Author Lawrence G. Walters, Esq.
Adult film stars are reportedly having their bank accounts systematically closed by JP Morgan Chase bank, for no other reason than their connection with porn. According to industry publications and more directly, tweets from adult film performers, Chase has been busy sending letters to hundreds of performers, arbitrarily closing their accounts with the financial institution. One actress, Teagan Presley, attempted to open another account at Bank of America after her termination at Chase but was immediately denied. Our law firm has received numerous similar stories of account closures or denial of banking services.
This is not the first time financial institutions have targeted the adult industry. Last year, adult performer Chanel Preston reported being denied a loan from City National Bank in Los Angeles due to her status in the adult industry. Earlier that month, industry producer Marc L. Greenberg was also denied a loan from Chase on what the bank called “moral” grounds. Years ago, PayPal turned its back on the adult industry, and refused to process payments for most adult-oriented products and services. More recently, blogs have noted that online payment processors such as Paypal, along with WePay, have ramped up their hostility towards erotica, by shutting down accounts of bloggers involved in merely publishing content of a sexually-oriented nature.
In response to these discriminatory banking activities, a popular Change.org petition has been created, demanding that Chase reverse these decisions. The public pressure on Chase previously caused the bank to reverse its decision on the denial of payment processing services, through its subsidiary, Paymentech, to a condom sales company who challenged the action. The outrage felt by adult industry performers and publishers is certainly justified, but is the activity illegal? Certainly, private banks can do business with whomever they choose, right? That’s partially true, but there’s more to the story. Initially, there are some restrictions imposed on the banking and financial community when it comes to illegal discrimination. For example, banks cannot systematically deny loans and other services to disadvantaged minorities, without running afoul of federal law.
However, the stunning truth is that these account closures appear to be motivated by none other than the U.S. Department of Justice (DOJ), which created a leaked program dubbed “Operation Choke Point” designed to pressure banks into denying service to certain disfavored industries including “pornography.” Vice News notes that megabanks and other financial institutions, like Chase, are responding to this pressure by closing adult performers’ accounts, and denying services to other adult businesses. The banking industry, itself, seems to be uncomfortable with this governmental overarch into the financial sector. American Bankers Association CEO Frank Keating wrote a Wall Street Journal op-ed noting that the banks may have no real say in the issue, since the choices are either to comply or get slammed with a penalty. William Isaac, the former chairman of the FDIC has even called Operation Choke Point “way out of control.”
The government’s efforts in applying thumb screws to federally-regulated banks in order to snuff out erotic businesses engaged in First Amendment-protected entertainment constitutes censorship – pure and simple. Instead of falling into the realm of discretionary private business decisions that would ordinarily be protected from legal liability, denial of banking to adult industry participants at the behest of the DOJ likely violates federal civil rights conspiracy laws, including 42 U.S.C. § 1985. This infrequently-invoked federal statute prohibits two or more individuals (or government actors) from conspiring to deprive a person’s civil rights or equal protection under the law. While the statute has primarily been used in the context of racial discrimination, it could well provide a legal vehicle for claims against banks and others who have conspired with the DOJ to discriminate against adult performers based solely on their participation in erotic expression. This sort of retaliation against citizens for participating in constitutionally-protected activity is intolerable, if not illegal. The idea that our government would use the full force and intimidation of the Department of Justice to pressure banks (who are now largely indebted to the feds for bailing them out in 2008) into terminating customers it finds politically advantageous, represents a new low in governmental censorship.
Restricting the ability to access fundamental banking services can spell disaster for any business, and the DOJ presumably knows this. In fact, the author predicted this sort of governmental interference in the financial system as a means to impose censorship of erotica as far back as 2002, in the article entitled “A Chokehold on the Gatekeepers.” Cut off the ability to move money, and the business dries up.
Far from achieving its perhaps original purpose of curbing money laundering and other illegal activities, Operation Choke Point has become a means for the federal government to use banks to do its own dirty work of censoring adult businesses – something it could not do directly, thanks to the First Amendment. While affected performers and businesses may suffer in the long term, the continued popularity of digital currencies like Bitcoin and Litecoin may prove to be an important alternative for the adult industry to stay in business. Already, it has been reported that the affected businesses are flocking to Bitcoin to avoid the banking problems. While accepting Bitcoin as a payment method has inherent risks, and no one alternative currency is the perfect solution, this is another example of the Internet routing around censorship. So long as creative solutions are considered by the affected industries, the banks will lose some of their ability to control the content of entertainment and free expression.