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12/11/2017

EB-5 “Cash-for-Visa” Investors Sue Casino Project Linked to Former Senator Harry Reid

According to the Los Angeles Times, “[s]ixty Chinese investors,” who participated in the EB-5 Immigrant Investor Program, have sued the developers and managers behind the SLS Las Vegas Hotel & Casino for failure to deliver on “promised green cards.”  According to the investors’ lawsuit, the hotel redevelopment project has “not turned a profit from day one and is currently on the verge of bankruptcy.”  “To make matter[s] worse,” the lawsuit continues, “the SLS Hotel[’s] revenue was less than 50% of what was projected so the project has not created sufficient jobs to allow all investors . . . to get green cards.”

The exaggeration of job-creation estimates and misleading advertising to foreign nationals is hardly unique to the SLS Casino.  News of the lawsuit follows the opening of two other prominent EB-5 cases.  Last week, the Securities & Exchange Commission filed a fraud lawsuit against an immigration lawyer and his firm for failing to disclose to clients that the firm was receiving substantial commissions on EB-5 transactions—“at least $1.6 million . . . from no less than six regional centers[.]”  Also, in late November, The Washington Times reported that a group of thirty-two Chinese investors had filed suit against outgoing-Virginia Governor Terry McAuliffe, and his former business partners behind GreenTech Automotive, for perpetrating a “$120 million scam.”  Just like the SLS Casino, GreenTech failed to create promised jobs, leaving immigrant investors to face revocation of their visas and possible deportation.

Entirely absent from the Los Angeles Times’s report, however, is the crony connection between the casino project and former U.S. Senator Harry Reid.  In December 2013, CoA Institute filed a request for investigation with the Senate Select Committee on Ethics after learning that Reid contacted officials at the U.S. Citizenship and Immigration Services—including then-Director Alejandro Mayorkas—in an attempt to influence and expedite the approval of EB-5 visa applications that had been flagged for “suspicious financial activity.”  The Senate Ethics Committee ignored CoA Institute’s request, claiming that it never received a copy despite evidence to the contrary.  And the motivation for Reid’s intervention?  His son, Rory Reid, and Rory’s law firm, Lionel, Sawyer & Collins P.C., were legal counsel to the SLS Casino, which itself was a major contributor to the Democratic Party and its candidates.

CoA Institute’s concerns about the SLS Casino and Senator Reid’s inappropriate intervention were confirmed in March 2015 when the Department of Homeland Security Inspector General released a report detailing the discomfort of career staff with the favoritism toward Senator Reid.  In response, a defiant Reid dismissed agency whistleblowers who had a problem with his lobbying as a “bunch of whiners.”  “If I had to do it over again, I would . . . [and] I would probably be stronger than I was,” he claimed.

Such rampant abuse and blatant politicization in the administration of the EB-5 program is one reason why CoA Institute has called for the end of the “cash-for-visa” regime all together.  Too many politicians have hijacked the system to enrich themselves and others close to them.  Such preferential treatment skews the marketplace and unfairly results in American taxpayers underwriting speculative business ventures that only profit so long as they have advantageous political connections.

Ryan P. Mulvey is Counsel at Cause of Action Institute

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12/7/2017

Inside NOAA’s Secret Staff Newsletter

Imagine being a New England fisherman.  You’re subject to complex and burdensome regulation, and the federal government isn’t exactly helping to keep your way of life afloat.  In fact, its officials have worked increasingly to limit your ability to catch fish and to impose onerous costs on your continued livelihood.  Take, for example, the legally dubious requirement that groundfish sector members pay up to $700 per day to have “at-sea monitors” ride their boats and watch them fish—a scheme that could put 60% of small-scale fishermen out of business.  Consider also the efforts underway to expand industry-funded monitoring to all other regional fisheries.

If oppressive regulation weren’t enough, now picture these same officials publishing a secret internal newsletter that describes their dealings with you and your fellow fishermen in less-than-flattering terms.  Sadly, this isn’t a hypothetical situation.  According to records obtained by Cause of Action Institute (“CoA Institute”) from whistleblowers and under the Freedom of Information Act (“FOIA”), National Oceanic and Atmospheric Administration (“NOAA”) employees in the Greater Atlantic Regional Fisheries Office have long circulated a paper that often contains their candid feelings towards the fishermen with whom they are supposed to collaborate.

In one article, dated June 29, 2010, Port Agent Victor Vecchio, who works in the “Stakeholder Engagement Division,” described fishermen at a “groundfish outreach meeting” as spreading “various conspiracy theories,” at least until they “ran out of steam (or vodka . . . or whatever).”

Figure 1: Vic Vecchio, “Groundfish Outreach Meeting–Montauk, NY 6/29/2010,” Fathoms (July 2, 2010)

In response to an October 17, 2017 FOIA request, the National Oceanic and Atmospheric Administration released a complete copy of its April 1-15, 2017 issue of Fathoms, which was heavily redacted to “protect” confidential commercial information.  The range of topics covered in the paper include news about enforcement actions, in-season events (such as the opening of the recreational fishery), the impact of weather patterns on fishing activity, and even scientific developments.  Much of this appears benign and, indeed, informative.  But, as expected, the issue also discusses the industry’s frustration with planned regulatory actions.  The entire content of that article was conspicuously redacted.

In addition to filling a follow-up request for all issues of Fathoms from December 2015 to the present, CoA Institute has filed an administrative appeal challenging NOAA’s heavy-handed redactions.  Exemption 4, which protects confidential commercial information, does not typically apply to government-generated information.  More importantly, the sort of information contained in Fathoms could hardly be described as “confidential” because it would neither impair NOAA’s ability to obtain information from fishermen in the future nor cause a competitive disadvantage to any part of the fishing industry.

It seems instead that the National Oceanic and Atmospheric Administration is hiding behind an exemption designed to protect businesses in order to actually keep secret its criticism of businesses.  CoA Institute’s staff attorneys have spoken to a number of fishermen who are completely unaware of the existence of Fathoms.  Given the derision they likely receive in its pages, they are unlikely to be too pleased by efforts from the National Oceanic and Atmospheric Administration to block disclosure.

NOAA’s shenanigans don’t end there.  Another record disclosed to CoA Institute suggests that there’s a second internal digest—Dock Buzz—that could similarly provide insight into the government’s relationship with the New England fishing industry.  CoA Institute also continues to investigate NOAA’s likely violation of federal records management laws in failing to preserve employee Google Chat/Google Hangout records.

Ryan P. Mulvey is Counsel at Cause of Action Institute.

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11/28/2017

CoA Institute Files Second Lawsuit for Records Concerning EPA Employees’ Use of Encrypted Messaging App

Washington, D.C. – Cause of Action Institute (“CoA Institute”) today filed a second lawsuit in the U.S. District Court for the District of Columbia against the Environmental Protection Agency (“EPA”) for the failure to disclose records about an ongoing investigation into agency employees’ use of an encrypted messaging application, called “Signal.”  The records at issue—which were the subject of two Freedom of Information Act (“FOIA”) requests (here and here)—include a special report, requested by the EPA Office of Inspector General and generated by an agency contractor, which identifies the mobile applications running on most EPA-furnished devices, as well as documents concerning the agency’s continuing efforts to address allegations of wrongdoing, including the avoidance of federal records management laws.

CoA Institute Counsel Ryan Mulvey: “We now know that a small group of career EPA employees used Signal to avoid transparency.  These employees’ work-related communications—including their messages concerning any proposed efforts to thwart the new administration’s political appointees from carrying out the president’s policy agenda—should have been preserved for disclosure to the public.  Records released by the EPA, however, prove that this preservation never took place.  Now, the EPA has effectively refused to disclose any additional documents that could show how pervasive the use of Signal was and how seriously the agency has tried to rectify deficiencies in meeting its record preservation obligations.”

CoA Institute opened its investigation into the use of Signal at the beginning of the year, following media reports that suggested a select number of career officials were using the application to plan methods for obstructing the Trump administration’s incoming political leadership.  CoA Institute’s investigation was widely discussed in the press, along with Congress’s request for the EPA’s watchdog to independently investigate the matter.

Just hours after CoA Institute filed its first FOIA lawsuit, on March 23, 2017, the EPA’s Office of General Counsel acknowledged that there was, indeed, an “open law enforcement” investigation and, as a result, responsive records would have to be redacted.  The EPA ultimately reconsidered its position and, notwithstanding its active investigation, agreed to release relevant records.  Those records prompted the follow-up FOIA requests at issue in today’s lawsuit.

More information on CoA Institute’s investigation can be found here.

The full complaint can be found here.

For information regarding this press release, please contact Zachary Kurz, Director of Communications at CoA Institute: zachary.kurz@causeofaction.org.

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11/27/2017

Investigation Update: EPA Employees’ Use of an Encrypted Messaging App to Thwart Transparency and Fight the White House

Shortly after President Trump took office, Politico reported that a small group of career employees at the Environmental Protection Agency (“EPA”)—“numbering less than a dozen”—were using an encrypted messaging application, called “Signal,” to discuss ways in which to prevent incoming political appointees from implementing the Trump Administration’s policy agenda, which may violate the Federal Records Act.  These employees sought to form a sort of “opposition network” to combat any shift in the EPA’s mission and to preserve the “integrity” of “objfedective” scientific data collected for years by the agency.

The use of Signal at the EPA mirrored reports about the use of electronic messaging platforms at other agencies, including the State Department and the Department of Labor.  But the EPA seemed to present a particularly potent site for the fermentation of political opposition among the civil service bureaucracy.  As reported by Reuters, for example, “[o]ver 400 former EPA staff members” wrote an open letter to the U.S. Senate, asking that former Oklahoma Attorney General Scott Pruitt’s nomination as Administrator be rejected, and employees in the EPA’s Chicago regional office held a joint protest against Pruitt with the Sierra Club.  Such resistance, as our investigative findings suggested, has yet to dissipate.

* * *

Cause of Action Institute (“CoA Institute”) opened its investigation into the use of Signal following Politico’s report.  We were concerned that Signal might have been used to conceal internal agency communications from oversight and that the EPA had failed to meet its legal obligations under the Freedom of Information Act (“FOIA”) and the Federal Records Act to preserve records of official government business created or obtained on Signal.  The EPA’s less-than-sterling reputation for managing electronic records likely inspired the House of Representatives to seek similar clarification from the EPA Inspector General on the Signal scandal.

In our view, to the extent intra-agency Signal correspondence pertained to employees’ plans, in their official capacities, to fight the White House on policy issues, those records were governed by the FOIA and the Federal Records Act, even if created or received on private devices.  Applicable guidance from the National Archives and Records Administration (“NARA”) on electronic records states as much.  Although some have argued that Signal could have been used in the employees’ personal capacity or “off the record,” such claims rest on “murky legal ground.”  At least to the extent employees used Signal on EPA devices, there should have been some mechanism in place to preserve messages until agency authorities could determine whether federal records laws applied.  Such a mechanism was particularly important given the difficulty of recovering encrypted messages after deletion.

* * *

To date, CoA Institute’s investigation has unearthed previously undisclosed information about the Signal scandal and the EPA’s efforts to address allegations of legal wrongdoing.  In response to our first FOIA lawsuit, the EPA acknowledged that there was an “open law enforcement” investigation and, therefore, many of the records at issue would be withheld in full.  The EPA eventually changed its position on this matter and released a number of partially-redacted records.  Those records corroborate the alarming facts reported in the media and reveal much more.

For example, the EPA Office of Inspector General apparently opened its official investigation into the use of Signal only after reading the Washington Times report on CoA Institute’s FOIA efforts.  As Assistant Inspector General Patrick Sullivan noted:

Figure 1: February 3, 2017 E-mail from Patrick Sullivan to Arthur Elkins et al.

An unidentified special agent then explained how an official “hotline complaint” would be initiated, but only after consulting with IT staff.

Figure 2: February 3, 2017 E-mail from Unidentified Special Agent

The EPA’s administrative offices appear to have been alerted to the Signal scandal before the Inspector General, and only because of the efforts of President Trump’s political appointees.  David Schnare almost immediately highlighted the need for a high-level response.

Figure 3: February 2, 2017 E-mail from David Schnare

Mr. Schnare subsequently resigned from the EPA in March 2017, citing difficulties with “antagonistic” career staff opposed to President Trump’s policy agenda.

The next day, again in response to the Washington Times, another Trump-appointed advisor, former State Senator Donald Benton, described the media reports as “disturbing if true,” and wondered whether the EPA could detect whether Signal had been improperly downloaded on any devices. (Senator Benton also left the EPA following alleged clashes with Administrator Pruitt.)

Figure 4: February 3, 2017 E-mail from Donald Benton

Steven Fine, the EPA’s Acting Assistant Administrator of the Office of Environmental Information and Acting Chief Information Officer, assured Senator Benton that the agency could not detect “app downloads,” but could, in fact, scan devices for already-installed programs.

Figure 5: February 3, 2017 E-mail from Steven Fine

The EPA’s ability to “scan” for the installation of Signal was also revealed during summary judgment briefing against Judicial Watch in unrelated FOIA litigation.  A declarant for the EPA described a software tool known as “Mobile Device Management” or “MDM,” which can compile a master report that identifies the applications running on most EPA-furnished equipment.  Indeed, Mr. Fine likely wrote to Senator Benton with knowledge of the Inspector General’s pending request for “assistance in identifying whether certain mobile apps, including Signal, had been downloaded” to EPA devices.

Figure 6: February 3, 2017 E-mail from Patrick Sullivan

* * *

Figure 7: February 3, 2017 E-mail from Rena Key

Interestingly, an unidentified special agent in the Office of the Inspector General recognized the limitations in retrieving Signal messages, regardless of the agency’s ability to use MDM to identify the relevant devices on which the application was installed.

Figure 8: February 3, 2017 E-mail from Unidentified Special Agent

An EPA contractor eventually generated the requested report in the MDM devices and transmitted it to the Office of Environmental Information.  CoA Institute has a pending FOIA request for a copy of the MDM report.

Records released to CoA Institute also raise or confirm other concerning facts:

  • Based on a list of approved “Terms of Service” agreements, EPA employees never were, and still are not, authorized to download and use Signal. Although various social medial tools are approved for use, Signal is not one of them.
  • Internal agency guidance leaves individual employees with total discretion in determining whether text or instant messages need to be forwarded to an official e-mail address and agency recordkeeping system. Although the guidance highlights the differences between “substantive (or non-transitory)” records and those that need not be retained, there is no clear system of oversight to prevent the unauthorized deletion of electronic records.
  • On February 22, 2017, NARA wrote to the EPA to request an update on the records management issues involved in the Signal scandal. The EPA responded a month later, explaining that its investigation was still ongoing and a final report would be forthcoming.  The agency referred to its existing list of approved “Terms of Service” agreements, as well as its efforts to remind employees of their individual responsibility to preserve certain records.  No specific mention was made of the use of Signal.

As additional information becomes available, we will provide further analysis on the EPA’s investigation into the unauthorized use of Signal.

Selected records from CoA Institute’s FOIA production, excepts of which have been used above, can be accessed here.

Ryan P. Mulvey is Counsel at Cause of Action Institute.

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11/9/2017

The Forgotten 21 Disks: The IRS’s Unlawful Disclosure of Taxpayer Data to DOJ & FBI

Just as the Internal Revenue Service (“IRS”) targeting scandal was beginning to fade from Washington’s collective memory, it returned to the forefront of the national political scene with a vengeance.  It started with the Department of Justice (“DOJ”) decision in early September to forgo further criminal investigation of Lois Lerner and other IRS officials because of allegedly insufficient evidence of “criminal intent.”  Shortly thereafter, the Treasury Inspector General for Tax Administration’s (“TIGTA”) released an audit review that expanded upon the watchdog’s 2013 report, which had concluded the IRS inappropriately selected conservative tax-exempt applicants for heightened scrutiny based on their names and policy positions rather than objective criteria.  TIGTA’s new report found that the IRS had similarly mistreated left-leaning groups.  As my colleagues argued, TIGTA’s findings hardly diminished the import of the earlier investigation, but “widen[ed] the scope of IRS misconduct and increase[ed] the urgency for further changes at the agency.”  More importantly, the report impliedly highlighted the absence of any serious attempts to root out the cause of IRS politicization.

While TIGTA announced its revised findings, the IRS rolled out a work plan for the Tax Exempt and Government Entities division—the component in which Ms. Lerner worked—which signaled efforts to develop “data-driven” criteria and “analytics” for IRS decision-making.  That, of course, raised the curious question of what exactly the IRS meant by “data-driven” and what criteria it previously had been using to assess tax-exempt compliance.  And this development was followed in quick succession by a DOJ announcement that it had reached a settlement agreement with some of the so-called “Tea Party” groups, who successfully argued their constitutional rights had been violated by the IRS.  Finally, Commissioner Koskinen ended his tenure as head of the IRS and, on the way out the door, tried—yet again—to downplay TIGTA’s role in exposing IRS wrongdoing.  “Sometimes they get a little carried away with their reports,” he suggested.

Lost in all this news—particularly, the DOJ decision not to reopen a criminal investigation—was the government’s stunning admission that confidential taxpayer data was, in fact, unlawfully disclosed by the IRS to the DOJ Public Integrity Section and the Federal Bureau of Investigation.  As Cause of Action Institute (“CoA Institute”) reported last year, the DOJ Inspector General (“DOJ-OIG”) confirmed that “protected taxpayer information was included on compact discs (CDs) that the IRS provided to the Department [of Justice] in response to a Department request.”  Those infamous twenty-one disks contained more than 1.1 million pages of return information on different tax-exempt groups.  DOJ-OIG summarily concluded that the “matter does not warrant further investigation.”  TIGTA, which was also alerted to the unlawful disclosure, refused to comment.

DOJ ostensibly sought this trove of non-public information as part of the Obama Administration’s efforts to prosecute exempt entities for engaging in prohibited political activity.  Given the pattern of IRS abuse and politicization in previous administrations, however, those stated goals were always suspect, particularly given Ms. Lerner’s involvement.  Now, in light of TIGTA’s revelations about the scope of the IRS’s targeting, progressives should be as alarmed as conservatives about the lack of accountability for one of the largest and most significant breaches of taxpayer confidentiality laws in U.S. history.

When it confirmed that taxpayer data had been mishandled, DOJ-OIG also claimed that DOJ informed Congress about the unlawful disclosure.  We filed a Freedom of Information Act (“FOIA”) request last year to investigate the matter.  That request has gone unanswered.  We filed two additional follow-up requests last month (here and here), one of which also seeks records about the processing of the 2016 request.  To date, the authorities have refused to hold anyone at the IRS or DOJ accountable for the wrongful disclosure of countless pages of Americans’ private tax information.  The importance of these records cannot be overstated.  CoA Institute remains committed to bringing them to public light.

Ryan P. Mulvey is Counsel at Cause of Action Institute

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11/3/2017

President Trump to appoint a new watchdog for the Intelligence Community

As we have argued previously, one of the most troubling aspects of President Obama’s legacy was his failure to nominate permanent Inspectors General (“IGs”) at many agencies across the federal government.  Without presidentially-appointed, Senate-confirmed leadership, there is always a real danger that IG offices will lack the necessary commitment to transparency and accountability in government.  As Senator Ron Johnson has commented, “acting” IGs—who are typically career civil servants—risk being “not truly independent [because] they can be removed by the agency at any time; they are only temporary and do not drive office policy; and they are at greater risk of compromising their work to appease the agency or the president.”

When President Obama left office, twelve agencies lacked an IG.  Since taking office, President Trump has steadily moved to remedy this dearth of leadership.  Last month, we praised the President for nominating five individuals to some of these watchdog vacancies.  Now, we can sound another note of accomplishment following the White House’s announcement today that it intends to name Michael Atkinson as Inspector General of the Intelligence Community.  Although this post only became vacant shortly after President Trump took office—the former IG, Charles McCullough, retired in March 2017—it is a vital one, particularly in the current political climate.  Mr. Atkinson, who studied law at Cornell University, currently serves as the Acting Deputy Assistant Attorney General for the Department of Justice’s National Security Division.  He previously worked in the Department’s Fraud and Public Corruption Section.

We reiterate our hope that the White House will continue its efforts to find IGs for all current vacancies, such as those at the Department of Defense, the Department of Energy, and the Department of Housing and Urban Development.  The Department of the Interior, sadly, continues to lack a permanent IG since the previous watchdog left office 3,175 day ago.  These large agencies have substantial budgets, and presidentially-appointed IGs will provide an important internal check on waste, fraud, and abuse.

Ryan P. Mulvey is Counsel at Cause of Action Institute.

 

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10/20/2017

DHS Watchdog Claims Political Appointees No Longer Politicizing FOIA

One of the earliest transparency scandals of the Obama Administration erupted in 2010 when the Associated Press discovered that officials at the Department of Homeland Security (“DHS”) had, “in a highly irregular move,” started to “filter hundreds of public records requests through political appointees, allowing them to examine what was being requested and delay releasing sensitive material.”  These appointees, along with senior officials and public affairs staff, effectively blocked or delayed the disclosure of potentially embarrassing or politically-damaging agency records under the Freedom of Information Act (“FOIA”).  Their interjection into the FOIA process—and retaliation against career staff members who objected to this “sensitive review”— resulted in a congressional inquiry and damning Oversight Committee report.  The Obama Administration politicized FOIA the same way at the Department of Housing and Urban Development, the Environmental Protection Agency, the State Department, and the Department of the Treasury.  The situation at DHS, however, has improved, according to a recently-released Inspector General report.

The July 7, 2009 memorandum establishing sensitive review procedures at DHS included extensive reporting requirements, including updates to the White House about agency disclosures.  The DHS Inspector General politely described this, in a March 2011 report, as “unprecedented.”  It “created inefficiencies that hampered full implementation” of the FOIA.  More troubling, the policy had the practical effect of targeting media organizations and critics of the Administration.  Agency officials regularly delayed requests from media outlets, for example, so that they could develop a public response to damaging records.  And other disclosure decisions were sometimes based on the political affiliation of a requester.

Now, in response to a June 2015 request from the U.S. Senate Homeland Security and Governmental Affairs Committee, the Inspector General has published a new report that revisits its earlier findings and suggests that the culture of FOIA politicization at DHS has improved.  Since 2011, DHS has “reduced the number of days that political appointees . . . have to review releases from 3 days to 1 day.”  The sensitive review process has been renamed the “1-Day Awareness Notification Process.”  And, in most cases, FOIA officers “no longer wait for approval before releasing responses to significant FOIA requests” because it is “not required.”  An audit of 57 “significant requests” showed that none were delayed because of political appointee intervention.

These findings are positive.  The more limited involvement of fewer political appointees—“an advisor to the DHS Secretary, an official in the Office of Public Affairs, and the Chief FOIA Officer”—as well as a shorter “notification” period, limits the potential for politicization while respecting agency leadership’s concern for being kept aware of disclosures that might ignite media attention.  The apparent removal of any sort of necessary “clearance” authorization from political staff, or the removal of a requirement to obtain such clearance before release, is also a helpful development.  Oddly, DHS’s revised procedures are only “informally documented” in a “2012 email” and “2015 draft guidance.”  According to the Inspector General’s report, the DHS Privacy Office aims to finalize them by the end of the year.  The sooner, the better.

Ryan P. Mulvey is Counsel at Cause of Action Institute.

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