Mr. DODGE. I quote from this guidance given by Mr. Stork to his employees:

As a general rule, no employee" of this office," nor his spouse, nor minor children whose assets are under the legal control of the employee or his spouse, may acquire or own securities or other property interest in any corporation, partnership, or other business venture in a field that is to any degree subject to" this office's regulation.

Then he goes on to specify various types of companies in which there is a prohibition in his office against stock ownership: auto companies, anto parts manufacturers or marketers, aircraft engine manufacturers, airlines, oil refiners, et cetera.

Do you believe that this more strict rule is appropriate in the case of that office?

Mr. FRICK. It is feasible in that office. The appropriateness, I think, gets back to the judgment of the head of the office of what problems appearances present for his particular program.

In this instance the Deputy Assistant Administrator felt very strongly that the program demanded a more rigorous standard than the rest of the Agency followed or that the statute required.

Mr. DODGE. In at least one other instance, in the Office of Noise Abatement and Control, a deputy counselor has agreed with the first deputy counselor and applied a similar standard.

În your view, should this standard become more generally applied in different offices of the Agency or agencywide?

Mr. FRICK. I can only speak from my personal views, since the Administrator ultimately must make those decisions. I do not believe that the strict requirement that you cannot own a stock in the program in which you are employed is workable on an agencywide basis. Mr. DODGE. Can you elaborate on that?

Mr. FRICK. Principally because those programs have limited discreet areas of regulation: the motor vehicle industry, the aircraft industry, noise producing products. You can define the sources which they are regulating.

When you got into areas such as the Office of Air Programs and the Office of Water and Hazardous Materials, you are regulating virtually all companies in the country. Such a test does not at all reflect what I view, first of all, as the diversity of the regulated companies; and, second, the diversity of jobs in any one program.

Air Programs has an incredible number of jobs, many of which may be limited to one or two industries. For example, you could say someone who works on establishing limitations for smelters could not own stock in Sears because they might be regulated under a State implementation plan that has regulations limiting parking lot size. I think that, from an appearance standpoint, goes beyond what is really necessary.

Mr. DODGE. Do you think it would be possible for EPA to compile, in the way of advance guidance to its employees, lists of stock in companies regulated by particular programs within EPA which would then serve to educate the employees as to which stocks would be prohibited for them to own?

Mr. FRICK. I think the same problem arises with that. You have to, one, define the program because if you take it very broadly, you are

going to get into the same box. You are including such a vast number of companies who are or may be regulated that your list would be so extensive as to essentially preclude the employee from investing.

Mr. DODGE. So, the Agency's answer to that, rather than making that effort, it to take a permissive view on stocks which may raise a conflict or the appearance of conflict?

Mr. FRICK. No, it does not take a permissive view. It takes a caseby-case view.

Mr. DODGE. Are you aware of the fact that the Food and Drug Administration, which also has a large number of firms under its jurisdiction, has assembled a booklet listing 6,600 companies and is now considering whether to distribute this as advance guidance to its employees on which investments are permissible. I would note the FDA operates under rules. which are not dissimilar from those of EPA.

Mr. FRICK. I am not aware of the program.

Mr. DODGE. Mr. Chairman, I would like to suggest that at least parts of this booklet be offered for the record.

Mr. LUKEN. Without objection, it will be made a part of the record. [The material, consisting of a covering memorandum, and two sample pages from the booklet, follows:]

SUBJECT: Summary Booklet, Conflict of Interest March 21, 1976

You may recall that our June 18, 1976 memorandum to all employees on the
subject of Revisions to FDA's Conflict of Interest Regulations enclosed a
partial listing of prohibited financial interests for FDA "control
activity" employees. That was the only information available at the time
and we thought it might be especially useful for the employee who would be
completing a disclosure form for the first time, inasmuch as they could
anticipate disposition of any stock they owned which was on the list.
Since that time, we have been able to assemble a booklet covering some 6600
firms. This includes all firms listed on the New York Stock Exchange, the
American Stock Exchange, and the Over-the-Counter Exchange. In essence,
most American firms in which the public can purchase stock are listed in
this booklet.

From a

The information contained in the booklet is utilized by our Conflict of
Interest Staff for the initial review of an employee's HEW-473
(Confidential Statement of Employment and Financial Interests).
practical standpoint, we find it to be the most current source of
information regarding whether a firm is or is not "significantly regulated"
by FDA.
It is my feeling that if this kind of summary information could be
assembled and made available to our employees, they would be in a much
better position to identify both permissible and prohibited financial
holdings and act accordingly.

Therefore, I am providing a copy of our Conflict of Interest Staff's
"Summary Report Major U.S. Industries NYSE, AMEX, & OTC Exchanges" to
each major organizational element and requesting that this be made
available for review through the appropriate Bureau office(s) to any
employee who desires to review it. Our Policy Management Staff will work
with your Administrative Management Staffs to identify those offices which
should receive a copy. The report will be updated quarterly and a copy
provided to all offices designated by you to receive a copy.

In developing this summary report a contract was awarded to an independent
organization which utilized the information on file with the Securities and
Exchange Commission, the major stock exhanges, and Standard and Poor's.
The FDA Product Codes Manual served as a cornerstone for this project.

You will note that the report contains five columns of information which are described as follows:

First column

Name of firm. (Some firms are identified by their initials such as CPC Int'l Inc. for Corn Products Corporation, or RCA Corp for Radio Corporation of America. Also, note that the list does not identify subsidiaries such as Armour Laboratories which is a part of Greyhound Corporation, but rather is limited to those firms in which stock may be purchased.)

Second column Date of firm's data as provided by FDA's contractor for inclusion in report. Any employee able to provide more current data is requested to do so.

Total annual sales of the firm (Expressed in $100,000).

Fourth column The percentage of the annual sales which occur in products regulated by FDA. When a firm's annual sales reaches 10% or more, the firm becomes a prohibited financial interest for a control activity employee. (NAX indicates the company's total percentage is not available.)

Fifth column Abbreviation: "P" = (permissible), "R" = (prohibited or restricted).

While these reports will be updated quarterly and distributed on that basis, there may be instances in which an employee may wish to obtain more current information from a firm. This is particularly important when a firm is hovering around the 10% mark and/or is one that is active in acquiring or divesting subsidiary companies. In all instances, the most current information will be used and the next summary report will reflect that information.

Let me stress again that I am distributing this information to you in order that it may be made available to our employees. It is my sincere hope that our employees will use this information to evaluate their position with respect to our conflict of interest regulations and take appropriate action to promptly divest of any prohibited holdings.

Should there be any questions regarding this information, please feel free to contact the Policy Management Staff's Conflict of Interest Officer on 8-443-3130.

Gerald F. Meyer

HOW TO USE THIS REPORT

The following information is furnished to assist you in the use of this report. Each column has specific information which can be determined from the following examples:

An means the percentage shown includes an amount of non-FDA regulated products or services. This amount does not affect the list assignment.

▲ + sign indicates that certain amounts of FDA regulated products or services are not included in the percentage shown. This amount does not affect the list assignment:

A indicates a combination of and +.

The letter X signifies that percentage calculations are not possible due to the product line reporting practices of the company. List assignment was made by analytical staff, and attempts to ascertain definitive product line breakdowns for the company continue.

The letters NA indicate that the firm does not make detailed information available.