WASHINGTON BRIEF

by Marcia Coyle

Iraq is already under attack – in U.S. courts

A week before Secretary of State Colin Powell made his case before the United Nations for an attack on Iraq, lawyers for American victims of Iraqi torture were in federal court using a new law to attack and attach Iraqi assets.

Their long legal battle - more than a decade in the case of Miami's Andrew C. Hall and his clients - continues after a judge's ruling that Iraqi banks should get 30 days' notice of the victims' plan to seize more than $100 million of their frozen assets to pay court judgments and an additional 30 days to respond.

Sixty days may not seem like a lot of time in the normal course of events, but it is when at lease one of your clients is dying and your country is on the brink of war with the nation whose assets are your target, said Daniel Wolf of Sprenger & Lang, counsel to more than 200 Americans who were held hostage by Saddam Hussein and used as "human shields" by Iraqi security forces to prevent air attacks after Iraq invaded Kuwait in 1990.

They have judgments totaling about $92 million, Frazier v. J.P. Morgan Chase & Co., No. 02-7642. Wolf explained that his lead plaintiff, Jack Frazier, is near death. "And the outcome is uncertain at this very late stage of the game."

His colleague, Hall of Hall, David and Joseph, represents David Daliberti and three other Americans who were working on the Kuwaiti border when they were seized, imprisoned and tortured by Iraq for up to six months. They won judgments totaling about $20 million and Hall is more optimistic that the end is near. Daliberti v. J.P. Morgan Chase, No. 02-9773.

If the Iraqi banks don't show up and assert defenses, "which I suspect they will not," said Hall, "then the order is entered" and the money released by two American banks holding the frozen assets, J.P. Morgan Chase Bank and the Bank of New York.

A number of American victims of foreign terrorists have won court judgments compensating them for their torture, but the problem traditionally was collecting those judgments. They often found themselves pitted against their own government, which opposed the use of frozen foreign assets for paying the judgments because, the government claimed, those funds were important bargaining tools.

Congress addressed the judgment problem piecemeal over the years, freeing funds for some victims, but not for others. But last year, at the end of the congressional session, Congress passed the Terrorism Risk Insurance Act (TRIA), which contains a key provision addressing the frozen assets issue. Under the act, the frozen assets of the seven State Department designated state sponsors of terrorism, or their agencies and instrumentalities, are available to anyone who has won a court judgment. According to reports by the U.S. Treasury Department, the United States has frozen about $4 billion in assets of alleged terrorists or terrorist countries now held in U.S. banks.

Wolf's human-shield clients and Hall's border clients initially sought to execute their judgments in an action against the Treasury Department, J.P. Morgan Chase Bank and The Bank of New York. After enactment of the TRIA, the United States was dismissed as a party.

"We are limiting ourselves to seeking assets held in the name of the government of Iraq or the Central Bank of Iraq or the Rafidain Bank," said Wolf. The two American banks, he added, have said they hold sufficient assets to satisfy the judgments and do not oppose the position to free the assets.

But when they went before U.S. District Judge John Sprizzo on Jan. 27, the banks expressed concern about their own liability if the two Iraqi banks did not receive independent notice of the enforcement proceeding. And they questioned against agencies of designated state sponsors of terrorism.

"The judge basically was faced with how far does the TRIA go," said Hall. "To accept the premise that the block on assets was over was fairly easy. Anything in the name of the Republic of Iraq is clearly available. Governments very often have quasi-governmental corporations through which they do business. The assets of such a corporation also are available. I think the judge indicated that was fairly clear."

"However, he was concerned there be adequate notice given and they have the opportunity to come into court to assert any defenses, recognizing the act pretty much ends the day on it."

The lawyers acknowledge that they "can't control the clock" on a possible war with Iraq.

"On those frozen assets, I don't think there is a situation where you go to war and tomorrow there's a regime change and the next day assets are unfrozen and returned," said Wolf. "I guess it was done that way in Afghanistan, but that was unusual . . .We have liens on this money and we would argue against their return by our government."

Coyle's e-mail address is mcoyle@nlj.com.

Source: The National Law Journal