[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]




 
    DOJ'S QUID PRO QUO WITH ST. PAUL: A WHISTLEBLOWER'S PERSPECTIVE

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

                             JOINT HEARING

                               before the

                    SUBCOMMITTEE ON ECONOMIC GROWTH,
                  JOB CREATION AND REGULATORY AFFAIRS

                                 of the

              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                                and the

           SUBCOMMITTEE ON THE CONSTITUTION AND CIVIL JUSTICE

                                 of the

                         COMMITTEE ON JUDICIARY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 7, 2013

                               __________

                           Serial No. 113-23

             (Committee on Oversight and Government Reform)

                               __________

                            Serial No. 113-6

                        (Committee on Judiciary)


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


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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland, 
MICHAEL R. TURNER, Ohio                  Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee       CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona               GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania         JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee          MATTHEW A. CARTWRIGHT, 
TREY GOWDY, South Carolina               Pennsylvania
BLAKE FARENTHOLD, Texas              MARK POCAN, Wisconsin
DOC HASTINGS, Washington             TAMMY DUCKWORTH, Illinois
CYNTHIA M. LUMMIS, Wyoming           ROBIN L. KELLY, Illinois
ROB WOODALL, Georgia                 DANNY K. DAVIS, Illinois
THOMAS MASSIE, Kentucky              PETER WELCH, Vermont
DOUG COLLINS, Georgia                TONY CARDENAS, California
MARK MEADOWS, North Carolina         STEVEN A. HORSFORD, Nevada
KERRY L. BENTIVOLIO, Michigan        MICHELLE LUJAN GRISHAM, New Mexico
RON DeSANTIS, Florida

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                    Stephen Castor, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director

  Subcommittee on Economic Growth, Job Creation and Regulatory Affairs

                       JIM JORDAN, Ohio, Chairman
JOHN DUNCAN, Tennessee               MATTHEW A. CARTWRIGHT, 
PATRICK T. McHENRY, North Carolina       Pennsylvania, Ranking Minority 
PAUL GOSAR, Arizona                      Member
PATRICK MEEHAN, Pennsylvania         TAMMY DUCKWORTH, Illinois
SCOTT DesJARLAIS, Tennessee          GERALD E. CONNOLLY, Virginia
DOC HASTINGS, Washington             MARK POCAN, Wisconsin
CYNTHIA LUMMIS, Wyoming              DANNY K. DAVIS, Illinois
DOUG COLLINS, Georgia                STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina
KERRY BENTIVOLIO, Michigan
RON DeSantis Florida
                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        JERROLD NADLER, New York
HOWARD COBLE, North Carolina         ROBERT C. ``BOBBY'' SCOTT, 
LAMAR SMITH, Texas                       Virginia
STEVE CHABOT, Ohio                   MELVIN L. WATT, North Carolina
SPENCER BACHUS, Alabama              ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona                  Georgia
LOUIE GOHMERT, Texas                 PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio                     JUDY CHU, California
TED POE, Texas                       TED DEUTCH, Florida
JASON CHAFFETZ, Utah                 LUIS V. GUTIERREZ, Illinois
TOM MARINO, Pennsylvania             KAREN BASS, California
TREY GOWDY, South Carolina           CEDRIC RICHMOND, Louisiana
MARK AMODEI, Nevada                  SUZAN DelBENE, Washington
RAU?AE1L LABRADOR, Idaho             JOE GARCIA, Florida
BLAKE FARENTHOLD, Texas              HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina
DOUG COLLINS, Georgia
RON DeSANTIS, Florida
[Vacant]

           Shelley Husband, Chief of Staff & General Counsel
        Perry Apelbaum, Minority Staff Director & Chief Counsel
                                 ------                                

           Subcommittee on the Constitution and Civil Justice

                    TRENT FRANKS, Arizona, Chairman

                    JIM JORDAN, Ohio, Vice-Chairman

STEVE CHABOT, Ohio                   JERROLD NADLER, New York
J. RANDY FORBES, Virginia            JOHN CONYERS, Jr., Michigan
STEVE KING, Iowa                     ROBERT C. ``BOBBY'' SCOTT, 
LOUIE GOHMERT, Texas                 Virginia
RON DeSANTIS, Florida                STEVE COHEN, Tennessee
[Vacant]                             TED DEUTCH, Florida

                     Paul B. Taylor, Chief Counsel

                David Lachmann, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 7, 2013......................................     1

                               WITNESSES

The Honorable Charles E. Grassley, A U.S. Senator from the State 
  of Iowa
    Oral Statement...............................................    10
    Written Statement............................................    14
The Honorable Johnny Isakson, A U.S. Senator from the State of 
  Georgia
    Oral Statement...............................................    19
Mr. Fredrick Newell, St. Paul, Minnesota, Accompanied by Mr. 
  Thomas Devincke, Malkerson Gunn Martin LLP
    Oral Statement...............................................    21
    Written Statement............................................    24
Ms. Shelley R. Slade, Partner, Vogel, Slade and Goldstein, LLP
    Oral Statement...............................................    56
    Written Statement............................................    59

                                APPENDIX

Letter to the Honorable Christopher B. Coleman, Mayor, City of 
  Saint Paul.....................................................    96
Letters to The Honorable Eric H. Holder, Jr., Attorney General, 
  U.S. Department of Justice.....................................   101
Letters to the Honorable Thomas E. Perez, Assistant Attorney 
  General, Civil Rights Division, U.S. Department of Justice.....   109
Letter from Gary L. Azorsky and Jeanne A. Markey, Cohen Milstein.   114
Letter from Ben Bernia, The Vernia Law Firm......................   118
Mr. Stephen Gillers, Elihu Root Professor of Law, New York 
  University School of Law, Statement............................   124
The Honorable Jerrold Nadler, a Member of Congress from the State 
  of New York, Opening Statement.................................   126
The Honorable Elijah E. Cummings, a Member of Congress from the 
  State of Maryland, Opening Statement...........................   130


    DOJ'S QUID PRO QUO WITH ST. PAUL: A WHISTLEBLOWER'S PERSPECTIVE

                              ----------                              


                          Tuesday, May 7, 2013

                  House of Representatives,
Subcommittee on Economic Growth, Job Creation, and 
                                Regulatory Affairs,
  Committee on Oversight and Government Reform, joint with 
       Subcommittee on the Constitution and Civil Justice, 
                                Committee on the Judiciary,
                                                   Washington, D.C.
    The subcommittees met, pursuant to call, at 10:06 a.m., in 
Room 2154, Rayburn House Office Building, Hon. Jim Jordan 
[chairman of the Subcommittee on Economic Growth] presiding.
    Present: Committee on Oversight and Government Reform: 
Representatives Jordan, DeSantis, Duncan, McHenry, Collins, 
Meadows, Issa, Cartwright, Connolly, Pocan, Kelly, Horsford, 
and Cummings.
    Committee on the Judiciary: Representatives Franks, 
Goodlatte, Chabot, King, Gohmert, Nadler, Conyers, Scott, and 
Jackson Lee.
    Staff Present, Committee on Oversight and Government 
Reform: Ali Ahmad, Communications Advisor; Alexia Ardolina, 
Assistant Clerk; Molly Boyl, Parliamentarian; Lawrence J. 
Brady, Staff Director; David Brewer, Senior Counsel; Ashley H. 
Callen, Senior Counsel; Steve Castor, General Counsel; John 
Cuaderes, Deputy Staff Director; Adam P. Fromm, Director of 
Member Services and Committee Operations; Linda Good, Chief 
Clerk; Tyler Grimm, Senior Professional Staff Member; 
Christopher Hixon, Deputy Chief Counsel, Oversight; Michael R. 
Kiko, Staff Assistant; Justin LoFranco, Digital Director; Mark 
D. Marin, Director of Oversight; Laura L. Rush, Deputy Chief 
Clerk; Jaron Bourke, Minority Director of Administration; 
Jennifer Hoffman, Minority Press Secretary; Carla Hultberg, 
Minority Chief Clerk; Adam Koshkin, Minority Research 
Assistant; Jason Powell, Minority Senior Counsel; Brian Quinn, 
Minority Counsel; Dave Rapallo, Minority Staff Director; and 
Rory Sheehan, Minority New Media Press Secretary.
    Staff Present, Committee on the Judiciary: Dan Huff; 
Counsel; John Coleman, Counsel; Zach Somers, Counsel; Sarah 
Vance, Clerk; Heather Sawyer, Minority Counsel; and Veronica 
Eligan, Minority Clerk.
    Mr. Jordan. The joint committee will come to order. I want 
to thank our witnesses for being here today.
    Senator Grassley, Senator Isakson, we will get to you as 
quickly as we can. You know the routine. You have got to listen 
to us first. We have got some brief opening statements and then 
we will get right to your testimony.
    We have convened this joint hearing to examine the 
importance of whistleblowers to good government. These brave 
individuals shed light on waste, fraud and abuse, often at 
great personal or professional risk and make what we do in 
Congress a whole lot easier. We should always be grateful for 
the sacrifice these individuals make and proud of their 
contributions to the Nation.
    Perhaps the most important tools that whistleblowers have 
are the qui tam provisions of the False Claims Act. Senator 
Grassley, who we will hear from shortly, was instrumental in 
amending the False Claims Act in 1986 to ensure whistleblowers 
are protected. This year, of the $4.9 billion of False Claims 
Act recoveries, $3.3 billion came from whistleblower suits, a 
record amount.
    It is within this setting that I am so troubled by the quid 
pro quo between the Department of Justice and the City of St. 
Paul. In 2009, Fredrick Newell filed a whistleblower complaint 
alleging that the City of St. Paul, Minnesota, had fraudulently 
received millions in Federal dollars. Career DOJ and HUD 
attorneys investigated his case for almost 3 years. And by 
November 2011, the United States Government was poised to join 
the case on Mr. Newell's behalf. These career attorneys told 
Mr. Newell that the United States strongly supports his case 
and would intervene on his behalf.
    Documents support this impression that the case was strong. 
In a memo from November 2011, the career attorneys wrote, the 
city repeatedly and falsely told HUD and others it was in 
compliance. The city knowingly submitted false claims in order 
to obtain Federal funds. The career attorneys also wrote, We 
believe this is a particularly egregious example of false 
certifications given by a city that was repeatedly shown what 
it had to do but repeatedly failed to do it. These attorneys 
recommended the United States intervene in the case.
    Then, Assistant Attorney General Thomas Perez stepped in 
and executed a quid pro quo with St. Paul to ensure that the 
United States Supreme Court did not consider an unrelated 
appeal concerning a controversial theory under the Fair Housing 
Act.
    To prevent the appeal from getting before the court, Perez 
leveraged Mr. Newell's whistleblower case. He promised St. Paul 
that the United States would not intervene in the case in 
exchange for St. Paul withdrawing the Supreme Court appeal. 
Unfortunately, Mr. Perez was successful.
    In a closed-door meeting in the St. Paul city hall, he 
convinced the city to agree to the deal. The next week, the 
Department of Justice declined to intervene in Mr. Newell's 
case. The following day, the city withdrew its Supreme Court 
appeal. The quid pro quo was complete.
    This effectively killed Mr. Newell's case, as St. Paul was 
able to dismiss the case on grounds that would not have been 
available if the Department of Justice had joined the case. As 
a result, Federal taxpayers lost the chance to recover up to 
$200 million. In addition, residents of St. Paul lost the 
chance to better their community and improve their economic 
opportunities, the goal Mr. Newell had all along.
    More alarming about this quid pro quo is the precedent that 
this case sets for future whistleblowers who bring claims of 
waste, fraud and abuse, only to be thrown under the bus for 
political purposes.
    I want to applaud Mr. Newell for his courage in appearing 
here today to tell his story and for his work in identifying 
misspent Federal funds. And I look forward to hearing from all 
of our witnesses in just a few minutes. And with that, I would 
yield to the ranking member, the gentleman from Pennsylvania, 
Mr. Cartwright.
    Mr. Cartwright. Thank you, Mr. Chairman.
    I would like to welcome our witnesses here today, including 
attorney Shelley Slade, a nationally recognized expert on 
government fraud lawsuits and, in fact, a board member of 
Taxpayers Against Fraud in this country. Ms. Slade will be able 
to clarify some significant misunderstandings that the majority 
seems to have about these Federal fraud lawsuits, called qui 
tam lawsuits.
    And I would like to welcome Mr. Newell, who by all accounts 
is an active citizen, committed to advocating for economic 
opportunities for low-income individuals and businesses.
    The majority has staged today's hearing to discredit the 
President's nominee for Secretary of Labor with baseless 
accusations of fabricated, dubious----
    Mr. Issa. Mr. Chairman, Mr. Chairman.
    Mr. Jordan. The gentleman from California.
    Mr. Issa. I regret to ask the gentleman to either rephrase 
or take down his words. To disparage the reason for this 
hearing is to disparage the chair. It is well-known that to 
claim that the intent is somehow nefarious and not what the 
hearing is about is, in fact, to disparage the chairman.
    Would the gentleman take down his words.
    Mr. Nadler. Mr. Chairman.
    Mr. Jordan. The gentleman from New York is recognized.
    Mr. Nadler. Mr. Chairman, to comment on the motivation or 
the purpose of the hearing is well within fair comment and this 
attempt by the gentleman from California to stop free and fair 
debate is wrong. And the words should not be taken down. They 
are well within fair comment, and the purpose of the hearing is 
open to anyone's comments, as is anything else about the 
hearing.
    Mr. Issa. Does the gentleman insist that our reason for 
this hearing is the nefarious purpose other than, in fact, 
righting a wrong that is perceived by the chair and by many 
experts?
    Mr. Jordan. The gentleman can respond.
    Mr. Cartwright. Mr. Chairman, the word ``nefarious'' was 
not used, and the only word that was used was that the attempt 
is being made to discredit the President's nominee for 
Secretary of Labor, and I feel that is an appropriate comment.
    Mr. Issa. Mr. Chairman.
    Mr. Jordan. The gentleman from California.
    Mr. Issa. I would raise the point of order that this 
investigation began 10 months ago and has been endlessly 
delayed by documents requested, not granted, and that 
ultimately, we reach this point only because of a long delay 
from the time of the action. So, again, I would ask that the 
gentleman recognize the full length of the investigation, the 
attempts to right this wrong for many months, long before a 
rather obscure member of the Attorney General's staff, by 
comparison to being a Cabinet appointee, was ever announced.
    Mr. Nadler. Mr. Chairman.
    Mr. Jordan. The gentleman from New York is recognize.
    Mr. Nadler. What the gentleman from California just said is 
his view. It is subject to debate. It is subject to other 
people's views and has nothing to do with taking down words and 
stifling legitimate debate. He is entitled to his view.
    Mr. Issa. Does the gentleman stand by his words accusing 
the chair of doing this for that purpose?
    Mr. Cartwright. I absolutely do stand by my words, and in 
fact, the timing that the gentleman from California raises is 
important as well because we expect to hear these 
unsubstantiated allegations repeated tomorrow by Republican 
Senators at the Senate Health, Education, Labor, and Pensions 
Committee hearing on the nomination of Tom Perez as Secretary 
of Labor. It is unlikely, however, that these Senators will 
repeat the only true facts that today's hearing will uncover, 
that experts say that Mr. Perez acted completely appropriately, 
within ethical boundaries, and in the best interest of this 
country.
    Mr. Newell and his attorney were invited to give a 
whistleblower's perspective on DOJ's decision not to intervene 
in his False Claims Act lawsuit. However, neither Mr. Newell, 
nor his attorney is----
    Mr. Issa. Mr. Chairman, since the gentleman has returned to 
his opening statement, I would ask that my motion be withdrawn 
at this time. I will sit through this dialogue, but only under 
protest.
    Mr. Jordan. The gentleman's complaint has been recognized. 
The gentleman may proceed.
    Mr. Cartwright. Neither Mr. Newell nor his attorney is an 
expert in the Federal law in which Mr. Newell's lawsuit is 
based, and more importantly in this case, Mr. Newell is not 
technically a qualifying whistleblower for the lawsuit. Experts 
we have consulted, including Ms. Shelley Slade, who is one of 
the preeminent False Claims Act litigators in our Nation, has 
concluded that Mr. Newell's lawsuit brought through the advice 
of his attorney was weak, failed to fulfill statutory 
requirements, and was susceptible from the moment it was filed 
to dismissal. These are the facts.
    DOJ intervenes in about 25 percent of all false claims 
lawsuits. Mr. Newell's lawsuit was therefore treated in the 
same manner as a majority of similar lawsuits brought to DOJ. 
The committee's investigation has turned up no evidence 
whatsoever of unethical or improper actions by the department. 
In fact, the majority cannot point to a single ethics rule or 
standard of professional conduct that was violated. The 
department's decision not to intervene did not end the case; 
rather Mr. Newell was free to pursue his lawsuit without the 
Federal Government, as all qui tam relators are in these cases. 
However, the case was dismissed by a Federal Court judge 
because Mr. Newell failed to meet that statutory requirement of 
a qualifying whistleblower, as I mentioned before. He did not 
have any original independent knowledge of the false claims by 
the City of St. Paul.
    So DOJ's decision not to intervene was the correct one and 
was supported by senior career officials regarded as the 
government's preeminent experts in their field and based on the 
facts of the particular case. The majority takes issue with 
efforts by DOJ and Tom Perez, then Assistant Attorney General 
for Civil Rights and today President Obama's nominee for 
Secretary of Labor, to preserve the concept of disparate 
impact, an important civil rights enforcement tool that helps 
prevent housing and lending discrimination from a potentially 
adverse Supreme Court ruling in an unrelated legal matter.
    Mr. Perez told the committee staff that disparate impact 
was used by DOJ in settling a case involving Countrywide 
Financial that was the largest residential fair lending 
settlement in the history of the Fair Housing Act. This 
settlement helped hundreds of thousands of victims harmed by 
widespread practices or patterns of discrimination in lending. 
But this valuable enforcement tool faced potential problems in 
the context of a case, called Magner v. Gallagher, which was 
scheduled to be heard by the U.S. Supreme Court. As every 
lawyer knows, bad facts make bad law, and Magner was a strange 
case with bad facts. That case, landlords of low-income housing 
units, sued the City of St. Paul for alleged aggressive 
enforcement of housing safety codes to address: ``rodent 
infestation, missing dead bolt locks, inoperative smoke 
detectors, poor sanitization, and inadequate heat.'' They 
claimed that if they were forced to fix these very basic 
problems, they would have to close the buildings, causing 
people to lose housing options.
    I find it hard to believe that anybody intended the Fair 
Housing Act to be used as a shield to prevent landlords from 
correcting housing code violations in their buildings. And I 
believe it was prudent of the Department of Justice and Tom 
Perez to be concerned that a majority of the Supreme Court 
might take advantage of the irony to deliver a setback to the 
enforcement of these antidiscrimination laws.
    Working with St. Paul to withdraw the appeal was in the 
best interest of protecting civil rights law and in the best 
interest of DOJ. Thank you, Mr. Chairman.
    Mr. Jordan. Thank the gentleman.
    The chairman of the Constitution Subcommittee of Judiciary, 
Mr. Franks, is recognized.
    Mr. Franks. Well, let me begin by thanking the Chairman for 
allowing the Constitution Subcommittee members to join in 
today's hearing. We appreciate that very much and I also want 
to express my appreciation for Senator Grassley's and Senator 
Isakson's presence.
    We have called this hearing to examine the quid pro quo 
between the City of St. Paul and Assistant Attorney General Tom 
Perez; a quid pro quo that cost U.S. taxpayers the opportunity 
to recover over $200 million along with being an injustice and 
a disservice to this Nation. This secret deal consisted of the 
Justice Department's agreeing to decline intervention in Mr. 
Newell's false claims case against the City of St. Paul in 
exchange for the City withdrawing an appeal from the Supreme 
Court.
    To paraphrase the maxim that is inscribed on the wall 
outside the Office of the Attorney General of the United 
States: the government prevails not when it wins its case in 
court but when justice is done.
    Over the years, attorneys within the Justice Department had 
consistently taken the steps necessary to ensure that they live 
up to this maxim. Unfortunately, Assistant Attorney General Tom 
Perez has failed to meet these expectations. Instead, Mr. Perez 
manipulated the rule of law and pushed the limits of justice to 
strike a deal with the City of St. Paul to block the Supreme 
Court from hearing an appeal that would have placed in jeopardy 
his division's use of an unjust legal theory.
    This theory, known as disparate impact, has allowed the 
Civil Rights Division to target banks and others for policies 
that are neutral and nondiscriminatory in their intent but may, 
nonetheless, have a disproportionate impact on certain groups. 
It was the use of this theory that in many ways precipitated 
the Nation's foreclosure crisis, as lenders lowered their 
borrowing criteria to avoid disparate impact claims.
    Mr. Perez went out of his way to find leverage to use 
against the City to get it to drop its case before the high 
court. And after he found that leverage, he began personally 
directing and advising officials at the Department of Housing 
and Urban Development and career attorneys within the DOJ's 
Civil Division, and at the U.S. Attorneys' Office in Minnesota 
to get them to switch their position on Mr. Newell's False 
Claims Act case.
    Once Mr. Perez achieved this goal, he tried to cover up his 
secret deal by instructing career attorneys to omit any 
discussion of the Supreme Court appeal from their official memo 
on Mr. Newell's case. He further attempted to cover the deal up 
by insisting that the final deal with the City not be reduced 
to writing; instead insisting that your ``word was your bond.'' 
How sadly ironic that in the same breath, Mr. Perez was 
breaking both his word and his bond to uphold justice.
    Assistant Attorney General Perez' deal, his secret deal 
will have lasting consequences for the Department of Justice, 
the City of St. Paul, and the American taxpayers. In overruling 
career attorneys and ignoring its own internal procedures, the 
Department weakened the False Claims Act and created a large 
disincentive for citizens to expose fraud. The City of St. Paul 
missed a tremendous chance to improve the economic 
opportunities available to the low- and very low-income 
residents that Mr. Newell championed. American taxpayers lost a 
strong opportunity to recover over $2 million of fraudulently 
spent funds and justice was ultimately and deliberately denied.
    Mr. Perez' actions in facilitating and executing this quid 
pro quo with the City of St. Paul represented a fundamental 
disregard for the rule of law. Rather than allowing the Supreme 
Court to freely and impartially adjudicate an appeal that the 
court had affirmatively chosen to hear, Mr. Perez deliberately 
worked to get the appeal off the Court's docket.
    Instead of permitting the normal decisionmaking process to 
occur within the Civil Division, Mr. Perez usurped the process 
to ensure his preferred course of action occurred. That others 
within the Justice Department and HUD went along with Mr. 
Perez' departure from the rule of law is also a disgrace. I 
look forward to the witnesses' testimony. I hope that it can 
shed further light on this disturbing chapter.
    Again, I want to thank Senators Grassley and Isakson for 
taking time out of their busy schedules to be with us here 
today, and I would also like to thank our whistleblower witness 
Fredrick Newell for his courage and for taking the time to 
travel for the second time from Minnesota to be part of this 
investigation.
    Mr. Chairman, I thank you and yield back.
    Mr. Issa. Mr. Chairman.
    Mr. Jordan. I thank the gentleman.
    Mr. Issa. Mr. Chairman.
    Mr. Jordan. The chairman of the full committee is 
recognized.
    Mr. Issa. In support of my earlier motion, I would ask 
unanimous consent that the letter the committee sent, the 
Subcommittee Chairman Patrick McHenry, sent on February 27, 
2012, to Christopher Coleman, the mayor of St. Paul, less than 
30 days after dismissal of the case.
    I would also ask unanimous consent that the April 10th 2012 
letter, to the Attorney General Eric Holder, again questioning 
this action in 2012, more than a year ago, be placed in the 
record.
    Additionally, I would ask that the September 24, 2012, 
letter to the Attorney General, again, questioning this 
dismissal on legal grounds be placed in the record.
    Additionally, I would ask that the letter of March 27th, 
2013 to Thomas Perez be placed in the record.
    And last, the April 4, 2013, letter jointly signed by 
myself, and Mr. Goodlatte be placed in the record in support of 
the time and effort we have put into this investigation.
    Mr. Nadler. Mr. Chairman, reserving the right to object. 
Can I----
    Mr. Jordan. Certainly.
    Mr. Nadler. I have no objection to placing anything the 
gentleman wants in the record. I was a little confused. You 
said you wanted to place it in support of--I am sorry, you said 
you wanted to place these documents in the record in support of 
something. In support of what?
    Mr. Issa. The gentleman, the ranking member of the 
subcommittee has chosen to claim motives related to an 
impending appointment. These documents clearly show a pattern 
from almost the moment that we became aware of them.
    Mr. Nadler. So, going to the majority's motive for this 
hearing, in effect.
    Mr. Issa. Going to the ranking member's assertion of a 
motive----
    Mr. Nadler. Supporting your opposition, supporting the 
beneficent interpretation of the majority's motive for this 
hearing. Right?
    Mr. Issa. Does the gentleman continue to reserve?
    Mr. Nadler. I am just asking you that.
    Mr. Issa. The gentleman cast a question for some unknown 
reason as to the motives for this hearing. These documents 
clearly show that long before anyone could have imagined, first 
of all, President Obama perhaps having a second term, but 
certainly, the fact that he would elevate this individual with 
this kind of a record to be a full Cabinet officer, thus making 
it very clear that our investigation began in earnest after 
this quid pro quo, long before that time.
    Mr. Nadler. I will--since--since I believe anybody can put 
anything in the record, I withdraw the objection.
    Mr. Jordan. Without objection----
    Mr. Issa. Thank you.
    Mr. Jordan. --the documents will be made a part of the 
record.
    Mr. Jordan. We now recognize the distinguished Senator from 
the State of Iowa.
    Mr. Nadler. Excuse me.
    Mr. Jordan. I am sorry, Mr. Nadler. You talked so much, I 
thought you gave your statement. We will let you go now.
    The gentleman from New York is recognized.
    Mr. Nadler. Thank you, Mr. Chairman.
    Mr. Chairman, today's hearing is not about Mr. Newell, or 
about protecting legitimate whistleblowers. It is about Tom 
Perez, the current Assistant Attorney General of the Justice 
Department Civil Rights Division and President Obama's nominee 
to be the next Secretary of Labor.
    Tomorrow is the Senate's markup of Attorney General Perez' 
nomination. The entire purpose of this hearing is to attack the 
leadership and reputation of one of this Nation's best public 
servants, Tom Perez. Of course, the Constitution grants the 
Senate, not the House, the role of providing advice and consent 
to the President on nominees. Whatever input into that process 
we might wish to have, it should not devolve into the type of 
partisan attack that this hearing represents.
    My Republican colleagues have declared that Assistant 
Attorney General Perez, ``manipulated justice and ignored the 
rule of law,'' by successfully negotiating an agreement with 
City of St. Paul, Minnesota, to withdraw its appeal to the 
Supreme Court in Magner v. Gallagher.
    But Assistant AG Perez did nothing wrong. On the contrary, 
he acted professionally and appropriately and in full accord 
with ethical and professional responsibility requirements to 
advance the best interest of the United States.
    The Magner case challenged the use of disparate impact 
theory to enforce the housing laws. Disparate impact theory 
allows the government to challenge policies or practices that 
are seemingly neutral on their face but in practice result in 
discrimination against a protected class. It is a critical tool 
for weeding out all forms of discrimination, whether 
intentional or not, and ensuring equality of opportunity for 
all. It has long been used by Republican and Democratic 
administrations to attack discriminatory lending, employment, 
and housing practices.
    An adverse ruling from the court in Magner could have 
eliminated use of this critical civil rights enforcement tool. 
Assistant AG Perez viewed Magner, where landlords of low-income 
housing were making the novel argument that disparate impact 
theory prevented St. Paul from enforcing its housing codes, as 
an extremely poor factual vehicle for presenting this critical 
theory to the Supreme Court.
    Rightly concerned that bad facts make for bad law, he 
seized the chance to reach an agreement with the city to 
withdraw Magner and avoid the risk of an adverse ruling. There 
was nothing wrong with that. It is what any good lawyer would 
do and certainly what the steward of the Justice Department 
Civil Rights Division should do to safeguard the best interest 
of the United States.
    My Republican colleagues are unhappy that the court did not 
get the opportunity to eliminate the disparate impact theory. 
After all, they dispute the use of disparate impact, and 
dislike the robust enforcement of civil rights laws. And they 
are unquestionably angry at Mr. Perez for his role in 
convincing St. Paul to withdraw its Magner appeal. But their 
complaints and the accusations that they have leveled against 
Assistant AG Perez have no legitimate, legal, ethical, or 
professional responsibility basis.
    In fact, when the City of St. Paul suggested that it would 
withdraw its Magner appeal if the Civil Division declined to 
intervene in Mr. Newell's False Claims Act case, Assistant AG 
Perez sought and received guidance from ethics and professional 
responsibility experts who approved such an agreement and his 
role in negotiating it. This alone debunks any claim of 
improper conduct.
    Even accepting the Republicans' characterization of the 
agreement as a quid pro quo, whereby the city withdrew its 
appeal ``in exchange,'' for the decision against intervention 
in Mr. Newell's case, there is nothing unethical or improper 
with reaching or brokering such an agreement; nor did Assistant 
AG Perez pressure career DOJ lawyers into recommending against 
intervention in Mr. Newell's case or somehow manipulate the 
Civil Division's decisionmaking process.
    As the documents and testimony reviewed over the course of 
the committee's 18-month investigation in this matter confirm, 
the decision not to intervene in Mr. Newell's case was made by 
the Civil Division, not Mr. Perez' division, based on its 
independent evaluation of the evidence, witnesses, litigation 
risks, lack of HUD support for intervention, burden on the St. 
Paul taxpayers, and anticipated withdraw of the city's Magner 
appeal.
    At the end of the day, the Justice Department's top career 
lawyers disagreed with earlier recommendations of more junior 
colleagues because they concluded that Mr. Newell did not have 
a strong False Claims Act case on its merits.
    My colleagues are free to disagree with the Civil 
Division's final decision in Mr. Newell's case, just as they 
are free to disagree with Assistant AG Perez' and the Civil 
Rights Division's desire to protect the disparate impact 
theory. But let's not pretend that these disagreements have any 
legitimate ethical or professional responsibility basis. This 
is, at best, a policy disagreement; at worst, simply partisan 
politics.
    Senator Harkin recognized this when he canceled the hearing 
on Occupational Health and Safety to which Mr. Newell had been 
invited to testify. Mr. Newell's complaints have nothing to do 
with that subject. And Senator Harkin appropriately dismissed 
that effort as a transparent, ``attack on the President's 
nominee for Secretary of Labor,'' Tom Perez, and refused to 
allow what he deemed as an abuse of process to go forward.
    It is unfortunate that our committee's majority did not 
follow Senator Harkin's lead. It is also unfortunate that Mr. 
Newell has been dragged into this partisan fight. His 
disappointment that the United States declined to intervene in 
his False Claims Act case is understandable. But that decision 
was never Tom Perez' to make, and he did not make it.
    The decision against intervention in the Newell case by the 
Civil Division's top False Claims Act lawyers was the right 
choice, as is confirmed by the testimony that we will hear from 
Shelley Slade today, as well as by the letters that we have 
received from other career False Claims Act lawyers, who 
similarly view Mr. Newell's case as a weak candidate for 
government intervention.
    I would ask unanimous consent to have the letters that we 
received made a part of record of this hearing.
    Mr. Jordan. Without objection.
    Mr. Nadler. Thank you.
    Assistant Attorney General Perez has done a tremendous job 
leading the Civil Rights Division and it is long past time to 
end this smear campaign against him. We should all be thankful 
for his services and look forward to his stewardship as 
Secretary of Labor.
    We do not serve the public interest by holding this hearing 
as part of a shameful smear campaign against Mr. Perez.
    With that, I yield back the balance of my time.
    Mr. Jordan. Thank the gentleman for his statement.
    Distinguished Senator from Iowa is recognized for 5 
minutes.

  STATEMENT OF THE HON. CHARLES E. GRASSLEY, A UNITED STATES 
                 SENATOR FROM THE STATE OF IOWA

    Senator Grassley. Thank you for inviting me to testify. It 
is important to examine the impact of the deal between the 
Justice Department----
    Mr. Jordan. Senator, just pull that real close so that we 
can all hear you. There you go. Great. Thank you.
    Senator Grassley. --to examine the issue between the 
Justice Department and the City of St. Paul and the impact that 
that has had on the whistleblower Fredrick Newell. I come to 
hearings like this not just to testify on the issue, but I want 
to encourage whistleblowing. I want to encourage the protection 
of whistleblowers. And I want to encourage use of qui tam-type 
lawsuits building upon the success of that act that we got 
passed and updated in 1986.
    The qui tam action that we included in the updated law 
allows individual whistleblowers to represent the Federal 
Government in certain cases and recover a share of the 
proceeds. When courts across the country narrowed the False 
Claims Act, I worked with Chairman Leahy to author legislation 
that overturned years of court decisions that watered down the 
False Claims Act of 1986.
    One of our fixes has an important relevance to today's 
hearing. Before 2010, the Supreme Court said that private 
citizens do not get rewarded unless the original source 
information is the basis of the settlement or verdict. Our 
provision to fix the public disclosure bar made it clear that 
Congress disapproved of this broad interpretation made by the 
courts. Instead of allowing organizations and individuals to 
string along whistleblowers, only to kick them off the case at 
the very end, the provision required the Justice Department 
file a timely motion to dismiss claims that violate the public 
disclosure bar.
    Tom Perez committed the Justice Department to assist the 
city in getting Fredrick Newell's qui tam action dismissed on 
public disclosure barred grounds in exchange for dismissing a 
nonrelated Supreme Court case to further his own favored legal 
theory.
    In doing so, Mr. Perez circumvented Congress' legislative 
intent in reforming the law to help whistleblowers like Mr. 
Newell. In the process, Mr. Perez made it impossible that Mr. 
Newell would succeed in his suit to recover money for the 
United States. We are talking about not just a few million but 
hundreds of millions of dollars.
    The result is that the department has demonstrated to 
future qui tam whistleblowers that they might be helped, but 
only if a defendant doesn't have something else the department 
wants in exchange.
    Senate-confirmed appointees testified before the Judiciary 
Committee that they support False Claims Act and that they 
would work with whistleblowers to make sure that cases received 
consideration and assistance from the Justice Department. It 
seems clear that the department did the exact opposite in Mr. 
Newell's case. Consequently, the False Claims Act and 
whistleblowers everywhere might suffer.
    In this case, the department took the authority granted to 
them under the law and rather than using it to secure those 
millions of dollars for taxpayers, they used it for leverage. 
They took the leverage and struck a deal to throw out the case 
that the career lawyers, and I want to mention, career lawyers 
in the department considered very strong. And along with it, 
they threw out the ability to recover a potential hundreds of 
millions of dollars of taxpayers' money. And in the process, 
the sad thing is, they left Mr. Newell, the whistleblower, 
twisting in the wind.
    There are a couple of points about this deal to emphasize. 
First, even though the department traded away Mr. Newell's 
case, Mr. Perez has defended his actions, in part, by claiming 
that Mr. Newell still had his, ``day in court.''
    What Mr. Perez omits from his story is that Mr. Newell's 
case was dismissed precisely because the United States was not 
a party. After the United States declined to join the case, the 
judge dismissed Mr. Newell's case based upon the public 
disclosure bar, finding he was not, ``the original source of 
information to the government.''
    I will remind you, preventing an outcome like this, is 
exactly why we amended the law as Chairman Leahy and I did. 
Specifically, those amendments made clear that the original 
source defense is not available when the United States joins 
the action. That is the whole point. That is why it was so 
important for the City of St. Paul to make sure that the United 
States did not join the case. That is why the city was willing 
to trade away a strong case before the Supreme Court. The city 
knew that if the United States joined the action, the case 
would go forward. Conversely, the city knew if the United 
States did not join the case, it would likely get dismissed.
    Now, think about that a while. The department trades away a 
case worth millions of taxpayers' dollars. They did it 
precisely because of the impact the decision would have on the 
litigation. They knew, as a result of their decision, the 
whistleblower would get dismissed based upon original source 
grounds. And yet, when Congress starts asking questions, they 
have the guts to say, ``We didn't do anything improper because 
Mr. Newell still had his day in court.''
    The second point has to do with the strength of the case. 
Throughout the investigation the department has tried to defend 
Mr. Perez' actions by claiming the case was marginal, or weak. 
The documents, however, tell an entirely different story. 
Before Mr. Perez got involved, the career attorneys at the 
department wrote a memo recommending intervention in the case. 
In that memo, they described St. Paul's actions as, ``A 
particularly egregious example of false certification.'' In 
fact, the career lawyers in Minnesota felt so strongly about 
the case that they took the unusual step of flying to 
Washington, D.C., to meet with HUD officials. And HUD, of 
course, agreed that the United States should intervene. Of 
course, that was before Mr. Perez got involved.
    The documents made clear that career lawyers considered it 
a strong case, but the department has claimed that Mike Hertz, 
the department's expert on False Claims Act, considered it a 
weak case.
    In fact, 2 weeks ago, Mr. Perez testified before my 
colleagues on the Senate Health Committee that Mr. Hertz, ``Had 
a very immediate and visceral reaction that it was a weak 
case.''
    The documents now tell a far different story. Mr. Hertz 
knew about the case in November 2011. Two months later, a 
department official took notes of the meeting where the quid 
pro quo was discussed. That official wrote down Mr. Hertz' 
reaction. She wrote, ``Mike, odd. Looks like buying off St. 
Paul. Should be whether there are legit reasons to decline as 
in past practice.'' Sounds like a very devoted lawyer working 
for the taxpayers. That is my editorial.
    The next day the same official emailed the Associate 
Attorney General and said, ``Mike Hertz brought up the St. Paul 
disparate impact case in which the Solicitor General just filed 
an amicus brief in the Supreme Court. He is concerned about the 
recommendations that we declined to intervene in two qui tam 
cases against St. Paul,'' end of email to the Associate 
Attorney General.
    Now, these documents appear to show that Mr. Hertz' primary 
concern was not the strength of the case, as Mr. Perez led my 
Senate colleagues to believe. Mr. Hertz was concerned that the 
quid pro quo Mr. Perez ultimately arranged was improper. Again, 
in his words, it, ``Looks like buying off St. Paul.''
    And we have a document that just came to our attention last 
night. The Justice Department sent my staff a critical 33-page 
slide show about the department's case against St. Paul. In 
this document, the career lawyers make their case for 
intervention. The department failed to provide this document to 
the committee, and we all warned about it in recent interviews 
with HUD employees, getting such critical documents so late in 
this investigation could be construed as a coverup. I expect 
any remaining documents will be immediately forthcoming.
    The department's actions and specifically those of Mr. 
Perez in orchestrating this deal are to the detriment of the 
American taxpayers, the whistleblowers, and the department. 
Ironically, the Justice Department and the Obama administration 
are currently engaged in waging the war on whistleblowers in 
the Federal courts across the country, most notably a case 
pending before the Federal courts titled Berry v. Conyers.
    While unrelated to this matter, we all need to keep an eye 
on this case as it could effectively end protecting 
whistleblowers in the Federal Government. I thank Mr. Newell 
for having the fortitude to come forward as a whistleblower and 
to keep fighting after the Justice Department hung him out to 
dry. He should be praised for being here today, and if we do 
anything short of that, we are going to discourage further 
whistleblowers from coming forth. And we can do the best job of 
oversight we can in the Congress of the United States, every 
one of us. If all 535 of us are involved, there is no way we 
can know where the bones are buried. We have got to rely upon 
people that are there where the fraud is being done. And we 
have got to encourage them. If we don't, we are never going to 
stop all of this fraudulent activity.
    I yield the floor.
    [The prepared statement of Senator Grassley follows:]

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    Mr. Jordan. I want to thank the Senator for his testimony.
    And I understand that Senator Grassley has to leave.
    And Senator Isakson, you are recognized for your 5 minutes 
more or less.

 STATEMENT OF THE HON. JOHNNY ISAKSON, A UNITED STATES SENATOR 
                   FROM THE STATE OF GEORGIA

    Senator Isakson. Chairman Jordan, Chairman Franks, Ranking 
Member Cartwright, Ranking Member Nadler, thank you for the 
invitation to introduce Fredrick Newell today, and thank you 
for letting me return to my roots in the U.S. House, and thank 
you for giving me the opportunity to publicly acknowledge the 
great work of my cohort, Senator Grassley, who is an 
outstanding Senator in many ways, but particularly on the 
whistleblower statute and enforcement of the standards of the 
United States of America.
    This is a very serious situation which we are about to 
discuss, and it is very important that both sides of the story 
be told. Two weeks ago, the Senate Subcommittee on Employment 
and Workplace Safety, of which I am the ranking member, was to 
hold a hearing on OSHA's whistleblower protection statute.
    Following on the heels of Thomas Perez' hearing before the 
committee, I solicited Fredrick Newell to be my witness at that 
hearing, since we were discussing the 22 whistleblower statutes 
within the Department of Occupational Safety and Health 
Administration, of obviously germane testimony. I felt it was 
important that we know what involvement Mr. Perez may have had 
in the St. Paul case, but more importantly, that we heard both 
sides of the story.
    I appreciate the willingness of both of these committees to 
reach out to Mr. Newell and provide him the opportunity, which 
was taken away from him by the chairman of the committee in the 
Senate when they pulled our ability to have that hearing and 
Mr. Newell's testimony.
    Mr. Newell courageously comes before the committee hearing 
today as a vital community leader and a blessed family man. Mr. 
Newell was born in Hazlehurst, Mississippi, the ninth of 16 
children. After high school graduation, he joined the United 
States Navy and served as an intelligence specialist and a 
photographer.
    Mr. Newell wears many hats. He is currently the pastor of 
True Spirit Ministries in St. Paul, Minnesota. Mr. Newell, he 
served in the ministry since 1986, at which time he has 
occupied positions which included deacon, Bible teacher, and 
assistant pastor. In addition to his pastoral work, Mr. Newell 
is also a part owner of three construction companies in St. 
Paul, Minnesota.
    One of these companies, Newell Abatement Services, was 
awarded honors as runner-up in the Twin Cities Small Business 
of the Year and also the Frogtown Small Business of the Year in 
1998.
    Mr. Newell has provided the construction training for over 
50 individuals from low-income backgrounds, through his 
communities and became a catalyst for the U.S. Department of 
Housing and Urban Development to force St. Paul to implement 
its first ever Section 3 program. As if he is not busy enough, 
Mr. Newell is also the President of Access Group, a nonprofit 
organization created to empower low-income individuals through 
awareness of community engagement.
    Mr. Newell is a nationally recognized Section 3 advocate 
and has participated in various national forums on the issue. 
As I said, he has been married for 28 years and has raised 5 
children. I thank him for making the journey to Washington 
today to give his testimony. I thank him for having the courage 
to blow the whistle. As Senator Grassley said, we will never be 
able to get to the bottom of many issues as a Congress if our 
citizens are not willing to tell us what they know. It takes a 
certain sense of civic responsibility and moral courage to do 
what he did.
    Mr. Newell, I again thank you for your willingness to 
testify. I look forward to the hearing and hearing what you 
have to say. And again, I want to thank Chairman Jordan and 
Chairman Franks for having the courage to call this hearing 
today so that all of the facts can come out.
    Mr. Jordan. I want to thank you, Senator, for your 
testimony and for your hard work on this issue and for pointing 
out the important fact that the hearing last week was canceled 
solely because Mr. Newell was invited to give testimony. We 
appreciate that.
    And I will now get ready for our second panel.
    Mr. Conyers. Mr. Chairman.
    Mr. Jordan. The gentleman from Michigan is recognized.
    Mr. Conyers. Thank you very much. Could I put my statement 
in the record? I am honored to have been invited here to be in 
the hearing room, and----
    Mr. Jordan. The former chairman of the Judiciary Committee 
is more than welcome to have his statement entered into the 
record.
    So, without objection, the statement is entered.
    Mr. Conyers. Thank you.
    Mr. Connolly. Mr. Chairman, I would also ask unanimous 
consent to insert in the record my statement.
    Mr. Jordan. Without objection.
    Mr. Connolly. I thank the chair.
    Mr. Jordan. I will now recognize the second panel.
    Mr. Nadler. Mr. Chairman.
    Mr. Jordan. Yes. The gentleman from New York.
    Mr. Nadler. A point of order, a point of inquiry, I am not 
sure which. I thought the next panel was supposed to have Mr. 
Newell and Ms. Slade together.
    Mr. Jordan. It is my understanding there are three panels, 
and Ms. Slade is on the third panel.
    Mr. Nadler. Is there a Memorandum of Understanding among 
the committees on this subject?
    Mr. Jordan. My understanding is that staff----
    Mr. Nadler. What?
    Mr. Jordan. My understanding is that the staff had worked 
that out. We have done this several times in this committee, 
may not be the practice in Judiciary Committee, but we have 
done this several times where we have had the----
    Mr. Nadler. The rules require that there be such a 
Memorandum of Understanding. Is there one?
    The House Judiciary Committee rules require that there be a 
Memorandum of Understanding when there is a joint committee 
hearing precisely to work out questions like this.
    And it was our understanding that this panel would have 
both Mr. Newell and Ms. Slade. I really think they should be 
together.
    Mr. Jordan. Well, obviously, we think different.
    And I will just let the gentleman know that this committee, 
the Oversight Subcommittee, has set several hearings, frankly, 
in the last few weeks. Mr. Cartwright can attest to this--where 
we have had several panels, not all witnesses, minority 
witnesses, were on the first panel; sometimes they were only on 
the second panel. This is not unprecedented at all for this 
committee. My understanding is you have had 10 days notice of 
how this hearing was going to be conducted.
    Mr. Nadler. I will simply say that I am glad to hear that 
the Oversight Committee operates that way. This is a joint 
hearing of two committees. The rules of one of them, the 
Judiciary Committee, require that there be a Memorandum of 
Understanding, and that this kind of question be in that 
memorandum. My understanding is that--my understanding as of 
this moment is that, in effect, the rules of the Judiciary 
Committee are being violated by the absence of such a 
Memorandum of Understanding.
    Second, we had understood, it had been our information that 
there be one panel. I just think in the interest of efficiency. 
I have no particular reason beyond that.
    Mr. Jordan. If you have no particular reason beyond that, 
you are making an awful big deal about it.
    Mr. Nadler. Well, I do think the rules should be followed, 
but I am wiling to withdraw any objection at this time.
    Mr. Jordan. I think the rules should be followed, too, and 
this is the precedent of this committee.
    The second panel is about the whistleblower. It is about 
Mr. Newell, and that is why he is on the second panel.
    There will be a third panel. Ms. Slade will be recognized 
at that time, and I will stay as long as we have to stay. We 
will take as many questions as Mr. Nadler may have.
    With that, we will--I will swear in our second panel. Mr. 
Fredrick Newell is a small business owner and minister from St. 
Paul, Minnesota and is a whistleblower in the False Claims Act 
against the City of St. Paul. Pursuant to committee rules, all 
witnesses will be sworn in before they testify. Please raise, 
if you would, Mr. Newell stand and raise your right hand.
    [Witness sworn.]
    Mr. Jordan. Let the record show that the witness answered 
in the affirmative.
    Mr. Newell, we are going to take your testimony, and then 
we will swear in Mr. DeVinke here in a second.
    So you are recognized for 5 minutes more or less, and we 
have been pretty generous as you saw from the Senators' 
statements. But you have got approximately 5 minutes. There is 
a lighting system there. Just pull that microphone close and 
the floor is yours.

STATEMENTS OF FREDRICK NEWELL, ST. PAUL, MINNESOTA, ACCOMPANIED 
         BY THOMAS DEVINCKE, MALKERSON GUNN MARTIN LLP

    Mr. Newell. Thank you, Mr. Chairman.
    I do have a prepared statement. I do want to first and 
foremost thank God for this opportunity, and I do count it as 
an opportunity.
    And then, as it is proper and customary, I want to thank 
the congressional committee for this opportunity to present 
before you as Representatives of our great Nation facts and 
concerns that have brought each of us to this occasion.
    I also want to thank my attorney here, Mr. Thomas DeVincke, 
who is to my left, though has yet to be introduced. He has been 
with me for over 8 years in this matter. But yet, in other 
words, since 2005, but if the truth be told, he is yet to even 
receive any compensation for his actions.
    I am here today to bring light to my actions and intent to 
work for over 13 years to create opportunities for the minority 
and low-income community in St. Paul and count this once again 
as an opportunity to that end.
    I will be making constant reference in my testimony to a 
HUD program called Section 3. Section 3 is a Federally mandated 
HUD program that was created to address the national ills 
facing this Nation in 1968. The facts of that day were 
highlighted by the Kerner Commission, formed by President 
Lyndon Johnson. The Kerner Report concluded that this Nation 
was moving toward two societies, one black, one white, separate 
and unequal. His finding was that the riots of 1968 resulted 
from the black community's frustration at a lack of economic 
opportunities. The report urged legislation to promote racial 
integration and to enrich slums, primarily through the creation 
of jobs, job training programs, and decent housing.
    To mark the 13th anniversary of the Kerner Report, the 
Eisenhower Foundation sponsored two complementary reports, 
``The Millennium Breach'' and ``Locked in the Poor House.'' 
``The Millennium Breach,'' co-opted by former Senator and 
Commissioner member Fred Harris, Fred R. Harris, found the 
racial divide had grown in the subsequent years within the 
city, unemployment at crisis level.
    ``The Millennium Breach'' found that most of the decade 
that followed the Kerner Report America made progress on the 
principal fronts the report dealt with, race, poverty and inner 
cities. Then progress stopped and in some ways reversed by a 
series of economic shocks, and trends, and the government's 
actions--and the government's actions and inactions.
    Harris reported to date, 30 years after the Kerner Report, 
there is more poverty in America. It is deeper, blacker, and 
browner than before. And there is more concentrated in the 
cities, which have become America's poor houses. From the 
Kerner Report, the Section 3 legislation, 24 CFR part 135 was 
passed by Congress in 1968. The result in Section 3 program was 
established to ensure that contracting, training, and 
employment opportunities were provided to low- and very low-
income individuals and communities where HUD funds were 
expended.
    One of the issues here today must be the intent or the 
intended outcome of Section 3. That intended outcome is 
employment. It is training and contracting opportunities for 
the communities in this country where those Federal funds are 
being spent. Basically, Section 3 epitomizes the essence of 
fair trade by requiring that the community, that the local 
community benefit from the opportunities in their community.
    Let us be clear, Section 3 focuses on these three things, 
employment, training, contracting, for the low-income 
community.
    Section 3 is a race-neutral program that takes into account 
that the Federal Government is spending money in these 
impoverished areas and seeks to use those funds to create those 
opportunities that I have mentioned for the residents of those 
areas. Those aren't just the inner cities. HUD funds are also 
expended in remote areas such as the Appalachian Mountains. HUD 
funds are spent in Wyoming, in Idaho, any State or city where 
poverty or divestment has occurred.
    Section 3 is not a new tool but a critical tool for the 
low-income community. The same principles were seen in the Work 
Progress, or Project Program, as some called it, or the Works 
Project Administration of the 1930s, and 1940s.
    As noted in a 2011 Section 3 report by the American 
University School of Public Affairs, entitled ``Section 3 
Regulation As Policy,'' the merits--that report states, The 
merits of Section 3 are compelling, as they aim to provide 
preference to low- and very low-income persons and businesses 
as a means to promote self-sufficiency among this constituency 
and correct for an unlevel playing field in the labor market.
    However, through its nearly 43 years, it has encountered a 
number of barriers to successful implementation, including 
challenges in collecting accurate and useful data from HUD 
funding recipients, confusion, or lack of awareness on the part 
of the funding recipients and the intended beneficiaries, and a 
lack of training to qualify low and very low income people for 
the Section 3 opportunities.
    It is from this aim that I spent over 13 years of my life 
pursuing opportunities for the low-income community, both for 
St. Paul and nationally.
    So, as you hear the term ``Section 3,'' please think of the 
true issues, employment, training, and contracting 
opportunities for people who really want and need them just 
like in 1968.
    Mr. Newell. Now I have elected to use the remainder of my 
time to read into the record a letter that I had written or 
drafted back in January of this year. This letter was and is 
addressed to Attorney General Holder and Secretary Donovan. I 
had proposed and intended to send this out back in January, 
but, unfortunately, my attorneys felt it best that I did not.
    Mr. Jordan. Mr. Newell?
    Mr. Newell. Yes.
    Mr. Jordan. We may just have you enter that--we can enter 
that letter into the record instead of having you read that, if 
that's okay.
    Mr. Newell. That is fine.
    Mr. Jordan. Okay. Thank you for your testimony.
    [Prepared statement of Mr. Newell follows:]

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    Mr. Jordan. It is my understanding Mr. Newell's attorney, 
Thomas DeVincke, is present to assist and advise his client 
this morning and may be called upon to answer questions on 
behalf of his client. Pursuant to committee policy, we will now 
swear in Mr. DeVincke. However, the subcommittees recognize 
that Mr. DeVincke is not here as an independent factual witness 
but, rather, here in his capacity as counsel to Mr. Newell.
    Please raise your right hand.
    Do you solemnly swear or affirm that the testimony you are 
about to give will be the truth, whole truth, and nothing but 
the truth, so help you God?
    Mr. DeVincke. I do.
    Mr. Jordan. Let the record show that Mr. DeVincke answered 
in the affirmative.
    Mr. Nadler. Mr. Chairman?
    Mr. Jordan. The gentleman from New York.
    Mr. Nadler. Let the record show that I object to Mr. 
DeVincke's being sworn. I know he is going to be because of 
force majeure. But the fact is, his testimony was not noticed, 
and it's improper under the rules of the House.
    If he's not testifying, why was he sworn? And if he's 
answering questions, he's testifying. And it was not noticed. 
It's a violation of the Rules of the House. I object.
    Mr. Jordan. Objection is noted.
    The gentleman from Arizona, the chairman of the 
Constitution Subcommittee, is recognized for his 5 minutes of 
questioning.
    Mr. Franks. Well, thank you, Mr. Chairman.
    Mr. Newell, I want to express a sincere gratitude to you. I 
know that, you know, this place is replete with political 
nuances, and I understand it; my own comments will be 
interpreted as such. But people like yourself, regardless of 
what the outcome of this hearing is, are the ones that really 
create the kind of forward movement in this country that is 
important to all of us. And I appreciate your courage and your 
tenacity and just your heart.
    Mr. Newell. Thank you.
    Mr. Franks. And, with that I guess the first question I'd 
like to ask you, just in your own words--I know sometimes we're 
all called upon to read statements. I have to do it all the 
time, and it's kind of a challenge to really get people to know 
what really you're feeling. But can you just tell me, tell us 
all, what, honest to God, is your goal in bringing this False 
Claims Act case in the first place?
    Mr. Newell. My aims were accountable follow-up, and I'm 
referring to bringing the False Claim Act lawsuit. It was a 
follow-up to actions to make a program work in St. Paul that we 
found would help our people.
    When I first started, I started somewhere around 2000 
pushing for Section 3. And as I did, we found that St. Paul 
didn't have a Section 3 program. So I went from that point of 
encouraging them to about 2006, when I finally, after St. Paul 
deciding they weren't going to start this program, I decided to 
file a Federal case in district court. As I did, this district 
court kicked the case out, basically saying that Section 3 had 
no private right of action in it.
    From that point, I went another 3 years of trying to 
encourage St. Paul, the public housing agency, and the city to 
do Section 3, writing emails, encouraging them, talking to 
them, talking to the Section 3 program, providing them with 
information to try to get this program off the ground. And when 
they didn't do it, then in 2009 is when I filed and encouraged 
HUD to come into town.
    But had also looked at HUD's programs, their solutions not 
to be adequate to what I was really hoping for. So, from that 
point, I also simultaneously, or within the months thereafter, 
filed a False Claim Act lawsuit.
    Mr. Franks. Well, I want you to feel free to consult with 
your counsel on any question here. But when DOJ says you were 
free to continue your case without them after this quid pro 
quo, it doesn't sound like it's really that simple to me, and 
I'd like for you to address that.
    And, essentially, how did DOJ's secret deal not to 
intervene in your fraud case affect your chances of success in 
the court? The Senator tried to respond to that to some degree 
already, Senator Grassley, but I would like to hear your 
perspective on how it affected the potential success of your 
case.
    Mr. Newell. There is a--I'm told by my attorney there is a 
political--I mean, a legal land mine that I have to try to 
dodge here. And so if I get kicked under the table, I hope you 
will excuse my reactions.
    Mr. DeVincke. Congressman, the issue as addressed by 
Senator Grassley, who I think got it largely correct, relates 
to a jurisdictional defense that's available to claims that are 
being pursued by a relator after a case is declined by the 
Department of Justice.
    That question and the answer to that question touches also, 
Mr. Chairman, on your question about why Mr. Newell pursued 
Section 3 complaints at every level and has been doing it for 
the last 8 years.
    In this case, which has been dismissed, as has been pointed 
out, by the United States District Court but which is currently 
on appeal to the United States Court of Appeals for the Eighth 
Circuit, St. Paul successfully raised a public disclosure bar 
defense and convinced, prevailed upon the court to conclude 
that Mr. Newell was not an original source of the allegations 
upon which the fraud counts are based.
    That defense is not available against claims that are 
pursued by the United States against the United States. That 
defense can still be raised as to a relator in a case that is 
accepted by the Department of Justice, as we believe this case 
would be. But Mr. Newell, importantly, has never pursued these 
matters for personal gain.
    And the False Claim Act played an important role in Section 
3 enforcement on the nationwide model. The only available 
remedies available other than a False Claim Act for Section 3 
enforcement were administrative complaints before HUD, which 
are relatively finite proceedings defined jurisdictionally by 
HUD to include matters that have arisen in the past 6 months. 
If you've ever seen the one-page HUD complaint form for a 
Section 3 complaint, in a sense that form itself confines the 
jurisdiction of HUD on those administrative complaints. It's 
quite limited.
    And as Mr. Newell pointed out, he attempted a direct 
complaint against St. Paul alleging a violation of Section 3, 
and, again, a jurisdictional defense was raised that the court 
lacked subject-matter jurisdiction because the statute did not 
confer an implied private cause of action. Respectfully, Mr. 
Newell and I disagreed with that conclusion, but we did not 
take an appeal, mindful that we didn't want to create some bad 
law in the circuit. I think that issue has been raised, which 
is always on an attorney's mind no matter what they are working 
on; I agree with that thought.
    So point being, even if the public disclosure bar was 
raised on an intervened case and Mr. Newell's relator standing 
was attacked, the lawsuit still would have served a great 
purpose for Mr. Newell's Section 3 advocacy. The False Claim 
Act filled in or provided another level of enforcement for 
Section 3 that HUD had not pursued. To my knowledge, it was the 
first use of the False Claim Act in this specific context, 
first false certifications of Section 3 compliance. These cases 
are filed under seal, but enough time has gone by since it was 
filed, and I believe it's only one.
    Mr. Jordan. The gentleman's time has expired.
    We'll now turn to the gentleman from Pennsylvania, Mr. 
Cartwright.
    Mr. Cartwright. Thank you, Mr. Chairman.
    Now, I have some legal questions, Mr. Newell. And I'm going 
to invite your counsel, Mr. DeVincke, to jump right in and help 
you, but, certainly, I don't mean to preclude you, Mr. Newell, 
from answering any of these questions. And I welcome you here 
today, the both of you gentlemen.
    We heard Senator Grassley testify earlier today, and he 
talked about this defense, the public disclosure bar defense. 
And the idea is that you're not really a whistleblower if 
you're complaining about things that are available to the 
public in general. And the idea is a qui tam lawsuit can be 
dismissed because if it's public information, there really 
isn't a whistleblower involved in this particular case.
    Am I getting that right, Mr. DeVincke?
    Mr. DeVincke. As right as I'd probably get it, sure.
    Mr. Cartwright. All right. So that Senator Grassley did 
testify that, in this case, if the DOJ had pursued the case, 
then the public disclosure bar would not have been available as 
a defense. And that wasn't quite right, was it, Mr. DeVincke?
    Mr. DeVincke. You want me to disagree with Senator Charles 
Grassley about the False Claim Act. You know, I was not top of 
my class in law school, so I'm not going to take that 
invitation, but I'll just say this: That defense is not 
available against the United States and against the United 
States bringing its claim. It can be raised as to the relator 
at any time is my understanding.
    And I'll just say this: This case is still on appeal. That 
issue could be litigated at a later date. That's my answer.
    Mr. Cartwright. So that Senator Grassley's statement was a 
bit of a broad-brush statement. It's not quite as clear as he 
said it, is it?
    Mr. DeVincke. Things are never that clear, are they? It was 
a bit of----
    Mr. Cartwright. Thank you.
    Mr. DeVincke. --a broad statement.
    But I would say, I think--to be fair, he's not here--I 
think Senator Grassley was mindful of the amendments that would 
not apply to this case, which was prior filed. This is a 2000, 
and--I can't speak for the Senator. I'll just say this case was 
before the most recent amendments to the act, and perhaps he 
had those in mind. But it was a broad statement, yes.
    Mr. Cartwright. And, now, Mr. DeVincke, you started to go 
into your own pedigree as an attorney, and I don't mean to 
interrupt you on that. Now, can you give us here in the hearing 
room an idea of how many False Claim Act cases you have 
litigated to verdict or judgment other than the Newell case?
    Mr. DeVincke. This is the only False Claim Act I've worked 
on, and I don't--I don't hold myself out as a False Claim Act 
expert. I am an expert on Mr. Newell and Section 3.
    But with that in mind, I co-counseled with Michael Allen of 
Relman Dane here in D.C., who, to my mind--and it might be too 
strong a word, but he in some ways pioneered the use of false 
certifications in a False Claim Act lawsuit regarding false 
certifications made to HUD, and he did that in the Westchester 
County case, which is of some renown in the practice of False 
Claim Act litigation. That case----
    Mr. Cartwright. I don't mean to cut you off. I only have a 
limited----
    Mr. DeVincke. Of course.
    Mr. Cartwright. --time, Mr. DeVincke. And I appreciate 
that. You do not hold yourself out as an expert in False Claim 
cases, correct?
    Mr. DeVincke. That is correct.
    Mr. Cartwright. All right. We do have an expert in False 
Claim cases here today, and it's attorney Shelley Slade. Now, 
you've heard of her, I take it.
    Mr. DeVincke. I have.
    Mr. Cartwright. Okay.
    Mr. DeVincke. And I do not mean to occupy her panel if 
she's supposed to be here. So my apologies if I'm in her----
    Mr. Cartwright. I think you're a lot safer not being on her 
panel.
    All right, so here's my question. The case of Rockwell v. 
United States ex rel. Stone, that's a False Claims case, right?
    Mr. DeVincke. It is.
    Mr. Cartwright. And you are familiar with that, are you?
    Mr. DeVincke. I'm having, like, law school flashbacks and 
nightmares right now, but, yeah, I've heard of the case. I'm 
not intimately familiar with it.
    Mr. Cartwright. Is it not the case that Rockwell v. United 
States ex rel. Stone, which is a qui tam False Claims case, is 
the governing United States Supreme Court case on the issue of 
whether the public disclosure bar would be a defense if the 
Department of Justice had pursued the claim?
    Mr. DeVincke. Correct.
    Mr. Cartwright. You're aware that that's the governing law?
    Mr. DeVincke. That's correct. I am.
    Mr. Cartwright. All right.
    Mr. DeVincke. And I think I agree that the defense could 
still be raised as to the relator, but the United States would 
proceed with the claim.
    And I hope I've been clear about how important that was to 
Mr. Newell, because Section 3 really suffered from a lack of 
visibility and enforcement. And the intervened case, whether a 
motion was brought as to the relator under the jurisprudence 
controlling a lot that I mentioned----
    Mr. Cartwright. I have one more question----
    Mr. DeVincke. Oh, sure. I'm sorry.
    Mr. Cartwright. --Mr. DeVincke. The question is, not ever 
having handled a False Claims case or a qui tam case other than 
this one, when you agreed to take the case, did you have any 
frame of reference to say whether this was a good case, a bad 
case, or a better-than-average case? Did you have any frame of 
reference from your own practice?
    Mr. DeVincke. Frame of reference? I researched the area of 
law generally and spoke to attorneys who practiced in the 
field. Is that frame of reference what----
    Mr. Cartwright. But from your own experience, you had no 
way of judging whether this was better than other qui tam cases 
you had handled, because you never handled any other such 
cases. Am I correct in that?
    Mr. DeVincke. Well, respectfully, I had worked on Section 3 
issues with St. Paul----
    Mr. Cartwright. I yield back, Mr. Chairman.
    Mr. DeVincke. --for many years, and I was well aware that 
there are certifications to the United States Government were 
made in a knowingly false manner. HUD understood that. The 
Department of Justice clearly understood that. There were no 
questions in my mind about the strength of the case, in that 
there were false certifications for which payment was made.
    You know, the issues we would look at, materiality is 
always going to be a thorny issue. So you look at whether, you 
know, it's a condition of payment versus a condition of 
participation. Being in the Eighth Circuit, you look at the 
Vigil case.
    And--I'm sorry, Chairman.
    Mr. Jordan. That's fine. I thank the gentleman.
    The gentleman from Florida is recognized, Mr. DeSantis.
    Mr. DeSantis. Thank you, Mr. Chairman.
    Mr. Newell, thank you for coming here today.
    It seems to me whistleblowers are supposed to and can serve 
a vital function in highlighting governmental abuses so that 
waste and fraud can be remedied and that they shouldn't be 
subordinated to the ideological predilections of a political 
appointee at the Department of Justice. And I would just note 
that the Department of Labor, of which Mr. Perez is nominated 
to be the head of, that they have roughly 20 whistleblowing 
statutes that are implicated in that agency. And so I think 
this is an important issue.
    And I just wanted to ask you, Mr. Newell, when you're doing 
this as a whistleblower, bringing a case like that, is that 
something that's easy to do, or was it difficult for you?
    Mr. Newell. Actually, it is difficult if you understand the 
potential kickback, if you would, from the communities that 
you're in. Everything we've done in--on Section 3 have not been 
well received in St. Paul. And thereby our first actions to get 
Section 3 off the ground was rebuffed. And when we filed a case 
in 2005, then there was some rebuffing. And as such, our 
company suffered. And even to when we brought the HUD 
complaints, we were even retaliated against. And even to this 
date, there is still--as you say, it's not easy. There is much 
pushback.
    Mr. DeSantis. Thanks. And my next question, I think you 
spoke to it. So you do feel that you did face retaliation 
through this process?
    Mr. Newell. We were--we filed a number of retaliation 
cases. And I say ``a number'' based on the fact that that--our 
initial filings with HUD was against St. Paul, against the St. 
Paul Public Housing Authority, against another entity in the 
city, the health department in Ramsey County.
    And St. Paul Public Housing Authority was found--HUD did 
investigate and found that the housing authority had retaliated 
against us. The Ramsey County Health Department retaliation 
complaint was investigated maybe 2 years after the complaint 
was lodged. And they stated they could--I believe the language 
was they could find no connection between the persons whom we 
say was involved in the retaliation and the ones who actually 
made the decision.
    And then we held presently a retaliation complaint against 
St. Paul itself that has yet to be addressed, where we had 
projects we bidded on or where we had opportunities we sought, 
and the city did not respond to us to let us take part in those 
projects. We basically documented for 2 years after they did a 
voluntary compliance agreement where we went to them, kept 
contacting them, saying to them we want these opportunities, 
and the city refused to let us in the door.
    And as a matter of fact, finally, we was asked by 
Department of Justice and HUD, or at least through--I believe 
it was through HUD that we stop contacting the city pressing 
for those things, because there seemed to be some issue of us 
pressuring them.
    Mr. DeSantis. Are you going to add something?
    Mr. Newell. Yes. My attorney was just kind of pointing out 
a point that may be well introduced. And that is, our companies 
in time past, when we first started this, or, better still, as 
you heard in the introduction, we started in 1995. Our 
companies had great potential. As companies, we had 
approximately eight different disciplines that we operated in. 
And from the year 1997--we started in 1995. About year 1997, we 
were working with the Minneapolis public housing program, and 
they had a Section 3 program or at least were producing one. As 
such, our revenues went from the basic first year, second year 
of $20,000, $30,000, $100,000 to where we begin to peak out as 
$300,000, $400,000 worth of work from '97 through 2000, where 
we had begin to do work and quality work. And so we were doing 
demolition, asbestos abatement, lead abatement. We had a number 
of other areas. We were licensed as residential builders.
    So within that period of time, we had even got accredited, 
according to our growth, that we were awarded with two awards 
as Entrepreneur of the Year and/or runner-up in a certain 
community. After we started pushing for Section 3 in 2000, then 
in St. Paul a lot of my efforts went toward trying to get that 
program off the ground by a factor of contacting the city, 
saying to them, ``We can help with you this program. We've got 
people we can work with.'' We even went to the community 
development corporation then, got them to nominate low-income 
individuals from their communities, saying to them, ``If you 
will nominate them, we will put them into the work we're doing. 
We'll get them trained using HUD dollars, and we will get them 
into jobs.'' Nothing prevailed. We got the people trained, but 
no work came out of it.
    And so, as a company, when we pushed for Section 3 in St. 
Paul, we started getting instant pushback. We were told, we're 
not hiring, we're not taking on any new contractors. And the 
more we pushed, the more resistance.
    Mr. DeSantis. Great. Thank you for that.
    I see my time has expired, and I yield back.
    Mr. Jordan. The gentleman from New York is recognized for 5 
minutes.
    Mr. Nadler. Thank you, Mr. Chairman.
    Mr. Newell, it seems to me we're really talking about two 
different things here. One is Section 3.
    Mr. Newell. Go ahead.
    Mr. Nadler. And the other is the whistleblowers and qui 
tam.
    Now, in 2007, you filed a Federal lawsuit against the city 
of St. Paul, Nails Construction Company et al. v. City of St. 
Paul.
    Mr. Newell. 2006.
    Mr. Nadler. 2006, excuse me. In that lawsuit, you alleged 
the city had failed to comply with Section 3 in a number of 
ways.
    Mr. Newell. Correct.
    Mr. Nadler. Why was the case dismissed?
    Mr. Newell. The case was dismissed because the Federal 
courts, not just on my case but in a number of cases, were 
determining that the language that enforced Section 3 did not 
provide for a private right of action for individuals to bring 
this case before the Federal courts.
    Mr. Nadler. But wasn't it also true that the court found 
that you had not been on the contracts and had no personal 
injury in that case----
    Mr. Newell. There was----
    Mr. Nadler. --and, therefore, no standing?
    Mr. DeVincke. I can comment.
    Mr. Newell. Please.
    Mr. DeVincke. The court in dicta was not the holding of the 
court. The court in dicta mentioned that, because the plaintiff 
had not identified a contract to which they would be entitled 
under Section 3, they lacked Article 3 standing to pursue the 
claim.
    Mr. Nadler. Exactly, they lacked standing. So, in other 
words, Mr. Newell lacked standing, and the case had to be 
dismissed.
    Now, presuming----
    Mr. DeVincke. If I may--and I understand the time is 
short--we respectfully disagree with that.
    Mr. Nadler. You disagree with the court. Fine. But that was 
the holding of the court.
    Mr. DeVincke. Correct.
    Mr. Nadler. Mr. Newell, presuming you were able to overcome 
the standing issue and other issues, do you think that Congress 
should work to create a private right of action under Section 
3?
    Mr. Newell. I appreciate the question. That's something 
that I've been pushing for for the last--since that time, since 
2005.
    Mr. Nadler. Okay.
    Mr. Newell. A lot of our work with Congresswoman Velazquez 
has been toward that end.
    Mr. Nadler. Well, I would agree with you. But what you're 
really saying, or at least my conclusion about what you're 
really saying is that your beef is with Congress for not 
creating the private right of action and not really with what 
we're talking about here today.
    Now, would you have--the False Claims Act, as we know, we 
have discussed this already--well, if you had--if Congress had 
created that private right of action, you would not have needed 
to pursue a False Claims Act case, correct?
    Mr. Newell. That may be so.
    Mr. Nadler. You would have pursued----
    Mr. Newell. I think part of it would've been determined by 
the possible remedies for the community that we were seeking.
    But you made a statement. You said the beef is regarding 
not having a private right of action.
    Mr. Nadler. Well, the chief----
    Mr. Newell. I take--and it would have been in one of my--in 
my statements. I take issue only to the point that my beef, I 
guess, goes a little deeper. And I don't like the term 
``beef,'' but since you used it----
    Mr. Nadler. All right, but go ahead.
    Mr. Newell. Okay. We pushed for this in 2005 hoping to get 
for that community because of the problems that were in that 
community. And believe me, Minneapolis-St. Paul is considered 
the worst in the country. Please, let me----
    Mr. Nadler. Excuse me, I only have 5 minutes--we know--I'll 
grant that St. Paul isn't very good on this stuff. So just go 
ahead.
    Mr. Newell. Okay, then my point is this: We pushed Federal 
courts. That did not work. We went to HUD. We did not go to HUD 
first because we were concerned that HUD would only do 
administrative actions. When we finally got to HUD, we got 
administrative actions that was very limiting. But we were also 
encouraged by HUD that they would support this False Claim Act 
lawsuit. And, as such, we saw this as the true opportunity.
    Mr. Nadler. Okay. So HUD said, or someone at HUD said they 
would support a False Claims Act. But, of course, you realize 
that HUD has to go to the Department of Justice, which makes 
all litigation decisions for the Federal Government.
    Mr. Newell. And so when we met with the Department of 
Justice and HUD in St. Paul, it's similar to how I kind of have 
been meeting individuals here. There are times when individuals 
will come to you and shake your hand and say, ``Good job.'' 
That's what--that's the response we got when we met with 
Justice and HUD, that they felt this was a good case.
    Mr. Nadler. Okay.
    Mr. DeVincke. I do want to comment generally that an 
express private cause of action would go a long way to address 
all of the flaws in the enforcement model that we talked about 
earlier.
    Mr. Nadler. I certainly agree with that, and we should do 
that.
    Now, we have discussed in this hearing so far the public 
disclosure bar which prohibits lawsuits on the False Claims Act 
by people who do not know anything beyond--who aren't alleging 
something that isn't publicly already known.
    Now, I gather that you are barred, in effect, by the 
False--not by the--by the public disclosure bar. You said that 
had the Federal--had the Justice Department sued, that would 
have eliminated that problem. But--no?
    Mr. DeVincke. It doesn't take the issue completely out of 
the case----
    Mr. Nadler. Yeah, I was coming to that. My understanding is 
that Mr. Newell would still have been dropped from the case as 
a result of the public disclosure bar, but the Justice 
Department could have continued on its own, the United States 
could have continued on its own.
    But, in effect, what you're saying is that the Federal 
Government should have had its own lawsuit with Mr. Newell out 
of it.
    Mr. DeVincke. No. We would never say that. We're saying 
that----
    Mr. Nadler. But that's what you're saying would have 
happened, at best.
    Mr. DeVincke. I'll say this: I believe Mr. Newell is an 
original source, and I'm hopeful that on appeal the Eighth 
Circuit will agree with me. He does have independent direct 
knowledge of the fraud. And because that issue is on appeal, 
all I can respectfully say is, you know, I don't want to 
speculate in that direction. I will say this: The public 
disclosure bar can still be an issue in a case even on an 
intervened case, generally speaking.
    Mr. Nadler. I see my time has expired. Thank you.
    Mr. Jordan. I thank the gentleman.
    The chairman of the Judiciary Committee, the distinguished 
gentleman from Virginia, is recognized.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Mr. Chairman, I would like to start by reminding folks why 
we're here today, which is to examine a secret deal struck by a 
senior Justice Department official, Assistant Attorney General 
Thomas Perez. This secret deal was brokered by Mr. Perez with 
the city of St. Paul in order to prevent a case from being 
decided by the Supreme Court. In this exchange, Mr. Perez 
pressured officials at both the Justice Department and the 
Department of Housing and Urban Development to overrule career 
attorneys and abandon two pending False Claims Act cases 
against St. Paul. This quid pro quo potentially cost American 
taxpayers over $200 million.
    The Judiciary and Oversight and Government Reform 
Committees have been conducting an investigation into this 
matter for over 6 months. And I would point out that is long 
before Mr. Perez was nominated by the President to a Cabinet-
level position in another department.
    And last month, the committees released a report detailing 
this background deal. The report found, among other things, 
that Assistant Attorney General Perez was personally and 
directly involved in negotiating the mechanics of the quid pro 
quo, and he personally agreed to the quid pro quo on behalf of 
the United States during a closed-door meeting with the mayor 
of St. Paul; that despite the Department of Justice's 
contention that the intervention recommendation in Newell was 
a, ``close call,'' and, a ``marginal,'' contemporaneous 
documents show the Department believed that Newell alleged a 
particularly egregious example of false certifications, and, 
therefore, the United States sacrificed strong allegations of 
false claims worth as much as $200 million to the Treasury; 
that Mr. Perez attempted to cover up the quid pro quo when he 
personally instructed career attorneys to omit a discussion of 
the Supreme Court case in the declination memos that outlined 
the reasons for the Department's decision to decline 
intervention in Newell and Ellis; and that Mr. Perez attempted 
to cover up the quid pro quo when he insisted that the final 
deal with the city settling two cases worth potentially 
millions of dollars to the Treasury not be reduced to writing, 
instead insisting that, ``your word was your bond''; and that 
Mr. Perez made multiple statements to the committees that 
contradicted testimony from other witnesses and documentary 
evidence.
    So, Mr. Newell, I want to first thank you for coming 
forward today and ask you, first of all, how all this made you 
feel after you saw the courage you had to take to step forward, 
the wrongs that you were trying to right, and to see it all 
subverted as a part of a much larger deal.
    Mr. Newell. As this issue was brought to light, many people 
say, ``Aren't you upset?'' Now, I believe that there's a good 
reason that I'm here today and would not have come otherwise. 
It wasn't to undercut but to finish the agenda that I had, 
which was making Section 3 work.
    Section 3 was and is so important to me that when I looked 
at disparate impact regulations, my first response was they've 
caused the very results by protecting the disparate impact that 
disparate impact was designed to do, and that is to not cause 
discriminatory effects.
    We pressed for Section 3. We took every effort we could, 
and we found after court actions and HUD actions that we 
couldn't make any inroads on Section 3. And then we found that 
the False Claim Act lawsuit was a real possibility. The 
administration----
    Mr. Goodlatte. Let me interrupt you right there because I 
want to ask you a question about that.
    So you had discussions with representatives of the 
Department of Justice and the Department of Housing and Urban 
Development about the False Claims Act case that you thought 
you had. What kind of statements did you receive from them 
about whether they planned to pursue your False Claims Act 
case? And how strong, in your mind, were those signals?
    Mr. Newell. The False Claim Act lawsuit went under seal in 
2009. And so there weren't a lot of direct communications on 
it. There was encouragement from the HUD Department in our 
actions. I remember being at one particular seminar with Deputy 
Secretary Sims, who was heralding Section 3--I mean, False 
Claim Act as the remedy for a lot of the regulatory actions 
that couldn't be addressed otherwise. Same individuals came to 
me thereafter and shook my hand, who didn't know me, and said 
``Hey, good job. Keep up the good action.'' So a lot----
    Mr. Goodlatte. Let me ask you one more question, since my 
time has expired.
    How do you think your experience might affect the 
willingness of future whistleblowers to come forward?
    Mr. Newell. I think----
    Mr. Goodlatte. Isn't that really why you're here today?
    Mr. Newell. I'm sorry?
    Mr. Goodlatte. Isn't that really why you're here today, to 
make sure that the opportunity to step up and call attention to 
wrongdoing is not something that is subverted and discouraged 
but, in the future, that people don't feel that way? And how do 
you think how this case was handled will affect those future 
whistleblowers?
    Mr. Newell. That is number two on my agenda, it is, because 
I do believe that--let's say it this way. One of the 
individuals before I left St. Paul who deals with a lot of the 
Section 3 businesses made a statement to me, and he said that 
one of my biggest concerns is that most of these contractors 
who I deal with will not want to go through what you went 
through. They will not want to file a complaint, knowing that 
the city of St. Paul will retaliate, that the administration 
or, if you would, HUD will not support, and that their actions 
can cause the kind of actions or results that you've 
experienced.
    So you're more than correct. It is, in my eye, a real 
travesty what has happened. I hope to turn it into an 
opportunity, as everything else I've done. But, yes, it is 
truly--and I can't imagine that even the administration would 
think otherwise, that the efforts that we went through and that 
they supported just got sold, according to what I was told. But 
being sold, it also sold the Section 3 community and me down 
the road.
    Mr. Goodlatte. Mr. Newell, I thank you for coming forward 
today.
    Thank you, Mr. Chairman.
    Mr. Jordan. I thank the chairman.
    The ranking member of the Oversight Committee is 
recognized, the gentleman from Maryland.
    Mr. Cummings. Thank you very much.
    Mr. Newell, I want to thank you for your testimony.
    Mr. Newell. Yes, sir.
    Mr. Cummings. Your concerns about people being left out, 
not being given opportunities, being treated unfairly----
    Mr. Newell. Yes, sir.
    Mr. Cummings. --working hard all their lives simply to have 
a piece of the American pie, never getting it, and then they 
die.
    Mr. Newell. Go ahead.
    Mr. Cummings. So I can understand your concerns. And I want 
to just go to your lawyer.
    The majority, Mr. DeVincke, has made a claim that Mr. 
Perez--who, by the way, I've known for over 15 years and is one 
of the most honorable people I know--manipulated the decision-
making process for intervention in a False Claim Act case--and 
I understand that you don't consider yourself an expert, I 
understand that, but I'm sure you can easily answer this 
question--resulting in a consensus of the Federal Government to 
switch its recommendation and decline intervention.
    I just want to ask you two questions about intervention 
decisions and DOJ's decision-making process. And I'm going to 
ask the same thing of Ms. Slade.
    And, Ms. Slade, I wish you were on this panel because it 
would have made it a lot more--I mean, I think we could have 
been much more effective and efficient in our time and our 
efforts.
    But be that as it may, Mr. DeVincke, are there any 
requirements in the False Claims Act that mandate that the 
government intervene?
    Mr. DeVincke. I can answer that one. No.
    Mr. Cummings. Yeah, good.
    Mr. DeVincke. I was afraid I wouldn't be able to.
    Mr. Cummings. There's nothing that mandates it; is that 
right?
    Mr. DeVincke. No.
    Mr. Cummings. And isn't it true that DOJ intervenes in only 
25 percent of False Claims Act cases that are brought to the 
Department?
    Mr. DeVincke. That I have heard, but I don't know.
    Mr. Cummings. Okay.
    So, you know, it's certainly no coincidence that today's 
hearing is being held 1 day before a committee vote in the 
Senate to confirm Tom Perez as the President's nominee for 
Secretary of Labor. Today's hearing is an unfortunate and 
highly partisan exercise intended to raise unfounded questions 
about the reputation of Mr. Perez, despite the fact that there 
is no evidence that his actions were anything but professional 
and in the best interests of combating discrimination in our 
Nation's housing.
    The core allegation leveled by the Republicans is that Mr. 
Perez, as the head of the Civil Rights Division at the 
Department of Justice, inappropriately coordinated a quid pro 
quo agreement with the city of St. Paul in which the Department 
declined to intervene in two False Claim Act cases in exchange 
for St. Paul withdrawing a separate case before the Supreme 
Court.
    The problem with the Republican theory is that Mr. Perez 
did nothing wrong. He obtained clearance from the ethics 
officials at the Department. He coordinated properly with the 
head of the Civil Division. And he and others at the Department 
relied on career experts with decades of experience, who 
concluded after a careful review of the evidence that the False 
Claims Act cases were too weak to recommend that the government 
expend resources to litigate them.
    Since then, a host of other legal experts have backed up 
the Department's conclusions. For example, in a statement 
issued yesterday, Professor Stephen Gillers, who has taught 
legal ethics for more than 30 years at the New York University 
School of Law, wrote that a Republican report issued last month 
suggesting that Mr. Perez acted improperly, ``cites no 
professional conduct rule, no court decision, no bar ethics 
opinion, and no secondary authority that supports this 
argument.'' The reason, he explained, is that there is no 
authority that supports it.
    In addition, one of today's witnesses, Shelley Slade, is an 
attorney with 20 years of experience in False Claim Act cases. 
She explained in her written statement, ``I am confident that 
the decisions taken by the Civil Division officials with regard 
to the Newell qui tam case, including the factors that were 
considered in declining the decision, were fully consistent 
with the law as well as ethical and professional obligations.''
    She went on to say, ``If my law firm had been contacted 
about taking on this case, we would have rejected it. 
Notwithstanding the apparent strong evidence that St. Paul 
engaged in repeated and egregious violations of Section 3 of 
the Housing and Urban Development Act of 1986, the qui tam case 
presents serious litigation risks on a number of fronts.''
    And, with that, I yield back.
    Mr. Jordan. I thank the gentleman.
    Mr. Newell, you've lived in St. Paul how long?
    Mr. Newell. Since 1985.
    Mr. Jordan. 1985. You are a successful businessman, award-
winning small-businessman, it was cited earlier. You've been a 
pastor in that community for how long?
    Mr. Newell. Since--officially, just since 2006.
    Mr. Jordan. You've been a pastor in that community. You are 
a founder of a nonprofit. You care about the people you live 
with and work with and minister to; is that correct?
    Mr. Newell. Correct.
    Mr. Jordan. And you cite in your testimony, let's be clear, 
Section 3, focus on creating employment, training, contracting 
for the low-income community.
    Mr. Newell. Correct.
    Mr. Jordan. That's what it's about. And St. Paul wasn't 
doing the job. And you knew they weren't doing the job. You saw 
it firsthand, they weren't doing the job. And you said, this is 
not right, they are wasting taxpayer money, and they not 
helping the people they are supposed to help, the people I care 
about, the people I live with, the people I minister to.
    And you were mad about it. And you said, ``You know what? 
I'm going to take action.'' And even if you couldn't proceed 
personally, you wanted the United States to proceed and 
intervene because you wanted to fix the problem. Isn't that 
correct?
    Mr. Newell. That is correct.
    Mr. Jordan. And you not only knew that they were wrong, the 
Department of Justice knew they were wrong.
    Put up slide 1, if you would, please.
    Right here it says, ``The United States Attorney's Office 
for the District of Minnesota and HUD recommend that we 
intervene.'' This is a November 2011 letter to Tony West, 
Assistant Attorney General for the Civil Division.
    Put up slide 2, please.
    ``We recommend--'' same letter--``We recommend intervening 
in this action to assert false claims actions and common law 
claims against the city.'' They know what you know. They know 
St. Paul ain't doing the job.
    Put up slide 3, if you would, please.
    The city knew about its obligation to comply with Section 3 
but failed to comply. The Justice Department knew exactly what 
you saw firsthand.
    Mr. Newell. Correct.
    Mr. Jordan. They said it three times now in the same 
stinking letter.
    Slide 4, please.
    We believe this is a particularly egregious example of 
false certifications given by the city. Repeatedly shown what 
it had to do, repeatedly failed not to do it. Right?
    Mr. Newell. Correct.
    Mr. Jordan. Now, let's go to--let's go to a year later. 
Same people, career attorneys at Justice, writing to the same 
guy, Tony West, Assistant Attorney General, Civil Division. 
Now, this is exactly like slide 1 except for two words. It 
says, ``The United States Attorney's Office for the District of 
Minnesota and HUD recommend that we decline to intervene.'' So 
something's changed.
    Mr. Newell. Correct.
    Mr. Jordan. One year later, we got the exact same language, 
except they add words, ``We decline to intervene.''
    Slight 6, if you could, please.
    They say it was a close call, this decision not to 
intervene a year later. Now, just a few months before that they 
had said it's egregious, it's false, they failed to comply, 
we've never seen anything like this, this is a terrible 
example, we agree with Mr. Newell, we know how bad it is. And 
now they call it a close call.
    Slide 7, please.
    Again, they say, ``We decline to intervene after going 
through it.''
    And then we have the--where they go through--in the last 
slide, slide 8, they refer to the case. They refer to Magner in 
the last case.
    And so here's my question to you: What changed their mind? 
What event took place between November 2011 and the February 
2012 letter? What happened?
    Mr. Newell. Well, sir----
    Mr. Jordan. Well, let me suggest something here.
    Mr. Newell. Go ahead.
    Mr. Jordan. I would say this: I would say Mr. Perez got on 
the phone and started talking to the folks in St. Paul, at the 
city, said, ``Hey, guys, you're in trouble. I got smart people 
at Department of Justice who say you guys are in big trouble.''
    Mr. Nadler. Point of order, Mr. Chairman.
    Mr. Jordan. The gentleman will state his point.
    Mr. Nadler. You're asking a witness questions of which he 
can possibly have no knowledge. You ought to be asking this of 
Justice Department officials as to what changed. Mr. Newell----
    Mr. Jordan. I would love to ask Justice Department 
officials. All I know is Mr. Newell was supposed to testify a 
week ago----
    Mr. Nadler. Mr. Newell can have no----
    Mr. Jordan. --and the hearing was cancelled.
    Mr. Nadler. Mr. Newell----
    Mr. Jordan. And I didn't interrupt you during your 5 
minutes, so I would like to go ahead and ask the witness 
questions.
    Mr. Nadler. I am making a point of order. You're asking a 
witness questions of which he has no possible knowledge, namely 
what changed within the Department----
    Mr. Jordan. I'll rephrase it.
    Mr. Nadler. Let me finish. Namely what changed within the 
Department of Justice.
    Mr. Jordan. I'm asking----
    Mr. Nadler. Mr. Newell has no knowledge of that.
    Mr. Jordan. Mr. Newell has a lot of knowledge of this case. 
That's why he's the whistleblower in front of the committee.
    Mr. Nadler. He knows nothing of the decision-making process 
within the Department of Justice, which is what you're asking 
about.
    Mr. Jordan. Okay. Well, let's say, Mr. Newell, would you 
hazard a guess as to why this dramatic change from Justice, 
what events may have transpired in the interim to take the 
Justice Department saying it's egregious, they failed to 
comply, I've never seen anything like this, to, oh, now it's a 
close call, we're not going to weigh in?
    And all I'm suggesting is I know one event that took place. 
Mr. Perez called the attorneys at St. Paul, talked to the 
folks--in fact, on February 3rd, Mr. Perez took what I would 
assume was a pretty unprecedented action, got an a plane, flew 
to St. Paul, sat down in a closed-door meeting with the lawyers 
in St. Paul, and the next thing we know they're saying this is 
a close-call case and we're not going to intervene.
    Do you know of anything else that could have possibly been 
an event that would change what the Justice Department 
interpretation of this whole case was?
    Mr. Newell. In answer to your question, sir, no.
    I was going to say a second ago that in reading much of or 
all of the data that's been flowing out--and I'm not referring 
only to that he told the reporters reports, but the 
understanding from the statements from the Department of 
Justice----
    Mr. Jordan. Well, let me just ask you this, Mr. Newell, 
because my time is running short. Those first four slides I 
showed--egregious, both Justice and HUD said we should 
intervene, we concur that career--this is Justice and HUD from 
Minnesota and--they're all saying we should jump into this 
case, this is a strong case, St. Paul is pathetic, they're not 
doing the job, we should get involved.
    Did they relate that to you guys when you were having 
conversation?
    Mr. Newell. Yes.
    Mr. Jordan. So that's consistent with what they told you.
    Mr. Newell. That is consistent with----
    Mr. Jordan. And then suddenly this dramatic change. And the 
only event I can think of that might have had--and, now, Mr. 
Nadler may think it's something else, but I think maybe there's 
a chance when Mr. Perez gets on the phone and calls them, gets 
on a plane and flies up there personally, I don't know that--
you know, why not just let the same lawyers who've been doing 
it handle this case? It was moving along fine. But, no, he 
personally flies to St. Paul, goes in a closed-door meeting, 
and, shazam, everything changes. Go figure that.
    I see my time has expired. With that----
    Mr. DeVincke. Mr. Chairman, we can say that--I had most of 
the conversations with the United States Attorney's Office. And 
I can tell you that as of November 7th of 2011, it was accepted 
without debate that the United States would intervene in this 
case.
    And, in fact, I had been contacted by the Department of 
Justice on two fronts: one, to gather information that would 
counter and address St. Paul's defense that it did not have 
substantial funds to pay a settlement; and, two, that I should 
reach out to my local media contacts to get Fredrick's story 
out because Justice expected that St. Paul would get its story 
out and it would be negative toward my client, and that Justice 
wanted me to run point on public outreach on the case.
    Mr. Jordan. To me, this is as obvious as it gets. This is 
someone in a position of power who said, You know what? Forget 
what the facts say. Forget what the people who for over 2 years 
have looked at this case and said this case is one we should 
intervene in. Forget all that. I care more about this theory 
and what may happen in front of the United States Supreme 
Court. And because I'm in a position of power, I'm going to 
hurt the poor people in St. Paul, Minnesota, that Mr. Newell 
pastors to, ministers to, and works with. I'm going to hurt 
them.
    And that's exactly what--and anyone with common sense can 
see this pattern. They can see the memos and the emails sent in 
November 2011. And they can see the abrupt change after Mr. 
Perez gets on a plane, flies to St. Paul, goes in a closed-door 
meeting, and changes people's minds because he is powerful and 
he's now going to be potentially the next Secretary of Labor. 
And that's why this is wrong, and that's why this hearing is so 
important.
    With that, I'd yield to----
    Mr. DeVincke. Mr. Chairman, may I comment on that briefly?
    Mr. Jordan. No. I'm going to recognize Ms. Kelly first; 
then we'll----
    Mr. DeVincke. Of course.
    Mr. Jordan. We'll keep going.
    Ms. Kelly, I'm sorry.
    Ms. Kelly. I have no questions for this panel.
    Mr. DeVincke. If I may comment briefly on the prior 
statement?
    We don't know or believe that Mr. Perez--personally, I've 
never met the man. I don't think he bears any ill will toward 
Mr. Newell.
    Mr. Newell. Mr. Perez?
    Mr. DeVincke. Yeah.
    But I do want to say that, you know, my client was 
overlooked here in this process. And we feel that Mr. Perez's 
department or he himself should have taken Mr. Newell into 
account at some point in this process. He was the relator on 
this case, and yet he was not told about any resolution 
reached. He was not told that the Magner case was connected to 
his case in any way. And he wasn't given any share of any 
proceeds of anything that the government received ultimately.
    And that's on appeal right now. We want to have some 
discovery on these issues regarding whether there was a 
settlement or an alternate remedy under the statute. But as a 
relator, he had rights.
    Mr. Jordan. Ms. Kelly, you yield your time back?
    Ms. Kelly. Yes.
    Mr. Jordan. Okay.
    We'll recognize chairman of the full committee, Mr. Issa.
    Mr. Issa. Thank you, Mr. Chairman.
    I'd ask unanimous consent that my letter to the Honorable 
Thomas Perez of May 6th, 2013, be entered in the record.
    Mr. Franks. [Presiding.] Without objection.
    Mr. Issa. Thank you.
    Mr. Issa. In this letter, I'm making it clear that, as of 
today, this committee has had zero response as to what is known 
to be 1,200 emails, of which at least 35 occasions we know that 
these emails were in violation by Mr. Perez of the Federal 
Records Act.
    And this remains one of the great questions of this 
committee, is: If somebody works at the highest levels of law 
enforcement, circumvents a Federal law, why is it the Justice 
Department, the very entity that to a certain extent is on 
trial here today for their wrongful actions against Mr. Newell, 
why they refuse to make these records available?
    We do have one record I'd like to make available in 
realtime.
    Could we have the voicemail played, please?
    This is an actual call.
    [Voice message begins.]
    ``Mr. Perez: Hey, Greg. This is Tom Perez, calling you at 9 
o'clock on Tuesday. I got your message. The main thing I wanted 
to ask you--I spoke to some folks in the Civil Division 
yesterday, and wanted to make sure that the declination memo 
that you sent to the Civil Division--and I'm sure it probably 
already does this--but it doesn't make any mention of the 
Magner case, it's just a memo on the merits of the two cases 
that are under review in the qui tam context. So that was the 
main thing I wanted to talk to you about. I think, to use your 
words, we're just about ready to rock and roll. I did talk to 
David Lillehaug last night. So if you can give me a call, I 
just want to confirm that you got this message and that you 
were able to get your stuff over to----
    [Voice message ends.]
    Mr. Issa. Thank you.
    Mr. Newell----
    Mr. Newell. Yes.
    Mr. Issa. --were you aware of this kind of direct action by 
Mr. Perez?
    Mr. Newell. No, I was not.
    Mr. Issa. Earlier, one of the Members, Mr. Nadler, 
apparently decided that you didn't have knowledge of certain 
things so you couldn't be asked a question. Having heard this, 
do you believe that this and other phone calls and emails may 
have contributed to your case, your valid case, your valid 
concern on behalf of your community essentially being 
circumvented by Mr. Perez?
    Mr. Newell. Based on everything I've read, even in the 
reports from the committee, I would say they all had a definite 
bearing.
    Mr. Issa. And I think for your counsel: In your experience, 
this kind of ex parte intervention, do you find that a little 
unusual to come out of somebody who is supposed to stand on 
behalf of civil rights as the law is written?
    Mr. DeVincke. Mr. Chairman, I will duck your question a 
little bit and just say this generally. What was most 
disturbing to my client and I was--and we don't know this to be 
the fact, but the suggestion in the record evidence that there 
may have been an affirmative offer from either HUD or Justice 
to aid St. Paul in defending my client's False Claim Act case 
when these were the two departments that worked so closely with 
my client for so many years and had pledged support to him and 
he had dedicated his time and resources to the cause. And then 
to find out that, in fact, they provided material support or 
may have promised to provide material support to the defendant 
in a False Claim Act case was very troubling. And it remains 
troubling.
    Mr. Issa. Well, there are two things I'd like to put in the 
record at this time.
    First of all, this committee will not cease its 
investigation until we have interviewed individuals who changed 
their position as to what caused them to change their position. 
We will interview any and all necessary for that. And we look 
forward hopefully to finding whistleblowers who will tell us 
about these ex parte conversations and how this may have led to 
it.
    Secondly, I would call on Mr. Cummings, my ranking member, 
to join with me to insist that Mr. Perez provide these emails 
which were done in violation of the Federal Records Act, to 
make them all available to the committee to be reviewed to find 
out how many additional documents were used and what the 
documents' contents are.
    I'd yield to my ranking member.
    Mr. Cummings. Let me just ask you this. I understand that 
some of these--some of these records were received and reviewed 
by committee, the committee staff. Is that right? In camera at 
the Department.
    Mr. Issa. The--Mr. Perez--you're somewhat correct. Mr. 
Perez initially said under oath that there were none, then 1, 
then now 34 additional, which we were allowed to see in camera 
but not allowed to have copies of.
    The committee has requested all roughly 1,200 to be 
reviewed since he has, one, had a lack of memory of actual 
violations of Federal record, and, quite frankly, the committee 
has a right to look at all documents that he used on this 
quasi-government email to determine whether or not he has been 
truthful.
    Mr. Cummings. Well, would the--just this one thing. I'm 
happy to--you know I'm happy to cooperate with you. Contrary to 
some of the things that have been said on national media, we on 
this side do care about whistleblowers. We do care about 
whistleblowers. I want to make that real clear. And I resent 
anybody saying anything different than that.
    And we will work with you. As I've said to you many times, 
I will follow the evidence wherever it may lead. And so I'd be 
happy to--I just need to know exactly what I'm agreeing to, 
that's all.
    Mr. Issa. Well, and let me rephrase it. The 34 that we were 
allowed to see in camera were redacted. We want the unredacted 
versions of that. And we'd like to have all 1,200--in other 
words, all the emails that he used--for an in camera, 
unredacted review.
    Now, if they're personal, the committee, on a bipartisan 
basis, can say ``next, next,'' until we've gone through them 
all. But in the sense that initially it was claimed he had 
zero, then 1, now 35, and we haven't been able to see them in 
the entirety, it would certainly seem that we, the committee, 
should be the judge of whether any or all of the 1,200 
additional ones are germane.
    Mr. Cummings. All right, I will join you and work----
    Mr. Issa. I thank the gentleman.
    Yield back.
    Mr. Jordan. [Presiding.] I thank the gentleman.
    I now recognize the gentleman from Nevada, Mr. Horsford.
    Mr. Horsford. Thank you, Mr. Chairman. I'm going to reserve 
my time for the third panel.
    Mr. Jordan. Got it.
    Mr. Horsford. And I know we have been asking for this to be 
both sides of the issue, and we have spent now 2 hours and 
haven't heard from the other side.
    Mr. Jordan. Okay. Fine.
    The gentleman from North Carolina, Mr. McHenry, is 
recognized.
    Mr. McHenry. Thank you, Mr. Chairman. And thank you for 
having this very important hearing and publishing the report.
    This committee has worked very diligently over the last 
Congress and this Congress to find the truth in what is a very 
bad situation, tragic in its results for you, Mr. Newell, and 
awful in its intent by somebody who's going through Senate 
confirmation today, who is a high-ranking government official, 
Mr. Perez. Mr. Perez' actions raise great questions about his 
intentions on this matter and even to the question about his 
willingness to provide very important information, not even 
following through and following through in delivering records 
for a subpoena request.
    So I do want to ask about this whistleblower lawsuit 
because this matters to taxpayers. This matters to taxpayers, 
though Mr. Perez has brought himself into great question based 
on his actions and his interventions against what was working 
through the process with career Department of Justice officials 
who, apparently, according to the records we've seen, thought 
that, Mr. Newell, you had a strong case.
    Now, Mr. Newell, how long were you working with the 
Department of Justice on your case?
    Mr. Newell. We first met with Department of Justice in 
2009, and so it started from that point.
    Mr. McHenry. 2009.
    Mr. Newell. Correct.
    Mr. McHenry. And how long did they work with you until--how 
long did they work with you?
    Mr. Newell. We finally got an indication or declination in 
2012.
    Mr. McHenry. 2012.
    Mr. Newell. Correct.
    Mr. McHenry. Mr. DeVincke, you're an attorney by trade.
    Mr. DeVincke. Right.
    Mr. McHenry. When you're working with the Department of 
Justice, did they give you an indication you had a weak case in 
the, you know, 2, 3 years that you're working with them on 
this? Did they say, you know what, we're not going to throw 
government resources on this whistleblower claim; you know, 
we're just going to--I mean, did you get any indication?
    Mr. DeVincke. The indications were uniformly that the case 
had merit. This position was strengthened by St. Paul's 
response to the claims against them, which Justice found to be 
further evidence of knowingly false certifications in support 
of the case.
    Also, Justice served a lengthy subpoena on the city of St. 
Paul that resulted in a what we call open-file discovery where 
the Justice Department, I believe through the United States 
Marshals Service, conducted open-file discovery at city hall in 
St. Paul.
    Mr. McHenry. So is that--I'm not an attorney, and I know 
we've got Judiciary folks here. They are well-versed in that. 
Is that kind of standard for a weak case?
    Mr. DeVincke. I am no expert on----
    Mr. McHenry. I'm sorry. I wish the ranking member would 
jump in and tell me that was a bad question to ask.
    Mr. DeVincke. I would say----
    Mr. McHenry. So let me just ask this.
    Mr. DeVincke. They spent 2 years and 9 months, significant 
attorney time, investigator time, and resources on the case. 
They tied out the damages to the penny. And----
    Mr. McHenry. And what was that? What did they come out to?
    Mr. DeVincke. $86 million and change----
    Mr. McHenry. Oh, and change. Okay.
    Mr. DeVincke.--was the received funds. And then----
    Mr. McHenry. So we're Congress, so we won't worry about the 
change. We'll just talk about the $86 million.
    And as a result of that claim, what would the taxpayers 
recoup?
    Mr. DeVincke. If it was trebled, the maximum recovery under 
the damages model that would be most aggressive would be 
approximately $260 million, plus penalties, plus fees, plus 
costs.
    However, there are--that's a simple answer because you're 
asking for the biggest number possible. There are alternate 
damages models. And we never really got there, just because the 
number was so high already. In fact, there was quite a debate 
over whether they were even going to spend all the time to tie 
out the damages to the penny because, as some attorney at 
Justice said, what's the point? We know it's in the tens or 
hundreds of millions. And we also know that, it being a taxing-
authority municipality, we're not going to try to essentially 
bankrupt the city of St. Paul. That would not be in anyone's 
interest.
    Mr. DeVincke. So the point being, the actual amount of 
damages----
    Mr. McHenry. Okay.
    Mr. DeVincke. Once you hit a certain number, you go to 
settlement.
    Mr. McHenry. Thank you.
    So, Mr. Newell----
    Mr. Newell. Yes.
    Mr. McHenry. --are there still problems with the St. Paul 
low-income jobs programs?
    Mr. Newell. There are.
    Mr. McHenry. Okay. Now, have you ever met with the 
Assistant Attorney General, Tom Perez?
    Mr. Newell. No, I have not.
    Mr. McHenry. Okay. Have you ever talked to Mr. Perez about 
the problems in St. Paul with Section 3 compliance?
    Mr. Newell. With Mr. Perez, no.
    Mr. McHenry. Okay. Mr. Newell, you know, when we are going 
through these records, we see an obvious quid pro quo by the 
Assistant Attorney General.
    Mr. Newell. Okay.
    Mr. McHenry. That is a deep issue for us, as an oversight 
panel, to make sure that we get the facts of your case. And my 
understanding is, through this whole process, there are 
documents that were jaw-dropping to you and your attorney based 
on the fact that you had the Department of Justice moving 
forward and they were going to support your claim.
    Mr. Newell. Go ahead.
    Mr. McHenry. Politics intervened. An Assistant Attorney 
General, using his personal email account to get around 
government records requests, counter to the law that is 
existent for the executive branch, trying to use his personal 
email account and some of these games that you played with 
voicemails so that he wouldn't have to disclose the fact that 
he was putting the screws to you and your case and the 
taxpayers.
    This is the deeply devastating thing that we have to bring 
to light. And I ask my colleagues on the other side of the 
Capitol Building to think twice about Mr. Perez' nomination 
based on the records that we have simply come through with on 
this committee. It raises great question about his government 
service. What we want is honorable and good folks that are 
there for the government good and the public good, not simply 
out for politics.
    And this is obviously what Assistant Attorney General Perez 
was all about. That's what we see in his records, and that's 
why we need more records, to actually verify what we have seen 
is, in fact, true.
    And, with that, I yield back.
    Mr. Jordan. I thank the gentleman.
    I now yield to another gentleman from North Carolina, Mr. 
Meadows.
    Mr. Meadows. Thank you, Mr. Chairman.
    And thank you, Mr. Newell, for having the courage to come 
and testify, but not only having the courage to come and 
testify, to stand up for those that don't have a voice. And we 
appreciate your willingness to do that.
    And I want to get right to some of the points that have 
been made. Obviously, as we look at it, in testimony there has 
been an indication from the get-go from Mr. Perez that this was 
a weak candidate for intervention. Was that your understanding 
from career staff people that you talked to?
    Mr. Newell. No, sir.
    Mr. Meadows. So you never got that indication, that it was 
a weak candidate?
    Mr. Newell. No, sir.
    Mr. Meadows. All right. Let me go on a little bit further. 
And so, as we start to see this, if indeed it was not a weak 
candidate, do you believe that they would have been investing 
all this time and your time to look at this, the amount of 
dollars to pursue this, if they didn't have some hopes that it 
would have merit?
    Mr. Newell. No, sir.
    Mr. Meadows. So when we start to see this--you know, my 
colleagues opposite here have created this almost sainthood of 
Mr. Perez in terms of who he is. In fact, I think to quote Mr. 
Cartwright, he said that there's not a single thing that he has 
done wrong.
    And would you agree with that, having read some of the 
things that are here, would you agree with that 
characterization, that there is not a single thing that he has 
done wrong?
    I can see you are reluctant to answer that, and so I'm 
going to go on because my time is limited.
    So the committee has done a great job. And as I started to 
review all of this, I said, well, obviously, even the President 
can't know all this stuff that has gone on with Mr. Perez and 
feel good about this nomination because of some of the things 
that are there. And so, everything that you have heard from 
career attorneys, would you say that it was a marginal case 
based on what you have heard from them?
    Mr. Newell. I have yet to hear--well, you say have I heard 
from any attorney that it was a marginal case?
    Mr. Meadows. In general. Did most of the attorneys indicate 
that it was a marginal case?
    Mr. Newell. And are you referring to attorneys that worked 
from Justice, HUD, or what are you referring?
    Mr. Meadows. From Justice.
    Mr. Newell. I will confess that all communications with the 
Department of Justice and HUD was through my attorney.
    Mr. Meadows. Okay.
    Mr. Newell. But all references to me from my attorney was 
that our case was not only a good case, but in the phrase of 
Justice was discussing settlement of the case, and that's why 
they kept extending----
    Mr. Meadows. So they thought there was enough merits there 
to discuss settlement?
    Mr. Newell. Correct.
    Mr. Meadows. All right. Let me go on a little bit further. 
We talked just a few minutes ago about these emails, these 
nonofficial emails, that have been sent by the Assistant 
Attorney General, Mr. Perez.
    Were you aware of that, that he was sending personal emails 
to different folks?
    Mr. Newell. No.
    Mr. Meadows. Okay. I have a letter here that was sent to 
him that outlines the fact that there has been some 1,200 times 
that his personal email has been used. And I'm troubled by some 
of the things that I see in there, mainly because we want to 
make sure that it gets covered.
    In this particular letter, it refers to the fact that there 
are 34 separate violations of the Department of Justice, the 
Federal Records Act. Were you aware that he was violating the 
Federal Records Act some 34 times?
    Mr. Newell. No, sir.
    Mr. Meadows. All right. Let me go on a little bit further, 
because, in this, it is real troubling that he actually sends a 
personal email to a New York Times reporter on information from 
the Department of Justice that was not public. And to quote 
this, it says, ``Just closed a deal 15 minutes ago. Will 
announce at 3 o'clock tomorrow.''
    Okay? So when you look at this email, he is sending private 
information from the Department of Justice to a New York Times 
reporter of a deal that, quite frankly, was about Countrywide 
Financial Corporation. And so would you not think that that 
would be inappropriate?
    Mr. Newell. Not--my attorney kind of put the answer that I 
would have said, which is simply, I'm not in a position to be 
able to, you know, evaluate or judge those particular actions.
    Mr. Meadows. Well, I guess my question is, as a citizen, 
when I read this, I would say, well, why would a New York Times 
reporter be privy to information from the Department of 
Justice? Would that not--would you do the same thing? Let me 
ask you that, Mr. Newell.
    Mr. Newell. Would I----
    Mr. Meadows. Would you let somebody, a reporter know about 
nonpublic information before it's known to the public if you 
were working for the Department of Justice?
    Mr. Newell. I'm not clear on the constraints that he would 
have.
    Mr. Meadows. All right.
    Well, I can see my time is out. I yield back, Mr. Chairman. 
Thank you for your indulgence.
    Mr. Jordan. I thank the gentleman.
    I now recognize the gentleman--we started with an Iowa guy, 
and we are finishing here with an Iowa guy--the gentleman from 
Iowa, Mr. King.
    Mr. King. Thank you, Mr. Chairman. Mr. Chairman, I thank 
you for this hearing.
    And, Mr. Newell, I very much thank you for your testimony 
and for your willingness to step up for all this time and take 
on something that I think you view as an injustice.
    And as I listen to the testimony and the questions in this 
hearing, I just reflect upon--you deliver a sermon from time to 
time, Mr. Newell?
    Mr. Newell. Yes, I do.
    Mr. King. And I don't have any knowledge of this, but I'm 
going to ask you a question, and that is: Have you ever 
contemplated or delivered a sermon on the irony of a 
dishonorable man from the Department of Justice delivering 
injustice to honorable people?
    Mr. Nadler. I have--Mr. Chairman?
    Mr. Jordan. The gentleman is recognized.
    Mr. Nadler. If Mr. King will not take back his words 
referring to the Assistant Attorney General as a dishonorable 
man, I think his words ought to be taken down.
    Mr. Jordan. I think the gentleman was talking about a 
sermon that Mr. Newell may have delivered about honorable----
    Mr. Nadler. I think he was referring to the subject of this 
hearing, and I think that it was clear from the context.
    Will Mr. King make clear that he was not referring to Mr. 
Perez when he commented in any way or analogizing Mr. Perez 
when he commented on a dishonorable man?
    Mr. Jordan. I don't think the gentleman mentioned anyone's 
name in his comments. He was talking about----
    Mr. Nadler. I asked Mr. King if he would----
    Mr. Jordan. And I am the chairman of the committee, and I 
was just saying what I heard, what I think what most people 
heard----
    Mr. Nadler. I'm glad what you heard. I asked Mr. King a 
question. I am entitled to do that before I move to take down 
his words, if I do.
    Mr. Jordan. I was going to let him answer your question.
    Mr. Nadler. Fine. Thank you.
    Mr. Jordan. All I'm saying is, I think the gentleman was 
asking Mr. Newell, in his duties as a pastor----
    Mr. Nadler. You don't have to instruct him how to answer 
the question. He is smart enough to answer for himself.
    Mr. Jordan. I know he is smart enough to answer for 
himself. I just wanted to give you my opinion of what I think 
most people in the room heard. He can respond.
    Mr. King. I thank you both for the endorsement of my 
ability to answer this question.
    And I'd make the point that I specifically didn't name 
anyone. This is a question--I can repeat it again--about a 
dishonorable man from the Department of Justice delivering such 
injustice to honorable people.
    And I would point out that in the previous discussion that 
we have had here, I remember Mr. Nadler saying that this is a 
shameful smear campaign against Mr. Perez, and went on, and the 
gentleman from Maryland said that he is one of the most 
honorable men I know.
    Mr. Nadler. I agree.
    Mr. King. So I have heard the endorsement of Mr. Perez. I 
didn't state his name in my question. And I wouldn't be willing 
to change the definition or the meaning of what I said, nor ask 
my words be taken down, be removed----
    Mr. Cummings. Mr. Chairman?
    Mr. King. --because the answer is no.
    Mr. Cummings. Mr. Chairman?
    Mr. Jordan. The ranking member is recognized.
    Mr. Cummings. I'm going back to what Mr. Nadler said. It 
sounds like he was referring--I mean, just based on what he 
just said, it sounds like he was referring to Mr. Perez.
    I'm just, I mean, I'm listening here. And, by the way, when 
I said honorable, I was saying something good about the person 
who I know. I was not, you know, going against his character or 
making him sound like some bad person. There is a big 
difference between what I did and what you did.
    Mr. King. Since you have all brought up this discussion 
about the honorability or dishonorability of the individual I 
didn't name, I would point out that individual testified before 
the Judiciary Committee twice that I can recall, once in 2009, 
once in 2011. And in 2009 Mr. Gohmert asked the gentleman you 
are referring to if he had seen the video of the New Black 
Panthers, and it took five questions to get the answer ``yes'' 
to that. When I asked him on June 1st of 2011, did you provide 
the highest penalty under law to the individual who was the 
principal in the New Black Panthers case, his answer was, yes, 
the highest penalty under law. We know that wasn't true.
    So I'm going to suggest when I say the dishonorable man, 
you know the facts that I have just listed here, and that's why 
you jumped to the conclusion that I was talking about Mr. 
Perez.
    Mr. Cummings. Well, who are you talking about?
    Mr. King. I asked a hypothetical question to the witness, 
and you are all inflammatory here, inflamed because you know 
that the question itself goes so close to the real truth that 
we are talking about here, and that is the lack of integrity 
that is being presented by the President.
    Mr. Jordan. The gentleman has 4 minutes and 20 seconds.
    Mr. Nadler. Mr. Chairman, I move to take down the 
gentleman's words.
    Mr. Cummings. By the way, Mr. Chairman, we are not being 
inflammatory.
    Mr. Jordan. In the practice of the House, I would just--
Members may employ, when referring to references to executive 
officials, which Mr. King didn't do, but nevertheless, if he 
was referring to an executive official, he is permitted to 
employ strong language in criticizing the government, 
government agencies, and government policies. So I think the--
and he did not say anything personally offensive toward the 
President.
    And the gentleman from New York, if he wants words taken 
down, he needs to specifically decide which words he wishes 
taken down. I don't believe there was a violation of the House 
practice or committee rules, and would recognize the gentleman 
from Iowa for his remaining 4 minutes and 20 seconds.
    Mr. Nadler. Mr. Chairman, my----
    Mr. King. Thank you, Mr. Chairman.
    Mr. Nadler. --motion has to be disposed of.
    Mr. Jordan. Yeah, and I indicated that the gentleman needs 
to state which specific words he wants taken down.
    Mr. Nadler. I want the words specifically in which it was 
clear from the context he was referring to Mr. Perez. He said 
the word ``dishonorable.''
    Mr. Jordan. The chair rules that the words of the gentleman 
from Iowa are not parliamentary because they--excuse me. The 
chair overrules the point of order by the gentleman from New 
York but asks that the Members please afford all of the Members 
the respect that they are entitled and refrain from using 
rhetoric that could be construed as an attack on the motives or 
the character.
    Mr. Nadler. Given the ruling of the chair and hoping that 
Mr. King will adhere to those, I will withdraw the motion.
    Mr. Jordan. I appreciate the gentleman withdrawing.
    The gentleman from Iowa is recognized.
    Mr. King. Thank you, Mr. Chairman. I will revert back to my 
natural gentle nature and turn to the witness at hand.
    And I would ask you then, Mr. Newell, when did you first 
suspect that there might have been a quid pro quo?
    Mr. Newell. We--right after we got our declination, about I 
would say within the next month or so, I was approached by a 
gentleman who was part of the Magner case, who then asked me if 
I knew of some connecting issues there.
    Mr. King. And then when--you've got a question about that. 
When was it confirmed? When did you learn about the Perez 
involvement?
    Mr. Newell. The actual Perez involvement came to my 
attention when the letters went out to the--or when I received 
copies of the letters to the Secretary of HUD and the Secretary 
of--I mean, Assistant Secretary--Attorney General.
    Mr. King. And the copies of the letters, they would be some 
of the letters that Mr. Issa introduced into the record?
    Mr. Newell. Correct. That would be about September or 
October of 2012.
    Mr. King. Uh-huh. And yet Mr. Perez said that there 
wouldn't--this wouldn't be documented, it would be your word 
was your bond, if I remember the discussion. Had you run across 
that language previously?
    Mr. Newell. I have.
    Mr. King. And then did it seem curious to you that he would 
be willing to put such a message on an audio of a voicemail 
that--had you heard that voicemail before today?
    Mr. Newell. No, I had not.
    Mr. King. Does it seem curious to you that a man that is so 
careful about making sure that there isn't a trail would leave 
a voicemail?
    Mr. Newell. The advice was similar to my own thought, and 
that is not a personal--or not wanting to make the speculation 
based on knowing his intent.
    Mr. King. Let me state, it seems curious to me, Mr. Newell.
    Mr. Newell. I understand.
    Mr. King. And do you have the sense now that you have been 
sold out?
    Mr. Newell. If I go by the language of the letter or the 
statement made by Miss Tracy, I believe, from the Department of 
Justice that that was a global resolution, I kind of count that 
as being, ``sold out'' or cut out of what was an actual deal 
that was made.
    So, in a sense of the word, her statement says they did 
make a deal, that they did have a global settlement, a global 
resolution. And I, you know, I have not been a party to that 
resolution at all.
    Mr. King. And, Mr. Newell, I can only imagine what it must 
be like to toil every day to help people the way you do in a 
number of different ways, multitasking to do so, and step into 
something like this, like this qui tam case. And impossible to 
anticipate that a very questionable legal theory called 
disparate impact could be a legal theory that would be so 
important to be defended that the interest of the taxpayers and 
the people in the community and those that you work for and 
represent should pay such a price to try to advance such a 
questionable legal theory. And I question whether justice ever 
comes from the levels that we have seen in this way.
    And so I just appreciate your testimony. And I hope and I 
pray that the energy that you put into the community and into 
helping the people you minister, that it is not drained away by 
these kind of confrontations, that it strengthened instead of 
weakened, and that you can go forward from this and look back 
on it being stronger and better. And I thank you for your 
contributions to your community and your country.
    And I yield back.
    Mr. Jordan. I thank the gentlemen.
    Mr. Newell, we want to thank you again for your courage in 
stepping forward and for the work you are doing in St. Paul to 
make life better for the families that you get a chance to 
interact with and minister to and work among.
    And, Mr. DeVincke, we want to thank you, as well.
    We will now move to our third panel. If staff could get the 
table ready for Ms. Slade.
    Mr. Nadler. Mr. Chairman?
    Mr. Jordan. The gentleman from New York. I've said that how 
many times, I wonder, today.
    Mr. Nadler. You will say it more.
    Mr. Jordan. I figured I would.
    Mr. Nadler. Mr. Chairman, before we start this third panel, 
I just want to note for the record my objection to this 
absolute travesty that you have perpetrated here today, in 
which the minority party's witness was not permitted to testify 
on the same panel. We have had 2-1/4 hours of that panel. 
Virtually none of the Republicans are here for the second 
panel--for the third panel, rather. Consequently, it will be a 
much shorter panel. And you have had 2-1/4 hours of one-sided 
presentation before----
    Mr. Jordan. If the gentleman would yield?
    Mr. Nadler. I will not yield.
    Mr. Jordan. If the gentleman wants 2-1/4 hours for Ms. 
Slade, he can have it.
    Mr. Nadler. Very good. We will take as much time as we 
think necessary because there are not--but the fact is, I have 
never seen in a committee of this House before where you had 
the one side's witnesses on one panel and the other witness on 
a subsequent panel.
    Mr. Jordan. Because you are not a member of the Oversight 
Committee. If you were, you would have seen it.
    And you used the word ``travesty.'' The travesty is what 
has been done to Mr. Newell. And--
    Mr. Nadler. Well, that is the subject of----
    Mr. Jordan. No, no, no, no.
    Mr. Nadler. That is the subject of the hearing that you 
will discuss.
    Mr. Jordan. No, you used the term ``travesty.''
    Mr. Nadler. About the committee hearing, not about the 
subject----
    Mr. Jordan. The travesty is families in St. Paul are not 
getting the kind of support they need, and now they will be 
continued to be denied that because this suit couldn't go 
forward. That is the travesty.
    Mr. Nadler. The subject matter----
    Mr. Jordan. And the travesty is Mr. Newell was supposed to 
testify a week ago in a Senate committee and he was denied his 
chance to tell his story.
    Mr. Nadler. The subject----
    Mr. Jordan. He needed a single panel to do that, and that's 
why we afforded him that opportunity.
    Mr. Nadler. The subject matter of the hearing, namely what 
went on in St. Paul and whether that is good or bad or 
indifferent, we have talked about for the last 2 hours, will--
--
    Mr. Jordan. Indifferent?
    Mr. Nadler. Wait, wait.
    Mr. Jordan. Minneapolis citizens you're indifferent about?
    Mr. Nadler. I'm certainly not indifferent. I'm saying 
whether that was good or bad or whatever, the merits of that we 
have talked about for the last 2 hours. We will continue 
talking about it in the next panel.
    What I'm saying was the travesty is not anything to do with 
the subject matter but the manner of conduct of this hearing. 
Totally unfair.
    Mr. Jordan. The longer the gentleman talks, the longer 
we'll have to wait for Ms. Slade to give her testimony.
    Ms. Slade, we want to thank you for joining us today on 
this all-important third panel.
    We'd ask that you stand up. We have the practice where 
witnesses need to be sworn. And stand up, raise your right 
hand.
    Do you solemnly swear to tell the truth, the whole truth, 
and nothing but the truth, so help you God?
    Ms. Slade. I do.
    Mr. Jordan. Let the record show that the witness affirmed 
the statement.
    And you are now recognized, Ms. Slade. You've been here, 
saw how this works, and you've probably testified in front of 
Congress before.
    Ms. Slade is a lawyer here in Washington, D.C.
    And you now have your 5 minutes.

    STATEMENT OF SHELLEY R. SLADE, PARTNER, VOGEL, SLADE & 
                         GOLDSTEIN, LLP

    Ms. Slade. Okay. Thank you.
    Good afternoon, Committee Ranking Minority Member Cummings, 
Subcommittee Chairmen Jordan and Franks, Ranking Minority 
Members Cartwright and Nadler, and members of the subcommittee. 
Thank you for the invitation to testify.
    I am here in my personal capacity as an attorney with more 
than 20 years' experience handling qui tam cases filed under 
the False Claims Act. For the last 13 years, I have been a 
partner in a law firm dedicated to the representation of False 
Claims Act whistleblowers. Before that, I spent 10 years in the 
Civil Division of the Department of Justice handling False 
Claims Act matters.
    I plan to address two issues. First, I will summarize the 
law and procedures that ordinarily govern the Department of 
Justice's decision-making process with regard to intervention 
in qui tam cases. Second, I will provide my perspective as a 
qui tam practitioner on the Department of Justice's decision to 
decline to intervene in the U.S. ex rel. Newell v. City of St. 
Paul lawsuit.
    The False Claims Act provides that a private party, 
referred to as a qui tam plaintiff, may bring a False Claims 
Act action on behalf of the United States by filing a complaint 
under seal and serving the complaint on the United States 
alone. After the government investigates the case while it 
remains under seal--and the investigation may last as long as 4 
or even 5 years--the United States must notify the court 
whether it will intervene in the case. In those instances in 
which the government declines to intervene, the qui tam 
plaintiff may proceed to litigate the case on their own under a 
private attorney general provision in the law.
    The Department has broad discretion in making its 
intervention decisions. As the U.S. Supreme Court held in 
Heckler v. Chaney, ``An agency's decision not to prosecute or 
enforce, whether through civil or criminal process, is a 
decision generally committed to an agency's absolute 
discretion.''
    The courts that have elaborated on this principle in the 
False Claims Act context have ruled that a Department of 
Justice decision on whether to pursue a qui tam case need bear 
no more than a rational relationship to a legitimate government 
purpose. Accordingly, courts have upheld even motions to 
dismiss qui tam cases, which is not at issue here, over the 
objections of the whistleblower, on grounds such as working to 
achieve peace among competitors, protecting national security, 
and conserving scarce law enforcement resources.
    As a matter of practice, when the Department of Justice 
decides whether to intervene, it relies heavily on 
recommendations from affected program agencies. Those 
recommendations often take into account the agencies' broad 
programmatic interests.
    Although this hearing is focused on Mr. Perez, this hearing 
is also implicitly examining whether it would have been 
improper or unusual for the Civil Division to take into account 
broad programmatic interests of the client agency in deciding 
whether to intervene in the Newell case.
    I would see nothing the least bit untoward or unusual if 
this, in fact, was the case. The Civil Division's decisions on 
intervention, by relying on program agency recommendations, 
often take into account the agency's broad policy concerns. 
Moreover, knowing, as I do, the clear managers who have 
overseen the False Claims Act work in the Department, I am 
confident that the Civil Division's actions were fully 
consistent with the law as well as ethical and professional 
obligations.
    With regard to the merits of the Newell case, it is 
surprising to me that the line attorneys originally recommended 
intervention. If my law firm had been contacted about taking on 
this case, we would have rejected it. Notwithstanding the 
apparent evidence that the city of St. Paul engaged in 
egregious regulatory violations and notwithstanding the 
commendable efforts of Mr. Newell to correct those infractions, 
the case, as a qui tam case, presents serious litigation risks.
    To be successful, a False Claims Act plaintiff must 
establish much more than violations of a regulation. Most 
courts hold that the plaintiff must demonstrate that the agency 
consider compliance with the regulation to be a prerequisite 
for or material to the payment decision. Yet, in the Newell 
case, there appears to be evidence that HUD, one, knew about 
the city's failure to submit required Section 3 reports; two, 
likely learned about the city's failure to comply with Section 
3 during the agency's annual reviews; and, three, on at least 
two occasions exercised a legal option to continue funding the 
city after having found that the city was out of compliance 
with Section 3.
    Learning of the factors that the Department of Justice may 
have taken into account in deciding whether to intervene in 
this case will not, in my judgment, deter whistleblowers or 
their counsel from bringing meritorious qui tam cases. Given 
the legal challenges, the equities, and the broader 
programmatic concerns, the Department's decision-making 
process, in my view, was fully consistent with its usual 
policies and practices.
    Thank you.
    Mr. Jordan. Thank you, Ms. Slade.
    [Prepared statement of Ms. Slade follows:]

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    Mr. Jordan. The gentleman from Pennsylvania is recognized 
for 5 minutes.
    Mr. Cartwright. Thank you, Attorney Slade, for coming here 
today and sharing your expertise. Unfortunately, you are the 
only qui tam expert we have heard from in the testimony today. 
We had Mr. Newell's attorney admit candidly that he is not a 
qui tam expert and a False Claims Act expert. So it is very 
important that we hear from your testimony today.
    Now, we did hear the chairman of the Judiciary Committee, 
Mr. Goodlatte, say on the record today that dropping the Newell 
case cost the U.S. Government over $200 million. Did you hear 
him say that?
    Ms. Slade. I did.
    Mr. Cartwright. Well, based on your review of the claims 
and the defenses in the Newell case, was this any $200 million 
case, counselor?
    Ms. Slade. Well, the first point to be made is that there 
are serious problems to establishing liability in the case, in 
my view.
    Second, even if liability were to be established, then 
there would be the question of establishing what the damages 
were. There are varying court decisions on how you measure 
damages in a case like this, where you have a service that's 
been delivered but regulatory noncompliance.
    I find it extremely unlikely that a court would determine 
single damages to be the $85 million figure.
    Mr. Cartwright. Okay. And so, unlikely that they were 
talking about a $200 million case here. But even beyond that, 
assume for the moment that it were a $200 million case, we are 
talking about money that would be coming from where? The city 
of St. Paul, is that right?
    Ms. Slade. That's right.
    Mr. Cartwright. And you also heard Mr. DeVincke, Mr. 
Newell's lawyer, candidly state on the record that a figure 
like that would have just bankrupted the city of St. Paul. Does 
that make sense to you?
    Ms. Slade. I don't know the particulars of the city's 
finances, but it sounds like a lot of money for a city to pay.
    Mr. Cartwright. In other words, anybody who suggests to the 
public at large that dropping the government's involvement in 
the Newell case cost the U.S. taxpayers money, we are talking 
about any $1 coming out of that case would have been coming 
from the taxpayers of the city of St. Paul. Am I correct on 
that?
    Ms. Slade. That's right.
    Mr. Cartwright. All right.
    Now, in this case, was Mr. Newell a whistleblower?
    Ms. Slade. I believe your question goes to whether the 
court had jurisdiction over the case in light of the public 
disclosure bar.
    Mr. Cartwright. Right.
    Ms. Slade. And there was, again, serious litigation risk on 
that front for this qui tam plaintiff.
    Mr. Cartwright. And the idea is that the public disclosure 
bar means that if you are bringing a False Claims Act case 
based on information that is available to the public at large, 
you don't have the kind of inside information that makes you a 
whistleblower. Am I getting that right?
    Ms. Slade. Well, there is an exception to that bar for 
somebody with direct and independent knowledge who is 
considered an original source.
    Mr. Cartwright. Right.
    Ms. Slade. That can be a difficult standard to meet in 
these cases. And, generally, you need to be an insider, 
although not always.
    Mr. Cartwright. So did you hear anything or read anything 
about this case that would have qualified Mr. Newell for that 
exception?
    Ms. Slade. I think he had challenges to meeting that 
standard, serious challenges.
    Mr. Cartwright. So that if anybody mentions this Newell 
case as if it is a whistleblower case and he is to be the 
commended for coming forth with his secret, inside information, 
and saving the American taxpayers money thereby, there is 
nothing to that at all, is there?
    Ms. Slade. Well, the points you made, I think, overlap to 
some degree with the problems of liability, because you have a 
situation here where HUD did learn--should have known all along 
but did eventually learn and decided to employ a voluntary 
compliance agreement as the remedy. And the court would not 
ignore that and may well have considered that in connection 
with the public disclosure decision without articulating it.
    Mr. Cartwright. Thank you, Ms. Slade.
    Now, another point that you brought up was the discretion 
of the Department of Justice Civil Division to pursue broader 
policy goals. Did you talk about that?
    Ms. Slade. Yes.
    Mr. Cartwright. And that's the biggest point of all here, 
is that the United States Department of Justice and the people 
who run it do have the unfettered discretion to pursue broad 
policy goals of the administration, do they not?
    Ms. Slade. That's right. They are representing the program 
agencies.
    Mr. Cartwright. And are you aware of any restriction placed 
upon the Department of Justice from managing its litigation 
docket in a way that will promote its policy and broader goals 
of the administration?
    Ms. Slade. I am not.
    Mr. Cartwright. That's the most important answer all day. 
Thank you, counselor. Appreciate it.
    I yield back.
    Mr. Jordan. I thank the gentleman.
    The gentleman from Arizona, the chairman of the 
Constitution Committee, is recognized.
    Mr. Franks. Well, thank you, Mr. Chairman.
    And thank you, Ms. Slade, for being here.
    Ms. Slade, you have testified that you would not have 
recommended intervening in Mr. Newell's case if you had 
reviewed it. And, certainly you are entitled to that opinion.
    However, career attorneys at DOJ and HUD did disagree with 
your assessment. On November 22nd, 2011, the Civil Frauds 
section drafted a formal memo recommending intervention and 
outlining the reasons. The memo found that, ``The City of St. 
Paul was required to comply with the statutes. Our 
investigation confirms that the City failed to do so.'' The 
memo further stated that, ``We believe that its certification 
of Section 3 compliance to obtain HUD funds were actually more 
than reckless and that the City had actual knowledge that they 
were false.''
    Thus, as of November 22nd, 2011, HUD and the Civil Frauds 
section and the U.S. Attorney's Office in Minnesota all 
strongly recommended intervention in Mr. Newell's case. There 
is no documentation that they viewed the case as marginal or 
even a close call. Indeed, last week, the highest career 
official at HUD to have reviewed the case stated to committee 
investigators in a transcribed interview that he still stands 
by his original recommendation that HUD should have recommended 
intervening in the case.
    So, after reviewing all of the evidence in this matter, it 
is clear that the only factor, at least from my perspective, 
that the only factor that led to the government declining to 
intervene in this case was Mr. Perez's desire to have the 
Supreme Court not hear the Magner disparate impact case.
    So my question to you is, while you were an attorney at the 
Justice Department, did you ever provide evidence to a False 
Claims Act defendant to help that defendant win a motion to 
dismiss on public disclosure bar grounds?
    Ms. Slade. No.
    Mr. Franks. Would it have been appropriate for you to have 
shared such information?
    Ms. Slade. I haven't researched that question. I don't know 
the answer.
    Mr. Franks. Okay. You contend, Ms. Slade, that Mr. Newell 
undermined the False Claims Act because the district court 
determined that he was not the original source of the 
allegations in this complaint; is that correct?
    Well, either way----
    Ms. Slade. Yeah, it was that he had litigation risks, 
serious litigation risks on that front.
    Mr. Franks. Okay. And in United States ex rel. Lisitza v. 
Johnson & Johnson, the district court determined that your 
client was not the original source of the allegations and that 
your client's complaint ``simply adds a sprinkle of factual 
garnish,'' to the original--to the true original source's 
allegations.
    So, you know, there is a dual issue here. It sounds like 
you are guilty of what you've accused Mr. Newell of doing.
    Ms. Slade. You mean--I'm not sure I follow.
    Mr. Franks. Well, your client in this stated case was not 
the original source of the allegations, and that your-- the 
court said this, that your client's complaint, ``simply adds a 
sprinkle of factual garnish'' to the true original source's 
allegations.
    In fact, in Mr. Newell's case, he was the only one pursuing 
an FCA case against the city of St. Paul. In your case, your 
client was kind of attaching himself to the complaint of 
another whistleblower who was already pursuing a case on behalf 
of the United States. So help me understand the conflict here.
    Ms. Slade. Okay. Well, I will say that we disagree with the 
court's decision, but that litigation has not yet been 
resolved, so it is not appropriate for me to comment on it.
    Mr. Franks. Okay. All right.
    Your written testimony notes that--well, I'm afraid my time 
has expired. Maybe--no, I'm sorry, I'm looking at the wrong 
button here.
    Your written testimony notes that during the congressional 
investigation of this matter, the former Deputy Assistant 
Attorney General, Michael Hertz, who was widely considered at 
the time to be the government's preeminent expert on False 
Claims Act, was quoted, to use his term, was quoted as saying 
this case sucks. You add that this, ``opinion does not surprise 
you.''
    During the investigation, Hertz was also quoted as saying, 
``It looks like buying off St. Paul.'' Does that surprise you?
    Ms. Slade. That he would have said that?
    Mr. Franks. That he would have said--do you think that he--
what is your perspective of his perspective?
    Ms. Slade. Well, I will just state generally that the first 
comment, I think, is a very important one to focus on because, 
as I understand it, it was said early on when the intervention 
memo first came up, the memo recommending intervention. 
Apparently, he confided in his deputy, Joyce Branda, that he 
felt that the case sucks. And knowing, having worked with and 
for Mike for 10 years, he was to the point----
    Mr. Franks. It sounds like that's something he might say.
    Ms. Slade. And when I asked him----
    Mr. Franks. But when he said, ``looks like buying off St. 
Paul,'' what is your perspective on that?
    Ms. Slade. I have no----
    Mr. Franks. Was he confused?
    Ms. Slade. I wasn't in that meeting. I can't be a witness 
on that topic.
    Mr. Franks. No, I understand.
    Ms. Slade. Yeah.
    Mr. Franks. All right. Well, thank you, Ms. Slade.
    And, Mr. Chairman, I would just suggest to you that the 
bottom line here is that Mr. Perez intervened in a case, and 
the result was that the people of St. Paul were ill-served and 
so was this country. And, ultimately, it was to save a false 
process of the court to indicate that disparate impact--that he 
knew that this was going to be in trouble before the court, and 
I believe that's why he did it. And I think that's the real 
issue here.
    And, with that, I yield back.
    Mr. Meadows. [Presiding.] I thank the gentleman, and he 
yields back.
    And the chair recognizes the gentleman from Michigan, Mr. 
Conyers.
    Mr. Conyers. Thank you, Chairman Meadows.
    We welcome your testimony here today. You've been very 
patient in waiting your turn.
    And you said that there may be a concern about the 
potential public disclosure problem. Would you describe that a 
little bit for me, please?
    Ms. Slade. Sure.
    Well, the False Claims Act, at the time when the misconduct 
in this case occurred, the alleged misconduct, had a public 
disclosure provision that provided that a court lacked 
jurisdiction over a qui tam action if it was based on matters 
that had been publicly disclosed in various forums--the media, 
litigation, administrative proceedings.
    The exception to that bar is where the whistleblower is an 
original source of the information, in that he or she has 
direct and independent knowledge of it and has gone to the 
government before filing suit.
    Mr. Conyers. Uh-huh.
    Now, even if a lot of allegations here are true, even if 
the Newell and Ellis cases were appropriate for intervention, 
even if the Associate Attorney General actively sought to 
decline intervention in these cases in exchange for the city's 
withdrawal of Magner, would anything illegal or improper have 
occurred under those circumstances in this case, in your view?
    Ms. Slade. I don't know of any law or rule of ethics that 
would have prohibited the Department of Justice from acting as 
a single entity taking into account and coordinating among its 
components to get the best possible outcome for the United 
States.
    Mr. Conyers. Uh-huh.
    Ms. Slade. It seems to me that that's what happened here.
    Mr. Conyers. Thank you.
    Now, in the Department of Justice for a decade or longer, 
can you give me an idea of the professionalism of the Civil 
Litigation Division when these False Claim Act cases arise?
    Ms. Slade. Sure. I worked closely, as I mentioned, with 
Michael Hertz, who sadly passed away about a year ago, and with 
Joyce Branda, who had always been his number two. The two of 
them not only are extremely capable and experienced--I think 
Mike Hertz handled False Claims Act matters for about 30 
years--they also have impeccable integrity. They are selfless 
public servants. And I can't imagine that a final decision on 
this case would have been made in anything but the most ethical 
fashion.
    Mr. Conyers. I thank you so much for your response to these 
questions and commend you for being our most effective witness 
here so far. And I----
    Mr. Connolly. Would my colleague yield?
    Mr. Conyers. Surely.
    Mr. Connolly. I thank my colleague.
    I just want to say, Ms. Slade, look around. There is 
obviously a reason why you were not put on the second panel. 
And the press, of course, got the story they wanted, so 
apparently your testimony, expert testimony, isn't really 
important.
    Most of my colleagues on the other side of the aisle that 
had plenty to say in terms of assassinating the character of 
the pending Department of Labor Secretary are all gone, because 
why would they want to hear from an expert? They would rather 
hear from some poor soul and his erstwhile lawyer who has zero 
experience in this endeavor so that they can make a case 
against an honorable man yet again.
    And I say to my colleague, Mr. Nadler, on the Judiciary 
Committee, I'm very pleased to see you shocked. Unfortunately, 
it is de rigueur here at the Oversight and Government Reform 
Committee, travesty upon travesty in terms of sham hearings to 
assassinate someone's character or to make some blatant 
political point rather than actually try to get at the truth.
    I apologize to you, Ms. Slade, for the fact that you had to 
wait for the third panel and, of course, you have so little by 
way of audience here at the committee.
    Mr. Conyers. Do you yield back to me?
    Mr. Connolly. I'm very pleased to yield back to you, Mr. 
Conyers. And thank you for letting me have my moment.
    Mr. Conyers. Well, my pleasure, indeed.
    I want to associate myself with the shock that you ascribe 
to Mr. Nadler. And I thank you very much for your testimony.
    Is there anything you would want to add in this discussion?
    Ms. Slade. No. Thank you for the opportunity to testify.
    Mr. Conyers. Thank you.
    I yield back, sir.
    Mr. Meadows. I thank the gentleman from Michigan.
    And the chair reserves his time, 5 minutes, for later and 
will defer to the gentleman from Nevada.
    Mr. Horsford. Thank you, Chairman Meadows, and to the 
committee.
    I also want to express my disappointment in how this 
hearing has been conducted. You know, I'm a freshman, but I 
still read the rules, and Rule XIV(c) says that a ranking 
minority member of the full committee shall select a ranking 
minority member for each panel. And that is in the rules. And 
that was not followed today. And now we are on the third panel, 
and you did not have an opportunity to bring forward the 
minority's perspective in the course of this debate until now. 
So that's unfortunate, and it is clearly politically motivated 
by the majority side.
    And we also have two chambers. And I didn't believe that 
it's the House of Representatives that is involved in the 
confirmation process, but that's reserved for the Senate. But 
apparently some Members of the House believe it's their job to 
do everything.
    I would like to ask Ms. Slade here, you know, the 
Republicans have made numerous allegations that there is 
something improper about the Department of Justice considering 
broader interest of the United States in its intervention 
decision in a False Claims Act case. As someone who has been at 
the Department of Justice and represented whistleblowers and is 
an expert on the False Claims Act in general, let me ask you: 
Is there anything unethical or improper in what the Department 
of Justice did in this broader interest?
    Ms. Slade. I don't see anything unethical or improper about 
considering broader programmatic interests of the client 
agencies in a decision on a qui tam case.
    And I also did want to point out that I believe it may have 
been gratuitous to even reference the fact that the Supreme 
Court petition for cert was being withdrawn as a factor in the 
memo recommending declination. I think it may well be the case, 
based on what I know of Mr. Hertz' views on cases and the legal 
risks in this case that the Department of Justice, when the 
decision got up to his level, that they were going to be 
declining. And he is a career manager.
    I think it may well be that they were going to decline the 
case anyway, so that that reference being in there was in there 
for full transparency, that there had been discussion about it, 
but it was not necessary to the decision.
    Mr. Horsford. Okay. In fact, as you explain in your written 
testimony, ``In the False Claims Act, Congress did not dictate 
to the U.S. Department of Justice the criteria it should employ 
in making this intervention determination. Every single court 
that has looked at the issue has emphasized the broad 
discretion vested in the Department of Justice to decide what 
is in the best interest of the United States in making its 
enforcement decisions.''
    That is the law; is that correct?
    Ms. Slade. Yes.
    Mr. Horsford. And so let's also indicate what Professor 
Stephen Gillers, who has taught legal ethics at the New York 
University School of Law since 1978, examined the Republicans' 
allegations. Professor Gillers identified, ``no authority to 
support the notion that such a consideration is unethical.''
    And Mr. DeVincke is no longer here, so I can't ask him the 
question that I had for him.
    But, Ms. Slade, on February 9th, 2012, a Department of 
Justice memo signed by Tony West authorizing the government to 
decline intervention transparently refers to Magner v. 
Gallagher as a factor in the Department of Justice's decision-
making. It reads, ``The city has indicated that it will dismiss 
the Gallagher petition, and declination here will facilitate 
the city's doing so. Under the circumstances, we believe this 
is another factor weighing in favor of declination.''
    Ms. Slade, is there any problem that you are aware of in 
law or legal ethics with linking two cases in the interest of a 
single client?
    Ms. Slade. No.
    Mr. Horsford. So then the entire spectacle that we have had 
here today basically, unfortunately, using Mr. Newell as a 
pawn--you know, I would really take objection to so many 
Members who claim that they are concerned about the interests 
of low-income families.
    When I read about what was happening in St. Paul and with 
some of the landlords here, you literally had them bringing 
suits against the city rather than bringing their units up to 
code. That's the part of this hearing that was not discussed. 
One landlord plaintiff was so negligent about addressing a rat 
infestation that his tenant resorted duct-taping rat holes in a 
failed attempt at containment.
    So if you want to fix something, let's fix that, and stop 
making false allegations against members of the public service.
    Thank you, Mr. Chairman.
    Mr. Jordan. I thank the gentleman.
    I'd just point out, the declination statement with the 
reference to Magner was put in there even though Mr. Perez said 
he didn't want it in there because, I mean, it seems obvious to 
me that the career attorneys at Justice said, we've got to 
include that, this is what this is all about. That's why they 
put it in there.
    Ms. Slade, we understand that you are affiliated with an 
organization called Taxpayers Against Fraud?
    Ms. Slade. That's right.
    Mr. Jordan. Is that accurate? Are you testifying on behalf 
of Taxpayers Against Fraud today?
    Ms. Slade. No, I'm not.
    Mr. Jordan. Why not? Did they tell you not to do that, or 
did you ask if I could testify on their behalf, or----
    Ms. Slade. I was asked to testify in my personal capacity. 
There was never any discussion of testifying on----
    Mr. Jordan. Are you on the board of that organization?
    Ms. Slade. I am, yeah.
    Mr. Jordan. Okay. But they didn't give you any instructions 
about coming here today?
    Ms. Slade. No, they did not.
    Mr. Jordan. Okay. Thank you.
    Let's put up the--we have--we got this yesterday. I mean, 
we've been asking for documents for a long time, but we----
    Ms. Slade. Actually, Mr. Jordan, could I correct my 
statement?
    I did inform Taxpayers Against Fraud staff that I would be 
testifying. And I did ask a factual question or two of them, 
and I did get back answers to my factual questions.
    However, I contacted them having accepted the invitation to 
testify already----
    Mr. Jordan. Oh, okay.
    Ms. Slade. --without any communication before I accepted 
the invitation.
    Mr. Jordan. In that communication that you had with the 
staff people at Taxpayers Against Fraud, which you are a board 
member of, in any of that communication did they tell you, you 
know what, we wish you weren't testifying on this situation, 
this case? We wish you weren't going to this hearing and 
testifying?
    Ms. Slade. I'm----
    Mr. Jordan. It's a pretty simple question.
    Ms. Slade. No, I know, I know----
    Mr. Jordan. Did they say to do it or not do it? Did they 
say, you know, we wish you really weren't doing that, we are 
supposed to represent fraud, there is obviously fraud that 
occurred here, as evidenced by the memo----
    Ms. Slade. I believe I got a communication that they 
thought it was a politically motivated investigation and 
hearing and that I shouldn't expect it to be really about the 
merits of the issues.
    Mr. Jordan. What?
    Mr. Nadler. And they were correct, obviously.
    Ms. Slade. You asked a question.
    Mr. Jordan. Okay, well, I want to get to the--not a 
politically motivated thing--I want to get to the--this is from 
U.S. attorneys from St. Paul who came to Washington, gave a 
PowerPoint in front of main Justice. And let's just go the last 
page, the conclusions. ``The city has long been aware of its 
obligation under Section 3. The city repeatedly told HUD and 
others that it was in compliance with Section 3. The city has 
failed to substantially comply with Section 3.''
    So I guess I want to go back with you. In fact, let's go 
back to the very first slide. So we've got this--we've got U.S. 
attorneys from St. Paul, from Minnesota, flying to main Justice 
saying, you know, it is a strong case.
    Let's go back to the very first slide I had up back in--
slide 1, if we could.
    I want to go back to where I was with Mr. Newell and Mr. 
DeVincke in the last--it is not just Justice or HUD or the 
folks in St. Paul. It's Justice, the U.S. attorneys in St. 
Paul, and HUD. Everyone recommends they intervene.
    Slide 2. ``We recommend intervening in this action to 
assert a False Claims action in common law claims against the 
city.''
    Slide 3. You even used this in your testimony. I think this 
is where we talk about ``egregious.'' Is this the one, the 
slide that talks about ``egregious''? I guess that's the next 
one. ``The city knew about its obligation and failed to 
comply.''
    Here, slide 4, they use the same term you used in your 
testimony. ``This is a particularly egregious example of false 
certifications.''
    So, I mean, this is pretty strong, Ms. Slade. And I know 
you have a background in this and you are the expert and all, 
but it seems to me a reasonable person would look at all of 
this, U.S. attorneys flying to D.C. saying, look, they didn't 
comply, here is a PowerPoint presentation. Everyone agrees, 
attorneys in Minnesota, attorneys at HUD, attorneys at Justice, 
everyone agrees, even Ms. Slade, the expert, agrees it is 
egregious and we should proceed.
    And then the one thing that happens, the only thing I can 
see, maybe there is something else, but the one big event that 
happens between all this communication and the sudden change of 
heart is Mr. Perez gets on an airplane, personally flies to St. 
Paul, and suddenly everything changes.
    And you say, oh, this is common practice. It is common 
practice for everyone to agree, for U.S. attorneys to fly to 
Washington, make a PowerPoint presentation, HUD attorneys, U.S. 
Attorneys in Minnesota, folks at main Justice, everyone agrees, 
let's go forward. In fact, they communicated that to Mr. Newell 
and his counsel: This is a strong case, we are going to 
intervene, we are going to move forward. Mr. Newell is excited 
because he doesn't want to personally benefit from this; he 
just wants to help the people in St. Paul.
    And then suddenly things change. And the only thing I can 
see that could cause that is Mr. Perez flying to St. Paul, a 
closed-door meeting. Everything changes after that meeting on 
February 3rd, 2012.
    Ms. Slade. Well, I guess in response I will say that my use 
of the word ``egregious'' was with respect to the violations of 
Section 3, not with respect to violations of the False Claims 
Act----
    Mr. Jordan. No, that's how they used it, too.
    Ms. Slade. --and there is a difference.
    Mr. Jordan. I understand that.
    Ms. Slade. That's right.
    Mr. Jordan. That's how they used it in the memo.
    Ms. Slade. Yeah.
    Mr. Jordan. I can read the memo.
    Ms. Slade. Right.
    And in terms of everybody being on board, you failed to 
mention a key player, and that is Michael Hertz. It was going 
to be Michael Hertz' decision and then, above him, the decision 
of Tony West. And Michael Hertz is the first----
    Mr. Jordan. Well, then why did Perez have to fly to St. 
Paul? Why didn't Michael Hertz fly to St. Paul? Why didn't Tony 
West?
    Ms. Slade. I don't know the answer to that.
    Mr. Jordan. Oh, well, you just said those are the guys who 
made the decision. But all I know is the guy who flew to St. 
Paul, got in a closed-door meeting, and then everything changed 
a week later, it wasn't Michael Hertz or it wasn't Tony West. 
It was--oh, it was Mr. Perez. Imagine that.
    Ms. Slade. I think there is a good bit in the record about 
the view--first of all, even the memo recommending intervention 
identifies some fairly serious possible defenses that could be 
made by the city of St. Paul.
    Mr. Jordan. Well, they knew--these are--you worked at 
Justice, right? You are one of the--you know these lawyers. 
They are good, smart people. They had 2-1/2 years, and they all 
said, let's intervene. Suddenly they didn't think of that 
until--oh, I get it. Tom, he is so smart, he is the only one 
who thought about, you know what, there's some problems, and 
I'm going to get on a plane and I'm going to fly to St. Paul 
and we are going to change everyone's mind.
    Is that how it happened? It probably doesn't work that way 
normally at Justice, does it?
    Ms. Slade. These----
    Mr. Jordan. Does it? No, is that the normal practice? One 
guy flies to St. Paul and everything changes?
    Ms. Slade. I disagree with your characterization of what 
the record indicated----
    Mr. Jordan. No, you indicated that there were problems with 
the case, and what I said is, well, then why did everybody? You 
know, you would have a point if two of the three, if the 
attorneys in Minnesota said we want to intervene, and the folks 
at HUD said we want to intervene, but then the career folks at 
Justice, main Justice here in Washington, said, you know what, 
we don't think so, there's problems with the case.
    Ms. Slade. Either----
    Mr. Jordan. Or if it was HUD who said, you know what--the 
other two said we want to intervene, and HUD says, no, we don't 
want to do that, you would have a point.
    But when everybody, every single expert career attorney who 
looks at this says we need to intervene--and the two folks you 
said who make the decision, they don't show up in the 
narrative, they are not flying to St. Paul. It is only Mr. 
Perez.
    Ms. Slade. There are instances from time to time, and I 
have heard of instances in the past year and before, where----
    Mr. Jordan. Time to time, and you've heard of them. We 
don't want time to time, we don't want you've heard of them.
    Mr. Nadler. Could you let her answer instead of 
interrupting her all the time, sir?
    Mr. Jordan. I think, Mr. Nadler, I'm the chairman, and I 
can ask the questions the way I want to ask the questions.
    Mr. Nadler. Let her answer the question instead of 
interrupting her five times in one sentence.
    Mr. Jordan. I will. I will let her answer.
    Mr. Nadler. You want to be civil, but it's getting 
incredible here.
    Mr. Jordan. Well, you used the term ``civil.'' You've 
interrupted more people in this hearing than any other member 
of the committee.
    Ms. Slade, you can--Ms. Slade, you can proceed.
    Ms. Slade. Yeah, I was just going to say, the Deputy 
Assistant Attorney General for the Civil Division does not 
serve as a rubber stamp. The person filling that role does from 
time to time overrule, reject the decisions, the 
recommendations coming from below and make the decision on 
their own----
    Mr. Jordan. Which begs my question again. Why didn't that 
person, if it was such a close call, why didn't that person, 
who you just cited, who from time to time overrules, why didn't 
that person get on an airplane, fly to St. Paul, meet with the 
attorneys at St. Paul, and cut the deal that way?
    Ms. Slade. Well, that person was Mike Hertz. My 
understanding is he did say the case sucks when he first saw 
the memorandum seeking authority to intervene. So that was his 
first opinion of the case, and he was really the ultimate----
    Mr. Jordan. Still gets to the question. Why didn't he fly 
to St. Paul, then? If he is the guy making the call, why didn't 
he do it? Why does Mr. Perez have to step in and do it?
    Ms. Slade. I don't know.
    Mr. Jordan. Okay. Any further questions for our witness?
    Mr. Horsford. Been going to over 2 hours.
    Mr. Jordan. Mr. Nadler, I thought you had been recognized. 
I had to step out.
    The gentleman from New York is recognized.
    Mr. Nadler. Thank you.
    Ms. Slade, in your written testimony, you comment on the 
memorandum from all these slides today. And you quote some of 
what the slides show, and then you say, ``These conclusions by 
the staff--which ironically are set forth in the original 
memorandum recommending intervention--in and of themselves 
would have been more than an adequate basis to recommend 
declination during the 10 years which I handled qui tam cases 
and health care fraud policy matters for the United States and 
Civil Division of the U.S. Justice Department,'' Why?
    Ms. Slade. There were serious problems with the case in 
terms of establishing whether compliance with the Section 3 
regulations was a condition of payment, which the courts, most 
of the courts require. There are serious problems with 
establishing that compliance with those Section 3 requirements 
was material to HUD's payment decisions. And particularly 
relevant here is the fact that HUD, when it learned of the 
problem, worked out a Voluntary Compliance Agreement. That was 
their solution, to continue financing the city nonetheless. But 
the optics of that and the law are not favorable for the qui 
tam plaintiff.
    Mr. Nadler. So these factors are factors which would lead a 
rational, knowledgeable, experienced attorney to say this isn't 
a winning case and we shouldn't do it. Right?
    Ms. Slade. That would have been my recommendation at the 
time.
    Mr. Nadler. Thank you.
    Now, secondly, Mr. Jordan, the distinguished gentleman from 
Ohio, showed us a bunch of slides. And he said, well, all the 
attorneys decided we should,--you know, we have to do this, and 
Mr. Perez overruled it.
    Wasn't it the case that it was more that these were written 
by rather junior attorneys in the division and that the more 
senior attorneys, namely Ms. Branda and Mr. Hertz and perhaps 
others routinely overrule more junior attorneys when it comes 
time to review such things and that they did so in this case 
and that they decided that the case ought to be declined on the 
merits of the case?
    Ms. Slade. From time to time, the deputy assistant attorney 
general would overrule the recommendations coming from below.
    Mr. Nadler. Not the deputy attorney general. Isn't Mr. 
Hertz a career attorney?
    Ms. Slade. He was the deputy assistant attorney general----
    Mr. Nadler. Okay. So senior career attorneys from time to 
time will overrule junior career attorneys on the merits of 
whether it makes sense as a legal matter to bring a case.
    Ms. Slade. Of course.
    Mr. Nadler. And did so in this case.
    Ms. Slade. That is my understanding.
    Mr. Nadler. So the senior attorneys in the division, which 
division was it--Civil Division, not Mr. Perez' division--in 
the Civil Division, they decided that, based on the merits of 
the case, the case should be declined. Correct?
    Ms. Slade. Well, my understanding that there was reference 
to the Supreme Court on the petition for cert as a factor that 
was stated in the----
    Mr. Nadler. But they also declined it on the merits of the 
case.
    Ms. Slade. They looked at the merits as well.
    Mr. Nadler. Now, let's assume that that wasn't the case. 
Let's assume--well, before I get to that. Do you think it is 
accurate to describe the decision not to intervene in Mr. 
Newell's case as hanging him out to dry or leaving legitimate 
whistleblowers twisting in the wind?
    Ms. Slade. I don't agree with that characterization.
    Mr. Nadler. Because?
    Ms. Slade. First of all, I think the case has, as I 
mentioned, serious litigation risks. Secondly, there is the 
private attorney general provision. And if one files a qui tam 
lawsuit, one can't expect the government to intervene, even if 
it is meritorious. There may be resources at issue. Other 
reasons. So one has to be prepared to go forward if the facts 
and the law appear at the time of declination to be the same as 
they were when you first filed your case.
    Mr. Nadler. And the fact that, according to Mr. Newell, the 
Department of HUD had told him--I think he said that they would 
proceed with this case, that doesn't bind the Justice 
Department or make it--or give them not the right but the--the 
right to rely on that before it gets to the Justice Department?
    Ms. Slade. The department of Justice makes the decision on 
litigation in fraud cases. And the HUD lawyers are not as 
experienced in False Claims Act matters as the Justice 
Department officials.
    Mr. Nadler. And Senator Grassley expressed his concern that 
whistleblowers would be discouraged from bringing cases because 
of Mr. Newell's experience. Do you share his concern?
    Ms. Slade. I do not. I have the greatest respect for 
Senator Grassley, and all he has done for the False Claim Act 
and whistleblowers. On this particular issue, I beg to differ. 
I don't think that any competent qui tam attorney looking at 
the--this matter closely would be deterred, nor would their 
clients.
    Mr. Nadler. So any characterization, which is what we heard 
all day today, of Deputy Attorney General Perez selling out--
well, let me ask a different question.
    The people of St. Paul were allegedly sold out by 
attorney--Deputy Attorney General Perez. They were sold out 
from the possibility of having to pay a lot of money in damages 
out of their tax base. I don't understand that. Could you--if 
this suit had proceeded, if the Federal Government had 
intervened, had not declined and had won, what would have been 
the results to the citizens of St. Paul? Would they have had to 
pay a lot of money to somebody else?
    Ms. Slade. Yeah. I would think that it would have come out 
of their taxes, yes. I think that they would have been the ones 
to suffer. It wasn't as if the case was against a Boeing or a 
Pfizer or a private entity that had unduly profited as a result 
of fraud.
    Mr. Nadler. So there is no way of saying that the people of 
St. Paul were injured by not having to defend a case which had 
they lost would have cost them as taxpayers a lot of money.
    Ms. Slade. I believe that is right.
    Mr. Nadler. Thank you.
    Lastly, let me just ask this. Let's assume that all this 
weren't the case. Let's assume that the case had--that the--
that all this weren't the fact. Let's assume that the--Mr. 
Newell's case was strong on the law, instead of having many 
litigation risks. Let's assume that it was a meritorious case. 
And it may be a meritorious case, but let's assume there were 
no problems with the case. And that on the merits, the 
Department of Justice might have--will have not declined the 
case, but that the attorney general or deputy attorney general 
decided as a matter of policy that rather than proceed with the 
Magner case, it was worth trading off this. Is that within the 
purview of the proper exercise of discretion of the department 
to make such decisions? And if it made such a decision--which, 
again, it is a hypothetical that this case, in fact, had a lot 
of merits, which it apparently didn't, and didn't have a lot of 
litigation risk, which apparently it does--would there be 
anything improper, improper, illegal, unethical with the 
department deciding this one is more important than that one?
    Ms. Slade. Well, I think that gets us back to the case law 
that I mentioned in my written testimony and oral testimony. In 
the context of government motions to dismiss qui tam cases over 
the objections of a whistleblower, which is a far more extreme 
action than merely declining to intervene, in that context, the 
courts have said the Department of Justice has unfettered 
discretion in making that decision. And several courts, several 
courts of appeals have elaborated on that and said, as long as 
the decision has a rational relationship to a legitimate 
government purpose, the government may even dismiss a case----
    Mr. Nadler. And it is certainly a legitimate government 
purpose, whether you agree with it or not, to avoid taking 
something to the Supreme Court, which the decision maker thinks 
may get a result that he thinks is damaging to the United 
States.
    Ms. Slade. I would agree with that.
    Mr. Nadler. Okay. So, to summarize, to summarize, number 
one, the Newell case--Newell is not a whistleblower, although 
he was a legitimate qui tam complainant because of the public 
disclosure bar, one; two, his case had major legal problems 
associated with it that could--that could cause and in your 
experience would have caused senior litigation attorneys in the 
Department of Justice to say we should not get involved in this 
case; three, the decision to do so was basically made on the 
merits by senior litigation--by senior people in the Civil 
Division, namely Mr. Hertz and Ms. Branda, concurred in by the 
assistant attorney general; four, that it is common or 
oftentimes that the senior litigation--that the senior 
attorneys in the department will overrule the junior attorneys 
who wrote the memos and slides that we have seen; five, that 
there is nothing improper about their doing so; six, that there 
is nothing improper about the attorney general agreeing with 
them; and, seven, that even if that all--if all that weren't 
the case--oh, seven, that by doing so, they weren't hurting the 
citizens of St. Paul, who were evading--avoiding, I should say, 
not evading--avoiding thereby a possibility of having to pay 
higher taxes because of a huge penalty against the City; eight, 
that Mr. Newell, who is sympathetic and doing the right thing 
here nonetheless had no right to expect that the Federal 
Government would intervene in the case; and, finally, that even 
if all this weren't the case, it is within the proper 
discretion of the Justice Department to decide that it is 
better to have a--to--to not decline--to decline in this case 
so as to get a result in that case or not to get a result in 
that case if that is indeed the tradeoff, and there is nothing 
immoral or unethical about that. Have I summarized your 
testimony correctly?
    Ms. Slade. That was a fairly long question. And I agree 
with most of what you said. I did write notes on a couple areas 
that I would phrase a little differently. With regard to the 
public disclosure issue, I think Mr. Newell had litigation 
risk, is the way I would put it. I wouldn't say categorically 
that he definitely is not qualified to bring a False Claims Act 
case. With regard to the career Department of Justice managers, 
I would say that from time to time, they will object----
    Mr. Nadler. Overrule.
    Ms. Slade. --to a recommendation coming from below. I 
wouldn't say commonly.
    Mr. Jordan. Can I just pick up there real quickly? Then I 
will yield to Mr. Meadows.
    You said, ``from time to time.'' How often does that 
happen? I mean, you got unanimous, everyone says let's 
intervene, let's proceed. How often does it happen? Time to 
time. Mr. Nadler tried to get to you confirm his ``routinely.'' 
You stuck with ``time to time.'' What does that mean? 10 
percent? 80 percent?
    Ms. Slade. I can't give you a precise number. I just know I 
hear of it from time to time.
    Mr. Jordan. Your practice. You worked there. How often was 
it done?
    Ms. Slade. I worked there 13 years ago.
    Mr. Jordan. But you worked there. That is why I am asking 
how often is it typically done?
    Ms. Slade. Very rough guess. Very rough. I mean----
    Mr. Jordan. Let me ask you this----
    Mr. Nadler. Let her answer.
    Mr. Jordan. I think she is going to say ``time to time'' 
again.
    I want to yield to Mr. Meadows, too.
    Mr. Nadler. You said a rough guess, and she was about 
answer your question.
    Mr. Jordan. Give me the answer, then. Rough guess is what 
percentage?
    Ms. Slade. Okay. Well, first of all, the way things work is 
that ordinarily you have a dialogue before you send your memo 
up. And sometimes in that dialogue, you will learn that your 
supervisors aren't on board or have serious questions about 
your analysis. So sometimes that dialogue will result in your 
going down a different path.
    Mr. Jordan. Well, we are way past that on this.
    Ms. Slade. Right. In terms of the actual memo be prepared 
and being--going up the chain and then coming back without 
approval, when I was--it is very hard to place a number on it. 
But I would say maybe 1 out of 30, 1 out of 40.
    Mr. Jordan. That few a times.
    Ms. Slade. That is a rough guess. It is a guess, nothing 
more.
    Mr. Jordan. When you say ``from time to time,'' it is like 
very rarely. Right?
    Ms. Slade. I don't know how you--that number is a guess. It 
could be----
    Mr. Jordan. One out of 30.
    Ms. Slade. Yeah. It is a guess.
    Mr. Jordan. I thought 1 out of 10, 10 percent--like 1 out 
of 30.
    Ms. Slade. I could qualify that. I was not----
    Mr. Jordan. Mr. Nadler wants to make 1 out of 30 routine.
    Mr. Nadler. She wants to qualify.
    Ms. Slade. I was not a reviewer at the departments, so I 
didn't see----
    Mr. Jordan. You are the expert and you just said 1 out of 
30. Mr. Nadler says, that is routine. You say 1 out of 30 is 
time to time. We are now saying----
    Now let me ask you this way: One out of 30 times that it 
gets overturned, how many of those 1 out of 30 take 3 years?
    Ms. Slade. Again, 1 out of 30 is a guess. With regard to 
the----
    Mr. Jordan. One out of 30, 3 years of time, effort, and 
frankly, taxpayer money, which Mr. Nadler suddenly cares a lot 
about--taxpayer money put to use for 3 years they are all 
pursuing it, and it is still overturned.
    Ms. Slade. Believe it or not----
    Mr. Jordan. And that is routine, according to Mr. Nadler.
    Ms. Slade. --time of filing until the decision on 
intervention. Qui tam actions will--and this time I will use 
the word ``commonly,'' they commonly last more than 2, 3, or 4 
years before the government gets to the point of deciding on 
intervention.
    Mr. Jordan. One out of the 30. One out of 30, great.
    Ms. Slade. Again----
    Mr. Jordan. Gentleman from if North Carolina is recognized.
    Ms. Slade. That is a guess.
    Mr. Nadler. Excuse me. I am still on my time, I think.
    Mr. Jordan. No, you are not. I gave you 11 minutes.
    Mr. Nadler. You said you will give us 2 and a quarter hours 
to question this witness.
    Mr. Jordan. I know. I didn't say I will give all the 2 and 
a quarter to you. Our guys want to ask questions, too. We did a 
back and forth. Right? Mr. Gohmert hasn't asked any questions 
yet, and you have had----
    Mr. Gohmert. Eleven minutes and 45 seconds.
    Mr. Jordan. I was being liberal with the time.
    Mr. Meadows, then we will go back on anyone on your side. 
If Mr. Nadler wants more, we will give him more. Then we will 
go to Mr. Gohmert.
    Mr. Meadows. Thank you, Mr. Chairman.
    And thank you, Ms. Slade, for coming to testify.
    And as you mentioned that just a few minutes ago, you said 
there was one key person, Michael Hertz, you know, that would 
make the difference. Did you speak to Michael Hertz personally?
    Ms. Slade. He passed away a year ago.
    Mr. Meadows. Yes, he did. So you didn't speak to Michael 
Hertz personally.
    Ms. Slade. Not about this case.
    Mr. Meadows. And so, before today, had you ever met Mr. 
Newell?
    Ms. Slade. No.
    Mr. Meadows. And so were you involved in any discussions 
with Mr. Newell, the Department of Justice, and HUD about this 
False Claims Act?
    Ms. Slade. No.
    Mr. Meadows. So were you involved in any discussions with 
Mr. Newell's attorney and the Department of Justice, and HUD 
with regards to this False Claims Act?
    Ms. Slade. No, I was not.
    Mr. Meadows. So you have no personal knowledge of this 
particular case that you come to testify as an expert witness 
today, and you have really no personal knowledge of any of 
that.
    Ms. Slade. In preparing my testimony, I did first read all 
of the documents in Appendix I to the majority report. And I 
gained my knowledge about the deliberative process and the 
facts----
    Mr. Meadows. So when you go to court--you are a litigator, 
I would guess. When you go to court, do you normally interview 
people before you make a particular assumption? Yes or no. 
Would you normally interview somebody?
    Ms. Slade. It would depend.
    Mr. Meadows. So normally not? I mean, it is a yes or no. 
Normally, you would or--more than 50 percent of the time would 
you normally have of a conversation with somebody?
    Ms. Slade. I am unclear on your question.
    Mr. Meadows. Let me go on a little bit further. You said 
that it sucks, was the comment by--so how did you know that he 
said that if you hadn't talked to him?
    Ms. Slade. In the majority report, I believe appendix--
well, in one of the reports I read----
    Mr. Meadows. So it was something you read.
    Ms. Slade. I read that Joyce Branda was interviewed and 
quoted Mr. Hertz as having said that.
    Mr. Meadows. I have got a note here that says that--by the 
same Michael Hertz, ``looks like buying off St. Paul.'' So how 
would you say ``it sucks'' compared to ``it looks like it's 
buying off St. Paul''? How do you reconcile those two?
    Ms. Slade. I don't think it is difficult at all to 
reconcile the two statements if in fact, you know----
    Mr. Meadows. Well, it sucks that they are buying off St. 
Paul.
    Ms. Slade. No. He said the case sucks. So I think it is 
fully consistent that he thought the case had some fatal flaws 
in terms of legal theories, but at the same time, he was 
concerned about the appearance----
    Mr. Meadows. So you are coming to day to testify as an 
expert witness from a legal theory point of view and not from a 
personal knowledge point of view.
    Because you--it doesn't sound like you have any personal 
knowledge of this case, other than what you have read because 
they got you because you 13 years ago worked for the Department 
of Justice in their Civil Division. Is that correct?
    Ms. Slade. I did work for the Civil Division 13 years ago. 
That is true.
    Mr. Meadows. Okay. So that is where your expertise comes 
from is working for the Civil Division of the Department of 
Justice, and that is why you are here today.
    Ms. Slade. Well, in addition, I have handled exclusively 
qui tam False Claims Act cases during the 13 years since I left 
the department.
    Mr. Meadows. You have represented whistleblowers.
    Ms. Slade. That is right.
    Mr. Meadows. And so do you not see a conflict today where 
we have a whistleblower that is coming in and you have 
represented them and now today you are showing up to discourage 
that kind of activity? Do you not see a conflict there in terms 
of your mission with the, I guess it was Taxpayers Against 
Fraud?
    Ms. Slade. I don't see any conflict in providing truthful 
information----
    Mr. Meadows. Did anybody at Taxpayers Against Fraud see 
that as a conflict? Did anybody?
    Ms. Slade. Nobody mentioned it to me.
    Mr. Meadows. Nobody mentioned that they were concerned 
about you coming here today and what it might appear to the 
client?
    Ms. Slade. I am here in my personal capacity.
    Mr. Meadows. I understand you are here in your personal. 
Did anybody there say that they were concerned about you doing 
that with regards to how it may be affecting other 
whistleblowers?
    Ms. Slade. I don't think so.
    Mr. Meadows. You don't think so.
    Ms. Slade. I can't recall that they did.
    Mr. Meadows. Let me go on a little bit further, because you 
mentioned about the Civil Division.
    How often is it--I understand that Mr. Perez was not really 
in the Civil Division; he was in the Civil Rights Division, 
which is a different division. How often is it that an 
assistant attorney general of a different division would 
intervene in a Civil Division jurisdiction? Is that common?
    Ms. Slade. I can't answer that. I don't know.
    Mr. Meadows. In your experience with the Civil Division, 
how many times did it happen when you were there--because, 
obviously, it is not a normal thing that somebody from the 
Civil Rights Division, who had no jurisdiction over this, would 
come and intervene. So how many times did that happen when you 
were there in the Civil Division?
    Ms. Slade. I can't answer because I wasn't at the level at 
which those communications took place.
    Mr. Meadows. So what level were you at? I mean, they are 
bringing you in here as an expert, so we would think that you 
would be able to talk about all those things with expert 
testimony. So what level were you at?
    Ms. Slade. Well, for the first 8 years, I was a trial 
attorney; for the last 2 years, I was a Senior Counsel for 
Health Care Fraud for the Civil Division.
    Mr. Meadows. Okay.
    Mr. Perez, from what I understand, spoke directly with 
career attorneys in the Civil Division. Is that normal? Yes or 
no, is that normal?
    Ms. Slade. I can't answer that. Well, what is normal is for 
Department of Justice----
    Mr. Meadows. Now, I asked you if that was normal. I didn't 
ask you what is normal; I asked you, is that normal?
    Ms. Slade. I don't know; I didn't overlap with Mr. Perez.
    Mr. Meadows. Okay. Did it ever happen when you were there?
    Ms. Slade. I don't believe he was there when I was at the 
department.
    Mr. Meadows. No. Did anybody from the Civil Rights Division 
come in and talk to people in the Civil Division and take the 
lead in a particular case and start to negotiate anything? Had 
that ever happened before, Ms. Slade?
    Ms. Slade. I don't know. I wasn't involved.
    Mr. Meadows. Are you aware of any? Yes or no.
    Ms. Slade. No.
    Mr. Meadows. You are aware of none.
    Ms. Slade. That is right.
    Mr. Meadows. All right. So this would unique, then, with 
your recollection of what you are aware of.
    Ms. Slade. With regard to the cases I handled, which were a 
subset, of course, of the cases handled by the Civil Division, 
it didn't happen on my cases.
    Mr. Meadows. So how many--you are a litigator. How many 
False Claims Acts have you actually been the lead litigator in?
    Ms. Slade. At the Department of Justice or since?
    Mr. Meadows. Yes.
    Ms. Slade. At the Department of Justice, again, this is a 
guess. Perhaps there were 20 or 30.
    Mr. Meadows. That you were the lead litigator.
    Ms. Slade. Roughly, yes.
    Mr. Meadows. So did you normally have contacts with other 
divisions within the DOJ on a regular basis in terms of that 
litigation? So would you go with and have them come in and 
confer with you with other departments?
    Ms. Slade. We communicated frequently with the Criminal 
Division.
    Mr. Meadows. All right. And so, as we see this, how often 
do you think that, as we are looking at this, is--this is here, 
and I can see my time is expiring so I will yield back after 
this question.
    Now, here we are with St. Paul about to be heard before the 
Supreme Court. They had--they had filed it. And just a few 
weeks prior to oral arguments, they miraculously decide that 
they are going to withdraw. Now, the fact that the case, this 
particular case was dropped on February the 9th and they 
withdrew on February the 10th, do you not see that as extremely 
coincidental in terms of those time frames, February 9th to 
February 10th?
    Ms. Slade. I think the documents and Appendix I speak for 
themselves as to that matter.
    Mr. Meadows. I am asking you, not what the documents say. 
Do you not see that that is unbelievably coincidental that 
those two documents or those two things would have happened 
without some kind of outside interference?
    Ms. Slade. I believe there has been acknowledgment, has 
there not, that there was a linkage between the two events.
    Mr. Meadows. So there is a linkage. So who was the causal 
effect of that linkage?
    Ms. Slade. Are you asking me to interpret what I read in 
Appendix I?
    Mr. Meadows. Who do you think was the causal effect, Ms. 
Slade?
    Ms. Slade. I think the Department of Justice----
    Mr. Meadows. So the Department of Justice was the causal 
effect of why that happened.
    Ms. Slade. Department of Justice and the City of St. Paul, 
along with----
    Mr. Meadows. Which division? The Civil Division or the 
Civil Rights Division.
    Ms. Slade. I think the Department of Justice was acting as 
a single entity with input from----
    Mr. Meadows. But don't they have different jurisdictions, 
Ms. Slade?
    Ms. Slade. They do.
    Mr. Meadows. So whose jurisdiction would it have been? 
Civil?
    Ms. Slade. The qui tam cases, of course, were within the 
jurisdiction of Civil. And the civil rights issues within the--
--
    Mr. Meadows. But this was not--this was a whistleblower. 
This was not a civil rights issue. The--the Supreme Court was a 
totally separate issue; it wouldn't have been anything to 
interfere in. Isn't that correct?
    Ms. Slade. The components of the Department of Justice 
are----
    Mr. Meadows. Let me finish up. What personal motivation 
brought you here today? I mean, you say you are here because 
you want to see justice. Is that what it is, Ms. Slade?
    Ms. Slade. I was asked to testify. And I want the record to 
be----
    Mr. Meadows. So you were asked to testify by who?
    Ms. Slade. By the minority.
    Mr. Meadows. Okay. And your motivation is what?
    Ms. Slade. To provide truthful information to the best of 
my ability.
    Mr. Meadows. Okay. To help taxpayers?
    Ms. Slade. In the interests of truthfulness in our public 
discourse.
    Mr. Meadows. Thank you.
    I yield back. Thank you for your patience, Mr. Chairman.
    Mr. Jordan. Mr. Cummings and then Mr. Gohmert.
    Mr. Cummings. Ms. Slade, let me tell you something. What 
just happened, I don't want you to be discouraged. What just 
happened. You came here as a lawyer and as someone who was 
volunteering your time to be here. You have represented 
whistleblowers. And you came here to testify with regard to 
this case what you know. We had a gentleman here a few minutes 
ago, in the first panel, where this type of case was his first 
case. You have talked about years and years of experience. And 
I guess my point is, is that when somebody who has represented 
whistleblowers can come in and, as you said, simply coming to 
give truthful testimony, and it just so happens that your 
opinion is--may not, you know, whistleblowers may not love it, 
but you are merely telling the truth, to me, that is even more 
credibility that you were even--that you would do that.
    So I want to just ask you a few questions. And the reason 
why I said don't be discouraged is because I want more people 
like you, people who have an expertise, more expertise than 
many of us, who have spent year after year, first of all, in 
training, in law school, and going all through that thing, they 
are going through school, I mean, they are going through 
various jobs and then ending up where you are now. Everything 
that has happened to you up until this moment prepared you for 
this moment. And we are the beneficiaries of it. And I thank 
you for saying over and over and over again that you simply 
came here to tell the truth.
    Now, the majority has made the claim that Mr. Perez 
manipulated the decisionmaking process for intervention in a 
False Claims Act case, resulting in a consensus of the Federal 
Government to switch its recommendation and decline 
intervention. I would like to ask some questions about 
intervention in DOJ's decision making process. Ms. Slade, are 
there any requirements in the False Claims Act that mandate 
that the government intervene?
    Ms. Slade. No, there are not.
    Mr. Cummings. Isn't it true that DOJ intervenes in only 25 
percent of False Claims Acts cases reported to the department. 
Is that right?
    Ms. Slade. That number is approximately correct.
    Mr. Cummings. All right. When you say ``approximately,'' 
does that mean it is 26? 27?
    Ms. Slade. Over the years, I have heard 20 percent, I have 
heard 25 percent, I have heard 18 percent.
    Mr. Cummings. But 25 percent is a safe figure.
    Ms. Slade. That would be the highest figure.
    Mr. Cummings. So most False Claim Act cases are treated no 
differently than Mr Newell's.
    Ms. Slade, your testimony described the unfettered 
discretion provided to the department in decisions regarding 
the False Claim Act. Can you explain this unfettered 
discretion? What does that mean?
    Ms. Slade. It would--the two circuit courts, I believe it 
is the Ninth Circuit and the 10th Circuit that have elaborated 
on that have stated that what it means is that the government 
needs to have a rational relationship between its decision and 
any legitimate government purpose. And that is really the 
strictest standard. Most courts just say ``unfettered 
discretion.'' And it emanates from the U.S. constitution, the 
Take Care Clause, that the executive branch is vested with that 
discretion.
    Mr. Cummings. Ms. Slade, are you familiar with the internal 
process of DOJ as far as deciding whether or not to intervene 
in a case. Is that correct?
    Ms. Slade. That is right.
    Mr. Cummings. Given the fact that the department declines 
to intervene in the False Claims Act cases most of the time and 
the many significant weaknesses in Mr. Newell's case, 
specifically, does it surprise you that the government declined 
to intervene if Mr. Newell's case?
    Ms. Slade. It does not surprise me.
    Mr. Cummings. And you have seen no evidence that one DOJ 
official manipulated that process to get the specific decision 
in the Newell case. Is that right?
    Ms. Slade. I wouldn't use the word ``manipulation.'' I 
think what happened was a consideration of the broader 
interests of the United States in a very thoughtful and 
coordinated fashion within the Department of Justice looking at 
broader interests and that the--it was not a question of 
manipulation; it was a question of trying get to the right 
result for the government as a whole.
    Mr. Cummings. In fact, you once worked with the career 
False Claims Act experts at the department who worked on the 
case, Mike Hertz and Joyce Branda. Isn't that correct?
    Ms. Slade. I did.
    Mr. Cummings. Knowing them, what do you have to say about 
the suggestion that they may have been manipulated?
    Ms. Slade. In my experience, that is highly, highly 
unlikely. They are--again, have great integrity. They are very 
experienced. They are very capable. They can't be bullied.
    Mr. Cummings. Thank you very much. I see my time is up.
    Mr. Meadows. [Presiding.] I thank the gentleman.
    And the chair recognizes the gentleman from Texas, Mr. 
Gohmert.
    Mr. Gohmert. Thank you, Mr. Chairman. And thank you, Miss 
Slade, for being here today.
    Ms. Slade. Thank you.
    Mr. Gohmert. Who is Tony West?
    Ms. Slade. Tony West is the--well, was at the time the 
assistant attorney general for the Civil Division.
    Mr. Gohmert. And who is Brian Martinez?
    Ms. Slade. Brian Martinez.
    Mr. Gohmert. Yes. A year ago.
    Ms. Slade. I am not sure.
    Mr. Gohmert. You are not sure.
    Ms. Slade. Yeah. I believe I read his name in the 
materials, but I am forgetting----
    Mr. Gohmert. How about Stuart Goldberg?
    Ms. Slade. I don't know his position.
    Mr. Gohmert. And James Cole?
    Ms. Slade. I don't know his position.
    Mr. Gohmert. Or David O'Neill.
    Ms. Slade. I am sorry, the last name?
    Mr. Gohmert. David O'Neill.
    Ms. Slade. I do not know his position.
    Mr. Gohmert. Okay. Well, you had indicated previously that 
you had reviewed the documents in the case. And so I am sure 
you are familiar with the email that was generated from Brian 
Martinez and that included the report as to the situation with 
regard to U.S. v. City of St. Paul, Minnesota and, in 
parentheses, involves two different qui tam cases. Are you 
familiar with that? And it has got stuff blotted out. I don't 
know if they can be thrown up on the screen.
    Ms. Slade. Yes, I have that in front of me.
    Mr. Gohmert. Right. And so, well, would you tell us again 
exactly what this was--this document was part of? I mean, it 
was conveyed by email. But--and that was what was furnished 
from the department of attorney general. So what is this 
document?
    Ms. Slade. Are you referencing the document that was the 
memorandum recommending intervention?
    Mr. Gohmert. No.
    Ms. Slade. Then I may not have it.
    Mr. Gohmert. Do you have that where you can put it up on 
the screen?
    This is the recommendation with regard to major cases. And 
it is the list that was the Civil Division significant ongoing 
affirmative matters as of 3/8/12.
    Ms. Slade. Yeah, I did see that in the materials. I 
remember it.
    Mr. Gohmert. That was set to the deputy attorney general. 
So you are familiar with that, you did see it?
    Ms. Slade. I remember it.
    Mr. Gohmert. Apparently, we don't have it to put up on the 
screen.
    But, in any event, you know, you had mentioned in--that the 
Justice Department has unfettered discretion in some cases on 
what they pursue, what they do not pursue.
    But in this report regarding significant cases that was 
being sent to the deputy attorney general, this reads, 
specifically, it says, The Ellis case alleges that the City of 
Minneapolis is inappropriately condemning and knocking down 
low-income housing, which has a disparate racial impact. 
Government declined to intervene in Newell and has agreed to 
decline to intervene in Ellis in exchange for defendants' 
withdrawal of cert petition in the Gallagher case and, 
parentheses, a civil rights action.
    So you had read that. Correct?
    Ms. Slade. I saw--I at least saw reference to it in the 
materials. I am not sure if I saw the actual document, but I 
saw reference to in the materials I read in preparation for 
coming here today.
    Mr. Gohmert. Right. And this was the document that was 
being sent to the deputy attorney general with regard to the 
significant cases. And you have done an excellent job of 
testifying about all the different considerations that may go 
into deciding to pursue or not pursue a case. But in this case, 
when a report is going to the deputy attorney general and you 
are listing many other cases, obviously, you would submit what 
would you felt like would be the most important aspects of the 
case for the deputy attorney general to know. Correct?
    Ms. Slade. Correct.
    Mr. Gohmert. And that is why the preparation of this 
document going to the deputy attorney general makes the point, 
it doesn't discuss all the other things that you have done an 
excellent job of covering; it gets right down to the nitty-
gritty and says government declined to intervene in Newell and 
has agreed to decline to intervene in Ellis in exchange for 
defendants' withdrawal of cert petition in the Gallagher, the 
Magner v. Gallagher case.
    That is the report that we were provided that went to the 
deputy attorney general to explain to the deputy attorney 
general the real nuts and bolts of why this decision was made. 
And it does appear to be a quid pro quo from the documents we 
were provided. And so do you have any information that would 
indicate that on the report of the significant civil cases 
going to the deputy attorney general, there was in any way an 
intent to give false information to the deputy attorney general 
about what was the reason, the real underlying reason for 
declining or withdrawal of cert petition in the Gallagher case? 
Do you know of any reason they would try to mislead to deputy 
attorney general?
    Ms. Slade. I have no information one way or the other on 
that issue.
    Mr. Gohmert. Thank you.
    Now, I appreciate my friend, Mr. Cummings, pointing out how 
many times you have said, I just came here to tell the truth.
    Obviously, you are an excellent trial lawyer. You have 
quite a reputation, and you are to be commended. It is good 
when we have people that have tried a lot of cases, and we 
appreciate you subjecting yourself to the laws of having to 
tell the truth before a congressional body. And so we 
appreciate you coming up, with those penalties hanging over 
your head for not being truthful, so I know you will be.
    How many times--can you have any kind of estimate how many 
times you may have told witnesses, as you prepared them to 
testify in a case that if somebody starts attacking your 
credibility, just say something to the effect, I just came here 
to tell the truth?
    Ms. Slade. I have never told a witness that.
    Mr. Gohmert. You have never ever told a witness that if 
somebody questions your motivation, I just came to tell the 
truth?
    Ms. Slade. I have never----
    Mr. Gohmert. Not even words to that effect?
    Ms. Slade. No, of course, I advise them to tell the truth. 
But I don't say that you should maintain that they are only 
there to tell to the truth in response to an attack on 
credibility. No, I have never, ever.
    Mr. Gohmert. How about when you talk to a witness about if 
they are attacked and it is made to look as if the lawyer put 
words in their mouth, because in proper preparation for a 
witness, an attorney will usually say, You may have questions 
come up about our conversation. You've talked to witnesses 
about that, surely?
    Ms. Slade. You mean in terms of asserting privilege?
    Mr. Gohmert. No. I am just talking about talking to a 
witness before they are to testify in a case, because you can't 
have a very good reputation as a trial attorney if you don't 
talk to your witnesses before they go in to testify. Do you not 
talk to witnesses before going to testify?
    Ms. Slade. Well, I would counsel my client, of course.
    Mr. Gohmert. Okay.
    Ms. Slade. Prepare them for the deposition or whatever the 
situation is.
    Mr. Gohmert. Right. And would you prepare them for cross-
examination at all?
    Ms. Slade. Yes.
    Mr. Gohmert. And you have surely heard on cross-
examination, a cross-examiner ask, Did you have a conversation 
with your attorney about this testimony?
    Ms. Slade. In depositions, I have heard that said, yes.
    Mr. Gohmert. And have you not told a witness that they can 
expect a question about, Did you talk to your attorney about 
this testimony?
    Ms. Slade. I think what I usually counsel clients is that 
the communications with me are privileged. And of course, they 
can acknowledge that they have prepared with their counsel. But 
the preparation process is privileged.
    Mr. Gohmert. Yes. But that doesn't prevent a question being 
asked with regard to someone who is not a client, who is a 
witness that you have offered, who is being cross-examined. And 
I got to come back. You are saying you never talked to a 
witness, who is not a client, and tell them about what to 
expect when they come in a courtroom. I am shocked that you 
never talked to anybody but a client about what they can expect 
during cross-examination. Is that your serious contention 
before us? How many cases have you tried?
    Ms. Slade. I think you are mischaracterizing what I----
    Mr. Gohmert. Okay. Well, then, you characterize it for me. 
This was what I got to earlier, and you corrected me when I 
said, ``Have you talked to witnesses?'' And you said, ``No, 
I've talked to clients.'' And so I want to get back to what I--
apparently, you have talked to witnesses in preparation for 
their going before a court to testify, have you not?
    Ms. Slade. I have talked to--I am thinking back on my time 
at Department of Justice. I don't know if you know this but the 
False Claims Act cases, ordinarily, if they are any good and 
the government intervenes, and then they settle before trial 
about 90 percent of the time or more.
    Mr. Gohmert. Right. And that is about standard. But so you 
don't try many cases?
    Ms. Slade. No. That is right. We don't. We----
    Mr. Gohmert. Okay. How about a deposition? Have you not 
prepared witnesses for depositions in preparation for cross-
examination, who were not your clients?
    Ms. Slade. Well, while at the Department of Justice, I did 
prepare client agency employees. But the client agency was our 
client.
    Mr. Gohmert. So you have never prepared witnesses who are 
about to go in and testify and talk to them about what to 
expect on cross-examination.
    Ms. Slade. I may have. Right now, just thinking back, most 
of my focus has been on my qui tam relator clients so----
    Mr. Gohmert. So you have never offered a witness in 
deposition for anything?
    Ms. Slade. Well, when I was with the Department of Justice, 
we were offering witnesses from client agencies and those----
    Mr. Gohmert. I am asking you a question, and you are 
dancing around it. Have you ever provided, proffered, offered a 
witness to be--to provide testimony in a deposition?
    Ms. Slade. Who wasn't a client, is your question?
    Mr. Gohmert. Who was not a client.
    Ms. Slade. Sitting here today, I am tired--it's 1:30, I 
haven't had lunch. We've been here for about 3 and a half 
hours--I cannot recall. I could get back to you on that and 
write you a letter with the information.
    Mr. Gohmert. You have no idea if you have ever provided a 
witness for testimony. Well, I am just blown away that we have 
somebody up here as an expert that has never even provided a 
witness for a hearing. I am just shocked. I am shocked. I 
cannot believe. And I am sure that if trial lawyers across this 
country, no matter whether plaintiffs or defense attorneys, 
hear this, they will be shocked as well at the kind of people 
that are handling the kind of cases that are this important. I 
yield back.
    Mr. Jordan. Thank the gentleman.
    Ms. Slade, if you can stay 5 more minutes, Mr. Nadler gets 
5 more minutes.
    Mr. Nadler. I won't take time 5 minutes.
    I just want to, first of all, join Mr. Cummings in thanking 
you for you your testimony. And I suppose--thank you for your 
testimony, period.
    You have been through a lot. Some of it, you shouldn't have 
had to go through.
    Let me just say you said that you were--you handled a lot 
of qui tam cases when you were with the Department of Justice.
    Ms. Slade. That is right.
    Mr. Nadler. And since you were with the Department of 
Justice, which I think was the last 13 years, you have also 
handled a lot of qui tam cases representing whistleblowers?
    Ms. Slade. That is right.
    Mr. Nadler. So you have handled qui tam cases basically for 
23 years.
    Ms. Slade. That is correct.
    Mr. Nadler. So you are the only witness we have heard today 
who has, aside from Mr. DeVincke, who is working on his first 
qui tam case, with any experience in judging the strength of a 
qui tam case or whether it makes sense or anything else about 
it. Is that correct? On an experience basis; I am not talking 
about intelligence or anything else.
    Ms. Slade. Yes.
    Mr. Nadler. Okay. I thank you. I yield back.
    Mr. Jordan. Want to thank Ms. Slade for being here today. 
Hearing is adjourned.
    Mr. Cartwright. Mr. Chairman, I ask----
    Mr. Jordan. I am sorry.
    Mr. Cartwright. Unanimous consent to enter into the record 
statements of four legal experts refuting allegations made by 
the majority----
    Mr. Jordan. Without objection.
    Mr. Cartwright. A letter received yesterday by the 
committees----
    Mr. Jordan. Without objection. We got them.
    Mr. Cartwright. You got them? Thank you, Mr. Chairman.
    [Whereupon, at 1:38 p.m., the subcommittees were 
adjourned.]

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