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10/31/2013

Statement: Cause of Action on Deputy IG Charles Edwards stonewalling Congress

Cause of Action, a government accountability group which has investigated Department of Homeland Security Deputy Inspector General (IG) Charles Edwards, issued the following response to the letter sent by Chairman McCaskill and Ranking Member Johnson to IG Edwards regarding his delay in providing information related to the Senate’s investigation.

Executive Director Dan Epstein:

“The lack of transparency by and failure of IG Edwards to provide documents to Cause of Action pertaining to allegations of misconduct and abuse drove us to sue DHS for records. But now DHS has taken a new and alarming stance in their affront to transparency: denying both the public’s access to documents as well as stonewalling Congress. Edwards’ failure has now extended beyond a refusal to provide documents; six members of his staff are refusing to conduct interviews with congressional investigators. IG Edwards must be held accountable for his alleged misconduct and his deliberate and continued objection to the public’s right to know about it.”

 

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10/17/2013

Cause of Action files opposing briefs in Department of Energy cronyism lawsuit

As we’ve seen over the past month the DOE is reviving its loan program, this time under new management.

Yet Cause of Action (CoA), a government accountability group, hasn’t forgotten how the DOE handled applications for the Loan Guarantee Program in the first go-round.

Today CoA took a step in a lawsuit we filed against the DOE for corrupting its lending programs to favor political insiders, and arbitrarily denying applications by failing to review applications with ‘established merit criteria’ as required by law.

CoA has been investigating the DOE’s loan guarantee program for  more than a year and has uncovered that the agency failed to give XP Vehicles and Limnia, Inc., two qualified applicants under the DOE’s loan guarantee program fair treatment and the honest opportunity to compete for Government loan funds to build advanced technology vehicles and components.

Click here to see the Opposition to Defendant’s Motion to Dismiss the Official Capacity Claims

Click here to see the Opposition to the Individual Capacity Defendants’ Motion to Dismiss

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09/23/2013

Cause of Action Report Exposes GreenTech Automotive’s Abuse of Political Influence

FOR IMMEDIATE RELEASE                                                                    CONTACT:

September 23, 2013                                                                           Jamie Morris, 202-499-2425

 

Cause of Action Report Exposes

GreenTech Automotive’s Abuse of Political Influence

“GreenTech Automotive: A Venture Capitalized by Cronyism”

WASHINGTON – Cause of Action (CoA), a government accountability organization, today released “GreenTech Automotive: A Venture Capitalized by Cronyism,” an investigative report revealing how GreenTech Automotive (GreenTech) used government funds and political connections to pursue big profits for its founder, Charles Wang, and Chairman, Terry McAuliffe. This is the second report in a series of investigations by Cause of Action shining light upon companies around the country that are structuring their businesses to use political connections for profit.

The CoA report details how GreenTech used political connections to receive millions of taxpayer dollars in loans and tax incentives, yet failed to meet expectations, instead exaggerating projections of job creation and vehicle production.

CoA’s six-month investigation uncovers how GreenTech relied on political graft to influence officials at the state and federal level to gain preferential treatment and skew the marketplace, resulting in American taxpayers underwriting the risk of speculative business ventures, while the company pocketed the profits.

Cause of Action’s Executive Director Dan Epstein explained:

“Concerns about how GreenTech does business have been expressed by every branch of our federal government – from Senator Grassley in Congress, to the Securities and Exchange Commission in the Executive Branch, to a federal judge in Mississippi- and American taxpayers share in the concern about how business is run in our country.

“GreenTech Automotive is an example of how cronyism means the government, not the market, is picking financial winners like Terry McAuliffe and Charles Wang.”

In light of issues raised in the report, CoA is alerting the House Oversight and Government Reform Committee of concern about GreenTech’s potentially improper activities.

Findings revealed in the report include:

  • Terry McAuliffe, while GreenTech Chairman, e-mailed then-Mississippi Governor Haley Barbour, seeking his assistance in pressuring United States Citizenship and Immigration Services (USCIS) Director Alejandro Mayorkas into fast-tracking EB-5 visa applications by GreenTech’s Chinese investors.
  • In 2009, when Mississippi Governor, Haley Barbour contacted Barbara Velarde, the head of the USCIS office that oversees the Regional Center program, urging the agency to designate Gulf Coast Funds Management (GCFM), a processing center than manages EB-5 investments for GreenTech and is run by former Secretary of State Hilary Clinton’s brother Tony Rodham, as the Regional Center for the entire state of Mississippi. Subsequently, GCFM became the country’s largest Regional Center for processing EB-5 investments, covering both Mississippi and Louisiana.
  • GreenTech may have violated USCIS regulations in every one of its four rounds of financing by impermissibly structuring each investment as “risk-free.”
  • GreenTech has made misleading statements to investors that potentially violate Section 17(a) of the 1933 Securities Act by inflating job-creation estimates.
  • GreenTech submitted exaggerated projections about its manufacturing output and job creation prospects in its funding applications to both Mississippi and Virginia. Unlike Virginia, Mississippi state officials failed to conduct proper due diligence on GreenTech and ultimately gave the company millions in loans and tax incentives to locate its manufacturing facility within the state.

To access the full report, click here.

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 Mary Beth Hutchins, mary.beth.hutchins@causeofaction.org or Jamie Morris, jamie.morris@causeofaction.org.

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09/19/2013

LabMD Responds to FTC Complaint: Agency Has No Section 5 Enforcement Jurisdiction

FOR IMMEDIATE RELEASE                                           CONTACT: Mary Beth Hutchins, 202-400-2721

September 19, 2013                                                                                Kevin Schmidt, 202-499-2414

 LabMD Responds to FTC Complaint: Agency Lacks Enforcement Jurisdiction

Government Watchdog Group Says the Agency has no Section 5 Authority 

WASHINGTON – Cause of Action (CoA), a government accountability organization, filed an answer to an aggressive and arbitrary enforcement action brought by the Federal Trade Commission (FTC) against LabMD, a small cancer diagnosis company.

CoA is defending LabMD against a complaint brought by the FTC in August, based, in part, on allegations that a third party was able to obtain data from LabMD’s computers through the peer-to-peer (P2P) file sharing program LimeWire. LabMD denies the FTC’s allegations of violations of Section 5 of the FTC Act as well as allegations that LabMD failed to provide reasonable and appropriate security for personal information on its computer networks. The filed answer also explains that the FTC may lack the statutory authority to regulate data-security practices as “unfair acts or practices” under Section 5.

“The FTC admitted in 2000 that it ‘lacks the authority to require firms to adopt information practice policies,’ and while they have wanted Congressional approval for that authority, Congress has said no,” explained Reed Rubinstein, Cause of Action’s senior vice president of litigation. “This is why we are asking the Administrative Law Judge to deny the Commission’s requested relief and dismiss the Complaint in its entirety.”

Cause of Action’s Executive Director, Dan Epstein explained, “Cause of Action is taking up this fight because the FTC’s attempt to exert authority that it does not have on a business that engaged in no wrongdoing is an abuse of agency authority that threatens American jobs.”

Key evidence of this lack of FTC authority includes:

  • Notwithstanding the FTC’s repeated requests that Congress confer upon it the authority to regulate data-security, Congress has refused to grant the FTC this authority.
    • In a 2000 report to Congress, Privacy Online: Fair Information Practices in the Electronic Marketplace: A Report to Congress, for example, the FTC admitted that it “lacks the authority to require firms to adopt information practice policies” and requested Congress enact legislation providing a federal agency with the authority to regulate data security. Since then, Congress has not passed any such law.
  • The FTC cannot rely on any judicial precedent for the proposition that the FTC has the authority to regulate data-security practices under Section 5.
  • Federal District Judge William Duffy recently noted that “there is significant merit to [LabMD’s] argument that Section 5 [of the Federal Trade Commission Act] does not justify an [FTC] investigation into data security practices and consumer privacy issues….”
  • Even if the Commission did have jurisdiction over the claims in the Complaint, which it does not, because the Commission has not published any rules, regulations, or other guidelines clarifying and providing any notice, let alone constitutionally adequate notice, of what data-security practices the Commission interprets Section 5 to prohibit or require, this administrative enforcement action against LabMD violates due process requirements guaranteed and protected by the Fifth Amendment to the U.S. Constitution.

CoA states in LabMD’s answer that “Section 5 of the FTC Act does not give the Commission the statutory authority to regulate the acts or practices alleged in the Complaint and therefore the Commission’s actions are arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; contrary to constitutional right, power, privilege, or immunity; in excess of statutory jurisdiction, authority, or limitations, or short of statutory right; or without observance of procedure required by law.”

A hearing on the matter is scheduled for April 28, 2014 before Chief Administrative Law Judge Michael Chappell.

The FTC complaint can be found here  and the answer filed by CoA can be found here.

About Cause of Action:

Cause of Action is a nonprofit, nonpartisan organization that uses investigative, legal, and communications tools to educate the public on how government accountability and transparency protects taxpayer interests and economic opportunity. For more information, visit www.causeofaction.org.

About LabMD:

LabMD is a cancer detection facility that specializes in analysis and diagnosis of blood, urine, and tissue specimens for cancers, micro-organisms and tumor markers. You can find out more about their battle with the FTC here.

To schedule an interview with Cause of Action’s Executive Director Dan Epstein, contact Mary Beth Hutchins, mary.beth.hutchins@causeofaction.org or Kevin Schmidt, kevin.schmidt@causeofaction.org.

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09/6/2013

Cancer Detection Business Strikes Back Against Federal Trade Commission’s Arbitrary Enforcement

FOR IMMEDIATE RELEASE                                                                                                   

September 6, 2013

 

Cancer Detection Business Strikes Back Against Federal Trade Commission’s Arbitrary Enforcement

Cause of Action Challenges FTC Overreach, Claims It Lacks Regulatory Authority

 

WASHINGTON – LabMD, a small cancer detection facility in Atlanta, Ga., has retained government accountability group Cause of Action (CoA) in order to challenge an aggressive and arbitrary enforcement action brought by the Federal Trade Commission (FTC). LabMD was targeted by the federal agency in what the company calls “an ongoing witch hunt against private businesses.”

The FTC issued a complaint against LabMD in August, alleging  violations of Section 5 of the Federal Trade Commission Act based, in part, on allegations that a third party was able to obtain data from LabMD’s computers through the peer-to-peer (P2P) file sharing program LimeWire.

“The FTC’s targeting of LabMD is the most recent example of a federal agency abusing its authority and acting outside of its power in order to punish American job creators,” said Executive Director of CoA, Dan Epstein. “The FTC has scapegoated a company whose aim is to save lives.”

Cause of Action is representing LabMD in legal proceedings before the FTC in which LabMD will vigorously respond to the FTC’s complaint and address whether the FTC has authority under Section 5 of the Federal Trade Commission Act to bring its enforcement action.

As part of their efforts to educate the public on the dangers posed by the FTC’s actions, CoA and TechFreedom are co-sponsoring a Thursday, September 12, discussion of the FTC and data security issues to be held in Washington, DC and streamed live online. More information can be found here.

About Cause of Action:

Cause of Action is a nonprofit, nonpartisan organization that uses investigative, legal, and communications tools to educate the public on how government accountability and transparency protects taxpayer interests and economic opportunity. For more information, visit www.causeofaction.org.

 

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09/4/2013

Statement: Cause of Action on Proposed Advertising Campaign for Affordable Care Act

Yesterday, Senator Rubio asked HHS Secretary Sebelius to cancel $8.7 million in planned advertisement buys made through the Centers for Medicare & Medicaid Services (CMS) to promote the Patient Protection and Affordable Care Act using taxpayer dollars.

Dan Epstein, executive director of Cause of Action, offered this response to the possible misuse of federal dollars through efforts to promote the Patient Protection and Affordable Care Act:

“HHS must take seriously the concerns that have arisen about use of taxpayer money for advertising campaigns promoting the Patient Protection and Affordable Care Act. We are already troubled by the fact that HHS has spent nearly $60 million in taxpayer funds to contract with huge PR companies to promote the implementation of the new law, while Secretary Sebelius has simultaneously asked executives from pharmaceutical and insurance companies to support Enroll America, an organization that has spent ‘at least seven figures’ on paid advertising.  Cause of Action’s warning about the high risk of misuse of taxpayer dollars has recently been expressed through letters to state health exchanges and we will continue to monitor any wasteful spending or abuse of federal funds as the law goes into effect.”

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09/4/2013

What to Do about Data Security? A Discussion of the FTC’s LabMD & Wyndham Cases

What to Do about Data Security? A Discussion of the FTC’s LabMD & Wyndham Cases

Over the last decade, the Federal Trade Commission has settled nearly four dozen cases alleging that a failure to have “reasonable” data security constitutes an unfair or deceptive trade practice. The FTC has established no clear data security standards, and no court has ever ever ruled on the FTC’s assertions, but two pending litigations may finally finally allow the courts to rule on the legal validity of what the FTC calls its “common law of settlements” — and whether the agency can continue bringing such data security enforcement actions.

Join TechFreedom and Cause of Action for a livestreamed luncheon discussion on September 12 about these two cases and what they might mean for the future of consumer protection and competition regulation. We’ll hear from Mike Daugherty, founder of LabMD, a small cancer diagnostic lab based in Atlanta. Represented by Cause of Action, a non-profit dedicated to government transparency and accountability, LabMD is defending against the FTC complaint, which focuses on the fact that, in 2007, a government-funded surveillance program was able to access a file containing patient information on LabMD’s network through the Limewire filesharing program. Mike will preview his new book, The Devil Inside the Beltway: The Shocking Exposé of the US Government’s Surveillance and Overreach into Cybersecurity, Medicine and Small Business, due out September 17. (Hint: the “devil” is a broader regulatory mentality.)

Our panel of legal experts will discuss the unique aspects of the LabMD case, especially the FTC’s decision not to prosecute filesharing services like Limewire for unfair trade practices in configuring their software to trick users into sharing files unintentionally — a decision the FTC eventually reversed, but not until it finally brought an enforcement action against Frostwire in 2011 for the same unfair practice. The panel will also discuss the larger legal issues raised by the LabMD case, the FTC’s pending litigation with Wyndham Hotels, and other recent cases settled by the FTC. Is the FTC’s approach consistent with the rule of law? Could it be? Does it actually protect consumers? What should the courts and Congress do?

Space is limited so RSVP now if you plan to attend in person. A livestream of the event will be availablehere. You can follow the conversation on Twitter on the #LabMD hashtag.

When: 
Thursday, September 12, 2013
12 p.m. (registration and coffee opens at 11:45, event and livestream at 12:15)

Where:
100 Maryland Ave NE
Washington D.C. 20002

Questions? 
Email contact@techfreedom.org.

Read TechFreedom’s amicus brief in the recent Wyndham and POM Wonderful cases for more legal analysis of how the FTC’s extra-legal regulations.

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