Bloomberg News

Obama Labor Choice Criticized in Republican Report

April 14, 2013

President Barack Obama’s nominee for Secretary of Labor led efforts to arrange a deal that may have cost U.S. taxpayers as much as $200 million, according to congressional Republicans.

Thomas Perez, a Justice Department official, helped arrange a deal where the federal government stayed out of a whistle- blower case in exchange for the withdrawal of a Supreme Court appeal from the city of St. Paul, Minnesota. The appeal was opposed by the Obama administration because it put at risk a key tool for enforcing lending discrimination cases, according to the draft of a report being released today by House and Senate Republican investigators.

“The quid pro quo demonstrated that the Department of Justice, led by Assistant Attorney General Thomas Perez, placed ideology over objectivity and politics over the rule of law,” said the report, which runs more than 60 pages.

In an e-mailed response, Justice Department spokeswoman Dena Iverson said that the briefings, testimony and documents provided by the department to the committees investigating the matter “make clear the department’s decisions in these cases were based on appropriate considerations.”

Republican lawmakers have been probing the deal for more than a year. They reviewed more than 1,500 documents provided to Congress by the Justice Department, Housing and Urban Development Department and the city of St. Paul. Congressional staff also interviewed top officials, including Perez.

Confirmation Hearing

The report comes three days before his April 18 Senate confirmation hearing for the Labor Department position. Republican senators have said they plan to question the nominee on the deal during the hearing.

While the report doesn’t explicitly say Perez broke any laws, it calls into question the intent of his actions and suggest that he may have gone beyond what Justice Department ethics officials rules as permissible. The $200 million loss is what the government might have received from the dropped whistle-blower cases, according to the report.

Senator Charles Grassley, an Iowa Republican and one of the four authors of the report, said on March 18, the day of Perez’s nomination, Perez would “face a lot of tough questions” during the Senate confirmation process. Senator David Vitter, a Louisiana Republican, has already pledged to block Perez’s nomination due to an unrelated matter.

Legislative Issues

House Oversight and Government Reform Committee Chairman Darrell Issa, a California Republican, Judiciary Committee Chairman Bob Goodlatte, a Virginia Republican, and Representative Patrick McHenry, a North Carolina Republican and subcommittee chairman on Issa’s panel, helped draft the report.

If confirmed by the Senate, Perez would replace Hilda Solis, who resigned in January, and would play a prominent part in pushing Obama’s agenda on issues including an immigration law overhaul and raising the nation’s minimum wage to $9 an hour from $7.25.

The Democratic staff of the Oversight panel circulated a 26-page memo to its committee members yesterday, based on its own review of the documents made available as part of the investigation. They called the allegations against Perez unfounded and politically motivated.

Led by Representative Elijah Cummings of Maryland, the Democrats said the documents didn’t show unethical or improper behavior by Perez and instead showed that officials “acted professionally to advance the interests of civil rights and effectively combat the scourge of discrimination in housing.”

Democratic Defense

“The committees have identified no evidence during this investigation that calls into question Mr. Perez’s integrity, professionalism, or effectiveness as assistant attorney general for the civil rights division at the Department of Justice,” the memo said.

Perez, 51, has led the Justice Department’s civil rights division since 2009. In that role, he has helped enforce the administration’s crackdown on lending discrimination. He has embraced the “disparate impact” analysis -- that statistical evidence can prove bias even if there is no provable intent -- for the basis of regulatory lending-discrimination cases against financial institutions.

Supported by civil rights groups and opposed by bank trade groups such as the American Bankers Association, Perez has called the analysis a “linchpin” of civil rights enforcement, according to the report.

Supreme Court

The Supreme Court granted the city of St. Paul’s appeal in a case that may have led the court to strike down the basis for disparate impact. By November 2011, Perez began a process to make a deal with the city in order to have the appeal dropped, according to the report. In doing so, he asked HUD to reconsider its support for a whistle-blower case the city was facing. That helped become a basis for the department’s civil division not to intervene in the case, according to the report.

Perez then began personal negotiations with the city to arrange for the withdrawal of its Supreme Court appeal, according to investigators.

Perez, in an interview with congressional investigators cited in the report, said he encouraged the city to withdraw its appeal because he believed the St. Paul case was “undesirable factual context in which to consider disparate impact.”

In decisions on False Claims Act cases, the Justice Department “has broad discretion to consider legal, factual and policy factors,” said Iverson, the Justice Department spokeswoman.

“The litigation decisions made by the department were in the best interests of the United States and were consistent with the department’s legal, ethical and professional responsibility obligations,” Iverson said.

By February 2012, after a process that included a Perez visit to Minnesota to help secure the deal, the city of St. Paul agreed to withdraw its appeal. The government recoveries from the whistle-blower cases, should they have won, may have totaled as much as $200 million, according to the Republican report.

The Justice Department historically joins about 25 percent of the whistle-blower cases it reviews through the False Claims Act, a law used to sue for fraud against federal government and its programs. The department recovered $3.3 billion in whistle- blower suits in the 2012 fiscal year.

To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net


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