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12/12/2016

CoA Institute Challenges SEC’s Unlawful Expansion of Criminal Liability

Washington D.C. – Cause of Action Institute (CoA Institute) has filed an Amicus Curiae Brief in the First Circuit Court of Appeals challenging the District Court’s decision to defer to the U.S. Securities and Exchange Commission’s (SEC’s) interpretation of a law in a criminal case where that interpretation actually contradicts the text of the statute.

In May 2016, Richard Weed, a California-based attorney, was convicted on charges of conspiracy to commit securities fraud, which included a “pump-and-dump” scheme involving penny stocks. The government alleged that Mr. Weed performed legal work for two co-conspirators that enabled them to evade SEC stock registration requirements. Mr. Weed was sentenced to forty-eight months in prison.

The government’s case was premised on the fact that the co-conspirators were required to register the stock with the SEC. However, the stock at issue did not require registration under the Securities Act. The government conceded this point, but nevertheless argued that registration was required in accordance with the SEC’s interpretation of the law.

In its Amicus Brief, following a long line of judicial precedent, CoA Institute argued that Section 3(a)(9) of the Securities Act is unambiguous and should be construed as such, something the District Court of Massachusetts failed to do. More broadly, the Brief contends that federal agencies should not be able to administratively rewrite federal statutes to create new crimes that Congress never intended and then demand that the courts “defer” to the agency’s views on what the law prohibits or requires. Such a constitutionally dangerous practice violates the separation of powers and threatens individual liberty. The Amicus Brief argues that criminal statutes should be narrowly interpreted to protect citizens from arbitrary, overreaching prosecutions.

CoA Institute Counsel Patrick Massari: “The Constitution provides for the courts to have exclusive authority to interpret criminal laws passed by Congress. The SEC overstepped its authority by interpreting the law in a way that is directly contrary to the plain text of Section 3(a)(9). The unchecked power of the SEC and the administrative state harms individual liberty and threatens free market principles. CoA Institute is uniquely situated to assist the Court in reaching its decision because this case deals with the intersection of overcriminalization and administrative law.”

The full Amicus Brief can be found here.

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12/1/2016

CoA Institute Sues IRS for Improperly Shielding Records

Washington D.C. – Cause of Action Institute (CoA Institute) today filed a lawsuit against the IRS after the agency refused to produce records under the Freedom of Information Act (FOIA) relating to its dealings with Congress’s Joint Committee on Taxation (JCT).

In December 2015, the IRS Office of Chief Counsel issued new guidance claiming that nearly all IRS records relating to the JCT should be treated as “congressional records” and therefore shielded from public disclosure under FOIA. This revised guidance contradicts long-standing precedent for what records government agencies must provide in response to FOIA requests.

CoA Institute Vice President John Vecchione: “The IRS continues to withhold agency records that the American people have a right to see. Agency records, including communications with Congress, are subject to FOIA. But the IRS is now attempting to change the rules and withhold all of its communications with, and other records relating to, the JCT. Our lawsuit challenges what appears to be a ploy by the IRS to avoid transparency.”

For months, CoA Institute has sought IRS communications with JCT and other JCT-related records, including those that reflect internal deliberations concerning the agency’s dealings with the JCT.  By definition, these are agency records, as they would necessarily have been received or created by the IRS and are currently in the possession of the agency.  Such records would have been used by IRS employees and uploaded or stored into IRS recordkeeping systems, including e-mail or correspondence tracking databases.

On November 22, 2016, in response to CoA Institute’s administrative appeal, the IRS re-affirmed its conclusion that the requested records were not subject to FOIA and went a step further to describe CoA Institute’s FOIA requests as “too broad and too nebulous.” The Department of Justice has explained, however, that “[t]he sheer size or burdensomeness of a FOIA request, in and of itself, does not entitle an agency to deny that request on the ground that it does not ‘reasonably describe’ records.” The IRS never indicated that it was unable to locate records responsive to CoA Institute’s FOIA requests, nor did it suggest it required a narrowed scope or clarification as to the records sought.

CoA Institute’s lawsuit seeks to prevent the IRS from improperly shielding agency records from disclosure under FOIA.

The lawsuit can be found here
Exhibits can be found here

 

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11/22/2016

CoA Institute Investigates Employee Telework Fraud at U.S. Patent Office

Washington D.C. – Cause of Action Institute (CoA Institute) today sent a Freedom of Information Act (FOIA) request seeking records from the U.S. Patent and Trademark Office (USPTO) after details emerged about extensive attendance and telework abuse by agency employees. The FOIA request seeks records to clarify whether disciplinary action has been taken against those who claimed hours they did not work.

The Department of Commerce Office of Inspector General (OIG) released a report in August 2016 that found USPTO telework employees were paid for nearly 300,000 unsupported hours of work over a 15-month period. These hours equate to more than $18 million in wages and benefits fraudulently paid to employees.  

CoA Institute Assistant Vice President Henry Kerner: “Such rampant abuse is particularly concerning given the USPTO’s policies to promote more telework for its employees. Over the last decade, the agency has doubled its number of patent examiners largely through teleworking. The American people deserve to understand whether disciplinary action has been taken to hold employees accountable for telework fraud.”

Teleworking is common in many industries and allows employees to work from home, but requires close oversight to prevent abuse by employees.  The USPTO is particularly susceptible to telework abuse because approximately half of its 12,600 employees work from home full-time without ever reporting to a physical office. The OIG report also found that 415 patent examiners who fraudulently reported hours racked up nearly $8 million in bonuses in less than two years.

CoA Institute today requested all records related to time and attendance abuse at USPTO in order to understand the full extent of the abuse and to identify potential policy changes that could address the problem.

The full FOIA request can be found here.

 

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11/22/2016

CoA Institute Influences New DHS FOIA Regulations

 

The Department of Homeland Security (“DHS”) just finalized new Freedom of Information Act (“FOIA”) regulations.

Last year, Cause of Action Institute (“CoA Institute”) submitted comments to DHS in response to its proposed rule.  We urged the agency to remove the outdated “organized and operated” language from its definition of a representative of the news media.  This language has been used in the past to deny fee waivers to organizations like CoA Institute that are conducting investigations of potential agency wrongdoing.  For example, we had to take the Federal Trade Commission all the way to the D.C. Circuit just to get it to acknowledge that its FOIA fee regulations were outdated and that it was improperly denying us a fee reduction.

In deciding our case, the D.C. Circuit issued a landmark decision clarifying the proper definitions and application of fees in FOIA cases.  CoA Institute cited this case to DHS in its regulatory comments and DHS took heed of the current case law and removed outdated language from its regulations.

This is just another small step in our efforts to provide effective and transparent oversight of the administrative state.

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11/15/2016

CoA Institute Files Lawsuit to Obtain Communications Surrounding Interior’s Decision to Exclude Atlantic from Oil and Gas Leasing Program

Washington, DC – Today, Cause of Action Institute (CoA Institute) filed a complaint in federal court against the U.S. Department of the Interior (DOI) to find out whether DOI’s decision to withdraw the Atlantic Outer Continental Shelf (OCS) from the 2017-2022 Oil and Gas Leasing Program was politically motivated.  In August, CoA Institute filed a Freedom of Information Act (FOIA) request for related communications, but DOI failed to turn over any responsive records. Meanwhile, DOI is busily finalizing the new Five-Year Program.

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

On March 15, 2016, DOI announced its decision to withdraw the Atlantic Planning Areas from the Program. Within months – just after Kaine became the Democratic Vice Presidential running-mate – he also reversed course and said he opposed offshore energy development, citing objections from the Department of Defense (DoD). DOI, meanwhile, has insisted that the withdrawal of the Atlantic Planning Areas was not predominantly attributable to the DoD’s comment on 5% of the proposed area.

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

CoA Institute Vice President John Vecchione: “When the Department of the Interior reverses course without explanation on including the Atlantic in the new Five-Year Program, it raises questions about whether the reversal was political.  Although DOI claims its decision was based on opposition from the public, the states, and the military, the available record appears to show otherwise.  Americans deserve to know whether their government is favoring special interest groups rather than making decisions based on the facts.  That’s why CoA Institute is determined to shed light on DOI’s opaque decision to withdraw the Atlantic Planning Areas from the 2017-2022 Program.”

The complaint can be found here
Exhibits can be found here
The August 2016 FOIA request can be found here

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11/15/2016

If the Government Wants to Monitor Fishermen, the Government Should Pay

CoA Institute files opening brief in appeal of decision to force costs of at-sea monitors on struggling fishermen

Washington D.C. – Cause of Action Institute (CoA Institute) has filed its opening brief in an appeal of the district court’s decision that fishermen should be forced to pay for their own at-sea monitors. CoA Institute is representing New Hampshire fisherman David Goethel and a group of Northeast fishermen in the case against the U.S. Department of Commerce.

In July, the U.S. District Court for the District of New Hampshire dismissed the lawsuit, ruling that fishermen must pay out-of-pocket for the cost of those monitors. Cause of Action Institute is appealing the ruling. The opening brief, filed in the First Circuit Court of Appeals, states:

“The New England and Mid-Atlantic fishing industry is older than the Nation itself.  Today it creates thousands of jobs in countless fishing communities. The industry’s regulators, however, have embarked on a project that threatens its imminent destruction.  They have done so without statutory authority, defying the most elementary limits on federal agency power.  This Court should intervene to protect fishermen from agencies run amok.”

Current government regulations compel fishermen to carry “at-sea monitors” who live with the fishermen at sea, observe their activities, check their compliance with federal regulations, and file reports upon their return to dock.  Fishermen have accepted the presence of monitors for years, and the government has historically paid for them with money appropriated by Congress.

In early 2016, however, the Government claimed to have run out of money.  Its response was to enforce a new requirement — now, the fishermen must pay for the monitors themselves, at an estimated cost of more than $700 per trip.  Most fishermen cannot afford to do so, and will be forced to abandon their livelihoods.

If the Government wants third-party monitors to police fishing activity, the Government must also take responsibility for paying for them. The district court disagreed, holding that the Government’s power to regulate the fishing industry and place monitors includes the much broader power to extract money from regulated parties when congressional appropriations run short.

The brief states:

“Such reasoning represents an unprecedented expansion of agencies’ implied powers, with implications stretching far beyond the agencies involved in this case. Contrary to the district court’s reasoning, the bedrock of administrative law is that federal agencies are limited to congressionally-delegated powers and congressionally-appropriated funds.  If they lack statutory authority or appropriated funds, they have no power to act.  They may not coerce their regulated industries to provide the funding that Congress has declined to grant.  This Court should reaffirm that principle and reverse the district court.”

For more information about the case, visit our website.

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11/7/2016

The Government Should Not Use Americans’ Confidential Tax Information to Sell ObamaCare

Washington D.C. – Cause of Action Institute (CoA Institute) today sent a Freedom of Information Act (FOIA) request to the Centers for Medicare and Medicaid Services (CMS) and requested two separate Inspector General (IG) investigations after details emerged about the federal government using confidential taxpayer information to market ObamaCare to individuals who have opted out of the program.

CoA Institute Assistant Vice President Henry Kerner: “Information obtained from tax returns should not be used to sell health insurance. The federal government is obligated to protect the confidentiality of tax returns. Instead, the Obama administration appears to be mining Americans’ tax returns to advertise and sell ObamaCare to people who don’t want it.”

A fact sheet released by CMS titled “Strengthening the Marketplace by Covering Young Adults” highlights CMS’s plan to boost ObamaCare enrollment by using taxpayer information. According to the fact sheet, “[f]or the first time this fall, we will conduct outreach to individuals and families who paid the fee for being uninsured, or claimed an exemption from that fee, for 2015.”  The law allows for personal tax information to be used only for the limited purpose of determining ObamaCare subsidy eligibility. It does not, however, permit CMS to market subsidies to taxpayers who have already rejected ObamaCare.

The potential disclosure of protected taxpayer information by the IRS raises concerns about whether the information is being appropriately safeguarded. To that end, CoA Institute sent requests for investigation to the Inspectors General of the Department of Justice (DOJ) and the Department of Health & Human Services (HHS).

In its FOIA request, CoA Institute requested all records related to the use of taxpayer information by CMS to contact individuals who paid the penalty for being uninsured in 2015, as well as all records relating to the June 2016 CMS report on how to enroll more young adults.

The FOIA to CMS is available HERE

The HHS IG request for investigation is available HERE

The DOJ IG request for investigation is available HERE

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