By Jeremy Pelofsky
WASHINGTON (Reuters) - U.S. officials correctly designated an Islamic charity, Al-Haramain Islamic Foundation (AHIF) Oregon, as supporting terrorism but improperly seized its assets, a U.S. appeals court ruled on Friday.
The U.S. Court of Appeals for the Ninth Circuit ruled the U.S. Treasury Department was correct in finding the organization connected to terrorism because one of its board members was designated by Treasury as linked to terrorism and the group provided money for terrorist activities in Albania and Chechnya.
But the appeals court found the Treasury Department's Office of Foreign Assets Control (OFAC) improperly seized AHIF-Oregon's assets using a "blocking order" to freeze its assets without a warrant supported by probable cause, violating the Fourth Amendment right against unreasonable seizures.
"A blocking order effectively shuts down the private entity," the three-judge panel wrote, noting that it can be very time consuming to appeal such blanket orders when the group is effectively shuttered.
"OFAC's interest in preventing terrorism is extremely high. But we cannot accept OFAC's contention that its blocking orders are per se reasonable in all circumstances, solely by virtue of that vital mission," the court said.
A spokesman for the Justice Department, which represented the Treasury Department in court, declined to comment on the ruling. The judges sent the case back to a lower court to determine any remedies.
The rules for such designations and to freeze assets were adopted soon after the September 11, 2001 attacks by the Bush administration in a bid to choke off financial support to al Qaeda, the group previously led by Osama bin Laden.
The Treasury Department froze AHIF-Oregon's assets in 2004 pending an investigation, saying it totaled just over $20,000. The charity said another $440,000 in proceeds from the sale of some property was also frozen.
After substantial back and forth between the Treasury Department and the organization, in 2008 the government formally designated it as having connections to terrorism-related groups and activities.
One point of dispute involved more than $150,000 sent from the Oregon chapter to the Saudi Arabian chapter of the organization -- and whether it was to be used for humanitarian relief or terrorism.
The case resulted in an embarrassment for the government because the charity was inadvertently given documents that showed authorities had targeted it for wiretaps without a warrant, a much criticized anti-terrorism program by the Bush administration.
The charity was awarded more than $2.5 million in attorneys' fees and damages by a federal judge in that case last year, but the Obama administration has appealed.
(Reporting by Jeremy Pelofsky, editing by Todd Eastham )