A charity that the government suspected of having ties to the militant Islamic group Hamas has shut down but is still negotiating a settlement with the U.S. Department of the Treasury over its frozen assets.
The filing made last week comes nearly six years after the Treasury Department essentially closed the charity's operation when it ordered U.S. banks to freeze the group's assets, saying it was funneling money to a terrorist organization.
The leaders of KindHearts for Charitable Humanitarian Development in Toledo denied being connected to any terrorist group and sued the government after it refused to say why the charity's money was frozen.
The two sides are working to finalize a settlement in the case after reaching a preliminary agreement, according to court filings over the last few months. The government expects a deal to be completed by early July.
A federal judge sided with the charity in 2009, ruling that the government violated the Constitution because it did not tell the organization why it was freezing its assets or give it a chance to respond. The judge later told the government to halt the investigation because its actions could cause KindHearts to lose its attorneys and harm its reputation.
"KindHearts not only is blindfolded, but also has its hands tied behind its back," U.S. District Judge James Carr said in his ruling.
The government argued that the judge didn't have the authority to issue an order stopping the investigation.
Carr's ruling marked the first time a federal court has said the Treasury Department should get a judge's permission before putting a hold on an organization's funds under terror-financing laws.
KindHearts attorney Fritz Byers declined to comment Monday about the charity's decision to go out of business or a potential settlement in its lawsuit with the government.
The Treasury Department in 2006 said KindHearts was connected with the Hamas-affiliated Holy Land Foundation and the al-Qaida-affiliated Global Relief Foundation. KindHearts leaders have said it is a nonprofit charitable organization, providing up to $6 million a year in humanitarian aid to the world's poor.