Archives for 2016

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.

CoA Institute Investigates Extravagant Taxpayer-Funded Foreign Travel, ‘Over the Top’ Office Renovations by Commerce Dept. Employee

Washington, DC – Today, Cause of Action Institute (CoA Institute) sent a Freedom of Information Act (FOIA) request to the Department of Commerce Office of Inspector General (OIG) to investigate misconduct by a high-ranking political appointee, including inappropriate travel reimbursements and excessive spending on office renovations.

CoA Institute President and CEO, and former federal judge, Alfred J. Lechner, Jr.: “A high-ranking political appointee at the Department of Commerce must be held accountable for his rampant wasteful spending and misconduct. Reports of taxpayer-funded lavish foreign travel, luxury car service, and ‘over the top’ office renovations raise serious concerns. Such misconduct is beyond inappropriate and could even be criminal.  American taxpayers have the right to know whether such wasteful spending could be a more widespread problem at the agency.”

On September 8, 2016, the Department of Commerce Office of Inspector General (OIG) released a report detailing numerous instances of misconduct and wasteful spending. A high-ranking political appointee appears to have regularly used the U.S. Treasury as a slush fund by staying in luxury hotels and using luxury car services at taxpayers’ expense.

In one case, the employee traveled to Geneva, Switzerland where he stayed at a luxury hotel that cost around $1,150 per night, despite the allowable per diem being $340 per night. He was subsequently reimbursed 150 percent of the standard per diem rate for his entire stay, even though a portion of the trip was for personal travel. During the same trip, one of his staff members stayed in a room at a different hotel that was below the per diem rate.

Taxpayers also footed the bill for the employee to travel in luxury vehicles, including nearly $1,800 for an SUV provided by a luxury hotel during his two-day trip to Boston, Massachusetts.

The employee also spent an excessive amount of taxpayer money on his office renovations, likely violating the Anti-Deficiency Act. Despite Congress limiting office renovations to $5,000, the Department spent more than $50,000 on this political appointee’s office.  Shortly after assuming his role with the Department, the employee instructed his subordinates to make the space “reflective of [his] position.” Some subordinate employees were apparently fearful of losing their position if the renovations were not acceptable. According to the OIG report, renovations included new carpeting “chosen after consultation with an interior maintenance specialist” for a luxury hotel. An administrative official described these renovations as “over the top.”

In order to understand the full extent of the abuses, CoA Institute requests all of the materials compiled by the OIG for its report. The full FOIA request can be found here.


Growing Concern over Controversial Mortgage Settlements

Congress to Consider a Bill to Halt Government Slush Funds


On July 13, 2016, Cause of Action (CoA) Institute filed a complaint in the U.S District Court for the District of Columbia against the United States Housing and Urban Development (HUD). The lawsuit seeks records that HUD has failed to produce in response to a Freedom of Information Act (FOIA) request regarding HUD’s role in the federal government multi-million dollar settlements with three banks over their allegedly faulty mortgage practices.  As CoA Institute continues to investigate and litigate, others are paying attention to these troubling settlements as well.

Last week, prominent Washington Post columnist George Will penned a column calling out the government for using the bank settlements as a slush fund.  Will notes that the government:

allows banks to meet some of their settlement obligations by directing “donations” to various nongovernmental advocacy organizations that serve Democratic constituencies and objectives — organizations that were neither parties to the case nor victims of the banks’ behaviors. These donations are from money owed to the government, money that otherwise would go to the Treasury, money the disposition of which is properly Congress’s responsibility.

And in the Wall Street Journal, Andy Koenig, senior policy adviser at Freedom Partners Chamber of Commerce, similarly focuses on one of the key facets of these settlements: financial incentives for the banks to fund third party groups:

Most of the deals give double credit or more against the settlement amount for every dollar in “donations.” Bank of America’s donation list—the only bank to disclose exactly where it sends its money—shows how this benefits liberal groups. The bank has so far given at least $1.15 million to the National Urban League, which counts as if it were $2.6 million against the bank’s settlement. Similarly, $1.5 million to La Raza takes $3.5 million off the total amount of “consumer relief” owed by the bank. There are scores of other examples.

To address the growing chorus of concerns over these controversial settlements, the House of Representatives today will consider the “Stop Settlement Slush Funds Act of 2016,” a bill introduced by Rep. Bob Goodlatte (R-Va.)  to prevent any such future settlements. In other words, the bill would prohibit the government from creating a slush fund to direct settlement payments to favored (or any other) outside recipients.  The U.S. House of Representatives has scheduled a vote on this bill for September 7, 2016.

**UPDATE** The House passed the “Stop Settlement Slush Funds Act of 2016” on September 7 by a vote of 241-174.

CoA Institute Investigates Political Pressure in Decision to Withdraw Atlantic OCS from Oil and Gas Leasing Program

Washington, DC – Today, Cause of Action Institute (CoA Institute) sent a Freedom of Information Act (FOIA) request to the U.S. Department of the Interior (DOI) to find out whether there was political pressure surrounding DOI’s decision to withdraw the Atlantic Outer Continental Shelf (OCS) from its five-year Oil and Gas Leasing Program.

CoA Institute President and CEO, and former federal judge, Alfred J. Lechner, Jr.: “The changing positions of both the Department of the Interior and Senator Kaine raise questions about whether DOI withdrew the Atlantic OCS from the leasing program due to political pressure. Less than one month after Hillary Clinton selected him as her vice presidential running mate, Senator Kaine changed his position and now opposes offshore energy development in the Atlantic. Such an abrupt departure from his previous position, as well as DOI’s decision to disregard strong support for including the Atlantic, raise questions as to why this region was withdrawn from the program.”


When DOI released its Draft Proposed Program in January 2015, it included one lease sale in the Atlantic Region. The inclusion of the Atlantic in the DPP enjoyed broad support. Members of the congressional delegations from affected East Coast states, including Senator Tim Kaine of Virginia, supported the inclusion of the Atlantic Planning Areas.

On March 15, 2016, DOI announced its decision to withdraw the Atlantic Planning Areas from the program. Within months, Sen. Kaine also reversed course and said he opposed offshore energy development, citing objections from the Department of Defense (DoD). DOI, meanwhile, has insisted that the withdrawal of the Atlantic Planning Areas was not predominantly attributable to the DoD.

CoA Institute today requested access to all communications concerning the Atlantic OCS and the 2017-2022 OCS Oil and Gas Leasing Program between or among DOI and its bureaus, as well as communications about the program between the White House, DoD, and the office of Senator Kaine.

The full FOIA request can be found here.


CoA Institute Probes HHS’s Decision to Use Taxpayer Money to Pay Off Insurance Companies

Washington, D.C. – Cause of Action Institute (CoA Institute) today filed a Freedom of Information Act (FOIA) request to investigate the U.S. Department of Health and Human Services’ decision (HHS) to shift money away from taxpayers to pay off insurers.


The Affordable Care Act (ACA) established the transitional reinsurance program that requires HHS to make payments to health insurers who enroll high-risk individuals and deposit a portion of the contributions from insurers into the U.S. Treasury. Unfortunately for taxpayers, it appears when HHS collected less funds than required by the ACA, the agency decided to allocate all transitional reinsurance program funding to health insurers, depriving taxpayers of billions of dollars.

CoA Institute President and CEO, and former federal judge, Alfred J. Lechner, Jr.:

“COA Institute seeks to understand why the Obama Administration bailed out insurance companies with money that should have been returned to the U.S. Treasury to benefit taxpayers. Providing insurers with the entire contribution from the transitional reinsurance program is not the intention of section 1341(b)(4) of the Affordable Care Act. American taxpayers have a right to know why the Obama Administration skirted the law and gave money intended for the U.S. Treasury to insurance companies.”


Section 1341 of the ACA created the transitional reinsurance program. This program requires that HHS collect reinsurance contributions from health insurance providers and third party administrators on behalf of group health plans. In order to comply with the law, HHS was supposed to use those contributions to make payments to health insurers who enroll high-risk individuals and deposit a portion of the contributions in the U.S. Treasury. In total for 2014, 2015, and 2016, taxpayers were scheduled to receive $5 billion. According to the Congressional Research Service, providing the entire contribution from the transitional reinsurance program to health insurance providers is “in conflict with a plain reading of 1341(b)(4).”

CoA Institute requests documents and communications to understand the Obama Administration’s decision to use taxpayer money to pay off health insurance companies. The full FOIA request is available HERE.