Archives for May 2015

Moultrie News: Mira retrieves eight cases of underwater wine, extending commitment to innovation

Read the full story: Moultrie News

Mira Winery, a producer of critically acclaimed wines exclusively from Napa Valley, announced today that it had retrieved seven cases of the winery’s Rutherford Cabernet and one case of Chardonnay, a fraction of the winery’s total production, as it extends its commitment to innovation. As part of that effort, Mira will join forces with Cause of Action, a national, nonpartisan government accountability organization, to fight back against government overreach that threatens to stifle Mira’s Aquaoir experiment… Mira has partnered with Cause of Action. The legal non-profit group will provide counsel as Mira tries to understand the government’s intentions and resolve the issue. Mira has filed additional requests based on the Freedom of Information Act. The findings of these requests will inform next steps.

Nonpartisan Transparency Coalition Asks Federal Trade Commission For Information About Email Use

Cause of Action, along with MuckRock News and National Security Counselors, have submitted a Freedom of Information Act (FOIA) request to the Federal Trade Commission seeking to determine whether agency employees may be attempting to shield government records.

The FOIA specifically seeks “access to all records referring or relating to, but not maintained or hosted on, the domain name”

The existence of this domain was recently confirmed via emails obtained by MuckRock showing that FTC Chairwoman Edith Ramirez lobbied former Sen. Jay Rockefeller to delay important FOIA reform legislation late last year. MuckRock requested those emails based on a tip from Cause of Action.

The emails show not only how the FTC lobbied aggressively against transparency reform, but also that Jeanne Bumpus, the FTC’s congressional liaison, used a non-government email account,, to lobby the FTC.

“While this revelation may come as a shock to some, opacity at the FTC is nothing new to us,” said Cause of Action Executive Director Dan Epstein.

On a related note, Cause of Action is currently defending LabMD, a cancer detection facility that is being targeted by the FTC. Throughout our efforts, the FTC has failed to fully cooperate with our requests to view agency communications regarding the case.

Cause of Action Sues the Justice Department For Information On Tax Detail Program

Cause of Action, a nonprofit government accountability organization, recently discovered that the Department of Justice has been placing their Tax Division attorneys, some of whom have worked directly on the IRS targeting scandal, in the White House to provide legal advice to the President.

Having found no evidence of agency policies in place to safeguard against confidential tax information being shared with the wrong people, this practice of DOJ attorneys being detailed at the White House is alarmingly urgent.

In April, Cause of Action submitted several Freedom of Information Act requests and sent a letter to the Justice Department Inspector General Michael Horowitz. These documents sought answers to whether appropriate legal and ethical safeguards are in place at both the Office of White House Counsel, as well as the DOJ, to ensure that detailed attorneys are appropriately screened to prevent confidential taxpayer returns and/or return information protected under Section 6103 of the Internal Revenue Code from being unlawfully accessed or disclosed.

Having received no response from the government since our April requests, Cause of Action on Tuesday filed a complaint in U.S. District Court for the District of Columbia against the Department of Justice and Internal Revenue Service.

As the complaint states, CoA is seeking the release of records relating to how the federal government protects Americans’ private tax information when government attorneys have the power to access and disclose that information. These records have been requested and improperly withheld by the Internal Revenue Service and United States Department of Justice.

“Given the IRS’ track record of failing to protect confidential tax information, this lack of agency oversight is a threat to our privacy and democracy,” said Cause of Action President Dan Epstein. “Ethical and legal protocols at these agencies should be held to the highest standards, especially when government attorneys are accessing confidential taxpayer return information while intermittently leaving to work in the White House.”

The case number is 15-cv-00770.

[Read the Complaint below]


ECF No. 1 5.26.2015 Complaint

ECF No. 1-1 5.26.2015 Exhibits 1-15 to Complaint

Daily Caller: Cause of Action Sues DOJ, IRS On Protecting Tax Info From White House Abuses

Read the full story: Daily Caller

A watchdog group filed a complaint against the Department of Justice and the Internal Revenue Service Wednesday after the two agencies failed to respond to Freedom of Information Act requests  for documentation of how they protect Americans’ private tax information from abuse by government attorneys.  Cause of Action, a nonprofit government accountability group, filed the claim in the U.S. District Court for the District of Columbia seeking to force the agencies to disclose information regarding how Justice Department tax attorneys assigned to the White House are screened before gaining access to taxpayers’ confidential information. “Given the IRS’ track record of failing to protect confidential tax information, this lack of agency oversight is a threat to our privacy and democracy,” said Cause of Action President Dan Epstein in a statement. “Ethical and legal protocols at these agencies should be held to the highest standards, especially when government attorneys are accessing confidential taxpayer return information while intermittently leaving to work in the White House.”  Cause of Action recently found that Justice Department tax attorneys, some of whom worked on the IRS’s illegal targeting of conservative and Tea Party non-profit applicants during the 2010 and 2012 elections, now work in the White House giving legal advice.

Cause of Action Asks Federal Court To Reconsider Complaint Filed By Small Business Owner Who Is Being Wrongly Targeted By The Federal Government

This week, Cause of Action filed an opening brief on behalf of Rhea Lana, Inc. and Rhea Lana’s Franchise Systems, Inc. in Rhea Lana v. U.S. Department of Labor (No. 15-5014). The case is now pending in the United States Court of Appeals for the D.C. Circuit.

In a nutshell, Rhea Lana’s is appealing from the district court’s dismissal of its case on procedural grounds. The brief we’re filing explains why the district court erred, and why Rhea Lana’s complaints against the Department of Labor are ready for the district court to consider on the merits. Here is some key background on the case.

Rhea Lana’s is a family-owned business that organizes consignment sales of children’s clothing in 24 states. Rhea Lana’s, like other consignment industry participants, gives its consignors the opportunity to volunteer at consignment events to set up, write price tags, check inventory, and help with sales.

Consignors are typically young stay-at-home mothers, working mothers, and retired grandmothers, and many of them are also interested in shopping at the sales where they contribute clothing. Volunteering gives them the opportunity to shop early and a higher likelihood of selling their own items — not to mention the chance to build friendships with other moms. In short, volunteering is a “win-win” for all concerned.

The Department of Labor, though, wants to put a stop to it. In 2013, the Department notified Rhea Lana’s that its volunteers are actually employees under the Fair Labor Standards Act (FLSA), and are therefore entitled to back wages. The Department also informed Rhea Lana’s that if it doesn’t start treating its volunteers like employees, which would put Rhea Lana’s at a major competitive disadvantage in the industry, Rhea Lana’s would be liable for statutory penalties. Even worse, the Department sent a letter to Rhea Lana’s volunteers telling them that they have a right to sue Rhea Lana’s themselves. Tellingly, none have taken up that offer.

Rhea Lana’s sued the Department, arguing that due process and basic principles of federal administrative law ought to prevent the government from punishing entrepreneurship, undermining the culture of volunteerism, and depriving mothers of the opportunities that volunteering affords.

The United States District Court for the District of Columbia dismissed Rhea Lana’s complaint on November 21, 2014.  Even though the Department has told Rhea Lana’s that it is in violation of the FLSA and liable for penalties if it doesn’t change its business model, the district court held that there hasn’t been any “final agency action” by the Department that’s ready for judicial review.

As Cause of Action’s opening brief shows, though, that’s completely mistaken: The Department’s letters determine Rhea Lana’s rights, effectively order Rhea Lana’s to conduct its business differently, and change Rhea Lana’s legal position for the worse.  That’s all that Rhea Lana’s needed to show, and all that’s required for the district court to reach the merits and decide whether the Department’s bullying can stand.

Looking ahead, the Department’s response brief is due on July 6, 2015. Rhea Lana’s has requested oral argument.

Wall Street Journal: The Wine-Dark Sea of Regulation

By: Jim Dyke Jr.

On May 27, our Napa Valley winery will pull eight cases of Cabernet Sauvignon out of Charleston Harbor in South Carolina. We placed them there six months ago, protected from the elements, following similar experiments in the past two years. The cold water and the tides seem to expedite the aging process, and we believe that our ocean-aged fine wine—which we’ve trademarked as Aquaoir—could revolutionize how vintners around the world think about winemaking. The only obstacle: the federal government.

For more than a year, our winery has been targeted by the Treasury Department, specifically, the Alcohol and Tobacco Tax and Trade Bureau. The agency believes our product is unfit for human consumption, despite an utter lack of evidence, and it has threatened to revoke our winemaking license. Washington doesn’t recognize this wine for what it is: the product of entrepreneurship and experimentation.

As a small business in a highly competitive industry, we out of necessity want to stand out through innovation. The aging process was the logical place to start. The traditional technique, developed in France hundreds of years ago and hardly changed, is to age wine at a cool 55 degrees Fahrenheit, often for years or decades. Such factors as light and pressure are also important.

Aware of the renown that has historically been attached to wine pulled up from shipwrecks after years on the ocean floor, we decided to see if intentionally submerging wine bottles for months at a time could speed the aging process and enhance flavor along the way. Our search for an ideal location eventually took us to Charleston Harbor. Sixty feet under the waves, there exists a promising blend of temperature, pressure and darkness, with the additional variable of constant motion.

In February 2013, we submerged four steel mesh cages, each containing a case with 12 bottles of our winery’s 2009 Cabernet Sauvignon. To protect the wine, the top of each bottle was coated with high-grade wax sealant. The bottles were left underwater for three months.

After retrieving the wine, we blind-tasted it with a sommelier, comparing it with the original land-aged vintage. It became immediately clear that the ocean had somehow sped the aging process. Intrigued, we took the wine to several experts and chemists, who confirmed that the experiment had created a vintage that, for its age, had uncharacteristically round tannins—the sign of a mature wine.

We promptly took the new product on a road trip, hosting tastings with sommeliers and food-and-beverage experts in Washington, D.C., New York, Los Angeles and San Francisco. The experimentation also continued, with eight cases sitting in Charleston Harbor for six months rather than three.

The tour prompted a certain amount of publicity last year. That’s when we heard from the feds. In March 2014 the Alcohol and Tobacco Tax and Trade Bureau sent us an email saying that it had identified several potential safety concerns regarding the ocean-aged wine. The letter was informal and contained no indication that we should cease and desist. We retrieved the eight cases, conducted additional tests and dropped a third batch into Charleston Harbor in November.

Then the federal government tried to end our experiment…

Read the full story: Wall Street Journal

Cause of Action Asks Appellate Court to Disallow Government-Sanctioned Abuse of Federal Grant Program in President’s Hometown

By: Laura N. Begun 

This week, Appellant Cause of Action filed a reply brief in Cause of Action v. Chicago Transit Authority, pending in the United States Court of Appeals for the Seventh Circuit.

This case arises from Cause of Action’s investigation into CTA’s long-standing practice of misreporting data used by the Federal Transit Administration to allocate federal grant funds. Cause of Action’s investigation revealed that CTA’s potentially fraudulent reporting from 1982 to 2011 allowed CTA to pocket up to $150 million in undeserved taxpayer dollars. Adding insult to injury, federal officials knew about CTA’s misreporting, yet continued to allow CTA to receive unearned grant funds year after year.

Cause of Action filed suit on behalf of taxpayers pursuant to the False Claims Act (“FCA”), which allows private citizens to sue based on fraud against the federal government. However, the lower court dismissed the case on procedural grounds, finding that the Seventh Circuit’s interpretation of the FCA prevented Cause of Action from the opportunity to prove that CTA committed fraud.

The FCA provides that a case cannot proceed if the lawsuit’s allegations are substantially the same as information that has already been publicly disclosed in a government audit, report, hearing or investigation. Cause of Action disputes that there has been a public disclosure of the information in its complaint. The documents at issue are a state audit report, a private memorandum provided to government officials, and a private letter from the Federal Transit Administration to CTA, and none contain information about a potential fraud.

On appeal, Cause of Action is asking the Seventh Circuit to overturn its interpretation of the FCA’s public disclosure bar, which allows a defendant like CTA to escape liability for knowingly submitting a false claim for federal funds if a responsible government official knew about the wrongdoing, yet did nothing to disallow the claim.

The Seventh Circuit’s interpretation improperly equates a disclosure to the government as a disclosure to the public, contrary to the plain language of the FCA and Congressional intent. This interpretation also contradicts the approach followed by a majority of circuit courts, which require a disclosure of potential fraud to the public at large.

Cause of Action requested oral argument, which the Court could schedule later this summer.