Archives for January 2013

Cause of Action Files FEC Complaint against DNC

FOR IMMEDIATE RELEASE                                                                                                 CONTACT:      

JANUARY 30, 2013                                                                                Mary Beth Hutchins, 202-400-2721

Jamie Morris, 202-499-2425


Cause of Action Files FEC Complaint Against Democratic National Committee For Failing to Properly Disclose its Reimbursements for Kathleen Sebelius’ Improper Political Activity


Request also made to Office of Special Counsel to investigate Hatch Act violation by Sebelius aide



WASHINGTON – Cause of Action (CoA), a government accountability organization, filed a complaint before the Federal Election Commission (FEC) today against the Democratic National Committee (DNC) and specifically against Andrew Tobias both individually and in his capacity as Treasurer of the DNC for violating the Federal Election Campaign Act (FECA) and FEC regulations when reimbursing the Department of Health and Human Services for Secretary Kathleen Sebelius’ 2012 Hatch Act violation.

In September, the Office of Special Counsel (OSC) found Sebelius guilty of violating the Hatch Act, but claimed that the DNC’s reimbursement meant that the “issue has been resolved.”  Cause of Action has found that the DNC failed to properly disclose its reimbursements as independent expenditures, therefore violating FECA.

“While the President gave Secretary Sebelius a pass on the most high-profile Hatch Act violation in history, what has come to light in our investigation is that the reimbursement for her campaigning wasn’t properly filed by the DNC,” explained Cause of Action’s Executive Director, Dan Epstein. “While HHS sought reimbursement from the DNC prior to the OSC’s Hatch Act investigation being complete, the DNC attempted to classify these payments as operating expenditures, and failed to report them accurately on multiple months’ reports. The FEC has an obligation to investigate and take appropriate measures to enforce their own rules as well as FECA.”

Moreover, Cause of Action’s investigation raises the question as to whether Sebelius’ use of her official capacity to support President Obama’s re-election was paid for by a loan from the United States, later reimbursed by the DNC, but nevertheless in potential violation of 18 U.S.C. § 595.

Cause of Action is also filing a complaint with OSC requesting an investigation into Sebelius’s aide AJ Pearlman, for whom the DNC also reimbursed expenses to HHS, yet no investigation into Pearlman’s potential violation of the law was conducted.

According to internal documents procured by Cause of Action through Freedom of Information Act requests, the following facts came to light about the February 25, 2012 event at which Secretary Sebelius campaigned for President Obama and Walter Dalton’s candidacy for Governor of North Carolina:

  • March 2012 – DNC fails to report to the FEC any contribution, debt, or other obligation from HHS for relevant reporting period.


  • Apr. 12, 2012 – DNC issues check to HHS for $1,003.69 and reported the expense under the category of “Other Federal Operating Expenditure” in their FEC report.


  • Jul. 9, 2012 – OSC interviews Sebelius about HRC gala for investigation.


  • Jul. 18, 2012 – OSC advises HHS that there were additional costs associated with Sebelius’ attendance at the gala and needed to be reimbursed to the Treasury.


  • Jul. 23, 2012 – HHS requests reimbursement from DNC for additional $1,500 travel costs for Sec. Sebelius’s aide.


  • Aug. 2, 2012 – DNC again reports payment expense under category of “Other Federal Operating Expenditure.”

The FEC complaint can be found here and the OSC complaint can be found here.


About Cause of Action:

Cause of Action is a nonprofit, nonpartisan organization that uses investigative, legal, and communications tools to educate the public on how government accountability and transparency protects taxpayer interests and economic opportunity. For more information, visit


To schedule an interview with Cause of Action’s Executive Director Dan Epstein, contact Mary Beth Hutchins,  202-400-2721 or Jamie Morris,


E&E Publishing: 2 companies sue, alleging politics steered green energy loans

2 companies sue, alleging politics steered green energy loans


John McArdle, E&E reporter, Published: Friday, January 11, 2013

Two electric-vehicle companies sued the Department of Energy yesterday for allegedly doling out billions of dollars in green energy loans to companies with political connections to the Obama administration.

XP Vehicles Inc. and Limnia Inc., which sought and didn’t receive funding through DOE’s Advanced Technology Vehicles Manufacturing (ATVM) loan program, also charged in U.S. District Court and Federal Claims Court filings yesterday that DOE leaked patented intellectual property to favored companies.

The companies are seeking a combined $675 million in damages through the suits, which also name as defendants Energy Secretary Steven Chu and the head of DOE’s ATVM program.

The filings come after nearly two years of congressional inquiries into DOE’s loan program. Those investigations focused primarily on the now-bankrupt Solyndra LLC solar energy company but also looked into the agency’s Loan Program Office and billions of dollars in other loans.

In response to the lawsuits, DOE maintained the stance taken through the congressional probes, which were led by Republicans on the House Energy and Commerce and House Oversight and Government Reform committees.

“While the Department does not comment on pending or potential litigation, multiple investigations spanning almost two years and involving millions of pages of documents show that decisions made on the Department’s loan program were made solely on the merits after careful review by the Department’s technical experts,” DOE spokesman Damien LaVera said in an email.

In 2008 and 2009, Limnia and XP Vehicles applied for $55 million in funding through the ATVM program for two projects. Limnia sought $15 million to develop a new advanced vehicle energy storage system, and XP Vehicles sought $40 million to help produce a new gasless SUV-style vehicle that cost less than $20,000 and replaced metal doors and body panels with polymer plastics and a lightweight alloy frame.

But the companies say they were passed over in favor of competitors, including Tesla Motors Inc. and Fisker Automotive Inc., companies with deep-pocketed investors, some of which have connections to the Obama administration. Combined, Fisker and Tesla received nearly a billion dollars in ATVM loans in early 2010.

“Because DOE’s ‘merit review’ criteria and process were so opaque, the taxpayer-funded ATVM Loan Program and [loan guarantee program] became cash cows for government cronies,” the companies argued in one filing. “Politics and political pressure infected these programs, shaping, in whole or in part, the judgment of DOE’s ultimate decision makers.”

In addition, the companies argued that some of their legally protected trade secrets ended up in the hands of other ATVM loan applicants.

An attorney representing the companies in the case is Dan Epstein, a former congressional staffer who now works as executive director of the watchdog group Cause of Action.

Epstein, who had worked for House Oversight and Government Reform Chairman Darrell Issa (R-Calif.), has been involved in a number of efforts to combat what he decries as government overreach in his current endeavor.

Last year, Epstein’s group took on the Interior Department in a long-standing controversy over whether the agency should allow a California oyster farm to continue operating in a potential wilderness area. The group has also battled the Department of Energy’s energy efficiency standards, questioned political campaigning by government official and taken the Food and Drug Administration to task for ordering a man to stop the “manufacture” of his own sperm (Greenwire, Nov. 14, 2012).


What’s a CEO to do?

Imagine you are a CEO of a major corporation. You hire an external consulting group to draft a report for you about the overall health of your organization. Confident in the future of your organization, you begin reading the report, which includes the following phrases:

  1. “Long-term fiscal path remains unsustainable.”
  2. “Ineffective process for preparing the consolidated financial statements.”
  3. “Widespread material internal control weaknesses, significant uncertainties, and other limitations.”

You stop reading because your corporation appears to be in shambles and it’s obvious that drastic changes need to be made.

Sadly, this hypothetical situation isn’t very farfetched. Recently, the Government Accountability Office issued a report on the past two years of federal government spending that included those same phrases—word for word. Gene L. Dodaro, comptroller general of the United States and head of the GAO, stated that “our federal government’s long-term fiscal path remains unsustainable without further policy changes.”

In fact, the GAO found that some agencies couldn’t even be audited because of “widespread material internal control weaknesses, significant uncertainties, and other limitations.”  In essence, the Department of Defense and the Department of Homeland Security, agencies that collectively represent nearly one quarter of all federal budget spending, could not be fully audited due to “serious financial management problems.”

GAO also cited difficulty in accounting for “intragovernmental activity and balances between federal agencies” along with the “federal government’s ineffective process for preparing the consolidated financial statements”—jargon for massive failures in tracking and reporting spending.

Sadly, the fact that the federal government isn’t effectively tracking its own spending is no surprise to us. Last year, one of our investigations found government agencies giving employees GPS systems, Nook readers, and iPods. That same investigation revealed agencies that spent large amounts of money on flash drives shaped like police cars, and hamburger yo-yos. All of these lavish expenses were paid for with taxpayer dollars with seemingly little (or no) oversight.

During his first inaugural address, President Obama said that “those of us who manage the public’s dollars will be held to account, to spend wisely, reform bad habits, and do our business in the light of day, because only then can we restore the vital trust between a people and their government.” We just want to know exactly how the president is planning on accomplishing that accountability since a large portion of federal spending remains unchecked.

For now, we only hope that the President will respond to this GAO report in much the same way any responsible CEO would: with major changes.

Tuesday, Jan 29, 2013 Morning News

Coverage of our Drakes Bay Oyster Company lawsuit against the Department of the Interior and National Park Service continues. The Pacific Sun writes:

West Marin oyster farming is still floating in limbo this week, as Drakes Bay Oyster Company awaits a decision from an Oakland judge as to whether it can keep its Inverness vermiculture operation up and running during its lawsuit against the National Park Service and the Department of the Interior. The lawsuit was filed in December after Secretary of the Interior Ken Salazar allowed the farm’s lease to expire upon its Nov. 30 deadline.


The EPA was dealt a blow recently for the culture of overregulation that has seemed to permeate the agency as of late. Michael Bastasch of the Daily Caller News Foundation reports:

A federal court delivered a serious blow to the Environmental Protection Agency’s renewable fuel agenda, ruling that the agency exceeded its authority by mandating refiners use cellulosic biofuels, which isn’t commercially available.

The court sided with the country’s chief oil and gas lobby, the American Petroleum Institute, in striking down the 2012 EPA mandate that would have forced refineries to purchase more than $8 million in credits for 8.65 million of gallons of the cellulosic biofuel. However, none of the biofuel is commercially available.


The winds of change are starting to blow at the National Labor Relations Board, starting with a federal appeals court ruling that came down on Friday. Josh Hicks of the Washington Post brings us this story:

A federal appeals court on Friday ruled that President Obama exceeded his constitutional authority with three appointments to the National Labor Relations Board while the Senate was on break last year.

The impact of that decision by a three-judge panel of the D.C. Circuit Court of Appeals in Noel Canning v. NLRB will depend on what the Obama administration does next.


The Government Accountability Office is due to produce its biannual report on the areas of the government that present the highest risk for squandering tax payer dollars in the next couple weeks, and we are looking forward to seeing it.


Some more interesting reads:

The Atlantic – The most ridiculous law of 2013

USA Today (Op-Ed) – Revolving Door Government Ethics

Dispelling the Myths about the Drakes Bay Oyster Company conflict

The decision last November by Interior Secretary Ken Salazar not to renew The Drakes Bay Oyster Company’s lease was based on a number of inaccurate and misleading claims. Here are five myths that the Secretary, his supporters, and the National Park Service use to justify the oyster farm’s eviction from Drakes Estero:


Myth #1:

The Secretary’s decision was based on sound science.

National Park Service researchers claimed that oyster farming operations in Drakes Estero damaged eelgrass beds and upset seal breeding patterns.  Yet other NPS reports contradicted these claims, and the National Academy of Sciences stated that the Park Service had “exaggerated the negative and overlooked the potentially beneficial aspects of the oyster culture operation.” Marine biologist Corey Goodman, who independently studied the farm’s impact on the region’s ecology, called the Park Service research “a stunning misuse of science by our federal government.”  Secretary Salazar ultimately decided that the Park Service’s inaccurate Environmental Impact Study was “not material” to his final decision, ignoring federal law that requires such a study be taken into account.

Myth #2:

Renewing the lease would set a precedent.

Some people were concerned that allowing the oyster company to remain in Drakes Estero would create a model of privatization that other leaseholders in national parks could follow.  However, the 2009 law granting Salazar the right to extend the lease another ten years expressly states that the provision would not be viewed as precedent.  In fact, Salazar’s removal of the oyster company is likely to set a standard in the opposite direction, with more working farms and orchards expelled from national park lands.

Myth #3:

Removing the oyster farm would improve the region’s environmental health.

When owner Kevin Lunny first bought The Drakes Bay Oyster Company in 2004, he took out a $300,000 loan to clean and restore the farm.  Because his family’s livelihood depended on the productivity of Drakes Estero, he was careful to keep the waters clean and productive by clearing the bay of debris and trash left by hikers and kayakers.  The oysters themselves actually improved the bay’s water quality by filtering out algae that inhibits eelgrass growth.

Myth #4:

The disagreement is between environmentalists and the agriculture industry.

As a committed environmentalist, Kevin Lunny turned The Drakes Bay Oyster Company into a model of sustainable agriculture.  “It’s extremely healthy for the environment,” Mr. Lunny said. “There are no feeds, no fertilizers, no chemicals.”  Biologist Corey Goodman called Mr. Lunny “one of the pioneers for organic and sustainable agriculture that also protects the environment.” Advocates for the consumption of locally-produced food to reduce its environmental footprint have long supported the oyster farm, which sells nearly all its product to tourists and local restaurants. With Drakes Bay accounting for 40 percent of the state’s oyster production, California restaurants will have to fly oysters in from the Pacific Northwest or East Coast, increasing greenhouse gases and other harmful emissions.

Myth #5:

The Drakes Bay fight is only about politics: It’s Democrats versus Republicans

Some contend that the fight over Drakes Bay is politically split along ideological fault lines. This too is untrue. First, there has been an outpouring of support from a community where most bi-partisan races were easily won in 75/25 percent split (Democrats/Republicans). Further, Democratic Senator Dianne Feinstein has been a staunch defender of Drakes Bay Oyster Company, as well as a fierce critic of the National Park Service and Department of the Interior. In addition to crafting legislation, Feinstein has been outspoken in her support, even writing a letter to Secretary Salazar last March that called on him to renew the lease. With demonstrated partisan support, this issue isn’t split along party lines.


As of May 24, 2013, Cause of Action no longer represents Drakes Bay Oyster Company, the Lunny family, or Dr. Corey Goodman and will be withdrawing as counsel from the litigation.

The future may not hold the “sunshine” we government accountability advocates long to see.

In November we asked why the President continues to ignore laws that have been put in place to protect the integrity of the election system. What we continue to find is that there is a pressing need for increased accountability, not just over election law, but in holding administration officials accountable.

In April 2012 when the Federal Election Commission approved an audit by a vote of 6-0 finding that the Obama for America campaign “did not file required 48-hour notices for 1,312 contributions totaling $1,972,266 that were received prior to the general election,” the Obama for America Campaign agreed to pay the FEC a $375,000 fine, the largest fine ever given to a presidential campaign. Obama campaign spokeswoman Katie Hogan downplayed the FEC investigation, but this audit demonstrated that the FEC will take violations and enforcement of the law seriously.

Will this commitment from the FEC serve as a catalyst in an Administration for greater transparency and oversight? If the best predictor of future success is past behavior, the future may not hold the “sunshine” we government accountability advocates long to see.

Take the following examples into consideration:

When Health and Human Services Secretary Kathleen Sebelius violated the Hatch Act she lamented that the ruling was “somewhat unfair” and her actions were “technical and minor.” Regardless, she still broke the law and is the highest Administration official to ever be found guilty of a Hatch Act violation, yet she received no formal punishment for her actions.

National Labor Relations Board General Counsel Lafe Solomon was not prosecuted for violating conflict of interest laws, but instead was excused by the Board’s Office of Inspector General by a claim of “extenuating and mitigating circumstances.” According to a sworn affidavit by a former ethics officer at the NLRB, Solomon should not have been excused.

These are just two examples of a culture of abuse of power that seems to be carried out by the President and his Administration: First from his campaign, then through his first term. What will happen in his second term? The American people deserve public officials that are held accountable for their actions, and we will continue to call the President and his officials on the carpet in our demands for accountability and transparency.

DBOC Filings: Reply to Gov’t Opposition to Motion for Preliminary Injunction

Legal Brief:

Reply to Gov’t Opposition to Motion for Preliminary Injunction




Jorge Mata: Manager of DBOC. Lives on the farm with his family.

Dr. Linda Martello, ENVIRON: senior scientist consultant. Expert in ecological risk assessment and marine mammals.

Richard Steffel: Principal at ENVIRON International Corporation, specializing in environmental impact assessments related to air quality and environmental noise

Scott Luchessa, ENVIRON: natural resource consultant

Laura Moran: permitting specialist

Corey Goodman: scientist, member of the National Academy of Science

Kevin Lunny: President, DBOC.