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Holder's 'Choke Point' is strangling American business

By M.D. Kittle |

North Carolina businessman Brennan Appel found his successfulcompany caught in the crosshairs of a murky U.S. Department of Justiceinitiative targeting merchants that don’t fit into the Obama administration’sidea 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 OperationChoke Point, a shadowy, multi-agency effort ostensibly aimed at going afterunlawful consumer fraud by "choking” off access to banking systems.

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

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

Operation Choke Point, Wise said, has servedto limit consumer access as it harasses and interferes with legitimatebusinesses.

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

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

Must be a mistake

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

Strange, the business owner thought. GlobalHookah Distributors had been a customer in good standing with the bank for13 years, he said. His financial services reps had even recently talked to himabout expanding investment opportunities.

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

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

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

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

‘A little thing called Choke Point’

Appel said he learned his tobacco salescompany was a target of Operation Choke Point during a subsequent conversationwith Alex Bacon, president of EFT Network, GHD’s electronic payment processingprovider.

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

On the recording, Bacon struggles to offerAppel an answer.

"Um, that’s a question that I am askingmyself 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, quitehonestly, frankly, I am asking the same questions and I’m looking,” Bacon says.

Later in the conversation, Bacon asks Appelif he has heard of Operation Choke Point and the Consumer Financial ProtectionBureau, the secretive, Obama administration-created agency that oversees theinitiative.

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


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

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

"What report is that?”

"Oh, because we had an account with Bank ofAmerica 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 verymuch but we can no longer be your bank.’”

"Yeah, after 12 years.”


Appel tells Bacon that he believes thefederal government appears to be blanketing industries instead of determiningwho 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 ona rather, you know, directed basis of their own free will,” Bacon says in theconversation.

Beyond ‘payday and porn’

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

That list is long. Payday lenders, coindealers, firearms and ammunition sellers, tobacco merchants and many more havelanded on the target list of the DOJ and its accomplices, according to a HouseOversight Committee report.

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

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

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

U.S. Rep. Sean Duffy, R-Wisconsin, hasled the charge in the effort to reform of the Consumer Financial ProtectionBureau. Last week, Duffy, chairman of the House Financial Services Subcommitteeon Oversight and Investigations, along with several colleagues, reintroducedhis 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 structuralreform,” Duffy said in a statement. "He continues to stonewall Congress, hewon’t respond to (congressional) inquiries, and why would he? We have no toolsin the toolbox to hold the fortress that is the CFPB accountable.”

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

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

Have guns, must travel

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

Schuetz, too, recorded his conversation withthe credit union regional manager, who told him the financial services firmcould not service "certain industry” the federal government deems to be a highrisk.

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

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

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

‘A constant struggle’

Wise doesn’t necessarily blame the financialinstitutions. The advocate said banks, for the most part, are just followingorders from the federal government.

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

"I’m an independent, third-party paymentprocessor, and I act at the will and directive of my processing bank. If myprocessing 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. Insteadof auditing you once a year we’re going to audit you four times a year. Andthen, we’re going to come in and look at all this and if we find anythingnegative we’re going to write it up and then you’re going to incur increasedcosts, increased focus with your board of directors and from other bankingregulators,’” Bacon says.

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

"The government already is looking bad inthe 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 ofopportunity, with the American Dream. What are you talking about? It’s aconstant struggle to stay in business.”

Wisconsin Reporter’s Courtney Mullen contributed to this story.