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person should keep these reports in mind when considering his testimony.

Mr. Chairman, there are other serious reasons why I am concerned about the nature of this hearing. I am concerned that the microscopic scrutiny that is being paid to Admiral White's salary deflects attention away from some much, much more serious problems within TVA.

Let me say this: As a member of two subcommittees with oversight responsibility for TVA, I believe that TVA is on sound legal footing in their relationship with Admiral White. But even if I am wrong, the problem here is insignificant in comparison to the gravity of TVA's nuclear difficulties. Mr. Chairman, TVA is undergoing a nuclear safety crisis of monumental proportions. All five nuclear plants have been shut down since last August as a result of TVA mismanagement.

By last fall, it became obvious to our TVA Congressional Caucus that TVA could not solve this crisis with their existing management leadership. There was a bipartisan consensus in our Valley delegation that extraordinary steps had to be taken. The most important first step was to force TVA to hire a tough, independent nuclear nanager to take over the program. TVA simply had no choice except to pay the market rate for such a service.

Admiral White was hired on a temporary basis. He has been on board for only a few months. He is tough. He is independent. He is experienced. And he is able. He may not solve this safety crisis, but right now he is the only chance we ave.

We in the Valley Congressional Delegation, believe he needs to be given a chance to succeed. My point is this: the shutdown of TVA's nuclear plants is costing the ratepayers of the Tennessee Valley more than a million dollars a day in replacement energy costs alone. When you figure the total cost that the ratepayers are paying for nuclear energy plants that are not operating, this figure rises to $4.6 million every day of the week. In comparison to the bottom-line cost to the ratepayers, Admiral White's salary is minuscule. As the safety crisis continues, Tennessee Valley consumers are paying more in one single hour than the entire annual sum of Admiral White's contract.

I don't like being here and defending a $355,200 salary. It is not a comfortable position. But I can assure you of one thing, Mr. Chairman. The costs are going to be thousands of times greater if we don't give TVA a chance to make the system work.

This matter has already been debated before the full House of Representatives. Less than two months ago, Representative Schroeder of Colorado attempted to cut $355,200 from TVA's appropriated budget as a protest against Admiral White's salary. The matter was debated fully on the floor and the amendment was rejected.

I find it extremely disappointing that Members of Congress outside of the Valley have spent more time debating Admiral White's contract than on proposing ways to help TVA work its way out of the nuclear crisis.

In conclusion, let me say I share the chairman's concern and The Washington Post's concern about the technicalities of the $355,200 contract. But I am much more concerned, however, about a nuclear safety crisis that may cost billions and could hold dire, unspeakable consequences in the absence of strong leadership.

As you proceed with this hearing, I hope you can keep the big picture in mind, and I appreciate the opportunity for my words to be given today. Thank you.

Mr. SIKORSKI. Thank you, Mr. Sundquist. I appreciate your words and can assure you that we are sensitive. I have had occasion to oppose that salary number. But I have to say, in talking with Members from the Valley, that TVA's problems are such that it is perhaps necessary to purchase the kind of talent that only comes at a price higher than the Federal pay cap.

However, the focus here is on conflict-of-interest laws and the way that White's end-run around the pay cap was structured. And our concern is what happens to ethics officials who try to enforce the law, and the kind of support they get or don't get from the Office of Government Ethics. That is why this hearing comes so close to our investigation of the OGE. We want to give the two TVA agency officials who were in charge of ethics a chance to enlighten us as to their experience.

Mr. SUNDQUIST. Mr. Chairman, I thank you for that comment, and I understand where you are headed. I just think it may be a little premature being that all these other folks have not reported yet.

I also am a little perturbed that we didn't give TVA enough time, enough notice to testify. And in the absence of that, I would hope that you would ask Mr. Sanger today if he didn't in fact write the contract for Mr. Bill Bibb of the MAC Company that established the pattern for Admiral White's salary.

I, incidentally, have fought TVA in their blanket attempt to lift the pay cap. But the seventy-some thousand dollar pay cap for some nuclear managers is a problem. You can't find skilled nuclear expertise for under that price. I think TVA tried before to find nuclear expertise for that price and they failed. So something clearly has to be done. I think TVA was dealing in good faith when they tried to find an expert and a way that would solve the TVA nucle ar safety crisis.

Also, I would ask that you question the witness today as to the extent of his activities as the person in charge of listening to whistleblowers. There has been a lot of discussion off the record and I have received phone calls and correspondence from people who wanted to tell what was going on but felt like they couldn't over the past few years.

Mr. SIKORSKI. I have questions on my list already and I will star them to be asked.

Have you had an opportunity at all to talk with either Mr. Sanger or Mr. Mason?

Mr. SUNDQUIST. I have not. I thought it would be inappropriate, considering the fact that Mr. Sanger's conduct has been the focus of an ongoing investigation.

Mr. SIKORSKI. About the conflict-of-interest charges or the subsequent charges dealing with their personal conduct?

Mr. SUNDQUIST. To my knowledge, I haven't spoken to them.

Mr. SIKORSKI. The OĞE has taken a position, a very strong position, on the conflict of interest, and they assured us yesterday that they are not finished with it. The non-statutory TVA Inspector General sent back the original memorandum raising the conflict-ofinterest charges to Mr. Sanger, and told him that it wasn't in his area. We are going to attempt to find out what is the position of TVA's private counsel. You made mention that these three entities were looking at the issue.

Mr. SUNDQUIST. That is right. And I do think it would be better if we had some balance the same day, and I realize that TVA couldn't testify. But certain comments by Mr. Sanger, I am sure, will want to be answered by TVA.

Mr. SIKORSKI. Of course they get the benefit of seeing those comments and preparing a long well-researched and well-funded response. They get the benefit of not having to respond on a one-toone basis, too. I think it is a plus and a minus, and evidently they weighed those. And we are going to respect their right to have their side of the story told.

Mr. SUNDQUIST. I appreciate that, Mr. Chairman. Thank you for letting me testify.

Mr. SIKORSKI. Thank you.

Our next witnesses are Mr. Herbert S. Sanger, Jr. and Mr. William E. Mason.

Mr. Sanger worked at the TVA for some 25 years. The past 11 years he was TVA Chief Counsel, as well as the Designated Agency Ethics Official for six years. Mr. Mason was TVA Assistant General Counsel for seven years.

Gentlemen, some technical questions. I will note that before you on the table there is a list of the rules of the House. With particular reference to House Rule 11, do either of you wish to have counsel present?

Mr. SANGER. No.
Mr. MASON. No.
Mr. SIKORSKI. And do either of you object to being sworn?
Mr. SANGER. No.
Mr. MASON. No.
(Witnesses sworn.)

Mr. SIKORSKI. Good morning, gentlemen. Do you have a prepared statement?

Mr. SANGER. Mr. Chairman, I have some brief notes. There is also a statement that is available here.

Mr. SIKORSKI. Let me make sure I have it-is that this “Statement of Herbert S. Sanger, Jr., Concerning Events Leading to His Forced Resignation From the TVA"'?

Mr. SANGER. That is correct.

Mr. SIKORSKI. Very good. And do you have a summary of the important points you would like to make?

Mr. SANGER. Yes.

Mr. SIKORSKI. OK, why don't you proceed? TESTIMONY OF HERBERT S. SANGER, JR., FORMER CHIEF COUN.

SEL AND DESIGNATED AGENCY ETHICS OFFICIAL, TENNESSEE VALLEY AUTHORITY

Mr. SANGER. My name is Herbert S. Sanger, Jr. With me is William E. Mason. Mr. Mason was an assistant general counsel who

for us.

handled personnel and ethics work in my office and who left TVA at the same time I did.

As the chairman has indicated, I served as a lawyer for TVA for 25 years, the last 11 as TVA's general counsel, the highest ranking position in TVA as a lawyer. I also was appointed, in 1980, by the TVA Board as TVA's Designated Agency Ethics Official. I have appeared in congressional hearings on many occasions. The normal opening remark was always to say that we were glad to be present, even when we knew that that might not be a particularly good day

Mr. SIKORSKI. Even under oath, huh?
Mr. SANGER. That is correct.

We are here today because we were asked to appear. Incidentally, as the chairman knows, we got our request this weekend also.

Mr. SIKORSKI. That is right. After the article appeared in The Washington Post, staff of the subcommittee contacted you and requested your appearance, in fact, yesterday.

Mr. SANGER. That is correct.

Mr. SIKORSKI. You were available, but we felt it would be better to wait at least one day to see if we could get the TVA's testimony.

Mr. SANGER. We have no large staff. We have no word-processing equipment. We are here just simply to recite to you what was done. And as I say, we are here because we were asked to appear.

We are not happy about the story we have experienced and will speak of today. Our previous experience before subcommittees of the House Post Office and Civil Service Committee was about TVA's programs which were viewed as models in the Federal Government, such as TVA's very successful Retirement System pro gram and some aspects of TVA's labor relations. We are not happy today because the story today is an abrupt departure by TVA from its past model experience under the Ethics in Government Act of 1978.

The story is this: In December 1985, we advised a then fully constituted, three-person TVA Board that TVA had the authority to contract for services even though the contractor would be paid grossly in excess of the TVA pay cap. We take no position on the propriety of the pay cap. We never argued against it. In fact, we supported entering into that contract now. I have filed two formal opinions, one of which Congressman Sundquist repeated, or had it quoted in its entirety in the Congressional Record in opposing Mrs. Schroeder's amendment. That has nothing to do with the conflicts issue.

However, we also told the TVA Board orally and in writing on two occasions, February 13, 1986, and May 5, 1986, that the administration of such contracts involve serious Federal criminal conflictof-interest questions under 18 U.S.C. Section 208. As required by law, we gave those written opinions to the Office of Government Ethics. There is a specific regulation issued under the Government in Ethics Act that required that any time an ethics official wrote such an opinion on section 208, that that opinion had to be sent to the Ethics Office.

The Ethics Office responded on different occasions, two times very firmly. In its first letter, dated June 23rd, the Office of Government Ethics stated that it fully agreed with the legal analysis that Mr. Mason had made-Mr. Mason and I had made. They urged the TVA Board to correct the conflict-of-interest situation without regard to any waivers.

The second letter-a second letter was an August 15 letter in which the Office of Government Ethics said that the second retained counsel by the TVA Board was advising the Board to violate a Federal criminal law, or could be perceived to be violating a Federal criminal law.

In addition to providing these memos, that is, the February 13 and May 5 memos, to the Office of Government Ethics we discussed the issue at the specific request of a Member of Congress. We have been criticized for that, but I thought then and I think now and it had always been my experience in TVA that if a Member of Congress asked us for information that we were to respond fully and honestly. We did that.

One TVA Board member resigned after our February 13 memo saying that he found our advice persuasive and could not vote for waivers of the Federal criminal conflict-of-interest law under those circumstances.

In January of 1986, the full TVA Board approved a letter speaking of the unquestioned integrity of the General Counsel and the DĂEO. Later, the Board, consisting of its present two persons, after this intervening advice had been given on the conflict-of-interest issue, asked me to resign stating that it was because of the advice I had given on the conflict-of-interest issue. Upon my resigning, as requested, those two members leaning on their appointed IG-as you know,

the IG in TVA is not a statutory IG but is appointed by the TVA Board; in fact, TVA is opposed to the appointment of a statutory IG—but leaning upon his advice the TVA Board has impertinently attempted to discredit me particularly, and Mr. Mason, by leaking statements about allegations of impropriety.

In the paper that we have submitted here today there is a full explanation of what Mr. Sundquist referred to as the information I had given about the Retirement System. I don't think any fairminded person could ever conclude that that was an impropriety on my part. The information was given by TVA's

general manager William F. Willis in following directions of the TVA Board to attempt to retain a TVA employee. Indeed, it was the employee that Mr. White was replacing. That TVA employee, in the only written and sworn statements provided in the investigation, said he learned everything that he knew about the proposed Retirement System change from Mr. Willis. That he did not learn anything else from me.

Mr. Willis, himself, told that to the IG and to the TVA Board. With the TVA Board directing the general manager to attempt to retain that employee and approving a $36,000 payment to him on January the 3rd, approving procedures where he would not lose his accumulated annual leave, and approving his designation as an assistant to the general manager-it seems highly likely to me that the TVA Board itself knew what Mr. Willis was discussing with Mr. Parris.

Speaking of timing of matters, the latest effort was that Friday night TVÅ leaked some sort of memo from its special counsel, Swidler, in which it spoke of allegations of the type that Congress

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