[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]

                       NON-PROSECUTION AGREEMENTS 



                               BEFORE THE

                            SUBCOMMITTEE ON

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES


                             FIRST SESSION


                             JUNE 25, 2009


                           Serial No. 111-52


         Printed for the use of the Committee on the Judiciary

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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            DANIEL E. LUNGREN, California
MAXINE WATERS, California            DARRELL E. ISSA, California
WILLIAM D. DELAHUNT, Massachusetts   J. RANDY FORBES, Virginia
ROBERT WEXLER, Florida               STEVE KING, Iowa
STEVE COHEN, Tennessee               TRENT FRANKS, Arizona
  Georgia                            JIM JORDAN, Ohio
PEDRO PIERLUISI, Puerto Rico         TED POE, Texas
MIKE QUIGLEY, Illinois               JASON CHAFFETZ, Utah
LUIS V. GUTIERREZ, Illinois          TOM ROONEY, Florida
BRAD SHERMAN, California             GREGG HARPER, Mississippi
ADAM B. SCHIFF, California
LINDA T. SANCHEZ, California

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

           Subcommittee on Commercial and Administrative Law

                    STEVE COHEN, Tennessee, Chairman

WILLIAM D. DELAHUNT, Massachusetts   TRENT FRANKS, Arizona
MELVIN L. WATT, North Carolina       JIM JORDAN, Ohio
BRAD SHERMAN, California             HOWARD COBLE, North Carolina
DANIEL MAFFEI, New York              DARRELL E. ISSA, California
ZOE LOFGREN, California              J. RANDY FORBES, Virginia
JOHN CONYERS, Jr., Michigan

                     Michone Johnson, Chief Counsel

                    Daniel Flores, Minority Counsel

                            C O N T E N T S


                             JUNE 25, 2009


                           OPENING STATEMENTS

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.............................................     1
The Honorable Steve King, a Representative in Congress from the 
  State of Iowa, and Member, Subcommittee on Commercial and 
  Administrative Law.............................................     2
The Honorable Steve Cohen, a Representative in Congress from the 
  State of Tennessee, and Chairman, Subcommittee on Commercial 
  and Administrative Law.........................................     4
The Honorable Howard Coble, a Representative in Congress from the 
  State of North Carolina, and Member, Subcommittee on Commercial 
  and Administrative Law.........................................     6
The Honorable William D. Delahunt, a Representative in Congress 
  from the State of Massachusetts, and Member, Subcommittee on 
  Commercial and Administrative Law..............................     7
The Honorable Trent Franks, a Representative in Congress from the 
  State of Arizona, and Ranking Member, Subcommittee on 
  Commercial and Administrative Law..............................   121


Ms. Eileen R. Larence, Director of Homeland Security and Justice, 
  U.S. Government Accountability Office
  Oral Testimony.................................................     9
  Prepared Statement.............................................    11
The Honorable Christopher J. Christie, former United States 
  Attorney, District of New Jersey
  Oral Testimony.................................................    46
  Prepared Statement.............................................    48
The Honorable Gary G. Grindler, Deputy Assistant Attorney General 
  for the Criminal Division, U.S. Department of Justice
  Oral Testimony.................................................    73
  Prepared Statement.............................................    75
The Honorable Chuck Rosenberg, former United States Attorney, 
  Eastern District of Virginia, Hogan & Hartson, LLP
  Oral Testimony.................................................    89
  Prepared Statement.............................................    91
Mr. Vikramaditya S. Khanna, Professor of Law, The University of 
  Michigan Law School
  Oral Testimony.................................................    97
  Prepared Statement.............................................    99
The Honorable Bill Pascrell, Jr., a Representative in Congress 
  from the State of New Jersey
  Oral Testimony.................................................   149
  Prepared Statement.............................................   151
The Honorable Frank Pallone, Jr., a Representative in Congress 
  from the State of New Jersey
  Oral Testimony.................................................   154
  Prepared Statement.............................................   156


Material submitted into the Record by the Honorable J. Randy 
  Forbes, a Representative in Congress from the State of 
  Virginia, and Member, Subcommittee on Commercial and 
  Administrative Law.............................................   133

               Material Submitted for the Hearing Record

Response to Post-Hearing Questions from the Honorable Christopher 
  J. Christie, former United States Attorney, District of New 
  Jersey.........................................................   161
Post-Hearing Questions submitted to the Honorable Gary Grindler, 
  Deputy Assistant Attorney General for the Criminal Division, 
  U.S. Department of Justice.....................................   175
Post-Hearing Questions submitted to the Honorable Chuck 
  Rosenberg, former United States Attorney, Eastern District of 
  Virginia, Hogan & Hartson, LLP.................................   178
Response to Post-Hearing Questions from Vikramaditya S. Khanna, 
  Professor of Law, The University of Michigan Law School........   180
Letter from John Wesley Hall, President, National Association of 
  Criminal Defense Lawyers.......................................   186
Letter from Cynthia Hujar Orr, President-Elect, National 
  Association of Criminal Defense Lawyers........................   189

                       NON-PROSECUTION AGREEMENTS


                        THURSDAY, JUNE 25, 2009

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

    The Subcommittee met, pursuant to notice, at 11:17 a.m., in 
room 2141, Rayburn House Office Building, the Honorable John 
Conyers, Jr. (acting Chairman of the Subcommittee) presiding.
    Present: Representatives Cohen, Conyers, Delahunt, Watt, 
Sherman, Maffei, Lofgren, Johnson, Scott, Franks, Jordan, 
Coble, Issa, Forbes, and King.
    Also present: Representative Jackson Lee.
    Staff present: (Majority) Eric Tamarkin, Counsel; Adam 
Russell, Professional Staff Member; and (Minority) Daniel 
Flores, Counsel.
    Mr. Conyers. Good morning, ladies and gentlemen. I have 
been invited by Subcommittee Chair Steve Cohen, to begin our 
important hearing this morning, and I call the Committee on the 
Judiciary, the Subcommittee on Commercial and Administrative 
Law to order.
    Welcoming our guests, we are very pleased to have Eileen 
Larence, the Honorable Christopher Christie, the Honorable Gary 
Grindler, the Honorable Chuck Rosenberg, Vikramaditya Khanna, 
and on the second panel we have two of our colleagues, the 
Honorable Frank Pallone and the Honorable Bill Pascrell.
    Because of the time limitations of some of the members in 
panel one, the Members of Congress who normally precede the 
regular witnesses we have, by agreement, allowed the panel to 
go first because of time constraints.
    We welcome you all and let me just say that----
    [Pause in hearing.]
    Today, this Subcommittee revisits a matter that was first 
considered last year, the Department of Justice's use of 
deferred or non-prosecution agreements in criminal cases 
involving corporate defendants.
    These deferred prosecution agreements, which we will be 
examining today, originally were created as an alternative to 
the prosecution of non-violent juvenile and drug offenders. 
Under these types of agreements the government agreed to 
refrain from prosecuting in exchange for a defendant's 
agreement to admit wrongdoing, provide restitution and abide by 
certain other obligations.
    The government's use of such agreements as a prosecutorial 
tool with respect to corporate defendants, however, grew in the 
aftermath of the Arthur Andersen case in the earlier part of 
this decade.
    Thousands of people now deemed to be innocent lost their 
jobs after the company collapsed in the face of criminal 
charges, the outcome of which was reversed in the higher court 
hearing on appeal.
    The thinking was that pre-trial agreements might allow the 
government to achieve a better balance between the competing 
imperatives of seeking justice from corporate wrongdoers on one 
hand and protecting innocent bystanders to corporate 
malfeasance on the other.
    But with the growth in the use of these deferred and non-
prosecution agreements, it became evident that there were 
frequently not meaningful standards governing the circumstances 
under which the government might enter into such agreements or 
even what the scope of some of these agreements should be.
    Sometimes there was a lack of guidance with respect to the 
selection and the use of corporate monitors to implement such 
agreements, and so that is what brings us here today.
    One of the cases that are going to be discussed is the 
Zimmer case, in which then the former U.S. attorney for that 
area, Christopher Christie, selected former Attorney General 
Ashcroft to serve as a corporate monitor, and also we note that 
the former attorney general came before this Committee in the 
discussion of these matters.
    And so the Committee was prompted to hold a hearing last 
year, and the Department has taken some steps, which we will 
find out about, to revise some of the activity, but we are here 
to examine these questions, and I would like now if I can----
    Oh, all right. Mr. Franks has a legislative responsibility 
on the House and we will hold--you will defer your statement 
until you return, sir.
    Mr. Franks. Until after the speakers have been around?
    Mr. Conyers. Whenever you get back.
    Is there anybody on the Republican side that would have an 
opening comment in lieu of Mr. Franks' absence?
    Steve King is usually so reticent that I hesitate to invite 
him to make a comment, but I will at this time. The gentleman 
is recognized.
    Mr. King. Thank you, Mr. Chairman. I do appreciate your 
demeanor and tone and your gentlemanliness, and I would be 
ashamed not to accept an invitation from the Chairman of the 
Judiciary Committee.
    And so I will though adjust my tone to the tone that the 
Chairman has delivered this morning. And I am, of course, 
interested in the information we will be gathering here this 
morning and the testimony of all of the witnesses on the panels 
that will come forward.
    And as I frame my outlook on this issue, I would just seek 
to frame for this Committee that we have seen many of the 
members of the former Bush administration before this Committee 
during his tenure as President of the United States and then 
    And some of the subject of this is John Ashcroft, whom as I 
watched him testify before this Committee, it was an exemplary 
display of how a witness can come before this Committee fully 
informed, giving direct answers soundly based in legal analysis 
and theory, and having their recollection that was so 
impressive to me.
    If I had him for a client or if I had evaluated his 
professionalism I couldn't raise it any higher than what I have 
seen in his full career and before this Committee as well. 
There have been a number of other members of the Bush 
administration that have been before this Committee, David 
Addington comes to mind. Doug Fife comes to mind. There are a 
number of others.
    And you know, I would just suggest that we have a lot of 
important issues before this country, and we are on the 
precipice of going forward, perhaps in this Congress, with some 
irrevocable decisions. I think at this point we are at the 
reversible point. The things that have happened so far during 
this Administration are reversible should the American people 
decide to do so.
    Once we cross this Rubicon into the three big issues that 
are ahead of us in this Congress, I don't know that we can go 
back to the place where we are today, or the place, my 
preference, which was where we were before.
    But I would suggest that we should be forward-looking, 
rather than backward-looking, and the data that I have looked 
at indicates to me that there has been a positive result from 
some of these negotiations that have taken place.
    And if we are going to be looking backwards and I reflect 
backwards on some decisions that have been made by the 
Department of Justice agreements not to prosecute entities that 
are significantly engaged in affecting the political decisions 
on this Capitol Hill.
    So if we are going to look backwards, I may want to dig 
through some papers back into the history quite a ways and 
without specifying particularly what they are, in the meantime, 
hopefully this will be a balanced hearing and we can hear from 
the witnesses and we can evaluate this information without 
    And if there is a constructive result that has come and if 
the right things are done for the right reason, I am hopeful 
that in a bipartisan way we can congratulate the people who 
participated in that and move forward into the future rather 
than looking back.
    I think especially, gentlemen, Mr. Christie is part of the 
future leadership in this country, and hopefully this will 
enhance his ability to contribute to American society, and I 
would yield back the balance of my time and thank the Chairman.
    Mr. Conyers. I want to thank you, Steve King, for striking 
such an appropriate and sensitive note. Now, would some of your 
reflections as you look back over history, would this be before 
the Compromise of 1876 or after the Compromise of 1876?
    Mr. King. Being so junior on this Committee, Mr. Chairman, 
I would have to defer to your experience and seniority for the 
judgment call on that, and I will bring those issues up and you 
will be able to make that decision at the appropriate time.
    Mr. Conyers. Well, let us work on it together.
    Mr. King. Thank you, Mr. Chairman.
    Mr. Conyers. I am very pleased now to call upon the 
Subcommittee Chairman himself, Steve Cohen. Steve Cohen who--
the gentleman from Tennessee has a remarkably long career as a 
state legislator, a state senator and is now already the 
Chairman of one of the most important Committees in the 
Judiciary, Commercial and Administrative Law, and he has kindly 
allowed me to sit in the Chair for a short period of time, and 
I am very honored to call on him at this moment.
    Mr. Cohen. Thank you, Mr. Chairman. I do appreciate your 
time that you have extended and the fact that we reciprocate on 
time as I have sat in the Chair for you.
    This hearing is one that my Subcommittee is very eagerly 
anticipating. There are several issues before us. One is 
whether or not deferred prosecutions are a good idea in 
general. Some in the Justice Department, I believe, still 
believe that they are good and they may be good.
    I understand that corporations are different than 
individual citizens in that they represent a large number of 
stockholders, and to punish a corporation in a certain way, and 
possibly with a death sentence if there is a criminal 
conviction, affects not just the corporation but all of its 
    On the other hand, corporations should abide by the law, 
and shouldn't necessarily get a sweetheart deal because they 
are a corporation and be subjected to a different set of 
justice than an individual would.
    As a private practicing attorney you have an individual, 
sometimes a first offender, there is a deferred prosecution. 
And that gives that person a second chance and I hope that in 
some of the cases, and in most of them, that they are first 
offenders. I suspect that they are.
    But nevertheless, the offenses that the corporations are 
generally alleged to have committed, are more serious than the 
minor misdemeanor that a person might have committed as a first 
criminal offense.
    In the circumstance of an individual in a criminal court 
there is a public hearing, and there is public notice of what 
has happened even though the person can generally get their 
record expunged.
    In these corporate situations sometimes the public never 
knows of the wrongdoing of the corporation, and the public is 
harmed. And that is an issue we need to look into, what is the 
public good in having these agreements be private, in camera 
rather than public and giving notice to the public of possible 
wrongdoing and possible ramifications that could occur to an 
individual by these problems?
    The deferred prosecution agreements have really risen in 
the last few years, a lot more use of them. One of the cases of 
the most notoriety, I guess, is the medical devices in Zimmer 
and a corporate citizen in my community, Smith & Nephew.
    Issues have arisen, and I am aware of on how the monitors 
are chosen, and that is a serious issue. I think at all times 
that public monies are expended, no matter how they are done, 
they should be done in a transparent manner and in a fair 
manner, to where every person has an opportunity to 
participate, to do justice and to be compensated for that 
    In these situations over three-fourths of the monitors, so 
says The New York Times in a current report, have been former 
government officials, and over half of them have been 
prosecutors which seems like it is an in-house shop for folks 
who have left their roles with Justice or left their roles in 
U.S. Attorneys' Offices to get lucrative business once they 
    Maybe they have the expertise, maybe they are getting an 
advantage of knowing the right people in the right place, and 
that is not the way justice should work--Government shouldn't, 
never. But Justice should be like Caesar's wife and beyond 
reproach. Circumstances in these cases make us think that 
Caesar's wife would be blushing even more so than some 
governors' wives might blush.
    The fact is when you select a monitor you ought to be 
selecting somebody from a panel of people who make themselves 
available. It should be publicly known, I believe, and I think 
that an independent third party like a judge should be involved 
in selecting the monitors to make sure that there is fairness, 
equal protection, due process and not just political influence.
    The companies are in a no-win position. They have the 
opportunity not to be convicted and they go through this 
monitor situation. But the monitor has them by very special, 
unique and tender posture, and accordingly the corporations 
can't say a lot when they think they are wrong.
    And there should be some type of ombudsman there for the 
corporation to say, ``The fees are outrageous. What they are 
doing is outrageous. It is unnecessary. The expenses are too 
great,'' but they really can't do it.
    And what happens is the monitors are put in a position 
where they can extract their own individual largesse at the 
expense of the corporation. And the corporation can't complain 
because they are in a particularly special situation of 
avoiding prosecution, and in essence they are paying baksheesh 
to the monitors. They have no ombudsman to go to to complain, 
to see that the fees are appropriate or right.
    In the Zimmer case, it is my understanding that Mr. 
Ashcroft's firm was paid $52 million. To me, that is 
outrageous. I don't care what you did. It is not worth $52 
million. Even if you took steroids and hit 70 home runs, it is 
not worth $52 million.
    In the case with Zimmer, there was not an opportunity to 
review the fees. As I understand it there were fees that the 
company were just told, ``You are going to pay this up front. 
You have no choice,'' and they had to do it. That is not 
America. That is not fair justice.
    I believe there needs to be a change in the way that the 
monitors are chosen, an impartial, fair manner. I think there 
needs to be an ombudsman to make sure that the corporations 
have an opportunity to voice their concerns and see that the 
fees are fair and right.
    And they need to be disclosed publicly so the public knows 
what fees are being paid and the relationships between the 
appointing authority, if there is one, whether it is a judge in 
a situation like I would suggest or in the past the U.S. 
attorney and possible conflicts of interest that might exist in 
the appointments or in the relationship that exist.
    These are most important issues that we need to look at and 
see if there is reform that needs to take place that this 
Committee can recommend and the full Judiciary Committee and 
this Congress can pass to see that justice is, indeed, 
respected, justice is blind, justice is fair. That is the hope 
that I have that this Committee will come out with.
    I look forward to the testimony. Mr. Christie has most 
experience, I think, of almost any U.S. attorney in this 
country on these issues. He has been involved in quite a few of 
them, and can give us some information which I look forward to.
    And I don't mean to cast an issue, but if there is some 
information I have--Bristol-Myers Squibb--that U.S. Attorney 
Christie required them to endow a chair in business ethics at 
his alma mater, Seton Hall.
    I am interested to hear about this because if a Member of 
Congress required anybody to endow a chair at a school there 
would be outrageous response. There would be outrage and a 
response from the public.
    And on the other side there would be questions for ethics 
and the idea that it is an ethics chair is indeed ironic. I 
think we have to have arm's length transactions, and we have to 
know that we have to sometimes take our own personal interests 
and put them secondary to the public interest.
    I am sure that we will learn more about what has happened 
in the matters in past hearings, past monitors and hopefully 
come up with some recommendations that protect the public.
    Mr. Chairman, I appreciate the opportunity to make this 
statement, and I hope that all the past corporate or political 
papers that are brought forth by Mr. King will be after Hayes-
Tilden because that way we can rely on you for experience. 
Thank you, sir.
    Mr. Conyers. Thank you, Chairman Cohen. We deeply 
appreciate the exhaustive research that you put into this 
matter for today, and I am now pleased to recognize briefly a 
senior Member of the House Judiciary Committee who has been a 
Chairman, the Ranking Member, and extremely active across the 
years with our Committee, Howard Coble of North Carolina.
    Mr. Coble. Mr. Chairman, I just wanted to tell you how much 
I enjoy the frequent and pleasant verbal exchanges between you 
and the gentleman from Iowa. You two keep us on our toes. Mr. 
Chairman, I won't take the 5 minutes. I have a transportation 
hearing I am going to have to attend back and forth.
    But I just wanted to, for the benefit of the Committee 
Members who may not know it, and I think I am right about this, 
and I think deferred prosecutions were inaugurated by the Bush 
one administration, continued thoroughly by the Clinton 
    Furthermore continued thoroughly by Bush two, and, I 
believe, continuing presently under the Obama administration, 
so deferred prosecution is by no means a case of first 
impression before us. They have been around a pretty good while 
and I just wanted to put that on the record, Mr. Chairman, and 
I thank you for having recognized me.
    Mr. Conyers. It is a pleasure, indeed.
    I would like to inquire if our former prosecutor from 
Massachusetts and Chairman of the Foreign Affairs Subcommittee, 
Bill Delahunt, had an opening comment. If he does, he is 
recognized for it.
    Mr. Delahunt. Well, I might as well take advantage of the 
time then. The gentleman from Iowa talked about a Rubicon and I 
think it is important to understand that our justice system 
enjoys a reputation that is unparalleled in terms of the 
justice systems elsewhere in this world.
    And I think much of that can be attributed to the fact that 
there is a level of confidence in the integrity of that system 
by the American people. Now, that level of confidence 
fluctuates. At times it is diminished and at times it is at a 
high standard.
    Now, as the Chairman indicated to the full Committee, I 
myself was a prosecutor, an elected prosecutor, states 
attorney, district attorney in the Greater Boston area for 22 
years, so I support the concept of prosecutorial discretion. I 
know that can be important so that injustices do not occur.
    But there have been a number of concerns that have been 
expressed regarding so-called deferred prosecutions, and by 
that I interpret that deferred prosecutions are in lieu of 
indictments. In other words, one could argue that there is a 
different set of standards, a different justice system, if you 
will, for one class that is American corporations that are 
accused of wrongdoing, and the vast majority of Americans who 
are accused of other crime.
    As I read through the briefing material and listening or 
reading RABA, the order of magnitude of improper gain 
apparently some corporations managed to realize, and the 
discretion was exercised by the prosecutor not to prosecute, or 
at least not to seek an indictment. And then I thought of many 
of the young men, particularly, that appeared in my courts who 
we prosecuted and sent to jail for long periods of time.
    What the view of the community at large would be to send a 
young man into the state prison system for maybe 4 or 5 years 
in the case of an unarmed robbery, and yet corporations who 
were committing crimes that impacted thousands of people were 
not indicted but managed to reach an agreement to avoid that 
    You know, there are other options that are available to the 
government, but I don't know if they have been seriously 
considered. A prosecutor and, Mr. Christie, I note that you are 
a former U.S. attorney, and I think there are others on the 
panel, a prosecutor can indict.
    So this is a statement to the public that that corporation 
has probably committed a crime. And then, if there is a 
decision that is in the best interest of the United States or 
an individual state, they can be diverted, a pre-trial 
diversion concept.
    But that, again, obviates, eliminates the need for, I 
think, the appearances that people question. I heard the Chair 
of the Subcommittee talk about fees of $52 million. I mean, I 
would like to see the billing on that. That is a high hourly 
rate and I am certainly not one that doesn't believe that 
lawyers should be well paid, but it does raise issues.
    And again, you know, and I am not suggesting or impugning 
anyone's integrity here, but when the prosecutor makes the 
decision as to who the monitor is and I am sure that the 
monitors of those that are reviewing these agreements, 
presumably, are people of solid credentials and high integrity, 
but they are friends of former associates.
    Then the public is going to infer something, that it is the 
good old boy network at work or good old girl network at work, 
whatever the case may be. And these are appearances I would 
suggest that we want to avoid because, as I said at the 
beginning, our justice system depends on the confidence of the 
American people in terms of the integrity.
    You know, I am looking at some of the briefing material 
here and, you know, I am sure, I hope, that these decisions 
were made in good faith, but they reek of favoritism, high 
fees, and it is not a good situation, and secrecy.
    If you are going to have a viable justice system you need 
transparency. You have got to lay it out, and I would suggest, 
Mr. Chairman that it ought not to be the prosecutor. It ought 
to be the court that makes these assignments and enunciates and 
promulgates whatever guidelines are necessary.
    I see Mr. King is taking his glasses off. I am getting 
nervous. Maybe he will agree with me. But why not have the 
court, an independent body, rather than having the prosecutor 
who in the end has ultimate responsibility for the 
investigation and making charging decisions appoint someone 
that he may or may not have a relationship with.
    I read your testimony, Mr. Christie, and you keep referring 
to the office and I understand that, what you mean by that 
term, but in the end it is the individual United States 
attorney. It is not the office that makes that decision.
    Sure, U.S. attorneys, like I did when I was the states 
attorney, we always listen, but in the end it is going to be 
myself that makes that decision, and appearances, even if there 
is nothing improper, impact the confidence of the people in the 
    So I know we have legislation pending, and I know it deals 
with guidelines, but I guess I would conclude by saying I would 
ask everyone on the panel why not have the court, as it should 
appropriately through the probation offices, and the courts 
appoint masters, not at $52 million. If it was $52 million, 
sign me up. I am ready to move for $52 million.
    But we have masters that take on these kind of tasks that 
can do them, that are people of great expertise time and time 
again to handle matters that are complex because this issue is, 
I think, has the potential to seriously erode confidence in 
terms of the administration of justice in this country if not 
reformed. And with that, I yield back. I thank the gentleman.
    Mr. Conyers. Representing the Government Accountability 
Office (GAO), is Ms. Eileen Larence, Director for Justice 
Issues. As such, she manages congressional requests to assess 
various law enforcement and Department of Justice issues and 
has been at the GAO for some period of time. We have her and 
all of your statements that will be entered into the record, 
and we will allow you to proceed at this moment. Welcome to the 


    Ms. Larence. Mr. Chairman and Members of the Subcommittee, 
thank you for the opportunity to discuss the preliminary 
results of our review of Justice's use and oversight of 
deferred and non-prosecution agreements.
    Increasing use of these tools as alternatives to 
prosecuting companies for criminal conduct is both topical, 
given concerns about corporate behavior leading to the economic 
downturn, and controversial, as some question whether the tools 
let companies off the hook. They give prosecutors too much 
    Their use also raises questions about balancing the 
tradeoffs of uniformity, consistency and transparency with 
prosecutor discretion and flexibility to address unique cases.
    Given these issues, we have work underway to answer four 
questions about these tools. First, what factors do justice 
prosecutors consider when deciding whether to use the tools and 
what company requirements or terms to impose?
    Second, how do the prosecutors oversee company compliance 
with these terms? Third, how do they select independent 
monitors, and fourth, what do companies think of monitor's 
costs and responsibilities?
    I would now like to briefly summarize our preliminary 
answers to these questions. As for the first question on 
deciding whether to use these tools and what terms to include, 
justice prosecutors we interviewed consistently said they 
consider the nine principles of Federal prosecution of business 
organizations, especially how well the company is cooperating 
with investigators, what collateral consequences third parties, 
such as shareholders and employees might face with prosecution, 
and what remedial actions the company had already taken to fix 
its problem.
    Justice offices we contacted also consistently issued press 
releases about agreements reached or required that some be 
posted to Web sites promoting transparency. Justice offices 
were less consistent, however, in deciding which of the two 
tools to use and on labeling agreements as either a DPA or NPA, 
despite recent guidance calling for consistency so that justice 
can track their use and identify best practices.
    We in the Department are continuing to review whether 
further guidance on the documentation of and supervisory review 
over these decisions may be important. Most agreements we 
reviewed required monetary payments ranging from $30,000 to 
$615 million, and were based on sentencing guidelines as well 
as case specific factors.
    The agreements lasted from 3 months to 5 years, depending 
on the amount of time prosecutors believe the company would 
need to fix its problems. Most agreements also required 
companies to improve their ethics and compliance programs to 
prevent and deter criminal conduct, unless the companies were 
already doing so for their regulators, for example.
    While prosecutors stated that companies could appeal 
unfavorable terms to Justice, some companies were reluctant to 
do so for fear of retaliation.
    Turning to the second question on ensuring compliance with 
agreements, in about half of the agreements we reviewed Justice 
required the company to pay for an independent monitor because 
the offices did not have the resources or expertise in-house.
    Almost all monitors had to provide written reports of their 
findings to Justice. For the other half of the agreements, 
Justice relied on regulators to ensure compliance or required 
companies to certify they complied, among other things.
    Addressing the third question about selecting monitors, 
Justice typically chose the monitor but gave companies the 
opportunity for input, although to varying degrees. Justice and 
companies generally relied on personal knowledge and 
colleagues' recommendations to identify potential monitors with 
    They did check for conflicts of interest, used an in-house 
committee to make a final decision, and coordinated with 
regulators if they already had monitors in place in order to 
avoid duplication and extra costs.
    Companies and prosecutors thought developing a national 
list of potential monitors to avoid favoritism could provide 
consistency and pre-screened, qualified candidates, as well as 
expedite selection. But others thought it might not provide the 
needed expertise and might result in more conflicts of 
interests, less company input and more favoritism if justice 
created the list.
    Recent Justice guidance begins to address some of these 
issues by requiring the use of selection committees and final 
monitor approval by the deputy attorney general among other 
things. We are recommending that prosecutors also document the 
process and reasons for monitor selection to avoid favoritism, 
and provide an audit trail for accountability and transparency, 
and Justice agreed with this recommendation.
    Finally, in terms of monitor fees and responsibilities, 
while a couple of companies said their fees were high, others 
thought they were customary and were more concerned that 
monitors did more work than necessary and beyond the scope of 
the agreement, driving up costs.
    Companies felt they had little leverage to fight these 
costs and so would like more help from Justice such as 
negotiating monitor responsibilities in the agreements, 
requiring upfront monitor work plans and budgets and 
periodically meeting with companies to discuss monitor 
    Mr. Chairman, we are continuing to work on a number of 
these issues, including the need for additional guidance or 
improvements and the role of courts in this process, and plan 
to issue a final report this fall. That concludes my statement. 
I would be happy to answer any questions.
    [The prepared statement of Ms. Larence follows:]
                Prepared Statement of Eileen R. Larence



    Mr. Conyers. Thank you so much. We are now pleased to have 
the former U.S. attorney for the District of New Jersey who has 
for 6 years had been the U.S. attorney for his state and has 
left his post as of December 1st, 2008.
    He has been an advisor of one of the 17 lawyers that 
advised former Attorney General Alberto Gonzales and has had a 
long career of experience in the law, and we are very pleased 
that he could make time out of his schedule to be with us 
today. Mr. Christie, welcome.


    Mr. Christie. Thank you, Mr. Chairman, and thank you very 
much to you for the invitation today, to the Members of the 
Committee. Thank you also for the flexibility that you showed 
in terms of the scheduling of this hearing, recognizing that I 
am in the middle of a campaign for governor of New Jersey.
    Your willingness to be able to be flexible regarding the 
scheduling has made it possible for me to prepare adequately 
and to be here to spend time with all of you today and answer 
your questions, and I appreciate it.
    A number of key points to make, without repeating some of 
the things that were already pointed out by the GAO, first and 
foremost, deferred prosecution agreements were utilized by my 
office during my tenure in the 7 years that I was United States 
attorney to achieve results of justice for the public.
    When wrongdoing was committed, people involved in 
corporations, both individuals who were charged and companies 
who were dealt with, needed to be dealt with firmly, directly 
and strongly to make sure that people understood that there 
were integrity in the system.
    Let us talk about how these agreements work. First and 
foremost, there is absolutely in the discussion of the 
monitors, zero--zero taxpayer dollars spent on these monitors. 
It is important to note because there seems to be some 
confusion on that so I want to be clear.
    Zero taxpayer dollars are spent on these monitors. They are 
all incurred, these costs, by the companies who were involved 
in the wrongdoing in order to reform the culture in that 
    Secondly, in the case of the medical device prosecutions, 
there is already nearly a half a billion dollars in savings 
returned to the Federal Government. Let me be specific on how 
that was done. Four of the companies paid $311 million back to 
the Federal Government at the time of the settlement of this 
    In addition, in just the first year of these agreements, 
payments to consultant surgeons by these companies dropped by 
$150 million. Those costs were costs that were past directly 
onto the consumers and onto the Federal Government 
predominantly through the Medicare system, who was paying for 
these costs through the companies. So now, nearly half a 
billion dollars has been returned, and counting, to the 
government because of these agreements.
    Third, collateral consequences were mentioned by the GAO. I 
will tell you, I was a member of the Justice Department during 
the Arthur Andersen matter. Each one of the United States 
attorneys was affected significantly by the loss of nearly 
75,000 jobs at Arthur Andersen, in a case that ultimately was 
reversed by the United States Supreme Court. The case was 
reversed, but those jobs were not reversed back into the 
American economy.
    The artificial hip and knee medical companies employ 47,000 
American citizens, providing innovation and products that 
improve the health of our country. Indictment of those 
companies would have--all of them whom are publicly traded--
most certainly would have led to their debarment from the 
Medicare program, and since two-thirds of all of those 
replacement surgeries are paid for by Medicare, this would have 
put those companies out of business, companies that controlled 
94 percent of the market in artificial hips and knees in our 
    Those collateral consequences, in my view, were absolutely 
something that needed to be avoided. In addition, it is an $80 
billion industry and there was no harm done to the company's 
shareholders during this entire time. In fact, during the time 
of the deferred prosecution agreements, three of these 
companies saw growth in their shareholder value instead of 
    These products are vital to the health of our citizens--
absolutely vital to the health of our citizens. And if they had 
been eliminated from the marketplace, 94 percent of these 
devices, this would have caused great harm--great harm to the 
people of our country who rely upon them.
    All of these monitors were proposed to the companies, 
interviewed by the companies and then accepted by the 
companies, and they were made clear by our office that they had 
the opportunity to object and if they did we would propose 
another monitor.
    Lastly, Mr. Chairman, we also have shown great transparency 
in this because at the time that these agreements were put into 
place, not only were they announced publicly, not only were the 
agreements put up on our Web site, not only were they required 
to be put up on the Web site of the companies, but also 
criminal complaints were filed, reviewed by a Federal judge, 
approved by a Federal judge along with approving the 
agreements, and all of that was placed into the public record.
    So there is transparency. There is no taxpayer dollars 
being spent. There is nearly half a billion dollars being 
returned to the Federal Government, Mr. Chairman, and so I look 
forward to a good conversation about this and to have the 
opportunity to talk to all of you about the great work that the 
office of the United States attorney for the district of New 
Jersey did on behalf of the American citizens on these and 
other prosecutions.
    Thank you.
    [The prepared statement of Mr. Christie follows:]
      Prepared Statement of the Honorable Christopher J. Christie



    Mr. Conyers. Thank you, sir. We are now pleased to welcome 
from the Department of Justice, Deputy Assistant Attorney 
General of the Department of Justice's Criminal Division since 
March 2009, Attorney Gary Grindler.
    He has been working on, and previously, on special matters 
in Governmental Investigations Practice Group in his former law 
firm of King and Spalding. Welcome this afternoon to our 
hearing, sir.


    Mr. Grindler. Good afternoon, Mr. Chairman and to the 
Members of this Committee. I thank you for your invitation to 
address this Committee on this very important topic.
    I am privileged to serve the Department of Justice as a 
Deputy Assistant Attorney General in the Criminal Division, and 
in my private practice in my past involvement with the 
Department, I have had the opportunity to observe the 
Department's impressive efforts over the last several years to 
combat corporate fraud and other corporate malfeasance.
    Since 2002, the Department has obtained approximately 1,300 
corporate fraud convictions. This includes convictions of more 
than 370 senior corporate officers. In addition, between 2004 
and 2008, the Department has secured over 940 guilty verdicts 
or pleas from corporate defendants.
    During that same time, the Department resolved 
approximately 80 corporate cases with the use of deferred 
prosecution agreements and non-prosecution agreements which 
comprises approximately 8 percent of the total number of 
corporate criminal convictions during that period.
    In order for corporate enforcement efforts to be effective, 
Federal prosecutors must be permitted the discretion to fashion 
appropriate agreements with business organizations to resolve 
investigations and those decisions have to be made on the 
unique facts and circumstances of a particular case.
    The Department will continue to bring criminal charges 
against business organizations where the conduct is egregious, 
pervasive and systemic. At the same time, however, the 
Department recognizes that charging and convicting a 
corporation runs the risk of triggering significant negative 
consequences for innocent third parties who played no role in 
the criminal conduct, including employees, pensioners, 
shareholders and customers.
    These collateral consequences may be unjustified where the 
corporation has fully cooperated, disciplined the culpable 
individuals, implemented comprehensive compliance reforms and 
made restitution to all victims. These are issues that must be 
considered when determining whether to charge a business 
    Prosecutors may use a variety of tools other than an 
indictment and a prosecution to bring justice to the victims 
and to the public, and among those tools are DPAs, NPAs, and 
the use of independent monitors.
    The Department last year in the United States Attorneys' 
Manual issued clear guidance on the principles that must be 
considered when evaluating the appropriate resolution of a 
corporate criminal investigation.
    The use of DPAs and NPAs and independent monitors, indeed, 
has increased over the last 5 years, and while they avoid the 
collateral consequences that I just described, the companies 
nevertheless will face serious consequences for their criminal 
    Typically, during the time period of a DPA and NPA, the 
corporation will be required to fulfill requirements, certain 
requirements, including the payment of restitution to victims, 
the payment of financial penalties, full cooperation by the 
business organizations which may enable additional prosecutions 
both of companies and individuals and the implementation of an 
effective compliance program.
    In appropriate cases, DPAs and NPAs may also require the 
retention of an independent compliance monitor. And last year, 
as you know, the Department issued guidelines regarding the 
selection and use of monitors that identified a series of 
principles to be followed in using these monitors in connection 
with these agreements.
    The guidelines are designed to ensure that well qualified 
independent monitors are selected, that the process is free 
from potential conflicts of interest and that the monitors 
focus on reducing the risk of a corporation's future 
    The Department of Justice recognizes this Committee's 
interest in the use of DPAs, NPAs and independent monitors. 
However, we do have serious concerns about the provisions 
contained in H.R. 1947 entitled The Accountability in Deferred 
Prosecution Act of 2009, and we do oppose this proposed 
    This bill, if passed, will diminish the ability of Federal 
prosecutors to fully exercise their prosecutorial judgment and 
discretion which is a core prerogative of the executive branch. 
And I want to emphasize that the Department's written guidance 
governing the principles that apply to prosecutive decisions 
that involve DPAs and NPAs were carefully developed with input 
from a number of people, and that we believe they adequately 
address the issues that are covered by the bill.
    Finally, requiring courts to approve a non-prosecution 
agreement before they can take effect raises separation of 
powers issues, and could impede and delay the government's 
enforcement efforts against corporate fraud.
    The Department is committed to using all of the tools at 
its disposal to root out corporate fraud, and our experience 
has shown that DPAs and NPAs must be tailored to the specific 
needs of a particular case and provide sufficient flexibility 
to achieve real results.
    It is important that we preserve the ability of experienced 
prosecutors to balance all of these concerns and resolve the 
criminal matters in the best interest of the public and the 
victims. I would be pleased to answer any questions that the 
Committee may have. Thank you.
    [The prepared statement of Mr. Grindler follows:]
          Prepared Statement of the Honorable Gary G. Grindler



    Mr. Conyers. We thank you for your testimony. Chuck 
Rosenberg is a partner at Hogan & Hartson, has served as the 
U.S. attorney for the Eastern District of Virginia and as the 
U.S. attorney for the Southern District of Texas.
    He has also served in several post-senior ones at the 
Department of Justice, as chief of staff to Deputy Attorney 
General Jim Comey, as counsel to Attorney General John Ashcroft 
and counsel to FBI Director Bob Mueller. From 1994 to 2000 he 
was an assistant U.S. attorney in the Eastern District of 
    We welcome you here this afternoon, and we will listen 
carefully to your testimony.


    Mr. Rosenberg. I was simply thanking the Committee for the 
invitation. It is a pleasure and an honor to be here today. 
Thank you, Mr. Chairman.
    I joined the Department of Justice out of law school. I 
went to law school because I wanted to be an assistant U.S. 
attorney and I should tell you that I consider it still the 
greatest professional privilege of my life including the 
opportunity to have served as U.S. attorney.
    I work with wonderful men and women of great integrity and 
dedication and intelligence. I miss it every day. These men and 
women of the Department struggle with how best to handle 
corporate crime.
    Corporate crime presents a very difficult dilemma. How do 
you punish corporate criminal behavior without harming innocent 
third parties? One solution tool that we found, that works and 
works well, has worked well for a long time, are deferred 
prosecution agreements. I have just three points to make about 
them. I am going to be brief, and then I am going to be quiet.
    First, prosecutors need to strike a balance between doing 
too much and doing too little. We struggle with that all the 
time. We want crime to be punished, obviously. We need specific 
and general deterrents for the bad actors, but we also need a 
level playing field for the vast majority, vast majority of 
corporations that do it by the book.
    The collateral consequences of prosecuting a corporation, 
Mr. Grindler alluded to that, even the bad corporate actor that 
does not play by all the rules can devastate individual lives, 
and we have seen that, employees, shareholders and so on, who 
had absolutely no role in the corporate criminal wrongdoing and 
no ability to prevent it.
    Also, in highly regulated industries, a prosecution can 
mean the debarment of a corporation and therefore its demise. 
In some cases that is appropriate. In many cases it is not. So 
point one, we need a balanced approach.
    Point two, we got one. We have a balanced approach. The 
Department has a very sensible approach in place. I have been 
with the Department--I had been with the Department for a very 
long time. I know what that approach is, and I think they have 
it right.
    So I guess it is not very interesting for me to show up 
here and tell you that the system is not broken, but actually, 
I am not very interesting, and that is why I am here, to tell 
you that the system is not broken.
    DOJ has struck the right balance, has the right safeguards 
in place and handles deferred prosecution agreements, including 
the appointment of corporate monitors in a thoughtful, careful 
and proper manner. There are two key documents here. I 
respectfully refer the Committee to both, although I am sure 
you are quite familiar with them.
    The first is the March 2008 guidance by then Acting Deputy 
Attorney General Craig Morford, like me also a career guy in 
the Department of Justice, regarding DPAs and the selection of 
corporate monitors.
    The second key document articulates the current Justice 
Department principles in place right now regarding the 
prosecution of business organizations, found at Title 9, 
Chapter 9-28 of the U.S. Attorneys' Manual. A lot of very smart 
and experienced prosecutors spent a lot of time constructing 
this guidance. I think they got it right. It is not broken. It 
doesn't need tinkering.
    Third point, and final point, there are a couple of 
proposals floating around, split the oversight of deferred 
prosecution agreements and the selection of corporate monitors 
in the hands of the Federal judiciary.
    I completely understand the impulse. I spent a lot of time 
in front of Federal judges and, by and large, they are 
terrific. They are very, very good at what they do. So we are 
tempted to tap into their experience and independence to imbue 
DPAs with the same integrity associated with all the other 
proceedings in Federal court.
    Here though, I believe, that the participation of the 
judiciary would be a mistake. Deciding who and how to 
prosecute, or whether to prosecute at all, is a core executive 
function. Judges do many, many things well, no dispute, but 
there are a bunch of things that judges should not do, and 
acting as prosecutors is one of them.
    Mr. Chairman, thank you for inviting me here today. It is a 
privilege. I am pleased to answers questions of the Committee.
    [The prepared statement of Mr. Rosenberg follows:]
          Prepared Statement of the Honorable Chuck Rosenberg


    Mr. Conyers. We are very glad you are part of our panel. I 
am now pleased to call on Professor Vikramaditya Khanna of the 
University Michigan Law School faculty and before that the 
Boston University School of Law faculty, and he has been 
visiting faculty--a fellow at the--no, he has been at Harvard 
Law School, a senior research fellow at Columbia Law School and 
a visiting scholar at Stanford Law School.
    And this is not to indicate that he can't stay in more than 
one place for any length of time. We are very impressed by your 
career. His areas of research and teaching include corporate 
law, securities fraud and regulation, corporate crime, 
corporate and managerial liability, and corporate governance in 
emerging markets.
    And so we have your prepared statement and we will now 
listen to you to conclude this panel, sir. Welcome.


    Mr. Khanna. Thank you and good afternoon Chairman Conyers, 
Chairman Cohen and other distinguished Members of the 
Subcommittee. Thank you for inviting me here today to testify.
    I will primarily focus my comments on the growth and 
functioning of corporate monitors as part of corporate deferred 
and non-prosecution agreements. In particular, I would like to 
address three issues today in my testimony.
    First, when is it desirable to impose a corporate monitor 
on a firm as part of the DPA? My response is essentially that 
in instances where the potential cash fines that we can impose 
on a corporation seem unlikely for whatever reason to obtain 
the level of deterrence we desire, we should consider the use 
of a corporate monitor.
    This helps to ensure that monitors are only appointed when 
they are socially desirable, and helps to reduce concerns that 
a monitor is a way to avoid imposing serious sanctions on the 
    Second, if a corporate monitor is to be used, then what 
steps should be taken to reduce the concerns associated with 
the appointing of such monitors?
    My response is that we should try to encourage the growth 
of a market, of sorts, for monitor services, because that will 
not only enhance the accountability and the transparency of the 
monitor, but also provide a strong competitive impetus for good 
performance. This will help reduce concerns both about the 
selection process and about the compensation levels, as well as 
potentially enhancing performance.
    Third, what steps, in addition to those proposed in the 
recent House bills and the Department of Justice memo may be 
worth exploring to enhance the functioning of corporate 
    My response here is that I applaud the efforts, both taken 
in the House and by the Department of Justice, as important 
steps in this area. These reforms are broadly consistent with 
my analysis on corporate monitors as I suggest in my written 
testimony. In addition to these steps, however, I would suggest 
some further steps that might help to enhance the functioning 
of corporate monitors.
    In particular, first, explicit discussion by the Department 
of Justice when deciding to go forward with a corporate monitor 
about why a cash fine or other sanction would not suffice for 
deterrence, and why a monitor with frequent ongoing contact 
with the firm would be a desirable thing to have on the facts 
of this case?
    Second, some oversight on monitor compensation might indeed 
be desirable, but the pure flat fee being suggested in the 
House bill, should be adopted very cautiously. Instead, I might 
suggest judicial review triggered by perhaps the fees crossing 
some hourly threshold that makes us wonder a little bit about 
their size.
    In addition, maybe open competitive bidding for the 
position of a monitor, or maybe even an alternative, such as 
multiple flat fees that might apply at different levels 
depending on the kind of expertise you are expecting from the 
    For example, in certain monitoring instances, to address 
the concerns of the firm may require a great deal more skill 
and investment of time than, say, in others, and having a flat 
fee for both might be somewhat troublesome in terms of being 
able to generate the kind of expertise you might want. You 
wouldn't necessarily want to pay your neurosurgeon the same 
amount as you pay your primary care physician.
    Third, the groups of people who are qualified to act as 
monitors, I think, should be expanded to include, of course, 
not only former enforcement officials, but also attorneys with 
substantial litigation experience and others who have 
experience in compliance matters.
    Sometimes, compliance issues, particularly, in the area of 
financial and securities fraud, don't necessarily require 
tremendous litigation experience as much as experience with 
looking through financial statements and knowing where the 
skeletons might be buried.
    Fourth, in terms of arranging for some degree of judicial 
oversight, I think that can be useful, but perhaps in limited 
doses. For some of the concerns already raised by members of 
the panel, but also because of the notion that judicial 
oversight is a precious thing to have. We should use it where 
we think it is most important, perhaps when the DPA is being 
finalized rather than ongoing oversight, unless some triggering 
event occurs that might merit greater interest for the judge.
    Finally, in terms of public disclosure of monitor's 
reports, so far, the approach seems to be that monitor's 
reports would be disclosed, to the government, the Department 
of Justice, and potentially to the court.
    But I would suggest that maybe public disclosure should be 
something we should consider as a norm with the power of the 
court and the Department to redact out information that might 
be troublesome or potentially competitively problematic for 
    This will help both in terms of the ability to inform 
victims of potential wrongdoing of the potential harm they may 
suffer, and that would help to reduce, maybe the harm they 
suffer, as well as potentially informing other companies about 
steps they can take to avoid future wrongdoing in similar 
industries or in similar contexts.
    With that, I will end my testimony. I will be happy to 
elaborate on any of these matters. Thank you again for inviting 
me to testify today.
    [The prepared statement of Mr. Khanna follows:]
              Prepared Statement of Vikramaditya S. Khanna


    Mr. Conyers. Thank you so much, Professor Khanna, and I 
thank all five of you, lady and gentlemen. And I want to 
observe, before I turn to Chairman Steve Cohen, I can't help 
but wonder--does this application of a non-statutory piece of 
work, does it have any relation or any possibility to non-
corporate prospectively criminal cases, because, we are here 
looking at one thing?
    There are those, and it has not been articulated, that want 
to end this system. There are others that think it is working 
fairly well, perfectly okay, and then there is another school 
that would like to modify it.
    And so I turn now to the Chairman of this Committee to 
begin inquiry.
    Mr. Cohen. Thank you, Mr. Chairman.
    Mr. Christie, you mentioned that the defendants had an 
opportunity to turn down monitors. Did Zimmer turn down Mr. 
    Mr. Christie. No. In fact, sir, let me give you a complete 
answer to that.
    Mr. Cohen. That is the complete answer.
    Mr. Christie. No, no, it is not sir. It really isn't 
because I think it is important for you to know, that Zimmer 
first came to our office to suggest that the one thing they 
wanted to make sure they had in a monitor, since they were a 
company from Warsaw, Indiana and in the Midwest, what they did 
not want a large New York law firm. They did not want a large 
northeastern law firm. They said they wanted someone with 
Midwestern sensibilities.
    We then sent them Mr. Ashcroft's name, who, I think 
everyone is aware, is from the Midwest, and they had an 
opportunity to interview him, and were told that if they had an 
objection they should come back and express it.
    When they came back, counsel for Zimmer and their CEO said, 
``We are thrilled. We think we got the best monitor.''
    Mr. Cohen. Did any other entity in the medical devices 
lawsuit turn down the monitor?
    Mr. Christie. No sir, they did not.
    Mr. Cohen. They didn't. Has any monitor that you have 
recommended been turned down by the defendant?
    Mr. Christie. In the instances of, in terms of other 
deferred prosecution agreements, the operation of the selection 
of the monitors worked differently, and options were not given 
in those instances. I would----
    Mr. Cohen. So it was----
    Mr. Christie [continuing]. Relate to you why. It was 
    Mr. Cohen. So let me ask you this then. You can then tell 
me then, based on your testimony that nobody ever objected to 
the monitor. In your testimony you said, ``All the defendants 
could turn them down,'' but in reality nobody turned them down. 
Is that right?
    Mr. Christie. No, they all agreed after interviews----
    Mr. Cohen. They all agreed.
    Mr. Christie [continuing]. They all agreed after interviews 
with their monitors and the opportunity to meet with them----
    Mr. Cohen. Right.
    Mr. Christie [continuing]. They all agreed.
    Mr. Cohen. The answer is, they all agreed.
    Mr. Christie. Yes, sir.
    Mr. Cohen. The bottom line is you made them an offer they 
couldn't refuse.
    Mr. Christie. I don't agree with that sir.
    Mr. Cohen. That is what happened, sir, I believe.
    Mr. Christie. No, sir, I don't--you were not----
    Mr. Cohen. That is the problem.
    Mr. Christie. Excuse me, sir. You were not in the room. Let 
me answer the question. You were not in the room----
    Mr. Cohen. I have got the microphone, sir.
    Mr. Christie. Sir, you have said that I gave them an offer 
you couldn't refuse----
    Mr. Cohen. That is right.
    Mr. Christie. First of all, it is an ethnically insensitive 
comment by you, first of all, to an Italian-American. And 
    Mr. Cohen. I had no idea you were Italian----
    Mr. Christie [continuing]. And secondly sir, let me finish.
    Mr. Cohen. Mr. Christie, I have no idea and I----
    Mr. Christie [continuing]. Secondly sir----
    Mr. Cohen [continuing]. That you are suggesting----
    Mr. Christie [continuing]. You were not in the room when 
the negotiations took place, sir, and I was. And these folks 
came back and were not under duress. They came back and said 
that they appreciated the monitors that were selected, and they 
accepted the monitors they were selected.
    Mr. Cohen. Right.
    Mr. Christie. And I don't appreciate, unfortunately sir, 
the implication that you make in the question.
    Mr. Cohen. Well, the facts speak for themselves. Nobody 
turned one down. In your testimony, you made the point to say 
they could turn them down, like this is a very open-ended 
    Mr. Christie. And it was.
    Mr. Cohen. The fact is, none of them turned them down, 
because they couldn't afford to because, otherwise----
    Mr. Christie. The fact is----
    Mr. Cohen [continuing]. They were about to be prosecuted. 
Stop, Mr. Christie. Otherwise, they were going to be 
    Mr. Christie. No. That is not the case.
    Mr. Cohen. You had them in a situation. You offered them a 
deal that they couldn't refuse.
    Mr. Christie. No. You are wrong sir. The fact of the matter 
is, that they didn't turn them down because the career 
prosecutors in my office who prosecuted this case, along with 
my executive staff, along with our ethics officer and myself, 
took great time, and great care to analyze the facts inside 
each company, to analyze the monitors that were suggested, to 
make sure that both their experience and their approach would 
be compatible with the companies that we had been investigating 
for 3 years----
    Mr. Cohen. All right, that is why.
    Mr. Christie. The alternative answer, Mr. Cohen, to your 
question is, not because they thought they were under duress, 
but because the Department of Justice, through the United 
States attorneys' office for the district of New Jersey, did 
their job by putting proper monitors in place for each company.
    Mr. Cohen. Did you or anyone in the New Jersey U.S. 
Attorneys' Office ever send any e-mails about fee negotiations?
    Mr. Christie. Yes, there were e-mails that were sent to me 
regarding Zimmer that I responded to during the time they were 
negotiating fees with the Ashcroft Group.
    Mr. Cohen. And Zimmer objected. They thought the fees were 
outrageous. They were supposed to pay $750,000 up front to Mr. 
Ashcroft and his two other senior executives just as a retainer 
fee. Is that accurate?
    Mr. Christie. I was not the least bit shocked, sir, to 
receive e-mails from high priced lawyers arguing over fees.
    Mr. Cohen [continuing]. Over the defendants.
    Mr. Christie. No, it was not, sir. The e-mails were from 
the defendant's counsel----
    Mr. Cohen. Right. And they were----
    Mr. Christie [continuing]. Who, by the way, was being paid 
handsomely by the hour to argue as he had been arguing with us 
for the last 4 months before the agreements were executed in 
order to get the best deal that he possibly could for his 
    He is a partner at Fulbright & Jaworski, an incredibly 
competent health care lawyer who argued vehemently and got 
great concessions from our office for his client. He then 
raised issues regarding the fees proposed by the Ashcroft 
Group, and I told him in my e-mails to him to go back--and I 
also told the Ashcroft Group--to go back and resolve whatever 
differences they had regarding fees without intervention by the 
    If they could not I would have intervened and within a 
week's time, after I sent them back to begin negotiating again, 
they had agreed to fees.
    Mr. Cohen. On October 17, 2007, did Attorney Rick Robinson 
say, ``The parties have reached an impasse on certain key 
issues,'' the first issue being a flat fee provision? And did 
you refuse to intervene when they had reached an impasse, Mr. 
    Mr. Christie. Mr. Cohen, he sent me that e-mail, and I am 
looking for them now, he sent me that e-mail and when you read 
the totality of the e-mail I think you come to the conclusion 
that there wasn't an impasse that was reached.
    And I instructed him back to go and try to resolve it as I 
did instruct the Ashcroft Group to go back and attempt to 
resolve it in good faith. If the United States attorney gets 
involved in every dispute between their monitors and the 
companies they are monitoring, the United States attorney would 
have no time to do anything else in his office but litigate 
those disputes. Within 1 week after the sending of that e-mail, 
they came to an agreement on fees by compromising with each 
    Mr. Cohen. Well, I don't--I am not sure if the attorneys 
for Zimmer would agree with that, but nevertheless let me go to 
    Mr. Christie. Well, he was no longer the attorney after 
this, Mr. Cullen. So I don't know which attorneys you are 
talking about.
    Mr. Cohen. Let me go to the Bristol-Myers Squibb situation. 
Why did you not suggest that it would be wrong for a 
contribution at--the chair to be endowed at the school that you 
attended? We in the public life have to be beyond Caesar's 
life, too.
    Mr. Christie. Yes, sir, and I suggest to you that neither 
you nor I have cornered the market on that. So let me be very 
clear with you about what you are saying.
    Mr. Cohen. It is an admission on your part----
    Mr. Christie. No, it is not an admission on my part, sir. 
Let me tell you exactly how it happened. Bristol-Myers Squibb 
was represented by Mary Jo White, the former United States 
attorney for the southern district of New York and one of the 
most respected prosecutors and private practice attorneys in 
this Nation.
    It was in fact the suggestion of counsel for Bristol-Myers 
Squibb that one of the things they wanted to do in order to 
ensure an ethical culture in their company was to endow a chair 
at a New Jersey law school on ethics.
    I told them if that was their idea that was fine, and they 
were to handle it. They came back and told me that their--
Rutgers Law School in New Jersey all ready had an endowed chair 
in ethics by the Prudential Corporation and they were then 
going to move to Seton Hall to have discussions with them.
    I was not involved in those discussions. It was not my 
idea. It was not my initiative. It was the idea, initiative and 
suggestion of the Bristol-Myers Squibb Corporation and they 
still today participate in twice annual seminars on corporate 
ethics run by Seton Hall Law School, financed by Bristol-Myers 
    It was not my idea, it was not my suggestion, I did not 
suggest Seton Hall. I did not suggest this whole idea. It was 
suggested by Mary Jo White and management of Bristol-Myers 
Squibb. It was their decision, sir, not mine.
    Mr. Cohen. Mr. Chairman, if I can only respond. I would 
submit to you, sir, that even though the suggestion might have 
been by the defendant, who may not have been made an offer they 
couldn't refuse, but that it was the position of a U.S. 
attorney to rise above that and to understand the appearance of 
impropriety, and to refuse it and to say, ``I suggest you pick 
Princeton or Montclair State--''
    Mr. Christie. Well, sir, if Princeton had a law school I am 
sure they might have looked at them. If Montclair State had a 
law school----
    Mr. Cohen. They have a business school.
    Mr. Christie. Sir, they do not. This was to be done--this 
was their idea. There are two law schools in the state of New 
Jersey, sir, Rutgers and Seton Hall. Rutgers already had a 
corporate chair for corporate ethics funded by the Prudential 
Corporation. That is what moved Bristol-Myers Squibb to go to 
Seton Hall.
    Your implication that there is something inappropriate 
about a corporate citizen deciding that they wanted to endow a 
chair in the study of corporate ethics given the corporate 
climate in this country is surprising to me.
    What the public needs to know is that it was not my idea, 
it was not my initiative, and it was something that they asked 
for in the agreement. It was a concession we made to them as 
part of their overall agreement. It was not an offer I made, 
rather it was an offer they made, sir.
    Mr. Cohen. Thank you, Mr. Chairman.
    Mr. Conyers. The Chair recognizes the distinguished 
gentleman from Iowa, Steve King, acting Ranking Member of this 
Subcommittee, who has removed his glasses again.
    Mr. King. And I had agreed with Mr. Delahunt, but I thank 
the Chairman for recognizing me, and it sounded as I listened 
to the witnesses that there is a significant amount of 
unanimity with regard to the subject that is before us, 
deferred prosecution agreements.
    And there is a significant amount of disagreement and the 
clash that has just taken place between Mr. Cohen and Mr. 
Christie, and so I would like to direct my attention to that 
and ask Mr. Christie if you are aware where the genesis of this 
allegation about the endowment might have originated?
    Mr. Christie. Sir, there was no discussion of this at the 
time. When the agreement was made it was made public. 
Allegations of this came up much, much later on in a much more 
political context.
    Mr. King. And I accept that and I suspect that, and I just 
reiterate that this is turning into a political issue, and 
hopefully we could examine the issue in front of us and still 
let the public know, Mr. Chairman, about the political 
components of this.
    And it got my attention as I listened to Mr. Cohen's 
opening remarks, when he made this allegation about the 
endowment at Seton Hall, and so it occurred to me instantly 
that when he said that Members of Congress wouldn't do 
something like that. No, Members of Congress instead just 
simply offer earmarks for their endowments.
    And I can think of some in my district there are Harkin 
Grants. My junior senator--he has his name clearly over these 
things. Those are endowments that go into the educational 
institutions all over the country with the name Harkin Grant on 
them. There are buildings named after living members of the 
United States Senate, and we try not to do that for living 
members of the House of Representatives.
    But I would ask the panel is anyone aware--first I would 
ask Mr. Christie, could you name the five businesses that were 
the subject of the agreement?
    Mr. Christie. On the medical devices, sir?
    Mr. King. Yes.
    Mr. Christie. Okay, the five companies were the Zimmer 
Corporation, the DePuy Corporation, which is a subsidiary of 
Johnson & Johnson, the Smith & Nephew Corporation, the Stryker 
Corporation which is out of Kalamazoo, Michigan and the Biomet 
Corporation which is also out of Indiana.
    Mr. King. Okay, I thank you. And is there anyone on the 
panel that is aware of any earmarks that have been provided to 
these companies that are the subject of our testimony today? 
None at all? Well then into the record I would suggest that I 
am reading what we understand to be a press release that lays 
out a case that there is an $800,000 earmark for Smith & Nephew 
for developing a new trauma hemostat surgical tool.
    Do you have any knowledge of that anyone on the Committee? 
And apparently no one on the Committee does, and I would ask 
unanimous consent to introduce at the appropriate time, the 
original press release that identifies this earmark to this 
company called Smith & Nephew by the gentleman from Tennessee, 
Mr. Cohen, an $800,000 earmark.
    Mr. Conyers. Without objection, does the gentleman object?
    Mr. Cohen. I don't know what--I just heard my name which I 
was reviewing some material to prepare for the second round, 
and I heard my name or reference to me.
    Mr. Conyers. Well, let me do this. If we have agreement 
with both of the Steves on the Committee, let me reserve that, 
and I will examine it and make a comment about it later in 
terms of putting it into this record.
    Mr. King. I appreciate it, Mr. Chairman.
    Mr. Conyers. Thank you.
    Mr. King. And I thank the Chairman for his indulgence and 
we will produce the original documents and we will have that 
deliberation at that another time. I make this point because it 
is easy to point fingers. It is easy to make allegations. It is 
much more difficult to make a cogent case against deferred 
prosecution agreements.
    No one on this panel has made a case against them. They 
have raised the issue about unintended consequences. And so I 
would then, rather than go down the list of things I would like 
to see reiterated here by the witnesses, and the record is 
relatively replete, but I am reflecting upon a part of Mr. 
Christie's written testimony that I didn't hear in his oral 
presentation about the difficulty of reaching this agreement 
with five companies simultaneously.
    And the language that jumps off the page when I read the 
written testimony is, ``Negotiating these agreements was akin 
to landing five airplanes on the same runway at the same 
time.'' I would ask Mr. Christie if he would speak to the 
difficulty of this agreement.
    Mr. Christie. Thank you, sir. This was a 4\1/2\-month long 
negotiation with some of the best lawyers, corporate health 
care lawyers in America. This is an $80 billion industry, the 
medical device sensors, an $80 billion industry that has 
significant resources to hire outside counsel in order to be 
adversarial, as they need to be with our office.
    We engaged in a 4\1/2\-month long negotiation, and 
understand these are competitive companies. They are competing 
with each other every day. They were willing to agree to 
reforms but only if everyone was going to play by the same set 
of rules going forward.
    So imagine now, you have five of the biggest law firms in 
America who each get a chance to make comments on a 30, 40 plus 
page long agreement that will govern the conduct of their 
client going forward for the next number of years.
    We went through nearly a dozen drafts of that agreement 
which meant 60 copies of it because each was times five, with 
different negotiation requests. These were incredibly 
contentious negotiations that literally, sir, were not resolved 
until 9 a.m. on the morning that we announced these agreements 
at 11 a.m., is when the last issues were resolved.
    And all five of the companies kept calling in to me to say, 
``Is everybody agreeing to exactly the same thing? Is everybody 
doing exact--because if they are not, I am not signing.'' So 
literally it was akin to trying to land five jets on the same 
runway at the same time without them crashing.
    The reform that they achieved in my view was extraordinary. 
In the first year after this agreement, payments to surgeon 
consultants by these companies dropped by $150 million. There 
were more than 1,000 fewer consultants at the end of the first 
year of this agreement than there had been when we entered the 
agreement. Imagine, they were still functioning, still being 
profitable, with 1,000 less consultants.
    Those reforms were achieved as well as a transparency that 
has been discussed in this country for a long time with medical 
device and pharmaceutical companies. This agreement required 
that each and every one of those companies post on their Web 
site and update quarterly the names of all the surgeons they 
were making consulting payments to, where those surgeons were 
located and how much they were paid.
    So a citizen in your district, sir, if they were 
considering an artificial hip or knee replacement and their 
doctor recommended a device from a particular company, they 
could go on the Web site and see if that doctor was in fact 
being paid by that company so they could judge whether their 
advice was objective or not.
    This is an area of transparency that now was, as you can 
see in my written testimony, replicated in the pharmaceutical 
industry after we instituted these changes in the medical 
device industry. Those are the kind of things we were 
    Mr. King. Thank you, Mr. Christie. And in conclusion if, 
with some deference from the Chair, I would like to just 
summarize this that I have not been able to get two opposing 
attorneys to agree on anything. The only way I can get them to 
agree is if they are paid by the same client.
    And the difficulty of bringing this together over massive 
dollars--an $80 billion industry and 94 to 95 percent of the 
industry controlled by these five entities depending on whether 
it is written or oral testimony, but that is a huge number.
    And saving the public $450 million at least, $150 million 
of that from the costs of these services and saving 47,000 jobs 
seems to me to be an extraordinary accomplishment, and I cannot 
for the life of me divine why you would be in the public eye 
unless it would be for adulation.
    And so I would suggest, Mr. Chairman, with that 
disagreement that we are discussing that at the end of this 
hearing we could take that issue up, and I would suspend it 
until that time, and I would yield back the balance of my time, 
and I thank you.
    Mr. Conyers. Are you referring to your attempt to put 
something into the record?
    Mr. King. Yes. Yes, I am.
    Mr. Conyers. I would like to ask you to reflect on 
withholding that from the record because I would like to notify 
all of our Committee Members that the five companies, Zimmer 
and four other medical device companies, that agreements can be 
examined on our own Web site judiciary.house.gov. And I think 
that would go a long way and I would appreciate your 
cooperation to that respect.
    Mr. King. Mr. Chairman, I am not suggesting to introduce an 
agreement into the record. I am just asking unanimous consent 
to introduce Mr. Cohen's press release into the record.
    Mr. Franks. Mr. Chairman.
    Mr. Conyers. I would take that under advisement. Let me ask 
our Ranking Subcommittee Member, Trent Franks of Arizona, who 
has returned, if he would care to make his opening statement 
now, or would he like to reserve it until a later point in 
    Mr. Franks. Mr. Chairman, if you would afford me that 
courtesy I would appreciate it.
    Mr. Coyers. Would you? All right. By unanimous consent I 
would ask that the gentleman be allowed to make his opening 
statement at this point in time, and he is recognized for that 
    Mr. Franks. Mr. Chairman, I certainly appreciate the 
courtesy here. I apologize. I was out trying to save the world 
and the vote----
    Mr. Conyers. Again.
    Mr. Franks. Yes, sir. We don't know whether I was 
successful yet. The vote will be taken a little bit later, but 
thank you very, very much.
    Mr. Chairman, I obviously would welcome the witnesses, and 
it sounds like you have all done a wonderful job here today, 
and I particularly want to express my welcome to one of our 
colleagues from New Jersey, a distinguished former U.S. 
attorney from the district of New Jersey.
    In the wake of the Enron scandal in 2001, our corporate 
landscape changed dramatically. One of those changes, really, 
is what has led us to today's hearing. Arthur Andersen, Enron's 
accounting firm, was swept into scandal by allegations of 
accounting improprieties, and it was indicted, prosecuted and 
convicted in the southern district of Texas.
    As a result, it had to surrender its accounting license, 
effectively destroying the business. Seventy-five thousand jobs 
were lost. Innocent people had held virtually all of them. The 
Supreme Court later unanimously overturned Arthur Andersen's 
conviction; I know that has been part of the record thus far, 
the damage, however, was irreparable.
    Arthur Andersen and its jobs never came back from the 
damage inflicted by the trial court proceeding. As a result, 
the Department of Justice took a long, hard look at whether or 
not there was a better way to pursue wrongdoing by companies 
without prosecuting companies out of business and innocent 
jobholders out of jobs.
    This decision was to begin using deferred prosecution 
agreements more frequently to avoid needless damage to the 
economy while still policing and correcting wrongdoing. One the 
great success stories following that change, of course, 
occurred in New Jersey under U.S. Attorney Chris Christie.
    Mr. Christie and his office, uncovered a major kickback 
scheme, a scandal, involving doctors in all five major U.S. 
manufacturers of hip and knee replacements. The problem, Mr. 
Chairman, was huge. These companies represented almost 95 
percent of the U.S. market.
    In 2000 alone, more than 700,000 hip and knee replacements 
were performed in the United States of America. Medicare paid 
more than two-thirds of those procedures. The five companies 
employed 47,000 people in the United States. If prosecuted and 
convicted, they would have been debarred from the Medicare 
    The U.S. industry would have simply imploded. It would have 
been Arthur Andersen all over again, but with this time, and 
with the entire--and, of course, in this case it would have the 
entire U.S. sector. And it was critical the Department clean up 
this scandal, but it was equally critical that the Department 
not destroy 10,000 jobs and wreck an important part of our 
economy and our health care system.
    Chris Christie met both of those needs, obtaining deferred 
prosecution and non-prosecution agreements with all five firms, 
a very challenging achievement. Under the terms of the 
agreements, the companies lived under the intense scrutiny of 
corporate monitors and the threat of prosecution until their 
acts were cleaned up.
    They struck 5-year corporate integrity agreements with the 
U.S. Department of Health and Human Services. They repaid $311 
million to the United States. They stopped $150 million in 
shady payments to doctors in the first year. These agreements 
worked, Mr. Chairman.
    The companies cleaned up their acts, jobs were preserved, a 
U.S. industry was saved, and nearly half a billion dollars was 
restored to the public at no cost to the taxpayers because the 
companies themselves paid for the corporate monitors that were 
crucial to these results.
    Chris Christie deserves, in my judgment, a medal for his 
achievements like these, and so do other U.S. Attorneys who 
obtained similar results. Our hearing today should therefore 
focus on how the Department can replicate, and if possible, 
improve on this kind of success.
    The Obama administration, evidently, concurs because its 
Justice Department substantially replicated Mr. Christie's 
terms in the WellCare agreement recently negotiated by the U.S. 
attorney for the middle District of Florida, and we will hear 
more from that Department if we haven't already today.
    In January 2008, The New York Times and New Jersey 
democrats tried to kick up a controversy over the hiring of 
former Attorney General John Ashcroft as the corporate monitor 
for Zimmer, the most powerful company subject to Mr. Christie's 
    Critics and partisans overlooked that it was Zimmer and the 
other corporations subject to an agreement, not Mr. Christie 
that selected General Ashcroft and all of the other monitors. 
They overlooked that the companies, not Mr. Christie and the 
taxpayers, had hired General Ashcroft and the other monitors 
and negotiated and paid all fees and costs for the monitors. 
Taxpayers did not pay anything for those monitors.
    And they overlooked that General Ashcroft was immensely 
qualified for the job of serving as the monitor for Zimmer. 
Testimony at our hearing last spring laid this controversy to 
rest until the press and New Jersey democrats recently 
attempted to stir it up again, but the monitors for Mr. 
Christie's agreement did a terrific job in the New Jersey case.
    I take hope from these clear results from the caption of 
our hearing today and from the composition of our expert 
witnesses on the panel today, that today's hearing will not go 
down the dead-end road trodden by some democrats and New Jersey 
    I also have confidence that our Committee and Subcommittee 
Chairman will appreciate the effectiveness of the New Jersey 
agreements in rectifying the underlying wrongdoing while saving 
workers' jobs.
    Because of Mr. Christie's good work, Mr. Chairman, and 
because these companies complied with agreements Mr. Christie 
negotiated, those jobs are still in existence today, and I 
thank the Chairman for especially going beyond the call of duty 
to allow me this opportunity to go ahead and give my statement.
    Thank you, and I yield back.
    Mr. Conyers. Well, it is my pleasure, and I apologize to 
our other Chairman, Bill Delahunt, who has postponed or is 
trying to rearrange his other activity.
    Mr. Delahunt. Well, thank you, Mr. Chairman.
    Mr. Conyers. With pleasure I call upon----
    Mr. Delahunt. Yes, I understand that we will have several 
rounds, so I have to go and introduce a foreign dignitary, but 
at least I will be here for the first round. You know, I want 
to tell you, Mr. Christie, until today I did not realize that 
you were a candidate for governor. So I want you to understand 
that, you know, I am a very, you know, ardent democrat, but I 
want you to be very clear, I had no idea you were a candidate.
    But I think your case does illustrate the problems. Having 
that power invested in the U.S. attorney and after serving in 
that office to develop a political ambition, then one begins to 
attract, and you will discover this I am sure during the course 
of your campaign, a certain scrutiny.
    And that reflects on what I said earlier about the issues 
of confidence in the integrity of the criminal justice system. 
I am not impugning any of your motives or what you did during 
the course of this particular case, but what I am suggesting is 
the authority ought to be moved from prosecutor's offices--I 
disagree with Mr. Rosenberg--to the judiciary.
    We wouldn't be having these hearings today. You wouldn't be 
questioned about whether you, you know, sought to have Mr. 
Ashcroft, you know, made the monitor in this particular case. 
You know, there are appearances, and I think you would agree 
with me--well, I will ask you a question. Appearances in terms 
of conflict of interest are important, do you agree with that?
    Mr. Christie. Actual conflicts are most important and 
appearances are also important, sir, yes.
    Mr. Delahunt. Thank you. But I, you know, you could be a 
democrat up in Massachusetts and I am sure----
    Mr. Christie. That is not likely, but I guess anything 
could happen.
    Mr. Delahunt. Anything can happen. Anything is possible. I 
mean the reality is $52 million is a lot of money. $52 million 
to the former Attorney General whom you work for--did you work 
during--did you serve----
    Mr. Christie. I was proud to serve for 3 years under 
General Ashcroft. Yes, sir.
    Mr. Delahunt. That is fine. So what is the public going to 
say? The public is going to say $52 million for what? For what? 
For one single case. And I am not suggesting you did anything 
improper, but appearances are important. Now, if the court was 
the--clearly, a separate and independent branch of government 
appointed any monitor, whether it be the former attorney 
general or whomever, these questions would not occur.
    I wouldn't be asking you, nor would anyone else, whether 
you had any--did you display favoritism? I have no idea. Did 
you appoint Attorney General Ashcroft?
    Mr. Christie. As I said in my written testimony, sir, it 
was part of a process that we went through in our office----
    Mr. Delahunt. Okay.
    Mr. Christie [continuing]. And that involved the lead 
prosecutors who investigated the matter.
    Mr. Delahunt. I understand.
    Mr. Christie. My executive staff, but I would like to 
    Mr. Delahunt. Sure.
    Mr. Christie [continuing]. Because I think a point you made 
before is apt, and I don't want to back off from that.
    Mr. Delahunt. Okay.
    Mr. Christie. At the of the day, sir, we discuss that as an 
office, we put enormous amount of time into it, but in the end 
the buck stops with me in terms of my recommendation to the 
    And so I took all the input that I got from all of my 
career prosecutors, career members at the Department of 
Justice, fine people, and we picked the five best people we 
thought to recommend to these companies.
    These companies interviewed those people and came back and 
told us that they were acceptable to them. And in fact, in the 
case of Zimmer, and I don't remember if you were in the room 
were not when I said this so I want to repeat it. Zimmer came 
back and said, ``We believe we got the best monitor in General 
Ashcroft, `` after they had interviewed him. So----
    Mr. Delahunt. In other words, was the former attorney 
general one of five that you referred?
    Mr. Christie. Yes, sir.
    Mr. Delahunt. Okay.
    Five--oh, in other words you recommended former Attorney 
General Ashcroft to Zimmer. Is that an accurate statement?
    Mr. Christie. Yes, sir. Yes, sir.
    Mr. Delahunt. Okay. Now, having said that, and I am not 
questioning his talent, his abilities, but here we are. Let's 
think of the people of New Jersey, the people in Massachusetts 
that might be interested in these kind of issues.
    Here you are, and I am sure there was no actual conflict of 
interest, appointing a former attorney general who did testify 
here, and I have a vague memory as to his appearance, and then 
it surfaces later that the fee was $52 million. That is a lot 
of money.
    Mr. Christie. Sir, first of all----
    Mr. Delahunt. Do you agree it is a lot of money?
    Mr. Christie. I don't know where you get the number from, 
first of all, because I do not know how much his total fees 
were. That comes from an estimate, from a range of estimates, 
that is the high end of the range of estimates----
    Mr. Delahunt. What is the low? What is the low?
    Mr. Christie. I think the low end was in the $20's 
    Mr. Delahunt. So somewhere between $20 and $50 million.
    Mr. Christie. Right, and in March of 2008 The New York 
Times reviewed this----
    Mr. Delahunt. Right.
    Mr. Christie [continuing]. And they put together a group of 
experts and they said, The New York Times said that ``outside 
lawyers who have reviewed Mr. Ashcroft's fee structure said it 
was not out of line for this work.''
    And so, while I don't know what the exact fees turned out 
to be because those were between Zimmer and the Ashcroft Group, 
The New York Times looked at in March of 2008 and said that 
outside experts they consulted said that the Ashcroft fee 
structure was not out of line, nor did the Zimmer folks.
    Not only did they enter the agreement with Mr. Ashcroft, 
but it is important to note, they then voluntarily retained the 
Ashcroft Group to do other matters inside the company that they 
were concerned about might have raised issues of violations of 
law, and they paid them additional fees for that in order to 
make sure that they were doing these things the right way. That 
was the company's choice. The company didn't have to do that. 
They must have thought it was reasonable, sir.
    Mr. Delahunt. Well, but at the same time, let us be very 
practical, and we all understand the real world. You send the 
recommendation over. The recommendation is the former attorney 
general. One can imagine the conversation within Zimmer. 
Listen, the U.S. attorney sends him over and he served under 
the former attorney general. I am not saying this is in your 
thinking, but let me tell you, if I was counsel at that table I 
would say this could work for us.
    That counsel doesn't have an obligation to the American 
public, doesn't have an obligation to the Department of 
Justice, but to make the best decision for the interests of 
that client.
    Let me tell you, if I was attorney for Zimmer and a 
recommendation came from you that the former attorney general 
under whom you served you can bet that I would have said, ``He 
is our guy, bingo.'' That would have been my advice. I am not 
asking you for an opinion. I go back to what I said earlier 
about appearances.
    Mr. Christie. Well, I wish you had been there, sir, because 
if you had have been there I suspect, given that attitude, we 
would have had a lot less arguing with Zimmer and the counsel 
than we actually did because, as I detailed earlier for Mr. 
King, we had months and months of contentious negotiation with 
one of the largest law firms in America, Fulbright & Jaworski, 
and one of their top partners and a slew of associates who 
argued over every word of every line that ultimately wound up 
in those agreements----
    Mr. Delahunt. But that was----
    Mr. Christie [continuing]. Argued--no, sir, let me just 
finish--who argued also with us over every aspect of 
enforcement as we moved forward. And so----
    Mr. Delahunt. But that was the agreement, Mr. Christie. I 
am talking about the appointment of the monitor.
    Mr. Christie. Part of the agreement, sir. It was all part 
of the agreement. The agreement to go with the monitor was 
    Mr. Delahunt. I understand, but the----
    Mr. Christie [continuing]. But it was, sir, the monitor was 
appointed as part of the agreement before the agreement was 
signed. It was something that we gave them the opportunity to 
do before they agreed to the resolution in order to make it 
part of the overall negotiation. And so it was just one of the 
many issues that they argued over. It was just one of many 
    Mr. Delahunt. But Mr. Christie, but the reality is that was 
a non-contentious piece of the agreement.
    Mr. Christie. It turned out to be that way, sir.
    Mr. Delahunt. Because it was an agreement because you sent 
over the recommendation.
    Mr. Christie. No, sir.
    Mr. Delahunt. I mean you can talk. Was there a contention? 
Was there a debate----
    Mr. Christie. No. There was----
    Mr. Delahunt [continuing]. Between your office and----
    Mr. Christie [continuing]. Contentious--there was 
contentious argument about a lot of things.
    Mr. Delahunt. No. Mr. Christie, you have got to understand, 
we have rules here.
    Mr. Christie. I understand.
    Mr. Delahunt. The time is my rule. I am asking you a 
question, and I am asking it respectfully.
    Mr. Christie. And I am trying to answer it.
    Mr. Delahunt. Fine. And what I am asking you is, was there 
any contention on the issue of Mr. Ashcroft serving as the 
    Mr. Christie. There turned out not to be----
    Mr. Delahunt. Okay. Thank you.
    Mr. Christie [continuing]. In the context of all the other 
contentious nature. I don't know why the lawyer decided to 
argue about something that might have been in paragraph 34 
versus the appointment of General Ashcroft.
    Mr. Delahunt. Right, but my point is that wasn't even a 
debate and it goes back to----
    Mr. Christie. I don't know if it wasn't a debate.
    Mr. Delahunt. Well, it wasn't contentious. You just 
admitted it was.
    Mr. Christie. It was not a debate between me and Zimmer. I 
don't know what kind of debate happened inside Zimmer.
    Mr. Delahunt. Well, let me tell you, I mean, I am just 
hypothecating. I don't know but I would have said, let's get 
Christie's guy. I mean, that is me. I am not suggesting that 
was your motive, but what I am suggesting is it really creates 
a problem with an appearance.
    Mr. Christie. Sir, I----
    Mr. Delahunt. And----
    Mr. Christie. I disagree with you, sir and I----
    Mr. Delahunt. And I can understand that you can disagree 
with me. And you know, I respect that we can disagree, but what 
I am saying is that I would prefer, and you heard my opening 
observations, about having the authority of appointment in the 
court, not in the prosecutor.
    You can create internal procedures and internal vetting, et 
cetera, but in terms of the perception of the public, the 
public is now hearing this term 52 million, maybe it is 30 
million. We don't even know. I mean, that is rather 
interesting. We don't know, and yet there is an agreement that 
somehow precludes the American public, the people in New 
Jersey, from knowing what the cost was.
    Mr. Conyers. Before the----
    Mr. Delahunt. I yield back. I thank the gentleman.
    Mr. Christie. If I could just answer that last part of it, 
Mr. Chairman, with your indulgence, is just to say this, that 
what we achieved in doing this and what the public does know 
about this is that no taxpayer money was spent on any of these 
monitors, not a nickel of taxpayer money was spent on these 
    The monitors were paid for by the companies that were 
engaged in wrongdoing that was defrauding the American public. 
That nearly half a billion dollars to date and counting has 
been saved because of these agreements, and transparency has 
been brought to this process. And so that is what the public 
does know about this.
    Mr. Delahunt. Mr. Chairman, if I can, because I do want to 
respond, and I hear what the gentleman is saying. I think we 
all want to see positive results. What I am suggesting to you 
is there is another method that is far superior than vesting 
the authority in the executive without any check of balance.
    Mr. Christie. And sir, and I agree.
    Mr. Delahunt. Would you just give me a little time?
    Mr. Christie. I will let you go on. I am sorry.
    Mr. Delahunt. No, I wasn't. I mean I hear things about 
saving jobs. Of course, everybody--we don't want collateral 
damage whether it is war or peace, okay? And the reality is, I 
don't really think that in an indictment and then a pre-trial 
diversion subject to an agreement would in any way threaten 
those jobs.
    You make the point that jobs were saved. You know, I 
daresay okay, that we don't know whether those jobs were saved 
or if there would have even been any risk to those jobs if we 
proceeded differently.
    With that, I yield back.
    Mr. Christie. The history tells us, sir. History tells us 
after the Arthur Andersen debacle that jobs were lost. And 
    Mr. Delahunt. But you know----
    Mr. Christie. Secondly----
    Mr. Delahunt. Mr. Christie, I am going to continue to 
because, you know, I am up here and you are there and the game 
is here that I get to have the last word, right? So I mean----
    Mr. Christie. I understand, sir, but a charging document 
was filed.
    Mr. Delahunt. A charging document is not an indictment. You 
know, you can go out and seek an indictment and demonstrate to 
the American people that we are serious about deterrence, and 
that every----
    Mr. Christie. We did, sir----
    Mr. Delahunt. No, you didn't.
    Mr. Christie [continuing]. Because the Federal judge signed 
off on a criminal complaint. An independent Federal judge 
signed off on a criminal complaint that was filed with----
    Mr. Delahunt. Then it is not--on prosecution.
    Mr. Christie. Yes, it is. And then the judge signs an order 
deferring prosecution based upon her review of the agreement 
and only the process----
    Mr. Delahunt. And if there is a violation of the, and if 
there is a violation of the--I guess what I would do is suggest 
that the court, if there is an indictment, through its 
probation officer in its capacity to appoint masters could do 
it for a lot less than $52 million or $25 million. You know, we 
both are practitioners of the law. We know these kinds of 
cases. I have never heard----
    Mr. Conyers. The time of the gentleman may have expired and 
the Chair wishes to observe that during his inquiry, Trent 
Franks and I have been talking about the importance of the 
ability to obtain some transparency about the nature of the 
work product that came out of the relationship between the 
former attorney general and the five medical device companies.
    And to that we will ask our staffs to do an inquiry into 
that which may hopefully throw further light upon this subject. 
Does the gentleman agree?
    Mr. Franks. Mr. Chairman, I am always for transparency. I 
would respectfully submit that any of the negative intonations 
cast on Mr. Christie today seem to be totally without any 
evidence and seem to be sort of a manufactured effort, but I 
will try to deal with that when we get to questions, but I 
certainly support transparency.
    Mr. Conyers. I thank the gentleman and I call upon the 
distinguished Member of the Committee from North Carolina, 
Howard Coble.
    Mr. Coble. Thank you, Mr. Chairman. Good to have you 
panelists with us today. Mr. Christie, in my opening statement 
I gave some background on deferred prosecution. I wanted to 
make it clear that you don't hold the patent on deferred 
prosecution. You didn't invent it.
    Mr. Christie. No, sir, I did not.
    Mr. Coble. And I think it has served us well. You mentioned 
the half billion dollar return. Elaborate very briefly, if you 
will, Mr. Christie, on the 47,000 jobs. I didn't follow that.
    Mr. Christie. Sure. Yes, sir. These companies employ 47,000 
people in the United States. If in fact we had indicted these 
companies, they would have most certainly been debarred from 
the Medicare program, and two-thirds of all of these hip and 
knee replacements are paid for by the Medicare system. It would 
have put these folks out of business and those jobs would have 
been lost.
    Mr. Coble. I didn't tie that together. Mr. Rosenberg, you 
said you were not interesting. I found your testimony very 
interesting. You and Mr. Grindler have indicated you have some 
concerns about H.R. 1947. Give us some hypothetical cases where 
the impediments to effective law enforcement might come into 
play if enacted.
    Mr. Rosenberg. Certainly, Congressman. My objection, my 
concern was general in nature, and Mr. Grindler might be able 
to speak more to the specifics, but I have always believed that 
prosecutors who work the case, who know the case, know the 
history and have a broad base of experience, perhaps even 
prosecuting cases in that industry, bring the best knowledge to 
bear to the problem.
    And so it is not that judges aren't smart. They are very 
smart, and they do a wonderful job judging. But now we are 
asking them to do something that they really shouldn't be doing 
which is making prosecution decisions.
    A deferred prosecution agreement is essentially an 
agreement not to charge a company. Sometimes complaints are 
filed, as Mr. Christie described, sometimes they are not. If 
they are and the company meets all of the terms, they can be 
    But that is a very important prosecutive, excuse me, 
prosecutorial function, and I just don't think our judges, as 
good as they are, should be doing that, sir.
    Mr. Coble. Mr. Grindler, do you concur with that?
    Mr. Grindler. I do, Congressman. I would add that your 
inquiry about some examples. One aspect of this bill would 
require a non-prosecution agreement to be filed with the court. 
Now, a non-prosecution agreement, which is different than a 
DPA, does not involve the filing of criminal charges.
    It is a decision really not to prosecute with any filing 
with a court, so if you have to file with the court to get 
approval of a non-prosecution agreement that is the core 
discretionary function of the prosecutors.
    Mr. Coble. Yes, I understand that.
    Mr. Grindler. And if you have to then educate a court on 
all of the details of a criminal investigation and have the 
court then look at the nine principles that are being applied 
and how, then that will delay matters.
    Mr. Coble. I thank you both for that.
    Ms. Larence is it?
    Ms. Larence. Larence.
    Mr. Coble. Ms. Larence, there has been talk about a 
gubernatorial race to the north of here and timing the release 
of the GAO's report later this year in order to avoid actual or 
apparent attempt to perhaps the gubernatorial election in New 
Jersey. Do you intend to comply with the constraints such as 
those described in the U.S. Attorneys' Manual for the 
announcement of politically charged or fraud cases prior to 
that election?
    Ms. Larence. Mr. Coble, in order for the companies and 
monitors to participate in our review, with the Subcommittee's 
approval, we entered into confidentiality agreements with all 
of the companies and monitors, so our report will not discuss 
individual cases or companies. We won't be reporting 
information that you can use to identify individual companies 
or monitors.
    Mr. Coble. I thank you for that.
    Mr. Chairman, as I always try to do with you, I try to 
yield back before that red light illuminates, and I see my 
record is intact today.
    Mr. Conyers. That is just for today. We don't know about 
the rest of the week or the month of July either.
    Mr. Coble. I repeat, I yield back. Thank you, gentlemen, 
for being with us.
    Mr. Conyers. I thank the gentleman very much. We turn now 
to the gentleman from North Carolina who is a Chair of the 
Subcommittee in the Finance Committee and a veteran Member of 
this Committee, Mel Watt, for inquiry.
    Mr. Watt. Thank you, Mr. Chairman, and I want to yield 
briefly to the gentlelady from California, who has a time 
urgency here.
    Ms. Lofgren. I appreciate that. Yes, I have to go to the 
White House for the immigration meeting and I am very 
interested in this. I do have questions but I will be unable to 
ask them if I am going to make the meeting.
    So I did want to offer my apologies and perhaps I can 
submit my questions in writing, and I thank the gentleman for 
    Mr. Watt. Mr. Chairman, I have listened to the questions 
and answers, responses that Mr. Conyer, the Chair of the 
Subcommittee and part of the questions and responses that Mr. 
Delahunt got, and I think they point up a real problem here.
    I don't much care about Mr. Christie or his political 
ambitions or his history here. I am really more interested in 
the public policy implications here which he seems to be tone 
deaf to. There is an appearance of impropriety, whether there 
is impropriety or not.
    And the appearance of impropriety sometimes is more 
powerful to the public than actual impropriety. And when I read 
that somebody offered to do this job for $3 million, and 
somebody was paid $52 million for doing it, that goes beyond 
the appearance of impropriety. It goes to somebody having paid 
for that.
    And you can protest to me all you want that the taxpayers 
didn't pay for it, but if somebody paid $52 million for a 
service, it got passed along to taxpayers or customers in some 
way. That having been said, I really want to focus on the 
policy implications and really everybody seems to have an 
opinion about this that is sitting here other than the first 
witness and the last witness, so I am going to go to the last 
witness and maybe I can get some policy things out on the 
    It seems to me, I guess I am old fashioned, that most of 
what we are talking about here in this corporate area is 
distinct from what you are talking about in the individual 
    When I hear people talking about who is going to be the 
monitor, I guess nobody on the private side, the individual 
side, gets to negotiate who is going to provide the monitor 
that keeps them in their house if they are home-confined. Who 
is going to be the prison warden? Who is going to be the 
probation officer?
    So obviously there are two different standards here that 
are very troubling to me, and the interplay here between what 
the U.S. attorneys here are doing and the private individual or 
class action litigation on the civil side, comes into this 
discussion very heavily from a public policy perspective.
    The question I want to ask, professor, is the extent to 
which in these corporate settings the use of deferred 
prosecutions or non-prosecution agreements with monitors has 
grown contemporaneously with the time in which the rights of 
individual private attorneys' general have been lessened and 
lessened and lessened so that individual attorneys general can 
play some of these roles that these gentlemen sitting to your 
right have been playing?
    Is there some correlation that you are aware of or am I 
missing something here?
    Mr. Khanna. Thank you, Congressman Watt. It is not an area 
that I have specifically studied, but it is certainly something 
of a trend to see more deferred prosecution agreements in the 
corporate context. I think one of the motivating factors for 
that is of course the concern about collateral damage to other 
entities or other groups of people like employees and so forth.
    Mr. Watt. Well I mean do you perceive it as the 
prosecutor's role to be monitoring, spending a bunch of time 
entering into agreements about matters that are quasi criminal 
versus civil, or I mean I am missing something here.
    Mr. Khanna. The entire area of corporate liability as it is 
divided between criminal and civil has substantial amount of 
overlap, so I think you are correct to note that a lot of what 
appears to be going on might be something that could be seen in 
the civil side, too.
    Mr. Watt. So is there an obligation under any of these regs 
that have been written up, Mr. Rosenberg? Mr. Grindler, I think 
you are in charge of the regulations that implement this. Do 
you share any of this information with private attorneys 
general so that people can be compensated who have been 
    Is there any obligation on your part to share this 
information that you are gathering at taxpayer expense with 
people have been wronged on the civil side?
    Mr. Grindler. I am not sure, Congressman Watt, that I fully 
understand the question.
    Mr. Watt. You don't understand the concept of private 
attorneys general and this interplay with U.S. attorneys and, 
you know, you don't understand the interplay between what is 
civil and what is criminal?
    Mr. Grindler. No, no, I do, Congressman. I mean on the 
civil side, for example, in the False Claims Act area 
individuals through private counsel can bring actions in the 
name of the United States in order to deal with frauds upon the 
United States.
    So in that instance those lawyers are involved----
    Mr. Watt. But weren't there some individuals other than the 
United States wronged in this criminal process in Bristol-
Myers, in Zimmer, in all of these things? Where did the 
individuals come into this or have we given over all of our 
individual prerogatives in the civil context to U.S. attorneys 
to handle and negotiate monitoring agreements and pay $52 
million to people to do what appears to me to be a civil 
function? Am I missing something?
    Mr. Grindler. Well, let me try to respond. First in terms 
of victims of a crime, there are obligations that the 
Department of Justice has to comply with even in the context of 
a deferred prosecution agreement to address the needs of the 
victims and the losses of the victims, and because with the 
deferred prosecution agreement there is actually the filing of 
a charge with a court, those responsibilities are triggered 
    Mr. Watt. But no transparency about what your findings are? 
Didn't you make a determination that this person has engaged in 
some criminal conduct and some civil fraud?
    Mr. Grindler. Typically, Congressman, with a deferred 
prosecution agreement what is filed with the court includes a 
statement of facts which is a public record of findings of 
facts that are typically admitted to by the corporation, which 
is in the public record.
    And it could, if it formed the basis or would allow a 
private litigation, that would be a source of factual 
information in which an individual could then review the facts, 
retain counsel and bring litigation against the company. 
Parallel to that is the Department of Justice dealing with the 
responsibility to get restitution to the victims which is also 
part of what has to be addressed----
    Mr. Watt. Who got restitution in the Bristol-Myers case?
    Mr. Grindler. Congressman Watt, I am not familiar with the 
case. I wasn't here at the time.
    Mr. Watt. All right. My time has expired. This is very 
frustrating because I think this is a failure to recognize the 
interplay between the U.S. attorneys' responsibility to the 
public and the responsibility to individual claimants.
    And I think we have erred way on the side of criminalizing 
things that could be more appropriately handled if we quit 
beating up on the civil litigation system and making it sound 
like everybody who files a lawsuit is filing a frivolous 
    It sounded to me like $52 million was paid out to anybody 
to do anything is a frivolous waste of taxpayer money to me, 
especially when we have the e-mails that suggested the same 
services could have been provided for $3 million. Go figure.
    I yield back, Mr. Chairman.
    Mr. Cohen. [Presiding.] Thank you, sir.
    Recognize the gentleman from Virginia, Mr. Forbes, for 5 
    Mr. Forbes. Thank you. Mr. Chairman, I request unanimous 
consent to have entered in the record a press release from your 
office dated October 17, 2008, indicating that you obtained an 
earmark in the amount of $800,000 for one of the five companies 
involved in these deferred prosecution matters.
    Mr. Cohen. There won't be unanimous consent because Mr. 
Chairman Conyers thought that the Committee Members should be 
more civil to each other and----
    Mr. Forbes. Then Mr. Chairman----
    Mr. Cohen [continuing]. Didn't want to set a precedent. I 
don't feel comfortable ruling on it because Mr. Conyers took a 
different position than me. I am proud of the earmark, but Mr. 
Conyers thought for the Committee's sake that it shouldn't be 
entered. Therefore, there will not be unanimous consent.
    Mr. Forbes. Mr. Chairman, then I move to have entered into 
the record a press release from the Chairman of the 
Subcommittee holding this hearing today indicating that he 
obtained an $800,000 earmark for one of the firms involved in 
the deferred compensation----
    Mr. Cohen. You are recognized for questioning, sir. You are 
out of order.
    Mr. Forbes. I appeal the ruling of the Chair.
    Mr. Chairman, if you would like for me to address it I 
will. Mr. Delahunt talked earlier today about it----
    Mr. Cohen. You know, Mr. Forbes, if you would please 
refrain for a moment. You know, I am the Chairman of this 
Subcommittee. I am proud of my earmark. I hope you will enter 
all of the earmarks I get from my district.
    This is so extraneous and illogical that it makes no 
difference, and I am happy to have it entered into the record 
and I hope you will enter all the other earmarks that I have 
received for my district. Thank you, sir.
    [The information referred to follows:]
Material submitted into the Record by the Honorable J. Randy Forbes, a 
  Representative in Congress from the State of Virginia, and Member, 
           Subcommittee on Commercial and Administrative Law



    Mr. Cohen. And now that it has been entered into the 
record, you can proceed with your questioning. You have----
    Mr. Forbes. Thank you, Mr. Chairman.
    Mr. Cohen [continuing]. Three minutes and 17 seconds.
    Mr. Forbes. Yes, sir, Mr. Chairman. I can do it in that 
    Mr. Christie, I don't need a lot of time up here because we 
have got witnesses here to testify and unfortunately we 
oftentimes do more testifying than they do. You were a U.S. 
attorney during all these procedures that you are asked to 
testify about today. Is that true?
    Mr. Christie. Yes, sir.
    Mr. Forbes. And as such when you do these deferred 
prosecution agreements, do you have guidelines that you have to 
go by in filing those?
    Mr. Christie. Yes, sir.
    Mr. Forbes. Was one of those guidelines issued by the 
current Attorney General of the United States, Mr. Holder----
    Mr. Christie. Yes, sir, it was the Holder Memo. It was 
issued before I was in the Department in 1999. It was expanded 
upon by Deputy Attorney General Thompson.
    Mr. Forbes. Now, you don't get to write the legislation to 
guide these deferred prosecution agreements. You have to go by 
the guidelines, memos that you are given. And did you comply 
with all of those and----
    Mr. Christie. Yes, sir, I did.
    Mr. Forbes. And in addition to that, one of the things in 
the agreement that apparently the judge looks at, it talks 
about a monitor. Is there any language in there about the 
competency of the monitor or any language at all that would 
give some guidance as to the qualifications or the ability of 
the monitor that might be in those agreements?
    Mr. Christie. Sir, I don't remember whether those were in 
the agreements or not as I am sitting here today. I haven't 
reviewed those agreements in a while.
    Mr. Forbes. The agreement though in totality would be 
viewed by a judge? Is that correct?
    Mr. Christie. Yes, sir, both the criminal complaint and the 
agreement have to be reviewed and approved by a Federal judge 
before deferring the prosecution.
    Mr. Forbes. And in that review when you look at it, and 
there has been a lot of talk about Mr. Ashcroft, was he part of 
a larger firm?
    Mr. Christie. He is a part of a larger firm, sir.
    Mr. Forbes. Any idea about how many attorneys they had in 
    Mr. Christie. I know that at any one time they had about 40 
different people working on this matter.
    Mr. Forbes. And Mr. Ashcroft has, just the record that we 
have been given, was a state auditor. Is that correct?
    Mr. Christie. Yes, sir.
    Mr. Forbes. And he was also state attorney general.
    Mr. Christie. Yes, he was, sir.
    Mr. Forbes. He was also the governor of the state.
    Mr. Christie. Yes, sir.
    Mr. Forbes. He was also a senator.
    Mr. Christie. Yes, sir.
    Mr. Forbes. He was also attorney general of the United 
    Mr. Christie. Yes, he was, sir.
    Mr. Forbes. Anybody ever question his competence to do this 
    Mr. Christie. No, sir.
    Mr. Forbes. Okay, anything that you haven't had time to 
respond to because we have cut you off that you would like to 
do at this time?
    Mr. Christie. Sir, all I would say is this, that we talk 
about, Mr. Delahunt and I were talking about the role of the 
judiciary in all of this, I wanted to just make two points 
really clear. First, one that you just raised which is a 
Federal judge is involved in all this.
    The criminal complaint and the deferred prosecution 
agreement is presented to a Federal judge for their approval 
before the agreement can be finalized because only a Federal 
judge can, in fact, enter that order that allows the criminal 
complaint to be deferred for prosecution until the conclusion 
of the agreement.
    Then at the conclusion of the agreement, we sit down with 
the Federal judge to review and request the dismissal of the 
criminal complaint if in fact the company has complied with all 
the terms of the agreement. Only that Federal judge can 
ultimately sign that dismissal.
    And lastly in terms of judicial involvement in these 
selection processes, I just happen to agree with the attorneys 
general in the Bush administration 41, in the Clinton 
administration, in Bush 43 administration and in the Obama 
administration, all of whom believe that these, with proper 
guidelines, that these decisions are best placed in the hands 
of the prosecutors who are prosecuting the case because they 
know these companies and the cases best.
    So I agree with all of those attorneys general who have 
looked at this and the great people inside the Justice 
Department who have looked at this over four different 
Administrations and have concluded this is the best way to go.
    Mr. Forbes. Thank you, Mr. Christie.
    And I yield back, Mr. Chairman.
    Mr. Cohen. Mr. Sherman of California, you are recognized.
    Mr. Sherman. Mr. Chairman, we have got so many conflicts of 
interest and so little time.
    Professor, you put forward the idea that we shouldn't 
prosecute corporations because there is ``collateral damage.'' 
I would point out that we prosecute husbands and fathers and 
wives, and their children are the collateral damage, and we 
have--creating a society where the big corporations are allowed 
to do anything they want as long as they are willing to pay big 
fees to the big, established law firms.
    Mr. Christie, the Committee is aware of five, rather seven, 
of the monitors that were appointed under your tenure, 
Ashcroft, Kelley, Lacy, Sampson, Stern, Yang and Carley. Are 
there any others?
    Mr. Christie. No, sir.
    Mr. Sherman. Now turning to the Zimmer situation, you put 
forward the idea that, ``Oh, we are going to lose 47,000 jobs 
if you prosecute.'' The fact is there is money to be paid for 
the devices they make. If you had prosecuted they would have 
sold their assets to legitimate managements that hadn't 
committed fraud.
    Instead you left those factories, those employees and most 
importantly the consumers of those products at the whim of a 
management that you had determined had committed fraud. You may 
not agree with that, but you will at least agree that the 
Zimmer factories and the Zimmer Company, rather, deserved 
monitoring and needed monitoring, and yet you deliberately 
created a circumstance where there was an enormous conflict of 
    Let me point it out. If you are running a bar you have got 
to look at the local cop on the beat who is going to make sure 
that you not a nuisance to the community. You are monitored by 
that cop. If you gave that cop a couple of hundred bucks worth 
of a few drinks over a couple of weeks that would be a conflict 
of interest.
    Ashcroft not only got tens of millions of dollars of fees 
from Zimmer, but they were free under your agreement to hire 
him for tens of millions of dollars. There was no limit. Was 
there any limit on the total amount of money that Zimmer could 
give to the Ashcroft and his law firm under your agreement?
    And why are we upset if a cop takes a few hundred bucks in 
free drinks from a bar, but Ashcroft's firm is not only able to 
charge its full fee for tens of millions of dollars, but 
provide unlimited additional services for unlimited additional 
amounts of money?
    Mr. Christie. Because I don't believe, sir, that the 
analogy is an apt one.
    Mr. Sherman. Is there any limit to the amount that Zimmer 
could pay Ashcroft?
    Mr. Christie. I do not know because I didn't see the 
agreement between Zimmer and Ashcroft.
    Mr. Sherman. Well they are free to enter into as many 
agreements as they want to for Ashcroft to provide whatever 
services at whatever amount----
    Mr. Christie. No, sir, not under the terms of the deferred 
prosecution agreement----
    Mr. Sherman. Under the deferred prosecution agreement, sir, 
you bragged that Ashcroft's firm was retained to provide 
additional services----
    Mr. Christie. That all were part of what needed to be done 
to make sure they complied with Federal law.
    Mr. Sherman. No, well, you bragged that Zimmer voluntarily 
retained Ashcroft for services outside----
    Mr. Christie. That is not what I said, sir.
    Mr. Sherman. Okay. Is there anything in the deferred 
prosecution agreement that prevents Zimmer from retaining the 
Ashcroft firm to provide a variety of services?
    Mr. Christie. No, sir. There is nothing that prevents them 
from doing a whole bunch of things.
    Mr. Sherman. Okay. A whole bunch of things, tens of 
millions of dollars, and then you are going to rely on that 
firm to protect my constituents from fraud that has already 
occurred and might occur again while the monitor is getting 
unlimited tens of millions of dollars.
    Mr. Christie. Yes, sir, because what the record shows is 
that over the first year of this agreement across those five 
companies that consulting fees were reduced by $150 million and 
that more than 1,000 consultants were, excuse me, were fired by 
those companies.
    Mr. Sherman. I am going to reclaim my time. I have so many 
questions. What process did you have to make sure that minority 
and women owned business were eligible for these lucrative 
monitoring contracts?
    Mr. Christie. There is no--the process that was put into 
place was for all of us to be able to do that and in fact one 
of the monitors in the hip and knee case was a minority woman. 
So you had a formal process.
    Mr. Sherman. What process did you have to invite people you 
didn't know to apply for these monitoring jobs or were these 
lucrative contracts limited to people that you and your staff 
had a relationship with?
    Mr. Christie. These contracts were limited to people who 
were qualified for the job----
    Mr. Sherman. Oh, but what about somebody----
    Mr. Christie [continuing]. And we picked the five best 
qualified people that we could find to do this job.
    Mr. Sherman. Did you invite people you didn't know, who 
might be smarter than the people you do know, to apply?
    Mr. Christie. Sir, there is no process within the 
Department of Justice----
    Mr. Sherman. So you did not create a----
    Mr. Christie. Excuse me, sir. There was no process within 
the Department of Justice to do that, and it is not my position 
to set up guidelines for the Department of Justice. It is the 
job of main Justice, sir.
    Mr. Sherman. Sir, how many of the seven monitors involved 
have helped you with your election campaign?
    Mr. Christie. Sir, I have gotten no help from people in my 
election campaign, with the exception, with the exception of 
former Federal judge, Herbert Stern, who is not involved in the 
agreements that we are talking about today.
    Mr. Sherman. And his law firm and their partners and 
spouses have not donated to your campaign, and Mr. Ashcroft has 
not endorsed you for governor?
    Mr. Christie. Mr. Ashcroft has not endorsed me for 
governor, no, sir.
    Mr. Sherman. And none of the other monitors have provided 
any assistance?
    Mr. Christie. I said with the exception of former Federal 
judge, Herbert Stern.
    Mr. Sherman. Okay. Now----
    Mr. Christie. Mr. Chairman, I just would like to let you 
know that as I said to you in the letter that I sent to you, I 
had to depart at 1:30 today because of pressing business that I 
have back in New Jersey. I have been here since 11 o'clock and 
available and so I don't want to cut anybody off, but I need to 
go and catch a train, sir.
    Mr. Sherman. Then, sir, I would like you to answer for the 
record whether you think there was a perception of a quid pro 
quo when you retained Mr. Kelley and gave him a lucrative 
contract when just 2 years prior he had declined to prosecute 
your brother, even though your brother was on a list of people 
involved in trading and those both above him and below him were 
subject to prosecution.
    Mr. Christie. No, sir, because my brother committed no 
wrongdoing and was found not to have committed any wrongdoing, 
both by the southern district of New York and the SEC. Thank 
you, Mr. Chairman, for the opportunity to testify.
    Mr. Franks. Would it be possible for 5 more minutes?
    Mr. Cohen. The Ranking Member would like to ask----
    Mr. Franks. Just 5 minutes? I will cut it as quick as I 
know you are----
    Mr. Christie. I will try. I will try.
    Mr. Franks. Let me just first ask Mr. Rosenberg. Mr. 
Rosenberg, I understand that you have looked over this 
agreement. Was there anything that was inappropriate or illegal 
about this agreement?
    Mr. Rosenberg. Mr. Franks, I have not looked over that 
    Mr. Franks. Okay. I am misinformed.
    Mr. Rosenberg. But no, not to my knowledge.
    Mr. Franks. Not to your knowledge.
    Mr. Rosenberg. I don't believe anything was inappropriate.
    Mr. Franks. All right. Mr. Christie, let me just ask you 
this, if you had failed to accomplish what you did, isn't it 
possible that there would be five lengthy lawsuits that would 
still be going on today?
    Mr. Christie. Yes, sir.
    Mr. Franks. Okay. I was just doing a little calculation. 
Even if the $52 million is correct, the high end, and neither 
of us knows that, from my calculations of 47,000 jobs that 
comes out to about $1,100 per job that you saved and the 
taxpayers never paid for a penny of it.
    And when I compare that to the stimulus $780 billion, that 
should give us approximately 711 million jobs for America and 
might I just ask you as just a personal request, please do not 
consult with the Obama administration because if they figure 
out how you are able to save this many jobs at so little they 
might get re-elected.
    Mr. Christie. Thank you, sir.
    Mr. Franks. So with that, I wish you the best. I think you 
have done a fantastic job here today and I am sorry that you 
were subjected to some of the insinuations, but you have done a 
great job and I might endorse you for governor.
    Mr. Christie. Thank you, sir.
    Mr. Cohen. Mr. Christie, what time is your train?
    Mr. Christie. My train is a little bit before 2:00, sir, 
and I have to go.
    Mr. Cohen. You are not going to make a 2 o'clock, so----
    Mr. Christie. Well, sir, I am----
    Mr. Cohen. Mr. Johnson, you are recognized.
    Mr. Christie. Sir, I am going. I said I had to leave at 
1:30 and I will.
    Mr. Cohen. Mr. Johnson, you are recognized for your 
    Mr. King. The agreement was----
    Mr. Cohen. Five minutes.
    Mr. King. There was an agreement with the gentleman, Mr. 
Chairman. Is that not correct, an agreement at 1:30?
    Mr. Cohen. Mr. Johnson, you are recognized.
    Mr. Johnson. Yes, I am not going to have any questions----
    Mr. King. Parliamentary inquiry, Mr. Chairman.
    Mr. Johnson [continuing]. For Mr. Christie.
    Mr. King. Parliamentary inquiry.
    Mr. Johnson. I will not have any questions for Mr. 
    Mr. Cohen. Mr. King, what is your parliamentary inquiry?
    Mr. King. Parliamentary inquiry, I would ask if you would 
respond. Was there an agreement with Mr. Christie that he would 
leave at 1:30 and why would you resist that?
    Mr. Cohen. I didn't. I asked Mr. Johnson for his time. 
There is four panelists with information he wasn't going to ask 
Mr. Christie. I hope you are satisfied. Mr. Johnson, continue.
    Mr. King. I am unsatisfied.
    Mr. Johnson. Thank you and what I think we have done is 
turn this into a partisan matter and it is really not. This is 
a situation involving prosecutorial discretion with respect to 
how to dispose of a case that is in the best interest of the 
    And I would cite to you the case of T.I., done in the 
northern district of Atlanta, and T.I. was charged formally 
indicted actually, for some firearms offenses, and as a 
consequence there were plea negotiations between his lawyers 
and also the U.S. Attorney Nahmias.
    And as a result of those negotiations an agreement was 
reached, and the agreement provided for T.I. to be able to do 
something that was very important for young people who listen 
to him. And so I thought that was--I wanted to commend first of 
all the U.S attorney for the northern district for having the 
courage to do that, because we are talking about blue collar 
crime right there.
    Now, white-collar crime should get a similar analysis by 
prosecutors and so I have no problem with that basic tool. I 
will say, however, that I appreciate Mr. Bill Pascrell, who is 
from the great state of New Jersey, as well as my friend Mr. 
Frank Pallone also from New Jersey and their motives have been 
very sincere.
    And I want to ask you all whether or not you have any 
problems with let us see, H.R., what is that, Mr. Pascrell, 
H.R.--your bill, H.R. 1947, which has been introduced by Mr. 
Pascrell and also has a number of co-sponsors.
    And you all didn't ask me if I wanted to sign it as an 
original co-sponsor, but I certainly would have signed on, and 
I believe I am signed on now, as a matter of fact, as a co-
sponsor, so I wish to commend you and I want to ask you, 
starting with you, ma'am, do you have any problems with H.R. 
1947 is it? Mr. Pascrell's bill?
    Ms. Larence. We don't take positions----
    Mr. Johnson. And the way I want you to answer this question 
yes or no, each one of the panelists. And then, depending on 
the response, I will ask for a follow up. Yes, ma'am.
    Ms. Larence. Mr. Johnson, GAO doesn't endorse particular 
    Mr. Johnson. All right.
    Ms. Larence [continuing]. But we might have information on 
particular provisions in the bill that would be helpful.
    Mr. Johnson. All right, thank you.
    Mr. Grindler. Congressman, yes, the Department of Justice 
does have some serious concerns with a number of the provisions 
of the bill.
    Mr. Johnson. How about you, Mr. Rosenberg?
    Mr. Rosenberg. Yes.
    Mr. Johnson. Do you support it?
    Mr. Rosenberg. No.
    Mr. Johnson. All right, and how about you, Mr. Khanna?
    Mr. Khanna. I support a number of provisions but I have 
some concerns with some.
    Mr. Johnson. Okay, and let me ask this question. Are these 
deferred prosecution agreements and also the agreements not to 
charge, non-prosecution agreements, in other words should there 
not be--I don't think you all are saying there should not be 
guidelines. I think what you are saying is you would like to 
see some tweaking of this bill so that it could pass. Is that 
    Mr. Grindler. Congressman, the Department of Justice 
opposes this legislation.
    Mr. Johnson. Now, the legislation simply calls for 
guidelines to be established that directs the attorney general 
to issue public written guidelines for deferred prosecution and 
non-prosecution agreements within 90 days of the enactment 
date. Do you have a problem with that, Mr. Grindler, is it? I 
am sorry----
    Mr. Grindler. Yes, Congressman.
    Mr. Johnson [continuing]. My eyes are going bad. Do you 
have a problem with that?
    Mr. Grindler. If I may explain----
    Mr. Johnson. Yes or no first, before you explain. Do you 
have a problem with H.R. 1947, which directs the attorney 
general to issue public written guidelines for deferred 
prosecution and non-prosecution agreements within 90 days of 
the date of enactment? I mean, who could have a problem with 
    Mr. Grindler. In the context of the entire bill, yes, I do, 
    Mr. Johnson. All right. Well, let me ask you but that 
particular stipulation you have no problems with, correct?
    Mr. Grindler. Some of the paragraphs under the guideline 
provision we do have problems with.
    Mr. Johnson. Okay.
    Mr. Grindler. If you are talking about guidelines as a 
separate piece of legislation----
    Mr. Johnson. You have said that repeatedly. I am trying to 
pin you down. It also directs the attorney general to establish 
rules for the selection of independent monitors. Who could be 
in disagreement with that and why?
    It also provides that a national list of possible monitors 
from which the Justice Department must appoint an independent 
monitor, and must establish a fee schedule for compensation of 
independent monitors and their support staff. I mean, what 
could be wrong with that? I have no idea. Nobody will answer 
the questions.
    The bill also sets out certain restrictions relating to 
deferred prosecution and non-prosecution agreements and it 
provides for judicial oversight of such agreements. It doesn't 
take any prosecutorial discretion away.
    Although I might add that we have done just that with our 
Federal court judges by limiting their discretion on certain 
things like imposing sentencing guidelines and also mandatory 
minimums, which have resulted in a lot of low level folks in 
the drug business being incarcerated for long periods of time 
like 20, 30 years, those kinds of things.
    We have taken away our discretion of our Federal judges and 
I certainly am opposed to those kinds of schemes which treat 
everybody the same way. I just don't understand why anybody 
would be opposed to H.R. 1947, and with that I will yield back.
    Mr. Cohen. Thank you, Mr. Johnson.
    I believe Mr. Scott is next.
    Mr. Scott. Thank you, Mr. Chairman. Ms. Larence, generally 
speaking, do the U.S. attorneys' offices have the expertise to 
handle these kinds of contracts?
    Ms. Larence. What they reported to us is oftentimes they 
will choose an independent monitor because they don't have 
either the resources or the technical expertise for that 
particular industry.
    Mr. Scott. Well, in contracting with a monitor, I mean 
normally if you are building a courthouse or something like 
that there would be a fair process including public request for 
    There would be a process to select and oversee a 
multimillion dollar contract and does the U.S. attorneys' 
office have that kind of expertise to draft and oversee and 
select an appropriate person to be awarded the contract.
    Ms. Larence. What is interesting that we have found in our 
review is that different U.S. attorney offices have different 
practices. One office actually did go through a competitive 
bidding process to identify candidates and open up 
    Other offices have the companies themselves go through a 
nomination process, and the companies are allowed to bring 
monitor nominations to the Department of Justice. In other 
cases the Department of Justice presents the monitor and the 
company pretty much has a yes or no decision at that point.
    Mr. Scott. Is that Department of Justice or U.S. attorneys' 
    Ms. Larence. Individual U.S. attorneys' offices.
    Mr. Scott. And this could be a sole source contract?
    Ms. Larence. I am not sure I have an answer to that one, 
    Mr. Scott. Well, let me ask Mr. Grindler, I mean according 
to this contract--I mean on an hourly rate that seems 
excessive, is there a limit to how much a monitor can make on 
these contracts before somebody has committed a crime?
    Mr. Grindler. Congressman, I think the limit stems from 
what is agreed upon between the government and the defendant as 
to the scope of what the monitor should do, and under the 
memorandum issued by the Deputy Attorney General in 2008, the 
scope should be limited to whether the company is complying 
with the agreement, and whether it has instituted a compliance 
program in sufficient internal controls to ensure that there is 
not criminal conduct going forward.
    But the contract----
    Mr. Scott. Well, no, I mean----
    Mr. Grindler [continuing]. Between the company and the 
monitor, they actually are the ones that do the negotiating of 
the contract between those two entities.
    Mr. Scott. Well, does the company have--in this case it 
just appeared that the escrow firm had been picked, and the 
company was kind of stuck with them, and the rate in the e-mail 
traffic there seemed to be some question about what the hourly 
rate was. Do you know what the hourly rate was that Mr. 
Ashcroft was getting?
    Mr. Grindler. Congressman, I do not.
    Mr. Scott. Does anybody know what the hourly rate was? 
Could it be calculated? Was he guaranteed a certain amount?
    Mr. Grindler. Congressman, I just don't know.
    Mr. Scott. E-mail traffic suggests at least $1,000 an hour. 
Is that what monitors are suppose to be making?
    Mr. Grindler. Congressman, under this memorandum from the 
Deputy Attorney General the decision as to who the monitor 
should be is no longer with a United States attorney or the 
Assistant Attorney General for the Criminal Division in the 
context of a DPA or an NPA.
    It now rests ultimately with the Office of the Deputy 
Attorney General, and the memorandum issued by Mr. Morford in 
2008 states explicitly that the Assistant Attorney General for 
the Criminal Division or any other division, and the United 
States attorneys do not have approval or veto authority with 
respect to a recommendation for a lot of them.
    Mr. Scott. And why was that change made?
    Mr. Grindler. That was in March 2008.
    Mr. Scott. Why was it made?
    Mr. Grindler. My understanding, I was not with the 
Department of Justice when this discussion began, but my 
understanding from conversations I have had actually with David 
Nahmias, was that this process began in 2005 in the summer, and 
to look at monitor relationships and to look at best practices 
and try to develop guidance.
    And that there were meetings within the Department of 
Justice with U.S. attorneys and with the criminal division to 
discuss it, and that there was a meeting with outside counsel, 
private lawyers to get their input. And then yes, at the end of 
2007 because of interest by Congress, and the public, that 
process was escalated and the memorandum was issued in March of 
    Mr. Scott. And what was so upsetting about this contract 
that caused the change to be made?
    Mr. Grindler. Congressman, I just can't speak about that. I 
have been able to talk to David Nahmias who is still the United 
States attorney in Atlanta, but I have not, you know, 
communicated with people who are no longer with the Department 
about that.
    Mr. Scott. Is there kind of a general kind of range that 
monitors should cost? I mean because this contract cost us $50 
some million?
    Mr. Grindler. I don't know the details of the contract.
    Mr. Scott. Do you know what other monitors generally make 
in other situations?
    Mr. Grindler. I do not. In the two instances and they are 
still under review where there is a monitor possibility, we 
have made specific inquiries of the monitor about the financial 
arrangements and whether or not the subject corporation is 
satisfied with it and whether that been addressed.
    And certainly under this memorandum from the deputy 
attorney general it encourages companies that come and talk 
about issues that may arise in the context of both the monitors 
and the deferred prosecution agreements.
    Mr. Scott. But before this was picked the U.S. attorney, 
local U.S. attorney, had pretty much carte blanche authority to 
pick whoever he wanted and award essentially unlimited fees.
    Mr. Grindler. My only response, Congressman, is that before 
March of 2008, the United States attorneys throughout this 
country would have had the authority within the cases brought 
in those jurisdictions to make decisions about how to resolve 
criminal cases.
    Mr. Scott. And we have--because of what has happened the 
way they used that authority we had to change the process is 
that right?
    Mr. Grindler. Again, the process was already under review 
prior to the events that gave rise to expediting the issuance 
of the memorandum, based on what I was told.
    Mr. Scott. Well, you weren't there, so I mean they had--
anybody looking at the situation knows that something is wrong 
when local U.S. attorneys' sole source of $50 million contract 
for someone who has political connections.
    Mr. Cohen. Thank you, sir.
    Mr. Grindler. Okay.
    Mr. Cohen. Mr. Grindler this might have been where he was 
going. You are at the Justice Department now, and as I 
understand it, now, you can confirm or not confirm, there was 
internal guidance since this time in the Justice Department 
that prohibits the type of extraordinary restitution that was 
imposed in the Bristol-Myers Squibb agreement because of actual 
or perceived conflict of interest or other ethical 
considerations emanating from such a provision. Is that not 
true? Are you aware of those changes?
    Mr. Grindler. What I am aware of, Mr. Chairman, is that in 
May of 2008, a provision was added to the United States 
Attorneys' Manual that said that, ``With respect to plea 
agreements DPAs and NPAs that they should not include terms 
requiring a defendant to pay funds to a charitable educational 
community or other organization or individual that is not a 
victim of the crime or is not providing services to redress the 
harm caused by the defendant's criminal conduct.'' That was put 
into the United States Attorneys' Manual in May of 2008.
    Mr. Cohen. And do you know of any situation, other than 
that of Mr. Christie and his alma mater, Seton Hall, where this 
    Mr. Grindler. I don't, but I was not with the Department of 
Justice then.
    Mr. Cohen. Right, I know you weren't. You weren't, you 
know, with Davy Crockett at the Alamo, but you know they all 
died. So let me ask you this--do you know of any situation in 
the Department of Justice where somebody had such an agreement, 
other than Mr. Christie where he gave was part of this deferred 
prosecution and somebody gave money to his law school.
    Mr. Grindler. I don't think so, Congressman.
    Mr. Cohen. In that type of arrangement or that type of 
settlement would be not permitted any longer is that right?
    Mr. Grindler. That is correct unless the law school is 
somehow providing services that redress the harm caused by the 
criminal conduct.
    Mr. Cohen. So if the law school was doing knee-jerk 
reaction in this, you know, type of thing there was some kind 
of bodily deal, medical device work, that would be one thing, 
but there weren't.
    Mr. Grindler. I mean I have no knowledge of that. I would 
add, Mr. Chairman, that there are also statutes and regulations 
that address the requirement of disqualification in 
circumstances in which there is personal or political 
    Mr. Cohen. And would you explain what those are, those came 
about after Mr. Christie's situation with Seton Hall, is that 
    Mr. Grindler. I don't think they did. I think they were----
    Mr. Cohen. Before that?
    Mr. Grindler. I am not sure about that, Mr. Chairman, but I 
think they were already in place at the time.
    Mr. Cohen. They were in place, and what are those policies?
    Mr. Grindler. One of the provisions, and by the way these 
are provisions that, in terms of the current process as a 
result of the Deputy Attorney General's memorandum, when 
monitorships are reviewed there is explicit reference to the 
need to have an ethics official within the group of people, the 
Committee that has to review the decisions on those monitors.
    But one provision is 45 CFR Section 45.2, it is titled 
Disqualification from Personal or Political Relationship, and 
it says basically that, ``No employee shall participate in a 
criminal investigation or prosecution if he has a personal or 
political relationship with any person or organization which he 
knows has a specific and substantial interest that would be 
directly affected by the outcome of the investigation or 
    And then there is a provision relating to personal 
relationship, which is somewhat more subjective because it can 
extend to friends, but it really gets back to----
    Mr. Cohen. Wouldn't Mr. Christie's selection of his former 
employer, Attorney General Ashcroft, for this lucrative 
monitoring contract be a direct violation of that Federal rule 
that is what is considered a special--what is the word of art--
special relationship or is that not accurate? Wouldn't that be 
    Mr. Grindler. I just don't know enough about the situation 
to be able to respond to you, Mr. Chairman.
    Mr. Cohen. Well, the important, the ``shall not participate 
in the matter unless he has informed the agency, received 
authorization of the agency designee, employs a covered 
relationship with any person for whom the employee has within 
the last year served as officer, director, trustee, general, 
partner, agent, attorney, consultant, accountant or employee.
    In this situation Mr. Christie was an employee of Mr. 
Ashcroft. Therefore, he is covered in your policy under 
b(1)(iii) as a covered relationship, and under the guidelines 
in affect at the time that was improper.
    Mr. Grindler. Mr. Chairman, I just don't have sufficient 
information about that matter to be able to come to a 
    Mr. Cohen. Assuming those facts are true, that was he was 
his previous employer, would that not be in a hypothetical come 
within a covered relationship?
    Mr. Grindler. I would just have to look at it in the 
context of the language of it. I just don't know enough about 
    Mr. Cohen. All right. Let me ask you this. In the wake of 
these monitor appointments, did the Department issue the 
Morford Memo which provides some guidance on monitor selection?
    Mr. Grindler. I am sorry?
    Mr. Cohen. The Morford Memo.
    Mr. Grindler. Yes.
    Mr. Cohen. You are familiar with that? Was that a response 
to the situation in New Jersey?
    Mr. Grindler. My only knowledge of that comes from some 
conversations I have had because I wasn't there, but I was told 
that the an effort began at the Department of Justice in the 
summer of 2005 to begin to look at monitor relationships and 
develop best practices, and that meetings occurred both within 
the Department and in one instance with outside private counsel 
to begin to develop those best practices.
    And then at the end of 2007 there were inquiries from 
Congress, and there were also public concerns raised which 
expedited that process, and then the memorandum was issued in 
March of 2008. And again, that is what I have been told about 
it. I wasn't at the Department at the time, so I wasn't 
    Mr. Cohen. Okay. I want to just ask you this, there were 
five defendants in the medical devices cases, and one of them 
was from my district, and the world should know that I am an 
effective Congressman I got an earmark in my district, and I am 
pleased that the word is going out now, but that had nothing to 
do with this hearing.
    In fact that company said Mr. Christie was a reasonable 
guy. They spoke well of him. I had a good impression of him 
until today, and the fact is they did think that there should 
be some type of ombudsman, that there were times when their 
monitor went and did certain travels and went certain places 
and spent certain amounts of money on top flight hotels and 
first class airfare, et cetera, et cetera things like that, and 
they objected.
    Do you not think that there should be somebody looking in 
on that circumstance because they didn't feel like they could 
say anything?
    Mr. Grindler. Well, Mr. Chairman, I believe that the 
corporation in the first instance, which is negotiating these 
agreements with the monitors, and I think some of those 
discussions can take place before decisions are made on 
monitors, that they in the first instance with the lawyers they 
have should attempt to put some restraints on what the costs 
are some appreciation of what it is from the Department of 
Justice's point of view under the Morford Memo.
    We are encouraging companies to talk to us about these 
relationships and concerns that arise, and I would think that 
if concerns arise in which a monitor was going beyond the scope 
of his or her charge as a monitor, then those issues should be 
brought to us.
    And we would be interested in having discussions about it 
because the Morford Memo itself recognizes the importance of 
looking at the cost and impact of monitorships on the company, 
both in terms of making the decision to have a monitor and in 
terms of what the scope of the monitor's duty should be.
    Mr. Cohen. Anybody on this side have another round of 
    Mr. King of Iowa?
    Mr. King. Thank you, Mr. Chairman. I really take the 
opportunity to thank all the witnesses and glad to have the 
chance to do so. I remarked to one or more of my colleagues at 
the conclusion of all of your testimony that the filter that 
you all went through to get here must have filtered out anybody 
that didn't happen to have significant intelligence because all 
of your testimony to me seems to be very well informed and very 
measured and very accurate and precise.
    And I, but it is not that we don't get good panels of 
witness here, but you certainly rank among the best we have 
seen. And I am struck by that unanimity, the view that you 
bring for the deferred prosecution agreements that are the 
subject of this.
    And as I recall, Mr. Grindler, you spoke I think in the 
most depth with regard to the unintended consequences that 
might come, although I don't recall that this panel has 
examined those unintended consequences as deeply as you may 
prefer or as I may prefer, and I would ask if you could expand 
upon the unintended consequences?
    Mr. Grindler. Well, I mean it is always a difficult 
valuation when you are faced with a company that has engaged in 
criminal activity, but you do have to look beyond that and I 
think part of that stems from the fact that a corporation 
cannot be put into jail.
    So from a deterrent point of view I think that is one 
reason why the collateral consequences do come into play, so 
you see what the impact may be of going forward with a 
prosecution where you tend to get a guilty verdict.
    And that is, of course, on the employees, on the 
shareholders, on pensioners and even on the public. But having 
said that, if you have a corporation that is a recidivist, or 
where the criminal activity goes across the culture of the 
company and is systemic, then I think the pendulum typically 
would swing the other direction where a prosecution may be 
    And so these are the sort of balancing act that we try to 
go through when we review what our choices are in prosecuting a 
    Mr. King. I thank you, Mr. Grindler, and I just would ask 
if you have any knowledge of any deferred prosecution agreement 
that would have put a limit on the amount that might be paid a 
consulting firm?
    Mr. Grindler. I don't have a knowledge where there is a 
provision that says you are capped at a certain amount, but I 
started at the Department in March of this year so I am 
beginning to review proposals for deferred prosecution 
agreements, and so I don't have a real base to----
    Mr. King. If I could then defer that questioning to Mr. 
Khanna to respond?
    Mr. Khanna. Thank you, Congressman King. We have looked at 
almost about 30 deferred prosecution agreements and tried to 
get information about the pay. There doesn't appear to be any 
explicit limit on the hourly rate that monitors might get paid.
    I think the sense--we have spoken to a few monitors, too--
the sense is that they try to charge their normal hourly rate, 
whatever that might be, but there doesn't appear to be any 
explicit limit on how much that might be per case.
    Mr. King. And in your professional judgment would there be 
any motivation for a company to pay an additional amount so 
that might justify putting a cap on, or a limit on?
    Mr. Khanna. Well, it is hard to imagine why a company would 
want to pay more. Of course, the----
    Mr. Delahunt. Would the gentleman yield?
    Mr. King. I would yield.
    Mr. Delahunt. Would the company wish to maintain a good 
rapport with the monitor, given the fact that----
    Mr. Khanna. Yes.
    Mr. Delahunt [continuing]. If there was a violation of the 
agreement then the process would stop and the case would be 
brought in front of a judge. So in terms of leverage, to my 
good friend from Iowa, I would suggest that the alternative, in 
terms of payment to the monitor by the company, the company has 
zero leverage.
    Mr. King. I reclaim my time. I appreciate the gentleman's 
view on this and an opportunity to restate it. It just occurs 
to me that of the people I have hired, when I paid them what 
was agreed to in the contract that that has always been 
satisfactory, and I don't remember ever feeling that urge to 
write an extra check to them if they were satisfied with the 
compensation for the services that they had rendered.
    I would also point out that there is such a thing as 
contract agreements, and I think we should adhere to them, even 
up to the point of allowing a witness to leave when the 
agreement is that the witness be allowed to leave.
    I would also point out that the gentleman from 
Massachusetts has stated that he supports prosecutorial 
discretion, and I think that has been explored to some extent 
here at least, and the question becomes how much discretion?
    But the important point is I think made by Mr. Rosenberg, 
that if we are going to accept some of the suggestions about 
turning that prosecutorial discretion over to the judiciary 
branch, we are asking judges to do jobs that overloads them and 
they may or may not be, however qualified they are to do the 
jobs they are assigned.
    So I appreciate the witnesses, the testimony, and some of 
the things that happened in this hearing today, but political 
lynchings are not among those things I appreciate.
    Mr. Cohen. One minute.
    Mr. King. I yield back.
    Mr. Cohen. Thank you. Mr. Pallone and Mr. Pascrell would 
like to testify on the second panel before we go in for votes. 
We are supposed to go in for votes between 2:15 and 2:30. Well, 
I don't have any questions for my two colleagues.
    Could you have a quick question before the panel before we 
dismiss them?
    Mr. Delahunt. Well, I would like to point out that, you 
know, contracts should be respected, but the problem seems to 
be that within that contract there are no guidelines. There are 
no caps in terms of what compensation is.
    It is open-ended and clearly, at least from my perspective, 
any legal services or services that are rendered in the 
amount--let us just presume that that $52 million figure is 
accurate--I would say that would be hard to justify.
    But could I just offer you one hypothetical? If I were the 
United States attorney and I will pose this to the panel, and I 
came to you and I indicated that I had a relative, a close 
relative that was accused, only accused, of a certain crime and 
not in a formal sense but was a suspect, and a colleague, 
professional colleague, another district attorney or another 
prosecutor, declined to prosecute presumably on good solid 
    If I came to you and I was working for you, Mr. Rosenberg 
or you in your capacity Mr. Grindler, and say, ``I am 
considering appointing the individual prosecutor who declined 
to prosecute as a monitor in a particular matter that would 
generate sufficient revenue, what would your advice be to me?
    And again, I go back to my original comments about 
appearances and confidence of the people and the integrity of 
the system.
    Mr. Grindler. I think what I would do is consult with an 
ethics expert at the Department of Justice and get specific 
advice as to how I should proceed.
    Mr. Delahunt. Thank you.
    Mr. Rosenberg? Now remember, this is a close relative----
    Mr. Rosenberg. I understand.
    Mr. Delahunt [continuing]. Who 2 years prior, the 
individual that I intend to appoint as a monitor, which may or 
may not generate millions of dollars of revenue, declined to 
prosecute, what would you do?
    Mr. Rosenberg. I understand the hypothetical, sir. I have a 
little bit of difficulty separating it from the underlying 
situation from which I believe you are referring.
    Mr. Delahunt. Well, I don't want to refer to anything. This 
is me coming to you. You are a district attorney, or you were. 
I am the current sitting state's attorney up in Boston, and I 
had a close relative. You reviewed the case and made a decision 
not to prosecute, and now I am looking to you to become a 
special monitor whereby you have the potential to generate 
hundreds of thousands of dollars, if not millions.
    Mr. Rosenberg. I agree with Mr. Grindler.
    Mr. Delahunt. You would go to an ethics expert? Okay.
    Mr. Rosenberg. I would.
    Mr. Delahunt. Okay.
    Professor Khanna?
    Mr. Khanna. Certainly nothing wrong with going to an ethics 
expert. I would----
    Mr. Delahunt. On its face.
    Mr. Khanna. I am sorry?
    Mr. Delahunt. But I am just giving you this. You don't have 
time to go to an ethics expert.
    Mr. Khanna. Oh, Okay. Rarely do professors run out of time, 
but all right. I would be somewhat squeamish about agreeing----
    Mr. Delahunt. You would have concern about appearances?
    Mr. Khanna. Yes.
    Mr. Delahunt. Thank you, Mr. Chairman, and I yield back.
    Mr. Cohen. Thank you. If there is no other questions of the 
panel we thank each of the members of the panel and we excuse 
you, and thank you for your contributions, and there are some 
written questions from Ms. Lofgren that may be going to one of 
you, and if you would be kind enough to respond to them in 
writing they will be made part of the record.
    And Members of the Committee have 5 days to submit further 
questions to you which could be posed, and we would appreciate 
you responding to those in an expeditious manner. With that, 
the panel is dismissed.
    Without objection, the record will remain open for 5 
legislative days for further additional material. Thank you.
    Thank you, sirs. Normally we come down and shake hands and 
all those things, but we are going to pass up all those typical 
congressional niceties because we have the congressional votes 
to come very soon, and they trump niceties, so the second 
    I am now pleased to introduce the witnesses for our second 
panel for today's hearing. Our first witness will be Mr. 
William Pascrell, Jr., representing the 8th District of New 
Jersey, elected to Congress in November 2006. I think everybody 
knows about his record. He introduced H.R. 1927, Accountability 
and Deferred Prosecution Act of 2009 this past April 2.
    Congressman, would you please proceed with your testimony?


    Mr. Pascrell. Mr. Chairman, I am honored to be here today 
and thank the entire Committee and Ranking Member. We are here 
to eliminate deferred prosecutions. That was--no part of the 
bill says that. We are simply here to elevate their 
    Every citizen in this esteemed Committee should understand 
how deferred prosecutions have become part of the justice 
system. As I study this issue, Mr. Chairman, I believe that 
deferred prosecutions are related to the larger issue of 
corporate prosecutions in the post-Enron era. What I have come 
to realize is that these agreements are actually even more 
relevant to the type of corporate malfeasance that cost 
millions of Americans their jobs.
    They are gone. Those jobs are gone. I do not know, the 
prior witness, what jobs he was talking about, that led our 
Nation to the brink of the greatest economic crisis since the 
Depression. Quite simply, corporate greed, collusion and 
illusion have become legion.
    The executive branch and the Congress have for the most 
part stood aside, witnessed a significant collapse of 
oversight, justice and professed American values. I would 
contend, after examining the volumes of evidence before us, 
that the sentinels at the gate, a fair number of U.S. 
attorneys, have been handmaidens to the fleecing of our 
    However, as we saw in the Zimmer case, older Americans were 
the ones who suffered the physical and mental consequences of 
bribery and fraud. We witnessed the bribery of physicians so 
that they would advocate for a specific prosthetics device, 
regardless of whether it was defective or not. Not one person 
before us today on the first panel talked about the victims.
    These perpetrators of Medicare fraud are the lowest of the 
low in my opinion, and yet, because they entered into a 
deferred prosecution these corporate criminals have never had 
to even admit guilt to the consumers they cheated, and thanks 
to Mr. Christie they never will.
    Mr. Chairman and the Members of this Committee, there has 
been an erosion of confidence, as Mr. Delahunt talked about 
earlier. Not only in the financial system but in the justice 
system which failed to bring the bad actors to justice. Pay a 
fine, avoid jail. Promise you will do better next time and no 
one gets prosecuted. The fine simply becomes the price of doing 
    In fact, many corporations as part of their business brief, 
the captains of corporate America who did our Nation wrong, 
look to the very justice system that is supposed to protect 
citizens, to bail themselves out. We are here today seeking 
legislation to help right the ship of justice.
    This goes way beyond one conflict of interest concerning a 
$52 million no-bid contract. Mr. Christie and Mr. Ashcroft 
should not flatter themselves. Our bill, the Accountability in 
Deferred Prosecution Act of 2009, yes, Mr. Johnson, what could 
be wrong with that? Accountability. You are right.
    It simply brings accountability and transparency to this 
process for the first time. I want to literally show all of you 
just one example of why we need transparency on this issue. 
Here are the files of one monitor, Debra Wong Yang. These are 
files we obtained from the Senate Committee on the Aging, which 
held its own Medicare fraud investigation in the case in 
    This bill, from DePuy Orthopaedics, sent to DePuy 
Orthopaedics, which had former U.S. attorney Debra Yang 
selected as its monitor, is about 200 pages long. I have read 
every page and it is so detailed that even documents--every 
time Ms. Yang had to charge a cab fare, which is standard 
billing practice for law firms.
    However, the bill sent to Zimmer, Incorporated by Ashcroft, 
the Ashcroft Group, which charged many millions more in 
expenses, does not include any information about the services 
provided. It gives us no information whatsoever. No billable 
hours, no reimbursable expenses.
    In fact, it is just on one page, a bill listing the total 
amount due. The bank information about where to wire the bank--
I think that is fitting by the way--and nothing more. This is a 
ransom note not a billing statement. Please examine both of 
them. You come to your own conclusion about transparency.
    Mr. Cohen, it should come as no surprise that the executive 
branch will always prefer to alter its own procedures at its 
own pace, but as Members of Congress, I believe we have a 
solemn to oversee these practices and take corrective action 
when it is called for.
    The Zimmer case merely highlights the lack of oversight of 
deferred prosecutions. In this case, there existed a clear 
outright conflict of interest as Mr. Christie set out to hire 
his former boss, Attorney General Ashcroft.
    We know of at least 120 different deferred prosecution 
agreements, and as the GAO pointed out, many of them were 
undertaken by Federal prosecutors who had the diligence to seek 
a transparent and fair process for entering into these 
agreements and selecting monitors.
    We are not just talking about the manager. We are not 
talking about a manager of a baseball team, and I happen to be 
playing on that baseball team, I am talking about the manager 
of justice in the United States of America who left his 
position and was hired by one of the fellows, one of the people 
on his team to do this job.
    Mr. Christie, and many of his acolytes, will trumpet the 
deferred prosecution system. They expand it as a fail-proof 
method to cleanse corporations. To them I need cite only one 
example, AIG, 2004, 2006--two deferred prosecutions and it 
worked well, didn't it?
    This former insurance giant, which is now synonymous with 
corporate greed and public deceit, received two deferred 
prosecution agreements and paid a monitor $20 million. For 
what? In accepting deferred prosecution, Mr. Greenberg, now 
disgraced, too late--the horse is out of the barn--said this.
    ``This comprehensive deal brings finality to the claims 
raised by the SEC and the Department of Justice. The role of an 
independent consultant complements our own transaction review 
processes. We welcome this enhancement,'' he said.
    Today, the records of AIG sets asunder the ruined dreams 
and hopes of so many Americans who literally had their planned 
futures taken away from them. I wonder how many of those lost 
their jobs and lifelong savings, would say that the deferred 
prosecution system did its job?
    Mr. Chairman, thank you for listening. I have more to say, 
but time is of the essence.
    [The prepared statement of Mr. Pascrell follows:]
        Prepared Statement of the Honorable Bill Pascrell, Jr., 
       a Representative in Congress from the State of New Jersey
    I want to thank Full Committee Chairman Conyers and Subcommittee 
Chairman Cohen for allowing me to testify before the Subcommittee on 
Commercial and Administrative Law on the issue of deferred prosecution 
agreements. My attention was first brought to this issue of deferred 
prosecution agreements in large part because of published reports 
regarding the actions taken by the U.S. Attorney's Office in New 
Jersey. It had been reported that 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. This settlement reportedly ended a two-
year federal probe into allegations that these manufacturers paid 
surgeons millions of dollars to use and promote their knee and hip 
replacements, which would constitute a violation of Medicare fraud 
statutes. Within this agreement these manufacturers agreed to hire a 
federal monitor, selected by the U.S. Attorney, which would ensure they 
comply with the law and a strict set of reforms. However, I was 
initially concerned that there was little transparency within this 
provision of the agreement as it could allow the federal monitor to act 
with impunity while the manufacturers remain under the threat of 
    Furthermore, this agreement raised questions about the discretion 
of the U.S. Attorney's Office to select federal monitors. In this case, 
Mr. Christie selected Ashcroft Group Consulting Services, which 
according to reports stands to collect as much as $52 million in 18 
months for its monitoring of Zimmer Holdings of Indiana. Apparently, 
these compensation agreements for federal monitors are almost never 
known publicly and were only released in this instance because they 
were disclosed in the SEC filings for Zimmer Holdings of Indiana. I was 
concerned that under the continued threat of prosecution, any party 
being investigated seemingly has little choice but to agree to the 
selection of these federal monitors and their exorbitant fees. Therein 
the selection of these federal monitors by Mr. Christie could give the 
impression of impropriety and political favoritism.
    I believe it is important that Mr. Christie has agreed to appear 
before the 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 deferred 
prosecution agreements. Furthermore, Mr. Christie has thus far failed 
to shed any light on his selection of federal monitors in this case.
    There are a number of indisputable facts in this case that raise 
very troubling questions, which remain unanswered. First and foremost 
is the fact is that Mr. Christie selected former Attorney General John 
Ashcroft, his own former superior, for a highly lucrative federal 
monitoring contract. In addition, there were four other medical device 
manufacturers given deferred prosecution agreements under this case. In 
every instance Mr. Christie selected former Justice Department 
associates to serve as federal monitors under highly lucrative 
monitoring contracts. This was seemingly done without any negotiation 
of fees or any consideration of selecting monitors with whom he was not 
closely associated with. These actions are all the more troubling in 
the light of testimony by representatives of Zimmer Holdings to the 
Senate Special Committee on Aging that Mr. Christie never presented the 
evidence he held against them and that he never forewarned them to the 
fact that he would be selecting Ashcroft Group as their monitor. This 
representative also made clear that Zimmer Holdings felt compelled to 
consent to this deferred prosecution agreement because they feared 
being taken off the Medicare providers list, which would have crippled 
their business. Therefore, Mr. Christie held all the leverage in this 
agreement and dictated the terms completely as he saw fit.
    In my mind, these monitoring agreements amount to no-bid federal 
contracts that are ripe for political considerations. In the end, Mr. 
Christie may defend himself by saying that he needed to select these 
monitors since he knew he could trust them. But, I must be clear when I 
say that the selection of close associates by a federal officer to take 
on highly lucrative contracts, which are not negotiated and in which 
outside contractors are not even considered, is the essence of 
political favoritism.
    As I delved deeper into this issue involving U.S. Attorney Christie 
and former Attorney General Ashcroft I came to the realization that 
this case of deferred prosecution agreements encompassed 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 Trial Act of 1974 (Public 
Law 93-619, codified at 18 U.S.C. 3161(h)(2)), which first gave the 
attorney for the Government the right to have a period of delay during 
which prosecution is deferred pursuant to a written agreement with the 
defendant. In the beginning this remedy was rarely used by government 
prosecutors, except in small-scale drug cases involving diversion 
programs usually for marijuana-related offenses. However, the 
indictment and ensuing collapse of accounting giant Arthur Andersen in 
March 2002 made clear to both prosecutors and defense attorneys the 
susceptibility large corporations have to federal prosecutions and the 
consequences that result. In response to the large number of federal 
prosecutions against corporations, the Department of Justice issued a 
memorandum, known as the ``Thompson Memo'' after Deputy Attorney 
General Larry Thompson, which, instructed federal prosecutors to 
explicitly consider ``granting a corporation immunity or amnesty or 
pretrial diversion . . . in exchange for cooperation when a 
corporation's timely cooperation appears to be necessary to the public 
interest and other means of obtaining the desired cooperation are 
unavailable or would not be effective.''
    However, it has become clear in the years since the `Thompson Memo' 
that federal prosecutors hold even greater power and discretion through 
deferred prosecution agreements since oversight of such agreements 
seemingly has not existed through the federal government or the 
judiciary. In fact, a study conducted by Lawrence D. Finder and Ryan D. 
McConnell found that the number of deferred prosecution agreements 
between the Department of Justice and corporations grew to thirty-five 
last year from just five in 2003, highlighting the explosive use of 
this hidden policy. It is my contention that the intent of the Speedy 
Trial Act of 1974 was never to the scope and breadth of deferred 
corporate prosecutions now being brought by federal prosecutors. It 
seems clear that the Department of Justice in recent years has 
consistently worked to shield this practice from oversight by Congress 
and the courts.
    I, along with my colleague Frank Pallone have introduced the 
Accountability in Deferred Prosecution Act of 2009, H.R. 1947. This 
legislation lays out four main principles, which I believe are key to 
bringing forth transparency and accountability in deferred prosecution 
    1) Provides Real Guidelines on Deferred Prosecution Agreements--
Requires the Attorney General to provide public written guidelines for 
deferred prosecution agreements and nonprosecution agreements in order 
to promote uniformity and to assist prosecutors and organizations as 
they negotiate and implement deferred prosecution agreements and 
nonprosecution agreements.
    2) Restores Judicial Oversight of Deferred Prosecution Agreements--
Requires government prosecutors to file each and every deferred 
prosecution agreement in an appropriate United States district court, 
which must then approve the actual agreement between the parties.
    3) Takes the Selection of Federal Monitors Out of the Hands of U.S. 
Attorneys--Sets forth rules for an open, public, and competitive 
process for the selection of such monitors through the creation of a 
national list of organizations and individuals who have the expertise 
and specialized skills necessary to serve as independent monitors.
    4) Requires Full Disclosure of Deferred Prosecution Agreements--
Requires the Attorney General to place the text of these agreements on 
the public website of the Department of Justice, together with all the 
terms and conditions of any agreement or understanding between an 
independent monitor appointed pursuant to that agreement and the 
organization monitored.
    I can not stress more strongly the need to pass this comprehensive 
legislation regarding deferred prosecution agreements. This practice 
has clearly been created by the Department of Justice to generate 
unmitigated power for federal prosecutors in pursuing corporations, as 
is highlighted by the actions of U.S. Attorney Christie in this case. 
Corporate prosecutions are of critical importance to our nation because 
of the money, resources and jobs that can be at stake. However, an even 
more essential concern has emerged through these deferred prosecution 
agreements and that is the lack of any checks and balances within the 
system. We are all well versed on the checks and balances between the 
executive, legislative and judiciary branches of government. However, 
within each of these branches also exists its own set of checks and 
balances necessary to avoid the concentration of power. As Members of 
this Committee know, within the judiciary branch these checks and 
balances involve the powers and responsibilities of the defense, the 
prosecution and the courts. However, within the deferred prosecution 
system power is almost entirely concentrated in the hands of federal 
prosecutors. For example, if an individual is charged with a crime and 
strikes a plea bargain with the prosecution then that plea must go 
before a judge who has the power to deny and in some cases to alter 
that agreement based on judicial discretion. However, when it comes to 
these deferred prosecution agreements that are struck between federal 
prosecutors and corporations it means that neither party ever sees the 
inside of a courtroom let alone has to put these agreements before a 
    No one here, including myself, is in a position of defending 
corrupt corporations or arguing against their full prosecution by the 
law. But the presumed innocence of defendants before trial and the 
balance between the prosecution and defense are hallmarks of our 
justice system. In this instance however, we are left with a deferred 
prosecution system that gives federal prosecutors unmitigated power to 
be judge, jury and sentencer. Truly, it was never the intent of our 
justice system to concentrate such power in the hands of any one 
individual or office. We must not allow deferred prosecution to become 
a form of deferred justice.
    Again, I want to thank Chairman Conyers and Chairman Cohen for 
allowing me to testify before this Subcommittee. I look forward to 
continued investigation of this critical issue and moving the 
Accountability in Deferred Prosecution Act of 2009 forward through this 
    Thank You.

    Mr. Cohen. Thank you, sir.
    We have got 8 minutes until the next vote. Our next witness 
will be Congressman Pallone, 6th District, distinguished Member 
and messenger. You would like some time.


    Mr. Pallone. Thank you, Mr. Chairman, and thank you and the 
Committee for holding this hearing and it is a very serious 
matter. I will try to be brief. You have my written testimony, 
which I will ask you to include in the record in its entirety. 
What led Congressman Pascrell and me to introduce legislation 
is because we saw all the inconsistencies and lack of proper 
oversight of monitors.
    And I believe that without a legislative fix, basically 
U.S. attorneys will continue to write their own rules, and that 
leads to a broad spectrum of practices, often bad practices 
from U.S. attorneys, dictating to the company who the monitor 
will be, how much they will charge, and all the other things 
that have come up today.
    The troubling thing is that Federal prosecutors have too 
much 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.
    Now, I want to mention briefly, Congressman Pascrell and I 
went to a day at NYU Law School that was totally devoted to 
this issue, and the interesting thing about it was they were 
talking about all kinds of deferred prosecutions. There was no 
question that the poster child for abuse was Mr. Christie.
    The fact that he hired his former boss, Mr. Ashcroft in one 
case, that another former Federal judge who was retired was 
hired as a monitor in another case and then basically kicked 
back or sent thousands of dollars in election contributions to 
his campaign in the second case, and the third case with Seton 
Hall Law School that had nothing to do with the actual case in 
front of her with the deferred prosecution, was given an 
endowed professorship.
    These are the kinds of abuses if there is unfettered 
discretion. In other words someone just comes in and says, 
``Look, I can do whatever I want and I will do these kind of 
things unless there is some kind of limitations.''
    And if anybody tells you that somehow, you know, he wasn't 
in charge of how much money was going out, I mean that e-mail 
that you saw between Zimmer Holdings, you know, and the 
Ashcroft case, where they were complaining to Christie and his 
assistant about how, you know, we are not getting paid enough, 
was a perfect example of what is going on; actually going back 
to the U.S. attorney and saying, ``We are not getting paid 
enough and can you intercede here to try to resolve this so 
that ultimately we get paid more.''
    When Mr. Pascrell talked about the bills, this came up at 
the NYU conference that day, and it was just unbelievable how 
the one woman, Debra Yang, who was actually there, talked about 
how she had itemized her bills to justify the time and the 
billable hours that she put in.
    But in Ashcroft's case he just submitted a memo and 
basically didn't justify it at all. So I mean this is the 
problem that we are having. If you don't step in and we don't 
pass some kind of legislation, you are going to have these 
kinds of abuses continue, and I think they can only get worse 
if you have somebody as U.S. attorney who feels that he can do 
whatever he wants in almost dictatorial fashion.
    Now, I am just going to end with this, Mr. Chairman, there 
is so many unanswered questions in the case of these cases that 
were handled by Christie and I just want to list some of them 
if I can, and then I will conclude.
    How much was John Ashcroft paid after you selected him as a 
monitor? Why did you fail to disclose how much Ashcroft and 
other monitors were paid? How did you decide to give Ashcroft 
the contract? Did you use any objective criteria, such as the 
bidding process?
    How many candidates did you have for the Ashcroft deal and 
for the other monitors? What were their names? What kinds of 
due diligence were performed on each candidate to avoid 
conflicts of interest? What types of billing records did you 
require of Mr. Ashcroft and the other monitors? What criteria 
is in place to determine if a monitor does the job right?
    Why do you believe there is no conflict of interest in 
granting David Kelley a monitoring contract after he decided 
not to prosecute your brother? Are you going to return the 
campaign contributions from John Inglesino? Are you going to 
return the contributions to Herb Stern? Why aren't these forms 
of pay-to-play? What sets you apart from the other prosecutors 
who use competitive bids, judges and a written criteria to 
select monitors?
    When we were at NYU that day there were many other U.S. 
attorneys who actually use transparency, went to a judge to 
approve it, chose from a list of experts. Didn't use their 
friends, didn't give the money to their own alma mater, didn't 
supervise, you know, how much money they were getting, as you 
saw in these e-mails.
    So the problem is if you don't move on some sort of 
legislation like what we are proposing, yes, you will have good 
U.S. attorneys that use a transparent process that pick from a 
list of experts, that don't hire their friends, but then you 
will have the Chris Christie's who will do exactly the opposite 
because it is in their political interest to select their 
friends, make sure they get big fees and continue these 
unfettered practices.
    So all we are asking is that you consider this legislation. 
I know you are seriously considering it, because we are really 
concerned that without it there is no objectivity and there is 
a lot more potential for abuse. Thank you, Mr. Chairman.
    [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


    Mr. Cohen. Thank you, sir.
    There is a minute 56 to go, so if--I would like to adjourn 
the panel so that we can go vote. Mr. Franks, you have a 
question? I don't know if we are going to come back to you.
    Mr. Franks. Well, Mr. Chairman, We can defer coming back or 
just not come back at all, but I would like to say that, you 
know, there has been a lot of statements here made that Mr. 
Christie hired--this is just all nonsense and I am sorry that 
it has to be that way, but I suppose it would take us all day 
to try to correct all the nonsense that has been put forth here 
from these two New Jersey members, whom I respect, but I am 
sorry that there is always a witch hunt on this Committee.
    And with that----
    Mr. Pascrell. Mr. Chairman?
    Mr. Franks [continuing]. If we are going to come back I 
would be glad to come back.
    Mr. Cohen. Mr. Pascrell?
    Mr. Pascrell. Chairman?
    Mr. Cohen. Yes.
    Mr. Pascrell. Mr. Pallone and I set out on this journey a 
year and a half ago. This has nothing to do with politics. All 
we want is answers to questions and we put legislation before 
the Committee in good faith. We are ready to defend the 
legislation, particularly in terms of what you hear if you step 
back from the politics of the--you want transparency.
    I know, Mr. Franks, you have always talked about 
transparency. That is what we want, and we are willing to work 
with you on this legislation. This system is not working, I can 
assure you. Forget about us. You make the judgment. You look at 
the materials. Thank you.
    Mr. Delahunt. I move we now adjourn.
    Mr. Cohen. Move that we adjourn. I would like to thank the 
witnesses. Without objection, 5 days to write here. Adjourned.
    [Whereupon, at 2:26 p.m., the Subcommittee was adjourned.]

                            A P P E N D I X


               Material Submitted for the Hearing Record

 Response to Post-Hearing Questions from the Honorable Christopher J. 
    Christie, former United States Attorney, District of New Jersey


  Post-Hearing Questions submitted to the Honorable Gary G. Grindler, 
   Deputy Assistant Attorney General for the Criminal Division, U.S. 
                         Department of Justice*
    *The Subcommittee had not received a response to their post-hearing 
questions prior to the printing of this hearing.


  Post-Hearing Questions submitted to the Honorable Chuck Rosenberg, 
 former United States Attorney, Eastern District of Virginia, Hogan & 
                             Hartson, LLP*
    *The Subcommittee had not received a response to their questions 
prior to the printing of this hearing.


    Response to Post-Hearing Questions from Vikramaditya S. Khanna, 
        Professor of Law, The University of Michigan Law School


               Letter from John Wesley Hall, President, 
            National Association of Criminal Defense Lawyers


               Letter from Cynthia Hujar Orr, President, 
            National Association of Criminal Defense Lawyers