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An agonizing dispute among terror victims

Victims of State Sponsored Terrorism Fund splitting payouts under questionable rationale

Kenneth Feinberg, former administrator of the U.S. Victims of State Sponsored Terrorism Fund, said he does not understand the rationale for paying out 9/11 victims from the fund . (Scott J. Ferrell/CQ Roll Call file photo)
Kenneth Feinberg, former administrator of the U.S. Victims of State Sponsored Terrorism Fund, said he does not understand the rationale for paying out 9/11 victims from the fund . (Scott J. Ferrell/CQ Roll Call file photo)

Four decades ago, William Daugherty, a former CIA operative, was held hostage in Iran for 444 days. His wait for the financial compensation policymakers had promised him will now be a lot longer than that.

A fund created in 2015 for the Iran hostages and other victims of state-sponsored terrorism has become a new source of cash for relatives of the victims of the Sept. 11, 2001, attacks waged by al-Qaida terrorists on New York and Washington. President Donald Trump in November signed into law a measure that divided the fund in half, splitting the revenue between two competing groups: victims of state-sponsored terrorism like Daugherty and the 9/11 families.

The move has exacerbated tensions between the two groups and appears unlikely to fully satisfy anyone.

“We’ve been waiting 40 years,” Daugherty said of his fellow former hostages, who were seized in the capture of the U.S. Embassy in Tehran during the 1979 Iranian Revolution. By contrast, he said, the 9/11 families “have been waiting 17 years, if they’ve been waiting at all.”

[Lankford: Iran Hostage Bill the Right Legacy for Hero]

The attempt at compromise will cost taxpayers about $1.1 billion in the coming decade, according to the Congressional Budget Office.

The U.S. Victims of State Sponsored Terrorism Fund, designed initially for the Iran hostages, is financed by criminal and civil penalties paid by companies that do business with countries linked to terrorism. Under the new law, a greater percentage of those penalties will now be funneled into the terror victims’ fund instead of being used for other programs, and the fund’s life has been extended another four years, through 2030.

The coming payouts to 9/11 families are based on a federal court ruling that some lawmakers and terrorism victims say they find hard to swallow: that Iran should be held responsible for the attacks of Sept. 11, 2001.

Most of the 19 airline hijackers that day were from Saudi Arabia; none were from Iran. While al-Qaida, which conducted the attacks, is a Sunni Muslim terrorist group, Iran is a Shia-led state, and the two chief branches of Islam have seldom seen eye to eye since the original Sunni-Shia schism some 1,400 years ago.

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But in a contentious 2011 ruling, U.S. District Judge George B. Daniels of New York found that “the Islamic Republic of Iran provided material support and resources to al Qaeda for acts of terrorism, including the extrajudicial killing of the victims of the September 11, 2001 attacks.” He said Iran provided “services, money, lodging, training, expert advice or assistance, safehouses, false documentation or identification, and/or transportation.”

The court ruling ran counter to the conclusion of the 9/11 Commission, the official group created by Congress in 2002 to provide a full account of the al-Qaida attacks. In its final report, the commission noted “strong evidence” that Iran did facilitate travel of al-Qaida members into and out of Afghanistan before the Sept. 11 attacks. And it said senior al-Qaida operatives had traveled to Iran in the 1990s for training in explosives.

But the commission concluded: “We have found no evidence that Iran or Hezbollah was aware of the planning for what later became the 9/11 attack. At the time of their travel through Iran, the al Qaeda operatives themselves were probably not aware of the specific details of their future operations.”

Claims piling up

The court ruling had no immediate practical effect in 2011, since Iran didn’t participate in the lawsuit and had no intention of paying anything to 9/11 victims. But last year, with the Victims of State Sponsored Terrorism Fund up and running, Daniels issued default judgments against Iran in a lawsuit filed on behalf of more than 1,000 relatives of 9/11 victims: A sibling of a 9/11 victim could collect $4.25 million, a parent or child would be owed $8.5 million, and a spouse would be awarded $12.5 million.

Armed with those judgments, some 9/11 families started seeking compensation from the new terror victims fund. And applications surged, growing from 2,883 in 2016 to more than 5,100 last year.

“I still don’t understand it,” said Kenneth Feinberg, who served as “special master,” or the chief administrator, of the fund until he stepped down in February 2019. “I thought the [Sept. 11] commission concluded that Iran had nothing to do with 9/11.”

Lawmakers agreed to broaden access to the victims fund for 9/11 families in November without embracing the court ruling that found Iran liable.

“Not particularly,” said Sen. Lindsey Graham, a South Carolina Republican, when asked if he considered Iran responsible for the Sept. 11 attacks.

But Graham, who as chairman of the Judiciary Committee helped author the compensation provision, defends his effort as an attempt at rough justice.

“I do believe we should give victims as much recourse as possible, and Iran has done their fair share of dirty stuff,” Graham said. “This is sort of an end run, but it works for me.”

Two bites at the apple

Most immediate family members of 9/11 victims had already received compensation from a fund created especially for them. The September 11th Victim Compensation Fund, which initially operated from 2001 to 2004, distributed $7.1 billion to some 5,300 victims and family members, according to Feinberg, who administered that fund at the time.

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“All taxpayer money, all tax-free” for the victims’ families, he said of the payouts. The average payment for a death was $2 million, while the average for a physical injury was $400,000, he said.

But now, with 9/11 families tapping the same pot of money created for Iran hostages and other victims, revenues are getting spread thin. The greater the number of claims made on the fund, the longer each recipient must wait to collect his or her full award. Tensions among victims seemed all but inevitable.

Like the rest of the former Iran hostages, Daugherty was awarded $4.4 million, or $10,000 per day of captivity, under the state-sponsored terror victims’ fund established in 2015.

But so far, after four years of waiting, he said he has received only $760,000, or about 17 percent of what he is owed. And with a surge of claimants, it’s not clear how many years he must wait to collect.

“We should have been the first to be paid,” Daugherty, 72, said of his fellow former Iran hostages. “We have people who are going to be dead in two years. We have a couple in hospice now.”

‘Not a matter of need’

But Charles Wolf, who lost his wife, Katherine, on Sept. 11 in the World Trade Center twin towers, says he has no qualms about his pursuit of a claim through the fund originally designed for Iran hostages, even though he already received a payout from the 9/11 fund. He declined to say how much money he received.

“This is not a matter of need,” said Wolf, a 65-year-old salesman who lives a mile from the World Trade Center site. “The doggone plane flew right over my apartment and went right into my wife’s office. … Our government failed us in a big, big way.”

As for the Iran hostages, Wolf said, “They’re home with their family. Where’s mine? There was nothing ever found of my wife. Nothing. She was vaporized.”

And as the tensions rise, the share of awards getting paid out is growing smaller. In the initial round of payments, made in 2017, claimants received about 14 percent of the money they are owed. In the second round, awarded last year, the surge of claimants meant each received only 4.2 percent of the amount owed, according to the special master’s report of February 2019.

Feinberg, who administered both funds without pay, says the experience has provided some painful lessons.

“They’re fighting with one another,” he said of the victims and their relatives. “You see now the consequences. No good deed goes unpunished.”

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