U.S. GOVERNMENT PUBLISHING OFFICE

WASHINGTON : 

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

94–654 PDF 2015

ONGOING OVERSIGHT: 

MONITORING THE ACTIVITIES OF THE 

JUSTICE DEPARTMENT’S CIVIL, TAX AND 

ENVIRONMENT AND NATURAL RESOURCES 

DIVISIONS AND THE U.S. TRUSTEE PROGRAM 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

REGULATORY REFORM, 

COMMERCIAL AND ANTITRUST LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

MAY 19, 2015 

Serial No. 114–34 

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 

BOB GOODLATTE, Virginia, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

LAMAR S. SMITH, Texas 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

RAU ́ L LABRADOR, Idaho 

BLAKE FARENTHOLD, Texas 

DOUG COLLINS, Georgia 

RON DeSANTIS, Florida 

MIMI WALTERS, California 

KEN BUCK, Colorado 

JOHN RATCLIFFE, Texas 

DAVE TROTT, Michigan 

MIKE BISHOP, Michigan 

JOHN CONYERS, JR., Michigan 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

JUDY CHU, California 

TED DEUTCH, Florida 

LUIS V. GUTIERREZ, Illinois 

KAREN BASS, California 

CEDRIC RICHMOND, Louisiana 

SUZAN DelBENE, Washington 

HAKEEM JEFFRIES, New York 

DAVID N. CICILLINE, Rhode Island 

SCOTT PETERS, California 

SHELLEY HUSBAND, Chief of Staff & General Counsel 

PERRY APELBAUM, Minority Staff Director & Chief Counsel 

SUBCOMMITTEE ON REGULATORY REFORM, COMMERCIAL AND ANTITRUST LAW

TOM MARINO, Pennsylvania, Chairman 

BLAKE FARENTHOLD, Texas, Vice-Chairman 

DARRELL E. ISSA, California 

DOUG COLLINS, Georgia 

MIMI WALTERS, California 

JOHN RATCLIFFE, Texas 

DAVE TROTT, Michigan 

MIKE BISHOP, Michigan 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

SUZAN DelBENE, Washington 

HAKEEM JEFFRIES, New York 

DAVID N. CICILLINE, Rhode Island 

SCOTT PETERS, California 

DANIEL FLORES, Chief Counsel 
(III) 

C O N T E N T S 

MAY 19, 2015 

Page 

OPENING STATEMENTS 

The Honorable Tom Marino, a Representative in Congress from the State 

of Pennsylvania, and Chairman, Subcommittee on Regulatory Reform, Commercial and Antitrust Law .................................................................................. 1 

The Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Representative in Congress 

from the State of Georgia, and Ranking Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law ................................................. 3 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Chairman, Committee on the Judiciary ................................. 4 

WITNESSES 

Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Civil Division, U.S. Department of Justice 

Oral Testimony ..................................................................................................... 7 

Prepared Statement ............................................................................................. 9 

The Honorable John C. Cruden, Assistant Attorney General, Environment 

and Natural Resources Division, U.S. Department of Justice 

Oral Testimony ..................................................................................................... 17 

Prepared Statement ............................................................................................. 19 

Caroline Ciraolo, Acting Assistant Attorney General, Tax Division, U.S. Department of Justice 

Oral Testimony ..................................................................................................... 30 

Prepared Statement ............................................................................................. 32 

Clifford J. White, III, Director, Executive Office for United States Trustees 

Oral Testimony ..................................................................................................... 50 

Prepared Statement ............................................................................................. 52 

Michael Horowitz, CEO, Twenty-First Century Initiatives 

Oral Testimony ..................................................................................................... 98 

Prepared Statement ............................................................................................. 101 

Daniel Z. Epstein, Esq., Executive Director, Cause of Action 

Oral Testimony ..................................................................................................... 111 

Prepared Statement ............................................................................................. 113 

Andrew M. Grossman, Adjunct Scholar, Cato Institute, Associate, Baker & 

Hostetler L.L.P. 

Oral Testimony ..................................................................................................... 119 

Prepared Statement ............................................................................................. 121 

Lauren K. Saunders, Associate Director, National Consumer Law Center 

Oral Testimony ..................................................................................................... 141 

Prepared Statement ............................................................................................. 143 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

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

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

on the Judiciary ................................................................................................... 71 

Material submitted by the Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Representative in Congress from the State of Georgia, and Ranking Member, 

Subcommittee on Regulatory Reform, Commercial and Antitrust Law .......... 179 
Page

IV 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Response to Questions for the Record from Benjamin C. Mizer, Principal 

Deputy Assistant Attorney General, Civil Division, U.S. Department of 

Justice ................................................................................................................... 186 

Response to Questions for the Record from the Honorable John C. Cruden, 

Assistant Attorney General, Environment and Natural Resources Division, 

U.S. Department of Justice ................................................................................. 190 

Questions for the Record submitted to Caroline Ciraolo, Acting Assistant 

Attorney General, Tax Division, U.S. Department of Justice .......................... 201 

Response to Questions for the Record from Clifford J. White, III, Director, 

Executive Office for United States Trustees ...................................................... 205 

Response to Questions for the Record from Andrew M. Grossman, Adjunct 

Scholar, Cato Institute, Associate, Baker & Hostetler L.L.P. .......................... 208 

Response to Questions for the Record from Lauren K. Saunders, Associate 

Director, National Consumer Law Center ......................................................... 211 
(1) 

ONGOING OVERSIGHT: MONITORING THE ACTIVITIES OF THE JUSTICE DEPARTMENT’S 

CIVIL, TAX AND ENVIRONMENT AND NATURAL RESOURCES DIVISIONS AND THE U.S. 

TRUSTEE PROGRAM 

TUESDAY, MAY 19, 2015 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON REGULATORY REFORM, 

COMMERCIAL AND ANTITRUST LAW

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 1:13 p.m., in room 

2141, Rayburn House Office Building, the Honorable Tom Marino 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Marino, Goodlatte, Issa, Collins, Ratcliffe, Trott, Johnson, Conyers, Jeffries, and Peters. 

Staff Present: (Majority) Dan Huff, Counsel; Andrea Lindsey, 

Clerk; (Minority) Slade Bond, Counsel. 

Mr. MARINO. The Subcommittee on Regulatory Reform, Commercial and Antitrust Law will come to order. Without objection, the 

Chair is authorized to declare a recess of the Committee at any 

time and we are going to vote very shortly. We welcome everyone 

here today to today’s hearing on Ongoing Oversight: Monitoring the 

Activities of the Justice Department’s Civil, Tax and Environment 

and Natural Resources Division and the United States Trustee Program. I will recognize myself now for an opening statement. 

House rules in good governance require that congressional Committees conduct regular oversight over Federal agencies within 

their jurisdiction. The last oversight hearing featuring these Justice Department components took place on May 31, 2012. In the 

meantime, the activities of these components have raised serious 

questions that merit congressional oversight. For example, will the 

Federal Deposit Insurance Corporation’s withdraw of its list of 

‘‘High Risk Merchants’’ prompt the Civil Division to rethink Operation Choke Point? 

A Justice Department spokesperson advised that ‘‘because each 

of our investigations is based on specific evidence of unlawful conduct, the FDIC’s revised regulatory guidance will not have an effect 

on the ongoing investigations.’’ This misses the point. Fraud may 

be the Civil Division’s target, but Operation Choke Point’s method-
2 

ology is having spillover effects. Congress has received numerous 

reports of banks severing relationships with law-abiding customers 

from legitimate industries that the Administration has designated 

‘‘High Risk.’’ 

The FDIC’s retraction reflected an understanding of these troubling effects. The Civil Division should follow the FDIC’s lead and 

eliminate Operation Choke Point’s potential for collateral damage. 

In the absence of such concrete steps, I fear the Civil Division may 

simply be continuing with Operation Choke Point as if nothing 

changed. 

Another high profile matter is a Texas judge’s finding that division attorneys misled the court during legal challenges to the President’s administrative actions on immigration. After a hearing on 

the matter, the judge wrote, ‘‘the Court is extremely troubled by 

the multiple representations made by the Government’s counsel— 

both in writing and orally . . .’’ This is not the only judge worried 

about Civil Division lawyer misconduct. 

In a Contracts case involving the ATF, Judge Francis Allegra 

ruled that ‘‘the record revealed at least two instances of conduct by 

defendant’s counsel that, in the court’s view, provide indication 

that fraud on the court has occurred here.’’ How does the Department plan to restore its reputation with these judges and what internal controls have been put in place to prevent a recurrence? 

On March 24, 2015, the House Judiciary Committee approved 

H.R. 712 which addresses inappropriate sue and settle tactics. In 

this arrangement, plaintiffs and a sympathetic agency collaborate 

to accomplish, under the authority of a court order a policy change 

that both want but neither could obtain as readily through standard processes. 

In July 2013, 12 State Attorneys General sued the Environmental Protection Agency saying they are to use sue and settle action tax needs to circumvent the legislative and regulatory process. 

The complaint alleges the practice has raised utility costs by as 

much as 20 percent in many regions. 

A separate study of just six Obama administration sue-and-settle 

environmental regulations found that they would cost an estimated 

$101 billion annually. How does ENRD evaluate whether to settle 

environmental cases? Furthermore, how does it ensure in the settlement context that, the statutes and Executive Orders intended 

to ensure quality regulations and adequate public input are respected? Environmental enforcement is also a frequent source of 

over-criminalization. What steps is ENRD taking to prioritize the 

right cases and use civil sanctions rather than criminal penalties 

where appropriate? This is a bipartisan concern. 

Finally, there is an overreaching theme of Obama administration 

lawyers subordinating law to cause. In a recent article, a former 

Reagan administration lawyer drew a powerful contrast between 

Obama administration lawyers and Reagan-era advisers who, for 

the sake of principle, frequently stood in the way of ‘‘actions and 

policies, thought to be of great value to the administration.’’ 

There is much ground to cover in this hearing today and I want 

to thank the witnesses for appearing and I look forward to their 

testimony. I look to the Ranking Member, Mr. Johnson, for his 

opening statement. 
3 

Mr. JOHNSON. Thank you, Mr. Chairman. Today four components 

of the Justice Department, the Civil Division, the environmental 

and natural resources division and the tax division and U.S. Trustee Program will report to us about their work and about their 

many accomplishments. 

The Civil Division plays a major role in defending the interest of 

the United States and its citizens over a broad spectrum of issues. 

The ENRD is charged with protecting the environment and the Nation’s natural resources. The tax division ensures compliance with 

the U.S. Tax Code and we do need one, although it’s too complicated, filled and riddled, really, with loopholes and you are— 

while you’re being defunded in terms of your ability to get those 

entities who are large enough to have the army of lawyers to avoid 

paying taxes, and you’re trying to create a fair tax system or tax 

enforcement regimen, should I say, despite the budget cuts. I really 

appreciate the work that you’re doing, complying—ensuring compliance with the U.S. Tax Code and ensuring that the Nation’s tax 

revenues are collected. And also, the fourth division, the U.S. 

Trustee Program promotes the integrity and the efficiency of the 

bankruptcy system ensuring benefits to all stakeholders in bankruptcy, debtors, creditors and the public. 

We have not held oversight hearings of these components in several years, and accordingly, there is much ground to cover. Additionally, I anticipate that the majority may question several of the 

Justice Department’s recent settlement agreements. Since 2013, 

the Civil Division has investigated and combated mass market consumer fraud by focusing on payment systems on the automated 

clearinghouse ACH network. 

To date, the Justice Department has entered into settlement 

agreements with three banks: CommerceWest Plaza, CommerceWest Plaza, and Four Oaks. Each of these agreements stem from 

complaints filed by the Justice Department alleging that the banks 

lacked reasonable controls to respond to red flag activity, or knew 

and deliberately ignored the use of these banks accounts and access 

to the national banking system to defraud consumers of millions of 

dollars. For instance, Four Oaks Bank allowed a payment processor 

to directly access the ACH network, allowing it to conduct transactions on behalf of the illegal activity such as online gambling and 

a Ponzi fraud scheme. 

Beyond those investigations, the Justice Department has recently 

settled with several banks, JPMorgan, Citigroup, and Bank of 

America, relating to their fraudulent conduct that directly led to 

the mortgage foreclose crisis and the Great Recession. And in the 

case of Chase, fraudulent conduct and abuse of the bankruptcy systems integrity; all of this being at such levels that have been no 

greater than since the Great Recession. 

Collectively, these settlements amply demonstrate the fraud that 

pervaded every level of the securities industry, fraud that substantially contributed to the mortgage foreclosure crisis and the recession, and even fraud on consumers that has occurred years after 

the onset of the Great Recession. 

In addition to significant civil penalties, several of these agreements contain consumer relief provisions designed to provide 

much-needed relief to millions of Americans affected by the fraudu-
4 

lent sale of toxic securities, including educational assistance 

through the housing counsel agencies and other programs. 

The Department of Housing and Urban Development has documented that if a consumer works with a HUD-approved housing 

counseling agency, the odds of a favorable outcome to a mortgage 

foreclose are almost two times greater. 

As we search for ways to avoid another mortgage crisis while we 

are paring the incalculable damage that has already occurred, it is 

essential that we use every tool to keep families in their homes. Although I wish that the Justice Department settlements had required more of the banks that contributed directly to the plight of 

so many, I am confident that these agreements will do much to 

help millions of consumers across the country. 

I thank the Justice Department for fighting on behalf of consumers, and I encourage it to continue its investigations and I yield 

back. 

Mr. MARINO. Thank you. The Chair now recognizes the Chairman of the Judiciary Committee, Congressman Goodlatte of Virginia for his opening statement. 

Mr. GOODLATTE. Thank you, Mr. Chairman. Good afternoon and 

welcome to our witnesses. The Judiciary Committee is in the midst 

of a ‘‘pattern or practice’’ investigation of the Justice Department. 

There is mounting evidence that DOJ is systematically subverting 

Congress’ budget authority by using settlements to funnel money 

to activist groups. 

There have been two important developments. First, the Department of Justice continues to resist document requests, but what little has been provided confirms that activist groups which stood to 

gain from mandatory donation provisions were involved in placing 

those provisions in the settlements. 

The evidence includes an email from activist groups requesting 

a meeting with then-Deputy Attorney General Tony West. They 

write that they, ‘‘worked with’’ Federal officials to include donations as an option in the 2013 JPMorgan settlement. Now they 

want to go further and have Mr. West make certain ‘‘grants mandatory in all future settlements.’’ In another email, they suggest offering ‘‘enhanced credit’’ for such donations. 

On March 4, 2014, the activists met with an official from Mr. 

West’s office. Just a few months later, the Department of Justice 

announced the Citigroup and Bank of America settlements, both of 

which require mandatory donations to community groups and offer 

enhanced credit for donations above the required total minimum of 

$150 million. 

This record does not square well with the DOJ’s testimony to the 

Judiciary Committee earlier this year that, ‘‘there was no outside 

third-party group that participated in any way in these negotiations.’’ The groups involved include two local affiliates of the Industrial Areas Foundation, or ‘‘IAF.’’ A celebrated scholarly work on 

community organizing attests to the activist pedigree of IAF. The 

book highlights the IAF Training Institute’s self-description as a ‘‘a 

school for professional radicals,’’ whose objective is, ‘‘training to 

help leaders see the connection between their local issues and associated progressive causes.’’ 
5 

Mandatory donation provisions present real dangers of subversion of Congress’s appropriations authority. The core concern is institutional and non-partisan. We raised this concern formal with 

the Department in November 2014, but instead of spending the 

practice, the Department of Justice has doubled down. 

On March 3, 2015, the U.S. Trustee Program entered into an over $50 million settlement with JPMorgan Chase relating to robosigning. $7.5 million of that did not make it to victims. Instead, it 

went to a third party, largely to educate high school and college 

students about using credit cards responsibly. The tenuous connection between the alleged harm and the purpose of the donation creates significant questions, and the mere fact that the donation 

raises concerns under the Miscellaneous Receipts Act. 

Furthermore, from a good government standpoint, the settlement 

is striking in the lack of oversight. It states explicitly, ‘‘the parties 

understand and agree that neither has any oversight over’’ the 

third-party recipient, and ‘‘neither will monitor the use of the contribution by the recipient.’’ The situation is even more egregious 

when one considers that the third-party recipient is to receive a required donation that nearly doubles its net level of assets. It’s 

deeply troubling for that to happen at the unilateral discretion of 

the Executive Branch. 

Since this is the first U.S. Trustee Program settlement containing mandatory donations, it appears DOJ is expanding this 

controversial practice following its initial use in other areas. This 

disrespects legitimate congressional concerns and reverses the Department of Justice’s own policy in 2008 when it nearly banned the 

practice of third party payments entirely, ‘‘due to instances of perceived abuse.’’ 

This issue is a high priority for the Committee, but there is also 

much more to cover. I thank the witnesses for attending, and I look 

forward to the discussion. 

Mr. MARINO. I thank the Chairman. Without objection the Members’ opening statements will be made part of the record. 

We have an extremely important panel before us here today and 

I want to thank you for being here. And I will begin by swearing 

in the witnesses. Would you please stand and raise your righthand. 

Do you swear that the testimony that you are about to give will 

be the truth, the whole truth, and nothing but the truth, so help 

you God? Please be seated. 

Let the record reflect that all the witnesses responded in the affirmative. 

I will now introduce our witnesses, I will introduce each one 

right after the other. Our Ranking Member of the full Committee 

will be here very shortly and he will make his opening statement. 

Mr. Benjamin Mizer, correct? 

Mr. MIZER. Yes. 

Mr. MARINO. Was appointed Principal Deputy Assistant Attorney 

General for the Department of Justice Civil Division on March 2nd 

of 2015. Congratulations. 

Mr. MIZER. Thank you. 

Mr. MARINO. Prior to his employment, Mr. Mizer served in the 

DOJ as counselor to then-Attorney General Eric Holder, Jr., on 
6 

matters that include civil litigation, civil rights and national security, and as a Deputy Assistant Attorney General in the Office of 

Legal Counsel. Mr. Mizer also served as a solicitor general in Ohio 

and argued in the United States Supreme Court, the Sixth Circuit 

Court of Appeals and the Ohio Supreme Court. Mr. Mizer is a 

graduate of University of Michigan Law School and the College of 

Wooster. He clerked for Judge Judith Rogers of the United States 

Court of Appeals for the D.C. Circuit, and for Justice John Paul 

Stevens of the Supreme Court. Welcome, sir. 

Mr. MIZER. Thank you. 

Mr. MARINO. Our next witness is Mr. John Cruden. Mr. Cruden 

was confirmed by the U.S. Senate as the Assistant Attorney General for the Environment and Natural Resources Division on December 16 of 2014. Mr. Cruden’s government service spans 35 

years. He began as an Army ranger in Vietnam, and took the LSAT 

in Saigon. That was a double horrendous situation. He began his 

legal career at Army litigator and moved to the Justice Department 

in 1991 as chief of Environmental Enforcement. Mr. Cruden has 

played a leading role in almost every major environmental case, including the government’s prosecution for the Exxon Valdez oil spill 

in Alaska, toxic waste dumping at Love Canal in New York, dioxin 

contamination in Times Beach, and finally the BP oil spill. Mr. 

Cruden is a graduate of West Point University of Santa Clara law 

school and the Woodrow Wilson School at the University of Virginia. Welcome, sir. 

Ms. Caroline Ciraolo. 

Ms. CIRAOLO. Ciraolo. 

Mr. MARINO. I am pronouncing it in the Italian way. I apologize 

for that. It is Caroline Ciraolo. 

Ms. CIRAOLO. That’s all right. 

Mr. MARINO. Is the Acting Assistant Attorney General for the 

Tax Division. Prior to assuming the position Ms. Ciraolo survived— 

excuse me, served—in that office, it’s a survival—served as a Principal Deputy Assistant Attorney General and Deputy Assistant Attorney General on Policy and Planning for the Tax Division. Ms. 

Ciraolo has also worked as an attorney adviser for the Honorable 

Stanley Goldberg of the U.S. Tax Court. Her private sector experience includes serving as the chair of the tax controversy litigation 

practice group as Rosenberg, Martin, Greenberg, L.L.P. And working for Martin, Junghans, Snyder & Bernstein, PA. She is a graduate of the College of New Jersey and the University of Maryland 

School of Law, she also holds an LLM in taxation from the University of Baltimore School of Law. Welcome. 

Our next witness is Mr. Clifford White, he’s the Director of the 

U.S. Trustee Program, his former role with the program included 

serving as Deputy Director and Assistant United States Trustee. 

Prior to the U.S. Trustee Program, Director White served as a Deputy Assistant Attorney General for the Department of Justice and 

served in an official capacity for two other Federal agencies. Director White is a graduate of George Washington University, and the 

George Washington School of Law. Welcome, sir. 

Mr. WHITE. Thank you. 

Mr. MARINO. Each of the witnesses written statements will be 

entered into the record into its entirety. I ask that each witness 
7 

summarize his or her testimony in 5 minutes or less. To help you 

stay within the time, there is a timing light in front of you. The 

light will switch from green to yellow indicating that you have 1 

minute to conclude your testimony. When the light turns red, it indicates that the witness’ 5 minutes have expired. Thank you so 

much. 

I think—the bell rang for votes, but we can get a couple of statements in by the witnesses, so I’m going to start with Mr. Mizer. 

TESTIMONY OF BENJAMIN C. MIZER, PRINCIPAL DEPUTY ASSISTANT ATTORNEY GENERAL, CIVIL DIVISION, U.S. DEPARTMENT OF JUSTICE 

Mr. MIZER. Thank you, Chairman Marino, Ranking Member 

Johnson and Members of the Subcommittee. Thank you for inviting 

me here to testify about the work of the Civil Division of the Department of Justice. I joined and have lead the Division since 

March 2 of this year, and I appreciate the opportunity to discuss 

the important work that Civil Division is doing as well as its budget and resource needs for fiscal year 2016. 

The Civil Division is made up of more than 1,300 permanent employees, including more than 950 attorneys. Each year, our attorneys handle tens of thousands of cases that collectively involve tens 

of billions of dollars in claims and recoveries. The Civil Division 

represents the United States, its agencies, Members of Congress, 

cabinet officers and other Federal employees. In doing this work, 

the Division confronts significant policy issues, often with constitutional dimensions, in defending and enforcing various Federal programs and actions. The priorities of the Division include strengthening the security of our Nation, protecting the health and safety 

of consumers and pursuing fraud against the government and in 

the finance sector. 

Approximately 87 percent of the Division’s cases involve defending claims filed against the government. This litigation reflects the 

vast diversity of government activities. In fiscal year 2014, well 

over $100 billion was at issue in our defensive suits alone. I’d like 

to give some examples to illustrate the work done by the Divisions 

dedicated and talented public servants. 

Our work to protect our national security is vital to defending 

the Nation. In recent years, the Civil Division has, among other 

things, successfully defended the validity of a cause of action 

against state sponsors of terror, as well as screening procedures for 

individuals entering the United States. And the Division’s Office of 

Immigration Litigation has successfully prevented known or suspected terrorists from becoming naturalized citizens, and defended 

against habeas corpus petitions seeking the release of known or 

suspected terrorists. 

The Civil Division is also primarily responsible for defending the 

legality of statutes passed by Congress. For example, among other 

recent cases raising issues of national significance, we are currently defending against constitutional and statutory challenges to 

a section of the USA PATRIOT Act. While the majority of the Division’s work is defensive, the Division has achieved extraordinary 

results in affirmative litigation as well. 
8 

Through these cases, the Civil Division protects the health, safety and financial security of our citizens, returns billions of dollars 

to the treasury, and holds accountable those who unlawfully 

threaten the integrity of our financial systems. Since 2009, the 

Civil Division working with the United States attorneys across the 

country has obtained more than $33 billion in civil and criminal 

judgements and resolutions in affirmative cases. During that same 

period, the Division often in concert with the U.S. Attorneys has 

used the False Claims Act to recover more taxpayer dollars lost to 

fraud, over $24 billion, than in any other comparable period. 

In fiscal year 2014 alone, the government recovered a record $5.7 

billion in False Claims Act cases. And similarly, the government’s 

health care fraud recoveries since January 2009 are at an all-time 

high. 

In addition, through our efforts to target multiple aspect of fraud 

that contributed to the 2008 financial crisis, the Civil Division, 

along with the Federal and State partners recovered over $36 billion from JPMorgan Chase, Citibank and Bank of America collectively through settlements resolving claims arising out of misconduct in the packaging marketing, sale and issuance of residential mortgage-backed securities. 

Although the most visible efforts of the Civil Division in this area 

are those lawsuits that result in large monetary judgments, the impact of the Division’s work cannot be measured solely in dollars 

and cents. It must also take into account the Division’s efforts to 

prevent and deter conduct that harms the consumers and the 

health care system on which they rely, including by pursuing the 

misbranding and adulteration of drugs, the distribution of tainted 

food and the sale of unsafe goods. 

The President’s fiscal year 2016 request for the Civil Division 

would provide the resources we require to maintain the superior 

legal representation services that have yielded such tremendous 

success. The request seeks 1,360 positions, 968 for attorneys, and 

approximately $326 million, including increases for pursuing 

health care fraud, enforcing our immigration laws and improving 

our litigation support services. We hope the House and Senate will 

fully fund the Division’s 2016 request. 

It is an honor to be a part of the Civil Division, and I am tremendously proud of the work my colleagues do on behalf of the American people day in and day out. Mr. Chairman, I look forward to 

addressing any questions you or Members of the Subcommittee 

may have. 

[The prepared statement of Mr. Mizer follows:] 
9 
10 
11 
12 
13 
14 
15 
16 
17 

Mr. MARINO. Thank you, sir. Mr. Cruden. 

TESTIMONY OF THE HONORABLE JOHN C. CRUDEN, ASSISTANT ATTORNEY GENERAL, ENVIRONMENT AND NATURAL 

RESOURCES DIVISION, U.S. DEPARTMENT OF JUSTICE 

Mr. CRUDEN. Chairman Marino, Ranking Member Johnson and 

all Members of the Subcommittee, thank you for inviting me to tell 

you about the work of the Environmental and Natural Resources 

Division. 

Mr. MARINO. Sir, I don’t know if your mic’s on or if you have to 

pull it closer. 

Mr. CRUDEN. I’ll do it. Again, Chairman Marino and Ranking 

Member Johnson, Members of the Subcommittee, thank you very 

much for inviting me here to talk about the work of the Environment and Natural Resources Division. Mr. Chairman, as you pointed out, I am returning to the division where I previously was the 

career Deputy Assistant Attorney General, and before that, I was 

the Chief of Environmental Enforcement. During that time, I have 

witnessed the extraordinary efforts of the career public servants 

that I now supervise in the division. They spend countless hours 

representing the United States in Federal courts across our Nation. 

The division is over 100 years old now, and functions as the Nation’s environment and natural resources lawyer. We’ve got broad 

responsibility for thousands of cases. Our enforcement and defensive work protects the country’s air, land and water, and promotes 

responsible stewardship of America’s wildlife, natural resources 

and public lands. I’m very proud of what the division accomplished 

last year. I was not there for most of it, so I can brag about things 

that they did in my absence of obtaining over $6 billion in corrective measures through court orders and settlements. They secured 

over $270 million in civil monetary relief, concluded over 48 criminal cases obtaining important sentences of corporations and individuals, and finally, in handling the defensive part of our docket, 

saved the American taxpayer over $2 billion. 

But the division’s highest priority in enforcement remains the 

Deepwater Horizon litigation holding those people accountable for 

the millions of barrels that were spilled into the Gulf of Mexico in 

2010. 

That discharge went on for 87 days; 11 people were killed and 

over 40 people were injured. The spill affected all of the Gulf 

States. And we have now been litigating over the course of now 

several years the penalty aspects of that trial. We’ve already settled with two of the defendants, but we have been now diligently 

working through the penalty of the remaining two, both BP and 

Anadarko. The district court has already issued several rulings. In 

April, we finished the last trial on penalty and we are now awaiting a decision. 

In addition to our enforcement docket, a substantial portion of 

the division’s work includes representing Federal agencies in 

things like the management of public lands and associated natural 

and cultural resources, including water rights. This ranges from 

the defense of the U.S. Department of Agriculture’s management of 

forest lands to the defense of the Interior Department’s administration of its Federal onshore and offshore oil and gas programs, min-
18 

ing programs and projects expanding the development of renewable 

sources of energy like wind and solar. Victories in such cases have 

provided greater certainty to the regulated community, and have 

enabled substantial development of energy resources across the 

country. 

In the last few weeks, I’ve also had the honor of announcing 

cases across the United States, most of them in partnership with 

States who joined us in the prosecution of these cases. Here’s only 

a few examples that are explained in more detail in my prepared 

testimony. On Earth Day, with the State of Colorado we announced 

a significant Clean Air Act case against Noble. That same day, joining with the State of Arkansas, we announced a case, ExxonMobil 

which involved an oil spill into a tributary of the Arkansas River. 

Following that, with the State of California, we announced Lehigh 

Cement, an important Clean Water Act case. In each of those 

cases, we look for settlements that were going to make sure that 

those things didn’t happen again to violate the law. We’re looking 

to correct the environmental misdeeds and the penalties that we 

achieved, each one of them were shared with the States. 

Just last week, with three U.S. Attorneys’ offices in North Carolina, I had the pleasure of announcing the plea agreement with 

Duke Energy, including over $100 million in fines, which arose 

from the massive coal ash spill that went into the Dan River in 

North Carolina in February of 2014. 

Mr. Chairman, in my prepared testimony, you have my goals for 

the year coming up. Here are the few that I would highlight. 

We want to enforce the Nation’s bedrock environmental laws that 

protect air, land, and water for all Americans. We are dedicated to 

protecting the public fisc. We are going to advance environmental 

justice, but promote and defend tribal sovereignty, treaty obligations, and rights of Native Americans. 

And finally, we are going to provide effective stewardship of the 

Nation’s public lands, natural resources, and animals, including 

fighting for the survival of the world’s most protected and iconic 

species and marine resources and working across the government 

and the globe to end the illegal trade of wildlife. 

Again, I appreciate the opportunity to participate in the hearing 

and would be happy to address any of your questions. 

[The prepared statement of Mr. Cruden follows:] 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
30 

Mr. MARINO. Thank you. Ms. Ciraolo. 

CAROLINE CIRAOLO, ACTING ASSISTANT ATTORNEY 

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

Ms. CIRAOLO. Chairman Marino, Ranking Member Johnson and 

Members of the Subcommittee, thank you for this opportunity to 

appear before you to discuss the work of Department of Justice’s 

Tax Division. The Tax Division’s mission is to enforce the Nation’s 

Internal Revenue laws fully, fairly and consistently in Federal and 

State courts throughout the country. In doing so, we aim to promote voluntary compliance with the tax laws by deterring those 

who try to avoid paying what they owe, and promoting the sound 

development of law by carefully considering the issues raised in our 

cases. 

In every single case the Tax Division tries to collect the proper 

amount of tax due and owing, no more, no less. In every criminal 

case the Tax Division authorizes appropriate charges based on the 

law and the evidence. The Tax Division typically has 6,000 civil 

cases in various stages involving claims exceeding $9 billion, and 

our civil appellate attorneys handle between 600 and 700 appeals 

each year. 

In addition, the Tax Division annually authorizes between 1,300 

and 1,800 criminal tax investigations and prosecutions. The Tax 

Division employs approximately 340 attorneys, 120 executive and 

administrative staff. These men and women are bright, honest, 

hardworking and truly dedicated to public service. As Acting Assistant Attorney General, I am honored to represent them today. 

One of the biggest enforcement challenges we face is stolen identity refund fraud, commonly referred to as SIRF. In SIRF crimes, 

offenders steal personal identification information, and file tax returns early in the season showing false refund claims. These crimes 

often involve multiple offenders at various levels in the conspiracy, 

and frequently target the most vulnerable members of our society. 

SIRF crimes require immediate action to prevent enormous harm 

to the American public. To this end, the Tax Division delegates authority to the U.S. Attorneys offices to open SIRF related grand juries, charge SIRF offenders by criminal complaint, and seize SIRFrelated illegal proceeds. 

The Division preserves the traditional role of authorizing SIRF 

prosecutions and brings its hands-on expertise to many of these 

cases. 

Between October 12 and December 2014, the Department 

brought more than 725 SIRF prosecutions involving more than 

1,400 individuals. Judges have imposed prison terms ranging from 

several years to more than a decade. The prosecution of SIRF’s 

crimes is a national priority, and together with our Federal, State 

and local law enforcement partners, we will continue to look for 

ways to identify schemes, dismantle criminal operations and share 

real-time information with the IRS to improve its filters. 

Combating offshore tax evasion also remains a top priority of the 

Tax Division. The Department has charged more than 100 U.S. account holders and dozens of individuals who have assisted account 

holders in evading their U.S. tax obligations. 
31 

We have reached resolutions with nine financial institutions, including the historic guilty plea in May of 2014 of Credit Suisse, second largest bank in Switzerland. These efforts have encouraged delinquent taxpayers to come into compliance. According to the IRS, 

since 2009 there have been more than 50,000 voluntary disclosures 

of offshore accounts resulting in the collection of more than $7 billion in taxes, penalties and interest. 

It is important to keep in mind that not all of our law enforcement actions are public and lack of public disclosure should, in no 

way, be viewed as inaction on the part of our prosecutors. The Tax 

Division is currently investigating individuals and entities based on 

information derived from a wide variety of sources. We are following the evidence where it leads, and where warranted, we will 

prosecute the offenders to the fullest extent of the law. 

In the civil arena, our trial attorneys spends 65 percent of their 

time defending cases brought against the United States, the majority of which are refund claims and save the Treasury hundreds of 

millions of dollars. Just this month, the District Court for the Middle District of Louisiana declared a victory for the government in 

a tax shelter case involving Dow Chemical Company. Over a 13- 

year period Dow claimed over $1 billion in improper tax deductions. The district court disregarded the transaction in its entirety 

and imposed a 40 percent penalty. 

The Division also engages in affirmative litigation, such as filing 

collection suits and seeking injunctions against fraudulent tax return preparers and promoters of abusive tax schemes. I have only 

touched on a few of the many issues litigated by the Tax Division. 

Each case whether relatively straightforward or complex, can have 

a significant multiplier effect on voluntary compliance. Where an 

area of tax law may be susceptible to reasonable dispute, we advance positions that promote the sound development of the law. 

And when individuals or entities engage in misconduct to avoid 

or evade their legal obligations, the Tax Division will use all available tools to firmly but fairly hold them accountable. Thank you for 

inviting me to appear before you this afternoon and I’m happy to 

answer any questions you may have. 

[The prepared statement of Ms. Ciraolo follows:] 
32 
33 
34 
35 
36 
37 
38 
39 
40 
41 
42 
43 
44 
45 
46 
47 
48 
49 
50 

Mr. MARINO. Thank you. I now have to declare a recess, we’re 

down to the wire for voting. We will be back in about 15, 20 minutes. 

[Recess.] 

Mr. MARINO. The hearing will now come to order, Director White, 

we recognize you for your opening statement. 

TESTIMONY OF CLIFFORD J. WHITE, III, DIRECTOR, 

EXECUTIVE OFFICE FOR UNITED STATES TRUSTEES 

Mr. WHITE. Thank you. Good afternoon, Mr. Chairman, Ranking 

Member, and Members of the Subcommittee. I thank you for the 

opportunity to appear before you this afternoon to discuss the actions of the U.S. Trustee Program to advance our mission as the 

watchdog of the bankruptcy system. We carry out broad, administrative, regulatory, and enforcement responsibilities to protect the 

integrity and the efficiency of the bankruptcy system for the benefit 

of all stakeholders—creditors, debtors, and the general public. The 

Program has fulfilled its core responsibilities of policing debtor 

abuse and ensuring that private trustees effectively administer estate assets. We also have demonstrated agility and responsiveness 

in protecting consumer debtors from fraud and abuse and enhancing the accountability of management and professionals in chapter 

11 business cases. A core function of the USTP is to combat bankruptcy fraud and abuse. In fiscal year 2014, the Program took more 

than 35,000 formal and informal civil enforcement actions and 

made nearly 2,100 criminal referrals. 

Many of these civil actions involve curtailing debtor abuse by ensuring compliance with a means test which requires that consumer 

debtors devote disposable income to the repayment of creditors. Importantly, we judiciously use our statutory discretion to decline to 

file motions to dismiss under the means test when we find exceptional circumstances, such as job loss. As a result, we uphold Congress’ purpose of establishing an objective basis for consumer relief 

without creating unfair results in individual cases. 

We also have devoted substantial attention to consumer protection and have reached numerous national settlements over the past 

few years with major creditors and others to resolve such matters 

as the improper release of privacy protected information, unlawful 

collection practices, and violations by major mortgage servicers that 

harmed homeowners in bankruptcy. 

We remain actively engaged in policing mortgage servicer practices. We continue to find violations of bankruptcy law by large 

banks, as well as by newer and growing entrants into the servicing 

industry. We recently entered into a nationwide settlement with 

JPMorgan Chase Bank to rectify bankruptcy violations, such as 

continued robo-signing of court-filed documents, inaccurate accounting, and untimely noticing. We’re actively policing the buying 

and selling of unsecured bankruptcy claims, such as credit card 

debt. We’re reviewing the claims selling practices of banks that 

may result in debts discharged in bankruptcy remaining on credit 

reports. Two banks who were subject to USTP discovery orders 

very recently announced changes to their credit reporting practices. 

We also have obtained discovery orders so we can investigate highvolume claims buyers who may be robo-signing documents that are 
51 

filed in bankruptcy court. Outside the consumer arena, the program also carries out significant responsibilities in business reorganization cases to ensure accountability by management of debtor 

corporations. 

In the chapter 11 area, our role as watchdog is essential to vindicate congressional mandates and protections for creditors and other 

stakeholders. We do not substitute our business judgment for that 

of economic stakeholders, but we do ensure that the Bankruptcy 

Code and Rules are followed by all participants, including in matters of attorneys’ fees and executive bonuses. 

We promulgated new guidelines for attorneys’ fees in large chapter 11 cases. Our guidelines are designed to promote greater transparency in billing practices and to ensure that fees do not exceed 

market rates outside of bankruptcy. It appears that at least some 

of the Nation’s largest law firms have changed internal practices 

to satisfy the guidelines. But it’s still a bit too early to judge the 

ultimate impact on bankruptcy practice. USTP also has sought to 

vindicate congressional restrictions on executive bonuses. Regrettably, many corporations continue to propose statutorily prohibited 

retention bonuses to their key executives after filing bankruptcy. 

Our most noteworthy success in this area was twice blocking bankruptcy court approval of a $20 million severance payment to the 

outgoing CEO of American Airlines. 

Finally, we’re requesting appropriations in fiscal year 2016 to 

maintain current operations without enhancements. USTP appropriations usually are offset by collections from filing fees and chapter 11 quarterly fees. We propose a change in the revenue structure 

to allow a higher fee in the largest chapter 11 cases to ensure that 

appropriations are fully offset by collections and the U.S. Trustee 

System Fund is replenished after 4 years of reduced revenues as 

a result of the decline in bankruptcy filings. 

My prepared statement sets forth a more complete record of our 

accomplishments. Our 1,100 employees have demonstrated an unwavering commitment to our mission. I’m honored to work alongside such dedicated public servants. And I would be happy to answer any questions from the Subcommittee. 

[The prepared statement of Mr. White follows:] 
52 
53 
54 
55 
56 
57 
58 
59 
60 
61 
62 
63 
64 
65 
66 
67 
68 
69 
70 

Mr. MARINO. Thank you, sir. The Ranking Member is back. And 

the Chair is now going to recognize the Ranking Member of the full 

Committee, the Judiciary Committee, for his opening statement. 

Mr. CONYERS. Thank you, Mr. Chairman. I would like unanimous consent to put my statement in the record. 

Mr. MARINO. Without objection. 

[The prepared statement of Mr. Conyers follows:] 
71 
72 
73 
74 
75 
76 
77 
78 

Mr. MARINO. Is that it, sir? 

Mr. CONYERS. That’s it. 

Mr. ISSA. I love that man. 

Mr. MARINO. This is the way it should be done. This is the way 

it should be done. I’m going now to recognize myself for 5 minutes 

of questioning. And, Mr. Mizer, you drew the short stick because 

of my relationship and my love for the Justice Department as a 

U.S. Attorney. I would like to ask you some questions that I think 

need some explanation, if you don’t mind, sir. 

So in two recent cases, judges found apparent serious misconduct 

by Civil Division attorneys. And you heard me read what the judge 

said about that. How frequently, and has this occurred before, do 

judges find potential serious misconduct by Civil Division attorneys? 

Mr. MIZER. I’m sorry, could you repeat the question? I didn’t hear 

the last part. 

Mr. MARINO. Yes. How frequently do judges find potential serious 

misconduct by Civil Division attorneys? 

Mr. MIZER. My understanding, Congressman, having only been 

in the Civil Division for a couple of months, is that these are very 

rare occurrences. But we take them very seriously. As a member, 

a former member of the Justice Department, I’m sure you understand that we view our obligation of the duty of candor and professional responsibility to the courts very highly and take those obligations with extreme seriousness. In the two cases that you mentioned in your opening statement, Mr. Chairman, we are aware of 

these cases. In neither case, do we believe that any misconduct occurred. And those cases are in ongoing litigation. We have responded to the judges and papers filed in those cases, taking the 

position that no misconduct did occur on behalf of the Civil Division attorneys. 

Mr. MARINO. When you say ongoing litigation, is that with a 

court in determining whether there was misconduct or not? 

Mr. MIZER. Each case is different. In the Texas case that you referenced, the judge has requested additional materials to determine 

whether or not any such misconduct occurred, and we have contested any such allegation. And in the other case that you referenced, proceedings are ongoing with a special master. 

Mr. MARINO. So with your statement here, my next two questions are moot because you’re saying you disagree with the misconduct. So my next question would have been what steps were 

taken and what, if any, disciplinary action? What if the court rules 

that there was misconduct and hands that down, will there be disciplinary action taken? 

Mr. MIZER. The Justice Department, as you know from your time 

in the Department, has internal mechanisms for dealing with questions of conduct by attorneys. And we would, without question, deploy those internal mechanisms. 

Mr. MARINO. Thank you. We know that senior DOJ officials met 

with activist groups seeking mandatory donations in the mortgage 

settlements. By contrast, mortgage investors say that substantial 

portions of the reported settlements are funded not by defendant 

banks, but by innocent bond holders who were not even consulted. 
79 

Did DOJ meet with mortgage investors or consumers actually 

harmed about what the settlement terms should be? 

Mr. MIZER. If your question is about the residential mortgagebacked security settlements, I was not part of the negotiations of 

those settlements. I’m generally aware of those settlements, but 

can’t speak with specificity to those concerns. I do know that the 

Judiciary Committee has posed additional questions to the Justice 

Department about those terms in the settlements and about the 

negotiation process for those settlements. And I know that the Justice Department is working hard on providing additional information with respect to those questions. 

Mr. MARINO. Okay. What can the Division do to include investors 

and consumer representatives in negotiations where investors’ and 

consumers’ rights are substantially affected? 

Mr. MIZER. Congressman, again, I was not part of the negotiation of those settlements. But my understanding is that no outside 

parties were involved in any of the negotiations. 

Mr. MARINO. What would you do in the future in having that position now? 

Mr. MIZER. Sure. In the future, only the Justice Department or 

Federal entities would be involved in any negotiation process. And 

any settlement that would be entered during my time in the Civil 

Division would fully and fairly represent the best interests of the 

United States. 

Mr. MARINO. Do we have a situation where, in the past, where 

investors have been affected by this, would they have a chance to 

speak up? 

Mr. MIZER. Certainly we are acutely aware of the concerns of investors and of the harm that was done to investors by fraud, not 

only in the residential mortgage-backed securities context, but in 

any context in which fraud is committed against the public or 

against the United States. And we take those interests very much 

into consideration when we enter settlements or when we sue in 

order to fully discharge the interests of the United States. 

Mr. MARINO. So I guess I’m going to go out here on a leap of 

faith and say at some point, those individuals will have an opportunity to bring up their issues concerning what took place with 

DOJ? 

Mr. MIZER. Yes. In fact, the False Claims Act provides an opportunity for relators themselves to bring claims. And then the fraud 

division, the fraud section of the Civil Division also will often work 

with those relators. 

Mr. MARINO. So I see my time has almost run out. I will yield 

back the remainder of my time. And the Chair now recognizes the 

Ranking Member of the Subcommittee, Mr. Johnson. 

Mr. JOHNSON. Thank you, Mr. Chairman. Mr. Mizer, the Justice 

Department is vested with broad authority to conduct litigation 

and to settle matters in the interest of the United States, correct? 

Mr. MIZER. That’s correct. 

Mr. JOHNSON. Does the Miscellaneous Receipts Act limit the Justice Department’s ability to enter into such settlements? 

Mr. MIZER. I am not an expert on the Miscellaneous Receipts 

Act. I do know that it places certain limitations on the kind of ar-
80 

rangements that the Justice Department can enter. But I can’t 

speak with specificity to what those limitations might be. 

Mr. JOHNSON. Thank you, sir. Mr. Cruden, Andrew Grossman, a 

witness on our second panel, has cited a concurring opinion and a 

dissenting opinion in two recent cases involve the ENRD’s support 

of the conclusion that the ENRD’s litigation strategies on the issue 

of credential standing are undermining the government-wide litigation efforts. What is your response? 

Mr. CRUDEN. I have not read in any detail that testimony. But 

I did look at the two cases that both occurred before I returned to 

the Department of Justice. I found it interesting that in both cases, 

the Department of Justice’s positions prevailed. I believe he was 

commenting on a standing issue in two cases. But it kind of overlooks the hundreds of times that the Environment Division actually 

brings standing to the attention of the court and vigorously litigates that issue. 

Mr. JOHNSON. Thank you. Mr. Grossman also argues in his written testimony that the ENRD’s litigation practices merit further investigation because Environmental Protection Agency officials and 

environmental groups collaborate with ENRD attorneys. What is 

your response to that allegation? 

Mr. CRUDEN. I don’t actually understand what his allegation is. 

If he says that we are communicating with those agencies that we 

represent, yes, we do. On the other hand, at the end of the day, 

the position that we present in court is the position that the Department of Justice has decided is in accordance with law and 

facts. Clearly, we receive input from all of the agencies that we represent in that process. 

Mr. JOHNSON. Thank you, sir. Andrew Grossman also has cited 

a debunked U.S. Chamber of Commerce report to conclude that the 

ENRD is colluding with third-party organizations through a sueand-settle, phenomenon that predetermines the outcome of settlements and skirts the Administrative Procedure Act rulemaking 

process, or actually rulemaking requirements. Can you respond to 

that allegation? 

Mr. CRUDEN. To the extent that I know what has happened in 

the Division, which includes this year and then many years beforehand when I was a career attorney in the Division through several 

different Administrations. I have not seen a collusive lawsuit. I 

would not accept a collusive lawsuit and would not do anything like 

that during my tenure as Assistant Attorney General. 

Mr. JOHNSON. And how long have you been in this position, sir? 

Mr. CRUDEN. I’ve been in this position since January, but my 

total time in the Division exceeds 20 years. 

Mr. JOHNSON. Thank you, sir. And please explain how consent 

decree practices have resulted in beneficial settlements for all parties, including corporations, and produced good environmental outcomes. 

Mr. CRUDEN. We bring a number of cases alleging violations of 

Clean Air or Clean Water to protect the citizens of the United 

States and very often we’re able to resolve those cases with a consent decree. Under those, our standards are very clear: that is, if 

the consent decree is going to be better for the U.S. than litigating 

the case to conclusion, we should do that. That is very often where 
81 

we’re getting not only the kind of penalties that I described in my 

opening statement, we’re also getting the injunctive relief that is 

very scientific, very engineer-oriented, that is going to restore the 

environment to where it would have been but for the polluting 

event. Consent decrees not only get the communities involved. They 

not only get the public involved, but they also clean up the mess 

that was made initially by someone breaking the law. 

Mr. JOHNSON. Thank you. I wish I had time to hear from you, 

Ms. Ciraolo, before time expires about how the budget cutting has 

severely impacted your ability, your agency’s ability to perform. 

But perhaps one of the other witnesses, one of the other panelists 

might ask you that question. So thank you. I yield back. 

Mr. MARINO. Thank you. The Chair recognizes the Chairman of 

the full Judiciary Committee, Congressman Goodlatte. 

Mr. GOODLATTE. Thank you, Mr. Chairman. Mr. Mizer, the Committee still has not received the documents we requested on November 25, 2014. When are we going to receive those documents? 

Mr. MIZER. Mr. Chairman, I know that an additional request was 

received very recently by the Justice Department. 

Mr. GOODLATTE. No. No. A partial response of about 60 pages, 

out of a much larger body of documents, was requested a long time 

ago. And that’s all we got. And we wrote again, it wasn’t a supplemental request, it was a request saying whoops, you didn’t send us 

all the documents we’ve asked for, now where are they? We sought 

all communication relating to the controversial mandatory donation 

terms in the Bank of America and Citigroup settlements. The Department has sent a paltry 60 pages of email between the Department of Justice and outside groups, no internal Department of Justice emails. And those are critical. We sent a follow-up request last 

week. Last night, the DOJ responded without answering any of the 

questions and without providing any date when we could expect 

the documents. It’s been nearly half a year. When will we get those 

documents? 

Mr. MIZER. I don’t know the specific timing of the response. But 

I know that the Justice Department is working hard on responding 

to your questions. 

Mr. GOODLATTE. Who is making the decision on when we’re getting the response? You’re the head of the Division. 

Mr. MIZER. The settlement agreements that the questions relate 

to relate to the residential mortgage-backed security settlements. 

Those occurred before, the settlements were entered before my time 

in the Civil Division. And they also implicated multiple offices 

within the Justice Department. So the Justice Department is coordinating a response. And I’m sure we’ll respond timely. 

Mr. GOODLATTE. Timely has gone by already. But quickly will 

avoid a subpoena. 

Mr. MIZER. Thank you. 

Mr. GOODLATTE. During the Reagan administration, the Department of Justice Civil Division Chief, Richard Willard, routinely refused to sign off on case settlements—and this goes to your statement too, Mr. Cruden—mandating the funding of agency-favored 

activities for which Congress had failed to appropriate money. The 

Citibank and Bank of America settlements provide money for a 

HUD home counseling program that Congress specifically cut 
82 

spending for. How does Mr. Willard’s example affect your analysis 

of this issue? 

Mr. MIZER. Mr. Chairman, the settlement agreements that 

you’ve referenced were, again, entered before my time in the Civil 

Division. But I’m generally aware of the provisions that you’re citing. 

Mr. GOODLATTE. So it’s going to be your policy now to follow Mr. 

Willard’s example and not include in settlements people who do not 

have standing in the lawsuit, who are not parties to the lawsuit? 

Mr. MIZER. The policy of the Civil Division will be, under my 

leadership, to fully and fairly negotiate settlements that are in the 

best interests of the United States. And the—— 

Mr. GOODLATTE. How about following this little document here, 

too, which says that the Congress appropriates funds, not the Justice Department. 

Mr. MIZER. We certainly will, in all instances, follow the Constitution as our lodestar and enter settlement agreements that are 

consistent with all laws passed by the Congress. 

Mr. GOODLATTE. Dr. White—— 

Mr. WHITE. Yes, sir. 

Mr. GOODLATTE [continuing]. At the time you negotiated the 

JPMorgan settlement, were you aware that the required donation 

to the third party would nearly double that third party’s net assets. 

Mr. WHITE. I’m not aware of the specific balance sheet situation 

of the American Bankruptcy Institute. 

Mr. GOODLATTE. $7.5 million, my understanding is that the net worth today is a little over $11 million. 

Mr. WHITE. Yeah, I’m not sure of the precise accuracy of those 

numbers. It’s a 501(c)(3) organization. It doesn’t exist for purposes 

of building its balance sheet. It recently took over the Credit Abuse 

Resistance Education Program, which is the main object. 

Mr. GOODLATTE. I think their objectives are very good. But where 

do you come off funding them as opposed to the Congress funding 

them. 

Mr. WHITE. Because of our effort in the settlement discussions 

with JPMorgan Chase to ensure two important objectives, accountability by the bank, and remediation for the—— 

Mr. GOODLATTE. Was the American Bankruptcy Institute a party 

to that lawsuit? 

Mr. WHITE. No, it’s not. 

Mr. GOODLATTE. So why were they the beneficiary of, effectively, 

appropriations that bypassed the Congress when they received 

those funds? 

Mr. WHITE. As I said, if you could bear with me just a moment, 

Mr. Goodlatte. For the purposes of accountability as well as remediation, the offenses committed by Chase Bank in this case included both monetary and non-monetary offenses, including against 

the integrity of the bankruptcy system. There’s $43 million of direct remuneration to homeowners, either through credits or direct 

payments. In addition to that, there’s $7.5 for the—— 

Mr. GOODLATTE. Presumably, homeowners were the injured 

party? 

Mr. WHITE. No, I would suggest to you, very importantly, our job 

is watchdog of the bankruptcy system and that responsibility is 
83 

codified in titles 11 and 28 of the U.S. Code. The integrity of the 

bankruptcy system was injured here in a very direct way. So it’s 

part of the negotiations. And, of course, as you know, there are 

many moving parts in a negotiation. All parts have to go together. 

An essential part of that negotiation also was getting the correct 

amount that should be set for the payments by Chase Bank for accountability. Now, in the statute that we’re dealing with in the 

Bankruptcy Code, we’re dealing with an offense—— 

Mr. GOODLATTE. Excuse me, Director. My time has already expired. But I want to follow up on the very point you’re making. Because the Congressional Research Service, when we asked them to 

look into this, said that the connection with the American Bankruptcy Institute was tenuous at best. Now let me ask you this: 

Whose idea was the $7.5 million payment? The bank’s or the government’s? 

Mr. WHITE. It’s all the product of a negotiation. But I own this 

provision lock, stock, and barrel because—— 

Mr. GOODLATTE. I understand it was your idea. 

Mr. WHITE. Excuse me, sir? 

Mr. GOODLATTE. I said my understanding, it was your idea. 

Mr. WHITE. Yes. I would say—— 

Mr. GOODLATTE. That would be a more straightforward answer. 

Mr. WHITE. I’m not walking away from this provision at all. I 

think it was an important—— 

Mr. GOODLATTE. At the time you were negotiating the JPMorgan 

settlement, did anyone make you aware that the Judiciary Committee was very concerned about third-party payment terms subverting Congress’ appropriation power? 

Mr. WHITE. To go back in my mind at the time I was negotiating 

this with Chase, it was sometime deep into negotiation when I believe there had been a hearing some months ago. 

Mr. GOODLATTE. And you didn’t think that that would be cause 

to hold up and say maybe we shouldn’t go down an avenue that 

is controversial under the separation of powers under the United 

States Constitution? 

Mr. WHITE. I believe that the statute that we were operating 

under, Mr. Goodlatte, and the objectives we had set here, this is 

a perfectly proper provision. And with regard to the object of the 

third-party payment, it has a nexus with the bankruptcy system. 

And it is the largest organization of bankruptcy professionals that 

is a 501(c)(3). It doesn’t take Federal money. It doesn’t lobby. 

Mr. GOODLATTE. Reclaiming my time which has expired. Director 

White, did you consider coming to the United States Congress for 

$7.5 million for that purpose? 

Mr. WHITE. I did not—— 

Mr. GOODLATTE. If it has all the merit that you describe, why not 

ask for an appropriation from the Congress for that purpose? 

Mr. WHITE. Because I was looking for accountability. 

Mr. GOODLATTE. You were looking for money and going around 

the Congress and this was a convenient way to do that, wasn’t it? 

Mr. WHITE. I respectfully disagree entirely with that statement. 

I was looking for accountability by Chase Bank for robo-signing 

50,000 documents filed in bankruptcy court. 
84 

Mr. GOODLATTE. You get the accountability by turning it over to 

the government. And you could also, at the same time, say I recommend to the Congress that we—— 

Mr. WHITE. If I may explain our statute. 

Mr. GOODLATTE [continuing]. Appropriate $25 million of that for 

the Bankruptcy Institute. 

Mr. WHITE. May I have a moment to explain the statute that 

I—— 

Mr. GOODLATTE. That’s up to the Chairman. I will subsist from 

asking further questions. If you want to allow the witness to respond, I would be happy to listen. 

Mr. MARINO. Yes. You can do it briefly, sir. 

Mr. WHITE. Thank you, Mr. Chairman. The creditor abuse practices that we were addressing in this settlement aren’t subject of 

a specific penalty provision in the Bankruptcy Code. We’re using 

the equitable powers of the bankruptcy court to fashion an appropriate remedy. So in the course of that, we’re trying to ensure that 

there’s full accountability by the bank that also ensures full remediation for the aggrieved homeowners. I believe we achieved that 

by the dollar remediation that is provided there for the homeowners, as well as the additional payment by Chase. Also, in order 

to suggest that this somehow is a penalty that otherwise would 

have been paid to the Federal Treasury is I think, at best, highly 

speculative, given the statute that we’re operating under. 

Also in our agreement, Chase admits to conduct throughout the 

agreement. It doesn’t admit to particular liability. So to suggest 

that there otherwise would have been a penalty, that we could 

somehow dissect the provisions of the agreement, take out the $7.5 

million, instead of going to a third party would have gone to the 

Federal Treasury, I would suggest, respectfully, is at best highly 

speculative. The bank admitted to conduct. It didn’t admit to specific liability. And the Bankruptcy Code does not provide for creditor abuse, specific fines, or penalties. It’s the equitable power of 

the court. 

I appreciate the time. 

Mr. MARINO. The Chair now recognizes the ranking Committee 

of the full Committee, Mr. Conyers. 

Mr. CONYERS. Thank you, Mr. Chairman. 

I want to begin by yielding to the distinguished gentleman from 

Georgia, Mr. Johnson, for his very penetrating question that he 

wasn’t able to get to you. 

Mr. JOHNSON. Thank you. And so as not to repeat myself and 

waste any time, would you care to respond to the question that I 

said that I would have raised? 

Ms. CIRAOLO. Thank you, Mr. Johnson. 

The Tax Division appreciates the budget and the resources its 

been given to pursue its tax enforcement efforts. I think that you 

might be referring to the sequestration that we were under in the 

past, and that was a very difficult process for the Tax Division. 

Mr. JOHNSON. It’s an ongoing process as well. 

Ms. CIRAOLO. We appreciate the resources we’ve been given now, 

and we are using those resources to the best of our ability. 

In the last few years, there was a hiring freeze. We lost a lot of 

senior attorneys to attrition. We are in the process of hiring new 
85 

attorneys, but that obviously had an impact on our ability to pursue tax enforcement and tax administration. 

Mr. JOHNSON. Thank you. 

What percentage of your attorney force has been decimated by 

the tax cuts? 

Ms. CIRAOLO. During the budget difficulties, we lost 20 percent 

of our experienced attorneys. That, coupled with the hiring freeze 

at the time, put us at a disadvantage in terms of pursuing tax enforcement. The men and women of the Tax Division are bright and 

hard-working, and they will do what it takes to pursue the cases 

that they have. But further cuts to the budget would be devastating to the Tax Division. 

Mr. JOHNSON. Thank you. 

And I’ll yield back to the Chairman. 

Mr. CONYERS. Thank you so much, sir. 

Director White, are you aware of a concern voiced by attorneys 

for consumer debtors that some trustees make burdensome document demands that well exceed what’s required by law? And if this 

concern is valid, what do you recommend that the program do in 

response to it? 

Mr. WHITE. Yes, sir. I do think overall that our trustees do an 

outstanding job with regard to efficiently administering and fairly 

administering bankruptcy cases. But I have been made aware from 

time to time that there have been concerns with regard to whether 

document production requests made on a routine basis by certain 

trustees is excessive. And we take that seriously for purposes of the 

efficiency of the bankruptcy system. 

Similar, and actually related to this matter as well, is that we 

sometimes become frustrated and pay some resource enforcement 

attention to the fact that debtors’ counsel do not always respond in 

a timely and complete fashion to legitimate requests for document 

production, whether it be pay advices, tax returns, and so forth 

that are needed in order to properly administer an estate. 

So we believe there’s a common interest here with efficiency of 

the system on the part of both trustees who need the information 

and debtors’ counsel who provide the information. 

A couple of years ago, in response to these concerns, we decided 

what we would do, in light of the fact that it is a decentralized system, local rules are different, local practices vary from district to 

district, we issued some best-practices guidelines for trustees that 

could be used as a training tool by trustees as well as by debtors 

counsel to try to ensure that document production requests were 

not excessive. There would be some guidelines for what’s appropriate, given various fact scenarios. 

Recently, after 2 years of these guidelines being out—— 

Mr. CONYERS. Okay. I’m running out of time, sir. 

Mr. WHITE. Okay. We’ve been doing something about it, Mr. Conyers, is the bottom line. 

Mr. CONYERS. I get your drift. 

Let me turn to Mr. Cruden now. 

Would you, please, explain how consent decree practices have resulted in beneficial settlements for all parties, including corporations, and produced good environmental outcomes? 
86 

Mr. CRUDEN. As you all know, Ranking Member Conyers, the 

consent decree process comes in litigation. So when there has been 

a lawsuit, there has been a complaint, and the consent decree is 

resolving that dispute. The consent decree process also gives the 

court authority to look over and make sure that promises are carried out. 

So one particular advantage of a consent decree is it ends the 

litigation, and it ends attorneys fees. So all of the parties, in fact, 

can spend their money, in my case, doing positive things for the environment as opposed to funding additional litigation. So that’s a 

positive step right away. 

Second very positive thing, very often corporations are coming to 

us right away and saying: We are interested in settling. We know 

that we have made mistakes. They don’t have to admit liability, 

but they can, again, look at how to correct that activity. Sometimes 

they are increasing the training of their individuals. Very often, 

they’re taking steps, and then the local community is going to stop 

a polluting event, and correct any environmental problem that occurred there. 

So the consent decree has a positive economic effect but it also 

has a positive environmental effect. 

Mr. CONYERS. Thank you so much. 

And thank you, Mr. Chairman. 

Mr. MARINO. Thank you. 

The Chair now recognizes Congressman Trott. 

Mr. TROTT. Thank you, Mr. Chairman. 

Director White, thank you for being here today. 

And as you may know, the American Bankruptcy Institute recently issued some recommendations relating to chapter 11 bankruptcies, particularly relating to concerns over trusts that are established post-confirmation and the lack of transparency and disclosure and governance with respect to those trusts. 

I wonder if you have any of those same concerns as it relates to 

trusts that are created post-confirmation and what your thoughts 

are regarding that recommendation? 

Mr. WHITE. Yes, sir. In recent years, we’ve heard increasingly 

from creditors and then also through the chapter 11 Commission 

that you referred to the fact that there has been a proliferation of 

post-confirmation trusts and entities created in chapter 11 reorganization cases that are really vital to the success of the plan. They 

deal with efforts to bring money in a litigation trust distribution 

but concern about transparency. 

Now, we have limited authority with regard to post-confirmation 

after a plan is confirmed and a case emerges from bankruptcy. 

Where we do have a role is in the disclosure statement process, 

which is what the commission looked at specifically. Where issues 

of corporate governance need to be set out in who is going to control the trust, issues of how the claims are going to be processed, 

issues with regard to if a stakeholder has a question or a problem 

or an objection to the administration of the trust, ensuring there’s 

a mechanism to get to the court so that the judge can resolve that. 

So I believe that an important issue is raised. Under current 

statute, we try to act to bring greater transparency and fairness to 

the system. It’s an integrity system for us, and it is something 
87 

we’ve been sensitive to. We should probably be more sensitive to 

it, and I share your concerns. 

Mr. TROTT. Thank you. 

There’s some feeling in the mortgage servicing industry that 

sometimes the U.S. Trustee, you know, places more emphasis on 

form over substance. Within your staff, are there any quotas or rewards given to folks for the number of investigations or the number of complaints they bring against mortgage servicers? 

Mr. WHITE. No, nothing of that. We, of course, measure—try to 

measure various enforcement activities in numerous categories so 

we can see, for example, if an area we should shift resources, but 

absolutely not. 

And the cases that we’ve brought with regard to mortgage 

servicers, we’re dealing with things—to use Chase or other examples in other national settlements—where I think one would agree 

these were significant and required action, robo-signing, inaccurate 

accounting, and so forth. But there’s no room for quotas in a legitimate enforcement system, and we don’t have them. 

Mr. TROTT. It’s pretty clear banks like Citi, Chase, Wells, B of 

A are exiting or working to exit the servicing space because it’s 

really not profitable, nor is it good for a reputational risk. Do you 

view the rise of specialty servicers as a good or bad things for consumers? 

Mr. WHITE. I don’t know that I view it either way. I will say that 

we have—and I amplify this a bit in the full statement—we have 

tried to look at the newer and boutique entrants into the servicing 

industry because we’ve seen that they were making the same kinds 

of errors that we saw 5 years ago before the national mortgage settlement. So we want to be very concerned that the progress we 

made with regard to the traditional banks is not lost as those loan 

portfolios are sold off to the newer entrants into the system. 

Mr. TROTT. Thank you, sir. 

Mr. Mizer, I know you are relatively new to your position. Congratulations. Do you have any numbers of how the nonprofit housing groups like NeighborWorks and others that received in excess 

of $150 million as part of the settlement, how are they doing? How 

many loan workouts and modifications have they helped borrowers 

complete? How many homes have been saved, and how many foreclosures have been avoided? Do you have any numbers internally 

on that? 

Mr. MIZER. I don’t have any numbers on that. I do know that 

there’s consumer relief provisions, that those agreements are independently monitored and that those independent monitors have reporting obligations, but I don’t have numbers with respect to your 

specific question. 

Mr. TROTT. Director White, a few minutes ago, talked about the 

Trustees’ Office working to ensure timely discovery and disclosure 

of information. So can you sort of understand—and it wasn’t under 

your watch, but can you sort of understand why this Committee 

would be highly suspicious of mandatory payments in excess of 

$150 million as part of some settlement to potentially politically 

motivated nonprofits, and it takes 6 months for us to get incomplete answers to questions in that regard? Do you sort of understand why that gives us pause. 
88 

Mr. MIZER. I certainly understand the concern, Congressman. I 

would note that the consumer relief provision that you’ve identified 

provides the banks with a menu of options from which to choose, 

and then if the banks—— 

Mr. TROTT. So they were given incentives to funnel money into 

potentially a slush fund for these politically motivated nonprofits. 

That’s the concern. So they have choices, but they have bonus credit points if they choose certain choices. You’re familiar with that 

part of the settlement, right. 

Mr. MIZER. I’m generally familiar with it. 

Mr. TROTT. One last question. 

And I’m out of time, Mr. Chairman. 

In hindsight, wouldn’t it have been better, instead of opening up 

a can of worms of politically motivated nonprofits, to direct that 

money, which in some cases $150 million would be an incredible 

amount of money to State bar programs, to have mediation programs that have a much greater chance of success or State housing 

development authorities that have a very accurate and process that 

is full of integrity, that wouldn’t be susceptible to this kind of attack? I mean, wouldn’t that be a better way to help borrowers? 

Mr. MIZER. Congressman, I can’t speak to the decisionmaking 

that went before. But what I can say is that in the future, in any 

settlement that we enter, we will consider the concerns that you’ve 

identified and other concerns in making sure that the public fisc 

is restored for some of the harm done to it by fraudsters and that 

some measure of relief is given to those who deserve it. 

Mr. TROTT. Thank you, sir. 

I yield back my time. 

Mr. MARINO. Thank you. 

The Chair recognizes Congressman Peters. 

Mr. PETERS. Thank you, Mr. Chairman. 

I will start by asking, ma’am, can you tell me how to pronounce 

your name? 

Ms. CIRAOLO. Ciraolo. 

Mr. PETERS. Ciraolo. Ms. Ciraolo, thank you for being here. 

Thanks to all the witnesses for being here. 

I had a question on two topics in the tax provision. One is bad 

tax preparers. I wonder what you could do—well, you could tell me 

about what you are doing to take bad tax preparers off the street. 

Ms. CIRAOLO. Sure. Thank you. And we share your concern regarding fraudulent tax preparers. 

The Tax Division has a twofold approach to fraudulent tax preparers. One is our civil injunctions. These are immediate actions to 

put the preparers out of business when they are identified. And on 

the criminal side, we prosecute fraudulent preparers that are engaged in willful conduct, willfully preparing and filing fraudulent 

tax returns. 

Mr. PETERS. Those are options open to you. But do you have any 

sense for what’s being effective, how often you’re seeing it? Can you 

give me sort of a sense? I understand those two avenues as possible 

procedures. How is that working? 

Ms. CIRAOLO. It’s a significant problem, and we are bringing all 

of our resources to bear. Since 2000, we brought over 500 civil in-
89 

junctions against fraudulent return preparers and abusive promoters of schemes. 

On the criminal side, we’re prosecuting, we’re identifying fraudulent return preparers, prosecuting them. We’re working with our 

law enforcement partners both within the IRS and within the U.S. 

Attorney’s Office to identify these and prosecute. 

Mr. PETERS. Do you perceive that you’re having a positive effect 

on this, or are you just kind of treading water or—— 

Ms. CIRAOLO. Well, the criminal element doesn’t seem to go 

away, but we are there. And we’re getting significant sentences in 

these cases. Anyone out there that’s contemplating this type of behavior should take a look at the cases we’ve brought to date. And 

it’s our obligation to the honest return preparers—and there are 

many honest return preparers out there—to pursue this on behalf 

of them and on behalf of the American public. 

Mr. PETERS. Okay. The other issue is, I’m still on identities. So 

I saw the New York Times’ report on instances where criminals 

have electronically filed tax returns using stolen IDs, and then they 

would get a fraudulent return but with money back to them. 

So I was sort of curious about how substantial or widespread you 

see that this problem is, and then what efforts you’re making in 

the division to address this issue. 

Ms. CIRAOLO. Thank you. Again, we share your concern. This is 

a growing problem. Stolen identify refund fraud is essentially a 

street crime, and it’s a growing problem. We are working with the 

IRS and the U.S. Attorneys’ offices along with State and local law 

enforcement partners to identify these offenders, dismantle the operations, and prosecute the offenders. 

As we pursue these cases, we are not only prosecuting the offenders, but we are sharing information gathered in the investigation 

in realtime with the IRS so we can improve its filters to stop the 

refunds at the door. We have over 100 prosecutors in the Tax Division, many of whom are working on these cases. We’ve also delegated authority to the U.S. Attorneys’ offices so they can act quickly to impanel SIRF grand juries charged by criminal complaint and 

obtain seizure warrants for illegal proceeds in SIRF cases. 

In February 2014, we established a SIRF advisory board. This 

board works with U.S. Attorneys’ offices and with the IRS to offer 

training in these cases to better spot the offenders and deal with 

the problem. So we are bringing all of our resources to bear in this 

area. 

Mr. PETERS. And do you feel you have adequate tools in this 

area, or is there anything Congress should be doing for you to help 

assist these efforts? 

Ms. CIRAOLO. Thank you for raising that issue. 

We are using all the resources that we have available. We’re 

using all available tools. We welcome any ideas to combat this significant problem. 

Mr. PETERS. I think that the idea is that you would have more 

of an idea what you need than we would. So that’s why I’m asking 

you. 

Is there something that—I understand the financial or the monetary aspect of it. But is there something in terms of tools, particu-
90 

larly with respect to the Internet, that you would need help with 

from this Committee or from Congress as a whole? 

Ms. CIRAOLO. We have a variety of tools we use. Right now we’re 

sharing information in realtime with the IRS. And the IRS—— 

Mr. PETERS. You’re saying you have what you need in terms of 

tools or—— 

Ms. CIRAOLO. We’re always open to more ideas on how to combat 

this problem. 

Mr. PETERS. But don’t have any ideas. Okay. Okay. Just maybe 

in the last 30 seconds that I have, can you share a sense for what 

the sequester meant in terms of your ability to prosecute tax fraud 

and particularly if you have some sort of numbers in terms of the 

return that we are losing on getting money back from people who 

are cheating on their taxes? 

Ms. CIRAOLO. Yes. Thank you. Sequestration was extremely difficult for the Tax Division. We had a reduction in the funds for litigation expenses, for travel expenses. That put our attorneys at a 

severe disadvantage when they were going up against other counsel in cases, both in civil cases and criminal investigations. We had 

a hiring freeze. We had to limit outside training. We lost 20 percent of our experienced attorneys. 

We have been working very hard to hire up, but the morale 

dropped during that period of time. With limited resources and 

with sequestration, we’re less able to pursue additional cases. Our 

men and women are working very hard. They’re going to do what 

it takes to get these cases done, to pursue the offenders. And I 

don’t want anyone out there thinking that, you know, with limited 

resources, we’re not going to identify and pursue these offenders. 

Mr. PETERS. Thank you very much. 

Mr. Chairman, thank you. 

Mr. MARINO. Thank you. 

The Chair recognizes Congressman Ratcliffe. 

Mr. RATCLIFFE. Thank you, Mr. Chairman. 

I want to thank all the witnesses for being here today. Effective 

oversight is one of the most important duties that we have as a 

Committee, and I appreciate the willingness of each one of you to 

be here to assist us in that regard. 

I also want to thank you, Chairman Marino, for holding this 

hearing today, to examine the activities of the four Justice Department components within this Subcommittee’s jurisdiction. 

As a former U.S. Attorney like you, Mr. Chairman, I had the 

great privilege of serving with many great men and women at the 

Department of Justice, and I care a great deal about the reputation 

of the DOJ with the American people. 

With that context, Mr. Mizer, many of the 700,000 Texans that 

I represent are deeply concerned about Operation Choke Point and 

the role of DOJ with respect to that operation. Many of the folks 

that I represent viewed the operation as a, frankly, a blunt weapon 

which targets and stigmatizes entire industries that the Administration doesn’t like. 

I recently met with a number of folks in the gun industry, and 

a number of these law-abiding citizens had, in fact, been targeted 

by this program. 
91 

In July of 2014, this Subcommittee held a hearing on Operation 

Choke Point. After the hearing, the FDIC announced that it would 

rescind its list of high-risk merchants. This move seemed to be an 

apparent recognition of the fact that Operation Choke Point was inflicting an unacceptable level of collateral damage on legitimate 

businesses. 

So my question to you is, what specific steps has DOJ taken to 

mitigate the collateral damage of Operation Choke Point subpoenas? 

Mr. MIZER. Thank you, Congressman. 

My experience with Operation Choke Point only extends to the 

2 months or so that I have been in the Department. But I can say 

that we are pursuing only fraudsters and those banks that knowingly allow fraud to occur. And in my time in the division, we’ve 

settled two significant cases that make clear what we’re doing and 

what we’re not doing. 

What we’re not doing is targeting the kind of gun retailers that 

you have identified. What we are doing is going after banks that 

are ignoring very serious red flags and ignoring the legal obligations that they have not to do business with fraudsters who are defrauding American consumers of their money by stealing bank account information and essentially stealing money. 

So, in one of the cases that we have settled, one of the banks had 

boxes full of affidavits in which consumers were telling the bank 

that, in fact, the charges against them had never been authorized 

and, nonetheless, the bank continued to allow the charges to occur. 

So we are only going after those kinds of unlawful practices and 

not the lawful gun retailers who have expressed concern to you. 

And we want to make that abundantly clear. 

Mr. RATCLIFFE. Thank you. 

So can you tell me, and maybe you can’t, but I’d like to know 

whether the Justice Department has sent any additional Operation 

Choke Point subpoenas since the Subcommittee hearing last summer. 

Mr. MIZER. I don’t believe that the division did. During my time 

in the division, which has only been the past couple of months or 

so, I have not signed off on any additional subpoenas in this regard. 

Mr. RATCLIFFE. Okay. Thank you, Mizer. 

I’d like to use my remaining time to quickly turn to another issue 

that is on top of the mind for many of my constituents. 

As you know, in February, Judge Andrew Hanen of the United 

States District Court for the Southern District of Texas enjoined 

the executive amnesty announced by the Administration back in 

November of 2014. He later discovered that DOJ lawyers had misled the court by saying that no action would be taken on the November executive amnesty policy until a certain date when, in fact, 

the Administration had, in fact, already begun carrying out the 

new amnesty policies. 

Mr. Mizer, as you know, those types of misrepresentations are 

unacceptable and extremely serious. And in some instances, I 

would have expected maybe other Federal judges to consider striking the government’s pleadings in their entirety. 
92 

Again, with that context, what steps are you aware of that DOJ 

is taking to mend its credibility with the court? 

Mr. MIZER. Congressman, like you, we, in the Civil Division and 

in the Justice Department take extremely seriously the high obligation that the Justice Department has and duty of candor to the 

courts. And we vigorously dispute any suggestion that we engaged 

in misrepresentations or misconduct in front of any court, including 

the Judge Hanen. We have filed papers in that court demonstrating that, in fact, no misconduct occurred, and we continue 

to discharge our obligations of candor to that court. 

Mr. RATCLIFFE. Well, my time has expired, so we’ll just have to 

agree to disagree on that issue, Mr. Mizer. 

I thank you and yield back. 

Mr. MARINO. The Chair recognizes Congressman Jeffries. 

Mr. JEFFRIES. I thank the Chair for convening this hearing as 

well as all the witnesses for your participation here today and your 

service to the country. 

If we can just start with Mr. Mizer. I wanted to just kind of explore, again, the context by which the Department of Justice has 

gone after some of the financial institutions responsible for participating in the greatest collapse of the United States economy since 

the Great Depression. 

It is my understanding that we’re in the midst of an appropriate 

oversight hearing. It was referred to earlier as a pattern-and-practice hearing. I think there was a pattern and practice of fraudulent 

behavior, whether that included mortgage-backed securities and 

no-document loans and targeting of vulnerable individuals, credit 

default swap market that was completely unregulated and out of 

control, all of which collectively led to the Great Recession. 

And so I think, responsibly, the Department of Justice has taken 

action against many of the financial institutions that broke the law 

and should be held liable and accountable for their actions. And it’s 

my understanding that in this context, several settlements have 

been reached, of course, and that the Department of Justice really 

pursued five different types of areas where consumer relief was 

provided? Is that correct? 

Mr. MIZER. Those settlement agreements were entered before my 

time in the Civil Division, so I don’t know if the five different types 

is exactly the right number. But I do know there are consumer relief provisions included. 

Mr. JEFFRIES. So my understanding that there were loan modifications as part of DOJ settlements; refinancing assistance provided to individuals who were trapped in high-interest mortgages— 

that would be two; three, closing cost and down payment assistance; four, financing for affordable housing; and then, five, donations to community organizations. And I think the fifth one, donations to community organizations, seems to be a matter of some 

controversy. I have yet to understand why, but I get that it’s a 

matter of some controversy. So we can hone in on that for a moment. 

In terms of the overall totality of the settlement, if we just take 

settlement related to JPMorgan, the settlement related to 

Citigroup, the settlement related to Bank of America, the aggregate 
93 

settlement amount seems to be in excess of $30 billion to $35 billion. Is that correct? 

Mr. MIZER. The aggregate settlements were over $35 billion. 

That is correct. 

Mr. JEFFRIES. Okay. In terms of the assistance to community or- ganizations, am I correct that that number was about $100 million? 

Mr. MIZER. I believe it was a small fraction. I think it was between 100 and 150 million. But, again, because the settlements 

were entered before my time, I’m not specifically familiar. 

Mr. JEFFRIES. Okay. $100 million is, in and of itself, in isolation, 

a substantial number. But, clearly, in the context of the overall 

amount of consumer relief or settlements that were generated, it 

is a very small fraction. But can you just elaborate for me on what 

was the rationale in the context of these different areas where consumer relief was found, the majority of which went into other 

areas, what was the rationale behind entering into sort of these 

partnerships between the financial institutions and the community 

organizations? 

Mr. MIZER. My understanding is that the purpose of the provisions was the banks who had engaged in unlawful conduct to direct 

some of the money to individuals who had suffered as a result of 

their unlawful practices and for some measure of relief to be given 

to individuals who either lost their homes or who suffered as a result of the unlawful practices of these large financial institutions 

that resulted in such severe harm to our economy. 

Mr. JEFFRIES. Now, are you also involved in sort of overseeing 

operation choke hold? 

Mr. MIZER. I believe it’s Operation Choke Point. 

Mr. JEFFRIES. I’m sorry. We had a police violence hearing earlier 

today. I’m getting my talking points mixed up. But Operation 

Choke Point. And I guess there’s some controversy about certain financial institutions perhaps being targeted that were involved in 

some way in gun running. Is that correct? 

Mr. MIZER. I’m aware of reports that some businesses that are 

engaged in lawful practices, including gun retailers, alleged have 

been affect by Operation Choke Point. But those allegations are unfounded. We are targeting only lawful business. We are not targeting gun retailers. We are only going after those businesses that 

are engaged in illegal conduct and fraud against American consumers. I’m happy to provide more information, but I see my time 

has expired. 

Mr. JEFFRIES. Yeah. Thank you for that. 

If I could just have an additional point of the observation. 

Mr. MARINO. Yes. 

Mr. JEFFRIES. Very briefly. I would just say that, you know, 

we’ve got 5 percent of the world’s population but 50 percent of the 

world’s guns. And we believe there are more than 285 million guns 

in circulation right now in America. It seems to me reasonable that 

something should be done to keep those guns out of the hands of 

individuals that would do us harm. 

I yield back. 

Mr. MARINO. Thank you. 

The Chair now recognizes Congressman Issa. 

Mr. ISSA. Thank you. 
94 

Mr. Mizer, I really appreciate the opportunity to pick up right 

where we left off. During your answer, you actually said ‘‘lawful 

business.’’ I assume you meant unlawful business? 

Mr. MIZER. If I misspoke, I apologize. We are targeting—— 

Mr. ISSA. Because you sure did send subpoenas to a lot of lawful 

businesses. Now, you do you remember the name Ray Donovan 

from your history books? 

Mr. MIZER. Yes. 

Mr. ISSA. Okay. What department do these people go to get their 

reputation back, famously the Secretary of Labor said after he was 

exonerated. You’ve sent out countless subpoenas. You’ve caused 

banks to drop lawful businesses by the scores, particularly payday 

lenders, not just ammunition sales. And now they want to know 

where to go to get their reputation and, by the way, their bank’s 

relationship back. What do I tell them? 

Mr. MIZER. Congressman, many of the subpoenas that you’ve 

identified—— 

Mr. ISSA. I can’t identify them because you haven’t delivered us 

the list of them. For example, since November, sorry, July 28 of 

2014, how many subpoenas have you sent out? I know you’ve only 

been there 2 months, but—— 

Mr. MIZER. What I can say is we are not—— 

Mr. ISSA. Have you sent out subpoenas? 

Mr. MIZER. Congressman, in the 2 months that I have been in 

the Civil Division, I have not authorized any subpoenas in relation 

to this set of concerns. 

Mr. ISSA. Okay. So when the FDIC printed this rather interesting semi-retraction of we were misunderstood when we said target these high risks and cause banks to drop all kinds of lawful 

businesses and you followed up, you’re going to tell us that there 

was no political agenda even though the gentleman made it very 

clear that the political agenda of the President is consistent with 

this: Get these people their banking relationships dried up and you 

can stop them from being in business. 

So the question once more is, after this kind of use of power, 

where do they go to get a clean bill of health? Are you participating 

in this? Are you willing to be part of remediation, as the FDIC has 

said, as the FDIC Chairman has said he is doing but hasn’t shown 

us yet? 

Mr. MIZER. Congressman, I can’t speak to what the FDIC is 

doing. What I can say is that—— 

Mr. ISSA. Are you doing anything? 

Mr. MIZER. Congressman, we are trying to make abundantly 

clear that we are not targeting—— 

Mr. ISSA. Are you doing any remediation of those who have had 

their reputations destroyed by Operation Choke Point? 

Mr. MIZER. Congressman, we have not received any financial institutions communicating to us that involuntary bank closures 

were on account of Operation Choke Point. And so—— 

Mr. ISSA. Operation Choke Point put companies out of business, 

took away their bank relationships. You’re aware of that, right? 

Mr. MIZER. Congressman, the unlawful conduct that we are targeting should have not resulted in any lawful business losing a 

bank account. 
95 

Mr. ISSA. But it did. Let me go on to a little different, but it’s 

on my list of shakedown is the title that my people gave me on all 

this. In a case of—filed by the ACLU, the Lopez v. Johnson case, 

you entered into a settlement, right? 

Mr. MIZER. I am not specifically familiar with that case. 

Mr. ISSA. Okay. So the fact that in a settlement, the ACLU was 

able to get the United States Government, not through Congress, 

to agree to advertise in and hold a campaign in Mexico to encourage people who had voluntarily deported themselves, voluntarily 

departed, to let them know that they could come back and fight it. 

You’re not aware of any of this? 

Mr. MIZER. I am not aware of that case. But I would be happy 

to continue to confer with the Committee. 

Mr. ISSA. I would be thrilled if you would come back to us. Because we, quite frankly, do not understand on what basis you agree 

to spend money campaigning to tell people that are, in fact, 

illegals, who have voluntarily left, that they should come back and 

fight deportation. Director White, you answered sort of questions of 

the Chairman, but I’m going to try and ask it a different way. 

Mr. WHITE. Sure. 

Mr. ISSA. You have, at times, taken penalties into the Federal 

Treasury from entities such as the ones that—such as JPMorgan 

Chase, is that correct? 

Mr. WHITE. I’m not sure that any—— 

Mr. ISSA. You have had settlements in which the Treasury received money? 

Mr. WHITE. I’m not sure any settlement that we were solo, without other Federal entities, has ever had a penalty go in. Where we 

get penalties—and we, actually, in our annual report, list penalties 

that—— 

Mr. ISSA. Let me just ask a question. 

Mr. WHITE. Sure. 

Mr. ISSA. Is there any prohibition on the nonprofit known as the United States of America receiving the $7.5 million, ‘‘voluntarily,’’ 

so that the United States Government would have specific funds to 

go out for a grant program openly and transparently to entities to 

do the remediation that you’re talking about, is there any prohibition in law that would have prevented you from bringing it in and 

allowing a grant program? And I’ll just give you a followup question. 

Isn’t it true the Department of Justice does, in fact, have grant 

program authority, as do other parts of the government, that could 

have done some of these, if you will, informational grants? 

Mr. WHITE. My expertise is in the Bankruptcy Code and those 

parts of title 28 that deal with us. And in order for the money to 

have gone to the taxpayer or more money to the homeowner, then 

we would have needed two other things to occur, which I suggest 

are highly speculative. One, Chase agreeing to it. 

Mr. ISSA. Chase was going to agree to whatever you said, or they wouldn’t have given that $7.5 million otherwise. 

Mr. WHITE. From your mouth to God’s ears. 

Mr. ISSA. Inshallah. 

Mr. WHITE. I mean, I think it’s speculative to suggest that the 

agreement could have been done without—the way it was fash-
96 

ioned, both with the remediation that went to the homeowners in 

the amounts that was to the homeowners and additional accountability imposed through the third-party payment. I believe it was 

an essential part of the agreement. 

Mr. ISSA. So you would support, then, legislation that would keep 

you from, in fact, bypassing Congress, bypassing the appropriation 

process, and selecting what might very well be considered to be 

partisan 501(c)(3) groups with an agenda, if you will, to do this 

work? 

Mr. WHITE. Respectively, Mr. Issa, I don’t believe that we in any 

way bypassed the Congress, nor do I believe in any way we sent 

it to an organization that is in the least bit controversial. 

Mr. ISSA. Well, I appreciate that you don’t think they’re the least 

bit controversial. 

Mr. WHITE. I’m talking about, I can only—— 

Mr. ISSA. Look, we put a community organizer in the White 

House. The American people made that decision. But when you 

make a decision to direct funds toward organizations and you double their financial base as a result, you make a real difference in 

their ability to do things which, in fact, is fine if it’s done through 

an open and transparent process, which it doesn’t appear to be. 

Mr. WHITE. Perhaps, Mr. Issa, if I may—— 

Mr. Issa. Of course. 

Mr. WHITE [continuing]. I may have misunderstood your question, sir. I thought you were referring to the Chase settlement that 

U.S. Trustee Program entered into in March. In that case, the only 

recipient was the American Bankruptcy Institute, which is the 

largest professional association of bankruptcy professionals. It does 

not lobby. It does not litigate on behalf of private clients. It does 

not accept Federal money and so forth. So what I’m testifying to— 

I thought the question went to—the ABI grant. That’s the one that 

I can speak to. And I must say that I have viewed it as an unassailable provision of that agreement. 

Mr. ISSA. And unappropriated. 

I thank the Chairman. 

Mr. MARINO. Seeing no other witnesses for this panel, you are 

excused. I want to thank you so much for being here this afternoon. 

And we will impanel our next witnesses. Thank you. 

Mr. WHITE. Thank you. 

Mr. MARINO. Good afternoon. The meeting will be, the hearing 

will come to order again. I would like to thank our panel for waiting and for testifying. 

And I want to begin by asking you to please stand, raise your 

right hand to be sworn in. 

Would you please stand and raise your right hand to be sworn 

in? 

Do you swear that the testimony you’re about to give is the 

truth, the whole truth, and nothing but the truth so help you God? 

You may be seated. And let the record reflect that all the witnesses have responded in the affirmative. 

I’m going to introduce the panel. And I will begin with Mr. Horowitz. Am I pronouncing that correctly? 

Mr. HOROWITZ. Yes. 

Mr. MARINO. Thank you, sir. 
97 

Mr. Horowitz is the CEO of Twenty-First Century Initiatives and 

serves as senior fellow for the Hudson Institute. Mr. Horowitz 

served as general counsel for the Office of Management and Budget 

under the Reagan administration. For nearly two decades, Mr. 

Horowitz has run the Religious Liberty Project at the Hudson Institute, playing a lead role in the shaping and passage of such 

wide-ranging legislation as the International Freedom Act, the 

Sudan Peace Act, the Prison Rape Elimination Act, the North 

Korea Human Rights Act, and the Trafficking Victims Protection 

Act. Mr. Horowitz served in the United States Marine Corps Reserves. He is a graduate of City College of New York and the Yale 

Law School. 

Good afternoon, sir. 

Mr. Daniel Epstein is the executive director of the nonpartisan, 

public advocacy and legal reform organization Cause of Action. 

Prior experience includes having served at the U.S. House of Representatives as a counsel for oversight and investigations at the 

Committee on Oversight and Government Reform, where he specialized in tax, labor, nonprofit, and Federal grant-spending investigations and oversight. Mr. Epstein has been cited by a variety of 

media outlets, including the National Journal, the Chicago Tribune, and the Washington Post. He is a graduate of Emory University Law School and Kenyon College in Gambier, Ohio. 

Good afternoon, sir. 

Mr. Grossman is an associate at the firm Baker & Hostetler, 

LLP, and an adjunct scholar at the Cato Institute. He has filed several high-profile amicus curiae briefs in Supreme Court cases and 

in the Federal courts. Mr. Grossman has been a frequent legal commentator on radio and television, having appeared on Fox News, 

CNN, MSNBC, CNBC, NPR, CBN, and in print publications, such 

as The Wall Street Journal, USA Today, The Washington Post, The 

Washington Times, and many others. He has testified before the 

House and Senate Judiciary Committees numerous times on issues 

of constitutional law and legal policy, and frequently advises Members of Congress. Mr. Grossman is a graduate of George Mason’s 

School of Law and the University of Pennsylvania master’s program. He holds an undergraduate degree from Dartmouth College. 

Welcome, sir. 

Ms. Saunders is the associate director at the D.C. branch of the 

National Consumer Law Center, where she serves as its managing 

attorney. Ms. Saunders specializes in the area, including the Consumer Financial Protection Bureau, prepaid cards, mobile payments, and small-dollar loans, credit cards, bank accounts, and preemption. Prior to working with the NCLC, Ms. Saunders directed 

the Federal Rights Project of the National Senior Citizens Law 

Center and was an associate at Hall & Phillips. Ms. Saunders is 

a graduate of Harvard Law School where she was an executive editor of the Law Review. She also holds a master’s degree from Harvard and an undergraduate degree from Stanford University. 

I want to thank each of you. Each of the witness’ written statements will be entered into the record in its entirety. I ask each witness to summarize his or her testimony in 5 minutes or less. And 

to help you stay within the time, there is a timing light in front 

of you. The light will switch from green to yellow, indicating that 
98 

you have 1 minute to conclude your testimony. When the light 

turns red, it indicates that the witness’ 5 minutes have expired. 

Mr. Horowitz, you are recognized for your 5 minutes or less opening statement. Thank you, sir. 

TESTIMONY OF MICHAEL HOROWITZ, CEO, 

TWENTY-FIRST CENTURY INITIATIVES 

Mr. HOROWITZ. Thank you, Mr. Chairman. 

Thank you, Mr. Chairman. 

Thank you, Mr. Ranking Member. 

It is a distinct pleasure to be here as you begin a hearing on 

some of the most fundamental issues that face government. They 

are, first, the relationship of means to ends, as government pursues 

its objectives. And, second, the role of the rule of law in the government’s process. I’ve wrestled with those questions a great deal. I’ve 

seen others wrestle with those questions. And I’ve done so particularly at two important moments in American history. The first was 

the battle against segregation in Mississippi and throughout the 

South. And the second is as OMB general counsel. 

When I was in Mississippi, Mr. Chairman, I saw lots of people 

who placed policy preference over law. They created a crisis for the 

United States. They did not help the State of Mississippi, nor did 

they help their cause. I also saw men who were indifferent to the 

issue of segregation. I think of Judge Claude Clayton of the Northern District of Mississippi. He probably was comfortable with the 

culture as it was. But it was a matter of indifference to him when 

he saw the law being violated. That, to him, took precedence over 

policy objectives at all times. And he, more than anyone, ended segregation. And it was the rule of law, despite one’s personal views 

or personal preferences in policy, that was the feature that did it. 

I saw the same thing in the Reagan administration, Mr. Chairman. We, as senior attorneys, said no to the President and to agencies. We often hurt presidential policy. We often hurt the President 

politically. I remember being with the White House Counsel, being 

the subject of newspaper ads, being attacked because we opposed 

a conservative so-called ‘‘defund the left’’ movement. We thought 

that grants should be given based on the quality of the grant application, not the politics of the grantee. 

Mr. Goodlatte, you had mentioned Richard Willard. We fought 

like tigers against those sweetheart settlements, not only when 

moneys were given to favored parties but also when government 

agencies were told to perform functions and given money outside 

the appropriations process. The mechanism here is, of course, the 

judgment fund. The judgment fund is a permanent, indefinite appropriation. And if a court signs a piece of paper, Congress has no 

say in the matter. And infinite amounts of money can be spent. 

That’s what the judgment fund means. So use of the judgment fund 

as a means of circumventing the constitutional appropriations process. I remember the bittersweet moment when independent counsel 

came to me and complimented me for defeating Ollie’s Army. It 

was quite a bittersweet moment because I had issued a ruling saying that Congress had passed a law that didn’t allow the White 

House to manage the Iran—the Contra campaign. And we had to 
99 

turn it over to the State Department, whose policies were not the 

policies of the President. 

Many of us would tell people who came to us and said that we 

have policies that we prefer, and by the way, one of the beneficiaries will be this fellow who has given a lot of money to campaigns. We had a pretty standard tactic: We said do it again, and 

we refer you to the FBI. 

I tried to propose tort reforms, which I thought were constitutionally permissible. And my colleagues said, No, it can’t be done. 

And I went to my colleagues and said: But, you know, the tort lawyers are creating all this difficulty. And if we don’t do the reform 

at the Federal level, it won’t be done. 

Nobody, as the President regularly does now, said: Well, if we 

don’t do it, it won’t happen. And we’ve got to do it, come what may. 

The issue was on the Federalism component. And I was shot 

down by my colleagues. 

Now, when we did it, Mr. Chairman, I felt badly. Ed Meese was 

heartsick when he brought to public attention the fact that money 

was being paid to the Contras by—and there were financial arrangements with Iran. The President had said that we weren’t giving money to Iran in the course of negotiating with terrorists. And 

it turns out we were. He got the evidence, and he went public immediately on that evidence. 

And, yet, Mr. Chairman, when I look back in retrospect, what I 

realize is that what we helped do was create a Presidency which 

stood for more than its own self-interest, which stood for principle. 

People said regularly: Well, I don’t agree with Reagan, but he 

stands for something and I will support him. And it was a Presidency that really counted because it was respect for the rule of law. 

And if there is, what are we going to do, Mr. Chairman, with this 

incredulous performance of this Administration, Executive orders 

that repeal whole systems, Executive orders that create whole statutory frameworks, these settlement matters of which we could talk 

some more. 

There is no way, Mr. Chairman, I can say this definitively, that 

confronted with a statute that says billions of dollars shall go out 

to support a healthcare system—and it said that there are two 

classes of beneficiaries, only one of whom shall get money—there 

is no way, Mr. Chairman, we would have allowed money to go to 

a second class of beneficiaries, which is what has happened, nor 

would we have permitted deadlines to be ignored, nor would we 

have permitted the waiver of tax moneys, no matter what our feelings on the matter. 

Now, I don’t blame the President so much on this, Mr. Chairman. 

He may be a lawyer, but he’s a client in this case. And I do say 

that we have a group of lawyers who never say no. That’s outrageous. We depend on them. We don’t—what they do is what the 

southern segregationists did: Hey, we can do anything we want. If 

you don’t like it, sue us. And at the end of litigation, if we get a 

court order, at that point, we’ll change. That’s what the Administration is doing. And in the process, it’s hostaging the courts. Because it’s now saying to the courts: If you rule and follow the law 

here and say that ObamaCare benefits shall not go to everybody, 

if you tell those immigrants that you don’t have a clear path, even 
100 

though you’re illegal, enough time has passed, we’ve created the 

fait accompli, that you’re going to be politically at fault. 

Mr. MARINO. Sir, can you sum up? Could you please sum up? 

And then we’ll get to the questions. 

Mr. HOROWITZ. Yes. I see the Congressman is back, and I would 

say I’m sorry Mr. Johnson is gone now—— 

Mr. MARINO. He’ll be back. 

Mr. HOROWITZ [continuing]. Because I think there are things 

Congress must do. I’ve tried to spell out a couple of options for Congress to consider. But if there were bipartisan support for a rule 

of law regime that would be in the interests, politically, of this Administration, we wouldn’t need to go down that road. And I hope 

that Democrats will come to understand that. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Horowitz follows:] 
101 
102 
103 
104 
105 

ADDENDUM 
106 
107 
108 
109 
110 
111 

Mr. MARINO. Thank you, sir. 

Mr. Epstein. 

TESTIMONY OF DANIEL Z. EPSTEIN, ESQ., 

EXECUTIVE DIRECTOR, CAUSE OF ACTION 

Mr. EPSTEIN. Good afternoon, Chairman Marino, Ranking Member Johnson, Members of the Subcommittee. 

My name is Daniel Epstein. And I’m the executive director of 

Cause of Action, a nonprofit, strategic oversight group that is committed to ensuring the regulatory process is transparent, fair, and 

accountable. 

Cause of Action uses various investigative tools and legal tools 

to educate the public about the importance of transparency and accountability of the Federal Government. We consider our efforts to 

be a vital form of public oversight that supplements the important 

efforts of Congress. 

I appreciate the opportunity to testify today about oversight of 

the Department of Justice, particularly its Tax Division. As a matter of both law and principle, when it comes to Americans’ tax information, Federal Government attorneys must keep it secret, even 

if the President asks them to divulge it. 

Since 2009, the White House has run a program where attorneys 

from the Tax Division at the U.S. Department of Justice, go on ‘‘detail’’ or temporary leave of absence from DOJ to spend a year as 

a legal adviser to the President. Cause of Action is concerned that 

this program may be a manner for which the President can be 

armed with information that may benefit him politically. 

To illustrate, Andrew Strelka, a former IRS attorney who was allegedly involved in the targeting of conservative groups, later 

joined the Tax Division of the Justice Department, where he defended the IRS in a targeting against one such group, Z Street. 

This was, as former Oversight Committee Chairman Darryl Issa 

called it, a conflict of interest. But that was only half the story. 

Mr. Strelka went on leave from DOJ Tax to join the White House 

Counsel’s Office, the legal advisers to President Obama, where he 

did background checks on potential nominees, accessing their tax 

information and providing recommendations to the President. Mr. 

Strelka, who is one of several DOJ tax attorneys who served on detail at the White House, obtained confidential information from the 

IRS, from the Department of Justice, and from the White House, 

and had the opportunity to share information obtained from one 

government employer with any other. Not only would such sharing 

be a violation of the Tax Code, it is fundamentally at odds with 

legal ethics. To be sure, Congress has granted the President the 

authority to access the return information of any nominee so long 

as reports of such requests are submitted to Congress. 

The legislative history of the Tax Reform Act of 1976 and both 

Treasury Department and Department of Justice guidance indicate 

that Congress sought to balance the President’s broad access to 

taxpayer information by requiring transparency. However, Congress has never received reports of the President conducting tax 

checks on nominees. The concern here is that the detailing of DOJ 

tax attorneys to the White House allows for the circumvention of 

a congressionally mandated process for the President to access tax-
112 

payer information of potential nominees or, for that matter, any individual. Indeed, the Treasury inspector general for tax administration was ordered by the U.S. District Court of the District of Columbia to disclose the existence of 2,500 records of alleged unauthorized disclosures by the IRS to the White House of tax information. 

Cause of Action has submitted numerous requests to the DOJ’s 

Tax Division seeking answers on how individuals, like Andrew 

Strelka, were screened and the information they accessed properly 

safeguarded to prevent the White House from accessing tax information held by the Justice Department and vice versa. As we sit 

here today, DOJ Tax has failed to fully respond to Cause of Action’s requests. In light of these concerns, on April 15, Cause of Action requested the DOJ inspector general, who is also named Michael Horowitz, to investigate the Tax Division’s practice of detailing attorneys to the White House. To date, the inspector general 

has not responded to Cause of Action’s request. Cause of Action’s 

examination of records reveals no policies, no procedures, no rules, 

no guidelines to ensure that Tax Division attorneys detailed to the 

White House are appropriately screened and the information safeguarded to prevent confidential tax returns or return information 

from being unlawfully accessed or disclosed. The American people 

deserve answers as to whether their most private information may 

have been shared with the White House for political gain. 

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

the work of Cause of Action. And I’m happy to answer any questions that you or any other Members of the Subcommittee may 

have. 

[The prepared statement of Mr. Epstein follows:] 
113 
114 
115 
116 
117 
118 
119 

Mr. MARINO. Thank you, sir. 

Mr. Grossman. 

TESTIMONY OF ANDREW M. GROSSMAN, ADJUNCT SCHOLAR, 

CATO INSTITUTE, ASSOCIATE, BAKER & HOSTETLER L.L.P. 

Mr. GROSSMAN. Mr. Chairman and Members of the Subcommittee, thank you for holding this hearing today and inviting 

me to testify. My statement will focus on the potential conflicts 

that arise when Federal agencies’ relationships with outside special 

interests lead them to adopt litigation positions that may differ 

from those of the rest of the government. The Department of Justice litigates on behalf of the entire government. The positions it 

takes must not only be effective but also coherent across the field 

of government litigation. In general, it performs this task admirably. But sometimes it falls short. 

In a recent opinion, D.C. Circuit Court Judge Laurence Silberman faulted the Department’s Environmental and National Resources Division for, in his words, acting to subordinate governmentwide litigation interest to the desires of one agency, the EPA. 

While his immediate complaint was the division’s failure to raise 

meritorious standing defenses, his concern was stated in much 

broader terms. The division’s litigating practices, he said, have led 

to dramatic contrasts with positions taken by the Civil Division. 

Reading between the lines, Judge Silberman’s opinion raises two 

important points: The first is that these litigation lapses likely reflect EPA’s political views. In particular, EPA’s close relationship 

with environmentalist groups is leading it to compromise its litigating positions, such as by foregoing defenses that might undermine those groups’ ability to participate in future cases against the 

agency. There is, in order words, at least a whiff of collusion. 

And the second is that ENRD countenances this, undermining its 

ability to ensure uniformity and sophistication in government litigation. These serious charges by a well-respected jurist raise a 

number of questions worthy of investigation. For example, when 

has the EPA directed the Justice Department to forego arguments 

that the government would raise in similar circumstances involving 

other agencies? To what extent do outside groups participate in the 

formulation of the EPA’s litigation strategies? And are those groups 

also in contact with ENRD attorneys? And what is the litigation 

impact of the revolving door between EPA and environmentalists 

groups? Are agency officials properly recusing themselves when 

their former employers seek to spur the agency into action through 

litigation or otherwise? Congress should demand answers. 

Judge Silberman’s observations also throw new light on the phenomenon of sue and settle, another instance of collusion between 

agencies and outside groups. The Subcommittee is already familiar 

with the problems that arise when settlements between agencies 

and special interests are used to set agency priorities and duties. 

These include lack of transparency, lack of public participation, 

rushed and sloppy rulemaking, and, above all, the evasion of proper accountability and oversight. These things are all well understood. But what is new is recent pushback by those claiming that 

the issue is overblown and that such settlements have only a limited impact on agency action. That view is mistaken. First, the 
120 

*Note: The supplemental material submitted with this witness statement is not printed in 

this hearing record but is on file with the Subcommittee. The statement, in its entirety can be 

accessed at: http://docs.house.gov/meetings/JU/JU05/20150519/103476/HHRG-114-JU05- 

Wstate-GrossmanEsqA-20150519-U1.pdf. 

facts speak for themselves. For example, EPA rushed out its mercury rule subject to the terms of a settlement. And it has since 

been required to amend, correct, and reconsider that rule on numerous occasions. And that rule may be struck down by the Supreme Court due to EPA’s failure, in its haste to regulate, to properly consider the costs of doing so. 

EPA is once again rushing to finalize the Brick MACT rule after 

its first one, which was also rushed out the door to meet its settlement deadlines, was struck down. The Judiciary Committee has 

heard testimony showing how the timing crunch for the Brick 

MACT rule provided the Agency an excuse to avoid serious consideration of flexible alternatives that may ease compliance burdens 

while providing the same environmental protections. 

A final example is the Fish and Wildlife Service’s 2011 settlements committing to rush out Endangered Species Act listing determinations for 251 species by September 2016 while abandoning 

its discretion to find that a listing may be warranted but is precluded by higher priorities. 

These are just three current examples. There are many more. 

The second point is that between 2008 and June 2013, 14 of the 

17 major nondiscretionary rules issued by EPA resulted from deadline lawsuits. On the horizon are rules setting performance standards for new and existing powerplants. This impact is by no means 

limited. And a third point is that the proof is in the pudding. Special interests wouldn’t bring lawsuits destined for settlement if it 

didn’t work. Unfortunately, it does. 

The problem will only get worse in the waning days of the 

Obama Presidency. At this point, agency officials have every incentive to sign settlements that help them rush rules out the door and 

that attempt to bind their successors in the next Administration. 

This has happened before. Vigorous oversight will be necessary to 

ensure the next Administration, which may have very different priorities than this one, is not bound by its predecessor’s unwise policy choices. 

Let me conclude with a word on solutions. The Sunshine for Regulatory Decrees and Settlements Act would provide important procedural reforms to ensure that settlements setting agency priorities 

do not compromise transparency, accountability, and the public interest. As I discuss in my written testimony, Congress should also 

address the problem at its root by reforming unrealistic agency 

deadlines and rethinking citizen suit provisions for suspensions 

that allow outside groups to coerce agency actions. Even if these reforms are unlikely to be signed by the current President, they 

should be readied now for the possibility that the next Administration may have an appetite for serious regulatory reform. 

Again, I thank the Committee for the opportunity to offer these 

remarks. And I look forward to your questions. 

[The prepared statement of Mr. Grossman follows:]* 
121 
122 
123 
124 
125 
126 
127 
128 
129 
130 
131 
132 
133 
134 
135 
136 
137 
138 
139 
140 
141 

Mr. MARINO. Thank you, sir. 

Ms. Saunders. 

TESTIMONY OF LAUREN K. SAUNDERS, ASSOCIATE DIRECTOR, 

NATIONAL CONSUMER LAW CENTER 

Ms. SAUNDERS. Thank you. 

Chairman Marino, Ranking Member Johnson, and Members of 

the Subcommittee, all in one seat, thank you for inviting me. 

I’m here to testify in support of the Department of Justice’s Operation Choke Point and to urge DOJ to do more to combat payment fraud. 

Last year, DOJ brought its first Operation Choke Point case 

against Four Oaks Bank and Trust, which helped process payments for a Ponzi scheme, an illegal gambling site, and illegal and 

fraudulent payday loans. The bank overlooked hundreds of consumer complaints, warnings from State attorneys general, and extremely high rates of payments rejected as unauthorized. 

I have not heard one word of criticism about the Four Oaks case 

itself. The bank’s conduct was indefensible. Yet the case led to 

rampant speculation that DOJ was engaged in a covert attack on 

legal businesses deemed immoral. 

These concerns should have been put to rest by the two most recent Choke Point cases brought this past March. Commerce West 

Bank facilitated 1.3 million remotely created checks for telemarketing scams, medical benefit discounts card scams, and payday loan finder scams. In taking on the new payment processor account, the bank planned for and soon saw half of the payments rejected. Hundreds of consumers complained. Commerce West 

blocked debits from banks that complained that their customer 

was—that Commerce West’s customer was targeting elder abuse. 

But Commerce West allowed the debits to continue at the banks 

that didn’t complain. 

In the third case, Plaza Bank enabled tens of millions of dollars 

of Internet telemarketing schemes, fraudulent identity theft protection insurance, and false offers of free credit cards and airline tickets. The bank’s COO, who was secretly a part owner of the payment processor, dismissed concerns from its compliance officer 

about extremely high return rates and complaints from banks and 

law enforcement. Even when new management was brought in, 

they debated whether the lucrative revenue outweighed the risk to 

the bank from the frauds. 

Again, I have heard no one question the extent of the fraud or 

the egregiousness of the banks’ conduct in these cases. And, yet, 

this evidence about what DOJ is actually doing has not stopped 

criticism. Lately, pawnbrokers and gun dealers have complained 

that their accounts were closed. But I have seen no ties to DOJ’s 

Operation Choke Point. Complaints about bank closures go back to 

the Bush administration, to the 2001 PATRIOT Act. A decade ago, 

long before Operation Choke Point, the pawnbrokers complained in 

a letter to FinCEN in 2006, ‘‘Pawn industry members have lost 

longstanding lines of credit as well as demand deposit relationships 

in those parts of the country since 2004.’’ Anti-money-laundering 

rules require scrutiny of accounts with high levels of cash or international transactions. Gun dealers are often pawnbrokers. And 
142 

both may be cash-intensive. If a regulator finds Bank Secrecy Act 

violations or a bank spots problems, accounts may be closed until 

the problems can be fixed. 

Numerous other reasons that I outlined in my written testimony 

that have nothing to do with Operation Choke Point can also account for bank account closures. 

But there is one area where DOJ does deserve some credit, accounts used for payment fraud. And my only complaint is that DOJ 

has not done enough. With only three cases in the last 2 years, 

DOJ has barely touched the tip of the iceberg. In March, a court 

fined the ringleaders of a scam who took $11 million illegally from 

seniors’ accounts. What did the scammer’s bank know? In another 

case, fraudulent payday lenders took $46 million from the bank accounts of consumers who never took out a payday loan. What did 

the scammer’s bank know? 

DOJ does go after scammers directly. And I’ve outlined many instances in my written testimony. But if a bank is a willing accomplice, choking off several scammers at once is more effective than 

playing Whack-A-Mole by chasing individual scammers around the 

globe. Choke Point is also a helpful reminder about how financial 

institutions can be and, in most cases, are part of the fight against 

fraud. 

In this age of rampant data breaches and Internet scams, why 

on earth would we criticize DOJ for using all the tools it has to protect the American public from fraud? Thank you for the opportunity to testify today. I am happy to answer your questions. 

[The prepared statement of Ms. Saunders follows:] 
143 
144 
145 
146 
147 
148 
149 
150 
151 
152 
153 
154 
155 
156 
157 
158 
159 
160 
161 
162 
163 
164 
165 
166 
167 

Mr. MARINO. Thank you. 

And, once again, all of your statements will be made of the full 

record. 

And I’m going to recognize myself for some questions. Mr. Johnson said he would be back. 

So, with that, let’s start the questioning. And I would like to 

start with Mr. Horowitz, if you would, please. Mr. Horowitz, you 

provided such an honorable picture of your colleagues in the 

Reagan administration and in the White House. That appears to 

sharply contrast with what is taking place today. What do you 

think has changed? 

Mr. HOROWITZ. Well, I think Ronald Reagan understood that 

there were things more important in the end than winning a particular game. One had to stand for something larger than oneself. 

And I think it was reflected. I also think there was a quality issue. 

My younger colleagues, then younger, at the Reagan White House 

included two later circuit court judges, the CEO of Home Depot, a 

group of Washington all-stars, people making more money than 

even the settlement amounts paid that have been described here, 

and the Chief Justice of the United States. These were people for 

whom the rule of law meant something. We took it seriously. But 

what we got was leadership from the top. 

And I think that this Administration is just so eager to win, to 

score, to achieve results, that the means become irrelevant and the 

ends are. Leadership comes from the top. 

I would say one other thing. And that is that I believe—and I’m 

glad Mr. Johnson is here when I say it—that Eric Holder has been 

the most lawless Attorney General since John Mitchell. I just do 

not see this notion of the rule of law trumping some immediate political gain. And I think that that has—so that the quality of the 

lawyers taken from the top, from the Attorney General, are just extraordinarily disappointing here. They think they’re winning. I 

think they get press support for doing it whereas we used to get 

hit by the press. That was helpful to us when we got criticized by 

the press. They kept our feet to the fire. The press is not doing it 

to this Administration. 

Mr. MARINO. My next question for you is, what is the long-term 

damage, if any, to the system from these results-driven lawyers? 

Mr. HOROWITZ. Well, it is extraordinary. And I’m, again, grateful 

that Mr. Johnson is here because what I tried to say was that the 

issue that’s raised by the misperformance of this Administration is 

not a Democrat versus Republican issue. It’s the executive branch 

versus Congress issue. When Executive orders are issued that create whole legal regimes, Congress becomes irrelevant. 

You know, the reach of the Federal Government is now so great 

that you don’t need Congress anymore. The President can say anybody who wants to deal with the Federal Government shall from 

now on do and he fills in the blank. Do this in terms of environmental laws. Do this in terms of discrimination. Do this in terms 

of immigration. He is not simply managing the Federal Government; he is legislating for the entire country with the stroke of a 

pen. I think that is dangerous to democracy. And it’s got to stop. 

I also think he creates—when there’s not that democratic process 

going on, the President constantly talks about: My authorities have 
168 

expanded. I’ve got a pen that’s handy, and I can just sign a piece 

of paper and make all kinds of things happen. 

I will say, Mr. Johnson, that today Democrats may applaud what 

gets done on immigration. But if that power over Executive orders 

can trump Congress, if that power to make settlements trumps the 

appropriations process, what’s sauce for the goose is sauce for the 

gander. And there will be a conservative administration that will 

trump Congress just as well. 

So I think there is a real damage and risk to the whole process 

of governance because the rule of law today—and I’m not saying 

this is a venal administration—but I will say, Mr. Johnson, as 

someone who got attacked by the Ku Klux Klan when I was in Mississippi, I find little difference in terms of respect and disrespect 

to the law between the Attorney General’s Office of the State of 

Mississippi at its worse and the lawyers of this Administration. I 

think there’s nothing worse that can be said of this Presidency. 

Mr. MARINO. Thank you. 

Mr. Epstein, the historian Paul Johnson writes that President 

Roosevelt was well known for using the IRS to punish political enemies. Do you see anything going on today that makes you fear 

that this is taking place with this Administration? 

Mr. EPSTEIN. Well, I think what is most obvious, and this is a 

direct result of my organization’s litigation against the Treasury inspector general for tax administration, is we know based off an 

order to TIGTA that there are 2,500 records of alleged unauthorized disclosures from the IRS to the White House. The White 

House has very broad means to obtain taxpayer information. It 

does that through a provision of the Tax Code. What is clear is the 

White House has never disclosed that it ever used these provisions. 

And, yet, what is obvious is that taxpayer information is going into 

the White House. And when you have 2,500 records of that, it— 

while there is, because of the lack of transparency on this, no direct 

evidence of the President specifically requesting that information, 

it is highly likely that there is some risks. And I think the fact that 

the President has not followed direct congressional statutes indicates that there may be some serious issues involved with this 

White House and taxpayer information. 

Mr. MARINO. Thank you. 

Mr. Grossman, what do you say to the suggestion that collusive 

litigation is not a problem? 

Mr. GROSSMAN. Mr. Chairman, I think my response is simply to 

look at the facts. If one looks at the 2011 settlements between two 

environmentalist groups and the Fish and Wildlife Service requiring the Fish and Wildlife Service to make listing determinations for 

251 separate species within a set period of time, while abandoning 

its traditional discretion, its statutory discretion to defer such listings and then to prioritize its operations based on sound science— 

that’s what the statute says—if you look at that settlement agreement, I think it becomes clear that what is going on here is not 

what Congress intended when it anticipated that the citizen suit 

provisions would be used to encourage agencies to undertake their 

statutory duties. 

Mr. MARINO. My time has long expired. And I’m going to defer 

to the Ranking Member, Mr. Johnson. And we’ll come back and do 
169 

a second round because I don’t like making you come here and then 

just do one round of questioning and then send you on your way, 

if you don’t mind. 

Mr. Johnson. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

And I thank the panelists for being here today. 

Mr. Horowitz, I realize that you are the lead witness on this 

panel. I realize you’re the lead witness on this panel. And it was 

not my intent to disrespect anyone on the panel by having to leave 

out. I had a pre-arranged 3:30 event that I had to take care of. And 

so, therefore, I went ahead and did it. And so I missed your testimonies. So, please, don’t take that as a sign of disrespect. 

And I do, Mr. Horowitz, feel your intensity about what you see 

as a usurping or overstepping of executive authority as you see it. 

I happen to disagree. And I’m one of those who feels that a strong 

government can promote prosperity for all. I look at government in 

terms of being an entity that protects the weak from the strong. 

And it does so through rules and regulations and laws. And there’s 

a reason why the legislative branch is the first branch dealt with 

in our Constitution in Article I. It’s a reason why the executive 

branch is afforded less attention in the founding document than 

the powers enumerated to the legislative branch. There’s a reason 

for that. And I think the Framers intended for the legislative 

branch to—although we have a coequal branch or coequal setup of 

checks and balances where each branch checks the other. So, from 

that standpoint, it’s equal. But I do understand the hierarchy that 

is set forth in our Constitution. 

And I would also note that, of late, our legislative branch has 

been gummed up. It hasn’t really been working. The 113th 

branch—or Session of Congress was known as the most donothingest branch of Congress in the history of our country. And 

when you take the number of bills that were enacted into law, 

passed and enacted into law, and this, despite the grave circumstances within which we find ourselves as a Nation, on a global 

level. Our challenges are unprecedented, both domestically and beyond our borders. And we just can’t let things go within our borders and expect to maintain the same position internationally that 

we have enjoyed. 

And so that has given rise to some practical responses, I think, 

by the executive branch. When there is a vacuum, it has to be 

filled. And if not filled, then woe be unto the entire Nation. And 

so I don’t think that there is any ulterior purposes by our President 

and our former Attorney General in terms of doing the work that 

they see that needs to be done. And I think both have evidenced 

a desire to work with Congress. But despite that mentality, I think 

both have been met by unprecedented levels of obstruction, particularly the President. It seems like anything that he does and any 

person that he puts into a position to do anything is going to be 

opposed just because it’s President Obama’s prerogative. 

So, you know, that’s kind of where we find ourselves in my view. 

And I look at—I look at both men having proceeded out of love and 

admiration for the country and not for any other purpose other 

than to serve the people of our great Nation. And, fortunately, in 

this Nation, we can agree to disagree with each other. And we have 
170 

elections. And we change the guard. The American people speak 

through those elections. And President Obama was elected twice, 

the second time with the same Attorney General as he appointed 

the first time. So that’s kind of where we stand. And I certainly 

would have no problem with you responding, though my time has 

run out. 

Mr. HOROWITZ. Well, if I may comment, Mr. Johnson. 

First, we don’t disagree on much that you said. We agree on 

much that you said. First, I believe in a strong Presidency. The 

Reagan administration was a very strong Presidency that filled in 

what we thought were lots of gaps. And there was debate on the 

matter. 

The part—and I agree that there are gaps now in governance 

and things that need to be done and blockages in terms of action. 

These are problematic things always in government. However, and 

this I believe is the key, if there is gridlock in the system, no matter how bad the consequences, it must never permit the President 

and, very particularly, the Attorney General to override the clear 

force of law. And that is what lawyers are there to say. We saw 

lots of gaps from our point of view in the Reagan administration. 

And, yet, when the Iran, when the Contra battle was going on, I 

had the unhappy task of making it even harder for the President 

to prevail in Nicaragua because you had passed legislation that 

made it impossible for the White House, as I viewed it, to have administration over that combat. 

That’s where I disagree. Maybe you think ObamaCare is absolutely critical. And let me say I share your view that Eric Holder 

and the President operate from love of the country. I don’t disagree 

with that. What I am saying is that that love and that frustration 

should never allow them and you should never allow them to transcend the law. How in the world do they justify giving billions of 

dollars to people in Federal exchanges when the law says only people in State exchanges could get the money? How do they justify 

ignoring deadlines? How do they justify waiving tax payments? The 

law is clear on that subject. And if there is gridlock, let me just 

say—— 

Mr. JOHNSON. With all due respect, on the issue of the Federal 

versus State exchanges, I think that clearly when you look at the 

legislative intent and you construe it in accordance with time-honored rules of construction by the court, you must conclude that the 

legislative branch intended for everyone to have benefit of subsidies, regardless of whether or not the Federal Government or the 

State set up of the exchange. 

Mr. HOROWITZ. Well, let’s say we disagree on that. And maybe 

after the hearing, I can give my view and you give me yours if you 

have a second. But I don’t want to moot that here. What I really 

mean to say is if there is gridlock and if it is hurting the country 

and if there is impatience, it does not justify issuing an Executive 

order, as the President says: Hey, Congress is not acting, so I’m 

issuing an Executive order ordering clemency for illegals and putting them on a path to citizenship. The remedy for gridlock, the 

remedy for failure is elections. 

If there’s a Republican Congress, it’s a do-nothing Congress, do 

what Harry Truman did: Get them kicked out in the next election. 
171 

But do not issue an Executive order to fill in the gap that Congress 

refused to fill in, in your judgment. That’s what I see happening 

here. 

Mr. JOHNSON. Mr. Horowitz, if we were to take your view to its 

logical conclusion, then there should never be a single Executive 

order issued by a President. 

Mr. HOROWITZ. Mr. Johnson, as general counsel at OMB, I had 

primary responsibility for handling Executive orders. I’ve got 5 

years of the most critical experience in dealing with Executive orders. I am trying to—and they are necessary tools of the President. 

But I want again to make clear, the idea that you take, the President has waiver authority. And then you extend it to waive anything is just, is legislation. There is—— 

Mr. JOHNSON. That’s what we have a court system for though. 

Mr. HOROWITZ. Ah, but that’s where I think my Mississippi experience is very important. What would happen would be the lawyers 

didn’t ever have to make a decision. If the courts had ordered integration of the parks and then there would be pools; they would 

keep them segregated. And they would say: Well, let’s keep them 

segregated. And they can litigate it. When the court tells us to integrate the pools, we’ll integrate the pools. 

Mr. JOHNSON. And that’s pretty much the way—— 

Mr. HOROWITZ. It is not the responsibility—an Administration 

has its own responsibility to follow the law and to follow it carefully, no matter what the consequences and not simply say: Well, 

it goes to us, and when the courts come in, they’ll tell us what to 

do. I tell you, accepting your judgment about love of country, that 

it pains me to see that the practices of this Administration, in 

terms of being constrained by legal mandates, is no different from 

what I saw in Mississippi during the massive resistance campaigns. I agree, it’s a noble motive. But when—and let me say one 

last thing in terms of the rule of law: It won’t work because eventually what is going to happen, Mr. Johnson, is that the courts are 

going to step in. We have already had a 9-nothing decision from the 

Supreme Court on recess appointments that never should have 

been allowed if lawyers had been alive here. And so, in the end—— 

Mr. JOHNSON. That’s something that had been taking place for, 

since—— 

Mr. HOROWITZ. Yes, but not during congressional sessions. And 

it was a 9-nothing decision of the court. I think you are going to 

find, as the Nixon administration did, as the Southern States did, 

that extended indifference to law and I got a stroke of the pen and 

I got new authorities every day is going to create counter-reactions 

that is going to make ObamaCare less lasting because that is—you 

do not breed respect for what you do if you think you can do it by 

yourself and if you override Congress. I’m just telling you if—— 

Mr. JOHNSON. Mr. Horowitz, I would love to continue our dialogue. But I’m doing a disservice to my Chairman, who is trying 

to run this Committee. 

And, so out of respect, I do, I must yield back. 

Mr. MARINO. We’ll ask another round, if you don’t mind. Is anybody in a hurry here other than wanting to get home? Just bear 

with me. We’re going to vote here shortly anyhow. Ms. Saunders, 

let me qualify my question before I ask it because, as a prosecutor, 
172 

district attorney in my State of Pennsylvania, and a U.S. attorney 

responsible for prosecuting Federal laws and working for Justice 

and the White House, I just, whoever breaks the law has to pay 

the consequences. I have absolutely no problem with that. And 

there were banks doing that and probably still are. And I hope they 

do get caught. And they should be punished and not only with civil 

penalties but criminal penalties as well. 

So the issue is not that banks and other entities that are operating under—that are operating illegally, according to the rule of 

law. That’s warranted. It’s the collateral effects that is taking place 

here because of negotiations and settlements and how it’s being 

done. 

When I was a prosecutor, I didn’t say to someone or suggest to 

anyone that if you do things this way, we will not prosecute you. 

If you broke the law, you broke the law. So let me give you two 

examples of where there is collateral damage. And certainly the 

Justice Department and the IRS, any government entity that has 

that kind of power can simply say no, we didn’t force someone to 

do this. But they’ve suggested in numerous situations not to lend 

to a particular individual or individuals or to suggest to banks that 

if you don’t change your lending habit, we will shut you down. If 

they violated the law, it should have been dealt with. So there’s a 

situation where ZestFinance—it’s an online lending startup, funded 

by a Princeton graduate, who is the former chief information officer 

at Google. Are you familiar with ZestFinance? Maybe not. Z-E-ST Finance. 

Ms. SAUNDERS. I’ve heard of it. 

Mr. MARINO. It uses—and I’m not going to ask you to respond 

to ZestFinance particulars because there are many cases that I 

don’t know about either. But ZestFinance uses mathematical analysis of large consumer data. It sets to offer loans at a far lower cost 

than competing products. ZestFinance submitted a statement to 

this Committee that as a result of Operation Choke Point, they 

have already had to layoff 45 percent of their workforce. Are you 

aware of this? 

Ms. SAUNDERS. Not—— 

Mr. MARINO. I’m not trying to get you because there are many 

cases out there. 

Ms. SAUNDERS. I do vaguely recall testimony about Zest. 

Mr. MARINO. And let me tell you why, because Zest Finance, 

being a startup company, needed financing to continue with its 

business and needed continual financing until it got to the point 

where it was generating the profits to not have to run to get financing. But the bank said, you know, your industry is not a popular industry, and we’re not going to do business with you. And I 

have to believe that it’s an example of Justice or IRS or some entity going in, saying: Hey, we don’t like the way you’re doing business. 

The rule of law isn’t based on we do not like the way you are 

doing business. The rule of law is here is the statute, here is the 

law, here is the evidence that we have that you violated, and you 

will be prosecuted. Most recently, in November 2014, Heritage 

Credit Union told Hawkins Guns in Wisconsin that it was closing 

the company’s account. To determine why, the owner called the 
173 

bank manager and teller and recorded the conversation. The bank 

confirmed that officials from the National Credit Union Administration forced the closure. 

NCUA officials came in, looked at their books, looked at everything and said: Here are some accounts that we feel that we are 

going to regulate you on. So that put Hawkins Guns at a disadvantage and lost a lot of business because of it. I’m not sure if they 

went out of business. So if there was something wrong there, the 

Federal Government should have done two things. If they had the 

evidence, they should have said to Heritage Credit Union: You are 

making illegal loans, or whatever the situation is, you are not following the banking rules, and you will be prosecuted. Didn’t happen, at least to my knowledge, not yet. And as far as Hawkins 

Guns, however they’re concerned, if they were selling guns illegally 

or doing something in violation of the crimes code or sales law or 

not paying their taxes, they should have been prosecuted as well. 

And they were not. 

So you criticize opponents of the operation of Choke Point for 

making baseless claims. But these are not baseless claims. And I’ve 

had information from people saying: We don’t want to publicly 

come out because the IRS will come after us or some entity will 

come after us. 

So this is what I’m telling you what the collateral effects are. But 

that is not the argument that this Committee is making. We’re 

simply explaining it; the rule of law must be followed. And no government entity should be saying to someone: I don’t think you 

should do this because of political reasons. 

Either you prosecute or you do not prosecute. What say you? 

Ms. SAUNDERS. Thank you. Well, I think that as a former prosecutor, I am sure you also appreciate that not every allegation that 

gets thrown around is necessarily backed up by the evidence. And 

I have seen all sorts of baseless claims about this bank account and 

that bank account was closed because of Operation Choke Point. 

But I haven’t seen any evidence that the Justice Department is 

pressuring any bank to close a lawful business. 

Mr. MARINO. Okay. I’ll let you finish. But you know as well as 

I do, that there are very subtle ways of getting the message across. 

And you know as a prosecutor, there are ways of dodging so-called, 

the ‘‘terminology of the law’’ to get a point across. Prosecutors 

should not be doing that, Government entities should not be doing 

‘‘I think you should not lend this company money.’’ 

Ms. SAUNDERS. And I’ve seen no hint that that is going on. In 

the case of Heritage Credit Union, first of all, you quoted NCUA 

which, of course, is not the Department of Justice, and it’s not 

Choke Point. And, of course, supervisory exams by the bank regulators are secret. And I think the banks like it that way. So they 

can’t always talk about exactly what is going on. So I don’t know. 

I do know that I think Heritage Credit Union sent the gun dealer 

a letter, saying they had some matters that they needed to take 

care of, but they would be happy to have the gun dealer back as 

a customer. I believe, if I’m not mistaken, that’s a credit union that 

had recently merged and that had grown quite quickly. And it may 

be that there were some compliance issues with the Bank Secrecy 

Act. 
174 

Mr. MARINO. Now you’re jumping to conclusions here. 

Ms. SAUNDERS. And so are these dealers. 

Mr. MARINO. It may be, it may be this, it may be that. And, yes, 

it’s not part of the Justice Department, but it’s a part of the Federal Government. And it should be transparent. And it should be 

open. And no games will be played. And I didn’t tolerate it from 

my prosecutors. They made me look good. They followed the law. 

But when the Federal Government starts flexing its muscle because of political reasons, there is a severe problem. 

Ms. SAUNDERS. Would you like every bank exam to be public? I 

mean, there’s lots of bank examinations. I would love to see what 

is going on. Frankly, we are often frustrated because regulators do 

things quietly, you know, with the bank behind the scenes. 

Mr. MARINO. Well, given the disaster that Dodd-Frank has 

caused, I would imagine that banks would not, even mine, exams 

being opened up to the public if they didn’t have to follow such ridiculous regulation that has been laid out over the decade. 

Ms. SAUNDERS. You know, I think a lot of these complaints go 

back to the Bush administration, have nothing to do with this Administration. 

Mr. MARINO. I wasn’t in Congress during the Bush administration. If I were, I would be holding the Bush administration responsible for that. There is something—here’s my premise about being 

a Congressman: I want to improve the quality of life for Americans. 

I think there is too much regulation. And I don’t care if it’s a Republican President; I don’t care if it’s a Democrat President. I’m the 

type of individual, as I took an oath as a prosecutor—I was a prosecutor for 18 years. That’s still in my mind, and that’s still ingrained in me. Again, I don’t care what Administration, if I were 

around or if I will be around when there’s a Republican President 

and I think that they are circumventing the system, breaking the 

law or trying to play some games, I will be the first one leading 

the charge on taking them on. 

Ms. SAUNDERS. Right. My point is that it’s easy to attribute motives. But back, in 2006, CFSA, which represents payday lenders 

said—this is in 2006—for the past 6 years banks have been abandoning us, first in a trickle, then continuously accelerating so that 

now few banks are willing to service us. 

Now, I don’t think anybody thought that the Bush administration was on a moral crusade against payday lenders. It’s easy to 

attribute motives, but I think we have a serious problem with funding of terrorists and drug dealers that move cash around. And, unfortunately, you know, there are rules that impact all of us. And, 

you know, the conversation whether we have too much regulation 

or not enough regulation is, you know, is another conversation. You 

know, the Justice Department is not passing regulations here. 

Frankly, I think that better regulation would have saved us hundreds of billions of dollars, and a Great Recession, and communities 

devastated, and countries around the world are on the verge of collapse and so I—— 

Mr. MARINO. I’m going to respectfully disagree with your opinion, 

but I hear it constantly, not only from my constituents but small 

businesses and large businesses and medium businesses, that regulation is killing them, regulations that I could explain here. You 
175 

look up my record, it’s on record, example after example after example of regulation. But, again, I don’t care what Administration 

it is; there is, at this point, businesses are being so regulated that 

they are going out of business. And you talk about—you really 

don’t want to open a can the worms when you talk about terrorism 

and funding of terrorism with this Administration. We don’t have 

the time to go into that, but I’d love to have that debate with you 

some day. 

Ms. SAUNDERS. I just ask you not to believe every headline. 

Mr. MARINO. Believe me, I don’t. And that’s another thing, as a 

prosecutor, I take with a pound of salt what someone tells me, 

what evidence is there. And you have to do a lot of work and research. And, as a prosecutor, just continually root out what evidence that is brought to your attention, so-called evidence, to make 

sure that when you go into the courtroom, you’re not doing something, presenting any evidence that is just not so. And this Administration and the departments have been—the Justice Department 

has been accused of doing this, not being straightforward with 

judges. And it’s not one judge; it’s several judges. I can—if, as a 

prosecutor, if any one of my staff or I were publicly chastised and 

accused by a Federal judge, let alone several Federal judges, that 

the issue was—is still being litigated, I would be devastated. I 

would absolutely be devastated because we’re officers of the court. 

There’s a rule of law, and if nowhere else—which I think should 

be done in other areas—you don’t try to pull the wool over someone 

in a courtroom. So, with that—— 

Ms. SAUNDERS. Well, I would just say that I think the best evidence on Choke Point—the best evidence of what they are doing is 

what they’ve actually done, three, you know, sound cases that we 

should all be standing up and applauding them for. We should be 

thanking the financial institutions that are doing their duty, which 

is most of them. We should be thanking the bank conferences that 

I see agenda, people talking about: Hey, here are the red flags; 

these are things you can look out to. 

And people are there listening because they want to cooperate—— 

Mr. MARINO. But here are the red flags, but here are the red 

flags, but instead of us finding you, why don’t you donate money 

to a particular organization, that yet—we’re going to have hearings 

on that as well. 

So, with that, I’m going to defer to was it Mr. Epstein or Mr.— 

raising your hand? 

Mr. Horowitz. 

Mr. HOROWITZ. If I could indulge, because I really—— 

Mr. MARINO. Just for a moment. 

Mr. HOROWITZ. Just be very short. I really want to come back to 

Mr. Johnson, and I want to say the following: First, the President 

and the Attorney General act out of love for their country, I share 

your view. 

What I criticize is not their pursuit of politics but their pursuit 

of policies that they believe in and believe are deeply needed. But 

I think they risk all when they go through stroke-of-the-pen kinds 

of practices to fill in what they see as the gap. They risk their reputation. They risk backlash from the courts and Congress. They 
176 

risk making the policies that they care about become impermanent 

rather than permanent. That’s the lesson of the Reagan, as I say, 

as against the Nixon administration in terms of the importance of 

rule of law. 

They weaken what makes a democracy really work. And so if I 

were advising this President as a senior lawyer, I would say the 

same thing we did in the Reagan administration, it may hurt now 

what happens, but the long-term consequence of patience, of respect for law, wins you a lot more than you’ll lose. The remedy for 

gridlock is elections, not saying: I’ve got new authorities that I’ve 

just discovered; I’ve got a pen ready to sign anything. 

I think we’re going to need reform now as a result of this practice 

of Executive orders, of lots of practices of this President. And I 

think these—less discretion is going to be given to the Presidency 

because the performance of this Administration and a failure to follow the rule of law. 

Mr. JOHNSON. Mr. Horowitz, I believe that any Administration 

will fill the vacuum, the void, left by congressional inaction when 

it comes to what needs to be done for the benefit of this country. 

And we may view—we may have different views. Some of us come 

from an anti-regulatory philosophical bent of mind like Charles and 

David Koch. I mean they are free-market, no-regulation, laissezfaire folks. And that’s a philosophy that has taken hold in Congress 

and has been here for decades now, predominantly. And that’s 

what led to the Great Recession, in my opinion—an anti-regulatory, 

hands-off approach, ‘‘let the free market settle everything.’’ And 

when it all boiled down, the free market needed a bail out. And 

this economy and thus the world economy was teetering on the 

brink of disaster. And woe and behold the free-marketers came to 

Congress and asked for the American people to bail them out. And 

the American people bailed them out. 

I didn’t vote for the bailout because I didn’t think that it was— 

the $700 billion was adequately restricted or conditioned. There 

were not enough congressional conditions on the use of that money. 

And so, therefore, the banks that created the Great Recession 

themselves in a deregulated environment because there was no restriction between the investment and the commercial side, and that 

investment side took over. The American taxpayers were on the 

hook for $250,000 per account. And we had to bail them out like 

that. We had to bail out the banks to that extent. But on the investment side, it got much deeper, and we had to bail out the 

whole thing. 

And so the American people bailed out the banks, gave them 

money. What did they do? The too big to fail got even bigger and 

too bigger to fail. And what about the homeowners? What about 

the homeowners—what about the homeowners on whose backs the 

crushing weight of the recession hurt most? They were not bailed 

out. But, nevertheless, we’re still in an antiregulatory environment.That’s what controls Congress now. That’s the mindset of 

Congress. And it has led to a do-nothing Congress. 

And, Mr. Epstein, you are an alumnus of the Koch brothers associates program, correct? That’s not C-o-k-e; K-o-c-h, the Koch brothers. 

Mr. EPSTEIN. I used to work at the Charles Koch Foundation. 
177 

Mr. JOHNSON. Uh-huh. And you are an alumnus of the Koch associates program, correct? 

Mr. EPSTEIN. That’s correct. 

Mr. JOHNSON. And can you tell us what—tell us about that program. 

Mr. EPSTEIN. It is a—— 

Mr. JOHNSON. It instills free-market principles in those who 

come through it? 

Mr. EPSTEIN. Yeah. Actually, those who go through that program 

believe, I think like you do, that the government should be accountable, fair, and transparent. 

Mr. JOHNSON. And they also believe that there should not be a 

government that takes a lot of aggressive action. You favor a more 

laissez-faire approach to the economy. 

Mr. EPSTEIN. Well, it’s interesting, Mr. Johnson—— 

Mr. JOHNSON. Is that true? 

Mr. EPSTEIN. You—well, I can’t speak on their behalf. I can only 

tell you that my organization and why—I’m here to testify, to talk 

about 

Mr. JOHNSON. Cause of Action. 

Mr. EPSTEIN [continuing]. In the Federal Government. 

Mr. JOHNSON. Cause of Action. 

Mr. EPSTEIN. That’s correct, sir. 

Mr. JOHNSON. Now, there was a 2015 article, a February 2015 

article, in the Los Angeles Times that notes that critics of Cause 

of Action call it a sophisticated charade, saying the lawyers trawl 

for clients like Fuel Cell, whose cases enable them to pursue a 

Koch brothers agenda in the guise of helping individuals or small 

firms that liberals might find sympathetic. 

Is that true, or is that false? 

Mr. EPSTEIN. Yeah, that’s false. Cause of Action, we are committed, just like what you pointed out, which is there is an 

antiregulatory bias in the Federal Government. That’s exactly 

what’s happening. Choke Point is a policy that has no regulation. 

It’s not subject to notice and comment. The Bank of America settlements were not subject to notice and comment. These were 

unelected officials engaging in decisionmaking that the public had 

no stake in. I believe that—— 

Mr. JOHNSON. You don’t think that Federal agencies should have 

the ability to take wrongdoers to civil courts to obtain civil remedies? 

Mr. EPSTEIN. I absolutely do. But neither in the case of Choke 

Point nor in the case of Bank of America was there any court involvement at all. In the case of Bank of America, that settlement 

agreement was never approved by a court. As you pointed out in 

your arguments about arbitration, you actually believe in a very robust court system. Yet that robust court system has nothing to do 

with the programs and policies that have been discussed here 

today. 

Now just simply point out—— 

Mr. JOHNSON. But the parties agreed to it, though, didn’t they? 

Mr. EPSTEIN. Well, and I think that’s exactly the point. You 

know, the banks that agreed—— 
178 

Mr. JOHNSON. There was nobody holding a gun to anybody’s head 

to make them do something. 

Mr. EPSTEIN. Well, I think that Congressman Johnson, that the 

banks that agreed to the settlements and the slush fund, it’s no 

surprise that these are banks that also accepted payments from the 

bailout. These are also banks that have the groups that they are 

going to be funding, they are groups that these banks’ foundations 

have funded in the past. You yourself said that strong government 

ensures prosperity for all. Well, what strong government means is 

that the banks are the only ones who can afford to understand the 

cost of government decisions. 

Mr. JOHNSON. All I know is that $700 billion in taxpayer funds 

and a $30 million agreement for Bank of America and Citigroup to 

donate to HUD-approved housing counseling agencies, I mean 

that’s—that’s just—we’re sitting here—I mean, we’re comparing 

ants to elephants. 

And, with that, and I do wish we could have further dialogue, 

but I know that the Chairman wants to adjourn this hearing. 

And, with that, I yield back. 

Before I do that, though, I would like to tender for the record, 

by unanimous consent, an article from The Hill entitled ‘‘Is Operation Choke Point to Blame for Bank Account Closures?’’ And also 

a coalition letter on Operation Choke Point to the U.S. House of 

Representatives. 

Mr. MARINO. Without objection. 

[The information referred to follows:] 
179 
180 
181 
182 
183 
184 

Mr. JOHNSON. Thank you. 

Mr. MARINO. Ladies and gentlemen, this concludes our hearing 

for today. I want to thank you for the time that you’ve spent here 

and the lively debate. I’ve learned things, and I try to learn something every time we have hearings. Again, thank you for attending, 

and you are excused. 

And this hearing is concluded. 

[Whereupon, at 4:30 p.m., the Subcommittee was adjourned.] 
(185) 

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD
186 

Response to Questions for the Record from Benjamin C. Mizer, Principal 

Deputy Assistant Attorney General, Civil Division, U.S. Department of 

Justice 
187 
188 
189 

f 
190 

Response to Questions for the Record from the Honorable John C. Cruden, 

Assistant Attorney General, Environment and Natural Resources Division, U.S. Department of Justice 
191 
192 
193 
194 
195 
196 
197 
198 
199 
200 

f 
201 

*Note: The Subcommittee did not receive a response from this witness at the time of the filing 

of this hearing record. 

Questions for the Record submitted to Caroline Ciraolo, Acting Assistant 

Attorney General, Tax Division, U.S. Department of Justice* 
202 
203 
204 

f 
205 

Response to Questions for the Record from Clifford J. White, III, Director, 

Executive Office for United States Trustees 
206 
207 

f 
208 

Response to Questions for the Record from Andrew M. Grossman, 

Adjunct Scholar, Cato Institute, Associate, Baker & Hostetler L.L.P. 
209 
210 

f 
211 

Response to Questions for the Record from Lauren K. Saunders, 

Associate Director, National Consumer Law Center 

Æ