Litigation against OFAC, Connection to Viktor Bout had been Alleged

Editor's Note: Mr. Chichakli maintains a http://www.chichakli.com information about his case.

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On September 26 the Fifth Circuit vacated in part an Order freezing the assets of Richard A Chichakli by the Office of Foreign Asset Control.

"Richard Chichakli had challenged a “Blocking Notice” issued by the Office of Foreign Assets Control (“OFAC”). He asserts the Blocking Notice was unconstitutional and the evidence was insufficient to support entry of the Notice against him. The district court granted summary judgment on all claims in favor of Defendants. We affirm the district court except for the ruling regarding a taking. We vacate that part of the judgment, as explained below."

In July 2004, President Bush issued an Executive Order, which declared a national emergency with respect to Liberia. The Order authorized the freezing of the assets of 28 individuals, including Viktor Bout, who were deemed to be contributing to the unstable situation in Liberia as well as anyone found “acting or purporting to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this order.”

OFAC later claimed that Chichakli was acting on behalf of Bout. A Blocking Notice was issued, subjecting Chichakli to the sanctions set out in the Executive Order. After OFAC denied reconsideration of the denial, Chichakli filed this suit, asserting violations of his due process rights, of the Takings Clause, and of the Administrative Procedures Act.

The Fifth Circuit did not find any violation of due process for having been denied an opportunity to challenge the freeze prior to its having gone into effect.


The district court had held (1) that the pre-notice deprivation was necessary to secure an important government interest as demonstrated by the Executive Order that declared conditions in Liberia to be a serious threat to the foreign policy of the United States, (2) that there was a special need for prompt action to protect against the transfer of the assets that were subject to the Executive Order, and (3) that the Executive Order narrowly set out the criteria that the Treasury Department could use to identify affected individuals to ensure that the deprivation was not baseless.

Chichakli's also claimed that the Government's actions in freezing his assets constituted an unconstitutional taking without compensation in violation of the Fifth Amendment. The district court held that OFAC's blocking action was not a taking within the meaning of the Fifth Amendment because title to the property never vested in the government.

The Court also ruled that Chichakli's claims were in excess of $10,000 and therefore falls under the exclusive jurisdiction of the Court of Federal Claims. Because the district court did not have jurisdiction to decide this issue, we vacate the district court's judgment as it relates to Chichakli's takings claim under the Fifth Amendment.

Chichakli's also challenged the sufficiency of the evidence that he was purporting to act on behalf of Viktor Bout. We review OFAC's designation of him as someone who was assisting Bout for whether the determination was “arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with law.”

Chichakli's specific challenge is to the relevance and reliability of certain information utilized by OFAC to justify the blocking order. The district court pointed out that the evidence supports the conclusions that Chichakli held senior level positions in several businesses connected with Bout, that Chichakli had a close relationship with Bout, and that he had intimate knowledge of Bout's businesses. Therefore, the district court correctly held that OFAC did not act in an arbitrary and capricious manner in determining that Chichakli acted for or on behalf of Viktor Bout.