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) Huduser.org; (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.

National Review: The Obama Administration’s Newly Political Approach to FOIAs

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At the Treasury Department, the memo came down from the deputy executive secretary, Wally Adeyemo, in December of 2009. Going forward, the memo stated, “sensitive information” requested under the Freedom of Information Act was to be reviewed not only by career FOIA officials but also by a committee of political appointees, including Adeyemo and representatives from the public-affairs, legislative-affairs, and general counsel’s office, before release. What followed was an unusual review of Treasury FOIA requests by high-ranking political officials. And it didn’t just happen at Treasury, but at the IRS and the Department of Homeland Security, too. Current and former FOIA attorneys at these agencies say documents requested by the media have come in for special scrutiny, called “sensitive review,” often holding up release for weeks or months. At times, these officials say, political officials delayed the production of documents for political convenience. The policy runs counter not just to the spirit and the letter of the Obama administration’s pledge to unprecedented transparency, but also to the spirit of the Freedom of Information Act itself….

The Treasury Department is not alone in its use of the sensitive-review process. Internal documents suggest that the IRS (part of Treasury, but with its own policies), the Department of Homeland Security, and a number of other agencies have, to varying degrees, implemented similar procedures. At the IRS, for instance, when the legal watchdog group Cause of Action sued in 2012 to secure the release of documents under FOIA, it set off a spate of e-mails within the agency about whether the request had been subject to sensitive review. On October 12, John Davis, the agency’s chief of disclosure, wrote to Valerie Barta, a tax-law specialist, of Cause of Action’s original FOIA request: “This case we closed out in May of this year is coming back to haunt us. Gary wants to know why this was not on a sensitive case report. Can you pull this case and if you can tell why Susan didn’t put this on a sensitive case report?”

Washington Examiner: How FOIA is pulling back the curtain on Clinton emails

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Internal State Department documents from Hillary Clinton’s tenure as secretary of state have slowly made their way to the public through the Freedom of Information Act as Congress fights to reform what many see as a broken transparency law.  A high-profile lawsuit between Vice News and the State Department over the agency’s failure to respond adequately to a FOIA request prompted the court ruling last week that will force the agency to release batches of Clinton’s private emails every 30 days….

Daniel Epstein, executive director of nonpartisan watchdog Cause of Action, said the Benghazi Committee has likely obtained scores of documents it has decided not to release to the public.  “They don’t want the media to adjudicate these issues,” Epstein said. “You may leak certain documents at opportune times because getting the media to talk about an issue is helpful to put pressure on a target,” Epstein said. “But you don’t want your target to know all the information you may be aware of.”  Epstein said FOIA requesters often have “different incentives” than congressional investigators. He said the barrage of FOIA lawsuits against the State Department often fail to produce documents “when you have an agency whose incentive is to obfuscate the truth.”

New Documents Show How FTC Lobbied Sen. Jay Rockefeller To Kill FOIA Reform

By: Daniel Epstein

Cause of Action led the charge to uncover the information

Yesterday, MuckRock.com released documents obtained through the Freedom of Information Act (FOIA) showing how the Federal Trade Commission (FTC), at the direction of FTC Chairwoman Edith Ramirez, lobbied former U.S. Sen. Jay Rockefeller to hold up FOIA reform legislation late last year.

Sen. Rockefeller is the former chairman of the Senate Commerce Committee – the committee charged with FTC oversight.

Shawn Musgrave at MuckRock.com requested the documents at the suggestion of our organization—Cause of Action, a group that works tirelessly to make the federal government more open and transparent.

While the revelation may come as a shock to some, cronyism and opacity at the FTC is nothing new to us. Prior to yesterday, our organization released documents exposing both the close relationship between the FTC and Sen. Rockefeller, as well as the FTC’s opacity when it comes to FOIA requests.

The documents obtained by MuckRock.com show not only how the FTC lobbied aggressively against transparency reform, but also reflect the heights to which FTC’s opacity – and Sen. Rockefeller’s acquiescence – reach. In fact, Jeanne Bumpus, the FTC’s congressional liaison, used a non-government email account to lobby the FTC: ftcexchange.com.

This isn’t the first case of a government official using a non-government email address to conduct official government business. It is, however, yet another example of how this administration’s “commitment…to usher in a new era of open Government” was little more than lip service.

The FTC Used Sen. Rockefeller As Its Personal Hit Man

Last year, Cause of Action alleged that Sen. Rockefeller was a pawn for the FTC. We produced documents showing that Sen. Rockefeller’s own chief of staff negotiated with Chairwoman Ramirez concerning former House Oversight Committee Chairman Darrell Issa’s investigation into the FTC, an investigation initiated in response to the FTC’s aggressive and fraudulent battle with the cancer detection company LabMD.

In an effort to silence our organization, the FTC motivated Sen. Rockefeller to publicly attack us in a letter to Congressman Issa.

What the documents uncovered yesterday confirm is that the FTC and Sen. Rockefeller shared an extremely cozy relationship whereby the FTC would use the senator as a proxy to fight its battles to kill FOIA reform and to attack us.

Washington Examiner: New Voices for 2015

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The Washington Examiner’s editors and reporters have identified the intellectuals, policymakers, think tank leaders, campaign operatives, candidates, pols, pundits, wonks and others who are pushing our thinking and testing the limits of political possibility.

 

Some names on this list are already familiar to many; others will be virtual unknowns. This is as it should be. We set out to find people who are not yet fully in plain view above the horizon, which is why you won’t find party leaders or presidential hopefuls on this list. Instead, we sought out talented iconoclasts whose ideas on politics and policy are likely to be heard and should be listened to — but who may not earn the attention of the national media on a regular basis…

 

Dan Epstein’s organization, Cause of Action, is a leader in the world of government transparency and accountability. It advocates for FOIA reform laws, files lawsuits and conducts its own research and investigations. Called the “most active nonprofit you’ve never heard of,” Cause of Action has investigated everything from Hillary Clinton’s violations of the Federal Records Act, to possible fraud in a visa-for-cash program administered by the DHS, to overbilling by the Chicago Transit Authority. Epstein is no newcomer to the accountability game: Before his work at Cause of Action, he served on the Counsel for Oversight and Investigations at the House Committee on Oversight and Government Reform. Expect Epstein and Cause of Action to stay in the headlines as they work to hold the powerful accountable.

The Hill: Federal secrecy watchdog has yet to bite

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The federal agency charged decades ago with policing excessive government secrecy has never taken a single action against a federal official.

 

Transparency advocates fear the Office of Special Counsel’s (OSC) inability to carry out a prosecution points to problems in the underlying law and represents a lost opportunity by Congress to hold federal officials accountable for cover-ups.

 

“There is a risk that there is a lot of arbitrary and capricious withholding, and DOJ [the Department of Justice] is just not doing its job in making sure these individuals are held to account,” said Dan Epstein, executive director of the right-leaning Cause of Action.

 

“It appears that process isn’t happening, which provides incentives to employees to withhold documents.”

CQ Researcher: Presidential Power

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Dan Epstein, executive director of the civic watchdog group Cause of Action, says Obama has “politicized the bureaucracy” by dictating agency actions. In August 2014, the group sued the Obama administration, alleging that white House attorneys interfere with the release of public documents in violation of the freedom of Information Act (FOIA). The practice is based on an April 15, 2009, white House memo directing general counsels at all executive agencies and departments to consult with white House counsel before complying with FOIA requests.

 

Epstein says the memo “allowed the white House to assert more control over the ways agencies control docu- ments that let the public know what the government is up to. It has chilled democracy, and done so in ways that have gone unchecked by Congress and the courts.” As a result, he says, agencies “are following laws dictated by the president rather than laws dictated by the people.”