[Senate Hearing 112-44]
[From the U.S. Government Publishing Office]



                                                         S. Hrg. 112-44

PROTECTING AMERICAN TAXPAYERS: SIGNIFICANT ACCOMPLISHMENTS AND ONGOING 
                 CHALLENGES IN THE FIGHT AGAINST FRAUD

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

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                            JANUARY 26, 2011

                               __________

                           Serial No. J-112-1

                               __________

         Printed for the use of the Committee on the Judiciary











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                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
HERB KOHL, Wisconsin                 CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California         ORRIN G. HATCH, Utah
CHARLES E. SCHUMER, New York         JON KYL, Arizona
RICHARD J. DURBIN, Illinois          JEFF SESSIONS, Alabama
SHELDON WHITEHOUSE, Rhode Island     LINDSEY GRAHAM, South Carolina
AMY KLOBUCHAR, Minnesota             JOHN CORNYN, Texas
AL FRANKEN, Minnesota                MICHAEL S. LEE, Utah
CHRISTOPHER A. COONS, Delaware       TOM COBURN, Oklahoma
RICHARD BLUMENTHAL, Connecticut
            Bruce A. Cohen, Chief Counsel and Staff Director
        Kolan Davis, Republican Chief Counsel and Staff Director
                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Grassley, Hon. Chuck, a U.S. Senator from the State of Iowa......     3
    prepared statement...........................................    80
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont.     1
    prepared statement...........................................    84

                               WITNESSES

Breuer, Lanny A., Assistant Attorney General, Criminal Division, 
  U.S. Department of Justice.....................................     5
West, Tony, Assistant Attorney General, Civil Division, U.S. 
  Department of Justice..........................................     7

                         QUESTIONS AND ANSWERS

Responses of Lanny A. Breuer to questions submitted by Senators 
  Leahy, Coburn, Grassley, Klobuchar and Sessions................    23
Responses of Tony West to questions submitted by Senators Leahy, 
  Coburn, Grassley and Sessions..................................    56

                       SUBMISSIONS FOR THE RECORD

Breuer, Lanny A., Assistant Attorney General, Criminal Division, 
  U.S. Department of Justice, statement..........................    69
West, Tony, Assistant Attorney General, Civil Division, U.S. 
  Department of Justice, statement...............................    87

 
PROTECTING AMERICAN TAXPAYERS: SIGNIFICANT ACCOMPLISHMENTS AND ONGOING 
                 CHALLENGES IN THE FIGHT AGAINST FRAUD

                              ----------                              


                      WEDNESDAY, JANUARY 26, 2011

                                       U.S. Senate,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:41 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Patrick J. 
Leahy, Chairman of the Committee, presiding.
    Present: Senators Leahy, Whitehouse, Klobuchar, Franken, 
Coons, Grassley, Hatch, and Coburn.

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

    Chairman Leahy. Good morning, everybody. By Washington 
standards, a snowy morning; by Vermont standards, a light 
dusting. Some of you have heard me tell the story of being home 
a while ago and turning on the radio in Vermont. They were 
giving the news, and they said, ``In other news today, we 
expect a light dusting of snow, no more than 5 or 6 inches,'' 
then went on to something else.
    I want to have this hearing, and I first wanted--and we 
will do this formally at our executive meeting tomorrow. I want 
to welcome my friend Chuck Grassley, who is here. Chuck and I 
have served together for decades. We have worked on issues from 
agriculture to criminal fraud. We have had a lot of either 
Grassley-Leahy or Leahy-Grassley bills that have been passed. 
We are considering a vital issue today on an issue that Senator 
Grassley and I have worked together with great success: the 
fight against fraud.
    One of the first major bills the Senate Judiciary Committee 
considered last Congress--it was actually one of the very first 
bills the President signed into law--was the Leahy-Grassley 
Fraud Enforcement and Recovery Act. It gave fraud investigators 
and prosecutors the tools and resources to better hold those 
who commit fraud accountable and, just as importantly, to 
recover taxpayer money.
    Working together, we strengthened the False Claims Act, 
which empowers whistleblowers to find fraud and recover stolen 
tax dollars that would otherwise go undiscovered. We worked on 
key provisions to fight fraud in the Affordable Care Act and 
the Wall Street Reform Act. Those new laws are already paying 
off, and I think it is safe to say that Senator Grassley and I 
will be watching how well they do. And we have a number of 
Senators in both parties who are very interested in this.
    We will hear today about the historic successes in anti-
fraud efforts. In the last fiscal year alone, the Department of 
Justice recovered well over $6 billion through fines, 
penalties, and recoveries from fraud cases. Since January 2009, 
the Department has recovered $6.8 billion of taxpayer dollars 
in False Claims Act cases, and I had the staff check and I find 
that is far more than any other 2-year period.
    Now, I would like to reinvest a small amount of these 
recoveries back into fraud enforcement. I think it is a good 
deal for America as we get greater recovery of taxpayer funds 
without any new spending of taxpayer money.
    In addition to recovering billions of dollars in penalties 
and fines, I think the Department of Justice has to focus on 
holding individuals accountable for their fraud crimes.
    I was pleased to learn that the Financial Fraud Enforcement 
Task Force has secured charges against 343 criminal defendants 
and 189 civil defendants for fraud schemes that harmed more 
than 120,000 victims. I am referring to Operation Broken Trust. 
The Health Care Fraud Prevention and Enforcement Action Team 
created by the Justice Department and Department of Health and 
Human Services have had similar victories.
    We are going to learn today about ongoing challenges that 
law enforcement officers face in investigating and prosecuting 
fraud. The FBI, to their credit, has recently more than doubled 
the number of agents investigating fraud and has created the 
National Mortgage Fraud Team, in part thanks to our legislation 
and the appropriations that came with it. But I am disturbed by 
ongoing reports of fraud in the mortgage foreclosure process--
fraud that has affected every single State in this country, 
certainly every State that is represented on this Committee, 
where so many Americans are finding themselves in this 
challenging economy and facing fraud and mortgage foreclosure. 
I want to know whether the Justice Department needs new tools 
and greater resources to root out those responsible.
    I have got to say I want people who are doing this, who are 
committing these frauds, obviously fined, and I want to see 
people go to jail. We have got to make it very clear. If you 
get some kid that steals a car, they might go to jail. You have 
somebody who steals tens of millions of dollars, they ought to, 
too.
    The President and Attorney General Holder have 
enthusiastically supported legislative initiatives to bolster 
fraud enforcement; they have spearheaded important new efforts 
on mortgage fraud, health care fraud, and financial fraud. And 
I think that commitment to fraud enforcement is shown by our 
witnesses here today, and I am glad to see Assistant Attorneys 
General Lanny Breuer and Tony West back here.
    Major fraud cases take time to investigate and prosecute. I 
think the push we have seen will continue to yield significant 
results. But we have to keep giving law enforcement the tools 
and resources necessary to root out fraud so that they can 
continue to recoup losses to taxpayers. Every day taxpaying 
Americans deserve to know their Government is doing all it can 
to hold responsible those who committed fraud and to prevent 
future fraud, particularly with so much taxpayer money at risk, 
and I compliment the administration for pushing hard on this. 
We want to make sure we are giving you all the tools so you can 
push.
    Americans are worried about their budgets at home. We have 
to protect their investment in Government. So I look forward to 
working with Senator Grassley on this and other areas as we 
have for so many other things.
    Chuck, I will yield to you.

STATEMENT OF HON. CHUCK GRASSLEY, A U.S. SENATOR FROM THE STATE 
                            OF IOWA

    Senator Grassley. Well, let me thank you for the welcome 
that you gave me, and you accurately have described the very 
close working relationships we have had on some pieces of 
legislation. I think more important than the few pieces of 
legislation or a lot of pieces of legislation we worked on--and 
we have some philosophical differences, but the most important 
thing for me is in the 30 years that I have been on this 
Committee with you, there has not been one confrontation that I 
can remember, and I am sure I would remember it.
    [Laughter.]
    Chairman Leahy. That is a midwestern understatement.
    Senator Grassley. Okay. And so I think that that best 
describes our relationship, the fact that you and I can 
disagree on some things, agree on a lot of things, and still 
work together and try to solve problems, and that is our job 
here. So I want to thank you for that welcome.
    The Committee has a lot of work to do, and our work could 
not come at a more critical time for our country. Every move 
that we make must take a painstaking look at the fiscal 
realities of our time, the constitutional responsibilities that 
we hold, and the will and desires of the American people that 
we represent. I am going to have more to say tomorrow at our 
first markup, but I look forward to working with you as we move 
this Committee forward in a productive manner, consistent with 
our relationship over the years.
    Today's hearing is a good way to start--and probably my way 
of characterizing this hearing is a whole lot different than 
the way you characterized our working together on fraud. But it 
is a good way for me to start my new responsibilities as 
Ranking Member. Fighting fraud is something that you and I have 
worked on together over many years in the Senate. I am glad to 
be in this chair as we begin the 112th Congress and focus on 
continued efforts to protect Federal tax dollars from fraud. As 
the author of the 1986 amendments to the Federal False Claims 
Act, which have recovered nearly $28 billion back to the 
taxpayer, I have spent a great deal of my time in the Senate 
working to combat fraud against taxpayers. I welcome the 
opportunity to begin this Congress on this very important 
issue.
    Combating fraud obviously is not a partisan issue. It is an 
American taxpayer issue and one that every Senator and Member 
of Congress should focus on. As Congress looks for ways to cut 
Federal spending and reevaluates which Federal programs are 
worthy of hard-earned taxpayer funds, we need to be cognizant 
that every dollar lost to fraud is a dollar of funding siphoned 
off from legitimate programs. Last Congress, as Chairman Leahy 
just said, he and I worked together and crafted this Fraud 
Enforcement Act to address the number of problems with Federal 
fraud fighting. Today's hearing offers another opportunity to 
follow up on the Justice Department's implementation of the 
Fraud Act and to ask questions to help us determine what is and 
is not working.
    Monday, the Department announced health care fraud 
recoveries for fiscal year 2010. The civil recovery numbers 
were impressive in our great victory in the fight against 
fraud. However, these recoveries only represent a small 
fraction of the estimated $40 to $60 billion in annual health 
care fraud.
    There are a number of topics on health care fraud I would 
like to cover today, including the questions of paying and 
chasing fraud, privacy of physician billing information in the 
Health Care Fraud and Abuse Act, and the HEAT programs. 
Additionally, I am interested in talking about transparency in 
the False Claims Act settlements by requiring the Department to 
report a number of statistics to Congress annually. This will 
help alleviate concerns I have had for years that these 
settlements may simply become the cost of doing business for 
these large corporate fraudsters.
    I also want to ask the witnesses about security fraud and 
some high-profile settlements with the SEC signing off last 
year. Specifically, I want to know what the Justice Department 
knew about these settlements in advance and whether they signed 
off on them or otherwise agreed to them. I want to learn more 
about why so many of these complex financial fraud cases seemed 
to end in settlements where shareholders are punished and yet 
there are so few ending in criminal prosecution where the 
senior executives ought to be held accountable.
    Finally, I would like to note that, regardless of the 
substantive laws that we pass, Mr. Chairman, the investigative 
and law enforcement resources appropriated and the prosecutions 
brought so far, criminal fraud will not be deterred until we 
revisit the Supreme Court's decision in United States v. 
Booker, and that obviously deals with child pornography, fraud 
cases, the type that we are discussing here today. If potential 
fraudsters view the lenient sentences now being handed down as 
merely the cost of doing business, efforts to combat criminal 
fraud could be undermined.
    I appreciate the opportunity to raise these important 
issues today with the witnesses and look forward to working 
with the Chairman.
    Could I ask, Mr. Chairman, that some time about 5 minutes 
to 12, Senator Harkin and I are honoring Medal of Honor winner 
Staff Sergeant Giunta from our State, and we have to go 
together to do that. So I will----
    Chairman Leahy. I would stop anything for a Medal of Honor 
recipient. Feel free. We will start then with Lanny Breuer, who 
is the Assistant Attorney General for the Criminal Division of 
the United States Department of Justice, and I thank you for 
your kind words, Senator Grassley.
    Mr. Breuer started his career as an assistant D.A. in New 
York City, prosecuted offenses ranging from violent crime to 
white-collar crime. He later joined Covington & Burling, where 
he served as co-chair of the White-Collar Defense Investigation 
Group. He was Special Counsel to President Clinton from 1997 to 
1999, where we got to know each other better. He got his 
undergraduate degree from Columbia and his law degree from 
Columbia Law School.
    Mr. Breuer, please go ahead, sir. What we will do is we 
will hear from Mr. Breuer, then we will hear from Mr. West, 
then we will go to questions.

STATEMENT OF HON. LANNY A. BREUER, ASSISTANT ATTORNEY GENERAL, 
         CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE

    Mr. Breuer. Thank you. Good morning, Mr. Chairman, Ranking 
Member Grassley, and distinguished members of the Committee. 
Thank you for inviting me to speak with you today about the 
many ways in which the Department of Justice protects American 
taxpayer dollars by bringing criminal fraud prosecutions. I am 
honored to appear before you on behalf of the Department and 
along with my colleague and friend, Assistant Attorney General 
Tony West.
    Together with the United States Attorney's Offices, our 
important partners in the Inspector General community, and our 
many other law enforcement partners, the Criminal Division, 
whose nearly 600 lawyers I am privileged to lead, is 
investigating and prosecuting fraud cases all across the 
country. We are holding fraudsters accountable for bilking the 
American people, and we are seeking sentences designed to 
punish and deter them.
    We are also aggressively working to recoup the money these 
criminals have stolen, whether from individual investors 
through investment fraud schemes or from our taxpayer-funded 
public programs, such as Medicare.
    As a result of our efforts over the past year, the Criminal 
Division, the United States Attorney's Offices, and our 
colleagues in the Civil and Antitrust Divisions have prosecuted 
thousands of defendants for fraud crimes and obtained judgments 
and settlements amounting to billions of dollars in fraud and 
corporate corruption proceeds. In fiscal year 2010, for 
example, in criminal matters in which the Criminal Division 
participated, we obtained approximately $3.4 billion in 
judgments and settlements.
    The Department is grateful for the many resources Congress 
has provided to support and enhance our criminal fraud 
enforcement efforts. Beyond providing expanded statutory tools, 
Congress has authorized critical funds through various means, 
including in the Fraud Enforcement Recovery Act, FERA, which, 
of course, Chairman Leahy and Ranking Member Grassley 
sponsored. In addition, last year in the Affordable Care Act, 
Congress authorized additional, critical funding for use in 
health care fraud enforcement.
    Congress's financial support of our criminal investigations 
and prosecutions is critical to protecting the American 
taxpayer's hard-earned money. And the amount of taxpayer money 
restored to the United States Treasury through our criminal 
enforcement efforts far exceeds--far exceeds--what we spend to 
recover that money.
    In September 2010, when I last testified before the 
Committee on the subject of financial fraud, I described 
numerous significant prosecutions that we had recently brought 
in the areas of investment fraud, mortgage fraud, bank fraud, 
and fraud in disaster programs. Since that time, we have 
continued our aggressive push to investigate and prosecute 
fraud in all its forms.
    For example, we have expanded our aggressive efforts to 
prosecute those who seek to defraud the Medicare program. The 
Healthcare Fraud Prevention & Enforcement Action Team (HEAT)'s 
Medicare Strike Force, which now operates in seven U.S. cities, 
has led this effort.
    In fiscal year 2010 alone, the Strike Force filed 140 
indictments involving charges against 284 defendants who 
collectively billed the Medicare program more than $590 million 
in just those seven cities. We have also been working closely 
with the Special Inspector General for the taxpayer-funded 
Troubled Asset Relief Program, TARP, and our other law 
enforcement partners to hold accountable fraudsters trying to 
pilfer TARP funds.
    In addition, as described in greater detail in my 
accompanying written testimony, we have been working hard to 
investigate and prosecute perpetrators of investment fraud 
schemes, procurement fraud schemes, securities fraud schemes, 
and mortgage fraud schemes. In many of these cases as well, we 
work closely with our many partners, including the Financial 
Fraud Enforcement Task Force, on which I serve as co-chair of 
the Commodities and Securities Working Group, the Recovery Act 
Working Group, and the Rescue Fraud Working Group.
    As I have told this Committee before, prosecuting fraud is 
a high priority of the Department of Justice. Every day Federal 
prosecutors and agents across the country are working hard to 
investigate and prosecute those intent on defrauding American 
taxpayers or otherwise undermining the transparency and 
integrity of our markets. We are absolutely committed to 
continuing these efforts.
    Thank you for this opportunity to provide this Committee 
with this brief overview of the Department's efforts to combat 
fraud. I look forward to working with the Committee further, 
and I am happy to answer any questions.
    Thank you.
    [The prepared statement of Mr. Breuer appears as a 
submission for the record.]
    Chairman Leahy. Thank you very much.
    We will next hear from Tony West, who is the Assistant 
Attorney General for the Civil Division of the United States 
Department of Justice. Prior to his time at Civil Division, Mr. 
West was a partner at Morrison & Foerster, representing 
individuals and companies in civil and criminal matters. Before 
that he served as Special Assistant Attorney General for the 
State of California. He started his career at the Justice 
Department. He spent 2 years working on crime policy issues as 
Special Assistant to the Deputy A.G., and later 5 years working 
as Assistant U.S. Attorney for the Northern District of 
California. That is a job where you do not get too much time to 
yourself, I know.
    Mr. West. That is true.
    Chairman Leahy. He earned his bachelor's degree from 
Harvard University, his J.D. from Stanford University Law 
School.
    Assistant Attorney General West, we are delighted to have 
you here, sir.

STATEMENT OF HON. TONY WEST, ASSISTANT ATTORNEY GENERAL, CIVIL 
              DIVISION, U.S. DEPARTMENT OF JUSTICE

    Mr. West. Thank you so much, Mr. Chairman and Ranking 
Member Grassley and members of the Committee. It is good to be 
with you again. It is a great privilege to appear before you 
with my good friend and colleague, Assistant Attorney General 
Lanny Breuer, to discuss the Civil Division's work to fight 
fraud and recover taxpayer dollars on behalf of the American 
people.
    The Civil Division, as you know, represents the United 
States in courts throughout the Nation in a wide variety of 
matters and is the Justice Department's largest litigating 
component. We handle cases that touch upon nearly every aspect 
of the Federal Government's operations and this 
administration's domestic, national security, and foreign 
policy priorities. And central to our mission is the recovery 
of taxpayer dollars lost to fraud, waste, and abuse.
    The primary enforcement tool that we use to achieve this 
important objective is the False Claims Act, a landmark piece 
of legislation that is well known to the members of this 
Committee. And essential to our success has been the ability to 
enlist the aid of whistleblowers pursuant to the Act's qui tam 
provisions--provisions that in 1986 were substantially 
strengthened due to the successful efforts of Ranking Member 
Grassley and Representative Howard Berman.
    Indeed, Mr. Chairman and Ranking Member Grassley, thanks to 
your crucial leadership not only in promoting the False Claims 
Act but in substantially strengthening it in 2009 with the FERA 
amendments, the Justice Department today has better enforcement 
tools, better resources, and a better ability to pursue fraud 
perpetrated on the American people, better tools than we have 
ever had before.
    In fact, since January 2009, the Civil Division, working 
with our partners in U.S. Attorney's Offices around the 
country, secured over $10 billion in fraud settlements, 
judgments, fines, and penalties under the Division's many 
statutory authorities--a staggering amount that represents the 
largest 2-year Civil Division fraud recovery in the history of 
the Department of Justice.
    Now, while the largest share of this record-breaking sum 
represents the Department's vigorous efforts to fight health 
care fraud, something I will discuss in just a moment, that 
amount is also comprised of a wide variety of fraud cases we 
have pursued and resolved over the last 2 years, from 
procurement fraud cases involving substandard supplies to our 
men and women in uniform, to the ongoing cases involving 
suppliers of defective bulletproof vests that not only cheated 
the taxpayers but, more importantly, put our men and women in 
law enforcement at risk.
    What is more, our success over these last 2 years 
highlights the results we can achieve when we combine enhanced 
resources for enforcement purposes and more effective 
coordination between the Justice Department and our sister 
Federal agencies with appropriate but aggressive enforcement 
strategies aimed at deterring illegal conduct and holding 
responsible actors accountable. Nowhere is this more evident 
than in our fight against health care fraud.
    Now, when I was asked to appear before this Committee in 
October 2009, I said that we in the Justice Department 
recognized the urgency posed by a health care problem that 
undermined the quality, integrity, and safety of patient care. 
And now just over a year later, I am pleased to report that the 
Department of Justice has never been more aggressive or more 
successful in its fight against health care fraud.
    Since January 2009, the Civil Division has--again, working 
with the Nation's U.S. Attorneys--opened more health care fraud 
matters, secured larger fines and judgments, negotiated higher 
settlements, and recovered over $8 billion for the taxpayers in 
health care fraud cases. This, too, is a record representing 
more health care fraud monies recovered than in any other 2-
year period in history.
    And even beyond the recovery of billions of dollars, this 
anti-fraud effort reflects a commitment by the Attorney General 
and the Civil Division to pursue cases that span the broad 
spectrum of health care fraud, including sophisticated 
corporate overbilling schemes, heart-wrenching cases of 
preventable patient neglect in nursing homes, large 
pharmaceutical companies that provide illegal kickbacks to 
physicians, and individual doctors who endanger the lives of 
those in their care just to bump up their Medicare 
reimbursements.
    Indeed, ours is a commitment which recognizes that while 
most health care providers, companies, and individuals who do 
business with the Government are dealing fairly, playing by the 
rules, and are careful with the taxpayer dollars they receive, 
we know that there are those who cut corners, who take 
advantage, who put profits over patient safety. And, Mr. 
Chairman, it is those individuals and those corporations who 
attract our enforcement attention.
    Finally, let me briefly touch upon the Civil Division's 
work to protect consumers by pursuing economic fraud. At the 
cornerstone of our efforts in this area is the interagency 
Financial Fraud Enforcement Task Force that Assistant Attorney 
General Breuer talked about. And the Mortgage Fraud Working 
Group, which I co-chair, is at the core of the task force's 
mission to combat mortgage fraud, from foreclosure rescue fraud 
and loan modification schemes to systematic lending fraud in 
the nationwide housing market. And our aggressive enforcement 
efforts have significantly increased recoveries in housing and 
mortgage fraud matters.
    Last June, Attorney General Eric Holder announced the 
results of a nationwide mortgage fraud sweep, Operation Stolen 
Dreams, which resulted on the civil side in over 190 civil 
enforcement actions involving recoveries of almost $200 
million.
    Mr. Chairman, I look forward to working with you and the 
members of this Committee as we continue to tackle the 
challenges that are posed by fraud on the American taxpayers. 
Thank you for the opportunity to be with you, and I am happy to 
answer any questions you may have.
    [The prepared statement of Mr. West appears as a submission 
for the record.]
    Chairman Leahy. Well, thank you, and I hear some of these 
stories. I have followed with interest the one on the 
bulletproof vests. Former Senator Ben Nighthorse Campbell and I 
had worked together in getting bulletproof vests for our law 
enforcement, and on an Appropriations Committee I worked very 
hard to get more body armor for our troops in the field. This 
is just one area of fraud. You assume when you are protecting 
our people who protect us that you are giving them the best. 
And I think it is as malicious thing as possible when they do 
that.
    Obviously, you have talked about the mortgage fraud. When 
you have somebody who is out of work, they are facing enough 
other problems, and to have somebody try to reap an illegal 
benefit on that, it is Dickensian in its action.
    You talk about civil and criminal fraud recoveries for the 
last fiscal year, over $6 billion; recoveries since January 
2009, $10 billion. We are talking about real money, and that is 
money coming back, lost taxpayer money, lost frauds coming back 
as protecting Americans' investment in their Government.
    Would you agree with me that the money we spend on fraud 
enforcement has not only paid for itself, but it is a pretty 
good return on investment? And this kind of money, if we 
continue to spend this money on fraud enforcement, we are going 
to continue to see returns. Mr. Breuer, would you agree with 
that?
    Mr. Breuer. Mr. Chairman, I absolutely would agree. If you 
look at the number for the Criminal Division, our budget is a 
small, small fraction of the $3.4 billion that we were involved 
in recovering for the United States last year. Putting aside 
the deterrence and putting aside every other aspect, I do not 
think there is a question that what the Department is doing--
the Criminal Division and the Civil Division--is showing that 
it is a remarkable return, as we are stewards of the taxpayer 
dollars.
    Chairman Leahy. Mr. West, do you feel the same?
    Mr. West. Absolutely. I think there is no question that 
that is some of the best money that we spend in terms of 
enforcing our laws against fraud. There is no question that we 
bring back a multiple amount of money for every dollar we spend 
when it comes to anti-fraud enforcement.
    Chairman Leahy. And I would assume that, again, the 
deterrent effect when people actually think, wait a minute, 
they are going to come after us, that must have some effect.
    Mr. West. I think that is absolutely right. As Assistant 
Attorney General Breuer noted, clearly nothing focuses the mind 
quite like jail time, and there has been great success on the 
criminal side. And we are intent--going to Ranking Member 
Grassley's comments earlier this morning, when it comes to 
holding corporate defendants responsible, we want to make sure 
that we are sending the message that this is not just a cost of 
doing business. We want to create a financial disincentive to 
those who would perpetrate fraud.
    Chairman Leahy. Mr. Breuer, let me ask you on that, again, 
we have a lot of former prosecutors on this Committee, and we 
have always agreed that nothing focuses your criminals' 
attention more than the fact that the bars may close on them. 
In the past, we have heard people who have committed fraud that 
sometimes when they get a fine, it is considered a cost of 
doing business.
    What are we doing about real jail sentences? Obviously, I 
want to get money back for the taxpayers. Obviously, you want 
to get the fines. But what about putting some of these people 
in jail?
    Mr. Breuer. Well, Mr. Chairman, we are putting them in 
jail. Let us use one example, a discrete one. The health care 
fraud prosecutions, the Medicare Fraud Strike Forces, we are 
talking about doctors, we are talking about nurses, we are 
talking about assistants. The average sentence in a health care 
fraud case is approximately 40 months. These are cases that we 
are bringing in remarkable time. We are bringing them quickly, 
swiftly, and efficiently. That is one example.
    And if we look at all kinds of fraud cases, Mr. Chairman, 
there is no question that the defendants are going to jail for 
lengthy periods of time. Depending on the crime, depending on 
the seriousness of it, we are putting people in jail. We are 
extraordinarily focused on it.
    If you look at the FCPA area, we have put more people in 
jail, and we have indicted more people there than we have ever 
done in history. That is true, really, with every aspect of 
fraud.
    Chairman Leahy. Again, I mentioned what Senator Grassley 
and I did--I was going to say ``bipartisan.'' It was actually a 
nonpartisan matter. We had people support it across the 
political spectrum in the Fraud Enforcement and Recovery Act. I 
think it is the most significant anti-fraud legislation in more 
than a decade. We have talked about the resources for Justice, 
FBI, and other agencies. We did this on the Affordable Care 
Act, the Wall Street Reform Act. We did it with the idea that 
it was going to make it easier for you, and one of the reasons 
for having the hearing, we want to know if it has made it 
easier for you and if there are other things that we should be 
doing.
    Mr. Breuer. There is no question, Mr. Chairman, that what 
you and Senator Grassley did with FERA was enormously 
important. It has provided us with extraordinarily helpful 
tools. By, for instance, expanding commodities, options, and 
futures to constituting securities fraud under 1348, we have 
been able to bring cases of securities fraud that we have never 
been able to bring before, and we have already done so. Making 
``financial institution'' include private mortgage lending 
businesses has also provided us a very important tool. And, 
frankly, making fraud under the TARP a major fraud and making 
mortgage lending businesses, applications to them constitute 
false statements when you make a false statement, have all been 
tools that we are using. So both with respect to the monies 
received and the broadened statutory interpretations that you 
provided us, you have enhanced very substantially our ability 
to bring fraudsters to justice.
    Chairman Leahy. I am going to have some follow-up questions 
that I may just pass on to you. I appreciate the fact that both 
of you have always been available anytime either my staff or I 
have called.
    I yield to Senator Grassley.
    Senator Grassley. I am going to repeat something I said in 
my opening statement, that health care fraud is a pervasive 
problem, and to the tune of about 5 to 8 percent of Federal 
expenditures. And obviously I am acquainted with this because 
of my leadership on the Senate Finance Committee for a long 
period of time.
    I want to refer to a recent Wall Street Journal series 
examining fraud of health: ``Medicare often fails to stop 
questionable payments up front'' because of the pay and chase 
system occurring for a number of reasons. It is a major 
vulnerability. I authored legislation last year to correct some 
of this, and I think that is the next logical step in combating 
health fraud.
    Additionally, the Wall Street Journal article pointed out 
how a three-decade-old court decision made in 1979 protects 
physician privacy by limiting the release of physician billing 
records. A former Department of Justice official is quoted in 
the article as saying that, ``We should make these records 
public. At least I think it is time to revisit this issue and 
bring some transparency to this whole thing.''
    Mr. Breuer and Mr. West, do you agree that we should 
consider revisiting the privacy protections for physician 
billing records in Federal health care programs? And if not, 
why not?
    Mr. Breuer. Well, Mr. Chairman, I want to begin by thanking 
and applauding you for your leadership, and we take that very 
much to heart. In our prosecutions we use the tools you have 
provided for us, and we are very pleased with how our Medicare 
Fraud Strike Forces are working.
    We would absolutely want to work with you on these kinds of 
issues and have the dialog, but we also do believe, I should 
say, that we do have right now, because of your work and 
others, the resources that we need and are able to get the 
information that we need for prosecutions. But we always are 
open for more, and the more enhanced tools we get, the better 
our job can be.
    Senator Grassley. Would you chime in, Mr. West?
    Mr. West. Sure, Senator, and I would actually echo 
Assistant Attorney General Breuer's thanks for your leadership 
on these issues because it really has provided us in the Civil 
Division with the tools we need to be able to pursue not just 
health care fraud but all types of fraud. And we very much 
welcome the opportunity to talk about any tools that can 
enhance our ability to identify fraud and to go after it and 
recover taxpayer dollars. And so I know we have had an ongoing 
conversation, our staffs, and we look forward to continuing 
that dialog.
    Senator Grassley. On another point, just for Mr. Breuer, 
the HCFAC program cost over $7 million last year. Do you 
believe that suspending provider payments up front for entities 
that are under Federal investigation for fraud is a better 
investment compared to continuing to pay and chase fraud via 
law enforcement?
    Mr. Breuer. Well, Senator, you have my word that we will be 
zealous in our prosecutions, but I will be the first to 
acknowledge we cannot prosecute our way out of this problem. I 
noted that Secretary Sebelius the other day talked about new 
steps that she and her people were taking. And so, of course, 
we do believe that our friends at HHS, the steps that they are 
taking on the front end will be the most effective way of 
stopping the fraud. But when the fraud occurs, we will be 
there.
    Senator Grassley. Okay. Mr. Breuer again. I have a letter, 
a response from DOJ and HHS I received Monday. About 66 percent 
of all False Claims Act cases pending allege health care fraud. 
The letter also stated that 180 of these cases involved the 
pricing and marketing of pharmaceuticals. Additionally, the 
letter stated that 726 criminal convictions and plea bargains 
occurred in fiscal year 2010.
    Could you tell me--and if you cannot, I would take it in 
writing--how many of those criminal convictions involved 
individuals employed by pharmaceutical manufacturers?
    Mr. Breuer. Well, Senator, it may make sense for my 
colleague Assistant Attorney General West to take the lead on 
this, because I think he is handling the False Claims Act cases 
more than we are.
    Mr. West. With regard to the--and these are cases that will 
often involve, as you know, Senator, the Food, Drug, and 
Cosmetic Act. We would be happy to get you a breakdown of which 
of those convictions involved individuals employed by 
pharmaceutical companies.
    Senator Grassley. Okay. And then I hope this is for you, 
Mr. Breuer, but over the last several years, a number of 
pharmaceutical companies have paid billions of dollars in fines 
and penalties for illegal marketing of their products or their 
drugs, some pleading guilty to criminal cases, yet individuals 
were not held accountable for breaking the law.
    Did the Department of Justice consider prison terms as a 
deterrent in these cases? And if not, why not?
    Mr. Breuer. Senator, my good friend Tony West may be 
annoyed with me, but I think that is also one that he is going 
to have to answer. They are taking the lead with respect to the 
pharmaceutical companies in this space.
    Mr. West. I will take that on. Let me start by saying that 
we consider in all appropriate cases the whole panoply of 
criminal and civil penalties when it comes to these types of 
cases involving pharmaceutical companies. And we do not 
hesitate--if individual culpability indicates and the facts are 
there and the law supports it, we will not hesitate to 
prosecute those cases. And we have actually quite a few good 
examples in the last 2 years where we have held individuals 
accountable.
    For instance, just three off the top of my head. There are 
two physicians that we have gone after individually because of 
their actions, physicians, their actions with regard to actions 
they took which were substandard care issues. We, I guess just 
3 months ago, indicted the associate general counsel of a major 
pharmaceutical company for allegations of obstruction of 
justice when it came to an FDA investigation.
    And so, you know, the message that we have been giving 
quite consistently, both Assistant Attorney General Breuer and 
myself, is that we will look at individuals and we will pursue 
individuals when the facts and law allow.
    Senator Grassley. Okay. And, Mr. Chairman, just one more 
short question in this series?
    Chairman Leahy. Of course, of course.
    Senator Grassley. Again, I do not know; Mr. Breuer, I 
thought it was you. According to the same letter, 80 False 
Claims Act cases are under investigation involving hospitals. 
How many of the 726 criminal convictions or pleas involve the 
individuals employed by hospitals? And if you cannot answer 
that, if you could answer it in writing.
    Mr. Breuer. Absolutely. And, again, the False Claims Act is 
my friend.
    Senator Grassley. You could easily conclude that I do not 
know what each of----
    [Laughter.]
    Mr. West. It is confusing, but I do think it is a sign of 
the close collaboration that we are sometimes doing so much 
together.
    We will get you the breakdown that you are asking for in 
terms of how many of those individuals were employed by 
hospitals.
    Senator Grassley. Okay. Thank you, Mr. Chairman.
    Chairman Leahy. Thank you, Senator Grassley.
    Senator Whitehouse, another former prosecutor, U.S. 
Attorney, Attorney General, it is all yours.
    Senator Whitehouse. Thank you, Mr. Chairman.
    I have a comment that I would invite you to respond to off-
line because if we go down this road, we will take up every 
minute of my time on it. But I wanted to sort of put out a 
marker that I view that America is right now on the losing end 
of the biggest transfer of wealth through theft and piracy in 
the history of humankind, and that it is happening in 
cyberspace, and that our law enforcement particular 
investigative resources to address that problem are nowhere 
near adequate, off by orders of magnitude at this point. And I 
know that you all are deep into your interagency process that 
is supposed to conclude, I hear, in a matter of weeks, maybe a 
month or two, and I just want to put a marker down that I very 
much hope that you are pushing for the kind of resources that 
this problem demands. If you actually sort of see it in all its 
dimensions, as I have had the ability to do on the Intelligence 
Committee, it is really big and most Americans really do not 
see it because it is either classified or protected by 
corporations that do not want the public and shareholders and 
regulators to know how badly they are being scooped. So that is 
the point that I want to make.
    The question that I have for you both is about predictive 
modeling and how engaged you are with making sure that that is 
an effective investigative and prosecutorial tool. I come at 
this on two fronts. We had a long fight with DEA about trying 
to get off paper records for controlled prescriptions--
pharmaceuticals--because it disabled e-prescribing networks to 
require people to have a paper one next to their electronic 
one. And after 3 years of struggle, that battle is finally won, 
and DEA has changed it position, and we now have a new 
regulation in place. I wish it had taken 3 months and not 3 
years, given what was at stake. But that is, I guess, the 
nature of bureaucracy.
    At the same time, we have the LeMieux-Whitehouse bill that 
has authorized the Secretary of HHS to engage in and hire firms 
to do predictive modeling through the Medicare data bases, and 
I gather those are coming up to bid with contracts very 
shortly, maybe in, I think my notes say, in April. And what I 
am hoping is that you all are talking to Secretary Sebelius and 
that you see this predictive modeling technology as a really 
good way for highlighting discrepancies and anomalies, things 
that suggest that, you know, suddenly a doctor goes from no 
prescriptions of Percocet to a hundred a week may be worth an 
inquiry, or the same patient is getting prescriptions from five 
different doctors. That is just in the prescriptions phase. 
Then you get into billing and starting to develop the signs of 
fraud. I think it can be a hugely effective tool, both in e-
prescribing and in regular Medicare billing. And if you could 
tell me a little bit about how engaged you are in that process 
that is happening over at HHS so we do not get to a position 
where that is done and they have met all of their goals by 
doing it, and you are looking at it say, oops, this does not 
work for us because you were not sufficiently engaged in that 
process.
    So are you really looking forward to these predictive 
modeling tools? Do you think they are valuable? And how engaged 
are you with those who are developing them?
    Mr. Breuer. Absolutely, Senator Whitehouse. First, even 
though you told me not to comment, I just want to make sure you 
know how committed I am and how committed we are on the first 
issue you spoke about. Indeed, one of my deputies testified----
    Senator Whitehouse. Provide it in writing, and go on to 
predictive modeling.
    Mr. Breuer. Okay. I will put it in writing.
    Senator Whitehouse. Thank you.
    Mr. Breuer. With respect to predictive modeling, I 
absolutely am a fan and believe in it. Our Medicare Fraud 
Strike Forces that I mentioned before in our seven cities have 
been stunningly successful, and in no small part because of 
that very modeling. When we find out that Dr. A is billing at 
an exorbitant rate higher than Dr. B, and they are near one 
another, we look at Dr. A right away. That is why we have been 
able to bring cases literally in months. So we are huge fans of 
that.
    Moreover, in the Recovery Act, Earl Devaney, the Chair of 
the Recovery Act Board, to some degree is doing exactly that 
right now, and we would like to think that is one of the 
reasons why fraud appears to be as low as it is. We are very 
aware of that. We are having ongoing dialogs. The FBI I know 
was very involved in that. I meet with the FBI, and they have a 
very data-driven process in place that I think is very 
successful.
    With respect to ongoing discussions with HHS, I will have 
to get back to you to what degree we are having those, and----
    Senator Whitehouse. There are two contracts that are 
expected to be awarded in April, I believe, and then on July 1, 
the use of the new technology should kick in, which basically 
does it kind of--it is like a search function as opposed to 
doing it in individual identified cases.
    Mr. Breuer. Well, I am pretty good about butting myself in 
places, so I will find out.
    Senator Whitehouse. Please make sure you are comfortable 
with what they are doing.
    Mr. Breuer. Absolutely. But more generally, the notion of 
predictive modeling is something that we very much agree with.
    Senator Whitehouse. Very good. My time has expired, so 
sorry, Tony.
    Mr. West. That is all right.
    Senator Whitehouse. [Presiding.] Senator Franken is next.
    Senator Franken.
    Senator Franken. Thank you, Mr. Chairman. I want to thank 
Senator Grassley and Senator Leahy, Chairman Leahy, for their 
leadership in this area, and I think it is especially fitting 
that this is our first hearing with you as Ranking Member, 
because you have been a leader in this area for so long. I 
enjoyed serving on this Committee with Senator Sessions as the 
Ranking Member, but I am very much looking forward to working 
with you in this capacity, Senator.
    Mr. Breuer, as you may know, I have a longstanding interest 
in making sure that we hold Government contractors to a higher 
standard. If the Federal Government chooses to contract with a 
company, we have an obligation to make sure that contractor is 
not defrauding American taxpayers, and that means vigorously 
investigating allegations of contractor fraud. But it also 
means thinking twice before we award any new contracts to a 
company that has been indicted or convicted of fraud. I do not 
know about you, but if I hired a contractor to work on my house 
and he charged me a ton of extra money for work he did not do, 
I would not use that contractor again. And I would make sure 
that my friends knew not to use him either. It seems like the 
same should be true of Government contractors.
    As Chair of the National Procurement Fraud Task Force, what 
are you doing to make sure that Federal agencies are 
collaborating on suspension and debarment actions if a 
contractor is convicted of procurement fraud? How can we make 
sure that contractors that we know we cannot trust are not 
awarded new contracts?
    Mr. Breuer. Thank you, Senator. As an aside, the National 
Procurement Fraud Task Force has been folded into the Financial 
Fraud Task Force.
    Senator Franken. Okay.
    Mr. Breuer. But we are still covering it.
    Obviously, the Department of Justice itself is not the 
debarring official, and so we cannot make that decision. But, 
of course, what we are is absolutely transparent in our cases, 
and I have had many meetings with IGs and in the IG community. 
We value them tremendously. So, ultimately, after we pursue 
these corporations--and I would like to think we are doing it 
aggressively and we are doing it in a targeted manner--that 
information is there for the debarring officials.
    I agree with your premise that if you commit a fraud 
against the United States, you should not have a right to 
continue doing business. But, ultimately, that part of it is 
not our decision. That is the part of the department or agency 
that actually provides the contract, and they all have 
debarring officials who make those ultimate decisions.
    Senator Franken. Okay. Well, I can see this is not your 
ultimate decision, but I am particularly worried that Federal 
agencies are giving a free pass to large contractors. According 
to the Project on Government Oversight's Records, over the past 
15 years, there have been only five suspension actions and zero 
debarment actions of the Government's top 100 contractors, 
which receive 55 percent of all contracts. I think part of the 
problem is that we are too dependent on a handful of very large 
contractors, particularly when it comes to the wars in Iraq and 
Afghanistan, and that too many contractors maybe now are too 
big to fail.
    Mr. Breuer. Senator, I share your concern and, like you, 
feel very deeply about procurement fraud, so much so that you 
may know that I literally have three prosecutors on detail from 
the Inspector General in charge of Iraq who literally work in 
my fraud section. We are prosecuting fraud in Iraq, in that 
area, and in Afghanistan. And so I agree with you that those 
numbers seem very low.
    Senator Franken. How frequently is DOJ putting in 
settlements, specific language that can be used to prevent 
debarments and suspensions?
    Mr. Breuer. I do not think we ever do, Senator. I do not 
think we would do it for the very reasons you said. I do not 
think the Department of Justice believes that it is our role to 
determine whether someone should be debarred or not because we 
do not have the expertise of the department of agency who has 
to decide how valuable this particular contractor is.
    Senator Franken. Okay. I am running out of time. I just 
want to ask something about return on investment. The FBI 
estimates that health care fraud may be as high as 10 percent 
of all health care expenditures, which means this type of fraud 
may cost the Nation more than $220 billion annually. But you 
were able to recover $2.5 billion from health care fraud 
judgments and settlements this year. I think there is some 
estimate that for every dollar invested in investigations, we 
get back $17. And what I am wondering is, would you like more 
resources? Can that return on investment mean that we are 
actually reducing our deficit by spending more money on these--
--
    Mr. Breuer. Right. Well, Senator, I will say this: I mean, 
our budget in the Criminal Division is a bit under $200 
million. Now, we do get other monies that are targeted to us, 
but we were responsible for approximately well over $2 billion 
just by ourselves and $3.4 billion working with other U.S. 
Attorneys. So I think there is absolutely no question that we, 
the Civil Division, the Department, are a remarkable return on 
investment. We are being very efficient and targeted in our 
work and will continue to be, and we are being very aggressive 
about getting dollars back and returned to the U.S. Treasury.
    Senator Franken. Thank you.
    Sorry, Mr. West.
    Mr. West. That is all right.
    Senator Franken. Thank you, Mr. Chairman.
    Chairman Leahy. Thank you very much, Senator Franken.
    Senator Klobuchar.
    Senator Klobuchar. Thank you very much, Mr. Chairman. I 
also welcome Ranking Member Grassley from our neighboring State 
of Iowa, and I am glad that he is in his position. I also 
enjoyed working with Senator Sessions.
    I first have a question--since we are going to be very 
focused in the next few months on budget issues--for Mr. 
Breuer. In your written testimony, you mentioned that you have 
obtained approximately $3.4 billion in judgments and 
statements, which is truly an extraordinary figure. Do you have 
any sense of how this compares with past year?
    Mr. Breuer. I do, Senator. It is clearly higher than in our 
past years. Last year, it was $3.4 billion. In fiscal year 
2009, I think it was, candidly, probably half that amount of 
money. It was probably just under $2 billion. So it is by far a 
record year.
    Senator Klobuchar. And I think you have heard some of the 
budget proposals out there. I personally have favored caps and 
things like that. But some of the proposals would hit 
particularly hard on the Department of Justice, something like 
one of them I heard would cut FBI agents by 4,000. And I just 
wondered what you think of that and what would happen to our 
prosecutions if that were to occur. And I guess also at one 
point in your written testimony you said the money you have 
obtained in the criminal prosecutions has more than paid for 
the cost of investigating them. Do you have specific numbers? 
And how will you use that argument if you want to protect some 
of these criminal--or some of us want to protect these criminal 
justice resources?
    Mr. Breuer. Well, Senator, without going to any particular 
provision, I just think it is inescapable that if you take our 
prosecutors away and if you take our FBI agents away, we will 
not be able to protect the American people in the way we are 
now protecting. We will not be able to recover the funds in the 
way we are recovering them. And every day in the United States 
we see victims of all kinds of fraud and other kinds of crime.
    I could not be more proud of the lawyers in our Criminal 
Division and our U.S. Attorney's Offices. I could not be more 
proud of the investigators in all of the agencies. I deal with 
them all the time. And it is just the reality that when--we 
think we are, of course, a great return on investment. We also 
think we perform a remarkably important function, and if there 
are fewer of us, we will be able to do less.
    Senator Klobuchar. Okay. Well, I think it will be very 
important to be armed with those statistics as we go into some 
of these negotiations, because I do believe, having seen some 
of these cases in the white-collar area, that you can actually 
pay for the investigation, not to mention what you are 
preventing from happening in the future.
    In the health care fraud area, I again commend you for 
that. You mentioned that through the work of the Medicare 
Strike Force, 146 defendants were sentenced to prison terms 
with an average sentence of more than 40 months. Would you say 
that there is a renewed focus on prison time as a punishment in 
the health care fraud area?
    Mr. Breuer. Well, whether renewed or not, there is an 
enormous focus on prison time. It is insidious that people are 
trying to defraud the Medicare program and trying to steal 
taxpayer dollars. So our prosecutors are very zealously 
fighting for jail time, and they are getting it in the vast 
majority of cases. And, of course, often these are, again, 
people who have never gone to jail in their lives and often 
people who have no records. They are white-collar people who 
have decided that for whatever reason they ought to try to 
defraud the program, and we are seeking and getting jail time.
    Senator Klobuchar. Very good. One last thing I wanted to 
mention. We had another hearing on this; I think it was Senator 
Specter's last hearing that he chaired on the Foreign Corrupt 
Practices Act. I think we both know it is an important statute 
both in theory and in practice. But I have to tell you I have 
heard from several companies, and it turned out a lot of other 
Senators have heard this, too, in their State that are trying 
very hard to comply with this, but because of some increased 
enforcement efforts, they do not feel like they have the 
guideposts to know exactly how they comply. I think you know 
that many companies self-report FCPA violations when they 
discover them, and as we discussed at that hearing whether or 
not the DOJ is considering providing guidelines for self-
reporting or Senator Coons and I are working on some potential 
legislative changes to update that statute. As you know, they 
define a foreign official very broadly, and in today's China, a 
nurse could be construed as a foreign official because they 
work for the state. So how--just if you have given some thought 
or if you would go back and give some thought and talk to 
people about the guideposts with that statute, the need for 
some guidance for our companies who are really trying to do the 
right thing as well as some potential statutory changes.
    Mr. Breuer. So, Senator, we are always willing to engage in 
dialogue and absolutely will. But I do not really accept that 
premise. I believe that there is much guidance with respect to 
the FCPA. It is the one statute, for instance, that provides an 
opinion release. If you have a question, we will give you an 
opinion on it.
    If you look at our website in the Fraud Section, we have 
every document that we have filed in court right up there. 
Myself, my fraud chief, many speak on this area all the time. 
So if there is a subtle issue that you really feel you do not 
understand, we are happy to explain it. But if you look at the 
cases we have brought, these are not subtle cases. We do not 
want----
    Senator Klobuchar. Could I--I have no dispute with the 
cases you have brought. It is just that the investigations that 
are taking place oftentimes, I am sure, find nothing wrong that 
are wreaking havoc in terms of companies trying to do business 
consistent with the President's focus on doubling exports where 
they find out a nurse comes to a seminar on how to use some 
health care third quarter, the Metro is closed down, they give 
her money to take a cab back, and then they get a major 
investigation.
    Mr. Breuer. Well, Senator, I do not think that they are 
getting major investigations. And one other point there: More 
than half the companies that we are investigating and 
prosecuting actually are foreign-based companies. So we are 
very proud of our work. But absolutely we are always willing to 
engage in dialogue and will continue to do so.
    Senator Klobuchar. All right. Thank you very much.
    Chairman Leahy. Thank you. Normally I go next, but I know 
that Senator Grassley has an important meeting with a Medal of 
Honor recipient, so I will yield to you, Senator Grassley.
    Senator Grassley. Thank you.
    Mr. West, last year Congress revised what is known as the 
public disclosure bar, the False Claims Act. It was amended so 
that it is no longer a jurisdictional issue for the courts that 
can be raised by a defendant. Instead, the courts shall dismiss 
claims under the new public disclosure provision unless it is 
opposed by the Government. This provision is meant to have a 
significant impact on qui tam whistleblowers if it is not 
properly administered by the Department.
    Has the Department developed guidelines concerning when it 
will and will not oppose such motions?
    Mr. West. Well, first let me say, Senator, this was part of 
the FERA amendments, of course, that you and the Chairman led 
that have helped us in our enforcement capability. And this was 
one of the important changes so that there is this amendment to 
the whistleblower--to the public disclosure bar so that 
whistleblower suits are not inordinately tossed out of court 
because of that. And this is something that we are working as 
we--we have an open dialogue with the relators bar, and we work 
often very closely with them to make sure that these cases are 
being brought in a way that not only reflect meritorious 
investigations but are ones that ultimately can be successful.
    Senator Grassley. Well, then, if the guidelines have not 
been developed yet, do you anticipate developing such 
guidelines? And if you did develop guidelines, will the 
guidance be made public or available to Congress for oversight 
purposes?
    Mr. West. Well, certainly, I mean, to the extent that there 
are any guidelines that we would be sharing with the relators 
bar or with anyone else, we would make those public, and we 
would share those with Congress. I think, you know, that would 
be our practice if we were going to share them both with 
outside counsel.
    Senator Grassley. Before I get to the next question, I 
would like to note as a follow-up to Mr. Breuer's response to 
Chairman Leahy's question about putting fraudsters in jail, 
while it is true that some health care defendants get jail 
time, this does not seem to be the case in securities fraud 
where sentences, aside from Bernie Madoff, have been light or 
non-existent, at least not putting big-fish corporate America 
people in jail.
    My question here is in regard to the SEC. If the Justice 
Department fails to act in a case where the Government finds a 
hedge fund paid hush money to someone to get them to withhold 
crucial information, does this not send the message that 
perjury to the SEC will be tolerated? And I had a page and a 
half here background to that question, but I do not want to 
take time to read it. I think you understand what I am up to 
here.
    Mr. West. Yes, Senator, and actually I am going to do what 
Assistant Attorney General Breuer did to me earlier, because he 
actually handles referrals from the SEC in the area of 
securities fraud. His Division handles that.
    Mr. Breuer. Senator, if I may, just to begin, I just want 
for a moment to take issue with what I think sometimes is a 
misimpression. If you just look over the last few months in the 
area of securities fraud, you will see that Mr. Dickson for 
securities fraud got 2 years in jail. Mr. Mott for securities 
fraud got 8 years in jail. Mr. Wolf got 4\1/2\ years in jail. 
The UBS trader got 5 years in jail. Joseph Collins of Refco got 
7 years in jail.
    Senator, those were all sentences over the last months.
    Senator Grassley. Can I bring up a case then where I and 
former Senator Specter were involved in over a period of years? 
The Pequot founder paid $28 million to settle the SEC case. The 
SEC says he paid a former employee over $1 million of hush 
money. There has been no prosecution of that person.
    Mr. Breuer. So, Senator, my only point and issue was just 
to suggest--I just wanted to make it clear that securities 
fraudsters are going to jail. Without talking about a 
particular case, what I can tell you is that my partnership 
with Rob Khuzami, the Director of Enforcement, is 
extraordinarily close. Our teams meet on a regular basis. It is 
extraordinarily collaborative. And in any case where we believe 
we can prove beyond a reasonable doubt that a crime was 
committed, we are bringing those cases.
    Obviously, the SEC has a different standard of proof 
because they pursue their cases civilly. But where we can bring 
a criminal case, we will. And where incarceration is 
appropriate, we seek it, and we do that in quite a number of 
cases.
    Senator Grassley. Did the Securities and Exchange 
Commission consult the Department of Justice before entering 
the Goldman Sachs settlement?
    Mr. Breuer. We collaborate with the SEC, but they do not 
seek our guidance when they resolve their cases. They do that 
independently.
    Senator Grassley. Maybe one last question--well, no, I will 
stop there because I think I have to go right now. So I will 
submit questions for answer in writing.
    Chairman Leahy. In fact, I will keep the record open for 
any other questions until the close of business.
    [The questions of Senator Grassley appear under questions 
and answers.]
    Chairman Leahy. Senator Whitehouse, you had other 
questions.
    Senator Whitehouse. I did want to follow up. Thank you, 
Chairman.
    The first thing I wanted to follow up on was perhaps 
unfairly I drew the conclusion from the delay, what one might 
actually describe as foot dragging--from at least my 
perspective, it seemed that way; maybe it is just the way the 
bureaucracy operates--that the Drug Enforcement Administration 
did not see any value in going to electronic prescribing 
records. They made the case that, you know, it might put at 
risk their ability--you know, you can see the old agent sitting 
next to the prosecutor at the table, and one by one entering 
those handwritten scripts into evidence and thinking that is 
how you made drug diversion cases. And that seemed to be the 
sort of model that they were proceeding from, and they did not 
seem, to me anyway, to have any appreciation of how incredibly 
valuable having this information electronically so that you can 
make cases and find these anomalies and things so much more 
rapidly.
    And so in addition to a sort of general question of do you 
support this, can you vouch for the fact that there has been a 
change of heart at DEA or that I was mistaken about this and 
that, in fact, they do get what a valuable tool they will 
acquire for investigation?
    Mr. Breuer. Senator, I do not want to speak for the DEA, 
nor should I. What I can tell you is that I meet with the 
Administrator, Michele Leonhart, who is a great patriot, 
incredibly devoted to the agency and to serving the American 
people. I find DEA to be very forward leaning. I will be happy 
and will speak to her about this very issue.
    It has been my impression over the last 2 years that DEA is 
very open to new approaches and being as vigorous as it can be, 
and I will speak with her about that.
    Senator Whitehouse. Good. I appreciate that. And then 
because time was short--I was not sure we would get a second 
round--I cut you off on the comment that you were prepared to 
make on the cybersecurity issue, and I just wanted to give you 
an opportunity to go ahead and make that comment now that we 
have a little bit more time at our disposal.
    Mr. Breuer. I just wanted to reassure you that it is very 
much on our mind as well. I could not be more proud of our 
CCIPS unit, our Computer Crime and Intellectual Property unit. 
The Deputy who oversees that section testified yesterday. We 
are very aware of these approaches. We are speaking within the 
administration a lot about that, and I just wanted you to know 
it is very much on our mind. And we will be vigorous and also 
look at this as an issue of remarkable import for the American 
people.
    Senator Whitehouse. Good. I appreciate that, and I 
certainly did not want anything in my comment to deprecate the 
extraordinary work that is being done in this area by you all, 
in some cases in close conjunction with other services. I am 
familiar with it, I am proud of it. It is extremely impressive. 
But when you scale it against the dimensions of the problem 
that we are facing, I think it is an order of magnitude too 
small. I know that is not your problem. I think you all are 
doing a wonderful job with the resources that we have given 
you, and so the thrust of my question is to make sure that you 
are not shy about coming back to us making a strong case for 
what resources are really needed to protect the cyber 
infrastructure of our country, particularly around critical 
infrastructure; to protect the intellectual property that 
resides on our cyber infrastructure and that is being looted 
wholesale by foreign competitors; to protect our banks from 
electronic robbery; to protect against massive trademark and, 
you know, music, film, other property being sold at will 
without paying licensing.
    There is just a lot of that, I think, going on, and I think 
it relates in scale to the type of criminal problem we face 
from the narcotics industry, for instance. It relates in scale 
to what the Alcohol, Tobacco and Firearms jurisdiction presents 
as a risk to our country. And so I think the scale that we are 
going at it on, which is our fault not yours, is way too small. 
But I want you to engage with us vigorously in that if you come 
to agree that we need to ramp up the scale of the very 
wonderful work that you all are doing right now.
    Mr. Breuer. Yes, Senator, and as you may know, this is a 
great priority of Attorney General Holder's. We all work 
closely with Victoria Espinel, the IP czar, and we will 
absolutely do that.
    Senator Whitehouse. I appreciate it.
    Chairman, thank you for the extra time. I appreciate it 
very much.
    Chairman Leahy. Thank you. And, gentlemen, I will have some 
questions to submit, but my staff and I will be following up. I 
want to indicate that it was not by coincidence that this was 
the first hearing of the Senate Judiciary Committee this year. 
I want to emphasize that it is a matter of great importance to 
the Committee. I want to see real enforcement. We have worked 
hard to give some bipartisan tools. If we need more tools, we 
will give them. If there are areas where there are things that 
should be changed, be very candid and let us know, and we will 
work on that.
    There is no way either for the American taxpayers or just 
as a country we should be allowing this kind of fraud. 
Obviously, we have an advantage if we are able to recover huge 
amounts of money for the taxpayers. But I am also thinking of 
the fact that there are thousands and thousands of people out 
there who need our protection. They are not going to be able to 
do it on their own. We can do it for them. So keep in touch 
with us. I think you are going to have a welcome Committee 
here.
    Thank you very much, and we stand in recess.
    Mr. Breuer. Thank you, Mr. Chairman.
    [Whereupon, at 11:55 a.m., the Committee was adjourned.]
    [Questions and answers and submissions to follow.]





                                 
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