Democrats, GOP spar over Labor nominee's handling of whistle-blower case

Republicans contend that Perez, head of the Justice Department’s Civil Rights Division, made a secret, unethical deal with city officials in St. Paul, Minn., to drop a Supreme Court appeal that would have had a potentially adverse effect on discrimination cases in exchange for the Justice Department's agreement to step away from two whistle-blower cases and forfeit upward of $200 million in damages for the federal government. 

Rep. Trent Franks (R-Ariz.) charged that Perez "manipulated rule of law" and used it as leverage to strike the deal that led to St. Paul agreeing to drop the Supreme Court case that "would have put an end to the use of his unjust legal theory."

He added that Perez ignored internal procedures and that justice for those who needed help in St. Paul was "deliberately denied" and it was a "disgrace that HUD [the Department of Housing and Urban Development] and Justice joined in."

Democrats were quick to jump to Perez's defense arguing that the nominee acted professionally, ethically and in the best interests of the United States in relation to the Frederick Newell whistle-blower case. 

Rep. Jerrold Nadler (D-N.Y.), a member of the House Judiciary Committee, expressed disappointment that Newell has been "dragged into a partisan fight as part of a shameful smear campaign against Perez."

He said disparate impact is a "critical tool to weed out all forms of discrimination, and it has been used by Democrats and Republicans to root out" those types of infractions.  

"At best, it's a policy disagreement, at the worst, partisan politics," he said.  

Perez defended use of the theory of disparate impact in housing and other discrimination cases during his testimony before the Senate Health, Education, Labor and Pensions Committee on April 18. 

The Senate panel is set to vote at 4 p.m. on Wednesday. Perez is expected to have enough support to get out of committee but faces several other hurdles besides questions over these cases. 

House Oversight ranking member Elijah Cummings (D-Md.) said Republican allegations against Perez are "unfounded," and that the problem with the Republicans' theory is "he didn't do anything wrong."

Shelley Slade, a lawyer with Vogel, Slade & Goldstein, who was a witness for the minority, said the outcome of the case reflected the "broader interests of the United States" and the lawyers at Justice acted in a "coordinated fashion" in determining to decline intervening.

"It's not a question of manipulation, it is trying to get to the right result of the government as a whole." 

When looking at the Newell case, she said that her firm would not have taken it because there were too many "litigation risks" and "legal problems." 

She told lawmakers that there wasn't enough evidence from Newell to deem it a whistle-blower case, and thus it would likely not produce the millions in damages that Republicans say were expected. 

Still, Newell and his attorney said they were "encouraged" during initial talks with government officials about their case and "troubled" when the government backed away. 

Republicans asked Newell about documents provided by Justice that showed that, early on, officials had determined that St. Paul had made "egregious" mistakes in providing funding for some low- to very-low income housing programs. 

Newell said that Justice's decision to not intervene likely led to the dismissal of his case by a federal judge. 

Rep. Jim Jordan (R-Ohio), chairman of the House Oversight and Government Reform Subcommittee on Economic Growth, Job Creation and Regulatory Affairs, asked Newell to "hazard a guess" about why Justice declined to take his case.

But Democrats said there was no way for Newell to know why Justice had made the determination. 

Jordan said that Justice's assessment started with "egregious" and wound up as "a close call" after Perez flew up to meet with St. Paul officials. 

"Shazam, everything changes," he said. 

Sen. Charles Grassley (R-Iowa), who testified at the hearing, said he is concerned that the actions by Perez and Justice will hurt efforts to get whistle-blowers to come forward. 

Grassley said Perez circumvented Congress's legislative intent, and that he and Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) had amended the law to avoid these types of outcomes when the original source is not available. 

He said 33 pages of new documents sent to him by Justice on Monday making the case for intervention could be "construed as a cover up" because career attorneys are making the case to take it. 

Meanwhile, Issa is still pushing Perez for more than 1,200 documents, including emails, he argues could violate federal law that doesn't allow government employees to conduct business on personal email. 

Cummings said he is willing to work with the chairman on the issue.