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Service Quality and Reputation
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Category Archives: government fraud spending collusion
AmericanSpectator: Fox Mulder and Dana Scully, the FBI agents on Fox’s The X-Files, have been known to draw weapons on aliens, poltergeists, and phantoms. But they have an excuse — they’re fictional characters in a network TV drama, coming back on-the-air soon after a long hiatus. Not so the Environmental Protection Agency’s (EPAs) own, real-life agents. They are packing pistols and even heavier firepower to catch the nation’s contributors to global warming and other, mythical phenomena. Truth is stranger than science fiction in today’s Washington, D.C., and the truth is way out there.
According to a report released last week by a watchdog group called Open the Books, the EPA has spent millions of dollars recently on guns, ammo, body armor, camouflage equipment, and even night-vision goggles to arm its agents in the war on polluters.
The Illinois-based investigative group examined thousands of checks totaling more than $93 billion from 2000 to 2014 by the EPA, and its auditors indicate that about $75 million is authorized each year for “criminal enforcement” of America’s clean air and water laws. This includes cash for a cadre of 200 “special agents” that engage in SWAT-style ops.
“We were shocked ourselves to find these kinds of pervasive expenditures at an agency that is supposed to be involved in clean air and clean water,” said Open the Books’ founder, Adam Andrzejewski, a former candidate for governor of Illinois. “Some of these weapons are for full-scale military operations.”
Some of these military operations have been reported in the media. Two years ago, the EPA was involved in an armed raid at a small town in Alaska where miners were accused of polluting local waters, as Fox News reported that EPA “armed agents in full body armor participated.”
The EPA’s own website describes the activities and mission of the criminal enforcement division as “investigating cases, collecting evidence, conducting forensic analyses and providing legal guidance to assist in the prosecution of criminal conduct that threatens people’s health and the environment.”
Don’t blame President Obama for this alone. The EPA was first given police powers in 1988 during the Reagan era. These days, EPA also conducts joint projects with the Department of Homeland Security as it engages in what a media report calls “environmental crime-fighting.”
“For more than 30 years,” according to the EPA website, “there has been broad, bipartisan agreement about the importance of an armed, fully-equipped team of EPA agents working with state and federal partners to uphold the law and protect Americans.”
But that’s not all that the Open the Books investigators found. Backing up these armed environmental crusaders are scores of highly paid lawyers and other professionals.
The report showed that seven of 10 EPA workers earn more than $100,000 a year, and EPA’s $8 billion budget also finances the salaries of 1,000 attorneys, making the agency one of the biggest law firms in the U.S.
The EPA is hardly going solo in this armed adventure against America, however. The agency has collaborated with the U.S. Department of Homeland Security, and a recent report by the U.S. Department of Justice indicates that more than 40 federal agencies, with 100,000 officers, carry guns and make arrests.
How far will EPA agents go to enforce the law as they interpret it? The Sixth Circuit Court of Appeals on Friday issued a temporary stay on the Environmental Protection Agency’s new Clean Water Rule that regulates “waters of the U.S.” The court decided the EPA’’s Rule that originally became effective on August 28, 2015 requires “further judicial analysis.” The new Clean Water Rule defined navigable waters to include tributaries and wetlands, and even puddles caused by rainstorms. The rule defines which waterways would be protected by the Clean Water Act of 1972. A total of 18 states are challenging the new rule. Perhaps the new water rules will be enforced at gunpoint by armed agents if President Obama and EPA Administrator Gina McCarthy decide that “environmental justice” requires it.
*** Gina likes Thunderclap, so she hired them for crowd-sourcing positive responses.
EPA is planning to use a new social media application called Thunderclap to provide a way for people to show their support for clean water and the agency’s proposal to protect it. Here’s how it works: you agree to let Thunderclap post a one-time message on your social networks (Facebook, Twitter or Tumblr) on Monday, September 29 at 2:00 pm EDT. The message will be posted on everyone’s walls and feeds at the same time.
Here’s the message: “Clean water is important to me. I want EPA to protect it for my health, my family, and my community. www.epa.gov/USwaters”
EPA Publishes Final 2012 and Preliminary 2014 Effluent Guidelines Program Plans
Under Clean Water Act section 304(m), EPA develops biennial plans for issuing new regulations or revising existing regulations to control industrial wastewater discharges. While EPA’s final 2012 plan and preliminary 2014 plan do not propose any new effluent guidelines for industry, EPA is announcing initiation of detailed studies of the petroleum refining industry and centralized waste treatment facilities, and continuation of its preliminary review of the metal finishing industry. EPA will accept public comments on the preliminary 2014 plan through November 17, 2014. Learn more.
Section 319 Success Story: Ionine Creek, Oklahoma
Ionine Creek in Grady County runs through an area of high cattle, wheat, and hog production. An assessment of the creek’s fish community in 2004 revealed a poor biological condition, prompting Oklahoma to add the creek to the state’s Clean Water Act section 303(d) list of impaired waters for biological impairment. Implementation of best management practices to reduce runoff from grazing land and cropland and to improve wildlife habitat decreased sediment and nutrient contributions to the creek and provided better in-stream habitat. As a result, Oklahoma removed Ionine Creek from Oklahoma’s list for fishes bioassessment. Ionine Creek now fully attains its fish and wildlife propagation designated use. The complete success story can be found here.
There is no longer doubt that certain personnel at the State Department were in collusion with the Clintons, but this time on the Foundation side and with regard to Bill giving speeches for big money.
Each time there was a speech request for Bill, the procedure was to pass the full speech application request to the State Department to determine if the sponsors were acceptable and approved. A database is maintained at State for diplomatic purposes on global and domestic corporations such that the speech requests would be only somewhat investigated. This also gives rise to the fact that government and especially corporations use the State Department and likewise in reverse to advance mutual relationships, agendas and of course money is always involved. Thanks to Judicial Watch for their tireless work as noted below.
The Clinton email scandal is serious enough. Nonetheless, it is useful to remember what exactly Mrs. Clinton was trying to hide before our litigation forced the disclosure of her separate email system. You can bet that the cover up of the depth of her abuse of office for private gain is one thing about which she does not want you to know the full truth. Judicial Watch is in the lead in uncovering these Clinton cash abuses. This week, we released 789 pages of State Department “ethics” review documents concerning former Secretary of State Hillary Clinton, revealing that at least one speech by Bill Clinton appeared to take place without the required State Department ethics approval. The documents also include a copy of Bill Clinton’s draft consultant agreement with Laureate Education, Inc., which was submitted for ethics review by the State Department. But the State Department redacted the information regarding compensation and the specific services Bill Clinton was hired to provide to the controversial “for profit” education company. The documents were released as a result of a federal court order in our history-making Freedom of Information Act (FOIA) lawsuit filed against the State Department on May 28, 2013, (Judicial Watch v. U.S. Department of State (No. 1:13-cv-00772)). The documents include heavily redacted emails from 2009 about the review of a speech Bill Clinton was set to give to the Institute of Scrap Recycling Industries (ISRI). An April 1, 2009, email from then-State Department Senior Ethics Counsel Waldo W. “Chip” Brooks notes that the ethics review approval of the speech “was in the hands of Jim [Thessin] and Cheryl Mills. They were to discuss with Counsel to the former President. I do not know if either ever did.” A follow-up September 1, 2009, email to Brooks from a colleague asks, “[W]as there ever a decision on the Clinton request involving scrap recycling? Below is the last e-mail I have on it – I assume it just died since I don’t’ have an outgoing memo approving the event …” Brooks responds two minutes later:
“I think the decision was a soft call to Clinton’s attorney and the talk did not take place. You might want to send an email to [Clinton Foundation Director of Scheduling and Advance] Terry [Krinvic] and tell her that you have a gap in your records because you were gone and wanted to know if the President ever did talk before ISRI?
In fact, Bill Clinton spoke to the scrap recycling group on April 30, 2009, for a reported fee off $250,000. The documents also include a request from Doug Band of the Clinton Foundation for an ethics review of Mr. Clinton’s proposed consulting arrangement, through WJC LLC, with Laureate Education, Inc. The Obama State Department redacted key terms of the attached May 1, 2010, draft agreement, including Mr. Clinton’s fees and the nature of Mr. Clinton’s services. Laureate Education, Inc. is the world’s largest, for-profit, international higher education chain and reportedly uses many of the same practices that spurred a 2014 regulatory crackdown by the Obama administration on for-profit colleges in the United States. In 2010, according to The Washington Post, the company hired former President Clinton to serve as its honorary chancellor, and since that time the former president has made more than a dozen appearances in countries such as Malaysia, Peru, and Spain on the company’s behalf. Since 2010, the former president reportedly has been paid more than $16 million from the company for his services. The Clinton-Laureate connection is rich. The Daily Caller did some digging into the Clinton tax returns that were highly revealing:
Clinton signed on as the honorary chancellor of Laureate International Universities, a subsidiary of Laureate Education, in 2010. Despite the honorary nature of his position, that didn’t stop the company from paying him on average approximately $3 million a year. The investment likely paid off, though, as Clinton has lent Laureate significant legitimacy and has served as an advocate for the company overseas, making appearance in countries like Peru and Malaysia to praise it. In addition to these direct payments, Laureate also donated to the Clinton Foundation and has cooperated with the Clinton Global Initiative.
The latest State Department documents also show some push-back by ethics officials concerning proposed Clinton speeches to Chinese government-linked entities. State Department officials, for example, had several questions about a proposed 2009 speech to a subsidiary of the Shanghai Sports Development Corporation, a Chinese “quasi-government” agency. Rather than answer the questions, the Clinton Foundation representative emailed “we are not going to proceed with this.” State Department ethics official “Chip” Brooks commented on the withdrawal of the Chinese speech in December 2009 to then-Deputy Legal Adviser Jim Thessin, “Cooler heads have prevailed.” The documents show the State Department approved scores of requests by former President Bill Clinton to appear as the featured speaker at events sponsored by some of the world’s leading international investment and banking firms, including J.P. Morgan, Barclays, Merrill Lynch, Sweden’s ABG, PriceWaterhouseCoopers, Brazil’s Banco Itau, Vista Equity Partners, Goldman Sachs, Vanguard Group (described as “one of the world’s largest investment management companies”), Canada’s Imperial Bank of Commerce, and Saudi Arabia’s SAGIA conglomerate (which claims to be the “gateway to investments in Saudi Arabia”). While the majority of the documents do not contain the fees that Clinton charged for his speaking services, those that are disclosed reveal that the former president routinely received six-figure honorariums for his advice to the international investment counseling firms and banking institutions, including:
Barclays Capital Singapore – $325,000 • Needham Partners South Africa – $350,000 • Cumbre de Negocios (sponsored by Nacional Financiera and El Banco Fuerte de Mexico) – $275,000 and $125,000) • NTRPLC (which describes itself as “developing a new investment portfolio of wind projects in Ireland and the UK”) – $125,000
The documents reveal that between 2009 and 2011, former President Clinton spoke to more than two dozen leading international investment firms and banking institutions, many of them on more than one occasion. At least one of the documents shows that Hillary Clinton Chief of Staff Cheryl Mills used a non-governmental email account for the Clinton ethics reviews. Mills reportedly negotiated the “ethics agreement” on behalf of the Clintons and the Foundation that required the Clintons to submit to rigorous conflict-of-interest checks. Despite this, and in apparent violation of Obama administration ethics rules, the documents reveal that Bill Clinton’s requests for speaking engagement approval were invariably copied to Mills, who was involved in ethics reviews as chief of staff for Mrs. Clinton at the State Department. The documents also include the demands that Bill Clinton’s speakers bureau, The Harry Walker Agency, laid out for a speech sponsor in Slovenia. Notably, the documents require that press be kept in a “designated, roped off area in the back of the room with a staff escort” and that the “press should not be given access to any area where the President likely may be.” This JW lawsuit broke open the Clinton cash scandal by forcing the disclosure of documents that provided a road map for over 200 conflict-of-interest rulings that led to at least $48 million for the Clintons and the Clinton Foundation during Hillary Clinton’s tenure as secretary of State. Previously disclosed documents in this lawsuit, for example, raise questions about funds Clinton accepted from entities linked to Saudi Arabia, China and Iran, among others. This and other JW lawsuits on Benghazi were the key pressure that forced the disclosure of the Clinton email system. Judicial Watch’s litigation to obtain these conflict of interest records is ongoing. The State Department has yet to search the email records Mrs. Clinton purportedly turned over to the agency last year, despite Judicial Watch’s first requesting these records in 2011 and filing this lawsuit in 2013. The State Department also has yet to explain why it failed to conduct a proper, timely search in the 20 months between when it received our request on May 2, 2011, and February 1, 2013, when Secretary Clinton left office. Judicial Watch also is pressing the State Department to conduct a reasonable search for records, including any emails on the Hillary Clinton email server. On September 3, Judicial Watch filed a request with the court for discovery from the State Department and/or Mrs. Clinton in order to find these records so they might finally be searched as the law requires. Specifically, Judicial Watch’s attorneys ask the court to take steps to obtain the records directly:
To the extent Secretary Clinton or her agents or vendors continue to have access to this agency system of records, or any records from the system that have migrated or been transferred to any new servers, storage devices, or back-up systems, Judicial Watch respectfully submits that a constructive trust must be imposed on any such records and systems so that the State Department can access and search them for records…
Accordingly, Judicial Watch asks the court to order the State Department:
To identify, either through declarations or discovery, all information in its possession or control about the transfer of any data from the “clintonemail.com” server to Secretary Clinton’s vendor and whether any such data is still available or otherwise recoverable from the vendor’s server, storage devices, or back-up systems. If the State Department asserts that it does not have this information or cannot obtain it, limited third-party discovery of Secretary Clinton and/or her vendor should be authorized to enable the Court to obtain the information, which is necessary to remedy the State Department’s failure to search the server during Secretary Clinton’s tenure in office, its further failure to secure all federal records on the server when Secretary Clinton left office, and Secretary Clinton’s wrongful retention of these records after she left office.
Judicial Watch’s court filing details how it was “wrongful and in violation of federal law and State Department regulations” to allow Hillary Clinton “to retain exclusive access to this agency system of records (Clinton’s separate email server) and the official State Department communications and records it contains after she left office on February 1, 2013.” In short, we’re asking the court to allow us to figure out where the Clinton documents are and to take steps to make sure they are preserved and searched as the law requires. These records show that the “ethics reviews” of Bill and Hillary Clinton’s potential conflicts of interest was a joke. JW supporters should be proud of how their support resulted in a lawsuit that helped force the disclosure of Hillary Clinton’s separate email system. And now we hope that it results in getting all the Clinton emails searched to find out what else Hillary Clinton didn’t want the American people to see about her shady dealings. Judicial Watch’s FOIA lawsuit has become particularly noteworthy because it has been reported that the Clinton Foundation, now known as the Bill, Hillary, & Chelsea Clinton Foundation, accepted millions of dollars from at least seven foreign governments while Mrs. Clinton served as secretary of State. The Clinton Foundation has acknowledged that a $500,000 donation it received from the government of Algeria while Mrs. Clinton served as secretary of State violated a 2008 ethics agreement between the foundation and the Obama administration. Some of the foreign governments that have made donations to the Clinton Foundation include Algeria, Kuwait, Qatar, and Oman, have questionable human rights records. Links to the full production of documents can be found here: May 4, 2015; June 15, 2015; July 27, 2015 and September 4, 2015. Feel free to review the documents and let us know if you find anything important that we might have missed!
Where is the U.S. Department of Treasury? Where is the White House? (rhetorical)
By the hour scandals come out of the Federal government where the reaction is: ‘it is under investigation’ or we have created a task force to advise on how to correct the issue or it was due to a computer glitch.
Never do we hear that someone is going to prison for malfeasance or theft or obstruction.
So how about putting pressure on the White House to call in the FBI, build the case and then move to a criminal case? Sounds great huh? Maybe even House of Cards will do a whole series on the waste, fraud and corruption, after all it is revenue generating right? Oh…one more thing, whistleblowers have a very short life and career span in Washington DC, but there are laws where Federal employees must comply and report waste, fraud and abuse….well so it goes.
Well back to the $125 billion, while that was only LAST year.
A number of strategies, including implementing preventive controls and addressing GAO’s prior recommendations, can help agencies reduce improper payments, which have been a persistent, government-wide issue. The improper payment estimate, attributable to 124 programs across 22 agencies in fiscal year 2014, was $124.7 billion, up from $105.8 billion in fiscal year 2013. The almost $19 billion increase was primarily due to the Medicare, Medicaid, and Earned Income Tax Credit programs, which account for over 75 percent of the government-wide improper payment estimate. Federal spending in Medicare and Medicaid is expected to significantly increase, so it is critical that actions are taken to reduce improper payments in these programs. Moreover, for fiscal year 2014, federal entities reported estimated error rates for 10 risk-susceptible programs that exceeded 10 percent. Recent laws and guidance have focused attention on improper payments, but incomplete or understated estimates and noncompliance with criteria listed in federal law hinder the government’s ability to assess the full extent of improper payments and implement strategies to reduce them. For example, for fiscal year 2014, 2 federal agencies did not report improper payment estimates for 4 risk-susceptible programs, and 5 programs with improper payment estimates greater than $1 billion were noncompliant with federal requirements for 3 consecutive years. Identifying root causes of improper payments can help agencies target corrective actions, and GAO has made numerous recommendations that could help reduce improper payments. For example, strengthening verification of Medicare providers and suppliers could help reduce improper payments. GAO has stated that continued agency attention is needed to (1) identify susceptible programs, (2) develop reliable estimation methodologies, (3) report as required, and (4) implement effective corrective actions based on root cause analysis. Absent such continued efforts, the federal government cannot be assured that taxpayer funds are adequately safeguarded. The full report is here.
A Government Accountability Office report found that the federal government racked up more than $124 billion in improper payments in 2014, $19 billion above the previous year.
The Oct. 1 report found that the surge in payments came almost exclusively from Medicare, Medicaid, and Earned Income Tax Credit programs, which account for 75 percent of improper payments across the federal government.
“Federal spending in Medicare and Medicaid is expected to significantly increase, so it is critical that actions are taken to reduce improper payments in these programs,” the report said.
Improper payments include things like overpayments, underpayments or payments made for goods and services not received.
GAO estimated that since agencies began reporting improper payments in 2003, $1 trillion in federal funding has been lost to the issue.
The report called for greater compliance from government agencies, citing findings that five federal programs with more than $1 billion in improper payments were noncompliant with federal law for three years.
U.S. Comptroller General Gene Dodaro testified before the Senate Committee on Finance on Oct. 1 to address the report’s findings as well as GAO’s recommendations.
“Reducing improper payments is critical to safeguarding federal funds and could help achieve cost savings and improve the government’s fiscal position,” Dodaro said in testimony.
The report noted that Medicaid and Medicare accounted for $77.4 billion in improper benefits in 2014. To fix the problem, GAO suggested the Centers for Medicare and Medicaid improve Medicare automated audits, track postpayment recovery audit activities, remove Social Security numbers from Medicare cards to help prevent fraud and other reforms.
GAO recommended improving efficiency and oversight for Medicaid, including tracking liability for third-party insurers. CMS concurred with the recommendations and, in some cases, was already working on implementation plans for them.
The other big source of improper payments identified in the report was from the Earned Income Tax Credit, a refundable tax credit for low- to moderate-income earners, particularly those with children.
The report identified $17.7 billion in improper payments related to EITC, largely to due to the credit being incorrectly claimed on tax returns.
“As we have reported, a root cause of EITC noncompliance is that eligibility is determined by taxpayers themselves or their tax return preparers and that IRS’s ability to verify eligibility before issuing refunds is limited,” the report said.
Dodaro said that while the some fraud could play a role in improper EITC payments, the complexity of tax law has led to mistaken applications, which perpetuate improper payments.
“Complexity is definitely the heart of the problem here with the error rates,” he said. “We’re not suggesting they be made more complex. What we are suggesting is that Congress regulate paid tax preparers.”
Dodaro cited Oregon’s practice of regulating paid tax preparers, which originated in the 1970s, and pointed to a 2008 study that found Oregon tax returns are 72 percent more likely to be accurate than a comparable return from paid preparers in other states.
“I’m continuing to learn about the details of the new Trans-Pacific Partnership, including looking hard at what’s in there to crack down on currency manipulation, which kills American jobs, and to make sure we’re not putting the interests of drug companies ahead of patients and consumers,” she said in a statement. “But based on what I know so far, I can’t support this agreement.”
At the end of the segment of Senator Rand Paul this week with Bret Baier on Fox, Paul describes some of the classified maneuvers of the TPP.
One particular group, left leaning for sure is WikiLeaks, who has been an interesting champion of trying to get all the details on the Transpacific Partnership Part.
The idea behind the TPP is free trade – amongst the member states, it aims to lower trade barriers, create a common standard for intellectual property, enforce labour and environmental law standards and promote economic growth.
Others have criticised the more stringent intellectual property laws it would introduce, which could extend copyright terms and mean harsher penalties for file-sharers.
A number of trade unions and economists, such as Joseph Stiglitz, have said the agreement “serves the interest of the wealthiest”, and caters to the needs of corporations rather than the citizens of member nations.
Concerns have also been raised over the effect it could have on the cost of medicines – by extending the intellectual property rights of certain branded drugs, delays in the development of cheaper, ‘generic’ versions of these drugs could ensue, potentially leading to poorer people having to wait much longer than the wealthy to get access to the newest medicines.
The chapter on these intellectual property issues is what has been leaked by Wikileaks, and is one of the more controversial chapters in the whole agreement.
Peter Maybarduk, the program director at Public Citizen’s Global Access to Medicines, said that if the TPP is ratified, “people in the Pacific-Rim countries would have to live by the rules of this leaked text.”
“The new monopoly rights for big pharmaceutical firms would compromise access to medicines in TPP countries. The TPP would cost lives.”
The document, dated 5 October, was apparently produced on the day it was announced that the 12 member states to the treaty had reached an agreement after five and a half years of negotiations.
The nations of Vietnam, Peru, Mexico, Malaysia, Japan, Canada, Australia, USA, Singapore, New Zealand, Chile and Brunei are all prospective member states to the free-trade agreement, between them representing over 40 per cent of the world economy.
Despite the leak, the final text of the TPP is reportedly being held until after the Canadian general election, on 19 October.
While, as Wikileaks says, there still needs to a be a final “legal scrub” of the document before it is finished, negotiations on the document between signatories have now ended.
What does it look like when the president of the United States is a desperate man for a deal? Does he have a platoon of legal eagles searching law and then writing executive orders to finesse the law? The order from the White House is ‘FIND A LOOPHOLE’.
FNC:James Rosen > Some senior U.S. officials involved in the implementation of the Iran nuclear deal have privately concluded that a key sanctions relief provision – a concession to Iran that will open the doors to tens of billions of dollars in U.S.-backed commerce with the Islamic regime – conflicts with existing federal statutes and cannot be implemented without violating those laws, Fox News has learned.
At issue is a passage tucked away in ancillary paperwork attached to the Joint Comprehensive Plan of Action, or JCPOA, as the Iran nuclear deal is formally known. Specifically, Section 5.1.2 of Annex II provides that in exchange for Iranian compliance with the terms of the deal, the U.S. “shall…license non-U.S. entities that are owned or controlled by a U.S. person to engage in activities with Iran that are consistent with this JCPOA.”
In short, this means that foreign subsidiaries of U.S. parent companies will, under certain conditions, be allowed to do business with Iran. The problem is that the Iran Threat Reduction and Syria Human Rights Act (ITRA), signed into law by President Obama in August 2012, was explicit in closing the so-called “foreign sub” loophole.
Indeed, ITRA also stipulated, in Section 218, that when it comes to doing business with Iran, foreign subsidiaries of U.S. parent firms shall in all cases be treated exactly the same as U.S. firms: namely, what is prohibited for U.S. parent firms has to be prohibited for foreign subsidiaries, and what is allowed for foreign subsidiaries has to be allowed for U.S. parent firms.
What’s more, ITRA contains language, in Section 605, requiring that the terms spelled out in Section 218 shall remain in effect until the president of the United States certifies two things to Congress: first, that Iran has been removed from the State Department’s list of nations that sponsor terrorism, and second, that Iran has ceased the pursuit, acquisition, and development of weapons of mass destruction.
Additional executive orders and statutes signed by President Obama, such as the Iran Nuclear Agreement Review Act, have reaffirmed that all prior federal statutes relating to sanctions on Iran shall remain in full effect.
For example, the review act – sponsored by Sens. Bob Corker (R-Tennessee) and Ben Cardin (D-Maryland), the chairman and ranking member, respectively, of the Foreign Relations Committee, and signed into law by President Obama in May – stated that “any measure of statutory sanctions relief” afforded to Iran under the terms of the nuclear deal may only be “taken consistent with existing statutory requirements for such action.” The continued presence of Iran on the State Department’s terror list means that “existing statutory requirements” that were set forth in ITRA, in 2012, have not been met for Iran to receive the sanctions relief spelled out in the JCPOA.
As the Iran deal is an “executive agreement” and not a treaty – and has moreover received no vote of ratification from the Congress, explicit or symbolic – legal analysts inside and outside of the Obama administration have concluded that the JCPOA is vulnerable to challenge in the courts, where federal case law had held that U.S. statutes trump executive agreements in force of law.
Administration sources told Fox News it is the intention of Secretary of State John Kerry, who negotiated the nuclear deal with Iran’s foreign minister and five other world powers, that the re-opening of the “foreign sub” loophole by the JCPOA is to be construed as broadly as possible by lawyers for the State Department, the Treasury Department and other agencies involved in the deal’s implementation.
But the apparent conflict between the re-opening of the loophole and existing U.S. law leaves the Obama administration with only two options going forward. The first option is to violate ITRA, and allow foreign subsidiaries to be treated differently than U.S. parent firms. The second option is to treat both categories the same, as ITRA mandated – but still violate the section of ITRA that required Iran’s removal from the State Department terror list as a pre-condition of any such licensing.
It would also renege on the many promises of senior U.S. officials to keep the broad array of American sanctions on Iran in place. Chris Backemeyer, who served as Iran director for the National Security Council from 2012 to 2014 and is now the State Department’s deputy coordinator for sanctions policy, told POLITICO last month “there will be no real sanctions relief of our primary embargo….We are still going to have sanctions on Iran that prevent most Americans from…engaging in most commercial activities.”
Likewise, in a speech at the Washington Institute for Near East Policy last month, Adam Szubin, the acting under secretary of Treasury for terrorism and financial crimes, described Iran as “the world’s foremost sponsor of terrorism” and said existing U.S. sanctions on the regime “will continue to be enforced….U.S. investment in Iran will be prohibited across the board.”
Nominated to succeed his predecessor at Treasury, Szubin appeared before the Senate Banking Committee for a confirmation hearing the day after his speech to the Washington Institute. At the hearing, Sen. Tom Cotton (R-Arkansas) asked the nominee where the Obama administration finds the “legal underpinnings” for using the JCPOA to re-open the “foreign sub” loophole.
Szubin said the foreign subsidiaries licensed to do business with Iran will have to meet “some very difficult conditions,” and he specifically cited ITRA, saying the 2012 law “contains the licensing authority that Treasury would anticipate using…to allow for certain categories of activity for those foreign subsidiaries.”
Elsewhere, in documents obtained by Fox News, Szubin has maintained that a different passage of ITRA, Section 601, contains explicit reference to an earlier law – the International Emergency Economic Powers Act, or IEEPA, on the books since 1977 – and states that the president “may exercise all authorities” embedded in IEEPA, which includes licensing authority for the president.
However, Section 601 is also explicit on the point that the president must use his authorities from IEEPA to “carry out” the terms and provisions of ITRA itself, including Section 218 – which mandated that, before this form of sanctions relief can be granted, Iran must be removed from the State Department’s terror list. Nothing in the Congressional Record indicates that, during debate and passage of ITRA, members of Congress intended for the chief executive to use Section 601 to overturn, rather than “carry out,” the key provisions of his own law.
One administration lawyer contacted by Fox News said the re-opening of the loophole reflects circular logic with no valid legal foundation. “It would be Alice-in-Wonderland bootstrapping to say that [Section] 601 gives the president the authority to restore the foreign subsidiary loophole – the exact opposite of what the statute ordered,” said the attorney, who requested anonymity to discuss sensitive internal deliberations over implementation of the Iran deal.
At the State Department on Thursday, spokesman John Kirby told reporters Secretary Kerry is “confident” that the administration “has the authority to follow through on” the commitment to re-open the foreign subsidiary loophole.
“Under the International Emergency Economic Powers Act, the president has broad authorities, which have been delegated to the secretary of the Treasury, to license activities under our various sanctions regimes, and the Iran sanctions program is no different,” Kirby said.
Sen. Ted Cruz (R-Texas), the G.O.P. presidential candidate who is a Harvard-trained lawyer and ardent critic of the Iran deal, said the re-opening of the loophole fits a pattern of the Obama administration enforcing federal laws selectively.
“It’s a problem that the president doesn’t have the ability wave a magic wand and make go away,” Cruz told Fox News in an interview. “Any U.S. company that follows through on this, that allows their foreign-owned subsidiaries to do business with Iran, will very likely face substantial civil liability, litigation and potentially even criminal prosecution. The obligation to follow federal law doesn’t go away simply because we have a lawless president who refuses to acknowledge or follow federal law.”
A spokesman for the Senate Banking Committee could not offer any time frame as to when the committee will vote on Szubin’s nomination.
In the months since the signing of the Iran Threat Reduction and Syria Human Rights Act (which we will stubbornly continue to refer to here as “ITRA”), the Obama administration has worked to implement tougher sanctions against Iran. Although many of the ITRA regulations are not expected until early November, an Executive Order issued last week marked the beginning of a much stricter era of sanctions pursuant to ITRA, the Iran Sanctions Act of 1996 (ISA), and the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA).
On October 9, 2012, sixty days after President Obama signed ITRA into law, he issued Executive Order No. 13,628, extending U.S. Iran sanctions to cover foreign subsidiaries of U.S. parent companies, a prohibition that did not exist until promulgated in ITRA.[1] The Executive Order implements ITRA Section 218,[2] which we highlighted in our August 17, 2012 post, by providing that:
No entity owned or controlled by a United States person and established or maintained outside the United States may knowingly engage in any transaction, directly or indirectly, with the Government of Iran or any person subject to the jurisdiction of the Government of Iran, if that transaction would be prohibited by [the pre-existing Iran sanctions].
The Executive Order defines the term “entity” to mean “a partnership, association, trust, joint venture, corporation, group, subgroup, or other organization.” This is a slight expansion of the definition provided by Congress in Section 218, which does not include the words “group” or “subgroup.” The resulting definition appears to authorize sanctions where any group “controlled by” a U.S. person, regardless of whether the group is formally incorporated, conducts prohibited Iran-related business.
The Executive Order gives no quarter for existing contracts, and authorizes standard Office of Foreign Assets Control (OFAC) penalties against the U.S. person controlling the foreign entity. However, Subsection 4(c) of the Order provides that civil penalties shall not apply if the U.S. person divests or terminates its business with the foreign subsidiary not later than February 6, 2013.
The Order also directs that Secretaries of Treasury and State to issue regulations to implement several other provisions of ITRA (though the ITRA itself also directed the issuance of such regulations within 90 days of the effective date of the statute). Thus, Treasury regulations may be expected by around November 8, 2012 regarding several ITRA provisions, including the following:
Section 202, which requires the imposition of at least five ISA sanctions on any person who, on or after November 8, 2012, beneficially owns, operates, or controls a vessel that is used to transport crude oil from Iran to another country. This provision applies, however, only if the President determines under the National Defense Authorization Act that there is a sufficient supply of petroleum from countries other than Iran to permit petroleum purchasers to significantly reduce purchases from Iran;
Section 214, which increases the availability of sanctions on subsidiaries and agents of UN-sanctioned persons;
Section 215, which extends the availability of sanctions against persons connected to Iran’s weapons of mass destruction to any foreign financial institution who aids that person; and
Section 216 adds a new section to CISADA, expanding sanctions to apply to financial institutions connected to certain proliferation or terrorism activities of Iran or its National Guard.
In addition to the forthcoming regulations, the President is required to provide a great deal of information to Congress on and after November 8. Under section 211, the President must report to Congress on the identity of operators of vessels and persons that conduct or facilitate significant financial transactions that manage Iranian ports designated for sanctions under the International Emergency Economic Powers Act. Furthermore, the President must provide the identity of and the restrictions on individuals, including senior Iranian officials, Iranian Revolutionary Guard Corps Officials, foreign persons supporting the Iranian Revolutionary Guard, and foreign government agencies carrying out transactions with certain Iran-affiliated persons.[3]
The Secretaries of Treasury and State also are required to report to the relevant Congressional committees on certain aspects of the implementation of ITRA. Under Section 206, the Secretary of State must brief Congress on the implementation of the ISA by November 8, 2012, and every 120 days thereafter. The Secretary of Treasury, pursuant to sections 216 and 220, must report to Congress on the implementation of sanctions on persons and entities who provide financial assistance to proliferation and terrorism activities.
The pace of Iran sanctions has accelerated rapidly in recent months and should be expected to continue to increase over the near and medium term. We will continue to provide our analysis of new developments here.
[1] On the same day the Executive Order was issued, OFAC issued a “Frequently Asked Questions” document providing guidance with regard to the Order.
[2] Sec. 218 – Liability of Parent Companies for Violations of Sanctions by Foreign Subsidiaries (requiring the President and the Secretary of Treasury to promulgate regulations within 60 days of enactment).
