[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
A TIME TO REFORM: OVERSIGHT OF THE ACTIVITIES OF THE JUSTICE
DEPARTMENT'S CIVIL, TAX, AND ENVIRONMENT AND NATURAL RESOURCES
DIVISIONS AND THE U.S. TRUSTEE PROGRAM
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
REGULATORY REFORM,
COMMERCIAL AND ANTITRUST LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
JUNE 8, 2017
__________
Serial No. 115-19
__________
Printed for the use of the Committee on the Judiciary
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://judiciary.house.gov
U.S. GOVERNMENT PUBLISHING OFFICE
27-890 WASHINGTON : 2018
----------------------------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, [email protected].
COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan
Wisconsin JERROLD NADLER, New York
LAMAR SMITH, Texas ZOE LOFGREN, California
STEVE CHABOT, Ohio SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California STEVE COHEN, Tennessee
STEVE KING, Iowa HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona Georgia
LOUIE GOHMERT, Texas THEODORE E. DEUTCH, Florida
JIM JORDAN, Ohio LUIS V. GUTIERREZ, Illinois
TED POE, Texas KAREN BASS, California
JASON CHAFFETZ, Utah CEDRIC L. RICHMOND, Louisiana
TOM MARINO, Pennsylvania HAKEEM S. JEFFRIES, New York
TREY GOWDY, South Carolina DAVID CICILLINE, Rhode Island
RAUL LABRADOR, Idaho ERIC SWALWELL, California
BLAKE FARENTHOLD, Texas TED LIEU, California
DOUG COLLINS, Georgia JAMIE RASKIN, Maryland
RON DeSANTIS, Florida PRAMILA JAYAPAL, Washington
KEN BUCK, Colorado BRAD SCHNEIDER, Illinois
JOHN RATCLIFFE, Texas
MARTHA ROBY, Alabama
MATT GAETZ, Florida
MIKE JOHNSON, Louisiana
ANDY BIGGS, Arizona
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 DAVID CICILLINE, Rhode Island
DOUG COLLINS, Georgia HENRY C. ``HANK'' JOHNSON, Jr.,
KEN BUCK, Colorado Georgia
JOHN RATCLIFFE, Texas ERIC SWALWELL, California
MATT GAETZ, Florida PRAMILA JAYAPAL, Washington
BRAD SCHNEIDER, Illinois
C O N T E N T S
----------
JUNE 8, 2017
OPENING STATEMENTS
Page
The Honorable Bob Goodlatte, Virginia, Chairman, Committee on the
Judiciary...................................................... 4
The Honorable Tom Marino, Pennsylvania, Chairman, Subcommittee on
Regulatory Reform, Commercial and Antitrust Law, Committee on
the Judiciary.................................................. 1
The Honorable David Cicilline, Rhode Island, Ranking Member,
Subcommittee on Regulatory Reform, Commercial and Antitrust
Law, Committee on the Judiciary................................ 2
WITNESSES
Mr. Chad A. Readler, Acting Assistant Attorney General, Civil
Division
Oral Statement............................................... 7
Mr. Jeffrey H. Wood, Acting Assistant Attorney General,
Environment and Natural Resources Division
Oral Statement............................................... 8
Mr. David A. Hubbert Acting Assistant Attorney General, Tax
Division
Oral Statement............................................... 10
Mr. Clifford J. White III, Director, U.S. Trustee Program
Oral Statement............................................... 12
Mr. Hans von Spakovsky, Esq, Senior Legal Fellow, Heritage
Foundation
Oral Statement............................................... 28
Ms. Cleta Mitchell, Esq., Partner, Foley & Lardner LLP
Oral Statement............................................... 30
Mr. Andrew M. Grossman, Esq., Partner, Baker & Hostetler LLP
Oral Statement............................................... 31
Mr. Robert Weissman, Esq., President, Public Citizen
Oral Statement............................................... 33
OFFICIAL HEARING RECORD
Responses to Questions for the Record from Mr. Chad A. Readler,
Acting Assistant Attorney General, Civil Division.............. 00
Responses to Questions for the Record from Mr. Jeffrey H. Wood,
Acting Assistant Attorney General, Environment and Natural
Resources Division............................................. 00
Mr. David A. Hubbert Acting Assistant Attorney General, Tax
Division....................................................... 00
Responses to Questions for the Record from Prof. Bruce Grohsgal,
Esq., Helen S. Balick Visiting Professor in Business Bankruptcy
Law, Delaware Law School....................................... 00
ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD
Statement submitted by the Honorable John Conyers, Jr., Michigan,
Committee on the Judiciary. This material is available at the
Committee and can be accessed on the Committee Repository at:
http://docs.house.gov/meetings/JU/JU05/20170608/106076/HHRG-
115-JU05-MState-C000714-20170608.pdf
Article submitted by the Honorable John Conyers, Jr., Michigan,
Committee on the Judiciary. This material is available at the
Committee and can be accessed on the Committee Repository at:
http://docs.house.gov/meetings/JU/JU05/20170608/106076/HHRG-
115-JU05-20170608-SD002.pdf
A TIME TO REFORM: OVERSIGHT OF THE ACTIVITIES OF THE JUSTICE
DEPARTMENT'S CIVIL, TAX AND ENVIRONMENT AND NATURAL RESOURCES DIVISIONS
AND THE U.S. TRUSTEE PROGRAM
----------
THURSDAY, JUNE 8, 2017
House of Representatives,
Subcommittee on Regulatory Reform,
Commercial and Antitrust Law,
Washington, DC.
The Subcommittee met, pursuant to call, at 1:00 p.m., in
Room 2141, Rayburn House Office Building, Hon. Blake Farenthold
(Vice-Chairman of the Subcommittee) presiding.
Present: Representatives Farenthold, Goodlatte, Ratcliffe,
Gaetz, Cicilline, Conyers, Johnson of Georgia, Jayapal, and
Schneider.
Staff Present: Dan Huff, Counsel; Slade Bond, Minority
Counsel; and Andrea Woodard, Clerk.
Mr. Farenthold. Good afternoon. The Subcommittee on
Regulatory Reform, Commercial and Antitrust Laws shall come to
order. Without objection, the Chair is authorized to declare a
recess of the Committee at any time. We welcome everyone to
today's hearing on a time to reform: oversight of the
activities of the Justice Department's Civil, Tax, Environment,
and Natural Resources Divisions, and the U.S. Trustees Program.
And I will now recognize myself for a brief opening statement.
Welcome to this oversight hearing on four of the Justice
Department components within this Subcommittee's jurisdiction.
The new administration creates an opportunity for introspection
and reform within the DOJ. This hearing will aid that process
by reviewing abuses under the prior administration, determining
whether the new DOJ leadership has started to initiate reforms,
how far these reforms have progressed, and will explore, with
the DOJ, what other forms will be appropriate.
This Subcommittee has examined numerous examples of
Administration lawyers straining the meaning of the statutes to
justify activities never contemplated by Congress.
For example, Operation Choke Point was a Justice-
Department-led program to deny merchants, like firearm dealers
or payday lenders--that the Obama administration deemed
objectionable--access to the financial networks they needed to
survive. The DOJ has cited its special authority to issue
administrative subpoenas when fighting fraud, ``affecting''
banks. But the claimed fraud in Operation Choke Point was far
removed from banks, perpetrated ostensibly on the customers of
their customers' customers. Furthermore, Committee oversight
has found that the program was inflicting an unacceptable level
of collateral damage on legitimate businesses, whether intended
or not. That damage lingers, and I would like to know what the
DOJ is planning to do to reverse it.
In another instance, a New York Times expose revealed that,
on the eve of an inevitable victory in court, the Department
abruptly switched courses away from litigation and settled a
discrimination case, despite vigorous objections from career
attorneys within the DOJ. It appears the Department settled in
order to pay off friends, including a plaintiff's lawyer, who
was on President Obama's transition team. What can the
Department's new management do to halt Justice Fund abuse?
Another troubling pattern from the last administration was
sue and settle abuse. This kind of abuse occurs when a
regulatory agency agrees to settle a lawsuit with the friendly
plaintiff, requiring it to implement a desired policy under the
cloak of judicial authority, circumventing the normal
rulemaking process, and paying both sides attorneys' fees.
On May 27th, a report by the U.S. Chamber of Commerce found
that, in 8 years, the Obama administration welcomed 137 Clean
Air Act settlements, far more than the 93 settlements that the
previous administration did over a preceding 12-year period.
What steps is the DOJ considering to halt abusive sue and
settle practices?
Additionally, the Tax Division has been defending the
Internal Revenue Service in lawsuits arising out of IRS's
inappropriate targeting of conservative groups. The Sixth
Circuit rebuked the Obama Justice Department's Tax Division
lawyers for delaying one of the leading cases, saying: ``[T]he
government is doing everything it possibly can to make this as
complicated as it possibly can, to last as long as it possibly
can, so that, by the time there is a result, nobody is going to
care except the plaintiffs.''
Finally, I am interested in an update from the U.S.
Trustee's Office on its need for funding assistance, the
reduction of fraud in the Asbestos Trust, and its oversight of
Puerto Rico's bankruptcy processing filing its May 3, 2017
filing.
I appreciate the DOJ making witnesses available amidst this
transition, and I hope this hearing will help the new
management implement reforms by identifying problem areas and
solutions. I also look forward to the suggestions of our second
panel that has been carefully monitoring DOJ activities.
At this time, the Chair will now recognize the Ranking
Member of the Subcommittee on Regulatory Reform, Commercial and
Antitrust Law, Mr. Cicilline from Rhode Island, for his opening
statement.
Mr. Cicilline. Thank you, Mr. Chairman. Today's hearing is
an important opportunity to conduct oversight into the work of
several components of the Justice Department within the
Subcommittee's jurisdiction. The importance of legislative
oversight cannot be overstated. It is a fundamental check and
balance, key to the public's confidence in government, and it
cannot be overstated.
In less than 5 months, President Trump has fired Acting
Attorney General Sally Yates after she informed the White House
that National Security Advisor Michael Flynn was a security
risk; fired FBI Director James Comey, who was overseeing an
ongoing investigation into the Trump campaign's ties to
Vladimir Putin; former National Intelligence Director James
Clapper has called this ``egregious and inexcusable''; refused
to disclose his tax returns, breaking with the tradition of
Presidents from the last four decades; refused to release White
House visitor logs; refused to release documents requested by
Congress; appointed numerous officials with serious and
unresolved conflicts of interest to key government positions;
repeatedly attacked the Federal Judiciary, a co-equal branch of
government, eroding trust in our legal system and the rule of
law; and took the alarming and extreme step of instructing
government officials to ignore congressional oversight requests
unless supported by a Republican Committee Chair.
Because my Republican colleagues have shown little interest
in examining any of these matters, this hearing is one of the
few opportunities that we have to hear from the Justice
Department on the issues important to our constituents. Today's
oversight hearing concerns the work of Civil, Environment, and
Natural Resources and Tax Divisions along with the U.S. Trustee
Program. The Civil Division is the largest litigating component
of this Justice Department. Among its many other
responsibilities, it is tasked with defending the President's
unconstitutional Muslim travel ban.
The President recently lashed out at his own Justice
Department, stating on Twitter that it, ``Should have stayed
with the original travel ban, not the watered-down politically-
correct version.'' The editorial board of the Wall Street
Journal referred to these comments as ``reckless on multiple
levels and merely the latest incident in which Mr. Trump,
popping off, undermined his own lawyers.''
George Conway, the husband of White House Counselor
Kellyanne Conway, referred to the President's statements as
sad, adding that ``every sensible lawyer in the White House's
counsel office and every political appointee at DOJ would agree
with me.'' Mr. Conway personally recently removed himself from
contention for the appointment as permanent assistant attorney
general of the Civil Division, suggesting that the President's
toxic conduct and statements have discouraged qualified
individuals from serving in this administration. It is
important that we hear from the Civil Division on this matter.
The Civil Division is also responsible for representing
President Trump in lawsuits relating to conflicts of interest
in his alleged violations of the Constitution's Foreign
Emoluments Clause by profiting from foreign investments in his
property, which has not been divested. Together with Ranking
Member Mr. Conyers, I have co-sponsored H.R. 371, the
``Presidential Conflicts of Interest Act'', to require the
President and Vice President to disclose and divest any
potential financial conflict of interest.
The Environment and Natural Resources Division is
responsible for enforcing the Nation's environmental laws to
ensure that America's air, water, and lands are clean. Early
this week, the Trump administration announced that it plans to
appoint Jeffrey Bossert Clark, a climate skeptic, who
represented BP in lawsuits related to the Deepwater Horizon
spill, one of the Nation's worst environmental disasters. While
he will not testify for today's hearings, I am concerned that
these types of serious conflicts of interest will imperil the
Environment Division's mission.
The Tax Division litigates all matters under the Internal
Revenue laws, collecting more each year than its entire budget.
It also plays an important role in investigating and
prosecuting offshore tax invasion, a significant concern of
mine. Every year, U.S. corporations hide trillions of dollars
of profits offshore, securing $90 billion in Federal income
taxes. In April, I introduced H.R. 2005, the ``Offshore
Prevention Act'', to keep jobs in America by eliminating tax
breaks for companies that evade our tax laws by hiding income
oversees. I look forward to hearing from the Tax Division on
its enforcement efforts to level the playing field for
hardworking Americans and small businesses.
Finally, the U.S. Trustee Program is responsible for
promoting integrity and efficiency of the bankruptcy system. I
look forward to hearing from the program about its efforts to
combat creditor abuse, particularly the practice of robo-
signing, and its other initiatives to protect consumer debtors.
The American people demand and deserve transparency. It is
critical that we hear from the Justice Department on how these
matters affect its statutory responsibilities.
In September, Chairman Goodlatte noted at this hearing,
``It is an opportunity to conduct aggressive oversight of these
four components of DOJ to determine where they are making
decisions to uphold the law or follow the political whims of
the administration.'' I agree, and I thank the witnesses for
appearing today and look forward to your testimony. With that,
I yield back, Mr. Chairman.
Mr. Farenthold. Thank you, Mr. Cicilline. The Chair now
recognizes the Chairman of the full Judicial Committee, Mr.
Goodlatte of Virginia, for his opening statement.
Chairman Goodlatte. Thank you, and I second your remarks
about the need for reforms at DOJ. I am very pleased that
already a major reform is in place. Yesterday, Attorney General
Sessions announced a ban on payments to non-victim, third
parties in Department of Justice settlements. I applaud the
Attorney General's action. The new Justice Department's respect
for the Separation of Powers stands in stark contrast to the
behavior of the Obama Administration officials, who used their
positions to funnel billions of settlement dollars to their
political allies. The Committee will continue working to pass
the bipartisan ``Stop Settlement Slush Funds Act of 2017''
which would ban this practice permanently.
Additional reforms are also needed. The Department of
Justice did not just force settling defendants to pay non-
victims. In 2013, a shocking New York Times expose revealed
that the Obama administration bilked over a billion dollars
from the tax payer-funded Judgement Fund and handed it to
special interests.
The vehicles for this giveaway were parallel, weak cases
alleging bias by the Department of Agriculture. The Times
described how, after a succession of Department of Justice
legal victories, including in the Supreme Court, ``political
appointees . . . engineered a stunning turnabout: they
committed $1.33 billion to compensate . . . thousands of
Hispanic and female farmers who had never claimed bias in
court.'' The deal was ``fashioned in White House meetings,
despite the vehement objections . . . of career lawyers . . .
who had argued that there was no credible evidence of
widespread discrimination.''
The government's statistical expert from U.C. Berkeley told
the Times regarding the parallel Keepseagle case, ``[i]f they
had gone to trial, the government would have prevailed . . . It
was just a joke . . . I was so disgusted. It was simply buying
the support of Native Americans.''
The Keepseagle settlement was based on the plaintiffs'
lawyers' self-serving estimate that there were 19,000
claimants. The plaintiff's attorneys collected $60.8 million in
attorneys' fees. Just a year before, the lead plaintiffs'
attorney, Joseph Sellers, had served on President Obama's 2008
transition team.
In the end, there were just 4,400 claimants--fewer than
even the government had estimated--and $380 million left over.
This was taxpayer money, but instead of demanding it back, DOJ
agreed to direct it to non-victim third parties. This troubled
the presiding judge who wrote: ``Although a $380 million
donation by the Federal Government to charities . . . might
well be in the public interest, the Court doubts that the
Judgement Fund from which this money came was intended to serve
such a purpose. The public would do well to ask why $380
million is being spent in such a manner.''
On May 25, 2017, I wrote the Attorney General, alerting him
to a potential opportunity for the Department to recover the
$380 million for taxpayers. I look forward to discussing
remedies for the larger issue of Judgement Fund abuse.
Overreach is not limited to the executive branch. District
court judges are issuing preliminary injunctions outside of
their jurisdictions and for the protection of nonparties.
According to a forthcoming article in the Harvard Law
Review, this is a recent development, not in accord with
traditional practice. The traditional view was that court
injunctions restrained the defendant's conduct, vis-a-vis the
plaintiff, not vis-a-vis the world. Nationwide injunctions
trample the sovereignty of sister courts. They also create a
``shop till the statute drops'' problem. Opponents of
government action can lose in 93 judicial districts, win one
preliminary injunction in the 94th, and then government action
can be stayed nationwide, despite it being upheld everywhere
else. Such perverse results might be avoided if the Department
of Justice insisted on the original understanding that courts
do not have authority to issue such sweeping injunctions.
There are many additional issues to cover. This hearing is
one of a series that the Committee is holding on the Justice
Department to identify areas that are in need of reform. I want
to thank our witnesses for their participation here today, and
I look forward to hearing their thoughts on restoring the
Justice Department to its proper role. Mr. Chairman, I yield
back.
Mr. Farenthold. Thank you very much, Chairman. It is my
understanding Mr. Conyers will submit a statement for the
record, and Mr. Johnson has a brief opening statement in lieu
of Mr. Conyers, so we will recognize the gentleman from
Georgia.
[Statement submitted by the Honorable John Conyers, Jr.,
Michigan, Committee on the Judiciary. This material is
available at the Committee and can be accessed on the Committee
Repository at: http://docs.house.gov/meetings/JU/JU05/20170608/
106076/HHRG-115-JU05-MState-C000714-20170608.pdf]
Mr. Johnson of Georgia. Thank you. I thank the Chair, and I
must recognize the fact that we are in the Trump administration
now. The Obama administration has gone bye-bye. The need for
oversight of the Obama administration has ended back on January
20th over 100-and-some-odd days ago. And so, now it is time to
do oversight into the operations of the Trump administration,
and that is the focus of this hearing, and with that, I will
yield back.
Mr. Farenthold. Thank you very much. Actually, I think we
need to swear in our witnesses, so gentleman, if you would
please rise.
Do you swear that the testimony that you are about to give
before the Committee is the truth, the whole truth, and nothing
but the truth, so help you God?
Let the record reflect all witnesses have responded in the
affirmative. You all may be seated.
I would like to introduce our distinguished panel of
witnesses: Chad A. Readler, if I am pronouncing that right, was
appointed acting assistant attorney general for the Civil
Division on January 30, 2017. Prior to joining the Department,
Mr. Readler was a partner at the Jones Day law firm where he
handled complex civil and criminal litigation matters with an
emphasis on appellate litigation. Mr. Readler is a recipient of
the Marshall Memorial Fellowship and previously served as a
volunteer for Lawyers Without Borders, training Kenyan lawyers
in Nairobi. Mr. Readler earned his bachelor's degree and his
J.D. with honors from the University of Michigan. Following law
school, he clerked for Judge Allen Norris of the U.S. court of
appeals for the Sixth Circuit. Welcome, Mr. Readler.
Jeffrey H. Wood was appointed Acting Assistant Attorney
General of the Environment and Natural Resources Division on
January 20, 2017. Prior to this appointment, Mr. Woods served
as environmental counselor for U.S. Senator Jeff Sessions and
as the Republican staff director for the U.S. Subcommittee on
Clean Air and Nuclear Safety and Water and Wildlife. Mr. Wood
has also worked in private practice, both as an environmental
and energy lawyer and as in-house counsel for a transportation
company. Mr. Wood earned his bachelor's degree and J.D. from
Florida State University. A welcome to you as well, sir.
David H. Hubbert was appointed Acting Assistant Attorney
General of the Tax Division in January of 2017. He was
previously Tax Division's Deputy Assistant Attorney General for
several trial matters. Mr. Hubbert has vast experience with the
Tax Division, overseeing litigation functions and the
operations of the six regional, civil trial sections, the Court
of Federal Claims section, and the Office of Civil Litigation.
He also served as a trial attorney in both the civil and trial
section and the appellate section covering various regions of
the country. Mr. Hubbert earned his bachelor's degree in
accounting from the University of Arizona and his J.D. cum
laude from the University of Pennsylvania Law School. Welcome,
sir.
Mr. Clifford White III has served as the Director of the
U.S. Trustee's Program since 2006. Mr. White has more than 30
years in Federal service, and most of his tenure has been with
the United States Trustee Program including formerly as a
Deputy Director and an Assistant United States Trustee. Prior
to joining the program, Mr. White served as the deputy
assistant attorney general within the Department of Justice and
is official at two other Federal agencies. He has been
recognized with an Attorney General's award for distinguished
service and was conferred the Presidential Award of Meritorious
Executive in 2016 and Distinguished Executive in 2009. Mr.
White earned his bachelor's degree and his J.D. with honors
from George Washington University and the George Washington
University Law School.
So, gentleman, each of you have prepared and presented with
us a written statement, which will be entered into the record
in its entirety. I ask each witness to summarize his testimony
in 5 minutes or less, and to help you stay within that, there
is a timing device in front of you. The light will switch from
yellow to green, indicating it is time to speed up, and you
have 1 minute to conclude your testimony. When the light turns
red, it indicates that your time has expired, so please wrap it
up promptly, so we will get started with Mr. Readler. You are
recognized for 5 minutes, sir.
STATEMENTS OF CHAD READLER, ACTING ASSISTANT ATTORNEY GENERAL,
CIVIL DIVISION; JEFFREY WOOD, ACTING ASSISTANT ATTORNEY
GENERAL, ENVIRONMENT AND NATURAL RESOURCES DIVISION; DAVID
HUBBERT, ACTING ASSISTANT ATTORNEY GENERAL, TAX DIVISION; AND
CLIFFORD WHITE III, DIRECTOR, U.S. TRUSTEE PROGRAM
STATEMENT OF CHAD READLER
Mr. Readler. Good afternoon, Mr. Chairman, Ranking Member
Cicilline, and Ranking Members of the Subcommittee. Thank you
for inviting me to testify this afternoon about the work of the
Civil Division of the Department of Justice. I was honored to
join the Division on January 30th of this year. It is a
privilege to lead the Division, and I appreciate the
opportunity to discuss with you the important work we are
doing, as well as to discuss our budget and resource needs for
fiscal year 2018.
The Civil Division is made up of more than 1,350 career
employees including more than 1,000 attorneys. Each year, the
Division handles tens of thousands of cases that involve
billions of dollars in claims and recoveries. Even in my
relatively brief tenure, I have been highly impressed by the
capabilities and professionalism of our attorneys and support
staff. The Division has the privilege of representing the
United States, its agencies, members of Congress, Cabinet
officers, and other Federal employees. Chief among our duties
is defending and enforcing various Federal programs and
actions. In so doing, the Division routinely confronts
significant policy issues, often with constitutional
dimensions. I would like to highlight a few examples of the
significant and varied work done by the talented and dedicated
public servants in the Division.
First is national security: defending our Nation is one of
the highest priorities of the Department and the Division. The
Division's efforts to support our national security interest
include defending lawsuits against government officials arising
out of efforts to protect national security; defending policies
and procedures related to the security of our borders, such as
screening procedures for individuals entering the United
States; defending against habeas petitions filed by individuals
detained at Guantanamo Bay; defending against challenges to
alleged surveillance activities conducted by the National
Security Agency; and protecting against the disclosure of
national security or classified information in the context of
civil litigation.
Second is defending immigration actions. The Division
defends and prosecutes civil immigration matters in Federal
court including actions challenging an order of removal. The
Division also defends numerous cases brought by known or
suspected terrorists and convicted criminals attempting to
acquire immigration benefits or avoid removal. The Division
also works to prevent known or specific terrorists from
becoming naturalized citizens or to revoke such
naturalizations. And, third, let me highlight our work in the
area of fraud and consumer safety. The Division takes legal
action against conduct that threatens the health or safety of
American consumers, such as misbranding or adulteration of
drugs and against conduct that seeks to defraud consumers or
wrongly deplete the Federal fisc. We vigorously pursue false
claims that target Federal healthcare programs. The
pharmaceutical industry continues to account for part of the
Division's health care fraud recoveries. In addition, the
Division has put a special focus on elder fraud issues and has
addressed both consumer fraud schemes targeting the elderly as
well as fraud targeting medical services for the elderly.
In each of the last 7 fiscal years, the government's health
care fraud recoveries have equaled or exceeded $2 billion. The
Division's efforts to include targeting fraud that contributed
to the 2008 financial crisis. In the last year, the Division
has recovered nearly $1.7 billion in losses from financial
institutions that arose out of failed mortgages. The
President's fiscal year 2018 budget request seeks 1,140
positions and $291,758,000. While consistent with prior budget
request in many respects, the proposed budget includes a
request for an increase in funding for immigration litigation.
These resources are necessary to maintain the superior legal
representation services provided by the Division. We hope the
House and Senate will fully fund the request.
In closing, let me see it is an honor to work in the Civil
Division and to participate in important and challenging work
my talented colleagues perform on a daily basis. Mr. Chairman,
I look forward to addressing any questions you or any members
of the Subcommittee may have. Thank you.
[Mr. Readler's written statement is available at the
Committee or on the Committee Repository at: http://
docs.house.gov/meetings/JU/JU05/20170608/106076/HHRG-115-JU05-
Wstate-ReadlerC-20170608.pdf]
Mr. Farenthold. Thank you very much and well within the
time, then. Mr. Wood, you are recognized for 5 minutes.
STATEMENT OF JEFFREY WOOD
Mr. Wood. Thank you, Representative Farenthold; Mr.
Chairman, thank you. Ranking Member Cicilline and other Members
of this Subcommittee, thank you for the opportunity to discuss
the vital work of the Environment and Natural Resources
Division, or ENRD.
I currently serve as the acting assistant attorney general
for ENRD where I have the privilege of leading the Nation's
premiere team of environmental lawyers, paralegals, and staff.
I am also proud to be part of the Department-wide team led by
Attorney General Jeff Sessions, for whom I worked when he was a
Senior Member of the Senate and Environment Public Works
Committee. On Tuesday, the President announced his intent to
nominate Jeff Clark to be our next Senate-confirmed AAG. We
look forward to welcoming Mr. Clark back to ENRD, where he
served from 2001 to 2005 as a deputy assistant attorney
general.
Over more than a century, ENRD has protected the country's
air, land, and water; safeguarded the rights and resources of
Indian tribes; and promoted responsible stewardship of
America's wildlife, natural resources, and public lands. As
detailed in my written statement, the Division's record of
legal excellence continues to the present day. Looking forward,
I believe ENRD is key to the successful implementation of
President Trump's new directions for our Nation, including his
call for an America First Energy Policy: a major reduction in
regulatory burdens, particularly for agriculture and
manufacturing, and rebuilding our Nation's infrastructure,
while at the same time protecting the environment.
To guide our work, I have emphasized four primary goals for
ENRD at this time. First, we will pursue our core mission of
protecting clean air, clean water, and clean land for all
Americans though the vigorous enforcement of statutes and
regulations and the defense of the lawful actions of our client
agencies. Fundamentally, this is about respect for the
Constitution and laws passed by Congress. As this Subcommittee
is aware, ENRD is representing the United States in many cases
involving agency actions now under review or reconsideration by
the new administration. Agencies have inherent authority to
review past decisions and to revise, replace, or repeal a
decision to the extent permitted by law and supported by a
reasoned explanation. As Justice Rehnquist once wrote, ``[a]
change in administration brought about by the people casting
their votes is a perfectly reasonable basis for an executive
agency's reappraisal of the costs and benefits of its programs
and regulations.'' In these kinds of cases, our aim is to avoid
unnecessary litigation, support the integrity of the
administrative process, and conserve the resources of the
courts, the agencies, and other litigants.
Second, a key goal is to effectively support and defend the
infrastructure decisions of our client agencies. For example,
ENRD is vigorously defending vital infrastructure projects
today including the Dakota Access and Keystone XL Pipelines as
well as many highway, port, and other projects of importance to
communities around the Nation. Third, we will work
cooperatively with the States and Indian tribes to achieve
shared environmental goals. Many of the laws entrusted to us
give a primary role to the States and tribes, and we aim to
keep that important principle at the forefront of our minds as
we fulfill our mission. In this regard, I have greatly
appreciated the positive outreach from a wide range of
stakeholders, especially our State partners, during the first 4
months of my tenure at ENRD. State Attorney General Offices and
State environmental officials have reached out or visited to
share their perspectives about a broad range of issues.
The Environmental Council of the States, the Association of
Air Pollution Control Agencies, and other State groups have
afforded me an opportunity to visit with their members to hear
about their concerns and priorities. On many occasions, when
discussing a matter that is taking place in a State, I have
asked our attorneys a straightforward question: what does the
State have to say about it? Fourth, we will accomplish our work
as efficiently and effectively as possible, keeping in mind
that every tax dollar we are given must be put to good and
appropriate use for the American people.
For fiscal year 2018, our Division has requested
appropriations of approximately $115.6 million. Within that
funding level, we also seek one proposed budget enhancement of
approximately $1.8 million for additional attorneys and staff
to support land acquisition and related efforts to secure the
southern border of the United States. In closing, let me say
again that I am proud of our team at ENRD. In just the last few
months alone, the Division has obtained a record breaking
monetary penalty in a criminal vessel pollution case,
prosecuted multiple cases involving renewable fuels fraud,
brought significant new actions involving violations of the
Clean Air Act, and successfully intervened to stop illegal
wildlife trafficking. These are just a few examples of the
important work that ENRD lawyers, paralegals, and staff do
every day on behalf of the American people. I appreciate the
opportunity to participate in this hearing and would be happy
to address your questions. Thank you.
[Mr. Wood's written statement is available at the Committee
or on the Committee Repository at: http://docs.house.gov/
meetings/JU/JU05/20170608/106076/HHRG-115-JU05-Wstate-WoodJ-
20170608.pdf]
Mr. Farenthold. Thank you very much. Mr. Hubbert, you are
recognized for 5 minutes.
STATEMENT OF DAVID HUBBERT
Mr. Hubbert. Thank you, Chairman Farenthold, Ranking Member
Johnson, and members of the Committee. Thank you for this
opportunity to appear before you today to discuss the Tax
Division's important work.
The Tax Division's mission is to enforce the Internal
Revenue's laws fully and fairly and consistently in Federal and
State courts throughout the country. We do so through two types
of litigation: civil investigations and cases and criminal
investigations and prosecutions. In this litigation, we aim to
promote voluntary compliance with the Nation's tax laws by
deterring those who would avoid paying what they owe and
promoting the sound development of law by carefully considering
the legitimate issues raised in our cases. In each and every
civil case, the Tax Division's attorneys strive to collect the
proper amount due in owing, no more and no less. In each and
every criminal case, Tax Division's attorneys authorize and
prosecute cases after determining there is a reasonable
culpability of conviction.
In recent years, the Division typically has 6,000 civil
cases in various stages, handles hundreds of civil and criminal
appeals, and authorizes between 1,300 and 1,600 criminal tax
investigations and prosecutions, which are then handled by the
Division's prosecutors, prosecutors in the United States
Attorney Offices, or some combination of the two. The Tax
Division has currently approximately 350 attorneys and 145
administrative professionals handling all of this work. I am
honored to be able to represent them here today; they serve the
American people with great skill and dedication.
Among the Division's top priorities is civil and criminal
employment tax enforcement. Employers have a legal
responsibility to collect, account for, and pay over what they
withhold from their employee's wages. Amounts withheld from
their employee's wages represent nearly 70 percent of all
revenue collected by the Internal Revenue Service.
Unfortunately, billions of dollars of employment taxes go
unpaid when employers fail to comply with their obligations;
they are stealing not only from their employees, but also the
U.S. Treasury, as well as gaining an unfair advantage over
their honest competitors. Since 2014, the Tax Division has
obtained more than 70 permanent injunctions against delinquent
employers and pursued criminal investigations and prosecutions
against those who willfully fail to comply with their
obligations. These cases send a clear message that the conduct
will not be tolerated. The Department remains committed to
addressing this serious issue and leveling the playing field
for all employers.
Addressing offshore tax evasion remains a top priority in
the Tax Division and the Department. Since 2008, the Department
has criminally charged more than 130 U.S. taxpayers who used
foreign, financial accounts to evade their tax and reporting
obligations, and more than 40 individuals who facilitated that
criminal conduct. In August 2013, the Department announced the
Swiss Bank Program, which provided a path for Swiss banks to
resolve their potential criminal liabilities in the United
States. By January 2016, the Department had executed 78
agreements with 80 Swiss banks and financial institutions
collecting more than $1.3 billion in penalties. The information
we received from that program provides substantial insight into
the methods used to facilitate offshore tax evasion. Along with
the IRS, we are reviewing the information to pursue ongoing and
new criminal tax investigations and to support civil tax
enforcement efforts. According to the Internal Revenue Service,
it has received more than 55,000 voluntary offshore disclosures
and collected more than $10 billion in taxes, interest, and
penalty.
Another significant area of concern is identity theft and
stolen identity refund fraud, commonly referred to as SIRF,
which involves stealing personal identifying information and
filing fictitious tax returns to claim refunds. Through March
2017, the Department authorized more than 1,400 SIRF
investigations involving more than 2,400 subjects and
authorized more than 1,100 prosecutions of more than 2,200
individuals. While the ultimate goal is to stop fraudulent
refunds at the door, and that ability is improving, the
Department will continue to work with its law enforcement
partners to prosecute these cases and hold those who engage in
this conduct accountable. I have only touched on a few of the
many issues being litigated by the Tax Division. Through our
criminal and civil litigation, we send a clear message: when
individuals or entities engage in this conduct to avoid or
evade their legal, tax obligations, the Tax Division will use
all available tools to firmly but fairly hold them accountable.
In conclusion, I am honored to represent the bright,
honest, and truly dedicated public servants working at the Tax
Division, and I am happy to answer any questions you may have.
[Mr. Hubbert's written statement is available at the
Committee or on the Committee Repository at: http://
docs.house.gov/meetings/JU/JU05/20170608/106076/HHRG-115-JU05-
Wstate-HubbertD-20170608.pdf]
Mr. Farenthold. Thank you very much. We appreciate your
testimony. I know your job is very taxing.
Mr. White, you are recognized for 5 minutes. Could you turn
your microphone on and get real close to it? We bought the
budget mics, so you need to be real close so we can hear you.
STATEMENT OF CLIFFORD WHITE
Mr. White. Thank you for the reminder. Good afternoon, Mr.
Chairman, Ranking Member, and members of the Subcommittee. I am
grateful for the opportunity, once again, to report to you on
the activities of the U.S. Trustee Program and to discuss our
success in achieving our mission to promote the integrity and
the efficiency of the bankruptcy system for the benefit of all
stakeholders, debtors, creditors, and the public.
As recited in greater detail in my written testimony, we
perform a wide array of administrative, regulatory, and
enforcement activities that are essential to the proper
functioning of the bankruptcy system. Basic case administration
depends upon our appointing and overseeing 1,400 private
trustees who administer more than $10 billion in assets
annually; i.e. protecting the rights of all stakeholders relies
in significant measure on the neutral United States Trustee
enforcing the law as the law was written by the Congress; and
ferreting out fraudulent abuse depends upon the Program serving
as the vigilant watchdog of the bankruptcy system. Since our
last oversight hearing, the USTP has continued on a steady path
of vigorous and balanced enforcement of the Bankruptcy Code.
Each year we take more than 30,000 formal and informal civil
enforcement actions and make about 2,000 criminal referrals to
our law enforcement partners.
A majority of these actions curb debtor abuse, but a
cornerstone of our efforts also has been consumer protection.
For example, we remain vigilant in policing mortgage servicer
and other creditor misconduct. Earlier this year, we filed two
additional settlements with Chase Bank to resolve violations
involving improper billing and noticing of 16,000 accounts in
bankruptcy. As remediation, Chase is providing about $2.8
million in payments, refunds, and credits to affected
homeowners. Several months ago, we also launched an initiative
to address professional misconduct by consumer debtor lawyers
including those who work across district lines and advertise on
the Internet. Two national bankruptcy firms ceased operations
as a result of enforcement efforts, and we are litigating and
investigating other cases.
In business bankruptcies, we frequently are the only party
to uphold statutory mandates to restrain management
professionals and other parties. In the Jevic Holding
Corporation case, for example, we litigated on the side of
truck drivers who were laid off the day before the company
filed bankruptcy. Over our objection, the debtor obtained
bankruptcy court approval to pay unsecured creditors but not
the truck drivers whose claims were entitled a higher priority
under the statute. Although we lost in the lower courts, our
position prevailed in the Supreme Court.
Among our new chapter 11 initiatives, we are reaching out
to stakeholders in anticipation of developing guidelines
governing our review of fees charged to the bankruptcy estate
by financial professionals including investment bankers. In
recent years, the fees of these professionals have grown and
even exceeded attorneys' fees in some cases.
Similarly, we are revising extant guidelines governing our
review of conflicts in the employment of chief restructuring
officers. Over the past decade, CROs have been hired more
frequently, and the scope of their employment sometimes
provides issues of corporate governance and conflicts of
interest. Both of these guidelines will bring greater
transparency and greater predictability in the bankruptcy
system. In early May, as was mentioned by Mr. Farenthold, the
Commonwealth of Puerto Rico filed for debt adjustment under
Title III of PROMESA. As in municipal bankruptcies, the courts
and the USTP play a more limited role than under corporate
reorganization cases. Under PROMESA, we have two major duties:
one, to appoint one or more creditor's committees that
represent the interests of unsecured creditors including
retirees, and, two, to review and object to professional fees.
We are taking steps to perform both of these tasks.
To achieve our mission, we are requesting an appropriation
for fiscal year 2018 of $225.5 million. This is essentially the
same amount appropriated in each of the past 3 years. Over 10
years, our budget has increased by less than 2 percent, and our
staffing level has decreased by 14 percent. We are grateful to
this Committee for favorably acting on our proposal to increase
quarterly fees paid into the U.S. Trustee System Fund. If
enacted, it will ensure that appropriations made to the Program
will be fully offset by revenues.
We have achieved our mission in a period of scarce
resources by adopting innovative work processes, allocating
field staff to perform region-wide and nationwide tasks, and
taking other prudent cost cutting steps. But more than that,
the primary reason we have succeeded is the extraordinary
dedication of my colleagues in the U.S. Trustee Program. They
deserve respect and appreciation for their talent, for their
service to the public, and for their noteworthy
accomplishments. I would be happy to respond to any questions.
[Mr. White's written statement is available at the
Committee or on the Committee Repository at: http://
docs.house.gov/meetings/JU/JU05/20170608/106076/HHRG-115-JU05-
Wstate-WhiteC-20170608.pdf]
Mr. Farenthold. Thank you very much, Mr. White. As is
typical when I Chair a committee, since I am here the whole
time, I reserve my questions for last out of respect for other
members' time and it gives me an opportunity to back clean up
so to speak. So, with that, we will recognize the gentleman
from Florida for his line of questioning first.
Mr. Gaetz. Thank you, Mr. Chairman. Mr. Wood, good to be
here with a fellow Seminole. I wanted to ask some questions
about the mechanism by which the Department of Justice enforces
environmental laws. When the Department of Justice is bringing
an action under the Clean Air Act, does it require any sort of
pre-clearance or permission from the EPA?
Mr. Wood. First, thank you. Go 'Noles. We are honored to be
able to work in the defense of the Nation's Clean Air laws, and
we work closely with EPA. Civil matters are not brought as a
first matter by the Department of Justice. They are first
referred to us from EPA, and we continue to work in
consultation with them including in our Clean Air Act Cases.
Mr. Gaetz. I also want to ask a question regarding your
testimony on border security. You have indicated that land
acquisition will be an essential component of building a wall
on the southern border with Mexico. What would be the time
frame for that acquisition?
Mr. Wood. Thank you very much. So, there are approximately
2,000 miles, as you know, along the southern border. 5 border
Districts. We work closely with the U.S. Attorney's Offices in
those districts. We have no specific time frame at this point
and I would refer you to CBP on specific details related to the
border construction. Our responsibility is to make sure that,
to the extent that land acquisition is required, that it is
done in compliance with the 5th Amendment, which we take very
seriously.
Mr. Gaetz. I also wanted to ask a question. I believe it
is, I guess, a tax question. I am sorry, a trust question. It
was mentioned in testimony that there is misuse of trust laws
as it relates to marijuana businesses and their access to
bankruptcy laws. If marijuana was no longer a Schedule 1 drug,
but was instead a Schedule 3 drug, would those challenges
continue to persist?
Mr. White. Excuse me again for not pressing the microphone.
I would have to consider that issue further, but as long as
something is an illegal asset under Federal law, and if it
cannot be sold under Federal law, then we would take steps to
ensure it cannot be administered under the Federal bankruptcy
law.
We recently issued a directive which really restated
longstanding policy that we have had in the program to move to
dismiss or take other enforcement actions, which among other
things, protects trustees who otherwise are not allowed to sell
a marijuana asset. They cannot break Federal law in order to
sell an asset to distribute to creditors in bankruptcy, and we
also wanted to ensure that we are being made aware of all of
the marijuana asset cases that have been filed so that we can
intervene and take the appropriate action and be consistent in
our enforcement. With regard to which schedule it is on, I
would have to go back, and I would have to do some more
research with that, but the basic point is, if it is illegal
under Federal law to sell an asset, to sell a controlled
substance, which you cannot do, or to possess a controlled
substance, then we would take action to ensure that the Federal
Bankruptcy Code does not provide an avenue to evade those
Federal laws.
Mr. Gaetz. Do we know how much in taxes is paid from
marijuana companies in cash?
Mr. White. I do not know.
Mr. Gaetz. If we were able to have Federal law consistent
with State law that allows marijuana transactions to occur,
what would we anticipate would be the impact on creditors in
circumstances where there is a failed marijuana business and
their outstanding obligations?
Mr. White. I do not know, dollar wise, what the size of the
marijuana operations are that have come into bankruptcy, and so
forth. But our job as watchdog of the bankruptcy system is to
ensure that the laws as passed by Congress are upheld, and that
is why we have taken the position through two administrations
with regard to marijuana assets. They will not be administered
through the bankruptcy system; trustees will not sell those
assets. And yes, in some cases, that means that assets that
otherwise would be liquidated by a trustee will not be
distributed to creditors, but if the case is dismissed, it
simply puts the parties in the same position they would be
under State law had there never been a bankruptcy.
Mr. Gaetz. Thank you for your indulgence, Mr. Chairman. I
will yield back.
Mr. Farenthold. Thank you very much, and we will now
recognize the Ranking Member of the full Committee, Mr.
Conyers, the best dressed man on this panel today.
Mr. Conyers. Thank you so much for the compliment. Ladies
and gentlemen, this is an important hearing, and I would like
to begin by asking whoever talked about the Flint water crisis,
or wants to talk about it, or deal with the situation.
Americans deserve access to safe drinking water. What is the
Environment and Natural Resources Division doing to ensure that
the Flint Water Crisis is not repeated in other communities?
Mr. Wood. Thank you for the question. It is a very
important issue.
Mr. Conyers. It is.
Mr. Wood. I recognize that in recent months the
administration released $100 million to address issues in
Flint, Michigan. I know that there are important resources that
will go to help. It is a bigger, national issue. Our mission at
the ENRD is to ensure that all Americans have safe, clean
drinking water and clean air, so we enforce the laws to ensure
that that is provided for. One of our recent cases may be of
interest on this point: we worked with the State of
Mississippi, MDEQ, to prosecute an individual who had
intentionally contaminated local drinking water. And so, we
take this issue seriously nationwide, and we would be glad to
talk to you or your staff about more details about our specific
work in many other areas.
Mr. Conyers. Do any of the other witnesses have any
thoughts about what went on in Flint and would like to add to
this part of our discussion? Okay.
Let's look at the issue of identity theft. And whoever is
prepared for some discussion about this, please join in.
Criminals have electronically filed tax returns using the
stolen identities and personal data of innocent taxpayers to
file returns and obtain refunds fraudulently. How substantial
or widespread is this problem? What efforts has the Division
made to address this issue?
Mr. Hubbert. Thank you for raising this issue. It is an
important one. I think the Department has said from the outset
of this problem that we were never going to prosecute our way
out of it, and, really, the best way to address it is to have
the fictitious refunds and the false returns stop at the door.
And I think the Internal Revenue Service has reported that
their efforts in that area have improved. I think the
commissioner has stated that from 2016, there was a 46 percent
decline in new victims from 2015, so there is some progress
being made with the filters in stopping the refunds.
With respect to what the Tax Division is doing, often these
are more like street crimes than they are financial crimes, and
so we have pushed out the authority to handle these cases to
the U.S. Attorney's Office to the greatest extent we can. We
have a cadre within the Tax Division that focus on these cases,
so that when there is an unusual case or a matter that is
unusually complex, we can provide resources to the U.S.
Attorney's Office. Where there is a spike in a particular scam
in an area, we have attorneys that we can send out there to
help in the area, in that particular district, so we have tried
to do what we can to make these cases move as efficiently as we
can and as effectively. The sentences that the Department has
been obtaining are significant, and we hope that those who
would think about those crimes are being deterred from
continuing.
Mr. Conyers. Thanks you, Mr. Hubbert. Let me turn now from
my last question to Mr. Clifford White III, the Director of the
Trustee Program. With respect to the $60 fee that a Chapter 7
trustee receives from administering a no asset case you note
that the United States Trustee Program supports increasing this
fee. Now, it is known that the Chapter 7 trustee administers a
bankruptcy case primarily for the benefit of the creditors with
respect to investigating any fraud and the availability of any
assets. Accordingly, should the creditors pay for this fee and
this fee increase for Chapter 7 trustees? Director White?
Mr. White. Well, Mr. Conyers, our position on that has
been, as a general proposition, that the no asset fee, which is
what the $60 is--it is provided in every case, as you said--has
not been increased for more than 20 years, and as a general
proposition, ought to be increased. How that can be done in a
way that is fair to all stakeholders has been a debate that has
been had in Congress for some period of time, so we are not
endorsing any particular proposal.
I just make one additional point, however, Mr. Conyers, and
that is that with regard to most of the trustees--when you say
most of the trustee's work is liquidating assets and so forth--
in fact, they are dealing with thousands and thousands of
cases--95 percent of all of the cases that they are assigned,
in fact, have no assets. There will be no distribution, but it
takes some fair degree of review of the papers filed in the
case before they can come to that conclusion. So, for so many
of these cases that are no assets and that no money goes to
creditors at all, that is primarily where the rub comes with
regard to the economics of not having changed that $60 fee for
more than 20 years.
Mr. Conyers. Thank you very much. My time has expired, and
I may send questions to some of you to be added to our record
today, and I yield back and thank the Chairman.
Mr. Farenthold. Thank you very much, Mr. Ranking Member.
Since I am the one left on our side, I will go ahead and do a
few questions myself. I will start with Director White. There
has been substantial press coverage about fraud and asbestos
litigation and fraudulent claims made against the Asbestos
Bankruptcy Trust. One bankruptcy judge cited a ``startling
pattern of misrepresentation,'' and that is a quote by trial
attorneys seeking payment from these trust sand from companies
in bankruptcy. A former trial lawyer turned whistle-blower even
stated that asbestos trusts are platforms for institutionalized
fraud.
Does the DOJ agree there is enough controversy related to
fraud against bankruptcy trust to warrant a review by the DOJ?
Mr. White. I cannot speak for all of the Justice
Department, Mr. Farenthold, so let me just speak for the U.S.
Trustee Program. It is a fact that there is a lack of
transparency in corporate governance in post-confirmation
trusts in general, and I have testified on that in the past as
well. It was recognized, in fact, by a panel of bankruptcy
experts assembled by the American Bankruptcy Institute as a
commission to study the reform of Chapter 11. As a watchdog of
the system, when you look at post-confirmation trusts, and
asbestos trusts in particular, it is very clear there is no
independent policeman. There is no watchdog for that; neither
the court nor the U.S. Trustee Program have significant
jurisdiction post-confirmation, so when you do not have an
independent review of any kind of an entity in bankruptcy,
including the asbestos trust, then you run certain risks for
abuse.
Mr. Farenthold. I appreciate it. I have got a lot of
questions. I do not mean to cut you short, because this is a
topic of interest to me, but I do have several questions for
Mr. Wood on the Sue and Settle Program.
As you know, under a process called sue and settle,
agencies like the EPA and Department of Interior enter into
court appointed agreements with outside environmental groups.
These agreements mandate agency actions, reorganize agency
priorities and funding, and bypass the laws that allow a public
to provide a meaningful impact. What do you think the
implications of sue and settle agreements given that agencies
often end up diverting their focus from congressional
priorities are?
Mr. Wood. Thank you. That is a very important question and
important issue. First, let me say our focus in our Division is
on defending the lawful regulations and actions of our client
agencies. Under my watch, there will be no collusion involving
any sue and settle actions whatsoever. And with respect to the
longstanding policy of the Department of Justice, we will abide
by Attorney General Meese's memorandum. In fact, whenever
settlement agreements are presented to my desk, we will look
closely at that to make sure it abides by those requirements.
Mr. Farenthold. Now, the other issue with sue and settle
agreements is that following an agreement, the taxpayers' hard-
earned dollars usually goes to paying for the environmental
groups' attorney fees. These expenses can hurtle into hundreds
of thousands of dollars per settlement. Do you think we will be
seeing fewer sue and settle cases if the environmental groups
filing them could not recover attorney fees from the
government?
Mr. Wood. Well, I cannot comment on any specific
legislative proposal, but I can say that it is important to
make sure that any payment in any case is based soundly in law.
The statutes provide that attorney's fees are not necessarily
owed in every case, and in fact, attorney's fees are not owed
if the position of the agency is substantially justified under
the statute. However, that may not have been enforced as
closely as we might have hoped it would have been in the past.
But, certainly, looking at that issue is an important priority,
I think, for Congress.
Mr. Farenthold. On May 25, 2017, Chairman Goodlatte wrote a
letter to the Attorney General alerting him to the potential
opportunity for the DOJ to recover $380 million in taxpayer
dollars that the Obama administration improperly handed to
their political allies. This is real money, but the necessary
motions would have to be filed quickly. Does anybody on the
panel know if a decision has been made on this issue yet?
Mr. Readler. Thank you, Mr. Chairman. I can address that
question. First off, we appreciate Chairman Goodlatte's letter,
and Chairman Goodlatte, I think, referenced in his opening
remarks, there was a policy issued yesterday by the Attorney
General that addresses the topic of payments to third parties,
and it is a very important policy that the Department will
adhere to. It emphasizes that victims in any given case will be
compensated according with court order or settlement. But,
otherwise, any additional dollars will be returned to the
public fisc and not paid out to third parties. Now with respect
to the Keepseagle case specifically, pursuant to longstanding
Department practice, we do not comment on pending cases, but we
are certainly aware of the request from the Chairman, and we
are reviewing the issue.
Mr. Farenthold. One final question on environment, the
Environment Division is defending a Federal land grab relating
to the Red River. The Bureau of Land Management has deemed that
the Red Riverbed extends more than a mile into dry land in
direct contradiction to the Supreme Court's ruling that said
the boundaries follow the course of the stream. Are you all
evaluating whether this legal action serves the public interest
of justice, and if the Bureau of Land Management wishes to
compensate Native American tribes with land, would it not be
better to take the case to Congress rather than private
citizens, Mr. Wood?
Mr. Wood. Congressman, thank you for that question. I am
familiar with the case, the Aderholt v. BLM case. I cannot
speak to specifics about ongoing litigation that our Division
is handling, but I can assure you that we are taking a close
look at the matter.
Mr. Farenthold. I see that my time has expired. Now I
recognized the gentleman from Georgia, Mr. Johnson.
Mr. Johnson of Georgia. Thank you, Mr. Chairman. Mr.
Readler, the Trump administration has reportedly issued an
order instructing agencies to refuse to respond to Democratic
Congressional inquiries or information requests. Is that
correct?
Mr. Readler. Well, thank you for the question. I think that
the terms of any order would speak for itself in terms of what
the President has issued. Our policy, at the Department, is
certainly, with respect to letters, that are issued from
Congress--and I see those pretty regularly--that we do attempt
to respond to all letters issued by Congress. Otherwise, with
respect to oversight responsibilities, we certainly comply with
requests from the chairman, and then take other matters under
advisement.
Mr. Johnson of Georgia. So you are saying that the Civil
Division of the Justice Department will be responding to
Democratic ranking members' of Committees, Subcommittees,
requests for information including documents?
Mr. Readler. Well, no. Those are issues that we take under
advisement at the Department----
Mr. Johnson of Georgia. Those would be covered under the
order issued by the Trump administration not to respond.
Mr. Readler. Well, the Department of Justice, of course,
sets the legal position of the United States, and we will take
all of those requests under advisement, and we will consider
those against the backdrop of governmental law and the
principles articulated by the administration.
Mr. Johnson of Georgia. Will you respond to questions for
the record from Democratic members of this Subcommittee as part
of the record for this hearing?
Mr. Readler. I am not sure I understand the question. Yes,
I am certainly here to address the questions I can address.
But, I obviously cannot comment on pending cases or pending
requests.
Mr. Johnson of Georgia. Earlier today, former FBI Director,
James Comey, testified before the Senate Intelligence Committee
that President Trump demanded his loyalty, telling him, ``I
need loyalty. I expect loyalty.'' Have you pledged your loyalty
to President Trump through communications or otherwise?
Mr. Readler. Like the other members of the Department, we
have all sworn allegiance to the Constitution to uphold the
Constitution, and that is our guiding principle in terms of
cases in addition to interpreting and applying the law and the
facts as they take us in any specific case.
Mr. Johnson of Georgia. So you have not been asked to swear
your allegiance to President Trump?
Mr. Readler. Again, I am not--no. The answer is we uphold
the Constitution.
Mr. Johnson of Georgia. Well, thank you. The Civil Division
is responsible for all civil, immigration litigation including
the Muslim Travel Ban. Is that correct?
Mr. Readler. The Civil Division was chiefly responsible for
defending the challenges to the executive orders given by the
President including the executive orders that address travel
issues. And I would really like to commend my colleagues,
especially the career colleagues, at the Department of Justice
who worked extremely hard in defending these cases under
challenging circumstances, given the pace of those cases and
the number of cases that have been filed. Those specific cases,
of course, now are all pending litigation; there are two
matters before the Supreme Court, and I, of course, cannot
comment on any specific pending case.
Mr. Johnson of Georgia. Well, gosh, I was going to find out
whether or not you agreed that the orders that were issued by
the President are indeed travel bans.
Mr. Readler. Well, the----
Mr. Johnson of Georgia. Is that true?
Mr. Readler. The Department has taken a very consistent
position are lawful exercises to the President's executive and
constitutional powers.
Mr. Johnson of Georgia. You do not want to go near the
travel ban language?
Mr. Readler. Well, the executive order, I think, speaks for
itself.
Mr. Johnson of Georgia. Has the President's manifestations
on Twitter about the orders being Muslim or actually travel
bans, has that hurt the Department's ability to prosecute its
appeal?
Mr. Readler. Well, again, I cannot comment on pending
cases. We have two cases pending in the Supreme Court where we
have vigorously defended the executive orders as lawful
exercises of the President's constitutional and statutory
authority, including authority granted the President by this
body and a host of immigration laws.
Mr. Johnson of Georgia. Thank you, Mr. Wood. President
Trump recently announced that the United States will withdraw
from the Paris Agreement, stating that the United States would
be exposed to ``massive legal liability if we stay in.''
Leading environmental law experts strongly disagree with this
statement, however. UCLA law professor James Salzman notes that
President Trump's statement is ``not true'' because there is
``no liability mechanism under the Paris Agreement.'' While
Columbia law professor, Michael Berger, adds that the United
States may be more exposed to lawsuits as a result to
withdrawing from the Paris Agreement. Do you, Mr. Wood, agree
with President Trump?
Mr. Wood. Thank you, Congressman. We have a very
significant role in the Division in defending the
administration's actions including its actions pursuant to its
America First Energy Policy, and we are actually engaged in
those cases. Any questions with respect to the International
Paris Accord, I would refer you to the State Department who is
primarily responsible for those issues, but thank you for the
question.
Mr. Johnson of Georgia. Well, let me ask you this. Are you
concerned that withdrawing from the agreement may result in
increased liability for inaction as President Trump has warned?
Mr. Wood. Well, thank you for the question. I think the
President's statement stands for itself, and we will continue
to vigorously defend all actions of the client agencies who
were honored to serve to the extent those come up in court.
Thank you.
Mr. Johnson of Georgia. President Trump has referred to the
international scientific consensus that climate change is real
and caused by human activity as an ``expensive hoax'' that was
created by and for the Chinese, in order to make U.S.
manufacturing noncompetitive. Is that a statement that you
agree with?
Mr. Wood. Well, I would refer you to the EPA, for the
administration's current position on climate change. Our
responsibility at the Environment Division is to defend the
lawful actions of our client agencies. That includes those
actions in the regulatory context under the Clean Air Act, as
well as the enforcement of the Clean Air laws, which we
continue to vigorously do.
Mr. Johnson of Georgia. Well, I take it you are not going
to share your personal views on these issues.
Mr. Wood. Thank you, sir. My personal views are not really
relevant to my responsibility to enforce the law.
Mr. Johnson of Georgia. Well, you are saying you are going
to determine that my questions are not relevant, and so
therefore, not answer them. Is that something that the
administration has instructed you all to do?
Mr. Farenthold. The gentleman's time has expired. We will
let Mr. Wood answer the question, and then we will move on.
Mr. Wood. Thank you, Congressman. I respect you and your
question. I think it is an important issue. I do not diminish
the issue whatsoever. I just would simply say, with respect to
the administration's position, that is put forth by EPA and
others. My responsibility as the head of the Environment
Division at DOJ is to enforce the laws including the Clean Air
Act and to defend the lawful actions of our client agencies.
But I do respect you and the position that others have on that
issue. Thank you.
Mr. Johnson of Georgia. Thank you, sir.
Mr. Farenthold. Thank you, Mr. Johnson. We will now
recognize the second best dressed man on the panel today, the
gentleman from Texas, Mr. Ratcliffe.
Mr. Ratcliffe. Thank you, Mr. Chairman. I thank the
witnesses for being here today. I think these are really
important issues that we are talking about, because I and the
vast majority of the constituents that I represent are of the
opinion that there have been a number of instances over the
last 8 years where the prior administration, the Obama
administration, appeared to put politics above the rule of law.
There were a variety of cases where we saw the Obama
administration appear, in fact, to expressively subvert the
will and the intent of Congress and the American people.
One of those instances that comes to mind was Operation
Choke Point where we saw that administration target banks that
did business with certain disfavored retailers like pay day
lenders and payment processors and disfavored industries like
gun sellers and coal producers. More broadly, we also saw the
targeting of conservative groups by the IRS merely because of
their political beliefs. Now, those are just a few instances,
but I will tell you that I am optimistic going forward that we
have an opportunity to turn the page and restore accountability
and put the rule of law back above politics. I say that because
we saw an example of it just this week when the Trump
administration announced its decision to halt these settlement
slush funds that is to prohibit the practice of the Obama
administration Department of Justice of systematically
subverting Congress's spending power by requiring settling
parties to donate money to various activist groups.
Mr. Wood, I want to start with you because you stated in
your written testimony we all know that ENRD plays an important
role in enforcing our Nation's environmental laws, the Clean
Water Act, the Clean Air Act. Knowing that these laws and
corresponding regulations could hurt jobs, for instance, in
mining and manufacturing, Congress specifically included in
Section 321A of the Clean Air Act a requirement that the EPA
conduct continuing evaluations of potential loss or shifts of
employment that could result. I am sure that you are aware, and
maybe some of my colleagues have already covered this, but
there are cases pending in the Fourth Circuit where the Murray
Energy Corporation sued the EPA under the Obama administration,
asserting that the EPA's refusal to complete that job impact
analysis irreparably harmed Murray Energy. The lower court
agreed with Murray, noting that it would be an abuse of
discretion for the EPA to refuse to conduct that evaluation for
the impact that it might have on regulations for the coal
industry.
In recent arguments before the Fourth Circuit, I understand
that the Department of Justice focused largely on procedural
issues arguing that Murray lacks standing in urging that the
case be dismissed, but the DOJ also recently filed a compliance
plan with the District court, which indicated how the EPA would
comply with the law. And I will tell you I was heartened when I
saw the compliance plan, because at least in that sense it
represented an effort on the part of this administration that
was not evident under the prior administration, particularly
because this effort, to me, seems consistent with the
statements made by Administrator Pruitt and Attorney General
Sessions on this issue as well.
So, my question to you is this: if the Fourth Circuit
agrees with the Department of Justice argument that Murray does
not have standing, is the administration still committed to
conducting the job's impact analysis requirement under the
Clean Air Act?
Mr. Wood. Thank you, Congressman. I am aware of the letter.
I appreciate receiving the letter. As has been mentioned a few
times on this panel today, we cannot speak to specific issues
in pending litigation. I am aware of the filing that you
mentioned, which was required under the District court's order,
and I would refer any questions specifically related to EPA's
plans to the EPA. I am proud of the work our lawyers are doing
in all of our full range of cases. We take a close look at the
law and the facts to make sure every position we are taking is
well-grounded, and we will continue to do that. And I will
commit to keep the Committee informed as to any developments
that we can share with you about that case.
Mr. Ratcliffe. Well, I appreciate the comments regarding
pending litigation, but quite frankly, we would rather this not
be pending litigation, because we would hope that you will be
willing to comply with the job impact analysis required by law,
but let me move on then. 321A of the Clean Air Act uses the
term ``shall,'' yet this language is being interpreted as a
``discretionary duty.'' Can you answer for me whether there is
additional language that, as a member of Congress, we could
include to clarify that this job loss analysis is required and
is not a discretionary duty?
Mr. Wood. Thank you, Congressman, for that comment. I
cannot comment on specifics related to the pending case, as we
have said, but I welcome that input, and we will be sure to
keep this Committee informed on the case as it progresses.
Mr. Ratcliffe. Then I will yield back, Mr. Chairman.
Mr. Farenthold. Thank you, Mr. Ratcliffe. We will now
recognize the gentleman from Illinois for 5 minutes.
Mr. Schneider. Thank you, Mr. Chairman, and thank you to
all of you for being here today, and more importantly, thanks
for the work you, and I am going to extend it to the many
people working in your Department's do, for our Nation every
day.
Mr. Wood, I would like to start with you. The materials
that you submitted to the Subcommittee for this afternoon's
hearing state that the mission includes ``promoting national
security in military preparedness.'' In 2015, the Department of
Defense released a report on the national security implications
of climate change, finding that climate change will aggravate
problems, such as poverty, social tension, environmental
degradation, ineffectual leadership, and a weak political
institution that threatens stability in a number of countries.
During its confirmation hearing, Secretary of Defense, James
Mattes, similarly observed that climate change is a challenge
that requires a broader, whole of government response, and he
went on to say that he would ensure that the Department of
Defense plays its appropriate role within such a response by
addressing national security aspects.
So, my questions for you are what is your take of the
assessments of the Department of Defense under both now the
Obama and Trump administrations that climate change is a
national security threat, and how will that or should that
affect the work that you are doing in your Department?
Mr. Wood. Thank you, Congressman. As I mentioned earlier
with respect to a similar question, our role at the Environment
and Natural Resources Division is to defend the lawful actions
of our client agencies and to enforce the laws, including the
Clean Air Act, which we are continuing to do. With respect to
any issues related to the administration's position on
international issues or on climate change, I refer you to the
State Department and to the EPA.
Mr. Schneider. But if I can, to the extent that the law and
regulations are requiring actions of our government and
pursuing, there is a difference perhaps of positions from the
White House and the Department of Defense, how will that affect
what you are trying to do?
Mr. Wood. So our responsibility is to look at the law, look
at the facts, look at the actions that our client agencies take
in light of what the statutes that Congress has passed would
require, and where the actions of the agencies are lawful and
appropriate, to defend those vigorously in court, and that is
what we are doing. I would note that the current
administration, with the President's directive on an America
First Energy Policy, is taking a fresh look, doing a review, or
reconsideration in some cases, of previous regulations. Those
kinds of reviews happen in the beginnings of virtually every
administration. And the work of our lawyers right now includes
assisting with those efforts to ensure that the agencies have
the appropriate time to do a thoughtful review consistent with
the Administrative Procedures Act and to ensure that they, to
the extent that they make changes in positions, that those are
vigorously defended in court, and we are honored to be able to
work with our client agencies on those endeavors.
Mr. Schneider. Thank you, and I will just say to the extent
that the laws were drafted with the intention of ensuring the
sustainability of our environment and to ensure national
security, I look forward to you enforcing them or defending
them as best as possible. Mr. Readler, if I can turn to you.
You asked for a budgeting increase to add more lawyers. What
would those lawyers be doing?
Mr. Readler. We have a request for 20 additional lawyers in
our Office of Immigration litigation. That is the office that
handles both district court and appellate court that help to
enforce the immigration laws of the United States working with
DHS and other Federal partners.
Mr. Schneider. Okay. Recent reports have talked about the
administration unable to fill senior roles, and 93 U.S.
attorney vacancies nationwide, are you having a challenge
bringing on lawyers? Do you see it being difficult to bringing
lawyers on, those additional lawyers you are talking about?
Mr. Readler. I am not sure which specific lawyers you are
referring to. U.S. attorneys are not hired through the Civil
Division, so that would not be something we have oversight
over, but we have some new lawyers joining us in the next few
weeks.
Mr. Schneider. And as far as recruiting, has it been a
challenge finding lawyers willing to come to the administration
in the current environment?
Mr. Readler. I am not aware of challenges that we have for
recruiting. As the political leadership, we are not directly
involved with recruiting. There are a lot of rules with respect
to hiring that we are expected to adhere to, but my general
sense is that when their openings, there are many lawyers who
are interested in working at the Justice Department and,
specifically, in the Civil Division.
Mr. Schneider. Great, and as my time is about to expire, I
will yield back.
Mr. Farenthold. Thank you very much, and if the Ranking
Member will indulge me for two quick questions, I wanted to
follow up. Mr. Readler, you said you requested additional
funding for lawyers to handle immigration cases. I assume you
need more judges because there is a backlog. Or, I am sorry,
more lawyers because there is a backlog. Even with more
lawyers, is there not backlog also for shortage of judges to
adjudicate these issues?
Mr. Readler. Yes, well, with respect to the Civil Division
specifically, our lawyers handle the immigration cases really
at the end of that process when cases are appealed from the
Order of Immigration appeals to the Federal courts of appeals.
But on the front end of that process with the Executive Office
of Immigration Review, my understanding is that there is some
backlog there, and that there have been separate requests to
add judges to expedite that process or move those cases ahead,
which would then, on the backend, create additional work for
the Civil Division to handle appeals.
Mr. Farenthold. Is your shortage of lawyers creating delays
in adjudicating these cases as well where you are having to ask
for continuances and things because of lawyer workload?
Mr. Readler. I think currently we are doing a pretty good
job of staying on top of those cases. We have about, on
average, 7,000 appeals per year, but our capacity would
increase, and we would be able to handle additional cases
obviously with additional funding.
Mr. Farenthold. Thank you. I appreciate your indulgence. We
will now recognize gentlelady from Washington for her line of
questioning.
Ms. Jayapal. Thank you so much, Mr. Chairman. I am sorry I
missed some of this hearing, but I did read the testimony, and
I appreciate you all being here. I wanted to focus a little bit
of attention on environmental regulation and specifically
direct some questions to you, Mr. Wood. The Environment and
Natural Resource Division is responsible for litigating
environmental and natural resource cases on behalf of the
United States including those that arise under the Clean Air
Act, the Clean Water Act, and other environmental protective
statutes, but I wanted to ask you, prior to your current
position, you worked as a lobbyist for energy companies while
also advising the Trump campaign. Is that correct?
Mr. Wood. Thank you for your questions. I am very proud of
the work that I have done as a private practice attorney, and I
was, yes, a volunteer, as many lawyers do, for campaigns across
the country. I exercised my First Amendment and constitutional
right to volunteer for a campaign.
Ms. Jayapal. Absolutely. But you were a lobbyist for energy
companies as well, is that correct?
Mr. Wood. I was a registered lobbyist, yes. Thank you.
Ms. Jayapal. Thank you. And in that capacity, you
represented Southern Company, a utility company that generates
a third of its power from coal, is that correct?
Mr. Wood. I am not sure of the specific reference that you
make there to the statistic, but I did work on behalf of
Southern Company and a variety of other clients.
Ms. Jayapal. And in 2016, you referred to the Clean Power
Plan and other environmental protections as, these are your
words, ``contentious environmental rules that were the
disappointment of many in the regulated community.'' Is that
accurate?
Mr. Wood. I am not sure where that quote comes from, but it
sounds like something I may have said.
Ms. Jayapal. And do you believe that the purpose of
environmental protections is to please regulated entities?
Mr. Wood. No, and I do not think that is the context in how
I would have meant that quote. And clearly, in the capacity as
the Assistant Attorney General, my constitutional and statutory
duty is to vigorously enforce the laws. And I think, as my
written testimony and my statement here today shows, we are
actively and vigorously doing that across a full spectrum of
our statutes, including the Clean Air Act and Clean Water Act
and every other environmental and natural resources law. We
have over 6,000 cases, matters, and appeals that are being
well-handled by our team of over 400 career attorneys, and it
has been an honor to work with them on that.
Ms. Jayapal. That is good to hear, because it does concern
some of us that the person that is the head of the EPA has
actually sued the agency multiple times around these
environmental regulations. So, should environmental projects
that are contentious, using your word, solely because they are
unsupported by a regulated agency still be enforced? I just
wanted to clarify that.
Mr. Wood. Clearly, we enforce every lawful regulation and
statute on the books. And we take that obligation very
seriously. I do as well, and we will continue to do so in this
administration.
Ms. Jayapal. Mr. Wood, I respect very much your work, and
so please do not take this the wrong way, but there are some
who have suggested that the appointment of a former coal
lobbyist as the acting Assistant Attorney General of the
Environment and Natural Resources Division is a form of
political patronage by the Trump administration in return for
millions of dollars in campaign contributions by coal
executives and companies to the Trump campaign. And I wanted to
give you chance to respond to that and tell us what you might
say in response to many of my constituents who are writing to
me about that specific issue.
Mr. Wood. Thank you. I am very proud of the work I did in
the private sector as an attorney representing great clients
and had the opportunity to work on behalf of those clients, and
my work is a matter of public record with respect to the
filings that I have made, and those would reflect that much of
my work was not in the area of coal, but more so in the area of
nuclear. The only other thing that I would mention in that
regard is that upon my arrival at the Department of Justice, I
worked with the ethics officials there and was provided an
ethics opinion regarding my recusal obligations. As I
mentioned, we have 6,000 matters, cases, or appeals; a very
small number of those involve issues for which I would have had
some involvement previously, and I am recused from those. And I
have abided by that ethics letter and will continue to do so,
but thank you for your question.
Ms. Jayapal. Thank you. I appreciate that. I have just a
few minutes left, so let me ask one more question. Under the
Obama administration, the ENRD prosecuted several coal
companies for violating environmental laws. For example, in
2015, Duke Energy pleaded guilty to nine criminal violations of
the Clean Water Act for a massive coal ash spill. Your
predecessor, John Cruden, stated that this massive spill, and
these are his words, ``was a crime, and it was the result of
repeated failures by Duke Energy subsidiaries to exercise
control over coal ash facilities.'' Will you and the ENRD
prosecute similar violations of the Clean Water Act and other
environmental laws so that we can be assured that communities
in rural areas, urban areas, across the country, can be
protected against things like coal ash spills?
Mr. Wood. Congressman, thank you for that question. I
cannot speak to any specific case, but you have my assurance
that the ENRD continues to vigorously enforce the Clean Water
and Clean Air laws of the United States. We will continue to do
so, and I think my written testimony accounts for several
recent examples in just the past few months where we are doing
exactly that. But thank you for your question.
Ms. Jayapal. I appreciate that, and I tell you that
communities across the country including in places like Flint,
Michigan and rural communities that are suffering with toxic,
toxic situations and death in many of their communities, will
be counting on you and your leadership to make sure that we
continue to take this extremely seriously and prosecute
violations of the law. Thank you. I yield back.
Mr. Farenthold. Thank you very much. The House has votes
scheduled for 4:00. That is an hour and a half from now. We are
now an hour and a half into this two-panel hearing, so we are
kind of at the halfway point where we probably need to bring
our second panel in. As much as I would like to do a second
round of questioning with our distinguished panel, I do not
think time will permit it. That being said, I would request
that our witnesses entertain questions for the record that we
will, most likely, submit to you, and if anybody has questions
for the record, if you could get them to the staff within the
next 5 legislative days. We will pass those along to you, and
if would you all agree to answer those questions? And we got
affirmative from everybody on the panel.
So, with that being said, that will conclude our first
panel. I want to thank you all for being here and for your
testimony, and you are excused. We will now call the second
panel for today's hearing, and we will give the staff time to
set up, give everyone time to get settled, give me time to
freshen up, and we will get going again here in about 4
minutes.
[Recess.]
Mr. Farenthold. The Committee will come back to order. Have
to bang here. I will begin by swearing in our second panel of
witnesses before introducing them. If you all will please rise.
Do you swear that the testimony that you are about to give
before this Committee is the truth, the whole truth, and
nothing but the truth, so help you God?
Let the record reflect that all the witnesses answered in
the affirmative, and you all may be seated. Thank you very
much. We have got another great panel of witnesses as we
continue our oversight in this Subcommittee.
We will start with Mr. Hans von Spakovsky. I am going to
call you Hans. Even though I have met you several times, but
your name is a mouthful even for somebody who has a radio
background like I do. Hans is a senior fellow in the Center for
Legal and Judicial Studies at the Heritage Foundation. He was a
commissioner for the Federal Election Commission for 2 years,
and prior to that, he was a career counsel to the assistant
attorney general for Civil Rights at the U.S. Department of
Justice. He is a former, in-house counsel and also served in
private practice. He is a 1981 graduate from MIT in a 1984
graduate from the Vanderbilt University School of Law where my
daughter is now attending. Go `Dores. He published many
articles, studies, and reports for the Heritage Foundation,
National Review, Fox News, Wall Street Journal, and numerous
other publications and is a co-author on two books on election
integrity and the U.S. Justice Department. Welcome, sir.
Ms. Cleta Mitchell is a partner and political law attorney
in the Washington, D.C. office of Foley and Lardner, LLP, and a
member of the firm's political law practice. Mrs. Mitchell
practices before the Federal Elections Commissions, the Ethics
Committee of the U.S. House and Senate, and similar State and
local enforcement bodies and agencies and represents numerous
candidates, campaigns, and members of Congress, as well as
State and national political party committees. Prior to joining
Foley and Lardner, Ms. Mitchell served as a member of the
Oklahoma House of Representatives where she chaired the
Appropriations and Budget Committee. She also served on the
Executive Committee on the National Conference of State
Legislators. As a University Texas graduate, it pains me to
tell you she earned her bachelor's degree with honors and J.D.
from the University of Oklahoma.
Andrew Grossman is a partner in the Washington, D.C. office
of the law firm of Baker and Hostetler where he practices
appellate and constitutional law. He is also an adjunct scholar
of the Cato Institute, a think tank, and writes frequently on
the law and legal policy. He was previously a fellow in the
Meese Center for Legal and Judicial Studies at the Heritage
Foundation. Mr. Grossman earned his bachelor's degree from
Dartmouth College and his master's degree in public
administration from the University of Pennsylvania and a J.D.
from George Mason University School of Law, where he graduated
magna cum laude. Congratulations and welcome.
Mr. Robert Weissman is the president of Public Citizen, the
Washington, D.C. public interest advocacy organization. He is a
Chair of the Coalition for Sensible Safeguards, an alliance of
more than 100 consumer small business, labor, scientific,
research, faith, community, health, and environmental
organizations united to protect health, safety, consumer, and
environmental standards. Mr. Weissman has published extensively
on issues related to corporate accountability. He is a graduate
of Harvard College and the Harvard Law School.
Each of the witnesses' statements, as with the first panel,
will be entered into with record in its entirety. I ask all to
summarize your testimony to fall within the 5 minutes that will
be indicated on the clock in front of you. When it goes yellow,
just like when you are driving, you speed up. No. You have just
got 1 minute left to conclude your testimony. When it is red,
please wrap it up as quickly as possible. So, Hans, we will
start with you.
STATEMENTS OF HANS VON SPAKOVSKY, MANAGER OF ELECTION LAW
REFORM INITIATIVE, SENIOR LEGAL FELLOW, HERITAGE FOUNDATION;
CLETA MITCHELL, PARTNER, FOLEY AND LARDNER LLP; ANDREW
GROSSMAN, PARTNER, BAKER & HOSTETLER LLP; AND ROBERT WEISSMAN,
PRESIDENT, PUBLIC CITIZEN
STATEMENT OF HANS VON SPAKOVSKY
Mr. von Spakovsky. Thank you, Mr. Chairman. The duty of the
Civil Division is to defend the government, including its
client agencies. Now, rule 1.3 of the Rules of Professional
Conduct of lawyers in the District of Columbia also requires a
lawyer to ``represent a client zealously and diligently within
the bounds of the law.'' Most importantly, lawyers may not
intentionally ``prejudice or damage a client during the course
of a professional relationship.'' Thus, Civil Division lawyers
have a professional obligation and an ethical duty to defend
the actions of Federal agencies unless there are absolutely no
circumstances, under which they can be defended, a situation
that occurs only rarely.
Yet, in a recent case involving the U.S. Election
Assistance Commission, Division lawyers violated that
professional duty. In a lawsuit involving the Federal Voter
Registration Form, Civil Division lawyers took the side of the
plaintiffs and refused to defend the agency. EAC Chair Christy
McCormick sent a letter to former Attorney General Loretta
Lynch and Judge Richard Leon, who was assigned to the case,
expressing her ``grave concerns regarding the potential
conflict of interest and failure of the Department of Justice
to provide'' the EAC with proper representation.
The Civil Division's erroneous claim that it could not
defend the EAC were belied by the fact that Judge Leon ruled in
favor of the EAC in his February 23, 2016 order, denying a
requested temporary restraining order. In his order, Judge Leon
commented on the misbehavior of DOJ, noting that the Division
had taken ``the extraordinary step of consenting to plaintiff's
request, not for a TRO, but for a preliminary injunction.'' He
ruled for the EAC despite DOJ's failure to defend the
Commission. In fact, at the hearing, which I attended, Judge
Leon said that he had never seen such behavior by a government
lawyer in his entire experience as a lawyer or a judge.
There was also evidence in the case of a serious conflict
of interest because of lawyers from the Civil Rights Division
taking over the decision making regarding the main issue in the
case, thus usurping the policymaking function of an
independent, bipartisan Commission. The Civil Division was
apparently so worried about this conflict becoming public that
it asked for the deposition of Commissioner McCormick to be
sealed. None of the lawyers involved in this violation of their
professional obligations have been investigated or disciplined
in any way.
Second issue and this has been mentioned by the Chairman.
One of the little-known costs for taxpayers is the Judgment
Fund housed at the U.S. Treasury Department, a permanent,
indefinite appropriation. This is used to aid judgments against
the U.S. when it loses lawsuits, but it is also used to pay
amounts negotiated by the Department of Justice, such as the
Civil Division and the Environment Division to settle claims.
Now, the Treasury Department does send a yearly report to
Congress, and it maintains a webpage, but the information
provided is so limited that it is not sufficient to identify
what the government did wrong and who is benefitting from these
government payments. No copy of the complaint judgment against
the government or settlement agreement is made available. All
of this information could be easily supplied by the Justice
Department's various Divisions to the Treasury Department and
made available for the public and members of Congress. The
public deserve to know all the details of this, and this is the
kind of transparency that we need.
A third issue, an important issue in the International
Refugee Assistance Project v. Trump case being handled by the
Civil Division, is the issuance of injunctions by Federal
district courts with limited geographic jurisdiction that apply
nationwide or globally to unidentified aliens who are not even
parties to a suit. All of this violates a U.S. Supreme Court
decision, which the Civil Division, I do not think, has been
asserting forcefully enough in all of its cases, including U.S.
v. Mendoza. The key in that case was the usual role of
collateral estoppel that applies to private parties does not
apply to the government. That means that the government has the
ability to apply the executive order to individuals who are not
actual parties to the litigation.
One other thing that the Congress should consider: that is
the chaos caused by having cohorts all over the country issue
potentially conflicting and duplicative decisions on the same
issue. I think you should consider passing a law that says that
any lawsuit contesting an executive order issued by the
President has to be filed in the District of Columbia Federal
district court. This would prevent different cases and
different decisions from coming all over the court, and there
are precedents for this kind of action. Thank you.
[Mr. von Spakovsky's written statement is available at the
Committee or on the Committee Repository at: http://
docs.house.gov/meetings/JU/JU05/20170608/106076/HHRG-115-JU05-
Wstate-vonSpakovskyH-20170608.pdf]
Mr. Farenthold. Thank you very much. Ms. Mitchell, you are
recognized for 5 minutes.
STATEMENT OF CLETA MITCHELL
Ms. Mitchell. Thank you, Mr. Chairman, members of the
Committee, and thank you for the opportunity to appear here
today. I am appearing here today in my capacity as counsel to a
number of organizations who were targeted by the IRS during the
IRS targeting scandal, and subsequently, in my capacity as
counsel to one of the groups which filed a suit against the IRS
because of the targeting scandal.
There are multiple cases that have been filed by different
litigants that arose from the IRS targeting scandal, and all of
those cases are defended by the Tax Division of the Department
of Justice. And I am here to talk about our experiences in
three areas with respect to the attorneys in the Department of
Justice Tax Division.
In a word, the DOJ tax attorneys have done, and continue to
do, everything in their power to stall, delay, and block the
orderly proceedings of these civil cases and to throw every
monkey wrench they can invent, devise, or imagine to keep these
plaintiffs from discovering the truth and the facts that
resulted in the intentional delay of the normal processing of
hundreds of applications for exempt status by citizens groups,
solely because of their names and missions. The DOJ tax
attorneys argue at every turn that none of these plaintiffs are
entitled to any relief, but it is not that that I find so
objectionable.
What I find objectionable are three things that I am going
to turn to now: the first is that I believe that it is the
responsibility of the tax attorneys in the Department of
Justice for the fact that the Lois Learner emails were lost. At
the time that our lawsuit was filed in 2013, and under the
Federal laws of civil procedure under several Federal statutes,
and also the Committee on Oversight and Government Reform
issued two subpoenas to preserve those documents/materials
relevant to the IRS investigation, which were also under a
litigation hold, resulting from our lawsuit. And yet, imagine
our surprise in June of 2014 when we learned, through the
media, that supposedly Lois Learner's emails were lost. We
immediately sent a letter, which is attached to my testimony,
to the Department of Justice tax attorneys and said we would
like to immediately go to court, or ask them to allow us to
collectively, jointly have an independent forensics expert team
go into the IRS to see about recovering, locating, and
retrieving these supposedly lost emails.
They fought us at every step. They refused to agree to any
kind of cooperative effort. We filed a motion for expedited
discovery. They argued through the summer and ultimately
prevailed, and no independent expert was appointed or allowed
access to the servers, the backups, and et cetera.
And what we learned, subsequently, is that, at the very
time they were objecting to allowing access to those servers,
the servers were erased at the very time. And it also is
absolutely clear that they took no steps when the lawsuits were
initially filed to do what normal litigants do, which is to
ensure that your clients are not doing anything to lose any
documents, materials, or evidence. They even objected to the
fact that we called it evidence, so I believe that that falls
squarely at their feet.
And since that time and separately from that, I have
attached a copy from the order of the Sixth Circuit of the
court of appeals in which the court castigated the Justice
Department attorneys, the trial court, castigated the Justice
Department attorneys and said that their behavior, with regard
to discovery, constituted studied obstructionism. It is very
rare for an appellate court to call out the attorneys in a
case, and in particular, to call out the government attorneys,
but that is what the Sixth Circuit court did. These lawyers in
the Department of Justice, Tax Division should not be allowed
to continue to engage in this misconduct.
The trial court in Cincinnati said that what the IRS had
done was being perpetuated by what their attorneys were doing,
and they have applied different legal theories completely,
taking the same legal theory and applying it in one manner in
one of the cases and in another manner in other cases, on
whatever suits their purposes to try to obstruct and keep these
lawsuits from coming to a conclusion.
So, I would argue that it is time for Congress to do
something and that the administration should do something to
bring these long, pending lawsuits to a conclusion, which will
only happen if the Department of Justice attorneys in the Tax
Division stop obfuscating, stalling, and doing everything they
can to keep it from happening. Thank you.
[Ms. Mitchell's written statement is available at the
Committee or on the Committee Repository at: http://
docs.house.gov/meetings/JU/JU05/20170608/106076/HHRG-115-JU05-
Wstate-MitchellC-20170608.pdf]
Mr. Farenthold. Thank you very much. Mr. Grossman, you are
up for 5 minutes.
STATEMENT OF ANDREW GROSSMAN
Mr. Grossman. Thank you, Mr. Chairman, and thank you for
holding this hearing today and inviting me to testify. My
statement will focus on two issues concerning the Department's
use of settlements to resolve litigation: one is the sue and
settle phenomenon, and the other, which I will turn to first,
is the Department's new policy announced yesterday morning
generally prohibiting so-called slush funds.
The new policy is to be commended. As the Subcommittee is
all too aware, the previous administration believed that it
could circumvent Congress's control of the purse by entering
into settlements that required defendants to pay money not to
the Treasury, but to third party organizations. These
organizations, including activist groups, were not parties to
these lawsuits; they were not victims; and the money they
received was not compensation or restitution or attorney fees.
This was pure, programmatic spending that requires
Congressional appropriation. The previous administration's
lawyers believed--incorrectly, in my view--that they could
skirt that requirement by diverting funds from entering the
Treasury. The Attorney General's new policy puts an end to that
sleight of hand. It bars the Department from ``entering into
any agreement on behalf of the United States in settlement of
Federal claims or charges that directs or provides for a
payment or loan to any non-governmental person or entity that
is not a party to the dispute, excepting restitution and
attorney fees and payments expressly authorized by statute.''
So, we should commend the Attorney General's action, but I will
identify two respects in which it may fall short.
The first concerns a particular type of slush fund
settlement that draws money directly from the Treasury through
the Judgement Fund Act to make payments to third party
organizations for programmatic activities. Now, if requiring
settling defendants to make payments to activist organizations
intrudes on this body's appropriations power, then taking the
money directly out of the Treasury to pay for programs that
have never been authorized or appropriated is an even more
serious violation. Now, the poster child for this kind of
abuse, as you all know, is the Keepseagle settlement that was
recently the subject of a split decision of the D.C. circuit. I
will not discuss the case because the Subcommittee is well
aware of it, but I will note that the Attorney General's new
policy statement, at least as it is written, appears to be
ambiguous on abuse of the judgement fund to make payments to
third party organizations.
I understand that there may be disagreement within the
Department over whether such settlements should be allowed or
not, although Mr. Readler's statement on the previous panel
seems to suggest otherwise. I think this Subcommittee and the
American people deserve to know with greater clarity what the
Department's position is on this important issue and whether
the Department believes that undertaking such payments is
consistent with the governing statutory authority as well as
constitutional authority. And I think they also deserve an
answer to the Committee Chairman's letter regarding whether the
Department will act to claw back the extra Keepseagle
settlement money for the benefit of taxpayers before it goes
out the door.
The second shortcoming of the new policy is that it
ultimately does not bind an administration that does not wish
to be bound. In my view, the Constitution and statutory law
already prohibit these kinds of settlements, but when everyone
gets bought off, there is no adversary to oppose an unlawful
settlement. A simple fix is required, a simple statutory fix.
Judges should not be allowed to approve these kinds of
settlements, and the Judgement Fund Act should be amended to
make crystal clear that it does not authorize payments to third
party organizations. This is required to prevent the gaming of
our judicial system to circumvent Congress's power of the
purse.
Let me now turn quickly to the sue and settle issue. The
Subcommittee is certainly familiar with the problem, and so I
will not cover old ground. We all know that agencies in the
previous administration used collusive settlements to advance
regulatory agendas and to evade accountability. I can report
that, so far, we have not witnessed any of this kind of abuse
by the Trump administration. In fact, EPA administrator Scott
Pruitt has declared that his agency, which was one of the worst
offenders under the Obama administration, will not enter into
settlements that set the agency's agenda, but EPA is only one
agency, and I am disappointed to say that the Department of
Justice has so far been relatively silent on this issue. The
proper policy for the Department is not a mystery, because it
is the one that was actually identified on the previous panel
by Mr. Wood. That is the policy that was adopted in 1986 by Ed
Meese, Ronald Reagan's Attorney General. The policy is
straightforward: do not enter into settlements or consent
decrees that convert discretionary authority into mandatory
duty or that require the expenditure of unappropriated funds.
If the Trump administration is serious about accountability, it
should officially reaffirm the Meese policy.
Action by Congress is also appropriate. As I explained in
my written testimony, the Sunshine for Regulatory Decrees and
Settlement Act, H.R. 469, adopts a thoughtful and comprehensive
approach to this issue. More broadly, Congress should consider
its use aspirational and unrealistic statutory deadlines
combined with broad citizen suit provisions. As a matter of
good public policy, a deadline that Congress does not expect an
agency to meet is one that ought not to be on the books, and as
a matter of constitutional principle, Congress should be the
one enforcing rulemaking deadlines through its oversight and
appropriations powers. Again, I thank the Committee for the
opportunity to offer these remarks, and I look forward to your
questions.
[Mr. Grossman's written statement is available at the
Committee or on the Committee Repository at: http://
docs.house.gov/meetings/JU/JU05/20170608/106076/HHRG-115-JU05-
Wstate-GrossmanA-20170608.pdf]
Mr. Farenthold. Thank you very much. Mr. Weissman, you are
up for 5 minutes, sir.
STATEMENT OF ROBERT WEISSMAN
Mr. Weissman. Thank you very much, Mr. Chairman, Mr.
Johnson, for the opportunity to be here today. I wanted to
speak broadly to issues about corporate accountability at the
Justice Department including both criminal and civil
enforcement with a focus on issues related to Wall Street
crimes and wrongdoing.
In 2008, as we all know, Wall Street crashed our economy,
and we are living with the after effects of that. Strikingly,
though, the Wall Street banks in the financial sector,
generally, were able to escape accountability for the
widespread wrongdoing that occurred. There were effectively no
criminal prosecutions by the Department of Justice and no
criminal prosecutions either of the largest banks or the
executives at those banks who are responsible for devastating
harm across the economy. We found out eventually that the
Department of Justice officials thought those institutions were
too big to fail, too big to jail as well, too big to prosecute.
Later in the Obama administration, there were a series of
civil settlements reached with the banks, and those did obtain
significant sums of money, but they were poorly executed. Those
settlements did not disclose the underlying wrongdoing that the
banks were alleged to have committed in some circumstances and
gave, really, no basis for assessing whether the settlements
reached correlated in any with the impact and damage that the
banks had had on the economy.
There was a related problem that goes back far before the
Obama administration that we saw especially in the financial
sector but more broadly as relates to corporate wrongdoers,
which is the extraordinary use of deferred and non-prosecution
agreements against corporate violators, as well as limited
criminal accountability for corporate executives. It became the
norm for corporations that broke the law to escape the
requirement to plead guilty or to be convicted, instead
entering into deferred or non-prosecution agreements that
effectively amount to nothing more than a promise to not break
the law in the future, which is a promise with no meaning
whatsoever, since they are already obligated to not break the
law in the future. As I discuss in my testimony, perhaps the
most egregious instance involved HSBC for a massive money
laundering scheme for which they were able to escape any kind
of criminal liability.
At the end of the Obama administration, in response to
public criticism around these issues, we saw some, slight
change. Importantly, we saw the issuance of the Yates
Memorandum with a focus on trying to prosecute executives of
corporations that engaged in wrongdoing. We saw some notable
criminal prosecutions involving Mass E Energy and its executive
Don Blankenship, The Peanut Corporation of America, and a
couple other notable examples. We also saw in the last day of
the administration the settlement with Volkswagen, which both
obtained substantial compensation, launched indictments against
a number of executives and managers, and required the company
to plead guilty to criminal wrongdoing. So, we saw some
progress in this area at the end of the administration.
Unfortunately, in the early days of the Trump
administration, signs are that things are going to reverse.
Just recently, the Department of Justice entered into a non-
prosecution agreement with City Group in another money
laundering case. This is the City Group's subsidiary in Mexico
for what the Justice Department called vast criminal
wrongdoing, but again, no criminal prosecution, no criminal
plea. It is a worrisome sign of a return to those old days. We
have seen astounding revolving door set of nominations for key
positions in the Justice Department from the solicitor general
on down. And we have seen, just earlier this week, a move to
deny justice for victims of corporate wrongdoing through
Attorney General Session's newly announced policy to prohibit
settlement payments to third parties. If you look at the
actuality of those settlements, they are designed to ensure
full compensation, full restitution, for victims who often
cannot be compensated directly. And I think this was an
unfortunate move, which I worrisomely may be a harbinger of
more gentle treatment for large corporations.
Corporate crime and violence inflicts far more damage on
society whether measured by dollars, injuries, or lives than
street crime, as horrible as street crime is. And it is
absolutely vital that the Department of Justice take corporate
crime and wrongdoing seriously, prosecute it fully, and also
engage in aggressive civil enforcement. I think the early signs
of the Trump administration are troubling about whether it
intends to do just that.
[Mr. Weissman's written statement is available at the
Committee or on the Committee Repository at: http://
docs.house.gov/meetings/JU/JU05/20170608/106076/HHRG-115-JU05-
Wstate-WeissmanR-20170608.pdf]
Mr. Farenthold. Thank you very much, and we will begin some
questioning, and since there is nobody else on my side, I will
kick it off. Mr. Spakovsky, and I did get that right, I have a
couple of questions for you. What is the scope of the duty of
the DOJ to defend? When can they say yes? When can they say no
to defending a government agency, and what is appropriate
there?
Mr. von Spakovsky. The longtime policy of the Justice
Department, and it does not matter what administration is in
the White House, the view has always been that it has a duty to
defend all laws passed by Congress, even if the present
administration might not like them, and also to defend all
actions of agencies in the current administration, past
administration, with the only exception being, for example,
when it comes to Congress, laws that infringe on the
constitutional authority of the President. And with regard to
agency actions, only if there is absolutely no reasonable way
of defending the agency's action and that almost never happens.
Mr. Farenthold. Well, we have seen some issues where the
Justice Department has not done that. Should the agencies be
able to go out and get outside counsel to do that? What is the
solution to that problem?
Mr. von Spakovsky. Well, that is a problem. The case, for
example, that I mentioned in my testimony, in fact, when the
Justice Department, in essence, told the U.S. Elections
Assistance Commission that they would not defend them, the
Chairwoman of that Commission asked for permission to hire
their own independent counsel to defend them, and the Justice
Department has a say so over that, because the EAC has no
independent litigating authority, said no. This was so
disconcerting to Judge Leon that when the State of Kansas and
the public interest legal foundation, which is a public
interest legal, came in to intervene and say, ``well, if the
Justice Department will not do its duty, we will defend the
EAC.'' The judge did what is kind of unusual; he allowed them
to intervene, and they actually defended the Federal agency. It
was the most bizarre situation I have ever seen.
Mr. Farenthold. We saw a similar situation here in
Congress. Should the Justice Department be required to enforce
things like contempt of Congress or a subpoena for a
Congressional committee?
Mr. von Spakovsky. I certainly think they should, yes.
Mr. Farenthold. Ms. Mitchell, would you like to weigh in on
that?
Ms. Mitchell. Yes, I would. I think that Congress should
take steps to establish a procedure whereby it does not have to
go to the Executive Branch. I think there is a serious
separation of powers issue when the legislative branch of
government is dependent upon the executive branch to enforce a
subpoena issued by the legislative branch of government. I
think there are ways that the House and Senate could establish
a rule and procedure through some of the ways that it has
established litigation procedures in other areas. But I
definitely think that this is a huge problem, and I think the
Article 1 power of Congress is an issue when you have the
Department of Justice refusing to enforce a Congressional
subpoena, but imagine that this became particularly acute when
you had the situation where the Congressional subpoena was
issued to the Department of Justice.
Mr. Farenthold. And you talked a little bit about DOJ and
servers getting erased and tapes getting lost. If that had
happened in a civil suit between private parties, it would be a
huge spoliation claim, so why is the government different
there?
Ms. Mitchell. It should not be different, and I think that
is one of the things that is really problematic with the
Department of Justice and the Civil Division, particularly the
tax attorneys. That is where I have had my experience, and I
think that, you know, you have had trial courts and you have
had the circuit courts both admonishing that the DOJ attorneys
telling them to stop being so recalcitrant. If it were anybody
else, these lawyers could be, themselves, personally subject to
sanctions, and the party is entitled to damages. And it is just
breathtaking to me that the fact of the matter is those
attorneys in the Tax Division should have taken immediate steps
in May of 2013. They really should have taken them sooner, but
in May of 2013, when all of these lawsuits were filed, they
should have immediately taken steps to ensure that nothing
happened to any backups, any servers, any emails, any
documents, and they did not do it.
Mr. Farenthold. And now I have two quick questions for Mr.
Weissman. Did you hear the Chairman's opening statement quoting
from the New York Times' expose on the DOJ abusing the judgment
fund to pay off allies over the vigorous objections of career
prosecutors, and does that report trouble you?
Mr. Weissman. I am sorry, Mr. Chair. I have to say I am
most familiar with the Judgement Fund issue. I am more familiar
with the issues related where the government is prosecuting the
case as the plaintiff in the case against corporate defense.
Mr. Farenthold. All right, and just on a related topic,
would it trouble you if the DOJ reworded donation terms in
settlements to ensure groups of particular ideological stripes
were ineligible for donations?
Mr. Weissman. If groups based on their ideology were
ineligible?
Mr. Farenthold. Right.
Mr. Weissman. Sure, that would be troubling.
Mr. Farenthold. Thank you. I see my time is expired. Would
you like to go? Or Mr. Conyers? I will leave it up to you two
to decide which one goes first. We will go to the Ranking
Member of the full Committee, Mr. Conyers.
Mr. Conyers. Thank you, and excuse my departures from time
to time that are unavoidable. I wanted to start off with Public
Citizen's witness. The New York Times indicated yesterday that
officials across the government receive special waivers to
disregard ethics rules. Did you happen to see that?
Mr. Weissman. I did see that, yes.
Mr. Conyers. And it offers additional evidence that
lobbyists and industry executives have an unusual ability to
shape policies benefitting their former clients and companies.
So, that sounds astounding to me. Can you help me feel more
comfortable with this report?
Mr. Weissman. No, I think your concerns are well-justified,
and that report actually is only a glimpse of the overall
problem. The New York Times story was talking about the issue
of waivers that have been issued after some considerable
pressure that the administration had made available the waivers
it has granted. There were not as many as we expected outside
the White House. There were several extremely troubling
examples from the White House. The reason the problem is worse
than the New York Times story indicated is that it only related
to the waivers. The bigger issue is the revolving door
question, which I think is pervasive in the number of
appointments that the Trump administration has made and is
particularly the case at the Justice Department including in
the example of the new nominee to run the Department of
Environment and Natural Resources Division whose prior practice
involved defending BP in the Gulf oil disaster to replace the
acting, who as we heard earlier, who worked as a lobbyist for
coal companies. That is emblematic of what is going on in the
Justice Department and really throughout the government right
now.
Mr. Conyers. This becomes an incredibly important hearing,
which I hope this Subcommittee and its leaders will continue to
press on even after this hearing. I think we have not stumbled
on, but we have revealed a lot of things that most people
including members of the House do not know are going on. And I
appreciate this panel very, very much. Mr. Weissman, Public
Citizen, was the financial crisis caused by fraudulently
securitized mortgage investment packages, caused in some way by
the Department of Justice?
Mr. Weissman. That was one of the main causes. The
Department of Justice was not a facilitator of that. I would
say of massive regulatory failure was, on the backend, I think,
since there was really massive crime and wrongdoing associated
with those activities, we should have seen the Department
prosecuting people and corporations, and we did not.
Mr. Conyers. What explains the dearth of the prosecutions
of those involved in these fraudulent activities?
Mr. Weissman. That is a hard question to answer, you know.
I think one of the problems, actually, is exactly the same
revolving door story that we see playing out on a worse scale
now. We had high-level officials in the Obama Justice
Department also come from the corporate defense bar, and I
think they were very sympathetic to their former clients, or
companies that might have been their former clients.
Mr. Conyers. So, this had gone on before the present
administration?
Mr. Weissman. This is a problem that goes back as long as I
know, actually, but I think we are seeing the worse we have
seen in the Trump administration.
Mr. Conyers. I will yield back the balance of my time, and
I may send you some questions or comments that I would like to
check your reaction to them. I thank the entire panel for their
helpfulness.
Mr. Farenthold. Thank you, Mr. Conyers. We will now
recognize the gentleman from Georgia, the Ranking Member of the
Subcommittee, Mr. Johnson.
Mr. Johnson of Georgia. Thank you, Mr. Chairman. Mr. von
Spakovsky----
Mr. von Spakovsky. The Chief Justice of the Supreme Court
also stumbled over it, so do not be embarrassed.
Mr. Farenthold. I would just go with Hans. Trust me on
this.
Mr. Johnson of Georgia. I want to meet the challenge and
get it right, but Mr. von Spakovsky, as a member of the Federal
Elections Commission, you were accused of politicizing your
position, or being unacceptably partisan, and it was alleged
that you consistently used your position to disenfranchise poor
and minority voters. And it is also alleged that as an official
of the Justice Department that you advocated for the Department
to apply the Voting Rights Act of 1965 in a ``race neutral
manner.'' And throughout your career, it has been alleged that
you have an obsession with the phantom and now debunked notion
of so-called mass voter fraud all with the aim of suppressing
Democratic Party voters. What do you say about these
allegations, and what is the Heritage Foundation's position in
so far as the Russian attempts to influence the recent
presidential election?
Mr. von Spakovsky. Well, I am happy to answer those
questions, Mr. Chairman, although they are not quite on the
topics of today. I will tell you that those claims that you
made about me are defamatory, libelous lies, and if you would
like, I would be happy to send you a copy of the 2013 Report of
the Department of Justice Inspector General where he took a
look at the cases that we handled at the Justice Department
when I was there and the conclusion of the Inspector General
against those accusations that you have just made was that
there was no evidence whatsoever that any of the cases that we
handled were done in a political or partisan manner. And that
is in the IG report. You do not have to take my opinion for it.
As to voter fraud, yes, that is an issue I work on. On that
issue, I would be happy to send you a copy of the report that
the Heritage Foundation has recently put together of close to
500 cases from across the country, 800 individuals convicted of
voter fraud. I think that is something that we should all be
concerned about when it comes to the integrity of the election
process.
Mr. Johnson of Georgia. Okay, and the Heritage Foundation
studies on the Russian involvement in the recent presidential
elections, are there any underway this far?
Mr. von Spakovsky. Well, I would cite to you the interview
given by J. Johnson, the Secretary of Homeland Security during
the Obama administration.
Mr. Johnson of Georgia. No, I am talking about the Heritage
Foundation.
Mr. von Spakovsky. Yeah, well, I am telling you that our
view agrees with that of J. Johnson who said that, one week
after the November election, that there was no evidence of any
kind that the Russians had hacked into the voting process, the
ballot counting process, or any of the actual voting
administration process, and I agree with that.
Mr. Johnson of Georgia. Thank you, sir. Ms. Mitchell, is it
not true that no organization was ever denied tax exempt status
under the admittedly flawed criteria used by the IRS to process
social welfare organizations for compliance with 501C4?
Ms. Mitchell. Congressman, I actually do not think that
that is a true statement. I think that there are several
organizations that were denied their tax exempt status.
Mr. Johnson of Georgia. All right, and Mr. Grossman, in
your written testimony, you state that the Justice Department
should readopt the Meese memo, which restricts the use of
settlement policy to circumvent Federal statutes such as the
Administrative Procedure Act. Are you aware that the Meese memo
was iconified in 1991?
Mr. Grossman. Yes.
Mr. Johnson of Georgia. Thank you. Last but not least, Mr.
Weissman. In your written testimony, you state that the recent
Wells Fargo scandal where the bank fraudulently transferred
millions of accounts raises both public and private enforcement
questions. What effect does Wells Fargo's use of forced
arbitration clauses in its consumer agreements have on the
public's ability to hold the bank accountable for its
misconduct?
Mr. Weissman. Well, as you know, Mr. Johnson, this is a
problem that is not unique to Wells Fargo. It is pervasive in
the financial sector. The extraordinary misconduct of Wells
Fargo though does throw into relief both the scale of its
problem, its impact, and how absurd it is that corporations are
permitted to force victims into arbitration rather than into
civil courts.
In this case, because victims have been forced under
arbitration, they were disinclined to bring lawsuits in the
first place, therefore, unable to join in a class or engage in
mass discovery that probably would have uncovered this problem
earlier. With the problem now well known, Wells Fargo is still
defending itself from the grounds that victims should seek
compensation and remedy not in the courts and not through class
action mechanism, but through arbitration tribunals. That is to
say, Wells Fargo is saying that victims who did not agree to
have accounts created for them should be constrained by forced
arbitration provisions and contracts related to other accounts
they opened, not regarding these phantom accounts, which by
definition, they never contracted for. And, nonetheless, Wells
Fargo is making this claim and given the state of the law, it
remains to be determined whether or not they will prevail on
it.
Mr. Johnson of Georgia. Well, they take that position
because forced arbitration usually results in a decision in
favor of the corporate interest. Is that correct?
Mr. Weissman. That is right. These are tribunals that are
stacked in favor of large corporations who were the repeat
players and often have some influence over choosing who the
arbitrators themselves are. They frequently make it impossible.
The provisions of these contracts frequently make it impossible
to join together as a class. Discovery is limited, and often
the results remain secret so the public does not get the
benefit of an open judicial system.
Mr. Johnson of Georgia. Certainly, no record created, no
right to appeal, no precedent or reliance on precedent in the
decision making. No reliability for the consumer other than the
fact that the deck is stacked against them.
Mr. Grossman. Exactly so. We refer to them as rip off
clauses or get-out-of-jail-free cards for large corporations.
Mr. Johnson of Georgia. Thank you. With that, I yield back.
Mr. Farenthold. Thank you very much, and as we have been
through our round of questionings, and Mr. Conyers, I believe
has gotten you all agree to respond to any questions for the
record, I think it gives us an opportunity to conclude today's
hearing, and I want to thank you for----
Mr. Conyers. Mr. Chairman, may I have a unanimous consent
to put in to the record the New York Times article dated June
7th: ``Lobbyists Were Granted Ethics Waivers in Trump
Administration?''
Mr. Farenthold. Without objection, so ordered.
[This material is available at the Committee or on the
Committee Repository at: http://docs.house.gov/meetings/JU/
JU05/20170608/106076/HHRG-115-JU05-20170608-SD002.pdf]
Mr. Farenthold. Again, I say thank you to our witnesses for
attending. I enjoyed hearing your testimony and found it to be
very helpful. Without objection, all members will have 5
legislative days to submit additional, written questions for
the witnesses or additional material for the record. With that,
we are adjourned.
[Whereupon, at 3:16 p.m., the Subcommittee was adjourned.]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]