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With the stroke of his pen on the first day of the Iraq war, President George W. Bush handed millions of dollars to nearly 150 Americans who had been held captive and used as human shields by Iraq during the first Gulf War. But looking ahead, some lawyers say that the president’s move will make it much more difficult for other American victims of Saddam Hussein’s regime to collect civil penalties lodged against Iraq. On March 20, Bush ordered the federal government to confiscate nearly $1.5 billion in frozen Iraqi assets held by U.S. banks. He directed that any outstanding U.S. judgments against Iraq be paid from those funds. The action ended a four-year quest for compensation by the Americans and their lawyers. “This was a huge effort,” says Daniel Wolf, 42, a partner at D.C.’s Sprenger & Lang who represented the plaintiffs. “We never knew it would be a successful one.” Last week, his clients received the second half of a $95 million payout. Now that the government has earmarked the remaining assets for the rebuilding of Iraq, lawyers for plaintiffs who already have cases pending say it is unlikely they would receive any of that money, even if they obtained court judgments. As a last resort, the victims could face the prospect of suing their own government to get relief — a step some plaintiffs lawyers say they would be reluctant to take. The seizure of Iraq’s assets could also put challenges in the way of any possible future victims who may want to press lawsuits over Iraq’s actions during the current conflict. Judging from past experience, claims could come from captured American soldiers who are tortured, or from civilian aid workers or journalists who are illegally detained. While current law provides for such claims to be litigated, the victims can no longer look to frozen Iraqi assets for relief. “It’s going to be a challenge for anyone in the new cases that are filed to get any of that money,” says Stuart Newberger, a partner at D.C.’s Crowell & Moring who has sued the governments of Iran and Libya for terrorist acts. There are at least three cases against Iraq pending in the U.S. District Court for the District of Columbia. In one, 17 Gulf War American POWs claim they were tortured while in the custody of Iraqi soldiers. Another suit is being pressed by about 175 American civilians who were taken captive by Iraq in 1990 and 1991. And a suit was filed by CBS News reporter Bob Simon and a cameraman, who claim they were kidnapped and tortured for 40 days by Hussein’s troops in 1991. Stephen Fennell, who represents the prisoners of war and Bob Simon, says the federal government has blocked his attempts to get a financial settlement for his clients. “It would be simply unthinkable to ask the American POWs tortured by Iraq to bear the cost of the reconstruction of Iraq,” says Fennell, a partner at D.C.’s Steptoe & Johnson. Others note that the political stakes are too high for the United States to use seized Iraqi assets on anything but the rebuilding of that country once Hussein is out of power. “We have an obligation to rebuild Iraq,” says Stuart Eizenstat, former deputy secretary of the treasury in the Clinton administration and a partner at Covington & Burling. “We need the full flexibility to use this $1.5 billion to help rebuild post-Saddam Iraq, rather than having to pay victims of terrorism here.” It remains unclear whether the Bush administration is putting together a plan to deal with any outstanding Gulf War lawsuits or any claims likely to result from the current conflict. Treasury Department officials did not return calls seeking comment. HARD TO COLLECT Since 1996, Americans have had the right to sue foreign governments in U.S. courts for state-sponsored terrorist acts such as hostage taking, torture, execution, and aircraft sabotage. But while monetary awards against such governments as Iraq or Iran are obtainable, lawyers have found that collecting these judgments is nearly impossible. Both Republican and Democratic administrations have blocked attempts to use frozen foreign assets to pay domestic judgments, arguing that the money may be needed for political negotiations. Eizenstat, a top-ranking official under both Presidents Jimmy Carter and Bill Clinton, points to the Iran hostage situation as a prime example of such assets being used as a negotiating tool. Eizenstat says nearly $10 billion in Iranian money seized by Carter in 1979 was used to bargain for the safe release of U.S. Embassy hostages. When Iran released the hostages just as President Ronald Reagan began his first term, most of that money was returned. “The frozen Iranian assets were absolutely central in getting our hostages back,” says Eizenstat, who was Carter’s chief domestic policy adviser at the time. “[The money] was a very, very important factor in making the deal possible.” While the cases are usually heart-wrenching and the victims’ stories compelling, lawyers have battled with administration after administration to negotiate payments for terrorist acts by countries such as Cuba, Libya, Iran, and, most recently, Iraq. Money is usually turned over to victims, but only after years of political wrangling. Just days before he was to leave office in 2001, President Clinton handed $310 million to litigants who sued Iran and Cuba. But his order also barred future litigants suing countries tied to terrorism from using foreign assets to satisfy judgments. Victims have taken their stories to Congress, which has acted on numerous occasions to try to make it easier for victorious litigants to collect from terrorist-sponsoring governments. These efforts, however, have been met with tough resistance by the executive branch. In one of the Gulf War cases, plaintiffs’ lawyer Wolf hired lobbyist Gary Shiffman to work Capitol Hill and the Bush administration for support after winning a $94 million court judgment in 2001. Shiffman, director of government relations for Greenberg Traurig in the District, had been instrumental as a senior adviser to then-Sen. Connie Mack (R-Fla.) in getting congressional support for earlier legislation that eventually led to Clinton’s final actions in 2001. “We hired Greenberg Traurig to get the job done on Capitol Hill and they did a spectacular job,” says Wolf, a former State Department lawyer. Last November, President Bush signed into law a massive terrorism insurance bill that included a provision allowing Americans to collect court-ordered compensatory damages from frozen assets of terrorist states. “The goal of that legislation was so that victims would not be fighting the State Department anymore,” says Shiffman, who worked on getting the language into the bill with Greenberg partner Ronald Kleinman. FOLLOW THE MONEY While Shiffman was working Capitol Hill, Wolf was looking for Iraqi money in the United States. In addition to Wolf, Texas lawyer James Cooper-Hill was also trying to collect on two judgments against Iraq for nearly $20 million. Wolf says the two signed an agreement in which both lawyers would split the proceeds of any funds they recovered for their clients. In late August, he came across at least $300 million being held by the Bank of New York and J.P. Morgan Chase & Co. The money was frozen, so Wolf filed suit against the Treasury Department, which initially argued against its release. Once the new law was on the books, however, the Justice Department on Dec. 30 gave notice that the fight for the funds was now, for the most part, between the banks and Wolf. With the federal government out of the way, Wolf says he thought it would be just a matter of days before the money was released. But that same day, Wolf says, his office received word that the banks were not going to release the funds. “We were totally sandbagged,” Wolf says. “We had no idea this was coming.” Tom Johnson, a spokesman for J.P. Morgan Chase, says the bank wanted the court’s interpretation of the new law before turning any money over to the plaintiffs. “We would hate to be characterized as being against the plaintiffs when we were looking for clarity from the courts,” Johnson says. After a hearing at the end of January in which the judge said a ruling wouldn’t come until April 15, Wolf says he was desperate to find assets elsewhere, and fast. After all, war with Iraq was on the horizon, and a regime change in Iraq could pose problems if that money was no longer frozen, he says. He located about $2 million in a Riggs Bank account in the District and filed in the federal court here to lay claim to that money. Wolf says he had a feeling that the Federal Reserve Bank in New York may have Iraqi assets held in the name of the Iraqi government. He says he used Lexis/Nexis and Google to search for assets and that he turned up evidence that funding for the Food for Oil Program in Iraq had passed through the bank. He soon located $58 million in Iraq’s name that the Federal Reserve was holding. Wolf notified the Federal Reserve that there was a court judgment and a new federal law giving his clients access to the money. According to Wolf, lawyers for the bank said they would release the money if ordered to do so by a judge. A federal judge in New York handed down that order on March 11 — the same day a federal judge in the District gave Wolf’s clients access to the Riggs Bank funds. The money covered about half of his clients’ judgment and nearly half of the funds sought by Cooper-Hill’s clients. It was a precedent-setting victory in terms of collecting money from a terrorist state without government involvement. But it may be the last as far as Iraq money goes. Bush satisfied the rest of the judgments with his March 20 executive order confiscating all of Iraq’s frozen assets. While his order put to rest all U.S. court-ordered judgments against Iraq, it did not specify how any current or future claims against the country would be handled. Wolf says he has another 175 plaintiffs who were also held captive by Iraqis during the Gulf War whose cases are awaiting judgment. If and when judgments are obtained, Wolf is not clear how they will collect. Steptoe’s Fennell, whose final briefs in the POW case are due March 31, says he is concerned that when the war is over, no Iraqi assets will be left to compensate his clients. “I don’t have a bank account in the name of Iraq or its government to attach [a judgment to], because all that money is in the Federal Reserve,” Fennell says. “I have to go elsewhere.” There has been talk about — and the State Department has pushed for — a victims fund that would cap claims at a certain amount. The problem with this, according to some lawyers, is that terrorism victims want the money to come from terrorists themselves and not from a general fund. Some of the options sound familiar. Fennell and Wolf say they could turn to Congress for support. There is also the possibility of trying to settle claims with the new regime.

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