ACLU helped foil scheme to seize Russian oligarchs’ funds for Ukraine

The American Civil Liberties Union this week helped defeat a bill that would have allowed the Biden administration to liquidate the assets of Russian oligarchs and return the proceeds to Ukraine.

ACLU officials told lawmakers on Tuesday that the legislation could run counter to due process protections in the U.S. Constitution because it does not allow its targets to challenge government actions in court, according to two people familiar with the matter who spoke on condition of anonymity. to describe private conversations. ACLU officials warned the measure would likely be struck down by the judiciary if passed as proposed, giving Russia a potential propaganda victory over the United States, the people said.

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The legislation — co-sponsored by Reps. Tom Malinowski (DN.J.) and Joe Wilson (RS.C.) — would have allowed the Biden administration to confiscate assets worth more than $5 million from Russians who had been sanctioned by the United States Government. Under the bill, those assets could be sold for cash that would then be given to Ukraine for military and humanitarian aid. The amount of these funds could be in the billions.

On Tuesday night, lawmakers voted to significantly weaken the measure by turning it into a “meaning of Congress” resolution that does not create the new authority. The amended measure also creates a task force giving the Biden administration 60 days to “determine the constitutional mechanisms” by which President Biden could confiscate the assets, after which lawmakers could create a new legislative proposal.

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The ACLU’s objections to the bill have fueled existing concerns among some members of the House Foreign Affairs Committee who were already uncomfortable about it, two people said. A companion bill in the Senate also faces an uncertain path to passage, despite bipartisan support. Proponents of the legislation say they will try to address the ACLU’s concerns in a revised version of the bill.

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“This bill was so unconstitutional that it raised the possibility that a sanctioned Russian national could win in a US court, which would likely have struck down both the law and the sanction as unconstitutional,” said Christopher Anders , director of federal policy for the ACLU. , in an interview.

The House legislation jockey may represent the first part of a much larger debate about what to do with the potentially large sums of the Russian oligarch’s assets that are set to be seized by US and European officials in reprisals for the war in Ukraine.

According to a 2017 article published by the National Bureau of Economic Research, Russian billionaires have about as much financial wealth hidden in offshore foreign accounts as the country’s entire population has in Russia itself. Biden told Russian oligarchs at the State of the Union that the United States and Europe would work to “find and seize your yachts, your luxury apartments, your private jets. We come for your ill-begotten gains.

But what exactly will happen to the money has remained an open question. Typically, US sanctions simply freeze the sanctioned person’s assets. It normally takes a court determination that a crime has been committed for these assets to be confiscated and then reused or sold by the government.

Malinowski and Wilson said an accelerated approach to this process was warranted because of the extraordinary atrocities reported in Ukraine. Their bill would have given Biden new unilateral power to liquidate and sell the assets of Russian oligarchs — power typically available to the president only when a declaration of war has been made, according to sanctions experts. The Fifth Amendment to the Constitution states that no person shall be “deprived of life, liberty, or property without due process.”

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In an interview Friday, Malinowski said the ACLU is “doing its job … to enforce the guardrails of due process and to raise questions about precedent,” adding that the organization has raised legitimate questions. Malinowski said he was willing to change the law if necessary to protect due process, including incorporating a new judicial mechanism, but he also expressed his determination not to allow the return of Russian assets seized in this country. if the sanctions were lifted after the war.

“It is out of the question for us to return Russia’s wealth to Putin while Ukraine is in ruins and Ukrainians are burying their dead. It’s not going to happen,” Malinowski said. “So the question is: do we let these assets rest somewhere for decades subject to uncertain litigation, or do we find a way to use at least some of them to rebuild the country that Putin is destroying. ? ”

Malinowski also said US authorities should not be misled by what he said is a misconception that the assets of Russian oligarchs are forms of private property. Instead, Malinowski said, the United States should view these assets as a form of Russian state assets — since the Russian state effectively wields power over their management and use.

“The Russian state is responsible for the destruction of Ukraine, and it is indeed Russian state property even though the person whose name appears on the title is not Vladimir Putin,” Malinowski said. “This wealth was amassed in a country without due process, which then takes advantage of due process in our country to protect it. In that sense, we have been fully complicit in the corruption of Putin’s corrupt business and bear some responsibility in helping to unravel it.”

Malinowski said the legislation would also apply to frozen Russian central bank funds that had been kept overseas. He added: “It would not be a good outcome if we let our commitment to property rights and due process allow for the return of assets that were stolen precisely because these people destroyed property rights and due process in Russia”.

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Treasury Department officials provided information to congressional staff on the measure, according to a Treasury spokeswoman, although she received no formal approval from the administration.

Sanctions experts say they have trouble identifying a precedent for the bill.

“The idea of ​​trying to seize these assets and use them for some sort of restitution has a lot of appeal,” said Richard Nephew, a senior fellow at Columbia University. “The real problem is that it’s a pretty big expansion of sanctions authority. It’s not the sort of thing we usually do. It’s a very noble goal, but it it doesn’t take too much to extend that precedent in ways we may not be comfortable with.

Malinowski pointed to the US government’s decision to refuse to seize Afghan central bank reserves as a potential precedent for the bill. He added that lawmakers also have the ability to create new authorities.

The ACLU’s position on the bill may not be politically popular at a time when Republicans and Democrats are calling for more punitive measures against Russia. But that’s consistent with the organization’s history of championing unpopular causes on principle. The ACLU defended the free speech rights of alt-right commentator Milo Yiannopoulos in 2017, and in 2020 defended the rights of Michigan anti-Semitic protesters picketing a synagogue.

Adam M. Smith, a partner at Gibson Dunn and a former Obama administration sanctions chief, said the bill was carefully crafted to achieve a kind of “karmic justice” for Ukrainians.

“The bill was deliberately very narrow on the parts that would have been subject to seizure,” Smith said. “The editors were sensitive to civil liberties concerns and tried to strike a balance.”

The fate of the bill remains uncertain at this time. Norm Eisen, a senior fellow at the DC-based Brookings Institution, said constitutional challenges to the legislation should be resolved through a committee amendment process that allows time for due process issues to be resolved.

“Whether it’s a revived version of this bill or another alternative, Congress must act decisively to pass legislation that closes the implementation gap that will make sanctions against Russian aggression even more effective in the long run,” Eisen said in an email.

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