Background
Joseph Paul Englehardt and Yvonne Dora Wade were injured in Hezbollah attacks on U.S. diplomatic facilities in Beirut and later obtained judgments against Iran under the Foreign Sovereign Immunities Act’s terrorism exception. Both were approved as eligible claimants of the United States Victims of State Sponsored Terrorism Fund, but their claims remained underpaid because eligible claims substantially exceeded the Fund’s available assets.
British American Tobacco P.L.C. and a subsidiary agreed to pay more than $629 million in criminal penalties and forfeitures arising from an IEEPA conspiracy and a related bank-fraud conspiracy involving business with North Korean entities. The Justice Department placed only about $11 million into the Fund, reasoning that proceeds qualified only to the extent the underlying conduct occurred while North Korea was designated a state sponsor of terrorism. Englehardt and Wade challenged that allocation under the Administrative Procedure Act, but the district court granted summary judgment to the Department.
The Court’s Holding
The D.C. Circuit reversed. Interpreting 34 U.S.C. § 20144(e)(2)(A)(i), the court held that the statute creates two categories of covered offenses. Proceeds from violations of IEEPA or TWEA must be deposited into the Fund regardless of any nexus to a state sponsor of terrorism. Proceeds from a related criminal conspiracy, scheme, or other federal offense qualify only if that offense arises from the actions of, doing business with, or acting on behalf of a state sponsor of terrorism.
BAT’s IEEPA conspiracy fell within the first category because conspiracy is expressly prohibited by IEEPA itself, so all proceeds from that charge belonged in the Fund. The bank-fraud conspiracy fell within the second category, but the entire conspiracy arose from BAT’s business relationship with North Korean state-owned entities while North Korea was designated a state sponsor of terrorism. Because conspiracy is a single continuing offense, the Department could not divide its proceeds transaction by transaction based on when North Korea’s designation was in effect. The court remanded with instructions to enter summary judgment for Englehardt and Wade.
Key Takeaways
- All proceeds from an IEEPA or TWEA violation must enter the Fund, even when the violation lacks a nexus to a designated state sponsor of terrorism.
- The state-sponsor nexus requirement applies to the entire statutory list of related conspiracies, schemes, and other federal offenses.
- For a continuing conspiracy, courts examine whether the conspiracy offense originated in covered dealings with a state sponsor of terrorism, rather than allocating proceeds among its individual transactions.
Why It Matters
The decision requires the Justice Department to place all proceeds from BAT’s IEEPA and bank-fraud conspiracies into the Fund, substantially increasing the assets available to compensate eligible victims of state-sponsored terrorism.
More broadly, the ruling rejects the Department’s longstanding, narrower interpretation of the Fund’s financing provision. It establishes that all IEEPA and TWEA proceeds are covered and that proceeds from a qualifying continuing conspiracy cannot be prorated according to the timing of its component transactions.