Anti-Terrorist Financing: Lower Court Finds Executive Order Provisions Unconstitutional

January 2007

Note: The following discussion is provided for informational purposes only and is not intended to serve as legal advice. For specific information about anti-terrorist financing rules, consult your attorney.

The United States District Court, Central District of California, declared certain portions of Executive Order 13224 unconstitutional on November 21, 2006. In Humanitarian Law Project v. United States Department of Treasury, Judge Audrey B. Collins ruled that the president's authority to designate Specially Designated Global Terrorists (SDGTs) under Executive Order 13224 is unconstitutionally vague on its face. Judge Collins also held that the executive order's provision punishing those "otherwise associated with" SDGTs is unconstitutionally vague on its face and overbroad.

Background: Executive Order 13224

President Bush issued Executive Order 13224 on September 23, 2001, pursuant to his authority under the International Emergency Economic Powers Act. The order:

Blocks the property of SDGTs.
Blocks the property of individuals and organizations that assist, sponsor, or provide financial, material, or technological support for terrorism, SDGTs, or unnamed persons determined to be subject to the order.
Blocks the property of those who are otherwise associated with SDGTs or unnamed persons subject to the order.
Prohibits U.S. individuals and organizations from engaging in transactions in blocked property, including making or receiving any contribution of funds, goods, or services for the benefit of SDGTs or unnamed persons subject to the order. This prohibition includes humanitarian aid.

If a charity violates the order, its assets can be blocked and its tax-exempt status revoked. The charity may also be subject to criminal and civil penalties. Unlike the USA PATRIOT Act, the executive order does not have a knowledge or an intent requirement. In other words, a charity can violate the order even if it does not know it is providing support to an SDGT.

In the annex to the executive order, President Bush initially designated 27 individuals and organizations as SDGTs. He authorized the secretary of the treasury to designate additional SDGTs, provided that the foreign individual or organization committed, or posed a significant risk of committing, acts of terrorism that threaten U.S. interests. President Bush also authorized the secretary of the treasury to designate as an SDGT anyone acting "for or on behalf of" or "owned or controlled by" an SDGT as well as anyone that provides support, assistance, or services to or is "otherwise associated with" an SDGT.

See a current list, updated regularly, of individuals and organizations identified under Executive Order 13224 >

The Case: Humanitarian Law Project v. United States Department of Treasury

Humanitarian Law Project v. United States Department of Treasury was filed by five organizations and two U.S. citizens (plaintiffs) seeking to provide support for the lawful, nonviolent activities of the Partiya Karkeran Kurdistan and the Liberation Tigers of Tamil Eelam. Both organizations are designated as SDGTs.

The plaintiffs contended, among other things, that the president's authority to designate SDGTs is unconstitutional. The prior designation of the 27 organizations and individuals was made without any explanation of the criteria used. Moreover, the executive order provides no process by which SDGTs can challenge their designation. The plaintiffs argued that under the executive order, the president's designation authority is subject only to his unfettered discretion. The court agreed and held that the president's designation authority is unconstitutionally vague. In contrast, the court held that the designation authority delegated to the secretary of the treasury is constitutional, because the executive order and its regulations require the secretary of the treasury to make specific findings before designating any individual or organization as an SDGT and provide for a procedure to contest the designation.

Plaintiffs also challenged the constitutionality of the executive order provision barring groups and individuals from being "otherwise associated with" an SDGT. The court held that the "otherwise associated with" provision is unconstitutionally vague on its face and overbroad. The court noted that the phrase "otherwise associated with" does not have a clear meaning and is not defined. The prohibition on being "otherwise associated with" an SDGT unconstitutionally restricts activity protected by the First Amendment. Guilt by association alone violates the First Amendment. The court stated that association was the sole legal basis for designating 2 of the 375 SDGTs.

The court's ruling prohibits the government from (1) designating plaintiffs as SDGTs pursuant to the president's authority under the executive order and (2) blocking plaintiffs' assets or subjecting plaintiffs to designation as SDGTs for being "otherwise associated with" Partiya Karkeran Kurdistan or the Liberation Tigers of Tamil Eelam. The court declined to grant a nationwide injunction preventing enforcement of the unconstitutional provisions against other parties. David Cole, Center for Constitutional Rights board member and lead counsel for the plaintiffs, stated that a judge only has the power to issue a ruling regarding the parties in the case before him or her. He noted that Judge Collins's injunction was as far as she could go given the identity of the parties.

Judge Collins has not yet issued the final judgment in this case. Mr. Cole stated that he fully expects the government to appeal the final judgment.

Implications for Other Nonprofits

Although the effects of this case appear to be limited, Judge Collins's rulings in prior cases have led to changes in the law. Judge Collins previously ruled that parts of the USA PATRIOT Act regarding providing material support to terrorists were impermissibly vague. This ruling was affirmed by the Ninth Circuit. In December 2004, Congress revised portions of the PATRIOT Act in response to those rulings, and the case was sent back to the District Court. In July 2005, Judge Collins in Humanitarian Law Project v. Gonzales ruled that the terms "training," "expert advice or assistance" in the form of "specialized knowledge," and "service" were still impermissibly vague. The government has appealed this ruling and the appeal is pending in the Ninth Circuit.

Cherie Evans, Esq., Evans & Rosen LLP
© 2007, Evans & Rosen LLP

Cherie Evans is a partner in the law firm of Evans & Rosen LLP, which primarily represents nonprofit organizations. She is based in San Francisco and can be reached at
(415) 264-1800 or cherie@evansrosen.com.