[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
         
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               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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