Company Says It Was Dropped By Two Banks Because Of Federal Program
An Arizona businessman says his company was dropped by two separate banks because of a controversial federal initiative called Operation Choke Point.
Steve Stratford, director of operations at Secure Account Service (SAS), which processes payments for debt relief accounts, said that two banks, JP Morgan Chase and Horizon Community Bank, severed their relationships with the company out of the clear blue.
Stratford’s case is the first to be highlighted in a new initiative from the United States Consumer Coalition (USCC) called “Whistleblower Wednesday.”
As part of the initiative, details of which were shared exclusively with The Daily Caller ahead of its rollout, USCC will spend up to $5 million to draw attention to Operation Choke Point, a Department of Justice program designed to prevent criminal and fraudulent companies from doing business.
The objective of “Whistleblower Wednesday” is to attract companies, consumers, and government employees to share their stories about Operation Choke Point, which USCC calls a “reprehensible program.”
Other critics of Operation Choke Point, including House Oversight chairman Rep. Darrell Issa, have said that the federal initiative unfairly hinders banks from doing business with companies in industries that are classified by federal agencies as “high-risk.”
Some of the industries labeled as high-risk include gun sellers and coin dealers. Powderhorn Outfitters, a Massachusetts gun seller, recently detailed how it was dropped by TD Bank because — as it was told by a bank manager — it sells firearms and ammunition.
What Operation Choke Point does, its critics say, is force banks to deeply scrutinize relationships with customers in “high-risk” industries. Fearing cumbersome regulation themselves, the banks merely cut ties with the companies rather than trigger more federal oversight.
Stratford’s saga began in April 2013, when JP Morgan Chase sent his company a notice saying that it would be closing SAS’s accounts within six weeks, on June 17.
Seeking answers, Stratford sought out an employee with the bank’s risk management division. The employee claimed that he couldn’t divulge the reasons that SAS had been dropped. But he said that the bank had “issued letters to hundreds of companies in similar industries in obedience to directions from several federal agencies, including the Office of the Comptroller of the Currency at the Department of Treasury.”
Stratford said that this left his company in a bind.
“Without a bank, SAS cannot do business,” said Stratford.
Prospects brightened when, after interviewing a number of potential banks, SAS decided to do business with Horizon Community Bank.
The company says that the bank reviewed the company’s policies and found them satisfactory.
But things went south when SAS became the target of another investigation. By mid-November, examiners from the Federal Deposit Insurance Corporation, which has worked in some capacity with the DOJ on Operation Choke Point, said that neither the bank nor SAS were sufficiently mitigating risk.
Horizon issued a Cease and Desist letter to SAS, giving them 30 days to find another banker.
Stratford said that neither the banks nor the regulators have told him what his company did wrong.
“Certainly if we were not compliant or performing an unethical or illegal task, we would certainly want to know that so that we could take steps to change the situation,” Stratford told TheDC.
“Unfortunately we were unable to ever get an answer to those questions,” said Stratford.
He says that his company, based in Lake Havasu City, Ariz. suffered a blow to its reputation after word spread that SAS had been denied by two banks.
“It is unjustifiable and outright appalling that Mr. Stratford’s company has had to hold funds in three separate banks in the last year because of the Administration’s political objections to lawful industries,” said USCC senior advisor Brian Wise.
“This is the most significant threat to consumer choice and freedom that this country has ever seen,” Wise told TheDC, adding that Operation Choke Point “fundamentally changes the way commerce is conducted” in the U.S.
He said that obtaining information from people who have been harmed by Operation Choke Point, those who have worked in banks that are forced to comply with it, or government employees that are familiar with its workings is the only option to fighting it.
“There is no legislative fix to this, there is no regulatory fix to this,” said Wise. “The only way we can stop this is for the industries to come together, and for individual consumers to come together.”
He said that banks are victims of Operation Choke Point just as much as consumers and businesses, but they have “no choice” but to comply with the federal governments’ “mafia-like tactics.”
“There’s no incentive for the banks to not cooperate with the government,” said Wise.
“If they were to stand up and say that they will not comply with the government, that would be tantamount to putting a target on your back.”