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Senate Judiciary Committee Considers Nomination of Operation Choke Point Overlord

Friday, November 6, 2015

Senate Judiciary Committee Considers Nomination of Operation Choke Point Overlord

On Wednesday, the Senate Judiciary Committee held a hearing on the nomination of Stuart F. Delery for the position of associate attorney general of the United States. If confirmed, Delery would become the third-ranking official in the U.S. Department of Justice (DOJ), behind the attorney general and the deputy attorney general. Delery has been serving as “acting” associate attorney general since September 2014. 

The NRA is seriously troubled by Delery’s nomination because of his supervisory role over DOJ’s scandalous Operation Choke Point (OCP). Fortunately, committee members had some tough questions for him on this point. Delery’s unconvincing denials and platitudes in response demonstrate that he does not take seriously the harm OPC, whether intentionally or not, caused to legitimate businesses. The fact that the Obama administration continues to push his nomination shows that it is more interested in rewarding ideological and political fidelity than performance in the pursuit of justice. 

The functions of DOJ, however, are far too important, and the department’s powers too great, to make politics its main function. 

Delery himself had key oversight responsibility for OCP. He approved the operation and its tactics. He also individually approved the investigative subpoenas that resulted in various banks ceasing business with certain industries wholesale, rather than trying to separate good actors from bad within those industries. Attached to the subpoenas that Delery approved were FDIC guidance materials that included a list of supposedly “high risk” merchants and activities. These included sales of ammunition and firearms. This same list appeared in a PowerPoint presentation given in September 2013 to bank examiners at a workshop conducted by officials from the FDIC, Department of Justice, and Office of Comptroller of the Treasury. 

Whatever the true intent of OCP (and DOJ has done nothing to earn the benefit of the doubt on that score), the effect of the government’s tactics was clear: banks were interpreting DOJ’s actions as directives not to deal with certain types of legal businesses. As a result, numerous gun shops and manufacturers lost long-established banking relationships or were refused those relationships in the first place.

Questioners at Wednesday’s hearings pressed Delery hard on these facts. In his opening statement, Chairman Chuck Grassley (R-Iowa) called OCP a “stunning and dangerous” use of government power. He noted that the operation was “sold to the public as merely an initiative to protect consumers from predatory payday lending practices.” Nevertheless, he continued, “we now know based on internal DOJ documents that from the outset it was specifically designed to prey on the banking industry`s fear of civil and criminal liability, with the stated goal of shutting down legal businesses” disfavored by the Obama Administration. He also criticized the broad net the program cast over the banking industry: “three prosecutions out of 60 subpoenas is hardly a justification for the scattergun approach the Department undertook.”

Sen. Grassley went on to confront Delery with documentation that Delery was aware of the negative affect OCP had on lawful industries. DOJ’s response to these developments was to rationalize that if individual businesses were operating lawfully, they should be able to establish that fact with the banks. Yet the banks themselves had in many cases already made the decision that case-by-case determinations invited more scrutiny and pressure from DOJ than they were worth to the bank. 

The toughest questioning, however, came from Sen. Ted Cruz (R-TX). Cruz offered a blistering summary of the program and confronted Delery with examples of actual businesses that had lost banking relationships, not because of poor performance, but because the banks had decided to sever all relationships with the firearm industry. Delery insisted that no firearm businesses had even been investigated or prosecuted. “Choke Point,” Cruz shot back, “was all about using government power to intimidate banks to cut off their money even though they weren’t violating the laws.” The program as it pertained to firearm businesses, Cruz continued, “was not targeted on evidence of fraud but based on an antipathy of the Obama Justice Department to the exercise of the Second Amendment right to keep and bear arms by American citizens.”

Delery uniformly denied any intention to use DOJ’s authority to target lawful businesses. In essence, he blamed the banks themselves for misunderstanding DOJ’s intentions. Yet when bank after bank came to the same supposedly unintended conclusion, DOJ did not change course. Only when Congress itself stepped in to investigate DOJ’s tactics did the department issue public “clarifications” of its objectives to target specific fraudulent actors and not entire industries per se. 

By that time, however, the damage to lawful industries had been done. Reports from the field, moreover, indicate that these industries continue to suffer the residual suspicion of financial service providers, notwithstanding DOJ’s more recent guidance on the professed scope of the program. For many banks, once burned means twice shy.

One of the more ridiculous aspects of Wednesday’s hearing was the repeated insistence of Sen. Al Franken (D-MN) that NRA “agrees” that OCP did not intend to target lawful businesses. To “substantiate” this point, he quoted from an alert we issued on May 2, 2014, as rumors were swirling about OCP in the media. We stated at that point that we had “not substantiated … an overarching federal conspiracy to suppress lawful commerce in firearms and ammunition, or that the federal government has an official policy of using financial regulators to drive firearm or ammunition companies out of business.” We cautioned, however, that “NRA will continue to monitor developments concerning Operation Choke Point and report on any significant activity of concern to gun owners.” We also noted, “The Obama administration's record … certainly provides no reason for confidence.” 

Three weeks later, we posted an update to that story in which we specifically stated, “At the time of [the May 2] report, we were unaware of a ‘smoking gun’ to tie [banks’ decisions to drop or refuse firearms industry business] back to pressure from regulatory authorities,” and noted, “That may be changing.” That second report went on to detail additional evidence on OCP that had since come to light, as well ongoing investigative efforts. 

Since that time, NRA has reported on OCP extensively, including here, here, here, here, here, here, here, here, here, here, and here. Anyone who read these reports could not fail to understand that NRA has been gravely concerned about OCP for well over a year and that whatever OCP’s original justification might have been, DOJ was willing to accept or even embrace its negative affect on the firearm and ammunition industries. Yet Sen. Franken cherry-picked one phrase from an early report to falsely portray NRA’s current position and view of the matter. Certainly, this sort of duplicity does not serve the senator’s integrity or the cause of Delery’s nomination well.

Delery’s nomination has not yet been scheduled for a vote. Based on his unconvincing performance at the hearing, however, and continued unanswered questions about the true origins, design, and scope of OCP, NRA remains deeply troubled by this nomination. America deserves better than senior DOJ officials who are merely tools for the political views and schemes of an ideologically-driven administration. To reward such officials for this behavior with promotions is clearly beyond the pale.

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