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06/24/2014

FOIA Request to IRS regarding IRS Targeting and Records Management

Yesterday Cause of Action, along with Tea Party Patriots, sent a Freedom of Information Act request to the IRS seeking to discover who was responsible for the targeting of conservative groups and to determine how the IRS maintains records in (or not in) accordance with federal law.

On January 26, 2009, in one of President Obama’s first acts in office, the President issued an executive order to allow both incumbent and former Presidents to claim executive privilege on certain records they sought to protect.  Three years later, on August 24, 2012, the White House issued a Directive that “require[d] that to the fullest extent possible, agencies eliminate paper and use electronic recordkeeping.  It is applicable to all executive agencies and to all records, without regard to security classification or any other restriction.”  It is entirely possible that the IRS followed this Directive in a manner that violated the Federal Records Act.

“Because the White House may consult the Archivist of the United States and dispose of certain records, the White House’s inability to locate any emails from Lois Lerner during the time frame of her ‘lost’ emails doesn’t prove that no emails existed at one time.  The IRS follows different records preservation laws than the President. That is why access to these records are critical to determining who was responsible for targeting conservative groups,” said Cause of Action’s Executive Director Dan Epstein. “Accountability is unfortunately an uphill climb with this agency, but it is necessary to determine who, both within and without the IRS, is responsible for the political targeting that occurred against certain nonprofit groups. That is why we are seeking information on what and how the IRS retains in terms of data, emails, investigations, and protocol.”

06-23-2014 IRS FOIA Request Re Missing Lerner Emails by Cause of Action

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06/12/2014

Congress Questions FTC’s Evidence Against LabMD

FOR IMMEDIATE RELEASE                                                                                                   

June 12, 2014

 

 Congress Questions FTC’s Evidence Against LabMD

WASHINGTON – On June 11, 2014 Congress’s chief watchdog, the House Committee on Oversight and Government Reform, advised the Federal Trade Commission (FTC) that the information the FTC obtained from Tiversa, Inc. is “false,” “incomplete” and “inaccurate.”   The Committee also said that it expected the FTC to “cooperate fully” with any subsequent document requests or transcribed interviews with FTC employees.

Cause of Action, a government accountability and transparency organization, has been defending LabMD, an Atlanta-based cancer-detection lab, in an ongoing Federal Trade Commission enforcement action alleging that LabMD’s data security, though not in violation of applicable HIPAA regulations, is unreasonable.

The FTC commenced its four and one-half year assault against LabMD based on information it obtained from Tiversa, Inc. Tiversa is a company claiming to specialize in peer-to-peer network security.

The FTC obtained confidential LabMD patient information from Tiversa in 2009 by way of a sham corporation located in the home of Tiversa’s CEO’s uncle.  Although Tiversa had a strong commercial interest in the FTC’s commencement of enforcement proceedings, there is no evidence that the FTC took any steps to authenticate Tiversa’s claim that LabMD patient files had been found in multiple places on a peer-to-peer network.  As the FTC and Tiversa were both aware, the unauthorized taking of patient files from a Georgia workstation, by peer-to-peer software or by any other means, is a crime under Georgia law.

To date, the FTC has refused to make public the full nature and extent of its relationship with Tiversa.

According to Dan Epstein, Cause of Action’s Executive Director, “the House Oversight Committee’s investigation should send a message to federal agencies, the President and the courts that the arbitrary abuse of administrative power will not go unchecked.  Cause of Action exists to hold accountable those who so choose to abuse their office.  This is why it has investigated and litigated for LabMD to stop the FTC from arbitrarily expanding and abusing its power by victimizing an entrepreneur who did nothing wrong.  The Committee’s action, and the record of testimony before the Administrative Law Judge and Judge Duffey in the U.S. District Court in Georgia, all lead to a single conclusion:  That the FTC – including its commissioners and staff attorneys – must be stopped.”

Excerpts from today’s hearing before the Chief Administrative Law Judge Michael Chappell of the FTC as well as statements from FTC Commissioner J. Thomas Rosch and U.S. District Court Judge William Duffey all point to the dangers or the FTC relying upon unauthenticated evidence as the basis for targeting LabMD:

Commissioner J. Thomas Rosch from his dissent on June 21, 2012 to the FTC’s denial of LabMD’s request to quash civil investigative demands against the company:

Specifically, I am concerned that Tiversa is more than an ordinary witness, informant, or “whistle-blower.” It is a commercial entity that has a financial interest in intentionally exposing and capturing sensitive files on computer networks, and a business model of offering its services to help organizations protect against similar infiltrations. Indeed, in the instant matter, an argument has been raised that Tiversa used its robust, patented peer-to-peer monitoring technology to retrieve the 1,718 File, and then repeatedly solicited LabMD, offering investigative and remediation services regarding the breach, long before Commission staff contacted LabMD. In my view, while there appears to be nothing per se unlawful about this evidence, the Commission should avoid even the appearance of bias or impropriety by not relying on such evidence or information in this investigation.

Judge William Duffey, from the May 7, 2014 United States District Court Northern District of Georgia hearing in LabMD v. FTC:

THE COURT: But the assistant director has just said that there will be evidence presented before a judicial officer, I guess an administrative law judge, in which somebody will state these nine thousand individuals — information about  individuals in a single record was accessed by an outside source through a file-sharing program that had been installed on LabMD’s computers. You are going to say that there is no evidence of that —that that ever happened, and you are going to believe that you are right, and the FTC, although sometimes I wonder if they are — just how compelling their evidence is, that they are going to claim that they are right, and somebody will make a determination of whether there has been a breach or not. Then the question is — and I do find this — and I think I know enough about this, and I learned a lot from the CID hearing — is that the FTC is going to go into the business of monitoring and investigating and regulating security breaches and that they have decided I think to do that within what they believe is their administrative authority, because I think they went to Congress and Congress wouldn’t authorize that for whatever reason, whether it’s politics or not. But I think there has been no amendment to Section 5 to specifically allow that. But they are taking the position that they have the authority to do that.

During that same hearing, Mr Schoshinski, an attorney representing the FTC, stated:

THE COURT: So sitting here today, you have no idea where the documents came from, whether they came from LabMD or some other source? Is that a fair thing to say?

MR. SCHOSHINSKI: No. We believe they were LabMD’s documents.

THE COURT: Well, they might have been LabMD’s documents, but you don’t know how they got into the possession of the two individuals that you tried to contact that pled guilty to this offense?

MR. SCHOSHINSKI: That’s correct, Your Honor.

THE COURT: So you have no information to establish how those documents were obtained; is that right?

MR. SCHOSHINSKI: That’s correct, Your Honor.

THE COURT: And you are still proceeding on this claim?

MR. SCHOSHINSKI: Yes, Your Honor, because the claim is not concerning that incident alone. It’s concerning —

THE COURT: All right. But are you still proceeding on that claim?

MR. SCHOSHINSKI: We are proceeding on that evidence, Your Honor.

THE COURT: And that evidence relates to other claims, because you have other documents that were found in other places?

MR. SCHOSHINSKI: That evidence relates to the potential injury suffered by consumers as a result of exposure of this information.

THE COURT: Are you serious about that last response?

MR. SCHOSHINSKI: Yes, Your Honor, I am.

THE COURT: So you don’t know where the documents came from, you don’t know how these people got the possession of it, you don’t know whether they originated from LabMD or some other place, but you are going to use that to show that, because they committed identity theft, that certain individuals were damaged by documents, the source of which you don’t even know?

MR. SCHOSHINSKI: Yes, Your Honor.

THE COURT: Holy cow.

From the June 12, 2014 proceedings before the Administrative Law Judge Chappell at the FTC. The “letter” referenced below is a June 11, 2014 letter from the House Oversight Committee to the FTC found here. Ms. VanDruff, counsel representing the FTC, stated:

JUDGE CHAPPELL:  Ms. VanDruff, what part of this letter do you think is not relevant to this proceeding? Stand up and address that question immediately.  I just read paragraph 2.  I want to hear from you.

MS. VANDRUFF:  Your Honor, I didn’t say it wasn’t relevant, Your Honor.  And Mr. Sherman is also copied on this letter and it is Mr. Sherman who raised the issue of Mr. Wallace this morning.  To the extent that Mr. Sherman believed that this letter was relevant to Your Honor’s —

JUDGE CHAPPELL:  You would agree this letter refers to the 1718 File.

MS. VANDRUFF:  Absolutely, Your Honor.

JUDGE CHAPPELL:  In black-and-white, it’s right there.  You would agree it refers to testimony being accurate or not regarding this case.

MS. VANDRUFF:  Yes, Your Honor.  I made no representation to the contrary.

JUDGE CHAPPELL:  Yet you didn’t talk about the letter until I asked you; is that correct?

MS. VANDRUFF:  Your Honor.

JUDGE CHAPPELL:  Until this lady brought it up.

MS. VANDRUFF:  The issue that Your Honor —

JUDGE CHAPPELL:  Were you going to sit there and not tell me about this letter?  Were you going to do that if I hadn’t asked you?  That’s what I want to know.

MS. VANDRUFF:  Your Honor, I was prepared address this letter today.  Mr. Wallace is not our witness, nor is Mr. Boback, and so if it was in the interest of — I don’t know.

JUDGE CHAPPELL:  You don’t think in the interest of truth this information should be disclosed to this court in this proceeding?

MS. VANDRUFF:  I was not withholding the information, Your Honor.

JUDGE CHAPPELL:  We’re trying to get to the truth here, aren’t we?

MS. VANDRUFF:  Of course we are.

JUDGE CHAPPELL:  You don’t think this letter touches on this matter in truth on this matter that we’re having a trial.  You were not going to bring up this letter; is that correct?

MS. VANDRUFF:  No, Your Honor, that is not what I said.  No.  That is not the position of the government, of course not.

JUDGE CHAPPELL:  Then you had plans to offer this letter because it’s relevant?  Is that what you’re doing?

MS. VANDRUFF:  Excuse me, Your Honor?

JUDGE CHAPPELL:  You had plans to offer this as an exhibit?

MS. VANDRUFF:  Your Honor, I don’t think that it is admissible for any purpose in this matter because it is hearsay.  Nonetheless, I think it’s appropriate in the context of Ms. Dickie’s representations to the court regarding Mr. Wallace and the conduct of the committee for Your Honor to have been advised about the current state of the committee’s investigation.

JUDGE CHAPPELL:  This is a letter to the head of the FTC.

MS. VANDRUFF:  Correct.

JUDGE CHAPPELL:  Talking about fundamental matters in this proceeding about truth or veracity, fundamental matters of a source that’s been very helpful to the government I might add in its case based on what I’ve heard.  I’m very disappointed this was not brought to my attention by the government.  Go ahead.

MS. VANDRUFF:  I apologize, Your Honor.  Thank you.

 

 

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06/4/2014

Cause of Action: Time for Department of Labor to Stop Hiding Behind Regulations

FOR IMMEDIATE RELEASE                                 CONTACT: Adam Temple

June 3, 2014                                                          temple@jdafrontline.com

 

Cause of Action: Time for Department of Labor to Stop Hiding Behind Regulations

WASHINGTON – In court filings today on behalf of Rhea Lana, Inc., a national children’s consignment event company, Cause of Action opposed the Department of Labor’s (DOL) motion to dismiss its lawsuit seeking to free the company from DOL’s attempts to ban consignor-volunteers at for-profit enterprises.

Rhea Lana, Inc. hosts consignment sales in numerous cities that allow parents and other family members to sell children’s clothing and items to other families. Consignors keep approximately 70 percent of the profits generated from their items, and Rhea Lana, Inc. keeps 30 percent.  The small family business has grown to include sales in 23 states across the country.  Consignors assist at sales events in exchange for the option to shop early. Given the tough economic reality facing many parents with young children, shopping for affordable, quality children’s items at Rhea Lana, Inc. events has led to overwhelmingly positive experiences for many families.

In January 2013, DOL commenced an investigation and concluded, despite receiving no apparent complaints from parents and other participants, that consignment event consigner-volunteers were “employees” under the Fair Labor Standards Act (FLSA).

The suit, filed in the U.S. District Court for the District of Columbia, argues that the DOL acted arbitrarily and outside the law when it classified Rhea Lana’s consignor-volunteers as employees under the FLSA. Cause of Action seeks a declaration that Rhea Lana, Inc. consignor-volunteers are not employees under the FLSA and an injunction prohibiting the DOL from bringing action against the company.

About Cause of Action:

Cause of Action is a non-profit, nonpartisan government accountability organization that fights to protect economic opportunity when federal regulations, spending and cronyism threaten it.  For more information, visit www.causeofaction.org.

About Rhea Lana, Inc.:

Founded by Rhea Lana Riner in her living room 16 years ago and headquartered in Conway, Arkansas, Rhea Lana’s Children’s Consignment hosts semi-annual sales.  With Arkansas roots, Rhea Lana’s Franchise Systems, Inc. is rapidly growing with 69 locations in 23 states.  The company is the first consignment sale business in the country to offer on-line management and real time tracking of merchandise through a computerized inventory system and a convenient mobile application. For more information, visit www.rhealana.com.

To schedule an interview with Cause of Action’s Executive Director Dan Epstein, contact Adam Temple, temple@jdafrontline.com

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05/30/2014

FTC Proceedings Against LabMD Stalled by Congressional Investigation

FOR IMMEDIATE RELEASE            CONTACT: Adam Temple, (843) 722-9670

May 30, 2014                                                              temple@jdafrontline.com

FTC Proceedings Against LabMD Stalled by Congressional Investigation

Tiversa Employee Indicated he Would Take the 5th, House Oversight Committee Investigates Tiversa Dealings with FTC

Congress launched an investigation into Tiversa and their dealings with federal agencies including the FTC which threw a wrench into the FTC’s administrative proceedings against LabMD today.

“An investigation by the House Oversight committee will hopefully bring the accountability and transparency that we have yet to see from the FTC. We will now wait to see what Congress is able to uncover,” said Reed Rubinstein, of Cause of Action.

The investigation was brought to light in FTC proceedings today, which prompted former Tiversa employee and potential trial witness Rick Wallace to indicate his intention to take the 5th, through his attorney.

Tiversa CEO Robert Boback’s attorney asked for more time before his client would testify.

Judge Chappell granted a recess until June 12.

 

The unofficial transcript from today’s proceedings:

Disclaimer: This is a draft and subject to change and revision by the court – it is not the final transcript.

FTC v. LabMD May 30, 2014 Unofficial Trial Transcript by CauseOfAction

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05/22/2014

Cause of Action: “Court Must Hold Chicago Transit Accountable for Fraud”

FOR IMMEDIATE RELEASE            CONTACT: Adam Temple, (843) 722-9670

May 22, 2014                                                              temple@jdafrontline.com

Cause of Action: “Court Must Hold Chicago Transit Accountable for Fraud”

CTA Seeking Dismissal Over Technicality To Avoid $150 Million Fraud Allegation

 WASHINGTON – The Chicago Transit Authority (CTA) engaged in a potentially years-long fraud, fleecing the American taxpayer, and is now pushing a federal court to follow the Justice Department’s lead and look the other way rather than hold it accountable. Cause of Action (CoA), a government accountability organization that is pursuing False Claims Act litigation against the CTA, filed opposition papers today calling on the U.S. District Court for the Northern District of Illinois to rule against the CTA’s motion to dismiss its claims.

“The Chicago Transit Authority potentially defrauded hard-working American taxpayers of up to $150 million,” said Cause of Action Executive Director Dan Epstein. “To date, no funding has been paid back and the CTA is hoping to avoid any accountability by having this case dismissed on a technicality. The court has an opportunity in this case to defer to how Congress intended accountability to work by allowing these claims to proceed past this threshold stage and get to the merits.  Our hope is that the district court validates the role that the public can play in making government open and honest.”

CTA has likely been overreporting estimated mileage to receive a higher amount of federal grant funding at least as far back as 1982.  As a result, it has potentially obtained up to $150 million at the expense of American taxpayers. After CoA reported this story to the government, the Department of Justice, led by Attorney General Eric Holder, declined to intervene in the case.  CoA then filed the False Claims Act litigation to challenge CTA’s possible fraud.

On March 13, 2014, the CTA moved for the dismissal of CoA’s claims on a procedural technicality.  The court will now decide whether to dismiss the case or elect to hold oral argument prior to deciding.

About Cause of Action:

Cause of Action is a non-profit, nonpartisan government accountability organization that fights to protect economic opportunity when federal regulations, spending and cronyism threaten it. For more information, visit www.causeofaction.org.

To schedule an interview with Cause of Action’s Executive Director Dan Epstein, contact Adam Temple, temple@jdafrontline.com 

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05/20/2014

CoA Investigation Leads Oversight Committee to Investigate White House Politicization of EPA

Once again, the United States Congress has relied upon Cause of Action’s work to hold federal agencies accountable and demand transparency.

On May 15, 2014, the House Committee on Oversight and Government Reform (OGR) sent a letter to the Environmental Protection Agency (EPA) asking for documents based on internal emails Cause of Action obtained showing White House intervention into FOIA and congressional document requests.

OGR seeks documents that will determine “whether White House or EPA employees have engaged in illegal conduct by actively obstructing this Committee’s investigation.”

  • On July 2, 2013, Cause of Action sent a FOIA request to the EPA regarding White House review of document requests, both from FOIA requesters and Congress.
  • The EPA responded to our request with internal e-mails showing the White House delayed an April 10, 2013 joint document request from OGR, led by Chairman Darrell Issa (R-CA) and the Senate Committee on Environment and Public Works, led by Ranking Member David Vitter (R-LA).
  • In response to our findings, on November 7, 2013, OGR subpoenaed the EPA for communications with White House officials regarding the agency’s delay to a congressional document request.

According to the Committee’s latest letter, EPA withheld documents improperly: “When the Committee was finally able to review the unredacted e-mails, it was clear that the redactions applied to the FOIA production were made to hide embarrassing conversations between EPA staff.  The redactions were not, in fact, covered by the FOIA exemptions cited by EPA.  It is unacceptable for EPA to hide behind improper FOIA redactions.”

In March 2014, Cause of Action released a report, Grading the Government: How the White House Targets Document Requesters, detailing how the White House is politicizing FOIA and Congressional document requests.

Cause of Action’s strategic investigations help Congress to expose the hypocrisy of this Administration’s claim to be “the most transparent in history.”  Moreover, Cause of Action has empowered the House Oversight Committee to raise unique constitutional concerns related to alleged obstruction of congressional oversight by the President.

In order to hold EPA accountable and give the American taxpayers transparency, Cause of Action has now sent a Freedom of Information Act (FOIA) request to EPA requesting all documents provided to Congress pursuant to a subpoena as well as documents evidencing communications between EPA and the White House.

You can read CoA’s letter to the EPA here.

You can read the OGR letter to the EPA here.

See all the documents from Cause of Action’s investigation here.

 

Oversight Committee Letter to EPA Administrator Gina McCarthy by CauseOfAction

May 19, 2014 FOIA to EPA re White House review of records by CauseOfAction

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05/15/2014

LabMD Files Appeal, Takes Fight Against FTC Back to 11th Circuit

LabMD Files Appeal, Takes Fight Against FTC Back to 11th Circuit

Judge tells FTC investigation is “a sad comment on your agency” but lacks jurisdiction to stop it

 Washington, D.C. (May 15, 2014) – Today, Cause of Action (CoA) is filing an emergency appeal on behalf of LabMD, following a federal judge’s ruling that he lacked jurisdiction even while telling the Federal Trade Commission (FTC) “the public is served by guiding people beforehand rather than beating them up after.”

On May 7, 2014, in open court, U.S. District Court Judge William S. Duffey, Jr., criticized the FTC for its practice of monitoring blogs containing critical speech, for “parachuting in” to the highly regulated health care field, and for its failure to “tell…[health care companies] what the FTC rules are because they have never told anybody.” He told the FTC that its investigation of LabMD was “a sad comment on your agency …” and that the FTC’s assault against LabMD harmed the “consuming public” by taking LabMD “out of the market” thereby reducing the number of companies providing cancer detection services.  Judge Duffey advised the FTC that it had an obligation to give companies “guidance” as to what it does or does not expect with respect to data security because “the public is served by guiding people beforehand rather than beating them up after …”

However, on May 13, 2014, Judge Duffey ruled he lacked jurisdiction to stop the FTC’s attack against LabMD.

Today, Cause of Action (CoA) is filing an emergency appeal on behalf of LabMD in the 11th Circuit seeking to stop the FTC’s assault.

Daniel Epstein, CoA’s Executive Director said:

“No federal agency should be able to act without authority to damage business and exert power it has never been granted, which is why LabMD must appeal the Federal District Court’s decision. Judge Duffey described the FTC’s aggressive actions against LabMD as ‘a sad comment’ on the agency, and accountability for its over-the-line attempts to insert the agency into the healthcare field must be stopped.

“When a district judge recognizes the egregious and shameful behavior of an agency but rules that he is unable to take action to stop it, the Federal Courts of Appeals are well positioned to ensure that runaway power is not tolerated in our federal system.”

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