[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
GOVERNMENT LITIGATION AND THE
NEED FOR REFORM
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON THE CONSTITUTION
AND LIMITED GOVERNMENT
OF THE
COMMITTEE ON THE JUDICIARY
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
TUESDAY, JUNE 6, 2023
__________
Serial No. 118-24
__________
Printed for the use of the Committee on the Judiciary
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via: http://judiciary.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
52-562 WASHINGTON : 2023
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COMMITTEE ON THE JUDICIARY
JIM JORDAN, Ohio, Chair
DARRELL ISSA, California JERROLD NADLER, New York, Ranking
KEN BUCK, Colorado Member
MATT GAETZ, Florida ZOE LOFGREN, California
MIKE JOHNSON, Louisiana SHEILA JACKSON LEE, Texas
ANDY BIGGS, Arizona STEVE COHEN, Tennessee
TOM McCLINTOCK, California HENRY C. ``HANK'' JOHNSON, Jr.,
TOM TIFFANY, Wisconsin Georgia
THOMAS MASSIE, Kentucky ADAM SCHIFF, California
CHIP ROY, Texas ERIC SWALWELL, California
DAN BISHOP, North Carolina TED LIEU, California
VICTORIA SPARTZ, Indiana PRAMILA JAYAPAL, Washington
SCOTT FITZGERALD, Wisconsin J. LUIS CORREA, California
CLIFF BENTZ, Oregon MARY GAY SCANLON, Pennsylvania
BEN CLINE, Virginia JOE NEGUSE, Colorado
LANCE GOODEN, Texas LUCY McBATH, Georgia
JEFF VAN DREW, New Jersey MADELEINE DEAN, Pennsylvania
TROY NEHLS, Texas VERONICA ESCOBAR, Texas
BARRY MOORE, Alabama DEBORAH ROSS, North Carolina
KEVIN KILEY, California CORI BUSH, Missouri
HARRIET HAGEMAN, Wyoming GLENN IVEY, Maryland
NATHANIEL MORAN, Texas Vacancy
LAUREL LEE, Florida
WESLEY HUNT, Texas
RUSSELL FRY, South Carolina
------
SUBCOMMITTEE ON THE CONSTITUTION AND LIMITED GOVERNMENT
MIKE JOHNSON, Louisiana, Chair
TOM McCLINTOCK, California MARY GAY SCANLON, Pennsylvania,
CHIP ROY, Texas Ranking Member
DAN BISHOP, North Carolina STEVE COHEN, Tennessee
KEVIN KILEY, California VERONICA ESCOBAR, Texas
HARRIET HAGEMAN, Wyoming CORI BUSH, Missouri
WESLEY HUNT, Texas SHEILA JACKSON LEE, Texas
RUSSELL FRY, South Carolina HENRY C. ``HANK'' JOHNSON, JR.,
Georgia
CHRISTOPHER HIXON, Majority Staff Director
AMY RUTKIN, Minority Staff Director & Chief of Staff
C O N T E N T S
----------
Tuesday, June 6, 2023
Page
OPENING STATEMENTS
The Honorable Mike Johnson, Chair of the Subcommittee on the
Constitution and Limited Government from the State of Louisiana 1
The Honorable Mary Gay Scanlon, Ranking Member of the
Subcommittee on the Constitution and Limited Government from
the State of Pennsylvania...................................... 2
The Honorable Jerrold Nadler, Ranking Member of the Committee on
the Judiciary from the State of New York....................... 5
WITNESSES
Kirby West, Attorney, Institute for Justice
Oral Testimony................................................. 8
Prepared Testimony............................................. 10
John Shu, Attorney, Legal Commentator
Oral Testimony................................................. 11
Prepared Testimony............................................. 13
Todd Phillips, Principal, Phillips Policy Consulting
Oral Testimony................................................. 20
Prepared Testimony............................................. 22
Andrew Grossman, Partner, BakerHostetler
Oral Testimony................................................. 27
Prepared Testimony............................................. 29
LETTERS, STATEMENTS, ETC. SUBMITTED FOR THE HEARING
All materials submitted for the record by the Subcommittee on the
Constitution and Limited Government are listed below........... 57
Materials submitted by the Honorable Mary Gay Scanlon, Ranking
Member of the Subcommittee on the Constitution and Limited
Government from the State of Pennsylvania
A report entitled, ``Frustrating, Corrupt, Unfair: Civil
Forfeiture in the Words of Its Victims,'' Oct. 2021,
Policing for Profit, Institute for Justice, Arlington,
Virginia
Statement from Professor Louis Rulli, University of
Pennsylvania Carey Law School, Philadelphia, Pennsylvania
A collaborative letter from various organizations for support
of H.R. 1525, the Fifth Amendment Integrity Restoration
Act (FAIR Act)
An article entitled, ``Prosecuting Civil Asset Forfeiture on
Contingency Fees: Looking for Profit in All the Wrong
Places,'' 2021, Alabama Law Review, University of
Pennsylvania Carey Law School
An article entitled, ``Seizing Family Homes from the
Innocent: Can the Eighth Amendment Amendment Protect
Minorities and the Poor from Excessive Punishment in
Civil Forfeiture?'' 2017, Journal of Constitutional Law,
University of Pennsylvania Carey Law School
Materials submitted by the Honorable Russell Fry, a Member of the
Subcommittee on the Constitution and Limited Government from
the State of South Carolina, for the record
An article entitled, ``TAKEN: How police departments make
millions,'' Apr. 22, 2020, Greenville News
An opinion article entitled, ``Opinion: Why SC must end its
civil asset forfeiture,'' Nov. 23, 2019, Greenville News
An overview article entitled, ``What's in the TAKEN civil
forfeiture investigation: Table of contents,'' Jan. 27,
2019, Greenville News
GOVERNMENT LITIGATION AND THE.
NEED FOR REFORM
----------
Tuesday, June 6, 2023
House of Representatives
Subcommittee on the Constitution and Limited Government
Committee on the Judiciary
Washington, DC
The Subcommittee met, pursuant to notice, at 2:38 p.m., in
Room 2141, Rayburn House Office Building, Hon. Mike Johnson of
Louisiana [Chair of the Subcommittee] presiding.
Present: Representatives Johnson of Louisiana, McClintock,
Kiley, Hageman, Fry, Scanlon, Escobar, Jackson Lee, and Johnson
of Georgia.
Mr. Johnson of Louisiana. The Subcommittee will come to
order. Without objection, the Chair is authorized to declare a
recess at any time. I hope we don't need it.
We welcome everyone to today's hearing on Government
Litigation and the Need for Reform. I will now recognize myself
for an opening statement.
Today's hearing will address various aspects of various
government litigation that we believe merits reform. Our House
Judiciary Committee is charged with safeguarding American's
most fundamental rights. Through that lens today's hearing is
going to primarily focus on three topics. Civil asset
forfeiture, sue and settle tactics, and slush funds.
In recent times here's the problem civil asset forfeit has
become a device for unjustified governmental takings. Federal
and State laws allow law enforcement agencies to take personal
property through civil proceedings under certain circumstances.
The standards for government taking a property vary from State
to State and sometimes differ from Federal standards.
The problem today is that current Federal standards for
civil forfeiture invite abuse. In part because State agencies
can skirt State based forfeiture protections and rely on more
relaxed Federal law to confiscate property and that results
innocent citizens losing their property that the government
simply pockets. The reform to Federal law is necessary to
restore the original intent of the law because it's an
important one and better protect citizens' property.
On a second issue another area of reform relates to the so-
called sue and settle tactics. Sue and settle can occur where
proregulatory plaintiffs and willing government agencies
circumvent Federal law, namely the Administrative Procedure Act
while rewarding special interests that very favor. When a
proregulatory plaintiff sues and then settles with an agency in
ways that require certain types of rulemaking, the result is
the plaintiff and agency is avoid public scrutiny and
Congressional oversight of the agreed to policy.
So, the sue and settle tactics also can bind Federal
agencies to rulemaking that extends from one administration to
the next. With reforms, we can better guard against this tactic
and return transparency, because that's what the American
people want and deserve and Congressional oversight to the
agency rulemaking.
Finally, the third issue, in this hearing we're going to
provide the opportunity to examine the use of settlement slush
funds. That's a phrase that's thrown around, but it refers to
cases where defendants settle lawsuits with government
agencies. Instead of government directing all settlement funds
to the U.S. Treasury or to the injured parties, agencies have
this habit now--agencies instead have required defendants to
give them money to politically favored special interests that
are disconnected entirely from the litigation in many cases.
These types of slush funds directed to support pet projects
go to obviously the pet projects of an administration. They can
amount to a form of Executive Branch spending that is not
approved or even reviewed by Congress. This circumvents
Congressional oversight and the resulting accountability of the
Executive Branch. So hereto, of course, we believe that reform
is desperately needed.
So, Congress is considering proposed legislation to address
concerns with all these issues. These proposals include for
example the FAIR Act, H.R. 1525, the Sunshine for Regulatory
Decrees and Settlements Act of 2023, that H.R. 3446. The Stop
Settlement Slush Funds Act of 2023, that's H.R. 788.
Governments unwarranted taking of private property and
administrative State's litigation tactics to gain game the
system on rulemaking or to direct funds to politically favored
causes are highly problematic. Our deepest concern is that they
are pretty clearly a violation of our Constitutional order. So,
we are here today to gain a better understanding of these
issues and how possible reforms will help restore confidence in
our government.
We were talking just here a moment ago that the people's
faith in our institutions is at an all-time low. We have to fix
this because it's difficult to maintain a republic if people
lose fate in those institutions.
So, with that, I thank all our witnesses who appeared to
testify before us today. I look forward to a robust discussion
on these really important issues.
I now recognize our Ranking Member, Ms. Scanlon, for her
opening statement.
Ms. Scanlon. Thank you, Mr. Chair. Thank you to our
witnesses for joining us today.
I am delighted to have the opportunity to hear from some
these witnesses, because although I disagree strongly with the
majority's conclusions with respect to the need to impose
additional burdens upon the settlement of certain Federal
cases, I strongly agree that the abuse and injustices allowed
by our Federal civil forfeiture system stand in need of serious
reform. I'm heartened by the broad bipartisan support for the
FAIR Act which would do just that.
My interest in this bill stems from over a decade of work
in Philadelphia before coming to Congress to reform
Pennsylvania's civil forfeiture statute in many of the ways
proposed by the FAIR Act. The legal services pro bono program
that I led worked in conjunction with the Institute for Justice
which is represented here by majority witness Kirby West today
and under the guidance of the Professor of Lou Rulli at the
University Pennsylvania Law School, along with an army ever
volunteer law students and attorneys who were trained and
donated their time to help dozens of low-income Philadelphians
challenge the abuses of Philadelphia's civil forfeiture statute
by local authorities who used it to seize the property of low-
income residents, many of whom were innocent of any crime.
One of our typical clients whose case resulted in the
Pennsylvania Appellate Courts changing the standard of proof
needed to seize assets was Elizabeth Young, an elderly Black
Philadelphia homeowner. Ms. Young was a widow with health
problems living in a house she and her husband purchased over
40 years previously. After her adult son, I think he was in his
fifties, moved in with two of his children, he was arrested for
selling small amounts of marijuana. Despite Ms. Young never
having committed any wrongdoing and with no proof that she was
aware of the activity the government's seized Ms. Young's home
and her car, throwing this elderly woman in poor health onto
the street with no way to travel to her medical appointments.
Her context, her car, and home were worth less than $60,000.
Her son was arrested for selling a few bags of $20 worth of
marijuana.
After pro bono counsel took years of appeals that went all
the way to the Pennsylvania Supreme Court, Ms. Young prevailed
in a groundbreaking decision on the proper application of the
excessive funds clause of the United States and Pennsylvania
Constitutions in civil forfeiture cases.
This case was far from the exception to the rule. Civil
asset forfeiture was initially adopted as a tool to improve law
enforcement by allowing the seizure of assets allegedly
connected to criminal activity, but over time we've seen that:
(1) LCivil asset forfeiture laws have once shown no
identifiable impact on the public safety,
(2) Lhave resulted in wrongful seizure of the personal
property of the persons innocent of crime, and
(3) Lcreated perverse financial incentives for law
enforcement agencies to seize money and property to bolster
their budgets.
While the proponents of civil forfeiture of projected
seizure of drugs, expensive cars and other fruits of criminal
enterprise far more frequently we saw seizures involving the
cash, homes, or cars of persons of limited means who were often
innocent relatives of someone suspected, but not necessarily
even convicted of criminal activity.
Unlike criminal asset forfeiture, Federal civil asset laws
do not require the government to prove that the individual
whose property is seized has committed a crime beyond a
reasonable doubt or even by a preponderance of the evidence.
Federal agencies have been empowered under an administrative
process to decide these cases without any judicial oversight.
Furthermore, the Federal statute encourages State and local
agencies to partner with Federal law enforcement to seize
assets that more protected State laws would prevent. This
perversion of the law has created persistent abuses of civil
asset forfeiture that require urgent and meaningful reform.
Fundamental fairness requires that Congress ensure people
are protected from wrongful seizure of their property. We
should create guardrails against the persistent abuse of civil
forfeiture laws that have raised Constitutional concerns for
individuals due process rights protected under the Fifth
Amendment.
Chief among the many issues raised by the civil forfeiture
process is that it is so complex, and the standard of proof so
overwhelmingly favors the government that low-income victims of
this process are often unable to navigate it. They frequently
lose their property, homes, and vehicles by default in the
legal process. Either because they don't understand the process
at all, or they can't afford a law.
In fact, the typical value of seized property is usually
less than half the cost of retaining a lawyer. With minimal due
process protections, without court supervision, without a right
to counsel civil forfeitures can often leave people who have
never even been charged with a crime financially devastated
even homeless and with little recourse. Most frequently these
perverse financial incentives and due process issues play out
in low-income and minority communities.
Congress has direct authority to address much needed
reforms here and we need to act. That's why I've cosponsored
H.R. 1525, the FAIR Act. This would address the due process
concerns raised by our civil asset forfeiture laws, including
eliminating administrative forfeitures so only Federal courts
can order a forfeiture, providing access to counsel for
indigent civil defendants seeking the return of their property,
and requiring Federal forfeiture funds to be sent to the U.S.
Treasury's general fund rather than deposited into funds that
can only be used for law enforcement purposes.
These sensible reforms have garnered bipartisan support.
Unfortunately, today, this hearing is conflating this real
issue that has bipartisan support with a partisan
antiregulatory agenda. For decades Republicans have made
spurious allegations that the Federal government is engaging in
Executive overreach by abusing the court system to enact
regulatory policies that violate Congress Legislative and
spending authority to justify an antiregulatory agenda.
Democrats together with a broad coalition of environmental,
public interest, labor and civil rights groups have
consistently opposed these antiregulatory measures, both
because they are unwarranted and because they undermine
agency's ability to protect public health and safety. We've
heard our colleagues on the other side conjure up dubious
allegations to justify taking action against a practice they
refer to sue and settle, but there's no credible evidence to
support these allegations.
In fact, Republican Administrations have also argued that
settlement agreements with corporate violators in cases brought
by the Department of Justice that included donation
requirements to a third-party group might help remedy the harm
caused to the public. Both parties' Presidential
Administrations, including the Trump Administration, have
settled what can be more accurately described as deadline
lawsuits.
Congress authorizes these private lawsuits to enforce
Federal law and require the agencies to abide by the rulemaking
timelines set by Congress. Settlements and consent decrees are
often the most the efficient means of resolving these cases
because the Federal government has no chance to prevail in
court, not to mention they save taxpayer dollars by avoiding
expensive and protracted litigation. These third-party donation
requirements allow Federal agencies to hold wrongdoers
accountable more effectively.
These funds are especially important in addressing systemic
injustices that impact all of us but may not have easily
identifiable victims like harms to public health, the
environment or customers patronizing our Nation's financial
systems. These measures are designed to gum up the regulatory
process created by Congress and if passed, would result in
weakened protections for public health and safety.
Nonetheless, I thank the Chair for devoting time to Federal
civil asset forfeiture reform and I hope to work with you both
on the FAIR Act and other bipartisan measures in the future.
Thank you.
Mr. Johnson of Louisiana. Thank you, Ms. Scanlon.
Ms. Scanlon. Sorry. At the outset, I'd seek unanimous
consent to introduce into the record the following, the 2021
report prepared by the Institute for Justice entitled,
``Frustrating, Corrupt, Unfair: Civil Forfeiture in the Words
of Its Victims.''
A written statement by Professor Lou Rulli of the
University of Pennsylvania Law School, dated June 6, 2023, a
letter from a broad coalition of civil rights organizations
ranging from the ACLU to the Goldwater Institute expressing
support for the reforms in the FAIR Act.
Two law review articles by Professor Rulli, one from 2021
entitled, ``Prosecuting civil asset forfeiture on contingency
fees,'' and another from 2017 entitled, ``Seizing family homes
from the innocent.''
Mr. Johnson of Louisiana. Without objection.
Mr. Johnson of Louisiana. The gentlelady yields back. I
recognize the Ranking Member of the Full Committee, Mr. Nadler,
for his opening statement.
Mr. Nadler. Thank you, Mr. Chair.
Mr. Chair, the majority appears to have dusted off its old
playbook from the Obama Administration for today's hearing.
Apparently whenever there is a Democratic Presidential
Administration, the Republicans go-to move is to waste the
Committee's time accusing the Executive Branch of overreaching
its legal and Constitutional authorities.
Conspiracy theory de jure for our hearing is that Federal
agencies are, ``colluding with liberal activist groups who
abuse civil litigation in order to circumvent Congress'
legislative authority.'' Despite many hearings over several
Congresses, as well as a multiyear investigation, there is
simply no credible evidence to support these allegations.
Instead, today's hearing is simply a tired attempt by the
majority to paint a Constitutional veneer upon unpopular
antiregulatory agenda which includes enacting legislation
credit that will undermine critical financial, environmental,
health and safety protections for the American public.
Take for example H.R. 3446, the so-called sunshine bill.
This legislation would create a gauntlet of burdensome and
time-consuming procedures that would effectively stifle
settlements and dissent decrees that resolve or can best be
described as routine deadline lawsuits. The issue in these
cases is a simple one: A Federal agency has failed to meet its
statutory rulemaking deadline or other duty and a private party
files a lawsuit demanding that they follow the law. That's it.
The majority likes to spin tails of nefarious motives and
collusion with liberal groups, a premise of the nonpartisan and
independent Government Accountability Office debunked years
ago. These deadline lawsuits do not result in a particular rule
or policy outcome, nor do they circumvent the normal rulemaking
process established by Congress under the Administrative
Procedure Act. They simply require Federal agencies to do the
job that Congress gave them.
Paradoxically then instead of protecting his Constitutional
prerogatives, H.R. 3446 would thwart Congress' will by further
slowing down the rulemaking process that it has mandated. Of
course, for my Republican colleagues, that's not a bug in the
legislation, rather than it's primary feature.
Similarly, Committee Republicans have alleged that the
Department of Justice is ``Colluding'' with liberal activists
by including third-party donations and settlement agreements
with corporate wrongdoers who actions have resulted in public
harm. The public has accused DOJ of essentially creating a
politically motivated slush fund. An outlandish argument based
on the false premise that such settlements are illegitimate, a
premise that both the GAO and the Congressional Research
Service have debunked.
Nonetheless, the majority seeks to enact H.R. 788, the so-
called slush-fund bill which would prevent DOJ settlements with
corporate wrongdoers from including payments to third parties.
Primarily nonprofits and educational community-based
organizations that are best positioned to remedy societal harms
caused by defendant. This legislation would curtail DOJ's
ability to enter settlements with third-party payments that
would provide relief for systemic or diffuse harm caused to the
public by illegal conduct.
For Congress to pass H.R. 788 it would be a gift to
lawbreakers at the expense of families and communities
suffering from injuries that cannot be addressed by direct
restitution such as civil rights violations, environmental
justice harms, or harms caused by fraudulent lending practices.
One bright spot in today's hearing is the discussion of the
need to reform Federal civil asset forfeiture laws. Here I do
believe that there are legitimate policy concerns that current
Federal civil asset forfeiture laws create incentive, perverse
financial incentives for Federal agencies to pursue civil
forfeiture in unmeritorious cases. Combined with the low
standard of proof that the government must meet and the lack of
due process protections, current Federal civil asset forfeiture
laws, very serious civil liberties and policy concerns.
My concerns are further heightened by the evidence that the
burdens of civil forfeiture laws for disproportionately on
working people. Particularly in communities of color already
have few financial resources on which to draw.
Given the bipartisan interest this issue, I am deeply
disappointed that Committee Republicans have chosen to shoehorn
into this antiregulatory hearing, what is an otherwise worthy
discussion of civil asset forfeiture reform. Unlike the case
for civil asset forfeitures, these antiregulatory bills are
solutions in search of a problem, designed to serve deep pocket
and corporate wrongdoers and those seeking environmental
consumer workplace and other protections.
To be clear, where there is a legitimate issue to address,
we are prepared to work with our Republican colleagues. I hope
the majority takes up the bipartisan FAIR Act of 2023
introduced by our colleagues Jamie Raskin and Tim Walberg to
address the real problems presented by Federal civil asset
forfeiture laws. The antire-
gulatory measures for the bulk of today's discussion however do
not address legitimate concerns, they are a distraction from
the important work we could accomplish together.
I thank the Chair and I yield back.
Mr. Johnson of Louisiana. Without objection, all other
opening statements will be included in the record.
We will now introduce today's witnesses.
We'll begin with Ms. Kirby West. Ms. West is an attorney
for the Institute for Justice, she litigates cases involving
the First Amendment, educational choice and property rights.
She received her law degree with honors from Harvard Law School
and clerked for Judge Dennis Shedd on the 4th Circuit Court of
the Appeals.
Mr. Andrew Grossman is a partner at BakerHostetler, L.L.P.
where he leads the firm's appellate and major motions practice.
He also serves as a Senior Legal Fellow at the Buckeye
Institute and is an adjunct scholar at the Cato Institute. He
received his law degree from George Mason University, law
degree Antonin Scalia, and clerked for Judge Edith Jones of the
5th Circuit Court of Appeals.
Mr. Shu, John Shu, is an attorney who focuses on
Constitutional law, Administrative law, antitrust law and
securities and corporate law. He previously served in both the
George H.W. Bush and George W. Bush Administrations and has
written about the use of settlements in government litigation.
Finally, Mr. Todd today Phillips is the founder of Phillips
Policy Consulting and is a fellow at the Roosevelt Institute
and previously served as the Director of Financial Regulation
in corporate governance at the Center for American Progress. As
an attorney adviser to the Administrative Conference of the
United States.
We welcome our witnesses and thank you for your patience
and for appearing today. We'll begin by swearing you in. So, if
you'd all rise and raise your right-hand.
Do you swear or affirm under penalty of perjury that the
testimony you are about to give is true and correct to the best
of your knowledge, information and belief so help you God?
Thank you. Let the record reflect that the witnesses have
answered in the affirmative.
Please note as you all know, I don't think this is your
first rodeo for any of you, but your written testimoneys will
be entered into the record in their entirety and so accordingly
we ask you to summarize your testimony in five minutes. You'll
see the clock there and the lights and I think you know the
process.
Ms. West, we will begin with you.
STATEMENT OF KIRBY WEST
Ms. West. Thank you, Mr. Chair and Members of this
Committee for the opportunity to testify today. My name is
Kirby Thomas West. I'm an attorney at the Institute for
Justice. The Institute for Justice is a national, nonprofit
public interest law firm. For more than 30 years, we've
litigated case on behalf of individuals and small businesses,
defending their Constitutional rights, including cases
challenging civil forfeiture.
When the government charges you with a crime, you can rely
on the guarantees of the Bill of Rights to know that you have a
fair opportunity to fully contest the charges against you and
the protections of the Bill of Rights also ensure that you
won't be punished unless the government can prove its case
beyond a reasonable doubt.
When the government alleges that your property, your car,
your cash, or even your home has been involved in some kind of
wrongdoing there is a trapdoor to the protection of the Bill of
Rights. This trap door is civil forfeiture.
To describe civil forfeiture, you have to discredit it. The
government can seize and forfeit property that it believes is
connected with a crime regardless of whether it believes the
property owner committed or was even involved in that crime.
Throughout the forfeiture process the deck is stacked in the
government's favor.
The property owner has no right to counsel, the government
need only make its case by a preponderance of the evidence. An
innocent proper owner bears the burden of proving their own
innocence. To make matters worse most Federal civil forfeitures
never make their way to a real court.
Instead, the entire process occurs within the agency that's
attempting to forfeit the property in what's known as
administrative forfeitures. By way of example, from 2000-2019,
93 percent of the DOJ civil forfeitures were administrative
forfeitures. This process is extremely complicated to navigate
as shown here in this graphic. Its full of stumbling blocks for
property owners, any one of which cause you to permanently lose
your property and that's these red triangles here.
Civil forfeiture is not only unjust, it is ubiquitous. From
2000-2019, Federal law enforcement agencies deposited $45.7
billion into Federal forfeiture funds. The reason that civil
forfeiture is so common is very simple, law enforcement gets to
keep the money. Federal law enforcement retains 100 percent of
the proceeds of civil forfeitures. State law enforcement can
get back up to 80 percent of forfeiture proceeds, as long as
they partner with Federal law enforcement in a process known as
equitable sharing.
Civil forfeiture also just doesn't work. Studies have shown
that civil forfeiture has no meaningful impact on crime rates
or drug use, and it may even reduce crime closure rates by
diverting law enforcement time and resources. So, that's the
problem.
Now what can we do about it? There are three immediate
reforms that would make a big difference.
(1) LEnd administrative forfeitures. Part of the genius of
the Constitutional system of separation of powers is that it's
design to ensure it takes an act of each of the three branches
of government. Congress has to act to pass a law. The Executive
Branch has to act to enforce that law. The Judiciary Acts to
adjudicate each individual case. Administrative forfeitures cut
the judiciary out of that process entirely. If someone's going
to permanently lose their property, they should get to appear
in a real court, before a real Article III Judge.
(2) LEnd of the financial incentive for forfeiture. Law
enforcement priorities should be driven by how they can best
solve and prevent crime, not by budgetary concerns. Directing
all the proceeds of civil forfeiture to the general fund rather
than to the seizing agencies would eliminate that incentive.
(3) LEnd equitable sharing. In recent, years many State
governments have reformed their civil forfeiture laws, but
their efforts are undermined by equitable sharing. Ending
equitable sharing would close the loophole that allows State
law enforcement to circumvent State laws. Each of these reforms
would be accomplished if Congress passes the FAIR Act, a bill
with a wide coalition of advocates outside of Congress and
strong bipartisan support within Congress, including the
current and the former Chair of this Full Committee.
I urge Congress to take advantage of this opportunity to
work together to address this serious, long-standing injustice.
Thank you very much for the opportunity to testify.
[The prepared statement of Ms. West follows:]
The prepared statement from Kirby West, Attorney, Institute
for Justice, is available at https://docs.house.gov/meetings/
JU/JU10/20230606/116049/HHRG-118-JU10-Wstate-WestK-
20230606.pdf.
Mr. Johnson of Louisiana. Thank you, Ms. West.
Mr. Shu, you may begin next if you're ready.
STATEMENT OF JOHN SHU
Mr. Shu. Thank you, Mr. Chair, madam Ranking Member, thank
you very much. The issue of third party, improper third-party
settlement payments it is a nonpartisan issue. My goal here is
to try and explain why it's important for the Congress to
protect its very own Article I powers and not just in the sense
of the appropriations clause, but also in the sense of statutes
that the Congress has passed, such as the Miscellaneous
Receipts Act and the Antide-ficiency Act.
The fact of the matter is that H.R. 788 which would end
this practice, it's actually proenforcement, proregulation
against any kind of corporate wrongdoing. The reason is
because, for example, under the Obama Administration when the
Obama DOJ settled case, mortgage fraud cases with the bulge
bracket banks they gave credits a two-for-one dollar credit to
organizations that provided these type of improper payments.
The fact of the matter is that the recovery and overall
dollar amounts could have been higher, could have been sent to
the victims or could have been sent to the community.
So, in this sense, certainly getting H.R. 788 is pro law
enforcement against corporate wrongdoing and pro-enforcement of
the regulatory State.
Second, I think it's well-known that only this body, only
Congress has the appropriations power and there have been
Supreme Court cases that have ruled that unless Congress
specifically authorizes an expenditure, it can't happen. The
earliest case that I can think of is the Resign Case from 1850.
That's a long time, that's a heck of a precedent. It's never
been challenged, and I don't think it will ever by overturned,
quite frankly.
Another issue I think that would be important is the fact
that there is a quo of whether H.R. 788 would take away an
enforcement tool from not only the Justice Department, but any
Executive Branch agency, including but not limited to HUD, EPA,
and the Department of Interior.
Probably these four agencies are the ones that engage in
improper third-party payments the most. The fact of the matter
is that H.R. 788 and/or its predecessors would not take away
the enforcement tool. The Justice Department can only enforce
the law as it is written. The fact of the matter is that making
sure that the victims receive restitution, making sure that,
for example, any of our mental context--let's say British
Petroleum blows a Deepwater well in the Gulf, there is nothing
preventing either the Justice Department or the Congress from
requiring that British Petroleum compensate for that horrific
incident.
So, the fact is that I think this Congress can do itself a
lot of good by exercising and flexing its Article I authority.
Your body is the body that is closest to the people, whether
it's in midtown Manhattan, El Paso, Atlanta, Delaware County
Louisiana, Modesto, Roseville, Wyoming, or Read County, the
fact of the matter is that this would apply equally to
everybody.
We have in the news today that later on this evening former
Governor Chris Christie is almost certainly going to announce
he's running for President of the United States in New
Hampshire. As is indicated in my written remarks which is
submitted for the record, Mr. Chair.
The fact of the matter is that Governor Christie when he
was the U.S. Attorney in New Jersey as part of the settlement
with Bristol Myers Squibb he forced an improper third-party
payment. He forced Bristol Myers Squibb to pay $5 million U.S.
dollars to Seton Hall to fund a professorship. Yes, it is just
by coincidence that Seton Hall is Governor Christie's alma
mater. It is just by coincidence that this kind of work would
be a boost to his local political career in New Jersey.
Governor Christie's behavior there ought to be shocking and
disappointing to everybody in this room, regardless of whether
in the majority or in the minority. So, if you don't like what
Governor Christie did, if they don't like what the Republican
Administration's have gone with respect to improper third-party
payments, the solution is statutorily for the Congress to
exercise its authority, get rid of it and bring us back to a
Constitutional State for enforcement.
Thank you very much.
[The prepared statement of Mr. Shu follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Johnson of Louisiana. Thank you, Mr. Shu.
Mr. Phillips, you may begin. We're going in reverse
alphabetical order, if anybody is confused. Sorry. Throw you
off.
STATEMENT OF TODD PHILLIPS
Mr. Phillips. Thank you, Johnson, Ranking Member Scanlon,
Ranking Member Nadler, and Members of the Subcommittee, thank
you for the opportunity to discuss the Federal government's
civil litigation practices and authorities. I'm Todd Phillips,
principal with Phillips Policy Consulting.
I previously served as an attorney adviser with the FDIC
and Administrative Conference of the United States, and as
counsel what was then known as the House Oversight and
Government Reform Committee. My statements are my own.
My testimony today will focus on my concerns regarding two
enforcement bills the Judiciary Committee is considering. I
note at the outset that as the Supreme Court explained the case
Heckler v. Chaney an agency enforcement decision, ``Often
involves a complicated balance of a number of factors which are
peculiarly within its expertise.'' If enacted, these bills
would prevent the agency officials who know individual cases
inside and out from using their expert judgment and discretion
to ensure that the government operates efficiently.
In addition, my time as a Congressional staffer taught me
to be concerned about waste, fraud, and abuse within the
government. I'm concerned that enacting these bills could
ultimately result in wasteful government spending. First, the
Sunshine for Regulatory Decrees and Settlements Act would, if
enacted, empower opponents of particular regulatory safeguards
both inside and outside the government to perpetuate unlawful
agency inaction.
Congress frequently enacts statutory deadlines for agencies
to complete new regulations. Yet, agencies often fail to
complete rulemakings pursuant to those mandates. Failing to
enact mandated regulations can leave financial markets, the
environment, and workers subject to abuse.
It also creates uncertainty for industry which must
incorporate the potential effects of possible agency
decisionmaking into future plans. Often these deadline lawsuits
are our harmed parties only available recourse at agencies
delay rulemakings by nine years, 12 years or longer.
Importantly deadline lawsuit settlement agreements have no
bearing on the substance of the rules agencies complete.
Several GAO studies have found that settlement terms nearly
establish schedules for issuing statutorily required rules. No
reviewed settlements included terms that finalize the
substantive outcome of the ultimate rules. Rather than
encouraging the Executive Branch to comply with its legal
requirements, this bill would impose duplicative burdensome and
time consuming hurdles slowing down the rulemaking process and
preventing Federal law from being implemented. It would subject
any regulatory settlement to a lengthy new notice and comment
process, even though agencies are already required to engage in
notice and comment.
It would permit interventions by individuals who declare
themselves effected by the regulatory action and include them
in court supervised settlement talks even though individuals
agree with by rules may challenge agency's rulemaking
procedures in preenforce-ment litigation. Ironically, this bill
would make the reason deadline litigation is brought in the
first case, delayed agency action even worse.
Rather than endeavoring the slow down necessary
Congressionally mandated rulemakings, Congress should determine
why agencies violate this mandate in the first instance. Next,
the Stop Settlement Slush Funds Act would place arbitrary
limits on how Federal agencies may enter into settlements
agreements that arise from enforcement actions brought against
companies that have violated Federal laws. Its cumulative
effect would be to deter agencies from the efficient resolution
of civil complaints through settlement agreements.
When government agencies litigate, all parties may find
that settlement agreements are the most effective and efficient
way of resolving the issues and of improving the lives of
affected nonparties. Importantly without the ability to enter
into a settlement agreement that provides for mediation to
impacted victims, there is no guarantee that defendants will
agree to settle.
Agencies may be forced to trial, wasting time, resources
and taxpayer dollars, and delaying timely provision of relief
for victims, if victims received any relief at all. In sum,
these bills are solutions in search of problems and if enacted
could result in unnecessary government waste. They would
prevent the agency officials who know individual cases inside
and out from ensuring that the government operates as
efficiently and effectively as possible. Congress should
endeavor to conduct oversight rather than enact to apply to
every agency settlement.
Thank you. I'm happy to answer any questions.
[The prepared statement of Mr. Phillips follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Johnson of Louisiana. Thank you, Mr. Phillips.
Mr. Grossman, you may begin.
STATEMENT OF ANDREW GROSSMAN
Mr. Grossman. Chair, Ranking Member Scanlon, and Members of
the Subcommittee, thank you for holding this hearing today and
inviting me to testify. My testimony will address a litigation
based regulatory practice known as sue and settle. Sue and
settle refers to collusion between agencies and outside groups
to evade transparency and accountability mechanisms through
friendly litigation and settlements.
In most cases, agencies vigorously defend against claims
seeking to compel agency action. That's not always the case.
Agencies and activist groups have learned over the past decade
or so that litigation and settlements can be used to expedite
and even short circuit normal regulatory procedures.
The way it works is that an activist group files a case
seeking to compel and agency to take some action such as
promulgating a new regulation or undertaking environmental
review that will delay permitting that the group opposes.
Rather than fight the case, the agency agrees to a settlement
or consent decree that obligates to take the requested action
off an on-a-set timetable.
The agency may even agree to bind itself to certain types
of policy outcomes. For example, a consent decent might adopt a
broader, more burdensome interpretation of a statute or
regulation. The advantage to the agency is that a settlement or
consent decree means that its hands are tied to carry out the
policy that it favors.
Collusive settlements of course are not a new thing. The
Reagan Administration entered office to find itself hemmed in
by descent decrees that traded away policymaking discretion and
purported lock in policies that the administration considered
to be unlawful and unwise. What has changed since then is that
the tactic has become routine. The use of sue and settle
exploded during the Obama Administration.
Between 2008 and June 2013, 14 of the 17 major nondiscre-
tionary rules issued by the EPA resulted from deadline
lawsuits. Both environmental activists and regulators have
learned that they can use settlements to push through
controversial policies. The Trump Administration however
stopped sue and settle in its tracks.
EPA administrator Scott Pruitt instituted a policy that
restricted the use of settlements and made sure that no
settlement could go forward without hearing from all the
stakeholders, including States and including regulated parties.
Now, that policy was revoked by the Biden Administration.
Over the past two years EPA has agreed to more than 20
litigation settlements, nearly all of them with
environmentalist groups and it isn't just EPA. The Bureau of
Land Management has entered a series of settlements with
environmentalists that have shutdown energy development on
millions of acres of public lands.
According to one of the environmentalists' groups behind
these lawsuits, the settlements and I quote, ``Entirely recasts
the Federal government's obligation to consider the cumulative
climate impacts of oil and gas leasing.'' The results of this
settlement is a de facto moratorium, which is completely at
odds with the proenergy policies enacted by Congress.
The problems with sue and settle are obvious. It allows
agencies to evade accountability. In some cases, it cuts short
ordinary rulemaking timelines, limiting public participation,
and leading to sloppy rulemaking. Worst of all, it can allow
agencies to achieve policy outcomes that Congress had a
rejected.
Congress does have the power to enact reforms. It should
ensure that settlements are open to public scrutiny, that
stakeholders have a seat at the table, that senior agency
officials are accountable and that settlements do not
compromise the rulemaking process. The Sunshine for Regulatory
Decrees and Settlements Act does all these things.
Congress should also reconsider aspirational and
unrealistic statutory deadlines in broad citizen suit
provisions. Suing to compel an agency to act on a permit
application is entirely different in kind from seeking to
compel it to issue generally applicable regulations or to take
action against third parties.
Citizen suit provisions give private litigants control over
actions and decisions that are committed to the Executive
Branch by Article II of the Constitution. We have seen that
allowing private parties to force agency action through
litigation leads to bad policy results.
I thank the Committee for its time and for inviting me
today.
[The prepared statement of Mr. Grossman follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Johnson of Louisiana. Thank you, Mr. Grossman.
We will now proceed under the five-minute rule with
questions. I will recognize myself for five minutes.
I want to thank you all again for being here today and for
your patience. As I mentioned in my opening statement, we're
here to discuss the government's use of litigation and the ways
that we, the Congress can reclaim our Article I powers and
fight back against the abuses of power by the Executive Branch.
Mr. Shu, I love what you said about our opportunity here to
I think you say flex our Article I authority. Hear us roar, my
friend. I love it. I wanted to amen you when you said it. So, I
am going to start with you on the topic of settlement slush
fund. So, Article I of the Constitution gives Congress the
power of the purse, not the Executive Branch. As you said, this
should be well understood by everybody.
My understanding is that the typical policy for settlement
agreements with the Federal government is to deposit those
funds into the Treasury or distribute them to victims of the
alleged action by a defendant. However, as has been noted here,
under the Obama Administration the Federal government began the
practice of diverting the settlement funds to politically
favored third-party entities or programs that the
administration supported, all while avoiding Congressional
oversight.
The Trump Administration rightfully did away with that
practice. Within his firsthand full of months on the job,
Attorney General Merrick Garland revived the use of settlement
slush funds presumably to reward politically expedient groups.
So, Mr. Shu, with that context in mind, can you provide us any
specific example of the Federal government using the settlement
slush fund in contravention of Article I authorities?
Mr. Shu. Thank you, Mr. Chair. Yes. Probably the most
egregious was the mortgage fraud settlements with the bulge
bracket banks. JPMorgan Chase, Bank of America, Citi, et
cetera. Mr. Chair, I would respectfully disagree with you on
the issue that began with the Obama Administration.
As a matter of fact, under President Carter the--his
Justice Department had written a memo stating that these third-
party payments were not proper. As I mentioned before, even
under a Republican Administration, the Bush Administration 43,
when Chris Christie was a U.S. Attorney he engaged in this
reprehensible behavior.
So, in fact, you mentioned General Garland rescinding
General Session's order. That's especially interesting because
if it wasn't a big deal as some people say, then why would he
have to rescind it? He rescinded it because it was an important
function for them, an important funder of their allied groups.
Make no mistake, they go to allied groups. Whether it is Chris
Christie or whether it was Tony West it is going to allied
groups.
I would add that in General Garland's rescission memo he,
actually, in my view, misstatements the law. He had cited an
OLC memo from 2020 and which in turn cited an OLC memo
regarding the settlement in the Canadian software lumber case.
The reason that's important is because No. 1, the 2020 memo to
General Barr, it was merely a form in the Gowdy memo about the
CFR. It was not analyzing whether the Miscellaneous Receipts
Act actually requires prohibiting the third-party settlement.
So, that was sort of the misuse of that particular memo.
The Canadian lumber settlement. Again, I believe General
Garland misapplied that case and the reason is case in the
United States was the defendant. The United States was not the
plaintiff in this case. Canada our allies to the North they
sued the United States because they were unhappy with timber
imports.
So, in that situation the United States as defendant agreed
to fund certain escrow accounts not as the plaintiff. Also,
there was plenty of disclosure in that case because the USTR
negotiated that. Unlike the mortgage cases or other cases where
there was no disclosure at all, as a matter of fact if it
hadn't been for former Chair Goodlatte and his hard work and
his team's hard work, and of course working together with at
that time Congressman Nadler and his excellent staff, the fact
of the matter is that information would not have come to light.
I would say, when people lobby before Congress, that has to
be reported, that has to be disclosed, but if it hadn't been
for Chair Goodlatte and the work of the entire Committee, the
lobbying that was done to the DOJ, the fighting for the money
and the distributions, that would have never come to light. It
would have remained in the shadows and Congress would not have
been able to exercise either its oversight or its statement in
account power.
So, that's why I'm here to help Congress flex its power.
Mr. Johnson of Louisiana. You know too much, and I only got
one question so I approach yes that. I'm out of time. We will
yield back. I recognize the Ranking Member of the Full
Committee, Mr. Nadler for his questions.
Mr. Nadler. Thank you, Mr. Chair.
Mr. Phillips, under H.R. 3446 the Sunshine for Regulatory
Decree Settlement Act it appears that any private third party
could weigh in on a proposed consent decree or settlement
agreement pertaining to regulatory action that affects the
rights of private parties.
What is the scope of entities that could intervene in a
suit to enforce statutory rulemaking deadlines under this
provision? What impact would it have on the efficacy of the
rulemaking process.
Mr. Phillips. Thank you, Congressman. This provision
provides that any person who believes that its in their
interest, who would ``not be represented adequately by the
existing parties to the action'' should be permitted to
intervene in the litigation where a settlement is being
considered.
This provision is written unbelievably broad with little
limitation. It is much broader than what is currently required
under the Constitution for Constitutional standing
requirements, which requires parties to show that they were or
will definitely be injured by the agency's action, the agency's
delay will cause injury and that the harm will be redressed by
favorable outcome.
The end result of this is that it will end up delaying the
rulemaking process. Agencies are already required to go through
a--in my mind very laborious notice and comment process to
ensure that the public has the opportunity to comment by
allowing any party under the sun to engage in these
presettlement arbitration discussions to try to add additional
provisions, it's just going to slow everything down in an
already slow process.
Mr. Nadler. Thank you.
Mr. Phillips, why is H.R. 788 the so-called slush funds
bill a solution in search of a problem?
Mr. Phillips. Yes, thank you again, Congressman. This
settlements bill times aims to address--the settlements this
bill aims to address are just not problematic. No one is
forcing firms to enter into settlement agreements, no one is
forcing them into settlements with third-party payments. They
do so voluntarily because they think that settling is a better
value for them than the alternative.
They could certainly proceed to trial if they wanted to,
but enacting this bill would create more problems by preventing
parties from voluntarily settling. If you look at the
settlements entered into after the 2007-2008 financial crisis,
banks entered into these settlement agreements largely because
of some of these third-party payments.
So, JPMorgan Chase settled for $13 billion, $4 billion of
which was going to go toward consumer relieve. A good chunk of
that money Chase was going to have to pay regardless because
they were going to have to do mortgage modifications and things
like that.
So, reducing its actual settlement expenditures to roughly
$10 billion, if this bill had been in place and JPMorgan Chase
had been asked to settle with a $13 billion fine directly to
Treasury.
I'm really doubtful that they would have settled and would
have gone to trial. That would have forced the Department of
Justice litigators to spend a lot of time and a lot of money
preparing and defending their action. It would have just been
wasteful government spending as opposed to moving on to
pursuing different other wrongdoers.
Mr. Nadler. Thank you.
Ms. West, you stood for Justice's 2020 report titled,
``Policing for Profit,'' it states that the Department of
Justice's equitable sharing program, ``creates a giant
loophole.'' What is this loophole? Can you explain how it
allows State and local law enforcement agencies to circumvent
civil forfeiture laws passed by the State legislatures?
Your mic.
Ms. West. Sorry. Thank you.
So, with equitable sharing even with States that have
passed reforms to their own civil forfeiture laws, State law
enforcement if they work with the Federal agencies, they can
still get back the proceeds of civil forfeiture.
One great example for that is in Missouri the Missouri
Constitution actually has an amendment that says all the
proceeds of forfeiture should be going to schools. Because
Missouri State law enforcement can still take forfeitures and
hand them over to the Federal government through equitable
sharing and then get kickbacks up to 80 percent of the
forfeitures, a 2019 investigation showed that only less than
two percent of the forfeiture proceeds in Missouri were
actually going to Missouri schools as was mandated by the
Missouri Constitution.
Mr. Nadler. Thank you, Ms. West.
My time has expired. I yield back.
Mr. Johnson of Louisiana. Thank you. The gentleman the
gentleman yields back.
The Chair recognizes Mr. Kiley five minutes.
Mr. Kiley. I yield my time to the Chair.
Mr. Johnson of Louisiana. Thank you for yielding.
I have got to go back to Mr. Shu because I have some more
questions.
So, I mentioned a moment ago that I started tracking this
during the Obama Administration, but as you noted it goes back
to at least to the Carter Administration, so that was a little
before my time. What is your best guess? Let me say this, one
study that I looked at said only 1.4 percent of all settlement
slush fund payments can be tracked.
So, that means 98.6 percent of the 668 million that was
this calculation was directed in ways that were undisclosed, so
we have to oversight ability at all over that. What's your best
guess for how much money has been diverted through the
settlement slush funds and I guess this could be back to the
seventies, right.
Mr. Shu. We're talking in the tens of billions,
Congressman.
Mr. Johnson of Louisiana. With a B?
Mr. Shu. B.
Mr. Johnson of Louisiana. Wow. I had a list of the some of
the Obama Administration examples of this, where settlements
were directed funds to the groups like National Fish and
Wildlife Foundation, National Community Reinvestment Coalition,
National Urban League, and National Council of La Raza. In your
mind what are some of the more egregious examples? Can you name
some of the beneficiaries of these funds over the years?
Mr. Shu. Yes. Certainly, the ones that you mentioned were
beneficiaries. They were also even local to Washington, DC,
there was the Voice Group and the Metro IAF in Virginia. They
actually not only did they lobby the DOJ, they also lobbied
Mark Warner to help them get these settlement funds. It's not
an accident that every single entity who received the largest
of improper third-party payments was a liberal group.
Now, you could say well, it's because the Obama
Administration is Democrat. Yes, I understand that, but there
is also an email that former Chair Goodlatte had uncovered
where you have the Acting Senior Counsel for access to justice
programs at DOJ writing to the Principal Deputy Associate
Attorney General and she said, concerns include.
Not allowing city to pick a statewide intermediary like the
Pacific Legal Foundation because it does conservative property
rights free legal services. I mean, come on. I'm not saying
it's bad or good. As I mentioned, Chris Christie was awfully
partisan himself. So, I'm saying that either way from either
point of view it's not right. Its offensive to Congress' power
and authorities.
Mr. Johnson of Louisiana. We agree.
Ms. West, I want to go to you. I love the picture is worth
a 1,000 words. I think there are actually a 1,000 words on this
chart here. For those who might not have seen your opening
testimony, this is in the record, this is entitled, ``The
convoluted process property owners face when their property is
seized for Federal forfeiture.''
There is no way that--I'm a lawyer and this is hard for me
to follow. So, it is difficult for citizens to do that. It is
difficult for us to track and oversight and all the things we
are talking about.
To summarize your testimony, you say this is a trapdoor for
the protections of Bill of Rights and you gave three
recommendations, end administrative forfeitures, end financial
incentive for forfeiture which is send all this to the general
fund instead of other things, and inequitable sharing.
So, really quick, with a minute and 90 seconds, the FAIR
Act has all this in it, we were able to pass legislation to
check each of those boxes, what would this chart look like
after that? Would it simplify it dramatically.
Ms. West. Not only would it simplify it, but it would
takeaway this whole half of the chart.
Mr. Johnson of Louisiana. Oh, wow. OK.
Ms. West. So, anything under administrative forfeiture. If
we end administrative forfeiture, all forfeitures will happen
where they should happen, which is in a real court, a real
Article III Court.
Mr. Johnson of Louisiana. Excellent.
Mr. Grossman, you said that the sue and settle issue really
exploded under the Obama Administration. Do you have a theory
as to why it began? Why is this such a recent advent in the law
or a recent practice.
Mr. Grossman. I think the political dynamics really do
explain it. Many of the groups bringing these suits are
proregulatory groups. They had discovered that they could use
the leverage of litigation to lead to favorable settlements at
the tail end of the Carter Administration.
There was a little bit of activity along these lines during
the Clinton Administration as well, but it was really during
the Obama Administration that it exploded across the board not
merely in the environmental space, but really effecting any
number of different Federal programs and agencies.
Mr. Johnson of Louisiana. It started a custom and practice
and the only way to reel that back in and change it in our
view, is if Congress acts and has to do this, and so that's why
we appreciate your testimony so much.
I remember from law school the term in-law school vexatious
litigation, it feels that way, it feels like that.
The Chair is out of time.
I recognize next Ms. Escobar.
Ms. Escobar. Thank you, Mr. Chair. Thanks to our witnesses
today.
Mr. Phillips, I want to piggyback off something that--off
Mr. Nadler's question, so under H.R. 3446 if the regulatory
action involved the Clean Air Act, for example, could a private
third party include someone who breathes air?
Mr. Phillips. Absolutely, Congresswoman. The provisions in
that bill are just so broad, as I said to be practically
meaningless.
Ms. Escobar. Thank you.
Also, can you share with us what are some reasons why DOJ
or another agency might want to enter into a settlement
agreement that would provide for consumer relief provisions,
such as, payment to the a local community nonprofit
organization.
Mr. Phillips. Sure. So, going back to the large bank
settlements, these institutions were bundling mortgage-backed
securities in such a high rate that they needed as many
mortgages as they could get and that incentivized the creation
of low quality mortgages. They had no interaction with the
mortgage holders. They were not the ones who were making loans
themselves.
So, they would where not the direct and proximate cause of
those consumers harms. The reason that DOJ or other agencies
would want to include some of these third-party agreements is
so that the consumers who were hurt by the defendant's actions,
even if they were not the direct and approximate cause could
still get some relief. It's complicated and it's difficult.
It is a not a good use of corporate resources to search for
each and every harmed individual. What does make sense is doing
some mortgage relief or to give a donation to a group that is
able to do homeowner relief themselves and things like that,
even if they aren't a part of the company.
Ms. Escobar. Thank you very much.
Can you also explain how consent decree practices have
resulted in beneficial settlements for all parties, including
corporations and produced good proconsumer outcomes.
Mr. Phillips. Absolutely, Congresswoman. The laws that
Congress has enacted frequently require agencies to write rules
by a certain deadline, ensuring that consumers financial
markets, and the environment workers are protected.
The consent decrees that these agencies entered into really
just ensure that the rules Congress has mandated get put on the
books. It is just the agency's effectuating Congress' law. It's
nothing more.
It ensures that corporations are benefited by corporations
can plan for the future. When Congress says to an agency to
write a law by X date, but the agency doesn't do it, it leaves
corporations in the lurch. They want to be able to plan for the
future and know what the law is. When an agency waits nine
years, 10 years--I do financial regulation, there is right now
a rule we've been waiting on for 12 years, it means that
corporations can't plan, they can't invest as they would like
to because of the uncertainty.
Ms. Escobar. Thank you so much.
Mr. Chair, I yield back.
Mr. Johnson of Louisiana. Thank you. The gentlelady yields
back.
The Chair recognizes Mr. McClintock for five minutes.
Mr. McClintock. Thank you, Mr. Chair. When we speak of
threats to democracy, it seems to me the ultimate threat is a
government that's detached from the will of the electorate.
When we speak of independent bureaucracies, I think we have to
ask of question well, independent of whom. Well, obviously,
independent of the elected officials who in turn elected by and
answerable to the people.
So, we're talking about the separation of our democracy,
the rule of the people. From the government that's now in
effect running itself.
It's also been operating not only outside the rule of
democracy, the people, it's also operating outside the bounds
of the Constitution, which gives all legislative powers to the
Congress of the United States. Under the separation of powers
at the center of our Constitutional architecture, Congress
makes law but cannot enforce it. The President enforces law,
but cannot make it. The Executive authority to--pardon me. The
Exclusive authority to adjudicate disputes that are arising
under our laws belong to the Judiciary.
Now, Mr. Phillips, just told us, well, there's no problem
here, nobody's forcing these settlements, but that's not the
point. The point is these settlements are making laws quite
independent from the elected representatives. It may even be in
diametrical opposition to the policies of the elected
President. That means our government's become a law to itself.
Mr. Grossman, am I correct that a bureaucracy needs only to
collude with likeminded pressure groups to establish a new
rule, an enforceable law, even if it's at odds with the elected
representatives of the people?
Mr. Grossman. In some instances, agencies have, in fact,
done that to adopt legal interpretations that have very serious
consequences to regulated parties as well as the broader
economy, yes.
Mr. McClintock. Isn't this a quintessential threat to
democracy when laws are imposed not by the elected
Representatives of the people, but entirely contrary to their
wishes as they express them through the vote?
Mr. Grossman. Yes, yes. I think that is exactly right. You
see that, in particularly, as you pointed out, in what's
called--known as the slush-fund settlement context. Because in
that instance, the programs that are being created by the
settlements, they may be well and good. Some people may look at
them and say they're laudable, and they lead to good public
policy results. The problem is they were never enacted by
Congress.
Mr. McClintock. Therefore, you're getting a runaway
bureaucracy completely attached and controlled by the
electorate.
Mr. Grossman. Exactly. Not only standing up its own
programs with its own policy objectives, but then funding those
programs independently of Congress. So, there is no check and
no oversight.
Mr. McClintock. By the way, it accuses you of violating the
law it is now made by itself. You're held to account in an
administrative law court, are you not, run by that very same
agency?
Mr. Grossman. That is often the case, yes.
Mr. McClintock. Then as we get into some of the other
issues, if the agency's court finds you guilty of violating the
agency's law, the agency gets to decide what to do with those
funds that it has now collected from you without the process of
due process of law or trial by jury. Is that correct?
Mr. Grossman. In settlements, yes. The money can be
directed to third parties. So, when Congress typically enacts a
fine, the money goes into the Treasury, and then it's subject
to appropriations. Under these sorts of agreements, there isn't
that type of democratic oversight.
Mr. McClintock. Mr. Shu, we had a California insurance
commissioner many years ago who was forced to resign when he
was found to be directing a settlement with insurance companies
to contribute to an ad campaign that featured himself as he
prepared to run for Governor. Is that the kind of abuse we're
talking about?
Mr. Shu. It certainly could be and in any other context.
Mr. McClintock. He was a Republican. As you pointed out,
Chris Christie directed funds from a settlement to his alma
mater, a Republican. So, isn't this something Democrats should
be just as concerned about as Republicans?
Mr. Shu. Yes, Congressman, that is why I mentioned that
whether somebody's from Atlanta or media or a Thousand Oaks,
the fact of the matter is that this is a nonpartisan issue.
Democrats should be concerned. There's also the funding issue
in the sense that in 2011, Congress had cut certain grantees
from the budget. President Obama signed it into law. These
settlements didn't end right around the appropriations--
Mr. McClintock. This frightens me, because it is a brave
new world if it's replacing the Constitutional republic that
our Founders envisioned. Our chance to set things right is
quickly passing from our hand. So, I think the proceedings
today are extremely important. I know the authoritarian left
applauds these developments because they believe the policy
outcomes favors their goals. They should beware of such powers
because those power once summoned are not easily contained and
could one day be turned against them.
Mr. Shu. Yes, sir.
Mr. McClintock. I yield back.
Mr. Shu. Yes, sir.
Mr. Johnson of Louisiana. The gentleman yields back. The
Chair recognizes the gentleman from Georgia, Mr. Johnson, for
five minutes.
Mr. Johnson of Georgia. Thank you, Mr. Chair. H.R. 788 and
H.R. 346, which we're discussing today, should not be joined
with the civil asset forfeiture measure that we're also
considering today because H.R. 788 and 3446 are MAGA Republican
antiregulatory bills in search of a problem. So, I don't think
we're well-served by looping in this for forfeiture bill with
those two corporate loving bills. H.R. 3446, the so-called
Sunshine Bill, would throw a monkey wrench into the rulemaking
process by creating a gauntlet of burdensome and time-consuming
procedures before allowing an agency to settle cases.
It opens the door wide to dilatory tactics by corporate
opponents of statutes like the Clear Air Act, and it would
force expensive time-consuming litigation at taxpayers'
expense. H.R. 3446 also subverts the Federal Rules of Civil
Procedure and the longstanding practice of judicial discretion.
Under the Federal Rules, the courts are empowered to manage
litigation and to consider equities in their decisionmaking.
Yet, this bill would strip judges of that authority.
H.R. 788 would be a gift to lawbreakers at the expense of
families and communities suffering from injuries that cannot be
addressed by direct restitution, such as civil rights
violations, environmental justice harms, or harms caused by
fraudulent lending practices. That bill would hamstring DOJ's
ability to address remedy and deter systemic harm caused by
unlawful conduct.
Democrats are prepared to work with our Republican
colleagues where there are legitimate issues to address, but
the antiregulatory measures that form the bulk of today's
discussion are not based on legitimate concerns; instead, they
are a reaction to MAGA conspiracy theories and would cause
immense harm to the public health and welfare if they were
enacted.
Now, Ms. West, according to your organization's October 21,
2021--excuse me, October 2021 report, which compared to
Philadelphians' overall respondents--well, let me rephrase
this. According to your organization's October 2021 report,
quote:
Compared to Philadelphians overall respondents in civil asset
forfeiture cases where more often minority and low-income, and
that, in fact, two-thirds of the respondents were Black.
Do you agree that civil asset forfeiture impacts low-income
people and people of color disproportionately?
Ms. West. Yes, Representative Johnson. The report you're
talking about is the report that Ranking Member Scanlon
mentioned earlier, and it did find that civil forfeiture
disproportionately impacts low-income and minority communities.
We have dozens of examples showing that's the case.
One example from, Mr. Chair, from your home State of
Louisiana, we have a client named Kermit Warren who had lost
his job, unfortunately, in the COVID-19 pandemic, and he was
going to use his life savings of $30,000 to buy a tow truck to
start a new business. As he traveled to Ohio to look at a
truck, it turned out the truck didn't work for him, so he took
his money, and he was flying back to his home State of
Louisiana.
Mr. Johnson of Georgia. With cash money?
Ms. West. Cash money, that's right. His money was seized at
the airport just because it was a large sum of money. Federal
law enforcement agencies can do that when they see large sums
of money.
Mr. Johnson of Georgia. A Black man?
Ms. West. Yes, sir.
Mr. Johnson of Georgia. Mm-hm. Thank you.
Mr. Phillips, why would H.R. 788's limitation on settlement
agreements be harmful?
Mr. Phillips. Absolutely. It would require companies and
the government to potentially enter into protracted legal--
protracted court cases. It would prohibit them from settling
and using their resources to make--to enact new policies, to
bring about new enforcement actions. It would just hamstring
the Federal government from using their independent and expert
judgment to figure out how to litigate the cases that they are
tasked by the Constitution with litigating.
Mr. Johnson of Georgia. Thank you. I'm reaching the end of
my time, so I'll yield what I have remaining back. Thank you,
Mr. Chair.
Mr. Johnson of Louisiana. Thank you. The gentleman yields
back. The Chair yields to--or recognizes Ms. Hageman for five
minutes.
Ms. Hageman. Thank you. Mr. Grossman, when Congress passes
a law instructing the agency to act in settlement cases,
special interest groups sue those agencies, and then obtain
consent decrees that override Congress by requiring agency
rulemaking favorable to the special interest. Doing so can bind
the agency in ways not intended by Congress, and even in ways
that then bind subsequent administrations. There's also another
problem associated with this particular paradigm known as the
Equal Access to Justice Act. Have you ever heard of the EAJA?
Mr. Grossman. Yes.
Ms. Hageman. Can you briefly explain what the EAJA does?
Mr. Grossman. Well, in general, a plaintiff's group that
obtains such a result in a case would be a prevailing party and
so would be able to recruit large amounts of its litigation
costs, attorney's fees.
Ms. Hageman. Well, and that's if there's litigation. They
also, the agencies and the environmental groups can actually
enter into a consent decree where the agency will agree to pay
EAJA funds to particular environmental organizations. Is that
right?
Mr. Grossman. Yes.
Ms. Hageman. So, I'm going to read a bit of information to
give the folks here a bit more background about how the EAJA
has been abused over the years.
Environmental litigation has become an expensive national
policy issue that causes harmful gridlock for the Federal
agencies managing wildlife and public lands. At the center of
their problem is the Equal Access to Justice Act, which permits
the recovery of attorney's fees and lawsuits against the
Federal government.
EAJA was enacted in 1980 to protect ordinary citizens and
small business from government overreach and wrongdoing by
giving them the means to pursue otherwise prohibitively
expensive litigation. Over the years, EAJA shifted from being a
well-intentioned corrective measure to a powerful weapon for
large, well-funded special interest nonprofit groups to
continuously sue the government on environmental issues.
Litigation against government agencies is virtually nonstop,
because these groups can recover substantial legal fees under
EAJA, even if they win only a small part of the case or settle
out of court. Most of these lawsuits are settled out of court.
Recently, I filed a bill to delist the Grizzly bear. One of
the things that happened was that the Fish and Wildlife Service
agreed in 2007 and again in 2017 that the Grizzly bear had been
fully recovered. Environmental groups sued, and eventually the
Fish and Wildlife Service reached an agreement. When the
environmental groups came back seeking funds, they sought
almost $500 an hour in their legal fees, and ultimately $1.4
million under the Equal Access to Justice Act.
Wouldn't you agree that this is another incentive or
perverse incentive that has been created that needs to be fixed
that encourages these kinds of sue and settle tactics that
you're describing?
Mr. Grossman. It is a very unfortunate structure in that
effectively it's a self-perpetuating proregulatory, almost
lobbying treadmill, because groups sue agencies to compel
agency action. In many instances, the agency will be favorable
to what it is the group is asking for. So, they then get
priority for their policy preferences, and at the same time
they obtain additional funds that then can use to promote
further regulatory initiatives. It is a very unusual structure
that you would have the government funding effectively a
proregulatory to force the government to undertake additional
regulatory actions. It's not protecting people's rights against
the government; it's expanding the government to exert more
force in general.
Ms. Hageman. Interestingly enough, I've had numerous
opportunities to deal with EAJA as a trial attorney. I have
worked with a variety of organizations, private landowners,
farmers, ranchers, irrigation districts, interest groups such
as Pharm Bureau, stock growers, and those kind of things.
What I have found is when I prevail against the Federal
government, it's very difficult for me to receive EAJA funds.
Yet, when environmental groups again may prevail on a technical
matter, and the agencies will actually enter into consent
decrees so that they can get the EAJA funds. Have you noticed a
similar pattern in what you have reviewed?
Mr. Grossman. It's simply another aspect of the collusion
that is unfortunately prevalent in the space and certainly
something that demands Congress' attention.
Ms. Hageman. Thank you, and I yield back.
Mr. Johnson of Louisiana. Thank you. The gentlelady yields
back. The Chair recognizes the Ranking Member, Ms. Scanlon, for
five minutes.
Ms. Scanlon. Thank you. At the outset at the hearing, I
spoke about the work that the Institute for Justice did with
Professor Julia Penn and many of my colleagues to study and
challenge abuses in Philadelphia's Civil Forfeiture Program. I
would urge my colleague to review the report that we've already
entered into the record because it's really thorough and really
paints a pretty damning portrait of what could happen with
civil forfeiture programs.
In that report, it described the courtroom where civil
forfeiture cases were heard as a kangaroo court; where someone
failed to show up, they could get listed for default judgment.
If they did show up, the prosecutors would relist the case,
again and again and again, forcing people to come back to
court, which is a problem if you're in minimum wage or other
restrictive jobs.
Your report also talked about the fact that pit
disproportionately entangled members of disadvantaged
communities who would have difficulty fighting back. It took an
average of nine months to get property back, as long as three
years, sometimes three, four, five, or more court appearances.
Then the median value of items seized by law enforcement in
any incident was only $1,300. The median cost of hiring an
attorney to fight forfeiture was $3,500. Given this
disproportionate impact and the cost, is it fair to conclude
that the absence of counsel or a right to counsel significantly
impacts the ability of people to fight civil forfeiture?
Ms. West. Yes, Ranking Member Scanlon, it's absolutely
true. That's another--I mentioned three reforms that will be
accomplished by the Fair Act. Of course, the Fair Act also
includes a right to counsel. That's so crucial when you look
again at how complicated this process is. You were talking how
the process disproportionately impacts low-income and minority
communities. The report you mentioned from Philadelphia also
showed that people have lower levels of education have a much
harder time getting their property back. It's easy to see why
that's the case because it disproportionately impacts the low-
income communities at both ends of the forfeiture process. So,
on the front end, we'll have law enforcement who will
frequently say, these are high-crime areas. We think that there
was a crime involved in this property because this is a high
area. Well, people live in high-crime areas, and often those
people are low-income.
Then on the back end, once you're already into the
forfeiture process, it's not hard to understand why if you
can't afford a lawyer you are going to be much less likely to
be able to get your property back.
Ms. Scanlon. Thanks. The report also talks about more than
half of the people who ultimately lost their property were
never charged with a crime. Can you talk a little bit about the
impact that civil asset forfeiture has on individuals who are
arrested or charged and the innocent owners' issues?
Ms. West. Sure. So, as I mentioned earlier, they're--under
current Federal law, it's up to an innocent owner to prove
affirmatively their own innocence, which is a huge problem. In
this report that you mentioned from Philadelphia, it actually
showed only one in four were found guilty or pleaded guilty to
a crime. There are all kinds of circumstances in which innocent
people find themselves caught up in this forfeiture process.
We have one client, for example, from Rochester, New York.
Her apartment was raided because her boyfriend was accused of
selling drugs. During that raid, the local police department
seized $8,000 from our client. Ultimately, which is often not
the case in forfeiture, but ultimately there was a criminal
charge against her ex-boyfriend, but he was acquitted of the
crime. Nevertheless, the local police department turned over
her $8,000 to the DEA for forfeiture. This was money that she
was planning to use to upgrade her business which is a mobile
food cart to a full food truck to support her grandnephew and
herself. We don't have time to get through even half of the
stories of innocent people who find themselves in a similar
situation.
Ms. Scanlon. Certainly, one of the egregious cases that I
know our Philadelphia colleagues dealt with was a kid whose
piggybank with his $91 in birthday money was seized. It took
months to get this back. Yes, the financial incentives for law
enforcement to sweep up everything they could and keep it,
essentially, really adds a perverse incentive here. Can you
talk about that a little bit?
Ms. West. Sure. Law enforcement will sometimes be honest,
and they'll say, oh, the reason we need civil forfeiture is
because we need the money. Of course, I don't know what exactly
is the right level of funding for the various Federal law
enforcement agencies. What I am 100 percent sure about is whose
responsibility that is, and that's yours. The Constitution
unequivocally grants to Congress only the power to raise
revenues. So, it's not only a corruption of this Constitutional
power for the Executive Branch law enforcement agencies to be
raising revenue, but it's also distracting them from what they
should be doing, which is solving crime and preventing crime.
Ms. Scanlon. Thank you. I yield back.
Mr. Johnson of Louisiana. Thank you. The gentlelady yields
back. The Chair recognizes the gentleman from South Carolina,
Mr. Fry, for five minutes.
Mr. Fry. Thank you, Mr. Chair. Thank you for having this
hearing today. I actually did a lot of work on civil assets
forfeiture when I was in the State house in South Carolina.
It's amazing to me as divided as this is as divided as Columbia
can be at times, the bill that we filed was sponsored by 80
percent of the entire House of Representatives. You have
conservatives lined up with Liberals that really understood
that this was a problem and that we needed to fix it.
Civil asset forfeiture has really become a device for
unjustified government takings. It's violative oftentimes, my
view, of the 4th, 5th, 8th, and 14th Amendments. The problem
that I have is that it doesn't have to accompany a charge. It's
a totally separate mechanism. There's no due process, or very
little. There's no judicial review or very little. Whether or
not it's excessive or not, there's no real protection for the
individual.
As you pointed out, you have to go through this entire
labyrinth here a layperson, as a litigant yourself to establish
your innocence and to get your item back. It's never within a
timely manner.
Many people are unaware of how the government or legal
system really works until they find themselves in this exact
spot. As Ms. Scanlon pointed out, it's actually really
interesting because a lot of these crimes or a lot of these
seizures are less than a thousand dollars.
In South Carolina, 55 percent are less than a thousand
dollars. Nobody is going to hire an attorney for that amount of
money to go get their stuff back. They're just not going to do
it.
In instances within the districts, since we were doing
this, Ms. Eller Vermel was a 72-year-old senior living in
Conway, South Carolina. She owns a thousand square foot home.
She's had it for decades. She's not in the best neighborhood.
She did everything she could to get people off of her property
when she was sleeping or at nighttime or when she was at work
because they would sell drugs at the corner by her house. She
put up ``no trespassing'' signs. She talked to other people in
the neighborhood. She talked to parents. She talked to kids.
She talked to the police. She even trimmed her bushes so that
police could have a better vantage point of what was going on
in the city of Conway. The city of Conway seized her home. She
had fight to get that back. It's very similar to what Ms.
Scanlon was talking earlier.
Randi Cook dropped off a friend at a Myrtle Beach sports
bar as a favor. Drug enforcement agents swarmed the car in the
parking lot. Because she was a waitress and didn't have a bank
account, she had roughly $5,000 in her possession. Because her
friend was wanted, and she was unaware, they seized her money,
too. It took really a very long time to get that back. This
isn't a debate in my mind about pro or antipolice, really. It's
really about process, right? Civil forfeiture is kind of based
on the in rem jurisdiction that you can go seize the item. That
the item committed the crime, it's not in personam, of course,
which could be against the owner itself.
You look at these--Mr. Chair, briefly, I want to introduce
into the record with unanimous consent an investigatory series
in 2019 from the Greenville News in the Anderson Independent-
Mail called, ``TAKEN: How Police Departments Make Millions,''
which talks about civil asset forfeiture in South Carolina.
Mr. Johnson of Louisiana. Without objection.
Mr. Fry. Another one, too, an opinion article by Andrew
Yates on ``Why South Carolina Must End Its Civil Asset
Forfeitures.''
Mr. Johnson of Louisiana. Without objection.
Mr. Fry. In this series, which is a massive investigatory
series by the news, in three years, law enforcement seized $17
million. Twenty percent of people who lost their property were
never charged with an actual crime. Another 20 percent were
charged, but not convicted. The average time between seizure
and when the prosecutor filed an action was 304 days, and 55
percent of cash seizures were less than a thousand dollars.
The problems, as you highlighted, really are everywhere.
It's a separation of powers issue. It's a burden of proof
issue. It removes the impartiality agencies now have a
financial incentive to go do this and continue to do it. It
doesn't protect innocent owners. It's not worth the fight to go
against the government on small sums, as has been outlined. Of
course, it's violative possibly of the 4th, 5th, 8th, and 14th
Amendments, and, of course, the preponderance of the evidence
standard. These are all problems.
Ms. West, have you encountered similar instances
representing people who have lost either property or cash
through civil forfeiture?
Ms. West. Yes, thank you. More again, we could possibly
cover, even if we had--this hearing was three hours longer. One
that comes to mind just because you were talking about how long
this can take, and how long people can be deprived of their
property in the civil forfeiture process, is we had a client
who was traveling near the border to visit family near Mexico.
He was driving his Ford F-250 pickup truck, and CBP stopped
him. He didn't have any weapons in the car, but what he did
have, he has a licensed firearm back home. What he did have
were five lone bullets in a console in his car. CBP took his
car because he was transporting munitions of war across the
border.
After his property was taken and put into the forfeiture
process, he went two years without ever having an opportunity
to even have a hearing to contest the forfeiture and try to get
his truck back. It's obviously a huge problem because we see
all the time we have clients who if you don't live in a place
that has reliable public transportation, for example, if your
car is taken away, that means you can't get your kid to school;
you can't get to the grocery store; and you can't get to your
job.
So, this is a really serious problem. These procedural
defects really impact real people's lives.
Mr. Fry. Thank you, Mr. Chair. With that, I yield back.
Mr. Johnson of Louisiana. Thank you. The gentleman yields
back. The Chair recognizes the gentlelady from Texas, Ms.
Jackson Lee, for five minutes.
Ms. Jackson Lee. Let me thank the Chair and the Ranking
Member for a very important and constructive hearing. It is
noteworthy again. I guess I'm often to say this that we have
gone through these civil forfeiture legislation initiatives in
the more than two decades that I've been here. I am reminded of
Chair Hyde--one of the issues that he was focused on--the late
Chair Hyde.
It seems that we have a space where we can find some
enormously bipartisan issues. To listen to an example of a
senior citizen's house being taken because they can't stop drug
activity on the corner of the front yard is egregious. There
are similar stories that you have spoken to, Ms. West. So, I'm
going to pose my questions to you and Mr. Phillips on a
different line of questioning.
First, I'd like to say that we recognize that penalties,
civil penalties are part of the justice system in some way in
that the taking of things are clearly an aspect of that. We
just had the Department of Justice in Houston on a settlement
of dumping; egregious dumping in somebody else's neighborhood.
It happens to be in the neighborhoods of minorities. So,
clearly a tool could be used.
If you travel miles in a truck to dump, there may be a
basis that punishment is your truck is gone. You may have
rights to get it back, but you have been notified there are
signs it's not a dumping place, you are dumping. So, I would
offer to say that it is a tool. It is a tool that must be
contained, and there must be reasons.
So, let me just raise this point and I think you have--or
this report and just this October, just this October 2021
report on civil forfeiture says that: ``Frustrating, corrupt,
unfair, so forfeiture in the words of its victim.'' Can you
speak to where that is, also asset forfeiture is frustrating,
corrupt, and unfair? Let me pose my question to Mr. Phillips
before you answer, and that is that we are also lumping
together a number of legislative initiatives that are shocking
to me, H.R. 3446, saying that there's collusion among agencies
around regulations. H.R. 788 prevents the DOD settlements of
corporate wrongdoers from including payments to nonprofits.
Then H.R. 788 will be a gift within essence via the expense of
families and communities suffering from injuries that cannot be
addressed directly. So, things that would help the American
public.
Let me go to Ms. West on the frustrating and corrupt and
unfair of civil asset forfeiture programs.
Ms. West. Sure. Thank you, Representative Jackson Lee. I
would say to your point about forfeiture being a tool, no one
contests that if the government charges someone with a crime
and convicts that person of a crime with all the protections
that the criminal justice system that grants to that person
when they are charged with a crime, the government can then
take the proceeds of that crime or property that's the fruits
of that crime through criminal forfeiture. No change to--
Ms. Jackson Lee. I should have clarified and thank you for
doing that for me.
Ms. West. Yes, yes.
Ms. Jackson Lee. That's what happened to a dumping case,
but go ahead it would be a criminal.
Ms. West. That's exactly right. So, criminal forfeiture is
what allows the government to address property that's actually
involved with their crime. When you look at civil forfeiture,
you're sweeping in all kinds of other property.
A great example out of California recently our clients
Linda Martin and Reggie Wild were saving money to buy a home,
and they had $40,000 in cash in a safe deposit box. So, you
can't get safer than that. You've got your money in a safe
deposit box at a private safe deposit box company. The FBI
raided that business and took all the property from all the
safe deposit boxes, including Linda and Reggie's money that
they are saving to purchase a home. When they got a notice
about the FBI's intent to forfeit everybody's property in the
safe deposit boxes, they couldn't even tell what crime it was
alleged that their property had been involved in because there
was a laundry list of possible crimes.
So, you're looking at situation where you're facing this
Byzantine process get your property back, and you don't even
know what it is that you're contesting. So, I would just say
that criminal forfeiture is where we should look when we're
looking to take property that's actually been involved with a
crime.
Ms. Jackson Lee. I thank you. I would ask the Chair to
indulge for Mr. Phillips to be able to respond to that question
that I impose.
Mr. Johnson of Louisiana. I always indulge Ms. Jackson Lee.
Go ahead.
Ms. Jackson Lee. I thank you. I think is an important
hearing on the aspects of dealing with the civil asset
forfeiture. Thank you very much, Mr. Phillips.
Mr. Phillips. Thank you, Congresswoman. Thank you, Ranking
Chair. Really quickly, you asked what could improve these
settlements? I would say don't throw the third-party
agreements, baby out with the bathwater. I think they can be
very useful. As I said before, I think oversight is really
important.
One Representative brought up earlier the Equal Access to
Justice Act. One of the things that Congress did recently was
it required all agencies that engage in that payout EAJA fees,
EAJA awards have to submit that to a data base that's
accessible to the public so the public can understand where
this money is going. Through this data base, we have learned
that the vast majority of EAJA fees go to social security
awardees who have been wrongly denied. They had to hire a
lawyer to appeal, and their lawyers got EAJA fees helping them
get Social Security benefits.
I imagine that Congress could do something similar with
regards to these third-party settlements just to ensure that
there is disclosure and oversight. Sunshine is the best
disinfectant. I imagine this is something that could
potentially get bipartisan agreement.
Ms. Jackson Lee. Thank you. I yield back.
Mr. Johnson of Louisiana. Thank you. The gentlelady yields
back. That concludes today's hearing. I do sincerely want to
thank the witnesses again for appearing today and giving us
your insights on, obviously, a very important series of issues
that we might actually find bipartisan agreement on. So, we'll
see. Wonders never cease.
Without objection, all Members will have five legislative
days to submit additional written questions for the witnesses
or additional materials for the record. Without objection, the
hearing is adjourned.
[Whereupon, at 4:10 p.m., the Subcommittee was adjourned.]
All materials submitted for the record by Members of the
Subcommittee on the Constitution and Limited Government can
be found at: https://docs.house.gov/Committee/Calendar/ByEvent
.aspx?EventID=116049.
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