The committee met, pursuant to recess, at 10 a.m., in room 3302, Dirksen Senate Office Building, Hon. Abraham Ribicoff, chairman, presiding.

Present: Senators Ribicoff, Percy, and Javits.

Staff members present: Richard A. Wegman, chief counsel and staff director; David R. Schaefer, counsel; Marilyn A. Harris, chief clerk; and Elizabeth A. Preast, assistant chief clerk.

Chairman RIBICOFF. The committee will be in order.

Mr. Cohen, would you be willing to start, and then would you step aside, please, when Senator Case comes?

Mr. COHEN. Certainly.

Chairman RIBICOFF. I do suspect he went over to vote.

Mr. COHEN. I understand.

CONTINUATION OF HEARINGS

Chairman RIBICOFF. We continue our hearings on Watergate Reorganization and Reform Act, especially the disclosure provisions, and I would like to make a few personal observations.

First, whatever financial disclosure requirements that we have in the bill for the President and Vice President in my opinion, should be uniform throughout the Government. Whatever we pass out of this committee should not only include the President and Vice President, but the executive branch, the Congress and the judiciary. Financial disclosure should affect all three branches of the Government exactly the same way out of a sense of fairness.

From a personal standpoint, I am against disclosure of income tax returns. Section 7213, title 26, sets out a very, very strong set of restrictions to protect the confidentiality and privacy of what is in an income return. As far as I am personally concerned, a member of the executive branch, a member of the judiciary, and a Member of Congress, are entitled as taxpayers to the same degree of privacy as any other citizen in this Nation.

I see a great many potential abuses otherwise, and a basic sense of unfairness.

Let me give you a few examples. Personally, my charitable contributions are substantial. They are varied, and they are numerous. I do not think it is anybody's business to whom I give a charitable contribution. It is a decision I make myself, and when I decide to

make a charitable contribution to the recipient, other potential recipients should not or need not know to whom I make a charitable contribution.

The problem of medical expenses troubles me also. In the past I have had substantial medical bills in my family. I think it really is out of a sense of morbidity that I should have to disclose to what doctors or what hospitals I paid medical bills, and the size of the medical bills that I might have paid on behalf of the member of my family who was ill.

Take the problem of gifts. You may have children and grandchildren, and you might give gifts in varying amounts to different members of your family. Why should what members of my family get varying amounts that I may decide to give as gifts be spread on the record.

So there is as much of an income tax return that is so private, and so personal, that I think that Congress, in assuring that income tax returns remain sacrosanct should apply to any member of the Government.

There is a cloture vote, so I will have to excuse myself while I go to vote. It will be one of those days.

[Whereupon the committee was in short recess.]

AFTER RECESS

Chairman RIBICOFF. The committee will be in order.

I think one other comment would be in order.

As chairman of this committee, it is my strong belief that any point of view, and every point of view should have an opportunity to be presented in testimony and that every point of view should be given an opportunity to be discussed in markup sessions when the committee goes to work. And, as long as I am chairman of the Government Operations, whether I was for or against a proposal, no point of view would ever be bottled up because it is in disagreement with the position that the chairman might have personally.

Senator Case, I am delighted that you are here.

We are about 40 minutes late due to the activity on the floor. If you will proceed as you would, that would be fine.

TESTIMONY OF HON. CLIFFORD CASE, A U.S. SENATOR FROM THE STATE OF NEW JERSEY

Senator CASE. Thank you very much, Mr. Chairman.

May I say on the record, that I hope as long as we have a Democratic Congress, you are right in that spot. It gives us great confidence. Chairman RIBICOFF. Thank you very much.

Senator CASE. I shall be very brief, Mr. Chairman, subject to your wishes, and if I may, I ask that my statement be printed in the record. Chairman RIBICOFF. Without objection, the entire statement will be made a part of the record at the conclusion of your testimony. Senator CASE. This is not a new subject, Mr. Chairman, for you and for me. We have been involved in it for many, many years. I have had strong conviction for a long time and it has increased over the years that disclosure is the real corrective of corruption in

Government, and I hope that we are right that our time has come for this proposal. I think that it has.

While we have come a long way I think the full correction of the things that have come out in Watergate, and the concurrent inquiries and investigations, cannot be dealt with without this kind of legislation.

I think, Mr. Chairman, that disclosure should apply to all Government officials. I think it ought to apply to all branches of Government, the executive no less than Congress, and the judiciary no less than either of them.

I do not think the President should be exempt. That is my strong view. I feel strongly that everybody ought to be treated alike, and I see no reason not to have it done.

We have to some degree met the principle requirement of publicity in disclosure. We have separate regulations in the Senate, from those applicable in the House, and each of these sets of regulations has its deficiencies.

I think the time has come to have one rule applicable to all.

Chairman RIBICOFF. I commented before you came in, in my opening statement, Senator Case, that whatever rule is adopted should apply exactly in the same manner to the executive branch, the legislative branch, and the judicial branch of Government.

Senator CASE. I understand you also made a comment about income tax returns. I agree that this is not the appropriate instrument for disclosure. We file of course, here in the Senate and I have no particular objection to doing this. But I think tax returns contain certain information that people have a right to keep confidential, not only because it affects them, but in many cases because it affects other people.

Chairman RIBICOFF. Thank you very much.

We have another vote, and it seems that you have finished, and you can go to your vote again, and so will I.

Senator CASE. Thank you very much.

[The prepared statement of Senator Case follows:]

PREPARED STATEMENT BY HON. CLIFFORD P. CASE, A U.S. SENATOR FROM THE STATE OF NEW JERSEY

It is most fitting that financial disclosure be a major pillar of Watergate Reform legislation for I do not believe we can hope to clean house in any one branch of government without a substantial effort to restore public confidence in the whole governmental process.

As I see it, reform which fails to address the very basic question of betrayal of the public trust will miss the point and we must not shy from the point again.

To me, full public disclosure is the real protection of the integrity of our system of representative government. We do not expect our representatives to give up their fortunes or their special skills and backgrounds to serve in our government. We want them to be "representative."

What is needed is public assurance as to the extent of the fortunes, the resources, the assets and the liabilities of elected officials. Moreover, disclosure should not stop with elected officials. All top officials in the executive and judicial branches should make annual reports of their sources of income including gifts, their assets and liabilities and any transactions involving stocks, bonds and real property. Specifically my bill would require that the President, the Vice President, all Members of Congress, all candidates for federal offices, all federal judges and top staff in each branch of government file disclosure statements which are to be made public.

S. 181, which is my 10th financial disclosure bill, was introduced during the opening days of this Congress. My first disclosure bill was introduced in 1958 and at that time I was the only sponsor. The following year, with Senator Neuberger, I re-introduced disclosure legislation.

To date, there are 23 co-sponsors of S. 181 and there are numerous other disclosure bills pending before this committee, the Senate Rules Committee and in the House. În general, they are similar. Some would limit disclosure to the legislative and executive branches. My bill also includes the judicial branch.

This is not without considerable thought on my part. Those of us elected to office can be voted out. Officials in the executive branch can be fired, but federal judges are lifetime appointees whose removal can be accomplished only through impeachment.

Therefore, I think disclosure is a necessary, as well as an appropriate, means of assuring the public of the integrity of the judiciary.

The federal judiciary does police itself to a certain extent. At the recommendation of the Judicial Conference, approximately 600 federal judges, all full-time magistrates and referees in bankruptcy file twice-yearly public accountings of extra-judicial income-gifts in excess of $100 and income from non-bench work. While filing reports of Extra-Judicial Income is a start in the right direction, it is not enough. Public disclosure would be better served by a straightforward listing of assets, liabilities, gifts, transactions in stocks and/or commodities and dealings in real estate.

It should be noted that the Judicial Conference cannot force a judge to make these reports and a very few judges have declined to file. Some members of the Supreme Court have elected to file similar reports of Extra-Judicial Income; some have not.

I understand that the Judicial Conference opposes inclusion of the federal judiciary in disclosure legislation on the grounds that the judiciary is already subject to a disclosure procedure, but the point is that we must have full disclosure and disclosure documents must be readily available to the public and to the press. Senators and representatives are presently subject to certain standing rules. House members must make public disclosure of business and professional connections, the source of income from services exceeding $5,000, capital gains from a single source exceeding $5,000, reimbursement for expenditures exceeding $1,000, honorariums from a single source amounting to $300 or more, and the names of creditors for unsecured loans when the aggregate amount owed is in excess of $10,000.

Senators must file with the Comptroller General reports of federal tax returns, the amount and source of each fee of $1,000 or more, the names and addresses of business or professional corporations in which the person filing holds an office or is employed and receives compensation; the identity of each trust or other fiduciary relation in which he holds a beneficial interest having a value of $10,000 or more; the identity of each liability of $5,000 or more; and the source and value of all gifts having an aggregate value of $50 or more from a single source. But only gifts amounting to $50 or more and honorariums of $300 or more are available for public inspection. Other financial information is confidential.

In May of this year, we saw how the Senate's rule could be used to subvert the whole process of financial disclosure. A prosecuting attorney had attempted to subpoena personal financial material filed by a former Senator in accordance with the Senate Rule, and the chairman of the Select Committee on Standards said on the Senate floor that surrendering the disclosure statement made in reliance on a Senate rule which protects its confidentiality would jeopardize the whole system of Senatorial disclosure. The prosecuting attorney did not get the material and the Senate appeared in the role of protector of one of its own members accused of serious wrong-doing.

Executive Order 11222 establishes ethical standards and requirements for confidential financial disclosure for top and mid-level employees of the executive branch, excluding the President and Vice President who are not covered by disclosure requirements. In general, the executive branch employees are required to make confidential disclosure of employment and business interests, creditors and interests in real property.

In addition all top and mid-level White House staff are required to disclose all personal employment, financial interests and activities, as well as those of

spouse and members of immediate families. These reports are not made public. In my view they must be public-if they are to be effective.

Last winter there were press reports of Geological Survey employees who filed financial reports with their agency. But apparently no one in the agency looked at them until the General Accounting Office subsequently examined them and found a number of instances of conflict of interest.

What we must have is a uniform approach as to what constitutes financial disclosure and uniformity in making the material public. Agencies do not police their own employees any better than senators police senators. And this "Buddy" system is pervasive in practically every group in American life. Politicians are by no means the only, or the worst, example.

S. 181 would require a full disclosure of the amount and the source of each item of income, the amount and source of each item of reimbursement for any expenditure, the amount and source of each gift (other than from any relative or spouse) received alone or with a spouse when the gift exceeds $100; the amount and source of any fee or honorarium; the value of each asset and liability; all dealings in securities or commodities; and all purchases and sales of real estate. Some of the other disclosure bills before this committee use a floor of $1,000 as the point at which disclosure of amount and source should begin. I have no real objection to "floors"; it has always been difficult for me to determine where they should be established.

Three bills call for disclosure of federal and/or state income tax information. It has always been my view that tax information intrudes on the private areas of an individual's life his charity or the lack of it and his health or lack of it— without being fully effective as disclosure documents.

Mr. Chairman, I believe the time has come to adopt a uniform disclosure procedure. We owe it to the public which has no other real protection.

From all sides we hear of the public's distrust of its elected officials. The pollsters tell us that public confidence in government has rarely been at a lower point. If our system of government is to endure we must reverse this. One step in the right direction would be the adoption of public disclosure legislation.

Not only will disclosure put the facts into the open and allow the forces of public opinion to operate, it will make all public servants more sensitive to possible conflicts of interest and more alert to misuse of the public trust.

Chairman RIBICOFF. Mr. Kastenmeier, you can start, and let us see how much we can do before I run over to the floor for the next vote.

TESTIMONY OF HON. ROBERT W. KASTENMEIER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WISCONSIN

Representative KASTENMEIER. Mr. Chairman, I will be very brief, and perhaps you might be able to conclude with me.

I do want to express my gratitude to you, Mr. Chairman, for the courtesy of having me here to testify this morning.

Chairman RIBICOFF. Your entire statement will be in the record. Representative KASTENMEIER. Yes, I make that request, Mr. Chairman, and I appreciate it. The bill that we have introduced in the House, and that Mr. Steelman has cosponsored with me, is cosponsored by 157 Members, and I think this illustrates dramatically that in terms of what is contained here, there is nothing so powerful as an idea whose time has come, and this is realized I think, in the Congress today.

Certainly, in the case of financial disclosure that is in effect.

Our legislation is very similar to Senator Case's. We would require uniform reporting by Government officials. Uniformity is important, even though the Senate, the House, the judiciary are independent