two good morning ladies and gentlemen i've been invited by subcommittee chairman steve cohen to begin our important hearing ell because of the time limitations of some of the members in panel one the members of congress who normally preceded  the regular witnesses by agreement allowed the panel to go first because that time constraints we welcome you all and let me just say that  today this subcommittee revisits a matter that was first considered last year the department of justice is use deferred or non prosecution agreements in criminal cases involving corporate defendants these deferred prosecution agreements which we'll be examining today originally were created as an alternative to the prosecution of nonviolent drug and drug offenders under these types of agreement the government agreed to refrain from prosecuting in exchange for defendants agreement to admit wrongdoing provide restitution and abide by certain other obligations the government uses such agreements as a prosecutorial too with respect to corporate defendants  the aftermath of the arthur andersen case in the earlier part of this decade thousands of people deemed to be innocent lost their jobs a fter the company collapsed in the face of criminal charges the outcome of which was reversed in a higher court hearing on  appeal the thinking was that preacher and agreements might allow the government to achieve a better balance between the competing imperatives of seeking justice from  prosecution agreements it became evident that there were frequently no meaningful standards governing the circumstances under which the government might enter into such agreements or even what the scope of some of these agreements should be sometimes there was a lack of guidance with respect to the selection and the use of corporate monitors to implement and so that's what brings us here today one of the cases that are going to be discussed is the zimmer case in which then the former u s attorney for that area christopher christie selected former attorney general ashcroft to serve as a corporate monitor and also we know that the former attorney general came before this committee in the discussion of these matters and so the committee was prompted to hold a hearing last year and the department has taken some steps which we'll find out about  chairman i do appreciate your demeanor and tone in a gentle yes and i would be a shame not to accept an invitation from the chairman of the judiciary committee and so i will go i just my tone to the tone that the chairman has delivered this morning and  m course interested in the information will be gathering here this morning the testimony of all the witnesses on the panels that will come forward and as i frame my outlook on this issue i'd just seek to frame for this committee that we have seen many of the members of the former bush administration before this committee during his tenure as president of the united states and then after and some of the subject of this is john ashcroft well as i watched him testify before this committee  was exemplary display of how witness can come before this committee fully informed giving direct answers soundly based in the legal analysis and theory and having the recollection that it was so impressive to me and if i had him for a client or if i had evaluated as professional as i couldn't raise it any higher than what i've seen in his full career and before this committee as well but a number of other members of the of the bush administration have been before this committee  david addington comes to mind doug feith comes to mind there are a number of others and you know i would just suggest that we have a lot of important issues before this country and we are on the going forward perhaps within this congress with some ear revokable decisions i think at this point we are at the reversible point the things that have happened so far during this administration are reversible should the american people decide to do so once we cross th into the three big issues that are ahead of us in this congress i don't know that we can go back to the place where we are today or the place in my preference which we where we were before but i would suggest that we should be forward looking rather than backward looking and a data that i have looked at it indicates to me that there has been a positive result from some of these this negotiations that have taken place and if we're going to be looking backwards and i reflect backwards on some decisions that have been made  by the department of justice agreements not to prosecute entities that are significantly engaged in effecting the political decisions on this capitol hill so if we're going to look backwards i may want to dig through some papers back into history quite a ways and without specifying particularly what they are in the meantime hopefully this will be a balanced hearing and we can hear from the witnesses and we can evaluate this information without bias and if there's a constructive result it's common i right things are done for the right reason i'm hopeful that in a bipartisan way that we can congratulate the people who participated in that and move forward into the future rather than looking back and i think especially gentlemen mr christie is part of the future of the leadership in this country and  hopefully this will enhance his ability to contribute to american society and ideal back my time thank chairman i want to thank you steve king for striking such an appropriate and sensitive no compromise being so junior on this committee mr chairman i'd have to defer to your experience in seniority for the judgment call on that and i'll bring those issues up and you'll be able to make that decision at the appropriate time we'll let's work on it together thank you michel i'm very pleased to call upon the sub remarkably long career as a state legislator a state senator and is now already the chairman the one of the most important committees in the judicia commercial and administrative law and he's kindly allowed me in the chair for a short period of time and i'm very honored to call him at this moment thank you mr chairman i do appreciate your time that you've extended in the fact that we are separate on time as i sat in the chair for you this hearing is one that my subcommittee is very eagerly anticipating there are several issues before us one is whether or not deferred prosecutions are a good idea in general some in the justice department i believe believe still believe that they are good and they may be good i understand that corporations are different than individual citizens in that they represent a large number of stock holders and to punish a corporation in a certain way and possibly with a death sentence if there's a criminal conviction not just the corporation but all of its shareholders on the other hand corporations should abide by the law and shouldn't necessarily get a sweetheart deal because they are a corporation and be subjected to a different set of justice than an individual would as a private practicing attorney you have an individual sometimes first offender there's a deferred prosecution and that gives a person a second chance and i hope that in some of these cases and most of them that they're first offenders i suspect they are but nevertheless the offenses of the corporations are generally alleged have committed a much more serious than the minor misdemeanor that a person might have committed as a first criminal offense in the circumstance of an individual in a criminal court there is a public hearing and there is public notice of what has happened even though the person can generally get their record expunged in these corporate situations sometimes the public never knows of the wrongdoing of the corporation and the public is harmed and that is an issue we need to look into and what is the public good in having these agreements be private in camera rather than public and giving notice to the public of possible wrongdoing and possible ramifications that could occur to to an individual by these problems the the preferred prosecution agreements have really risen in the last few years a lot more use of them one of the cases of most  notoriety i guess is the medical devices and zimmer and a corporate citizen and my community smith nephew issues have arisen and i that i'm aware of on how the monitors are chosen and that's a serious issue i think at all times that public monies are expended no matter how they're done they should be done in a transparent manner and in a fair manner to where every person has an opportunity to participate to do justice and to be compensated for that justice in these situations over three fourths of the monitors so says the new york times in a current report have been former government officials and over half of them have been prosecutors which seems like it's an in house shop for folks who have left their roles with justice or left the roles of u s attorneys office to get lucrative business once they leave maybe they have the expertise maybe they're getting an advantage of knowing the right people in the right place and that's not the way justice should work government shouldn't never but justice should be like caesar's wife and beyond reproach circumstances in these cases make us think that caesar's wife would be blushing even more so than some governor's wives might blush the fact is when you select a monitor you ought to be selecting somebody from a panel of people who make themselves available it should be publicly known i believe and i think that an independent third party like a judge should be involved in selecting the monitors to make sure that there is fairness equal protection due process and  just not political influence the companies are in a no win position they have opportunity not to be convicted and they go through this monitor situation but the monitor has them by a very special unique and tender posture and accordingly the corporations can't say a lot when they think they're wrong and there should be some type of alms buds in there for the corporation to say the fees are are outrageous what they're doing is outrageous it's unnecessary the expenses are too great but they really can't do it and what happens is the monitors are put in a position to where they can extract their own individual large s at the expense of the corporation and the corporation can't complain because they're in a particularly special situation of avoiding prosecution and in essence they are paying back sheesh to the monitors they have no budget meant to go to to complain to see that the fees are appropriate right in the zimmer case it's my understanding that mr ashcroft's farm was paid fifty two million dollars to me that is outrageous i don't care what you did it's not worth fifty two million dollars even if you took steroids and it's seventy home runs it's not worth fifty two million dollars in the case with zimmer there was not an opportunity to review the fees as i understand it there were fees that the company were just told you're going to pay this upfront you have no choice and they had to do it that is not america that's not fair justice i believe there needs to be a change in the way that the monitors are chosen and impartial fair manner i think that there needs to be and i was a budget man to make sure that the corporations have an opportunity to to voice their concerns and see that the fees are fair and right and they need to be disclosed publicly so the public knows what people are being paid and the relationships between the appointing authority if there is one whether to judge an appropriate situation like i would suggest or in the past the u s attorney and possible conflicts of interest that might exist in the appointments or the relating that exist these are most important issues that we need to look at and see if there's reform that needs to take place that this committee can recommend and the this congress can pass to see that justice is indeed respected a justice is blind justice is fair that's the hope that i have that this committee will come out with i look forward to the testimony of mr christie has the most experience i think of almost any and the idea that it's an ethics chair is indeed ironic i think we have to have arms length transactions and we have to know that that we have to sometimes take our own personal interests and put them secondary to the public interest i'm sure that we'll learn more about what's happened in the in the matters and past hearings past the monitors and hopefully come up with some recommendations that protect the public mr chairman i appreciate the opportunity to make the statement and i hope that all the past bush bush wanted to destroy continued thoroughly by the clinton administration furthermore continued there only by bush two and i believe continuing presently under the  prosecution has it but no means a case of first impression for us they've been around a pretty good while and i just want to put that on the record does is recognize for it well i might as well take advantage of the time the the gentleman from iowa talked about a rubicon  and i think it's important to understand that our justice system enjoys a reputation that's unparalleled in terms of the justice systems elsewhere in this world and i think much of that can be attributed to the fact that there's a level of confidence in the integrity of that system by the american people now that level of confidence fluctuates at times it's diminished and at times it's at a high standard now as the chairman indicated the full committee i myself was a prosecutor and elected prosecutor state's attorney district attorney in the greater boston area for twenty two years so i support the concept of prosecut discretion i know that can be important so that enjoy this is do not occur but there have been a number of concerns that have been expressed upon regarding so called deferred prosecutions and by that i interpret that deferred prosecutions are in lieu of indictments in other words one could argue that is a different set of standards a different justice system if you will for one class that is american corporations that are accused of wrongdoing and the vast majority of americans who are accused of other crimes as i read through the debriefing material and they did discretion was exercised by the prosecutor not to prosecute or at least not to seek an indictment and then i thought of many of the the view of the community a logic would be to send a young man into the state prison system for maybe four or five years in the case of an  and yet cooperations who were committing crimes that impacted thousands of people were not indicted but managed  to reach an agreement to avoid that indictment you know there are other options that are available to the government that i don't know if they have been seriously considered a prosecutor can indict so this is a statement to the public that that corporation has probably committed a crime and then if there is a decision that it's in the best interests of the united states are an individual state they can be diverted a pretrial diversion concept but that again obviates eliminates the need for i think the appearances that people question i heard the chair of the subcommittee talk about fees of fifty two million i mean that i would like to see the billing author that that's a high hourly rate and i'm surely not one that doesn't believe that lawyers should be well pa but it does raise issues and again you know and i'm not suggesting or impugning anyone's integrity here but when the prosecutor makes the decision as to who the monitor is and i'm sure that the monitors or those that are reviewing these agreements presumably of people of solid credentials and high integrity but the a friends of former associates then the public is going to infer something that it's the good old boy network at work good old girl network at work or whatever the case may be and these are appearances i would suggest that we want to avoid because as i said at the beginning our justice system depends on the confidence of the american people in terms of the integrity you know i'm looking at some of the briefing material here and you know i'm sure i hope that these decisions were made in good faith but they reek of favoritism high fees and it's not a good situation and and secrecy if you're going to have a viable justice system you need transparency got to lay it out and i would suggest mr chairman that it ought not to be the prosecutor it ought to be the court that makes these  have the court an independent body rather than having the prosecutor who in the end has ultimate responsibility for the investigation and making charging decisions appoint someone that he may or may not have a relationship with i read you are just a money mr christie and you keep referring to the office and i understand what you mean by that term but in the end it is the individual united states attorney it's not the opposite makes that decision she will the u s attorney like i did when i was the state's attorney always listen but in the end it's going to be myself that makes those that decision and appearances even if there is nothing improper impacts the confidence of the people in the system so i know we have legislation pending and i know it deals with guidelines but i guess i would conclude by saying i would ask everyone on the panel why not have the court as it does as it should appropriately through the probation officers and the courts appoint masters not to fifty two million it was fifty two million sign me up i'm i'm ready to move for fifty two million but we have masters that take on these kind of tasks that can do them that are people of great expertise time and time again to handle matters that are complex because this issue is of i think is has the potential to seriously road confidence in terms of the administration of justice in this country if not reform with that i yield back i thank the gentleman representing the general the government accountability office is miss i mean lawrence director for justice issues  topical given concerns about corporate behavior leading to the economic downturn and controversial some question whether the tools let companies off the hook give prosecutors too much power their use also raises questions about balancing the tradeoffs of uniformity consistency and transparency with prosecutor discretion and flexibility to address unique cases given these issues we have worked under way to answer four questions about these tools first what factors do justice prosecutors consider when deciding whether to use the tools and when company requirements or terms to impose a second how do the prosecutors oversee company compliance with these terms there and how do they select independent monitors and fourth what the companies think of monitors cost and responsibilities i would not likely like to briefly summarize our preliminary answers to these questions as for the first question on deciding whether to use these tools and what terms to include just as prosecutors we interviewed consistently said they consider the nine principles of federal prosecution of business organizations especially how well the company is cooperating with investigators what collateral consequences third parties such as short shareholders and employees might face with prosecution and what remedial actions the company had already taken to fix its problem just as offices we contacted also consistently issued press releases about agreements reached or required that some be posted to websites promoting transparency just as offices were less consistent however in deciding which of the two tools to use then labeling agreements is a either a d p a or n p a despite recent guidance calling for consistency so that justice contracts are used and identify best practices within the department of continuing to review whether for the guidance on documentation of an supervisory review over these decisions may be important most agreements we reviewed required monetary payments ranging from thirty thousand dollars to six hundred fifty million and were based on sentencing guidelines as well as case specific factors the agreements lasted from three months to five years depending on the amount of time prosecutors believe the company would need to fix its problems most agreements also require companies to improve their ethics and compliance programs to prevent and deter criminal conduct unless the companies are already doing so for their regulators for example the prosecutor stated the companies could appeal on favorable terms to justice some companies were reluctant to do so for fear of retaliation joining to the second question on compliance with agreements and about half of the agreements we reviewed justice require the company to pay for an independent monitor because the offices did not have the resources or expertise in house almost all monitors had provide written reports of their findings to justice for the other half of the agreements justice relied on regulators to ensure compliance or require companies to certify they complied among other things addressing the third question about selecting monitors just as difficult chose the monitor they gave companies the opportunity for input although to varying degrees justice and companies generally relied on personal knowledge and colleagues recommendations to identify potential monitors with expertise they did check for conflicts of interest use an in house committee to make a final decision and coordinated with regulators if they already had monitors in place in order to avoid duplication and extra costs companies and prosecutors thought developing a national list of potential monitors to avoid favoritism could provide consistency and prescreen qualified candidates as well as expedite selection but night other side it might not provide the needed expertise and might result in more conflicts of interest less company men input and more favoritism if justice created the list recent justice guidance begins to address some of of selection committee and final monitor approval by the deputy attorney general among other things we are recommending that prosecutors also document the process and reasons for monitor selection to avoid favoritism and provide an audit trail for accountability and transparency and justice agree with this recommendation finally in terms of monitor fees and responsibilities while a couple of companies said their fees were high others thought they were customary and were more concerned that monitors did more work than necessary and beyond the scope of the agreement driving up costs companies felt they had little leverage to fight these costs and so would like more help from just as such as negotiating monitor responsibilities in the agreements requiring upfront monitor work plans and budgets and periodic lee meeting with companies to discuss monitor activities mr chairman we are continuing to work on a number of these issues including the need for additional guidance or improvements and the role of courts in this process and plan to issue a final report this fall that my statement i would be happy to answer any questions thank you so much we're now pleased to have the former u s attorney for the district of new jersey who has for six  thousand and eight been an visor of one of the seventeen lawyers that advise the former attorney general  a long career of experience in the law and were very pleased that you could make time out of your schedule to be with us today mr christie welcome thank you very much to you for the invitation states the members of the committee thank you also for the flexibility that you showed in terms of the scheduling of this hearing recognizing that i am in the middle of a campaign for governor of new jersey  willingness to be able to be flexible regarding the scheduling has made it possible for me to prepare adequately at to be here to spend time with all of you today at your questions and i appreciate it number of key points to make without repeating some of the things that were already pointed out by the g a o first and foremost the first prosecution agreements were utilized by my office during my tenure and seven years that i was united states attorney to achieve results of justice for the public when wrongdoing was committed people involved in corporations both individuals who were charged and companies were dealt with need to be dealt with firmly directly and strongly to make sure that people understood there was integrity in the system let's talk about how these agreements work first and foremost there is absolutely in the discussion of the monitor's zero zero taxpayer dollars spent on these monitors it's important no because there seems to be some confusion on that so i want to be clear zero taxpayer dollars are spent on these monitors they are all incurred these costs by the companies who were involved in the wrongdoing in order to reform the culture in that corporation secondly in the case of the medical device prosecutions there is already nearly a half a billion dollars in savings returned to the federal government let me be specific and how that was done four of the companies paid three hundred eleven million dollars back to the federal government at the time of the settlement of this matter in addition in just the first year of these agreements payments to consultants surgeons by these companies dropped by one hundred and fifty million dollars those costs were cost passed directly to the consumers and outs of the federal government predominantly through the medicare system that was paying for these costs through the companies so now nearly half a billion dollars has been returned and counting to the government because of these agreements third collateral consequences were mentioned by the g a o i will tell you i was a member of the justice department during the arthur andersen matter each one of the united states attorneys was affected significantly by the loss of nearly seventy five thousand jobs at arthur andersen in a case that ultimately was reversed by the united states supreme court the case was reversed but those jobs were not reversed back into the american economy the artificial hip in the medical device companies employ forty seven thousand american citizens providing innovation and products that improve the health of our country indictment of those companies would have all of them whom are publicly traded most certainly would have led to their debarment from the medicare program and says two thirds of all of those replacement surgeries are paid for by medicare this would have put those companies out of business companies that control ninety four percent of the market in artificial hips and knees in our country those collateral consequences in my view were absolutely something that needed to be avoided in addition is an eighty billion dollar industry and there was no harm done to the company shareholders during this entire time in fact during the time of the first prosecution agreements three of these companies saw growth in their shareholder value instead of diminishing these products are vital to the health of our citizens absolutely vital to the health of our citizens and if they have been eliminated from the marketplace ninety four percent of these devices this could have caused great harm great harm to the people o country who rely upon them all these monitors were proposed to the companies interviewed by the companies and then accepted by the companies and they were made clear by our office that they are the opportunity to object and if they did we would pose another monitor lastly mr chairman we also have shown great transparency in this because at the time that these agreements are put into place not only a very now publicly not only were the agreements put up on our website not only were they required to be put up on the website of the companies but also criminal complaints were filed reviewed by a federal judge approved by a federal judge along with approving the agreements and all of that was placed into public record so there is transparency there is no taxpayer dollars being spent there is nearly half a billion dollars being returned to the to the federal government chairman and so i look forward to a good conversation about this as you have the opportunity to talk to all of you about the great work that the office of united states attorney for the district of new jersey did on behalf of the american citizens in these and other prosecutions thank you thank you sir were no pleased to welcome from the department of this very important topic i am privileged to serve the department of justice as a deputy assistant attorney general in the criminal division and in my private practice in my past involvement with the department i have had the opportunity to observe the department's impressive efforts over the last several years to come back corporate fraud and other corporate malfeasance since two thousand and two the department has obtained approximately thirteen hundred corporate fraud convictions this includes convictions of more than three hundred seventy senior corporate officers in addition between two thousand and four and two thousand and eight the department has secured over nine hundred forty guilty verdict corporate defendants during that same time the department resolved approximately eighty corporate cases with the use of deferred prosecution agreements and non prosecution agreements which comprises approximately eight percent of the total number of corporate criminal convictions during that period in order for corporate in forstmann efforts to be effective federal prosecutors must be permitted the discretion to fashion appropriate agreements with business organizations to resolve investigations and those decisions have to be made on the unique facts and circumstances of a particular case the department will continue to bring criminal charges against business organizations where the conduct is agree just pervasive  systemic at the same time however the department recognizes that charging in convicting a corporation runs the risk of triggering significant negative consequences for innocent third parties who played no role in the criminal conduct including employees pensioners shareholders and customers these collateral consequences may be unjustified where the corporation has fully cooperated disciplined the culpable individuals implemented comprehensive compliance reforms and made restitution to all victims these are issues that must be considered when determining whether to charge a business organization prosecutors may use a variety of tools other than an indictment and a prosecution did bring justice to the victims and to the public and among those tools and the use of independent monitors the department last year in the united states attorney's manual issued clear guidance on the principles that must be considered when evaluating the appropriate resolution of a corporate criminal investigation the for their criminal violations typically during the time period of a deep corporation will be required to fulfill requirements certain requirements including the payment of rent restitution to victims the payment of financial penalties full cooperation by the business organizations which may enable additional prosecutions both of companies and individuals and the implementation of an effective compliance program in appropriate  cases also require the retention of an independent compliance monitor and last year as you know the department issued guidelines regarding the selection and use of monitors that identified a series of principles to be followed in using these monitors in connection with these agreements the guidelines are designed to ensure that well qualified independent monitors are selected that the process is free from potential conflicts of interest and that the monitors focus on reducing the risk of corporation's future misconduct the department of justice recognizes this committee's interest in the use of independent monitors monitors however we do have serious concerns about the provisions contained in h r one hundred four seven entitled the accountability and prosecution act of two thousand and nine we do oppose this proposed legislation this bill if passed will diminish the ability of federal prosecutors were carefully developed with input from a number of people and that we believe they adequately address the issues that are covered by the bill finally requiring courts to approve a non prosecution agreement before they can take effect separation of powers issues and could impede the government's enforcement efforts against corporate fraud the department is committed to using all of the tools at his disposal to root out corporate fraud and our experiences  must be tailored to the specific needs of a particular case and provide sufficient flexibility to achieve real results it is important that we preserve the ability of experienced prosecutors to balance partner at hogan and hartson served as the u s attorney for the eastern district of virginia and is the u s attorney for the seven district of texas he's and we welcome you here this afternoon and listen carefully to your testimony i was simply thank in the committee for the invitation it's a pleasure an honor to be here today thank you mr chairman i joined the department of justice out of law school i went to law school because i wanted to be an assistant u attorney and i should tell you that i consider it still the greatest professional privilege of my life including the opportunity to have served as u s attorney i work with wonderful men and women of great integrity dedication this is every day these men and women of the department struggle with how best to handle corporate crime corporate crime presents a very difficult dilemma how do you punish corporate criminal behavior without harming innocent third parties one solution tool that we found that works and works well and has worked well for a long time deferred prosecution agreements i have just three points to make about i'm going to be brief and i'm going to be quiet first prosecutors need to strike a balance between doing too much and doing too little we struggle with out all the time we want crime to be punished obviously we need specific and general deterrence for the bad actors but we also need a level playing field for the vast majority vast majority of corporations that do it by the book the collateral consequences of prosecuting a corporation mr grenville are alluded to that even the bad corporate actor that does not play all the rules can devastate individual lives and we've seen that employees shareholders and so on who had absolutely no role in the corporate criminal wrongdoing and no ability to prevent it also in highly regulated industries a prosecution can mean the department of and therefore it's demise in some cases that's appropriate in many cases it is not so point one we need a balanced approach point two we've got one we have a balanced approach the department has a very sensible approach in place i've been with the department i had been with the department for a very long time i know what that approach is and i think they have it right so i guess it's not very interesting for me to show up here and tell you that the system is not broken  actually i'm not very interesting and that's why i'm here to tell you that the system is not broken d o j has struck the right balance has a right safeguards in place and handles deferred prosecution agreements including the appointment of corporate monitors in a thoughtful careful and proper manner there are two key documents here i respectfully refer the committee to both although i'm sure you're quite familiar with them the first is the march two thousand and eight guidance by then acting deputy attorney general craig  morford like me also a career guy in the department of justice regarding d p s in the selection of corporate monitors the second key document articulate the current justice department principles in place right now regarding the prosecution of business organizations founded title nine chapter nine dash twenty eight of the u s attorney's manual a lot of very smart and experienced prosecutors spent a lot of time constructing this guidance i think they got it right it's not broken it doesn't need tinkering third point final point there are a couple of proposals floating around but the oversight of deferred prosecution agreements and the selection of corporate monitors in the hands of the federal  i completely understand the impulse of spent a lot of time in front of federal judges and by and large they are terrific they are very very good at what they do so we're tempted to tap into their experience and independence to i s with the same integrity associated with all the other proceedings in federal court here though i believe that the participation of the group cheri would be a mistake deciding who and how to prosecute or whether to prosecute at all is a core executive function judges do many many things well no dispute but there are a bunch of things that judges should not do and acting as prosecutors is one of them mr chairman thank you for invit here today it is a privilege i'm pleased to answer questions of the committee we're very glad your parent of our panel i'm pleased to call on professor media khana of the university of michigan law school faculty and before that the boston university school columbia law school and a visiting scholar at stanford law school and this is not to indicate that he can't stay in more than one place for any length of time we're very impressed by your career his areas of research and teaching include corporate law securities fraud regulation corporate crime corporate and managerial liability and and corporate governance in the emerging markets and so we have your prepared statement and we will listen to you testify i will primarily focus my comments on the growth and functioning of corporate monitors as part of corporate deferred and non prosecution agreements in particular i'd like to address three issues today in my  first when is it desirable to impose a corporate monitor on a firm as part of a d p a my response is essentially that in instances where the potential cash fines that we can impose on a corporation seem unlikely for whatever reason to obtain the level of deterrence we desire we should consider the use of a corporate monitor this helps to ensure that monitors are only appointed when they are socially desirable and helps to reduce concerns to monitor is a way to avoid imposing serious sanctions on the firm second if a corporate monitor is to be used then what steps should be taken to reduce the concerns associated with the appointing of such monitors my response is that we should try to encourage the growth of a market of sorts for monitor services because that will not only enhance the accountability on the transparency of the monitor but also provide a strong competitive impetus for good performance this will help to reduce concerns both about the selection process and about the compensation levels as well as potentially enhancing performance third what steps in addition to those proposed in the recent house builds and the department of justice memo may be worth exploring to enhance the functioning of corporate monitors my response here is that i applaud the efforts both taken in the house and by the department of justice as important steps in the area these reforms are broadly consistent with my analysis on corporate monitors as i suggest in my written testimony in addition to these steps however i would suggest some further steps that might help to enhance the functioning of corporate monitors in particular first explicit discussion by the department of justice when deciding to go forward with a corporate monitor about why a cash fine or other sanction would not suffice for deterrence and why a monitor with frequent ongoing contact with the firm would be a desirable thing to have on the facts and second some oversight on monetary compensation might indeed be desirable but the pure flat fee being suggested in the house bill should be adopted very cautiously instead i might suggest judicial review triggered by perhaps the fees crossing some hourly threshold but makes us wonder a little bit about their size in addition maybe open competitive bidding for the position of the monitor or maybe even an alternative such as multiple flat fees but might apply at different levels depending on the kind of expertise you're expecting from the monitor for example in certain monitoring instances to address the concerns of the firm may require a great deal more skill and investment of time than say and others and having a flat fee for both might be somewhat troublesome in terms of being able to generate the kind of expertise you might want you would necessarily want to pay your neurosurgeon the same amount as you pay your primary care physician third the groups of people who are qualified to act as monitors i think should be expanded to include of course not only former enforcement officials but also attorneys with substantial litigation experience and others who have experience in compliance matters sometimes compliance issues particularly in the area financial and securities fraud doesn't necessarily require tremendous litigation experience as much as experience with looking through financial statements and knowing where the skeletons might be buried for us in terms of arranging for some degree of judicial oversight i think that can be useful but perhaps a limited doses for some of the concerns already raised by other members of the panel but also because of the notion that judicial oversight is a precious thing to have we should use it where we think it's most important perhaps when the d p a is being finalized rather than ongoing oversight on lest some triggering event occurs that might merit greater interest for the judge finally in terms of public disclosure of monitors reports so far the approach seems to be that monitors reports would be disclosed to the government the department of justice and potentially to the court but i would suggest that maybe public disclosure should be something we should consider as a norm with the power of the court and the department to redact out it mean that might be troublesome or potentially competitively problematic for firms this will help both in terms of the ability to inform victims of potential wrongdoing or potential harm they may suffer that would help to reduce maybe the harm they suffer as well as potentially informing other companies about steps they can take to avoid future wrongdoing in similar industries or in similar in similar contacts with that i will i will and my a testimony i'll be happy to lab rate on any of these matters thank you again for inviting me to testify today thank you so much professor kearney and i think all of five of you lady and gentleman and   there are others that think it's working fairly well perfectly ok and then there's another school that would like to modify it and turn to the chairman of this was never turned down the gym or turned out mr ashcroft no in fact sir let me to give you complete answer to that that that's a complete answer no it's not fair really isn't because i think it's important for you to know that zimmer first came to our office to suggest that the one thing they wanted to make sure they had the monitor since they were company from warsaw indiana and in the midwest which they did not want to a large new york law firm they did not want a large northeastern law firm they said they wanted someone with midwestern sensibilities we then sent there mr ashcroft's name who i think everyone is aware is from the midwest and they had an opportunity interview him and were told that if they had an objection they should come back and express lawsuit turn down the monitor no sir they did not they didn't has any monitor that you've recommended been turned down by the defendant in the instances of in terms of other  prosecution agreements the operation the selection of the monitors worked differently and options were not given in those instances i thought was a balance you why so let me and if you listen you can then tell me then based on your testimony that nobody ever objected to the monitoring your testimony you said all the defendants could turn them down but in reality nobody turned them down is that right no they all agreed after interviewing all agree all agreed after interviews with their monitors and the opportunity to meet right that they all place sir and i was and these folks came back and we're not we're not under duress they came back and said that they appreciated the monitors that were selected and they except at the monitors they were selected right and i don't and i don't appreciate  that you're making the question well the facts speak for themselves nobody turned one down in your testimony you made the point to say they could turn him down like this is a very open and a process and it was active none of them turned him down because they couldn't afford to because otherwise cute stop mr christie otherwise they would be prosecuted and if you had him in a situation you offered him a deal that they couldn't refuse so you're wrong sir the fact of the matter is that they didn't turn them down because the career prosecutors in my office who prosecuted this case along with my executive staff along with our ethics officer and myself to great time and great care to analyze the facts inside each company to analyze the monitors that were suggested to make sure that both their experience and their approach would be compatible with the companies that we have been investigating for three years and that's why the alternative answer mr cohen to your question is not because they thought they were through  but because the department of justice through the united states attorney's office for the district of new jersey did their job by prodi proper monitors in place for each company did you or anyone in the new jersey u s attorney's office ever send any e mails about the negotiations yes there were e mails that were sent to me regarding exam or and that i responded to during the time they were negotiating fees with the ashcroft group ended and zimmer objected they thought that these were outrageous they were supposed to pay seven hundred fifty thousand  upfront to mr ashcroft in his two other senior executives just as a retainer fee is that accurate i was not the least bit shocked sir to receive e mails from high priced lawyers arguing over fees fees when i told her the defendants know  was not so the e mails were from the defendant's counsel right then they would do it all when we had by the way was being paid handsomely by the hour to argue as he had been arguing with us for the last four months before the agreements were executed in order to get the best deal that he possibly could for his client he's a partner at fulbright and jaworski an incredibly competent healthcare lawyer who argued vehemently and got great concessions from our office for his client he then raised issues regarding the fees proposed by proposed by the escrow group and i told him in my emails to him to go back and i also told the ashcroft group to go back and resolve whatever differences they had regarding fees without intervention by the office if they could not i would have intervened and within a week's time after i sent them back to begin to go shooting again they had agreed to feed on october seventeenth two thousand and seven did mr attorney rick robinson say quote the parties have reached an impasse on certain key issues the first issue being a plat  provision and did you refuse to intervene when they had reached an impasse mr presti mr cohen he sent me that e mail and i'm looking for them now he sent me that email and when you read the totality of the e mails i think you come to the conclusion that there was an impasse that was reached and i instructed him back to go and try to resolve it as i did instruct the ashcroft group to go back and attempt to resolve it in good faith if the united states attorney gets involved in every dispute between their monitors and the companies they're monitoring the united states attorney would have no time to do anything else in his office but litigate those disputes within one week after the sending of that e mail they came to an agreement on fees by bristol myers squibb situation why did you not suggest that it would be wrong for a contribution a chair to be endowed at the school that you attended we are public life have to be beyond caesar's wife to yes sir and i suggest to you that neither you nor i have cornered the market on that so let me be very clear with you about what you're saying it's a mission on your part oh it's not an admission on my part sir let me tell you exactly how it happened  by mary jo white the former united states attorney for the southern district of new york and one of the most respected prosecutors and private practice attorneys in this nation it was in fact the suggestion of counsel for bristol myers squibb that one of the things they wanted to do in order to ensure an ethical culture in their company was to endow a chair at a new jersey law school on ethics i told them if that was their idea that was fine and they were to handle it they came back and told me that there were rutgers law school in new jersey already had an invalid chair an ethics by the prudential corporation and they were then going to move to seton hall to have discussions with them i was not involved in those discussions it was not my idea it was not my initiative it was the idea initiative and suggestion of the bristol myers squibb corporation and they still today participate in twice annual seminars on corporate ethics run by seton was their decision sir not mine mr chairman if i can only respond i would submit to you sir that even though the suggestion might have been by the defendant who may not have been made an offer they couldn't refuse but that that was the defend i'm sure they might have looked at them if my clear state had a law school have a bit of it or they do not this was to be done this was their idea there are two law schools in the state in new jersey sir rutgers and seton hall rutgers already had a corporate chair for corporate ethics funded by the prudential corporation that is what moved bristol myers squibb to go to seton hall your implication that there was something inappropriate about a corporate citizen deciding that they wanted to in dallas share in the study of corporate ethics given the corporate climate in this country surprising to me what the people public needs to know is that it was not my idea it was not my initiative and it was something that they asked for but i thank the chairman for recognizing me and i sounded as i listened to the witnesses that there is a significant amount of unanimity with regard to this subject that's before us deferred prosecution agreements and there is a significant amount of disagreement in the clash that's just taken place between mr cohen mr christie and so i'd like direct my attention to that and ask mr christie if you're aware where the the genesis of this allegation about the might have originated sir there was no there's no discussion of this at the time when the agreement was made it was made public this these allegations of this came out much much later on in a much more political context and i am except that and i suspect that not just reiterate that this is this is turning into a political issue and hopefully we can take examine the issue in front of us and  still let the public know mr chairman about the political components of this and i got my attention as i listened to mr collins opening remarks when he when he made this allegation about the endowment at seton hall and saw it it occurred to me instantly that in a money when he said that members of congress wouldn't do something like that members of congress instead just simply offer earmarks for their endowments and i can think of some in my district there are  my junior senator he has his name clearly over these things that those are endowments that go into the educational institutions all over the country with the name harken grad on him there are buildings named after living members of the united states senate we try not to do that for a living members of the house of representatives but i'd ask the panel as anyone aware first i would ask mr christie could you name the five businesses that were the subject of the agreement on the medical devices service ok the five companies were  corporation the pew corporation which is a subsidiary of johnson and johnson smith and nephew corporation the the stryker corporation which is out of  kalamazoo michigan and the biomed corporation which is also out of indiana i think you and is there anyone on the panel that's aware of any earmarks that have been provided to these companies that are the subject of our testimony today a all well and into the record i'd suggest to that i'm reading what we understand to be a press release that lays out a case that there is an eight hundred thousand dollar earmarked for smith and nephew for developing a new trauma hemostats surgical tool you have any knowledge of that anyone on the committee and apparently no one on the committee does and i would ask unanimous consent to  introduce at the appropriate time the original press release that identifies this earmark to this company called smith and nephew by the gentleman from tennessee mr cohen eight hundred thousand dollar and i thank the chairman for his indulgence and will produce the original documents we'll have that deliberation at another time i make this point because it's easy to point fingers it's easy to make allegations it's it's much more difficult to make a cogent case against deferred prosecution agreements no one on this panel has made a case against them you've raised the issue about unintended consequences and so i would then rather than go down to the list of things that i'd like to see reiterated here by the by the witnesses and their record is relatively replete but i'm reflecting upon a part of mr christie has written testimony that i didn't hear in his oral presentation about the difficulty of reaching this agreement with five companies simultaneously and though and the language that jumps off the page when i read the written testimony as negotiating these agreements was akin to landing five lawyers in america this is an eighty billion dollar industry medical device and eighty billion dollar industry that has significant resources to hire outside counsel in order to be adversarial as they need to be with our office we engaged in a four and a half month long to go see a shrink understand these are competitive companies they're competing with each other every day they were willing to agree to reforms but only if everyone was going to play by the same set of rules going forward so imagine now you have five of the biggest law firms in america who each get a chance to make comments on a thirty forty plus page long agreement that will govern the conduct of their client going forward for the next number of years we went through nearly a dozen drafts of that agreement which meant sixty copies of it because each was times five with different negotiation requests these were incredibly contentious negotiations that literally sir were not resolved until nine a m on the morning that we announced these agreements at eleven a m is when the last issues were resolved and all five of the companies kept calling in to me to say is everybody agreeing to exactly the same thing is everybody doing exact because if they're not i'm not signing the literally it was akin to trying to land five jets on the same runway at the same time without them crashing the reform that they achieved in my view was extraordinary in the first year after this agreement payments to surgeon consultants by these companies drop by one hundred and fifty million dollars there were more than one thousand fewer consultants at the end of the first year of this agreement than there had been when we entered the room and imagine they were still functioning still being profitable with a thousand  less consultants those reforms were achieved as well as a transparency that has been discussed in this country for a long time with medical device and pharmaceutical companies this agreement required that each and every one of those companies post on their website and update quarterly the names of all the surgeons they were made consulting payments to where those searches were located and how much they were paid was citizen in your district or if they were considering artificial hip or knee replacement and their doctor recommended a device from a particular company that could go on the web site and see if that doctor was in fact being paid by that company so they could judge with their advice was objective or not this is an area of transparency that now was my written testimony replicated in the in the pharmaceutical industry after we instituted these changes in the medical device industry those are the kind of things we were negotiating thank you mr christie and in conclusion if some with some deference from the chair i'd like to just summarize this that i've not been able to get two opposing attorneys to agree on anything and how i get him to agree is if they're paid by the same client and the difficulty of bringing this together over massive dollars eighty billion dollar industry and and ninety four ninety five percent of the industry controlled by these five men today and today is depending on whether written early oral testimony but that's a that's a huge number and saving the public four hundred fifty million dollars at least one hundred fifty million dollars of that from the costs of these services and saving forty seven thousand jobs seems to me to be an extraordinary accomplishment and i cannot for the life of me divine why you would be and public i unless it would be for adulation and so i would suggest mr chairman with that disagreement that we are discussing that at the end of this hearing we could take that issue up and i'd suspended until that time and i deal back the balance of my time and i think you're referring to the  that the gentleman be allowed to make his opening statement at this point in time and he's recognized for that purpose mr chairman i certainly appreciate the courtesy here i apologize i was out trying to save the world and the vote again yes sir we don't know whether i'm successful yet the vote will be taken a little bit later but but thank you very very much mr chairman i obviously would welcome the witnesses and it sounds like you've all done a wonderful job here today and i particularly want to express my welcome to one of our colleagues from new jersey distinguished former u s attorney from the district of new jersey in the wake of the enron scandal in two thousand and one our corporate landscape changed dramatically one of those changes really is what has led us to today's hearing arthur andersen enron's accounting firm up in a scandal  is of accounting improprieties it was indicted prosecuted and convicted in the southern district of texas as a result it had to surrender its accounting license effectively destroying the business seventy five thousand jobs were lost innocent people had held virtually all of them the supreme court later unanimously overturned arthur andersen's conviction i know that's been part of the record thus far the damage however was irreparable arthur andersen  jobs never came back from the damage inflicted by the trial court proceedings as a result the department of justice took a long hard look at whether or not that there was a better way to pursue wrongdoing by companies with up prosecuting companies out of business and innocent job holders out of jobs is decision was to begin using deferred prosecution agreements more frequently to avoid needless damage to the economy while still policing and correcting wrongdoing one of the great success stories following that change of course occurred in new jersey under u s attorney chris christie mr christie and his office uncovered a major kickback scheme as a scandal involving doctors in all five major u s manufacturers of hip and knee replacements the problem mr chairman was huge but these companies represented almost ninety five percent of the u s market in two thousand and alone more than seven hundred thousand hip and knee replacements were performed the united states of america medicare paid more than two thirds of those procedures the five companies employ forty seven thousand people in the united states if prosecuted and convicted they would have been d barred from the medical medicare program the u industry would have simply imploded it would have been arthur andersen all over again but with this time and with the entire course in this case it would have wiped out the entire us sector and it was critical the department know up to scandal but it was equally critical that the department not destroyed ten thousand jobs and reckoned important part of our economy and our health care system chris christie met both of those needs obtaining deferred prosecution and no prosecution agreements with all five firms very challenging achievements under the terms of the agreements that companies lived under the intense scrutiny of corporate monitors and the threat of prosecution until their acts were cleaned up they struck five your corporate integrity agreement with the u s department of health and human services they repaid three hundred eleven million dollars to the united states they stopped one hundred fifty million dollars in shady payments to doctors in the first year these agreements work mr chairman the companies cleaned up their acts jobs were preserved us industry was saved and nearly half a billion dollars was restored to the public at no cost to the taxpayers because the companies themselves paid for the corporate monitors that were crucial to these results chris christie deserves in my judgment a medal for his achievements like these and so do other u s attorneys who obtain similar results are hearing today should therefore focus on how the department can replicate and if possible improve on this kind of success administration evidently concurs because it's just a part and justice department substantially replicated mr christie's terms in the well cared remit recently negotiated by the u s attorney for the middle district of florida and we'll hear more from that department if we haven't already today in january two thousand and eight the new york times newark new jersey democrats tried to kick a couple of controversy over the hiring of former attorney general john ashcroft as a corporate monitor presume are the most powerful companies subject to mr christie's agreements critics and partisans overlook that it him and the other corporation subject to an agreement not mr christie that selected general ashcroft and all of the other monitors they overlooked at the companies and not mr christie and the taxpayers not mr christie in the taxpayers had hired general ashcroft and the other monitors and negotiated and paid all fees and cost for the monitors taxpayers did not pay any thing for those monitors and they overlooked that general ashcroft was a mentally qualified for the job of serving as the monitor for zimmer testimony our hearing last spring latest controversy to rest until the press and new jersey democrats recently attempted to stir it up again but the monitors from mr christie's agreement did a terrific job in the new jersey case i take hope from these clear results from the caption of our hearing today and from the composition of our expert witnesses on the panel today that today's hearing will not go down the dead end road trodden by some democrats and new jersey press i also have confidence that our committee and subcommittee chairman w appreciate the effectiveness of the new jersey agreements and rectifying underlying wrongdoing while saving workers jobs because of mr christie's good work mr chairman and because these companies applied plied with agreements mr christie negotiated those jobs are still in existence today and i thank the chairman for his especially going beyond the call of duty to allow me this opportunity to go ahead and give my statement thank you know you back well it's my pleasure and i apologize to our other chairman bill dignitary but at least i'll be here for the first round you know i i want to tell you i'm mr christie and so today i did not realize that you're a candidate for governor so i want you to understand that you know i'm a very you know ardent democrat but i want you to be very clear i had no idea you were a candidate but i think your case does illustrate the problems having that power invested in the u s attorney and after serving in that office to be to develop a political ambition then one begins to attract and you will discover this i'm sure during the course  a certain scrutiny and that reflects on what i said earlier about the issues of confidence in the integrity of the criminal justice system not impugning any of your motives or what you did during the course of this particular case but what i'm suggesting is the authority ought to be moved from a prosecutor have mr ashcroft you know made the monitor in this particular case you know there are appearances and i think you would agree with me well i'll ask you a question appearances in terms of conflict of interest are important do you agree with that actual conflicts are most important and appearances are also important sir yes thank you but i you know that you could be a democrat up in  you know up in massachusetts and i'm sure that's not legal you are well that's unlikely but i guess anything could happen anything can happen anything is possible i mean the reality is fifty two million dollars is a lot of money so what is the public going to say the public is going to say fifty two million dollars for what for what for one single case and i'm not suggesting you did anything improper but appearances are important now if the court was clearly a separate independent branch of government appointed any monitor whether it be the former attorney general of our whomever these questions would not occur i wouldn't be asking you nor would anyone else whether you had any did you display favoritism i have no idea did you appoint attorney general ashcroft as i said in my written testimony sir it was part of a process that we went through in our office and that involved the lead prosecutors who investigated the matter i understand my executive staff but i'd like to finish just sure because i think a point you made before is apt and i don't want to back off from that ok end of the day sir we discuss that this is an office we put an enormous amount of time into it but in the end the buck stops with me or it comes of my recommendation to the company and so i took all the input that i got from all of my career prosecutors career members of the party just as fine people and we picked the five best people we thought to recommend to these companies these companies interviewed those people and came back and told us that they work sceptical to them in fact in the cases immer and i don't remember if you were in the room or not when i said this so i want to repeat it zimmer came back and said we believe we've got the best monitor in general ashcroft after they'd interviewed him so in other words he was the former attorney general one of five that you referred yes or ok and i'm not questioning his talent his abilities but here we are let's stick of the people of new jersey the people of the united the people in massachusetts that might be interested in these kind of issues here you are and i'm sure there's no actual conflict of interest appointing a former attorney general who did testify here and i have a vague memory as to his appearance and then it surfaces later that the fee was fifty two million dollars that's a lot of money sir first of all i would raise a lot of money i don't know where you get the number from first of all because i do not know how much his total fees were that comes from an estimate that was given a range of estimate that's the high end of the range of estimates a lot was given it's a lie think the low end was in the twenty's somewhere so somewhere between twenty and fifty million in march of two thousand eight the new york times reviewed this and they put together a group of experts and they said the new york times said that outside wearers who have reviewed mr ashcroft structure said it was not out of line for this work and so while i don't know what the exact fees turned out to be because those were between zimmer and the ashcroft group the new york times looked at it in march of two thousand and eight and said that outside experts they consulted said that the ashcroft restructure was not out of line and so nor did zimmer folks not only did they not do they answered the agreement with mr ashcroft but it's important to note they then voluntarily retained of the ashcroft group to do other matters inside the company that they were concerned about might have raised issues of violations of law and they paid them additional fees for that in order to make sure that they were doing these things the right way that was the company's choice and somebody didn't have to do i they must've thought it was reasonable sir well i  at the same time let's let's be very practical and we all understand the world real world use and the recommendation over the recommendation is the former attorney general one can imagine the conversation with listen the u s attorney sent him over and he worked for served under the former attorney general i'm not saying this isn't your thing but let me tell you if i was counsel at that table i would say this could work for us that counsel doesn't have an obligation to the american public doesn't have an obligation the department of justice but to make the best decision for the interests of that client let me tell you if i was attorney zimmer and a recommendation came from you that the former attorney general under a who serve you can bet that i would have said he's our guy bingo that would have been my advice i'm not asking you flaw an opinion i go back to what i said earlier about appearance well i wish you had been there sir because you've been there i suspect given that attitude we would have a lot less arguing with zimmer and the council than that than we actually did because as i detailed earlier for mr king we had months and months of contentio with one of the largest law firms in america fulbright and jaworski and one of their top partners and a slew of associates who argued over every word of every line that ultimately was up in those agree but that we argue no sir let me just finish you argue also with us over every aspect of enforcement as we move forward and what that was grima it missed the chorus the i'm talking about the appointment of the modern part of the agreements or it's all part of the agreement the  but it was certain the monitor was appointed as part of the agreement before the agreement was signed it was something that we gave them the opportunity to do before they agreed to the resolution in order to make it part of the overall negotiation and so it was just that was the one of many i know is that they argued over it was just one of many years the course and the reality is that was a non contentious piece of the agreement it turns out to be that way sir because there was you've got to understand we have rules here i understand time is my rule i'm asking you a question and i'm asking it respectfully and i'm trying to answer it fine and what i'm asking you is was there any contention on the issue of m ashcroft serving as the monitor their turn their turns out not to be in the content of all the other contentious nature i don't know why that that is applied and i don't know why the lawyer decided to argue about something that might have been a paragraph thirty four versus the p i don't know but i would have said let's get christie's guy i mean that's me i'm not suggesting that was yob motive but what i am suggesting is it really creates a problem within the peer sir i disagree with you  i can understand that you can disagree with me and you know i respect that we can disagree but what i'm what i'm saying is that i want to get i would if i would prefer and you heard my opening observations about having the authority of appointment in the court not in the prosecutor you can create internal procedures an internal vetting etc but in terms of the perception of the public the public is now hearing this term fifty two million maybe it's thirty million we don't even know i mean that's rather interesting we don't know and yet there's an agreement that somehow precludes  this that what we achieved in doing this and what the public doesn't know about this is that no taxpayer money was spent on any of these monitors not a nickel of taxpayer money w spent on these monitors the monitors were paid for by the companies that were engaged in wrongdoing that was defrauding the american public that nearly half a billion dollars to date and counting has been saved because of these agreements and transparency has been brought to this process and so that's what the public does know about the chairman if i can because i do want to respond and i hear what the gentleman is saying i i think we all want to see positive results what i'm suggesting to you is there is a nother method that is far superior than investing the authority in the executive without any check balor and sir and i agree i'm going to do a little trying on i'm sorry i was and i hear things about saving jobs of course everybody we don't want collateral damage whether it's  and the reality is i don't really think that in an indictment and then a pretrial diversion subject to an agreement would in any way to threaten those jobs you make you make the point that jobs were saved you know i dare say ok that we don't know whether those jobs were saved while they would have even been any risk to those jobs if we proceeded differently with that i yield back in history but history tells us are history tells us after the arthur andersen debacle that jobs were lost and second but you know i second that you know you going to continue to you know because i'm up here when you are there when the games here that i get they have the last word so i mean i understand sir but charging document was filed by charging document is not an indictment you know you can go out and seek an indictment and demonstrate to the american people that was serious about the tyrant so we do better every because a federal judge can find off on a criminal complaint an independent federal judge signed off on a criminal violate i guess what i would do is suggest that the clear what if there's an indictment through its probation office and its capacity to appoint masters could do it for a lot less than fifty two million or twenty five million you know we both are practitioners of the law we know all these kind of cases i have never heard the term of the gentleman may have expired and the chair wishes to observe that during his inquiry franks and i have been talking about the importance of the ability to obtain some turns parents about the nature of the work product that came out of the relationship between the former attorney general and the evidence and seem to be sort of a manufactured effort but i'll try to deal with that when we get to questions but i certainly support transparency i think the gentleman and i call upon the thing we should remember the committee from north carolina howard employed forty seven thousand people in the united states if in fact we had indicted these companies they would have most certainly been barred from the medicare program and two thirds of all of these hip knee replacements are paid for by the medicare system it would have put these folks out of business and those jobs have been lost i didn't tie that together this duros number and you said you were not interested in your testimony very interesting that you and mr green live indicated you have some concerns about my objection my concern was general in nature and mr grindley might be able to speak more to the specifics but i've always believed that prosecutors who work the case who know the case know the history and have a broad base of experience perhaps even prosecuting cases in that industry bring the best knowledge to bear to the problem and so it's not the judges aren't smart they're very smart and they do a wonderful job judging but now we're asking them to do something that they really shouldn't be doing which is making prosecution decisions a deferred prosecution agreement is essentially an agreement not to charge a company and there are sometimes complaints are filed as mr christie described sometimes or not if they are in the company meets all the terms they can be dismissed but that's a very important prosecutor sunni prosecutorial function and i just don't think our judges as good as they are should be doing that sir to you concur with that i do congressman i would add that your inquiry about some examples one aspect of this bill would require a non prosecution agreement to be filed with the court now a non prosecution agreement which is different than a deal does not involve the filing of criminal charges it's a decision really not to prosecute any filing with the court so if you have to file with the court to get approval of a non prosecution agreement that is the core discretionary function of the process and if you have to then educate a court on all of the details of a criminal investigation and have a court then look at the nine principles that are being applied now then that will delay matters i thank you both for that there's been talk about a gubernatorial race to the north of here timing the release the g a o report later this year the order to avoid actual or apparent attempt to perhaps fraud case prior to election mr coble in order for the companies in monitors to participate in our review with the committee subcommittees approval we entered into confidentiality agreements with all of the companies in monitors so our report will not discuss individual cases companies we won't be reporting information that you can use to identify individual companies or monitors like you mr chairman from california i think it's a time urgency here yes i have to go to the white house for the immigration meeting and i wanted to i'm very interested in this i do have questions but i will be unable to ask them if i'm going to make the meeting so i did want to i don't much care about mr christie or his political ambitions always history here i'm really more interested in the public policy implications  e which he seems to be tone deaf to there's an appearance of impropriety of whether there's impropriety or not and and the  impropriety sometimes is more powerful to the public than then actual impropriety and when i read that somebody offered to do this job for three million dollars and somebody was paid fifty two million dollars for doing it that goes beyond the appearance of  goes to to somebody having paid for that and you can protest to me all you want that the taxpayers didn't pay for it but if somebody paid fifty two million dollars for a service it got passed along to taxpayers customers in some way that having been  really want to focus on the policy implications and really everybody seems to have an opinion about this sitting here other than the first witness and the last witness so i'm going to go to the last witness and maybe i can get some some some policy things out on the table it seems to me i guess i'm old fashioned  t most of what we're talking about here in this corporate area is is distinct from what you're talking about in the individual area when i hear people talking about negotiating with who's going about who's going to be the monitor i guess nobody on the private side the individual side gets to negotiate s comes in to this discussion very heavily from a public policy perspective the question i want to ask professor is the extent to which in these corporate settings deferred prosecutions or non prosecution agreements with monitors has grown well it's not an area that i've specifically studied but it is certainly something of a trend to see more prosecution agreements in the corporate context i think one of the motivating factors for that is of course the concern about collateral damage to other entities or other groups of people like employees and so forth well i mean do you perceive it as the prosecutor's row to be compensated who have been wronged is there any obligation on your part to share this information that you are gathering at taxpayer expense with people who who have be function and i'm missing something well let let me try to respond first in terms of victims of a crime there are obligations that the department of justice has to comply with even in the context of a deferred prosecution agreement the needs of the victims and the losses of the victims and that is because with the deferred prosecution agreement there is actually the facts which is a public record of findings of facts that are typically admitted to by the corporation and which is in the public record and could form the basis or would allow a private litigation that would be a source of factual information in which an individual could then review the facts retain counsel and bring in litigation against the company parallel to that is the department of justice  be more appropriately handle if we quit beating up on the civil litigation system and and making it sound like everybody who files a lawsuit is following a frivolous lawsuit is sounding to me like fifty two million dollars paid out anybody to do anything is a frivolous waste of taxpayer money to me especially when when we have  chairman i request unanimous consent to have entered in the record a press release from your office dated october seventeenth two thousand and eight indicating that you obtained an earmark in the amount of eight hundred thousand dollars for one of the companies involved in these deferred prosecution matters there won't be unanimous consent because mr chairman conyers thought that the committee members should be more civil than others and mr didn't press release from the chairman of the subcommittee holding this hearing today indicating that he obtained an eight hundred thousand dollar mark for one of the firms involved in the deferred compensation you're recognized for questioning sir you're out of order this is so extraneous and illogical that it makes no difference and i'm happy to have it under the record and i hope you'll honor all the other earmarks that i've received from my district thank you sir and now you can now this been entered in the record you can proceed with your question you have thank thank you mr chairman three minutes and seventeen seconds yes sir mr chairman i'll do it in that i don't need a lot of time up here because we've got witnesses here to testify and unfortunately oftentimes we do more testifying the judge looks at it talks about a monitor is there any language in there about the competency of the monitor or any language at all that would give some got it to the qualifications or the ability of the monitor that might be in those  remember whether those were in the agreements or not as i'm sitting here today i have a view those agreements in a while the agreement though and to tell too would be viewed by both the criminal complaint and the agreement have to be reviewed and approved by a federal judge before deferring the prosecution and in that in that review when you look at it has been a lot of talk about mr ashcroft was he part of a larger firm he is a part of a larger firm so any idea about how many attorneys they had in there i know that any one time they had talk about mr nigh we're talking about the role of the judiciary in all of this i want to just make two points really clear first one that you just raised which is a federal judge is involved in all this the criminal complaint and that the first prosecution agreement is presented to a federal judge for their approval before the agreement can be finalized because only a federal judge can in fact enter that order that allows the criminal complaint to be deferred for prosecution until the conclusion of the agreement then at the conclusion of the agreement we sit down with the federal judge to review and request the dismissal of the criminal complaint if in fact the company has complied with all the terms of the remit only that federal judge can ultimately sign that this missile and lastly in terms of judicial involvement in the selection process he's i just happen to agree with the attorneys general in the bush administration forty one in the clinton administration in bush forty three administration and  administration all of whom believe that these with proper guidelines that these decisions are best placed in the hands of the prosecutors who are prosecuting the case because they know these companies in the cases best so i agree with all those attorneys general who have looked at this in the great people inside the justice department who have looked at this over four different ministrations and if you could this is the best way to go chairman of california recognize mr chairman we've got so many conflicts of interest and so little time professor you put forward the idea that we shouldn't prosecute corporations because there's quote collateral damage i would point out that we prosecute husbands and fathers and wives and their children are the collateral damage and we have creating a society where the big corporations are allowed to do anything they want as long as they're willing to pay big fees the big established law firms  mr christie were the committee's aware five rather seven of the monitors you appointed under that were appointed under your tenure your ass kroft kelly lacy sampson stern yang and carly are there any others no sir now turning to the zimmer situation you put forward the idea that oh we will lose forty seven thousand jobs if you prosecute the fact is there is money to be paid for the devices they make if you had prosecuted they would have sold their assets to legitimate managements that hadn't committed fraud instead you left those factories those employees and most importantly the consumers of those products at the whim of the management that you would determine had committed fraud you may not agree with that but you at least agree that the zimmer factories and the zimmer company rather deserved monitoring and needed monitoring and yet you deliberately created a circumstance where there was enormous conflict of interest let me point it out if you're running a bar you've got to look at the local cop on the beat who's going to make sure that you're not a nuisance to the community you're monitored by that cop if you give that cop a couple hundred bucks where the few drinks over a couple of weeks that would be a conflict of interest ashcroft not only got but tens of millions of dollars of freeze from zimmer but they were free under your agreement to hire him for tens of millions of dollars there was no limit was there any limit on the total amount of money that zimmer could give to the ashcroft and his law firm under your agreement and why are we have set if a cop takes twenty one hundred few hundred bucks and free drinks from a bar but ashcroft's firm is not only able to charge its full be for tens of millions of dollars but provide unlimited additional services for limited additional amounts of money because i don't believe sir that the analogy is an apt one do is there any limit to the amount that zimmer could pay ashcroft i do not know because i didn't see the agreement between zimmer and ashcroft well they're free to enter into as many agreements as they want to for ashcroft to provide whatever services at whatever amount no sir not under not under the terms of the deferred prosecut deferred prosecution agreements are you bragged that ashcroft's firm was retained to provide additional services that we all were that all were part of what needed to be done to make sure they complied with federal law well you bragged that the zimmer voluntarily retained ashcroft for services outside my son but i said ok is there anything in the deferred prosecution agreement that prevents them or from retaining the ashcroft firm to provide a variety of service no sir and there's nothing that prevents them from doing a whole bunch of things ok a whole bunch of things pens of millions of dollars and then you're going to rely on that firm to protect my constituents from fraud that's already occurred and might occur again while the monitor is getting unlimited tens of millions of dollars yes sir because what the record shows is that over the first year of this agreement across those five companies that consulting fees were reduced by a hundred fifty million dollars and that more than a thousand consultants were excuse me were fired by them going on but i'm going to reclaim my time i have so many questions did you ever what process did you have to make sure that minority and women owned businesses were eligible for these lucrative monitoring contracts there's no the process that was put into place was for all of us to be able to do that in fact one of the monitors in the hip in the case was a minority woman so you had a formal process what product there was no formal what process did you have to invite people you didn't know to apply for these monitoring jobs or was the or were these lucrative contracts limited to people that you and your staff but a relationship with these contracts were limited to people who were qualified for the job but we paid about there was no process within the department of justice to do that and it is not my position to set up guidelines for the department of justice it is the job of main justice arthur other how many of the seven monitors involved have helped you with your election campaign sir i have gotten no help from people in my election campaign with the exception with the exception of former federal judge herbert stern who was not involved in the in the rooms that were talking  partners and spouses of not donated your campaign mr ashcroft has not endorsed you for governor mr ashcroft has not endorsed me for governor no sir and none of the other monitors have provided any assistance i said with the exception of former federal judge herbert stern ok now i just would like to let you know that as i said to you in the letter that i sent to you i had the part at one thirty today because of pressing business that i have back in new jersey i've been here since eleven o'clock and a i don't want to cut anybody off but i need to go and train service so then sir i'd like your ass answer for the record whether you think there was a perception of a quid pro quo when you retain mr kelly and gave him a lucrative contract when just two years prior he had declined to prosecute your brother even though your brother was on a list of people involved in trading and those both above him and member would like day just for five minutes i'll cut it as quick as i know you are limit let me just first ask mr rosenberg mr rosenberg you understand that you have looked over this agreement was there anything that was inappropriate or illegal about this agreement mr franks i have not still be going on today ok i was just doing a little calculation even if the fifty two million dollars is correct the high end and neither of us knows that from my calculations of forty seven thousand jobs that comes out to about eleven hundred dollars per job that you saved and the taxpayers never paid for a penny of it and when i compare that to the stimulus seven hundred eighty billion dollars that should give us approximately seven hundred and eleven million jobs for america and might i just ask you is this a personal request please do not to consult with the the obama administration because if they figure out how you are able to say this many jobs so little they might get reelected so  that i wish you the best i think you've done a fantastic job here today and i'm sorry that you were subjected to some of the the insinuations but you've done a great job and i might endorse you for governor thank you sir miss mr christie christie help you're satisfied mr johnson continued i am on satisfied thank you and what i think we have done is turn this into a partisan matter and it's really not this this is  choice formally indicted actually for some firearms offenses and as a as a consequence there were plea negotiations between blue collar crime right there now white collar crime should get a similar analysis by prosecutors and so i have no problem with that non prosecution agreement in other words are those should not be i don't think you all are saying there should not be guidelines i think what you're saying is you'd like to see some tweaking it i mean who could have a problem with with that in the context of the entire bill yes i do congressman all right well let me ask you but that particular stipulation you have no problems with there are some of the paragraphs under that the guideline provision we do have problems with ok you have a right if you're talking about guidelines as a separate piece of lead you have  said that repeatedly i'm trying to pin you down it also directs the attorney general to establish rules for the selection of independent monitors who could be in disagreement with that and why it also it also provides that a national list of possible monitors from which the justice department must appoint an independent monitor and most establish a fee schedule for compensation of independent monitors and the support staff i mean what could be what could be wrong with that i have no idea nobody will answer the questions did the bill also sets out certain restrictions relating to deferred prosecution and non prosecution agreements and it provides for judicial oversight of such agreements doesn't take any prosecutorial discretion away although i might add that we have done just that without federal court judges by limiting the their discretion on certain things like imposing sentencing guidelines and also  mandatory minimum which resulted in a lot of low level folks in the drug business being incarcerated for long periods of time like twenty thirty years those kinds of things we have taken away our discussion of our discretion of our federal judges and i certainly am opposed to those kinds of schemes which treat everybody the same  expertise to handle these kinds of contracts and what they reported to us is oftentimes that they will choose independent monitor because they have either they don't have the resources or the expert technical expertise for that process including requests public requests for proposals there would be a process to select and oversee a multimillion dollar contract and  s attorney's office have that kind of expertise to draft an oversee and select an appropriate person to be awarded the contract what's interesting that we found and in our review is that different u s attorney offices have different practices one office actually does did go through a competitive bidding process to identify candidates and open up  opportunities other offices have the companies themselves go through a nomination process and the companies are allowed to bring monitor nominations to the department of justice and other cases the department of  justice presents the monitor in the company pretty much has a yes or no decision at the department of justice or u s attorneys office individual u s attorneys offices and this could be a sole source contract seemed excessive is there a limit to how much a monitor can make on these contracts before somebody has committed a crime congressman the i think the limit stems from what agreed upon between the government and the defendant as to the scope of what the monitor should do and under the memorandum issued by the deputy attorney general in two thousand and eight the scope should be limited to whether the company is complying with the agreement and whether it has instituted a compliance program and sufficient internal controls to ensure that there is not criminal conduct going forward but the contract between the company and the monitor they actually are the ones that do the negotiating of the contract between those two entities  to be calculated it was a guarantee of a certain amount congressman i just don't know the e mail traffic suggests at least a thousand dollars an hour congressman under the memorandum from the deputy attorney general the decision as to who the monitor is no longer with a united states attorney or the assistant attorney general for the criminal division in the context of a d p a or an m b a it now rests ultimately with the office of the deputy attorney general and the memorandum issued by mr morford in two thousand and eight state explicitly that the assistant attorney general for the criminal division or any other division and the united states attorneys do not have approval or veto authority with respect to a recommendation for a while as a change was in march of two thousand and eight why was it made my understanding i was not with the department of justice when this discussion began but my understanding from conversations i've had  actually with david nominees was that this process began in two thousand and five in the summer and and to look at monitor relationships and to look at best practices and try to develop guidance and that there were meetings within the department of justice with the u s attorneys and with the criminal division to discuss it and then that there was a meeting with outside counsel private lawyers to get their input and then yes at the end of two thousand and seven because of interest by congress and the public that process was escalated in the memorandum was in march of two thousand and eight and what was so upsetting about this contract that caused the change to be made congressman i just can't speak about that i've been able to get talk to david nami is still the united states attorney in atlanta but i have not communicated with people that are no longer with the department about that know the details of the contract contract you know what other monitors generally make and other situations i do not in the two instances and they're still under review where there is a monitor possibility we have made specific of the monitor about the financial arrangements and whether or not the subject corporation is satisfied with it and whether that's been addressed and certainly under this memorandum from the deputy attorney general we  encourage companies to come and talk about issues that may arise in the context of both the monetary is and the deferred prosecution agreements but before this was picked the u s attorney local u s attorney had pretty much  authority to pick whoever he wanted an award essentially unlimited mileage response congressman is that before march of two thousand and eight the united states attorneys throughout this country would have the looking at the situation knows that something is wrong when you local u s attorneys fifty million dollars contract to someone who has political connections restitution that was imposed in the bristol myers squibb agreement because of actual or perceived conflict of interest or other ethical considerations such provision is that not true are you aware of those changes what i'm aware of  chairman is in may of two thousand and eight provision was added to the united states attorney's manual that said that with respect to a plea agreement that they should not include terms requiring a defendant pay fines to a charitable educational community or other organization or individual that is not a victim of the crime or is not providing services to redress the harm caused by the defendant's criminal conduct that was put into the united  states in may of two thousand and eight and you know of any situation other than that of mr christie and his alma mater seton hall where this occurred i don't but i was not with the department of justice then right i know you weren't you weren't you weren't  with davy crocket at the alamo but you know they all died let me ask you this do you know of any situation in the department of justice where somebody has had such an agreement other than mr christie where he had was part of this deferred prosecution and somebody gave money to his law school i don't ok congressman and that type of arrangement or that type of settlement would be not permitted any longer is that right that that's correct unless the law school is somehow providing services to redress the harm caused by the criminal conduct so if the law school was doing knee jerk reaction in this type of thing some kind of body late medical device worked that would be one thing but there weren't i mean i have no knowledge of that i would add mr chairman that there are also statutes and regulations that address the requirement of disqualification in circumstances in which there is personal or political relationship and would you explain what those are those came about after mr christie situation was correct i don't think they did i think they were for that i'm not sure about that mr chairman but i think they were already in place at the time they were in place and what are those  forty five c f r section forty five point two title disqualification from personal or political relationship and it says basically that no employee shall participate in a criminal investigation or prosecution if he has a personal or political relationship with any person or organization which he knows has a specific and substantial interest that would be directly affected by the outcome of the investigation or prosecution and that is a provision relating covered relationship and under the guise lives in effect at the time that was improper mr chairman i just don't have sufficient information about that matter to be able to come to a conclusion assuming those facts are true that he was his previous employer would that not  provide some guidance on monitor selection i'm sorry the morford memo was that was that a response to the situation in new jersey my only knowledge is that comes from some conversations i've had because i wasn't there but i was told that the effort began at the department of justice in the summer of two thousand and five to begin to look at monitor relationships and develop best practices and that meetings occurred both within the department and in one instance with outside counsel to begin to develop those best practices and then at the end of two thousand and seven there were inquiries from congress and there were also  public concerns which expedited that process and then the memorandum was issued in march of two thousand and eight and again that's what i've been told about it i wasn't at the department at the time so i wasn't involved  ask you this the there were five defendants in the medical devices case and one was from my district and and the world should know that i'm an effective congressman i got an earmark in my district and i place the words going out now but that had nothing to do with this hearing in fact that company said mr christie was a reasonable doubt they spoke well of him i had a good impression of him until today and the is they did think there should be some type of obs about that there were times when there monitor went and did certain travels and went certain places and spent certain amounts of money on top flight hotels and first class airfare etc etc things like that and they objected do you not think that there should be somebody looking in on that circumstance because they didn't feel like they had they could say anything well mr chairman  i believe that the corporation in the first instance which is negotiating these agreements with the monitors and i think some of those discussions can take place before decisions are made on monitors that they in the first ends an with the lawyers i have should attempt to put some restraints on what the costs are some prescience of what it is from the department of justice point of view under the morford memo we are encouraging companies to talk to us about these relationships and concerns that arise and i would think that if concerns arose in which a monitor was going beyond the scope of his his or her charge as a monitor then those issues should be brought to  us and we would be interested in having discussions about it because the morford memo itself recognizes the importance of looking at the cost and impact of monitor ships on the company both in terms of making the decision to have a monitor and in terms of what the scope of the monitors duties should be anybody aside have another round of questions mr king of iowa thank you mr chairman i really take the opportunity to thank all the witnesses and glad to have a chance to do so i remarked to one or more of my colleagues at the conclusion of all of your testimony that the filter that you all went through to get here must a filled out anybody that didn't happen to have significant intelligence because all of your testimony to me seems to be very well informed and very measured and very accurate and  that's it's not that we don't get good panels or witnesses here but certainly rank among the best we've seen and i'm i have to also i'm struck by that view that you bring for the for the  deferred prosecution agreements that are the subject of this and as i recall mr grenell are you spoke i think most up with regard to the unintended consequences of my calm although i don't recall that this panel has examined those unintended consequences deeply as as you may prefer or as i may prefer and i'd ask if you could expand upon the unintended consequences i mean it is always a difficult valuation when you're faced with a company that has engaged in criminal activity but you do have to look beyond that and i think part of it stems from the fact that a corporation cannot be put into jail so from a deterrent point of view i think that's one reason why the collateral consequences do come into play so you see what the impact may be going forward with a prosecution where you tend to get a guilty verdict and that is of course on the employees on th and even on the public but having said that if you have a corporation that's a risk or where the criminal activity goes across the culture of the company in a systemic then i think the pendulum typically would swing the other direction where a prosecution may be necessary and so these are the sort of balancing act that we try to go through when we review what our choices are in prosecuting a corporation i don't have knowledge where there's a provision that says you are capped at a certain amount but i started the department in march of this year so i'm beginning to review proposals for deferred prosecution agreements  information about there doesn't appear to be any explicit limit on the hourly rate that monitors might get paid i think the sense we've spoken to a few monitors to the sense is that they tr charge their normal hourly rate whatever that might be but there doesn't appear to be any explicit limit on how much that might be and in your professional judgment would there be any motivation for a company to pay an additional amount  with the company wish to maintain a good report with the with the monitor given the fact that you know that if there was a violation of the agreement then the process would start case would be brought in front of a judge so in terms of leverage to my good friend from ohio i would suggest that the alternative in terms of payment to the monitor by the come the company has zero leverage and i claim my time appreciate the gentleman's view on this and an opportunity to restate it it just occurs to me that of the people that i've hired when i paid them what that was agreed to in the contract that that has always been satisfactory i don't remember ever feeling that urge to write an extra check to them if they were satisfied with the compensation for the services it rendered that also point out that there such thing as contract agreements and i think we should adhere to them even up to the point of allowing a witness to leave when the agreement is that the witness be allowed to leave also point out that i the gentleman from massachusetts has stated that he supports process of prosecutori discretion and i think that's been explored to some extent here at least and the question becomes how much discretion but the important point as i think i've made by mr rosenberg that if we're going to accept some of the suggestions about about turning that prosecutorial discretion over to the judiciary branch we're asking judges to do jobs that they do that overloads them and they may or may not be qualified to do however qualify they are do the jobs are so i appreciate the witnesses testimony and some of the things that happened in this hearing today but political lynchings are not among the let me to i appreciate your back thank you mr plowman and mr pasqual would like to testify in the second panel before we go in for votes we're supposed to go in for votes between two fifteen and two thirty well i i don't have any questions for my two colleagues could you have a quick question for the panel before we dismiss them well i like to point out that you know i agree contacts contracts should be respected but the problem seems to be that within that contract there are no guidelines there are no caps in terms of what compensation is open ended and clearly at least from my perspective any legal services a server that i rented in the amount let's just presume that that fifty two million figure is accurate i would say that would be hard to justify but can i just offer you one hypothetical if i were the united states attorney and i'll pose this to the panel and i came to you and i indicated that i had a relative a close relative that was accused only accused of a certain crime and not in a formal sense but was a suspect and a colleague professional colleague another district attorney or another prosecutor declined to generate sufficient revenue what would your advice be to me and again i go back to my original comments about appearances and confidence of the people and the integrity of the system i think what i would do is consult with an ethics expert at the department of justice and get a specific advice as to how i should proceed thank you mr rosenberg i remember this is a close relative under several years prior  the individual that i intend to appoint as a monitor which may or may not generate millions of dollars of revenue declined to prosecute would you do understand a hypothetical the current sitting state's attorney and up in boston and you had i had a close relative you reviewed the case you made a decision not to prosecute and now i'm looking to you to become a special monitor whereby you have the potential to generate hundreds of thousands of dollars if not and i agree with mr brander you go to an ethics expert ok i would professor kind i would be i would be somewhat squeamish about the greed of concerned about it appearances thank you mr chairman i yield back thank you if there's no other questions of the panel we thank each of the members the panel and excuse you and thank you for your contributions and there might be there are some written questions from islam from the maybe going to one of you if you would be kind enough to respond to them in writing that we made part of the record and members of the committee have five days to submit further  questions to you which could be posed and we'd appreciate you responding to those and expeditious manner with that the panel is is is the panel is dismissed without objection  normally we come down and say thank you and shake hands all those things we're going to pass all those typical congressional niceties because we have the congressional votes to come very soon and they trump niceties so the second panel i'm now pleased to introduce the witnesses for a second panel for today's hearing our first witness will be mr william scrawl jr from the eighth district of jersey elected to congress in november ninety six i think everybody knows about his his record he introduced h r nine hundred twenty seven accountability deferred prosecution act of two thousand and nine this past april second congressman would you please proceed with your testimony to elevate their application every citizen and this esteemed committee should understand how the fir prosecutions have become part of the justice system as i studied this issue mr chairman i believe that the f prosecutions are related to the larger issue of corporate prosecutions in the post enron are well i come to realize that these agreements are actually even more relevant to the type of corporate malfeasance that cost millions of americans their jobs they're gone those jobs are gone i do not know the prior witness what jobs he was talking about the lead our nation to the brink the greatest economic crisis is the depression quite simply corporate greed collusion and illusion have become legion the executive branch and the congress have for the most part stood aside witnessed a significant collapse of oversight justice and professed american values i would contend that they're examining the buy ins of the evidence before us that the sentinels at the gate a fair number of us attorneys have been handmaide to the fleecing of our citizens however as we saw in the zimmer case older americans were the ones who suffer the physical and mental consequences of bribery in florida we witnessed the bribery of physicians so that they would advocate for a specific prosthetics device regardless of whether it was the fact of or not no one person before us today on the first panel point about the victims these perpetrators of medicare fraud are the lowest of the low in my opinion and yet because they entered into with the for prosecution these corporate criminals and never had to even admit guilt to the consumers they cheated and thanks to mr christie they never will miss the chairman and the members of this committee there's been an eros of confidence as mr delahunt talked about earlier not only in the financial system but in the justice system which failed to bring the bad actors to justice pay a fine avoid jail promise you'll do better next time and no one gets prosecuted the fine simply becomes the price of doing business and fact many corporations as part of their business brief the captains of corporate america who did our nation wrong look to the very justice system that's supposed to protect citizens to bail themselves out we're here today seeking legislation to help right the ship of justice this goes way beyond one conflict  concerning a fifty two million dollars no big contract mr christie mr ask rob should not flatter themselves on the bill the accountability in the furred prosecution act of two thousand and nine yes mr johnson what could be wrong with that accountability you're right it's simply brings accountability and transparency to this process for the first time i want to literally show all of you just one example of why we need transparency on this issue here in the files one monitor deborah huang yang these are files we have taken from the senate committee on the aging which held its own medicare fraud investigation in the case in question this bill from   even documents every time this young had to charge a cab fare which is standard billing practice for law firms whenever the bill sent to incorporated by ashcroft the ashcroft group which charged many millions more in expenses does not include any information about the service provided it it gives us no information whatsoever no bill of all ours none reimbursable expenses fact it's just one page on one page bill listing the total amount due the bank information about where to hold wire the bank i think that's fitting by the way and nothing more this is a ransom note not a billing statement and you come to your own conclusion about transparency which going to it should come as no surprise that the executive branch will always prefer to alter its own procedures at its own pace but as members of congress i believe we have a solemn responsibility to oversee these practices and take corrective action when it is called for the similar case merely highlights the lack of oversight of the for prosecutions in this case there existed a clear outright conflict of interest as mr christie set out to hire his former boss attorney general ashcroft we know that least one hundred twenty different the for prosecution agreements and as the g a o pointed out many of them were undertaken by federal prosecutors who had the diligence to seek a transparent and fair process for entering into these agreements and selecting monitors we're not just talking about the manager we're not talking about a manager of a baseball team and i have to be playing on that baseball team i'm talking about the manager of justice in the united states of america who left this position that was hired by one of the fellows one of the people on his team to do this job was to christie and many of his acolytes will trumpet that the first prosecution system they expanded as a fail proof method to cleanse corporations to them i need cite only one example a i j t two thousand and four or two thousand six to the furred prosecutions and yet what worked well didn't this former insurance giant which is now synonymous with corporate greed and public deceit received to defraud prosecution agreements and paid a monitor twenty million dollars for a walk in accepting the fired prosecutors you mr greenberg now disgraced too late forces out of the barn this said this this comprehensive deal brings finality to the claims raised by the f c c and his apartment of justice the role of an independent consultant compliments our own transaction review process as we welcome this and handsome and he said today the messager like sometime thank you mr chairman and thank you in the committee for holding this hearing and and it's a very serious matter i'll try to be brief you have my written testimony which hellish to include in the record in its entirety what led congressman pascrell and me to introduce legislation is because we saw all the inconsistency and lack of proper oversight of monitors and i believe that without a legislative fix basically u s attorneys will continue to write their own rules and that leads to a broad spectrum of practices often bad practices from u s attorneys dictating to the company who the monitor will be how much they will charge and all the other things that have come up today the troubling thing is that federal prosecutors have too much  appointing these corporate monitors and allowing an unelected official unfettered leverage against companies and corporations who potentially engage in criminal criminal behavior in vice the type of abuse our judicial system is designed to prevent now i want to mention briefly congress impressed girl and i went to a day at n y u law school that was totally to be devoted to this issue and the interesting thing about it was they were talking about all kinds of different prosecutions there was no question that the poster child for abuse was mr christie the fact that he hired his former boss mr ashcroft in one case that another former federal judge who was retired was hired as a monitor another case and then basically kickbacks were or sent thousands of dollars in election contributions to his campaign in the second case and the third case with seton hall law school that had nothing to do with the with the actual case in front of  deferred prosecution was getting given in and out professorships these are the kinds of abuses if there's unfettered discretion now there was someone just comes in and says look i can do whatever i want and i will do these kinds of things and lester some kind of limitations and if anybody tells you that that somehow you know he wasn't in charge of of how much money was going out i mean that e mail that you saw between zimmer holdings you know in the ashcroft case where they were  complaining to christie and his assistant about how you know we're not getting paid enough was a perfect example of what goes on is actually going back to the u s attorney and saying we're not getting paid enough and can you intercede here to try to resolve this so that so that ultimately we get paid more when when when mr pascual talked about the bills this came up at the n y u conference that day and it was just unbelievable how the one woman deborah yang was actually there talked about how she had itemized her bills to justify the time and the billable hours that she put in but in ashcroft's case he just submitted a medal and basically been justified at all so i mean this is that the problem that we're having if you don't step in and we don't pass some kind of legislation you're going to have these kinds of abuses continue and i think they could only get worse if you have somebody as the u s attorney who feels that he can do whatever he wanted almost a dictatorial fashion and i'm just going to end with this mr chairman there are so many and answered questions in the case of these cases that were handled by christie and i just want to list some of them if i can and then i'll conclude how much was john ashcroft paid after you selected him as a monitor why did you fail to disclose how much ashcroft and other monitors were paid how did you decide to give a score of the contract did you use any objective criteria such as a bidding process how many candidates did you have for the ashgrove deal and for the other monitors what were their names what kinds of due diligence were performed on each candidate to avoid conflicts of interest what types of billing records did you require of mr ashcroft and the other monitors what criteria is in place to determine if the moderator does the rob the job right why do you believe there is no conflict of interest in granting david kelley a monitoring contract if you're he decided not to prosecute your brother are you going to return the campaign contributions from john english scene are you going to return the contributions to herb stern why aren't these forms of pay to play what set you apart from the other prosecutors who use competitive bids judges and a written criteria to select monitors but we were at n y u that day there were many other u s attorneys who actually use transparency went to a judge to approve it didn't chose from a list of experts didn't use their friends didn't give the money to their own alma mater the didn't supervise you know how much money these they were getting as you saw in these e mails so the problem is if you don't move on some sort of legislation like what we're proposing yes you will have good people that us attorneys that use a transparent process that pick from a list of experts that don't hire their friends but then you will have chris christie's who will do exactly the opposite because it's in their political interest to select their friends make sure they get big fees and continue these under vetted practices so all we're asking is that you consider this legislation i know you are seriously considering it because they are really concerned that without it there is no objectivity and there's a lot more potential for abuse thank you mr chairman thank you sir there's a minute fifty six to go  christie hired this is just all nonsense and i'm sorry that it has to be that way but i suppose it would take us all day to try to correct all the nonsense has been put forth here from these two new jersey members and who i respect but i'm sorry that there's politics was we wanted answers to the questions and we put legislation before the committee in good faith we're ready to defend the legislation particularly in terms of what you hear if you step back from the politics of the you want transparency  you've always talked about transparency that's what we want and we're willing to work with you on this legislation this system is not working i can assure you forget about us you make the judgment you look at the materials