U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

74–416 PDF 2012

DEPARTMENT OF JUSTICE—CIVIL, ENVIRONMENT 

AND NATURAL RESOURCES, AND TAX DIVISIONS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COURTS, COMMERCIAL 

AND ADMINISTRATIVE LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

MAY 31, 2012 

Serial No. 112–124 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

LAMAR SMITH, Texas, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

DENNIS ROSS, Florida 

SANDY ADAMS, Florida 

BEN QUAYLE, Arizona 

MARK AMODEI, Nevada 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

JARED POLIS, Colorado 

RICHARD HERTLING, Staff Director and Chief Counsel 

PERRY APELBAUM, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON COURTS, COMMERCIAL AND ADMINISTRATIVE LAW

HOWARD COBLE, North Carolina, Chairman 

TREY GOWDY, South Carolina, Vice-Chairman 

ELTON GALLEGLY, California 

TRENT FRANKS, Arizona 

DENNIS ROSS, Florida 

BEN QUAYLE, Arizona 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

MELVIN L. WATT, North Carolina 

JARED POLIS, Colorado 

DANIEL FLORES, Chief Counsel 

JAMES PARK, Minority Counsel 

(III) 

C O N T E N T S 

MAY 31, 2012 

Page 

OPENING STATEMENTS 

The Honorable Howard Coble, a Representative in Congress from the State 

of North Carolina, and Chairman, Subcommittee on Courts, Commercial 

and Administrative Law ...................................................................................... 1 

The Honorable Steve Cohen, a Representative in Congress from the State 

of Tennessee, and Ranking Member, Subcommittee on Courts, Commercial 

and Administrative Law ...................................................................................... 25 

WITNESSES 

Stuart F. Delery, Acting Assistant Attorney General, Civil Division, U.S. 

Department of Justice 

Oral Testimony ..................................................................................................... 3 

Prepared Statement ............................................................................................. 5 

Response to Questions for the Record ................................................................ 80 

Ignacia S. Moreno, Assistant Attorney General, Environment and Natural 

Resources Division, U.S. Department of Justice 

Oral Testimony ..................................................................................................... 26 

Prepared Statement ............................................................................................. 28 

Response to Questions for the Record ................................................................ 82 

Kathryn Keneally, Assistant Attorney General, Tax Division, U.S. Justice 

Department 

Oral Testimony ..................................................................................................... 46 

Prepared Statement ............................................................................................. 48 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable Steve Cohen, a Representative in Congress from the State of Tennessee, and Ranking Member, Subcommittee 

on Courts, Commercial and Administrative Law .............................................. 77 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, and Ranking Member, Committee 

on the Judiciary ................................................................................................... 78 

(1) 

DEPARTMENT OF JUSTICE—CIVIL, ENVIRONMENT AND NATURAL RESOURCES, AND TAX 

DIVISIONS 

THURSDAY, MAY 31, 2012 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON COURTS, 

COMMERCIAL AND ADMINISTRATIVE LAW, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 12:08 p.m., in room 

2141, Rayburn House Office Building, the Honorable Howard Coble 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Coble, Gowdy, Ross, Quayle, and 

Cohen. 

Staff Present: (Majority) Daniel Flores, Subcommittee Chief 

Counsel; Johnny Mautz, Counsel; Omar Raschid, Professional Staff 

Member; Rachel Dresen, Professional Staff Member; Ashley Lewis, 

Clerk; Will Green, Intern; (Minority) James Park, Subcommittee 

Chief Counsel; Susan Jensen-Lachmann, Counsel; and Rosalind 

Jackson, Professional Staff Member. 

Mr. COBLE. The Subcommittee will come to order. 

One of our Committee’s most important duties is to perform oversight of the United States Department of Justice. Today, the Subcommittee seeks to fulfill this duty through oversight of several Department components within the Subcommittee’s jurisdiction. 

The Civil, Environment and Natural Resources, and Tax Division 

dollars and potential recoveries and liabilities are at stake. Together, these three divisions manage a vast amount of civil litigation brought by or against the Federal Government. They handle 

many thousands of cases each year, though no fewer than 28 litigating sessions, and they employ well over 2,000 people. 

Substantively, the responsibilities of these divisions carry out a 

remarkable variety of cases of constitutional litigation over Federal 

programs to Medicare and Medicaid fraud, defense of our Nation’s 

air, water, and land from pollution, complex tax litigation, and the 

emerging issue of identity theft tax fraud. It is vital that these divisions carry out these duties effectively, efficiently, fairly, and impartially. Billions of dollars in potential recoveries and liabilities 

are at stake. In many cases, so are precious natural resources. 

But, even more important, public confidence in our legal system 

and our Federal legal officials depends to no small degree on how 

well these divisions discharge their respective duties. 

2 

This is the first opportunity the Subcommittee has had to conduct oversight of the divisions since June of 2010 when we last 

held oversight on the Civil Division. A number of new issues have 

arisen to prominence since the divisions were last before us, and 

we look forward to the opportunity to discuss them with the divisions at this time and perhaps subsequently. 

Other issues, of course, are of perennial importance, and we look 

forward to examining those issues as well. 

Let me introduce the witnesses and then perhaps Mr. Cohen will 

be here. I think he is on his way, is he not? 

We have a distinguished panel before us today. And good to have 

the gentleman from Arizona, Mr. Quayle. Good to have you with 

us as well. 

Mr. Stuart Delery—am I pronouncing it correctly, Mr. Delery? 

Mr. DELERY. Yes. 

Mr. COBLE [continuing]. Was appointed Acting Assistant Attorney General for the Civil Division in March of 2012. Before this appointment, Mr. Delery served in the Department of Justice in a variety of roles, including senior counselor to the Attorney General. 

Prior to joining the Justice Department in 2009, Mr. Delery was 

a partner in the Washington, D.C., office of WilmerHale, where he 

was a member of the Litigation Department and the Appellate and 

Supreme Court Litigation Practice Group and served as vice chair 

of the firm’s Securities Department. Mr. Delery graduated from the 

Yale School of Law and the University of Virginia. He clerked for 

Justice Sandra Day O’Connor and Byron White on the U.S. Supreme Court and for Chief Judge Gerald B.—how do you pronounce 

his surname? 

Mr. DELERY. Tjoflat. 

Mr. COBLE. Thank you, sir—of the U.S. Court of Appeals. 

Our second witness is Ignacia Moreno, Assistant Attorney General for the Environment and Natural Resources Division, Department of Justice. 

Ms. Moreno has enjoyed a distinguished career in both public 

and private sectors. Ms. Moreno started her legal career in 1990 at 

Hogan & Hartson, LLP in Washington and worked there until 1994 

when President Clinton appointed her to the Department of Justice. She served there for 7 years, including time as a private counsel to the Assistant Attorney General for Environment and Natural 

Resources Division. 

From 2001 to 2006, Ms. Moreno was of counsel and later a partner at Spriggs & Hollingsworth in Washington, D.C. From 2006 

until her confirmation, Ms. Moreno was counsel, Corporate Environmental Programs, at the General Electric Company. Ms. Moreno 

is a graduate of the New York University School of Law and 

earned her BA from New York University. She was born in Colombia and raised in New York City. 

Ms. Kathryn Keneally is the Assistant Attorney General for the 

Tax Division, Department of Justice. Ms. Keneally was sworn in as 

Assistant Attorney General for the Tax Division on 6 April 2012. 

She oversees more than 350 attorneys as they enforce the Nation’s 

tax laws. 

Prior to joining the Justice Department, Ms. Keneally was a 

partner in the New York office of the law firm of Fulbright & JaVerDate Aug 31 2005 09:15 Sep 12, 2012 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\053112\74416.000 HJUD1 PsN: DOUGA
3 

worski, LLP. For 25 years, Ms. Keneally represented individuals 

and businesses before the Internal Revenue Service and the Department of Justice in criminal and civil tax cases, trial cases in 

the Federal district and appellate courts and the United States Tax 

Court. 

Ms. Keneally earned an LLE in taxation from the New York University School of Law, graduated magna cum laude from Fordham 

Law School, and received her BS from Cornell University. Ms. 

Keneally clerked with the Honorable Edward R. Neaher, U.S. District Judge of the Eastern District of New York. 

We are pleased to have each of you with us today. 

The bad news is I am told we must vacate this building on or 

about 1:15. We should be through by then. At that time, I am told 

that the Immigration Subcommittee will be invading our territory. 

We have been joined by the distinguished gentleman from Florida, Mr. Ross. Good to have you with us. 

Mr. Cohen is on his way. 

Let me go ahead and start the hearing with you, Mr. Delery. 

Then we will recognize Mr. Cohen when he comes in. And, if you 

can, confine your comments if you can to within the 5-minute rule. 

There is a panel on your desk. You will see the green light. And 

when the green light turns to amber that is your notice that you 

have a minute to go. We won’t keelhaul you if you offend that purpose. 

Mr. Delery, good to have you with us. 

TESTIMONY OF STUART F. DELERY, ACTING ASSISTANT ATTORNEY GENERAL, CIVIL DIVISION, U.S. DEPARTMENT OF 

JUSTICE 

Mr. DELERY. Thank you, Mr. Chairman; and thank you also to 

Congressman Cohen and the other Members of the Subcommittee 

for the privilege to appear before you today at this oversight hearing to discuss the work of the Justice Department’s Civil Division. 

As you know, the Civil Division represents the United States in 

court in a wide variety of matters. The Division’s cases involve virtually every executive branch agency as well as the President, Cabinet officers, and Members of Congress. With over 1,000 attorneys 

and over 400 support staff, the Civil Division is the Justice Department’s largest litigating component, and the cases we handle include both defensive and affirmative litigation. 

As part of our mission the Civil Division defends the legality of 

Federal statutes and programs when they are challenged; we seek 

to recover money that is lost to the government through fraud, 

waste, and abuse; we defend the government when it is sued for 

damages, whether for breach of contract or for personal injury; and 

we help to administer sensitive national compensation programs. 

The three main priorities for the Civil Division are protecting the 

national security, protecting taxpayer dollars, and protecting the 

Nation’s consumers. 

Protecting the American people remains the Department’s highest priority. The Civil Division plays a key role in this effort 

through its active docket of national security litigation. In these 

cases, we vigorously defend our national security consistent with 

the rule of law. For example, the Civil Division is currently defendVerDate Aug 31 2005 09:15 Sep 12, 2012 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\053112\74416.000 HJUD1 PsN: DOUGA
4 

ing around 140 habeas corpus petitions brought by detainees held 

at Guantanamo Bay, Cuba, and we have had significant success resolving many of the most important legal questions in these cases 

in the government’s favor. 

In other matters, earlier this month our attorneys prevailed in 

a case seeking to force the National Security Agency to disclose 

whether it had records involving contacts with Google regarding 

cyber security. And the Division defends in the Federal courts 

every immigration removal order involving terrorists and other 

aliens who present national security risks. 

We are particularly proud of the Division’s work in these and 

other cases as it underscores the Attorney General’s tireless efforts 

to address terrorism and other threats to national security with integrity and devotion to our most fundamental values. 

In terms of protecting taxpayer dollars, we have enjoyed unprecedented success. Since January, 2009, the Department has recovered over $11 billion in civil fraud cases under the False Claims 

Act, more than in any comparable period. When coupled with 

criminal recoveries from our Consumer Protection Branch, the Civil 

Division has, standing side by side with U.S. Attorneys offices and 

State attorneys general across the country, obtained nearly $15 billion in civil and criminal fraud settlements, judgments, penalties, 

and fines. Health care fraud comprises the largest category of these 

fraud recoveries, more than $11 billion, with the largest share coming from pharmaceutical and medical device industries. 

Just earlier this month, the Department announced that Abbott Laboratories would pay $1.5 billion to resolve criminal and civil allegations arising from its illegal marketing of the prescription drug 

Depakote. This was the latest in a series of so-called off-label marketing cases in which the Civil Division, working with U.S. Attorneys offices around the country, has prosecuted pharmaceutical 

and device manufacturers who violate the Food, Drug, and Cosmetic Act by marketing their products for uses not approved as 

safe and effective by the FDA. 

But our efforts to tackle fraud do not end with health care fraud. 

We are actively pursuing economic fraud and seeking to recover illgotten gains for the benefit of fraud victims. 

We have also been vigilant in our efforts to root out fraud in connection with the procurement of goods and services used by our 

military and civilian agencies, including fraud affecting our men 

and women fighting in Iraq and Afghanistan. Since January, 2009, 

procurement fraud cases have accounted for approximately $1.6 billion in recoveries, which exceeds the amount in any comparable period. 

Our final area of focus in the Civil Division is to protect consumers. We continue to be at the forefront of the Department’s civil 

and criminal enforcement of Federal consumer protection laws. And 

since January, 2009, our Consumer Protection Branch obtained the 

convictions of 123 defendants and courts imposed criminal penalties exceeding $3.9 billion. 

Now, while the Civil Division has had a particularly active enforcement practice over the last 3 years, most of our work is defensive. Our work defending the Federal Government in commercial, 

tort, and other claims has saved billions of dollars, and our defense 

5 

of numerous statutory and constitutional challenges has upheld 

critical executive and congressional authority. 

Mr. Chairman, my written testimony describes in more detail 

these and other areas of the Civil Division’s work, and I would be 

happy to respond to the Committee’s questions. I thank you again 

for the opportunity to be here today. 

[The prepared statement of Mr. Delery follows:] 


SFD-1.eps
6 


SFD-2.eps
7 


SFD-3.eps
8 


SFD-4.eps
9 


SFD-5.eps
10 


SFD-6.eps
11 


SFD-7.eps
12 


SFD-8.eps
13 


SFD-9.eps
14 


SFD-10.eps
15 


SFD-11.eps
16 


SFD-12.eps
17 


SFD-13.eps
18 


SFD-14.eps
19 


SFD-15.eps
20 


SFD-16.eps
21 


SFD-17.eps
22 


SFD-18.eps
23 


SFD-19.eps
24 

Mr. COBLE. Thank you, Mr. Delery. And I am glad to hear you 

emphasize health care fraud, because it is plaguing all of us, not 

the least of which you all get plagued with it as well, I am sure. 


SFD-20.eps
25 

We have been joined by the distinguished Ranking Member, the 

gentleman from Memphis, Tennessee, Mr. Cohen; and I will now 

recognize him for his opening statement. 

Mr. COHEN. Thank you, Chairman Coble, and thank you for all 

of your courtesies you have extended—the nicest human being in 

all of Congress, Mr. Coble—and for holding these hearings on these 

three divisions: Civil, Tax, and Environment. You are. You are the 

nicest guy. It is amazing how nice you are. People do not understand that we all get along. But if they were all like Howard we 

would all get along even better. 

Mr. COBLE. If the gentleman from Tennessee will yield, I thank 

you for those generous comments. Thank you, sir. 

Mr. COHEN. But we have the Civil Division before us today which 

we had hearings when I was the Chair of this Subcommittee; and 

it is nice to have Tax and Environment and Natural Resources 

here, too. 

I want to report to you all that I have seen your boss lately, and 

he is doing his job. We were at the White House and General Holder was there, and we talked a little bit about California. And he 

does not yet understand how they are making a mistake there, but 

they are making a mistake there in going after some of those people they should not necessarily be going after. Because they are 

really California’s problem and not America’s. But he is still doing 

his job. 

And I saw Mr. Perez there, who is doing a great job in Memphis 

working on the juvenile court situation. 

So I appreciate what all the attorneys do at Justice. It is a tough 

job, and you represent the American people on a great variety of 

issues in the courts, the Federal courts. And you enforce the laws 

that we make. So it is so important, that it is important that we 

have this oversight hearing. 

We need to provide you with adequate funds to do your job and 

resources. We are not here just in a vacuum. We pass laws. Somebody has to enforce them. Thank you for enforcing Congress’ laws. 

In fiscal year 2013, the President requested $298 million for the 

Civil Division and 110 for ENRD and 106 for the Tax Division. 

They are modest amounts in light of the overall Federal budget 

and especially in light of the returns to the taxpayers from work 

in these divisions. These are all divisions that bring in monies. 

Energy and Natural Resources obtained more than $650 million 

in civil recoveries and criminal fines and saved taxpayers $2.1 billion by successfully defending against meritless claims. The Civil 

Division’s civil fraud recovery since ’09 have exceeded $9 billion, 

and the Division has successfully defended the United States in 

cases involving billions of dollars. And the Tax Division brings in 

$13 for every dollar spent. 

Without you, we would not exist. You are the sine qua non of all. 

Beyond the monetary benefits, this Division’s work has intangible 

but in some ways even more valuable benefits like ensuring clean 

air and clean water, things that we used to take for granted, maintaining public health and securing dignity for all Americans. We 

have seen some evidence that some of the values that we hold in 

the past have been questioned, but we appreciate your carrying on. 

As Mr. Delery—I hope I pronounced that correct. Is it Delery? 

26 

Mr. DELERY. Delery. 

Mr. COHEN. Delery—Mr. Delery noted in his testimony, the 

House recently passed a fiscal year 2013 appropriations bill that 

did not include requested funding for the Civil Division’s financial 

fraud work or for adjustments to base which are intended simply 

to keep pace with the cost of things like increases in rent, contracts, health benefit coverage, and other increased costs. Such a 

funding approach is shortsighted. And while no one likes wasteful 

spending this money request is not being wasted. So it is an investment in protecting the public fiscal health as well as ensuring our 

laws are enforced and that justice is served. 

So I thank our witnesses for their work and for your update and 

thank Chairman Coble for allowing me to give this testimony at 

this time. I look forward to the remainder of your testimonies and 

yield back the balance of my time. 

Mr. COBLE. Thank you, Mr. Cohen. 

Ms. Moreno, we will recognize you for 5 minutes. 

TESTIMONY OF IGNACIA S. MORENO, ASSISTANT ATTORNEY 

GENERAL, ENVIRONMENT AND NATURAL RESOURCES DIVISION, U.S. DEPARTMENT OF JUSTICE 

Ms. MORENO. Chairman Coble, Representative Cohen, and Members of the Subcommittee, thank you for the opportunity to appear 

before you today to discuss the important work of the Environment 

and Natural Resources Division, also known as ENRD. 

The Environment and Natural Resources Division is a core litigating component of the United States Department of Justice. 

Founded more than a century ago, it has built a distinguished 

record of legal excellence. The Division functions as the Nation’s 

environmental lawyer, with a staff of about 700 individuals, including close to 400 lawyers who are dedicated to protecting human 

health and the environment. 

We bring civil and criminal cases and defend the vital work of 

client Federal agencies under more than 150 Federal statutes. 

ENRD’s litigation docket contains almost 7,000 active cases and 

matters in courts across the United States, about half of which are 

defensive in nature. 

The Division’s priorities are guided by our core mission, which 

includes, first, strong enforcement of civil and criminal environmental laws to ensure clean air, clean land, and clean water for all 

Americans; second, vigorous defense of environmental wildlife, and 

natural resources laws in agency actions and protection of the public fisc; third, effective representation of the United States in matters concerning the stewardship of our public lands and natural resources, including the acquisition of land for public purposes from 

national parks to national security; and, fourth, vigilant protection 

of tribal sovereignty, tribal lands and resources, and tribal treaty 

rights. 

The work that we do in the Environment Division could not be 

more important. The Deepwater Horizon fire, explosion and oil spill 

in the Gulf of Mexico in April of 2010 came into our homes in daily 

news coverage of the resulting tragic loss of life and environmental 

devastation. After the disaster, the importance of environmental 

and natural resources protection could not be clearer. The EnvironVerDate Aug 31 2005 09:15 Sep 12, 2012 Jkt 000000 PO 00000 Frm 00030 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\053112\74416.000 HJUD1 PsN: DOUGA
27 

ment Division will continue to vigorously enforce applicable laws 

and regulations within existing authorities to ensure that we protect human health and the environment and that the American 

people do not bear the cost of pollution or mismanagement of our 

natural resources. 

The Division has achieved impressive monetary results from civil 

and criminal enforcement. For example, from January, 2009, 

through December, 2011, ENRD secured $2.2 billion in civil and 

stipulated penalties, cost recoveries, natural resource damages, and 

other civil monetary relief, including almost $1.3 billion recovered 

for the Superfund. The Superfund finances the clean-up of sites 

contaminated with hazardous substances. 

We also secured about $21.3 billion in corrective measures, court 

orders, and settlements, measures that will go a long way toward 

protecting our air, land, water, and other natural resources. 

Over the same period, the Division concluded 140 criminal cases 

against 266 defendants, obtaining more than 125 years in confinement and over $233 million in criminal fines, restitution, community service funds, and special assessments. 

Many important benefits flow from these results. They provide 

tangible health and environmental benefits for the American people through significant reductions in pollution. They serve to deter 

future violations, increasing exponentially the significance of this 

work. They also reflect good value, returning many times over the 

Division’s operating budget to the U.S. Treasury. 

In all that we do, we ensure that all communities, including 

those most vulnerable, are protected from environmental harms. 

All Americans deserve clean air, clean land, and clean water so 

that they may prosper where they live, work, and play. 

Again, I appreciate the opportunity to participate with my colleagues in this hearing and would be happy to address your questions. 

[The prepared statement of Ms. Moreno follows:] 

28 


ISM-1.eps
29 


ISM-2.eps
30 


ISM-3.eps
31 


ISM-4.eps
32 


ISM-5.eps
33 


ISM-6.eps
34 


ISM-7.eps
35 


ISM-8.eps
36 


ISM-9.eps
37 


ISM-10.eps
38 


ISM-11.eps
39 


ISM-12.eps
40 


ISM-13.eps
41 


ISM-14.eps
42 


ISM-15.eps
43 


ISM-16.eps
44 


ISM-17.eps
45 


ISM-18.eps
46 

Mr. COBLE. Thank you, Ms. Moreno. 

Ms. Keneally. 

TESTIMONY OF KATHRYN KENEALLY, ASSISTANT ATTORNEY 

GENERAL, TAX DIVISION, U.S. JUSTICE DEPARTMENT 

Ms. KENEALLY. Chairman Coble, Ranking Member Cohen, and 

Members of the Subcommittee, thank you for inviting me here to 

testify about the work of the Tax Division. 

As Chairman Coble noted, on April 6, 2012, I had the privilege 

of being sworn in as the Assistant Attorney General for the Division. 

Mr. COBLE. Ms. Keneally, maybe it is my hearing impairment, 

but get a little closer to the mic if you will. 

Ms. KENEALLY. I was thanking you for commenting on my appointment. 

Mr. COBLE. Oh, you bet. 

Ms. KENEALLY. Thank you again for inviting me here today. 

While my arrival in the Department is fairly recent, my experience with Federal tax administration and litigation is not. Over the 

course of my career I have represented many clients before the Tax 

Division, United States Attorneys Offices, and the Internal Revenue Service on a variety of civil and criminal tax matters. 

Over that time, I have learned effective tax administration is 

guided by two fundamental principles. First, we owe it to all taxpayers who voluntarily comply with our tax laws to enforce the 

laws against those who do not comply. Second, because tax touches 

on all citizens, residents, and income earners, there must be a fair 

and consistent tax enforcement policy throughout the country. 

These values are deeply engrained in the culture of the Tax Division. As Assistant Attorney General I am committed to serving the 

American people by reaffirming these principles and leading the 

Division in what can only be described as the increasingly more 

complex and global task of tax enforcement. 

The Tax Division plays a critical role in the fair and consistent 

administration of our tax laws. The IRShas primary responsibility 

for determining and collecting taxes owed. In most cases, the IRS’s 

administrative powers are sufficient to ensure compliance with the 

tax laws. However, when taxpayers do not voluntarily comply, the 

IRS relies on the Tax Division to bring timely enforcement in Federal Court. 

For example, the Tax Division enforces and defends summonses 

to gather information for ongoing tax examinations, collects and defends tax assessments when taxpayers do not pay voluntarily, obtains civil injunctions to shut down tax scam promoters and fraudulent return preparers, authorizes criminal tax prosecutions, and 

investigates and prosecutes criminal tax violations throughout the 

country. Each year the Division has approximately 6,000 civil tax 

cases in process, handles hundreds of civil and criminal tax appeals, and authorizes between 1,300 and 1,800 prosecutions. 

To carry out the work of the Division, we currently have 378 attorneys. The President’s budget for 2013 fiscal year provides $106.5 

million in funding for the Tax Division. This funding level will 

allow the Division to continue its enforcement efforts through its 

prosecutions, collections, and injunctions actions, all areas that are 

47 

critical to the full and fair enforcement of the tax laws enacted by 

Congress. 

As Member Cohen noted, given that on average every tax dollar 

invested in a Division attorney results in a savings of at least $13 

to the Federal Treasury, the full funding of the Tax Division is a 

wise investment in the economic stability of the Nation. 

While the Division continues to maintain a sizable caseload of 

traditional tax enforcement matters we are also mindful of the 

need to identify and respond to ongoing, growing, and new trends 

in noncompliance. I would like to highlight four areas of noncompliance that are among our highest enforcement priorities: stolen 

identity refund fraud, as Chairman Coble noted; abusive tax shelters; offshore tax schemes; and tax defiers. 

Prosecutions in civil injunctions against individuals who engage 

in tax fraud have always been top priorities for the Division. Recently, a new and more aggressive scheme has cropped up across 

the country at an alarming rate, stolen identify refund fraud. The 

plan is frighteningly simple—steal Social Security numbers, file tax 

returns showing a false refund claim, and then have the refunds 

loaded onto a prepaid card or sent to an address where the wrongdoer can get access to the funds. While the Division has been successful in prosecuting these cases and in obtaining lengthy sentences, we are committed to work even harder to shut down these 

schemes. 

We are also continuing to build on the Division’s success in fighting abusive tax shelters. These schemes were designed to cost the 

Treasury many tens of billions of dollars in unpaid taxes. Each victory by the Division recovers not only the taxes due in that case 

but also sets a precedent to resolve other cases and to deter others 

who are engaging in these schemes. 

The Division is also continuing to investigate and prosecute account holders, banks, bankers, and other facilitators in connection 

with offshore activities designed to evade taxes. 

Finally, tax defiers who engage in conduct to undermine our tax 

system, often through violence, must and will remain an enforcement priority. 

In all cases, the Division’s enforcement efforts serve to assure the 

vast majority of taxpayers that their voluntary compliance is justified and that everyone will be held to pay their fair share in our 

tax system. 

Thank you again, Mr. Chairman, for the opportunity to discuss 

the important work of the Tax Division. I am happy to answer any 

questions that you or any other Members of the Committee may 

have. 

[The prepared statement of Ms. Keneally follows:] 

48 


KK-1.eps
49 


KK-2.eps
50 


KK-3.eps
51 


KK-4.eps
52 


KK-5.eps
53 


KK-6.eps
54 


KK-7.eps
55 


KK-8.eps
56 


KK-9.eps
57 


KK-10.eps
58 


KK-11.eps
59 


KK-12.eps
60 


KK-13.eps
61 


KK-14.eps
62 


KK-15.eps
63 

Mr. COBLE. Thank you, Ms. Keneally. 

Thanks to each of you for your testimony. 

We try to adhere to the 5-minute rule as well, and we usually 

comply pretty much in order. So if you will keep your answers as 

tersely as possible to meet the 5-minute rule. 

We have been joined by the distinguished gentleman from South 

Carolina, Mr. Gowdy. Good to have you with us, Trey. 


KK-16.eps
64 

And I remind the Members again we are supposed to vacate the 

room on or about 1:15 because of the Subcommittee on Immigration. 

Mr. Delery, let me start with you. It has been brought to my attention that hospitals are more frequently facing False Claims Act 

charges stemming from the decisions of physicians to admit certain 

patients. I also understand that in many of these suits hospitals 

settle claims to forego the cost and agony of a protracted trial and 

discovery process and to protect their respective reputations. Does 

the Justice Department have a policy or guidelines for bringing 

these charges and can you share any statistical information on 

these cases to help us verify the frequency of the litigation and the 

awards that have been paid through judgments and settlements? 

Mr. DELERY. Thank you, Mr. Chairman, for that question. 

As to that particular type of False Claims Act case, I do not here 

today have statistics to share with you but would be happy to provide that information to the Committee. 

Mr. COBLE. If you would do that, we would appreciate that. 

Let me put another question to either of the three of you, probably Mr. Delery to begin with. 

Estimates of yearly fraud in Medicare and Medicaid range from 20 to $80 billion. Yet the Civil Division’s fraud recoveries from all 

sources in 2011 were less than $4 billion. What are you all doing 

to make sure that Medicare and Medicaid fraud finally comes 

under control—or under better control? 

Mr. DELERY. Thank you, Mr. Chairman. I can answer that. 

So certainly the fraud in those programs is a serious problem 

and one that the Civil Division is devoting significant and substantial resources to addressing. The recoveries over the last 3 years 

have been the highest over any comparable period, reflecting that 

diligent work. 

Obviously, it is a large problem, and we are doing the best that 

we can with the resources that we have available to try to leverage 

the successes that we do have into prevention. Among other things, 

we are attempting to focus on nonmonetary remedies as part of 

our—in addition to the substantial recoveries, as part of the resolutions of these cases to improve compliance, to improve procedures 

in place in the organizations, to prevent recidivism, and hopefully 

to serve as models for other organizations so that they can help to 

crack down on this serious problem. 

Mr. COBLE. I do not mean to be ignoring the two ladies, but it 

appears that this is your bailiwick, right, Mr. Delery, so let me 

come to you with another question. 

Civil fraud recoveries from all sources since 1987 are about $34 

billion. This is less than 1 year’s estimated fraud in Medicare and 

Medicaid alone. Can Civil do a better job of stamping out fraud and 

recovery of tens if not hundreds of billions of dollars that taxpayers 

lose every year? 

Mr. DELERY. I think, Mr. Chairman, we certainly continually try 

to do better in this area. As I indicated, it is a very serious problem. 

Among other things, we think that we could be helped with full 

funding of the President’s request for funding for the Civil Division 

so that we can maintain current levels at least and add some reVerDate Aug 31 2005 09:15 Sep 12, 2012 Jkt 000000 PO 00000 Frm 00068 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\053112\74416.000 HJUD1 PsN: DOUGA
65 

sources to address various kinds of financial fraud. So that is one 

thing that could help us improve the rate of recoveries in this area. 

But it is a very large problem. We have devoted substantial resources to it and continue to work on innovative solutions to try 

toimprove our effectiveness. 

Mr. COBLE. Thank you, sir. 

My red light has not yet appeared. Do you other ladies want to 

contribute to either of these questions? 

Ms. MORENO. Congressman Coble, the questions that you posed 

are addressed to the Civil Division. They are in the competency of 

the Civil Division. I have nothing to add. 

Mr. COBLE. Okay. Ms. Keneally. 

Ms. KENEALLY. I agree. I thank you for the opportunity, but I 

defer to my colleague from the Civil Division. 

Mr. COBLE. Thank you. 

I recognize the distinguished gentleman from Tennessee, Mr. 

Cohen. 

Mr. COHEN. Thank you, Mr. Chair. 

I noticed in the—Mr. Delery. 

Mr. DELERY. Delery. Like celery but with a D, Congressman. 

Mr. COHEN. Thank you. That makes it easy. Mr. Celery. 

Mr. DELERY. Yes. I am happy to take that, Congressman. 

Mr. COHEN. Just a little humor. 

You mentioned some cases where you have made some massive 

recoveries for the United States, and they involve drug companies 

and they involve people who had—the shipping company that had 

defrauded the country by inflating the invoices. Settlements in the 

area, I see one here was $222 million, another was 31.9 at qui tam, and then there were some others here in the drug war which were 

even higher. 

Do you believe that we should give you or do you have greater— 

a greater hammer? I mean, when people defraud the government, 

particularly in the war effort, as this shipping company did, it 

seems like there is not a sufficient remedy. Do we need to give you 

more powers? 

Mr. DELERY. I think, Congressman, that certainly the Department does have significant tools in place. These cases are complicated because they often involve accounting irregularities, other 

forms of financial conduct that are difficult to identify and then to 

pursue. So they are resource intensive, and they take some time to 

develop. 

So I think, while it may be that there are some additional tools 

that would be useful, and we are certainly happy to work with the 

Committee on that, we would be happy to work with you and your 

colleagues, I think that, from our perspective, the False Claims Act 

and other tools are powerful tools. 

We are attempting to be creative, as I indicated in the health 

care context earlier, in coming up with parts of the remedies in 

these cases that would allow for greater compliance going forward; 

and we are always conscious of the need for resources to do these 

labor-intensive cases. 

Mr. COHEN. Well, let us take this—and I guess you pronounce it, 

is it Maersk? 

Mr. DELERY. Yes, I believe that is correct. 

66 

Mr. COHEN. You say the Department announced that Maersk Line Limited agreed to pay $32 million—$31.9 to resolve qui tam 

allegations that it inflated invoices for transporting thousands of 

shipping containers to the U.S. military operating in Iraq and Afghanistan. Now, inflated invoices is not the same thing as difficulty 

in accounting. This seems like fraud. 

Mr. DELERY. That is correct. That is correct, Congressman. My 

reference was to the process of needing to identify—presumably, 

the fraud is done in cases like this over the course of many transactions, many invoices, and the exercise of putting it all together. 

Mr. COHEN. Was there any criminal action brought against the 

Maersk Line? 

Mr. DELERY. I would have to check on that. I am not certain that 

there was. 

Mr. COHEN. It just seems like if somebody is ripping off the— 

Iraq—it is enough that the Afghanis are ripping us off, but then 

our own. And Maersk, where are they? Are they out of Sweden? 

Where are they from? Where is their—— 

Mr. DELERY. Again, I am not sure of the home. 

Mr. COHEN. But, wherever they are, all they are doing is passing that $32 million on to their customers. And unless there is a 

stronger penalty, which there should be, we are paying for it. We 

are paying for their corruption. 

Mr. DELERY. Congressman, I completely agree with you about 

the conduct; and that is why the Civil Division has, as one of its 

highest priorities, protecting the taxpayers from fraud, waste, and 

abuse. So I would be happy to work with you and other Members 

of the Committee on any ideas that you have for additional penalties as we continue to try to tackle this very serious problem. 

Mr. COHEN. Well, I appreciate it. Because I would like to look 

into something for legislation. I mean, I do not know exactly what 

we can do. But all this is is the cost of doing business to some of 

these folks. 

The same thing with the drug companies. You had down I think 

it was—I forget which drug company, but it was a settlement, and 

Abbott Labs paid $1.5 billion, and GlaxoSmithKline paid an additional $600 million civil claims. 

Mr. DELERY. Again, that is a very serious problem. And to make 

sure that these amounts are not viewed as simply the cost of doing 

business the Department is very focused on, as I indicated, nonmonetary components of the remedies. So in the Abbott case, for 

example, the company is subject to court-supervised probation in 

connection with the settlement. 

Mr. COHEN. Let me ask you about those things: deferred-prosecution agreements and court-supervised probations. Do you have anything to do with deferred-prosecution agreements? 

Mr. DELERY. There could be some in these cases. Principally, it 

is other parts of the Department. 

Mr. COHEN. My red light is about to come on. You can answer. 

Be honest. 

Let me tell you this. We had hearings when I was Chair of this 

Committee on some deferred-prosecution agreements with some of 

the manufacturers of medical devices; and we found that Chris 

Christie, when he was the U.S. Attorney, had given one case to the 

67 

former United States Attorney and he made like $30 million out of 

it. And then there was another guy who had not prosecuted his 

brother, something to that effect, and he made $20 million or something. It was outrageous. 

Are there any controls in this Department of Justice to see to it 

that U.S. Attorneys cannot use their positions to enrich others and 

make the companies have to be basically prisoners of a private Attorney General? 

Mr. DELERY. So, Congressman, on that, respectfully, I am not familiar with those cases or with the internal processes that would 

govern the U.S. Attorneys in those areas. The Abbott resolution 

that I was talking about did not involve a situation like that. 

Mr. COHEN. Well, let me ask you, right now, when the U.S. Attorneys appoint somebody in a deferred-prosecution case to be the 

monitor, does it come through your office at all or does the Justice 

Department in Washington have any controls? 

Mr. DELERY. I would have to look into that. I certainly have not 

encountered that situation in my tenure here on the Civil Division, 

so we could certainly get back to you. 

Mr. COHEN. Do either of you have any knowledge of this? 

Ms. MORENO. Congressman, as a general matter I would say that 

the Department has a core goal of fair administration of justice. 

We—at least I will speak for the Environment Division, we work 

very closely with U.S. Attorneys Offices—we enforce the laws enacted by Congress, and we take a look at the facts in every case 

very carefully, as well as the law, and we proceed accordingly and 

exercise our discretion. 

Mr. COHEN. But you do not know if you have implemented any 

reforms to make sure that there is some control and protection 

even for the companies that might be evildoers in the past but not 

continuing to keep them in an abject position of almost corporate 

slavery. 

Ms. MORENO. All I can tell you is how we handle the cases and 

matters that come before us, and we do so very mindful of the 

rights of all the parties involved. 

Mr. COHEN. And you are going to ditto it. That is the company 

line and I got you. 

Thank you very much. I yield back the balance of my time. 

Mr. COBLE. I thank the gentleman. 

As to the Christie matter—I am doing this from memory—I do 

not think there was any finding of wrongdoing on that, but I am 

going just from my memory on that. 

The gentleman from Arizona, Mr. Quayle, is recognized. In order 

of arrival I think you were the first one here. 

Mr. Quayle, you are recognized for 5 minutes. 

Mr. QUAYLE. Thank you, Mr. Chairman. 

Ms. Moreno, did your Department negotiate the proposed consent 

decree entered into by the National Parks Conservation Association 

and eight other environmental organizations with EPA Administrator Jackson on December 2, 2011, which established deadlines 

in which EPA must take action on States’ regional haze implementation plans or promulgate Federal implementation plans? 

Ms. MORENO. That would be a consent decree within the Division, yes. 

68 

Mr. QUAYLE. So your Division was the one that was negotiating 

that? 

Ms. MORENO. Yes. 

Mr. QUAYLE. Did you consult with the State of Arizona, local governments, the Navajo nation, or any stakeholder that would have 

to come under these regulations prior to entering into the proposed 

consent decree? 

Ms. MORENO. Congressman Quayle, to the extent that we entered into a consent decree—and let me step back and speak generally, and then I can address the specifics of your question. If we 

are in a situation where there has been a missed deadline, the 

agency is already in violation of a requirement enacted by Congress, what we will do is we will do outreach to interested parties 

in the context of the lawsuit. We will—— 

Mr. QUAYLE. How do you define ‘‘interested parties’’? Because 

this is a big problem with these consent decrees and sue on settlement agreements, is that those stakeholders who are going to be 

coming under the regulations do not actually get a lot of outreach, 

do not get a seat at the table, and these consent decrees and sue 

on settlement agreements are actually done behind closed doors, 

and often in the case is that a complaint is filed in the same day 

that the agreement is filed as well, completely shutting out stakeholders. 

So when you say ‘‘interested parties’’ are you just talking about 

those that are actually suing the EPA or other agencies, rather 

than those that are actually going to be under the regulatory burdens that are going to be placed by the consent decree? 

Ms. MORENO. Thank you for the opportunity to be more clear and 

to respond to your question. 

There are the parties in the litigation and then there are the 

stakeholders that you have mentioned. If an agency has missed a 

deadline, our goal is to get the agency to be in compliance with the 

mandatory requirements that Congress has reflected in the statutes. To that end, what we will do is we will seek to get the agency 

in compliance by negotiating an agreement in the context of litigation—and I am speaking generally—that will get the agency into 

compliance on a specific deadline. 

In the context of those agreements, whether they be consent decrees or settlement agreements on a deadline suit, we will negotiate the agreement. We will file it to the court usually by way of 

stipulation. We do not always agree with parties in the litigation. 

Mr. QUAYLE. I just do not have that much time. So can you just 

get to the question of did you actually consult with the State of Arizona, the Navajo tribe, local governments, and other stakeholders 

when you entered into the consent decree—the proposed consent 

decree on December 2, 2011? 

Ms. MORENO. As I sit here, I cannot tell you specifically as to all 

of those stakeholders, but I would like to get to an important point. 

Mr. QUAYLE. Well, if you could just get back to me on that, that 

would be great. 

Ms. MORENO. I would be happy to. 

Mr. QUAYLE. But one of the things that is troubling about the 

manner in which these types of decrees and agreements are—are 

you aware that this agreement actually affects the Navajo generVerDate Aug 31 2005 09:15 Sep 12, 2012 Jkt 000000 PO 00000 Frm 00072 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\053112\74416.000 HJUD1 PsN: DOUGA
69 

ating station in Arizona? And if the Navajo generating station is 

forced to shut down, that is going to cost hundreds of jobs in Arizona. Many of them are Native Americans, the vast majority of 

them will be Native Americans, and it will possibly triple energy 

costs and water costs for the whole entire State of Arizona. These 

type of factors, are they even taken into consideration when you 

enter into a consent decree or a settlement agreement? 

Ms. MORENO. As you know, what we do at the Department of 

Justice is we enforce the laws as enacted by Congress. We do not 

make policy. We are not the agencies who in fact go through the 

public and notice process under the Administrative Procedure Act 

to adopt rules. The Environmental Protection Agency in the case 

that you have mentioned would be the agency that certainly would 

do that. 

In settlements—and now I want to give you a different example. 

For example, under the Clean Water Act, we often do consider the 

party’s—for example, a municipality’s ability to pay in enacting— 

in agreeing with a municipality on Clean Water Act commitments 

that may be sequenced over time. 

So in the context of trying to get a municipality or another party 

into compliance in the Superfund context we also consider ability 

to pay. We do try to structure the agreements in a way that compliance will be achieved, because that is our ultimate goal. 

Mr. QUAYLE. Mr. Chairman, just one last question. 

No other Administration has utilized consent decrees and settlement agreements as broadly as this Administration has, whether 

it is Bush—either Bush or Reagan or Clinton. Was there a decision 

from either Attorney General Holder or from others higher up 

within the Administration to say that we are going to use this process to make sure that we have different regulations that have—I 

mean, this has just never been done before where we have stakeholders completely cut out of the process. 

There is the Meese memo, which I am sure you are aware of, 

that was put forth in Reagan that was pretty much abided by by 

future Administrations but not this one. What is the decision behind utilizing this process as a way to really I think go around 

Congress to make sure that we have, you know, the rulemaking authority that has gone through the courts rather than through the 

executives? 

Ms. MORENO. Congressman Quayle, I can personally tell you that 

we are fully complying with the Meese memo. In fact, in consent 

decrees that I approve and review I look to make sure that in fact 

we are complying with the Meese memo requirements that are 

now—also appear in regulations. 

Parties to these consent decrees are agreeing to or stipulating to 

a deadline. The agency continues to go through the rulemaking 

process with all of the Administrative Procedure Act protections to 

ensure notice and public comment. So on the substance there is an 

opportunity for stakeholders to participate. And in the context of 

the litigation itself there is an opportunity under Federal Rule of 

Civil Procedure 24 for parties to intervene in the litigation. 

I can say to you that we are very, very mindful of our role. I cannot give you a point of comparison in terms of the use of consent 

decrees in other Administrations and this one. All I can tell you is 

70 

that we look at each case individually. That is how we proceed with 

career prosecutors and with my office and things that come to my 

desk. We proceed with great care, given the role of the Department 

of Justice, in the fair administration of justice. 

Mr. QUAYLE. Okay. Thank you very much. 

I see my red light is on, so I yield back. 

Mr. COBLE. The distinguished gentleman from Florida, Mr. Ross, 

is recognized for 5 minutes. 

Mr. ROSS. Thank you, Mr. Chairman. 

Ms. Moreno, to follow up with you, you have about 7,000 cases 

that your Division handles? 

Ms. MORENO. Currently, we have about 7,000 filed cases and 

matters. 

Mr. ROSS. Active. About how many of those would you say involve NEPA, the National Environmental Policy Act? 

Ms. MORENO. I would have to provide that information. I do not 

have those statistics off the top of my head. 

Mr. ROSS. Half of them probably? 

Ms. MORENO. I could not say. Half of our docket is defensive in 

nature, and there would be certainly some NEPA cases, and I am 

happy to provide the statistics. 

Mr. ROSS. If you would not mind, I would appreciate that. 

Now, as you know, under NEPA, of course, while there is a process, there is no procedure. And it can take years, it can take decades in some regards to the resolution of matters in the permitting 

process under NEPA. Would you not agree that there should be 

some procedure in place that would streamline the litigation that 

ensues—well, not only with the litigation but the process itself? 

Ms. MORENO. Congressman Ross, I can say that in this Administration the Council on Environmental Quality has in fact issued a 

number of documents, guidance to try to streamline processes 

under NEPA. 

Mr. ROSS. And that would include also maybe standing? That an 

interested party would have to have—would develop standing to 

sue only after they have been involved in the permitting process? 

Ms. MORENO. I do not believe that the reforms that the Council 

on Environmental Quality has adopted include that particular aspect, but I would have to check. 

Mr. ROSS. But wouldn’t you agree that one of the biggest problems that we have in defending NEPA cases is the fact that you 

have people come in after the issuance of a permit who allege 

standing and do so within a 6-year statutory of limitations period? 

Ms. MORENO. I couldn’t say that that is a broad-based problem 

that we see. 

As you know, we do defend NEPA cases. The cases do not require 

any particular outcomes. The cases certainly—well, I should say 

the statute certainly requires a process, consideration of environmental impacts, both beneficial and detrimental, for certain—— 

Mr. ROSS. Let us talk about the statute of limitations here. It is 

6 years, right, under NEPA for somebody to bring a suit under 

NEPA? I mean it defaults to the APA statute. 

Ms. MORENO. It does. 

Mr. ROSS. So, therefore, 6 years. I mean, wouldn’t it be more prudent that if we are interested in actually seeing these projects go 

71 

through the permitting process to maybe have a shortened period? 

Wouldn’t that be a little bit more advantageous in your defense of 

some of these cases if we had a shorter statute of limitations period 

from 4 to 2—6—go down to 4 or even 2 years? 

Ms. MORENO. To the extent that there is a consideration of proposals to amend existing requirements under the Administrative 

Procedure Act I am not in a position to address those. 

Mr. ROSS. But it would help in your—it may lighten your caseload if you had a reduced statute of limitations, would you not 

agree? 

Ms. MORENO. As a general matter, I could say that defense lawyers always like having as many tools available as possible. 

Mr. ROSS. And would another tool that would be good would also 

be that which would constitute standing, and that in order to have 

standing you should be involved in the permitting process and at 

least present your concerns at that point in order to be able to sue 

later on? 

Ms. MORENO. Congressman, I am not in a position to address—— 

Mr. ROSS. But as a defense lawyer representing the EPA who is 

your client in this case, would it not be better, more advantageous, 

to at least define what standing would be and to have standing to 

be allowed only when you have been involved in the permitting 

process and not after the fact within the 6-year period of time? 

Ms. MORENO. I can tell you that we enforce and have the benefit 

of the laws enacted by Congress, but I am not in a position—— 

Mr. ROSS. But you would go for reduced litigation, would you 

not? I mean, you do not want to proliferate litigation, do you? I 

mean, as a defense lawyer, come on. Unless you are billing by the 

hour, I cannot understand that. 

Let me move on to something else. You talked about the Clean 

Water Act and how—that you take that into consideration, the economic impact that it may have when entering into a consent decree. 

I happen to be from the great State of Florida where we had the 

Clean Water Act imposed upon us through numeric nutrient water 

criteria. A lot of concerns over that. It is estimated anywhere between $800 million to $3 billion in compliance alone in the agricultural industry could cost as many as 14,000 jobs in the agricultural 

industry. That is a significant impact. Was that taken into consideration at the time the consent decree was entered? 

Ms. MORENO. Congressman, what we do in a context like that is 

we work with our client agencies. We work with our client agencies 

either to defend or enforce. 

Mr. ROSS. But you did not take into consideration—I mean, you 

testified with Mr. Quayle’s question that especially with the Clean 

Water Act you took into consideration the economic impact, the financial impact. But yet you do not know if you took it into consideration or not when entering into the consent decree regarding the 

numeric nutrient water criteria with Florida. You do not know. It 

would be safe to say you do not know, unless you do know. 

Ms. MORENO. Well, I am trying to answer your question in the 

context of what I do know. 

Mr. ROSS. Okay. 

72 

Ms. MORENO. And I am trying to separate out what considerations the agency may have had in setting the criteria and the considerations that we have in litigation. Filing a case is different 

than settling a case. In the Clean Water Act context that I was 

talking about before, I was talking about in the context of settlement where we do have more opportunities to work with a party 

sued by the United States to come up with a plan that is not only 

feasible but that can be complied with and implemented. 

Mr. ROSS. I agree. 

I see my time is up, but I want to request that if you would supplement your answer with any evidence that would indicate that 

those economic impacts were taken into consideration when entering in that consent decree with the numeric nutrient criteria. 

I yield back. 

Ms. MORENO. I will be happy to—— 

Mr. COBLE. And I will say to the gentleman from Florida we will 

keep this record open for 5 days so we can address that. 

The distinguished gentleman from South Carolina, Mr. Gowdy, is 

recognized. 

Mr. GOWDY. Thank you, Mr. Chairman. 

To whom should I direct my question about why the State of 

South Carolina was sued for its efforts to assist in immigration enforcement? 

Mr. DELERY. That would be a Civil Division matter, Congressman. 

Mr. GOWDY. And why was the State of South Carolina sued for 

trying to do what the Federal Government has been woefully inadequate at doing? In fact, we have had hearing after hearing where 

immigration enforcement officials have come and said they are 

overworked and underpaid and a whole litany of reasons why they 

cannot do it; and then a State wants to assist and they wind up 

being sued, which is not an infrequent occurrence with my State. 

I think we very three current lawsuits that the Department of Justice has filed against us. So why don’t you want our help with immigration enforcement? 

Mr. DELERY. I think, Congressman, the Federal Government certainly looks for and relies on the assistance of States in enforcing 

immigration laws, and that has been reflected in the policy statements of the government and in the pleadings that have been filed 

in that case. But when the State crosses from cooperation with 

Federal law and Federal priorities into creating, in effect, a Statelevel immigration policy, that is where the government concluded 

the constitutional violation occurred. 

Mr. GOWDY. But when States pass guest worker laws on their 

own you do not sue them. 

Mr. DELERY. Well, Congressman, in the State of Utah, that is 

one that I am aware of—— 

Mr. GOWDY. Have you filed suit in the State of Utah? 

Mr. DELERY. We have filed in the State of Utah but not against 

the State worker program, because it does not go into effect until 

2013. But we have told the State of Utah that, in our view, that 

provision of the State law is preempted because it conflicts with 

Federal law and that if it remains on the books at the time that 

73 

it is scheduled to go into effect next year we would be prepared to 

take action at that time. 

Mr. GOWDY. We have concurrent jurisdiction in drug cases, 

agreed? 

Mr. DELERY. That is my understanding. 

Mr. GOWDY. We have concurrent jurisdiction in bank robbery 

cases. The good ones go to the U.S. Attorney’s Office and the ones 

that are tougher to prove go to the State DA’s office, right? 

Mr. DELERY. Again, that is my general understanding. 

Mr. GOWDY. When a stop and rob is robbed, it could be a hobjack 

case if the United States Attorney’s Office wants to take it or it 

could just be a garden variety common law robbery case in State 

court. 

We have had hearing after hearing—and I do not even want to 

get into administrative amnesty by memo. They say they do not 

have the tools, they do not have the workers, they do not have the 

time, they are having to prioritize who is removed, where it is enforced, where it is not enforced. I would just think that you would 

welcome the help from States, and it just doesn’t seem like that is 

the case. 

Mr. DELERY. Congressman, again, I think the Federal Government does welcome and does work closely with States and immigration enforcement. 

Mr. GOWDY. You can understand how the filing of a suit against 

a State might lead that State to conclude otherwise. 

Mr. DELERY. I think, Congressman, here the situation was, as I 

indicated, that after careful review the government concluded that, 

in the case of South Carolina and some other States, that by creating a State-level immigration policy in an area that the Constitution reserves to the Federal Government and creating a patchwork 

of immigration laws that that not only conflicted with the constitutional structure but would be problematic. 

Mr. GOWDY. What portion of the Constitution do you read as giving exclusive—are you talking about article I, Section 8, where it 

says the process of naturalization? Is there another basis for it? 

Mr. DELERY. I think—and other enumerated authorities related 

to foreign affairs. I think the Supreme Court has recognized that 

immigration is—because it is connected closely to foreign affairs is 

an area of Federal authority. 

Mr. GOWDY. To whom should I direct my questions about Medicare and Medicaid fraud? 

Mr. DELERY. That would also be me, Congressman. 

Mr. GOWDY. In the last 12 months, how many active prison sentences have been meted out for Medicaid or Medicare fraud? 

Mr. DELERY. I am sorry. Active prison sentences. 

Mr. GOWDY. Active prison sentences. Not fines, not corporate, 

you know, don’t do it again. Active prison sentences. 

Mr. DELERY. Right. I don’t know that number, Congressman, but 

we could certainly—— 

Mr. GOWDY. Yes. Round number. 

Mr. DELERY. I am sorry. I don’t have that. 

Mr. GOWDY. Ten? Hundred? 

Mr. DELERY. Unfortunately, Congressman, I can’t speculate. I am 

happy to get back to you with—— 

74 

Mr. GOWDY. Do you know how many times you filed a motion for 

upward departure in those sentencing hearings to try to send an 

even clearer message? 

Mr. DELERY. I don’t, Congressman. 

Mr. GOWDY. Would you be willing to give me that information? 

Mr. DELERY. To the extent that we can identify it, we will certainly get back to you. 

Mr. GOWDY. You would know. I mean, I assume you are a supervisor in the Department. You have to approve motions for upward 

departure, don’t you? 

Mr. DELERY. I think it depends—actually, I think usually those 

have not come to me, at least in my experience. 

Mr. GOWDY. Are you familiar with the Texas orthodontia fraud 

case? 

Mr. DELERY. Not specifically. 

Mr. GOWDY. There was more money given out in the State of 

Texas for orthodontists—and I am not aware of any study that 

shows there is more crooked teeth in Texas than there is any other 

State—but more money was doled out in Texas than all other 

States combined. In fact, they were advertising free braces. Far be 

it for me to tell the bureau or anyone else where they ought to look, 

but that just strikes me as a case that probably would not be that 

tough to prove. 

I yield back, Mr. Chairman. 

Mr. COBLE. I thank the gentleman. We are coming in on the 1:15 

deadline. 

Ms. Keneally, you have been on the sideline. Let me put one 

question to you, if I may. Is it true that, as currently written, the 

aggravated identity theft statute, 18 USC 1028(a), does not help 

you specifically to reach this issue? 

Ms. KENEALLY. Thank you for that question. 

I believe that that statute, along with the tax statutes and other 

statutes that we have, are providing us very, very good tools to address the stolen identity refund fraud cases. 

Mr. COBLE. Could you benefit from additional investigative tools 

or resources to handle tax fraud cases, or is the operation adequate 

as is? 

Ms. KENEALLY. I am pleased to report that I believe we are doing 

a very effective job in these areas, but I do understand that there 

are various legislative proposals, and we would be happy to work 

with the Department to comment on any of them. 

Mr. COBLE. You can get back with us on that. 

Ms. KENEALLY. Thank you. 

Mr. COBLE. Mr. Cohen, for one final question. 

Mr. COHEN. Thank you, sir. 

Ms. Keneally, in my jurisdiction there is a company called Mo’ 

Money Taxes, and you smile. You know about Mo’ Money Taxes. 

Congressman Scott and Congressman Thompson and others have 

asked, as well as I have, to look into what they have done or allegedly done in terms of checks and not getting refunds, et cetera. I 

am sure some of these companies—and maybe this company as 

well—do a great service, but the IRS has a service where you all, 

as I understand it, will do taxes for folks free of charge; is that 

75 

not—am I not right on that? I know you are not IRS, but you know 

about it, don’t you? 

Ms. KENEALLY. I am sorry. I am actually unfamiliar with that 

service. 

Mr. COHEN. You are not familiar with that service. 

Well, let me ask you this then. Is there anything the Tax Division does on a proactive basis to try to ferret these folks out before 

they either misdirect their checks or lose their checks or keep their 

checks or whatever? 

Ms. KENEALLY. The Tax Division is very committed to all forms 

of enforcement against fraudulent return preparers. 

Mr. COHEN. Right. 

Ms. KENEALLY. It would be inappropriate for me to comment on 

any particular cases. 

Mr. COHEN. I know that. But do you do anything in a proactive 

way to seek out and find folks that might not be doing things in 

the proper way to protect the taxpayers? 

Ms. KENEALLY. The Tax Division cases come to it by referral 

from the IRS or by request from U.S. Attorneys Offices to open a 

grand jury investigation. 

Mr. COHEN. Right. 

Ms. KENEALLY. We have made very clear that this is an enforcement priority. We have a number of situations where we have our 

prosecutors very actively involved in ongoing investigations, and 

we are bringing every resource and making every effort—— 

Mr. COHEN. And that is great, but is there anything that you 

do—maybe it is the IRS’s job, but is there anything you do to try 

to proactively find these folks before it gets to an enforcement case? 

Ms. KENEALLY. It is primarily the IRS’s job. I have said and will 

say as many times as I can that we would rather charge these 

cases as attempted than completed. We would rather get to them 

before the crime occurs. We are making every effort to use the information that we are learning in these investigations to develop 

better investigative tools, to work with the IRS in training on what 

we have learned, to learn from them, and to be as proactive in this 

area as we can. 

Mr. COHEN. Thank you. I yield back. 

Mr. COBLE. I thank the gentleman, and we thank the witnesses 

for your testimony today. 

Without objection, all Members will have 5 legislative days to 

submit to the Chair additional written questions for the witnesses 

which we will forward and ask the witnesses to respond as promptly as they can so that their answers may be made a part of the 

record. 

This hearing stands adjourned. 

[Whereupon, at 1:13 p.m., the Subcommittee was adjourned.] 

(77) 

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable Steve Cohen, a Representative in 

Congress from the State of Tennessee, and Ranking Member, Subcommittee on Courts, Commercial and Administrative Law 

I thank Chairman Coble for holding today’s hearing on three of the Department 

of Justice’s litigating divisions—the Civil, Tax, and Environment and Natural Resources Divisions. 

Two years ago, when I was Chairman of this Subcommittee, we held a very fruitful oversight hearing on the Civil Division. I am glad to have the Civil Division back 

before us today. 

I also appreciate the opportunity to hear from the Tax and Environment and Natural Resources Divisions to discuss their activities, accomplishments, and resource 

needs. 

Every day, the attorneys of these Divisions, like all Department of Justice attorneys, do the yeoman’s work of representing the American people in court on a broad 

range of matters, from defending the United States in national security matters to 

going after health care fraud, pursuing tax collections, and protecting the environment and consumers. 

Given the importance of their work, Congress should ensure that these Divisions, 

like the Department as a whole, are provided the funds and other resources necessary to carry out their missions. 

For fiscal year 2013, the President requests $298,040,00 for the Civil Division, 

$110,360,000 for the ENRD, and $106,459,000 for the Tax Division. 

These are modest amounts in light of the overall federal budget, and, especially, 

in light of the returns to the taxpayer from the work of these Divisions. 

For example, last year the ENRD obtained more than $650 million in civil recoveries and criminal fines and saved taxpayers another $2.1 billion by successfully defending against meritless claims. 

The Civil Division’s civil fraud recoveries since 2009 have exceeded $9 billion. 

Moreover, the Division successfully defends the United States in cases sometimes 

involving billions of dollars. 

The Tax Division’s work brings in $13 in tax collections for every dollar spent on 

the Division. 

And beyond the monetary benefits of these Divisions’ work are the hard-to-quantify, but in some ways even more valuable, benefits, like ensuring clean air and 

clean water, maintaining public health, and securing dignity for all Americans. 

Unfortunately, we have already seen some evidence that not everyone in Congress 

shares my view of the value of these Divisions’ work. As Acting Assistant Attorney 

General Stuart Delery notes in his written testimony, the House recently passed an 

FY 2013 appropriations bill that did not include requested funding for the Civil Division’s financial fraud work or for adjustments-to-base, which are intended simply 

to keep pace with the cost of things like increases in rent, contracts, and health benefits coverage. 

Such a funding approach is short-sighted. While no one likes wasteful spending, 

the money requested by these Divisions is far from being wasted. Rather, it is an 

investment in protecting the public fisc as well as ensuring that our laws be enforced and that justice be served. 

I thank our distinguished witnesses for taking the time to update us on the work 

of their respective Divisions and I look forward to their testimony. 

f 

78 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, and Ranking Member, Committee on the Judiciary 

The Department of Justice plays a critical role in enforcing our Nation’s laws and 

protecting the rights of all Americans. 

This agency is essentially the federal government’s lawyer, a tremendous responsibility that must be implemented in a nonpartisan and truly fair manner that is 

above reproach. 

Today, three components of the Justice Department will report to us about their 

work and accomplishments, namely, the Civil Division, the Environment and Natural Resources Division, and the Tax Division. 

The Civil Division plays a major role in defending the interests of the United 

States and its citizens over a broad spectrum of issues that pertain to, for example, 

national security, health care fraud, immigration enforcement, and mortgage fraud. 

The ENRD is charged with protecting the environment and the Nation’s natural 

resources, as well as safeguarding the interests of Native Americans. 

The Tax Division ensures compliance with the U.S. Tax Code and that the Nation’s tax revenues are collected. The last time our Committee conducted any oversight of this Division may have been in 1978, according to an informal survey by 

the Congressional Research Service. 

Accordingly, there is much ground to cover, and in particular, I want to focus on 

these issues. 

To begin with, the Judiciary Committee—as the authorizing committee for the 

Justice Department—must ensure that these Divisions have the resources and funding from Congress that they need so that they can fulfill their important missions. 

Adequate funding is vital to ensuring that these Divisions, like other components 

of the federal government, can continue to perform their duties on behalf of the 

American people. 

Each of these Divisions recovers or saves far more in taxpayer dollars than is 

spent to keep them operating. 

For example— 

• Last year alone, the ENRD saved American taxpayers more than $2.1 billion 

by defending the United States against unmeritorious claims and obtained more 

than $650 million in civil recoveries and criminal fines. 

• For every dollar invested in a Tax Division attorney, $13 in tax collections is 

generated for the Nation’s Treasury. 

• And, Civil Division attorneys each year litigate thousands of cases that concern 

billions of dollars in claims and recoveries. For example, the Division’s civil 

fraud recoveries since 2009 have exceeded $9 billion. 

Yet, earlier this month, the House passed appropriations legislation that fails to 

include some of the Administration’s requested increases that would fund critical 

programs, such as the Civil Division’s financial fraud investigation and prosecution 

task force. 

It also fails to include enhanced funding to cover increases in rent, employee 

health benefits, and other fundamental expenditures needed to keep this agency 

functioning. 

Unfortunately, the current political climate appears to be dominated by a shortsighted agenda that irrationally prioritizes budget cuts, when, in fact, those cuts 

may ultimately prevent these agencies from doing their jobs. These cuts are advocated without much thought to the long-term consequences of doing so. 

Second, with respect to the use of settlement agreements and consent decrees, 

I note that the Divisions appearing before us today rely heavily on these tools to 

carry out their duties in a manner that is efficient, cost-effective, and fair. 

In fact, there are repeated references to these settlements and their many benefits 

in the prepared statements submitted by the witnesses for today’s hearing. 

Nevertheless, some of my colleagues on the other side of the aisle have expressed 

serious concerns about the use of settlement agreements and consent decrees. 

In fact, earlier this year, this Subcommittee conducted a legislative hearing on 

two bills introduced in response to these purported concerns. 

The proponents of these measures argue that consent decrees involving state and 

local government defendants may be too difficult to terminate or modify and that 

they therefore unduly undermine the authority of state and local government officials. 

We also heard that agencies collude with sympathetic plaintiffs in order to engage 

in back-door rulemaking via consent decrees or settlement agreements. 

79 

Frankly, I have strong doubts that either of those points have much—if any— 

merit. 

Finally, I note that the Civil Division plays a prominent role in the Administration’s Financial Fraud Enforcement Task Force. In particular, the Division is a cochair of the Mortgage Fraud Working Group and the recently formed Residential 

Mortgage-Backed Securities Working Group. 

While I appreciate the efforts that the Justice Department has undertaken to address fraudulent activities in the mortgage lending industry and in the securitzation 

process, much more needs to be done. 

For example, it appears from the written testimony that 2,100 defendants have 

been charged with mortgage-fraud related crimes. That number, however, does not 

appear to include any of the principal mortgage lenders and Wall Street players 

that had a role in causing this financial disaster. 

I want assurances that those responsible for causing one of the Nation’s most severe financial crises since the Great Depression are brought to justice. 

The millions of American homeowners who were tricked into mortgages that ultimately caused them to lose their homes, the many who were victims of fraudulent 

foreclosure practices, and the millions of us whose retirement investments disappeared in the wake of the so-called Great Recession deserve at least that much. 

f 

80 


74416A-1.eps
81 

f 


74416A-2.eps
82 


74416B-1.eps
83 


74416B-2.eps
84 


74416B-3.eps
85 


74416B-4.eps
86 


74416B-5.eps
87 


74416B-6.eps
88 


74416B-7.eps
89 

Æ 


74416B-8.eps