FINANCIAL DISCLOSURE ACT

THURSDAY, JULY 29, 1976

HOUSE OF REPRESENTATIVES.

SUBCOMMITTEE ON ADMINISTRATIVE LAW

AND GOVERNMENTAL RELATIONS

OF THE COMMITTEE ON THE JUDICIARY,

Washington, D.C.

The subcommittee met, pursuant to notice, at 10:05 a.m., in room 2141, Rayburn House Office Building, Hon. Walter Flowers [chairman of the subcommittee] presiding.

Present: Representatives Flowers, Danielson, Mazzoli, Pattison, Moorhead, and Kindness.

Also present: William P. Shattuck, counsel; Jay T. Turnipseed, assistant counsel; and Alan F. Coffey, Jr., associate counsel.

Mr. FLOWERS. We will continue our hearings on the financial disclosure bills, H.R. 3249 and companion bills. We have, carrying over from yesterday and I want to apologize to our dear friend for not working him in yesterday, but I think he understands the problemsour fellow colleague, an old friend from another committee, Ken Hechler. Ken, we are delighted to have you this morning, and we will receive your testimony first.

TESTIMONY OF HON. KEN HECHLER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WEST VIRGINIA

Mr. HECHLER. Thank you, Mr. Chairman. It is an honor to be on the right wing of the GAO.

[Laughter.]

Mr. HECHLER. I ask consent my entire statement be incorporated, and I will summarize.

Mr. FLOWERS. Without objection.

Mr. HECHLER. As a cosponsor of H.R. 3249, I urge this committee to take favorable action on some form of financial disclosure legislation. The present regulations and practices are chaotic and inconsistent, and many Members of Congress, including myself, have thoroughly and publicly disclosed their financial holdings.

Now, it is all very well to moralize and state that a person in public life should not enjoy the luxury of privacy, but when we do disclose our assets, many of those in public life are looked upon as engaging in some form of financial "streaking".

[Laughter.]

Mr. HECHLER [continuing]. The public kind of gawks, and cynics kind of point out that these financial streakers are being a little self

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righteous. I think it would be very good, instead of having people point and say, "Look at that streaker baring his assets"

[Laughter.]

Mr. HECHLER [continuing]. We really ought to formalize this in law. I just went through a campaign where I made full disclosure of my assets, and my principal opponent, whose name was Rockefeller, refused to disclose his assets, and the public reacted very sympathetically to Mr. Rockefeller.

There are other reasons why financial disclosure should be standardized and regularized. Some of the present requirements for financial disclosure are not based on any statute, they lack the teeth of enforcement, and the statements are not required to be made available to the public. In addition there has been very little effort on the part of responsible officials to review these statements once they have been filed.

In the House of Representatives, for example, there is no uniform requirement for which committee employees, or which staff members should file; and these statements, of course, are only partially made public.

Since 1974 the General Accounting Office has made nine reports on financial disclosure practices of various agencies, and these reports reveal widespread failure to file financial statements, and generally there is no requirement that they be made public.

These GAO findings have led me to develop and introduce financial disclosure amendments which I have offered to various bills, a copy of one of them is available before the committee this morning. In fact, just yesterday the House unanimously passed an amendment to the Mine Safety Act, which incorporated these provisions you have in front of you, requiring each employee, officer of the Secretaries of Interior, Labor, and HEW, who performs any function and duty under the act that is of a policymaking nature, to file annual written statements of his assets.

I think it would be useful to this committee to look over these amendments and perhaps incorporate them into the legislation in a formal way.

Just very briefly, Mr. Chairman, I believe also that, even though I cosponsored the pending legislation, I think that the grade classification. which is written into the legislation of a GS-16, or salary of $25,000, is probably not a very good and precise definition of whether a person is in a policymaking, or regulatory position. Therefore, I think that perhaps this legislation should be amended to require that those peoplę in policymaking positions should file.

Mr. FLOWERS. Ken, I just can't help but comment. I know you are not through, and I don't mean to interrupt you, but yesterady we had a near full house here, and today our crowd is somewhat diminished. I know that some of those most interested in the legislation are over in the balcony, watching the proceedings over on the House floor now. There was a great clamor among our members to get this legislation going, and I notice that we are down to two on the subcommittee here. I hope that the great movement which was launched in the Democratic caucus a week or so ago-whenever it was-was not just a movement for the people back home, but was a real movement for reform; but I can't help but be somewhat suspicious. I am not talking to you

because I know you have done this for years now, and I'm well aware of it. You are a well-known "streaker," as you put it.

[Laughter.]

Mr. FLOWERS. But it does concern me. We launched this only yesterday and already, I think, there is a waning of interest in it. I just wondered if you would have a comment on that.

Mr. HECHLER. Well, certainly there are competing things at the present moment that require the attention of members who are very definitely interested in this legislation. I do not think we can measure as of the moment the interest because you have to measure it against

Mr. FLOWERS. I think almost everybody in this room is going to testify at some time this morning, I venture.

Mr. HECHLER. I will proceed quickly toward conclusion, Mr. Chairman. I would like simply to say that I support the position of the Comptroller General and the General Accounting Office that the GAO perhaps should not be placed in the position of annually reviewing these statements, or even a small portion thereof. I read General Staats' statement, and I endorse it.

With that, Mr. Chairman, I hope that this legislation will pass with the comments and amendments I have suggested.

Mr. FLOWERS. Thank you very much, Ken. Of course your full statement will be included in the record, as well as your comments this morning. I have no questions, Ron, do you?

Mr. MAZZOLI. The only thing I would say is really a statement, that I, personally, am very sorry to see Congressman Hechler leave the House. Certainly, if you decide to go back home, it will be our loss and West Virginia's gain.

I think that the time the gentleman has spent in the House has been marked by devotion to the good of the people, and I think furthermore, devotion at no small personal expense and cost, I am sure, trying to upgrade the whole processes here in the House.

I think his testimony this morning, Mr. Chairman, is just further evidence that even at a time when he could be taking it easy and enjoying these "perks" that we allegedly are so involved in nowadays, he is here devoting his time to something we all think is very important. I would like to commend the gentleman.

Mr. HECHLER. I thank the gentleman from Kentucky. I hope the last part of his statement will spread throughout West Virginia, but I fervently hope that the first part of his statement does not because I have decided to run a write-in campaign for the House of Representatives. Mr. FLOWERS. The gentleman from West Virginia has always been known to do things in an unorthodox manner.

Mr. MAZZOLI. Are you saying, Mr. Hechler, that "The rumors of my political death are a little bit premature"?

Mr. HECHLER. Right.

Mr. FLOWERS. He managed a couple of years ago to have to run against another incumbent member, as I recall; and now he is going to see if he can win a write-in campaign. I would not count him out of anything, I'll tell you that.

Ken, thank you.

Mr. HECHLER. Thank you, Mr. Chairman, I appreciate it.

[The prepared statement and amendment to H.R. 13555 by Hon. Ken Hechler follows:]

STATEMENT OF HON. KEN HECHLER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WEST VIRGINIA

Mr. Chairman, I appreciate the opportunity to appear here today in support of a comprehensive bill requiring annual disclosure of financial interests by Federal officials and employees, such as H.R. 7249, which I co-sponsored.

For some time, I have been concerned about the problem of conflicts of interest and the extent to which persons in our three branches of Government have undisclosed financial interests which might form the basis of a conflict of interest. Under our present system, many persons in our three branches of government are annually required to file with appropriate officials annual statements of financial disclosure. In general, the purpose of these requirements is to insure that such persons avoid any action which might result in, or create the appearance of, using public office for private gain, giving preferential treatment to any organization or person, losing independence or impartiality of action, and affecting adversely the confidence of the public in the Government's integrity.

But this purpose has not been achieved. This is primarily due to the reasons that these requirements are not generally based on any statute and thus lack teeth of enforcement, and, most importantly, that the statements are not required to be available to the public. In addition, there has been little effort made by responsible officials to review them for possible conflicts of interest. Also, many persons in policymaking or regulatory positions are not even required to file such statements.

In the House of Representatives there is no uniform requirement that all Committee employees file statements. Most important, the statements filed by Members and employees are not public.

The General Accounting Office, in 8 reports since September, 1974, confirms this. (See Appendix A.) At the Federal Power Commission, the GAO found that 55 officials failed to file the required statements and that the disclosures that had been made had not been reviewed to detect actual or potential conflicts of interest.1 At the Civil Aeronautics Board, the GAO said that a review of financial interests reported by 111 CAB employees showed that four employees owned a total of six securities which represented potential conflicts of interest and that 58 employees not then filing statements had responsibilities "which affect the airline industry and warrant the filing of a statement."" At the Interior Department, the GAO found 1,435 persons were exempt from filing statements even though they were in very sensitive positions."

These GAO findings have led me to develop a "Sunshine in Government" amendment to several bills. The amendment which is appended to my statement (see Appendix B) generally provides that:

All employees of an agency, regardless of pay or grade level, who have policymaking or regulatory functions or duties to perform under a particular law and who have a known financial interest in any person receiving aid under, or regulated by, that law, shall annually file financial interest statements with the agency head;

The agency head may exempt by regulation nonpolicymaking and non-regulatory positions from this requirement;

The agency defines by regulation what is a "known financial interest" for purposes of that law;

All such statements shall be available to the public;

The agency must monitor and enforce these provisions and review the statements and make an annual report to Congress; and

Any violation is a criminal offense.

My amendment was enacted into law for FEA employees and some Interior employees as part of Public Law 94-164-the Energy Policy and Conservation Act of 1975. The amendment, which I sponsored, was also added by the House this year to:

H.R. 9560 for employees of the Environmental Protection Agency who administer the water pollution control program;

1 GAO Report, B-180228, Sept. 13, 1974, Chapter 6.

2 GAO Report, FPCD-76-6, Sept. 16, 1975.

GAO Report, FPCD-75-167, Dec. 2, 1975.

H.R. 6218 for employees of Interior administering the Outer Continental Shelf leasing program;

H.R. 13777 for Interior employees administering our public lands;

H.R. 13555 for Interior, Labor and HEW employees administering our mine health and safety laws.

Congressman Dodd also added it to H.R. 13350 for ERDA employees.

H.R. 5249 and Title III of the Senate-passed bill S. 495 have the same objective as my amendment, but, of course, they cover individuals in all three branches of Government. However, there are some provisions in the Senate-passed bill that give me particular concern.

First. S. 495, at the suggestion of President Ford, requires financial statements from persons in the Executive Branch who occupy positions at GS-16 or above. Anyone at a lower grade level, regardless of whether that person is in a position of a policymaking or regulatory nature, is exempt from disclosure.

This limitation is a weakening of current Federal agency practice. For example, a GAO report of December 2, 1975, states that Civil Service Commission regulations now require employees classified at GS-13 or above, "who are in decision-making positions, or who have duties which could involve conflict-ofinterest situations" to file such statements. Those regulations, according to the GAO, also provide that employees classified below GS-13 could be required to file statements.

The CAB has, according to the GAO, followed the GS-16 criterion of the Senate-passed bill suggested by President Ford. This has resulted in 41 positions in CAB's Bureau of Economics not filing statements. The GAO believes they should.

I urge that all employees be required to file such statements, while giving discretion to the agency head to exempt positions of a non-policy and non-regulatory nature. This approach puts the burden on the agency to review the positions and responsibilities thereof and decide by regulation whether or not they should file. It avoids the use of the GS-level criterion, which is arbitrary and does not uniformly reflect the situation in every agency.

Second. Both bills require that the financial disclosure statements shall be filed with the GAO and give that agency the duty to audit not more than five percent of the statements filed and to make them available to the public. They must also be filed with the appropriate agency head and Congressional and Judicial officials. Such agency and official is then required to review them and take action whenever conflict of interest exists.

Simply stated, I do not believe that the GAO could review annually even five percent of the statements which would be required to be filed by persons in the three branches of Government without a significant increase in personnel. Moreover, I do not think this is the proper function of an agency created to serve as a Congressional watchdog. This tends to give the GAO functions that properly rest with executive branch agencies, the Congress, and the Judiciary.

So long as the bill mandates annual review and provides teeth, I believe the appropriate executive agency and Congresional and Judicial official, can effectively police this program at far less cost and with less possibility of a paper bottleneck. That agency and official should also provide for public disclosure. The GAO should act as it does now to review the performance by such agencies and officials in insuring that the provisions of this Act are being effectively complied with and report its findings to Congress. Such review could, of course, include, on a random basis, an audit of statements filed by Federal personnel. Third. No provision is made in the legislation for the filing of financial disclosure statements by experts or consultants who are employed by contract on a temporary basis for up to one year under 5 U.S.C. 3109. These people perform many valuable services for the Government, but they may have financial holdings that could lead to a conflict of interest. This could be serious even though the consultant is hired on a temporary basis. I understand that in some cases, but not all, they are required to file such statements with the agency with which they have a contract, but there is no statutory provision with teeth for review and monitoring of those statements or for making them public. I hope that the Subcommittee will consider adoption of provisions applicable to these people.