Recouping From Terrorists

On paper Steven Perles is an exceedingly successful lawyer. In the past decade the District of Columbia litigator has won more than $6 billion in civil suit judgments, including a $2.6 billion verdict in September against Iran for its role in the 1983 bombing in Beirut that killed 241 U.S. Marines. Most foreign countries are shielded from lawsuits under a legal principle known as sovereign immunity, but a bill passed by Congress in 1996 opened the door to civil suits against a handful of countries deemed state sponsors of terrorism—and Perles has used the legislation to seek compensation for the families of Americans killed or wounded in Mideast-related attacks. But for all his success in winning large judgments, Perles has managed to collect only about 1 percent of the damages for his clients (and for himself: he takes most of the cases on a contingency basis). The problem, he told NEWSWEEK recently, is that existing laws make it hard to trace and seize the few assets these countries still have in the United States.

Payday for Perles and his clients may now be a little closer. An amendment passed by the Senate this week allows lawyers to go after the property of countries that sponsor terrorism even if Americans run the property and receive all of the profit—a significant shift, according to analysts and legal scholars. The upshot is that billions in assets here in the United States could fall within the reach of terror victims who have been awarded judgments against countries like Iran and Libya. The legislation has a long history and plenty of opponents. State Department officials say it will deny them a key bargaining chip in dealings with so-called rogue states, while the business community fears it will expose U.S. investors in the Middle East to reciprocal measures. "The government prefers to use these assets in a game of leverage for larger geopolitical issues," says David Aufhauser, who headed the National Security Council's terrorist financing task force until 2004. "To have other voices at the table dilutes the leverage."

Perles has been jostling for a seat at that table since 1995, the year a 20-year-old American college student was killed in a bombing in the Gaza Strip. Alisa Flatow had left Brandeis University for a semester to study in Israel. On a trip to a Jewish settlement in Gaza, her bus was blown up by the Iranian-backed Islamic Jihad group. Her father, Stephen Flatow, resolved immediately to hold Iran accountable. First he lobbied his senator, New Jersey's Frank Lautenberg, for legislation that would deny sovereign immunity to state sponsors of terrorism. When the "Flatow amendment" passed, he hired Perles to launch a suit against Iran. (No other country has allowed similar suits.) The Iranian government, listed as the respondent, mostly ignored the action, describing it as illegal. The Flatow family won a judgment in 1998 and was awarded $247 million.

Perles managed to collect $27 million from the State Department, which has held frozen Iranian assets since the Islamic revolution in 1979. But his attempts to go after Iran's former diplomatic properties in America were hampered by legal restrictions. "Getting the judgment in these cases is just 20 percent of the work," he says. Lautenberg, meanwhile, was getting phone calls from other constituents. About 24 New Jersey family members whose loved ones died in the 1983 bombing of the Marine barracks in Beirut had joined another lawsuit against Iran. By the time the Marine families won their $2.6 billion judgment in September, Lautenberg had already secured broad support in the Senate and the House for a new amendment (tacked onto the military spending bill) easing collection restrictions. A compromise reached with the White House to shield Iraq from Saddam-era civil suits by Americans (including by POWs held by Iraq in 1991) cleared the way for President Bush to sign the bill, which he's expected to do in the coming days.

But could the legislation rebound on Americans who do business abroad? Major business groups, including the U.S. Chamber of Commerce, warned in a letter to Congress earlier this month that the bill would end up "crippling new (American) investment" in a country like Libya, which also owes money to terror victims. U.S. companies have invested more than $3 billion in Libya since it came off Washington's list of countries that sponsor terrorism last year. The business groups said American companies are now worried that for every Libyan asset lawyers seize in the United States to pay off the judgments, the Libyans will seize an American asset of similar value in their country. "The effects … are egregious and we urge you to make the necessary correction to the legislation," the groups wrote before the amendment passed.

But backers of the legislation say it will encourage a country like Libya to settle its account with the victims before seizures begin. And they insist that financial restitution is one of the few practical ways of holding a country accountable when it supports terrorism. Lynn Derbyshire, whose brother was killed in the Beirut attack of 1983, says she was reluctant at first to join the suit against Iran. Depositions taken by lawyers in the summer of 2001 caused her usually stoic mother to break down in tears. "I was driving home after that, thinking we have to back out. The emotional toll will be too high," she says. The attacks of 9/11 changed her mind. "It made me believe we have to send a message to the terrorists that they can't get away with murder." The new law sharpens that message. It also stands to make Perles and his clients rich. And not just on paper.