House Oversight Democrats Release Perez Testimony on St. Paul
By Mary Jacoby | March 27, 2013 11:47 pm

Assistant Attorney General Tom Perez, tapped to be the next Secretary of Labor, gave an interview to House congressional investigators last week about his role in a disputed deal with the city of St. Paul, Minn., that is overshadowing his upcoming nomination hearing.

The transcript of Perez’s March 22 opening statement was released today by House Oversight ranking member Rep. Elijah Cummings (D-Md.), who also sent a memo to other Democrats on the committee about the matter. (Read the memo and Perez’s opening statement here.)

Thomas Perez (photo by Channing Turner / Main Justice)

Perez, who has headed the Justice Department’s Civil Rights Division since October 2009, said in the statement that an attorney for St. Paul first proposed what Republican lawmakers have called a “quid pro quo” between the department and St. Paul intended to protect a landmark housing anti-discrimination law, the Fair Housing Act.

Republicans have said they will raise the matter with Perez during his Senate confirmation hearing, slated for next month.

In his statement, Perez said he spoke with David Lillehaug, a former United States attorney in Minnesota, about the possibility of the city withdrawing its 2011 petition for Supreme Court review of a case called Magner v. Gallagher. It was Lillehaug who suggested that in exchange for the city dropping its appeal that the Justice Department decline to join a False Claims Act fraud case against the city, Perez said in the statement.

Perez said he was worried that Magner v. Gallagher presented an “undesirable factual context” in which to consider the use of so-called “disparate impact” theories to protect minorities from discrimination in housing. Local landlords had sued St. Paul for enforcing housing codes that the landlords claimed were intended to force out their mostly low-income, minority renters in favor of higher-income homeowners. But St. Paul had argued the landlords simply weren’t maintaining their properties.

The case was appealed to the Supreme Court, where an adverse decision could have made it harder for Perez’s Civil Rights Division to argue that actions that disproportionally harm minorities constitute discrimination.

“[B]ecause bad facts make bad law, this [case] could have resulted in a decision that undermined our ability and the City of St. Paul’s ability to protect victims of housing and lending discrimination,” Perez said in his statement.

Perez told committee investigators: “Mr. Lillehaug suggested that the City might be willing to withdraw its Magner petition, but was also interested in addressing” a False Claims Act case filed by local businessman Frederick Newell, alleging the city had misused federal job assistance funds.

Perez said he sought “ethical and professional responsibility advice” about his ability to have such conversations with Lillehaug, as False Claims Act cases are handled by the department’s Civil Division.

“I was informed that there would be no concerns so long as I had permission from the Civil Division to engage in these conversations. I was also informed that because the United States is a unitary actor and entitled to act in its best overall interests, there was no prohibition on linking matters such as Mr. Lillehaug had suggested,” Perez said, according to the transcript.

Perez said he spoke with Assistant Attorney General Tony West, then head of the Civil Division, about Lillehaug’s “proposal to link the Newell and the Magner cases.” Perez said West expressed “no reservations.”

Perez continued: “At some point, I learned that the Civil Division and the U.S. Attorney’s office [in Minnesota] viewed the Newell case to be a marginal one for intervention, although I understood that the initial recommendation of the Civil Fraud and the U.S. Attorney’s Office had been to intervene.”

Officials at the Department of Housing and Urban Development, Perez said, told him that the Newell case was “marginal” and that it was appropriate for Justice to decline to join it. If Justice had backed the fraud case, Newell’s chances of winning would have greatly increased, and as a federal whistleblower, the businessman could have received up to 30 percent of any recovery of funds won by the federal government against St. Paul.

Perez said it was his “understanding” that former Vice President Walter Mondale, who had sponsored the 1968 Fair Housing Act when he was in the Senate, spoke with St. Paul Mayor Chris Coleman about the need to protect the “disparate impact” theory under the Fair Housing Act. “And as you know the city has publicly reported that it was motivated to withdraw its Magner petition … in no small measure due its concerns about the effect that the decision could have on future civil rights enforcement efforts,” Perez said.

“This was the very point I had sought to make to the City and others in my discussion,” he added.

On Feb. 3, 2012, Perez said he met in St. Paul with Mayor Coleman and city lawyers. At that meeting, the city agreed to withdraw its Supreme Court petition and settle with the local landlords, Perez said. The Civil Division later decided it would not join the fraud case against the city. The city’s withdrew its Supreme Court appeal later in February 2012.

“I believed then, and I believe now, that the result achieved here was in the best interests of the United States,” Perez told the committee investigators.

The committee on March 18 also interviewed former Civil Division chief West, who is currently the acting Associate Attorney General, the No. 3 official at Justice.  And on March 8, the panel heard from B. Todd Jones, the Minnesota U.S. Attorney whose office played a role in reviewing the matters.

West’s nomination to be the permanent Associate Attorney General has been held up as a result of the congressional inquiries.

This article was updated to clarify that only Perez’s opening statement was released and not the full transcript of his committee interview.

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