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67–415 PDF 2011

S. HRG. 112–44 

PROTECTING AMERICAN TAXPAYERS: SIGNIFICANT 

ACCOMPLISHMENTS AND ONGOING CHALLENGES IN THE FIGHT AGAINST FRAUD 

HEARING 

BEFORE THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

JANUARY 26, 2011 

Serial No. J–112–1 

Printed for the use of the Committee on the Judiciary 

( 

(II) 

COMMITTEE ON THE JUDICIARY 

PATRICK J. LEAHY, Vermont, Chairman 

HERB KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

SHELDON WHITEHOUSE, Rhode Island 

AMY KLOBUCHAR, Minnesota 

AL FRANKEN, Minnesota 

CHRISTOPHER A. COONS, Delaware 

RICHARD BLUMENTHAL, Connecticut 

CHARLES E. GRASSLEY, Iowa 

ORRIN G. HATCH, Utah 

JON KYL, Arizona 

JEFF SESSIONS, Alabama 

LINDSEY GRAHAM, South Carolina 

JOHN CORNYN, Texas 

MICHAEL S. LEE, Utah 

TOM COBURN, Oklahoma 

BRUCE A. COHEN, Chief Counsel and Staff Director 

KOLAN DAVIS, Republican Chief Counsel and Staff Director 

(III) 

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page 

Grassley, Hon. Chuck, a U.S. Senator from the State of Iowa ............................ 3 

prepared statement .......................................................................................... 80 

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont .................... 1 

prepared statement .......................................................................................... 84 

WITNESSES 

Breuer, Lanny A., Assistant Attorney General, Criminal Division, U.S. Department of Justice .............................................................................................. 5 

West, Tony, Assistant Attorney General, Civil Division, U.S. Department 

of Justice ............................................................................................................... 7 

QUESTIONS AND ANSWERS 

Responses of Lanny A. Breuer to questions submitted by Senators Leahy, 

Coburn, Grassley, Klobuchar and Sessions ....................................................... 23 

Responses of Tony West to questions submitted by Senators Leahy, Coburn, 

Grassley and Sessions ......................................................................................... 56 

SUBMISSIONS FOR THE RECORD 

Breuer, Lanny A., Assistant Attorney General, Criminal Division, U.S. Department of Justice, statement ........................................................................... 69 

West, Tony, Assistant Attorney General, Civil Division, U.S. Department 

of Justice, statement ............................................................................................ 87 

(1) 

PROTECTING AMERICAN TAXPAYERS: SIGNIFICANT ACCOMPLISHMENTS AND ONGOING CHALLENGES IN THE FIGHT AGAINST 

FRAUD 

WEDNESDAY, JANUARY 26, 2011 

U.S. SENATE, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:41 a.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Patrick J. Leahy, 

Chairman of the Committee, presiding. 

Present: Senators Leahy, Whitehouse, Klobuchar, Franken, 

Coons, Grassley, Hatch, and Coburn. 

OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. 

SENATOR FROM THE STATE OF VERMONT 

Chairman LEAHY. Good morning, everybody. By Washington 

standards, a snowy morning; by Vermont standards, a light dusting. Some of you have heard me tell the story of being home a 

while ago and turning on the radio in Vermont. They were giving 

the news, and they said, ‘‘In other news today, we expect a light 

dusting of snow, no more than 5 or 6 inches,’’ then went on to 

something else. 

I want to have this hearing, and I first wanted—and we will do 

this formally at our executive meeting tomorrow. I want to welcome my friend Chuck Grassley, who is here. Chuck and I have 

served together for decades. We have worked on issues from agriculture to criminal fraud. We have had a lot of either GrassleyLeahy or Leahy-Grassley bills that have been passed. We are considering a vital issue today on an issue that Senator Grassley and 

I have worked together with great success: the fight against fraud. 

One of the first major bills the Senate Judiciary Committee considered last Congress—it was actually one of the very first bills the 

President signed into law—was the Leahy-Grassley Fraud Enforcement and Recovery Act. It gave fraud investigators and prosecutors 

the tools and resources to better hold those who commit fraud accountable and, just as importantly, to recover taxpayer money. 

Working together, we strengthened the False Claims Act, which 

empowers whistleblowers to find fraud and recover stolen tax dollars that would otherwise go undiscovered. We worked on key provisions to fight fraud in the Affordable Care Act and the Wall 

Street Reform Act. Those new laws are already paying off, and I 

think it is safe to say that Senator Grassley and I will be watching 

2 

how well they do. And we have a number of Senators in both parties who are very interested in this. 

We will hear today about the historic successes in anti-fraud efforts. In the last fiscal year alone, the Department of Justice recovered well over $6 billion through fines, penalties, and recoveries 

from fraud cases. Since January 2009, the Department has recovered $6.8 billion of taxpayer dollars in False Claims Act cases, and 

I had the staff check and I find that is far more than any other 

2-year period. 

Now, I would like to reinvest a small amount of these recoveries 

back into fraud enforcement. I think it is a good deal for America 

as we get greater recovery of taxpayer funds without any new 

spending of taxpayer money. 

In addition to recovering billions of dollars in penalties and fines, 

I think the Department of Justice has to focus on holding individuals accountable for their fraud crimes. 

I was pleased to learn that the Financial Fraud Enforcement 

Task Force has secured charges against 343 criminal defendants 

and 189 civil defendants for fraud schemes that harmed more than 

120,000 victims. I am referring to Operation Broken Trust. The 

Health Care Fraud Prevention and Enforcement Action Team created by the Justice Department and Department of Health and 

Human Services have had similar victories. 

We are going to learn today about ongoing challenges that law 

enforcement officers face in investigating and prosecuting fraud. 

The FBI, to their credit, has recently more than doubled the number of agents investigating fraud and has created the National 

Mortgage Fraud Team, in part thanks to our legislation and the 

appropriations that came with it. But I am disturbed by ongoing 

reports of fraud in the mortgage foreclosure process—fraud that 

has affected every single State in this country, certainly every 

State that is represented on this Committee, where so many Americans are finding themselves in this challenging economy and facing fraud and mortgage foreclosure. I want to know whether the 

Justice Department needs new tools and greater resources to root 

out those responsible. 

I have got to say I want people who are doing this, who are committing these frauds, obviously fined, and I want to see people go 

to jail. We have got to make it very clear. If you get some kid that 

steals a car, they might go to jail. You have somebody who steals 

tens of millions of dollars, they ought to, too. 

The President and Attorney General Holder have enthusiastically supported legislative initiatives to bolster fraud enforcement; 

they have spearheaded important new efforts on mortgage fraud, 

health care fraud, and financial fraud. And I think that commitment to fraud enforcement is shown by our witnesses here today, 

and I am glad to see Assistant Attorneys General Lanny Breuer 

and Tony West back here. 

Major fraud cases take time to investigate and prosecute. I think 

the push we have seen will continue to yield significant results. 

But we have to keep giving law enforcement the tools and resources necessary to root out fraud so that they can continue to recoup losses to taxpayers. Every day taxpaying Americans deserve 

to know their Government is doing all it can to hold responsible 

3 

those who committed fraud and to prevent future fraud, particularly with so much taxpayer money at risk, and I compliment the 

administration for pushing hard on this. We want to make sure we 

are giving you all the tools so you can push. 

Americans are worried about their budgets at home. We have to 

protect their investment in Government. So I look forward to working with Senator Grassley on this and other areas as we have for 

so many other things. 

Chuck, I will yield to you. 

STATEMENT OF HON. CHUCK GRASSLEY, A U.S. SENATOR 

FROM THE STATE OF IOWA 

Senator GRASSLEY. Well, let me thank you for the welcome that 

you gave me, and you accurately have described the very close 

working relationships we have had on some pieces of legislation. I 

think more important than the few pieces of legislation or a lot of 

pieces of legislation we worked on—and we have some philosophical differences, but the most important thing for me is in the 

30 years that I have been on this Committee with you, there has 

not been one confrontation that I can remember, and I am sure I 

would remember it. 

[Laughter.] 

Chairman LEAHY. That is a midwestern understatement. 

Senator GRASSLEY. Okay. And so I think that that best describes 

our relationship, the fact that you and I can disagree on some 

things, agree on a lot of things, and still work together and try to 

solve problems, and that is our job here. So I want to thank you 

for that welcome. 

The Committee has a lot of work to do, and our work could not 

come at a more critical time for our country. Every move that we 

make must take a painstaking look at the fiscal realities of our 

time, the constitutional responsibilities that we hold, and the will 

and desires of the American people that we represent. I am going 

to have more to say tomorrow at our first markup, but I look forward to working with you as we move this Committee forward in 

a productive manner, consistent with our relationship over the 

years. 

Today’s hearing is a good way to start—and probably my way of 

characterizing this hearing is a whole lot different than the way 

you characterized our working together on fraud. But it is a good 

way for me to start my new responsibilities as Ranking Member. 

Fighting fraud is something that you and I have worked on together over many years in the Senate. I am glad to be in this chair 

as we begin the 112th Congress and focus on continued efforts to 

protect Federal tax dollars from fraud. As the author of the 1986 

amendments to the Federal False Claims Act, which have recovered nearly $28 billion back to the taxpayer, I have spent a great 

deal of my time in the Senate working to combat fraud against taxpayers. I welcome the opportunity to begin this Congress on this 

very important issue. 

Combating fraud obviously is not a partisan issue. It is an American taxpayer issue and one that every Senator and Member of 

Congress should focus on. As Congress looks for ways to cut Federal spending and reevaluates which Federal programs are worthy 

4 

of hard-earned taxpayer funds, we need to be cognizant that every 

dollar lost to fraud is a dollar of funding siphoned off from legitimate programs. Last Congress, as Chairman Leahy just said, he 

and I worked together and crafted this Fraud Enforcement Act to 

address the number of problems with Federal fraud fighting. Today’s hearing offers another opportunity to follow up on the Justice 

Department’s implementation of the Fraud Act and to ask questions to help us determine what is and is not working. 

Monday, the Department announced health care fraud recoveries 

for fiscal year 2010. The civil recovery numbers were impressive in 

our great victory in the fight against fraud. However, these recoveries only represent a small fraction of the estimated $40 to $60 

billion in annual health care fraud. 

There are a number of topics on health care fraud I would like 

to cover today, including the questions of paying and chasing fraud, 

privacy of physician billing information in the Health Care Fraud 

and Abuse Act, and the HEAT programs. Additionally, I am interested in talking about transparency in the False Claims Act settlements by requiring the Department to report a number of statistics 

to Congress annually. This will help alleviate concerns I have had 

for years that these settlements may simply become the cost of 

doing business for these large corporate fraudsters. 

I also want to ask the witnesses about security fraud and some 

high-profile settlements with the SEC signing off last year. Specifically, I want to know what the Justice Department knew about 

these settlements in advance and whether they signed off on them 

or otherwise agreed to them. I want to learn more about why so 

many of these complex financial fraud cases seemed to end in settlements where shareholders are punished and yet there are so few 

ending in criminal prosecution where the senior executives ought 

to be held accountable. 

Finally, I would like to note that, regardless of the substantive 

laws that we pass, Mr. Chairman, the investigative and law enforcement resources appropriated and the prosecutions brought so 

far, criminal fraud will not be deterred until we revisit the Supreme Court’s decision in United States v. Booker, and that obviously deals with child pornography, fraud cases, the type that we 

are discussing here today. If potential fraudsters view the lenient 

sentences now being handed down as merely the cost of doing business, efforts to combat criminal fraud could be undermined. 

I appreciate the opportunity to raise these important issues 

today with the witnesses and look forward to working with the 

Chairman. 

Could I ask, Mr. Chairman, that some time about 5 minutes to 

12, Senator Harkin and I are honoring Medal of Honor winner 

Staff Sergeant Giunta from our State, and we have to go together 

to do that. So I will—— 

Chairman LEAHY. I would stop anything for a Medal of Honor recipient. Feel free. We will start then with Lanny Breuer, who is the 

Assistant Attorney General for the Criminal Division of the United 

States Department of Justice, and I thank you for your kind words, 

Senator Grassley. 

Mr. Breuer started his career as an assistant D.A. in New York 

City, prosecuted offenses ranging from violent crime to white-collar 

5 

crime. He later joined Covington & Burling, where he served as cochair of the White-Collar Defense Investigation Group. He was 

Special Counsel to President Clinton from 1997 to 1999, where we 

got to know each other better. He got his undergraduate degree 

from Columbia and his law degree from Columbia Law School. 

Mr. Breuer, please go ahead, sir. What we will do is we will hear 

from Mr. Breuer, then we will hear from Mr. West, then we will 

go to questions. 

STATEMENT OF HON. LANNY A. BREUER, ASSISTANT ATTORNEY GENERAL, CRIMINAL DIVISION, U.S. DEPARTMENT OF 

JUSTICE 

Mr. BREUER. Thank you. Good morning, Mr. Chairman, Ranking 

Member Grassley, and distinguished members of the Committee. 

Thank you for inviting me to speak with you today about the many 

ways in which the Department of Justice protects American taxpayer dollars by bringing criminal fraud prosecutions. I am honored to appear before you on behalf of the Department and along 

with my colleague and friend, Assistant Attorney General Tony 

West. 

Together with the United States Attorney’s Offices, our important partners in the Inspector General community, and our many 

other law enforcement partners, the Criminal Division, whose nearly 600 lawyers I am privileged to lead, is investigating and prosecuting fraud cases all across the country. We are holding 

fraudsters accountable for bilking the American people, and we are 

seeking sentences designed to punish and deter them. 

We are also aggressively working to recoup the money these 

criminals have stolen, whether from individual investors through 

investment fraud schemes or from our taxpayer-funded public programs, such as Medicare. 

As a result of our efforts over the past year, the Criminal Division, the United States Attorney’s Offices, and our colleagues in the 

Civil and Antitrust Divisions have prosecuted thousands of defendants for fraud crimes and obtained judgments and settlements 

amounting to billions of dollars in fraud and corporate corruption 

proceeds. In fiscal year 2010, for example, in criminal matters in 

which the Criminal Division participated, we obtained approximately $3.4 billion in judgments and settlements. 

The Department is grateful for the many resources Congress has 

provided to support and enhance our criminal fraud enforcement 

efforts. Beyond providing expanded statutory tools, Congress has 

authorized critical funds through various means, including in the 

Fraud Enforcement Recovery Act, FERA, which, of course, Chairman Leahy and Ranking Member Grassley sponsored. In addition, 

last year in the Affordable Care Act, Congress authorized additional, critical funding for use in health care fraud enforcement. 

Congress’s financial support of our criminal investigations and 

prosecutions is critical to protecting the American taxpayer’s hardearned money. And the amount of taxpayer money restored to the 

United States Treasury through our criminal enforcement efforts 

far exceeds—far exceeds—what we spend to recover that money. 

In September 2010, when I last testified before the Committee on 

the subject of financial fraud, I described numerous significant 

6 

prosecutions that we had recently brought in the areas of investment fraud, mortgage fraud, bank fraud, and fraud in disaster programs. Since that time, we have continued our aggressive push to 

investigate and prosecute fraud in all its forms. 

For example, we have expanded our aggressive efforts to prosecute those who seek to defraud the Medicare program. The 

Healthcare Fraud Prevention & Enforcement Action Team 

(HEAT)’s Medicare Strike Force, which now operates in seven U.S. 

cities, has led this effort. 

In fiscal year 2010 alone, the Strike Force filed 140 indictments 

involving charges against 284 defendants who collectively billed the 

Medicare program more than $590 million in just those seven cities. We have also been working closely with the Special Inspector 

General for the taxpayer-funded Troubled Asset Relief Program, 

TARP, and our other law enforcement partners to hold accountable 

fraudsters trying to pilfer TARP funds. 

In addition, as described in greater detail in my accompanying 

written testimony, we have been working hard to investigate and 

prosecute perpetrators of investment fraud schemes, procurement 

fraud schemes, securities fraud schemes, and mortgage fraud 

schemes. In many of these cases as well, we work closely with our 

many partners, including the Financial Fraud Enforcement Task 

Force, on which I serve as co-chair of the Commodities and Securities Working Group, the Recovery Act Working Group, and the Rescue Fraud Working Group. 

As I have told this Committee before, prosecuting fraud is a high 

priority of the Department of Justice. Every day Federal prosecutors and agents across the country are working hard to investigate 

and prosecute those intent on defrauding American taxpayers or 

otherwise undermining the transparency and integrity of our markets. We are absolutely committed to continuing these efforts. 

Thank you for this opportunity to provide this Committee with 

this brief overview of the Department’s efforts to combat fraud. I 

look forward to working with the Committee further, and I am 

happy to answer any questions. 

Thank you. 

[The prepared statement of Mr. Breuer appears as a submission 

for the record.] 

Chairman LEAHY. Thank you very much. 

We will next hear from Tony West, who is the Assistant Attorney 

General for the Civil Division of the United States Department of 

Justice. Prior to his time at Civil Division, Mr. West was a partner 

at Morrison & Foerster, representing individuals and companies in 

civil and criminal matters. Before that he served as Special Assistant Attorney General for the State of California. He started his career at the Justice Department. He spent 2 years working on crime 

policy issues as Special Assistant to the Deputy A.G., and later 5 

years working as Assistant U.S. Attorney for the Northern District 

of California. That is a job where you do not get too much time to 

yourself, I know. 

Mr. WEST. That is true. 

Chairman LEAHY. He earned his bachelor’s degree from Harvard 

University, his J.D. from Stanford University Law School. 

7 

Assistant Attorney General West, we are delighted to have you 

here, sir. 

STATEMENT OF HON. TONY WEST, ASSISTANT ATTORNEY 

GENERAL, CIVIL DIVISION, U.S. DEPARTMENT OF JUSTICE 

Mr. WEST. Thank you so much, Mr. Chairman and Ranking 

Member Grassley and members of the Committee. It is good to be 

with you again. It is a great privilege to appear before you with my 

good friend and colleague, Assistant Attorney General Lanny 

Breuer, to discuss the Civil Division’s work to fight fraud and recover taxpayer dollars on behalf of the American people. 

The Civil Division, as you know, represents the United States in 

courts throughout the Nation in a wide variety of matters and is 

the Justice Department’s largest litigating component. We handle 

cases that touch upon nearly every aspect of the Federal Government’s operations and this administration’s domestic, national security, and foreign policy priorities. And central to our mission is 

the recovery of taxpayer dollars lost to fraud, waste, and abuse. 

The primary enforcement tool that we use to achieve this important objective is the False Claims Act, a landmark piece of legislation that is well known to the members of this Committee. And essential to our success has been the ability to enlist the aid of whistleblowers pursuant to the Act’s qui tam provisions—provisions 

that in 1986 were substantially strengthened due to the successful 

efforts of Ranking Member Grassley and Representative Howard 

Berman. 

Indeed, Mr. Chairman and Ranking Member Grassley, thanks to 

your crucial leadership not only in promoting the False Claims Act 

but in substantially strengthening it in 2009 with the FERA 

amendments, the Justice Department today has better enforcement 

tools, better resources, and a better ability to pursue fraud perpetrated on the American people, better tools than we have ever 

had before. 

In fact, since January 2009, the Civil Division, working with our 

partners in U.S. Attorney’s Offices around the country, secured 

over $10 billion in fraud settlements, judgments, fines, and penalties under the Division’s many statutory authorities—a staggering amount that represents the largest 2-year Civil Division 

fraud recovery in the history of the Department of Justice. 

Now, while the largest share of this record-breaking sum represents the Department’s vigorous efforts to fight health care fraud, 

something I will discuss in just a moment, that amount is also 

comprised of a wide variety of fraud cases we have pursued and resolved over the last 2 years, from procurement fraud cases involving substandard supplies to our men and women in uniform, to the 

ongoing cases involving suppliers of defective bulletproof vests that 

not only cheated the taxpayers but, more importantly, put our men 

and women in law enforcement at risk. 

What is more, our success over these last 2 years highlights the 

results we can achieve when we combine enhanced resources for 

enforcement purposes and more effective coordination between the 

Justice Department and our sister Federal agencies with appropriate but aggressive enforcement strategies aimed at deterring ilVerDate Nov 24 2008 14:42 Aug 11, 2011 Jkt 067415 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\67415.TXT SJUD1 PsN: CMORC
8 

legal conduct and holding responsible actors accountable. Nowhere 

is this more evident than in our fight against health care fraud. 

Now, when I was asked to appear before this Committee in October 2009, I said that we in the Justice Department recognized the 

urgency posed by a health care problem that undermined the quality, integrity, and safety of patient care. And now just over a year 

later, I am pleased to report that the Department of Justice has 

never been more aggressive or more successful in its fight against 

health care fraud. 

Since January 2009, the Civil Division has—again, working with 

the Nation’s U.S. Attorneys—opened more health care fraud matters, secured larger fines and judgments, negotiated higher settlements, and recovered over $8 billion for the taxpayers in health 

care fraud cases. This, too, is a record representing more health 

care fraud monies recovered than in any other 2-year period in history. 

And even beyond the recovery of billions of dollars, this antifraud effort reflects a commitment by the Attorney General and the 

Civil Division to pursue cases that span the broad spectrum of 

health care fraud, including sophisticated corporate overbilling 

schemes, heart-wrenching cases of preventable patient neglect in 

nursing homes, large pharmaceutical companies that provide illegal 

kickbacks to physicians, and individual doctors who endanger the 

lives of those in their care just to bump up their Medicare reimbursements. 

Indeed, ours is a commitment which recognizes that while most 

health care providers, companies, and individuals who do business 

with the Government are dealing fairly, playing by the rules, and 

are careful with the taxpayer dollars they receive, we know that 

there are those who cut corners, who take advantage, who put profits over patient safety. And, Mr. Chairman, it is those individuals 

and those corporations who attract our enforcement attention. 

Finally, let me briefly touch upon the Civil Division’s work to 

protect consumers by pursuing economic fraud. At the cornerstone 

of our efforts in this area is the interagency Financial Fraud Enforcement Task Force that Assistant Attorney General Breuer 

talked about. And the Mortgage Fraud Working Group, which I cochair, is at the core of the task force’s mission to combat mortgage 

fraud, from foreclosure rescue fraud and loan modification schemes 

to systematic lending fraud in the nationwide housing market. And 

our aggressive enforcement efforts have significantly increased recoveries in housing and mortgage fraud matters. 

Last June, Attorney General Eric Holder announced the results 

of a nationwide mortgage fraud sweep, Operation Stolen Dreams, 

which resulted on the civil side in over 190 civil enforcement actions involving recoveries of almost $200 million. 

Mr. Chairman, I look forward to working with you and the members of this Committee as we continue to tackle the challenges that 

are posed by fraud on the American taxpayers. Thank you for the 

opportunity to be with you, and I am happy to answer any questions you may have. 

[The prepared statement of Mr. West appears as a submission for 

the record.] 

9 

Chairman LEAHY. Well, thank you, and I hear some of these stories. I have followed with interest the one on the bulletproof vests. 

Former Senator Ben Nighthorse Campbell and I had worked together in getting bulletproof vests for our law enforcement, and on 

an Appropriations Committee I worked very hard to get more body 

armor for our troops in the field. This is just one area of fraud. You 

assume when you are protecting our people who protect us that you 

are giving them the best. And I think it is as malicious thing as 

possible when they do that. 

Obviously, you have talked about the mortgage fraud. When you 

have somebody who is out of work, they are facing enough other 

problems, and to have somebody try to reap an illegal benefit on 

that, it is Dickensian in its action. 

You talk about civil and criminal fraud recoveries for the last fiscal year, over $6 billion; recoveries since January 2009, $10 billion. 

We are talking about real money, and that is money coming back, 

lost taxpayer money, lost frauds coming back as protecting Americans’ investment in their Government. 

Would you agree with me that the money we spend on fraud enforcement has not only paid for itself, but it is a pretty good return 

on investment? And this kind of money, if we continue to spend 

this money on fraud enforcement, we are going to continue to see 

returns. Mr. Breuer, would you agree with that? 

Mr. BREUER. Mr. Chairman, I absolutely would agree. If you look 

at the number for the Criminal Division, our budget is a small, 

small fraction of the $3.4 billion that we were involved in recovering for the United States last year. Putting aside the deterrence 

and putting aside every other aspect, I do not think there is a question that what the Department is doing—the Criminal Division and 

the Civil Division—is showing that it is a remarkable return, as we 

are stewards of the taxpayer dollars. 

Chairman LEAHY. Mr. West, do you feel the same? 

Mr. WEST. Absolutely. I think there is no question that that is 

some of the best money that we spend in terms of enforcing our 

laws against fraud. There is no question that we bring back a multiple amount of money for every dollar we spend when it comes to 

anti-fraud enforcement. 

Chairman LEAHY. And I would assume that, again, the deterrent 

effect when people actually think, wait a minute, they are going to 

come after us, that must have some effect. 

Mr. WEST. I think that is absolutely right. As Assistant Attorney 

General Breuer noted, clearly nothing focuses the mind quite like 

jail time, and there has been great success on the criminal side. 

And we are intent—going to Ranking Member Grassley’s comments 

earlier this morning, when it comes to holding corporate defendants responsible, we want to make sure that we are sending the 

message that this is not just a cost of doing business. We want to 

create a financial disincentive to those who would perpetrate fraud. 

Chairman LEAHY. Mr. Breuer, let me ask you on that, again, we 

have a lot of former prosecutors on this Committee, and we have 

always agreed that nothing focuses your criminals’ attention more 

than the fact that the bars may close on them. In the past, we have 

heard people who have committed fraud that sometimes when they 

get a fine, it is considered a cost of doing business. 

10 

What are we doing about real jail sentences? Obviously, I want 

to get money back for the taxpayers. Obviously, you want to get the 

fines. But what about putting some of these people in jail? 

Mr. BREUER. Well, Mr. Chairman, we are putting them in jail. 

Let us use one example, a discrete one. The health care fraud prosecutions, the Medicare Fraud Strike Forces, we are talking about 

doctors, we are talking about nurses, we are talking about assistants. The average sentence in a health care fraud case is approximately 40 months. These are cases that we are bringing in remarkable time. We are bringing them quickly, swiftly, and efficiently. 

That is one example. 

And if we look at all kinds of fraud cases, Mr. Chairman, there 

is no question that the defendants are going to jail for lengthy periods of time. Depending on the crime, depending on the seriousness 

of it, we are putting people in jail. We are extraordinarily focused 

on it. 

If you look at the FCPA area, we have put more people in jail, 

and we have indicted more people there than we have ever done 

in history. That is true, really, with every aspect of fraud. 

Chairman LEAHY. Again, I mentioned what Senator Grassley and 

I did—I was going to say ‘‘bipartisan.’’ It was actually a nonpartisan matter. We had people support it across the political spectrum in the Fraud Enforcement and Recovery Act. I think it is the 

most significant anti-fraud legislation in more than a decade. We 

have talked about the resources for Justice, FBI, and other agencies. We did this on the Affordable Care Act, the Wall Street Reform Act. We did it with the idea that it was going to make it easier for you, and one of the reasons for having the hearing, we want 

to know if it has made it easier for you and if there are other 

things that we should be doing. 

Mr. BREUER. There is no question, Mr. Chairman, that what you 

and Senator Grassley did with FERA was enormously important. 

It has provided us with extraordinarily helpful tools. By, for instance, expanding commodities, options, and futures to constituting 

securities fraud under 1348, we have been able to bring cases of 

securities fraud that we have never been able to bring before, and 

we have already done so. Making ‘‘financial institution’’ include private mortgage lending businesses has also provided us a very important tool. And, frankly, making fraud under the TARP a major 

fraud and making mortgage lending businesses, applications to 

them constitute false statements when you make a false statement, 

have all been tools that we are using. So both with respect to the 

monies received and the broadened statutory interpretations that 

you provided us, you have enhanced very substantially our ability 

to bring fraudsters to justice. 

Chairman LEAHY. I am going to have some follow-up questions 

that I may just pass on to you. I appreciate the fact that both of 

you have always been available anytime either my staff or I have 

called. 

I yield to Senator Grassley. 

Senator GRASSLEY. I am going to repeat something I said in my 

opening statement, that health care fraud is a pervasive problem, 

and to the tune of about 5 to 8 percent of Federal expenditures. 

11 

And obviously I am acquainted with this because of my leadership 

on the Senate Finance Committee for a long period of time. 

I want to refer to a recent Wall Street Journal series examining 

fraud of health: ‘‘Medicare often fails to stop questionable payments 

up front’’ because of the pay and chase system occurring for a number of reasons. It is a major vulnerability. I authored legislation 

last year to correct some of this, and I think that is the next logical 

step in combating health fraud. 

Additionally, the Wall Street Journal article pointed out how a 

three-decade-old court decision made in 1979 protects physician 

privacy by limiting the release of physician billing records. A 

former Department of Justice official is quoted in the article as saying that, ‘‘We should make these records public. At least I think it 

is time to revisit this issue and bring some transparency to this 

whole thing.’’ 

Mr. Breuer and Mr. West, do you agree that we should consider 

revisiting the privacy protections for physician billing records in 

Federal health care programs? And if not, why not? 

Mr. BREUER. Well, Mr. Chairman, I want to begin by thanking 

and applauding you for your leadership, and we take that very 

much to heart. In our prosecutions we use the tools you have provided for us, and we are very pleased with how our Medicare Fraud 

Strike Forces are working. 

We would absolutely want to work with you on these kinds of 

issues and have the dialog, but we also do believe, I should say, 

that we do have right now, because of your work and others, the 

resources that we need and are able to get the information that we 

need for prosecutions. But we always are open for more, and the 

more enhanced tools we get, the better our job can be. 

Senator GRASSLEY. Would you chime in, Mr. West? 

Mr. WEST. Sure, Senator, and I would actually echo Assistant Attorney General Breuer’s thanks for your leadership on these issues 

because it really has provided us in the Civil Division with the 

tools we need to be able to pursue not just health care fraud but 

all types of fraud. And we very much welcome the opportunity to 

talk about any tools that can enhance our ability to identify fraud 

and to go after it and recover taxpayer dollars. And so I know we 

have had an ongoing conversation, our staffs, and we look forward 

to continuing that dialog. 

Senator GRASSLEY. On another point, just for Mr. Breuer, the 

HCFAC program cost over $7 million last year. Do you believe that 

suspending provider payments up front for entities that are under 

Federal investigation for fraud is a better investment compared to 

continuing to pay and chase fraud via law enforcement? 

Mr. BREUER. Well, Senator, you have my word that we will be 

zealous in our prosecutions, but I will be the first to acknowledge 

we cannot prosecute our way out of this problem. I noted that Secretary Sebelius the other day talked about new steps that she and 

her people were taking. And so, of course, we do believe that our 

friends at HHS, the steps that they are taking on the front end will 

be the most effective way of stopping the fraud. But when the 

fraud occurs, we will be there. 

Senator GRASSLEY. Okay. Mr. Breuer again. I have a letter, a response from DOJ and HHS I received Monday. About 66 percent 

12 

of all False Claims Act cases pending allege health care fraud. The 

letter also stated that 180 of these cases involved the pricing and 

marketing of pharmaceuticals. Additionally, the letter stated that 

726 criminal convictions and plea bargains occurred in fiscal year 

2010. 

Could you tell me—and if you cannot, I would take it in writing—how many of those criminal convictions involved individuals 

employed by pharmaceutical manufacturers? 

Mr. BREUER. Well, Senator, it may make sense for my colleague 

Assistant Attorney General West to take the lead on this, because 

I think he is handling the False Claims Act cases more than we 

are. 

Mr. WEST. With regard to the—and these are cases that will 

often involve, as you know, Senator, the Food, Drug, and Cosmetic 

Act. We would be happy to get you a breakdown of which of those 

convictions involved individuals employed by pharmaceutical companies. 

Senator GRASSLEY. Okay. And then I hope this is for you, Mr. 

Breuer, but over the last several years, a number of pharmaceutical companies have paid billions of dollars in fines and penalties for illegal marketing of their products or their drugs, some 

pleading guilty to criminal cases, yet individuals were not held accountable for breaking the law. 

Did the Department of Justice consider prison terms as a deterrent in these cases? And if not, why not? 

Mr. BREUER. Senator, my good friend Tony West may be annoyed 

with me, but I think that is also one that he is going to have to 

answer. They are taking the lead with respect to the pharmaceutical companies in this space. 

Mr. WEST. I will take that on. Let me start by saying that we 

consider in all appropriate cases the whole panoply of criminal and 

civil penalties when it comes to these types of cases involving pharmaceutical companies. And we do not hesitate—if individual culpability indicates and the facts are there and the law supports it, we 

will not hesitate to prosecute those cases. And we have actually 

quite a few good examples in the last 2 years where we have held 

individuals accountable. 

For instance, just three off the top of my head. There are two 

physicians that we have gone after individually because of their actions, physicians, their actions with regard to actions they took 

which were substandard care issues. We, I guess just 3 months 

ago, indicted the associate general counsel of a major pharmaceutical company for allegations of obstruction of justice when it 

came to an FDA investigation. 

And so, you know, the message that we have been giving quite 

consistently, both Assistant Attorney General Breuer and myself, is 

that we will look at individuals and we will pursue individuals 

when the facts and law allow. 

Senator GRASSLEY. Okay. And, Mr. Chairman, just one more 

short question in this series? 

Chairman LEAHY. Of course, of course. 

Senator GRASSLEY. Again, I do not know; Mr. Breuer, I thought 

it was you. According to the same letter, 80 False Claims Act cases 

are under investigation involving hospitals. How many of the 726 

13 

criminal convictions or pleas involve the individuals employed by 

hospitals? And if you cannot answer that, if you could answer it in 

writing. 

Mr. BREUER. Absolutely. And, again, the False Claims Act is my 

friend. 

Senator GRASSLEY. You could easily conclude that I do not know 

what each of—— 

[Laughter.] 

Mr. WEST. It is confusing, but I do think it is a sign of the close 

collaboration that we are sometimes doing so much together. 

We will get you the breakdown that you are asking for in terms 

of how many of those individuals were employed by hospitals. 

Senator GRASSLEY. Okay. Thank you, Mr. Chairman. 

Chairman LEAHY. Thank you, Senator Grassley. 

Senator Whitehouse, another former prosecutor, U.S. Attorney, 

Attorney General, it is all yours. 

Senator WHITEHOUSE. Thank you, Mr. Chairman. 

I have a comment that I would invite you to respond to off-line 

because if we go down this road, we will take up every minute of 

my time on it. But I wanted to sort of put out a marker that I view 

that America is right now on the losing end of the biggest transfer 

of wealth through theft and piracy in the history of humankind, 

and that it is happening in cyberspace, and that our law enforcement particular investigative resources to address that problem are 

nowhere near adequate, off by orders of magnitude at this point. 

And I know that you all are deep into your interagency process 

that is supposed to conclude, I hear, in a matter of weeks, maybe 

a month or two, and I just want to put a marker down that I very 

much hope that you are pushing for the kind of resources that this 

problem demands. If you actually sort of see it in all its dimensions, as I have had the ability to do on the Intelligence Committee, it is really big and most Americans really do not see it because it is either classified or protected by corporations that do not 

want the public and shareholders and regulators to know how 

badly they are being scooped. So that is the point that I want to 

make. 

The question that I have for you both is about predictive modeling and how engaged you are with making sure that that is an 

effective investigative and prosecutorial tool. I come at this on two 

fronts. We had a long fight with DEA about trying to get off paper 

records for controlled prescriptions—pharmaceuticals—because it 

disabled e-prescribing networks to require people to have a paper 

one next to their electronic one. And after 3 years of struggle, that 

battle is finally won, and DEA has changed it position, and we now 

have a new regulation in place. I wish it had taken 3 months and 

not 3 years, given what was at stake. But that is, I guess, the nature of bureaucracy. 

At the same time, we have the LeMieux-Whitehouse bill that has 

authorized the Secretary of HHS to engage in and hire firms to do 

predictive modeling through the Medicare data bases, and I gather 

those are coming up to bid with contracts very shortly, maybe in, 

I think my notes say, in April. And what I am hoping is that you 

all are talking to Secretary Sebelius and that you see this predictive modeling technology as a really good way for highlighting 

14 

discrepancies and anomalies, things that suggest that, you know, 

suddenly a doctor goes from no prescriptions of Percocet to a hundred a week may be worth an inquiry, or the same patient is getting prescriptions from five different doctors. That is just in the 

prescriptions phase. Then you get into billing and starting to develop the signs of fraud. I think it can be a hugely effective tool, 

both in e-prescribing and in regular Medicare billing. And if you 

could tell me a little bit about how engaged you are in that process 

that is happening over at HHS so we do not get to a position where 

that is done and they have met all of their goals by doing it, and 

you are looking at it say, oops, this does not work for us because 

you were not sufficiently engaged in that process. 

So are you really looking forward to these predictive modeling 

tools? Do you think they are valuable? And how engaged are you 

with those who are developing them? 

Mr. BREUER. Absolutely, Senator Whitehouse. First, even though 

you told me not to comment, I just want to make sure you know 

how committed I am and how committed we are on the first issue 

you spoke about. Indeed, one of my deputies testified—— 

Senator WHITEHOUSE. Provide it in writing, and go on to predictive modeling. 

Mr. BREUER. Okay. I will put it in writing. 

Senator WHITEHOUSE. Thank you. 

Mr. BREUER. With respect to predictive modeling, I absolutely am 

a fan and believe in it. Our Medicare Fraud Strike Forces that I 

mentioned before in our seven cities have been stunningly successful, and in no small part because of that very modeling. When we 

find out that Dr. A is billing at an exorbitant rate higher than Dr. 

B, and they are near one another, we look at Dr. A right away. 

That is why we have been able to bring cases literally in months. 

So we are huge fans of that. 

Moreover, in the Recovery Act, Earl Devaney, the Chair of the 

Recovery Act Board, to some degree is doing exactly that right now, 

and we would like to think that is one of the reasons why fraud 

appears to be as low as it is. We are very aware of that. We are 

having ongoing dialogs. The FBI I know was very involved in that. 

I meet with the FBI, and they have a very data-driven process in 

place that I think is very successful. 

With respect to ongoing discussions with HHS, I will have to get 

back to you to what degree we are having those, and—— 

Senator WHITEHOUSE. There are two contracts that are expected 

to be awarded in April, I believe, and then on July 1, the use of 

the new technology should kick in, which basically does it kind of— 

it is like a search function as opposed to doing it in individual identified cases. 

Mr. BREUER. Well, I am pretty good about butting myself in 

places, so I will find out. 

Senator WHITEHOUSE. Please make sure you are comfortable 

with what they are doing. 

Mr. BREUER. Absolutely. But more generally, the notion of predictive modeling is something that we very much agree with. 

Senator WHITEHOUSE. Very good. My time has expired, so sorry, 

Tony. 

Mr. WEST. That is all right. 

15 

Senator WHITEHOUSE. [Presiding.] Senator Franken is next. 

Senator Franken. 

Senator FRANKEN. Thank you, Mr. Chairman. I want to thank 

Senator Grassley and Senator Leahy, Chairman Leahy, for their 

leadership in this area, and I think it is especially fitting that this 

is our first hearing with you as Ranking Member, because you have 

been a leader in this area for so long. I enjoyed serving on this 

Committee with Senator Sessions as the Ranking Member, but I 

am very much looking forward to working with you in this capacity, Senator. 

Mr. Breuer, as you may know, I have a longstanding interest in 

making sure that we hold Government contractors to a higher 

standard. If the Federal Government chooses to contract with a 

company, we have an obligation to make sure that contractor is not 

defrauding American taxpayers, and that means vigorously investigating allegations of contractor fraud. But it also means thinking 

twice before we award any new contracts to a company that has 

been indicted or convicted of fraud. I do not know about you, but 

if I hired a contractor to work on my house and he charged me a 

ton of extra money for work he did not do, I would not use that 

contractor again. And I would make sure that my friends knew not 

to use him either. It seems like the same should be true of Government contractors. 

As Chair of the National Procurement Fraud Task Force, what 

are you doing to make sure that Federal agencies are collaborating 

on suspension and debarment actions if a contractor is convicted of 

procurement fraud? How can we make sure that contractors that 

we know we cannot trust are not awarded new contracts? 

Mr. BREUER. Thank you, Senator. As an aside, the National Procurement Fraud Task Force has been folded into the Financial 

Fraud Task Force. 

Senator FRANKEN. Okay. 

Mr. BREUER. But we are still covering it. 

Obviously, the Department of Justice itself is not the debarring 

official, and so we cannot make that decision. But, of course, what 

we are is absolutely transparent in our cases, and I have had many 

meetings with IGs and in the IG community. We value them tremendously. So, ultimately, after we pursue these corporations—and 

I would like to think we are doing it aggressively and we are doing 

it in a targeted manner—that information is there for the debarring officials. 

I agree with your premise that if you commit a fraud against the 

United States, you should not have a right to continue doing business. But, ultimately, that part of it is not our decision. That is the 

part of the department or agency that actually provides the contract, and they all have debarring officials who make those ultimate decisions. 

Senator FRANKEN. Okay. Well, I can see this is not your ultimate 

decision, but I am particularly worried that Federal agencies are 

giving a free pass to large contractors. According to the Project on 

Government Oversight’s Records, over the past 15 years, there 

have been only five suspension actions and zero debarment actions 

of the Government’s top 100 contractors, which receive 55 percent 

of all contracts. I think part of the problem is that we are too deVerDate Nov 24 2008 14:42 Aug 11, 2011 Jkt 067415 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\67415.TXT SJUD1 PsN: CMORC
16 

pendent on a handful of very large contractors, particularly when 

it comes to the wars in Iraq and Afghanistan, and that too many 

contractors maybe now are too big to fail. 

Mr. BREUER. Senator, I share your concern and, like you, feel 

very deeply about procurement fraud, so much so that you may 

know that I literally have three prosecutors on detail from the Inspector General in charge of Iraq who literally work in my fraud 

section. We are prosecuting fraud in Iraq, in that area, and in Afghanistan. And so I agree with you that those numbers seem very 

low. 

Senator FRANKEN. How frequently is DOJ putting in settlements, 

specific language that can be used to prevent debarments and suspensions? 

Mr. BREUER. I do not think we ever do, Senator. I do not think 

we would do it for the very reasons you said. I do not think the 

Department of Justice believes that it is our role to determine 

whether someone should be debarred or not because we do not 

have the expertise of the department of agency who has to decide 

how valuable this particular contractor is. 

Senator FRANKEN. Okay. I am running out of time. I just want 

to ask something about return on investment. The FBI estimates 

that health care fraud may be as high as 10 percent of all health 

care expenditures, which means this type of fraud may cost the Nation more than $220 billion annually. But you were able to recover 

$2.5 billion from health care fraud judgments and settlements this 

year. I think there is some estimate that for every dollar invested 

in investigations, we get back $17. And what I am wondering is, 

would you like more resources? Can that return on investment 

mean that we are actually reducing our deficit by spending more 

money on these—— 

Mr. BREUER. Right. Well, Senator, I will say this: I mean, our budget in the Criminal Division is a bit under $200 million. Now, 

we do get other monies that are targeted to us, but we were responsible for approximately well over $2 billion just by ourselves 

and $3.4 billion working with other U.S. Attorneys. So I think 

there is absolutely no question that we, the Civil Division, the Department, are a remarkable return on investment. We are being 

very efficient and targeted in our work and will continue to be, and 

we are being very aggressive about getting dollars back and returned to the U.S. Treasury. 

Senator FRANKEN. Thank you. 

Sorry, Mr. West. 

Mr. WEST. That is all right. 

Senator FRANKEN. Thank you, Mr. Chairman. 

Chairman LEAHY. Thank you very much, Senator Franken. 

Senator Klobuchar. 

Senator KLOBUCHAR. Thank you very much, Mr. Chairman. I 

also welcome Ranking Member Grassley from our neighboring 

State of Iowa, and I am glad that he is in his position. I also enjoyed working with Senator Sessions. 

I first have a question—since we are going to be very focused in 

the next few months on budget issues—for Mr. Breuer. In your 

written testimony, you mentioned that you have obtained approximately $3.4 billion in judgments and statements, which is truly an 

17 

extraordinary figure. Do you have any sense of how this compares 

with past year? 

Mr. BREUER. I do, Senator. It is clearly higher than in our past 

years. Last year, it was $3.4 billion. In fiscal year 2009, I think it 

was, candidly, probably half that amount of money. It was probably 

just under $2 billion. So it is by far a record year. 

Senator KLOBUCHAR. And I think you have heard some of the 

budget proposals out there. I personally have favored caps and 

things like that. But some of the proposals would hit particularly 

hard on the Department of Justice, something like one of them I 

heard would cut FBI agents by 4,000. And I just wondered what 

you think of that and what would happen to our prosecutions if 

that were to occur. And I guess also at one point in your written 

testimony you said the money you have obtained in the criminal 

prosecutions has more than paid for the cost of investigating them. 

Do you have specific numbers? And how will you use that argument if you want to protect some of these criminal—or some of us 

want to protect these criminal justice resources? 

Mr. BREUER. Well, Senator, without going to any particular provision, I just think it is inescapable that if you take our prosecutors 

away and if you take our FBI agents away, we will not be able to 

protect the American people in the way we are now protecting. We 

will not be able to recover the funds in the way we are recovering 

them. And every day in the United States we see victims of all 

kinds of fraud and other kinds of crime. 

I could not be more proud of the lawyers in our Criminal Division and our U.S. Attorney’s Offices. I could not be more proud of 

the investigators in all of the agencies. I deal with them all the 

time. And it is just the reality that when—we think we are, of 

course, a great return on investment. We also think we perform a 

remarkably important function, and if there are fewer of us, we 

will be able to do less. 

Senator KLOBUCHAR. Okay. Well, I think it will be very important to be armed with those statistics as we go into some of these 

negotiations, because I do believe, having seen some of these cases 

in the white-collar area, that you can actually pay for the investigation, not to mention what you are preventing from happening 

in the future. 

In the health care fraud area, I again commend you for that. You 

mentioned that through the work of the Medicare Strike Force, 146 

defendants were sentenced to prison terms with an average sentence of more than 40 months. Would you say that there is a renewed focus on prison time as a punishment in the health care 

fraud area? 

Mr. BREUER. Well, whether renewed or not, there is an enormous 

focus on prison time. It is insidious that people are trying to defraud the Medicare program and trying to steal taxpayer dollars. 

So our prosecutors are very zealously fighting for jail time, and 

they are getting it in the vast majority of cases. And, of course, 

often these are, again, people who have never gone to jail in their 

lives and often people who have no records. They are white-collar 

people who have decided that for whatever reason they ought to try 

to defraud the program, and we are seeking and getting jail time. 

18 

Senator KLOBUCHAR. Very good. One last thing I wanted to mention. We had another hearing on this; I think it was Senator Specter’s last hearing that he chaired on the Foreign Corrupt Practices 

Act. I think we both know it is an important statute both in theory 

and in practice. But I have to tell you I have heard from several 

companies, and it turned out a lot of other Senators have heard 

this, too, in their State that are trying very hard to comply with 

this, but because of some increased enforcement efforts, they do not 

feel like they have the guideposts to know exactly how they comply. 

I think you know that many companies self-report FCPA violations 

when they discover them, and as we discussed at that hearing 

whether or not the DOJ is considering providing guidelines for selfreporting or Senator Coons and I are working on some potential 

legislative changes to update that statute. As you know, they define a foreign official very broadly, and in today’s China, a nurse 

could be construed as a foreign official because they work for the 

state. So how—just if you have given some thought or if you would 

go back and give some thought and talk to people about the guideposts with that statute, the need for some guidance for our companies who are really trying to do the right thing as well as some potential statutory changes. 

Mr. BREUER. So, Senator, we are always willing to engage in dialogue and absolutely will. But I do not really accept that premise. 

I believe that there is much guidance with respect to the FCPA. It 

is the one statute, for instance, that provides an opinion release. 

If you have a question, we will give you an opinion on it. 

If you look at our website in the Fraud Section, we have every 

document that we have filed in court right up there. Myself, my 

fraud chief, many speak on this area all the time. So if there is a 

subtle issue that you really feel you do not understand, we are 

happy to explain it. But if you look at the cases we have brought, 

these are not subtle cases. We do not want—— 

Senator KLOBUCHAR. Could I—I have no dispute with the cases 

you have brought. It is just that the investigations that are taking 

place oftentimes, I am sure, find nothing wrong that are wreaking 

havoc in terms of companies trying to do business consistent with 

the President’s focus on doubling exports where they find out a 

nurse comes to a seminar on how to use some health care third 

quarter, the Metro is closed down, they give her money to take a 

cab back, and then they get a major investigation. 

Mr. BREUER. Well, Senator, I do not think that they are getting 

major investigations. And one other point there: More than half the 

companies that we are investigating and prosecuting actually are 

foreign-based companies. So we are very proud of our work. But absolutely we are always willing to engage in dialogue and will continue to do so. 

Senator KLOBUCHAR. All right. Thank you very much. 

Chairman LEAHY. Thank you. Normally I go next, but I know 

that Senator Grassley has an important meeting with a Medal of 

Honor recipient, so I will yield to you, Senator Grassley. 

Senator GRASSLEY. Thank you. 

Mr. West, last year Congress revised what is known as the public 

disclosure bar, the False Claims Act. It was amended so that it is 

no longer a jurisdictional issue for the courts that can be raised by 

19 

a defendant. Instead, the courts shall dismiss claims under the new 

public disclosure provision unless it is opposed by the Government. 

This provision is meant to have a significant impact on qui tam 

whistleblowers if it is not properly administered by the Department. 

Has the Department developed guidelines concerning when it 

will and will not oppose such motions? 

Mr. WEST. Well, first let me say, Senator, this was part of the 

FERA amendments, of course, that you and the Chairman led that 

have helped us in our enforcement capability. And this was one of 

the important changes so that there is this amendment to the 

whistleblower—to the public disclosure bar so that whistleblower 

suits are not inordinately tossed out of court because of that. And 

this is something that we are working as we—we have an open dialogue with the relators bar, and we work often very closely with 

them to make sure that these cases are being brought in a way 

that not only reflect meritorious investigations but are ones that 

ultimately can be successful. 

Senator GRASSLEY. Well, then, if the guidelines have not been developed yet, do you anticipate developing such guidelines? And if 

you did develop guidelines, will the guidance be made public or 

available to Congress for oversight purposes? 

Mr. WEST. Well, certainly, I mean, to the extent that there are 

any guidelines that we would be sharing with the relators bar or 

with anyone else, we would make those public, and we would share 

those with Congress. I think, you know, that would be our practice 

if we were going to share them both with outside counsel. 

Senator GRASSLEY. Before I get to the next question, I would like 

to note as a follow-up to Mr. Breuer’s response to Chairman Leahy’s question about putting fraudsters in jail, while it is true that 

some health care defendants get jail time, this does not seem to be 

the case in securities fraud where sentences, aside from Bernie 

Madoff, have been light or non-existent, at least not putting bigfish corporate America people in jail. 

My question here is in regard to the SEC. If the Justice Department fails to act in a case where the Government finds a hedge 

fund paid hush money to someone to get them to withhold crucial 

information, does this not send the message that perjury to the 

SEC will be tolerated? And I had a page and a half here background to that question, but I do not want to take time to read it. 

I think you understand what I am up to here. 

Mr. WEST. Yes, Senator, and actually I am going to do what Assistant Attorney General Breuer did to me earlier, because he actually handles referrals from the SEC in the area of securities fraud. 

His Division handles that. 

Mr. BREUER. Senator, if I may, just to begin, I just want for a 

moment to take issue with what I think sometimes is a 

misimpression. If you just look over the last few months in the area 

of securities fraud, you will see that Mr. Dickson for securities 

fraud got 2 years in jail. Mr. Mott for securities fraud got 8 years 

in jail. Mr. Wolf got 41⁄2 years in jail. The UBS trader got 5 years 

in jail. Joseph Collins of Refco got 7 years in jail. 

Senator, those were all sentences over the last months. 

20 

Senator GRASSLEY. Can I bring up a case then where I and 

former Senator Specter were involved in over a period of years? 

The Pequot founder paid $28 million to settle the SEC case. The 

SEC says he paid a former employee over $1 million of hush 

money. There has been no prosecution of that person. 

Mr. BREUER. So, Senator, my only point and issue was just to 

suggest—I just wanted to make it clear that securities fraudsters 

are going to jail. Without talking about a particular case, what I 

can tell you is that my partnership with Rob Khuzami, the Director 

of Enforcement, is extraordinarily close. Our teams meet on a regular basis. It is extraordinarily collaborative. And in any case 

where we believe we can prove beyond a reasonable doubt that a 

crime was committed, we are bringing those cases. 

Obviously, the SEC has a different standard of proof because 

they pursue their cases civilly. But where we can bring a criminal 

case, we will. And where incarceration is appropriate, we seek it, 

and we do that in quite a number of cases. 

Senator GRASSLEY. Did the Securities and Exchange Commission 

consult the Department of Justice before entering the Goldman 

Sachs settlement? 

Mr. BREUER. We collaborate with the SEC, but they do not seek 

our guidance when they resolve their cases. They do that independently. 

Senator GRASSLEY. Maybe one last question—well, no, I will stop 

there because I think I have to go right now. So I will submit questions for answer in writing. 

Chairman LEAHY. In fact, I will keep the record open for any 

other questions until the close of business. 

[The questions of Senator Grassley appear under questions and 

answers.] 

Chairman LEAHY. Senator Whitehouse, you had other questions. 

Senator WHITEHOUSE. I did want to follow up. Thank you, Chairman. 

The first thing I wanted to follow up on was perhaps unfairly I 

drew the conclusion from the delay, what one might actually describe as foot dragging—from at least my perspective, it seemed 

that way; maybe it is just the way the bureaucracy operates—that 

the Drug Enforcement Administration did not see any value in 

going to electronic prescribing records. They made the case that, 

you know, it might put at risk their ability—you know, you can see 

the old agent sitting next to the prosecutor at the table, and one 

by one entering those handwritten scripts into evidence and thinking that is how you made drug diversion cases. And that seemed 

to be the sort of model that they were proceeding from, and they 

did not seem, to me anyway, to have any appreciation of how incredibly valuable having this information electronically so that you 

can make cases and find these anomalies and things so much more 

rapidly. 

And so in addition to a sort of general question of do you support 

this, can you vouch for the fact that there has been a change of 

heart at DEA or that I was mistaken about this and that, in fact, 

they do get what a valuable tool they will acquire for investigation? 

Mr. BREUER. Senator, I do not want to speak for the DEA, nor 

should I. What I can tell you is that I meet with the Administrator, 

21 

Michele Leonhart, who is a great patriot, incredibly devoted to the 

agency and to serving the American people. I find DEA to be very 

forward leaning. I will be happy and will speak to her about this 

very issue. 

It has been my impression over the last 2 years that DEA is very 

open to new approaches and being as vigorous as it can be, and I 

will speak with her about that. 

Senator WHITEHOUSE. Good. I appreciate that. And then because 

time was short—I was not sure we would get a second round—I cut 

you off on the comment that you were prepared to make on the cybersecurity issue, and I just wanted to give you an opportunity to 

go ahead and make that comment now that we have a little bit 

more time at our disposal. 

Mr. BREUER. I just wanted to reassure you that it is very much 

on our mind as well. I could not be more proud of our CCIPS unit, 

our Computer Crime and Intellectual Property unit. The Deputy 

who oversees that section testified yesterday. We are very aware of 

these approaches. We are speaking within the administration a lot 

about that, and I just wanted you to know it is very much on our 

mind. And we will be vigorous and also look at this as an issue of 

remarkable import for the American people. 

Senator WHITEHOUSE. Good. I appreciate that, and I certainly 

did not want anything in my comment to deprecate the extraordinary work that is being done in this area by you all, in some 

cases in close conjunction with other services. I am familiar with 

it, I am proud of it. It is extremely impressive. But when you scale 

it against the dimensions of the problem that we are facing, I think 

it is an order of magnitude too small. I know that is not your problem. I think you all are doing a wonderful job with the resources 

that we have given you, and so the thrust of my question is to 

make sure that you are not shy about coming back to us making 

a strong case for what resources are really needed to protect the 

cyber infrastructure of our country, particularly around critical infrastructure; to protect the intellectual property that resides on our 

cyber infrastructure and that is being looted wholesale by foreign 

competitors; to protect our banks from electronic robbery; to protect 

against massive trademark and, you know, music, film, other property being sold at will without paying licensing. 

There is just a lot of that, I think, going on, and I think it relates 

in scale to the type of criminal problem we face from the narcotics 

industry, for instance. It relates in scale to what the Alcohol, Tobacco and Firearms jurisdiction presents as a risk to our country. 

And so I think the scale that we are going at it on, which is our 

fault not yours, is way too small. But I want you to engage with 

us vigorously in that if you come to agree that we need to ramp 

up the scale of the very wonderful work that you all are doing right 

now. 

Mr. BREUER. Yes, Senator, and as you may know, this is a great 

priority of Attorney General Holder’s. We all work closely with Victoria Espinel, the IP czar, and we will absolutely do that. 

Senator WHITEHOUSE. I appreciate it. 

Chairman, thank you for the extra time. I appreciate it very 

much. 

22 

Chairman LEAHY. Thank you. And, gentlemen, I will have some 

questions to submit, but my staff and I will be following up. I want 

to indicate that it was not by coincidence that this was the first 

hearing of the Senate Judiciary Committee this year. I want to emphasize that it is a matter of great importance to the Committee. 

I want to see real enforcement. We have worked hard to give some 

bipartisan tools. If we need more tools, we will give them. If there 

are areas where there are things that should be changed, be very 

candid and let us know, and we will work on that. 

There is no way either for the American taxpayers or just as a 

country we should be allowing this kind of fraud. Obviously, we 

have an advantage if we are able to recover huge amounts of 

money for the taxpayers. But I am also thinking of the fact that 

there are thousands and thousands of people out there who need 

our protection. They are not going to be able to do it on their own. 

We can do it for them. So keep in touch with us. I think you are 

going to have a welcome Committee here. 

Thank you very much, and we stand in recess. 

Mr. BREUER. Thank you, Mr. Chairman. 

[Whereupon, at 11:55 a.m., the Committee was adjourned.] 

[Questions and answers and submissions to follow.] 

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