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07/30/2013

The Hill’s HealthWatch: Watchdog requests IRS review of group that is promoting ObamaCare

Watchdog requests IRS review of group that is promoting ObamaCare

By Sam Baker – 07/29/13 12:40 PM ET

A watchdog group is asking the IRS to review the tax-exempt status of a organization crucial in helping to promote ObamaCare.

Cause of Action has asked the IRS to investigate Enroll America, a nonprofit that is encouraging people to enroll in new coverage options under the healthcare law.

The watchdog group said Enroll America should not have received tax-exempt status because its work helps secure new customers for insurance companies.

“If Enroll America is designed to benefit insurance companies instead of the American public, then its charitable status no longer applies,” said Dan Epstein, executive director of Cause of Action. “An organization that has been granted tax deductible status but is actually depriving the American people of taxable revenue warrants an investigation.”

Enroll America is a known ally of the White House, and was established to help raise awareness of new insurance options available under ObamaCare. Health and Human Services Secretary Kathleen Sebelius has made fundraising calls for the organization.

Enroll America National Communications Director Jessica Barba Brown said the objections are baseless.

“This complaint is completely without merit,” she said. “Enroll America is focused solely on helping to educate American consumers about the new health insurance benefits created by the Affordable Care Act.  The IRS has reviewed both the mission of Enroll America and in most cases the exact statements that Cause for Action is citing, and found that Enroll America qualifies for 501(c)(3) status.”The request for additional IRS scrutiny comes after conservatives have taken aim at the agency over its treatment of certain advocacy organizations, including those affiliated with the Tea Party, during the 2012 elections.

Enroll America is classified as a 501(c)3 organization, citing a charitable and educational mission to “maximize the number of lower- and moderate-income people either enrolled in Medicaid or certified for exchange-based subsidies.”

Enroll America’s aim is not to promote the healthcare law politically, but to encourage people to sign up for the new insurance options the law provides. The group’s leader is a former White House official, but it has also partnered with insurance companies and other industry players to focus on enrollment.

Cause of Action said the organization should not have tax-exempt status because increased ObamaCare enrollment will benefit the healthcare industries that sit on Enroll America’s board.

“As Enroll America’s purpose is so closely aligned with the commercial interests of these for-profit entities, its activities thus far demonstrate that it is little more than a trade association for the healthcare industry, employing marketing tactics and its high-level access to executive branch officials as a means to increase the sale of healthcare services,” Cause of Action’s complaint states.

Cause of Action describes itself as a nonpartisan watchdog group that fights government regulation and spending. Its executive director is a former aide to Rep. Darrell Issa (R-Calif.). the powerful chairman of the House Oversight Committee, and has worked for the powerful conservative donors Charles and David Koch.

— This story was updated at 2:54 p.m. and 5:04 p.m.

 

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07/18/2013

National Law Journal: Group Wants Justices to Lift Limits on Political Giving

Group Wants Justices to Lift Limits on Political Giving

By Marcia Coyle      July 17, 2013

For its first brief in the U.S. Supreme Court, the Cause of Action Institute picked a controversial cause: an end to certain limits on individual contributions to federal candidates, political action committees and political party committees.

McCutcheon and Republican National Committee v. Federal Election Commission offers the Supreme Court an another opportunity to deregulate money in elections following its much criticized ruling in Citizens United v. Federal Election Commission in 2010. The justices will hear arguments in the case this fall.

The Cause of Action Institute, which describes itself as a nonprofit, nonpartisan government-accountability organization “that fights to protect economic opportunity when federal regulations, spending and cronyism threaten it,” has joined the legal fight with an amicus brief supporting challengers Shaun McCutcheon and the Republican National Committee (RNC).

“This is their first Supreme Court brief, but it’s right down their alley,” said Barnaby Zall of Weinberg, Jacobs & Tolani in Rockville, Md., counsel of record on the amicus brief. “They are an organization focused on government accountability and they work mainly with the [Freedom of Information Act]. They understand disclosure and rules. They looked at this issue as combining lots of issues that affected them.”

Under federal campaign finance laws, there are two types of limits on political contributions by individuals. Base limits restrict the amount an individual may contribute to a particular candidate committee ($2,600 per election); national party committee ($32,400 per calendar year); state, district and local party committee ($10,000 per calendar year (combined limit)); and political action committee (PAC) ($5,000 per calendar year). Aggregate limits restrict the total contributions that individuals may make in a biennial—two-year—election cycle.

McCutcheon and the RNC urge the justices to apply the most searching scrutiny—strict scrutiny—to those biennial limits and find that the limits violate the First Amendment. Under the aggregate limits, individuals may contribute $48,600 to candidate committees and $74,600 to non-candidate committees, of which no more than $48,600 may go to non-national party committees (state, district and local party committees (combined) and PACs).

The amicus brief by Cause of Action Institute walks the justices through the last 40 years of changes in the campaign spending and disclosure environment. Those changes, it argues, undercut the original rationale for the aggregate limits.

“In an era in which parties and campaigns compete not only with other like entities, but also with independent voices armed with the latest technology and an almost limitless ability to uncover, analyze and publish contributor information, does the rationale for the current aggregate limits survive?” the brief asks.

The rationale for the limits, according to Congress in 1974, was to prevent circumvention of the limits on individual contributions. As the Supreme Court said in its landmark campaign finance ruling, Buckley v. Valeo: “Congress was surely entitled to conclude that disclosure was only a partial measure, and that contribution ceilings were a necessary legislative concomitant to deal with the reality or appearance of corruption inherent in a system permitting unlimited financial contributions, even when the identities of the contributors and the amounts of their contributions are fully disclosed.”

But what was true of disclosure in 1974 is not true today, the institute posits in one of two key arguments.

“ ‘Fully disclosed,’ in 1974, meant buried in a mountain of paper filings” in a few offices, according to the institute, with little public access.

“Today, there are effective and efficient public and private alternatives, all designed to disclose and publicize any evasions of the contribution limit,” the brief argues. “The Justice Department, the media, and private organizations all use these technologies to monitor, in real-time, campaigns and donors, and release the results on the Internet free of charge, in formats expressly designed to be used by relatively unsophisticated analysts and observers.”

That difference between today and 40 years ago, the brief adds, demonstrates that the aggregate limits are no longer tailored to the problem that Congress was addressing.

And then there is Citizens United. That 5-4 decision lifting the ban on corporate and union independent spending, along with other court decisions, has created alternative methods for individuals to speak during campaigns, the institute says. That new freedom to speak has removed the major incentive to circumvent individual contribution limits.

“Those alternative means are readily available to cautious donors now,” the brief explains. “These lawful, compliant expenditures can be made by one speaker or in conjunction with others.”

The effect of the limits today is “to punish those few donors who want to support more candidates directly than the aggregate limits permit. Thus the aggregate limits are simply another attempt to prevent persons of wealth (or those who seek to promote challengers or innovative candidates) from associating in the manner they choose.”

Daniel Epstein, the institute’s executive director and former investigative counsel for the U.S. House Committee on Oversight and Government Reform, said the aggregate limits do not protect against the most serious type of political corruption today—so-called dark money contributions for which the identity of the donor does not have to be disclosed.

“We don’t usually write amicus briefs,” Epstein said. “Most of our litigation is directly representing clients. The reason we were motivated to work with Zall is he is obviously an election law expert and we tend to be free market. You want a marketplace of ideas not just in terms of economic transactions but in terms of speech as well. One of the things we basically argue is that the contribution limits are both over-inclusive and under-inclusive. It would have a potential limit on the kinds of discussions that we viewed as important. Minority groups, bloggers and others might be adversely affected by the limits.”

The ability of someone who wants to violate the law has diminished substantially, according to Zall. “That is recognized by the Department of Justice and others, but the interpretations of the law have not changed” he said, adding that the institute’s brief brings “a realization that the old interpretations don’t work in the new environment. What they end up doing is causing more problems than they would solve.”

 

 

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07/18/2013

The Hill: Dan Epstein: Who should be holding whom accountable?

Who should be holding whom accountable?

 By Dan Epstein  July 12, 2013

Inspectors General, who hold federal agencies accountable by conducting audits and, when needed, investigating alleged misconduct, are in place to provide oversight over how taxpayer funded federal agencies are operating. But what happens if the inspectors are allegedly conducting the misconduct?

A case in point is the recent investigation involving Department of Homeland Security (DHS) DeputyInspector General Charles Edwards and allegations of his misconduct and abuse. Senators McCaskill and Johnson share similar concerns to those of Cause of Action that have been brought forward by insiders at DHS. These concerns range from wasteful spending to the destruction of federal records, which is a criminal offense. We have already begun releasing documents we have obtained and are committed to exposing the truth about Edwards and his office.

But everyday Americans aren’t always afforded the time and resources to uncover the facts about government employees such as Edwards. That’s why, as a government watchdog group, Cause of Action is committed to exposing the overreach and cronyism fueling the federal government’s waste, fraud, and abuse of taxpayer dollars. As a result of our own investigation and information from insiders familiar with the DHS OIG office, Cause of Action sent a letter to President Obama on July 1 requesting that the President remove Edwards from his position. Edwards has failed to honestly and appropriately conduct investigations, manage subordinates, and has potentially misused public resources.

Cause of Action exposes these types of government accountability issues because Americans have the right to know how their government spends their hard earned money. We are rooted in the belief that regardless of party affiliation, we all deserve an efficient, effective government that protects our best interests rather than an ulterior political or personal agenda. Cause of Action concentrates on the decisions and rule making that may go unchecked at federal agencies.

Our staff of investigators, lawyers, and communications professionals frequently uses Freedom of Information Act (FOIA) requests to shed light on otherwise opaque facets of the federal government. We also seek to utilize valid tips from government employees who have noticed the misuse of taxpayer resources.

Our recent accountability work included a report on a Centers for Disease Control and Prevention’s (CDC) grant program revealing seven grant recipients who allegedly used federal funds to illegally lobby for tobacco taxes, clean air ordinances, and bans on sugar-sweetened drinks.

Our work doesn’t stop at exposing misuses of power; we fight to hold officials accountable through litigation and public education. Our litigation and investigations are tactical, covering a spectrum of issues and targets that are part of our greater mission to educate the public on how the government exercises its unchecked power.

By employing the checks and balances our government provides, whether through the courts or through Congressional investigations, our aim is to bring real public change through our investigations and litigation. We remain committed to shedding light on the discretionary power of unelected officials who spend our dollars and regulate our sources of livelihood.

Epstein is executive director of Cause of Action, a non-profit, nonpartisan government accountability organization.

 

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07/1/2013

Dan Epstein Discusses Acting DHS Deputy IG Edwards on The Lead

Dan Epstein discusses the corruption within the Department of Homeland Security Office of Inspector General with Jake Tapper on CNN’s The Lead.

Who Watches The Watchmen?

 

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06/25/2013

Dan on WIBA 6/24/2013

 

Dan Epstein discusses how White House, Treasury politicize FOIA

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06/24/2013

SCNow: Florence leaders claim no wrongdoing in Smoke Free lobbying case

Florence leaders claim no wrongdoing in Smoke Free lobbying case

Officials and volunteers with anti-smoking movement blame DHEC for poorly run campaign, while Florence City Council members say they did no wrong.

By JOHN SWEENEY    June 12, 2013

 

FLORENCE, SC – Former officials with Smoke Free Florence are saying they and members of the Florence City Council did nothing wrong during a campaign to pass a city wide smoking ordinance two years ago and are blaming a state agency’s heavy handedness for raising legal red flags.

“We don’t know if we still know the whole story or if we still know the truth about what happened,” said Clyde Nance, director of preventative services at Circle Park Behavioral Health Services.

Nance and Richard Sale, chairman of the Florence County Coalition for Alcohol and Other Drug Abuse Prevention, spoke out Monday in reaction to a story in the Morning News that ran Saturday regarding a report issued by the government watchdog group Cause of Action (CoA) that showed Smoke Free Florence illegally lobbied members of the Florence City Council to pass a smoking ordinance in 2011.

A separate report from the U.S. Government Accountability Office confirmed CoA’s findings and required the S.C. Department of Health and Environmental Control pay back $247.79 in funds deemed misused and required some staff members to attend additional ethics training.

The discrepancies came to light after local members of Circle Park and Smoke Free raised concerns over various practices by DHEC officials, including a request by DHEC to alter Smoke Free Florence meeting minutes so as not to show employees of the state agency was present during a meeting.

Nance and Sale said that was just one example of an unusual and often unsettling relationship with the state agency that was anything but efficient.

“It was such a strange partnership,” Nance said. “It was so different from anything that we’d ever done. It was so separated from the community and the state level.”

Sale, who served as chairman of Smoke Free Florence during its operation, has been involved with the Florence County Coalition since its inception more than 20 years ago. He said he’s never seen a project run the way that DHEC attempted to run the Smoke Free Florence campaign.

“I think it’s because they wanted to run it at the state level,” he said. “It was like they gave us the grant but they wanted to run it.”

Smoke Free Florence received $2.1 million of a $6 million grant made available by the American Recovery and Reinvestment Act.

The federal grant money was designated to educating youth to the dangers of smoking, assisting municipalities and school districts in enacting “smoke-free and tobacco-free policies,” and to offer health services dedicated toward helping smokers quit. The group utilized entities like Circle Park for that last piece, forming the group “Smoke Free Florence,” which no longer exists since the grant funding ran out .

“I was very proud of the coalition,” Sale said.

Sale and Nance aren’t the only ones bothered by the fact local individuals affiliated with Smoke Free Florence are no being mentioned in the same sentence as officials with DHEC who committed the violations.

Florence City Council members Buddy Brand, Glynn Willis and Octavia Williams-Blake said that since the initial story ran over the weekend they had received calls from family members and constituents asking if they did anything illegal.

All three council members said on Monday they were proud of the work they had down to tailor a smoking ordinance that fit the community. That ordinance include major changes from the original proposal DHEC proposed through Smoke Free Florence that would have had businesses losing their license if someone was caught smoking on their property. The new ordinance was more lenient, and according to Nance and Sale frustrated DHEC because it didn’t follow the “cookie cutter” document DHEC proposed.

Neither the report from CoA or the U.S. Government Accountability Office found local officials guilty of wrong doing, but did find fault with DHEC and forced the agency to pay a fine of $247.79 and required two employees receive additional training.

Sale said both the coalition and local officials approached the ordinance the right way, having debate and some give and take before a final decision was reached. Any notion that local individuals did something wrong, he said, was just not true.

Initially following the CoA report, DHEC issued a statement saying it had complied with the findings of the accountability office and considered the matter resolved.

A spokesperson for DHEC said Wednesday the agency had no additional comment.

For Nance, the incident has served as a lesson that the next time Circle Park or the coalition works with DHEC, they will be more careful in how they deal with their state partner.

“I think that the coalition will continue to take a look at their partnerships as they always have done and try to ensure that our partners will conduct themselves with the integrity and honesty and transparency that we do in the efforts that we have,” Nance said.

“The coalition holds itself to a pretty high standard and I think what we will look at in the future is try to make sure that anybody we partners with holds (themselves) to the same standard.”

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06/20/2013

The Fiscal Times: Dan Epstein: Lax IRS Oversight Fostered Costly Charity Scams

Lax IRS Oversight Fostered Costly Charity Scams

By DAN EPSTEIN    June 20, 2013

 

In addition to its clean beaches, rolling hills and exclusive real estate, Pacific Palisades, California, was home to the International Humanities Center (IHC), a tax-exempt sponsor of over 300 charitable endeavors. Its executive director, Steve Sugarman, rose to non-profit stardom by leading IHC-supported organizations to over $6 million in combined revenue.

But by December 2011, several IHC-sponsored projects received a shocking letter from Sugarman. It disclosed that IHC was “running a considerable deficit that has severely impacted all operations,” and warning the projects that future payments may not be processed.IHC became so successful so quickly that by 2009 the organization had to place a moratorium on sponsoring new projects. Sugarman’s secret was fiscal sponsorship – a term of art referring to tax-exempt 501(c)(3) charities that raise tax-deductible contributions on behalf of projects that lack the resources to operate as independent, tax-exempt charities themselves.

One month later, Sugarman informed IHC’s projects that their fiscal sponsor was shutting down. Donations to hundreds of charitable causes – and the sponsor entrusted with them – had vanished. The FBI subsequently launched an investigation into the apparent disappearance of an estimated $1 million in donations that about 200 non-profits reported losing when the organization abruptly shut down.

The story of IHC is not unique. Fiscal sponsors that engage in money laundering and fraud are systemic. And these CEOs are not on Wall Street or in the boardrooms of large, publicly-traded corporations. This kind of corporate fraud occurs in small, tax-exempt nonprofits, often run by one or two individuals who have discovered an opening in the tax code that allows them to dupe unsuspecting start-up charities and fly under the radar of an over-complicated tax code.

While the Internal Revenue Service got into trouble for targeting Tea Party groups, many fiscal sponsors have wrongly obtained charitable status to engage in a dangerous pattern of abuse that destroys jobs and ruins charitable aims toward the public good. Sadly, despite evidence of fiscal sponsors having fabricated tax documents and bank statements or mismanaged federal grant money, fiscal sponsorship has been unmanaged, unchecked, and undefined by the IRS.

The importance of IRS oversight of fiscal sponsorship is not just in the interest of those charitable projects that rely on the practice for their support – but for the American taxpayers as well. IHC received economic stimulus funding from the U.S. Department of Energy – yet no shovel-ready jobs were created.

In fact, the IHC’s use of these funds was subject to a DOE Inspector General investigation, with a criminal and civil case pending against IHC as of April 2012. Proper IRS oversight over fiscal sponsorship would have averted whatever bureaucratic wisdom concluded that IHC merited tax dollars or that it would employ out-of-work Americans.

Moreover, fiscal sponsorship has been abused in ways that threaten American security interests. Many are familiar with the Freedom Flotilla, which was led by the pro-Hamas Free Gaza Movement; it resulted in the death of nine people. But few are aware that the Free Gaza Movement is fiscally sponsored by a Washington, D.C.-based tax-exempt nonprofit, the American Educational Trust. For the IRS, fundraising for terrorism abroad apparently does not raise the same red flags as does being a “patriot” or supporting the constitution.

The IRS must regulate fiscal sponsorship by clearly defining the parameters and standards of the practice. Fiscal sponsorship agreements should be treated as contracts that identify the fiscal sponsorship arrangement between sponsor and client, as well as provide evidence that the sponsoring organization will exercise discretion and control over its client. The IRS, through rulemaking, should require that any 501(c)(3) organization that engages in fiscal sponsorship file with its Form 990 copies of all of its written fiscal sponsorship arrangements. Additionally, the IRS should require that fiscal sponsors disclose in their 990s when the gross receipts of a sponsored project exceeds $50,000.

Cases like IHC and the Free Gaza Movement underscore the substantial lack of guidance regarding fiscal sponsorship. Those gaps in oversight have exposed hundreds of charities to abuse and allowed substantial sums of donations – including federal government grants – to be mismanaged by unaccountable sponsors.

The IRS’s failure to properly oversee tax-exempt groups puts all projects that find themselves under an incompetent or disreputable fiscal sponsor at risk of losing funding and shutting down.

Dan Epstein is executive director of Cause of Action, a nonprofit, nonpartisan group that promotes government accountability and transparency. The group has filed a request with the IRS to develop rules and standards for tax-exempt fiscal sponsors.

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