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Stuck on a U.S. Government Blacklist?

Stuck on a U.S. Government Blacklist?

One of Erich Ferrari’s clients is sitting in a Peruvian jail. Two are alleged associates of a former Liberian strongman. Others are accused of having links to various international drug rings. Ferrari isn’t a standard defense attorney, and his clients haven’t been formally charged with any crimes. They’ve instead been put on one of the U.S. government’s various blacklists. They’ve hired Ferrari to get them off.

"I guess I’m the only person in the world who feels bad for the narco-kingpins and the WMD proliferators," he said in a recent interview, speaking on the phone from Los Angeles. He’s part of a small cottage industry that has developed around the U.S. government’s sanctions program. Ferrari has a four-person firm that helps people — mostly non-U.S. citizens — appeal the government’s decision to freeze their assets and cut them off from the U.S. financial system. So far, he has succeeded with four of them, and one has been rejected. He has 16 cases pending.

The U.S. government’s financial sanctions programs have been credited with bringing Iran to the negotiating table by decimating its economy and driving the value of its currency to record lows. But they’re not just used against Tehran. Alleged drug kingpins, associates of deposed war criminals, and supporters of various dictatorships also find themselves on the Treasury Department’s target list. The key innovation in these modern sanctions is the ability to target individuals and companies and make it illegal for U.S. banks and companies to interact with them. Putting trade embargoes into place against countries like Cuba hasn’t worked, but pressuring specific individuals and companies has. Ferrari is one of a small group of lawyers making a good living relieving that pressure.

Ferrari has an office across the street from the Treasury Department, but he makes his legal arguments through documents, not in person. There’s no courtroom for blacklist cases and no judges or juries that can hear his case. Ferrari always asks for a meeting, but he almost never gets one. "In my almost seven years, eight years of doing this, I’ve been allowed in twice," he said.

Getting a client off one of the blacklists isn’t easy. Many blacklist decisions are based on confidential information gathered through the State Department or intelligence agencies, so Ferrari is often not allowed to see the evidence against his clients. The government normally responds to his petitions with news articles, blog posts, or even its initial press releases about the person’s alleged crimes. In other words, the Treasury tells people they’re guilty by pointing to one of the government’s own earlier pronouncements of their guilt. That often leaves lawyers guessing as to what officials are basing their decisions on.

"The biggest problem in getting off the list is knowing the grounds for being placed on the list," said Ron Meltzer, a partner at WilmerHale who has worked on a handful of sanctions petition cases. "It’s a Kafkaesque hell because there’s no way to understand the parameters or the ground rules or anything."

Lawyers who’ve worked on these cases say it’s a long, difficult process that can take years and cost tens of thousands — and sometimes millions — of dollars. There aren’t a ton of cases because most people never challenge their designation. The cases are hard to win, and because the clients can’t access their money, it can be hard to get paid.

The Treasury Department says people who have stopped doing the activity that got them on the blacklist can send in a petition to have the sanctions lifted. But that doesn’t necessarily mean much in practice: Because the petitioners are not U.S. citizens, they’re not entitled to the rights of the American justice system, including presumption of innocence, notice of the charges against them, or a trial before their peers.

"Usually we want to see that they admit to the bad behavior," said a Treasury official with the Office of Foreign Assets Control (OFAC). "If the person comes in and continues to deny the bad behavior, the process can be very long."

Douglas McNabb, a lawyer who has worked on some of Ferrari’s cases with him, says that the unwritten Treasury rules put attorneys in the difficult position of appealing to the very officials who put their client on the list in the first place.

"You can’t successfully argue to OFAC that they screwed up because they won’t admit they’re wrong, but you can’t admit to a federal crime either," McNabb said.

Ferrari’s own work routinely brings him to Asia, the Middle East, and Africa to meet his blacklisted clients. The meetings are very different from what lawyers normally see in the United States.

"I’ve never been held at gunpoint, but there have been meetings I’ve gone into that have had a lot of security and bodyguards" with guns, he said.

And he did once step into a cheetah cage while visiting a potential client. He was on the way to a meeting in a foreign country — he wouldn’t say which one for fear of identifying the person — and then he was told that the meeting had been canceled and they were going to the zoo. At the zoo he and his colleague were told to get into the cheetah cage. He wasn’t forced in, but very large men strongly made clear that they wanted him in the cage.

"I wasn’t sure if they were trying to give us an experience or trying to intimidate us," Ferrari said. "We were very specific that we weren’t going into the cheetah cage, and they were like ‘No, you must.’"

Ferrari and his colleague obliged, stepped into the cage, and watched the cheetahs move around them as the zookeeper removed the meat the animals had been snacking on. After a few minutes, they were let out and told that they could proceed to see their host. Ferrari had the meeting, but didn’t end up getting the job.

"We haven’t seen any evidence that this person engaged in any wrongdoing, but the whole trip was strange and intimidating," Ferrari said. Most of his meetings, he added, are far more mundane sessions with people who want to get access to their frozen assets, salvage their reputations, or clear up the stigma that their designation attaches to family members.

"They’re typically older businesspeople who have no idea how they got on the list," Ferrari said.

The list is maintained by the Treasury Department, which uses the United States’ position as a hub of global finance and its oversight of banks that operate in the United States to make sure those banks don’t serve blacklisted companies and people. If the banks don’t comply, they are faced with large fines and possible secondary sanctions. No global bank wants to be shut out of the U.S. financial system, so even when the United States is acting alone, the sanctions are usually taken up by foreign banks with connections to the United States.

Adam Szubin, the Treasury Department official in charge of the program, said in 2006, "All financial roads lead to New York." Effectively, people on the list are prohibited from interacting not just with U.S. banks and credit cards companies, but also with any company in another country that wants to be able to do business with the United States.

Ferrari is a tall, clean-cut guy in his early-30s. He was born in Miami and grew up in Pittsburgh. He is Iranian-American but has never been to Iran. He notes that U.S. sanctions against the Iranian government date back to exactly a year before he was born. He got involved in terrorism law as a research fellow in law school and started working on sanctions cases after graduation. Dressed in the slightly oversized suit that is Washington’s signature style, he wouldn’t stick out in a crowd of D.C. lawyers who make a living asking the government for one thing or an
other. But his clients set him apart.

One of them, Mozambican businessman Mohamed Bachir Suleman, has tearfully denied the Treasury’s allegation that he is a large-scale drug trafficker, according to the Associated Press. The Treasury alleges that Suleman runs drugs and launders money through his family business, retail store, and shopping mall. He petitioned the Treasury three years ago and is still waiting for a decision.

Another woman has a company that is on the list because of alleged dealings with Iran Air, which has been sanctioned as part of the broad sanctions against Iran that are related to its nuclear program. Ferrari says many people end up on the list because of business deals with companies that they didn’t know were blacklisted.

One client is a Syrian businessman who allegedly supported Bashar al-Assad’s regime. Ferrari said he’s alleged to be related to President Assad through marriage, but Ferrari says that’s not true.

Another client owns a hotel in Dubai that Ferrari says the Treasury alleges has a very similar name to a hotel a few miles away that is owned by someone else on the blacklist. "I had to print the map out showing them that they were two different hotels," Ferrari said.

Other clients are already in jail, which Ferrari says should get them off the list because they literally can’t be doing the activity for which they’ve been sanctioned. One of them is in jail in New York. He’s an associate of convicted Russian arms trafficker Viktor Bout, and he’s on the list for allegedly helping former Liberian warlord Charles Taylor.

Another client owned the largest airline in Peru, Aero Continente, before he and his company were designated in 2004. Fernando Zevallos says his designation as a drug kingpin caused criminal authorities to come after him in Florida, where he was indicted for violating sanctions, and in Peru, where he was convicted and sent to prison. The Treasury says he’s a "major figure in Peruvian narcotics trafficking activities." After he was imprisoned in Peru, Treasury went back in 2009 and sanctioned his four sisters, a brother, eight associates, and his mother, whom they believe took over the business.

Lawyers can take their cases to court if the petition process doesn’t work. Ferrari has done that with Zevallos, who has been accused of running a drug business through his airline. It took the Treasury eight years to even respond to his request to get off the blacklist, and the department said no. He’s hoping to have better luck in court.

"You can’t let someone languish on a list for eight years," Ferrari said. "That’s absurd." The government has asked a court to dismiss the case, but the judge has not yet ruled.