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03/15/2018

Inspector General Admits to Flawed FOIA Rule and Intends to Request HUD Revisions

The Department of Housing and Urban Development (“HUD”) Office of Inspector General (“OIG”) has responded to Cause of Action Institute’s (“CoA Institute’) letter requesting that the watchdog recall and revise its direct final rule implementing changes to its Freedom of Information Act (“FOIA”) regulations.  CoA Institute criticized the OIG’s cross-referenced definition of a “representative of the news media,” which improperly retained the outdated “organized and operated” standard, rather than incorporating the statutory definition.  The OIG now admits that its flawed FOIA rule “does not track the current statutory language,” and agrees that the D.C. Circuit’s decision in Cause of Action v. Federal Trade Commission is controlling.

As we previously explained, the OIG, as an independent component of HUD, maintains its own rules regulating public access to its records.  Yet the OIG still relies on department-wide FOIA policy in certain respects, including HUD’s general provisions for charging fees to requesters.  With respect to the definition of a news media requester, HUD’s regulations do not comport with statutory and judicial authorities.

Although the HUD watchdog concedes it promulgated a flawed FOIA rule, it will not commit to revising its regulations due to the “difficulty” of doing so.  The OIG has instead forwarded CoA Institute’s letter to HUD with the request that the agency-wide regulations be amended.

Unfortunately, HUD issued its own final rule implementing revised FOIA regulations back in January 2017.  When it did so, the agency did not solicit public feedback.  CoA Institute nevertheless submitted a comment to explain the deficiency in HUD’s rule.  That comment went unanswered and, to date, HUD has not indicated any intention of revisiting its flawed rule.  It is promising that the OIG agrees there is a serious deficiency in its regulations.  Considering that acknowledgement, though, the agency should undertake efforts now to fix the obvious error.

Ryan Mulvey is Counsel at Cause of Action Institute

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03/14/2018

GAO audit of Office of Special Counsel referrals under FOIA reveals weakness in the statute

An audit report released yesterday by the Government Accountability Office (“GAO”) provides alarming details concerning the lack of referral of cases of wrongful withholding under the Freedom of Information Act (“FOIA”) to the Office of Special Counsel (“OSC”).  Since at least 2008, neither the Department of Justice (“DOJ”) nor any federal court has referred a single case to the OSC so that the agency could investigate whether disciplinary action would be warranted for the arbitrary or capricious withholding of records litigated in court.  The publication of the audit coincided with the testimony of the GAO’s Director of Information Technology Management Issues, David Powner, at a hearing before the Senate Judiciary Committee.

OSC’s Investigatory Role under the FOIA

Congress envisaged a special role for the OSC in policing agency behavior with respect to the withholding of records.  Section 552(b)(4)(F) of the FOIA obliges the OSC to investigate whether disciplinary action is warranted against an official responsible for withholding records if a federal court has (1) ordered the production of those records, (2) assessed reasonable attorney fees and litigation costs against the government, and (3) issued a “written finding” that the case “raises questions whether agency personnel acted arbitrarily and capriciously with respect to the withholding.”

Once these conditions are met in any given case, the Attorney General must refer the matter for investigation to the OSC, and the agency at issue must take any corrective action recommended by the OSC.  If the government fails to comply, a court can punish a responsible official with contempt.  Apart from the FOIA, the OSC also has independent authority under 5 U.S.C. § 1216(a)(3) to investigate most allegations of arbitrary or capricious withholding of records.

No Referrals Have Been Made to the OSC Over the Past Ten Years

After examining various records and interviewing officials at the DOJ and OSC, the GAO concluded that, since 2008, no court orders have issued in a FOIA lawsuit such that referral to the OSC was appropriate.  At the same time, between 2013 and 2016, requesters in at least six cases nevertheless sought a court-ordered referral to the OSC.  In all six cases, the court denied the requests.

The referral provisions of the FOIA are toothless in practice.  According to one source, the OSC has investigated only two possible cases of punishable wrongdoing.  In Holly v. Acree, the OSC concluded that it could not determine the “officer or employee who was primarily responsible for the [wrongful] withholding.”  And in Long v. Internal Revenue Service, the OSC closed its investigation without any public findings.  Furthermore, despite numerous allegations and some instances of field investigation over the years, it does not appear that the OSC has ever initiated a disciplinary proceeding under Section 1216(a)(3).

Judicial decisions likewise exemplify the reticence of courts to refer cases to the OSC.  The judicial branch is already highly deferential to the government when assessing justifications for the treatment of FOIA records.  That deference appears to affect the analysis of whether it is appropriate to issue a “written finding” that an official or employee may have personally acted wrongfully.  For example, in the case of Kempker-Cloyd v. Department of Justice, No. 97-253, 1999 U.S. Dist. LEXIS 4813 (W.D. Mich. 1999), the court acknowledged that an agency failed to act in a timely manner, to conduct adequate searches, or to comply with the FOIA “in good faith.”  On further order, the court also determined the agency was liable for attorney fees and litigation costs.  Yet the court still did not believe there was evidence suggesting the agency acted in an arbitrary or capricious manner.  In a more recent case, Consumer Federation of America v. Department of Agriculture, 539 F. Supp. 2d 225 (D.D.C. 2008), when faced with a motion to refer the case to the OSC after the agency conducted an inadequate search and lost responsive records, the court sidestepped the issue altogether by ordering the agency to file a supplemental declaration confirming its promise—made during oral argument—to revise the process for handling requests for electronic records and to correct the problems that led to the loss of the records at issue.  Countless other examples of judicial refusal to engage with the OSC referral provisions abound.

The FOIA Should Be Strengthened to Hold Agency Officials Responsible for Wrongful Withholdings

As it stands, agency officials are effectively unaccountable for their decision-making under the FOIA.  There is no punishment for an agency when it mishandles a request or forces a requester to file a lawsuit to obtain records or fight wrongful withholdings.  Indeed, it is the taxpayer who ends up footing the bill for the government’s litigation costs.  The individuals responsible for processing requests, therefore, have little incentive aside from their personal commitment to transparency to ensure that agency decision-making is consistent with the law.  Even if a requester prevails in court, he faces the uphill battle of securing attorney fees and recoverable litigation costs, not to mention the tremendous difficulty of obtaining a written finding of arbitrary and capricious behavior on the part of the agency.

The requester community deserves better.  If agency officials knew that they would be held personally responsible for their administration of the FOIA, we would have a more efficient disclosure regime and a more transparent government.  The OSC can and should play an important role here, but the FOIA, as implemented, does not currently facilitate that endeavor.  Congress should undertake efforts to remedy the situation.

Ryan Mulvey is Counsel at Cause of Action Institute

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03/13/2018

IRS Seeks to Halt Fifth Circuit Appeal of Controversial Inversion Rule, Submits Final Rule for White House OMB Review

In January, Cause of Action Institute released a report highlighting IRS exemptions from various regulatory oversight mechanisms.  This report kicked off a flurry of activity, and Treasury and OMB are now in talks about whether and how the IRS should continue to be functionally exempt from White House review of IRS rulemakings.  A recent development in a closely watched Fifth Circuit case challenging an Obama-era rulemaking on inversions shows the effort may be bearing fruit.

In April 2016, the Obama Administration issued a controversial rule attempting to block inversions, a business reorganization technique designed to provide relief from high U.S. corporate taxes.  The IRS made this rule by issuing a Notice and publishing a proposed rule in the Federal Register.  Because IRS rules are effective from the date of the Notice, the agency was in no hurry to complete the Administrative Procedure Act (“APA”) rulemaking process that it had begun with the proposed rule and request for comment.  The Obama Administration ended without the rule ever being finalized but the Notice continued to be in effect.

The Chamber of Commerce sued the IRS over the inversion rule, claiming that the agency failed to comply with APA rulemaking procedures and that the substantive rule was in excess of its statutory authority.  The IRS tried to use the Anti-Injunction Act (“AIA”) to block the suit, as it often does.  But, in October 2017, a district court in Texas ruled that the AIA did not deny the court jurisdiction over the case and that the IRS did indeed violate the APA.  The court than invalidated the temporary rule.  The IRS promptly appealed to the Fifth Circuit.

IRS Moves to Stay Appeal of Inversion Rule Decision

But, in a twist, last week the IRS moved the appellate court to stay the proceedings because it was restarting the long-dormant APA process and finalizing the underlying rule.  In its motion seeking a stay (or a 45-day extension), counsel for the IRS wrote that it needs “to reevaluate whether [the IRS] should proceed with th[e] appeal[.]”  The IRS also told the Fifth Circuit that:

Having completed notice and comment, Treasury and the IRS plan to finalize the proposed regulation. That process is nearly complete. A draft of the final regulation has been prepared, and it has been submitted to the Office of Management and Budget for review. The final regulation would replace the temporary regulation that is at issue in this case, which will be removed.

Accordingly, we respectfully request that briefing of this case be stayed until a final regulation is published in the Federal Register, during which time the Government will evaluate whether it should proceed with this appeal or dismiss it.

This is an interesting development.  The inversion rule remains controversial and whether it is still necessary, following the recent changes to the corporate tax rate, is an open question.  But it now appears that Treasury and IRS are rethinking whether it is wise to press the government’s current disadvantage on the AIA and APA compliance in the Fifth Circuit.  This case could provide a clear circuit split with the D.C. Circuit (following Florida Bankers, which held the AIA blocked pre-enforcement review in APA challenges to IRS rules) on the proper application of the AIA.  So we may be seeing a strategic retreat by the IRS trying to limit the damage from its earlier loss in the district court.  But it is good to see that the agency is involving OMB in this finalization process.

We’ll have to wait to see what OMB says about the rule, whether the IRS does indeed finalize the rule, what form that final inversion rule will take, whether the Fifth Circuit grants the stay, and, ultimately, whether the IRS will back out of this appeal.  Stay tuned.

Update: The Fifth Circuit did not act on the stay motion before the deadline for the IRS to file its opening brief, which it timely did on March 16.

Update 2: On March 22, the Fifth Circuit denied the stay motion and the case is proceeding.

James Valvo is Counsel and Senior Policy Advisor at Cause of Action Institute.  He is the principal author of Evading Oversight.  You can follow him on Twitter @JamesValvo.

 

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03/13/2018

CoA Institute President John Vecchione Submits Written Testimony to Senate Judiciary Committee for Sunshine Week

Before The United States Senate Committee on the Judiciary

Hearing on The Freedom of Information Act: Examining the Administration’s Progress on Reforms and Looking Ahead

March 13, 2018

Written Testimony of John Vecchione

President & CEO, Cause of Action Institute

Chairman Grassley, Ranking Member Feinstein, and Members of the Committee, thank you for the opportunity to submit this written testimony about the Freedom of Information Act (“FOIA”), the implementation of the FOIA Improvement Act of 2016, and other issues related to government transparency.

My name is John Vecchione and I am the president and CEO of Cause of Action Institute (“CoA Institute”).  We are a nonpartisan, nonprofit government oversight organization committed to ensuring that government decision-making is open, honest, and fair.  We use various communication, investigatory, and legal tools to pursue that mission.  We believe deeply that in order for a government to be accountable to the people, it must be transparent.  To that end, we use the FOIA to gather information and educate the public.  But we also police agency behavior under the FOIA, submit regulatory comments on proposed FOIA regulations, and use strategic litigation to bring agencies into compliance with the FOIA and the Federal Records Act.[1]

Today, I would like to address two important topics: the proposed policy of Release to One, Release to All and agencies updating their regulations to reflect statutory changes in the FOIA.

Release to One, Release to All

In July 2016, the country celebrated the 50th anniversary of the FOIA.  Congress marked the occasion by passing the FOIA Improvement Act of 2016.[2]  In conjunction with signing the bill into law, President Obama announced a series of policies to implement the bill and build on the goal of increasing government transparency.[3]  One of those policy initiatives was to learn from the Department of Justice Office of Information Policy’s (“OIP”) Release to One, Release to All pilot program and to work toward all agencies posting their FOIA productions online.

President Obama wrote that this “concept would ensure that all citizens—not just those making a request—have access to information released under FOIA.”[4]

[The President then] direct[ed] the newly established Chief FOIA Officers Council to consider the lessons learned from the DOJ pilot program and work to develop a Federal Government policy establishing a “release to one is a release to all” presumptive standard for Federal agencies when releasing records under FOIA.  The Chief FOIA Officers Council [was directed to] examine issues critical to this policy’s implementation, including assessing the impact on investigative journalism efforts, as well as how best to address technological and resource challenges.[5]

President Obama established a “January 1, 2017 [deadline for] the Chief FOIA Officers Council [to] work with the Office of Management and Budget (‘OMB’) to provide further guidance” on this policy.[6]

On August 10, 2016, in a round of pre-publication comments, CoA Institute submitted comments to OMB and OIP that broadly supported the Release to One, Release to All policy and identified areas where explicit guidance language was necessary to prevent abuse of discretion or agency-avoidance behavior.[7]  We support the policy “because when an agency produces records under FOIA, it has reviewed those records for release to the public and not just the requester.  Proactive disclosure of records may reduce the need for use of FOIA to access information in the first place and thus lessen the burden on FOIA offices throughout the federal government.”[8]  Congress has long recognized that frequently requested records should be proactively disclosed by agencies.  In the FOIA Improvement Act of 2016, Congress directed that once a record has been requested and released three times, the agency must post the record in its electronic reading room.[9]  Release to One, Release to All simply takes this idea one step further and would have agencies release information to the public after the first FOIA request and production.

CoA Institute is concerned that too many exceptions to the Release to One, Release to All policy could undermine the policy’s goal.  Namely, in our comments, we highlighted that an exemption for content that is “inappropriate” could be abused “to protect the agency mission, agency head, administration generally, or the president from the political fallout of an embarrassing release.”[10]  CoA Institute has been investigating the role political interference plays in the release of information through FOIA,[11] and we urged OIP not to allow such considerations to taint a Release to One, Release to All policy.  As part of this project, we recently profiled the National Oceanic and Atmospheric Administration’s practice of applying so-called “sensitive review” procedures to “high visibility” FOIA requests.[12]

We also commented on several others issues as well, including: agency compliance the readability requirements of Section 508 of the Rehabilitation Act, the posting of auxiliary information along with produced documents (such as final determination letters), and recognizing the need for a short delay between releasing information to the requester and making information publicly available in order to safeguard incentives for requesters—particularly news organizations—to make requests in the first place.

In December 2016, OIP issued a request for comment in the Federal Register, seeking input on its draft guidance.[13]  The comment period closed on December 23, 2016.  President Obama’s January 1, 2017 deadline has come and gone; and, more than a year later, neither OMB nor OIP has finalized the guidance or implemented the policy.  OIP also has refused to respond to multiple requests for updates on its process of either finalizing or abandoning the policy.  Frustrated by this lack of action, in October 2017, CoA Institute joined with the Sunlight Foundation and filed a petition for rulemaking with OIP and OMB asking those agencies to finalize the Release to One, Release to All policy.[14]  We have not received a response.

Release to One, Release to All remains an important opportunity for the government to both increase the amount of government information in the public sphere and also potentially ease the burden on FOIA offices.  It is both ironic and unfortunate that the agencies tasked with implementing a transparency policy are being opaque about their plans with regard to the policy.  I urge this Committee to press OIP and OMB to finalize and implement Release to One, Release to All.

Agency FOIA Regulations

The FOIA Improvement Act of 2016 required agencies to update their FOIA regulations within 180 days of enactment to reflect the statutory changes.[15]  As often happens, most agencies missed this deadline but, as a whole, agencies have made moderate and steady progress in updating their regulations.

There are approximately 120 agencies subject to the FOIA.[16]  Although most agencies have their own regulations, some share regulations with another agency; and some entities within an agency, such as an office of inspector general, may have FOIA regulations separate from a parent agency.[17]  Therefore, there does not appear to be an exact count of how many FOIA regulations need to be updated with each statutory amendment.  According to FOIA Advisor, a website that tracks FOIA news and regulatory developments, since the passage of the FOIA Improvement Act of 2016, approximately sixty-three agencies, or about half, have either proposed or finalized updates to their FOIA regulations.

CoA Institute has been paying particular attention to this process because many agencies still maintain an anachronistic definition of a “representative of the news media,” a category of FOIA requester that is able to access records at a reduced cost.  Congress defined the term more than a decade ago in the Open Government Act of 2007.[18]  We were embroiled in litigation over this issue when the Federal Trade Commission used the outdated standard that an entity must be “organized and operated” to publish or broadcast news to deny CoA Institute access to records by claiming we did not qualify for reduced fees and demanding we pay a large sum in order to access records.  Unfortunately, agencies sometimes try to use fees and fee definitions to deny requesters access to records.  In 2015, CoA Institute secured an opinion from the U.S. Court of Appeals for the District of Columbia Circuit holding that the “organized and operated” standard has no place in FOIA administration and that agencies must use Congress’s statutory definition.[19]

Following that decision, CoA Institute has been submitting regulatory comments to agencies when they propose or finalize new FOIA regulations in an attempt to bring those agencies’ regulations in line with the 2007 Act and binding jurisprudence.  Over the past few years, we have submitted twenty-four regulatory comments, many focused on agencies’ improper fee definitions.

Relatedly, OMB maintains a three-decades-old guidance document—which the FOIA requires agencies to follow—directing agencies to use the “organized and operated” standard.[20]  CoA Institute is currently in litigation with OMB over a petition for rulemaking we submitted urging OMB to update its guidance and conform to the statute.[21]  When CoA Institute filed that petition, the improper “organized and operated” standard appeared in the Code of Federal Regulations more than seventy times, including in the FOIA regulations of eleven cabinet-level agencies.[22]  While we have been successful in convincing several agencies to conform to the statute,[23] the improper definition of a representative of the news media still appears in dozens of agency FOIA regulations and in OMB’s guidance.

CoA Institute will continue to monitor agency regulatory updates and urge them to bring their regulations into harmony with the FOIA statute.  I urge you to raise this issue with OMB and encourage them to update their guidance document.

Conclusion

I want to thank you again for the opportunity to submit this written statement for the record.  I look forward to continuing to work with you to secure the public’s right to access documents concerning the public’s business.

 

A PDF file of the testimony is available here.

[1] See, e.g., Judicial Watch, Inc. v. Kerry, 844 F.3d 952 (D.C. Cir. 2016) (securing decision as co-plaintiff that agency Federal Records Act obligations are not moot so long as agency can still recover records that have been unlawfully removed from the government); Cause of Action v. Fed. Trade Comm’n, 799 F.3d 1108 (D.C. Cir. 2015) (securing decision on proper definition of a “representative of the news media” under FOIA’s fee provisions).

[2] FOIA Improvement Act of 2016, Pub. L. No. 114-185, 130 Stat. 538 (2016).

[3] Press Release, The White House, Fact Sheet: New Steps Toward Ensuring Openness and Transparency in Government (June 30, 2016), available at http://bit.ly/2xSReOa.

[4] Id.

[5] Id.

[6] Id.

[7] Letter from James Valvo, Cause of Action Inst., to Hon. Shaun L. S. Donovan, Dir., Office of Mgmt. & Budget, White House, & Melanie Ann Pustay, Dir., Office of Info. Policy, Dep’t of Justice (Aug. 10, 2016) [hereinafter CoA Institute Release to One, Release to All Comment], available at http://coainst.org/2lej2GH.

[8] Id. at 2.

[9] FOIA Improvement Act of 2016 § 2(a); 5 U.S.C. § 552(a)(2)(D)(ii)(II).

[10] CoA Institute Release to One, Release to All Comment at 2.

[11] See Cause of Action Inst., Grading the Government: How the White House Targets Document Requesters (Mar. 18, 2014), available at http://coainst.org/2FpsnBr; Cause of Action Inst., White House FOIA Obstruction, http://bit.ly/2r0hBub (last visited Mar. 12, 2018).

[12] Ryan Mulvey, NOAA Records Demonstrate Expansion of Sensitive Review FOIA Procedures, Cause of Action Inst. (Mar. 12, 2018), http://coainst.org/2tFnLp5.

[13] Dep’t of Justice, Request for Public Comment on Draft “Release to One, Release to All” Presumption, 81 Fed. Reg. 89023 (Dec. 9, 2016); see Draft Mem. for the Heads of Departments & Agencies, “Release to One, Release to All” Presumption:  Achieving Greater Transparency by Making More Information Available Online, from Office of Info. Policy, Dep’t of Justice (undated).

[14] See Letter from Alex Howard, Deputy Dir., Sunlight Found. & James Valvo, CoA Inst., to Hon. Mick Mulvaney, Dir., Office of Mgmt. & Budget, White House, & Melanie Ann Pustay, Dir., Office of Info. Policy, Dep’t of Justice (Oct. 31, 2017), available at http://coainst.org/2I6Xkf6.

[15] FOIA Improvement Act of 2016 § 3(a).

[16] See FOIA.gov, Where to Make a FOIA Request, Full List of Agencies, https://www.foia.gov/report-makerequest.html (last visited Mar. 12, 2018) (listing agency FOIA contacts).

[17] See, e.g., 7 C.F.R. pt. 2620 (Department of Agriculture Office of Inspector General maintaining separate FOIA regulations).

[18] See Openness Promotes Effectiveness in our National Government Act of 2007 § 3, Pub. L. No. 110-175, 121 Stat. 2524, 2525 (2007).

[19] See Cause of Action, 799 F.3d at 1119.

[20] See Office of Mgmt. & Budget, Uniform Freedom of Information Act Fee Schedule and Guidelines, 52 Fed. Reg. 10012 (Mar. 27, 1987); 5 U.S.C. § 552(a)(4)(A)(i) (Agency fee schedules “shall conform to the guidelines which shall be promulgated . . . by the Director of [OMB] and which shall provide for a uniform schedule of fees for all agencies.”).

[21] See Cause of Action Inst. v. White House Office of Mgmt. & Budget, No. 17-2310 (D.D.C. filed Nov. 2, 2017).

[22] See Letter from James Valvo, CoA Inst. to, Hon. Shaun L.S. Donovan, Dir., Office of Mgmt. & Budget, at 4 (June 2, 2016) (listing agencies), available at http://coainst.org/2D64Raw.

[23] See Ryan Mulvey, CoA Institute Criticizes the Presido Trust on Flawed FOIA Rule, Cause of Action Inst., Mar. 6, 2018, http://coainst.org/2FolU9M (detailing successful regulatory comments to “among others, the Consumer Product Safety Commission, Office of the Special Counsel, Department of Defense, U.S. Agency for International Development, and Department of Homeland Security”).

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03/12/2018

Bankrupt: Terry McAuliffe’s Crony Green Energy Venture Folds

There has been yet another development in the saga of GreenTech Automotive—the “green energy” car company that sought to profit from its ties to former Virginia Governor Terry McAullife, Chinese businessman Charles Wang, and Secretary Hillary Clinton’s brother, Anthony Rodham.  According to papers filed in federal court last month, GreenTech and its sister corporations, including Gulf Coast Funds Management—GreenTech’s “cash-for-visas” outlet—are declaring bankruptcy.

GreenTech cites various reasons for its financial woes but emphasizes negative publicity stemming from critical reportage by the Franklin Center’s Watchdog.org, as well as investigations into possible fraud and wrongdoing by the Securities and Exchange Commission and the Department of Homeland Security Office of Inspector General.  GreenTech’s bankruptcy petition recounts that the company “received investments aggregating $141.5 million from a total of approximately 283 investors,” nearly all of whom were Chinese nationals lured by the promise of permanent residency through the EB-5 Immigrant Investor Regional Center Program.  (The future of the EB-5 visa program remains undecided by Congress.)

But nobody seems to know where all that money has gone, and former Governor McAuliffe and his former partners have never adequately explained its disappearance.  Although GreenTech refers to “personnel issues” and “other difficulties experienced in pursing” an “ambitious business plan,” there is little evidence that much capital was ever spent on employee salaries or manufacturing, let alone research and development.  As recently as May 2016, GreenTech employed only seventy-five people, never finished building a fully-operational manufacturing plant, and never sold a single vehicle.

In addition to the newly-initiated bankruptcy proceedings, GreenTech is still embroiled in several ongoing lawsuits.  The State of Mississippi sued the venture last November to recover $6 million in taxpayer-funded loans and to seek forfeiture of the land provided for the never-realized car factory.  GreenTech originally promised to create upwards of 25,000 jobs in the state, but later signed a pledge to invest $60 million and create 350 full-time jobs.  Even those promises came to naught.

GreenTech—and Governor McAuliffe in his personal capacity— is also defending itself in a lawsuit filed by thirty-two Chinese nationals, who describe the crony venture as being part of a “$120 million scam.”  Because GreenTech never created a sufficient number of qualifying jobs under the EB-5 visa program’s rules, these foreign investors face revocation of their green cards and deportation.  They seek damages of at least $17.92 million.  The court is now considering GreenTech’s motion to dismiss, as well as a request that proceedings be stayed pending resolution of the bankruptcy petition.

As I have previously discussed, GreenTech has been a suspicious operation from the start.  It thrived only as long as it could rely on its politically-connected principals.  When Cause of Action Institute released its investigative report on GreenTech in September 2013, we warned how the company’s exaggerated job-creation estimates, questionable advertising, and readiness to take advantage of favorable political connections, could violate federal law and be part of a larger scheme to defraud investors.  It appears those warnings are now proving prescient.

Unfortunately, a crony venture such as GreenTech Automotive is not an outlier.  For years, taxpayers have subsidized failed businesses that rely on political connections to transfer wealth to their principals, who then walk away without consequences while leaving others to pick up the pieces.  It is time to get the government and the American taxpayer out of the business of picking economic winners and losers.

Ryan Mulvey is Counsel at Cause of Action Institute

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03/12/2018

NOAA Records Demonstrate Expansion of Sensitive Review FOIA Procedures

The Freedom of Information Act (“FOIA”) ensures all citizens equal and open access to records of the administrative state.  It should come as no surprise, however, that the Executive Branch has never been thrilled about disclosing its records to the general public.  At various times, the White House has orchestrated efforts to frustrate prompt disclosure of records under the FOIA, and President Trump is no exception.  In its first year, the Trump Administration has expanded the so-called sensitive review process.  In doing so, agencies have denied FOIA requesters their statutory right of prompt access to government records.

Sensitive review refers to the practice of giving certain FOIA requests extra scrutiny, usually because the records they seek could solicit media attention once disclosed.  The sensitive review process may involve an agency’s public affairs team or other communications specialists, and often includes political appointees at the agencies involved.  The process delays and sometimes prevents disclosure of records that the public has a right to see.

Recently, Cause of Action Institute (“CoA Institute”) learned that at least one agency—the National Oceanic and Atmospheric Administration (“NOAA”)—has expanded the sensitive review process by putting FOIA requests from attorneys into a special class.  In some cases, the agency has done this out of fear it would release records that could be used against it in litigation.  These evasive tactics violate the spirit and purpose of the FOIA.  They cannot and should not be tolerated.  Sensitive review of requests based on the identity of a requester can only reflect the Administration’s efforts to limit the disclosure of records, or at least the segment of requester to whom such information is provided, rather than representing any legitimate concern.

Investigating NOAA’s “High Visibility” FOIA Process

For some time now, CoA Institute has been concerned that NOAA may be abusing the sensitive review process to avoid disclosing information it would rather keep hidden.  In one FOIA production from the agency, for example, NOAA used dubious grounds to redact an email and one of its attachments almost in their entirety, as shown below.

One of the two tracking tables attached to this email included a list of incoming requests at NOAA.  NOAA withheld the substantive information concerning those requests—such as the identities of the requesters, the tracking numbers of their requests, and their respective fee category (e.g., representative of the news media)—under attorney-client privilege.  But it is difficult to credit that such benign tracking information would be privileged, particularly when many agencies regularly release FOIA logs containing just this sort of information.

The second tracking table attached to the email reflected NOAA’s contributions to a Department of Commerce-wide effort to track requests pertaining to the Trump Administration’s transition period.  For example, in response to a request from ProPublica, NOAA was unable to locate any records of correspondence with former Trump nominee Todd Ricketts.  Unlike the NOAA-specific tacking table, however, the information about departmental requests was left unredacted in most instances.

Newly Released Records Provide Details about NOAA’s Enhanced Sensitive Review

In an attempt to understand NOAA’s sensitive review practice, on December 11, 2017, we submitted a FOIA request to NOAA seeking access to all records about the agency’s practice of identifying “high visibility” FOIA requests, as well as its tracking of requests concerning the Trump transition.  This week the agency provided an interim production of responsive records, and the records produced are helping us piece together just what the agency considers to be a high visibility request.

As noted, sensitive review refers to the practice of giving certain FOIA requests extra scrutiny, including by bringing political appointees into the review process.  At the Department of Treasury during the Obama Administration, for example, a whole committee of political appointees—along with representatives from the agency’s public affairs, legislative affairs, and general counsel offices—availed themselves of the opportunity to review responsive records and delay disclosures.  In the past, sensitive review has been used to target media requesters and frustrate the release of potentially embarrassing or politically-damaging agency records.  It even prompted an investigation by the House of Representatives Committee on Oversight and Government Reform.

NOAA’s current sensitive review policy, according to one of the recently-produced records, appears to have been formulated in May 2017.  FOIA staff are expected to “[p]rovide the Office of Public Affairs each Thursday afternoon” with “weekly reports listing incoming FOIA requests of interest.”  Weekly meetings are also anticipated to discuss these requests.  The types of requests that elicit agency “interest” include those from the media and those that seek records in the public interest.  But they also include any request “submitted by an attorney.”  Moreover, NOAA’s Office of Public Affairs has the authority to “identify requests of interest warranting OPA review of response determinations.”  Although NOAA’s policy doesn’t require political appointees to insert themselves into the FOIA process, it does appear to represent a worrisome subordination of career FOIA staff to the agency’s communications shop.  That flies in the face of good government.

In our estimation, one of the more troubling aspects of NOAA’s new policy is the agency’s decision to treat FOIA requests from “lawyers” as deserving special scrutiny.  What is the basis for such treatment?  According to one of NOAA’s weekly FOIA reports, CoA Institute—a non-profit organization that is routinely recognized as a news media requester under the FOIA—was subjected to this heightened sensitive review when we requested processing notes for several earlier requests concerning the Antiquities Act.

In the “Comments” column, NOAA FOIA staff noted some alarming details about what it considered important for the Office of Public Affairs to consider:

Regardless of the motivation behind CoA Institute’s, or anyone’s, request, it is illegitimate for an agency to treat a requester differently simply because the agency fears the requester may enforce his rights in a court of law.  FOIA litigation is unique in that there is a tremendous asymmetry in knowledge between the parties about the processing of a request.  That can make it difficult for a requester to challenge agency affidavits defending the adequacy of a search or the use of an exemption.  Courts already routinely defer to such affidavits.  It now seems NOAA wants to fight against anything that could result in the public learning more about the way a request is processed.  Subjecting requests for processing notes to sensitive review could also suggest that NOAA is strategically laying the groundwork for the future application of the attorney-client or attorney work product privileges, namely, by memorializing the agency’s expectation of future litigation—no matter how distant, unreasonable, or disconnected that “expectation” may be from reality.

NOAA’s fear of a “litigation risk” from CoA Institute even prompted the flagging of other requests from unrelated parties about similar topics.

The fear of possible litigation also underlies the agency’s reticence to produce FOIA logs—basically, a type of processing note—when those records implicate subject-matters that could receive media attention.

NOAA continues to process CoA Institute’s December 11, 2017 request, and we have yet to review all the records that have been disclosed thus far.  Many of these records are in Word or Excel format and contain detailed metrics on the performance of NOAA’s FOIA office, including efforts to eliminate the backlog of pending requests.  As we review the available data and begin to receive correspondence reflecting sensitive review deliberations, we will provide additional updates on our website.

Sensitive Review as a Form of FOIA Politicization

The enhanced sensitive review at NOAA is concerning.  But it also confirms a growing suspicion in the news media and the FOIA requester community that the Trump Administration is intentionally increasing the involvement of agency leadership and political appointees in the processing of FOIA requests.  Last December, the Washington Post reported that officials at the Environmental Protection Agency (“EPA”) and the Department of the Interior (“Interior”) had started to “keep closer tabs” on incoming requests for records that could be embarrassing or politically damaging to the Administration.  More recently, a senior career official at the Department of Housing and Urban Development (“HUD”) claimed to have been “barred from handling” requests submitted by the Democratic National Committee because she was perceived to be a “Democrat,” and therefore opposed to the Administration’s interests in limiting the disclosure of embarrassing of politically-damaging information.

As I have explained, the improper interference by political appointees in the administration of the FOIA is hardly new.  It has been ongoing for years regardless of which party controlled the White House and in a variety of federal agencies, including the Department of Treasury, the Department of Housing and Urban Development, the EPA, Interior, the State Department, the Department of Veteran Affairs, the Department of Defense, and the Department of Homeland Security (“DHS”).  (Admittedly, it does seem that DHS has made efforts to limit political appointees’ involvement in FOIA administration.)

To the extent President Trump has sought to avoid transparency and open government—to chip away at the “colossus” of FOIA, as Nate Jones has described—he is following in the unfortunate and inexcusable footsteps of his predecessors.  That action should not go uncontested.  CoA Institute remains committed to holding the White House and every federal agency accountable when they violate the spirit and letter of the FOIA.

Ryan Mulvey is Counsel at Cause of Action Institute

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03/9/2018

Appellate Court Unfreezes Small Business Owner’s Assets After Being Wrongly Targeted by FTC

Washington, D.C. – The 11th Circuit Court of Appeals has ruled to unfreeze in part the assets of our client, Robert Cupo, who owns a small family-run tech support company, Vylah Tec, LLC (“V-Tec”), after the Federal Trade Commission (“FTC”) used misleading evidence to convince the lower court to grant a damaging injunctive order against his company. The ruling rejects the government’s clear overreach in not only freezing assets of the company, but also the joint marital assets of Mr. Cupo and his wife, and the assets of his brother who had no business connection to V-Tec.  Cause of Action Institute (“CoA Institute”) filed an appeal of the district court’s order in September 2017.

CoA Institute Senior Counsel Cynthia Crawford: “The Government attempted to bulldoze Mr. Cupo and his family with punitive financial penalties before they had an opportunity to defend themselves. The preliminary injunction was granted based on faulty and mischaracterized evidence. That’s not due process, and it certainly is not justice. After nine long months of financial hardship, a large portion of the burden has finally been lifted, allowing our client to continue to fight to clear his name.”

The 11th Circuit found that the district court “did not make sufficient factual findings to support freezing these assets.”

Case Background:

V-Tec provides tech support to customers and also sells third-party antivirus and other data security software. In May 2017, the company’s headquarters was raided by FTC regulators, in conjunction with the Florida Attorney General’s office, on suspicion of “deceptive” sales practices.

To obtain the injunctive order that froze the Cupos’ assets, the FTC in court cited two examples of recorded calls that were both mischaracterized. The Government conceded that it submitted false evidence. Nonetheless, a Florida district court judge granted the injunctive order turning V-Tec’s operation over to a third-party receiver and freezing the assets of Mr. Cupo and several of his family members.

The 11th Circuit ruling vacates the asset freeze imposed against the assets held jointly by Mr. Cupo and his wife, as well as the asset held by his brother.

The full opinion can be found here.

For information regarding this press release, please contact Zachary Kurz, Director of Communications at CoA Institute: zachary.kurz@causeofaction.org.

 

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