tive questions. And I gather that the people who would have to administer this would like a more objective standard than that kind of a definition. But that is an alternative that we put in. Mr. MAZZOLI. If I might pursue that 1 minute, it would make more difference than-as far as the waiver is concerned. It would be issued automatically if a person can make suitable proof and suitable assurance under oath that they did not have official responsibility for that case, and that is what you represent the SEC would also augment. Thank you very much, Mr. Chairman. Mr. DANIELSON. Mr. Moorhead? Mr. MOORHEAD. Using the phrase that we have in this bill, what would not be pending before a commissioner? Given the scope of the work that comes before the Commission would you have any place that you could go after leaving? Mr. POLLACK. First, let me say that I do not anticipate, when I leave, that I will practice before the Commission. Mr. MOORHEAD. I'm not referring specifically to you. Mr. POLLACK. As a matter of my own personal preference I want to make that clear. I can give you an example. I came out of the Commission's Division of Enforcement when I went on the Commission, and as a matter of personal decision, even though I knew nothing about many of the matters that were pending there or in the field. I have disqualified myself from those insofar as administrative proceedings are concerned, purely from the point of view of image rather than point of view of really having any disqualification. But, insofar as the Commission is concerned there would be really nothing pending before the Commission or the staff that would not be deemed to have been under the Commissioner's official responsibility as we interpret the "official responsibility" concept. So, in the case of a former Commissioner, he couldn't appear or practice before the Commission for 1 year in connection with any matter which was pending before the Commission or its staff while he served on the Commission. As far as new appointees are concerned, I understand President Carter is obtaining that commitment from them so that they will not be adversely affected. The existing commissioners who came in, like me, before that, would be subject the proposed legislation, if enacted, and, of course, the existing statutes and rules applicable to practice before the agency. Mr. MOORHEAD. Virtually anyone who is very high up in a Government agency finds himself, as a practical matter, pretty much under that same prohibition. Mr. POLLACK. Yes, our staff people would be affected very broadly, too, because we are a fairly small agency. We have roughly 2,000 employees, and most of our matters or cases involve more than one division. For example, I do not know what Mr. Pitt could say was not under his official responsibility, maybe some filings in the Division of Corporation Finance that never raised any questions. But, beyond that, almost every other activity he would have had some official responsibility for since he is the counsel to the Commission and the counsel to all of our operating divisions and offices. So that, in effect as to him, it would be an absolute prohibition almost for two years. Mr. PITT. If I may, I would just like to point out that in administering our conduct regulation which also bars people from appearing in connection with any matter for 1 year after they leave the Commission as to which they had official responsibility, we take a very broad definition of the words "official responsibility." I think the distinction to be drawn is between "official responsibility" and new matters arising as to which the former agency employee had absolutely no responsibility or contact. Section 207 (b) of 18 U.S.C. as proposed to be amended by this bill would cover these things, and the Commission has not raised an objection to the applicability of that provision in cases where a matter was under someone's official responsibility within the last year of his or her employment. Mr. MOORHEAD. I'm wondering, because of your objection to the existing language in the bill if the waiver language you suggest would really solve your problem. Mr. POLLACK. I didn't understand your question. Mr. MOORHEAD. As to pending matters, you don't like the other wording that is in the bill for a particular matter or matters. But you say that this wording as to the matters which are actually-where there is direct responsibility-would be satisfactory. Mr. POLLACK. Yes; because we have a prohibition for prophylatic purposes which say that if you leave and you had official responsibility you cannot practice before the Commission with respect to those items for 1 year. We have an absolute prohibition for 1 year for "official responsibility" matters and a complete prohibition forever with respect to anything with which you had any personal, direct contact. Mr. MOORHEAD. Does that apply to the office work, too? Mr. POLLACK. Yes; they could not do office work on something they had personal contact with in the agency. That would be an evasion of the rule that would not be permitted. We object to the third part of the bill because it would make it completely impossible for anybody to represent anybody, even in a matter in which he had no official responsibility and no personal contact with, for the 1-year period. So that with respect to somebody like Mr. Pitt, it would seem to me that he would be barred for 1 year. It wouldn't make any difference what his capacity was before. Regardless of what he was doing, he could not come back to the agency for the purpose of practicing before it for the next year. Mr. MOORHEAD. What effect would this have on recruiting bright young people? Would you be able to get them to come to work with you with such a prohibition? Mr. POLLACK. We feel that it would be detrimental. We now get many people who worked for us for 4 or 5 years and then go out. And, incidentally, I ought to mention that we feel that those people go out and do perform a very good service in carrying out the spirit and letter of the law. They are trained in what we require. They are, we hope, imbued with the spirit of serving the public best by serving it well, and not serving it in an illicit or improper manner. These people on the outside, in advising their clients on how to comply with the law, help the law. It has worked out much better. Mr. MOORHEAD. In your experience, how much actual misuse have you seen by people who worked for Government agencies? Mr. DANIELSON. That has been covered, Mr. Moorhead. Mr. POLLACK. Did you want me to repeat, then? Mr. DANIELSON. Well, I would rather not. We have a limited. amount of time. With the gentleman's indulgence, we'll just leave the record as it is. OK? Mr. MOORHEAD. Thank you, sir. Mr. DANIELSON. Did you have further questions? Mr. MOORHEAD. NO. Mr. DANIELSON. I have no questions; I have a suggestion only. I' would like to suggest that you gentlemen prepare for our consideration some proposed amendatory language which might give effect to the suggestions that you've made. That is not a commitment that we will adopt them at all, but at least it would make it easier for us to consider them in the context of the bill. Would you be willing to do that? Mr. DANIELSON. And if you could get them up fairly early, I'll appreciate it. There is an urgency factor in connection with that. Mr. PITT. We will attempt to get them to Mr. Shattuck tomorrow. Mr. DANIELSON. Excellent. [The material subsequently supplied to the subcommittee is as follows:] SECURITIES AND EXCHANGE COMMISSION, Hon. GEORGE E. DANIELSON, DEAR MR. CHAIRMAN: This is in response to your request for language amending the above-captioned bill along the lines suggested in my testimony of yesterday morning. As I noted at that time, the Commission strongly supports your Committee's efforts to provide a meaningful framework within which to regulate the ethics of government employees. With the addition of the amendments set out below, we believe that the proposed legislation would more than adequately achieve that objective. The first amendment concerns the provision making public the proposed financial disclosures to be required of certain government officials. As the Commission pointed out in its letter of comment, we support the principle of increased financial disclosure by government officials, and, indeed, believe that more disclosure may be appropriate in certain cases. We believe, however, that unfettered access by the public to the disclosure reports may well constitute an abuse of those officials' personal privacy. As an alternative, we favor a system whereby the Office of Government Ethics is given the authority to require additional disclosures beyond those mandated in the statute, but, at the same time, the disclosed information is not made generally available to the public. Of course, the agency would have the discretion, consistent with existing law, to make reports public in individual cases. Specific language effecting this amendment is attached as Exhibit A. The Commission, as you are aware, is also concerned with Title III of the bill, which would, among other things, bar certain officials from having any contact with their former agencies for a period of one year after they leave the government. Our concern goes not only to the unfair effect of the provision on existing staff persons, but also to its effect on future staff persons. Accordingly, we suggest two amendments-one making it clear that the subsection does not apply to current staff members and one setting up a procedure whereby the former official's agency may exercise a waiver. This latter procedure, which is similar to the current procedure in cases where a government employee has a financial conflict of interest (see 18 U.S.C. 208) is twofold. First, the agency, by general rule or regulation reviewed by the Office of Government Ethics and published in 95-896 - 77-36 the Federal Register, may except certain geheric categories of "appearances" from the prohibition. Typical categories under this amendment would include noncontroversial items such as extensions of time to comment on proposed agency regulations or where the problem of undue influence is more properly the province of another person such as appearances in connection with court litigation or proceedings before an impartial tribunal. Second, the agency, subject to review by the Office of Government Ethics, may waive the prohibition in certain cases where, after full disclosure by the former official of all the facts surrounding his representation, it determines that the former official will have no undue influence on a proposed substantive agency action by virtue of the former association with the agency. Any waiver issued would be a matter of public record. Specific language effecting these amendments is attached as Exhibit B. Thank you for the opportunity to testify before you on this legislation, and I hope that we have been of assistance to you. Sincerely, Enclosures: IRVING M. POLLACK, Commissioner. EXHIBIT A Amendment to Section 102 of H.R. 6954 Subsection (a) of this section would be amended by adding the following new subsection (11): (11) and such other information as the Office of Government Ethics may prescribe. Amendments to Section 105 of H.R. 6954 Subsection (a), (b), and (d) of this section would be deleted; subsection (c) would remain and become Section 105 in its entirety. Amendment to Title III of H.R. 6954 EXHIBIT B Subsection (c) of this section would be amended by adding the following at the conclusion of the current version: Provided further, that subsection (c) shall not apply (1) if the former official's appearance before the agency is of the category exempt by the agency by general rule or regulation, approved by the Office of Government Ethics and published in the Federal Register, or (2) if the agency, after full disclosure of all facts by the former officer or employee, makes a written determination, subject to review by the Office of Government Ethics, that the former officer or employee will not exercise any undue influence on substantive agency action by virtue of his or her former association with the agency. All waivers granted under this subsection shall be a matter of public record. Provided further, that subsection (c) shall not apply to persons who were employed by the government in the positions specified in subsection (c) (i) or (ii) at the effective date of this section. Mr. DANIELSON. I have no questions. That's the only suggestion I have. I thank you gentlemen for your attendance and for the information that you have given us. Mr. POLLACK. May I express again our appreciation of your hearing us on such short notice. Mr. DANIELSON. Without objection the letter from the chairman which constituted the written statement of the gentlemen will be received in the record. Mr. POLLACK. Thank you. Mr. DANIELSON. Mr. Thomas Henderson, Chief of the Public Integrity Section of the Criminal Division, Department of Justice, come forward. If you have a written statement-you do have one? Mr. HENDERSON. Yes; I do, Mr. Chairman. Mr. DANIELSON. Fine. Without objection your statement will be received into the record. [See p. 718.] You may proceed at will. Mr. HENDERSON. Thank you, Mr. Chairman. TESTIMONY OF THOMAS H. HENDERSON, JR., CHIEF, PUBLIC INTEGRITY SECTION, CRIMINAL DIVISION, DEPARTMENT OF JUSTICE Mr. HENDERSON. My name is Thomas H. Henderson, Jr. I'm Chief of Public Integrity Section of the Criminal Division of the Department of Justice. In that capacity I supervise and assist in the enforcement of criminal statutes involving the abuse of office, including those which involve conflicts of interest. I am pleased to appear for the Attorney General at your invitation to present the Department's views on several bills to strengthen the enforcement and prevention of conflicts of interest in the Federal Government. These bills are the Ethics in Government Act proposed by President Carter, the Federal Ethics and Financial Disclosure Act of 1977 and three bills entitled Financial Disclosure Act. In recent months there have been significant efforts by the White House, the Department of Justice, and the Congress to restore public confidence in the integrity of government. Many of these efforts have included proposals to strengthen the conflict of interest laws and the rules on financial disclosure by certain high level Federal employees. The five bills which are under discussion today are all examples of these efforts. Since the expertise I bring to this discussion is in the area of criminal enforcement, I plan to focus my remarks on the administrative and enforcement aspects of these bills and the conflict. of interest laws generally. The Public Integrity Section of the Criminal Division has responsibility, as I mentioned, for the administration and enforcement of the criminal conflict of interest laws. Over the past year, this section. has experienced considerable enforcement difficulty in the conflicts of interest area. It would not be an exaggeration to state that conflicts of interest have caused simultaneous frustration to prosecutors, agencies, government employees, and to the public. The frustrations faced by the prosecutors seem to stem primarily from the fact that we are dealing with poorly drafted statutes containing loopholes and vaguely defined prohibitions, criminal sanctions which are frequently overly severe for the conduct involved, and inadequate coordination of criminal and administrative sanctions. The Public Integrity Section has conducted an informal survey of the conflict of interest cases handled in the section. In reviewing these matters, we have found that it was frequently the opinion of the attorney handling the investigation that prosecution was inappropriate because the felony sanction was too severe given the nature of the conduct involved in the particular case. In many of those cases the attorney would have pursued a less severe sanction such as a misdemeanor prosecution, a civil fine or administrative action had such alternatives been available. I would like to point out that the President's bill, H.R. 6954, provides a very broad spectrum of remedies for enforcing its financial disclosure provisions. Section 104 of the bill provides for a misdemeanor penalty, a civil fine and administrative personnel actions to enforce the disclosure requirements. In addition, title I of the bill establishes an Office of Government Ethics in the Civil Service Commission. This office will be able to provide the needed oversight and coordination of conflict of interest |