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Congress last week toppled a wall erected by the executive branch to keep American victims of terrorism from attaching the frozen assets of terrorist states and organizations as a way of paying multimillion-dollar court judgments for their injuries and losses. Using a bill badly sought by the Bush administration — the terrorism reinsurance program — key lawmakers, assisted by lawyers for many victims of terrorist acts by Iraq and Iran, won final approval of provisions eliminating a presidential order which put those assets — frozen by the U.S. government — off-limits to the victims or their families. The legislation was adopted despite strong opposition from, and lobbying by, the State Department. It asserts Congress’ clear intent that victims of terrorism should be able to satisfy their judgments from the blocked assets of terrorists, terrorist organizations and state sponsors of terrorism. The bill contains a limited exception for certain types of diplomatic property. “What was happening was that victims could go to court,” says international law scholar Pamela Falk of City University of New York School of Law, and under exemptions to foreign sovereign immunity, “they could sue state sponsors of terrorism, but couldn’t collect. “So you have this very strange situation where a U.S. court would accept all the proof and make awards, but there was no way to get the money. “The bill opens the floodgates to lawsuits. It is much more feasible that a victim would sue when the victim can attach assets. It’s the end to State Department control of frozen assets.” The bill is also an attempt to end piecemeal efforts by Congress in recent years to provide money for victims with judgments in the face of the executive branch’s opposition and order. Those efforts sometimes left out in the cold victims who lacked the political influence to be included in compensation bills and that further embittered many families already outraged by the State Department’s position on frozen assets. The bill’s asset language is “very broad,” says Ronald Kleinman of Greenberg Traurig, whose legislative team was hired by lawyers for victims of Iraqi and Iranian terrorism to assist in enforcing their judgments. “It is what was originally intended five years ago: Terrorism victims seeking to enforce judgments they lawfully obtained against terrorism-sponsoring states should be able to enforce those just as any judgment holder,” says Kleinman, once a State Department lawyer. “It’s not supposed to be about a group of Cuban-American, Iraqi or Iranian victims. It’s supposed to be about everybody.” ‘HUMAN SHIELDS’ Whether the Bush administration will agree that the bill does what its backers say it does or will find a way to continue its opposition to use of the blocked assets remains to be seen, says Daniel Wolf of Washington, D.C.’s Sprenger & Lang. His firm has hired Greenberg Traurig, and his clients — Americans used as “human shields” by Iraq to prevent U.S. air attacks in the Gulf War — hold judgments totaling $93 million. The first look at the government’s position may come this week when it files a brief supporting its motion to dismiss an enforcement action filed by Wolf against the Treasury Department and J.P. Morgan Chase Bank, which holds Iraqi frozen assets. Frazier v. O’Neill, No. 02CV7642 (S.D.N.Y.). “We have identified sufficient Iraqi assets to satisfy the judgments entered so far on behalf of 178 victims,” says Wolf of his clients. “There should be nothing under the new law, when it’s signed, to prevent the victims from executing against the assets that have been identified. Certainly that is the clear intent of the provision.” But, he adds, he hasn’t heard yet what position the Justice Department, representing Treasury, will take on the legislation. “While I think the arguments would be extraordinarily weak, there is the potential they might make some constitutional challenge to the legislation,” says Wolf, who, like Kleinman, is a State Department alumnus. “I really think that would be absurd, but I wouldn’t put it beyond the realm of possibility.” The battle over enforcing terror-related judgments is part of the legislative effort to broaden the ability of American terror victims to sue terrorists, state sponsors of terrorism and terrorist organizations. In 1998, two years after Congress opened the courts to suits against nations designated state sponsors of terrorism by the State Department, lawmakers enacted a mechanism for attaching blocked assets by judgment holders. But President Clinton, who had supported the 1996 law permitting terror suits, exercised a blanket waiver in the 1998 law. In effect, it put the blocked assets outside the reach of the victims’ enforcement actions. Then and now, the State Department argues that depleting the frozen assets would harm national security interests. Those assets often become leverage in negotiations with hostile nations or help shore up relations with friendly governments that have replaced hostile ones. “A permanent taking of those assets would not increase the deterrent effect, rather it would undermine our fight against terrorism since the hope of getting assets back is a practical incentive for states to end support of terrorism,” says a State Department spokesman. Last December — in a letter to Sen. George Allen, R-Va., a prime sponsor with Sen. Tom Harkin, D-Iowa, of the recently passed asset bill — Deputy Secretary of State Richard Armitage also warned that Iran’s blocked assets, in particular, are not sufficient to pay the compensatory part of all existing judgments, “much less those likely to be issued in the future.” The newly enacted asset legislation, he and his department say, will promote races to the courthouse and pit victims against each other in a competition for the same limited pool of money. Wolf calls the department’s arguments “pure crap.” He notes that the government, dating back to World War II, used frozen assets to compensate American claimants. The only difference today, he adds, is that the Harkin-Allen legislation takes control over determining the claims and the disbursement of money away from the State Department. “This comes down in the final analysis to preserving the State Department’s — and particularly the legal advisor office’s — turf,” says Wolf. “They want control over distribution of assets and control over the pot of money. In addition, they do not believe an individual should be able to do anything within his own power to hold a state accountable for wrongdoing, because they believe that is their responsibility. But they almost never live up to that responsibility.” The asset legislation does contain special rules for judgments against Iran. Recognizing the limited pool of funds remaining, the bill creates a proportional formula for payment. If the legislation is signed into law, it would immediately apply to only two judgments now existing against Iraq. One is for Wolf’s “human shield” clients. Hill v. Republic of Iraq, 175 F. Supp. 2d 36 (2001). The other is the case involving four Americans working on the Kuwait border who were arrested and imprisoned by Iraq and who won judgments totaling about $19 million. Daliberti v. Republic of Iraq, 146 F. Supp. 2d 19 (2001). Four cases are pending against Iraq, notes Wolf, including a second human shield case of his with about 170 plaintiffs. Another suit charges Iraqi involvement in the Oklahoma City bombing. Others are a Sept. 11 suit against Iraq and Iran and one on behalf of 19 airmen shot down and tortured during the Gulf War. The Victims of Trafficking and Violence Protection Act of 2000 included partial payment of about $300 million in terror judgments in 13 specific cases against Cuba and Iran. The new asset bill will apply to five additional judgments left out of the 2000 compromise with President Clinton. “Two years ago, if you had a final judgment against Iran, you could trade in your compensatory damages to Treasury, which, in turn, would give you the money as an advance and you subrogated your creditor rights to Treasury,” says Stuart Newberger of D.C.’s Crowell & Moring, who, like Wolf, specializes in these international-terror cases. A large number of cases are pending against Iran, but without judgments yet. Newberger says, “Everyone realizes there may not be enough” money for those cases. But he notes that the bill has special rules for paying Iranian claims on a pro rata basis if needed. While Newberger has no client with a stake in this legislation, he says it may be helpful in the long term in cases he has involving Libya. Unlike Iran, both Iraq and Libya, he says, have more than $1 billion in potentially attachable assets. Cases, but no judgments, are pending against Libya and Sudan, and none is pending against other countries on the U.S. government’s list of alleged terrorist nations: North Korea, Cuba and Syria. ‘A LOT OF MONEY’ The Treasury Department, through its Office of Foreign Assets Control, has reported it has blocked $4.11 billion in assets of designated terror states. “That’s a lot of money,” says City University’s Falk. “And there’s another$7 billion in frozen assets in much murkier reach that belongs to foreign terrorist organizations.” After creating a compensation program for Sept. 11 victims and recognizing its scatter approach to compensating other terror victims in the past, Congress last year directed the State Department to come up with a comprehensive proposal by February 2002 for compensating terror victims. Last summer, the department suggested a government-funded program similar to the Sept. 11 program and the fund for families of officers killed in the line of duty. Lawyers handling terror suits roundly criticize the department’s failure to produce anything comprehensive or specific. The problem in the past and today, Wolf explains, is that “government bureaucrats dealing with this don’t understand the distinction between legal accountability that provides justice and the idea of providing a social safety net that gives government payments to victims of terrorism, like the 9/11 people, who need help to get over the hump for completely unpredictable suffering.” Both concepts are valid and both can exist, he says, adding, “But the latter is not the one that most of the victims that I represent were interested in or needed. For my clients, the idea is to get closure, to feel like justice was had.”

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