Cause of Action Institute Sues HUD to Disclose its Role in Controversial Mortgage Settlements

Banks required to provide “donations” to government-approved third parties

Washington D.C. – Cause of Action Institute (CoA Institute) today filed a complaint in the U.S. District Court for the District of Columbia against the United States Department of Housing and Urban Development (HUD) for failing to produce records about its role in the federal government’s multi-million dollar agreements with big banks over their allegedly faulty residential mortgage securities practices.  HUD has failed to produce relevant documents for more than a year after CoA Institute filed a Freedom of Information Act (FOIA) request for information.

Cause of Action Institute President & CEO, and former federal judge, Alfred J. Lechner, Jr.: “Taxpayers deserve to know why the money from these agreements is going to third parties and not being returned to the Treasury Department.  The Obama administration should be held accountable when agencies like HUD make decisions behind closed doors and fail to produce timely relevant documents in accordance with the law.”

Starting in 2013, the Department of Justice (DOJ) in collaboration with HUD and other agencies entered into a series of agreements with three large banks to resolve potential federal and state legal claims that these institutions knowingly sold billions of dollars in faulty residential mortgage-backed securities to investors prior to and during the 2008 financial crisis.  These agreements contain so-called consumer relief provisions requiring or permitting that banks provide “donations” to government-approved third parties in lieu of paying funds to settle the federal claims into the U.S. Treasury.

CoA Institute, a nonprofit legal watchdog organization, has led efforts to investigate these controversial agreements.  Last year, CoA Institute issued multiple public records requests aimed at exploring whether the federal government was authorized to encourage or force banks to steer funds to these third-party groups that support various initiatives backed by the Obama administration.  One of these requests was submitted to HUD on July 8, 2015.

HUD has failed to respond or produce any documents in response to CoA Institute’s request.  Recent evidence uncovered by the House Financial Services Oversight & Investigations Subcommittee, chaired by Congressman Sean Duffy, indicates that these agreements were structured, in a DOJ-HUD collaboration, with, in Chairman Duffy’s words, a “keen eye to make sure conservative groups could not access any money through these settlements.”

CoA institute is suing to force HUD to respond to its request and to get to the bottom of these issues.

  • Cause of Action Institute’s full complaint with exhibits is available HERE.

Did Federal Government Push Controversial Hawaii Gun Law?

Washington, DC – Cause of Action Institute (CoA Institute) today filed a Freedom of Information Act (FOIA) request to examine any potential involvement by the Department of Justice (DOJ) in preparing or advocating for Hawaii’s recently-passed law to restrict the exercise of constitutionally-protected gun rights.

CoA Institute President and CEO, and former federal judge, Alfred J. Lechner, Jr.: “While touted as an important public safety measure designed to encourage responsible gun ownership and assist law enforcement, in reality this legislation will place law-abiding American citizens into a database maintained by the federal government to monitor criminals. This measure has the potential to severely chill gun ownership in Hawaii and limit individuals from exercising their Second Amendment rights.”

On June 23, 2016, Hawaii Governor David Ige signed into law SB 2954, thereby authorizing “county police departments in Hawaii to enroll firearms applicants and individuals registering their firearms” into a federal database known as “Rap Back,” which is a centralized “criminal record monitoring service” maintained by the FBI.

The Hawaiian gun law is unprecedented.  It makes Hawaii the first state to submit information about its gun-owning citizens to the federal government. In light of current efforts by the Obama administration to create a national gun registry—which would be prohibited under current law —there is significant interest in examining the role, if any, played by the federal government in the development of this new law.

The full FOIA request is available HERE

Investors Business Daily – Obama DOJ Channels Bank Shakedown Money To Private Groups

By Dan Epstein

The Department of Justice’s war against the financial industry shows no sign of ending. The agency is now suing Quicken Loans over alleged issues with its taxpayer-backed housing loans. This follows a string of multibillion dollar settlements with major banks for their alleged actions prior to the Great Recession, most notably the record $16.65 billion deal with Bank of America and $7 billion settlement with Citigroup in 2014 and the $13 billion deal with JP Morgan Chase in 2013.

To date, the DOJ has extracted at least $127 billion from these and other companies in the wake of the financial crisis.

Yet while the DOJ says that its actions are in the public interest, the public has no way of verifying whether this is true. Moreover, the agency’s opaque administrative process has resulted in settlements that raise more questions than answers.

The DOJ has not explained which laws or regulations allow it to divert a bare minimum of $150 million, and potentially billions, from its bank settlements to third-party organizations — a historically unprecedented arrangement.

Before the Department of Justice can squeeze a similar settlement out of Quicken Loans, the public deserves to learn the details about how — and why — such deals were reached.

On June 15, government watchdog Cause of Action, where I am executive director, filed a Freedom of Information Act request with the DOJ concerning its recent settlements with Bank of America, Citigroup and JP Morgan Chase. We seek an explanation of the DOJ’s statutory authority to direct a private organization’s settlement money to third-party organizations — and why specific organizations were chosen.

The settlements’ problems primarily stem from their “consumer relief” sections. Under the terms of their respective deals, Citigroup must commit $2.5 billion, JP Morgan must pay $4 billion, and Bank of America must remit $7 billion on this item.

Normally, consumer relief money would go to actual victims of fraud. Instead, the Department of Justice provided a menu of organizations to which the banks could give their money.

The Bank of America settlement, for instance, included a minimum of $20 million to “housing counseling agencies” approved by the Department of Housing and Urban Development and a minimum $50 million to “Community Development Financial Institutions” approved by the U.S. Treasury. The settlement also offers to forgive $2 of money owed for every $1 given to such groups — a powerful incentive to direct money their way.

Moreover, such arrangements conveniently dovetail with several of the Obama administration’s other policy goals.

The money to community development financial institutions, or CDFIs, is the most obvious example. They are marketed as taxpayer-backed alternatives to payday lenders and check-cashing services in low-income communities. Not coincidentally, the DOJ is also engaged in a multiyear campaign — “Operation Choke Point” — that’s effectively shutting down payday lenders and giving CDFIs an opportunity to gain market share. Bank of America is now legally obliged to assist them.

The money to housing counseling agencies is also troublesome. By directing cash to these groups, the DOJ is forcing Bank of America to fund a program whose budget was eliminated by Congress in 2014. In effect, the Obama administration is using the private sector’s money in lieu of taxpayer dollars.

Another eyebrow-raising provision requires that Bank of America and JP Morgan Chase spend a combined $4.15 billion on loan forgiveness and forbearance. Both settlements note that this money can be given to the “Making Home Affordable Program,” a taxpayer-funded federal program created by the Obama administration as part of the 2009 stimulus bill.

MHA is set to expire at the end of 2016, but before that day comes, it can likely count on an influx of cash from the private sector.

Finally, there’s the matter of what happens if the three banks haven’t disbursed their consumer relief budgets by December 2017 for JP Morgan Chase, August 2018 for Bank of America and December 2018 for Citigroup. At that point, all of the money still owed by Citigroup and JP Morgan Chase, and 25% of Bank of America’s outstanding obligation, will go to the third-party organization NeighborWorks America, which will spend the money on many of the programs and causes listed above.

Imagine if a Republican administration directed billions of dollars of “small business relief” into the coffers of the U.S. Chamber of Commerce, the National Federation of Independent Business and the National Restaurant Association, all while hiding the details from the public. The media and political outcry would be severe.

Yet that’s essentially what the Obama administration has done with its campaign against the financial industry, forcing banks to bankroll organizations and causes that advance its political agenda.

The Justice Department must release the documents that make clear why it structured the Bank of America, Citigroup and JP Morgan Chase settlements in such a way, and why that is legally acceptable. The American people deserve to know if the federal government is disguising political shakedowns as a public service.

Cause of Action Launches Investigation Into The Justice Department’s Settlements With Large Financial Firms

WASHINGTON – Cause of Action (CoA), a nonpartisan strategic oversight group committed to ensuring that discretionary decision-making is accountable, transparent and fair, has filed a Freedom of Information Act request seeking clarity from the Justice Department on its legal authority to enter into financial settlements and arbitrarily allocate settlement funds.

Additionally, CoA is petitioning the Treasury and Justice Departments to show how the bank settlements comply with the Miscellaneous Receipts Act and the Government Corporation Control Act.

Click here to view the FOIA and the petition for rule making

Last August, the Department of Justice entered into a record $16.65 billion settlement with Bank of America, marking the agency’s largest victory against major banks that sold residential mortgage-backed securities (RMBS) prior to the 2008 financial crisis. Related settlements reached with Citigroup and JP Morgan brought the total DOJ victory against these three banks to a whopping $36.65 billion.

Typically, settlement funds are directed to the Treasury for appropriation by Congress. Of that nearly $37 billion dollars in settlement funds, the Justice Department has directed $13.5 billion to consumer relief efforts and third-party consumer groups – that’s more than the entire IRS budget in FY2014.

For example, provisions of the BofA settlement require the bank to pay at least $20 million to housing counseling agencies approved by the Department of Housing and Urban Development and at least $50 million to Community Development Financial Institutions certified by the Treasury Department.

The payouts raise the question of whether the Justice Department has the legal authority to enter into these colossal settlements, and distribute funds to unrelated third parties instead of victims aggrieved by the Banks’ actions.

Cause of Action Executive Director Dan Epstein issued the following statement:

“Lacking accountability and proven effectiveness, when the government forces economic redistributions through discretionary grants, it not only hinders long-term social change, it encourages waste fraud and abuse by grant recipients who are not held accountable for protecting the poor versus protecting themselves.”

Policy experts have written and testified before Congress expressing their concern that the settlements impermissibly settle claims of DOJ and other agencies, improperly distribute funds to unrelated third parties, and do not ensure that the funds DOJ and third parties receive are used to redress the harms identified in the settlements.

To date, the Justice Department has failed to identify any legal authority allowing itself to arbitrarily mandate these measures. Absent regulatory guidance, federal agencies are required to go through the rulemaking process, which the Justice Department has not done.

During a recent House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law hearing, Epstein testified that the “Bank of America settlements were not subject to notice and comment. These were unelected officials engaging in decision-making that the public had no stake in.”

Responding to inquiry from Rep. Hank Johnson (D-GA), Epstein noted, “in the case of Bank of America, that settlement agreement was never approved by a court. As you pointed out in your arguments about arbitration, you actually believe in a very robust court system. Yet that robust court system has nothing to do with the programs and policies that have been discussed here today.”

To ensure that government decision-making is transparent and fair in order to protect against the misuse of tax dollars and arbitrary abuses of discretion by the unelected, Cause of Action has requested access to the following documents pursuant to the Freedom of Information Act:

  • All records referring or relating to DOJ’s authority to agree to the Consumer Relief Donation Provisions of the RMBS Settlements.
  • All records referring or relating to DOJ’s authority to assume the contractual claims/settlement terms of the FDIC and SEC.
  • All records referring or relating to DOJ’s authority to enter into and/or reasons to execute the RMBS Settlements without notice and comment rulemaking.
  • All communications within DOJ, and/or between DOJ and any of the following: a) Bank of America; b) Citigroup; c) JP Morgan; d) FDIC; e) SEC; f) HUD; g) Treasury; h) the White House; i) the RMBS Working Group; and j) the states of California, Delaware, Illinois, Kentucky, Maryland, Massachusetts, and New York, regarding the RMBS Settlements.  You may limit the scope of this search to communications referring or relating to “Operation ChokePoint”, “CDFI”, HUD-approved housing counsel*”, “Neighborworks”, “Home Affordable Mortgage Program” and “HAMP”.
  • All records referring or relating to DOJ’s authority to bind private parties to comply with HAMP by entering into the RMBS Settlements.
  • All records referring or relating to (a); (b) OMB Circular A-25; (c) the Chief Financial Officers Act; (d) the Anti-Deficiency Act; (e) “publicity or propaganda”; (f) the Colorado Division of Housing; (g) Empire Justice Center; (h) Center for New York City Neighborhoods.  You may limit the scope of this search to records concerning the Consumer Relief Donation Provisions.

Cause of Action Sues the Justice Department For Information On Tax Detail Program

Cause of Action, a nonprofit government accountability organization, recently discovered that the Department of Justice has been placing their Tax Division attorneys, some of whom have worked directly on the IRS targeting scandal, in the White House to provide legal advice to the President.

Having found no evidence of agency policies in place to safeguard against confidential tax information being shared with the wrong people, this practice of DOJ attorneys being detailed at the White House is alarmingly urgent.

In April, Cause of Action submitted several Freedom of Information Act requests and sent a letter to the Justice Department Inspector General Michael Horowitz. These documents sought answers to whether appropriate legal and ethical safeguards are in place at both the Office of White House Counsel, as well as the DOJ, to ensure that detailed attorneys are appropriately screened to prevent confidential taxpayer returns and/or return information protected under Section 6103 of the Internal Revenue Code from being unlawfully accessed or disclosed.

Having received no response from the government since our April requests, Cause of Action on Tuesday filed a complaint in U.S. District Court for the District of Columbia against the Department of Justice and Internal Revenue Service.

As the complaint states, CoA is seeking the release of records relating to how the federal government protects Americans’ private tax information when government attorneys have the power to access and disclose that information. These records have been requested and improperly withheld by the Internal Revenue Service and United States Department of Justice.

“Given the IRS’ track record of failing to protect confidential tax information, this lack of agency oversight is a threat to our privacy and democracy,” said Cause of Action President Dan Epstein. “Ethical and legal protocols at these agencies should be held to the highest standards, especially when government attorneys are accessing confidential taxpayer return information while intermittently leaving to work in the White House.”

The case number is 15-cv-00770.

[Read the Complaint below]


ECF No. 1 5.26.2015 Complaint

ECF No. 1-1 5.26.2015 Exhibits 1-15 to Complaint

Cause of Action Renews Request for Review of Department of Justice’s Asset Forfeiture Program

By: Josh Schopf

Cause of Action today sent a letter to the Inspector General for the Department of Justice (DOJ IG), renewing its request for an investigation of DOJ’s asset forfeiture program. In response to a prior letter from Cause of Action, the DOJ IG announced in January 2015 that it was conducting a review of its asset seizure activities. This review, however, does not examine administrative seizures, or the civil liberties threats that result from such seizures, even though administrative seizures comprise the majority of adoptions.

Cause of Action also demanded an immediate investigation of Desert Snow, LLC, an approved federal contractor involved in asset seizure and training activities. Specifically, Desert Snow’s founders created a program known as Black Asphalt, which was used for a government-run license-plate tracking system, and enabled more than 25,000 officers and federal authorities throughout the country to share reports about American motorists, many of whom had not been charged with any crimes. The purported goal of the license-plate tracking program, run by the DEA, is to seize cars, cash and other assets to help combat drug trafficking. But the breadth of the program has expanded, and is now being used in connection with potential crimes and is being accessed by numerous state and local law-enforcement agencies. Congress has questioned license-plate tracking systems and other surveillance programs, but reports indicate that the program continues to expand, and that Desert Snow continues to receive federal funds, including from DOJ.

Cause of Action is asking the DOJ IG to investigate Asset Forfeiture Program contractors and systems, including but not limited to, Desert Snow, Black Asphalt, and license plate tracking systems.

CoA NLRB Report and Letter to DOJ

121207 CoA letter to DOJ & NLRB Report