- The Washington Times - Tuesday, July 15, 2014

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.


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“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.

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