Episode 747: The Man Who Sued Iran

Jan 13, 2017

Steve Flatow's daughter, twenty-year-old Alisa Flatow, was studying abroad in Israel. One day she was on a bus in the Gaza Strip, and a suicide bomber blew the bus up. Alisa died in the attack.

The bomber was part of a group called Palestinian Islamic Jihad, which the U.S. State Department believed was funded by Iran. Flatow decided to sue Iran for monetary damages. But under the Foreign Sovereign Immunities Act, U.S. citizens couldn't sue countries.

That didn't stop Flatow. He called up Steve Perles, an international reparations lawyer. The two knocked on hundreds of doors on Capitol Hill, pitching the idea that if Flatow won his suit, and won it big, maybe they could make it too expensive for Iran to sponsor terror groups.

It worked. And in 1996, President Bill Clinton changed the law to say that an Americans could sue certain countries in terrorism cases.

So they sued.

Today on the show, how Steve Flatow's quest for justice put him up against both Iran and his own government--and how he shook up assumptions about international diplomacy.

Music: "Curious Process" and "Chimera." Find us: Twitter/ Facebook.

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Steve Flatow is a real estate lawyer. He works on the ground floor of an anonymous office building in New Jersey. He's got a big messy desk. And when he sits at his desk and looks to the left, Steve sees family photos, his kids - 16 grandkids - at weddings, Disney World, bar mitzvahs, bat mitzvahs. On the opposite wall, there's a picture of his daughter Alisa. She has curly brown hair and deep dimples like Steve. And he says when Alisa was a teenager, she was very smart and she was very generous and she was also very stubborn. He remembers one night she got invited to a party way out on Long Island.

STEVE FLATOW: And it was snowing, and the prediction was it was going to get worse. So I couldn't see myself driving an hour and 45 minutes to Long Island and then turn around and come back in a blizzard. Well, the histrionics about missing the party - I don't think she spoke to me for a day, which was fine. I could use the peace and quiet.

KING: (Laughter).

In the spring of '95, Alisa was 20, a junior in college. She was studying abroad in Israel, and one day, she called her parents.

FLATOW: She told us she was going on vacation.

KING: Spring break basically. Steve reminded her of the Flatow family travel rules. Number one - no hitchhiking. Take the bus. Number two - never travel alone. And number three - let me know where you're going to be.

FLATOW: When I asked her where she was going, she told me Gush Katif. I didn't know where it was. And then when I asked her, she told me Gaza.

KING: The Gaza Strip, a narrow Palestinian territory along the Mediterranean coast. Not the safest place in the world, but he thought, look, she knows what she's doing. She's been to Israel six times. She's been working hard all semester.

FLATOW: So instead of yelling at her and telling she couldn't go, I tell her I wished her well and to call us in three days when she returned.

KING: Next morning around 8, Steve was running late for synagogue. He jumped into the car and was backing out into the street.

FLATOW: And I put the radio on, and the news came on of a bus bombing in Gaza.

KING: A bus bombing. And this insane and terrible thought flashed through his head - Alisa was on that bus.

FLATOW: I just felt it in my bones. I didn't hear the explosion. I didn't hear the sound that metal makes when it's ripped from the side of a bus. I did not hear cries of pain, but I just knew it.

KING: His wife called a few minutes later. He was right. That afternoon, he flew to Israel. Alisa was in a hospital in a coma, and he held her hand. He was thinking that if she heard his voice she'd wake up.

FLATOW: I squeezed her hand, and I whispered in her ear that everything will be OK because Daddy was here. But when I let go of her hand, it just fell limp to the side of the bed.

KING: She never woke up. And later on, Steve would learn what happened from the State Department and from Israeli investigators. On the morning of April 9, 1995, Alisa boarded a bus from Ashkelon, Israel, headed to Gaza. At noon, she was dozing off. At about five minutes after noon, a suicide bomber in a van loaded with explosives drove into the bus. The bus exploded. Alisa jumped up like out of a bad dream and then she slumped back down in her seat. A piece of shrapnel had pierced her skull and lodged in her brain. Steve flew her body back home, and after the funeral, he grieved. He and his wife tried a bereavement group for parents.

FLATOW: And when we said Alisa was murdered in a terror attack, people were like (gasping). They gasped.

KING: And so, a lot of the time, he ended up grieving alone.

FLATOW: People don't know what to do. First of all, they don't know what to say, so they don't want to be near you. Second of all, there's a fear that it might rub off somehow. And there's no third reason. People just don't know how to react to the death of a child.

KING: The man who blew up Alisa's bus was a member of a group called Palestinian Islamic Jihad. It was a small group, but the U.S. State Department believed this group got funding from the government of Iran, and they told Steve as much.


KING: So Steve Flatow of suburban New Jersey decided he was going to war with Iran to get justice for his daughter.

FLATOW: I wanted to send a message to the Iranians that you cannot take an innocent life and not pay it back.

KING: I'm Noel King, and today on PLANET MONEY, we have the story of Steve Flatow's war. It was a war a lot of people didn't want fought where billions of dollars and some of the most tenuous diplomatic relationships in the world were at stake. And it's a war whose outcome is still echoing today.


KING: Steve Flatow was not the president. He could not start an actual war with Iran. He is a lawyer and lawyers sue, but he couldn't sue Iran because of a U.S. law called the Foreign Sovereign Immunities Act. This law says a U.S. citizen can't sue a country. The law's been around since the 1970s, but its roots go way back to the divine right of kings. The sovereign, the king, is always right. You can't sue him. Countries are like that. But Steve Flatow got lucky because another man, another lawyer down in Washington, D.C., had been looking for an opportunity to bust a hole in this law.

STEVEN ROBERT PERLES: My name is Steven Robert Perles, and I am a practitioner of international reparations law.

KING: Steve Perles is a big player in this corner of the legal world. You know how we all have annoying workplace stories like somebody used my coffee mug or somebody parked in my spot? Steve Perles' workplace stories are like one time I was in Libya and the police thought my toothbrush was a weapon and they tried to confiscate it, or the Iranian parliament called me a snake.

PERLES: I am not going to Tehran on vacation next year.


KING: Steve Perles, as far as I can tell, is a professional obsessive, and in the mid-'90s, he was obsessed with the law that says U.S. citizens can't sue countries. He was specifically obsessed with exceptions to the law. There are a handful of them, and most of them cover commercial disputes. So say that the French embassy here in New York hires me to paint their walls and I do it and I do a good job and they won't pay me. Well, I can turn around and sue France. Steve Perles wanted another exception, one that would allow U.S. victims of terror to sue the countries responsible.

PERLES: At some point, a foreign sovereign's conduct vis a vis the U.S. national becomes so noxious that that sovereign has no expectation of immunity.

KING: These countries have behaved so badly that they don't get to be immune anymore.

PERLES: That is correct.

KING: This argument made sense to Congress, and in the mid-'90s, Congress added another exception. It said Americans who were victims of terror could sue countries, but the exception was very vague, especially on the question of money. Could American citizens sue countries and win money? Steve Perles wanted it to be clear that they could. And then, as he remembers it, one day he was in the office, the phone rang and there was a man on the other end.

PERLES: He said to me my name is Steve Flatow. Do you know who I am? And I said yes, your daughter was killed in Israel.

KING: They talked, and Steve Perles realized that in this broken-hearted father he had found a perfect test case, a man who wanted to sue a country and wanted to win money for a reason. Here's Steve Flatow.

FLATOW: I saw it as a way to possibly put the Iranians out of the terrorism business.

KING: That's big to put the Iranians out of the terror business. That's not a small...

FLATOW: But, you know, countries have bottom lines also, and the goal was to make their lives so miserable that they would say we're done.

KING: In the summer of 1996, the two men went to Capitol Hill, and they knocked on doors, hundreds of doors, of Congress people. And here was their pitch - let's say you let Steve Flatow sue Iran. Let's say he wins. Let's say he wins a lot. Well, maybe we can make it too expensive for Iran to be in the business of blowing up buses. And their pitch worked. President Bill Clinton clarified the law to say if an American could prove a country was responsible for an act of terror, they could sue and they could win damages. It didn't apply to all countries, just a handful, ones that the U.S. designates as state sponsors of terror. Iran was one of those. So now Steve and his team had to prove that Iran did this, that Iran had given money and support to the group that killed Alisa. To do this, they called up an American economist named Patrick Clawson. Clawson has a skill that's kind of an unusual skill for an American economist.

How do you say good morning in Farsi (laughter)?

PATRICK CLAWSON: (Speaking Farsi).

KING: He speaks and reads Farsi fluently. He learned it when he was doing his Ph.D. thesis in Iran's economic development.

CLAWSON: I said that if I'm going to ever be taken seriously by people who study Iran, I got to learn the language. And so I threw myself into it and discovered I loved it.

KING: Loved it so much that, at the time, he was reading five Iranian newspapers in Farsi every day. And in the mid-'90s, the Iranians kind of mind-blowingly actually published their national budget in the newspaper. So one day...

CLAWSON: I was reading this really boring budget law. I came across this law, and I fell off my chair. I said, what do you mean?

KING: Way down at the bottom under the budget lines for tourism and infrastructure was a line item for support to terror groups, including Palestinian Islamic Jihad.

CLAWSON: What idiot is going to put down in their budget as approved by the parliament that they're providing financial support for a terrorist group?

KING: They just wrote it in there?

CLAWSON: Yeah, it's in the budget law.

KING: This was the proof Steve Flatow's legal team needed. They served Iran papers. They sent them in the mail to Tehran. The papers were mailed back. The envelope had clearly been steamed open. There was a mini freak-out at the law offices of Steven Perles.

FLATOW: He (laughter) had the bomb squad look at the package to make sure that it wasn't mined with anything.

KING: It wasn't a bomb. In fact, there was no response. And when Flatow versus Iran went to trial in D.C. in 1998, it was Flatow versus an empty chair. Iran didn't show up. Flatow's lawyers made their case to the judge - we want to put Iran out of the terror business, and we want you to award damages to help us do that. Three weeks after the trial, the judge asked Steve Flatow to come back to Washington for the verdict. He's back in front of the judge by 9 a.m.

FLATOW: And he began to read his opinion. He found the Iranian government responsible for the murder of Alisa Flatow and therefore he was entering a judgment in favor of the family for approximately $24 million and punitive damages of approximately $225 million.

KING: Two hundred twenty-five million dollars.

FLATOW: In punitive damages.

KING: And the judge makes it really clear. He says right there I'm awarding you a quarter of a billion dollars to punish Iran, to deter terrorism.

FLATOW: I just slammed my hand on the table and I looked up at the ceiling and I said, yes, Alisa.

KING: So what were you - what did you think?

FLATOW: I was astounded and that we would never see a nickel of it.

KING: OK, so here's the difference between Steve Flatow and his lawyer Steve Perles. Steve Flatow thought he'd never see a nickel. Steve Perles, on the other hand, he was there too. And here's what was going through his mind.

PERLES: OK, now I've got a hunting license. How do I go get that money?

KING: How do I go get that money? Well, Iran hadn't recognized the lawsuit. It wasn't going to turn over a quarter of a billion dollars. Iran and the U.S. have been in a kind of cold war for decades. We cut diplomatic ties after some Iranian students seized the U.S. embassy in Tehran and held Americans hostage. But Steve Perles knew there were still Iranian assets in the U.S. There was the embassy in Washington. There was a big house that had been owned by the ambassador also in D.C. Steve Flatow and his lawyers got permission from the courts to seize those properties, and they went after them.

FLATOW: That's when all hell broke loose.

KING: All hell broke loose because there is another very powerful interest here - the White House. And the White House came out swinging. Every time Steve's legal team identified a property and tried to seize it, the White House would drag them into court and put a stop to it. Steve remembers facing off against sometimes a dozen lawyers.

FLATOW: I listened to all their nonsense and their legal gobbledygook and on how, you know, if the court would allow us to proceed, it would upset vital relations, you know, foreign policy and...

KING: So why would the White House do this? Steve had won in court. He'd had personal conversations with Bill Clinton about Alisa. He knew the president sympathized. Everyone sympathized. Stuart Eizenstat was deputy secretary of the treasury at the time. He represented the White House, and a lot of times he was the one facing off against Steve's legal team. He knew all about Alisa.

STUART EIZENSTAT: It was really heart wrenching. I had particular sympathy for her because she was a young Brandeis University student, which happened to be my wife Fran's alma mater.

KING: But Stu has spent many years in government and in diplomacy. And he argues if Steve Flatow could collect - could get Iranian property - it could be a disaster for the United States because Iran could retaliate. And if that domino fell...

EIZENSTAT: If you try to satisfy these individual lawsuits of foreign government frozen funds, it can encourage those governments to retaliate against the United States with reciprocal action. We have over $10 trillion in U.S. diplomatic property abroad.

KING: Wow.

EIZENSTAT: And if we start attaching their property for individual claims, then they can do the same.

KING: And that actually pales in comparison to the second reason, Stuart says. Those frozen assets are leverage. The U.S. uses them as bargaining chips. The Americans held in Iran in '79 - big part of how we got them home? We unfroze Iranian assets. When we wanted to get POWs home from Vietnam, when we wanted to know what happened to guys who'd gone missing in action, we used frozen Vietnamese assets as leverage. The Clinton administration was arguing you stack up the interests of the states versus the interests of a single family - well, there's a clear winner. But Steve Perles, the reparations lawyer, wasn't going to let this go. He'd won a quarter-billion-dollar judgment. His client was the man who sued Iran and won. It became a public fight, and Perlis says complete strangers started trying to help them out.

PERLES: The more public the fight became, the more people are trying to tell us about what they think are Iranian assets in the United States that we haven't found, so...

KING: They're like - hey, look, there's a building out in California you guys don't know about.

PERLES: Right.

KING: Hey, look, there's a (unintelligible) in Virginia you might not be aware of it.

PERLES: Yeah, yeah.

KING: So people are actually calling to, like, tip you off.

PERLES: Oh, yeah. We're - Absolutely.

KING: Doesn't matter. As far as the White House is concerned, diplomatic property is diplomatic property. And then one day in the year 2000, there's a big tip.

PERLES: One of the calls at the office that we get is from a gentleman who purports to be a retired military officer.

KING: U.S. military officer.

PERLES: U.S. military officer.

KING: Does he give you a name?


KING: No name.

PERLES: No name.

KING: This guy says the U.S. used to sell weapons to Iran. No secret there. That stopped after the hostage crisis, but Iran had already made a down payment.

PERLES: And he says there's $420 million of Iranian money sitting at the Pentagon in a weapons account that was never used. You should go seize that.

KING: Perlis calls around to his friends on Capitol Hill to ask if it's true.

PERLES: There was a little bit of hide-the-pea that got - that got played.

KING: I don't know that term. What is hide-the-pea?

PERLES: Hide-the-pea? They tried to make $420 million disappear.


Here's what happened next. Pressure from the public was immense. People felt bad for Steve Flatow, so the Clinton White House backed down. The White House and Congress negotiated to create a new statute called Victims of Trafficking and Violence Prevention Act of 2000. They offered Steve $25 million - not a quarter billion, but a wave of other families had now also sued Iran for acts of terror. They were owed some of that money, too. It was a compromise. Steve says he asked - is it coming from the Iranians? And they said yes. He took it.

FLATOW: I know I was not truly happy. I know the federal government was not truly happy. And taking that into account, the money that we accepted - roughly 10 percent of our judgment - was going to have to do.

KING: You decided enough was enough.

FLATOW: I decided enough was enough.

KING: Remember, he didn't think he was going to get a nickel. He used some of the money to start a scholarship fund in Alisa's name. He got on with his life - the man who sued Iran and won. Of course, there's another man who sued Iran and won - Steve Perles, the international reparations lawyer. He's been on a tear since the mid-'90s on the strength of the precedent set by Steve Flatow. Eisenfeld versus Iran - two other American kids, another bus, more than 150 million in damages. Jenco versus Iran - a priest tortured for 18 months, more than 300 million in damages. Peterson versus Iran, Gates versus Syria, Amduso versus Sudan, Beecham versus Libya - it goes on.

Steve Perles says he's won $16 billion in judgments against foreign countries. About 2 billion of that so far has been paid out. He has won in court three and a half billion in judgments against Iran. And he says remember what the point of all this was.

PERLES: Three and a half billion dollars has gotten Iran's attention.

KING: How do you know that?

PERLES: Because they filed a complaint in the International Court of Justice against the United States.

KING: Saying what?

PERLES: All this work the Perles has been doing - that's a violation of international law. We want our money back. We're making those people mad, and that's deterrence. I'm not saying that they will stop killing Americans, but they will think twice every time they plan out a bus bombing. And maybe - just maybe - some kid is going to survive somewhere in the world because the Iranians have said, we're going to get chased forever if we kill a U.S. national in one of these events.

KING: 'Cause you'll be doing the chasing.

PERLES: Yeah, 'cause we'll be doing the chasing or somebody else will be doing the chasing.

KING: Perles has another big case underway - Sotloff versus Syria. Steven Sotloff was an American journalist. He was beheaded by ISIS in the fall of 2014. And Congress recently voted to pave the way for another lawsuit, and it's a big one. Families of people who died in the September 11 attacks got the go-ahead to sue Saudi Arabia, a country and not a state sponsor of terror, either. Saudi Arabia is a U.S. ally with hundreds of billions of dollars in assets tied up here, And we have hundreds of billions of dollars of assets tied up in Saudi Arabia. Steve Flatow wasn't paying a whole lot of attention to any of this. In the 15 years since his settlement, he's been focusing on his kids, the 16 grandkids, Disney World, bar mitzvahs, bat mitzvahs. And then in the summer of 2015, just like you and me, Steve Flatow heard this on the news.


PRES BARACK OBAMA: After two years of negotiations, the United States, together with our international partners, has achieved something that decades of animosity has not - a comprehensive, long-term deal with Iran that will prevent it from obtaining a nuclear weapon.

KING: An unprecedented deal with Iran. In spite of years of tension between the U.S. and Iran, diplomacy had won the day. A year ago, Iran implemented the nuclear deal. And a day later, a Swiss Air Force plane takes off from the airport in Tehran carrying three Americans. They'd been held in Iranian prison. They were now heading home. That same day on a tarmac at the airport in Tehran, Iranian guards unload pallets and pallets of cash from an airplane. It was - and the U.S. has admitted this - it was the money - 400-some-odd million - that had been sitting in the Iranian weapons account - the same account Steve Flatow was told his money came from. And he realized something.

Whose money did you get?

FLATOW: The end of the day - American taxpayer money.

KING: He thought he'd gotten justice. He thought he'd gotten Iran's money. He hadn't.

FLATOW: Fifteen years later, you wake up. You see the money going back to Iran. And you feel like a schnorrer. You feel like a beggar - that you've taken money out of the American taxpayer. And you want the government to have done the right thing, and they didn't.

KING: You won in court. The money is there. Do you ever want to just scream? Like...

FLATOW: I was frustrated when I learned that the money had been released to Iran. Your citizens had valid judgments against them issued by United States courts. It was - it was low. It was - it was - I don't want to use the word despicable. I'll use the word despicable 'cause we didn't want American taxpayer money. We wanted Iranian money.

KING: OK, now here is an area of disagreement. Stuart Eizenstat, the former deputy treasury secretary - he says no, no, Congress spelled it out back in 2000. We'll pay, but we are not using Iranian money. We are not losing our leverage.

EIZENSTAT: This was not done by subterfuge. It was done by a congressional action.

KING: But then is Steve Flatow misremembering? Is he lying?

EIZENSTAT: You know, when you're in intense negotiations, things can sometimes be remembered in different ways.

KING: I don't know that we'll ever get an agreement on exactly what happened there. And in the years since, some of these claims have ended up with victims getting actual Iranian money. Just about everyone I spoke to for this story could agree on one thing. In the coming years, more Americans will likely die in terror attacks. More lawsuits will be filed, and there will be more fights over who gets paid and how. And whether or not they agree with Steve Flatow, diplomats and lawyers will tell you this is how the world is now, in part because of what he did. And here is what Steve will tell you. His daughter Alisa wasn't supposed to be on that bus that day. She'd missed an earlier bus, and he still sometimes talks to her about this.

FLATOW: I hear her voice in the back of my head. And she says to me, Daddy, why did this happen to me? And I always start out the same way. I tell her that things happen that we don't understand. Don't cry.

KING: He tries to make sense of it for her. That's what parents do. And he tries to cheer her up. That's also what parents do. He says, you were in a place that you loved. You were where you were meant to be. And he says he believes this. And he says openly that he is at war with Iran, even today. He has no remorse about this. He says, a bully hurt my kid, and I went after the bully. That's something that parents do, too.


KING: Send us your questions about this episode or about anything you hear on PLANET MONEY. We love to know what you think of the show. You can email us - planetmoney@npr.org. - or find us on Facebook or Twitter. Today's episode was produced by Sally Helm - thank you, Sally - and by Nick Fountain. Thanks, Nick. Special thanks on this one to Aton Aroosi (ph) of Global Impact Services, Jim Kreindler at Kreindler and Kreindler, Michaeleen Katzler (ph) at Covington and Burling and Julia Simon and Kent DePinto. If you're interested in reading more about the Flatow suit, let me recommend a terrific book. It's called "The Bus On Jaffa Road" by Mike Kelly. The Atavist magazine also ran an in-depth piece on the suit by M.R. O'Connor. It is called "Hidden Damages."

Hey, do you know an undiscovered musician who deserves a break? All right. We have an idea for them. NPR Music is holding a Tiny Desk Contest to find one great unsigned musician to play the iconic Tiny Desk Concert series and to tour the U.S. with NPR Music. Super cool. All you have to do is shoot a video of your musical act playing an original song behind a desk and submit it by January 29. You can learn more at npr.org/tinydeskcontest. I'm Noel King. Thanks for listening. Transcript provided by NPR, Copyright NPR.