Martinez Morales v. Treasury: Federal Court Upholds OFAC’s Denial of a Global Magnitsky Delisting Petition — and Hands Practitioners a Roadmap

Quick take: On July 24, 2026, Judge Beryl A. Howell of the U.S. District Court for the District of Columbia granted summary judgment to the government in Martinez Morales v. U.S. Department of the Treasury, No. 24-2519 (BAH), upholding OFAC’s denial of a delisting petition filed by a former Guatemalan official sanctioned under Executive Order 13818, the Global Magnitsky corruption and human rights authority. The opinion reaffirms OFAC’s sweeping IEEPA designation power just months after the Supreme Court curtailed IEEPA in the tariff context, confirms that OFAC may rely on classified evidence and post-designation conduct, and — most usefully for anyone on the SDN List — effectively endorses a checklist of what a successful petition for removal under 31 C.F.R. § 501.807 must contain.

Read the full opinion: Martinez Morales v. Treasury, slip opinion (D.D.C. July 24, 2026)

Case Snapshot

Background: The Designation and the Delisting Petition

OFAC designated Luis Miguel Martinez Morales on December 1, 2023, under section 1(a)(ii)(B)(1) of E.O. 13818 — the Global Magnitsky corruption prong. Martinez was the former head of the Centro de Gobierno, a since-shuttered quasi-cabinet-level agency in the Guatemalan government. Treasury alleged that he colluded to steer government contracts to favored bidders outside Guatemala’s formal procurement system, secured contracts for companies in which he held financial interests, and solicited large kickbacks connected to Guatemala’s purchase of 16 million doses of the Russian Sputnik V COVID-19 vaccine.

Four days after the designation, Martinez petitioned OFAC for administrative reconsideration under 31 C.F.R. § 501.807. Over the following seven months he made five additional submissions, including responses to two detailed OFAC questionnaires issued in February and June 2024. While the petition was pending — roughly nine months in — he sued OFAC in the District of Columbia, alleging unreasonable delay. OFAC then denied the reconsideration request on February 7, 2025, approximately fourteen months after the initial petition, and Martinez amended his complaint to challenge the denial itself.

On cross-motions for summary judgment, Judge Howell ruled for the government across the board.

What the Court Held

1. Unpleaded claims don’t count. Martinez’s operative complaint contained a single count — that OFAC unreasonably denied his removal from the SDN List. His summary judgment briefs, however, argued that the designation exceeded IEEPA, violated due process, and violated the APA’s notice requirement. Because none of those theories appeared in the complaint, the court held they could be disregarded on that basis alone — and rejected each on the merits anyway.
2. E.O. 13818 reaches corruption anywhere in the world. The court rejected the argument that no national emergency covers “local corruption in Guatemala.” The President declared an emergency as to corruption “around the world,” and nothing in the Executive Order carves out small-scale or local conduct, or any particular country.
3. No right to the classified file. Redactions of classified, law-enforcement-sensitive, and privileged material did not violate due process or the APA. The unclassified record — the press release, Federal Register notice, denial letter, and unclassified portions of OFAC’s evidentiary memorandum — supplied ample notice.
4. The denial was not arbitrary and capricious. Applying the “extremely deferential” standard that governs review at the intersection of national security, foreign policy, and administrative law, the court sustained every ground in OFAC’s denial letter, after reviewing the classified portions of the record ex parte and in camera under 50 U.S.C. § 1702(c).

Does the Supreme Court’s IEEPA Tariff Ruling Limit OFAC Sanctions?

Not according to this opinion. In Learning Resources, Inc. v. Trump (Feb. 20, 2026), the Supreme Court held that IEEPA’s grant of authority to “regulate . . . importation” does not authorize the President to impose tariffs, with several Justices invoking the major questions doctrine. Some observers wondered whether that reasoning would migrate into the sanctions space.

Martinez Morales is one of the first designation decisions issued since that ruling, and the signal is unambiguous: Judge Howell reaffirmed the traditional, maximal reading of IEEPA’s blocking authority under Dames & Moore v. Regan and Holy Land Foundation v. Ashcroft, and quoted Vassiliades v. Rubio, 792 F. Supp. 3d 1 (D.D.C. 2025), for the proposition that IEEPA imposes no proportionality requirement and does not limit the President to sanctioning those who personally contributed to the declared threat. Limits Congress did not enact, the court wrote, are ones courts “cannot make . . . up.”

The plaintiff never squarely raised a major questions argument, so the question remains technically open. But Martinez Morales suggests the D.C. courts view the tariff ruling as confined to the meaning of “regulate importation” — with blocking and designation authority as IEEPA’s undisturbed core.

Can OFAC Keep Someone on the SDN List Based on Evidence It Won’t Show Them?

Yes. The opinion consolidates the modern line of authority — Bello v. Gacki, 94 F.4th 1067 (D.C. Cir. 2024), Ralls Corp., Fares v. Smith, and, most recently, Bahman Group v. Palluconi (D.D.C. 2025) — holding that due process does not require disclosure of classified information supporting a designation, that unclassified summaries are helpful but not required, that counsel are not entitled to access classified material, and that law-enforcement-sensitive privileged information is likewise protected.

The court reviewed the withheld material ex parte and in camera, then concluded the publicly available portions of the record were sufficient on their own to sustain the denial. For designated persons, the practical message is stark: the fight cannot be won by demanding the government’s file. It has to be won by building an affirmative evidentiary record of one’s own.

Does Being Cleared by Foreign Prosecutors Get You Off the SDN List?

No — and this opinion is now one of the cleanest statements of that principle. Martinez argued that Guatemala’s special anti-corruption agency investigated and cleared him regarding the Sputnik V vaccine transaction, and that he has never been charged with a crime anywhere. OFAC accepted both facts “at face value” — and denied the petition anyway, explaining that decisions by foreign law enforcement, prosecutors, or courts “are not conclusive” as to a U.S. sanctions determination, because foreign proceedings involve different procedures, substantive requirements, and standards of proof.

Judge Howell endorsed that reasoning in full. A foreign exoneration remains useful context, but standing alone it will not carry a delisting petition. It must be paired with evidence that affirmatively refutes the conduct underlying the designation.

Can OFAC Use Post-Designation Conduct to Deny a Delisting Petition?

Yes. OFAC’s denial rested in part on Martinez’s “involvement in other government corruption in Guatemala, both before and after his designation,” including new information about corrupt activities from 2020 to 2022 that OFAC acquired after the listing. The court found nothing improper in that.

The lesson: administrative reconsideration under § 501.807 is not appellate review of the original evidentiary memorandum. It is a fresh determination based on the totality of information available to OFAC at the time of decision — including things OFAC learns during the petition’s pendency, and including the petitioner’s own conduct while the petition is pending.

What Does OFAC Actually Want to See in a Delisting Petition?

This is where Martinez Morales is most valuable. The court walked through OFAC’s February 2025 denial letter and evidentiary memorandum and endorsed each ground as well-reasoned — which converts that denial letter into something close to a judicially approved rubric for reconsideration petitions. The elements the court blessed:

• Affirmative refutation, not credibility attacks. OFAC faulted Martinez for maintaining only that the agency lacked credible evidence, noting that he “never asserts that he has not engaged in corruption.” The court credited that inference. Hedged, evidence-insufficiency-only petitions now carry a documented cost.
• Candor and completeness in questionnaire responses. OFAC found Martinez “not forthcoming” for refusing to detail his income, assets, post-government activities, and relationships with Guatemalan officials.
• Current supporting documentation. Providing only public financial disclosures from 2020 and 2021 — years before the questionnaires — was held against him.
• Proposed remedial steps. Section 501.807 expressly invites petitioners to propose remedial measures. Martinez proposed none, and both OFAC and the court treated that absence as an independent ground for denial.
• Demonstrated changed circumstances since the designation.
• Accountability and a credible commitment to addressing the conduct underlying the designation.
  Petitioners and counsel should architect every § 501.807 filing against this list, because this is now the framework a reviewing court will use to test any subsequent denial.

The Procedural Lesson: If It Isn’t in the Complaint, It Doesn’t Exist

The opinion is also a quiet warning about litigation discipline. Every theory absent from the complaint — the IEEPA excess-of-authority argument, the due process challenge, the APA notice claim — was disregarded as unpleaded. Arguments raised for the first time in the reply brief, including contentions about shifting U.S. enforcement priorities, were forfeited. And evidence outside the administrative record — news articles and a YouTube video — was excluded outright, because APA review is confined to the record that was before the agency.

For anyone contemplating an APA challenge to OFAC action, the sequencing is unforgiving: the arguments must be made to OFAC first, the evidence must be placed in the administrative record first, and every legal theory must be pleaded in the complaint from the outset.

Five Takeaways for Designated Parties and Their Counsel

1. Plead every theory, and re-plead when the posture changes.
   A delay suit that ripens into a denial challenge needs an amended complaint that adds the merits, statutory, and constitutional counts — not just updated facts. Martinez amended his complaint twice and still went to summary judgment with a single count, forfeiting three arguments before the court ever reached the merits.
2. The administrative record is the entire case.
   Anything a court should eventually see — evidence, exonerations, hardship, even arguments about changed U.S. policy priorities — must be submitted to OFAC before litigation. Extra-record material is dead on arrival.
3. Questionnaire responses can decide the outcome.
   OFAC’s candor findings were the backbone of both the denial and the court’s affirmance. Responses should include current documentation and complete answers on finances, activities, and relationships — or an on-record explanation for any gap.
4. Choose the denial posture deliberately.
   Where a petitioner can truthfully deny the underlying conduct, the petition should say so affirmatively. And a foreign clearance or dismissed investigation should never stand alone; it must be paired with independent evidence refuting OFAC’s stated basis.
5. Propose remedial steps — even while contesting the designation.
   The absence of proposed remedial measures was treated as an independent reason to deny. Forward-looking commitments can be framed in a manner that does not concede the underlying allegations, and after Martinez Morales, omitting them entirely is a documented risk.

Frequently Asked Questions

What is a delisting petition under 31 C.F.R. § 501.807?

It is the administrative process through which a person or entity on OFAC’s Specially Designated Nationals and Blocked Persons (SDN) List seeks removal. The petitioner may submit arguments and evidence showing that an insufficient basis exists for the sanction, or propose remedial steps that would negate the basis for the designation. OFAC may issue questionnaires seeking additional information and ultimately provides a written decision.

How long does OFAC take to decide a delisting petition?

There is no regulatory deadline, and timelines vary widely. In Martinez Morales, OFAC issued its written denial approximately fourteen months after the initial petition, after two rounds of questionnaires. Where delay becomes protracted, petitioners can sue under 5 U.S.C. § 706(1) for agency action unreasonably delayed — which is how this case began before OFAC issued its decision.

Can OFAC rely on classified evidence without disclosing it?

Yes. Under settled D.C. Circuit law, reaffirmed in this opinion, due process does not require the government to disclose classified, privileged, or law-enforcement-sensitive information supporting a designation. Courts may review that material ex parte and in camera under 50 U.S.C. § 1702(c).

Does an acquittal or dismissed investigation abroad require OFAC to delist someone?

No. Martinez Morales confirms that decisions by foreign law enforcement, prosecutors, or courts are not conclusive for U.S. sanctions purposes, because foreign proceedings apply different procedures and standards of proof. Foreign exonerations are relevant context but must be paired with affirmative evidence.

What standard do courts apply when reviewing OFAC decisions?

Courts review OFAC action under the APA’s arbitrary-and-capricious standard, and they apply it with heightened — the case law says “extreme” — deference because sanctions sit at the intersection of national security, foreign policy, and administrative law. Courts will not substitute their judgment for OFAC’s where the agency examined the relevant data and articulated a rational explanation.

Did the Supreme Court’s 2026 IEEPA tariff decision change anything for sanctions?

Not so far. The tariff ruling turned on whether “regulate . . . importation” authorizes tariffs. Martinez Morales — one of the first designation opinions issued after it — reaffirmed the traditional broad reading of IEEPA’s blocking and designation authority without qualification.

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