Grassley Floor Statement on the Nomination of Tom Perez

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Floor Statement of Senator Chuck Grassley of Iowa

Ranking Member, Senate Judiciary Committee

The Nomination of Tom Perez to be Secretary of Labor

Wednesday, July 17, 2013

    Mr. President, I will take a few minutes to talk about the President's nominee for Secretary of Labor, Tom Perez.  I have already spoken about Mr. Perez over the last few weeks.  I will not repeat everything I said, but it is important for my colleagues to understand the basis of my opposition.  We have had a lot of debate around here over the last few days about what grounds are appropriate to oppose an executive branch nominee.  Many of my colleagues have suggested that Senators should not vote against such a nominee based on disagreement over policy.  That may or may not be the appropriate view, but I am not going to get into that debate today. 

    I am quite sure I would disagree with Mr. Perez on a host of policy issues, but I wish to make clear to my colleagues those policy differences are not the reason I am vigorously opposed to this nominee.  I am opposed to Mr. Perez because the record he has established of government service demonstrates that he is willing to use the levers of government power to manipulate the law in order to advance a political agenda.

    Several of my colleagues cited examples of his track record in this regard, but in my view perhaps the most alarming example of Mr. Perez's willingness to manipulate the rule of law is his involvement in the quid pro quo between the city of St. Paul and the Department of Justice.  In this deal that the Department of Justice cut with the city of St. Paul, the Department agreed not to join two False Claims Act cases in exchange for the city of St. Paul withdrawing its case before the Supreme Court in a case called Magner v. Gallagher. 

    Mr. Perez's actions in this case are extremely troubling for a number of reasons.  At this point, no one disputes the fact that Mr. Perez actually orchestrated this entire arrangement.  He manipulated the Supreme Court docket so that his favored legal theory, called disparate impact theory, would evade review by the high court.  In the process, Mr. Perez left a whistleblower twisting in the wind.  Those are the facts and even Mr. Perez doesn't dispute them.

    The fact that Mr. Perez struck a deal that potentially squandered up to $200 million taxpayer dollars in order to preserve a disparate impact theory that he favored is, of course, extremely troubling in and of itself.  But in addition to that underlying quid pro quo, the evidence uncovered in my investigation revealed Mr. Perez sought to cover up the facts that the exchange ever took place.        

    Finally, and let me emphasize that this should concern all of my colleagues, when Mr. Perez testified under oath about the case, both to congressional investigators and during confirmation hearings, in those two instances, Mr. Perez told a different story.  The fact is that the story Mr. Perez told is simply not supported by the evidence.


    Let me begin by reviewing briefly the underlying quid pro quo.  In the fall of 2011, the Department of Justice was poised to join a False Claims Act lawsuit against the city of St. Paul.  That is where the $200 million comes in.  That is what was expected to be recovered.  The career lawyers in the U.S. Attorney’s Office in Minnesota were recommending that the Department of Justice join the case.  The career lawyers in the Civil Division of the Department of Justice were recommending the Department join the case.  And the career lawyers in the Department of Housing and Urban Development were recommending that Justice join the case.  At that point, all of the relevant components of government believed this case was a very good case.  They considered the case on the merits, and they supported moving forward, or as one of the line attorneys wrote in an e-mail in October, 2011:  "Looks like everyone is on board."  But of course this was all before Mr. Perez got involved.


    At about the same time, the Supreme Court agreed to hear the case called Magner v. Gallagher. 


    In Magner, the city of St. Paul was challenging the use of the disparate impact theory under the Fair Housing Act.  The disparate impact theory is a mechanism Mr. Perez and the Civil Rights Division were using in lawsuits against banks for their lending practices.  For instance, during this time period Mr. Perez and the Justice Department were suing Countrywide for its lending practices based upon disparate impact analysis.  In fact, in December 2011 the Department announced it reached a $355 million settlement with Countrywide.  Again, in July 2012 the Department of Justice announced a $175 million settlement with Wells Fargo addressing fair lending claims based upon that same disparate impact analysis.  Of course, there are a string of additional examples, but I don't need to recite them here. 


    What is clear is that if that theory were undermined by the Supreme Court, it would likely spell trouble for Mr. Perez's lawsuits against the banks.  Mr. Perez approached the lawyers handling the Magner case, and, quite simply, he cut a deal.  The Department of Justice agreed not to join two False Claims Act cases in exchange for the City of St.  Paul withdrawing Magner from the Supreme Court.  Now we have an interference in the agenda of the Supreme Court at the same time that a deal is going to cut the taxpayers out of winning back $200 million under the False Claims Act. 


    In early February 2012 Mr. Perez flew to St. Paul, and he flew there solely to finalize the deal.  The next week the Justice Department declined to join the first False Claims Act, called the Newell case.  The next day the city of St. Paul kept their end of the bargain and withdrew the Magner case from the Supreme Court. 


    There are a couple of aspects of this deal that I wish to emphasize for my colleagues.  First, as I mentioned, the evidence makes clear that Mr. Perez took steps to cover up the fact he had bartered away the False Claims Act cases and the $200 million. 


    On January 10, 2012, Mr. Perez called the line attorney in the U.S. Attorney's Office regarding the memo in the Newell case.  Newell was the case that these same career attorneys I referred to and quoted previously were strongly recommending the United States join before Mr. Perez got involved.  Mr. Perez called the line attorney and instructed him not to discuss the Magner case in the memo that he prepared outlining the reasons for the decisions not to join the case.  Here is what Mr. Perez said on that call: 

“Hey, Greg.  This is Tom Perez calling you at -- excuse me, calling you at 9 o'clock on Tuesday.  I got your message.  The main thing I want to ask you, I spoke to some folks in the Civil Division yesterday and wanted to make sure that the declination memo that you sent to the Civil Division -- and I am sure it probably already does this -- but it doesn't make any mention of the Magner case.  It is just a memo on the merits of the two cases that are under review in the qui tam context.” 


    It is pretty clear they didn't want anything in writing that led people to believe there was any deal being made.


    After that telephone message was left, approximately 1 hour later Mr. Perez sent Mr. Brooker a follow-up e-mail, writing:

“I left a detailed voicemail.  Call me if you can after you have a chance to review [the] voicemail.”


    Several hours later Mr. Perez sent another follow-up e-mail, writing:


“Were you able to listen to my message?”

    Mr. Perez's voicemail was quite clear and obvious.  It told Mr. Brooker to "make sure that the declination memo...doesn't make any mention of the Magner case.  It is just a memo on the merits of the two cases."  It is so very clear.  In fact, it couldn't be more clear that this was an effort -- that there was no paper trail that there was ever any deal made. 

    Yet, when congressional investigators asked Mr. Perez why he left the voicemail, he told an entirely different story.  Here is what he told investigators:

“What I meant to communicate was, it is time to bring this to closure, and if the only issue that is standing in the way is how you talk about Magner, then don't talk about it.”


    Anyone who actually listens to the voicemail knows this is plainly not what he said in that voicemail.  He didn't say anything about being concerned with the delay.  He said:  Make sure you don't mention Magner.  It is just a memo on the merits.  His intent was crystal clear. 


    Mr. Perez also testified that Mr. Brooker called him back the next day and refused to omit the discussion of Magner.  Let's applaud that civil servant because he chose not to play that game.  According to Mr. Perez, he told Mr. Brooker during this call to follow the normal process.  Again, this story is not supported by the evidence. 


    One month later, after Mr. Perez flew to Minnesota to personally seal the deal with the city, a line attorney in the Civil Division e-mailed his superior to outline the "additional facts" about the deal. 


    Before I begin the quote, I want to give the definition of "USA-MN," which stands for "U.S. Attorney, Minnesota."


    Point 6 reads as follows:

“USA-MN considers it non-negotiable that its office will include a discussion of the Supreme Court case and the policy issues in its declination memo.”


    If Mr. Perez's story were true and the issue was resolved on January 11, why 1 month later would the U.S. Attorney's Office need to emphatically state that it would not hide the fact that the exchange took place? 


    As I just mentioned, Mr. Perez flew to Minneapolis to finalize the deal on February 3.  You would think, wouldn't you, that a deal of this magnitude would be written down so the parties understood exactly what each side agreed to.

    But was this agreement written down?  No, it wasn't.  After Mr. Perez finalized the deal, the career attorneys asked if there was going to be a written agreement.  What was Mr. Perez's response? 


    He said: 


    "No, just oral discussions; word was your bond."


    So let me just review.  At this point Mr. Perez had just orchestrated a deal where the United States declined to join a case worth up to $200 million of taxpayers' money in exchange for the City of St. Paul withdrawing a case from the Supreme Court.  When the career lawyers asked if this deal will be written down, he said: 


    "No...[your] word was your bond."


    Of course, the reason you make agreements like this in writing is so that there is no disagreement down the road about what the parties agreed to.  As it turns out, there was, in fact, a disagreement about the terms of this unwritten deal.


    The lawyer for the city, Mr. Lillehaug, told congressional investigators that on January 9, approximately 1 month before the deal was finalized, Mr. Perez had assured him that "HUD would be helpful" if the Newell case proceeded after the Department of Justice declined to intervene.  Mr. Lillehaug also told investigators that on February 4, the day after they finalized the deal, Mr. Perez told him that HUD had begun assembling information to assist the city in a motion to dismiss the Newell complaint on "original source" grounds.  According to Mr. Lillehaug, this assistance disappeared after the lawyers in the Civil Division learned of it. 


    Why is that significant?  Mr. Perez represents the United States.  He represents the American people.  Mr. Newell, the whistleblower, is bringing a case on behalf of the United States and indirectly the people.  Mr. Perez is talking to the lawyers on the other side, and he tells the people, in essence:  After the United States declines to join the case, we will give you information to help you defeat Mr. Newell, who is bringing the case on behalf of the United States. 


    Let me say that a different way.  In effect, Mr. Perez is offering to give the other side information to help defeat his own client.  Is that the way you represent the American people?  Mr. Perez was asked about this under oath.  Mr. Perez told congressional investigators, "No, I don't recall ever suggesting that."


    So on the one hand, we have Mr. Lillehaug, who says Mr. Perez made this offer first in January and then again on February 4 but the assistance disappeared after the lawyers in the Civil Division caught wind of it.  On the other hand, it was Mr. Perez who testified under oath:  "I don't recall" ever making such an offer.  Whom should we believe?  The documents support Mr. Lillehaug's version of the event. 


    On February 7, a line attorney sent an e-mail to the director of the Civil Fraud Section and relayed a conversation a line attorney in Minnesota had with Mr. Lillehaug.  The line attorney wrote that Mr. Lillehaug stated that there were two additional items that were part of the deal.  One of the two items was this:  HUD will provide material to the city in support of their motion to dismiss on original source grounds.


    Internal e-mails show that when the career lawyers learned of this promise, they strongly disagreed with it, and they conveyed their concern to Tony West, head of the Civil Division.  During his transcribed interviews, Mr. West testified that it would have been "inappropriate" to provide this material outside of the normal discovery channels.  Mr. West said: 

“I just know that that wasn't going to happen, and it didn't happen.”


    In other words, when the lawyers at the Civil Division learned of this offer, they shut it down. 


    Again, why is this important?  It is important because it demonstrates that the documentary evidence shows the events transpired exactly as Mr. Lillehaug said they did. 


    Mr. Perez offered to provide the other side with information that would help them defeat Mr. Newell in this case on behalf of the United States. 


    In my opinion, this is simply stunning.  Mr. Perez represents the United States.  Any lawyer would say it is highly inappropriate to offer to help the other side defeat their own client. 


    This brings me to my final two points that I wish to highlight for my colleagues.  Even though the Department traded away Mr. Newell's case and $200 million, Mr. Perez has defended his actions, in part by claiming that Mr. Newell still had his "day in court."  What Mr. Perez omits from his story is that Mr. Newell's case was dismissed precisely because the United States would not continue to be a party and would not be a party.


    After the United States declined to join the case, the judge dismissed Mr. Newell's case based upon the "public disclosure bar," finding that he was not the original source of information to the government.


    I will remind my colleagues, we amended the False Claims Act several years ago precisely to prevent an outcome such as this.  Specifically, the amendments made clear that the Justice Department can contest the "original source" dismissal even if it fails to intervene, as it did in this case.


    So the Department didn't merely decline to intervene, which is bad enough, but, in fact, it affirmatively chose to leave Mr. Newell all alone in this case -- and, of course, that was the whole point.  That is why it was so important for the city of St. Paul to make sure the United States did not join the case.  That is why the city was willing to trade away a strong case before the Supreme Court, and when the Newell case didn't go forward, they cut the taxpayers out of $200 million.  The city knew if the United States joined the action the case would almost certainly go forward.  Conversely, the city knew if the United States did not join the case and chose not to contest the original source, it would likely get dismissed.


    The Department traded away a case worth millions of taxpayers' dollars.  They did it precisely because of the impact the decision would have on the litigation.  They knew as a result of their decision, the whole whistleblower case would get dismissed based upon "original source" grounds since the Department didn't contest it.  Not only that, Mr. Perez went so far as to offer to provide documents to the other side that would help them defeat Mr. Newell in his case on behalf of Mr. Perez's client, the United States.


    How would a person like to have a lawyer such as Mr. Perez defending them in some death penalty case?  Yet when the Congress started asking questions, they had the guts to say:  "We didn't do anything improper because Mr. Newell still had his day in court."  Well, Mr. Newell didn't have his day in court because the success of that $200 million case was dependent upon the United States staying in it.


    Now, this brings me to my last point on the substance of this matter, and that has to do with the strength of the case.  Throughout our investigation, the Department has tried to defend Mr. Perez's action by claiming the case was marginal and weak.  Once again, however, the documents tell a far different story.


    Before Mr. Perez got involved, the career lawyers at the Department wrote a memo recommending intervention in the case.  In that memo, they described St. Paul's actions as "a particularly egregious example of false certifications." 


    In fact, the career lawyers in Minnesota felt so strongly about the case they took the unusual step of flying to Washington, DC, to meet with officials in the Department of Housing and Urban Development.  The Department of Housing and Urban Development, of course, agreed the United States should intervene in this false claims case.  But, of course, that was all before Mr. Perez got involved.


    The documents make clear that career lawyers considered it a strong case, but the Department has claimed that Mike Hertz -- the Department's expert on the False Claims Act -- considered it a weak case.  In fact, during his confirmation hearing, Mr. Perez testified before my colleagues on the Senate HELP Committee that Mr. Hertz "had a very immediate and visceral reaction that it was a weak case."  


    Once again, the documents tell a much different story than was told to Members of the Senate. Mr. Hertz knew about the case in November of 2011. Two months later, a Department official took notes of a meeting where the quid pro quo was discussed.  The official wrote down Mr. Hertz's reaction.  She wrote:         

“Mike -- odd -- Looks like buying off St. Paul.  Should be whether there are legit reasons to decline as to past practice.”  


    The next day, the same official e-mailed the associate attorney general and said: 


    Mike Hertz brought up the St. Paul disparate impact case in which the Solicitor General just filed an amicus brief in the Supreme Court.  He's concerned about the recommendation that we decline to intervene in two qui tam cases against St. Paul. 

    These documents appear to show that Mr. Hertz's primary concern was not the strength of the case, as Mr. Perez led my Senate colleagues to believe. Mr. Hertz was concerned the quid pro quo Mr. Perez ultimately arranged was improper.  Again, in his words, it "looks like buying off St. Paul."  Yet, Mr. Perez led my colleagues on the HELP Committee to believe that Mr. Hertz believed it was a bad case on the merits.

    Let me make one final point regarding process and why it is premature to even be having this debate.

    As of today, when we vote on Mr. Perez's nomination, we will be voting on a nominee who, to date, has not complied with a congressional subpoena compelling him to turn over certain documents to Congress.  I am referring to the fact that the House Committee on Oversight and Government Reform subpoenaed e-mails from Mr. Perez. 


    During the course of our investigation, we learned that Mr. Perez was routinely using his private e-mail account to conduct government business, including business related to the quid pro quo.  In fact, the Department of Justice admitted that Mr. Perez had used his private e-mail account approximately 1,200 times to conduct government business.  After Mr. Perez refused to turn those documents over voluntarily, then the House oversight committee was forced to issue a subpoena.  Yet, today, Mr. Perez has refused to comply with the subpoena.


    Here we have a person in the Justice Department doing all of these bad things.  People want him to be Secretary of Labor, and we are supposed to confirm somebody who will not respond to a subpoena for information to which Congress is constitutionally entitled.  We have people come before Congress who say, yes, they will respond to letters from Congress; they will come up and testify; they are going to cooperate in the spirit of checks and balances, and then we have somebody before the Senate who will not even respond to a subpoena.


    So I find it quite troubling that this body would take this step and move forward with a nomination when the nominee simply refuses to comply with an outstanding subpoena.  Can any of my colleagues recall an instance in the past when we were asked to confirm a nominee who had flatly refused to comply with a congressional subpoena?  Why would we want somebody in the Cabinet thumbing their nose at the elected representatives of the people of this country who have the constitutional responsibility of checks and balances to make sure the laws are faithfully executed?  That is what they take an oath to do.  It is quite extraordinary and should concern all of my colleagues, not just Republicans.


    My colleagues are well aware of how I feel about the Whistleblower Protection Act, and my colleagues know how I feel about protecting whistleblowers who have the courage to step forward, often at great risk to their careers.  But this is about much more than the whistleblower who was left dangling by Mr. Perez.  This is about the fact that Mr. Perez manipulated the rule of law in order to get a case removed from the Supreme Court docket.  And this is about the fact that when Congress started asking questions about this case, and when Mr. Perez was called upon to offer his testimony under oath, he chose to tell a different story. 


    The unavoidable conclusion is that the story he told is not supported by the facts.  This is also about the fact that we are about to confirm a nominee who, even as of today, is still thumbing his nose at Congress by refusing to comply with a congressional subpoena.


    I began by saying that although I disagree with Mr. Perez on a host of policy issues, those disagreements are not the primary reason my colleagues should reject this nomination.  We should reject this nomination because Mr. Perez manipulated the levers of power available to few people in order to save a legal theory from Supreme Court review.  Perhaps more importantly, when Mr. Perez was called upon to answer questions about his actions under oath, I do not believe he gave us a straight story. Finally, we should reject this nomination because Mr. Perez failed -- and refuses still -- to comply with a congressional subpoena.


    For these reasons, I strongly oppose the nomination, and I urge my colleagues to do the same.


    Mr. President, I have completed my statement and I yield the floor.