Archives for September 2016

September Newsletter

Cause of Action Institute published its September newsletter today. You can read the newsletter here and subscribe to the newsletter here.  The September newsletter highlights:

  • documents CoA Institute recently obtained through FOIA revealing a secret agreement between the IRS and the White House to exempt IRS rules from prepublication review;
  • details of our investigation into taxpayer reimbursements for luxury travel of a political appointee and cash payments to Iran; and
  • links to a recent op-ed Judge Lechner wrote about the spread of partisan politics into the Cabinet and to several press stories about recent CoA Institute activities.


Court Rightly Denies Rep. Van Hollen Request to Rehear Free Speech Case

Supporters of free speech and the First Amendment won a significant victory this week when a federal court denied a last ditch effort by Congressmen (and Senatorial candidate) Chris Van Hollen (D-Md.) to salvage his campaign finance case.

On January 21, 2016, a DC Circuit panel reversed the District Court for the District of Columbia and upheld a Federal Election Commission (“FEC”) regulation requiring unions and corporations (including nonprofit organizations) to disclose only those contributors who donate for the purpose of funding an election campaign.

Van Hollen had sued the FEC, arguing that such organizations should be required to reveal all donors, not just those that donate for an election. On appeal to the DC Circuit, CoA Institute filed an amicus brief in support of free speech principles. The DC Circuit agreed with the CoA Institute position that the FEC had struck an acceptable balance between disclosure requirements and First Amendment protections.  In so doing, the Court emphasized a number of points made in the CoA Institute brief, particularly the importance of protecting the constitutional rights of contributors to privacy and anonymous speech.

Following the DC Circuit decision, Van Hollen moved the entire DC Circuit to rehear the case (a rehearing en banc).  On September 27, 2016, the full court denied the petition.  Pending a Supreme Court appeal, the DC Circuit decision is now final.

Cause of Action Institute Investigates Taxpayer Bailout of ObamaCare Insurance Companies

Washington, D.C. – Cause of Action Institute (CoA Institute) today sent a Freedom of Information Act (FOIA) request to the Centers for Medicare and Medicaid Services (CMS) to investigate the Obama administration’s apparent attempt to bailout insurers through judicial settlements to compensate for shortfalls in the Affordable Care Act (ACA) risk corridors program.

CoA Institute President and CEO, and former federal judge, Alfred J. Lechner, Jr.: “The continuing failures of the ObamaCare Risk Corridors Program raise serious concerns about the long-term viability of the program.  It appears the administration is attempting to circumvent the law by bailing out insurance companies through judicial settlements. Americans deserve to understand how far the administration is willing to go to prop up a failing program with taxpayer money.”

Under the ACA, the Risk Corridors Program was supposed to collect payments from insurers with lower than expected losses and redirect the money to subsidize insurers with higher than expected losses. But because of the monetary shortfalls in the risk corridors program, payouts have been limited.

On September 9, 2016, CMS released a document entitled “Risk Corridors Payments for 2015,” stating that “no funds will be available at this time for 2015 benefit year risk corridors payments.” More concerning, the CMS document essentially invites judicial settlements with insurance companies:

We know that a number of issuers have sued in federal court seeking to obtain the risk corridors amounts that have not been paid to date. As in any lawsuit, the Department of Justice is vigorously defending those claims on behalf of the United States. However, as in all cases where there is litigation risk, we are open to discussing resolution of those claims. We are willing to begin such discussions at any time.

The CMS document raises serious questions about the intentions of the administration to fund the risk corridors program. Moreover, the U.S. Department of Justice Office of Legal Counsel has also determined that these “backdoor bailouts” are improper.

CoA Institute today requested all records referring to a lack of funds for risk corridors payments to insurance companies, as well as all records related to the September CMS document entitled “Risk Corridors Payments for 2015.”

The full FOIA can be found here.

Cause of Action Institute Secures Access to Secret IRS Memos with the White House

Washington, D.C. – Cause of Action Institute has secured access to a series of previously undisclosed memoranda of agreement between the IRS and the White House, which the IRS claims exempts it from prepublication review of its rules.  The release includes agreements between the IRS and White House from 1983 and 1993 that contain “exemptions from regulatory review.”

The IRS has resisted providing the memos to Congress, which have been sought by the Senate Finance Committee but to-date have not yet been provided.  The memos were also discussed in a recently released Government Accountability Office audit.  However, until today, the memos have not been made public.

Click here to access the memos.

Cause of Action Institute President and CEO, and former federal judge, Alfred J. Lechner, Jr.: “Agencies of the federal government should not operate by secret agreement with the White House.  Lawful prepublication reviews are critical to the regulatory process to ensure that rules are developed in a fair and transparent manner. The IRS has skirted these rules for far too long.”

Typically, agencies submit their rules to the White House Office of Management and Budget (OMB) for regulatory review before publication.  However, the IRS has long claimed an exemption from this rule.  As Cause of Action Institute argued to the Supreme Court in an amicus brief, “Over the past ten years, the IRS has submitted only eight rules to OIRA [the Office of Information and Regulatory Affairs] for regulatory review and deemed only one of those rules significant.  Those eight rules are less than one percent of the final rules the IRS published in the Federal Register over the same period.”

Why Did U.S. Choose to Send $1.7 Billion in Untraceable Cash to Iran?

Washington, DC – Today, Cause of Action Institute (CoA Institute) sent a second Freedom of Information Act (FOIA) request to the U.S. Department of Treasury to obtain records that will shed light on the Obama administration’s decision to ship more than $1.7 billion in untraceable cash to Iran. In light of recent testimony before Congress, as well as reports of concerns expressed by the Department of Justice, questions remain surrounding the decision to send cash rather than make the payments using more transparent means.

CoA Institute President and CEO, and former federal judge, Alfred J. Lechner, Jr.: “Regardless of the merits of the settlement agreement, and regardless of whether the cash payments created ‘leverage’ for the release of American hostages, shipping more than $1.7 billion in untraceable cash to the world’s leading state sponsor of terrorism appears to be unjustifiable – particularly when alternative, more transparent means were available.”

Between January 14 and February 5, 2016, the U.S. Department of the Treasury transferred approximately $1.7 billion to Iran. The payments allegedly settled a long-standing claim before the Iran-U.S. Claims Tribunal, but Obama administration officials have also conceded that the payments served as “leverage” to ensure the release of several Americans held hostage by Iran. The Treasury Department wired each of the payments to a European bank, where it was then converted into foreign currency and the cash disbursed to an Iranian official.

Last month, President Obama said that “we had to give [the Iranians] cash . . . because we’re so strict in maintaining sanctions.” This month, the Treasury Department provided testimony to Congress directly contradicting the president’s statement and asserting that in fact the U.S. government has broad leeway to engage in transactions necessary to settle claims before the Iran-U.S. Claims Tribunal.  In fact, the Department of Treasury recently confirmed to Politico that two wire transfers occurred from the U.S. to Iran around the same time period.

This discrepancy raises questions about the nature of the payments and why – if they were made pursuant to a settlement agreement and therefore could have been wired – the Obama administration agreed to pay the Iranians in untraceable cash.

The FOIA requests all relevant Treasury authorization records for these payments as well as certain communications between the Treasury Department and the State Department concerning the settlement.

The full FOIA request can be found here.

Partisan politics in the Cabinet (Judge Lechner op-ed)


Obama allows senior officials to meddle unlawfully and without accountability

By Alfred J. Lechner Jr. | ANALYSIS/OPINION:

The Obama administration repeatedly allows senior officials to unlawfully meddle in politics without being held accountable. In just the latest incident, Department of Housing and Urban Development (HUD) Secretary Julian Castro in July was found to have violated a law designed to ensure that federal officials work on behalf of all Americans, not their political party. The Hatch Act, enacted in 1939, prohibits employees in the executive branch from engaging in electoral politics when acting in their official capacity. In other words, public officials paid by taxpayers cannot use their position to influence elections.

Apparently this law is a dead letter. During a recent media interview with Yahoo News, Mr. Castro violated this law when he expressed his enthusiastic support for the election of his close friend Hillary Clinton. He touted Mrs. Clinton’s accomplishments while criticizing the Republican Party and its candidate for president, Donald Trump. At the time, Mr. Castro was reported to be on Mrs. Clinton’s short list for vice president.

To be clear: Mr. Castro appeared in his official capacity. The interview was conducted in the HUD broadcast studio in Washington D.C., he was introduced and consistently referred to as the HUD secretary, and the interview was conducted with the official HUD seal visible behind him. The interview began with a discussion of various HUD programs and initiatives.

Soon after, the U.S. Office of Special Counsel (OSC), the watchdog in charge of tracking such violations, investigated and released its findings that Mr. Castro violated the Hatch Act when he discussed politics and the upcoming general election.

At the time of the interview, Mr. Castro stated he believed he had acted appropriately. The OSC, however, questioned the credibility of that statement. Mr. Castro had received four briefings on the Hatch Act during his tenure, including one as recently as February 2016. Ethics officials at HUD also stated that they had specifically advised Mr. Castro how to handle political questions when he is speaking in his official capacity by stating that he is not there to talk about politics.

Such a high-profile violation of the Hatch Act is not a mere technical error. Condoning Hatch Act violations poses a serious threat to the legitimacy of our democratic system. And this was not the first time a cabinet member in the Obama administration has violated the Hatch Act.

In August 2012, the OSC found that Secretary of Health and Human Services, Kathleen Sebelius, also violated the Hatch Act when she delivered the keynote speech at the Human Rights Campaign Gala in North Carolina on February 25, 2012. At the event, Ms. Sebelius explicitly acknowledged she was there “to represent the president and the Obama administration.” Later in her speech she said it was “imperative” that attendees “come together here in Charlotte to present the nomination to the president, [and to] make sure that in November he continues to be president for another four years.”

These were historic violations: No Cabinet secretary in any prior administration had been found in violation of the Hatch Act since its enactment under Franklin Delano Roosevelt. Yet, neither Ms. Sebelius nor Mr. Castro suffered any consequences for abusing their positions. Ms. Sebelius went on to serve an additional two years in the president’s cabinet without any official repercussion or reprimand; Mr. Castro continues to serve as HUD secretary.

The president is the only person charged with holding cabinet officials accountable for violating the Hatch Act. His failure to sanction Ms. Sebelius sent a message that he does not take violations of the Hatch Act seriously. This could have no other effect than emboldening Mr. Castro to discuss partisan electoral politics without fear of consequences. Under the law, removal or suspension from office would be have been appropriate in his case, but the president — for the second time — chose not to impose any penalty.

In response to a question about the Ms. Sebelius Hatch Act violation, White House spokesman Eric Schultz stated that the Obama administration holds itself “to the highest ethical standards.” Those words ring hollow. Three years later, White House press secretary Josh Earnest responded to Mr. Castro’s violation stating that Mr. Castro “acknowledged the mistake he made” and that he “owned up to it.” But what really matters is whether he is held accountable, and to date, Mr. Castro has not been sanctioned for his unlawful act. Mr. Obama’s unwillingness to hold Ms. Sebelius or Mr. Castro accountable raises questions as to why other high-ranking Obama administration officials would have any incentive not to use their positions to influence elections.

This is even more concerning when you compare Mr. Castro and Ms. Sebelius’ treatment with that of lower-level government employees who violate the Hatch Act. In May, a U.S. Postal Service letter carrier settled with OSC after he displayed a congressional candidate’s sign on his work vehicle. He was subsequently suspended for five days without pay. Elsewhere, an IRS employee settled with OSC for violating the act. There is thus a double-standard for cabinet-level officials — they can apparently break the law with impunity.

The Obama administration is drawing to a close, but this pattern nonetheless sets a dangerous precedent. Our democracy is undermined when those with power and political influence are exempted from the consequences of their illegal actions. Let’s hope that years from now, the Obama administration is recalled as the low-water mark for ethics violations and accountability, not a sign of things to come.

Alfred J. Lechner Jr. is a former U.S. district judge for the District of New Jersey, and president and CEO of the Cause of Action Institute.

TIGTA Reviews IRS FOIA Compliance

The Treasury Inspector General for Tax Administration (“TIGTA”)—the Internal Revenue Service (“IRS”) watchdog—released its annual audit report today on IRS compliance with the requirements of the Freedom of Information Act (“FOIA”). The results of the review suggest that IRS disclosure officials may have improperly withheld information from the public in 12% of FOIA cases. Additionally, the review reveals that while increased training has reduced the number of inadvertent disclosures of confidential tax information, these unauthorized disclosures have not been entirely eliminated. Overall, the IRS FOIA backlog continues to grow and the agency has room for improvement.

These findings should be unsurprising to everyone who follows FOIA issues. The IRS has a long history of evading its obligations under that statute. Cause of Action Institute remains committed to fighting for transparency and openness at the IRS. We continue to litigate access to records about potentially unauthorized requests for taxpayer information from the White House. We recently filed another lawsuit to challenge the refusal of the IRS even to recognize, let alone process, two FOIA requests for records of communications between IRS officials and White House advisors.

Ryan Mulvey is Counsel at Cause of Action Institute.