Mr. FLOWERS. Our next witnesses are from the Department of Justice, Hon. Mary Lawton, Deputy Assistant Attorney General, Office of Legal Counsel, and associate. Please come forward.

We appreciate you being here this morning, and all the nice things we said about the GAO we will apply to the Department of Justice for the purpose of these proceedings. Please proceed, ma'am.

TESTIMONY OF MARY LAWTON, DEPUTY ASSISTANT ATTORNEY

GENERAL

Ms. LAWTON. Thank you, Mr. Chairman. With me is Mr. Ed Kneedler, of the Office of Legal Counsel.

Because of the time, I, too, would suggest that we enter the statement, and I will summarize it, if that is convenient to you.

Mr. FLOWERS. We had hoped you would do that. Thank you very much; it will be so received.

Ms. LAWTON. A key feature of all the financial disclosure bills before this subcommittee is, of course, that financial reports be filed by Federal officers and employees, and that they be available for public inspection. This is, as has been pointed out, a significant departure from most of the existing financial reporting requirements now in effect. While reporting requirements exist for the most part, the records have not been published in the past.

The Comptroller General has discussed at some length the conflict between the public availability and disclosure in the interest of accountability and the prevention of conflicts of interest and the countervailing interest of privacy, involving not only Federal officers and employees, but also their spouses and dependents.

There seems to be, however, an emerging consensus that some degree of public disclosure is warranted with respect to certain key positions in all three branches of Government and with respect to candidates.

There are, of course, a number of bills pending before this subcommittee, and as you know, the Senate passed as part of the total Watergate reform package a financial reform title, S. 945; and the President, of course, has sent proposals to the Congress dealing with similar subject matters.

They all deal with this idea of financial disclosure; they all deal to some extent with publication of the disclosure, but there are differences. We are troubled by some aspects of the bills pending before this subcommittee, particularly H.R. 110 and H.R. 3249, in their scope—that is, the coverage of those who must report-and in the degree of specificity required in the reports. Some of these problems are detailed in the prepared statement.

We have a general problem with setting the scope of the disclosure requirements in the executive branch on the basis of a salary figure. As you know, in recent years there have been as to some levels of the executive branch an annual increase, and that means that your coverage encompasses increasingly lower grades each year that the salary comes up to the levels set in the statute. We think it preferable to set the scope of the statute for the executive branch by reference to grade or position, rather than a dollar figure.

We also think that the bills pending before this subcommittee should show some specificity in what is required to be reported, both in terms

of assets and liabilities. The bills, at least H.R. 110 and 3249, are quite vague on what assets must be reported and extremely specific on what has to be reported in terms of liabilities; we think that could be evened out a bit.

The approach taken by the Senate bill S. 495 and the President's proposal is that assets and liabilities be reported with reference to a certain range of value but not in specific dollar terms. This, again, is partly because of the privacy interest, and partly because of the difficulty in areas such as stocks and bonds of being precise about value in a fluctuating market.

We share to some extent the Comptroller General's concern about who should review these reports, although we, I think, are a little less reluctant to have the Comptroller General play a role than he is. We believe that in the interest of the coequality of the three branches, that the initial reporting should probably be within each branch, rather than to a central point, rather than to the Comptroller General. Thus, the executive branch would report within the agency, and if a central point is desired, also to the Civil Service Commission; the legislative branch would report to the legislative branch, and the Judiciary to the judicial branch. However, we see no objection to the Comptroller General's audit of these reports, either on a random sampling basis, as the President proposes, or spot checks where specific complaints are raised as to conflicts of interest.

We have a concern, as the Comptroller General does, with the whole aspect of the privacy of the individuals required to report and, speaking only for the executive branch, particularly with respect to the career employees in the executive branch who rise through the ranks into the positions covered by the reporting requirement. The individual who comes into Government from the outside into a high-level policymaking decision can be said to have voluntarily assumed the responsibilities, including disclosure responsibilities. On the other hand, the career employee coming up through the ranks is basically penalized for promotion by being required to make public disclosure. Reporting is appropriate because clearly many of these people exercise policymaking decisions; but we would suggest, as the President's bill proposes, that the publication of the required reporting distinguish between the career employee in the civil service and the policymaking noncareer positions in the super grades and the executive level.

We also have some concern-and I don't propose to go into it here, Mr. Chairman, except to call attention to an appendix attached to our statement with respect to the coverage of persons in the intelligence community whose very connection with the Government may have to be, and is by statute in some cases, protected from disclosure. We suggest some amendments to take care of that particular aspect.

Mr. FLOWERS. If I could back up to one thing, I was just sort of listening with one ear there. You see a distinction between the career civil servant and the short-term type policymaker. I am curious about that distinction. You apparently mean that the short-term person would be the most likely one to have a conflict of interest, and if you are going to publish anything that would be the one to be made public. Ms. LAWTON. No, that is not the rationale behind it, Mr. Chairman. The idea is more that the short-term person comes into the Government on notice, and for a temporary period; and in effect, assumes the

risk, as an elected official assumes the risk, that they will be subject to the greater public scrutiny because of the position they seek. The career employee may be discouraged from accepting an earned promotion if the price is his privacy.

It is essentially that difference between knowing what you are coming into, and being penalized by reason of a promotion.

Mr. FLOWERS. Well, if you are talking about gaining the expertise of a particular individual to do a particular high-level job, the outside person may be reluctant to go in for the same reason.

Ms. LAWTON. Oh, yes, the same problem is there. That is the basic fundamental conflict the Comptroller General alluded to, between privacy and public disclosure. It is a weighing of values, and it is a problem that Congress faces in deciding, really, where the values are, and who should be hurt by them. We are suggesting a dividing line.

Mr. FLOWERS. Well, I may be looking at it from the short-term, twoyears-at-a-time person, and you are looking from the career civil service point of view.

Ms. LAWTON. That could have something to do with it, Mr. Chair

man.

Mr. FLOWERS. The old adage, "Where you stand depends on where you sit."

Ms. LAWTON. Yes, sir.

Mr. FLOWERS. Please, proceed.

We have, gentlemen, just let me say this, from 11:46 we have 15 minutes to vote on the Ketchum amendment to the State food stamp bill. We will probably adjourn and go cast a vote, and then come back and finish this testimony.

Mr. MOORHEAD. May I ask a question. Isn't there very little likelihood, though, that a career civil servant who made these reports would ever have the contents of that report really made public, or have anyone take any tremendous interest in it?

You know, when the reports of Members of Congress, or someone who is in a particular position that is spotlighted, the press will pick it up; but they cannot pick up these thousands of reports on all these people and make them public to the point where one really pays any attention to it. I don't see how they would be hurt that badly.

Ms. LAWTON. I do not think that the press interest would be particularly strong. What worries me is that you will get special interests that will take an interest for whatever reason. Just as an aside, but as an example, there are some people who make it perhaps a hobby to file Freedom of Information Act requests concerning the grade, salary, title, length of service and duty station-which is all public information-of any of our employees in the department whose names happen to turn up in the paper, either because they represent the Government in court or otherwise. We get a guaranteed FOI request within a week. Who they are, why they want it, I don't know, but it happens.

Mr. MOORHEAD. Thank you.

Mr. FLOWERS. Gentlemen, let's recess for 10 minutes and come back. [Whereupon a short recess was taken.]

Mr. DANIELSON. The subcommittee will resume its session. We are operating under a very difficult situation with votes coming up all the time, so we will follow the policy of just moving ahead.

Ms. LAWTON. Yes, sir.

Mr. DANIELSON. So, Miss Lawton, would you proceed?

Ms. LAWTON. Yes, sir. There are only really three more points I would like to make, and I will make them very briefly.

On any legislation on this subject of financial reporting and disclosure, we think it extremely important that the fact that the existing conflict of interest laws are not being affected, should be spelled out. Presently none of the bills do this, and we think that it is important that there be a disclaimer of any intent to alter existing conflict of interest statutes.

Second, all of the bills are somewhat inadequate, we think, with respect to the entire subject of reporting on blind trusts. Many persons come into the Government and put their investments into a blind trust, so that they will not even know what the investments are. If they are required to determine what these investments are and then report them, the entire purpose of the blind trust is defeated. So, some provision should be made for that.

The only other point is that of course this is only one aspect of a general reform package that is being considered by the full Judiciary Committee-although I realize not this subcommittee-and that includes not only the special prosecutor and the legislative counsel provisions, but also separate legislation on the subject of lobbying, to which the Comptroller General alluded. We are convinced that all of these are extremely important and urge the committee to move rapidly on them. That is the sum of the statement.

Mr. DANIELSON. Your final conclusion then is that you do support some legislation.

Ms. LAWTON. Very definitely.

Mr. DANIELSON. I thank you for your statement and for setting forth the position of the department. I regret that everyone cannot be here, but your statement is in the record, and will not just be reposing there, it will be read.

Ms. LAWTON. I will be happy to work with the staff in any way on this, sir.

Mr. DANIELSON. Thank you, we will probably take you up on that. Thank you very much, Miss Lawton.

[The written statement of Mary Lawton is as follows:]

STATEMENT OF MARY C. LAWTON, DEPUTY ASSISTANT ATTORNEY GENERAL, OFFICE

OF LEGAL COUNSEL

Mr. Chairman and members of the subcommittee, I am pleased to appear before the Subcommittee today to present the views of the Department of Justice on H.R. 110, H.R. 3249, and related bills which would require disclosure of financial interests by certain officers and employees of the Legislative, Executive, and Judicial Branches and candidates for nomination or election to Federal office.

A key feature of these bills is that the financial reports filed by Federal officers and employees would be available for public inspection. This represents a significant departure from most financial reporting requirements now in effect. For example, the reports required of Presidential appointees and certain Executive Branch employees classified at GS-13 or above under Executive Order 11222 and implementing Civil Service Commission regulations, 5 CFR 735.403, are confi dential and their disclosure is subject to the stringent provisions of the Privacy Act. Reports filed under Senate Rule XLIV by Senators and officers and employees of the Senate earning more than $15,000 and reports of the amount of income, assets, and liabilities filed by Members and officers of the House of Representatives and their principal assistants and professional committee staffs pursuant to Part B of House Rule XLIV are also kept confidential.

Public availability of the reports required by the proposed bill obviously would entail a substantial invasion of the privacy of the Government officers and employees involved and their spouses and dependents. Nevertheless, there appears to be an emerging consensus that public disclosure is warranted with respect to those persons holding key positions of responsibility in any of the three branches of the Federal Government and candidates for election to Federal office.

Implicit in this consensus is the conclusion that the invasion of privacy entailed in public financial disclosure is outweighed by the strong public interest in exposing and hopefully thereby deterring conflicts of interest among policy makers and other senior officers and employees of the Federal Government. We believe this conclusion is sound, provided the category of persons affected is appropriately limited. The legitimate expectation of privacy of senior officials is diminished when they voluntarily assume important and visible positions in the Federal Government, and the countervailing public interest in exposing potential conflicts of interest is the strongest with respect to these same individuals. As the Supreme Court has stated, conflict of interest is "an evil which endangers the very fabric of a democratic society, for a democracy is effective only if the people have faith in those who govern, and that faith is bound to be shattered when high officials and their appointees engage in activities which arouse suspicions of malfeasance and corruption." United States v. Mississippi Valley Generating Co., 364 U.S. 520, 562 (1961). The Department of Justice therefore supports the principle of full public financial disclosure by those Federal officers and employees who are in a position to influence governmental decision-making to their personal advantage, except, of course, when such disclosure by an individual would compromise important intelligence activities.

As I mentioned earlier, there is widespread support for public financial dis closure by key officials. Numerous disclosure bills have been referred to this Subcommittee during this Session of Congress, and the Senate on July 21 passed S. 495, the so-called Watergate Reorganization and Reform Act of 1976, Title III of which contains provisions for financial disclosure similar to those proposed in H.R. 110 and H.R. 3249. In addition, the President in his message of July 18 to the Senate in connection with its consideration of S. 495 supported the financial disclosure provisions of Title III of S. 495 in most particulars. The Department of Justice believes that S. 495, if modified to reflect the President's proposals, is preferable to either H.R. 110 or H.R. 3249 in a number of respects, including identification of the employees required to file, the financial interests required to be reported, provisions for review of financial statements, and the categories of individuals whose reports will be made public.

H.R. 3249 would require financial statements to be filed by the President, Vice President, Members of Congress, each officer or employee of the Executive, Legislative, and Judicial Branches who earns more than $25,000 per year, each officer or employee of the United States who performs duties determined by the Comptroller General to be of the type generally performed by an individual occupying a position at GS-16 of the General Schedule or higher, any member of a uniformed service who is compensated in an amount equal to or in excess of the pay established under chapter 3 of title 37 of the United States Code for grade 0-6 or higher, and any candidate for nomination or election to Federal office who does not occupy any such office at the time he becomes a candidate. H.R. 110 would require statements to be filed by Members of Congress, all civilian and military officers of the Executive Branch, justices and judges of United States courts, each employee of the Legislative, Executive, or Judicial Branch who earns more than $18,000 per year, and candidates of a political party in a primary or general election for Federal office.

The Department of Justice opposes the imposition of reporting requirements on Federal employees solely because they earn a minimum of $18,000 or even $25,000. For example, the $18,000 floor would result in reporting by thousands of employees in grade levels as low as GS-11. Certainly most such employees do not have the ability to affect governmental decision-making to the degree that would justify the invasion of privacy involved in the reporting of all their financial interests and those of their spouses and dependents. Moreover, fixing salary as the cutoff point for the filing requirement in terms of a given amount of compensation has the added disadvantage of failing to take into account what have become annual increases in the General Schedule and other Federal salary schedules, with the result that more and more employees would be brought under