CA5: OFAC seizure subject to balancing of interest was reasonable

OFAC blocking order was a seizure but was not challenged, and a balancing of interests support the government’s actions so the evidence was not suppressed. United States v. El-Mezain, 664 F.3d 467 (5th Cir. 2011):

We agree with the Ninth Circuit’s assessment of the debilitating effect of a blocking order, but because the defendants have not challenged the order in this case, our analysis begins at a different point than Al Haramain [posted here], and the applicable balancing of interests yields a different result. Here, the unchallenged blocking order gave the Government complete control over both HLF’s assets and the premises and reduced the defendants’ interests to a minimum. As the Ninth Circuit recognized in Al Haramain, the significant effects of a blocking order are “by design.” 660 F.3d 1019, Id. at * 22 (“[T]here is no limited scope or scale to the effect of the blocking order.”). Indeed, a “designation [as a SDT] is not a mere inconvenience or burden on certain property interests; designation indefinitely renders a domestic organization financially defunct.” 660 F.3d 1019, Id. at *10. Further, “[a] blocking order effectively shuts down the private entity.” 660 F.3d 1019, Id. at *22.

The text of the blocking order in this case demonstrates the Government’s control and the virtual elimination of any possessory and privacy interests held by the defendants in the assets and premises of HLF. The blocking order expressly directed all persons to leave the offices. It prohibited the defendants from engaging in any activity involving HLF’s property, and it even prohibited the defendants from occupying the premises without OFAC’s prior authorization. The warrantless imposition of these conditions has not been contested here. Unlike in Al Haramain, we are therefore faced with a presumptively valid order that stripped the defendants of any possessory interests in the HLF offices and assets. Any remaining privacy interest that the defendants had was minimal, and, as we discuss below, was protected by the subsequent warrant obtained prior to the Government’s search.

Balanced against the defendants’ significantly diminished privacy interests is the Government’s “extremely high” interest in preventing actions that could facilitate terrorism. Al Haramain, 660 F.3d 1019, 2011 WL 4424934, at *23. An important purpose of a blocking order is to prevent asset flight, which was a genuine concern in this case. The evidence here showed that the defendants had been funneling millions of dollars to organizations associated with Hamas. They were capable of quickly transferring large sums of money by wire transfer to overseas bank accounts controlled by HLF and others. These accounts were in locations such as the West Bank and Gaza, where they were likely to be beyond the reach of a judicial warrant. The Government therefore had a strong interest in moving quickly to prevent the flight of assets that could be used to further terrorist activity. See 660 F.3d 1019, id. at *23 (recognizing that “’asset flight’ is a legitimate concern”).

In addition to considering the competing interests of the defendants and the Government, we also consider the nature of the Government’s intrusion into the defendants’ interests. We address here an uncontested blocking order that has comprehensively restricted the defendants’ privacy and possessory interests. Viewed objectively, therefore, we believe that the Government’s mere transfer of HLF’s property from the offices to a storage facility pursuant to the blocking order, without invading the contents of the material, did not intrude into the defendant’s privacy or possessory rights any more than was reasonable under the initial blocking order. See Jacobsen, 466 U.S. at 115 (“The reasonableness of an official invasion of the citizen’s privacy must be appraised on the basis of the facts as they existed at the time that invasion occurred.”).

We stress the importance of the fact that the Government took custody of the property without searching it and secured it to prevent unauthorized use, loss, or destruction. As we have said, the Government was already permitted by IEEPA and the blocking order to control the property and the premises, and its transfer of the assets to storage did not further circumscribe the defendants’ interests. Had the Government actually examined the property before obtaining a warrant, this might be a different case.