Archives for November 2013

LabMD Sues Federal Trade Commission

FOR IMMEDIATE RELEASE

CONTACT: Kevin Schmidt, 202-499-2414

kevin.schmidt@causeofaction.org

 

LabMD Sues Federal Trade Commission

Action Taken in the District Court for D.C., Seeks Relief from FTC’s unconstitutional abuse of government power 

WASHINGTON – Cause of Action (CoA), a government accountability organization, filed a Complaint for Declaratory and Injunctive Relief in the U.S. District Court for the District of Columbia, on behalf of LabMD, seeking to stop the Federal Trade Commission’s (FTC) extralegal abuse of government power.  LabMD argues that the FTC lacks the authority to regulate patient-information.

CoA is also defending LabMD against a complaint brought by the FTC based, in part, on allegations that a third party was able to obtain data from LabMD’s computers through the peer-to-peer (P2P) file sharing program LimeWire. The FTC has attacked LabMD without publishing any data-security regulations or standards and with the knowledge that LabMD’s data security practices are regulated by the U.S. Department of Health and Human Services (HHS).  HHS has never suggested that LabMD violated any patient information data-security regulations or requirements.

In September, CoA challenged the FTC’s statutory authority to regulate patient information data-security practices as “unfair acts or practices” under Section 5 of the FTC Act and disputed the FTC’s claim that LabMD supposedly failed to provide reasonable and appropriate security for personal information on its computer networks. Earlier this month, CoA filed a Motion for Protective Order before an Administrative Law Judge on behalf of LabMD seeking to quash 35 subpoenas served by the FTC in a single day. As the filing today argues, the FTC’s subpoena tactics are wrongfuly instrusive and burdensome. These tactics are consistent with the FTC’s plain goal of forcing LabMD into submission by exhausting the small Atlanta-based cancer diagnosis company’s resources.

“The FTC has clearly abrogated the law Congress granted it or specifically refused to grant it,” said CoA Executive Director Dan Epstein.  “From the initial action to the burdensome subpoenas, the FTC continues to exemplify the dangers of unbridled federal agency overreach into areas in which they have no authority.”

“By filing this lawsuit, we are asking the court to stop FTC’s abuse of government power and to ensure LabMD’s case is decided fairly and objectively. Right now, small businesses like LabMD that stand up to the FTC must play a rigged game because FTC is the legislator, prosecutor, judge, jury and executioner all rolled into one,” CoA Senior VP of Litigation Reed Rubinstein said.  “The FTC has no power over LabMD here and its obvious disregard for the patient-information data security regulations that the Department of Health and Human Services has had in place for years creates additional chaos, expense and hardship for America’s doctors, medical labs and clinics.”

The FTC’s bullying tactics include:

  • Conducting a multi-year “civil investigation” requiring LabMD to produce thousands of documents and its principals to submit to multiple examinations by government lawyers all unsupported by any concrete allegation of wrongdoing.  Complying with the FTC’s demands has cost LabMD hundreds of thousands of dollars as well as thousands of hours of management and employee time.
  • Forcing LabMD into an administrative hearing in which the Commission itself makes the “law,” prosecutes the “violations” and then determines the “verdict.”
  • Using abusive tactics that would not be tolerated by any independent federal court.  For example, the FTC served 35 subpoenas on third parties around the country demanding at least 23 depositions to take place simultaneously.  For LabMD to comply with the FTC’s oppressive subpoenas, LabMD would have to hire more than 23 attorneys and pay for their transportation to appear at depositions in California, Georgia, Pennsylvania and Florida, etc.

Given the FTC’s lack of jurisdiction to even bring such a data-security action against LabMD, it makes their abusive practices all the more egregious:

  • Notwithstanding the FTC’s repeated requests that Congress confer upon it the authority to regulate data-security, Congress has refused to do so.
  • In a 2000 report to Congress, Privacy Online: Fair Information Practices in the Electronic Marketplace: A Report to Congress, for example, the FTC admitted that it “lacks the authority to require firms to adopt information practice policies” and requested that Congress enact legislation providing a federal agency with the authority to regulate data security.  Notwithstanding the FTC’s pleas, Congress has not seen fit to expand the FTC’s jurisdiction.
  • The FTC cannot rely on any statutory precedent for the proposition that the FTC has authority to regulate data-security practices under Section 5 of the FTC Act.
  • Federal District Judge William Duffy recently noted, “There is significant merit to [LabMD’s] argument that Section 5 [of the Federal Trade Commission Act] does not justify an [FTC] investigation into data security practices and consumer privacy issues….”
  • Even assuming, arguendo, that the FTC did have jurisdiction over its asserted claims against LabMD because the Commission has not promulgated any rules, regulations, or other binding guidelines establishing the data-security practices with which it expects compliance, this enforcement action against LabMD violates due process requirements guaranteed and protected by the Fifth Amendment to the U.S. Constitution.

The lawsuit filed today, along with the previous filings on behalf of LabMD, can be found here.

About Cause of Action:

Cause of Action is a non-profit, nonpartisan government accountability organization that fights to protect economic opportunity when federal regulations, spending and cronyism threaten it. For more information, visit www.causeofaction.org.

About LabMD:

LabMD is a cancer detection facility that specializes in analysis and diagnosis of blood, urine, and tissue specimens for cancers, micro-organisms and tumor markers. You can find out more about their battle with the FTC here.

 

To schedule an interview with Cause of Action’s Executive Director Dan Epstein, contact Mary Beth Hutchins,  202-400-2721 or Kevin Schmidt, kevin.schmidt@causeofaction.org.

 

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Atlanta Business Chronicle: Government watchdog sues feds on behalf of Atlanta business

Read the full story here: Atlanta Business Chronicle

“The FTC has clearly abrogated the law,” said Dan Epstein, executive director of Cause of Action. “From the initial action to the burdensome subpoenas, the FTC continues to exemplify the dangers of unbridled federal agency overreach into areas in which they have no authority.

 

“By filing this lawsuit, we are asking the court to stop FTC’s abuse of government power and to ensure LabMD’s case is decided fairly and objectively.”

WSB-TV: VA hospital paying record malpractice settlements

Read the full story: WSB-TV

 

“It’s not just harming the taxpayers, they’re harming public health,” said Daniel Epstein, from the D.C. based watchdog group “Cause of Action.” He called for an Inspector General’s audit when Channel 2 showed him VA malpractice costs soared to a 10-year high in 2012 to nearly $100 million.

 

The highest payout in 2012 went to Marine Vet Christopher Ellison. He was awarded a $17 million judgment. He had a stroke following a dental procedure. He is now paralyzed

 

“I think this sounds like a management problem. This sounds like a systemic problem at the agency,” said Epstein.

Cause of Action Files Notice of Appeal to Challenge FTC’s Vendetta to Shield Agency Records

FOR IMMEDIATE RELEASE         CONTACT: Jamie Morris, 202-499-2425                                                                                              

 Cause of Action Files Notice of Appeal to Challenge FTC’s Vendetta to Shield Agency Records

FTC’s decision could have a crippling effect on government transparency

WASHINGTON – Cause of Action (CoA), a government accountability organization, today appealed a United States District Court for the District of Columbia decision that upheld the Federal Trade Commission’s (FTC) denial of CoA’s news media status with respect to Freedom of Information Act (FOIA) requests.  CoA filed three separate FOIA requests to the FTC between 2011 and 2012 for documents pertaining to the agency’s internet advertising guidelines on endorsements regarding social media authors and bloggers. The FTC repeatedly denied not just CoA’s access to these documents, but also a public interest fee waiver as well as news media requestor status.

Cause of Action’s Executive Director Dan Epstein commented on the potential chilling effects of the court’s ruling:

“The current message from the court is that new media and nonprofit news organizations are treated differently than traditional media for purposes of qualifying for a waiver of fees.  We are challenging this decision because we are dedicated to gaining access to information that will help us educate Americans about how their government uses taxpayer dollars, makes decisions, and claims authority.   Cause of Action believes the court needs to review the facts of the case to fully understand the improper decision made by the FTC.”

  1. On May 25, 2012, CoA sued the FTC challenging the agency’s improper denial of CoA’s fee waiver and wrongful withholding of public documents.
  2. On August 19, 2013, Judge Emmet G. Sullivan erroneously ruled that CoA (as a nonprofit government accountability and transparency organization) was not entitled to either a public interest fee waiver or news media requester status, and in so doing effectively denied CoA access to important and relevant records with which to educate the public regarding a very important issue in social media.
  3. On September 10, 2013 both parties filed a Joint Status Report and Recommendation, stating both parties reserved the right to appeal all issues.

CoA’s Notice of Appeal can be found here.

About Cause of Action:

Cause of Action is a non-profit, nonpartisan government accountability organization that fights to protect economic opportunity when federal regulations, spending and cronyism threaten it. For more information, visit www.causeofaction.org.

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

 

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Bloomberg: The Buckyballs Guy Is Suing the Feds

Read the full story here: Bloomberg

Zucker is fighting back.

 

In a lawsuit he plans to file on Tuesday, Nov. 12, Zucker will ask the U.S. District Court of Maryland to block the CPSC from seeking damages against him personally. He notes that the agency hasn’t sought damages from other toy magnet sellers, who folded their companies ahead of recall proceedings, and that similar products are still on the market. The complaint, prepared by conservative advocacy group Cause of Action, alleges that the CPSC targeted Zucker for speaking out against the agency. It also says the CPSC violated Zucker’s rights to free speech and due process when it retaliated against him, setting a “chilling” precedent for other corporate executives who publicly disagree with the federal government.

 

“What you have here at a minimum is a shocking example of regulatory overreach and abuse of statutory power,” says Reed Rubinstein, a lawyer at Dinsmore & Shohl serving as counsel to Cause of Action. “At its most sinister, this is an example of government power being used to punish people who object to it.”

Creator of Buckyballs® Sues Federal Government for Unprecedented Regulatory Overreach

FOR IMMEDIATE RELEASE NOVEMBER 12, 2013

Media Contact:

Elise Flick

212-333-0275

epf@karvcommunications.com

                                                           

Creator of Buckyballs® Sues Federal Government for Unprecedented Regulatory Overreach 

Entrepreneur Craig Zucker Strikes Back Against Consumer Product Safety Commission for Egregious Abuse of Agency Power

WASHINGTON – Craig Zucker, co-founder of the company that created Buckyballs®, filed a lawsuit today against the Consumer Product Safety Commission (CPSC) for naming him personally liable in its $57 million case CPSC v. Maxfield and Oberton Holdings, LLC. et al. Maxfield and Oberton, the company that sold Buckyballs®, one of the world’s most popular adult desktoys, was sued by the CPSC to force a full product recall in July 2012 and, due to the action, driven out of business in December 2012. Although the products have never been proven to be defective and remain legal to sell today, the CPSC has now turned its sights on Zucker individually, grossly over-reaching its authority by naming him personally in its suit.

Zucker has retained government accountability group Cause of Action to push back against the CPSC by filing a complaint in the U.S. District Court of Maryland. This complaint states that the CPSC lacks jurisdiction to carry out this unprecedented action against Zucker, a former corporate officer at Maxfield and Oberton, and seeks an injunction to stop the CPSC’s abuse of power.

Last month, Zucker launched “United We Ball,” a campaign selling new products, such as Liberty Balls, to help raise funds for his ongoing legal battle, the effort of one individual to stand up for what’s right for American consumers, businesses, and individuals. The campaign has received media praise and an overwhelming amount of support from the public.

“For too long I have been a target of the CPSC and I am no longer willing to just take it,” said Zucker. “Despite over zealous regulators targeting me in the first place for speaking out, I am now taking legal action to defend myself against the CPSC’s egregious attempt at rewriting our cherished laws of limited liability. The success of United We Ball has given me the support base from consumers, lawmakers, and the media to take our fight to the next level. I will keep going until the case is won and ensure the CPSC can’t ever do this again to another individual.”

“The Commission has committed an unprecedented act by attempting to hold an individual entrepreneur liable for a recall that CPSC is seeking against a company that it forced out of business,” said Cause of Action Executive Director Dan Epstein. “At a minimum this action is an obvious overreach of the CPSC’s authority and at maximum it is an illegal abuse of power by persons within the Commission who seek to punish Mr. Zucker. Entrepreneurs in this country should not have to face a rogue federal agency that is merely making up the rules as they go along. The CPSC’s actions against Mr. Zucker are a very real threat to the liberty of every small business owner nationwide.”

The CPSC is arguing that Zucker is personally liable for the costs of the recall due to the Park Doctrine. The Park Doctrine, named for the 1975 Supreme Court case, United States v. Park, holds that in some circumstances, corporate officers can be individually liable for criminal violations committed by their corporate employers. However, under the Park Doctrine, former corporate officers have not been required to personally carry out civil remedial orders issued in response to the conduct of their former corporate employers. In this case, the corporate conduct was not illegal in the first place. Neither Maxfield and Oberton nor Zucker have committed any crimes or been accused of any criminal activity.

In addition to the lawsuit, Cause of Action is also filing Freedom of Information Act requests to discover the facts, factors and circumstances that led to the Commission’s extraordinary, unprecedented and illegal overreach against Zucker, as well as an Information Quality Act complaint with the CPSC to seek and obtain correction of false statements made by the Commission concerning Zucker, Maxfield and Oberton, and Buckyballs®. Copies of all filings can be found at www.UnitedWeBall.org/legal.

For more on contributing to Zucker’s legal defense and to purchase Liberty Balls, please visit www.UnitedWeBall.org.

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About United We Ball

United We Ball is a campaign founded by Craig Zucker and his supporters created to sell new products and fight the legal battle of one individual against the government to stand up for what’s right for American consumers, businesses, and individuals. The ultimate goal of United We Ball is to prevent more overreaching bureaucratic lawsuits against job-creating entrepreneurs who speak out against selective justice and to fight to preserve principles of limited liability for responsible company officers and entrepreneurs. 100% of the profits from United We Ball will go towards the legal fees of defending CPSC v. Maxfield and Oberton Holdings, LLC, et al. The campaign web site can be found at www.UnitedWeBall.org

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 www.causeofaction.org.

To schedule an interview with Craig Zucker or for more information, contact Elise Flick, epf@karvcommunications.com, 212-333-0275

To schedule an interview with Cause of Action’s Executive Director Dan Epstein, contact Mary Beth Hutchins, 202-499-4232. 

Report Exposes Forest City Enterprise’s Bait and Switch Business Model

FOR IMMEDIATE RELEASE                                                                                                 

CONTACT:      

Jamie Morris, 202-499-2425

Report Exposes Forest City Enterprise’s Bait and Switch Business Model

“The Ratner Way: Lobby, Profit and Bilk” reveals how Forest City Enterprises

Ravishes Communities of Local and State Tax Dollars

 

WASHINGTON –Cause of Action (CoA), a government accountability organization, today released “The Ratner Way: Lobby, Profit and Bilk,” the second installment of the three-part investigation, “Political Profiteering: How Forest City Enterprises Makes Private Profits at the Expense of American Taxpayers,” examining how real estate development giant Forest City Enterprises (FCE) has extended its pattern of using politics for profit across the country.  As part of CoA’s ongoing investigations into crony companies, the report reveals how FCE pocketed $277.2 million in subsidies from taxpayers in Brooklyn, N.Y. and Albuquerque, N.M. after contributing $310,450 to local political candidates and spending over $8.6 million on lobbyists. Additionally, FCE promised to create more than 70,000 permanent jobs and 3,750 affordable housing units in Brooklyn and Albuquerque, but has actually produced only 3,000 permanent jobs and built no affordable housing units.

“FCE’s unfair pattern of creating a false market for themselves extends across the country, leaving a trail of broken promises and nearly $9 million in the pockets of lobbyists,” said Dan Epstein, Cause of Action’s executive director.  “Even when taxpayers from Brooklyn and Albuquerque delivered on $277 million in tax incentives and subsidies to FCE, the company failed to ensure the creation of the jobs and housing units promised, instead opting to back out of projects.”

Among the most nefarious of examples of FCE’s profiting from communities revealed in the report:

  • Forest City Ratner (FCR) promised to create 10,000 permanent jobs and 2,250 units of affordable housing in exchange for $270 million in direct taxpayer money to build the Barclays Center.  To date, none of the affordable housing has been built and only 2,000 permanent jobs have been created — 1,900 of which are part-time jobs.
  • Despite receiving $270 million in subsidies for the Atlantic Yards project in Brooklyn and a commitment of $630 million over 25 years for its Mesa del Sol project in Albuquerque, FCE has failed to deliver the public benefits promised in exchange for taxpayers’ financial support.
  • FCE provided $150,000 in campaign contributions and use of its corporate jet to then-Governor of New Mexico Bill Richardson in order to push through a bill creating a new subsidy for real estate development in 2006.  In 2007, FCE received commitments from the City of Albuquerque and the State of New Mexico for up to $130 million and $500 million in subsidies, respectively, over 25 years.
  • FCE’s Residential Group (FCRG) has promised the City of New Rochelle, N.Y. that its Echo Bay project will create about 59 permanent jobs and increase local tax revenue.  Despite the fact that residents have been facing property tax increases and cuts in public services for years, FCRG seeks $20 million in tax abatements from 2016 to 2035.

To access the full report, click here.

To access the first report, Anatomy of a Crony Capitalist, click here.

About Cause of Action:

Cause of Action is a non-profit, nonpartisan government accountability organization that fights to protect economic opportunity when federal regulations, spending and cronyism threaten it. For more information, visit www.causeofaction.org.  

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

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