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08/8/2018

GAO Finds Ex-Im Bank Lacks Comprehensive Fraud Prevention: CoA Renews Push to Abolish

The Export-Import Bank of the United States (“Ex-Im Bank”  or “Bank”) is a federal agency that provides financial credit to those who claim they are unable to obtain it privately. In reality, Ex-Im Bank offers taxpayer-guaranteed loans to politically-connected companies while leaving smaller companies at a competitive disadvantage. Last August, citing Ex-Im Bank as a form of corporate welfare, Cause of Action Institute advocated for its abolishment.

Now, a new Government Accountability Office (GAO) report finds that Ex-Im Bank lacks a comprehensive framework to deter fraud, needs comprehensive fraud risk management reform, and currently poses a significant risk of loss to taxpayers by failing to provide these adequate protections against fraud and abuse.

Between October 2016 to July 2018, the GAO conducted a performance audit of the Bank, surveying more than 400 employees about the organization’s fraud risk management capabilities. The GAO report concluded that:

“[T]he Bank has approached fraud risk management on a fragmented, reactive basis, and its anti-fraud activities have not been marshalled into the kind of comprehensive, strategic fraud risk management regime envisioned by GAO’s Fraud Risk Framework and its leading practices.”

The report found that employees were concerned about the lack of proactive measures being taken to combat and prevent fraud. The protocols in place focus on reacting after the fraud was committed, rather than preventing fraud from occurring. The GAO noted that the Bank was making efforts to reform its anti-fraud capabilities, but it was not clear whether improvements were keeping pace with expectations.

The GAO report surveyed employees and included the following comments and summaries about the Bank’s attitude towards addressing fraud:

  • “The Bank is more concerned with increasing sales than preventing fraud.”
  • “[The current division of responsibilities] is not the most effective way for the Bank to oversee fraud and fraud risk, as responsibility needs to be given to the teams on the front end—such as the individual relationship managers and loan officers—not on the back end.”
  • “[The current arrangement]seems to be more of an after-the-fact approach to potentially (if reluctantly) detecting fraud than any proactive encouragement to actively prevent fraud.”

These comments from Ex-Im Bank employees illustrate both a cultural challenge within the Bank and the Bank’s failure in constructing comprehensive reforms to prevent fraud. The GAO presented Ex-Im Bank with a list of recommendations to address its vulnerabilities and create a culture of prevention rather than reaction.

Given the Bank operates with taxpayer funds, these improvements are critical. In the words of a concerned Bank employee,  “More due diligence should be required in order to qualify for the U.S. government’s support.”

It is Cause of Action’s mission to advocate for a transparent and accountable government free from fraud and cronyism. The Ex-Im Bank is a key example where oversight and accountability are critical to ensuring its service to the public interest. For too long, the Ex-Im Bank has been linked to providing political favors for well-connected corporations and undermining fair market competition, and Cause of Action Institute will continue to advocate for ending the Bank and this form of corporate welfare.

Ethan Yang is a Research Fellow at Cause of Action Institute.

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08/8/2018

DoD Watchdog Details Agency’s Failure to Address FOIA Shortcomings

The Inspector General (“IG”) for the Department of Defense (“DOD”) recently published its annual compendium of unimplemented recommendations given to various DOD components and military departments in past investigations, audits, and inspections.  The list of unresolved matters is rather lengthy—some issues are more serious, others less so.  Relevant here, the watchdog highlighted two outstanding recommendations concerning the Freedom of Information Act (“FOIA”) and, more specifically, the formalization and publication of Pentagon guidance on “sensitive review.”

Both of these FOIA-related recommendations originate with an August 16, 2016 IG report that was prepared at the request of Senator Ron Johnson, Chairman of the Homeland Security and Governmental Affairs Committee (“HSGAC”).  Senator Johnson initiated an investigation in 2015 into interference by political appointees within the Obama Administration in agency FOIA processes.  Cause of Action Institute (“CoA Institute”) actively followed the HSGAC inquiry and sued one agency, the Central Intelligence Agency, for refusing to release its response to the Committee.

“Sensitive review” refers to the practice of giving certain FOIA requests extra scrutiny, usually because the records sought are potentially newsworthy or politically embarrassing.  In its most benign form, sensitive review involves notifying an agency’s public affairs team, communications specialists, or political leadership of incoming requests and outgoing productions.  At its worst, it entails the active involvement of non-career officials in processing and redacting records, which results in significant delays and sometimes completely prevents the disclosure of records that the public has a right to access.

Sensitive review has been increasingly in the news.  A week ago, I described CoA Institute’s new investigation into politicized FOIA at the Department of Veterans Affairs, following allegations raised by Democrats on the Senate Veterans’ Affairs Committee.  Last month, I explained how an official from the Environmental Protection Agency told Ranking Member Elijah Cummings at the House Oversight and Government Reform Committee that the Trump White House had supposedly added an “extra lawyer of review” for “politically charged” or “complex requests.”  And, earlier this year, I revealed records exposing the National Oceanic and Atmospheric Administration and the Federal Aviation Administration for heightening sensitive review by, among other things, targeting attorney and media requesters.

Although recent news reports suggest that “sensitive review” is a novel practice, that is not so.  Intra-agency FOIA politicization, and related practices such as “White House equities” review, did not originate with the Trump White House, but date to the Obama Administration and beyond.  Indeed, as I have explained here and here, the Obama White House was particularly notorious for its efforts to delay and block disclosure of politically damaging or otherwise newsworthy records.  President Trump is taking advantage of President Obama’s legacy of secrecy.

All this is confirmed by the case of the DOD.  In its 2016 report, the IG explained that it had failed to identify any instances of “noncareer officials” either “adversely affecting” or “unduly influencing” the agency’s FOIA process.  But the watchdog’s cautious language and technical phrases failed to mask other troubling practices, including a special “situational awareness process” for “significant” requests.  DOD guidelines governing that process still have not been incorporated into the agency’s FOIA regulations, FOIA manual, or FOIA directive.  (The IG also faulted DOD for failing to update its regulations in light of the Open Government Act of 2007 and Executive Order 13392, but that was remedied with the finalization of new regulations in February 2018.)

CoA Institute has obtained copies of two versions of DOD’s “situational awareness” protocol (here and here), one of which dates to December 2012.  Both records similarly define “significant” requests—that is, requests deserving of special treatment—to include anything likely to “generate media interest” or be of “potential interest” to DOD leadership.  Requests implicating Members of Congress or President Obama, even during his time as a senator, also were included.

In addition to “situational” notification, component FOIA officers were expected to provide weekly updates on “significant” requests to the front office and delay any response or production of records until clearance was provided by departmental disclosure leadership.

This requirement was emphasized for “White House or Congressionally related” FOIA requests.

Although alerting or involving agency leadership, including political appointees, in FOIA administration does not violate the law per se—and may, in rare cases, be appropriate—there is never any assurance that the practice will not lead to severe delays of months and even years.  The danger for politicization is evident.  “Notification” and “situational awareness” can too easily lead to political leadership controlling the disclosure of public records.  That result cannot be tolerated.

Although DOD has yet to incorporate its sensitive review protocol into formal and publicly available guidance, it is also unknown whether the policy has changed or been enhanced in any way in recent years.  Considering the unresolved IG recommendations, CoA Institute has submitted a FOIA request to DOD seeking further information.  We will continue to report on the matter as records become available.

Ryan P. Mulvey is Counsel at Cause of Action Institute



2018 08 08 Final and Approved DOD Sensitive Review FOIA Request (Text)

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08/8/2018

Congressional Inquiries into the VA are the First Steps Towards Reforming the Agency

We recently published a blog post urging newly confirmed Department of Veterans Affairs (“VA”) Secretary Robert Wilkie to mitigate the cultural plagues preventing the VA from operating as the functional and ethically organized agency that our veterans deserve.  Reports published last month from the Washington Post and the U.S. Government Accountability Office (“GAO”) found several problems within the VA including politicization, retaliation against whistleblowers, impunity for senior officials, and an overall lack of transparency.  The VA’s problems won’t be fixed overnight, but external pressures for reform within the agency should hopefully spur necessary changes.

Fortunately, there appear to be signs of progress on the reform front with several new congressional inquiries.  At the end of July, members of Congress from both sides of the aisle wrote letters to express concern about the VA’s toxic culture and to seek further information about the agency’s ongoing problems.

  • As Cause of Action Institute Counsel Ryan Mulvey discussed last week, eight Democratic Senators, led by Ranking Member Jon Tester of the U.S. Senate Committee on Veteran’s Affairs wrote to the VA on July 25th to express concern about the possible politicization of the agency’s Freedom of Information Act (“FOIA”) policies. The senators sent a concurrent letter to the VA’s watchdog, Inspector General Michael J. Missal, requesting an investigation in their allegations: “[FOIA] is the route through which media and other interested parties get answers and information after their requests to [the] VA about policies and initiatives have gone unanswered.”
  • On July 26th, Representatives Tim Walz (D-MN), Mark Takano (D-CA), and Kathleen Rice (D-NY) authored a letter to Attorney General Jeff Sessions referring former Acting Secretary Peter O’Rourke for investigation for “alleged perjury, or withholding information from Congress, or making otherwise unlawful statements in testimony and communications before the Committee on Veterans’ Affairs.” This letter comes one month after O’Rourke falsely claimed he had authority over the VA Inspector General—an independent entity that ensures investigators can conduct their work without fear of reprisal by agency leadership.
  • Finally, on July 30th, a bipartisan coalition of congressmen wrote to Secretary Wilkie asking him to implement the GAO’s recommendations from their report:

“To ensure the Department of Veterans Affairs (VA) can fulfill its important mission, it is vital that its work force is properly trained, led, and accountable.  To that end we call your attention to the recent [GAO] report . . . and urge the VA to immediately implement the recommendations outlined in that report . . . The GAO’s investigation uncovered serious issues with the VA’s record-keeping, its protection of whistleblowers, and its handling allegations of misconduct, waste, fraud, and abuse.”

I have previously discussed the GAO’s sixteen recommendations in an earlier blog post.  Of those sixteen recommendations, the VA concurred with nine of them and partially concurred with another five.  The congressional letter explains that immediate implementation of the GAO’s recommendations is necessary because the agency must encourage trust and openness in its culture.

These letters address different aspects of improvement needed at the VA.  Senator Tester’s letters highlight the possible politicization of how information is made available to the public.  The letter to Attorney General Sessions asks the VA to hold its senior officials to the same standards as their subordinates—one of the most prominent issues covered in the GAO report.  And finally, the letter to Secretary Wilkie underscores a necessary criticism of the VA: the primary role of the agency is to care for Americans injured or traumatized while defending our nation and, as such, it is unacceptable for agency leadership to tolerate misconduct, let alone encourage it.

However, we should view these signs of progress with just a bit of skepticism.  Senator Tester and the other Democrats on the Committee on Veterans’ Affairs have asked preliminary questions regarding politicization in the FOIA process, which is good, but what happens next? Will they continue to hold the VA accountable for their culture and leadership?  Or will they move on to another issue?  Will Attorney General Jeff Sessions open an investigation to determine whether O’Rourke made unlawful statements in providing false testimony, or will the bipartisan coalition fall upon deaf ears?

Cause of Action Institute will continue to investigate VA mismanagement  and the agency’s efforts to adopt GAO’s recommendations.  But we will also watch the congressmen who have expressed interest in reforming the plagued agency.  The authors of the letters to Attorney General Sessions and VA officials should be applauded for their inquiries, but they should also be committed to following through to the complete reform of the VA.

Chris Klein is a Research Fellow at Cause of Action Institute

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08/1/2018

Democratic Senators Seek Records about “Sensitive Review” from VA, Ask Inspector General to Open Investigation into FOIA Politicization

Last week, a group of eight Democratic Senators, led by Ranking Member Jon Tester of the U.S. Senate Committee on Veterans’ Affairs, wrote to the Department of Veterans Affairs (“VA”) to express concern over the possible politicization of the agency’s Freedom of Information Act (“FOIA”) processes.  The senators requested various records concerning the involvement of political appointees in the FOIA decision-making process, as well as other “sensitive review”-type policies.  They also wrote to the VA’s Inspector General to request an investigation into these allegations.  Among other things, the legislators sought “an assessment of the role that political appointees play in the FOIA process, what types of oversight exist to ensure employees are providing all responsive material, and who makes determinations about what is or is not responsive to a request[.]”

Sensitive FOIA review has been increasingly in the news.  The most recent reports have focused on the Environmental Protection Agency (“EPA”).  According to EPA Chief of Staff Ryan Jackson, the Trump Administration has added an “extra layer of review” for “politically charged” or “complex requests.”  Other officials claim that “sensitive review,” and similar practices such as “White House equities” review, actually originated with the Obama White House.  This latter claim is better supported by the historical record, as I (here and here) and others (here) have repeatedly argued.  The Obama Administration was notorious for its efforts to delay and block the disclosure of politically damaging or otherwise newsworthy records.  This is not to say the Trump Administration is innocent—it has likewise contributed to obfuscation and an overall erosion of transparency.  My posts earlier this year on sensitive review at the National Oceanic and Atmospheric Administration and the Federal Aviation Administration demonstrate as much.

In the case of the VA, the agency’s watchdog previously argued, in 2010 and 2015, that there has not been regular inference by political appointees in the FOIA process.  But the public has long known of internal practices at the VA that likely contribute to politicization.  In August 2007, for example, the agency issued a directive concerning the processing of “high visibility” or “sensitive” FOIA requests that implicate potentially embarrassing or newsworthy records.

The potential for politicization only worsened during the Obama Administration.  An October 2013 memorandum instructed all Central Office components to clear FOIA responses and productions through Jim Horan, Director of the VA FOIA Service.  (Mr. Horan is still part of the leadership in the Office of Privacy and Records Management.)  This clearance process imposed a “temporary requirement” for front office review—although it is unknown whether the practice continues—and entailed a “sensitivity determination” leading to unnamed “specific procedures.”

Regardless of which party or president controls the government, sensitive review raises serious concerns.  Although alerting or involving political appointees in FOIA administration does not violate the law per se—and may, in rare cases, be appropriate—there is never any assurance that the practice will not lead to severe delays of months and even years.  At its worst, sensitive FOIA review leads to intentionally inadequate searches, politicized document review, improper record redaction, and incomplete disclosure.  When politically sensitive or potentially embarrassing records are at issue, politicians and bureaucrats will always have an incentive to err on the side of secrecy and non-disclosure.

Considering the new allegations of FOIA troubles at the VA, CoA Institute has submitted a FOIA request seeking further information about the agency’s sensitive review policy.  We will continue to report on the matter as information becomes available.

Ryan P. Mulvey is Counsel at Cause of Action Institute.




 

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07/31/2018

Millennium Challenge Corporation Adopts CoA Institute’s Recommendations for FOIA Regulations

The Millennium Challenge Corporation (“MCC”) finalized a rule at the end of last week implementing new Freedom of Information Act (“FOIA”) regulations and incorporated important revisions proposed by Cause of Action Institute (“CoA Institute”) in a comment submitted to the agency in March 2018.  The MCC is a small agency tasked with delivering foreign aid to combat global poverty.

CoA Institute made several recommendations in response to the MCC’s proposed rulemaking.  Most importantly, we urged the agency to remove outdated “organized and operated” language from its proposed definition of a “representative of the news media.”  Such language has been used in the past to deny news media requester status—and favorable fee treatment—to government watchdog organizations, including CoA Institute.  For example, CoA Institute sued the Federal Trade Commission, and took its case all the way to the D.C. Circuit, just to get the agency to acknowledged that its FOIA fee regulations were outdated and that it had improperly denied CoA Institute a fee reduction.

In deciding that case, the D.C. Circuit issued a landmark decision clarifying proper fee category definitions and the application of fees in FOIA cases.  CoA Institute cited this case to the MCC and the agency took heed of the current case law, removing the outdated “organized and operated” standard from its final rule.

CoA Institute also asked the MCC to remove language directing FOIA officials to read agency regulations “in conjunction with” fee guidelines published by the White House Office of Management and Budget (“OMB”) in 1987.  Portions of the OMB guidance, which are actually the source of the “organized and operated” standard, are simply no longer authoritative—they conflict with the statutory text, as amended by Congress, and judicial authorities, including Cause of Action v. Federal Trade Commission.

Continued reliance on the OMB guidelines threatens to cause confusion.  In 2016, the FOIA Advisory Committee and the Archivist of the United States both called on OMB to update its fee guidelines.  CoA Institute also filed a petition for rulemaking on the issue, and is currently litigating the matter in federal court.  Although the MCC has decided not to alter its reference to the OMB guidelines (and did not provide an explanation for rejecting that portion of CoA Institute’s comment), the fact remains that no agency can rely on OMB’s superseded directives.

Since the passage of the FOIA Improvement Act of 2016, CoA Institute has commented on twenty-six separate rulemakings.  Of the twelve that have been finalized, CoA Institute has succeeded in convincing seven agencies to abandon the outdated “organized and operated” standard in favor of a proper definition of “representative of the news media,” including the following:

Some agencies, including the National Credit Union Administration and the Federal Reserve, choose to defer on CoA Institute’s recommendations and have promised to propose further rulemakings in the near future to address outstanding fee issues.

CoA Institute’s successful comment to MCC is another small step in our efforts to provide effective and transparent oversight of the administrative state and, more specifically, to ensure agency compliance with the FOIA.

Ryan P. Mulvey is Counsel at Cause of Action Institute

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07/26/2018

EPA Jobs Loss Evaluations Update

Late last year, CoA submitted an amicus brief in the case of Murray Energy v. EPA.  The brief supported Murray Energy’s cert. petition seeking review of its case before the Supreme Court.  The Murray Energy case centered on employment evaluations required under Section 321(a) of the Clean Air Act.

A federal court in West Virginia ordered the EPA to comply with the statutory mandates of Congress, requiring the EPA to conduct “continuing employment evaluations” related to Clean Air Act implementation or enforcement.  The Fourth Circuit, however, sided with the EPA and ruled that, despite the plain language of the statute, Section 321(a) was discretionary and not an agency obligation.

Our brief made the following point: Congress specifically stated that the EPA shall conduct these continuing employment evaluations.  Not may, or if something happens, or if the EPA deems it expedient, but shall.  Unfortunately, earlier this year, the Supreme Court denied Murray Energy’s petition and will not review the matter.  However, the EPA has admitted its failure to conduct job loss evaluations and committed to doing so in the future: “the Agency historically has not conducted these assessments. EPA acknowledges the importance of considering the cumulative effects of its regulations on the American public. Accordingly, EPA intends to conduct these evaluations consistent with the statutes.”  CoA will continue to monitor these developments and help ensure that the EPA follows through on its promises.

Meanwhile, nearly two years ago, CoA petitioned the EPA to initiate a rulemaking to implement procedures and hearings under Section 321(b) of the Clean Air Act.  This section allows any employee who is discharged or laid off, threatened with discharge or layoff, or whose employment is adversely affected by Clean Air Act requirements to request an investigation and a hearing from the EPA.  The EPA has failed to promulgate any regulations regarding the process and standards by which it should conduct investigations and hearings under Section 321(b) and has not responded to our petition, other than to acknowledge it.  As the agency is now under the new leadership of Acting Administrator Andrew Wheeler, the opportunity again presents itself for the EPA to finally address our petition and give the public the necessary tools to seek relief from its regulatory activities.

Josh Schopf is Counsel at Cause of Action Institute

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07/24/2018

Now is the Time for VA to Change its Culture

Yesterday, the Senate confirmed Pentagon official Robert Wilkie as the new Secretary for the Department of Veterans Affairs (“Department” or “VA”). Wilkie takes over a federal agency plagued with a culture of toxicity, politicization, and misconduct. Although recent news reports and investigations of VA leadership have been a public relations nightmare for the agency, the prescription for success for the Secretary is rather simple: implement a culture change from the top-down to develop a VA that both performs its duty to veterans and operates in an ethical and productive manner.

A recent Washington Post report found that acting VA secretary Peter O’Rourke removed or reassigned VA staff members perceived to be disloyal to President Trump and his agenda for veterans. The report said that none of the staffers were given reasons for their reassignments. O’Rourke also incorrectly claimed authority over the VA Inspector General in a letter to the Inspector General. Although it would be easy to blame O’Rourke for the Department’s toxic climate, he only took office in May 2018; the systemic issues within the VA long precede the acting secretary.

Following the Washington Post report, the U.S. Government Accountability Office (“GAO”)  identified several issues within the Department regarding employee misconduct, retaliation against whistleblowers, and impunity for senior officials. Perhaps the most troubling finding was that senior officials, who perpetuate the agency’s climate, are held to a lower standard than their subordinates. The following figure shows the outcomes of seventeen misconduct cases against senior officials where disciplinary or adverse action was proposed over a 53-month period. Although twelve of the officials faced proposed actions calling for their removal based on the specific charges, only three officials were actually removed from their position. In total, 71% of senior officials who were guilty of misconduct served lesser or no disciplinary action compared to the original proposed action.

Other issues the GAO identified include:

  • Poor record-keeping – the current information system for recording adverse disciplinary actions does not track employee misconduct across the Department, despite the system having the capability to include and incorporate such models.
  • Poor communication within the Department – VA employee files investigated by GAO did not always contain documentation indicating that employees were informed of the reason disciplinary action was brought against them. The lack of oversight in the VA’s human resource policies increases the risk that employees will not be adequately informed of their rights during adjudication.
  • Lack of Transparency – VA facilities and program offices did not always provide the supporting documentation that they used to reach their conclusions about case referrals. This calls into question whether enough evidence was gathered to make sound conclusions about disciplinary or adverse actions.
  • A clear disregard for procedure – the report found that facility and program offices did not consistently follow policies and procedures for investigating allegations against senior officials. Similarly, senior officials may not have always been held accountable for misconduct, whether disciplinary action was not taken or recommended, or previous disciplinary failures were not considered in repeated offenses.

Whistleblowers provide a public service by exposing illegal or unethical activity within an organization. But whistleblowers in the VA allege that managers in their chain of command took actions against them after they reported misconduct. These alleged actions included reassignment to other locations, reduced access to computer equipment necessary to complete assignments, and social isolation from peers. Whistleblowers also were not provided adequate information by VA on how to document or file a claim of misconduct or retaliation.

The GAO report included sixteen recommendations to the VA, of which the VA concurred with nine and partially concurred with five. According to their comments to GAO, the VA plans to, among other things, have the Secretary direct the Office of Accountability and Whistleblower Protection (“OAWP”) review and issue guidance on how OAWP will discipline senior officials, and develop a functional process to ensure the implementation of whistleblower protections.

Wilkie is now the face of the VA. It is up to him to make sure that the agency implements the recommendations to protect whistleblowers and hold managers that retaliate against them accountable. Cause of Action Institute will continue to conduct oversight to make sure the VA follows through with adopting GAO’s recommendations. We have documented what happens when agencies provide lip-service instead of fixing problems. Our veterans deserve a functional and ethically-operated VA, and that can only start by repairing the climate of the agency from the top.

Chris Klein is a Research Fellow at Cause of Action Institute

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