Archives for January 2013

Bloomberg: Car Companies XP Vehicles, Limnia Sue U.S. Over Loans

Car Companies XP Vehicles, Limnia Sue U.S. Over Loans


By Tom Schoenberg on January 10, 2013
President Barack Obama’s administration played favorites on clean-energy loans while improperly blocking a carmaker and a related technology company from receiving millions in aid, according to two lawsuits.

XP Vehicles Inc. and Limnia Inc. filed complaints against the U.S. and the Energy Department today in two federal courts in Washington, seeking damages for what they say were abuses of the $25 billion Advanced Technology Vehicle Manufacturing loan program. XP Vehicles, which has dissolved, and Limnia are asking for $450 million in a case filed in the U.S. Court of Federal Claims and at least $225 million in U.S. District Court.

“Defendants used the ATVM loan program as nothing more than a veil to steer hundreds of millions of taxpayer dollars to government cronies,” according to the district court complaint.

Today’s lawsuits are the latest challenge to clean-energy loan programs administered by the Energy Department, which has come under scrutiny over a $535 million loan guarantee to now- bankrupt solar-panel maker Solyndra LLC.

“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,” Damien Lavera, an Energy Department spokesman, said in an e-mail.

Koch Foundation
The companies are being represented by Daniel Epstein, executive director for a Washington-based nonprofit advocacy group. He previously worked for a foundation started by Koch Industries Inc. Chief Executive Officer Charles Koch, a billionaire contributor to Republican-leaning causes. He was also counsel for Republican U.S. Representative Darrell Issa’s House Oversight and Government Reform Committee, which is leading a probe of the department’s loan programs.

XP Vehicles, or XPV, said it applied in 2008 for a $40 million loan in an effort to mass produce an SUV-style electronic vehicle with doors and other parts made from foam. The starting price for the vehicle was to be less than $20,000.

The carmaker said it believed the review of its application would take “a matter of weeks.” After meeting with the agency in May 2009, XPV said it discovered that two of its competitors — Tesla Motors Inc. (TSLA) and Fisker Automotive Inc. — were receiving special assistance from agency staff with the loan application process.

Obama Contributor
One member of Tesla’s board at the time was Steven Westly, a campaign contributions bundler for Obama, while Fisker’s investors included Obama donors, according to the complaint.

Tesla received a $465 million loan in June 2009 with an interest rate of 1.6 percent, according to the complaint. XPV called one of Tesla’s products “an expensive electric car targeted at rich actors, journalists and businessmen, not average Americans.”

Fisker received a $528.7 million loan. The department in May 2011 blocked Fisker from receiving the bulk of the loan, after the company didn’t meet milestones for producing its first model.

Jeff Evanson, a spokesman for Palo Alto, California-based Tesla, and Roger Ormisher, a spokesman for Anaheim, California- based Fisker, didn’t immediately respond to e-mail messages seeking comment on the lawsuits.

XPV’s application was denied in August 2009. The reasons given by the agency involved vehicle specifications as well as manufacturing and sales plans, according to the complaint.

Limnia is also challenging applications for loans it sought that were denied.

The Energy Department has made five loans under the advanced-vehicles program — none since the 2011 bankruptcy of Solyndra — and $16 billion remains undistributed.

The court of federal claims case is XP Vehicles Inc. v. U.S. Department of Energy, 12-cv-00774, U.S. Court of Federal Claims (Washington). The district court case is XP Vehicles Inc. v. U.S. Department of Energy, 13-cv-00037, U.S. District Court, District of Columbia (Washington).

When cronyism takes the place of merit at the DOE, everyone loses

With the new push towards green energy most recently from the 44th administration, Congress created Department of Energy loan guarantee programs designed to help the private sector develop new technology and products. Sadly, instead of the return Americans were expecting, they found much of their money upside down in poorly executed projects.

It should come as no surprise that these projects failed, given the level of cronyism that went into the decision making process for DOE loan guarantees. Still, shock or no shock, when cronyism takes the place of merit, everyone loses.

If we look at the electric car initiative alone, failures abound. Fisker is selling cars that catch fire. Tesla hit a huge snag when they started swallowing cash at an enormous rate without churning out product.

And the worst part? All of these failures could have been prevented if cronyism not been the modus operandi of the Department of Energy and White House.

When Cause of Action took on XP Vehicles and Limnia as our clients, we learned that the level of cronyism extended beyond just “picking winners and losers.”

  • DOE had two sets of rules with respect to these programs: one for its favored cronies, and one for everyone else. The DOE loan programs were designed by Congress to help the private sector develop new technology. Instead, there is overwhelming evidence that DOE repeatedly discriminated against companies that lacked a history of large campaign contributions and political patrons.
  • DOE admitted in writing that our client was qualified for an ATVM loan but still denied its loan application.  Although DOE had billions in available funds, it asserted that it could not fund all qualified applicants, and that our client failed to meet certain secret “merit review” criteria.  These secret criteria mysteriously resulted in DOE funding only government crony companies.
  • Despite having $16 billion of unused loan authority, DOE has refused to make a single ATVM loan to another electric vehicle company since funding Tesla and Fisker in 2009, thus protecting both Tesla and Fisker from competition.
  • There is strong evidence DOE slyly gave our client’s confidential intellectual property—IP that DOE itself believes is 3 times more effective than traditional hybrid batteries—to GM and possibly gave unique pressure membrane technology to Ford; actions that, if true, violate the agency’s confidentiality agreements, as well as the trust of the American people.

Not only did XP have all the merits of any of their competition, but they had better technology. A car that wouldn’t catch fire like Fisker, or one that didn’t rely on other crony corporations to provide energy storage technology.

We hope that XP Vehicles, Limnia, and the American people find their vindication, which is why we’ve filed two lawsuits detailing the ways that they have been wronged. To see the documents we filed in the US District Court for the District of Columbia and the US Court of Federal Claims click here.

Press Release: Cause of Action Sues DOE for Wrongfully Denying Loans to Green Energy Startup Companies

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JANUARY 10, 2013



DOE awarded loans to government cronies over more qualified applicants

WASHINGTON – Cause of Action (CoA), a government accountability organization, filed two lawsuits today, one in the United States Court of Federal Claims against the Department of Energy, and another in the United States District Court  for the District of Columbia against the Department of Energy as well as Secretary of Energy Steven Chu and Director of the Advanced Technology Vehicles Manufacturing Loan Program, Lachlan Seward , for unlawfully denying XP Vehicles, Inc.’s (XP)and Limnia, Inc.’s applications for funds as well as leaking patented intellectual property to government-backed General Motors and Ford.

“XP and Limnia are fighting against the Department of Energy’s lack of fairness in favor of politics as well as its flagrant abuse of taxpayer dollars to harm small business and benefit political cronies,” stated Dan Epstein, executive director of Cause of Action. “XP and Limnia are now turning to the court for the accountability the DOE failed to administer.”

XP and Limnia allege that the Department of Energy granted loans in an arbitrary and capricious manner, inconsistently favoring some, while disadvantaging other applicants. These loan programs were intended to promote U.S. advanced technology companies and to reduce U.S. dependency on foreign oil.

Evidence suggests that XP’s November 10, 2008 Advanced Technology Vehicles Manufacturing (ATVM) loan application was deliberately “set aside,” substantially delayed consideration, and later denied by the DOE in favor of loan applications from politically-connected governmentcronieslike Tesla, Fisker, and GM.

Additionally, the lawsuit identifies the multiple violations of Non-Disclosure Agreements in which Limnia’s confidential intellectual property including patented energy storing systems and pressure membrane technology were disclosed to GM and to Ford, a recipient of the ATVM Loan Program.

XP and Limnia turned to Cause of Action to hold the Department of Energy, its Secretary and its programs administrator accountable for their actions in wrongfully denying loan applications while at the same time engaging in the unauthorized disclosure of confidential intellectual property with government-backed competitors.

The complaints can be found here.


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


Washington Post: Car company says Obama team steered stimulus funds to political favorites




Car company says Obama team steered stimulus funds to political favorites


Learn More Government Ethical Standards Are Toothless, Unenforced

Read full article here.

“Nonpartisan watchdog Cause of Action said in a memo that “OGE recklessly disregarded clear warning signs of waste, fraud and abuse at GSA. Furthermore, any mismanagement or fraud within the OGE is subject to review only by OGE itself, as OGE lacks an inspector general.”

In the 34 years since the formation of OGE, none of the 5,700 employees working in the 133 executive agencies has found any wrongdoing to be significant enough to trigger enforcement of ethical standards. Similarly, Congressional oversight of the executive branch has ignored president/s who condone torture, assassination, imprisonment of whistleblowers they formerly encouraged, violate the Constitution at will and have been accused of war crimes by constitutional lawyers…”

Daily Caller: Former ethics officer says NLRB inspector general ‘improperly’ cleared Obama appointee of wrongdoing

Read the full story here. Daily Caller

“Prompted in part by Joseph’s claims, the legal advocacy group Cause of Action sent a Dec. 7 request to the Department of Justice for a new investigation into the Solomon case. Cause of Action claimed that the OIG “shifted the blame away from Solomon” in order to resolve a case that has caused turmoil within the NLRB and a headache for the Obama administration.

The case dates back to January 2012, when the NLRB considered suing Wal-Mart over allegations that it violated federal labor laws with its social media policy.

Despite holding more than $15,000 in Wal-Mart stock, Solomon attended a meeting in his office with the NLRB’s Division of Advice on Jan. 23. Solomon expressed in the meeting his desire for the NLRB to delay the lawsuit and instead “reach out” to Wal-Mart to encourage the company to change its social media policy.”


A new year’s resolution for the federal government

In a recent Washington Examiner article, Executive Editor Mark Tapscott asked leading advocates for government transparency for their thoughts on what should be the government’s top transparency priorities for 2013. Cause of Action’s Executive Director Dan Epstein was featured as one of the “Nine people who know how to make government work better, more honestly.” Dan laid out five needed changes in the federal government that would yield greater accountability and transparency. One area he touched on is Freedom of Information Act (FOIA) requests.  In addition to Dan’s suggestion of a “Uniform database of FOIA requests and processing, following current online tracking used by the Department of Labor and the FBI,” we want to offer some practical ways agencies can and should be improving their FOIA approach.

For those of us who believe in an honest, transparent government, 2012 was a disappointing year. In January 2009, President Obama submitted a memorandum for heads of Executive Branch agencies stating, “The Freedom of Information Act should be administered with a clear presumption: In the face of doubt, openness prevails.”

Despite the administration’s self-proclaimed commitment to openness, the responses to FOIA requests and lack of available data highlight a lack of follow-through from numerous agencies.

The Cato Institute graded the federal government’s data publication practices and found that, “the administration and the Congress both receive fairly low marks under systematic examination of their data publication practices.” On budgeting, appropriating and spending, eight out of 11 subjects received a D or F.

A Bloomberg investigation submitted FOIA requests to 57 agencies asking for travel records for Cabinet Secretaries and top officials in fiscal year 2011. Only 8 of the 57 agencies provided the documents within the 20-day period required by law and 7 provided the documents within 21 to 30 days. Almost half of the agencies did not provide documents at all by September 14, 2012 (the requests were sent in June of 2012). In a follow-up report in December of 2012, Bloomberg noted that 19 agencies still had not provided documents, including nine of 15 cabinet offices.

A staff report by the House Committee on Oversight and Government Reform examined the FOIA tracking systems for 180 government entities and gave cabinet agencies a C- grade and all 180 entities a B-. The report notes, however, that this only tests an agency’s ability to track its own FOIA requests and does not necessarily reflect its ability to respond to requests.

A FOIA Project study found that FOIA lawsuits have increased 28 percent during 2007-2008 and 2011-2012 from 562 to 720.

Here at Cause of Action, many of the FOIA requests we filed in 2012 hit unnecessary roadblocks including superfluous redactions, needless fees, and failure to meet time mandates required by the law. At one bureau, a whopping 30 percent of our requests have gone unfulfilled for more than 180 days, and at another our investigations team was halted when a FOIA officer went on vacation for 3 weeks without anyone to even answer our questions.

But now, it’s 2013. A new year has come, both in time and politics. This year, we have three New Year’s resolutions to suggest for the government.

  1. Increase efficiency in providing responsive documents to FOIA requests. Some of our requests have been open for more than 6 months with no production. At the very least, agencies should attempt to provide a timetable for when the documents can be produced.
  2. FOIA officers should improve communications with requesters by responding to email and phone calls in a timely manner. One agency could not give any information on one of our outstanding requests because the FOIA officer in charge of our request was out of town for almost three weeks. We could not get a status update or even an acknowledgement that they had our request. If the agency has a question regarding the FOIA request, it should not hesitate to contact the requester to resolve the issue. This will cut down on response times while also reducing appeals and lawsuits.
  3. President Obama and Attorney General Holder need to enforce the vision set out in their 2009 memorandums. Holder stated that agencies “should not withhold information simply because it may do so legally” and “whenever an agency determines that it cannot make full disclosure of a requested record, it must consider whether it can make partial disclosure.” These promises have largely gone unfulfilled, and since there’s no better time than the present, 2013 would be a good time to start keeping them.