[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
STOP SETTLEMENT SLUSH FUNDS ACT OF 2016
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
REGULATORY REFORM,
COMMERCIAL AND ANTITRUST LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
ON
H.R. 5063
__________
APRIL 28, 2016
__________
Serial No. 114-69
__________
Printed for the use of the Committee on the Judiciary
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Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan
Wisconsin JERROLD NADLER, New York
LAMAR S. SMITH, Texas ZOE LOFGREN, California
STEVE CHABOT, Ohio SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California STEVE COHEN, Tennessee
J. RANDY FORBES, Virginia HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE KING, Iowa Georgia
TRENT FRANKS, Arizona PEDRO R. PIERLUISI, Puerto Rico
LOUIE GOHMERT, Texas JUDY CHU, California
JIM JORDAN, Ohio TED DEUTCH, Florida
TED POE, Texas LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah KAREN BASS, California
TOM MARINO, Pennsylvania CEDRIC RICHMOND, Louisiana
TREY GOWDY, South Carolina SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho HAKEEM JEFFRIES, New York
BLAKE FARENTHOLD, Texas DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia SCOTT PETERS, California
RON DeSANTIS, Florida
MIMI WALTERS, California
KEN BUCK, Colorado
JOHN RATCLIFFE, Texas
DAVE TROTT, Michigan
MIKE BISHOP, Michigan
Shelley Husband, Chief of Staff & General Counsel
Perry Apelbaum, Minority Staff Director & Chief Counsel
------
Subcommittee on Regulatory Reform, Commercial and Antitrust Law
TOM MARINO, Pennsylvania, Chairman
BLAKE FARENTHOLD, Texas, Vice-Chairman
DARRELL E. ISSA, California HENRY C. ``HANK'' JOHNSON, Jr.,
DOUG COLLINS, Georgia Georgia
MIMI WALTERS, California SUZAN DelBENE, Washington
JOHN RATCLIFFE, Texas HAKEEM JEFFRIES, New York
DAVE TROTT, Michigan DAVID N. CICILLINE, Rhode Island
MIKE BISHOP, Michigan SCOTT PETERS, California
Daniel Flores, Chief Counsel
Slade Bond, Minority Counsel
C O N T E N T S
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APRIL 28, 2016
Page
TEXT OF THE BILL
H.R. ____, the ``Stop Settlement Slush Funds Act of 2016''....... 3
OPENING STATEMENTS
The Honorable Tom Marino, a Representative in Congress from the
State of Pennsylvania, and Chairman, Subcommittee on Regulatory
Reform, Commercial and Antitrust Law........................... 1
The Honorable Henry C. ``Hank'' Johnson, Jr., a Representative in
Congress from the State of Georgia, and Ranking Member,
Subcommittee on Regulatory Reform, Commercial and Antitrust Law 5
The Honorable Bob Goodlatte, a Representative in Congress from
the State of Virginia, and Chairman, Committee on the Judiciary 6
The Honorable John Conyers, Jr., a Representative in Congress
from the State of Michigan, and Ranking Member, Committee on
the Judiciary.................................................. 7
WITNESSES
The Honorable Daniel E. Lungren, Esq., Principal, Lungren Lopina
LLC
Oral Testimony................................................. 10
Prepared Statement............................................. 13
Paul F. Figley, Esq., Professor, Associate Director of Legal
Rhetoric, American University Washington College of Law
Oral Testimony................................................. 28
Prepared Statement............................................. 30
David M. Uhlmann, Esq., Director, Environmental Law and Policy
Program, The University of Michigan Law SchooL
Oral Testimony................................................. 43
Prepared Statement............................................. 45
APPENDIX
Material Submitted for the Hearing Record
Material submitted by the Honorable Henry C. ``Hank'' Johnson,
Jr., a Representative in Congress from the State of Georgia,
and Ranking Member, Subcommittee on Regulatory Reform,
Commercial and Antitrust Law................................... 72
Response to Questions for the Record from David M. Uhlmann, Esq.,
Director, Environmental Law and Policy Program, The University
of Michigan Law SchooL......................................... 79
H.R. 5063, the ``Stop Settlement Slush Funds Act of 2016''....... 82
STOP SETTLEMENT SLUSH FUNDS ACT
OF 2016
----------
THURSDAY, APRIL 28, 2016
House of Representatives,
Subcommittee on Regulatory Reform,
Commercial and Antitrust Law
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:07 a.m., in
room 2141, Rayburn House Office Building, the Honorable Tom
Marino (Chairman of the Subcommittee) presiding.
Present: Representatives Marino, Goodlatte, Walters,
Ratcliffe, Johnson, and Conyers.
Staff Present: (Majority) Dan Huff, Counsel; Andrea
Lindsey, Clerk; and (Minority) Slade Bond, Minority Counsel.
Mr. Marino. The Subcommittee on Regulatory Reform,
Commercial and Antitrust Law will come to order. Good morning,
everyone.
Without objection, the Chair is authorized to declare a
recess of the Committee at any time.
We welcome everyone to today's hearing on H.R. 5063, the
``Stop Settlement Slush Funds Act of 2016.''
And I now recognize myself for an opening statement.
The bill's title sums up the issue. A Judiciary Committee
investigation has revealed that DOJ is requiring settling
parties to donate money to third-party groups. At issue are
large sums of money; close to $1 billion in just the last 2
years. Of that, over half-a-billion has already been disbursed
or is committed to be disbursed.
I purposely did not make this hearing about groups that
received the money. I did not want to distract from the central
issue, and I feel the central issue is the harm that these
provisions do to Congress as an institution. The spending power
is Congress' most effective tool in reining in the executive
branch. This is true no matter which party is in the White
House.
A Democrat-led Congress passed the Cooper-Church Amendment
to end the Vietnam war. More recently, Congress used a funding
restriction to prevent the transfer of Guantanamo Bay prisoners
to the United States mainland. Bipartisan funding restrictions
were passed to block lavish salary and conference spending by
Federal agencies and grantees. This policy control is lost if
the Executive gains authority over spending.
Serious people on both sides of the aisle understand this.
Consider Todd Peterson, former Deputy Assistant Attorney
General for the Office of Legal Counsel in the Clinton
administration. He warned in 2009, that ``because the
Department of Justice has such broad settlement authority, it
has the ability to use settlements to circumvent the
appropriations authority of Congress.'' In 2008, a top
Republican DOJ official circulated a memo to Federal
prosecutors restricting mandatory donation provisions, because
they can ``create actual or perceived conflicts of interest and
or other ethical issues.''
So, again, serious people understand that this is
fundamentally a bipartisan, institutional issue. Indeed, the
language on which this bill is based passed the House last
year, by a voice vote.
The ``Stop Settlement Slush Funds Act of 2016'' prohibits
settlement terms that require donations to third-parties. It
states explicitly that payments to provide restitution for
actual harm, directly caused, including harm to the
environment, are not donations.
As a former Federal prosecutor, I am acutely aware of the
needs of DOJ in negotiating settlements. Now, as a Congressman,
I am also aware that a line has to be drawn. This commonsense
bill merely ensures that settlement money goes either to direct
victims or to the U.S. Treasury so that the people's elected
Representatives can decide how best to spend it.
I understand we could differ on the details, but today is
not a markup. This is an opportunity to hear from expert
witnesses to ensure that the legislation has the proper scope.
Let's work together from a common premise. So I call on my
colleagues to join me in defending the fundamental principle:
Elected, accountable Members of Congress should decide how
Federal funds are spent.
I am pleased that every Republican Subcommittee Member is
already a cosponsor. I hope my Democratic colleagues will soon
join this important effort.
I thank our witnesses for appearing and look forward to the
discussion.
[The text of the bill, H.R. 5063, follows:]
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__________
Mr. Marino. The Chair now recognizes the Ranking Member of
the Subcommittee on Regulatory Reform, Commercial and Antitrust
Law, Mr. Johnson of Georgia, for his opening statement.
Sir.
Mr. Johnson. Thank you, Mr. Chairman.
H.R. 5063, the ``Stop Settlement Slush Funds Act of 2016,''
would remove an important civil enforcement tool available to
agencies to hold corporations accountable for the general harm
caused by unlawful conduct and would create waves of
uncertainty, delay, and needless litigation in the enforcement
of civil law.
H.R. 5063 would have potentially disastrous consequences on
the remediation of generalized harms in civil enforcement
actions. For unlawful conduct with systemic harms, such as
environmental catastrophe--or an environmental catastrophe,
settlements provide a mechanism to provide for the remediation
of generalized harms through offsets and other indirect
remedies. Similarly, parties seeking to regain public trust may
also wish to include voluntary auditing requirements in
settlement agreements that ensure that similar violations do
not occur in the future.
Joel Mintz, an expert in environmental law and enforcement,
observes that these settlements ``can create a win-win scenario
for all parties involved, including regulators, regulated
companies, and local communities,'' by creating a flexible
regulatory climate and repairing ``corporate public images that
would otherwise be further harmed by negative environmental
publicity.''
For example, in 2012, the Mitsui Oil Exploration Company
settled its liability for violations of the Clean Water Act
resulting from the Deepwater Horizon oil spill. In addition to
civil penalties, Mitsui Oil agreed to facilitate land projects
in several States, including Texas, Mississippi, Alabama,
Louisiana, and Florida, to conserve critical habitat within the
Gulf of Mexico.
In this case and others like it, donations under settlement
agreements serve as a critical tool to remedy a general harm
and provide the settling party with an opportunity to re-earn
the public's trust. H.R. 5063 would eliminate these donations
in both existing and future settlement agreements. This is true
even in cases where the settling party seeks a donation to
offset its unlawful conduct or where a party's harmful conduct
could not otherwise be remedied.
This legislation is also an unwarranted encroachment on the
prosecutorial discretion of civil enforcement agencies. The
exercise of enforcement discretion is a traditional power of
executive branch agencies. This authority provides broad
prosecutorial flexibility to civil enforcement agencies when
crafting settlement agreements within the scope of their
statutory authority.
It is little surprise that the Supreme Court has
consistently held that the exercise of such discretion is a
core function of the Executive's power under the take-care
clause, as it did in Heckler v. Chaney, where the Court
observed that the characteristics of a decision of a prosecutor
in the executive branch have long been regarded as the special
province of the executive branch inasmuch as it is the
executive branch who is charged by the Constitution to take
care that the laws be faithfully executed.
Under this constitutional norm, agencies' prosecutorial
discretion to settle potential civil actions extends to
requiring donations in settlement agreements. Additionally,
settlement agreements may exceed the remedies identified in an
agency's underlying statute so as long as they relate to the
agency's statutorily authorized prosecutorial objectives, which
generally requires that donations have a sufficient nexus
between the underlying violation and the proposed remedy. H.R.
5063 represents a severe departure from these core principles,
raising separation-of-powers concerns and threatening to
curtail agency discretion in the enforcement of the law.
In closing, I'd like to thank our witnesses for appearing
today. I'd like to welcome our former colleague Dan Lungren
back to the other side.
And I yield back the balance of my time.
Mr. Marino. Thank you.
The Chair now recognizes the Chairman of the full Judiciary
Committee, Mr. Bob Goodlatte of Virginia, for his open
statement.
Mr. Goodlatte. Well, thank you, Mr. Chairman. I appreciate
your holding this hearing.
Eighteen months ago, this Committee commenced a ``pattern
or practice'' investigation into the Justice Department's
mortgage lending settlements. We found that the Department of
Justice is systemically subverting Congress' spending power by
requiring settling parties to donate money to activist groups.
In just the last 2 years, the Department of Justice has
directed nearly a billion dollars to third-parties entirely
outside of Congress' spending and oversight authority. Of that,
over half a billion has already been disbursed or is committed
to be being disbursed. In some cases, these mandatory donation
provisions reinstate funding Congress specifically cut.
Whether the beneficiaries of these donations are worthy
entities or not is entirely beside the point. The Constitution
grants Congress the power to decide how money is spent, not the
Department of Justice. This is not some esoteric point. It goes
to the heart of the Separation of Powers theory and Congress'
ability to rein in the Executive in practice.
Certainly, the Department of Justice's authority to settle
cases necessarily includes the ability to obtain redress for
victims. However, Federal law understands victims to be those
``directly and proximately harmed'' by a defendant's acts. Once
those victims have been compensated, deciding what to do with
additional funds extracted from defendants becomes a policy
question properly decided by elected Representatives in
Congress, not agency bureaucrats or prosecutors. It is not that
Justice Department officials are necessarily funding bad
projects. It is that, outside of compensating actual victims,
it is not their decision to make.
We have brought these reasonable concerns to the Department
of Justice. But rather than suspend the practice of mandatory
donations, DOJ has doubled down. Just 2 weeks ago, a major DOJ
bank settlement required $240 million in ``financing and/or
donations'' toward affordable housing.
It is time for Congress to take action to end this abuse.
The ``Stop Settlement Slush Funds Act of 2016'' bars
mandatory donation terms in DOJ settlements. It is a bipartisan
bill.
It makes clear that payments to provide restitution for
actual harm, directly caused, are not donations. It explicitly
references the environmental context where the injury to the
environment may be diffuse and there may be no identifiable
victims. The bill deals with this by explicitly permitting
payments to remediate environmental damage. If direct
remediation of the harm is impossible or impractical, the
violator is not let off the hook. The full penalty is paid, but
into the Treasury.
The principle is clear, but the details need to be studied.
I am pleased that we have an expert panel today to offer views.
I am particularly interested to hear their thoughts on the
scope of the bill. It covers civil settlements. Is that
sufficient? What about the language permitting remediation of
harm ``directly and proximately'' caused? Does this impose a
sufficiently tight nexus between the payment and the offense to
prevent further DOJ mischief?
So I am eager to hear from our witnesses, and I thank them
for coming. And I also want to thank all of the bill's
cosponsors, particularly Chairman Marino, Representative
Peterson, Chairman Culberson, and every Republican Member of
this Subcommittee.
And it's also a pleasure to welcome back to the Judiciary
Committee my longtime friend and former colleague, Dan Lungren,
who I'm sure has a keen interest and insight into this issue.
And I welcome the other witnesses today as well.
Thank you, Mr. Chairman. I yield back.
Mr. Marino. Thank you.
The Chair recognizes the full Judiciary Committee Ranking
Member, Mr. Conyers of Michigan, for his opening statement.
Mr. Conyers. Thank you, Chairman Marino.
And I join all of us in welcoming back Dan Lungren in his
newer capacity. He was an outstanding Member of the Judiciary
Committee, and we look forward to his testimony.
Today's hearing concerns legislation that would prohibit
the enforcement or negotiation of any settlement agreement
requiring donations to remediate harms that are not directly
and proximately caused by a party's unlawful conduct.
The proponents of this bill assert that the Justice
Department and civil enforcement agencies used such settlement
agreements to unlawfully augment their own budgets as an end-
run around the congressional appropriation process.
I believe that this bill is a seriously misguided effort
for a number of reasons.
To begin with, these settlement agreements have been
successfully used, for example, to facilitate an effective
response to the predatory and fraudulent mortgage lending
activities that nearly caused the economic collapse of our
Nation. Settlement agreements with two of these culpable
financial institutions, Bank of America and Citigroup, require
a donation of less than 1 percent of the overall settlement
amount to help affected consumers.
The majority initially claimed, however, that the Justice
Department used these settlement agreements as a vehicle for
funding activist groups. Notwithstanding the production of
hundreds of pages of documents by the Justice Department, along
with hundreds of pages of documents produced by private
parties, the majority's investigation has not produced any
evidence that the government included unlawful or politically
motivated terms in its settlement agreement with Bank of
America or Citigroup, let alone slush funds.
In the absence of any facts to support their initial claim,
the majority now asserts that the Justice Department and other
agencies have augmented their appropriations through civil
enforcement. But existing law already prevents agencies from
augmenting their own funds through civil enforcement. These
laws require that donations in settlement agreements have a
clear nexus to the prosecutorial objectives of the enforcement
agency. And both the Government Accountability Office and the
Congressional Research Service conclude that the settlement
agreements providing for secondary remediation do not violate
Congress' constitutional power of the purse.
And, finally, I'm also very concerned that this measure
will have potentially disastrous consequences on the
remediation of systemic harms in civil enforcement actions.
Settlement agreements allow parties to resolve their civil
liability by voluntarily remediating the harms caused by their
conduct. In the context of environmental enforcement actions,
for example, parties may voluntarily agree to undertake
restoration projects to protect local ecosystems in order to
offset environmental damage.
Moreover, for some unlawful conduct, such as, for example,
employment discrimination, secondary remediation of harms may
be the only remedy available for systemic violations of the
law. Employment discrimination lawsuits typically affect the
interests of employees who are not parties to an action.
Secondary remediation in these cases serves as an important
tool to protect victims of workplace harassment and establish
lawful workplace norms through voluntary compliance and
training programs.
So you can see I have some serious concerns about this
legislation, but I thank our witnesses for being with us today,
and I look forward to hearing their testimony.
Mr. Chairman, I yield back.
Mr. Marino. Thank you.
Without objection, other Members' opening statements will
be made part of the record.
I will begin by swearing in our witnesses before I
introduce them.
Would you please stand and raise your right hand?
Thank you.
Do you swear that the testimony you are about to give
before this Committee is the truth, the truth, and nothing else
but the truth, so help you God?
Please be seated.
Let the record reflect that all the witnesses have
responded in the affirmative.
And I'm going to just take several minutes to introduce all
three of you at once, and then we'll start with Congressman
Lungren, but I like to refer to you as ``General,'' because you
know how we prosecutors are. As a matter of fact, all of you as
along those lines.
But Daniel Lungren is a principal at Lungren Lopina LLC.
Mr. Lungren has served nine terms as a Member of the U.S. House
of Representatives from California, as well as two terms as
attorney general of California. In Congress, he was a Member of
the House Judiciary Committee, House Intelligence Committee,
and was a senior Member of the House Committee on Homeland
Security, where he worked on a number of important legislative
reforms.
As attorney general, Mr. Lungren led an office of nearly
1,000 lawyers with an annual criminal and civil caseload of
approximately 50,000 cases. In that capacity, Mr. Lungren
achieved record settlements under California's environmental
laws, including the largest environmental settlement up to that
time in California in a toxic spill case. He also won two of
the largest settlements ever under the Federal Clean Water Act
and the Federal Superfund law.
Mr. Lungren earned his bachelor's degree from the
University of Notre Dame and his law degree from Georgetown
University Law Center.
Welcome, Congressman.
Professor Paul Figley is the associate director of the
legal writing and rhetoric program and professor of law at the
American University Washington College of Law.
Prior to joining the faculty at Washington College of Law,
Professor Figley served as a U.S. Department of Justice
litigator for three decades, with the last 15 years as Deputy
Director in the Torts Branch of the Civil Law Division. At
Justice, Professor Figley represented the United States and its
agencies involving tort, national security, and informational
law.
Professor Figley earned his bachelor's degree from the
Franklin and Marshall College and his law degree from the
Southern Methodist University School of Law.
Welcome, Professor.
Professor David Uhlmann--am I pronouncing that correctly,
sir?
Mr. Uhlmann. You are, sir.
Mr. Marino [continuing]. Is the director of the
environmental law and policy program at the University of
Michigan Law School and is the Jeffrey F. Liss Professor from
Practice.
Prior to joining the Michigan faculty, Professor Uhlmann
served for 17 years at the United States Department of Justice
and the last 7 as Chief of the Environmental Crime Section,
where he chaired the Justice Department's Environmental Crimes
Policy Committee.
Professor Uhlmann has published in various national
publications and leading law journals and has testified before
Congress. Professor Uhlmann graduated with a bachelor's degree
in history, with high honors, from Swarthmore College, and a
law degree from Yale Law School.
Professor, welcome.
Mr. Uhlmann. Thank you, sir.
Mr. Marino. Each of the witnesses' written statements will
be entered into the record in its entirety.
I ask that each witness summarize his testimony in 5
minutes or less. And to help you state within that 5 minutes,
there are light in front of you. But as I do on occasion when
I'm out there making a statement, I pay no attention to the
lights. So what I will do is very diplomatically sort of pick
up the hammer here and just give a little tap and ask--by doing
that, asking you to wrap up.
So I will now recognize the former attorney general of
California, former Congressman, the Honorable Dan Lungren, for
his opening statement.
TESTIMONY OF THE HONORABLE DANIEL E. LUNGREN, ESQ., PRINCIPAL,
LUNGREN LOPINA LLC
Mr. Lungren. Thank you, Mr. Chairman. And thank all Members
of the Subcommittee, particularly the Chairman of the full
Committee, the Ranking Member of this Committee, the Ranking
Member of the full Committee, who I refer to as Chairman
emeritus from time to time.
Like many--well, first of all, let me just say I'm going to
try and give a perspective of both a former Member of Congress
and attorney general in this matter. And like many of you, I
have observed with concern the American public, who appears to
have lost some considerable faith with the present state of our
politics and governance.
In other words, a healthy skepticism of government, which I
believe is enshrined in our opening documents--founding
documents, has been replaced in some cases with outright
cynicism, and that is in fact harmful to our democracy. There
are many reasons for this corrosive development, but they are
too numerous to mention here, but I do believe they establish a
context for a discussion today.
I fear the growing trend in law enforcement is contributing
to the erosion of the public's trust that it will receive
impartial and fair justice. And I think also, particularly in
the case that we are talking about here today, it is intruding
on the core prerogatives of the Congress as well.
There are about four points that I make in my written
presentation. The first deals with the specific subject matter
we're talking about here, where executive branch agencies now
use settlements of enforcement actions to fund private parties
whose activities further the policy and, I believe, in some
cases, the personal goals of the agency officials.
Secondly, law enforcement officials and their offices
increasingly have a direct financial stake in the outcome of
prosecutions. At the Federal level, we talk about asset
forfeiture and equitable sharing programs which allow law
enforcement agencies to retain a share of their forfeiture
proceedings.
Let me be clear. I was present at the creation of the 1984
iteration of that law and proudly claim some share of
authorship. But I think abuses have arisen, and they must be
dealt with, and I think this Congress must review them in some
detail.
Third, such practices have not been limited to the Federal
Government. State enforcement officials, including State
attorneys general, have used settlements to fund their own
operations and create new grant programs outside their State
legislative processes and sometimes in conjunction with the
Federal Government.
Fourthly, there is a modern 24 news--24-day news cycle
that's transformed the public information domain and how public
officials act. The pressure is even greater on public
officials, particularly those who are law enforcement. How do
we help them make sure that they are doing justice? How do we
help them make sure that they are making their decisions
without fear or favor?
I think there are at least three things we ought to look
at: clear rules of the road; secondly, defendants given a fair
chance to defend themselves rather than being subjected to
multiple overlapping enforcement actions that leave no choice
in some cases but an unfair and unjust settlement; and
punishments should fit the offense. And Congress--it ought to
be looked as to whether or not we have excessive demands that
are coercing settlements from the innocent.
Let me go back to my first point and the subject of
specific legislation before this Committee. Does anyone believe
that these donations are freely given, voluntary expressions of
support for these organizations? No, they're coerced--coerced
payments to the entities mandated by the officials acting with
the full power and majesty of the government.
Let me just give a few examples of these grant phenomenas.
In 2012, the Department of Justice forced Gibson Guitars to
pay a $50,000 community service payment to the National Fish
and Wildlife Foundation even though the foundation was not a
victim of the alleged crime and had no direct connection with
the case. It was simply a nongovernmental organization that DOJ
employees liked.
In 2006, the DOJ forced a wastewater plant that had been
accused of violating the Clean Water Act to give a million
dollars to the United States Coast Guard Alumni Association.
Looking at the case, I can find that the association had
absolutely no connection and had suffered no harm, direct or
indirect.
This Committee, I think, is to be commended for your
investigation into the contours of DOJ settlements with our
country's largest banks. Look, we could go through detail after
detail on this, but the Bank of America settlement is most
curious to me. The bank was to set aside $490 million to pay
any potential tax liability to be incurred by their customers
occasioned by loan modification or forgiveness. In other words,
if there is a forgiveness, the net result of the forgiveness is
viewed as an income to the individual who held the loan, and
the government comes after them for taxes.
So I can understand why that was done. However, Congress,
in its infinite wisdom--I always thought we were going to do
this--extended the non-tax liability in those cases. So what
happened to the $490 million? Well, they were donated to the
NeighborWorks America and Interest on Lawyers Trust Accounts
groups.
Look, some of us here, those on the Committee and I, might
agree with the worthiness of these organizations. However, is
that the Department of Justice's decision to make? I would
argue that under the Constitution it is not. I would argue that
in my years in Congress I saw some of the core prerogatives of
the Congress ceded either by omission or comission to the
executive branch.
And, thirdly, I would just say that, as the American people
are looking at their institutions of governance on all levels,
Congress ought to at least follow the Constitution. And as
Senator Byrd said, appropriations go to the legislative branch
because it is the most open and responsive or representative
branch of our government. So we're talking about accountability
and transparency.
Thank you for your consideration.
[The prepared statement of Mr. Lungren follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
__________
Mr. Marino. Thank you.
Professor Figley, please.
TESTIMONY OF PAUL F. FIGLEY, ESQ., PROFESSOR, ASSOCIATE
DIRECTOR OF LEGAL RHETORIC, AMERICAN UNIVERSITY WASHINGTON
COLLEGE OF LAW
Mr. Figley. Thank you, Mr. Chairman and Members of the
Committee.
Congress' power of the purse and its authority under the
appropriations clause to direct where government money will be
spent is a key component of our constitutional system of checks
and balances.
The authority has roots in the Magna Carta, and it was a
substantial factor in the development of constitutional
democracy in England. The colonial legislatures leveraged their
taxation power into the power of appropriation, laying the
groundwork for American independence.
The authors of the Constitution vested the right of
appropriation in the legislative branch. They did so, as James
Madison explained in the Federalist No. 58, to ensure that
government is directly accountable to the people and to provide
Congress ``a key check on the power of the other branches.''
The current practice of allowing government attorneys to
negotiate settlements that require other parties to make
payments to individuals or entities who are not involved in the
underlying dispute or damaged by the defendant's action
circumvents the appropriations process and undermines Congress'
power of the purse. The practice allows those government
lawyers to provide payments to persons or entities without
congressional authorization to do so.
The practice creates numerous difficulties. As a practical
matter, Federal attorneys are poorly suited to choose which
persons or entities should receive a financial windfall. The
system is unfair to other potential beneficiaries who did not
collect the handout.
The system lacks transparency. What factors determine which
group will receive a payment? Who makes that decision? Are
political considerations weighed? As the U.S. Attorneys' Manual
recognizes, the practice creates ``actual or perceived
conflicts of interest and other ethical issues.'' One such
issue is the potential for settlement payments to be directed
to political allies or to further the political or personal
ends of the government attorney.
A second ethical issue is the risk that payments to
unrelated third-parties will be strong-armed from defendants
who seek to avoid publicity or debarment.
The fallacy of tolerating this practice is reflected in
settlement decisions like those requiring private entities to
provide a $1 million endowment to the U.S. Coast Guard Academy,
a $5 million endowment to the Seton Hall Law School, and a $2.4
billion payment to the National Fish and Wildlife Foundation.
Such windfalls should not be bestowed by executive branch
attorneys negotiating settlements with anxious defendants.
Congress, acting with its power of the purse, has the right to
determine which payments should be made.
For these reasons, I support enactment of the Stop
Settlement Slush Funds Act of 2016. I encourage the Committee
to consider clarifying the act that the act would apply to
settlements in both civil and criminal matters that require
private defendants to make donations or payments to persons or
entities not involved in the dispute or injured by the
defendant's actions.
Thank you.
[The prepared statement of Mr. Figley follows:]
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__________
Mr. Marino. Thank you, sir.
Professor Uhlmann?
TESTIMONY OF DAVID M. UHLMANN, ESQ., DIRECTOR, ENVIRONMENTAL
LAW AND POLICY PROGRAM, THE UNIVERSITY OF MICHIGAN LAW SCHOOL
Mr. Uhlmann. Thank you, Chairman Marino, Congressman
Johnson, and Members of the Subcommittee, for inviting me to
testify today.
A case I prosecuted at the Justice Department, where I
served for 17 years before becoming a law professor, highlights
why third-party payments often are needed to address the harm
caused by regulatory violations. The case involved John Morrell
& Company, which until the mid-1990's was the largest employer
in the State of South Dakota. Morrell operated a slaughterhouse
in Sioux Falls that discharged waste into the Big Sioux River.
Under the terms of its Clean Water Act permit, Morrell was
required to treat its waste to limit the concentration of
ammonia nitrogen, and other pollutants that could harm the
river. The permit also required Morrell to test its waste at
least three times each week and to report all sampling to EPA
and the State of South Dakota. Instead, over a period of more
than a decade, Morrell officials engaged in a conspiracy to
violate the Clean Water Act, discharging ammonia at levels
nearly 40 times those allowed under the law and lying to
conceal those violations.
I provide additional details about the case in my written
testimony, but suffice it to say that the illegal scheme was so
well-known within the company that the senior vice president in
charge of the Sioux Falls facility repeatedly asked, ``Who's
going to jail this month?'' when he signed the falsified
discharge monitoring reports.
The Justice Department prosecuted Morrell under the Clean
Water Act but could not prove the extent of the harm to the
river because Morrell had concealed its violations for years.
With the approval of the Federal district court, the
Morrell plea agreement created the Big Sioux River
Environmental Trust Fund to support cleanup efforts on the
river and to restore recreational opportunities for communities
harmed by the company's misconduct. Morrell paid a $2 million
criminal fine and $1 million in restitution and community
service to the Big Sioux River Environmental Trust Fund.
While Morrell was a criminal case, it is instructive about
the shortcomings of the proposed legislation. Environmental
violations cause significant harm to our communities. In some
cases, the harm can be addressed by restitution to individuals,
which the proposed legislation would not disturb. In the
overwhelming majority of cases, however, the harm is
generalized. Air is polluted; water is contaminated. Everyone
in the community suffers, and third-party payments are the only
remedies. These are not minor violations but serious breaches
of the rule of law that cause real harm and have real
consequences.
I have three concerns about the Stop Settlement Slush Funds
Act of 2016.
First, the bill would undermine the Justice Department's
ability to hold corporations responsible for the harm caused by
violations of our environmental laws but also our civil rights
laws, our consumer protection laws, food and drug laws, and
antitrust laws. The bill prohibits only donations but it never
defines that term, which could be construed by courts to apply
to all third-party payments. In addition, while the bill
exempts payments for actual harm, it does not state that actual
harm includes generalized harm like what occurred in Morrell.
Second, the bill's focus on civil settlements rests on a
faulty premise, namely that generalized harm occurs in criminal
cases but not in civil cases. There's no principled reason why
corporations should be required to remediate the harm they
cause in criminal cases but not required to do so in civil
cases. If harm only could be addressed in criminal cases, it
would encourage law enforcement personnel to pursue criminal
prosecution in matters that might otherwise be resolved by
civil settlements, which would risk overcriminalization of
regulatory violations.
Third, Congress is simply not able to legislate to address
all harm that occurs in our communities every time a regulatory
violation occurs. No one disputes that Congress has the power
of the purse. And for that reason, the Miscellaneous Receipts
Act and the Antideficiency Act impose significant limits on
third-party payments in both plea agreements and civil
settlements. But corporations who engage in wrongdoing, not the
general public, should be responsible for addressing the harm
caused by their violations.
I share the Subcommittee's desire to ensure that all third-
party payments serve the public interest and law enforcement
objectives. Law enforcement is a sacred trust, and officials
who have the honor of representing the people of the United
States must serve the common good and not their personal
interests.
In my view, third-party payments must be negotiated
separately from criminal or civil penalties, must address the
harm caused by violations, and cannot augment Federal agency
programs. I also might impose a limit on the percentage of
funds that could be devoted to these payments. But those terms
are nowhere to be found in the proposed legislation.
Thank you again for inviting me to testify, and I'd be
pleased to answer your questions.
[The prepared statement of Mr. Uhlmann follows:*]
---------------------------------------------------------------------------
*Note: Supplemental material submitted with this statement is not
printed in this record but is on file with the Committee, and can also
be accessed at: http://docs.house.gov/meetings/JU/JU05/20160428/104872/
HHRG-114-JU05-Wstate-UhlmannD-20160428-SD001.pdf.
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__________
Mr. Marino. Thank you.
I will now recognize myself for my 5 minutes of
questioning.
First of all, it's a pleasure to be talking with brother
prosecutors. I do want to make clear that we kept the bill as
narrow or simple as possible because we wanted to hear what you
had to say as far as, perhaps, expanding on issues. And just
through your opening statements, I can see areas where we need
to expand civil, criminal--do we say ``funds,'' you know,
instead of ``donations'' and explanations.
But, as a prosecutor, I would like to first ask, there's
been some concern about this curtailing prosecutorial
authority. And, as a prosecutor, as far as discretion is
concerned, we all know that there are multiple ways to resolve
a case. So how would this not resolve a case? Why do you think
it would prevent--if you do--why do you think it would prevent
a prosecutor's discretion in moving forward with a case?
And I'd ask Congressman Lungren if you could address that,
and each one of you, please.
Mr. Lungren. Well, in answer, I would say I don't think it
unnecessarily restricts prosecutors. As I understand the way
the bill stands now, it prohibits mandatory donations but not
redress to individuals as affected.
One of the arguments I see that has been made is that in
criminal cases this has been allowed. But certain criminal
statutes have very specific authorities to do this, and you
have to say, why would the Congress give them specific
authority if in fact they have general authority? I think it's
because Congress looked at those specific cases to say, in
these matters, we can allow a more generalized redress.
And the third point I would make is this. If, in fact, the
harm has been done to the public and is so diffuse that you
can't identify those who are the proximate sufferers of it, if
you can prove in court, as a legal matter, that damage has been
done but it is diffuse, then the money ought to go to the
Federal Government, and the Federal Government ought to decide
through the regular appropriation process how those funds ought
to be expended.
Look, it's a natural thing. As attorney general, I liked
the great flexibility I had, but I remember the largest case we
did, I think, was the famous tobacco case. California got the
largest amount of money from that, but, as I recall, I was not
able to direct those funds under the California constitution.
They went into the general fund. I would've liked to have. I
thought I had a superior idea as to where they should go.
Unfortunately, the California constitution said otherwise.
I think, similarly, the U.S. Constitution, as Senator Byrd
explained in his statement that I have in my statement, it is
the most representative and the most open of our branches.
Mr. Marino. Okay. Thank you.
Professor Figley?
Mr. Figley. I think Congressman Lungren's last point is
exactly right. If there has been general harm, money can go
into the general Treasury, and Congress can decide the best
places to spend it, as opposed to having any government--any
Department of Justice official make that determination.
Mr. Marino. Thank you.
Professor Uhlmann?
Mr. Uhlmann. So Congress has already determined that
criminal penalties go to the Crime Victims Fund, civil
penalties go to the civil Judgment Fund. So the idea that
additional moneys that might be paid as part of either plea
agreements or civil settlements is somehow going to revert back
to the Federal Treasury for Congress to then reappropriate is a
complete misnomer. It would require changing how all criminal
penalties are directed by Congress. It would require changing
how all civil settlements are directed.
But it also misses a broader point, which is Congress has
also has said that restitution to victims takes priority over
all penalties in the criminal system. And as I've already
discussed and as we can certainly discuss at greater length, it
is simply not always possible to identify individual victims to
meet the requirements of Federal law. The environmental example
is the easiest one, but the same concerns arise in other
regulatory schemes.
And so, to your question, Mr. Chairman, we would deprive
prosecutors and civil enforcement attorneys of their ability to
address the generalized harm that occurs in these cases. So
we'd get half a loaf in every case. We'd get criminal penalties
or civil fines. We'd get individualized restitution. We
couldn't address the harm to our communities.
And there are hundreds, if not thousands, of these
violations every year. Congress is not going to be able to
legislate for each one of them. And so this is, I think, the
best way--you know, clear rules about what is allowed and what
isn't allowed in these third-party payments is the best way to
proceed, not by prohibiting them, as this legislation would do.
Mr. Marino. Okay. I'm going to take some liberties here, if
my colleagues don't mind. We don't have a full panel here.
You do understand that if a specific victim can be
identified that prosecutors have the authority to address that
issue and recoup funds for those specific individuals. But if a
specific entity cannot be identified or if there is collateral
damage, I still have an issue with an agency--and, thinking as
a prosecutor, as we do, that discretion or that authority is
very powerful and good in 99.9 percent of the cases. But
Congress does appropriate. And I err on the side of the
Constitution, the fact that, okay, those funds must go to the
Treasury, but I don't have a problem with discussing and
expanding on the ability of Justice or EPA requesting from
Congress additional funds because of X, Y, and Z. We still have
to appropriate, and the appropriation process for the last 20
or 30 years is not what it was designed to be in the
Constitution under all Administrations.
So that's my problem with that, Professor. And you look
like you want to respond to something, so please go ahead.
Mr. Uhlmann. Yeah, no, I mean, I think it's a great
question. And I appreciate the Chairman's concern here. Two
thoughts.
One, you know, a great example of a case that's sort of
happening right now is Volkswagen. Everybody's familiar with
the Volkswagen debacle. Volkswagen had defeat devices on its--a
lot of its cars that allowed them to evade the requirements in
the United States under the Clean Air Act.
There are a lot of victims, and there are a lot of
consumers who were defrauded. And I don't see anything in the
proposed legislation that would prevent those individual
victims from being compensated by Volkswagen.
Mr. Marino. Please bear in mind, this is just exactly why
we're having this hearing.
Mr. Uhlmann. Right. Right. Absolutely.
Mr. Marino. Okay.
Mr. Uhlmann. But I think that even the skeletal, sort of
trimmed-down version of the bill that we had before, that we've
started with, preserves the restitution for those individual
car owners.
Mr. Marino. Yeah.
Mr. Uhlmann. But what about the rest of us? I mean,
Volkswagen's conduct--you know, some news reports have
suggested that hundreds of people will die because of the
nitrogen oxide that Volkswagen cars emitted into the
environment. How do we address that harm?
Mr. Marino. I don't dispute that with you. But I believe
that's Congress' responsibility.
Mr. Uhlmann. Well, but is Congress going to--so for each of
these cases? Are we going to have the Volkswagen Harm Act? Are
we going to have the Exxon Harm Act? The BP Harm Act? I mean,
you see----
Mr. Marino. No. We're going to go through the appropriation
process by which any department or agency requests money for
its original budget.
Mr. Uhlmann. Of course. And EPA--I'm not sure how well
their budgets are faring in this Congress, but EPA does have--
you know, makes a budget request every year to address air
pollution.
Mr. Marino. Sure.
Mr. Uhlmann. But my point is, you know, how do we address
the air pollution caused by Volkswagen, or the harm to the Gulf
of Mexico ecosystem caused by BP. The whole idea of these
payments is they allow, not the taxpayer, but the company
involved to pay for the harm that they did in cases where harm
is not identifiable to individuals.
Mr. Marino. And this isn't the time or place to discuss the
extent of the damage. I mean, that's for another hearing. But I
have used way over my time. I----
Mr. Lungren. Mr. Chairman, could I just respond a little
bit?
Mr. Marino. As long as my colleagues agree.
Go ahead.
Mr. Lungren. And the answer--I think we've given an answer
to the question. The question is, how do we remediate that
damage that was done? As trained lawyers, we prove it.
It seems to me the agency or the Justice Department makes
the allegation that this amount of extra pollution has been
crated, that would seem to me to be an evidence of the damages
to be paid or additional damages to be paid. Whoever is the
appropriate executive branch agency comes to the Congress,
makes the case that this additional impact on the environment
has occurred, this amount of money has been extracted from the
perpetrator, and we believe that using this amount of money or
a portion of it to respond to it is appropriate. And then
Congress makes the decision.
Mr. Marino. Yeah.
Mr. Lungren. The other thing is, as I understand, in the
bill, you allow specifically remediation of environmental
damage----
Mr. Marino. Yes.
Mr. Lungren [continuing]. But it has to be proven. It has
to be proven. Let's not forget that. We're talking about
proving it.
And, again, if the impact is so diffuse but you can still
get a sum of money for it, run it through the appropriation
process, where Congress, if it does its job properly, ought to
be able to respond in appropriate fashion.
Mr. Marino. All right.
Professor, do you----
Mr. Figley. Very briefly.
The complexity of the problem--somebody has caused a
general, diffuse difficulty for the American people--can't be
resolved by deciding that this particular university or
environmental organization should receive money as opposed to
this one.
Mr. Marino. Yeah.
Mr. Figley. If that decision is going to be made, it is
much better that it be made through the appropriations process
than by a Department of Justice official.
Mr. Marino. Good point.
I now beg forgiveness from my colleagues and recognize the
Ranking Member of the Subcommittee, my friend, Mr. Johnson.
Mr. Johnson. Thank you, Mr. Chairman.
I can't resist asking Professor Uhlmann to offer the
response that I see he's burning to make.
Mr. Uhlmann. I have such a good poker face.
No, I agree with Professor Figley. I mean, this notion of
direct--you know, it's a famous case now. It involves the
current Governor of New Jersey. I won't name him, but, you
know, when he was U.S. attorney, funds were directed to his law
school. And that shouldn't happen. And I think everybody agrees
that have shouldn't happened. I don't know, I even think the
Governor of New Jersey might agree that was a mistake, in
hindsight.
But it's not the case, as Professor Figley suggests, that
environmental prosecutors, my former colleagues, are handing
out money to their favorite environmental charities. The
practice at the Justice Department, codified now--I mean, made
clear in two separate policy documents--first, one that was
issued over my signature in December of 2000 and then another
that was issued in the Bush administration by Assistant
Attorney General Ron Tenpas--require that the funds only go to
organization that Congress has already identified as
organizations that can receive this type of funding.
So I think it's important to sort of describe what's really
going on here and recognize that the funds that we're talking
about--the funds in the Gibson Guitar case that Congressman
Lungren has talked about went to an organization so it could
address the harm caused by illegal logging operations. Congress
had designated that organization, established that
organization, to receive this type of funding.
It's not going to everybody's favorite environmental
groups; it is not going to law schools. But I agree with both
of my colleagues on the panel that it shouldn't be going to
those organizations, and I'd have no objection to Congress
saying that can't happen.
Mr. Johnson. Well, tell me now, if relief must be a direct,
point-to-point remediation of harms, how do you directly remedy
the damage of an oil spill wherein the damage--or whereby the
damage is to all of the birds along the shore? So, in other
words, a bunch of oily birds, how do you directly remedy the
harm done to those birds?
Yes?
Mr. Lungren. I think you do what we've done in the past,
which is require the companies responsible to pay for the
remediation.
Mr. Johnson. Well----
Mr. Lungren. It doesn't stop them from hiring----
Mr. Johnson. How would----
Mr. Lungren. It doesn't stop them from hiring
organizations----
Mr. Johnson. How would you do that?
Mr. Lungren [continuing]. Who know how to do that.
Mr. Johnson. How would the company actually remediate the
harm to all of the birds?
Mr. Lungren. Well, as they've done in the past. They hire
groups that actually go out and do it. I don't see any problem
with that. I will say this, though.
Mr. Johnson. Well, isn't that a donation?
Mr. Lungren. There's no problem with that, as long as it's
specifically to--no. If it--if you look at the language of the
bill, that is not a donation. It is a service that is rendered
as----
Mr. Johnson. Well, you would make----
Mr. Lungren [continuing]. A result of the remediation. So
in that sense, that is not a donation, as I understand the
terms of the bill as written.
Mr. Johnson. But the order, pursuant to the litigation,
would direct a--would be to an entity to actually remediate----
Mr. Lungren. Right.
Mr. Johnson [continuing]. The harm.
Mr. Lungren. That would be a service. As I understand the
language of the bill, that would be allowed. That would not be
considered a donation. That's made an exception to the
definition of donation. I do know this.
Mr. Johnson. What's the difference?
Mr. Lungren. The difference is, that's the way the law was
written.
Mr. Johnson. Well----
Mr. Lungren. Secondly, I would say this. I have not been
able to see any improvement in the wastewater, anywhere that I
have been, as a result of a million dollar donation to the U.S.
Coast Guard Alumni Association.
Mr. Johnson. Well, now, I mean, you take one particular
example and try to make it the norm. And I would--I would
suggest that that's not the norm. Same way the Governor of New
Jersey directing funding to his alma mater, it's an anomaly,
and we don't want to throw the baby out with the bathwater
here.
What do you say to that, Professor Uhlmann?
Mr. Uhlmann. Well, that expression, I think, captures the
whole problem here. I mean, there is no question that there
is--there are circumstances where this authority could be
abused, and we've come up with some isolated examples of where
it might have been in the past.
I mean, I don't want to be on record saying that, you know,
the payment to the Coast Guard, which I'm not familiar with all
the details about, or even the Seton Hall donation was an abuse
of authority, but they could be. And I think limits on the
authority in that way could be helpful. I do think they are
already provided by existing policy, so I'm not sure that
there's something to add here for Congress.
But look, I think clear rules of the road, which is one of
the suggestions that Congressman Lungren made, are always
helpful. I think clarifying what is and is not acceptable about
third-party payments could be helpful. But this misnomer that
somehow third-party payments are a way that people are self-
dealing, are pursuing partisan agendas, are engaging in
conflict--you know, creating conflicts of interest, I mean,
it's not the Justice Department I served in. And I served there
for 17 years in both Democratic and Republican administrations.
And I think it's unfair to describe the government in that way
or suggest that that's what's happening in these cases.
These are real harms that don't have identifiable victims
that the government is trying to address, as it is obligated to
do so, to do justice in its cases.
Mr. Johnson. Thank you, Professor. In your written
testimony, you observe that the practical effect of H.R. 5063
may be to generate more criminal enforcement of environmental
cases.
Could the Justice Department have brought the Morrell case
you cite in your written testimony as a civil case, and what
other types of cases might also be brought in criminal instead
of civil actions as a result of H.R. 5063?
Mr. Uhlmann. Well, Morrell, very definitely, could have
been either a criminal or civil case. I think the evidence that
we were able to amass about statements like who's going to jail
this month, there was another--there was a document that
actually said the detailed violations, and the cover memo said
this--this document has been destroyed at the plant and should
be destroyed by you after reading it. So my fellow former
prosecutors will understand why we got pretty excited about
that as a criminal case.
But the reality, under the environmental laws and under
most of our public health and safety laws, is that prosecutors
enjoy enormous discretion about whether any particular
violation is going to be criminal or civil. And so, you know,
I've written about a lot and focused a lot about the need to
exercise that discretion in an appropriate way to limit
criminal enforcement to the most egregious violations.
But look, in the close calls, and there are a lot of close
calls that we ask the Justice Department to make and that we
trust them to make properly, you know, if they feel like they
can redress the harm to the communities if they bring a
criminal case but can't do so in a civil case, it's going to
tip the balance toward criminal enforcement. At least in some
cases it otherwise might be left for civil enforcement, and
that's the concern I was raising.
Mr. Johnson. Thank you.
And with that, I'll yield back, Mr. Chairman.
Mr. Marino. You know, this--we are all attorneys up here. I
don't know if that's a good thing or a bad thing, but this is
just actually one of the most interesting discussions that I
have had the privilege of chairing since I've been here.
And the Chair now recognizes another prosecutor from the
State of Texas, a former U.S. Attorney, Congressman Ratcliffe.
Mr. Ratcliffe. Thank you, Mr. Chairman.
I thank the witnesses for being here today.
You know, I've been grateful over the last several months
to have the opportunity to participate in something called the
``Article I Project.'' It's a network of House and Senate
Members focused on reclaiming, as unnecessary as that may seem,
reclaiming the Article I powers of Congress and limiting the
ever-expanding executive branch.
And I think this hearing, I agree with you, Mr. Chairman,
very interesting, and it really underscores the critical need
for Congress to reassert the separation of powers. In this
case, it seems to me especially so in response to what appears
to be really an outrageous overreach by the Administration and
disregard for Congress' constitutional power of the purse.
This Department of Justice scheme of funneling money to
activist groups, some of those groups where Congress has
specifically denied funding, Federal funding, is especially
troubling, as a former prosecutor and someone that's worked
closely with the Department of Justice. And, you know, equally
troubling is the fact that the Department of Justice, not only
have they been less than forthcoming, it seems, in response to
this Committee's investigation, but essentially have doubled
down on a practice that would appear to ignore the Constitution
and lacks transparency with regard to the appropriations
process that allows the American people to hold their
government accountable, and instead, here we see money that
should go to the U.S. Treasury going to DOJ selected winners
and losers. In fact, DOJ picking winners and losers from groups
that stand to gain from these settlements, and in some cases,
who have actually lobbied DOJ to receive them.
So beyond the constitutional concern, I'm troubled by a
lack of transparency and a host of ethical issues that this
scheme would present. And the idea that a Department of Justice
official can direct immense sums of money to a pet organization
or political allies with zero accountability is something that
I would think would trouble all of us, Republicans and
Democrats.
So let me start out, Congressman Lungren, great to see you
again back here on the Hill. You talked about this grant
phenomenon in your testimony at both the State and Federal
level. I know you've seen it as the attorney general in
California, these grants being these, to quote you, coerced
payments to entities that are mandated by officials acting with
the full power and majesty of the government.
Let me ask you this. First of all, do you think that this
scheme that the Department of Justice, my words, has doubled
down on, do you think it violates the Constitution, number one?
And secondly, would you--depending on your answer, would you
elaborate on why you think the allocation to Congress of the
power to spend Federal funds is critical to the separation of
powers that I talked about?
Mr. Lungren. Well, first of all, thank you very much, a
fellow Notre Dame Domer. I appreciate that.
I have been concerned, over the years I was in Congress, at
the failure of Congress to assert itself appropriately. And
when you study the Constitution, the Constitutional Convention,
and the arguments made in the Federalist Papers, it is very
clear that they felt that the power to extract funds and to
spend funds on the part of the government was one of the
potentials for tyranny. And I'm not suggesting we're involved
in tyranny, but it is an essential bedrock principle that the
Founding Fathers talked about.
They made a conscious decision, I think, to make Congress
Article I. The first thing they thought about when setting up
the government was the most representative branch of the
government. Then they also felt that it was important, between
the Senate and the House, that the House be given primary
responsibilities in these matters, even though I think we
forfeit that right in some of the legislative legerdemain that
takes place where we send a bill over to the other side, they
take everything out except the title, and then they send it
back so that the revenue bill didn't start in the House,
essentially.
But they did that because they knew that the Members of the
House had to go before the people more often than anybody else,
and that, therefore, if the average citizen--if the citizenry
felt that there was a violation of that trust in that most
important area, they could respond. To the extent that gets
placed in a gray area, and I think this is--look, if you're
talking about a couple of dollars here and there, all right.
But Senator Everett Dirksen once said a billion dollars here, a
billion dollars there, pretty soon you're talking about real
money.
Now, as I understand it, we're talking about a billion
dollars in just the time that the Congress had the temerity to
ask the Justice Department what they were doing. That doesn't
sound to me like an olive branch to the House of
Representatives.
And the last point I would make is this. I happen to
applaud what Professor Uhlmann did at the Justice Department. I
think you were moving in the right direction. But despite his
best efforts, you still had, in 2006, that million dollars
going to the Coast Guard Alumni Association on a matter of the
environment.
Madison said it best. He talked about if--if men were
angels, we wouldn't need government. But men are not angels, so
we need government. But then he said: Once you decide those who
are in the government--in the government, you have to figure
out how to govern the govern. And the answer he gave, as I
mention in my paper is, you pit ambition against ambition.
In one sense you pit one branch of government against
another. That's what we do. And one of the ways you do that is
you give primacy to the House of Representatives for spending
matters. It is not neat. It is not pretty. It is not the most
efficient way of doing things, but that is the genius of our
Founding Fathers that they thought, as Justice Scalia said many
times: The greatest protection for our civil liberties and
against their invasion was the construct of government that we
set up.
And I think that's lost in today's debate, and Congress has
got to be one of those branches of government that understands
their responsibility, understands their role, and understands
the limits of all branches of government.
I'm sorry it was a long-winded answer. It gave me a chance
to----
Mr. Ratcliffe. No, I enjoyed your answer. Thanks,
Congressman.
And my time has expired, but if the Chairman would beg my
indulgence. I have one quick question I really want to ask
Professor Figley because we were both at the Department of
Justice. I'm not sure if we were there at the same time.
But I'm curious about your experience with respect to the
mandatory payments to nonvictim third-parties. More
importantly, how has this practice evolved in recent years, and
most particularly, in your opinion, what do you think is the
driving force behind this?
Mr. Figley. I never had anything to do with it when I was
at Justice. I mainly defended tort cases, big ones, but tort
cases.
My concern here is that we saw, as our mission in life,
protecting the Judgment Fund and protecting the people's money.
Here, I think the practice gets away from that.
Professor Uhlmann talked about the Gulf Oil spill and the
money there. There's a $2.4 billion grant to one particular
environmental organization, and it may be a perfectly good one,
but I think it would have been much better to have had all of
the environmental organizations interested in receiving a $2.4
billion grant, apply for it and go through procedures where
there would be transparency and clarity about where the money
was going and why it was going to that particular entity.
Mr. Ratcliffe. I appreciate your response.
And I appreciate the Chairman's indulgence. With that, I
yield back.
Mr. Marino. The Chair now recognizes the Ranking Member of
the full Judiciary Committee, another attorney, Congressman
Conyers.
Mr. Conyers. Thank you, Chairman Marino.
I welcome all the witnesses, of course.
Our former colleague witness here today argued that
enforcement--agency enforcement decisions must be motivated by
the public interest and not politically motivated self-
interest.
And so, Professor Uhlmann, what guidance, what laws
currently exist to promote the public interest in settlement
agreements, in your view?
Mr. Uhlmann. Well, I absolutely agree with former
Congressman Lungren that that is the role of law enforcement.
And, of course, all the laws that are within the purview of
this Committee are laws that are designed to promote the public
interest, protect the public from the--from a whole host of
potential harms.
Congress already passed the Miscellaneous Receipts Act,
which ensures that funds that are--have been directed by
Congress can't be redirected by agencies. Congress already
passed the Antideficiency Act, which ensures that these sort of
third-party payments that we're talking about can't be used to
augment agency budgets. The agencies can't have a role in
administering the funds.
Congress already designated certain organizations to
receive payments like those we're talking about. In fact, like
the payment in the Gulf Oil spill that Professor Figley is
talking about, this notion that somehow all the environmental
groups should have lined up and petitioned the Justice
Department for funding, I mean, respectfully, you know, that
would give me far more concern than what the Justice Department
did.
They made sure that the money went to an organization that
Congress already established in the public interest. And I
happen to share the concern about the size of that payment, but
it went, as it should have, to an organization that Congress
determined should receive these funds. And then, as I indicate
in my testimony, there are a number of policy statements that
the Justice Department and the various regulatory agencies have
developed to do just what you're talking about, Congressman
Conyers.
You know, I suppose those could be codified by Congress,
but they do exist in each of the various--at the Justice
Department in each of the various regulatory agencies.
Mr. Conyers. Did anyone want to add to this question?
Mr. Figley. If I might, Congressman.
Mr. Conyers. Yes, Mr. Figley.
Mr. Figley. I think that presents a false choice. We have
$2.4 billion. Is it for Justice to decide to give it to this
organization or to set up a way for different organizations to
apply to the Department of Justice for the $2.4 billion?
Neither of those is the answer.
The answer is, put the money back in the Treasury, let
Congress decide how the money will be utilized, and if there is
to be a grant program, it should be administered through the
appropriations process.
Mr. Conyers. Uh-huh. Mr. Chairman Emeritus.
Mr. Lungren. See, I'm bothered by the example of the
Housing and Urban Development's Housing Counseling Assistance
Program. My last year here--last term here in Congress, we
voted on some very tough budgets, as you know. We had to
eliminate that, we thought, that 1 year, $88 million. The next
year we came back, my very last year in the Congress, we came
back with a budget that granted, I think it was 55 percent of
that total, and then we maintained it at that level. That's
what we thought in terms of our budget priorities. And yet if
you look at the Citibank settlement as well as provisions in
the Bank of America settlement, $150 million worth of mandated
donations went to those housing nonprofits, which essentially
reversed the decision of Congress.
Now, you might say, and we might agree, that Housing
Counseling Assistance is an appropriate program, but it seems
to me if Congress, looking at all the priorities out there,
made the decision that it could only be funded at half of what
it had been before, then that money should be----
Mr. Conyers. Okay.
Mr. Lungren [continuing]. That additional money ought to be
determined by Congress, not by HUD.
Mr. Conyers. All right. Let me close with this final
question about Mr. Figley's recommendation that H.R. 5063 apply
to criminal settlement agreements.
Professor Uhlmann, what would--affect would that have on
criminal enforcement cases?
Mr. Uhlmann. You know, if this type of language also
applied in criminal cases, it would just shut down the Justice
Department's ability to address a lot of the harm that's caused
by criminal violations of our public health and safety laws.
And it would give corporations a free pass for the harm they
caused.
Now, Congressman Lungren suggested, you know, go prove it
in court. But so much of the kind of harm to communities, harm
to society that we're talking about is not possible to prove,
certainly not beyond a reasonable doubt, and even--even by
clear and convincing evidence, where it is not possible to
monetize. And it's those companies, not the American taxpayers,
who should be addressing that harm.
And so it's particularly important to have this authority
in criminal cases because if our criminal authorities are being
exercised properly, those are the worst violations that cause
the most harm. And the companies who engage in that misconduct
should be held accountable.
And I worry if the Committee were to accept Professor
Figley's recommendation, it would just make a potentially bad
bill worse.
Mr. Conyers. I think you're probably right.
I know we could continue this discussion, but my time has
expired, and I thank you all for this very important hearing.
Mr. Marino. I do have one more question I'd like to throw
out to all three of you gentlemen, but I'm starting to get
flashes back of law school when we talk about the proximate
cause in Cardozo and Palsgraf, and the whole nine yards. I
mean, when--that can go forever.
But, Professor Uhlmann, there's no question that I support
the fact that Justice, the agency, can see that those that are
directly injured receive the funds to compensate and to even go
further than compensating. But let's talk a second about the
banking settlements, which trouble me.
Mandatory donations that did not conform to EPA guidelines
that you cite with respect to the amount of credit given for
donations. There's credit given. Lack of oversight. There's
lack of oversight in all this. That's probably in addition to
the issue concerning Congress controlling the purse strings.
That's the next thing that really bothers me, lack of
oversight, where is it going and why.
Augmenting agency funds by reinstating funding, Congress
specifically cut. So what say you?
Mr. Uhlmann. You know, I think the Chairman's concerns are
reasonable. I mean, I understand where you're coming from.
Mr. Marino. Thank you.
Mr. Uhlmann. And I think, you know, in the area where I
work, which wasn't banking, there are pretty clear rules of the
road that are governing how the Justice Department and EPA
exercise its authority.
If that needs to be done across the government to ensure
that other sectors have similar rules, then that should be
done. Whether the best way to do it is legislation or whether
the best way to do it is policy statements, I'd, you know,
defer to the Committee about, but--or the Subcommittee about.
But I would say this. If the Subcommittee were to
legislate--I mean, I think it's far better to legislate through
positive rules that say these are the things you're allowed to
do, and certainly then to add, and these are the things you're
not allowed to do.
If there are things that we think are good--and I think
there's actually a lot that we would agree is good. I think
we--we don't want--in fact, I think your opening statement, or
perhaps it was the full Committee's Chairman's opening
statement, recognized that there can be generalized harm, and
companies should be on the hook for that if they break the law.
You know, we should be--you know, we shouldn't lose sight
of the fact that companies that break the law get a significant
advantage, competitive advantage against other companies who
follow the law. And so, you know, they're properly punished
when they break the law, and if they cause harm, they should
compensate the communities that have been harmed for doing so.
And so, you know, I--I mean, I certainly felt as we--this
sort of all grew up when I was at Justice, and I did feel at
times like we were kind of in an open--open field where there
was the potential for the kinds of things that the Chairman's
described happening. And so I really wanted rules. And I even
might have thought at some--at some point that maybe Congress
should write those rules. But Congress wasn't writing them, so
wewrote them.
And we tried to be--wetried to be principled,
notwithstanding the fact that that one case happened on my
watch. Although it was a case brought--I now know which case
Congressman Lungren was talking about. It was brought by the
U.S. attorney in Connecticut.
Mr. Lungren. Oh.
Mr. Uhlmann. My office was not involved. I think it was a
deferred prosecution agreement. We didn't do those. But, you
know, the bottom line is there's so much good here and so
much--well, there's so much bad that happens that we need to
address, and I think it's good to address that. We want the
government to address that.
We're not taking money away from the taxpayers. We're not
taking away the money that this Congress--and every Congress
has the Article I authority to appropriate. We are saying
corporations should pay for the harm they cause. And we don't
want--and I would--I think it would be a shame if there was
legislation that let companies off the hook and prevented the
government from being able to address those harms.
Mr. Figley. Mr. Chairman.
Mr. Marino. Processor Figley, would you like to respond?
You don't have to, but if you'd like to.
Mr. Figley. Well, very briefly. Nobody's saying let
corporations off the hook. The question is, when you get money
from them, who should decide where that money goes? And that's
something that I don't think the Department of Justice should
be in the business of doing.
And I--I have the highest opinion of the Department of
Justice and the attorneys that work there. It is a bulwark of
inertia in the very best direction. Throughout the Department,
people do what they think is right. They don't try to serve
their own purposes. But it shouldn't be the business of the
Department of Justice to dole out money, particularly grants of
billions of dollars.
Mr. Marino. Okay.
Mr. Lungren. Mr. Chairman, I----
Mr. Marino. Professor.
Mr. Lungren. I have the greatest respect for Professor
Uhlmann. I really do think he did very good things in the
Department leading in the right direction. Two of his responses
cause me pause, however.
In the one case, he said if this bill were to pass, there
would be a tendency, perhaps, for officials of the Justice
Department to move cases from civil side to criminal side. But
then in response now to if it applied to the criminal side, it
would be, we couldn't go forward because you have to prove
guilt beyond a reasonable doubt.
I think the dilemma lies in what do we believe about
proving cases? As prosecutors, we all know--and in California,
I was responsible for the ultimate cases, the death penalty
cases. We all know, in our gut, people that were guilty that
were never successfully prosecuted. Why? Because we couldn't
prove beyond a reasonable doubt.
Mr. Marino. Sure.
Mr. Lungren. That's the way the system works.
And for some reason, to be hung up on the fact that, man,
if you have to go to court, you've got to prove these cases and
we've got to prove what the dimensions of the harm are bother
me. That's what we do. That's part of the requirement in our
system, and we don't catch all the malefactors that way, and we
don't punish all the harm that has been done because the system
is set up that to protect the innocent, we accept those things.
So I would like us to have more proof regarding these
things. And then with respect to the money, the only reason
these monies are given is because of the power and the majesty
of the government. I used to remind my prosecutors, you know,
always keep in the back of your mind you could be wrong.
Because if, in fact, you have someone who is guilty, you should
bring the power and the majesty of the government against him,
but if you haven't, think how unfair that is to an individual.
And so there's a certain sense of humility that we have to
maintain in all this. And I do believe, and I firmly believe
this, with the people that work with me at the California
Department of Justice and with those that I know at the U.S.
Department of Justice, they are good people. They are trying to
do the right thing, but sometimes even good people have to have
guidelines that--of restraint, and the Constitution gives us
that, and maybe we ought to look at the Constitution
occasionally.
Mr. Marino. Well, gentlemen, this has been an incredible
discussion. I have the utmost confidence and faith in the
frontline prosecutors. It's just if we learn to keep the
politics, not pointing the finger at anybody, out of this,
might just sleep better at night knowing that with the amount
of prosecutors that we have, not only at Justice but at the
State and local levels. And I certainly appreciate what you've
contributed today.
Yielding now to the gentleman for further questions.
Mr. Johnson. Thank you, Mr. Chairman. And I associate
myself with the remarks that you are in the process of making
about our dear friends here.
But I would like to ask Professor Figley, since you served
in the civil division of the Justice Department, have you had
any experience showing that unlawful conduct was the direct and
proximate cause of an injury, direct and proximate cause? I
mean, that's a standard that does not currently exist in civil
enforcement actions. Is that correct?
Mr. Figley. I fought against that in a number of cases
brought against the government. Occasionally, we would bring
big suits, and I had million dollar settlements in a case where
a corporate officer parked a car in high, dry grass in a
national park and caused a huge forest fire, and another case
where there was a government-owned irradiation facility where a
capsule holding radioactivity cracked and it contaminated the
whole facility, and it was worth millions of dollars. And
there, we'd have to prove it up or show----
Mr. Johnson. Have to prove proximate cause.
Mr. Figley. Yes. Did the defendant's act cause in fact what
happened, and was it connected close enough in time and space--
and you talk about Palsgraf--and what seems reasonable to
people making hard political choices, that it's close enough to
establish liability?
And in those two cases, we were able to convince the
defense attorneys that we had the goods. Your car starts a
forest fire because of the catalytic converter, there's not
much question. And there wasn't much question with the cracked
capsule. So we were able to prove our cases and accomplish a
settlement.
Mr. Johnson. With direct and proximate cause being a new
standard that is proposed by this legislation, what--I mean, so
proximate cause is not the same as direct proximate--direct
proximate cause, is it? That's kind of like a heightened
standard. There is just absolutely no deviation between points,
causation.
Mr. Figley. When we talk about causation and negligence,
there's two parts. First is cause in fact.
Mr. Johnson. Right.
Mr. Figley. Did what you do, if you hadn't done it, it
wouldn't have happened. So if you were speeding down the New
Jersey Turnpike going 40 miles over the speed limit, and when
you got to Maryland, you drove cautiously, and you hit a little
old lady walking across the street, your action of speeding
through New Jersey for 2 hours was a cause in fact of your
hitting the little old lady, because she wouldn't have been in
the street if you'd gotten there later.
Now, the question about liability then turns on, is there
proximate cause? Is this close enough in time and space that
the law will say, yes, there should be liability? Or is it too
far removed? And most courts would say speeding in New Jersey 4
hours ago is too far removed to impose liability. But both--to
establish liability, you have to prove both parts. And I don't
see a difference between direct cause and cause in fact, which
is what I was talking about.
Mr. Johnson. Well, yeah, I mean, if that same person
speeding hit--ran into a--ran up on a curb and hit a ladder
upon which someone was washing windows, and then that person
fell off the ladder and went through the windshield of a car, I
guess--I mean, a direct and proximate cause----
Mr. Figley. There's clearly direct cause. Now, whether
you're going to have proximate cause and liability is the
harder question.
Mr. Johnson. I guess I'm trying to--I'm trying to come up
with a scenario where you may not have a direct cause, but you
do have causation from--that was proximately caused. You do
have a damage that was proximately caused as opposed to
directly caused. And I'm just curious as to why the language
``direct and proximate cause'' appears in this legislation, and
I wonder what effect the requirement of having to prove direct
and proximate cause would have on secondary remediation of
unlawful conduct.
Mr. Figley. I would see the proximate cause part being a
limitation so that if there's a direct cause, there also has to
be a proximate cause. But the direct cause is the easy one. It
wouldn't have happened but for this thing going on, there would
not be a direct cause.
Mr. Johnson. It's definitely a heightened requirement of
proof. Is that correct, Professor Uhlmann?
Mr. Uhlmann. Of course, I teach criminal law and not tort
law, but the--I mean, I think Professor Figley is right that
there are two separate causation concepts that govern both
criminal law and tort law. I mean, causation is an issue in the
criminal law as well, and so there has to be actual cause in
fact. There has to be proximate cause.
This term ``direct'' does come out of--I'm not sure where
it comes from. So, you know, we're not--the Chair said we're
not in markup. If we were, I would suggest that a better term
would be ``actual'' rather than ``direct,'' which is, I think,
the correct term from tort law.
Although, frankly, and I think this is what Professor
Figley was suggesting, something--proximate cause by itself
would be sufficient because you can't--something can't be the
proximate cause without also being a cause in fact. Something
could be a cause in fact without being the proximate cause. So
we tend to focus on proximate cause, although it does need to
be linked in the chain of causation to be proximate--to
proximately cause something.
Mr. Figley. In some States, the elements of negligence are
listed as duty, breach of duty, proximate cause, and damages.
In other States, they're listed as duty, breach of duty, cause
in fact, proximate cause, and damages. So as with so many
things, it varies with State law.
Mr. Johnson. Well, thank you. And I will conclude by saying
that, Professor Lungren, you've missed your calling. I think
you should be on the academic side also. But thank you all.
Mr. Marino. Thank you. I think, in closing, I can shed some
light on direct and proximate cause that's referred--that's
specifically delineated in the Crime Victims' Act, Title 18,
USC section 3771(c) and--in general, the term ``crime victim''
means a person directly and proximately harmed as a result of
the commission of a Federal offense or an offense in the
District of Columbia.
So I mean, we make a lot of--I tell you, what you folks did
for me today, tonight I'm going to have nightmares about law
school exams, okay, with proximately and related and direct and
how far do we go from, as my friend's example of the speeding
car hits a ladder, the guy falls off the ladder through the
windshield, the guy in the car hits somebody else, destroys
this.
Mr. Uhlmann. Kind of like a law school hypothetical, isn't
it?
Mr. Marino. I don't even want to even think about it.
Mr. Lundgren. That was in Mad, Mad, Mad World.
Mr. Marino. Yeah. Thank you so very much. This concludes
today's hearing.
I can't tell you how much that we have enjoyed this
discussion. Please do not hesitate, if you care to, to send us
recommendations, additions, deletions. This is how good law is
made. We congressmen, as soon as we get elected, we think we're
taller, smarter, and better looking, but this is how good law
is made when we reach out to everyone who has a dog in the hunt
and the expertise of people like you so we don't have to go
back. And we can't anticipate everything, but I think my
colleague will agree with me, having discussions like this just
is the right thing to do.
So without objection, all Members will have 5 legislative
days to submit additional written questions for the witnesses
or additional materials for the record. This hearing is now
adjourned, and thank you very much.
[Whereupon, at 11:40 a.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
Material Submitted for the Hearing Record
Material submitted by the Honorable Henry C. ``Hank'' Johnson, Jr., a
Representative in Congress from the State of Georgia, and Ranking
Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law
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__________
Prepared Statement of Joel A. Mintz, Professor of Law,
Nova Southeastern University College of Law
My name is Joel A. Mintz. I am a Professor of Law at Nova
Southeastern University College of Law, where I have taught
Environmental Law and related subjects since 1982. Prior to that, for
six years, I was an attorney and chief attorney with the U.S.
Environmental Protection Agency (EPA) in Chicago and Washington, D.C. I
have written or co-written three books and numerous law review articles
regarding environmental enforcement, which is the major focus of my
academic research.
I am submitting this statement in respectful opposition to the bill
titled ``Stop Settlement Slush Funds Act of 2016.'' I believe that this
bill, if enacted will severely undercut an immensely valuable
environmental and public health protection program, EPA's Supplemental
Environmental Program (SEP). It will also interfere unduly with the
discretion presently afforded to (and needed by) federal agencies and
prosecutors.
A Supplemental Environmental Program (SEP) is defined in EPA's
March, 2015 policy on the subject as ``an environmentally beneficial
project or activity that is not required by law, but that a defendant
agrees to undertake as part of the settlement of an enforcement
action.'' According to the Agency, ``SEPs are projects or activities
that go beyond what could be legally required in order for the
defendant to return to compliance, and secure environmental benefits in
addition to those achieved by compliance with applicable laws.'' Their
primary purpose is to encourage and obtain environmental and public
health benefits that may not otherwise have occurred in the settlement
of an enforcement action. They advance worthy and important goals,
including (among others) protecting children's health, preventing
pollution, securing the development of innovative pollution control
technologies, and ensuring environmental justice.
The Random House Dictionary of the English Language defines the
phrase ``slush fund'' as ``a sum of money used for illicit or corrupt
political purposes, as for buying influence or votes, bribing public
officials, or the like.'' The SEPs permitted by EPA cannot be fairly
considered slush funds in any sense. Instead they are limited and
prudent exercises of enforcement discretion that benefit the Agency,
regulated parties, and local communities alike.
To be acceptable to EPA, all proponents of SEPs projects must
establish a ``substantial nexus,'' i.e. a relationship between the
alleged violation and the project proposed. For that reason, SEPs are
generally carried out at the site where the violation occurred, at a
different site within the same ecosystem, or within the same immediate
geographic area. Moreover, to ensure that SEP funds are not used
improperly, EPA has established--and enforced--strict limitations on
how those funds may be spent.
Thus, for example, SEP monies may not be used in support of general
public educational or public environmental awareness projects; as
contributions to environmental research at a college or university; as
cash donations to community groups, environmental organizations, state
local or federal governmental entities or any third parties; to support
beneficial projects unrelated to environmental protection; and in
conjunction with projects to be undertaken with federal financial
assistance. Similarly, SEPs may not provide additional resources to
support any specific activities performed by EPA employees or
contractors, or for any activity for which EPA receives a specific
appropriation. SEPs may also not provide funds to perform work done on
any federal property, or for any project performed by a federal agency
other than EPA.
To the best of my knowledge, these limitations are taken seriously
by EPA when they assess the acceptability of SEP proposals. They
establish appropriate, realistic, and effective prohibitions of illicit
or corrupt implementation of SEPs in individual case settlements.
At the same time, EPA's judicious approach to SEPs prevents the
possibility that violators will be permitted to benefit too greatly
from the performance of a SEP. Thus, the Agency's SEPs Policy does not
alter the obligation of an environmental violator to remedy its
violations expeditiously. Nor does it excuse violators from their
obligation to pay penalties that recoup the economic benefit that a
violator has gained from noncompliance with the law, along with
``gravity-based'' penalties reflecting the environmental harm caused by
the violation. The money from both types of financial penalties must be
remitted directly to the United States Treasury.
Notably, SEPs can create ``win-win'' scenarios for all parties
involved, including regulators, regulated companies, and local
communities. SEPs demonstrate EPA's willingness to cooperate with the
regulated community, and they create a more flexible regulatory
climate. SEPs also benefit environmental violators by reducing some of
the civil penalties those parties would otherwise have to pay. They
help repair corporate public images that would otherwise be further
harmed by negative environmental publicity; and they promote
settlements, allowing businesses to avoid the costs and risks of
litigation. Finally, SEPs increase the likelihood that communities
forced to bear the burden of environmental degradation will benefit
directly from enforcement actions against violators.
Regrettably, the proposed Stop Settlement Sludge Funds Act appears
likely to prohibit many of the important benefits now provided by EPA's
SEPs program. The bill's definition of the term ``donation''
specifically excludes ``any payment by a party to provide restitution
for or otherwise remedy the actual harm (including to the environment),
directly and proximately caused by the alleged conduct of the party
that is the basis for the settlement agreement.'' This exception is too
narrowly drawn to allow for numerous beneficial uses of SEP monies.
Thus, for example, the bill would appear to ban the following entirely
legitimate, appropriate uses of SEP funds that are currently permitted
by EPA:
1) Pollution prevention projects that improve plant procedures
and technologies, and/or operation and maintenance practices,
that will prevent additional pollution at its source;
2) Environmental restoration projects including activities
that protect local ecosystems from actual or potential harm
resulting from the violation;
3) Facility assessments and audits, including investigations
of local environmental quality, environmental compliance
audits, and investigations into opportunities to reduce the
use, production and generation of toxic materials;
4) Programs that promote environmental compliance by promoting
training or technical support to other members of the regulated
community; and
5) Projects that provide technical assistance or equipment to
a responsible state or local emergency response entity for
purposes of emergency planning or preparedness.
Each of these types of programs provide important protections of
human health and the environment in communities that have been harmed
by environmental violations. However, because they are unlikely to be
construed as redressing ``actual (environmental) harm, directly and
proximately caused'' by the alleged violator, the bill before this
committee would prohibit every one of them.
My other objection to the proposed Stop Settlement Slush Funds Act
is more broad. In my view, this bill inappropriately reduces the
discretion that federal agencies and prosecutors need to do their jobs
in a fair and effective fashion. In its decision in the landmark case
of Heckler v. Chaney, 470 U.S. 821 (1985), the U.S. Supreme Court took
note of the importance of leaving decisions to prosecute or not
prosecute in the hands of administrative agency personnel and
prosecutors. The Court noted that ``an agency decision not to enforce
involves a complicated balancing of a number of factors that are
peculiarly within its expertise. . . .The agency is far better equipped
than the courts to deal with the many variables involved in the proper
ordering of its priorities.'' Id. at 831-832.
This same rationale clearly applies to the terms of the settlement
agreements that a federal agency or prosecutor chooses to enter into.
Such settlements involve numerous complicated technical issues as well
as important judgments respecting the use of limited prosecutorial
resources. Their terms are best left in the hands of expert agencies
and prosecutors, rather than dictated by Congress or the federal
courts.
In sum, the bill before you will harm the interests of Americans
who have been the victims of unlawful pollution by arbitrarily and
unreasonably limiting many of the benefits those people may now receive
through SEP settlement agreements. This bill will discourage settlement
of environmental enforcement cases and place greater burdens on
regulated firms and regulators alike. It will inhibit the advancement
of technology and the restoration of damaged natural resources. It will
also unwisely intrude on the discretion of federal agencies and
prosecutors. For these reasons, with respect, I recommend that you vote
against this bill.
Response to Questions for the Record from David M. Uhlmann, Esq.,
Director, Environmental Law and Policy Program, The University of
Michigan Law School
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