Jul
22
Cuba Tourist Files Suit Over OFAC Questionnaire
Posted by Clif Burns at 9:33 pm on July 22, 2009
Category: Cuba Sanctions
Zachary Sanders, a Brooklyn attorney, filed* suit in federal district court against the Office of Foreign Assets Control (“OFAC”) in connection with a $9,000 fine imposed on him by OFAC for failing to respond to a Request for Information (“RFI”) that the agency sent to him in 2000. The RFI sought information about suspected travel by Sanders to Cuba in 1998.
Although courts have tossed out challenges to the constitutionality of the travel embargo, this case presents a different issue. OFAC was not charging Sanders with travelling to Cuba but only with failing to answer questions OFAC asked about whether he had traveled to Cuba. In this case, the issue is whether penalizing Sanders for failing to answer the RFI violates the Fifth Amendment of the U.S. Constitution.
The story begins with Mr. Sander’s return to the United States on July 6, 1998. Customs officials became suspicious because Mr. Sander’s passport and travel papers showed that he had visited Mexico and then returned to the United States through the Bahamas on a transit visa. That, apparently, is a good indication that the traveler likely travelled to Cuba. Mr. Sander’s case wasn’t helped when Customs found a box of Cuban cigars in his luggage that weren’t listed on his customs declaration.
Almost two years later, on March 1, 2000, OFAC finally got around to sending the RFI at issue, which asked Sanders, among other things, whether he had travelled to Cuba, what he had done there and how much he had spent there. On February 13, 2002, OFAC sent a pre-penalty notice relating to Sander’s failure to respond to the RFI. The complaint for failure to answer the RFI was filed with the assigned ALJ on March 2, 2000. By the time that the administrative complaint was filed in 2005 by OFAC, the five-year statute of limitations contained in 28 U.S. § 2462 prevented the agency from including any charges based on the alleged 1998 trip.
A one-day hearing was held before the ALJ on June 27, 2005. It took the ALJ more than three years to write and to issue his five-page opinion, which he finally released on September 4, 2008. Such a lengthy gestation did not prevent the ALJ’s opinion from being an utter mess. Among other things, the ALJ wondered, even though no party argued this, whether OFAC could effectively extend the statute of limitations by simply filing RFIs and starting the five-year limitations period all over again. But after raising this issue, he never bothered to answer it.
More oddly, the ALJ acknowledged that the Fifth Amendment privilege against self-incrimination was applicable to the RFI because of the possibility of criminal prosecution for travel to Cuba. But he nonetheless imposed a $1,000 penalty assessment against Sanders, relying on the U.S. Supreme Court decision in Baxter v. Palmigiano, 425 U.S. 308 (1976), Baxter held that an adverse inference could be drawn in a civil proceeding based on a refusal to testify. Thus, if OFAC had charged Sanders with Cuba travel, it could draw an adverse inference from his refusal to say whether he had been to Cuba and could, in conjunction with other evidence, such as the smoking Cuban cigar box, find him guilty of travelling to Cuba. But the Baxter court did not say, and no court that I am aware of has said, that an agency could impose a civil penalty based solely and directly on a proper assertion of the Fifth Amendment privilege.
Upon review of the ALJ’s recommended decision and order, OFAC accepted everything in it, except the proposed penalty, which it increased to $9,000. Sanders’s district court complaint followed on July 16, 2009, more than 11 years after the alleged trip at issue, making this matter OFAC’s own version of Jarndyce and Jarndyce.
As an interesting detour in this case, Mr. Sander’s application for admission to the New Jersey Bar was denied over the alleged 1998 trip to Cuba and its aftermath, as well as two other Cuba trips not raised by the OFAC proceedings. But the decision ultimately appeared to be based on Sanders failure to declare the Cuban cigars in his baggage which occurred on his first two trips and not on the travel itself or the refusal to answer the RFI. Apparently Sanders finally wised up and, on the third trip, he didn’t pack any Cuban cigars in his luggage.
*PACER subscription required. I haven’t uploaded the large pdf file of the complaint to avoid undue bandwidth costs. If you don’t have a PACER subscription and want a copy of the complaint, email me and I’ll send it to you
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9 Comments:
Clif,
I just love your euphemisms, e.g. “the smoking Cuban cigar box”. 🙂
June Deptulski
All Pacer dockets are available for free at freecourtdockets(dot)com.
Enjoy!
[Clif adds: This comment is highly misleading. In order to gain access to the cases through that docket, you must provide a substantial amount of personal information to the service, including your email address which the site’s privacy policy says it will share with third parties for the purposes of allowing them to send you spam. Use this site at your own risk.]
Given that the United States is the only country that boycotts Cuba, and further given that true Cuban cigars are preferable over the things stuffed in Tampa or elsewhere in Occupied Florida, the presence of Cuban cigars in luggage is in no way indicative of a visit to Cuba. I have encountered Cuban cigars all over the globe. Of course, I never inhaled.
Once again, Clif. I am impressed by the depth of your knowledge. Though I’m not sure how or why a box of Cuban cigars — which can be bought quite easily in Mexico — is valid support for OFAC’s suspicion that Sanders traveled to Cuba.
Also, I saw you quoted in this month’s Report on Research Complianc regarding the Roth case. Very nice!
chris
I agree that the box of Cuban cigars would not alone be proof of travel to Cuba, but coupled with the suspicious itinerary, i.e. going through the Bahamas on a transit visa to return to the U.S., and a refusal to deny that he’d been to Cuba makes a stronger case that he’d been swilling daiquiris at El Floridita. That being said, I think the Cuban embargo is ridiculous and OFAC shouldn’t be spending 11 years harassing people over an alleged Cuba trip. By the way, Sanders admitted to the New Jersey Bar examiners that he had made three trips to Cuba.
Cliff – I’m not familiar with the RFI process. Does it have a firm basis in the OFAC regulations? More to the point, is there a statutory or regulatory requirement that a party receiving a RFI, respond to it? Apart from the 5th Amendment issue, I’m not sure I see a basis for an agency imposing a monetary penalty for a party’s failure to answer questions, if there is no statutory/regulatory requirement for the party to do so. The Baxter desicion would seem to say that a party’s refusal to answer questions, could serve as evidence of an underlying substantive violation – here, travel to Cuba. But does it support a theory that the agency can impose a penalty for the refusal itself, rather than for the underlying substantive offense? I can tell you from my time at Customs, ICE and BIS that we only imposed monetary penalties for failures to provide information, where there was a statutory/regulatory obligation for the party to have done so, such as providing required information in a customs declaration or SED. I can’t recall an instance in which we tried to penalize someone for refusing to answer an investigator’s question (we did charge false statements when someone lied to us, but that’s a significant distinction from failing to respond to a question or refusing to answer it, on 5th Amendment or any other grounds).
Mike, the regulatory authority for the RFI is 31 CFR 501.602. The Trading With The Enemy Act gives the agency, assuming that we are in a time of war (which is another issue), the power to “investigate” dealings with the enemy, but the mere power to investigate doesn’t necessarily mean the right to demand answers and punish failures to answer. One would think that in light of the Fifth Amendment Congressional authorization would need to be clear and explicit to grant that power to the agency.
Another ex OFAC guy weighing in. I always thought of the so-called “602 letter” as essentially an administrative subpoena. A response is compulsory where the respondent has an interest in property subject to a sanctions program, or as 31 CFR 501.602 puts it:
Every person is required to furnish … complete information … relative to any property in which any foreign country or any national thereof has any interest of any nature whatsoever, direct or indirect.
*****
The cigars triggered jurisdiction, I’m wagering. Regarding the 5th Amendment, I think the proper way forward would have been to respond by invoking the privilege. It seems that the complete lack of response is what is being construed as the administrative violation. But I confess, I’m a drive-by commentator who has not digested all the pertinent facts, so add a grain of salt.
One more thing: personally I concede the utter silliness of enforcing the Cuban embargo in any manner, especially under what appear to be all-too-typically picayune circumstances for OFAC’s Civil Penalties Division. These guys seem to breath life in the old axiom, “tripping over quarters to pick up nickels….”
Perhaps, though, the moral is that when OFAC has the arguably legitimate authority to compel the production of information (even if the response is pleading the 5th), the case was meant to confirm the agency’s investigative powers. Just spitballing….
