ACLU helped defeat plan to seize Russian oligarchs’ funds for Ukraine

The American Civil Liberties Union helped scuttle a bill this week that would have enabled the Biden administration to liquidate Russian oligarchs’ assets and turn the proceeds over to Ukraine.

ACLU officials told lawmakers Tuesday that the legislation could run afoul of due-process protections in the US Constitution because it does not allow its targets to challenge the government’s actions in court, according to two people familiar with the matter who spoke on the condition of anonymity to describe private talks. ACLU officials warned that the measure would probably be struck down by the judicial branch if enacted 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 property worth more than $5 million belonging to Russians targeted with sanctions from the US government. Under the bill, those assets could be sold for cash that would then be given to Ukraine for military and humanitarian assistance. The amount of those funds could run in the billions.

On Tuesday night, lawmakers voted to dramatically weaken the measure by turning it into a “Sense 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” through which President Biden could confiscate the assets, after which lawmakers could create a new legislative proposal.

In response to Russian President Vladimir Putin’s invasion of Ukraine, the West sanctioned some of his closest advisers. (Video: Luis Velarde/The Washington Post, Photo: The Washington Post)

The ACLU’s objections to the bill fueled existing concerns among some members of the House Foreign Affairs Committee on Foreign Affairs, two of the people said. A companion bill in the Senate faces an uncertain path to passage, as well, despite bipartisan support. Supporters of the legislation say they will try to resolve the ACLU’s concerns in a revised version of the bill.

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

The jockeying over the House legislation may represent the first part of a much broader debate about what to do with the potentially substantial sums of Russian oligarch assets expected to be seized by US and European officials in retaliation for the invasion of Ukraine.

Russia’s billionaires have about as much financial wealth stashed in offshore foreign accounts as the entire country’s population has in Russia itself, according to a 2017 paper released by the National Bureau of Economic Research. Biden told Russia’s 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 are coming for your ill-begotten gains.”

But what exactly should become of the money has remained an open question. Typically, US sanctions simply freeze the assets of the individual under sanctions. It normally takes a determination by a court of law that a crime has been committed for those assets to be confiscated and then repurposed or sold by the government.

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

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In an interview Friday, Malinowski said that the ACLU was “doing its job … to enforce guardrails of due process and to raise questions about precedent,” adding that the organization had raised legitimate questions. Malinowski said he was open to amending the legislation as needed to protect due process, including by incorporating a new judicial mechanism, but he also expressed determination not to allow seized Russian assets to flow back to that country should the sanctions be lifted after the war.

“There is no way we’re going to return Russia’s wealth to Putin while Ukraine lies in ruin and Ukrainians are burying their dead. It’s not going to happen,” Malinowski said. “So the question is: Do we let these assets sit 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 that US authorities should not be deluded by what he characterized as the false notion that Russian oligarch assets are forms of private property. Instead, Malinowski said, the United States should look at these holdings as a form of Russian state assets — since the Russian state effectively exerts power over their management and use.

“The Russian state is responsible for destroying Ukraine, and these are effectively Russian state assets even if the person whose name is on the title is not Vladimir Putin,” Malinowski said. “This wealth was amassed in a country with no due process, that then takes advantage of due process in our country to protect it. In that sense, we have been totally complicit in the corruption of Putin’s corrupt enterprise and have some responsibility in helping to unravel it.”

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

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Treasury Department officials have provided feedback to congressional staffers on the measure, according to a department spokeswoman, although it has received no formal endorsement from the administration.

Sanctions experts say they struggle to identify previous for the bill.

“The idea of ​​trying to sixteen these assets and use them for some kind of restitution has got a lot of attractive elements to it,” said Richard Nephew, a senior research scholar at Columbia University. “The real issue is it is a fairly significant expansion of sanctions authority. It’s not the kind of thing we usually do. It’s a completely noble goal, but it does not take too much to extend this previous out in ways we may not be comfortable with.”

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

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

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

“The bill was purposefully very narrow on which parties would have been subject to the seizing,” Smith said. “The drafters were sensitive to civil liberties concerns and tried to achieve a balance.”

The fate of the bill remains unclear for now. Norm Eisen, senior fellow at the DC-based Brookings Institution, said the legislation’s constitutional challenges should be resolved in a committee amendment process that provides time for due-process concerns to be resolved.

“Whether it is a revived version of this bill or another alternative, Congress must move with resolve to pass legislation closing the implementation gaps that will make sanctions against Russian aggression even more effective for the long haul,” Eisen said.

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