FINANCIAL DISCLOSURE ACT MONDAY, SEPTEMBER 12, 1977 U.S. HOUSE OF REPRESENTATIVES, AND GOVERNMENTAL RELATIONS The subcommittee met at 10:05 a.m. in room 2237, Rayburn House Office Building, Hon. George E. Danielson [chairman of the subcommittee], presiding. Present: Representatives Danielson, Jordan, Mazzoli, Moorhead, and Kindness. Staff present: William P. Shattuck, counsel, Timothy J. Hart, assistant counsel, Alan F. Coffey, Jr., associate counsel, and Florence. McGrady, clerk. Mr. DANIELSON. A quorum being present, the subcommittee will come to order. Our agenda for this morning is a continuation of taking the testimony on the bills H.R. 1 and related bills, which have to do with the reporting of the financial picture of Members of Congress, members of the executive branch, and the members of the judicial branch. I do know that today we are going to focus principally upon the judicial branch, having had testimony on the executive branch almost exclusively last Friday. I would like to accommodate the needs of our witnesses to the needs of the subcommittee to the greatest extent possible. I understand that we have Mr. Joseph Spaniol here, Administrative Officer, who has a judicial conference meeting scheduled at 11 o'clock. Mr. SPANIOL. Yes, sir. Mr. DANIELSON. And is the witness, or the witnesses, from the SEC also being in some kind of urgency? Mr. POLLACK. We are, but we will accommodate ourselves because of the importance of this hearing. Mr. DANIELSON. And we have a gentleman from the Department of Justice also. What are your needs? Mr. HENDERSON. Your pleasure. Mr. DANIELSON. Well, let's take Mr. Spaniol first, then, because he does have an absolute deadline. Come forward, please. This is Mr. Joseph F. Spaniol, Jr., Assistant Director, Administrative Office of the U.S. Courts. Mr. Spaniol, do you-sit down, please. Do you have a written statement? (535) Mr. SPANIOL. Yes, sir, I have a prepared statement which has been filed with the committee. Mr. DANIELSON. Without objection, the statement will be received in the record, and you are free to proceed in any manner that you like. You may read it, you may wish to call our attention to the highlights of points which you wish to make; just be totally free to proceed in the most effective manner that you can. TESTIMONY OF JOSEPH F. SPANIOL, JR., ASSISTANT DIRECTOR, ADMINISTRATIVE OFFICE OF THE U.S. COURTS Mr. SPANIOL. Mr. Chairman, thank you very much. I appreciate that. I think I can summarize some portions of this statement, and others, I think, because of their importance, I ought to read. First of all, I should say that the Judicial Conference of the United States has not considered H.R. 1, and H.R. 9, and H.R. 6954, which have been introduced in the 95th Congress. They've considered financial disclosure, but not taken action on any of these bills. The Conference did consider some of the bills in the 94th Congress, and voted to recommend against the enactment of the provisions relating to the judicial branch of the Government. As I'll explain more fully, this action was taken on the basis that the Federal judiciary already has adopted a system of financial reporting and disclosure, which the Judicial Conference believes is suitable to the needs of the Federal judiciary. At the outset let me say that the judicial branch of the Government has, for some time now, recognized the need to develop a system of ethical standards and has recognized the need for requiring financial reporting and disclosure. Whereas other branches of the Government have only recently addressed these matters, the Judicial Conference. established a reporting system for Federal judges and other employees of the Federal judiciary 7 years ago, and, within the past 2 years, has extended the system to cover supporting personnel, chief probation officers, and certain other officers and employees of the judicial branch. Mr. Chairman and members of the subcommittee, a copy of that form is attached to the statement. Mr. DANIELSON. That's this long sheet here-correct? Now, the Judicial Conference endeavors to establish standards in the Federal judiciary and to create a systematic procedure for dealing both with ethical problems and financial disclosure are set out in an article that was published recently in Federal Rules Decisions. Reprints of that article have also been furnished to this subcommittee, and that article sets out in detail what the procedure is within the judiciary. Mr. DANIELSON. That, I assume, is this blue jacket. Mr. SPANIOL. Yes, sir. Now, I'd like to summarize briefly the structure created by the Judicial Conference that deals with ethical problems. There are, presently, three committees, composed entirely of Federal judges, that serve in this area and have responsibility for ethical problems. The first is the Judicial Conference Advisory Committee on Judicial Activities. This committee renders advice to Federal judges on prob lems arising under the Code of Judicial Conduct for the U.S. Judges, which was adopted by the Judicial Conference back in 1973. The opinions of this committee are always given in writing. Some are informal, but those that are of general interest are separately published for the guidance of all judges. Now, to date, the committee has considered approximately 190 separate inquiries, and has published 50 separate formal opinions. This volume, Mr. Chairman, contains those published opinions, contains the Code of Judicial Conduct, and contains other materialsstatutory provisions relating to the conduct of judges. This volume is in the hands of every Federal judge. Mr. DANIELSON. May I inquire, are the contents of that-that's a loose-leaf volume I know, but are those opinions published anywhere? Are they available to the public? Mr. SPANIOL. Yes; indeed, they are available to the public. They aren't, generally, distributed, but attorneys inquire from time to time about various matters, and copies of the opinions are given to attorneys and it is made available. And, occasionally, some publishing firms have picked up a particularly interesting opinion and have published it-in Law Week and some other publications. Mr. DANIELSON. But, I gather they are considered to be public record, but the public accessibility is somewhat limited since, obviously, it's not of very broad interest. Are copies of this available in any of the major law libraries throughout the land? Mr. SPANIOL. Not to my knowledge, sir; they are available in the courthouse libraries, the court of appeals libraries, and they are available in the chambers of each judge, as I said. Mr. DANIELSON. In the District Court Library? Are they available? Mr. SPANIOL. I believe they are in some libraries. We provide extra copies, and some of these have been placed in the libraries, but it is spotty, I believe, across the country. Mr. DANIELSON. Thank you. Mr. SPANIOL. Now, that is the function of the first committee, to render advice to judges that have difficult problems. The second committee is the Judicial Conference Review Committee, which receives semiannual reports-financial reports-filed by judges and judicial officers. Now, in addition to reviewing these reports, the committee corresponds directly with the judges and reporting officials to clarify items of reporting. That is important, as I will explain, because these reports, semiannual reports, filed by judges, are filed locally with the clerk of the court, and are public documents available to anyone-members of the press, anyone who wants to see them. If these reports-financial disclosure reports filed with the committee seem to indicate any particular problem, this committee will refer the problem to the Judicial Conference Advisory Committee on Judicial Activities for an opinion. The third committee is the Judicial Conference Joint Committee on the code itself. This committee is composed of all the members of the two committees I just mentioned, plus one or two other judges; and the function of that committee is to keep up to date and review the provisions of the Code of Judicial Conduct, make changes in that code if necessary by developing circumstances. The Judicial Conference has felt that these three activities of continuous monitoring and updating of the ethical code, the rendering of timely advice to judicial officers on ethical problems, and a thorough review of financial reports, all three are essential to a viable program. By resolution of the Judicial Conference, officers and employees of the Federal judiciary are now required to file the semiannual reports. The items, as you will see from the form, are four: one, a report must be made of all earned income for extra judicial services; second, judicial officers must report on gifts and bequests received; third, any excess expense reimbursement; and; finally, fourth, any positions held during the reporting period besides the position that they hold with the government. As I indicated before, this report is widely available. The original is filed with the committee. The judge keeps a copy. A copy of the report is filed with the chief judge of the circuit. In the case of district judges, a copy is filed with the chief judge of the district court, and a copy is filed with the clerk of the court where it is available as a public document. The availability of this report is well known among members of the press, and they do, in some areas, go to the courthouse and look at these reports and, from time to time, stories have appeared in the press summarizing the reports that have been filed by judges. Mr. DANIELSON. Let me interrupt again. This public report of extra judicial income, then, is filed-I'd say the most accessible place would be the clerk of the district courts. Mr. SPANIOL. Yes, sir. Mr. DANIELSON. Where would the circuit judges file theirs? Mr. DANIELSON. Are they available for public inspection at those places? Mr. SPANIOL. Yes, sir. Mr. DANIELSON. We have, within the Congress under existing law, statements filed with one of our offices, and when someone comes to inspect it, he or she may inspect it but they must also fill out a little form identifying themselves and stating-well, theoretically, it's the reason why they want to look at it. Is there a similar requirement for a judicial statement? Mr. SPANIOL. No, sir, anyone who wishes to see that report may do so just by making inquiry. Mr. DANIELSON. Thank you. Mr. SPANIOL. Now, the filing of these financial reports by officers and employees of the judiciary has been a voluntary undertaking, and is backed merely by the moral authority and prestige of the Judicial Conference itself. There are no sanctions, yet the rate of compliance is very high. Of the approximately 650 Federal judges required to file, only 10 or 12 do not file the reports regularly, and they decline to do so "as a matter of conscience." The Conference has directed that the names of the judges and judicial officers that do not file reports be published in the annual reports of the proceedings of the Judicial Conference, which, of course, are filed with Congress. So, the names of all nonreporting judges are a matter of record. Those who do not file "as a matter of conscience" have indicated, in part, their belief that judges ought not to be singled out and required to file reports when officers in the other branches of Government do not file similar reports. I should add that among these 10 or 12 judges who do not file, some of those are the most respected and renowned judges that we have on the Federal bench. The existing reporting procedure does not require the reporting of assets or liabilities, nor does it require the reporting of transactions in securities, real estate, and so forth. In other respects the provisions requirements of this reporting procedure are very similar to requirements in the various bills pending before this subcommittee. There are several reasons why disclosure of assets and liabilities is not required. First of all the judges and judicial officers, as you know, Mr. Chairman and members of the subcommittee, judges are required by 455-section 455-title 28, to disqualify themselves in any matter in which they have a financial interest, "however small." Questions involving the interpretation of this statute, of course, are reviewable upon appeal. Also, judges are appointed for life, are not subject to the loss of their positions and, as a consequence, they do not have exactly the same types of pressures that are placed on other Government employees-officials. Nor do they deal directly with industry representatives, awarding of contracts, the issuance of licenses, and so forth, situations which offer opportunities for potential conflicts of interest or impropriety, or even the appearance of impropriety. By not requiring in the present system not requiring the reporting of assets, a measure of privacy is maintained in the conduct of judges' individual affairs. As previously indicated, the success of the efforts of the Conference in developing this system of financial disclosure and reporting for judicial officers and employees has led the Conference to oppose any legislation on financial reporting solely on the basis that the Federal judiciary has voluntarily developed its own program which is suitable, appropriate, and adequate to the needs of a judicial system. And, indeed, the program of the Judicial Conference, based upon the definitive standards of ethical conduct set out in the provisions of the Code of Judicial Conduct for the U.S. Judges, may well be regarded by some commentators as superior to programs of financial reporting proposed in pending legislation for the legislative and executive branches of the Government simply because it is backed by a definitive ethical code. There is an argument which can be made, that any reporting system which is not based on a definition of what is ethical and what is not can never be fully effective. In its effort to regulate itself, the judicial branch has concluded that firm rules are necessary and that reporting procedures should be tailored to show compliance with the rules. If the bill to require financial reporting by the officers and employees of all three branches of the Government is to be enacted, the Judicial Conference would prefer that the judiciary be covered by a general provision granting authority to the Conference to establish a financial reporting system suitable for the judiciary and requiring judicial officers to comply with any reporting requirements. This |