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Archives for December 2013

12/17/2013

Cause of Action responds to resignation of DHS Deputy IG Charles Edwards

Cause of Action, a government accountability group which has investigated Department of Homeland Security (DHS) Deputy Inspector General (IG) Charles Edwards, issued the following response to his resignation.

Executive Director Dan Epstein:

“Cause of Action has investigated Charles Edwards for two years, working with information from credible insiders, and filing a FOIA request for records related to Edwards’ misconduct on March 27, 2013, which DHS OIG ignored, prompting us to sue. Our lawsuit ultimately led to the receipt of documents revealing nepotism, mismanagement and the existence of several internal complaints against Edwards, compelling us to ask the President to remove him from office. Cause of Action sees the failure of the Administration to hold Edwards accountable and Edwards’ resignation, less than three days before a Senate hearing, as a cowardly excuse to avoid answering difficult questions about allegations of his abuse and misconduct, some of which may rise to violations of the law, in the Inspector General office.”

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12/16/2013

CoA requests investigation of Sen. Harry Reid, USCIS in EB-5 abuse

In light of Senator Harry Reid’s (D-NV) expected nomination announcement of Alejandro Mayorkas as Deputy Secretary of the Department of Homeland Security (DHS), Cause of Action (CoA) sent a request for investigation to Chairwoman Barbara Boxer (D-CA) of the U.S. Senate Select Committee on Ethics, calling for the investigation of Senator Reid’s communications with U.S. Citizenship and Immigration Services (USCIS) officials and the potential fast-tracking of EB-5 immigrant investor applications.

CoA is continuing to investigate EB-5 program abuse, and just last week, we wrote to Chairman Issa of the House Oversight and Government Reform Committee urging the committee to examine USCIS’ abuse of the EB-5 program.

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12/16/2013

Winston and Strawn: LabMD Files Suit Challenging FTC’s Authority to Regulate Data Security

Read the full story:  Winston and Strawn

LabMD joins Wyndham Hotels & Resorts LLC in challenging the FTC’s authority to regulate and punish entities for data security breaches. Like Wyndham, LabMD argues that because the FTC has never issued regulations, standards, or guidelines regarding data security under Section 5, LabMD had no constitutionally adequate fair notice of what Section 5 of the FTC Act requires, and thus, the FTC’s administrative actions against it violate the Fifth Amendment’s Due Process Clause. LabMD also argues that HHS, rather than the FTC should enforce patient security breach matters under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (LabMD is a covered entity and thus subject to HHS regulation). LabMD has requested a preliminary injunction in its favor, and the case is still pending.

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12/16/2013

Steptoe and Johnson: LabMD Goes On Offense Against FTC

Read the full story:  Steptoe and Johnson

We reported in September that LabMD (a laboratory services company) became the second company (after Wyndham Hotels & Resorts) to challenge the Federal Trade Commission’s authority to regulate cybersecurity, when it raised this issue in response to an administrative complaint filed by the Commission.  This month, LabMD switched to offense, filing a complaint in the U.S. District Court for the District of Columbia seeking to enjoin the FTC’s administrative action on various constitutional statutory grounds.  Also this month, the judge in the Wyndham case signaled that she is likely to reject Wyndham’s challenge.  So companies that want to see the FTC brought down a peg will now be pinning their hopes on LabMD’s suit.

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12/16/2013

Stewart Baker: The 2014 Privies

Read the full story:  Stewart Baker

c.  FTC v. LabMD (Federal Trade Commission)
Stupid Mistake + Media Coverage = Unfair Practice

 
When LabMD set up security for its network, it didn’t expect a rogue employee to poke holes in its security by running Limewire, a program notorious for sharing pirated music — as well as any business or personal records that happen to be on the same network. And it certainly didn’t expect a complaint from the Federal Trade Commission when Limewire shared a spreadsheet with customer data.

 
There’s no doubt that LabMD made a mistake, and a bad one. But the Federal Trade Commission isn’t empowered to correct every mistake made by American businesses.  It only has authority to charge companies that have committed “unfair practices.”  What LabMD did may have been dumb; it may have been sloppy; but you’ve got to strain pretty hard to call it an unfair practice.  The FTC has been trying for years to become America’s privacy and security enforcer.  For just as long, Congress has refused to give it that role.

 
You have to admire an agency with the cojones to argue that it can make up its own legal authority as well as the offenses that it chooses to punish.  Maybe if you look closely at the seal, you can see the agency’s true motto:  “Whatever It Takes:  Finding Ways To Punish Companies Criticized by the New York Times Since 1914.”

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12/11/2013

Statement: Cause of Action on Mayorkas’ Pending Deputy Secretary Nomination

Cause of Action, a government accountability group, sent a letter to Chairman Darrell Issa of the House Committee on Oversight and Government reform urging the committee to examine the U.S. Citizenship and Immigration Services’ (USCIS) oversight of the EB-5 visa Pilot Program. Cause of Action issued the following statement in response to the Senate Homeland Security and Governmental Affairs Committee pending nomination for Alejandro Mayorkas for Deputy Secretary of the Department of Homeland Security (DHS) :

Executive Director Dan Epstein:

“Just this week, Cause of Action sent a letter to the House Committee on Oversight and Government Reform urging the Committee to examine the USCIS’ administration of the EB-5 visa Pilot Program, which is under the oversight of Alejandro Mayorkas. Whistleblowers revealed that Mayorkas fast-tracked visa applications through the EB-5 program, which is being used to finance crony companies while failing to deliver on job creation.  In light of these concerns and the current DHS OIG investigation of Mayorkas, it was irresponsible for the Senate Homeland Security and Governmental Affairs Committee to vote on Mayorkas’ nomination for Deputy Secretary of the DHS before DHS’s internal investigation is complete.”

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12/9/2013

Report: Forest City Enterprises Profits Despite Legal Violations

FOR IMMEDIATE RELEASE                                                                                                 

CONTACT:      

Jamie Morris, 202-499-2425

 

Report: Forest City Enterprises Profits Despite Legal Violations

Cause of Action calls on Congress to investigate Forest City Enterprises and lax oversight at USCIS, DOJ 

WASHINGTON –Cause of Action (CoA), a government accountability organization, today released “Unfair Enrichment: How Forest City Enterprises Acts Above the Law,” the third and final installment of the three-part investigation, “Political Profiteering: How Forest City Enterprises Makes Private Profits at the Expense of America’s Taxpayers,” exposing how New York State manipulated census data to benefit Forest City Enterprises’ (FCE) New York subsidiary Forest City Ratner (FCR) and the New York City Regional Center (NYCRC).  With this data, FCR and the NYCRC enticed foreign investors into a cash-for-visas program, all while downplaying the risk of investment and exaggerating job creation predictions.  Further, the Department of Justice (DOJ) failed to prosecute FCR executives who bribed city council members to approve another FCR development in project in Yonkers, N.Y.

CoA’s nearly two-year investigation found that executives of FCR played illicit roles in the 2005-2006 bribery scandal that resulted in the federal conviction of two local politicians in Yonkers, N.Y. for securing approval for FCR’s Ridge Hill development project.  The DOJ failed to prosecute, despite being alerted by a 2010 letter from Ranking Member of the House Committee on Oversight and Government Reform Darrell Issa (R-CA) and Ranking Member of the House Judiciary Committee Lamar Smith (R-TX) that raised concerns that “political favoritism” guided the DOJ’s decision “not to pursue legal charges against Forest City Ratner and its employees.”

Dan Epstein, Cause of Action’s executive director commented:

“Our investigation uncovered that not only did FCR violate the law and engage in political profiteering, but the DOJ turned a blind eye to FCR’s criminal activity while the USCIS failed to hold New York State accountable. We can’t rely on these federal agencies to properly apply their own rules and protect the interests of taxpayers, which is why Congress should intervene and investigate these practices.”

Findings from the report include:

  • The New York Department of Labor (NYDOL) and the Empire State Development Corporation (ESDC) manipulated census data in order to create a “targeted employment area” (TEA) for the New York City Regional Center (NYRC) and FCR in violation of U.S. Citizenship & Immigration Services (USCIS) regulations.
  • FCR and NYRC, with the cooperation of New York state elected officials, misleadingly advertised the Atlantic Yards Project to potential investors by keeping the actual purpose of EB-5 funding ambiguous and exaggerating job creation predictions.  EB-5 investors were also misled as to the risk of their investing in the Atlantic Yards project—a potential Federal securities violation.
  • The DOJ failed to prosecute FCR executives who bribed Yonkers City Council Member Sandi Annabi.  FCR executives covered up payments to Yonkers Republican Party Chairman Zehy Jereis under the guise of a consulting contract for “retail hunting” in order to protect themselves from federal criminal liability when, in fact, Jereis’s consulting contract was in exchange for Annabi’s vote approving FCR’s Ridge Hill Project.
  • FCE defended and benefited from eminent domain seizures for private development in California and New York, and spent a combined $350,000 on California ballot initiatives in 2006 and 2008 to back sweeping eminent domain measures to benefit private developers.

In light of these findings, CoA wrote to Chairman Issa of the House Oversight and Government Reform Committee urging the committee to examine USCUS’ treatment of states’ TEA designations and determine whether undue political influence affected DOJ’s decision not to prosecute FCE.

To access our letter, click here. 

To access Unfair Enrichment: How Forest City Enterprises Acts Above the Law, click here.

To access parts one and two of the investigation, 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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