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Trading a Headache for a Migraine
For the U.S. Department of Justice's top lawyers, an unusual deal to get rid of a legal headache from Minnesota two years ago has turned into a major political headache in Washington today.
In 2011 the city of St. Paul was appealing to the U.S. Supreme Court allegations that the city had violated provisions of the Fair Housing Act. The Justice Department was upset because the appeal, which the high court had agreed to hear, threatened the "disparate impact" theory of civil rights discrimination—a favored way of civil rights division lawyers to enforce fair housing laws.
So it offered a deal. St. Paul dropped the appeal, and Justice declined to intervene in an unrelated whistle-blower suit against St. Paul, wounding the lawsuit's chances of succeeding. That suit, filed by whistle-blower Fredrick Newell, claimed that the city had received millions of dollars by falsely certifying compliance with a section of the Housing and Urban Development Act of 1968.
Legal experts argue that the federal courts have granted Justice wide discretion to make such agreements, but congressional Republicans have turned it into one of their highest-profile attacks against the Obama administration.
The main targets of the Republicans' ire have been the political nominations of four Justice Department lawyers to leadership roles, most prominently that of Assistant AG Thomas Perez, who orchestrated the St. Paul deal, to be secretary of the U.S. Department of Labor.
The ensuing political scrap, featuring congressional reports and hearings, has brought heightened scrutiny to the Justice Department's use of the False Claims Act, one of its most powerful tools against health care fraud and abuses in the mortgage industry.
The tiff has stirred debate in Congress and among qui tam lawyers and others over whether the Justice Department and other government agencies should use whistle-blowers as bargaining chips for other government priorities. One of the administration's most vocal critics on this subject has been Senator Chuck Grassley (R-Iowa), a longtime defender of whistle-blower rights and the ranking minority member of the Senate Judiciary Committee. Of the St. Paul deal, Grassley said at a Capitol Hill hearing in May: "The result is that the department has demonstrated to future qui tam whistle-blowers that they might be helped, but only if a defendant doesn't have something else the department wants in exchange."
Democrats dismiss the controversy as a smear campaign against Perez's nomination—a mix of opposition to the work he did on voter rights as chief of the civil rights division, to the legal theories he supports, and to Obama's nominees in general.
But Grassley confirmed that the Minnesota deal is behind delays for several nominations that run through the Judiciary Committee. Sri Srinivasan, the principal deputy solicitor general, couldn't get a confirmation hearing for a spot on the U.S. Court of Appeals for the D.C. Circuit until he assured Republicans in private—and again during the public hearing—that he had not worked on the St. Paul case. (He was unanimously confirmed in May.)
The nomination of Minnesota U.S. Attorney B. Todd Jones to be the director of the Bureau of Alcohol, Tobacco, Firearms and Explosives is stalled. Acting associate attorney general Tony West had the final say on the St. Paul deal, according to a Republican congressional investigation. West, as the acting third in command at Justice, oversees civil litigation, including the civil division and the civil rights division. He was nominated to assume the permanent position last year, but still has not had a hearing.
Republicans have repeatedly delayed committee votes on Perez's nomination. In May, Senate Minority Leader Mitch McConnell (R-Kentucky) cited the St. Paul case in a floor speech that foreshadowed a possible Republican filibuster to block Perez from getting a confirmation vote. As Labor secretary, Perez would have the last say over whistle-blower claims brought under 22 statutes.
"Americans of all political persuasions have a right to expect that the head of such a sensitive federal department, whether appointed by a Republican or a Democrat, will implement and follow the law in a fair and reasonable way," McConnell said. "I do not believe they could expect as much from Mr. Perez."
During his confirmation hearing in April, Perez said it was St. Paul, and not the Justice Department, that first brought up the possibility of a global settlement. He said he consulted with ethics experts in the Justice Department, who assured him that the deal would be appropriate as long as West, the former head of the civil division, retained the ultimate decision. The Justice Department's expert attorney on the False Claims Act—Mike Hertz, who is now deceased—had an "immediate and visceral reaction that it was a weak case," Perez added.
Republicans have released documents that tell a different story, however, with notes from a meeting during which Hertz said, "Odd—looks like buying off St. Paul. Should be whether there are legit reasons to decline as past practice."
Lawyers for whistle-blower Newell are fighting in the U.S. Court of Appeals for the Eighth Circuit to revive the suit. "Contrary to mere declination, the United States's actions are unprecedented," said Newell's attorneys, including Thomas DeVincke of the Minneapolis firm Malkerson Gunn Martin, in a brief.
Shelley Slade, a partner at Washington firm Vogel, Slade & Goldstein, testified in May that she saw "nothing the least bit untoward or unusual" about the Justice Department's considering "broad programmatic interests of the United States in deciding not to intervene."
Moreover, there were serious doubts about the merits of the whistle-blower case in the St. Paul deal, Slade said. "If my law firm had been contacted about taking on this case, we would have rejected it," she said. The Justice Department action "does not in any fashion deter me or the other members of my law firm from bringing qui tam cases."
On the other hand, Stephen Kohn, a partner at Kohn, Kohn & Colapinto, says the St. Paul deal is "not a violation of law, but it's an abuse of the public trust." He compared enforcing whistle-blower cases to civil rights cases. Would the government agree not to join a lawsuit about a company firing 100 female workers, Kohn asks, if the company agreed to an unrelated deal on a railroad?
"At the end of the day, there's a whistle-blower who often has lost their job, risked their career and reputation to do the right thing," Kohn says. "If you permit political bargaining, the whistle-blower will always lose."
A version of this story appeared in The National Law Journal, a sibling publication of Corporate Counsel.