WASHINGTON - Senator Chuck Grassley, along with 16 other senators, today wrote the Attorney General urging him to bring justice to the actions of MF Global executives for the potentially illegal misappropriation of funds from the segregated accounts of its commodity customers.

 

"If the (Justice) Department's ongoing investigation uncovers illegal actions, criminal prosecution should be pursued without hesitation ... we urge federal agents to use every legal resource available," the senators' letter said.

 

Grassley has participated in oversight hearings of the Senate Committee on Agriculture seeking information and accountability for the loss of up to $1.2 billion in customer funds, including money from Iowa farmers, grain coops and brokers.

 

"Establishing the specifics of what happened is key to figuring out how the system failed and how to fix it going forward.  That's in addition to the immediate task of helping to minimize the damage for farmers and other investors caught in the MF Global debacle," Grassley said.  "Both the brokerage firm that's now in bankruptcy and top federal officials in charge of enforcing commodity trading and securities law, including the Commodity Futures Trading Corporation, need to be held accountable."

 

Today's letter to Attorney General Eric H. Holder Jr. was signed by Senators Max Baucus of Montana, John Thune of South Dakota, Ben Nelson of Nebraska, Grassley, Kent Conrad of North Dakota, Sherrod Brown of Ohio, Scott Brown of Massachusetts, John Barasso of Wyoming, Jon Tester of Montana, Roy Blunt of Missouri, Amy Klobuchar of Minnesota, Mark Kirk of Illinois, Mike Johanns of Nebraska, Johnny Isakson of Georgia, Dan Coats of Indiana, John Hoeven of North Dakota, and Tim Johnson of South Dakota.

 

Click here to read the letter.

WASHINGTON - Senator Chuck Grassley said today that Christopher J. Drew of Coralville has been selected for admission to the U.S. Military Academy in West Point, New York, for the 2012-2013 school year.

Drew will graduate in May from Iowa City West High School.  He is the son of Tracy and Stephen Drew.

"Admission to West Point is highly competitive and a great honor," Grassley said.  "Students like Christopher Drew work incredibly hard to earn this kind of opportunity, and I join many others, no doubt, in wishing him well and expressing appreciation for his commitment to serving our nation."

At Iowa City West High School, Drew has been active in National Honor Society, student government, Boy Scouts, track and field, jazz band, show choir, and the school musical.

Drew was one of the Iowa students Grassley recommended this year for appointments to the U.S. service academies.  Information about seeking a nomination is posted at http://grassley.senate.gov/info/academy_nominations.cfm.

For more than 200 years, the U.S. service academies have educated and trained the best and the brightest to lead and command the U.S. armed forces.

 

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Defense Contractor Salary Cap Included in Defense Authorization Bill Awaiting President Obama's Signature

Washington, D.C. - U.S. Senators Barbara Boxer (D-CA) and Chuck Grassley (R-IA) and Congressman Paul Tonko (D-NY) today called on the Office of Management and Budget (OMB) to immediately implement a new benchmark for taxpayer-funded salaries for defense contractors, especially in light of the National Defense Authorization Act's new provision that will ensure that all defense contractor employees are subject to the same limit on taxpayer-funded salaries.

Currently government contractors can charge taxpayers $693,951 for the salaries of their top five employees, based on an executive compensation benchmark last amended in 1998. Employees of government contractors outside of the top five can and do earn taxpayer-funded amounts in excess of the current benchmark.

The Administration has already told lawmakers that it considers the current cap on taxpayer-funded salaries for contractors to be "unreasonably high." But the Administration has not yet released its salary benchmark for 2011, even as 2012 quickly approaches.

In their letter, the legislators urged OMB to implement the National Defense Authorization Act's new rules quickly and provide lawmakers with regular updates on its progress in addressing this important issue.  The National Defense Authorization Act was enacted earlier this month.

The text of the letter follows:

 

December 19, 2011

The Honorable Jacob J. Lew

Director
Office of Management and Budget
725 17th Street, NW
Washington, DC 20503

 

Dear Director Lew:

We write to follow up on a letter we sent in September 2011 regarding the executive compensation benchmark for government contractors.  As we are now only days away from the start of 2012, we note that you have still not announced the new benchmark for 2011.

The National Defense Authorization Act of 2011 (NDAA) includes an important provision that extends the benchmark to all employees of defense contractors, with narrowly targeted exceptions for scientists and engineers.  While we were disappointed that the final conference language did not include the exact language of the Boxer-Grassley amendment to align the benchmark with the salary of the President of the United States, we are encouraged that real savings will result from applying the benchmark to all defense contractor employees.

As you noted in your response to our previous letter, increases in the compensation benchmark are "forcing our taxpayers to cover levels of compensation that we in the Administration view as unreasonably high."  We could not agree more with your statement - which is why we are requesting that OMB implement this law as soon as possible.

Section 803 of the NDAA requires that regulations to enforce this provision be implemented within 180 days of enactment of the law.  To ensure that new regulations are published in the Federal Acquisition Regulation (FAR) no later than July 2012, we request that you provide us, in writing, with regular updates on the FAR Council's progress in complying with the law.

We believe that taxpayers should not be on the hook for exorbitant contractor salaries, and we look forward to your prompt response.

Sincerely,

 

Barbara Boxer

United States Senator

 

Chuck Grassley

United States Senator

 

Paul D. Tonko

United States Representative

 

###

 

More than $30 billion has been recovered thanks to federal False Claims Act

WASHINGTON - Senate Judiciary Committee Ranking Member Chuck Grassley today said that the federal False Claims Law has recovered an additional $3 billion to the U.S. Treasury.  Grassley is the author of the 1986 qui tam amendments to the law as well as an update to the False Claims Act in 2009.  According the U.S. Department of Justice, the qui tam amendments alone recovered $2.8 billion of taxpayer money.  The total amount recovered through the False Claims Act since Grassley's 1986 provisions were signed into law is now more than $30 billion.

"Year after year, the federal False Claims Act proves to be the most powerful tool in rooting out fraud against the federal treasury.  Not only does the law help recover billions of taxpayer dollars, but it deters untold more, and is a real savior for taxpayers tired of Washington ways," Grassley said.  "The whistleblowers who bring these cases to light know the secrets hidden by those who are ripping of federal taxpayers.  Unfortunately, alerting federal officials about fraud often puts them at great employment peril.  Our 1986 qui tam amendments have empowered these people to come forward and risk their livelihoods to do what is right."

The amendments Grassley championed 25 years ago along with Rep. Howard Berman of California strengthened the Civil War-era False Claims Act which was originally signed into law by President Abraham Lincoln.  The 1986 Grassley-Berman qui tam amendments empowered whistleblowers to file suit on behalf of the United States against those who fraudulently claim federal funds, including Medicare, Medicaid, contract payments, disaster assistance and other benefits, subsidies, grants and loans.

According to the Justice Department, since the 1986 Grassley-Berman qui tam amendments were signed into law, whistleblowers have filed more than 7,800 actions under the qui tam provisions, including a peak of 638 this past year.

In 2008 Grassley introduced legislation that would further update the federal False Claims Act.  Many provisions of this legislation were included in the Fraud Enforcement Recovery Act that was signed into law in 2009.  The legislation overturned several court decisions that threatened to limit the scope and applicability intended by Congress in the 1986 update.  Grassley said the update helps ensure that no fraud will go unpunished because of legal loopholes.

Fraudulent claims by defense contractors during the 1980s prompted Grassley's initiative.  Today the qui tam amendments also recoup billions that would otherwise be lost to health care fraud.  This year alone, most of the $2.8 billion in recoveries were in the Medicare and Medicaid programs administered by the Department of Health and Human Services, the TRICARE program administered by Department of Defense, the Federal Employees Health Benefits program administered by the Office of Personnel Management, and Veterans Administration health programs.

 

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________________________________________________________________________

FOR IMMEDIATE RELEASE                        CIV

MONDAY, DECEMBER 19, 2011                           (202) 514-2007

WWW.JUSTICE.GOV TTY (866) 544-5309

 

JUSTICE DEPARTMENT RECOVERS $3 BILLION IN FALSE CLAIMS ACT CASES IN FISCAL YEAR 2011

Department Sets Records for Recoveries in Health Care and War-Related Fraud Annual Recoveries in Whistle Blower Cases Reach All Time High

WASHINGTON - The Justice Department secured more than $3 billion in settlements and judgments in civil cases involving fraud against the government in the fiscal year ending Sept. 30, 2011, Tony West, Assistant Attorney General for the Civil Division, announced today.  This is the second year in a row that the department has surpassed $3 billion in recoveries under the False Claims Act, bringing the total since January 2009 to $8.7 billion - the largest three-year total in the Justice Department's history.

The $3 billion total for fiscal year 2011 includes a record $2.8 billion in recoveries under the whistleblower provisions of the False Claims Act, which is the government's primary civil remedy to redress false claims for federal money or property, such as Medicare benefits, payments on military contracts, and federal subsidies and loans.  The department has recovered more than $30 billion under the False Claims Act since the act was substantially amended in 1986.  The 1986 amendments strengthened the act and increased the incentives for whistle blowers to file lawsuits on behalf of the government.  That in turn led to an unprecedented number of investigations and greater recoveries.

"Twenty-eight percent of the recoveries in the last 25 years were obtained since President Obama took office,"Assistant Attorney General West said.  "These record-setting results reflect the extraordinary determination and effort that this administration, and Attorney General Eric Holder in particular, have put into rooting out fraud, recovering taxpayer money and protecting the integrity of government programs."

Assistant Attorney General West noted that the $3 billion recovered this year included $2.4 billion in recoveries involving fraud committed against federal health care programs.  Most of these recoveries are attributable to the Medicare and Medicaid programs administered by the Department of Health and Human Services (HHS).  They also include the TRICARE program administered by Department of Defense (DoD), the Federal Employees Health Benefits program administered by the Office of Personnel Management and Veterans Administration health programs.

Fighting health care fraud is a top priority for the Obama Administration.  On May 20, 2009, the Attorney General and HHS Secretary Kathleen Sebelius announced the creation of an interagency task force, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to increase coordination and optimize criminal and civil enforcement.  Since January 2009 alone, the department has used the False Claims Act to recover more than $6.6 billion in federal health care dollars.  This is more recovered under the act than in any other three-year period.

The historic $2.8 billion recovered in whistle blower cases came from suits filed under the qui tam, or whistleblower, provisions of the False Claims Act.  These provisions allow private citizens, known as relators, to file lawsuits on behalf of the government.  In the 25 years since the False Claims Act was substantially amended, whistle blowers have filed more than 7,800 actions under the qui tam provisions. Qui tam suits hit a peak of 638 this past year, after hovering in the 300s and low 400s for much of the decade.

Assistant Attorney General West thanked the courageous citizens who have come forward to report fraud, often at great personal risk:  "We are tremendously grateful to whistle blowers who have brought fraud allegations to the government's attention and assisted us in this public-private partnership to fight fraud," he said.

In 1986, Senator Charles Grassley and Representative Howard Berman led successful efforts in Congress to amend the False Claims Act, including enhancements to the qui tam provisions to encourage whistle blowers to come forward with allegations of fraud.  In this 25th anniversary year of the 1986 amendments, Assistant Attorney General West paid tribute to the bill's sponsors, saying that "without their foresight, the breadth of the recoveries we announce here today would not have been possible."  He also expressed his gratitude to Senator Patrick J. Leahy, chairman of the Senate Judiciary Committee, and to Senator Grassley and Representative Berman for their support of the Fraud Enforcement and Recovery Act of 2009, which made additional improvements to the False Claims Act and other fraud statutes.

Assistant Attorney General West also applauded Congress' passage of the Affordable Care Act (ACA) in 2010, which reenforced the government's ability to redress fraud in the nation's health care system.  Among many other changes, the ACA amended the False Claims Act to provide additional incentives for whistle blowers to report fraud to the government and strengthened the provisions of the federal health care Anti-Kickback Statute.

Enforcement actions involving the pharmaceutical industry were the source of the largest recoveries this year.  In all, the department recovered nearly $2.2 billion in civil claims against the pharmaceutical industry in fiscal year 2011, including $1.76 billion in federal recoveries and $421 million in state Medicaid recoveries.  These cases included $900 million from eight drug manufacturers to resolve allegations that they had engaged in unlawful pricing to increase their profits.  Additionally, GlaxoSmithKline PLC paid $750 million to resolve criminal and civil allegations that the company knowingly submitted, or caused to be submitted, false claims to government health care programs for adulterated drugs and for drugs that failed to conform with the strength, purity or quality specified by the Food and Drug Administration.

Adding to its successes under the False Claims Act, the department obtained 21 criminal convictions and $1.3 billion in criminal fines, forfeitures, restitution, and disgorgement under the Food, Drug and Cosmetic Act (FDCA).  The FDCA's criminal provisions are enforced by the Civil Division's Consumer Protection Branch.

In addition to health care, the department continued its aggressive pursuit of fraud in government procurement and other forms of financial fraud, including grant, housing and mortgage fraud that emerged in the wake of the financial crisis.  In November 2009, President Obama established the Financial Fraud Enforcement Task Force to hold accountable the individuals and corporations who contributed to the crisis as well as those who would claim illegal advantage through false claims for funds intended to stimulate economic recovery.  Of the $3 billion in fiscal year 2011 recoveries, these non-war related procurement and consumer-related financial fraud cases accounted for nearly $358 million.

Overall, the department recovered $422 million in fiscal year 2011 in procurement fraud cases, including $89.3 million in recoveries in connection with the wars in Southwest Asia.  This brings civil fraud recoveries in connection with the wars in Southwest Asia since January 2009 to $153.4 million, and the total amount recovered in procurement fraud cases during that time to $1.5 billion, again a greater amount than in any previous three-year period.

Assistant Attorney General West expressed his deep appreciation for the dedicated public servants who contributed to the investigation and prosecution of these cases.  These individuals include attorneys, investigators, auditors and other agency personnel throughout the Civil Division, the U.S. Attorneys' Offices, HHS, DoD and the many other federal and state agencies.

# # #

***Click here to watch Senator Grassley's floor statement.***

Prepared Floor Statement of Senator Chuck Grassley

Ranking Member, Senate Committee on the Judiciary

Hall v. United States and Chapter 12 of the Bankruptcy Code

Friday, December 16, 2012

Mr. President, I'd like to take a few minutes to discuss a case that was argued a few weeks ago before the Supreme Court, Hall v. United States.  This case involves a specific provision I authored, which is contained in 2005 Bankruptcy Reform law.  Throughout the litigation in this case, my statements supporting the provision were discussed at length.  I want to take a few minutes and walk through the history and intent of this provision, so people hear it straight from the author's mouth.

At its core, Hall v. United States is about statutory interpretation.  The statute at issue is 11 U.S.C. section 1222(a)(2)(A), which was a farm bankruptcy provision added to the Bankruptcy Code in 2005.  Before I get into a discussion about the case, let me explain what this particular provision does and why it was needed.

Congress enacted Chapter 12 of the Bankruptcy Code in 1986, which was subsequently made permanent in 2005.  Chapter 12 allows family farmers to use the bankruptcy process to reorganize their finances and operations.  It's a proven success as a leverage tool for farmers and their lenders.  It helps the farmer and the banker sit down and work out alternatives for debt repayment.  Not long after it became law in 1986, we began to hear about what worked and what didn't work for farmers who were reorganizing in bankruptcy.

One problem we learned about arose when a debtor farmer needed to sell assets in order to generate cash for reorganization.  A farmer may need to sell portions of the farm to raise cash to fund a plan and pay off his creditors.  However, in this situation we're usually dealing with land that's been in a family's hands for a long time.  This means that the cost basis is usually very low.  So, once a farmer filed bankruptcy and then tried to sell a portion or all of the land, he would be hit with a substantial capital gains tax.

This created problems because, as originally drafted, Chapter 12 required full payment of all priority claims under Section 507 of the Bankruptcy Code.  The only way to avoid this requirement was if the holder of the claim agreed that its claim could be treated differently.  Thus, when a farmer sold his land, which resulted in large capital gains, the IRS would have a priority claim against the bankruptcy estate.

Now, let me take a moment to explain the concept of a bankruptcy estate, which may be a bit confusing.  When an individual or a corporation files for bankruptcy, an estate is created.  The estate consists of property that is liquidated for the purpose of paying creditors.  So, in the case of farmers filing a bankruptcy petition under Chapter 12, the farm assets are property of the estate.  And according to Section 541(a)(6) of the Bankruptcy Code, the proceeds from the sales of those assets are also property of the estate.

So, the situation farmers faced was where the IRS held a large priority claim against the bankruptcy estate.  Let's talk a minute about claims against the estate, because this helps to understand how we got to where we are today.  In the situation I'm discussing, we're dealing with a claim that is based on taxes owed.   The Bankruptcy Code says that taxes incurred by the estate are administrative expenses.  An administrative expense essentially receives top priority when determining who gets paid what.

Thus, the effect this had was that the IRS, with its priority claim, could object to any reorganization plan that didn't provide for full payment of its tax claim.  The IRS essentially held veto authority over the farmer's plan confirmation.  In some instances, then, a farmer who sought to sell a portion of his farm to reorganize, pay creditors and become profitable again was prohibited completely from doing so.

After learning of this problem, I started working on a way to fix it.  Simply put, I wanted to make sure that family farmers in a Chapter 12 case could, in fact, sell portions of their farms to effectively reorganize, without the capital gains taxes jeopardizing the reorganization.  The very purpose of Chapter 12 and bankruptcy in general is to allow for a fresh start.  Unfortunately, this wasn't happening.

In 1999 I introduced the "Safeguarding America's Farms Entering the Year 2000 Act."  This bill, among other things, sought to fix the capital gains tax issue.  When I introduced this bill, I said that it would "help[] farmers to reorganize by keeping tax collectors at bay."  I also explained that:

"Under current law, farmers often face a crushing tax liability if they need to sell livestock or land in order to reorganize their business affairs. . . High taxes have caused farmers to lose their farms.  Under the Bankruptcy Code, the IRS must be paid in full for any tax liabilities generated during a bankruptcy reorganization.  If the farmer can't pay the IRS in full, then he can't keep his farm.  This isn't sound policy.  Why should the IRS be allowed to veto a farmer's reorganization plan?"

The language I proposed ultimately was enacted in the 2005 Bankruptcy Reform law.    Since the Bankruptcy Code, courts and the IRS treated the tax liability as an administrative expense, the new provision created a very narrow exception.  Basically, only in a Chapter 12 case, if a farmer sold farm land that resulted in a capitals gain liability, then the IRS's claim would not receive priority status.

Instead, the government would have an unsecured claim, which means they may get paid something, but not necessarily the entire amount.  Also, the IRS would no longer be able to veto a plan's confirmation.  Thus, the farmer debtor would be allowed to try and reorganize.

Now, from a bankruptcy point of view, this approach makes complete sense.  As I've discussed already, filing a petition creates a bankruptcy estate.  The bankruptcy estate then sells the land, post-petition, and that results in capital gains that are owed to the IRS.  These taxes, incurred by the estate post-petition, are administrative expenses, which receive priority status.  So, my language, enacted into law in 2005, stripped the priority claims owed to the government, in this very specific instance, and made them general unsecured claims.

However, since passage of this provision, the IRS has made an about face.  The government now argues, despite the way it treated this situation for all these years, that the tax liability created is the responsibility of the individual and not the bankruptcy estate.  Yet, the entire reason we created this new provision was because of the way the IRS treated the tax liability.

The IRS's new position has been argued in federal court and has received mixed results.  So now  there's a dispute whether my provision accomplishes what it was designed to do.  A 2009 Eighth Circuit case, Knudsen v. Internal Revenue Service, held the provision applies to the post-petition sale of farm assets, which is what we're discussing here.  Specifically, the Eighth Circuit rejected the IRS's position that the Internal Revenue Code does not recognize a separate taxable entity being created when a debtor files a Chapter 12 petition.

Put another way, the IRS is claiming the individual debtor is responsible for the tax liability that arises out of the bankruptcy estate's actions.    The Eighth Circuit disagreed and said there's now an exception preventing the IRS from having a priority claim for the capital gains.

But in a Ninth Circuit case, the court there held that there was no exception for post-petition capital gains.  In Hall v. United States, now before the Supreme Court, the Ninth Circuit said the Halls were responsible for the capital gains taxes from selling part of their farm during bankruptcy. This holding means that my provision didn't create a narrow exception, even though that's what was intended.

Unfortunately, the IRS, under the Obama administration, is taking a position today that is anti-farmer and the exact opposite of what it said six years ago.

This about-face came only after we made the change in the law, and it became clear that in very narrow circumstances the IRS would lose its priority position.  I respect the IRS's interest in pursuing tax dollars, but it exhibited a lot of chutzpah in taking this position. Our policy reasons for this new exception were simple.  The farmers didn't have enough money to pay everyone.  We decided that it would be better to let them sell some assets, which would generate cash and help them to reorganize and pay their creditors.  In making this decision, we realized that someone would have to make a sacrifice.  We decided to give the farmers a break from government taxes in a very narrow set of circumstances.  Now, though, the government is trying to figure out a way to jump back ahead of other creditors and get more money.

And these creditors that the IRS is trying to break in front of are small businesses, suppliers and small, local banks that extend credit and supplies to farmers.  This is not what we expected would happen when we passed the 2005 Bankruptcy law.

This is an important issue and an important case that the Supreme Court will decide in the coming months.  The Supreme Court will decide whether this provision accomplishes my goal, which I've stated.  I look forward to seeing how the case is resolved.  Rest assured that I'll work to ensure that this policy of protecting family farmers is followed as that was our clear intent in having this law enacted.  Chapter 12 has proven successful as a leverage tool for farmers and their lenders.  It helps the farmer and the banker sit down and work out alternatives for debt repayment.

Should the Court rule that the Internal Revenue Code is inconsistent with the Bankruptcy Code, and rule against my intent as the author, I will work to remedy this inconsistency.

 

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During his weekly video address, Senator Chuck Grassley discusses revelations made during the Senate Agriculture Committee hearing regarding the MF Global collapse in which up to $1.2 billion in customer funds was lost - including money from Iowa farmers and brokers.

Click here for audio.

Here is the text of the address:

This week's oversight hearing in the Senate Agriculture Committee on the MF Global collapse yielded some revelations on what happened and who knew what when.

An executive of a financial exchange that oversees MF Global testified that the former head of the firm may have known the firm was using customer funds to make a $175 million loan to a European affiliate.  This statement from the head of the CME Group struck another senator on the Agriculture Committee as a "bomb."

It strikes me as a bombshell, too, because just minutes before, Mr. Jon Corzine continued to express his lack of understanding of how MF Global lost up to $1.2 billion in customer funds - including money from Iowa farmers and brokers.

The revelation wasn't in any prepared testimony.  It came in response to senators' questions.

It goes to show that congressional oversight yields results.

Those responsible can and should be brought to account, whether it's firms playing fast and loose with customer money in violation of the law or the regulators who are supposed to stop malfeasance.

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WASHINGTON - Senator Chuck Grassley has asked the Obama administration to appeal a World Trade Organization panel decision that, while validating the U.S.'s authority to have Country Of Origin Labeling for meat products, strikes down the Country of Origin Labeling regulations which implement the law.  Grassley joined 18 senators to send a letter to Department of Agriculture Secretary Tom Vilsack and U.S. Trade Representative Ron Kirk.

"Family farmers take pride in the fact that the crops they harvest make it to dinner tables around the world.  People want to know where the food on their tables comes from, and makes Country of Origin Labeling a no-brainer," Grassley said.  "Nearly all products sold in the United States show where the product was made.  In fact, other countries label where their meat originated.  It's completely legitimate for us to show if the meat we buy originated in the United States."

The senators wrote in their letter, "We request that your agencies take appropriate actions to appeal the DSP's ruling and to work to ensure that our COOL program both meets our international trade obligations while continuing to provide such information to consumers."

From here, the panel decision will either be adopted by the WTO Dispute Settlement Body or the decision can be appealed to the WTO Appellate Body.

Grassley joined senators Tim Johnson of South Dakota, Mike Enzi and John Barrasso of Wyoming, Sherrod Brown of Ohio, Jon Tester of Montana, Carl Levin of Michigan, Dianne Feinstein of California, Tom Udall of New Mexico, Ron Wyden and Jeff Merkley of Oregon, Kent Conrad and John Hoeven of North Dakota, Claire McCaskill of Missouri, Mary Landrieu of Louisiana, Michael Bennet of Colorado, Tom Harkin of Iowa, Amy Klobuchar of Minnesota, and John Thune of South Dakota in signing the letter.

Here's a copy of the text of the letter.  A signed copy can be found here.

November 14, 2011

 

Secretary Tom Vilsack                        Ambassador Ron Kirk

U.S. Department of Agriculture                    Office of the U.S. Trade Representative

1400 Independence Ave., SW                             600 17th Street, NW

Washington, DC 20250                          Washington, DC 20508

 

Dear Secretary Vilsack and Ambassador Kirk:

 

We write regarding the November 18, 2011, World Trade Organization (WTO) Dispute Settlement Panel (DSP) finding affirming arguments made by Canada and Mexico over the implementation of the United States Country of Origin Labeling (COOL) law.  The DSP validated the statutory authority for the United States to require such labeling; however, the panel also found that the manner in which the program was implemented treats cattle and hogs from those countries less favorably than U.S.-origin livestock.  While we are pleased that the DSP affirmed our right to require such labeling, we are concerned about the impact that the DSP's ruling will have on our ability to continue providing such information to consumers.

 

As you are aware, included in the Food, Conservation, and Energy Act of 2008 (Farm Bill) was a common sense plan for implementing a food labeling program to provide consumers with information about the origins of the food they purchase.  It was the intention of Congress in developing this provision that such labeling would be nondiscriminatory in its treatment of imported products by requiring the labeling of both domestic as well as imported products.

 

With that goal in mind, we appreciate the thoughtful rulemaking process undertaken by the Agricultural Marketing Service (AMS) and the Food Safety Inspection Service (FSIS) of USDA in developing the rule implementing COOL.  While we believe that improvements should have been made to the final rule, we believe that it appropriately establishes a labeling system which provides important and useful information to consumers while not placing an undue burden on the industry.  Additionally, we believe that the labeling system continues to provide the same opportunity for imported livestock to compete in the domestic marketplace as was the case prior to USDA's implementation of COOL.

 

We appreciate the work you have done in defending both the COOL statute and its implementation before the WTO's dispute settlement proceedings.  As you know, many of our major trading partners, including Canada and Mexico, themselves impose their own country of origin labeling requirements for imported meats.  As such, it is clear that it is within our authority under our WTO obligations to implement such a program.

 

We request that your agencies take appropriate actions to appeal the DSP's ruling and to work to ensure that our COOL program both meets our international trade obligations while continuing to provide such information to consumers.  We appreciate your attention to this matter, and we look forward to working with you moving forward.

Thursday, December 15, 2011

Sen. Chuck Grassley of Iowa is the author of legislation pending before the Senate to ban the chemicals used to make the dangerous drug known as "K2" or "Spice." As Judiciary Committee Ranking Member, Grassley advanced the legislation, named for a young Iowa man who took his own life after using the drug.  A fellow senator is objecting to Senate consideration of the legislation.  Grassley made the following comment on the legislation.

"A new survey out this week showed one in nine high school seniors reported using synthetic drugs last year.  That's terrible news.  These drugs are toxic and dangerous.  They caused a young Iowan to take his life.  Other deaths around the country are directly linked to synthetic drugs.  Their availability at the local mall or online does not make them safe.  Just because you can buy something in a shiny package with a cute name does not mean safety is assured.  Cynical manufacturers and sellers peddle these products either not knowing or not caring about their content or effects.

"The federal Drug Enforcement Administration has banned some of the chemicals used to make these drugs, but the ban is limited and temporary.  Congress needs to act to impose a permanent ban.  State bans aren't enough.  What's passed in one state might be different than what's passed in another state, so kids can go across the river to another state to find the drugs.  Many of the chemicals in these drugs are imported, especially from China.  States are very limited in capturing the drugs at U.S. ports of entry.

"One argument against a federal ban is that manufacturers constantly come up with new compounds to skirt the ban.  My colleagues and I have worked with the Justice Department and the Drug Enforcement Administration to broaden the language to capture more than 400 compounds that could possibly be created from the ones currently identified.  Although more compounds could be created in the future, the Controlled Substances Act allows for the prosecution of analogs to federally banned drugs, which can help land more prosecutions. The bill also increases the length of time the Drug Enforcement Administration has to temporarily ban any forthcoming dangerous drugs, including synthetics. This will be an effective tool against future compounds.

"Parents want this legislation.  Law enforcement wants this legislation.  Poison control centers want this legislation.  There's no compelling reason against it and every reason for it."

More information on Grassley's legislation is available here.

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Wednesday, December 14, 2011

U.S. Senator Chuck Grassley today released the following statement on the one-year anniversary of the shooting of U.S. Border Patrol Agent Brian Terry.  Agent Terry later died from the gunshot.  Guns found at the scene of the crime were part of an illegal gunwalking program initiated by the federal government called Fast and Furious.  Grassley has been investigating the program for nearly one year after courageous whistleblowers came forward to reveal the disastrous strategy.  Grassley has three goals in his investigation: First to get answers for the Terry family who have been left in the dark since the murder, second, to find the highest ranking official in the federal government who authorized the program and hold that person accountable, and third, to ensure a program like Fast and Furious never happens again.

Here is Grassley's comment.

"One year ago today U.S. Border Patrol Agent Brian Terry was shot in a gun fight along the U.S.-Mexico border.  Since his death, Agent Terry's family has tried to get information from the administration, but the Departments of Homeland Security and Justice have failed to adequately explain to them how our government allowed guns to fall into the hands of drug cartels.  Since last January when courageous whistleblowers came forward and alerted me to the disastrous policy, known as Fast and Furious, I've worked to help get that information for the Terry family.  But, the administration has stonewalled and slow-walked any efforts Chairman Issa and I have made to pry information out of the Justice Department.  We'll get to the bottom of what led to that sad day one year ago when one of our own was killed because of an ill-advised gunwalking policy concocted by the federal government.  The Terry family deserves no less than a full accounting of how this all happened sooner rather than later."

Prepared Statement of Senator Chuck Grassley of Iowa

Ranking Member, U.S. Senate Committee on the Judiciary

FBI Oversight Hearing

Wednesday, December 14, 2011

Chairman Leahy, thank you for calling this oversight hearing today.  It has been five months since Congress passed and President Obama signed into law an unprecedented two-year extension of Director Mueller's term as Director of the Federal Bureau of Investigation (FBI).  Given the historical problems with the FBI amassing too much power, the President's request to extend Director Mueller's term for an additional two years, breaking from over thirty-five years of practice limiting the Director to a ten-year term, was not a decision I took lightly.  Ultimately, given the President's failure to nominate a replacement in a timely and responsible manner, I reluctantly agreed to the request provided we built a historic record that showed modification of the Director's term was a one-time event.

I'm pleased that Chairman Leahy and members of the committee agreed with me and moved the extension through regular order including a hearing on the legislation, an executive mark-up of the legislation, floor consideration of the legislation, a new nomination from the President, along with a final confirmation vote.  This process sets the historical record that extending Director Mueller's term was not a fly-by-night decision.  It also puts the President on notice to begin the process of selecting and nominating a new FBI Director earlier than the last attempt.  Another extension will not occur.  So, it would be irresponsible not to begin planning sooner rather than later for Director Mueller's inevitable exit.

That said, I want to welcome Director Mueller here today.  Director Mueller's tenure as FBI Director has been a good one and his dedication and reputation were significant factors in his 100-0 confirmation vote this past July.  I'm sure when his two-year extension runs out he'll be ready for some much needed downtime and will look forward to transitioning the office to his successor.

With regard to policy matters, there are a number of topics I intend to discuss with the Director.  First, I want to discuss a perpetual problem at the FBI, whistleblower protection.  I have raised this issue with the Director repeatedly during his tenure, but it continues to plague the FBI.  Director Mueller has repeatedly assured me that he will not tolerate retaliation of any whistleblowing at the FBI.  Despite these assurances, two particular whistleblower cases have been dragging on for years.  These cases are largely fueled by the FBI's desire to continually appeal rulings and findings of wrongdoing by FBI supervisors.

For example, FBI Agent Jane Turner filed a whistleblower complaint in 2002 when she discovered that FBI agents were removing items from Ground Zero following 9/11.  The agents were collecting items from the 9/11 crime scene as personal memorabilia.  She faced retaliation for raising concerns about these agents and her case has been stuck in administrative limbo at the Justice Department for over nine years.  This is despite the fact she won a jury trial in Federal District Court where the FBI was ordered to pay nearly half a million dollars in damages, in addition to a Justice Department administrative ruling substantiating her claims of retaliation.  Even though she has won twice, the FBI recently appealed the case to the Deputy Attorney General who remanded it for further proceedings.  Nine years is far too long for any case to be resolved?especially a whistleblower case.

In another case, that of Robert Kobus, a 30-year non-agent employee of the FBI who disclosed time and attendance fraud, the case has languished for over 5 years.  This case is similar in that the Inspector General issued a 70 page investigative report detailing the retaliation that Mr. Kobus faced?including being reassigned to a vacant floor at a New York FBI Field Office.  Again, the FBI has continued to appeal this case despite clear findings of retaliation.

I wrote to Attorney General Holder last month about these cases pointing out statements made by the Attorney General and Deputy Attorney General to support whistleblowers.  Those statements are similar to assurances given by Director Mueller.  But, like nearly all my inquiries on these cases, the Attorney General's response from his Assistant Attorney General for Legislative Affairs simply provided me a recitation of the appeals process for FBI whistleblowers.  Actions speak louder than words.  And if the Attorney General, Deputy Attorney General, and FBI Director truly wish to help whistleblowers, they have the power to end the years of appeals and accept the findings issued by the Inspector General and Office of Attorney Recruitment and Management.  I intend to ask the Director why he continues to allow the FBI to file appeal after appeal despite clear findings of retaliation.  He has the power to end this cycle and show whistleblowers that the FBI and Department of Justice take their complaints seriously.

Anthrax Investigation (Amerithrax):

I also want to discuss some issues that have recently arisen as follow-up to the FBI's closing of the Amerithrax investigation.  Specifically, the Justice Department recently settled a wrongful death lawsuit in Florida for $2.5 million.  That suit was filed by the family of an editor who died as a result of the 2001 anthrax attacks.  The lawsuit raised questions in the press given potentially conflicting statements made by the Justice Department that seemed to cast doubt on Dr. Ivins' ability to actually manufacture the Anthrax.  Additionally, in subsequent depositions of Dr. Ivins' coworkers, statements were made calling into question Dr. Ivins' ability to produce the anthrax used in the attacks given his lack of access to necessary equipment.  Ultimately, the department filed a supplemental filing correcting statements that seemed to cast doubt upon the FBI's case, but did not seek to refute the depositions of Dr. Ivins' coworkers.

I wrote to the Attorney General and the FBI Director in August asking how the department's filing and the depositions could be squared against the FBI's contention that Dr. Ivins was the sole assailant.  In the response, the Justice Department argued that the "issue raised by the United States in its motion did not pertain to whether Dr. Ivins was responsible for the anthrax attacks or whether he could have created the anthrax powder in his laboratory."  The department instead argued, "The issue raised by our motion is whether the Army failed to properly oversee and supervise operations at the United States Army Medical Institute for Infectious Disease (USAMRIID) such that the agency was negligent in failing to anticipate and prevent the theft of liquid anthrax and its conversion into powder for use in the attacks."  With regard to the depositions, the department argued, "doubts of [Dr. Ivins'] colleagues only underscore [DOJ's] view that Dr. Ivins' actions were not foreseeable under Florida tort law."  While these statements attempt to thread the needle about the government's liability, the fact remains that the government ended up paying $2.5 million to settle the case and cast a further cloud on the FBI's case that Dr. Ivins' was the sole perpetrator.

Access to Line Agents and Attorneys:

The Anthrax investigation and the department's response to it have also raised additional questions.  Notably, in responding to press accounts questioning the government's case against Dr. Ivins, the FBI and department both allowed line agents and attorneys to be interviewed on national television.  In allowing these FBI agents and Assistant U.S. Attorney's to conduct detailed interviews with the press, the FBI and department have provided greater access to the press than they have Congress.  Both the department and FBI routinely argue that line agents and attorneys are prohibited from talking to members of Congress.  Yet, you can turn on a television and see in-depth interviews with these same agents and attorneys that members of Congress would like to interview.  This has been a very important part of my investigation of the department's failed handling of the ATF's Operation Fast & Furious.  I want to know from Director Mueller why he allows line agents to provide detailed interviews to the press on national television, but repeatedly refuses to let Congress and their staff interview line agents and attorneys.

Anthrax Investigation Leaks:

The Anthrax investigation also spurned an unfortunate situation where someone in the Justice Department leaked sensitive information regarding the investigation to the press.  Those leaks involved alerting the media that Dr. Steven Hatfill was under investigation and that search warrants were going to be executed on his residence.  Ultimately, Dr. Hatfill was exonerated of any wrongdoing in the case, and the Department of Justice settled a civil lawsuit filed by Dr. Hatfill based upon the Department's violation of the Privacy Act.  This settlement cost the American taxpayers nearly $6 million and occurred based upon the department's leak of information to the press.  I have repeatedly asked for a status update on the investigation into the leak to determine who the source was.

In response to my August 31, 2011, letter, the department stated, "After an extensive investigation, career prosecutors concluded that, based upon the Principles of Federal Prosecution, criminal charges were not appropriate in this matter."  This is a stunning development and only adds to concerns I have that leakers at the Justice Department are held to a different standard than federal employees outside the department.  Now that it appears that the investigation is over, I want to know from Director Mueller who the leakers were and whether they faced any administrative sanctions for the leaks.  The actions of these individuals put federal taxpayers on the hook for a $6 million settlement; they need to be held accountable.

Another area of concern is the FBI's relationship with informants.  The bureau's actions regarding Whitey Bulger were a black eye for the FBI and recent press reports from Boston indicate that a similarly cozy relationship may have developed between alleged mobster Mark Rossetti and the Boston FBI.  I wrote Director Mueller a letter on Mr. Rossetti on October 17th and I look forward to asking him more questions on this matter today.

I would also like to note, that today is the one-year anniversary of the tragic shooting of Border Patrol Agent Brian Terry.  My investigation into the ATF's failed Operation Fast & Furious continues.  I sent Director Mueller a letter dated October 20, 2011, asking some questions about the FBI's investigation of the murder of Agent Terry.  I have not yet received a response to that letter, but I have talked with Director Mueller about the case.  I want a commitment from Director Mueller that my letter will be answered in writing.  The Terry Family deserves answers about Agent Terry's murder and answering my letter is another step toward getting those answers.

Time permitting, I'd also like to ask the director about his involvement in the drafting of a memorandum that was reported in the press regarding the targeted killing of Anwar al-Awlaqi, the potential transfer of known enemy combatant Ali Mussa Daqduq from U.S. military custody to Iraq, FBI involvement in investigating mortgage fraud at Countrywide Financial, conflicts between the FBI and agents of the Department of Homeland Security Inspector General investigating corruption among DHS officers at the border, and about the recent Government Accountability Office report on the status of the FBI's headquarters in Washington, D.C.

There is a lot to cover so I look forward to Director Mueller's testimony and his responses to these important matters.  Thank you.

 

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