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Aid bill for 9/11 families exposes rift with former Iran hostages

Fund set up to compensate victims of state-sponsored terrorism is dwindling

Andrew Kalp, 12, and his stepfather, Milton Swartz, read the news of the release of the Iranian hostages in their home in Randolph, Mass., on Jan. 19, 1981. Kalp’s father, Malcolm Kalp, was one of the 52 Americans held in the American Embassy in Iran for 444 days.
Andrew Kalp, 12, and his stepfather, Milton Swartz, read the news of the release of the Iranian hostages in their home in Randolph, Mass., on Jan. 19, 1981. Kalp’s father, Malcolm Kalp, was one of the 52 Americans held in the American Embassy in Iran for 444 days. (Stan Grossfeld/The Boston Globe via Getty Images file photo)

Legislation the Senate might take up next month to expand compensation for family members who lost loved ones in the Sept. 11 terrorist attacks has broad bipartisan support.

But the lobbying push from 9/11 victims’ families threatens to reignite tensions with those who’ve waited even longer for restitution: Americans held hostage by Iran after the 1979 revolution that brought an Islamic regime to power.

The legislation, which the House passed last month on a 400-31 vote would provide nearly $3 billion in “catch-up payments” to 9/11 family members denied earlier rounds of compensation.

The measure is a priority for Senate Majority Leader Charles E. Schumer, D-N.Y., who is co-sponsoring that chamber’s version led by Sen. Bob Menendez, D-N.J. It’s picked up bipartisan support in that chamber from Sen. John Cornyn, R-Texas.

Menendez also filed his bill as an amendment to the annual defense authorization bill that the Senate plans to take up in November. An omnibus fiscal 2023 spending bill is another potential vehicle.

“It is a modicum of justice for the seven years we have been fighting for equality,” said Angela Mistrulli, who lost her father in the World Trade Center attack. She won a court judgment for compensation in 2015, but has been unable to collect on that because of complex rules governing the U.S. Victims of State Sponsored Terrorism Fund.

“We’re shut out of almost everything, and people do not understand that,” said Mistrulli, who helped lead a grassroots movement for the bill.

But the measure comes as another blow to a group of victims whose wait for compensation stretches back decades longer.

The fund that Mistrulli wants to tap was created in 2015 chiefly to compensate the former Iran hostages, along with other victims of terrorist acts like the U.S. embassy bombings in Kenya and Tanzania and attack on the U.S.S. Cole. Separate funds had been created earlier and periodically reauthorized to provide medical and financial compensation to 9/11 victims and family members.

But under a 2019 law, the fund for state-sponsored terrorism has effectively been divided in two, with half of available money going to 9/11 families and the other half reserved for all other victims.

The change was made in response to court judgments won by 9/11 families in recent years that many found hard to swallow: that Iran should be held liable for the Sept. 11 attacks on New York and Washington waged by al-Qaida terrorists, who were mostly from Saudi Arabia.

“If they’re going to pay the 9/11 people, they should pay us too,” said Thomas Lankford, an attorney representing 143 former hostages who were held captive in Tehran for 444 days.

When the 2015 law was enacted, he said, “Everything was supposed to be paid straightaway. That didn’t happen at all.”

For Iran hostages like William Daugherty, a former CIA operative, the wait has been agonizing. Like other former hostages, Daugherty was awarded $4.4 million — or $10,000 per day of captivity — under the 2015 law.

But he said he’s still waiting for about three-quarters of the money he is owed. And time is not on the former Iran hostages’ side.

“Unless we get the remainder in a lump sum soon, many of my colleagues will be dead or too elderly and/or ill to take advantage of it,” Daugherty said by email. “Already at least something like 11 former hostages have died (probably more) and many are in their 80’s.”

Lankford, who represents Daugherty, said he is working with the office of Sen. Raphael Warnock, D-Ga., to secure money for the former hostages. Warnock’s predecessor was former Sen. Johnny Isakson, R-Ga., who helped push through the original 2015 law on behalf of constituents like Daugherty. Isakson died late last year.

Aides to Warnock, who is battling for reelection in a hotly contested race, did not respond to requests for comment.

Resources dwindling

Tensions between former hostages and 9/11 families have been mounting because the fund’s resources are limited and have been dwindling. The money comes from criminal and civil penalties paid by companies that violate U.S. sanctions against doing business with state sponsors of terrorist acts.

Annual fund deposits reached a peak of over $1 billion in fiscal 2019, capping years of steady growth. But deposits have plummeted since then, averaging less than $50 million since fiscal 2020, according to the fund’s website.

The bills by Menendez and House Judiciary Chairman Jerrold Nadler, D-N.Y., would provide fresh funding: nearly $3 billion diverted from unspent money in the Paycheck Protection Program, which offered forgivable loans to employers who kept workers on payroll during the height of the COVID-19 pandemic.

The new money would be limited to “catch-up payments” made to certain 9/11 family members of victims who were denied awards in previous compensation rounds.

The fund for state-sponsored terrorism initially barred payments to spouses and children of 9/11 victims who had received money from the original Sept. 11th Victim Compensation Fund, which operated from 2001 to 2004. It distributed $7.1 billion to some 5,300 victims and family members.

That fund helped Mistrulli, but she said her payment was relatively modest, at $100,000, while other members of her family were collecting $1 million each through the state-sponsored terrorism fund that had initially barred her.

The catch-up payments in the Menendez and Nadler bills would net her about $400,000, Mistrulli said.

The Sept. 11 fund was recreated in 2011 to compensate first responders and others suffering illnesses from the collapse of the twin towers. In a 2019 law, the fund was given unlimited money to pay any eligible claims filed by Oct. 1, 2090. The Congressional Budget Office estimated a nearly $10.2 billion price tag for the first decade and billions more in the decades to follow.

But that fund does little good for those such as Mistrulli, who lost a loved one on Sept. 11 but suffers no illness. And while the awards from that fund are relatively modest — with a limit of $250,000 for a noneconomic loss that results from a cancer, for example — court judgments have been far more generous.

In a contentious 2011 ruling, U.S. District Judge George B. Daniels of New York found that Iran provided “services, money, lodging, training, expert advice or assistance, safehouses, false documentation or identification, and/or transportation” for the al-Qaida terrorists.

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.

That commission found that Iran had facilitated travel of al-Qaida members prior to 9/11 and that some of the group’s operatives had traveled to Iran in the 1990s for explosives training. However, the commission concluded that there was “no evidence” that Iran “was aware of the planning for what later became the 9/11 attack.”

Floodgates open

The 2011 ruling had no immediate practical effect, since Iran didn’t participate in the lawsuit and had no intention of paying anything to 9/11 victims.

But several years later with the state-sponsored terrorism fund up and running, Daniels began issuing 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.

The fund honored the court judgments through a complex system of caps that reduced the value of the initial judgments, but the awards were still sizable. Mistrulli said her late father’s siblings received $1 million each.

While Mistrulli said she received a court judgment for $8.5 million in 2015, she wasn’t eligible to tap the state-sponsored fund at the time because of her earlier award from the 9/11 fund.

The 2019 law corrected that imbalance by making all 9/11 family members eligible for the state-sponsored terror fund. “I would have some trust in the court system,” Mistrulli said, defending her court judgment. “I absolutely do believe [Iran] played a participatory role in 9/11.”

Health program fix

A separate 9/11 fund for medical expenses, meanwhile, faces its own shortfall that Congress wants to fix in the upcoming lame-duck session.

The World Trade Center Health Program, which pays medical bills and monitoring for those injured on Sept. 11, faces a $3 billion shortfall in the next few years. House Oversight Chairwoman Carolyn B. Maloney, D-N.Y., who is leaving Congress after losing to Nadler in a primary, has introduced bipartisan legislation that would appropriate the $3 billion.

Maloney is trying to add her bill as an amendment to either the defense authorization bill in conference or to the fiscal 2023 omnibus, an aide said. Schumer and Speaker Nancy Pelosi, D-Calif., have also pledged action on the health funding shortfall this year.

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