Archives for 2014

Cause of Action Pursues Multimillion Dollar Fraud Lawsuit Against the Chicago Transit Authority After Justice Department Refuses to Intervene

FOR IMMEDIATE RELEASE                                                                                                     CONTACT:      

January 20, 2014                                                                                                        Mary Beth Hutchins, 202-400-2721

Cause of Action Pursues Multimillion Dollar Fraud Lawsuit Against the Chicago Transit Authority After Justice Department Refuses to Intervene

WASHINGTON – Cause of Action (CoA), a government accountability organization, is pursuing False Claims Act litigation against the Chicago Transit Authority (CTA) for engaging in systemic fraud at the expense of American taxpayers. The Department of Justice (DOJ), led by Attorney General Eric Holder, declined to intervene in the case.

CoA first brought the lawsuit to the DOJ’s attention on May 8, 2012, uncovering up to $150 million in taxpayer funds that the CTA may have improperly received by overreporting mileage for grant funding dating as far back as 1982. On December 16, 2013, the DOJ refused to intervene despite the Federal Transit Administration’s (FTA) own determination on April 27, 2012 that the CTA had misreported data in 2010.  Furthermore, the Department of Transportation’s (DOT) Inspector General and the FTA communicated about the need for recusals of agency employees moving forward.

In addition to the improper reporting, there exists potential conflicts of interest between the CTA and the Executive Branch; most notably Robert S. Rivkin, the current General Counsel at the DOT, who formerly served as CTA’s General Counsel from 2001 to 2004, and Valerie Jarrett, current Senior Advisor to the President, who was formerly a chair of CTA from 1995 to 2003.

“We are pursuing this fraud lawsuit against the CTA because American taxpayers deserve accountability,” said Cause of Action’s Executive Director, Dan Epstein. “The reputations of political insiders cannot be more important than the integrity of federal programs and the protection of taxpayer funds. When the federal government, including Department Inspector Generals, cannot be counted on to discourage fraud, citizen watchdog groups like ours must intervene.”

According to a report by the House Committee on Oversight and Government Reform, this isn’t the first time the DOJ decided not to intervene in a high-profile fraud case: In 2009, the DOJ and then Assistant Attorney General, Thomas Perez, who is the current Secretary of Labor, declined to intervene in a whistleblower lawsuit alleging the City of St. Paul improperly received federal funds. Perez’s decision, apparently involving an inappropriate quid pro quo agreement with the city, allowed the fraud to go unpunished.

In October 2012, CoA released an investigative report about fraud at the CTA, which can be read 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

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

Statement on FTC Denial of Motion to Dismiss

On January 16, 2014, and as predicted, the FTC denied LabMD’s Motion to Dismiss its administrative case against the company.

FTC has never issued data security regulations for patient information.  The Department of Health and Human Services has.  And, FTC admits LabMD complied with those regulations.  But in its decision and order, which can be found here, FTC said compliance with HHS regulations did not matter.  Instead the “concrete circumstances of this case” provide an opportunity for the FTC to address “whether or not LabMD’s data security procedures constitute ‘unfair . . . acts or practices’” without regard for HHS’s rules.

Furthermore, FTC already had the opportunity to investigate whether or not it believed that LabMD’s data security procedures were “unfair” by issuing a Civil Investigative Demand (CID).   After years of investigation, FTC sued LabMD.  In other words, FTC’s approach is verdict first, trial after.

In its decision, FTC justifies its actions by saying Congress extended it rulemaking tools to regulate data security problems. The FTC concedes that they have the rulemaking authority, yet they chose to not engage in rulemaking. Instead they issued a CID and brought an enforcement action.

FTC’s actions here, from its claim of authority over patient information to its “pre-cooked” administrative action and verdict to its refusal to issue regulations and provide fair notice, have resulted in a gross bureaucratic overreach that is destroying a small cancer detection laboratory business.   This overreach must be stopped.  And that’s why Cause of Action will continue to fight the FTC’s arbitrary abuse of power in federal court.


Fox News: ‘Excessive’: Marine biologist ends 7-year legal battle with feds over feeding whales

Read the full story: Fox News

Cause of Action Executive Director Dan Epstein helped negotiate the deal and says the original charges against Black “certainly seemed excessive” and warns her case is a cautionary tale.


“Providing pro bono assistance to individuals like Nancy Black allows Cause of Action to fight back against overzealous and unfair prosecutions in order to preserve the rule of law and economic opportunities for all Americans,” Epstein said in a statement to “While we don’t understand why the federal government took aggressive actions against her, we hope Ms. Black will be able to quickly get back to her successful whale-watching business and her research.”

The Hill: Safety commission moves to dismiss Buckyball lawsuit

Read the full story: The Hill’s RegWatch

That’s when the accountability watchdog group Cause of Action stepped in to defend Zucker.


“This case is very much about what reins there are on the government,” Cause of Action Executive Director Dan Epstein said Wednesday in an interview. “The government is essentially saying it can go after former corporate officers (who have done nothing illegal). It sets a dangerous precedent for innovators and entrepreneurs in the United States.”


At issue is the notion of limited liability — whether business owners and corporate officers should be personally responsible for the actions of their companies.


Cause of Action and Zucker fought back with a counter lawsuit that argues the government exceeded and “abused” its authority by going after a business owner — an individual person — who had not broken any laws.

Related Documents: U.S. v. Nancy Black

United States District Court for the Northern District of California

Proceeding for Final Sentencing Hearing (January 13, 2014)

Defendant Nancy Black’s Response to the Government’s Sentencing Memorandum (January 8, 2014)

Defendant Nancy Black Sentencing Memorandum (December 30, 2013)

Plea Agreement (April 23, 2013)

Indictment (January 4, 2012)

Dan Epstein on WIBA-AM Upfront w/ Vicki McKenna 01/14/2014

Discussing the FBI’s decision to forego criminal charges in the IRS investigation.

Related Documents: IRS Targeting & Politicization

Sensitive Case Reports: A Hidden Cause of the IRS Targeting Scandal

Read our full report on IRS targeting here. (March 2017)

TIGTA FOIA Litigation

Final Response to Cause of Action FOIA Request (December 15, 2014)

Joint Status Report and Proposed Schedule (December 5, 2014)

Clarification of Initial Response to Cause of Action FOIA Request (December 5, 2014)

TIGTA Response to Cause of Action FOIA Request(December 1, 2014)

Opinion (September 29, 2014)

Reply Brief (March 17, 2014)

Complaint (August 9, 2013)

IRS FOIA Request regarding IRS Targeting and Records Management

FOIA Request (July 23, 2014)

IRS FOIA Request and Lawsuit

Plaintiff’s Cross-Motion for Summary Judgment (June 10, 2014)

Complaint (June 19, 2013)

October 9, 2012

FOIA Request: records of communication between the White House and the IRS concerning taxpayer information, particularly communications that were not made pursuant to 6103(g) of the tax code, which authorizes the President to request any individual’s tax return information from the IRS.

FOIA request to TIGTA August 16, 2013

Request for access to the work calendars of Inspector General J. Russell George from March 1, 2012 to July 31, 2013.

FOIA production received from TIGTA December 30, 2013