Last month a judge approved the government’s forfeiture of the Piaget Building on 5th Avenue because it was secretly owned by the Iranian government. Certainly the taking of a 36 story building in Manhattan is a major victory in the government’s struggle to impose economic sanctions. What is surprising, however, is that the government is not relying on an international trade theory. Instead, it is using a tool designed to punish criminal behavior, that is… forfeiture.
Obviously, anytime an entire skyscraper is taken it’s a newsworthy event. But this case is more than simply sensational. It presents several issues that are not only significant from a legal perspective but also sobering from a civic viewpoint.
Issue #1: Subject Matter Expansion: Using Forfeiture in the IEEPA context.
Regardless of how any person feels about forfeiture, its theories center upon efforts to punish criminal behavior. That is where the Alavi case differs. In this matter the government used a criminal prosecutorial tool to accomplish a geo-political goal.
To be clear, the fact that the government is expanding its forfeiture efforts isn’t surprising. One only needs to look at the increase in assets held by the AFF (Asset Forfeiture Fund) to see that the government manages multiple billions of dollars in assets. By the way, the AFF is only one forfeiture bucket; the Treasury has TEOAF (Treasury Executive Office of Asset Forfeiture) which has its own fund that amassed over one billion dollars between 2011 and 2013. However, it is the use of the IEEPA to do so that makes this case remarkable.
The International Emergency Economic Powers Act (IEEPA) authorizes the President to regulate commerce after declaring that a nation constitutes an unusual and extraordinary threat. Such regulation includes the ability to freeze assets. For example, it was invoked after the Iran Hostage Crisis by President Carter and is applied against Iran today.
Under federal law, violations under the IEEPA are considered specified unlawful activities. This means that property that is “involved in” such violations are subject to forfeiture.
However, usage of the IEEPA for forfeiture ignores the natural distinction between crimes and acts of terrorism. Remember, DOJ efforts to try terrorism suspects in federal civilian courts presented a major controversy just recently. This is because while acts of terrorism involve assault and murder, they seem qualitatively different from crimes typically prosecuted in public courts. This case is an example where the federal government ignores that distinction by introducing a criminal instrument into a political controversy.
Issue #2: Should Property Transfers be Acceptable on the Basis of Nationality?
The act is simple, ownership of any property by the Iranian government within the jurisdictional boundary of the US is prohibited. But, unlike traditional civilian crimes, the IEEPA does not require a meaningful mental state. Instead, the nationality of the owner is the driving factor. That means that even if the Piaget building were used to feed the homeless, because it’s owned by the Iranian government, it stands in violation of the IEEPA.
However, the ability of the government to freeze an asset is distinct from its right to own it. Forfeiture is more than a blockade. It is a property transfer that benefits the government. In a nation that asserts that deprivations of life, liberty, and property are serious is it acceptable to take and keep property based upon nationality?
Let’s be clear, no one will shed a single tear for Iran’s loss of an asset held in the United States, especially if it uses a charitable organization as a front. Let’s be even more clear, the IEEPA is probably supported by the vast majority of Americans for good reason because it applies political pressure via economic sanction.
But let’s not gloss over the fact that forfeiture does more than merely freeze or block an asset, it allows the government to own that asset. These are forfeitures “to the United States” under 18 USC 981 and 982.
National Security is a prime directive and no one seriously disputes the President’s ability to freeze assets of dangerous nations. But is this power subject to abuse? Obviously, world history is filled with efforts by governments to take private property in the name of national security. Some of these efforts have been legitimate and some have been sinister.
These issues simply highlight a much larger question. Is an expansion of forfeiture statutes to encompass matters that have previously been handled in terms of international trade a good idea? Whether it is or isn’t is in the eye of the political beholder. Be that as it may, the government’s taking of a foreign nation’s skyscraper under a stretched civilian forfeiture justification shouldn’t go unnoticed.
The Asset Forfeiture Group at Brown, PC represents businesses and individuals in high stakes and highly contested asset seizure and asset forfeiture cases in both state and Federal courts throughout the United States. For more information about our asset forfeiture practice, visit our web site at www.brownassetforfeiture.com.