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Archives for September 2018

09/20/2018

Dennis Cupo Officially Dismissed from FTC v. Vylah Tec LLC

WASHINGTON D.C. In a major victory, Cause of Action Institute (CoA Institute) today, celebrated the decision by a federal district court to dismiss, with prejudice, all claims against Dennis Cupo in an ongoing case, FTC v. Vylah Tec LLC. The Federal Trade Commission moved to dismiss Mr. Cupo from the case after the U.S. District Court Middle District of Florida ruled the FTC had failed to produce any evidence linking him to any alleged wrongdoing and denied the FTC’s motion to re-freeze his assets.

“We applaud today’s decision to dismiss Mr. Dennis Cupo from this case so he can rebuild his life after being unfairly targeted by the government,” said John Vecchione, president and CEO of Cause of Action Institute. “While we celebrate today’s dismissal, the FTC is still casting overbroad nets to freeze the assets of Americans and illustrates the urgent need to reform the agency from the top down.”

After obtaining a secret court order, Vylah Tec, a family-run tech support company owned by Dennis’ brother Robert Cupo, was targeted by the Federal Trade Commission as part of “Operation Tech Trap” because it bore a superficial resemblance to other companies with illegitimate practices. Failing to take into account Vylah Tec’s substantial well-regarded services, the Government sought to shut the company down, depriving thousands of customers of pre-paid technical support services. The FTC aggravated that overreach by implicating Dennis Cupo, for whom the FTC failed to establish any meaningful relationship to the business. Despite this, it took a year of litigation and a court order to motivate the Federal Trade Commission to finally dismiss an innocent bystander from the case.

The case highlights much-needed reform in the FTC due to its aggressive, overbearing, and unfair enforcement process. Cause of Action Institute recently filed more than 15 pages of recommended changes that can read here.

About Cause of Action Institute

Cause of Action Institute is a 501(c)(3) non-profit working to enhance individual and economic liberty by limiting the power of the administrative state to make decisions that are contrary to freedom and prosperity by advocating for a transparent and accountable government free from abuse.

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09/14/2018

Cause of Action files lawsuit against DOJ relating to Lois Lerner-IRS data scandal

WASHINGTON, D.C. – Sept. 14, 2018 – Cause of Action Institute (CoA Institute) has filed a lawsuit against the Department of Justice (DOJ) seeking records relating to the infamous Lois Lerner-IRS scandal. In 2010, the Internal Revenue Service (IRS) improperly released 21 CDs of confidential taxpayer information to the DOJ. This illegal release of confidential tax information resulted in several internal investigations, but the government has refused to release any of its internal reports or communications relating to the scandal.

“Taxpayers deserve to a have a full and clear picture of what took place nearly a decade ago when the U.S. Department of Justice and Internal Revenue Service were partnering in an effort to target nonprofits,” said Ryan Mulvey, counsel at Cause of Action Institute. “We have repeatedly requested the release of the internal investigation reports and the records revealing when and what the DOJ shared with Congress about this improper release. Taxpayers deserve a clear picture of who knew what and what really took place in the targeting of nonprofits by the DOJ and the IRS.”

In its investigation of this matter, CoA Institute has engaged with various DOJ components and Treasury Inspector General for Tax Administration (TIGTA), filed multiple unanswered Freedom of Information Act (FOIA) requests, and sought records regarding the potentially illegal access to and disclosure of this confidential taxpayer information.

Background:

  • In 2013, the public learned that the IRS Exempt Organizations Section, led by then-Director Lois Lerner, had been involved in unfairly targeting nonprofits, allegedly for political purposes.
  • Before then, the IRS and DOJ met on several occasions to discuss targeted prosecutorial efforts.
  • At one of those meetings, the IRS improperly provided the DOJ with 21 CDs containing statutorily protected confidential taxpayer information. That information could have been disclosed to the DOJ pursuant to statutory exemptions, none of which applied to this disclosure.
  • DOJ returned to the IRS, the CDs contained 1.1 million pages of confidential information regarding tax return information of various tax-exempt groups.
  • CoA Institute wrote to both the TIGTA and the DOJ Office of Inspector General (DOJ OIG) to request investigations into this illegal access to and disclosure of confidential taxpayer information. TIGTA and DOJ OIG both opened investigations of this matter.
  • TIGTA refused to release its findings.
  • DOJ OIG, in a letter to CoA Institute, explained that, “[b]ased upon [its] initial inquiries, it appears that some protected taxpayer information was included on compact disks (CDs) that the IRS provided to the Department in response to a Department request.” Once “the Department learned of this, it returned the CDs to the IRS and informed Congress about it.” Citing “the absence of available information,” DOJ-OIG “determined that [CoA Institute’s request] does not warrant further investigation.”
  • In October 2016, CoA Institute sent a FOIA request to the DOJ-OIG seeking records of its communication with Congress relating to this unauthorized disclosure.
  • In October 2017, CoA Institute sent two additional FOIA requests to various DOJ components to ensure that CoA Institute received all relevant records pertaining to the IRS’s unlawful disclosure, particularly regarding the DOJ’s communications with Congress.
  • DOJ has refused to respond to any of the CoA Institute FOIA requests for this matter.
  • On Thursday, Sept. 13, 2018 Cause of Action Institute filed the following complaint against the U.S. Department of Justice, Cause of Action Inst. v. U.S. Dep’t of Justice, 18-2126 (D.D.C.)

Full complaint can be viewed below.

About Cause of Action Institute

Cause of Action Institute is a 501(c)(3) non-profit working to enhance individual and economic liberty by limiting the power of the administrative state to make decisions that are contrary to freedom and prosperity by advocating for a transparent and accountable government.

Media Contact:

Matt Frendewey

matt.frendewey@causeofaction.org

202-699-2018

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09/14/2018

Federal judge rejects DOJ’s use of attorney-client, deliberative process privileges to hide communications with the White House Counsel from public disclosure

Judge James Boasberg of the U.S. District Court for the District of Columbia yesterday granted in part Cause of Action Institute’s (“CoA Institute’s) motion for summary judgment in a Freedom of Information Act (“FOIA”) lawsuit against the Department of Justice (“DOJ”). Judge Boasberg vigorously rejected DOJ’s attempt to withhold records of communications with the White House under the attorney-client and deliberative process privileges.  CoA Institute filed its lawsuit in July 2017, after DOJ refused to produce records that would have revealed whether it was involved in implementing a controversial directive from the U.S. House of Representatives Committee on Financial Services.  The underlying request at issue, which CoA Institute submitted in May 2017, followed reports that Jeb Hensarling, Chairman of the Financial Services Committee, had directed twelve agencies—including, the Department of the Treasury and eleven other entities—to treat all records exchanged with his Committee as “congressional records” not subject to the FOIA.

Judge Boasberg’s most damning holding concerned DOJ’s misuse of Exemption 5 to redact a line from a White House email and to withhold in full an attachment—presumably the letter from Chairman Hensarling—received by several Executive Branch agencies.  As the Court explained:

Indeed, any reasonable individual would reach the same conclusion as the Court after cursorily examining the record at issue.

The sole basis of DOJ’s defense was the declaration a senior agency attorney, who claimed that the White House email reflected a “routine” sort of “consultative exchange” in which Office of Information Policy Director Melanie Pustay was asked for “advice.”  But the Court saw through this self-serving statement and explained that DOJ had failed to meet its burden in proving that the specific record at issue reflected the provision of legal services.  To rule otherwise would tend to turn any correspondence with a government attorney into privileged material.

The Court also failed to see how the withheld material contained any confidential information.  For example, the attachment to the White House email—ostensibly, a copy of the Hensarling letter—was merely one of many substantively identical letters that DOJ admitted were received across the Administration.  There was simply no agency-specific confidential information at issue.

Judge Boasberg further rejected DOJ’s use of the deliberative process to withhold the same White House communications.  Despite the government’s arguments during briefing, after reviewing the records itself, the Court determined that they contained nothing that could be construed as deliberative.

Although the court granted in part CoA Institute’s motion, it also sided with the government over the withholding of eleven pages of records exchanged between DOJ and an unidentified agency.  After reviewing those records, the Court determined that they did, in fact, reflect the agency’s decision-making processes and revealed the solicitation and provision of confidential legal advice.  Moreover, there were no reasonably segregable portions of the records that could be released to CoA Institute. Finally, the court did not resolve the parties’ dispute over the “foreseeable harm” standard that Congress introduced in the FOIA Improvement Act of 2016..

* * *

The Court has ordered DOJ to release unredacted versions of the White House communications. Once these records have been released, we will provide another update addressing their contents.

Judge Boasberg’s opinion is available here.

Ryan Mulvey is Counsel at Cause of Action Institute

 

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09/13/2018

CoA Institute Defends U.S. Citizens’ Privilege and Immunity From Excessive Fines in Latest Amicus Brief

On Tuesday, September 11, 2018, Cause of Action Institute (“CoA Institute”) filed an amicus curiae brief in the Supreme Court case Tyson Timbs v. State of Indiana in support of the Petitioners, who asked the Court to determine whether the Eighth Amendment’s Excessive Fines Clause is incorporated against the States through the Fourteenth Amendment. The matter arises from a civil action against both Tyson Timbs and his vehicle, which the State sought to forfeit. The state trial court and intermediate appellate court ruled that forfeiture of the vehicle (worth about $40,000) would be “excessive” and “grossly disproportional to the gravity of”[i] crimes to which Timbs pleaded guilty in a separate case (the maximum fine for which was $10,000, and Timbs was actually fined much less). But the Indiana Supreme Court reversed because the U.S. Supreme Court has not yet held that the Excessive Fines Clause applies to the States.[ii] CoA Institute argues that the Indiana Supreme Court should be reversed because, as a citizen of the United States, Timbs is privileged and immune under the Fourteenth Amendment from the grossly disproportionate fine that Indiana seeks to impose through forfeiture of his vehicle.

Our brief calls attention to the fact that the Supreme Court has never ruled on whether the Excessive Fines Clause is applicable against the States. We argue that the Excessive Fines Clause is, in fact, enforceable against Indiana through the Privileges or Immunities Clause of the Fourteenth Amendment. That clause provides that “no State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States.” CoA Institute relies on recent jurisprudence, like Justice Thomas’s concurrence in McDonald v. City of Chicago, which notes that on its face, Section 1 of the Fourteenth Amendment grants U.S. citizens a “certain collection of rights – i.e., privileges or immunities – attributable to [their] status” as citizens of the country as well as an individual state.[iii]

Additionally, our brief demonstrates that Excessive Fines Clause includes the ancient principle of salvo contenemento, which prohibits fines that would deny any defendant the basic ability to earn a living. Forfeiture of Timbs’ vehicle in this case would violate this ancient principle.

Our amicus brief is available here

Libby Rudolf is a Research Assistant at Cause of Action Institute.

[i] State v. Timbs, 84 N.E.3d 1179, 1181 (Ind. 2017) (quoting trial court).

[ii] Id.

[iii] McDonald v. City of Chicago, 561 U.S. 742, 808 (2010) (Thomas, J., concurring in part and concurring in judgment).

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09/12/2018

Court to FTC: Effort to freeze assets goes too far

In the ongoing Cupo case (FTC v. Vylah Tec LLC), Court denies FTC’s motion to re-freeze CoA Institute’s clients’ assets, including a house and personal bank accounts

Washington, D.C. Cause of Action Institute (CoA) successfully defeated the Federal Trade Commission’s (FTC) efforts to re-freeze some personal assets of CoA client Dennis Cupo and marital assets of Robert Cupo. The assets were frozen at the outset of the case, but upon appeal, the 11th Circuit Court of Appeals unfroze the assets and remanded the case back to the District Court. Judge Sheri Polster Chappell’s order, published yesterday evening, is a major victory for the defendants, especially Dennis Cupo – the Court agreed with CoA’s argument that the Government failed to tie Dennis Cupo’s personal assets to any of the allegations. Much of the case, FTC v. Vylah Tec LLC, centers on the FTC’s aggressive action, including seizing the now-freed assets, securing a temporary restraining order in secret, and using aggressive policing tactics – such as raiding the defendant’s office with armed police officers.

“Yesterday’s ruling and this case are broader than a simple enforcement action by the FTC – it’s about an agency that routinely exceeds its authority to crack down on businesses with aggressive tactics that are meant to scare, intimidate, and bully companies and individual entrepreneurs,” said John Vecchione, president and CEO of Cause of Action Institute. “The Court’s opinion makes clear that the FTC cannot charge Americans with wrongdoing and seize assets, while failing to prove a defendant’s connection to the case or justify the asset seizure. This is a significant victory for the defendants and an important victory in our effort to curb the FTC’s abuse of power.”

Importantly, the Court found that the Government has failed to produce any evidence of wrongdoing about one of the named defendants, Dennis Cupo.  As the Court said, “For one thing, it only works if Dennis is a ‘wrongdoer.’ The evidence above clearly suggests otherwise.”

The case involves a small family-run tech support company, Vylah Tec, LLC (“V-Tec”). After obtaining a secret court order, the Federal Trade Commission targeted the company and conducted an hours-long raid of the company’s headquarters on suspicion of “deceptive” sales practices. The raid was initiated as part of a politically-hyped campaign known as Operation Tech Trap headed by the FTC in conjunction with the Florida Attorney General’s office. Despite the hostile raid and seizure of all computers and records, FTC investigators were unable to produce evidence tying any alleged improper conduct to the unfrozen assets, or wrongdoing of any kind to Dennis Cupo.

Not only did the FTC demand a freeze of assets of the defendants, but they also went so far as to demand a freeze of the jointly held marital assets of the wife of one of the defendants. After the 11th Circuit Court of Appeals reversed this freeze – the FTC filed a new motion to recapture the same personal assets without the evidence needed in equity. Judge Chappell strongly rebuked the motion.

“The FTC often lives in a world of its own reality and tries to summarily dictate the law to businesses,” Vecchione added. “In these cases, the FTC plays with a stacked deck as they are granted a much lower bar to proving wrongdoing or seizing assets. The Court found that the FTC did not meet even the lower standard. The Court’s order means a Florida couple can proceed with their lives without a Government threat to leave them homeless, and we hope will lead to Mr. Dennis Cupo being dismissed from the case. We are gratified by this ruling, denying the FTC’s lawless effort to seize assets without following the process every American is due.”

The case highlights much-needed reform in the FTC due to its aggressive, overbearing, and unfair enforcement process. Cause of Action Institute recently filed more than 15 pages of recommended changes that can read here.

About Cause of Action Institute

Cause of Action Institute is a 501(c)(3) non-profit working to enhance individual and economic liberty by limiting the power of the administrative state to make decisions that are contrary to freedom and prosperity by advocating for a transparent and accountable government free from abuse.

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