[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]




 
                      FUELING TERROR: THE DANGERS

                       OF RANSOM PAYMENTS TO IRAN

=======================================================================

                                HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON OVERSIGHT
                           AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 8, 2016

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 114-100
                           
                           
                           
                           
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking 
    Vice Chairman                        Member
PETER T. KING, New York              CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
SCOTT GARRETT, New Jersey            GREGORY W. MEEKS, New York
RANDY NEUGEBAUER, Texas              MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico            RUBEN HINOJOSA, Texas
BILL POSEY, Florida                  WM. LACY CLAY, Missouri
MICHAEL G. FITZPATRICK,              STEPHEN F. LYNCH, Massachusetts
    Pennsylvania                     DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia        AL GREEN, Texas
BLAINE LUETKEMEYER, Missouri         EMANUEL CLEAVER, Missouri
BILL HUIZENGA, Michigan              GWEN MOORE, Wisconsin
SEAN P. DUFFY, Wisconsin             KEITH ELLISON, Minnesota
ROBERT HURT, Virginia                ED PERLMUTTER, Colorado
STEVE STIVERS, Ohio                  JAMES A. HIMES, Connecticut
STEPHEN LEE FINCHER, Tennessee       JOHN C. CARNEY, Jr., Delaware
MARLIN A. STUTZMAN, Indiana          TERRI A. SEWELL, Alabama
MICK MULVANEY, South Carolina        BILL FOSTER, Illinois
RANDY HULTGREN, Illinois             DANIEL T. KILDEE, Michigan
DENNIS A. ROSS, Florida              PATRICK MURPHY, Florida
ROBERT PITTENGER, North Carolina     JOHN K. DELANEY, Maryland
ANN WAGNER, Missouri                 KYRSTEN SINEMA, Arizona
ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania       DENNY HECK, Washington
LUKE MESSER, Indiana                 JUAN VARGAS, California
DAVID SCHWEIKERT, Arizona
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas
TOM EMMER, Minnesota

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel
              Subcommittee on Oversight and Investigations

                   SEAN P. DUFFY, Wisconsin, Chairman

MICHAEL G. FITZPATRICK,              AL GREEN, Texas, Ranking Member
    Pennsylvania, Vice Chairman      MICHAEL E. CAPUANO, Massachusetts
PETER T. KING, New York              EMANUEL CLEAVER, Missouri
PATRICK T. McHENRY, North Carolina   KEITH ELLISON, Minnesota
ROBERT HURT, Virginia                JOHN K. DELANEY, Maryland
STEPHEN LEE FINCHER, Tennessee       JOYCE BEATTY, Ohio
MICK MULVANEY, South Carolina        DENNY HECK, Washington
RANDY HULTGREN, Illinois             KYRSTEN SINEMA, Arizona
ANN WAGNER, Missouri                 JUAN VARGAS, California
SCOTT TIPTON, Colorado
BRUCE POLIQUIN, Maine
FRENCH HILL, Arkansas
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    September 8, 2016............................................     1
Appendix:
    September 8, 2016............................................    73

                               WITNESSES
                      Thursday, September 8, 2016

Ahern, Paul, Assistant General Counsel, Enforcement and 
  Intelligence, U.S. Department of the Treasury..................    11
Backemeyer, Christopher, Deputy Assistant Secretary for Iran, 
  U.S. Department of State.......................................     5
Dubowitz, Mark, Executive Director, Foundation for Defense of 
  Democracies....................................................    54
Grosh, Lisa, Assistant Legal Advisor, Office of International 
  Claims and Investment Disputes, U.S. Department of State.......     7
Lorber, Eric B., Senior Associate, Financial Integrity Network...    57
Maloney, Suzanne, Deputy Director, Foreign Policy, and Senior 
  Fellow, Center for Middle East Policy, the Brookings 
  Institution....................................................    59
McCord, Mary, Principal Deputy Assistant Attorney General for 
  National Security, U.S. Department of Justice..................    10
Rubin, Michael, Resident Scholar, American Enterprise Institute..    56

                                APPENDIX

Prepared statements:
    Ahern, Paul..................................................    74
    Backemeyer, Christopher......................................    76
    Dubowitz, Mark...............................................    80
    Grosh, Lisa..................................................    98
    Lorber, Eric B...............................................   102
    Maloney, Suzanne.............................................   118
    McCord, Mary.................................................   124
    Rubin, Michael...............................................   126

              Additional Material Submitted for the Record

Hill, Hon. French:
    Written responses to questions for the record submitted to 
      Lisa Grosh and Chris Backemeyer............................   135


                      FUELING TERROR: THE DANGERS



                       OF RANSOM PAYMENTS TO IRAN

                              ----------                              


                      Thursday, September 8, 2016

             U.S. House of Representatives,
                          Subcommittee on Oversight
                                and Investigations,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:02 a.m., in 
room 2128, Rayburn House Office Building, Hon. Sean P. Duffy 
[chairman of the subcommittee] presiding.
    Members present: Representatives Duffy, Fitzpatrick, 
Mulvaney, Hultgren, Wagner, Tipton, Poliquin, Hill; Green, 
Capuano, Cleaver, Ellison, Delaney, Beatty, Heck, and Vargas.
    Ex officio present: Representatives Hensarling and Waters.
    Also present: Representatives Royce, Pittenger, Guinta, and 
Kildee.
    Chairman Duffy. The Subcommittee on Oversight and 
Investigations will come to order.
    Today's hearing is entitled, ``Fueling Terror: The Dangers 
of Ransom Payments to Iran.''
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time.
    Also, without objection, members of the full Financial 
Services Committee who are not members of this subcommittee may 
participate in today's hearing for the purposes of making an 
opening statement and questioning the witnesses.
    The Chair now recognizes himself for 2\1/2\ minutes for an 
opening statement.
    Today's hearing will examine the Obama Administration's 
$1.7 billion cash payment to Iran to settle longstanding claims 
predating the Iran revolution. While the settlement was 
disclosed in January, new details about the payments surfaced 
in August when The Wall Street Journal reported that $400 
million of that payment was converted into Swiss francs and 
euros and then flown to Iran in cash on the same day that five 
American detainees were released from the Islamic Republic.
    On Tuesday Administration officials were forced to admit 
that the remaining $1.3 billion it paid to Iran in interest was 
also handed over in cold, hard cash. Despite vigorous denials 
that there was any link between the payment and the release of 
American prisoners, the evidence presented by the 
Administration makes it difficult to believe.
    Iran officials certainly believe that this was a ransom 
payment. A Revolutionary Guard commander said on state media 
that, ``Taking this much money back was in return for the 
release of the Americans,'' period, end quote. And one of the 
prisoners, Pastor Saeed Abedini, recalled that while waiting to 
be freed Iran police told him that, ``We are waiting for 
another plane. So if the plane doesn't come we never let you 
go.'' Sounds like ransom to me.
    In an effort to corroborate the Administration's claims, 
this committee requested records about the payment from 
Treasury and the Department of Justice more than a month ago. 
And to date, the self-proclaimed most transparent 
Administration in our history has failed to provide any--not 
one document--to this committee. And the witnesses here today 
only agreed to appear under threat of subpoena.
    With jurisdiction over terror financing, this committee has 
a right and a responsibility to understand the facts 
surrounding this peculiar payment. While there is much that we 
don't know, we can be sure that Iran is committed to its 
support for terrorist groups like Hezbollah, the enemy of 
Israel and the West, whose leader earlier in the year admitted 
that he virtually gets all of his funding from the Iranian 
mullahs.
    Iran's support also goes to Bashar al-Assad, the Syrian 
dictator who uses chemical weapons on his own civilian people. 
I look forward to an explanation from our witnesses why we 
would make it so easy for Iran to continue to fuel terrorism by 
U.S. taxpayer expense.
    With that, my time has expired, and I yield to the 
gentlemen from Texas, Mr. Green, the ranking member of the 
subcommittee, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Chairman, I appreciate greatly the opportunity to bring 
some clarity to this issue and to a good many other issues. 
William Cullen Bryant is right: ``Truth, crushed to earth, 
shall rise again.''
    So today I would like to take the opportunity to resurrect 
the truth, or resuscitate the truth, if you will. And the truth 
is this: The genesis of this hearing is a meeting that took 
place at or near the time President Obama was being sworn in, 
when a group of very powerful Republicans met and made a 
conscious decision to do everything they could to block any and 
everything the President attempted to do.
    At that meeting were the top leaders of the House of 
Representatives to date. At that meeting was a person who sits 
on this very committee, and people from that day forward have 
been committed to blocking everything that the President brings 
forth. And the truth be told, they have done a fairly good job.
    So I don't agree with the style of the hearing today. I 
think that a better style for this hearing would be, ``Don't 
Bother Me with Facts; My Mind is Made Up.'' I think a better 
style for the hearing would be, ``We Kept Our Word.'' Because 
that is exactly what is happening today.
    We have a circumstance wherein Americans who were being 
held prisoner have been brought home. The exchange was money 
that was owed to the people who were holding the Americans, and 
we are condemning that. You would think that we would have a 
parade; the President would be saluted; the people who 
negotiated would be applauded.
    But this committee chooses to do what it has consistently 
done, and that is to deny this President any success that they 
can block. Let's just look at the evidence of what I--of which 
I speak.
    Dodd-Frank: They fought it tooth and nail and are still 
fighting it and would, if they could, today eliminate the 
Consumer Financial Protection Bureau.
    Obamacare: They have not replaced it. They don't have a 
replacement for it. They will repeal it, but they don't have a 
replacement. And we have voted more than 50 times to repeal 
Obamacare, the Affordable Care Act.
    The Ex-Im Bank, something that has traditionally been 
agreed upon that has been a great benefit to this country: We 
had to have an unusual process to take place to keep the Ex-Im 
Bank functioning, and still we cannot make loans over $10 
million because a committee on the Senate side refuses to 
appoint additional appointees to that Ex-Im Bank board.
    We have refused--not we; the Republicans--to even discuss 
the budget. Usually the budget comes up, there is a hearing, it 
is discussed, and a decision is made. They have refused to 
discuss the budget.
    And finally, the Supreme Court: Who would have thought that 
we would hold up the Supreme Court's nomination simply because 
of an agenda that has been set to make sure that this President 
does not have a record of success, a track record of success.
    So here is where we are, and I am going to keep bringing it 
up. This won't be the last time today. Here is where we are: We 
have people on this committee who were at that hearing--at 
least one person--that meeting that took place. We have two 
members of the senior leadership in the House who were there 
and they are honoring their commitment.
    That is what this hearing is about today--keeping their 
word, making sure that they do everything that they can to stop 
this President.
    As a matter of fact, what started out as a simple stop-the-
President has gone on steroids now and it is literally an 
effort to destroy the presidency, it seems to some--not all. 
This is disgraceful, if you want to know the truth.
    I do not believe that this is the conduct in which a 
committee of the stature of the Financial Services Committee 
should be engaged. We will become the ``Kerfuffle Committee'' 
if we are not careful.
    I yield back the balance of my time.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the chairman of the full Financial 
Services Committee, the gentleman from Texas, Mr. Hensarling, 
for 2\1/2\ minutes.
    Chairman Hensarling. Thank you, Mr. Chairman, for convening 
an incredibly important hearing today.
    Any person here today can take out their iPhone or 
electronic device and Google Merriam Webster's definition of 
``ransom.'' Quote, ``Money that is paid in order to free 
someone who has been captured or kidnapped.''
    The American people want to know, did this Administration 
pay ransom? Does it meet the legal definition? And if it 
doesn't, did the actions of this Administration tragically 
achieve the same end, which is to incent terrorists to kidnap 
American citizens, and to put a price on the head of every 
tourist, soldier, sailor, airman, and Marine who serves or 
visits overseas?
    Was the cash transaction legal? My guess is if any private 
citizen had done what this Administration had done, they would 
be indicted on money laundering. Instead, the Administration 
calls it ``diplomacy.''
    Was the cash transaction legal? If so, should it be legal? 
And if perfectly legal, why did the Administration go to such 
great lengths to hide it from the American people? Why did it 
take a Wall Street Journal expose to bring the true nature of 
this transaction to our attention?
    Why did I have to threaten subpoenas to get the 
Administration to show up in the first place? Did the Iranians 
demand that this payment be made in cash? We have a Terrorism 
Financing Task Force here that knows it is cash transactions 
that fuel terrorism.
    And it is the Obama State Department which has labeled 
Iran, ``the world's foremost state sponsor of terrorism.'' It 
is the President's Treasury Department that has classified it 
as, ``A jurisdiction of primary money laundering concern.''
    Then why, Mr. Chairman, why were they given $1.7 billion, 
$1.3 billion of which was taxpayer money that could have gone 
to the United States Army but instead apparently is going to 
the Iranian Revolutionary Guard? The American people deserve 
answers.
    Mr. Chairman, thank you for demanding the answers and 
calling this hearing. I yield back.
    Chairman Duffy. The chairman yields back.
    I now want to welcome our panel and witnesses today.
    I will now introduce our first panel. Mr. Backemeyer is the 
State Department's Deputy Assistant Secretary for Iran Affairs, 
and the former Deputy Coordinator for Sanction Policy.
    Ms. Grosh is the State Department's Assistant Legal Advisor 
in the Office of Internal Claims and Investigative Disputes.
    Ms. McCord is the Principal Deputy Assistant Attorney 
General in the National Security Division of the Justice 
Department.
    And Mr. Ahern is the Assistant General Counsel for 
Enforcement and Intelligence at the Treasury Department.
    Welcome, all of you.
    In a moment, the witnesses will be recognized for 5 minutes 
to give an oral presentation of their testimony. And without 
objection, the witnesses' written statements will be made a 
part of the record.
    I would note that I don't believe you have provided written 
statements, but I anticipate those statements will be coming. 
And so, the Chair intends to submit any witness statements 
pursuant to general leave for inclusion in the hearing record.
    Once witnesses have finished presenting their testimony, 
each member of the subcommittee will have 5 minutes within 
which to ask the panel questions.
    On your table I would just note there are three lights: 
green means go; yellow means you have 1 minute left; and red 
means your time is up.
    And with that, Mr. Backemeyer, you are now recognized for 5 
minutes for your opening statement.

STATEMENT OF CHRISTOPHER BACKEMEYER, DEPUTY ASSISTANT SECRETARY 
               FOR IRAN, U.S. DEPARTMENT OF STATE

    Mr. Backemeyer. Thank you, Mr. Chairman. As you said, my 
name is Chris Backemeyer and I am the Deputy Assistant 
Secretary of State for Iranian affairs. I am a career State 
Department official and I have worked on Iran for the better 
part of the last decade.
    I welcome the opportunity to come before the committee as 
well as the American people and describe and correct some of 
the misunderstandings about the about The Hague Claims Tribunal 
settlement that was reached in January of this year.
    As you know, President Obama and Secretary Kerry announced 
the settlement on January 17th. When it was concluded it 
specifically noted that the settlement involved $400 million 
for the FMS Trust Fund that had been established with Iranian 
funds, as well as $1.3 billion as a compromise on interest on 
this sum. This was also posted on the State Department website.
    After the announcement we received inquiries from Congress, 
and in each case we offered to provide closed briefings to 
members and staff. And one member requested such a briefing, 
which we did provide.
    The Hague Claims Settlement resurfaced in the press again 
recently, as you have noted. And again we received questions, 
and again we offered to provide a closed briefing. Two days 
ago, we provided two such briefings to House staff and to 
Senate staff.
    And we are happy to be here today to continue discussing 
this issue and all of the things that we have accomplished for 
the American people through our diplomatic efforts toward Iran.
    I should note at the outset that there will be limitations 
to what I and my colleagues can say in an open setting. As I 
mentioned earlier, we have previously offered closed briefings 
because there are a number of litigation and diplomatic 
sensitivities that could jeopardize U.S. interests if we were 
to go into too much detail.
    Specifically, as my colleague will explain in a minute, the 
settlement in January addressed a significant part but only one 
part of a much larger multibillion-dollar claim which is being 
actively litigated. Iran has a long history of mining the U.S. 
public record for ammunition to use us against--use against us 
in claims litigation. This includes statements that have been 
made in congressional briefings.
    As a result, it is important--it is extremely important 
that we not say anything in a public setting that would 
jeopardize our defenses to Iran's remaining claims of the 
tribunal.
    With those limitations, though, I will proceed to provide 
you with as much information as I can. I think the best way to 
start is to take a moment to summarize the series of events 
that occurred on the weekend of January 16th and 17th, a 
weekend where we finalized a number of diplomatic efforts that 
advanced U.S. interests in significant ways.
    As you may be aware, at this time the United States was 
pursuing multiple lines of effort that we sought to finalize on 
or around the same time in mid-January. First, we were on the 
verge of implementing the nuclear deal and the International 
Atomic Energy Agency, or IAEA, was in the process of verifying 
that Iran had met all of its commitments under the deal.
    On that weekend Iran's breakout timeline went from less 
than 90 days to over a year and 98 percent its enriched uranium 
stockpile was removed and extensive transparency measures were 
implemented.
    At the same time, we were pushing to finalize an 
arrangement to get several wrongly detained American citizens, 
including Post--Washington Post reporter Jason Rezaian, 
Christian Pastor Saeed Abedini, and former Marine Amir Hekmati 
safely out of Tehran, which was a top priority for us and one 
that I know Congress shared.
    We had been pressing the Iranians to release these 
Americans at every opportunity throughout the negotiations of 
the nuclear deal and continued our efforts to secure the 
release over 14 months at separate discussions. These 
individuals were facing lengthy prison terms if not potentially 
worse sentences on trumped-up national security and espionage 
charges.
    And lastly, our lawyers were working to finalize the 
settlement of a longstanding claim that the Iranians had filed 
at the Iran-U.S. Claims Tribunal regarding the Foreign Military 
Sales Trust Fund. The issue of settling the large remaining 
claim a number of times--sorry--the issue of settling the large 
remaining claims of The Hague, including the trust fund, had 
been raised by Iran a number of times over the years. The 
Iranians have been making a push at the tribunal to have a 
hearing on this case and we knew they were eager to settle the 
case so that they could address critical economic needs.
    As my colleague will describe in a moment, we realized that 
we could take advantage of the importance that Iran attached to 
recovering the principle from the FMS Trust Fund in order to 
drive a bargain on the 37 years of interest.
    Now, there has been much--recently much attention paid to 
the timing of these various issues. So I think it is worth 
clarifying here today--I think it is worth clarifying some of 
the mischaracterizations here today.
    It is important to remember that for more than 3 decades, 
we have had no diplomatic relations with Iran and minimal 
diplomatic contact. As a result, there was significant risk 
that any one of these efforts could unravel at any time.
    The one we were most worried about was the consular 
dialogue, where we feared that our American citizens would not 
be freed. We therefore had some pretty--or this process had 
gone in fits and starts and there were elements inside of Iran 
extremely opposed to any sort of arrangement in which our 
citizens would be freed, and we had some pretty significant 
concerns that it would unravel.
    On January 16th and 17th, when after the terms of the 
consular arrangement had been finalized and the Swiss were just 
about ready to fly our people out of Tehran, our fears were 
realized when we were unable to locate the wife and mother of 
Jason Rezaian. It was agreed that Jason's wife and mother would 
also be allowed to leave Iran as part of this deal, so their 
disappearance was highly concerning.
    At this point the IAEA had verified Iran's commitments on 
the JCPOA and the nuclear deal had begun, and my colleagues at 
the Treasury Department had begun the necessary arrangements to 
refund the principal in the FMS Trust Fund, but the payment had 
not yet occurred. When this uncertainty presented itself we 
became very concerned and decided to take a pause before 
finalizing this other line of effort--specifically, the 
finalization of the payment for settlement of the FMS Trust 
Fund.
    After a stressful night of uncertainty and after several 
high-level phone calls, including by Secretary Kerry, we were 
able to confirm the location of Jason's wife and mother, and 
get them on an airplane so that they could leave Iran. With 
that resolved we moved forward with the reciprocal humanitarian 
gesture in which we provided the relief to certain Iranian 
nationals, including several dual U.S.-Iranian nationals that 
had primarily been charged with sanctions-related crimes, and 
we reinitiated our efforts to finalize the outstanding actions 
that we had agreed to on The Hague Claims Tribunal, including 
the refund of Iran's FMS Trust Fund principal.
    This decision was made out of prudence when the success of 
our diplomatic efforts was in serious doubt. So we took the 
prudent step to pause, assess the situation, and resolve our 
concerns before moving forward.
    Through these negotiating tracks we were able to conclude 
these issues in a manner that advanced our core interests--
again, ensuring Iran can never have a nuclear weapon, 
potentially saving taxpayers billions of dollars on this claim, 
and freeing wrongfully detained Americans as well as their 
family members. Again, each of these arrangements was analyzed 
on its own merits and determined to be in U.S. interests.
    The release of several U.S. citizens along with Jason 
Rezaian's mother and wife by Iran was based on reciprocal 
humanitarian gesture in which we provided relief to certain 
Iranian nationals, including several dual U.S.-Iranian 
nationals. And the release of the FMS Trust Fund monies was 
based on a settlement of Iran's claim for those monies and for 
37 years of interest--a settlement that was highly favorable to 
the United States.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Backemeyer can be found on 
page 76 of the appendix.]
    Chairman Duffy. Thank you.
    I now recognize Ms. Grosh for 5 minutes.

  STATEMENT OF LISA GROSH, ASSISTANT LEGAL ADVISOR, OFFICE OF 
 INTERNATIONAL CLAIMS AND INVESTMENT DISPUTES, U.S. DEPARTMENT 
                            OF STATE

    Ms. Grosh. Thank you, Mr. Chairman.
    I am the Assistant Legal Advisor for International Claims 
and Investment Disputes of the Department of State, where I 
have worked to defend the United States against Iran at The 
Hague Tribunal for nearly 30 years. Over that time we have won 
some cases, we have lost some, and sometimes we have decided to 
settle. And I am here today to explain as best as I can in this 
setting the settlement that was announced in January.
    As my colleague, Mr. Backemeyer, explained, this was only a 
partial settlement of a very large case. The rest of that case 
is ongoing at The Hague Tribunal today. Because of that, I am 
limited in what I can discuss in this public setting.
    As he explained, Iran and its lawyers are vigilant in 
scouring the public record for statements or information that 
they can use against us in these arbitrations. In fact, I can 
recall being The Hague Tribunal many times and hearing Iran 
quote extensively from things that witnesses and Members of 
Congress said in hearings, trying to use that to their 
advantage.
    These are multibillion-dollar claims against the United 
States, so for some of your questions I may need to defer the 
question to a closed setting like the one that we did for House 
and Senate staff earlier this week.
    Now to provide some background, the United States and Iran 
entered into the Algiers Accords in 1981, which created The 
Hague's--The Hague Tribunal. And it was primarily created to 
address claims of U.S. nationals, but also claims between the 
two governments.
    The agreement was entered into by the Carter 
Administration, it was endorsed by the Reagan Administration, 
and was debated by both Houses of Congress. And in the end it 
was determined that the Algiers Accords and the Tribunal 
process were of great benefit to the United States and U.S. 
nationals.
    In the first 20 years of the tribunal process it focused 
primarily on resolving claims of U.S. nationals for debt, 
contract, expropriation, and other measures affecting property 
rights. U.S. citizens and companies received over $2.5 billion 
in awards and settlements from that process.
    And there were significant government-to-government claims 
that were also filed at the tribunal. The majority and 
certainly the largest were by Iran against the United States, 
including Iran's large contract claims arriving--arising out of 
its former--foreign military sales program.
    Like of FMS customers, Iran paid money into a trust fund 
that was used to facilitate prompt payment to the U.S. 
contractors working on Iranian contracts. But by January 1979 
Iran had already been struggling to make the necessary payments 
on its more than 1,000 outstanding FMS contracts.
    In February 1979 Iran and the United States concluded a 
memorandum of understanding providing for the cancellation of 
many of the remaining purchases. The two sides worked on 
implementing the MOU and to wind down Iran's FMS program over 
the ensuing months.
    But as we all know, in November 1979 the hostages were 
taken and those efforts became to an end. The dispute over the 
FMS Trust Fund and interest which resulted in the settlement in 
January of this year was part of Iran's FMS claims that it 
filed with the tribunal in 1982. So you can imagine the scale 
of it and the money involved. It is a giant breach-of-contract 
case covering 1,126 huge FMS contracts.
    Before the settlement in January other parts of the FMS 
claims were decided or settled some time ago. Indeed, 
settlement discussions over technical legal matters have been 
held in this channel for decades, typically led by the State 
Department legal advisor and the Iranian presidential legal 
advisor.
    My estimate is that since the early 1980s, through the 
Reagan, Bush, and Clinton Administrations, some 40 rounds of 
claims meetings have occurred at this level. Indeed, the prior 
settlements with Iran of other portions of the FMS claims 
occurred during the first Bush Administration.
    In 1989, for example, the United States and Iran settled a 
claim for $7.5 million for spare parts. It was paid from the 
Judgment Fund. In 1990 the parties entered into a partial 
settlement for $200 million from the trust fund, and this is 
the same trust fund that was the subject of the final 
settlement in January.
    And in 1991 the parties also settled Iran's claim for 
titled FMS assets for $278 million, and this was paid from the 
Judgment Fund. Apart from the FMS claims there were other 
significant settlements between the parties, including in 1990, 
when Iran paid the United States $105 million from--in 
settlement of certain U.S. national claims and U.S. Government 
claims.
    These settlements, and in particular the FMS settlements, 
were reached at key moments in the cases, such as before key 
hearings or when they were on the verge of going to decision. 
In the past 2 years, as proceedings of the tribunal have been 
advancing, we revisited the possibility of settlement of 
tribunal claims through 2014 and 2015.
    These discussions led to settlement of small claims that 
were the subject of ongoing hearings. They involved 
architectural drawing and were--that were transferred to the 
Tehran Museum of Contemporary Art, and for fossils that were 
transferred to the Ministry of the Environment.
    In the spring of 2015, after years of extensive briefing, 
Iran pressed the tribunal to schedule comprehensive hearings in 
these remaining FMS claims. The tribunal ordered both parties 
to file their respective proposals for the structure of 
hearings, and Iran filed its proposal on November 11, 2015.
    Iran was also pressing for a preliminary ruling on issues 
including the outstanding balance of the FMS Trust Fund and 
interest since 1979. They sought interest based on a provision 
in the 1979 memorandum of understanding calling for unexpended 
FMS funds associated with Iran's FMS program to be placed in an 
interest-bearing account.
    With the settlements over the smaller claims concluded in 
December 2015 and with the hearings on the FMS claims on the 
horizon we were able to achieve this most recent settlement, 
which finally and fully resolved Iran's claim for funds in the 
FMS Trust Fund as well as interest since 1979.
    As we publicly announced in January, pursuant to the 
settlement, Iran received the balance of $400 million in the 
FMS Trust Fund as well as roughly $1.3 billion, representing a 
compromise on the interest. The trust fund balance of $400 
million was paid from Iranian funds that were deposited in the 
FMS Trust Fund itself in connection with the program. The 
payment for the compromise on interest was provided out of the 
Judgment Fund, as was the case for the largest prior settlement 
of the FMS claims during the Bush Administration.
    If Iran's claims for the trust fund balance and interest 
had gone to decision in The Hague Tribunal the United States 
could well have faced significant exposure in the billions of 
dollars. Iran, of course, was seeking very high rates of 
interest for a period of over 3 decades. We were able to secure 
a favorable resolution on the interest and avoid the potential 
for a much larger award against us.
    The details of why we settled for this amount is 
litigation-sensitive and getting into that explanation would 
get at other issues still pending at the tribunal. Iran's 
lawyers would try to use my words, or maybe even your words, 
against us to help their position at the tribunal.
    But what I can say here today is that I believe that this 
settlement was the best thing for the United States. It was the 
best way to avoid a possible decision from the tribunal 
ordering us to pay a lot more.
    Thank you.
    [The prepared statement of Ms. Grosh can be found on page 
98 of the appendix.]
    Chairman Duffy. Thank you.
    The Chair now recognizes Ms. McCord for 5 minutes.

 STATEMENT OF MARY MCCORD, PRINCIPAL DEPUTY ASSISTANT ATTORNEY 
   GENERAL FOR NATIONAL SECURITY, U.S. DEPARTMENT OF JUSTICE

    Ms. McCord. Good morning, Chairman Duffy, Ranking Member 
Green, and members of the subcommittee. Thank you for the 
opportunity to appear before you today to discuss the 
Department of Justice's role in the settlement of Iran's claim 
before the Iran-U.S. Claims Tribunal at The Hague for the funds 
in the foreign military sales or FMS Trust Fund, as well as 
Iran's associated claim for interest on those funds.
    As the attorney general has made clear when the deal was 
first announced in January, the Department of Justice fully 
supported the Administration's resolution of several issues 
with Iran, including the settlement of The Hague Tribunal Claim 
involving the FMS fund as well as the arrangements that led to 
the return of U.S. citizens detained in Iran.
    With respect to The Hague settlement, when there is a 
settlement of litigation that is pending against the United 
States it is generally paid from the Judgment Fund unless there 
is a separate source of funding for the settlement.
    For a payment of a settlement to be made from the Judgment 
Fund, the attorney general must certify to the Treasury that 
the payment of the settlement is in the best interests of the 
United States.
    Here, the attorney general approved the settlement and 
certified payment from the Judgment Fund of the portion of the 
settlement that resolved the interest dispute. The 
certification was based on the Department of Justice's typical 
assessment for a Judgment Fund payment.
    Assessment of a settlement payment from the Judgment Fund 
includes consideration of the exposure that the United States 
faces from the claim proposed for settlement. It also considers 
the likelihood of an adverse ruling against the United States, 
the likely size of such an award, the background of the 
litigation, the tribunal, relevant legal arguments, relevant 
facts, and governing legal doctrines.
    The Department's certification of this settlement payment 
from the Judgment Fund was based on the assessment that it was 
in the best interest of the United States, that the payment was 
significantly less than the United States' exposure under the 
claims for the balance in the FMS account and the interest on 
those funds.
    The Department of Justice was also involved in the consular 
negotiations with Iran and in effectuating the ultimate 
arrangements that led to the release of the detained American 
citizens. In this regard, the Department identified certain 
criminal cases involving Iranian and Iranian-American 
defendants for which relief could be provided as a reciprocal 
humanitarian gesture. The defendants in these cases had been 
charged primarily with violating the U.S. trade embargo. None 
were charged with terrorist activity of other violent crimes.
    As has been noted previously, the ultimate arrangement 
involved the pardon or commutation of seven defendants who had 
been convicted or were awaiting trial in the United States and 
the dismissal of criminal charges against 14 others, all of 
whom were located outside the United States and for whom our 
attempts to obtain custody through extradition had failed or 
were assessed to be likely to fail.
    The Department was also responsible for preparing and 
filing the paperwork related to the pardons, commutations, and 
dismissals.
    Thank you for the opportunity to testify, and I am happy to 
answer any questions you may have.
    [The prepared statement of Ms. McCord can be found on page 
124 of the appendix.]
    Chairman Duffy. Thank you, Ms. McCord.
    And Mr. Ahern, you are now recognized for 5 minutes.

STATEMENT OF PAUL AHERN, ASSISTANT GENERAL COUNSEL, ENFORCEMENT 
       AND INTELLIGENCE, U.S. DEPARTMENT OF THE TREASURY

    Mr. Ahern. Chairman Duffy, Ranking Member Green, thank you 
for inviting me to testify this morning.
    I am very pleased to be here with my colleagues from the 
State Department and the Justice Department. My name is Paul 
Ahern and I am the assistant general counsel for enforcement 
and intelligence at the Treasury Department.
    I am here today to discuss with you the Treasury's role in 
effectuating the payments related to the January 2016 
settlement of the long-outstanding claim at the Iran-United 
States Claims Tribunal at The Hague. The settlement involved 
two payments by the United States regarding an account 
established decades ago with Iranian funds as well as the 
compromise of its claim for interest on that account.
    The Administration publicly announced the $1.7 billion 
settlement on January 17th, 2016, and that announcement is 
publicly available at the State Department's website.
    Now, for the first settlement payment Treasury assisted the 
Defense Finance and Accounting Service, or DFAS, in crafting a 
wire instruction to transfer $400 million on January 14th, 
2016. The $400 million came out of what is typically referred 
to as the Foreign Military Sales Trust Fund, or the FMS 
account.
    It had amounted to about $600 million until 1990, when the 
Bush Administration entered into a settlement returning $200 
million to Iran, and since that time the fund has amounted to 
about $400 million. Treasury worked with DFAS and the Federal 
Reserve Bank of New York so that the funds transferred from 
DFAS to a European bank. The funds were then converted to a 
foreign currency, were withdrawn as foreign currency bank 
notes, and physically transported to Geneva.
    On January 17th Treasury dispersed the payment to an 
official from the Central Bank of Iran for transfer to Tehran. 
The funds were under U.S. Government control until their 
disbursement, pursuant to the settlement.
    The second payment, involving settlement over the dispute 
over accrued interest, was dispersed out of the Judgment Fund. 
The Judgment Fund is the source of funding Congress is provided 
for use generally in paying judgments and settlements of claims 
against the United States when there is no other source of 
funding.
    Awards and settlements of tribunal claims have been paid 
from the Judgment Fund in the past, including the $278 million 
settlement reached in 1991. Though the payment to settle the 
dispute over accrued interest was one payment, the Judgment 
Fund system has a technical limitation that prevents it from 
processing individual claims in amounts over 10 digits in 
length. Therefore, the single claim of $1.3 billion was broken 
into 13 claims of $99,999,999.99 and the remainder of 
$10,390,236.28.
    As in similar prior instances, the system's technical 
limitation required a claim to be divided into these smaller 
amounts. These are amounts are displayed on Treasury's Judgment 
Fund website, as is additional information about claims 
processing through the Judgment Fund.
    Treasury dispersed the payment after receiving the 
appropriate approvals from the Department of Justice. The 
payment from the Judgment Fund was initiated through a transfer 
to a European bank. In this circumstance it was held available 
for disbursement to Iran.
    Pursuant to an arrangement between Iran, the home country 
of the European bank, and the United States, the European bank 
converted the $1.3 billion into a foreign currency, withdrew 
the foreign currency in foreign currency bank notes, and then 
dispersed the funds as bank notes to an official from the 
Central Bank of Iran. This process occurred in two 
installments--one on January 22nd and one on February 5th.
    And I would note that the sanctions regime we built with 
our international partners had effectively cut off Iran from 
the international financial system. Iran was very aware of the 
difficulties it would face in accessing and using the funds if 
they were in any other form than cash even if--after the 
lifting of sanctions under the Joint Comprehensive Plan of 
Action, or JCPOA.
    Therefore, effectuating the payment of the funds in the FMS 
account and the subsequent interest payments in cash was the 
most reliable way to ensure that they received the funds in a 
timely manner, and it was the method preferred by the relevant 
foreign banks.
    For both the payments to settle the dispute over principal 
and the interest, no direct transfer was made from any U.S. 
account to Iran. In addition, these transactions complied with 
U.S. sanctions law and did not require a unique license, 
waiver, or other form of authorization.
    Treasury's regulations at Title 31 of the Code of Federal 
Regulations Section 560.510 explicitly authorize all 
transactions necessary to payments pursuant to settlement 
agreements entered into by the United States Government in a 
legal proceeding in which the United States is a party, such as 
a settlement of claims before the tribunal.
    Thank you again for the opportunity to testify about these 
issues, and I look forward to your questions.
    [The prepared statement of Mr. Ahern can be found on page 
74 of the appendix.]
    Chairman Duffy. Thank you, panel.
    The Chair now recognizes himself for 5 minutes.
    The panel has made a point of noting that you don't want 
any information coming from this hearing that could jeopardize 
your negotiations for future settlements--duly noted. But to 
the panel, any of the $1.7 billion that has been provided in 
cash to Iran, is any of that going to be used for terrorism and 
can you guarantee me that that money won't be used to harm any 
Americans?
    Mr. Backemeyer?
    Mr. Backemeyer. Congressman, thank you for your question. 
It is our assessment that the vast majority of the money that 
Iran has gotten from both this settlement as well as other--
    Chairman Duffy. Can you guarantee me that, though? That is 
my question? Can you guarantee this money won't be used for 
terrorism or to hurt Americans?
    Mr. Backemeyer. As I said, it is our assessment the vast 
majority has gone to the economic--the critical economic needs 
that Iran has had. Now, I can't speak to every dollar that is 
going to go in and out of Iran, as you know. But what I can 
tell you is that we have a variety of tools that we use--
    Chairman Duffy. But I am looking for a guarantee. And so I 
just want to note that there is a risk that you have taken in 
providing $1.7 billion to the lead sponsor of terrorism in the 
world.
    I don't want to be chastised on this committee about 
information that could hurt your negotiations when I think this 
deal has endangered the security in the region and for U.S. 
citizens. But let's set that aside for a moment.
    I want to quickly talk on the issue of ransom. On the day 
of the prisoner-for-cash deal, would the prisoners have been 
released, in your assessment, if the cash was not sent--the 
$400 million?
    Mr. Backemeyer. Congressman, I cannot speak to that 
hypothetical situation. And I would make a point, that this was 
not a prisoner-for-cash deal. These two issues--
    Chairman Duffy. So you don't know. They might not have been 
released had you not sent the cash. Is that a fair assessment?
    Mr. Backemeyer. These two issues were settled based on 
their own merits--
    Chairman Duffy. I am trying to get to the heart of this. 
You can't tell me that you are guaranteed that our prisoners 
would have been released had your money not been sent, right? 
And maybe to put it another way, if the prisoners hadn't been 
released would have we sent the money?
    Mr. Backemeyer. As I noted in my statement, Congressman, 
specifically after we learned that we could not locate the wife 
and mother of Jason Rezaian we put a pause on making this 
payment--not because it was linked to that particular 
transaction, but because it was a prudent step.
    Chairman Duffy. So, prudent step--but you are telling me 
that you wouldn't have sent the money but for the release of 
our prisoners, yes? Is that a fair assessment?
    Mr. Backemeyer. I cannot speak to what we would--had this 
deal not come together at all in the following week, I cannot 
tell you that we would not have gone down that path.
    Chairman Duffy. Exactly, which is--
    Mr. Backemeyer. What I can tell you--
    Chairman Duffy. --which is the point that is--most common-
sense Americans look at this and they say, ``Hey, this was a 
payment of $400 million for the release of five prisoners,'' 
which in everyone's assessment leads us to believe that, as the 
chairman noted, per Webster's Dictionary, is a ransom payment.
    Let's leave that aside. I am sure my colleagues will get to 
that a little bit later.
    Out of the tribunal there have been settlements in the 
past. And have those settlements all been made in cash?
    Ms. Grosh?
    Ms. Grosh. Yes, Mr. Chairman, my--
    Chairman Duffy. So every single settlement--
    Ms. Grosh. My experience has been that every single one of 
these settlements has been sui generis. Most of the settlements 
that were made in the past were before sanctions. And in fact, 
before--
    Chairman Duffy. I only have 2 minutes. To be clear, when we 
have had settlements the payments to Iran have been made in 
cash payments, not wire transfers, not checks, not any other 
form? It is a cash payment, like what we did with the $1.7 
billion. Is that fair?
    Ms. Grosh. I am not aware that they ever have, but they 
have all been different and been done on their own merits. Some 
were done by check; some were done by wire transfers.
    Chairman Duffy. Right. That is my point. So this payment 
did not have to be made in cash. The payment could have been 
made in the form that others were made, whether it was a check 
or a wire transfer.
    You were not prohibited from using a wire transfer or a 
check. You didn't have to send cash, is my point. Is that 
correct?
    Ms. Grosh. I can't really, you know, speak to that. I do 
know that Iran was having very serious banking problems because 
of sanctions, and I think my colleagues can speak more to that.
    Chairman Duffy. You have used wire transfers and checks in 
the past, yes?
    Ms. Grosh. Well, we have used checks in the past, but to my 
knowledge Treasury doesn't cut checks anymore.
    Chairman Duffy. So if the President says due to 
international sanctions against Iran the payment made in euro 
and Swiss francs and other currencies had to be made in cash, 
you are telling me that no, that iss not true. We have actually 
made other forms of payment through the tribunal.
    Mr. Backemeyer. Congressman, I can speak to that.
    Chairman Duffy. Sure.
    Mr. Backemeyer. These other payments were before the period 
of the intense international sanctions that we had on Iran, 
those sanctions that we worked closely with this Congress to 
implement.
    Chairman Duffy. So you put the handcuffs on yourself at 
the--I want to make a couple of quick questions.
    Did Iran request the money come in cash payment?
    Mr. Backemeyer. The terms of this deal for Iran were that 
they would get an immediate refund of the principal. For them 
the critical need was that they got immediate access so that 
they could address the critical economic needs that they had. 
And at the time our people that were facilitating these 
transactions felt that the only way to provide that immediate 
payment--
    Chairman Duffy. They didn't ask for cash, but you made sure 
that they got this money, the $400 million and the $1.3 
billion. They get immediate access to it. It is untraceable. 
And per media reports, this money has gone to the military, not 
for the benefit of the Iranian people.
    My time is up.
    And I now recognize the ranking member of the full 
Financial Services Committee, the gentlelady from California, 
Ms. Waters, for 5 minutes.
    Ms. Waters. Thank you very much, Mr. Chairman.
    And I would like to thank our witnesses for being here 
today.
    But the first thing I want to say to our State Department 
witnesses is this: Much of what happened around this payment is 
classified information, and I know that holding this hearing 
puts you in a position where you have to be very careful. And I 
don't wish you to be intimidated or wish you to make a mistake 
in trying to answer some of these questions because, as I 
understand it, every member of Congress has been offered to 
have classified briefings by the Administration and they could 
have had any of their questions answered.
    So feel free to resist any questions that will carry you 
into classified information. Be very, very careful.
    In addition to that, I simply want to say to our 
Administration witnesses that I am concerned that this may be a 
part of the strategy that is being employed by my colleagues on 
the opposite side of the aisle to discredit the President of 
the United States of America. I am reminded that on the night 
of Barack Obama's inauguration a group of top GOP luminaries 
quietly gathered in a Washington steakhouse to lick their 
wounds and ultimately create the outline of a plan for how to 
deal with the incoming Administration. And that is a quote.
    And so, it appears that this has been a continuing strategy 
that has been employed by members on the opposite side of the 
aisle, again, in this attempt to discredit the President.
    I could ask you a lot of questions here today, and I 
suppose a lot of questions will be asked of you about why pay 
them in cash, wasn't this basically ransom, et cetera, et 
cetera. But I am not going to do that because any questions 
that I have I am going to take advantage of the classified 
hearings--briefings, rather--that are being offered to all of 
us to answer any of the questions that we may have.
    With that, if there is anything you would like to share 
with us, having been--please do that at this time. I have no 
questions for you. Would you like to share anything with us? 
Please do it at this time. That is both of our State Department 
representatives here.
    Mr. Backemeyer. Thank you, Congresswoman.
    I think we have laid out our remarks in our opening 
statements, but thank you.
    Ms. Waters. You are certainly welcome. Well, can you help 
to clarify whether or not the Members of Congress have been 
offered classified briefings? Do you know about that?
    Mr. Backemeyer. Yes, I would be happy to clarify that. We 
have offered since January, when this--when these three lines 
of effort were concluded, we have offered--with respect to this 
particular piece we have offered classified briefings to all 
members in--of Congress. We did have one such offer accepted 
and we provided that briefing.
    We also offered, when this resurfaced recently, to have 
closed member and staff briefings, and we did have 2 days ago 
staff briefings in both the House and Senate in a classified 
setting.
    Ms. Waters. Would you please clarify how many members of 
this committee have taken advantage of that offer?
    Mr. Backemeyer. Congresswoman, I am afraid I am not 
familiar with the one offer that was accepted, so it would be 
hard for me to say. But as I mentioned, there was one offer--
one briefing provided or one briefing accepted, and we provided 
it.
    Ms. Waters. Are you saying there was a briefing where maybe 
several members of the committee came or one member was 
briefed?
    Mr. Backemeyer. It is my understanding that it was one 
member.
    Ms. Waters. Only one member. Was that member a member of 
this committee?
    Mr. Backemeyer. No, he was not.
    Ms. Waters. So basically, it is correct if I conclude that 
the offer was made, the staff have been briefed, but not one 
member of the committee, including myself, have taken advantage 
of that offer? So all of what will be asked here today could 
have been asked and they could have had access to classified 
information in that briefing. Is that correct?
    Mr. Backemeyer. That is correct. And the full details of 
this process are best described in a classified setting, given 
the various diplomatic and--
    Ms. Waters. Is that offer still available to every member 
of this committee?
    Mr. Backemeyer. Absolutely.
    Ms. Waters. So today they can only get information that is 
not classified. But if they are truly interested they can get a 
classified briefing and get every question that they have 
answered. Is that correct?
    Mr. Backemeyer. That is correct.
    Ms. Waters. Thank you very much. I have no other questions.
    Chairman Duffy. The gentlelady's time has expired.
    The Chair now recognizes the former Chair of the Terrorism 
Financing Task Force, and the vice Chair of this committee, Mr. 
Fitzpatrick from Pennsylvania, for 5 minutes.
    Mr. Fitzpatrick. Thank you, Chairman Duffy, for calling 
this really critical hearing today.
    Mr. Backemeyer, my first question is if Saeed Abedini had 
not disclosed the existence of the second plane which contained 
the pallet of cash, would either Congress or the American 
people have ever learned of the existence? And the reason I ask 
is because I found out about that fact probably the way most of 
my colleagues did, because he spoke about it when he returned 
and we saw it on the news.
    So how was Congress ever going to find out about how that 
cash was delivered and why?
    Mr. Backemeyer. Congressman, thank you for that question. I 
am glad you raised it.
    We have said publicly and we continue to say that--what Mr. 
Abedini was told was incorrect. The delay in the departure of 
his flight was due to a variety of complications related to the 
prisoner release deal, including--
    Mr. Fitzpatrick. But it so happened that they all--they 
occurred simultaneously in the end, did they not?
    Mr. Backemeyer. The prisoner release deal was held up 
because we could not locate Jason Rezaian's wife and mother. 
There were also some complications with respect to some of the 
Iranian nationals in the United States.
    Mr. Fitzpatrick. It was just ironic it all happened the 
same night? Is that what you are saying?
    Mr. Backemeyer. As I mentioned in my opening statement, we 
had a desire to conclude all of our lines of effort--the Iran 
nuclear deal, the consular deal, and this Hague Tribunal deal, 
all around--on or around the same time because we believed 
there was significant diplomatic momentum that allowed us to 
advance U.S. interests all at the same time, and we believed 
that there was significant risk that if we allowed one or two 
of those to lag that we would not be able to achieve all of our 
core--
    Mr. Fitzpatrick. Leaving aside for a moment the issue of 
the timing of the payment and the release of the hostages--and 
this is a follow-up on Mr. Duffy's question--who specifically 
made the decision to make this payment in cash? Who at the 
State Department? Who at the Department of Justice? Who made 
that decision?
    Mr. Backemeyer. I cannot speak to who made the decision to 
make it in cash. What I can tell you is that it was the 
determination of the people that had to facilitate this payment 
that the way to provide--
    Mr. Fitzpatrick. Who could tell us who made that decision? 
If you can't--you are here to testify this subcommittee or this 
committee--who can tell us? Was it a condition of the Iranian 
government? Or was it a decision of the United States 
Department of State?
    Mr. Backemeyer. The condition of the deal was that there 
would be immediate payment. We knew that Iran had critical 
economic needs that it had to address immediately and that 
would not be addressed by the removal of the broader Iran 
sanctions--
    Mr. Fitzpatrick. Certainly there are other ways to make an 
immediate payment other than a middle-of-the-night what appears 
to be a drug drop.
    Mr. Backemeyer. Congressman, the--
    Mr. Fitzpatrick. What are the other ways we could have made 
an immediate payment?
    Mr. Backemeyer. Congressman, I understand your concerns 
about this. But what I will tell you is that the power of the 
sanctions that we had in place in Iran, and that we still have 
in place--I will remind that we have a full U.S. embargo on 
Iran that prohibits transfers of funds through the United 
States, and there is a great reluctance by global financial 
institutions, sanctions aside, about doing these sorts of 
business.
    And so we have seen difficulties with global banks being 
willing to engage in these particular transactions, and this 
was the way--this was the mechanism that we felt we could 
guarantee immediate payment. And that immediate payment was 
critical to getting the favorable settlement that we did. Had 
we not been able to perform on that obligation we would have 
likely not gotten such a favorable settlement for the American 
people.
    Mr. Fitzpatrick. Speaking of the favorable settlement, Mr. 
Backemeyer, I think you mentioned in your opening statement 
that you don't want to say anything here today that might 
compromise United States defenses to other remaining claim to 
the Islamic Republic of Iran. Was that your opening statement?
    Mr. Backemeyer. That is correct.
    Mr. Fitzpatrick. If this is a Joint Comprehensive Plan of 
Action, if this was a comprehensive settlement, what are the 
other possible claims that Iran still has? We have made a 
payment of $1.7 billion in cash.
    Mr. Backemeyer. Well--
    Mr. Fitzpatrick. What are the other claims that they have 
that we did not settle as part of this Joint Comprehensive Plan 
of Action?
    Mr. Backemeyer. I will let my colleague respond to that, 
but let me just point out that the Joint Comprehensive Plan of 
Action is a reference to the nuclear deal. It does not 
reference all of these lines of efforts. So the JCPOA, the 
Joint Comprehensive Plan of Action, is the deal that we 
resolved comprehensively the threat posed by--
    Mr. Fitzpatrick. You said in your opening statement there 
were other claims. Do you know what they are? It was your 
opening statement, sir. Do you know what those other claims 
are?
    Mr. Backemeyer. If you would like more detail my colleague 
can provide it, but there are a variety of other claims related 
to foreign military sales--
    Mr. Fitzpatrick. Let me move back to the previous question 
about other ways that you could have made payment other than 
pallets of cash in the middle of the night. How have we 
conducted payments with other actors, such as North Korea, who 
are also cut off from the international financial system? We 
don't deliver cash.
    Mr. Backemeyer. Congressman, I am not familiar with any 
payments of that kind. I couldn't speak to that.
    Mr. Fitzpatrick. I have nothing further.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentleman from Massachusetts, 
Mr. Capuano, for 5 minutes.
    Mr. Capuano. Thank you, Mr. Chairman.
    I would like to thank the panel.
    I don't really speak diplomatic. I have trouble whenever I 
listen to people that are doing it, so I I have to kind of 
clarify what I think I heard and what I think I know. I am not 
really sure.
    Is there a difference between cash and a check? I guess 
people in the Treasury would know that. If somebody owes me 
money and they pay me cash or a check, does it matter?
    Mr. Ahern. Sir, there are a variety of ways to effectuate a 
payment. Cash, check--
    Mr. Capuano. It doesn't matter. Somebody owes me money, 
they pay me cash, they pay me check, they pay me transfer, they 
pay me in S&H Green Stamps if they still have them. It all 
counts, right?
    Mr. Ahern. There are a variety of ways of making payment.
    Mr. Capuano. I would like to ask--I guess it would be the 
State Department people--regardless, if there was no hostages, 
no U.S. hostages, no Iranian prisoners--by the way nobody wants 
to talk about the fact that we gave up Iranian prisoners, as 
well. This is a prisoner swap in some ways. But if there 
weren't any, forget them, would we have still had to pay this 
money?
    Ms. Grosh. Congressman, the State Department has been 
attempting, as I mentioned, for decades been discussing the FMS 
claims--
    Mr. Capuano. No, I am not questioning your judgment on the 
settlement.
    Ms. Grosh. Yes.
    Mr. Capuano. I think the judgment--the questioning of 
judgment on any settlement is a fair question.
    Ms. Grosh. What I--
    Mr. Capuano. Questioning the Iran nuclear deal is a fair 
question. The question I have: Once you made the decision to 
have a settlement, would we have paid this money whether there 
were hostages or not? Would we have paid this money to Iran at 
some point?
    Ms. Grosh. It is clear to me that we reached a time when we 
were able to achieve a settlement, and it is--
    Mr. Capuano. You are not answering--look, I am trying to 
help. You don't want me to help? Don't let me. Go ahead, keep 
speaking.
    Very clear question. Forget the hostages. You made a deal 
at The Hague, which is in the Netherlands, not in Iran. I am 
not questioning the deal.
    I am saying, okay, you made a deal. Once the deal was made 
would you have had to pay Iran the amount that you agreed to 
pay? Yes or no? Kind of simple.
    Ms. Grosh. Yes, once the deal was made we would have had 
to.
    Mr. Capuano. That is what I thought.
    So the payment would have been made with or without 
hostages. And the hostages were a separate item agreed 
simultaneously.
    So it sounds to me like my friends on the other side who 
are all upset about this would rather we paid Iran the money 
and not gotten our people back. They would have been happy. 
Yay. Yippee.
    I wouldn't have been.
    And by the way, had you done that you would still be here 
being criticized for not getting Americans home. So you can't 
win this.
    I hope you understand this is a political game to try once 
again to, number one, trash the Obama Administration; number 
two, trash the Iran nuclear deal; and number three, somehow 
make them look like criminals dropping bags of cash in the 
middle of the night like a drug dealer. This is ridiculous.
    And again, I think there are fair and reasonable and 
thoughtful and tough questions to ask about the Iran nuclear 
deal. I voted for it. But I think there are questions that are 
reasonable.
    Any legal settlement with the risk of litigation--I was a 
lawyer back in my previous life when I was actually had some 
useful function to have. Any legal settlement is a question of 
negotiations, a question of judgment. It is a judgment call. 
You are going to save money, or make money, lose money. Fair 
question. Those are fair questions to say whether your judgment 
was right or wrong on this one.
    It is not fair to say we should have left four Americans in 
Iran. And if you had done that--let's assume you had paid the 
money. Do you trust Iran to have lived up to their separate 
deal to let four Americans go?
    Mr. Backemeyer. No, Congressman. In fact, as I mentioned, 
our biggest concern was this particular piece, that they would 
not follow through on that.
    Mr. Capuano. I don't trust them either. And actually, it 
sounds like my friends on the other side trust them more than I 
do.
    It is awfully nice that you trust the Iranians. Good job. 
Great leadership. Great judgment.
    Of course we don't trust them. That is why the nuclear deal 
had the most invasive, aggressive inspection regime of any deal 
ever made in the history of this world. Again, I don't trust 
them.
    I am glad the Americans are home. If this was a separate 
deal, cash-for-Americans, I would be agreeing with my 
colleagues on the other side. Ransom is unacceptable. But 
payment--by the way, whose money was this?
    Am I wrong to think that this was the money that we grabbed 
from Iran in 1980 to say, ``Everything is on hold. This is 
money you paid for a contract. We are not giving it back until 
we negotiate and we will see you in The Hague?'' Is that right? 
It was their money.
    Ms. Grosh. That is exactly right.
    Mr. Capuano. So we gave them back their money in a form of 
legal tender that is now very public, and yet people are 
criticizing it because we got four Americans. Mother of God, 
thank you. Good job.
    Chairman Duffy. The gentlemen's time has expired.
    The Chair now recognizes the chairman of the full Financial 
Services Committee, the gentleman from Texas, Mr. Hensarling, 
for 5 minutes.
    Chairman Hensarling. Thank you, Mr. Chairman.
    It is clear that perhaps the Administration and certain 
Democratic Members of the House are the only people in America 
who believe that ransom was not paid. It is also clear that 
many believe this is a good U.S. policy. I believe it not to be 
a good U.S. policy. Otherwise, 4 hostages may lead to 40 
hostages, and that may lead to 400 hostages. And that is why I 
believe in the history of our republic, it has not been the 
policy of the United States of America to pay ransom for 
hostages.
    The question I have, though, is, again, it is most curious 
that this payment was made in cash.
    Now, some believe this is not a particularly relevant 
issue. According to the Financial Action Task Force, ``The 
physical cross-border transportation of currency is one of the 
main methods used to move illicit funds, launder money, and 
finance terrorism.''
    Cash is the currency of terrorism. We paid cash to the 
world's foremost state sponsor of terrorism. And the question 
is, again, why was that done? Was there a legal obligation?
    We have heard that some of these payments have been made in 
other methods that could be more transparent through the normal 
financial channels. And the tribunal itself states that it has 
finalized more than 3,900 cases.
    So I think one of our witnesses--Ms. Grosh, did you not say 
that at least some of these were not made in cash? Is that 
correct?
    Ms. Grosh. Congressman, yes. There have been more than 39 
cases resolved at the tribunal. The bulk of those payments came 
from a security account that Iran is obligated to ensure 
payment of all awards in favor of U.S. nationals and U.S. 
companies, and that is what resulted in $2.5 billion being paid 
to--
    Chairman Hensarling. Let me ask you this question. Again, I 
am having a little trouble figuring out why this was a cash 
payment. Isn't it true that under the Iranian Transactions and 
Sanctions Regulations there are exceptions to financial 
dealings that license payments between the American and Iranian 
financial systems in order to receive, pay, or settle claims 
pursuant to the United States Claims Tribunal, specifically 31 
CFR Section 560.510?
    Mr. Backemeyer. Yes sir. That is the general license I 
mentioned in my opening statement.
    Chairman Hensarling. Okay, so you didn't have to pay it in 
cash, but you did pay it in cash. It is, again, still unclear. 
The question has been asked but it hasn't been answered. 
Specifically, did someone in the Iranian government ask for the 
cash payment?
    Can anybody on the panel answer the question besides a 
macro view that Iranians wanted money?
    Mr. Backemeyer. Congressman, I am trying to be specific. 
The term of the deal was that they got immediate payment. The 
reason for cash was not--
    Chairman Hensarling. Are you aware of anybody specifically 
in the Iranian government asking for a cash payment?
    Mr. Backemeyer. I am not aware, nor am I aware of all the 
conversations that took place.
    Chairman Hensarling. Who would be aware? Who could this 
panel go to to get an answer to that simple question?
    Mr. Backemeyer. We would be happy to follow up with you on 
further details in a closed session and we would be happy to 
discuss that with you in that setting.
    Chairman Hensarling. Are you aware that according to press 
reports these funds have ended up in the hands of the Iranian 
military, the Iranian Revolutionary Guard?
    Mr. Backemeyer. Congressman, I have seen those press 
reports. As I mentioned, we--it is our assessment that the vast 
majority of funds that Iran has had access to, whether through 
the JCPOA or this, continue to be used for its economic needs.
    We have seen some press reports of an Iranian budget line 
item. Our translators and those in the intelligence community 
have--
    Chairman Hensarling. That item is roughly 10 percent of the 
entire annual defense budget, the military budget, of Iran. 
Does this Administration not believe that giving the leading 
state sponsor of terrorism $400 million in cash followed by 
$1.3 billion--does that not present any serious terrorist 
financing concerns to you at all?
    Mr. Backemeyer. Congressman, we have made clear from the 
very beginning that the deals that we struck on this day do not 
resolve all of our concerns with Iran and those concerns remain 
significant. What we resolved was the most imminent and 
critical, which was the nuclear program. And we were able to 
resolve two additional pieces of business at the same time.
    But we still oppose and object to Iran's destabilizing 
activities in the region, its support for terrorism--
    Chairman Hensarling. My time has expired.
    Thank you, Mr. Chairman.
    Mr. Backemeyer. --and we continue to counter those 
activities through the very vigorous tools that we have.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Cleaver, for 5 minutes.
    Mr. Cleaver. Thank you, Mr. Chairman.
    In January I will have been on this committee for 12 years, 
assuming I am reelected. And so I am always careful--not just 
here; I am careful everywhere, because I do think words matter, 
which is why I would not allow my 3-year-old granddaughter to 
watch the news.
    And so I can't tell you how disturbed I am. I am often 
disturbed, but I am going to start saying things when this 
happens on both sides. But I think one of my--my colleague, who 
is a good guy--I know him; I have been to his home and met his 
family. But when you drop a word like--words like, you know, a 
``drug drop'' that creates some discomfort.
    And I know that the gentleman didn't mean what could be 
interpreted to be really awful. And it would be my hope that, 
you know, that it was, you know, a misstatement and--or 
sometimes we all say things we would rather pull back. I am 
assuming that he would rather pull that back.
    Because there are a lot of people--I mean, this could 
mushroom into something that I think would be an embarrassment 
to the entire committee. We are talking about this 3-hour 
strategizing meeting; fast forward to this hearing and we are 
saying, you know, it was like a drug drop.
    That is not good. That is a little scary.
    And my partisanship doesn't--or my ideological leanings 
have to stop at some point. You know, which is--I mean, I 
wouldn't say that George Bush, you know, had a drug drop, or 
hopefully anybody.
    So you know, this is maybe a political gathering and we are 
supposed to do some of this stuff. I can't do it because I 
just--I think we are--the whole country is looking at this 
political process and saying, ``You know, Washington stinks.'' 
And we are creating a higher level of stinktivity--yes, it is a 
word; I made it up--when we do this kind of thing. We are 
stinking up the political process.
    You know, I have some questions but, you know, after that I 
just decided I got good questions. As Mr. Trump would say, 
these are very good questions, big questions.
    But after that I don't want to engage in this. So I would 
like to just yield back the rest of my time.
    Mr. Green. Would you yield to me, Mr. Cleaver? Mr. Cleaver, 
would you yield to me?
    Mr. Cleaver. Yes, I would.
    Mr. Green. Thank you, Mr. Cleaver, and thank you for your 
thoughtfulness.
    A couple of points to be made. We hear people bemoaning the 
money that was accorded the Iranians. But there have been 
settlements that inured to the benefit of Americans totaling 
about $2.5 billion.
    So would we give back the $2.5 billion that have been 
accorded Americans in settlements? Not a lot of emphasis is 
being placed on the fact that people came home.
    Thank you, Mr. Capuano.
    People came home. Americans were freed. Would you send them 
back? Would you put them back into harm's way, incarcerated in 
Iran? Is that what you are pushing today?
    This hearing is about headlines, not headway. Headway could 
be made by doing--as the honorable Maxine Waters has indicated, 
classified briefings are available to all of us and we could 
make headway. Today is about headlines.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentleman from South Carolina, 
Mr. Mulvaney for 5 minutes.
    Mr. Mulvaney. Thank you.
    A couple of random questions. First of all, I want to 
follow up on something.
    I think Mr. Hensarling started to ask--I don't know if he 
asked it this way--a cash payment is in violation of law, isn't 
it? Cash payment violates 31 CFR 208.3. Is that true?
    Mr. Ahern. Sir, the payment was done consistent with all of 
the appropriate Treasury regulations.
    Mr. Mulvaney. Okay. I am reading 208.3 Payment by 
Electronics Fund Transfer. Subject to 208.4, which is a waiver, 
which I don't think is relevant here because it deals with 
checks, and not withstanding any other provision of law, 
effective January 2, 1999 all Federal payments made by any 
agency shall be made by electronic funds transfer.
    Didn't this transfer of cash, at least the $400 million in 
cash--hard currency--doesn't that violate 208.3?
    Mr. Ahern. Sir, if could just for a moment walk through the 
flow of these transaction, they generally flowed in the same 
manner. So we will take the $400 million principal payment.
    Mr. Mulvaney. Do it quickly please. I only have 5 minutes.
    Mr. Ahern. Generally speaking, that payment was transferred 
by a wire transfer. It was transferred to the account of a 
foreign central bank. That foreign central bank then converted 
it into foreign currency bank notes and dispersed it to the 
government of Iran. Treasury's regulations speak to that 
payment to the payee of the claim, not necessarily to the 
ultimate payment of the claimant, which in this case was the 
government--
    Mr. Mulvaney. So I guess the shorter answer is since the 
wire transfer went to an escrow agent, the escrow agent paid 
out the cash, you didn't violate 208.3. Is that the basic 
argument?
    Mr. Ahern. This was consistent with Treasury's regulations, 
sir.
    Mr. Mulvaney. Okay. Why do we pay interest? My 
understanding is that the FMS Trust Fund does not bear 
interest.
    Ms. Grosh. Congressman, yes that is correct. In the typical 
situation customers pay their funds into the trust fund and by 
law that trust fund does not accrue interest.
    As I mentioned in the top of my remarks, the United States 
and Iran entered into a memorandum of understanding in February 
of 1979 that has express provision for unexpended funds to be 
placed in an interest-bearing account, and it is on that--based 
on that language that Iran has brought its claim for interest.
    Mr. Mulvaney. Did we put it in an interest-bearing account?
    Ms. Grosh. The funds were not placed in an interest bearing 
account.
    Mr. Mulvaney. So we had an agreement with Iran that 
required us to put that money into an interest-bearing account 
but we didn't do that?
    Ms. Grosh. As a factual matter that is correct. I could 
have a lot more to say about that but these--some of these 
matters are still--other issues related to that memorandum of 
understanding are currently being litigated between the 
parties.
    Mr. Mulvaney. So I guess--
    Ms. Grosh. I would be happy to discuss that further in a 
closed setting.
    Mr. Mulvaney. So if either the Carter Administration or the 
Reagan Administration or both had followed the MOU the interest 
would have been paid by the bank into which we put the escrow 
account--the escrow monies.
    Ms. Grosh. All Administrations since the memorandum of 
understanding in 1979 acted consistently with respect to these 
funds.
    Mr. Mulvaney. No. You just told me they didn't. It said the 
MOU required us to put it in an interest-bearing and then you, 
in the next sentence, said that we didn't do that.
    Ms. Grosh. That is correct. But what I was saying was that 
each Administration treated those funds consistently, 
notwithstanding the language of the MOU. There are legal 
arguments at stake here that continue to be before the 
tribunal, and again, I would be happy to discuss that further 
in a closed setting.
    Mr. Mulvaney. All right. We may get that opportunity.
    Last question to Mr. Capuano. I think he stepped out.
    My understanding of the flow of the funds is that the 
original $400 million, which was in the FMS, was indeed a 
payment by the government of Iran under the FMS program. I get 
that, okay? Their money, for lack of a better word.
    But there was a legal lien against that money, wasn't 
there, that the 2000--Victims of Trafficking and Violence 
Protection Act of 2000 specifically placed a lien against that 
exact amount of money. Is that not true?
    Ms. Grosh. Well, if you are talking about a judicial lien 
that is not true.
    Mr. Mulvaney. No, I am talking about a public law, 106--I 
don't have the U.S. Code in front of me. I have 106-386, and it 
says that judgments against Iran for purposes of funding 
payments under section A--we were trying to make sure that 
victims of terrorism got paid.
    In case of the judgments against Iran the secretary of 
Treasury shall make such payments for amounts paid and 
liquidated from, and there is a list of things. One of the list 
includes funds not otherwise made available in an amount not to 
exceed the total of the amount in the Iran Foreign Military 
Sales program account. This money was liened by law in 2000.
    Ms. Grosh. Yes. I am familiar with that, Congressman. 
What--
    Mr. Mulvaney. Did we repeal this law, or how did we get 
around this?
    Ms. Grosh. What happened was that the judgments were paid 
from appropriated funds to the extent of $400 million, which 
was the balance of the FMS Trust Fund at that time, at the time 
of enactment--
    Mr. Mulvaney. Whoa, whoa, whoa.. So the taxpayers paid $400 
million in claims when we could have taken it out of this fund?
    Ms. Grosh. Yes, that is correct. Congress passed 
legislation that appropriated funds to be paid to those victims 
to the level of what was in the balance of the trust fund.
    Mr. Mulvaney. When did we do that?
    Ms. Grosh. Through the very act that you are discussing.
    Mr. Mulvaney. Okay. The very act that I am discussing 
doesn't say that, though. The very act says that for purposes 
of funding payments we go to the FMS Trust Fund.
    Ms. Grosh. Yes, and if you--
    Mr. Mulvaney. I am in section 2002, subsection (2)(b).
    Ms. Grosh. Right. And if you look at that act, it also 
provides that the United States shall be fully subrogated to 
the extent of the payments. Subrogation means that the United 
States made those payments--
    Mr. Mulvaney. I am aware of what subrogation means.
    Ms. Grosh. Yes. so the United States was subrogated to 
those claims. What that means is those claims then become the 
U.S. Government claims.
    Mr. Mulvaney. To Mr. Capuano's piece, at the end of that, 
after the subrogation they are not Iran's funds anymore. They 
are the United States Government's funds, aren't they?
    Ms. Grosh. No. The funds remained in the trust fund as 
Iranian monies in the trust fund. The United States Congress 
appropriated $400 million to be paid to these individuals--
    Mr. Mulvaney. Instead of taking the money out of the FMS 
Trust Fund.
    Ms. Grosh. That is correct.
    Mr. Mulvaney. But by doing so we thus own the $400 million.
    Ms. Grosh. No, that is incorrect. I am sorry.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the gentleman from Maryland, Mr. 
Delaney, for 5 minutes.
    Mr. Delaney. Thank you, Mr. Chairman.
    Did the $400 million actually sit in an account segregated 
at a separate financial institution or was it just held by the 
United States Government?
    Ms. Grosh. The $400 million was in what is called the FMS 
Trust Fund. It sits in the Treasury. All FMS customers pay 
funds in there and then they are separated through separate 
holding accounts for each customer.
    Mr. Delaney. But is it kind of fungible cash or is it 
actually segregated in a separate account? I mean, when you say 
it is held at the Treasury does that mean it is effectively 
fungible with all the cash of the United States and it is just 
tracked as a separate account or is there actually somewhere, 
the equivalent of a bank account at a large financial 
institution, where there is a statement that says there is $400 
million in cash sitting in there?
    Ms. Grosh. I believe my colleagues at the Treasury could 
maybe speak to this more but my understanding is that it is an 
account within the U.S. Treasury.
    Mr. Delaney. Got it. Okay.
    So it seems like what effectively happened in the middle of 
2015 is three things came together simultaneously: the Iran 
nuclear agreement, the prisoner exchange swap and then the 
settlement of this claim. Is that the right way of thinking 
about it? Three separate transaction or three separate 
agreements were reached by three separate teams?
    Mr. Backemeyer. Congressman, that is correct. We thought to 
finalize all of those issues on the same, or on around the same 
time to take advantage of the diplomatic moment we had.
    Mr. Delaney. So as it relates to this claim, is it fair to 
say that a legal obligation of the United States of America was 
created in mid-2015 to pay $1.7 billion?
    Ms. Grosh. I wouldn't put it exactly that way. These are 
matters that were under litigation for many years and members 
of the legal advisors office at the State Department had been 
looking--had been litigating these FMS claims for a long time.
    Mr. Delaney. Right, but I am talking about--fast--forget 
about all the history. In the middle of 2015 you said this was 
settled.
    Ms. Grosh. It wasn't settled. What we were facing was we 
were approaching a hearing date.
    Mr. Delaney. Right.
    Ms. Grosh. And Iran wanted to move to--it is like going to 
trial and they wanted to have this decision not only go to 
hearing and heard by the tribunal but decided in a preliminary 
manner.
    Mr. Delaney. And what interest rate were they claiming was 
owed across the period of time?
    Ms. Grosh. Iran was claiming very, very high interest 
rates.
    Mr. Delaney. What rate?
    Ms. Grosh. This is an area that I would prefer not to get 
into in this--
    Mr. Delaney. It looks like we settled at a slightly higher 
than 4 percent interest rate. Is that right?
    Ms. Grosh. I don't know exactly what that translates into. 
There was certainly a methodology behind that and I would be 
happy to go through that in a closed setting.
    Mr. Delaney. Do you know what the average interest rate--
Treasury rate across the period of time was?
    Ms. Grosh. I do know that in the early 1970s and 1980s the 
interest rates were around 18, 19, 20 percent.
    Mr. Delaney. Right, they were high. And I haven't done the 
exact math, but just looking at the chart it looks like the 
average fed rate across the period of time was about 8 percent 
and you settled for about 4, and the power of compounding is 
such that at 8 percent it would have been $8 or $9 billion and 
at 4 percent it was $1.3 billion. So that is the bargain you 
thought you negotiated. Is that correct?
    Ms. Grosh. We agreed to the disposition and a compromise on 
interest.
    Mr. Delaney. That is right. And so was it actually a legal 
obligation, would you say? I mean, you say you agreed and you 
settled, but was there any kind of formal agreement that was 
reached where somewhere in the books of the United States of 
America we entered a $1.7 billion liability?
    Ms. Grosh. I am not sure I understand the question, but we 
certainly--
    Mr. Delaney. So if someone would have asked the government 
in the fall of 2015, ``How much do we owe Iran,'' would they 
have said $1.7 billion or would they have said $400 million?
    Ms. Grosh. Again, this is, as was referred to by one of 
your colleagues, this is a matter of litigation risk and these 
are the kinds of issues we look at like any litigating parties 
when you are actively litigating claims. We could discuss 
that--some of that litigation risk in a closed setting.
    Mr. Delaney. So I guess the question, was this settled in 
mid-2015 or was it still open-ended?
    Ms. Grosh. In mid-2015 we were discussing this with Iran 
and we were--we--there was some urgency because we felt that 
this was going to go to hearing and then a decision by the 
tribunal.
    Mr. Delaney. Were you still discussing it in September of 
2015?
    Ms. Grosh. Yes.
    Mr. Delaney. And December of 2015?
    Ms. Grosh. Yes. Iran filed its hearing proposal in November 
of 2015.
    Mr. Delaney. What day do we think that we actually agreed 
to the $1.7 billion--like that number?
    Ms. Grosh. Are you speaking to the United States--
    Mr. Delaney. Yes.
    Ms. Grosh. --or to Iran?
    Mr. Delaney. Yes. When do we feel like we had an agreement 
with them as to $1.7 billion?
    Ms. Grosh. Again, I think it would be better to discuss 
those details in a closed setting.
    Mr. Delaney. Because that date is relevant as to whether 
this was an obligation of the government or something else. But 
I assume what you are saying here today is that that agreement 
for $1.7 billion was reached before the payment was made.
    Ms. Grosh. That is correct.
    Mr. Delaney. How much in advance of the payment would you 
say?
    Ms. Grosh. Again, on issues of timing we certainly had 
agreed with Iran sometime before the payment was made. I wasn't 
involved in all the--
    Mr. Delaney. Does ``sometime'' mean more than 30 days, or 
more than 60 days, or more than 90 days?
    Ms. Grosh. It was less than 30 days.
    Mr. Delaney. Okay. Thank you.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the gentlelady from Missouri, Mrs. 
Wagner, for 5 minutes.
    Mrs. Wagner. Thank you, Mr. Chairman.
    And thank you, to our panel, for appearing today to answer 
questions for us, but more importantly, to answer questions for 
the American people and shed some light, some transparency, on 
what actually happened with this money transfer to Iran--
unmarked cash in foreign currencies strapped on wooden pallets 
and loaded onto a cargo airplane to be sent to a recognized 
state sponsor of terror.
    It seems more like a scene out of a made-for-TV movie than 
actual real-life U.S. policy. And as an Army mom whose son is 
an active duty infantry officer, and as a former United States 
ambassador, I just have to say I am very concerned with the 
appearance of our government paying ransoms for captured 
prisoners and further, in future, endangering our other 
soldiers and diplomats abroad.
    I would like to reference a quote from White House Press 
Secretary Josh Earnest from earlier August as to why the United 
States made this settlement payment so quickly, to which he 
said the Iranians ``were eager to try to address the legitimate 
concerns of the Iranian people about the state of the Iranian 
economy.''
    Is it the opinion of the State Department or the Treasury 
Department that this money transfer would be used for the 
Iranian economy?
    Mr. Backemeyer?
    Mr. Backemeyer. Congresswoman, first let me say thank you 
for the service of your son and thank you for your service. We 
spend our days at the State Department, I know, as well as the 
Treasury and the Justice Department, doing our best to advance 
the U.S. interests and doing our best to protect our men and 
women overseas, and we are grateful for their service.
    With respect to your question, this was a situation, as I 
said, where the timing was related to the various pieces of 
business that we were trying to get done. All--
    Mrs. Wagner. Did you believe that it was going to help the 
Iranian economy?
    Either State or Treasury?
    Mr. Backemeyer. As I said, it is our assessment that the 
vast majority of the funds that they have received have--
    Mrs. Wagner. What assurances were you given, sir?
    Mr. Backemeyer. Even if I had gotten assurances from the 
Iranians, you would not believe those assurances nor would I. 
And that is why, as I said--
    Mrs. Wagner. Precisely. Let me move on. Reclaiming my time, 
I have a short--a lot of questions and a short amount of time.
    We have since seen that Iran's latest year budget provides 
for an additional, guess what, $1.7 billion--the same amount 
transferred by this Administration to the military 
establishment to spend as it wishes in Iran.
    Ms. Grosh, why did the White House think that this money 
would be used for the economy when Iran ended up using it for 
their military?
    Ms. Grosh. Congresswoman, I am sorry, that is way out of my 
league and I am not in a position to decide that. My expertise 
really involves litigation of these claims at the tribunal and 
determining the settlement--
    Mrs. Wagner. Let me ask a more relevant question. How do we 
know that this $1.7 billion increase did not come as a direct 
result as the cash transfer from the United States?
    Mr. Backemeyer. Congresswoman, the press report that you 
are referring to is one that we have reviewed and had our 
Persian translators review and we believe that it is 
inaccurate.
    Mrs. Wagner. National Security Advisor Susan Rice recently 
admitted that some of the $150 billion that Iran will receive 
in sanctions relief from the Iran nuclear agreement would, 
``support international terrorism.''
    Mr. Backemeyer, what assurances do we have that this 
settlement money will not end up funding terror proxies--units 
like Hezbollah, considering that they receive support from the 
Islamic Revolutionary Guard Corps?
    Mr. Backemeyer. As I have mentioned, Congresswoman, we have 
serious concerns with Iran's problematic behaviors, including 
those that you have just referenced--their support for 
terrorism, their support for proxy groups. We have a variety of 
tools that we use to counter those activities--
    Mrs. Wagner. Let's talk about those. Does paying Iran in 
all cash make it more riskier that the money could end up in 
supporting terrorism?
    Mr. Backemeyer. Congresswoman, I can't speak to the risk on 
that but what I can say is that this settlement was made based 
on its own merits.
    Mrs. Wagner. If this settlement, let's say funding, does in 
fact end up promoting terrorism, what actions could the United 
States take to punish Iran for its behavior?
    Mr. Backemeyer. We have a variety of tools--through 
sanctions, through other means--that we can use to enforce our 
sanctions against Iran. These include authorities that go 
against individuals and entities like the IRGC, the Quds Force, 
and those that are involved in terrorism. That includes 
activities that are operational in nature that we use--
    Mrs. Wagner. I am running out of time.
    Ms. Grosh, what incentive or gain did the United States 
receive in return for structuring the payments so favorably in 
cash to Iran?
    Ms. Grosh. I am not aware. I know that this settlement was 
in the interest of the United States--
    Mrs. Wagner. Mr. Ahern, did Iran insist that the settlement 
money be delivered in cash? We are going to try one more time 
at this.
    Mr. Ahern. Ma'am, I wasn't part of the negotiations. I 
can't speak to that. What I can say is that my understanding is 
that settling this claim at this time in this manner--
    Mrs. Wagner. When was it agreed upon that it would be cash?
    Mr. Ahern. --saved the United States Government potentially 
from paying billions of dollars more to Iran.
    Mrs. Wagner. My time has expired.
    I appreciate the indulgence of the chair. I have many more 
questions and I will submit them for the record. Thank you, Mr. 
Chairman.
    Chairman Duffy. The gentlelady's time has expired.
    The Chair now recognizes the gentlelady from Ohio, Mrs. 
Beatty, for 5 minutes.
    Mrs. Beatty. Thank you, Mr. Chairman.
    And thank you, to our ranking member.
    And a big thank you to our witnesses who are here today.
    Mr. Chairman, I just have a few brief statements, and more 
so for clarification for me and for all of those who are 
watching this.
    So let me start by thanking you for advising us to get the 
real answers that we need. If we want it to move forward then 
our leadership and others, including myself, had I known about 
it, would be doing this in a classified briefing. That is 
number one.
    We are often chastised on this side of the aisle if we are 
a little late for complying with some rules. And so I am going 
to assume, since it is my understanding that the title of 
today's hearing is picked by the Majority and the title is, 
``Fueling Terror: The Dangers of Ransom Payments to Iran.'' So 
if they really thought that this was a problem, seems like you 
would want to be more armed by being in a classified setting 
where you could get real information.
    If you don't want real information and you just want to 
showboat then you do--or you get what we are seeing here today.
    There has been a lot of opening statements in your opening 
statements. Let's go back to the opening statement that our 
chairman made of the Financial Services--the chairman 
mentioned--when he said it was the Iranian officials who said 
this was really a ransom.
    Now, our President--I am not saying my President, let's get 
something clear. The President of the United States is our 
President. So our President is telling us that it was not. He 
was trying to save lives and bring them back home.
    So let's figure out who the real enemy is here. If I am 
sitting here listening to this, as many Americans are, it 
almost seems like my colleagues are pitting our President 
against the individuals that they are now chastising us for for 
bringing our individuals home.
    So we have been intense in here. We have been somewhat 
humorous in here. So let me be very abstract in here.
    Since this has been a lot about money, let's just say I 
wanted to say, since they are expecting you after you have 
actually said in one of your statements that you thought the 
money went for economic needs, but yet you keep being badgered 
over the cash and badgered over where the dollars are going, 
and more specifically that they are going to fund terrorism.
    So what if I would say to my colleagues: There is something 
called the RNC, and monies that they give go into the RNC. So 
would they remember or know if their monies to the RNC that 
went to the presidential candidate Donald Trump, who I believe 
excites terrorism--would they be able to then say back to me 
why they did?
    Let's assume most of them didn't give to him. Interesting, 
isn't it? But we know their dollars will go in to fund a 
presidential candidate who excites terrorism, a presidential 
candidate who is not about saving lives, who makes fun of those 
who are disabled, who degrades women.
    And yet, they stand here wanting to question our President 
for going back and giving the money that belonged to them 
already. It was their money he gave them back.
    Now, I also think you would use words like, ``It was 
incredibly brilliant that our President cared so much about 
those individuals who were being held there that he wanted to 
do one thing. And if he is guilty of something it was to make 
sure that the timing of the transaction''--it was already done 
that he was giving the money. That wasn't a secret.
    We knew he was giving it. We even know how they lined up 
the foreign currency to be put on the pallets to give to them. 
So that is not a secret.
    If you are trying to do something that is not legal or 
fair, you don't publicize and describe it and you say it. So it 
was the timing that he wanted to do to make sure that people 
were returned safely.
    So I want to thank you for trying to be helpful. I want to 
thank you for your answers. But I think you said it best when 
you said you are not there knowing how the dollars are 
transferred or what we did, but you do believe that it went for 
economic needs.
    Thank you, and I yield back.
    Chairman Duffy. The gentlelady yields back.
    The Chair now recognizes the gentleman from California, the 
Chair of the House Foreign Affairs Committee, Mr. Royce, for 5 
minutes.
    Mr. Royce. Well, thank you, Mr. Chairman.
    The reason we are concerned with cash going to Iran, 
especially $1.7 billion in cash, is because Iran is in the 
process, with the Iranian Revolutionary Guards Corps, of 
funding terrorism in the region. And specifically what they are 
trying to do is get their hands on hard currency.
    So when they are trying to develop, for example, for 
Hezbollah the capability to use GPS in order to be able to 
equip the missiles and rockets in the inventory with this 
special capability to be able to hit the tallest buildings in 
Tel Aviv or be able to get around the Iron Dome, this needs two 
things: the transfer of the missiles from Iran to Hezbollah--
they already have transferred 100,000 of these rockets and 
missiles; and second, it needs the capability of being able to 
switch this over to this GPS capability.
    For that kind of terrorism they need hard currency. That is 
why we are interested in the $1.7 billion cash payment, because 
by insisting that it was the only way to get the money to Iran 
we are strict in maintaining banking sanctions. This is hugely 
misleading, and let me explain why.
    The sanction system was designed with tribunal payments in 
mind. The Iran transaction sanctions regime contains a number 
of exemptions from the rule so that certain transactions can go 
forward. And in this case, transactions for tribunal 
settlements are explicitly authorized and would shield any 
entity involved in such a transaction from liability under U.S. 
law if this had been done the proper way without use of cash.
    No. It was the Iranians that wanted the cash. They wanted 
the cash because they are trying to fund terror.
    That is what the IRGC does. It is the number one state 
sponsor of terrorism in the world today.
    So the Administration chose not to license a transaction 
within the international financial system. They chose to 
deliver $1.7 billion in untraceable assets, which was the 
demand on the part of Iran. And if everything was on the up and 
up and there is no connection to hostages, why not go through 
the process laid out in law?
    This is a state sponsor of terrorism. So you are right that 
banks don't want to do business with a country that is backing 
the slaughter of hundreds of thousands of innocents and those 
in Syria, and developing missiles--ballistic missiles, by the 
way, aimed at us because they are intercontinental ballistic 
missiles. But the truth of the matter of is that if you wanted 
to pay through a bank you could have.
    The primary example here is North Korea and Banco Delta 
Asia. No one was more toxic than North Korea and the BDA, not 
even Iran today. But when the last Administration wanted to get 
North Korea--wanted to give the funds back to North Korea it 
found a way using the New York Fed and the Russian Central 
Bank. It found a way through legitimate financial channels, 
which you certainly could have done.
    Likewise, you found a way during the interim agreement to 
facilitate $700 million back to Iran each month through 
international banking relationships. Yes, it would have taken 
longer, but the dispute this payment was supposed to settle was 
over 35 years old. What is a couple more months?
    The only way that I see timing coming into play if this was 
a ransom for the release of Americans and if this didn't drive 
the capture of three more Americans--and remember, that is what 
the Department of Justice said at the time: Don't do this; it 
will be perceived as ransom and we will have more Americans 
captured.
    The heavy water payment, another $10 million. Now that is 
not much compared to the $1.7 billion, but was this paid in 
cash, too? I would certainly like to know, because the danger I 
see here is that cash is going to become the new normal for the 
Iranians.
    And lastly, I just bring up pursuant to the Victims of 
Trafficking and Violence Protection Act of 2000, $400 million 
in taxpayer dollars was supposed to go to U.S. citizens to 
settle judgments against Iran for terrorist attacks. It looks 
to me like part of this understanding is letting Iran off the 
hook for those terrorism claims that was part of that 
settlement. Is that correct?
    Ms. Grosh. With respect to the victims of terrorism claims, 
as I was speaking--as I answered one of your colleagues' 
questions, those judgments were paid in 2000; with the Victims 
of Trafficking Act Congress appropriated $400 million to pay 
them. So their judgments were paid.
    Mr. Royce. But what about the interest on that that should 
have come out of this account?.
    Ms. Grosh. Those claims were then subrogated to the United 
States, so they became U.S. Government claims and they were 
factored into the overall settlement.
    Mr. Royce. And in terms of my question on the situation of 
how this was handled with North Korea, why was it not handled 
the same way with respect to Iran?
    Mr. Backemeyer. Congressman, I am not familiar with North 
Korea, but what I can tell you is this: We share your concerns 
with respect to Iran's troubling activities. We have a variety 
of tools that we use to counter those activities including 
robust sanctions, including sanctions that continue with 
respect to Hezbollah in legislation that was passed in this 
body. We continue to use those and intend to aggressively 
enforce those as we go forward.
    With respect to the mechanism of the payment, all I can say 
is that Iran did not--regardless of the legal prohibitions, 
Iran did not have the international relationships, did not have 
the accounts because of the sanctions that were so strongly 
imposed by this Congress. Accounts were not allowed during the 
sanction period, and as a result Iran did not have those 
relationships.
    So it was difficult to do anything else in an immediate 
way. And the immediate payment of these funds is what allowed 
us to get favorable terms that were in the interest of the 
United States.
    Mr. Royce. The immediate payment is what managed to 
coincide with the exact exchange for all four hostages.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the gentleman from Washington, Mr. 
Heck, for 5 minutes.
    Mr. Heck. Thank you, Mr. Chairman.
    And this question is for either Mr. Backemeyer or Ms. 
Grosh. My understanding is that the most recent settlement at 
The Hague Tribunal before January 2016 was in 1991, when 
Washington and Tehran agreed to a $278 million payment as 
compensation for military equipment that the shah paid for but 
was undelivered at the time of the revolution.
    The final negotiations on that settlement coincided with 
the release, as you will recall, of two Western hostages, 
including one American, by Iranian-backed Shiite Muslim 
militants over in Lebanon. According to a New York Times 
article dated November 28th, 1991, Bush Administration 
officials at the time denied that the deal was linked in any 
way to the fate of the hostages in Lebanon.
    The State Department's legal advisor then, as now, under 
President Bush said in the Times that, with respect to the arms 
deal, ``It is pure coincidence that it is coming together at 
the same time the hostages are being released.''
    In your view, is there any reason to doubt the Bush 
Administration's claim that the hostages' release had anything 
to do with the arms deal settlement, which they claim had been 
under discussion for a long time?
    Ms. Grosh. Congressman, I am familiar with those. I recall 
those reports at the time. I wasn't involved in that particular 
settlement, but our practices that we--in looking at all of 
these cases we assess litigation risk and we decide these 
settlements on their own merit.
    Mr. Heck. I will take that as there is no reason to have 
doubted the Bush Administration's claim.
    I would ask you if you recall any public outcry at the time 
over that. Fact was, there was none from Congress. I will save 
you the time.
    I would ask you if you recall any hearings being held by 
any relevant committee of jurisdiction regarding that issue, as 
we are today? I will save you the time. There were none.
    And I will also remind you that in the wake of the original 
Iranian hostage crisis back in 1981 we, in fact, signed a deal 
to transfer nearly $8 billion--a transfer which was authorized 
by incoming President Reagan. And once again there were no 
Congressional hearings on the legality of those nor an 
indication from the members of the then-majority party, as now, 
that it constituted a ransom.
    So one of my favorite expressions is ``consistency is the 
hobgoblin of small minds.'' Congratulations. Evidently there 
are no small minds here today because there certainly isn't a 
lot of consistency.
    You know, ordinarily we have hearings often on subjects 
which I don't agree with or with such incendiary titles as is 
today's hearing. But I almost always find a way to thank the 
Chair because I think it at least unlocks the door or opens the 
door for a constructive dialogue and questions and answers that 
can help illuminate.
    That is not the case today. There is no legitimate reason 
to be holding this discussion other than to dissemble the facts 
and to engage in propaganda. None whatsoever.
    Indeed the only thing I want to say, and not further 
legitimize this hearing, is that for the four of you and your 
colleagues, however directly or indirectly you were involved in 
the return of those four Americans, you have our thanks.
    I yield back the balance of my time, Mr. Chair.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentleman from Colorado, Mr. 
Tipton, for 5 minutes.
    Mr. Tipton. Thank you, Mr. Chairman.
    Ms. Grosh, what is the policy of the United States when it 
comes to ransom for putting out payment for hostages?
    Ms. Grosh. Congressman, my understanding, as stated by the 
President, that it is the United States Government's policy not 
to pay ransom.
    Mr. Tipton. We don't pay ransom.
    Mr. Backemeyer, you made the comment that there was desire 
to be able to conclude all of our lines of effort when payments 
were made of ultimately $1.7 billion cash sitting on pallets 
going in the middle of the night to Iran. Were the hostages 
part of that line of efforts that you were talking about?
    Mr. Backemeyer. Congressman, as I described, there were 
multiple lines of effort. There was the implementation of the 
nuclear deal that we--
    Mr. Tipton. Was there a tie between the cash and the 
hostage release?
    Mr. Backemeyer. There was not a tie between the cash and 
the hostage release. The tie--
    Mr. Tipton. How does that go back to your comment that it 
was all of the lines being tied together to be able to achieve 
the end?
    Mr. Backemeyer. I don't believe I said the lines tied 
together, sir. I believe what I was trying to convey was that 
we thought we had a unique opportunity and diplomatic momentum 
where we could achieve multiple U.S. objectives, including 
implementing the nuclear deal that extended Iran's breakout 
timeline from less than 90 days to over a year, including 
bringing home American citizens that had been unjustly detained 
and arrested on bogus and trumped-up charges--
    Mr. Tipton. So there was tie.
    Mr. Backemeyer. --and settling a longtime outstanding claim 
that we would have paid one way or another.
    So this was not a question with respect to The Hague claim 
tribunal--or Hague Tribunal claim of whether to pay $1.7 
billion or zero; it was a question of whether to pay $1.7 
billion or much more.
    Mr. Tipton. So there was a tie with no connection. I would 
like to be able to get into the terrorism end of this, in terms 
of the agreements that were put forward
    Ms. Grosh, during the negotiations for the settlement 
purposes of the agreement with Iran in payments, did anyone in 
the Administration ever bring up the issue could these funds be 
used for terrorism? Was that raised as a concern?
    Ms. Grosh. Again, my expertise in all of this is very 
narrow. It really is to litigating claims, assessing litigation 
risks, and in any of these settlements, whether it is this one 
or the ones that we have entered into prior, to give advice 
about what is a good settlement for the United States 
Government.
    Mr. Tipton. Mr. Backemeyer, can you maybe answer that? Were 
any concerns raised by the Administration?
    Mr. Backemeyer. Congressman, as I said, we have multiple 
concerns with the Iranian government and multiple concerns with 
their activity--
    Mr. Tipton. What overrode those concerns?
    Mr. Backemeyer. Congressman, as I have noted, we have tried 
to take step-by-step on multiple lines of effort areas where we 
think we can advance U.S. interests.
    We do so in a concerted and thoughtful way and we have done 
that with respect to the most immediate threat, which is the 
Iranian nuclear program. We have done that with respect to one 
of our top priorities of bringing home our American citizens. 
And with respect to this claim, we did so in a way that saved 
taxpayer dollars.
    We are obviously concerned about any potential--
    Mr. Tipton. Okay. You are talking about saving the taxpayer 
dollars. You know, if we look at National Security Advisor 
Susan Rice, she admitted that some of the Iranian money could 
be used for terrorism. Is that a concern that you took into 
consideration?
    Mr. Backemeyer. We are constantly concerned with what Iran 
might do with respect to its support for terrorism and we have 
a variety of tools that we use to counter that. That includes 
robust sanctions that were passed in this very House; that 
includes designations of individual entities like the IRGC, the 
Quds force, other entities in Iran that support terrorism. We 
have a robust intelligence effort to--
    Mr. Tipton. Mr. Backemeyer, maybe you could give me a 
little bit of clarity on this. The $1.7 billion settlement 
where you sent over cash in the middle of the night on pallets 
to Iran that went into their possession, you have said that the 
majority of this has gone to infrastructure programs so we are 
left assuming that they are filling potholes over there.
    Since you are able to track that money, what happened to 
the rest of it? Did a little bit of it go to terrorism funding? 
You were able to track the infrastructure program.
    Mr. Backemeyer. Sir, what I am speaking to is our 
assessment of the vast majority of funds Iran has gotten access 
to with respect to the multiple lines of effort that we have. I 
cannot get into specific details about where any those are 
going as I can speak in a general matter.
    But it does not change the fact that we have serious 
concerns about what Iran does do with its money, and we have--
    Mr. Tipton. We are talking about in a general matter it is 
going to infrastructure. Where did the other money go to?
    Mr. Backemeyer. Congressman, I don't think I said 
infrastructure. I believe I--
    Mr. Tipton. No, I think you did. You said infrastructure 
programs.
    Mr. Backemeyer. If I did I--what I recalled saying was it 
was going to domestic economic needs. But I have made the point 
again and again that we have concerns about where Iran does 
send its money and its support and we have a variety of tools 
that are in place in order to try to counter that. That is an 
ongoing effort of our government--
    Mr. Tipton. Did they give you any guarantees that the money 
wouldn't be used for terrorism?
    Mr. Backemeyer. I am not aware of any guarantees, but our--
the way we approached this is from what the U.S. Government can 
do with respect to our intelligence capabilities, with respect 
to our operational capabilities, and respect to our diplomatic 
capabilities to try to track and deter those sorts of 
activities.
    We have a vigorous effort to both deter and disrupt 
shipments to Hezbollah, other proxies in the region. That is an 
active effort that is ongoing. We have active efforts with 
respect to our sanctions, which is intended to degrade the 
potential for those actors.
    And we have, as you know, ultimately other diplomatic lines 
of effort where we are trying to resolve other issues of 
concern and other threats to the United States.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the gentleman from Michigan, Mr. 
Kildee, for 5 minutes.
    Mr. Kildee. Thank you, Mr. Chairman. And to you and the 
ranking member, thank you for agreeing to my participation.
    I am not on the subcommittee but I am here because there is 
probably not a subject since I have been in Congress for the 
last 4 years that I have spent more time on than the issue of 
the U.S. relationship with Iran, specifically because one of 
those Americans that people continue to refer to is a young man 
who lives about a mile from me now, a young man named Amir 
Hekmati, from Flint, Michigan, my hometown, who, gratefully, 
thankfully, as a result of the great work of the agencies 
represented here, our secretary of state, President of the 
United States, is now a free man at home pursuing the rest of 
his life.
    The reason I make that point is that there were very many 
Members of Congress, including some Members who have expressed 
their outrage today in this hearing based on their assumption 
that there was some connection between these three distinct 
negotiations that took place, that one was a quid pro quo for 
the other.
    There were many members of the House of Representatives who 
took time at the point that the JCPOA was enacted, agreed to, 
that the release of these Americans should have been a part of 
that transaction and that it wasn't.
    So I have a bit of concern with what I see as some 
duplicity here, that on one hand when it fits the political 
narrative the Administration is criticized for not making these 
separate negotiations all combined into one, and when it fits 
the political narrative a month or 2 before a presidential 
election suddenly we are criticizing the fact that they assume 
that they were.
    Well, they can't have it both ways. So, you know, this does 
not make these negotiations--these agreements do not make--does 
not make Iran a good player on the global stage. There are 
still a lot of unresolved issues--certainly some regarding 
their terrorist activities or their support of terrorist 
activities fits that category.
    The fact that we still haven't had information about the 
status of Robert Levinson is another cause of great concern. 
Many of us continue to press Iran for information regarding his 
status.
    But to hear the same voices say that the release of these 
Americans should have been part of these separate negotiations 
now say that they were a part, coming out of the same voices, 
makes it obvious that what is going on here is simply politics, 
sadly, especially when we consider the gravity of not just the 
relationship between the United States and Iran and Iran and 
the rest of the world, particularly in that region, but to 
bring in the release--the happy release of these Americans into 
that conversation, I think is unfortunate.
    So let me just ask, at what point since 1979 did the United 
States have any direct negotiations with Iran? Was there any 
point in time before President Obama and President Rouhani 
spoke by telephone during the General Assembly? Was there any 
direct negotiations, face-to-face negotiations officially 
between the United States and Iran between the revolution and 
that moment in 2013?
    Mr. Backemeyer. Congressman, I wouldn't want to speak to 
the entire history, but let me summarize and I think we will 
answer your question. Diplomatic contact was basically cut off 
for that entire period.
    Mr. Kildee. I guess the better way to put it: Was there 
ever an opportunity that presented itself to resolve these 
longstanding disputes through direct negotiation, whether it is 
the release of the Americans or this dispute that resulted in 
the payment that is the subject of this hearing? Was there a 
moment that occurred prior to the JCPOA negotiations that took 
place that allowed for another track of negotiations to occur 
simultaneously?
    Mr. Backemeyer. Well, with respect to The Hague Tribunal, 
as my colleague has noted, we have had ongoing conversations in 
that tribunal to settle claims. But with respect to the 
consular issues that you raised that we do agree are so 
important, our first real, tangible opportunity to raise those 
was in the context of the JCPOA, and we took every opportunity 
in those negotiations, as you note, to raise these particular 
cases. And it was that channel that allowed us to continue 
discussions on their ultimate release.
    Mr. Kildee. Thank you for that.
    My point is that it should come as no surprise to anybody 
observing the relationship between the United States and Iran 
that for the first time in a very long time the ability to have 
bilateral discussion suddenly occurred outside the context of 
tribunal action. This was bilateral discussion that was able to 
take place as a result of the JCPOA negotiation.
    I know that that opened the door for discussions regarding 
the disposition of the Americans, and I know that it opened the 
door for discussion regarding the resolution of these 
longstanding disputes.
    So the fact that these all took place in a period of time 
which was coincidental is as a result not of just sudden 
coincidence, but as a result of a change in the nature of 
relationship between the two governments.
    With that, I know I have exceed my time. Thank you very 
much.
    Mr. Fitzpatrick [presiding]. The gentleman's time has 
expired.
    The gentleman from Maine, Mr. Poliquin, is recognized for 5 
minutes.
    Mr. Poliquin. Thank you, Mr. Chairman, very much. I 
appreciate it.
    Ms. Grosh, I believe you stated in your opening statement 
you have been at the State Department dealing with these 
claims, settlement process, for about 30 years?
    Ms. Grosh. Yes, that is correct.
    Mr. Poliquin. Okay, about 30 years, thank you. And you have 
been involved in a number of different transactions. How many 
of them have been settled in cash?
    Ms. Grosh. To be clear, I am not involved in the exact 
financial transactions but I have--
    Mr. Poliquin. Okay, well to the best of your knowledge--to 
the best of your knowledge of the settlements that you have 
been involved with, is it common for these settlements to be 
disposed of in cash?
    Ms. Grosh. Again, I think as I raised, Congressman, with 
one of your colleagues, there have been various pretty large 
settlements over time, some small. Each one has been sui 
generis and there has been a difference in the way many of 
those settlements have been paid.
    Mr. Poliquin. Okay. Since you are not going to answer me 
the question how common it is to use cash let's just move on.
    I have to be very honest with you, I am very concerned 
about this. And I think all kinds of Americans across our great 
land are concerned about this. I certainly know the people that 
I represent up in Maine are very concerned about this.
    Let's step back for a minute. We have a government that 
is--has vowed to wipe our major ally in the Middle East--really 
the only one that we trust, I think--Israel, off the face of 
the earth. And they vowed to kill as many Americans as they can 
and they have blood on their hands right now.
    And you have been working on a claim settlement here that 
dates back 37 years. And you testified, Ms. Grosh, earlier 
today that because of the sanctions in place back in January 
that there was an inability to transfer $1.7 billion from 
America to Iran because the banking system problems because of 
the sanctions, which we now know is not true.
    So all of a sudden we have a wire transfer going from this 
country to a bank account in Europe somewhere, Switzerland I 
presume, where it is then converted into cash. $400 million of 
principal payments and $1.3 billion in cash. And that is 
transferred to a pallet or a series of pallets and put on a 
cargo plane in Europe before it is flown to Tehran.
    So my question to you is, since we don't want any of this 
cash to land in the hands of terrorists who are trying to kill 
Americans in the Middle East, who at the other end of that 
transaction, Ms. Grosh--you worked on this transaction for a 
long time--who in Europe when that cash was put on wooden 
pallets before it was sent over to Tehran, what top-ranking 
American official was there to see that cash? Who?
    Ms. Grosh. I am really not in a position to answer that 
because I was involved in the settlement. I believe some of my 
colleagues here today discussed those--
    Mr. Poliquin. Ms. McCord, do you know who it was? Who was 
the top-ranking American official who was on the ground in 
Europe when that cash was put on a pallet before it was flown 
over to Tehran? Who was it?
    Ms. McCord. I am also not--
    Mr. Poliquin. Okay, so you don't know.
    Mr. Ahern, do you know? You work for Treasury.
    Mr. Ahern. Sir, as I stated in my--
    Mr. Poliquin. Okay, you weren't involved.
    Mr. Backemeyer, do you know somebody? Do you have a name 
for me?
    Mr. Backemeyer. Congressman, let me address your particular 
question.
    Mr. Poliquin. Do you have a name for me who was the top-
ranking U.S. official who was on the ground when the cash was 
put on the pallet?
    Mr. Backemeyer. Congressman, I would be happy to brief you 
in closed setting on all the details--
    Mr. Poliquin. Okay.
    Ms. Grosh, let's go back to you since you are not going to 
answer me. Okay, do we know, when the cash was transported from 
this airport in Europe to Tehran, who was the top-ranking 
Iranian official who was in receipt of that cash?
    Ms. Grosh. I was not there.
    Mr. Poliquin. Does anybody know?
    Ms. Grosh. I negotiated the--
    Mr. Poliquin. Okay. Does anybody know? We are going to have 
the same stalling here. Does anybody know?
    Mr. Ahern. Sir, as I mentioned in my opening statement, the 
cash was eventually dispersed to a representative of the 
Central Bank of Iran.
    Mr. Poliquin. Okay. Was this someone who represented the 
military or was this someone who represented economic 
development of Iran? Who was it? What is his name?
    Mr. Ahern. It was an official of the Central Bank of Iran.
    Mr. Poliquin. Okay, do you have a name for me?
    Mr. Ahern. I don't recall his name, sir.
    Mr. Poliquin. Oh, but you do have name, you just don't 
recall it now, correct?
    Mr. Ahern. Sir, there were a variety of people.
    Mr. Poliquin. Okay, so you do--there is a person, though, 
correct? And you have that name. You just told me--I think you 
just referred, you don't recall who it is. That means there is 
someone and there is a name, correct?
    Mr. Ahern. There were a variety of officials involved in 
this transaction. I would have to take that question back.
    Mr. Poliquin. So if our office got in touch with yours, Mr. 
Ahern, you could tell us who that individual was or those 
individuals were, couldn't you?
    Mr. Ahern. We will take that inquiry back, sir.
    Mr. Poliquin. Say it again?
    Mr. Ahern. I will take that inquiry back, sir.
    Mr. Poliquin. I didn't hear you. My ears are bad.
    Mr. Ahern. I will take your inquiry back, sir.
    Mr. Poliquin. You will take my inquiry back. No, I don't 
want the inquiry back; I want the answer. I want to know who 
was in receipt of that cash when that--when those pallets of 
cash landed in Tehran.
    Here is why. Here is the problem, Mr. Ahern: We don't have 
any idea where this cash went. We don't know who received it. 
We don't know what it was used for, and it is untraceable, and 
it is with the a country that is the state sponsor of 
terrorism--one of the three state sponsors of terrorism in this 
world.
    Don't you think that is a problem Mr. Ahern? We don't even 
know who received the cash.
    Mr. Ahern. A couple of points, sir. One, to carry on the 
comments of my colleague, I would commend to you the testimony 
of Acting Undersecretary Szubin, who has testified about the 
funds freed up by the JCPOA and has testified about the deep 
economic hole that Iran was in, to the tune of half a trillion 
dollars. And so I would commend that testimony to you.
    Mr. Poliquin. Cash is the currency of terrorism.
    Chairman Duffy. The gentleman's time has expired.
    Mr. Poliquin. This is a state sponsor of terrorism that 
received $1.7 billion of cash on a pallet in Tehran. Our office 
will be in touch with yours, Mr. Ahern, so we can find out who 
the Iranian officials were who received that cash.
    Thank you.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the gentleman from Minnesota, Mr. 
Ellison, for 5 minutes.
    Mr. Ellison. Thank you, Mr. Chair and ranking member.
    You know, Mr. Chair, I just want to say that I think that 
this--we always have to understand that all of the things we 
talk about in this committee take place within a certain 
context, and I would like just to remind folks January 15, 
2013--no, actually that is the date that this document I am 
reading from was cited, but actually it was on the night of 
Barack Obama's inauguration, group of top GOP luminaries 
gathered together in a Washington steakhouse and pledged to 
each other that they would make President Obama a one-term 
President, oppose every single thing he did.
    I am telling you that since that time we have seen 
committee after committee, issue after issue, relentlessly 
trying to make anything--anything--into a scandal or something 
like that. And I only want to say to my friends who are part of 
this, you literally are shaking the American people's faith in 
the institutions of this nation by pursuing that strategy. You 
said Obama was going to be a one-term President. Well, you 
lost.
    And you know what? I wish that people would just come to 
their senses and do what was right for the American people, and 
I am going to keep on hoping that we do that.
    Now let me just say this, also: I have read reports in the 
press that the Treasury Department worked with foreign partners 
to effectuate the transfer of funds as part of The Hague 
Tribunal settlement payment.
    First of all, this money that we have been talking about, 
was this--were these funds that were always Iranian funds that 
we froze? That is a question to anybody on the panel.
    Ms. Grosh. Congressman, the $400 million that was paid 
immediately, that came--those were Iranian funds in the FMS 
Trust Fund that is held in the Treasury.
    Mr. Ellison. And why were they Iranian funds? What made 
them Iranian funds?
    Ms. Grosh. These were funds that were paid into the FMS 
Trust Fund during the course of the Iranian Foreign Military 
Sales program. And as I noted earlier, that was--
    Mr. Ellison. What year?
    Ms. Grosh. This would have been from the--throughout the 
1970s and up through 1979, when we had the memorandum of 
understanding.
    Mr. Ellison. So back in the 1970s, they paid us the money 
for some items and we froze that money after the seizure of our 
embassy?
    Ms. Grosh. There was a blocking prior to the--sorry, 
following the taking of the embassy. The 1981 Algiers Accords 
addressed issues that had been taken in response to the hostage 
taking
    The trust fund had always been there. There was a 
memorandum of understanding and Iran pointed to that as a basis 
for its claim that those funds were to be returned to Iran.
    Mr. Ellison. Okay. So reports indicate that you worked with 
both the Dutch as well as the Swiss Central Bank. Can you 
confirm that?
    Mr. Ahern. Sir, we did work with a variety of partners in 
this transaction.
    Mr. Ellison. Okay, fair enough.
    Now, it was reported in the press that at least one member 
of the Congress said that the U.S. flew pallets of U.S. dollars 
to Tehran. Would you say that that statement would be accurate? 
Pallets of U.S. dollars. Is that what happened?
    Mr. Ahern. That is inaccurate, sir.
    Mr. Ellison. Inaccurate?
    Mr. Ahern. Inaccurate.
    Mr. Ellison. Okay, so you said inaccurate.
    Mr. Ahern. That is correct. As I mentioned in my opening 
statement, in both transactions the funds were converted to a 
foreign currency. They were then withdrawn as foreign currency 
bank notes--
    Mr. Ellison. Right, but you should understand that the 
whole country is watching this. This is sort of like a 
theatrical performance and I don't want to be inarticulate 
about this, the claim that there was some pallet of U.S. 
dollars flown from America to Tehran is a false statement. You 
used the term inaccurate, right?
    Mr. Ahern. That is correct. U.S. dollars were not dispersed 
to Iran.
    Mr. Ellison. Right, right.
    So can you mention what foreign financial institutions were 
involved? Weren't these major institutions? I mean, there is 
some implication that there is some shady, obscure stuff going 
on. Were these major, reputable institutions that we are 
talking about who helped facilitate the transfer?
    Mr. Ahern. Sir, what I can say is that our partners in both 
transactions were different central banks, national central 
banks. In the first transaction it was the Swiss National Bank. 
In the second transaction it was the National Bank of the 
Netherlands, the Dutch National Bank.
    Mr. Ellison. Now look, in my 38 seconds remaining, I just 
want to pursue this. I have seen some of my colleagues 
demanding names of individuals who have somehow played some 
role in facilitating the whole transaction. As just a Member of 
Congress who has rules around classified information and who 
has a general commitment to protect and safeguard the lives, 
interests, and the means and methods of U.S. engagement, 
particularly with foreign power, I mean, how would you regard 
that?
    Is that appropriate to disclose the names of individuals? 
And would it jeopardize U.S. national interest to do so in a 
public open hearing like this?
    Mr. Backemeyer. Congressman, it is certainly our preference 
to discuss those details in a closed setting.
    Mr. Ellison. For the interest of the United States 
Government.
    Mr. Backemeyer. Exactly.
    Mr. Ellison. And people.
    Mr. Backemeyer. Exactly.
    Mr. Ellison. All right.
    I yield back.
    Chairman Duffy. The Chair now recognizes the gentleman from 
Arkansas, Mr. Hill, for 5 minutes.
    Mr. Hill. Thank you, Mr. Chairman.
    Thank the panel for being here.
    And, of course, we are not here to talk about Obamacare. We 
are not here to talk about Donald Trump. We are here in an open 
hearing to try to give some clarity to this transaction that 
has been I think inadequately disclosed by the Administration.
    So the fact that we are doing part of this not in a 
classified setting is for the benefit of the American people so 
that they have more clarity about this transaction and all the 
details around it, and I thank the chairman for scheduling it.
    I am confused because my friend from South Carolina began 
talking about President Clinton's signing of the Victims Act 
back in 2000, and that is sort of related also to my friend's 
comments from Minnesota. I am used to gap accounting and not 
government doublespeak and double-counting, but I am trying to 
understand that if, as you said, Ms. Grosh, that the $400 
million was--in that 2000 act was appropriated by Congress, did 
we release Iran, then, from their $400 million obligation?
    Because we keep talking about it as if we froze this 
account in 1979 and then, pursuant to the Algiers Accords, that 
money was still sitting there and we paid interest on it. But 
in fact, we, in that act, paid out $400 million of appropriated 
money.
    So is the $400 million then remaining in the FMS account 
not the United States' money? In other words, was Iran released 
from that obligation?
    Ms. Grosh. Congressman, if I could try to clarify that, 
under the Victims of Trafficking Act Congress appropriated $400 
million. This would be in subsection (b) of that act that was 
referred to earlier. Funds not otherwise made available in an 
amount not to exceed the total amount in the foreign military 
sales account at the date of enactment, which was $400 million.
    Then in a subsequent provision of that act the United 
States Government--because those were appropriated funds the 
United States Government was then subrogated to those claims, 
meaning that they became the claims of the U.S. Government. And 
the U.S. Government was then in a position to pursue those 
claims against Iran.
    And so in the overall settlement we factored in those 
claims in reaching the settlement that we did in January.
    Mr. Hill. You both used that term, ``factored into the 
overall settlement,'' but it just seems in conflict with that 
law to me, in my reading of it.
    It says, ``No funds shall be paid to Iran or released to 
Iran from property blocked under the International Emergency 
Economic Powers Act or from the Foreign Military Sales Fund 
until subrogated claims have been dealt with to the 
satisfaction of the United States.'' And so in my view the 
satisfaction of the United States includes the people of the 
United States and the people's representatives here in 
Congress.
    So whose signature, whose wet signature authorized this 
settlement? Did Secretary Lew approve this settlement and make 
the recommendation to President Obama?
    Ms. Grosh. I am really not in a position to know at what 
level, but I believe--
    Mr. Hill. Mr. Ahern, can you shed light on that? I know the 
State Department led the negotiations, but who approved this 
transaction and its structure? Did Secretary Lew approve it?
    Mr. Ahern. This settlement was the subject of a number of 
interagency discussions, as you can imagine. Secretary Lew, 
Acting Undersecretary Szubin were part of those discussions. I 
don't know the answer to your question beyond that.
    Mr. Hill. And Secretary Lew, of course, was the director of 
OMB in 2000, so I assume he knows the details of this Public 
Law 106-386 and this particular paragraph, since he was the 
director of the Office of Management Budget at that time.
    I want to give you another shot at explaining how it 
factored into the overall settlement, though, because the way I 
take it is we released them and, in fact, we, the taxpayers, 
ought to get $400 million plus accrued interest. And yet we 
have paid it out as a part of this overall settlement, and that 
is double counting to me. I just am not clear on your point.
    Ms. Grosh. Maybe I could give you an example. At the top of 
my remarks I mentioned that in 1990 we entered into a 
settlement with Iran. It settled both U.S. Government claims 
and U.S. national claims for $105 million.
    In my experience in claims practice, it is not unusual to 
settle multiple claims together at the same time. And if those 
are the claims of the U.S. Government we take all those into 
account, just as we could counterclaims.
    And so in the negotiation of this claim settlement with 
Iran we had discussions about those claims and they were 
settled along with the trust fund issues.
    Mr. Hill. Well, thank you for that answer.
    But, Mr. Chairman, I remain confused that this is somehow 
double counting, and I urge our committee staff to try in 
discussions to get to the bottom of that.
    Last question I have for the Treasury official: Were there 
any IRGC members on the IranAir flight that picked up this 
money and took it back to Tehran?
    Mr. Ahern. As I said, the money was disbursed to a 
representative of the Central Bank of Iran. As I understand it, 
there were no specially designated nationals involved.
    Mr. Hill. Thank you.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the ranking member of this 
subcommittee, the gentleman from Texas, Mr. Green, for 5 
minutes.
    Mr. Green. Thank you, Mr. Chairman.
    Witnesses, I thank you and I compliment you for being 
truthful and forthright.
    This hearing today has taken us back 35 years thereabout, 
maybe a little bit more, to the Algiers Accords. And I think it 
was appropriate that we do this.
    But I also think it appropriate for us to go back to the 
inauguration of President Obama because it was around that time 
that persons met and concluded--in fact, pledged--that they 
would do everything that they could to stop the President. That 
is what POLITICO reported: Stop the President.
    But I have in my hands what I would like to place in the 
record, an article styled, ``The Republicans' Plan for a New 
President.''
    Mr. Green. And this article addresses the notion that on 
the night of Obama's inauguration a group of top GOP 
luminaries, as was indicated by another member, quietly 
gathered in a Washington steakhouse.
    They were there to lick their wounds. But ultimately they 
created this plan on how to deal with the incoming 
Administration. This is a furtherance of the plan.
    And for those who are curious as to persons in attendance, 
without going through all of the luminaries, I think it 
appropriate to say that the current Speaker of the House was in 
the house.
    I think it fair to say, as reported in this article--and by 
the way, there are other reports. CNN has reported on this. It 
has been reported widely. But it is fair to say that the 
current majority leader had a leadership role. He was there, 
too.
    So with this kind of pledge made to each other it just 
seems appropriate that the style of this hearing would be, ``We 
Kept Our Word, and We Are Keeping Our Word, and Anything That 
This President Brings Up, We Will Oppose It.'' And that has 
been the record. The record is replete with specific examples 
of how they have opposed everything this President has brought 
forth.
    But I will be very candid with you. I did not believe that 
it would get to this point.
    There are families--I have two--who have relatives who are 
being held hostage. Can you imagine what these families have to 
conclude when they hear people saying that somehow giving--
returning money to people that belonged to them, and seeing our 
people come home, that there is something inappropriate about 
this?
    These families are suffering. I meet with them regularly. I 
know their pain. They want their loved ones to come home.
    We ought to be proud of the fact that we didn't give a 
ransom, and we did bring them home. This was the money that 
belonged to the Iranians. It was a prisoner swap. We have 
Americans who were brought home.
    My God, can we not credit the President with something? He 
has made a difference in the lives of these people.
    But this is not about this specific transaction. It is 
really about a deal that was cut on the night of the 
inauguration thereabout to do everything to disenfranchise this 
President.
    Who would have thought that Members of Congress would say 
that the President wasn't born in the United States of America? 
The President of the United States of America not born--not an 
American? It has continued, it has been consistent, and they 
have been persistent.
    But we have to stand by the truth.
    Remember William Cullen Bryant: ``Truth, crushed to earth, 
shall rise again.''
    Remember Carlyle: ``No lie can live forever.''
    Remember Martin King: ``The arc of the moral universe is 
long, but it bends toward Justice.''
    History will not be kind to these who would do what they 
are doing to this President, pursuant to a deal that was made. 
You are keeping your word.
    I yield back.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentleman from North Carolina, 
Mr. Pittenger, for 5 minutes.
    Mr. Pittenger. Thank you, Mr. Chairman, and thank you for 
calling this very important hearing.
    Mr. Ahern, are you old enough to know the TV show, 
``Dragnet?''
    Mr. Ahern. I am, sir.
    Mr. Pittenger. You are. Sergeant Friday?
    Mr. Ahern. He is one of my favorite characters, sir.
    Mr. Pittenger. Then you recall, ``Just the facts, ma'am, 
just the facts.''
    Mr. Ahern. Yes, sir.
    Mr. Pittenger. He was renowned for that line, and I think 
that is all I would request today. I am going to ask a series 
of questions, and I would like your response, just the facts, 
if I could.
    Mr. Ahern, what--who exactly was in charge in gathering the 
$400 million in currency? What level of staff is tasked to 
gather the $400 million in cash, place it on a plane, and send 
it to a foreign government? How were these dollars packaged?
    Was the military used to fly the plane, to fly the money to 
Iran? How did Iran receive the cash? Please take a moment and 
articulate the exact process of the money exchange from the 
money the State Department went to the bank and withdrew the 
cash to the moment Iran received the money.
    Mr. Ahern. Sir, as I said, there were two payments. They 
flowed in generally the same manner, but I will break them down 
into two payments and walk through the flow, how they each 
worked.
    With respect to the $400 million principal that was held in 
the FMS account, that--those funds were transferred to the--an 
account of the Swiss National Bank.
    Mr. Pittenger. Who was in charge of gathering that money?
    Mr. Ahern. I am sorry, sir?
    Mr. Pittenger. Who was in charge of gathering the $400 
million?
    Mr. Ahern. It was a wire transfer to that account. Once in 
that account, the foreign national bank converted those funds--
    Mr. Pittenger. And who initiated the wire transfer?
    Mr. Ahern. That was initiated by the, as I said in my 
opening statement, the Defense Finance and Accounting Service.
    Mr. Pittenger. I am sorry I missed that. But just kindly 
convey that.
    Mr. Ahern. It was a Department of Defense-controlled 
account, and so the Defense Finance and Accounting Service, 
DFAS, was the one to initiate that wire payment. We helped them 
build the wire instruction to do that.
    The funds were then transferred to the foreign central 
bank, which converted them into Swiss francs. Those francs were 
then withdrawn as bank notes. They were transported from one 
location in Switzerland to Geneva, and there they were 
disbursed to a representative of the Central Bank of Iran.
    With respect to the second payment, the $1.3 billion that 
represented the compromise of interest pursuant to the 
settlement agreement, that money was transferred, again, from 
the Judgment Fund, which is the fund that Congress has 
authorized for the payment of judgments and settlements when 
there is no other appropriated fund. It was transferred to the 
account of another central bank, again, the Central Bank of the 
Netherlands.
    It was converted into euros at that stage. It was withdrawn 
as bank notes, pursuant to an arrangement between the United 
States, the home government of that central bank, and Iran. 
That bank then disbursed those funds to representatives of the 
Central Bank of Iran.
    Mr. Pittenger. Was there a receipt for all these fund 
transfers? Was a receipt given?
    Mr. Ahern. For which leg, sir?
    Mr. Pittenger. Well, when the funds were received--when 
money is transferred there is acknowledgment and there is a 
receipt. Was there a receipt given for the transfers? Do we 
have access to those receipts?
    Mr. Ahern. I am not familiar with the answer to that 
question, sir. I would have to take that back.
    Mr. Pittenger. Well, I would like to know what type of 
receipt was received, in what manner, from Iran to the United 
States for the $400 million.
    Mr. Ahern, considering the funds that were received, what 
confidence do you have that this money was not diverted 
immediately toward terrorist interests and organizations?
    Mr. Ahern. Again, to carry on some of the comments that my 
colleagues have made in the past, and also I would commend to 
you the testimony of our Acting Assistant Secretary Szubin 
recently with respect to the funds that were released pursuant 
to the JCPOA, and he has testified in detail about the deep 
hole that the Iranian economy was in to the tune of half a 
trillion dollars. And so while we can't track any particular 
bank note, we do know that Iran had a very significant domestic 
need for funds.
    I can also say that the Treasury Department is committed to 
identifying and countering terrorist financing, its 
facilitators, its networks. We have an entire office, the 
Office of Terrorism and Financial Intelligence, that combines 
all the national security functions of the Department under one 
roof. That office's primary mission, in fact the reason it was 
established, was to counter terrorist financing, and we 
continue to be focused on countering terrorist financing and 
its networks.
    Mr. Pittenger. These negotiations are scripted and very 
well thought through in an effort to make sure that there are 
no mistakes intentionally. How could this be done without 
recognizing that $400 million would be transferred 
simultaneously that the hostages were being released? Was there 
not a full recognition that that would be taking place, and at 
least the perception of that reality?
    Mr. Backemeyer. Congressman, if I may interject to answer 
your question, as I have mentioned, it was a fact that we tried 
to resolve multiple lines of business all--on or around the 
same time. That included the Iranian nuclear deal, which we 
were implementing, and the IEA verified that weekend that Iran 
had met its commitments under that deal. We were trying to 
resolve the prisoner release and the return of our American 
citizens back to the United States.
    And as I mentioned previously, that was--there was a 
reciprocal humanitarian gesture with respect to Iranian 
nationals that were in the United States.
    And we were trying to resolve this particular issue with 
respect to the settlement of the claims because we thought that 
this judgment was in the interest of the United States. And we 
did so all at the same time because there was a momentum that 
did not exist for the past 3 decades and we were fearful that 
if we let one or two of these lines of effort drag out and we 
did not conclude them all at the same time that we would 
jeopardize our--
    Mr. Pittenger. My time has ended. I will just say that I 
was there to receive Pastor Abedini in Germany and he heard the 
conversation between--with one of the guards that they were 
waiting for a plane to come in with the cash. He has made 
already a public statement on that. Thank you very much.
    Chairman Duffy. The gentleman's time has expired.
    I would note that we are going to move to a second round of 
questionings of the panel. I am going to yield to the ranking 
member for a brief moment to voice an objection.
    Mr. Green. Thank you, Mr. Chairman. I do object. And I will 
be more explicit with my objection with the 5 minutes that I 
will consume in the second round. But I do object and would ask 
that we not have another round of this.
    Chairman Duffy. And duly noted, and it is in the 
prerogative of the Chair to go to a second round.
    So the Chair now recognizes himself for 5 minutes.
    I want to go to a few points of clarification.
    Again, who authorized the payment? That question has been 
asked for numerous times.
    Mr. Ahern, I think you indicated that at least Mr. Lew was 
involved in knowledge of this agreement. Correct?
    Mr. Ahern. Sir, think it is unsurprising that with a 
transaction--
    Chairman Duffy. Agreed.
    Mr. Ahern. --of this nature it would involve discussions--
    Chairman Duffy. Mr. Backemeyer, was Mr. Kerry apprised of 
this?
    Mr. Backemeyer. Secretary Kerry has been deeply involved in 
all of our discussions with Iran. This has been subject to a 
vigorous debate within our interagency--
    Chairman Duffy. And the President was aware of this, as 
well?
    Mr. Backemeyer. --and the cabinet of the United States.
    Chairman Duffy. I am going through some quick cleanup. 
President was aware of--as well, of this deal? Absolutely 
correct?
    Mr. Backemeyer. President was aware.
    Chairman Duffy. Highest levels. Okay.
    When these deals in the tribunal are resolved there is a 
settlement agreement that is put out. A settlement agreement in 
regard to this deal has not been released. Is a settlement 
agreement forthcoming?
    Ms. Grosh. I believe I could ask--answer that question, 
Congressman. Typically what happens at the tribunal if there is 
a settlement--and this would have applied to U.S. national 
settlements as well as government settlements--they are 
affirmed as an award on agreed terms and they would be attached 
to--
    Chairman Duffy. Is there a settlement agreement 
forthcoming?
    Ms. Grosh. The parties in this situation, because there 
are--it was--there are pending claims at the tribunal the 
parties asked the tribunal not to record it as a--
    Chairman Duffy. There have been pending claims at the 
tribunal for 37 years and a settlement agreement has been 
released. I would expect that a settlement agreement, so the 
American people can see what the deal truly was, should be 
forthcoming, and it is of concern to this committee that it 
is--it has not been released and appears, by your testimony, is 
not forthcoming.
    Ms. Grosh. Yes, there are claims continuing. In fact, today 
my office is filing a submission in the FMS claims with the 
Iran-U.S. Claims Tribunal, and there is a lot of concern about 
the fact that those claims are ongoing and we do not want to 
undermine any U.S. positions.
    Chairman Duffy. And Iran knows of this deal. It is just 
that we, the American people, want to know about it as well. 
And I am sure if you share it with us you don't undermine your 
negotiating position with Iran because they were part of it.
    In regard to the $400 million, I think you all indicated 
there was a claim by the victims of Iranian terror lien on that 
$400 million. You all agreed to that?
    Has that lien been released now that that $400 million has 
been paid?
    Ms. Grosh. The statute really doesn't provide for a lien, 
so I am not sure what you are really talking about, but--
    Chairman Duffy. There is a claim to the money. Mr. Mulvaney 
read that to you and you agreed that there was a claim or a 
lien, however you want to phrase it, per statute on the money.
    Ms. Grosh. It was subrogated to the United States 
Government. That is correct. That--
    Chairman Duffy. So now that that $400 million has been 
released to Iran, who is going to pay the claims to the victims 
of Iranian terror?
    Ms. Grosh. The victims of Iranian terrorism who had those 
judgments were already paid in 2000.
    Chairman Duffy. So there is no outstanding claims?
    Ms. Grosh. There are outstanding claims.
    Chairman Duffy. So who is going to pay those outstanding 
claims?
    Ms. Grosh. Those individuals have pursued litigation in 
U.S. courts. They have received judgments, and as far as I am 
aware they are pursuing--
    Chairman Duffy. They are not going to get--
    Ms. Grosh. --they are pursuing attachments to--
    Chairman Duffy. So is the U.S. Government going to be 
responsible for those claims?
    Ms. Grosh. They are the claims of the U.S. nationals and 
they do not become the claims of the U.S. Government unless 
they are subrogated or unless the U.S. Government formally 
exercises diplomatic protection.
    Chairman Duffy. I want to go quickly here. As part of the 
Iran nuclear deal assets were unfrozen, or thawed, if you will. 
As part of that deal were any of those assets transferred or 
converted into cash and also transferred back to Iran?
    Mr. Backemeyer. Congressman, the sanctions relief in the 
JCPOA, the Joint Comprehensive Plan of Action, was quite 
different. You are correct that the sanctions were lifted that 
had previously restricted those funds. And those sanctions were 
lifted and Iran then was--it was up to Iran to access those 
funds.
    Chairman Duffy. And were they able to access those funds in 
cash?
    Mr. Backemeyer. At that point, once those sanctions 
restrictions were lifted it would be up--between them and 
whatever bank they had their funds in--
    Chairman Duffy. So are you aware, did they get large 
transfers of hard currency back to Iran that you are aware of?
    Mr. Backemeyer. I am not aware of how Iran is ultimately--
or how any funds were ultimately disbursed to Iran. What we 
know is that--
    Chairman Duffy. Were any disbursed to Iran? So they got the 
$1.7 billion in cash. Did they get any other cash payments by 
way of us unfreezing their assets?
    Mr. Backemeyer. Well, Congressman, it is worth remembering 
that these were--
    Chairman Duffy. Yes or no? I got limited time. Yes or no? 
Did they get more cash?
    Mr. Backemeyer. These were Iranian funds in Iranian 
accounts overseas--
    Chairman Duffy. I know that. So did--
    Mr. Backemeyer. --and they used those funds to buy and 
trade and do things like that--
    Chairman Duffy. So is it fair to say they got more cash 
shipments in with hard currency because we unfroze their 
assets? Yes, right?
    Mr. Backemeyer. No, I am not sure that it is. I don't know 
how Iran would have sought the disposition of its assets 
overseas.
    Chairman Duffy. One last question: This deal that you say 
is so great--was a determination from the tribunal imminent?
    So I was a prior prosecutor. Before the jury comes back--
the jury is about to come in or the judge is about to rule, the 
parties settle. Was the judge about to rule? Was there an 
imminent settlement of this deal that was pending that made you 
have to act and settle for $1.7 billion?
    Ms. Grosh. As I mentioned in my opening, the--Iran was 
pressing very hard to go to hearings.
    Chairman Duffy. That is not my question. I didn't act if 
they are pressing you. I asked you if a settlement or a 
determination by the tribunal was imminent, not whether they 
were pressing you. They have probably been pressing for 37 
years. Was there a determination imminent?
    Ms. Grosh. At that point in time it was our judgment that 
there was going--that there was a possibility of a judgment 
coming very soon.
    Chairman Duffy. So the hearings had been had? All of the 
evidence was with the tribunal and they were about to make a 
decision. Is that your testimony?
    Ms. Grosh. My testimony is that Iran was pressing for a 
preliminary determination about this issue regarding the 
disposition of the trust fund and interest.
    Chairman Duffy. So there was no--
    Ms. Grosh. It was our determination that it was much better 
to have a decision made to resolve this for a much smaller 
amount than what we thought the tribunal could have rendered.
    Chairman Duffy. So there was no imminent determination on 
the horizon. My time has expired.
    And I will now recognize the ranking member, Mr. Green, for 
5 minutes.
    Mr. Green. Mr. Chairman, thank you.
    I am a former judge and I can say to you from experience 
that when the litigants sense what the ruling of the court will 
be it becomes imminent at that point. You don't have to say it 
for it to become imminent. But when they sense that there is a 
ruling that may be adverse to their best interest it is not 
unusual for those who are litigating to act.
    Mr. Chairman, I want you to know that we are displeased 
with the hearing, and I want to thank all of my colleagues who 
have appeared and who are prepared to return, but this really 
has become now about more than oversight; it is about 
micromanaging the presidency--more specifically, micromanaging 
President Barack Obama.
    The President should have the latitude to negotiate 
international affairs. It is inherent in the power of the 
executive branch. But we want to micromanage this President.
    A deal was made, and to the extent that the deal can be 
consummated we would go this far. I think that it would be a 
disservice for us on this side to legitimatize a continuation 
of this fiasco.
    There are some things that you just don't do. You don't 
participate in your own demise. You don't allow people to 
create a petard to which you can be hoist. There are some 
things you just don't do.
    To continue with this is a disservice to the committee 
itself because this has become about nothing more than 
confusion and an attempt to honor a commitment that was made 
when the President was inaugurated.
    So I thank you for allowing me to, pursuant to the rules, 
of course, make this comment, and I am going to ask that all of 
the members on our side make a--make better use of your time. 
This has gone too far already and we are not going to take it 
any further.
    With that, not only do I yield back my time but I will make 
my departure.
    Chairman Duffy. Thank you.
    The Chair now recognizes the gentleman from Arkansas, Mr. 
Hill, for 5 minutes.
    Mr. Hill. Thank you, Mr. Chairman.
    On the issue of the ransom topic, I know that the 
Department of State and the U.S. Government has been--expressed 
displeasure in the past when Germany paid 5 million euros in 
Mali, and when France paid 25 million euros in Mali for--to Al 
Qaeda, and it was something we tried to enforce through all of 
our diplomatic channels and our leadership channels as the 
United States.
    And public reports say that Al Qaeda has between 2008 and 
2014 gotten about 125 million euros in paid ransom for tourists 
or captives that have been returned to their countries.
    So my concern is no matter what it is called, you have an 
appearance problem. And I think that is something that was poor 
judgment in the process of the negotiating effort.
    And secondly, to Chairman Royce's point, this issue of cash 
is really disturbing to me, and I think it is to anyone who has 
been a former Treasury official, as I have on my resume. You 
just don't provide cash to the number one state sponsor of 
terrorism.
    And as Chairman Royce pointed out, the tribunal regulations 
permit it, and clearly this was an Iranian request and we 
acceded to it. And it was, in my view, not the right decision 
in the best interest of the American people because we know 
what is done with cash in the hands of the number one state 
sponsor of terrorism.
    You also have testified today that it is--I think Mr. 
Backemeyer, you commented on the state of the Iranian economy.
    And whether you are the desk officer at the assistant 
secretary for international economic policy at State or over in 
Oasia, sure people write estimates of the state of our friends 
and foes around the world, but with an $800 million 
approximately purchase price parity in GDP, taking the midpoint 
of the public number of what was freed up in the JCPOA of $100 
billion, that is 20 percent of GDP. So if they want to help the 
Iranian people maybe they can cut down on a $20 billion defense 
budget and not be looking to that as a reason in negotiations 
to be, you know, kind-hearted and settling for a higher 
interest payment than you think perhaps they should have 
received.
    So I really think if we want the Iranians to have a better 
economy and take care of their ``domestic infrastructure 
needs,'' they ought to rearrange how they spend their money and 
not spend so much money threatening their neighbors, 
threatening the United States, threatening the people of 
Israel.
    With that, Mr. Chairman, I yield back.
    Chairman Duffy. The gentleman yields back.
    I would just like to note as we are going to wrap up this 
portion of the hearing, I thank the panel for their service to 
our country. I know how hard all of you work. I know that you 
have gotten tough questions today. But do know that the 
Congress and this committee respects your work, though we might 
have some disagreement with what has taken place in regard to 
this deal.
    I would just note that you may get follow-up questions from 
committee members that I would ask you to answer in a 
reasonable amount of time.
    I would also note specifically to State and to Treasury, we 
have sent over written requests for documentation. It has been 
over a month. There has been zero production from either State 
or Treasury--documents that we are entitled to.
    I would ask you to take that message back to your superiors 
and please provide those documents that are duly owed to the 
Congress.
    With that, again, thank you.
    Our committee is now going to stand in recess for 5 minutes 
as we switch out panels.
    [brief recess]
    Chairman Duffy. I want to welcome our second panel, and 
first off apologize to the panel that the first panel took so 
long, but I thought it was worthy of a lengthy discussion. I 
hope you all do, as well.
    Let me introduce our second panel: Mr. Dubowitz is the 
executive director of the Foundation for Defense of 
Democracies; Dr. Rubin is a resident scholar at the American 
Enterprise Institute, AEI; Mr. Lorber is a senior associate at 
the Financial Integrity Network; and Ms. Maloney is the deputy 
director of foreign policy, and a senior fellow at the Center 
for Middle East Policy at the Brookings Institution.
    Each of the four of you will be recognized for 5 minutes to 
give an oral presentation of your testimony. And without 
objection, each of your written statement will be made a part 
of the record.
    Once the witnesses have finished their testimony, each 
member of the subcommittee will have an opportunity to ask each 
of you questions for a period of 5 minutes.
    Again, you probably all know this, but on your table you 
have your three lights: green means go; yellow is you have a 
minute left; and red means your time is up.
    I would just note that the Democrats know we are doing this 
second panel. We may get some more of them back in the room as 
we proceed, but they know we are going to proceed without any 
of them here.
    With that, Mr. Dubowitz, you are recognized for 5 minutes.

STATEMENT OF MARK DUBOWITZ, EXECUTIVE DIRECTOR, FOUNDATION FOR 
                     DEFENSE OF DEMOCRACIES

    Mr. Dubowitz. Thank you, Chairman Duffy, Vice Chairmen 
Fitzpatrick, Ranking Member Green, Congressman Hill, and 
distinguished members of the subcommittee. On behalf of FDD and 
its Center on Sanctions and Illicit Finance it is an honor to 
testify today.
    And we have talked about Iran's malign activities and they 
pose a severe threat to U.S. national security. These 
activities include support for terror groups, Shiite militias, 
proxy forces, and rogue states.
    As has been discussed today, to expand these illicit 
activities the regime needs cash because it is liquid, it is 
untraceable, it is convertible, and it is easy to transfer. And 
according to the Financial Action Task Force, cross-border cash 
transfers are one of the main methods used to move illicit 
funds, launder money, and finance terrorism.
    Now, instead of focusing my testimony only on the question 
of whether the $1.7 billion was a ransom, I want to broaden the 
inquiry. The key question I want to ask today, which is best 
illustrated in the handout that you have before you as well as 
on the screen, is did Iran, in fact, get tens of billions of 
dollars of cash, maybe up to $33.6 billion?
    So let's start with this: President Obama has said, ``The 
reason that we had to give them cash is precisely because we 
are so strict in maintaining sanctions. We could not wire the 
money.''
    Well, as we have discussed, legally the President is wrong. 
Existing regulations permit transactions.
    The President may also use his special authority under 
IEEPA to authorize banks to facilitate these transactions.
    In short, there are no legal barriers. The tribunal has 
settled about 4,000 claims. I find it hard to believe they were 
all done in cash.
    Now, it is certainly possible that banks were unwilling to 
not wire the funds no matter what guarantee they got because 
they have a healthy fear of sanctions after so many years. But 
if so, it raises a troubling question: How did Iran receive the 
billions of dollars in sanctions relief under the JPOA and 
JCPOA?
    During the JPOA negotiations we know that Iran was granted 
$700 million a month, or $11.9 billion, from its restricted 
overseas oil escrow accounts. If no mechanism existed to 
transfer the tribunal funds through the formal financial 
system, what mechanism was used to transfer the $11.9 billion?
    Now, a senior official has admitted to The Wall Street 
Journal that, ``Some of that money was sent in cash,'' and 
that, ``We had to find all these strange ways of delivering the 
monthly allotment.'' What exactly were these strange ways? Did 
they include cash, or gold, other precious metals? Or was there 
a formal financial channel?
    Now, it doesn't end there. In July, U.S. officials 
estimated that Iran had repatriated ``less than $20 billion 
from previously frozen overseas assets of $100 to $125 
billion.'' Were those funds also repatriated in cash and gold? 
Was this in addition to the $11.9 billion or inclusive?
    If the White House could only send cash to Iran from the 
start of the JPOA period through the tribunal payment, that 
could amount to a grand total of $33.6 billion. Did any of this 
money go through the formal financial system?
    If so, the Administration is not being truthful about the 
$1.7 billion. If many billions of dollars arrived in Iran on 
pallets, this would be a pretty astounding revelation.
    Now to the question of ransom.
    If Iran was able to receive some or all of the sanctions 
relief through the formal financial system, why was the $1.7 
billion paid in cash? For example, in February 2014 the Bank of 
Japan reportedly wired $550 million to an Iranian Central Bank 
account in Switzerland as part of the interim agreement. There 
is no reason that the Administration couldn't have wired the 
$1.7 billion immediately to that same account rather than 
sending cash.
    So perhaps Iran simply wanted cash. As one senior official 
said to The Wall Street Journal, ``Sometimes the Iranians want 
cash because it is so hard for them to access things in the 
international financial system.''
    Is this an admission that cash was an Iranian demand and 
not a logistical impossibility? The $400 million cash delivery 
in January was part of a tightly scripted exchange timed to the 
release of the American hostages. If Washington needed Iran to 
receive the funds immediately in order to keep to the script, 
was cash the only way or could they have wire-transferred that 
money immediately to the same Central Bank of Iran account, 
Swiss Central Bank?
    Now, the Administration calls it leverage, but Iranian 
officials call it a ransom. And it is really that Iranian 
opinion that I think matters. This might explain one of the 
reasons why the IRGC has arrested more Americans and other dual 
nationals, to cash in again.
    So let me conclude by summarizing my concerns with these 
two key questions. Number one: Did the Administration authorize 
the cross-border transfer of as much as $36 billion in cash and 
perhaps gold, or some portion thereof? If so, the White House 
provided Iran with unprecedented and untraceable funds to fuel 
Iranian regime terror and other nefarious activities.
    Or, question two: If the Administration never before 
authorized the transfer of cash and gold to Iran, did they send 
this $1.7 billion as a unique cash delivery to satisfy Iranian 
demands? And did they do this because it was the only way to 
get our hostages back? Well, this suggests ransom.
    It just seems to me that the Administration can't have it 
both ways.
    Thank you for the opportunity to testify, and I look 
forward to your questions.
    [The prepared statement of Mr. Dubowitz can be found on 
page 80 of the appendix]
    Chairman Duffy. Thank you.
    Dr. Rubin, you are recognized for 5 minutes.

    STATEMENT OF MICHAEL RUBIN, RESIDENT SCHOLAR, AMERICAN 
                      ENTERPRISE INSTITUTE

    Mr. Rubin. Chairman Duffy, Ranking Member Green, and 
honorable members of the subcommittee, thank you for the 
opportunity to testify today about the Obama Administration's 
willingness to provide Iran with $400 million in cash on the 
same day Iran released all but one of the American hostages it 
held. In subsequent days the United States delivered an 
additional $1.3 billion.
    At issue is whether the payment was proper, whether it was 
ransom, how Iran used the money, and whether the fact that the 
payment was made in cash might fuel greater terrorism.
    I have gone into detail in my written testimony, utilizing 
Iranian sources and Iranian government journals, with regard to 
how Iranian figures perceived the payment, how they might 
launder it, what their strategy is, and how the Islamic 
Revolutionary Guard Corps corrupts the Iranian economy. For the 
sake of brevity, let me summarize.
    When Secretary of State John Kerry says the $1.7 billion 
was Iranian money, there is no reason it needed to be paid now. 
After all, successive Administrations, both Democratic and 
Republican, have delayed repayment so as to avoid funding 
Iranian terrorism. Likewise, if the United States freezes 
accounts linked to Al Qaeda or Hamas, releasing it and saying, 
``It is their money anyway,'' would not be a tenable 
explanation.
    Cash payments are highly irregular. The closest precedent 
was the 1848 treaty ending the Mexican-American War. There is 
no critical economic need in Iran for which they have used the 
cash.
    The White House and State Department might perform 
intellectual somersaults to avoid calling the payment a ransom, 
but despite initial denials, the State Department has now 
acknowledged the linkage between the cash paid and the release 
of the hostages. We have had repeated diplomatic dialogue over 
the years, so to say that this is just a confluence of events 
is absolute nonsense.
    And Undersecretary of State William Burns, for example, met 
directly with the Iranians in 2008, I believe it was; Ryan 
Crocker in 2007. The whole arms-for-hostages scheme during the 
Reagan Administration was, at its core, about diplomatic 
dialogue.
    Regardless, Washington's spin is irrelevant. Iranians 
perceive the payment to be a ransom and said so. ``Taking this 
money back was in return for the release of American spies,'' a 
senior Islamic Revolutionary Guard Corps general said.
    Not only has delivery of the millions of dollars been 
perceived as a ransom, providing an incentive to seize more 
hostages--and indeed, they have been seized--but because the 
money was delivered in cash the payment bolstered the strength 
of the Islamic Revolutionary Guard Corps and augmented its 
ability to finance and conduct terrorism.
    I should say that reliance on the Iranian defense budget or 
their line items--it shouldn't be done. They are fictional. 
Iran's budget is opaque.
    After the Flatow verdict back in 1999 or 2000, where the 
judge assigned damages based on the line item for resistance, 
the line item simply disappeared in subsequent budgets. That 
didn't mean that the Iranians stopped conducting terrorism.
    Every time the United States Government has offered Iran 
incentives in the face of terrorism the Iranian response has 
been more terrorism and hostage-taking. That was the case with 
the Reagan-era arms-for-hostages scheme. It should be no 
surprise that the Iranians have seized more than a half-dozen 
Western hostages in the months since.
    The problem isn't just incentivizing bad behavior. Rather, 
the problem is that the IRGC continues to dominate the Iranian 
economy. Allowing the IRGC to have custody of the money is to 
allow the group to launder cash for its own purposes.
    Even Iran's Justice minister just a month ago has said that 
50 million bank accounts in Iran are opaque or their ownership 
unclear. That is a country of 80 million people--50 million 
bank accounts the Justice minister in Iran says are basically 
bogus.
    In my written testimony I also highlight how the IRGC often 
uses the Tehran Stock Exchange to launder money and play a 
shell game with companies to evade proliferation and terrorism 
sanctions. So this is another danger of making the payments in 
cash.
    Payment in cash is especially problematic as it hampers the 
ability of the intelligence community and the Treasury 
Department to trace it. Remember, the Iranian plot to murder 
the Saudi ambassador in Washington, D.C. was exposed because 
the United States was monitoring specific bank accounts. Also 
remember that a suicide bomb belt can cost as little as $1,500.
    This hearing may be about Iran, but the issue is broader. 
What happens in Tehran doesn't stay in Tehran. Exposing U.S. 
rhetoric about refusal to pay ransom as empty has put a target 
on every American's back and convinced terrorist leaders and 
rogue regimes that kidnapping and ransoming pays.
    Thank you for the opportunity to testify.
    [The prepared statement of Dr. Rubin can be found on page 
126 of the appendix.]
    Chairman Duffy. Thank you.
    Mr. Lorber, you are now recognized for 5 minutes.

   STATEMENT OF ERIC B. LORBER, SENIOR ASSOCIATE, FINANCIAL 
                       INTEGRITY NETWORK

    Mr. Lorber. Thank you.
    Chairman Duffy, Vice Chairman Fitzpatrick, Ranking Member 
Green, and distinguished members of the subcommittee, I am 
honored to appear before you today to discuss the dangers of 
ransom payments to Iran. In particular, I would like to focus 
my testimony on the legality of the $400 million cash payment, 
as well as the subsequent $1.3 billion cash payments; the risks 
that such payments pose; and how, most importantly, we could 
have structured these payments to limit Iran's ability to use 
these funds to support terrorism, weapons proliferation, and 
regional instability.
    With the recent 1-year anniversary of the JCPOA it is as 
important as ever to ensure that Iran is limited in its ability 
to support terrorist forces and corrupt the international 
financial system. Make no mistake: Though Iran has signed and 
implemented the JCPOA, it has not changed the underlying 
criminal activity that has led respectable financial 
institutions across the world to refuse to do business there.
    Iran's unwillingness to change its destabilizing conduct is 
one of the reasons the payment of the $1.7 billion to the 
Islamic Republic raises serious concerns that this money will 
be or already has been used to support the IRGC, the Iranian 
military, and Iran's proxy terrorist forces throughout the 
region.
    To be clear up front and as discussed, this payment does 
appear permitted under U.S. law. Pursuant to 31 CFR 
560.510(d)(2), which is part of the ITSR, U.S. persons are 
authorized to conduct all transactions necessary to payments 
related to settlement agreements in a legal proceeding between 
the United States and Iran. The provision permits U.S. 
Government officials and foreign financial institutions to 
transfer these funds to Iran after a settlement agreement at 
the United States-Iran Claims Tribunal, even if such transfers 
are done in cash, though I will point out that, as 
Representative Royce noted, that means you could use the formal 
financial system to transfer these payments. You do not have to 
go through cash.
    Despite the likely legality of the transfer, however, the 
payment of this money to Iran, particularly without 
preconditions to ensure that it was not used to support Iran's 
terrorism-related activities, is both troubling and a missed 
opportunity. It is troubling because in providing funds to Iran 
without controls on how it would use that money, we allow the 
country to disperse these funds to the Iranian military and 
other nefarious actors.
    In addition, the very nature of the payment reportedly led 
IRGC officials to conclude that it amounted to a ransom. While 
the payment itself may not have been a prohibited ransom 
payment under U.S. law, Iran's perception of that payment 
matters.
    A principal purpose of the United States' no-ransom policy 
is to deter hostage-takers from compromising the safety of 
American citizens abroad. If terrorist groups and rogue 
countries do not think the United States will pay for hostages, 
those bad actors will be less likely to take them. Because of 
the particular nature of these payments, Iran believed this to 
be a ransom and consequently may be more inclined to seize 
Americans in the future, as Mr. Rubin noted.
    It is a missed opportunity because the United States could 
have set up payments stemming from the settlement agreement in 
a way that conditioned providing the funds on ensuring they 
would not be able to support terrorism or be given to the 
Iranian military or sanctioned parties. By releasing these 
funds in such a way rather than in unrestricted cash, the 
Administration could have outmaneuvered the Islamic Republic.
    Moving forward, Congress should take specific steps to 
ensure that any funds given to Iran are subject to certain 
conditions. First, Congress could pass legislation that 
modifies 31 CFR 560.510 and requires that any funds to be sent 
to Iran pursuant to a settlement agreement be placed in an 
escrow account and released only upon meeting certain 
conditions, including that the funds not be provided to a 
sanctioned party and must be released in tranches with a 
certification provided by the secretary of the Treasury and 
relevant U.S. Government agencies that the prior released 
amount has not gone to designated parties or to entities 
engaged in a number of proscribed activities.
    Second, Congress could take steps, including passing 
legislation, to ensure that any payments made to Iran would 
present reduced risks of diversion by setting up a so-called 
white list, where Western banks could process legally 
permissible transactions to vetted and monitored Iranian banks 
with no connections to the IRC or to the government or Iran. 
Such a white list would create a specified channel for 
processing transactions, including settlement agreements like 
this one, in a way that would limit Iran's ability to channel 
the funds to the IRGC and designated parties.
    As Iran continues to support terrorism and foment regional 
instability, the United States should ensure that we play no 
role in inadvertently funding such activities or putting U.S. 
citizens at risk. These proposals, I believe, are a step in 
that direction. I look forward to discussing them with you 
during the remainder of the hearing.
    Thank you for your time.
    [The prepared statement of Mr. Lorber can be found on page 
102 of the appendix.]
    Chairman Duffy. Thank you.
    And Ms. Maloney, you are now recognized for 5 minutes.

STATEMENT OF SUZANNE MALONEY, DEPUTY DIRECTOR, FOREIGN POLICY, 
AND SENIOR FELLOW, CENTER FOR MIDDLE EAST POLICY, THE BROOKINGS 
                          INSTITUTION

    Ms. Maloney. Chairman Duffy, Vice Chairman Fitzpatrick, 
Ranking Member Green, and distinguished subcommittee members, 
thank you for the opportunity to appear before you today.
    When five Americans returned home in January after months, 
or in some cases even years, of unjust imprisonment in Iran we 
all rightly celebrated. The detention of these individuals, 
including a Washington Post reporter, a Christian pastor, and a 
former U.S. Marine, as well as many, many other innocents, 
underscores the threats to basic rights and freedoms in Iran's 
Islamic Republic.
    That this release was timed to coincide with the settlement 
of a nearly 40-year-old financial dispute between the United 
States and Iran and that this payment included an airlift of 
foreign bank notes to Tehran has prompted the allegations of 
ransom that have brought us here today.
    I want to speak first to the question of ransom. I do not 
believe the facts of the case support the use of the word.
    As Chairman Hensarling noted at the outset of the hearing, 
a ransom is a payment made specifically to secure the release 
of a detained person. This sum, by contrast, was made to 
satisfy a legitimate debt that the United States owed to Iran.
    The payment provided Tehran with nothing other than its own 
funds--money that was due to Iran as part of the adjudication 
of an old settlement. Further delay in settling this claim 
would not have obviated its reimbursement. In fact, we 
benefitted, as the prior panel discussed, from an expeditious 
resolution of the remainder of the Iranian claims before the 
tribunal.
    Let me move beyond the specifics of the payment to 
emphasize a point that I think has been lost in the 
controversy. The coordination of the two separate tracks of 
negotiation to expedite American priorities and advance the 
American national interest with respect to Iranian behavior is 
neither unusual nor surprising. Since the 1979 seizure of the 
U.S. embassy in Tehran, each American President has sought to 
utilize economic leverage, both penalties and incentives, as a 
central component of a strategy designed to address the 
challenges posed by revolutionary Iran.
    This is the point of the sanctions, after all. It is the 
logic of the deal that was made to release the hostages in 
1981, and it was the toolbox that was used by each of President 
Obama's predecessors. Presidents Reagan, George H. W. Bush, 
William Clinton, and George W. Bush each utilized sanctions as 
well as economic incentives in order to try to gain cooperation 
from Iran on various priorities.
    Using economic leverage has never precluded the 
intensification of sanctions or the use of military force for 
other coercive measures against Iranian actors or their proxies 
in the region. These are not mutually exclusive policies.
    Let me close by speaking to the issue of the unjust 
detention of Americans and other dual nationals in Iran. There 
have been a number of critics of the Administration who have 
warned that the linkage that appears to be present in this 
settlement might induce Iran to seize more Americans and 
increase the risks to Americans in Iran.
    I understand why such inferences have been made and I 
appreciate the rationale of imputing a kind of rational 
calculus to Iran's treatment of its own citizens and of its 
dual nationals. Unfortunately, in my view this reflects a naive 
understanding of the drivers of Iranian politics.
    I simply see no evidence that Iran's longstanding patterns 
of human rights abuses, inadequate rule of law, and 
exploitations of individuals to advance an ideological 
narrative are subject to the logic of financial incentives. 
There is no attempted extortion here.
    In these arrests I think that there is no method to the 
madness other than the obnoxious realities of authoritarian 
power. There is one factor that drives the detention and 
seizure of Americans and other dual nationals, and that is the 
DNA of the Iranian State includes and emphasizes a paranoia 
that is deep-seated toward external actors and external states. 
The jailing of Americans has always been motivated by a sense 
of a conspiracy, American-led, of regime change that is 
facilitated by these individuals.
    In that respect, let me conclude my remarks with an appeal 
to Congress to devote at least as much time and energy to 
seeking ways to facilitate the release of those Americans who 
remain behind bars, missing, or detained in Iran today--first 
and foremost, Bob Levinson, who was sent to Iran by his own 
government; also Siamak and Baquer Namazi, who have been in 
prison for as long as a year, in one case; and Nizar Zakka, who 
is a U.S. permanent resident. There are a number of other dual 
nationals who are seized in Iran today, and this is at a--the 
center point of the legitimacy of the Iranian regime.
    Thank you.
    [The prepared statement of Ms. Maloney can be found on page 
118 of the appendix.]
    Chairman Duffy. Thank you.
    The Chair now recognizes himself for 5 minutes.
    Ms. Maloney, you talk about prior presidents using 
sanctions and incentives in the past, and I wouldn't dispute 
that point. But can you give me an example of one prior 
President that has, in essence, given $400 million of Iranian 
cash back to them, $1.3 billion of taxpayer money back to them 
in the form of interest, and the fact that we have unfrozen 
billions of dollars in assets? What other President has given 
that much to Iran?
    Ms. Maloney. President Ronald Reagan sold arms to Iran 
while it was in an existential war with Iraq. President George 
H. W. Bush provided Iran with settlements at a time where--
under the very similar conditions of the U.S.-Iran--
    Chairman Duffy. To the tune of how many billions of 
dollars? How many billions of dollars?
    Ms. Maloney. --Claims Tribunal.
    Chairman Duffy. How many billions?
    Ms. Maloney. Hundreds of millions of dollars in that case, 
and they--
    Chairman Duffy. Did you say a hundred or--
    Ms. Maloney. --were intended to help to facilitate the 
release--
    Chairman Duffy. Hundreds of millions or hundreds of 
billions?
    Ms. Maloney. --of American hostages and other Westerners 
in--
    Chairman Duffy. Listen, don't talk over me. Hundreds of 
millions or hundreds of billions?
    Ms. Maloney. Hundreds of millions.
    Chairman Duffy. Hundreds of millions. So it is fair to say 
not to the tune of $33.6 billion. I think that is what is 
important to note here, the size of this--
    Ms. Maloney. I don't believe that figure is part of the 
transaction that is under the consideration--
    Chairman Duffy. I am just going to note that I--
    Ms. Maloney. --of this hearing today.
    Chairman Duffy. I yielded to you for 5 minutes for your 
testimony. This is my 5 minutes, and I will ask questions and 
hope you will answer them. And I will reclaim my time, but 
please don't talk over me.
    I would just ask the panel, is there any significance to 
the fact that this money wasn't wired or sent by way of a 
check, but instead was--it was wired and then converted to cash 
and sent into Iran? Is there any significance to the cash 
component of this?
    Mr. Rubin?
    Mr. Rubin. Very briefly, it makes it much easier to launder 
and much easier to use for nefarious purposes.
    Chairman Duffy. And why is it? Why is it easier to use cash 
to launder or use for nefarious purposes?
    Mr. Rubin. We often monitor bank accounts, and banks also 
have various structures and, in theory, transparency 
requirements, which make it hard to conduct terrorism or drug 
dealing or any other nefarious activity through the banks. That 
is why organized crime uses cash.
    Chairman Duffy. Mr. Dubowitz, did you have an answer to 
that? You look like you were going to say something.
    Mr. Dubowitz. No, I absolutely agree. And the example I 
quoted in my opening testimony is we facilitated or green-
lighted the transfer of $550 million by wire transfer in 2014 
as part of the JPOA sanctions relief. It instantaneously hit 
the Central Bank of Iran's accounts in Switzerland, at the 
Central Bank of Switzerland.
    So the question then is, Mr. Chairman, why send $400 
million in cash if, as Mr. Backemeyer said, they were seeking 
immediacy? They had to provide an immediate payment. That is 
what he said in his testimony.
    Well, we could have provided immediate payments by wire 
transferring. I mean, you have seen those films--those scenes 
in movies where the hostage-taker is on the phone with his 
banker in Switzerland and he says to him, ``The money has hit 
the account,'' and he says, ``Great,'' and they release the 
hostages. So there are ways to do this.
    And I think the $33.6 billion is at issue in this hearing 
because how did that money get repatriated to Iran? How much 
got repatriated to Iran? And did they send billions of dollars 
of cash--so we are not just talking about $1.7 billion; we may 
be talking about $8 billion, $10 billion, $15 billion of cash?
    Chairman Duffy. And my concern with this is that this is 
the lead sponsor of terrorism in the world. And frankly, if you 
look at successful terrorist attacks, whether in our country or 
other places, it is cheap. It doesn't cost a lot of money. And 
you look at the amount of terror that can be financed with--if 
we just use the $1.7 billion, it is a lot of really bad 
activity that can be financed with that taxpayer money.
    One other question I want to ask the panel. There is a 
dispute, and you have all heard it: Was this ransom?
    Now, I am going to tell you I believe if it walks like a 
duck and it quacks like a duck it is not a rooster. It is a 
duck. Some are trying to say it is a rooster.
    Let's leave that aside for a second because we could debate 
that all day. What do you perceive the rest of the world--Iran 
and other rogue regimes and rogue actors--how do they, do you 
think, perceive what happened with this $400 million for five 
prisoners?
    Anyone on the panel?
    Mr. Rubin. It is perceived as a ransom and we should expect 
that other groups are going to play, ``look at me,'' to try to 
do better than the Iranians have done once they are in need of 
cash, as well.
    Chairman Duffy. Can anybody tell me on the panel--and even 
you, Ms. Maloney--that the money that has been paid, that this 
will not be used for terrorism or funding terrorist purposes as 
seen fit by the Iranian regime?
    Ms. Maloney. I can make no assurances about how the 
Iranians spend their money. What I can tell you is the long 
history of Iran's involvement in terrorism demonstrates no 
correlation between the amount of revenues available to Iran 
and its nefarious activity abroad.
    Chairman Duffy. My time has expired.
    I am now going to yield to the Vice Chair of this 
subcommittee, the gentleman from Pennsylvania, Mr. Fitzpatrick, 
for 5 minutes.
    Mr. Fitzpatrick. Thank you, Mr. Duffy.
    For the past almost 2 years a task force of this 
committee--bipartisan task force--had a series of hearings 
where we investigated, reviewed, debated, and ultimately put 
together some bipartisan legislation that passed the House of 
Representatives recently. It is now sitting over in the Senate. 
We investigated how to deny resources, specifically cash, to 
international terrorist organizations that want to kill 
Americans and kill citizens of our allies.
    As we have heard many times during the course of those 
hearings and even here today, cash is--it is the preferred 
currency of terrorism. So imagine our surprise in the middle of 
a 2-year investigation that we find out that the United States 
Government, in negotiating with the Islamic Republic of Iran, 
reaches a settlement that provides $400 million to be delivered 
in the middle of the night to Iran in cash. It was the first 
payment.
    I haven't heard a lot about the second. I guess the second 
payment was the interest that taxpayers paid, maybe $1.3 
billion.
    Is there any indication as to how those second payments 
were made? Were they also made in cash?
    Any of the panelists that may wish to comment?
    Mr. Dubowitz. Yes. The Wall Street Journal reported that it 
was made in cash and Administration officials have confirmed 
that. It sounded like the same kind of financial scheme where 
it was wire-transferred to a central bank in Europe, withdrawn, 
and then provided to the Iranians. And then, again, flown on an 
Iranian plane to--presumably to Iran, or perhaps it stopped in 
Damascus or Beirut to give money to Assad or Hezbollah. One 
doesn't know.
    Mr. Fitzpatrick. Mr. Dubowitz, do you know on what airline 
the cash--at least the initial cash--was delivered to Tehran?
    Mr. Dubowitz. So again, The Wall Street Journal reported 
that the money was picked up by an Iran Air plane, which is 
controlled by the Revolutionary Guard but was designated in 
2011 because it was controlled by the IRGC and regularly flies 
routes from an IRGC resupply base in Abadan, Iran to Damascus 
and on to Beirut. So good plane to use if you want to send that 
cash to Hezbollah or Assad.
    Mr. Fitzpatrick. One of the more frustrating things with 
the previous panel is with all the Government witnesses from 
the Department of the Treasury, the Department of State, and 
the Department of Justice, nobody could tell us who 
specifically requested that the delivery be made in cash. Was 
it a condition of Iran? Was it a suggestion of the United 
States Government?
    Is there any open-source information out there as to how 
that decision was made or light that you can provide to us so 
that we can get that information back?
    Mr. Dubowitz. So Mr. Backemeyer said that the reason they 
used cash is because they needed an immediate payment. Now, 
presumably the Iranians demanded an immediate payment if they 
were going to release the hostages, and he suggested that 
only--the only immediate payment that they could actually think 
of was cash.
    And what I have tried to suggest in my testimony is that 
there are other ways to transfer money immediately. It is an 
electronic transfer that takes a millisecond and that could hit 
the Central Bank of Iran's account in Switzerland.
    Now, as Mr. Rubin said, you want to use the formal 
financial system because the Swiss Central Bank is not going to 
give the Iranians hundreds of millions of dollars without 
knowing who the end beneficiary of that transaction is. And so 
it is good to keep things in the formal financial system.
    It provides transparency and checks and balances against 
money laundering and terror financing, and it is precisely why 
the Iranians don't want the money in the formal financial 
system. They wanted it in cold cash that they can then ship to 
Hezbollah, to Assad, and to their other surrogates.
    Mr. Rubin. If I may, sir, according to reporting in The 
Wall Street Journal and elsewhere, the negotiations to release 
the hostages culminated around Christmas time in 2015 with this 
idea of a swap between the hostages that Iran held and many 
Iranian-American and Iranian prisoners who had been found 
guilty of trying to smuggle nuclear parts and other prohibited 
components.
    At that point in time the Iranians demanded an additional 
$400 million, and to put it simply, they were utilizing as 
leverage the desire--the overwhelming desire of the 
Administration to come back with an agreement. I mean, simply 
put, if we don't want to call it a ransom we can call it a 
bribe in order to maintain--figuratively--in order to maintain 
the notion that this agreement was working.
    Mr. Fitzpatrick. Mr. Lorber, you suggested that there were 
other ways you could have structured the payments to 
essentially outmaneuver Iran. What--
    Mr. Lorber. Exactly. So going to the question of immediacy, 
we actually had a mechanism set up to provide Iran with funds 
under the JPOA, the precursor to the JCPOA. There was a 
humanitarian finance channel that had been specifically set up 
to allow foreign financial institutions to give funds--wire-
transfer funds directly into Iran for that purpose. And so the 
argument that it needed to be in cash for immediacy purposes I 
don't think holds that much water.
    Mr. Fitzpatrick. Thank you.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the gentleman from Arkansas, Mr. 
Hill, for 5 minutes.
    Mr. Hill. Thanks, Mr. Chairman.
    Can anyone report to me on a transaction under a tribunal-
type settlement, legal settlement, or in any other case where 
the United States Government has made a payment in cash?
    Mr. Dubowitz. There is no evidence of that. In fact, I 
mean, we found a 2015 tribunal settlement for $848,000 that was 
owed to Iran, and it seems to have been wire-transferred. And 
so of the 4,000 tribunal settlements we see no evidence that 
any of those tribunal settlements were paid in cash.
    Mr. Hill. Further, in your testimony, since the JCPOA has 
been put in place and sanctions have been lifted you cited the 
government of Japan wiring money to Tehran, I presumed is a 
part of the freed frozen accounts. So there has been evidence 
of SWIFT wire-transfer since the completion of the JCPOA. Is 
that your general understanding?
    Mr. Dubowitz. Congressman, in fact, not only since the 
completion of the JCPOA, but since the completion of the 
interim agreement. And Mr. Backemeyer seems to suggest that 
there was a financial embargo in Iran and that is the reason 
that we couldn't send electronic funds.
    But the reality is is that Iranian banks remained on SWIFT 
even at the height of sanctions. As Mr. Lorber says, there is a 
humanitarian channel where over 3,000 humanitarian transactions 
are settled every year. We gave the Iranians access to $11.9 
billion and $700 million a month was sent from the Bank of 
Japan and other banks to these accounts that Iran could use.
    And that is really the heart of my testimony, which is the 
Administration is trying to have it both ways. Either there is 
a financial embargo, which is why they had to send $1.7 billion 
in cash. If that is the case then they have sent many billions 
of dollars in cash, including the $11.9 billion and the $20 
billion that they admit to repatriating. Or there is no 
financial embargo; it is just difficult, but there are other 
ways to actually send the money besides cash, and they used 
cash in this case because it was an Iranian demand.
    The Administration can't have it both ways.
    Mr. Hill. It seems to me that there is no legal basis for 
cash other than the request of the negotiating party, that they 
sought cash. So I think that is what we have heard both from 
the government witnesses today and from our private sector 
panel.
    Mr. Lorber, you talk about this idea of Iran certifying 
that the funds aren't used for terrorism. You used a couple of 
examples.
    To me that was one of the biggest weaknesses in sanctions 
relief under the JCPOA because it was a cliff vesting. They got 
all their money held--frozen abroad back immediately with no 
ability to let it out over time if they maintained compliance 
with this agreement.
    I am not sure your white list idea would hold a lot of 
clout with me because I am not sure we know what goes on inside 
Iran. But this idea that we let money out over time and we have 
Iran certify a pledge to the payment that it be certified not 
be used for terrorism might be useful.
    Have we used that in any settlement before--that kind of 
settlement over time basis with certifications from the 
recipient?
    Mr. Lorber. I am not familiar with any circumstance, 
particularly in the Iranian case, where we have used a sort of 
tranched approach with intermediate certification. But I agree 
that it would be a way to at least ensure that there could be 
some limitations.
    And indeed, we have proposed this in other contexts, as 
well, before this committee. Mr. Dubowitz and I have both 
suggested something along these lines when structuring the 
Boeing and Airbus deal to Iran as a way to structure those 
contracts.
    Mr. Rubin. If I may, sir, the PLOCCA legislation required 
that there be regular certification, I believe biannual, that 
none of the monies which are given to the Palestinian authority 
or the Palestine Liberation Organization are used for 
terrorism. So there is precedent in which such certifications 
can occur.
    Mr. Hill. Thank you. That is helpful.
    Can you think of any legitimate justification why in 
January--in the 17 January announcement by the Administration 
about the release of the--our hostages, our American citizens, 
which we are all thrilled to have back--we want Robert Levinson 
back, as well; we need to keep that pressure up--and the 
decision about this claim settlement matter, can you think of 
any legitimate justification of why the Administration kept the 
fact that they paid all this money in cash secret from the 
American people? What would be the basis for that?
    Mr. Dubowitz. Well, I think there are two reasons. One is 
the concerns that everybody is raising about how cash is used 
by money launderers and terror financiers.
    I think the second reason is I think the Administration is 
loath to admit that they may have transferred many billions of 
dollars to Iran. And we are not just talking about $1.7 
billion, but we are talking all of that money that is on the 
screen there, some or all of the $33.6 billion.
    If they had admitted that it was cash, Congress would then 
rightly be asking questions about all the other money that Iran 
has repatriated over the past 3 years and then you would be 
very concerned that it is perhaps billions if not tens of 
billions that the Iranians have gotten in cash to finance not 
only terrorism but to support their military, to support Bashar 
Assad, and all the other malign activities.
    Mr. Hill. Thank you.
    I want to conclude, Mr. Chairman, by reading from the 
distinguished former member of the Senate, Joseph Lieberman 
his--in his op-ed today in The Wall Street Journal: ``On the 
15th anniversary of 9/11 the United States should not be 
rewarding Iran for its deadly actions with gifts of sanctions 
relief and the easing of arms embargoes and ballistic missile 
restrictions. It is time to hold the regime accountable for its 
reckless aggression and support of terrorism.''
    I yield back.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentleman from New Hampshire, 
Mr. Guinta, for 5 minutes.
    Mr. Guinta. Thank you very much, Mr. Chairman.
    Thank you all for being here today.
    Ms. Maloney, I wanted to actually start with you. I have 
listened to your comments and I have read earlier testimony. Am 
I correct in making the statement that you don't believe this 
was either a ransom or an exchange for prisoners, the $400 
million?
    Ms. Maloney. What I believe is that the timing of the 
release of the prisoners was coordinated with the timing of the 
resolution of this long-held financial dispute between the two 
countries. I do not believe it was a coincidence.
    Mr. Guinta. You do not believe it was a coincidence.
    Ms. Maloney. I do not. And I believe that that is, in fact, 
consistent with exactly what the Bush Administration--the 
George H. W. Bush Administration--did in seeking the release of 
Americans who were held hostage and other Westerners held 
hostages in Lebanon in the late 1980s and early 1990s. This is 
the sort of diplomacy that the United States has engaged in 
time and time again with Iran.
    It doesn't always pay off. It didn't pay off as we had 
hoped in the--with the release of hostages in--from Lebanon. It 
did, in this case, clearly pay off with the release of the four 
Americans and a fifth American who had been held at the same 
time.
    Mr. Guinta. At a cost of $400 million?
    Ms. Maloney. At a cost of resolving a debt that we would 
have had to resolve irrespective of the release of those 
Americans. I would rather clear the underbrush, as President 
Bush said when he talked about very similar actions back in the 
late 1980s, and see the return of Americans who are being held 
unjustly than to resolve a debt and not see the return of these 
same Americans.
    Mr. Guinta. Do you believe that there was any discussion of 
the prisoner exchange in the JCPOA?
    Ms. Maloney. I believe what I have read in the media 
consistently, which is that Secretary Kerry and those officials 
who were engaged in the negotiations raised the case of these 
Americans time and time again on every occasion when they met 
with their Iranian counterparts.
    Mr. Guinta. So it is likely as part of that Iran deal there 
is discussion about a return of prisoners; and there also, 
coincidentally, at the same time is a discussion about $400 
million or $1.3 billion payment.
    Ms. Maloney. The negotiations that go on at the U.S.-Iran 
Claims Tribunal are very much separate and distinct, I think, 
from the broader diplomatic--
    Mr. Guinta. I thought you just said Secretary Kerry brought 
it up at every single--
    Ms. Maloney. At the nuclear negotiations, yes.
    Mr. Guinta. Okay. So that is--
    Ms. Maloney. He brought up the status of American prisoners 
in Iran.
    Mr. Guinta. Okay. So that is my question. While Secretary 
Kerry, under the direction of President Obama, is negotiating 
with Iran on the JCPOA they brought up at every moment, as you 
said, every possible option and chance to release prisoners. 
And it sounds like as a result of that agreement there was a 
$1.7 billion payment made.
    Now, I understand that you are saying there is a tribunal 
that has to be addressed, so that is the--that is their 
justification for a ransom payment.
    Ms. Maloney. The deliberations at the tribunal have been 
going on now for 35 years. They occur through very separate 
channels--
    Mr. Guinta. So, okay--
    Ms. Maloney. --very separate personnel from those who were 
involved in the negotiations over the nuclear deal or those who 
were involved with the negotiations of the--
    Mr. Guinta. So 35 years of negotiations and this is the 
moment that Secretary Kerry and President Obama decide to make 
a $1.7 billion transfer?
    Ms. Maloney. We have paid out judgments as part of the 
U.S.-Iran Claims Tribunal for 35 years--
    Mr. Guinta. Do you think there was a judgment that was 
imminent with--
    Ms. Maloney. --as the Iranians have paid to us.
    Mr. Guinta. Do you think there has--there was a judgment 
that was going to be imminent?
    Ms. Maloney. The previous panel debated the use of the word 
``imminent.'' I don't have any way to gauge whether it was or 
was not.
    What I do believe is what the State Department legal 
advisor's office testified at the previous panel, which was 
that they believe that this compromise agreement was in the 
interest of the American people, that it was, in fact--
represented a lower figure than what the Iranians had been 
demanding, and that it was worthwhile to get the--
    Mr. Guinta. I have heard their--
    Ms. Maloney. --claim resolved.
    Mr. Guinta. No, I appreciate that. Reclaiming my time, I 
have heard their excuse and I have heard their rationale. I 
just don't believe it, nor do the American people.
    Do you know what the President Obama's Administration 
position is on private citizens paying ransom internationally?
    Ms. Maloney. I am very familiar with the prohibitions, 
longstanding policy against payment of ransom for release of 
hostages abroad, and I think it is a wise policy that ought to 
be defended. I do not believe in this case that a ransom was, 
in fact, paid. I believe that economic leverage was used as 
part of a broader diplomatic engagement--
    Mr. Guinta. What economic leverage?
    Ms. Maloney. --with an adversarial state.
    Mr. Guinta. I mean, when you look at this screen, $33.6 
billion in cash. What economic leverage?
    Ms. Maloney. I don't believe that we have evidence that 
$33.6 billion was paid in cash to Iran.
    Mr. Guinta. Okay. So what evidence do--what dollar amount 
do we have evidence of that was paid to Iran, in your opinion, 
if it is not $33.6 billion?
    Ms. Maloney. We have evidence and we know from The Wall 
Street Journal that a payment was made in foreign currency cash 
to Tehran in the case of the resolution of this financial 
dispute in January and early February of this year and that 
that was a total of $1.7 billion.
    Mr. Guinta. Thank you very much.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the gentleman from Colorado, Mr. 
Tipton, for 5 minutes.
    Mr. Tipton. Thank you, Mr. Chairman.
    And, Mr. Dubowitz, maybe if you would speak to this, I just 
listened to Ms. Maloney's comments in regards to policy of the 
United States not to be paying ransom for hostages. In fact, 
Ms. Grosh from the Department of State said that, indeed, was 
not the policy of the United States.
    Would you speak, is there a distinction with a difference 
when we deliver $400 million on pallets in the dead of night to 
Iran? Is that a ransom?
    Mr. Dubowitz. Steve Sotloff, who was executed by ISIS, used 
to be an adjunct fellow at my organization, and I know the 
Sotloff family tried to privately raise money to free Steve and 
that the Obama Administration threatened the family with 
criminal prosecution if they moved forward.
    I think there has been some modification of that policy now 
under President Obama, but it is--what is clear to me is that 
the Administration saw an opportunity to use leverage, as State 
Department Spokesman John Kirby has admitted, to use leverage. 
The money was leveraged to get the hostages back.
    So Dr. Maloney admits lots of presidents have used leverage 
to try and get hostages back. I think other Administrations 
have also paid ransom. This may not be the first time.
    I think what we do is try to--we try to create a cover 
story so that we don't violate our prohibition against ransom 
payments in order to pay ransom so that we can get hostages 
back, and that is exactly what has happened. I think the 
Administration doesn't want to admit it, because they don't 
want to admit we paid a ransom after they have threatened the 
prosecution of the Sotloff family.
    I think they don't want to admit it because they don't want 
to admit how much cash has actually gone to Iran. I don't think 
it is $33.6 billion, but I do think it is probably in the 
neighborhood of $8 billion to $10 billion based on 
conversations I have had with former Administration officials.
    I think we are talking about at least $8 billion to $10 
billion of cash that has gone to Iran since the JPOA period, 
and the Administration does not want to admit that because that 
$8 billion is going to be used to fund terrorism, to fund the 
Iranian military, to fund missile procurement, to fund illicit 
nuclear procurement in Germany. And there is no way that our 
intelligence community, once it is in cash, can trace and to 
figure out and confirm that that money is actually being used 
for economic development and not for malign activities.
    Mr. Tipton. Could you maybe expand just a little bit? 
Because when we listened to Mr. Backemeyer and he said the 
desire to be able to conclude all of our lines of effort 
effectively it falls in with what you just described.
    What is going to be the outcome with other rogue nations 
when they are now looking at the United States, given what we 
know now, and daylight being shown on this Administration's 
policies, this Administration's actions in delivering cash to 
Iran? What can we expect out of other rogue players?
    Mr. Dubowitz. Look, the Iranians have been taking American 
hostages for decades. American Presidents have been trying to 
get hostages back. Fictions have been created in order to pay 
ransom payments to the Iranians in order to get those hostages 
back. We have seen in other situations with this where a 
fiction has been created to try and pay a ransom.
    If I were the Iranians, I would do exactly what they are 
doing now. They are taking more hostages.
    If I were other rogue actors, my inference from all of this 
would be the Obama Administration pays ransoms, and so I am 
going to take more hostages. They will create some elaborate 
fiction to pretend that they are not, but I am going to take 
more hostages in order to get hundreds of millions if not 
billions of dollars back from the United States. I mean, that 
would be my interpretation if I were a rogue actor.
    Mr. Tipton. Would you maybe speak, because I know you were 
in--listening to the testimony that Mr. Backemeyer commented 
that the vast majority of the $400 million in cash had gone to 
infrastructure programs in Iran. Is there any way, given your 
comments now on cash--how can we--
    Mr. Dubowitz. Look, I agree with Dr. Rubin. I think that is 
ridiculous. I think there is no way that they can confirm 
whether $400 million in cash, in unmarked bills, delivered to 
the Iranians ends up in an infrastructure project rather than 
in either the Iranian defense budget, which is then sent along 
to the Revolutionary Guards and the Quds Force, or doesn't go 
to the defense budget, ends up in some hidden line item which 
goes directly to Qasem Soleimani so that he can continue to 
fund his bloodshed in Syria. I mean, I don't know how our 
intelligence community can continue to make these claims that 
they know for sure that most of the money received is going to 
infrastructure.
    Mr. Tipton. Dr. Rubin?
    Mr. Rubin. If I may, sir, first of all, Mark is absolutely 
correct that there is no way of knowing and it would be very 
useful to press the Administration on how they know. Second of 
all, remember that Khatam-al Anbiya, which is the economic wing 
of the Islamic Revolutionary Guard Corps, according to some 
estimates dominates up to 40 percent of the Iranian economy, 
including major infrastructure projects.
    Now, the official budget of the Islamic Revolutionary Guard 
Corps is about $5 billion per year. If you factor in the cross-
Persian Gulf smuggling you add another $11 billion or $12 
billion per year.
    Now, according to open sources, just in the South Pars oil 
field, which is the Iranian oil field in the Persian Gulf, the 
IRGC infrastructure programs have gotten up to $50 billion in 
no-bid contracts, which means if you were to zero out the 
official budget of the Islamic Revolutionary Guard Corps, 
proportionately they would be facing less of a budget cutback 
than the U.S. military is through sequestration.
    Mr. Tipton. Thank you.
    And I yield back, Mr. Chairman.
    Chairman Duffy. The gentleman's time has expired.
    I just want to note that thank goodness, through these kind 
of payments from our Government to Iran, we have now bought 
peace with the Islamic State. Or not so much.
    I want to thank the panel for your patience, for taking the 
time to testify, and for sharing your insight with this 
committee. We are very grateful for that.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    And this hearing is adjourned.
    [Whereupon, at 1:33 p.m., the hearing was adjourned.]

                            A P P E N D I X


                           September 8, 2016
                           
                           
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