Federal Judge Rejects Export-Import Bank’s Arguments for Refusing to Disclose Public Records

Judge James Boasberg of the U.S District Court for the District of Columbia ruled this week that the Export-Import Bank (“EXIM Bank”) must produce a variety of records it initially withheld in response to two FOIA requests from Cause of Action Institute (“CoA Institute”). CoA Institute’s September 20, 2018 FOIA request sought all communications to or from EXIM leadership regarding key EXIM stakeholders and beneficiaries. The May 2019 FOIA request sought information after a Government Accountability Office (“GAO”) report found EXIM potentially provided billions in financing to companies with delinquent federal debt by failing to use a readily available federal database.

EXIM attempted to shield the records from disclosure under FOIA Exemption 5 and the deliberative-process privilege (a.k.a., the “withhold it because you want to” exemption). After reviewing the withholdings and unredacted versions of the records in camera, the Court issued a forceful opinion that describes numerous instances where the agency either inappropriately withheld public records or failed to adequately defend its refusal to disclose them.

Page 13 regarding cybersecurity documents:

“[T]he agency’s Vaughn Index omits all mention of one of the two withheld memoranda.  The Court only because privy to its existence by way of in camera review, finding it tucked within a different record marked for other purposes. It need scarcely be said that the Court cannot affirm Defendant’s withhold of a record it never even acknowledges. . . . [I]t is painful enough for the Court to laboriously pore over all of these in camera records even without errors.”

Pages 17–18 regarding media outreach and marketing documents, events and conference documents, and high-level statistics:

“Instead of discussing (or even alluding to) these parts of the senior staff reports, Defendant simply approaches the documents from a generic, 30,000-foot view while ever so briefly narrowing in on a few unrepresentative portions . . . . [M]uch material in the reports hardly qualifies as ‘advisory opinions, recommendations and deliberations,’ nondisclosure of which is necessary to “protect[] the decision making processes of government agencies. . . . [T]he agency bears the burden of establishing that the withheld information is both predecisional and deliberative, such that it comes within the privilege. It has not discharged that obligation with respect to the excerpts examined here.”

Pages 19–20 regarding meeting documents:

“[R]eprising its earlier oversight, Defendant neglects to include in its Vaughn Index one of the three sets of meeting minutes, as well as one of the two meeting agendas.  The Court, once again, only discovered their existence during its in camera review.  Such repeated carelessness only undermines the Court’s confidence in the attention the Government has devoted to its responsibilities here.  The second problem is perhaps worse: notwithstanding its near-complete withholdings, Defendant in its submissions completely ignores all six records, declining even to mention them in its declaration and briefing.  That lapse is all the more glaring where [CoA Institute] explicitly flagged the deficiency in its Cross-Motion.”

Page 23 regarding an e-mail from EXIM’s Assistant General Counsel:

“The Court could go on — for instance, Defendant never establishes . . . that the underlying information was kept confidential. . . . This record must see the light of day.”

Pages 30–31 regarding EXIM communications with the GAO:

“Even the briefest in camera review reveals that this description is plainly overbroad and — at least with respect to some of the withheld documents — seemingly inaccurate, as their content has nothing to do with ‘fraud[] that had been committed against the agency.’”

Page 33 regarding a single EXIM e-mail to the GAO:

“In addition to thus appearing to flunk Exemption 5’s threshold requirement . . . in no fashion may the document be deemed deliberative. . . . Defendant has pointed to no foreseeable harm from its disclosure, the agency must release it to Plaintiff.”

Page 41 regarding efforts to segregate and release non-exempt portions of records:

“[CoA Institute] has highlighted several red flags undermining the ‘presumption’ that Defendant has disclosed all reasonably segregable material, including the basic reality that a number of the records the Government claims were only redacted in part appear to have been redacted in full.  The Court’s own in camera review, moreover, causes it further [to] question whether the Bank has adequately complied with FOIA’s segregability mandate.”

Read more of CoA Institute’s work on EXIM:

EXIM Supporter Investigated for Potentially Defrauding the Bank

Cause of Action Institute recently received documents indicating that a repeat customer and vocal supporter of the Export-Import Bank of the United States (“EXIM”) allegedly defrauded the bank. EXIM, which is tasked with assisting the financing of U.S. exports, has gained a reputation for favoring certain companies over others, which is exemplified by its nickname “the Bank of Boeing” for its preferential treatment of the airline. Recent reports from the Government Accountability Office and the EXIM Inspector General (”IG”) have also shown a disconcerting susceptibility to fraud.

Learn More

GAO Report Finds EXIM Potentially Provides Billions in Financing to Companies with Delinquent Federal Debt

While the Export-Import Bank (EXIM) celebrated the recent confirmation of its president and two members of its board of directors, the Government Accountability Office (GAO) released a troubling report concerning EXIM potentially providing billions of dollars in loans and financing to companies improperly. GAO found EXIM failed to use a federal database available to all government agencies free of charge to identify companies that have delinquent federal debt. Consequently, EXIM may have provided financing to ineligible companies and increased it’s susceptibility to fraud.

Learn More

CoA Calls on IG to Investigate Use of Government Owned Vehicles at EXIM Bank

Cause of Action Institute (CoA Institute), a nonpartisan government watchdog organization, sent a letter today to the Office of Inspector General (OIG) at the Export–Import Bank of the United States (EXIM Bank), requesting the EXIM Bank’s Inspector General investigate the use of government owned vehicles by EXIM Bank staff based on documents uncovered by Cause of Action Institute through a freedom of information request. The newly released documents reveal troubling evidence of EXIM Bank staff abusing the use of government owned vehicles.

Kevin Schmidt, director of investigations at Cause of Action Institute issued the following statement:

“We’re calling on the EXIM Bank’s Office of Inspector General to launch an investigation into what appears to be ongoing abuse and use of government vehicles by Bank staff.

“As a result of our own independent investigation, we’ve discovered what appears to be unauthorized use of government vehicles by Bank staff, lack of details in automobile use logs that are required under EXIM Bank policies, including staff leaving off the purpose for the use of government owned vehicles.

“As a financial institution with the power to hand out billions of dollars in federally subsidized and backed loans to corporations, all taxpayers should be concerned that the bank staff cannot seem to follow standard government automobile use protocols that are designed to prevent abuse and protect tax dollars.”

EXIM Bank’s OIG had previously investigated this matter in 2016, producing a report that included a detailed list of deficiencies by the Bank and Bank staffs’ use of government owned vehicles.

Letter and exhibits to the EXIM Bank’s Office of Inspector General

Questionable Vehicle Use

Ex-Im Vehicle Use Policy

2019.4.3 FOIA Request to Ex-Im Bank Vehicle Use

 

 

 

GAO Finds Ex-Im Bank Lacks Comprehensive Fraud Prevention: CoA Renews Push to Abolish

The Export-Import Bank of the United States (“Ex-Im Bank”  or “Bank”) is a federal agency that provides financial credit to those who claim they are unable to obtain it privately. In reality, Ex-Im Bank offers taxpayer-guaranteed loans to politically-connected companies while leaving smaller companies at a competitive disadvantage. Last August, citing Ex-Im Bank as a form of corporate welfare, Cause of Action Institute advocated for its abolishment.

Now, a new Government Accountability Office (GAO) report finds that Ex-Im Bank lacks a comprehensive framework to deter fraud, needs comprehensive fraud risk management reform, and currently poses a significant risk of loss to taxpayers by failing to provide these adequate protections against fraud and abuse.

Between October 2016 to July 2018, the GAO conducted a performance audit of the Bank, surveying more than 400 employees about the organization’s fraud risk management capabilities. The GAO report concluded that:

“[T]he Bank has approached fraud risk management on a fragmented, reactive basis, and its anti-fraud activities have not been marshalled into the kind of comprehensive, strategic fraud risk management regime envisioned by GAO’s Fraud Risk Framework and its leading practices.”

The report found that employees were concerned about the lack of proactive measures being taken to combat and prevent fraud. The protocols in place focus on reacting after the fraud was committed, rather than preventing fraud from occurring. The GAO noted that the Bank was making efforts to reform its anti-fraud capabilities, but it was not clear whether improvements were keeping pace with expectations.

The GAO report surveyed employees and included the following comments and summaries about the Bank’s attitude towards addressing fraud:

  • “The Bank is more concerned with increasing sales than preventing fraud.”
  • “[The current division of responsibilities] is not the most effective way for the Bank to oversee fraud and fraud risk, as responsibility needs to be given to the teams on the front end—such as the individual relationship managers and loan officers—not on the back end.”
  • “[The current arrangement]seems to be more of an after-the-fact approach to potentially (if reluctantly) detecting fraud than any proactive encouragement to actively prevent fraud.”

These comments from Ex-Im Bank employees illustrate both a cultural challenge within the Bank and the Bank’s failure in constructing comprehensive reforms to prevent fraud. The GAO presented Ex-Im Bank with a list of recommendations to address its vulnerabilities and create a culture of prevention rather than reaction.

Given the Bank operates with taxpayer funds, these improvements are critical. In the words of a concerned Bank employee,  “More due diligence should be required in order to qualify for the U.S. government’s support.”

It is Cause of Action’s mission to advocate for a transparent and accountable government free from fraud and cronyism. The Ex-Im Bank is a key example where oversight and accountability are critical to ensuring its service to the public interest. For too long, the Ex-Im Bank has been linked to providing political favors for well-connected corporations and undermining fair market competition, and Cause of Action Institute will continue to advocate for ending the Bank and this form of corporate welfare.

Ethan Yang is a Research Fellow at Cause of Action Institute.

It’s Time to End Ex-Im Bank’s Taxpayer Subsidized Corporate Welfare

When the federal government subsidizes a private company, we all lose. Such subsidies, often referred to as “corporate welfare” by critics, tend to benefit big companies, while stifling innovation and making it more difficult for smaller companies to compete. The Export-Import Bank, or Ex-Im Bank, is perhaps the highest profile example of this process.

The Ex-Im Bank claims to facilitate exports of U.S. goods and support American jobs. To do this, the Bank finances American businesses—freeing them from the need to obtain private loans—so that they can compete internationally. This may sound good in the abstract but its implementation imports all the hazards of corporate welfare.

In April, President Trump disappointed supporters of free trade when he seemingly changed his position on the Ex-Im Bank. As a candidate in 2015, Trump said the Ex-Im Bank was “unnecessary” and contradictory to free enterprise. However, three months after his inauguration, he called the Bank “a very good thing” claiming that “it actually makes money.” In his first budget proposal, President Trump decided to keep it. He also intends to nominate two board members, which will permit the bank to enter into full operation, meaning more and bigger loans from the taxpayer.

On the bright side, President Trump has nominated former Rep. Scott Garrett to head the Bank. In the past, Garrett has been an outspoken critic of the Ex-Im Bank, which hopefully means that should he be confirmed, he will limit its operations and advocate for reform. It can only be seen as a positive sign that the big businesses who benefit most have already come out in opposition to his nomination.

The Ex-Im Bank claims to “level the playing field” for domestic products and help small businesses compete internationally. But federal subsidies to politically-favored companies hurt both international competition and market efficiency. If a business can’t get a private loan, resources should be allocated elsewhere to companies that can better compete, without taxpayer-subsidized assistance. Artificially propping up private industry is not the role of the federal government.

Many economists recognize the failures of the Ex-Im Bank. But supporters, most prominently the companies that get these cheap loans, argue it is acceptable to sacrifice quality, efficiency and competition to help prop up American jobs. However, the biggest recipients are generally in good positions to sustain themselves and do not need these funds to retain American jobs.

Most beneficiaries of the Ex-Im Bank’s loans are, in fact, not small businesses. The largest recipient, by far, is Boeing, which takes a whopping 40 percent the Bank’s financing.  The top 10 recipients, which include Caterpillar, General Electric, and other behemoth companies (and which frighteningly includes “unknown”), makes up 75 percent of the Bank’s expenditures.

Boeing has repeatedly threatened job losses if the Bank goes away. In 2015, the company cautioned that ending the Ex-Im Bank would lead to the loss of thousands of employees because otherwise it would be unable to compete with the European company, Airbus. Congress gave in and re-instated the Bank—and Boeing went ahead and cut 4,000 jobs anyway. Re-instatement of the Bank did nothing to save those jobs, but it did line the pockets of shareholders (18 of which are members of Congress). Companies like Boeing don’t need subsidized loans to stay afloat. Faced with the possibility of the Ex-Im Bank closing, for example, the government and Standard & Poor released reports that found Boeing would do fine without the aid. The other largest recipients are similarly financially sound.

Free and open trade breeds competition and efficiency, whereas corporate subsidies set up a system of reliance, barriers to entry and inefficiency. If you’re playing with the house’s money, you’re much more likely to chase the river and make poor decisions. For example, in 1987, the Ex-Im Bank’s investments were so bad that it requested a massive federal bailout. After the loss of hundreds of millions of dollars, it needed a $3-billion bailout just to stay afloat. The bank had some gains and some losses in the 1990s. Although there was an overall profit of $5 billion since 1990, the low interest rates brought in much less money than it could have and defaults may result in a net loss in the future.

A federal budget agency found that the Ex-Im Bank’s current budget is on pace to cost taxpayers $2 billion over the next decade. Yet we continue to throw more and more taxpayer money at an unnecessary corporate welfare regime, benefitting not the free market but favored players.

Federal policies should create an even playing field for industry and a friendly environment for entrepreneurship to flourish. Only about two percent of all exports are subsidized by the Ex-Im Bank. If 98 percent of the market can export without needing any help from a corporatist bank, the other two percent should manage fine. The Bank helps line the pockets of politically-connected businessmen and gives little aid to the average person. It is time for the president and Congress to end it for good.

Tyler Arnold is a communications associate at Cause of Action Institute

TechDirt – Lawsuit Filed After Export-Import Bank Official Swears He ‘Accidentally’ Deleted All Of His Responsive Text Messages

Read the full story: Tech Dirt

Sure, Freedom of Information laws are great, but they have their downsides. For one thing, they clearly signal to agencies which records are being sought. It’s unavoidable. To answer a request, an agency needs to know what it’s looking for. Once the request is out in the open, efforts can begin in earnest to excise information anyone affected doesn’t want made public.   I’m not saying anyone did anything wrong, but it very definitely looks like someone did something deliberately wrong.  A top official at a controversial U.S. export finance agency deleted text messages sent within days of the 2014 midterm elections after a watchdog group filed an open records request for the messages, the agency admitted recently.

The watchdog group — Cause of Action — sought “text messages, Blackberry messenger chats and SMS messages sent or received by top officials during the period of days between November 2, 2014 and November 8, 2014.” These would be texts fired back and forth during the mid-term elections by officials of the controversial US Export-Import Bank, which was facing the reality of having its funding halted by House Republicans.   Cause of Action got most of what it sought… several months later. It filed the request on November 20, 2014 but didn’t receive a response until May 12, 2015. That response brought with it the following bad news:  [T]he messages for Scott P. Schloegel were accidently deleted on approximately January 1, 2015. Enclosed is signed declaration from Mr. Schloegel attesting to the deletion.