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Washington, DC. The subcommittee met, pursuant to call, at 9:05 a.m., in room 2218, Rayburn House Office Building, Hon. Gerry Sikorski (chairman of the subcommittee) presiding.

Mr. SIKORSKI. This is a continuation of the Investigations Subcommittee's hearing examining the executive branch ethics program and the performance of the Office of Government Ethics and its efforts to fulfill its mandated responsibilities under the Ethics in Government Act.

Over the last year, the subcommittee has examined a variety of issues related to OGE's role and authority. We have learned that the Office of Government Ethics is not providing adequate policy guidance to the agencies, guidance which is necessary if conflictsof-interest and ethics violations are to be reduced. We have learned that the Office of Government Ethics does not adequately oversee and monitor agency ethics programs. And we have learned that the OGE is asleep at the wheel when it comes to exercising its crucial legal authority to enforce ethics laws and regulations in a uniform manner.

It is clear that the Office of Government Ethics has not taken the leadership role that Congress intended it to take. Yesterday's hearing confirmed what we have been told repeatedly: The American people are not getting what they pay for.

Today we take a closer look at the Federal ethics program at the agency level. We will hear from two agency ethics officials who have successfully created strong ethics programs, despite a lack of clear direction and strong leadership from the Office of Government Ethics. They are Mr. Gerald Yamada, Deputy General Counsel and Designated Agency Ethics Official (DAÈO) at the Environmental Protection Agency, and Mr. Gabriele Paone, Deputy Agency Ethics and Audit Coordination Official at the Department of the Interior.

We will begin this hearing with testimony from two former agency ethics officials who apparently tried to enforce the ethics laws but were spurned and driven out of their jobs. Mr. Herbert Sanger worked at the Tennessee Valley Authority for 25 years. For the past 11 years, he served as the TVA's Chief Counsel and addi


tionally was the TVA Designated Agency Ethics Official - DAEOfor six of those years. Mr. William Mason was Assistant General Counsel at the TVA for seven years.

Although other allegations have been made, both men recently resigned after the TVA Board evidently became displeased with their continued objection to conflict-of-interest waivers granted to Stephen White, the new head of the TVA's nuclear power program, and to four other Stone & Webster Engineering Company employees.

It seems that Mr. White worked out a deal with TVA so that he would not be subjected to the Federal pay ceiling of $72,500 per year. Instead, Mr. White was loaned by the engineering firm of Štone & Webster at the rate of $355,200 per year for two years. Mr. White arranged to hire his Stone & Webster colleagues via a $4 million/TVA-Stone & Webster support services contract, and this created a conflict-of-interest problem. Because Mr. White's loan arrangement arguably maintained a financial interest in Stone & Webster, he was disallowed by Federal conflict-of-interest laws from hiring his colleagues at Stone & Webster.

To get around this problem, the TVA Board waived the law's restriction for Mr. White and four other Stone & Webster employees on the grounds that their interests in Stone & Webster were somehow insubstantial.

After four unsuccessful months of trying to resolve the matter internally at TVA, Sanger and Mason turned to the Office of Government Ethics for assistance. They asked the OGE to intervene to get the TVA Board to reverse its waiver decisions and to comply with the conflict-of-interest laws. Mr. Martin, the Director of the Office of Government Ethics, sent two strong letters to the Board and made phone calls urging the TVA to take action to terminate all on-going conflicts-of-interest. Mr. Martin, however, failed to exercise statutory authority to order corrective action against the TVA Board.

Absent a show of action by Mr. Martin, the TVA Board was unmoved by his tough words. Time passed, summer arrived, and the TVA ethics officials were soon out of work.

Although the witnesses which we will hear from shortly believed that a Federal ethics program was in place which should have resolved these troubling conflict-of-interest problems and supported them in their efforts as agency ethics officials to uphold the law, they were wrong-and they have evidently paid the price.

TVA officials contacted yesterday and requested to testify today declined the subcommittee's invitation. Although they have had time to make several calls to Members of Congress, Washington, D.C. counsel, and others to dissuade the subcommittee from moving forward, they understandably felt that they could not prepare their testimony by this morning. We will attempt to arrange a convenient time for them to testify after they have provided this subcommittee with relevant documents.

After my statement, a letter from Mr. C. H. Dean, Jr., Chairman of the Tennessee Valley Authority, without objection, will be inserted into the record. Mr. Dean respectfully declines the invitation to testify this morning but offers to work with us as we continue our investigation.

This subcommittee is concerned that other Designated Agency Ethics Officials subjected to similar pressures when acting on waivers, disclosures, referrals, recusals, and other opinions not be discouraged from enforcing the ethics laws. We are concerned that the Office of Government Ethics act to fully protect agency ethics officials from such pressures. And we are concerned that all agencies be dissuaded from shaving or ignoring ethics laws which seemingly get in the way of solving a problem.

The TVA has serious, even horrendous, problems. But violations of ethics laws as part of a quick-fix only buy greater problems, as TVA is finding out. Evidently, the past actions of TVA management are costing TVA rate-payers millions of dollars each day. Therefore, some have argued that TVA should throw ethics laws out the window in order to accede to the dictates of an individual who might help to rectify the problems.

It is not unusual for humans to panic in dire times and to offer to pay any price for assistance. They will pay money, improve contracts, allow sweetheart deals, make end-runs around Federal pay statutes, and even bend or break ethics laws. But America was founded on the conviction that we are equal under the law. The Federal ethics and conflict-of-interest laws apply equally to everyone who works for America, from the $12,000-a-year disabled custodian to the $355,200-a-year nuclear czarr-especially the nuclear czar because he is well positioned to take public action which can affect his private interests.

Without objection, we will also insert in the record two memorandas to this Subcommittee entitled, "Authority of the Office of Government Ethics to Order Agency or Employee Action,” dated September 26, 1986, from the American Law Division, Congressional Research Service, and "Congressional Intent Concerning the Authority of the Office of Government Ethics Over Individual Ethics and Conflicts-of-Interest_Matters”, dated August 7, 1986, again from the American Law Division.

[The letter and memoranda follow:)


September 29, 1986



The Honorable Gerry Sikorski, Chairman
Subcommittee on Investigations
Committee on Post Office & Civil Service
U.S. House of Representatives
Washington, DC 20515

Dear Mr. Sikorski:

Director John Waters and I received this afternoon your invitation to
attend and testify at a hearing to be held by your Subcommittee at 9:00 a.m.
tomorrow. As we understand it, the hearing is to cover the conditions
of employment of Admiral Steven White as TVA's Chief of Nuclear Power,
and of other personnel drawn from firms experienced in nuclear construction
and operation.

We are anxious to cooperate with the work of your Subcommittee and to be
fully responsive to your questions. In the time allowed, however, it
would not be possible for us to prepare ourselves for a hearing on these
matters, especially without guidance as to your areas of interest. We
welcome the opportunity to respond to any questions that you or your staff
may direct to us and would do so as expeditiously as possible. Should
you also believe oral testimony with respect to any specific issues to
be desirable, we would arrange for the presentation of such testimony to
your Subcommittee.

Mr. Waters and I are ever mindful of the enormity of the problem that now
confronts us as we seek to improve our nuclear plants so that we can assure
in the future a reliable, efficient electric power supply for the three
million customers to whom we have that responsibility. We would welcome
the assistance of your Subcommittee and pledge to work with it in the coming

Please introduce this letter in the transcript of the hearing.



C. H. Dean, Jr.

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Authority of the Office of Government Ethics to Order Agency
or Employee Action

This memorandum is submitted in response to your request as discussed

with you and Rick Shapiro of the Subcommittee staff concerning the legal and

statutory authority of the Office of Government Ethics (OGE) to order an agency

or an employee to take certain action with respect to conflict of interest

avoidance or other ethics matters.

The issue involves whether OGE is empowered

to order and direct that an agency or an employee take particular action, or

whether OGE may only suggest a recommended course of action to an agency or an


The Office of Government Ethics was created as

an entity within the

Office of Personnel Management by the Ethics in Government Act of 1978, P.L.

95-521, as amended.

The statutory language regarding the authority of the

Director of OGE, who is to provide the "overall direction of executive branch

1/ policies related to preventing conflicts of interest," enumerates the statutory


P.L. 95-521, as amended, Section 402(a); see 5 U.S.C. App. 402(a).

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