Targeting Legal Businesses Through Financial Institutions.

Squashed-bills-ROHYou may not be aware of a Department of Justice program called “Operation Choke Point.”

The program began as all programs do with the best of intentions – at least that is what was advertised.

The DOJ sought to cripple the so called “payday lending” companies by telling banks that dealing with such companies might put the banks at risk for more scrutiny, attention and audits.

As the Washington Times writes:

In meetings with bank officials, the feds made it clear that

the bankers have every right to provide services to such businesses, but warned them that doing so might put them at risk, too, and could almost certainly trigger more extensive audits than would be required of banks that don’t service such customers. Bankers depend for their very survival on those who regulate them and know a threat when they hear one. Many decided it would be wiser to quietly get rid of customers in such high-risk businesses.

As a result, customers of long-standing around the country had their lines of credit called and their accounts closed. The affected businesses were never officially told why, because the government made it clear to the banks that they would face criminal charges if they talked. Even as the feds were briefing bankers on the program and their need to protect themselves by choking off high-risk businesses, the Justice Department was refusing to brief Congress on what was going on.

We can argue whether payday loan companies are good or bad, but the fact of the matter is that they are legal in many states. In telling financial institutions to stop dealing with the payday loan companies, the DOJ was essentially taking an end run around the Congress and other agencies.

After achieving some success with the payday lending companies, the DOJ widened their net to other businesses.

The FDIC’s list of 30 high-risk merchant categories that are currently being pursued by the DOJ.

Ammunition Sales
Cable Box De-scramblers
Coin Dealers
Credit Card Schemes
Credit Repair Services
Dating Services
Debt Consolidation Scams
Drug Paraphernalia
Escort Services
Firearms Sales
Fireworks Sales
Get Rich Products
Government Grants
Home-Based Charities
Life-Time Guarantees
Life-Time Memberships
Lottery Sales
Mailing Lists/Personal Info
Money Transfer Networks
On-line Gambling
PayDay Loans
Pharmaceutical Sales
Ponzi Schemes
Pyramid-Type Sales
Racist Materials
Surveillance Equipment
Tobacco Sales
Travel Clubs

This means that if the DOJ doesn’t like firearm dealers and wants to effectively put them out of business, they don’t have to go attack the business, they can stop the businesses’ banks from doing anything with the business. Credit card transactions, business accounts, loans, etc would all be out of the reach of legal business owners because the DOJ simply doesn’t like their product.

One of the companies that has been hit with their bank telling them they are no longer welcome is a company by the name of TomKat Ammunition in Gaithersburg, MD. According to Kat O’Connor, one of the owners of TomKat Ammunition, they jumped through every regulatory hoop put up before them:

It is easy to confirm that we are a legitimate and law-abiding business by running our Federal Firearms License number through the Bureau of Alcohol, Tobacco, Firearms and Explosives database. We are licensed by ATF with a Type 06 Federal Firearms License and hold two Maryland state licenses for manufacturing and dealing in explosives, as well as a local business license. It took us a year to open our doors and go through the bureaucratic process to get our licenses.

Yet TomKat was told by PNC Bank they could not have business accounts or process credit card payments through the bank. “Square Reader,” told the business they were no longer welcome. Even PayPal did not want to process payments from the company’s eBay store.

In essence, at a time when some businesses – legal businesses – are looking to grow and expand within a tortured economy, the DOJ is acting as an impediment by threatening banks not to do business with companies like TomKat Ammunition.

We can write more about this type of injustice, but instead you should watch an interview John Stossel hosted with the US Consumer Coalition’s Brian Wise and Kat O’Connor, owner of TomKat Ammunition LLC.

The DOJ should not be interfering with legal businesses just because employees of the DOJ disagree with the industry. After all, doesn’t the DOJ have more that it could be doing in other areas?

One Response to “Targeting Legal Businesses Through Financial Institutions.”

  1. Lee says:

    I read about this awhile back and find it extremely disturbing. While most of the stiff on that list I think we can do without, as long as a legitimate business is operating legally, no matter how distasteful (eg, pornography), I think the DOJ’s MO is reprehensible boring belief. I pray we make it through the next two years…