Page 1       TOP OF DOC
92–831 PDF








MARCH 31, 2004

Serial No. 100

 Page 2       PREV PAGE       TOP OF DOC
Printed for the use of the Committee on the Judiciary

Available via the World Wide Web: http://www.house.gov/judiciary

F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
HENRY J. HYDE, Illinois
HOWARD COBLE, North Carolina
MARK GREEN, Wisconsin
MELISSA A. HART, Pennsylvania
 Page 3       PREV PAGE       TOP OF DOC

JOHN CONYERS, Jr., Michigan
HOWARD L. BERMAN, California
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ADAM B. SCHIFF, California
LINDA T. SÁNCHEZ, California

PHILIP G. KIKO, Chief of Staff-General Counsel
PERRY H. APELBAUM, Minority Chief Counsel

Subcommittee on Commercial and Administrative Law
CHRIS CANNON, Utah Chairman
HOWARD COBLE, North Carolina
 Page 4       PREV PAGE       TOP OF DOC

MELVIN L. WATT, North Carolina
WILLIAM D. DELAHUNT, Massachusetts

JAMES DALEY, Full Committee Counsel
STEPHANIE MOORE, Minority Counsel


MARCH 31, 2004

    The Honorable Chris Cannon, a Representative in Congress From the State of Utah, and Chairman, Subcommittee on Commercial and Administrative Law
 Page 5       PREV PAGE       TOP OF DOC

    The Honorable Melvin L. Watt, a Representative in Congress From the State of North Carolina, and Ranking Member, Subcommittee on Commercial and Administrative Law


Ms. Helaine M. Barnett, President, Legal Services Corporation
Oral Testimony
Prepared Statement

Mr. Jose R. Padilla, Executive Director, California Rural Legal Assistance, Inc.
Oral Testimony
Prepared Statement

Ms. Jeanne Charn, Director, Hale and Dorr Legal Services Center, and Director, Bellow-Sachs Access to Legal Services Project, Harvard Law School
Oral Testimony
Prepared Statement


Material Submitted for the Hearing Record

    Letter submitted by Members of the Congressional Hispanic Caucus

 Page 6       PREV PAGE       TOP OF DOC
    Letter submitted by the Brennan Center for Justice at New York University School of Law

    Letter submitted by the Mexican American Legal Defense and Education Fund (MALDEF)

    Letter submitted by the League of United Latin American Citizens

    Letter submitted by the Farmworker Justice Fund, Inc.

    Letter submitted by the California Catholic Conference

    Letter submitted by the Mexican American Bar Association

    Letter submitted by 12 Law Professors

    Letter submitted by the National Hispanic Leadership Agenda

    Report of Leonard J. Koczur, Acting Inspector General, Legal Services Corporation

    Photographs submitted by California Rural Legal Assistance Inc.

    Supplemental Prepared Statement of Jeanne Charn, Director, Hale and Dorr Legal Services Center, and Director, Bellow-Sacks Access to Civil Legal Services Project, Harvard Law School
 Page 7       PREV PAGE       TOP OF DOC

    Response to Post-Hearing Questions from Helaine M. Barnett, President, Legal Services Corporation

    Response to Post-Hearing Questions from Jose R. Padilla, Executive Director, California Rural Legal Assistance, Inc.

    Response to Post-Hearing Questions from Jeanne Charn, Director, Hale and Dorr Legal Services Center, and Director, Bellow-Sachs Access to Legal Services Project, Harvard Law School



House of Representatives,
Subcommittee on Commercial
and Administrative Law,
Committee on the Judiciary,
Washington, DC.

    The Subcommittee met, pursuant to notice, at 1:03 p.m., in Room 2141, Rayburn House Office Building, Hon. Chris Cannon (Chair of the Subcommittee) presiding.

 Page 8       PREV PAGE       TOP OF DOC
    Mr. CANNON. The Subcommittee will come to order.

    The Subcommittee on Commercial and Administrative Law is meeting this afternoon to receive testimony from various sources as part of its continuing oversight of Legal Services Corporation and the activities of its grantees. The focus of today's hearing is on the potential benefits of a co-pay system whereby clients partially subsidize the cost of their legal representation. In addition, the hearing will focus on certain recent complaints brought against the California Rural Legal Association and the efforts undertaken to resolve and hopefully prevent the recurrence of these problems.

    The Legal Services Corporation was formed by Congress to distribute Federal money to provide legal services for civil legal assistance to those who otherwise may not be able to afford legal representation. LSC does not provide services directly but, instead, acts as the funding source to various grantees organized across the country who in turn provide the actual legal services.

    Congress relies on the LSC to effectively oversee the activities of its grantees by ensuring they act in accordance with the scope and purpose of restrictions that Congress has periodically imposed upon their activities. This is intended to maximize the efficient delivery of services with the highest degree of client representation and professionalism in the discharge of legal representation. Congressionally mandated restrictions specify which cases a grantee may undertake.

    In our discussions today, we hope to obtain a better appreciation of the potential benefits that may be derived from requiring LSC clients to pay some portion of the cost of legal services they receive. Such a co-pay system that can be applied to LSC grantees could have several positive results. First and foremost, the client, by paying a portion of the cost of representation, might expect and demand a higher level of professionalism and performance from his or her attorney, thus causing the grantee to provide better service. In addition, more funds could be available to serve eligible clients. Finally, such a system may make grantees less dependent on fluctuating Federal appropriations and help stabilize the LSC funding process.
 Page 9       PREV PAGE       TOP OF DOC

    Additionally, we hope to gain insight into the activities of the California Rural Legal Association, or CRLA, since the restrictions were enacted pursuant to the 1996 Appropriations Act. LSC grantees are partnered with groups active in restricted activities under a so-called community justice program.

    The partnership approach requires strict scrutiny by LSC and Congress to ensure that congressionally mandated restrictions are not being circumvented. Based upon the report filed by LSC's Inspector General, CRLA has been, in spirit if not in fact, failed to comply with certain of these restrictions. Issues are presented as to whether this is the cause of willful disobedience, negligent management, or a breakdown in communication and understanding between LSC and its grantees.

    I now turn to my colleague Mr. Watt, the distinguished Ranking Member of the Subcommittee, and ask him if he has any opening remarks.

    Mr. WATT. Thank you, Mr. Chairman, and thank you for convening this hearing.

    The Legal Services Corporation is an important part of our legal system, providing free, quality representation for the poor and assisting in expanding the number of lawyers with the appropriate understanding and expertise to serve the needs of the poor and underprivileged. And for that, I'm always grateful to have a hearing so that we can highlight the wonderful things that the Legal Services Corporation and legal services lawyers throughout the country are doing for poor people who cannot afford to have representation otherwise.
 Page 10       PREV PAGE       TOP OF DOC

    I have a longstanding association with Legal Services going all the way back to working in the Hill community in New Haven, Connecticut, when I was in law school, and then going to the board of directors of our local Legal Services Corporation in Charlotte, North Carolina, Mecklenburg County Legal Services. So I know the value that the Legal Services Corporation and its lawyers and other legal services lawyers play in the administration of justice in our system.

    I do, however, have two concerns about today's hearing that are somewhat troubling to me. First, I'm concerned about the decision to call one of the witnesses, Mr. Padilla. He is the executive director of the California Rural Legal Assistance program, CRLA, as it is called. It is a legal services grantee and, as such, is subject to various restrictions imposed by Congress on its activities. And last fall, the Office of Inspector General issued a report of its investigation into whether California Rural Legal Assistance violated some of those restrictions.

    CRLA has responded and the process is ongoing, and I believe that bringing Mr. Padilla before this Committee to respond to inquiries about the allegations is inappropriate and threatens to influence the outcome of an ongoing investigation. It would be tantamount to calling witnesses in a trial that is going on before a court.

    So I think we could be very counterproductive in what we are doing. I believe that Legal Services Corporation governing body is perfectly capable of monitoring compliance with the regulations and that we should tread lightly as we proceed with this hearing so as not to prejudice or influence the outcome of the investigation, which, as I have indicated, is ongoing.
 Page 11       PREV PAGE       TOP OF DOC

    Second, if we are going to tread on these waters, it seems to me that we should tread with a degree of balance that may not—we may not be able to have. When I learned that we were going into this inquiry, we sought the testimony of a former Legal Services Corporation president, Mr. John McKay, who has substantial knowledge of the CRLA and this process for investigating complaints. Mr. McKay would have provided valuable testimony about the internal machinery of the Legal Services Corporation and how it has effectively resolved concerns about compliance with the law and regulations governing the Legal Services Corporation up to and including defunding those grantees who refuse to take corrective action when they are found to be in violation.

    We have here today on the panel the current Chair of the Legal Services Corporation, Ms. Barnett, whom I admire and respect greatly, and in the audience, Mr. Frank Strickland, who I also have utmost confidence in. Unfortunately, they are new to this process and would not be able to give the kind of testimony that Mr. McKay would have been able to give on this important subject.

    And it's unfortunate that Mr. McKay, who is now the U.S. Attorney for the Western District of Washington, was denied clearance to testify by the Department of Justice. This Administration seems to be not real sure whether it wants anybody in the Administration to testify about anything, apparently. Perhaps if we had had a little bit more time, we could have gotten this resolved. But they refused to allow him to come to testify, and I know, Mr. Chairman, that you share our concern about establishing and maintaining cooperation among our co-equal branch of Government. And I know you are also disappointed that this witness could not be here to testify. But I think it leaves us—leaves open the possibility that we could not get the entire picture of what we are here to inquire about, even if it is an appropriate inquiry.
 Page 12       PREV PAGE       TOP OF DOC

    Finally, Mr. Chairman, I would just say one thing on whether we should be consider—whether we should consider imposing a co-pay structure on the Legal Services Corporation. I am a firm opponent of that and believe that instituting a system of co-pay, even on a voluntary basis, might lead to the end of a comprehensive free legal services system in this country. And I know that there are people who are being served by legal services lawyers who simply don't have the capacity to do it. It's not because they don't want to pay for their legal services. They simply don't have the wherewithal to do so.

    I look forward to hearing the testimony of the witnesses and hope that we will tread lightly and not do damage to an ongoing investigation as we proceed. And I yield back Mr. Chairman.

    Mr. CANNON. I thank the gentleman.

    Without objection, the gentleman's entire statement will be placed in the record. Also, without objection, all Members may place their statements in the record at this point. Any objection?

    Hearing none, so ordered.

    And without objection, the Chair will be authorized to declare recesses of the Subcommittee today at any point.

    Hearing none, so ordered.
 Page 13       PREV PAGE       TOP OF DOC

    I ask unanimous consent that Members have 5 legislative days to submit written statements for inclusion into the hearing record. So ordered.

    I now am pleased to introduce the witnesses for today's hearing.

    Our first witness is Helaine Barnett, the newly appointed president of Legal Services Corporation. Ms. Barnett has devoted her life to providing legal services to the indigent. For 27 years, she has served as an advocate and manager for the Legal Aid Society of New York City, which is the oldest and largest legal aid organization in the country. Ms. Barnett is a graduate of Barnard College and received her law degree from New York University School of Law.

    Our next witness is Jose Padilla, executive director of the California Rural Legal Assistance program. Mr. Padilla has been the executive director of CRLA since 1984 and worked as a staff attorney prior to that, resulting in a total of 25 years of affiliation with CRLA. Mr. Padilla has received numerous awards and honors, including being listed as one of the 100 most influential lawyers in California—a nation unto itself, I might point out.

    A child of migrant workers in California's Imperial Valley, Mr. Padilla has maintained a deep commitment to representing the interests of migrant workers. Mr. Padilla received his undergraduate degree from Stanford University and his law degree from the University of California at Berkeley, Boalt Hall School of Law.

    I might just interject that Mr. Padilla and I spent some time speaking yesterday. We had a very pleasant discussion and have agreed that the purpose of America and of Government is to give people opportunity, and education is a core concept there. And so we look forward to Mr. Padilla's testimony today.
 Page 14       PREV PAGE       TOP OF DOC

    Our last witness is Jeanne Charn. She is the director of the Hale and Dorr Legal Services Center as well as the director of the Bellows-Sachs Access to Civil Legal Services Project, both of which are located at Harvard Law School. These programs were conceived by Ms. Charn and her late husband, Mr. Gary Bellows, appointed assistant dean for clinical programs at Harvard Law School in 1973. Ms. Charn has been part of the Harvard Law tradition for nearly 30 years. In addition, Ms. Charn has served as a consultant to the Legal Services Corporation. A native of Illinois, Ms. Charn obtained her undergraduate degree from the University of Michigan and her law degree from the Harvard Law School.

    I would also like to take this opportunity to note the attendance of Mr. Frank Strickland, Chairman of LSC's Board of Directors. Mr. Strickland, we appreciate your taking the time from your active law practice to make this trip from Atlanta to monitor this hearing. We appreciate your being there. I personally had the pleasure to meet with you and to discuss the work of LSC. You've made yourself available to my staff. We very much appreciate your cooperation and efforts on behalf of LSC. Again, thank you for your attendance.

    In addition, I would like to note that there is no minority witness at today's hearing. This late-breaking development appears to have resulted from the Department of Justice's confusion as to the propriety of the requested witness testifying. I can assure you that I intend to follow up on this matter with my colleague, Mr. Watt, to ensure that such problems do not occur in the future.

    We have a prerogative in Congress. We on a bipartisan basis tend to assert that prerogative with great clarity. Every Administration has its confusions about this, which we tend to be able to clarify and to regularly do so. And so we will work together to do that, and I apologize for the fact that we don't have a minority witness. I agree with the Ranking Member that that would have made this hearing more beneficial, and we shall try other ways to include some of the ideas that we may have missed by not having him here today.
 Page 15       PREV PAGE       TOP OF DOC

    I extend to each of you my warm regards and appreciation for your willingness to participate in today's hearing. In light of the fact that your written statements will be included in the record, I request that you limit your oral remarks to about 5 minutes. So, accordingly, feel free to summarize your most salient points in your testimony. We do have a lighting system, and it is green for 4 minutes and then turns yellow for a minute, then turns red. That doesn't mean you have to stop, if you'll just sort of wrap at that point. I have a tendency to tap, not to stop you, but to just remind you that it's moving on. I think that we're all benefited by a hearing that moves fairly quickly today.

    After all the witnesses have presented their remarks, the Subcommittee Members in the order they arrived will be permitted to ask questions of the witnesses subject to the 5-minute limit.

    Ms. Barnett, would you now proceed with your testimony?


    Ms. BARNETT. Thank you, Mr. Chairman, Congressman Watt, and Members of the Subcommittee. I am pleased to be here today, along with Frank Strickland, Chairman of the Legal Service Corporation Board of Directors. I want to thank you for this opportunity to appear before you on behalf of the Legal Services Corporation to discuss LSC's ongoing efforts to promote equal access to civil justice in America and to answer, to the best of my abilities, any questions that Members may have about LSC.
 Page 16       PREV PAGE       TOP OF DOC

    I assumed the presidency of LSC on January 20th, after 37 years of providing legal services to the indigent in New York City. Having spent my entire professional career helping low-income people in times of legal crisis and having seen the critical difference that legal service attorneys make in the individual lives of poor clients facing homelessness, hunger, unemployment, and threats to their health and safety, I can say unconditionally that the support of Congress, this Subcommittee, and the Administration is crucial.

    LSC grantees assist victims of domestic violence to achieve liberty and self-sufficiency in a safe environment. They help seniors preserve maximum independence. They help uninsured individuals access health care. They help persons with disabilities obtain disability benefits that dramatically improve the quality of their lives. They preserve housing of families with children and prevent homelessness and shelter stays. Their clients include parents who seek custody arrangements to protect their children from abuse; children who are in foster care seeking adoption by a loving and supportive family; elderly consumers seeking protection from fraudulent loan and collection practices; small family farmers in financial difficulties; veterans seeking Government benefits to which they're entitled; victims of natural disaster.

    Without question, the Federal Government remains the single largest and most important funding source for civil legal services nationally. Yet even with Congress' support, only an estimate one in five eligible low-income persons across this country is receiving assistance when confronted with these pressing civil legal problems, leaving 80 percent of our poor with unmet legal needs.

    Moreover, the 2000 U.S. Census reported an increase in the number of Americans living in poverty. More than 43 million people are now eligible for Federal legal assistance, yet fewer than 3,700 LSC-funded attorneys nationwide are charged with providing that critical help to those most vulnerable and in need.
 Page 17       PREV PAGE       TOP OF DOC

    Because of insufficient resources, LSC-funded programs are forced to turn away annually tens of thousands of eligible individuals with urgent civil legal problems. In 1996, Congress passed a series of reforms requiring recipients of LSC funds to focus on the basic day-to-day legal problems of America's poor. I strongly support Congress' decision to focus Federal dollars in this way. The LSC board and staff share a deep commitment to the mission of promoting equal access to our system of justice for low eligible—for low-income eligible Americans in unequivocal conformity with the mandates of Congress.

    As LSC president, I am committed to ensuring full and faithful compliance with all congressional requirements and restrictions. LSC is proud of its strong record on grantee oversight and compliance. By and large, our grantees are very diligent and careful in complying with congressional requirements and restrictions. Nevertheless, LSC will continue to devote very considerable staff resources to these activities in order to ensure that Federal recipients abide by the 1996 restrictions, as well as all other laws and rules governing thoroughly funded legal aid entities.

    Working with our Inspector General, LSC will closely monitor our programs and take strong corrective action whenever a grantee fails to comply with the law or LSC regulations.

    LSC will also continue to devote considerable attention and energy to devising strategies that promote the best and most efficient use of Federal funds in every State. Congressional funding of innovative technology grants has been extremely successful in this regard. The Corporation has awarded grants that have made possible expanded access through hotlines, increased access to information through an array of self-help and community education materials to help clients help themselves, as well as more efficient intake structures and case management system.
 Page 18       PREV PAGE       TOP OF DOC

    LSC grantees close nearly 1 million cases a year as well as approximately 4 million matters, such as community legal education sessions. Only about 10 percent of LSC-funded cases are resolved through a court decision, while nearly 75 percent are resolved through advice, counsel, or brief service. Oftentimes a letter or a phone call from a legal services attorney can resolve a problem at the outset, saving a substantial number of hours and dollars. We seek to provide meaningful assistance to individual clients while serving as an efficient, problem-solving program and as a model of efficient dispute resolution.

    This year, LSC is exploring how to better and more effectively promote quality in the delivery of legal services to the poor. We are examining how to define and measure quality and how we transmit the learning of this generation of leaders to the next.

    In conclusion, I believe there are fewer responsibilities more important in a democracy than ensuring equal justice under law. I know from personal experience that legal services programs are often the last line of defense for hard-working poor men and women and their families who desperately need our help and who seek some degree of self-sufficiency and a measure of fairness in our society. I am proud to play a role in this vital effort, and I look forward to working closely with Congress in the future and welcome your thoughts and suggestions with respect to the work of LSC as we pursue the goal of equal justice for the poor in America.

    Thank you.

    [The prepared statement of Ms. Barnett follows:]

 Page 19       PREV PAGE       TOP OF DOC


    Mr. Chairman, Congressman Watt, and Members of the Subcommittee, thank you very much for the opportunity to testify before the House Judiciary Subcommittee on Commercial and Administrative Law. On behalf of the Board of Directors and Legal Services Corporation's (LSC) management, we are pleased to report on LSC's accomplishments since we last testified before the Subcommittee in 2002 and to answer any questions Committee Members might have.

    Legal Services Corporation is a private, nonprofit corporation created by Congress with bipartisan support in 1974. LSC's charge is to ensure equal access to justice by supporting the provision of civil legal assistance to those who otherwise would not be able to afford it. For Fiscal Year 2004, Congress appropriated $338,848 million to LSC, $322,948 million of which has been allocated in grants to fund 143 legal services programs serving every U.S. county and territory.(see footnote 1) LSC spends less than 4 percent of its total appropriation for the management and administration of the national program.

    The LSC Board and staff are committed to our mission, as defined by the LSC Act, to promote equal access to our system of justice for low-income people throughout the United States. Given funding realities, LSC has focused in recent years on devising and implementing strategies that promote the highest and best use of federal funds in every state and territory. We continue to devote considerable LSC staff resources to compliance and enforcement activities, in order to ensure that federal recipients abide by congressional requirements and restrictions enacted in 1996, as well as all other laws and regulations governing federally-funded legal aid entities.
 Page 20       PREV PAGE       TOP OF DOC


    LSC is governed by an 11-member Board of Directors appointed by the President of the United States with the advice and consent of the Senate. By law, the Board must be bipartisan; no more than six members may be of the same political party. The Board appoints LSC's President, who serves as LSC's chief executive officer, subject to general policies established by the Board. The 1988 Amendments to the Inspector General Act (the IG Act) required LSC to establish an Office of Inspector General (OIG) and extended specific provisions of the IG Act to LSC. Accordingly, such an office was established by and for LSC. The Inspector General is appointed by, reports to, and serves under the general supervision of LSC's Board of Directors.

    Submitting written testimony are LSC President Helaine M. Barnett and LSC Chairman Frank B. Strickland. Ms. Barnett assumed her position as President of LSC on January 20, 2004. She has been a legal services attorney for 37 years, employed throughout that time at the Legal Aid Society of New York City, the country's oldest and largest legal services organization. For nearly three decades prior to assuming the LSC presidency, Ms. Barnett was involved in the management of the Legal Aid's Society's multi-office civil division, heading it since 1994. In that capacity, she oversaw the provision of legal services covering the full range of civil legal problems of the poor, established a major initiative for homeless families with children, created citywide health law and domestic violence projects, and mobilized the organization's 911 Disaster Assistant Initiative. Ms. Barnett also assumed many additional leadership responsibilities within the legal community at the national, state, and local levels. She is a co-chair of the New York State Commission to Promote Public Confidence in Judicial Elections; Treasurer of the Association of the Bar of the City of New York; a member of the American Bar Association Governance Commission and House of Delegates and a past member of the ABA Board of Governors, where Ms. Barnett was the first and only legal services attorney to serve. Ms. Barnett was also a member of the ABA Executive Committee.
 Page 21       PREV PAGE       TOP OF DOC

    Mr. Strickland is a partner in the Atlanta law firm of Strickland Brockington Lewis, LLP. He served for seven years on the board of the LSC-funded Georgia Legal Services Program and for four on the board of LSC-funded Atlanta Legal Aid Society. President George W. Bush nominated him to the LSC Board in 2002, and he was sworn in as a member and elected Chairman in 2003. Mr. Strickland has been a member of the Board of Governors of the State Bar of Georgia since 1985 and is a former member and chairman of the Georgia State Ethics Commission. He has been general counsel of the Georgia Republican Party and is a member of the Board of Governors of the Republican National Lawyers Association. In addition, he is Chairman of the Atlanta Lawyers Chapter of the Federalist Society. When Mr. Strickland was President of the Atlanta Bar Association (1985–1986), he received the American Bar Association's Harrison Tweed Award for coordinating the year's outstanding pro bono project in America—mobilizing more than 400 volunteer lawyers to provide representation to more than 800 Cuban detainees in administrative parole proceedings.


    LSC's Office of Compliance and Enforcement (OCE) was established to ensure that congressionally-mandated restrictions and other regulations are adhered to by LSC grantees. OCE's responsibilities include reviewing compliance by grantees with the LSC Act and regulations; responding to public complaints; approving major expenditures by LSC recipients; conducting accountability training; and providing follow-up to certain findings and recommendations contained in grantees' audited financial statements. The FY04 budget for OCE is $2.47 million, which supports a 17-member staff comprised of a Vice President of Compliance and Enforcement, a Director of Compliance, a dozen attorneys, two fiscal analysts, two support staff and a management analyst.
 Page 22       PREV PAGE       TOP OF DOC

    New restrictions enacted by Congress in 1996 prohibit grantees who accept LSC funding from, among other things, filing or litigating class action lawsuits, engaging in most types of lobbying, seeking or receiving attorneys' fees, litigating on behalf of prisoners, or representing undocumented aliens. LSC has implemented these restrictions by regulation and monitors its grantees closely to ensure strict adherence. The LSC Board and management have not hesitated to take strong and decisive action when grantees fail to comply with the law or LSC regulations. Fiscal sanctions have and will be imposed where necessary and appropriate, up to and including termination of the program's LSC grant.

    In 2003, OCE performed 39 on-site reviews, surpassing its ambitious goal of 32 annually. OCE investigates public concerns, closely reviews mandatory annual audits filed by each LSC grantee, and performs on-site reviews to ensure that all congressional restrictions on LSC-funded programs are enforced. OCE selects programs for on-site review based on a combination of a number of criteria, including complaints of non-compliance, referrals from the Office of the Inspector General, a considerable change from one year to the next in Case Services Reports, and other indicators. Since 2001, LSC has had the authority to conduct random compliance reviews as well. Finally, if OCE uncovers a serious violation of the restrictions, or if a grantee implements a corrective action plan to resolve a compliance problem, OCE will perform a follow-up review within one year of the last review and provide technical assistance to ensure effective implementation of the corrective action plan.

    LSC feels confident in the effectiveness of its compliance efforts. Because we use indicators such as complaints from Congress and the public to determine which programs to review, we give especially close attention to those grantees against which serious allegations have been made. In addition, the possibility of random audits occurring at any time is an effective safeguard against non-compliance. Finally, Independent Public Accountants (IPAs) perform an annual review of the compliance of each LSC grantee with LSC regulations and congressional restrictions. IPAs report any evidence of non-compliance to the Inspector General, who in turn refers the findings to LSC management for follow-up and resolution.
 Page 23       PREV PAGE       TOP OF DOC

    Since October 1997, LSC management and the Inspector General have instituted an official audit follow-up process with its grantees known as the A–50 Follow-up Process. This process is based on Office of Management and Budget (OMB) Circular A–50 for agency follow-up of OIG reports. The process sets out a general timeline for handling OIG findings and resolving any differences between the OIG and LSC management regarding such findings. OCE receives approximately fifty A–50 referrals a year. The overwhelming majority of issues are resolved in less than 30 days to the satisfaction of both management and the OIG. If OCE substantially agrees with the OIG that a grantee is not in compliance and that a satisfactory plan has not been submitted by the grantee to bring it into compliance, LSC may impose a number of sanctions. LSC may put the grantee on a short-term funding schedule; it may suspend part or all of a grantee's funding for up to 30 days; and it may terminate funding if the grantee engages in continued serious violations.


    The central role of LSC is to manage and oversee the use of federal funds that support the direct provision of legal services by 143 LSC-funded legal services providers. Since 1996, LSC has used a system of competition for grants to promote the economical and effective delivery of services, as required by the LSC Act. This system supplanted the previous system of presumptive refunding of LSC grantees.

    We encourage non-incumbent legal services providers to compete for available grants by broadly circulating information on the availability of grant funds and by providing outreach and technical support to potential applicants. LSC announces the grants competition each year in national and local newspapers, on the LSC website, in the Federal Register, and in bar journals.
 Page 24       PREV PAGE       TOP OF DOC

    During the competition process, LSC evaluates applications according to established quality standards and awards grants to those providers best able to efficiently provide high-quality legal services in accordance with all applicable legal requirements. LSC provides three channels through which competitive grant applicants, including non-incumbents, can raise questions, issues, and complaints about the grants process. LSC surveys all applicants who file a notice of intent to compete but fail to subsequently file a grant application. LSC has an applicant service desk that responds to applicant questions and concerns throughout the grants competition period. Additionally, LSC hosts an ''Applicant Information Session,'' which is a free telephonic conference used to inform potential applicants about how to file a viable grant application. It also provides a formal vehicle for LSC to respond to questions and issues regarding its grants competition process.

    LSC has held a grants competition each year since 1996 and recently completed the grants competition for calendar year 2004 funding. During the past eight years, there have been three competitions in which an incumbent LSC grantee lost to an applicant that had never previously received a grant from LSC. Whether or not there are multiple applicants for an LSC service area contract, every entity seeking LSC funds must submit a comprehensive application for LSC funding for a term not to exceed three years, and each grantee must submit an annual application for a renewal of LSC funding.

    Over time, we have examined the competition process to learn how it can be improved and how to potentially attract more applicants. However, many factors help explain the lack of emergence of competitors for LSC funds. There are many situations across the country in which the legal community believes that the current LSC provider is performing well, and there simply has been no expressed interest by another entity seeking to become a legal services grantee. In our experience, law firms with an initial interest in offering one type of free service to low-income clients, such as representation in custody and divorce, are not interested in providing a full array of legal services, including housing, family, consumer and income maintenance work. Offering such services also requires establishing costly intake structures, emergency access, and other core capacities. Potential applicants also have reported that extensive reporting requirements attached to LSC funding are a deterrent to applying for LSC funds. Some firms have made the economic determination that the limited LSC funding does not compensate for the time-consuming extra administrative tasks they would be required to perform. Congressionally mandated restrictions on LSC grantees also make it somewhat more difficult to attract qualified applicants able to compete with incumbent programs. In particular, some applicants have noted that the restriction on accepting attorneys' fees makes it difficult to stay financially competitive as a potential LSC service provider.
 Page 25       PREV PAGE       TOP OF DOC


    LSC grantees close approximately 1 million cases a year on behalf of low-income clients and handle an additional estimated 4 million ''matters''—assistance that falls short of the official definition of a case (i.e., pro se assistance, dissemination of community legal education materials, referrals, mediation assistance, etc.). To serve the individuals and families these cases represent, LSC programs employ 8,277 full-time staff, of whom 3,652 are attorneys. The average starting salary for a staff attorney is $33,489, making legal services lawyers among the lowest-paid members of the legal profession.(see footnote 2)

    Well over 50 percent of our clients are served through the advice and counsel efforts of our programs. Almost another 20 percent are assisted by brief service efforts. Fewer than ten percent of LSC grantee cases are resolved through a court decision. About three-quarters of LSC's client population are women, many with young children. Almost 11 percent are elderly. About one-quarter of the client population is African-American; about 20 percent is Hispanic; and approximately two percent are Native American and another two percent are Asian or Pacific Islander in origin.


    LSC has used its State Planning Initiative to help grantees address emerging client populations, diminishing resources and important new technological advances that are revolutionizing the practice of law and helping legal services practitioners reach underserved client populations. State Planning requires that grantees supplement and enhance technology structures to improve client services and access. It requires grantees to coordinate functions with local and state stakeholders, including other LSC grantees, so more eligible clients who need legal assistance can receive it. State Planning also stresses local resource development and instructs grantees to undertake efforts to leverage their federal dollars with non-federal resources.
 Page 26       PREV PAGE       TOP OF DOC

    State Planning, in combination with federally mandated competition for LSC grants, is fully in accord with strategies set forth in President Bush's Management Agenda. In 2001, all federal agencies were instructed to leverage resources to maximize the use of limited government funds. The most enduring legacy of LSC's State Planning Initiative may be its success in achieving that directive. Through State Planning, LSC spawned partnerships with judges, state legislators and private bar members to help increase state funding and private contributions for legal services.


    LSC's Technology Initiative Grant (TIG) program supports projects to develop, test and replicate technologies that enable programs to improve program efficiency and enhance client access to high-quality assistance in the full range of legal services. Initiated with a special appropriation in FY00 and funded by Congress every year since, the TIG program awards grants to LSC grantees through a competitive grant process. LSC awarded 51 TIG grants in 2003. In FY05, LSC plans to allocate $4 million to the TIG program. Since the program's inception, LSC has funded a range of pioneering and effective technology projects. Pro se initiatives have equipped clients with the tools and support to protect their legal interests on their own while increasing the efficiency of the courts. Web-based systems, video-conferencing and related approaches have increased access to justice for clients living in remote areas. Newly designed case management and intake systems, as well as other infrastructure investments, offer increased efficiencies that enable programs to save time and money and ultimately serve more clients. Finally, client-centered statewide legal services web sites provide legal information in 49 states and territories, thanks in part to TIG grants and ongoing technical assistance funded with TIG monies. Using these tools, clients can more easily obtain legal information through computers in their homes or at public venues such as libraries.
 Page 27       PREV PAGE       TOP OF DOC

    The TIG program has increased access to legal information, self-help resources and other legal assistance for low-income Americans. It has also given traditionally hard-to-reach clients living in isolated areas a new avenue to pursue and obtain legal aid. TIG awards have allowed many LSC grantees to leverage matching funds from other sources. For instance, our program in Alaska received matching funds from the Alaska Court System to install and configure workstations in each of the six state courthouses. These provide access to public legal education and self-help materials in both English and in Yup'ik, a traditional Alaskan language.

    Another replicable TIG innovation is our Montana pilot project on teleconferencing, which has enabled the Sixteenth Judicial District (200 miles in diameter) to hold trials in county courthouses throughout the area by utilizing video conferencing technology to hear from witnesses who live far from the actual courthouse. Many judges throughout the state now hold trials via teleconferencing. Sheriffs no longer have to bring in witnesses and litigants who lack transportation and judges can make better assessments of witnesses' and litigants' mental capacities when they are in familiar surroundings. Overall, court proceedings take far less time.

    A further innovative example of a TIP project is California's I-CAN! project, a web-based legal services kiosk that offers convenient, effective access to vital legal services. Developed by the Legal Aid Society of Orange County, in partnership with the courts, local government agencies, libraries and legal services organizations, I-CAN! creates properly formatted pleadings, provides court tours, and educates users on the law and how to pursue their matter. I-CAN! software facilitates completion and filing of forms on complaints regarding parental obligations, domestic violence restraining orders, orders to show cause, earned income tax credits, fee waivers, license denial reviews; paternity petitions, small claims matters and unlawful detainers. Users can access the program for free on any computer connected to the Internet and through kiosks in courthouses, legal aid offices, community centers, women's shelters, and libraries. It serves hard to reach groups such as rural communities and individuals with limited or no English proficiency as some modules can be accessed in Spanish and Vietnamese.
 Page 28       PREV PAGE       TOP OF DOC


    LSC management and the Board's Committee for the Provision of Legal Services launched a Quality Initiative in 2004 to study ways to enhance and promote the delivery of high-quality assistance by federal grantees. LSC is committed to identifying and subsequently spurring the development of certain core quality standards in its grantees. LSC will work with the American Bar Association and others to revise performance standards developed by the ABA's Standing Committee on Legal Aid and Indigent Defendants as well as those from other professions. Consensus has already been reached on certain quality benchmarks: streamlined case management systems, competent staff, peer review, resource development, consistently strong client outcomes and high client satisfaction. Other standards under examination include client involvement, workforce diversity, client accessibility, strategic use of scarce resources, and dissemination of best practices among providers. LSC will continue to examine how our most successful programs have achieved high quality and what is required to maintain it. We are providing a forum for experts to discuss the development of these qualities and showcasing grantees whose work demonstrates that they have given consistent attention to quality in staff work product, client concerns, and community relations.

    It is essential that LSC have a strong presence in the national legal services community and be visible among its grantees as we assist them with their profoundly important mission. Our experience has shown that the more readily available we are to programs, the quicker they are to call us with questions and report problems. We have found that programs are eager to learn about ways in which they can improve performance and conform to LSC requirements. Teaching programs how to succeed yields far stronger outcomes for clients and lessens compliance problems. Recently, we increased our quality site visits to grantees. Sites were selected because they showed indications of weakness in one or more aspects of program activity or exemplified some of the best qualities found in legal services organizations. Although current LSC resource levels permitted fewer than a dozen trips in 2003, we have already realized significant rewards from the effort. LSC has been able to give guidance on improvements and to provide mentoring, partnership, and assistance in ways that allow grantees to deliver quality legal aid. LSC has also learned how strong programs achieve their success and has been able to share that information with others.
 Page 29       PREV PAGE       TOP OF DOC


    The Office of Information Management (OIM) is responsible for collecting data reported by our grantees or affecting them. Using 2000 census data, OIM determined the appropriation funding amounts for grantees based on a per capita calculation of the number of eligible poor people in each LSC service area. OIM is also responsible for managing the Case Service Reports (CSR) grantees file annually. In 1999, two U.S. Government Accounting Office (GAO) reports raised questions about the accuracy and validity of the CSRs. Problems reported by GAO stemmed in part from a lack of clarity found in past LSC reporting guidelines and, more generally, from insufficient attention by grantees to the existing reporting and documentation requirements.

    LSC promptly took up the issue and instituted the necessary measures to correct the problem. LSC developed and issued to all grantees more detailed guidance on CSR reporting and on improving their case management systems to comply fully with LSC's operational standards. Then LSC provided additional training to those grantees most in need of it. LSC also established a system for sampling CSR data so that grantees can diagnose and correct reporting problems and LSC can track the error rate both grantee-by-grantee and nationally. As a result, accuracy greatly improved from an 11 percent sample error rate for 1999 CSRs to a 4.9 percent rate for 2000 CSRs. We continued to improve with a 4.3 percent sample error rate for 2002 CSRs. We expect a projected sample error rate between 4.2 and 4.3 percent in 2003.(see footnote 3) We are confident that the goal of ''substantial accuracy'' has been achieved. LSC will continue to pay close attention to the quality of CSR reporting to ensure the integrity of CSR figures, which are our strongest hard numerical indicator of services delivered, both on a national and individual program basis.
 Page 30       PREV PAGE       TOP OF DOC


    For FY05, LSC requests an appropriation of $352.4 million to provide funding for civil legal assistance to eligible low-income persons throughout the United States. This represents a modest four percent increase over LSC's FY04 appropriation and only partially accounts for the increased number of eligible poor clients living in many LSC service areas. More than 43 million low-income Americans are currently eligible for federally funded assistance—a record high. In addition, LSC's funding over the years has been dramatically outpaced by inflationary increases at a rate of more than 2 to 1. Current funding, in 1980 real dollars, equals just $149.17 million.

    LSC's FY05 budget request is structured to allow LSC to meet three key goals:

 To modestly increase the availability of legal services to eligible persons;

 To ensure legal services clients are receiving high-quality legal assistance; and

 To ensure that legal services programs fully comply with all legal requirements.

    The FY05 request eliminates funding for the census adjustment line item that had been included in LSC's budget during the previous two fiscal years. In FY03 and FY04, as a transitional measure, extra funding was set aside to assist LSC-funded programs facing significant federal losses due to poverty population shifts. The census funding adjustments enabled grantees to gradually adjust to lower funding levels and gave program leaders an opportunity to reallocate scarce resources and devise strategies to raise additional non-federal funds. For FY05, LSC asks that its funding be distributed proportionally among all grantees based on per capita determinations of the eligible poor living in each service area.
 Page 31       PREV PAGE       TOP OF DOC

    Federal funding is the single largest and most critical funding component for legal aid and low-income Americans seeking access to critical civil legal assistance. The federal investment has become even more important in recent years, which have seen a variety of non-federal funding sources stagnate or shrink. Many LSC-funded programs are forced to turn away thousands of qualified individuals with urgent civil legal problems. These include victims of domestic violence seeking protective orders, parents seeking custody arrangements to protect their children from abuse, elderly consumers seeking protection from fraudulent loan and collection practices, tenants seeking to keep their families off the streets, and veterans and seniors seeking vital government benefits. Over 3,600 legal aid attorneys throughout the country are charged with providing civil legal assistance to the more than 43 million financially eligible Americans-individuals with annual incomes of $11,638 or less, which is 125 percent of the federal poverty threshold. Despite the hard work and dedication of this skeletal workforce, studies show that approximately 80 percent of eligible clients do not have access to legal services when they have serious civil legal concerns.


    LSC is best understood in terms of the clients our programs assist. They are all poor individuals and families who face overwhelming legal challenges. We have selected several client histories that are indicative of the range of cases that our grantees across the nation handle where the provision of civil legal assistance has made a critical difference in their lives.

    Ms. K. came to the Legal Aid Society of Orange County (LASOC) when she was 20 years old and the mother of a young son. She and her boyfriend began dating when she was 17 years old, and the severe physical abuse began two weeks later. He beat and kicked her repeatedly, hit her in the stomach when she was pregnant, isolated her from her family and friends, was verbally abusive, and refused to allow her to go out without him. He took her to and from her job and forced her to turn over her paycheck to him. She finally was fired because she was so stressed on the job from the situation at home. Despite her best efforts to please him, Ms. K was beaten because she did not keep a clean enough house or prepare meals her boyfriend liked. She finally left when he told her that she would be beaten when he returned home from work for failing to iron his shirt. LASOC assisted her in applying for restraining orders and custody and visitation orders. The judge indicated that she was the textbook domestic violence victim and granted the orders as requested.
 Page 32       PREV PAGE       TOP OF DOC

    In New York, Legal Services of New York (LSNY) represented Ms. S. who was widowed when her husband, the primary breadwinner of the family and an employee of the World Trade Center, was killed on September 11, 2001. Shortly after the tragedy, while she was still in shock and grieving her loss, a finance company began eviction proceedings against her despite the fact that she had paid her rent. She learned that a foreclosure proceeding against her landlord had resulted in the landlord's loss of the house. LSNY successfully negotiated a settlement with the finance company and Ms. S. was given enough time to find another affordable place to live.

    When Ms. A. was in junior high school she was assaulted so viciously that she could no longer walk. As a young adult she lived in her own apartment but required twenty-four hour a day living assistance. The state decided to decrease her home health care hours to save costs. Since Ms. A. was dependent on the availability of health care and assisted living on a twenty-four hour a day basis, the potential loss of her home health care benefits would give the young woman little choice but to enter a nursing home. With the assistance of Legal Aid of Western Missouri (LAWMO), Ms. A. was able to retain her home health care assistance and graduated from college. She now plans a career as a legal service attorney.

    Ms. P acquired a ten-acre parcel of property in rural Idaho prior to her marriage. With the help of friends and neighbors she constructed a small home on the property. Eventually she married. Within a week of the marriage, her new husband, taking advantage of her disabilities, convinced her to sign a quitclaim deed giving him a one-half interest in her property. Over time he acquired complete control of their finances and incurred $85,000 in debt. He grew abusive and was arrested for domestic violence. Upon his release from jail he filed for divorce and asked that ''their'' land and home be sold to cover the credit card debt. Idaho Legal Aid Services represented her in a multi-day trial. The court revoked the quitclaim deed and assigned the vast majority of the credit card debt to Ms. P's ex-husband.
 Page 33       PREV PAGE       TOP OF DOC


    At the Committee's request, the LSC is addressing the adaptability of a co-pay system for LSC-funded grantees. Although the question of charging clients a fee for legal assistance is not specifically addressed in the LSC Act, the legislative history of the Act strongly indicates that federally funded legal assistance provided pursuant to the Act is to be free of charge. Both the House and Senate reports note that ''It is in the Nation's interest to encourage and promote the use of our institutions for the orderly redress of grievances . . . and that the program of providing free legal assistance to those unable to afford such counsel should receive continued support.'' The House Report goes on to state that ''regulations promulgated by the corporation will assure that . . . no person or group will be charged any fee for legal services provided by recipients under this bill.''

    LSC has followed this very clear legislative intent, and it has been the policy of LSC that our grantees may not charge fees for LSC-funded legal assistance. Our clients represent the poorest of the poor and most vulnerable individuals in the country and are desperately seeking civil legal assistance to make a critical difference in our lives.

    Moreover, in the mid-1990s co-pay was considered and rejected by Congress. Reauthorization bills introduced in both the House and the Senate contained provisions that would have required LSC to undertake a demonstration project to study co-pays, and would have permitted—but not required—LSC to establish a system of co-pay for some or all of its programs. Neither reauthorization bill passed. However, a number of the provisions from the reauthorization bills were ultimately included in the 1996 Appropriations Act. The co-pay demonstration project was not included.
 Page 34       PREV PAGE       TOP OF DOC

    The legislative history of the 1996 Appropriations Act also makes clear that Congress intended for legal services to be provided free of charge. In justifying the attorneys' fees restriction, the House Report states, ''Further, the Committee notes that Corporation grantees are supported by public resources to provide free legal aid to their clients. Therefore, the Committee believes it is inappropriate for attorneys' fees to be collected for free legal aid.'' We believe Congress was right when it indicated that federally funded legal services should be provided free of charge to those in our society most in need. (Emphasis added.)


    In response to the Committee's request to consider current alleged infractions committed by California Rural Legal Assistance, LSC will report on the status of LSC's review of the OIG's and the possible sanctions that might be imposed on any program that has been referred to LSC by the OIG.

    On September 30, 2003, the OIG provided CRLA with a draft audit report. As is standard procedure, CRLA was given an opportunity to respond. On November 14, 2003, CRLA submitted comments in response to the OIG's report. CRLA disputed the OIG's draft findings. On December 11, 2003, the OIG issued its final report. The OIG accepted some minor corrections from CRLA and dropped one finding. Otherwise, the OIG reiterated its previous findings. The OIG gave CRLA two months to provide a corrective action plan (CAP), which CRLA submitted in February of this year. OIG reviewed it and, on March 5, 2004, after deciding that CRLA's proposed CAP inadequately addressed the problems outlined in the report, the OIG referred the matter to LSC's Office of Compliance and Enforcement (OCE) through what is known as the A–50 referral process.
 Page 35       PREV PAGE       TOP OF DOC

    We take our responsibilities under the A–50 process very seriously. The A–50 process stems from a requirement in the 1996 Appropriations Act that LSC was to ''develop procedures to ensure effective follow-up that meet at a minimum the requirements of Office of Management and Budget Circular Number A–50.'' A–50 provides for general federal agency follow up procedures for IG findings.

    Following the procedures outlined in that process, OCE, in conjunction with LSC's Office of Legal Affairs and management, is currently reviewing the facts and the law presented in this case. We hope to conclude this review of whether or not we agree with the OIG's report by May 1, 2004. We will, however, conclude our work on this case in as short a time frame as we reasonably can.

    There are a number of possible scenarios that could arise after LSC completes its review of an OIG report. If we concur with the OIG's findings that a program violated LSC regulations, and we agree that a program's proposed CAP will not adequately remedy the situation, we would try to work with the program to develop a CAP that will bring them into compliance.

    If working with the program does not bring them into compliance, we will consider the imposition of any and all sanctions necessary to promptly bring the program into compliance. LSC may suspend part or all of the grantee's funding for up to thirty days; we could put the grantee on a short-term funding schedule at the end of the calendar year; and, if the grantee continued to engage in serious violations of congressional will as codified in LSC Act, appropriations acts and regulations, we could terminate the grantee's LSC funding.
 Page 36       PREV PAGE       TOP OF DOC

    Another sanction available to LSC is to cease to fund the program during the next competitive grant cycle. LSC always takes a grantee's compliance history into account during the competition process.

    If after review of the OIG's report, LSC management disagrees with the OIG's conclusions, then as part of the A–50 process, an Audit Follow up Official (AFO), designated by the LSC president, tries to work out an agreement. If an agreement cannot be reached between the OIG and LSC management, then the AFO issues a decision that will be final.


    Civil legal services programs play a critical role in helping poor individuals and families achieve independence and self-sufficiency and in obtaining critical relief. Annually, the LSC cases fall into traditional poverty law categories. Grantees close almost 40 percent of their cases in family law each year, primarily representing custodial parents and victims of domestic abuse seeking divorces and orders of protection. More than ten percent of our closed cases involve efforts to help elderly clients with income maintenance issues, veterans' benefits, disability claims, and other relief under benefits programs designed for older Americans. Almost one-quarter of our grantees' litigation is devoted to housing law issues—preventing family homelessness by challenging evictions, preventing foreclosures, improving living conditions, helping with Section 8 and other federal housing subsidies or through community activities to improve neighborhoods and develop affordable housing. Our programs' lawyers keep children in school by representing them in expulsion hearings and helping students with disabilities learn in effective and appropriate settings. LSC grantees make sure that the working poor have access to fair employment and the wages to which they are entitled. Our grantees also assist consumers with bankruptcy and other debt relief, including that caused by predatory lenders.
 Page 37       PREV PAGE       TOP OF DOC

    In conclusion, we at LSC are proud of our partnership with Congress and enormously grateful for the bipartisan support we have earned over the past decade. We also deeply appreciate the support the Bush Administration has shown for our efforts to provide equal access to justice for low-income Americans in the most efficient and effective manner possible. The LSC Board and staff will continue in this collaborative effort and will build upon these important relationships in the future as we endeavor to give meaning to the goal of equal access to all Americans. Thank you.

    Mr. CANNON. Thank you, Ms. Barnett.

    Mr. Padilla?


    Mr. PADILLA. Mr. Chairman, Congressman Watt, Congressman Delahunt, my name is Jose Padilla. I'm the executive director of CRLA. I am proud to say I've been a legal aid lawyer with CRLA for more than 25 years, almost 20 of those years as its director. I am always honored to speak on its behalf and on behalf of the more than 85 committed advocates in our program, and especially on behalf of the more than half a million rural poor and farm workers to whom we minister legal aid, who honor us by allowing us to be their lawyers.

    CRLA is considered one of the more effective legal aid programs in the country. We are proud of that legacy of high-quality, ethical, and effective litigation. Congress wants to give poor access to courts. We bring cases to courts. Courts decide.
 Page 38       PREV PAGE       TOP OF DOC

    Recent examples of our work: We enabled three wheelchair-bound high school students to secure district-wide building modifications that brought schools in compliance with the Americans with Disabilities Act. These students had been unable to navigate their campuses, use bathrooms, or participate in academic programs that physically accessible—that were physically accessible only to the able-bodied.

    We obtained a fair housing discrimination case settlement against a predator landlord who sought out women residing at a local homeless shelter and offered rental discounts in return for sex.

    We secured improvement to a farm labor camp housing hundreds of asparagus pickers which had no functioning toilets or showers, with a filth-laden kitchen, and recovered months of unpaid back wages for some 400 workers residing there.

    I provided Congressman Watt with pictures of that labor camp going—pictures that show housing going from filth to decency.

    And we provided thousands of K–3 English learners access to Reading First grants under No Child Left Behind, enjoining the State Department of Education from enforcing a ban that kept these funds from reaching hundreds of English-learner classrooms.

    But it has been a repeated fact of our history, Congressmen, that effective advocacy invites controversy. So we have come to answer any questions that you may have about recent audits of our program. So I briefly speak to three things: the first two, compliance and cooperation.
 Page 39       PREV PAGE       TOP OF DOC

    About compliance, CRLA has always realized that we will be able to provide diligent and effective advocacy on behalf of the most vulnerable only through administering efficiently and effectively all aspects of financial accounting, local office operation, and staff activities. Protection of the Federal resource is the most critical responsibility that a program director will assume. Indeed, for someone born in a rural community and raised by parents who were themselves migrants, this obligation to protect at all cost the Federal rural legal service dollar weighs heavier.

    About cooperation, the recent IG audit presented many more issues and many requests for information than any previous audit that we had gone through. We cooperated fully. No inquiries remained unaddressed. No pending issues remained open. When questions arose concerning client privacy and CRLA ethical responsibility to its clients, those were discussed, as lawyers should, and resolved.

    During the 30-month audit period that extended from notice to final report, we expended significant resources responding to the OIG demands. Although CRLA has no final estimate, after 16 of the 30 months of the audit, CRLA had expended 4,479 staff hours in audit-related work, at a cost of more than $113,000.

    Of course, under the LSC Act, it is the LSC board, its president, and management staff that make the rules and policies for LSC. Under the IG Act, the LSC Inspector General assures that the Federal dollar is protected by auditing for compliance with restrictions. The IG investigates, inspects, recommends.

 Page 40       PREV PAGE       TOP OF DOC
    In our case, after the extensive review by the IG of hundreds of case files, hundreds of financial transactions, numerous staff interviews, and weeks of on-site field office visits, there was good news. No financial irregularities, no violation of LSC rules were found that required any form of penalty, nor any form of formal Federal intervention.

    The IG found that CRLA, Inc., and CRLA Foundation were independent entities. It found there were no improper fund transfers between the two. And after intensive review of CRLA's 17200 litigation, complex cases that are brought to recover hundreds of thousands of dollars of unpaid wages, the IG found this to be a proper use of resource. Our clients, Congressmen, are working people, by and large. We do use legal resources to get wages after they've worked and employers think that they can get away without paying them. We do that work. That's basic access.

    Nevertheless, the IG did make findings in the audit that raise questions regarding 1610. We responded in full in writing. Where we could, Congressmen, we agreed. We have changed policies and practices. Where there was fair disagreement with what LSC requires, we will be looking to LSC for clarity regarding the findings.

    About three findings, subsidy. The IG found that when tenants paid rents late, although we collected the rent, we didn't charge a penalty; we didn't charge interest. And when we did, Congressmen, it was about $511. It should be noted that the issue of subsidy amounts to $511 in an $18 million period of operation.

    A second issue about client identity. We also disagreed where the IG findings and recommendations conflict with the black letter of the law regarding client identity required to be revealed to the public. Where clients have explicitly chosen not to be plaintiffs in litigation for fear of landlord or employer retribution, the choice must be honored. The IG's position appears to be inconsistent with the requirements of the LSC regulation, statutory language, and with our own ethical responsibilities.
 Page 41       PREV PAGE       TOP OF DOC

    And, finally, Congressmen, about shared staff, we also disagree with the findings about shared staff and about co-counseling. We rigorously followed the guidelines set by LSC regarding shared staff. Specifically, we complied with the LSC guidance for 10 percent of our staff to be shared with an entity doing restricted work. In fact, Congressmen, during this period, CRLA only shared 2 percent of its staff with CRLA Foundation, and we have even offered to the IG that we would set upon ourselves a 5-percent standard even though the LSC standard would be 10 percent.

    So, finally, we disagree with the recommendation by the IG that we co-counsel in the future with this foundation with junior lawyers. This will create bigger supervisory and regulatory problems that we believe that LSC would want to avoid.

    Congressmen, our written testimony discusses all of these issues, and I am here to respond to these and any other questions you or Members of this Committee may have concerning any of that audit that we just finished.

    Thank you very much.

    [The prepared statement of Mr. Padilla follows:]



 Page 42       PREV PAGE       TOP OF DOC
    It is a distinct honor to submit testimony on behalf of the organization I have now directed for almost 20 years. This hearing presents inopportunity to make people aware of the work CRLA performs serving the legal needs of the poor. It is also an opportunity to speak on behalf of the almost 555,000 rural poor persons and more than 463,000 farm workers and dependents who are the client constituents of CRLA. Their poverty status and the challenges facing them makes evident the need for CRLA's daily presence in rural communities of California.

    CRLA has a proud legacy of effective, ethical and high-quality representation on behalf of its rural clients, and adopts as a core value the democratic principle that the poor deserve legal representation as much as those economically better off. In recent examples, CRLA:

 enabled 3 wheel-chair-bound high-school students to secure district-wide building-modifications that brought schools in compliance with the Americans with Disabilities Act; these students had been unable to navigate their campuses, use bathrooms, or participate in academic programs physically accessible only to the able-bodied (Mitchum v. Santa Barbara School District, );

 obtained a fair housing discrimination case settlement against a predator landlord who sought out women residing at a local homeless shelter and offered rental discounts in return for sex (Project Sentinel [Cordero] v. Lal);

 secured improvement to a farm labor camp housing hundreds of asparagus pickers which had no functioning toilets or showers, a filth-laden kitchen with inadequate refrigeration, and unscreened, unsecured doorways and window openings, and recovered months of unpaid back wages for some 400 workers residing there (Ramirez v. JB Farm Labor Contractor);
 Page 43       PREV PAGE       TOP OF DOC

 worked with HUD to secure a fair housing enforcement agreement with a rural county that made available grants and loans of up to $30,000 per family to enable thousands of farm worker families living in substandard trailer parks to move their homes or secure new homes in newly developed mobile home parks(Hernandez v. Riverside County);

 provided thousands of K–3 English-learners access to Reading First grants under No Child Left Behind; and enjoined the California Department of Education from enforcing a ban that kept these funds from reaching hundreds of English-learner class rooms (Pazmino v. State Board of Education).

    In describing the foregoing cases, I wanted to share with the Committee the significant work that CRLA performs in the rural areas of California. More importantly, these few examples typify the egregious and shocking situations which poor rural persons, particularly farmworkers and mostly Latino face day in, day out.

    I recognize, however, that the invitation to testify before this Committee was not due to a keen interest in how a particular legal services agency discharges its responsibilities. Rather, the Committee's invitation to testify referred to allegations of violations of the regulations of the Legal Services Corporation. I want to address those issues as follows.

    I have managed CRLA as its Executive Director for almost 20 of CRLA's 38 years of service.(see footnote 4) During my tenure alone, CRLA has gone through five extensive Federal audits and a number of investigations. The recent OIG audit has been the longest ever, with the most extensive on-site review by an audit team—7 weeks on-site in four visits stretched over a 2-year period. Two audits in the 1980's were of 2-weeks duration each with larger teams of 10–15 members. During my tenure—and indeed since the Legal Services Corporation Act was enacted in 1974. no program review, audit nor investigation has found any instance of material non-compliance by CRLA with the Act and its implementing regulations.
 Page 44       PREV PAGE       TOP OF DOC

    Regarding that auditing history, I make two observations: First, CRLA has always realized that we will be able to provide diligent and effective advocacy on behalf of the most vulnerable rural communities only through administering efficiently and effectively all aspects of financial accounting, local office operation and staff activities. CRLA must run efficiently; otherwise, effective advocacy cannot follow. Second, we have always sought to protect the public dollar by creating internal oversight mechanisms that guarantee full compliance with Congress' and the Corporation's legal strictures. Our funds are not only public—which necessarily require protection as taxpayer money—but represent hours of daily public service, of daily legal service, that the poor themselves pay for with both taxes and lack of representation. CRLA fully understands that survival of national legal services today is a bipartisan responsibility that has required agreement to a restricted legal practice. Protection of the Federal resource is the most critical responsibility that a program Director assumes.

    Indeed, for someone born in a rural community and raised by parents who were themselves migrant farm workers, this obligation to protect—at all costs—the Federal rural-legal-service dollar weighs heavier. CRLA institutionally, and I personally, take pride in knowing that our understanding of, and strict adherence to, the laws and regulations governing national legal services—overseeing millions of Federal funds to one of the 10 largest programs in the nation—has protected this precious rural resource for the last 30 years.

    In turning now to current substantive concerns, I begin by noting that CRLA has not been advised regarding the specific questions we should address before the Subcommittee. Accordingly, I take the liberty of anticipating the Subcommittee's concerns, and will initially address two matters. First is the question of CRLA's ''cooperation'' with LSC's Office of the Inspector General and the process of our ''acceptance'' of certain OIG findings and recommendations. Second, is the issues regarding the substantive findings in the two subsequent reviews by OCE and by the OIG of the relationship between CRLA and a non-LSC-funded entity, the California Rural Legal Assistance Foundation—and our compliance with the ''program integrity'' requirements of LSC Regulation 1610.
 Page 45       PREV PAGE       TOP OF DOC


    Both the Committee on the Judiciary and this Subcommittee have communicated concerns to the Legal Services Corporation (hereafter, ''LSC'') questioning whether LSC's Office of Inspector General (hereafter, ''OIG'') ''requests [to CRLA] for information . . . are met with resistance from the grantee.''(see footnote 5) In fact, CRLA has provided the OIG with all requested information; there were discussions regarding client rights arising from the attorney-client relationship, but those were resolved early in the audit. There are NO open issues whatsoever concerning requested information. Throughout the course of reviews by both oversight entities—LSC's Office of Compliance and Enforcement (hereafter, ''OCE'') and the OIG—CRLA has acted in good faith and in full cooperation.

    Audits occur in the midst of the dynamic of daily legal assistance and representation, and a law firm must always act fully consistent with its ethical and professional responsibilities owed its clients. The recent OIG audit presented many more issues and more requests for information than any previous audit. We cooperated fully. During the 30-month audit period that extended from June 11, 2001 through the issuance of the final report on December 11, 2003, CRLA expended significant resources responding to the OIG demands from both the on-site audit team and Washington headquarters to: retrieve, review hundreds of closed and open client files and transmit relevant documents from our 22 service-office network to our central headquarters; review and compile client and case-related data which no LSC nor professional requirements obliged us to assemble or report; produce and review financial documentation for the 2-year audited period. Although CRLA has not estimated the total resources expended for the entire audit, at least through October, 2002 (after 16 months of the 30 months of audit), CRLA had expended 4479 staff hours in audit-related work, at a cost of $113,091.(see footnote 6)
 Page 46       PREV PAGE       TOP OF DOC

    Throughout the audit, CRLA has understood that the OIG's findings are to be in the form of recommendations to LSC for the latter's final consideration and review. That understanding is consistent with both the Legal Services Corporation Act and the Inspector General Act. LSC's Board implements the LSC Act through adopting regulations and periodically providing other written guidance to its grantees. The OIG audits recipients' compliance with the Act, LSC's regulations and policies, under OMB and other federal standards. OIG transmits its findings and recommendations to LSC in a public report, and has done so with regard to CRLA; we understand that report has been reviewed by the Subcommittee's staff. The OIG has also requested CRLA to submit a ''corrective action plan'' corresponding to its recommendations.

    Before describing our response to the OIG's request for the ''corrective action plan'', we reiterate a position we articulated earlier in our comments to the OIG: we believe the OIG's extensive review has overwhelmingly confirmed the propriety and regularity of CRLA's operations; we note that in no instance did OIG recommendations include imposition of any LSC penalty, as the OIG can—and does from time to time—recommend.

    As to the OIG's request for a CRLA ''corrective action plan'', with respect to the majority of recommendations, CRLA either accepted the OIG view or had already eliminated or ''corrected'' the situation of concern before issuance of the final report. As more fully discussed below, CRLA believes some OIG recommendations are inconsistent with provisions of the LSC Act and/or LSC formal regulations and/or LSC policy guidances issued to recipients. In some instances we are left with the conclusion that OIG recommendations flatly and facially contradict provisions of the Act or LSC regulations.

 Page 47       PREV PAGE       TOP OF DOC
    CRLA formally advised the OIG on February 9 regarding both our acceptance of the majority of recommendations and of those few issues where we believe their recommendations need to be reviewed by LSC. We understand our response has been made available to the Subcommittee and reviewed by your staff. Since February 9, neither the OIG nor any other unit of LSC has responded to CRLA.

    Typically, in a situation like this, the LSC Board will determine whether CRLA or the OIG is correct in its view; that process has yet to be completed. It was thus surprising for CRLA to be asked to testify about issues that have yet to be finally determined. While normally CRLA would prefer to have that process before the LSC Board concluded, being respectful of the Committee's invitation to testify, we provide detailed information below on the outstanding issues.



    The OIG audit is the second of two 1610 audits conducted by the Federal government over the last 3 1/2 years. It is our understanding that both audits were initiated by complaints to members of Congress from the Western United Dairymen (WUD), a trade association in California whose mission is to look after the ''general welfare and longevity of dairy producers.'' Both audits asked whether Federal funds were being provided to the California Rural Legal Assistance Foundation(see footnote 7) to, ostensibly, fund the Center on Race, Poverty and the Environment (CRPE). The second was more succinct: ''whether CRLA and interrelated agencies CRPE and CRLAF have engaged in restricted activities with federal monies.''
 Page 48       PREV PAGE       TOP OF DOC

    While I describe below in detail each of the audits, it is important to note at the outset the most telling result of these audits after the significant amount of Federal and recipient resources spent. Neither report mentions a word of the Center on Race Poverty and the Environment, the alleged relationship driving both reviews.


    The first audit was requested on September 11, 2000, by Congressman William Thomas (R-Bakersfield) and was requested of LSC's Office of Compliance and Enforcement (OCE) (hereafter ''the LSC audit''). That audit was undertaken over 4 days by LSC's OCE on October 30-November 2, 2000. Findings were issued December 18, 2000, in the name of then LSC President John McKay. For all practical purposes, LSC exonerated CRLA regarding compliance with the 1610 regulation.

''A review of the totality of circumstances (the threshold of our review) has demonstrated that CRLA did not act in violation of the applicable restrictions and that CRLA maintained program integrity with the Foundation.''


    The second audit requested by Congressman Calvin Dooley (D-Fresno) went to LSC's Office of Inspector General (OIG). The OIG's review began with notice to CRLA on June 11, 2001, and extended 30 months, ending with the December 11 report. The OIG process included: on-site fieldwork involving four separate audit-team field visits totaling nearly seven weeks; production of hundreds of case files; CRLA's transmission to Washington of thousands of pages of case and advocacy materials plus hundreds of pages of specially-prepared legal memoranda between and after visits and literally thousands of hours of CRLA staff time in responding to OIG's document and other information requests.
 Page 49       PREV PAGE       TOP OF DOC


    Despite the extensive review of hundreds of case files, hundreds of financial transactions, numerous staff interviews and weeks of on-site field office visits, no financial irregularities, no violation of LSC rules were found that required any form of penalty nor any form of formal Federal intervention. The OIG found that CRLA Inc. and California Rural Legal Assistance Foundation were independent entities. It found that there were no improper fund transfers between the two. After extensive and intensive review of CRLA 17200 litigation—complex cases that, in large part, are brought to recover hundreds of thousands of dollars of unpaid wages—the OIG found this to be a proper use of resources. Nevertheless, the OIG did make findings in the audit that raised questions regarding 1610.

    The application of 1610 involves the examination of 5 broad criteria to determine the existence of ''program integrity''. Those are'' (1) legally separate entity (2) transfer of program funds (3) subsidies (4) physical and financial separation and 5) certification of program integrity. After a 2-year examination, issues arose regarding two criteria. A summary of those findings were:

    (1) Legally separate entity—CRLA and the Foundation are separate legal entities and have been separate for 24 years (since 1981). There are no overlapping board members. They have separate executive and deputy directors. They are headquartered in cities 90 miles apart.

    (2) Transfer of program funds—CRLA transferred no LSC funds to the Foundation.
 Page 50       PREV PAGE       TOP OF DOC

    (3) Subsidies—The OIG determined that CRLA had failed to charge late rents, i.e., an indirect subsidy for not charging interest for late rent all of which was collected. The total involved in and interest on late rent payments was $511.00. CRLA's policy was uniform for all tenants. No favoritism was found regarding any tenant. CRLA sublets space to reduce rent or mortgage obligations. The $511.00 was collected. Given that the OIG's period of review was 2-years of operation, amounting to nearly $18 million of expended funds, the indirect subsidy appears of immaterial value.

    CRLA's experience indicates that the issue of subsidy has been treated inconsistently by OIG and LSC. In its December 2000 report, LSC found an ''indirect subsidy, which was the equivalent of a short-term, interest free loan''. It treated the matter in a manner consistent with a lack of materiality. LSC stated that:

''. . . CRLA and the Foundation have entered into a number of agreements for the benefit of each party, and that these agreements are at fair market value. Nonetheless, there were minor lapses in CRLA billing.''

On the other hand, without explanation, the OIG report of December 11, treated the exact same ''indirect subsidy'' with more seriousness, by using it as one of 4 key factors that lead to the 1610 violation. The OIG stated that

''. . . The grantee subsidized the Foundation by routinely allowing late payment of rent over a long period of time. Between June 2001 and May 2002 the Foundation seldom paid its rent for three offices on time.''
 Page 51       PREV PAGE       TOP OF DOC

It concluded that

''[b]y allowing the interest free use of these funds the grantee subsidized the Foundation activities.''

Respectfully, presence or absence of minor penalties for late rental payments is no ground for a finding of any material violation of the law.

    (4) Physical and financial separation—This criterion has 3 aspects: financial separation, shared space, and shared staffing.

 Financial accounting for the two organizations was found to be entirely separate.

 Regarding physical separation, CRLA was found to have complied with the articulated LSC criteria regarding ''physical separation''—separate signage, market value rent, separate entry, separate institutional identification. In one instance, the OIG questioned the fact that both tenants could access a shared lunchroom and concluded it was impermissible. But that situation, even if shared access to a lunchroom can be said to be a problem, has been rendered moot because the rental space is no longer shared.

 Shared staff arrangements are a separate sub-criteria examined in the audit. CRLA has separate time keeping from all other organizations it works with. LSC's guidelines suggest that recipients that are as large as CRLA, should not allow more than 10 % of advocacy staff to be shared with an organization that undertakes restricted activities, and that doing so will call into question the organizations' separation.(see footnote 8) Under the guideline, CRLA could have had up to 8 such shared employees before it would be questioned. During the period at issue, CRLA had 1 attorney and 1 paralegal—only 2%. Nonetheless, ignoring the established LSC guideline, the OIG questioned the involvement of the 1 attorney and 1 volunteer attorney.
 Page 52       PREV PAGE       TOP OF DOC

    (5) Certification of program integrity—Recipients are required to file a Board-approved annual certification of 1610 compliance. CRLA has filed these in all years required, to the present.


    We begin by noting that co-counseling of litigation does not appear as a 1610 factor under the statute, regulations or LSC guidance; the OIG's extensive evaluation of this practice has inserted a new program integrity factor of which neither CRLA nor other recipients had any prior notice. The Compliance Supplement For Audits of LSC Recipients (December 1998) used by LSC, the OIG and Independent recipient auditors for auditing programs does not identify co-counseling as a factor for assessing 1610 compliance. Recipients use this manual in preparing for LSC and OIG reviews. Nonetheless both LSC and the OIG have analyzed co-counseling in assessing compliance with 1610.

    Co-counseling is, of course, common in litigation and other types of legal practice, and is consistent with the Act and Regulations. CRLA undertakes co-counseling to satisfy our obligation under LSC Regulations to expend 12 1/2% of our annualized basic field award to involve private attorneys in delivery of legal services. (''Private Attorney Involvement'' or ''PAI'', 45 C.F.R., §1614.) CRLA attempts to secure ''private'', i.e., non-LSC-funded, attorneys to co-counsel with our staff attorneys in significant litigation, but in rural California this is one of the very few effective ways that programs both leverage such resources and meet the LSC obligation.

 Page 53       PREV PAGE       TOP OF DOC
    CRLA engages in extensive co-counseling with non-LSC-funded attorneys and law firms in order to: (1) satisfy our obligation under LSC Regulations to expend 12 1/2% of our annualized basic field award to involve private attorneys; (2) obtain the benefit of experienced litigators who can enable a local office staffed by limited-experience staff to undertake representation that we could not otherwise provide; (3) obtain added staffing and physical resources to pursue litigation for which we would not otherwise have sufficient professional and support personnel to undertake; (4) acquaint and train members of the private bar in specialized areas of poverty law with the goal of expanding the availability of private-bar representation to low-income clients including the vast number of non-LSC-eligible poor people in rural California.

    CRLA implements litigation co-counseling arrangements through written co-counseling agreements, generally based upon a 9-page ''model'' agreement that is tailored in individual cases as appropriate to the particular circumstances of the case and/or the needs and resources of outside counsel. Upon request, we identified agreements in 42 separate cases including six in which the Foundation co-counseled, and made forty-one agreements available for review. In these 42 cases (including some cases in which we co-counseled with more than one firm), CRLA co-counseled with at least 26 different law firms one of which was the Foundation.(see footnote 9) We co-counseled on more than one case with at least 9 of these firms.

    CRLA implements and monitors our co-counseling relationships through a series of rigorous review steps including collective review and approval of detailed Litigation Assessment Plans and draft complaints by the four Directors of Litigation, Advocacy and Training in conjunction with the Deputy Director; through review and approval of detailed, lengthy written co-counseling agreements, and through similar collective review of semi-annual written reports submitted by advocacy staff for all significant advocacy including co-counseled litigation.
 Page 54       PREV PAGE       TOP OF DOC

    CRLA does not differentiate among firms with whom we co-counsel in our pursuit of the above-described goals, practices and compliance with professional responsibility and LSC requirements. We maintain these goals, practices and compliance equally with the Foundation as with all other co-counsel.

    The OIG recommended that CRLA staff any cases co-counseled with the Foundation only with its most junior attorneys. Co-counseled cases are generally the largest and most difficult litigation with the most complex issues both substantively and procedurally. The Inspector General's recommendations that only junior counsel participate in cases with the Foundation are completely counter-intuitive to his concern that this co-counseling results in loss of objective integrity and independence. Independence and CRLA institutional integrity are far more likely to be maintained by senior counsel who are sufficiently experienced in litigation and administration to confidently exercise the independent judgment that an inexperienced advocate simply has not acquired.

    CRLA informed the OIG in its Response of February 9, 2004 that it would strengthen certain aspects of its personnel policy, and would otherwise comply with Parts 1610 (and 1604 and 1635) through adherence to a number of policies to be incorporated into its CASE HANDLING AND OFFICE PROCEDURES MANUAL and/or our PERSONNEL MANUAL and/or our OPERATIONS MANUAL, as appropriate, and authorized as appropriate by Board actions.


    The OIG's Final Report directs CRLA to turn over to the employer, landlord or other defendant in a lawsuit of this kind the names of every individual who may have consulted with CRLA about their rights—even those who have not authorized CRLA to bring lawsuits and who are not plaintiffs in a pending or contemplated action, and even though revealing the identities of these non-plaintiff employees or tenants who considered and rejected the pursuit of formal legal remedies regarding their employment or housing is very likely to jeopardize that employment or housing, and to profoundly deter potential clients from consulting a lawyer to determine if they have been treated illegally in the future. The Inspector General's position would effectively penalize the consultation with legal services attorneys that the Legal Services Corporation Act and implementing regulations are supposed to guarantee.
 Page 55       PREV PAGE       TOP OF DOC

    The OIG's position is inconsistent with LSC's regulations in Part 1636, and contrary to the professional responsibilities that CRLA attorneys owe their clients and potential clients under state and federal law. Part 1636 requires CRLA to identify to adversaries and obtain written factual statements from plaintiffs that we represent in all litigation (including that brought under California's Business & Professions Code Sections 17200 et seq.). CRLA has complied fully with those requirements. Our compliance is implemented through formal policy incorporated in our CASE HANDLING MANUAL and through specific confirmation in each Litigation Assessment Plan reviewed jointly by our Directors of Litigation, Advocacy and Training (as described previously, p. 8).

    The OIG found no instance in which CRLA had failed to comply with these requirements. Instead, the Final Report directed CRLA to implement procedures by which it would obtain statements of fact from and identify to adversaries' clients who have consulted with CRLA attorneys but who have refused to become plaintiffs in litigation. The OIG's position is inconsistent with Part 1636 and would require CRLA attorneys to violate their own professional obligations under governing law. Part 1636 is not ambiguous. Sub-part 1636.1 provides in relevant part that,

[t]he purpose of this rule is to ensure that, when an LSC recipient files a complaint in a court of law or otherwise . . . the recipient identifies the plaintiff it represents to the defendant and ensures that the plaintiff has a colorable claim.

Sub-part 1636.2(a) further provides,
 Page 56       PREV PAGE       TOP OF DOC

When a recipient files a complaint in a court of law or otherwise . . . participates in litigation against a defendant . . . on behalf of a client who has authorized it to file suit in the event that the settlement negotiations are unsuccessful, it shall:

    Identify each plaintiff it represents by name in any complaint it files . . . ; and

    Prepare a dated written statement signed by each plaintiff it represents, enumerating the particular facts . . . (Emphases added)(see footnote 10)

Eligible persons often enter into attorney-client relationships with CRLA for assistance in investigating and evaluating their potential rights or liabilities vis a vis an opposing interest, or for advice and counseling in dealing with an opposing interest by means other than litigation. Many such persons never authorize CRLA to file suit on their behalf, often because they have no desire to have their concerns publicly revealed for fear of retribution. Absent publicly filed litigation in which they are parties, their desire for privacy is recognized and respected by federal and state law. As just described, Part 1636 limits recipients' obligations to identify clients to their adversaries to the circumstances when those clients have specifically authorized the recipient to name them as plaintiffs in pending or anticipated litigation, but not when those clients are only counseled rather than named as parties to litigation.

    The American Bar Association's Model Rules of Professional and LSC's own rules that require recipients' attorneys to adhere to their professional duties in serving their clients and potential clients, support CRLA's position. The Statement of Findings in the LSC Act indicates that,
 Page 57       PREV PAGE       TOP OF DOC

attorneys providing legal assistance must have full freedom to protect the best interests of their clients in keeping with the Code of Professional Responsibility, the Canons of Ethics, and the high standards of the legal profession.

(42 U.S.C., §2996, subd. (6) .) In furtherance of this mandate, Congress expressly required that the Legal Services Corporation

shall not . . . interfere with any attorney in carrying out his professional responsibilities to his client as established in the Canons of Ethics and the Code of Professional Responsibility of the American Bar Association . . . or abrogate as to attorneys in programs assisted under this subchapter the authority of a State or other jurisdiction to enforce the standards of professional responsibility generally applicable to attorneys in such jurisdiction.

For these reasons, CRLA expects that upon review of this position regarding 45 CFR1636 and the applicable professional rules, LSC will accept CRLA's position.


    On January 7, 2004, Congressman John Doolittle (R-CA) filed a complaint with the Office of Inspector General on behalf of former California state legislator Dean Andal. He charged that CRLA had violated ''prohibitions against desegregation and class action lawsuits''. The OIG audited CRLA for 4 days, January 20–23. On March 12, 2004, the OIG issued its findings which contend that although it was permissible for CRLA to have continued working on the case Hernandez v. Stockton Unified since 1977, CRLA violated the 1996 prohibition against participation in class actions because it had engaged in negotiations with the Stockton Unified School District (at its request) to bring the case to closure.
 Page 58       PREV PAGE       TOP OF DOC

    The Inspector General correctly notes that in 1977, LSC's Office of the General Counsel approved continued CRLA representation of the plaintiff class. (LSC letter dated May 31, 1977, from Alice Daniel, General Counsel, to Hon. M. Caldwell Butler, U.S. House of Representatives.). That letter recognized, in part, that CRLA's participation was to negotiate stating: ''Negotiations with respect to the court's findings and conclusions of law are now in progress''.

    The Hernandez litigation was filed in 1970 and resulted in a judgment in 1974 finding the district guilty of de jure segregation of Latino and African American students. The court granted a traditional desegregation remedy to the petitioner parents, including busing and an implementation plan approved in 1977 that established phased integration in District schools. In 1991 the judgment was amended by further order to eliminate busing and substitute remedial funding for those schools in poor neighborhoods that had earlier suffered the imposition of segregation. All this activity preceded Congress' 1996 adoption of the class-action prohibition; all was appropriate LSC-funded activity, and indeed, constituted recipient's Private Attorney Involvement activity through co-counseling.

    In 2002, the District approached CRLA and petitioners requesting that CRLA and co-counsel facilitate final resolution of the case. CRLA's presence during the 2002–2003 meetings between the defendant District and petitioner's counsel was requested by the District and expected by the court which had overseen this case for years. The parties assumed that a negotiated agreement was far more efficient and less costly than litigating the issue before the court which would be more time consuming. Agreement was reached in early 2003 providing for the termination of the consent decree (because its purpose had been met) and a 2-year transition thereafter during which the schools that had received state desegregation funds would receive a reduced percentage of those funds until they would be split evenly with low-achieving schools or as the district otherwise saw fit. CRLA's role in these meetings and negotiations subsequent to the 1996 class-action prohibition did not represent either a new case nor new intervention in an existing case but rather undertaking our ethical duties to existing clients arising from the long-standing, still-open lawsuit.
 Page 59       PREV PAGE       TOP OF DOC

    CRLA's role during those meetings and negotiations was beneficial to the parties' abilities to resolve and finally settle this three-plus-decades old litigation, and thus was in the public's interest and in the interest of its client community. Although reasonable minds could differ, CRLA understood that its presence during the negotiations did not constitute participation in ''adversarial proceedings'' as that term is used in the statute and regulations. CRLA went on record with the court and the opposing party about the nature of the prohibition,(see footnote 11) and neither was concerned that CRLA was acting outside the scope of permitted activity. The client community was similarly informed.


 But for the district court's request that CRLA assist in bringing the case to closure, the case would have continued as a virtually ''inactive'' case under the existing consent decree; the current class action regulation allows recipients to ''remain informed about, or to explain, clarify, educate or advise others about the terms of an order granting relief''.

 CRLA, petitioners, defendants and the Court expressed the belief that the presence of CRLA, who had been counsel in the case since its inception in 1970, would be beneficial to putting to bed this over-3-decades-old case. The availability of CRLA's knowledge served their—and the public's—interests. In sum, CRLA believes that its role in the proceedings at issue was not ''adversarial'' and was desired by the parties and the court, benefited the public interest in enabling the parties and the court to finally resolve lengthy litigation, and was undertaken in the good-faith belief that we were complying with the spirit and language of the class-action and desegregation prohibition.
 Page 60       PREV PAGE       TOP OF DOC

 The court dismissed the primary case on June 18, 2003, at which time CRLA ceased to be a part of the case in any capacity.(see footnote 12) CRLA closed its case file in the Hernandez matter effective December 31, 2003.

 CRLA filed its withdrawal with the Stockton Superior Court for the County of San Joaquin on March 26, 2004.


    CRLA has been privileged for some 38 years to provide the rural poor of California with full access to the state's civil courts and, thereby, to provide some semblance of justice to those not accustomed to such civil representation. This is what CRLA believes to be the simple mission of the Legal Services Corporation Act of 1974. In meeting this purpose, CRLA has carefully and rigorously adhered to the law, regulations and guidelines set by Congress and LSC. CRLA will continue to do so.

    Mr. CANNON. Thank you, Mr. Padilla.

    Ms. Charn?


 Page 61       PREV PAGE       TOP OF DOC
    Ms. CHARN. Chairman Cannon, Mr. Watt, Mr. Delahunt, and Members of the Committee, it's a pleasure to speak to you today about the work that we've undertaken over the years at Harvard Law School. For 25 years, I've directed the major civil clinic at Harvard Law School, now known as the Hale and Dorr Legal Services Center. It's our belief that our students, as we introduce them to the practical aspects and skill dimensions of lawyering, will learn best in a fully operational law office.

    The center has a staff at any time of about 20 attorneys, fellows, and paralegals, and we're very pleased that part of our students' education, our students often have opportunities to work for the finest Government, private, and other law firms. We think it's also very important that students from Harvard Law School have some understanding of the needs of low-income people and how the law and the justice system works for those who have little and who otherwise could not afford the services of the fine lawyers that most of these students will become.

    Our office is in Boston. It's not on campus in Cambridge. It serves a quite racially and income-diverse area. It serves the lowest-income areas of the city of Boston.

    In addition to our student education mission, we have a mission of providing the highest quality service and functioning as a laboratory to experiment with cost- and quality-effective approaches to delivering services to low- and moderate-income people.

    Over time, we came to make a decision to serve moderate- as well as low-income people. This year, in Boston, the area median income is $82,000, in excess of $82,000. We are a high-cost-of-living area, and many individuals above the poverty line share the same problems. They need assistance in domestic matters, around credit problems, around threatened foreclosure of their homes, as very low income people do. So we serve a population that goes up to about three times the poverty rate.
 Page 62       PREV PAGE       TOP OF DOC

    We do—much of the work that we do is similar to work that an LSC office might do. We represent tenants. We represent people on benefits issues. We represent people on family issues. We had a practice going back 15 years that focuses on families impacted by HIV and AIDS, one of the first programs in the country to do so.

    But particularly since the time that we were fortunate enough to form a partnership, really, with a major Boston corporate firm, Hale and Dorr offered money to purchase a permanent home for the center but, more important, began to volunteer large numbers of hours to assist with our learning and service program.

    We decided that it would be useful to see if we might provide assistance to small businesses, particularly minority business owners in previously disinvested areas, to people seeking to make purchase of a home, to not-for-profits, and to other institutions and entities that form the basic fabric of a low-income community and who may generate jobs and resources that benefit large numbers of low-income communities.

    We began to do this, and Hale and Dorr assisted us by providing a lot of the expertise in business and other matters that are typically not present in a legal aid office.

    We are predominantly funded by Harvard Law School, and generously funded by Harvard Law School, and the school is very proud of the amount of service that our office provides. We close between 700 and 900 full representation cases a year, and we advise and assist in more limited ways as many as a thousand clients each year.

 Page 63       PREV PAGE       TOP OF DOC
    We have always sought and obtained statutory fees where appropriate in our ordinary service cases. Our mission is not particularly law reform or statutory change. Our mission is direct service to individuals around the everyday problems that people face.

    As part of our experimentation, particularly when we began representing small businesses and other entities, we introduced a co-payment system in that part of our practice. When we found that it was working and that it was accepted by clients, we expanded it to other areas of our practice. The reasons we did it were largely those mentioned by the Chair in his opening remarks. We thought we might gain income. We thought that it might empower clients to feel more entitled to diligent and high-quality service; that it might help them in deciding if there was a small or modest co-payment if they really wanted to take on legal action in an area. And we wanted our students to understand that there is a business dimension to law practice.

    We have no co-payment in emergencies. Clients who are in need-based benefit programs do not make co-payment, and many clients at or below poverty do not make clients. The vast majority of clients who participate in the co-payment system or whom we ask to make co-payments are above the poverty line.

    We do know that we've been effective in increasing resources available to the office, that our students have learned about business practice, and that clients have been accepting of this project. We have not studied, but we intend to within the next year and a half, the extent to which the co-payment system is received and perceived by clients in ways that we had hoped.

    My last comment would be that, in addition to running this teaching, learning, and service center in the Jamaica Plain area of Boston, we are—I'm also involved with an ongoing policy study on ways of making legal services more widely available. This has been my life's work for my career, making legal services available, and I remain hopeful as I approach 60 that at some point in this country legal services will be widely and freely available, not only to the very poor but to all those low-income and working people above the poverty line who also are in desperate need of services and who cannot afford quality service at the market. And in such a system, I think it is most reasonable and appropriate that, as we—particularly as we move up the income scale, that clients make a contribution to cost of service.
 Page 64       PREV PAGE       TOP OF DOC

    Thank you so much for your attention.

    [The prepared statement of Ms. Charn follows:]


    Good afternoon, and thank you for the privilege of speaking to the Subcommittee on Commercial and Administrative Law. I have been asked to provide information on aspects of the client service program of the Hale and Dorr Legal Services Center of Harvard Law School, particularly information on client co-payments that we have instituted for some of the services that we provide. I begin with some background on the Hale and Dorr Legal Services Center of Harvard Law School and conclude with a brief mention of the Bellow-Sacks Access to Civil Legal Services Project, both of which provide important context for our experiment with client co-payments.


    The Hale and Dorr Center, (the Center), was founded by my late husband Gary Bellow and me in 1979. At that time, the office was known as the Legal Services Institute. Until 1982, the program was a legal services practice center in which twenty-four third year law students spent the entire year in courses and casework preparing for careers in LSC legal services programs around the country. Eight of the twenty-four students were from Harvard Law School but up to sixteen students were from Northeastern University Law School in Boston and from other law schools in the country. The Legal Services Corporation, through a partnership between Harvard Law School and Greater Boston Legal Services, was the primary funder of the program.
 Page 65       PREV PAGE       TOP OF DOC

    Beginning in 1982, Harvard Law School became the primary sponsor and funder of the Center, though we have always retained a tie to Boston area legal services providers. The goals of the Center since 1982 have been:

 To introduce students to law practice—Our experience suggests that students learn best in a realistic setting. Under the supervision of experienced lawyers, students represent clients and, in companion courses, discuss and analyze the judgments, ethics, responsibilities, tasks and relationships of law practice. We have developed the concept of a ''Teaching Law Office'' similar to a teaching hospital in the medical profession.

 To provide high quality service to clients—The teaching and learning methods that best meet our students needs also produce a great deal of service to clients who cannot afford to pay for good quality legal assistance. Harvard Law School and its clinical program is very proud of the contribution we make to meeting the every day legal needs of thousands of Boston households and individuals. On an annual basis, the Center typically provides extended representation to over 700 clients and brief service and advice to as many more.

 To be a laboratory for experimenting with approaches to delivery of high quality legal services—The Center deliberately experiments with ways of providing excellent and cost-effective service to as many clients as possible. We are committed to documenting, validating and reporting on the results of these efforts. Our service experiments have included: (i) extensive use of telephone advice beginning in the mid 1980s; (ii) development of regular clinics where staff and students assist clients appearing pro se—we have conducted a pro se divorce clinic for twenty years; (iii) in the late 1980s, offering legal services to individuals and families affected by AIDS and HIV; (iv) early in the 1980s, focusing on service to victims of domestic violence in our family practice and collaborating with shelters and other social service providers as the seriousness of this problem came to be more widely recognized and understood; (v) collaboration with area medical providers to offer preventive law services and benefits check ups to low-income patients on site in clinics and hospitals; (vi) expansion of assistance to individuals and households up to four times the poverty level because these clients legal needs are similar to those of the very poor;(see footnote 13) (vii) providing service to first time home-buyers, community not-for profits, affordable housing developers, and small businesses; (viii) development of a comprehensive quality assurance program that, among other things, tracks outcomes for all clients, sets annual performance goals for advocates and practice units, and evaluates every advocate and practice unit in terms of these annual goals;(see footnote 14) and (ix) development of a system of client co-payments for some areas of service, which I describe below.
 Page 66       PREV PAGE       TOP OF DOC

    In 1992, Hale and Dorr, LLP a major Boston law firm, donated funds to provide a permanent home for the Center. Perhaps more important than the generous gift of funds for a building, Hale and Dorr began a partnership with the Center in which firm lawyers volunteer thousands of hours to serve clients and mentor students. For the past five years, Hale and Dorr has assigned a senior partner half time, year round to supervise students and to practice with staff at the Center. The first ''partner in residence'' retired this spring and a second partner has now joined us. The Center and the Hale and Dorr firm recently celebrated the tenth anniversary of our collaboration and we are developing a strategic plan for joint work in the coming years.

    The Center now has twenty or more lawyers, fellows and paralegals and as many as seventy students practicing and learning together each semester. During the summer we accept volunteer students. For the summer 2004, we received over a hundred applications from students in many law schools, volunteering for fewer than fifty internships. The demand for our summer program has grown as past summer interns have spread the word about the quality of service and learning at the Center.


    As the brief description of the Center's history and program indicates, while we share with LSC and its grantees a commitment to providing high quality service to households and individuals in their every day legal problems, we serve a broader clientele and we offer service in areas that are not typical of LSC grantees.

    Law school support for the Center's annual operating program in fiscal 2004–2005 (Harvard's fiscal year runs from July 1 through June 30) is projected to be approximately $1,995,000. For the same period, the Center projects earnings from statutory attorney's fees, client reimbursement of costs of service (e.g. filing fees, depositions, experts) and income from client co-payments to be between $135,000–$140,000. We project to spend between $45,000 and $50,000 in out of pocket case related expenses. These figures are consistent with year-end projections for 2003–2004.
 Page 67       PREV PAGE       TOP OF DOC

    We have always sought attorney fees where authorized by statute and, in the past, this was our main source of service generated income. We began a co-payment system in the mid-1990s, when we began to offer service to entities (not for profits and small businesses) and first time home buyers. As we found clients accepting of the co-payment concept in these areas of practice, we expanded to other areas. We do not charge co-payments to clients whose only income is need based benefits or to clients below the poverty line unless our representation produces funds from which the co-payment could be made, for example, settlement of a claim or receipt of back benefits due to an approved application. We do seek reimbursement of out of pocket costs of representation from clients of all income levels, with provision for waiver in cases of hardship. In many instances, for very low-income clients, costs of representation may be waived by courts or paid for under statues, so the Center does not incur out of pocket costs.

    We do not charge co-payments in emergency matters, such as clients who need immediate assistance in obtaining domestic violence restraining orders, because we do not want to impose even the smallest impediment to access for clients in crisis. Also, there are no co-payments for any client for preliminary consultations related to whether or not we will be able to provide advice or assistance beyond any limited advice that may be offered in a first meeting.

    As we have institutionalized the co-payment system, we are finding that while attorneys fees claimed under statutes has in the past accounted for most of the service generated income to the Center, we are now approaching about a third of ordinary service generated income from client co-payments mostly in the range of $100 to $300. We occasionally are awarded and paid a single large fee, which would skew ratios significantly towards statutory fees, but excluding the occasional larger fee, we are beginning to see a regular flow from co-payments for the services that we routinely provide.
 Page 68       PREV PAGE       TOP OF DOC

    We decided to experiment with a system of client co-payments for a number of reasons. First, we hoped to increase resources to serve more clients. Second we hoped that clients who made even a small payment for service would have a greater sense of entitlement to diligent, responsive service. Third, we thought that it was possible that a small co-payment would play some role in helping clients decide if they really wanted to pursue legal action. Fourth, we wanted our students to have a realistic experience of dealing with the business aspects of law practice.

    The increase in resources is measurable, and we see our students learning how to discuss fees and costs with clients. We have found most clients accepting of a modest co-payment system, but we have not systematically surveyed or tested our goals in terms of client perception and attitudes. We hope to do this within the next two years, and will have better information at that time. We plan to continue the system we have in place, modifying it based on experience, and to conduct a careful and full review by the end of academic 2005–2006.

    Any system of co-payments requires strong fiscal systems and fiscal controls, and attention to safety issues in terms of funds on hand, even for very short times, in the office. Fortunately, Harvard Law School is our fiscal agent, with well-established systems and controls, and we have not had any safety incidents.


    In 1999, a number of the faculty at Harvard Law School, including my late husband, met to plan a project that would look broadly at ways of greatly expanding access to civil legal assistance for low and moderate-income people. Twenty years of experience at the Hale and Dorr Center suggested approaches that might work on a larger scale. When my husband died in the spring of 2000, his classmates from the Class of 1960 along with others who admired his life-long dedication to improving access to justice, generously donated funds to support a policy research project, which I was asked to direct. The Bellow-Sacks Project is entirely supported by Harvard Law School and its alumni who share a dedication to making access to justice available to all whom the market cannot serve. The Project has no bias towards any existing or future system or stakeholder. We have invited, and been fortunate to have the participation of leadership from the Legal Services Corporation at a number of Bellow-Sacks sponsored events in the past three years.
 Page 69       PREV PAGE       TOP OF DOC

    We expect to have a preliminary report and findings by next fall. One important area of study has been the much larger government supported and led legal services programs in other countries. These programs serve moderate as well as very low-income clients through private bar involvement as well as staffed offices. Most involve client contributions to the cost of service at higher levels of income eligibility. In this sense, our client co-payment experiment should be understood not only as part of the program at the Hale and Dorr Center, but also as informing the possible contours of a larger and more comprehensive U. S. legal aid program that, drawing on present LSC efforts, will be well managed, cost-effective, and highly valued by the much larger number of clients it serves.

    Mr. CANNON. Thank you, Ms. Charn.

    We appreciate all of your testimony, and may I just ask you, Ms. Charn, to follow up on what you were just saying, do you think there's a place for co-payment then in the Legal Services Corporation system?

    Ms. CHARN. There may be. I would say in our case, we focused on other areas before we moved to co-payments. We were very interested in having a very high quality and efficient program that was both diligent, turned over cases, did it in a way that was client centered and met their needs; and that only when we were satisfied that we were making good progress on that front did we try any experiment with co-payments. And we were cautious as we went forward with it.

    There are clients in our office who would be similar to Legal Services-eligible clients who are involved in the co-payment system primarily when our representation produces for them resources out of which a modest co-payment might be made.
 Page 70       PREV PAGE       TOP OF DOC

    There are many clients who are Legal Services eligible where we haven't yet implemented this program, and we always have hardship exceptions. But I think we'll know more when we critically study what the client view is.

    One wants to be careful not to create barriers, but I do think there may be gains of the sort that you mentioned around client ownership and sense of pride and dignity that could be involved with such a system. We'd like to test that out and get some more information on it.

    Mr. CANNON. Great. Thank you very much.

    Mr. Padilla, in the case of the office manager in your Oceanside office, this individual's working as a full-time employee for CRLA, in addition, as the head of the office and in a supervisory role. I assume that this individual had direct oversight from one of your DLATs as well as yourself. Generally speaking, how much interaction do you have with the foundation? And considering your views on the importance of immigration issues, were you not aware that this employee was holding a director position within the foundation dealing with these specific issues?

    Mr. PADILLA. Congressman, I'm aware of—oh, I'm sorry. It says ''talk.''

    In our Oceanside office, I think you're referring to an employee that left CRLA 3, 4 years ago. And the issue there arose in the context of the LSC guidelines. It was about shared staff. And when the IG came to us, they came in asking about a number of shared staff. And at the end of all of that, even though we could have had seven or eight, we had two. One of those two, according to the IG, was a volunteer attorney. And you're making reference to a volunteer attorney that, as far as we understand the regulation, is not covered by the 1610 regulation.
 Page 71       PREV PAGE       TOP OF DOC

    So the 1610 regulation covers part-time attorneys when folks go part-time, but it also does not cover full-time employees. The director of that office, who I am sort of fully aware of the work and the litigation, the IG brought the information to my attention. We reviewed that. As a matter of fact, they served me with a number of newspaper articles involving this particular attorney. But when it came down to it, we told the IG that this person on their own volunteer time could—could do what they could do. We cannot regulate what our employees do on volunteer time.

    And so it just happened that in that particular regulation which you were asking about is that person is not a shared staff person because shared staff persons are persons who are working part-time with you and working part-time with another entity. So with respect to the Oceanside office, that's—I'm assuming that that's what you were referring to, and so that employee in particular was working full-time with us.

    Mr. CANNON. In a case like that, when you have an employee who is working for you and being paid by you but is volunteering outside, do you allow the utilization of LSC resources or CRLA resources in fulfilling those volunteer activities?

    Mr. PADILLA. Well, no, Congressman, we don't. We're very, very clear with staff that when staff is doing any kind of work, actually both with—work that would be considered prohibited with entities that are doing restricted work, or when they're doing work with any nonprofit, we clearly, clearly tell our staff that they must follow the rules about respecting the resource, the CRLA resource. Whether that is paid by LSC funds, whether it's paid by State funds, whether it's paid by private foundations, all of that resource belongs to CRLA.
 Page 72       PREV PAGE       TOP OF DOC

    So to the extent that they may be working with another entity, we clearly explain what the rules are, what our expectations are with respect to even reimbursement. We're told that to the extent that resources may be used, for example, something as minimal as Xeroxing, we tell folks you have to reimburse programs when you're using that kind—our program when you're using that kind of resource.

    So, Congressman, we're very clear about those rules. We are responsible for setting those bright lines for our attorneys and our advocates, and so we make sure that when they're working with those entities that they're protecting our resource, because we're the ones that employ them.

    Mr. CANNON. Thank you, Mr. Padilla.

    My time has expired, but, Ms. Barnett, I'd appreciate if you'd think about that answer because I'd like to come back to that on the second round.

    And at this point, I'd recognize the Ranking Member for 5 minutes.

    Mr. WATT. Two rounds, Mr. Chairman?

    Mr. CANNON. Yes. Would you—the gentleman from Massachusetts is recognized if you have someplace else you need to be.

    Mr. DELAHUNT. I thank the Chair. I will wait to speak to the co-payment issue later. I still really can't understand why Mr. Padilla is here.
 Page 73       PREV PAGE       TOP OF DOC

    I'm almost embarrassed that you're here, Mr. Padilla. Here we are discussing a discrete issue in a State, in California, the details of which I don't know. I presume there's some political overtones to it. I'm just reading some pieces from the Modesto Bee and something about the dairyman and class action suits. And here we are in front of a congressional Subcommittee?

    It's my understanding—and you can correct me. Maybe you can respond to this, Ms. Barnett. I understand there is a review being done by LSC.

    Ms. BARNETT. Yes, Congressman. On March——

    Mr. DELAHUNT. That's all I needed was the ''yes.'' Now, let me ask you this: Has the review been concluded yet?

    Ms. BARNETT. No, it has not. It is currently——

    Mr. DELAHUNT. Thank you. That's all I need.

    And here we are in a Subcommittee in the United States Congress talking about something about shared office space, concerns, I guess, have been expressed by Members of Congress as to whether CRLA—I'm even learning the acronyms in this short period of time—is somehow involved in a class action suit. I would hope and think that we could wait until the administrative review had been concluded before we have an oversight hearing.

 Page 74       PREV PAGE       TOP OF DOC
    I've got a lot of ideas for oversight hearings. And if the Chair and the Chair of the full Committee would want a long laundry list, I think at least from my world view, that are far more important and significant and would be ripe, if you will, to use the legal term, would be ripe for oversight.

    But having said that, I will yield back the rest of my time. Mr. Padilla, I'm not even going to ask you any questions. I will yield back the rest of my time and wait for the second round, which hopefully will come soon, Mr. Chairman.

    Mr. CANNON. I thank the gentleman. Let me just point out that we hope this system will work well and the oversight process and the inquiries will result in people who may not be as supportive as LSC as we would like them to be become more supportive of the agency.

    Mr. DELAHUNT. Let me, if I can, Mr. Chairman, I want to state on the record, I am aware of your support, you know, for LSC and your concern for equal access to the justice system, because if we're going to have a justice system, we better have equal access because we'll lose the confidence of the American people in not just our justice system but our democracy. And I understand the purpose, your intention here, but at the same time—and I know sometimes it's incumbent upon those of us who serve in this body to do certain tasks. And I presume we're attempting to do that with a larger goal in sight. But here we are, we're talking about a specific case.

    Mr. CANNON. There are a number of issues that have been raised that I want to touch on.
 Page 75       PREV PAGE       TOP OF DOC

    Mr. DELAHUNT. Sure.

    Mr. CANNON. Because it seems to me that if we establish a record of where we're going, we've taken LSC, I think, as a body from a highly controversial, very angry issue to one that there is a great deal of support for. I think it's good to be clear about where we're headed, and, you know, Mr. Padilla is actually a pretty tough guy, been around for a long time, and——

    Mr. DELAHUNT. I could tell he's a tough guy.

    Mr. CANNON. We've had discussions about this. I don't think that anyone is objecting to where we're going on this. And we would like to see where LSC is headed, be clear so that we don't have some of the objections we've had in the past. And, frankly, I think the world is much better served today by the—what is almost close to unanimity in Congress over this agency. So——

    Mr. DELAHUNT. I guess my point, Mr. Chairman, is that when viewed in the larger context of our responsibilities, for us to be conducting this inquiry, A, is premature, without having the administrative oversight function that we've invested into LSC concluded.

    Well, you know, maybe I should exercise some restraint and conclude my remarks with that, Mr. Chairman.

 Page 76       PREV PAGE       TOP OF DOC
    Mr. CANNON. I thank the gentleman.

    The Ranking Member is recognized for 5 minutes.

    Mr. WATT. Thank you, Mr. Chairman. I would say, now that I see this in brighter context, probably except for the procedural separation of powers issue on which we differ with the Administration, it's probably a blessing that we didn't fly an Assistant U.S. Attorney all the way across the country to deal with this. And I'd have to say it is a shame that Mr. Padilla had to fly all the way across the country and lose a whole day's work.

    So, in a sense, there is a blessing that goes with the Department of Justice saying we're not going to let this person come over here and——

    Mr. CANNON. I'd thank the minority not to give them excuses. [Laughter.]

    Mr. WATT. Well, I clarify that I'm upset about the process issue, but I think the result has turned out to be all right.

    Ms. Charn, your clinic is called Bellow-Sacks?

    Ms. CHARN. That's the policy project that's looking at availability of legal services. We're called the Hale and Dorr——

    Mr. WATT. Oh, Hale and Dorr.
 Page 77       PREV PAGE       TOP OF DOC

    Ms. CHARN.—Legal Services Center.

    Mr. WATT. Legal Services Center, okay. And you all serve clients that are Legal Services eligible and clients that are not Legal Services eligible?

    Ms. CHARN. Yes, that's correct.

    Mr. WATT. Okay. And about what part of your resources are devoted to Legal Services-eligible clients versus non-Legal-Service-eligible clients?

    Ms. CHARN. The majority of our clients are Legal Services eligible or close to it. But we serve a substantial number. It might be a third or more. I would have to check our data for certain, but there are a sizable number of people who are above. Probably the vast majority of clients are within 200 percent of poverty, but a few are more.

    When we're focusing on something like predatory lending, and we've got a client who maybe household income is $40,000 and $20,000 and another that is $15,000 or $18,000 and they all have the same problem, then we'll want to—we'll want to represent all of those people because it often is more effective that way.

    Mr. WATT. I'm actually less concerned about getting into the issue of the co-pay here than I am understanding how you have been able to comply with this split services requirement. There are a number of legal services organizations that get resources from places other than the U.S. Government. And we have said to them, You can't mix those resources and services with the services that you are providing for—I actually think it's a ridiculous policy myself, but I'm wondering how your organization has been able to deal with that dichotomy, getting private resources—getting resources from Harvard and, I presume, other funding sources in addition to the Legal Services resources that you get.
 Page 78       PREV PAGE       TOP OF DOC

    Ms. CHARN. Let me say that the vast majority of our resources—our budget will be about two hundred—$2,300,000 next year. Close to $2 million of that will come from Harvard Law School. We have—so we are substantially funded by the law school, and most of the Legal Services-eligible clients that we serve are served on law school money. So that's the main answer. We don't—we don't separate them.

    We do have——

    Mr. WATT. So your clients—your lawyers are serving Legal Service-eligible clients and——

    Ms. CHARN. Yes.

    Mr. WATT.—non-Legal-Service-eligible clients in the same context? You haven't had any kind of problems and nobody's raised a question about it?

    Ms. CHARN. Well, we have a small grant that is in a—not us, but a separate corporation that serves—it's evolved historically because originally we were actually an LSC-funded program way back in the 1970's.

    Mr. WATT. Perhaps I should quit asking questions about this. I really am not trying to create——

    Ms. CHARN. I understand.
 Page 79       PREV PAGE       TOP OF DOC

    Mr. WATT.—create problems for you. I'm just trying to figure out how—what the distinction is.

    Ms. CHARN. There's—we have a separate corporation. It's not subject to co-payments or any of these things.

    Mr. WATT. Sharing the same space, though, and the same lawyers?

    Ms. CHARN. No, not the same lawyers. It has its own staff.

    Mr. WATT. So no sharing of lawyers' time on any of these cases that you're working on jointly?

    Ms. CHARN. No. They would be—they would be separate. They have—they do work that's only—that is particular to that unit. And it's not the same work that the rest of the office would do. And it may change over time, but that's a very small part of our program. The vast majority of our service, that's mainly advice assistance and screening. And then most of the full representation work, the vast majority is done on law school money. And the reason that we have room to experiment is that money is not restricted in any way. We are service oriented, we've seen value in mixed income service.

    Mr. WATT. Ms. Charn, I hope I have not created a problem——

 Page 80       PREV PAGE       TOP OF DOC
    Ms. CHARN. I don't think you have.

    Mr. WATT. I hope I haven't created an investigation here by asking you these series of questions.

    Ms. CHARN. Mr. Padilla will help me. [Laughter.]

    Mr. WATT. But if I have, I apologize. That was not my intent, I assure you.

    Ms. CHARN. I don't think you have.

    Mr. WATT. I think my time is up on this round. I'll yield back to the Chair.

    Ms. CHARN. Thank you very much, Congressman Watt.

    Mr. CANNON. I thank the gentleman.

    We have a series of questions. I'm going to send questions, if the panelists are comfortable answering those in writing, that may be good. I'd like to just follow up on one comment, and then I'm not sure anybody else wants to have a second round.

    But, Mr. Padilla, you talked about $511, which is this amount that was—I think you called it ''immaterial'' in an $18 million funding. And I understand that you've also solved that problem now by having a contract that doesn't allow for the carry of rent, which has come sporadically, apparently.
 Page 81       PREV PAGE       TOP OF DOC

    Would you talk just a little bit about that in this context? You solved the problem. It seems to me that the perception of interrelationship even at a nominal cost, even at a de minimis cost, has its problems. By fixing that, have you—are you suggesting or would you suggest to this panel that you have—you recognize these problems, small as they may be, as larger in the context of the perception that they create and, therefore, you are committed in the future to help avoid the perception of using LSC resources to fund these foundations?

    Mr. PADILLA. Yes, Congressman. We have——

    Mr. CANNON. That will do. [Laughter.]

    Just kidding. Please go ahead.

    Mr. PADILLA. Go ahead?

    Mr. CANNON. I'm sorry. We're just joking here about it. But I would really actually appreciate your response to that point.

    Mr. PADILLA. Well, Congressman, as we mentioned before, surprisingly enough, when I look at these investigations and audits, it's one of those few times when a director—when a director can actually get a feedback with respect how he or she will follow guidelines, follow regulations. And so to the extent that we go through an extensive audit, we take those findings seriously. Five hundred and eleven dollars, I wish I could say, Congressman, that it was zero. But, Congressman, the nature of the $511 is this: Clearly, it seems to me that what the public does not want to see, Congress does not want to see, are programs that in some way or another turn over direct resource over to entities doing restricted work. The perception of anybody doing that would create more problems than we already have.
 Page 82       PREV PAGE       TOP OF DOC

    But I distinguish that from an indirect subsidy. In this case, for us, we were following the guidelines that were being set by LSC. LSC in its 1610 talked about this. It talked about telling programs, when you are working with another entity and sharing space, there are certain things that you must do. You must have agreements where you collect market rent. We had those. They ask—you have to have separate signage. If there are suites, it must be clear to the public that there is Legal Aid and there is the entity doing restricted work. And so we followed those rules.

    Mr. CANNON. Let me just interject. You had one group where you had two separate entrances that came to the same group of desks. Are you saying that, given this audit, you're now looking at that and will take corrective action there as well?

    Mr. PADILLA. We've already changed that, Congressman. As a matter of fact, there are no longer—no longer any such relationships with the CRLA Foundation. There is no—there are no shared suites. There are no longer any of those kinds of agreements that we've entered into. That's happened in the last year. At the time that the IG came in, the IG was looking at three such relationships. And all I am saying is that when they came back and you read the report, what they had a problem with was the issue of subsidy, that is, the $511 in late rent that we didn't charge. In other words——

    Mr. CANNON. That was actually interest, was it not?

    Mr. PADILLA. It was interest.

 Page 83       PREV PAGE       TOP OF DOC
    Mr. CANNON. Interest, was that—which was part of the contract?

    Mr. PADILLA. The late rent came—the late rent was there. It was paid in lump sum. We collected it. And then the issue was: Well, why didn't you charge interest on that, because you are floating an interest-free loan? And so what we've now done is, as we enter new contracts with other nonprofits, we are now putting into our agreements that we will charge late rent in case they pay their late rent.

    Mr. CANNON. So essentially you have a commercial agreement with penalties or interest that—with your—with these groups that you rent space to?

    Mr. PADILLA. Yes, Congressman. And I do have to add that for a legal aid like us, that we are actually purchasing buildings in some communities. We also have leases where we pay high rents. Periodically, we will have space, and in order for us to try to make our space work, we rent to nonprofits.

    And so you're totally correct that now we're being asked to treat even those relationships very commercially, and now we've—we now understand the rule. I don't think that LSC—maybe they will disagree with that rule about treating nonprofits in a commercial manner. But we understand it, and now all of our agreements that we're entering into—and as a matter of fact—well, with all those agreements, that's exactly what we have. We are now looking at these as being defined by commercial agreements, just like any other landlord-tenant relationship.

 Page 84       PREV PAGE       TOP OF DOC
    Mr. CANNON. I thank the gentleman. Let me just say that there's been some joking by the panel here. I don't mean to suggest that this issue is taken lightly by any of us at all. It has clearly been an intense issue historically. We appreciate your comments, especially Mr. Padilla, about how you've made adjustments after getting the guidelines from the IG. I encourage the LSC to continue to be clear about guidelines or clarify guidelines, and in your investigations look at these things, because clarity saves all of us a lot of difficulty.

    That said, would anyone else like to participate in a second round? The gentleman from Massachusetts is recognized for 5 minutes.

    Mr. DELAHUNT. Thank you, Mr. Chairman.

    Can I ask you how much was the interest, Mr. Padilla? I didn't mean to come back to you, but I want to get my arms around this.

    Mr. PADILLA. The interest that we——

    Mr. DELAHUNT. The interest on the late payment.

    Mr. PADILLA. $511.

    Mr. DELAHUNT. Can you repeat that again, please?

    Mr. PADILLA. It's $511, Congressman.

 Page 85       PREV PAGE       TOP OF DOC
    Mr. DELAHUNT. Fine. And how much did your round-trip ticket cost here?

    Mr. PADILLA. It cost about $1,200 and change.

    Mr. DELAHUNT. Thank you.

    Let me go to Ms. Charn for a moment. I understand your concept of the co-payment system. I understand there was a proposal before the Massachusetts Legislature which would have incorporated that into their Legal Services, and that it was resoundly rejected. Am I accurate in that?

    Ms. CHARN. I believe so, yes.

    Mr. DELAHUNT. Okay. And you indicated, your words were ''Maybe it should be implicated into the LSC system.'' And I guess that condition of that would be a completion of a critical study, which I thought I heard that you were undergoing or had under way.

    Ms. CHARN. We plan to look carefully at our own experience and to get some independent and systematic evaluation of client—client response to it.

    What I really——

    Mr. DELAHUNT. If I can, I don't want to——

 Page 86       PREV PAGE       TOP OF DOC
    Ms. CHARN. Sure.

    Mr. DELAHUNT.—delay you, and I know Mr. Padilla has got to get on that plane because we don't want to have him stay overnight again and continue to add on that. In any event—and I don't mean to be rude, Ms. Charn. I really want to compliment the program at Harvard. I'm familiar with it. Maybe you're unaware, but I served for 21 years as the elected district attorney in the greater Boston area, and we utilized many of the clinical programs in the metropolitan Boston area.

    Ms. CHARN. I am aware of that.

    Mr. DELAHUNT. And Harvard was good. It was good. BC was just a little bit better as far as the criminal—— [Laughter.]

    —clinical program. But at the same time, I think you really do serve and do provide a wonderful experience for law students.

    I don't think you need to teach them about the business dimension, however, because most Harvard Law School graduates, at least when they finish, receive their J.D. degree, they seem to be doing pretty well upon their graduation.

    But, seriously—and we'll await the conclusion of that study that you alluded to earlier. But, you know, I think—and I'm glad to hear that you're servicing the moderate-income community because a growing—a concern of mine is really access to the civil justice system. For the middle class today, it's almost impossible, particularly when you're dealing, you know, with a claim against a—against a corporation. I'm not talking a small business but against a corporation. You do not have the resources. And I think that is a niche area that really has to be addressed.
 Page 87       PREV PAGE       TOP OF DOC

    And it's my understanding, too, that one of the restrictions that Congress passed, I think it was in 1996, is that no longer is LSC prohibited to be involved in class actions. And I wonder if it's time to really, as far as legal clinical programs—and, again, we have many of them in the Boston area—to consider a consortium of those programs to examine a need, a vacuum, if you will, and as it particularly relates to LSC and the restrictions that are placed on it. Many of those restrictions I happen to think are unreasonable, but the law is the law and we respect the law.

    But we need some lawyers today who service that low- to moderate-income that really do need the kind of resources that the law schools can supply, and particularly those areas that could very well address a significant social need that oftentimes is brought about through the mechanism of a class action suit. Best example, the Firestone case, for example. I really think that would be a very exciting opportunity for a consortium of law schools to come together with a program to train future lawyers in terms of how to meet that particular—how to meet—not just how to meet that particular need, but to give them an experience that has become very rare as opposed to the direct aid that's provided by LSC.

    I don't know. Maybe I'm not being clear enough in terms of what I'm suggesting, but take, for example, the restriction on LSC dealing with class action suits and the need for particularly certain segments of our community who do not have the wherewithal, could never envision what a class action suits really means when there is an obvious problem to be addressed. For the law schools to support that kind of effort in clinical programs, because there is a vacuum, there is an opening—and, again, too often today, you know, our Government is not protecting those who really need to be protected the most, those that are the vulnerable. And we have to rely on lawyers. We have to rely on the courts. We have to rely on access to the system.
 Page 88       PREV PAGE       TOP OF DOC

    Any comments?

    Ms. CHARN. Well, I do share the regret that there are restrictions on remedies that can be pursued. I accept that they're there, and I think it's important that until and unless they're changed, there absolutely should be compliance. I think class action is a remedy. In some cases, it's appropriate. I don't think it's the be-all and end-all of what people need. I think that lots of people also need direct service, and we've been very concerned about those just above poverty who share exactly the same kinds of problems, are victims of the same sorts of situations. And I don't think—I think there can be cause for resentment when the very poor, albeit in small numbers, are eligible for things that middle-income and people who are working hard but couldn't begin to afford decent legal services don't have access. So we've been concerned about that.

    On the subject of restrictions, I think one that has some real practical effect is that the prohibition from seeking attorneys' fees in ordinary cases where it's authorized by local law and statute, that can be an important source of income, and it does bring in more income to our program than any part of the co-payments. And we are not—we are not looking at high-profile cases because we want our students to have some direct, hands-on experience, and you're not going to give a second-year law student any lead role. They'll do research, but they know how to do research. They don't know how to sit in a room with a client, bargain across the table, or make a 2-minute argument in a busy court as opposed to a lengthy argument in a high-level court.

    So we've looked at that part of the need, and I do think at a practical level, the inability of programs to be able to access attorneys' fees where it's authorized by local law is something that could provide resources, would be a benefit, and it was on that base that we built a co-payment system.
 Page 89       PREV PAGE       TOP OF DOC

    Mr. DELAHUNT. I would encourage you, Ms. Charn, to incorporate that particular issue in terms of the study that you referred to earlier. I think it would be very beneficial to have.

    Ms. CHARN. Thank you, Congressman.

    Mr. CANNON. The gentleman yields back.

    I think the Ranking Member would like to take another round, and I will defer to him in just a moment.

    Let me point out, Ms. Charn, that your point that people on the lower end get angry because some people get a benefit and they don't is very well taken, and it's one of the key issues that I think we need to focus on to keep LSC a healthy organization.

    I just want to make a point, Mr. Padilla. My round-trip ticket is about—is less than $300. We need to get you a Government fare somehow in this process. [Laughter.]

    And, of course, as we reduce the cost of your being here, the enormity of the cost of compliance or dealing with this audit is great. My understanding is that it cost somewhere way north of $113,000 to deal with this audit. I think—I don't know that anybody is going to complain about that. I think it's very important that we have clarity about the rules. Other people in other places will see how clear the rules have become and avoid problems there. And so we appreciate your—the time and effort you have put into this and what it does for the health of the whole organization.
 Page 90       PREV PAGE       TOP OF DOC

    With that, the Chair yields 5 minutes to the gentleman.

    Mr. WATT. Thank you, Mr. Chairman. Just let me clarify, though, this is not another round. This is my second bite at the apple, as you and Mr. Delahunt have already had your second——

    Mr. CANNON. I would just appreciate it if you didn't take as big a bite as each of us took. We went way over the red light.

    Mr. WATT. I'm just going to take long enough to try to dig myself out of this hole that I dug for myself in the first round of questions, and I want to do it this way:

    First of all, I want to say how much I agree with the last comment Ms. Charn made about attorneys' fees. I think that's one of the more ridiculous rules that we have imposed upon Legal Services Corporation.

    Number two, in my continuing effort to get myself out of the hole with Ms. Charn, I want her to deliver to my good friend and former classmate, Duncan Kennedy, my highest regards and tell him I'll be up there for the convention. I'm looking forward to him hosting me there.

    Ms. CHARN. Professor Kennedy came and practiced with us at the center, and I hope I won't be disclosing too much in saying that he never passed the bar. We had to have him as a paralegal. But he was very effective.
 Page 91       PREV PAGE       TOP OF DOC

    Mr. WATT. Oh, is that right?

    Ms. CHARN. Very, very effective.

    Mr. WATT. Well, he never was much attention—paid much attention to those kinds of details. His thought processes—and I was in the same class with him. We always thought we're always on a different plane than the proletariat lawyers who were having trouble understanding the simple concept. He had taken it to another concept. So it didn't surprise me that he ended up being a professor and I ended up being a country lawyer and politician. So give him my best regards. He's a great friend of mine, and I respect him highly—even though he hadn't passed the bar, it sounds like.

    Ms. CHARN. He didn't take—he would have passed it. Let me be clear.

    Mr. WATT. Finally, I want to clarify, I guess, your program, the Hale and Dorr Legal Services Center, does or does not receive LSC support?

    Ms. CHARN. A separate entity, a separate corporation receives LSC support. Historically, we had a strong affiliation with the LSC-funded programs in the area. After the Gingrich congress, that changed, for a variety of local reasons. But——

    Mr. WATT. The Gingrich congress is a concept I do not understand.
 Page 92       PREV PAGE       TOP OF DOC

    Ms. CHARN. I mean the Contract With America, the restrictions that came in——

    Mr. WATT. That was in 1995–96?

    Ms. CHARN. Yes.

    Mr. WATT. I have never acceded to the notion that that was his Congress or anybody else's.

    Mr. CANNON. It did become mainstream America.

    Mr. WATT. It was—this Congress is always the American people's Congress, and——

    Ms. CHARN. Well put.

    Mr. WATT.—this is the people's House

    Ms. CHARN. Well put.

    Mr. WATT. But I understand you're talking about 1995–96.

    Ms. CHARN. Yes.
 Page 93       PREV PAGE       TOP OF DOC

    Mr. WATT. Okay. All right. Keep going.

    Ms. CHARN. So I would say that, in fact, what our program does is, aside from that continuing small grant to a separate corporation, in fact, Harvard Law School is providing its own resources that are making available substantial services to LSC clients.

    Mr. WATT. Okay. So with respect to that program, you can charge a co-pay or whatever you want. I mean, you don't need Congress'——

    Ms. CHARN. That's right.

    Mr. WATT. Okay. And in the LSC-funded program, you are not charging a co-pay——

    Ms. CHARN. Certainly not.

    Mr. WATT.—because that's prohibited——

    Ms. CHARN. That's prohibited.

    Mr. WATT.—by the rules.

    Ms. CHARN. Exactly right.

 Page 94       PREV PAGE       TOP OF DOC
    Mr. WATT. All right. What I'm trying—the bottom line I'm trying to get to on this co-pay issue is I assume and hope you're not suggesting that because in a separately funded mechanism where you do services for Legal Services-eligible clients and non-Legal-Services-eligible clients, you have a co-pay system that you would impose that same co-pay system in every Legal Services Corporation-funded program throughout America. That's not what you're suggesting, is it?

    Ms. CHARN. No, I don't——

    Mr. WATT. Okay. All right. I just——

    Ms. CHARN. It's not for me to suggest—we have some experience with it. In the future, as we evolve, I don't think it's unthinkable, but I have no—I'm not making any suggestion that that would be a priority of any kind for this legal—and I trust Chairman Strickland and the new president. That is really a matter of policy for the Congress and them. I simply report on an experience, and it's our role——

    Mr. WATT. And actually, in your experience—I take back what I said in my opening statement—you have the right to experiment in your program because you're not received Federal funds.

    Ms. CHARN. That's correct.

    Mr. WATT. In that part of your program, which is why I wanted to go back and clear this up. I didn't want to start another investigation. There are two separate programs here.
 Page 95       PREV PAGE       TOP OF DOC

    Ms. CHARN. Yes.

    Mr. WATT. And one is Legal Services funded and one is not. So I just wanted to be clear on that.

    I think I have dug myself out of the hole. I probably put myself back in it by mentioning Duncan Kennedy.

    Ms. CHARN. Not at all.

    Mr. WATT. But he'll understand that I was trying to get myself out of the hole.

    With that, I'll yield back.

    Mr. CANNON. The Chair was aware that these are separate programs, I might just point out.

    Mr. WATT. Okay.

    Mr. CANNON. And I had no intention of pursuing it beyond that.

    We thank the panel very much. We appreciate the Members of the Committee who have been here today asking questions, watching over me, making sure we stayed on the straight and narrow.
 Page 96       PREV PAGE       TOP OF DOC

    Let me just say in closing that this is an important issue. It's been an issue that America has reacted to in many different ways. I think, Ms. Charn, your statement about the concern by people who can't get access to legal services is a very serious one. I appreciate the way you are dealing with it, and we're going to take a careful look in the future at a program that might mitigate that along the lines of what you've done with Hale and Dorr and with Harvard, and we appreciate that.

    Mr. Padilla, we appreciate your having come in and come across the country. It's not a day, let me point out. It's actually 3 days. You know, the Federal Government calls travel across the country a day's work, so we appreciate that.

    And, Ms. Barnett, we appreciate your being here and your participation.

    It seems to me Mr. Padilla would like to make another comment.

    Mr. WATT. And I need to make a unanimous consent request.

    Mr. CANNON. Okay. Why don't we go to the unanimous consent request and we'll let——

    Mr. WATT. All right. Mr. Chairman, I ask unanimous consent that we have submitted for the record letters of support for the California Rural Legal Assistance, Inc., as if they needed that, from Members of the Congressional Hispanic Caucus, Brennan Center for Justice at NYU School of Law, Mexican American Legal Defense and Educational Fund, League of United Latin American Citizens, Farm Worker Justice Fund, Inc., California Catholic Conference, Mexican American Bar Association, twelve law professors, and the National Council of La Raza.
 Page 97       PREV PAGE       TOP OF DOC

    Mr. CANNON. Thank you. Without objection, so ordered.

    [The ''letters of support'' are inserted in the Appendix.]

    Mr. CANNON. Mr. Padilla, do you want to make a final comment?

    Mr. PADILLA. Yes. Chairman, just putting my whole issue aside, I just felt the need to make one statement about thanking you for your leadership. As you well know, CRLA spends a significant amount of time representing working people. And to the extent that you as a Congressman has taken leadership in the ag jobs bill and taken leadership in the DREAM Act, I have to say on behalf of the clients that we serve in California, people who sometimes the only sustenance that they can get—they need the sustenance of food, but they also need sustenance like faith and hope. And to the extent that you have taken the leadership in that area with those two pieces of legislation, I have to thank you on behalf of our client community, because I know you've taken a position on a very volatile issue. But it's an issue that's so critical to the people that we serve on a daily basis. And I just wanted to make that comment because this is probably the last time that I will ever be able to thank you so publicly because of the stance you've taken.

    Mr. CANNON. Well, I hope we could meet privately because I intend to get to California, but I thank you very much. And as we talked yesterday, let me just say, and as I said earlier in the hearing, we have problems in America. We need to solve those on many fronts. But opening up the path for people to move from lower income to higher income, meaning getting education available to them, having access to other resources, those things are vitally important, not to me, not to you, but to all Americans. It's important that all Americans have—all other Americans have all the opportunities that this great country provides.
 Page 98       PREV PAGE       TOP OF DOC

    I would ask unanimous consent to insert the IG report in this matter in the record. Without objection, so ordered.

    [The ''IG report'' is inserted in the Appendix.]

    Mr. WATT. I would ask unanimous consent to insert in the record the exhibits that Mr. Padilla——

    Mr. CANNON. Without objection, so ordered.

    Mr. WATT.—testified about with reference to the labor camp at Haute, California.

    Mr. CANNON. Without objection, so ordered.

    [The material referred to is inserted in the Appendix.]

    Mr. CANNON. And on this kindly note, let us adjourn the hearing.

    [Whereupon, at 2:24 p.m., the Subcommittee was adjourned.]


 Page 99       PREV PAGE       TOP OF DOC
Material Submitted for the Hearing Record












 Page 100       PREV PAGE       TOP OF DOC













 Page 101       PREV PAGE       TOP OF DOC












 Page 102       PREV PAGE       TOP OF DOC













 Page 103       PREV PAGE       TOP OF DOC












 Page 104       PREV PAGE       TOP OF DOC













 Page 105       PREV PAGE       TOP OF DOC

    The following information is offered as a supplement to the written remarks and oral testimony presented to the Subcommittee on Commercial and Administrative Law of the House Judiciary Committee on Wednesday, March 31, 2004.

    On the topic of experiments at the Hale and Dorr Legal Services Center with client co-payments, I emphasize that we serve clients above 125% of poverty. Some of these clients are fledgling entrepreneurs, not for profits and other clients not typically served by LSC funded legal services providers. These clients may have incomes above poverty, but they cannot afford decent legal services at market rates. Most of the Center's clients who have incomes above 125% of poverty have legal problems that are the same as most of our clients who are below 125% of poverty—they have job related issues, or they are seeking unemployment compensation; they seek disability assistance because they are ill or injured and cannot work; they seek assistance with child support, protection from domestic violence or assistance with divorce; they are homeowners threatened with foreclosure or tenants with unsafe or unhealthy apartments who may also be facing eviction. Housing costs in Boston are high so many people above the lowest income levels have difficulty finding and retaining decent affordable housing. With rental housing costs in lower income Boston neighborhoods reaching eight hundred to as much as one thousand dollars per month or more, we serve many clients who are ''shelter poor,'' that is their incomes may be above poverty but they have no discretionary money and could not possibly afford lawyer assistance.

    For tenants, we claim attorney's fees pursuant to state statutes and rules. All income from representation of tenants is pursuant to these statutes and rules. When we represent clients who have been victimized by predatory lending, we similarly seek attorney's fees and costs of litigation pursuant to local and federal statutes.
 Page 106       PREV PAGE       TOP OF DOC

    Under 45 CFR Part 1642, LSC funded programs are not permitted to seek these fees. As indicated in my testimony on March 31, 2004, I would urge the Subcommittee to consider easing the current restrictions that prevent LSC grantees from seeking fees under existing statutes and rules, whether local or federal. These fee-shifting statutes are intended to encourage compliance and deter rule breaking. Permitting LSC grantees to seek such fees would have no impact on the present substantive restrictions that Congress has enacted, but would be consistent with the intent of the fee shifting statutes and would produce income to programs that would support increased service.

    While existing regulations do not permit LSC grantees to seek attorney's fees pursuant to statute or rule, I would point out that section 1642.6 of 45 CFR Part 1642 permits LSC grantees to seek reimbursement of out of pocket costs from ''. . . damages or statutory benefits . . .'' that result from the representation. LSC might encourage programs that may not be doing so already to regularly seek reimbursement of out of pocket costs when representation produces funds from which such costs could be paid.

    At the Hale and Dorr Center, we seek such cost recoveries from all clients whether above or below 125% of poverty. The clients who are represented with the Private Attorney Involvement (PAI) funds pursuant to an annual contract with Boston's Volunteer Lawyer Project (VLP) are never charged co-payments because VLP has only LSC funds. However, we do seek co payments from clients below 125% of poverty whom we represent with non-LSC funds. We seek co-payments from these very low-income clients only when our representation produces resources from which the co-payment can be made, for example, back benefit awards in disability or unemployment compensation matters. In these areas, most co-payment charges are for clients in the income range of 200% of poverty or lower.
 Page 107       PREV PAGE       TOP OF DOC

    Finally, a note on the PAI funds received by a separate not for profit entity housed at the Hale and Dorr Center in Jamaica Plain from the LSC grantee, The Volunteer Lawyer's Project. While these funds must be used to serve clients consistent with LSC regulations and the LSC statute, participating in a PAI program funded by an LSC grantee such as the VLP does not restrict other funds of the private attorney. We have gone further and segregated the PAI funds in a separate not for profit entity that contracts annually with the VLP. Pursuant to contract, VLP requires the not for profit to serve a specific number of LSC eligible clients each year.

    In conclusion, I want to express my thanks to the Committee for its interest in the service delivery experiments of the Hale and Dorr Center and the broader work of the Bellow-Sacks Access to Civil Legal Services Project. The knowledge, thoughtfulness and obvious commitment of the Subcommittee Chair and members to making high quality legal services broadly available was heartening and of great importance to the future of our legal system.





 Page 108       PREV PAGE       TOP OF DOC












 Page 109       PREV PAGE       TOP OF DOC

(Footnote 1 return)
Pre-rescission figures are used throughout this testimony.

(Footnote 2 return)
Legal Services Corporation 2002 Summary of Average Salaries by Job Classification for Full Time Staff. (www.rin.lsc.gov)

(Footnote 3 return)
For 2002 cases, one more adjustment was made, excluding Title III Administration on Aging cases where collection of financial eligibility data is restricted by law. This adjustment reduced reported case closures by about another 35,000.

(Footnote 4 return)
CRLA Inc. was incorporated March 3, 1966, and received its first grant from the Office of Economic Opportunity (OEO) on May 24, 1966.

(Footnote 5 return)
Letter dated November 20, 2003, to LSC Chairperson Frank Strickland, from Hon. James Sensenbrenner, Chairman, Committee on the Judiciary; and Hon. Chris Cannon, Chairman, Subcommittee on Commercial and Administrative Law, p. 2. The issue of ''office-sharing'' was also mentioned there.

(Footnote 6 return)
These estimates were provided to both LSC and OIG by letter of October 24, 2002.

(Footnote 7 return)
Since 1982, the relationship between CRLA Inc. and CRLAF has been reviewed during 5 Federal audits—in 1986, 1988, 1991, 2000 and 2002.

(Footnote 8 return)
This guideline is found in GUIDANCE IN APPLYING THE PROGRAM INTEGRITY STANDARDS, attachment to LSC Memorandum to All LSC Program Directors, Board Chairs re ''Certification of Program Integrity'', October 30, 1997, from John A. Tull, Director, Office of Program Operations.

(Footnote 9 return)
These firms included both traditional, for-profit, private law offices and other non-profit entities that provide legal representation.

(Footnote 10 return)
The dictionary definition of a ''plaintiff'' is, unsurprisingly, consistent with the assumption underlying these regulations: ''A person who brings an action; the party who complains or sues in a civil action and is so named on the record . . .'' (BLACK'S LAW DITIONARY (5th ed., 1979); ''1. one who commences a personal action or lawsuit to obtain a remedy for an injury to his rights . . . 2. the complaining party in any litigation . . .'' (WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY (1986).)

(Footnote 11 return)
In a February 24, 2003 letter to the District's counsel prepared before the present OIG investigation, we confirmed that CRLA was making no claim for past or present attorney fees or costs and reiterated that although we had at one time been counsel, Mr. Roos ''of META is the sole counsel for the Petitioners and has full authority to settle the case . . . or otherwise represent the Petitioners.'' Shortly thereafter, still prior to the present investigation, Mr. Roos submitted a declaration executed March 3, 2003, to the court also asserting that he was ''the sole attorney of record, as CRLA is barred by federal law from participating in class actions . . .''

(Footnote 12 return)
The case was appealed by a group of intervenors who seek to deny the court the 2-year transitional jurisdiction the court sought to maintain by its June, 2003, order. CRLA is no longer receiving any judicial or party notices or any other notices related to the appeal.

(Footnote 13 return)
Boston is a very high cost of living area. In 2004, the area median income for a family of four is $82,600. Housing subsidy programs consider 80% of area median as low income and 50% of area median income as very low income.

(Footnote 14 return)
The quality assurance program is described in more detail in Jeanne Charn, Quality Assurance at the Provider Level: Integrating Law Office Approaches with Funder Needs, available at www.lsc.gov; and Jeanne Charn and Randi Youells, A Question of Quality, LSC Equal Justice Magazine, Winter 2004