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Obama Administration’s Operation Choke Point Goes After New Target: The Tobacco Industry

Operation Choke Point, an under-the radar project launched by the Obama administration in 2013 to shut down third-party payment processors, payday lenders, and online lenders in the private lending industry as well as small dealers and retailers in the firearms industry by “choking off” banking and financial institution relationships, is targeting a new industry: tobacco distributors.

Federal bureaucrats at the Department of Justice, the FDIC, and the Consumer Financial Protection Bureau (the “untouchable” independent agency established by the Dodd-Frank legislation), are apparently behind the recent closure of the bank account and payment processing account of a North Carolina distributor of tobacco products.

Brennan Appel, owner of Global Hookah Distributors (GHD), one of the country’s leading distributors of hookahs (water pipes used to smoke tobacco) and the shisha tobacco used in hookahs, (through its Smokesouth.com website) says the federal government’s Operation Choke Point forced both his bank and payment processor to shut down the company’s accounts.

“Last year, Bank of America (BofA) abruptly shut down GHD’s numerous bank accounts after serving their business for 12 years. Initially, BofA offered no explanation as to why the accounts were closed,” according to a statement released by the U.S. Consumer Coalition.

Just last month, GHD’s payment processor, EFT Network, which processed the company’s ACH check payments “also shut down their account due to regulatory pressure from Operation Choke Point.”

According to its website, EFT Network, established in 1998, is “one of the largest check and ACH processors nationwide.”

Appel recorded a phone call with Alex Bacon, president of EFT Network, who clearly explained that pressure from the Consumer Financial Protection Bureau–the agency at the center of the federal government’s Operation Choke Point effort–forced EFT Network to shut down GHD’s account.

Appel said that everyone who calls GHD is informed their calls may be recorded.

“The nature of what we do in payment processing, at least with our processing bank, has become so more regulated and strict and focused on compliance and certain efforts in Washington,” EFT Network’s Bacon told Appel.

“Have you heard of a little thing called Choke Point and the CFPB?” Bacon asked Appel.

“They’re taking aim at industries like you and others to eliminate you from business by choking off your payment processing,” Bacon continued.

“They’re doing it by fiat,” Bacon said. “They’re doing it without a legislative process, they’re just doing it on a rather, you know, directed basis of their own free will.”

“They’re going after clinics, they’re going after collection agencies, gun dealers, ammunition dealers, payment processors,” Bacon explained.

He then elaborated on the leverage the federal bureaucrats and political operatives who manage the Obama administration’s Operation Choke Point use to intimidate and hurt small businesses.

“I’m an independent third-party payment processor,” Bacon told Appel.

“I act at the will and directive of my processing bank. If my processing bank says no, you can’t do this, then there’s nothing I can do. There’s literally nothing I can do,” Bacon said.

“They’re the ones on the front lines, they’re the ones that the Choke Point people are going after,” Bacon said of the processing banks.

Later, Bacon added the processing bank examiners can make life miserable for third party payment processors who don’t follow their directions to drop an account:

[They say] We’re going to make your life miserable. Instead of auditing you once a year we’re going to audit you four times a year. Now we’re going to come and look at all of this and if we find anything negative we’re going to write it up and then you’re going to incur increased cost, increased focus from your board of directors and from banking regulators. And they all run scared because they’re all sheep.

EFT Network itself was a victim of pressure from the CFPB, Bacon told Appel.

“Frankly, I hate to say it, but it’s [Operation Choke Point] succeeding, because it’s forcing my processing bank and then it’s forcing me to have to respond,” Bacon said.

“We had an account with J.P. Morgan Chase,” Bacon told Appel.

We had a mortgage with J.P. Morgan Chase. We got the same letter because of what we do as a business. We got a 30-day letter. . . We got a 30-day letter and it was almost 12 years as well, it was 14 actually, and I have to tell you my owner, he really took offense, he said, you know what we were thinking of refinancing anyway so we went and paid the mortgage and just kind of severed all relationships with them.

According to a timeline provided by the U.S. Consumers Coalition, GHD was founded in 2002. That same year, it established a banking relationship with the Bank of America.

In April 2014, “BofA reward[ed] GHD with perks for their positive banking relationship.”

But a month later, in May 2014, “BofA [shut] down all of GHD’s account without any explanation.” Later that month, “BofA express[ed] lack of knowledge on why they were pressured to shut down GHD’s accounts.” Subsequently, GHD opened “new accounts with Wells Fargo and PNC Bank” and filed “complaints with the Office of the Comptroller of the Currency.”

It is unclear if GHD has also re-established new payment processing accounts. Sources tell Breitbart News that the extraordinary length of time and bureaucratic paperwork it takes to set up new accounts with banks and payment processors are part of the federal government’s Operation Choke Point strategy to shut down business in industries which the bureaucrats behind it do not like.

Hookahs, which have been used to smoke tobacco in the Middle East for hundreds of years, have become increasingly popular in the United States over the past two decades. While their use is considered as harmful to health as smoking tobacco, hookahs and shisha (hookah tobacco) are legal in all 50 states. Across the past decade, an estimated 1,000 hookah bars have opened up across the country.

While hookahs can be used to smoke marijuana, they are specifically designed to be used to smoke tobacco. Bongs are the preferred devices for smoking marijuana.

Appel had seen his GHD’s sales increase by around 30 percent annually each year of operation since he founded the company more than a decade ago. Currently, GHD has more than 10 employees and annual revenues are estimated to be in excess of several million dollars.

The targeting of the tobacco industry is yet another example of the Obama administration’s brazen efforts to “weaponize the apparatus of the federal government against people and industries it opposes ideologically.”

For its part, the Republican controlled Congress has done little to push back against the abuses of executive power that continue with Operation Choke Point on a daily basis.

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