>> okay. and does the government have any oversight in your sense of these tests or you simply give the results to the government? do they actually see -- do they see the test -- the examinations themselves? >> not to my knowledge, although, at any time they would request we would send in the results. we have all of our tests documented. they're open to audit. >> okay. one last question, mr. schmitt, i think it was you who said that you work with dcaa, you work with dcma. you work with the army. do you get the sense -- in fact, i'd like to ask all of us do you get the sense that the government speaks with one voice on these matters?

i guess >> i guess from our limited view of the contract, i would say yes. >> i don't see anything but a single voice. >> okay. mr. houck >> i would agree with the exception of dcma. we have received very little input oversight from my knowledge from dcma. in fact, they contacted us for the first time just last week. >> really? >> yes, sir. >> thank you very much. that's fascinating. i'll yield my last 30 seconds. >> commissioner tiefer? >> mr. houck? >> yes, sir. >> on the issue of you having had no choice left to you by inscom but to cut linguists' salaries, would you undertake to give our staff -- would you have some high level people who know the stuff in your place give our staff a briefing with actual records and actual figures as opposed to the alternative of simply reducing the ridiculously

set-up subcontracting structure which your contracting officer could have done for you on a partial termination for convenience? >> we will welcome the opportunity, sir, to brief your staff. there is a significant amount of detail. >> good. great, we'll set it up. you provided us with a grid, and i believe it. as to which subcontractors did which functions. and i'm just -- i believe it but i just want to make sure. l-3 did not do language testing, l-3 did not do functional training linguist services operating in a war zone? and l-3 did not do in-country management and leadership and supervision? >> that is correct, sir. we -- gao performs those functions currently. >> i'm sure l-3 is not so modest about the services they provide. was it the case -- now, you know

the forbes article that i've been mentioning, right? >> only from your testimony. >> you're kidding me? you're kidding me? you mean when forbes writes an article about your parent company -- >> i'm not aware of it, sir. >> you don't bother to read it? that's an insult to the media. you're not being read over there. you've got to work harder. so you don't know whether it's true as forbes says that mckown is chairman of the board and owns a car roughly of dyncorp? >> yes, i do not that and that is the case. >> oh, okay. and that it helped -- that this linguistic contract helped to boost dyncorp's revenue by 45%. >> i believe that's true, yes. >> okay. well, you don't have to agree with me on this characterization but i'm just going to say the contract and the taxpayer became a cash cow -- sort of a great big juicy steak that two companies with thick slabs out

of this cash cow. poor taxpayer. let's get to -- let's get to l-3. and i'm far from defending my position that mr. zakheim is a poor substitute as witnesses, myself included -- a poor substitute to the hands-on people actually making the management -- yesterday dyncorp sent us is real executive. not a counsel. but we'll see what we can do. you mentioned two protests that were good and successful in your opening statement. mr. miller, does the figure 17 protests accord with the number of protests you filed over the four years it took for this contract to be awarded? >> 17? >> 17. >> no, it does not. >> give me your number. >> three, four if you include an

agency action during the course of the gao protests relative to the linguist contract. >> i'm not talking about the reconsideration, no. >> there are other protests that took place that l-3 was not a part of relative to the linguist contract going back to 2004. that is perhaps where your number comes from. >> yes. 2004 contract -- >> well, we were not a part of the protests, sir. >> okay. >> in fact, in 2004, we didn't have the contracts. >> okay. so it was just one or two protests -- it was part of the consideration that made them -- make you a subcontractor was the resolution of the protest, wasn't it? >> i'm absolutely positive of that, sir. >> okay, just one or two, not more than that, huh? >> three. >> just three. not more than that. >> two successful and one unresolved because it was dismissed. >> they're easily framed?

>> unresolved but withdrawn. >> that's correct. >> withdrawn. >> because of the negotiated subcontracting agreement. >> that is correct. >> you bought titan? >> that is correct. >> and it was titan that had a linguist who came under investigation at abu ghraib because of the scandal there? >> that took place, yes, sir. >> okay. what about -- so we just heard you agree with what mr. houck said. you don't do those categories? i could read them back. you don't do language testing or functional training. and you don't do in-country management? >> that is correct, sir. >> i would characterize you as a do-little subcontractor for the amount of money that you get, thank you. >> thank you, commissioner tiefer. i might note -- again, i'll make the note that all of you get the opportunity to lay a capstone on anything you might choose.

>> i can wait for a minute if he would like to respond now. >> sure. >> i can wait. >> sure. >> would you like to respond to that now or later? >> no, sir, there's no need to. >> are you going to respond at all? >> what, to the allegation that's made? >> i don't think it's productive for me to respond to that allegation. i already made my statement. it's on the record as well as the written testimony. >> well, surely if a commissioner asks a question you ought to answer it. >> sure, it wasn't a question. >> but a question mark after it, charlie. you did in your statement describe the functions -- i described the ones you don't do, what you think of my characterization that you are a do-little subcontractor. >> i respectfully disagree, sir. >> commissioner henke. >> following on that fruitful

dialog. [laughter] >> we're lawyers. >> i'd like to understand some of the numbers that have been tossed around. we have a chart here that says l-3, you employ exclusively u.s.-hires, right? >> that is my understanding, yes, sir. >> okay. so you employ u.s.-hires and you have 733 linguists according to this chart dated whenever. and northrop, your business practices is you employ local nationals, right? >> yes, sir. >> and so you have about 2,000 local nationals, iraqi -- >> 1500, sir. >> 1500, okay. >> obviously, the u.s.-hires are more expensive than local nationals; is that correct? >> yes, sir. >> that's the general -- >> uh-huh.

>> generally, what is the business reason for dividing it up between i'll do local -- i'll do local nationals and i'll do u.s. hires? mr. miller? >> that's what we negotiated and agreed to with gls. >> why? >> that's one of the things that was offered in the negotiations. sort of perhaps gls can specify why. it wasn't -- at the time we didn't restrict it to u.s. hires but that was the anticipation it would be predominantly u.s. hires. >> is the relationship with the prime to have 22.5% of the work -- is it 22.5% of the linguists of the employees? >> it's 22.5% of the value of the contract basically. >> of the total contract value. so it's really more related to the dollars? >> yes, sir. >> so if -- your subcontract

relationship for a lot more people is 5% of the total contract value. >> actually, sir, to date we're running about 2% of the contract value to date. >> 2% of the contract value? >> yes, sir. >> mr. miller, the attachment from miss stephenson's testimony, three large businesses -- it's page 7. i'm sure you have it. i suppose, your company attend there, right? >> most likely it's the one attached to it. >> and that's a cost plus award fee contract. >> that is correct, sir. >> okay. can you tell me roughly and in detail for the record of that billion 45 going to 733 linguists plus your administrative staff, which is on the order of -- you said 100 or so?

can you tell me how much of that billion 45 winds up in a paycheck. >> if you -- we have a ceiling on our indirect costs that we bill to gls. and if we exceed those, we don't bill them. our ceiling is 9.5%. so i need a calculator to figure that one out. i'm a lawyer. >> so your total indirects is 9.5? >> uh-huh. >> and what is your fee? >> it is our equal share or our proportionate share of the award fee that gls receives. so we don't have a separate award fee so to speak. we participate with gls. i don't believe they put fee on our fee. i don't believe that happens. >> but what is the -- what is the fee amount? >> there is 1.5% of the estimated and please correct me if i get this wrong. as i recall 1.5% of the cost

proposal at the start of a contract period is in the nature of a fixed fee. and then i believe there's a possibility for an award of up to another 6%. for a total of 7.5 if you have 100% award fee. >> okay. so your maximum award fee on top of your 9.5% indirect is -- could be up to 7.5%? >> well, i wouldn't say it's on top of the 9.5%. i mean, it's on top of the total -- >> salary base. >> yeah, the total costs. >> right. >> yeah. >> but it's 9.5 -- 7.5? >> 7.5. so then you pass it to mr. houck -- what's your indirect rate? >> sir, i don't know my exact indirect rate. >> you can ask your cfo behind you.

>> sir, about 15.6% in indirects plus the 7.5% potential base plus award fee. >> okay. so if i'm trying -- >> i'm sorry, if i may also correct, mr. miller, we do place our fee on their fee. >> i was mistaken. i apologize. >> it was fee on fee. >> it's all wrapped in. if i tried to explain it to someone who's not an expert in contracting, i'm not an expert in contracting, i would use it like this your play poll is $100. u.s. have u.s. hires in exclusively -- if the payroll was $700, you'd add to that, mr. miller, 9.5% up to 7.5% as an award fee, hand that number to mr. houck who takes the new

number, adds his indirect of 15.6% and adds possibly a 7.5% fee, which includes the fee on the fee, right? >> the concept is correct. i was just corrected in that the total indirect plus -- including indirect including fee is 15.6. >> say that again. the total indirect including fee is 15.6%. >> including the fee? >> yes. but you have the concept correct, yes, sir. >> i'm out of time. thanks. >> thank you, commissioner henke. commissioner ervin? >> thank you. i was going to begin my round of questioning with you, mr. houck, to give you an opportunity to respond to the question i was engaging in on the earlier panel about whether gls would have contracted with l-3 but for the bid protest and i will give you an opportunity to do that. but before doing that, i was really riveted by your testimony, mr. miller, because to me, you really made an

eloquent case for why gls had no choice really essentially but to subcontract with l-3 and an eloquent case for why it seems to me l-3 should have been awarded this contract in the first place and i understand why gao likely confirmed the bid protests. you said that gls had to set up a $600 million business here from scratch. you, l-3, were the incumbent here in iraq. you had this extensive experience already in the balkans and afghanistan. you had $180 million lower price to offer. that really raises the question of why you get the contract in the first place when that's not the question for the first panel. but anyway, it's very interesting. and it sets the stage for this. now we are where we are at this point so the question now is for l-3 and for northrop grummond what additional value do you provide and we talked a little bit about this in the rounds of we've had but i want to delve into it more. again, to go back to this chart, which we keep talking about on page 6 of your testimony,

mr. houck, you know, as i've begun to point out already and others have, looking now at l-3, you provide corporate training, personnel security administration, human resources administration, casualty assistance, financial administration and that's defined direct deposit, all of those functions that i've just read are also functions that gls provides. the only function that you provide that is unique on this chart that grand larceny doesn't is advisory in management support to gls. what does that mean in l-3's case? >> i'm not sure what gls was thinking of in choosing those words so it is speculation on my part but i suspect that what it reflects is the experience that we brought to the program, to the tims program from the prior project. the expertise that our people have, the support that we give them as we move forward and as they face various challenges in performance of the contract.

that's my guess, sir. >> okay. now, of course, i'm going to ask mr. houck that question but before i do that, presumably, i just want your answer to this, mr. miller. at least in theory, gls could provide the corporate training and all these other functions that you provide, right, in theory? >> uh-huh. >> all right. so the only thing on this advisory management support, mr. houck is mr. miller's understanding of what you, gls, means by the advisory and management support that l-3 provides your understanding as well? >> yes, sir, it is. we turn to l-3 as well as northrop grummond on a regular basis to seek joint solutions to problems to get lessons learned from the team who performed this contract for many years. they're very valuable to us as a team. >> mr. schmitt, i want you to get into this. again, just reading down the list of what northrop grummond does, these are exceptions with the exception of advisory

management support that gls provides. so what unique management support does northrop grumman provide that gls can't get on its own? >> sir, we have, to my knowledge, provided some support to gls on certain topics. i could get back with you on the record on specifically what those were, but they did fall in the area of some of the processing of time card improvements as well as some of the activity that was going on with some of the linguists activity and some of the personnel issues that they were having with the linguists but i would like to get back from my team on the -- >> all right. i'd like you to do that on the record and you likewise, mr. miller, and then it's a question for me the commission to evaluate whether this institutional knowledge, as you put it, mr. how can how about -- houck on l-3 is worth it to the taxpayer. and just a couple of other kwoik questions.

-- quick questions. what does mcneal technologies add to the venture. what do they do? >> mcneal provides oversight via the board of managers, actually the group that i report to. mcneal -- in addition to the board -- i'm sorry, the board has appointed an executive committee of the ceo of dyncorp and the ceo of mcneal. i meet with that group weekly, communicate with them daily for the purposes of contract oversight. additionally, mcneal has a contract to provide management and recruiting support to gls. that is a contract that does not carry fee. >> if i might have just one more minute to just ask the question to begin with. i would for the record, mr. houck, would like you to answer the question whether but for the bid protest that l-3 went through three times, the

subcontract l-3 would have been awarded? >> well, i believe our team is stronger with l-3's presence. i believe that we would not have made a decision to bring l-3 on the team if not for the secession of the protest activities. >> thank you. >> well, based on what you've just said just now, how much marginal value really is there to these advisory services if you would have been just as comfortable without l-3? >> i can't give you a quantitative figure. i can only tell you that there is significant value to the team based on l-3's past experience and expertise. >> there wasn't value enough to make you want to go with l-3 in the first place? >> that is correct. >> thank you. northup grummon, corporate question, everyone issued their '08 financial statements.

can you give me a ballpark on total sales on northrop grummon? i'm looking at you and it was a trick question. i'm going to ask l-3 in a second. so i had to pause. mr. schmitt? >> okay. approximately $35 billion sir. >> so $35 billion and this is the second half of the trick -- or question but i'm looking at you now. about how much of that has u.s. government involved variety and forms, like 70%, 80%, 90%? ballpark? >> i would say about 90%, sir. >> all right. i can work with that. l-3, corporate sales? >> somewhere between $14 and $15 billion annually. >> i'll round it up $15 billion. that's a better number. can you give me that percentage? >> i think it's a higher percentage than northrop but i don't know it off the top of my head. i think it's in the 80 to 90 ra range but that may be high.

>> okay. i'll use the lowest figure. i'm going to come back to that. mr. houck, you have about 40% of the heads that are linguists. >> correct. >> and about 60% are spread through the contractors. you have a payroll system and you process checks and you do the like. am i accurately reflecting this that a company that has those systems in place, that either print checks or result in the money or whatever you have to hand out -- whether it's 3,000 people or 9,000 people it's a process that you have to follow and that you could do that function? >> yes, sir. >> 'cause if you couldn't, i'd worry about the 3,000. >> correct. >> and i would absolutely expect that. so you can do it. i'll build upon mr. ervin's and my question is for mr. schmitt and mr. miller and again, i apologize, mr. miller, for camouflaging you. but my question comes down to -- we got a $35 billion company plus 90%. we got a $15 billion company, 80%.

a top 10 government supplier contractor. it's a big deal. now, miss stephenson laid out this $556 million premium of which we've paid 100 but we've got 456 and if i'm right we've got 470 but dueling pins later. but it's a straightforward as a taxpayer, why wouldn't you recommend northrop grummom and inscom, gls got together and confirmed all this, why wouldn't you recommend and step aside due to these sentence savings and very similar quality that would accrue get out of the business as far as this very small to your corporate health, very profitable -- i'm not arguing that point. it should be. why wouldn't you just step aside

as a defense contractor that's trying to support where inscom got up and said we're looking at alternatives. that seems the obvious thrust i'm coming from. why wouldn't northrop step aside if asked? >> i described in my opening statement, we have a subcontract with gls. >> right. we know. the question is really, though, as a $35 billion primarily government contractor, why couldn't you sit there and say, wow, you know, bringing this into light, bringing this into focus, i don't believe in this. they can do it. i come from a viewpoint and whether we're talking about permitting of a fee or indirect costs or innecessary costs we have this real opportunity, $456 million we're staring down, why shouldn't you? >> well, sir, all i can say is we do have a legal obligation to gls -- >> under the current contract

because you signed a contract, you're going to deliver the contract unless the contract's changed or unless rules have changed. and regulations changed. >> if they do not need our services anymore -- >> it'll be affected contractually. >> yes, sir. that's a good answer. that's a fair answer. mr. miller? >> i have two points to the answer, sir. the first deals with fundamentals of contracts. >> okay. that's the basically the same answer of mr. schmitt. >> it's for professor tiefer but go ahead. >> l-3 delivered a substantial amount of consideration, if you will -- >> at the outset and consideration meaning? >> value. >> experience? >> transition -- no in the transition period we literally turned over our company in a manner of speaking, key employees and numerous key employees spread out across the country to gls facilities to oversee, participate, support

the transition and we participated in that approach until early this year. >> so -- >> when they changed that approach. >> you brought value to the transition and as a contractor, quite frankly, call it like it is, regardless you're a subcontractor that you lost the award, you were paid to -- >> we entered into a contract which -- >> you were paid to do this transition? >> sir, we were indeed. and the deal that we entered into, the agreement that we entered into with gls was that we would be in this position as a subcontractor for five years. in other words, we performed a large part of -- >> okay. i hear that and we take that and that deal is costing you and me, taxpayer, a whole lot of money. what's your second point? >> sir, if i could just respond to that real quickly. >> sure. >> i think there is considerable value that anything that the government and the taxpayer is paying, they are receiving value for.

there is a serious value in having a second source. there is a serious value in having the ability to call upon l-3 and, in fact, l-3 being there and resident and able to help in the performance of this contract. >> okay. again -- >> your customer is mr. houck. but your previous customer said that he agreed fully and that's why this organization that was up in afghanistan that you reference, rem or whatever they call, he used them for competition. so my time is way up but you'll get a wrap-up session, but to me that's the part that rivets me is why wouldn't $50 billion competency total do this when there's a need and transition is going on all over in iraq -- kbr was in here. kbr is stepping aside from a lot of work, you know, and that's

painful. so we're in the point now where we can pursue and we'll let you go first -- because rather than going around, we're going to in speediness we're going to go around and change the process a little bit. commissioner zakheim? >> if i understood you correctly, you were being paid to transition, which is normally the case so the fact that you did what you were paid for doesn't strike me as a big deal. tell me why it was such a big deal to do what you paid for. >> sir, we went beyond doing what we paid for, which is to say we went beyond simply working the transition of a set of linguists from l-3 to gls which is what normal transition is. by becoming a part of the gls team, we became a part of their management. we grafted onto them our lessons

learned and our abilities and then we didn't stop at that. we literally handed over intellectual property. you're looking for a altruistic sort of action on the part of the american corporation. there it is right there because we had a greater concern about the performance of this contract. we wanted it to go very well. >> well, okay, since you talked about altruism. it wasn't me. it was you. on page 6 of the inscom testimony, it talks about 5 million in spending that was overspent because of private housing for vendor management and administrative personnel, private three bedroom apartments for individual employees. an isolated instance of a contractor that was deployed dependence with government expense. automobile densities of a 1 to 1 ratio for management personnel, lost productivity due to less than expendient linguists into

iraq. is that what your experience got us. is that what you were adding value to? you didn't turn around to this company which was wet behind the ears, unlike you guys, and say you can't be doing this? i mean, what exactly did you transfer? ..

and you keep talking to me about this added value and i just have a lot of trouble. maybe i'm blind but i have a lot of trouble seeing it in your testimony is written in such a way that it doesn't tell me much money there. so perhaps you can give us for the record and i was like an itemized list of what it is you have been adding not just during the transition by the way but the transition is kind of work, since then i'd like a list if you give me half a dozen things i'd appreciate them. >> commissioner ervin. >> i will be brief and this question may have been answered in an earlier round so i apologize, i was distracted with a colloquy began and i want to understand what the rationale is for l-3 contrasting with u.s. nationals for the linguistic services northrop grumman -- northrup grummon nie understand it is more expensive. i also understand that there are

more nationals obviously and i think it would be better prepared because they live on the ground there and there for daily they understand it nuances of language but i want to understand for u.s. and foreign nationals. >> i can take that question. when we're negotiating with the joint team the, granted is a complicated structure but in an effort to try to reduce the complexity everyone to give to the difference of contract is different populations and it would give them only local nationalist with our small businesses gave them u.s. hires come exclusively because of the difficulties overseeing the h.r. aspects which these companies do of a local nationals. likewise with l-3, it is two keep the complexities and out of the oversight process is from a dos gls.

>> didn't have anything to do your turn to him a tony 2.5 percent value? >> absolutely. >> in the way to do that was to hire more expensive u.s.-hires. >> precisely. you had on earlier the local nationals are pacing never given less than our u.s.-hires and never to get to that level of work share you need to give them -- >> you have to get the 22.5? >> that's, correct. >> mr. miller, you previously said when talking about the fees that i don't think gls puts a heavy on rnd. >> i was mistaken. >> but you're also surprise when her that they did in an nassau's something you are familiar with that to put a fee on a fi. >> i've seen that happen in government contracting. i've been in this for 30 years of us on a surprise. that was my understanding of the structure when we went through on negotiations to create the

subcontract. i did not understand the relationship in that regard too. >> i think that's something they need to add utility or advantage to allow ability of a pea. i want to talk to mr. houck, it's illegal lao? >> the law is pretty clear from here on out. >> excellent. mr. houck they talked about some contractors that gls was bill and the government for subcontractors who were in double billing, billing beyond what was allowed and the contractor and then you passed that on a pair lead to the government and now your billing system is deemed inadequate and in your mind getting paid. you're bills are suspended which is worse than a whistle parent it is not just a percentage of their money being withheld, you aren't able to be billed. so how did you pass on a double

billing of your subcontractors to the government? isn't that your job to oversee that? >> yes, ma'am, and i can provide some background. halfway through our performance thus far as you know we undertook cost-cutting efforts. one of those was two go back to our subcontractors and negotiated the indirect ceiling rates down by about 50%. the disconnected occurred and it's our responsibility to check these things between are contacting shop and in the shade and present contract agreements and other financial shop and that adds to a previous the invoices appear in one hand wasn't talking to the other parent the invoice evaluators were notified that the subcontracts have been renegotiated down. this came to light just last week and is just the issues working with dcaa. we have i believe it put corrective action in place and in practice last night the billing was put back in place.

>> thank you. >> we are going to skip over and actually grant commissioner green. >> two or three very quick questions, yes or no answers. mr. schmidt, you said you had about 46 people that worked the gls headquarters or whenever the sistine. am i correct? >> yes. >> mr. miller, you didn't know. mr. houck coming to know how many l-3 have support you? >> i think what mr. miller was referring to was there are part of a management pool and we don't have the number of employees. >> could one of you get us that number? number two, but one of you and probably l-3 is the best one to do that mr. miller could you characterize and compare and contrast the time of transition between the iraq and afghanistan, the difference in the length of time to transition the contracts that were involved

in? >> yes, sir. i do not recall exactly how long a transition was. i do know it was short, sure that iraq for sure because it was a much smaller contract at that time. it is still a much smaller contracts i believe and we work very closely to transition over the employee is. >> will you kind of hung around and iraq for a much longer time? >> you have paid a lot of money cried. >> on my written testimony i spoke on that. >> one last point and i don't want to be a dead horse mr. houck they made a comment about the difficulty and his small company's subcontractors managing the h.r. staff. i think it was your term. i just want to make sure that we

don't have an additional subcontractors or if we do they are identified because having worked with a lot of small businesses pay roll is complicating, for example,. many of his other administrative a journal functions are complicated and many small businesses and maybe years are all exceptions, many small businesses do not have the technical expertise to do those the canada lands. >> of one of our small businesses or any of our company's subcontractors are using a third tier companies to process payroll or anything on not aware but you will get that. >> we are going to leapfrog for a second. >> mr. schmitz, when it l-3 had the previous contract to 99 to

04 and then extended to 08 were you a subcontractor? northrup grummon frank. >> yes we were. >> of pay, mr. miller, when l-3 had the contract to do have in that contract small business subcontracting spent and i do remember what they were priced 35%? 31%? >> i don't recall what had been set up here and if i remember correctly the, the proposal offers the program at that time we were probably running close to 44% small-business. that's what comes to mind, a 44%. >> i am told right now there are 9400 did linguists' roughly. was that about is you have at the end of the contract in of seven? >> river over a thousand. >> and did you employ local and national san u.s. high years, he must have had two. >> yes. >> when you have the earlier contract since you have larger

subcontract arrangements with large businesses? for the nine percentages of the total contract value? >> i don't think so because the way this contract to evolve over time. in other words, loss of times a large percentages with percentages better fix and set up are a result of agreements leading into competitive solicitation. as you will recall, this began way back when as a 12 lead with contract so there wasn't a great deal of things for us back in 99 to agree to some it went forward. l-3 and tyson been trying to manage the contrary to believe then gls. it would not have sole centralize recruiting, we used to recruiting there are subcontractors. >> but importantly you didn't find yourself in a business relationship where you had given

to large businesses large amount of the work? >> no search. >> those rich l-3 employees? >> we have relationships with large businesses and in many of our small businesses over the years grew into large businesses and if you're talking about a top six now. >> okay mcneal thank you. john, can you come up and take a seat on. you are already under oath. commissioner had a question now wants to focus i think to and then bounced through, however, you want to do. >> use on having some trouble. technically the iii protests made by l-3 of the gls contrast that one way to explain what we are seeing is that enormous pressure was brought on gls it

to cut a very sweet deal for l-3. were there, not more technically than three but more protests involve? i have a number of 17 in non my head. >> yes the contract is it l-3 have as a linguist provider was broken into four separate contract efforts. due to a secret protests which was protests number one, that was up tell the. each of the other three small business protests i believe it was poor protests each before the performance was finally accomplished on those and so while we were fighting one protester had multiple processor running at the same time. >> i can see he would be busy at one and have persons that yuma seven putting the our san. but as far as pressure brought

on a gls with l-3 on a team of these small contractor protests, in a general way it's often the case that to use -- a pawn is not a fair statement but there is a big character in the weeds and there's a little character making the protests. >> i can't speak to the exact nature of their relationship, but as the incumbent the l-3 was a business partner with many of the offers. >> l-3 as incumbent, and they benefit from the and was stalling by these approximately 17 protests? doesn't think, and stay in possession and isn't the money continuing from the contract rolling in and were talking about 2004 to 2008? >> yes, sir. >> thank you dr.. mr. miller, is there something you'd like to say that was said

that he got it wrong? >> the only thing i'd like to observe and those are not our protests and we may have been the third-party beneficiary if you well. my understanding is most were protests of small business status were at the different pieces that had been broken out here. >> allen like to have your lott, let's put it that they're in can i ask further, the commissioner discussed with you that you were a general counsel and did not go. >> and things like that. the private aquilo this is the chairman of the board does he go. does he bring his private equity expertise to the deal on these contracts? >> are you asking me?

>> i cannot answer that. in i cannot answer because i'm not sure if mr. mccain has traveled. >> are not. >> can you give me some answer as to whether he is a hands-on executive with these contracts. >> he is a hands-on executive in is over a site diamond pour. >> he's not working that much on this particular contract. >> no, sir. >> well, i just don't see what l-3 was getting except huge pressure was brought on and gls. gls had revealed and as a result of that pay a of the translator was cut and our troops were in peril. thank you. >> thank you, commissioner.

was shea attica and the mentioned in a couple of the testimonies, or they a subcontractor mr. miller to l-3 in the prior contract? >> i don't recall the name, at some point i just saw recall it. >> fake work to your knowledge. >> not that i can recall. >> in my accurate and i don't have a schedule, but for some reason $67 million sticks in my mind approximately, them as the service second-largest behind a l-3 subcontractor. >> they subcontracted 15% of the berkshire. >> so they weren't on the l-3, the college shea attica linguistics and my question is very large subcontracts during, were they the, we heard organizations that have been in the linguistics feel the with race exceptions and concerns

about shared contracts the question. they supported the field and they're knowledgeable. had it is shea added at any experience with you read them as a subcontractor. there are an alaskan native corporation based in alaska. did they bring arabic and kurdish and whenever background as part of their proposal? >> they do have a proposal of wang was contracts. >> that meant -- in other words for the record alan ask for that. >> yes, sir. >> is there anything in terms of what i look at it in my going to see their providing 2,000 interpreters or linguists now the end of their high water mark for kurdish and arabic was 12 people or something like that? >> i don't have the specifics of the contract. >> for the record and the chairman is just about done.

>> dave don sali, haven't they? the contracts are in spanish and portuguese, right? they haven't been doing contract in southeast asia, have a? >> i don't have the answer. >> we are going to find out then. >> per our agreement if you have any hopefully we've done a good job of letting it, but if you have a final comments were in a thing to share the worker way across. mr. houck. >> briefly, this morning inscom discuss and their lack of resources and that police support then needed for providing the out of passats of to the source said agencies. we view our relationship is a partnership. we know that they are struggling with their portfolio contracts and it was a two have an additional resources i think that would help this whole situation immensely and other than that i thank you for your

time. >> thank you, mr. miller. >> i would be happy to respond to what we call tasker is that i have received from the commission today and report to give those answers quickly. i appreciate the time you're taking to look into this and listen to us. i appreciate very much. l-3 is proud of what it has done to support our troops not only on this contract but a lot of other work. we without any reservation to believe we have had a great value and done a good things here and as all have to say. thank you very much. >> mr. schmidt. >> yes are a couple points of clarification if i could, northrup grummon north of sales r 33.9 billion for the record and also concerning the question on our involvement with l-3 in the previous contract that was in calendar years 2006 and 2007. >> equivocation.

>> also i will take the action to get for the record the exact activities that we have done in the advisory support so we can be clear on that and again thank you for the office tuesday to testify in clarify our position as a subcontractor for gls. i think hopefully we've done a clear job focusing on our limited the scope of work for this contract. >> and want to thank all three of you. i think we thank our prayer group. we have a very competent staff in the consists of several great talented did what we referred to as young chennai warriors and then they will work with you very directly in terms of if this is what i heard as far as the tasker over there you want to call it, a follow-up and will get a meeting of the mines and bring forward. i want to thank you all, think the commission. thank you. we are done. they tell me to say, we are

entering a. we're having here. [inaudible conversations] [inaudible conversations] [inaudible conversations]

now discussion on cybersecurity, national broadband and other technology issues facing congress and the obama administration. hosted by the lobbying group attack america in washington, this is just over an hour.

>> [inaudible conversations] i just want to introduce phil bond as he puts on his microphone, president of tech america and he will have a few opening remarks to give a lay of the land of the various issues that have been watching and what we are looking for in the fall and then we have a number of our policy experts on hand and on the phone as well to facilitate what we hope will be a good q&a session for all of you. >> thank you very much, charlie. bear with me everybody for one minutes. i'm technologically challenged. welcome to everybody coming glad you could join us, we are tech america, the largest active state group on behalf of the industry with 200 member companies and through our regional affiliates across the country touch some 16,000 technology companies in on behalf of them i welcome you here. we have some of our key staff

with us today to help us feel from your questions after i do a quick review, kind of a waterfront of some of the issues still in the policy arena on behalf of the technology sector. let me introduce those we get to the russians on the phone. we have olga, executive vice presidents of our public sector group that is all the issues having to do with bringing technology to governments, we have a privilege, are seen as rector of tax and also health policy. jeff clark is the acting director of nursing government affairs program, lobbing in off into space on behalf of our industry. we have it, executive director for tech america midwest and will hear more from him later. with me in the room jennifer, to my left vice president of federal homeland security policy. it to my immediate left tray

hodgkin's, national security and federal procurement policy and on my right to joshua who is our senior vice president for commercial policy and has our government relations after is generally. and then class and certainly not least lisa, vice president of cyber secured a policy. let me see if i can to a quick tour of the waterfront for you. from a technology industry perspective congress parts for its august break after a very positive start through rate recovery act and serve and made clear that innovation essential to the president and congressional plans and terms of confronting our nation's biggest problems. washington also has taken up with renewed vigor the entire question of cybersecurity, several bills of light and, of course, plans to appoint unprecedented high-level adviser in the white house. innovation clearly it was a priority in the omnibus budget. we saw that expressed in rnd and

competing in alternative energy and smart kids. the and the question now live is where do we go from here after a very good start and realizing we're in a very competitive world feared summer i think it's fair to say that most of the attention and recovery projects has certainly been about 20th-century member structure. in tech america and his members are more interested in 21st century and the structure so broadband deployment, revolutionizing health care and information flow there, education, smart kids, green technologies. this is not to diminish shovel ready projects but we're more interested in innovation ready projects in the me just observe that the two don't have to be mutually exclusive. if we are going to be tearing up roads were building roads were repairing roads and bridges as show already projects are teed up there's a reason miami can

simultaneously be laying down a plea for century a researcher with fibre and other roads and we have, over exactly that. josh can talk more about that later. in recognize that to do this to need to make sure the regulations and planning is done in advance but i would say that that technology center and as companies are anxious to get moving, there's a lot to do. meanwhile we are continuing to work with states as well. much of the recovery many, of course, will flow through to the states and we're working to make sure that we continue the innovation headquarters of the world and in particular tech america midwest chapter with ed and leading the charge has been asked to permit on the illinois margin britain task force. this is an effort in this illinois to establish a physical microprints testing as a national resource to test for some of this large projects that will be coming to the department

of energy. so as we made progress in those federal state levels around some of these we also have been urging governors and federal legislators to not forget the outsize contribution and the small companies are making in this arena. 25% of the stimulus funding has been targeted for smaller companies. we have been in touch with governors in all this is to underscore that. and if that we're currently collecting some interest from small companies to write to the governance to make that point to them as well. small companies need to understand better how government operates and so tech america, our mission is to be at that intersection to help the companies understand how they can plug into some of the government programs and educate policymakers and governors and others have federal agencies to find those small businesses. so as we play the role of the federal and state levels we

focus on things like broadband plans and seamless investments but also the long term commitments. the fcc plan in national broadband plan. we have called here and tech america for flexible national strategy that focuses on the high-capacity networks, consumer demand so that there is some pull to the networks and them what is called a middle mile networks making sure you have an acre of high capacity capability in a community from which you can branch off to reach other elements of that. as we tried to extend broadband two every corner of america. once that plan is developed and released we look forward to working with both the congress and administration on implementation to one other area i want to mention quickly with his speech to leading a new group of associations and companies to seek a stable and you run into ikaria compensation so that you can enable networks to move information.

this is particularly focus on voice over internet protocol and other ip base services. ..

>> our counterpoint to that is that this is a linchpin in american competitiveness, this particular tax provision is critical to our company. we are 5% of the world's population, which means 95% of the world market is outside the u.s. and the tax provisions around overseas income are critical to allowing our companies to go overseas and compete and succeed. we do not think that it is a good trade to sacrifice long term job for short-term revenue. and we will be making that point on the hill. this is a provision that our members are wholeheartedly against any restrictions. another tax provision that is out there on the horizon that absolutely has to be addressed is that the r&d tax credit of course it gets ready to expire at the end of the year. this is something that must be done on an annual basis. we will be reminding members of congress that this isn't just

about scientist working on something for 10 years from now, but in fact, it shows that 70% of the r&d expenditure actually create real-time jobs. so we are here to say that either you think it is a good idea to encourage r&d in america and create those jobs, or you don't. and so we will be watching proponents very closely, watching not just the vote but who is really doing the work. not just cosponsoring, but who is sponsoring and doing the heavy legislative lifting. those will be the true friend of american innovation and argue. there are a number of issues in cybersecurity that i want to mention we're quickly and kivas up for any questions you may have. most important i think would be the appointment of a cybersecurity court made in the white house, which we are all waiting and believe will be coming in the very nude term. it is worth noting that really

outstanding folks have been added to this administration, greg schafer at dhs in particular. but in this environment it has been reported, melissa have to wait after finishing the 60 day review has submitted her resignation, as has michelle kwan from dhs. so this appointment comes even more urgent. i think that many in the technology space to understand the importance of cybersecurity, both to secure your assets but also to make the medium secure and instill confidence in people using the medium, that we are a little bit frustrated that the appointment has not been made yet and i would delsing the president shares that frustration because he certainly came to the white house with 60 day review was completed to promise fast action in his personal involvement in that appointment. legislatively, we really look forward to some progress on senator carper seville to

improve the federal information security management act. that will be critical and we have been engaged in that process. on the house either is a comprehensive legislation for breach notification, data breach. we are engaged there with subcommittee chairman rush as well. this will be important important things for congress to address in the second half of the year. as it really is related on the security front. one is past id, and the other is -- both related to past id. real id was proposed to identify -- to ensure that people are who they say the word to the driver's licenses more secure. this was a recommendation of the 9/11 commission. past id is a successor to that. we believe this recommendation makes some great progress on privacy. but in fact makes drivers license is less secure than they might have been otherwise.

and so we think it is important that you be able to truly validate that somebody is today say they are. so we will be continuing to work on that. and there's some specific concerns about the readable data on the cards that we will ask jennifer to address if you have questions of there. immigration, is on the horizon again now. it has kind of been reenergized. joining forces to address what we agree is a broken immigration system and we look forward to continuing to work with them to make sure that we get security borders, but also able to bring in the best and brightest from around the world. both those employed by our company and those who might be. our members also will be working on a related matter, which is that you verify system. we support good employment

verification we have called for changes on legislation in this area. we also sent a letter out to folks expressing our concern and our need in this area. let me see if i can cover just a couple of others real quickly before we open it up. one is on procurement. i mentioned in passing earlier. we are watching with great interest guidance coming out of a omb in response to the president's march 4 march 4 memorandum on government contracting. mmo posited a number of very good questions, and we will be watching as the agencies respond to those and working with them to make sure that as we pursue reforms and positive developments around the kind of contracting and procurement the taxpayers can have confidence in that we don't unintentionally put up hurdles in the way so that we do not bring the best

technology and innovation to the government sector. finally, i would like to note our concern over a couple of other appointments. again, these are both related somewhat to the procurement arena. first is the gsa administrator. we support and have called upon the senate to immediately upon its return to fill the position of the gsa administrator. to other positions at gsa have been given a green light to go ahead and be filled, and that is good news, but we need the administrator in place. the second position i want to mention, the secretary of army, representative john mccue is the nominee there. again, we call on the senate to act on that as soon as possible after their return. that is a rapid and far-reaching summary of things that are pending right now.

what i would like to do at this point is a term the gavel over to all of you, open the floor for any questions. and either defer to the appropriate expert to help us out. or you may take the first question yourself. let me go right there for the first question. please identify yourself for the cameras and others. >> irv chapman to guide work for bloomberg radio. just to flesh out at a couple of little things that you ran quickly passed. you want to build fiber under roads, bridges. what do you want to do, where do you want it to go? and broadband with the same token. i say broadbent, it's actually the sense of kind of a 50000, halfway across the country. what you want to do for that? where do you want it to go? >> i will call on commissioner gustitus give you a little more detail, but we think fundamentally you don't want to

20 century infrastructure to put an infrastructure for the 21st century. so to us it makes ultimate common sense to put the fiber down for all kinds of capabilities. some of which we can't know yet because they are over the horizon but they would certainly be municipal needs, private sector should be able to plug into that as well. should notify isps if you're going to tear up the road so they want to put down some of their own proprietary capabilities they can do that. i will let josh talk a little bit more about that. in terms of what we want the folks to do with the broadband, our first thought is you really use these kind of demand aggregators, big users, hospital, libra, some other significant public service which you can can branch off with greater speed. let me do for now to josh lamel who oversees all of our telecom work, was an adviser to senator

ron wyden on the hill for a number of years. and he leaves our committee effort to there. >> well, i think -- on th so the are a couple of things you. i think first, the first part of the question is the basic answer why does rural america, small-town america need broadband? why do we want, where is it going, why are we going to the 50000 person town's. i think there are a lot of recent. i think first and foremost for the residents of that counter the competitive in the 21st century job market, for the education to be competitive they need broadband. we are at a point in terms of when we talk about this broader debate around u.s.

competitiveness where, if you do not understand and know how to use the services you get because of broadband you are left behind in this world. and you're not going to be creating a competitive workforce dish you are not creating a competitive workforce for 2005, when loan for 2025 and 2050. i think that is important. it bring huge economic efficiencies to these communities. one of the best examples we see and hear people about is the importance of broadband to farmers and our agriculture system. in terms of the way they can monitor crops, regulate water delivery, regulate fertilizer delivery, make sure they are keeping track of anything. it bring huge efficiencies, brings down the cost, the cost of producing food, that brings down the cost of the. that i think no argument would be. and terms of how you do this, i think one of the reasons you see is anchored around this concept,

the idea of going to a library, going to a community center, hospital, with these massive middle mile qaeda connections and then allowing the last mile to be built off both of that middle mile connection through the stimulus or whatever, the fcc is going to be doing a national broadband plan, is that these institutions, you know, a hospital, library, these are the key institutions for access. a hospital, you're getting into issues around provision and medical care. hostile having broadbent allows maybe the role of doctors to confer with the number one expert in the country. send an extra, send a scan, send a task quickly and in real-time so he can potentially make a lifesaving diagnoses if he or she otherwise would not have the ability to make. that is a perfect example why hospitals is a good anchor institution of having a fat broadband connection is really important to that.

libraries, libraries are a place of learning for a lot of people in the community, and frankly not everybody wants to spend money on having a broadband connection in their own. not everybody has a computer in their home. a library is a place where you can allow those people to go into those things. schools i think are fairly obvious why it is important to have these in schools. it has been a long-standing policy dating back to 2001 in this country at the fcc. so that there is a lot of good we can do from that. and what you can do, and i think this is important, if you had this huge connection, the capacity is not going to get used just by that institution. and so what it allows the company to build wi-fi networks, connections through wireline off of those connections out to the community for those people who do want to purchase in the home, do want to purchase it for their own business. and allows you to do so in a cheaper way while meeting a need in the community while eating big core government aid while

both providing broadband to these institutions. >> let me make one other perhaps more urgent point. three years ago we did a study here to show that domestic sourcing and rural sourcing in the u.s. is becoming increasingly competitive with overseas sources. so great innovation in the past 10 years have been companies outsourcing work to others to do it more efficiently. rural america can do that work. they have the capability. human capabilities. with some training, they can do that. but what they need is serious bandwidth so that they are unrestricted and what kind of services they can provide. we have seen some governors, most notably governor bill dodgy in maine recognize this and market his role parts of the state in places who can compete globally for outsourced work. so that is one immediately, real global trend that is going on. this can be employment for rural america but they need some

bandwidth. other questions in the back. >> you mentioned cybersecurity, and i know a big challenge that has been identified is involving industry. so it is a coordinated attempt to tackle the issue and at the same time industry has voiced concerns about liability, even antitrust laws violations given information sharing requirements. so how can that be rectified so that we are in a coordinated attempt to tackle this such as necessary. at it as a follow-up, you mention dhs's new leadership in cybersecurity. is that enough to strengthen their leadership, which has been criticized in the past and how they are handling everything? >> we have some 300 companies who are engaged at techamerica and cybersecurity related efforts to track policy and impact that policy, both new legislation as well as

regulation and interaction with procurement officials. let me just say before i hand it off, that first of all, we think the two appointments inside the dhs are two extraordinarily strong players and that can only help in the cause. the need for the white house court nation is something that would recognize, called for in the past and certainly anxious to get that piece done. i think that some of the challenges you identified concerns about liability and proprietary information, only reinforce argument from more engagement in partnership. we need the best and most cutting edge technology which means you also need to engage their perspective to understand what the hurdles may be too getting that into government service. and with that, let a hand at first you liesyl franz ended to trey hodgkins.

>> i think you did either address a couple challenges that people did talk about with regard to the partnership that is so crucial between industry and government on cybersecurity, and we know ones whose element can do it, the whole thing on its own as the partnership's efforts that have been launched to date indicate. i think that from the industry's perspective, we looked at the current environment as the time to make changes that can enable information sharing and partnership in a way that removes those obstacles. we might need to restructure poor reconstitute what that partnership looks like to enable

that kind of interaction. and remove fears of either inadvertent sharing of proprietary information, or the threat of liability requirements that would have unintended consequences for the use of products and services. and didn't really reduce security rather than an able get. to address your second question, as phil pointed out, they are very good appointments to the department. and has really hit the ground running. the issue perhaps for the department is whether or not, where its authorities lie. and we see that there is some movement on the hill to try and put into statute some of those authorities, and that have not previously been there so we look

forward to seeing where that might come out. and again, the opponent of the cybersecurity cordwainer would be crucially important to coalescing all of the efforts of dhs and other agencies, not only for securing themselves as an agency, but bringing their resources and capabilities to combat the problem in a coordinated manner. >> a real-time example where it are partnering, working diligently to try to partner with the government is around the far councils case regarding authentic it products and services. the last public hearing for that effort will be this thursday and industry has been working with the two develop a proposal for way ahead that would allow the

government and industry to come about how we do this so that we are not excluding innovation and commercial products that we are not inadvertently cutting off small-business access to government market, but also providing a degree of assurance for the products and services that are limited to the federal government that is a real-time exercise it where industry is working with the government to come up with what will ultimately become the contract clause. it's not going they shall we have discovered is it's not an easy task. it's not going to happen overnight. it's something not to be resolved on thursday. we need to identify a timeframe in which we can all work together and reach a conclusion. but that is a real-time example of trying to work together with the government on an immediate issue. >> what is it called again? >> it's the authentic it products and services far case, and i can get that case number

40. >> the corridor of the broadband project is pretty vocal in saying the records so far submitted by industry and stakeholders, there is no ideas that will let the people plan that will move broadband for. how do you respond to that? do you all think you have ideas that would really involve? >> that is certainly a local point. , a vocal criticism that is out there right now. and i think industry is taking it too hard, and really going back and looking at what they said. i think part of it, you know, from a trade perspective you are representing the interest of in our case, you know, hundreds to thousands of people in industry.

so it gets hard to get really down into the details i think. but what we try to do in our comments is try to focus it on some of the really big ideas that people may not necessarily be thinking about, things like when you're defining broadband, we really don't know how to define speed in this country. speak, defining speech, people say it's a hundred megabit per second that's what it is. that's not what it is. it is depends on what the day you are logging on, how many of your coworkers are on, what you are doing, what you are doing on the back and. it is not a science. don't focus on the. what this is really about is focusing on what, and what you need to do, do what you think is the right thing to do. do what you think is the best that focus on what consumers need. whether that is a business consumer or individual consumer. focus on what they need and make sure that whatever broadband is, it is meeting the needs of the community at large. and that is an important thing. so we tried to stay with the big picture with that. some of the, in terms of the

technical details, i think part of the frustration you are saying is no one to go kind of out on a ledge and jump and say, you know, this is what you should do. but i think there are some people willing to do that. i think this gets also areas around sunshine. to be honest with you, i think there are some people who would love to say some things and make some proposals and throw out some ideas, not on the record, that cannot do so because the fcc is sunshine laws. would love to have those conversations over dinner with the commissioner, this is where we would like to be in 10 years. we don't know that's where would be but that's where would like to be. and the sunshine laws prevent that, you know you don't want to be put on record giving ideas that you don't know you will be up to keep or not and i think that is part of it. i also think, i mean, we have

heard that in many people have been going into this really thinking that broadband coordinator and the fcc chairman have really had an idea of what they want to do with this from the beginning and they're just collecting a record in order to back up what they want to do. and so i think people have not been investing necessarily because of that belief. people may not be investing serious amount of time of really putting together a 500 page set of comments that are going to indent on every issue that they otherwise would have. i also think people recognize -- i recognize that the less these guys have to reiterate thousand, respecting thousands of comments or at the fcc. and i want to stick to it and focus on what i can actually state from real authority. and i think an ad value for our organizational perspective as to what they are doing. i can talk personally about what we did. we are not going to add value to the strip we are not engineers. we are not hard core scientistic

we are not going to add value to this process by talking about in depth specifications that need to happen for lpd in the future. and everything around that. that is what engineers, scientists at the company's to do. you want to focus in on, there are some bigger pictures, thank you that we don't want you to forget the we don't want you to lose track of as we delve into the details of this. and it is important too, you know, have that underlying everything you are doing. >> let me add one quick comment, if i can. i think one of the things that is betrayed by that kind of observation is that the companies and us as an association, and i think the fcc are all running into the fact that demand matters. and when i mentioned that, i would say that that is part of that indictment of us. as a trade association we need to do a better job of communicating to small businesses, individuals, so they really believe, which we believe

is demonstrably true, that they understand that bandwidth equals more job opportunities. so that there is real demand on the system. again, returning to something i mentioned before. that is why efforts like that of the governor and mainly talk about bandwidth is critical to row source jobs. if people begin to understand that, they will demand more bandwidth and i think that is one of the holy grail's of broadband strategy is how do we incite more demand out on the edge of the network. frankly i'm a i think we need to do a better job as an association in that regard. >> i think on that point, and i think that is a good point. you have to look at some of the studies that are out there that even when broadband goes into a community, what do you have, 50 or 60%, maybe in the 70%? who are those other 30, 40%. we all know the benefits of it, that there is no argument that broadband is an economic good but why are people choosing not to buy it?

wire businesses choosing not to buy it? and there is some fascinating studies out there on his. i think there are studies that clearly get at, and i think this team is bill and i think with the fcc and in tia are looking at, that it is still an issue in this country and if you don't have a computer you don't need a broadband connection. but at the same time, and many of those communities they have mobile devices. and they have cutting edge mobile devices that they can access some of the benefits of broadband, not all of them for their mobile devices. certain cutting-edge technologies like the iphone, the blackberry storm are changing this. that ability. uhlig also some of the net books that are coming on the market, you see some of the major wireless carriers making with provision of networks for a contract at cheap price. that is a rather revolutionary for lower incomes to accept a broadband. because the purchase of a computer was often an amphetamine of that and the

ability to get the newest, a new net book that allows them to do anything that they need to do for $99. or for free. it probably will be within six months to year the way the market goes on some of these things. it is for nominal. is a game changer and we talked about for how many years. that is an absolute game changer in that debate. the other thing, you know, when you look at these demand issues, another good place to look at, and we talked about this in our comment, reply ,-comcomment to the fcc, broadband has been revolutionary technology, wireless and broadband, to the disabled community to be able to committee with people. for the deaf and hearing impaired, the benefits have been immense. i think any of you if you go, i encourage everybody to go spend an hour at the new york avenue metro station. just watch, doubt that university, which is a

university that services the deaf community. and cd amount of communicating that is going on that previously couldn't go on because of some mobile device that is in their hand and what they are able to and interact with people. this has been revolutionary for the community and their ability to committee with the rest of us. but not everybody knows that not everybody understands that. the older generation doesn't necessarily understand the. we need to do a better job of educating them. we need to do a better job of showing the blind community of the benefits that broadband can bring to them just because they can't see all of the things they can do using computer, technology, things they thought they could do. we need to do a better job of educating the over 65 junior did in this country about the benefits of broadband. i always joke that if you could tell a grandmother, you would get a response to spiking an e-mail account you get every grandmother signed up within one hour.

but there's got to be a better educational job about the benefits and not just the benefits, but why it is a good investment because of these things cost money. why it is a good investment. why it economically makes sense for them to shell out the $30, $40, $50 a month to purchase the service tech we talk about why it is good but we don't talk about at the end of the day what it is worth them spending that kind of money on it, and it is worth of spending that kind of money on a. we need to do a better job of educating them on that. . .

who are trying to reach an monetize markets overseas but let me deferred to give a little bit of an update on where it stands legislatively. >> thanks, and i knew we would finally get to the good part of the program. thank everybody. [laughter] i will go in reverse order, largely underscore what will send you and i think one of the main points that take away from this debate is that the interest in the for all that is to say keeping the tax system as this is very widespread in hinges on only one factor the most part

and that is the amount of sales derived outside of this country or as bill said in the comments sales derive from that night i percent of the world that is in the. and that number alone seems to be this hibbing points and just in our membership if is a broadly about the economy but certainly in our membership we have members who are driving '90, '91, '92, of to 96 percent of the revenue from foreign markets and hence any kind of tax tinkering even if this sounds poultry to us is 100 basis points or 1 percent is an enormous impact to their bottom line and basically comes off the bottom line and these days back and a percentage of the bottom line equal jobs, no doubt about them. everyone kind of things about the h-p and microsoft of the world and so that story is interesting but i think not

nearly so interesting as all of this impacts. as for what is going on the hill, virtually no proposal has men into legislative language and certainly not serious legislative language however, the threat persists of tinkering with international tax system and outside of a tax reform notion and we find that whole approach to be frankly dangerous. i think the key point to understand about the current tax system and i see this report sometimes erroneously, this is not a way to advantage our companies. this is a way to level the playing field for our companies. hence if you take away this deferral portion you basically are putting your company on a lesser footing than that of foreign rivals as we all know, there are plenty around the world that are directly competing with our innovation industry. >> i think there is another important point here to make.

i think, first of all, what you're hearing from many congressional leadership is we want to talk about this in a context of a broader tax reform package in 2010 and reopened and welcome that discussion as there are lots of issues with our corporate tax code right now. i think both are small, medium and large businesses want to look at and i think a second important issue which is location it isn't what it used to be. the big joke use of the location, location, location. for a company to decide where it is located with advances in technology and changes in how the market is it is less important every day for companies to choose to be located in the u.s. parent and is less in that location becomes less and less of a factor in their decision making. so issues like the tax code get into a broader issues of general competitive, the u.s. tax code

in 1970 especially the corporate tax code existed in a bubble and if i put a bubble around the u.s. and states competing for business within it but basically the tax code exists in a bubble in the united states. it does not exist in the bubble anymore. when a country like ireland and another some controversy around it but when a country like ireland chooses to make a decision to promote and invest in technology especially with a strong r&d of provisions and tax provisions and they have the education system and the workforce. >> it up, it becomes very easy for a country to say i am better off being in ireland and then in the u.s.. and from my bottom line if you're a publicly traded company for your bottom line in front you are doing is the ceo of that company, there's going to be tons of pressure on you to do so

from the market, from your investors and if you are a small company investors and there is tons of pressure to do so. because location becomes less and will continue to become less important every day. every day that passes for your company is located will become less important and the corporate tax code becomes more important. >> let me say something, the impetus in the middle of doing a survey and will have data on this but i can tell you both from talking to folks in the early data i have looked at, the number one impetus for why an organization and company's small, large or public or private whatever, will send the folks out of this country and set up in the locations, the number one in virtually only reason is for sales and selling in a goes back to went he teed up. in making easy to come if you are selling pieces you can deliver in the neighborhood if

you don't have the location in the neighborhood for which to deliver a hot fast pizza. it's not that much different. if both the technical support and help you need to be on the ground to provide that technical support and help in sales. you're not going to do is sending e-mail's, you are going around the world to sell and that idea, that kind of business approach is the number one reason that our member companies certainly will locate internationally so to amplify what josh added, the reason people are leaving to set up in the time the facility elsewhere is often simply sales which derives revenue back to the u.s. of course, and creating more jobs. but in addition and they already have a location elsewhere so it's easier to be flexible and where they might be around the world. >> to is behind these proposals? is that the obama administration, other folks on

the hill and can you be specific about either members of congress for a particular agencies. >> obama put this in his budget that you propose to congress which started the fire storm of ever ready reacting. there has not been a push from congress yet on doing this, but behind the scenes when you talk to people in congress and talk to staff the have talked about it in you for some staff talk about and there's no specifics to any member of congress out there on this yet. on using this to pay for it was thrown out to us by members, by members on the hill that potentially could be used as a paid for in the health care package. that has since been promised it would not be done. i thank you have seen the senate finance committee certainly in chairman baucus talk about this more in the context of a broader

debate we're going to have in 2010 are on the tax code in general so i think that's where the senate leadership has been on this. out the house side has been fairly quiet on whether plans are on this. now. >> bartlett, anything you want to end. >> will send. >> let me wrap up before a promise to come up here and go here. in terms of available options that companies have today, i just want to underscore, we are tech america, committed to the notion of america been as high as possible to technology and leading companies as hospitable. we have as our kind of stated goal that we want america to be the innovation headquarters for the world in america has the scene to advantages not only as the biggest markets and higher education system continues as the end of the will, we have a melting pot population which gives rise to innovation culture and those are few to vintages to

the extent that we explicitly disadvantage our companies to the tax code and it does invite them to another places. we are committed to the notion we have real and granted to us here. >> how do you make e-verify work? >> the media for to our expert on the system another identity management systems. >> i think you're right that we do have concerns that it does allow for identity fraud to get to the system and it's not doing enough to actually authenticate the person presenting the information for the job. we support in online workable employment verification system of. age should be -- with the way technology is now we are able to do it online nlrb asking your h.

r. rep and a company to be a document of the contagion expert. there are ways to authenticate documents on-line and so it will surely create a systemic that we're going to use for employment verification than employers tend to share the information they are getting is correct and that our comply with a lot. it will create efficiencies in the system because we're taking a paper base system and putting on-line. we do have concerns with the scale ability of the system and concerns right now to bring someone else's documents and be employed whether that is me are not. we have concerns there is some liability issues, liable for our subcontractors and we don't always know what level of assurance we should have with our subcontractors actually using the system. i think we also have concerns with the error rate and i think right now they say is that 3 percent error rate which is absolutely much better than it was but 3% to a small company is

devastating especially when you have to work on government contracts because you have somebody trying to figure out who is eligible to work but the system has returned a false negative for having to work through the social security administration and dhs to clarify the information so i think of the system are faced in that there's a lot of stuff that can be done to improve the system and we can support it. it needs a little more investment on the system and i think was happening with e-verify and senator schumer smooth for by amateurs social security cards and what we're seeing with pass id and real id is struggling to figure out how to authenticate and verify a person's identity. right now we have no present form of identification in this country and there are many ways it can be done, many technologies employed, it can be done to ensure privacy and security of the system but i would argue you're on the verge of identity crisis and the identity issue is central to

everything we're doing, essential two national security and e-health, cybersecurity come immigration, all of these so i think until we sit down and resolve this issue we are going to continue to have the same questions. how you get a license and make sure the person is who they are? have you major in social security card is legitimately issued for the person praxis this person eligible to work? these are issues and i think on cybersecurity as well as printing sample is the homeland security presidential directive 12 carded for use on one department of defense started to use it for a physical and logical access actually accessing the computer they haven't and you might remember that figure, but over 70 percent drop in an attempted to hacking into the system appears in all and this is by using secure credentials to get onto a system and make sure your only accessing what you were supposed to so i can't think this item is

a place a major area and i think all the proposals we are seeing on the hill pass id, e-verify, some of the e-health stuff and the social security cards is trying to get to the fundamental issue of the where is the secure prudential and secure identity. >> if i could follow up on that, you mentioned earlier about to pass id and some concerns or problems, can you expand on where you are with fat -- with fact and what are your feelings franks. >> sure, so we do have some concerns with a bill that we can have a verification is dated to april 9/11 level and i thank you saw that some of of the issues around verification and validation are actually weaker so we are not always authenticating all the documents being presented to prove your identity and not here to find

that i'm actually the owners of those documents so i think one example there is a great youtube video of a guy who goes into a virginia dmv and guests were licenses on the same day and he uses documents and changes his name every time but the fourth time he actually spray-painted a unit brown on his face and they gave him the license. the thing is that's because they were able to authenticate the documents being presented by the social security number and birth certificate however but they weren't able to tie the that was really his documents been issued. in this bill we move away from that and roll back some of the verification and talented vacation and procedures and if the state to state verification to a pilot program so as no longer mandatory to ensure the license. and so i think some of that issue we have consensus there was great stuff done in the bill about codifying the privacy provisions and we have a concern

and still working hopefully two legs is of the restrictions being put on the use of the machine readable son on the back of a driver's license. a lot of companies use that for fraud prevention so those are some of the areas we are working on an accord to working with the senate and house on that legislation. >> of the last year a lot of the bills have come from committees related to energy and commerce and homeland security. does that kind of approach benefit the companies you represent? is that --? are using any kind of development in a certain type of committee? one committee taking a lead on this? seeing any movement because it seems as though coming from all directions, cybersecurity is all over. >> i want to offer a quick comment and see what she would have to admit that i guess my reaction and in part betrays a

the navidad like many people in town i worked on the hill for a number of deals so my reaction to that is it's inevitable. cybersecurity does have multiple facets to it, it does have implications for commercial use as well as just peer security concerns and information systems and networks and so it's inevitable that multiple committees in jurisdictions will look at this and ultimately that means better legislation because it represents a different use. but let me defer to somebody who tracks the summit day to day basis and much more of an expert than i. >> i thank you both touched upon the core issue which is that cybersecurity is broad reaching and touch his heart of every aspect of our lives whether it be commerce, government services for individual use and so as he noted it's not surprising and probably a positive thing that

there is an increase awareness of the issues that we are grappling with in cybersecurity and more and more people are getting involved in trying to find ways to improve its. having said that, while i think the increase awareness and increase interest and increase need to do something allows for proliferation of bills, i would hope that the progress they would progress toward a coalesced solution. except in cases where this very specific, very specific needed that can be addressed in one particular area. one might be the critical infrastructure, electric infrastructure protection bills that were put out both the senate and house, very specific

prospective and it means being addressed. if you're looking at something more about omnibus bills for example then you will need to coalesce with your colleagues in other areas to make sure that all the prospective are brought to bear in the discussion, but the very early stage so you can have a positive approach pursued. much like we think that a cyber coordinator in the white house will help bring together in coalesce some of the solutions i think you'll need to see that kind of a collaboration in the congress as well come into something for and that is positive. >> is an omnibus bill something you think is a good idea? is that something that is positive? >> i think that because there are so many aspects of it take a long time to put something

together that would address each of the aspects of cybersecurity in a positive way so aptly looking at it in a more targeted approach for example, senator carper has a bill to improve and then congressman rastus bill to address security and a breach, those of specific themes that can be addressed in a cohesive way and move forward more easily than something that tries to touch everything and be everything to all people. to the extent that anything might coalesce in a broader bill down the road, it is all positive and well vetted and will work along the process and with the right amount of collaboration then that would be positive as well. it's not one or the other i don't think. >> [inaudible] >> you didn't address this in

your remarks but i saw in your letters to included health i.t. letters that your organization recently sent to the senate committee. and talking about the need for incentives but, of course, the congress already gave quite a bit of incentives and recovery act. there's been a lot of talk about using doctors and hospitals to get up to date and everything but i think from the doctors and hospital perspective they are saying without the it is not any good. they are being promised all these wonderful things and then look at the products and they don't do it. so is in the industry -- what is industry doing to come together and make their products and to be interoperable and start doing some of these things? >> again, i will do some preliminary, as alleged partly due mark thomas, but at the very tail end of your question in regards to said the key release from my perspective which is interoperability concern and. that's really what is about and

there are funding efforts around sustanon as a sin in that area which are going to be critical to unlocking the greg capability here. i would say equally as important are close to its would-be the emphasis on training to make sure people understand what the real capability to the programs and other technologies are available and then, of course, is a sensation to make sure you got things going from paper to digit such as you can move them more speedily. bartlett, let me ask you to comment further on the letters and other things tech america has done on behalf of its memberships in this area. >> i'm happy to address the letter directly although it sounds like the question was slightly different than the rest of the letter so if you want to come back that reno. to the interoperability point, so one of our key positions until underscore this already,

interoperability is an absolutely critical. you're from above the frustration of the doctors and health care industry is exactly the right historical perspective and a part of the perspective that gave rise to stimulus money and one of the thrusts of the stimulus money is to get in some cases liquidity money out there into the health care systems, doctors, hospitals etc. to be able to adopt technology is especially if we move -- we suddenly had a leap of electronic healthcare records system. we need everyone to have some way to interact with that as opposed to paper copies so in some cases you will need money in some cases going to need work in interoperability as the key point of our work and one of our key talking points and part of the reason this money was made available is so systems can be

designed to enter operate, education and training as a key parts as a lot of good interoperability does if they don't know how to make it operate so is going to take some e-mail element to get the records transferred one place to another regardless. that said, i think the industry and this is going to be speaking to individual members as opposed to giving an account of empirical evidence, i think the message is heard. i don't think it's a surprise that we find that as a new system developing the developing parts of a country, i would say this is true of health care. restart his starkly with individual hospitals and health care givers and hospitals in aggregate doctors into a network, 20, 30 and 40 years ago you sensing the physical buildings. you know lager and, in fact, i went to the doctor's office and it will go to an office anymore, i go to what is a hospital complex that includes a pharmacy

in a jam and all kinds of health-related activities going on at one physical establishment and the same thing will happen in i.t.. and so while i do appreciate the rodentia up, that is exactly in the historical perspective. the current activities are all designed to get around and my last point would be that hhs, this is exactly where they're taking the time to make sure that definitions are a little arcane but the definition of meaningful use. we need to get those definitions right in our comments and your notes address interoperability with a suggestion to hhs not only product to product by product to government rules so in other words, they do not allocate money for systems that are already designed to be able to work with current or soon to be coming changes in regulation.

>> i hope that is a response to your question and any others have follow-up questions feel free to contact charlie and we will take any other questions later but without them if they give free airtime for coming by today. thus know how we can help you in the future. thank you very much [inaudible conversations] [inaudible conversations]

how is c-span funded? >> donations. >> funds. >> private contributions. >> honestly i don't know. >> advertisers. >> something from the government. >> how is c-span funded? and 30 years ago america's cable companies traded in c-span as a public service, a private

business initiative. no government mandate, no government money. >> first this conversation from today with a capitol hill reporter who is familiar with the issues. >> why is congress concerned about the rise of mexican drug cartels? >> i think the administration has pushed for the previous administration and continued this initiative which is a version of what was done with columbia with a lot more increase funding and since congress controls the funds they want nor the money is going out and spends involving the congress and the drug war in ways that haven't in the past. >> how much money is this initiative in dealing with, how much talking about? >> it is the caribbean countries as well as mexico but i believe in 2008 the cycle was about

100 million and congress has to sort of hold about 15 percent of that if my memory is right to certify the human rights being protected and other accounting within of the money is going. >> folks and read about this drug cartels, what exactly are they doing that is a threat to the u.s.? >> i think the new cartels have been around for 20 years and is a lot more violent in part because of the success the administration has had in breaking up the top of the organization's which has become a medusa when you cut off the head in a bar has grown, you got a lot more growth of the smaller and more violent cartel's 22 their way into the top. and i think that is one element and increasingly is spilled over into the u.s. border cities.

>> there weren't a lot of concrete things on the drug site it was restating. i think more than anything else

obama stood up for government on the way that was a little bit surprising. the funding, some of the funding for the drug plan has been held up by senator patrick leahy of vermont, who is concerned about these human rights that mexico hasn't done enough to at least investigate. not necessarily saying it is true, but that mexico hasn't even shown what it is doing to investigate and. obama made real clear that he thinks, westlaw covers of his family, lost a lot of close associate to the druglords who have killed or killing indiscriminately. obama gave him a strong public support. >> how is the approach of the obama administration different from the bush administration? >> i think one of the things that is very important new wrinkle is that the obama administration has committed to doing southbound inspections. the drugs come into the united states, but the money goes back into mexico. the estimate is around 25 billion bulk cash going back to mexico. people cut off the cash and

start to starve the cartel. we have done away with our assault weapon ban. mexican drug cartels are using mules to buy smaller numbers and then build them up. a arcadian, assault weapons of all sorts, and all of that ends up in the hands of mexican traffickers who now have better firepower than actual mexican police. in some cases the mexican military. >> what will happen with this issue that the money they promised to mexico? >> it appears state department officials have said mexico has provided some more information to them so there will be a report right after they come back that should free up money. i think that's as much a question of being able to document things as anything else. >> kevin hall with the classy newspaper. thank you for joining us. >> the meeting will come to

order. good morning and thank you all for being here or mexico has long been an important ally. is this country's third largest trading partner. as one of the largest economies in the americas, and remains the third largest source of foreign oil for the united states market. unfortunately, over the past few years, organized crime has made mexico a major producing and transit state of illegal drugs, trafficking into the u.s. as long as much as 90% of all cocaine entering the united states comes through mexico. criminals in mexico are now the largest foreign suppliers of marijuana and a major suppliers of methamphetamine. apparently crime pays. this criminal enterprise is estimated to produce annual

revenues ranging from 25 to 40 billion. in december 2006, shortly after taking office, mexican president felipe calderon began a major crackdown on the drug cartels operating in his country. since then, almost 11000 people in mexico have been killed in drug-related violence, almost daily reports from mexico depict killings, acts of torture and kidnappings. and it is getting worse. this past june was the deadliest month on record, with over 800 killed in drug-related violence. in short, in mexico, drugs and violence are a growth industry. as a result, mexico is facing one of the most critical security challenges in its

history. many who have had the courage to confront the drug cartels have been threatened or killed. this include policemen, soldiers, judges, journalists, and even the clergy. however, there is some basis for optimism. the courageous efforts of president col de romme have resulted in an important changes, law enforcement agencies and other federal officials have reported positive developments and the report untrimmed working relationship with their mexican counterparts. they say these changes are having a significant effect in addressing the drug threats posed to both countries. at the same time there's a front-page article in in today's washington post which reads, mexico accused of torture in drug war. army using locality to fight traffickers.

as the effort in mexico to address the drug threat continues, we must be clear, that abuses from the state are equally intolerable. i will seek to understand more about the facts related to this article as the committee's investigation continues. nevertheless, i believe the drug cartel and their associated violence constitute a major threat to security and safety along the southwest border. and i have called -- cause major disruptions to commercial activities, including international trade because untrimmed. because of my growing concerns about this problem, i said a bipartisan team of committee investigators to the southwest border to get a firsthand look at what is happening on the ground. our investigators met with numerous federal, state and local officials, including law

enforcement, military intelligence, and others. and unserved field operations in both daylight and night. this hearing was designed as a follow-up to the staff field investigation, to provide the committee with an overview of federal efforts to disrupt and dismantle the mexican drug trade, and to examine whether federal agencies have sufficient tools and capabilities to do the job required. over the past few years, there have been nagging questions about the effectiveness of federal policy with regard to the southwest border. while it is clear that this administration takes the drug cartel threat very, very seriously. questions remain though just one month ago, the administration published a document entitled national southwest border counter narcotics strategy.

this is a blueprint on how the administration will address the threats posed by mexican drug smuggling. but the key issue remains, who is in charge. we know who is leading the fight in iraq. we know who is leading the fight in afghanistan. what we don't know is who is leading the fight on our own border. is it the border czar? is it the drug czar? will it be the national guard? we will update a better understanding of this question today. one more thing before we begin. with us today are top representatives from key law enforcement agencies involved in the ongoing struggle to address the mexican drug trafficking. the work they do is critical both to the united states national security and to help

mexico in its objects and turning the corner on the threats it now confronts. i commend the effort and i look forward to working with them on this critical national security matter. thank you. before i recognized my ranking member for his opening statement, i would like to thank the minority for its assistance during this investigation. at all the work related to today's hearing was conducted on a bipartisan basis. i would like to thank the ranking member for his leadership, and he and his staff were continue to build on this important relationship. i look forward to it to me to work together on important matters such as today's topic. i will now yield to the ranking member, mr. issa for his opening statement.

>> i would've let you go much longer on the track. [laughter] spirit as a chairman said, this is a bipartisan issue and it is one in which there is no distance between the chairmen and myself. our staffs did work closely on it and continue to continue. there is no surprise that we will reach different conclusions on some other fixes, some of the things that should be done. we certainly will reach some differences in the priorities of the administration in putting its representatives before us today. and the two of us, but when it comes to finding the facts and to a green on the portions that can be agreed on so we can then disagree on very little, i think this committee is setting a high standard and 19 to continue that. mr. chairman, i ask unanimous consent that my entire opening statement be placed in the record. >> without objection, so ordered. >> and with that indulgence, i will take a moment to recognize alan berson. i don't know the rest of you as

well, but our new borders are, is not new to san diego. and he is not new to do with border issues. his work as a u.s. attorney. he has worked in education. is worked on the airport. the list of workers too long to do is as an introduction but you have been a champion for so many causes in san diego, and i couldn't be more delighted that the president has selected you as somebody who rises above the politics, rises above either party to do what is right for our country. so i look forward to your testimony today. and i am particularly pleased that the border as a separate issue is getting attention. i must admit that the reduction of the drug czar maple cabinet level position concerns me deeply. i think it sends the wrong message at a time in which your efforts and the efforts of the mexican government are going to be critical. and the fact that we pulled away to an half years ago from plant

plan colombia. we curtailed our support for plan colombia, and then on a very partisan basis, failed to support the colombian free trade initiative sends a chilling message to countries who bled so long with us in order to eradicate drugs that once literally controlled the government in colombia. today, in mexico, we have a very brave president who is fighting the same battle, and so far appears to be making progress. i say that because you are only one key assassination away from a dramatic change in mexico. and that we need to understand that. we need to understand that the depth of corruption in mexico, which has often been well understood when it is in the hands of people with guns and willingness to use them here at 11000 or so murders this year alone. says a great deal. we are going to hear today about

the spill over, or lack thereof. and i believe as a san diego, that people in san diego at the border, u.s. attorney and others are doing a good job of doing everything they can to ensure that the activity north of the board is disconnected as much as possible from the activity south of the border. but let's be clear. whether you are in san diego or saint louis, or cleveland, you are directly affected by our failure to stop narcotics from coming into our country. every city in america, and many rural areas, have organized crime directly linked to those assets being made available and sold. some in my party would save that it's another country's problem alone. i am not one of them. today, with former speaker denny hastert, we announced with many members from this committee, a drug task force, one that had been somewhat dormant for several years because we felt that we needed to work hard to

bring new emphasis to this growing problem. but also because we want to make sure that the facts are very clearly stated to the american people. first of all, we are the consumers and we are the suppliers of money. we all take a certain amount of blame for the fact that our money ultimately lead to these cartels operations in other countries. additionally, we are going to hear today about guns going south while drugs go north. i have no doubt that drugs do go south. one of the questions is is it through the tunnels that i have seen personally that move the drugs? or is it somehow through the borders? would we in fact give any real good if we set up an exiting american checkpoint at the border, or what it seems to be one more burden borne by our border patrol people at a cost much higher than either the mexicans doing their job, or in

fact, would we accomplish very little other than defined a small amount of drugs and a small amount of paraphernalia when, in fact, anything serious in the way of guns or other activities are probably going through the very means that bring drugs north are also sending things south. and if we didn't find the drugs going north, we are just as unlikely to find the guns going south. having said that, i look forward to an awful lot of information. we don't have every day in san diego. and i again want to thank the chairman because the only way we are going to really support the efforts of this administration and hold the administration accountable is on a bipartisan basis. we are off to an incredibly good start and i expected to continue. i yield back. thank you, mr. chairman. >> thank you very much, congressman issa. i would now like to recognize to make his opening statement if you would like. >> thank you, mr. chairman. i want to thank you and thank again our witnesses for being here this morning. morning. in march the subcommittee on

national subcommittee on foreign policy, foreign affairs, had a hearing on the issue of money, guns and drugs and whether or not the united states input for fueling violence on the u.s. mexican border. at that hearing we were her testament but what factors inside the united states are contributing to the strength and will be of mexican drug cartels. the key point that emerge in that hearing the point that i hope will be a export more today will be an endless task if we don't address the other related aspects of the drug trade. more progress needs to be made in three main areas. guns, cash, and the demand for drugs in the united states. according to some estimates, as many as 90% of the high caliber weapons that are being used by drug cartels to perpetrate the violence we've seen in the past several years are beginning in the united states. we can't hold the violence that has gripped border towns, the mexican government and the safety of our own citizens of the southern border if we do not halt the flow of arms into

mexico. this is a significant challenge for law enforcement and border patrol. in many cases the manufacture and purchase of these weapons may not be illegal. that means we have to check the gun vote at the border as well as in the interior of this country. a second major factor of the drug trade and the rise of powerful drug cartels is the cash flow coming in from the united states. we heard testimony at the march hearing that as much as $25 billion in bulk cash flows into mexico from drug sales in the united states each year. one of our witnesses testify that federal law enforcement is hampered by its efforts to find and stop these casos by what he called antiquated legislation. it also appeared that there may be a lack of ordination between the various agencies that have jurisdiction in these areas. i hope our witnesses today can address those issues in more detail as well. finally we must address the fact that it is the demand for drugs here in the united states that has allowed mexican our toes to become profitable. according to some estimates 90%

of the cocaine, heroin, methamphetamine, easier to say than use i suppose, and marijuana purges consumed the united states enters our country through mexico. americans spend as much as $65 billion annually in illegal drugs. there are no simple solutions to the problem. we need to recognize that our internal drug policy in curbing the use of these illegal substances in the united states can have a profound affect on the stability of our neighboring countries and our own national security. before closing i also want to know that there is a global problem. not sipping an issue in the united states and mexican border. after the march hearing we have testament of cocaine to mexican cartels is now headed to europe and russia. in addition mexican and massive drug cartels have made inroads in west africa. it makes the situation there particular concern to us, but it is just one piece of the global puzzle. i hope that our discussion here today can inform our approach to the other regions as well. again, i want you thank you, mr. chairman and i want to thank our

witnesses. >> and i yield. >> mr. chairman, let me say as a lifelong resident of the front area area i want to thank you for this hearing. it seems that everybody was talking about wars that are overseas and faraway. but we are ignoring our own backyard where fatalities are skyrocketing, where the death rate among law-enforcement just south of our border was far beyond anything we have seen anywhere else in the world. and we just sort of ignored it because it wasn't on the radar screen for the media. i want to say, apologize to the other two gentlemen, because i have to make a mention of my friend, mr. berson, life is a divisive ministry, there are disagreements i have but when it comes to the choice of our guy over in san diego and the western section, no one could have been a better choice than alan. and i want to thank him for being willing to serve again. because as everyone knows, it is not an easy job. you do what you were stepping

into, and we don't have time for a learning curve here. and i want to thank the administration for bring the man back on line. mr. chairman, the one thing that i just have to say is that too often we hear the media talk about the drug cartel. drug cartel. we need to change the terminology to the smuggling cartels, because we are talking about not only drugs going north, but we are talking about guns and money coming south. and the same cartel is involved in the illegal alien smuggling. it is all a network and a profiteering. in fact, i have grown up in an area where we got in the habit of saying illegals being used as the mules for the cartels, and the abuses and a high risk involved with illegal immigrants because of its relationship to the gun, money laundering and the drug cartel. so i did want to make sure that we understand that when we talk about this issue, there are all tied together. the cartels have control of the

building and the illegal crossing for much too long and i'm glad to see us address this. i am also glad to see this hearing because too many people on our side of the border think this is a problem that is across the border and it is not going to be a threat to the american communities. this is a major threat for all of us along the area on both sides of the border. and i hope i am able to get you photos that i don't think will show in public, but just so the members understand how bad this is, when a hospital in my county has somebody walking in with two fingers and say, is there any way to preserve these figures so that when we get the hostages back, we can sew them back on. when you've got law-enforcement that finds -- let me just say the remnants of decapitation. this is the kind of thing that we are having going on in our neighborhoods, not just in tijuana, but in the san diego county region. it is crossing over, and now is the time to win this battle and

working with mexico, working with call to run. and let me say one thing. president calderon is the bravest elected official i have ever known. and i think that we have got to give credit to him and we have got to throw aside our disagreements with mexico and work with him now as we either fight this battle on mexicans will and win it, but we are going to be fighting it on americans will at a much higher cost. and i appreciate the chance to be able to be here today and i yield back. >> thank you very much, congressman. >> i would now like to introduce our first panel of witnesses. testifying today. mr. kerlikowske, director of the office of national drug control policy, the executive office of the president. mr. breuer assistant attorney general, criminal division, united states department of justice. and mr. allen version, let them

praise all porting your. i want you to know to have congressman bilbray and the other guardsmen to say something nice about you, you must be great. [laughter] >> assistant secretary for international affairs and special representative for border affairs, office of international affairs, the united states department of homeland security. let me, i isabel that will go as far as we can. let me just where all of you in. please stand and raise your right hand. do you solemnly swear to tell the truth, the whole truth and nothing but the truth, if so answer in the affirmative. you may be seated. let the record reflect that all the witnesses answered in the affirmative. why don't we start with you, mr. kerlikowske. am i pronouncing that correctly? >> very good. your excellent in that.

[laughter] >> i practiced all last night. >> thank you, mr. chairman. and certainly ranking member issa, all of the committee members who are here today. last month secretary napolitano, and i publicly released a strategy that was referenced by the chairman. it is a cover is of interagency plan that was the belt through the work of the office of national drug control of our office, and it was done in a way that ensured all of the partners that you see here today being actively involved in it. this is a plan that is not going to sit on a shelf and gather dust and it is being put into action even as we speak. and it is being done in partnership also with the courageous and dedicated work of texaco's resident, calderon, with investments of the united states government has made, and a commitment to all other federal agencies, and the state and local agencies that we have talked to.

to ensure that it has turned into action, the administration will soon be announcing a dedicated interagency working group, which i believe, to push forward the full and effective implementation of the strategy. and that framework is being developed. will provide a public report on the information -- implementation of the strategy as part of the administration's first national drug control strategy which will be published early next year. is as part of my oversight responsibilities, my office recently identified over arching walls to help guide all of the federal agencies as they develop their policy initiatives, there've programmatic efforts and their budget proposals. over the coming months, we will be working with the department of homeland security, justice, state, defense and others to develop cross agency performance goals and metrics for the southwest border initiative. in addition, as the agencies update their strategic plans, we

will be working with only be and the departed spirit and the agencies to integrate key southwest border priorities that are defined in the strategy. this is not only going to ensure accountability, but it will make it clear that combating the flow of drugs and money and weapons across the southwest border must be a core element of our nation's approach to the entire drug problem. it is essential that we work together as one team to stop the flow of drugs into our country, as well as the southbound flow of all pretty and weapons that fuel drug cartel violence. to make headway on the full array of border challenges, the congress and the administration are going to need to work very closely together. i am looking forward to working with this committee, and i know that part of the focus that you certainly have identified is on accountability and we are very prepared to enter them. before i close, i want to take, talk for just a moment about how vital it is that the federal government improve its cooperation with state and local

partners. i asked the directors of the high intensity drug trafficking areas to meet with me along the southwest border last month. what the director told and what i believe the members of this committee already know is that our front-line state and local enforcement partners have been under enormous strain. bill colander, who is the retiring sheriff of 50 plus years of law enforcement have been friends for many years, so i listened to this very closely. although the strain is mostly cute on the border, as ranking member mentioned, clearly this is a national problem and it has affected us in seattle during the nine years that i was police chief as well as my colleagues in minnesota, and across the country. the administration intends to continue to help those law enforcement agencies who need it, and that are on the border and also within the interior. and we are going to keep an intense focus on the threat and

make a difference. the knowledge of local law-enforcement, meaning the state, county, city, is a great advantage to the work of the federal government. and when it comes to the critical challenge of southbound flow of weapons and awkwardly, partnership with those agencies is essential and i think i can be of great idea in that. state and local law enforcement personnel possess unmatched knowledge about the organizations that operate within their jurisdictions every day. law-enforcement operations are most effective when this knowledge is combined with the skill, technology and resources that the federal agencies can bring. all of this and this administration are committed to pursuing a truly national approach to the critical problem. naked, chairman, i look forward to answering questions. >> thank you very much. mr. breuer? >> chairman towns, and ranking member issa and raking members,

i appreciate the opportunity to appear before you today to discuss the department of justice's important role in the administration's overall strategy to address the threats posed by the rise of mexican drug cartels, particularly a lockout southwest border to the justice department's goal is to systematically dismantle these cartels which threaten the national security of our mexican neighbors, pose and organized crime threat to the united states, and are responsible for much of the scourge of illicit drugs and the increase in violence in mexico. this issue demands priority at the hiler leveled at the department leadership there cascio, on june 5, attorney general holder, department of homeland security secretary napolitano, an office of national drug control policy director carl caskey, released president obama's national southwestern order counter

narcotics strategy. the strategy is designed to stem the flow of a legal drug and/or illicit proceeds across the southwest border, and to reduce the associated crime and violence in the region. i look forward to working with director kerlikowske, and assistant director berson, and our many federal, state, local tribal and mexican partners to ensure success in the administration's strategy. the justice department plays a central role in supporting the national southwest border town or narcotics strategy. . .

government. >> the merit initiative including serving as the lead implement tour a programs of the capacity building, asset forfeiture, expedition training, and forensics. we continue to work closely to address of issue of cartel related public corruption. we also work together on extraditions of key cartel leaders and other fugitives. the administration has taken steps to confront the step, and with are committed to helping the mexican partners. we believe the department is the right strategy to disrupt and dismantle the cartels and stem the southbound flow of firearms and cash. the strengths are illustrated by, for example, the tremendous

successes of operation accelerators, a project reckoning. multioperation of the cartels. we recognize there is much more work to do. last month the traveled to the southwest border along with secretary bersin and saw the challenges that the personnel confront on a daily basis. the department is committed to working together with our colleagues with our state, local, and triable partners, and with the government of mexico to build on what we have done so far and development and implement new and refresh our strategies. the recently signed mous

between dea and atf are implementive of our collaborative, coordinated approach to the threats posed. by continuing to work together we can and will rise to the current challenge. again, thank you for your recognition of this important issue, and the opportunity to testify today. and i will be happy to answer any questions you may have. >> all right. thank you very much. let me say that we have votes on the floor. we will adjourn for one hour. and we convene ten minutes after the last vote just in case we run into problems. i think we will be back in an hour. we have the vote around here.

>> the committee will reconvene. we apologize for the delay. but votes are something that we have to do. mr. bersin. >> mr. chairman, members of the committee, thank you for this opportunity. the rise of the mexican drug cartels and u.s. national security poses the critical issue clearly and directly. this is a subject critical to our nation. and one with which i'll having served as the southwest border relatives for the department of justice 1995 to 1998. since my appointment to dhs in mid april i've traveled to the border of mexico to meet with u.s. officials at the federal,

state, and tribal level. i've also met on behalf of the department with immigrant advocacy groups and civic groups around the border by albuquerque, phoenix, and san diego. living and working on the border has given me the appreciation of the strategic enforcement of our political relationship with mexico as well as for the gravity of the crisis that we face given the rise of the drug cartels on the u.s. mexican border and within mexico itself. it is indeed a crisis in using that word. i note that the chinese word for crisis is written in mandrin. the danger comes from the fact that mexican cartels through

violent and corrupt means created a crisis. the power of the cartels is alarming. they have polluted the political system of mexico. they have corrupted the legal system p the second element of danger is the competition belong with the mexican's work attempts to combat them and lead to unpres sented violence in the northern states of mexico from california also. resulting in more than 11,000 deaths in the last three and a half years. our opportunity arises from the historic and courageous efforts. first we acknowledge the power of the cartels and second to willing confront the stark reality of systemic corruption that exist in mexican law

enforcement. the united states government has been old as well. starting with the unqualified acceptance, the consumption of drugs on the u.s. side of the border is a major contributing factor to the power and influence. for the first time we view drugs coming north and guns and bulk cash going south as two ends of the single problem. it is not the occasion for finger pointing between mexico and the united states. the acknowledgment of a shared problem has paved the way for cooperation between dhs, along with doj, and the government of mexico that would have been unthinkable 10 years ago and even unsayable 3 years ago. dhs is working in full partnership with the government of mexico. this is the relationship of trust with verify indication.

and one that is accepted by both countries on that basis. on march 24, secretary and deputy attorney general announced the president's major southwest border initiative. a reallocation of technology equipment and attention. importantedly, attention to the border. those deployments are now complete. dhs has also taken steps to deepen our relationship with agencies in the mexico. on june 14, we signed a letter of con -- content to guide the cooperative efforts with mexican customs. we have worked to broaden the bilateral relationship as well as in other areas that our law enforcement sensitive.

many have asked me what has changed between my first appointment and so-called borders are and my current job. the security threat on the border is certainly intensified with regard to the activities of the drug and other smuggling cartels that dot the border. however i note two positive changes within my government that make me optimistic that we will succeed our efforts to the reduce the power of the snuggling cartels. first we provide a better resource capability. it also has a unified chain of command overseeing our investigation and protection responsibility. secondedly, and genuinely i have been impressed by the cooperation in our federal agency. along with kerlikowske.

this is particularly true on the long-term vehicle for expanded cooperation between u.s. mexican law enforcement agency. mr. chairman, ranking member, it has been said that the challenge of our time is that the future is not what it used to be. when it comes to u.s./mexican relationships and the prospect for building on that cooperation to deal with mexican criminal organizations, that's a good thing. a very good thing indeed. i look forward to exploring this matter further with you and my colleagues in questions and answer. thank you. >> thank you very much for your testimony. we now will move to the question and answer period. i have one broad question for

you:are we winning the war against the mexican cartels? drug cartels, mexican drug cartels? >> chairman, we are. that's not to say we don't have much to do. if you look at the work that has occurred, with respect to operations that we have, whether it's operation accelerator, project reckoning, where we have investigated and prosecuted the cartels, we have extracted enormous blows against the cartel and golf cartel, we have lier levels of extraditions of drug and kingpins. we are taking very effective strategies with respect to intelligence based investigations and prosecution. that's not to suggest that we don't have more to do. but the battles among the cartels themselves are showing

that the pressure that we're putting on them and alliance with president cal da roan do demonstrate we are being effective. >> i agree. this is a long-term struggle about reducing the power of the cartels. therefore, we're turning it from what is currently a national security threat into a more conventional law enforcement or criminal justice problem. measured by that standard, i think we have a ways to go. i'm saying that for the reason he stated we are making progress and it's that measurable progress. we have intensity and continue to see a weakening of the cartel power, which now is alarmingly high which i said in my statement. >> it has been indicated then that the president is planning

to send national guard troops to the border. of course, if we send national guard troops to the border, who will be in the charge of them? >> mr. chairman, the decision whether or not to send national guard in support of law enforcement at the u.s. mexican border or indeed in any border is a decision reserved exclusively for the president. secretary gates and pole tan know has been conferring the recommendation that will be submitted to the president. but in the end, the mission and decision, is a function of presidential decision. and i'm not confident that in due course that decision within made one way or the other. >> all right. what are the implications for u.s. national security should

the calderon administration fail? what are the stakes for both mexico and the united states? >> yeah. do you want to take it? >> mr. chairman, there are very, very significant. certainly for mexico as system secretary said. they are confronting a national security tremendous challenge right now in their battle against the cartels. with respect to us right now, it is absolutely an organized -- the equivalent of a major organized crime challenge. we cannot permit president calderon to fail. this is his courage and willingness to take on the cartels. the continues -- consequences are very extraordinary and we need to ensure we do everything that we can to support the

president. >> i'm in agreement with secretary having heard her refer to the wit of opportunity. to the extent that we are not able to weaken the influence of the cartels and the mexican political system, we will continue to see a mexico in which decisions adopting made of the merits but are rather being made because they are bought and paid for. that kind of influence south of the border presents a whole series of security threats to mexico, which is why it is sop important that we use this window of opportunity with the calderon administration to weaken the power of these criminal os, these smuggling organizations that do damage to our side but even more damage to mexican society. >> all right. what would victory really look

like? >> one of the things that victory in mexico would look like is president calderon has is local law enforcement that is professional, highly trained, skilled, possesses the integrity to be responsive to the needs rather the heavy use of the military in that country. the other thing that i would look at in victory too has been remarked to me by representatives from the government of mexico. and that is the increasing addiction population or size of the population involved in drug use as all of the members, i believe, of the committee know the traffickers often pay their people in product. we in the united states have to be willing and have already

looking at providing resources that work toward the prevention end of drug use in that country, but also the treatment end. those are other parts that we hope to play. >> okay. >> thank you mr. chairman. whether bersin during your tenture as u.s. attorney you were quite well known for stop those trafficking human being. along the way you did an awful lot of drug charges antemules they carried. can you give us your opinion of the law and some of the penalties that you have for them that the u.s. attorney at the border areas have as tools today. are they sufficient? >> you raise an important point. particularly in this era in which the division used to exist

between smuggling organizations and drug smuggling organizations has been blurred in parts by the effort as we described pressure being brought on the cartels by u.s. enforcement, but also by the recession of the economy. so we begin to see a blurring of those lines. i believe certainly speaking from the perspective ten years ago, the series of busts and statutes available to prosecutors, and i would refer to mr. breuer since i wore the hat of former prosecutor but as an enforcement official i would say 1326 and 1325 which is a misdemeanor work well. 1324 which is something that ten years ago was believed to

require review. i commit to regardless of how we come out on it we could stand a further review at this point. >> look, and mr. breuer, we've had a challenge at the border that i've observed. which is that the first several times you catch a trafficker, he gets treated as an amateur like he happened to be mumbling over the border. we've had cases of dozens and dozens of times in which we cannot get, sometimes because of statute, we can't get the kind of enforcement. do you believe, all three of you, do you believe that the congress should be looking into giving you as prosecutors and the courts in their determination, at least a greater ability to have upper limits or have the lower limits

raised and or at least give them the ability to add tough 10% on the first or second time that you catch a trafficker, regardless if you can actually catch him with the drugs. >> thank you. i definitely think it's an issue that needs to be explored. i think what we need to do is we need to give the tools to our attorneys such as what secretary bersin was when he was the u.s. attorney in san diego, i think we need to give our u.s. attorneys particularly in the border states the disdiscretion and the tools to deal with the issues. i thinker we have to give the attorneys the discretion to prioritize. we have to ensure we have appreciate facilities, whether it's prison or other

facilities. >> let me go back through that. california has tens of thousands of people who are petty criminals and illegal aliens. are you saying that if we wanted to encars rate every person who was trafficking either in drugs or in human beings that you don't have the capacity to date to encars rate ensingle one? >> i think there would be challenges. we need to have the facilities and infrastructure to do that. more to the point as we look at that comprehensive approach what we want to do is give our u.s. attorneys the tools so we can most effectively dismantle the very cartels that you are talking about. >> but the only tool a prosecutor has is the ability to incarcerate. anything short of that is if you

turn on the rest we will not lock you up for 10 years. if you turn on your cartel or you'll send 60 days, somehow i don't think that's a powerful tool. the reason is first, should we have it. mr. bersin said he wouldn't mind having the stronger tools at his and the judge's disposal to use that in order to get cooperation and in many cases incarceration. but the bigger question is are we clogging the system with not having comprehensive immigration reform, with not having relations with mexico that allow us to return more of their citizens sooner with a full-faith belief that they will enforce -- incarcerate them. you would like it if you would look at it. we're the first stop in are

there tool us don't have either north or south thawier we should shed nights on. >> congressman, i think you have identified the issue. we absolutely aught to have comprehensive immigration reform. there's absolutely no question. secondingly in our building of our relationship with the mexican government and president calderon, a very effective tool of course is that we in certain circumstances do you want to be able to return people to mexico and know in confidence that the mexican government is going to treat them appreciately. so absolutely. those are parts of the puzzle. >> thank you very much. now to the gentleman from massachusetts. >> thank you. >> gentleman do we fully appreciate the amount of corruption and death? there's a large amount of money going into mexico and the reports that we see about the

corruption of the judicial system, what can we do about that? what are we doing? what confidence do you have? without taking the profit out of this thing, and deal with that money, we're just spinning on wheels; right? >> congressman, it's an enormous challenge. you are absolutely right. one of the effective tools that we do have and we hope to do more of is our ability through merit and other initialtives to work with and train law enforcement in mexico. we're making great strides to training better units. units that we have a lot of confidence that is not subject to bribery. they are subject to polygraphs and background. >> you're talking about about the military. >> no i'm talking about the police. >> you would agree there's a

fear amongst police officers no matter how much you train them, going away or taking the money is a lot better alternative than having your family violated. >> that's why i sense an enormous challenge. there are many courageous police officers there. >> don't we have to do something about the cash? if we stop the profit and cash we're along way along. tell me what are your thoughts about the importance of disrupting the cartel's money. how are we going to do that? >> well, of course what we are doing is from the law enforcement point of view of course it's parallel levels of forfeiture and seizures of the profit and the possessions of

the cartel members. one of our incooperating programs are forfeiture. >> don't we have to go back in the line? >> absolutely. congressman one of the challenges that taken place rantly is the acknowledgment of our end of the bargain that the consumption of drugs in that country, that generates through trafficking organization, the kinds of sums that had corrupted mexican politicians and its legal system is something that we'll continue until we get a better handle on reducing the demand. >> so how are we going to get it in the united states before it goes south? >> with regard to the drug demand reduction, the southwest border strategy that was unvailed by the a.g. by director kerlikowske and the secretary place a heavy emphasis on that. >> i see that. there's still until that time.

>> the cash going south is again another departure that has been made. have been cdp and the border control pay attention to that. so that for the first time while we had them in the past we have systemic checks going southbound. and that is a project that is very much geared to cooperating with mexico as it builds up its enforcement capacity again for the first time. >> a couple months ago had you spur rattic checks. we may not have the infrastructure there to be effective. what are you doing to do about that? with the tunnels that i hope to get to in a moment, a may be too late. you're right that it wasn't until mid april when the secretary changes policy that we

can prosporadic checks. we need to continue the effectiveness of that, particularly this is a bridge to mexican capacity to conduct its inspections which is not building up again on the east to the west. we need to assess that. whether or not we should be taking a major investment in infrastructure to have two southbound checks is one that is certainly on the table. i think we need to learn a lot more about the reasons -- >> what about the plan about coming further back to the chain before things get to the southwest border? >> no question. >> what are we going to do with that? >> there is a couple of things that's being done. beside the increase at the border, they are using local law enforcement to help. in seattle we sent officers along with the request of the federal government.

all of these local law enforcement agencies across the country are more than willing to do their part to help. that's only one part. the other the high intensity drug trafficking area, there's 28 places around the united states. their mission is to disrupt and dismantle those organizations. often they have the roots in mexico. they not only seize the drugs, make the arrest, work with federal prosecutor or local prosecutors but they also go after the funds and the money. so you are not just stopping the cash at the border, you are stopping the flow of cash in seattle and california and other places. and there is progress, there's more training being done. in treasury, we are working very hard under the new credit card act to develop ways of looking at the use of just a card that's going to carry thousands of dollars of cash. there's a lot more to be done. but there's a lot of progress on that front.

choking off the money is the key. >> thank you. >> gentleman from illinois,. >> thank you mr. chairman. gentleman, i know the issue of the national guard was raised broadly earlier. it is accurate there are about 500 national guardsman in the southwest border as we speak? >> there are a complement of national guard that have been engaged in a ongoing project that's been in existence for more than two decades in support of law enforcement activities. and i believe that that number is is one that i need to confirm. i do know that most of the guardsman are actually away from the border engaged in intelligence, analytical activities and the like. but i'll need to confirm whether it's 400 or some smaller number

that are physically on the border today. >> well, two follow-ups. the first would be the activities that they are completing as you talk about. do they relate to these drug cartel activities? >> the counterdrug program that's been in existence for two decades that and i'm familiar with as my time is definitely counterdrug in nature. that's the basis that congress has authorized the activity. and these are activities that involve supporting a law enforcement in a variety of ways that are consistent with the division between law enforcement and the military and served this country well over the years. >> you're probably read about the counts that discuss the possibly in the administration increasing this to perhaps another 1500. is that your understanding? or is that still isn't the planning phase? >> this is all in the discussion

stage as i indicated, congressman, because secretary ies together will make a final decisions. >> okay. excuse me if this have been discussed. we had in previous hearings discussions about the conflict between dea and icf. and i understand there has been an aagreement that was signed on this. what exactly what the problem and how does this solve it? do you sense that it is solving that issue? >> well, what it shows that congressman is the issue with icdea. they just entered into an understanding. i think it's fair to say that there's a remarkable commitment to work together and they in fact have been working well together. now what happens is that icdea

can work together. ice agents season there to pursue the drug-related crimes throughout the country. and very importantedly the information that we gather in the investigations can be shared in one of our remarkable date infusions centers so that all of the information from i.c.e. and dea is shared together. so it can be used to go after the cartels. >> any of this, perhaps the information loop, that will follow back to make sure that continues to be the case? >> there is and there's a great commit. it's a very great commitment by dea and i.c.e. and the department of national security. i'm sure that was. >> congressman, you will have a working together from immigration customs from dhs. i think we will speak directly

to whereby inquiry. >> and assistant director can as well. congressman? >> time permitting i guess the third point being that we often hear this figure that 90% of the conflicts come from the united states. given that we're not necessarily tracing all those guns, perhaps a fraction of them, how will we be determining that figure? >> well, i think congressman the precise number may be a little bit hard to identify. it's of course you are absolutely right. for those guns for which one can trace them. i think that number that you have identified is the number that has -- that has been said. and i think that's right. i think the larger issue is that it is inescapable that a very large percentage of the guns that are mexico today do in fact come from the united states.

and as we together or joining with our friends in mexico to combat the battle, that's one of the issues that we are all to confront here ourselves. >> why aren't more guns traced? is it just because some of them are untraceable or does the volume make it difficult? >> congressman, in the second panel billy hoover is here. we can in a much more coaching manner than i explain some of the interquasis there. of course when possible we will be in a better position than i do tell you some of the challenges atf has found. >> i appreciate that. we will have a second panel. in closing i supposed it would be easier to continue that if we cannot what the clinton administration did which was abandon semiautomatics weapons. it's a lot easier to control them if they are not being

sold. >> jim, the time has expired. the woman from washington, d.c. >> i'd like to pick up where the gentleman left off. i was frankly embarrassed when the episodess -- terrible episodes of our conflict some thought might even bring down the government that may have been somewhat exaggerated. it was the president trying to fight the gun cartels. guess what was supplying the guns? turns out not only where -- i mean i configureed -- some of these guns even with the most elementary inspection or capacity.

but when we check and did a sporadic outbound inspections they came going up. anyway, the notion that this country had been so central to the supply of guns when the -- which was essentially in good supply that it shall like an army that government itself was up against. not just a bunch of thugs. it had so much weapon. i'm far more into what we know what we are not doing much. what you get guns, we knew it doesn't take much to get them to mexico.

i'm far more interested in how these thugs so easily pick up guns in this country and lower these guns are being sold. is that your name sure sure -- >> breuer. >> how you could pick up large guns, equip yourself as if you were an army, with such force that the government for a while there was essentially fighting an internal army supplied in no small part by the united states of america. now where do these guns come

from? how are they able to pick them up in such large numbers? how are they able to get out what amounts to enough guns on a virtual small army? many of them are the united states and regardless of the figures and the notion that, well, a lot of them came from x, y, z. you know exactly where they game from. you have law enforcement jurisdiction in the united states of america. why are you not keeping these guns from being bought or otherwise in such large numbers so that they now arm a small army in another country. it is extremely embarrassing that mexico has been very kind

to us. i would has been very, very angry at the big guy in the north that was essentially shipping down arms to kill my people. while they won't do anything about its own assault weapon ban, while nobody in the administration even spoke out about illegal guns and the proliferation of guns in a country except the attorney general did say something about it. so it looked like all you have to do it get some guns and you'll get them across the border very easily and nobody in the united states is doing very much to keep thugs from acquiring those guns in the first place. i'm interested in this country what you're going here before you get to the border. >> well, congresswomen, i share

your concern. i want to begin by saying that there are people who are working very hard, our atf agents are doing an extraordinary job with their resources. >> what are they doing? who is selling the guns? >> i think they are coming from a lot of places. i think that are coming from licensed firearm dealers where you have strong purchasers and the power of these cartels is extraordinary. as you know their reach is great. so we have to dismantle those cartels. some are coming from the southwest border. >> there's nothing you can do? >> there's our atf agency. but they limited resources. >> what are they doing? >> hay are visiting the license -- they are going to the licensees, they are doing inspection. >> are they doing any undercover work? >> yes, they are. and they are sharing it with lots of agencies.

it's not fair to be critical of our agents. with the resources they have, every day they are serving the american people well. >> i'm not critical of them. i'm critical of the your leadership. i'm talking about what it takes to dismantle the gun cartel in this country that is not only enabling but making possible. >> your time has expired. >> let me first thank you for your testimony. again i apologize for the delay. but, you know, i'm just wondering if you could hold the record open, if you could get some information for us, you know, the rest seems to be very aggressive in terms of what's happening in mexico. but can you get us some information on the convictions in it's one thing to make a lot of arrests. but i want to know in terms if we can get some information in terms of the percentage in terms

of the convictions. you know we appreciate it. we'll hold the record open. >> absolutely. >> thanks. >> well, that's a good point too. what about a consensus? that's a good point. so we will hold the record open for the that information. thank you very, very much. >> thank you very much. >> we're continue in just a moment with this hearing. but first an update from a capitol hill reporter who's familiar with the issue. we're joined by kevin hall. why is congress concerned about the rise of mexican drug cartels? >> i think the administration has pushed forward the previous administration and continuing to this one the initialtive which is a version of columbia with a

lot more grandsonsed funding and since congress controls the funds they want to know how it's being spent in ways that it hadn't in the past. >> how much money is this initiative deal with? how much are we talking about? >> not just mexico, it's the caribbean countries as well. i believe in 2008 it was 100 million. if i remember we have to stand up to receive if i that human rights are being protected and so they know where the money is going. >> you read and see lot was reports. what are they doing? >> they have been a lot more violent in the last 20 years and that is in part because of the success that the administrations have had in breaking up the top which has become wind of like cutting off the head and a lot

more heads grow. you have a lot more smaller violent cartels trying to shoot their way into the top. that's one element. increasingly, it's spilled over into the u.s. border cities. lots of examples, there's a case in el paso area of a u.s. soldiers accused of carrying out a hit on behalf of the mexican cartel. it's filling over. >> congress wants to provide more money by they raise concerns. what are they concerned about? >> that is because the mexican police forces have been corrupt and corruptible. they say you're going to participate or we'll kill your entire family. the mexican military has been brought into this role. that's been a pumped up role, but some of the accusations have been abused some innocent citizens trying to get information or when police

officers who were arrested by the military cartels were taken to a military torture. >> what came out of the all the reasons why president obama and president calderon said? >> they wanted a statement. more than anything obama stood up for calderon in a way that was surprising. some of the funding for the drug plan has been held up with leahy in vermont. we need to at least investigate, we're not saying it's true bub mexico has shown what it's doing. obama made real clear that he has lost members of the family to the drug lords who are killing. obama gave them a strong public support. >> how's the approach of the

obama administration dependent the bush administration? >> i think one of the things that it's very important new wrinkle is that the obama administration has committed to doing southbound inspections. because the drugs come into the united states but the money goes back into mexico. the estimates are $25 billion in cash going back. if you can cut off the cash, you are starting to hurt the cartels. more importantedly, we have done away with the assault weapons bans. and all that ends up inspect hands of mexican traffickers who now have better fire power. the reason in some cases is the mexican military. >> what's going to happen with this issue with the money they promised to mexico? >> it appeared mexico has provided more important so that the report after they come back. that should free up the money.

it's as much a question of being able to document as anything else. >>kevin hall, thank you for joining. >> thanks. > please rise. >> do you swear to tell the truth and nothing but the truth. if so answer in the affirmative. be seated. let the record reflect that they all answered in the affirmative. this is our second panel. our witnesses is anthony is working with the u.s. department of justice. mr. ken ole, directly offer of

investigations and custom enforce of u.s. department of homeland security. u.s. customs and border protection, u.s. department of homeland security. mr. william hoover assistant director of field operations in bureau of alcohol, tobaccos, and firearms in the department of justice. and mr. robert mcbrien, associate director of investigation of enforcement office of foreign assets control, department of the treasury. gentleman it is our committee policy, of course, that five minutes for your presentation and then you allow us an opportunity to raise questions with you. so why don't we just go right down the line.

i guess mr. owens you first. then go down the line that way. make it easier. >> good afternoon members of the committee, thank you for the opportunity to be here today to discuss the efforts that u.s. customs and border protection is undertaking to secure our nation. i'm pleased to be here with my colleagues. i would also like to express my gratitude for its continued support of the mission and people. among the numerous priorities that were recognized in the american recovery and reinvestment act, we were provided with $680 million for greatly needed improvement and upgrades tech nothings. this funding will allow cbc to meet the needs of the border facility. they have taken steps to. this afternoon i would like to

focus my remarks to the outband enforcement agencies p the campaign of violence being waged in mexico remains a major concern. illegal drugs, money, and weapons put both across the border and link the united states and mexico in this battle. your response has implemented a southwest border strategy and cvc is implementing the strategy at our ports of entry. we in cdc field operation has taken actions and enhance our outbound enforcement efforts in the man power and equipment and technology. to be on recurring bases, cdc border control agents, other agencies along with our state and local law enforcement partners are now force on entry and firearms heading into

mexico. cdp mobile's response teams are shifting personnel between the ports also. these personnel are supported by inspection equipment. cbp currently enemployed 227 ports of entry, 91 on the southwest border. many of these system are mobile and which can and be used in our outbound efforts as well. and cdp is grateful for the $100 million stimulus funding to upgrate grade our systems. we are also getting k-9s, and adding additional throughout the summer as these family come out from the academy in virginia. these will allow our officers to

scan the southbound traffic. we are seeing the success of these increased effort. since we began these initiatives we have seized more $15.8. in currencies. we are also pursuing activities in u.s. and mexican border crossing and join operations have begun and more are planned to coordinate and cargo leading the u.s. chairman towns, remembers of the committee, thank you for your support the cdp has had. we thank you for the opportunity to be here. i'll be happy to address any of your questions. >> thank you for your testimony. mr. kibble. >> chairman and members of the committee, on behalf of the secretary and assistant secretary, i'd like to thank you the opportunity to discuss

ii.c.e.'s role in the customs laws. as the primary agency i.e.c.'s targets organizations that might exploit as a vulnerablabilities with the dea and atf. these agreements will enhance sharing and promote coordination. the border requires a comprehensive and collaborative effort on march the 24, the departments of homeland security, justice, and state, announced the southwest border initiative designed to crack down on mexican drug cartels. this was augmented by the 2009 national southwest border narcotic's strategy. we have seen increases in drugs and currency compared to the same type in 2008. during the period of june 23 of

this year, we have increased the narcotics by over 40%. i.c.e. continues to work with collaborate in various ways. we created the border enforcement security task force. the 15 best are series of i.c.e. led task forces that identify, disrupt, and dismantle criminal organization posing significant threats to border security. since 2005, they have reported over 4,000 and seized over 200,000 pounds over 2500 weapons and over 370 pounds of ammunitions. one recent success story is shown through an investigation between the el paso police department which led to the people trying to purchase the weapons illegally. the weapons they intended to

purchase was 300 short barrels rifles, 10 sniper rifles, 2 .40 milometers handguns, and a large amount of ammunitions. it would have had a total street value of $500,000. we doubled the number of agents working from 85 to 190. this explaining our ability to work with state local law enforcement on the crime occurring on the u.s. side of the border. a large number of weapons smuggled illegally clearly stopping this must be an priority. and i.c.e. is going to address this challenge. in june 2008i.c.e. along with state partners launched operations. since we have launched it, it

has taken more than $6.5 million and arrested 375 individuals. in addition to that, i.c.e. has partnered with operation near wall to move cash across the border. firewall has seized over seas and 475 arrests. i.c.e. also established the trade transparency which are often indicative of trade screams. under this initiatives i.c.e. exchange import and export. these efforts have led to more than $250 million in cash. we stop human smuggling and trafficking beyond the borders. i.c.e. is a major participant and supporter of targeting human

smugglers, traffickers, and various other. we have identify other methods to smuggle people into the u.s. so target these methods and routes, we form the territorial strike force in june of 2006, combining our intelligence resources to target, disrupt, and dismantle foreign based criminal travel networks. complementry, we have worked on other things. in conclusion, have a addressed the significant challenges we face to secure the border and custom laws. i thank the committee. i'm pleased to answer any questions. >> thank you very much. >> thank you mr. chairman. chairman, i appreciate the

opportunity to represent the views of the drug enforcement administration on this important issue regarding the wise of criminallalty and next can cartels and their implications for the u.s. security. >> pull your mic closer. >> as the lead agency for forcing the drug laws of the united states, dea is keenly aware of the critical requirement to break the power of transnational crime groups such as the mexican cartels. these groups not only supply to our country but have reverse consequences in terms of addiction, but left uncheck threaten regional stability and diminish confidence and promote lawlessness through violence. the good news is that together with highly committed and

capable mexican partners an the generous support of congress through the initiative we have bringing unprecedented pressure against these cartels in helping fortify mexico criminal justice system to ensure these gains can be sustained over time . :

>> during the first six months of this year there have been approximately 30600 putting it on to exceed last year's numbers. in the past of violence was largely confined to persons engaged in a drug trade there has been a disturbing new trend where mexican military and law-enforcement officials are being intentionally targeted by the cartel's. moreover in the ever intended to break the will of the government of mexico, the mutilated and decapitated bodies of the victims are frequently left as a sign warning of greater violence broke even if this carnage can be reproduced days refined-- confined to territory and has consequences

to u.s. security there is justifiable concern the violence plaguing mexico will spell across the border and have been more pronounced effect on americans the agency has attempted to distinguish criminal on criminal by less than has always been associated with drug trade and the new phenomenon with the tala terrie violence against officials and institutions we have until the delivered attacks by the cartel on u.s. government personnel weather in the u.s. or mexico, innocent civilians in the u.s. or u.s. if read facilities including embassies and consulates. based on this definition we have not yet seen a significant level of spillover violins however as you have heard we are building contingency plans for the worst-case scenario. i would reemphasize if confined to mexico the drug-related violence seriously undermines respect for the rule of law and

degrades confidence in mexican institutions by a and the bill -- instability has there keira the implications of lomas was the first conference consequences in south america and beyond rexroad d.a. continues to work with federal, state, local and foreign counterparts to address the threats the organizational track strategy is an attempt to systematically disrupted and dismantle the command and control elements of these send the kids. sharing information is the and coordination with counterparts to the special operations division, fusion center and el paso intelligence the center. in mexico dea has the largest presence and a partnership with the calderon administration in noting sustained attacks against the cartel the denial of proceeds and seizure of assets significantly impact the ability of these cartels to

exercise influence and further destabilize the region. projects marketing and operations accelerator are recent examples. while these collaborative operations are intended to break the power of the cartel's in the short-term also exacerbate the violence in mexico. briefly i like to address an issue of concern recently highlighted by the gao pertaining to collaboration between at i.c.e. and it dea i began my career with u.s. customs service , now i saw a one to underscore the importance of law enforcement and dea unwavering support for the interagency cooperation agreement between dea and i.c.e. both napolitano and attorney general holder has made it clear this is the most efficient and effective way to promote interagency cooperation the agreement addresses the concerns of both agencies about the need of legislative action to allow

the cross designation of the on limited number of i.c.e. agents have federal authority and strength and information sharing" end quote. -- coordination protocols members of the committee i thank you for the opportunity to testify and stand ready to answer questions. >> thank you for your testimony. >> germantown's, congressmen and other distinguished members of the committee i am william hoover and active deputy for tobacco firearms and explosives on behalf of acting director nelson -- mr. nelson i am here to discuss several from having firearms illegal traffic in to united states are working to lower the associated violence on the border. atf as protecting citizens and communities from filing criminals and travel organizations by safeguarding them from that illegal use of firearms and explosives and we are responsible for both

regulating explosives industries and enforcing the criminal laws relating to those commodities. atf has the commitment to investigate and disrupt groups that have obtained guns and illegally traffic them into mexico and facilitation of the drug trade the combination of atf crime-fighting expertise specific statutory or regulatory authority analytical capability and strategic partnership is used to combat arms trafficking along the u.s. border and throughout the nation in reno that we do not fight this battle a loan. last week 80 oppose today by mitt crime and arms trafficking summit in new mexico it was monumental to have a former partnership with atf and i.c.e. an understanding was signed establishing how we will work together on investigations regarding trafficking. this also establishes a notification process each

agency will follow while conducting these investigations. a two a strategy for disrupting the flow of firearms through project a gun runner has referred over 882 cases for prosecution involving 1,830 defendants and those include 4154 firearms trafficking which about 11,305 defendants an estimated 13,382 firearms. jt's said 90% of the firearms seized in mexico and traded come from the united states. the gao report published june 2009 concurred with our findings sparked out we have a step was the greatest proportion on firearms proportion to mexico comes out of the southwest border additionally it also shows they are acquiring firearms from other states as far east as florida and as far north and west as washington state. additionally mexican officials of seen an increase in the

number of explosive devices used in these five men to tax bracket agents and experts work with the mexican military and law-enforcement to identify and determine where these devices and components originate. all on the southwest border project gun runner includes 140 special agents on a full-time basis and 59 industry operation investigators responsible for conducting regulatory expansion of federally licensed gun dealers known as ffl. we send additional personnel to support our effort against the trafficking of firearms to mexico. atf has received 25 million in new funding in fiscal year 2009 and 2010 for project a gun runner. as the sole agency that regulates the 19 roughly 7,000 hour-long assault was border atf has a statutory authority

to examine records and inventory looking for firearms trafficking trends are patterns revoking the license of those that are accomplice it. princeton's 80 abuses regulatory authority to review the records of the ffl the received 2,000 firearms, remove the serial numbers and traffic into mexico with the aid of a co-conspirator in mexico. one key component of 80th strategies is the tracing of firearms seized in both countries. our analysis of this aggregate trade data can track network showing where the guns are being purchased and who is purchasing them. but may share an example how trace data can identify a trafficker. 80th analysis of trace data living days a man living over the border three crime guns located at three different crime scenes. further investigation uncovered he was the purchaser of a fourth fire are recovered at another crime scene in

mexico and he had purchased over 100ar15 receivers in the seven additional firearms and a short time span using nine different ffl distributors in april 200880 of seized 85 arms with a suspect and learned he was manufacturing guns in his home and sold over 100 guns to one individual who is suspected of being linked to a cartel and investigative leads are being pursued and charges are pending. last i like to mention the operational presence at the el paso center is one of the most viable tools for sharing in coordination with the agency ever to curb violence and trafficking activities along the southwest border and we operate the mission of a gun desk which is to identify -- analyze all firearms and explosives data collected from law enforcement and open source including

mexican military and u.s. law enforcement assets operating on both sides of the border. we want to continue our efforts and will harvests are partnerships but will continue will work with mexican officials to better understand the flow of firearms from our country into their i's. chairman towns, congressmen bill bree and other distinguished members on behalf of the men and women of 80th by think you and your staff for continued support of our work with the backing of this committee atf can continue to fight violent crime along the border and asian cities for our the board. >> thank you, mr. chairman hoover for your testimony. >> . >> mr. chairman and mr. bill gray and other members i am pleased to be here today on

the foreign control of the treasury department i will try to compress the statement as we go through it for the interest of time and so we can get into the questions and answers. foreign asset control mission is to enforce economic sanctions for foreign policy and national security in the particular instance of mexico we're talking but using the tool of the kingpin it designation act which congress passed in 1999 the kingpin act has been used in responding to a threat two and mexico since the year 2000 if the first kingpin was named at that time by president bush and we have continued to use it since that time so involved in the fight against the drug trafficking organizations and mexico is not something new but something we have been doing

even with a small resources that we have. the authorities delegated to ofac work towards foreign narcotics traffickers and terrorists one of burma's powerful instruments that are specially designated on our list is in to dispose and isolate and disrupt or incapacitate a foreign adversary with the intended results of denying them access to the u.s. financial and commercial system and demobilizing their resources. ofac authorities are administrative in nature but for persons subjects u.s. jurisdiction there is both civil and criminal penalties. every year since the kingpin act was passed the president's

have added more kingpins to the less they are across the world, not only mexico although mexico is roughly 50% of those that have been named. and this year president obama and moved from the usual june 1 day in which the statute ask there is a report made and acted early and on april 15 named three of the mexican cartels that are currently at to the center of much of the violence going on. he named three of them. and then in june he named to more kingpins although those and not involve mexico. these are referred to as ofac as a tier one trafficker while the president identified the tier one traffickers ofac has

been delegated the authority to designate four sanctions those working for or on behalf of or controlled by the tier one traffickers. this is the real meat of counter narcotics stations. these derivative that designation include money lender, remembers composite in narcotics trafficking activities, a criminal members of the organization, the transportation sells, logistics', procurement and communications cells that make up the financial and support network of drug trafficking organizations. since 1999 the president has identified 82 tier one traffickers, 37 of which are mexican and in that same time ofac has identified 251 tier two designations and mexico. in addition to that under the

program on which the kingpin act was conceptually based on a which is our sanctions against colombian traffickers under another authority, we have also under the colombian program in a recent times named 30 mexican entities or individuals who are also involved in the columbia at two mexico part of the drug trade. and total over the last several years is 280 percent come entities and individuals named by ofac for the blocking of their assets and their activities. i will skip through parts of this and just get down to some of the nitty gritty. i said i at the outset the objective is to identify and expose and isolate and

delegitimize, and mobilize, disrupt, dismantle, however we can do it. the drug trafficking organizations. we do this buy going after the heads of the organization, a key players, and perhaps most important and this again goes back to that networks, the chokepoints, the whole support structure that makes up a cartel. not just those who move the drug but all of the businesses the infiltrations' of the legitimate business world to front companies to give them their backbone, the objective is to go after the backbone and try to break it. ultimately we hope to expose halt and even reverse the penetration so this legitimate economy through our action but at the same time we're working collaboratively with all colleagues. all agencies at this table are working with ofac with these

projects. we have relied on an heavily integrated with ge s.a. and have been from the very beginning and i cannot say enough for the work they have done to enable us to carry out of our parts with the drug trafficking organization in mexico at the same time since the calderon administration came into power working very closely with the mexicans on the ever escalating basis and we are continuing to do that. i would just like to conclude if i may with no team of the kingpin act provides a part of mechanism practices against the threat of u.s. posed by foreign narcotics cartels weather in mexico or elsewhere park in the case of our southern neighbor ofac kingpin authority provides growing opportunity for partnership in combating this courage of the drug trafficking organization.

it is a force multiplier preventing efforts by d.a. >> please summarize so my guess are that is what i am doing right now. we're also supporting mexican authorities it is an important element in achieving a unity of effort among u.s. federal. >> i really say your five minutes is up. >> local agencies. [laughter] >> thank you chairman and a figure for the opportunity to be here today and answer any mini questions you may have. >> the key for your testimony. we have boats again and i understand there are three boats but what i would like to do if we can finish the panel because we do not know if they are procedural votes were not and how long it will take i would like to yield myself

two-minute then he'll the ranking member two minutes and then you two minutes and then we can finish up without having to delay them for the next hour but let me begin by first of all asking the average person has difficulty relating to the fact that we have problems in terms of the drug problems in mexico. what do we say to the average person out there that is concerned about what is happening in mexico? how do we explain that? i guess maybe mr. placido how do we explain to them our concerns? >> it is an excellent question and i would answer it this way that there is no country on the face of the earth that is probably more important to the united states and mexico we

share not only a common border, but immigration issues, trade, economy the air we breathe the water reuse for irrigation and agriculture were closely intertwined and the national security implications of corruption, intimidation violence and instability in mexico threat in a screenplay because of our integrated economy and in the integrated nature of our society. it is not only a source of much of the drugs consumed and abused in the united states but instability south of the border creates problems on a much broader scale. >> fell one thing i would add from the homeland security standpoint represents a vulnerability with our borders 1/2 to be concerned any smuggling network that can our return the introduce

contraband across our border we have to be concerned about the unknowingly or unknowingly facilitating national security threats into the homeland. so for those reasons from the ice perspective and cross-border criminal network perspective way need to leverage collectively to shut down these networks. >> i yield to the gentleman from california. >> i represent i.c.e., anyone or anything that crosses the border without being checked is a potential threat but i will ask about the and america initiative the laundering of the profits is something we do not talk about enough and we have prohibitions here and anybody jump in that require prior to -- identification at the time anybody opens a bank account the previous administration not only did not enforce babbitt endorsed bank accounts being opened with less than secure

identification and you know, exactly i am talking about. are we doing anything to shut down that opportunity to have thousands of bank accounts opened to where we really don't know who open and those accounts? are we going back and addressing those issues where we require a viable identification be issued before we opened an account before the previous of ministration? anybody want to comment? >> i am from treasury but i have to admit i am not in the position to comment because that is that is not what foreign asset control deals with. >> san diego is a issue you can go to the consulate card without any ied with the basics were allowing and condoned by the bush of frustration with no oversight to prove this was liable why have a lot if we will not apply it to everybody?

one redoing with the merida initiative? anybody who participates in mexico in our process they and their families will be suspect is there anybody here can we talk about this openly and how we are cooperating and training and supplying mexico to win the war on their soil before it gets two hours? >> exelon question there was concern on the first panel that the way it was characterized we are one assassination away from having the merida plan failed or bottom of we would go that far but certainly we would say the mexican partners with whom we work are extraordinarily vulnerable for their participation with us and with their bold and decisive actions against the cartels parker and a sponsor is a great deal of work going on under merida some of those are executive protection plans and

training for senior level officials. of course, the butting that has been discussed in terms of the integrity and capability of people we work with there's also institution building and that is a long-term peace of this that to build up and develop the accords and the prosecutor cadres of that take eight on this problem internally and break the impunity of these criminal organizations is the long-term solution. >> my time is expired but this is truly how tough is you have to hide the identity of the judge because they not only assassinate judges but families. i will make a public statement the merida initiative should bring young people in from the central america and the south into the united states and a train them here and keep them here until they do their hit or do their operations because as soon as to identify them in

mexico the family is at risk and if you leave them for long periods of that time they are susceptible for influenced by the cartel. as a layman who was worked on criminal-justice issues we need to to be serious to bring them into the night it's a thing keep them here and allowed them to do their job in mexico but protect them while they do those jobs. figure mr. chairman. >> we are running out of time to go vote what can we do to assist you? in making certain you are very successful in your endeavors what can congress do? >> mr. chairman i appreciate question and the first day that all witnesses 1/2 to say is we support the president's budget but clearly resource

constraints are an issue that face us with 1.4 billion over three years projected with the merida initiative to assist the government of central america and mexico there has spent relatively the toll spent on the domestic side of this equation to help the u.s. agencies that must work with them we're doing the best we can to prioritize resources and work within the existing budget constraints but it is difficult to increase the operational tempo of the foreign counterparts without a corresponding ability to do something on the side of the united states. >> do you want to comment on the lack of jail space? >> anybody want to comment? >> for the record we're grossly deficient would have to choose winners and losers and it is not a time to do that. thank you mr. chairman i appreciate the hearing. >> the brother record dea and

i.c.e. you are getting along now? [laughter] we purposely put you together. thank you very much. >> you are not deporting his mother? that is nice of you. [laughter] first of all, but completes the questioning of this panel. and of course, and i would like to give the members to put their opening statements into the record and let me thank all of the witnesses and members who attended the hearing please let the record demonstrate my submission of the documents related to this hearing and without objection find in to the committee record and without objection and the committee is adjourned. thank you very much for coming.

>> since congress controls the fund, they want to know where the money is going and how it's being spent. it's aboving the congress more than it had in the past. >> how much money is the merit initiative deal with? how much are we talking about? >> not just mexico, the caribbean countries as well. i believe in twight/2009 it was $100 million. congress can hold 13% to certify that the human rights are being protected and the accounting in place so they know where the money is going. >> we read and see lots of

reports. why exactly are they doing the threat to the united states? >> i think the new cartels have been around for 20 years. it is a lot more violent. it is in part because of the success because of the administration have had for inviting them and break up the top where it's like you cut off the head and eight more heads grow. you have smaller, more violent cartels trying to shoot their way into the top. that's one element. increasingly it's filled over to the u.s. border cities. lots of examples there's a case right now of a u.s. soldiers carrying out a hit on half of the mexican cartel. >> congress wants to provide more money they they raise concerns about human rights. what are those concerns about? >> that's because the mexican police forces has been corrupt and corruptible, and a lot of

times the drug traffickers say you're going to participant or we're going to kill your family. the police are more vulnerable. the mexican military has been brought into this role. it's been a stuffed up role but there has been some accusations that there have been some abuse and police officers who were arrested by the military and the cartels were taken to the military prisoner and there's been accusations of torture. >> what came out of the reasons that the presidents and prime minister said? >> he was more on the vision side and drug side i think obama stood up for calderon in a way that was surprising. some of the funding has been held up by senator leahy of vermont who is concerned about

the human rights to investigate, not saying it's true, but mexico hasn't shown what it's doing to investigate them. obama made real clear that he thinks calderon who has lost associates and members of his family. obama gave him a strong public support. >> how's the approach of the obama administration different from the bush administration? >> i think one of the things it's a very important new wrung the is that the obama's administration has committed to doing southbound inspection. buzz the -- because the drugs come into the united states but the cash goes back to mexico. if you can put off the cash, you can starve the cartels. more importantedly we've done away with the weapon ban and the mexican drug cartels are using the smaller numbers and building them. ar15, assault weapons, and all

that ends up in the hands of mexican traffickers who now have better fire power than the mexican police and some cases military. >> what's going to happen with the issue that the money they promised to mexico? >> it appeared mexico has provided more information. so there will be a report right after they come back. so should free up the money. i think it's as much of a question as being able to document things. >> kevin hall, thank you for joining us. >> thanks. >> tonight three coauthors discuss their book. then the author of telling histories talk about their career path. followed by ann cuolter with "guilty." with congress in recess, lawmakers are meeting with

constituents to discuss health care. texas congressman kevin brady held a meeting monday. you can see it tonight at 8:20 eastern on our companion network, cspan. >> three days of peace, love, and music. 40 years ago this weekend a half million people gathered at woodstock. saturday co-founder takes us behind the scenes. at 9 p.m. eastern on book tv. >> bill clinton kicked off the 2009 netroots nation bloggers convention. it starts thursday night and friday on health care reform with howard dean, pennsylvania politics with senator allan specter, and reshaping the supreme court. next a conversation with a capitol hill reporter. it's about half an hour. >> we're here with david clark

who wrote a renal story entitled how "clout really works in congress." thanks for being here. >> thanks for having me. >> what is clout in congress? >> we looked at the committees in the house and senate that proved funding for the federal government each year. what we want to do is look at the new members to see how they are doing and how they are using their spots in that committee for influence. we found it's always been assigning for people to be on that committee. we look at new members and the reasons are obvious. they want to secure more money for earmarks or spending. they are able and have more opportunities to offer amendments and get those passed. since the bills have to pass, there's more immediacy to it. interesting, a lot of new members said they got more face

time in hearings or otherwise and they felt the chance to press their case. we short of looked at the clout from that per spect and found that if you are republican or democrat your appropriations committee would have more clout. >> how does the member get on the committee? >> well, probably through a lot of back door lobbying. if there's an opening in the house, there's what they call steering committees that's what will sit on the whatever committee has the opening spot. a plot of times it's based on what part of the country they are from. they like to have regional diversity. the senate is different. people can press to get on the committee. >> what are the most sought after? >> defense, because it has the biggest budget out of the 12 bills. >> correct. right. that's a top assignment as well

as being able to deal with the issue of national defense, there's a lot of money and chance to move that around. another one would be the subcommittee that controls the budget for the health and human services department, the education department, and the labor department, that's probably the biggest domestic spending bill. then after that it depends on what issues the member wants to focus on. the interior bill if you come from a state with the national parks or you might want to be on that subcommittee. you're obviously going to want to be the appropriation or subcommittee and homeland security for a while is a popular post when that was sort of a hot issue earlier in the decade. defense and labor health and education, it depends on what's important to that member. >> when you reference earmarks, you don't need to be an appropriator to reference

earmarks. does clout get earmarks? >> well, they put their submissions into the committees and review them. one thing you fine when you look at the end result is who's getting the earmarks, you find members of the appropriations committee get a lot of them. so do leaders in the party. the idea that they have a tough reelection contest it's nice to be able to go home and say look at in road. i secure the funding for it. so critics of earmarking process look at this and say you are not awarding the funding based on the merit of the project alone if the members are a leader. and so the -- this is just sort of pork. obviously if you are receiving the funding you have a different view. but becoming a member of the appropriations committee definitely gives you a leg up. >> do you know members of both parties request them? >> generally the party is going

to get more of the earmarks. if we look at that, say you're a house republican, you don't have a whole lot of influence right now. but if you're on the appropriation committee and republican you can secure more funding for your district and the two lawmakers we looked at were able to do that. >> what's the difference between the house and senate? is it easier to get in one chamber over the other? >> well, the senate there's 100 as opposed to 400 house members. particularly in the house if you are republican, you're not going to have to much say. one of the people we looked at was a republican, one of the issues to him was car dealerships. they were able to end their contracts with some of these

dealerships. he was able to attach an amendment to one of the spending bills that said if you took government money, you can't end those contracts. that was a way where he was able to use the committee were a little bit of clout. he can go home and say i've been able to do something. >> let's take the call from washington. >> caller: yes, thank you. good morning. thank you for this opportunity. >> good morning. >> caller: i'm very concerned about the way that this government is going. and it has to do with the clout and many of the other things that are going on right now. and one of the concerns is we have a congress that has gotten way out of hand. we had a government that has gotten way out of hand. for example, the average person that i know does not have health insurance. does not. i live on an island where the

majority of the population is military. navy. therefore, all the surrounding businesses do not have to offer medical coverage because their spouse is getting it for free. anyway, we have people in congress that are voting for all of these things when they have their coverage than the average person does. and they are supposed to be our servants. and i don't mean that two weeks, two hours later, i do mean our servants. they are using their clout to push through things that they want. it drives me nuts. just for example, the cash for clunkers thing has been driving me nuts. as i say, perhaps i'm comes from a point of ignorance. but this is any mind's eye should only be offered for ford,

chevrolet, and chrysler, not tour toyota, meads da, this is not a time when the general public can afford to be courteous. i understand that toyota, subaru, they bring in money. we can't support them. if toyota needs support, then have toyota from china, have their government send them support. it just drives me crazy. they are not in the congress, the congress is not in the same world as the people that they represent. >> well, that's your two issues. one was health care and cash for clunkers. obviously the health care debate have been going on for quite a while. in the coverage in the town halls and motions. health care is going to be at

the top of the agenda. there's going to be a lot of focus on that. there's a lot of disagreement over what's going on the best plan. as far as what members will be con traiting health care is at the top of the list. another interesting thing, the caller mentioned was the cash for clunkers program. which is essentially getting -- having the government provide money for money for people who trade in fuel efficient cars. that's an issue government should be going towards products made in the usa. that comes up. i hear it from two angles. one of some of these foreign car companies actually make their cars in the u.s. they provide jobs. there's also the argument with american car companies not doing well or whatever american business it is the money should be directed there. i'm sure that's an issue that a lot of members are hearing about

back in august. >> patrick on the line. >> caller: good morning. thank you to cspan. first i have a comment, then a question. my comment is that i really want to know where all these deficits -- these republicans deficits are when the republicans had the white house and the house for so long. you know, the difference is double than no one talked about the deficit there. i think it's hard for us to say we can't afford cash for clunkers and health care now. >> well, the deficit, and the debt are a really big issue. they are setting new record levels. and there's a lot of criticism from republicans and democrats for whether it's a health care bill. whether it's too expensive and whether the country can do

this. of course democrats are saying that during the bush administration they didn't do enough to try to reduce the deficit and deal with the longer term problems. you will hear some republican members feel they lost control of congress in 2006 is that the party wasn't focused enough on issues like debt and spending. so there is -- it's always a constant pack and forth. you will hear it later. the white house will be releasing it's updated deficit. it's expected to be very high, somewhere short of $2 trillion. that will be something we will hear about. >> next caller. >> caller: good morning. thank you to cspan. my question was about how health care lobby, again, the big discussion today now in washington using their clout. and of course i really don't

have an image of lawyers sitting outside the doors of senate and congressman, but i don't understand why the obama administration doesn't keep the health care discussion simple. it seems that we're going to get in the near future when the bill comes about the preexisting conditions. but one thing i don't hear anybody talking about is the thing i have on my policy through my job is exclusions. there's so many exclusions. and i'm reasonably educated guy that i think i need an attorney to really tell me what is and what is excluded. you know, if you have health care, whatting should there be -- expect for possibly brutal medicine, why should there be any exclusions from coverage that you have to go back and forth with what is and what isn't covered. i think the consumer should only

have to know about the deductible and copay. if they kept it simple and allowed you to take lower deductible and pay a higher monthly cost or a higher deductible and copay and pay a lower monthly cost and keep it simple without the exclusions and preexisting conditions, the american people could more easily understand the discussion and i think we could go forward. >> well, i think as far as exclusions, there's a lot of concern about the bills moving through. how much they are cost congress in the end. obviously health care is worried how much they are paying for it. they also brought up the idea of keeping things simple. that's one thing you see with members up here.

they are struggling to explain. that might be what you are seeing now. it's a very complex subject. you know, it's very hard to spell out and simplify. a lot of people seem to feel they know congress is dealing. they don't understand specificically what they want to do. that's creating some of the tension you see. >> we want to get your reaction to a piece in the section of the "washington post" dated the gangs of d.c. the power is that the fund they had in mind? anyway, the senate finance committee is drafting health care legislation that may shape the final deal with public insurance option. montana, wyoming, north dakota, maine, washington, and iowa. these people hold and represent 3%.

>> well, it's interesting. there is a lot of focus in the senate on the senate finance committee that is writing one of the two health care bills. there is the committee working on its measure. when if comes to florida they will combine those. right now the attention has been on these six senators. >> they are. we should declare montana, iowa, wyoming, maine, north dakota, and new mexico. >> right. and it's three democrats an three republicans. >> there's a lot of questions about where should these six people -- why are these six in a room deciding what health care is going to look like? their argument is they are trying to come up with a bipartisan measure.

even some democrats have concerned about this. they say well i'm on the committee. why shouldn't i be in that room? why are we leaving it down to these six people. i think when they come back that'll be probably the first area people focus on is can these six come up with the deal. is the deal they come up the one that democrats want? >> how do these senators get to a point where they can work this kind of clout? >> well, in the senate, you have two senators from each state if you have been in with the senate rewards. if you have been there, you will eventually become a committee chairman. that's how someone gains power. it doesn't have much to do with how much people they represent back home. so many of these members have been there for a while. they are the swing votes, maine is moderate. we will vote with the democrats

on a variety of bills. her vote can be key sometimes to breaking up a filibuster. we saw that earlier in the year with the stimulus bill. the stimulus bill stuck. the republicans did have the votes to block it. generally you need 60 votes in the senate. the democrat went to snowe and susan collins as well as specter who was spill republican. what can we do? that's another way senator can wield influence. if their vote is key, nay can come in and say i'd like this in exchange for my vote. >> all right. let's go to my next call on the republican line. >> good morning. thank you for taking my call. i have a couple of comments. one of the clout questions, we have an area of business in outwater. we cannot get our senators nor

or congressmen to seem to help. we don't have -- i think donate enough to their campaigns to be recognized by them. and question on the insurance, we're a small business. and we have to provide our own insurance which cost a family of four $1200. i don't hear anything on small business and their cost. and we do have an employee, so that would be more insurance we would have to purchase. i don't think we really have any voice in the senate or the congress. so thank you very much. >> the issue of small businesses has been a fairly big part of health care debate. mostly if you are going to mandate employees have to provide it, how do you do that with a small business where it may be they don't have the money to do it. so there has been a concern

there especially a lot of moderate democrats from rule districts or districts in small businesses. there has been a lot of talk of how would you treat a small business under this new health care plan? would you exclude them? would they not be required? would they get some short of subsidy? also small business community does have a couple of fairly powerful groups here. so i think at least as far as health care debate you have a fair amount of small businesses. >> question on our twitter page, have you noticed a connection to the amount of money spent lobbying to the amount of clout effecting the issue? >> sure. that's always going ton an issue. members have to raise money. people who can influence will donate. particularly in recent years, with the appropriates committee which i focus on, there's been

some corruption issues. there's been a question of what is someone getting for their donation. i think most members say it doesn't effect me at all. i think there's been some investigations to show that obviously donating money does have an impact on what is member will do. that's always sort of continuing issue here. there's always talk of campaign finance reform to try to at least take away the appearance of influence. but it's always a topic here. >> yes, i just wanted to make a comment. on the facilitator at an outpatient program. i'm a recovering addict. we were just told monday night the program would be sunsetted. it's a program that runed out the medical center. the reason it is subsetted is because the insurance companies no longer want to pay for it. it's really sad to me because this is an outpatient program

that has helped so many people in this community get clean and sober. and now we have insurance companies come in and it is a nonprofit medical center. and so this program -- the outpatient program -- broke even. so we're not losing money. but because insurance doesn't want to pay for it, now they are not going to be able to offer this program to people in trouble. you know, and i just think that's the kind of money that we want to spend preventively, you know, it's a dollar well spent if you can get people clean and sober, they don't have as many medical problems, they don't cause problems in the community. i'm just baffled that an insurance company can say we don't want to cover treatment. >> i don't know specifics about this particular program. but again that's sort of a big issue here in the health care debate that has been doing on

for months. it will continue as to what type of treatments or procedures would get covered. a lot of that comes down to cost. and that's why you see a lot of focus on this debate on the cost of health insurance or what the government ways to boost the programs. >> caller: hi, good morning. it's a great program today. it's my first time calling. we would love to ask a question. i do understand that when your part of the party is easier to pass a program when you are winding for election. i would like to know about the party. is it harder when you're winning or what basically? thank you. >> obviously in congress it's much easier to do thing if you're a part of the party that's in control. right now if you're a democrat, your priorities are going to get

more attention. in the senate, minorities members have a chance to influence legislation. that's because there's the debate on the senate floor for what is more open. you have the opportunity to open and offer any amendment that you want. in the house it's tough for a member to have much clout. you have the amount of amounts that can be offered on the house floor committees. you don't really have that much of a chance. that's one of the reasons why we have the appropriations committee. at least during the committee process the amounts are more open and it's more bipartisan. although this year they played down the floor it wasn't. if you're a minority member it's probably better to be on the senate than the house. >> here in pennsylvania, the republican line. >> yeah, good morning. i have a couple of questions that i'd like to get answered. one of them being that the question about the who's,

covered and what kind of coverage the people currently have, one of the things that i noted that you people rarely ask the person that's calling in, you rarely ask what kind of coverage they have right now. >> what kind of coverage to you have, tom? >> >> caller: i have coverage through my employer. it's not the greatest. most of the republicans that called in, seem to have no sense of community at all. i know that i'm doing to be diagnosed as a republican in maine only, but the bottom line is that we have got community fire department, community police department, this whole charade that the republicans are going through about the socialized health care, they just know how to argue better than the democrats do.

and they have no conscience about arguments. to seek c-span at least ask people what kind of coverage they have. -- republicans have no conscience a aboutdevious arguments. the republicans have a smokescreen funded by insurance companies. it is the same party that handed the drug industry that golden package guaranteeing that the government will be involved in prices with them. they think people are so stupid they cannot see this going on, but i am confident that at least people who are interested do see it. host: our last call from oklahoma on the line for democrats. caller: yes, i have at least

three questions. first, i want to know -- what did you do when you are all tricare and your turn get too old to be on it and do not have insurance at all? once they go to a hospital it cost them an arm and leg. >> and then when they go back again they can be seen because of reddick. my husband has served in the military for 23 years, and i guess they are called military brats. they get jobs but have no insurance. i have one that is obie's, and he needs help.

and he can't get a job because when he gets one, he falls asleep. >> host: do you have a question? i am just wondering because we're running out of time. >> caller: yes, i have a question. i would like to see people more aware of people that don't have health care to vote for people that don't have -- that have children that have minimum wage jobs that can't get health care through them. >> guest: well, i mean, to her first point i am not an expert on the tri- care system so i'm not going to offer much vice on that. but again, a lot of callers have called in, you hear about the issue of coverage, and that is a big part of the debate going on right now is there is i think 40 million something uninsured a big part of the debate is how to decrease that number, how to expand health care coverage and i think that is going to be a

big part of this. >> host: thank you. >> guest: thanks for having me. >> here is the bill, 1018 pages. it was given to a on the ways and means committee. this was given to us at three minutes before midnight, and were asked to vote on it at nine the next morning. 1000 pages. no price tag to it. most members had no clue what was hidden in that bill, and what really brought it home to me, was that two weeks ago we met with the leaders of the

texas medical center in houston. you know, the largest medical center in the world, sees 160,000 patients a day. some of the brightest minds in our country. and their message to us was we have no idea what's in this bill. we don't know how it will affect our patients, and you know, no one has even asked our opinion how to make health care better. and so you have to wonder if some of the best minds in the country, those who are delivering health care to americans, don't know what is in this bill. who is writing this bill? and what about it that we need to know? we are going to talk today about this bill and answer questions. but let me just say something. we are hearing and reading a lot today about all the mobs at the town hall meetings. >> here we are. >> yeah, here you are. and you are a fine looking mock you, let me just say that. [applause] >> the last time we had a mob here, by the way, we're talking health care.

in fact, we started three years ago working on how to make health care better. we did an issue called 50 ideas how to improve health care. how are you doing? and we've got great ideas. they use examples from our livingston down all the time. we incorporated some of those ideas in our reforms way back then, so i have been anxious to do this for a long time. today i read a editorial that said, from the speaker of the house, that said it was un-american, you know, to challenge your lawmakers about this bill and what is in a. i will tell you, what i think is un-american is to encourage people to spy on their neighbors and report to the white house, you know, people actually disagree with part of this bill. it seems to me washington is getting very arrogant these days. it's almost as if how dare you challenge, you know, our bills. how dare you ask to read this legislation. but the truth of the matter is we all have loved ones who have

bought in wars to make sure we have the freedom to be here today in livingston, texas, to ask questions about his health care bill. so i am thrilled you are here. let's get to it. we ask, because no one in america knows what this bill does. we asked to joint economic committee, which i am the lead republican in house on the committee. i asked our economists in our health care people to go through this bill, provisioned by provision, and jealous, tell the american public how this bill, health care bill works. and this is how it works. [laughter] the. >> you can see congressman kevin brady's town hall meeting on health care in its entirety tonight at 8:20 eastern time on c-span. will you attend a town hall in your community? you can share your thoughts and experiences on health care c-span. just go to our website and check out citizen video to find out more. >> no, a senate hearing on

protection against financial fraud schemes, consumer advocates joint federal and state officials testifying on check-cashing, credit counseling and work-at-home scams. this is about an hour and 40 minutes. >> i call this hearing other consumer protection product safety and insurance subcommittee of the senate committee on commerce, science and transportation to order. i want to welcome all of our witnesses today, and thank you all for your testimony and your efforts in being here today. we are here to receive testimony on the trends and consumer frauds and scams related to the recession. this hearing will examine a variety of frauds that are exploiting the financial hardships of consumers during the current economic downturn.

we will further explore what the ftc is, or should be doing to protect and insulate consumers from these trends. for the last several financial quarters, i have noticed an increase in the press reports on organized consumer fraud and scams as the recession has deepened. and on july 1, 2009, the federal trade commission announced a crackdown on scams playing on consumer fears about the economy. it is called operation shortchange. and the ftc has initiated 15 actions to stop consumer fraud such as get rich quick and easy debt relief schemes. the ftc partner with the department of justice, which initiated 44 actions, 13 states, and the district of columbia. clearly, consumers are at risk of being swindled during this time your and they just

absolutely cannot afford to be built out of their savings and baking under making disastrous financial decision due to deceptive practices and fraud. our staff today has put together a great panel. we have the attorney general of the state of missouri, crisscrossechrisfoster. and general koster, it is great to have you here today and thank you. we also have david vladeck, who's the director of the bureau of consumer protection, the federal trade commission. we have chuck bell who is the program director of consumer reports. we have sally greenberg and timothy muris, the foundation professor, former ftc chairman and is great to have you all here. what we are going to do is do brief opening statements. we know at least one of our senators have to race back to

the judiciary committee here momentarily. and then we will ask the panel for their opening statements, ever going to keep ours to five minutes or less. and then we will get right to the panel and we would ask the panel to keep theirs to five minutes, if possible. >> senator nelson, do you have an opening statement? by the way, senator wicker is on the way and should be here shortly, and he would like to make an opening statement. senator mccaskill? >> i would just wait and ask questions. thank you, mr. chair. >> senator klobuchar, i know you need to run back to the judiciary committee. would you like to make an opening statement? >> yes, sir. my would. and thank you so much, mr. chairman, for holding this important hearing at this difficult economic times. because one of the things, when i was a prosecutor, something that a number of us have done up here, and one of the things that i would always notice is when economic times were tough, you would see more and more scam artists. and the other interesting part

was sometimes people would have been committing scams for years, but it was only when the economy went down that it was discovered because people started looking at their bank account or they could make mortgage payments, so you actually have the double whammy of people starting to commit more fraud. and then you also have fraud being discovered that maybe have been going on for years. so i think it is very important that we focus on this. i did want to start out, mr. vladeck, by committing the ftc for the work that you have done in a case where that came out of minnesota and is being brought in minnesota involving some dish after dish a violation of antitrust laws with a drug company that actually came out of minnesota where a real baby's heart drug, the prices were jacked up 18 times, simply because of the company could and because they had a patent for the competing drug. it was an outrageous case, and at an hearing just like as i held the little vial and said to the chair, and now chairman of the ftc, what should we do about

this? i am brand-new at this job and it seems outrageous. and within a few months the ftc brought a major fraud action in federal court in minnesota. so i did want to mention that we are very appreciative of those efforts. also, as you look at the panel here talks about fraud efforts. i hope you will focus him on of course the mortgage fraud issue and anything else that can be done. i know the administration has a proposal to set up a special consumer agency to deal with some of the fraught with financial documents. and while i may not be able to stay for question, i will submit those for the record and would like the panel's reaction to that. i have done a build that representative ellison is carrying in the house that is very much based on the minnesota model, which worked with mortgage fraud which is called the fairness for homeowners act. and i hope you will look at that as well. so mostly i hope to stay as long as i can. we do have that other little hearing going on any other

building, but i want to thank you for your efforts. i think now is the time more than any that we have to make sure we are enforcing these laws because people are really suffering out there and predators prey on them when there is not enough money to go around. thank you very much. >> thank you, senator klobuchar. we will be joined shortly by at least a couple of other colleagues it looks like. and maybe even more than that, depending on who is able to get away from their other committee obligations. but i would like to do now go through the panel, i'm going to take a little bit out of order since we have a statewide elected official here. i want to recognize general koster first and give them five minutes to make his opening and then i will come back to you, mr. vladeck, and go down the line. >> thank you, mr. chairman and members of the committee. i will focus my comments today on what we are seeing in missouri of particular interest and threats to our citizens. and the threat is this. companies and individuals who specialize in servicing, or

preying upon consumers who have a significant credit card debt or unsustainable mortgage are running amok in our state. foreclosure consultants and debt settlement firms claim to consumers that they can cut principle in half, reduce monthly payments by hundreds of dollars, or eliminate debt altogether. and they claim that this process can be virtually pain-free. all this required of consumers is a few thousand dollars and up front fees so that the companies may utilize their special expertise. consumers in our state are led to believe the settlement cubbies know the secrets of negotiating a way that consumers get. unfortunately, the real secret here is that these coming are offering services that consumers can largely due for themselves, or the nonprofit counselors will perform for a free or parse the. moreover, one of the primary strategies relied upon by these debt settlement and mortgage cubbies is to convince consumers to stop payments altogether, and to stop communications with his

or her creditors. which of course leads to long term damage to the consumer's credit rating, and hundreds if not thousands of dollars in additional debt and these. in the end, to the extent of these companies provide any service at all, debt settlement and mortgage modification companies often offer a service that leaves consumers with no better off than where the consumer started. real people are being harmed by these companies. imagery, our complaint unit has seen a sharp increase in the volume of complaints related to foreclosure rescue scams. in 2007 and 2008 combined, our office had a total of 25 complaints. however, in just the first six months of 2009, we have already received more than three times as many complaints as we saw in 2007 and 2008 combined. for debt settlement complaints, there has been a similar spike. consumers are being lured by these debt settlement companies and foreclosure consultants by

outrageously deceptive advertising techniques. including techniques that seek to co-opt the authority of the federal government. tens of thousands of direct mail pieces are being distributed that purport to do street money for an economic stimulus act of 2008. these advertisements particularly repeat with federal seals from the department of housing and urban development for the federal housing administration, and logos that generally appear to be from the federal government. eagles and flags abound on these advertisements. unfortunately, too many consumers are being fooled by this, and those that are fooled are in the most desperate financial straits. where do we go from here? i would raise for your committee's consideration the following ideas. first most attorney generals would i believe support a federal ban on up front fees related to mortgage rescue and debt settlement firms. imagery we have seen some examples of settlement companies that either never earn the deeds that they charge up front, or simply pocket the up front fee

and disappear altogether. second, do not shy away from applying the same up front the restrictions to lawyers and law firms who specialize in debt settlement work. although a caveat may need to be drawn around certain bankruptcy court practices. what is good for the goose is ultimately good for the gander. third, i would continue to provide the ftc with additional tools against settlement companies that claim the federal government. the use of government symbols and logos in ad, the strong inference that the solicitations are coming from hud or the federal housing administration or to claim that the solicitation has been sent directly as a result of the economic standards act should be stopped. these advertisements are gross deceptions and should be punished as such. finally, continued to restrict advertisements and solicitations around reverse mortgages, and particularly sales leaseback arrangements. imagery, advertisements for this product are increasingly frequent and increasingly old.

-- bold. i thank you for your time today. >> thank you, general. next we will have david vladeck, director of u. of consumer protection, federal trade commission. mr. vladeck. >> goodwin, chairman pryor. ranking member whicker and members of the subcommittee. i am david vladeck, i did knew director of the consumer protection at the federal trade commission. i appreciate the opportunity to appear before you this morning. we are doing what we can to protect consumers from fraud during this economic downturn. i want to make clear that although the written testimony that we submitted reflects the views of the commission, my oral remarks in any remarks i make in response to questions set forth my own views and are not necessarily those of the commission. the story nationwide is no different than the one in missouri. rising unemployment, shrinking

credit, record-setting foreclosures, and disappearing retirement accounts are causing tremendous anxiety among american consumers about their ability to make ends meet. the downturn in the economy has had a severe impact on american consumers. the un- employment rate now hovers around 10% and the national foreclosure rate is now over 12%. to con artist, today's challenging economy present a golden opportunity to exploit consumers fears and build them out of money. the ftc is moving aggressively to stop them. for instance, as general koster mentioned, the troubling economic times have given rise to unscrupulous companies praying those at risk of losing their homes through foreclosure. in the last year alone the ftc has brought 14 cases to protect consumers from mortgage loan modification and foreclosure rescue scams. there is more to come. we are stepping up our efforts

to enforce the law against an opportunist, victimizing people facing foreclosure. tomorrow, the ftc will announce another sweep in addition to operation shortchange. this one focusing in part on mortgage rescue scams in a coordinated federal and state law enforcement effort. the ftc's mission goes beyond foreclosure fraud. thousands of people have been swindled out of millions of dollars by scammers exploiting the economic downturn. their scams promise jobs, access to free government money, or the chance to earn money working from home. these promises deliver nothing. they raise people's hope, and then drives them deeper into the whole. two weeks ago, as the chairman mentioned, we announced operation shortchange, and law enforcement sweep we undertook along with the department of justice in 14 states, including i am proud to say, the state of

missouri, involving over 120 law enforcement actions nationwide. the ftc took 15 files, file 15 cases against scams that preyed on the unemployed. scans that exploited the entrepreneurial spirit of individuals looking to start their own businesses. scams that use the false promise of free government grants, and scams that promise to deliver much-needed credit for debt relief but instead delivered more debt. the perpetrators of these frauds used the telephone, internet, the television, and print ads to deceive people about what they could do for them, what course they could open, and how much they could make. and they did it by extracting money from their consumers account in a variety of ways. i want to give you just three examples of what we have alleged in some of our plates. job safety u.s.a. promised job hunters maintenance and cleaning

jobs. but it was the defendant who took the consumers to the cleaners. tricking them to pay about $100 for a credential that would entitle them to a job. but the credential was a sham and the jobs did not exist. grants for you now, seized him to stay in this package is the basis of its economic model. it promised access to or expertise and getting free government grants to pay personal expenses. it lied, plain and simple. i assure you there is no free government stimulus money to pay down personal debts or to remodel homes. mutual consolidated savings added insult to injury by using invasive robo calls which themselves are illegal to offer phony lifelines to people hoping to reduce their debt burden by negotiating lower interest rates with the creditors. other defendants and operation shortchange trick people into

disclosing their personal financial information, resulting in months of unauthorized charges. or stole money from on line consumers through unauthorized charges and debits for supposed membership services. the commission moved aggressively in these cases, seeking and obtaining export a temporary restraining order with asset freeze is where possible. we are seeking a permanent halt to each of these operations as well as the return of these ill-gotten gains to the people who were fleeced. now, the ftc we are about tough enforcement. but we would rather then no one fell victim to these scams in the first place. a critical component of our mission is to reach out to consumers and to warn them of these scans. an educated consumer is our first line of defense. we have produced a video, and i would like to show you a portion of it now, which features a former telemarketer of a fraudulent business

opportunities explaining exactly how he was able to lure people to part with their money. here is the preview. >> they have a little something to put away. now, they took their expense account, they cut their overtime so now they're looking to increase their earning. this is how opportunities can loom in a recession. >> nobody in business is going to give you your money back if your business to a. >> you saw a commercial on tv. you spoke to me for 10 seconds. i gave you some things to look at. you called me back three weeks later and you will be a check for $50000. does that sound screwed up? >> people want to believe that there is some opportunity that

there is a guarantee that they will have financial success. there is no such thing. there is no sure deal. none. >> the best device i can give to anybody, any purchase over the phone is fast nose and a slow yeses. fast nose and slow yeses. >> i should point out that he was convicted and spent over three years in jail for his telemarketing fraud. we are grateful to the committee for its continued support of our work and our mission. we are doing the best we can with the tools that are available to us. with greater resources and stronger statutory authority, we could do even a better job in protecting american consumers like beverly stewart. everly stewart is a single mother of two who was out of work and determined to find a job. she fell prey to an employment

scam. ms. stewart had the courage to come forward and report the scam to the federal trade commission, and our investigation into job safety u.s.a., one of the scams i just mentioned, was launched because of ms. stewart's complaint. here is her story in her own words. >> my name is beverly stewart. i am a single mother of two. i wanted a job, so i saw an ad in the washington post on january 20. and i was desperate. and it was 40 cleaning position. i was really excited so i went on line and i called the number. no one answered. i went on line to download my application, and that is what i did. and she also told me to give me

her number and give them $85 they would send me a certified form that would allow me to handle the materials. and i did just that. and after doing this information i realize i had been taken. i was upset. i was angry. i wanted to do something about that so i called them back and i complaint. and what i was told was that we will get to you as soon as we can. i knew right then and there that they had gotten me. that money was all that i had. i was desperate. >> informed consumers may be our best line of defense, but consumers who have been scanned by transcanada who come and report the violation would be our best friend. would not be up to initiate our enforcement proceeding against jobbed u.s.a. without complaints like ms. stewart's.

thank you very much for giving me this opportunity to testify before you is born. i would be glad to answer any questions you might have. thank you. >> thank you. our next witness will be chuck bell, program director of consumers report. >> i thank you very much for holding this hearing on ways to protect consumers during the current economic downturn against deceptive practices, fraud and scams. consumers union is the independent non-pop for publisher. with a circulation of 7 million. consumer reports postconsumer report.org subscribers are just part of our work reregulate research and report on misleading and deceptive practices that affect consumers. report on scams and fraud both to alert consumers so they can protect themselves and also to alert law enforcement agencies and policy makers so they can take action to directly curtail and stops these unethical deceptive and fraudulent practices. over the last several months, we have reported on a variety of

anti-consumer practices that are affecting financially distressed families which we think are worthy of attention by your committee. as the committee is well aware this is a very tough time for workers and consumers, and when the economy falters it is a prime time for toys that help consumers to get out of money messes. because they need fast help and are increasingly desperate. while many such frauds exist in both good and bad times, the con artist appeared to expand their marketing efforts in recessions and come up with very clever and you will still attract new victims. in march, consumer reports publish financial traps are pushing, an article that profiles several very costly financial traps that prey on financially distressed consumers. some of the financial draft include foreclosure rescue scams, hard-sell reverse mortgages, and high debt settlement services. briefly, foreclosure rescue scams, we profiled an illinois