Wyatt Employment Law Report

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Secretary of Labor-Designate Thomas Perez Faces Questioning at His Confirmation Hearing Over Deal Made in Whistleblower Case

By Edwin S. Hopson

On April 18, 2013, the U.S. Senate Health, Education, Labor and Pensions Committee held a hearing on the nomination of Thomas Perez to be the U.S. Secretary of Labor.  The ranking Republican on the committee, Senator Lamar Alexander (R-Tenn.), questioned Perez regarding his role in the Justice Department’s deciding not to intervene in a whistleblower case pending in Minnesota during the time Perez has been in charge of the Civil Rights Division at the Department of Justice.  Under the federal False Claims Act, if a recipient of federal funds misuses or misappropriates federal funds, it can be prosecuted under that law and any person (relator) who pursues that case can receive a portion of the recovery.  At the outset of such cases, the federal government is permitted time to consider whether it wants to intervene as a party to the case.

Senator Alexander asked Perez if there had been an agreement with city officials in St. Paul, Minnesota that they would not appeal a specific case to the Supreme Court that could have resulted in a decision unfavorable to the Civil Rights Division’s position on discrimination law in exchange for not intervening in the pending whistleblower case against St. Paul. Perez indicated that while he had requested the St. Paul officials to not appeal the discrimination case, it was not his decision as to whether the government would intervene in a whistleblower case. Perez testified that that was a decision to be made by a colleague—the head of the Justice Department’s Civil Division.  Perez did indicate that such an agreement was ultimately reached, however, but that it had been initially proposed by St. Paul officials and the decision not to intervene had been made by the Civil Division not his Division . Perez further testified that it was his understanding that the Civil Division had concluded that the St. Paul case lacked merit.

Alexander contended that by not intervening in the whistleblower case in Minnesota, the federal government had in fact missed out on a $200,000,000 recovery that ultimately resulted in the St. Paul False Claims Act litigation.

During the hearing, Alexander stated:

“Here is the way it looks to me: You are in one division of the Department of Justice. You see St. Paul in the Supreme Court with a case that you are afraid would produce the wrong result. To me it is an extraordinary thing that you would then become involved with the city of St. Paul – with another division of the Department of Justice and with the Department of Housing and Urban Development which had originally recommended that the whistleblower case be taken by the Department of Justice. And the end result after you’re involved with all this is that the Department of Justice declines to become involved in the whistleblower case.  We know that 90 percent of the time, when the Justice Department does get involved, the case succeeds. So it declines to become involved, the case doesn’t collect the money. St. Paul agrees to withdraw the lawsuit that might produce the result that you don’t like. That seems to me to be an extraordinary amount of wheeling and dealing outside the normal responsibilities of the Assistant Attorney General for Civil Rights.  It seems you have a duty to the government to collect the money [owed to taxpayers], a duty to protect the whistleblower who is left hanging in the wind, and at the same time it seems to me that you are manipulating the legal process to try to get the result you want in the Supreme Court in a way that seems inappropriate for the Assistant Attorney General of the US.”

Alexander also called on Perez to provide emails and other documents for which there is an outstanding subpoena.  Additionally, Alexander has requested copies of transcribed interviews obtained during the Department of Justice Inspector General’s earlier investigation of these allegations.