>> afsa and those green, they guaranteed wind farms 20th autocrat at a certain price which has allowed for the development of entrepreneurs.

i would say yes, we are really way too slow right now. our american businesses are having their information stolen. this is a very. it is cyber espionage and yes, we ratcheted up. we are losing jobs. we are losing income and our competitive advantage. >> we have seen this in the case of china, the chinese government has wrote back on some of the ambitions with the fifth, five year plan in terms of what they wanted from foreigners that's been referred to. so we have seen pressure exerted by a united front of the european american and government and -- they have backed off a bit but it remains to be seen how much for things go. your brought point still stands. a quick point, i want to remind the audience i'm going to turn to use them for question so please do collect your thoughts.

>> for an innovation economy, intellectual property is the bedrock. anything we can do to continue to reinforce that method with our trading partners i think is a good thing. i'd like to come back to -- >> but it's such an important part of your company's portfolio as a science-based company. let me challenge that from a different perspective, not from the perspective which most recent people might agree with, the points made, but from what i know about how innovation itself is changing. we are seeing much more powerful business models emerge that are collaborative, open innovation models, prize and and senate platforms. in a world where we see connections inside and outside the firm to quote bill joy, the smartest people in your industry don't work for you any longer. how do you have a vertically integrated traditional silos system that focuses on patents thrive when your competitors

have much nimbler models? >> you can't, short answer. i don't you market economy and public private partnership in conflict that innovation doesn't take place in a single company. we are projects where we work with other large companies and small companies and government laboratories, government support. so innovation model has change. we need to be nimble enough to adapt to that. and we need to put in place, and right now it's being done on a project by project basis. how intellectual property will be developed, how it will be owned. >> a more flexible approach seeking patents for example. seeking of trade secrets or other ways of having something of value. >> we do that with u.s. universities as well as companies. >> let me get a show of hands to quit people in the audience. why don't we get a microphone over here. i saw this ladies and first.

please identify yourself and let's have a short and sweet question, probably we the. [laughter] >> i'm catherine coleman and i'm an communications consultant at each of these panels has talked about the policy changes sweeping chinese to make it and i'm curious as to your perspectives on how effective our tools to persuade or push china to make some of these changes. >> anyone motivated? >> i would say you never really want a bank with an ideology, which is what we have with china. i think it is a dangerous proposition, our debt being owned by china. what tools were willing to exercise but in the same way the trade report, they talk about the government filing charges because in the recent solar case most of the companies want to fight fight in terms of standing up for the own intellectual property rights for fear of retaliation. i think we need a very, very

even then i think this administration has been better than anyone else. it's inadequate to the challenge we face because they are the only ones with the tool because the business i don't think have the courage to do it. >> i think we have to acknowledge the progress that is being made in china moving the r&d towards convertibility to stronger positions around intellectual property and other things that are positive signs. and then secondly in a very small room with very few people around i think we need to press our case very strongly to accelerate that process. >> let me underscore a point i made earlier. i know it's easy to attack the chinese. we need to be smart about this, and if you go back into the 1870s in this country, if you were a company burton in france, you want to come here and ride this economic way that occurred in this country. we need to view it that way. so i come back to the simple point, sure, we need to make sure it's a level playing field,

whatever that means. and she we need to make sure the rules are right. at the end of day if we are really smart, we will find a way to collaborate and work together to the mutual benefit of both societies. and that will develop lasting opportunities for all of us spent people do forget economic history. the development of the patent system. and let's get a microphone to the gentlemen here. please identify yourself. >> i am michael thibault, a professor of physics and also director public affairs for the american physics society. we've heard about the value. we've heard about the extraordinary capabilities our university system. you mentioned the idea that entrepreneurship creates jobs. stanford is very good at putting things out. mit is very good.

texas amn is very good. many universities are. how do we translate the models at work to the rest of the country? >> a great question. >> you have to recognize we need to create a hub of excellence. while we -- 240 companies and 27,000 people really focus on the power sector. we are working with community colleges. we're working with north carolina state, which is, they do research and development next door. they have incubator type of opportunity for entrepreneurs, the same with clemson. so i think this notion of creating hubs. with minneapolis. we have medical devices. we have in houston oil and gas. silicon valley. cities and regions in creating the infrastructure there, it's very critical for job creation

and creating new products and services so i think it's going on, not just in those major stanford and mit in texas a and m., but it's going on in a lot of different regions in our country. and that's what i have confidence in going forward. >> i would offer a note of caution. the number of places around with to try to duplicate silicon valley with names like it's in the dozens and dozens, and most of them, almost all of them fail. oftentimes it's because they use some formula of government money, maybe a favored academic institution, a city that looks promising. this is not essentially a top down project. the emergence of silicon valley itself is sir david is. government played a role in defense been in that area. but it was a very serendipitous occurrence. i would just caution wannabe

silicon valley's facing, a little more carefully. >> but another sector, as i said medical devices in minneapolis, houston, oil and gas -- >> the research triangle in north carolina. there are examples, but oftentimes they build on a place where there's already strength. and regions, competitiveness i would argue our rises not from particularly having competitive cluster but attracting competitive customers to come to your area. that my call for preconditions that government can play an important role in to attract competitive companies. >> i absolutely agree with that comment. there is an ecosystem that needs to be established around innovation and entrepreneurship. it's about entrepreneurial talent but it's about great universities and it's about money. you need to bring those elements together, and people are trying to reproduce silicon valley in various ways around the country.

>> the other place that is really important, if you look at all the great growth ways in our economy, its tight integration. we need to open our borders, and for all those who go to our universities, they should all get when they graduate a visa and be part of our economy. that is really critical to our future. >> we have a question of waiting but i'll make a small observation. i was interviewing bill gates and he made aspiration -- observation, he observed when it comes to the visas it's not just a one way street, that uc berkeley grad student, many foreign students actually get subsidized to get a graduate degree in computer science but when you want to stay and start an entrepreneur company, hiring americans, they are given the boot and told to go back. they go back to china and india answer countries that compete against americans but this is an absurd situation with our immigration policy at the

moment. >> my name is meredith. i help countries export developing countries export of u.s., and small companies here in the u.s. export out. my question is for antistress. fred's announcement yesterday order today about helping industries export, more opportunity to speak this was the seminal report. >> looking forward to be the. and hoping there's very good things and knowing fred their party will be. but i'm wondering, your union come that's what the entrepreneur spirit often comes but i'm wondering what would it take for those in the service industries and those are starting at a fairly low level to really, to be able to get to a point nothing possesses strong enough to export? 90. >> i think that's a good question, not just for the service. i think it's really hard to be

and ought unde -- if you can't h care, and you potential put your entire at risk because one of us will wipe you out. i talk to many entrepreneurs, retirement system, all the government, labor and other regulations are just too much for me to incubate might this is what i'm trying to do with all these other crisis. so i think our structure, backward on infrastructure, lots of things structurally we have wrong for innovation economy to make it really hard for small businesspeople are people that are willing to take risk to not really risk capital punishment and complete economic destruction. and i think it takes a government assistance and the private sector system to gauge her product into the marketplace. we know when a hard disk to get in china. is a hole through the people who run office. no one try to work the with the the chinese system without a partner. they made it into a size but

we're not very good at either foreign direct investment doing at the same what do you or try to figure how does america really make job creation the number one priority in the government. that would mean putting embassies to put our service, businesses to sell overseas as well at a much higher skill than we do today. >> come here for a question now. i'll try to come back to the other side next. >> i'm president of the council of scientific society of president. if i look at the business model of america right now, essentially we have decided to let manufacturing go. we have become the society of ideas and of services. is it time to reinvent our business model based on globalization and our ability to reach your jobs? is this the time and what would the model look like if we did?

>> somebody want to take that up? >> let me have a go at it because i think it is time to question our approach on a few things. you touch on a number of things there. i come from a company that is oriented towards manufacturing. with service offerings but we see that, the good sense of having a strong manufacturing component in the u.s. government. two-thirds of dupont sales are outside u.s. two-thirds of what we make are inside the u.s. we have a balance of trade and surplus on the half of the u.s., and i think that's a good thing and i think that is a model we ought to try to replicate. talk about other aspects to the innovators dilemma but how do we take a model that's worked so well for our country and we make it before it really needs to be remade. and i think that's a very good chance that we can look at a lot of the things that come up today, our approach to regulation, our approach to health care, our approach to a lot of the systems that may be a

burden to the internet and say let's re-examine these things, maybe this is the right time to do that. >> i think i saw a hand over your. >> hi. and stephen from the information technology innovation foundation. from 2000-2008, capital investment the u.s. manufactures were 16% greater overseas and inside the united states. what do we need to do to reverse that? and make sure that u.s. manufactures capital investments are occurring in the united states in the next decade and is a national manufacturing part of that strategy? >> jim, did you plant that man in the oddest? >> no, let me give you one of the statistic. multinational companies have created billions, a million and half jobs overseas. and reduce 900,000 in the united states. they are really focused on

creating wealth, as they should be. they are going for the markets are going and the middle class is being developed. and that's the bric countries primarily. but i think in our country, we have to go back and continue to strengthen, as i mentioned before, the ties between universities system and entrepreneurs. as i said, innovation doesn't create jobs. entrepreneurs create jobs. and now we have a lot of hurdles with health care, but we've always had hurdles. but what our countries had and we don't seem to exhibit very much, that is being exhibited in many startup companies here in the u.s. today come and that's the can-do spirit. we have a health care issue, we have this issue over here, as there's a lot of creativity and a lot of new businesses being started today in this country. sure, we have to solve these problems but i think we have the right environment to do it, and

sure it needs to be tinkered with a little bit. but at the end of the day, we have had the magic sauce, we just need to make it better. i feel like -- >> who had at one time, you know, blockbuster and in the world changed and you sort of say we had and it's going to happen. we are in a different from the third economic revolution moment in world history. agricultural took 3000 is to make a change, industrial to 200, it's a 30 year change but it is not waiting to look back. >> if you talk about a third economic revolution, presumably one that is based on internet communicate, technology, it has been observed earlier today, it's very hard to find a japanese or european or brazilian google or amazon or facebook. they may be coming and in china some of these will be, but they are essentially imitators. all of them in the chinese

internet space have copied shamelessly american business models and then begin to adopt them for local circumstances. so if this is the third great revolution it would appear at least the first part of it, america is winning. >> america is winning the technological, you know, innovation part. we're not winning the scale job part of the. that's where governments are economic teens. countries are economic teams in this revolution. it's not dominated, this question about the research, how do you build public-private partnership to promote and expand their businesses that are unique advantage. google is our unique advantage. if they are being stolen in another country there not a big advantage anymore. that's what countries our teams and we have to get back with our team to be the winning team, our government. >> let's see if we can sneak in, running close to the end of our time but there is a handy are.

>> thank you. and following up with which are talking about, the market place the future is maybe not in the best states but it is elsewhere. 7 billion, thing to be 9 billion then who knows what. all of you have talked about this but what are we doing to really exploit the opportunity to export our goods and services and intellectual property, intellectual capital? that seems to me that's the big one. >> i'll have a run at that. from a perspective standpoint, for my company within two years we will sell more into developing markets than we do in the u.s. market. and yes, we are a u.s. based company, approaching global markets. so i think major u.s. companies are getting very add depth at playing in global markets, investing in global markets, capturing customers into developing markets. one thing for music on the standpoint that would be helpful is to help the small and

midsized enterprises, address those global markets where they don't have the larger organization our footprint that a major company would have. >> that calls for an opportunity to create a link between large companies and small companies so you create supply chains that have the ability to ultimately, the small company, to supply their products worldwide. but, you know, what's been our greatest policy is the weak dollar has kept our exports up it and i don't think that's sustainable over the long term your but that's been in a short term a benefit to our export in the recent past. >> let me see if we can sneak in one more question. we just have a couple of minutes left. again, a short question. our time is short and. >> we just hosted on monday what would've been for regional mesa

around the country on the present advanced manufacturing partnership. you talked a little about that. what is the right role for government in the process, or is that something the industry alone can do? how do we prepare people who work in these new industries we're going to have down the road? >> i don't have an entry to the question but i think that is the right question and we need dialogue at public partner -- public-private dialogue in order to establish an answer to that question that i do know that other countries do play a more active role in such dialogues than historical we've had in this country. >> i would say it another way. i would say we really need to leaders, the leader some government as well as the leaders from the major universities in this country, to come together and create solutions to. >> i was say you need a market. the market that you start incubating businesses that haven't yet crossed over, and

you watch what germany and other countries to come and some other indigenous industries to give it a head start by procurement, not by necessary expenses, perturbatent but some how you need a hand to be an entrepreneur. private markers don't necessary have orders. they have capital but they don't have orders. >> there are tremendous arguments in favor of the government plane a role in this but also you mentioned germany a couple times. i just want to point out that germany had some of them has had of the most elaborate sources of indoor for the country has the lowest total potential in the earth. >> the highest electric rates in the world. >> you do get a mismatch sometimes when government takes specific policy winners. >> i have until we have a couple more minutes. if there is an additional question, i see a lady with her hand up. >> hi. i'm from tennessee.

where does the environment goes to global market? agreed international energy, well, contribution really, thank you very much, in 2035, if governments don't do anything, the world will be six degrees hotter. >> which is coming off the turbine summit which was not as successful as boosters had hoped. this is the age of climate realism, climate 50. where are we at? and the question is will the broader than you'd think that it's about the role of innovation and tackling environment of problems. >> actually the question really goes to the collaboration that could occur between u.s. companies and chinese companies in terms of being able to bring

these new technology -- >> you are banging a drum about u.s. and china. but these are -- >> right, that's why i make the point. if we can solve this issue, she's talking specifically about carbon, then those solutions can be worldwide solutions. so it is in technology. and it is in scathing, and it is in deployment across the world. spirit that it's a different aspect of innovation. people often think about innovation as the cool stuff in the left, the cutting edge technology, the new thing, the leading edge. but when you talk about scaling, it may necessary be the very latest coming out of the labs, or even if it is it's about the adoption, the diffusion and the penetration into market and technology. and history shows that is where the lion's share of value created by innovation comes. it's a crude not even to the inventor or the country or

society that invented something but to the one that most enthusiastically embraces the technology and adopts and uses them. american historical has been that society. we are adventuresome consumer. i think in that sense perhaps we continue to have an advantage in innovation. >> i think we can solve our energy, environment and economical, and it's not either or. and we can achieve all those goals if we have the right public-private partnerships, the right guideposts by the government. that in turn private sector needs can make it happen. >> right. we have about two minutes in our time clock. let me take this opportunity may be to take a quick straw poll, if i can take the moderator's prerogative. several times people brought up the age-old question does innovation create jobs or does it destroy jobs? the classic example of automation, robots was brought

up and people expressed different views to countries with this audience, you have to to give you one way or the other. no sitting on the fence. you have to vote yes or no. how many of you vote, if you had to, that innovation destroys jobs more than it creates jobs? raise your hand, on balance. raise your hand, just to be sure, how many everything on balance innovation creates? okay. for the web audience, this is an overwhelming vote in favor of innovation. i'm sure there's no bias of any sort in a crowd that came to hear people speak about innovation. [laughter] i believe that lack of innovation destroys jobs because if you're not innovating, there's someone out there who is. and once you lose out, the jobs are gone. the lack of innovation destroys jobs.

innovation creates jobs. >> mature industries like the steel industry and the auto industry, go to their plant 30 years ago and today, robots are being used and different technologies are being used, they are producing more steel and more cars with fewer people. and so immature industry that kind of innovation is a good thing. but it displaces -- >> this is the classic argument about creative destruction. while there may be jobs lost in one part of the economy, innovative economic that is able to redeployed human capital and financial capital to other areas, anyway that japan was and. >> one consideration that we are staffed remember is global economy that redeployment can happen differently. where those resources aren't redeployed. >> absolutely. in the last burning questions ask the lady in the back. >> do any of you see a reverse

trend of americans leaving this country to live overseas? i would like to attract the kind were health care is cheap and food is cheap. i'm just wondering whether you all see that as a trend in the future? >> in of you have retirement homes in china or anything we need to know about? [laughter] >> i guarantee if you took a poll of the american people, 99.9% say they were staying here, but i bet if you went to china, india or south america, you would have a large percent saying we want to relocate here. that's actually what we should be selling. we should be selling our country to the rest of the world and encouraging them, particularly those with high iqs to come to this country and allow us to continue the competitive advantage that we've had in the past. and we can continue it in the future. >> jim, if and when you retire as chairman you have a job

presumably as america's spokesperson of the world. [laughter] will you please join me in thanking our wonderful panelists? [applause] >> a good performance. we are now going to take a 15 minute break but we will come back for secretary clinton with jim lehrer. thank you very much. [inaudible conversations] [inaudible conversations] >> in a few moments fbi director robert mueller testifies on capitol hill about how terrorist suspects held in u.s. custody. and the senate is back in session at 9:30 a.m. eastern for general speeches. legislative business at

10:30 a.m. today's agenda includes a vote on the house-senate compromise on defense programs approved by the house on wednesday. >> ahead of the nuclear regulatory commission will be back on capitol hill today testifying for a second day about nuclear reactor safety and oversight.

>> and house-senate conference committee this week revise the defense authorization act to expand military jurisdiction over suspected terrorists requiring them to be held in military custody. even if they're caught in the u.s. fbi director robert mueller was on capitol hill yesterday to testify how those changes could affect the bureau operations. this is two hours.

>> i think you can tell, director, this is important during because you have the a team of photographers he. you have all the absolute best on the hill. there is used to be one very good for talk of the on field that he left to go work for the president. i have yet to see him now. today, the judiciary committee will hear from director robert mueller, the federal bureau of investigation. i want to thank the director once again for agreeing to put his life on hold when called upon by the president earlier this year to continue to serve another two years as fbi

director. his commitment and dedication to service are exempted. as i said the last time i mentioned this, i also want to thank mrs. mueller. she's a wonderful person, and i know that she also is willing to put a lot of her life on hold for that, so i hope you will pass on my compliments to her. >> i will, mr. chairman, and thank you for that. >> the bureau placed an integral role for protecting the nation to its characters investigation, intelligence gathering. its work has contributed more than 400 terrorism cases since september 112011. and knowing this of course i remain deeply concerned about provision of the national defense authorization bill that mandate, i stress the word mandate as the chair of the senate and house committee notes, the military detention and certain terrorist suspects, even if they're arrested on u.s. soil. director of us have this provision, adverse impact to

conduct counterterrorism investigation, and check a substantial element of uncertainty to its operation. i average what director mueller meant when he wrote that ms. cutter provision failed to take into account the realities of a counterterrorism investigation. especially the successful convictions that we've gotten in our federal courts. congress needs more to support enforced fashion important enforcement efforts but we should give life was important tools to combat the growing threat of cyber crimes. i think senator coons mention any other been. more and more, american consumers and businesses are being targeted by sophisticated cyber attacks designed to steal the most sensitive information. i met with the president, the ceo of one of our largest companies the other day and he told me all the steps, millions

of dollars they have to spend just to defend against cyber attacks, a lot of it coming from foreign countries, competitors and elsewhere. in september this committee again voted for the personal data privacy and security act. it's long overdue legislation that would provide the tools to help law enforcement combat cyber crime. and the senate and the congress probably passed this measure. the last congress made great strides towards more progress. but i worked hard with send a poll cited us to craft and pass the enforcement of recovery act with the most expensive anti-fraud legislation in more than a decade. we enacted important adequate provisions as well as health care, and wall street reform legislation. i am pleased to see the fbi has really increased the number of agents investigating fraud. more fraud arrest and fraud

recovery. this year i'm putting in the taxpayers act which directs a portion of the find is collected back into the fraud enforcement efforts. the bill would lead to substantial recoveries paying for itself many times over. this committee afforded -- voted for this over six months ago. it's time for the house and senate to pass this bill without further delay because law enforcement, the resources and tools it need to crack down on fraud, they all say we are opposed but we have to get the law enforcement the tools to fight it. and i commend fbi for maintaining its historical combating corruption. develop bipartisan bicameral anticorruption level.

hold accountable the american contractors, employees abroad. especially hurts taxpayers in this country. time and anchor in corporate and wrong doing, greed, corruption is at all time high. and anchor of congress. congress should act promptly to the fbi and other law enforcement tools they need to rein in fraud and corruption. we should let partisanship get in the way in this. too often these days, whether it is senator whitehouse built to make sure the fbi can respond or request local officials to provide to investigate crime, or senator blumenthal's bill to close the gaps, or our bill to assure the u.s. marshals requested right time it assistance in missing children cases. these seem to be delayed for no good purposes, so i wish we all,

always been our law enforcement even more. gave them the support they need. we hear a lot of tearing down of our law enforcement. we should be building up and giving them the tools they need. so i think the director for returning to the committee. and through him i think the hard-working men and women of the fbi. i know many of them, not all by any means, but i know they do better work every day to keep us safe and the director, please give accomplice to the men and women of the fbi. >> thank you, mr. chair move for this very important, and i want to inform you that i wasn't supposed to be here until 1030 thymic because us because us posted on the floor. when i got over there they said it wouldn't start 10:25 pics i had to come back and get my statement and then i'll go back over there and i'll come back for questions. >> in fact if i buy, i told the director when the first votes

start, i will stay until almost the end of it and go over, keep hearing going. the senators can go over and vote, and come back, and we will keep it. >> obviously, mr. mueller, and you know there's questions i want to ask you. it's been five months since congress passed an president obama signed into law an unprecedented two-year extension of director mueller's term as director of fbi, given the historical problems with fbi amassing power, the president's request to extend director mueller's term for an additional two years of breaking from our 35 year practice of limiting the director to a 10 year term. it was not a decision that i took lightly. ultimately, given the president failure to nominate a replacement timely in a responsible manner, i agreed to the request to provide this historic extension. i am pleased that chairman leahy

and members of the committee agreed with me and moody the extension through regular order, including a hearing, executive markup for consideration. a new nomination from the president and along with a final confirmation, quoted this process at the historic record that extending a director's term was not applied by the right decision but it also puts president on notice to begin a process of selecting and nominate a new fbi director earlier than the last attempt. another extension will not occur. that said, i want to welcome director miller to this day searing. his tenure as fbi director has been a very good one and his dedication and reputation for significant, were significant factors in his 100-zero confirmation vote in july but i'm sure that when his two-year extension runs he will be looking for the transition,

helping other people transition to office, and a well-earned change of lifestyle. first, i want to discuss the perpetual problem at the fbi, whistleblower protection, director mueller has repeatedly assured me he will not tolerate retaliation against whistleblowers in the fbi. despite these assurances, to particular whistleblower cases have been dragging on for years. these cases are largely fueled by the fbi's desire to continue appeal rulings and findings of wrongdoing by fbi supervisors at fbi agent jane turner of a whistleblower complaint in 2002 when she discovered fbi agents were removing items from ground zero following 9/11. she faced retaliation for raising concerns about these agents, and her case has been stuck in administrative limbo at justice department for over nine years. nine years is far too long for any case to be resolved,

especially a whistleblower case. another case, a 30 or nonpaged the point of the fbi. the case has language for over five years but again, the fbi has continued to appeal this case despite a clear findings of retaliation. i wrote to hold her last about these issues. the response was lackluster. if the attorney general, the deputy attorney general and fbi director truly wish to of whistleblowers, they have the power and years of appeals. in other words, you don't have to appeal. and there may be reasons other than just money that you are appealing because maybe you hope these people die and go away. i don't think they're going to. i also wanted to discuss some issues that recently arisen following come as a follow-up to the fbi's closing the

investigation. justice department recently settled a death lawsuit in florida for two-and-a-half million dollars. the lawsuit raised questions from the press given the potentially conflict with statements made by justice department that seemed to cast doubts on director ivan's ability to actually manufacture anthrax but ultimately the department filed a supplemental brief correcting statements that seemed to cast doubt upon the fbi's case but did not seek to refute the depositions of doctor ivan's coworkers. i wrote to the attorney general and fbi director in august asking how the department filings and depositions could be squared against the fbi's contention that doctor ivins was the sole assailant. among, or while the department attempts to thread the needle about the government's liability, the fact remains that the government ended up paying

two and half million dollars to settle the case and cast further cloud on fbi's assertion that doctor ivins was a sole perpetrator am also concerned about two of the issues for icing out of anthrax investigation. first and respond to press accounts, threatening the government's case against dr. ivan can't give you and the department of justice does allow flying agents and attorneys be interviewed on national television. pay attention to this because this is another inconsistency between congressional oversight and with the fbi and justice department is willing to do for other people under other circumstances. despite his full and public access to the press that they have given fbi agents on national television, the department has denied access to laying agents as part of our investigation into ats operation fast and furious. now, how do you square that inconsistency? i want to know from director

mueller why he allows laying agents to provide detailed interviews to the press on national television but repeatedly refuses to let the congress and the stat interview lined agents and attorneys. second, i want to know why the department of justice declined to prosecute the individual that leaked information about the information. that would cost american taxpayers nearly $6 billion in civil settlement for privacy act violations. the american people who picked up the tab deserve to know the names of the fbi or doj employees involved. why they were not prosecute and whether they faced in administrative punishment. i would also like to note that today is one year anniversary of the shooting of brian terry. failed operation fast and furious continues. i send director mueller a later

asking about the fbi's investigation of the murder of agent terry. i have not received a response but i've talked to director mueller. is been very good to come to my office and discuss these cases. i would like a commitment from doctor mueller that my letter will be answered in writing. the terry family deserves answers about agent terri's murder in answering my letter into another step towards eating those answers. .. >> and boston fbi.

thank him very much, mr. chairman. >> so with that cheerful welcome -- [laughter] mr. director l you, please, stand and raise your right hand? do you solemnly swear that the testimony you'll give will be the truth, the whole truth and nothing but the truth, so help you god? go ahead, please, sir. >> thank you. thank you, chairman leahy, thank you ranking member grassley and members of the committee -- >> is your microphone on? >> i'm sorry. let me start again. good morning, chairman leahy, ranking member grassley, other members of the committee, and thank you for the opportunity to appear today before the committee and discuss your concerns. and also i want to thank you for your continued support of the men and women of the f birks. fbi. three months ago our nation marked the tenth anniversary of the september 11th attacks, the horrific events of that day were

the prelude to a decade of political, economic and cultural transformation and globalization and technology have accelerated these changes. and since that time there have been significant changes in political leadership across the world, between the recent events in libya and egypt and in the economic arena, the past decade has seen billion dollar investment frauds, the failure of storied financial institutions and the abuse of financial products which have undermined the world's financial system. there has also been an exponential expansion in the development of new technologies, and these advancements have changed the way we work, the way we socialize and the way we communicate with each other. these changes in the global landscape have posed significant challenges to the fbi and our partners in the intelligence community and in the law enforcement community. accelerated by these changes, the threats to our nation are constantly evolving, and today's

fbi faces an ever-changing threat environment. let me begin with the terrorist threat. during the past decade, we have weakened al-qaeda due to the coordinated efforts of the military, law enforcement and our international partners. we have captured or killed many leaders or operatives including osama bin laden, and we have uncovered dozens of cells and prevented numerous attacks. core al-qaeda operating out of pakistan remains committed to high profile attacks against the west, so it's been confirmed from the records we seized from 3weu7b laden's compound upon his death. al-qaeda in the arabian peninsula operating in yemen has attempted several attacks on the united states including the failed christmas day airline bombing in 2009 and the attempted bombing of u.s.-bound cargo planes in october of 2010. and most recently we have a

growing concern about the threat from home grown violent extremists. these individuals have no typical profile, their experience and motives are often distinct, but they are increasingly savvy and willing to act alone which makes them increasingly difficult to find and to stop. and we must as an organization working with our counterparts keep adapting to these changing terrorist threats, staying one step ahead of those who would do us harm. and we must do all of this while respecting the rule of law and the safeguards guaranteed by the constitution. let me turn for a moment from terrorists to spies. many people assume the end of the cold war made the world of cloak and dagger obsolete. unfortunately, espionage is still very much with us. nations will always try to learn one another's secrets to gain political, military or economic advantage. indeed, the foreign intelligence presence operating in the united states is roughly the aim as it

was during the -- the same as it was during the cold war. today's spies are just as often students, researchers, business people or operators of front companies, and they seek not only state secrets, but trade secrets from corporations and universities such as research and development, intellectual property and insider information. turning to the growing cyber threat. the anonymity of the internet makes it difficult to discern the identity, the motives and location of an intruder, and the proliferation of portable devices that connect to the internet only increases the opportunity to steal vital information. the number and sophistication of computer intrusions have increased dramatically in recent years. american companies are losing billions of dollars worth of intellectual property, research and development and trade secrets. outside attackers burrow into company networks and remain

undiscovered for months or even years, and we must also consider that hostile nations or terrorist groups could launch cyber attacks against our critical infrastructure. to combat these threats, the fwi has cyber squads in each of our 56 field offices and more than 1,000 forensic examiners that run complex, undercover investigations and examine digital evidence. the fbi leads the national cyber investigative joint task force that brings together numerous partners from the intelligence community and other federal agencies to identify and disrupt significant cyber threats. these efforts have led to successful disruptions of large-scale, illegal bot nets and transnational hacking schemes involving, this some cases, millions of computers and millions of dollars. we also face threats from sophisticated financial crimes as well as health care and mortgage fraud. the fbi and law enforcement partners continue to uncover

major frauds, insider trading activity and ponzi schemes. at the end of fiscal year 2011, the fbi had more than 2500 active corporate and securities fraud investigations. a 47% increase since 2008. over the past three years, the fbi has obtained approximately $23.5 billion in recoveries, fines and restitutions in such programs. during fiscal year 2011, the fbi obtained 611 convictions, an historic high. the focus on health care and mortgage fraud is no less important. in 2011 the fbi had approximately 2600 health care fraud investigations and roughly 3,000 pending mortgage fraud investigations with nearly 70% involving losses of more than $1 million. let me just add that public corruption remains among the fbi's highest priorities particularly along the southwest

border. we continue to dedicate resources to the mexican drug organizations trying to corrupt public officials. i finally, the fbi continues to work to protect our communities from the longstanding efforts of gangs and violent crime. we have more than 150 task forces across the country. we target high-level violent enterprises and senior gang leadership to yield the greatest impact prosecutions. nor have we forgotten the children. we remain vigilant in our efforts to remove predators from our communities and to help keep our chirp safe, and we have -- our children safe, and we have ready response teams stationed across the country to quickly respond to child abductions. regardless of the complexity and the evolving nature of modern threats, the rule of law will remain the fbi's guiding principle as will the protection of privacy and civil liberties for the american people.

chairman leahy and ranking member grassley, let me conclude by thanking you and the committee for your continued support of the fbi and its mission. and, of course, i'd be happy to answer any questions you might have. >> well, thank you very much. i am sure based on, i can see here this morning that other senators are probably going to ask you about fast and furious which is not my number one choice to ask, but i want to -- i've been reading so much about allegations and conspiracy theories that have been aired by some congressional republicans, i thought i'd ask you a couple questions. congressman issa went on national television, he suggested the fbi engaged in a cover-up, the crime scene at which i.c.e. agent brian terry was killed and is continuing the cover-up. he suggested there was a third gun recovered at the crime

scene, even there was a murder weapon. the fbi's intentionally covering it up. i believe e know the answer to this, but what are the facts with respect to whether there was a third gun recovered at the scene of the crime as chairman issa suggested? >> let me start with adamantly rejecting the suggestion that the fbi would in any way cover up the what happened in the tragic killing of brian terry. to the contrary. every available, necessary resource has been put on that and similar informations where we lose one of our -- investigations where we lose one of our own. i do and am familiar with the suggestion that there was a third gun at the scene. there was no third weapon found at the scene. there were two weapons that were found at the scene, not a third. why there was suggestions as to a third, i'm still not certain. it may well be that the two

weapons that were found were designated k2 and k3 because there was a k1 that was not a weapon. but the fact of the matter is, there were only two weapons found at the scene. >> it was also, the congressman said the fbi is not looking for the killer of brian terry. how would you -- >> again, to the contrary. there's been one arrest, there's an ongoing investigation, there are documents that have been filed that under seal, and it is an ongoing, ongoing, strong investigation. and we will bring to justice those persons who are in any way involved in the killing of officer brian terry. >> i ask the question only to clear the air and, obviously, any one of us who have been involved in crime investigations know that the less you talk about the steps you're taking, the more effective it's going to be, but i did want those allegations out there knowing the answers to them. i thought it'd be a good chance for you to be able to state

publicly as you did, and i thank you. protecting american consumers and businesses from cyber crime has been a priority of the committee for many years. and recently the fbi issued a warning about a new phishing scheme in which cyber criminals are stealing american consumers' bank account information. at the same time, they're launching a denial of service attacks on u.s. banks to conceal these crimes. it's not like the old days where somebody would come in with a gun into a bank, steal a few thousand dollars and get caught quickly thereafter. we estimate the cost of cyber crime globally is $114 billion a year. september the judiciary committee favorably reported legislation that provided new tools to the justice department to combat the growing threat of cyber crime, including a

provision that would amend the criminal code to add violations, the computer fraud and abuse act, the definition of racketeering to make it easier for the justice department to go after cyber crime. so i ask you, first, how concerned you are about the growing threat of cyber crime, and would my proposal help the fbi investigate organized crime in cyber crime? >> yeah. as i've indicated in my remarks, both my remarks here today, but also the longer statement that i submitted, cyber crime is going to be one of the top priorities of the fbi in the future. for the very reasons that you articulated, the amount of numbers of dollars that are lost in a variety of ways, but perhaps more immediate concern is the possibility of people using cyber skills to attack our national security whether

interfering with the electrical grids or the energy and the like. we have seen around the world countries willing to utilize the cyber battlefield before they launch attacks. and so for us in the fbi we, i have a long-range plan to build up our cyber capabilities. we have since 2001 roughly doubled the number of personnel that we have on this particular priority, and we have used some innovative ways to address cyber criminals using both the criminal authorities as well as the civil authorities. making cyber offenses the predicate offenses were racketeering, a racketeering charge is, would be helping. will it be both appropriate as well as helpful. and so i believe i have not had a chance to discuss with the department, but my expectation is that the department would be supportive as would we. >> it's a long way from the bonnie and clyde or willie

sutton days. and you could have a career criminal a few decades ago that may spend years robbing banks what can be done now, the same thing could be done in a nanosecond. >> and the persons will not be in the city where you're located, even the country. it could be turkey, morocco, estonia or singapore. and consequently, the change for us is that we have to develop the relationships to be able to conduct these informations world -- investigations worldwide if we are to at all be successful in addressing cyber crime. >> i recently introduced the violet crime against women reauthorization act, worked with many senators on this committee. i know the fbi is currently working to update the definition of rape for the uniform crime report. and why is that important, to update that? >> it's -- that definition was

in some ways unworkable, certainly not applicable, fully applicable to the types of crimes that it should, it should cover. and as i think you're aware, the advisory committee for ncic in the saw -- statistics, developing the statistics, approved the change to that definition, and my estimation is it will go into effect sometime this spring. >> thank you. lastly, senator grassley and i worked together on the fighting fraud to protect taxpayers act. the department of justice, the fbi additional resources to investigate fraud cases at to cost to tax 35euiers -- taxpayers. the vice president announced this week in 2011 the department of justice recovered $5.6 billion in penalties and recoveries from prior cases, $15 billion -- [inaudible] this administration.

it's a lot more -- [inaudible] to pass the bill that senator grassley and i have introduced. it's now stalled in the senate even though it saves taxpayers money. i suspect we will recover even more. would the american people benefit -- and i realize this is kind of a leading question -- but would the american people benefit if fbi could hire more investigators in the fighting fraud to protect tact -- taxpayers act. >> the obvious answer to that leading question is, yes. [laughter] whenever it comes to the budget issues and discussions, we've got to prioritize. certainly, white collar crime in particular large scale white collar crime is one of our substantial priorities. >> thank you. senator sessions. >> thank you, mr. chairman.

and i appreciate the fbi had the honor to work with them 15 years as a federal prosecutor. i believe they represent the very finest in american law enforcement, maybe the finest -- you would think, i'm sure, and i share the view -- perhaps the finest law enforcement agency in the world ever seen. they are highly paid, we've increased the numbers, we have provided them technical support and training the likes of which few agencies in the world can match and certainly not in the numbers that we've seen before. so we expect a lot out of the fbi. and i believe your background as a prosecutor and having worked with the fbi for many, many years provided you the kind of experience necessary to be a good director. um, i will just say with regard to your letter of november 24th on mandatory military detention,

i thought you overstated the case but raised some points of importance. the legislation in conference was altered. it's clear to me -- let me just say this -- i am absolutely convinced that the right policy is to presume that combatants against the united states will be held in military custody, but i absolutely believe the fbi should l participate in those investigations. so we added language that said nothing in this section shall be construed to effect the existing criminal enforcement in national security authorities of the fbi with regard to a covered person regardless of whether such covered person is held in military custody. do you, does that answer at least some of the concerns you have to make clear that the fbi might continue to participate in

investigations in which your ability and skills would play an important role? >> senator, you might you said that i would -- understand that i would disagree on the characterization that i overstated it. isay i stated it appropriately, my concerns with regard to mdaa. and there were two basic concerns. the first was the adverse impact on our authorities or the lack of clarity with regard to our authorities, and the language that was developed goes a long ways to resolving that particular issue. and it tends to assure us that our authorities will be maintained. the other concern i voiced in the letter is that the uncertainty that the statute raises with regard to what happens at the time of arrest. and as i know you know as having been a prosecutor that it is tremendously important at the the time of arrest that you make the right decisions in terms of

addressing the person, particularly persons whom you hope to cooperate. not just interrogate, but to cooperate and turn around on others. and the statute lacks clarity with regard to what happens at the time of arrest. it lacks clarity with regard to what happens if we had a case in lack wanna, new york, and arrest has to be made there, and there's no military within several hundred miles. what happens if we have a case we're investigating on three individuals, two of whom are american citizens and would not go to military custody and the third is not an american citizen and could go to military custity. custody. now, in my discussions with others, i understand the answer to be, well, the president can waive this provision or, secondly, procedures are going to be developed that will satisfy that uncertainty. and my continuing concern is that uncertainty will be there

until it is resolved in some way by statute or otherwise. if i may just add one other point. i, actually, two points. i am as interested as anybody in developing intelligence to prevent attacks. because if there is an attack, the person they're going to look to sits here. what i am concerned about, however, is long term as well. this statute that gives the military an inroad to making the tensions in the united states maybe ap publicken and work well -- applicable and work well with the persons you have now, but five years, ten years down the road what could this mean? and so while the changes in the statute have addressed some of my concerns, the changes have not -- and i appreciate it. >> well -- >> have not addressed all of my concerns. >> we disagree. >> we do. >> to me, there's no rational argument that can be made that would suggest the united states is not in a better legal

position to treat an al-qaeda member arrested in the united states as they are a military combatant with the full ability of the fbi to participate in the investigation. giving miranda warnings, presenting them to courts in short order, providing them with lawyers within hours of arrest, allowing them to make phone calls to their co-conspirators that civil law prosecution requires is not helpful in a war. so that's where we disagree, and i'll go to the next question. >> may i just clarify one -- >> all right, please. >> what i have focused on is what happens at the time of arrest. >> well, you need to work this out with the department of defense, don't you? >> let him finish. >> well, i want to -- my time is -- i'll let him talk. >> i just want to make certain you understand that focus is at the time of arrest and what

happens afterwards particularly when we have been successful -- >> yes, i certainly agree. i think that's what the purpose of this was, presumptively treat them as a military detainee and then to have memorandums of understanding across designations that would allow full participation. but maybe this language will help you there. i appreciate you sharing that. with regard to the chairman's talk about fraud and prosecution, i've got to tell you i am disappoint inside the decline of those prosecutions. this shows some of the cases in their declines. we've had some progress in some of the cases, but bank embezzlement went from 230 in 2006 to 130. financial institution embezzlement went from 31 to 17. financial institution fraud went from 752 to 570.

bankruptcy fraud stayed about flat. bank robberies down, prosecutions down significantly. in a time when the american people are concerned about the financial integrity of some of the businesses that are failing, and it does appear many of them have had wrongdoing as part of that, are you concerned that we're not adequately addressing it? and i would note, and i'll ask you maybe in written questions that your numbers look a lot better. but to me, i've always felt the the administrative office of courts number represent the exact, more accurate number than agency numbers. so your numbers do look better than that, but i think these are the ones represent people actually charged and actually convicted. >> let me just respond to the last because we want to correlate those numbers.

we in no way do wish to fudge the numbers, and you will see in a number of categories the numbers going down, particularly since 2001 because we had to prioritize. >> well, this is from 2006 to 2011. >> and i will tell you there is not an fbi agent who join inside the last 15, 20 years doesn't love doing bank robberies. but the fact of the matter is we cannot afford to do the same number of bank robberies, and embezzlements we have done in the past because of the demands of terrorism, gangs, cyber -- >> well, bank robberies, i understand the bank robberies argument. that's been gown on for 25 years -- going on for 25 years. >> senator's time has expired, and as i said earlier, department of justice has recovered $5.6 billion this year alone to fines, penalties and recoveries, $15 billion so far in this administration. senator kohl. >> thank you very much, mr. chairman. director mueller, the fbi has proposed closing three of its

six wisconsin satellite offices. if these closures go through, the western district of wisconsin will be especially hard hit and will lose half of its fbi offices. as i told general holder and i wrote to you last month, i have strong objections to these closures. you've indicated that wisconsin will not lose agents or resources, so this clearly is not a simple cost-saving issue, and we think it's a bad idea to close these offices. as i have heard from law enforcement throughout the western district and wisconsin, f birks presence in these semirural areas is critical to maintaining long-term partnerships that protect wisconsinites. you have long emphasized the importance of the fbi's coordination with local law enforcement and have stressed that the fbi must maintain close contact with the law enforcement officers on the street day in and day out working, quote,

shoulder to shoulder with them. how are these closures which would move f birks agents hours away from large cities like was saw and lacrosse consistent with the statements you have made about working shoulder to shoulder with local law enforcement? >> well, let me -- the broad view is, senator, we have 56 field offices and just less than 400 -- i think it's about 385, 390 resident agencies around the country. and the fact of the matter is we have had, we've undertaken a review for the last two years on all of our resident agencies to determine if they are the most effective way of providing the support to state and local law enforcement which is tremendously important as you indicate. i did go back after the last hearing and look at the issues relating to these resident agencies. and i do believe that there are cost savings particularly with regard to the messty for -- necessity for outfitting our

resident agencies with skiffs where classified information can be maintained. it is very expensive to rent the space and put in the capabilities of another resident agency to handle classified information. so, yes, it does go to cost. what we have tried to do is look at the threats in the western district of wisconsin and determine how best we can address those particular threats understanding that the personnel who were in these other two resident agencies would be in the other resident agency that is in western wisconsin. and so i would like nothing better than to tell you, senate, i agree, we're going to keep them, but in reviewing the situation i do agree that the decision is appropriate to consolidate those resources in a particular resident agency where we can better prioritize, make some savings and my hope and expectation is that provide exactly the same degree of

service that we had before. >> i understand that there are a total of 26 office closures being proposed all over the country over the next two years, and three of them are in wisconsin. can you provide me a list of the other 23 proposed offices to be closed? >> i think i'd have to get back to you on that. i presume we would be able to as long as other notifications have gone out. >> thank you, director mueller. as i stated earlier and often and here today, i object to these closures in wisconsin. now, i understand that you've already signed off on them, but i hope in the spirit of open mindedness you'll continue to work with me and to can consider the possibility that maybe we can do better in wisconsin and in serving the people of wisconsin. i know you're an open man, you've indicated that time and time over your tenure, so while the issue is said to be closed, i'd like to hope that it's not finally ander revocably closed.

>> there's a crack there. [laughter] >> can all right. thank you. >> i'm always open to additional arguments anytime before something happens, i can be, i see that i'm making the wrong decision, i try to entertain the information and make the right decision. so i welcome what other information or whatever you want to provide. >> well said, and i appreciate that. >> yes, sir. important step to surge crime which costs united states companies billions of dollars each year, and it look forward to its swift passage. as you know, when companies fall victim to trade secret theft, they are often reluctant to share information for fear if

theft becomes publicly known at the investigatory stage, it will harm their reputation and bottom line. but if fbi, on the other hand, does not know about the theft, it cannot investigate and help other companies guard against these threats. director mueller, what steps are you taking to improve your relationship with the private sector the assure them that their information will not be exposed unless or until the government decides to prosecute the case? what efforts are you taking to bring more economic espionage cases? >> well, in terms of the economic espionage cases, we've had some substantial ones, several of them i think are listed in my longer statement where we have arsed and successfully prosecuted individuals who have stolen secrets from various corporations. one large case, agricultural entities where an individual had stolen a well-recognized

biologist had stolen their secrets and was in the process of taking them to china where we interceded and successfully arrested the individual and successfully prosecuted him. and there have been a number of these particular cases. we appreciate the enhanced sentencing. enhanced sentencing transcends into enhanced deterrence. it is with regard to the working with the private sector, i would say that it's much like the issues relating to data breach where companies would be reluctant to inform us of intrusions because of the impact on those companies. we work very closely through a number of outreach programs that we have in every one of our districts to assure the corporations and business leaders in the, in that particular community that there are ways of keeping their secrets private. we can go in and get a court

order that maintains that privacy, but it's absolutely imperative that we know what is happening in order to be able to stop it, and if it's in your company, you may be in another company, and you have to let us know what is happening if we are to protect not just your company in the future, but other companies that may be adversely affected as well. >> thank you. thank you very much, mr. chairman. >> thank you very much. senator grassley. >> yes. thank you, director mueller, for coming. my first question is about the letter authorizing targeted killing of anwar al-awlaki and because, and another u.s. citizen. the reason i ask this question is i'm getting a lot of mail from iowans wanting to know the authority for the united states to take that action. and i assume this letter gives that authority. do you support congress having a copy of that letter? >> it really is not my, sir,

it's not my role. it is -- whatever may have been developed would be developed by the department of justice. we would not have played a role in it. some of our information may have been used if there was such a finding, but i ask that you perhaps direct that to the department of justice. >> the department of justice settled a civil lawsuit for dr. hatfield for violation of privacy act for leaking details of the investigation. it cost the taxpayers $6 million in settlement. i've repeatedly asked both the department as well as your agency to identify the individuals who leaked information on the investigation. i've been repeatedly told the investigation's ongoing, and i assume that's the excuse for not answering our information we've requested. in response to august 31, 2011,

letter on the anthrax attacks, the department of justice thissed me that -- informed me that the investigation is complete and that no criminal charges will be filed against those who leaked the information. three questions. i'll give you all three of them. were the individuals who leaked fbi agents or employees of the fbi? what, if any, administrative action did you take against these individuals if they were fbi agents or employees? and do these people still have their jobs if they're fbi employees? >> well, i know, senator, and i appreciate your discussing this with me. these questions are more specific than the ones you raised when we met, and i would have to get back to you on it because it is specific to the fbi. i know there were other entities other than the fbi and the department of justice that had undertaken an investigation as well. so i will have to get back to you on that, and to the extent

that the investigations were undertaken by entities in the department of justice, defer to the department of justice in terms of providing information. but to the extent that it's specific to the fbi, i would have to get back to you on those questions. >> my next question deals with sensitive interactions between fbi and other law enforcement agencies. and you probably know that sometimes you get accused, your agency does, of not playing well with other, meaning other law enforcement agencies. i'm sure you would agree that we're, if we're busy fighting each other, then we're not fighting our real enemies. recently i've seen news articles about infighting between fbi and new york police. i was especially bothered by press reports of the fbi sources pointing out weaknds of new york -- weaknesses of the new york police department terrorism case. at the same time, i'm hearing complaints about fbi's inability to cooperate with department of homeland security, oig and

border corruption investigations. these complaints sound as if fbi is using kind of a pac-man mentality. since the culture of an organization starts at the top, i'm concerned about what may be going on in management at fbi, so i want to assume that you would agree that fbi agents should not anonymously or publicly attack the new york police department. i'm sure that you're committed to having the fbi work with all appropriate partners in addressing border corruption, so this question: what are you doing to improve the fbi's working relationship with other law enforcement agencies, and how are you relaying that message to line agencies and supervisors? and whether it's by impression or whether it's fact, it doesn't matter. there's a feeling out there that it exists, so it's a problem for you. >> well, it is.

i confess, it has been a long-term problem with the fbi. in the wake of september 11th, we identified ten prior it isties. eight of them were programmatic employees, and then on the criminal side, public corruption and the like. the ninth priority was collaboration with our federal, state, local and international partners. and there were only ten priorities, and the significance of that is we understood we could not be successful by our own. our success is dependent upon our partnerships. and since september 11th, since i've been there, i think we have made substantial strides in working with state and local law enforcement. and if you do talk with the iacp or the national there haves or -- sheriffs or a number of the organization, major city chiefs, my hope and expectation would be that they say there's been a stable change, and we work very clap collaboratively. i was as distressed as you and others to see the press reports,

anonymous of federal government persons, talking about another prosecutor's, another agency's investigation, this being nypd. i gave directions that that should not happen, and when i saw it happening, again, went back to give directions to have it sop -- stopped. i had sean joyce who is the deputy talk to ray kelly. i had talked to ray kelly, he gave me a call, and we have discussed this. we understand it should not have happened, from our perspective it should not have happened, but we still have a very good relationship with nypd particularly when it comes to addressing terrorism. we recognize, i recognize that ray kelly has done a remarkable job in terms of protecting new york city from terrorist attacks, new york city being a principle target. and as i say, these things are unfortunate. i wish they didn't happen, but our relationship remains solid. secondly, with regard to what is

happening on the border in terms of the handling of public corruption cases within the dhs agencies, we seek to work with those partners that want to work with us in developing these cases. and we leave it up to the department of homeland security to sort out the counterparts with whom we should work understanding that public corruption on the boarder is a substantial issue, and those cases have to be addressed, and they have to be addressed swiftly. and we seek to do it with the inspector general's office or the internal affairs, whichever entities would join with us in addressing that form of public corruption. >> thank you very much -- >> thank you very much, mr. chairman. mr. muller, as you know, i've known you for a long time. >> yes, ma'am. >> i think the fbi is very fortunate to have your

leadership. you've always been a straight shooter. i think your credibility and integrity is unmatched, and i just want to say that. um, as you may know, ican, the internet corporation for assigned names and numbers which governs top-level internet domain names, is planning to open these wide effective january 12. names would go for beyond, well, go beyond dot.com, dot.mil, dot.edu and the other established connections to virtually anything, dot.ga, and that's very concerning, anything. do you think it would be advisable for icann to delay this extension so congress and others can take a closer look at this situation, evaluate it implications for united states consumers, united states businesses and, most

importantly, internet security? >> senator, i have not looked at this in some time, and what knowledge i have of it is somewhat passing. my impression is that it opens up a can of worms, and we don't know exactly what's going to happen as a result. so any effort to analyze and to n my mind, constrain the different uses to which this could be put would be valuable. i understand, however, that icann has been a product principally of the united states or is an entity sported principally -- supported principally and abreed to by the united states and certain companies, but there is a desire out there to break the hold. so it may well be an uphill battle, but any effort that can be made to look at and

anticipate what is going to come out of this would be, i think, beneficial. >> well, another way of doing it, and i thank you for that, but is to stagger what they can do at any one time. so you don't have, literally, hundreds or thousands of new domains appearing all at once with all kinds of mischief. >> let me ask you this if i could get back to you and talk to sean henry and get his impact. >> would you? >> he's the expert in this area, and we'll get back to you and see what we, what thoughts we might have on that particular issue. >> if, if you could, i'd appreciate it. >> yes. happy to do that. >> as you know, when you first began to develop a national security division and go into the intelligence area, i doubted whether it could be done efficiently and effectively. i believe you've done it. i think the record indicates that. i think the intelligence, i think the way the 56 offices

operate, i think the fact that you have made 400 prosecutions as opposed to six military commission trials has demonstrated that the fbi has been effective. as you know, the defense bill will have a military presumption in it, it looks like. many of us on this side of the aisle do not believe that's the way to go, that there ought to be flexibility for the administration to say the evidence in this case best suits itself for a federal prosecution, the evidence in this case suits itself for a military commission. and have the ability to make that decision. could you -- i've never asked you at least for your view on this. could you talk a little bit about this and why you believe that this flexibility is so important? >> well, as i indicated in response to questions from senator sessions, when the bill first came out and we looked at

it, i had several concerns. and i expressed those concerns in a letter to the armed services committee. the two concerns were, first of all, what impact it might have on the continuing use of our authorities and then, secondly, it did not, it created uncertainty as to what happens at the time of arrest, particularly at a critical time when we are trying to get a person to cooperate. now, the legislation talks about not interrupting interrogations which is good, but gaining cooperation is something different than getting that continuing interrogation. and the, my concern is that you do not want to have fbi agents and military showing up at the scene at the same time on a covered person or with a covered person there may be some uncovered persons there with some uncertainty as to who has the role and who is going to do what. the answer, as i understand in

the legislation, is, well, procedures are to be developed by the administration. procedures can change, procedures can be controversial, and to a certain extent to accept that the statute introduces uncertainty, that is problematic for us. and to the extent that the uncertainty is to be resolved by procedures, procedures can change. and they can change if you have somebody different in a particular position within the government can exploit procedures where they cannot exprovide a statute. so my concern comes in to resolving that uncertainty, and i'm not certain that the drafters of the statute went some distance in resolving the issues relating to our authority with the new language, but did not really fully address my concerns about -- >> because i've been told that you're satisfied with what's been worked out. >> i was satisfied with a part of it with regard to the authorities. i still have uncertain --

concerns about the uncertainties that are raised by the statute, and my understanding last week is that there were some suggestions as to fixes that could be proposed in terms of resolving that other concern that i addressed in my letter. >> could i ask that you get your specific concerns to us? some of us are working on a bill in this area, so it would be very useful to have those. >> well, i did articulate the second part of my letter. the first part related to the authorities, the second part related to the concerns i have about what happens at the time of arrest. um, and so i have put that in a letter or, but i will go back and see if we can, see if there's a possibility in conjunction with the department of fleshing that out some. >> appreciate that. thank you very much. >> yep. >> thank you, mr. chairman. >> thank you. thank you very much. and, let's see, senator whitehouse was next, but senator

franken. >> thank you, mr. chairman. thank you, mr. director, for your service. um, mr. director, millions of americans have smartphones with preinstalled software signed by a company called carrier iq. recent research has shown that it captures a broad range of sensitive -- >> if senator would yield just a moment, i should note senator whitehouse went to vote so he can come back and continue the meeting. please, go ahead. >> um, recent research has shown that carrier iq's software captures a broad range of sensitive information like the content of text messages, the content of searches even if those searches are, if user thinks they're encrypted, the carrier iq gets them back unencrypted. also the full addresses of the

web sites that users use or visit. news reports have suggested that the fbi accesses and analyzes information gathered by carrier iq's software. what wireless carriers have the fbi requested this information from? what carriers? and what information have you obtained from those requests? >> let me start off by saying we have neither sought, nor obtained any information from carrier iq in any one of our informations. i can only follow up by saying there was some confusion, i believe, in response to a freedom of information act request which indicated a standard exemption was being utilized. and from that it was extrapolated that perhaps we were obtaining information from carrier iq. as i said before, we are not, have not and are not -- have not

sought and do not have any information. >> well -- >> on carrier iq. >> not directly from carrier, but what about from the wireless carriers? >> that's very general in terms of wireless carriers. i am sure -- well, let me -- >> can you get information from them from use of their software of carrier iq? >> no, i don't believe so. if you're specifying the use of the carrier iq software in, by a wireless carrier, have we sought that? i do not believe so. in other words, i'd have to, i'd have to check and be more specific in the question and the answer -- >> [inaudible] >> whether it would be title iii, we would seek specific information. i do not know the information we seek from wireless carriers or what have you, and i'm not

talking about carrier iq, i'm talking about wireless carriers -- >> right. >> -- we may contain information that in some way carrier iq might have been involved with. i'd have to get back to you. >> okay, great. i appreciate that. in january the fbi will roll out a facial recognition service in four states. that service will allow state and local law enforcement agents in those states to use a photo of a criminal suspect the way they use fingerprints right now to see if that photo matches up with people already in the system. what protections will the finishing bi have in place -- fbi have in place to make sure that innocent people aren't added into this database and to make sure that this service is not used for non-law enforcement purposes? >> well, the, this service is going to be used solely for criminal law enforcement. and booking photos and the like.

it will be made available to other law enforcement in the same way we provide other data to our law enforcement, but we will insure that they are to be used only for approved criminal law enforcement purposes. >> okay. well, as you roll out the service, i'd appreciate if your office would keep our office up-to-date on -- >> happy to do that. >> i'd just like to follow up on senator feinstein's thing just to ask you to keep me, also keep me in the loop on icann and their plan to greatly expand these number of top-level domains. >> happy to. >> i think that is an issue that might effect the agency's ability to fight internet fraud and identity theft, etc. um, i'd like to ask you about

reports of varyingly anti-muslim statements in some of the fbi's training materials. i'm worried that this'll be a further, will further set back the fbi in its efforts to partner with the muslim-american community to fight terrorism. has the fbi issued a clear and unequivocal apology to the muslim-american community for the bigoted and inflammatory statements found in those materials? and would you do so now? >> well, we have met with various of the representatives of the muslim community and not only said we apologize for what had happened, but also explained to them the process we're undergoing to address this issue. came to our attention last summer that there may have been inappropriate materials in the course of our training.

in the wake of that, we put together a panel of individuals two from the fbi, three from outside the fbi. the ones outside the fbi have credentials, one was at west point, one was at the naval, they have yes credentials hat at yale, princeton and harvard. they put together a document, a touchstone document that would be a base document for my the -- for any of our training when it comes to addressing the counterterrorism particularly when it relates to muslims. and after putting together that document, we pulled together all of our training materials since september 11th. approximately 160,000 pages. and have gone through and reviewed those materials with the context being how does it relate to the document that these outside and inside experts

put together. and then in response to foia requests, we have been producing those documents to the public. yes, we did have materials in these documents that were ip appropriate. they did not represent in any way, shape or form the fbi's perception. it is tremendously important that the muslim community cooperate with us, and the muslim community in many of these prosecutions has been the entity, individuals from the muslim community have been the ones who have alerted us to the issues. and i would say overall i believe our relationship with the muslim community is very good. things like this, as you indicate, set it back. but i do want to assure that we are addressing it, and we are addressing it comprehensively, and it does not represent the belief of the fbi. >> an anomaly. >> it's an anomaly. a perfect word the address it. yes.

>> thank you. >> thank you. >> for value -- validating my use of anomaly. [laughter] >> thank you. >> director mueller, let me jump in and -- >> and for your service. [laughter] >> let me go back to the cyber issue. >> yes. >> we are being attacked across the internet in a whole variety of different ways. we have the sort of light of day theft and piracy of intellectual property, movies, music, goods, electronic games. that is rampant around the world. we have direct fraud and theft against individual americans and businesses. we have what you might call the brain drain of intellectual property that is stolen very often without the knowledge of the company out of their computers and exported it

appears primarily to china so that they can compete against our manufacturers without licenses and without r&d expense. and it appears to be national policy on their part to do this. and then, of course, you have the danger of sabotage through the cyber vector either of our critical infrastructure, our banks, our electric grid and of military technology that could be disabled or interfered with. you stack all of that up, and i think there's a case to be made that this may be the greatest transfer of wealth through theft and piracy in the history of the world, and we are on the losing end of it. so i'm concerned about the resources that we dedicate to this. i understand that you are dealing with budget constraints, you're dealing with an omb that is primarily concerned about budget, not your outcomes. but what i'm hearing back from

the private sector folks who are involved in network security and who engage with your agency all the time is that your capability is extraordinary. the people who are involved are absolutely first rate. organizations like the ncijtf are operating at the highest level of professionalism. if america could get behind the classified screen and see what they were doing, people would be really proud and impressed. so the capability is great, but the capacity is what two recent folks said to me, quote, woefully inadequate. that there's been one corps flood case which was a great case, but there could have been a dozen because the problem that corps flood went after of botnets is profound. it's all over the web. you mention a variety of cyber prosecutions for intellectual property theft. i don't, i'm not aware of one of

them that is a pure cyber case. i believe that they all involved an individual who actually appropriated, expropriated intellectual process. >> yes. >> and yet you see i had a ceo in, of a major american energy innovator tell me that when he announce add new product, he got hit by 60,000 attacks in the next two hours, his company did. we've had one of our major defense contractors have the plans for an entire joint strike fighter hoovered out of their electronic records. we've been briefed about an american or company that had a huge investment in a new product that is gone. and there's actually a facility that's being prepared to make that product. again, no license, no r&d, just

to el it from the -- stole it from the company. so i'm concerned we don't yet have the right model for dealing with this in terms of capability. and i've spoken to jack lew and to dana hyde at omb, and they are willing to open up to a discussion that would look into how we might better pursue this. you know, should it be its own organized crime strike force model from the kennedy era? should it be akin to ocedef which has been quite successful against domestic narcotics trafficking? should it be a new dea or atf or fbi? should it be that big when you consider the scope of the threat and the complexity of making the cases? the forensics of making the case, the international angle to virtually all of them, the complexity of the statutes. i mean, you stack it all up, and

it's just -- each one of these cases is an almost majestic accomplishment to pull it together. and if we're going to do a lot of them, which we need to do, we've got to, i think, throw more money at the problem. and how we best do that, i think s a discussion that we need to have, and i would like to ask you if you'd be prepared to join in that discussion, um, and let me know who the right person to participate in that discussion for the fbi would be. kind of brainstorming what should this look like for the coming century? because it's not clear that the existing model, just creating a few more agents here or there, is where we want to end up. >> let me talk a little bit about where i think we need to go. the, there are several steps that we're taking to position ourselves to address this phenomenon. >> [inaudible]

enormous. >> pardon? >> massive. >> it is enormous. it is massive. there has to be triage and participation, but this has to be additional resources directed to it. we're upgrading the capabilities of every one of our agents by having a basic cyber training so that it brings everybody up to a level to handle much of the cyber crime or that which has migrated to the internet with sufficient understanding and background in the cyber arena. a baseline for every one of our agents. secondly, to add and continue to grow with persons who have the backgrounds in this arena in our agent cadre. thirdly, internationally i was in romania and bulgaria last week. both areas, particularly romania, it's known for its widespread internet fraud. we have specialists over in romania at this point, i've got

two persons, one used to be an ibm program programmer, the other one had worked for a number of software companies, and it extends our reach to those counterparts in the romaine began and bulgarian services. we have persons in estonia, i think in latvia, a number of other countries where we've expanded internationally in order to address these crimes. internally, the structure of the fbi does not lend itself to easily addressing cyber. yes, we have a cyber division. but what we find as it comes to espionage, it's now cyber. and the information's exfiltrated as opposed to getting an intelligence officer, getting him in and getting him latched up with people. >> your microfilm is over. >> it's still there. people -- [inaudible] they don't want to lose their own ways. we're the same way. but if you're sitting back in one of these countries and saying where can i get the biggest bang for my buck, it's

got to be in exfiltrating the information without risking people overseas. and so what we're looking to do is build on the concept of the ncijtf which is that threat-focus cells. as you know the principle there is you take an intrusion, and you bring your best people to address it not knowing whether it's going to be espionage or a crime, with whether it's going to be a high school student, and then decide how you going to treat it, whether you're going to treat it as a crime domestically, whether you're going to treat it as a national security risk to be addressed by other agencies on the intelligence side. and that concept of the ncijtf, in my mind, has to grow to address cyber crime because you cannot address it as we have crimes in the past where we have organized crime, we have narcotics, public corruption and the like because it cuts across all of those. so organizationally we've got to change and build up our capabilities. building up the specialists such as the persons we have over in romania and pull gaer ya now

is -- bulgaria now is tremendously important, and we have to find ways to be more efficient particularly when it comes to the, the forensic areas. and as you know being a united states attorney, backlogs in terms of forensic capabilities often hold up prosecutions. we have to become more efficient when it comes to utilizing the forensics, translate what we have forensically into the courtroom and putting people away. that's generally the direction that we're going in. >> i will be happy to both myself talk with you and also have sean henry, who basically oversees in the side of the house, sit down with you and discuss additional areas. >> good. i've talk today some of my colleagues on the other side of the aisle, they're equally interested in participating in this and trying to figure out where the choke points are, what the best structure would look

like and then i think we've got -- it's a big enough problem that i think we need to figure out what the proper design should be for going after it and then worry about how we pay for it. because, frankly, if, in fact, we're on the losing end of the biggest transfer of wealth ever through wealth and piracy, then paying for stopping it is a thousand to one, 10,000 to 1, million to one payback. it's really a big deal. i've heard numbers as high as a trillion dollars a year as estimates of what we lose in intellectual property that's just siphoned away, often unbeknownst to the factory or whatever it is that feels they have adequate security. in terms of the numbers we do have, i'm going to keep going for a little while because i think some of my colleagues are coming back from the vote, and i'll turn it over to them as soon as they return, but while i have you, i'd like to pursue this a little bit further. with respect to the fbi's own

numbers. when you describe that an agent is headquartered cyber division personnel or in the computer intrusion program or in the cyber crime program, does that include -- does that mean that there are full-time, absolutely-only dedicated to cyber, or is this a little bit more like on the doj side they will report how many cyber ausas they have, but having been an u.s. attorney, i know perfectly well they're probably doing other cases, they're just the ones who have to listen to the conference call with the mute button pushed while they're preparing their drug or gun case or whatever. but they're not really a full-time, cyber-only, dedicated member, you know, prosecutor. and how does the fbi's count work for that? do you count your cyber people, people who are designated if a cyber case works up, but they're

working bank robberies, terrorism, whatever else while they're in between cases? >> well, nobody's in between a cyber case now. there's so many, so much work to go around rarely do you find that. i'd have to look -- >> do you count an agent as a cyber -- >> well, 90%. they have additional duties, they may have s.w.a.t. duties, that kind of thing, but in terms of their caseload, it would be a cyber caseload, and each of the special agents in charge are desperate for additional persons their cyber squads. i'm not sure what statistics you're looking at, but we have doubled the number of agents who are doing cyber cases since 2001. that's still less than a thousand. >> yep. >> but we are -- >> compared to, say, nearly 5,000 dea agents, nearly 2500 atf agents, approximately 3200 secret service agents, over 1400 postal inspectors, all who are

doing great work, all whom i'm very proud of, but when you put those numbers side by side, there's a disconnect. >> well, i think we're one of the agencies, i think secret service, quite obviously, does, but we have separate cyber career paths. we recruit and bring in agents for the cyber program into new agents' class. they get the foundational instruction as to how to be an agent, how to conduct interviews, be an agent in the same way the military will bring somebody in, you're army first and then your secondary will be artillery or tanks or something like that. for us it's we bring 'em in, you'll be an agent first, but you have particular qualities, you were a software programmer before. i don't want you to do narcotics cases, i want you to do, you're in here to be in the cyber program. and we put them in generally a smaller office for a period of time, but in the cyber arena, and then they will graduate to a larger office.

we have a number of cases, a number of capabilities now where we have persons with special expertise who may be live anything cleveland or san diego or portland, gob, and portland, maine, who we will bring in on a virtual case coordinated by headquarters but where the expertise is around the country, and the bad guys can be anywheres. and for us to be effective down the road, we're going to have to make use of those specialties regardless of where the individual lies because the crime is most often not a local crime, not a state crime, but a crime that's launched overseas. and we need to bring the expertise to developing that and allow that group of persons wherever they are in the united states to bring the case to a successful close. >> and, first of all, let me

just make clear that i very much applaud the direction that you have been going in. i think that within the resources and structure that you've been provided i am very laudatory of the focus and the professionalism and additional resources particularly as you've been constrained and have the terrorism responsibilities added all at the same time. so i don't want to in any way have anything that i've said be taken as a criticism of you or of the fbi management. i think it's congress' job to make sure that you have the resources and the structure that will be most effective to accomplish your mission, and that's a discussion that we need to be having in a different way here in the congress. let me ask you one more question about, um, these cyber cases. and where in the array of cases that the fbi engages in they rank in terms of their resource intensiveness and their agent

intensiveness. i, it strikes me that between the subject matter expertise that's necessary to deal in this specialized area, between the computer familiarity that's required and the forensic computer capability to pick apart the actual traffic of what was done where and understand it and be able l to bring it out of the code and make it real for prosecutors, for instance, who have to make the case, dealing with the fact that the vast majority of this crime has an -- [inaudible] component to it which means you have to deal with intelligence services and foreign treaties, and it's probably a complicated racketeering-type case to begin with. so you add it all up, and it strikes me as a guy who used to have to run these kind of cases that this is the sort of thing i'd look at and say, oh, my god, i'm going to have to i put an awful lot of people on this to

get it done right, this is about as complicated as it gets. is that your take as well? >> really depends on the case. and one thing i do believe should not be lost in this is often human sources are as important as anything else. >> yeah. >> when you talk cyber, you think about that person with the software development expertise that you need to do the kind of investigative work. often in these cases it's a come combination of, it's a combination of cyber and also sources. so we can't, can't forget that. but it really depends on the case, the spread of the case, how far it takes you, whether or not if you're operating in turkey or morocco or estonia, latvia, romania, france, england, sweden, something like that, it brings in the legal attache's office, and people spend a fair amount of time coording with their counterparts overseas. and that didn't just mean europe, but also in the far east, quite obviously.