22

1 through decision, approval, disapproval, recommendation,

2 the rendering of advice, investigation, or otherwise, or which

3 is the subject of his official responsibility

4

"Shall be fined not more than $5,000, or imprisoned

5 not more than one year, or both.”.

Mr. DANIELSON. This morning we are pleased and favored to have with us the pioneer legislator on the subject of financial disclosure, the Honorable Robert W. Kastenmeier of Wisconsin.

Bob, come forward. I might state to you, while you are taking your seat and to the other witnesses, that we would be pleased to receive your statements in the record, and you can proceed ad lib to make the principal points which are probably of greatest interst to you. Mr. KASTENMEIER. Thank you, Mr. Chairman.

TESTIMONY OF HON. ROBERT W. KASTENMEIER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WISCONSIN

Mr. KASTENMEIER. Acting on your suggestion, I will offer my entire statement for the record and then proceed.

[The prepared statement of Hon. Robert W. Kastenmeier follows:]

SUMMARY OF STATEMENT OF HON. ROBERT W. KASTENMEIER OF WISCONSIN. Enactment of a government-wide public financial disclouse law is long overdue.

The House and the Senate Rules have been significantly amended this year to provide for public financial disclosure by Members, officers, principal assistants to Members and officers, and professional staff of committees. These new disclosure requirements are based upon the disclosure categories included in H.R. 1. The House Select Committee on Ethics has reported H.R. 7401, the Legislative Branch Disclosure Act 1977. This measure and the Senate passed bill, S. 555, propose to write into statute, with some modifications, the new congressional rules on financial disclosure.

It now is equally important that these financial disclosure requirements be extended, as proposed by H.R. 1 and S. 555, on a uniform basis throughout government.

The present financial disclosure standards for the Executive Branch are woefully inadequate. In a series of reports covering more than 20 government agencies, the GAO has revealed numerous deficiencies in the present reporting system and exposed blatant conflicts of interest. The disclosure statements are confidential and there is little or no effective agency oversight.

Although the Judicial Conference Code directs federal judges to file periodic public reports disclosing gifts of more than $100 and income from non-bench work, the Judicial Conference cannot require judges to file such statements, and Supreme Court Justices are not covered by the Code.

Financial disclosure is an important and necessary step in assuring the integrity of the public service, and it is the most effective deterrent to potential conflicts of interest. Public financial disclosure will reassure the American people that their government insists upon high standards, and it will make sure that those high standards continue to be maintained by those individuals who hold public office.

STATEMENT OF HON. ROBERT W. KASTEN MEIER OF WISCONSIN

Mr. Chairman, I am pleased that you have scheduled these hearings on H.R. 1, which requires public financial disclosure by the President and Vice President, Members of the Congress, justices and judges, other government officers and employees, and candidates for federal office. This legislation, which Congressman Tom Railsback and I have introduced, has been cosponsored by more than 170 of our colleagues including Representative Ron Mazzoli of this Subcommittee and 15 of our colleagues on the full Judiciary Committee.

Although the idea that a public office is a public trust is not a new one, the assumption that the officers of representative government will view themselves as trustees for the public has, only in recent years, emerged as a basis for what we hope will be the adoption of strong and workable rules of financial ethics for government officials.

Also, an increasing citizen awareness of the conduct of public officials and the growing public expectations of those entrusted with power have combined to produce new demands for higher standards of ethics in government.

The 95th Congress is responding in a most responsive manner to these challenges. This year, both the House and the Senate have adopted new rules governing financial ethics. House Resolution 287, which the House passed on March 2, amended House Rule XLIV by providing for public financial disclosure by Members, officers, principal assistants to Members and officers, and professional staff of committees. H. Res. 287 was based upon the proposals presented by the Commission on Administrative Review, U.S. House of Representatives which, in its report to the House, stated that "The Commission's recommendations on financial disclosure generally follow the disclosure categories included in Representative Kastenmeier's bill (H.R. 1).

The House Select Committee on Ethics has reported H.R. 7401, the Legislative Branch Disclosure Act of 1977. This measure and the Senate passed bill, S. 555, propose to write into statute, with some modifications, the new congressional rules on financial disclosure. The new requirements on disclosure, for example, are extended to candidates for federal office. Our congressional leaders have assured us that the Legislative Branch will be governed by a financial disclosure law.

It now is equally important that we turn our attention to extending, as proposed by H.R. 1, these financial disclosure provisions on a uniform basis throughout government. The President has stated his very strong support for public disclosure. He has made his own financial interests available for public inspection, and he has required new presidential appointees to disclose publicly their financial interests to remove any question of potential conflicts of interest. In addition, President Carter has asked appointees to enter into a letter of commitment in which they state their intention to serve for the entire appointed term and to agree to other provisions concerning financial disclosure and postgovernment employment. The President, also, has sent to the Congress a proposal for a three-part program of financial disclosure, creation of a new Office of Ethics and strengthened restrictions on post-employment activities of government officials. The Commission on Executive, Legislative and Judicial Salaries proposed a substantial public disclosure of assets, financial affairs and financial statements and income by source and amount for all senior public officials in all branches of government. In addition, the Senate, once again, has approved comprehensive financial disclosure legislation. S. 555, the Public Officials Integrity Act of 1977, requires public disclosure covering the three branches of government and incorporates the President's other proposals.

The present financial disclosure standards for the Executive Branch are woefully inadequate. Executive Branch officials, excluding the President and the Vice President, basically are governed by Executive Order 11222 which sets forth requirements and guidelines for the confidential reporting of certain financial disclosure information. The purpose of this requirement is to insure that such persons required to file these disclosure statements avoid any action which might result in or create the appearance of using public office for private gain. But this worthy goal, as we all know, has not been achieved completely. In a series of reports covering more than 20 government agencies, The General Accounting Office has revealed numerous deficiencies in the present reporting systems and blatant conflicts of interest or potential conflicts of interest were exposed. The GAO concludes that the existing system is not effectively designed and operated. It is managed with limited support and insufficient resources. It lacks the teeth of enforcement since the disclosure requirements generally are not based upon any statute. There is little or no effective agency oversight, and, most importantly, the financial disclosure statements are confidential, thus unavailable for public inspection.

There is also an important need to make public financial disclosure a part of the congressional process of confirmation for those individuals who are nominated by the President to a position for which, under the provisions of this legislation, a disclosure report is required.

With respect to the federal judiciary, Congress did pass legislation, in 1974, providing for judicial disqualification for federal judges, justices, magistrates or bankruptcy referees in order to avoid potential conflicts of interest. The Act specified a number of circumstances under which such an official should disqualify himself from participation, including cases in which he or his spouse, minor children or a person within the third degree of relationship to either of them or

the spouse of such a person had a financial interest that could be substantially affected by the outcome of a proceeding. This law requires that "a judge should inform himself about his personal and fiduciary financial interests, and make a reasonable effort to inform himself about the personal financial interests of his spouse and minor children residing in his household."

The Congress defined "financial interest" to include, among other things, "ownership of any legal or equitable interest however small." In addition, since 1973, the Judicial Conference Code directs federal judges to file periodic public reports disclosing gifts of more than $100 and income from non-bench work. The judges are to deposit these statements with the Judicial Conference, the judicial council of their circuit or the appropriate court and clerk of the court of which the judge is a member. The Judicial Conference, however, cannot enforce this directive, and a reading of the semiannual reports of the Proceedings of the Judicial Conference of the United States will reveal the names of those judges who refuse, for whatever reason, to make such disclosures. Further, Supreme Court justices are not covered by this Code directive.

Mr. Chairman, the most serious charge which can be made against a public official is that he betrays the public's trust in him by using his office to advance his own financial interests at the expense of the public. All three branches of our government have suffered embarrassments over the years because of the acts of a few. These actions have given government a bad name and they have contributed to the widespread public disenchantment with government officials. Financial disclosure is an important step in assuring the integrity of the public service, and it is the most effective deterrent to potential conflicts of interests. Allowing the public access to basic information regarding the financial interests of public servants will enable citizens to determine for themselves whether or not such interests could possibly affect the judgments and actions of Members of Congress and other government officials. It is a privilege to occupy public office, and those of us who hold such positions of trust must never lose sight of the fact that we owe an accountability for our actions and conduct to the public.

This month marks the 26th year since President Truman sent a special message to the Congress recommending conflict-of-interest legislation. On September 27, 1951, Mr. Truman called upon the Congress to enact legislation requiring officials in all branches of the government to place on the public record each year full information concerning their incomes from all sources, public and private. President Truman told the Congress:

"Public office is a privilege, not a right and people who accept the privilege of holding office in the Government, must of necessity accept that their entire conduct should be open to inspection by the people they are serving. With all the questions that are being raised today about the probity and honesty of public officials, I think all of us should be prepared to place the facts about our income on the public record. We should be willing to do this in the public interest, if the quirement is applied equally and fairly to the officials of all three branches of our Government."

Mr. KASTENMEIER. Mr. Chairman, President Truman's words are as relevant today as when they were issued in 1951. Public financial disclosure will reassure the American people that their Government insists upon high standards, and it will make sure that those standards continue to be maintained by those individuals who hold public office. The acceptance of financial disclosure will put new life in the precept that a public office is a public trust. Enactment of a governmentwide public financial disclosure law is long overdue. Thus, I urge this subcommittee to act expeditiously in favorably reporting H.R. 1.

I am pleased you scheduled these hearings on H.R. 1 and other pieces of legislation which require financial disclosure by the President, Vice President, Members of Congress, Government employees, and candidates for Federal office.

This legislation which the gentleman from Illinois, Tom Railsback, and I have introduced has been cosponsored by nearly 180 of our colleagues, including Congressman Mazzoli, who is here this morning,

and 15 of our colleagues in the full committee. Much of what I have said, I said last year in the hearings.

I think the issue remains the same. I know you have a long list of witnesses, including the gentleman from North Carolina, Richardson Preyer, whose Select Committee on Ethics has reported out H.R. 7401, and Mr. Wiggins, and other witnesses.

So I would like to say, in brief, that I think it is important that your subcommittee moves forward now as you have indicated you are doing.

I see as among the difficult challenges facing you, Mr. Chairman, and your subcommittee, the reconciliation of a number of approaches in terms of marking up the bill.

The Senate-passed bill, S. 555, has some similarities with H.R. 1, with the President's proposal, and with H.R. 7401. I think H.R. 7401 which affects the legislative branch in a number of general areas-is in agreement in most areas; essentially, with S. 555. Both, for example, deal with amounts and categories rather than precise numbers, as suggested by the prototype, H.R. 1, which was referred to as the principal bill forming the basis for the new House rules, which we adopted earlier this year relating to financial disclosure.

The two principal difficulties which require action, it seems to me, as far as the executive and judicial branches, which concern your subcommittee, are the woefully inadequate standards presently in effect, plus the differences between agencies.

The General Accounting Office has revealed many of these. The judicial conference code directs Federal judges to file periodic public reports disclosing gifts of more than $100 in income related to nonjudicial work.

Supreme Court Justices are not covered by that code. There have been a number of cases where federal judges have for one reason or another failed to file, some perhaps in protest against the fact that the Justices of the Supreme Court are not required to file.

Therefore, that we have a comprehensive multibranch bill affecting all public officials at a certain level is imperative and I urge your committee to go forward.

I might say, in conclusion, one of the difficulties will be to ascertain whether the General Accounting Office, or whether, as in the Senate bills, the supervising ethics officer or some other entity would be the repository for the filing of these reports and whether there be any audits required.

There are different approaches as far as audits. I'm sure the gentleman from North Carolina, the chairman of the Select Ethics Committee, may want to discuss the fact that we did provide the prospect that the General Accounting Office might recommend to Congress subsequent audits for purposes of credibility and other purposes.

These will be among the considerations you will want to take into account on markup.

I would, in conclusion, wish you all full speed ahead and pledge my own cooperation.

Mr. DANIELSON. We thank you, Mr. Kastenmeier.

I observe that the second bell has run on the second vote of this morning and for that reason we are going to have to recess.