Administration Blocks Ex-Hostages' Bid for Damages From Iran

At an emotional meeting this month at the State Department, steps from the office of Secretary of State Condoleezza Rice, a group of former American hostages released by Iran a quarter of a century ago, accompanied by lawyers and some relatives, confronted two of Rice's most senior aides.

The families' grievance: Why has the Bush administration, which has labeled Iran one of the world's most dangerous regimes and has called the hostages American heroes, fought their efforts to win damages for their ordeal from the Islamic republic?

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The answer is rooted in diplomatic obligations and a wariness about favoring one set of terrorism victims over others. U.S. officials express sympathy for the former hostages. But the administration has thwarted every effort in the courts or in Congress to win a monetary judgment against Iran, even as other victims of Iranian-linked terrorism have secured hundreds of millions of dollars in compensation.

Those attending the March 2 meeting said that Undersecretary of State R. Nicholas Burns and legal adviser John B. Bellinger III tried to keep the discussion civil but that anger spilled over. The wife of a former hostage exclaimed at one point: "You are bloodless!" The meeting broke up with Burns acknowledging the difficulty of the issues and saying he would be open to further discussions.

But last week the State Department objected when Rep. Brad Sherman (D-Calif.) tried to address the issue in a House bill that would maintain sanctions against Iran for its links to terrorism, forcing the lawmaker to withdraw his proposal.

"We have 52 of our finest Americans who were held hostage," Sherman said. "They go to court, and you know who appears against them? The State Department."

The former hostages have long tried to sue Iran over being blindfolded, tortured and held in dank cells during 444 days in captivity. Earlier lawsuits were dismissed because other countries generally cannot be sued in federal court. But in 1996 Congress amended the foreign sovereign immunity law to allow suits against countries listed as state sponsors of terrorism. The former hostages sued under the new law, seeking $33 billion in compensatory and punitive damages, and won a default judgment against Iran in 2001.

But on the eve of a hearing to consider damages, the Bush administration intervened, saying the suit violated an agreement with Iran that had secured the hostages' release. The judge threw out the suit in 2002 after Congress twice tried to intervene by passing legislation favoring the hostages. The Supreme Court declined to hear an appeal in 2004. Now the former hostages are seeking relief from Congress.

"Every one of us has spoken the same line for 26 years: The Iranians cannot get away with what they did because it sends the wrong message," said Richard H. Morefield, a former hostage and 50-year State Department veteran who was the embassy's consul general when it was seized in 1979 and who still works at State, declassifying records for the archives.

Beyond the plight of these hostages, the case raises difficult issues.

Even if a victim of terrorism wins at trial, it is almost impossible to collect damages. Iran's assets in the United States, for instance, are worth only about $20 million, mainly diplomatic property, according to State Department officials. So Congress in 2000 passed legislation authorizing the payment of $380 million in U.S. Treasury funds to claimants in cases involving 14 victims who were held hostage or killed by Iranian-supported groups such as Hezbollah, according to the Congressional Research Service. Lawmakers ordered the State Department to try to get that money reimbursed by Iran someday.

Other victims of terrorism, however, have received nothing, leading some lawmakers to conclude that it is inequitable -- and costly to U.S. taxpayers -- to carve out exceptions on a piecemeal basis.

"The problem is you have had some greedy lawyers" who have blocked efforts at a comprehensive solution because it would limit a big payout, said Rep. Frank R. Wolf (R-Va.), who wrote to Rice last month to urge the administration to come up with a "fair, just and equitable system." He said: "You have to have something that cuts the lawyers out."

The administration proposed a plan in 2003 that would have given any victim of terrorism $262,000. But only one hearing was held in the Senate, and the idea has languished, largely because of complaints that the amount was too low.

The former hostages of Iran have benefited from two laws, passed in 1980 and 1986, that among other things gave them tax breaks, paid their educational expenses and provided a "token detention benefit" of $50 for each day in captivity. In bringing a lawsuit, they must overcome the terms of the diplomatic agreement that led to their release but has also put the State Department directly in their path.

The agreement, known as the Algiers Accords, codified the 1981 deal between the United States and Iran under which the hostages were released, billions of dollars in Iranian assets were unfrozen, and an arbitration tribunal was established in the Netherlands to settle claims between the two countries. In the first part of the document, the United States pledged that it "will be the policy of the United States not to intervene, directly or indirectly, politically or militarily, in Iran's internal affairs." Elsewhere, the United States pledged to "bar and preclude" any claims filed by the hostages against Iran.

For the hostages, the situation is rich in irony. The State Department, in legal arguments and on Capitol Hill, has maintained that allowing the hostages' case to go forward will violate the Algiers Accords. But Rice has announced a $75 million plan to bolster democracy in Iran and to foster opposition to the theocracy that controls the country. The hostages say Rice's program violates the prohibition on interfering in Iran's affairs; Iran has also filed a complaint with the United States through the Swiss Embassy, which handles U.S. interests in Tehran.

"This administration has not been shy about breaking international agreements," said Barry Rosen, who was press attache at the U.S. Embassy and who now heads the Afghanistan Education Project at Columbia University's Teachers College. "The administration appears to be in contradiction of itself. It seems to me the Algiers Accords should be dead and buried."

Rosen, angry that others have "laid claim to millions and millions of dollars of compensation," added: "This may sound weird, but if I were made aware of that agreement, I would have stayed in Iran."

U.S. officials say that supporting democracy does not amount to interference under international law. And they say abrogating the Algiers Accords, though not a formal treaty, would be viewed overseas as a serious breach of international norms, harming U.S. interests. U.S. banks and companies have been able to settle claims with Iran because of the accords, while the United States has been forced to pay about $900 million to Iran for contract violations and property damage.

William J. Daugherty, a CIA employee who spent 425 days in solitary confinement during the crisis and is now a college professor, said the State Department is being "deceitful and dishonest." He added that "you can't argue that getting people to rise up against their government is not interfering in a country's affairs." He said that, after taxes, the check he received under the 1986 detention benefit was $17,000. "This came from the U.S. taxpayer, which none of us wanted to happen," he said. "We have always wanted Iran to pay for what it did."

Spokesman J. Adam Ereli said that the State Department supported the 1980 and 1986 measures giving direct benefits to the former hostages and that now the administration favors a "comprehensive program" for victims of international terrorism, including the former hostages.

"These brave people are members of the State Department family and are true heroes," Ereli added. "We are committed to having a full and open discussion about any issues they want to raise, and we will do our best to address them."