the unbiased criminal investigation and prosecution of senior government officials close to the President.

The need for this statute has not lessened. Indeed, the details being exposed in the Iran/contra affair only underline the importance of keeping our Federal officials within the parameters of the law and excluding self-interest and personal gain, or the appearance thereof, from decisions of public policy.

The purpose of the disclosure provisions is simple and uncomplicated: to make available to the public information about the financial interests of senior Government officials in order to both avoid and to permit the public to identify conflicts of interest.

What has apparently become somewhat complicated, and unnecessarily so, may I add, is the execution of that purpose, with the various financial arrangements that may be available to an individual. That is why, in part, the Office of Government Ethics was created-to serve as a guide that Federal employees can follow to make sure that the appropriate procedures are followed and to make the appropriate decisions on matters involving the Ethics in Government Act and the standards of conduct. It is incumbent upon the Federal employee to take advantage of the services and advice provided by the Office of Government Ethics, and it is incumbent upon the Office of Government Ethics to be vigilant in identifying acts of non-compliance. Moreover, the employee must certify that the statements made on the form that he fills out are true, complete and correct to the best of that employee's knowledge and belief.

The Ethics in Government Act states, at Section 202(f)(1), that an individual shall report "the holdings of and the income from a trust or other financial arrangement from which income is received" unless it meets the very restrictive exceptions in the statute. Those exceptions require the approval of the Office of Government Ethics. The Attorney General, on May 23, 1985, formed what he called a "limited blind partnership"-entitled Meese Partners— with a company owned by W. Franklyn Chinn. While he reported the Chinn company, not Meese Partners, as a limited blind partnership on his financial disclosure form, he did not disclose the various items purchased and sold by and for the partnership as required by the statute. Such reporting of stock transactions was required because the partnership had not been approved as an exception to the reporting requirement.

Mr. Meese also left Meese Partners off the list of his holdings on his recusal agreement although he had acquired that partnership just one day before he signed that recusal agreement.

This morning we are going to address questions to David Martin, who is the Director of the Office of Government Ethics, to determine, among other things, why the entity, Meese Partners, and the failure of the Attorney General to report the holdings of Meese Partners, was not questioned by the Office of Government Ethics until late April of this year; whether or not Mr. Meese's recusal agreement was or should have been reviewed by the Office of Government Ethics; and just what steps the Office of Government Ethics took or should have taken in reviewing and commenting on Mr. Meese's financial disclosure form and recusal arrangement.

This afternoon, we will address questions to the Attorney General, Mr. Meese, and the Deputy Attorney General, Arnold Burns, the individual who had the responsibility for reviewing Mr. Meese's financial disclosure form.

Mr. Martin, we welcome you and ask that you would come forward.

TESTIMONY OF DAVID H. MARTIN, DIRECTOR, OFFICE OF GOVERNMENT ETHICS, ACCOMPANIED BY JANE LEY, STAFF ATTORNEY

Mr. MARTIN. Good morning, Senator Levin.

Senator LEVIN. Good morning. Do you have an opening statement?

Mr. MARTIN. I do not have a prepared opening statement, but I have an unprepared statement which I would like to share with

Mr. MARTIN. It may take a minute or so longer than your normal ten minutes, but I ask your indulgence in that.

Senator LEVIN. Please proceed.

Mr. MARTIN. First of all, I would like to thank you for inviting me to appear here to clear the air on a lot of, I think, misrepresentations and allegations that have been made about a lot of people involved in this. And I want to commend you personally for acting responsibly and professionally when you received information from me back in May, almost two months ago, about the status of this matter and were allowing us to proceed in our normal procedure. At the same time, I feel compelled to publicly criticize those who have instead chose to politically grandstand, and I think for their own personal purposes. To that end, I think our normal procedures and process have been interrupted.

I have to say I am distressed at a number of the allegations, and some of them personally challenging and questioning my integrity. But my distress runs to a term that has come up in the press and used by some people, and it is the word "violation."

I really have to say that in the reporting and disclosure aspects of the Ethics in Government Act, the term "violation" should not be used because it is a tool, a financial disclosure tool to determine if there is a conflict of interest.

There are many, many inaccuracies, errors and misstatements in virtually every financial disclosure that we review that comes through our office in the nomination process. In the process of reviewing annual financial statements, it is our best estimate that at least 70 percent of them require some action by our analysts to go back to the designated agency ethics official and find information. So in that process, to call an error, a misstatement or inaccurate reporting a violation is truly a misrepresentation and, I think, inaccurate.

But reporting does raise issues about the basic principles and the purposes behind the Ethics in Government Act. The Act, as you said, Senator, does mandate full public disclosure to preserve and promote public confidence in the integrity of Federal officials through the reporting of their private sector financial holdings.

The Act does not contemplate that a filer should create his or her own blind trust because it would not provide-it might require disclosure if that filer creates his own blind trust, and it would not provide any statutory protections from the conflicts of interest envisioned in the blind trust provisions of the Ethics in Government Act-although I must say there is no strict prohibition from that attempt.

And as you indicated, Senator, Section 202(f)(1) of the Act provides that all the holdings and sources of income shall be reported unless there is a qualified trust involved or an excepted trust. An excepted trust is defined in the Act as one in which the filer was not active in the creation of the trust, and the filer has no knowledge of the holdings in that trust.

Normally, Senator, two years ago or maybe three years ago, when I first arrived on the job, I of course had to fill out a financial disclosure. It was called the "green monster" then. I determined that the instructions on it were inadequate, misleading, and really deficient. So I created a new form, labored with my staff for over six months, and new instructions.

Based on that, we normally would not expect the users of our form, with its instructions, to have to resort to any extensive legal analysis on the basic issue of what disclosure should be. The instructions contain extensive instructions on what a filer's responsibilities are.

I want to read to you from those instructions, Senator. In three different places these kind of instructions appear. In the case of holdings that are essentially non-public-such as private trades or business investment pools or other private investment vehiclessufficient disclosure must be made to give reviewers-that is, the agency ethics official-an adequate basis for the conflicts analysis required by the Act. That is, enough information must be disclosed to determine if there are any conflicts by the filer vis-a-vis the job he is going to do.

The reporting of financial interests stops at the level at which the specific nature of the investment is adequately described, so that there can be an evaluation of whether there is a prohibited nexus with the official's Government responsibility, or it stops where an entity is named, such as a mutual fund which can be readily consulted in manuals to determine their nature.

Now, as part of our continuing awareness program in our training requirements in the Ethics in Government Act, we distribute quarterly an ethics newsgram. I want to quote from a November 1985 issue that we distributed to all designated agency ethics officials, all inspector generals, and all interested parties.

I quote: "Frequently, we see references to non-public corporations, partnerships, trusts, IRAs, private investment holdings and other oblique interests with no explanation as to what trades, business or underlying investments attributable to the reporting individual because of such involvement. The FS 278"-that is the financial disclosure form-"should be considered incomplete as it does not contain sufficient information in detail to comply with the disclosure standards or to serve as an adequate basis for the review process.

So what I am saying to you, Senator, is that the instructions, the law, the regulations, and our education program, I think, have served to advise filers of their obligation. I am very pleased with our efforts in that regard and positive about them.

Now, in your letter inviting me to testify, you wanted to know about what our procedures were at the Office of Government Ethics for reviewing annual statements. Let me share that with you now, and then share with you the specific procedures and events that occurred with the analysis and review of Mr. Meese's annual financial statement.

I submit a memorandum to all designated agency ethics officials, usually in March of any given year-I did in March of 1986-requesting them to file with our office all of the financial reports that they have reviewed by September 15th of that year. So in March I advise them, look, do your review in 60 days; get them to us by September 15th. It rarely occurs that that happens with all agencies. Most agencies do not meet that deadline.

When the reports are received in my office, they are recorded in a computer and an instruction review paper is put on it. It is sent to a management analyst. I have nine management analysts. Their job is to review and monitor agency ethics programs, to review nominee statements, annual financial statements, and to ensure that the ethics programs in the various agencies that they are responsible for are ongoing.

One of these analysts, as a part-time job, my analysts review these annual statements. We try to do that, and we do take the initial cut within 60 days. If problems are noted or further agency action is required, our normal procedure is to have that analyst go back to the agency ethics official, which is done, as I said, in 70 percent of the annual filings made in our office.

If there is a problem and the management analyst is not sure of the answer to the problem or cannot deal with it on his own, he or she contacts one of the attorneys in the office. The attorney either advises him how to deal with it or that there is a problem, or sometimes the attorney will actually undertake to resolve the problem himself.

Once all the problems are either resolved or information is obtained, the report is forwarded to the chief of the Monitoring and Compliance Division-that is, the manager for all these management analysis-for further review. If he notes problems, it goes back to the analyst. If he does not, he authorizes it to be certified as required by the Ethics in Government Act.

The disclosure reports of Cabinet members and White House officials are always forwarded to an attorney for review and approval; that is, for those people it is a two-level review initially. Now, delays do occur in a number of ways. I have mentioned the agencies are not always responsive in sending them to us timely. My analysts, of the nine I have, I estimate that three-and-a-half man years are spent annually on reviewing only the annual filings. And agencies, I have to tell you, Senator, are slow in responding to our requests for additional information.

Now, we have developed as a result of this and-it is interesting-other problems an expedited treatment for certain individuals: Cabinet members, White House. I have now decided that they

should go into my deputy. He reviews them initially, forwards them immediately to one of the senior attorneys on my staff who handles all the trusts, and then goes to a management analyst for review.

Now, I have said it takes approximately three-and-a-half man years to review these annual statements, and there are betweenoh, I guess, close to a thousand a year. There are 300 nominee statements in 1986 and 1987, each year, that we have reviewed also. But as to the annual reports, it takes about 106 days on the average, from the time the report is received in my office until it is approved. Now, some take much longer, up to a year, even, but that is the average of all that come in for annual review.

Now, as a result of these statistics and our reviews, I have, of course, recommended that the office be increased, have additional staff, and I hope to get seven new additional positions for the next fiscal year; and, if I am lucky, maybe 12 additional. But I certainly would appreciate your help in that effort.

Now, let me get to the chronology of events with regard to Mr. Meese's financial disclosure which was due on May 15, 1986. The Department of Justice forwarded in bunches their financial disclosure reports. We received 96 of them on July 18, and 31 others on September 29, including the Attorney General's. I had, of course, advised everyone earlier that they should be to our office by September 15th.

The 278 was processed routinely. It went to a management analyst after clearing our computer and administrative process. He commenced his review-I think on November 17-within the 60day period, and he noted a number of problems on the 278 that needed clarification. He consulted with an attorney in regard to most of them, and he resolved some of them himself, including a number of gift problems, a number of problems related to the status of certain foundations, whether they were 501(c)(3) organizations or not.

On November 21st, he discussed problems that he saw with an attorney on our staff. That attorney contacted a Department of Justice staff attorney about some of these problems, and they resolved some of them.

The management analyst noted the limited blind partnership, but incorrectly-and I have to admit this-incorrectly assumed that it was a pooled arrangement or similar to an excepted trust, which I described earlier, and did not raise it with an attorney and did not raise it with anyone on my staff.

The attorney who reviewed it did not raise questions about it, so it did not become a red flag to me until April of this year when I received telephone calls, I think, from either reporters or other people in Government advising me that there was a problem with this limited blind partnership and some connection with Wedtech. At that point in April, I sent a letter to the Department of Justice and requested that they forward to me the underlying documents. My thinking at that point was, okay, somebody has to make an initial analysis to determine-make the conflicts review. My reasoning was if the underlying documents revealed adequate information to make a conflicts analysis, the analysis would stop