The Justice Department’s Antitrust Division and the Federal Trade Commission reached an agreement Wednesday with China’s three antitrust agencies that promises greater cooperation in reviewing mergers, exchanging information and commenting on proposed regulation.
Assistant Attorney General Christine Varney and FTC Chairman Jon Leibowitz signed the antitrust memorandum with three other Chinese antitrust authorities: Goa Hucheng, China International Trade Representative and vice minister of the Ministry of Commerce, Peng Sen, vice chairman of the National Development and Reform Commission and Zhong Youping, vice minister of the State Administration for Industry and Commerce.
“Our cooperative relationship with the Ministry of Commerce, the National Development and Reform Commission and the State Administration for Industry and Commerce has steadily strengthened,” Varney said in a statement. “This memorandum of understanding is a reflection of that relationship, and, by establishing a framework for enhanced cooperation among our agencies, the MOU also allows us to move to the next chapter in our collaboration on competition law and policy matters.”
The agreement resembles a two-decades old agreement between the U.S. and European antitrust enforcers. The agencies have also signed a similar agreement with Russia in 2009 and are drafting another with Indian authorities.
China’s antitrust law came into effect just three years ago in August 2008. And many in the business community have voiced concerns that, as emerging economies establish antitrust regimes, foreign regulators could use competition laws to promote their own trade interests.
In a speech at the U.S. Chamber of Commerce last week, Varney said that these agreements would help assuage those concerns.
“An MOU among competition agencies will not cure this problem, but it is a first step,” Varney said Friday. “These are our stepping stones to get us further along the line of a universal commitment to procedural fairness, due process and transparency.”
The agreement does not alter existing laws in either country.
The Justice Department is preparing a lawsuit against Wells Fargo for allegedly discriminatory lending practices that steered African American borrowers toward expensive, subprime loans during the housing bubble, the Huffington Post reported.
Wells Fargo, the nation’s largest home mortgage lender and the fourth-largest U.S. bank by assets, is currently seeking to settle the accusations in pre-lawsuit negotiations with the department, people with direct knowledge of the probe told the Huffington Post.
The Civil Rights Division’s Fair Lending Unit reportedly will handle the suit.
The bank also faces separate public actions involving similar allegations from the Federal Reserve and the city of Baltimore.
The Fed said last week that more than 10,000 borrowers were directed toward subprime mortgage loans or had loan documents falsified by banking personnel. Wells Fargo agreed to pay $85 million to settle civil charges and did not admit wrongdoing.
In the Baltimore case, the bank faces accusations of targeting black borrowers in a practice commonly called “reverse redlining.” The city alleges that the bank offered loans knowing borrowers would eventually default. But instead of shouldering the cost, the bank sold those loans to investors.
The False Claims Act is one of the Justice Department’s primary tools in combating fraud against the government. But critics say many FCA investigations are routinely dragging on for years, postponing the recovery of taxpayer funds and delaying the punishment of fraudulent companies.
Federal judges have expressed frustration with the long wait times associated with FCA investigations; Congress has legislation pending to speed up the investigatory process, and even businesses accused of fraud are starting to want cases resolved more quickly. The DOJ has indicated that it too would like to resolve cases in a more efficient way, but serious obstacles remain that prevent easy solutions to the problem of seemingly indefinite FCA investigations.
The FCA has led to more than $20 billion in recovered funds since it began to be used widely in fraud cases in the mid-1980’s, and particularly in health care fraud cases more recently. The act includes tough provisions that punish fraudulent companies with fines and exclusion from dealing with government programs, as well as possible exclusion for individuals within fraudulent companies.
But the time it takes for prosecutors to investigate FCA cases and resolve them through settlements or judgments is generating frustration. In whistleblower qui tam cases, which make up the majority of new FCA cases every year, the whistleblower first files suit against the alleged fraudulent group and alerts the government to the lawsuit. Then the DOJ investigates whether to intervene in the case while keeping the case sealed.
In cases that reached a DOJ election decision during the second half of the 1980’s, DOJ lawyers took roughly six months on average to decide whether to intervene. More recently, the average investigation time has ballooned to around two years, according to data collected by David Freeman Engstrom, a law professor at Stanford Law School. And that is just the time from the case being filed until the investigation step is complete. The actual in-court procedure can take an average of 18 more months to resolve.
And there are many cases to resolve: as of January of this year, there were 1,341 FCA qui tam cases alone which the DOJ is investigating under seal– almost two-thirds of which involved health care fraud, the DOJ and the Department of Health and Human Services said in a letter to Sen. Charles Grassley (R-Iowa), who has raised the issue of lingering FCA cases in the past. In the last five years, according to the statistics in the letter, the DOJ resolved 541 qui tam cases by settlement or judgment and 1,244 were declined or dismissed.
Two notable FCA cases took more than a decade to investigate and litigate, and another one that began in the 1990’s and lingered into the next decade was dismissed after a federal judge ruled that it violated the statute of limitations.
That has not been the only action by courts against long FCA cases. Federal judges have long been frustrated with and are increasingly trying to cut cases short, said Laurence Freedman, a partner at Patton Boggs LLP who represents health care industry clients accused of fraud and served as assistant director of the DOJ’s Civil Fraud Section for seven years. The DOJ often asks the court for lengthy extensions to allow more time to investigate, and this is where Freedman said judges have been less flexible in recent years.
In the DOJ’s investigation of the national pain medication monitoring company Millennium Laboratories, for example, a federal district judge denied the government’s request for an extension after 18 months of investigating and so the suit was unsealed before the government made up its mind. The government is still investigating that case.
In Boston, judges are ordering health-care related FCA cases to be unsealed amid a deep backlog.
Congress has also taken notice of the backlog.
In May, Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) and ranking member Grassley introduced the Fighting Fraud To Protect Taxpayers Act, and the panel approved the measure later that month. The bill contains a provision designed to help speed up FCA cases.
“It often takes time to build up a False Claims Act case, but cases that are longer than the median average are of concern because they leave whistleblowers in limbo and the federal government spending unnecessary money,” Grassley said in a statement to Main Justice. He said that a provision he included “will require the Justice Department to make transparent the length of time False Claims Act cases languish under seal across the country.”
There is already a dispute about DOJ transparency on the FCA.
In the January letter the DOJ and the Department of Health and Human Services provided to Grassley with information in fraud cases, Assistant Attorney General for Legislative Affairs Ronald Weich wrote that the average length of time an FCA case remained under seal, and therefore investigation, was 13 months.
Engstrom disputes that figure. Engstrom speculates that the DOJ figure may understate the average time qui tam cases remain under investigation because it may include only those cases filed since October of 2006 that have already reached a DOJ election decision, and thus may omit cases that remain under investigation and will not reach an election decision for some time. This latter set of cases, Engstrom said, could be large: among cases that reached an election decision in 2009, for instance, roughly 40 had been under investigation for more than four years, and roughly 100 for more than two years. If this trend continued, there could be many cases filed since 2006 that have been ongoing for more than 13 months but not counted in the DOJ letter to Congress.
A spokesman said a number of factors contribute to the length of time.
Charles Miller, a spokesman for the Civil Division, said in an email that the size and complexity of a case can determine its length, and can be “hampered” by a defendant’s refusal to cooperate or by the naming of hundreds of defendants.
“The Justice Department take seriously its obligation to verify allegations of wrongdoing before intervening or declining in those allegations,” Miller said.
Miller added that cases could also be slowed down by concurrent criminal investigations, which he said complicates the information-gathering and sharing process, and even delay the start of a civil investigation until after the criminal probe concludes.
“This process benefits both the United States and relators, even though it may have the effect of prolonging the seal period,” Miller said.
Outside opinions vary about how to solve the problem.
Freedman said that businesses accused of fraud and their lawyers, who have traditionally favored a longer, drawn-out process to delay any negative press or public attention, increasingly are favoring quicker decision-making, though “without short-cutting the mutual interest in resolving matters that can be resolved,” he said.
Late last month, for example, lawyers from the law firm Skadden, Arps, Slate, Meagher & Flom wrote that companies under investigation should be more aggressive and push to force the government to unseal lawsuits earlier. The firm cites the “government’s pinched resources” combined with thorough investigating, and says these factors will lead to long delays if companies do not actively resist.
But without hurting the quality of investigations or using non-existent extra resources, Freedman says the speed of fraud cases could be increased “if the department had clear authority to dismiss cases, and thus could focus its resources on investigations and litigations that fit its priorities.”
While some believe that the DOJ could do a better job of setting priorities, Engstrom says efficient triage for the DOJ can be difficult, as prosecutors cannot always tell which cases deserve more attention until they first devote resources to look into them. Engstrom called it an informational Catch-22.
“Increasing investigation times is in large part a basic resource problem,” Engstrom said. “But there’s also a tension here: if companies and defense lawyers want cases to be resolved more quickly, that will require more resources for prosecutors. But that could also lead to more aggressive enforcement and, in turn, potentially more qui tam filings, imposing further resource constraints.”
President Barack Obama signed a bill Tuesday that will extend FBI Director Robert Mueller’s tenure at the FBI until September 2013.
The White House also said the president has officially submitted Mueller’s name to the Senate for re-confirmation.
Mueller’s 10-year term would end Aug. 2 should his nomination fail, but both parties in the Senate have expressed confidence that he will easily win back his position.
The White House has pushed for an extension of Mueller’s term in order to preserve the continuity of Obama’s national security team until the end of his term. The House passed the measure by a voice vote on Monday.
The White House’s original plan for a straight-forward extension of the director’s term faced opposition from some Senate Republicans with constitutional concerns, and then was briefly held up by Sen. Rand Paul (R-Ky.) until he could meet personally to discuss FBI policies with Mueller. To silence constitutional objections, the White House agreed to alter the bill to create a special two-year term for Mueller instead.
The strategy behind Operation Fast and Furious never involved allowing firearms to “walk” into Mexico, two former Bureau of Alcohol, Tobacco, Firearms and Explosives supervisors in charge of overseeing the operation told a House panel Tuesday.
But mistakes were made, and their plan backfired — reportedly letting thousands of firearms be trafficked across the border, and spurring an intense congressional investigation that has targeted senior ATF and Justice Department officials.
Attorney Paul Pelletier flanks former Special Agent William Newell.
At the center of the House Oversight and Government Reform Committee’s second hearing on the operation were Special Agent In Charge William D. Newell, who oversaw the operation at the Phoenix Field Division, and his boss, ATF Deputy Director for Field Operations William McMahon. The two supervisors admitted making mistakes during the operation.
“However good our intentions, regardless of our resource challenge, and notwithstanding the difficult legal hurdles we face in fighting firearms traffickers – we made mistakes,” McMahon said. “The advantage of hindsight and the benefit of a thorough review of this case clearly points me to things that I would have done differently.”
But they defended the strategy behind Fast and Furious, saying that it originated at the “street-level” as a way to enact an October 2009 proposal from the Justice Department that sought to establish a multi-agency “Southwest Border strategy” to combat Mexican drug cartels. That proposal recognized the ineffectiveness of simply intercepting weapons without taking on the networks used to transport them.
“The purpose of this investigation was to identify and disrupt and dismantle an entire firearms trafficking organization that we linked to Mexican drug cartels,” Newell said. “At no time in our strategy was it to allow guns to be taken across the border.”
Newell also said he “made every reasonable effort” to keep his ATF colleagues in Mexico briefed about the investigation.
But Newell had few answers for committee members intent on holding him and higher-ups responsible for the debacle. And in a committee known for partisan squabbles, both sides seemed frustrated with Newell’s responses.
“Special Agent Newell, I must tell you that your testimony has been quite frustrating, I think for both sides,” said ranking Democratic Rep. Elijah E. Cummings of Maryland.
Newell’s attorney, former DOJ official Paul Pelletier, flanked him at the hearing. Pelletier spent nine years at the Justice Department as the Criminal Fraud Section’s chief deputy and acting chief before leaving in April, and his presence at the hearing highlighted similarities between Newell’s testimony and the opaque testimony of other DOJ officials who have appeared before the committee.
In particular, Newell and McMahon sparred with committee members over what constituted “walking guns.”
“In this investigation, to the best of my knowledge, we didn’t let guns walk,” Newell said. “To the best of my knowledge none of the suspects in this case was ever witnessed by our agents crossing the border with firearms.”
But these answers angered Chairman Darrell Issa (R-Calif.), who said that Newell’s distinction didn’t change the facts and called him a “paid non-answerer.”
Issa cited a memo written by Newell in January 2010 that acknowledged that firearms had showed up in Mexico and lobbied for the operation to continue, “albeit at a slower pace.”
“From day one you had straw purchasers … buying hundreds of weapons and providing them to his intermediary,” he said. “It seems like you knowingly allowed these weapons to get out of your control, [and] to someone who was trafficking into Mexico. You saw the results. You allowed it to continue, and now you’re telling us, ‘We don’t let guns walk.’
“Before this investigation ends, I’ve got to have somebody in your position or from Justice admit that you knowingly let guns walk,” Issa added.
Several other ATF agents testified before the committee, including former ATF Attaché to Mexico Darren Gil, ATF Acting Attaché to Mexico Carlos Canino, ATF Senior Special Agent Jose Wall and ATF Team Leader for the Field Intelligence Support Team Lorren Leadmon. They confirmed that allowing guns to walk was an “unimaginable” violation of operating procedure.
“I can say with authority walking guns is not a recognized investigative technique,” Canino said. “It infuriates me that people, including my law enforcement, diplomatic and military colleagues, may be killed or injured with these weapons.”
But Newell said the agency didn’t have enough evidence to identify how the guns were being moved into Mexico and chose to continue with the operation.
“What we believed and what we suspected was far short of what we could prove,” he said.
That statement, Issa said, confirmed for him that ATF agents put building a case against traffickers above protecting lives.
“You didn’t quit because you didn’t have a case, so we continued selling until we had a dead federal agent and a scandal,” Issa said. “We have not yet seen the end of the violence from Operation Fast and Furious. The deadly consequences of this irresponsible program could last for years to come.”
Goodwin Liu, the legal scholar whose nomination for a seat on the U.S. Court of Appeals for the 9th Circuit was blocked by Senate Republicans, has just received a pretty good consolation prize: he has been nominated to fill a vacancy on the California Supreme Court.
Gov. Jerry Brown described his nominee on Tuesday as “an extraordinary man and a distinguished legal scholar and teacher,” according to a report in The Los Angeles Times.
“I’m deeply honored by Gov. Brown’s nomination and look forward to the opportunity to serve the people of California on our state’s highest court,” said Liu, a law professor at the University of California at Berkeley. If confirmed, he would give the seven-member tribunal its fourth jurist of Asian heritage.
Brown has forwarded Liu’s name to the State Bar’s Commission of Judicial Nominees Evaluation. The appointment will not become final until the Commission on Judicial Appointments — consisting of state Supreme Court Chief Justice Tani Cantil-Sakauye, Atty. Gen. Kamala Harris and Justice Joan Dempsey Klein, senior presiding justice of the state Court of Appeal — confirms the nomination, The Times said.
As Main Justice reported in May, Liu withdrew his nomination to the 9th Circuit in May, when it seemed clear that Senate Republicans would not relent. They contended that Liu is too liberal, and that putting him on the 9th Circuit — already widely regarded as the most liberal of the 13 circuits — would be harmful.
If Liu will be less harmful, from the Republicans’ perspective, on the California Supreme Court, he will also be better paid than if he were on the 9th Circuit. California justices earn $218,237 a year — about $39,000 more than their federal circuit brethren.
Rod Blagojevich, the disgraced and convicted ex-governor of Illinois, hasn’t seen enough of the courtroom. He’d rather be there than in a prison cell, where he’ll go for 20 years or so, unless he wins on appeal or gets a new trial.
Accordingly, the former governor is seeking another trial in federal court (it would be his third) and has compiled 158 pages worth of reasons why he should get one. Put most succinctly, Blagojevich says he was “bamboozled” by the trial judge, Judge James Zagel of the Northern District of Illinois.
Blagojevich, it will be recalled, was convicted last month of essentially putting his office up for sale, most sensationally in trying to auction off the Illinois Senate seat vacated by Barack Obama when he was elected president in 2008.
But the verdict wasn’t fair, the defendant says, and he knows whom to blame. “Virtually every error in this trial stemmed from the fact that this court deprived Blagojevich of the presumption of innocence and exhibited bias against the defense,” reads a typical passage of the motion for a new trial, according to a report on Politico, which credits an account in The Chicago Tribune.
The Tribune said prosecutors will respond soon to the defense motion.
But does Blagojevich really want a third trial? In the first trial, he was convicted on only one of 24 charges, with the jury unable to decide on the others. In the second go-around, prosecutors obtained guilty verdicts on 17 of 20 charges. That’s not an encouraging trend for the defense.
A Department of Justice official expressed strong support on Tuesday for the “Clean Up Government Act of 2011,” telling lawmakers that it would make it easier to prosecute corrupt officials and send them to prison for longer terms.
“Our citizens are entitled to know that their public servants are making their official decisions based on the best interests of the citizens who elect them and pay their salaries, and not based on bribes, extortion, or a public official’s own hidden financial interests,” Mary Patrice Brown, deputy assistant attorney general in the Criminal Division, said at a hearing of the House Judiciary Subcommittee on Crime, Terrorism and Homeland Security.
Despite recent successes of the Criminal Division’s Public Integrity Section, including a conviction growing out of the Jack Abramoff lobbying scandal and convictions and guilty pleas in a sprawling New Jersey corruption case, Brown said prosecutors have been hobbled by time restrictions and by recent court decisions.
“Allegations of public corruption may not surface until years after the crime was committed,” she said, making the current five-year statute of limitations a big hurdle for investigators and prosecutors — and underlying the need to lengthen the statute of limitations, as envisioned in the statute.
Another section of the law that Brown said the DOJ wholeheartedly endorses would make it easier for investigators to use wiretaps and prosecute under the Racketeer Influenced and Corrupt Organizations Act, commonly known as RICO. And she said the proposed law would undo the harm caused by recent court decisions, including one involving Jeffrey Skilling, a key figure in the scandal that grew out of the collapse of Enron.
The Supreme Court held last year that prosecutors couldn’t simply allege that a defendant wasn’t doing his job honestly; they had to show that he had actually taken a bribe or kickback. The proposed law, Brown said, would make it easier to go after dishonest public officials, some of whose illegal schemes have been “ingenious,” and do so fairly.
“The Department of Justice is committed to prosecuting public corruption offenses at all levels of government,” Brown said.
Justice Department leadership failed to warn Mexican officials about a controversial gun-trafficking operation, even as agents in that country and Mexican officials expressed concern over a spike in gun recovery traced back to the U.S., according to a new report by Republican members of Congress probing a troubled investigation.
The report also includes details that investigators say provides the most concrete and comprehensive evidence thus far that Justice Department leadership knew about Operation Fast and Furious and the recovery of weapons in Mexico.
The report – released by the staffs of Rep. Darrell Issa (R-Calif.), chairman of the House Oversight and Government Reform Committee, and Sen. Charles Grassley (R-Iowa), the Senate Judiciary Committee’s ranking member – pulls statements by Bureau of Alcohol, Tobacco, Firearms and Explosives agents and Mexican officials to paint a grim picture of Operation Fast and Furious.
The report also comes as investigators hold another hearing on the operation Tuesday morning.
“The consequences of arming Mexican drug cartels seem obvious,” Issa said in a statement. “But even guns turning up at crime scenes in Mexico wasn’t enough for Justice Department officials to arrest straw purchasers and shut down their trafficking operations. Tragically, it wasn’t until Fast and Furious guns were found at the murder scene of a Border Patrol Agent that Justice officials finally ended this reckless and arrogant effort.”
By the fall of 2009, ATF officials in Mexico began noticing a spike in firearms recovered at crime scenes, the report says. Then-Deputy Attache to Mexico Carlos Canino told investigators he was surprised to learn that many of those guns could be traced back to the ATF’s Phoenix Field Division.
“I remember the event that my chief analyst and my deputy came in and said, hey, we’re getting this abnormal number of weapons that are being seized in Mexico and they’re all coming back to the Phoenix field division,” Caniono told investigators. “So that was my first awareness of this regarding anything to do with this case.”
A total of 122 guns from Fast and Furious were recovered at Mexican crime scenes, according to a list compiled by investigators. However, the list only included guns identified so far, leaving open the possibility of that number rising. The report also cited an internal email saying as many as 241 guns were recovered in Mexico.
That number also exceeds the 96 firearms reported by the Justice Department in answer to a congressional inquiry on July 22, the report said.
ATF Intelligence Operations Specialist Lorren Leadmon raised concerns about the operation to ATF leadership in a January 2010 briefing. According to the report, Assistant Director Mark Chait, Deputy Assistnat Director Bill McMahon, International Affairs Chief Daniel Kumor, Southwest Border Czar Ray Rowley and Assistant Director James McDermond all attended the briefing.
Then in a March 5, 2010 briefing ATF intelligence analysts told ATF and DOJ leadership that more than 1,000 had already been trafficked to Mexico as part of the operation, according to the report. And at the suggestion of ATF acting Director Kenneth Melson, Assistant Attorney General Lanny Breuer personally assigned Joe Cooley, a trial attorney from the DOJ’s gang unit, to serve as a Justice Department representative at the briefing.
Several agents also said that Breuer later praised the operation, according to the report.
“He said we got, there is a good case out of Phoenix,” Canino told investigators. “When he said it, I thought, oh, OK … he knows. He knows about [Fast and Furious].”
The Justice Department did not return requests for comment by Tuesday morning.
The meeting also featured an explanation that guns from the operation had been recovered in the possession of the Sinaloa drug cartel.
“I think it was common knowledge that they were going down there to be crime guns to use in the battle against the [drug trafficking organizations] to shoot each other,” Rowley told investigators.
But officials decided not to reveal the operation to their personnel in Mexico and the Mexican government despite expressions of concern from several individuals in Mexico and Phoenix. In testimony given to investigators, they expressed their disbelief that officials had allowed the operation to go so far.
“This is the perfect storm of idiocy,” Canino said. “How could anybody think … there’s a guy in this case that bought over 600 guns. At what point do you think you might want to pull him aside and say, hey, come here for a second.”
The House Monday evening sent President Barack Obama a bill that will pave the way for FBI Director Robert Mueller to serve another two years even though his term is set to expire.
The House cleared the legislation by voice vote with little debate. The Senate passed it last week. Since Obama asked for Muller’s term to be extended, he is certain to sign the measure. Obama pushed for the extension in order to give continuity to his national security team.
Now that legislation that would allow the extended term has cleared Congress, Obama must send the Mueller nomination to the Senate, which then will consider it.
