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Office of Foreign Assets Control, United States Dep't of the Treasury v. Voices in the Wilderness

August 12, 2005


The opinion of the court was delivered by: John D. Bates United States District Judge


Plaintiff Office of Foreign Assets Control ("OFAC" or the "Agency"), a division of the United States Department of the Treasury, brings this action to enforce a $20,000 civil penalty levied against defendant Voices in the Wilderness ("Voices") pursuant to Executive Order 12724 and the Iraqi Sanctions Regulations, 31 C.F.R. § 575, issued thereunder. Voices does not dispute that it exported medical supplies to Iraq without first obtaining the required license. Instead, Voices contends that OFAC acted contrary to law when it delayed issuance of a final penalty notice until nearly four years after issuance of a pre-penalty notice, and only a week after an anti-war protest organized by defendant. On this basis, Voices argues that the penalty is invalid and should not be enforced.

On August 9, 2004, this Court issued a Memorandum Opinion and Order that dismissed Voices' several counterclaims, but also denied OFAC's motion for judgment on the pleadings, and invited Voices to amend its answer to state a claim under the Administrative Procedure Act ("APA"), 5 U.S.C. § 706. The Court also ordered OFAC to provide any documentation with regard to the timing of the penalty notice. Voices has since amended its pleadings to allege that OFAC acted in violation of the APA, while OFAC has submitted a declaration explaining the reasons for the four-year delay, as well as the administrative record in the case. OFAC has now filed a renewed motion for judgment on the pleadings and to dismiss the amended counterclaim. For the reasons explained below, OFAC's motion is granted in full, and judgment is entered in its favor as a matter of law.


I. Regulatory Background

Pursuant to the International Emergency Economic Powers Act, the National Emergencies Act and the United Nations Participation Act, the President on August 9, 1990, ordered United States participation in the United Nations' trade embargo of Iraq. Exec. Order No. 12724, 55 Fed. Reg. 33089 (Aug. 9, 1990). To implement that order, OFAC issued regulations providing for the investigation of, and assessment of penalties upon, violators of the embargo. See 31 C.F.R. § 575 et seq. These regulations (known as the Iraqi Sanctions Regulations) state that

no goods . . . may be exported from the United States . . . to Iraq, to any entity owned or controlled by the Government of Iraq, or to any entity operated from Iraq, except donated foodstuffs in humanitarian circumstances, and donated supplies intended strictly for medical purposes, the exportation of which has been specifically licensed pursuant to §§ 575.507, 575.517 or 575.518.

Id. § 575.205. Anyone who exports goods to Iraq without first obtaining the necessary license is subject to a civil penalty not to exceed $325,000 per violation. Id. § 575.205(a)(1)-(2).*fn1

The regulations provide that when the Director of OFAC (the "Director") has "reasonable cause to believe that" a violation of the regulations has occurred, and determines that further proceedings are warranted, he may issue a pre-penalty notice to the suspected violator. Id. § 575.502(a). This notice details the legal and factual underpinnings of the alleged violation, and informs the recipient that he has thirty days to submit a presentation to OFAC explaining why the proposed penalty should be lessened or not imposed at all. Id. § 575.502(b). The regulations provide that "[i]f, after considering any presentations made in response to the prepenalty notice, the Director determines that there was a violation by the person named in the prepenalty notice, he promptly shall issue a written notice of the imposition of the monetary penalty to that person." Id. § 575.704.

After the Director provides written notice of a monetary penalty, the violator may choose whether to pay the penalty or request a hearing before an administrative law judge. Id. § 501.703(a)(3). If the violator opts for a hearing, the Director chooses whether to discontinue the penalty action or refer the matter to an administrative law judge. Id. § 501.703(a)(4). Once it is determined with finality that the violator is liable for a monetary penalty -- either through the violator's failure to request a hearing following an adverse determination by the Director, or upon entry of an adverse judgment by an administrative law judge -- and the violator fails to pay the fine or make payment arrangements, the matter is referred to the Department of Justice to file a civil action to recover the unpaid penalty. Id. § 575.705.

II. Factual Background

OFAC is an agency within the Department of the Treasury that administers and enforces economic sanctions and trade embargos against foreign entities. Voices in the Wilderness is an unincorporated association headquartered in Chicago that was formed to "challenge the economic warfare being waged by the [United States] against the people of Iraq." Voices in the Wilderness: 9 Years, at (visited Jul. 18, 2005).

In January 1996, the Department of Justice forwarded to OFAC several letters it had receivedfrom Voices stating the group's intention to violate the Iraqi Sanctions Regulations by sending its members to Iraq to deliver medical supplies without obtaining a license from OFAC. Compl. ¶¶ 12-13. Upon receiving the letters, OFAC sent warnings to several of Voices' members that described the prohibitions in the regulations and the application process for obtaining the necessary license to export humanitarian supplies to Iraq. Id. ¶ 13. Voices responded with more letters detailingunlicensed travel and aid shipments to Iraq that its members had already undertaken. Id. OFAC next received a report from the U.S. Customs Service in December 1997, informing the Agency of an investigation into a 1996 visit to Iraq by one Voices member and a 1997 trip by three Voices members. Decl. of R. Richard Newcomb ("Newcomb Decl.") ¶ 18. Then, in late 1998, OFAC discovered through media sources that Voices as a group hadexported relief supplies to Iraq in July and September of 1998, again without obtaining a license. Id. ¶ 20.

On December 3, 1998, the Civil Penalties Division ofOFAC issued a pre-penalty notice to Voices for its exports of relief supplies during 1998, and to four individual Voices members for travelling to Iraq in 1997 to deliver medical supplies. Newcomb Decl. ΒΆ 21; Pl. Mot. at 10. Voices and the four individuals promptly filed responsive presentations with OFAC in which they admitted that they ...

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