Waked Fares v. Smith ( 2017 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
ABDUL MOHAMED WAKED
FARES, et al.,
Plaintiffs,
Civil Action No. 16-1730 (CKK)
v.
JOHN E. SMITH, et al.,
Defendants.
MEMORANDUM OPINION
(April 7, 2017)
Plaintiffs Abdul Mohamed Waked Fares, Mohamed Abdo Waked Darwich, Lucia
Touzard Romo, and Groupo Wisa, S.A., have been designated as Specially Designated
Narcotics Traffickers by Defendants pursuant to the Foreign Narcotics Kingpin
Designation Act (“Kingpin Act”), 21 U.S.C. § 1901 et seq. In this action, they bring claims
pursuant to the Due Process Clause of the Fifth Amendment and the Administrative
Procedure Act (“APA”) for Defendants’ alleged failure to provide them with sufficient
post-designation notice regarding the bases for their designations. Presently before the
Court are Plaintiffs’ [3] Motion for Summary Judgment and Defendants’ [14] Motion to
Dismiss for Lack of Jurisdiction, or in the Alternative, for Summary Judgment. Upon
consideration of the pleadings, 1 the relevant legal authorities, and the record for purposes
1
The Court’s consideration has focused on the following documents:
• Final Mem. of P.&A. in Supp. of Pls.’ Mot. for Summ. J., ECF No. 20 (“Pls.’
Mem.”);
• Defs.’ Mem. of P.&A. in Supp. of their Mot. to Dismiss, or in the Alternative, for
Summ. J. and in Opp’n to Pls.’ Mot. for Summ. J., ECF No. 14 (“Defs.’ Mem.”);
• Pls.’ Combined Mem. of P.&A. in Reply to their Mot. for Summ. J. and in Opp’n
to Defs.’ Mot. to Dismiss, ECF No. 16 (“Pls.’ Opp’n and Reply Mem.”);
• Defs.’ Reply Mem. in Support of their Mot. to Dismiss, or in the Alternative, for
Summ. J., ECF No. 18 (“Defs.’ Reply Mem.”);
• Administrative Record, ECF No. 19 (“AR”).
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of the pending motions, the Court DENIES Plaintiffs’ [3] Motion for Summary Judgment,
DENIES Defendants’ [14] Motion to Dismiss, and GRANTS Defendants’ [14] Motion for
Summary Judgment. For the reasons stated below, the Court concludes that Defendants
have provided Plaintiffs with sufficient post-designation notice under both the Due Process
Clause and the APA.
I. BACKGROUND
A. Statutory Background
The Kingpin Act authorizes the President to designate “foreign person[s] that play
a significant role in international narcotics trafficking” as significant foreign narcotics
traffickers (“SFNTs”). 21 U.S.C. §§ 1903(b), 1907(7). The Act also authorizes the
Secretary of the Treasury, in consultation with other federal government agencies, to
designate foreign persons “as materially assisting in, or providing financial or
technological support for or to, or providing goods or services in support of, the
international narcotics trafficking activities of a[n] [SFNT],” id. § 1904(b)(2), “as owned,
controlled, or directed by, or acting for or on behalf of, a[n] [SFNT],” id. § 1904(b)(3), or
“as playing a significant role in international narcotics trafficking,” id. § 1904(b)(4). The
Secretary of the Treasury has delegated this authority to the Office of Foreign Assets
Control (“OFAC”), an agency within the Department of the Treasury. Persons designated
pursuant to such authority are referred to as “specially designated narcotics traffickers”
(“SDNTs”). 31 C.F.R. §§ 598.803, 598.314. The consequences of an SDNT designation
are dire, as the designation acts to block “all such property and interests in property within
the United States, or within the possession or control of any United States person, which
are owned or controlled by” the designated person. 21 U.S.C. § 1904(b).
2
Following designation, an SDNT may “seek administrative reconsideration of his,
her or its designation . . . , or assert that the circumstances resulting in the designation no
longer apply, and thus seek to have the designation rescinded . . . .” 31 C.F.R. § 501.807.
Administrative reconsideration is handled by OFAC. Id. The SDNT may, in addition, seek
a meeting with OFAC, although “such meetings are not required, and the office may, at its
discretion, decline to conduct such meetings prior to completing a review pursuant to this
section.” Id. After OFAC “has conducted a review of the request for reconsideration, it
[must] provide a written decision to the blocked person . . . .” Id.
B. Factual Background
OFAC designated Plaintiffs as SDNTs on May 5, 2016, along with non-parties
Waked Money Laundering Organization (“Waked MLO”) and Nidal Ahmed Waked
Hatum. These designations were based on the government’s determination that Plaintiffs
play a significant role in international narcotics trafficking by facilitating money laundering
on behalf of “multiple international drug traffickers and their organizations.” AR 107.
Following their designations, Plaintiffs filed a request for reconsideration with OFAC on
May 24, 2016. In that request, Plaintiffs asked for access to the administrative record,
expedited review of their request for reconsideration, and a meeting with OFAC. AR 3
Plaintiffs promised that the grounds for their request “w[ould] be provided in response to
any OFAC questionnaires directed to the Petitioners, and w[ould] be supported by briefing
and evidence volunteered by the Petitioners.” Id.
OFAC denied Plaintiffs’ request for reconsideration on June 8, 2016, noting that
reconsideration was inappropriate because only 19 days had passed since the initial
designation of Plaintiffs as SDNTs, and Plaintiffs had not provided any supporting evidence
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in conjunction with their request. AR 16–17. Nonetheless, OFAC indicated that, should
Plaintiffs’ request for reconsideration “be further developed or clarified,” they could
submit another request for reconsideration at a later date. Id. OFAC also informed Plaintiffs
that their request for the administrative record was being processed, but noted “that the
review process can be lengthy and requires extensive interagency consultation in order to
comply with U.S. government regulations regarding the protection of classified, privileged,
and otherwise protected information.” AR 18.
Plaintiffs received the redacted administrative record underlying their SDNT
designations in two deliveries on July 5, 2016 and July 18, 2016. AR 22, 112. OFAC’s
letter accompanying the July 18, 2016 disclosure indicated that “should additional
unclassified, non-privileged, or otherwise releasable information become available,” it
would be provided to Plaintiffs. AR 112. OFAC subsequently furnished additional
information by means of two unredacted summaries of “otherwise privileged information,”
which were provided to Plaintiffs on August 26, 2016 (“August Summary”) and October
28, 2016 (“October Summary”). AR 289, 292.
II. LEGAL STANDARD
A. Motion to Dismiss for Lack of Subject-Matter Jurisdiction
Defendants move to dismiss this action as moot pursuant to Federal Rule of Civil
Procedure 12(b)(1). To survive a motion to dismiss pursuant to Rule 12(b)(1), Plaintiffs
bear the burden of establishing that the Court has subject-matter jurisdiction over their
claims. Moms Against Mercury v. FDA, 483 F.3d 824, 828 (D.C. Cir. 2007); Ctr. for Arms
Control & Non-Proliferation v. Redd, No. CIV.A. 05-682 (RMC), 2005 WL 3447891, at
*3 (D.D.C. Dec. 15, 2005). The jurisdiction of federal courts is limited by Article III of the
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Constitution to the adjudication of actual, ongoing cases or controversies; a limitation that
“gives rise to the doctrines of standing and mootness.” Foretich v. United States, 351 F.3d
1198, 1210 (D.C. Cir. 2003); Sierra Club v. Jackson, 648 F.3d 848, 852 (D.C. Cir. 2011).
Pursuant to the mootness doctrine, it “is not enough that the initial requirements of standing
and ripeness have been satisfied; the suit must remain alive throughout the course of
litigation, to the moment of final appellate disposition. If events outrun the controversy
such that the court can grant no meaningful relief; the case must be dismissed as moot.”
People for the Ethical Treatment of Animals, Inc. v. United States Fish & Wildlife Serv., 59
F. Supp. 3d 91, 95 (D.D.C. 2014) (internal quotation marks and citations omitted). “A case
is moot when the challenged conduct ceases such that there is no reasonable expectation
that the wrong will be repeated in circumstances where it becomes impossible for the court
to grant any effectual relief whatever to the prevailing party.” United States v. Philip Morris
USA Inc., 566 F.3d 1095, 1135 (D.C. Cir. 2009) (internal quotation marks omitted).
The Complaint seeks two forms of relief under the Due Process Clause and the APA
stemming from Defendants’ alleged failure to supply Plaintiffs with sufficient notice
regarding the bases for their designations as SDNTs: (i) a declaration that “the
administrative record provided by Defendants violates Plaintiffs’ due process and statutory
rights to adequate post-designation notice and a meaningful opportunity to administratively
challenge their designations;” and (ii) an order requiring “Defendants to provide an
unredacted copy of their administrative record, or any other solution chosen by the Court
or agreed to by the parties which provides Plaintiffs with adequate post-designation
notice.” Compl. at 11. Although Defendants have provided additional disclosures to
Plaintiffs following the initiation of this lawsuit, there is no question that Defendants have
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yet to provide all of the relief sought in this action (e.g., the complete unredacted
administrative record upon which the SDNT designations were based). In other words,
although the government contends that Plaintiffs have received all the disclosure that they
are entitled to, Plaintiffs have not received all the relief that they have sought in their
Complaint. Accordingly, this case is not moot.
That is not to say that Plaintiffs are entitled to such additional relief, but rather that
this is a merits question that is not properly resolved on the basis of a Rule 12(b)(1) motion
for lack of subject-matter jurisdiction. Accordingly, the Court resolves this matter on the
basis of Plaintiffs’ motion for summary judgment. Nonetheless, the Court observes that its
resolution of whether Defendants have provided sufficient notice under the Due Process
Clause and the APA would be identical were it instead to proceed on the basis of
Defendant’s motion to dismiss, as the record for purposes of that motion would be identical
to the one considered for purposes of Plaintiff’s motion for summary judgment. See Lenox
Hill Hosp. v. Shalala, 131 F. Supp. 2d 136, 140 n.4 (D.D.C. 2000) (noting that a district
court can consider the administrative record for purpose of a motion to dismiss pursuant to
Rule 12(b)(1)).
B. Cross-Motions for Summary Judgment
Plaintiffs have moved for summary judgment on their claims pursuant to the Due
Process Clause and the APA, and Defendants have cross-moved for summary judgment in
their favor. Summary judgment is appropriate where “the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter
of law.” Fed. R. Civ. P. 56(a). The mere existence of some factual dispute is insufficient on
its own to bar summary judgment; the dispute must pertain to a “material” fact. Id.
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Accordingly, “[o]nly disputes over facts that might affect the outcome of the suit under the
governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). If material facts are genuinely in dispute, or
undisputed facts are susceptible to divergent yet justifiable inferences, summary judgment
is inappropriate. Moore v. Hartman, 571 F.3d 62, 66 (D.C. Cir. 2009). Under the particular
circumstances of this case, there is no factual dispute for the Court to resolve. Rather, the
parties disagree only over the legal question of whether the disclosures by OFAC regarding
Plaintiffs’ SDNT designations satisfy due process and the APA. There is no dispute, for
example, over the timing or content of OFAC’s disclosures.
Furthermore, “when a party seeks review of agency action under the APA [before a
district court], the district judge sits as an appellate tribunal. The ‘entire case’ on review is
a question of law.” Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C. Cir.
2001). Accordingly, “the standard set forth in Rule 56[] does not apply because of the
limited role of a court in reviewing the administrative record . . . . Summary judgment is []
the mechanism for deciding whether as a matter of law the agency action is supported by
the administrative record and is otherwise consistent with the APA standard of review.”
Southeast Conference v. Vilsack, 684 F. Supp. 2d 135, 142 (D.D.C. 2010). The APA “sets
forth the full extent of judicial authority to review executive agency action for procedural
correctness.” FCC v. Fox Television Stations, Inc., 556 U.S. 502, 513 (2009). It requires
courts to “hold unlawful and set aside agency action, findings, and conclusions” that are
“arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5
U.S.C. § 706(2)(A). “This is a ‘narrow’ standard of review as courts defer to the agency’s
expertise.” Ctr. for Food Safety v. Salazar, 898 F. Supp. 2d 130, 138 (D.D.C. 2012) (quoting
7
Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43
(1983)).
III. DISCUSSION
The narrow question of law before the Court is whether the information provided
to Plaintiffs regarding their designations by Defendants as SDNTs, coupled with the
opportunity to present evidence to rebut those designations, comports with procedural due
process and the APA. That question is further narrowed as Plaintiffs only contest the
amount of post-deprivation notice they received, and not whether they were entitled to
notice prior to their designations as SDNTs. 2 For the reasons stated below, the Court finds
that Plaintiffs have been afforded sufficient procedural due process under the
circumstances.
Defendants contend that, as foreign nationals, Plaintiffs lack “standing” to assert a
claim under the Due Process Clause of the Fifth Amendment. Defs.’ Mem. at 9.
Nonetheless, the United States Court of Appeals for the District of Columbia Circuit (“D.C.
Circuit”) has instructed that “[w]e need not decide whether or not [foreign plaintiffs] are
entitled to constitutional protections [in circumstances where,] even assuming that they are,
they have received all the process that they are due under our precedent.” Jifry v. F.A.A.,
370 F.3d 1174, 1183 (D.C. Cir. 2004). Here, the Court determines that Plaintiffs have
received notice and an opportunity to be heard in a manner that comports with due process,
and therefore does not reach the antecedent question of whether Plaintiffs are entitled to
2
In any event, the D.C. Circuit has held that pre-designation notice is not required under
the Kingpin Act as “providing notice before blocking the assets of international narcotics
traffickers would create a substantial risk of asset flight.” Zevallos v. Obama, 793 F.3d 106,
116 (D.C. Cir. 2015).
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the protections of the Due Process Clause.
Finally, contrary to Plaintiffs’ contentions, the Court finds no indication in the
present record that OFAC has failed to “follow its own regulations and procedures.” Pls.’
Mem. at 14. Consequently, as OFAC has furnished Plaintiffs with all of the materials that
was required by the Due Process Clause and the APA, Defendants are entitled to summary
judgment as a matter of law.
A. Due Process
The Court first surveys the limited case law that addresses the amount of disclosure
required of OFAC following an SDNT designation, and then analyzes whether OFAC’s
disclosures in this matter, in light of the applicable case law, satisfy due process.
1. Relevant Case Law
“[T]he fundamental norm of due process clause jurisprudence requires that before
the government can constitutionally deprive a person of the protected liberty or property
interest, it must afford him notice and hearing.” Nat’l Council of Resistance of Iran v. Dep’t
of State, 251 F.3d 192, 205 (D.C. Cir. 2001) (“NCOR”) (citing Mathews v. Eldridge, 424
U.S. 319, 334–35 (1976)). Nonetheless, “unlike some legal rules, [due process] is not a
technical conception with a fixed content unrelated to time, place and circumstance[; . . .]
due process is flexible and calls for such procedural protections as the particular situation
demands.” Id. (internal quotation marks and citations omitted). The D.C. Circuit recently
addressed what post-deprivation process is required of OFAC following an SDNT
designation. In Zevallos v. Obama, the D.C. Circuit found that plaintiff was afforded
sufficient post-designation process because OFAC provided plaintiff “several times with
the unclassified evidence on which it relied to designate him,” and plaintiff “not only had
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the chance to contest the propriety and adequacy of that evidence but did so on more than
one occasion.” 793 F.3d 106, 117 (D.C. Cir. 2015). The D.C. Circuit further noted that,
under the Kingpin Act and associated regulations, plaintiff “remains free now to continue
contesting his designation by filing new delisting requests, meaning that he can make any
new arguments that occur to him and reiterate and expand any arguments he felt received
short shrift on Treasury’s last review.” Id. Consequently, the D.C. Circuit found that
plaintiff was “given notice and a meaningful opportunity to be heard, which is what the
Due Process Clause requires.” Id. at 116.
The D.C. Circuit, in reaching this conclusion, relied on its prior holdings in the
context of a number of other “closely analogous statutes” that permit the executive branch
to block the U.S.-based assets of certain foreign-based or affiliated organizations and
individuals. Id. at 113. In Holy Land, the D.C. Circuit addressed the designation of the Holy
Land Foundation as a “‘Specially Designated Global Terrorist’ (‘SDGT’) pursuant to an
Executive Order issued under the International Emergency Economic Powers Act, 50
U.S.C. § 1701 et seq. (‘IEEPA’).” Holy Land Found. for Relief & Dev. v. Ashcroft, 333 F.3d
156, 159 (D.C. Cir. 2003). The processes for challenging SDNT designations under the
Kingpin Act are identical to those for challenging SDGT designations under IEEPA, as in
both cases, the affected party is added to a list of “Specially Designated Nationals.”
Zevallos v. Obama, 10 F. Supp. 3d 111, 126 (D.D.C. 2014) (“The legal consequence of this
list is that OFAC’s designation-challenging procedures for such persons designated, under
both the IEEPA and the Kingpin Act, are identical.”), aff’d, 793 F.3d 106 (D.C. Cir. 2015).
The Holy Land Foundation challenged its designation as an SDGT on due process grounds.
In denying that challenge, the D.C. Circuit held that, in the context of SDGT designations,
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“due process require[s] the disclosure of only the unclassified portions of the administrative
record[,]” and consequently, that plaintiff’s contention “that due process prevents its
designation based upon classified information to which it has not had access is of no avail.”
Holy Land, 333 F.3d at 164.
The decision in Holy Land was in turn based on a line of cases interpreting another
“closely analogous statute,” the Anti–Terrorism and Effective Death Penalty Act
(“AEDPA”), pursuant to which the Secretary of State is “empowered to designate an entity
as a ‘foreign terrorist organization’ [‘FTO’].” NCOR, 251 F.3d at 196. Like SDNT and
SDGT designations, the “consequences of [an FTO] designation are dire[,]” including
blocking of U.S.-based funds and resources, and denial of entry into the United States for
associated individuals. Id. AEDPA, like the Kingpin Act, permits the government to submit
classified portions of the administrative record to the reviewing court in camera and ex
parte. See 21 U.S.C. § 1903(i) (with respect to the Kingpin Act, providing that classified
information “may be submitted to the reviewing court ex parte and in camera”). In NCOR,
as in Holy Land, the D.C. Circuit concluded that the government’s notice “need not disclose
the classified information to be presented in camera and ex parte to the court under the
statute.” Id. at 208. Consequently, as in Holy Land, the D.C. Circuit only required
disclosure of the redacted, unclassified administrative record. Id. at 209. In a subsequent
decision, however, the D.C. Circuit suggested a limit to the ability of the government to
rely on undisclosed, classified information in the AEDPA context, noting that “none of the
AEDPA cases decides whether an administrative decision relying critically on undisclosed
classified material would comport with due process because in none was the classified
record essential to uphold an FTO designation.” People’s Mojahedin Org. of Iran v. U.S.
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Dep’t of State, 613 F.3d 220, 231 (D.C. Cir. 2010).
In addition, the parties rely extensively on two out-of-circuit decisions under
IEPPA. Although these decisions are not binding, the Court finds them instructive. First, in
Al Haramain, the United States Court of Appeals for the Ninth Circuit (“Ninth Circuit”)
reviewed OFAC’s blocking and subsequent SDGT designation of an organization known
as “AHIF-Oregon.” Al Haramain Islamic Found., Inc. v. U.S. Dep’t of Treasury, 686 F.3d
965, 973 (9th Cir. 2012). In addressing AHIF-Oregon’s due process challenge, the Ninth
Circuit first held that, “we join all other courts to have addressed the issue in holding that,
subject to the limitations discussed below, the government may use classified information,
without disclosure, when making designation determinations.” Id. at 982. Nonetheless, the
Ninth Circuit observed that “there may be means of providing information to the potential
designee that do not implicate national security. For example, an unclassified summary [of
the classified portions of the administrative record], by definition, does not implicate
national security because it is unclassified.” Id. at 983. The court also recognized, however,
that “disclosure may not always be possible. For example, an unclassified summary may
not be possible because, in some cases, the subject matter itself may be classified and
cannot be revealed without implicating national security.” Id. Ultimately, the Ninth Circuit
concluded that OFAC’s notice to AHIF-Oregon failed to satisfy due process because
“OFAC provided notice concerning only one of three reasons for its investigation and
designation and that notice occurred seven months after it froze AHIF–Oregon’s assets.”
Id. at 986. In the opinion of the Ninth Circuit, “[s]uch a significantly untimely and
incomplete notice [did] not meet the requirements of due process.” Id.
Second, in KindHearts, Chief Judge James G. Carr, of the United States District
12
Court for the Northern District of Ohio, likewise addressed whether OFAC had comported
with due process following its designation of an entity as an SDGT. KindHearts for
Charitable Humanitarian Dev., Inc. v. Geithner, 647 F. Supp. 2d 857, 864 (N.D. Ohio
2009). The essence of the charge against KindHearts, an Ohio-based charitable
organization, was that it had coordinated with and made contributions to Hamas. Id. at 867.
OFAC blocked KindHearts’ assets in February 2006, pending further investigation, and
officially designated KindHearts as an SDGT in May 2007. Id. at 899. In conjunction with
that designation, and more than 15 months after the initial block, OFAC provided
KindHearts with the unclassified administrative record, which was composed of 35
unclassified, non-privileged exhibits, many of which did not mention KindHearts. Id at
902–03. Accompanying the redacted administrative record was “an unclassified three-page
summary of the classified evidence.” Id at 868. According to the KindHearts court, the
summary “provided no explanation of the specific charges [OFAC] was considering against
KindHearts or why it thought the evidence supported a potential designation.” Id.
Ultimately, Chief Judge Carr held that KindHearts was not provided sufficient notice
following the blocking of its assets by OFAC, as KindHearts “remain[ed] largely
uninformed about the basis for the government’s actions.” Id. at 904. In particular, Chief
Judge Carr found that the government had failed to state “which recipients, to the extent
that it knows of specific recipients, were Hamas fronts or Hamas affiliated.” And noted
that “[w]ithout this sort of information, KindHearts cannot meaningfully challenge the
government’s actions.” Id. The court also faulted the government for failing to timely
provide the unredacted administrative record following the blocking action. Id. at 905 (“To
comply with due process requirements, OFAC should, at the very least, have promptly
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given KindHearts the unclassified administrative record on which it relied in taking its
blocking action.”). In other words, the due process deficiency in KindHearts resulted not
just from the lack of pertinent information regarding the government’s charges against
KindHearts, but also from the delay in providing information.
With these authorities in mind, the Court turns to address the particular issues
presented in this matter.
2. OFAC’s Post-Designation Disclosures Satisfy Due Process
The Court begins again by noting what is not at issue in this case. Although due
process requires a sufficient notice and hearing under the circumstances, Plaintiffs here
only contest the sufficiency of the notice they received from OFAC, and not their
opportunity to be heard. As discussed previously, Plaintiffs requested an opportunity to
present rebuttal evidence to OFAC shortly after they were designated as SDNTs. OFAC
declined that request, noting that less than three weeks had passed since the initial
designation, and that Plaintiffs had not furnished any evidence to rebut their designations.
Supra at 3. Nonetheless, as provided for by applicable regulations, OFAC indicated that
Plaintiffs could submit rebuttal evidence at a later time, and they in fact may do so as many
times as they please. Consequently, and as recognized by the D.C. Circuit in Zevallos,
OFAC has provided ample opportunity for SDNT-designees such as Plaintiffs to present
rebuttal evidence and to thereby supplement the administrative record. 793 F.3d at 115
(“Treasury’s procedure governing requests for reconsideration of designation decisions
imposes no limit on the number of times a designated person can request delisting.” (citing
31 C.F.R. § 501.807)). Although Plaintiffs criticize OFAC’s response to their initial request
for reconsideration in their briefing, see Pls.’ Opp’n and Reply Mem. at 11, the Complaint
14
includes no claim regarding OFAC’s hearing procedures or implementation of those
procedures in this case. In fact, the relief requested in this matter only pertains to the
sufficiency of notice, see Compl. at 11, and it is axiomatic that Plaintiffs cannot amend
their Complaint via their briefs, Arbitraje Casa de Cambio, S.A. de C.V. v. U.S. Postal
Service, 297 F. Supp. 2d 165, 170 (D.D.C. 2003).
Accordingly, the Court turns to address the narrow question at issue in this matter:
the sufficiency of the notice OFAC provided Plaintiffs following their designation as
SDNTs. Collectively, that notice included a redacted administrative record and two
unredacted summaries of privileged information (i.e., the August and October Summaries).
Defendants represent that the redactions result either from information being “law
enforcement sensitive,” or because the redacted information does “not pertain to Plaintiffs’
designations.” Defs.’ Mem. at 4. Plaintiffs also received a copy of the publicly filed press
release announcing their designation as SDNTs. See supra at 3–4.
A substantial portion of the administrative record is redacted, and Plaintiffs contend
that the unredacted portions do not provide meaningful information regarding the basis for
their designation as SDNTs. Pls.’ Mem. at 8 –14; see generally AR at 22–287. The Court
agrees with this assessment. Apart from conclusory statements indicating that Plaintiffs are
engaged in money laundering activities, there is scant information in the redacted
administrative record regarding Plaintiffs’ alleged money laundering activities. Rather, the
unredacted portions of the administrative record consist chiefly of publicly available
information regarding Plaintiffs’ personal and business relationships and activities
unrelated to money laundering. The government does not seem to contest this point. See
Defs.’ Reply at 6 (“Here, by contrast, much of the evidence is privileged, which made
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OFAC’s summaries appropriate.”).
More substantial information is provided in the public press release and the August
Summary of redacted information. In particular, these documents indicate that Plaintiff
Waked Fares co-leads the Waked MLO, “which uses trade-based money laundering
schemes, such as false commercial invoicing; bulk cash smuggling; and other money
laundering methods, to launder drug proceeds on behalf of multiple international drug
traffickers and their organizations.” AR 107; see also AR 290. The press release adds that
Plaintiff Lucia Touzard Romo was one of two attorneys who provided services to the
Waked MLO, including by incorporating shell companies, and that Plaintiff Waked
Darwich, Waked Fares’ son, manages duty-free retail and real estate development
operations, which the press release indicates are allegedly used to launder drug proceeds
on behalf of the Waked MLO. AR 107. The August Summary, in turn, emphasizes the
government’s view that La Riveria Duty Free stores and Plaintiff Groupo Wisa, S.A., “have
been used to launder drug proceeds via bulk cash smuggling and false commercial
invoicing.” AR 290. In particular, the government states that “[c]ouriers for various
international drug trafficking organizations transport bulk cash to and through La Rivera
Duty Free stores, and the drug proceeds are subsequently laundered via the stores using
false invoices, in order to legitimize the illicit funds.” Id.
Unquestionably, however, the most substantive notice provided by OFAC to
Plaintiffs regarding the basis for their SDNT designations is the three-page October
Summary. See AR 294–96. In sum and substance, the summary informs Plaintiffs that the
government views them as principal members of the largest known money laundering
organization in Panama. AR 294. The summary notes that Plaintiff Waked Fares has been
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identified as a Consolidated Priority Organization Target due to his status as co-head of the
Waked MLO. Id. This designation means that he is viewed as a command and control
element of one of the most prolific international drug trafficking and money laundering
organizations. AR 294 n.2.
The summary details the history of Plaintiff’s alleged involvement in money
laundering for international drug cartels, beginning with work for the Medellin Cartel in
the early-to-mid 1980s, and lists several such organizations and the time-periods during
which Plaintiff Waked Fares allegedly provided those organizations with money laundering
services. AR 294–95. Furthermore, the summary explains the manner in which the Waked
MLO allegedly engages in money laundering, indicating that the scheme “involves sending
millions of U.S. dollars in drug proceeds to Colombia and Panama, primarily by smuggling
bulk cash on commercial aircraft.” AR 295. An example is provided of one of the specific
ways in which the Waked MLO allegedly structures and obscures money laundering
transactions. Id.
The October Summary also details the business entities that are allegedly used to
facilitate money laundering, and how those entities are used. For example, the summary
indicates that “[Plaintiff] GRUPO WISA and VIDA PANAMA received bulk drug
proceeds from drug traffickers, including the SINALOA CARTEL, as part of the drug
money laundering scheme. GRUPO WISA and VIDA PANAMA would deposit the drug
proceeds into banks in Panama, sell products to businesses in Colombia, and then use false
invoices to deposit cash as payment for merchandise in banks in Panama.” AR 296.
Similarly, the summary indicates that “[Plaintiff] WAKED FARES owns LA RIVIERA
duty free stores in the Tocumen Airport in Panama City, Panama that are being used to
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launder millions of dollars in drug proceeds. Drug trafficking organizations are transporting
bulk cash in suitcases aboard commercial airlines into Tocumen Airport, delivering the
bulk cash to LA RIVIERA duty free stores and bribing airport officials.” Id.
The summary adds that the Waked MLO also launders money through real estate
investments; and that Plaintiff Waked Fares exercises control over Balboa Bank and Trust,
in which he deposits “bulk cash proceeds moved to Panama,” and through which he
controls “bank accounts for hundreds of companies, real and fictitious, and launder[s] large
sums of drug trafficking proceeds on behalf of [his] clients.” Id. Plaintiff Waked Fares also
is alleged to “use shell companies and property holdings as collateral in exchange for
loans,” and the summary details the manner in which such loans are used to further money
laundering operations. Id. Finally, the summary explains the relationship between Plaintiffs
Waked Darwich and Romo, and the Waked MLO and Plaintiff Waked Fares. In particular,
the summary indicates that “Lucia TOUZARD ROMO (TOUZARD ROMO) provides a
variety of services, including shell and other company incorporation, corporate
development, and customs facilitation, to WAKED FARES, Mohamed Abdo WAKED
DARWICH (WAKED DARWICH), and GRUPO WISA, as well as the WAKED MLO.”
AR 294. Plaintiff Waked Darwich, in turn, is described as “controlled or directed by, and/or
acts for or on behalf of, WAKED FARES as shown by his position as a deputy to WAKED
FARES in WAKED FARES-owned or -controlled companies.” Id.
Consequently, the October Summary informs Plaintiffs of the illicit activities in
which OFAC believes they are engaged; how and where they purportedly engaged in those
activities; during which time periods; for which entities they allegedly performed money
laundering services; and the relationship between Plaintiffs and others implicated in the
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purportedly illicit activities. As noted above, the D.C. Circuit has held that in the context
of SDNT and similar-type designations by OFAC, the notice component of due process is
satisfied by disclosure of the redacted administrative record, and the hearing component is
satisfied by the opportunity to present OFAC with rebuttal evidence, which is provided for
by applicable regulations. Plaintiffs, not without reason, contend that in this matter, the
redacted administrative record does not provide them with adequate notice. The Court, as
did the D.C Circuit in Mojahedin, recognizes that taken to its logical extreme, the notion
that a redacted record will always suffice to provide sufficient notice is clearly wrong; a
completely redacted record provides no notice whatsoever. But that is not the situation
here, and in this Court’s view, the total body of information provided by OFAC to Plaintiffs
satisfies due process as it provides sufficient notice for Plaintiffs “to effectively be heard”
via the post-designation hearing processes administered by OFAC. NCOR, 251 F.3d at 208.
In particular, unlike the plaintiffs in Al Haramain and KindHearts, who were left in the
dark as to the reasons for their designations, Plaintiffs here have been apprised, primarily
via the October Summary, of the government’s view regarding the basis for their
designations, and as such, can meaningfully “proffer rebuttal evidence and arguments to
OFAC to contest [their] designation[s].” Zevallos, 10 F. Supp. 3d at 131.
Plaintiffs challenge this point on several grounds. First, they contend that without
more specific information regarding the transactions that OFAC believes were used to
facilitate money laundering, Plaintiffs cannot meaningfully rebut the evidence underlying
their designations as SDNTs. In particular, Plaintiffs fault the October Summary for failing
to contain any “particularized, verifiable allegation that any Plaintiff knew about or
engaged in sanctionable conduct.” Pls.’ Opp’n and Reply Mem. at 14. According to
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Plaintiffs, in order to comport with due process, OFAC was required to provide notice that
contained statements of the form:
According to Confidential Informant [Redacted], who had credible first-hand
knowledge of the information provided as a result of [X position or role], on
[X date] Abdul Waked did [X sanctionable conduct] at [X duty free store] in
[X country].
Id. at 12. The Court disagrees. First, Plaintiffs cite to no authority supporting their
supposition that this degree of disclosure is required under the circumstances of this case.
To the contrary, the authorities recounted by the Court above expressly permit the
government to rely on classified information, to provide only a redacted administrative
record, and to supply privileged information in summary form. Furthermore, as a practical
matter, the Court disagrees that such detailed information is required for Plaintiffs to
effectively rebut their designations as SDNTs. The government’s accusations against
Plaintiffs are audacious; Plaintiffs are said to be directly involved in the management of
Panama’s largest money laundering organization. That organization is further alleged to
have ties with some of the world’s largest and most heinous narcotics trafficking
organizations. And business entities controlled by Plaintiffs are alleged to routinely engage
in overt acts of money laundering on behalf of such narcotics traffickers. If Plaintiffs decide
to rebut these allegations, they could, for instance, provide OFAC with an independent
auditor’s review of the activities and transactions undertaken by the business entities under
their control. In short, given the nature of the allegations against them, Plaintiffs are not, in
the Court’s view, for want of opportunities to present evidence to rebut those allegations.
Moreover, although Plaintiffs posit that allegations of the form they request “would not
reveal any law enforcement sensitive information,” id., the Court is not convinced; the level
of detail sought by Plaintiffs may very well suffice for the identification of confidential
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information and identities, or otherwise jeopardize ongoing investigations. Plaintiffs also
fault the October Summary for using the “conditional [and] passive tense,” and thereby
relaying “hypothetical scenarios,” because of its use of the word “would.” Id. 12–13. The
Court disagrees with this contention as well. The October Summary uses the word “would”
not to describe hypothetical scenarios, but rather to describe methods that were repeatedly
used by Plaintiffs to effect money laundering transactions. See, e.g., AR 296 (“GRUPO
WISA and VIDA PANAMA would deposit the drug proceeds into banks in Panama”).
In addition, Plaintiffs point out that the administrative record upheld in Zevallos
was far more detailed than the administrative record in this case. Pls.’ Opp’n and Reply
Mem. at 9–11. The Court does not dispute this observation, but agrees with the
government’s view of the matter. Defs.’ Reply Mem. at 6. In Zevallos the government was
able to furnish a substantially unredacted record. Here, for reasons of law enforcement
sensitivity, the administrative record has been largely redacted. Consequently, in order to
apprise Plaintiffs of the basis for their designations, the government has provided them
with unredacted summaries of privileged information. In other words, given the different
circumstances of the two cases, the form of notice in this matter is different from the one
in Zevallos, but ultimately sufficient, for the reasons stated above. The Court is also
sensitive to the government’s need in this case to redact sensitive law enforcement
information, including information regarding the particular law enforcement sources from
which the privileged material was derived, and information that may jeopardize ongoing
investigations. 3 Moreover, unlike the deficient summary of privileged information at issue
3
Plaintiffs also suggest that Defendants were required to produce a privilege log in
conjunction with the redacted administrative record, but cite no authority for this
proposition. Pls.’ Opp’n and Reply Mem. at 16. The case Plaintiffs do cite, Tuite v. Henry,
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in KindHearts, which “provided no explanation of the specific charges [OFAC] was
considering against KindHearts or why it thought the evidence supported a potential
designation,” the October Summary details the bases for Plaintiffs’ designations; and
Plaintiffs, unlike KindHearts, have not contended that they were deprived of due process
due to a delay in receiving adequate notice. See supra at 12–13. Furthermore, the Court
reiterates that the adequacy of notice in this matter is coupled with the opportunity for
Plaintiffs to meaningfully challenge their designations before OFAC through subsequent
requests for reconsideration of their designations as SDNTs. Accordingly, the Court
concludes that Plaintiffs have been afforded post-designation process in a manner that
comports with the Due Process Clause of the Fifth Amendment.
B. APA Requirements
Plaintiffs also claim that OFAC acted arbitrarily and capriciously under the APA by
failing to “follow its own regulations and procedures.” Pls.’ Mem. at 14 (citing Nat’l Envtl.
Dev. Assoc.’s Clean Air Project v. E.P.A., 752 F.3d 999, 1009 (D.C. Cir. 2014) (“Although
it is within the power of an agency to amend or repeal its own regulations, an agency is not
free to ignore or violate its regulations while they remain in effect.” (internal quotation
marks and alterations omitted)). In particular, Plaintiffs claim that “[f]or the same reasons
98 F.3d 1411 (D.C. Cir. 1996), involved a claim of law enforcement privilege in response
to a subpoena issued by private litigants in a civil suit, and not the provision of an
administrative record following agency action. See also FBME Bank Ltd. v. Lew, 209 F.
Supp. 3d 299 (D.D.C. 2016) (“[I]t is far from the norm to require agencies to produce
privilege logs when they exclude material from an administrative record. In fact, the
general rule is that when documents are not part of the administrative record—having been
omitted on privilege grounds—an agency that withholds these privileged documents is not
required to produce a privilege log to describe the documents that have been withheld.”
(internal quotation marks omitted)).
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that OFAC’s provision of an almost-entirely redacted and uninformative administrative
record violates Plaintiffs’ due process rights, it also violates the APA’s statutory mandate
that OFAC strictly comply with its own procedural regulations and that it act
constitutionally.” Id. Plaintiffs seemingly contend that the APA requires the same degree of
post-designation process as the Due Process Clause. See Pls.’ Opp’n and Reply Mem. at 4
(relying on Defendants’ purported concession “that the post-designation notice
requirements of the APA are coextensive with those of the Fifth Amendment”). The Court,
however, has concluded that OFAC comported with due process in its provision of post-
designation notice to Plaintiffs, and moreover, Plaintiffs have not pointed to any regulation
that required OFAC to provide more notice than what has already been provided in this
matter. For the reasons stated above, the Court also disagrees with Plaintiffs’ contention
that the notice in this case is inadequate for Plaintiffs to seek administrative
reconsideration. Pls.’ Mem. at 14. Accordingly, the Court concludes that the provision of
notice in this matter was not violative of the APA.
IV. CONCLUSION
The Court has concluded that Plaintiffs’ claims pursuant to the Due Process Clause
and the APA fail as a matter of law. As such, summary judgment must be entered in favor
of Defendants. Consequently, for the foregoing reasons, the Court DENIES Plaintiffs’ [3]
Motion for Summary Judgment, DENIES Defendants’ [14] Motion to Dismiss, and
GRANTS Defendants’ [14] Motion for Summary Judgment.
An appropriate Order accompanies this Memorandum Opinion.
Dated: April 7, 2017
/s/
COLLEEN KOLLAR-KOTELLY
United States District Judge
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