Hon. ALAN K. CAMPBELL, FEDERAL COMMUNICATIONS COMMISSION, Chairman, Civil Service Commission, DEAR MR. CHAIRMAN: As you may be aware, I was a witness at the May 23 hearings before the Subcommittee on Oversight and Investigations of the House Committee on Interstate and Foreign Commerce which is making a study of conflicts of interest. That subcommittee's staff study had determined that one member of our Commission owned three stocks which, while apparently not having been questioned by the Civil Service Commission, had been construed by our General Counsel, in response to employee inquiries, to be prohibited holdings under § 4(b) of the Communications Act of 1934. Section 4(b) of that Act is written in very broad terms and, unfortunately, sometimes has the effect of prohibiting interests in companies having only a rather remote relationship to the FCC's functions. For your convenience, I have attached the full text of § 4(b). To aid you in your review of financial interests of FCC Commissioners, I am enclosing a current list of stocks found to be prohibited holdings for our employees under § 4(b) of the Act. Section 4(b) applies also to Commissioners. As the list indicates, it is merely a compilation of past rulings and is not intended to be exhaustive. I would like, however, to make our General Counsel available to you or your staff to advise as to any financial interests of FCC Commissioners which you believe may raise any question. I suggest this could be done by simply seeking his advice as to any questionable holding without identifying the Commissioner or the amount of stock involved, thereby maintaining the confidentiality of Commissioners' reports to you. Any required divestiture of financial holdings would continue to be a matter as to which your Commission would deal directly with the Commissioner involved. Even though the Subcommittee's study found only this one instance out of 53 reports of Commissioners filed with you, I hope that this procedure will aid in preventing even that rare occurrence with respect to FCC Commissioners. If you have any different or additional suggestions as to how we may be of service to you in this area, while avoiding interference with your proper functions or compromising the confidentiality of information supplied you, I would be pleased to hear from you. Sincerely, RICHARD E. WILEY, Chairman, Hon. RICHARD E. WILEY, HOUSE OF REPRESENTATIVES, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Chairman, Federal Communications Commission, DEAR MR. CHAIRMAN: As you know, this Subcommittee recently held hearings on conflict-of-interest regulations during which several "case studies" of employees at your agency were mentioned as potential conflict situations. In our continuing oversight of this issue, we would appreciate it if you would inform us at this point of any changes in the status or financial holdings of these employees. In addition, you should notify us in the future of any similar changes as a result of your review of their cases. This will allow us to report those changes which may occur prior to our issuance of our report on these hearings, which we anticipate in several months. Because of our desire to avoid the mention of specific names, you should simply notify us by using the letter designations of our Staff Report. We would appreciate your prompt response to this request. Sincerely, JOHN E. Moss, Chairman, Subcommittee on Oversight and Investigations. Hon. JOHN E. Moss, FEDERAL COMMUNICATIONS COMMISSION, Chairman, Subcommittee on Oversight and Investigations, Committee on Interstate and Foreign Commerce, House of Representatives, Washington, D.C. DEAR MR. CHAIRMAN: Reference is made to your letter of July 22, 1977, requesting updating information concerning those Commission employees whose "case studies" were reviewed during the Subcommittee's recent hearings on conflict-of-interest regulations. Of the five cases referred to, those identified as B and C have been disposed of as follows: B-The employee reported on June 3, 1977, that the holdings of his wife in the General Electric Company had been sold by her on April 13. 1977 ; C— The employee reported on June 28, 1977, that the holdings of his wife in AT&T had been sold on June 20, 1977. With cases A, D, and E presently under active review, I have taken the necessary steps to keep the Subcommittee advised of any changes in the status or financial holdings of the employees' family members as a result of this review. Sincerely yours, RICHARD E. WILEY, Chairman. Mr. Moss. We will call now the witnesses from EPA. Mr. WILEY. Thank you, Mr. Chairman. Mr. Moss. Please stand and be sworn. Please raise your right hand. Do you solemnly swear the testimony you are about to give this subcommittee shall be the truth, the whole truth, and nothing but the truth, so help you God? Ms. BLUM. Yes. Mr. FRICK. Yes. Mr. JAMES. Yes. Mr. Moss. We want to welcome you here. I believe this is the first time you have appeared here since assuming office. Ms. BLUM. Thank you TESTIMONY OF BARBARA BLUM, DEPUTY ADMINISTRATOR, ENVIRONMENTAL PROTECTION AGENCY, ACCOMPANIED BY G. WILLIAM FRICK, GENERAL COUNSEL; AND MICHAEL A. JAMES, DEPUTY GENERAL COUNSEL Ms. BLUM. Mr. Chairman, I am very pleased to be here. I have no formal statement, but there are a couple of things I would like to say if I may. Mr. Moss. You are recognized. MS. BLUM. Thank you. I feel and our Agency feels that standards are essential to the success of our EPA programs. We feel that if we lose the confidence of the public then we are going to fail because so much of what we do depends on public support. With me here today is Bill Frick, who is the General Counsel for EPA. He served as Deputy General Counsel, who is Agency Counselor for Conflict of Interest, from February 1975 to June 1976. Michael James, on my right, is now Deputy General Counsel. He has served as Agency Counselor from June 1976 to date. The agency Counselor who served from the beginning date of your study, which I believe was January 1974, is no longer employed at EPA; or I would have him here, too. I believe, however, that these gentlemen can answer any questions. on past actions of the Agency in regard to conflict of interest on any of the cases that you have brought out in your study. I, of course, will be happy to attempt to answer any questions that you might have on present or future policy. Mr. Moss. Thank you. Mr. Dodge? Mr. DODGE. Ms. Blum, my first question relates to a memo which was produced well before your tenure with EPA. It is dated June 6, 1975. Mr. Chairman, I would like to request that this memo be made a part of the record. It is a memo to EPA's 44 deputy counselors from the Agency counselor, who at that time was Mr. Frick, who is with us today. Mr. Moss. Without objection, it will be made a part of the record. [The memorandum referred to follows:] U.S. ENVIRONMENTAL PROTECTION AGENCY, Memorandum to: Deputy Counselors. Subject: Statements of Employment and Financial Interest. The filing of new statements of financial interests, or negative statements where no changes have occurred, is required by June 30, 1975. All personnel required to file should be reminded of this requirement. I want to have a -certification from each of you no later than July 31 that all such statements have been filed. As you know, I have recently reviewed the Agency's compliance with the provisions of the federal conflict of interest laws and EPA's regulations in 40 CFR Part 3. My purpose in asking for copies of all the financial statements filed with each of you as Deputy Counselors was to determine any procedural deficiencies in our handling of these statements and to observe the type of review which the statements are being given, particularly with respect to stock holdings of employees since this is the most common problem and perhaps the most difficult to handle. The following comments and suggestions relate primarily to the compliance with the procedures for confidential statements. 1. The regulations provide that all Deputy Counselors file their Statement with the Agency Counselor. A number of Deputy Assistant Administrators are filing their statements with their AA. With these next statements, all Deputy Counselors should be sure to file with me. I recognize that this means that the Assistant Administrators will be counselors only for their immediate offices. 2. A large number of statements were not signed by the Deputy Counselor. Since the purpose of the statement is to alert the Counselor to possible conflicts, it is essential that the form show that the financial interests of the employee have been reviewed by the Deputy Counselor. 3. For the regional offices, the Regional Administrator is the Deputy Counselor, not the Regional Counsel. 4. These documents are confidential and should be treated accordingly. Access to the filed statements should be limited; preferably they should be kept in a locked container. Collecting and reviewing authority should not be delegated. We must remember that this is an intrusion into the private lives of the employees, many of whom disagree with the requirements, and we should be sensitive to this in our treatment of the statements. Communications between the Agency Counselor and the Deputy Counselor (or to the employee) concerning the contents of the statements should also be kept confidential. I recommend that a separate file be made for your memoranda on the statements and that the file be kept secure in the same place as the statements. 5. Several of the statements contained no entries in some of the spaces for information. An entry of "None" must be included if there is no information to be included in the particular category. A form with blank entries should not be signed by the Deputy Counselor. 6. The names of the corporations in which the employee has an interest must be included. It is not adequate merely to indicate, for example, that the individual has holdings in an oil company. The company must be listed. 7. All personnel should also be reminded that changes in their financial interests must be reported quarterly during the year; they are not to wait until the next annual filing. With respect to stock holdings, I have noted a large number of statements which indicate stock ownership in companies which obviously are regulated by EPA. It is often not clear whether the duties of the person will result in their participating in a decision affecting such companies. I want to reemphasize that stockownership of any amount is a financial interest covered by 18 U.S.C. 208. If an individual may be working on projects affecting the company, it is essential that the employee disqualify himself or herself from that particular project or obtain a waiver from the Agency Counselor that the interest is not so substantial as to constitute a conflict. The employee cannot individually make the decision that their ownership is de minimis and not a conflict of interest. Of course, in certain instances, the employee may be required to dispose of the stock or put it in a blind trust where his duties cannot be separated from his stock ownership. In order to make the reporting forms more effective as a means of indicating the absence of conflicts, I suggest that, where stock is listed, the reviewing official when signing it add a statement to the form that the stock ownership has been discussed with the employee and that it has been determined that it does not present a conflict for a specific reason, e.g., the employee's official duties do not involve regulation of the particular company or industry. In this way we can insure that the issue has been addressed. In my review, I have noted several instances where it appears that there clearly must be a conflict between the employee's duties and certain stocks that he or she owns. I will be getting in touch with the appropriate Deputy Counselors to discuss those situations. Mr. DODGE. The memo reads, in part: G. WILLIAM FRICK. With respect to stock holdings, I have noted a large number of statements which indicate stock ownership in companies which obviously are regulated by EPA. It is often not clear whether the duties of the person will result in their participating in a decision affecting such companies. Then, at the end, Mr. Frick continues his thought: In my review, I have noted several instances where it appears that there clearly must be a conflict between the employee's duties and certain stocks that he or she owns. I will be getting in touch with the appropriate Deputy Counselors to discuss those situations. My question is this: What specific steps did EPA take at that time to follow up on these situations? Ms. BLUM. Mr. Chairman, may I have Mr. Frick answer this since this is his memo? Mr. Moss. Yes. Mr. FRICK. With respect to the basic problem of whether the statement reflects a holding which may or may not conflict, we have revised the format of the reporting form. It now requires further information from the individual employee. It is the burden of the employee to indicate the nature of their holding, the nature of their official duties, and to indicate what is there so we have an idea of what the company does as well as what they do and can make the determination whether they would be involved in any particular matter involving that company. So, we have attempted to correct the procedural problem which I was attempting to identify. With respect to the individual cases, we attempted to follow this up with the individual deputy counselors. It was mainly done orally.. I do not have records. I do not recollect exactly what the disposition of these was. Again, some of those I am sure were resolved by the deputy counselors. As you point out in the report, in EPA we have a system whereby we have deputy counselors who do the main work with the individual employee. Mr. DODGE. Have you undertaken since the time of this memorandum of June 1975, Mr. Frick, any subsequent audits of the type you undertook here when you first took over the job? In other words, do we know now any better than we did then the extent to which there exists at EPA the sort of conflict that you found in your 1975 review? Mr. FRICK. NO; I have not done any further investigation. Mr. DODGE. Do you view it as within the role of the Agency counselor to perform periodic audits to find out whether or not the 40Agency counselors are doing their jobs? Mr. FRICK. Obviously, it is the job of the Agency counselor, as assisted by the Office of General Counsel, to monitor compliance. Mr. Moss. Excuse me. We have a series of votes on the floor. We are going to have to break until 2:30. [Brief recess.] Mr. LUKEN [presiding]. We will resume this hearing of the Oversight and Investigations Subcommittee. I believe when we adjourned Mr. Dodge was questioning the panel. Mr. Dodge? Mr. DODGE. Thank you, Mr. Chairman. We were discussing the role of the Office of the General Counselthe General Counsel and the Deputy General Counsel, who is also the agency Counselor for Ethics, in monitoring the performance of the 40 deputy counselors dispersed throughout EPA. EPA has given them the job of reviewing financial disclosure forms. and resolving any conflicts questions which arise. I believe I had just asked Mr. Frick whether or not, since his 1975. audit of how that system is functioning, he had performed any subsequent audits to learn how the system was performing. Mr. FRICK. I believe the answer was no, I have not. Mr. DODGE. My followup to that is this: Do you think it is appropriate for the Office of General Counsel to be performing such audits. on a regular basis? Can the system run adequately without surveillance from your office? Mr. FRICK. Obviously, some auditing must be done. The regularity with which it is done can be debated. Since the one audit we did do, there has only been one additional filing. Statements are filed annually. We did the one on the 1975 statements. But we will be getting another filing this June. It may be appropriate at that time to do another. Mr. DODGE. For the 1976 statements, then, you did not check to see whether or not Agency deputy counselors had actually reviewed those statements and signed them as having been reviewed? |