By Amanda Maine, J.D.
The Subcommittee on Oversight and Investigations of the House Financial Services Committee heard from witnesses on alleged "astroturfing" of the Administrative Procedure Act (APA) process for submitting comment letters on agency rulemaking. Astroturfing, according to the subcommittee, can involve special interest groups using invented or stolen identities to submit comments about proposed rules under the guise of a spontaneous grassroots movement. In particular, the subcommittee hearing memorandum cited reports of astroturfing relating to proposals by the SEC and the CFPB, as well as a proposed bank merger under the Office of the Comptroller of the Currency (OCC).
"Fake letters" from Main Street investors. In December, SEC Chairman Jay Clayton came under fire from Sen. Chris Van Hollen (D-Md), who said that the chairman had been "duped" into issuing a statement citing letters from purported Main Street investors in support of reforming the proxy process. A Bloomberg article cited by Sen. Van Hollen found that the letters referenced by Chairman Clayton were not actually authored by the people that signed them or were authored by relatives of the chairman of a corporate interest group.
Subcommittee Chairman Al Green (D-Tex), cited Clayton’s statement and the subsequent controversy over the "fake letters" as a reason for holding the hearing, noting that public trust in the rulemaking process must be restored. Ranking Member Andy Barr (R-Ky), scoffed that the hearing was a "thinly veiled attempt to slow the regulatory process" because the majority party does not like "the regulators who are writing the rules."
Mass comments and false comments. Professor Beth Simone Noveck of New York University testified that the notice and comment period on proposed federal regulations is sometimes referred to as the "notice and spam" period due to the volume of duplicate comment letters agencies receive. For example, the FCC’s 2017 net neutrality proposal had 22 million comments, she said. She recommended that the agencies use readily available tools to address voluminous, duplicative, and fake comments. These include machine learning to summarize voluminous comments, "de-duplication" software to remove identical comments, and filtering software to sift out "the real and the relevant."
Paulina Gonzalez-Brito, executive director of the California Reinvestment Coalition (CRC), said that her organization uncovered facts during the merger of OneWest Bank and CIT in 2014 and 2015 that confirmed that the public comment process had been compromised and that fabricated comment letters were submitted in support of the bank merger. She noted that Joseph Otting, then CEO of OneWest Bank and currently the Comptroller of the Currency, urged his Wall Street contacts and business partners to submit comment letters in favor of the merger. Upon investigation, the CRC found that nearly all letters in support of the merger were sent from Yahoo email accounts with questionable addresses such as "firstname.lastname@example.org." Other letters used fake names or real names without the individual’s permission. According to Gonzalez-Brito, OneWest benefited from the "fake support" because the letters were cited in the approval of the merger.
Professor Steven Balla of George Washington University cited the EPA as an example of how agencies can handle mass comment campaigns. According to Balla, about 75 percent of EPA comment letters come from environmental advocacy groups, labor groups, and progressive policy groups, with the rest coming from groups representing areas such as the agriculture industry and the energy sector. The EPA has dealt with mass comment letter campaigns by identifying and posting the campaigns to regulations.gov and informing the public about the organization that sponsored the campaign and the number of comments contained in the campaign. Instead of placing restrictions on mass comment letter campaigns, agencies should follow the EPA’s lead to separate mass comment letters from individual substantive letters, Balla recommended. Congress should focus its attention on the dangers presented by fake letters instead, he added.
Further action needed? Ranking Member Barr agreed that the problem is false comments and not mass comments. He asked Seto Bagdoyan of the GAO whether he thought that the APA should be amended to standardize the process. Bagdoyan noted that the APA does allow discretion to the agencies on how they collect and post comment letters. A 2019 GAO study recommended that certain agencies should clearly disclose how they post public comments and associated identity information, including the SEC and the CFPB. According to Bagdoyan, the SEC has implemented its recommendations by issuing a memorandum that reflects SEC’s internal policies for posting duplicate comments and associated identity information. The SEC has also communicated these policies to public users on the SEC.gov website by adding a disclaimer on the main comment posting page that describes how the agency posts comments.
Representative Katie Porter (D-Calif), asked Bartlett Naylor of Public Citizen about a letter his group wrote to the SEC’s inspector general about Chairman Clayton highlighting letters by "Main Street investors" who were in favor of restricting shareholder rights. Naylor called it a "Frank Capra moment" where Clayton referenced retired veterans and teachers with "ceremony and reverence." According to Naylor, Clayton had represented that he did a random sample across hundreds of comments and just happened to select the letters that were against shareholder rights.
Porter asked if it would be possible to pursue the lobbyists behind the fake comment letters. Naylor said it should be explored, as it involved corporate lobbyists using actual people as "stooges and pawns." In his written testimony, Naylor remarked that for the most egregious cases of comment fabrication, current law already provides penalties for fraud. It is a federal crime to "knowingly and willfully" make "any materially false, fictitious, or fraudulent statement or representation" to the federal government, punishable by a fine or up to five years in prison, or both. Naylor called on Congress to question why law enforcement has not penalized those who knowingly made such representations to the government in the form of these false comment letters. The committee should also commission a study on the utility of publicly listing of those who file fake comments, especially those who organize the effort, Naylor recommended.