The Justice Department decided to forego a fraud case against St. Paul, Minn., that could have netted $180 million for taxpayers in return for city officials dropping an unrelated Supreme Court appeal. Lawmakers are investigating whether it was an inappropriate quid pro quo struck by political appointees over the advice of career attorneys.
The Justice Department agreed earlier this year not to pursue a fraud case against St. Paul, Minn., in exchange for city officials dropping a Supreme Court appeal of a civil rights case, a deal that several Republican lawmakers charge was an inappropriate quid pro quo.
Justice Department officials confirmed the deal was approved by Assistant Attorney General Tom Perez and insisted it was in the best interest of the government. But lawmakers charged career officials inside the department were overruled and they questioned whether the deal served the interests of American taxpayers.
“This quid pro quo arrangement potentially cost U.S. taxpayers over $180 million,” the letter from Sen. Charles Grassley, R-Iowa, House Oversight and Government Reform Chairman Darrell Issa, R-Calif., and other lawmakers charged.
“One of the features of this quid pro quo, distinguishing it from a standard settlement or plea deal, was that it obstructed rather than furthered the ends of justice,” the lawmakers argued, because it “bargained away a valid case of fraud against American taxpayers in order to shield a questionable legal theory from Supreme Court scrutiny in order to keep on using it.
Justice Department spokeswoman Tracy Schmaler dismissed the criticism.
“The resolution reached in these cases was in the best interests of the United States and consistent with the Department’s practice in reaching global settlements,” she said. “The decision was appropriate and made following an examination of the relevant facts, law and policy considerations at issue.”
The deal involved two cases with the city of St. Paul.
City officials in February abruptly abandoned a case before the Supreme Court involving slumlords who had sued the city to prevent it from enforcing its housing code on the grounds that it disproportionately decreased the amount of housing available to minorities, the lawmakers said in their letter.
The city argued that the Fair Housing Act of 1968 prohibits only intentional discrimination, not neutral practices like code enforcement that happen to impact particular groups disproportionately.
The lawmakers, who also included House Judiciary Committee Chairman Lamar Smith, argued that Justice officials were concerned a win by St. Paul in that case would dry up mortgage lending settlements Perez’s team was reaching by suing banks for housing discrimination under a similar legal theory.
To entice St. Paul to drop its case before the justices, Perez agreed his department would refuse to intervene in an unrelated False Claims Act brought by a whistleblower against the city that had the potential to return over $180 million in damages to taxpayers, the lawmakers said.
Career Justice officials last fall had recommended pursuing the fraud case in which the whistleblower alleged the city falsely certified it was using federal funds to create jobs for low income workers of all races, when in fact it was only focused on employing minorities.
The career lawyers had concluded the city’s behavior was “particularly egregious,” the lawmakers said.
The lawmakers are demanding several Justice officials be made available for interviews as they continue to investigate the deal.
Justice officials said Perez consulted ethics officials before striking the deal and that the department's motivation was simply to avoid a Supreme Court ruling that could have caused unintended consequences for civil rights policy.