Archives for 2013

Roll Call: Dan Epstein: Congress Is Not the Answer: How We Really Should Be Investigating the IRS

Congress Is Not the Answer: How We Really Should Be Investigating the IRS | Commentary

By Dan Epstein     June 11, 2013, 5 a.m.

Three congressional committees were authorized to (and seemingly did) begin investigations in 2010 of the IRS’ political targeting, yet none of them were able to reveal what the Treasury Inspector General for Tax Administration reported last month.

Even though TIGTA head J. Russell George has now appeared before multiple committees, no one has questioned why TIGTA chose to examine the IRS’ politicization through an audit instead of an investigation. The Inspector General Act authorizes TIGTA to obtain the production of documentary evidence by subpoenas, yet TIGTA issued none. Item 2 of Treasury Order 115-01 authorizes TIGTA to conduct investigations, issue subpoenas, bring criminal enforcement actions and make referrals to the attorney general for prosecution. Yet none of this happened.

The much-publicized House Oversight and Government Reform Committee hearing on the subject revealed that former IRS Exempt Organizations Director Lois Lerner may have improperly received immunity by taking the Fifth only after pleading her innocence in an opening statement. The White House has claimed executive privilege, refusing to provide information to congressional oversight committees — and without independent prosecutorial authority, Congress can do little other than issue contempt charges, which this administration views as little more than a slap on the wrist. When Attorney General Eric H. Holder Jr. denied Congress information concerning the “Fast and Furious” scandal, Congress issued a subpoena, held him in contempt, then filed a civil lawsuit, which, as of March, is in mediation; most recently, the DOJ has filed motions to dismiss the case entirely.

Chairmen of both the House Ways and Means Committee and the Senate Finance Committee have authority under the tax code to investigate the IRS issues. Under federal law, the Ways and Means Republicans in the House must keep their investigation secret from Finance Republicans in the Senate just like the Senate Finance Democrats must not share protected information with Ways and Means Democrats. That means that not only is there a self-imposed limit to what Congress can do, there is the added dimension of partisanship: both Sen. Max Baucus, D-Mont., and Rep. Dave Camp, R-Mich., are forced to keep Sen. Orrin G. Hatch, R-Utah, in the dark.

If partisanship were not an issue, Congress should have established a committee that under 6103(f)(3) could be empowered with virtually unlimited investigative authority. But that hasn’t happened. Additionally, Congress always has the ability to appoint its own special counsel to investigate the IRS, as well as hire an outside counsel to advise it in its investigations. That hasn’t happened either.

Congress, in 1999, took away DOJ’s power to demand the D.C. Circuit appoint an independent counsel with prosecutorial power equal to the attorney general when high-ranking officials in the federal government engaged in criminal wrongdoing. However, the attorney general (or acting attorney general, in cases in which the attorney general is recused) is still authorized to appoint a special counsel when a criminal investigation of a person or matter is warranted so long as two conditions are met: an investigation or prosecution by a U.S. Attorney’s Office or litigating division of the DOJ would present a conflict of interest, and the public interest requires appointment of counsel independent from the DOJ. We therefore can infer that Holder’s decision to not appoint a special counsel, and instead ask the FBI to investigate the IRS, suggests that Holder believes no “conflict of interest” exists and it’s not in “the public interest” to have any outside scrutiny of the IRS.

Having exhausted the legislative and executive branch options, only the courts are left. Rule 53 of the Federal Rules of Civil Procedure would allow the federal courts, especially those hearing any of the current challenges to the IRS by tea party groups, to appoint what is called a “special master” to perform investigative and enforcement duties consented to by the parties in the dispute. This also includes authority to conduct an evidentiary hearing and exercise the appointing court’s power to compel, take and record evidence. With a gridlocked Congress and a White House pleading ignorance, the judiciary may be the only government institution capable of providing the thorough and accurate government accountability the American people deserve.

Dan Epstein is the executive director for Cause of Action.

REPORT: Ethical Violations and Retaliation: How to Get Promoted at the Bureau of Indian Affairs

According to a Department of the Interior, Office of the Inspector General (DOI OIG) report  and numerous complaints filed by Bureau of Indian Affairs (BIA) employees, Jeanette Hanna, the former Regional Director of the Eastern Oklahoma Regional Office of the BIA, mismanaged tribal trust funds, abused her authority, retaliated against employees, steered contracts, and had an inappropriate relationship with a government contractor that created a conflict of interest.  The DOI OIG report reveals that there were at least 17 formal complaints, 2 separate DOI OIG investigations, and 4 different reviews by the BIA and the DOI Office of Policy, Management and Budget (PMB) of Hanna’s behavior between 2005 and 2011.  Just how badly must a federal employee behave before getting fired?

In November 2009, the BIA placed Hanna on detail in Washington, DC, while the Office of the Assistant Secretary for Indian Affairs (AS-IA) reviewed her alleged ethical violations.  Hanna remained on detail for more than 500 days longer than allowed by agency rules.  However, no action was ultimately taken by the AS-IA, so the DOI OIG initiated an investigation in August 2011 after receiving information that BIA officials failed to act on the complaints against Hanna.

During the AS-IA’s formal review of the complaints against Hanna, investigators interviewed BIA employees who were “physically shaking” because they were so afraid Hanna might retaliate against them.  As the AS-IA discovered, Hanna had previously installed 40 “extra” security cameras with live feeds she used to monitor employees in her regional office, and the initial AS-IA report confirmed that Hanna engaged in retaliation and harassment of employees.  However, this report appears to have been ignored by higher ups at the AS-IA, who dismissed the findings as “minor personnel issues” and just so happen to be friends with Hanna.

Hanna not only fostered a hostile work environment.  The DOI OIG’s report ultimately found that the failure of the BIA and AS-IA to ensure Hanna followed agency spending procedures cost the government nearly $200,000.  After reviewing travel vouchers from Hanna’s detail filed by the AS-IA (to whom she had been assigned even though it was the AS-IA investigating her), investigators found an almost complete failure to comply with tax laws and agency regulations.  In sum, Hanna was reimbursed over $130,000 in travel costs, as she often traveled between Oklahoma and DC, with her $117-a-night hotel room sitting empty for weeks for at a time.  Perhaps even more outrageous, Hanna decided she required an agency-provided SUV for the over-two-year detail in DC “because of the snow,” as she later explained to investigators.

Following the DOI OIG’s referral, the U.S. Attorney’s Office (USAO) for the District of Columbia declined to prosecute this case.  While the USAO might have determined that the evidence did not warrant a criminal prosecution (even though Hanna still owes significant back taxes on her travel reimbursements), it is disturbing that such blatant disregard for agency regulations and federal law has warranted no punishment for Hanna.

To read the full story, see our investigation analysis here.

Drakes Bay Oyster Company Appeal Filings

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.

Filed 2/06/13:

Appeal 

Exhibit 1

Exhibit 2

Exhibit 3

Filed 2/07/2013

Motion for Expedited Ruling

Support for Expedited Ruling from Peter Prows

Filed 2/11/2013

Order Denying Injunction Pending Appeal (From Judge YVONNE GONZALEZ ROGERS)

Filed 2/12/2013:

Emergency Motion for Injunction Pending Appeal

Declaration of Amber Abbasi in Support of Emergency Motion

Filed 2/20/13:

Opposition to Emergency Motion (Filed by DOJ)

Filed 2/21/13:

Opposition to Amici Motion

Proposed Brief ISO Opp to Amici Motion to Participate

Declaration of Amber D. Abbasi ISO Reply to Emergency Motion

Exhibit 1 to Abbasi Declaration

Exhibit 2 to Abbasi Declaration ISO Reply to Emergency Motion

Exhibit 3 to Abbasi Declaration ISO Emergency Motion

Exhibit 5 to Abbasi Declaration ISO Reply to Emergency Motion

Reply to Emergency Motion for Injunction Pending Appeal

Filed 3/6/13:

Opening Brief and Statutory Addendum

Filed 4/3/13:

Appellee’s Answering Brief (Filed by DOJ)

Filed 4/22/13:

Appellants’ Reply Brief

How HHS Secretary Sebelius Broke Federal Law and Avoided Punishment

We’ve written before about Secretary of Health and Human Services Kathleen Sebelius violating the Hatch Act.  By campaigning for Walter Dalton’s election as Governor of North Carolina and Barack Obama’s reelection as President at a Human Rights Campaign Gala, Sebelius used taxpayer funding for her own partisan priorities.  The precedent for presidentially-appointed and Senate-confirmed federal employees violating the Hatch Act is resignation.  Sebelius is the highest-level federal employee to break this law, but President Obama, the sole administration official with the authority to see that the penalty for this violation was paid, not only declined to ask Sebelius to resign, but opted to keep the Secretary on for his second term.  White House spokesman Eric Schultz contended that this administration holds itself “to the highest ethical standards[,]” but the facts of the Sebelius debacle would suggest otherwise.

Sebelius labeled her speech at the Human Rights Campaign Gala as an “official” event, meaning that not only would her travel and time be paid for by the taxpayer, but the time and travel of her aide, AJ Pearlman, would be covered as well.  The Hatch Act is a federal law which, according to OSC, “prohibits federal employees from using their official authority or influence to affect the outcome of an election.”  For instance, the Secretary of Health and Human Services, under the law, cannot campaign for a political candidate using her official title, because this would be an abuse of government authority; nor can she use taxpayer-funded travel or the work hours of taxpayer-funded employees and aides to support a political event, because this would be an abuse of taxpayer funding, furthering a personal and political end.  However, Secretary Sebelius committed each of these violations at the HRC Gala – then attempted to cover it up.

In the first half-hearted attempt to make up for this abuse, Sebelius quickly reclassified the event as “political” instead of “official.”  This retroactive attempt to erase the fact that she used her standing as a Cabinet member to influence two upcoming elections was insufficient, and OSC nevertheless concluded that Sebelius did in fact violate the Hatch Act.

The second part of the abuse was the taxpayer dollars spent on the event, and accordingly, Sebelius had an HHS assistant request that the Democratic National Committee reimburse the government for her own travel.  Even this first attempt was mishandled, however: in January 2013, we filed an FEC complaint explaining that the DNC failed to properly disclose this reimbursement.  In fact, the reimbursement was almost impossible to connect to Sebelius’ Hatch Act violation at all: the DNC sent a check marked only with the word “travel” – preventing accountability in determining whether Sebelius’ violation of the law was truly “repaired” by reimbursement for her travel.

But the missteps didn’t end there.  Cause of Action found, after sending Freedom of Information Act requests to four separate agencies, that the U.S. Treasury was not, in fact, reimbursed.  Cause of Action’s FOIA request to the U.S. Treasury’s Financial Management Service turned up no responsive records – even though our FOIA production from OSC proved that Sebelius was ordered multiple times to reimburse the U.S. Treasury.  In the production we received from our FOIA request to HHS, Cause of Action found the DNC’s check, sent to reimburse HHS, not the Treasury:

sebeliusblog1

While White House press secretary Jay Carney again assured reporters that “the U.S. Treasury has been reimbursed,” this has clearly not been the case.  OSC did, however, recognize that HHS was reimbursed instead of the U.S. Treasury, but failed to take action on it, as showed by Cause of Action’s FOIA production from OSC:

sebeliusblog4

The improper reimbursement raises the question of whether the cost of the trip was truly reimbursed, or whether HHS was simply free to use the funds as it wished.  Because OSC did not insist on the proper execution of its own requests for reimbursement, taxpayers dollars remain, in effect, unrecovered.

While the reimbursement for Sebelius’ costs was bungled many times over, Sebelius was not the only federal employee affected by her violation.  In her lengthy process of abdicating responsibility for campaigning on the taxpayer dime, Sebelius effectively threw her own aide under the bus.  AJ Pearlman provided background research in preparation for the HRC Gala where Sebelius promoted Democratic candidates, and attended the event to assist.  As Cause of Action showed in an OSC complaint, when Sebelius scrambled to save her own skin by retroactively reclassifying the event as political instead of official, she made Pearlman’s actions illegal as well.  OSC openly acknowledged that Pearlman’s efforts could not legally be funded by the federal government and ordered Sebelius to reimburse the Pearlman’s travel costs as well, as revealed in a letter from OSC to HHS:

sebeliusblog2 sebeliusblog3

As Cause of Action showed in its January 2013 OSC complaint, if Pearlman’s actions, after Sebelius’s campaigning on government time, could not be funded by taxpayer dollars, then Pearlman too would have committed a Hatch Act violation.  As the OSC wrote to HHS: “the Hatch Act would have prohibited” Pearlman’s work on the HRC event – and so the funding had to be reimbursed.  Cause of Action did its part, but OSC has thus far refused to uphold its own rules (read more about Cause of Action’s letter to Congressman Darrell Issa requesting for investigation into OSC’s failure to execute its duties here).

OSC made clear in the excerpts above that had Sebelius classified the event as political from the beginning, Pearlman’s work would have prohibited by the Hatch Act, but it still chose not to take action against Pearlman. Additionally, the President refused to take any action against Sebelius for her violation, claiming that Sebelius’ meeting with “ethics experts” solved the problem.  The White House won’t hold Sebelius accountable, the U.S. Treasury has not been reimbursed, and OSC’s selective enforcement of the Hatch Act hides Sebelius’s victim: the aide who did as requested.

Sebelius broke federal law but the White House chose not to do its job and ask for her resignation – it seems that its “ethical standards” could use some work.

GAO on CPPW: Nothing to See Here

Arriving in the context of a broader lobbying controversy, the Government Accountability Office (GAO) recently released a report on the Centers for Disease Control and Prevention’s (CDC) lobbying policies. Even by the standards of government investigators, the GAO did a pathetic job examining the degree of CDC oversight of the Communities Putting Prevention to Work (CPPW) program and its award recipients.  It makes more sense to describe GAO’s work as a survey of CDC employees, rather than as an independent evaluative report.

In responding to requests for information from Senators Lamar Alexander (R-TN), Tom Coburn (R-OK), Susan Collins (R-ME), and Orrin Hatch (R-UT), the GAO reviewed:

[D]ocuments provided by CDC, including the written policy on lobbying that pertained to CPPW award recipients; CPPW award notices, which were the written agreements between the CDC and recipients; documentation generated by CDC staff during the monitoring of CPPW recipients; and CDC site visit reports.

The GAO also interviewed CDC officials regarding the lobbying policy that applied to CPPW award recipients in two hundred eighty CPPW cooperative agreements, all of which were made in fiscal year 2010.

But just over six weeks ago, Cause of Action (CoA) released its own report, “CPPW: Putting Politics to Work,” examining twelve grant recipients based on responses to FOIA requests we sent to the CDC. Of those twelve, eight appeared to use federal funds to illegally lobby for things like tobacco taxes, clean air ordinances, and bans on sugary-sweetened drinks, rather than on sensible preventative health efforts.

CoA’s report also demonstrated that the CDC failed to take comprehensive action in one case of illegal lobbying it actually managed to identify.  While the GAO had access to information on all grant recipients and considered two potential lobbying violations identified by the CDC, CoA continues to await more information from the CDC on the other grant recipients. If we found that eight of the twelve we have been able to investigate up to this point are at risk of violating federal law, how many more instances are out there that the GAO and CDC have failed to uncover?

Unfortunately, the GAO’s report was not a substantive investigation. In fact, the most noteworthy aspect of the GAO report is how sparingly the GAO examined the CDC’s ability to follow-through on its own processes for correcting instances of illegal lobbying by grantees.  Instead, the GAO confirmed that the CDC engaged in no active audit function for the CPPW program, could not independently verify subrecipient expenses, and depended on self-reporting by grantees.

These findings are particularly troubling because, as the GAO fails to mention in its report, by 2015 the Department of Health and Human Services will be able to spend $2 billion per year in perpetuity on similar programs through the Affordable Care Act’s Prevention and Public Health Fund.

 

Jon Corzine: The rogue trader that is too big to jail

More than two years after MF Global blew up and vaporized customer money, the CFTC and CFTC Chair Gary Gensler are finally receiving scrutiny for their actions during MF Global’s bankruptcy.

The CFTC’s watchdog said Gensler was intimately involved with the events leading up to the collapse, but only decided to recuse himself from the case after the official bankruptcy. His recusal was “unnecessary and wasn’t required by ethics rules” according to CTFC’s Inspect General.

Gensler also used his personal email to communicate with staff, which raises questions about the ability to obtain the email records via a Freedom of Information Act Request. Gensler claimed he used personal email because “he did not know how to access his work e-mail from home.” The House Oversight Committee has requested access to his emails from his personal account.

How Jon Corzine went from this

Via Fox Business

To this

Via DailyBail

But still hasn’t been held accountable

The MF Global rogue trader that lost $141 million in an overnight trade in 2008 was sentenced to five years in prison and ordered to pay $141 million in restitution. Ex-CEO of MF Global Jon Corzine put a $6 billion bet on European debt, failed to implement adequate controls despite multiple warnings, and illegally used $1.6 billion in  customer funds (Report and lawsuit). His punishment? He might have to start a hedge fund.

Joe Biden called Corzine “the smartest guy I know in terms of the economy and on finance,”  but Corzine insists his stewardship of MF Global was like this:

Via Imgur

Instead of this:

Via Biosocket

Friends in the right places

Corzine served as CEO of Goldman Sachs for 5 years before heavily financing his campaigns for Senate and Governor of New Jersey. Corzine was a top bundler for President Obama’s reelection campaign and is credited with raising $500,000 or more. Gary Gensler, head of the Commodities Futures Trading Commission (a financial regulator with oversight of MF Global), was a Goldman Sachs alum with Corzine and others in executive positions at MF Global. CFTC’s Director of Public Affairs is a former Corzine aide from his time in the U.S. Senate.

MF Global representatives met with CFTC officials 10 times during 2010 and 2011 and MF Global paid firms a total of $130,000 to lobby the CFTC for favorable regulations in 2010 and 2011.

More than two and a half years after the collapse of MF Global, the CFTC has not issued any enforcement actions and the investigation is still ongoing.

The National Futures Association could not even vote to ban Corzine from trading with other people’s money.

A perfect storm of special treatment

The New York Fed fast tracked MF Global’s primary dealer application shortly after Corzine was announced as CEO. Despite 3 straight years of losses, weak internal controls, and a risky new business strategy, MF Global was designated a primary dealer. It announced a $4.7 million loss for the quarter the following day.

The Financial Industry Regulatory Authority (FINRA) granted a waiver for two required licensing exams which it gives mainly to those returning from public service or to management professionals. Unlike other CEOs, Corzine directly traded with company money and even had his trades separated in documents with his initials: JSC.

If you had blown up a company and illegally used $1.6 billion in customer funds:

Via Times Union

Meanwhile, Corzine is living it up because his political connections leave him unaccountable:

HARDI Responds to Motion Opposing Its Standing in Court

A press release from HARDI and reposted here:

HARDI Responds to Motion Opposing Its Standing in Court


Columbus, Oh
io – Heating, Air-conditioning & Refrigeration Distributors International (HARDI) submitted a court filing Tuesday, May 28, 2013, in the Regional Efficiency Standards lawsuit in the U.S. Court of Appeals. This filing is in response to a motion by the American Public Gas Association (APGA) which seeks to deny HARDI an opportunity to present compelling information before the court.

On May 1, 2013, when the court accepted a stay from the furnace standard, it asked all parties involved to schedule additional briefings with the court. HARDI has sought to comply with the court’s wishes to schedule briefings, but filings by other parties have complicated and delayed the process.

HARDI believes the court should deny APGA’s motion and recognize that HARDI has standing to challenge the Direct Final Rule in its entirety.

Jon Melchi, HARDI director of government affairs, said, “HARDI continues to believe the facts of this case are on its side and will take every opportunity possible to communicate those facts. HARDI, with the support of the membership, will continue to fight this case of government overreach which we believe harms the HVAC industry.”

Dan Epstein, executive director of Cause of Action, who is representing HARDI in this lawsuit, said, “We hope the court honors the merits that HARDI brings to this case so that they can continue to fight against the abuse of discretion by the Department of Energy that is affecting thousands of Americans.”

 

For more information about HARDI’s case against the Department of Energy click here.