GOP balks at ‘Choke Point’

Democrats say con­cerns of over­reach are ‘po­lit­i­cal the­ater’

The Washington Times Weekly - - National - BY PHILLIP SWARTS

Con­gres­sional Repub­li­cans warned Tues­day that the Jus­tice Depart­ment’s Oper­a­tion Choke Point is us­ing “an axe rather than a scalpel” to tar­get fraud­u­lent businesses, leav­ing le­git­i­mate en­ter­prises such as gun sell­ers as col­lat­eral dam­age.

Oper­a­tion Choke Point, a credit card fraud probe that fo­cuses on banks and pay­ment pro­ces­sors, has sparked com­plaints and crit­i­cism that its threat of en­force­ment is forc­ing some banks to cut ties with cer­tain businesses.

“Equally im­por­tant to the federal prose­cu­tion of al­leged fraud­sters are law­ful meth­ods by which the govern­ment and reg­u­la­tors iden­tify and in­ves­ti­gate those in ques­tion,” said Rep. Patrick McHenry, North Carolina Repub­li­can and chair­man of the House Fi­nan­cial Ser­vices sub­com­mit­tee on over­sight.

The pro­gram is be­com­ing “an ide­o­log­i­cal cru­sade against in­dus­tries pro­filed by the govern­ment through their abu­sive threat of launch­ing federal in­ves­ti­ga­tions,” Mr. McHenry said dur­ing an over­sight hear­ing Tues­day.

Repub­li­cans, con­cerned the pro­gram could be used to deny lines of credit to le­git­i­mate businesses, brought rep­re­sen­ta­tives of ma­jor ju­di­cial and eco­nomic reg­u­la­tory agencies to Capi­tol Hill to tes­tify.

Democrats largely dis­missed the hear­ing as an­other GOP at­tempt to com­bat the White House at ev­ery turn.

“I have a sense that I’m par­tic­i­pat­ing un­wit­tingly in a bit of po­lit­i­cal the­ater,” said Rep. Daniel Kildee, Michi­gan Demo­crat, crit­i­ciz­ing lines of ques­tion­ing from Repub­li­cans such as how the oper­a­tion was named.

Oper­a­tion Choke Point has gar­nered con­tro­versy amid ac­cu­sa­tions of govern­ment over­reach. It was launched in re­sponse to 2008’s eco­nomic col­lapse, which had been caused in part by banks giv­ing loans to businesses and house­holds that could not re­pay their debts.

Federal law en­force­ment of­fi­cers have lauded the oper­a­tion as a tar­geted re­sponse by re­quir­ing banks to with­draw fi­nan­cial ser­vices and sup­port from businesses that en­gage in il­le­gal be­hav­ior.

By pres­sur­ing banks to stop serv­ing risky or il­le­gal com­pa­nies, the Jus­tice Depart­ment hopes swindlers can be cut off from mak­ing de­posits, get­ting loans and ac­quir­ing other fi­nan­cial ser­vices.

“Some banks in vi­o­la­tion of the law ei­ther know about the fraud they are con­sciously fa­cil­i­tat­ing or con­tinue to look the other way,” As­sis­tant At­tor­ney Gen­eral Stu­art Del­ery said Tues­day.

“Our in­ves­ti­ga­tions are about par­tic­u­lar ev­i­dence of fraud by par­tic­u­lar or­ga­ni­za­tions, not businesses act­ing law­fully,” he said. “Con­sumers, when they are the vic­tim of a fraud, face dev­as­tat­ing sit­u­a­tions.”

But Rep. Sean Duffy, Wis­con­sin Repub­li­can, said businesses seem to be tar­geted be­cause the Jus­tice Depart­ment thinks they are fraud­u­lent rather than hav­ing ev­i­dence of wrong­do­ing.

When Mr. Del­ery seemed at a loss to ex­plain how many fraud­sters had been brought to court or con­victed be­fore the Jus­tice Depart­ment asked banks to cut them off, Mr. Duffy lit into him.

“You can’t tell me how many have been ad­ju­di­cated fraud­u­lent?” he said. “And you’ve come in and you’ve told us with a straight face and a straight eye, ‘There is fraud and I’m pro­tect­ing the Amer­i­can people?’”

Mr. Duffy said Jus­tice’s meth­ods are dan­ger­ous re­gard­less of party, warn­ing that groups like Planned Par­ent­hood could be tar­geted if Repub­li­cans were to win the White House.

“We have a federal govern­ment that’s out of con­trol, and we have bu­reau­crats who think they can get a swift idea and im­pose the heavy hand of govern­ment on le­git­i­mate businesses that have no ad­ju­di­ca­tion of fraud,” he said.

Rep. Al Green of Texas, the sub­com­mit­tee’s top Demo­crat, said Repub­li­cans had re­sorted to sim­ply mak­ing ac­cu­sa­tions.

“To­day we have had a lot of anec­do­tal com­men­tary given to wit­nesses that would cause one to as­sume facts that have not been placed in ev­i­dence,” he said. “We have not had em­pir­i­cal ev­i­dence.”

Much fo­cus has been placed on a list that sur­faced from the Federal De­posit In­sur­ance Corp. that names in­dus­try sec­tors at “high risk” for po­ten­tial fraud. In­cluded with pay­day lenders, porn stores and drug para­pher­na­lia shops are gun mer­chants and tobacco sell­ers — businesses that Repub­li­cans say have been po­lit­i­cally tar­geted.

FDIC Gen­eral Coun­sel Richard Oster­man said the list was de­vel­oped with the aid of fi­nan­cial ex­perts and is meant to be a guid­ance for banks of po­ten­tial prob­lems, not a list of who to tar­get.

“There’s cer­tainly been a lot of dis­cus­sion about that list of ex­am­ples and a con­cern that en­ti­ties are be­ing tar­geted that are sim­ply not true,” he said.


Rep. Sean Duffy, Wis­con­sin Repub­li­can, says that Oper­a­tion Choke Point seems to tar­get busi­ness be­cause the Depart­ment of Jus­tice sus­pect they are fraud­u­lent, not be­cause of any ac­tual ev­i­dence of wrong­do­ing.

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