[Congressional Record Volume 159, Number 64 (Wednesday, May 8, 2013)]
[Senate]
[Pages S3234-S3239]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
NOMINATION OF THOMAS PEREZ
Mr. HARKIN. Mr. President, I come to the floor today to express my
deep disappointment that once again Republican obstructionism and
procedural tricks are preventing this body from carrying out its
constitutional duty and responsibility, its obligation to consider
important Presidential nominations.
This time the target is Mr. Tom Perez, the President's extremely
qualified nominee to be Secretary of Labor.
The HELP Committee, which I chair, was scheduled to vote on his
nomination at 4 o'clock this afternoon. Obviously, we are not doing
that. An anonymous Republican has invoked an obscure procedural rule to
prevent our committee from meeting at that scheduled time. This
pointless obstructionism is extremely disturbing.
I would like to point out that we had previously been scheduled to
vote on his nomination in my committee 2 weeks ago. In an effort to
bend over backwards and to be accommodating to our colleagues who
requested more time to consider documents related to the nomination, I
deferred it for 2 weeks as sort of senatorial courtesy.
This time there is no allegation that they have had insufficient time
for consideration, just delay for delay's sake on the nomination. Tom
Perez has been before our committee since March. We have had our
hearing, during which Mr. Perez fully answered all questions posed to
him. I cut off no one. I allowed anyone to ask whatever questions they
wanted.
Mr. Perez has met with any interested Senator personally and answered
over 200 written questions for the record. It is an understatement to
say his nomination has been thoroughly vetted. This continuing delay is
unconscionable and only hurts the American workers and businesses that
rely on the Department of Labor each and every day.
As our country continues to move down the road to economic recovery,
the work of the Department of Labor is becoming even more vital to the
lives of our working families. Whether it is making sure workers get
paid the wages they deserve, helping returning veterans reenter the
workforce, protecting our seniors' retirement nest eggs, ensuring that
a new mother can care for her baby without losing her job, the
Department of Labor helps families build the cornerstones of a middle-
class life.
Now more than ever we need strong leadership at the Department to
help strengthen our fragile recovery and build a stronger and
revitalized American middle class. That is why this nomination is so
important.
There has been a lot of public discussion about Mr. Perez but
remarkably little of it has focused on what should be the central
question before our committee today: Will Tom Perez be a good Secretary
of Labor. The answer is unequivocally yes. Without question, he has the
knowledge and experience needed to guide this critically important
agency.
Through his professional experiences, and especially his work as
Secretary of the Maryland Department of Labor, Licensing and
Regulation, he has developed strong policy expertise about the many
important issues for American workers and businesses that come before
the Department of Labor every day. He spearheaded major initiatives on
potentially controversial issues, such as unemployment insurance reform
and worker misclassification, while finding common ground between
workers and businesses to build sensible, commonsense solutions.
He also clearly has the management skills to run a large Federal
agency effectively. He was also an effective manager and a responsible
steward of public resources, undertaking significant administrative and
organizational reforms that made the Maryland DLLR more efficient and
more effective.
His outstanding work in Maryland has won him the support of the
business community and worker advocates alike. To quote from the
endorsement letter of the Maryland Chamber of Commerce:
Mr. Perez proved himself to be a pragmatic public official
who was willing to bring differing voices together. The
Maryland Chamber had the opportunity to work with Mr. Perez
on an array of issues of importance to employers in Maryland,
from unemployment and workforce development to the housing
and foreclosure crisis. Despite differences of opinion, Mr.
Perez was always willing to allow all parties to be heard,
and we found him to be fair and collaborative. I believe that
our experiences with him here in Maryland bode well for the
nation. That is a pretty strong endorsement by a chamber of
commerce for a nominee whom the minority leader today on
the floor characterized as a ``crusading ideologue . . .
willing to do or say anything to achieve his ideological
ends.'' That is how he was characterized by the Republican
leader today, but the Maryland Chamber of Commerce didn't
seem to think so. So that grossly unfair characterization
by the Republican leader is manifestly inconsistent with
the experiences of the Republican leaders and businesses
that have actually worked with Tom Perez.
Mr. President, I ask unanimous consent to have printed in the Record
letters from businesses and Republican leaders demonstrating the strong
bipartisan support for Mr. Perez's nomination. These people clearly
disagree with the Republican leader's assessment of Mr. Perez's
qualifications and character.
There being no objection, the material was ordered to be printed in
the Record, as follows:
March 19, 2013.
Joint Statement From State Attorneys General in Support of Nomination
of Tom Perez as Secretary of U.S. Department of Labor
``Tom Perez is a brilliant lawyer and leader, who listens
thoughtfully to all sides and
[[Page S3235]]
works collaboratively to solve problems. He has dedicated his
career to serving the public, and his experience as Secretary
of the Maryland Department of Labor, Licensing and Regulation
and in the U.S. Department of Justice make him ideally suited
to serve as the Secretary of the U.S. Department of Labor.
``As state Attorneys General, we have found Perez to be
open, responsive and fundamentally fair. He is committed to
justice and the rule of law and able to work across party and
philosophical lines to achieve just results.
``The U.S. Department of Labor and the country will be well
served by a leader who understands the need to forge
partnerships with state and local officials and who values
cooperation to bring about successful results for both
employers and employees.''
``The following Attorneys General issued this joint
statement in support of Perez's nomination:
``California Attorney General Kamala Harris, Delaware
Attorney General Beau Biden, Illinois Attorney General Lisa
Madigan, Iowa Attorney General Tom Miller, Mississippi
Attorney General Jim Hood, North Carolina Roy Cooper, Oregon
Attorney General Ellen Rosenblum, Tennessee Attorney General
Robert Cooper, Jr., Former Utah Attorney General Mark
Shurtleff and Former Washington Attorney General Rob McKenna.
____
March 15, 2013.
Hon. Barack Obama,
President of the United States, The White House, Washington,
DC.
Dear President Obama: The Maryland Chamber of Commerce
supports the nomination of Thomas E. Perez to serve as the
United States Secretary of Labor.
During his tenure as Secretary of Maryland's Department of
Labor, Licensing and Regulation, Mr. Perez oversaw a wide
range of regulatory programs of critical importance to the
state's business community, including unemployment insurance,
the regulation of financial institutions, worker safety and
professional licensing.
Mr. Perez proved himself to be a pragmatic public official
who was willing to bring differing voices together. The
Maryland Chamber had the opportunity to work with Mr. Perez
on an array of issues of importance to employers in Maryland,
from unemployment and workforce development to the housing
and foreclosure crisis.
Despite differences of opinion, Mr. Perez was always
willing to allow all parties to be heard and we found him to
be fair and collaborative. I believe that our experiences
with him here in Maryland bode well for the nation.
The Maryland Chamber of Commerce is Maryland's leading
statewide business advocacy organization. Our 800 member
companies employ more than 442,000 people in the state. The
Chamber works to support its members and advance the State of
Maryland as a national and global competitive leader in
economic growth and private sector job creation through its
effective advocacy, high level networking and timely
communications.
Sincerely,
Kathleen T. Snyder,
CCE, President/CEO,
Maryland Chamber of Commerce.
____
Greater Prince George's
Business Roundtable,
Bowie, MD, March 18, 2013.
To Whom It May Concern: Tom Perez is one of the most honest
and dedicated public officials that we in the Prince George's
County business community have ever worked with. His
understanding that government must work in partnership with
business to find solutions that succeed in today's
marketplace highlights his continual accessibility and his
empathic approach to working with job creators nationwide.
We applaud the President's nomination of Tom Perez as
Secretary of Labor because we have experienced, first hand,
the fruits of Tom's open door policy and his steady approach
to finding solutions that work for the benefit of all.
Sincerely,
M.H. Jim Estepp,
President/CEO.
____
The Maryland Minority
Contractors Association, Inc.,
Baltimore, MD, March 21, 2013.
President Barack Obama,
The White House, Pennsylvania Avenue, Washington, DC.
Dear President Obama, The Maryland Minority Contractors
Association applauds the nomination of Tom Perez as the
United States Secretary of Labor, and encourages a quick
confirmation. While serving as Maryland's labor secretary,
Tom proved to be fair-minded, and always had an open door.
The Maryland Minority Contractors Association is composed
primarily of merit shops, so our member companies have
employees that are not under union collective bargaining
agreements. We found ourselves at the table with Tom on a
range of issues, from workplace safety to apprenticeships to
the proper classification of employees. Although our
perspectives often differed, we always had a seat at the
table, and I can confidently say that our perspective was
always taken into consideration. Tom pursues his role of
protecting workers with vigor, but he always took the
concerns of our members seriously, and, when presented with
sound arguments, was willing to compromise.
We strongly support the nomination of Tom Perez, and we
believe that he will make an excellent Secretary of Labor. He
is a smart, honest person who will serve our county well.
Pless Jones,
President, Maryland Minority Contractors.
____
Whiteman Osterman
& Hanna LLP,
Albany, NY, April 15, 2013.
Re Thomas Perez, Nominee for Secretary of Labor.
Sen. Thomas Harkin (D-IA),
Hart Senate Office Building,
Washington, DC.
Sen. Lamar Alexander (R-TN),
Dirksen Senate Office Building,
Washington, DC.
Dear Senators Harkin and Alexander: I write as an appointee
by former President George H.W. Bush to the United States
Department of Justice in support of Thomas Perez who has been
nominated by President Obama to serve as Secretary of Labor
and urge your favorable consideration of his candidacy.
As the Assistant Attorney General for Civil Rights (1990-
1993), I worked directly with Tom (in fact, I hired him in
1990) on a variety of sensitive matters, including criminal
and voting rights issues. During a number of face-to-face
meetings, I had the opportunity both to review his legal-
based memoranda and to engage in a number of intense debates
as to what should be the Division's final course of action.
As a result of those experiences, I found Tom to be an
excellent lawyer, a dedicated public servant with a deep
commitment to the common good, and a person of legal and
moral integrity; qualities that enable him to recognize the
value of contending parties' positions in order to achieve
workable solutions.
I believe that he will bring those skills and strong
personal qualities to the duties of the Secretary of Labor
and enable him to perform in a manner worthy of your trust.
Thank you for listening to my support for this very special
and patriotic man.
Respectfully yours,
John R. Dunne.
Mr. HARKIN. Indeed, I think Mr. Perez's character--his character--is
exactly what qualifies him for this job--his character.
Tom Perez has dedicated his life to making sure every American has a
fair opportunity to pursue the American dream. At the Maryland
Department of Labor, he revamped the State's adult education system so
more people could successfully train for better jobs and brighter
futures. As the Assistant Attorney General for Civil Rights at the U.S.
Department of Justice, where he is right now, he has been a voice for
the most vulnerable, and he has reinvigorated the enforcement of some
of our most critical civil rights laws. He has helped more Americans
achieve the dream of home ownership through his unprecedented efforts
to prevent residential lending discrimination. He has helped to ensure
that people with disabilities have the choice to live in their own
homes and communities rather than only in institutional settings and to
make sure people with disabilities receive the support and services
they need to make independent living possible. He has stepped up the
Department's efforts to protect the employment rights of servicemembers
so our men and women in uniform can return to their jobs and support
their families after serving their country.
I can tell you that Tom Perez is passionate about these issues. He is
passionate about justice and about fairness, and I believe these are
qualities that Tom Perez learned at the hand of his former employer
here in the Senate, our former committee chairman of the HELP
Committee, Senator Ted Kennedy. But, as he explained in his
confirmation hearing, he also learned from Senator Kennedy ``that
idealism and pragmatism are not mutually exclusive.'' Mr. Perez knows
how to bring people together to make progress on even controversial
issues without burning bridges or making enemies. He knows how to hit
the ground running and quickly and effectively become an agent of real
change. That is exactly the kind of leadership we need at the
Department of Labor. We need his vision, we need his passion, and we
need, yes, his character at the helm of this important agency.
Allow me to state very clearly that while I know there has been
generated controversy--not real controversy but generated controversy--
surrounding Mr. Perez's nomination, there is absolutely nothing that
calls into question his ability to fairly enforce the law as it is
written. There is absolutely nothing that calls into question his
professional integrity or his moral character or his ability to lead
the Department of Labor.
[[Page S3236]]
As I mentioned, Mr. Perez has been as open and aboveboard as he could
possibly be throughout this entire confirmation process. He has met
with any Member personally who requested a meeting. As I said, he
appeared before our committee in a public hearing. He has answered more
than 200 written questions. He has bent over backward to respond to any
and all concerns raised about his work at the Department of Justice.
This administration--President Obama--has also been extraordinarily
accommodating to any Republican colleague, especially to their concerns
about Mr. Perez's involvement in the global resolution of two cases
involving the city of St. Paul, MN--Magner v. St. Paul and Newell v.
St. Paul. The administration has produced thousands of documents
concerning these two cases. They have arranged for the interview of
government employees. They have facilitated almost unprecedented levels
of disclosure to alleviate any concern about his involvement in these
cases.
As chairman of the committee, I have also tried to be as
accommodating as possible, joining in requests for documents that I,
quite frankly, thought were unnecessary but willing to acquire and
postponing the executive session for 2 weeks to provide Members
additional time for consideration.
All this extensive process has revealed is that Mr. Perez acted at
all times ethically and appropriately to advance the interests of the
U.S. Government. For example, with respect to the Magner and Newell
matters, Mr. Perez consulted with both outside ethics and professional
responsibility experts at the Department of Justice, and Mr. Perez
acted within their guidelines at all times. It is no surprise that
outside ethics experts have confirmed that Mr. Perez acted
appropriately in these matters.
I would like to submit again for the Record letters and statements
from several legal ethics experts and experts in the False Claims Act
confirming that Mr. Perez's handling of the Magner and Newell cases was
both ethical and appropriate. And I ask unanimous consent to have
printed in the Record these letters.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Statement of Stephen Gillers, Elihu Root Professor of Law, New York
University School of Law, May 6, 2013
The Joint Staff Report makes many assertions and contains
many factual allegations, which may or may not be contested.
However, only one issue is described as ethical. It is this
issue that the Democratic Staff memo mainly addresses. Stated
most favorably from the Joint Staff perspective, the issue
is:
``Assuming that Assistant Attorney General Tomas E. Perez
(Civil Rights Division) was mainly responsible for reaching
the agreement with the City of St. Paul described below--even
assuming that the agreement would not have happened without
his intervention--but assuming, too, that Assistant Attorney
General Tony West (Civil Division), who had ultimate
authority to decide whether or not to intervene in Newell and
Ellis, chose not to do so after considering their merits, the
United States interest in preserving the disparate impact
test under the Fair Housing Act, and the U.S. interest in
ensuring (so far as possible) that a Supreme Court ruling on
the proper test be based on favorable facts, did Perez
violate any rule of professional conduct (ethics rule)
governing him as a lawyer by encouraging others at DOJ or HUD
(or elsewhere) to refrain from intervention in Newell and
Ellis in exchange for St. Paul's agreement to withdraw the
Magner appeal?''
The Joint Staff Report argues that linking the two cases--
withdrawal of the Magner appeal and U.S. non-intervention in
the two Qui Tam actions, Newell and Ellis (hereafter
Newell)--was unethical. However, it cites no professional
conduct rule, no court decision, no bar ethics opinion, and
no secondary authority that supports this argument. In fact,
no authority supports it.
The duty of lawyers for the United States is no different
from the duty of lawyers generally, namely to pursue the
goals of their client within the bounds of law and ethics.
Clients generally identify those goals, but when the client
is the government, its lawyers often do so, sometimes in
conjunction with agencies, elected officials, or other
representatives of the government who are authorized to speak
for the client.
The United States had interests in Magner and also in
Newell. Qui Tam actions are brought to vindicate interests of
the sovereign, here the U.S. The U.S. interest was to recover
money assuming, of course, that Newell had merit. The U.S.
interest in Magner was to avoid Supreme Court review of a
legal issue in Magner, whose facts were seen as unfavorable
to a decision that would sustain a disparate impact test for
violations of the Fair Housing Act. Perez believed that
preserving the disparate impact test was important to his
client and more important than intervention in Newell.
I assume that Perez persuaded others with decision-making
authority, and in particular West, that withdrawing the
Magner appeal was more important to U.S. interests than
intervention in Newell. I also assume, though it is
contested, that Newell was meritorious and that but for the
agreement with St. Paul, the United States would have
intervened in Newell and perhaps prevailed.
Of course, it is legitimate to argue that Perez, West, and
others made the wrong choice and that pursuing Newell was
more important to U.S. interests than how the Supreme Court
would ultimately resolve the issue in Magner. I have no view
on that question. It is not an ethical question. The question
I can answer is whether Perez could ethically make the
decision he did and which he encouraged others to accept.
Could he ethically decide, when faced with a situation where
only one of two possible choices could be made, and where
each choice offered a benefit to his client, to choose option
A over option B?
The answer is unequivocally yes. Perez was not choosing to
advantage one client over another client. There was no
conflict here between the interests of two clients because
there was only one client. That client, we are assuming, had
two interests--withdrawal of Magner or intervention in
Newell--but under the circumstances, it could pursue only
one. Perez made a choice between these options and encouraged
others to agree. His conduct violates no ethical rule that
governs lawyers. He was acting in what he believed to be the
best interests of his client, which is what lawyers are
required to do.
____
The Vernia Law Firm,
Washington DC, May 6, 2013.
Re Declination by the United States Department of Justice in
United States ex rel. Newell v. City of St. Paul, Civil
No. 09-SC-001177 (D.Minn.).
Hon. Representative Jim Jordan,
Chairman, Subcommittee on Economic Growth, Job Creation &
Regulatory Affairs Committee on Oversight and Government
Reform, Rayburn House Office Building, Washington, DC.
Hon. Representative Matt Cartwright
Ranking Minority Member, Subcommittee on Economic Growth, Job
Creation & Regulatory Affairs, Committee on Oversight and
Government Reform, Rayburn House Office Building,
Washington, DC.
Hon. Representative Trent Franks
Chairman, Subcommittee on the Constitution and Civil Justice,
Committee on the Judiciary, Rayburn House Office
Building, Washington, DC.
Hon. Representative Jerrold Nadler
Ranking Minority Member, Subcommittee on the Constitution and
Civil Justice, Committee on the Judiciary, Rayburn House
Office Building, Washington, DC.
Dear Messrs. Jordan, Cartwright, Franks, and Nadler:
I am writing in advance of the Committee's May 7, 2013
hearing regarding the Department of Justice's declination of
the False Claims Act qui tam cases, United States ex rel.
Newell v. City of St. Paul, Minnesota, Civil No. 09-SC-001177
(D.Minn.), and United States ex rel. Ellis v. City of St.
Paul, Civil No. 11CV-0416 (D.Minn.), to provide my comments
on certain of the conclusions reached in the Joint Staff
Report, DOJ's Quid Pro Quo with St. Paul: How Assistant
Attorney General Thomas Perez Manipulated Justice and Ignored
the Rule of Law (April 15, 2013). I appreciate the
opportunity to address the Committee.
For most of my twenty years practicing law, I have handled
investigations and cases brought under the False Claims Act,
31 Sec. U.S.C. Sec. Sec. 3729, et seq. Early in my career, I
served for eight years as a Trial Attorney in the Fraud
Section of the Commercial Litigation Branch of the Department
of Justice's Civil Division. In that capacity, I handled
dozens of False Claims Act cases involving numerous federal
agencies, including the Department of Housing and Urban
Development (HUD). I left the Fraud Section to be a
prosecutor in the Criminal Division where, in 2005 I received
a John Marshall Award from the Department of Justice, and the
National Exploited Children's Award from the National Center
for Missing and Exploited Children.
That same year, I joined Covington & Burling LLP, initially
focusing on the defense of False Claims Act investigations
and suits. I started my own firm in 2009, in part to have the
flexibility of representing whistleblower clients as well as
defendants. I have filed numerous qui tam suits, and I am now
litigating some of those, including a major case against a
long-term care pharmacy for prescriptions reimbursed by
Medicare Part D. In addition to my work on these cases, I
have made presentations on the False Claims Act and related
statutes, and I write the best-read legal blog on the topic,
www.falseclaimscounsei.com.
I have had no professional involvement in the Newell or
Ellis cases, and have not spoken about them with any of the
persons described in the Joint Staff Report. I have, however,
reviewed that Report, its attached documents, the Democratic
Staff's Report on the same topic (April 14, 2013), and
certain of the documents publicly available on the District
Court for the District of Minnesota's PACER website.
[[Page S3237]]
As one of the few attorneys in private practice with
significant Department of Justice experience who represents
both defendants and whistleblowers, I read these documents
with great interest. With all due respect to the Joint Staff,
however, I feel compelled to write to take issue with certain
of their factual conclusions. I will limit my comments to
those that I feel are critical to assessing the conduct of
Department of Justice officials involved in these cases.
Merits of the Newell case
Because the documents do not treat the Ellis case as a
significant factor in the Department's decision-making, I
have not undertaken to analyze the merits of that matter. Let
me also preface my remarks by stating that I do not intend
this letter to disparage Mr. Newell or his counsel. The
Department of Justice appears to have largely corroborated
his allegations and his qui tam complaint is well-drafted.
I disagree, however, with the Joint Staff's conclusion that
``The Department of Justice Sacrificed a Strong Case Alleging
a Particularly Egregious Example of Fraud.'' See Joint Staff
Report at 37. Instead, I believe that the documents evidence
significant bases for skepticism by Department of Justice
officials.
The Joint Staff's conclusion rests in large part on its
rejection of statements by Department of Justice supervisors
that whether or not to intervene in Newell was a ``close
call,'' and its reliance instead on earlier positions in
support of intervention taken by the trial attorney and
others assigned to the case. But the draft memorandum urging
intervention acknowledges several significant potential
problems with the case--problems that clearly rebut the
conclusion that the case was a ``strong'' one, as the Joint
Staff asserts.
Newell's most prominent weakness was the potential
difficulty in proving that St. Paul's noncompliance with
Section 3 was material to the decision of HUD to make grant
payments. The trial attorney handling the case candidly
admitted that there was litigation risk regarding
materiality:
``The City will argue that even if HUD did not say it
explicitly, HUD's silence over many years is tacit approval.
We will have to admit that the City was failing to comply
with Section 3 in ways that should have been apparent to HUD.
The City did not send its HUD 60002 forms each year. HUD
never objected to this failure. The City will argue that HUD
was so unconcerned with Section 3 compliance that the City's
failure to comply did not affect, or could not have affected
HUD's decision to pay.
``The City will argue that HUD's failure to monitor its
Section 3 compliance was consistent with HUD's general lack
of oversight of Section 3 during the relevant period. The
city has already noted that previous federal administrations
were not concerned with Section 3 (a position with support in
recent HUD comments), and that it is unfair to require a City
to make boilerplate certification each year, ignore the
City's non-compliance year-after-year, and then seek FCA
relief when a new administration comes in that is more
concerned with compliance with Section 3.
Draft Intervention Memo at 7. Although the trial attorney
was optimistic that these arguments could be overcome, there
can be no doubt that significant concerns about proving
materiality of the City's noncompliance were evident long
before the alleged quid pro quo.
Reliability of the Draft Intervention Memorandum's Damages Calculation
I also respectfully disagree with the Joint Staff's
assertion that the Department of Justice's decision to
intervene in the case cost taxpayers a significant
opportunity to recover over $200 million. See Joint Staff
Report at 61. This, too, significantly overstates the
strength of Newell.
The draft intervention memo very briefly describes only one
damages theory, which the trial attorney characterizes as
``aggressive'': that the damages under the False Claims Act
were the entire amount of the Section 3 construction project
grants (which was some unknown fraction of the overall $86
million in HUD grants). That ``aggressive'' theory is an
unsettled area of law, however, and the Joint Staff's
reliance on it in calculating the cost to taxpayers of
declining to intervene in the suit is dubious.
For much of the False Claims Act's 150-year history,
computing damages was relatively straightforward: the fact-
finder calculated the difference between what the Government
actually paid and the value of the goods or services it
received. See United States v. Bornstein, 423 U.S. 303, 316
n. 13 (1976). When a third-party, and not the Government is
the intended recipient of the tangible benefit from the
outlay of federal funds, this approach arguably breaks down.
The traditional ``benefit-of-the-bargain'' approach is
strained further when the false claim relates not to quality
of the goods or services received by the third-party, but to
the fund recipient's satisfaction of some other condition
intended to benefit society more generally. The Newell case
falls into this category: the city receives Section 3 funds
to improve housing, and allegedly false claims relate to its
compliance with a condition unrelated to the quality of that
work.
The Courts have struggled with these issues, and four
Courts of Appeals--for the Second, Fifth, Seventh, and Ninth
Circuits--have chosen to follow the ``aggressive'' approach
the trial attorney described. The District of Columbia and
Third Circuits instead continue to employ the ``benefit-of-
the-bargain'' approach, which might result in a very low
damages calculation in a case such as Newell. I am not aware
of any controlling precedent on this issue in the Eighth
Circuit, in whose jurisdiction Newell was filed.
Given the unsettled nature of this area and the imprecision
in the Draft Intervention Memorandum's damages figure, $86
million represented only a theoretical upper limit on the
Government's damages for St. Paul's alleged violations. The
Department of Justice trial attorney acknowledged the
limitations of this approach, writing in the Draft
Intervention Memorandum: ``We acknowledge this is an
aggressive position, and that some less aggressive approach
may be needed for trial. To date, however, we have not yet
determined an alternative approach.'' Id. at 5.
Even if the Department of Justice had intervened and
secured a judgment against the City on False Claims Act
liability, moreover, there is a significant risk that the
District Court or the Court of Appeals for the Eighth Circuit
would, under the facts of this case (including HUD's apparent
disregard of Section 3 enforcement, and the defendant's
status as a taxpayer-funded entity) reject the ``aggressive''
approach of seeking to recoup all Section 3 grants. Such a
decision would hinder the Government and relators in future
False Claims Act cases in the Eighth Circuit's jurisdiction.
The Risk of Newell's Dismissal on Public Disclosure Grounds
The Joint Staff Report also criticizes the Department's
declination on the grounds that it exposed Mr. Newell to
dismissal of his qui tam suit on grounds that the Court
lacked jurisdiction under the False Claims Act's public
disclosure bar. See Joint Staff Report at 58; 31 U.S.C.
Sec. 3730(e)(4)(A) (2010). I respectfully disagree with the
premise of this criticism, which is that the Department of
Justice does, or should, evaluate the potential success of a
motion to dismiss on public disclosure grounds.
In my experience, both at the Department and in private
practice, the Government does not typically investigate the
common grounds on which declined qui tam suits founder:
public disclosure and particularity under Fed. R. Civ. P.
9(b). Although I, as a whistleblower attorney, would prefer
that the Department investigate these possible grounds for
dismissal prior to deciding whether to decline or intervene a
case, there are sound reasons for not doing so: the
Department of Justice has inadequate resources to investigate
the merits of the fraud allegations; routinely investigating
the public disclosures that might lead to the dismissal of a
declined qui tam would ultimately detract from the
Department's ability to carry out the False Claims Act's core
mission of detecting and remedying fraud.
Certainly no one has done more than Senator Grassley to
encourage whistleblowers to assist the Government in
uprooting fraud. The recent amendment to the public
disclosure bar demonstrates well his interest in improving
enforcement of the Act. I nevertheless believe that Congress
could best improve whistleblowers' involvement in fraud
enforcement by addressing more significant problems besetting
them (such as the application of Fed. R. Civ, P. 9(b) to
False Claims Act complaints, which is by far the most common
grounds for dismissal of declined qui tam cases).
In conclusion, after reviewing the publicly available
materials on the Department of Justice's decision to decline
to intervene in United States ex rel. Newell v. City of St.
Paul, I believe that Department officials acted well within
the scope of their discretion in declining to intervene in
that case. I must respectfully disagree with the contrary
conclusions the Joint Staff reached in its Report. I
appreciate your consideration.
Truly yours,
Benjamin J. Vernia.
____
Cohen Milstein
Sellers & Toll PLLC,
Philadelphia, PA, May 6, 2013.
The Hon. Jim Jordan,
Chairman, Subcommittee on Economic Growth, Job Creation &
Regulatory Affairs Committee on Oversight and Government
Reform, Rayburn House Office Building, Washington, DC.
The Hon. Matt Cartwright,
Ranking Minority Member, Subcommittee on Economic Growth, Job
Creation & Regulatory Affairs, Committee on Oversight and
Government Reform, Rayburn House Office Building,
Washington, D.C.
The Hon. Trent Franks,
Chairman, Subcommittee on the Constitution and Civil Justice,
Committee on the Judiciary, Rayburn House Office
Building, Washington, DC.
The Hon. Jerrold Nadler,
Ranking Minority Member, Subcommittee on the Constitution and
Civil Justice, Committee on the Judiciary, Rayburn House
Office Building, Washington, DC.
Dear Chairmen Jordan and Franks and Ranking Members
Cartwright and Nadler: The undersigned are partners and co-
chairs of the Whistleblower/False Claims Act Practice Group
at Cohen Milstein Sellers & Toll, PLLC. For over ten years,
we have assiduously represented whistleblowers in legal
actions brought pursuant the federal False Claims Act, 31
U.S.C. Sec. Sec. 3729, et seq., and its state counterparts in
federal and state courts throughout the country. We regularly
engage in the evaluation of the viability of
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potential claims under those statutes and work with relators
to combat fraud against the government. We have been asked by
committee staff to offer our opinion regarding the effect of
the Department of Justice's decision to decline to intervene
in the qui tam cases of United States ex rel. Newell v. City
of St. Paul and United States ex rel. Ellis v. City of
Minneapolis, et al. What follows is that opinion.
On May 19, 2009, Relator Frederick Newell filed his qui tam
action under the federal False Claims Act against the City of
St. Paul in the United States District Court for the District
of Minnesota. On February 9, 2012, the Department of Justice
advised the court that it declined to intervene in the case.
On March 12, 2012, Mr. Newell filed an amended complaint in
response to which the City of St. Paul filed a motion to
dismiss based, in part, on the Public Disclosure Bar.
At the time that Mr. Newell filed his initial complaint in
his action, the False Claims Act provided a jurisdictional
bar to a relator's qui tam action commonly referred to as the
Public Disclosure Bar. Subsequently amended and rendered a
non-jurisdictional basis for dismissal in the Patient
Protection and Affordable Care Act of 2010, this section, 31
U.S.C. Sec. 3730(e)(4), provided as follows:
``(A) No court shall have jurisdiction over an action under
this section based upon the public disclosure of allegations
or transactions in a criminal, civil, or administrative
hearing, in a congressional, administrative, or Government
Accounting Office report, hearing, audit, or investigation,
or from the news media, unless the Attorney General or the
person bringing the action is an original source of the
information.
```(B) For purposes of this paragraph, `original source'
means an individual who has direct and independent knowledge
of the information on which the allegations are based and has
voluntarily provided the information to the Government before
filing an action under this section which is based on the
information.''
On July 20, 2012, the court granted St. Paul's motion to
dismiss, finding that it lacked subject matter jurisdiction
over Mr. Newell's action because of manifold public
disclosures of his allegations predating the filing of his
complaint and because he was not an original source of the
information on which the allegations were based. Mr. Newell
has appealed the dismissal of his case and his appeal is
currently pending before the United States Court of Appeals
for the 8th Circuit.
On February 18, 2011, Relators Andrew Ellis, Harriet Ellis
and Michael Blodgett filed their qui tam action under the
federal False Claims Act against, among others, the Cities of
Minneapolis and St. Paul in the United States District Court
for the District of Minnesota. On June 18, 2012, the
Department of Justice filed a Notice of Election to Decline
Intervention. The defendants in that case subsequently filed
motions to dismiss the Relators' complaints, which the court
denied without prejudice. That case remains pending as of the
date of this letter.
The effect of the government's decision not to intervene in
these two qui tam cases is central to the issues presently
being considered by your subcommittees. Indeed, it is
important to understand that, contrary to conclusory
statements set forth in the Congressional Committees' Joint
Staff Report of April 15, 2013, the decision by the
Department of Justice not to intervene in Mr. Newell's case
did not allow the City of St. Paul to move for dismissal of
the case ``on grounds that would have otherwise been
unavailable if the Department had intervened.'' (Joint Staff
Report, p. 58). In fact, the same motion would have been
available to the City whether or not the government had
intervened in the case. In Rockwell Intl. Corp. v. United
States ex rel. Stone, 549 U.S. 457 (2007), the United States
Supreme Court rejected the argument that government
intervention provides jurisdiction to a Relator who is not an
original source. Even had the government intervened, Mr.
Newell would have been vulnerable to the exact same public
disclosure jurisdictional bar.
Likewise, in declining to intervene in Mr. Newell's qui tam
action, the Department of Justice did not ``give up the
opportunity to recover as much as $200 million.'' (Joint
Staff Report, p. 4). A declination of intervention has never
been recognized by any court as tantamount to the termination
of the government's right to pursue the claim asserted in the
action. In fact, the federal False Claims Act specifically
provides that if the government initially elects not to
proceed with the action, it may intervene at a later date
upon a showing of good cause. 31 U.S.C. Sec. 3730(c)(3). The
government can decline to intervene in one action and, after
that complaint is dismissed, decide to intervene in a
subsequently filed action. Or the government can institute
and pursue its own action under the False Claims Act.
Moreover, the dismissal of Mr. Newell's complaint does not
affect the government's ability to pursue the same claims
itself. Thus, in declining to intervene in the Newell and
Ellis actions, the government is not foreclosed from pursuing
the claims that Mr. Newell could no longer himself pursue or
to intervene at a later date in the Ellis action, nor is it
foreclosed from pursuing remedies that might be available
under any other statutory or regulatory provisions. In fact,
in declining to intervene in these actions, it ``gave up'' no
rights or opportunities whatsoever.
We trust that the foregoing sheds light on the effect of
the government's decision not to intervene in the Newell and
Ellis qui tam actions and that this letter is helpful to the
work of your committees.
Respectfully submitted,
Gary L. Azorsky.
Jeanne A. Markey.
Mr. HARKIN. As Professor Stephen Gillers, who has taught legal ethics
for more than 30 years at New York University School of Law, wrote in
one of these letters, Mr. Perez's actions in these cases ``violate[d]
no ethical rule that governs lawyers. He was acting in what he believed
to be the best interests of his client, which is what lawyers are
required to do.''
In short, Mr. Perez did his job at DOJ, and he did it well. When it
comes down to it, I think the fact that he did his job well is probably
the source of much of the generated controversy surrounding his
nomination. Maybe some people just don't like Tom Perez precisely
because he is passionate about enforcing our civil rights laws and has
vigorously pursued such enforcement in his current position.
I take great issue with the minority leader's suggestion today that
Mr. Perez doesn't follow the law or believe that it applies to him. I
would respectfully suggest that the Republican leader needs to check
his facts. To the contrary, Tom Perez has had a remarkable career as a
result of a determination to make the promise of our civil rights
statutes a reality for everyday Americans. Maybe these are some of the
same laws that some colleagues sometimes would like to forget are on
the books, but these laws matter. Voting rights matter. Fair housing
rights matter. The rights of people with disabilities matter. These
laws are part of what makes our country great. I am incredibly proud of
the work Mr. Perez has done at the Department of Justice to make those
rights a reality after years of neglect. He should be applauded, not
vilified, for the service he has provided to this country.
Mr. President, it almost seems that when Mr. Perez's name came up,
there was a controversy generated about these cases in St. Paul
involving whistleblower types and that somehow he acted inappropriately
and denied the government the ability to get back a couple hundred
million dollars or so. That seemed to be a belief some of my colleagues
on the other side had. So we looked into it. We went through all the
documents, all the e-mails, and thousands of pages, with ethics lawyers
both in the government and out. What we came up with was that Mr. Perez
acted ethically and appropriately at all times. There is no ``there''
there. So the facts belie the belief, but it seems that the belief
carries on and that somehow the belief trumps the facts.
Well, if some of my colleagues want to believe the worst about Tom
Perez, they can believe that, but they have no facts to back it up. It
is an unfounded belief. Is that what is going to guide this body in
approving nominations for this President or any President--that if I
believe something and I can get maybe some of my colleagues to join in
and believe it, that is enough? That is sufficient to vilify a nominee,
to try to tear him down?
What about the facts? Don't facts matter? Doesn't the record matter?
Of course it does. And the facts, as proven time and time again, are
that Mr. Perez acted ethically and appropriately at the Department of
Justice at all times and especially in the two cases--Magner v. St.
Paul and Newell v. St. Paul. That has been clearly brought forth, that
he acted appropriately and ethically.
So I say to my colleagues on the other side, believe what you want,
but that belief, mistaken as it is, should not be used to tear down a
good person, to vilify a good person, to cast this person in a light
which is totally false.
So, yes, Mr. President, there was an objection to our meeting today
under this obscure rule of the Senate, but we have rescheduled the
meeting for 1 week hence. So in 1 week we will meet again, and we will
vote to report out the nomination of Tom Perez, and then we will come
to the floor. Again, I hope that it won't be filibustered by my
Republican colleagues but that we will be able to vote up or down on
Mr. Perez based not upon what someone believes but what the facts are,
what his record is, what his record has been both in local government,
State government, and at the Department of Justice.
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When you look at that record, it is an exemplary record of unstinting
public service in the best interests of the civil rights and equal
rights of our country. That is why, with his background, his
experience, and his dedication to fairness and justice, the fact that
he has actually worked in the Senate on the HELP Committee--the
committee that has jurisdiction over the Department of Labor--gives
tremendous weight to his background and insight into how to be a truly
great Secretary of Labor.
So we will vote next week. I hope there are not other kinds of
roadblocks--unfounded roadblocks--thrown into the path of his
confirmation. We will do everything we can to make sure this good
person takes his rightful place as our next Secretary of Labor.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
The PRESIDING OFFICER. The Senator from Utah.
Mr. LEE. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
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