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Justice Department Bargains Away Chance to Recoup Tax Dollars

December 21, 2012
Senator Chuck Grassley , Dysart Reporter

With all eyes and ears directed towards Washington's so-called fiscal cliff, there's talk of striking a "grand bargain" between the White House and Capitol Hill to finesse a solution for the impending spending cuts and tax hikes slated to take effect January 1, 2013.

While high-stakes negotiations will likely continue through the end of the year and feed the 24-hour news cycle, I've also got my oversight eye aimed at a much different kind of bargain brokered between officials at the Justice Department and the city of St. Paul, Minn.

As President Obama launches a campaign to squeeze trillions more tax dollars out of the economy over the next decade, the Department of Justice appears to have made a tit-for-tat arrangement earlier this year that could have returned millions of tax dollars to the U.S. Treasury.

It seems incredible that the president's executive branch would turn a blind eye to help recover tens of millions of tax dollars potentially lost to fraud in an era of unsustainable federal spending. In an unprecedented twist of irony, an Assistant Attorney General essentially ignored the Justice Department's duty to faithfully enforce anti-fraud laws, and finagled a questionable arrangement against the advice of career attorneys. In exchange for the city of St. Paul, Minn., to drop an appeal before the U.S. Supreme Court on an unrelated lawsuit involving federal housing lending policy, the Justice Department agreed not to intervene in two False Claims Act lawsuits pending against the city.

The private whistleblower lawsuits alleged the city of St. Paul defrauded the U.S. government in its misuse of federal housing dollars. The plaintiffs charge the city violated the federal False Claims Act by falsely certifying it was using federal funds to create jobs for all eligible low-income workers. The Department of Housing and Urban Development, the Justice Department's Civil Fraud Section and the U.S. Attorney's office in Minnesota each recommended the Justice Department join the lawsuit against St. Paul.

Instead of protecting the taxpayer, the political appointee frittered away an opportunity to fight fraud and recover more than $180 million tax dollars. This goes beyond run-of-the-mill bureaucratic malpractice that I've worked to root out. This particular episode exemplifies how disregard for the rule of law trampled upon the interests of the taxpaying public.

I take seriously my constitutional oversight responsibilities to keep the Justice Department on its toes, working for, of and by the people. Regrettably, my repeated requests for related documents and witness interviews to get the facts of this matter on the table have not been met.

As a champion of the nation's whistleblower laws, I work to keep the teeth in the False Claims Act sharp and intact to protect the taxpaying public and to hold the government to account. By bargaining away an opportunity to join the qui tam lawsuits charging St. Paul with defrauding taxpayers, the Justice Department put ideology above the law.

In the meantime, one of the political appointees who helped orchestrate the quid pro quo has been nominated for a promotion to Associate Attorney General-the number three spot at the Justice Department. His nomination is pending before the Senate Judiciary Committee. And yet, the Justice Department refuses to release more than 1,000 documents regarding this arrangement to me as part of my oversight.

In keeping with my track record of keeping the people's business open to public scrutiny, I have written the U.S. Attorney General that failure of the Justice Department to produce this information may result in a delay of this nomination. It would not be in the public's best interest to consider this nomination without having all of the information-especially information regarding the nominee's involvement in this deal-necessary to evaluate his performance while serving the public in his current position.

My inquiry to date suggests this back room deal not only cost the U.S. Treasury the opportunity to recoup up to $180 million, but it has also called into question the department's pursuit of truth and justice.



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