Top Ten Worst Facts Uncovered About Operation Choke Point

posted June 9, 2014

From Chairman Darrell Issa’s Oversight Committee Report

Impact on Lawful Merchants

1. DoJ acknowledged that Operation Choke Point (OCP) would intimidate banks from working with entire legal industries: “Although we recognize the possibility that banks may have therefore decided to stop doing business with legitimate lenders, we do not believe that such decisions should alter our investigative plans.” –Six-Month Status Report on Operation Choke Point, prepared for Assistant Attorney General Delery on September 9, 2013

2. The Administration is targeting select industries without warrant. “…FDIC provided no explanation or warrant for the designation of particular merchants as ‘high-risk.’ Furthermore, there is no explanation for the implicit equation of legitimate activities such as coin dealers and firearm sales with such patently illegal or offensive activities as Ponzi schemes, racist materials, and drug paraphernalia.” –Committee Report

3. DoJ knew this would put the burden of proof on companies to prove their innocence: “Such an expectation – ‘if they are legitimate, they can prove it’ – is patently absurd, and reminiscent of the formulation that ‘if one is not a witch, then they will sink rather than float.’” –Committee Report

An Illegal Initiative

4. DoJ is applying FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act of 1989) illegally: “Ultimately, the Department’s tortured legal analysis has turned FIRREA on its head: Section 951 was intended to help the Department defend banks from fraud; instead, the Department is using it to forcibly conscript banks to serve as the ‘policemen and judges’ of the commercial world.” –Committee Report

5. The Administration tried to hide OCP from Congress. “…the Deputy Assistant Attorney General refused to provide basic information unrelated to specific investigations, such as the level of return rate sufficient to trigger an investigation, or the identity of the individual to whom the Attorney General had delegated his Section 951 subpoena authority.” –Committee Report

6. DoJ deliberately went after banks and industries rather than fraudulent merchants. “…This may mean filing civil complaints or criminal cases against banks based on transactions with fraudulent merchants and/or processors – but not filing actions against the underlying fraudulent merchants or processors. This practice is not optimal and may present litigation risks.” –Six-Month Status Report on Operation Choke Point, prepared for Assistant Attorney General Delery on September 9, 2013

7. DoJ is more interested in meeting quotas than in actually combatting fraud: “I propose that we identify and engage ten suspect banks within 150 days. This alone is likely to cause banks to scrutinize their account relationships…Moreover, our efforts will positively sensitize the banking industry to third-party payment processor risks.” –Memorandum from Joel M. Sweet, Assistant United States Attorney, to Stuart F. Delery, Acting Assistant Attorney General, November 5, 2012

Government Overreach and Abuse of Power

8. DoJ recruited other agencies to help execute OCP. “We have garnered additional resources to implement Choke Point – at no cost to the Department – including two Postal Inspectors, two Postal Inspection Service analysts, an FBI analyst, an FTC attorney assigned as a Special Assistant U.S. Attorney…” –Six-Month Status Report on Operation Choke Point, prepared for Assistant Attorney General Delery on September 9, 2013

9. Bank examiners and public interest attorneys knew more than Congress. “We recently addressed more than 300 public interest attorneys at the annual conference of the National Consumer Law Center…We estimate that more than 1,000 bank examiners have attended our presentations…” –Email memo from Maame Ewusi-Mensah Frimpong, Deputy Assistant Attorney General, to the Staff of the Offices of the Attorney General, Deputy Attorney General, and Associate Attorney General, November 21, 2013

10. Personnel at the DoJ are arbitrarily crafting policies that affect entire industries. “Given where we are in the development of this work, & the growing momentum around it, now is the right time to design and execute a specific operation. Joel [Sweet] is the perfect person to do this…It is a way to augment capacity efficiently within existing resources.” –Memo from Michael S. Blume to Stuart F. Delery, Acting Assistant Attorney General, comments by Maame Ewusi-Mensah Frimpong.