The Project On Government Oversight (POGO) Blog

Supreme Court Makes it Harder to Hold Contractors Accountable for Fraud

By MANDY SMITHBERGER and MICHAEL SMALLBERG

Yesterday, the Supreme Court weakened the government's ability to recoup money from contractors defrauding the government. In a 5-3 decision, the Court found in Schindler Elevator Corp. vs. U.S. that private citizens cannot file lawsuits under a qui tam provision of the False Claims Act that rely upon information obtained through the Freedom of Information Act (FOIA). The Justice Department secured $3 billion in civil settlements in 2010 under the False Claims Act (FCA), and has recovered more than $27 billion since 1986.

The case revolves around Vietnam War veteran Daniel A. Kirk, who was an employee of Schindler Elevator Corporation and suspected that the company was not in compliance with disclosure requirements under the Vietnam Era Readjustment Assistance Act of 1972. His wife received confirmation of these observations from information obtained from the Department of Labor under FOIA, and Kirk filed his own suit.

Supreme Court Rejects Corporate "Personal Privacy" FOIA Argument

By Scott Amey

Today, the U.S. Supreme Court unanimously rejected AT&T’s claim that the personal privacy exemption under the Freedom of Information Act (FOIA) applies to companies. The Court’s ruling was limited to the FOIA 7(c) exemption, which prevents the release of records or information compiled for law enforcement purposes that “could reasonably be expected to constitute an unwarranted invasion of personal privacy.”

POGO, along with other good government advocates, filed a “friend of the court” brief in the case of Federal Communications Commission v. AT&T, Inc., which was cited by Justice Ginsburg during the oral argument in January.

Not all corporate information turned over to the federal government will be publicly accessible as a result of the holding (there are other applicable FOIA exemptions and restrictions), but this is a win for transparency, openness, and the public.

The case involved protecting information related to a Federal Communications Commission (FCC) investigation into possible AT&T overcharges on a school IT program. The FCC determined that records related to its investigation could be released to a FOIA requester, an AT&T competitor. Today’s decision unanimously reverses the 3^rd Circuit, which held that FOIA exemption 7(c) applied and the records could not be released.

Scott Amey is POGO's General Counsel.

Image by Flickr user Mark Fischer, used under Creative Commons License.

Related:

• New Podcast: Now It's "Personal": The Case of FCC v. AT&T Inc.
• POGO Files "Friend of the Court" Brief in FCC v. AT&T
• Does a Corporate Entity Enjoy "Personal Privacy" When It Comes to FOIA?

 

POGO Mourns the Loss of Good Government Champion Steve Horn

The good government community lost a close friend and ally last week with the passing of former Rep. Steve Horn (R-CA).

Rep. Horn was the first recipient of POGO's Good Government Award, and served as a member of our advisory board. During his time in Congress, Rep. Horn was relentless in his efforts to challenge executive branch secrecy and improve the public's access to information. In 1996, he co-sponsored legislation to expand the Freedom of Information Act (FOIA) to include electronic records, and he continued to fight secrecy abuses throughout his time as Chairman of the House Government Reform and Oversight Committee. He also held the first hearings into the failures of the Department of Interior to collect royalties from oil and gas leases in 1996.

Steven Aftergood tracked down this 2002 interview with Rep. Horn, in which he spoke about his commitment to government transparency:

What struck me then and now is the critical role that public access to Government information plays in our democracy....It is key to having an informed citizenry and to supplying our citizens with the knowledge they need to hold their Government accountable. Therefore, I have always been a strong advocate of [FOIA].

Rep. Horn was also a champion of congressional oversight. Whether he was forcing the CIA to hand over documents or exposing the Army employee who used a government purchase card to pay for escort services, his hearings served as a model for holding federal agencies accountable. Rep. Horn was also a supporter of meaningful campaign finance reform, and he refused to accept any contributions from PACs.

You can watch many of Rep. Horn's hearings and floor speeches in C-SPAN's video archives.

Our warmest thoughts and prayers go out to Rep. Horn's family and friends. He will be deeply missed.

Congressional Oversight Quotes of the Day

By Bryan Rahija

Mickey Edwards, Vice President and Director of the Aspen Institute; former Member of Congress (R-OK) and Chairman of the House Republican Policy Committee:

When it comes to oversight functions—of either oversight committees, or oversight subcommittees, or any other special task force; anything that is created to do oversight over the executive branch—take off your party hat. Put it in a drawer, and deal with this as somebody who has taken an oath of office—or works for somebody who has taken an oath of office—to carry out the mandates of the Constitution to function as the people's voice.

Morton Rosenberg, Fellow, The Constitution Project; former Specialist in American Law at the Congressional Research Service (CRS):

The failure of a Member to foster and engage an inquiry to determine whether our laws are being faithfully carried out, or whether new laws or actions are needed, is a violation of a Member's oath of office, and abdication of his legislative role as a responsible Member.

Stanley Brand of the Brand Law Group; former General Counsel to the House of Representatives under Speaker Tip O’Neill, Jr.:

As Raoul Berger, the late, great Harvard law professor used to say, if you look at Article I—and what he called the vast armamentarium of powers enumerated in Article I—and you put the president's powers enumerated in Article II next, the president looks like the valet of the Congress.

Edwards, Rosenberg, and Brand spoke today at a congressional oversight seminar hosted by POGO and The Constitution Project.

We'll be posting  audio of each panelist's opening remarks shortly. POGO periodically hosts congressional oversight training seminars as part of our Congressional Oversight Training Series (COTS).

Bryan Rahija edits POGO's blog.

Photo of Edwards, Rosenberg, and Brand (second, third, and fourth from the left) and POGO's Danielle Brian (far left) by Joe Newman.

Congressional Investigations We Could Really Use

With the help of POGO and other good government groups, Congressional Quarterly's Brian Friel has put together a decent wish list of investigations for the House Oversight and Government Reform Committee, the key congressional watchdog committee now led by Representative Darrell Issa (R-CA).

Friel's column presents two categories of investigations—those that we are likely to see, and those that we need most—but we're optimistic that the divide between these two categories won't be so pronounced. Given the oversight "blueprint" Rep. Issa outlined in September, we expect to see a mix of investigations from both of Friel's categories.

We're curious what our readers think. What areas of government are in need of congressional investigation? What kind of investigations are you hoping for?

Let us know what you think in the comments below, and if you haven't already, be sure to check out our post last week for more analysis on congressional oversight in the wake of the election.

-- Bryan Rahija

Don't Be Afraid of the Congressional Oversight Bogeyman

While many in DC are crying into their beers or measuring the windows of their new offices, POGO has a different take on the election. We have been hearing a lot of talk from both Democrats and Republicans characterizing "oversight" as a dangerous weapon in the wake of the election. But from our perspective, both sides need to take a different tack.

The Democrats need to stop demonizing oversight as something to fear, and the incoming Republican committee chairs and leadership ought to focus on investigating substantive problems with an eye toward finding solutions to benefit the public interest—rather than gunning  for the 2012 elections.

Oversight has clearly been a watchword since the election results streamed in last Tuesday.  Incoming Speaker of the House John Boehner, Republican of Ohio, has called for “rock solid oversight of the executive branch, which is a constitutional responsibility of the Congress.”  Republican Rep. Eric Cantor of Virginia’s 22-point plan as the likely new majority leader has called for more oversight by individual lawmakers. 

All of this is music to POGO’s ears, assuming the oversight is serious inquires into significant areas, with a good faith effort at bi-partisanship.

Of course, some of the Democrat’s fears and Republican’s embrace of oversight are natural reactions.  As James Madison wrote in the Federalist Papers, "Ambition must be made to counteract ambition" and our constitutional system of checks and balances was designed to harness these counteracting ambitions.  However, congressional oversight of the executive is diluted when members of Congress approach it as political partisans rather than as part of an institution that is responsible for improving the government. 

That means congressional Democrats should not be out to protect the administration at any cost and should participate in explorations of wrongdoing, waste, mismanagement or incompetence in the executive branch--even though Republicans may chair their committees.  It also means congressional Republicans should not be out to destroy the administration--political witch hunts are usually transparent and end up backfiring. 

Everyone should keep in mind that underneath the executive branch’s political layer are men and women in uniform who’ve sworn their lives to protect us, scientists who strive to make sure patients are not harmed by drugs or medical devices, auditors who try to protect taxpayer money from going to waste, and others whose job is to serve the public interest.  Sabotaging the administration for political gain can sabotage the critical missions these public servants strive to achieve.

But it’s important to realize that while sometimes the problems lie with the political appointees, in other instances aspects of the permanent bureaucracy are the problem.  What that means is responsible congressional oversight could lead to strange bedfellows.  Imagine Tea Partiers working with Obama’s political appointees to get rid of corrupt government managers who retaliate against whistleblowers.

At the end of the day, oversight should lead to a better functioning government that better serves the citizenry.  On that note, we were heartened when California Republican Darrell Issa, the incoming chairman of the House Oversight and Government Reform Committee, said, “I want to prove the pundits wrong. My job is not to bring down the president. My job is to make the president a success.”

A Victory for Oversight: House Passes Eshoo Amendment

Late yesterday, the House passed an amendment allowing the Government Accountability Office (GAO) to audit the intelligence community.

This is a great victory for government oversight. POGO thanks Representative Anna Eshoo (D-CA) for her leadership on this issue, and also thanks the other co-sponsors—Howard Berman (D-CA), Rush Holt (D-WV), Mike Thompson (D-CA), Jan Schakowsky (D-IL), and John Tierney (D-MS)—for stepping up to the plate and supporting this important amendment. POGO also thanks House Speaker Nancy Pelosi for supporting and speaking in favor of the bill.

Read Rep. Eshoo's statement on the vote.

-- Bryan Rahija

POGO Neither Admits Nor Denies Any Errors in This Blog Post...

However, to avoid the delay, uncertainty, inconvenience and expense of protracted editing, proofreading and fact-checking of this post, POGO reaches a full and final settlement of readers’ allegations of errors pursuant to the following terms and conditions.

What if POGO were able to get away with any and all misconduct merely by uttering the above magic words and cutting a deal with our accusers? Well, our Federal Contractor Misconduct Database is chock full of examples in which the largest federal contractors were able to escape some serious legal scrapes through similar means.

Of the hundreds of misconduct instances in our database (910 as of today), the vast majority were resolved through criminal, civil or administrative settlement agreements. In almost every one, the contractor was allowed to categorically deny any liability or wrongdoing – using basically the same language you see at the beginning of this post – and remain eligible to receive more federal contracts.

We bring this up because this week, House Committee on Oversight and Government Reform Chairman Edolphus Towns (D-NY) wrote a letter to Attorney General Eric Holder expressing concern that criminal and civil settlements between the Department of Justice (DOJ) and federal contractors are preventing the government from suspending or debarring poorly performing contractors and that some contractors subject to these settlement agreements continue to break the law with impunity. You can tell exactly what prompted Chairman Towns to write this letter, because on the very first page he presents Exhibit A: the recent mishaps and misadventures of KBR.

Chairman Towns is also concerned that, as part of these settlements, DOJ may be inappropriately assisting contractors in suspension and debarment proceedings. For example, auto manufacturer Daimler AG settled a major foreign bribery case last month by paying millions of dollars in fines and entering into a deferred prosecution agreement with DOJ that includes this stipulation on page 14:

With respect to Daimler's present reliability and responsibility as a government contractor, the Department agrees to cooperate with Daimler, in a form and manner to be agreed, in bringing facts relating to the nature of the conduct underlying this Agreement and to Daimler’s cooperation and remediation to the attention of governmental and other debarment authorities, including the MDBs [Multilateral Development Banks], as requested.

Chairman Towns has given Attorney General Holder until May 28 to answer four important questions:

1. Does DOJ consider resolution of charges to foreclose action by other government agencies to suspend or debar companies from contracting?


2. In view of the fact that suspension and debarment is not a penalty, but is an important means for government agencies to protect themselves from unscrupulous and poorly performing contractors, please provide a detailed explanation of whether the Justice Department believes it is in the government’s best interest to continue to award contracts to those with a record of violations of law.


3. Does DOJ consult with federal government contracting authorities when entering into settlement agreements with companies that compete for government contracts?


4. Identify all instances in which DOJ officials intervened in a suspension and debarment proceeding on behalf of government contractors since 2005 and explain the basis for the DOJ intervention.

Recent events, most notably the oil spill in the Gulf of Mexico, have highlighted the disturbing tendency for various federal agencies to get too cozy with the companies they are supposed to be regulating. Has DOJ done the same with regard to the contractors it investigates and prosecutes? We eagerly await Attorney General Holder’s answers to Chairman Towns’ questions to find out.

-- Neil Gordon

Salazar Testifies Before Senate on Gulf Oil Spill Disaster

Secretary of the Interior Ken Salazar appeared before the Senate Committee on Energy & Natural Resources this morning, testifying to Congress for the first time since the Gulf oil spill disaster occurred. Salazar was frank with the Committee about some of his agency's weaknesses—particularly when it comes to oversight. Here are a few highlights in tweet form, culled from our coverage of the hearing on Twitter.

Senators mentioned below include John Barrasso (R-WY), Bob Menendez (D-NJ), Tom Udall (D-NM), and Ron Wyden (D-OR), while the suzyji handle belongs The Guardian's Suzanne Goldenberg.

Great Questions:

Congressional Oversight at Its Best

We thought it was important to point out what an exemplary job the Senate Permanent Subcommittee on Investigations (PSI) has been doing. For those who have read POGO's congressional oversight handbook, you may remember that we refer several times to PSI's effective oversight techniques. Lately, between its investigation into the Office of Thrift Supervision, its probe into the role of credit rating agencies on the financial crisis, and its hearing with Goldman Sachs executives, the Subcommittee has been conducting some top-notch congressional oversight. (Bonus kudos to Sen. Susan Collins, R-ME, for suggesting that Congress introduce a fiduciary duty requiring brokers to act in the interests of its clients.)

It has clearly been backbreaking work for the Hill staff — just look at the 2-foot thick binders of documents as evidence. All the elements have come into place: an outrage shared by both sides of the aisle; great prep work with the press so the media could cover the hearings with depth and could have familiarity with the best docs; relevance to current legislative activity; and not being scared off by current litigation. Keep up the good work!

-- Team POGO

Sen. Dodd Releases Financial Regulatory Bill

At long last, Senate Banking Committee Chairman Christopher Dodd (D-CT) has released new draft legislation for overhauling the nation’s financial regulatory system. A summary of the legislation is available here.

We’ll be going over the bill with a fine-tooth comb over the next few days, but here are some initial thoughts:

As had been widely speculated, the bill would create a Consumer Financial Protection Bureau within the Federal Reserve. Among other things, the Bureau will have an independent director appointed by the President, and will have the authority to examine and enforce regulations for banks and credit unions with assets over $10 billion as well as other mortgage-related businesses and non-bank financial companies. However, other regulators would have the authority to appeal the Bureau’s regulations if they believe the rules would endanger the safety and soundness of the banking system or the stability of financial markets. House Financial Services Committee Chairman Barney Frank (D-MA) recently said that the idea of housing a consumer protection agency inside the Fed is like a “bad joke,” but it appears that Elizabeth Warren—chair of the Congressional Oversight Panel and a long-time advocate of consumer protections—is open to the idea.

Other proposed initiatives that are likely to generate heated debate in the next few weeks include the creation of a Financial Stability Oversight Council—chaired by the Treasury Secretary and made up of other regulators from the SEC, FDIC, etc.—that would be responsible for monitoring systemic risk. The Council could vote to require that the Fed regulate non-bank financial companies that pose systemic risks (think AIG), and would also be able to approve decisions allowing the Fed to break up large, systemically risky companies. The bill also gives a nod to the White House’s proposed Volcker Rule by requiring regulators to implement rules prohibiting proprietary and hedge fund trading by banks, their affiliates, and bank holding companies, but adds that regulations will only be implemented after a study conducted by the Financial Stability Oversight Council. In addition, the bill would levy $50 billion in fees on the largest financial firms to cover the cost of dissolving failing companies in the future.

But while these sections are the ones that will likely generate the most media and congressional attention in the weeks to come, there are other provisions in the bill that could also have far-reaching consequences for the future of financial regulation, including some sections that will be of particular interest to readers of this blog.

At first glance, the bill appears to include some very sensible reforms for the SEC. For instance, it would create a program similar to the False Claims Act and the IRS whistleblower bounty program to encourage people to come forward with reports of securities violations, allowing them to keep between 10 and 30 percent of the funds recovered. It would also prohibit employers from retaliating against whistleblowers who lawfully provide the SEC with reports of securities violations, and would allow whistleblowers who were retaliated against to bring court action for relief, including reinstatement and backpay. The SEC’s mishandling of whistleblower complaints—including its inability to stop the Madoff Ponzi scheme despite receiving multiple tips from Harry Markopolos—has come under sharp criticism in recent years, and we applaud Congress for taking steps to protect whistleblowers and the investing public.

The bill would also create a new Office of Credit Ratings at the SEC to examine credit rating agencies, with the authority to fine or even deregister an agency for providing bad ratings, although there are concerns that these reforms might not be enough to address the rampant conflicts of interest resulting from the fact that the agencies get paid by the companies they rate.

We were encouraged to see that the bill includes language enabling the Government Accountability Office (GAO) to audit any emergency lending facility set up by the Fed under its 13(3) authority, a measure we supported in the House’s bill. We were also pleased to see a provision that would address conflicts of interest in the governance of Federal Reserve Banks by prohibiting past or present officers, directors, and employees of Fed-supervised companies from serving as directors.

One big question mark still hovers over the section of the bill that deals with the regulation of over-the-counter derivatives. The bill summary states that “Senators Jack Reed (D-RI) and Judd Gregg (R-NH) are working on a substitute amendment to this title that may be offered at full committee.” But in the meantime, the bill introduced today largely reflects language introduced in an earlier draft. For instance, it includes a provision that would create an “alternative swap execution facility” defined as “an electronic trading system with pre-trade and post-trade transparency in which multiple participants have the ability to execute or trade swaps by accepting bids and offers made by other participants that are open to multiple participants in the system, but which is not an exchange.” POGO had raised concerns about similar language in the House’s bill since it appears to undermine the goal of moving as much trading as possible to well-regulated and transparent exchanges and clearing houses.

It will also be interesting to see how the substitute amendment deals with the issue of so-called “end-users”: non-financial sector companies, municipalities and non-profits that use derivatives as a standard business practice to hedge against risk. According to the Congressional Research Service, a broad end-user exemption from the bill’s clearing requirement could leave many swaps in the dark, and Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler has been arguing that opacity in the over-the-counter derivatives market mostly benefits the large broker-dealers (Goldman Sachs, JPMorgan, etc.) rather than the end-users.

POGO also remains concerned that Congress is not adequately addressing the lack of transparency, conflicts of interest, and weak enforcement record at self-regulatory organizations such as the Financial Industry Regulatory Authority (FINRA). And even if the bill does fill some of the regulatory gaps that were exposed by the financial meltdown, there is still the problem of agencies that have all the authority they need but are still unduly influenced by the industry they’re tasked with regulating.

Stay tuned in the weeks ahead, as POGO will be analyzing the Senate’s bill in much greater detail and will be offering more of our own proposals for fixing the financial regulatory system.

-- Michael Smallberg

The Good Old Days of Signing Statements?

The Obama administration apparently has a new policy on signing statements — opinions that the president attaches to bills he is signing into law — that could have us longing for the days when presidents would, to the outrage of lots of folks including POGO, simply declare that provisions of laws passed by Congress were not applicable to the executive branch.

Now, as reported late last week in the New York Times, the Obama administration is effectively taking its disagreements with Congress off the radar. The White House explained that if it has previously indicated in a signing statement that the president would ignore a provision in a bill, a signing statement on a new but similar bill would not be necessary. Here's an example of how it works:

Last year the Obama administration disregarded a statute that forbid State Department officials to attend United Nations meetings led by nations deemed state sponsors of terrorism. Congress has included that restriction in several recent bills.

When Mr. Bush signed one such bill, he issued a signing statement instructing officials to view the law as merely advisory, and they attended at least one such meeting on his watch. By contrast, when Mr. Obama signed another bill with an identical provision, he did not specifically single it out for challenge. But his administration later obtained an Office of Legal Counsel opinion pronouncing it unconstitutional, and officials continued to attend such meetings.

Unlike signing statements, opinions from the Office of Legal Counsel are often secret.

This new approach doesn't just ignore one of our recommendations to the Obama administration — it completely violates the spirit behind it. Signing statements were bad enough, but at least with them we knew when the executive branch was abusing its powers — now, with mute disagreements and internal memos, it's possible that the public will be left completely in the dark.

-- Bryan Rahija