DPC | March 13, 2007

Senate Oversight Highlights Week of March 5, 2007

“It is the proper duty of a representative body to look diligently into every affair of government and to talk much about what it sees. It is meant to be the eyes and the voice, and to embody the wisdom and will of its constituents.…” — Woodrow Wilson

Congress has the Constitutional responsibility to perform oversight of the Executive Branch and matters of public interest. This report summarizes highlights from each week’s Senate oversight hearings. 

 

Tuesday, March 6, 2007: Senate Judiciary Committee

"Preserving Prosecutorial Independence: Is the Department of Justice Politicizing the Hiring and Firing of U.S.Attorneys?"

• Despite early assertions to the contrary, politics, not performance, appears to have been at the heart of the Bush Administration’s firing of U.S. Attorneys.
   
• The U.S. Attorney who prosecuted former Representative Duke Cunningham was fired in the midst of an ongoing investigation into serious public corruption.
   
• Another U.S. Attorney felt pressured to prosecute Democratic politicians in advance of the November election, and believes he was fired because he failed to do so.
   
• Recently fired U.S. Attorneys were threatened with disclosure of damaging information if they spoke to the press or voluntarily testified before Congress. 

 

Tuesday, March 9, 2007: Senate Armed Services Committee

“Senate Armed Services Committee Holds Hearing on Conditions at

WalterReedArmy Hospital”

• General Schoomaker said that the failings at Walter Reed are a metaphor for larger problems in the system. 
   
• Top military officials, including the Assistant Secretary of Defense for Health Affairs and the Surgeon General of the U.S. Army, were unaware of the conditions at Walter Reed.
   
• Lt. General Kiley and General Schoomaker believe that the current military disability system is shortchanging some of our soldiers.

 

Wednesday, March 7, 2007: Senate Appropriations Committee, Subcommittee on Defense
“Hearing on Department of Defense Medical Programs”

• The Bush Administration’s budget cuts and unrealistic estimates impede the military’s ability to care for our troops. 
   
• Senators demanded assurances that soldiers will not be punished for speaking out about substandard medical care. 
   
• The Bush Administration does not have a long-term plan to care for our injured troops.

 

Wednesday, March 7, 2007: Senate Homeland Security and Governmental Affairs Committee, Permanent Subcommittee on Investigations
“Credit Card Practices: Fees, Interest Rates, and Grace Periods”

• Senator Levin called for changes to unfair and abusive credit card practices. 
   
• A credit card executive apologized for policies that trapped customer in a sea of debt.
   
• Credit card companies have changed their practices in response to congressional oversight.

 

Wednesday, March 7, 2007: Senate Committee on Commerce, Science and Education, Subcommittee on Interstate Commerce, Trade and Tourism

“Policy Implications of Pharmaceutical Importation for U.S.Consumers”

·Prescription drug prices continue to rise, and Americans pay more for their drugs than consumers in other countries. 

·Consumers are currently purchasing drugs from outside of the U.S., and existing law does not sufficiently protect them. 

·Senator Dorgan’s proposed legislation would allow consumers to purchase drugs at lower prices and provide them with important protections when acquiring drugs from abroad. 

Wednesday, March 7, 2007: Senate Judiciary Committee

“The McCarran-Ferguson Act and Antitrust Immunity: Good for Consumers?”

• Both Republican and Democratic Senators expressed concerns that the McCarran-Ferguson Act, which exempts insurers from antitrust laws, is woefully out of date and has the potential to hurt consumers. 
   
• The insurance community’s immunity from federal antitrust laws has led, in part, to an insurance crisis on the GulfCoast.
   
• A homeowner from New Orleans gave emotional testimony on the helplessness he felt when his insurance company, with no fear of federal intervention, failed to pay for severe damage caused to his home by Hurricane Katrina. 

On Tuesday, the Senate Judiciary Committee investigated the circumstances surrounding the dismissal of eight U.S. Attorneys. Senators expressed alarmed at the unprecedented firing of these well-respected attorneys, who were in the midst of important prosecutions and appeared to have been fired for political reasons. Four of the eight testified before the committee: former U.S.Attorneys Bud Cummins, David Iglesias, Carol Lam, and John McKay.

 

Despite early assertions to the contrary, politics, not performance, appears to have been at the heart of the Bush Administration’s firing of U.S. Attorneys.

SEN. FEINSTEIN: On January 18th, the attorney general came before this committee and vigorously denied that the firings were politically motivated. He stated, and I quote, "I would never ever make a change in the United States attorney position for political reasons," end quote. Yet almost immediately the department had to start backtracking. Soon it became evident that Mr. Cummins from Arkansas here today was asked to resign for no other reason than to put in place a politically connected young lawyer, Tim Griffin…. On February 6th, Deputy Attorney General Paul McNulty stressed that this was an isolated case…. He went on to say that the others were asked to resign for, quote, "performance reasons," end quote However, here we are a month later and again the department is changing its tune. Now DOJ has begun to argue that these United Statesattorneys did not follow department priorities and therefore main justice had concerns about their policy decisions….However, every witness sitting before this committee today was judged by a team of independent evaluators to have a strategic plan and appropriate priorities to meet the needs of the department and their districts. Once again, the Department of Justice's answers don't hold up.

 

The U.S.Attorney who prosecuted former Representative Duke Cunningham was fired in the midst of an ongoing investigation into serious public corruption.

SEN. FEINSTEIN: As you know, the FBI chief in San Diego, Dan Dzwilewski, stated that yourcontinued employment, he believes, was critical to the success of a number of ongoing investigations. I understand this is an ongoing investigation, and I don't want you to reveal something confidential, but is it fair to say that even though there was a conviction in the Duke Cunningham case, there may also be other ongoing investigations that could stem from that case? 

CAROL LAM, FORMER U.S. ATTORNEY: Well, Senator, as you know, two days before I left office on February 15th, the office did bring an indictment against Dusty Fogo and Brent Wilkes…and at that time[,] our office announced that the investigation was ongoing. Beyond that, Senator, I don't really feel that I can comment further. 

… 

SEN: FEINSTEIN: Could you tell us what Dusty Fogo and Brent Wilkes are being indicted for? 

MS. LAM: It was an investigation that did arise out of facts learned during the investigation of former Congressman Cunningham. One indictment had to do with Mr. Fogo's use of his position at the CIA, his receipt of goods in order to get government contracts for Mr. Wilkes. And the other indictment involved a conspiracy to bribe Congressman Cunningham.

 

Another U.S. Attorney felt pressured to prosecute Democratic politicians in advance of the November election, and believes he was fired because he failed to do so.

DAVID IGLESIAS, FORMER U.S. ATTORNEY: Senator Pete Domenici [called and]…ask[ed] me about the matters of the corruption cases [involving Democrats] that had been widely reported in the local media. I said, "All right." And he said, "Are these going to be filed before November?" And I said I didn't think so, to which he replied, "I'm very sorry to hear that." And then the line went dead. 

SEN. SCHUMER: So in other words, he hung up on you. 

MR. IGLESIAS: That's how I took that. Yes, sir. 

SEN. SCHUMER: And he didn't say goodbye or anything like that? 

MR. IGLESIAS: No, sir. 

SEN. SCHUMER: Now, did you take that as a sign of his unhappiness with your decision? 

MR. IGLESIAS: I felt sick afterwards, so I felt he was upset at hearing the answer that he received. 

SEN. SCHUMER: Right. And so, is it fair to say that you felt pressured to hurry subsequent cases and prosecutions as a result of the call? 

MR. IGLESIAS: Yes, sir, I did. I felt leaned on. I felt pressured to get these matters moving. 

SEN. SCHUMER: And as you say, it was unusual for you to receive a call from a senator at home while you were theU.S.attorney. 

MR. IGLESIAS: Unprecedented. It had never happened. 

SEN. SCHUMER: OK. How long after that contact with Senator Domenici were you fired? 

MR. IGLESIAS: Approximately five or six weeks later perhaps. 

… 

SEN. SCHUMER: Tell us what Congresswoman Wilson said and what you said. 

MR. IGLESIAS: That was also a very brief conversation….[S]he'd been hearing about sealed indictments, and she said, "What can you tell me about sealed indictments?" The second she said…[“]sealed indictments,[”] red flags went up in my head, because as you know, we cannot talk about indictments until they're made public. In general, we specifically cannot talk about a sealed indictment. It's like calling up a scientist at Sandia Laboratory and asking them, "Let's talk about those secret codes, those launch codes." So I was evasive and nonresponsive to her questions. I said, "Well, we sometimes do sealed indictments for national security cases. Sometimes we have to do them for juvenile cases." And she was not happy with that answer, and then she said, "Well, I guess I'll have to take your word for it." And I said — I don't think I responded —"Goodbye." And that was the substance of that conversation. 

SEN. SCHUMER: Did you feel pressured during that call? 

MR. IGLESIAS: Yes, sir, I did.

 

Recently fired U.S. Attorneys were threatened with disclosure of damaging information if they spoke to the press or voluntarily testified before Congress.

SEN. SCHUMER: After your dismissal did any of you…receive any communication from any official at the Department of Justice that you believe was designed to discourage you from testifying or making public comments?... 

BUD CUMMINS, FORMER U.S. ATTORNEY: About, I believe, on February 20th, I received a phone call from Mike Ellston, who I believe is the chief of staff to the deputy attorney general. I had had some previous conversations with Mr. Ellston….[A]t one point, he did say that there was a feeling in the department that they had been too restrained in their defense of their actions, mainly concerning my colleagues, and this was after they had had the behind door session with the Senate to show whatever materials they showed, and he indicated that there was a viewpoint held among some people in management of the department that if the controversy would continue to be stirred up, that more damaging information might be brought out….I'm not trying to characterize that as a threat. It was a fairly congenial phone call. It might have been a threat. It might have been a warning. It might have been an observation, a prediction….But I thought about it for a while and…I didn't feel completely comfortable sharing it with anybody, but on the other hand, I was very concerned about my colleagues, the people that are sitting here and others that I didn't feel like were being treated fairly….I felt like I would not be comfortable having one of them give an interview the next day and then have the world fall on top of them without knowing that that message had been delivered. And I almost felt like it had been delivered for a purpose for me to share it. So I did in fact try to convey that to Ms. Lam, Mr. Iglesias, Mr. McKay, Mr. Bogden and Mr. Charleton. 

SEN. SCHUMER: How did you convey that to them? 

MR. CUMMINS: I actually sent them an e-mail. 

SEN. SCHUMER: OK. Mr. McKay, give us what your feelings were — your interpretation when you received that e-mail. 

JOHN MCKAY, FORMER U.S. ATTORNEY: Senator, thank you. Mr. Cummins delineated his information down to some fairly direct comments to us. I took those comments to be the following. Number one, public comments by former United States attorneys were intentionally frowned upon by the Department of Justice and we could expect repercussions if we continued to speak publicly. Number two... 

SEN. SCHUMER: This was after our investigation had begun. 

MR. MCKAY: That is correct….Number two, he made it clear — at least to Mr. Cummins, who passed it on to us — that any work with the Congress or testimony before the Congress would be seen as escalation by the Department of Justice and that they would respond accordingly. I heard both of those messages from Mr. Cummins, and Mr. Cummins related to us fairly, and I think with courage, that he considered Mr. Ellston'scall to be intentionally delivered to us, not just to him. And so therefore, Senator, I felt that that was a threat. I felt it was hugely inappropriate coming from a Department of Justice official, particularly with regard to potential congressional testimony. I do think it was inappropriate, and I want to say, while it was a threat, I'm not intimidated, and I don't think my colleagues are either. 

… 

MR. IGLESIAS: I felt like it was a warning shot across the bow. The message that I took is, "You'd better tone it down, stop talking, or there'd be other embarrassing things revealed about your record." It didn't intimidate me. It made me angry. Hence, my presence here.

 

None of the U.S. Attorneys testifying were informed that their prosecutions had failed to pursue Administration priorities or meet expectations.

SEN. FEINGOLD: So you were never informed by any DOJ people, top people or White House people that they were unhappy with this aspect of your performance, the priority setting. Is that right? 

MS. LAM: Certainly not to this level. There were sometimes inquiries made. I many times engaged in discussion and always felt that the department understood and accepted and supported my approach to various priorities. 

SEN. FEINGOLD: So the comments could not be characterized as signifying that they were unhappy with your choice of priorities. 

MS. LAM: No, sir. 

SEN. FEINGOLD: Mr. Iglesias? 

MR. IGLESIAS: I'd like to just read a sentence from Mike Battle dated January 24, 2006, to me. "I want to commend you for your exemplary leadership in the department's priority programs, including anti-terrorism, weed and seed, and the Law Enforcement Coordinating Committee." At no time did I receive any communication from main Justice that I was not following the priorities of the Department of Justice. 

SEN. FEINGOLD: Thank you. Mr. McKay? 

MR. MCKAY: Senator, I was never advised by the Department of Justice that I was failing to follow its priorities or that my office was ineffective in any way, shape or form. In fact, I think I had the most current evaluation by the Department of Justice, which was finalized September 22, 2006. My leadership was cited. More important to me, the work of assistant United States attorneys and the staff people in my office was cited, I think, in very outstanding terms…. 

SEN. FEINGOLD: Thank you very much. Mr. Cummins? 

MR. CUMMINS: [I]t hasn't been alleged against me that my district failed to meet the priorities….

 

The Bush Administration’s mid-term firing of U.S. Attorneys for purely political reasons is unprecedented and has the potential to hinder prosecutorial independence.

SEN. SPECTER: Do you think that you were inappropriately removed? 

MS. LAM: Well, Senator, I think that it was unusual, given the tradition and the history of United Statesattorneys within the Department of Justice. I understand legally that we do serve at the pleasure of the president, and I have no problem with that. I think traditionally United States attorneys have held a unique position as presidential appointees confirmed by the Senate in their district. So I think this was unusual. I'm troubled by it because of the potential chilling effect it has on United States attorneys. 

… 

SEN. WHITEHOUSE: It also strikes me that in our complex system of checks and balances in this country, one of the helpful checks and balances is what I consider to be a healthy tension that exists between main Justice, which has its priorities and its initiatives, and the United States attorneys in the field who know their judges, who know their locations, who know their agencies and who, as you said, Ms. Lam, have an understanding of where within the mosaic of enforcement they could best employ their resources compared to state and county municipal resources…. And I'm wondering if you would comment on what effect you think [your firing] will have on your [U.S. Attorney] colleagues with respect to that healthy balance and the extent to which push back against the department is viewed as a positive thing in certain situations — again, in our system of checks and balances. And specifically, Ms. Lam, in your case in the extent to which your role as really in many respects our forefront United States attorney on national public corruption cases, what chilling effect — the fact that this was applied to you — might have on your colleagues? 

MS. LAM: …Generally, I think if there were events that were going to lead up to a request for resignation, there would be some sort of ramp up, some sort of transparency to what the issue was, at least between the United States attorney and the Department of Justice. I think the fact that the recipients of the call were all shocked and trying to inquire what the reason was I think is what for me causes the greatest problem for the remaining United States attorneys — that there is no notice or awareness, and therefore it becomes a guessing game as to how it is that the department is displeased…. I think that is the concern, that there is mystery, and therefore, one then says, "Well, could it be because of this or could it have been because of that?" And that's the chilling effect. "Perhaps I should just play it safe and try not to displease anybody." And I don't think it's in the best interest of the country to have United States attorneys who just want to play it safe. 

SEN. WHITEHOUSE: Mr. Iglesias? 

MR. IGLESIAS: …I think what this entire controversy is about is separation of powers and the independence of the United States attorney, which historically has been true regardless of the administration in power. And what happened to me, I believe, is a violation of the separation of powers and also calls into question if political pressure does result in less independence, United Statesattorneys have to be independent. Politics can not play a part. And I hope the long-term effect of these hearings is that the future interactions between the branches relative to investigations are done correctly, because in my case it was not done correctly.

 

The Administration’s admittedly botched handling of the U.S. Attorney firings will negatively impact the morale of U.S. Attorney offices nationwide.

SEN. CARDIN: …U.S. attorneys generally have had the reputation of being above the political fray, and people really want to work in the U.S. attorneys' office because they know they'll have the freedom to do what's right without being intimidated. It would just seem to me that what has happened here will have an impact on the recruitment. 

MR. CUMMINS: Senator, what I would say about that is that I've been real concerned about the impact on my office, not because the office can't carry on their good work without me or any other U.S. attorney. The fact is that the backbone of these offices is the career people, who tend to be nonpartisan and stay there in some cases quite a long time. And they're going to get the work done with my leadership or somebody else's leadership, and so it's not that I'm irreplaceable, but I was concerned about the manner that these decisions -- the decisions themselves are probably of most interest to you, but from my perspective they were just handled so poorly. And I really felt like that demonstrated an insensitivity to the effect on my office and other offices, because it really created some awkward situations and put me in a position where I valiantly attempted for six months and failed to kind of conceal the facts of how things were going, because I just couldn't see if I told my office exactly how the decision had been implemented, that that wouldn't somehow inhibit my successor's ability to be successful in the office. And the office was important to me, and the people there are important to me. So I'm concerned about that.

General Schoomaker said that the failings at Walter Reed are a metaphor for larger problems in the system.

SEN. MCCAIN: General Schoomaker, do you think that TheWashington Post articles fairly characterized the problems at Walter Reed? 

General Peter Schoomaker, Chief of Staff, U.S. Army: I believe they did, especially in regard to the frustration that the soldiers – I think Building 18 became a metaphor for a bigger problem, and that is the frustration that we’ve been discussing and the bureaucracy and the inexplicable rules and the bureaucracy that surrounds that. So in that regard, I would say yes.

 

According to Lt. General Kiley, wounded soldiers face similar challenges at most military facilities across the country.

LIEUTENTANT GENERAL KEVIN KILEY, SURGEON GENERAL, U.S.ARMY: And what’s going on at Walter Reed in terms of the frustration of the staffs and the patients is probably mirrored to some extent in most of our other facilities, as I hear commanders talk to us about these issues. I think it’s amplified a little at Walter Reed because of the sheer numbers. There are a lot of soldiers at Walter Reed that are going through that process.

 

Top military officials, including the Assistant Secretary of Defense for Health Affairs and the Surgeon General of the U.S.Army, were unaware of the conditions at Walter Reed.

SEN. LEVIN: General Kiley, were you aware of those two specific shortfalls: that there were not being conducted the inspections of the soldiers’ room and that there was a backlog in work orders for maintenance of that Building 18? Were you aware of those? 

LT. GEN. KILEY: No, sir, I was not. 

SEN. LEVIN: All right. And, Dr. Winkenwerder, were you aware of those two shortfalls? 

William Winkenwerder, Assistant Secretary of Defense for Health Affairs: No, sir, I was not. 

SEN. LEVIN: Should you have been? 

DR. WINKENWERDER: Yes. 

SEN. LEVIN: General, should you have been? 

LT. GEN. KILEY: Certainly, if the Walter Reed commander was having any difficulty executing the repairs of those, I should’ve been aware of that. If General Weightman felt that I needed to know that, I should’ve been aware of it. But I’m still accountable as his next higher commander. And certainly as a result of all this....

 

Lt. General Kiley acknowledged his failure to make patient care the highest priority.

LT. GEN. KILEY: I certainly think that a part of our error, and certainly my error in counseling my commanders — I clearly failed in this regard – is in anywhere we're putting patients, soldier patients — despite the fact that we've worked very hard on that from day one at Fort Stewart until a couple of weeks ago, when the papers revealed our shortfalls — that patient care and patient building areas should have the highest priority. That was part of the problem we found with Building 18. And I failed in that regard.

 

Lt. General Kiley and General Schoomakerbelieve that the current military disability system is shortchanging some of our soldiers.

LT. GEN. KILEY: And I would agree that it is very difficult for the disability system of the Department of Defense to recognize the nuances, if I can use that term.… [T]he present disability system recognizes something as fundamental as a missing limb but doesn't appreciate or take into account the whole man theory that the PTSD the soldier may have, or TBI, may be as significant or more significant for their future. So I agree that we've got an issue there. And I think we need to take that on. 

SEN. LEVIN: In that respect, our failure to take those problems into account-- would you say we have been shortchanging some soldiers? 

LT. GEN. KILEY: Yes, sir. I think we have. 

GEN. SCHOOMAKER: One of the things I learned and I did not know before is that, of course, there's two different laws. And I'm not trying to -- just for clarity, the military system operates under a different law than the V.A. system does. And I was very surprised to see that, where a soldier would be rated, say, at 40 percent in the military system, that the V.A. may rate that very same soldier at 70 percent. This kind of problem is fundamental to people's understanding and trust and confidence in the system. And it's very difficult to explain. 

SEN. LEVIN: And it’s not only difficult to explain. It’s unexplainable. Its inexplicable. And it's unacceptable. 

GEN. SCHOOMAKER: I agree.
 

The Assistant Secretary of Defense for Health Affairs described the situation at Walter Reed by saying,“It’s just unacceptable.” 

DR. WINKENWERDER: I would assess the problems before us as follows: There’s the physical facility issues we’ve heard about. There’s a process of disability determinations. And then there’s a process of care coordination. I won’t speak about the substandard housing because, as you’ve just heard, the Army has already begun to correct that problem. Obviously, a wider review and look is needed across all services, and I think that is already under way. With respect to disability determination, let me just say that the servicemembersdeserve fair, consistent and timely determinations. Complex procedures must be streamlined or they’ve got to be removed. The system must not be adversarial. I think you made an excellent point: It shouldn't be adversarial, and the system's just got to improve. Likewise, coordination of services, there must be a higher ratio of case managers to wounded servicemembers to ensure personalized care, better support, communication with families and simpler processes. No servicemembershould ever have to work through a maze or a gauntlet or be on his own or her own to figure things out. It’s just unacceptable. 

The Bush Administration’s budget cuts and unrealistic estimates impede the military’s ability to care for our troops.

VICE ADMIRAL DONALD ARTHUR, SURGEON GENERAL, U.S. NAVY: We are in combat also here in the United Stateswithin our own system. We have been given efficiency wedges, which have cut our budget. We have been given military-to-civilian conversion objectives. We have had our staff cut without convergence. And with these financial and personnel challenges, we may very well find it difficult to meet our combat missions in the future. We have been given many medical readiness requirement review assumptions that have minimized the number of casualties that are expected in the future, minimized the number of deployments that we will have, minimized the biological or chemical warfare agent threat, minimized or even eliminated the homeland security, humanitarian assistance and homeland defense components of our mission. And we will find, I think, those missions to be very difficult to meet in the future…. We are not going to be able to maintain services at the level that we have now, with a one-sixth cut in our funding. So we've facing a number of challenges that are coming together in a perfect storm: It's the funding, it's the people, and it's an increasing mission not only for combat service support, but for those casualties who are coming back who need ever more services. We have physicians who are doing their own administrative work, filling out workers' compensation forms and other paperwork, because we don't have the support staff because they have been systematically cut over the last few years. It's degrading our efficiency. It's degrading our morale. And it's degrading our ability to take care of combat-wounded veterans.

 

Senators demanded assurances that soldiers will not be punished for speaking out about substandard medical care.

SEN. MURRAY: As you can imagine, since we've heard about what happened at Walter Reed, my office and others have been hearing from a number of soldiers who are on medical hold in our state. They've been talking to us, but as I sort of indicated, they've been very worried to talk publicly. We can't get to the bottom of this and we can't do our job unless we know exactly what's happening out there. And I want your personal assurance, if you would please give that to me, that no soldier who blows the whistle on substandard care will be retaliated against. 

LIEUTENTANT GENERAL KEVIN KILEY, SURGEON GENERAL, U.S.ARMY: Senator, you have my word. There's a law that prevents that also, the whistleblower law. And I share your concern that soldiers either feel that they can't talk — certainly talk to their representatives. Certainly we want them to talk to us, but we've never put a prohibition or a threat of retaliation, for example, if they talk to the press. 

… 

SEN. MIKULSKI: I'm hearing from soldiers, where they wanted to appeal their benefits, but they told me I can't use their stories because they fear retaliation…. They fear retaliation about speaking up at facilities. So you need to know that. 

LT. GEN. KILEY: Yes, ma'am. 

SEN. MIKULSKI: So there is a culture here. And I think the culture's got to change. 

LT. GEN. KILEY: I agree with you.

 

The Bush Administration’s zeal for privatization has hurt our troops.

SEN. MIKULSKI: I am concerned that administration's relentless pursuit of privatization has caused dire consequences at our facilities. If we go to Walter Reed, there was a relentless effort to privatize the 300 employees who do building maintenance — 300 employees who did building maintenance. The administration spent $7 million on an A-76 process, and then another $5 million to implement it — $12 million to get rid of 300 employees…. Then Colonel Garibaldi sent a letter or a memo on September 6th — this is the famous Garibaldi memo -- that said all of the contracting out of building maintenance was based on criteria for the year 2000, a year before 9/11 hit, three years before we went to war in Iraq— well, two years, Afghanistan; three years in Iraq. So we were functioning on an outmoded data — once again, not planning for a war, not planning for the casualties of the war, not planning for the care of the casualties for the war....My identification of the problem was that the A-76 was based on 2000 — the year 2000 — data. That was the problem. 

LT. GEN. KILEY: Well, that's clearly a mistake. 

SEN. MIKULSKI: And you spent $7 million to implement something that was based on that. That was what the problem was. 

LT. GEN. KILEY: Yes, ma'am. 

SEN. MIKULSKI: Did it have an impact on morale? Yes. 

LT. GEN. KILEY: Yes, ma'am, it did.

 

The Bush Administration does not have a long-term plan to care for our injured troops.

SEN. MIKULSKI: We ought to start calling it the "50-year care program." We had men and women who were injured and they're 19- to 20-years old. They're going to be alive for 50 years if it all works the way it should…. What I worry about is what happens after they leave Walter Reed…. What is the long-term care plan? Do you have a plan for TRICARE for them? Do you have a plan for assisted living? Do you have a plan for long-term care? Do you have a plan for family assistance? Do you have a plan to pay for the divorce lawyers? Do you have any plan at all for any of this? 

LT. GEN. KILEY: For the 50-year plan, no, ma'am, I do not. 

SEN. MIKULSKI: Do you have it for the next three-year plan? 

LT. GEN. KILEY: Not yet. We have not addressed... 

SEN. MIKULSKI: I find this shocking. This is a war that we have been fighting for five years. One hundred fifty thousand people will now be there if the president gets his surge way. But even not, 128,000. Five years, longer than World War II, where these men fought and bear the permanent wounds of war. That's why they're so passionate about this. They know what good care and good follow-up care means.

 

Lt. General Kiley apologized for the inadequate care at Walter Reed.

LT. GEN. KILEY: Americaand Congress have known the long, rich legacy of excellence at Walter ReedMedical Center, and it is a very highly regarded facility. Over the last three weeks you have learned that we are not living up to that legacy. And for that, I am personally and professionally sorry. And I apologize to the soldiers and their families, the Department of Defense, to the members of Congress and to the nation for this. I am the commander, and I share in these failures. I also accept the responsibility and the challenge for rapid corrective action. Secretary Gates expects decisive action now. And he and our soldiers will get it. We're taking immediate actions to improve the living conditions at Walter Reed. 

 

Senator Levin called for changes to unfair and abusive credit card practices.

SEN. LEVIN: It is clear that credit card issuers charge interest and fees in ways that produce enormous profit. For the last decade, credit card issuers have reported year after year of solid profits, maintained their position as the most profitable sector in the consumer lending field, and reported consistently higher rates of return than commercial banks. Credit card issuers make such a hefty profit that they sent out 8 billion pieces of mail last year soliciting people to sign up. With profits like those, credit card issuers can afford to stop unfairly charging interest on debt that is paid on time, stop forcing consumers to pay for the balances with the lowest interest rates first, stop charging consumers a fee to pay their bills, and stop imposing abusive fees and excessive penalty interest rates. As one Michiganbusinessman expressed it to the Subcommittee, "I don't blame the credit card issuers for putting me into debt, but I do blame them for keeping me there."

 

A credit card executive apologized for policies that trapped customer in a sea of debt.

SEN. LEVIN: In 2001 and 2002, Wesley Wannemacher…charged a total of about $3,200, which exceeded the card's credit limit by $200. He spent the next six years trying to pay off the debt, averaging payments of about $1,000 per year. As of last month, he'd paid about $6,300 on his $3,200 debt, but his February billing statement showed he still owed $4,400. How is it possible that a man pays $6,300 on a $3,200 credit card debt, but still owes $4,400? Here's how. Take a look at this chart. On top of the $3,200 debt, Mr. Wannemacherwas charged by the credit card issuer about $4,900 in interest, $1,100 in late fees, and $1,500 in over-the-limit fees. He was hit 47 times with over-limit fees, even though he went over the limit only 3 times and exceeded the limit by only $200. Altogether, these fees and the interest charges added up to $7,500 which, on top of the original $3,200 credit card debt, produced total charges to him of $10,700. In other words, the interest charges and fees more than tripled the original $3,200 credit card debt, despite payments by the cardholder averaging $1,000 per year. Unfair? Clearly, I think, but our investigation has shown that sky-high interest charges and fees are not uncommon in the credit card industry. While the Wannemacher account happened to be at Chase, penalty interest rates and fees are also employed by Bank of America, Citigroup, and other major credit card issuers. Last week, Chase decided to forgive the remaining debt on the Wannemacheraccount, and while that is good news for the Wannemacherfamily, that decision doesn't begin to resolve the problem of excessive credit card fees and sky-high interest rates that trap too many hard-working families into a downward spiral of debt. 

… 

RICHARD SREDNICKI, Chief Executive Officer, Chase Bank USA: Our policies failed, and we deeply regret it.

 

The practices of credit card companies target the most vulnerable in our society.

ALYS COHEN, STAFF ATTORNEY, NATIONALCONSUMER LAWCENTER: We have a debt crisis inAmericaand its source is the practices of the credit card industry. This debt crisis causes consumers to file bankruptcy more often, to reduce their savings to a historic low point, to spend the equity in their homes to pay off credit card debt by refinancing and putting homes at risk of foreclosure — all precipitated by unaffordable credit card debt. It is not generally the amount borrowed by these consumers that causes the swelling of unaffordable debt leading to these personal catastrophes for millions of families. It is the practices of the credit card industry that cause the most trouble. The exorbitant interest rates and multiple fees charged to already overburdened consumers are breaking the proverbial backs of American families. Make no mistake - the tremendous profits of credit card companies come off the backs of the most vulnerable, financially distressed consumers. 

… 

WESLEY WANNEMACHER, CONSUMER, LIMA, OHIO: Debt seems to invoke a feeling of hopelessness unlike any other problem I’ve encountered. When a debtor calls you on the phone and you make a minimum payment, you know that you’ve made no real progress and that in a month, they will be calling again.

 

Credit card companies have changed their practices in response to congressional oversight.

SEN. LEVIN: Recently, some banks have also taken steps to improve their credit card practices, including Chase’s recent decision to stop collecting the added interest charges involved in double cycle billing. But more needs to be done. 

… 

VIKRAM A. ATAL, Chairman & Chief Executive Officer, Citi Cards, Global Consumer Group, Citigroup Inc.: Our mission is to put our customers first….I want to start with two important changes that we announced just last week. First, we are eliminating re-pricing for what we call “off-us” behavior, known by some as “universal default.” It is standard practice for credit card issuers to consider a customer’s credit behavior with respect to other financial commitments to other companies, and to increase their interest rates if warranted by such behavior….We eliminated the practice altogether for all customers during the term of their card. Citiwill consider increasing a customer’s interest rate only on the basis of his or her behavior with us -- when the customer fails to pay on time, goes over the credit limit, or bounces a check….Second, we are eliminating what is commonly known as “any time for any reason” increases to the rates and fees of our customer accounts. Traditionally, credit card issuers have taken the position that they can increase the rates and fees of a cardholder’s account at any time for any reason, for example, to respond to general conditions in the financial markets. But last week we announced that we are giving up that practice. Once a card is issued, we will not voluntarily increase the rates or fees on the account until the card expires and a new card is issued (generally two years). The interest rate on the card, if linked to the prime rate as is typically the case, would still go up or down as the prime rate moves. But the only reason we would consider increasing the rates or fees before the card expires would be if a cardholder pays Citilate, exceeds the credit limit, or pays with a check that bounces. We believe we are the first bank to adopt this policy. 

The Senate Committee on Commerce, Science and Education held a hearing on S. 242, the Pharmaceutical Market Access and Drug Safety Act, bipartisan legislation to allow pharmacists and other licensed wholesalers to import federally approved prescription drugs for resale in the U.S. The legislation would also allow individuals to import prescription drugs from federally approved and inspected pharmacies in Canada. 
 

S. 242 would give consumers access to drugs at lower prices. 

SEN. DORGAN: We’re here today to consider a matter that literally means the difference between life and death for many Americans —the cost of prescription medicines. And the question we are going to ask is: do we really believe that Americans ought to have to pay the highest prices in the world for prescription medicines? I don’t believe they should….Today we are considering whether we should continue to allow drug companies to dictate the prices U.S. consumers pay for prescription drugs or whether we ought to introduce a little price competition into the market, by allowing the safe importation of FDA-approved medicines from Canada and other western industrialized nations…..I think it is wrong that consumers in the U.S. are forced to pay 98 percent more than Canadians for the very same medication….I believe part of the solution is to allow American consumers to purchase more affordable FDA-approved prescription drugs that are available in Canada and other countries….My goal is not to force Americans to go to Canada to purchase their prescription drugs but rather to create a little competition in the market so that we can put real downward pressure on domestic drug prices. 

… 

The Congressional Budget Office estimates that S.242 would save consumers and the government $50 billion over ten years, with $6.1 billion of that amount in savings to the federal government.

 

Prescription drug prices continue to rise.

ZELDA BARNETT, AARP Board Member: A recent AARP study revealed that, on average, pharmaceutical manufacturer prices for the 193 brand name drugs most widely used by older Americans rose at nearly twice the rate of general inflation in 2006….For the 153 brand-name drugs that were in the market since 2000, this translates into a cumulative average price increase of 53.6 percent, over two-and-one-half times the general inflation rate of 20.1 percent over the same period.

 

Consumers are currently purchasing drugs from outside of the U.S., and current law does not protect them. 

WILLIAM SCHULTZ, Partner, ZuckermanSpaeder LLP and former FDA Official: The Food Drug and Cosmetic Act (the “FDC Act”) does not permit individuals to purchase prescription drugs from Canada or any other country. Nevertheless, U.S.consumers are doing just that, and for all practical purposes, much of this activity has been blessed by FDA. For example, FDA regularly permits patients to bring with them into the United Statesa 90-day supply of drugs that they purchased outside of the United States. Even though this activity is technically illegal, as a matter of its enforcement discretion FDA permits the import of prescription drugs for personal use….In other instances, FDA policy does not permit the activity. For example, there is a well-known and widespread practice of consumers illegally purchasing prescription drugs from foreign internet websites and mail order companies. Although FDA has not condoned this practice, it has not been able to effectively stop it. As FDA has repeatedly told Congress, thousands of packages containing prescription drugs from foreign counties enter the United Statesdaily. Neither FDA nor U.S. Customs and Border Protection (“Customs”) can effectively police this practice. Moreover, the law, as it currently stands, makes it extremely difficult and burdensome for FDA and Customs to stop the illegal packages that they are able to identify. 

Because the FDC Act does not specifically permit patients to obtain their prescription drugs from foreign countries, it does not include any protections for consumers who are engaging in it. As FDA has repeatedly told Congress, the risks to patients are real and they are great. Most patients are probably receiving medicines that are comparable to those sold in the United States. But others may be receiving medicines that are expired, subpotent, contaminated or counterfeit. The labeling may be in another language, thus depriving the patient of important information about the drug. Moreover, if the patient experiences problems and they manage to trace it to the drug (which is not likely since they usually assume the drug they got is safe and effective), they probably have no recourse. FDA’s ability to take action against foreign suppliers is quite limited. The current system leaves American patients who obtain their prescription medicines from foreign countries completely unprotected.
 

S. 242 would provide consumers with important protections. 

MR. SCHULTZ: S. 242 recognizes, as have even FDA officials, that prescription drugs sold by Canadian pharmacies are safe. The challenge is to prevent the import of unsafe drugs from Canada and other countries. The bill addresses this issue in two ways. First, it creates a mechanism for individuals to obtain prescription medicines for their personal use from registered Canadian pharmacies (or from pharmacies in another permitted country if FDA determines that that country’s pharmacy laws are equivalent to Canada’s). Second, it creates a mechanism for U.S. pharmacies and wholesalers to commercially import medicines from a defined set of countries under controlled conditions. Both provisions require that the drug be an FDA-approved drug and be manufactured in an FDA-inspected facility. 

The mishandling of claims by many insurance companies in the wake of Hurricane Katrina has led Congress to reconsider the wisdom of antitrust immunity for the insurance industry. Senators Trent Lott and Mary Landrieu testified before the Judiciary Committee, along with a New Orleans homeowner, the Consumer Federation of America, and representatives of the insurance industry.
 

Both Republican and Democratic Senators expressed concerns that the McCarran-Ferguson Act, which exempts insurers from antitrust laws, is woefully out of date and has the potential to hurt consumers.

SEN. LEAHY: The nation's competition laws can be powerful tools to ensure that consumer welfare is the benchmark for fair and accountable industry practices. Consumers benefit through lower prices and more choices and better services. And those benefits come from competition. The antitrust immunity for the insurance industry, contained in an act, the 1945 McCarran-Ferguson Act...raises serious concerns with me….If the antitrust immunity is used in a way that distorts the market, that leads to higher prices and poorer service, consumers throughout the country could be harmed. The potential for insurance industry abuse became clear in the Gulf Coastin the wake of Hurricane Katrina. Residents, who lost somuch as the result of 2005 hurricanes and then were let down by a woefully unprepared government, were then left to face insurance companies refusing to fulfill their commitments and help rebuild. No one should have to go through what these Americans have been through. 

SEN. LOTT: A review of the Congressional Record [of Act’s debate] shows clearly that the intent of both houses was to provide only a temporary moratorium [from antitrust laws] rather than a permanent exemption. It was while the bill was being discussed by the conference committee that a seemingly innocuous phrase was inserted. It was this modification — not in any either the House or the Senate versions of the bill — that, when judicially interpreted, turned a temporary moratorium into a permanent exemption. So clear was the intent that President Roosevelt, upon signing the bill, stated the following in a press release: "After a moratorium period, the antitrust laws...will be applicable in full force and effect to the business of insurance...." But it goes beyond that, you know, antitrust laws. Shouldn't every corporation in Americahave to comply with that? How do we make sure that there's not price fixing or collusion or anticompetitive conduct of one kind or another? There should be some federal role here.

 

The insurance community’s immunity from federal antitrust laws has led, in part, to an insurance crisis on the Gulf Coast. 

SEN. LANDRIEU: Mr. Chairman, there is an insurance crisis along the Gulf Coast and probably over the Atlantic Coast, if not in the whole nation. In New Orleans today and in parts of south Louisiana and Mississippi, even people that might have a plan and money to rebuild can't do so, because they cannot either get or afford insurance for the rebuilding. So the billions of dollars that the federal government has sent down to the states, all the efforts that the states and the local governments are making are put at risk, because of this real and serious insurance crisis…. Justice needs to be found here in Congress through the repeal of this act — if it was unintended, as Senator Lott stated, or through other actions of the Banking Committee and others — to give people real relief. I have recently heard of one company that has raised premiums by 145 percent. In Orleansand Jefferson Parish, it is not unheard of for carriers to be raising rates up 50 percent. This is not just homeowners that are risk, all 250,000 that have lost their homes, but Mr. Chairman, it is our shopping centers, our commercial sector that's having difficulty finding insurance. And if they can't find insurance, the rebuilding is slowed down and people's lives and fortunes and futures are put at risk. This insurance crisis right now goes to the heart of rebuilding. And Congress does have a role.

 

Antitrust immunity allows insurance companies to engage in, and profit from, practices that would be illegal if done by businesses in other industries.

ROBERT HUNTER, INSURANCE DIRECTOR, CONSUMER FEDERATION OF AMERICA: In the last three years, the property and casualty insurance industry realized record profits despite all these hurricanes. Over the three years, the profits were $157.4 billion, equal to a profit of approximately $525 for every American. At the same time, we have heard what's going on onthe coast, access of insurance being denied and the claims not being settled. Coastal residents have suffered as a result of the antitrust exemption. Like all of America, the exemption allows anticompetitive practices such as: joint price-setting that impacts the majority of the rates of many companies affiliated with cartel-like rate bureaus; joint policy language development by these bureaus; use of the same or similar low-ball, claim-settling computer programs by many companies; and other practices that would be illegal, if it were not for the exemption of McCarran.

 

A homeowner from New Orleans gave emotional testimony on the helplessness he felt when his insurance company, with no fear of federal intervention, failed to pay for severe damage caused to his home by Hurricane Katrina. 

MICHAEL HOMAN, HOMEOWNER, NEW ORLEANS, LA: Like many in the GulfCoast region, my family's lives were forever changed by Hurricane Katrina. My wife, two children and I currently live in a FEMA trailer in the front yard of our collapsing home in New Orleans, as we continue to battle with Allstate over our insurance claim. 

We insured everything we had with Allstate. This included wind and flood…. We slept well every night thinking we were adequately insured with the self-designated "good hands" people. But we weren't in good hands…. After the levees failed, flood waters covered the first three feet of our house, and this water remained for more than 10 days, damaging the foundation and piers, causing our house to lean even more. And right now as I speak, our home is in danger of falling onto our neighbor's house. We filed a claim for wind and flood with Allstate the day after Katrina. We expected things to move along quickly, but we were wrong. 

We called Allstate every day for several months, and we wrote them frequently, but we rarely received answers. They played a shell game with us, providing us with 10 different agents through this ordeal, and it took nine months to even get a wind adjuster to come to our house. The third flood adjuster we had arrived in October of 2005, and right away he could see our house was leaning, and he ordered an engineer from Allstate to assess whether it was racked from wind or flood….But then we waited and waited and the engineers never showed up. We were told that everything hinged on that report, and we were told to be patient. Several months passed and we were running out of savings. We had to pay for our rent on top of our mortgage. We were insured so that Allstate would pay us additional living expenses should our house be destroyed or be in an unlivable state like ours was. But Allstate said they wouldn't pay any of that until they received the engineer's report. 

Because of our financial situation, my family and I were forced to move back into our structurally unsound home, and spent nine months living in the upstairs portion that didn't flood. 

Finally, in February 2006, after six months of phone calls and letters, two men from Haag Engineering arrived at our house. They spent 15 minutes there taking pictures and then they left. We didn't hear anything until May of 2006, when I received a letter from Allstate saying they were denying our claim for structural damage, because of the Haag Engineer's report. So, we were terrified. We had a $150,000 mortgage for a property that was worth now about $30,000. 

Fortunately for us, the Haag Engineer's report is full of huge mistakes. They have pictures that don't belong to our house. They call our house the "Wilson house." They said it wasn't windy enough during Katrina to make a house lean, even though lots of houses in our neighborhood have collapsed. 

Our story is not unique. I've heard from dozens of other people in the same situation as us, that the insurance company gets an engineering firm to write the report they desire, and then they deny the claim. And the insurance company won't be liable, because they relied on expert witnesses — or so-called "expert witnesses." 

DPC