Grassley Questions Attorney General on Ketek, FBI, Boeing Settlement

WASHINGTON – Sen. Chuck Grassley, chairman of the Committee on Finance, and a senior
member of the Judiciary Committee, at a Judiciary Committee hearing today asked Attorney General
Alberto Gonzales about the government’s cooperation in Grassley’s investigation of the Ketek
antibiotic, the FBI’s treatment of a senior Arab-American agent, and whether the Justice Department
should do a better job overseeing the tax deductibility of government settlements as in the Boeing
case. The text of Grassley’s questions and his opening statement follow. The relevant attachments
are posted at finance.senate.gov.

Question of U.S. Sen. Chuck Grassley for Attorney General Alberto Gonzales
re. Advice from the Department of Justice to the Department of Health & Human Services
Tuesday, July 18, 2006

In recent months, the Department of Health and Human Services has worked hand-in-hand
with the Department of Justice to obstruct my Committee's investigation of an antibiotic called
Ketek. In a letter to the Finance Committee, Assistant Secretary Vince Ventigmilia stated that HHS
consulted with the Justice Department regarding executive branch assertions of confidentiality. The
Assistant Secretary broadly referred to "long-standing policy" and "governing principles" as a basis
for denying access to documents and employees.

Because I know that these claims are not correct, I asked the Congressional Research Service
to look into these so-called policies and governing principles. As I anticipated, CRS told me that
there is "no legal basis" for these executive assertions of confidentiality. What HHS and Justice are
doing flies in the face of numerous historical precedents and legal rulings. In fact the CRS memo
which I respectfully request be placed into the record, identifies case after case where Congressional
Committees have legitimately obtained access to information about ongoing investigations, including
prosecutorial documents, and conducted interviews with law enforcement officials, including line
FBI agents and Assistant United States Attorneys.

It seems to me that the Justice Department's consultation with the Department of Health and
Human Services is part of a concerted effort to obstruct legitimate congressional oversight into
government misconduct, and what is bothering me is a fundamental disregard for constitutional
mandates, long-established historical precedents and bed rock legal rulings. Frankly, I am angered
by these obstructive policies and principles:

Is it not true that Congressional Committees and their staff members have, in the past, had
access to deliberative prosecutorial documents at the DOJ? Is it not true that Congressional
Committees and their staff members have, in the past, had access to line attorneys, line FBI agents,
Assistant United States Attorneys and investigators in the performance of its oversight
responsibilities.

Aside from matters of executive privilege and national security, I want to know the legal
justification, not policies and principles, for denying access to deliberative prosecutorial documents
and for obstructing interviews with line agents in the performance of my oversight responsibilities
to examine allegations of government misconduct. Can I have your written response by the end of
this week?

Question of U.S. Sen. Chuck Grassley for Attorney General Alberto Gonzales
re. the Office of Professional Responsibility on Bassem Youssef
Tuesday, July 18, 2006

The Department's Office of Professional Responsibility recently found that there was a
reasonable basis to believe that the FBI retaliated against its highest ranking Arab American agent
for raising concerns about being frozen out of counterterrorism assignments after 9/11. After the
agent, Bassem Youssef expressed his concerns to Director Mueller, the FBI halted its plan to transfer
him to the FBI's primary counterterrorism section.

While I am glad that DOJ/OPR has recommended that Youssef's transfer be implemented
as it should have been four years ago, I am concerned that the person responsible for halting his
transfer will not be held accountable. As I understand the Department's whistleblower regulations,
OPR's finding will be reviewed by another office, but there will not necessarily be any further
investigation to determine who is responsible for the retaliation.

How will retaliation against whistleblowers like this ever stop if your internal process doesn't
identify who is responsible and discipline them? Will you help me determine who ordered that his
transfer be halted and why? Also, would you commit to reviewing the Department's regulations to
make sure that they there is a process for identifying and punishing those who retaliate against
whistleblowers?

Question of U.S. Sen. Chuck Grassley for Attorney General Alberto Gonzales
re. the Boeing settlement with the government over hiring and contracting manipulation
Tuesday, July 18, 2006

I want to speak to you about the Boeing settlement. I am very troubled that your letter makes
clear that DoJ was completely blind as to the real amount of the penalty, that is, the after-tax amount.
To have a situation where the federal government is negotiating a settlement without understanding
what the real settlement amount will be, the after-tax amount, is embarrassing.

Not understanding the after-tax amount and its implications means that the $615 million
settlement with Boeing could be 35 percent less than advertised. For DoJ negotiators to not realize
that they are giving a 35 percent discount to the settlement is of great concern.

I can assure you that the lawyers on the other side of the table in these types of negotiations
with the government are very aware of the after-tax amount of these settlements. Of course they are
aware of the actual amounts. It means millions of dollars to their client. So we have one side, the
government, that has no idea about the after-amount of a settlement, and the other side, the business
being fully aware of the amount. That is not the way to negotiate a settlement in the best interests
of the public.

It is actually worse that DoJ doesn't even know what the tax treatment is of the Boeing
settlement. It tells me that DoJ lawyers gave away 35 percent of the store without even knowing it.
And let me make sure you understand one matter, the tax law in this area is quite clear: a fine or
penalty is not deductible. If the government clearly states it is a fine or penalty, it is not deductible.

It is when the lawyers start getting out their sharp pencils to find the gray areas that the trouble starts.
But if DoJ wants to make certain that a settlement is not deductible the law gives clear guidance on
how that can be accomplished.

Do you believe this is really how the government should operate? That government lawyers
should operate in the dark not knowing whether they are giving away 35 percent of value to the other
side? Don't you think your lawyers should understand the after-tax consequences of the settlement
so they have a full and accurate picture?

Prepared Opening Statement of U.S. Sen. Chuck Grassley
re. Senate Committee on the Judiciary Hearing on Oversight of the Department of Justice
Tuesday, July 18, 2006

Thank you, Mr. Chairman, for holding this hearing on Justice Department oversight. I look
forward to hearing the testimony of Attorney General Gonzales. While I share a number of concerns
that have been identified by Chairman Specter, I also have several other areas of interest that I would
like Attorney General Gonzales to address.

For example, I'm concerned about the tax deductibility of government settlements and the
Justice Department's policy regarding these settlements. Recently, I was joined by Senators McCain
and Warner in asking the Justice Department about whether The Boeing Company would be able
to deduct any of its $615 million settlement with the government over hiring and contracting
manipulation. I was extremely troubled with the inadequacy of the Justice Department's response
to our concerns. It's plain to me that the Justice Department doesn't understand that there are serious
tax implications to these settlements which undermine the mission of another agency -- the IRS --
and then end up being a burden to the American taxpayer. I plan on questioning Attorney General
Gonzales more about the basis for the Department's policy.

I also have serious concerns about the way the Justice Department reacts and how it advises
other departments to react to Congressional oversight. Our attempts to gather information from the
Executive Branch when we investigate allegations of government misconduct are too often met with
delays, excuses and arguments. We frequently hear the same objections time and time again, despite
their lack of any basis in law, history or common sense. The Department's "line attorney" or "line
agent" policy frequently is cited as a reason to allow only senior level policy makers to speak to
Congress, preventing us from gathering information from front-line government employees who
have in-depth knowledge of the facts and problems we are trying to look into. This policy is
selectively asserted as a way to deflect certain inquiries, but ignored whenever the Executive Branch
decides that allowing such employees to speak to Congress appears to be in its best interests. We
have been denied access to files from both the Justice Department's and FBI's Office of Professional
Responsibility, purportedly to protect the privacy of government employees who have been
investigated by those offices. However, Congress often needs the information in these OPR files to
evaluate the credibility of whistleblowers who come to us with information about waste, fraud and
abuse, as well as to assess whether they have been retaliated against for such disclosures. That is one
of the reasons that there is an exemption in the Privacy Act for Congressional requests.

For instance, the Judiciary Committee was recently denied OPR documents related to
allegations of misconduct in the investigation of the death of Jonathan Luna, an Assistant U.S.
Attorney in Baltimore who was found dead under mysterious circumstances in the Chairman's home
state of Pennsylvania. Three FBI employees were accused of turning the Luna investigation into a
personal vendetta against a fellow FBI agent, who complained about an overly personal, aggressive
and irrelevant interrogation as well as an unauthorized search of her computer. The FBI employees
accused of misconduct were investigated by FBI/OPR, but only after intervention by the Inspector
General prevented FBI management from sweeping the incident under the rug. One of the FBI
employees accused of misconduct has since been promoted to a senior counterterrorism position.
We requested documents regarding this matter from the FBI, but have been provided only a briefing.
Even though the head of OPR indicated that she had no objection to providing the Committee a copy
of her final report in this matter, neither that report, nor the other documents we requested have been
turned over.

This resistance to Congressional oversight has spread to other agencies through the advice
that the Justice Department provides to them. In my capacity as Chairman of the Finance
Committee, I am frequently conducting inquiries at HHS and FDA that are stalled, delayed, or
frustrated by these policies. I have some questions for the Attorney General about those today, and
I look forward to hearing his responses.

On a brighter note, I am pleased that when it comes to the Justice Department's oversight of
the FBI, there is some good news. Last February, the Judiciary Committee asked the Inspector
General to investigate allegations that the FBI's highest-ranking Arab American agent, Bassem
Youssef, had been denied a transfer to the International Terrorist Operations Section (ITOS) in
retaliation for raising concerns to the Director that his expertise and talents were being underused
by the FBI. The Inspector General referred the case to DOJ/OPR, which investigated and found that
there was a reasonable basis to believe that Youssef had been the victim of whistleblower retaliation.
Moreover, DOJ/OPR recommended that Youssef be transferred to ITOS, as the FBI had originally
planned to do four years ago.

I'm glad to see the Department's internal process working to provide some vindication to an
FBI whistleblower. This preliminary finding will now be reviewed by another DOJ office for final
action. However, I am concerned that the process may still not be as effective as it should be.
Specifically, even if Youssef is ultimately found to be a victim of retaliation and transferred to ITOS,
the person responsible for keeping him out of that position for four years may escape accountability
because of the way the Department's whistleblower regulations work. DOJ/OPR did not identify
which FBI official made the retaliatory decision to stop Youssef's transfer, and without further
fact-finding we may never know who did it. No matter how many senior officials claim that
whistleblower retaliation won't be tolerated, there is no disincentive as long as retaliators are not
identified and punished. I hope this Committee will schedule future hearings on DOJ and FBI
whistleblower issues, and specifically the cases of Michael German and Bassem Youssef.

There are other issues that I'm interested in, such as drug patent settlements and interchange
fees. I'm pleased that Chairman Specter will be conducting a hearing on interchange fees tomorrow
morning, but I'd also like to know whether the Justice Department sees any antitrust concerns with
these financial practices. I also wanted to express my disappointment with the Justice Department's
position in the recent Schering Plough case before the Supreme Court dealing with drug patent
settlements. Sweetheart deals that delay the entry of low cost drugs in the marketplace not only hurt
consumers, they also threaten the sustainability of federal health care programs, such as Medicare
and Medicaid. The Federal Trade Commission is doing the right thing by going after these kinds of
anti-consumer settlements. I hope that the Justice Department will take a hard look at its position
and decide to assist the FTC in its effort to crack down on anticompetitive activity and to promote
true competition in the prescription drug market.

In the meantime, I look forward to hearing the Attorney General's testimony today and having
this opportunity to ask him about some instances where the Justice Department has stood in the way
of Congress discharging its duty to conduct vigorous oversight of allegations of misconduct in the
Executive Branch, as well as the Justice Department's position regarding the deductibility of
government settlements.

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