Auto-Tariff Investigation Sets Dangerous Anti-Transparency Precedent

Tariffs are often used as a costly tool that economically harms American consumers and business. These protectionist policies often invite turmoil and government overreach, and the tariffs proposed and implemented by the Trump Administration have been no different. In fact, with each round of proposed tariffs, it seems that the government has become less transparent about its process and rationale.

In an effort to advance its trade agenda, the administration has used four Section 232 investigations into different imports to justify tariffs on national security grounds. Although national security concerns may have a place in trade policy where there is a clear and narrow interest, Section 232 should not be used as a tool to bypass Congress when there is no legitimate national security threat. Nevertheless, this was the purported rationale of initiating the Section 232 investigation into auto imports despite the President’s assertion that the importation of autos and auto-parts themselves do not actually pose a national security threat.

So why was this investigation initiated and what did the U.S. Department of Commerce (Commerce) conclude from its investigation? Commerce proactively published its findings and documents supporting its case for steel and aluminum tariffs but refuses to do the same with its auto investigation.

After Commerce announced that it was launching a Section 232 investigation into the national security impacts of auto imports, they were required by law to notify the U.S. Department of Defense (DOD). Commerce announced that it sent notification of the investigation to then-Secretary of Defense James Mattis but have yet to release a copy of this notification, as they did with the Section 232 investigation into steel and aluminum tariffs, as well as with the uranium investigation.

In June 2018, one month after the investigation into auto imports was announced, Commerce Secretary Wilbur Ross told then-U.S. Sen. Orin Hatch that while Secretary Mattis accepted the proposition for the threats imposed by steel and aluminum imports, Commerce was not yet sure about DOD’s views for the automotive sector. Neither Commerce nor DOD has released the Defense Department’s response memo to the auto-import investigation.

Due to this lack of transparency, Cause of Action Institute (CoA Institute) sent FOIA requests to Commerce and DOD on March 22 seeking DOD’s response to the investigation and any relevant communication regarding this matter. The government has yet to release a substantive response from either agency regarding these requests.

The lack of transparency compared to the steel and aluminum process is stark. The government has announced that it will not be releasing Commerce’s final Section 232 report and recommendations on auto imports to the public. Not only were the reports for steel and aluminum published upon completion but the government is statutorily required to publish in the Federal Register “any portion of the report submitted by the Secretary under subparagraph (A) which does not contain classified information or proprietary information.”

CoA Institute believes that this information should be disclosed as the statute requires, particularly if it is going to be used to justify a potential 25 percent tariff on cars and car parts. This is why CoA Institute filed FOIA requests to Commerce for a copy of the report. After Commerce failed to respond to the request within the statutory timeline, CoA Institute filed a lawsuit against the Commerce Department.

It is troubling that the government is not upholding its legal obligations or open-government practices when it comes to Section 232 investigations. Larry Kudlow, director of the National Economic Council, stated that the administration may delay the decision on whether to impose auto-tariffs beyond the 90-day deadline that began when Commerce completed and provided the report to the White House. It is not clear how or what legal justifications exist to allow the administration to defer the decision beyond the May deadline.

However, the lack of transparency on this issue is not a new concern when it comes to tariffs. In September, after reports emerged of potential corruption in the tariff exemption process for the already controversial steel and aluminum tariffs, CoA Institute filed three FOIA requests seeking information to clarify the methodology behind the exemption process. After the government failed to respond to any of the FOIA requests relating to the steel and aluminum tariff exemption process, CoA Institute filed a lawsuit against Commerce for this information. As a result of the lawsuit, the government has agreed to produce relevant records at the end of each month.

Tariffs can be an economically treacherous policy, eroding the economic freedoms of individuals, hurting businesses, and almost always causing consumers to pay more for products as the government picks winners and losers. In this instance, not only is the government imposing tariffs that harm Americans, but it is doing so in a manner that evades transparency and, in regard to the auto-tariff report, fails to comply with its statuary obligations. The path to a stronger economy is one that eliminates barriers to trade, not one that unfairly manipulates the free-market while withholding justification from the public.

Mallory Koch is a communications associate at Cause of Action Institute.

Cause of Action Institute Secures Rare Preservation Order in Fight to Obtain DOJ Records Created on Personal Email Account

Government official caught using personal email to conduct official business ordered to maintain copies of all records in Gmail account

Washington, D.C. (April 26, 2019) – Cause of Action Institute (CoA Institute), a nonpartisan government watchdog organization, today announced it had secured a rare federal court order requiring a former U.S. Department of Justice (DOJ) employee to preserve the contents of her personal email account, which had been used to conduct official agency business. Those records may be subject to later release.

Ryan Mulvey, counsel for CoA Institute, issued the following statement:

“Government transparency is a fundamental necessity in a free and open society. The use of personal devices to conduct official business remains a serious concern, resulting in records being lost, unsecured, or improperly destroyed. In some cases, personal email accounts are used to avoid disclosure altogether. This court order is an important reminder to all government employees to avoid using personal email and devices and adhere to all relevant agency rules and government transparency statutes. It also is a warning to agencies to ensure that they meet their record-keeping obligations.”

U.S. District Court Judge Amit Mehta granted Cause of Action’s motion, ordering the U.S. Department of Justice to require a former employee, Sarah Isgur Flores, not to delete any emails stored in her personal Gmail account, and to store copies of the account’s contents onto a thumb drive or other storage device, including all emails in archived or deleted folders. The Court also ordered Ms. Flores to maintain the emails until further instructed, and gave the U.S. Department of Justice until May 2, 2019 to provide notice of its compliance with the preservation order. Although the issuance of such a preservation order is rather rare, it is the latest example in a developing trend. Federal courts have become increasingly concerned about the use of personal email to conduct agency business, and they are taking serious the possible loss or destruction of government records that may be subject to the Freedom of Information Act (FOIA) and other federal records management statutes, including the Federal Records Act.

Background

In 2017, media reports indicated that Sarah Isgur Flores, then-spokeswoman for Attorney General Jeff Sessions, used her personal email to issue official statements on behalf of the government. Due to concerns that this sort of behavior could harm the public’s access to official records, and in light of past instances of personal email having been used as a way to conceal public information, Cause of Action Institute filed a FOIA request for Ms. Flores official work-related emails sent or received through her personal devices or accounts. After waiting more than 18 months for a response, CoA Institute sued DOJ to force the disclosure of the Flores records.

On September 27, 2018, DOJ responded, “As is evident from the enclosed records, Ms. Flores forwarded emails sent to her personal account to her official Department of Justice email account, including through an automatic forward. As such, all of these emails were located pursuant to our search of Ms. Flores’ official Department of Justice email account.”

However, within the 112 pages produced by DOJ, the original email issued by Ms. Flores, as reported by members of the press, was missing. Despite raising this issue with DOJ, the government insisted the 112 pages were a full-and-complete record. As a result, and after learning of Ms. Flores’s departure from public service, CoA Institute filed a motion, urging the court to compel DOJ and Ms. Flores to preserve all relevant records.

Late on Thursday, April 25, the Court granted CoA Institute’s motion in full, compelling the government to coordinate with Ms. Flores to preserve her personal email account and maintain copies pending further court proceedings.

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CoA Institutes’s Motion for Preservation Order

Federal Court’s Order for Preservation of Records 

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CoA Institute Discovers Curious DHS FOIA Notification Process for Employee Records

Earlier today, Cause of Action Institute (CoA Institute) received a misdirected email from the Department of Homeland Security (DHS) that apparently was intended to serve as a notification to an unidentified agency employee that certain personnel records were to be released under the Freedom of Information Act (FOIA).

The “awareness” email indicated that employee-related records were scheduled to be released in response to a FOIA request.  It also identified the name of the FOIA requester—a CoA Institute employee—and included an attached file containing the records at issue.  The email was issued “[i]n accordance with DHS Instruction 262-11-001,” which is publicly available on the DHS’s website and appears to have been first issued at the end of February 2018.

Under Instruction 262-11-001, the DHS is required to “inform current [agency] employees when their employment records . . . are about to be released under the FOIA.”  “Employment records” is defined broadly to include any “[p]ast and present personnel information,” and could include any record containing personal information (e.g., name, position title, salary rates, etc.).  Copies of records also are provided as a courtesy to the employee.

The DHS instruction does not attempt to broaden the scope of Exemption 6, and it recognizes that federal employees generally have no expectation of privacy in their personnel records.  More importantly, the policy prohibits employees from interjecting themselves into the FOIA process.  This sort of inappropriate involvement has occurred at DHS and other agencies in the past under the guise of “sensitive review,” particularly whenever politically sensitive records have been at issue.

Nevertheless, the DHS “awareness” policy still raises good government concerns.  As set forth in the sample notices appended to the instruction, agency employees are routinely provided copies of responsive records scheduled for release, as well as the names and institutional affiliations of the requesters who will be receiving those records.

To be sure, FOIA requesters typically have no expectation of privacy in their identities, and FOIA requests themselves are public records subject to disclosure.  There are some exceptions.  The D.C. Circuit recently accepted the Internal Revenue Service’s argument that requester names and affiliations could be withheld under Exemption 3, in conjunction with I.R.C. § 6103.  Other agencies, which post FOIA logs online, only release tracking numbers or the subjects of requests.  In those cases, a formal FOIA request is required to obtain personally identifying information.

Regardless of whether the DHS policy is lawful, it is questionable as a matter of best practice.  Proactively sending records and requester information to agency employees could open the door to abuse and retaliation, particularly if an employee works in an influential position or if a requester is a member of the news media.  The broad definition of “employee record” also raises questions about the breadth of implementation.

Finally, there are issues of fairness and efficiency.  If an agency employee knows that his records are going to be released, is it fair to proactively disclose details about the requester immediately and without requiring the employee to file his own FOIA request and wait in line like anyone else?  The public often waits months for the information being given to employees as a matter of course, even though the agency admits that there are no cognizable employee privacy interests at stake.

More importantly, an agency-wide process of identifying employees whose equities are implicated in records and individually notifying them about the release of their personal details likely requires a significant investment of agency resources.  Would it not be more responsible to spend those resources on improving transparency to the public at large?  To reducing agency FOIA backlogs?  Notifying employees whenever their information is released to the public is likely only to contribute to a culture of secrecy and a further breakdown in the trust between the administrative state and the public.

Ryan P. Mulvey is Counsel at Cause of Action Institute

2018.02.20 DHS Instruction 262-11-001

2018.12.20 DHS Notification Email

CoA Institute Files Brief in Support of Effort to Make Georgia Legislature Comply with Open Records Act

Files 50-state survey with Georgia Appeals Court

Cause of Action Institute (CoA Institute) filed an amicus brief today in support of a lawsuit requiring Georgia’s legislature to comply with the state’s open records act. The brief includes a 50-state survey on whether other state legislatures are subject to open records laws. The results of the survey show that 38 states provide the public with access to legislative records, while only a small minority, 11 states, exclude their legislatures from public-disclosure laws. Of those that exclude their legislature, eight states do so in express statutory terms.

The brief is in support of a lawsuit brought by the Institute for Justice (IJ) after they sent a series of public records requests to offices of the Georgia legislature seeking access to information about the state’s licensure requirement for music therapists. Yes, you read that correctly, licensure requirements for music therapists. The legislature claimed it was categorically exempt from Georgia’s open records law, and the superior court agreed. The case is now before the Georgia Court of Appeals.

CoA Institute’s survey reveals three important trends that should inform the Court’s decision:

  • When a state’s open records law does not cover the legislature, it’s usually explicitly statutorily exempt. Georgia law does not explicitly exempt the legislature;
  • In the absence of an express exclusion, broad terms are commonly interpreted to include the legislature, either in whole or in part; and
  • When there is any remaining ambiguity, the presence of statutory exemptions concerning specific legislative offices or records implies that the legislature must be covered; Georgia has these exemptions.

When IJ filed its requests, and the court below issued its order, the Georgia Open Records Act included two exemptions for legislative records. The first of these provisions exempted records from a series of legislative offices: the Legislative and Congressional Reapportionment Office, the Senate Research Office, and the House Budget and Research Office. The second provision, which is still in force, exempts certain records from the Office of Legislative Counsel. These offices are all contained within the legislative branch. Neither exemption would make any sense if the General Assembly were not, by default, covered by the Open Records Act.

To accept Georgia’s position, as adopted by the court, would render the Act’s explicit, narrow exemptions mere surplusage, violating a core canon of statutory construction. Therefore, the Court of Appeals should recognize that the presence of the exemptions for certain legislative offices as means that the broader legislature must be covered. This interpretation would conform Georgia’s approach to the broad trends that Cause of Action Institute identified in the 50-state survey.

The full amicus brief is available here.

James Valvo is Counsel & Senior Policy Advisor at Cause of Action Institute. You can follow him on Twitter @JamesValvo.

CoA Institute Submits Comment to FTC, Recommends Multiple Reforms to Curb Agency Overreach and Abuse

Cause of Action Institute (“CoA Institute”) today submitted a public comment to the Federal Trade Commission (“FTC” or “Commission”) in advance of a series of hearings concerning the agency’s efforts to evaluate its law enforcement and policy agenda, improve investigative processes, and otherwise reform its implementation of the FTC Act.

CoA Institute’s recommendations are based on considerable experience dealing with the FTC.  Our attorneys regularly practice before the Commission.  At present, CoA Institute represents D-Link Systems, a networking equipment manufacturer, which is fighting vague and unsubstantiated allegations that it placed consumers “at risk,” despite any evidence of actual or likely substantial injury.  CoA Institute also represents Vylah Tec, LLC, a family-run technical support company that has been targeted on suspicion of “deceptive” sales practices.  The FTC has failed to uncover any concrete evidence of wrongdoing, yet the company remains subject to a punitive injunctive order.  In the past, CoA Institute represented LabMD, Inc., a small cancer-detection company, against claims that it had unreasonable data-security practices.  And CoA Institute has directly litigated against the FTC over matters related to the Freedom of Information Act.

As explained in the comment, CoA Institute’s track-record with the FTC gives it unique insight into how the agency can be improved in four general areas:

Reforming the FTC’s Enforcement Processes

When FTC staff believes there has been a violation of the law, the agency typically threatens a regulated entity with an enforcement proceeding and attempts to settle the matter by consent order.  This is the outcome in most cases.  But these consent orders tend to be vague; they provide little guidance about the standards with which other regulated companies are expected to comply.  This opens the door to regulatory overreach.  The FTC should provide specificity in its consent orders.

The FTC also should refine its use of ex parte injunctions, which are an extraordinary remedy.  Without clearer guidance limiting the use of temporary restraining orders and asset freezes, the FTC may continue to raise due process concerns and impose unjustifiable hardships on regulated entities defending themselves in enforcement proceedings.

Concerns about due process likewise arise with respect to the FTC’s own rules of procedure, which differ in material ways from well-accepted rules of procedure and evidence in federal courts.  The Commission’s rules provide its staff a decided advantage, particularly given the relatively boundless resources available to the agency.  This is unfair and flouts the rule of law.

Finally, the FTC should eliminate its practice of seeking legal damages in excess of what the agency is statutorily authorized to pursue.  Although the FTC may request equitable monetary damages, including restitution or disgorgement of ill-gotten gains, in practice the damages sought by the Commission are pecuniary and ultra vires.  In short, they amount to the imposition of personal liability on defendants.  This approach cannot be countenanced by the FTC Act.

Increasing FTC Transparency

Related to the reforms of the FTC’s enforcement regime are the changes that should be made to its disclosure practices.  As mentioned, the FTC regularly relies on consent orders to settle matters before an actual enforcement proceeding is opened.  The use of these negotiated orders, which are party-specific and, again, vague, fails to provide the requisite notice of legal standards to which regulated parties are expected to conform.  The FTC should abandon efforts to treat consent orders as a “common law” body of precedent that shapes future obligations for regulated parties.

To the extent the FTC continues to use consent orders in this problematic way, however, it should aim to make the orders specific, with detailed analysis about the application of generally applicable standards.  The Commission also should proactively disclose the closing letters and closing memoranda from matters where enforcement is not pursued.  In these cases, the FTC has determined that a potential respondent is operating within legal bounds.  The Commission itself admits that these documents are useful, but they are not uniformly disclosed to the public.

Developing a Proper Understanding of “Substantial Injury”

At the heart of Section 5 of the FTC Act is the concept of “substantial injury.”  Without actual, or the threat of “likely,” substantial injury, the FTC can do nothing.  But the exact scope of what is “likely” and “substantial” harm is unclear.  The FTC does not define the terms precisely, and the body of consent orders that reflect settled matters provide little further detail.  What is clear, however, is that the FTC prefers to maintain ambiguity to facilitate its overreach.

The Commission should do a better job considering the countervailing benefits to consumers or competition provided by allegedly unfair acts or practices, too.  This can be done with rigorous cost-benefit analysis.  The FTC often focus on amorphous concepts of harm while ignoring how regulated entities’ practices benefit the consumer or, more broadly, competition in the marketplace.

How Congress Should Amend the FTC Act

Although CoA Institute’s recommendations are principally directed to the FTC, Congress should play a key role in reforming the Commission’s enforcement processes.  We propose that legislators amend the FTC Act to allow direct appeals to a U.S. Court of Appeals following an administrative law judge decision.  This would replace the current process by which an appeal is first made to the full Commission.  It would be better to permit respondents to seek appellate relief in an Article III venue, and bypass the full Commission, because the FTC has a remarkable track record of never losing its own administrative appeals.  Regulatory agencies should not be allowed to wear the dual hats of prosecutor and judge.

Ryan P. Mulvey is Counsel at Cause of Action Institute

Click here to access the full comment or read below.


 

Colorado AG Ignores CORA Request Citing Active Litigation, Setting Potentially Dangerous Precedent

The Colorado Open Records Act (CORA) requires nearly all public records be made available to the public except for a few exceptions. But, according to the Colorado Department of Law, if an individual or entity is in litigation with the state, they’re no longer allowed to utilize CORA to secure any public documents.

Cause of Action Institute (CoA Institute) represents the TABOR Foundation and three other plaintiffs in a lawsuit against the state of Colorado and several state agencies challenging the constitutionality of the state’s Hospital Provider Charge, which the state imposes on Colorado hospitals to increase Medicaid funding from the federal government. Although some documents from the government have been provided to the plaintiffs in discovery, CoA Institute also filed a CORA request for records that should, in part or full, be released under CORA.

In response, the state of Colorado’s Department of Law stated that it had already provided all documents responsive to the CORA request in discovery, but it also took the position that it need not respond at all to the CORA request because of the ongoing litigation.

In our view, the state’s response misapplies the applicable law and, if left unchallenged, could establish a dangerous precedent as it relates to transparency and the use of CORA.  In other words, if the position taken by the Colorado Department of Law is adopted in other matters, entities that have ongoing litigation before the state could be prevented from using CORA to supplement and investigate the facts relevant to their cases. This anti-transparency policy has obvious negative implications for media outlets and government watchdog organizations to conduct their vital work.

Matt Frendewey is the Director of Communications at Cause of Action Institute.

 

Resources:

Click here to visit the TABOR project page.
Click here to download the original CORA records request and subsequent denial letter.
Click here to download CoA’s response to the CORA request denial letter.

New Website Documents Fraud & Corruption from EB-5 Immigration Program

WASHINGTON, D.C. – Aug. 2, 2018 – Today, Cause of Action Institute (“CoA Institute”) launched a new website www.EndEB5.org, documenting  questionable investments and investigations relating to the EB-5 Immigrant Investor Program (“EB-5”) and the Regional Center Program. As the Cause of Action’s website reveals, the EB-5 program is ripe for fraud, corruption, can pose a national security threat, and provide questionable value to taxpayers and the U.S. economy. The website launched with more than a dozen examples of questionable investment. The organization has identified more than 50 examples and will release more troubling investments over the next two weeks.

CoA Institute created the website in response to Sen. Diane Feinstein asking the director of the program for a list of “shady programs.” The director didn’t have a list of “shady programs,” so CoA Institute put one together. As Congress weighs whether to extend or allow the Regional Center Program component of the EB-5 program to expire, CoA Institute urges Congress to review this website and recognize the severe flaws in the EB-5 program and let it expire on Sept. 30.

John J. Vecchione, president and CEO of CoA Institute, issued the following statement:

“The EB-5 Program faces legitimate scrutiny due to allegations that it’s become ripe for fraud and corruption and become a pay-to-play scheme. As our research illustrates, EB-5 and the Regional Center Program amounts to a pay-to-play scheme that enriches questionable actors who defraud investors and visa seekers and poses a threat to national security. We urge Congress to review the cases we have identified and allow this program to expire.”

BACKGROUND & HOW IT WORKS:

  • The Immigration Act of 1990 created EB-5 and permits foreign nationals to apply for a conditional visa by making a $1,000,000 investment in an American business that creates at least 10 jobs.
  • Alternatively, a visa-seeker can invest $500,000 in a “targeted employment area” (rural or area of high unemployment) to satisfy the visa requirement.
  • In 1992, the “Regional Center Program” was created to allow pre-approved third parties to pool EB-5 investments from foreign nationals toward American development projects.
  • The Regional Center Program is a source of much of the fraud in EB-5 Immigrant Investor program.
  • CoA Institute has found numerous cases where individuals who controlled a pre-approved Regional Center Program, use the program to collect huge sums in “investments” and fees from individuals seeking a visa, only to use the funds not to create jobs in the U.S. but to fund their lavish lifestyle.

On June 19, 2018, the U.S. Senate Committee on the Judiciary held a hearing on EB-5 with Lee Francis Cissna, Director of the U.S. Citizenship and Immigration Services (“USCIS”), the agency responsible for the program. In this hearing, when Senator Feinstein asked Director Cissna for a list of “shady investments” the agency has found while investigating fraud in this program, Cissna stated he was unable to produce one.

In response, CoA has begun tracking and identifying examples of fraud or other questionable investments made through the EB-5 program. The website includes 13 examples and CoA Institute expects to release as many as 50 examples of questionable investments under the EB-5 project files page, detailing projects that have been proven to be fraudulent and failed to provide the proposed economic benefit.

The countless documented instances of fraud and corruption developed through this program have pushed the EB-5 program far beyond the point of corrective legislative reform. CoA Institute will continue to publish findings on this website as Congress decides whether to allow the program to expire on September 30.

About Cause of Action Institute

Cause of Action Institute is a 501(c)(3) nonprofit, dedicated to providing government oversight, transparency and advocating for economic freedom and individual opportunity advanced by honest, accountable, and limited government.

Media Contact:

Matt Frendewey
matt.frendewey@causeofaction.org
202-499-4231