[Senate Hearing 111-1001]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 111-1001
 
            OVERSIGHT OF THE FEDERAL BUREAU OF INVESTIGATION

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

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 28, 2010

                               __________

                          Serial No. J-111-103

                               __________

         Printed for the use of the Committee on the Judiciary




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                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
HERB KOHL, Wisconsin                 JEFF SESSIONS, Alabama
DIANNE FEINSTEIN, California         ORRIN G. HATCH, Utah
RUSSELL D. FEINGOLD, Wisconsin       CHARLES E. GRASSLEY, Iowa
ARLEN SPECTER, Pennsylvania          JON KYL, Arizona
CHARLES E. SCHUMER, New York         LINDSEY GRAHAM, South Carolina
RICHARD J. DURBIN, Illinois          JOHN CORNYN, Texas
BENJAMIN L. CARDIN, Maryland         TOM COBURN, Oklahoma
SHELDON WHITEHOUSE, Rhode Island
AMY KLOBUCHAR, Minnesota
EDWARD E. KAUFMAN, Delaware
AL FRANKEN, Minnesota
            Bruce A. Cohen, Chief Counsel and Staff Director
              Brian Benczkowski, Republican Chief Counsel


                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont.     1
    prepared statement...........................................    90
Sessions, Hon. Jeff, a U.S. Senator from the State of Alabama....     3

                               WITNESSES

Mueller, Robert S., III, Director, Federal Bureau of 
  Investigation, U.S. Department of Justice, Washington, DC......     5

                         QUESTIONS AND ANSWERS

Responses of Robert S. Mueller, III, to questions submitted by 
  Senators Feinstein, Feingold, Durbin, Whitehouse, Kaufman, 
  Franken, Sessions, Grassley and Kyl............................    44

                       SUBMISSIONS FOR THE RECORD

Mueller, Robert S., III, Director, Federal Bureau of 
  Investigation, U.S. Department of Justice, Washington, DC:
    Correction of Misstatement...................................    92
    Responses from March 5, 2008, FBI Oversight Hearing..........    94


            OVERSIGHT OF THE FEDERAL BUREAU OF INVESTIGATION

                              ----------                              


                        WEDNESDAY, JULY 28, 2010

                                       U.S. Senate,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:01 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Patrick J. 
Leahy, Chairman of the Committee, presiding.
    Present: Senators Leahy, Kohl, Feinstein, Specter, Schumer, 
Durbin, Cardin, Whitehouse, Klobuchar, Kaufman, Franken, 
Sessions, Hatch, Grassley, and Kyl.

OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM 
                      THE STATE OF VERMONT

    Chairman Leahy. Good morning, everyone. I came out and I 
thought that Senator Sessions was out here, but it is your 
white hair I saw. But I understand he is on his way, and I am 
going to begin, and he will be recognized when he gets here.
    The Judiciary Committee today hears from Director Robert 
Mueller of the FBI for the fourth time this Congress. We held 
two FBI oversight hearings last year, and the Director appeared 
earlier this year to testify about national security issues. I 
welcome him back to the Committee.
    I would note the Director, the same as with his 
predecessor, has always been available anytime I have called or 
had questions. We have done briefings on both unclassified and 
classified matters, and I appreciate that and I appreciate his 
candor in responding. I wish I could talk about some of the 
things he has responded, but they were highly classified so I 
will not. But I just want to note for the record I appreciate 
his candor in that.
    Oversight is one of our most important responsibilities, 
and this Committee has taken it very seriously. Along with 
regular appearances from Director Mueller, the Committee has 
held multiple oversight hearings with Attorney General Holder, 
oversight hearings with Homeland Security Secretary Napolitano, 
the heads of key components of the Justice Department, and 
other senior executive branch officials. And the FBI, of 
course, has a critical mission in law enforcement and national 
security. And the Director has been very open in his efforts to 
balance the efforts in law enforcement while maintaining the 
values and the freedoms that we hold dear as Americans. He has 
worked to close the longstanding gaps in responses to written 
questions, inquiries, and document requests from this 
Committee. We always want more work on that, but the increased 
openness and responsiveness from the FBI helps the Bureau and 
Congress do their jobs more effectively. I would say that is 
helpful both as a member of this Committee and as a member of 
the Appropriations Committee.
    I appreciate that they has shown signs recently of real 
progress on issues vital to this Committee and to the country. 
Obviously, national security and counterterrorism are central 
to the FBI's mission. It has been heartening to see in recent 
months a series of important arrests of those who would do this 
country harm, and, Director Mueller, I appreciate your 
briefings you have given me on those arrests.
    But, also, last week the FBI announced the arrest of 
Zachary Chesser, an American who sought to join a terrorist 
organization in Somalia. Now, we see the headlines of arresting 
him, but what it does not show is the months and months of 
work, some of the finest investigative work I have seen, of FBI 
agents, and I hope you will compliment those agents who have 
followed him for months.
    It appears from court documents and public statements that 
in this case the system worked as it should. Mr. Chesser was 
watched carefully through court-approved surveillance, was 
placed on the no-fly list, and was arrested as he tried to fly 
to Africa. Cases like these reinforce my conviction that 
criminal investigations and prosecutions are vital weapons in 
our national security arsenal.
    In this Congress, we have made great strides toward more 
effective fraud prevention and enforcement. I worked hard with 
Senator Grassley, Senator Kaufman, and others to pass the Fraud 
Enforcement and Recovery Act, the most expansive anti-fraud 
legislation in more than a decade. I was pleased when the 
President signed it into law last spring. I know Senator 
Kaufman was, too.
    That important legislation added resources and statutory 
tools for effective prevention, detection, and enforcement of 
mortgage fraud and financial fraud. The same bipartisan group 
of Senators worked hard this year to ensure that the landmark 
health care reform legislation included new tools for cracking 
down on health care fraud, and that the historic Wall Street 
reform legislation the President just signed included key 
measures to strengthen enforcement of securities fraud and bank 
fraud.
    I am glad to see that the FBI has been taking full 
advantage of this heightened support for and focus on fraud 
enforcement. This spring, the Attorney General told Congress 
that, in part as a result of the recently passed legislation, 
the FBI has more than doubled the number of agents 
investigating fraud, but that also reflects from the top, from 
the Director of the FBI, what he feels.
    Since 2007, the Justice Department's health care fraud 
strike forces have sent more than 205 defendants to prison. 
They have significantly deterred Medicare fraud. That is one of 
the things that I know Senator Grassley and I have looked at 
very closely. And earlier this month, the Department charged 92 
defendants with cheating the Medicare system of more than $251 
million in the largest health care fraud sting ever. Senator 
Sessions and I, as former prosecutors, know that the way you 
deter some of these things is to deter them, actually lock them 
up. I congratulate the Director for the FBI's central role in 
these investigations. I hope they remain committed to that.
    Combating corruption has long been another important 
priority for the FBI. I was very disappointed that the Supreme 
Court last month undermined these efforts by siding with Enron 
executive Jeffrey Skilling and greatly limiting a statute, 
passed with bipartisan support, vital to Federal efforts to 
crack down on corruption and fraud. And I have already spoken 
with the Director and hope he will work with us on both sides 
of the aisle to see if we can fix that statute to give him the 
tools he needs.
    I am heartened to see that the FBI's statistics continue to 
show reductions in violent crime nationwide despite the painful 
recession. I commend them on their work in combating violent 
crime. But I also hope that Congress continues to supply and 
does supply the kind of resources you need to combat crime. It 
is one thing to say we will put the laws on the books and 
increase the penalties, but if we do not give you agents to go 
out and catch the people, it does not do much good.
    Areas of major concern remain, of course. I know the FBI is 
continuing to struggle with efforts to modernize its technology 
and information-sharing systems. The Sentinel program, there 
will be questions about that because of the great concern I 
have expressed to you privately.
    I was distressed to learn that the FBI has felt it 
necessary to suspend work orders and essentially start over yet 
again. I am glad to see you are taking control of it, but I am 
sorry we have gotten to that point. And I have also discussed 
with the Director the press reports this morning about 
widespread allegations of cheating on a test that is meant to 
ensure that FBI agents understand the limits of their 
investigative authorities, and I know the Director--it seems 
these stories always break the night before you are about to 
testify, but it will give us something--we want to make the 
hearing interesting for you, Director.
    I thank you for returning. I also thank the hard-working 
men and women of the FBI. You have stated publicly your pride 
in these agents, but you have also told me privately the same. 
It is not something you just say in public. You say it 
privately, too, the pride you have in the men and women of the 
Bureau. I share that price.
    Senator Sessions.

STATEMENT OF HON. JEFF SESSIONS, A U.S. SENATOR FROM THE STATE 
                           OF ALABAMA

    Senator Sessions. Thank you, Mr. Chairman. It is great to 
have Director Mueller, who is one of our Government's finest 
public servants, I think. But I do not think he would claim to 
be perfect, and the fabulous FBI is not perfect either, and we 
need to insist that we do all we can to assist you in making 
that great agency better than it is.
    I would just say first this Government is spending money in 
ways we have never comprehended before. The last two budgets 
that passed this Congress increased domestic spending about 17 
percent in each agency. That does not count the $800 billion 
stimulus package that is moving grant money out all over the 
country, and I continue to hear problems of fraud and abuse in 
that area.
    In addition, the Government has assumed greater control 
than ever in the history of the world over our health care 
system, and it is going to cost the American people money. And 
it has got to be managed correctly.
    I am concerned about that. We have got to have increased 
and more effective oversight over Federal spending as it grows, 
if for no other reason than it is growing in real terms. And so 
we need to focus more on that.
    I was disappointed to see in general FBI fraud statistics 
are down. I do not think that is an acceptable trend in light 
of the American people's concern over waste, fraud, and abuse 
in the Federal Government.
    Also, Mr. Director, I was a bit taken aback that we just 
got yesterday, perhaps, the answers to the written questions 
that I posed concerning the policy of the FBI when they arrest 
a terrorist, whether or not they will be presumptively a 
civilian defendant, if charged, or whether or not they would be 
handled by a military commission presumptively. And it appears 
that it remains the policy of this administration--I do not 
know what position you have personally taken, but the 
administration and the Department of Justice has apparently 
continued to pursue the view that these individuals, if 
arrested, like the Christmas Day bomber, are presumed to be 
tried in Federal civilian court, which means they are entitled 
to a prompt appearance before a magistrate, as you noted in 
your answers, given Miranda warnings, given pre-trial 
discovery, and given speedy trial rights; whereas, if they are 
treated as an enemy combatant, someone who has been arrested in 
the same way that German soldiers may have been arrested at the 
Battle of the Bulge, they are not brought before a judge, they 
are not given Miranda warnings. They are held until the war is 
over or there is some other reason for them to be released. And 
if these individuals have violated the rules of war, they by 
history and common sense can be tried by a military commission, 
without having to do so promptly or on the schedule according 
to the procedures that the Defense Department feels are 
legitimate.
    So I think the presumption needs to be that persons coming 
from al Qaeda or other terrorist organizations should be held 
in military custody; and if at some point it is decided it 
might be better to try them in civilian courts, the courts have 
approved that process.
    Also, we have had some situations in which individuals are 
making phone calls in my State indicating that Federal grant 
money is available, that you can apply for it if you send some 
group money. It appears to be a fraud scheme, and I would like 
to talk to you about that.
    Thank you, Mr. Chairman. I appreciate you having the FBI 
Director. We all admire him and admire the FBI, and we look 
forward to working together to make it better.
    Chairman Leahy. Thank you.
    Robert Mueller became the sixth Director of the Federal 
Bureau of Investigation on September 4, 2001. He had, 
tragically and horribly, a baptism of fire just a few days 
later on 9/11. But prior to that, he was U.S. Attorney for the 
Northern District of California. We have at least two former 
U.S. Attorneys on this Committee--Senator Sessions and Senator 
Whitehouse.
    The Director began his career at the Justice Department by 
working for 12 years in the U.S. Attorney's Office of the 
Northern District of California, chief of that office's 
Criminal Division, Assistant U.S. Attorney in Boston, and later 
as the Assistant Attorney General in charge of the Department's 
Criminal Division. He has his undergraduate degree from 
Princeton, master's degree from New York University, served in 
the Marines for 3 years in Vietnam, and then earned his law 
degree from the University of Virginia Law School.
    Director Mueller, the floor is yours.

 STATEMENT OF THE HONORABLE ROBERT S. MUELLER, III, DIRECTOR, 
 FEDERAL BUREAU OF INVESTIGATION, U.S. DEPARTMENT OF JUSTICE, 
                        WASHINGTON, D.C.

    Mr. Mueller. Let me start by thanking you. Good morning 
Chairman Leahy, Ranking Member Sessions and Members of the 
Committee. Thank you for the opportunity to appear before the 
Committee today. I am extraordinarily proud of the work that 
our people do.
    I also suppose I should thank you for making the hearing 
interesting this morning. Also, I want to thank Ranking Member 
Sessions for holding this hearing as well.
    Since the Committee's last oversight hearing, the FBI has 
faced an extraordinary range of national security and criminal 
threats. These threats underscore the complexity and the 
breadth of the FBI's mission to protect the Nation in a post-9/
11 world. Let me highlight, if I could, a few examples for you 
this morning.
    Over the past year, al Qaeda and its affiliates remain 
committed to conducting attacks inside the United States as 
well as against our military and against civilians overseas.
    Last September, the FBI disrupted the al Qaeda plot of 
Najibullah Zazi and others who were planning to attack the New 
York subway system.
    In December, Umar Farouk Abdulmutallab attempted to bomb 
Northwest Airlines Flight 253 on Christmas Day, an attack 
directed by al Qaeda in the Arabian Peninsula.
    And in May of this year, Faisal Shahzad attempted to 
detonate a car bomb in Times Square, an attack linked to 
support from TTP.
    And earlier this month, al-Shabaab took credit for 
detonating two bombs in the Uganda capital of Kampala, killing 
more than 70 people, including an American.
    Homegrown and ``lone wolf'' extremists also continue to 
pose a serious threat, as we saw with the attempted bombings of 
an office tower in Dallas and a Federal building in 
Springfield.
    Combating threats like these requires the FBI to continue 
improving our intelligence and our investigative efforts, as 
well as working closely with our intelligence and law 
enforcement partners, both here and abroad.
    The counterintelligence threat to the United States 
continues to persist, as we saw with the recent arrest of a 
network of Russian spies. Foreign adversaries, however, do not 
rely exclusively on such traditional agent networks. They 
increasingly employ non-traditional collectors--such as 
students, visiting scientists, businessmen--as well as cyber-
based tools to target and penetrate United States institutions.
    Turning to the cyber threat, the cyber threat cuts across 
our national security and criminal programs. To date, 
terrorists have not yet used the Internet to launch a full-
scale cyber attack, but al Qaeda and its affiliates have 
created a potent online presence. Extremists are not limiting 
their use of the Internet to recruitment; they are also using 
it to incite terrorism.
    The cyber threats also target Internet businesses, as we 
saw with the Google intrusion earlier this year. Internet fraud 
and identity theft remain a growing problem, as the Internet 
Crime Complaint Center, IC3, reported a 22-percent increase in 
complaints this year, with more than 330,000 involving more 
than $550 million in losses.
    The Internet has also become a platform for the theft of 
intellectual property around the world. Last week, a 2-year 
joint investigation by FBI, Spanish, and Slovenian authorities 
led to the arrest of individuals responsible for the creation 
of the Mariposa botnet, a vast network of more than 8 million 
remote-controlled computers worldwide. Using a computer virus 
known as the butterfly bot, criminals stole credit card and 
bank card information and launched denial-of-service attacks. 
In the last 2 years, the software used to create the Mariposa 
botnet was sold to hundreds of other criminals, making it one 
of the most notorious in the world.
    These cyber intrusions, thefts, and frauds undermine the 
integrity of the Internet and the businesses that they rely on. 
They also threaten the privacy and pocketbooks of all who use 
the Internet. I should also mention that finding and punishing 
those who use the Internet to conduct sexual exploitation 
always remains among our highest priorities.
    Let me spend a moment discussing our efforts against 
financial crimes. Over the past year, the impact of large-scale 
financial crimes has grown. In the wake of the financial 
crisis, the FBI continues to uncover major frauds in the 
thousands of cases we have under investigation, cases such as 
the Petters $3.9 billion in Minnesota yielded convictions and 
stiff sentences for top-level executives. In June, the former 
chairman of a securities firm was charged with a $1.9 billion 
fraud that contributed to the failure of Colonial Bank. And 
this month, the former CEO of Capitol Investments was charged 
in an $880 million Ponzi scheme.
    The focus on health care fraud is no less important. As, 
Mr. Chairman, you pointed out, 2 weeks ago the Medicare strike 
forces in Miami, Baton Rouge, Brooklyn, Houston, and Detroit 
announced charges against 94 individuals for more than $251 
million in false claims to Federal health care programs. These 
fraud schemes continue to plague the health care system, 
including fraudulent billing for home health care, durable 
medical equipment, and HIV infusion treatments. The number of 
pending FBI health care fraud investigations has grown steadily 
and now stands at more than 2,500 cases.
    Let me turn for a moment to information technology in the 
Bureau, a subject to which you alluded.
    The FBI has continued to improve and upgrade our 
information technology. In the past 18 months, the FBI has 
rebuilt many of our computer networking systems, deploying the 
next-generation network to over 800 locations worldwide and 
providing 45 times greater backbone bandwidth.
    The FBI is also replacing our computer work stations with 
the next-generation workplace which will provide state-of-the-
art voice over Internet, desktop videoconferencing, and Web 
collaboration tools for every one of our FBI users. And the FBI 
has now deployed more than 26,000 BlackBerrys to its workforce, 
including recent upgrades that allow direct access to databases 
like NCIC.
    Turning to Sentinel, starting this week the FBI is 
deploying phase two to all of our offices across the country. 
Phase two enhances Sentinel's capabilities for the thousands of 
FBI employees and supervisors who already use it each day. As 
you pointed out, this last spring we issued a partial stop-work 
order on phases three and four in order to ensure that phase 
two was completed successfully. Given the delays associated 
with the completion of phase two, we are examining ways to 
reduce costs and limit our reliance on contractors to keep the 
project within its budget. Currently the FBI is consulting with 
industry experts to evaluate our plan to finish Sentinel.
    In closing, as the Committee knows, the FBI faces a new 
budget climate in the coming year. Along with all other 
agencies, we are being asked to reduce costs and eliminate 
redundancies wherever possible, which we will make every effort 
so to do.
    To conclude, I appreciate the opportunity to discuss the 
FBI's recent work responding to the complex and the far-ranging 
threats we face today. I also want to thank the Committee for 
your continued support of the FBI in its mission, and, of 
course, I would be happy to answer any questions that you might 
have.
    [The prepared statement of Mr. Mueller appears as a 
submission for the record.]
    Chairman Leahy. Thank you very much, and I appreciate that.
    The Washington Post ran a series last week on the 
extraordinary growth of the intelligence community since 
September 11, 2001, and the terrorist attacks. But they also 
highlighted the increased reliance on private contractors. I 
talked with you briefly about this yesterday, but as you know, 
I am very concerned about sensitive national security work 
being done by for-profit companies rather than being done by 
public officials. And I was worried about all the overlapping 
use of private contractors that article or series of articles 
came up with.
    Now, aside from foreign language translators and 
information technology workers, how do the intelligence 
components of the FBI use contractors? How much of your 
intelligence work is comprised of contractors? I should note 
that series showed that you have a lot less contracting 
companies in the National Security Agency or the Department of 
Homeland Security or the Department of Defense. Please go 
ahead, sir.
    Mr. Mueller. We, of course, use contractors. We for several 
years now have undertaken to reduce our reliance on 
contractors. One of the areas that you mentioned is the IT 
arena, for instance. We have built up our in-house 
capabilities, which will enable us, I believe, to do some of 
the work that traditionally has been done by contractors.
    But to give you an example of the use of contractors, we 
have a Weapons of Mass Destruction--WMD--Division. There are 
periods where we need particular expertise to gain knowledge in 
an area in which someone outside will have the expertise and we 
do not have the expertise in place. So we will bring a 
contractor on for a period of time, whether it be in the 
nuclear arena or the biological arena or the chemical arena, 
for a period of time to help us establish a program. That is an 
example in, I guess you would call it, the intelligence arena 
where we use contractors.
    But we are sensitive to the fact that there are discrete 
areas where, as you pointed out, whether it is language 
translations, that contractors have a role. There are other 
areas where the work should be done in-house, and we are 
scrutinizing that.
    Chairman Leahy. Given your druthers, would you prefer in-
house to contractors?
    Mr. Mueller. Given my druthers, I would prefer in-house, 
both for the savings as well as developing the core 
capabilities.
    Chairman Leahy. The press reported this morning that the 
Inspector General of the Department of Justice is investigating 
whether FBI agents across the Nation cheated on a mandatory 
test on the FBI's Domestic Investigations and Operations 
Guidelines, the DIOG. This has been a source of concern. I 
along with a number of other Senators on this Committee had to 
really wrestle with former Attorney General Mukasey for months 
just to obtain a copy of this. Once we read it, many expressed 
fear that this broad authorization of domestic investigative 
techniques had the potential to encourage racial profiling. The 
FBI assured the Congress that the test that agents take and the 
content of DIOG would ensure that agents are fully trained on 
not only the scope but the limitations of the FBI's authority.
    Now, we learned last year that a small number of agents 
were accused of cheating on the test. That is what I was told. 
I was amazed when I went online this morning to find from press 
accounts that cheating was reportedly more widespread.
    What is the scope of the investigation? How many agents are 
involved? What steps have you taken to make sure this does not 
happen again?
    Mr. Mueller. Let me start, if I could, because your 
question addresses a number of issues that were raised.
    First of all, in terms of the guidelines, the new Attorney 
General guidelines, the point that should be made at the outset 
is that we do not, the FBI does not target persons or groups 
based on race, ethnicity, or religion. That is at the heart of 
those guidelines. And that is what we teach each of our 
personnel.
    After the guidelines were signed into place by the Attorney 
General, we undertook a substantial education program for our 
agents, having developed the DIOG, and all of our agents and 
much of our other personnel went through that training, more 
than 16 hours of training.
    There was a test given a year ago. It was an open-book 
test. The parameters were that you could use what materials you 
wanted to, it was open book, but you should not get help from 
another person.
    Early on, we in the Bureau had allegations that those 
procedures were not followed in particular instances. We 
investigated those instances and took appropriate action.
    The Inspector General has taken over that investigation and 
has indicated that there are additional personnel that did not 
abide by those procedures. We do not have all the specifics, 
and we are expecting a letter from the IG pointing out other 
occasions where there were abuses and the procedures were not 
followed with recommendations, and we will follow those 
recommendations.
    In the meantime, however, it is quite obviously my concern 
that all of our personnel understand the parameters in which we 
are to work. I am confident that the training and the testing 
and the continuous training we have has put our workplace--or 
our people in a position to fully know and understand the 
opportunities but also the limitations of what we can do. There 
are various levels of review.
    I will tell you one other statistic. After the training was 
completed and the test taken, the incidence of errors in the 
paperwork was reduced by 80 percent. And so I do believe that 
our workforce absolutely understands what can be investigated, 
how it must be investigated, what predication is necessary for 
a particular investigation in this day and age.
    Chairman Leahy. How many agents were involved in cheating 
on the test?
    Mr. Mueller. At this point I do not know. I do not have the 
report from the IG.
    Chairman Leahy. Do you have any idea?
    Mr. Mueller. I have got a general idea, but I do not know 
how many, and I am not certain the IG knows how many either. He 
has pointed out instances orally to me where there may be 
persons in a particular office where it was widespread, and it 
may be attributable to a lack of understanding and confusion 
about the procedures.
    Chairman Leahy. We will be asking the IG these questions.
    I do have one last one. A year from now, when we have a 
hearing, what will you be able to tell us about Sentinel? And 
where will we be with Sentinel then? I mean, you have wrestled 
with this. We have wrestled with this whole question of the 
computer system of the FBI. We have seen fits and starts. Where 
will we be a year from now?
    Mr. Mueller. Well, a year from now we certainly, I believe, 
will have successfully completed phase two. We ought to 
complete that at the latest this fall. Phase two is the heart 
of the system. It puts on agents' desktops a case management 
system. My expectation is that--from what I hear from around 
the country, it is work successfully. When I issued the initial 
partial stop order, it was because I was not satisfied that we 
had eliminated all of the coding errors that may be there, and 
I was not satisfied as to the scalability.
    After engaging in three pilot projects that were 
successfull, we ran that out this week, and the heart of the 
system is in place.
    The additional capabilities that we were seeking in phase 
three and four, we are looking to determine how best to go 
forward and obtain those capabilities. We have employed experts 
from outside the Bureau to look at it, and my hope and 
expectation is that we will be able to deploy many if not all 
of those capabilities given two factors: one, the enhancement 
in technology since this contract was initially issued 5 years 
ago; and, second, our ability to use our own staff for much of 
the development here on in, which goes to the building up of 
that IT staff and less reliance on contractors. We have built 
up our own IT staff. We benefit from technology advances. We 
ought to be able to make a substantial savings on phases three 
and four.
    Chairman Leahy. Please keep us posted on that because I 
think there has been bipartisan concern on this, and it is 
justifiable.
    Mr. Mueller. I understand.
    Chairman Leahy. Senator Sessions.
    Senator Sessions. Mr. Chairman, I would yield my time to 
Senator Grassley, who works very hard in this Congress to 
protect the Treasury of the United States, and I know he has 
some questions to ask, so I would yield to him at this time.
    Senator Grassley. I am going to continue where the Chairman 
just left off on Sentinel. In March, I wrote to you after 
learning the FBI issued a stop-work order to the prime 
contractor, Lockheed Martin. The reply I received indicated 
that this was temporary and would help assure delivery of phase 
two by this summer.
    Just last week, I wrote you a letter here again about the 
new stop-work order. I have yet to receive a response, but the 
FBI issued a press release saying phase two was not 
anticipated, as you just said, by--well, at least the press 
release said by the fall of 2010. I understand that phase two 
was released to the field just this week, but that may not be 
final until fall.
    I find all of this uncertainty in a major procurement very 
concerning. We have not been getting answers from the FBI about 
the projected cost or timeline on finishing the program. I am 
concerned that the uncertainty is a signal that the FBI will be 
unsuccessful in finishing Sentinel. I know you just said the 
opposite to the Chairman. This project was scheduled to be 
finished December 2009 at a cost of no more than $451 million. 
In a lot of correspondences we have had on this issue, the word 
keeps popping up about we are negotiating, we are negotiating, 
we are negotiating. And you wonder how much negotiation goes on 
when $451 million is involved.
    The timeline is a bust. The Inspector General noted that 
the FBI does not have a current schedule or cost estimate for 
completing the project. I asked for these estimates in March, 
and the FBI said it was negotiating with Lockheed Martin. There 
was no indication when we would get these projections. That is 
unacceptable because the American taxpayers deserve answers 
given the ballooning Federal deficit and endless delays in the 
program.
    Based upon negotiations with Lockheed Martin, how much 
longer will it take to complete the Sentinel system? When will 
it be finished? In May, the Washington Post reported that you 
believe Sentinel will be done be 2011. Do you still believe 
that that date is accurate?
    Mr. Mueller. You covered a lot there, Senator. If I might, 
I will start off by saying, as you pointed out, when I issued 
the partial stop-work order--I think it was in March--I 
indicated at that point in time that we wanted to do pilots in 
order to assure the feasibility, viability, and scalability of 
the system that upon success of those pilots that phase two 
would be deployed this summer. And as I said before and as I 
told you what happened, it is being deployed, and it should be 
deployed by--certainly the deployment should be finished by the 
end of this summer.
    We broke this project up into phases so we could look at 
each phase, learn lessons from each phase, so that we would not 
be bound by one overarching contract but could go and accept 
the project piecemeal. I am actually pleased that the heart of 
the program phase two is now on agents' desks and a case 
management system is there.
    Augmenting that will be additional forms and additional 
capabilities, we have to look at both the budget and the 
timeframe down the road and determine how much of that work can 
or should be done by the contractors, how much of that work can 
and should be done by ourselves, given the new technology. And 
as we finish phase two, that will be what we are looking at in 
the next 3 months.
    So I cannot at this juncture right now give you hard 
figures, but we have endeavored both for you in this Committee 
and other committees to keep you apprised of everything that 
happens in the course of our developing this software package.
    Senator Grassley. So you are saying you cannot give us a 
date, if it will be done by 2011?
    Mr. Mueller. Not until we have additional information based 
on what we have found to be both problems and successes in 
phase two. It is exactly what we did when phase one was 
completed in, I think it was, 2007. We went back, looked at the 
areas in which we were successful and looked at those areas 
where we failed and adjusted. We will do that again.
    Senator Grassley. Has Lockheed Martin provided a cost 
estimate to finish Sentinel? How much more will the taxpayers 
have to pay? Is it hundreds of millions of dollars, tens of 
millions of dollars? Can you tell us if the cost is going to 
exceed $1 billion?
    Mr. Mueller. Certainly it would not exceed $1 billion, but 
I can tell you, as you pointed out, there was an overarching 
budget for this project. We hope to stay within that budget. 
There are ongoing negotiations, but I am mindful of the 
necessity of maximizing the products that we get and minimizing 
the cost to the taxpayer, which is why, as I say, we are 
looking at alternative capabilities and with less reliance on 
contractors who can prove to be more expensive than if you 
could do it yourself in-house.
    Senator Grassley. In March, the FBI said it spent over $25 
million on phase three, which is now indefinitely delayed. Is 
that money lost and gone forever? Or will the FBI recoup those 
monies from the contractor?
    Mr. Mueller. That will go into our evaluation of where we 
go with phases three and four. As I pointed out before, we 
engaged in an incremental development process so that we could 
adjust throughout the contract.
    One of the, I think, striking differences from what we had 
not accomplished before is the fact that we have a case 
management system that is now working for the Bureau.
    Senator Grassley. Does the FBI plan to continue working 
with Lockheed Martin? Or are you going to consider hiring 
another contractor to complete phase three and four? And while 
you are answering that, does the FBI believe that it has gotten 
a good deal from the money on Sentinel so far?
    Mr. Mueller. We have a case management system through the 
Sentinel development process that we never had before. With 
regard to the extent to which we continue to work with Lockheed 
Martin, I do believe we will continue to work with Lockheed 
Martin, but we still have to iron out exactly what the roles 
will be and the amount of money that we want to expend through 
the contractor and the amount of money we want to expend in-
house to continue development.
    Senator Grassley. The FBI has issued over 39 contract 
modifications. However, that number is deceptive as phase two 
had 160 change orders rolled inside of those modifications. 
Does the FBI know what it wants? Or is the FBI passing up a 
good system in order to just try to have a perfect one?
    Mr. Mueller. I think what you point to is an issue everyone 
who develops software packages has to wrestle with. Over a 5-
year period, our mission has changed to a certain extent. Our 
necessities have changed. Things like the Attorney General's 
guidelines have changed. Our processes have changed, which 
requires us--if you lock in the requirements in 2004 in order 
to issue the contract, things are going to change between 2004 
and 2010. And while there have been modifications, I think they 
are relatively minor modifications, and not the principal 
contributor to whatever delays there have been.
    But you have to take that into stride, and you have to have 
a balance, on the one hand, of making the system work for your 
people, and on the other hand, staying within the requirements 
and the cost estimates and time estimates that you contracted 
to 4 or 5 years ago. And that is what we wrestle with.
    Chairman Leahy. Thank you.
    Senator Kohl, then Senator Sessions.
    Senator Kohl. Director Mueller, last week's Washington Post 
series on the growth of our intelligence efforts highlighted 
the tendency of both Congress and intelligence agencies to 
respond to terrorist threats by expanding programs and hiring 
more analysts. Since 9/11, the FBI has been expanding to meet 
its counterintelligence mission within the United States. 
However, we all know that bigger is not always better. Many 
intelligence officials seem to agree. In that article, Defense 
Secretary Gates said that he plans to review the Department of 
Defense for programs in terms of waste. Similarly, CIA Director 
Leon Panetta said that he is looking at ways to reduce the 
CIA's spending, describing the current level as 
``unsustainable.''
    Has the FBI done a thorough review for waste overlap and 
redundancy? Or do you have plans to do so? And how do you 
decide when more resources are needed or when it may be 
appropriate to scale back?
    Mr. Mueller. We have for a couple of years now looked at 
the contractor's program from a variety of perspectives: first 
of all, knowing and having a handle on all the contractors you 
have in an organization. And I think we have a very good handle 
on the number of contractors that we have and the jobs that 
they are performing.
    We have in certain areas, particularly in areas like 
counterterrorism, sought to reduce the number of contractors, 
and we have recently adopted additional programs to give 
incentives to our leaders within the Bureau to reduce the 
number of contractors.
    I will tell you that when it comes to the intelligence work 
that we do, it is performed generally by agents who I would 
call the collectors as well as analysts. We have hired since 
2001 over 2,000 analysts in-house, not relying on contractors 
but our own in-house analysts that have come with substantial 
educational backgrounds and many with experience in other 
agencies, to address the need to bring on people in the 
intelligence arena.
    That being said, there is still more that we can do, and we 
are looking at each of the job series and providing incentives 
to managers to reduce the number of contractors, to minimize 
them, and to eliminate whatever overlap there may be.
    Senator Kohl. The entire intelligence system has expanded 
rapidly, as you know. By the end of 2001, 24 new organizations 
had been created, and dozens more are added each and every 
year. Over the past 9 years, existing intelligence 
organizations and agencies have more than doubled in size.
    Director Mueller, you became the FBI Director just before 
9/11. You have seen firsthand the massive expansion of our 
counterterrorism efforts since it began. In your view, should 
there be more than an agency-by-agency review? Should there be 
a large-scale comprehensive review of this growth since 9/11 to 
assess its effectiveness?
    Mr. Mueller. I am familiar with the Washington Post 
articles, and I, of course, would participate in and would be 
open to any suggestions from any entity that provided a review 
to the intelligence community. I am not certain it would affect 
us dramatically. We have a distinct and I think very important 
role to play in addressing terrorism within the United States. 
And I do believe that we have resources adequate to that task 
now, but we have had to take those resources from other 
priorities within the organization.
    I am probably not the best person to ask as to whether or 
not there should be an overarching review. I am comfortable 
with what we have done, and I would leave the decision as to 
whether there ought to be an overarching review to others who 
are more familiar with the work of areas of the intelligence 
community with which I am not familiar.
    Senator Kohl. With respect to the possibility of an overall 
review would you support an independent commission? Or should 
the review come from within the intelligence community?
    Mr. Mueller. I am not certain that there is a necessity for 
a new commission. To the extent that there needs to be 
elimination of overlap, a coordination of response, I think we 
do a pretty darn good job now in the terrorism arena. That does 
not mean that there are not areas that we could look at, but I 
do believe that the Office of the Director of National 
Intelligence has that as one of its mandates, and that is to 
look for areas of overlap and address those areas. In my 
experience, that has happened in the past, and my expectation 
is it will happen in the future.
    Senator Kohl. Director Mueller, the Justice Department 
Inspector General released a report in June concluding that 
none of the agencies within the Department, with the exception 
of the FBI, have operational plans in place to respond to a 
terrorist attack involving a weapon of mass destruction. The 
Inspector General described the rest of the Justice Department 
as ``uncoordinated and fragmented'' and finding that the 
Department's critical incident response plan has not been 
updated since 1996, and it is completely unprepared to 
coordinate Federal law enforcement response activities if 
called upon to ensure the public safety.
    Director Mueller, we are pleased that the FBI has taken 
adequate steps to respond to a WMD attack. Are you working with 
other components of the Justice Department to ensure that they, 
too, become adequately prepared?
    Mr. Mueller. Well, the credit for all of that goes to our 
WMD Division and the leadership there, and, of course, our 
leadership has offered to, and I believe will, assist other 
components of the Department to learn from the lessons that we 
have had to learn ourselves.
    Senator Kohl. Are you working with these other departments?
    Mr. Mueller. I would have to get back to you specifically 
on what we are doing. I know we are working with the Deputy 
Attorney General's office to provide our expertise to the other 
agencies, and how we are doing that and what particular methods 
are used, I am not familiar. I have to get back to you on that.
    Senator Kohl. Director Mueller, as you know, the threat of 
fraud facing seniors is growing and evolving. Criminals are 
expanding their targeting techniques from traditional telephone 
calls and mass mailings to online scams, and seniors continue 
to be scammed out of their lifetime savings. According to a 
2009 report by the MetLife Mature Market Institute, the annual 
financial loss by victims of senior financial abuse is 
estimated to be at least $2.6 billion.
    Senator Gillibrand and I have introduced a bill, the Senior 
Financial Empowerment Act, S. 3494, that would require the FTC 
to partner with the FBI to disseminate information about mail, 
telemarketing, and Internet fraud targeting seniors to seniors 
and their families or caregivers, local law enforcement, and 
advocacy organizations that work to protect seniors from fraud.
    Are you familiar with the legislation? And if you are, do 
you support it?
    Mr. Mueller. I am generally familiar with the fact of the 
legislation. I cannot speak for--the Department of Justice has 
to issue opinion letters and the like, but I do believe for 
ourselves, even without the legislation, it is important for 
us, whenever we come across a particular fraudulent scheme that 
addresses the elderly, to not only address it by investigating, 
indicting, and convicting the persons responsible for that 
scheme, but alerting others around the country, other task 
forces about that scheme. And we have a regular procession of 
intelligence reports that we push out that alert others in the 
community, whether it be the health care community or the law 
enforcement community, to what we have found in one area of the 
country to alert others in other areas of the country to 
accomplish that. And to the extent that there is legislation 
that supports that, we would be supportive.
    Senator Kohl. I would appreciate it if you would take a 
look at our legislation and let me know if I could have your 
support on it.
    Mr. Mueller. Yes, sir.
    Senator Kohl. Thank you so much.
    Senator Sessions, we now call upon you.
    Senator Sessions. Thank you, Senator Kohl.
    Director Mueller, to follow up on the discussion we have 
had previously concerning how terrorists should be treated when 
they are arrested in the United States, you responded to 
Senator Hatch that, pursuant to HSPD-5--what is that, HSPD-5? 
Is that a----
    Mr. Mueller. It is a directive from the President that 
gives us certain authorities.
    Senator Sessions. All right. The Attorney General--I am 
quoting here from your answer--``has the lead responsibility 
for terrorism acts committed in the United States.''
    First let me just say that is a bit odd if we were attacked 
by an army enemy. I do not think that would be the case.
    But continuing, ``Consistent with that responsibility, the 
FBI will respond to the scene of any such attempted terrorist 
attack and will conduct an appropriate investigation in 
compliance with the Attorney General's guidelines for domestic 
FBI operations.'' And then you say, ``The FBI has no legal 
authority to proceed against a terrorism suspect who is 
arrested within the United States in any venue other than an 
Article III court.''
    That is civilian, normal Federal court.
    ``There have been only two instances in 2001 in which 
civilians were arrested that were placed in military custody 
for some period of time.''
    You do not mean to say by that that you could not 
participate in the arrest and if it is clear that the 
individual is a terrorist connected to al Qaeda, that they 
cannot be turned over to the military for prosecution, are you?
    Mr. Mueller. No, I am not. I do not mean to say that.
    Senator Sessions. If you are involved in that arrest of 
this terrorist, can you not proceed with the assumption they 
will be turned over? Or do you have to follow all the rules and 
regulations that the FBI must follow when they arrest a normal 
American criminal?
    Mr. Mueller. Well, our authority is derived, I believe, 
from Title 18 and others that authorize us to make arrests 
pursuant to certain criminal statutes, and it is somewhat 
limited in that regard. That does not mean that the President 
cannot direct that we turn an individual over to a military 
commission and military court, and that has happened in the 
past. But in----
    Senator Sessions. Does it take Presidential authority to 
make that decision?
    Mr. Mueller. Pardon me?
    Senator Sessions. Does the President himself have to make 
that decision? Can't he set a policy or regulation that would 
allow that decision to be made?
    Mr. Mueller. That went a little bit beyond my 
constitutional depth, and that is the type of question in my 
mind that should be answered by the Office of Legal Counsel. 
But for us, we can do the arrest. We do it pursuant to certain 
authorities. But then a determination can be made by the 
President that it go elsewhere.
    Senator Sessions. Well, normally you would give Miranda in 
less than 50 minutes--you waited 50 minutes, and I hope and 
believe you probably had a basis to wait that long, but it is 
pushing the limit. Under normal situations the Miranda has to 
be given immediately if you ask questions of the defendant once 
they are placed into custody.
    So I am worried about this whole process. It is not working 
logically to me, and some say, well, they could confess after 
being given Miranda and they could plea bargain or something if 
they are taken through the civilian courts. But there is much 
more ability for the U.S. Government in dealing with an 
unlawful enemy combatant, a terrorist attacking the United 
States, it seems to me, if that individual is placed into 
military custody where they belong if they are an enemy 
combatant. Aren't I correct about that?
    Mr. Mueller. We have had this discussion, I know, Senator, 
and I am every bit as interested in and concerned that we get 
intelligence as soon as possible with regard to other potential 
attacks. And even in the case of Abdulmutallab, who came into 
Detroit, utilizing the Quarles exception, he was interviewed 
for a period of time by our agents without Miranda warnings.
    In each of the instances that have reached the newspapers 
recently, there has been a variety of positions taken early on 
as whether to Mirandize or not. In each case, we have gotten 
the intelligence we have needed. So----
    Senator Sessions. I do not think--that is not impressive to 
me. I am not worried about what has happened anecdotally in 
some individual case. Clearly the policy, in my judgment, would 
be better if you took the other view and they were 
presumptively held by military custody. And it does appear to 
me that Homeland Security Directive HSPD-5, signed in 2003 
assigned the Attorney General the lead responsibility to 
investigate this, and that you are following Department of 
Justice policy in this regard. If that policy is to be changed, 
you do not have the authority to do that. Is that correct? That 
would have to be done by the President or the Attorney General?
    Mr. Mueller. We would follow the policies as set by the 
Attorney General pursuant to the policies, legal policies set 
by the President. We do believe the President has the authority 
to make the decision as to where an individual will be tried.
    Senator Sessions. So that is where the responsibility lies, 
with the President of the United States, and they are 
persisting in an unwise policy, in my view, that cannot be 
justified. But that is another matter. We will continue to 
pursue that.
    Let me ask you about fraud filings. In 2003, bank 
embezzlement cases under the FBI enforcement were 395 case 
filings; in 2008, 186. Bank institutional embezzlement cases 
were 44 in 2003, 37 in 2008. Financial institution fraud was 
916 in 2003, 524 in 2008. SEC-related fraud was 118 in 2003, 66 
in 2008. Bankruptcy fraud, which is Federal court, nobody else 
investigates bankruptcy fraud except the FBI--perhaps the 
Secret Service on occasion--was 92 only in 2003 and dropped to 
52 in 2008. You and I have talked about bankruptcy fraud cases 
before.
    It seems to me that these represent a very, very serious 
decline in fraud enforcement at a time we have had major 
problems with banks failing, allegations of misconduct and 
fraud out there. What is happening to cause such a decline in 
prosecutions?
    Mr. Mueller. At the outset, I would have to look at those 
figures. Some of them do not seem accurate to me. But putting 
that aside, that is part of the picture.
    After September 11th, we had to prioritize. One of the 
areas we prioritized is the focus on larger white-collar 
criminal cases. We could not take the bank teller cases. We 
could not take the smaller embezzlement cases. And the numbers 
inevitably went down as a result.
    As you have seen and all of us have been through in the 
last 2 to 3 years, we have a mortgage fraud crisis, we have a 
securities fraud crisis, and we have a corporate fraud crisis. 
We have focused on those cases where there are multi-million 
dollars at stake, where the investors have lost millions if not 
billions of dollars, and that has been the focus.
    Inevitably when you focus on the larger cases, the smaller 
cases will not be there to give you the numbers you had before. 
But I am comfortable that we prioritized appropriately.
    Senator Sessions. Well, I am not comfortable with the 
decline in prosecutions, so I am going to look to find out more 
about that. I have heard that spin from FBI Directors and the 
Department of Justice for 30 years--25 at least--that we are 
working bigger cases, that is why the numbers are down. Haven't 
you heard that?
    Mr. Mueller. Well, we have both heard it, but I can tell 
you at this time it is true. And I will tell you that--you look 
at the cases, you look at the indictments, you look at the 
Petters investigation that was successfully prosecuted in 
Minneapolis, where something in excess of $1 billion was lost 
to the investors. That is the type of case we are bringing, and 
successfully bringing.
    Senator Sessions. Thank you, Mr. Chairman.
    Chairman Leahy. And the quarter of a billion dollar one 
that I mentioned earlier.
    Senator Cardin.
    Senator Cardin. Well, thank you, Mr. Chairman.
    Director Mueller, once again welcome to our Committee, and 
thank you very much for your service to our country. We very 
much appreciate that.
    I want to follow up first on two questions that were asked, 
one by Senator Sessions and one by Senator Kohl. Senator 
Sessions' question to you, I want to make sure we get the full 
answer, because I believe you were saying that in regards to 
someone who is apprehended, you are confident that the current 
policy allows you to interrogate to get--to do your best job to 
get information to protect the safety of the people of this 
Nation, whether it is someone who is doing terrorist activities 
or criminal activities, that there is enough flexibility in 
this policy in regards to the exceptions under the Miranda 
rights, or the other options that are available in evidence to 
bring criminal matters or go to military tribunals, that the 
current policy allows you to question to get information that 
you believe is critically important to the safety of Americans.
    Mr. Mueller. I do believe that we effectively handle 
terrorism cases in the United States, both from the perspective 
of investigation and at the appropriate time, after we have 
developed maximum intelligence, arresting and then 
participating in the prosecution of individuals. I also believe 
that we do an effective job of interrogating, questioning 
individuals once they are detained here in the United States. 
In those circumstances where it is appropriate because the 
individual has information perhaps relating to other terrorist 
attacks to take advantage of the Quarles exception and do 
extensive questioning on that particular issue before we 
Mirandize an individual, and that at the appropriate time 
Mirandize that individual so that whatever is said afterwards 
can then be used in the prosecution.
    Senator Cardin. I thank you for that answer, and, of 
course, the Miranda rights concern information obtained. You 
can obtain information from other sources. There may have been 
statements made before. There may have been other evidence 
available to deal with criminal convictions.
    Mr. Mueller. Correct.
    Senator Cardin. Following up on Senator Kohl's point 
dealing with the IG's report--which was very complimentary of 
the FBI as it relates to preparations against attacks with 
weapons of mass destruction. Next week, the Subcommittee that I 
chair, the Subcommittee on Terrorism and Homeland Security, is 
going to hold a hearing on this subject. Senator Kyl has asked 
us to do this. He is the Ranking Republican Member of this 
Subcommittee. And I would like, if you could--it may require 
you to get back to us, but you commented very briefly about 
what lessons you have learned that could be helpful to other 
agencies under Department of Justice.
    It looks like that you have taken this issue very 
seriously. You have designated a key person for a response, and 
you are prepared to do everything you can to prevent an attack, 
but also to be prepared to deal with threats that may be here.
    Now, working in the Nation's capital, we are the epicenter 
of concern about those types of attacks. I represent the State 
of Maryland. The counties that are close by are almost in the 
bull's-eye area. So we are very interested in making sure that 
the lessons that you have learned in the FBI are not only 
shared but implemented by other agencies in the Department of 
Justice to make sure we are as prepared as we can be against 
this threat against America.
    Mr. Mueller. We have not forgotten the lessons of the 
anthrax attacks many years ago and have to assume--not that 
there is any threat currently, but that we have to be prepared 
to address it, not just in the Nation's capital but around the 
country.
    And so our program required the establishment of a 
particular division that was dedicated to this in all of its 
various aspects--nuclear, biological, radiological--but also 
around the country training individuals and additional persons 
to both investigate and respond to such attacks.
    So our program is not just headquarters-centric. It is 
throughout the United States, including, quite obviously, in 
Maryland. And we have capably trained individuals who are 
responsible for both the investigation and responses in every 
one of our 56 field offices around the country. It is those how 
we have organized any lessons that we have learned in terms of 
how you best maximize that organization that we are hopefully 
passing on to others who have certain responsibilities in the 
field as well.
    Senator Cardin. Well, we thank you for that, and we look 
forward to working with you in our Subcommittee as we try to 
get even better at preparation for these types of threats. So 
thank you on that.
    During our discussions on the hate crimes legislation, we 
talked a great deal about the Federal Government working with 
local governments in cooperation. Local governments today are 
having a very difficult time with their budgets. I am sure you 
are aware of that, and we have seen that locally in our State 
where there is concern as to whether there are the resources 
that go after different types of criminal activities. Gang 
activity seems to be on the rise in some parts of my State and 
in other States around the Nation.
    Can you just share with us what steps you are taking to 
work with local governments to deal with the concerns that the 
current economic crisis and budget problems are having on 
effective law enforcement?
    Mr. Mueller. I have two areas in which we attempt to 
address this. First, in the wake of the legislation, training, 
providing training programs to State and local law enforcement 
about what the Federal law is and how we would work with them 
to investigate hate crimes; sensitizing them to law, and we 
have done that around the country in many jurisdictions.
    Second, one of the deficiencies is the reporting of hate 
crimes, and we encourage throughout the country to our various 
field offices the reporting of hate crimes so that we have an 
accurate view of what is happening across the country. Those 
are two areas in which we have followed up.
    Senator Cardin. Well, thank you. The last point, I just 
want to compliment you. In your written statement, you deal 
with the Civil Rights Unit's work, and you bring up the 
Danziger Bridge episode, which I think was the right steps 
taken by the FBI. I just would encourage you in regards to the 
civil rights issues to keep a focus on this. We are concerned, 
again, about the rise of specific cases that are being brought. 
The trafficking issue that you mention in your report, we have 
seen some increased activity in trafficking, that I would just 
encourage you to give the highest attention of your agency.
    Mr. Mueller. Yes, sir.
    Senator Cardin. Thank you.
    Thank you, Mr. Chairman.
    Chairman Leahy. Thank you very much.
    Senator Hatch.
    Senator Hatch. Thank you, Mr. Chairman.
    Welcome. Good to see you again, Mr. Director. We appreciate 
the work that you do, and all of you at the FBI I have been 
very appreciative of over all these years of watching what you 
do, and you do a great job.
    Let me turn your attention to criminal gangs. Specifically, 
I want to discuss MS-13. Now, the FBI has previously described 
MS-13 as the most dangerous gang in America. MS-13 traces its 
origin to El Salvador. Ultimately they reached Los Angeles and 
now have an estimated 10,000 members in, I think, at least 33 
States. They stockpile and traffic in weapons. They have a 
business model that brings in revenue through extortion and 
shakedowns of merchants for ``protection fees.''
    A Mexican drug-trafficking organization identified as the 
Sinaloa cartel has contracted out to MS-13 for a wide variety 
of illegal activities. Now, that activity includes drug 
smuggling and illegal alien smuggling. Recently Arizona State 
law enforcement sources believe that an MS-13 member might have 
murdered Arizona rancher Robert Krentz. MS-13 is the example of 
why securing the border, combined with a tough and coordinated 
law enforcement approach is badly needed.
    In 2006, the only documented Federal informant to provide 
insight into this organization, Brenda Paz, was brutally 
murdered by MS-13 in Virginia. One of her MS-13 attackers had 
previously been deported after he was arrested for a stabbing 
that he committed in Florida.
    For several years now, I have been working with the 
distinguished Senator from California, Senator Feinstein, to 
get comprehensive and tough gang legislation passed into law, 
anti-gang legislation. This enforcement legislation includes 
prevention and strict penalties to dismantle not only MS-13 but 
any criminal gang. Now, I am well aware that the FBI has a 
national task force focused on MS-13.
    Now, to the extent possible, could you give us an update on 
FBI activities and investigations directed at MS-13?
    Mr. Mueller. Senator, as you rightly and appropriately 
point out, MS-13, a longstanding gang out of initially Los 
Angeles, generally El Salvadoran, has spread its tentacles 
throughout the United States over the last 10 years. We 
currently have over 190 task forces around the country that 
address gangs, violent criminal enterprises, with over 2,200 
agents that are working this.
    More particular to MS-13, we have an entity here at 
headquarters that monitors it and develops intelligence on that 
gang. But perhaps more importantly, we have a task force down 
in El Salvador, individuals working with our El Salvadoran 
counterparts to address MS-13, because you do find that MS-13 
members travel back and forth--not necessarily at will, but 
very easily--between the United States and El Salvador.
    We also have a fingerprint initiative that we have had for 
a number of years that focuses on MS-13 that we are operating 
with our counterparts in El Salvador. We also know that there 
are elements of MS-13 in Guatemala, Honduras, and in Mexico. 
And our legal attache offices work with our counterparts in 
each of those countries to share intelligence and coordinate 
takedowns of the elements of MS-13.
    It is one of our highest priorities when we look at 
criminal enterprises, gangs, and violent crime.
    Senator Hatch. Thank you for that summary.
    Mr. Director, our Nation's cyber defenses are vulnerable, 
and action must be taken quickly to address the threats that 
our networks and critical infrastructure are faced with every 
day. Last week, President Obama's nominee to be the next 
Director of National Intelligence, General James Clapper, 
praised the concept of establishing a national cyber center and 
a director responsible for organizing the Government's defense 
against these cyber threats. This cyber director would be 
modeled after the Director of National Intelligence, and he 
would coordinate the Government's cyber defense, threat 
analysis, response coordination, and information sharing.
    Like the National Counterterrorism Center, the new cyber 
center would collocate representatives from across the 
Government from both law enforcement and the intelligence 
community. Importantly, this center would not be based in any 
one department or agency, so it would be in a good position to 
see across the entire spectrum of Government defensive cyber 
activities without getting caught up in the various turf 
battles.
    Now, based on your experiences with deconfliction and 
sharing information within the intelligence community and law 
enforcement, what benefits do you see from creating a national 
cyber center and a director position based on these models? And 
what contributions do you believe the FBI could make to this 
type of a center, especially with respect to 
counterintelligence and cyber expertise?
    Mr. Mueller. I do think the concept of a cyber center makes 
some sense, but I can tell you that I believe the building 
blocks are already in place for that. The recent establishment 
of a Cyber Command under the military will, in my mind, bring 
together a great deal of expertise under Keith Alexander, 
General Keith Alexander, on the intelligence and the military 
side of the house. On the domestic side of the house, we 
already have the National Cyber Investigative Joint Task Force, 
which is a stand-alone task force with anywhere from 14 to 17 
contributing agencies whose sole purpose is to identify 
particular threats, whether it be a botnet or a denial-of-
service attack, and determine the attribution of that 
particular attack, understanding that it can come from a State, 
it can come from individuals associated with a State entity, or 
it can come from an organized crime group, or, last, it could 
come from that high school student that is living across the 
street.
    The National Cyber Investigative Task Force has been very 
successful in addressing these threats, bringing together these 
individuals. Expanding that, that which has already been 
successful, I think fits into the model that you are 
suggesting, and I would welcome each of the members and their 
staff to come and take a tour of that task force and see the 
type of work that they are doing. I think it will be 
illuminating. But I do think it is one of those building blocks 
that is there that can be expanded to fit the role that you 
suggested.
    Senator Hatch. Well, thank you so much, and thanks for your 
service.
    Mr. Chairman, my time is up.
    Chairman Leahy. Thank you very much.
    Senator Whitehouse, please go ahead, sir.
    Senator Whitehouse. Director, let me join my colleagues in 
thanking for your service. You have been one of the constants 
over the years in our national security team and in the 
Department of Justice team, and it is a pleasure to have you 
back.
    I serve with Senator Hatch on the Intelligence Committee, 
along with our Chairman who is here, Senator Feinstein, and the 
issue of cybersecurity is one that is very much at the 
forefront of the Intelligence Committee's concerns right now. 
The President's nominee for Director of National Intelligence, 
General Clapper, was before us the other day for his 
confirmation hearing, and he indicated in his listing of the 
major threats that he perceived, No. 1 on his list was 
cybersecurity, cyber attack. You have described it in your 
testimony today as an ever increasing wave, and you mentioned 
that reported cyber offenses have seen a year-to-year increase 
of 22 percent.
    What I would like to ask you about is your take on the 
extent to which you feel that the reported offenses provide an 
accurate snapshot of our Nation's vulnerability to cyber 
attack, and if you could carve out your answer into two 
separate pieces, I would appreciate it. The first would be 
where the victim is actually witting that they have been a 
victim of a cyber attack, but say for competitive business 
reasons they would rather not report it and have all their 
competitors pick up the phone to their clients and say, ``If 
you want to come to a more secure brokerage, try us. We are not 
in the newspapers as the victims of a cyber attack.''
    The second, particularly in the intellectual property area, 
is American companies that are not even aware that they are the 
victims of theft of their intellectual property, that they are 
being raided without being witting of the fact that often 
foreign interests are just siphoning out their intellectual 
property and using it against them for competitive purposes.
    In the wake of those two concerns, do you think that the 
reported offenses are the bulk of our risk, a small subset of 
it? What is your take on how the reported offenses fit into the 
larger picture of our cyber vulnerability?
    Mr. Mueller. From my perspective, if you look at IC3 and 
the types of referrals that are made to IC3, they probably do 
not include some of the more important, such as the Google 
intrusion would be an example of it. And what you advert to in 
terms of the reporting or failure to report is something that 
has been a problem over the years. I spent some time in Silicon 
Valley as a prosecutor there. One of the biggest challenges we 
had is to explain to companies that they need to report it to 
us in order to assure that others do not face the same fate, 
whether it be a denial-of-service attack or a botnet attack or 
what have you, and that we have to operate together.
    Not all companies agree to that for the reason that you 
said. It can reduce the value of the stock tomorrow if it looks 
like some of their clients' names and data has been put on the 
Internet.
    Every speech I give, I make a point of saying we have got 
to do this together, you have got to report, and I know there 
are certain statutes that are being contemplated that would 
mandate the reporting. And so----
    Senator Whitehouse. Do you agree that the underreporting of 
this particular crime or act of piracy, or whatever you want to 
call it, act of espionage, is a problem that merits attention?
    Mr. Mueller. Yes. And what they do not know also is there 
are statutes that allow us to maintain the privacy of their 
intellectual property when they come to us to identify an 
attack, and it is partially an issue of education, but also 
encouragement and giving them an incentive to report in order 
to up those statistics. And I am not sure that those are 
reflected in the uptick of statistics that we see from IC3.
    When it comes to intellectual property and the theft of 
intellectual property, it is rampant, and that is an 
understatement. And we, of course, have to prioritize. We 
received an additional 31 agents back in 2009 for this 
particular area. We have deployed them to four cities where we 
think they can make a maximum contribution. But we look for the 
larger cases or the more important cases, an example being----
    Senator Whitehouse. Let me interrupt you just for 1 second 
for a question for the record. I do not want to take your time 
on it right now, but I would like to see a deployment diagram 
of where your resources are deployed and to what purposes in 
the cyber protection area, if I may have that as a written 
question for the record. Thank you.
    Mr. Mueller. Happy to provide that.
    [The information referred to appears under questions and 
answers.]
    Mr. Mueller. The only other point I was going to make is we 
do have to prioritize. For instance, when it comes to health 
and safety, if there are counterfeit airplane or aircraft parts 
out there, that is something that has the additional element of 
being a threat to the public that makes it the priority.
    Senator Whitehouse. Yes. Well, ``rampant'' as an 
understatement I think is a good way to describe it, and I 
appreciate that you described it that way.
    Let me turn to the question of civil remedies in this area. 
The Microsoft company recently did a very effective civil 
action against the Waledac botnet and was able to, through the 
service providers, interrupt the command-and-control functions 
of the botnet and more or less shut it down.
    In the event that the Department of Justice determines that 
a civil remedy, particularly where attribution might be a 
problem, is a more effective way of limiting the country's 
exposure than a criminal prosecution, is the FBI, nevertheless, 
prepared to dedicate agents and resources to supporting a civil 
investigation and potentially civil orders that would eliminate 
access for miscreants to our cyber network?
    Mr. Mueller. Well, I would tentatively say yes, depending 
on the case and the circumstances. I mean, there is so much 
work out there on the criminal arena that has to be done that 
we would focus, quite obviously, on those cases where we can 
put somebody in jail for that activity so they cannot do it 
again.
    Senator Whitehouse. But you do not feel you need new 
authorities? It is a priority question.
    Mr. Mueller. No, we would not need new authorities.
    Senator Whitehouse. All right. Last, to follow up more on 
Senator Hatch's question, the issue of how the executive branch 
manages and administers its response to the cyber threat that 
we are facing is one that has been raised in dozens of pieces 
of legislation, and there are many different proposals. And I 
would urge you on behalf of the administration to take a 
position as soon as you can on how you would like to see it 
done, because every day there is a new proposal legislatively 
for how this should be done. Ultimately it is the executive 
branch that is going to have to implement, and the sooner the 
executive branch joins this debate in a meaningful way, the 
better off I think we will all be.
    Mr. Mueller. I will do that, although I would reiterate 
that if I look at our piece of it in terms of attribution for 
attacks, which we by necessity cannot do alone but must to with 
other agencies, I believe we have built a very strong platform 
that could be extended in the National Cyber Investigative Task 
Force.
    Senator Whitehouse. I agree.
    I thank the Chairman.
    Chairman Leahy. Thank you.
    Senator Kyl.
    Senator Kyl. Thank you, Mr. Chairman.
    Director Mueller, I apologize for not being here for your 
testimony and for the other questions, but I did want to ask 
you a little bit about the High-value Detainee Interrogation 
Group, or HIG, and I understand that that has not been covered 
yet in questions.
    Mr. Mueller. It has not.
    Senator Kyl. Actually, the first question is: What is the 
status of it? And then I will have a second question as a 
follow-up to that.
    Mr. Mueller. Well, prior to its formal establishment in, I 
guess, the beginning of this year, the spring of this year, the 
concept had been utilized both overseas and within the United 
States, and by that I mean having a group of individuals 
available when an individual comes into the custody of either 
the military or some other counterparty agency or, indeed, with 
the United States custody in our custody, putting together 
teams that have both interrogation expertise, just in how you 
do it, but teams or participants that are familiar with the 
background of the individual, thoroughly familiar, thoroughly 
familiar with the subject matter, so that in the course of 
doing an interrogation you have not just from the FBI but from 
a number of contributing agencies the best in the way of 
expertise.
    We have used that concept before the HIG was formally 
established. Right now I would have to get back to you as to 
how many people we have on board, but we have basically three 
components: one looks at the area of interrogation, the best 
practices and the like; one looks at training across the board; 
and the other one looks at how we operationally support 
interrogations around the world.
    Senator Kyl. Well, let me be a little more specific. My 
understanding is that it is under the direction--or the 
quotation here is ``run by the FBI''--and headed by an FBI 
employee with two deputies, one from CIA and one from the 
Defense Department. Is that correct?
    Mr. Mueller. That is correct.
    Senator Kyl. It is also reported that there are three 
regional teams, locations not discussed, and I do not know that 
we need to know how many teams there are or where they are. 
Could you just discuss that generally as to how quickly they 
could get to locations to perform their responsibilities 
quickly?
    Mr. Mueller. Well, if you anticipate the detention of 
somebody, it enables you to put the team together in 
anticipation of that detention. All too often what happens is 
somebody is detained, you did it by exceptional work by the 
intelligence community or otherwise, and so you very quickly 
have to put together the teams.
    We have anticipated in various areas of the world that we 
may be called upon to put in a team, and so we have already 
lined up areas of expertise that would be available on a 
moment's notice should somebody be detained in that particular 
area of the world where we have got substantial concern.
    Senator Kyl. So the idea is to be able to respond very 
quickly with all of the expertise that is needed regardless of 
where in the world it might be.
    Mr. Mueller. Yes.
    Senator Kyl. And does that include the United States?
    Mr. Mueller. Yes.
    Senator Kyl. I recall there was some question about whether 
or not the HIG was intended to apply to interrogations in the 
United States. Admiral Blair expressed concern that it had not 
been properly set up to do that, but it has been now. Is that 
correct?
    Mr. Mueller. Within the United States, it would be 
ourselves generally that would conduct the interrogations, and 
we would make use of that capability and have made use of that 
capability already.
    Senator Kyl. Well, when you say ``that capability,'' do you 
mean also Defense and CIA personnel with their access to their 
information sources that would be relevant to the 
interrogation?
    Mr. Mueller. Yes.
    Senator Kyl. So it is not just the FBI.
    Mr. Mueller. No. In each of the interrogations beginning, I 
think, back with the interviews with Headley in Chicago, you 
would have teams from across the intelligence community that 
would be participating in the interrogation, not necessarily 
asking the particular questions, although there have been 
occasions where it is not FBI agents who are asking the 
questions, but participating in that process.
    Senator Kyl. Right. What would you say is the primary--I am 
sure there are two or three goals here, but what is the primary 
goal of having the HIG?
    Mr. Mueller. I think it is twofold: the principal and 
essential goal is to gather as much intelligence as fast as 
possible that would prevent additional attacks; secondarily, to 
the extent possible to in the course of that intelligence 
obtain information that perhaps may be used as evidence in 
order to detain or lock up somebody else who may have been 
complicit. And, last, to the extent that there needs to be 
additional information that would assure the continued 
incarceration of that person, to make certain that you obtain 
that as well. But I do want to emphasize the principal priority 
is to gather intelligence to prevent future terrorist attacks.
    Senator Kyl. As to the third goal there, that could 
incorporate considerations, legal considerations relative to 
providing Miranda rights, for example?
    Mr. Mueller. Yes.
    Senator Kyl. Because of the need to have evidence that 
could, in fact, be used to detain the individual further or 
prosecute the individual.
    Mr. Mueller. Yes.
    Senator Kyl. But the first goal would not require that.
    Mr. Mueller. That is correct.
    Senator Kyl. And I have forgotten now what the second one 
was. I apologize. Repeat that again.
    Mr. Mueller. The second one was to gather information that 
will enable you to detain somebody else.
    Senator Kyl. Yes, further intelligence gathering, right. I 
got it. OK.
    And just a final question here on this news of the release 
of thousands and thousands of e-mails, classified documents on 
a website. Is the FBI involved in an investigation there? And 
what do you anticipate the action of the Government would be 
relative to prosecution of both the individuals who provided 
the information and those who might have been involved in the 
dissemination of the information?
    Mr. Mueller. We are currently supporting the DOD 
investigation into that leak, and to the extent that DOD needs 
our assistance or we can be of help, we are providing that 
support at this juncture. I cannot say as to where that 
particular investigation will lead.
    Senator Kyl. OK. Just a final thing, back on the HIG again, 
if there is anything that you want to provide to us to more 
fully explain exactly how it is set up, that which we can 
easily discuss in public, to give us a more complete picture of 
exactly how it is set up, what it is intended to do, how it is 
going to operate and so on, who is involved, if you could 
provide that to the Committee, I think it would be very 
appreciated.
    Mr. Mueller. I would be happy to provide a briefing by the 
head of the HIG in which he can answer those questions you have 
and respond to any questions you might----
    Senator Kyl. Well, you responded very fully. I am not 
suggesting that you did not. I was just saying if you want to 
have----
    Mr. Mueller. No, he can do a better job in terms of 
fleshing out the details.
    Senator Kyl. All right. Great. Thank you, Director.
    Chairman Leahy. Thank you.
    Obviously, on issues like this, anytime you would like to 
arrange especially the kind of briefings we have to do over in 
the SCIF, we are always happy to do that.
    Senator Kaufman.
    Senator Kaufman. Thank you, Mr. Chairman.
    Thank you, Director Mueller, for being here, and thank you 
for your service, and I agree with everyone else. You are one 
standard, bright, consistent star that we know we can always 
turn to. I appreciate it.
    Listen, Senator Sessions as usual raised some good 
questions about fraud and about the reduction in fraud from 
what we had earlier in the year, but I think a lot of what we 
discussed at the time just to confirm, when we passed the FERA, 
the Fraud Enforcement Recovery Act, that what happened here was 
that after September 11th, we moved a lot of FBI agents over to 
cover terrorism. In essence, we never backfilled those slots. 
Is that a pretty fair statement of what happened?
    Mr. Mueller. That is correct.
    Senator Kaufman. And so that really when we went with the 
FERA Act, which had broad support, that is really -one of the 
objectives of the FERA Act was to try to go after fraud 
enforcement, get more FBI agents, get more prosecutors so that 
we could actually get back to the levels of fraud investigation 
and prosecution that we had early in the 21st century. Is that 
fair to say, too?
    Mr. Mueller. Well, yes, I would say that--again, I go back 
to what you noted. We have not been able to replace those that 
we moved over to counterterrorism in the wake of September 
11th. But I will also say that we were doing a number of 
smaller cases that were distractions in terms of what we should 
have been focused on and pushing cases, white-collar criminal 
cases--anybody that has been a prosecutor knows that they take 
a long time to do, and you have to push them and push them and 
push them. And so the focus has been on prioritization as well.
    Senator Kaufman. Right. And really it is a lot--the example 
I have used in the past is it is a lot like drug dealers. I 
mean, you can pick up a lot of drug dealers that have a small 
amount of drugs. Really what we are after is the drug kingpins. 
So what we would like to do is encourage you to go after the 
more complex cases, and especially in the fraud area where you 
have folks who--as has been stated in this Committee by 
witnesses, they cover their tracks a lot better than drug 
dealers cover their tracks, that while they are doing this, if 
you are involved in fraud, complex fraud of the kind we are 
talking about, they do a much better job of, as they go along, 
cleaning up after themselves so it makes it difficult for them 
to be prosecuted. We can find them, but then prosecuting them 
is a problem. And, second, they have access to some of the very 
best legal help in the country.
    Mr. Mueller. Yes, my admonition to my people, my 
suggestions to prosecutors is in some sense to treat white-
collar criminal cases or handle them the same way you do drug 
cases; that is, identify the persons who conducted the wrong 
doing, gain the cooperation of one or more, and move up the 
line. Also, to utilize techniques that we have not necessarily 
used in the white-collar crime arena in the past, and that is 
Title 3s so that you can utilize many of those techniques that 
we traditionally have used against organized crime, against 
drug cartels and the like in the white-collar arena.
    Senator Kaufman. We have had oversight hearings that 
included Lanny Breuer, who is the head of the Criminal 
Division, and folks from the FBI to talk about the idea of 
moving the more complex cases and using the very things that 
you have talked about. Correct?
    Mr. Mueller. Correct.
    Senator Kaufman. Good. Can you tell us in securities fraud, 
which is one of the concerns that I have had in terms of--I 
think there is a lot of upset about what happened in the great 
securities meltdown, the loss of jobs, and the people losing 
their homes, the incredible difficulty people were faced with. 
And I think one of the examples, again, when we passed the 
Fraud Enforcement Recovery Act was to let people know that 
there is only one level of justice in this country, whether you 
are very, very wealthy and have a strong, complex legal team or 
whether you are someone else.
    So where does securities fraud fit in terms of the 
priorities when you are trying to deal with fraud?
    Mr. Mueller. It is one of the top five priorities. White-
collar is the No. 4 priority for us. And it is high there. We 
have almost 180 agents working solely on securities fraud as 
opposed to corporate fraud or mortgage fraud. And we currently 
have over 1,500 cases. We have had a number of, I think, 
successful prosecutions, the Petters prosecution out of 
Minnesota being one of them, the Galleon ongoing investigation 
in New York, and others where we have made a substantial 
impact.
    If you look in terms of Ponzi schemes, quite obviously 
Madoff comes to mind, and there are others who are also 
spending substantial years in jail as a result of their 
fraudulent activities.
    Senator Kaufman. And Galleon is a wonderful example of what 
you said earlier where someone came forward; you found someone 
who would testify and used them as a way to develop the case.
    Mr. Mueller. Yes.
    Senator Kaufman. Last year, in November, President Obama 
set up the Financial Fraud Enforcement Task Force with the FBI 
as a member. How has the task force been doing?
    Mr. Mueller. The task force meets periodically, but its 
main thrust is to assure that we have at the same table 
periodically the individuals who are responsible in addressing 
fraud and to assure that we are working together.
    For instance, one of the items that has been important to 
us is to assure that when records are subpoenaed by either the 
SEC or the prosecutor or come into the hands of the FBI, that 
we put those records in a data base that is searchable by each 
of our agencies as opposed to having to replicate different 
data bases when the case moves from agency to agency. And so 
not only a case that went through the SEC and through the FBI 
goes to the prosecutor, we are all working off the same data 
base of documents, which makes it much easier to investigate 
and a heck of a lot easier to prosecute.
    Senator Kaufman. Great. And mortgage fraud, you have done a 
great job, and you had some really great successes in terms of 
dealing with brokers and the mortgage fraud. And I met with 
your folks in Los Angeles and other places, in Las Vegas, where 
there is that kind of--tell me a little bit how you move 
upstream from that. I mean, a lot of these mortgages were put 
together into mortgage-backed securities, residential mortgage-
backed securities and the credit default swaps. That was one of 
the things that kind of drove the whole thing, as Senator 
Levin's Permanent Subcommittee on Investigations pointed out, 
was one of the key things.
    How do you move upstream to go after the folks on Wall 
Street who were involved in the mortgage fraud?
    Mr. Mueller. Well, there are two levels. Certainly on the 
local level, where you have, say, an assessor, a buyer, a 
seller, a real estate broker, you focus on one of them to 
explain the scheme and provide the evidence that you need.
    It is more difficult when mortgages are packaged and then 
sold as various investment vehicles to show knowledge on the 
part of those who are handling those investment vehicles as 
they pass hand to hand. But, again, it is a combination of 
obtaining the e-mail traffic, which often is very, very 
helpful, obtaining witnesses and in some circumstances 
utilizing a Title 3 wire to obtain evidence.
    Senator Kaufman. I just want to tell you, thank you for 
your testimony and for your service. I just want to say those 
complex cases, I know they take a lot of time and effort, and I 
know that it is easier to maybe get the mortgage brokers' 
cases. But I just would encourage you to not go after the 
numbers but to go after the key cases, because I think that as 
I travel around the country and around Delaware, that is the 
thing that people are really upset about. Let us get some of 
these folks in these complex cases and put them behind bars. So 
thank you again.
    Thank you, Mr. Chairman.
    Chairman Leahy. Thank you. Again, thank you for your work 
on the fraud legislation. You were, of course, a lead sponsor 
of that, and I think you shared my pride the day the President 
signed it.
    We have talked about this before, the fact that--the 
selective cases, have some people who actually get hit hard, go 
to jail, you get a deterrent effect on it.
    Senator Franken, you have been here patiently. Please go 
ahead, sir.
    Senator Franken. Thank you, Mr. Chairman.
    Director, I share everyone's view. You have been--thank you 
for your service, and not just as Director of the FBI, which 
you have done stalwart, very effective work for now almost--
well, 9 years, 9-1/2, but for all your service to this Nation.
    I want to follow up on mortgage fraud and what Senator 
Kaufman was talking about and just get some kind of idea of 
what we are talking about here. You were talking about schemes 
with assessors and those kinds of things. In Minnesota, we are 
No. 2 in same-day house flips where someone buys and sells a 
home in 1 day, in the same day. And this often indicates some 
type of fraud is going on.
    Is that a pretty common--what is going on there?
    Mr. Mueller. Well, actually about maybe a year ago, I had 
an opportunity to visit Minneapolis and talk about this 
particular area. I was looking at maps where there are swaths 
of territory that have gone way downhill as a result of 
mortgage fraud. Whether it be Minneapolis or elsewhere, data 
bases that show us that there are properties being flipped 
within 24 hours gives us an idea as to where to look. And so we 
utilize the data bases such as you have noted to put together a 
picture of persons who may be involved in a number of 
transactions in which there are one-day flips. And from there 
we will expand the investigation and determine what is the 
common denominator in these one-day flips, and then we will 
follow up the investigation to determine who else was involved 
in what often--most times turns out to be some sort of scheme 
that is being perpetrated by a real estate broker, an assessor 
or somebody else in the----
    Senator Franken. So whether they are underassessing it and 
someone buys it and then overassesses it and sells it, or 
what----
    Mr. Mueller. There are a number of particular schemes that 
they can use. Generally the role of the assessor is to assess 
it higher than it is worth so that you get an increased 
mortgage, and so that the mortgage pays for the property; 
whereas, the seller or others believe that there is a 
downpayment being made, and so the whole property is being 
supported by the bank without the collateral that ultimately 
would make the bank whole.
    Senator Franken. What type of mortgage fraud is the most 
common? Are we still unraveling stuff from the predatory 
lending that was happening, you know, 4 and 5 and 6 and 7----
    Mr. Mueller. Yes. The answer is today we have over 3,000 
cases, approximately 360 agents that are working on those 
cases. There are pockets in the country that have been hurt 
more than others, Las Vegas, Central Valley of California, just 
to mention two; but Phoenix and other cities have had--well, I 
would say had substantial issues with regard to mortgage fraud. 
In those cases, we put in place a task force. We will bring in 
the State and locals to participate on that task force. We have 
an inventory of mortgage fraud cases, and we will go down each 
of those cases and determine which ones we can pursue and which 
ones the State and locals can pursue, perhaps the State 
government, and try to work through that inventory to address 
each of them that has come to our attention.
    Senator Franken. Thank you. I also want to thank you for 
the Petters conviction. I know Senator Klobuchar and I want to 
thank you for that.
    I want to get to a whole different subject. Over the last 
several years, we have heard a lot of speculation about what 
kinds of interrogation techniques work to draw out the best and 
most reliable information. And I want to ask you, from your 
experience as FBI Director--you started just the week before 9/
11--what kinds of interrogation techniques do you think work 
best when dealing with terrorist suspects? Which kinds of 
techniques yield the most helpful and reliable information?
    Mr. Mueller. I did not have the opportunity to spend time 
as an agent myself doing interrogations. I was a prosecutor, 
and you could say that some of the questioning that you do 
falls in that category. But I rely on the experts within the 
Bureau, and the longstanding Bureau practice, we focus on 
rapport building--rapport building with the obtaining of 
collaboration--corroboration, I should say, corroboration with 
regard to whatever statement is being given. And that has been 
our practice for any number of years, and that is the practice 
we have followed over the last 10 years and presumably will be 
the practice we follow in the future.
    Senator Franken. Because I think some Americans, you know, 
question the use of so-called enhanced interrogation 
techniques, and I think they are--hopefully they are history. 
Do we get more reliable information from the kind of 
questioning the FBI has done or from the enhanced--from your 
judgment?
    Mr. Mueller. I am not certain that I am a person who can be 
definitive. All I can say is that we find our techniques very 
effective, and we do believe we get reliable information, but 
it is a combination of information that you obtain, knowing a 
great deal about the individual, having corroborating evidence 
to know that what you are getting is the truth, and it is a 
process--not just a process of questioning, but a process of 
developing rapport, developing information, and taking it step 
by step to assure that you are getting all that that person 
has, or to the extent that you can, and that it is accurate 
information.
    Senator Franken. My time is up, and I will submit in 
writing a question about trafficking from Indian reservations. 
The last time I did ask you about that, and I want to thank you 
for following up with me on it. I appreciate your work in that 
regard.
    [The information referred to appears as a submission for 
the record.]
    Senator Franken. Thank you, Mr. Chairman.
    Senator Whitehouse. We turn now to Senator Specter.
    Senator Specter. Thank you, Mr. Chairman.
    Director Mueller, I join my colleagues and again welcome 
you here.
    Mr. Mueller. Thank you, Senator.
    Senator Specter. As part of the Judiciary Committee's 
oversight of the FBI, I have inquired about the investigation 
of former Congressman Curt Weldon where there was a search-and-
seizure operation at the home of his daughter a few weeks 
before his reelection effort in 2006. And the television 
cameras arrived before the FBI arrived with the search-and-
seizure warrant, and the consequence was that Congressman 
Weldon was defeated. And the FBI conducted an investigation as 
to the leak, and four representatives of the Department of 
Justice had contacts with the news media. None was polygraphed, 
and there was not an effort made to pursue the source of the 
leak as intensity as you do in national security cases.
    My first question is: Is it the customary practice of the 
FBI to give polygraph examinations to people who have had known 
contacts with the news media in a situation like this?
    Mr. Mueller. I am not familiar with the case in which there 
is a relatively large universe of persons who may have 
disclosed the information where we would do polygraphs across 
the board. I am familiar with situations in which we may have a 
suspect----
    Senator Specter. I am not asking about polygraphs across 
the board. I am asking about four DOJ people who had known 
contacts with the media.
    Mr. Mueller. I do not have--I am not familiar with the 
circumstance where we would have done polygraphs--required 
polygraphs of four individuals.
    Senator Specter. So you say it is not the FBI policy to 
polygraph.
    Mr. Mueller. It is not. It is used on a case-by-case basis.
    Senator Specter. The briefing that I had, the briefers told 
me that on a matter of this sort, the issue is not pursued with 
the same intensity as in national security. For example, there 
were no questions asked of the newspaper reporters who 
published stories in McClatchy and in the Washington Post. Why 
not?
    Mr. Mueller. I am not certain that is the case. I know you 
were briefed by attorneys from the Department of Justice, and I 
am not certain what the rationale would be for not asking them 
questions. I would be, I think, surprised if they answered 
those questions, but certainly the questions generally are and 
should be asked.
    Senator Specter. Well, I wrote to you about this matter on 
July 22nd, so there has not been a whole lot of time. I infer 
you have not seen the letter.
    Mr. Mueller. No, I have seen the letter, sir, and I have 
looked at the letter, and many of the questions are--I think 
there were three questions you asked there, and I do believe 
the questions really are those to be answered by the Department 
of Justice who was handling the prosecution. Your question, for 
instance, about why we did not press and subpoena the reporters 
really goes to a determination in the Department of Justice 
where there is a balancing that takes place as to whether or 
not you do that.
    Senator Specter. Well, the investigation on the FBI leak 
was conducted by the FBI, wasn't it?
    Mr. Mueller. I believe we did undertake an internal 
investigation, yes. But the overarching investigation, the 
criminal investigation, was conducted by the U.S. Attorney.
    Senator Specter. Is it a crime to leak?
    Mr. Mueller. It certainly can be, yes.
    Senator Specter. Well, was it in this case?
    Mr. Mueller. I would have to go back and look at the facts 
and circumstances.
    Senator Specter. Well, it is a game of ping-pong. It took a 
long time to play this game, about 4 years so far. But when you 
have a Member of Congress involved, you have a very sensitive 
matter. The briefers told me that this matter was not 
investigated by pursuing the sources with the intensity that 
sources are sometimes pursued. It depends upon the importance 
of the investigation. If it is a key national security 
interest, then the sources are pursued, even to the extent of a 
contempt citation.
    You and I have differences of opinion as to the shield law 
which I have proposed and which has not yet been acted on. But 
as long as you have procedures for pursuing sources, I believe 
this is the kind of a case where sources ought to be pursued, 
that it is a very, very serious matter, like a national 
security matter. And I say that because of the separation of 
powers. Congress has the oversight responsibility to 
investigate the FBI, and the FBI appropriately has the 
responsibility to investigate Members of Congress if there are 
allegations of bribery, for example.
    But it seems to me that where you have separation of powers 
and you have the chilling effect that an FBI investigation has 
on a Member of Congress like Curt Weldon, it ought to be 
handled with the greatest intensity possible to pursue the 
sources if you can.
    Would you disagree with that?
    Mr. Mueller. Senator, I think we are on the same page, and 
I would venture to say in a case such as this, the agents who 
were handling would very much want to have pursued the sources. 
One of the ways to pursue the sources is to ask the persons who 
published the pieces or the persons who triggered that.
    As you are well aware, there is a process that you go 
through in the Department of Justice to gain approval to even 
contact a person in the media who may have developed source 
information and taken some action on it.
    Senator Specter. Well, my time is up, but that was not 
done, and the briefers told me they did not even question the 
cameras that arrived. That was news to them. Would you take 
another look at those issues, Mr. Director?
    Mr. Mueller. Yes, sir.
    Senator Specter. One more comment, Mr. Chairman. I will not 
be too much longer. I asked the briefers if the investigation 
was over, and I was not surprised that they did not tell me. I 
am not going to ask you a question. I am just going to state 
the proposition.
    It seems to me that when years have passed, people under 
investigation ought to be told if the investigation is over, 
and I know you have a policy of not doing that. And it seems to 
me--and I used to be in this line of work, so I understand the 
investigation--you do not tell people it is over because it may 
not be over. Well, it may not be over if new information is 
acquired, but if there are no undeveloped leads outstanding, it 
seems to me that the FBI ought to tell people that it is over 
so the Sword of Damocles is gone. And if something new comes 
up, they can always start it again.
    Do you disagree with that approach?
    Mr. Mueller. No. What I would say is that it is not 
necessarily us, it is the prosecutors that make the 
determination when the investigation is closed, and there is a 
procedure in the Department of Justice for a defense attorney 
to ask whether or not their client remains a subject or target 
of an investigation. And in most cases, the Department will 
respond, either affirmatively or negatively to that letter. But 
there is a process that is in place to accomplish what you are 
alluding to.
    Senator Specter. Thank you.
    Senator Whitehouse. We will now recognize Senator 
Klobuchar, followed by Senator Durbin, and I believe Senator 
Kohl would like to have a brief second round, and with time 
permitting, we will then go to Senator Kohl unless other people 
intervene for their first round.
    Senator Klobuchar.
    Did I say ``Kohl? '' Kyl. Senator Jon Kyl of Arizona. My 
apologies.
    Senator Klobuchar. Thank you very much, Mr. Chairman, and 
thank you, Director Mueller. It is good to see you again.
    I wanted to start out by commending your agents for the 
great work they did on that Tom Petters case. I think people 
were very focused, understandably, on the Madoff case, but this 
was the second biggest one in the country, an unbelievable loss 
of money in our State with so many people, including nonprofits 
that had invested, and it was very complicated. And it was an 
enormous victory, and everyone was prosecuted. So I want to 
thank you for that.
    Mr. Mueller. Thank you, ma'am.
    Senator Klobuchar. I know the top priority, as many people 
have talked about, is the work that needs to be done and 
continues to be done with terrorist threats in this country. 
But I wanted to focus on something I know Senator Whitehouse 
talked about a little, and that is, cyber crime and 
cybersecurity, which is not only necessary for our national 
security, but also to the economic and physical security of 
ordinary Americans.
    We all know that the Internet is a powerful tool, but in 
the wrong hands, it can also be a powerful tool the other way, 
for not good reasons. And my concern is that the predators have 
become more sophisticated than the laws that we have on the 
books, and I am going to use--one example is a bill that I am 
introducing in the next few days, a bipartisan bill on the 
stalker bill, and this is called the Stalking Act of 2010. It 
has already passed the House. We did an event yesterday with 
Erin Andrews, the ESPN reporter who was videotaped by a Peeping 
Tom who reversed the peephole in the door and then got that 
video out on the Internet of her changing clothes, and it went 
everywhere. And she is maybe a celebrity, but there are so many 
other people, including people in my own State, that have been 
victimized by this one guy, ended a relationship on the 
Internet, and he ended it and he was mad at the woman so he put 
all of her personal identification information and her children 
on porn websites asking people to rape their kids. He was 
convicted and sentenced.
    So what I would like to know--I hope that the FBI will be 
supportive of this bill that we have or be helpful in getting 
it done. But I want to know, Do you think that there is a need 
to modernize our criminal laws to keep pace with the new 
technologies? That is something we do in this bill. And are 
there particular areas that you think Congress should be 
focusing on when we look at some of the modernization of our 
statutes that needs to take place to keep up with these 
predators and also white-collar criminals that are using the 
Internet?
    Mr. Mueller. Let me start by saying I understand that the 
bill that you are suggesting will identify particular conduct 
and then have strong penalties for engaging in that conduct. 
Not being familiar with the bill myself and deferring to 
Justice for the opinions letter, nonetheless this is something 
that is badly needed. I venture to say in 10 years much of the 
discussion at a hearing like today, maybe 80 percent of it will 
revolve around the Internet and cyber as opposed to maybe 20 
percent of it now. And our laws are antiquated in the sense 
that they were developed to address conduct or equipment such 
as telephones and telephone lines and the like, and there is a 
great need to update them to continue to give us the 
authorities that we need to do our work, but utilizing the new 
modalities in order to accomplish that.
    Senator Klobuchar. We look forward to working with you on 
that, you know, even beyond the stalker issues. And in your 
testimony, you actually discuss the cyber attack on Google late 
last year, and this attack I believe highlights the growing 
security risk that we have in this country, which is cyber 
attacks that could actually potentially cripple our 
infrastructure. We are not here talking about, you know, one 
stalker out there in a hotel room. Here we are talking about 
actual threats to our national security and our infrastructure.
    What is the FBI going to do to address these kinds of 
threats? And what should we be doing here in Congress?
    Mr. Mueller. The task force that I alluded to before, the 
computer task force that we have with 14 or 15 other agencies 
is a very good first step in my mind. And as I said before, 
particularly when it becomes necessary to protect our 
infrastructure, there are lessons within the Federal Government 
that can be learned from persons in the Cyber Command, for 
instance, that are applicable to protecting the Government 
across the board, whether it be Congress or the Supreme Court 
or the various Government agencies.
    The more difficult problem becomes the dot-com and the 
networks that are not subject to legislation necessarily, but 
need as well to be protected because so much of our financial 
information goes out over these particular Internet wires. And 
to the extent that we can identify, isolate, and protect the 
backbone cyber structures of the United States, we need to do 
that. But then the next level is protecting businesses who 
utilize dot-com and the like as opposed to dot-gov, dot-mil, 
and the Government areas.
    We play a role in protecting the Government and determining 
the attribution of particular attacks. We would want to see 
that role expanded. But we do not necessarily play the role. 
DHS plays a role in protecting the Internet apart from the dot-
gov, dot-mil, and the rest of the governmental structure.
    Senator Klobuchar. Now public-private partnership is vital 
to the development of a comprehensive, innovative solution that 
improves and expands our Nation's capabilities and keep us 
ahead of these emerging threats. I am convinced of that from my 
work as a prosecutor that a lot of this was being able to work 
with private entities who are controlling some of this data.
    What is the Department doing to work with the private 
sector? And what more can we do to create incentives for 
private businesses and institutions to work with Government on 
cybersecurity issues?
    Mr. Mueller. We have got a number of initiatives to do just 
that. Out in Pittsburgh, working with Carnegie Mellon and 
others, we established partnerships that enable us to exchange 
information on the latest worms, viruses, attacks, and the 
like. We have a wide-ranging group of individuals whom we 
consult with and who alert us to new things that are happening.
    But I will say in the same breath that you to a certain 
extent have to be careful. You cannot have the private entities 
acting as an agent of the United States. On the one hand, you 
need the expertise and the cooperation, the collegiality; but 
on the other hand, when it comes to doing and conducting 
investigations, it needs to be the Government and not fall into 
a role where private industry is working so closely with 
Government that it becomes an agent of the Government. And so 
it is just a cautionary tale.
    Senator Klobuchar. How about a BP issue? You do not have to 
answer that.
    So I understand that, but I also think the expertise--
somehow we have to get that expertise and use it, because I 
just think that we are at the tip of the iceberg with some of 
these things we are seeing recently that have happened, and we 
look forward to working with the Department on improving our 
laws, both with the stalker one I mentioned, but in a much 
bigger way with security issues. So thank you very much.
    Mr. Mueller. Thank you.
    Senator Whitehouse. Senator Durbin.
    Senator Durbin. Director Mueller, good to see you again.
    Mr. Mueller. Sir.
    Senator Durbin. About 6 weeks ago, I attended a funeral in 
Chicago. It was a young Chicago police officer named Thomas 
Wortham, 30 years old. He had served in Iraq. An extraordinary 
young African American with a great life ahead of him. Gunned 
down in front of his home, in front of his father's home. His 
father, a retired policeman. They were armed as security would 
require and as their jobs required, and still he was shot down 
and killed.
    Last week, Michael Bailey, another Chicago policeman, left 
his detail guarding Mayor Daley and went home and at 6:30 in 
the morning was polishing off his new Buick that he could not 
wait to drive around when he retired in just a few weeks, and a 
man came up and shot and killed him.
    We have lost three policemen in Chicago in the last 2 
months. The gun crime there is sadly aggravated by the hot 
weather. Just terrible the loss of life that we are 
experiencing.
    There has been an exchange between the mayor of Chicago and 
Robert Grant, your Special Agent in Charge, whom I know and 
respect very much. And I think at the end of the day it 
reflected the frustration they both feel. Everybody is trying 
everything they can think of. And my request to you is: Can you 
help us in finding some new ways to go after the illegal guns 
in Chicago, the violence on our street? Is there something the 
FBI can do to help us in the city?
    Mr. Mueller. I am familiar with all three of those 
instances. I called Jody Weis, who is the chief of police, 
after the third one, not only with my condolences but also with 
is there anything more that we can do. Rob Grant is one of our 
best, most effective, and most longstanding Special Agents in 
Charge who feels deeply about the necessity for reducing the 
violence in Chicago.
    We have tried across the country a variety of techniques. 
My belief is that in Chicago we have tried just about every one 
of them. Rob Grant is on the cutting edge of utilizing whatever 
intelligence we can gather to try to focus on the shooters and 
put them behind bars. I will again go back and have a 
discussion with him. I believe he is in town, but have yet 
another discussion with him.
    We have added resources, I know, in the office there to 
address this, but in comparison to the extent of the problem, 
it is inadequate. And so we will do what we can.
    Senator Durbin. If you will tell me what you need, I will 
do everything in my power in the Appropriations Committee to 
help. It is just heart-breaking. And as Thomas Wortham's father 
said to everyone in Chicago, ``If they will shoot us down in 
uniform as policemen, armed, they will kill anybody.'' And that 
is the feeling many of us have, that we have to really do much 
more to try to bring this under control.
    I in the past have been complimentary of you and the 
efforts of the FBI since 9/11 to deal with the Arab and Muslim 
population in America. I thanked you, commended you for making 
it clear that we are not casting a wide net and saying that 
those of Arab descent or those of the Muslim faith are 
necessarily to be suspect; and also to suggest, as you have 
before this Committee, that the cooperation of Arab Americans 
and Muslim Americans is critical to bringing in the 
information. We need the intelligence. We need to stop future 
acts of terrorism.
    There has been a recent article in the New York Times which 
questioned the current situation at the FBI. It was entitled, 
``Muslims say FBI tactics sow anger and fear.''
    The terrorism expert David Schanzer said, ``This is a 
national security issue. It is absolutely vital that the FBI 
and the Muslim American communities clear the air and figure 
out how to work together.'' And Michael Rolince, a former FBI 
counterterrorism official, said, ``There are some people in the 
Bureau who believe as I do: The relationship with the Muslim 
community is crucial and must be developed with consistency. 
And there are those who don't.''
    One of the things that is still being debated, or at least 
considered for change, were some guidelines handed down by 
former Attorney General Mukasey concerning the assessments of 
innocent Americans, whether there is a suspicion of wrongdoing, 
and this is a source of concern in the urban Muslin community.
    Now, I know the new Attorney General, Eric Holder, pledged 
that he would review these Mukasey guidelines. Are you familiar 
with this Domestic Investigations and Operations Guide, DIOG?
    Mr. Mueller. Yes, absolutely.
    Senator Durbin. And it is my understanding it is 
unclassified?
    Mr. Mueller. It is unclassified; however, we have withheld 
certain portions of it from publication because it would give 
individuals an insight into how we operate. But I will say as 
we develop these guidelines--we fully briefed Congress. 
Congress has seen the guidelines.
    Senator Durbin. What Members of Congress?
    Mr. Mueller. Judiciary Committee when the guidelines were 
being developed, we had extensive meetings with staff of the 
Judiciary Committee. We had suggestions as to how to change the 
guidelines from the Judiciary Committee, both Judiciary 
Committees in developing these guidelines.
    Senator Durbin. Did you provide a copy to the Senate 
Judiciary Committee?
    Mr. Mueller. I believe we did.
    You have seen a copy. You have seen copies.
    Senator Durbin. OK. We do not have a copy. I imagine that 
is the difference here. The question is whether we get a chance 
to review it.
    Let me ask you this: Is there a requirement of suspicion of 
wrongdoing before there is surveillance of an individual or 
surveillance of a location?
    Mr. Mueller. Yes.
    Senator Durbin. All right. And so merely the fact that it 
is of a certain religious sect or ethnic group is not enough.
    Mr. Mueller. That in and of itself is not enough. There has 
to be something more.
    Let me just allude to one thing you said about the 
relationship with the Muslim community. I think it has 
maintained its positive note throughout. There are segments in 
the Muslim community that do not necessarily want the 
relationship to work out. But in every one of our 56 field 
offices, we have since September 12, 2001, had outreach to the 
Muslim community. And if you walk around and you talk to 
individuals in the Muslim community, the leaders in the Muslim 
community, you talk to our Special Agents in Charge, I think 
almost one of you will find that the relationships are very 
good.
    Now, there are distinct pockets where they do not want to 
see that relationship succeed, but I believe that that 
relationship has grown and improved and that the Muslim 
community understands that it is not just the FBI that is 
responsible for keeping this country safe, but all Americans, 
including the Americans who happen to be Muslim.
    The last point I would make is that the guidelines--we work 
with the new administration day in and day out in our 
investigations that are administered according to these 
guidelines. I believe they are effective. I think they are 
appropriate, and I think they are the appropriate balance 
between civil liberties on the one hand and giving us the tools 
we need to protect the American public against terrorist 
attacks.
    Senator Durbin. My time is up, but if I could just say in 
closing, for 8 or 9 years you and I have had an ongoing dialog 
about the new computer technology at the FBI. There have been 
some ups and some notable downs, and I know there is a new 
Inspector General's report about your Sentinel system, and I 
will send you some written questions and follow up----
    Mr. Mueller. And I would be happy to sit down and brief you 
on where we are and where we are going.
    Senator Durbin. Thank you very much.
    Mr. Mueller. Yes, sir.
    [The information referred to appears as a submission for 
the record.]
    Senator Whitehouse. Thank you.
    Senator Kyl, I know this is the second round and you will 
be going ahead of Senator Schumer, but he has said that if you 
will be brief, he is more than happy to accommodate you.
    Senator Kyl. Thank you very much. I just had two questions. 
One is a follow-up on--and thank you, Senator Schumer. One is a 
follow-up on the HIG.
    I had reference to a letter dated February 3rd of this year 
to Senator McConnell relating to the Northwest Airlines 
Christmas bombing event and related policies of the Department 
of Justice and the FBI. And with regard to interrogation, there 
is one paragraph in here that I thought might conflict with 
what you said about the three goals with respect to the HIG, 
whether abroad or in the United States, and I just wanted you 
to be able to clarify that.
    In this letter, you say, and I quote, ``The FBI's current 
Miranda policy, adopted during the prior administration, 
provides explicitly that within the United States Miranda 
warnings are required to be given prior to custodial 
interviews.''
    Now, there is a footnote right there which describes the 
Quarles exception in cases--and it is quoting, ``The warning 
and waiver of rights is not required when questions which are 
reasonably prompted by a concern for public safety are asked,'' 
and then you give an example.
    But the reality is that the HIG interrogation about 
potential future terrorism plots or plans do not really and 
easily fall within the Quarles exception in many cases because 
it is not a matter of--an immediate matter of public safety. Is 
that not correct? And so could you describe what the policy is 
with respect to the Miranda warning in domestic HIG 
interrogations?
    Mr. Mueller. Well, I think the fact that it is in a 
footnote--it probably should be elevated because we have 
adjusted it to address terrorist cases. Originally the Quarles 
exception, as I think you know, is related to a robbery and was 
much more discreet. There has been no elaboration on the extent 
of the Quarles exception, and, consequently, in bringing that 
over and adjusting to the terrorism arena, there is a breadth 
of interrogation that inevitably would take place that goes 
well beyond what happened on that particular day on that 
particular plane, which legitimately in my mind falls within 
the Quarles exception.
    I can tell you that in the wake of the Christmas Day 
bombing, for instance, we have educated our workforce, 
including the SACs, in terms of the Quarles exception so that 
it is on everybody's mind that when somebody is detained here 
in the United States, you have an opportunity to spend what 
time is necessary to gather the information on potential 
threats.
    What triggered this was what happened on December 25th with 
253 coming in from Amsterdam. In that particular case, as I 
know you are aware, the agents determined that they needed to 
interrogate Abdulmutallab immediately without Miranda warnings 
to obtain exactly that kind of information. There may be some 
disagreement as to how far you go, but in the terrorism 
context, I am comfortable that we will be asking the questions 
that are necessary to the public safety.
    Senator Kyl. That is very helpful, and I think it would be 
worthwhile to describe a little more fulsomely, to the extent 
that it is possible to do so, in these sort of hypothetical 
situations. But it is clear that you would need a broader 
interpretation of the Quarles exception in these terrorism 
cases, and, in effect, what you are saying is that you do 
interpret that exception in a broader context in trying to 
interrogate people about these terrorist threats. Is that 
correct?
    Mr. Mueller. That is correct.
    Senator Kyl. Yes, thank you.
    The other question I wanted to ask you has to do with the 
Lockerbie bomber, al-Megrahi. I was very impressed with the 
letter that you wrote to Scottish Justice Minister MacAskill 
when you learned of his released, and I just wanted to quote a 
little bit of it because I think it is quite appropriate. You 
said that his action in releasing Megrahi is ``as inexplicable 
as is detrimental to the cause of justice. Indeed, your actions 
make a mockery of the rule of law. Your action gives comfort to 
terrorism around the world who now believe that, regardless of 
the quality of the investigation, the conviction by a jury 
after the defendant is given all due process and sentence 
appropriate to the crime, the terrorist will be freed by one 
man's exercise of compassion.''
    And you also went on to fault Scottish authorities for 
``never once having sought our''--meaning the FBI's--``opinion, 
preferring to keep your own counsel and hiding behind opaque 
references to the need for compassion.''
    Also at the time, President Obama announced that he was 
surprised and disappointed and angry to learn of his release.
    But just last week, or maybe earlier this week, we learned 
that the State Department actually was consulted in advance, 
and, in fact, one Richard LeBaron, deputy head of the U.S. 
embassy in London, wrote to Scottish authorities on August 
12th, just before Megrahi's release, saying, and I quote, ``We 
greatly appreciate the Scottish Government's continued 
willingness to solicit the views of the United States and the 
families of its victims with respect to a decision on Megrahi's 
transfer,'' and then later, even offered qualified support for 
``conditional release on compassionate grounds.''
    When did you first learn of that State Department letter; 
do you know?
    Mr. Mueller. When it was in the newspapers.
    Senator Kyl. And was the FBI given an opportunity to weigh 
in or object prior to the letter being sent?
    Mr. Mueller. I had conversations with the Attorney General 
beforehand. I do not think there was any question but of the 
position that the Bureau felt strongly about and the Department 
of Justice felt strongly about. I think it was a shock to 
everybody that the decision went the way it did.
    Senator Kyl. I was very surprised, too, and that is why I 
do not quite understand how you could have the President being 
surprised and--what did he say?--surprised, disappointed, and 
angry, and have you say what you said, which I thought was very 
appropriate, and yet the State Department knew before then and 
acknowledged that it was being consulted.
    Can you explain or has there been an explanation subsequent 
to this that maybe you could make us aware of?
    Mr. Mueller. No, and when, I think, I alluded to in the 
letter that we had not been consulted, I meant the 
investigators who had spent so much time. I was speaking for 
the FBI. We had spent a great deal of time with the families, 
investigating that case, with our colleagues overseas, and 
generally in such cases when you spend so much time on an 
investigation, those who conducted the investigation are 
queried as to what the disposition should be. That did not 
happen in this case.
    Senator Kyl. Right. And it is clear in what you said; that 
is exactly what you meant. Thank you very much, Director.
    Senator Whitehouse. Senator Schumer.
    Senator Schumer. Thank you, Mr. Chairman. And thank you for 
your service, Director Mueller.
    I am concerned a little bit about prepaid cell phones. It 
is too easy for both would-be and successful criminals to use 
cell phones, prepaid cell phones anonymously to accomplish 
their ends and evade detection. Recently Faisal Shahzad, the 
Times Square bomber, made use of a prepaid cell phone, among 
other things, to call Pakistan, arrange the purchase of the 
Nissan Pathfinder that he rigged to kill as many people as he 
could on a busy Saturday night in Times Square. It was only 
because of a lucky break that authorities were able to trace 
him.
    The devices were also used to transmit information in the 
Galleon insider trading scheme, a different type of crime. 
Criminals of all types know they are anonymous and virtually 
untraceable. They can hide away from law enforcement's 
appropriate reach.
    So here is my question: Does the anonymity of prepaid cell 
phones pose law enforcement problems in a variety of cases as 
these and other anecdotes suggest?
    Mr. Mueller. Yes.
    Senator Schumer. Could you elaborate just a little bit?
    Mr. Mueller. As you said, criminals, terrorists, persons 
who for whatever reason want to avoid detection, can use 
throwaway cell phones at will, which minimizes the capability 
we have to intercept those conversations that are often 
essential to a successful thwarting of an attack or----
    Senator Schumer. I suppose as times goes on, more and more 
criminals are going to learn that this is sort of the way to go 
to avoid detection, particularly if they are in areas where 
there might be detection: terrorism, organized crime, financial 
crimes, things like that.
    Mr. Mueller. Yes, sir.
    Senator Schumer. OK. So I have sponsored a bill--this is a 
nice bipartisan note with Senator Cornyn, my colleague on the 
Judiciary Committee--that would require purchasers of prepaid 
cell phones to present ID, just the same way that purchasers of 
monthly cell phone service have to do. The information would be 
kept by the wireless carrier who would retain it, with the same 
privacy protections that we have when we register for cell 
phones for 18 months.
    Now, I know that you have to go to the great Justice 
Department to get the official OK on a piece of legislation, 
but would you agree that requiring prepaid cell phones would 
enable you to quickly and accurately investigate myriads of 
cases that involve prepaid cell phones as instrumentalities of 
crime?
    Mr. Mueller. Yes.
    Senator Schumer. What is the most you can say about such 
legislation that Senator Cornyn--without getting yourself fired 
or anything like that?
    Mr. Mueller. I think I can say that, without having seen 
the specifics of the statute, we would be very much supportive 
of that kind of reporting requirement, and it would be 
indispensable, goes too far, but essential to the success of a 
number of investigations and cases that we would have.
    Senator Schumer. Thank you.
    I would like to go, since I have a little more time here, 
to narcotics on the northern border. New York, of course, has a 
long border--peaceful, generally--with Canada. A few days ago, 
the FBI announced very positive results as part of Project 
Deliverance. This was involved with the Mexican border, drug-
trafficking organizations in the U.S., and involved 
coordination--FBI, ICE, DEA. You arrested thousands of 
individuals, seized about $154 million in currency.
    However, what is overlooked is that our northern border 
also faces a drug-trafficking epidemic, especially involving 
trafficking of different kinds of--some are the same, some are 
different--Ecstasy, marijuana, crystal meth. They have invaded 
our communities, particularly in upstate New York.
    So I have introduced legislation to try and get the Federal 
law enforcement agencies to develop a comprehensive northern 
border counternarcotics strategy. I am not asking you 
explicitly to support this legislation. I will quit while I am 
ahead. But do you think that we could benefit from such a 
strategy? And will the FBI work to try and bring a Project 
Deliverance effort to the northern border generally and New 
York specifically? How can we work together to make this a 
reality? It is becoming a more and more serious problem.
    Mr. Mueller. Certainly the cooperation of Federal, State, 
and local entities along the border is essential to the safety 
of the border. To the extent that we can and should play a 
role, we definitely would play a role. I would be surprised if 
there is not already a strategy that one could buildupon.
    Senator Schumer. Exactly. There is some cooperation, and we 
have gotten a little more attention in the past, but we could 
use a lot more, as you said, and I would hope that you 
internally would importune the powers that be to do so, as I am 
doing externally. But I am glad you say it would be helpful in 
terms of stopping drugs and stuff like that.
    Final question, Internet fraud. You mentioned in your 
statement it is a growing concern for legitimate businesses. 
According to the Internet Crime Complaint Center, a partnership 
between the FBI, the White-Collar Crime Center, and the BJA, 
Bureau of Justice Assistance, a great many of these schemes, 
such as auction fraud, Nigerian 419 schemes, fraudulent high-
yield investment programs are facilitated by, again, anonymous 
wire transfers that are hard to trace, almost impossible to 
reverse, and generally provide little or no fraud protection.
    Have wire transfers made the FBI's job more difficult in 
going after fraudsters? What tools would help the FBI enforce 
the existing fraud laws in anonymous wire transfers while 
protecting consumer needs? And I will just give you one example 
and then you can answer the question.
    Earlier this month, the New York Times reported on Internet 
scammers setting up fake Web sites pretending to sell used 
cars. They got the money; there was no car. They used 
Moneygram. Moneygram said the money had been collected on June 
12th, but then told law enforcement, ``We are not responsible 
for third-party fraud,'' and they would not even tell law 
enforcement--I am not sure if it was the FBI in this case, but 
in all likelihood, it probably was. They could not even tell 
them where the money was picked up unless you supplied a 
subpoena.
    What are you doing about these types of cases? What can 
Congress do to help the FBI and consumers protect themselves?
    Mr. Mueller. Well, to the extent that we are notified 
either through the IC3 or otherwise, we will handle 
investigations or work with State and local law enforcement to 
address a particular investigation. But it does not go to--that 
does not really answer your elemental question about what about 
anonymous wireless financial transfers. That is a growing 
concern throughout the world, not just the United States.
    The immediate response would be requiring passing 
legislation that would require the presentment of 
identification and keeping records that would be available 
pursuant to a subpoena down the road, in the same way that you 
suggest, doing that for throwaway cell phones.
    Senator Schumer. Right.
    Mr. Mueller. The ability to obtain records of past 
transactions is absolutely essential, whatever the method of 
payment or communication.
    Senator Schumer. Well, it is legislation I am looking into, 
so I am glad you are positively disposed to at least exploring 
it. And, again, the one thing I would say before turning things 
over--my time is up. We are not expanding--or impinging on 
anyone's privacy rights. These are the exact same privacy 
rights people have when they do give their names, and there are 
lots of safeguards that, in my judgment, have worked quite well 
over the years.
    Thank you, Mr. Chairman.
    Senator Whitehouse. Thank you, Director. This brings the 
hearing to a close. The record of the hearing will remain open 
for a week for any additional materials that anybody wishes to 
submit. As always, your testimony is helpful and candid, and we 
appreciate you being here.
    Mr. Mueller. Thank you.
    Senator Whitehouse. The hearing is adjourned.
    [Whereupon, at 12:16 p.m., the Committee was adjourned.]
    [Questions and answers and submissions for the record 
follow.]

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