If you have any questions of Mr. Kastenmeier-since you are coauthor of this bill, I know you are probably fully in tune. Mr. MAZZOLI. I want to commend the gentleman for his hard work in this area. Mr. DANIELSON. We are going to recess. I urge the members of the subcommittee to return as quickly as possible. We have witnesses here who have taken valuable time from their other schedules, and I wish to move ahead. [Recess.] Mr. DANIELSON. Our next witness will be the Honorable Richardson Preyer, who is chairman of the Select Committee on Ethics, who has already reported out a bill on this subject. TESTIMONY OF HON. RICHARDSON PREYER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH CAROLINA Mr. DANIELSON. I might state that three members of this subcommittee did serve on his special subcommittee on the subject. Now we are taking a postgraduate course. Mr. PREYER. Thank you, Mr. Chairman. I would like to take advantage of the offer to put my statement in the record. I hope I can shorten it thereby. Mr. DANIELSON. Without objection, the statement is received in the record. [The prepared statement of Hon. Richardson Preyer follows:] STATEMENT OF HON. RICHARDSON PREYER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH CAROLINA Mr. Chairman, I appreciate the opportunity to appear before this subcommittee today to discuss financial disclosure legislation for federal government officials. As you know, the House Select Committee on Ethics, which I chair, recently reported H.R. 7401, which provides for financial disclosure by Members of Congress, candidates for Congress, and certain staff employees. In this regard, I would like to thank you and the other members of this subcommittee who also serve on the Select Committee for your diligence and assistance. You have been most valuable in our effort to provide a compresensive disclosure bill for the legislative branch, and I hope that the Select Committee's experience will prove helpful to you in developing legislation to extend disclosure requirements to the executive and judicial branches. The committee report accompanying H.R. 7401 gives a thorough and detailed analysis of the history and issues concerning financial disclosure, and I strongly recommend it to this subcommittee in its entirety. However, my comments today will be limited to discussing the basic principles which the Select Committee adopted in its disclosure bill, with a focus on a few of the difficult issues we resolved in our deliberations. Financial disclosure legislation is a complex subject, and careful consideration of several competing interests is necessary. First, underlying the entire issue is the unescapable reality that along with the duties and privileges of serving as a high-level public official, comes a loss of personal privacy. As Members of Congress we all know that such sacrifices are part of the job. Public office holds a special trust, and the public has a right to know about any financial holdings or arrangements which might cause a conflict of interest with the responsibilities of their "trustees." But this “right to know" is not unqualified. It need not, and should not, extend to every aspect and detail of an official's personal and family life. For example, the public should have no right of access to the tax returns of public officials, which would disclose such personal items as charitable contributions and alimony payments. Nor should the reporting burden imposed by disclosure requirements be so demanding or detailed so as to turn public officials into part-time accountants. Basically, then, I believe that there are two touchstones for disclosure legislation that should guide your subcommittee as they guided ours: (1) disclosure should be required only for those items which are relevant to potential conflicts of interest; and (2) disclosure requirements should be designed to avoid excessively burdensome recordkeeping. Aside from the question of contents of reports, the Select Committee discussed in detail the complex problems created by blind trusts, whether systematic audits of disclosure reports are advisable, and the extent of spouse and dependent disclosure. First, most members of the Select Committee believe that blind trusts often have excellent vision, and that the term itself is somewhat of a misnomer. Nevertheless, the Select Committee believes that a truly "blind" trust can, in certain circumstances, be a very valuable tool to insulate decisionmakers-particularly in the executive branch-from potential conflicts of interest. But if blind trusts are to have any value, statutory standards must be enacted which would provide assurance that beneficiary of such a trust has no knowledge of, or control over, its holdings. S. 555, as approved by the Senate in June, contains such minimum statutory criteria which the Administration supports, which I feel are reasonable, and which this subcommittee will surely wish to consider. However, I would want to emphasize that blind trusts should not become a commonly used alternative to full financial disclosure. The second issue which this subcommittee may want to consider is audits of disclosure statements. Our Select Committee came to the conclusion that random audits, although appealing on the surface, would not only be wasteful and unnecessary, but also possibly counterproductive. After receiving testimony from a number of expert witnesses, the Select Committee became convinced that audits would not insure that information provided on disclosure statements is complete and accurate. The problem simply is that few individuals keep personal records in sufficient detail or in the form necessary for a professional auditor to certify to the validity of a disclosure statement. Since it would be impossible to verify the completeness of personal statements, in most instances audit reports would have to be so qualified as to render them worthless. Moreover, the Select Committee was convinced not only that audits would be ineffective, but also that they are essentially unnecessary. Public financial discolsure is, by its very nature, a self-enforcing concept. The information reported by officials will be scrutinized by supervising agencies, the public, and the press. Certainly, public access to these reports will encourage officials to make a careful and thorough, accounting of their financial interests. But in those rare instances when an individual might still wish to circumvent disclosure requirements, adequate deterrence to such a practice can be provided by appropriate civil and criminal sanctions for willful falsification or failure to file required information. In sum, the Select Committee believes that random audits would not provide any additional assurance of compliance with the law and that it would be deceptive to characterize as an "audit" a cursory review of disclosure forms by a third party to make certain that "all the blanks have been filled in." Perhaps the most sensitive issue before our committee was that of spouse and dependent disclosure. "After all," it is argued, "the spouse of an official is neither elected by the people nor employed by the government, and is entitled to his or her privacy." But the reality of our lives is that the financial interests of marital partners are usually shared or comingled in some fashion, and the benefit or potential benefit from these assets accrues to both parties. Moreover, without disclosure of spouse and dependent interests, disclosure requirements could be easily circumvented. Therefore, the general consensus of the Select Committee was that, in all but very unusual circumstances, the financial interests of spouses and dependents need to be disclosed. I should point out, however, that the Select Committee was sensitive to privacy considerations of a Member's family. Therefore, in H.R. 7401 we sought only the information absolutely necessary to indicate a conflict of interest. Our bill requires that only the source-not the amount-of spouse income over $1,000, and only gifts over $100 when received "because of" the spouse's relationship to the reporting individual need be reported. However, financial holdings of a spouse or dependent would be fully reported unless the reporting individual certified that the assets were obtained totally independently of the public officials, and that such official did not benefit, nor expect to benefit, from the holdings of the spouse or dependent. I would also like to share with you the results of analyses requested by the Select Committee from the Library of Congress. We asked for an extensive analysis of the major constitutional issues involved in financial disclosure legislation: "right to privacy," "spouse and candidate disclosure," and "overbreadth." It is clear that the provisions of H.R. 7401 (and S. 555 as it has passed the Senate) would overcome any constitutional challenge. Indeed, it is quite significant that each case appealed on these issues to the U.S. Supreme Court has been dismissed for want of a substantial federal question. Finally, I would like to comment on the specificity of disclosure requirements and the "rule of reasonableness." The essence of disclosure is that certain relevant information is made public. For these purposes, it is not necessary that exact dollar figures be made available. This point is made explicit in several sections of H.R. 7401. For example, financial assets, transactions and liabilities need only be disclosed by general "categories of value." Gifts valued at less than $35 are excluded entirely from reporting—a reasonable de minimis exemption. And we also realized that in many cases the exact value of gifts may not be readily ascertainable. In such instances, clearly a good faith estimate, along with a brief description of the gift, would be sufficient for the purposes of disclosure legislation. Mr. Chairman, I hope that these comments will be helpful to your subcommittee as you develop a framework for executive and judicial branch disclosure. As each of us is fully aware, our time is running short, and adjournment will soon be upon us. After your subcommittee and others complete their work, we must take a government-wide disclosure package to the floor, and, after passage, resolve our differences with the Senate-passed S. 555. If a strict timetable cannot be accommodated, then disclosure will not become a reality until the spring of 1979-beyond the next Congressional election. So you have a difficult assignment to accomplish in such a short time. But if you can successfully delve into the intricacies of lobbying legislation-as you have done then you may find disclosure legislation relatively uncomplicated. Finally, let me make a personal observation. You will undoubtedly know that you have struck the right balance with disclosure legislation when you are being attacked from some quarters for not having gone nearly far enough, and from other quarters for attempting to violate the essential protections of the Constitution. Writing disclosure legislation may not win us friends personally and politically, but it is a necessary job and one which I hope to join you in completing. Mr. PREYER. I also have a comparative table which compares S. 555 and the administration bill and H.R. 7401. Mr. DANIELSON. I am delighted you have it. We have worked out a couple of comparative tables, but we don't have that particular one. It will be of help to us. Without objection, I will include that in the record. [The table referred to follows:] Covers additional congressional employees: Places Office of the Attending Physician, under the Senate Ethics Committee. Places Architect of Capitol, Botanic Gardens, GPO, Library of Congress under the House Standards Committee. President, Vice President (and candidates for those Same as S. 555. offices), and each officer or employee compen sated at GS-16 level or above, or military grade 0-7 or above; and nominees requiring Senate confirmation. Each justice, judge, or other adjudicatory official No provision.. of the judicial branch of the United States and of the judicial branch of the government of the District of Columbia. Source and amount of earned income (excluding Source and category of value of unearned income Source, description, and value of gifts aggregating Source and amount of any gift with a fair market Same as S. 555. value of more than $25. Substantially the same as S. 555. 1. Gifts from relatives. 2. Gifts from personal friends with whom individual has no official conduct. 3. No comparable provision. 4. No comparable provision. Do. 1. Gifts from relatives. 2. Personal hospitality 3. Gifts of $35 or less. 4. No comparable provision. No comparable provision.. No comparable provision.. Under $5,000; $5,000 to $15,000; $15,000 to Categories of value: Under $5,000; $5,000 to No comparable provision. Value and identity of reimbursements, directly or Under $5,000; $5,000 to $15,000; $15,000 to Substantially the same as S. 555, but excluding Payments need not be reported. Same as S. 555 except that $1,000 value applies at Same as S. 555. No comparable provision.... do. Description, date, parties terms of any agreement |