[Senate Hearing 112-]
[From the U.S. Government Publishing Office]





 
  COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR 
                            FISCAL YEAR 2013

                              ----------                              


                        THURSDAY, MARCH 15, 2012

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:05 a.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Barbara A. Mikulski (chairman) 
presiding.
    Present: Senators Mikulski, Feinstein, Lautenberg, 
Hutchison, Murkowski, and Graham.

                         DEPARTMENT OF JUSTICE

                    Federal Bureau of Investigation

STATEMENT OF ROBERT S. MUELLER III, DIRECTOR

            OPENING STATEMENT OF SENATOR BARBARA A. MIKULSKI

    Senator Mikulski. Good morning, everybody. The Commerce, 
Justice, Science, and Related Agencies Subcommittee of the 
Senate Appropriations Committee will come to order.
    Today, we are taking the testimony of and engaging in a 
conversation with our Director of the Federal Bureau of 
Investigation (FBI), Robert S. Mueller III.
    This will be a two-part hearing. One will be here in open 
and public session, and then, because of the sensitivity of 
issues and budget involved for the FBI's fight against the 
global war against terrorism, we will have a classified 
briefing. So upon the conclusion of this phase, we will recess 
and reconvene in a classified environment in the Capitol 
Visitors Center (CVC), and all members are welcome. This is 
where we can have an additional in-depth conversation.
    Today, the subcommittee will hear from the Director of the 
FBI. We're grateful for Director Mueller's service and his 
agreement to serve 2 more years to work with our President in 
order to keep our streets, communities, and country safe.
    We begin our examination of the FBI's fiscal year 2013 
budget request with this open hearing.
    As chairwoman of this subcommittee, when I look at the FBI 
budget, I have three priorities: national security, which is 
how the FBI is working to keep America safe; community 
security, how the FBI is working with local law enforcement to 
keep our families and our neighborhoods safe; and then also 
oversight and accountability, to ensure that we're spending 
taxpayers' dollars wisely and ensuring that we get value for 
our dollar.

                          PREPARED STATEMENTS

    I'm going to ask unanimous consent, in the interest of 
time, that my full statement be included in the record along 
with a statement that Senator Mark Pryor has asked to be 
included.
    [The statements follow:]
           Prepared Statement of Senator Barbara A. Mikulski
    Good morning and welcome.
    Today, the Commerce, Justice, Science, and related agencies 
Subcommittee (CJS) will hear from Federal Bureau of Investigation (FBI) 
Director Robert S. Mueller III. We are grateful that Director Mueller 
agreed to serve for 2 more years.
    As Chairwoman, I have three priorities when examining the FBI's 
budget:
      National Security.--How is the FBI keeping America safe?
      Community Security.--How is the FBI keeping our families safe?
      Oversight and Accountability.--How is the FBI ensuring our tax 
        dollars are spent wisely?
    Today, we will learn more about how the FBI will use its funding to 
carry out its extraordinary responsibilities keeping 330 million 
Americans safe from terrorism and violent crime; dismantling organized 
crime and drug cartels; combating gang violence, and illegal drug and 
gun smuggling; and catching child sexual predators.
    Before we begin our hearing, I want to thank all of the hardworking 
FBI agents, analysts, and professional staff for their dedication and 
determination. Federal employees feel under siege and unappreciated. I 
want them to know that the CJS Subcommittee is on their side. We know 
what the FBI does every day to keep American safe, and we appreciate 
it.
    The President's budget request for the FBI is $8.2 billion. The 
request reflects the stringent budget reality. There are no new 
initiatives in the FBI's budget request this year. There is only one 
modest, targeted increase to enhance FBI's abilities to fight mortgage 
and financial fraud.
    In fact, FBI will be asked to do more with less in 2013. In order 
to afford to continue critical FBI efforts begun in previous years--
such as computer intrusions--the budget proposes $63 million in savings 
from lower-priority FBI programs. The FBI will also be required to give 
back $162 million in prior-year funding. FBI is also tasked with 
becoming the banker for all Federal law enforcement agencies on 
interoperable communications equipment purchases. I want to ensure that 
the FBI's budget maintains the FBI as our pre-eminent law enforcement 
agency.
    Additionally, if we don't avoid a sequester, FBI will be cut by 8 
to 10 percent across the board. We will want to hear from Director 
Mueller about the consequences of a cut like that and how it will 
impact the FBI's ability to carry out its mission.
    Our Nation faces a growing and pervasive threat overseas from 
hackers, cyber spies, and cyber terrorists. Cyber security may be the 
most critical component to our Nation's infrastructure. We need safe 
and resilient networks to protect our online banking and commerce, 
electrical and power grids, air traffic control systems and digitalized 
records. The budget request is $136 million for the FBI's cyber 
efforts, which is the same as the current level. I want to know if the 
request is sufficient for the FBI to carry out its role as a key 
guardian of our Nation's cyber security.
    After 9/11, the FBI was charged with a new national security 
mission to protect us from international terrorism. The FBI disrupts 
terrorist plots before they happen by identifying, tracking, and 
defeating terrorist cells in the United States. They dismantle weapons 
of mass destruction on U.S. soil. Today, counterterrorism and 
counterintelligence activities make up more than 40 percent of the 
FBI's budget. Just weeks ago, we saw the FBI's counterterrorism efforts 
up close when they arrested a man who was on a suicide mission plotting 
to blow up a bomb at the U.S. Capitol.
    I want to know if this budget request is enough to tackle all 
counterterrorism responsibilities, including weapons of mass 
destruction, cyber computer intrusions, foreign counterintelligence, 
and critical incident response.
    I also want to know how the FBI is protecting Americans from 
violent crime in their communities. The budget requests $2.7 billion 
for traditional crime fighting efforts here in the United States.
    The FBI targets sophisticated criminal organizations who prey on 
the vulnerable, including trafficking children for prostitution and 
schemers who scam families out of their homes. These organizations will 
do anything to make a profit. But I am concerned that this budget 
request is flat to fight violent crime and gangs.
    FBI's State and local law enforcement partners work with the FBI on 
task forces by fighting gangs and violent crime. State and local 
budgets are under stress and Federal help has been reduced. Crime-
fighting funding for State and local law enforcement has been cut by 
$1.5 billion or 43 percent since 2010.
    I am pleased that the budget request includes a modest increase to 
investigate the most complex financial crime cases, such as mortgage, 
corporate, and securities fraud. Mortgage fraud is the FBI's number one 
white collar crime problem. The FBI is investigating roughly 2,600 
mortgage fraud cases. This is down by 17 percent since 2010 peak of 
more than 3,100 cases. But the FBI expects its mortgage fraud caseload 
to remain high. Suspicious Activity Reports (SARs) are at the highest 
levels ever--93,000 last year.
    The budget requests $210 million to combat mortgage fraud. This is 
$15 million more than fiscal year 2012's enacted level. This funding 
will help hire 40 new special agents and four forensic accountants. It 
will establish two hybrid squads made up of agents, forensic 
accountants, and financial analysts to investigate complex financial 
schemes.
    Director Mueller, I know you are with me. We want to send a clear 
message to the predators. No more scamming or preying on hardworking 
Americans. If you break the law you will suffer the consequences.
    The President's budget request includes $109 million for the FBI to 
protect children, catch deviants who use the Internet to prey on 
children, and break up international sex trafficking and prostitution 
rings.
    The FBI plays an important role in enforcing the Adam Walsh Act. 
It's also responsible for monitoring and targeting Internet predators. 
It runs Innocent Images, a national initiative that in 2009 convicted 
more than 1,200 producers, distributors, and possessors of child 
pornography.
    The FBI's Innocence Lost initiative has rescued more than 1,100 
children from prostitution since 2003, including a victim who was just 
9 years old. Through this initiative, more than 500 pimps, madams, and 
their associates who exploit children through prostitution have been 
convicted. I want to hear from you if the budget request is sufficient 
to enhance child predator investigations, target predators before they 
strike and save children's lives.
    Finally, I want to say how proud I am of the men and women of the 
FBI who are on the job 24 hours a day, 7 days a week, fighting to keep 
America safe from terrorism and violent crimes.
    We must ensure that the FBI has the resources it needs to protect 
the lives of 330 million Americans. But we also want to make sure the 
FBI is a good steward of taxpayer dollars, making sure every $1 spent 
to keep our Nation safe is a $1 well spent.
    Thank you Director Mueller for your leadership. I look forward to 
continuing our productive relationship.
                                 ______
                                 
                Prepared Statement of Senator Mark Pryor
    First, I want to thank Chairman Senator Mikulski and Ranking Member 
Hutchison for their leadership and for conducting this important 
hearing to examine the President's fiscal year 2013 budget request for 
the Department of Justice (DOJ).
    I think that it is important that we work together with DOJ to 
provide our law enforcement organizations with the necessary funding to 
protect America and ensure the safety and security of its citizens. 
With that said, we all know that many tough decisions lie ahead as we 
strive to put our Nation's fiscal house in order, and I believe that no 
stone can remain unturned as we seek to do so. Effective oversight will 
be crucial in preventing and detecting cases of waste and abuse, and I 
am hopeful that the Attorney General and Inspector General will join us 
in seeking to increase efficiency within DOJ.
    As this subcommittee reviews the fiscal year 2013 budget request 
for DOJ, I look forward to working with the chairman and ranking member 
to ensure that taxpayer dollars are spent responsibly.
    Again, I thank Senators Mikulski and Hutchison for conducting this 
hearing. I look forward to Attorney General Holder's testimony and look 
forward to discussing the fiscal year 2013 budget request.

    Senator Mikulski. Having said that, my oral statement, to 
the point, is that we know that we ask the FBI to carry out 
extraordinary responsibilities, keeping 330 million Americans 
safe from terrorism and also violent crime; to continue their 
work to dismantle organized crime, which now has many new 
faces, many new locations, and many new techniques; and then 
the despicable drug cartels that continue to exist in our 
country and threaten our borders.
    We also ask the FBI to work to combat gang violence, 
illegal drug and gun smuggling, and at the same time to help us 
catch sexual predators.
    The President's budget request for the FBI is $8.2 billion. 
This request reflects the stringent budget reality in which we 
find ourselves. There are no new initiatives in the FBI's 
budget request this year, and only one modest, targeted 
increase, and that's the FBI's ability to fight mortgage fraud. 
In fact, the FBI will be asked to do more with less in 2013.
    In order to afford to continue the FBI's critical efforts, 
the budget proposes $63 million in savings from lower FBI 
programs, and the FBI will also have a give-back provision.
    The FBI is also tasked to become the banker for all law 
enforcement, helping with interoperable communication equipment 
purchases, not just for the FBI, but for the Drug Enforcement 
Administration (DEA), the Bureau of Alcohol, Tobacco, Firearms 
and Explosives (ATF), and U.S. Marshals. We've counseled the 
FBI to really watch this very carefully because, as we looked 
at our cousins in the Department of Homeland Security (DHS) 
appropriation, interoperable communications has been one of the 
biggest boondoggles I saw. Everybody bought a gadget, everybody 
got a gizmo, and at the end of the day none of those gadgets 
and gizmos could talk to anybody.
    So we're counting on the FBI to work to get it straight, 
and at the same time we need to get an update on their work on 
the Sentinel Program, our virtual case management file. Also, 
we want to be sure we take a look at the sequester consequences 
and what would be the impact on the FBI if there was an 8-
percent cut, and we need to know how this will impact the FBI's 
ability to carry out its mission.
    In the area of national security, the FBI was charged with 
protecting us from international terrorism. We disrupt 
terrorist plots before they happen by identifying, tracking and 
defeating them, and then also working to dismantle weapons of 
mass destruction. This definitely is not J. Edgar Hoover's FBI 
anymore. Counterterrorism and counterintelligence make up a 
substantial part of the FBI budget. Just weeks ago, we saw the 
FBI's counterterrorism efforts up close when they arrested a 
man who wanted to blow up the U.S. Capitol.
    Our Nation also faces a new kind of threat. That threat 
occurs in cyberspace. So we have cyber spies, cyber terrorists, 
and organized crime involved with cyber. Cyber is the new area, 
and we look forward to getting ideas and a concrete budget from 
the FBI Director on how we can keep us safe in that area and 
how they work with other intelligence agencies.
    I also want to know how the FBI is protecting Americans 
from violent crime and also fraud in their communities. The FBI 
targets sophisticated criminal organizations who prey on the 
vulnerable: the child pornographer, the trafficking in children 
and prostitution, the schemes and scams and bilking people out 
of Medicare, or mortgage fraud, and I'm concerned that this 
budget is flat to fight violent crime and gangs.
    I know my very able and wonderful colleague, Senator 
Hutchison, is going to talk about the Southwest Border. She's 
jazzed about it, and so am I, because of the ongoing threat at 
our border. State and local budgets are under stress, and we 
want to hear how you are leading that.
    I'm going to conclude my remarks, though, by saying this 
budget is not about numbers and statistics; it's about people, 
making sure that Americans are not victimized by any bad person 
or anyone with a predatory intent toward them. But we couldn't 
do it without the people who work for FBI.
    So, Director, before I turn to Senator Hutchison, I just 
want to thank you, and I'm thanking you for not only your 
service, but I'd like to thank you on behalf of all of those 
wonderful people who work every single day for the FBI, those 
that are out there in the field offices working on joint task 
forces, those that are around the world in, at times, very 
rugged and very dangerous positions. I know that the FBI works 
every day to protect us, that the people who work hard there 
every day are duty driven and dedicated, and they are in many 
ways our boots on the ground in local communities and also 
working with our intelligence and military agencies around the 
world. This is why I want them to know I respect them for the 
work they do, and I will fight for them in terms of their pay, 
benefits and pensions.
    So if we're going to say thank you, we want to thank you 
not only with words but with deeds.
    Thank you, and I'll turn to Senator Kay Bailey Hutchison.

               STATEMENT OF SENATOR KAY BAILEY HUTCHISON

    Senator Hutchison. Well, thank you very much, Director 
Mueller, for coming before our subcommittee. I'm happy to say 
that last year we thought it would be the last time that you 
appeared before our subcommittee, and I was very pleased that 
the President offered and you accepted an extension of your 
term, because I think what has happened at the FBI during your 
term is exponential. I think the changes that have taken place 
and the responsibilities that you've had have been more 
transformational than probably at any time since the beginning 
of the FBI.
    I do want to start my remarks just very briefly by 
recognizing also the chairwoman of this subcommittee, who will 
on Saturday become the longest-serving woman to serve in the 
Congress in the history of the United States Congress. We're 
going to make a big deal of that because we're really proud of 
this little pint-sized mighty-might who has outlasted them all.
    So, Mr. FBI Director, let me just state a couple of points. 
I think that Senator Mikulski has really outlined the big 
picture. There are a couple of areas of interest that I have, 
and concerns.
    Certainly, I think the Southwest Border has to be as much 
of a national security issue as any place that we have, and yet 
this request cuts the Southwest Border funding. I would 
question the priority of the administration in increasing the 
financial fraud enforcement and decreasing border security.
    So I'm going to say that I'll be looking carefully at that 
and hoping to restore at least the $5 million that was included 
to make it look like it was even funding. But really, that was 
just required to sustain the positions that had been added in 
the fiscal year 2010 border supplemental appropriations bill.
    So I'm hoping that we can add more where you think you need 
it the most, because that would be 13 border corruption task 
force members located in field offices across the border, as I 
understand it, and these are kind of the backbone of the FBI 
Southwest Border mission that provide intelligence and 
coordinate with the Southwest Intelligence Group (SWIG), El 
Paso Intelligence Center (EPIC), and the National Border Task 
Force. So I'm going to be looking at that very carefully.
    I'm also concerned and going to ask you about the $162 
million rescission and what exactly that is going to impact. If 
it is as it appears, that it would be the processing for 
fingerprinting and DNA on improvised explosive devices, that's 
an area where I think we could really link it to terrorists, 
and I wouldn't want to cut that unless you have other plans for 
using money to assure that is able to be done.
    So, and then the other area is cutting the contractors of 
counterintelligence programs, which would be informant 
validation, the Terrorist Screening Center, and the Foreign 
Terrorist Tracking Task Force. I will ask your opinion of 
those.
    And then the other area that I will ask you about is the 
FBI agents that were involved in the prosecution of the late 
Senator Ted Stevens. We had a disturbing hearing with Attorney 
General Holder last week in which we talked about the 
Department of Justice (DOJ) employees who apparently are still 
prosecuting at DOJ even after the report was released and the 
Attorney General himself dismissed the case against Senator 
Stevens because of misconduct on the part of the prosecutors. 
So I will want to know if there are people still at the FBI--I 
think there were just two agents that were accused of being 
involved in it. So I'd like to know your opinion of that, as 
well.
    So I thank you for all that you're doing in the other areas 
that Senator Mikulski mentioned, but especially knowing the 
role of the FBI now in international intelligence and law 
enforcement. So that expansion has been on your watch, and I 
appreciate that you have been able to handle it and work with 
the intelligence agencies so well. Thank you.
    Senator Mikulski. Director Mueller, please proceed.

               SUMMARY STATEMENT OF ROBERT S. MUELLER III

    Mr. Mueller. Thank you, Madam Chairwoman. Let me also join 
the others on the subcommittee in congratulating you on your 
tenure, which is far longer than mine, I might add.
    Also, let me thank you for your comments with regard to the 
FBI personnel. I'm reminded of that because recently I had an 
opportunity to talk to a number of agents, analysts and others 
who all worked 24 hours a day over the holidays in the case 
that we recently took down in Tampa, which was indicative of 
the degree of sacrifice that you see from the personnel in the 
organization. So, my thanks for commenting on that.
    Let me start by saying that the FBI continues to face 
unprecedented and increasingly complex challenges. As you know 
and as you pointed out, we must identify and stop terrorists 
before they launch attacks against our citizens. We must 
protect our Government, our businesses, and our critical 
infrastructure from espionage and from the potentially 
devastating impact of cyber-based attacks.
    We must root out mortgage fraud, fight white-collar and 
organized crime, stop child predators, and protect civil 
rights; and we must uphold civil liberties and the rule of law 
while carrying out this broad mission.
    For fiscal year 2013, the FBI has requested a budget of 
$8.2 billion to fund more than 13,000 Special Agents, more than 
3,000 intelligence analysts, and more than 18,000 professional 
staff. This funding level will allow the FBI to maintain, just 
maintain our base operations, with a small increase, as you 
pointed out, for financial and mortgage fraud investigations.
    Let me summarize, if I might, the key national security and 
criminal threats that this funding will address. First, the 
terrorist threat. While Osama bin Laden and other key leaders 
have been removed, al Qaeda and its affiliates remain a top 
terrorist threat in the United States. Core al Qaeda, operating 
out of Pakistan, remains committed to high-profile attacks 
against the West, and meanwhile al Qaeda affiliates and 
adherents have attempted several attacks on the United States. 
Such attacks include the failed Christmas Day airline bombing 
in 2009, the attempted truck bombing of Times Square in May 
2010, and the attempted bombing of U.S.-bound cargo planes in 
October of the same year.
    We are also concerned about the threat from homegrown 
violent extremists. As you pointed out, Madam Chairwoman, last 
month the FBI arrested Amine El Khalifi, a 29-year-old Moroccan 
immigrant. Khalifi allegedly attempted to detonate a bomb in a 
suicide attack on the U.S. Capitol building. Over the past year 
we have seen similar attempts by homegrown extremists in 
Florida, Massachusetts, Texas, and Washington State. These 
cases exemplify the need to continue to enhance our 
intelligence capabilities and to get the right information to 
the right people before any harm is done.
    Turning to foreign intelligence: while foreign intelligence 
services continue their traditional efforts to obtain military 
and state secrets, they also seek technology and intellectual 
property from companies and universities. For example, last 
year a long-time Northrop Grumman engineer was sentenced to 32 
years in prison for selling secrets related to the B-2 stealth 
bomber to several nations, including China; and last fall, a 
former Dow Chemical scientist plead guilty to transferring 
stolen trade secrets to individuals in Europe and in China. 
These are just a few examples of the growing insider threat 
from employees who may use their access to commit economic 
espionage.
    Turning to the cyber threat: this will be an area of 
particular focus for the FBI in the coming years, as cyber 
crime cuts across all of our programs. Terrorists are 
increasingly cyber savvy, and like every other multinational 
organization, they are using the Internet to grow their 
business and to connect with like-minded individuals, and they 
are not hiding in the shadows of cyberspace.
    Al Qaeda in the Arabian Peninsula has produced a full-
color, English-language online magazine. Al Shabaab, an al 
Qaeda affiliate in Somalia, has its own Twitter account. 
Extremists are not just using the Internet for propaganda and 
recruitment. They are using cyberspace to conduct operations, 
and while, to date, terrorists have not used the Internet to 
launch a full-scale cyber attack, we cannot underestimate their 
intent. In one hacker recruiting video, a terrorist proclaims 
that cyber warfare will be the war of the future.
    And then you have State-sponsored computer hacking and 
economic espionage, which poses significant challenges as well. 
Just as traditional crime has migrated online, so too has 
espionage. Hostile foreign nations seek our intellectual 
property and our trade secrets for military and competitive 
advantage. The result of these developments is that we are 
losing data, we are losing money, we are losing ideas, and we 
are losing innovation. And as citizens individually, we are 
increasingly vulnerable to losing our private information.
    The FBI has, in the past several years, built a substantial 
expertise in order to try to stay ahead of these threats, both 
at home and abroad. We now have cyber squads in every one of 
our 56 field offices, with more than 1,000 specially trained 
agents, analysts, and forensic specialists. Borders and 
boundaries pose no obstacles for hackers, so the FBI uses our 
63 Legal Attache offices around the world to collaborate with 
our international partners. We also have Special Agents 
embedded in Romania, Estonia, Ukraine, and the Netherlands 
working to identify emerging trends and key players in the 
cyber arena.
    And here at home, the FBI leads the National Cyber 
Investigative Joint Task Force, which brings together 18 law 
enforcement, military, and intelligence agencies in order to 
stop current and prevent future attacks. The task force 
operates through threat focus cells, specialized groups of 
agents, officers and analysts that focus on particular threats, 
such as botnets.
    Together, we are making progress. Just last week, DOJ and 
FBI, along with our domestic and foreign partners, announced 
charges against six hackers who align themselves with a group 
known as Anonymous. According to the charges, they were 
responsible for a broad range of high-profile cyber intrusions 
targeting companies, the media, and law enforcement since 2008. 
This case was successful because we worked extensively with our 
overseas partners, and we used our traditional investigative 
and intelligence techniques in the cyber arena.
    We must continue to push forward and to enhance our 
collective capabilities to fight cyber crime. We do need 
tougher penalties for cyber criminals to make the cost of doing 
business more than they are willing to bear.
    Just as we did after September 11, we must continue to 
break down walls and share information to succeed in combating 
this cyber threat. And just as we do or did with terrorism, we 
must identify and stop cyber threats before they do harm. It is 
not enough to build our defenses and to investigate the harm 
after the fact.
    Now, let me spend a moment, if I might, to discuss a few of 
the most significant threats in the criminal arena. From 
foreclosure frauds to subprime scams, mortgage fraud remains a 
serious problem. In fiscal year 2011, the FBI had more than 
3,000 pending mortgage fraud investigations, more than four 
times the number of cases we had in 2005, and nearly 70 percent 
of these investigations include losses of more than $1 million. 
In this budget for fiscal year 2013, the FBI is requesting a 
program increase of $15 million and 44 new positions to further 
address the mortgage and financial fraud schemes at all levels.
    The focus on healthcare fraud is no less important. The 
Federal Government spends hundreds of billions of dollars every 
year to fund Medicare and other healthcare programs. Together 
with our partners at the Department of Health and Human 
Services, the FBI has more than 2,600 active healthcare fraud 
investigations. In fiscal year 2011, these efforts led to the 
recovery of more than $4 billion taxpayer dollars.
    Violent crimes and gang activities continue to exact a high 
toll on our communities. According to the National Gang 
Intelligence Center, there are more than 30,000 gangs with more 
than 1 million members active in the United States today. 
Through Safe Streets and Safe Trails Task Forces, the FBI 
identifies and targets the most serious gangs operating, and 
targets them as criminal enterprises.
    Turning to the Southwest Border, which I know is a concern 
to Senator Hutchison, the continued violence along the 
Southwest Border remains a significant threat, and we rely on 
our collaboration with SWIG, the Organized Crime and Drug 
Enforcement Task Force Fusion Center, and EPIC to track and 
disrupt this threat.
    With regard to crimes against children, we remain vigilant 
in our efforts to remove predators from our communities and to 
keep our children safe. We have ready response teams stationed 
across the country to respond quickly to child abductions, and 
through our Child Abduction Rapid Deployment teams, our 
Innocence Lost National Initiative, and our Innocent Images 
National Initiative, the FBI and its partners are continuing to 
make the Nation safer for our children.
    Last, turning to the budget, the FBI budget for fiscal year 
2013 seeks to maintain our current base resources and 
capabilities in a restrained fiscal environment. But these 
resources are critical for us to continue responding to the 
broad range of national security and criminal threats we face 
today.

                           PREPARED STATEMENT

    Chairwoman Mikulski, Ranking Member Hutchison, and members 
of the subcommittee, let me close by again thanking you for 
your leadership and support of the FBI, and most particularly 
the men and women of the FBI, in pursuit of its mission. Your 
investments in our workforce, our technology, and in our 
infrastructure have made a difference to the FBI every day, and 
the transformation of the FBI that has been undertaken over the 
last 10 years would not have been possible without the support 
of this subcommittee. My thanks, and I look forward to 
answering what questions you have.
    [The statement follows:]
              Prepared Statement of Robert S. Mueller III
    Good morning Chairwoman Mikulski, Ranking Member Hutchison, and 
members of the subcommittee. On behalf of the more than 34,000 men and 
women of the Federal Bureau of Investigation (FBI), I would like to 
thank you for the years of support you have provided to the Bureau.
    The FBI remains focused on defending the United States against 
terrorism, foreign intelligence, and cyber threats; upholding and 
enforcing the criminal laws of the United States; protecting civil 
rights and civil liberties; and providing leadership and criminal 
justice services to Federal, State, municipal, and international 
agencies and partners. Our continued ability to carry out this complex 
and demanding mission reflects the support and oversight provided by 
this subcommittee.
    More than 10 years after the terrorist attacks of 9/11, the FBI 
continues to be a threat-focused, intelligence-driven organization that 
is guided by clear operational strategies. And we remain firmly 
committed to carrying out these strategies under guidelines established 
by the Attorney General that protect the civil liberties of those 
entrusting us with the authorities to carry out our mission.
    As our Nation's national security and criminal adversaries 
constantly adapt and evolve, so must the FBI be able to respond with 
new or revised strategies and operations to counter these threats. The 
FBI continues to shift to be more predictive, preventative, and 
actively engaged with the communities we serve. The FBI's evolution has 
been made possible by greater use of technology to gather, analyze, and 
share information on current and emerging threats; expansion of 
collaboration with new partners, both domestically and internationally; 
and investments in training, developing, and maximizing our workforce. 
The FBI continues to be successful in maintaining this momentum of 
transformation even during these challenging times.
    The FBI's fiscal year 2013 budget request totals $8.2 billion in 
direct budget authority, including 34,083 permanent positions (13,018 
Special Agents, 3,025 intelligence analysts, and 18,040 professional 
staff). This funding level continues increases provided to the FBI in 
the past, most recently in fiscal year 2012, allowing the FBI to 
maintain its forward progress, including targeting additional resources 
on investigating financial and mortgage fraud.
    Let me briefly summarize the key national security threats and 
crime problems that this funding supports.
                       national security threats
    Terrorism.--The terrorist threat facing the United States remains 
complex and ever-changing. We are seeing more groups and individuals 
engaged in terrorism, a wider array of terrorist targets, greater 
cooperation among terrorist groups, and continued evolution and 
adaptation in tactics and communication.
    While Osama bin Laden and certain other key leaders have been 
removed, al Qaeda and its affiliates and adherents continue to 
represent the top terrorism threat to the United States abroad and at 
home. Core al Qaeda remains committed to high-profile attacks against 
the United States. Additionally, al Qaeda affiliates and surrogates, 
such as al Qaeda in the Arabian Peninsula (AQAP), represent significant 
threats to our Nation. These groups have attempted several attacks 
against the homeland and our citizens and interests abroad, including 
the failed Christmas Day airline bombing in 2009 and the attempted 
bombing of U.S.-bound cargo planes in October 2010.
    In addition to al Qaeda and its affiliates, the United States faces 
a terrorist threat from self-radicalized individuals. Self-radicalized 
extremists--often acting on their own--are among the most difficult to 
detect and stop. For example, just last month, the FBI arrested Amine 
El Khalifi, a 29-year-old Moroccan immigrant, for the suspected attempt 
to detonate a bomb in a suicide attack on the U.S. Capitol building. 
According to court documents, Khalifi believed he was conducting the 
terrorist attack on behalf of al Qaeda and had become radicalized even 
though he was not directly affiliated with any group. The Khalifi case 
exemplifies the need for FBI to continue to enhance our intelligence 
capabilities--to get critical information to the right people at the 
right time--before any harm is done.
    The basis from which acts of terrorism are committed--from 
organizations to affiliates/surrogates to self-radicalized 
individuals--continue to evolve and expand. Of particular note is al 
Qaeda's use of on-line chat rooms and Web sites to recruit and 
radicalize followers to commit acts of terrorism. And they are not 
hiding in the shadows of cyber space: al Qaeda in the Arabian Peninsula 
has produced a full-color, English-language online magazine. Terrorists 
are not only sharing ideas; they are soliciting information and 
inviting communication. Al Shabaab, the al Qaeda affiliate in Somalia, 
uses Twitter to taunt its enemies--in English--and encourage terrorist 
activity.
    To date, terrorists have not used the Internet to launch a full-
scale cyber attack, but we cannot underestimate their intent. 
Terrorists have shown interest in pursuing hacking skills. And they may 
seek to train their own recruits or hire outsiders, with an eye toward 
pursuing cyber attacks.
    These adaptations of the terrorist threat make FBI's 
counterterrorism mission that much more difficult and challenging.
    Foreign Intelligence.--While foreign intelligence services continue 
traditional efforts to target political and military intelligence, 
counterintelligence threats now include efforts to obtain technologies 
and trade secrets from corporations and universities. The loss of 
critical research and development data, intellectual property, and 
insider information poses a significant threat to national security.
    For example, last year, Noshir Gowadia was sentenced to 32 years in 
prison for selling secrets to foreign nations. For 18 years, Gowadia 
had worked as an engineer at Northrop Grumman, the defense contractor 
that built the B-2 stealth bomber. Gowadia, a naturalized United States 
citizen from India, decided to offer his knowledge of sensitive design 
aspects of the B-2 to anyone willing to pay for it. He sold highly 
classified information about the B-2's stealth technology to several 
nations, and made six trips to China to assist them in the development 
of stealth technology for their cruise missiles.
    Last fall, Kexue Huang, a former scientist for two of America's 
largest agriculture companies, pled guilty to charges that he sent 
trade secrets to his native China. While working at Dow AgriSciences 
and later at Cargill, Huang became a research leader in biotechnology 
and the development of organic pesticides. Although he had signed 
nondisclosure agreements, he transferred stolen trade secrets from both 
companies to persons in Germany and China. His criminal conduct cost 
Dow and Cargill millions of dollars.
    And just last month, five individuals and five companies were 
indicted in San Francisco with economic espionage and theft of trade 
secrets for their roles in a long-running effort to obtain United 
States trade secrets for the benefit of companies controlled by the 
government of the People's Republic of China (PRC). According to the 
indictment, the Chinese Government sought to obtain a proprietary 
chemical compound developed by DuPont to be produced in a Chinese 
factory.
    These cases illustrate the growing scope of the ``insider threat'' 
from employees who use their legitimate access to steal secrets for the 
benefit of another company or country. Through our relationships with 
businesses, academia, U.S. Government agencies, and with other 
components of the Department of Justice (DOJ), FBI, and its 
counterintelligence partners must continue our efforts to identify and 
protect sensitive American technology and projects of great importance 
to the United States Government.
    Cyber.--Cyber attacks and crimes are becoming more commonplace, 
more sophisticated, and more dangerous. The scope and targets of these 
attacks and crimes encompass the full range and scope of FBI's national 
security and criminal investigative missions. Our national security 
secrets are regularly targeted by foreign and domestic actors; our 
children are targeted by sexual predators and traffickers; our citizens 
are targeted for fraud and identity theft; our companies are targeted 
for insider information; and our universities and national laboratories 
are targeted for their research and development. Since 2002, the FBI 
has seen an 84 percent increase in the number of computer intrusions 
investigations opened. Hackers--whether state-sponsored, criminal 
enterprises, or individuals--constantly test and probe networks, 
computer software, and computers to identify and exploit 
vulnerabilities.
    Just as FBI has transformed its counterterrorism program to deal 
with an evolving and adapting threat, FBI is enhancing its cyber 
program and capabilities. To counter the cyber threat, FBI has cyber 
squads in each of our 56 field offices. FBI now has more than 1,000 
specially trained agents, analysts, and digital forensic examiners that 
run complex undercover operations and examine digital evidence. Along 
with 20 law enforcement and intelligence agency partners, FBI is the 
executive agent of the National Cyber Investigative Joint Task Force. 
The task force operates through Threat Focus Cells--smaller groups of 
agents, officers, and analysts from different agencies, focused on 
particular threats.
    In April of this year, the FBI brought down an international 
``botnet'' known as Coreflood. Botnets are networks of virus-infected 
computers controlled remotely by an attacker. To shut down Coreflood, 
FBI took control of five servers the hackers had used to infect some 2 
million computers with malware. In an unprecedented step, after 
obtaining court approval, we responded to the signals sent from the 
infected computers in the United States, and sent a command that 
stopped the malware, preventing harm to hundreds of thousands of users.
    Over the past year, the FBI and our partners have also pursued 
members of Anonymous, who are alleged to have coordinated and executed 
distributed denial of service attacks against various Internet 
companies. To date, 16 individuals have been arrested and charged in 
more than 10 States as part of this ongoing investigation. According to 
the indictment, the Anonymous group referred to the distributed denial 
of service attacks as ``Operation Avenge Assange'' and allegedly 
conducted the attacks in support of Wikileaks founder Julian Assange. 
The defendants are charged with various counts of conspiracy and 
intentional damage to a protected computer.
    U.S. law enforcement and intelligence communities, along with our 
international and private sector partners, are making progress. 
Technological advancements and the Internet's expansion continue to 
provide malicious cyber actors the opportunity to harm U.S. national 
security and the economy. Given the consequences of such attacks, FBI 
must be able to keep pace with this rapidly developing and diverse 
threat.
                            criminal threats
    Criminal organizations--domestic and international--and individual 
criminal activity also represent a significant threat to our security 
and safety in communities across the Nation. FBI focuses on many 
criminal threats, from white-collar crime and healthcare fraud to 
organized crime and gang violence to corruption and violence along the 
Southwest Border. Today, I would like to highlight a number of these 
criminal threats for the subcommittee.
    Financial and Mortgage Fraud.--From foreclosure frauds to subprime 
scams, mortgage fraud is a serious problem. FBI continues to develop 
new approaches and techniques for detecting, investigating, and 
combating mortgage-related fraud. Through the use of joint agency task 
forces and working groups, FBI and its partners work to pinpoint the 
most egregious offenders and identify emerging trends before they 
flourish. In fiscal year 2011, these efforts translated into roughly 
3,000 pending mortgage fraud investigations--compared to approximately 
700 investigations in fiscal year 2005. Nearly 70 percent of FBI's 
pending investigations involve losses of more than $1 million. The 
number of FBI Special Agents investigating mortgage fraud cases has 
increased from 120 in fiscal year 2007 to 332 Special Agents in fiscal 
year 2011. The multi-agency task force and working group model serves 
as a force-multiplier, providing an array of interagency resources and 
expertise to identify the source of the fraud, as well as finding the 
most effective way to prosecute each case, particularly in active 
markets where fraud is widespread.
    FBI and its law enforcement partners also continue to uncover major 
frauds, insider trading activity, and Ponzi schemes. At the end of 
fiscal year 2011, FBI had more than 2,500 active corporate and 
securities fraud investigations, representing a 47 percent increase 
since fiscal year 2008. Over the past 3 years, FBI has obtained 
approximately $23.5 billion in recoveries, fines, and restitutions in 
such programs, and during fiscal year 2011, FBI obtained 611 
convictions, an historic high. FBI is pursuing those who commit fraud 
at every level and is working to ensure that those who played a role in 
the recent financial crisis are brought to justice.
    For fiscal year 2013, FBI is requesting a program increase totaling 
$15 million and 44 positions (40 Special Agents and 4 Forensic 
Accountants) to further address financial and mortgage fraud at all 
levels of organizations--both senior executives and lower level 
employees. These resources will increase FBI's ability to combat 
corporate fraud, securities and commodities fraud, and mortgage fraud, 
and they will enable FBI to adapt as new fraud schemes emerge.
    Healthcare Fraud.--The focus on healthcare fraud is no less 
important. The Federal Government spends hundreds of billions of 
dollars every year to fund Medicare, Medicaid, and other Government 
healthcare programs. In 2011, FBI had approximately 2,700 active 
healthcare fraud investigations, up approximately 7 percent since 2009. 
Together with attorneys at DOJ and our partners at the Department of 
Health and Human Services, FBI is aggressively pursuing fraud and abuse 
within our Nation's healthcare system.
    The annual Health Care Fraud and Abuse Control program report 
showed that the Government's healthcare fraud prevention and 
enforcement efforts recovered nearly $4.1 billion in taxpayer dollars 
in fiscal year 2011. This is the highest annual amount ever recovered 
from individuals and companies who attempted to defraud taxpayers or 
who sought payments to which they were not entitled.
    Gangs and Violent Crime.--Violent crimes and gang activities exact 
a high toll on victimized individuals and communities. There are 
approximately 33,000 violent street gangs, motorcycle gangs, and prison 
gangs with about 1.4 million members who are criminally active in the 
United States today. A number of these gangs are sophisticated and well 
organized; many use violence to control neighborhoods and boost their 
illegal money-making activities, which include robbery, drug and gun 
trafficking, fraud, extortion, and prostitution rings. Gangs do not 
limit their illegal activities to single jurisdictions or communities. 
FBI is able to work across such lines and, therefore, brings particular 
value to the fight against violent crime in big cities and small towns 
across the Nation. Every day, FBI Special Agents work in partnership 
with State and local officers and deputies on joint task forces and 
individual investigations. The FBI also has a surge capacity that can 
be tapped into during major cases.
    FBI joint task forces--Violent Crime, Violent Gang Safe Streets, 
and Safe Trails Task Forces--focus on identifying and targeting major 
groups operating as criminal enterprises. Much of the FBI's criminal 
intelligence comes from our State, local, and tribal law enforcement 
partners, who know their communities inside and out. Joint task forces 
benefit from FBI surveillance assets and its sources track these gangs 
to identify emerging trends. Through these multi-subject and multi-
jurisdictional investigations, FBI concentrates its efforts on high-
level groups engaged in patterns of racketeering. This investigative 
model enables us to target senior gang leadership and to develop 
enterprise-based prosecutions.
    In addition, while the fiscal year 2013 budget proposes to 
eliminate the National Gang Intelligence Center (NGIC), this will not 
hinder the FBI's ability to perform the analytical work done there. FBI 
will continue to produce intelligence products and threat assessments, 
which are critical to reducing criminal gang activity in our 
communities. FBI will also continue to examine the threat posed to the 
United States by criminal gangs and will focus on sharing intelligence 
at the field level, where intelligence sharing and coordination between 
DOJ agencies and State and local partners already exist. For example, 
our Field Intelligence Groups regularly produce intelligence products 
covering criminal threats, including gangs. It is through these 
existing resources that we will continue to produce gang-related 
intelligence in the absence of NGIC. In fact, the responsibility for 
the production of that material will happen now at the field level 
where gangs operate in neighborhoods, districts, and communities. The 
field offices are the closest to the gang problem, have a unique 
understanding of the gang problem and are in the best position to share 
that intelligence.
    Violence Along the Southwest Border.--The escalating violence 
associated with drug trafficking in Mexico continues to be a 
significant issue. In addressing this crime problem, FBI relies on a 
multi-faceted approach for collecting and sharing intelligence--an 
approach made possible and enhanced through the Southwest Intelligence 
Group, the El Paso Intelligence Center, Organized Crime Drug 
Enforcement Task Force Fusion Center, and the Intelligence community. 
Guided by intelligence, FBI and its Federal law enforcement partners 
are working diligently, in coordination with the Government of Mexico, 
to counter violent crime and corruption that facilitates the flow of 
illicit drugs into the United States. FBI is also cooperating closely 
with the Government of Mexico in their efforts to break the power of 
the drug cartels inside the country.
    Most recently, the collective efforts of the FBI, Drug Enforcement 
Administration, and other United States and Mexican law enforcement 
partners resulted in the identification and indictment of 35 leaders, 
members, and associates of one of the most brutal gangs operating along 
the United States-Mexico border on charges of racketeering, murder, 
drug offenses, money laundering, and obstruction of justice. Of these 
35 subjects, 10 Mexican nationals were specifically charged with the 
March 2010 murders in Juarez, Mexico, of a United States consulate 
employee and her husband, along with the husband of another consulate 
employee.
    Organized Crime.--Ten years ago, the image of organized crime was 
of hierarchical organizations, or families, that exerted influence over 
criminal activities in neighborhoods, cities, or States. That image of 
organized crime has changed dramatically. Today, international criminal 
enterprises run multi-national, multi-billion-dollar schemes from start 
to finish. These criminal enterprises are flat, fluid networks and have 
global reach. While still engaged in many of the--traditional--
organized crime activities of loan-sharking, extortion, and murder, new 
criminal enterprises are targeting stock market fraud and manipulation, 
cyber-facilitated bank fraud and embezzlement, identify theft, 
trafficking of women and children, and other illegal activities. This 
transformation demands a concentrated effort by FBI and Federal, State, 
local, and international partners to prevent and combat transnational 
organized crime.
    For example, late last year, an investigation by FBI and its 
partners led to the indictment and arrest of more than 70 members and 
associates of an Armenian organized crime ring for their role in nearly 
$170 million in healthcare fraud. This case, which involved more than 
160 medical clinics, was the culmination of a national level, multi-
agency, intelligence-driven investigation. To date, it remains the 
largest Medicare fraud scheme ever committed by a single enterprise and 
criminally charged by DOJ.
    The FBI is expanding its focus to include West African and 
Southeast Asian organized crime groups. The FBI continues to share 
intelligence about criminal groups with our partners, and to combine 
resources and expertise to gain a full understanding of each group. To 
further these efforts, the FBI participates in the International 
Organized Crime Intelligence Operations Center. This center serves as 
the primary coordinating mechanism for the efforts of nine Federal law 
enforcement agencies in combating nondrug transnational organized crime 
networks.
    Crimes Against Children.--FBI remains vigilant in its efforts to 
remove predators from our communities and to keep our children safe. 
Ready response teams are stationed across the country to quickly 
respond to abductions. Investigators bring to this issue the full array 
of forensic tools such as DNA, trace evidence, impression evidence, and 
digital forensics. Through globalization, law enforcement also has the 
ability to quickly share information with partners throughout the world 
and our outreach programs play an integral role in prevention.
    FBI also has several programs in place to educate both parents and 
children about the dangers posed by violent predators and to recover 
missing and endangered children should they be taken. Through our Child 
Abduction Rapid Deployment teams, Innocence Lost National Initiative, 
Innocent Images National Initiative, Office of Victim Assistance, and 
numerous community outreach programs, the FBI and its partners are 
working to make our world a safer place for our children.
                                offsets
    FBI's fiscal year 2013 budget request proposes offsets totaling 
approximately $63 million, including program reductions. Proposed 
offsets, which are expected to result in little if any impact on the 
missions and responsibilities of FBI, include:
  --elimination of the NGIC;
  --reduction of one training day and equipment provided for Federal, 
        State, and local bomb technicians and the Special Weapons and 
        Tactics and Hostage Rescue Team training;
  --reduction of contractor workforce funding supporting national 
        security programs;
  --reductions in funding for permanent change of station transfers, 
        which relocates staff to meet organizational needs and carry 
        out mission requirements; and
  --reducing funding for information technology, facilities, and other 
        administrative initiatives.
    We will work to sustain our efforts in these program areas and 
minimize the impact of these proposed reductions.
                               conclusion
    Responding to this complex and ever-changing threat environment is 
not new to FBI; in fact, it is now the norm. The budget proposed for 
FBI for fiscal year 2013 seeks to maintain current capabilities and 
capacities achieved through increases provided in the past, as well as 
target additional resources to address financial and mortgage fraud. 
These resources are critical for FBI to be able to address existing and 
emerging national security and criminal threats. Chairwoman Mikulski, 
Ranking Member Hutchison, and members of the subcommittee, I would like 
to close by again thanking you for this opportunity to discuss FBI's 
priorities and detail FBI's fiscal year 2013 budget request. Madam 
Chairwoman, let me again acknowledge the leadership that you and this 
subcommittee have provided to FBI. The transformation FBI has achieved 
over the past 10 years would not have been possible without your 
support. Your investments in our workforce, our technology, and our 
infrastructure make a difference every day at FBI offices in the United 
States and around the world, and we thank you for that support.
    I look forward to any questions you may have.

    Senator Mikulski. Thank you very much, Director Mueller.
    To my colleagues who have arrived, we're going to have one 
round of questions here, recognizing people in their order of 
arrival. When we've completed that, we will recess and then 
move to a classified hearing with the Director, particularly on 
those sensitive matters, and we will do that in our classified 
center and recess to CVC-217.
    Director, I want to move right into my questions. First of 
all, in your testimony, you showed the breadth of the work of 
the FBI, from international terrorism to cyber threats, to 
really working with our cops on the beat, and dealing also with 
where there is need, there's greed, like mortgage and 
healthcare fraud.
    So let me get right to, I think--we need to have for the 
record the major categories for FBI, which is how much of your 
$8 billion--which is actually a modest request, held very 
tightly pretty much to last year's funding--how much goes into 
national security, and then how much goes into traditional 
crime fighting, and then also where do they cross, like in the 
area of cyber? Because I think many people don't realize that 
the FBI has such a substantial role in counterterrorism, 
counterintelligence.
    FBI has transformed since 9/11. Could you elaborate, on 
your $8 billion, what goes into those categories?
    Mr. Mueller. Under the budget, 60 percent, or approximately 
$5 billion, is scored to what I would call the national 
security programs. That would be Counterterrorism, 
Counterintelligence, Directorate of Intelligence, Weapons of 
Mass Destruction, and additional pieces of other programs. 
That's about 60 percent of our budget, $5 billion. But also 
scored are pieces of other programs. For instance, the cyber 
program is split between criminal and national security. Sixty 
percent of the cyber program is scored to national security and 
relates to intrusions, whereas the other 40 percent relates to 
programs such as Innocent Images, which addresses child 
pornography on the Internet, and intellectual property rights--
the intellectual property crimes that we also address.
    So, 40 percent of it is cyber crime. The other 60 percent 
of it is perceived and scored against the national security 
piece of the budget, and that relates to computer intrusions.
    Senator Mikulski. Well, let's then go to the threat of 
sequester. I'm concerned that the Congress doesn't have a sense 
of urgency about cyber, but I'm also concerned that the 
Congress does not have a sense of urgency about the threat of 
sequester.
    Given this $8.2 billion, when one looks at what all we 
spend on other security issues, this is really modest. When you 
think of the scope, depth, technical expertise, personal 
integrity required of the agents and all who work there, what 
would happen to the FBI if sequester were triggered?
    Mr. Mueller. We tried to estimate what would happen in the 
event of sequestration, and the preliminary figures show that 
we would face a cut of $650 to $800 million of the $8 billion 
appropriated in 2012. That would translate into a 25-workday 
furlough across the FBI, and a reduction of 3,500 work years 
for Special Agents, intelligence analysts, and professional 
staff.
    Given what I've described in terms of the threats, we would 
have to do some very substantial prioritization, and it would 
have a huge impact on our investigations, our intelligence 
collection, and most particularly and not to be underestimated, 
it would have a very large impact on the morale of the 
workforce.
    We would have to rotate the furloughs to lessen the impact. 
We would have to reprioritize. But it would set us back to 
where we were many years ago, and the impact of that 
sequestration would be felt for many years in the future.
    Senator Mikulski. I have a whole set of questions related 
to cyber which I will defer to our classified meeting.
    In terms of accountability, as you know, I want to ask a 
question about Sentinel, on where you are in achieving the 
programmatic goals and keeping it within a budgetary framework. 
As you know, we've been at the Sentinel program, which was 
initiated a long time ago, to provide FBI with essentially 
virtual case files--to make them more effective and more 
productive. In the old lingo of post-9/11, connect the dots. 
Could you tell us, are we really getting Sentinel connected 
while we're busy trying to figure out how to connect the dots?
    Mr. Mueller. As you are aware, the contract was entered 
into a number of years ago. We had phase 1; that was produced. 
Phase 2, from our perspective, was not adequate. So we 
restructured the contract to bring in-house much of the 
software development. We had anticipated that we would be 
through the tests last fall and ready to start Sentinel. We had 
tests of the software, as well as the infrastructure to support 
the software. The software worked well, but the infrastructure 
needed updating.
    So, since the fall, we have put in new servers and built up 
the infrastructure to be able to handle the software package 
that is in the last stages of being completed.
    There are three factors that go into Sentinel. First, I 
want a product that people can use, that will be embraced in 
the field, and that actually works and is helpful. Second is 
the budget, and staying under budget. And third was doing it in 
a timely fashion. I have had to sacrifice the timely fashion in 
order to make certain that the product that we put in the field 
will be embraced by the workforce and, second, to keep it under 
budget.
    We have built up the infrastructure as a result of the 
consequence of the test we put in in the fall. We are testing 
that, and the tests are positive. My expectation is that 
certainly by the end of this fiscal year, by the fall, that we 
will have completed this and Sentinel will be in the field, and 
it will be under or just at budget.
    Senator Mikulski. Well, keep us posted on this.
    I now want to turn to Senator Hutchison, then Senators 
Lautenberg, Graham, and Feinstein.
    Senator Hutchison. Okay. Madam Chairman, I'm going to let 
Senator Graham have my time, and I'll come back at the end 
because I'm going to stay anyway. I do have questions, but I'm 
going to defer to Senator Graham.
    Senator Mikulski. Senator Graham.
    Senator Graham. Thank you. This has been a very informative 
hearing.
    Is it fair to say that we do not have the legal 
infrastructure in place to deal with the cyber threats that we 
face, that the Congress needs to give you better legislative 
support?
    Mr. Mueller. Yes.
    Senator Graham. Is it fair to say that, of all the things 
that we should be concerned about, cyber attacks from foreign 
governments and terrorists is a growing threat by the day?
    Mr. Mueller. Yes.
    Senator Graham. Okay. Would you consider a cyber attack 
generated from the People's Liberation Army of China against 
our national security infrastructure, should that be considered 
a hostile act?
    Mr. Mueller. Well, you're in an area that's somewhat beyond 
my purview, but in the way you would describe it, absolutely, 
it would be a hostile act. Now, I don't know about the 
connotations that hostile act has for----
    Senator Graham. See, I don't know either, but I think we 
need to come to grips with that because you've got a law 
enforcement model----
    Mr. Mueller. Yes.
    Senator Graham [continuing]. Against cyber attacks where 
people engage in economic espionage. They may try to shut down 
a powerplant or the grid. When is it a crime, and when is it a 
national security hostile act done under the law of war? I 
think that's what we need to consider among ourselves, and I 
would argue that, let's say, these Web sites generated by al 
Qaeda, if an al Qaeda-backed organization tried to commit a 
cyber attack, would you consider that an attack on the United 
States?
    Mr. Mueller. Yes.
    Senator Graham. So if we captured somebody involved in a 
cyber attack that was affiliated with al Qaeda, they would be 
treated differently than a common criminal. Is that correct?
    Mr. Mueller. It depends on the circumstances. I see where 
you're going, and----
    Senator Graham. You could use one or two models.
    Mr. Mueller. You could, and if I may, what you point to is 
one of the difficulties in the cyber arena.
    Senator Graham. I agree with that.
    Mr. Mueller. Because at the point in time of an intrusion, 
you don't know whether it's going to be a country, a terrorist, 
or the 18-year-old kid down the block.
    Senator Graham. Right, and the best way to find that out, I 
believe, is to hold someone that you suspect of being involved 
in terrorism and gather the information in an orderly fashion, 
and I do believe the law enforcement model has deficiencies in 
that regard.
    The people at Guantanamo Bay, there are some people being 
held there for multiple years. Is that correct?
    Mr. Mueller. Yes.
    Senator Graham. Have FBI agents interviewed the population 
at Guantanamo Bay----
    Mr. Mueller. Yes.
    Senator Graham [continuing]. On a regular basis? Have we 
gathered good information over time from that population 
without using waterboarding?
    Mr. Mueller. Yes.
    Senator Graham. Don't you agree that the best way to 
interrogate someone is not to torture them but to use 
traditional military law enforcement techniques?
    Mr. Mueller. That's somewhat of a loaded question. I will 
say that----
    Senator Graham. You can say ``No.''
    Mr. Mueller. I will say that we follow our rules, and what 
we have had for years----
    Senator Graham. And yet you don't torture people in the 
FBI, do you?
    Mr. Mueller. Pardon?
    Senator Graham. You don't torture people, do you?
    Mr. Mueller. No. No, Sir.
    Senator Graham. And you get good information.
    Mr. Mueller. Yes.
    Senator Graham. I totally agree.
    So what I would suggest to the subcommittee is that, 
Senator Mikulski's questions about sequestration, if this is 
not a wake-up call for the Congress, what would be? You just 
heard the FBI Director, who I think is doing a marvelous job, 
and all his agents, tell us that if we do what we're planning 
to do, we're going to devastate one of the frontline agencies 
in the war on terror.
    Ten years ago, what was FBI's budget when it came to 
national security issues? What percentage of your budget?
    Mr. Mueller. I would say two-fifths of the budget back in 
fiscal year 2001 was national security, and I would say the 
principal percentage of that was addressed to espionage in the 
Counterintelligence Division.
    Senator Graham. So before 9/11, what percentage of your 
budget?
    Mr. Mueller. I would say approximately two-fifths.
    Senator Graham. Okay. So if your budget has gone up from 
two-fifths, it's now 60 percent dealing with national security 
issues, something's got to give. Has your budget gone up? How 
much has your budget gone up in the last 3 years?
    Mr. Mueller. Last 3 years I'd say maybe $1 billion. I'd 
have to check.
    Senator Graham. Okay. What percentage of increase is that?
    Mr. Mueller. I can tell you since fiscal year 2001. Our 
budget in fiscal year 2001, which I'm much more familiar with, 
was $3.1 billion. It is now $8 billion. So it has almost 
tripled over that period of time.
    Senator Graham. Okay. And these resources have been needed?
    Mr. Mueller. Yes.
    Senator Graham. Do you have enough money to do all the jobs 
that you have told us that you do? And if you don't, tell us, 
because----
    Mr. Mueller. Well, it is a prioritization. We have to 
prioritize. As you saw, the threats that we face are 
substantial.
    Senator Graham. Mr. Director, it's one thing to prioritize. 
Everybody does it at home and in their businesses. It's another 
thing to just have to do it on the cheap.
    Are we giving you enough money not only to prioritize but 
to fully and robustly deal with the threats the United States 
faces? And if you think you need more money, now is the time to 
tell us.
    Mr. Mueller. I would say that my concern in the immediate 
future is having sufficient funds to build up the capabilities 
to address cyber in the same way we had and were afforded the 
funds to address counterterrorism. And whether that's fiscal 
years 2013, 2014, or 2015, I think that is an issue that is 
going to require additional funds down the road.
    Senator Graham. Could you give us some estimate, privately 
or whatever is appropriate, about how to build up the cyber 
account? Because not only do we need new laws to deal with the 
cyber threat, we probably need to fund you more robustly.
    So, thank you.
    Senator Mikulski. Will you be able to come to our 
classified----
    Senator Graham. Yes, ma'am. If I can get back from my press 
conference about Medicare, I will be there. And if we can save 
money on Medicare, we'll give some of it to him.
    Senator Mikulski. Senator Graham, thank you very much, and 
we'll look forward to seeing you in the classified hearing. 
Your considerable expertise in Armed Services and, again, 
you're a Judge Advocate General officer, this exchange was very 
informative.
    I also want to comment, on this side, Senator Lamar 
Alexander is absent because of a family illness. He sends his 
regards and will have questions for the record. I wanted to 
note his absence was due to a very compelling family reason.
    Senator Lautenberg.

                STATEMENT OF SENATOR FRANK R. LAUTENBERG

    Senator Lautenberg. Thanks, Madam Chairman.
    And thanks, Director Mueller, for the wonderful work that 
FBI has done, the diligence and the competence that your people 
operate with, and hats off to you for your leadership there. 
It's quite incredible when we hear a review of what has 
happened budgetarily for these years.
    And I'm reminded that on 9/11, the loss of lives and the 
restructuring of our society took place in a way that is not 
yet fully understood. On D-Day at Normandy, on Pearl Harbor 
day, we didn't lose as many Americans as we did on 9/11. And 
what we find, the proliferation of guns--and I'm not doing a 
second amendment review here. We're talking about guns in the 
wrong hands. We're not talking about people who apply and go 
through the rigors of testing, as they do now.
    One of the questions that I'm really anxious to review is, 
we now understand that people from the New York Police 
Department (NYPD) were doing surveillance in the State of New 
Jersey, across the river into our sovereignty. Last week, the 
Special Agent in Charge (SAC) of the FBI Newark Office 
criticized the NYPD surveillance of New Jersey communities and 
universities saying, and I quote him, ``It makes our job much, 
much harder.''
    Mr. Director, how do you feel about that?
    Mr. Mueller. Let me start off by saying that we have a very 
good relationship with the NYPD, and the work that the NYPD has 
done since September 11 to protect New York and the surrounding 
communities is first rate, and there has not been a successful 
attack on New York, in large part attributable to the work 
that's done by the NYPD, along with the Joint Terrorism Task 
Force, which has been ongoing for many years in New York, as 
has the Joint Terrorism Task Forces in New Jersey and 
elsewhere.
    Often there are issues in how you go about doing your work 
that arise over a period of time that are considered bumps in 
the road in terms of your cooperation. My expectation is that 
whatever bumps in the road there have been in the past in terms 
of alerting people to actions that are taken will not take 
place in the future.
    But it should not interfere with the work that is being 
done, and done exceptionally well, with the Joint Terrorism 
Task Forces in New Jersey, as well as in New York.
    Senator Lautenberg. Yes, and I agree with that, Director. 
But the fact of the matter is that there ought to at least be 
some privilege given to the law enforcement structure in our 
State, and for them to be alerted. Why should there not be that 
information available? What about cross-currents and bumping 
into one another? And I'm not going to press you further on 
this.
    Mr. Mueller. Well, I'll tell you, everybody knows you often 
have jurisdictional issues between the FBI and State and local 
law enforcement, between sheriffs and police chiefs and the 
like. It is not unusual to have that. My belief is you sit 
down, you talk about it in private, you get it resolved, and 
you move on. That's what has happened over a period of time, 
whether it be New York or Philadelphia or Washington, DC or San 
Francisco or Los Angeles or what have you.
    So, as was pointed out by the SAC in his remarks, he has a 
good relationship with NYPD in New Jersey.
    Senator Lautenberg. That's true.
    I want to ask you a question about people on the terror 
watch list. They're able to legally purchase a gun or 
explosives. In addition, the gun show loophole allows anyone to 
walk into a gun show, purchase a gun, no questions asked. And 
when you look at the statistics of murders in our country 
compared to other advanced societies, our numbers dwarf 
anything that comes from other places--England, Germany, 
Australia, you name it--Canada.
    Isn't it time to close that terror gap and the gun show 
loophole?
    Mr. Mueller. As we've discussed before in each hearing that 
we've had, I defer to the Department of Justice in terms of 
particular legislation. But needless to say, anything that can 
keep the guns out of the hands of terrorists or criminals is 
something that is beneficial in terms of reducing the extent, I 
believe, of violence in our society.
    Senator Lautenberg. Madam Chairman, may I continue with one 
more question even though the gong may go off?
    Cruise lines are required to inform FBI about serious 
crimes, and the number of crimes is supposed to be made public. 
However, according to FBI data that I obtained, the number of 
crimes posted online is lower than that reported by the 
industry. We're planning to change the law to address this 
discrepancy.
    In the meantime, what steps can FBI take to publicly 
disclose the actual number of serious crimes on cruise ships? 
And I don't want to--I'm not interested in hurting the 
industry, but I'm also not willing to permit crimes to be 
developed and not give the public the true facts about what's 
taking place.
    Mr. Mueller. Well, I think you raise two issues. One is the 
extent of reporting and compliance with the law, which requires 
reporting. Certainly, we can educate the cruise line companies 
in terms of the necessity of doing that and assuring, to the 
extent possible, that they comply with the statute.
    Second, in terms of making those figures public, I will 
have to get back to you. I am not certain to what extent they 
are publicized, and if not, why they would not be publicized.
    [The information follows:]
Whether the Federal Bureau of Investigation Makes Public Data on Crimes 
                       Occurring on Cruise Ships
    The Federal Bureau of Investigation (FBI) complies with the 
reporting requirements of the Cruise Vessel Security and Safety Act of 
2010 (CVSSA), which is codified in chapter 35 of title 46, United 
States Code. Pursuant to the CVSSA, when certain serious criminal 
offenses are alleged to have been committed on board a covered vessel, 
the owner of the vessel must report the offense both to an Internet-
based portal and to FBI. FBI does not open investigations on all of the 
alleged incidents reported to it. Often these are sexual offenses in 
which late reporting has resulted in a loss of physical evidence or a 
contaminated crime scene. In other cases, the next port of call or 
other country exercising jurisdiction has delayed investigation or 
intervened in a way that affects FBI's ability to conduct a thorough 
investigation. Each quarter, FBI reports to the Secretary of the 
Department of Homeland Security the number of cases closed during the 
quarter that stemmed from the serious criminal offenses reported to us. 
This number does not include investigations that were never opened, 
investigations that remain open, or investigations of offenses other 
than those serious criminal offenses specified by the statute.

    Senator Lautenberg. Thank you, Madam Chairman.
    Senator Mikulski. Before I turn to Senator Feinstein, I 
just want to comment. You have a long history on defending 
people on cruise ships. Do you remember there were some 
terrible incidents many years ago?

                           PREPARED STATEMENT

    Senator Lautenberg. Absolutely.
    Senator Mikulski. And you are to be congratulated. We need 
to protect the people that sail on the seas from pirates or 
other despicable behavior, and we look forward to hearing more 
from you about that.
    [The statement follows:]

           Prepared Statement of Senator Frank R. Lautenberg

    Madam Chairman, it goes without saying that the attacks of 
September 11, 2001, changed all of us. We lost more Americans 
that day than at Pearl Harbor or on D-Day, including 746 New 
Jerseyans who died that day. In the years since 9-11, the 
Federal Bureau of Investigation (FBI) has been asked to do more 
to keep us safe, and the Bureau has risen to the challenge.
    But to truly ensure our safety, we need laws on the books 
that prevent dangerous criminals from accessing dangerous 
weapons. More Americans have died from gun murders here at home 
in the past decade than have died on the battlefields of Iraq 
and Afghanistan. In 2008, guns were used to murder around 
10,000 Americans. By comparison, in the same year, guns killed 
39 people in England and Wales, 35 in Australia, and 200 in 
Canada.
    Recently our remarkable colleague Congresswoman Gabby 
Giffords stepped down from the Congress to focus on her 
recovery from a horrific shooting in January 2011. On that 
tragic day in Tucson, a man emerged from a supermarket, shot 
Representative Giffords in the head at point blank range, and 
fired 31 rounds before running out of ammunition. His rampage 
ended only when he stopped to reload and brave bystanders 
tackled him to the ground. Nineteen people were shot, and six 
were killed. If the shooter had been forced to reload sooner, 
lives might have been saved. That's why I've introduced 
legislation to reinstate the Federal ban on high-capacity 
magazines like the one the shooter used.
    We must also do more to keep guns out of the hands of 
criminals and terror suspects. Next month will mark 13 years 
since the shootings at Columbine--and as we know, the killers 
obtained their firearms at gun shows. More than a decade later, 
anyone--including known terrorists, convicted criminals, and 
the mentally ill--can walk into a gun show and purchase a gun, 
no questions asked. And, under current law, known and suspected 
terrorists are free to purchase any firearm--including an 
assault weapon--from a licensed gun dealer. Data from the 
Government Accountability Office show that from February 2004 
through December 2010, firearms or explosives transactions 
involving individuals on the terrorist watch list were allowed 
to proceed 1,321 times. I have a bill that would close the gun 
show loophole by requiring all sellers at gun shows to do 
background checks, and another that would eliminate the terror 
gap by giving the Attorney General the authority to stop 
individuals on the terror watch list from buying firearms. 
Passing these common sense bills would reduce violent crime and 
protect those who are charged with protecting us.
    The FBI stopped several recent terror plots, providing 
public reminders of the Bureau's constant work to keep us safe. 
My State of New Jersey is home to the stretch some in law 
enforcement have identified as ``the most dangerous area in 
America'' for a terrorist attack. We must make sure that the 
FBI has the resources it needs, and is doing everything it can 
to protect this area. I look forward to hearing from Director 
Mueller about how we can support the FBI in this critical 
mission and how we can improve our gun laws to keep Americans 
safe.

    Senator Lautenberg. Thank you.
    Senator Mikulski. Senator Hutchison, who was going to be 
next, yields to you. And so then we'll go to Murkowski and 
Hutchison that way, okay?
    Senator Feinstein. Thank you very much.
    I wanted to take up where Senator Graham left off. There 
has been an effort emanating out of the Armed Services 
Committee to change the National Defense Authorization Act 
(NDAA) to essentially put this country's detention policy under 
the laws of war. Under the laws of war, an individual can be 
held without charge or trial until the end of hostilities--the 
point made that America is a battlefield--and I think that's 
the point that some have been trying to make.
    I'd like to ask your view of this. I'm strongly opposed to 
it. I also know what you said during the worldwide threat 
hearing, that the FBI has interrupted or arrested some 20 
terrorist plots in this country over the past year. You have 
the high-value interrogation group, which, you testified to the 
House Appropriations Committee, has done 14 interrogations, and 
I gather with some success.
    I would like to ask you to comment on whether you believe 
that permanently detaining Americans without trial or charge is 
appropriate.
    Mr. Mueller. I would have to start with the NDAA 
legislation that has recently been passed which addresses that 
particular issue. As I think you and others are aware, I had 
some concerns at the outset in two areas: the continuation of 
our authorities during detention initially in military custody 
here in the United States; and second, whether or not there 
could be clarity in terms of either the statute or the 
Presidential directives that would clarify the process in which 
a person is deemed to be not an American citizen, but a person 
who is an al Qaeda affiliate engaged in a terrorist plot, and 
to what extent would there be an immediate military detention.
    With both the statute as well as the President's 
directives, I'm comfortable that the capabilities of the 
Bureau, coupled with the capabilities of the Department of 
Defense (DOD), will be maintained in that rather unique 
situation where you have a foreigner, not a U.S. citizen, who 
undertakes a terrorist attack affiliated with al Qaeda in the 
United States.
    Looking at that discrete issue, I am comfortable that we 
have preserved what we needed to preserve our role in that 
process.
    Senator Feinstein. But----
    Mr. Mueller. The broader question that you have----
    Senator Feinstein. The broader question is that the law is 
very cloudy, and this is a problem. And the court has had some 
holdings that you cannot detain a person indefinitely 
regardless of whether they're a citizen or not in this country 
without charge or trial.
    Mr. Mueller. The Supreme Court has occasion to opine on 
various aspects of that. What I have wrestled with is 
particular pieces of legislation that would impact that process 
whereby a person is detained in the United States, whether they 
are a U.S. citizen or a non-U.S. citizen. Both the Department 
of Justice and the President determine whether or not a person 
is ultimately tried or you proceed against that person in an 
Article III court, in which we operate, or in a military 
tribunal, which has also been upheld by the Supreme Court.
    So with the NDAA legislation, I believe that the issues 
have been fleshed out to the extent that I'm comfortable with. 
But I really hesitate to comment on other issues which have 
either not been the subject of legislation or are unique to a 
particular circumstance where you really don't know the facts, 
and not knowing the facts, it's very hard to apply the law.
    Senator Feinstein. Right. I appreciate that, and I 
appreciate the need for executive flexibility, whether it's 
military or whether it's a Federal court.
    Having said that, Senator Mikulski and I both serve on the 
Intelligence Committee, and the Foreign Intelligence 
Surveillance Act (FISA), is up for reauthorization and must be 
reauthorized by the end of the year. Do you view that 
reauthorization as important? Do you view it as valuable? And, 
if so, why?
    Mr. Mueller. I would go beyond that and use the word 
``critical'', because the world in which we live today is what 
Tom Friedman talks about, a ``flat'' world. With technology, 
criminals, terrorists and cyber terrorists cut across borders, 
at will, in seconds. And it is absolutely essential that the 
intelligence community, whether it be domestic but most 
particularly foreign, has the flexibility and capability of 
obtaining communications by these individuals as quickly as 
possible in order to prevent attacks, whether those attacks in 
the future be a terrorist attack on the infrastructure, on the 
financial structure, or attacks by al Qaeda and the like in 
cyberspace. It's absolutely essential that we have those tools.
    Senator Feinstein. Would you say that FISA is a critical 
tool of counterterrorism in this country?
    Mr. Mueller. Yes. Yes, and also it will be a critical tool 
as well in the cyber arena.
    Senator Feinstein. Yes. Thank you very much.
    Thank you, Madam Chairman.
    Senator Mikulski. And, Senator Feinstein, I hope you can 
join us shortly in our classified session as well.
    Senator Murkowski.
    Senator Murkowski. Thank you, Madam Chairman.
    Welcome, Director.
    Mr. Mueller. Ma'am.
    Senator Murkowski. Nice to have you here.
    This morning, the investigative report that details the 
prosecutorial misconduct in the case against Senator Ted 
Stevens was released. It was, I guess, precipitated almost that 
the Brady violations came about, but it was not until 5 months 
after that trial was completed that we learned of these 
violations, and it came about because of the complaint that was 
filed by an FBI agent that alleged the prosecutorial and other 
law enforcement misconduct in that case. In my opinion, that 
was exceptionally good work by that FBI agent, and Judge 
Sullivan suggested that were it not for the complaint of that 
agent, that, in fact, we might not have learned of the 
misconduct.
    I'm joined this morning, or this afternoon, with many of my 
colleagues, including Senator Hutchison, in filing legislation 
that would address some of the laws that are in place that 
allowed for this horrid situation to move forward. But because 
this whole thing came about because of the acts of an FBI 
agent, I would certainly hope that individual has been 
recognized for his persistence, standing up for the 
Constitution. I think he did right, and I hope that recognition 
has been given by FBI.
    Mr. Mueller. Well, I'd have to get back to you on any 
particular recognition. The case is still under review by the 
Office of Professional Responsibility (OPR), both the Justice 
Department as well as our own OPR. But I will say that the 
agent who came forward and did that was doing so in the 
tradition of FBI. It is a legacy to adhere to the Constitution. 
When you see something wrong, you bring that to the attention 
of others. That is exactly what we teach in our new agents 
training as they come through, that there is no case that is 
more important than abiding by the Constitution, the applicable 
statutes, and the Attorney General guidelines.
    [The information follows:]
Provide Details on any Recognition That was Given to the Federal Bureau 
of Investigation Agent That Reported the Alleged Misconduct of Senator 
                           Ted Steven's Case
    The Special Agent who reported the alleged misconduct did not 
receive an incentive award in recognition of this activity.

    Senator Murkowski. Well, I appreciate that. You mentioned 
the report that is still underway. I've asked OPR to conduct 
this formal investigation, and I am hoping that the FBI will 
work with OPR as they look into some of the issues that were 
behind the Stevens matter.
    In particular, the FBI has worked very, very closely with 
the Anchorage Police Department in this case that involved Bill 
Allen, who was the key witness in the case against Senator 
Stevens, and Mr. Allen was--it was alleged that he had 
transported a young Alaska Native woman across State lines in 
violation of the Mann Act. It's been widely reported in the 
media that the case was recommended for Federal prosecution, 
but DOJ higher-ups scuttled that.
    The question that I would have to you is, to what extent 
was the FBI involved in that investigation, and did that 
investigation indicate any reason that the prosecution should 
not go forward? This has just really stunned people back in 
Alaska. They cannot understand why DOJ has dropped this, and 
I've attempted to get answers all the way up the chain and 
simply have not been able to get any.
    Do you know any reason that, based on that investigation, 
the prosecution should not have gone forward?
    Mr. Mueller. I do not, but that is something we'd have to 
get back to you on. I would assume that this is a part of the 
OPR investigation inasmuch as the allegation that came out of 
that series of events, and that particular allegation, would be 
addressed in that arena.
    I am not familiar with the court's report that was issued 
earlier today, and I do not know whether that became or was a 
subject of that particular investigation.
    Senator Murkowski. Well, and I would ask you, because this 
is a matter that has really gone far beyond what most could 
have even have imagined, that you not only look at the report 
that is issued today but also do some follow-up in terms of the 
FBI investigation and where we are with OPR.
    The concern that so many of us have is that the allegations 
against Mr. Allen are, unfortunately, not isolated in Alaska. 
We have had a great deal of concern about sex trafficking 
within the State with young Native women, and I look at what 
has happened with the Bill Allen case, and the Government's 
failure to prosecute Bill Allen sends an awful message, just an 
awful message to other predators that might be out there, that 
if you are a young woman, and particularly a young Native 
woman, you don't stand a chance when you have been victimized 
by a person of political influence and financial means.
    We worry about the situation of sex trafficking. And again, 
if an individual doesn't feel that there is any recourse out 
there, it makes the situation pretty tough. So this goes even 
beyond the Bill Allen investigation. I know that you've got 
good folks within FBI that are working these issues. I've met 
with them. I've talked with them. But again, I think this is 
something that needs further attention to detail, and if you 
can give me your assurance that you will look into that, I 
would certainly appreciate it.
    Mr. Mueller. Yes. Also, I will tell you that when the 
issues came out in terms of the Brady violations, we went back 
to our workforce to make certain that everybody understands the 
requirements under the Brady rules, and if exculpatory, to make 
certain that one learns from this, first.
    Second, when it comes to human trafficking in Alaska, as 
you point out, we have persons that are working hard on that 
with State and local law enforcement who believe it is a 
priority. Any young woman or, for that matter, young man's life 
that can be saved in terms of working with State and local law 
enforcement to address this, we certainly want to be a 
participant and driver of that.
    Senator Murkowski. I appreciate that. Thank you, Director.
    Thank you, Madam Chairman.
    Senator Mikulski. Senator Hutchison.
    Senator Hutchison. Thank you, Madam Chairman.
    Just to add one more question to Lisa's line, and I think 
she has taken the lead on this, and properly so, but I do 
commend the FBI agent who came forward who just couldn't sit 
back and let a person be accused, go through a trial, lose an 
election, all based on very bad misconduct on the part of the 
agencies that we look to for complete integrity, which would be 
DOJ, the prosecutors, and the FBI.
    There were others that were implicated with the FBI in some 
of the alleged misconduct. And my question to you is, what are 
you doing to deal with the allegations, which I assume will 
come out in a report or the OPR report, if the agents are found 
to still be in the FBI and have been actually, to your 
satisfaction, part of the scheme that was put together to 
convict Senator Stevens?
    Mr. Mueller. Well, at the outset, the Justice Department 
OPR led the investigation. We participated and contributed to 
that investigation. To the extent that individuals within FBI 
were implicated, we, along with DOJ, investigated that. There 
is at least one individual who is still going through the OPR 
process. Let me just put it that way. I can tell you that 
process is monitored.
    But, it goes through a process whereby the person has an 
opportunity to respond to the charges and the findings. That 
process is under way. At the end, when it's resolved, we'll 
take a look at it and determine what lessons need to be 
learned, what the appropriate punishment is for whatever 
wrongdoing was undertaken, and do as we do in every case where 
we find that a person has not adhered to what we expect in FBI.
    Senator Hutchison. I would just ask if you would share the 
final result of that investigation and your actions with this 
subcommittee.
    Mr. Mueller. I'd have to look into that, but I would expect 
that we would report to you on what we have done.
    Senator Hutchison. I would ask that you do so.
    Mr. Mueller. Yes.
    [The information follows:]
   Report on Federal Bureau of Investigation's Investigation of the 
            Alleged Misconduct of Senator Ted Stevens' Case
    Federal Bureau of Investigation's investigation of employee 
misconduct related to the investigation of Senator Ted Stevens is still 
pending.

    Senator Hutchison. I want to just go back to a couple of 
other points. Number one, on cyber security, there are 
different bills that have been put forward to deal with cyber 
security. I think everyone in both bodies, the House and the 
Senate, and both parties in the House and Senate, agree it is a 
critical need that we address cyber security.
    I think how we do it is the question and the differences in 
the bills. Many of us are concerned about an overlay by DHS, 
especially over the areas that have developed the expertise 
through the years, and the experience in cyber warfare, 
security of all kinds, and that would be DOD, the Central 
Intelligence Agency (CIA), FBI, the Defense Intelligence Agency 
(DIA), as well as the National Security Agency (NSA).
    So we're trying to work through what the best approach is 
for cyber security, and I think my position has been that we 
don't need a DHS overlay so much as we need the agencies that 
have the experience and the expertise to be able to make these 
decisions on how is the best way to assure our networks and our 
infrastructure are secure.
    In a general way, how would you--I don't want to put you on 
the spot because I guess it's hard for you to say in this 
environment with all of the different ideas and the different 
agencies involved. But is there a particular area that you 
think is essential for us to agree on as we move forward in 
trying to determine how we get to the goal of securing our 
infrastructure?
    Mr. Mueller. Let me start by maybe indicating how I 
perceive the allocation of responsibilities in the cyber arena. 
On the one hand, you have the protection of the infrastructure, 
and protection of the .gov and .com networks. That falls to 
DHS.
    On the other hand you have, as was brought out, not just 
the possibility but the actuality of foreign countries seeking 
to extract information, with the possibility down the road of 
undertaking cyber attacks. That falls generally with the 
intelligence community overseas, NSA, CIA, and the like.
    In the middle comes domestic intrusions and a determination 
of whether that domestic intrusion is from a criminal, an 
organized crime group, a nation state, or a teenage hacker. We 
have 56 field offices around the country. We have 56 cyber 
squads. The first indication of a substantial intrusion will 
quite probably come to us, and it is our responsibility to do 
the investigation to determine who is behind that computer, and 
to stop them.
    Too often, the discussion is how we protect against foreign 
countries, but part of that has to be disrupting these 
individuals and putting them behind bars.
    The legislation that is currently pending includes three 
areas that are important to us. One is, to the extent possible, 
ultimately having a required notification to the Bureau of an 
intrusion. I think there are 47 States that have this, but it's 
all over the lot in terms of who has to report and when they 
have to report. So, first is notification.
    Second is, to a certain extent, the fact that we are where 
we were in terms of sharing information prior to September 11 
amongst the agencies. When it comes to counterterrorism, 
there's very little that's not shared. And I would say it's 
also readily true in the cyber arena amongst the agencies, 
whether it be DHS, NSA, ourselves, DIA and the like.
    What's so important to this is what you point out, both the 
experience and the expertise in the private sector. This is 
where it's different from addressing terrorism, because the 
private sector has to play a substantial role. The private 
sector runs our critical infrastructures. How you execute that, 
whether through the statute or not, is really up to others. My 
concern is the sharing of information so that we can determine 
who is responsible for this and lock them up.
    Perhaps the third area is the necessity of building up the 
expertise in the Federal Government amongst all of the agents, 
as well as the outreach to the private side, not only building 
up the expertise, but also the outreach to private businesses 
so that we become partners in ways that we have not in the 
other criminal arenas.
    Senator Hutchison. Well, you have really highlighted an 
area that makes this whole intelligence, security, holding 
accused terrorists without charges being filed--we're not 
dealing with an enemy that is a nation state, like we have in 
the past. So if you picked up a person that was in the German 
army or in the intelligence arm of the German Government, you 
would know in World War II that you had to hold that person in 
the military sense.
    But when it is organizations like al Qaeda and others that 
have attacked our country, but yet they're not under the rules 
of war as we accept it, the Geneva Conventions don't affect 
them, it makes it very difficult to deal with any kind of 
intelligence areas when you're dealing with an enemy of our 
country but not a nation state. So that's something that we're 
all going to have to deal with in, I think, I hope a realistic 
way, because I'm with Senator Graham on this.
    I think we need Guantanamo Bay. I think we need the ability 
to hold people that are suspected terrorists that have 
associations with al Qaeda and other networks that deal with al 
Qaeda, and I don't want us to give up our capability to protect 
our country from another attack from one of these entities that 
may not even be an organization yet.
    So I know you're wrestling with it. We are, too. But I'm 
going to come down on the side of protecting our people with an 
asymmetric war that we have. That's what we're given to deal 
with, and we've got to do it in a way that protects America.
    Thank you.
    Senator Mikulski. Thank you very much, Director Mueller.
    Colleagues, as Director Mueller has said, 60 percent of 
FBI's request is in the area of national security. Many of 
these are really sensitive issues that FBI is engaged in, and 
we need to make sure we get our resources right while we're 
working on very complex policies.
    Therefore, this is why we will move to a closed session.

                     ADDITIONAL COMMITTEE QUESTIONS

    If there are no further questions, the Senate may submit 
additional questions for the record. We request FBI's response 
in the usual 30 days.
    [The following questions were not asked at the hearing, but 
were submitted to the FBI for response subsequent to the 
hearing:]
           Questions Submitted by Senator Barbara A. Mikulski
                      federal programs facing cuts
    Question. Under the terms of the Budget Control Act of 2011 (Public 
Law 112-25), funding for virtually all Federal programs will face a 
possible across-the-board cut in January 2013 if the Congress fails to 
enact a plan before then to reduce the national debt by $1.2 trillion. 
According to Congressional Budget Office estimates, this would result 
in a cut of roughly 8 percent to programs across the Federal Bureau of 
Investigation (FBI).
    What impacts would these cuts have on the FBI? What is your 
strategic plan for the FBI to implement these cuts if Congress fails to 
enact an alternative plan? Please provide a list of expected workforce 
furloughs, consequences to public safety and national security 
programs, and other reductions at the FBI if sequestration is 
implemented.
    Answer. The administration is committed to avoiding a sequester; we 
urge the Congress to enact balanced deficit reduction legislation that 
avoids this type of sequestration so the vital missions of the FBI can 
continue.
    The effect of an across-the-board cut of 8.5 to 10 percent would 
mean budget cuts of approximately $650 to $800 million in fiscal year 
2013 (the FBI's fiscal year 2012 Appropriation was $8,036,991,000). 
These reductions would impact the FBI mission and result in cuts to 
investigative operations and infrastructure, a Bureau-wide furlough, 
and a lengthy hiring freeze. While the implementation of a $650 to $800 
million cut cannot yet be determined, cuts in this range would likely 
result in a 25-workday furlough, resulting in a decrease of 
approximately 3,500 Special Agent, Intelligence Analyst, and 
Professional Staff work years. In addition to the negative impact on 
employee morale and productivity, a hiring freeze and furlough of this 
length would likely disrupt national security and criminal 
investigations, intelligence collection and dissemination, and 
surveillance capabilities.
    The FBI would make every effort possible to minimize the negative 
impact to public safety; however, budget cuts of this magnitude would 
have a significant effect on FBI operations. These cuts would take 
agents off the streets, delay investigations, and disrupt intelligence 
collection. The FBI would continue to work with its Federal, State, and 
local law enforcement partners, but at a reduced capacity.
    As a component of the Department of Justice (DOJ), the FBI would 
participate in the Department-wide furlough, which will affect every 
program and employee. If these cuts are enacted, the FBI will issue 
furlough notices and immediately begin furloughing employees in order 
to achieve the necessary savings by the end of the fiscal year. The 
furloughs would be implemented on a rotating basis with each of the 
FBI's 36,000 employees being required to take roughly 25 days off. In 
addition, the FBI may be forced to freeze equipment purchases, restrict 
investigative travel, and cancel service contracts.
               federal bureau of investigation rescission
    Question. In fiscal year 2013, the FBI requests an appropriation of 
$8.2 billion, an increase of $114 million, or 1.4 percent. However, the 
request also proposes to rescind $162 million from the FBI's existing 
funding in the Salaries and Expenses account, which leads to a net 
reduction for the FBI to fight terrorism at home and abroad.
    What specific FBI activities would be impacted by the proposed 
rescission? Will the rescission impact missions in which Congress has 
made considerable investments in recent years? If so, which missions? 
How would this impact national security?
    Answer. DOJ and FBI are evaluating the impacts of the rescission. 
We will work to minimize its impact and ensure that priority programs 
and projects are not affected.
                          cyber security cuts
    Question. The Internet is the new battleground for terrorists, and 
the new playground for predators. To combat these threats, cyber 
security cuts across all of the FBI's programs.
    Why the urgency in combating cyber threats?
    Answer. Al Qaeda and other terrorist groups use the Internet as a 
recruiting tool, a moneymaker, a training ground, and a means for 
conducting operations. Terrorists have not used the Internet to launch 
a full-scale cyber attack, but we cannot underestimate their intent. 
Additionally, certain foreign nations use the Internet to steal our 
intellectual property and trade secrets for military and competitive 
advantage. We have also started to see that previously isolated hackers 
are now joining forces to create criminal cyber syndicates that steal 
information for sale to the highest bidder.
    Question. What cyber imperatives does the FBI face on security? 
Policy? Funding?
    Answer. The FBI will continue to expand its capacity to lead 
national efforts to investigate cyber intrusions, identify hackers, and 
put them in jail. The FBI will continue to build on current 
capabilities by:
  --Ensuring all agents are able to operate in the cyber environment;
  --Creating a virtual structure that enables cyber agents from around 
        the country to work together on difficult cases;
  --Cultivating sources that can infiltrate cyber criminal networks; 
        and
  --Expanding the network of cyber task forces around the country.
    Encouraging the private sector to share information with the 
Government about cyber intrusions and data breaches in a timely manner 
would enhance the FBI's ability to conduct investigations, identify 
hackers, and put them in jail. Hackers will not stop until we hold them 
accountable.
    The cyber threat continues to expand in scope and complexity, which 
will drive future funding requirements. Our adversaries are becoming 
increasingly sophisticated with using technology as a means to exploit 
our vulnerabilities; consequently, data, information, and 
infrastructure remain at risk of being compromised. We must continue to 
keep pace with technological advances.
    Question. The fiscal year 2012 Appropriations Act gave the FBI more 
resources for cyber training, specifically for agents. Please provide 
an update on the FBI's cyber training and what plans are being 
implemented. Will the fiscal year 2013 budget affect this plan?
    Answer. The FBI has recently restructured its cyber training 
curriculum to increase the emphasis on cyber national security 
investigations. Special Agents working on cyber issues will be trained 
toward working the most sophisticated organized crime and national 
security matters and will be required to complete more technically 
rigorous training requirements.
    In addition, the FBI is implementing a new initiative dedicated to 
training a majority of the workforce on conducting investigations in an 
increasingly high-technology environment. This training is expected to 
educate more than 16,000 FBI employees. This new training initiative 
will provide the cyber skills needed to conduct complex 
counterterrorism, counterintelligence, criminal, and computer 
intrusions investigations. Using base resources, we plan to expand and 
deploy this training to all FBI investigators in fiscal year 2013.
                       traditional crime fighting
    Question. The FBI's $8.2 billion budget is split at roughly 60 
percent for national security and counterintelligence, and 40 percent 
for traditional crime fighting efforts.
    How much goes to national security, and what activities make up 
this category? How much goes to traditional crime fighting? What 
activities make up this category? What programs cut across the national 
security and counterintelligence budget, and into the traditional crime 
fighting budget? What complications does this create in terms of the 
budget?
    Answer. The FBI's budget is broadly organized into four ``decision 
units'' as follows:
  --Intelligence;
  --Counterterrorism/counterintelligence;
  --Criminal enterprises/Federal crimes; and
  --Criminal justice services.
    The first two decision units are scored to national security and 
total nearly $5 billion, roughly 60 percent of the FBI's fiscal year 
2013 budget. These decision units fund all of the FBI's National 
Security Branch (Counterterrorism, Counterintelligence, Weapons of Mass 
Destruction, and the Directorate of Intelligence) as well as portions 
of other programs, such as Cyber. Funding for these decision units also 
includes pro-rated portions of enterprise-wide services such as 
information technology, rent, etc. The FBI's Cyber programs are divided 
between two basic categories:
  --Computer intrusions; and
  --Cyber crime.
    The Computer Intrusions section includes national security 
intrusions and programs such as the National Cyber Investigative Joint 
Task Force, representing approximately 60 percent of the overall Cyber 
Division budget.
    The latter two decision units total more than $3 billion of the 
FBI's budget and are scored to traditional criminal activities. This 
includes all of the Criminal Investigative Division, which operates the 
Violent Crime, White Collar Crime, and Public Corruption programs among 
others; our Criminal Justice Services Division; and the FBI laboratory. 
Also included is the Cyber Crime portion of the Cyber Division. Funding 
for these decision units also include pro-rated portions of enterprise-
wide services, like information technology, rent, etc.
    There are several programs that cut across both national security 
and criminal decision units. Cyber, as mentioned above, and 
Surveillance, are two examples.
                                 ______
                                 
            Questions Submitted by Senator Patrick J. Leahy
    new york city police department surveillance of muslim american 
                               community
    Question. In recent months, we have heard troubling information 
about the surveillance operations of the New York City Police 
Department (NYPD)--particularly targeting the Muslim American 
community. According to press accounts, the NYPD has been compiling 
databases of information concerning Muslim Americans residing 
throughout the northeast, and has used informants called ``rakers'' and 
``mosque crawlers'' to infiltrate mosques and Muslim student groups. 
Last week, the Special Agent in Charge of the Federal Bureau of 
Investigation's (FBI) Newark Division criticized these tactics as 
damaging to relations between law enforcement and the Muslim community, 
and more importantly, damaging to the counterterrorism efforts of the 
FBI.
    Was the FBI aware of the surveillance tactics being used by the 
NYPD to target the Muslim American communities in New York, New Jersey, 
and other places in the northeast prior to press reports on the matter? 
If so, when did it become aware of those tactics?
    Answer. The FBI is generally aware that the NYPD engages in 
physical surveillance and a wide range of other investigative 
techniques in connection with its efforts to protect New York City from 
terrorist attacks. The FBI was not specifically aware of the conduct 
described in the press reports and does not know if those reports are 
accurate. The FBI has and will continue to work with the NYPD, as we do 
with many state and local police departments, consistent with our rules 
and regulations under the Attorney General Guidelines and the Domestic 
Investigations Operations Guide.
    Question. I know that FBI agents must adhere to the Attorney 
General Guidelines and the FBI's Domestic Investigations and Operations 
Guide (DIOG) when the FBI is conducting surveillance. But does the FBI 
obtain and use information collected by the NYPD through use of the 
NYPD's surveillance tactics? If so, is this done in compliance with the 
relevant Federal guidelines?
    Answer. The FBI shares and receives information collected by its 
partner agencies. In particular, the FBI and NYPD work together on the 
Joint Terrorism Task Force, share investigative information, and 
exchange queries for operational and tactical de-confliction purposes. 
Unless circumstances suggest otherwise, the FBI assumes that our 
partner agencies have collected this information in accordance with the 
United States Constitution and other applicable laws and regulations.
                regional computer forensics laboratories
    Question. I have been working with a variety of stakeholders, 
including the law enforcement community, to strengthen and improve the 
forensic sciences used in criminal cases. Last year, I introduced 
legislation that would, among other things, help support forensics 
laboratories.
    Director Mueller, I understand that the FBI is in the process of 
trying to set up regional computer forensic laboratories and that a 
site has not yet been determined for New England. Can you tell me the 
current status of those plans and what the timeframe is for choosing a 
site for a regional lab in New England?
    Answer. The FBI has established 16 full-service Regional Computer 
Forensic Laboratories (RCFLs) devoted to the examination of digital 
evidence across the country. However, none are currently established in 
New England. Although there are no current plans to establish 
additional RCFLs the FBI continues to work with our law enforcement 
partners in the New England area to leverage all existing resources, 
facilities, and equipment to support its partners with the examination 
of digital evidence.
                                 ______
                                 
           Questions Submitted by Senator Frank R. Lautenberg
                     high-capacity ammunition clip
    Question. When Congresswoman Gabrielle Giffords and 18 others were 
shot on January 8, 2011, outside of a supermarket in Tucson, Arizona, 
the shooter used a gun with a high-capacity ammunition clip to kill 6 
people and wound 13 others. It was only when the shooter had fired all 
31 rounds in his clip that people were able to tackle him. At last 
year's hearing, Director Mueller stated that everybody in law 
enforcement supports efforts to lessen the threat of criminals getting 
weapons that do substantial damage. Would a high-capacity magazine ban 
lessen that threat?
    Answer. The Federal Bureau of Investigation (FBI) supports law 
enforcement efforts aimed at preventing prohibited persons from 
obtaining firearms, including those capable of substantial damage.
                           most at-risk area
    Question. According to the FBI, New Jersey is home to the most at-
risk area for a terrorist attack in the United States. An attack on 
this area could have an impact on 12 million people who live nearby. 
Last year, you assured me that the FBI is doing everything it can to 
ensure that there is not an attack there. What specific items in this 
budget request will help the FBI protect this area?
    Answer. The FBI continues to dedicate critical investigative 
resources to New Jersey's high-risk areas. As of April 2012, the FBI 
has more than 350 Special Agents in the Newark field office. Further, 
the FBI and DHS are working diligently through their task forces, 
including the Joint Terrorism Task Force (JTTF), to ensure the area 
remains safe by identifying and disrupting any threats. The fiscal year 
2013 budget includes resources to continue supporting the JTTFs and the 
Special Agents currently assigned to the Newark field office.
                     illegal trafficking of tobacco
    Question. Reports from the Government Accountability Office have 
identified an estimated tax loss of $5 billion a year due to the 
illegal trafficking of tobacco. The tremendous profits and low criminal 
penalties have attracted the involvement of organized criminal and 
terrorist groups. The FBI has primary jurisdiction on terrorism and 
organized crime, while the Bureau of Alcohol, Tobacco, Firearms, and 
Explosives (ATF) holds primary jurisdiction on cigarette trafficking. 
What are you doing to ensure that the FBI and ATF work together to 
prevent illegal tobacco proceeds from financing organized crime and 
terrorists?
    Answer. The Department of Justice's (DOJ) agencies have strong and 
effective working relationships with their DOJ partners as well as 
other Federal, State, and local agencies and a history of highly 
successful joint investigations. Supervisors in the field regularly 
review investigations on a case-by-case basis and involve other 
agencies as appropriate. For example, recently the ATF and the FBI 
worked together on ``Operation Secondhand Smoke'', an undercover 
investigation into a nationwide network of retailers, wholesalers, 
distributors, importers, and manufacturers who were avoiding cigarette 
taxes to make millions of dollars in profits.

                          SUBCOMMITTEE RECESS

    Senator Mikulski. This subcommittee will temporarily recess 
and reconvene in a closed session in room 217 in the CVC.
    Before I close this public part, I would like the Director 
to know, as we said to the Attorney General, when the issue is 
related to public integrity, and on the issues related to the 
Stevens matter, this is a bipartisan set of requests, because 
we feel that both our Justice Department--those involved in 
enforcing the law, if we're going to pursue public integrity 
issues, which we must and should, then those who are pursuing 
it have to have the highest public integrity themselves.
    We know FBI has that standard. You've insisted on that 
standard, and we thank you. But just note that it's not just 
from them because they're Republican and Stevens was on this 
subcommittee. It's larger than that.
    So we look forward to working with you, and we look forward 
to meeting in the other room where we can go into the national 
security budget in more detail.
    The subcommittee is temporarily recessed until we 
reconvene.
    Next week we'll have a hearing for the testimony of 
Secretary Bryson of Commerce.
    [Whereupon, at 11:18 a.m., Thursday, March 15, the 
subcommittee was recessed, to reconvene in closed session.]
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