Friday, April 27, 2012

Cuba trips triggered never-ending hassle

A New York lawyer said Friday he can't understand why federal authorities are intent on punishing him for a trip he made to Cuba illegally in 1998.

Zachary Sanders said in an interview:
It's a big contradiction ... a Cold War anachronism. You wonder why they pursued this after all this time. Gosh, it's been over a decade already.
Sanders, 38, said he traveled to Cuba without U.S. government permission three times roughly between July 1998 and March 2000. The Office of Foreign Assets Control, a branch of the Treasury Department, fined him $9,000 for failing to complete a questionnaire about his Cuba travels.

His lawyer, Shayana Kadidal, contends that such OFAC questionnaires are unconstitutional because they force travelers to incriminate themselves.

Kadidal said he believes that the Bush administration may have singled out Sanders because he was unrepentant about his Cuba travels and publicly disagreed with U.S. sanctions against Cuba. But he said it's difficult to understand federal authorities' motivation. He said:
That's really the big unanswered question - the fact that they pursued it all these years. It's a very unusual step.
Sanders said after he traveled to Cuba, the FBI questioned him about his friendship with a Cuban diplomat who worked at the United Nations. He said:
I've wondered if that played into it.
If he had to do it all over again, Sanders said he would have tried to go to Cuba legally, particularly given the attention he's gotten from the FBI and OFAC. But he said he isn't sorry that he visited Cuba. He said:
It was very important to me. I wouldn't take that back. I don't regret traveling there. I regret having this over my head lingering.

Sanders said going to Cuba was "really kind of an eye-opening experience for me."

He had been interested in Cuba since he was young and said his mother took part in a Venceremos brigade years ago.

Sanders said he was impressed with high level of education in Cuba and found Cubans "warm and welcoming."

He said he also noticed that people must endure many economic hardships, and he was struck that some tourist attractions were "segregated" and only available for foreign tourists.

Sanders said he would like to return to Cuba one day again but only if he can sort out his dispute with OFAC and find a legal way to travel to the island.

A conference in the case is scheduled for next week.

Sanders' lawyer provided additional background, which I am posting below.

Zachary Sanders traveled to Cuba in July 1998 and was stopped by Customs on his way back into the US, which put his name into the Treasury Department’s enforcement system. He heard nothing further from OFAC (Office of Foreign Assets Control, the part of Treasury that enforces the embargo) for two years.

Meanwhile he attended Cardozo Law School, graduating in 2001. He worked at CCR as an intern during law school (1999).

Two years after that trip, in March 2000, Sanders received a questionnaire from OFAC, entitled “Requirement to Furnish Information” (RFI), asking a series of questions about his travel to Cuba, including demanding itemized receipts for all expenditures in Cuba (all of which are presumptively illegal under the embargo) and other incriminating information, and threatening massive fines if he failed to respond within 20 business days. He made several phone calls to OFAC asking for more time, apparently because he had trouble locating an attorney to respond for him, and eventually failed to respond by the extended deadline. But he heard nothing from OFAC for another two years.

Meanwhile, President Bush was elected, and ramps up enforcement of the Cuba travel ban. OFAC, which is also the agency responsible for counterterrorism money-laundering enforcement, begins diverting resources to Cuba travel enforcement almost immediately, and enforcement efforts become intense during the summer travel season of 2001.

In late 2001/early 2002, OFAC revisits Sanders’ file. But by 2002 it was too close to the five year statute of limitations to go after Sanders for violations of the embargo itself — that is, for his 1998 travel to Cuba. OFAC’s informal position was that they had to be able to initiate a hearing (by issuing a document called an OIP) within five years of the violation or they would regard the case as lapsed. But his RFI was sent two years later than his 1998 trip. So once OFAC decided to go after Sanders, it made sense to go after his non-response to the RFI rather than his travel itself. So OFAC issued him a “Prepenalty Notice” (dated Feb. 13, 2002) indicating that the government intended to fine him for not responding to the RFI. He got a lawyer and requested a hearing. Nothing more happened for about two years.

Meanwhile, after graduating law school in 2001, Sanders had passed both the New York and New Jersey bar exams. He was admitted in New York, where he began practicing as a public interest lawyer. But he was denied admission to the New Jersey bar by the Committee on Character because of his Cuba travel. He appealed, but lost his final appeal to the New Jersey Supreme Court in May 2003 (the New Jersey Law Journal wrote a long story about it; one justice dissented). Based on the story, the bar committee seems to have treated the fine as if it were a final one that he’d decided not to pay, rather than a proposed penalty with a right to a hearing.

Around this time Sanders was diagnosed with testicular cancer; he successfully finished treatment in 2004. (He still today suffers aftereffects of his chemotherapy drugs.)

Sanders received an order sending his case to an Administrative Law Judge (ALJ) for a hearing to decide whether to impose a penalty in 2005. After a day-long hearing on June 27, 2005, the ALJ sat on Sanders’ case for years – presumably because he was troubled by the constitutional issues we raised (see “legal defense,” below), but didn’t really know what to make of them and was scared of the consequences of ruling against the government. So three more years pass, and then, just before he leaves his job, on September 4, 2008 the ALJ issues a decision fining Sanders $1000 for not filling out the form.

In order to bring the constitutional challenges into federal court, Sanders had to appeal to an Treasury appeals officer – the “Secretary’s Designee.” This had been a formality in most cases where the ALJ had imposed a fine: you ask for review, they typically decide not to review your case, and you move on to federal court. Not here: the appeals officer granted review to the government, took briefing, and issued a decision on January 16, 2009, the very last (business) day of the Bush administration that raised Sanders’ fine ninefold – to $9000. There is hardly any reasoning in the opinion other than that the original fine was too low to discourage people from ignoring RFIs in the future. (However, as OFAC acknowledged repeatedly, anyone is free to “respond” by saying that they refuse to answer any of the questions in the RFI per the Fifth Amendment privilege, in which case there is no fine. Also, OFAC settled over 200 travel cases for a standard $1000 settlement from 2001-2004.) Although the original ALJ heard evidence of Sanders’ financial condition in deciding on the $1000 fine, there’s no indication the appeals officer took any of that into account.

As far as I know this is the only case which the appeals officer ever took for review in three years, despite several other hearing cases where travelers had walked away with minimal or heavily reduced fines. In not a single other appeal to the Secretary’s Designee (the official who decides administrative appeals from fines issued by ALJs) was the fine raised or altered in any way.

The administrative appeals officer, Dan Iannacola, Jr., had no prior experience as a judge. In fact he was a random Treasury Department official, the Deputy Assistant Secretary for Financial Education – whose job involved things like speaking at high schools explaining basic personal finance concepts like compound interest. He was only appointed so that OFAC could argue that there was a way for people challenging these fines to eventually reach federal court (since the regs say you have to appeal to in order to then go on to appeal to a federal court). By naming Iannacola to fill the appeals officer position, OFAC managed to get a suit CCR brought in 2005 dismissed.

Sanders personally is quite sympathetic. He’s spent his entire legal career in public interest – he was working with Central American Legal Defense when I first met him, and then hanging his own shingle out for immigration cases. His income has averaged $29,000 a year since law school (which is less than tuition at his law school). Sanders had cancer during the pendency of the ALJ case (circa 2004). Sloane Kettering forgave his cancer bills because of financial hardship. (Of course, our clients who used to make hardship claims to OFAC were frequently told “well, how could you have afforded to go to Cuba if you are so poor now?”)


There are other cases where people are fined for not responding to the questionnaire, but usually those people don’t know they have been fined because the reason they’ve not responded is that the forms have gone to the wrong address – they’ve moved, etc. – and so they never get any of the forms (neither the questionnaire nor the subsequent form telling them the government wants to fine them for not answering the questionnaire and that they can ask for a hearing).

These defaults occur at a pretty regular pace: for the one period where we did a study from OFAC’s web site (which began disclosing final dispositions of cases circa 2003), we saw 14 in the first 22 months of OFAC publishing the data. All were for penalties in the amount of $10,000, which is the standard maximum penalty OFAC sets forth in RFI-nonresponse cases, and that amount is now spelled out by regulations.

(In a 2005 press release, we said that we had a case where OFAC was trying to fine someone $10,000 for not responding to the RFI even though the underlying travel was licensed. We are trying to track down that file.)

Three other similar CCR cases essentially settled for zero, despite the fact that they all involved default penalties (where the government is nearly immune to later challenge in court). In the past I suspect that OFAC’s qualms about the constitutionality of this sort of penalty were reflected in these settlements. Three different times we made similar arguments to OFAC, and each time they effectively dropped the penalty for RFI non-response: (1) once for M.G. (CU-178601), who had a default penalty for not responding to the RFI (and then not requesting a hearing) of $10,000 (over $14k with interest) that OFAC dropped in 2005 in exchange for our not pursuing planned litigation; (2) once for a Ms. A.F., same situation as M.G., same result (CU-166281/178295 and federal case 04-cv-957 (D.D.C.)); and (3) in the case of a law student named D.S. (CU-171682), who had a default penalty of $17,500 ($7500 for travel and $10,000 for RFI non-response), OFAC settled for $1500 – barely more than the standard $1000 they used to settle $7500 travel violations for. In fact, we tried to add M.G. to a class action we tried to file against OFAC that Sanders was name plaintiff in in 2005; OFAC dropped its claims against M.G. but not against Sanders. (That suit was eventually dismissed for technical “standing” reasons while Sanders’ case was before the ALJ.)

The disparity here makes it seem as if OFAC has a particular vendetta against people who, like Mr. Sanders, are perceived of as ideological travelers, the sort of vendetta that the news coverage of his New Jersey bar admission saga also conveys well.

In the past OFAC has open to charges of ideologically-motivated or otherwise disparate enforcement of the travel restrictions. The charges against Theron Mills and two other Methodists on a trip to Cuba to rebuild churches are one widely reported example: their white pastor and fellow congregants were scolded but waived thru the line by the same customs agent who initiated civil penalty paperwork against her and other black members of the party. Eventually bad press forced OFAC to drop its charges circa 2004.

To my knowledge Sanders’ case is the only Cuba travel case currently being litigated in the federal courts, but it’s nearly impossible to ascertain that with any certainty.

In fact only about 9 Cuba travel related cases ever had administrative hearings (including Sanders’). In the 1992 Cuban Democracy Act, Congress mandated hearings before OFAC could impose civil penalties, but OFAC never had administrative law judges in place to hold hearings until several years into the Bush administration. (Hundreds of other cases either settled before hearings, or defaulted when people failed for whatever reason to respond to OFAC’s pre-penalty notices by request a hearing.)


CCR represented 425 Cuba travelers from 1998 thru 2001 and trained hundreds of lawyers to represent others after our caseload became too large. In our experience, OFAC’s enforcement was aimed at non-Cuban Americans and ideological travelers (people who went not for a cheap vacation but in primarily order to examine Cuban society first hand, or out of sympathy with the Cuban government) in particular. A 2004 report on the embargo by a government panel chaired by Colin Powell showed that some 90,000 family travelers made some 120,000 family travel trips annually – in other words, almost 30,000 repeat travelers went, despite the fact that specific licenses are required prior to a second annual trip and are rarely issued by OFAC. That means Cuban-Americans account for approximately half the estimated unlicensed travel to Cuba, but out of CCR’s 425 clients (about one-third of the total number of cases initiated by OFAC during that period) only 4 were Cuban Americans – less than 1% of enforcement from 50% of unlicensed travelers.

Nor is the embargo aimed at stopping cash from flowing into the Cuban economy. Family travelers are the most frequent category of traveler to the island, and family travel is permitted rather freely. More importantly, each Cuban-American is allowed to make remittances to individual Cubans of up to $3000 a year. (Currently, it’s $2000 per year per person. ) Overall, remittances amounted to approximately 10% of the Cuban economy when Sanders’ case was before the ALJ. The regulations permitting these remittances are in the same part of the Code of Federal Regulations as the travel restrictions!

The embargo hasn’t “worked” (on its own terms) in its nearly fifty years in place – except (1) to give the Cuban government a ready excuse for all its shortcomings and (2) to serve as an embargo on American ideas and influence by stopping American travelers from visiting the island. Instead, the embargo is all about politics, and discriminatory enforcement is one part of that package.

The agency enforcing Cuba travel, OFAC, is also responsible for counterterrorism finance enforcement. While they were supposed to be chasing down Osama bin Laden’s supposed $300 million offshore, “[o]f 120 employees at the Office of Foreign Assets Control …, 21 are dedicated to enforcing the Cuba embargo and travel ban, with only four total working on tracking down Osama Bin Laden and Saddam Hussein’s finances.”


In the mid-1960s Dr. Timothy Leary was arrested on the Mexican border with drugs. Federal tax laws at the time required that anyone in possession of various recreational drugs had to file an excise tax return, effectively reporting their possession to the IRS, which would then turn the people in to state authorities for prosecution. Leary’s case went to the Supreme Court (CCR’s former legal director during Sanders’ hearing, Jeff Fogel, worked on it as a Rutgers student). The court overturned Leary’s conviction for failure to file his marijuana tax return. Leary v. United States, 395 U.S. 6 (1969). The ruling not only overturned a popular figure’s 20 year prison sentence, but also invalidated the entire scheme of federal narcotics regulation. (The “federal tax – state prohibition” scheme was created because scholars doubted the power of the federal government to ban marijuana directly. After Leary, Congress simply asserted that power by creating federal bans on narcotics possession, and the courts upheld it—the same basic debate about the scope of the Commerce Clause of the Constitution that continues today with the Health Care Act!)

Leary means that the Fifth Amendment prohibits the government from punishing failure to obey any regulation that requires an incriminatory act, so long as the records are not “required records” under the Court’s precedents in Marchetti and Shapiro v. United States. (To constitute “required records,” the information requested must be (1) records of the same kind as Plaintiff has customarily kept, (2) must have “public aspects” (keeping in mind that “[t]he Government’s anxiety to obtain information known to a private individual does not without more render that information public”), and (3) must be in an “essentially non-criminal and regulatory area of inquiry” as opposed to being directed to a “selective group inherently suspect of criminal activities.”)

The RFI questionnaire Sanders received was directed at a select group of people—Cuba travelers—suspected of criminal activity (violating the embargo), and it requested keeping of records not customarily kept (e.g. receipts of all transactions). Therefore, we believe the government violated the rule of Leary when it attempted to penalize Sanders’ failure to respond to his RFI..

Keep in mind what’s unusual here is that you can get not just civil penalties but also criminal prosecution for violating the Cuba embargo. So it’s not like the government is asking benign questions in the RFI—the answers to the questions on the RFI can theoretically land you in prison. Ordinarily when government wants to get answers in this sort of situation, they bring you before a judge who supervises the process of conveying immunity from criminal prosecution in exchange for the evidence.

OFAC mostly is concerned with its ability to demand information from corporations, which would be unaffected since corporations do not have Fifth Amendment privilege.


John said...

This is a very beautiful and interesting article
The most glamorous one i have read today!

GED Online

Karen McCartney said...

The ban on Us citizens travelling to Cuba makes an absolutely mockery of any pretensions the Washington government has to democracy. I lived in Cuba for six years and there is nothing that US citizens or anyone else needs to be protected from. Perhaps the powers that be fear that ordinary tourists travelling from the US to Cuba will discover that the country is not how they portray it, as some sort of Communist hell.

anon said...

nice one