President Barack Obama’s nominee to head the Department of Labor engaged in a quid pro quo that could have cost taxpayers $200 million and covered up the activity, according to a House Committee on Oversight and Government Reform report released late Sunday.
The committee's report details then-Assistant Attorney General Tom Perez’s involvement in a St. Paul, Minn. settlement that helped preserve the dubious legal doctrine of “disparate impact,” which enables minorities to allege discrimination based upon outcomes, rather than overt discrimination.
“We have found that Mr. Perez inappropriately used a whistleblower as bargaining chip and passed on an opportunity to collect $200 million for taxpayers,” Committee Chairman Darrell Issa (R., Calif.) said in a release. “This occurred as part of a deal he arranged to ensure an ideological pet policy of the Obama Administration would avoid Supreme Court scrutiny.”
Housing providers successfully challenged St. Paul’s aggressive enforcement of disparate impact in Magner v. Gallagher. The Supreme Court agreed to hear the city’s appeal in 2011 and many legal observers questioned whether the doctrine could pass constitutional muster. The committee discovered communications from Perez telling local officials that withdrawing the case was a “top priority” and was looking for “leverage” to pressure the city to do so.
Perez found his leverage in a $200 million federal whistleblower lawsuit against St. Paul called U.S. ex rel. Newell v. City of St. Paul. Perez met with several senior advisers in the Department of Justice’s Civil Rights Division to discuss dismissing the federal suit if the city withdrew the case, according to the committee.
“Civil Rights Division Appellate Section Chief Greg Friel’s notes from the meeting reflect a discussion of the Newell qui tam case,” the report said. “Friel’s notes stated that ‘[Housing and Urban Development] is will[ing] to leverage [the] case to help resolve [the] other case,’ presumably referring to Magner.”
Fredrick Newell, a local minister, blew the whistle on a multi-million-dollar fraud perpetrated by the city in connection to work training in the Housing and Urban Development Act. Newell was appalled by Perez’s political gamesmanship.
“The matters at hand are not just—the ethics of [the Department of Justice] leveraging the … lawsuit to secure the disparate impact regulations, or the treatment of myself as a whistleblower, or the influence of the Supreme Court docket,” Newell said in an interview with the committee. “The way that [Housing and Urban Development] and Justice have used me to further their own agenda is appalling—and that’s putting it mildly.”
The Department of Justice did not immediately return calls for comment.
The committee said not only did Perez arrange for the quid pro quo, he also attempted to cover-up the deal by instructing career Justice Department attorneys “to omit a discussion of Magner in the declination memos that outlined the reasons for the department’s decision to decline intervention in Newell and Ellis, and focus instead only ‘on the merits.’”
“Perez took steps attempting to cover-up his involvement in the quid pro quo and offered numerous misleading statements to investigators that are contradicted by the evidence,” Issa said. “Mr. Perez’s conduct has stained the integrity of the Justice Department and created serious doubt about its commitment to protecting the legal rights of whistleblowers who come forward with legitimate information about abuses of taxpayer funds.”
The report was released as the Senate takes up Perez’s nomination to succeed Hilda Solis as U.S. Secretary of Labor. Sen. Chuck Grassley (R., Iowa) said the report would play a large role in his confirmation hearing.
“Mr. Perez will have a lot of questions to answer this week as the Senate considers his nomination,” Grassley said. “Not only was he the ring leader of the quid pro quo deal that ensured the taxpayer would not be able to recover hundreds of millions of dollars, but he has been misleading and less than forthcoming with our Committees and the U.S. Civil Rights Commission.”