Appointment as U.S. Attorney

In January 2006, Paulose returned to the Justice Department, where she briefly served as senior counsel to acting deputy attorney general Paul McNulty and was the department's special counsel for health care fraud. She assisted with the formulation of guidelines for health care fraud and corporate fraud prosecution. She was a special assistant to Attorney General Alberto Gonzales.^[5]

On February 17, 2006, Paulose was appointed to serve as interim U.S. Attorney for the District of Minnesota. The incumbent U. S. Attorney, Thomas Heffelfinger, had announced his resignation effective February 28.

On August 3, 2006, while Paulose was serving as interim U.S. Attorney in Minnesota,^[4] President George W. Bush sent her nomination to the U.S. Senate, which unanimously confirmed her on December 9, 2006, the last day of the 109th Congress.

The confirmation occurred after a hearing by the United States Senate Committee on the Judiciary and the approval of both home state senators, including Mark Dayton.

Paulose pledged to fight child pornographers, saying that they were becoming "more graphic, more heinous, and frankly appalling." She also spoke out against urban crime and in favor of holding public officials accountable for their actions.

During her tenure in office, Paulose tripled child pornography prosecutions, doubled gun prosecutions, and initiated the first ever prosecutions of human trafficking and aggravated identity theft.

Paulose resigned in November 2007 after several members of her staff themselves resigned in protest over her leadership.

Swearing-in ceremony

Paulose's investiture was held before 300 people in the atrium of the University of St. Thomas School of Law in Minneapolis on March 9, 2007. Subsequently, Leah McLean of the Minneapolis television station KSTP ran a piece likening it to a "coronation", showing a program that referred to a "processional" and included a U.S. Marine color guard, professional photographer and choir.

Paulose has dismissed the criticism, saying the program KSTP based its report on was inaccurate and had been discarded long before the ceremony, although the color guard and choir were indeed present. She also added that the cost to taxpayers was minimal since the school donated the use of its atrium (which it normally rents for $1,500) for the investiture ceremony at her request, she paid for everything and the total government cost of the ceremony was only $225,^[10] less than half the $500 she was budgeted.^[11] Representatives of government watchdog groups said the donation was inappropriate and that the money spent didn't include the cost to taxpayers of event planning by Paulose's employees.^[10]

The Star Tribune reported that it was unusual that "the former U.S. attorney for Minnesota, Thomas Heffelfinger, was not invited" to the ceremony. Paulose's spokesperson, Jeanne Cooney, said "It was a public event. Anybody who wanted to go could have gone."^[12] The article speculated that Heffelfinger, a moderate Republican, could have been a candidate for a purge list had he not stepped aside to make way for a more conservative candidate.

Staff resignations

On April 5, 2007, three of Paulose's top administrators—First Assistant U.S. Attorney John Marti, second in command; civil division head Erika Monzangue and criminal division head James Lackner—voluntarily resigned those positions, reverting to simple assistant U.S. attorney status, reportedly in protest over Paulose's management style. According to the Star Tribune, she was noted for dressing down underlings and quoting Bible verses on the job.^[13][14]

The resignations occurred after a visit from a representative of the Executive Office of the U.S. Attorney in Washington.^[15] A later report said that the visit had been a last-ditch attempt by the Bush administration to persuade the three not to resign, and that a fourth official declined to comment on whether he had resigned or not.^[16] Paulose's defenders say that three simply had trouble changing their ways to accommodate an aggressive young prosecutor determined to bring the office more into line with the Attorney General's policies, and it had nothing to do with politics.^[17]

U.S. Attorney dismissal controversy

On April 17, the Associated Press reported that the House Judiciary Committee had contacted Paulose for voluntary questioning about the "firings of 8 U.S. federal prosecutors"^[18] On May 31, 2007, the Los Angeles Times published an article stating that Paulose's predecessor was removed from his post for failing to pursue voter fraud cases that would prevent a significant number of Native Americans in Minnesota from casting ballots in the 2004 election, and that Paulose's appointment stemmed not only from her credentials, but from her work in private law filing "election lawsuits on behalf of the Minnesota GOP."^[18] Heffelfinger and an assistant U.S. Attorney, Rob Lewis, had previously expressed concern "about possible voter discrimination against Indians", according to the Times. Also reported was that one of Paulose's "first acts in office was to remove Lewis, who had written the 2004 e-mails to Washington expressing concern about Native American voting rights in Minnesota, from overseeing voting rights cases."

On September 24, 2007, the Washington Post reported that Paulose "is the subject of an investigation by the U.S. Office of Special Counsel into allegations that she mishandled classified information, retaliated against those who crossed her, and made racist remarks about a support staff employee, said multiple sources in Minnesota and Washington, who declined to be identified because the probe is still under way. In addition, an internal Justice Department audit found that her employees gave her very low marks, alleging that she treated subordinates harshly and lacked the requisite experience for the job, according to several sources familiar with the audit. Her performance review was so poor that Kenneth E. Melson, head of the department's Executive Office for U.S. Attorneys, took the unusual step of meeting with her in Minnesota several weeks ago, according to two sources. The U.S. Office of Special Counsel released its findings on December 3, 2008, and found that there "were reasonable grounds to believe that a prohibited personnel practice had occurred that warranted corrective action".^[19] Paulose did indeed retaliate inappropriately against her top subordinate after he reported her for those transgressions. But the OSC noted that the settlement agreement "was entered into by the Department of Justice as a no-fault agreement and was not to be construed as an admission of liability by DOJ." The office and home of the OSC official who led the investigation against Paulose were raided "as part of an investigation into whether he himself mixed politics with official business."^[20]

Resignation from office

Palouse resigned on November 19, 2007, to work at the Justice Department. In reaction, Senator Norm Coleman said, "I support Rachel Paulose's decision today to step down from her duties as Minnesota's U.S. attorney. I have made it clear that I have had concerns about the office of the U.S. attorney under her watch, and I believe this decision will allow the office to move forward." Amy Klobuchar, Minnesota's other U.S. senator, also welcomed the resignation.