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Clancy v. Office of Foreign Assets Control of the United States Dep't of the Treasury

March 11, 2009


Appeal from the United States District Court for the Eastern District of Wisconsin. No. 05 C 580-Rudolph T. Randa, Chief Judge.

The opinion of the court was delivered by: Williams, Circuit Judge.


Before BAUER, KANNE, and WILLIAMS,Circuit Judges.

Having declared a national emergency to deal with the threat of Iraq in 1990, President George H. W. Bush imposed economic sanctions prohibiting unauthorized travel to Iraq and authorized the Treasury Department's Office of Foreign Assets Control ("OFAC") to promulgate regulations in accordance with those executive orders. In 2003, Clancy traveled to Iraq in violation of those regulations and was fined $8,000 by OFAC. Clancy challenged OFAC's regulations on a number of statutory and constitutional grounds, first in a written submission to OFAC and then in federal court. The district court granted summary judgment to the defendants, and Clancy now repeats all of his arguments on appeal. None has any merit.

We first reject Clancy's claim that he was fined without due process. Clancy was given the opportunity to make a written submission (which he did) and to contest OFAC's allegations regarding his unauthorized travel to Iraq (which he did not). Because Clancy is unable to explain how additional or substitute procedures would have guarded against any risk of erroneous deprivation, we are not convinced that additional procedures are constitutionally required.

Next, in light of Supreme Court case law regarding the President's power to impose economic sanctions and international travel restrictions during national emergencies, we are not persuaded that the regulations violate Clancy's Fifth Amendment right to travel or First Amendment right to free speech. See Regan v. Wald, 468 U.S. 222, 242 (1984); Haig v. Agee, 453 U.S. 280, 309 (1981). We also reject Clancy's argument that the regulations are ultra vires, as both the United Nations Participation Act and the Iraq Sanctions Act authorized the President to impose travel restrictions to Iraq. Nor does the International Covenant on Civil and Political Rights, an international agreement that does not address any right to travel that might conflict with these regulations, provide any relief for Clancy. And finally, we do not find arbitrary or capricious OFAC's interpretation of the word "services" to encompass Clancy's actions as a "human shield" in Iraq. Therefore, we affirm the grant of summary judgment in the defendants' favor.


In the summer of 1990, Iraq attacked Kuwait. Announcing that the policies and actions of the Government of Iraq constituted a threat to the national security and foreign policy of the United States, President George H. W. Bush declared a national emergency. Pursuant to his authority under the International Emergency Economic Powers Act, 50 U.S.C. § 1701 ("IEEPA"), President Bush imposed unilateral economic sanctions that prohibited, inter alia, the export of services to Iraq and all transactions relating to travel to Iraq. See Exec. Order No. 12722, 55 Fed. Reg. 31803 (August 2, 1990). Shortly thereafter, the United Nations Security Council adopted Resolution 661, which called upon all states to prevent their nationals and any persons within their territories from remitting any funds to persons or bodies within Iraq. In accordance with that resolution, President Bush issued Executive Order 12724 which, like Executive Order 12722, prohibited "[a]ny transaction by a United States person relating to travel by any United States citizen . . . to Iraq, or to activities by any such person within Iraq." Exec. Order No. 12724, 55 Fed. Reg. 33089 (August 9, 1990).

A few months later, in November 1990, Congress passed the Iraq Sanctions Act, which declared support for the President's actions and for "the imposition and enforcement of multilateral sanctions against Iraq." Iraq Sanctions Act, Pub. L. 101-513 § 586, 104 Stat. 1979, 2047-48 (1990). It directed the President to "continue to impose the trade embargo and other economic sanctions with respect to Iraq and Kuwait . . . pursuant to Executive Orders Numbered 12724 and 12725 (August 9, 1990) and, to the extent they are still in effect, Executive Orders Numbered 12722 and 12723 (August 2, 1990)." Id.

President Bush authorized the Secretary of the Treasury to take actions necessary to carry out the purposes of the Orders. So the Treasury Department's Office of Foreign Assets Control ("OFAC") promulgated regulations that (in relevant part) restricted unauthorized trade, transportation-related transactions, the exportation of services, and financial transactions with Iraq. 31 C.F.R. §§ 575.204-211; 31 C.F.R. §§ 575.702-704. Specifically, the regulations prohibited any "U.S. person" (with the exception of journalists and government officials) from engaging in "any transaction relating to travel" to Iraq, and also prohibited "the unauthorized payment by a U.S. person of his or her own travel or living expenses to or within Iraq." 31 C.F.R. § 575.207. 31 C.F.R. § 575.205 provides that "no goods, technology . . . or services may be exported from the United States [to Iraq]."

The regulations cite several sources of authority, including the Executive Orders, the IEEPA, and the United Nations Participation Act, 22 U.S.C. § 287c(a) ("UNPA"). We note that although the President eventually revoked Executive Orders 12722 and 12724, the orders were in effect at all times relevant to this case.

Violations of these regulations are punishable by monetary penalties. If OFAC has reasonable cause to believe a person has violated these regulations, it must first issue a "pre-penalty notice" stating the facts of the violation and notifying the person of her right to make a written presentation as to why a monetary penalty should not be imposed. 31 C.F.R. § 575.702. Any such presentation "should contain responses to the allegations in the pre-penalty notice and set forth the reasons why the person believes the penalty should not be imposed or, if imposed, why it should be in a lesser amount than proposed." 31 C.F.R. § 575.703. After considering the relevant materials, OFAC notifies the person in writing of its determination. Id. § 575.704.

Clancy, an American citizen and resident of Wisconsin, traveled to Iraq in violation of the regulations. According to OFAC's administrative record, he departed for Iraq on January 28, 2003. He never sought authorization for his travel. He went to protest the war and act as a "human shield" for the "human shield movement," which he had discovered through its website, The goal of this organization was to prevent the United States from bombing Iraq. While in Iraq, Clancy stayed at the Andalus Apartments (a hotel in Baghdad, Iraq), and at a food storage facility north of Baghdad.

Clancy returned to the United States on March 7, 2003. Upon his return, he was stopped and interviewed by a United States customs official. (Clancy had declared on his customs form that he had traveled to Iraq, and his passport bore Iraqi stamps.) According to the report of the customs official, Clancy told the customs official that he traveled to Iraq to protest the war and act as a human shield for the human shield movement, which involved staying at food storage facilities and schools in an attempt to deter the United States from bombing those locations.

A few weeks later, the United States invaded Iraq.

On July 8, 2004, OFAC issued Clancy a Pre-Penalty Notice ("PPN") charging Clancy with the following violations:

On January 28, 2003, you departed the United States with an ultimate destination to Baghdad, Iraq. The cost of the transportation totaled £300, including ground transportation between Amman, Jordan and Baghdad. You arrived in Iraq on or around February 5, 2003, where you stayed in the Andalus Apartments, a hotel in Baghdad, and a food storage facility 30 to 40 minutes north of Baghdad. While in Iraq, you provided services by shielding Government of Iraq facilities from possible U.S. military action. You returned to the United States on March 7, 2003.

The PPN provided the various laws and regulations that governed Clancy's actions and informed him that he could be assessed a civil penalty of $250,000 for each violation. It informed Clancy that he had thirty days to make a written presentation to OFAC responding to the allegations in the PPN. The PPN was signed by R. Richard Newcomb, a director of OFAC.

With the assistance of counsel, Clancy submitted a written presentation to OFAC on August 23, 2004. Clancy declined to waive his Fifth Amendment privilege and stated that for the purpose of his response only, he would accept as true the allegations that he departed the United States for Iraq on January 28, 2003, and that he returned to the United States on March 7, 2003. He did not admit or deny OFAC's remaining allegations. Clancy then made a lengthy legal argument challenging the validity of the regulations and their application to him. He did not dispute the allegation that he stayed at a hotel in Baghdad and a food storage facility north of Baghdad.

OFAC issued a final penalty notice to Clancy, finding that he had violated the regulations as set forth in the PPN, and assessed a civil penalty of $8,000 for his "unauthorized travel to Iraq and exportation of services" because "shielding a Government of Iraq (GOI) infrastructure from possible U.S. military action constitutes services to the GOI." OFAC assessed a reduced penalty of $8,000 because this was Clancy's first offense and because he had submitted a written response. The notice was signed by Robert W. Werner.

Clancy filed suit in the Eastern District of Wisconsin against OFAC and its Director, the Secretary of the Department of the Treasury, and the Attorney General of the United States. The defendants moved to dismiss Clancy's complaint and submitted a certified copy of the administrative record in OFAC's case against Clancy. The district court converted the motion to dismiss to a motion for summary ...

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