[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
                     DEFERRED PROSECUTION: SHOULD
                  CORPORATE SETTLEMENT AGREEMENTS BE 
                          WITHOUT GUIDELINES?

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   COMMERCIAL AND ADMINISTRATIVE LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               ----------                              

                             MARCH 11, 2008

                               ----------                              

                           Serial No. 110-174

                               ----------                              

         Printed for the use of the Committee on the Judiciary


   Available via the World Wide Web: http://judiciary.house.govFOR 
                               SPINE deg.
                         DEFERRED PROSECUTION: 
     SHOULD CORPORATE SETTLEMENT AGREEMENTS BE WITHOUT GUIDELINES?

                      DEFERRED PROSECUTION: SHOULD
                  CORPORATE SETTLEMENT AGREEMENTS BE 
                          WITHOUT GUIDELINES?

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   COMMERCIAL AND ADMINISTRATIVE LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 11, 2008

                               __________

                           Serial No. 110-174

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov



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                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
MAXINE WATERS, California            DANIEL E. LUNGREN, California
WILLIAM D. DELAHUNT, Massachusetts   CHRIS CANNON, Utah
ROBERT WEXLER, Florida               RIC KELLER, Florida
LINDA T. SANCHEZ, California         DARRELL ISSA, California
STEVE COHEN, Tennessee               MIKE PENCE, Indiana
HANK JOHNSON, Georgia                J. RANDY FORBES, Virginia
BETTY SUTTON, Ohio                   STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois          TOM FEENEY, Florida
BRAD SHERMAN, California             TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin             LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York          JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota

            Perry Apelbaum, Staff Director and Chief Counsel
      Sean McLaughlin, Minority Chief of Staff and General Counsel
                                 ------                                

           Subcommittee on Commercial and Administrative Law

                LINDA T. SANCHEZ, California, Chairwoman

JOHN CONYERS, Jr., Michigan          CHRIS CANNON, Utah
HANK JOHNSON, Georgia                JIM JORDAN, Ohio
ZOE LOFGREN, California              RIC KELLER, Florida
WILLIAM D. DELAHUNT, Massachusetts   TOM FEENEY, Florida
MELVIN L. WATT, North Carolina       TRENT FRANKS, Arizona
STEVE COHEN, Tennessee

                     Michone Johnson, Chief Counsel

                    Daniel Flores, Minority Counsel


                            C O N T E N T S

                              ----------                              

                             MARCH 11, 2008

                                                                   Page

                           OPENING STATEMENTS

The Honorable Linda T. Sanchez, a Representative in Congress from 
  the State of California, and Chairwoman, Subcommittee on 
  Commercial and Administrative Law..............................     1
The Honorable Chris Cannon, a Representative in Congress from the 
  State of Utah, and Ranking Member, Subcommittee on Commercial 
  and Administrative Law.........................................     3
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, Chairman, Committee on the 
  Judiciary, and Member, Subcommittee on Commercial and 
  Administrative Law.............................................    17

                               WITNESSES

The Honorable John Ashcroft, The Ashcroft Group, LLC, Washington, 
  DC
  Oral Testimony.................................................    21
  Prepared Statement.............................................    23
Mr. Timothy L. Dickinson, Paul, Hastings, Janofsky, & Walker, 
  LLP, Washington, DC
  Oral Testimony.................................................    35
  Prepared Statement.............................................    37
The Honorable David E. Nahmias, The United States Attorney's 
  Office Northern District of Georgia, Atlanta, GA
  Oral Testimony.................................................   123
  Prepared Statement.............................................   125
The Honorable George J. Terwilliger, III, Esquire, White & Case, 
  LLP, Washington, DC
  Oral Testimony.................................................   134
  Prepared Statement.............................................   136
Brandon Garrett, Professor, University of Virginia School of Law, 
  Charlottesville, VA
  Oral Testimony.................................................   145
  Prepared Statement.............................................   147
The Honorable Frank Pallone, Jr., a Representative in Congress 
  from the State of New Jersey
  Oral Testimony.................................................   312
  Prepared Statement.............................................   314
The Honorable William Pascrell, Jr., a Representative in Congress 
  from the State of New Jersey
  Oral Testimony.................................................   319
  Prepared Statement.............................................   321

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of the Honorable Christopher B. Cannon, a 
  Representative in Congress From the State of Utah, and Ranking 
  Member, Subcommittee on Commercial and Administrative Law......     4
Article from The Record titled ``Christie's All-Out War,'' 
  September 23, 2007, submitted by the Honorable Christopher B. 
  Cannon, a Representative in Congress from the State of Utah, 
  and Ranking Member, Subcommittee on Commercial and 
  Administrative Law.............................................   291
Article from The American Spectator titled ``First Spitzer, Now 
  Stryker,'' March 11, 2008, submitted by the Honorable 
  Christopher B. Cannon, a Representative in Congress from the 
  State of Utah, and Ranking Member, Subcommittee on Commercial 
  and Administrative Law.........................................   329
Article from The Washington Times, titled ``Medical supplier 
  Stryker probed,'' March 11, 2008, submitted by the Honorable 
  Christopher B. Cannon, a Representative in Congress rrom the 
  State of Utah, and Ranking Member, Subcommittee on Commercial 
  and Administrative Law.........................................   330

                                APPENDIX
               Material Submitted for the Hearing Record

Responses to Post-Hearing Questions submitted by the Honorable 
  Linda T. Sanchez, a Representative in Congress from the State 
  of California, and Chairwoman, Subcommittee on Commercial and 
  Administrative Law to the Honorable John Ashcroft, The Ashcroft 
  Group, LLC, Washington, DC.....................................   338
Responses to Post-Hearing Questions submitted by the Honorable 
  Linda T. Sanchez, a Representative in Congress from the State 
  of California, and Chairwoman, Subcommittee on Commercial and 
  Administrative Law to Timothy L. Dickinson, Paul, Hastings, 
  Janofsky, & Walker, LLP, Washington, DC........................   364
Responses to Post-Hearing Questions submitted by the Honorable 
  Linda T. Sanchez, a Representative in Congress from the State 
  of California, and Chairwoman, Subcommittee on Commercial and 
  Administrative Law to the Honorable David E. Nahmias, The 
  United States Attorney's Office Northern District of Georgia, 
  Atlanta, GA....................................................   368
Responses to Post-Hearing Questions submitted by the Honorable 
  Linda T. Sanchez, a Representative in Congress from the State 
  of California, and Chairwoman, Subcommittee on Commercial and 
  Administrative Law to the Honorable George J. Terwilliger, III, 
  Esquire, White & Case, LLP, Washington, DC.....................   378
Responses to Post-Hearing Questions submitted by the Honorable 
  Linda T. Sanchez, a Representative in Congress from the State 
  of California, and Chairwoman, Subcommittee on Commercial and 
  Administrative Law to Brandon Garrett, Professor, University of 
  Virginia School of Law, Charlottesville, VA....................   379
Prepared Statement of James K. Robinson, former Assistant 
  Attorney General for the Criminal Division, United States 
  Department of Justice..........................................   383
Letter to the Honorable Linda T. Snchez from the Honorable George 
  J. Terwilliger, III............................................   412


                      DEFERRED PROSECUTION: SHOULD
                   CORPORATE SETTLEMENT AGREEMENTS BE
                          WITHOUT GUIDELINES?

                              ----------                              


                         TUESDAY MARCH 11, 2008

              House of Representatives,    
                     Subcommittee on Commercial    
                            and Administrative Law,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 10:40 a.m., in 
room 2141, Rayburn House Office Building, the Honorable Linda 
Sanchez (Chairwoman of the Subcommittee) presiding.
    Present: Representatives Conyers, Sanchez, Johnson, 
Lofgren, Delahunt, Cohen, Cannon, Feeney, and Franks.
    Staff present: Eric Tamarkin, Majority Counsel; Daniel 
Flores, Minority Counsel; and Adam Russell, Professional Staff 
Member.
    Ms. Sanchez. This hearing of the Committee on the 
Judiciary, Subcommittee on Commercial and Administrative Law 
will now come to order. I will now recognize myself for a brief 
statement.
    I have called today's hearing to shed light on the use of 
pre-trial prosecution agreements in corporate crime cases, a 
growing practice that has so far been operating mostly in the 
shadows without guidelines and without oversight. Today's 
hearing is not being held with prejudice for or against 
deferred prosecution and non-prosecution agreements, but rather 
with concern about the number of unanswered questions 
surrounding them.
    The concept of deferred prosecution originated as a 
rehabilitation option for non-violent juvenile and drug 
offenders. After prosecutors file an indictment, the 
prosecution is put on hold in exchange for commitments by the 
offender to reform and provide restitution. If the offender 
meets the obligations in the agreement, prosecutors may ask a 
judge to dismiss the indictment.
    In the past 6 years, the Justice Department has 
increasingly relied upon a similar tool for white-collar 
crimes, usually involving private corporations. In such cases, 
an independent corporate monitor is often hired to determine 
whether the target corporation has complied with the 
obligations in the deferred prosecution or non-prosecution 
agreement.
    Late last year, I was troubled to learn of what appeared to 
be a back room sweetheart deal where New Jersey U.S. attorney, 
Christopher Christie appointed John Ashcroft, the former 
attorney general, to serve as an independent corporate monitor 
and collect fees between $28 million and $52 million. I was 
also concerned to learn from press accounts that Mr. Ashcroft 
was selected with no public notice and no bidding, and he had 
to use considerable time to prepare for the assignment and 
learn more about the business that he was contracted to 
monitor.
    When I continued to investigate the issue of deferred 
prosecution agreements and the appointment of independent 
corporate monitors, I discovered that the parties to these 
agreements were operating in a wild west type of environment 
with no laws and no Justice Department guidelines. Less than 24 
hours before today's hearing, the department sent us a memo 
mapping out some guidance with regard to the selection and use 
of monitors. And while I do believe that this may be a good 
start, uncertainties still remain as to how monitors should be 
selected and how these agreements should be structured.
    The absence of standards governing how independent 
corporate monitors are selected has resulted in a hodge-podge 
of approaches across jurisdictions. For example, in several 
agreements prosecutors selected the monitor, typically after 
consulting with the corporation. In others, the corporation 
selected the candidate.
    Additionally, a few agreements provide for collaboration 
among the corporation, regulators, and prosecutors in the 
selection. Finally, in at least three agreements, a court 
played a significant role in the monitor's selection process.
    Furthermore, the current system lacks guidelines to direct 
how independent corporate monitors conduct oversight of the 
corporation once they have been selected. Most monitors are 
granted broad powers to gather information, institute polices, 
and oversee compliance.
    For example, in one matter, the monitor had the power to 
``require any personnel action, including termination regarding 
individuals who were engaged in or were responsible for the 
illegal conduct described in the information.'' In essence, the 
agreement allowed the monitor to act as the prosecutor, judge, 
and jury for these employees.
    While uncertainty is common in many aspects of deferred 
prosecution agreements, one thing does remain certain. The 
government has tremendous leverage over a corporation entering 
into an agreement. Corporations facing criminal prosecution 
have an unfair choice. They can either risk a conviction and 
perhaps even dissolution after trial or be coerced into 
accepting the terms and the monitoring that a prosecutor 
unilaterally believes are appropriate.
    Unfortunately, because of a lack of transparency in many 
aspects of deferred prosecution agreements, we still don't know 
the full scope of this issue. On January 10th, Chairman 
Conyers, Congressman Pascrell and I sent a letter to the 
Justice Department requesting that the department disclose all 
deferred prosecution agreements and the individuals selected as 
monitors. It has been 2 months since our request, and we have 
yet to receive a response.
    While we patiently await the department's disclosure of 
information, this hearing serves as a critical starting point 
of bringing deferred prosecution agreements and the appointment 
of monitors out from behind the shadows. Accordingly, I look 
forward to probing these issues further and considering whether 
legislation in this area is appropriate.
    I would like to recognize now the Ranking Member of the 
full Judiciary Committee, Mr. Smith, who has joined us and has 
some opening words.
    Mr. Smith. Thank you, Madam Chair. I really don't have an 
opening statement. I do want to, however, welcome former 
Attorney General John Ashcroft to our hearing today. I know 
what he is going to say, and I agree with it. And I just 
appreciate his taking the time to be here today.
    Madam Chair, I also want to read an excerpt from an article 
in the New York Times today that speaks to the subject matter 
that we are here to discuss. And here is the exact quote from 
the New York Times article today.
    ``Outside lawyers who have reviewed Mr. Ashcroft's fee 
schedule said it was not out of line.'' Madam Chair, if you 
read that in the New York Times, that says a whole lot. And so, 
I just appreciate their commentary, and I appreciate your 
having this hearing today. With that, I will yield back.
    Ms. Sanchez. I thank the Ranking Member of the full 
Committee, Mr. Smith, and would like to recognize at this time 
our distinguished Ranking Member of the Subcommittee, Mr. 
Cannon.
    Mr. Cannon. Thank you, Madam Chair. I would ask unanimous 
consent to have my full statement entered into the record.
    Ms. Sanchez. Without objection, so ordered.
    [The prepared statement of Mr. Cannon follows:]

     Prepared Statement of the Honorable Christopher B. Cannon, a 
Representative in Congress From the State of Utah, and Ranking Member, 
           Subcommittee on Commercial and Administrative Law



























    Mr. Cannon. And I do that because I understand Mr. Ashcroft 
has a travel obligation he has informed the majority of and 
would need to leave at 12. And I think that he ought to have 
plenty of time to respond to the allegations that are being 
made.
    You made a point of Mr. Christie's involvement. He has been 
a remarkably effective prosecutor. And to a degree that becomes 
an issue I hope that we could address that. But I would like to 
thank you, Madam Chair, for this hearing. As you know, we have 
talked about the concerns that I have with prosecutorial 
discretion. And we have a marvelous panel here for addressing 
that issue and in particular, as it relates to the matters that 
we have before us today.
    So I hope that we come out of here with a much expanded 
view of what the possibilities are for, not only helping U.S. 
attorneys handle the extraordinary burdens that they have, but 
also helping us focus on how we in Congress and particularly, 
this Committee can become much more involved in the process of 
where we are seeing prosecutorial discretion is handled 
throughout the country. So I want to thank you again for 
drawing this panel together.
    I want to thank all the panelists for being here today. I 
suspect this will be a very interesting hearing. And I hope we 
can clear the air and allow Mr. Ashcroft to have the 
opportunity to respond with particulars to the suggestions of 
the possibility of impropriety, referring back to what Mr. 
Smith has just said, when the New York Times suggests that 
things don't seem out of line, there is probably a pretty good 
guess that they are not.
    But I think it would be very important that we have the 
opportunity to air both the charges that have been sort of 
insinuated against Mr. Christie and also Mr. Ashcroft and that 
we get beyond that and then start looking at the--we have a 
marvelous panel of people who actually understand these issues 
in great depth. And I hope we can plumb that understanding and 
learn how to do our job or learn what we can do here to be much 
better at our job.
    So thank you, Madam Chair. I yield back.
    Ms. Sanchez. I thank the gentleman for his statement.
    I would now like to recognize at this time Mr. Conyers, a 
distinguished Member of the Subcommittee and the Chairman of 
the full Judiciary Committee. Mr. Conyers?
    Mr. Conyers. Thank you, Madam Chairwoman, for holding the 
hearing. You and Chris Cannon are to be commended. And I 
appreciate the constructive tone with which we are beginning 
these off. I welcome John Ashcroft as the former attorney 
general and likewise, all the witnesses.
    All we are doing today, sir, is exploring the Department of 
Justice's use of corporate settlement agreements. We know that 
they are a useful prosecutorial tool, several aspects of their 
implementation that require congressional oversight and 
possibly legislative attention, as has been suggested.
    Congressional oversight of these agreements is probably 
essential to provide transparency. We understand the importance 
of these agreements as effective prosecutorial tools and 
respect confidentiality concerns. We, nonetheless, want to know 
the number of agreements into which the department has entered 
these agreements and the details around them. I am going to ask 
that of the Department of Justice.
    How many of these kinds of agreements are floating around? 
And it is important in light of the fact that the number of 
these agreements have increased dramatically during the tenure 
of our star witness here, former Attorney General John 
Ashcroft.
    In an effort to obtain information regarding the agreement, 
as Chairwoman Sanchez has indicated, we are still waiting to 
receive a response from the attorney general. Now, despite the 
guidance that the department released yesterday afternoon 
regarding the use of corporate monitors in these agreements, 
this guidance still fails to ensure uniformity in the 
agreements themselves. Indeed, some agreements require the 
implementation of compliance programs, restitution, and fines 
while others do not.
    While it may be necessary to fashion some agreements on a 
case-by-case basis, and we can concede that, general uniformity 
could ensure the fairest application. We hope that we will have 
these concerns addressed during the hearing today.
    We hope that the recently-released department guidelines 
regarding the selection of corporate monitors are successful 
applied and implemented, because otherwise there is the 
potential for department politicization. One such example for 
this potential has arisen in the agreement between Zimmer 
Holdings and the United States Attorney's office in which 
Attorney Christopher Christie, who has been described here as a 
stellar U.S. attorney, a trial expert, but that we still have a 
problem with the naming of our former Attorney General John 
Ashcroft as corporate monitor.
    Pursuant to this agreement, they have agreed to pay Mr. 
Ashcroft's firm anywhere from between $28 million and $52 
million. And if it is not asking too much, we would like to 
know exactly how much is involved here.
    Prior to the appointment of our former attorney general, 
there was neither public notice of the monitor position nor any 
public bidding for the assignment that we know of. This 
highlights the concern that brings us all here this morning.
    We must assure the public that the Department of Justice is 
not rewarding political allies in a forum where prosecutorial 
independence is absolutely necessary. Our investigation into 
the removal of nine U.S. attorneys has taught us, 
unfortunately, that the department can be politicized in a way 
that undermines public confidence. And so, we hope that the 
department guidelines released yesterday accomplish the goal of 
restoring public confidence.
    And finally, there ought to be independent judicial 
oversight of corporate settlement agreements because currently 
there is no transparency and no requirement that they be made 
public. Judicial oversight would help to ensure greater 
legitimacy of these agreements by providing a neutral decision-
maker to prevent abuses and politicization as well as ensure 
proper completion of the terms of the agreements.
    And so, I hope that all of our witnesses will help throw 
light on a subject that has not been examined up until now. And 
that is why I commend this Committee and its leadership for 
holding this hearing today.
    Thank you, Madam Chair.
    Ms. Sanchez. I thank the gentleman for his opening 
statement.
    And at this time, I would like to welcome two of our 
colleagues who have joined us on the dais, Mr. Pascrell and Mr. 
Pallone. They are not Members of the Subcommittee, but they 
will be listening in and providing testimony for our second 
panel.
    Without objection, other Members' opening statements will 
be included in the record. And without objection, the Chair 
will be authorized to declare a recess of the hearing at any 
point.
    I am now pleased to introduce our witness panel for today's 
hearing. Our first witness is Mr. John Ashcroft. Mr. Ashcroft 
serves as chairman of the Ashcroft Group, LLC, which provides 
confidential strategic consulting and crisis counseling to 
major international corporations. Prior to forming the Ashcroft 
Group, Mr. Ashcroft served during the first term of President 
George W. Bush from 2001 until 2005 as the 79th U.S. attorney 
general.
    During his tenure as attorney general, the corporate fraud 
task force was established within the department to restore 
integrity to the marketplace. Prior to his appointment as 
attorney general, Mr. Ashcroft was elected to the U.S. Senate 
in 1994 and served on the Senate Judiciary, Foreign Relations, 
and Commerce Committees.
    From 1985 through 1993, Mr. Ashcroft served as governor of 
Missouri and served as chairman of the non-partisan National 
Governors Association in 1991 and 1992. He received awards from 
the Business Roundtable, U.S. Chamber of Commerce, and National 
Federation of Independent Businessmen for his service in the 
Senate.
    We want to welcome you, Mr. Ashcroft.
    Our second witness is Timothy Dickinson. Mr. Dickinson is a 
partner in the Washington, D.C. firm of Paul, Hastings, 
Janofsky & Walker, LLP. Mr. Dickinson's practice is devoted 
primarily to international commercial matters, including all 
aspects of political risk insurance, the Foreign Corrupt 
Practices Act, U.S. export laws, and economic sanctions. Mr. 
Dickinson works closely with a wide range of industries on FCPA 
matters, including establishment of compliance programs, due 
diligence in acquisitions, special investigations, and defense 
before U.S. regulators.
    In 2005, Mr. Dickinson was appointed independent expert by 
Monsanto as part of a deferred prosecution agreement with the 
Department of Justice. Mr. Dickinson is currently an adjunct 
professor at the University of Michigan Law School where he 
teaches trans-national law and international commercial 
transaction. He has served on the board of editors of the FCPA 
Reporter since 1997 and is the director of the International 
Law Institute course on government integrity and anti-
corruption initiatives.
    Welcome to you, Mr. Dickinson.
    Our third witness is David Nahmias. Is that a correct 
pronunciation? Mr. Nahmias is the United States attorney for 
the Northern district of Georgia. He serves as the chief 
Federal law enforcement officer in that district representing 
the United States in all criminal and civil litigation in 
Federal court.
    In January of 2005, Mr. Nahmias was appointed to serve on 
the attorney general's advisory committee of the United States 
attorney, which reviews and recommends policies for Federal 
prosecutors nationwide. The attorney general also appointed Mr. 
Nahmias as chairman of the White Collar Crime Subcommittee in 
October of 2007.
    Prior to his appointment as the U.S. attorney, Mr. Nahmias 
served as a deputy assistant attorney general in the criminal 
division, the fraud section, the appellate section, and the 
capital case unit. Mr. Nahmias practiced with the law firm of 
Hogan & Hartson in Washington, D.C. and served as a law clerk 
for Judge Warren Silverman of the U.S. Circuit Court for the 
District of Columbia and for Justice Antonin Scalia of the 
Supreme Court of the United States.
    Welcome to you, Mr. Nahmias.
    Our fourth witness is George Terwilliger. Is that the 
correct pronunciation? Thank you--a partner with the law firm 
of White & Case, LLP, Mr. Terwilliger's clients include 
national and international companies and prominent individuals. 
He has represented the interests of major corporations and 
other institutions in civil and criminal enforcement 
proceedings, including financial crimes and environmental, 
anti-trust, health care, and tax matters, among others.
    Prior to joining White & Case, LLP, Mr. Terwilliger served 
as the presidential appointee in two Administrations. He was 
the deputy attorney general in charge of all Justice Department 
operations, including crisis response. He also served as a 
presidentially appointed United States attorney for 5 years and 
for 8 years as a Federal prosecutor.
    Welcome again to you.
    Our final witness on our first panel is Brandon Garrett. 
Professor Garrett joined the University of Virginia Law School 
faculty in 2005 as an associate professor of law. His areas of 
research and publication include criminal procedure, wrongful 
convictions, habeas corpus, corporate crimes, civil rights, 
civil procedure, constitutional law, and new forms of public 
governance.
    Prior to joining the University of Virginia School of Law 
faculty, Professor Garrett worked as an associate in New York 
City at Cochran, Neufeld & Scheck, LLP litigating wrongful 
convictions, DNA exoneration, and police brutality cases. He 
clerked for the Honorable Pierre Leval of the U.S. Court of 
Appeals for the 2nd Circuit.
    I want to thank you all for your willingness to participate 
in today's hearing. Without objection, your written statements 
will be placed into the record in their entirety. And we are 
going to ask that you please limit your oral remarks to 5 
minutes.
    You will note that we have a lighting system that starts 
with a green light when your testimony time starts. At 4 
minutes, you will get the yellow warning light that you have 
about a minute left to conclude your testimony. And then when 
your 5 minutes have expired, you will see the red light.
    If you are caught mid-sentence when the red light comes on, 
we will naturally allow you to finish your last thought before 
moving on to our next witness. After each witness has presented 
his or her testimony, Subcommittee Members will be permitted to 
ask questions subject to the 5-minute limit.
    With that, I would now invite Mr. Attorney General to 
please begin his oral testimony.

           TESTIMONY OF THE HONORABLE JOHN ASHCROFT, 
            THE ASHCROFT GROUP, LLC, WASHINGTON, DC

    Mr. Ashcroft. Good morning. And, Chairman Conyers, and 
Madam Chairwoman Sanchez, and other Members of the Committee, 
my written testimony has about eight points, which I would like 
to summarize in my oral remarks now and see if I can get that 
done in 5 minutes.
    You have covered point one, my experience. And I thank you 
for reminding folks that I served as state auditor, state 
attorney general, governor of the state, senator, United States 
senator, serving on Committees like Labor and Human Resources 
and serving as the attorney general of the United States. I 
thank you.
    Point two--the public safety effort that we rendered at the 
Department of Justice is one which is important and should be 
considered. While most Americans focused on the Department of 
Justice's record in successfully preventing another attack 
after September 11th, violent crime dropped to a 30-year low. 
Teen drug use dropped for the first time in a decade. Gun crime 
fell to record lows.
    The department won the largest health care fraud cases in 
the Nation's history. There was a 73 percent increase in health 
care fraud recoveries totaling $4.5 billion. And after the 
corporate malignancies of the 1990's surfaced, shaking 
worldwide confidence in our financial markets, we organized the 
corporate fraud task force, which reestablished a standard of 
integrity restoring America's reputation for sound and secure 
markets. In dozens of corporate fraud prosecutions, over 600 
corporate criminals were convicted, including 31 chief 
financial officers.
    Point three--deferred prosecution agreements protect the 
American public from corporate criminality while placing the 
cost of that protection on the corporate wrongdoers, not on the 
taxpayers. My fellow panel members have written about job loss 
and functional dislocations of traditional criminal 
prosecutions destroying entire corporations rather than 
addressing limited malignancies.
    In my experience, prosecutors understand that a corporate 
indictment can be a corporate death sentence. A deferred 
prosecution can avoid the catastrophic collateral consequences 
and costs that are associated with corporate conviction.
    Point four--as we seek to achieve with other tools in law 
enforcement, we should constantly seek to improve deferred 
prosecution agreements. As a result, I welcome and I support 
the principles announced in the additional guidelines from the 
Department of Justice.
    Point five--as attorney general, I instructed every U.S. 
attorney to--and I did this personally eyeball to eyeball. I 
had meetings with each of them--to be blind to the party 
affiliation and political preferences of individuals. That 
principle guided my endeavors, including deferred prosecution 
agreements. It was true then. It should be true now.
    Partisan consideration should be totally unwelcome in the 
enforcement of our Nation's laws. I learned only last week that 
during my tenure more Democrats were appointed as monitors than 
were Republicans. Partisan affiliation should neither qualify 
nor disqualify a person from being selected to do public 
service in the role of a monitor. The focus should be on the 
quality of service and the results that are expected.
    Point six--A monitor should be independent, should demand 
the highest quality work and the finest professional standards 
and be unwavering in the face of pressure. As you may or may 
not recall, there were plenty of people who attacked me for the 
way that I chose to defend America from terrorism. Those 
assaults did not shake my commitment to protect innocent 
American lives from terrorist attacks.
    Similarly, a monitor should be immune to pressure and 
should not allow attacks from whatever sources to contaminate 
the cause of justice. I will not allow external pressures to 
compromise my responsibilities as a monitor.
    Point seven--a monitor protects the public from further 
corporate abuse. In my case, five monitors are charged with 
reforming an entire industry which is mired in criminal 
allegations of Medicare fraud and kickbacks to surgeons. There 
are pending criminal cases against defendant corporations, 
corporations that have already paid $311 million in civil 
settlements. There is an active, ongoing criminal investigation 
into multi-million dollar payments to physicians that might 
have altered physicians' judgments about which devices they 
will implant or prescribe for their patients.
    A surgeon who makes decisions based on the receipt of 
illegal kickbacks violates his responsibility to his patients, 
breaches the public trust, and breaks the law. It must be 
stopped.
    Point number eight----
    Ms. Sanchez. Mr. Ashcroft, your time is expired. But we 
will allow you to go ahead and summarize your final points 
before we move on.
    Mr. Ashcroft. Thank you very much. The marketplace rewards 
corporations who from the chaos of contamination bring the 
clarity of integrity. On January 29, 2008, Zimmer, for which I 
am the monitor, publicly announced that it will expand its 
compliance program to all product lines and all of its global 
operations, reforms that are well beyond the mandates of the 
deferred prosecution agreement.
    After the first full quarter working with our monitoring 
team, Zimmer reported adjusted net earnings of $276 million, a 
28 percent increase over the previous quarter. Zimmer now 
projects adjusted net earnings to exceed $1 billion in 2008. 
Following these announcements, the corporation's market 
capitalization increased $2.1 billion.
    The $2.1 billion increase is in direct contrast to the 
steep market decline in stocks generally this year. The 
marketplace rewards a commitment to corporate integrity and 
results.
    In summary, effective deferred prosecution agreements can 
protect taxpayers. They can serve the cause of justice and 
enhance corporate integrity. And I thank you for the additional 
time.
    [The prepared statement of Mr. Ashcroft follows:]

          Prepared Statement of the Honorable John D. Ashcroft

























    Ms. Sanchez. We thank you for your testimony, Mr. Ashcroft.
    Mr. Dickinson, I would invite you to provide your testimony 
at this time.

TESTIMONY OF TIMOTHY L. DICKINSON, PAUL, HASTINGS, JANOFSKY, & 
                  WALKER, LLP, WASHINGTON, DC

    Mr. Dickinson. Thank you, Madam Chairwoman and Mr. 
Chairman, Members of the Committee. As you noted, I am a 
partner in the law firm of Paul, Hastings, Janofsky & Walker. I 
also serve as an adjunct professor at the University of 
Michigan Law School and hold a number of bar association and 
other positions.
    In addition, I serve as the independent consultant for 
Monsanto Company and Delta and Pineland Company. I have been in 
practice for over 25 years and have counseled companies on 
issues relating to the Foreign Corrupt Practices Act, including 
DPAs for my entire career. I also assisted in developing the 
World Bank's voluntary disclosure program, VDP, and worked with 
bank staff to advise a VDP participant on improving its 
compliance program.
    It is a great pleasure to be here today. And I should state 
at the outset that I am here in my personal capacity only and 
not as a representative of any company, client, law firm, law 
school, et cetera.
    In the interest of time, I will limit my remarks to three 
areas. First, when is a monitor an appropriate component of a 
deferred prosecution agreement? Second, in such circumstances, 
how should the monitor be appointed? And third, how should the 
scope of the monitor's work be determined?
    To date, no guidelines have been issued outlining the 
appropriate circumstances for appointment of a monitor as a 
part of a DPA. This is troubling because of the potential 
inconsistency and lack of predictability if, in similar 
circumstances, certain prosecutors insist upon a monitor and 
others do not. To remedy this concern, I would favor guidance 
from the Department of Justice that would establish clear 
criteria for prosecutors to follow when considering the 
inclusion of a monitor in the terms of a DPA.
    I would favor the imposition of a monitor under narrow 
circumstances such as when a company has elected not to 
establish a comprehensive compliance program or when there has 
been a fundamental breakdown in a company's internal controls 
or compliance program that the company has not adequately 
addressed itself. Such a standard would leave some flexibility 
to prosecutors but would also provide companies with the option 
to take aggressive remedial actions themselves in lieu of the 
intrusion of a corporate monitor.
    With respect to the appointment process prior to March 7, 
there were no guidelines. To date, the appointment process 
appears to be a mix of prosecutor appointments, recommendations 
for approvals, as, Madam Chair, you noted, but without any 
particular guidance. While I recognize that some flexibility in 
the appointment process may be beneficial to the government's 
objectives, the lack of a defined methodology for the 
appointment does not, in my view, serve the ultimate 
government's objective of ensuring compliance with the law.
    I would propose that the appointment process follow a 
fairly simple formula. First, the company involved in the 
deferred prosecution would propose to the government its 
preferred candidate. Such candidate would be required to be 
clearly qualified in the substantive area of law at issue. As I 
am sure everyone is aware, monitors have been utilized in a 
number of types of cases, including securities fraud, tax 
issues, export violations, and my field, the Foreign Corrupt 
Practices Act.
    It is my view that anyone who a company would propose as 
its monitor should have the requisite demonstrated expertise 
such that the government and the public can be assured that the 
monitor's duties will be carried out in an effective manner. 
Upon receipt of the company's proposed candidate, I would 
recommend that the government be given a veto over such 
appointment should the government believe that the person 
proposed does not possess the requisite skills or independent 
integrity to ensure a successful execution of his or her 
duties. I should point out that this was the formula or a 
similar formula to that which resulted in my own monitorship.
    Finally, the methodology for establishing the scope of the 
monitor's work is another topic that might be considered. In 
order, once again, to ensure a successful monitorship--and I am 
mindful that some critics may say that my use of the term 
successful is by definition an impossible result to achieve--
all parties involved, including the government, should agree at 
the early stages of any monitorship as to the scope, timing, 
and budget of the monitor's activities.
    Of course, adjustments may be appropriate and necessary, 
depending on what transpires during the monitor's terms. And 
some flexibility must be allowed.
    This would eliminate some of the uncertainty as to cost of 
monitors, which need to be factored into a company's analysis 
for entering into the agreement and would reduce the potential 
abuses of monitors. Thus, I would welcome guidelines to be 
issued by the Justice Department that would set out in a 
transparent manner when a monitor would be deemed necessary as 
well as the methodology to be followed in the appointment 
process and in defining the scope of work.
    I would be happy to elaborate on my comments. I have 
included additional comments in my written statement. And thank 
you very much.
    [The prepared statement of Mr. Dickinson follows:]

               Prepared Statement of Timothy L. Dickinson









                               ATTACHMENT




































































































































































    Ms. Sanchez. Thank you, Mr. Dickinson. We appreciate your 
testimony. And you came in right at the 5-minute mark. Very 
well done.
    Mr. Nahmias, at this time I would invite you to provide 
your testimony.

TESTIMONY OF THE HONORABLE DAVID E. NAHMIAS, THE UNITED STATES 
  ATTORNEY'S OFFICE NORTHERN DISTRICT OF GEORGIA, ATLANTA, GA

    Mr. Nahmias. Thank you, Madam Chairwoman, Ranking Member 
Cannon, and other distinguished Members of the Subcommittee. I 
appreciate the opportunity to discuss the important work of the 
Justice Department in preventing, deterring, and punishing 
corporate crime. The investigation and prosecution of corporate 
crime has been an important priority of the Department since 
the corporate fraud crisis of 2001 and 2002 and has resulted in 
more than 1,200 convictions of individuals and entities and the 
recovery of hundreds of millions of dollars in fines, 
penalties, and restitution for victims.
    We recognize, however, that criminal conviction of a 
corporation and sometimes even the indictment of a corporation 
can have significant collateral consequences for innocent third 
parties who may include employees, pensioners, shareholders, 
creditors, customers, and the general public. As set forth in 
the Department's Principles of Federal Prosecution of Business 
Organizations, prosecutors properly consider such collateral 
consequences in determining whether to charge the corporation.
    Prosecutors may use a variety of tools other than 
indictment and prosecution to achieve the goal of justice for 
victims and the public. These tools include deferred 
prosecution agreements, or DPAs, and non-prosecution 
agreements, or NPAs. Under these agreements, a corporation 
against which the government has sufficient evidence to file 
criminal charges, potentially undertakes a period of probation 
subject to specific conditions by agreement with the government 
instead of as a result of a criminal conviction that would have 
substantial collateral consequences.
    A DPA differs from an NPA in that a DPA typically includes 
a formal charging document and an agreement that is filed with 
the court, while in the NPA context, there is typically no 
charging document and the agreement is normally maintained by 
the parties.
    Deferred prosecution and non-prosecution agreements occupy 
an important middle ground in the resolution of corporate crime 
cases that may have distinct advantages over simply declining 
prosecution, which may allow a corporate criminal to escape 
without direct consequences, or charging and convicting a 
corporation and producing a result that may have calamitous 
collateral consequences. These agreements typically require the 
payment of restitution to victims, and/or fines and penalties 
long before such payments could be obtained in most cases 
through formal charging, protracted litigation, and inevitable 
appeals.
    The agreements encourage corporate cooperation in obtaining 
the evidence necessary to prosecute culpable individuals. 
Perhaps most importantly, by requiring the adoption of solid 
internal controls and ethics and compliance programs, the 
agreements encourage corporations to root out illegal conduct, 
prevent recidivism, and ensure that they are committed to 
business practices that meet or exceed applicable legal and 
regulatory mandates.
    Thus, these agreements can help restore the integrity and 
preserve the financial viability of a corporation that had 
descended into criminal conduct. If the corporation satisfies 
the obligations imposed by the agreement within a defined 
period, usually 1 to 5 years, then the government will not 
proceed with the prosecution. If the corporation materially 
fails to comply with the agreement, then the government retains 
the discretion to go forward with prosecution and in most 
cases, to use admissions of the corporation to prove the case.
    Since at least 1992, DPAs and NPAs have been used to 
resolve a variety of cases involving a wide variety of criminal 
offenses. But while the use of DPAs and NPAs to resolve such 
cases has expanded since the fraud crisis early in this decade, 
it is still a relatively limited practice.
    Even more limited in number are the DPAs and NPAs that 
include the use of a corporate monitor. Monitors are 
independent. They are not employees or agents of the 
government, and they are not paid with taxpayer funds. Instead, 
the monitor is retained by the corporation, which pays for the 
monitor along with all the other costs of implementing the DPA 
or NPA.
    The appointment of a monitor is not necessary in every 
case, but it can have distinct advantages for the public in 
appropriate cases. Monitors allow the government to verify 
through the work of an independent observer whether a 
corporation is fulfilling the obligations to which is has 
agreed. A monitor may also provide specialized expertise to 
oversee and ensure compliance with complex and technical 
aspects of a corporate agreement.
    We believe, as Attorney General Mukasey has previously 
indicated, that the issuance of additional policy guidance 
concerning the use of DPAs, NPAs, and monitors will improve 
consistency and transparency and encourage best practices. As 
you know, yesterday the Deputy Attorney General issued a set of 
nine principles on the selection and use of monitors in 
corporate deferred and non-prosecution agreements.
    The first of these principles sets forth a detailed policy 
on how monitors should be selected, which focuses on ensuring 
the selection of a respected, highly qualified monitor who is 
suitable for the particular assignment and free of any conflict 
of interest.
    As we go forward, we recognize that we will face new and 
varied forms of corporate crime. The Justice Department will 
continue its efforts to develop appropriate policies that 
provide useful guidance to prosecutors in this area. In doing 
so, we bear in mind that while public attention may focus on 
high-profile corporate fraud cases, DPAs, NPAs, and independent 
monitors have also been used creatively and successfully in 
other less prominent but equally meaningful corporate crime 
contexts.
    It is important that we avoid imposing an inflexible policy 
that fits one type of case--which may be the unusual type of 
case--but constrains the ability of Federal prosecutors to 
resolve other types of cases in the best interest of our only 
client, the citizens of the United States. Thank you.
    [The prepared statement of Mr. Nahmias follows:]

          Prepared Statement of the Honorable David E. Nahmias



















    Ms. Sanchez. Thank you, Mr. Nahmias. We appreciate your 
testimony.
    At this time, I would invite Mr. Terwilliger to please 
proceed with your testimony.

TESTIMONY OF THE HONORABLE GEORGE J. TERWILLIGER, III, ESQUIRE, 
               WHITE & CASE, LLP, WASHINGTON, DC

    Mr. Terwilliger. Thank you. Chairwoman Sanchez, Ranking 
Member Cannon, Members of the Committee, Mr. Smith, thank you 
for inviting me to appear before the Committee today. The 
proper handling of cases involving allegations of unlawful 
conduct by corporations and other businesses is a matter of 
vital interest to many who are stakeholders in those companies. 
That includes the people who own them, including the tens of 
millions of mutual fund owners and other shareholders of public 
companies, the millions of employees of those companies who 
depend on these employers for their livelihood, and the 
countless individuals and other businesses that depend on the 
goods and services that these companies provide.
    I appreciate the opportunity to share my views as the 
Committee considers issues concerning business crime and 
related policies, and/or guidelines which are important to 
achieving basic fairness by ensuring that like cases are 
treated alike. The views I offer for your consideration are 
from the perspective of 30 years of law practice, now divided 
almost evenly between public service and private practice.
    At the Justice Department I began my career as a law clerk 
while in law school and finished as the acting attorney general 
of the United States and in between dealt with many of these 
kinds of cases and these issues. I now represent businesses, 
including corporations, their boards, audit committees, and 
their leaders as they navigate their way through enforcement 
matters, including those under the jurisdiction of the 
Department of Justice.
    Deferred prosecution agreements provide a middle ground 
between a criminal and a civil disposition. The company avoids 
the appropriate and often considerable adverse collateral 
consequences that would attend to either a guilty plea to 
criminal violations or worse, a conviction after trial, while 
the government achieves deterrence and punishment objectives 
without the expenditure of the massive resources and the 
litigation risks that would be necessary to indict and try such 
a case.
    As noted, DPAs often impose an obligation on the company to 
employ at its expense an outside monitor. At its core, the 
function of an outside corporate monitor is to observe the 
conduct of a company relevant to its obligations under a DPA 
and to report the product of those observations, including the 
monitor's judgment about the company's conduct and its 
commitment to compliance obligations.
    Thus, to perform these functions, a monitor should be a 
person, to borrow a phrase, learned in the law, but as 
importantly, a person with the background, experience, proven 
judgment, and integrity to make keen and credible observations 
and reports concerning the compliance of a given type of 
business with its legal obligations. Consistent with the 
government's duty to assure the public that the administration 
of law is free of any partisan consideration, the process of 
selecting monitors with these qualifications should be 
transparent, subject to layered review, and approval at Main 
Justice in Washington.
    The selection of monitors should be on the basis of merit 
and enjoy input from both the government and the subject 
company. In my own view, since the monitor will be paid for 
with corporate funds and can provide value to the company in 
achieving its compliance objectives, the best approach is for 
the company to select a monitor from a panel of candidates, 
each of whom has been previously designated as acceptable by 
the government. I think the Department of Justice has taken an 
important and valuable step forward by articulating a 
principled basis for the selection and use of monitors, as it 
did in its memorandum of March 7.
    DPAs often describe the monitor as a compliance consultant. 
In my judgment, that is a good description of the role of the 
monitor as both a consultant to a company and as an internal 
observer of compliance who reports relevant findings to the 
government. Some go even farther and describe the monitor as 
being a government representative who is essentially given a 
seat at the boardroom table. I think this goes too far.
    Monitors should not have the power to run companies, and 
those who maintain the responsibility under the law, the 
management and directors of public corporations, should. It is 
equally important that any guidelines prescribing monitor 
functions not be dictated by the Congress.
    Under the separation of powers doctrine, neither Congress 
nor the judiciary can control the executive branch's exercise 
of prosecutorial discretion. The decision whether to enter into 
a DPA or require some other terms in deciding whether to bring 
charges in the exercise of prosecutorial discretion belongs to 
the executive branch. I believe the legislation that the 
Committee has considered is not, therefore, well-advised.
    I thank the Chair and the Subcommittee for allowing me to 
be heard today and appreciate that my written statement will be 
included in the record.
    [The prepared statement of Mr. Terwilliger follows:]

     Prepared Statement of the Honorable George J. Terwilliger, III



















    Ms. Sanchez. Thank you, Mr. Terwilliger. And we appreciate 
your testimony.
    And at this time, I would invite Professor Garrett to begin 
his.

TESTIMONY OF BRANDON GARRETT, PROFESSOR, UNIVERSITY OF VIRGINIA 
               SCHOOL OF LAW, CHARLOTTESVILLE, VA

    Mr. Garrett. Chairwoman Sanchez, Ranking Member Cannon, and 
Members of the Subcommittee, thank you for the opportunity to 
testify before you today. I am an associate professor of law at 
the University of Virginia School of Law. In 2007 I published 
an article exploring remedies in deferred and non-prosecution 
agreements in organizational cases. I will describe these 
agreements and then discuss two recommendations for reform, 
guidelines concerning their content, and judicial oversight 
over their adoption and implementation.
    First, just to describe an example, in 2007 after a lengthy 
investigation, the IRS referred a criminal tax case involving 
KPMG International to the U.S. attorney's office for the 
Southern district of New York. In 2005 prosecutors announced 
that they had reached a deferred prosecution agreement with 
KPMG. The settlement stated that if at the end of 14 months 
prosecutors were satisfied that KPMG had complied with its 
terms, they would move to have the case dismissed.
    In the agreement, KPMG provided detailed admissions of 
wrongdoing. KPMG agreed to shut down its entire private tax 
practice and to cooperate fully in an investigation of current 
and former employees.
    KPMG also agreed to retain an independent monitor for 3 
years in order to implement an elaborate compliance program. 
The monitor was paid by KPMG and had the power to recommend 
policy changes, obtain access to documents, interview 
employees, and to employ any personnel necessary. The district 
judge approved the agreement, and at the end of 14 months, 
prosecutors moved to dismiss the case stating the agreement had 
been effective. However, prosecutions of certain individual 
KPMG employees remained ongoing.
    At least 39 of these prosecution agreements were entered in 
the 4 years after the Thompson memo was issued in 2003. I have 
gathered data from the texts of these agreements with some 
difficulty where several were not readily available. Most 
resembled the KPMG agreement and involved compliance programs 
and independent monitors.
    In preparation for this hearing, I also compiled updated 
data reflecting 43 agreements entered into 1 year and 2 months 
after the McNulty memo was issued in December of 2006. In just 
slightly more than a year, more agreements were entered than 
had been entered during the almost 4 years the Thompson memo 
was in effect. That represents a remarkable acceleration in the 
use of pre-indictment agreements with organizations.
    I turn now to reform proposals advanced most recently in 
legislation drafted by Representative Pallone and in the 
statement of principles authored by Representative Pascrell. 
First, while the McNulty memo provides useful guidance on 
whether a firm should be charged at all, scant guidance exists 
regarding the structure of the remedies included in the 
agreements themselves or their implementation. The new Morford 
memo just issued by the DOJ addresses only a very limited set 
of issues concerning the selection and certain duties of 
monitors. Much more remains to be done.
    Several areas are particularly ripe for such guidance. 
Since 2003 when the Thompson memo was signed, at least 39 
agreements included the retention of monitors. Of those, only 
one advertised an open position to solicit candidates. And in 
only three did a court play any role in selecting the monitor.
    The new Morford memo procedures forbid the unilateral 
prosecutorial selection of monitors and provide for conflict 
checks and vetting of monitors by prosecutors. However, those 
guidelines neither require public notice of a monitor position 
nor judicial approval, both of which would alleviate any 
perception of cronyism in the selection of monitors.
    Many other questions remain. Why do some agreements not 
require creation of a compliance program? Why do some not 
include fines or restitution? When are non-prosecution versus 
deferred prosecution agreements appropriate?
    Additional guidelines could clarify such issues--judicial 
oversight of these agreements could provide greater legitimacy 
by providing a mutual decision-maker as well as greater 
transparency by making aspects of this process public. The U.S. 
code requires judicial approval of any deferral of prosecution, 
but does not address issues unique to the deferral of 
organizational prosecutions.
    For example, a court could be required to conduct an 
approval hearing in which the public or affected parties would 
have notice and an opportunity to comment, as is the case when 
certain agencies enter consent decrees. Regarding 
implementation, when an agreement ends, no information is 
typically released except the bare facts that prosecutors were 
satisfied it was successful. The court could publicly report on 
the monitor's progress.
    Further, agreements provide prosecutors with unilateral 
authority to declare a breach and terminate an agreement. A 
firm may lack any pre-indictment remedies should a prosecutor 
arbitrarily declare a breach. Courts could be provided with the 
authority to adjudicate pre-indictment any dispute regarding a 
breach.
    Now that pre-indictment agreements have become the 
preferred method for resolving organization prosecutions, it is 
time to consider ways to improve their fairness, transparency, 
and effectiveness. Prosecution guidelines concerning remedies 
and increased judicial oversight are warranted to achieve those 
goals.
    I would be pleased to answer any questions that you and 
your fellow Committee Members may have. And thank you for this 
opportunity to speak to you.
    [The prepared statement of Mr. Garrett follows:]

                 Prepared Statement of Brandon Garrett



















                              ATTACHMENT 1



































                              ATTACHMENT 2



















































































































































































































                              ATTACHMENT 3





















    Ms. Sanchez. Thank you, Professor Garrett. We appreciate 
your testimony.
    We will now begin our questioning. And I will begin by 
recognizing myself for 5 minutes of questions.
    Mr. Ashcroft, do you know who besides yourself was 
considered for the appointment of monitor in the Zimmer case? 
Or are you familiar with the selection process?
    Mr. Ashcroft. I know what the deferred prosecution 
agreement provides for in terms of the selection process. It 
provides that the----
    Ms. Sanchez. With all due respect, Mr. Ashcroft, I am just 
asking if you know how they came to select you as a monitor. I 
mean, did you just get a phone call one day saying we would 
like to consider you for this or we want you to be the monitor? 
Can you----
    Mr. Ashcroft. I would like to answer your question. And so, 
that is about what I was going to do, if you don't mind.
    Ms. Sanchez. Okay.
    Mr. Ashcroft. I understand that I was selected in 
accordance with the deferred prosecution agreement after 
consultation with the company by the U.S. attorney. And I was 
asked then to evaluate and to monitor the company's 
performance. I understand the corporation and the Department of 
Justice agreed to seek my service during the course of their 
discussions over the deferred prosecution agreement. So in the 
course of their discussion----
    Ms. Sanchez. Do you know if they considered anybody else 
for the position of monitor?
    Mr. Ashcroft. I don't know what kinds of discussions they 
had.
    Ms. Sanchez. Okay. That is fair.
    Mr. Ashcroft. I wasn't part of those discussions.
    Ms. Sanchez. Okay.
    Mr. Ashcroft. I learned about this after they had the 
discussions.
    Ms. Sanchez. I understand. That answers my question. Do you 
know whether there was any public notice or bidding prior to 
your appointment?
    Mr. Ashcroft. I did not participate in any bidding. Not a 
single cent of tax dollars is spent for monitors.
    Ms. Sanchez. I understand that. That is not the question 
that I am asking, though. I am just trying to get to the very 
things that----
    Mr. Ashcroft. This hearing costs far more in tax dollars 
than my monitorship will cost in tax dollars because not a thin 
dime of public money----
    Ms. Sanchez. I understand that. But the subject of the 
financing is not what I am trying to ask you.
    Mr. Ashcroft. Sure. Go ahead and ask me something.
    Ms. Sanchez. I am just trying to get some very basic 
questions out of the way.
    Mr. Ashcroft. I would like to get some very basic answers 
because your original remarks----
    Ms. Sanchez. Okay.
    Mr. Ashcroft [continuing]. Made a series of accusations. I 
would like to get to those so that I can answer them and 
clarify this situation because it deserves clarification.
    Ms. Sanchez. Okay. Well, if you will allow me to ask my 
questions, we will have many other questions from the panel, I 
am sure. In your view, would the monitor selection process in 
the Zimmer case comply with the guidance that was issued 
publicly by the department yesterday? Or have you had a chance 
to review those guidance?
    Mr. Ashcroft. I have reviewed them very briefly. They were 
made available to me late yesterday afternoon. I believe it 
would have been very possible that I could have been chosen 
under the kinds of guidelines. I would hope so.
    Let me say, as I said in my remarks, I don't think there 
should be a discrimination against individuals who have had the 
privilege of public service. I don't think there should be a 
discrimination against people on the basis of their partisan 
identification. And I would certainly hope that whatever 
guidelines would be promulgated by this Justice Department or 
encouraged by this Congress that they wouldn't discriminate 
against individuals whose qualifications are those like mine 
are.
    Ms. Sanchez. Okay. Well, Mr. Ashcroft, on that issue, I 
would like to call your attention to the fact that the guidance 
issued yesterday indicated--and I am quoting from the guidance, 
``Government attorneys who participate in the process of 
selecting a monitor shall be mindful of their obligation to 
comply with the conflict of interest guidelines set forth in 18 
USC, section 208 and 5CFR, part 2635.'' So the question that I 
want to get at, which I think is part of the problem, and we 
have heard from several witnesses talk about no conflict of 
interest, is do you believe that Mr. Christie violated any laws 
or regulations already in the books when he appointed you, his 
former employer, as a monitor in the Zimmer case?
    Mr. Ashcroft. I really don't believe that Mr. Christie is a 
law violator. His record as a prosecutor is----
    Ms. Sanchez. So you don't believe that conflict----
    Mr. Ashcroft [continuing]. An outstanding record. No law 
that I know of has been violated. And I don't think there is an 
even plausible suggestion that any has been violated. Now, Mr. 
Christie has made his reputation prosecuting----
    Ms. Sanchez. You don't believe that there is a problem----
    Mr. Ashcroft [continuing]. Public corruption in New Jersey. 
And for this Committee----
    Ms. Sanchez. You don't believe that there is----
    Mr. Ashcroft [continuing]. To attack him on political 
grounds----
    Ms. Sanchez. I am not attacking his record of prosecution.
    Mr. Ashcroft [continuing]. Is inappropriate. As a matter of 
fact----
    Ms. Sanchez. I am talking specifically about the issue of--
--
    Mr. Ashcroft [continuing]. Here is Mr. Christie's record 
from the newspapers.
    Ms. Sanchez [continuing]. Conflict of interest. Mr. 
Ashcroft, it is very interesting about his record. And we are 
not attacking his record of prosecution.
    Mr. Ashcroft. No innocent verdicts. No----
    Ms. Sanchez. We happen to be talking specifically about 
conflict of interest. That is a very appropriate question for 
this hearing. This is what we are trying to get at the crux of 
the problem is either conflict of interest or at least the 
appearance of conflict of interest.
    And if I am hearing your testimony correctly, would it be 
fair to say that you don't believe there is any kind of 
conflict of interest in a former employee hiring their former 
boss or suggesting that he be hired for a very lucrative 
contract of monitoring? You don't believe that there is a 
conflict or a problem with an appearance of a conflict of 
interest?
    Mr. Ashcroft. There is not a conflict. There is not an 
appearance of a conflict. The ability to hire individuals who 
have the qualifications to conduct monitorship should not be 
impeded by the fact that someone has at some time or another 
served in public life or public office.
    It should not be impeded based on partisan grounds. It 
should not be determined or dispositive in the Justice 
Department. And it shouldn't be equally dispositive or 
determinative here in the Judiciary Committee of the United 
States House of Representatives.
    Ms. Sanchez. Very interesting answer, Mr. Ashcroft. My time 
has expired.
    At this time, I would recognize Mr. Cannon for 5 minutes of 
questioning.
    Mr. Cannon. Madam Chair, I would prefer to pass, if that is 
acceptable to you, but would like to introduce for the record 
an article in the record that I think Mr. Ashcroft was just 
referring to about Christie's all-out war and which includes 
his rather remarkable list of successful prosecutions and point 
out that you keep referring to the problem. I think that we 
have an issue before us that we need to manage and develop, but 
I don't think there is a problem, especially when it comes down 
to Mr. Ashcroft's character and record on his own or Mr. 
Christie's.
    Ms. Sanchez. Will the gentleman yield on that point?
    Mr. Cannon. Let me just defer my time, if you don't mind. 
But I would be happy to--I think the Chair actually would 
control the time and can speak directly.
    Ms. Sanchez. Well, without objection, the article will be 
entered into the record. And the point that I was trying to get 
at is the public confidence in our justice system and whether 
or not conflicts of interest, actual or perceived, are a 
problem in terms of--a perceived problem in terms of the 
public's confidence in our justice system. And----
    [The information referred to follows:]
    
    
    
    
    Mr. Cannon. If the Chair would yield?
    Ms. Sanchez. I will yield.
    Mr. Cannon. This is a remarkably important issue, and we 
have an amazing panel. And on that panel we have a guy who is 
lionized in America for his willful determination to not sign a 
memorandum on his, some people call it, his death bed. It 
certainly was a very ill bed.
    And to say there is a problem related to him is one that I 
think ought to be squarely confronted. I know that we have two 
witnesses on the next panel who are representatives from New 
Jersey who want to attack Mr. Christie. And I understand the 
urge to attack Mr. Ashcroft's credibility. I find it appalling.
    Ms. Sanchez. Will the gentleman yield? I was not attacking 
Mr. Ashcroft's credibility. I was simply posing a question with 
respect to a potential----
    Mr. Cannon. You are questioning his integrity and calling 
it a problem.
    Ms. Sanchez. Well, if there is a conflict of interest, I 
would submit, that is a problem.
    Mr. Cannon. When you get the list of people who are capable 
of doing the job that needed to be done at Zimmer, I think it 
was a remarkably short list. And the people that appear on a 
list like that are going to be people that have relationships. 
And therefore, you can never get beyond the problem.
    I think the proper scope of this Committee is to actually 
oversee these monitors. I think that is an appropriate role. 
And I think we need a lot more staff in this Committee to do 
that. But right now I think we ought to be looking at policy 
rather than creating the question of a problem when you are 
talking about a man of such distinguished history and 
unquestioned ethics as Mr. Ashcroft.
    Ms. Sanchez. If the gentleman will yield back, I will 
recognize Mr. Johnson for 5 minutes of questions.
    Mr. Johnson?
    Mr. Johnson. Thank you, Madam Chair. And during 27 years of 
practicing law back home in Dekalb County, Georgia, I 
represented many people. And they were all just regular working 
class people, blue collar folks. And they were all subject to 
the maxim of you do the crime, you do the time. And so, now 
today I am hearing about non-prosecution agreements with 
corporations and also deferred prosecution agreements.
    And if there were any deferred prosecution, it would be 
something for my clients that they would have to appear in 
court and face the charge and admit to the allegations and ask 
the judge for some consideration. And the judge in his 
discretion, his or her discretion, would decide whether or not 
that person would be placed in a deferred prosecution program.
    And we don't have any of those kinds of qualities that 
exist or that existed for these prosecution agreements here. 
But I do want to ask Mr. Ashcroft, while appreciating your 
service to the Nation, according to billing records that detail 
5 months of work from September 2007 to January 2008, your firm 
has billed Zimmer, Incorporated more than $7.5 million. Over 
these 5 months, your total fees are higher than other monitors, 
particularly the four other monitors for the four other 
orthopedic device makers who entered into deferred or non-
prosecution agreements with the Justice Department.
    Your firm is the only one of the group that charges a set 
monthly fee of $750,000 on top of your hourly billing rate, 
which is also the highest of the five firms, topping out at 
$895 an hour. To your knowledge, are you aware of any monitors 
charging a monthly fee of $750,000 on top of an $895 hourly 
billing rate, Mr. Ashcroft?
    Mr. Ashcroft. Well, we do not charge both an hourly fee. 
The hourly fee covers one group of workers. Other individuals 
are covered in the set amount. And they are not working on an 
hourly basis.
    The reason our fees are appropriate is the complexity of 
the case and the responsibilities in which we have to be 
involved. I have been required to assemble an exceptional 
monitoring team of about 30 professionals, including lawyers, 
investigators, accountants, other business consultants to 
ensure that the deferred prosecution agreement is met. These 
professionals include former United States attorneys, assistant 
United States attorneys, former FBI members, former United 
States Department of Justice officials, intellectual property 
lawyers.
    Mr. Johnson. Well, you have answered my question. You have 
got a high-powered and highly-paid staff that consumes that 
monthly retainer fee.
    Now, for each monthly billing period, all that you have 
provided is a one-page bill that simply lists the total amount 
due and the bank information about where to wire the money. 
Whereas other firms would have submitted bills, detailed 
billing, 200 pages long, for instance, or 78 pages long. Why 
don't you provide Zimmer with a detailed accounting explaining 
the services provided and the monitoring expenses?
    Mr. Ashcroft. We believe that the quality of the services 
is the important point and that we have agreed and provided 
information about our fees in advance.
    Mr. Johnson. Will you provide this Committee with a 
detailed accounting of the services provided and expenses 
incurred in the Zimmer monitoring?
    Mr. Ashcroft. I will provide this Committee with the 
documents that are required under the deferred prosecution 
agreement. And I will make available to the Committee those 
items which are required by that agreement.
    Mr. Johnson. Who is tasked with monitoring the monitor? In 
other words, who ensures that you complete all of your 
responsibilities under the deferred prosecution agreement?
    Mr. Ashcroft. First of all, the company has an opportunity 
to raise issues if it finds the work of the monitor to be 
inappropriate, insufficient, of low quality or finds directions 
of the monitor to somehow be against what it considers to be 
the terms of the agreement, outside the scope of the agreement 
or otherwise inconsistent with the purposes of the corporation 
in remediating the problems that are faced by the corporation. 
The company carries those items to the U.S. attorney or to the 
office of the U.S. attorney to individuals in the office who 
are involved in the administration of the deferred prosecution 
agreement.
    Ms. Sanchez. The time of the gentleman has expired.
    At this time, I would recognize Mr. Feeney for 5 minutes of 
questions.
    Mr. Feeney. Well, thank you, Madam Chairman.
    Mr. Attorney General, it is great to see you back. The 
startling thing for me here is all of the suggestion or 
innuendoes, the mere implication of having the hearing today 
that there is some either conflict or something fundamentally 
wrong and we are worried about the costs to corporations. I 
have to be candid with you. The Congress voted overwhelmingly a 
few years ago for a bill that is commonly referred to as SOX, 
Sarbanes-Oxley.
    And what Sarbanes-Oxley effectively did--you know, Mr. 
Ashcroft, whose firm has been charged with monitoring a 
corporation where several individuals and perhaps the corporate 
entity itself may have been indicted or convicted of a crime to 
keep it alive and protect it, despite the wrongdoing. What 
Sarbanes-Oxley has done is effectively to take every innocent 
corporation that wants to go public in America and require them 
to spend about $6 million annually at the requirement of 
Congress to pay additional accounting fees on top of the 
accountants that they already have.
    I can't get members of the majority party to be concerned 
about the fact that Sarbanes-Oxley costs the United States 
economy, according to one study done by a professor from the 
Brookings Institute and another professor from the American 
Enterprise Institute--they estimate the annual costs, 
superfluous and unnecessary costs of accounting that bill costs 
the American economy $1.4 trillion. And that is for innocent 
corporations that have done no wrong.
    And yet when you have a corporation, some of whose leaders 
have actually committed crimes, you have a couple choices. You 
can, in effect, give that corporation the death penalty, even 
though the overwhelming majority of individual employees, 
partners, maybe even members of the board of directors and 
certainly the shareholders were totally innocent of any 
wrongdoing.
    So as Congress is continually battering and punishing the 
innocent because of the faults of the few, now we are here 
suggesting that there is something fundamentally wrong with 
hiring perhaps the most qualified individual in the country on 
health care and matters of jurisprudence from the attorney 
general's perspective, there is something fundamentally wrong 
about giving a company and its shareholders and the innocent 
employees and the innocent members of the board and the 
innocent partners a second chance.
    I don't know how many innocent people worked for Arthur 
Andersen when it was given the death penalty. Perhaps it was a 
prudent thing to do to punish all of the innocent along with a 
few of the guilty. But it didn't help the American accounting 
system very much.
    As a consequence of Sarbanes-Oxley, we now have only four 
corporations in America willing to do the type of work that is 
required by Sarbanes-Oxley. And so, you have a quadropoly where 
they get to charge whatever they want to. And every corporation 
in America has to pay the price. Presumably if you are, for 
example, Pepsi, and you have an inside auditor and your major 
competitor, Coca-Cola, has one inside auditor and has to hire 
one of the other big four outside, there is only one left. And 
you have to do business, whatever the cost.
    The indirect costs have totaled, according to this one 
estimate, $1.4 trillion for innocent American companies. And as 
capital flees America, we are out-sourcing our 100-year lead to 
places like London's stock market that advertises itself as a 
SOX-free zone, the Frankfurt market, the Hong Kong market. We 
have done this to ourselves. And we are happy about it.
    And yet, we find a situation where we are giving a company 
and the innocent people that are affiliated with it a second 
chance and most importantly, the shareholders. And we are here 
today battering people that are trying to save a company and 
giving it a second chance. I just find it remarkable.
    There is no situation in America that Congress can't make 
worse. And I think the hearing today is a great example of 
that.
    With that, I don't have any questions. I guess I have got 
an opinion already on this subject. But I will yield back the 
balance of my time.
    Ms. Sanchez. The gentleman yields back.
    And at this time, I would recognize Mr. Delahunt for 5 
minutes of questions.
    Mr. Delahunt. Well, I thank my friend from Florida for the 
exposition of Sarbanes-Oxley. I would suggest that Enron had 
more to do with it than Sarbanes-Oxley. We are talking about 
confidence here. And I think that Congress in its wisdom, in 
its bipartisan wisdom decided that if investors were going to 
have confidence in our free market system and free enterprise 
that something had to be done in terms of accountability.
    And maybe we are seeing that again in terms of the so-
called sub-prime crisis that has generated a tremendous 
magnitude, if you will, of economic pain as witnessed by the 
plummeting stock markets. But having said that, I am certainly 
not interested in discrimination against individuals who have 
served in government at whatever level. I don't think there 
should be any discrimination. And I don't think that, General 
Ashcroft, is the import of today's hearing.
    Again, to echo the observations by the Chair, I think it is 
a question of confidence in the integrity of the system, not 
your personal integrity, not the personal integrity of anyone 
here at the panel because we know it does count. Because while 
there are no taxpayer dollars involved, this is, if you will, a 
fine being levied on a company that could have presumably been 
indicted.
    Really, what it occurring here is a monitorship is 
performing a public function, a function that is a key element 
in terms of assuring the American people that justice is being 
done. I am a believer in prosecutorial discretion and judicial 
discretion. That is why I vote against mandatory sentences. But 
I do believe in sentencing guidelines and transparency. And 
what I would suggest is what we have here is a situation that 
doesn't provide the kind of transparency and raises issues and 
legitimately raises issues that ought to be addressed.
    General Ashcroft, you heard the testimony of Professor 
Garrett. Would you make any comments in terms of those policy 
issues that he raised in his testimony regarding guidelines, 
transparency, accountability? Because I was shocked, to be 
perfectly candid, that this company, Zimmer, was consulted 
about whether you were acceptable. I find that remarkable.
    There ought to be something better than receiving the 
imprimatur of a corporation that I would suspect was involved 
in significant wrongdoing and asking whether it is okay if 
former Attorney General Ashcroft leads a monitoring team. That 
was stunning to me.
    What I suggest is there ought to be a good, hard look at 
what the guidelines are, what we have in terms of transparency 
and accountability. I haven't had a chance yet to read the 
legislation proposed by my good friends from New Jersey. But 
something ought to be done.
    General?
    Mr. Ashcroft. Well, thank you very much. First of all, I 
don't believe that the monitorship is a fine. I think the 
monitorship is a way to say that because there is an agreed 
upon area where the law has not been respected in the way that 
the system believes it should be, that there should be a way to 
remediate that. And trusting the person who has been a 
wrongdoer to remediate that on his own is inappropriate.
    In our case--and this is public information because I am 
not here to discuss things that aren't public about the case or 
to telegraph where the investigation may go or not go. And 
there are real serious problems with having open hearings about 
ongoing criminal investigations. And this is an ongoing 
criminal investigation that relates not just to one----
    Mr. Delahunt. I understand that, General. But----
    Mr. Ashcroft [continuing]. But to five different companies 
that comprise 95 percent of the orthopedic joint replacement 
industry. But in the industry, consulting contracts were used 
as a cover for kickbacks to doctors. So a doctor implanting a 
device like an artificial knee or hip might have his decision 
clouded by the fact that if he implanted one, it would be in 
the interest of his wallet, whereas if he implanted another, it 
would in the interest of the patient.
    Mr. Delahunt. General, with all due respect, my question 
went to the recommendations.
    Mr. Ashcroft. Yes.
    Mr. Delahunt. And maybe you didn't have an opportunity to 
hear them closely.
    Mr. Ashcroft. Well, what I am saying is----
    Mr. Delahunt. Because what I suspect in terms of how 
appointments are made, when reports ought to be filed, when 
things ought to be made public would fall within appropriate 
discretions of a court, of maybe a probation service. Because I 
think that there could be a way to achieve the goals of those 
members who have expressed concern about this in a public--I 
mean, the reality is you are the former Attorney General. In 
some ways that is helpful. In some ways it is a burden that you 
will always carry.
    I was a former district attorney, and I have 70 former 
assistants that are currently serving on the Massachusetts 
bench. I know that half of them would recuse themselves if I 
simply came before them and argued a case. Although there is no 
conflict. But appearances do count. And I think that has got to 
be factored into the equation.
    Mr. Ashcroft. May I----
    Ms. Sanchez. The time of the gentleman has expired.
    At this time, I would invite----
    Mr. Cannon. Is the Chair going to let the attorney general 
respond?
    Ms. Sanchez. Briefly.
    Mr. Ashcroft. I would just say I have read a number of the 
professor's articles. He is a prolific author and a valuable 
contributor in raising the questions that ought to be 
discussed. I was attentive to Counselor Terwilliger's remarks 
that raised the issues that relate to the separation of powers. 
And I think that the decisions, as a former prosecutor you 
would agree, to prosecute or not to prosecute are appropriated 
vested in a way in a separate branch of government.
    The idea that you might have people in the judicial branch 
making decisions about whether or not to prosecute cases that 
they later sit in judgment on has serious--there are serious 
drawbacks to that. I noted that when the professor has 
addressed these items he has tried to avoid those kinds of 
problems with separation of powers. And any approach to this 
ought to be very tenderly undertaken with a view to respect, of 
not having the judge and the prosecutor be sourced in the same 
part of the governmental system.
    Now, I need to give my thanks to the Committee. When you 
scheduled this, I indicated to you that I had a speaking 
responsibility in Central Florida this evening and that I had a 
12:50 flight at Dulles. And so, I intend to leave in accordance 
with our previously agreed to scheduling. And I thank you for 
your understanding of that. I am grateful to you.
    And I want to thank each of these thoughtful individuals 
who has participated. And I think in my absence your ability to 
discuss the real issues here and not to be bogged down in this 
specific case, which would be inappropriate in any event, will 
be enhanced. Thank you very much.
    Ms. Sanchez. Thank you for your testimony, Mr. Ashcroft. We 
appreciate you coming today. And we wish you luck in catching 
your flight. You are excused.
    Mr. Franks. Madam Chair? Madam Chair?
    Ms. Sanchez. I don't know that congressional immunity 
actually exists for anything. If it does, I am not aware of it.
    Who seeks recognition?
    Mr. Franks?
    Mr. Franks. Yes, Madam Chair, General Ashcroft is leaving. 
I guess I wish that he could have been here for my own comments 
just related to the gentleman's reputation in this country for 
personal integrity. I think that he represents the kind of 
public servant that a lot of us would like to be when we grow 
up, other than a few partisan Members of Congress.
    It occurs to me that what is at stake here to this company, 
to Zimmer--one of the reasons I think they wanted someone like 
Mr. Ashcroft to be involved in this agreement was simply 
because they knew that his reputation was such that if indeed 
he entered into it that he would do so and would expand that 
commitment to integrity to their company.
    And, you know, in all respect to Mr. Delahunt's concerns, 
if I were on the board of this company and the guilty members 
had been expunged from the company, I was doing everything that 
I could to restore this company, not only to profitability, but 
to coming in compliance with the law and being a company that 
the stockholders could aspire to, I would do everything I could 
to bring a man like General Ashcroft into the equation. It 
makes all the sense in the world to me.
    And certainly, the result in the company's profitability 
and in their credibility, the change that took place in this 
company, I think, is partly something that we can lay at Mr. 
Ashcroft's feet. And I just----
    Mr. Delahunt. Well, if the gentleman would yield?
    Mr. Franks. Certainly.
    Mr. Delahunt. He referenced me. I think that we have a 
larger obligation. I am not in any way questioning the 
credentials of the former attorney general. But I dare say 
there are major law firms all over this country that could 
perform the kind of services necessary, that have people of 
high profile with bona fides that are impeccable.
    But when you have a potential wrongdoer, which is the 
corporate entity, requesting or signing off on who is going to 
monitor compliance with the agreement, I would suggest that the 
public says what is going on.
    Mr. Franks. Well, reclaiming my time, keep in mind there is 
two parties to the agreement. That is the company and the 
prosecutors. And they are trying to find someone who can be 
acceptable to both of them and to present to the public a 
credible image. And I think General Ashcroft does that in a way 
that very few people can.
    I mean, this gentleman has been the attorney general of 
Missouri, Missouri's chief auditor. Let me finish. I am about 
out of time--it is chief auditor, the governor of Missouri, 
U.S. senator from Missouri, the attorney general of the United 
States. And I don't know how you could find someone that more 
personifies the perfect example of what someone in this 
capacity--what qualifications they should have.
    Mr. Delahunt. If again my friend would yield for just a 
moment, I think that we all approve, as the Ranking Member 
indicated, of the former attorney general's courage in the face 
of the pressures that came from the White House in the form of 
Mr. Card and----
    Mr. Franks. Well, reclaiming my time, reclaiming my time, 
Madam Chair.
    Mr. Delahunt [continuing]. Former Attorney General Gonzalez 
to get him to----
    Mr. Franks. Reclaiming my time, Madam Chair.
    Mr. Delahunt. Well, I will yield back.
    Ms. Sanchez. Pardon me. The time belongs to the gentleman 
from Arizona.
    Mr. Franks. Yes, Madam Chair, I mean, if we are going to 
deviate into these other situations--if Mr. Ashcroft is an 
example here of what is wrong with the system, where is Mr. 
Toricelli? Where is Mr. Stryker? If we are going to deviate off 
here, this is a bad example to use someone like General 
Ashcroft as to what is wrong with the system. And I think that 
that has been done here to a degree.
    And I just wonder, you know, if the public realizes that he 
had nothing to do with the prescribed DPA or he didn't 
negotiate the terms with the company in any way. And the fee 
arrangements he didn't negotiate with the company in any way.
    And yet these things have been previously not released 
publicly. And I am wondering how the fee arrangements were made 
public in this situation. And I am about out of time, so I will 
now yield back to Mr. Delahunt.
    Mr. Delahunt. Well, I thank my friend.
    Ms. Sanchez. The gentleman yields back his time.
    Mr. Delahunt. Yes, I know. There is still some time on the 
clock I see, Madam Chair. But I wanted----
    Ms. Sanchez. Yes, but the gentleman has yielded.
    Mr. Delahunt [continuing]. To respond that I wasn't being--
--
    Ms. Sanchez. Does the gentleman seek unanimous consent for 
30 seconds to respond?
    Mr. Franks. Madam Chair, I have yielded my time to the 
gentleman.
    Ms. Sanchez. You have yielded your time? I am sorry. I 
misunderstood. The gentleman from Arizona has yielded the 
remainder of his time to Mr. Delahunt. Mr. Delahunt is 
recognized.
    Mr. Delahunt. Thank you, Madam Chair. I wasn't deviating. I 
was making a point that was brought up by Mr. Cannon, the 
Ranking Member, about the credentials, the credentials in terms 
of his political courage to stand up against the White House, 
against the then counsel to the White House, Mr. Gonzalez, and 
to support Mr. Colmey in what I consider an act of political 
courage.
    But my point is it is about appearances and the confidence 
of the American people in the system. No one here is 
questioning his morals, his ethics. It is what about the 
perception of a fee that, I am just reading, ranges from $28 
million to $57 million. That is a lot of money.
    Now, I am all in favor of lawyers making money. That is 
something that I have fought for all my life. And I have to 
tell you I am glad to hear that we can agree on that, because 
in the past, it has been the then majority, now minority that 
have argued for capping lawyers' fees when it came to class 
action suits. So I am glad that we have adjusted our sights and 
are now moving forward. And I thank my friend for yielding and 
yield back.
    Ms. Sanchez. The time of the gentleman has expired.
    At this time, I would recognize Mr. Cannon, who chose to 
pass, for 3 minutes of time.
    Mr. Cannon?
    Mr. Cannon. Thank you, Madam Chair. And I expect to ask 
unanimous consent for an additional 2 when we get to that 
point. But I am a little confused by this last exchange. We are 
talking about the courage of a man and his willingness to stand 
up and do the right thing, but somehow making a distinction 
between his courage and his credentials. I think that there is 
probably not a lawyer in America who has the credentials that 
Mr. Ashcroft has.
    The amazing thing about this hearing so far is we have this 
really incredible panel that could inform us on where we need 
to go, and virtually every single question on the Democratic 
side has been about raising the question of the problem of the 
perception of a conflict of interest.
    Ms. Sanchez. Will the gentleman yield?
    Mr. Cannon. Yes, I will briefly.
    Ms. Sanchez. And you will be granted time, I assure you. We 
will be moving on to a second round of questions. And I assure 
you there will be many questions that we will have for our 
remaining witnesses. I think our asking Mr. Ashcroft questions 
first was due to the time constraints. We knew he would not be 
here for the remainder of the hearing.
    Mr. Cannon. Reclaiming my time, these are not questions the 
majority was asking Mr. Ashcroft. These were veiled charges. 
This is all about innuendo.
    The fact is did we do--did this Committee do an open 
bidding process for Mr. Irv Nathan's services, for instance? 
The fact is--and as the Chair knows, I have been a big 
supporter of Mr. Nathan in his current job. But we didn't do it 
with a bidding process for a very good reason. And I think that 
we have sort of exhausted that----
    Ms. Sanchez. Will the gentleman yield?
    Mr. Cannon. No. I think we have sort of exhausted that 
issue with the attorney general. Now, if I might, I would like 
to actually turn to the panel and see if we can rekindle the 
discussion, which I think is absolutely fascinating. And so, I 
am going to ask two general questions that I would like the 
panel to respond to.
    Mr. Garrett said something to the effect of much more 
remains to be done with respect to guidelines. We have memos, 
three memos now. We have some guidelines that have been 
developed. And if I can just give these two questions to the 
panel, I won't ask for additional time, Madam Chair. But first 
of all, where do we go? Are we done with these guidelines? I 
think the answer is no. But where do we go with new guidelines?
    And then could each of you also address that and then 
secondarily, address the issue of oversight? Should courts 
oversee monitors? Or should Congress oversee monitors? We have 
a vast issue of separation of powers, and I would very much 
like to have your opinions on those two issues.
    We may start with Mr. Dickinson.
    Ms. Sanchez. Mr. Dickinson?
    Mr. Dickinson. Thank you. On your first point, where are we 
going, I think I would certainly hope that we are going with 
more guidelines from the Justice Department. I think we have a 
very, very good start with the guidelines that came out 
yesterday on the appointment process.
    I would still like to see, as I said in my remarks, the 
criteria in which a monitor should be appointed. That is an 
area where we still do not have any guidelines. And I think the 
work scope was the third area that I mentioned and one that 
perhaps should also be considered. But I think we definitely 
need some guidance as to when a monitor will or will not be 
incorporated into a DPA.
    With respect to the oversight, it is my view that the 
oversight should come from Department of Justice in conjunction 
with the DPA and the prosecutor and the entities involved with 
the negotiated DPA itself. And I think that I have proposed 
that there should be periodic meetings. There should be a 
discussion between both the government, the monitor, and the 
company involved, all three of them, throughout the monitorship 
period, which would allow all parties to discuss and understand 
the status of the monitorship, issues that arise, and how 
anything that has arisen should be resolved.
    And remember that these are not just for the typical 
criminal things that we are talking about today. These issues 
arise in the tax fora, in export laws. There are a variety of 
issues that may require a monitorship. So I think that the 
government expertise in this area should also be brought to 
bear in the oversight.
    Mr. Cannon. So justice continues to do oversight, and this 
Committee oversees justice?
    Mr. Dickinson. Correct.
    Ms. Sanchez. Mr. Nahmias?
    Pardon me. And if the witnesses could please keep their 
answers brief because we are running long.
    Mr. Nahmias. Well, I think it is useful to understand that 
we started really around the 5-year anniversary of the 
President's Corporate Fraud Task Force to realize that we had 
accumulated enough of an experience base with these types of 
agreements across the country and at Main Justice to start 
developing the type of best practices and guidance that we 
recognize is important in this area. There is some guidance, 
and we have started this process with the issuance of the 
criteria on selection and use of monitors that came out on the 
7th.
    One of the things that has struck me in working on 
developing this guidance is I had a perspective from my time at 
Main Justice seeing many of these large corporate fraud, 
Fortune 500-type cases. You have a very different perspective 
when you are in the field where a lot of the cases that involve 
these issues are not of that type, do not involve those types 
of offenses. And even more so when I talk to my colleagues as 
we develop policy and find out from them, yes, what appears to 
be a good policy will need an exception or some recognition of 
the fact that there are very legitimate prosecutorial reasons 
in another case that need to be taken into account.
    I think it is our view that this is an area that we need to 
continue to study. We are interested in input, obviously, from 
all sources, including the Congress. And we will take that into 
account as we go forward. We would like to have a chance to see 
how these guidelines that have come out work.
    On the issue of when a monitor should be used, while that 
is not fully spelled out, there are indications in the policy 
that came out this week that of the types of considerations 
that should be taken into account in deciding whether a monitor 
should be used. And there are also some guidance in the 
principles on the type of scope of work that a monitor should 
be considered for.
    With regard to the issue of oversight, it is important to 
distinguish between deferred prosecution agreements, which are 
filed with a court, both the charging document and the 
agreement is taken to a magistrate judge or a district judge 
who has to approve the deferral. And so, there is court 
approval of that deferral.
    As Mr. Ashcroft was saying, there are concerns about the 
court getting more enmeshed in the details of approving these 
agreements, which are agreements not to seek an indictment and 
final conviction of a corporation. Courts generally do not get 
involved in that area. I think Professor Garrett has talked 
about some court involvement. That is in the civil settlement 
context of consent decrees. In the criminal prosecution 
discretion area, the prosecutorial discretion is very 
important, and the concern about intrusion by the other 
branches of government is, I think, heightened.
    With regard to congressional involvement, the same issues 
arise. The principles for our exercise of prosecutorial 
discretion have typically been developed within the Justice 
Department often seeking input from various sources. But those 
are kind of core prosecutorial discretion functions. And I 
think there would be some fairly significant separation of 
powers issues if one of the other branches of government was 
too enmeshed in the exercise of who should be charged.
    Ms. Sanchez. Mr. Terwilliger--and I hate to do this to you, 
the last two witnesses. But considerable amount of time was 
given in the first two witnesses' response to these two 
questions. I would please encourage you to be brief in your 
answers to the two questions Mr. Cannon posed.
    Mr. Terwilliger. Thank you. In terms of where it goes from 
here, I want to commend the Committee for having this hearing, 
at least in so far as the focus is on the use of these kinds of 
agreements because from my clients' perspective, that is the 
business community, some focus on these issues is critically 
important.
    The guidelines the department issued, I think, are a very, 
very positive step forward in bringing some level of policy 
guidance and structure to the use of DPAs and, in turn, the use 
of monitor arrangements within DPAs. I do think, however, just 
based on the comments that have come from the Members at this 
hearing today, there is not yet a common understanding of what 
purpose a monitor serves and what purpose a monitor serves 
within the larger context of a DPA and what the use of DPA is 
in terms of an alternative disposition method. And I think it 
would be well-worth the time of the Committee to continue to 
look at that and look at that as an oversight matter in terms 
of how the Justice Department approaches that.
    In terms of oversight, courts have not proven to be very 
adept at running prisons, running school systems. And I don't 
think they would be very adept at running corporations through 
monitors. So while the courts have a role, it is a limited role 
in a criminal disposition involving any defendant, including a 
corporation.
    The responsibility for seeing to it that DPAs achieve their 
remedial purposes, vis a vis, corporate behavior, rests with 
the Justice Department. And this Committee clearly has a role 
in oversight to determine that the Justice Department is, in 
turn, meeting that responsibility.
    Ms. Sanchez. Thank you.
    Professor Garrett?
    Mr. Garrett. Just briefly, as----
    Ms. Sanchez. Please turn your microphone on.
    Mr. Garrett. I am sorry. So I think it is a wonderful 
development that the department is exploring best practices in 
this area. And there is a sufficient body of agreements and 
experience with them that I think this is an important time to 
be doing that.
    It is hard for outsiders like a law professor to study 
these agreements with so little information available. It is 
hard to even get the text of some of them. I think at minimum 
for the public to be able to evaluate what is going on we would 
need to know who are these monitors. It is hard to find out 
their names, much less the terms of their retention.
    A court could at minimum, even if it is not engaged in 
intrusive review of the work of a monitor, could ensure some 
transparency so that we know what the reports are or some 
version of what the implementation is. I think it is important 
to distinguish between the remedies and the implementation of 
these agreements from the charging discretion of the 
prosecutors.
    Courts could be involved in the implementation of the 
agreements or in just minimally approving the remedies, as they 
do now under the U.S. code if it is a deferred prosecution 
agreement. I think we should be more concerned about non-
prosecution agreements in which the court has no role. I think 
it is troubling to proceed in that fashion, and many 
practitioners have complained that there is little difference 
between the sorts of situations in which a non-prosecution 
agreement is entered versus a deferred prosecution agreement.
    I would just finally just point out that if a company is 
convicted and is placed in corporate probation, a court could 
very much supervise compliance or supervise a monitor. It is 
not unheard of. It is something that the sentencing guidelines 
provide for. So this is not a new role for courts. And it is 
something worth thinking about.
    Ms. Sanchez. Thank you.
    Mr. Cannon. Thank you, Madam Chair. And I yield back.
    Ms. Sanchez. I thank the gentleman for yielding back time 
which he does not possess.
    There is sufficient interest in a second round of 
questions, so I hope the witnesses will bear with us. These are 
sort of clean-up questions that hopefully will enlighten us 
further before we move on to our second panel. So I will 
recognize myself for 5 minutes of questions. And I will begin 
with Mr. Dickinson.
    I am interested in knowing, in your opinion or in your 
professional experience, to whom do you think that independent 
monitors owe duty. Are they owed to the prosecutor? Are they 
owed to the corporation? Can you enlighten us a little bit on 
that?
    Mr. Dickinson. It is a very good question, and I think a 
very difficult one to respond to. I notice in the Justice 
Department guidelines they state that the monitor does not have 
a responsibility to shareholders. I believe that the monitor 
really has a responsibility to all the parties involved and 
indeed is appointed for their independent expertise and their 
independent capability to assess both sides of the coin.
    They are brought into a matter after a problem has 
occurred. They are given a mandate. I would hope that the 
written structure of the DPA would actually inform the monitor 
as to those duties.
    Some monitors may, in fact, be required to report to the 
Justice Department. Some are not. Some are actually instructed 
to report on additional issues that arise. Some are not. These 
are the types of things that Mr. Nahmias has pointed out I 
think the Justice Department is getting better at and needs to 
refine more, as a short answer.
    Ms. Sanchez. Thank you. And I am interested in asking you, 
according to the Washington Post, Mr. Ashcroft had to use 
considerable time to prepare for the assignment and learn more 
about the business before he became the monitor in the Zimmer 
case. And I notice that both you and Professor Garrett 
emphasized in your testimony that the person selected have the 
requisite background, expertise, skills, and integrity in order 
to fulfill that role.
    In your view, should a monitor have to use considerable 
time to prepare for a monitoring assignment? Or do you think 
that they should essentially be ready to hit the ground running 
when they are appointed?
    Mr. Dickinson. I think they should be ready to hit the 
ground with respect to the substantive law at issue. I think it 
is only appropriate to appoint a monitor that has substantive 
expertise in the issue that has arisen that is the underlying 
issue of the problem.
    With respect to the business, however, I think it is very 
fair and vital that the monitor come in and understand both the 
background of the problem and the industry in which the monitor 
is to work.
    Mr. Terwilliger. Madam Chair, may I address that just 
briefly?
    Ms. Sanchez. Certainly.
    Mr. Terwilliger. My law firm, my practice group has 
conducted worldwide compliance reviews for companies looking--
where they go voluntarily to look at their own conduct and 
ascertain the level of compliance that exists in their 
international operations. It is absolutely essential, and 
really expensive, that the lawyers spend the time on the front 
end of that process understanding exactly what that business is 
and how it is conducted because otherwise, you don't know where 
to look for where the problems might be.
    Ms. Sanchez. Certainly, but you would also agree, would you 
not, with Mr. Dickinson that the selected monitor should have 
the requisite experience in that field of law that they can hit 
the ground running, so to speak?
    Mr. Terwilliger. Yes. Certainly in that field of law. But 
my point is slightly different.
    Ms. Sanchez. I understand. There are two different types 
of----
    Mr. Terwilliger. And that is that understanding the 
business is important.
    Ms. Sanchez. Absolutely. There are two different types of 
experience one would hope that the monitor would have. And both 
are important.
    I am interested in asking Mr. Nahmias--in the agreement 
deferring prosecution of Bristol-Myers Squibb, U.S. Attorney 
Christopher Christie inserted a provision requiring Bristol-
Myers Squibb to endow a chair in business ethics at Mr. 
Christie's alma mater, Seton Hall. I am interested in knowing 
why was that provision inserted into the Bristol-Myers Squibb's 
agreement? And do you think it is an appropriate type of thing 
to include into a deferred prosecution agreement? I am a little 
puzzled by that, to be honest with you.
    Mr. Nahmias. Well, this is an area that some people refer 
to as extraordinary restitution, the payment by a defendant or 
putative defendant to a third party. It is not an unusual 
occurrence for defendants, individuals or corporations, to do 
that in an effort to seek leniency with a court. And the issues 
arise when the government has some involvement in it. It is 
actually an area that is worthy of further consideration by the 
Department.
    With regard to the matter you are referring to in the 
Bristol-Myers Squibb case, my understanding is that that idea 
was actually raised by counsel for Bristol-Myers Squibb, not by 
the U.S. attorney's office.
    Ms. Sanchez. But would that not be a way to sort of curry 
favor with the prosecutor who is deciding whether or not they 
want to charge this defendant? I mean, don't you think that 
that creates this either conflict or potential conflict?
    Mr. Nahmias. Well, when it was raised, the only request by 
the U.S. attorney's office is that it be at a law school in New 
Jersey where the district is. My understanding is that Bristol-
Myers Squibb initially approached Rutgers Law School, which is 
not Mr. Christie's alma mater, and found out they already had a 
chair in business ethics. And only after they determined that 
they weren't going to go to Rutgers did they go to Seton Hall.
    These arrangements----
    Ms. Sanchez. But do you think that those types of 
extraordinary measures that get inserted there probably should 
be some kind of guidance?
    Mr. Nahmias. This is an area, I believe, is worthy of 
further guidance. And I think the Department is committed to 
looking into that area, hopefully, in the near future to 
establish some guidelines. Again, it is the kind of area that 
has occurred in both individual cases and corporate cases 
across the country for years, and we are reaching a point that 
we think we have the experience and the best practices to form 
the kind of policy guidance that could be useful.
    Ms. Sanchez. I think it would be well-advised to actually 
develop that guidance. My time is expired.
    Mr. Cannon is recognized for 5 minutes.
    Mr. Cannon. Thank you, Madam Chair. This has been 
interesting. And I appreciate the discussion we have had about 
deferred prosecution agreements and in particular, your answers 
on who should oversee that process. And I think that we have a 
consensus on the panel that that should be done at DOJ, the 
Department of Justice, with oversight by Congress, which would 
mean this Committee, the Committee on Commercial and 
Administrative Law, which has the jurisdiction within the 
Judiciary Committee of the House to oversee the U.S. attorneys.
    I would like to expand the idea of oversight of 
prosecutorial discretion a little bit and give you a couple of 
quick cases and then get your response to what ought to happen. 
We had a very famous case in Salt Lake City over the Olympic 
Committee when the first organizers of the Salt Lake Olympic 
Committee were charged with a crime. I just couldn't understand 
the simple country lawyer who actually didn't do much criminal 
law. But I couldn't figure out where the crime would be.
    And then after 5 years and a tortuous time and millions of 
dollars in defense fees--and by the way, in the middle of all 
that, the judge had dropped a number of the charges. And that 
was an appropriate time, I thought, to ask the Department of 
Justice to review the case. But there is really no other place 
where a congressman or a senator or anyone could actually 
suggest to a prosecutor that maybe there wasn't substance to 
the case.
    And then ultimately the case was presented. And we heard a 
pathetic plea by the prosecutor to the judge who was on his own 
motion going to dismiss the case, that the prosecutors plea was 
to the judge to let the jury inform the judge's conscience. And 
the judge says you can't--the jury can't inform my conscience 
as a matter of law, you didn't make your case, and dismissed 
the case.
    We had another similar case where in Utah the FTC had 
prosecuted a guy. And during the whole course of the 
prosecution, they demanded his financial statements. He said my 
financial situation is sort of complex. If I give you my 
financial statements and then the reality turns out to be 
different and I have signed those financial statements, then 
you will prosecute me for lying. And they said yes.
    So he said why don't we just decide what the penalty is 
that you want and I will pay the penalty. And they said, no, we 
want your financial statements because we are going to 
determine the penalty based upon your financial statements. But 
the guy could never get out of liability. So he went to trial. 
He was given 500 names of potential witnesses, had to interview 
those 500 names at a very high cost in lawyer fees per hour.
    When they got to trial, two witnesses were called. Both of 
them exonerated the fellow. And the case was dismissed, again, 
on, I guess in that case, on the motion by the defendant.
    The problem I am posing to you here is that there is no way 
for anybody to look at those kinds of cases. Now, in the case 
of the FTC, I know there is a review process. In the case of 
the Justice Department there is a review process. But basically 
political appointees are not ever going to want to get involved 
in the details of a case. So to the degree that you have got an 
official at the Justice Department or any other agency that can 
bring a criminal prosecution, there is very little that can be 
done to oversee that process. And yet we get a tendency for 
many reasons to prosecute people in ways that those two 
examples demonstrate.
    It seems to me that we need somewhere to have oversight 
that becomes effective. In other words, a new Administration 
takes over. New political people come in. They are loathe to go 
in and say show me the details of your case. In other words, I 
don't think the real world works like law and order works where 
you have got a brilliant prosecuting attorney who tells the 
cops why their case doesn't work or why it does work and is 
deeply involved in every detail. That just doesn't happen, I 
think, in our system.
    What do we do to create a process--and I am going to ask 
the whole panel, but I am going to start with you, Mr. Nahmias 
because of your particular experience, but also because we have 
very different views on this. But if we start here and go 
through the panel and come back to Mr. Dickinson, I would 
appreciate that. Because I would like to know what we can do.
    Do we have a select committee like the Select Intelligence 
Committee where people--we have guidelines in Congress and we 
have the ability to go in and look at particular cases? Do you 
set that up as a separate panel, an outside agency of some 
sort? Or do we just do it in this Committee with more oversight 
staff?
    Ms. Sanchez. The time of the gentleman is about to expire. 
I will allow each of the witnesses to give a very brief answer, 
30 second or less, please.
    Mr. Cannon. Actually, I do believe it is in the interest of 
the Chair to have a long answer because this goes to the very 
core of the jurisdiction of this Committee, which I think we 
would like to expand.
    Ms. Sanchez. I understand we were very generous in the last 
round of questioning with the amount of time that went over. I 
am just asking the witnesses to please pare down your answers 
to the essential points that you would like to make.
    Mr. Nahmias. I will try to be brief. I am not familiar with 
the cases you discussed, obviously. But, you know, I think the 
system is set up in lots of ways to provide accountability for 
the types of decisions that are made in cases, both through, I 
think, are very high-quality career assistant U.S. attorneys, 
U.S. attorneys who are confirmed by the Senate, and by the 
adversarial system and the other party's abilities to fight 
through the system with review by the court and ultimately by 
juries. There is obviously a proper role of oversight by this 
Committee or the Congress generally----
    Ms. Sanchez. Mr. Nahmias, I am sorry.
    Mr. Nahmias. The only concern I have is that it not happen 
while cases are pending because of the risk of injecting 
political influences into what should always and invariably be 
nonpartisan and non-political prosecutorial decision-making.
    Ms. Sanchez. Mr. Dickinson?
    Mr. Dickinson. Justice should be the first stop. And this 
Committee should be the second stop. I am quite familiar with 
the IOC case, if you want to talk about it.
    Ms. Sanchez. Thank you, Mr. Dickinson. I appreciate your 
brevity.
    Mr. Terwilliger? Sorry, it is a tongue twister.
    Mr. Terwilliger. Thank you, Madam Chair.
    Mr. Cannon, you have raised so many important and in-depth 
issues that couldn't possibly be responded to in 30 seconds or 
120 seconds. But I would be happy to submit some thoughts on 
the questions you raised for the record subsequently. I will 
say this.
    When I served as a presidentially-appointed United States 
attorney in the field, I thought the idea of oversight of my 
decision-making and exercise of prosecutorial discretion by the 
Department of Justice was extremely ill-advised. When I served 
as deputy attorney general supervising the Nation's 93 United 
States attorneys and saw some examples of some of the kinds of 
things you are talking about, I formed a very different view.
    But I do think the responsibility in the first instance has 
to be at the Justice Department on the decisions on cases and 
that Congress ought to have oversight on that to ensure that 
there are not improper factors and so forth, but also should 
exercise that oversight after the fact, after Mr. Nahmias 
suggests, and with a very light hand.
    Ms. Sanchez. Mr. Garrett?
    Mr. Garrett. Yes. Briefly I would say that----
    Ms. Sanchez. Could you please turn your microphone on?
    Mr. Garrett. I keep forgetting. As to prosecutorial 
discretion regarding charging, which I think was mostly what 
you were talking about, you know, prosecutors have wide 
discretion for separation of powers reasons. Courts review that 
discretion very deferentially, for good reasons.
    And the DOJ has promulgated the Thompson memo and the 
McNulty memo to provide guidance to organizations on how they 
go about making those charging decisions. So, you know, I think 
it makes more sense to focus instead on what happens after a 
charging decision is made and then there is the question of 
what does that agreement look like, how is it entered, how is 
it implemented, what remedies are included in it.
    Ms. Sanchez. Thank you, Professor Garrett. I think that 
that was the main crux of today's hearing.
    I would like to get through the final Member who would like 
to question because we have been summoned for votes across the 
street. And after Mr. Johnson is allowed to ask questions, I 
think we will be able to dismiss our first panel.
    Mr. Johnson is recognized for 5 minutes.
    Mr. Johnson. Yes, thank you, Madam Chair.
    Professor Garrett, in the case of a non-prosecution 
agreement, there is no charging document that is filed. How can 
there be oversight on those cases where there is nothing filed 
with the court, there is no public record, it is a secret 
process?
    Mr. Garrett. I think those agreements are troubling. And 
one possibility would be if the department issued a guideline 
recommending against the use of such agreements. I don't see, 
unless there is some legislation, you know, which I am not sure 
how that would operate, that forbade the use of such 
agreements. Perhaps the guidance would have to come first from 
the department.
    Mr. Johnson. Mr. Nahmias, I see you shaking your head.
    Mr. Dickinson. Could I make a comment on that? I would 
disagree with Professor on that statement. As with Mr. 
Terwilliger, I have been working in this area for 25 years. I 
have represented companies doing this type of work all over the 
world. I think a non-pros agreement is a highly appropriate 
remedy in certain circumstances. There may be cases where 
companies are willing to make voluntary undertakings and 
provide certification.
    Mr. Johnson. But it is done in secret, though.
    Mr. Dickinson. I am not sure I would use the term secret.
    Mr. Johnson. No public record.
    Mr. Dickinson. There may be a public record, yes.
    Mr. Johnson. Well, no requirement that there be a public 
record or----
    Mr. Dickinson. I am not sure about the requirement, but I 
have personally engaged in non-pros agreements where there have 
been public documents so citing. I think Mr. Nahmias can 
explain further.
    Mr. Nahmias. I think non-prosecution agreements are really 
at the core of the prosecutorial discretion not to bring 
charges. Those decisions by prosecutors not to bring charges 
against either individuals or companies have traditionally not 
been made public.
    Mr. Johnson. They involve the use of monitors, correct?
    Mr. Nahmias. Some of them involve the use of monitors. Many 
of them don't. Many of the ones involving individuals involve 
conditions but do not involve monitors, obviously.
    One of the things is in the area of publicly-traded----
    Mr. Johnson. But it is a secret process?
    Mr. Nahmias. Well, in the area of publicly-traded companies 
and others who have regulatory disclosure obligations, very 
often these agreements are made public by the effected entity. 
This is another area the Department has considered. But it is 
important that we be careful to guard the rights of people who 
are not charged in prosecutions. And the fact that they are 
corporations versus individuals may or may not make a 
difference in an appropriate case.
    Mr. Johnson. Thank you.
    Mr. Dickinson, the Ashcroft Group will reportedly receive 
fees of approximately $52 million for 18 months of monitoring 
in the Zimmer case. Furthermore, the Ashcroft Group gets a 
monthly fee of $750,000 against an hourly billing rate which 
tops out at $895 an hour. In your experience, is this 
reasonable compensation for monitoring Zimmer?
    Mr. Dickinson. I am sorry to say it is impossible to answer 
that in terms of the reasonableness factor. Every monitorship 
is different. Every monitorship has a different scope of work. 
Certainly, that hourly rate would not be unusual for a very 
senior person such as the attorney general. And depending upon 
the scope and the required activities, that may or may not be a 
reasonable amount.
    Mr. Johnson. Mr. Nahmias, U.S. Attorney Christopher 
Christie spearheaded the prosecution and the decision to enter 
a deferred prosecution agreement or an agreement with the five 
medical device companies who were engaged in the largest 
Medicare fraud case in recent history. This was a national case 
which affected thousands of Americans and involved hundreds of 
millions of dollars.
    How was Mr. Christie as the U.S. attorney for New Jersey 
able to obtain the right to prosecute this case instead of 
other U.S. attorneys? And was the decision as to which office 
or which U.S. attorney would prosecute the case--was that 
decision reached from Washington at the Department of Justice? 
Or was Mr. Christie just faster in asserting a claim to the 
prosecution in this national case?
    Mr. Nahmias. I don't know the direct answer to that. I 
believe that some of these companies had extensive activities 
in New Jersey. New Jersey's U.S. attorney's office has been a 
leader in a lot of the major health care fraud cases in the 
country.
    Mr. Johnson. All right. Okay. Thank you.
    Mr. Nahmias. Under Department policy, it is often the U.S. 
attorney who acts first and best that takes the case.
    Mr. Johnson. Okay, thank you. All right. Thank you.
    Professor Garrett, do you have any idea of how many non-
prosecution agreements and deferred prosecution agreements have 
been entered into by the Justice Department since 2003?
    Mr. Garrett. Yes, it is over 80.
    Ms. Sanchez. Please use your microphone.
    And the time of the gentleman has expired. I will allow the 
witness to answer.
    Mr. Garrett. It is over 80 agreements, at least those that 
we have able to locate.
    Mr. Johnson. I am sorry. Say that again.
    Mr. Garrett. We have been able to locate more than 80 
agreements. There may be others that haven't been made public. 
I don't know about those, of course.
    Ms. Sanchez. The time of the gentleman has expired.
    Does Mr. Cannon wish to be recognized for 30 seconds?
    Mr. Cannon. Thank you, Madam Chair. I want to again thank 
the panel for being here today. And as the Chair knows, I am 
deeply concerned about abuses of prosecutorial discretion and 
arbitrary prosecution in particular, prosecution by the 
Department of Homeland Security of groups that haven't 
committed crimes but maybe harboring or may have on their 
payroll, without being able to tell who they are, people who 
are illegal aliens. That would include the Swift prosecution or 
the raid of the Swift Company and the raids of various dairies 
and other groups around the country where there seems to be no 
consistent thought behind how it is done except to terrorize 
industries.
    And that, I think, is one of the issues that this Committee 
should clearly have jurisdiction for. I want to thank the panel 
for their opinions in informing us on what the nature of that 
jurisdiction should be as it relates both the deferred 
prosecution and also to prosecutorial discretion.
    And thank you, Madam Chair.
    Ms. Sanchez. I thank the gentleman. And issues of 
prosecutorial discretion are something that I think is sort of 
tangential to what the crux of today's hearing is. And I have 
enjoyed the discussion.
    I want to thank the first panel for their testimony. I am 
going to excuse you now so that Members can go across the 
street to vote. And we will remain in recess.
    [Recess.]
    Ms. Sanchez. I am now pleased to introduce the witnesses 
for our second panel for today's hearing. Our first witness is 
Congressman Frank Pallone, Jr., of the 6th District of New 
Jersey. First elected to Congress on November 8, 1988, Mr. 
Pallone serves as a senior member of the House Energy and 
Commerce Committee. And in January 2007 he became the Chairman 
of the Energy and Commerce Committee Subcommittee on Health.
    Mr. Pallone also serves on the House Natural Resources 
Committee. Additionally, Mr. Pallone authored H.R. 5086, 
legislation to require the attorney general to issue guidelines 
regarding deferred prosecution agreements.
    We want to welcome you and thank you for your patience, Mr. 
Pallone.
    Our second witness is Congressman Bill Pascrell 
representing the 8th District of New Jersey. Elected to 
Congress in November 1996, Mr. Pascrell serves on the Ways and 
Means Committee and on the House Committee on Homeland 
Security.
    I want to welcome you both. I appreciate your patience in 
waiting until we could actually have you guys here to testify.
    And with that, I would invite Mr. Pallone to proceed with 
his testimony.

      TESTIMONY OF THE HONORABLE WILLIAM PASCRELL, JR., A 
    REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you. I want to thank the Subcommittee 
for holding this very important hearing on the process for 
appointing Federal monitors in deferred prosecution agreements 
and particularly, thank the Chairwoman, Linda Sanchez, for 
inviting me to testify today.
    Recently it has come to light that certain Federal 
prosecutors are using their powerful positions to steer no-bid 
contracts to former employers and other influential people with 
which they have close ties. And I find it troubling that 
Federal prosecutors have such tremendous discretion in 
appointing these corporate monitors. Allowing an unelected 
official unfettered leverage against companies and corporations 
who have potentially engaged in criminal behavior invites the 
type of abuse our judicial system is designed to prevent.
    Specifically, in my home state of New Jersey, a consulting 
firm led by former Attorney General John Ashcroft received a 
contract from U.S. Attorney Chris Christie, his former 
employee. The fact that there was no competitive bidding and no 
public input in this process is problematic.
    It seems that every U.S. attorney handles the process of 
appointing corporate monitors differently. Some, like Christie, 
literally dictated the choice. Others provided a short list to 
the company accused of criminal activity or simply reserved the 
right to veto a company's selection.
    With little say over which firm is appointed as the 
corporate monitor, companies are strong-armed into complying 
with the will of the U.S. attorney. And this essentially 
amounts to corporate blackmail on the part of the U.S. 
attorneys, in my opinion.
    Yesterday the Justice Department released in internal memo 
outlining a set of guidelines for the use of Federal monitors 
in connection with deferred prosecution agreements. While it is 
encouraging that the Justice Department considered some of the 
reforms included in that legislation I have introduced, the new 
guidelines are far too weak. I believe that the only way to 
ensure that politics and favoritism are completely removed from 
this process is to have someone independent of the Justice 
Department, like a U.S. district court judge, involved in the 
process.
    And that is why I have introduced H.R. 5086, which would 
establish safeguards and eliminate the culture of favoritism 
and political interference that permeates these corporate 
monitor agreements. My legislation would direct Attorney 
General Michael Mukasey to issue guidelines delineating when 
U.S. attorneys should utilize corporate monitors.
    While the Justice Department touches upon this in its memo, 
the guidelines the Department outlines still give too much 
latitude to U.S. attorneys. My legislation requires that a 
corporate monitor be selected and approved by a third party 
district court judge or other magistrate from a pool of pre-
qualified firms. These monitors would then be paid according to 
a pre-determined fee schedule set by the district court.
    The legislation also sets out criteria for consideration in 
the determination of whether to enter into deferred prosecution 
agreements. The Justice Department guidelines do not provide 
sufficient guidance as to when these agreements are 
appropriate. My legislation recommends that the Justice 
Department consider the impact an agreement will have on 
employees and shareholders.
    Additionally, the Department should consider remedial 
action taken by the corporation in response to wrongdoing and 
possible alternative punishments available. Having a uniform 
set of criteria available for when to enter into these 
agreements will be essential in eliminating abuse.
    Another important aspect of my bill mandates that all 
corporate monitors submit reports to the appropriate U.S. 
attorney and U.S. district court. The Department guidelines 
vaguely state that ``it may be appropriate for the monitor to 
make periodic written reports to the government and the 
corporation.'' But this needs to be a requirement.
    It is essential to these monitors to keep the Department 
and all involved parties appraised of the progress being made 
on the agreement. And this will also ensure that the corporate 
monitor is properly performing all of the duties mandated in 
the agreement.
    Now, Madam Chairwoman, I would suggest to the Subcommittee 
that the separation of powers issue is a red herring coming 
from the Justice Department in an effort to avoid congressional 
action. Mr. Nahmias said there was no problem with the court 
approval of the deferral. So why would the guidance as to when 
to defer be a problem? Why would court approval of the monitor 
or the other transparency provisions in my bill create any 
constitutional problems? I don't see them.
    The use of deferred prosecution agreements and corporate 
monitors has increased exponentially from five in 2003 to 35 
such agreements last year. I believe that the reforms offered 
in my bill are essential in rooting out any possible corruption 
or wrongdoing in the process of distributing these monitor 
arrangements. We can't allow U.S. attorneys or the Justice 
Department to have unyielding and absolute powers in this 
process.
    And once again, I just want to thank you, Madam Chairwoman 
and the Subcommittee for inviting me here and Congressman 
Pascrell to testify. It is my hope that we can work together to 
have further hearings on the issue so that constructive reform 
to the process of deferred prosecution agreements can be 
brought about. Thank you.
    [The prepared statement of Mr. Pallone follows:]

       Prepared Statement of the Honorable Frank Pallone, Jr., a 
        Representative in Congress from the State of New Jersey











    Ms. Sanchez. Thank you, Mr. Pallone. We appreciate your 
testimony, specifically about the legislation that you have 
introduced.
    At this time, I would invite Mr. Pascrell to give his oral 
testimony.

      TESTIMONY OF THE HONORABLE WILLIAM PASCRELL, JR., A 
    REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pascrell. I want to thank full Committee Chairman 
Conyers and Subcommittee Chairwoman Sanchez and Ranking Member 
Cannon for allowing me to testify today. On November the 26th 
of last year, I wrote to Chairman Conyers and Chairwoman 
Sanchez calling for hearings on this critical issue. So I 
appreciate how far we have come in such a short period of time.
    My attention was first brought to this issue of deferred 
prosecution agreements because of the published reports that 
the U.S. attorney for the district of New Jersey, Christopher 
Christie had reached a $311 million settlement to end an 
investigation into kickbacks being made by leading 
manufacturers of knee and hip replacements. The fact that Mr. 
Nahmias has admitted that he has no idea why Mr. Christie got 
prosecution of this case is exactly why this whole process 
needs real oversight.
    And if I might add, Madam Chairwoman, it is the only reason 
why we are here today, is because Zimmer Holdings filed an SEC 
report. So we were in the dark up until that particular point 
about all of these procedures.
    Let us not kid ourselves. Let us cut to the chase here as 
to what we are talking about.
    This agreement raised questions about the discretion of the 
U.S. attorney's office to select Federal monitors since Mr. 
Christie had selected Ashcroft Group Consulting Services, which 
according to reports, stands to collect as much as $52 million 
in 18 months from its monitoring of Zimmer Holdings of Indiana. 
I am disappointed that Mr. Christie is not appearing before 
this Subcommittee today. Mr. Christie is at the center of this 
investigation and has thus far failed to enlighten Members of 
Congress or the general public about the process by which he 
concluded this deferred prosecution agreement.
    Mr. Christie is needed in this hearing in part because he 
awarded a $10 million monitorship contract to a former public 
official that served in the Morris County board of freeholders. 
A contract that was paid by UMDNJ, a public education entity, 
meaning that taxpayers footed the bill.
    Now, I want to make it very clear that throughout this 
process I have not made any accusations of corruption on the 
part of Mr. Christie. Indeed, in his examination of corruption 
in New Jersey, I have publicly and privately spoken out and 
applauded him for all of his efforts on a nonpartisan basis.
    So let us get that. Somebody said up there we were 
attacking him. That is absolutely absurd.
    There are a number of indisputable facts in this case that 
raise very troubling questions that have yet to be answered. 
First and foremost is the fact that Mr. Christie selected 
Former Attorney General John Ashcroft, his own former superior, 
for a highly lucrative Federal monitoring contract. No conflict 
of interest?
    In addition, he selected four other Federal monitors under 
this deferred prosecution agreement. In every instance, Mr. 
Christie selected former Justice Department associates to 
monitor these medical device manufacturers under highly 
lucrative monitoring contracts. This was seemingly done without 
any negotiation of fees, any consideration of selecting 
monitors with whom he was not closely associated with.
    In my mind, these monitoring agreements clearly amount to 
no-bid Federal contracts that are ripe for political 
considerations. I want to be clear in saying that the selection 
of close associates by a Federal law officer to take on highly 
lucrative contracts which are never negotiated and in which 
outside contractors are never considered is the essence of 
political favoritism.
    I am pleased that the former U.S. attorney general agreed 
to testify before this Subcommittee, as is necessary to 
understand the process or lack of it of which he was selected 
as the monitor for Zimmer Holdings. In the end I am troubled by 
the fact that as Attorney General, Mr. Ashcroft literally 
created the process of deferred prosecution agreements, a 
process that he now benefits from handsomely.
    As I delved deeper into this case involving U.S. Attorney 
Christie and former Attorney General Ashcroft, I came to the 
realization that this case of deferred prosecution agreements 
encompasses an even larger issue of corporate prosecutions in 
the post-Enron era. In researching the history, I discovered 
that the practice of deferred prosecution agreements was made 
legal through the Speedy Trials Act of 1974 and that this 
remedy was rarely used by government prosecutors, except in 
small-scale drug cases involving diversion programs usually for 
marijuana-related offenses.
    Almost 20 years later in 1993, the Department of Justice 
somehow interpreted this narrow statute used for small-time 
crimes to now be used to fight large-scale corporate 
corruption. It is my contention that the legislative intent of 
the Speedy Trials Act of 1974 was never meant to adjudicate 
large corporations. And it seems clear that the Department of 
Justice in recent years has consistently worked to shield its 
practice from oversight by Congress and the courts.
    I myself have not yet introduced legislation on this 
significant issue because I believe that this issue must first 
be investigated by this Committee. This is appropriate.
    In December of last year in lieu of legislation, I sent to 
the Committee my statement of principles on deferred 
prosecution agreements. These four principles laid out a 
comprehensive approach to reforming deferred prosecution 
agreements.
    I cannot, in conclusion, stress more strongly the need for 
comprehensive legislation to reform a deferred prosecution 
process that has been created by the DOJ to generate 
unmitigated power for Federal prosecutors without the necessary 
oversight. There is no oversight.
    These deferred prosecution agreements lack any checks and 
balances within the system as power is almost entirely 
concentrated in the hands of Federal prosecutors alone. No one 
here, including myself, is in a position of defending corporate 
corruptions or arguing against their full prosecution by the 
law. In this instance, we are left with a deferred prosecution 
system that gives Federal prosecutors unmitigated power to be 
the judge, the jury, and the sentencer.
    Truly it was never the intent of our justice system to 
concentrate such power in the hands of the few. We must not 
allowed deferred prosecution to become a form of deferring 
justice.
    Thank you, Madam Chairwoman.
    [The prepared statement of Mr. Pascrell follows:]

Prepared Statement of the Honorable William J. ``Bill'' Pascrell, Jr., 
       a Representative in Congress from the State of New Jersey













    Ms. Sanchez. Thank you, Mr. Pascrell, for your testimony. I 
want to thank this panel for their testimony. And unless we 
have any questions for this panel, they will be excused.
    Mr. Cannon. Madam Chair, I would love to question this 
panel.
    Ms. Sanchez. The gentleman seeks recognition. The gentleman 
is recognized for 5 minutes of questioning.
    Mr. Cannon. Thank you. And we don't look to you as experts 
on an issue that I think is very, very important. In fact, Mr. 
Pascrell and I had a discussion yesterday about the importance 
of this issue. I want to get some information out.
    And I know this is a relatively emotional issue, but as you 
are looking at this, both of you talked about courts reviewing 
the process. It seems to me that we are much better off if you 
have an administration process, that is DOJ, which I think you 
would both say is inadequate. But if that were complemented by 
an external review in Congress, which would probably be this 
Committee. Is that consistent with what you both are thinking 
about this?
    Ms. Sanchez. Mr. Pallone?
    Mr. Pallone. It is not in the sense that I am concerned 
that if the only review is--I mean, I should say if the process 
continues to be internal within the Justice Department and 
there is no court approval or court appointing of the monitor, 
then I do think that the potential for abuse continues. And so, 
a hallmark----
    Mr. Cannon. Why are we better off with a court or various 
courts approving monitors as opposed to having a process 
internal to justice with some advances that they have recently 
made and a series of memos that have helped verify or helped 
qualify the problems? Why would you want a court or courts 
around the country to do it instead of having one sort of 
central review place like Congress?
    Mr. Pallone. Well, I will answer your question consider the 
three-step process. I don't mean to suggest that the Justice 
Department in putting forth something isn't moving, you know, 
in a progressive way. But I do have the problem with three 
things.
    First of all, they don't really delineate what criteria 
would be looked at.
    Mr. Cannon. Let me cut to it. We agree that the current 
guidelines are not sufficient. Everybody on the prior panel 
agreed that they are a work in progress, we need to advance it. 
So no question about that.
    Mr. Pallone. Well, I----
    Mr. Cannon. But the first place you have to go is you have 
to have better guidelines.
    Mr. Pallone. Right.
    Mr. Cannon. But ultimately as you develop those guidelines 
and as this Committee oversees those guidelines, aren't we 
better off retaining oversight here in Congress than letting--
--
    Mr. Pallone. Well, you still have oversight. But the 
problem is even if you have guidelines and criteria for when 
you should have deferred prosecution agreements, which we have 
in my legislation, even if the Justice Department went that far 
and did that on their own, which I would hope they would, but, 
you know, even if they did that, and they haven't, if you don't 
have a third, you know, independent party, third party, in this 
case, a judge or a district court judge, which is what I 
suggest in the legislation, then I think the potential for 
abuse and the conflicts that we talk about could still be out 
there because it is still within the Justice Department. And 
then you also need the transparency of, you know, having, you 
know, the courts look at the agreement, how much the person is 
being paid.
    Mr. Cannon. Given the shortness of time, I think Mr. 
Pascrell has something he wants to say. And then I want to pose 
what I think is the dilemma that this all creates.
    Yes?
    Mr. Pascrell. Mr. Cannon, the first thing I would do is 
make sure we have full disclosure. We do not have this now.
    Mr. Cannon. To the world or to----
    Mr. Pascrell [continuing]. Exaggerating----
    Mr. Cannon. To the world or to a judge or to this 
Committee? Who would you do full disclosure to?
    Mr. Pascrell. Well, I incorporated in my recommendations 
the chief judge of the district court should be monitoring the 
situation. Every quarter he should get a report from both the 
prosecutor and the company so that somebody knows and somebody 
has some oversight. This Committee in no manner, shape or form 
should be minimized in that process. It is an attempt basically 
to have a checks and balance system.
    But you need to have full disclosure. We have no disclosure 
right now. And the only reason why we discussed that--I don't 
think I was exaggerating using an hyperbole--is because Zimmer 
Holdings had to file with the--or did file with the SEC. That 
is how we got to know what was going on. And the reports came 
out. Newspaper reported it. And I was shocked to find that 
nobody knew what was going on.
    In fact, we just learned that some corporations----
    Mr. Cannon. Pardon me, Mr. Pascrell, I see that I only have 
a minute. And there are just a couple of things I want to do. 
And I appreciate the intensity and the lack of transparency, 
which we really need to focus on.
    But let me suggest that the problem here is that we are now 
lambasting a lot of people's reputation. And so, I would like 
to submit for the record two articles from the Washington 
Times, one dated March 11th, ``A Medical Supplier Stryker 
Probe,'' the other dated also the 11th, ``First Spitzer, Now 
Stryker,'' is the title.
    Ms. Sanchez. Without objection, so ordered.
    [The information referred to follows:]

    
    
    
    
    
    
    Mr. Cannon. These things have wild allegations in them. $17 
million directed, according to this article, toward Democratic 
candidates over the years. And that is directed at John Conyers 
and quoting an aid to Nancy Pelosi talking about--let us see, 
``You have more than an appearance of a conflict of interest. 
You have a conflict of interest,'' says the leadership aid to 
Pelosi. ``In our current environment we can't afford to have 
many more of these situations.''
    Ms. Sanchez. The time of the gentleman has expired.
    Mr. Cannon. The fact is as we continue to pound on people's 
public reputations, you two guys are both from New Jersey and 
were all tied into people slamming people's reputations where I 
don't think, at least in the case of Mr. Ashcroft, there is a 
shred of evidence that he has done anything improper----
    Ms. Sanchez. The time of the gentleman has----
    Mr. Pascrell. Whose reputation are we slamming?
    Mr. Cannon. Well----
    Ms. Sanchez. The time of the gentleman has expired.
    Mr. Cannon. Mr. Christie's and Mr. Ashcroft's.
    Ms. Sanchez. The time of the gentleman has expired. I think 
I have been more than lenient today with time to the gentleman.
    Does Mr. Johnson have any questions that he would like to 
ask of this panel?
    Mr. Johnson. I would just say that this legislation appears 
to be reasonable in its scope and its intent. And I think it is 
something that I certainly look forward to supporting. And I do 
appreciate the heads up given to this Committee by Mr. Pascrell 
about the need for hearings. And my hat is off to the Chairlady 
for calling this hearing.
    And I am concerned about the outsourcing of justice in 
white collar criminal cases to private industry, i.e., insiders 
of prosecutors. And it is a system that begs for oversight. 
Something else in addition to what I have heard about you do 
the crime, you do the time is that there is two types of crime. 
One is legal crime, the other is illegal crime.
    The illegal crime is blue collar. And the legal crime is 
white collar. And society should definitely--American society--
we should have full confidence in our justice system that 
justice is fair and is blind. And so, if we have every 
corporation that gets in trouble being able to take advantage 
of a deferred prosecution agreement and in some cases, a non-
prosecution agreement and there being no oversight, no 
guidelines, in fact, no information about it that is available 
to the public, that is a disservice to the ideals that this 
country was built upon.
    And so, we must consider this legislation that has been 
introduced. I want to thank you.
    Mr. Cannon. Would the gentleman yield?
    Ms. Sanchez. Does the gentleman yield back?
    Mr. Cannon. Would the gentleman yield just for a moment?
    Mr. Johnson. Before I yield, I will ask Mr. Pallone to 
respond.
    Mr. Pallone. Well, I just wanted to say that I appreciate 
the fact that the gentleman is talking or focusing on whether 
and when we should even have these agreements because I think 
that, you know, a lot of the focus today was on the monitor and 
the process. But I really think that the Committee needs to 
focus on, you know, whether or not these agreements should even 
be out there and how often they should be used. And that is why 
in the legislation I also have criteria that would be met 
before they would even proceed.
    Because I do think that there are too many of them and that 
it is a problem in itself separate and apart from the issue of 
the monitor and the conflict of interest and the abuses that 
Mr. Pascrell and I have talked about. I think that that larger 
issue needs to be looked at.
    Mr. Johnson. Thank you.
    Mr. Cannon. Would the gentleman yield?
    Mr. Johnson. I will yield.
    Mr. Cannon. Because I know that Mr. Pascrell wanted to make 
a comment. I don't want to be offensive here. This whole 
hearing has largely been about Mr. Ashcroft and Mr. Christie. 
Their reputations have been put on the line. But I didn't want 
to see you cut off, Mr. Pascrell. And I didn't want to make 
that an accusation. But we are now in the middle of a lot of 
reporting about things that are problematic for many people's 
reputations. So with that, Mr. Pascrell, I know that you wanted 
to comment.
    Mr. Johnson. Reclaiming the balance of my time and asking 
for Mr. Pascrell's response.
    Mr. Pascrell. Thank you. I just wanted to make this very 
clear, again, Mr. Cannon, that I was one of the few people from 
my party that praised Mr. Christie's work. That does not give 
me a pass on what I believe is a significant area to look into 
and investigate. I personally believe that this Committee, not 
only has the wherewithal and the responsibility to do such.
    When you look at the term conflict of interest, it is at 
the basis of practically every corruption case. Now, there are 
44 of these deferred agreements that I have looked at for the 
knowledge that I have and for the information available. 
Because in sum, we have no knowledge. We have absolutely no 
knowledge.
    I think that you have a right, and I have a right, the 
public has a right, particularly when 10 of the 44 deal with 
health matters. And a lot of the others deal with international 
funneling of money. I think we have a right to ask the 
questions, particularly at a time when we are examining 
Medicare fraud. Because this is increasing the price and the 
costs of what products are sold to our senior citizens.
    These doctors bribe--you use whatever term you wish--were 
bribed by the company to push the product. I think that is 
pretty serious business.
    Mr. Cannon. I think that is not just a right, but a 
responsibility that we have in this Committee.
    Mr. Pascrell. Absolutely.
    Ms. Sanchez. The time of the gentleman has expired. And I 
just would like to take my 5 minutes to thank you both for 
testifying today, for following with such passion the 
developments of these deferred prosecutions, Mr. Pallone, the 
thoughtfulness of your legislation.
    And just to pick up on a couple of things, I think the 
reason why this Subcommittee was interested in holding this 
hearing is because there are a number of problems that we have 
identified. Number one, the discretion to use these deferred 
prosecution agreements, the fact that there aren't real 
concrete guidelines as to when they are used and who is making 
the decision and why are certain corporations allowed to enter 
these and others are prosecuted criminally. I think certainly 
it is a first step in the analysis that needs to be thoroughly 
done.
    I think once deferred prosecutions are entered into, how 
the monitor is selected is a very relevant question for this 
Committee to ask. And I think that we need to look to potential 
solutions that would take away any conflicts of interest or 
potential conflicts of interest that might exist.
    Now, I know Mr. Delahunt was particularly concerned with 
the fact that corporations sometimes in these deferred 
prosecution agreements get to choose who they want to have 
monitoring them. And I think we heard from our first panel of 
witnesses, all experts or have familiarity of these deferred 
prosecution agreements, that whoever is selected needs to meet 
some basic criteria and needs to have, not just a well-
established knowledge in the area of law in which these 
corporations have fallen short, but also an understanding of 
how some of these businesses run so that they can do their job 
effectively.
    And I don't think that it would harm the system to have 
some kind of entity that can oversee the monitors because right 
now, it doesn't appear that anybody is monitoring the monitors. 
There was some debate as to who does the monitor owe a duty to. 
Is it the corporation? Is it the shareholders? Is it the U.S. 
government? Is it, you know, the taxpayer?
    I mean, it seems like there are some of these conflicting 
ideas about to whom the monitor owes a duty to do their job and 
the fact that there isn't the kind of oversight available to go 
back and look at, you know, how are they billing the 
corporation for their time, what exactly are they doing to 
receive, in some cases, some very lucrative contracts. And I am 
not suggesting that the fees are wildly inappropriate, 
depending on whether or not there has been adequate work that 
justifies those fees.
    And I don't think it is asking a lot to require some 
detailed billing statements. We have seen some examples where 
some monitors have submitted 200 pages of very detailed billing 
statements delineating who did what work and for how long.
    And then we have got others' billing statements that are 
just a couple pages long, and they are sending out a monthly 
fee to the corporation. We don't know what the monitor is doing 
to earn those fees. And I think that is a very troubling area 
of this issue for me.
    So again, I want to thank both of my colleagues from New 
Jersey for their interest in this and their time and last of 
which was their patience in waiting until we got to this panel. 
I know typically we allow Members the courtesy of testifying 
first. But because Mr. Ashcroft could not stay for the whole 
hearing period, we did want to give an opportunity for him to 
testify and Members to ask questions. So----
    Mr. Cannon. Would the gentlelady yield?
    Ms. Sanchez. I will yield briefly to the gentleman. I don't 
have much time.
    Mr. Cannon. I only need to be brief. But I just wanted to 
say that I agree entirely with your summary of the hearing and 
what faces this Committee. But I think, frankly, Mr. Pallone 
and Mr. Pascrell have helped us focus on that. And I wanted to 
thank them as well.
    Ms. Sanchez. Great.
    I would like to thank you, again, for your testimony today. 
And without objection, Members will have 5 legislative days to 
submit any additional written questions, which we will have 
forwarded to the witnesses and ask that you answer as promptly 
as you can so that they can be made a part of the record.
    Without objection, the record will remain open for 5 
legislative days for the submission of any additional 
materials. Again, I thank everybody for their time today. And 
this hearing on the Subcommittee on Commercial and 
Administrative Law is adjourned.
    [Whereupon, at 1:35 p.m., the Subcommittee was adjourned.]

                            A P P E N D I X

                              ----------                              


               Material submitted for the Hearing Record

Responses to Post-Hearing Questions submitted by the Honorable Linda T. 
Sanchez, a Representative in Congress from the State of California, and 
 Chairwoman, Subcommittee on Commercial and Administrative Law to the 
    Honorable John Ashcroft, The Ashcroft Group, LLC, Washington, DC





















































                                

Responses to Post-Hearing Questions submitted by the Honorable Linda T. 
Sanchez, a Representative in Congress from the State of California, and 
   Chairwoman, Subcommittee on Commercial and Administrative Law to 
    Timothy L. Dickinson, Paul, Hastings, Janofsky, & Walker, LLP, 
                             Washington, DC









                                

Responses to Post-Hearing Questions submitted by the Honorable Linda T. 
Sanchez, a Representative in Congress from the State of California, and 
 Chairwoman, Subcommittee on Commercial and Administrative Law to the 
    Honorable David E. Nahmias, The United States Attorney's Office 
               Northern District of Georgia, Atlanta, GA





















                                

Responses to Post-Hearing Questions submitted by the Honorable Linda T. 
Sanchez, a Representative in Congress from the State of California, and 
 Chairwoman, Subcommittee on Commercial and Administrative Law to the 
   Honorable George J. Terwilliger, III, Esquire, White & Case, LLP, 
                             Washington, DC



                                

Responses to Post-Hearing Questions submitted by the Honorable Linda T. 
Sanchez, a Representative in Congress from the State of California, and 
   Chairwoman, Subcommittee on Commercial and Administrative Law to 
   Brandon Garrett, Professor, University of Virginia School of Law, 
                          Charlottesville, VA









                                

  Prepared Statement of James K. Robinson, former Assistant Attorney 
 General for the Criminal Division, United States Department of Justice













                               ATTACHMENT















































                                

 Letter to the Honorable Linda T. Snchez from the Honorable George J. 
      Terwilliger, III, Esquire, White & Case, LLP, Washington, DC











                                 
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