U.S. Secrecy Shield Challenged in Mystery Defamation Case

MANHATTAN (CN) - A classified memo explaining why the government believes a Greek shipping magnate's libel claims could compromise national security should be made public, attorneys said in a letter to chambers Wednesday.

New York-based advocacy group United Against Nuclear Iran (UANI) targeted Greek businessman Victor Restis and his companies last year in a "name and shame" program.

The campaign, which reached dozens of news agencies, portrayed Restis as a "front-man" for the Islamic Republic's oil industry. UANI's mailings named the Iranian ports where his company's oil tankers supposedly landed, but Restis insisted that the ships only carried humanitarian food supplies.

In a 63-page lawsuit, Restis claimed that the allegations were not only "extremely damaging" professionally, but also personally offensive because the Nazis deported his maternal grandparents from the Greek isle of Rhodes to the death camp at Auschwitz.

"It is a horrifying fact of history that nearly 95 percent of the Jewish community in Rhodes was exterminated during the Holocaust," his complaint states.

Restis said he resented being accused of being in league with "the most dire enemy of Israel and the Jewish people."

Playing hardball with the anti-Iranian group for more than a year, Restis and his lawyers have sought information on its powerful backers like billionaire philanthropist Thomas Kaplan and former Israeli intelligence chief Meir Dagan.

On Friday, Attorney General Eric Holder tried to scuttle the case by invoking the rarely used state secret privilege. The Justice Department moved to intervene on the public docket, explaining the legal basis for such a maneuver, and laid out its belied that the case could expose damaging secrets in another classified document.

The sealed document was filed ex parte, meaning for the judge's eyes alone.

In a Wednesday letter, Abbe Lowell, a lawyer representing Restis for the Washington-based firm Chadbourne & Parke, told U.S. District Judge Edgardo Ramos that the government did this with "unprecedented" secrecy.

"In the typical state secrets case, the government will simultaneously file both a sealed ex parte declaration and a detailed public declaration," he wrote. "The government has not offered any explanation as to why it cannot do so here."

Lowell also said that a typical public filing from the government would describe the "nature" of the information claimed as classified without revealing it.

It is "not clear how state secrets could be relevant to the defense," Lowell added.

The U.S. Attorney's Office did not immediately respond to a request for comment.

Lee Wolosky, representing UANI as a partner for Boies, Schiller & Flexner, suggested that Restis was engaging in misdirection.

"In order to deflect attention from his numerous criminal and civil problems, Victor Restis last year filed a meritless complaint in the United States against UANI," Wolosky said in a statement the day the government filed its motion. "His complaint falsely stated that he did no business in Iran. Mr. Restis then declined to come to the United States to testify under oath about his dealings in Iran. We expect Mr. Restis' lawsuit to be dismissed."

UANI "will continue to speak out against those who undermine the security of the United States, our friends and allies by doing business in Iran," he added.

Meanwhile, Lowell told Courthouse News in an email that "the government's intrusion in this strictly private lawsuit is shrouded in secrecy and sets a troubling precedent of interference without accountability."

"This heavy-handed attempt raises alarming questions about the government's relationship with UANI and why it is trying to protect a shadowy organization with a record of mounting baseless attacks against legitimate businesses," the attorney added.

The government insisted that this is not the first time it asserted the state-secrets privilege to throw out a defamation lawsuit involving private litigants.

One case involved a CIA scientist's lawsuit against Penthouse Magazine for reporting that he made "overtures" for selling "dolphin torpedoes" to Latin American countries. The other pitted a Los Alamos scientist who falsely claimed that his investigation for leaking nuclear information to China was racially motivated.

Lowell quipped in an email that comparing these cases to that of his client is "like saying that American and European football are the same because they both involve feet."

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