Lawsuit seeks federal investigation into US groups funding settlements

A federal lawsuit filed last week alleges that U.S.-based tax-exempt entities who raise money for Israeli settlements are engaged in money-laundering and other crimes, and seeks a Treasury Department investigation into those activities.

The suit, filed by the firm Martin McMahon and Associates on behalf of plaintiffs like Palestinian-American writer Susan Abulhawa, details a host of violations they say tax-exempt organizations commit. The suit alleges that the estimated 100 organizations are violating laws on money laundering that prohibit the transfer of money to assist illegal activities. In addition, the lawsuit says the organizations violate other U.S. laws that prohibit mail fraud, war crimes and the financing of terrorism.

Unlike past lawsuits on this issue, this one does not directly take aim at the entities themselves, though the suit is harshly critical of them and alleges they are engaged in the funding of crimes. Instead, it is asking a court to direct the Treasury Department to investigate whether the organizations, which include groups like the Hebron Fund and American Friends of Ariel, have violated federal regulations on the conduct of 501(c)(3)’s. They say that the Treasury Department could recoup up to a $1 trillion dollars for American taxpayers whose money has gone to the settlements. (The entities get tax breaks for sending donations to settlements, and those tax breaks come from the federal government.) The lawsuit states that instead of charitable activities, the money raised by tax-exempt groups goes towards paramilitary activities and land theft.

The lawsuit could bring attention to the widespread practice of Americans getting tax-deductions for donations that fund illegal Israeli settlements in the West Bank and East Jerusalem. The hundreds of millions that have flowed into the settlements have helped maintain settlement infrastructure, finance the legal defense of Israelis accused of terrorism and evict Palestinians.

In the lawsuit, Abulhawa said that she wants a court “to hold accountable those who have financed my pain of dispossession and exile; to hold accountable the financiers of Israel’s wholesale theft of another people’s historic, material, spiritual, and emotional presence in the world.”

This lawsuit estimates that $1 billion goes to settlements every year, but unlike other investigations by journalists, which have largely focused on explicitly pro-settlement groups, the lawsuit includes entities like the Friends of the Israel Defense Forces, which fund the army. The lawyers argue that the FIDF, though, is engaged in war crimes and the protection of settlements. The FIDF is a prolific fundraiser, sending tens of millions to the IDF every year.

Past attempts at asking the Internal Revenue Service to investigate these entities has not elicited any strong action. In response to a query from Martin McMahon and Associates about American Friends of Ateret Cohanim, the Internal Revenue Service told the lawyers in August that they have an “ongoing examination program to ensure that exempt organizations comply with the applicable provisions of the Internal Revenue Code.” The letter assured the lawyers that the information they submitted about the group, which assists Israeli Jewish settlers in East Jerusalem, would be included in their review. That response has also been sent to other groups who have asked for action against tax-exempt groups funding settlements.

“If the agency is not willing to investigate matters that are in their jurisdiction, and they have the law enforcement tools to do so, the only thing left is to go into court and say, ‘we need an order,’” said Martin McMahon, one of the lawyers who worked on the suit.

There have been other attempts to get government action against specific organizations who raise money for right-wing Israeli causes. In August, T’ruah, a left-leaning rabbinical group, filed a complaint with the New York State Attorney General against Honenu, an Israeli group that provides funds and legal assistance to Jews accused or convicted of terrorism against Palestinians. The fiscal sponsor of Honenu is the Central Fund of Israel, a New York-based group that funnels millions to West Bank settlements.

Honenu, and the Central Fund of Israel’s financing, have been highlighted by the Israeli investigative journalist Uri Blau, who recently published a series in Haaretz on the U.S. tax dollars going to Israeli settlements. Blau reported that from 2009-2013, private U.S. donors gave $220 million to West Bank settlements, and profiled the Central Fund of Israel. Mondoweiss has also done extensive reporting on the Central Fund, which operates out of a fabric store in New York.

While some liberal Zionist groups like J Street have not taken a strong stand on the issue, other establishment voices have. Last year, Marc Ginsberg, a former U.S. ambassador and advisor to President Carter, wrote in the Huffington Post that it was time for the Obama administration to to “put an end to this charade,” arguing that the tax-exempt groups fund “legally questionable commodities” like “guard housing as well as guard dogs, bulletproof vests, rifle scopes and vehicles to secure outposts deep in occupied areas.”

The lawsuit filed by McMahon and his partners was the result of months of research. The idea for it, McMahon said, was sparked by a conversation he had with a Palestinian friend, who urged him to get creative in taking action against the settlement project. And he said that as a person of Irish descent, he knows the experience of occupation.

“What’s going over there is wholesale violence, ethnic cleansing, theft of private property, murder and maiming of innocent civilians,” said McMahon. “This is not what 501c3s should be doing.”

He anticipates more Americans joining his lawsuit as it progresses. The Treasury Department has sixty days to respond. They are likely to ask for a dismissal of the lawsuit.