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Holder’s ‘Choke Point’ is strangling American business


By M.D. Kittle |

North Carolina businessman Brennan Appel found his successful company caught in the crosshairs of a murky U.S. Department of Justice initiative targeting merchants that don’t fit into the Obama administration’s idea of what an American business ought to be.

Appel, owner of Global Hookah Distributors, which sells tobacco and smoking-related products, says he’s the victim of Operation Choke Point, a shadowy, multi-agency effort ostensibly aimed at going after unlawful consumer fraud by "choking” off access to banking systems.

It appears the DOJ attempted to strangle Appel’s company, and it’s happening to good citizens and business owners all over the country in the name of "consumer protection,” according to the public interest group that has been shining a light on the stories of government abuse.

"We’re looking at one of the most prolific abuses of power this (Obama) administration has been a part of,” said Brian Wise, senior adviser to the U.S. Consumer Coalition, which bills itself as a "grassroots organization that works to protect consumers’ right to access free-market goods and services.”

Operation Choke Point, Wise said, has served to limit consumer access as it harasses and interferes with legitimate businesses.

USCC knows of more than 100 cases of victims targeted by the DOJ, but the organization is confident that there are thousands more under assault.

"We know this because we have talked to bank executives who are intimately familiar with this issue and in a lot of cases have made the decision to shut down these accounts,” Wise said.

Must be a mistake

Appel was in the same position nearly a year ago when he began receiving letters from Bank of America warning him the financial services giant was planning to close his accounts.

Strange, the business owner thought. Global Hookah Distributors had been a customer in good standing with the bank for 13 years, he said. His financial services reps had even recently talked to him about expanding investment opportunities.

His local bankers said the letters must be a mistake, that he was a good customer and they would straighten it out. That’s when a regional manager got involved and confirmed Bank of America was shutting down all of GHD’s accounts with the institution — in less than 21 days. Nobody would explain exactly why, Appel said.

Bank of America communications representatives did not return several calls from seeking comment. Neither did the Department of Justice.

GHD had to navigate through the turbulence of re-establishing accounts at a new bank, but the financial services provider had no problem with the company’s credit record, Appel said.

That didn’t seem to matter to Attorney General Eric Holder and the Justice Department.

‘A little thing called Choke Point’

Appel said he learned his tobacco sales company was a target of Operation Choke Point during a subsequent conversation with Alex Bacon, president of EFT Network, GHD’s electronic payment processing provider.

Appel taped the conversation. In it Bacon says EFT is closing GHD’s account, ostensibly because the company deals in higher amounts of cash. Appel tells Bacon that his company has often moved high amounts of cash with EFT, with no problem.

On the recording, Bacon struggles to offer Appel an answer.

"Um, that’s a question that I am asking myself with my own people and, uh, I guess the transaction from the 6th –  I guess last Friday – triggered it in some way. I’m looking, quite honestly, frankly, I am asking the same questions and I’m looking,” Bacon says.

Later in the conversation, Bacon asks Appel if he has heard of Operation Choke Point and the Consumer Financial Protection Bureau, the secretive, Obama administration-created agency that oversees the initiative.

The – the nature of what we do with payment processing at least with our processing bank, has become so much more regimented and strict and focused on compliance and certain efforts in Washington and have you heard – of a little thing called Choke Point and CFPB?”


"They’re taking aim at industries like you and others to eliminate you from business by choking off your payment processing.”

"I know, they are publishing our report in the media next Wednesday,” Appel tells Bacon.

"What report is that?”

"Oh, because we had an account with Bank of America for 12 years and they closed them…”

"You got a letter?”

"Yeah, in the summer last year.”

"You got a letter that said, ‘Thank you very much but we can no longer be your bank.’”

"Yeah, after 12 years.”


Appel tells Bacon that he believes the federal government appears to be blanketing industries instead of determining who is following the rules. Bacon seems to agree.

"Well, they are doing it by fiat — they’re doing it without a legislative process. They’re just doing it on a rather, you know, directed basis of their own free will,” Bacon says in the conversation.

Beyond ‘payday and porn’

The Federal Deposit Insurance Corp. earlier this year acknowledged its partnership role in Operation Choke Point and said it would take the appropriate steps to end its policies of targeting legal and legitimate industries that the Obama administration doesn’t like.

That list is long. Payday lenders, coin dealers, firearms and ammunition sellers, tobacco merchants and many more have landed on the target list of the DOJ and its accomplices, according to a House Oversight Committee report.

As reported earlier this year by the Daily Signal, the FDIC in an official Financial Institution Letter sent to all FDIC supervisory staff states decisions on accounts need to be made on an individual basis and not based on "industry or moral objection.”

"The (Obama) administration would like you to believe this is a program all about going after payday and porn,” Wise of the U.S. Consumer Coalition said. "The fact is they’re trying to discredit all of these legitimate industries by focusing on payday for instance.”

Forgotten along the way is the payday loan industry, like tobacco sales, is legal and highly regulated.

U.S. Rep. Sean Duffy, R-Wisconsin, has led the charge in the effort to reform of the Consumer Financial Protection Bureau. Last week, Duffy, chairman of the House Financial Services Subcommittee on Oversight and Investigations, along with several colleagues, reintroduced his Consumer Financial Protection Bureau reform package.

"After hearing testimony from (CFPB) Director Richard Cordray this week, I am convinced now more than ever that the CFPB is in dire need of structural reform,” Duffy said in a statement. "He continues to stonewall Congress, he won’t respond to (congressional) inquiries, and why would he? We have no tools in the toolbox to hold the fortress that is the CFPB accountable.”

The reform package includes a bill that would put the bureau under the regular congressional appropriations process; a bill that would require the CFPB to obtain consumers’ permission before the bureau collects data on them; and a bill, authored by U.S. Rep. Randy Neugebauer, R-Texas, that removes the director and replaces him with a bipartisan commission.

Another bill by Duffy would put the employees on the regular government pay scale. CFPB employees now set their own pay.

Have guns, must travel

Michael Schuetz, opened Hawkins Guns LLC in Hawkins, Wisconsin, in early November. He was in business less than two weeks when his credit union told him it was going to close his accounts. A credit union rep said a mistake was made. They weren’t supposed to open accounts for businesses that are in the business of selling guns.

Schuetz, too, recorded his conversation with the credit union regional manager, who told him the financial services firm could not service "certain industry” the federal government deems to be a high risk.

The businessman said he had his gun sales permit in order, and the credit union found his credit solid enough to open the business.

Scheutz still is in business, but now he has to drive 45 minutes to do his banking. The credit union was the only financial institution in town, he said.

"I guess this further shows the administration is wanting to take away our freedom and using slick and sly ways to do it,” said Scheutz, who also is working with the U.S. Consumer Coalition on the campaign to stop Operation Choke Point. "Eric Holder and anyone else that’s involved in this, I think they should be held accountable for it. I personally am not going to stop until someone is held accountable.”

‘A constant struggle’

Wise doesn’t necessarily blame the financial institutions. The advocate said banks, for the most part, are just following orders from the federal government.

In the recorded conversation, Bacon of the payment processing company, told Appel that his hands are tied.

"I’m an independent, third-party payment processor, and I act at the will and directive of my processing bank. If my processing bank says ‘No, you can’t do this,’ there is nothing I can do.”

"Yeah,” Appel responds.

"There is literally nothing I can do. … (the government says) ‘We are going to make your life miserable. Instead of auditing you once a year we’re going to audit you four times a year. And then, we’re going to come in and look at all this and if we find anything negative we’re going to write it up and then you’re going to incur increased costs, increased focus with your board of directors and from other banking regulators,’” Bacon says.

Appel estimates Global Hookah Distributors lost a conservative $100,000 in sales through the turmoil of the bank account and processing shut down. But he said there is a bigger price America is paying.

"The government already is looking bad in the American public face. This type of behavior is making them look worse,” Appel said. "At the end of the day, this is supposed to be the land of opportunity, with the American Dream. What are you talking about? It’s a constant struggle to stay in business.”

Wisconsin Reporter’s Courtney Mullen contributed to this story.