(The statement submitted by Mr. Roberts follows:)

STATEMENT OF MR. RALPH S. ROBERTS, ADMINISTRATIVE ASSISTANT SECRETARY, U.S. DEPARTMENT OF AGRICULTURE

Mr. Chairman, it is my understanding that you have invited me here this morning to discuss with your committee the regulations and procedures of the U.S. Department of Agriculture relating to conflicts of interest. In view of the nature of some of the programs and activities in which it is engaged, the Department for many years has directed the attention of its employees to this matter. The Department's Office of Personnel has the responsibility for developing and promulgating departmentwide regulations on personal conduct. And instructions have placed on the heads of Department agencies the obligation to inform their employees of the regulations and to report on any alleged irregularities.

Moreover, there exists in each of the larger agencies of the Department a staff responsible for comprehensive operational and management audits, including the investigation of irregularities. As of March 18, 1960, there were 551 people, excluding stenographic and clerical staff, assigned to this work. These are in addition to a staff of investigators in the Department's Office of Personnel where we have 18 men engaged in personnel conduct and security investigations.

This latter group conducts investigations on their own initiative, as well as on leads or other allegations from within the Department or from the public generally. All such information indicating any possible irregularity or misconduct is carefully and fully investigated.

For many years the Department has had administrative regulations which prohibit certain types of outside employment and business affiliations that may involve conflicts of interest, or which may in any way influence an employee's judgment in matters pertaining to his official responsibilities.

In addition, the Department has an "Employee Handbook" that is issued to each new employee which incorporates reference to our regulatory requirements. While I will quote from the administrative regulations now current, I should emphasize at the outset that the substance of the material I am using has been carried in the Department's regulations for many years. Changes have been made from time to time only for improving their editorial content and to update appropriate procedures.

Title 8, chapter 55, section 1 of the Department's administrative regulations deals with "Personal Conduct." Paragraph 2000 reads as follows:

"Duty of employees.-It is the duty of employees of the Department to serve the public well and faithfully under the Constitution and laws of the United States, and to administer these laws and the work of the Department impartially, efficiently, and in accordance with Department policies. Employees shall not at any time conduct themselves in a manner that might cause embarrassment to or criticism of the Department or interfere with the efficient performance of their duties.

"The Congress of the United States has established 'a charter of conduct against which those in public service may measure their own actions and upon which they may be judged by those whom they serve.' The charter, entitled 'Code of Ethics for Government Service' is reproduced as exhibit 1 of this chapter. As agencies have had an opportunity to obtain posters stating the code, and it appears on the inside back cover of the "Employee Handbook" all employees be familiar with it."

You will observe from the paragraph I have just read, the Department has incorporated in its administrative regulations the Code of Ethics which the Congress by House Joint Resolution 175 adopted for Government employees.

Paragraphs 7 and 8 of the code provide that no person in Government service should engage in "business with the Government, either directly or indirectly, which is inconsistent with the conscientious performance of his governmental duties"; and that he should never use any information coming to him confidentially in the performance of governmental duties as a means for making private profit."

As will be demonstrated from references I will make to specific provisions of the Department's administrative regulations, the two paragraphs quoted from the Code of Ethics are merely an affirmation of more explicit prohibitions that have been carried in the Department's regulations for many years.

Paragraph 2001 states conduct or activities that are specifically prohibited. To save the time of the committee, I will restate only those activities that relate to the question under consideration here:

"a. Accepting from any person, firm, or corporation any favor, gift, loan, unusual discount, service, entertainment, or other thing of value by employees whose duties require the enforcement of laws or regulations, or those who are in a position to award or influence the award of business or to take or influence the taking of any other official action that might affect favorably or unfavorably any such person, firm, or corporation.

"b. Giving or using information acquired through their official positions to advance the interests of themselves, their families, associates, or friends over those of other persons.

"c. Engaging in any personal business transaction or private arrangement for profit which accrues from or is based on their official positions or authorities, or on official information.” * * *

"e. Becoming unduly involved through frequent luncheons, dinners, entertainment, or other social engagements with persons outside the Government with whom they have official relationships. This is not intended to prevent the exchange of usual social courtesies which are wholly free of any embarrassing or improper implications." ***

"i. Willfully making false, misleading, or inaccurate statements in official documents or records, including travel vouchers, or concealing material facts therein. * * *"

Section 2 of the same chapter prescribes regulations regarding "Outside interests." Paragraphs 2010 reads in part as follows:

"Outside work.-No employee of the Department shall perform or be engaged in any work on his own behalf or for private individuals, firms, companies, organizations, or institutions:

"a. If the outside work will prevent the employee from rendering full-time service to the Department.

"b. If the efficiency of the employee may be impaired by the performance of the outside duties. ***

"c. If the work to be done in a private capacity may be construed by the public to be the official acts of the Department. * * *

"d. If the business connections to be established or property interests to be acquired may result in a conflict between the private interest of the employee and his official duty or tend to bias his judgment.

"e. If the doing of such work may involve the use of information secured as the result of employment in the Department to the detriment of the public service.

"f. If such employment may tend to bring criticism on the Department or cause embarrassment. ***"

Paragraph 2011, which is predicated on 18 U.S.C. 434, reads as follows: "Interested persons not to transact Government business.-a. General: No officer, employee, or agent of the United States shall transact business of the Government with any corporation, joint-stock company, association, firm, or partnership, or other business entity if he is an officer, agent, or member of, or is directly or indirectly interested in the pecuniary profits or contracts of such corporation, joint-stock company, association, firm, partnership, or other business entity. This is a statutory provision, violation of which is punishable by a fine of not more than $2,000, or imprisonment for not more than 2 years, or both. "b. Disclosure and disqualification: In any case in which an officer, employee, or agent has such an interest he shall immediately disqualify himself in writing, from acting, and inform the head of his agency of the reasons for his disqualification. He shall take no action in any such matter unless authorized to do so. The head of the agency shall forward a report of the facts and circumstances to the Office of the General Counsel for a ruling as to whether there is a conflict of interests. A copy of the report shall be forwarded to the Director of Personnel."

Section 3 of the chapter deals with "Speculation," and generally provides that, "no employee of the Department shall participate directly or indirectly in any transaction concerning the purchase or sale of corporate stocks or bonds, commodities, or other property for speculative purposes if such action might tend to interfere with the proper and impartial performance of his duties or bring discredit upon the Department."

The section then sets up specific prohibitions, paragraph 2019 reading as follows:

"Speculation in agricultural commodities.-Because of the possible effect of certain Department programs on market prices and futures trading, speculation, either direct or indirect, in any agricultural commodity is wholly prohibited in the case of employees of the Department concerned in any way with the administration of acts regulating trading in commodities for future delivery, programs for the purchase or sale of commodities, price-support programs, commodity loan programs, or other programs which directly affect market prices of agricultural commodities."

There are two other specific prohibitions stated therein based on statutes. I mention them here in order that the committee might be informed fully of what our regulations contain. Their existence also helps to explain the reason for the Department action, which I will describe later, in requiring declarations of pecuniary interests from certain of our employees. Paragraph 2020a relates to administration of the Sugar Act and is predicated on 7 U.S.C. 1157. It reads as follows:

"No person shall, while acting in any official capacity in the administration of this act (the Sugar Act of 1937, as amended) invest or speculate in sugar or liquid sugar, contracts relating thereto, or the stock or membership interests of any association or corporation engaged in the production or manufacturing of sugar or liquid sugar. Any person violating this section shall upon conviction thereof be fined not more than $10,000 or imprisoned not more than 2 years, or both."

Paragraph b is also statutory in character. It is contained in the Marketing Agreement Act, 7 U.S.C. 610 (g) and reads as follows:

"It is unlawful for any person while acting in any official capacity in the administration of the Agricultural Marketing Agreement Act to speculate, directly or indirectly, in any agricultural commodity or product thereof to which this act applies, or in contracts relating thereto, or in the stock or membership interests of any association or corporation engaged in handling, processing, or disposing of any such commodity or product. Violation of this provision is punishable by a fine of not more than $10,000 or imprisonment for not more than 2 years, or both."

Mr. Chairman, I submit herewith for the record a copy of the complete text of chapter 55 of the Department's Administrative Regulations.

(The document referred to will be found in the appendix at p. 410.)

In addition to the administration regulations, the Department, for a number of years, has furnished to our agencies for issuance to each employee a handbook designated "Agriculture Handbook No. 23." This handbook is designed to help each employee understand the work of the Department of Agriculture. It tells him not only of the benefits and privileges derived from employment in the Department, but defines his obligations and responsibilities as a member of the Department's staff. In section 3 of the handbook, under the heading "Conduct as an Employee," reference is made to the detailed provisions of title 8, chapter 55 of the administrative regulations, which I have just discussed. The following two paragraphs on page 18 of the handbook are pertinent :

"In the Department, as in any other large organization, certain rules and regulations have been established to guide employees in their conduct as public servants. It is expected that each employee will avail himself or herself of the opportunity to become familiar with the Department regulations so that he or she may render the highest type of service possible. You will find a more detailed statement with respect to employee conduct in chapter 55, title 8, of the administrative regulations of the Department. These regulations are available in the personnel offices of each agency.

"In localities where you do not have the Federal Personnel Manual or the administrative regulations readily available, consult your agency instructions or your supervisor.”

Section 3 also includes relevant statements of responsibility under side titles, "Business Relations" and "Speculation," on page 20. "Business relations

"Rules governing the personal conduct of employees are found in the administrative regulations of the Department, title 8, chapter 55. If you enforce regulations or are in a position to award or influence the awarding of business or to take or influence the taking of any other official action, you are forbidden to accept entertainment, favors, or gifts from those with whom you have official relations.

"You may not use your position, or information acquired through it, to advance the interests of yourself, your family, your business associates, or your friends over those of other persons." ***

"Speculation

You are prohibited from speculating, either directly or indirectly, in any agricultural commodity if you are in any way concerned with the administration of acts of regulating trading in commodities for future delivery, programs for the purchase or sale of such commodities, price support programs, commodity loan programs, or other programs which directly affect market prices of agricultural commodities.

"You may not participate directly or indirectly in any transaction concerning the purchase or sale of corporate stock or bonds, or property for speculative purposes, if such actions might tend to interfere with the proper and impartial performance of your duty or bring discredit upon your Department."

Title 8, chapter 56, of the administrative regulations prescribes authority for personnel investigations, outlines responsibility and channels for reporting on matters involving misconduct or acts of impropriety of any kind, and defines the interrelationships that must exist between the staff of investigators in the Department Office of Personnel and the agency heads and their respective internal audit and investigation staffs.

Paragraph 2075, of chapter 56, on scope and authority for personnel investigations reads in part as follows:

"Authority.--The Office of Personnel has the function of conducting personnel investigations for all agencies of the Department, and is authorized to make such investigations relating to the Department's business and its employees. This includes investigation of misconduct, falsification of official records, including time and attendance reports and purchase and travel vouchers, acts of impropriety, and other alleged wrongdoings on the part of employees ***"

Section 2, of chapter 56, covers "Investigation responsibilities and procedures." Paragraph 2080 reads as follows:

"Responsibility.-a. General: Agencies of the Department have the primary responsibility for the enforcement of Department regulations and agency instructions.

"b. Corrective measures: Heads of agencies are responsible, in the event that instances of delinquency, misconduct, or fiscal irregularities on the part of employees occur, for seeing that corrective measures are taken promptly with respect to any supervisory, organizational, accounting, or other administrative factors that may have contributed to the occurrence."

Paragraph 2081 provides that "each agency head shall issue such instructions as will insure that cases of alleged personal misconduct or delinquency of employees are properly reported." After directing that complaints regarding conduct of employees received from sources outside the agency shall be referred to the Director of Personnel, the paragraph enumerates types of misconduct that must have appropriate investigative attention, in the Office of Personnel, among which is "Conflict of interest.'

In order that our total investigative competence might be coordinated and utilized most effectively, paragraph 2082 provides that in those agencies which have independent program investigation or internal audit staffs, the agency head shall issue such instructions as will insure that cases of alleged program irregularities shall be reported to, and investigated by, such staffs. These include investigations of known or alleged irregularities in violation of laws or regulations pertaining to participation in official programs on the part of contractors, vendors, producers, borrowers, or others. If, during the course of an audit inspection or other program investigation, allegations are made or evidence is obtained indicating possible violation of law or misconduct on the part of a Department officer or employee, the agency head is required to report such fact immediately to the Director of Personnel who, in the light of facts and circumstances in each individual case, will determine whether the agency investigation staff, the Office of Personnel, or some other Government agency will pursue the investigation.

A few of our smaller agencies do not have internal audit or investigative staffs. Paragraph 2084, of chapter 56, is intended to cover such cases. It provides that the agency head, in any agency that has no internal audit or investigation staff, shall issue such instructions as will insure that allegations or complaints of fiscal or program irregularities, or employee misconduct are referred to the Department's Director of Personnel for investigation.

I have for the record, Mr. Chairman, the complete text of chapter 56 which also prescribes procedures to be followed on the completion of investigations, the handling of investigative reports, and so on.

(The document referred to will be found in the appendix at p. 440.)

In addition to other safeguards, it should be mentioned that most of the employees of the Department who are in grade GS-15 or above, particularly in the commodity and marketing areas, occupy positions that have been designated as sensitive. Thus, the occupant of any such position has been the subject of a full character and background investigation. Investigations of this kind are made also on contracting officers regardless of grade.

Applications for employment and other personnel documents also frequently provide leads to possible conflicts of interest. Where such is the case they are referred for appropriate administrative action. Applicants for important positions of responsibility, particularly in sensitive areas, are interrogated before appointment regarding their private business interests. Some have not been employed because of their private holdings, or because the applicant felt that it was too great a sacrifice to divest himself of the holdings in question. Although the Department of Agriculture had taken the steps I have outlined here this morning to inform employees of their responsibility, and of their obligation to comply with the regulations, we felt that we should do more to assure ourselves that employees are complying with these requirements. After reviewing practices in some of the other Government departments and agencies where somewhat comparable problems exist, we determined that we should obtain from certain of the employees in the Department a report of their pecuniary interest in private businesses and of private employment, if any.

In view of the diverse nature of the Department's activities, we found it difficult to formulate a limited declaration covering all possible situations. A form of questionnaire that might be peculiarly applicable to the Commodity Exchange Authority would not be broad enough in scope to meet adequately the needs of an organization such as the Commodity Stabilization Service or the Farmers Home Administration. Accordingly, it was decided that we should obtain a declaration of pecuniary interest or private employment from all employees in the Department in grades GS-13 and above, and from all other employees regardless of grade who are in positions involving procurement, contracting, or other authority where there was a reasonable possibility of a conflict of interest. This declaration included the employee's interest in stocks, bonds, certificates or other evidence of ownership in any corporation, proprietorship, or partnership; or right to income from rents, royalties, patents, fees, commissions, mortgages (including deeds of trust), or any other form of pecuniary interest in any business enterprise irrespective of whether it does business with the Department, whether held in the employee's name or for his benefit, in the name of his or her spouse, minor children, or other dependents; any private employment for profit of any nature, including acting or serving as agent or representative, either in his behalf, or for any person or firm doing business, or interested in doing business, with the Department.

On December 31, 1959, the Secretary of Agriculture issued memorandum No. 1436 prescribing the use of the form and requiring that it be submitted by all employees in the grades and categories indicated above by the close of business February 1, 1960. The memorandum also required that new employees in the same grades and categories must execute a similar declaration before entering on duty. Moreover, it requires that all employees who subsequently acquire pecuniary interests in, or employment by firms doing business with, or interested in doing business with, the Department shall execute a supplemental report immediately. This declaration has been obtained from 15,045 employees.

A copy of Secretary's memorandum No. 1436, together with a copy of the form and instructions for its use, is submitted for the record.

(The document referred to will be found in the appendix at p. 436.)

As a result of this action, some cases have come to our attention where there might be a conflict of interest. On the basis of the information reported by the employee, it is not possible to say whether there is or is not a conflict. However, we are giving them further study, including an interview with each employee in order to get necessary additional facts. If there has been no violation of law and no wrongful intent on the part of the employee, he will be given the opportunity to dispose of the holdings in question. In each case, however, where the facts warrant, the case will be referred to the Department of Justice for appropriate action.