[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
 DEPARTMENT OF JUSTICE--CIVIL, ENVIRONMENT AND NATURAL RESOURCES, AND 

                             TAX DIVISIONS
=======================================================================


                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON COURTS, COMMERCIAL

                         AND ADMINISTRATIVE LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 31, 2012

                               __________

                           Serial No. 112-124

                               __________

         Printed for the use of the Committee on the Judiciary


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




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                       COMMITTEE ON THE JUDICIARY

                      LAMAR SMITH, Texas, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        HOWARD L. BERMAN, California
HOWARD COBLE, North Carolina         JERROLD NADLER, New York
ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT, 
BOB GOODLATTE, Virginia                  Virginia
DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
STEVE CHABOT, Ohio                   ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
MIKE PENCE, Indiana                  MAXINE WATERS, California
J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona                  Georgia
LOUIE GOHMERT, Texas                 PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
TED POE, Texas                       JUDY CHU, California
JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
TIM GRIFFIN, Arkansas                LINDA T. SANCHEZ, California
TOM MARINO, Pennsylvania             JARED POLIS, Colorado
TREY GOWDY, South Carolina
DENNIS ROSS, Florida
SANDY ADAMS, Florida
BEN QUAYLE, Arizona
MARK AMODEI, Nevada

           Richard Hertling, Staff Director and Chief Counsel
       Perry Apelbaum, Minority Staff Director and Chief Counsel
                                 ------                                

       Subcommittee on Courts, Commercial and Administrative Law

                 HOWARD COBLE, North Carolina, Chairman

               TREY GOWDY, South Carolina, Vice-Chairman

ELTON GALLEGLY, California           STEVE COHEN, Tennessee
TRENT FRANKS, Arizona                HENRY C. ``HANK'' JOHNSON, Jr.,
DENNIS ROSS, Florida                   Georgia
BEN QUAYLE, Arizona                  MELVIN L. WATT, North Carolina
                                     JARED POLIS, Colorado

                      Daniel Flores, Chief Counsel

                      James Park, Minority Counsel


                            C O N T E N T S

                              ----------                              

                              MAY 31, 2012

                                                                   Page

                           OPENING STATEMENTS

The Honorable Howard Coble, a Representative in Congress from the 
  State of North Carolina, and Chairman, Subcommittee on Courts, 
  Commercial and Administrative Law..............................     1
The Honorable Steve Cohen, a Representative in Congress from the 
  State of Tennessee, and Ranking Member, Subcommittee on Courts, 
  Commercial and Administrative Law..............................    25

                               WITNESSES

Stuart F. Delery, Acting Assistant Attorney General, Civil 
  Division, U.S. Department of Justice
  Oral Testimony.................................................     3
  Prepared Statement.............................................     5
  Response to Questions for the Record...........................    80
Ignacia S. Moreno, Assistant Attorney General, Environment and 
  Natural Resources Division, U.S. Department of Justice
  Oral Testimony.................................................    26
  Prepared Statement.............................................    28
  Response to Questions for the Record...........................    82
Kathryn Keneally, Assistant Attorney General, Tax Division, U.S. 
  Justice Department
  Oral Testimony.................................................    46
  Prepared Statement.............................................    48

                                APPENDIX
               Material Submitted for the Hearing Record

Prepared Statement of the Honorable Steve Cohen, a Representative 
  in Congress from the State of Tennessee, and Ranking Member, 
  Subcommittee on Courts, Commercial and Administrative Law......    77
Prepared Statement of the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, and 
  Ranking Member, Committee on the Judiciary.....................    78


 DEPARTMENT OF JUSTICE--CIVIL, ENVIRONMENT AND NATURAL RESOURCES, AND 
                             TAX DIVISIONS

                              ----------                              


                         THURSDAY, MAY 31, 2012

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

    The Subcommittee met, pursuant to call, at 12:08 p.m., in 
room 2141, Rayburn House Office Building, the Honorable Howard 
Coble (Chairman of the Subcommittee) presiding.
    Present: Representatives Coble, Gowdy, Ross, Quayle, and 
Cohen.
    Staff Present: (Majority) Daniel Flores, Subcommittee Chief 
Counsel; Johnny Mautz, Counsel; Omar Raschid, Professional 
Staff Member; Rachel Dresen, Professional Staff Member; Ashley 
Lewis, Clerk; Will Green, Intern; (Minority) James Park, 
Subcommittee Chief Counsel; Susan Jensen-Lachmann, Counsel; and 
Rosalind Jackson, Professional Staff Member.
    Mr. Coble. The Subcommittee will come to order.
    One of our Committee's most important duties is to perform 
oversight of the United States Department of Justice. Today, 
the Subcommittee seeks to fulfill this duty through oversight 
of several Department components within the Subcommittee's 
jurisdiction.
    The Civil, Environment and Natural Resources, and Tax 
Division dollars and potential recoveries and liabilities are 
at stake. Together, these three divisions manage a vast amount 
of civil litigation brought by or against the Federal 
Government. They handle many thousands of cases each year, 
though no fewer than 28 litigating sessions, and they employ 
well over 2,000 people.
    Substantively, the responsibilities of these divisions 
carry out a remarkable variety of cases of constitutional 
litigation over Federal programs to Medicare and Medicaid 
fraud, defense of our Nation's air, water, and land from 
pollution, complex tax litigation, and the emerging issue of 
identity theft tax fraud. It is vital that these divisions 
carry out these duties effectively, efficiently, fairly, and 
impartially. Billions of dollars in potential recoveries and 
liabilities are at stake. In many cases, so are precious 
natural resources.
    But, even more important, public confidence in our legal 
system and our Federal legal officials depends to no small 
degree on how well these divisions discharge their respective 
duties.
    This is the first opportunity the Subcommittee has had to 
conduct oversight of the divisions since June of 2010 when we 
last held oversight on the Civil Division. A number of new 
issues have arisen to prominence since the divisions were last 
before us, and we look forward to the opportunity to discuss 
them with the divisions at this time and perhaps subsequently.
    Other issues, of course, are of perennial importance, and 
we look forward to examining those issues as well.
    Let me introduce the witnesses and then perhaps Mr. Cohen 
will be here. I think he is on his way, is he not?
    We have a distinguished panel before us today. And good to 
have the gentleman from Arizona, Mr. Quayle. Good to have you 
with us as well.
    Mr. Stuart Delery--am I pronouncing it correctly, Mr. 
Delery?
    Mr. Delery. Yes.
    Mr. Coble [continuing]. Was appointed Acting Assistant 
Attorney General for the Civil Division in March of 2012. 
Before this appointment, Mr. Delery served in the Department of 
Justice in a variety of roles, including senior counselor to 
the Attorney General.
    Prior to joining the Justice Department in 2009, Mr. Delery 
was a partner in the Washington, D.C., office of WilmerHale, 
where he was a member of the Litigation Department and the 
Appellate and Supreme Court Litigation Practice Group and 
served as vice chair of the firm's Securities Department. Mr. 
Delery graduated from the Yale School of Law and the University 
of Virginia. He clerked for Justice Sandra Day O'Connor and 
Byron White on the U.S. Supreme Court and for Chief Judge 
Gerald B.--how do you pronounce his surname?
    Mr. Delery. Tjoflat.
    Mr. Coble. Thank you, sir--of the U.S. Court of Appeals.
    Our second witness is Ignacia Moreno, Assistant Attorney 
General for the Environment and Natural Resources Division, 
Department of Justice.
    Ms. Moreno has enjoyed a distinguished career in both 
public and private sectors. Ms. Moreno started her legal career 
in 1990 at Hogan & Hartson, LLP in Washington and worked there 
until 1994 when President Clinton appointed her to the 
Department of Justice. She served there for 7 years, including 
time as a private counsel to the Assistant Attorney General for 
Environment and Natural Resources Division.
    From 2001 to 2006, Ms. Moreno was of counsel and later a 
partner at Spriggs & Hollingsworth in Washington, D.C. From 
2006 until her confirmation, Ms. Moreno was counsel, Corporate 
Environmental Programs, at the General Electric Company. Ms. 
Moreno is a graduate of the New York University School of Law 
and earned her BA from New York University. She was born in 
Colombia and raised in New York City.
    Ms. Kathryn Keneally is the Assistant Attorney General for 
the Tax Division, Department of Justice. Ms. Keneally was sworn 
in as Assistant Attorney General for the Tax Division on 6 
April 2012. She oversees more than 350 attorneys as they 
enforce the Nation's tax laws.
    Prior to joining the Justice Department, Ms. Keneally was a 
partner in the New York office of the law firm of Fulbright & 
Jaworski, LLP. For 25 years, Ms. Keneally represented 
individuals and businesses before the Internal Revenue Service 
and the Department of Justice in criminal and civil tax cases, 
trial cases in the Federal district and appellate courts and 
the United States Tax Court.
    Ms. Keneally earned an LLE in taxation from the New York 
University School of Law, graduated magna cum laude from 
Fordham Law School, and received her BS from Cornell 
University. Ms. Keneally clerked with the Honorable Edward R. 
Neaher, U.S. District Judge of the Eastern District of New 
York.
    We are pleased to have each of you with us today.
    The bad news is I am told we must vacate this building on 
or about 1:15. We should be through by then. At that time, I am 
told that the Immigration Subcommittee will be invading our 
territory.
    We have been joined by the distinguished gentleman from 
Florida, Mr. Ross. Good to have you with us.
    Mr. Cohen is on his way.
    Let me go ahead and start the hearing with you, Mr. Delery. 
Then we will recognize Mr. Cohen when he comes in. And, if you 
can, confine your comments if you can to within the 5-minute 
rule. There is a panel on your desk. You will see the green 
light. And when the green light turns to amber that is your 
notice that you have a minute to go. We won't keelhaul you if 
you offend that purpose.
    Mr. Delery, good to have you with us.

   TESTIMONY OF STUART F. DELERY, ACTING ASSISTANT ATTORNEY 
      GENERAL, CIVIL DIVISION, U.S. DEPARTMENT OF JUSTICE

    Mr. Delery. Thank you, Mr. Chairman; and thank you also to 
Congressman Cohen and the other Members of the Subcommittee for 
the privilege to appear before you today at this oversight 
hearing to discuss the work of the Justice Department's Civil 
Division.
    As you know, the Civil Division represents the United 
States in court in a wide variety of matters. The Division's 
cases involve virtually every executive branch agency as well 
as the President, Cabinet officers, and Members of Congress. 
With over 1,000 attorneys and over 400 support staff, the Civil 
Division is the Justice Department's largest litigating 
component, and the cases we handle include both defensive and 
affirmative litigation.
    As part of our mission the Civil Division defends the 
legality of Federal statutes and programs when they are 
challenged; we seek to recover money that is lost to the 
government through fraud, waste, and abuse; we defend the 
government when it is sued for damages, whether for breach of 
contract or for personal injury; and we help to administer 
sensitive national compensation programs.
    The three main priorities for the Civil Division are 
protecting the national security, protecting taxpayer dollars, 
and protecting the Nation's consumers.
    Protecting the American people remains the Department's 
highest priority. The Civil Division plays a key role in this 
effort through its active docket of national security 
litigation. In these cases, we vigorously defend our national 
security consistent with the rule of law. For example, the 
Civil Division is currently defending around 140 habeas corpus 
petitions brought by detainees held at Guantanamo Bay, Cuba, 
and we have had significant success resolving many of the most 
important legal questions in these cases in the government's 
favor.
    In other matters, earlier this month our attorneys 
prevailed in a case seeking to force the National Security 
Agency to disclose whether it had records involving contacts 
with Google regarding cyber security. And the Division defends 
in the Federal courts every immigration removal order involving 
terrorists and other aliens who present national security 
risks.
    We are particularly proud of the Division's work in these 
and other cases as it underscores the Attorney General's 
tireless efforts to address terrorism and other threats to 
national security with integrity and devotion to our most 
fundamental values.
    In terms of protecting taxpayer dollars, we have enjoyed 
unprecedented success. Since January, 2009, the Department has 
recovered over $11 billion in civil fraud cases under the False 
Claims Act, more than in any comparable period. When coupled 
with criminal recoveries from our Consumer Protection Branch, 
the Civil Division has, standing side by side with U.S. 
Attorneys offices and State attorneys general across the 
country, obtained nearly $15 billion in civil and criminal 
fraud settlements, judgments, penalties, and fines. Health care 
fraud comprises the largest category of these fraud recoveries, 
more than $11 billion, with the largest share coming from 
pharmaceutical and medical device industries.
    Just earlier this month, the Department announced that 
Abbott Laboratories would pay $1.5 billion to resolve criminal 
and civil allegations arising from its illegal marketing of the 
prescription drug Depakote. This was the latest in a series of 
so-called off-label marketing cases in which the Civil 
Division, working with U.S. Attorneys offices around the 
country, has prosecuted pharmaceutical and device manufacturers 
who violate the Food, Drug, and Cosmetic Act by marketing their 
products for uses not approved as safe and effective by the 
FDA.
    But our efforts to tackle fraud do not end with health care 
fraud. We are actively pursuing economic fraud and seeking to 
recover ill-gotten gains for the benefit of fraud victims.
    We have also been vigilant in our efforts to root out fraud 
in connection with the procurement of goods and services used 
by our military and civilian agencies, including fraud 
affecting our men and women fighting in Iraq and Afghanistan. 
Since January, 2009, procurement fraud cases have accounted for 
approximately $1.6 billion in recoveries, which exceeds the 
amount in any comparable period.
    Our final area of focus in the Civil Division is to protect 
consumers. We continue to be at the forefront of the 
Department's civil and criminal enforcement of Federal consumer 
protection laws. And since January, 2009, our Consumer 
Protection Branch obtained the convictions of 123 defendants 
and courts imposed criminal penalties exceeding $3.9 billion.
    Now, while the Civil Division has had a particularly active 
enforcement practice over the last 3 years, most of our work is 
defensive. Our work defending the Federal Government in 
commercial, tort, and other claims has saved billions of 
dollars, and our defense of numerous statutory and 
constitutional challenges has upheld critical executive and 
congressional authority.
    Mr. Chairman, my written testimony describes in more detail 
these and other areas of the Civil Division's work, and I would 
be happy to respond to the Committee's questions. I thank you 
again for the opportunity to be here today.
    [The prepared statement of Mr. Delery follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                               __________

    Mr. Coble. Thank you, Mr. Delery. And I am glad to hear you 
emphasize health care fraud, because it is plaguing all of us, 
not the least of which you all get plagued with it as well, I 
am sure.
    We have been joined by the distinguished Ranking Member, 
the gentleman from Memphis, Tennessee, Mr. Cohen; and I will 
now recognize him for his opening statement.
    Mr. Cohen. Thank you, Chairman Coble, and thank you for all 
of your courtesies you have extended--the nicest human being in 
all of Congress, Mr. Coble--and for holding these hearings on 
these three divisions: Civil, Tax, and Environment. You are. 
You are the nicest guy. It is amazing how nice you are. People 
do not understand that we all get along. But if they were all 
like Howard we would all get along even better.
    Mr. Coble. If the gentleman from Tennessee will yield, I 
thank you for those generous comments. Thank you, sir.
    Mr. Cohen. But we have the Civil Division before us today 
which we had hearings when I was the Chair of this 
Subcommittee; and it is nice to have Tax and Environment and 
Natural Resources here, too.
    I want to report to you all that I have seen your boss 
lately, and he is doing his job. We were at the White House and 
General Holder was there, and we talked a little bit about 
California. And he does not yet understand how they are making 
a mistake there, but they are making a mistake there in going 
after some of those people they should not necessarily be going 
after. Because they are really California's problem and not 
America's. But he is still doing his job.
    And I saw Mr. Perez there, who is doing a great job in 
Memphis working on the juvenile court situation.
    So I appreciate what all the attorneys do at Justice. It is 
a tough job, and you represent the American people on a great 
variety of issues in the courts, the Federal courts. And you 
enforce the laws that we make. So it is so important, that it 
is important that we have this oversight hearing.
    We need to provide you with adequate funds to do your job 
and resources. We are not here just in a vacuum. We pass laws. 
Somebody has to enforce them. Thank you for enforcing Congress' 
laws.
    In fiscal year 2013, the President requested $298 million 
for the Civil Division and 110 for ENRD and 106 for the Tax 
Division. They are modest amounts in light of the overall 
Federal budget and especially in light of the returns to the 
taxpayers from work in these divisions. These are all divisions 
that bring in monies.
    Energy and Natural Resources obtained more than $650 
million in civil recoveries and criminal fines and saved 
taxpayers $2.1 billion by successfully defending against 
meritless claims. The Civil Division's civil fraud recovery 
since '09 have exceeded $9 billion, and the Division has 
successfully defended the United States in cases involving 
billions of dollars. And the Tax Division brings in $13 for 
every dollar spent.
    Without you, we would not exist. You are the sine qua non 
of all. Beyond the monetary benefits, this Division's work has 
intangible but in some ways even more valuable benefits like 
ensuring clean air and clean water, things that we used to take 
for granted, maintaining public health and securing dignity for 
all Americans. We have seen some evidence that some of the 
values that we hold in the past have been questioned, but we 
appreciate your carrying on.
    As Mr. Delery--I hope I pronounced that correct. Is it 
Delery?
    Mr. Delery. Delery.
    Mr. Cohen. Delery--Mr. Delery noted in his testimony, the 
House recently passed a fiscal year 2013 appropriations bill 
that did not include requested funding for the Civil Division's 
financial fraud work or for adjustments to base which are 
intended simply to keep pace with the cost of things like 
increases in rent, contracts, health benefit coverage, and 
other increased costs. Such a funding approach is shortsighted. 
And while no one likes wasteful spending this money request is 
not being wasted. So it is an investment in protecting the 
public fiscal health as well as ensuring our laws are enforced 
and that justice is served.
    So I thank our witnesses for their work and for your update 
and thank Chairman Coble for allowing me to give this testimony 
at this time. I look forward to the remainder of your 
testimonies and yield back the balance of my time.
    Mr. Coble. Thank you, Mr. Cohen.
    Ms. Moreno, we will recognize you for 5 minutes.

  TESTIMONY OF IGNACIA S. MORENO, ASSISTANT ATTORNEY GENERAL, 
ENVIRONMENT AND NATURAL RESOURCES DIVISION, U.S. DEPARTMENT OF 
                            JUSTICE

    Ms. Moreno. Chairman Coble, Representative Cohen, and 
Members of the Subcommittee, thank you for the opportunity to 
appear before you today to discuss the important work of the 
Environment and Natural Resources Division, also known as ENRD.
    The Environment and Natural Resources Division is a core 
litigating component of the United States Department of 
Justice. Founded more than a century ago, it has built a 
distinguished record of legal excellence. The Division 
functions as the Nation's environmental lawyer, with a staff of 
about 700 individuals, including close to 400 lawyers who are 
dedicated to protecting human health and the environment.
    We bring civil and criminal cases and defend the vital work 
of client Federal agencies under more than 150 Federal 
statutes. ENRD's litigation docket contains almost 7,000 active 
cases and matters in courts across the United States, about 
half of which are defensive in nature.
    The Division's priorities are guided by our core mission, 
which includes, first, strong enforcement of civil and criminal 
environmental laws to ensure clean air, clean land, and clean 
water for all Americans; second, vigorous defense of 
environmental wildlife, and natural resources laws in agency 
actions and protection of the public fisc; third, effective 
representation of the United States in matters concerning the 
stewardship of our public lands and natural resources, 
including the acquisition of land for public purposes from 
national parks to national security; and, fourth, vigilant 
protection of tribal sovereignty, tribal lands and resources, 
and tribal treaty rights.
    The work that we do in the Environment Division could not 
be more important. The Deepwater Horizon fire, explosion and 
oil spill in the Gulf of Mexico in April of 2010 came into our 
homes in daily news coverage of the resulting tragic loss of 
life and environmental devastation. After the disaster, the 
importance of environmental and natural resources protection 
could not be clearer. The Environment Division will continue to 
vigorously enforce applicable laws and regulations within 
existing authorities to ensure that we protect human health and 
the environment and that the American people do not bear the 
cost of pollution or mismanagement of our natural resources.
    The Division has achieved impressive monetary results from 
civil and criminal enforcement. For example, from January, 
2009, through December, 2011, ENRD secured $2.2 billion in 
civil and stipulated penalties, cost recoveries, natural 
resource damages, and other civil monetary relief, including 
almost $1.3 billion recovered for the Superfund. The Superfund 
finances the clean-up of sites contaminated with hazardous 
substances.
    We also secured about $21.3 billion in corrective measures, 
court orders, and settlements, measures that will go a long way 
toward protecting our air, land, water, and other natural 
resources.
    Over the same period, the Division concluded 140 criminal 
cases against 266 defendants, obtaining more than 125 years in 
confinement and over $233 million in criminal fines, 
restitution, community service funds, and special assessments.
    Many important benefits flow from these results. They 
provide tangible health and environmental benefits for the 
American people through significant reductions in pollution. 
They serve to deter future violations, increasing exponentially 
the significance of this work. They also reflect good value, 
returning many times over the Division's operating budget to 
the U.S. Treasury.
    In all that we do, we ensure that all communities, 
including those most vulnerable, are protected from 
environmental harms. All Americans deserve clean air, clean 
land, and clean water so that they may prosper where they live, 
work, and play.
    Again, I appreciate the opportunity to participate with my 
colleagues in this hearing and would be happy to address your 
questions.
    [The prepared statement of Ms. Moreno follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    


                               __________
    Mr. Coble. Thank you, Ms. Moreno.
    Ms. Keneally.

TESTIMONY OF KATHRYN KENEALLY, ASSISTANT ATTORNEY GENERAL, TAX 
               DIVISION, U.S. JUSTICE DEPARTMENT

    Ms. Keneally. Chairman Coble, Ranking Member Cohen, and 
Members of the Subcommittee, thank you for inviting me here to 
testify about the work of the Tax Division.
    As Chairman Coble noted, on April 6, 2012, I had the 
privilege of being sworn in as the Assistant Attorney General 
for the Division.
    Mr. Coble. Ms. Keneally, maybe it is my hearing impairment, 
but get a little closer to the mic if you will.
    Ms. Keneally. I was thanking you for commenting on my 
appointment.
    Mr. Coble. Oh, you bet.
    Ms. Keneally. Thank you again for inviting me here today.
    While my arrival in the Department is fairly recent, my 
experience with Federal tax administration and litigation is 
not. Over the course of my career I have represented many 
clients before the Tax Division, United States Attorneys 
Offices, and the Internal Revenue Service on a variety of civil 
and criminal tax matters.
    Over that time, I have learned effective tax administration 
is guided by two fundamental principles. First, we owe it to 
all taxpayers who voluntarily comply with our tax laws to 
enforce the laws against those who do not comply. Second, 
because tax touches on all citizens, residents, and income 
earners, there must be a fair and consistent tax enforcement 
policy throughout the country.
    These values are deeply engrained in the culture of the Tax 
Division. As Assistant Attorney General I am committed to 
serving the American people by reaffirming these principles and 
leading the Division in what can only be described as the 
increasingly more complex and global task of tax enforcement.
    The Tax Division plays a critical role in the fair and 
consistent administration of our tax laws. The IRShas primary 
responsibility for determining and collecting taxes owed. In 
most cases, the IRS's administrative powers are sufficient to 
ensure compliance with the tax laws. However, when taxpayers do 
not voluntarily comply, the IRS relies on the Tax Division to 
bring timely enforcement in Federal Court.
    For example, the Tax Division enforces and defends 
summonses to gather information for ongoing tax examinations, 
collects and defends tax assessments when taxpayers do not pay 
voluntarily, obtains civil injunctions to shut down tax scam 
promoters and fraudulent return preparers, authorizes criminal 
tax prosecutions, and investigates and prosecutes criminal tax 
violations throughout the country. Each year the Division has 
approximately 6,000 civil tax cases in process, handles 
hundreds of civil and criminal tax appeals, and authorizes 
between 1,300 and 1,800 prosecutions.
    To carry out the work of the Division, we currently have 
378 attorneys. The President's budget for 2013 fiscal year 
provides $106.5 million in funding for the Tax Division. This 
funding level will allow the Division to continue its 
enforcement efforts through its prosecutions, collections, and 
injunctions actions, all areas that are critical to the full 
and fair enforcement of the tax laws enacted by Congress.
    As Member Cohen noted, given that on average every tax 
dollar invested in a Division attorney results in a savings of 
at least $13 to the Federal Treasury, the full funding of the 
Tax Division is a wise investment in the economic stability of 
the Nation.
    While the Division continues to maintain a sizable caseload 
of traditional tax enforcement matters we are also mindful of 
the need to identify and respond to ongoing, growing, and new 
trends in noncompliance. I would like to highlight four areas 
of noncompliance that are among our highest enforcement 
priorities: stolen identity refund fraud, as Chairman Coble 
noted; abusive tax shelters; offshore tax schemes; and tax 
defiers.
    Prosecutions in civil injunctions against individuals who 
engage in tax fraud have always been top priorities for the 
Division. Recently, a new and more aggressive scheme has 
cropped up across the country at an alarming rate, stolen 
identify refund fraud. The plan is frighteningly simple--steal 
Social Security numbers, file tax returns showing a false 
refund claim, and then have the refunds loaded onto a prepaid 
card or sent to an address where the wrongdoer can get access 
to the funds. While the Division has been successful in 
prosecuting these cases and in obtaining lengthy sentences, we 
are committed to work even harder to shut down these schemes.
    We are also continuing to build on the Division's success 
in fighting abusive tax shelters. These schemes were designed 
to cost the Treasury many tens of billions of dollars in unpaid 
taxes. Each victory by the Division recovers not only the taxes 
due in that case but also sets a precedent to resolve other 
cases and to deter others who are engaging in these schemes.
    The Division is also continuing to investigate and 
prosecute account holders, banks, bankers, and other 
facilitators in connection with offshore activities designed to 
evade taxes.
    Finally, tax defiers who engage in conduct to undermine our 
tax system, often through violence, must and will remain an 
enforcement priority.
    In all cases, the Division's enforcement efforts serve to 
assure the vast majority of taxpayers that their voluntary 
compliance is justified and that everyone will be held to pay 
their fair share in our tax system.
    Thank you again, Mr. Chairman, for the opportunity to 
discuss the important work of the Tax Division. I am happy to 
answer any questions that you or any other Members of the 
Committee may have.
    [The prepared statement of Ms. Keneally follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                               __________

    Mr. Coble. Thank you, Ms. Keneally.
    Thanks to each of you for your testimony.
    We try to adhere to the 5-minute rule as well, and we 
usually comply pretty much in order. So if you will keep your 
answers as tersely as possible to meet the 5-minute rule.
    We have been joined by the distinguished gentleman from 
South Carolina, Mr. Gowdy. Good to have you with us, Trey.
    And I remind the Members again we are supposed to vacate 
the room on or about 1:15 because of the Subcommittee on 
Immigration.
    Mr. Delery, let me start with you. It has been brought to 
my attention that hospitals are more frequently facing False 
Claims Act charges stemming from the decisions of physicians to 
admit certain patients. I also understand that in many of these 
suits hospitals settle claims to forego the cost and agony of a 
protracted trial and discovery process and to protect their 
respective reputations. Does the Justice Department have a 
policy or guidelines for bringing these charges and can you 
share any statistical information on these cases to help us 
verify the frequency of the litigation and the awards that have 
been paid through judgments and settlements?
    Mr. Delery. Thank you, Mr. Chairman, for that question.
    As to that particular type of False Claims Act case, I do 
not here today have statistics to share with you but would be 
happy to provide that information to the Committee.
    Mr. Coble. If you would do that, we would appreciate that.
    Let me put another question to either of the three of you, 
probably Mr. Delery to begin with.
    Estimates of yearly fraud in Medicare and Medicaid range 
from 20 to $80 billion. Yet the Civil Division's fraud 
recoveries from all sources in 2011 were less than $4 billion. 
What are you all doing to make sure that Medicare and Medicaid 
fraud finally comes under control--or under better control?
    Mr. Delery. Thank you, Mr. Chairman. I can answer that.
    So certainly the fraud in those programs is a serious 
problem and one that the Civil Division is devoting significant 
and substantial resources to addressing. The recoveries over 
the last 3 years have been the highest over any comparable 
period, reflecting that diligent work.
    Obviously, it is a large problem, and we are doing the best 
that we can with the resources that we have available to try to 
leverage the successes that we do have into prevention. Among 
other things, we are attempting to focus on nonmonetary 
remedies as part of our--in addition to the substantial 
recoveries, as part of the resolutions of these cases to 
improve compliance, to improve procedures in place in the 
organizations, to prevent recidivism, and hopefully to serve as 
models for other organizations so that they can help to crack 
down on this serious problem.
    Mr. Coble. I do not mean to be ignoring the two ladies, but 
it appears that this is your bailiwick, right, Mr. Delery, so 
let me come to you with another question.
    Civil fraud recoveries from all sources since 1987 are 
about $34 billion. This is less than 1 year's estimated fraud 
in Medicare and Medicaid alone. Can Civil do a better job of 
stamping out fraud and recovery of tens if not hundreds of 
billions of dollars that taxpayers lose every year?
    Mr. Delery. I think, Mr. Chairman, we certainly continually 
try to do better in this area. As I indicated, it is a very 
serious problem.
    Among other things, we think that we could be helped with 
full funding of the President's request for funding for the 
Civil Division so that we can maintain current levels at least 
and add some resources to address various kinds of financial 
fraud. So that is one thing that could help us improve the rate 
of recoveries in this area. But it is a very large problem. We 
have devoted substantial resources to it and continue to work 
on innovative solutions to try toimprove our effectiveness.
    Mr. Coble. Thank you, sir.
    My red light has not yet appeared. Do you other ladies want 
to contribute to either of these questions?
    Ms. Moreno. Congressman Coble, the questions that you posed 
are addressed to the Civil Division. They are in the competency 
of the Civil Division. I have nothing to add.
    Mr. Coble. Okay. Ms. Keneally.
    Ms. Keneally. I agree. I thank you for the opportunity, but 
I defer to my colleague from the Civil Division.
    Mr. Coble. Thank you.
    I recognize the distinguished gentleman from Tennessee, Mr. 
Cohen.
    Mr. Cohen. Thank you, Mr. Chair.
    I noticed in the--Mr. Delery.
    Mr. Delery. Delery. Like celery but with a D, Congressman.
    Mr. Cohen. Thank you. That makes it easy. Mr. Celery.
    Mr. Delery. Yes. I am happy to take that, Congressman.
    Mr. Cohen. Just a little humor.
    You mentioned some cases where you have made some massive 
recoveries for the United States, and they involve drug 
companies and they involve people who had--the shipping company 
that had defrauded the country by inflating the invoices. 
Settlements in the area, I see one here was $222 million, 
another was 31.9 at qui tam, and then there were some others 
here in the drug war which were even higher.
    Do you believe that we should give you or do you have 
greater--a greater hammer? I mean, when people defraud the 
government, particularly in the war effort, as this shipping 
company did, it seems like there is not a sufficient remedy. Do 
we need to give you more powers?
    Mr. Delery. I think, Congressman, that certainly the 
Department does have significant tools in place. These cases 
are complicated because they often involve accounting 
irregularities, other forms of financial conduct that are 
difficult to identify and then to pursue. So they are resource 
intensive, and they take some time to develop.
    So I think, while it may be that there are some additional 
tools that would be useful, and we are certainly happy to work 
with the Committee on that, we would be happy to work with you 
and your colleagues, I think that, from our perspective, the 
False Claims Act and other tools are powerful tools.
    We are attempting to be creative, as I indicated in the 
health care context earlier, in coming up with parts of the 
remedies in these cases that would allow for greater compliance 
going forward; and we are always conscious of the need for 
resources to do these labor-intensive cases.
    Mr. Cohen. Well, let us take this--and I guess you 
pronounce it, is it Maersk?
    Mr. Delery. Yes, I believe that is correct.
    Mr. Cohen. You say the Department announced that Maersk 
Line Limited agreed to pay $32 million--$31.9 to resolve qui 
tam allegations that it inflated invoices for transporting 
thousands of shipping containers to the U.S. military operating 
in Iraq and Afghanistan. Now, inflated invoices is not the same 
thing as difficulty in accounting. This seems like fraud.
    Mr. Delery. That is correct. That is correct, Congressman. 
My reference was to the process of needing to identify--
presumably, the fraud is done in cases like this over the 
course of many transactions, many invoices, and the exercise of 
putting it all together.
    Mr. Cohen. Was there any criminal action brought against 
the Maersk Line?
    Mr. Delery. I would have to check on that. I am not certain 
that there was.
    Mr. Cohen. It just seems like if somebody is ripping off 
the--Iraq--it is enough that the Afghanis are ripping us off, 
but then our own. And Maersk, where are they? Are they out of 
Sweden? Where are they from? Where is their----
    Mr. Delery. Again, I am not sure of the home.
    Mr. Cohen. But, wherever they are, all they are doing is 
passing that $32 million on to their customers. And unless 
there is a stronger penalty, which there should be, we are 
paying for it. We are paying for their corruption.
    Mr. Delery. Congressman, I completely agree with you about 
the conduct; and that is why the Civil Division has, as one of 
its highest priorities, protecting the taxpayers from fraud, 
waste, and abuse. So I would be happy to work with you and 
other Members of the Committee on any ideas that you have for 
additional penalties as we continue to try to tackle this very 
serious problem.
    Mr. Cohen. Well, I appreciate it. Because I would like to 
look into something for legislation. I mean, I do not know 
exactly what we can do. But all this is is the cost of doing 
business to some of these folks.
    The same thing with the drug companies. You had down I 
think it was--I forget which drug company, but it was a 
settlement, and Abbott Labs paid $1.5 billion, and 
GlaxoSmithKline paid an additional $600 million civil claims.
    Mr. Delery. Again, that is a very serious problem. And to 
make sure that these amounts are not viewed as simply the cost 
of doing business the Department is very focused on, as I 
indicated, nonmonetary components of the remedies. So in the 
Abbott case, for example, the company is subject to court-
supervised probation in connection with the settlement.
    Mr. Cohen. Let me ask you about those things: deferred-
prosecution agreements and court-supervised probations. Do you 
have anything to do with deferred-prosecution agreements?
    Mr. Delery. There could be some in these cases. 
Principally, it is other parts of the Department.
    Mr. Cohen. My red light is about to come on. You can 
answer. Be honest.
    Let me tell you this. We had hearings when I was Chair of 
this Committee on some deferred-prosecution agreements with 
some of the manufacturers of medical devices; and we found that 
Chris Christie, when he was the U.S. Attorney, had given one 
case to the former United States Attorney and he made like $30 
million out of it. And then there was another guy who had not 
prosecuted his brother, something to that effect, and he made 
$20 million or something. It was outrageous.
    Are there any controls in this Department of Justice to see 
to it that U.S. Attorneys cannot use their positions to enrich 
others and make the companies have to be basically prisoners of 
a private Attorney General?
    Mr. Delery. So, Congressman, on that, respectfully, I am 
not familiar with those cases or with the internal processes 
that would govern the U.S. Attorneys in those areas. The Abbott 
resolution that I was talking about did not involve a situation 
like that.
    Mr. Cohen. Well, let me ask you, right now, when the U.S. 
Attorneys appoint somebody in a deferred-prosecution case to be 
the monitor, does it come through your office at all or does 
the Justice Department in Washington have any controls?
    Mr. Delery. I would have to look into that. I certainly 
have not encountered that situation in my tenure here on the 
Civil Division, so we could certainly get back to you.
    Mr. Cohen. Do either of you have any knowledge of this?
    Ms. Moreno. Congressman, as a general matter I would say 
that the Department has a core goal of fair administration of 
justice. We--at least I will speak for the Environment 
Division, we work very closely with U.S. Attorneys Offices--we 
enforce the laws enacted by Congress, and we take a look at the 
facts in every case very carefully, as well as the law, and we 
proceed accordingly and exercise our discretion.
    Mr. Cohen. But you do not know if you have implemented any 
reforms to make sure that there is some control and protection 
even for the companies that might be evildoers in the past but 
not continuing to keep them in an abject position of almost 
corporate slavery.
    Ms. Moreno. All I can tell you is how we handle the cases 
and matters that come before us, and we do so very mindful of 
the rights of all the parties involved.
    Mr. Cohen. And you are going to ditto it. That is the 
company line and I got you.
    Thank you very much. I yield back the balance of my time.
    Mr. Coble. I thank the gentleman.
    As to the Christie matter--I am doing this from memory--I 
do not think there was any finding of wrongdoing on that, but I 
am going just from my memory on that.
    The gentleman from Arizona, Mr. Quayle, is recognized. In 
order of arrival I think you were the first one here.
    Mr. Quayle, you are recognized for 5 minutes.
    Mr. Quayle. Thank you, Mr. Chairman.
    Ms. Moreno, did your Department negotiate the proposed 
consent decree entered into by the National Parks Conservation 
Association and eight other environmental organizations with 
EPA Administrator Jackson on December 2, 2011, which 
established deadlines in which EPA must take action on States' 
regional haze implementation plans or promulgate Federal 
implementation plans?
    Ms. Moreno. That would be a consent decree within the 
Division, yes.
    Mr. Quayle. So your Division was the one that was 
negotiating that?
    Ms. Moreno. Yes.
    Mr. Quayle. Did you consult with the State of Arizona, 
local governments, the Navajo nation, or any stakeholder that 
would have to come under these regulations prior to entering 
into the proposed consent decree?
    Ms. Moreno. Congressman Quayle, to the extent that we 
entered into a consent decree--and let me step back and speak 
generally, and then I can address the specifics of your 
question. If we are in a situation where there has been a 
missed deadline, the agency is already in violation of a 
requirement enacted by Congress, what we will do is we will do 
outreach to interested parties in the context of the lawsuit. 
We will----
    Mr. Quayle. How do you define ``interested parties''? 
Because this is a big problem with these consent decrees and 
sue on settlement agreements, is that those stakeholders who 
are going to be coming under the regulations do not actually 
get a lot of outreach, do not get a seat at the table, and 
these consent decrees and sue on settlement agreements are 
actually done behind closed doors, and often in the case is 
that a complaint is filed in the same day that the agreement is 
filed as well, completely shutting out stakeholders.
    So when you say ``interested parties'' are you just talking 
about those that are actually suing the EPA or other agencies, 
rather than those that are actually going to be under the 
regulatory burdens that are going to be placed by the consent 
decree?
    Ms. Moreno. Thank you for the opportunity to be more clear 
and to respond to your question.
    There are the parties in the litigation and then there are 
the stakeholders that you have mentioned. If an agency has 
missed a deadline, our goal is to get the agency to be in 
compliance with the mandatory requirements that Congress has 
reflected in the statutes. To that end, what we will do is we 
will seek to get the agency in compliance by negotiating an 
agreement in the context of litigation--and I am speaking 
generally--that will get the agency into compliance on a 
specific deadline.
    In the context of those agreements, whether they be consent 
decrees or settlement agreements on a deadline suit, we will 
negotiate the agreement. We will file it to the court usually 
by way of stipulation. We do not always agree with parties in 
the litigation.
    Mr. Quayle. I just do not have that much time. So can you 
just get to the question of did you actually consult with the 
State of Arizona, the Navajo tribe, local governments, and 
other stakeholders when you entered into the consent decree--
the proposed consent decree on December 2, 2011?
    Ms. Moreno. As I sit here, I cannot tell you specifically 
as to all of those stakeholders, but I would like to get to an 
important point.
    Mr. Quayle. Well, if you could just get back to me on that, 
that would be great.
    Ms. Moreno. I would be happy to.
    Mr. Quayle. But one of the things that is troubling about 
the manner in which these types of decrees and agreements are--
are you aware that this agreement actually affects the Navajo 
generating station in Arizona? And if the Navajo generating 
station is forced to shut down, that is going to cost hundreds 
of jobs in Arizona. Many of them are Native Americans, the vast 
majority of them will be Native Americans, and it will possibly 
triple energy costs and water costs for the whole entire State 
of Arizona. These type of factors, are they even taken into 
consideration when you enter into a consent decree or a 
settlement agreement?
    Ms. Moreno. As you know, what we do at the Department of 
Justice is we enforce the laws as enacted by Congress. We do 
not make policy. We are not the agencies who in fact go through 
the public and notice process under the Administrative 
Procedure Act to adopt rules. The Environmental Protection 
Agency in the case that you have mentioned would be the agency 
that certainly would do that.
    In settlements--and now I want to give you a different 
example. For example, under the Clean Water Act, we often do 
consider the party's--for example, a municipality's ability to 
pay in enacting--in agreeing with a municipality on Clean Water 
Act commitments that may be sequenced over time.
    So in the context of trying to get a municipality or 
another party into compliance in the Superfund context we also 
consider ability to pay. We do try to structure the agreements 
in a way that compliance will be achieved, because that is our 
ultimate goal.
    Mr. Quayle. Mr. Chairman, just one last question.
    No other Administration has utilized consent decrees and 
settlement agreements as broadly as this Administration has, 
whether it is Bush--either Bush or Reagan or Clinton. Was there 
a decision from either Attorney General Holder or from others 
higher up within the Administration to say that we are going to 
use this process to make sure that we have different 
regulations that have--I mean, this has just never been done 
before where we have stakeholders completely cut out of the 
process.
    There is the Meese memo, which I am sure you are aware of, 
that was put forth in Reagan that was pretty much abided by by 
future Administrations but not this one. What is the decision 
behind utilizing this process as a way to really I think go 
around Congress to make sure that we have, you know, the 
rulemaking authority that has gone through the courts rather 
than through the executives?
    Ms. Moreno. Congressman Quayle, I can personally tell you 
that we are fully complying with the Meese memo. In fact, in 
consent decrees that I approve and review I look to make sure 
that in fact we are complying with the Meese memo requirements 
that are now--also appear in regulations.
    Parties to these consent decrees are agreeing to or 
stipulating to a deadline. The agency continues to go through 
the rulemaking process with all of the Administrative Procedure 
Act protections to ensure notice and public comment. So on the 
substance there is an opportunity for stakeholders to 
participate. And in the context of the litigation itself there 
is an opportunity under Federal Rule of Civil Procedure 24 for 
parties to intervene in the litigation.
    I can say to you that we are very, very mindful of our 
role. I cannot give you a point of comparison in terms of the 
use of consent decrees in other Administrations and this one. 
All I can tell you is that we look at each case individually. 
That is how we proceed with career prosecutors and with my 
office and things that come to my desk. We proceed with great 
care, given the role of the Department of Justice, in the fair 
administration of justice.
    Mr. Quayle. Okay. Thank you very much.
    I see my red light is on, so I yield back.
    Mr. Coble. The distinguished gentleman from Florida, Mr. 
Ross, is recognized for 5 minutes.
    Mr. Ross. Thank you, Mr. Chairman.
    Ms. Moreno, to follow up with you, you have about 7,000 
cases that your Division handles?
    Ms. Moreno. Currently, we have about 7,000 filed cases and 
matters.
    Mr. Ross. Active. About how many of those would you say 
involve NEPA, the National Environmental Policy Act?
    Ms. Moreno. I would have to provide that information. I do 
not have those statistics off the top of my head.
    Mr. Ross. Half of them probably?
    Ms. Moreno. I could not say. Half of our docket is 
defensive in nature, and there would be certainly some NEPA 
cases, and I am happy to provide the statistics.
    Mr. Ross. If you would not mind, I would appreciate that.
    Now, as you know, under NEPA, of course, while there is a 
process, there is no procedure. And it can take years, it can 
take decades in some regards to the resolution of matters in 
the permitting process under NEPA. Would you not agree that 
there should be some procedure in place that would streamline 
the litigation that ensues--well, not only with the litigation 
but the process itself?
    Ms. Moreno. Congressman Ross, I can say that in this 
Administration the Council on Environmental Quality has in fact 
issued a number of documents, guidance to try to streamline 
processes under NEPA.
    Mr. Ross. And that would include also maybe standing? That 
an interested party would have to have--would develop standing 
to sue only after they have been involved in the permitting 
process?
    Ms. Moreno. I do not believe that the reforms that the 
Council on Environmental Quality has adopted include that 
particular aspect, but I would have to check.
    Mr. Ross. But wouldn't you agree that one of the biggest 
problems that we have in defending NEPA cases is the fact that 
you have people come in after the issuance of a permit who 
allege standing and do so within a 6-year statutory of 
limitations period?
    Ms. Moreno. I couldn't say that that is a broad-based 
problem that we see.
    As you know, we do defend NEPA cases. The cases do not 
require any particular outcomes. The cases certainly--well, I 
should say the statute certainly requires a process, 
consideration of environmental impacts, both beneficial and 
detrimental, for certain----
    Mr. Ross. Let us talk about the statute of limitations 
here. It is 6 years, right, under NEPA for somebody to bring a 
suit under NEPA? I mean it defaults to the APA statute.
    Ms. Moreno. It does.
    Mr. Ross. So, therefore, 6 years. I mean, wouldn't it be 
more prudent that if we are interested in actually seeing these 
projects go through the permitting process to maybe have a 
shortened period? Wouldn't that be a little bit more 
advantageous in your defense of some of these cases if we had a 
shorter statute of limitations period from 4 to 2--6--go down 
to 4 or even 2 years?
    Ms. Moreno. To the extent that there is a consideration of 
proposals to amend existing requirements under the 
Administrative Procedure Act I am not in a position to address 
those.
    Mr. Ross. But it would help in your--it may lighten your 
caseload if you had a reduced statute of limitations, would you 
not agree?
    Ms. Moreno. As a general matter, I could say that defense 
lawyers always like having as many tools available as possible.
    Mr. Ross. And would another tool that would be good would 
also be that which would constitute standing, and that in order 
to have standing you should be involved in the permitting 
process and at least present your concerns at that point in 
order to be able to sue later on?
    Ms. Moreno. Congressman, I am not in a position to 
address----
    Mr. Ross. But as a defense lawyer representing the EPA who 
is your client in this case, would it not be better, more 
advantageous, to at least define what standing would be and to 
have standing to be allowed only when you have been involved in 
the permitting process and not after the fact within the 6-year 
period of time?
    Ms. Moreno. I can tell you that we enforce and have the 
benefit of the laws enacted by Congress, but I am not in a 
position----
    Mr. Ross. But you would go for reduced litigation, would 
you not? I mean, you do not want to proliferate litigation, do 
you? I mean, as a defense lawyer, come on. Unless you are 
billing by the hour, I cannot understand that.
    Let me move on to something else. You talked about the 
Clean Water Act and how--that you take that into consideration, 
the economic impact that it may have when entering into a 
consent decree.
    I happen to be from the great State of Florida where we had 
the Clean Water Act imposed upon us through numeric nutrient 
water criteria. A lot of concerns over that. It is estimated 
anywhere between $800 million to $3 billion in compliance alone 
in the agricultural industry could cost as many as 14,000 jobs 
in the agricultural industry. That is a significant impact. Was 
that taken into consideration at the time the consent decree 
was entered?
    Ms. Moreno. Congressman, what we do in a context like that 
is we work with our client agencies. We work with our client 
agencies either to defend or enforce.
    Mr. Ross. But you did not take into consideration--I mean, 
you testified with Mr. Quayle's question that especially with 
the Clean Water Act you took into consideration the economic 
impact, the financial impact. But yet you do not know if you 
took it into consideration or not when entering into the 
consent decree regarding the numeric nutrient water criteria 
with Florida. You do not know. It would be safe to say you do 
not know, unless you do know.
    Ms. Moreno. Well, I am trying to answer your question in 
the context of what I do know.
    Mr. Ross. Okay.
    Ms. Moreno. And I am trying to separate out what 
considerations the agency may have had in setting the criteria 
and the considerations that we have in litigation. Filing a 
case is different than settling a case. In the Clean Water Act 
context that I was talking about before, I was talking about in 
the context of settlement where we do have more opportunities 
to work with a party sued by the United States to come up with 
a plan that is not only feasible but that can be complied with 
and implemented.
    Mr. Ross. I agree.
    I see my time is up, but I want to request that if you 
would supplement your answer with any evidence that would 
indicate that those economic impacts were taken into 
consideration when entering in that consent decree with the 
numeric nutrient criteria.
    I yield back.
    Ms. Moreno. I will be happy to----
    Mr. Coble. And I will say to the gentleman from Florida we 
will keep this record open for 5 days so we can address that.
    The distinguished gentleman from South Carolina, Mr. Gowdy, 
is recognized.
    Mr. Gowdy. Thank you, Mr. Chairman.
    To whom should I direct my question about why the State of 
South Carolina was sued for its efforts to assist in 
immigration enforcement?
    Mr. Delery. That would be a Civil Division matter, 
Congressman.
    Mr. Gowdy. And why was the State of South Carolina sued for 
trying to do what the Federal Government has been woefully 
inadequate at doing? In fact, we have had hearing after hearing 
where immigration enforcement officials have come and said they 
are overworked and underpaid and a whole litany of reasons why 
they cannot do it; and then a State wants to assist and they 
wind up being sued, which is not an infrequent occurrence with 
my State. I think we very three current lawsuits that the 
Department of Justice has filed against us. So why don't you 
want our help with immigration enforcement?
    Mr. Delery. I think, Congressman, the Federal Government 
certainly looks for and relies on the assistance of States in 
enforcing immigration laws, and that has been reflected in the 
policy statements of the government and in the pleadings that 
have been filed in that case. But when the State crosses from 
cooperation with Federal law and Federal priorities into 
creating, in effect, a State-level immigration policy, that is 
where the government concluded the constitutional violation 
occurred.
    Mr. Gowdy. But when States pass guest worker laws on their 
own you do not sue them.
    Mr. Delery. Well, Congressman, in the State of Utah, that 
is one that I am aware of----
    Mr. Gowdy. Have you filed suit in the State of Utah?
    Mr. Delery. We have filed in the State of Utah but not 
against the State worker program, because it does not go into 
effect until 2013. But we have told the State of Utah that, in 
our view, that provision of the State law is preempted because 
it conflicts with Federal law and that if it remains on the 
books at the time that it is scheduled to go into effect next 
year we would be prepared to take action at that time.
    Mr. Gowdy. We have concurrent jurisdiction in drug cases, 
agreed?
    Mr. Delery. That is my understanding.
    Mr. Gowdy. We have concurrent jurisdiction in bank robbery 
cases. The good ones go to the U.S. Attorney's Office and the 
ones that are tougher to prove go to the State DA's office, 
right?
    Mr. Delery. Again, that is my general understanding.
    Mr. Gowdy. When a stop and rob is robbed, it could be a 
hobjack case if the United States Attorney's Office wants to 
take it or it could just be a garden variety common law robbery 
case in State court.
    We have had hearing after hearing--and I do not even want 
to get into administrative amnesty by memo. They say they do 
not have the tools, they do not have the workers, they do not 
have the time, they are having to prioritize who is removed, 
where it is enforced, where it is not enforced. I would just 
think that you would welcome the help from States, and it just 
doesn't seem like that is the case.
    Mr. Delery. Congressman, again, I think the Federal 
Government does welcome and does work closely with States and 
immigration enforcement.
    Mr. Gowdy. You can understand how the filing of a suit 
against a State might lead that State to conclude otherwise.
    Mr. Delery. I think, Congressman, here the situation was, 
as I indicated, that after careful review the government 
concluded that, in the case of South Carolina and some other 
States, that by creating a State-level immigration policy in an 
area that the Constitution reserves to the Federal Government 
and creating a patchwork of immigration laws that that not only 
conflicted with the constitutional structure but would be 
problematic.
    Mr. Gowdy. What portion of the Constitution do you read as 
giving exclusive--are you talking about article I, Section 8, 
where it says the process of naturalization? Is there another 
basis for it?
    Mr. Delery. I think--and other enumerated authorities 
related to foreign affairs. I think the Supreme Court has 
recognized that immigration is--because it is connected closely 
to foreign affairs is an area of Federal authority.
    Mr. Gowdy. To whom should I direct my questions about 
Medicare and Medicaid fraud?
    Mr. Delery. That would also be me, Congressman.
    Mr. Gowdy. In the last 12 months, how many active prison 
sentences have been meted out for Medicaid or Medicare fraud?
    Mr. Delery. I am sorry. Active prison sentences.
    Mr. Gowdy. Active prison sentences. Not fines, not 
corporate, you know, don't do it again. Active prison 
sentences.
    Mr. Delery. Right. I don't know that number, Congressman, 
but we could certainly----
    Mr. Gowdy. Yes. Round number.
    Mr. Delery. I am sorry. I don't have that.
    Mr. Gowdy. Ten? Hundred?
    Mr. Delery. Unfortunately, Congressman, I can't speculate. 
I am happy to get back to you with----
    Mr. Gowdy. Do you know how many times you filed a motion 
for upward departure in those sentencing hearings to try to 
send an even clearer message?
    Mr. Delery. I don't, Congressman.
    Mr. Gowdy. Would you be willing to give me that 
information?
    Mr. Delery. To the extent that we can identify it, we will 
certainly get back to you.
    Mr. Gowdy. You would know. I mean, I assume you are a 
supervisor in the Department. You have to approve motions for 
upward departure, don't you?
    Mr. Delery. I think it depends--actually, I think usually 
those have not come to me, at least in my experience.
    Mr. Gowdy. Are you familiar with the Texas orthodontia 
fraud case?
    Mr. Delery. Not specifically.
    Mr. Gowdy. There was more money given out in the State of 
Texas for orthodontists--and I am not aware of any study that 
shows there is more crooked teeth in Texas than there is any 
other State--but more money was doled out in Texas than all 
other States combined. In fact, they were advertising free 
braces. Far be it for me to tell the bureau or anyone else 
where they ought to look, but that just strikes me as a case 
that probably would not be that tough to prove.
    I yield back, Mr. Chairman.
    Mr. Coble. I thank the gentleman. We are coming in on the 
1:15 deadline.
    Ms. Keneally, you have been on the sideline. Let me put one 
question to you, if I may. Is it true that, as currently 
written, the aggravated identity theft statute, 18 USC 1028(a), 
does not help you specifically to reach this issue?
    Ms. Keneally. Thank you for that question.
    I believe that that statute, along with the tax statutes 
and other statutes that we have, are providing us very, very 
good tools to address the stolen identity refund fraud cases.
    Mr. Coble. Could you benefit from additional investigative 
tools or resources to handle tax fraud cases, or is the 
operation adequate as is?
    Ms. Keneally. I am pleased to report that I believe we are 
doing a very effective job in these areas, but I do understand 
that there are various legislative proposals, and we would be 
happy to work with the Department to comment on any of them.
    Mr. Coble. You can get back with us on that.
    Ms. Keneally. Thank you.
    Mr. Coble. Mr. Cohen, for one final question. 
    Mr. Cohen. Thank you, sir.
    Ms. Keneally, in my jurisdiction there is a company called 
Mo' Money Taxes, and you smile. You know about Mo' Money Taxes. 
Congressman Scott and Congressman Thompson and others have 
asked, as well as I have, to look into what they have done or 
allegedly done in terms of checks and not getting refunds, et 
cetera. I am sure some of these companies--and maybe this 
company as well--do a great service, but the IRS has a service 
where you all, as I understand it, will do taxes for folks free 
of charge; is that not--am I not right on that? I know you are 
not IRS, but you know about it, don't you?
    Ms. Keneally. I am sorry. I am actually unfamiliar with 
that service.
    Mr. Cohen. You are not familiar with that service.
    Well, let me ask you this then. Is there anything the Tax 
Division does on a proactive basis to try to ferret these folks 
out before they either misdirect their checks or lose their 
checks or keep their checks or whatever?
    Ms. Keneally. The Tax Division is very committed to all 
forms of enforcement against fraudulent return preparers.
    Mr. Cohen. Right.
    Ms. Keneally. It would be inappropriate for me to comment 
on any particular cases.
    Mr. Cohen. I know that. But do you do anything in a 
proactive way to seek out and find folks that might not be 
doing things in the proper way to protect the taxpayers?
    Ms. Keneally. The Tax Division cases come to it by referral 
from the IRS or by request from U.S. Attorneys Offices to open 
a grand jury investigation.
    Mr. Cohen. Right.
    Ms. Keneally. We have made very clear that this is an 
enforcement priority. We have a number of situations where we 
have our prosecutors very actively involved in ongoing 
investigations, and we are bringing every resource and making 
every effort----
    Mr. Cohen. And that is great, but is there anything that 
you do--maybe it is the IRS's job, but is there anything you do 
to try to proactively find these folks before it gets to an 
enforcement case?
    Ms. Keneally. It is primarily the IRS's job. I have said 
and will say as many times as I can that we would rather charge 
these cases as attempted than completed. We would rather get to 
them before the crime occurs. We are making every effort to use 
the information that we are learning in these investigations to 
develop better investigative tools, to work with the IRS in 
training on what we have learned, to learn from them, and to be 
as proactive in this area as we can.
    Mr. Cohen. Thank you. I yield back.
    Mr. Coble. I thank the gentleman, and we thank the 
witnesses for your testimony today.
    Without objection, all Members will have 5 legislative days 
to submit to the Chair additional written questions for the 
witnesses which we will forward and ask the witnesses to 
respond as promptly as they can so that their answers may be 
made a part of the record.
    This hearing stands adjourned.
    [Whereupon, at 1:13 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

 Prepared Statement of the Honorable Steve Cohen, a Representative in 
Congress from the State of Tennessee, and Ranking Member, Subcommittee 
              on Courts, Commercial and Administrative Law
    I thank Chairman Coble for holding today's hearing on three of the 
Department of Justice's litigating divisions--the Civil, Tax, and 
Environment and Natural Resources Divisions.
    Two years ago, when I was Chairman of this Subcommittee, we held a 
very fruitful oversight hearing on the Civil Division. I am glad to 
have the Civil Division back before us today.
    I also appreciate the opportunity to hear from the Tax and 
Environment and Natural Resources Divisions to discuss their 
activities, accomplishments, and resource needs.
    Every day, the attorneys of these Divisions, like all Department of 
Justice attorneys, do the yeoman's work of representing the American 
people in court on a broad range of matters, from defending the United 
States in national security matters to going after health care fraud, 
pursuing tax collections, and protecting the environment and consumers.
    Given the importance of their work, Congress should ensure that 
these Divisions, like the Department as a whole, are provided the funds 
and other resources necessary to carry out their missions.
    For fiscal year 2013, the President requests $298,040,00 for the 
Civil Division, $110,360,000 for the ENRD, and $106,459,000 for the Tax 
Division.
    These are modest amounts in light of the overall federal budget, 
and, especially, in light of the returns to the taxpayer from the work 
of these Divisions.
    For example, last year the ENRD obtained more than $650 million in 
civil recoveries and criminal fines and saved taxpayers another $2.1 
billion by successfully defending against meritless claims.
    The Civil Division's civil fraud recoveries since 2009 have 
exceeded $9 billion. Moreover, the Division successfully defends the 
United States in cases sometimes involving billions of dollars.
    The Tax Division's work brings in $13 in tax collections for every 
dollar spent on the Division.
    And beyond the monetary benefits of these Divisions' work are the 
hard-to-quantify, but in some ways even more valuable, benefits, like 
ensuring clean air and clean water, maintaining public health, and 
securing dignity for all Americans.
    Unfortunately, we have already seen some evidence that not everyone 
in Congress shares my view of the value of these Divisions' work. As 
Acting Assistant Attorney General Stuart Delery notes in his written 
testimony, the House recently passed an FY 2013 appropriations bill 
that did not include requested funding for the Civil Division's 
financial fraud work or for adjustments-to-base, which are intended 
simply to keep pace with the cost of things like increases in rent, 
contracts, and health benefits coverage.
    Such a funding approach is short-sighted. While no one likes 
wasteful spending, the money requested by these Divisions is far from 
being wasted. Rather, it is an investment in protecting the public fisc 
as well as ensuring that our laws be enforced and that justice be 
served.
    I thank our distinguished witnesses for taking the time to update 
us on the work of their respective Divisions and I look forward to 
their testimony.

                                

Prepared Statement of the Honorable John Conyers, Jr., a Representative 
 in Congress from the State of Michigan, and Ranking Member, Committee 
                            on the Judiciary
    The Department of Justice plays a critical role in enforcing our 
Nation's laws and protecting the rights of all Americans.
    This agency is essentially the federal government's lawyer, a 
tremendous responsibility that must be implemented in a nonpartisan and 
truly fair manner that is above reproach.
    Today, three components of the Justice Department will report to us 
about their work and accomplishments, namely, the Civil Division, the 
Environment and Natural Resources Division, and the Tax Division.
    The Civil Division plays a major role in defending the interests of 
the United States and its citizens over a broad spectrum of issues that 
pertain to, for example, national security, health care fraud, 
immigration enforcement, and mortgage fraud.
    The ENRD is charged with protecting the environment and the 
Nation's natural resources, as well as safeguarding the interests of 
Native Americans.
    The Tax Division ensures compliance with the U.S. Tax Code and that 
the Nation's tax revenues are collected. The last time our Committee 
conducted any oversight of this Division may have been in 1978, 
according to an informal survey by the Congressional Research Service.
    Accordingly, there is much ground to cover, and in particular, I 
want to focus on these issues.
    To begin with, the Judiciary Committee--as the authorizing 
committee for the Justice Department--must ensure that these Divisions 
have the resources and funding from Congress that they need so that 
they can fulfill their important missions.
    Adequate funding is vital to ensuring that these Divisions, like 
other components of the federal government, can continue to perform 
their duties on behalf of the American people.
    Each of these Divisions recovers or saves far more in taxpayer 
dollars than is spent to keep them operating.
    For example--

      Last year alone, the ENRD saved American taxpayers more 
than $2.1 billion by defending the United States against unmeritorious 
claims and obtained more than $650 million in civil recoveries and 
criminal fines.

      For every dollar invested in a Tax Division attorney, $13 
in tax collections is generated for the Nation's Treasury.

      And, Civil Division attorneys each year litigate 
thousands of cases that concern billions of dollars in claims and 
recoveries. For example, the Division's civil fraud recoveries since 
2009 have exceeded $9 billion.

    Yet, earlier this month, the House passed appropriations 
legislation that fails to include some of the Administration's 
requested increases that would fund critical programs, such as the 
Civil Division's financial fraud investigation and prosecution task 
force.
    It also fails to include enhanced funding to cover increases in 
rent, employee health benefits, and other fundamental expenditures 
needed to keep this agency functioning.
    Unfortunately, the current political climate appears to be 
dominated by a shortsighted agenda that irrationally prioritizes budget 
cuts, when, in fact, those cuts may ultimately prevent these agencies 
from doing their jobs. These cuts are advocated without much thought to 
the long-term consequences of doing so.
    Second, with respect to the use of settlement agreements and 
consent decrees, I note that the Divisions appearing before us today 
rely heavily on these tools to carry out their duties in a manner that 
is efficient, cost-effective, and fair.
    In fact, there are repeated references to these settlements and 
their many benefits in the prepared statements submitted by the 
witnesses for today's hearing.
    Nevertheless, some of my colleagues on the other side of the aisle 
have expressed serious concerns about the use of settlement agreements 
and consent decrees.
    In fact, earlier this year, this Subcommittee conducted a 
legislative hearing on two bills introduced in response to these 
purported concerns.
    The proponents of these measures argue that consent decrees 
involving state and local government defendants may be too difficult to 
terminate or modify and that they therefore unduly undermine the 
authority of state and local government officials.
    We also heard that agencies collude with sympathetic plaintiffs in 
order to engage in back-door rulemaking via consent decrees or 
settlement agreements.
    Frankly, I have strong doubts that either of those points have 
much--if any--merit.
    Finally, I note that the Civil Division plays a prominent role in 
the Administration's Financial Fraud Enforcement Task Force. In 
particular, the Division is a co-chair of the Mortgage Fraud Working 
Group and the recently formed Residential Mortgage-Backed Securities 
Working Group.
    While I appreciate the efforts that the Justice Department has 
undertaken to address fraudulent activities in the mortgage lending 
industry and in the securitzation process, much more needs to be done.
    For example, it appears from the written testimony that 2,100 
defendants have been charged with mortgage-fraud related crimes. That 
number, however, does not appear to include any of the principal 
mortgage lenders and Wall Street players that had a role in causing 
this financial disaster.
    I want assurances that those responsible for causing one of the 
Nation's most severe financial crises since the Great Depression are 
brought to justice.
    The millions of American homeowners who were tricked into mortgages 
that ultimately caused them to lose their homes, the many who were 
victims of fraudulent foreclosure practices, and the millions of us 
whose retirement investments disappeared in the wake of the so-called 
Great Recession deserve at least that much.





                                






                                

















                                 
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