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25–921 PDF 2006

CURRENT GOVERNANCE ISSUES AT

AMTRAK

(109–41)

HEARING

BEFORE THE

SUBCOMMITTEE ON

RAILROADS

OF THE

COMMITTEE ON

TRANSPORTATION AND

INFRASTRUCTURE

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

NOVEMBER 15, 2005

Printed for the use of the

Committee on Transportation and Infrastructure

(
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

DON YOUNG, Alaska, Chairman

THOMAS E. PETRI, Wisconsin, Vice-Chair

SHERWOOD L. BOEHLERT, New York

HOWARD COBLE, North Carolina

JOHN J. DUNCAN, JR., Tennessee

WAYNE T. GILCHREST, Maryland

JOHN L. MICA, Florida

PETER HOEKSTRA, Michigan

VERNON J. EHLERS, Michigan

SPENCER BACHUS, Alabama

STEVEN C. LATOURETTE, Ohio

SUE W. KELLY, New York

RICHARD H. BAKER, Louisiana

ROBERT W. NEY, Ohio

FRANK A. LOBIONDO, New Jersey

JERRY MORAN, Kansas

GARY G. MILLER, California

ROBIN HAYES, North Carolina

ROB SIMMONS, Connecticut

HENRY E. BROWN, JR., South Carolina

TIMOTHY V. JOHNSON, Illinois

TODD RUSSELL PLATTS, Pennsylvania

SAM GRAVES, Missouri

MARK R. KENNEDY, Minnesota

BILL SHUSTER, Pennsylvania

JOHN BOOZMAN, Arkansas

JIM GERLACH, Pennsylvania

MARIO DIAZ-BALART, Florida

JON C. PORTER, Nevada

TOM OSBORNE, Nebraska

KENNY MARCHANT, Texas

MICHAEL E. SODREL, Indiana

CHARLES W. DENT, Pennsylvania

TED POE, Texas

DAVID G. REICHERT, Washington

CONNIE MACK, Florida

JOHN R. ‘RANDY’ KUHL, JR., New York

LUIS G. FORTUN ̃ O, Puerto Rico

LYNN A. WESTMORELAND, Georgia

CHARLES W. BOUSTANY, JR., Louisiana

JEAN SCHMIDT, Ohio

JAMES L. OBERSTAR, Minnesota

NICK J. RAHALL, II, West Virginia

PETER A. DEFAZIO, Oregon

JERRY F. COSTELLO, Illinois

ELEANOR HOLMES NORTON, District of

Columbia

JERROLD NADLER, New York

CORRINE BROWN, Florida

BOB FILNER, California

EDDIE BERNICE JOHNSON, Texas

GENE TAYLOR, Mississippi

JUANITA MILLENDER-MCDONALD,

California

ELIJAH E. CUMMINGS, Maryland

EARL BLUMENAUER, Oregon

ELLEN O. TAUSCHER, California

BILL PASCRELL, JR., New Jersey

LEONARD L. BOSWELL, Iowa

TIM HOLDEN, Pennsylvania

BRIAN BAIRD, Washington

SHELLEY BERKLEY, Nevada

JIM MATHESON, Utah

MICHAEL M. HONDA, California

RICK LARSEN, Washington

MICHAEL E. CAPUANO, Massachusetts

ANTHONY D. WEINER, New York

JULIA CARSON, Indiana

TIMOTHY H. BISHOP, New York

MICHAEL H. MICHAUD, Maine

LINCOLN DAVIS, Tennessee

BEN CHANDLER, Kentucky

BRIAN HIGGINS, New York

RUSS CARNAHAN, Missouri

ALLYSON Y. SCHWARTZ, Pennsylvania

JOHN T. SALAZAR, Colorado

JOHN BARROW, Georgia

(II)
SUBCOMMITTEE ON RAILROADS

STEVEN C. LATOURETTE, Ohio, Chairman

THOMAS E. PETRI, Wisconsin

SHERWOOD L. BOEHLERT, New York

JOHN L. MICA, Florida

SPENCER BACHUS, Alabama

JERRY MORAN, Kansas

GARY G. MILLER, California

ROB SIMMONS, Connecticut

TODD RUSSELL PLATTS, Pennsylvania

SAM GRAVES, Missouri

JON PORTER, Nevada

TOM OSBORNE, Nebraska

MICHAEL E. SODREL, Indiana

LYNN A. WESTMORELND, Georgia, ViceChair

DON YOUNG, Alaska

(ex officio)

CORRINE BROWN, Florida

NICK J. RAHALL II, West Virginia

JERROLD NADLER, New York

BOB FILNER, California

ELIJAH E. CUMMINGS, Maryland

EARL BLUMENAUER, Oregon

LEONARD L. BOSWELL, Iowa

JULIA CARSON, Indiana

PETER A. DEFAZIO, Oregon

JERRY F. COSTELLO, Illinois

EDDIE BERNICE JOHNSON, Texas

JOHN BARROW, Georgia

JAMES L. OBERSTAR, Minnesota

(ex officio)

(III)

(V)

CONTENTS

TESTIMONY

Page

Castle, Hon. Michael N., a Representative in Congress from the State of

Delaware ............................................................................................................... 12

Costa, Hon. Jim, a Representative in Congress from the State of California .... 13

Cummings, Hon. Elijah, a Representative in Congress from the State of

Maryland ............................................................................................................... 17

Gunn, David, former President and CEO, Amtrak ............................................... 27

Hughes, David, acting President and CEO, Amtrak ............................................ 27

Laney, David M., Chairman of the Board, Amtrak .............................................. 27

Lautenberg, Hon. Frank, a United States Senator from the State of New

Jersey .................................................................................................................... 4

Menendez, Hon. Robert, a Representative in Congress from the State of

New Jersey ........................................................................................................... 15

Rosen, Jeffrey A., General Counsel, U.S. Department of Transportation .......... 27

Schumer, Hon. Charles, a United States Senator from the State of New

Jersey .................................................................................................................... 10

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Blumenauer, Hon. Earl, of Oregon ......................................................................... 79

Brown, Hon. Corrine, of Florida ............................................................................. 80

Costello, Hon. Jerry F., of Illinois .......................................................................... 87

Cummings, Hon. Elijah E., of Maryland ............................................................... 89

Johnson, Hon. Eddie Bernice, of Texas .................................................................. 112

Oberstar, Hon. James L. of Minnesota .................................................................. 157

Young, Hon. Don, of Alaska .................................................................................... 186

PREPARED STATEMENTS SUBMITTED BY WITNESSES

Gunn, David ............................................................................................................. 97

Hughes, David .......................................................................................................... 111

Laney, David M ....................................................................................................... 115

Rosen, Jeffrey A ....................................................................................................... 160

SUBMISSIONS FOR THE RECORD

Laney, David M., Chairman of the Board, Amtrak, responses to questions

from Rep. Brown of Florida ................................................................................. 119

Rosen, Jeffrey A., General Counsel, U.S. Department of Transportation:

Letter to Rep. LaTourette, October 26, 2005 and attachments ........................ 168

Memorandum for Alberto Gonzales, Counsel to the President, from M.

Edward Whelan III, Acting Assistant Attorney General, Office of Legal

Counsel, U.S. Department of Justice, September 22, 2003 .......................... 175

Responses to questions from Rep. Brown of Florida ......................................... 181

(1)

CURRENT GOVERNANCE ISSUES AT AMTRAK

Tuesday, November 15, 2005

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON RAILROADS, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, WASHINGTON, D.C.

The subcommittee met, pursuant to call, at 10:07 a.m., in Room

2325, Rayburn House Office Building, Hon. Steven LaTourette

[chairman of the subcommittee] Presiding.

Mr. LATOURETTE. We are going to ask the subcommittee to come

to order this morning. I want to welcome all of our members, our

guests and our witnesses this morning.

It was originally our intention to hold a hearing on rail safety

today, focusing on 10-car safety and some other things. But due to

events that have occurred that the National Passenger Rail Corporation, Amtrak, within the last week, the hearing has been shifted in focus to governance at Amtrak.

I want to, first of all, indicate that we are not in the transportation infrastructure room. It is under construction, which is expected from the Transportation Infrastructure Committee, and we

want to thank the Science Committee and Chairman Boehlert for

making this room available for us here today. A couple of housekeeping matters, I want to ask unanimous consent for members to

insert additional remarks into the record, and additional statements and materials by witnesses.

Also, we have been notified that, and we may expand this, but

ask unanimous consent that members not on the Rail Subcommittee but who have indicated a desire to participate today, be permitted to do so, Mr. Baker of Louisiana and Ms. Holmes Norton of

the District of Columbia, without objection.

The Chair also has an announcement to make. Pursuant to rule

6(f), paragraphs 2 through 4 the Committee on Transportation and

Infrastructure, and by agreement, with the ranking minority member, the subcommittee will be following the extended questioning

procedure today in today’s hearing. Under that procedure, one hour

of time will be allotted for extended questioning of witnesses with

the hour evenly divided between the majority and the minority.

The chairman and the ranking member respectively will recognize members for use of such extended questioning time. Pursuant

to the same rule, members seeking to ask questions outside of the

extended question period may be recognized to ask questions under

the 5-minute rule. So for members and your schedules, after the—

we won’t have extended questioning of our first panel, but on our

second panel, because of the complex legal issues that I think we

need to explore today, the Chair will control one half hour and dis-
2

tribute time accordingly. The ranking member will distribute one

half hour. And then we will go to the 5-minute rule.

Today, we will be examining current governance issues at Amtrak, although it may come as a surprise to some, Amtrak is not

a part of the government, but is a District of Columbia corporation.

It has a board of directors, shareholders, articles of incorporation

and bylaws. One of the Board’s responsibilities is to hire Amtrak

officers, including president and the CEO. Last week, the current

Amtrak board—and we will come back to whether or not we have

some questions about the Board—fired the CEO, Mr. David Gunn.

I happen to believe that Mr. Gunn was doing a reasonable job with

the hand that he was dealt.

As a matter of law, Mr. Gunn, or any other CEO, serves at the

pleasure of the Board. But there are deeper issues here, whether

one is a supporter or an opponent of Mr. Gunn.

The key issues we will examining today is whether Amtrak’s

board of directors is legally functional with the quorum required by

law. That affects, among other things, the company’s authority to

fire Mr. Gunn and to hire a new CEO. But that is just the tip of

the proverbial iceberg. There are a number of complex legal issues

here which we hope to discuss. But the sad reality is, even using

the quorum standards and personnel count of Amtrak and the administration, the company has been without a quorum for at least

part of the time since June of 2003, nearly 2-1/2 years. The best

word that I can think of for this situation is pathetic. The administration knew from day one exactly when each prior director’s tenure ended, and did not make timely nominations.

The administration wears two other hats in this saga. As the optional holder of one seat on the Board and as Amtrak’s preferred

shareholder, that neither the Department, the transportation’s

legal establishment, nor Amtrak’s general counsel apparently took

any preventive action, except the very thin read of authorizing socalled executive committees when disaster looms.

There was a substantial period of time prior to June 2003, when

the Board’s full legal functioning and quorum were beyond question, and when any corporation that was not totally clueless would

have done something if it had still had a fully functioning board.

The quorum requirements, for example, probably could have been

lowered by a joint action of the Board and the shareholders before

the Board lost its quorum. Also, Amtrak’s board could have rescinded a number of self-imposed restrictions requiring board action for all kinds of transactions including labor contracts. None of

that was done. As a result, the damage and chaos were maximized

and the company is now in a catch-22 posture, where it can’t even

reduce the damage from losing a quorum without first reacquiring

a quorum. The situation now is such a mess that I have heard it

said that you couldn’t think up a hypothetical case with this loony

if you tried.

Besides Amtrak’s dereliction in following normal corporate procedures, we still have a denial psychology, in my opinion, by the administration. Right now, there are no nominations pending in the

Senate, other than those of the two individuals now serving under

claimed recess appointments. That is it. To put it another way, if

all the administration’s pending nominees were confirmed this
3

afternoon, almost none of the legal issues about the quorum head

count at Amtrak would be resolved. This late in the session, the

administration has left itself virtually no options other than more

legally suspect recess appointments.

The saddest part of this picture is that its potential victims are

people who do have control over the situation—the employees and

unions who have signed labor contracts since mid 2003, the companies that do business with Amtrak, even the parties who sue Amtrak cannot be assured that when Amtrak, the corporation, signs

on the dotted line, it really means anything legally.

I hope that by exploring these issues today, we will spur Amtrak

and the administration first to take prompt corrective action as

soon as possible, and equally important, send the message that this

should never be allowed to happen again.

It is now my pleasure to yield to our distinguished ranking member, Corrine Brown of Florida.

Ms. BROWN. Thank you, Mr. Chairman. And I want to thank you

for holding this important hearing. And I also want to commend

you for your leadership and fairness in dealing with Amtrak. It

was through your leadership, Mr. Chairman, and the leadership of

Ranking Member Oberstar and other members of this subcommittee that we have been able to save Amtrak time and time again

from an administration that seeks to destroy our Nation’s only,

intercity passenger rail system.

Now it seems that here today, we are exploring the issues surrounding Amtrak’s governing board. Only this time, we are examining the Board that the administration has put in place--another

group of Bush cronies, the Amtrak Board Of Directors, or as I like

to call them, the Bush board. What I would like to focus on however, is not just the legal relationship between the Board and Amtrak’s chief executive officer, but the board’s firing of David Gunn.

When it comes to the Bush administration, it seems that if you

don’t do a good job, you stay on the payroll. But if you do a good

job and you are successful and you stand up for what is right for

the American people, you get fired.

Someone needs to explain that rationale to me. Obviously, it is

not going to be the two Bush board members who refused to show

up at this time, or Secretary Mineta, who parades around the country blasting Amtrak, but doesn’t have enough respect for the committee or the Board to have ever gone to a board meeting.

Mr. Gunn was fired because frankly, he was succeeding. And if

I was going to give a grade, as a former college professor, I would

give Mr. Gunn an A. And if I was going to give an F, just like the

American people, I would give an F to the Board and to the Bush

administration. You get an F. I reserve the balance of my time.

Mr. LATOURETTE. The gentlelady yields back. The gentleman

from Florida, Mr. Mica.

Mr. MICA. Well, thank you, Mr Chairman. Thank you for holding

this hearing. It does seek to clarify some questions relating to governance that we do need to resolve. I have been involved in this

process for some 13 years, worked on Amtrak reform legislation,

ARC legislation, that we passed.

I do believe to address the first question at hand that the Board

is legally constituted. There have, in fact, been problems with the
4

appointments, quite frankly, political games being played, people

who don’t want to see reform and who don’t want to see people appointed to the Board who seek or would initiate reform. So we have

had sort of a standoff in the Board governance.

I think people are now tying to raise questions once that we have

had a board that has taken some long overdue reform measures.

And I want to commend David Laney and those who have served

on the Board for making some decisions that are long overdue so

that we can move both high-speed rail, long distance service forward. It is stuck in a rut. Anyone who looks at the figures is kidding themselves, if they believe otherwise.

The country needs a national rail system. Amtrak has never,

under its current configuration or management, been able to take

us to the next step. I believe it was in September—September 22,

the Board voted to break off the Northeast Corridor, which is a

monumental advance in seeking transparency. The finances of

Enron, a great model compared to what we have had as Members

of Congress to get any information relating to the previous finances.

Mr. Laney has helped to bring some transparency, some rationality to the organization. And if we do break out high-speed rail, we

allow the private sector to develop that corridor and operate that

corridor, it will serve as a model for the country, we can enhance

dramatically service in that corridor and across the Nation. We can

conduct long distance service as the administration has envisioned

with public private partnerships and States, and expand it to

States like Florida and other parts of the country where it is needed and not a Soviet-style configuration or operational mode.

So I am pleased that you are holding this hearing. I am anxious

to hear from Secretary Manetta and others from the administration, I do believe the Board has taken some courageous stance. I

commend David Gunn. He did a good job as far as an operational

person. He took it as far as he could, but he refused to take it to

the next step, which the Board has done and now people are continuing to play games and stopping the true advance of advance of

high speed service, long distance service and other essential rail

services to this country.

So again, I hope this hearing will shed light on where we go from

today, and thank you, and yield back the balance of my time.

Mr. LATOURETTE. I thank the gentleman very much. I have been

advised that the Senator Lautenberg is here, Senator Schumer

should be here shortly, and with the concurrence of the ranking

member, they indicated that they may have another vote over in

the other body at about 10:45. So with everybody’s concurrence,

Senator Lautenberg, we would like to hear from you. And then we

will pick it back up with Mr. Nadler after we hear from you and

Senator Schumer. Welcome. And we look forward to hearing from

you.

STATEMENT OF FRANK LAUTENBERG, A UNITED STATES

SENATOR FROM THE STATE OF NEW JERSEY

Senator LAUTENBERG. Thank you very much, Mr. Chairman and,

thank you, Representative Brown, and all of you for inviting me

here to hear a view that comes from the other side of the Capitol.
5

And I found it shocking that Mr. Gunn was fired by the Amtrak

board. And it was a shock to my Senate colleagues on both sides

of the aisle. Less than 2 weeks ago, the Senate voted in favor of

bipartisan legislation, crafted by Senator Lott and myself, to revitalize Amtrak and move it forward.

That legislation passed the Senate by a vote of 93 to 6. And it

was intimated that the payback to this Senate from the chairman

of the Board of Amtrak, that that was kind of retribution for our

misbehavior.

This vote was in favor of our Amtrak amendment that was in

favor, was also a strong vote of confidence in the leadership of

David Gunn. And that is why we were shocked to see Amtrak’s

hasty firing of Mr. Gunn one week later. And I hope, Mr. Chairman, that you will search for specific reasons that the Board felt

it necessary to so inappropriately make this decision in terms of

time and in terms of reason.

There is a hostility to Amtrak demonstrated by the administration that, frankly, I do not see shared by my Republican colleagues

in the Senate. On both sides of the aisle, we want to see Amtrak

succeed and continue to serve the needs of the growing number of

Americans who use passenger rail.

One of the lessons that we learned on 9/11 was that our country

cannot afford to rely entirely on one mode of transportation. When

our aviation systems shut down that day, Amtrak was able to reunite thousands of travelers with their families. And we also saw

chaotic evacuations during the recent hurricanes, motorists stuck

in traffic for hours and those without cars left behind. We need

more rail service to help move our citizens to safety during emergencies. And of course, congestion isn’t just limited to our roads.

We all have experienced flight delays, cancellations at the airport,

this has impact throughout the aviation system.

The DOT has had to cap the number of flights at Chicago’s

O’Hare airport because of congestion. Safety is always an issue.

And the number of operational errors is up some 30 percent this

year over last.

People want an alternative. And Amtrak is that alternative.

Amtrak enjoyed record ridership last year with more than 25

million passengers, and about as many travelers ride the train between here and New York City as do fly. In the 35 years since Congress created Amtrak, we spent only $28 billion on passenger rail,

less than a billion dollars a year. And this year alone, we have

spent $36 billion on highways, 14 billion on our aviation system.

And it is not a balance that we should strive to maintain.

Other nations understand the importance of rails. Unfortunately,

we lag behind. A few years ago at a NATO meeting, I took a train

from Paris to Brussels. 18 trains a day between the two cities. The

210-mile trip took about 85 minutes. And that is where we ought

to be. The Europeans aren’t smarter than we are. They simply

have made a smarter investment in passenger rail. Germany, with

its modern high-speed rail system, invested $9 billion in 2003

alone,and the benefits of their world class system are obvious to

anyone who travels there.

And so, Mr. Chairman, what we are seeing from the Amtrak

board seems to be ideology over the needs of the American people.
6

And we need to do better. This latest decision to fire David Gunn,

an executive with remarkable credentials as a manager, and I

think his record will speak for itself, it is an impudent decision.

And to respond to a statement made from one of our colleagues

about the fact that David Gunn didn’t do everything he was supposed to. He has got a leaky house, the roof is coming apart and

everything else, and we don’t want to put the money in to rehab

it properly. And that is what is happening with Amtrak. They are

always fixing something that is broken. The rail cars, the track

systems, et cetera. And we haven’t put the money in, and it is our

fault. It is not Mr. Gunn’s fault.

So apparently, it is not good enough to be an effective public

servant anymore. This administration requires that you also have

to pass a loyalty oath to the president and we see that in the current board.

Mr. Chairman, Ranking Member Brown, I hope that this hearing

will help reveal to you just how badly this country needs guidance

on passenger rail service. I thank you very much for the opportunity to speak and to intervene with the schedule that you have

planned with your fellow colleagues.

Mr. LATOURETTE. Senator Lautenberg, we thank you very much

for coming and sharing your thoughts with us and we still don’t

have Senator Schumer. So I will go to Mr. Nadler for his opening

remarks and we will go to the Senator and proceed in regular order

after that. Mr. Nadler.

Mr. NADLER. Thank you, Mr. Chairman, Mr. LaTourette and

Ranking Member Brown, for holding this hearing on current governance issues at Amtrak, and thank you, Senator, for coming to

this side of the Capitol and sharing your thoughts.

Although, I think the title, ′′Current Governance Issues at

Amtrak′′ is a little misleading. Now that David Gunn has been

fired from Amtrak, there currently is no governance at Amtrak. I

mean no disrespect to Mr. Hughes, who has been appointed active

president following David Gunn’s firing, but I think it is obvious

what is going on here.

The Amtrak Board Of Directors has become a front for the Bush

administration and other people who want to destroy Amtrak.

Their goal is to dismantle the railroad. And I have never seen a

situation in which the obvious goal of the Board of Directors of a

corporation was to destroy the corporation.

When Mr. Gunn refused to go along with the Bush board on actions that would cripple the railroad, most notably, the spinoff of

the Northeast Corridor, he was fired. The Bush board had to resort

to these tactics because the administration cannot get Congress to

do its bidding and break up Amtrak.

Earlier this year, the Bush Administration requested that Amtrak’s funding be eliminated completely, be zeroed out and try to

force it into bankruptcy. In response, the House and Senate both

voted overwhelmingly to increase funding to Amtrak just showing

the contempt with which the House and Senate viewed the administration’s attitude toward Amtrak.

In fact, the transportation appropriations conference report, that

is expected to be filed this week, contains about $1.3 billion for Amtrak, which is higher than any funding level in Amtrak’s history.
7

In September, the Board suddenly approved a resolution to spin off

the Northeast Corridor and create a new subsidiary. Suddenly out

of the clear blue sky, the Senate responded last week by passing

Senator Lott’s Amtrak reauthorization as an amendment to the

deficit reduction bill by a vote that Senator Lautenberg noted of 93

to 6.

This reauthorization bill would maintain Amtrak as is, while

taking measures to enhance the railroad not to dismantle it, and

again shows the attitude of Congress toward the attempts to dismantle Amtrak by this Bush board. The Bush board is trying to

subvert the will of congress and the American people by destroying

Amtrak through actions behind closed doors. I am sure we will

hear a lot of talk today about management, about how the Board

wants to move Amtrak in a new direction. We may even hear about

this GAO report, which looks at the minutiae of management practices without looking at the broader context of how a railroad is

run and without acknowledging Amtrak’s performance results in

the face of starvation funding for the last 30 years.

The record will show that 2005 was a good year for Amtrak.

David Gunn saw Amtrak through some very tough times financially as well as through various Acela problems, Hurricane

Katrina natural disasters on the west coast and rising diesel fuel

prices.

Despite all of these challenges, ridership has increased, Amtrak

is not in bankruptcy as the administration wanted it to be and, in

fact, Amtrak expects its year-end available operating cash to be

more than $120 million. That is a remarkable record for a chief executive officer sabotaged by his own board. David Gunn is a

straight shooter who has made a number of common sense management reforms to help the railroad run more efficiently. He has almost 40 years of experience in this business. He came out of retirement 3 years ago to help Amtrak run a successful passenger service. And yet Amtrak is now being run by a board made up of persons who have virtually no experience—no experience in passenger

rail.

When David voiced his concerns about some of the bad decisions

the Board was making, he was fired.

In short, Mr. Gunn was fired because he would not agree with

the process of FEMA-tizing Amtrak. His firing is a sign of the

lengths Amtrak opponents will go in order to eliminate passenger

rail service in this country. They must be called on it. This must

be stopped.

I want to know what gives the Board the right to thumb its nose

at Congress and to take drastic actions such as spinning off the

Northeast Corridor. I want to know on what grounds David Gunn

was fired. The Board issued a press release claiming that Amtrak

′′needed to intensify the pace and broaden the scope of its reforms.′′

exactly what reforms is the Board referring to? Is it referring to

taking the railroad from a situation facing bankruptcy at the beginning of the year to $120 million surplus? Is it referring to record

ridership levels? That same release mentions the strategic reform

plan that the Board approved in April and says that Amtrak needs

′′a leader with vision and experience to get the job done.′′
8

Well, that strategic reform initiative that the Board approved in

April does not call for spinning off the Northeast Corridor. That is

why I called that initiative sudden. In fact, it states that ′′such an

action would be inadvisable,′′ the Board’s own resolution. It would

seem that David Gunn is more committed to the strategic reform

plan adopted by the Board than is the Board. It seems to me that

it is the Board that should be replaced, not Mr. Gunn.

I find this whole situation very disturbing. Amtrak is a vital part

of our national transportation system. The American people recognize that and so does Congress.

The Board apparently does not.

The Board is taking sudden drastic actions that threaten our

intercity passenger service. The only entity that seems to support

the Board is the Bush administration and the very small number

of the Members in Congress who do not have a majority or anything close to it. The American people and the millions of people

who ride Amtrak every year deserve to know the Board’s motivation.

They deserve to know what will happen to Amtrak in the future.

And they deserve the right to try to stop the Board’s open conspiracy to support the law—I am sorry. They deserve the right to try

to stop the Board’s open conspiracy to subvert the law and to dismantle Amtrak.

I hope this hearing will produce some answers and ultimately

shed some light on this situation so Congress can figure out how

to undo the subversive work of this board and save Amtrak in the

future. Thank you, Mr. Chairman. I yield back.

Mr. LATOURETTE. I thank the gentleman from New York for not

only his statement, but for teaching us a new verb. FEMA-tizing.

I appreciate that. Gentleman from Alabama.

Mr. NADLER. The English language must evolve.

Mr. BACHUS. I thank the chairman. This hearing today, I think,

which focuses not only on Amtrak, but whether we are going to

have a national passenger system, and I think anybody that travels

our interstates or goes through our airports, realizes that we have

to have a rail as an alternative, and as a viable alternative.

You go to Europe, I mean those of us who have been in Europe,

Japan, you see what they have, and you immediately realize that

we are missing that in the United States, except for the Northeast

Corridor, which really is underfunded itself.

And since 1970, when the government took over the operation of

our passenger rail, when it took it over, it formed, I think, the first

mistake in 1970, it formed a for-profit corporation which is somewhat laughable that anybody that ever thought that passenger rail

would turn a profit, when what the government took over was the

rail, the freight railroads operations which were losing tens of millions of dollars a year, had dilapidated equipment and rundown infrastructure, and was competing against highways that the Federal

Government, and the State governments and local governments

subsidized to the tune of when you take all the governments, it is

all, actually, hundreds of billions of dollars.

Senator Lautenberg mentioned that just last year, we put $14

billion into our airports, yet when the administration proposed

their financial support for national rail passenger service this year,
9

it was zero. Which, how is rail passenger—how is a system supposed to compete with no subsidies? There is not a rail passenger

system in the world that I have been able to determine that doesn’t

have public subsidies. None exist.

There are no other forms of transportation in the United States

that aren’t supported by literally billions of dollars worth of funding every year, including our waterways. We spend more money on

our waterways. And they do have freight but they do have some

passenger.

So we have got—I think the first thing when we start discussing

this—and I know I am a supporter of this administration.

But when they talk about that Amtrak—and I just quote what

they always say, that they have a poor financial picture, obviously

they do because of a lack of funding for years and years. And really

these funding problems are to me a safety concern.

Because we are just, you know, we could be weeks or month

away from a major accident costing lives because of the lack of

funding we put in an infrastructure.

The system has never turned a profit. It is never going to turn

a profit. Unless, the only way it could possibly turn a profit is if

tomorrow we backed away and quit funding our highways and our

airports, and we simply started charging passengers for all those

costs.

As for David Gunn, I think since the early 1990s, people have realized that he was probably the best man for the job. I know that

in the 1990s, he was offered the job to head up Amtrak, and he refused to take it. And when he did take it in 2002, he faced a company that was on the verge of bankruptcy. And I—at least, from

all apparent from what I could determine, he made great progress

in the 3 years that he was there. And this April, there was a strategic reform initiative, which was announced with a lot of fanfare

and lot of agreement, not only by David Gunn, but by the Board,

and I thought everyone had come up with sort of a game plan in

April. And then in September, we did hear about the Northeast

Corridor subsidiary, which a lot of people, including myself, looked

to me as if what that was is an attempt to keep the Northeast Corridor, which is by far the most important part of Amtrak, and the

only part that could, that is the big revenue producer, to take that

and break it off from the other parts of the system, which I think

there is no one that knows anything about rail passenger service

that doesn’t realize that that is an attempt to kill the rest of the

system, or to kill the rest of Amtrak.

And maybe that is what, maybe that is what we need to start

all over, just throw out Amtrak and start all over. But whatever

we have to do, we are going to have to pay for. And it is unrealistic

to think that we are, that we are going to have to have rail passenger service. That ought to be apparent to all of us. The American people want it. And it is going to cost money, and it is going

to cost a lot of money. It is going to cost more money have we have

been putting in every day. And to continue to have a board or a

chairman of Amtrak and to starve it financially, is both irresponsible and irrational.

Mr. LATOURETTE. I thank the gentleman. We are been joined by

Senator Schumer, and he has the same constraints as Senator Lau-
10

tenberg had, and so my intention is Senator Schumer, thank you

for coming to see us today. We will receive your testimony and then

we will go back to the regular order and hear from Mr. Menendez.

Thanks for coming.

STATEMENT OF CHARLES SCHUMER, A UNITED STATES

SENATOR FROM THE STATE OF NEW JERSEY

Senator SCHUMER. Thank you, and Mr. Chairman, first let me

thank you and Ranking Member Brown, for your courtesy and the

committee’s leadership on this issue, which I think is appreciated

by millions of people in my State and tens of millions around the

country.

I am also grateful that we are joined by David Gunn, who I admire for his intelligence, experience and dedication to rail transportation in general. He did a great job as head of head of the MTA

in New York City. He helped straighten that up. And now, we all

hoped that he would be given the chance to do the same for Amtrak.

Mr. Chairman, it is no secret. We sit here today as a crossroads

for Amtrak and the future of passenger rail service in this country.

We all know that the Amtrak Board of Directors unilaterally decided to fire Mr. Gunn, claiming he was not committed to reform,

which I find to be an unbelievable statement. No one has pushed

reform more than David Gunn. I know it. I have called him for

things in New York that he said I just can’t do because he wanted

to save money and he is such an on-the-merits guy. He is a brilliant manager and experienced railroad administrator who, during

his tenure, worked tirelessly to defend and expand Amtrak.

Frankly, Mr. Chairman, in the railroad industry, there is no

equal. He is truly the best we have. And that may be the reason

the Board was so quick to get rid of him.

Now, the real reason, in my judgment, that Mr. Gunn was dismissed is the Board wants to kill Amtrak as we know it. He wants

it to survive and prosper. It is that simple. David Gunn was an invaluable ally in the fight to preserve, reform and expand Amtrak.

And his unjust dismissal is a crushing blow for Amtrak’s hope for

success and reform, the action executed in the dead of night with

zero warning or consultation. I spoke to Mr. Gunn that morning.

He was still unsure of what the Board would do, is a striking example of the lengths that this administration is going to go to kill

Amtrak. But, Mr. Chairman, there is some little glimmer of hope

on the horizon.

There are serious legal and procedural questions, surrounding

the composition of the current board and its most recent actions.

One of my concerns is that the Board, as it is currently comprised

of only four active members, two of whom were recess appointments, may not satisfy the requirements for a quorum set forth in

the Amtrak articles of incorporation, and the D.C. Business Corporation Act. Amtrak’s articles of incorporation clearly state there

needs to be five active and voting members on the Board to constitute a quorum.

As we all know, right now there are only four. After consulting

with many legal experts, the legal questions are in need of thor-
11

ough examination by Congress, the Department of Transportation,

and other outside legal authorities.

It is my belief that Mr. Gunn, after talking—it is my belief, Mr.

Chairman, that Mr. Gunn, that the Board did not have the legal

power to remove David Gunn, or, at the very least, that is called

into such question that he should not be removed.

I am also concerned about a broader question, and that is whether the administration has lived up to its obligation to fill the Board

with qualified and experienced leaders to guide Amtrak in the 21st

century. In my estimation, it clearly has not. For more than 2

years, the Board has operated with only three or four members,

and it is safe to say many of them lack the qualifications and dedication to Amtrak’s future that we in Congress expected when we

passed the Amtrak Reform and Accountability Act, creating the

current board. Instead, we got people whose lone goal seems to be

to undermine Amtrak.

In addition, I believe had the President appointed serious administrators with sufficient railroad experience, we wouldn’t be confronting these legal questions and confusions. We have corporate

bylaws for a reason. There are meant to be followed, not dodged,

and serious people know that. I personally do not believe that a

board only half filled can oversee Amtrak’s operations and future

effectively and fairly.

At the end of this year, the President’s two recessappointments

to the Board, Floyd Hall and Enrique Sosa will expire. We are calling on the President to not simply grant recess appointments to

them or anyone else. So I am sending a letter, which I would ask

unanimous consent being placed into the record, Mr. Chairman—

Mr. LATOURETTE. Without objection.

Senator SCHUMER. —to the President. I’m asking him to send to

Congress a full list of five new nominees who will be subject to

Senate advice and consent. In addition, he needs to follow the letter of the law and consult with Senator Reid on these nominations,

the President cannot continue to skirt its legislative obligations

when it comes to Amtrak. Year after year, the administration plays

games with Amtrak’s funding and management not realizing that

its actions affect the daily lives of Amtrak’s more than 25 million

riders.

In the face of near weekly attacks, this year, both Houses of Congress, on a bipartisan basis, reaffirmed our commitment to Amtrak

by reversing the President’s budget request voting for 11.4 billion

again. I salute this committee and you, Mr. Chairman, and Ranking Member Brown, for your leadership on that issue.

The problem is not Congress. It is not Mr. Gunn. It is not Amtrak’s workers. The problem is an ideological administration and

its unwillingness to fund Amtrak sufficiently, an administration

that is willing to fund roads and airports but somehow is not willing to fund rail.

The bottom line is that the Board and the President’s actions

have put the future of Amtrak in grave danger, the firing of David

Gunn was the dagger in the heart. Again, I hope the Board will

reinstate Mr. Gunn as quickly as possible until the legal issues are

fully resolved. They are now, at best, cloudy. There is no clear legal

consensus that the Board had the power to fire Mr. Gunn.
12

It is no way to run a country. It is no way to run a transportation system. No business man or woman who knows how to get

things done would operate in this way. Thank you, Mr. Chairman.

Mr. LATOURETTE. Senator Schumer, thank you for not only your

thoughtful remarks, but coming back to where you used to work

and we appreciate your participation.

Senator SCHUMER. I miss it very much. Not that I don’t love the

Senate.

Mr. LATOURETTE. Thank you, Senator. And in talking to Ranking

Member Brown, I think that we are going to attempt to hear from

our other colleagues to let them be on their way, too, and we appreciate your waiting. And Representative Castle, Mr. Castle. We

thank you for coming and look forward to hearing from you.

STATEMENT OF THE HON. MICHAEL N. CASTLE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF DELAWARE

Mr. CASTLE. Well, thank you very much, Mr. Chairman and

Ranking Member Brown, for holding this very important and timely hearing, and for allowing me to offer testimony. Although I am

not a member of the Railroad Subcommittee, we have all worked

closely on this issue over the last several years, and I appreciate

this opportunity to express some of my concerns. I would also like

to thank today’s panel of distinguished witnesses for their presence

at this hearing. As some of you may know, I co-chair the House’s

passenger rail caucus. Over the last several months, Mr. Rosen and

Laney have been gracious enough to meet with caucus members on

several occasions. Mr. Gunn and Hughes have also worked closely

with our caucus. And I have been impressed by their extensive rail

experience and leadership abilities.

As the members of the Railroad Subcommittee know all too well,

this administration has made no secret of its intent to restructure

our passenger rail system and to discontinue Amtrak’s Federal operating subsidy, the lion’s share, that every person in this room

agrees that Amtrak continues to be in need of reform. It is also our

responsibility to provide safe and reliable transportation options for

the rail systems 25 million annual passengers. The Government

Accountability Office’s recent report highlighted the need for all of

us to continue our efforts to improve Amtrak’s management and

oversight. Rather than constantly looking for ways to shortchange

passenger rail, we should be working on a comprehensive strategy

to make Amtrak the best high-speed rail system in the world.

First and foremost, I strongly believe that improving passenger

rail service in this country depends on strong and experienced leadership at Amtrak. Unfortunately, in recent months, the Amtrak

board has made several important decisions despite the fact that

close to half of its seats remain empty. In particular, the unexpected firing of Amtrak President CEO David Gunn, someone who

is widely respected for his extensive rail and transit experience,

raises several questions regarding the Board’s commitment to Amtrak’s stability. During my seven terms in Congress, I have written

numerous letters to this administration and to the past administrations pleading for the appointment of experienced and dedicated

railroad people to serve on the Amtrak board.
13

Still, with two of the Board members’ terms expiring when Congress adjourns next month, we are quickly approaching the prospect of a headless national passenger rail system and an ineffective

board consisting of only two voting members. Frankly, I believe

that failure to appoint a fully functioning Amtrak board is disgraceful. It stands as an enormous disadvantage for this rail system.

Members of Congress can stress the need for accountability and

reform until we turn blue in the face. But in the end, what Amtrak

really needs is leaders with vision who attend and participate in

board meetings, and who are genuinely committed to improving

passenger rail.

Currently, this board is not effectively carrying out its responsibilities. And as of today, I seriously question whether some of the

individuals serving on the Amtrak board meet the standard of service that Amtrak customers deserve. Everything starts with this

board. A fully functioning Amtrak Board of Directors could set the

course for a new era of reliable high speed passenger rail in this

country.

For this reason, this week, I will introduce legislation to restructure the Amtrak board and ensure that vacancies on the Board are

filled by dedicated railroad, transportation and business professionals. Like similar provisions introduced in the Senate, my bill

would empower Amtrak’s president with a vote on the Board and

set a deadline for President Bush to set replacements for board vacancies.

This legislation would ensure that the Board provides professional corporate leadership by expanding the number of board

members from 7 to 9 and setting requirements for members with

diverse regional backgrounds, bipartisan philosophies and real-life

transportation expertise.

I commend Chairman LaTourette for wasting no time in convening this very important discussion. The safety and effectiveness of

our Nation’s transportation system is at stake, and it is imperative

that we act now to ensure Amtrak remains a viable option for traveler’s.

We have barely scratched the surface of passenger rail’s potential. Expert leadership on the part of the Amtrak board and a

strong commitment from Congress could lead to greatly expanded

possibilities for our Nation’s rail system.

Again, I thank the committee for the opportunity to testify. And

I look forward to working with all of you in this extremely important issue. And I yield back.

Mr. LATOURETTE. I thank you, Mr. Castle, very much for not

only your remarks, but for completing them in 4 minutes and 45

seconds.

The gentleman from California, Mr. Costa, we thank you for coming and look forward to hearing from you.

STATEMENT OF THE HON. JIM COSTA, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF CALIFORNIA

Mr. COSTA. Thank you very much, Mr. Chairman, and Ranking

Member Brown, for allowing me this opportunity to testify before

the subcommittee. I think it is fitting and appropriate that the sub-
14

committee exercise its appropriate role in oversight in what are

some very important issues involving not only the near term of

intercity rail in America, but the long-term important progress that

we need to make if intercity rail is going to be part of a multimodal transportation system that I believe most Americans think—

and I think most representatives believe that we ought to have in

this country, an intercity rail system that connects our air transportation system with our highway system and our rail system.

After all, aren’t the events of September 11 fresh enough in our

minds to understand what happened when we found ourselves crippled under the attack of a terrorist front that left our transportation system lacking—badly lacking—and certainly emphasized

the importance of a rail transportation system.

Members of the subcommittee, while I don’t have the pleasure to

serve with you, over the 20 years that I have served in California

State legislature, I carried, I was part of 4 multi billion dollar bond

measures that, in which 2 passed that provided significant funding

for intercity rail transportation in California. I am also the author

of the high-speed rail bond measure that is currently scheduled

next year on California’s ballot that will provide the first significant financing for high-speed rail in America, separate from what

the Federal Government has done with the Acela line.

So that we don’t believe this issue is simply a Northeast Corridor

issue, or limited to transcontinental trains. California, out of the

five busiest corridors in the Nation, has three of the busiest corridors. Number 2, the San Diego/Los Angeles Corridor. Number 3

is the Capital Corridor between San Jose and Sacramento, and

number 5 is the San Joaquin Corridor that serves part of my constituents from Bakersfield to the Bay area.

As a matter of fact, for your information, Amtrak operates over

70 intercity trains in California today and 200 commuter trains. It

operates a number of high frequency State-supported trains that

annually provide 9.3 million passenger ridership.

California has stepped up to the plate. We have provided literally

hundreds of millions of dollars for financing of intercity service.

And in the last 3 years, David Gunn has provided tremendous, tremendous partnership and his experience as an able administrator.

He has not only helped increase ridership, but he has decreased

costs of operation. He has been willing to invest in capital equipment. Most recently, a couple months ago, he and I completed efforts to open a brand new Amtrak intercity rail station in my district. He has been a hands-on administrator.

And therefore, for all the reasons that have been articulated, he

ought to be reinstated. I think that the efforts that this subcommittee will provide here in the ongoing days are critical. Your oversight is absolutely essential to finding out what has gone wrong.

In reality, the administration wants, I believe, to emasculate and

then kill Amtrak. What will that do? It will put another unfunded

mandate back on States that decide to try to continue to provide

intercity rail support. We need to critically evaluate the Board’s actions.

I think we must work in a bipartisan manner and return Congress to its position as an oversight body that all too often is lacking. We need to find out when the President will appoint a full Am-
15

trak board, and will he go through the proper process rather than

recesses appointments. We should require that the people have

substantive experience, and be appointed to the positions of Amtrak. We need to also examine why the Board continues to make

decisions in secret unannounced, with the minutes of the meetings

are not provided. We need to examine what the States’ problems

are going to be with this new position of the Amtrak board. What

will this transfer of Amtrak service mean in terms of pension funding, labor force, liability insurance, intellectual capital, et cetera?

These are all the actions that I think this subcommittee needs

to focus on, and the Congress need to focus on as we deliberate

whether or not we want to have a true multi modal transportation

system. Because that is what is at stake. We are not going to have

high-speed rail in America if we are not able to, in fact, provide an

opportunity for Amtrak to continue its progression as it has done

under David Gunn’s able tenure as the president of the Amtrak

board.

I thank you for the opportunity to testify before you, and I want

you to know that this is simply not a Northeast Corridor issue, but

it is an issue that affects the entire Nation as well.

Thank you, Mr. Chairman.

Mr. LATOURETTE. Mr. Costa, we appreciate your coming to share

your thoughts with us today, and based upon the expertise you had

in your prior life, I think you should be a member of this committee. And I think you would enjoy it.

Mr. COSTA. I would like to.

Mr. LATOURETTE. We are going to go back to regular order now

and pick it up with Mr. Menendez. By my count, we have seven

more—six or seven more opening statements. And just as a courtesy to the members of our second panel, if you want to go up and

use the facilities for the next 30 minutes or so, I think that is how

long it is going to be before we get to these. So Mr. Menendez.

STATEMENT OF THE HON. ROBERT MENENDEZ, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY

Mr. MENENDEZ. Thank you, Mr. Chairman. I want to salute you

and the ranking member for pursuing this hearing. I appreciate

Mr. Laney and Mr. Rosen being here today. But I am not pleased

at all that Mr. Sosa and Mr. Hall have defied the wishes of the

chairman and this committee and refused to appear today.

I think it is interesting that they can easily make it back to

Washington in order to fire Mr. Gunn, but they can’t answer a congressional request to explain themselves. I think that shows exactly how interested some of the President’s board appointees are

in the operation of a railroad.

This merely highlights my concerns with the way the Board has

been put together and the way it has been operating.

Mr. Laney and Mr. Rosen, I want to be blunt here. I don’t trust

you. And I don’t think this Congress can trust you. Your actions

in the past few months, passing a resolution to try to spin off the

Northeast Corridor, keeping that resolution secret for as long as

possible, and firing Mr. Gunn, have not given me any confidence

in your intentions for Amtrak or your ability to run it properly. I
16

am particularly concerned about what your intentions might be for

the Northeast Corridor.

I cannot overemphasize the importance of the Corridor to the

people of New Jersey. It is not just the millions of people who ride

Amtrak each year. It is the nearly 100,000 commuters each day

who rely on the Northeast Corridor to go back and forth to work.

New Jersey Transit operates over 400 trains a day over the Northeast Corridor, nearly four times the number that Amtrak does.

New Jersey puts out over $100,000,000 a year into the Northeast

Corridor, and has put over $1.5 billion into it in the past 10 years,

and yet they were not consulted. They were not even informed

about your decision to create an infrastructure subsidiary.

This is one of the most densely traveled, heavily congested corridors anywhere in North America. Trains cross from New Jersey

to New York every 2-1/2 minutes. And this operation requires a

tremendous amount of skill.

I cannot allow anything to jeopardize the safety of the people on

these trains. And yet you seem to want to play with fire.

Despite your reassuring words to me when we last met, Mr.

Laney, all of your actions appear to be aimed at one goal, selling

off the Northeast Corridor.

With a hand-picked board of administration loyalists and major

Bush fundraisers, a secret resolution to create a Northeast Corridor

subsidiary, a hasty decision to fire the company’s president because

he disagreed with your plan, your words are not reassuring at all.

Congress and the American people have clearly demonstrated

they want no part of the administration’s privatization schemes.

And yet, the Board moves forward intent on enacting these so

called reforms that seek to emulate the British model of separating

the infrastructure from the operations, a model that has resulted

in worse performance, higher government subsidies, and failed

fatal crashes. And my worst fear is that you are trying to sell off

the Northeast Corridor to a group of investors who will use it to

get huge tax breaks from the depreciation.

This is not a toy railroad. It is a highly complex, vital national

transportation asset. And unless you treat it as such, you are putting both the safety and the economic security of hundreds of thousands of people at serious risk.

Finally, I think the Board has shown an utter lack of respect for

Congress. And you have eliminated any confidence we had in your

ability to be good stewards of the Northeast Corridor. It has become abundantly clear that this Board’s lack of experience in running a railroad is matched only by its lack of commitment to preserving rail service for both the intercity and commuter riders who

depend on it.

Do changes need to be made in the way Amtrak operates? Perhaps. Do some reforms need to be enacted? Probably. But should

these reforms be made by a hand-picked board of political appointees with no railroad experience who don’t bother to consult

the States’ transit agencies, employees or passengers that depend

on the corridor, who don’t bother to consult with Congress about

their actions? Absolutely not.

We have no alternative but to explore actions that will protect

our customers and your citizens. We need to restore confidence in
17

the governance of Amtrak in the Northeast Corridor. We need to

have a deliberative, consultative and very open public process that

engages the stakeholders directly in deciding the future of rail

service. We need to end the decision making in darkness. We need

to find alternatives that put the Northeast Corridor firmly in accountable public hands, ensuring that the Federal Government

meets its responsibility while balancing the governance between

the interests of intercity and commuter services.

And I look forward to working with my colleagues to find these

alternatives and will fight side by side with them to prevent the

Board from pulling a fast one and dismantling Amtrak.

Mr. LATOURETTE. I thank the gentleman very much.

Ms. BROWN. Mr. Chairman, in accordance with clause 2(k)(6) of

rule 11, I move that the committee receive my request to subpoena

Mr. Hall and Mr. Sosa.

Mr. LATOURETTE. Well, make this observation. My

understanding—

Mr. MICA. Point of order, Mr. Chairman, I would like to reserve

a point of order.

Mr. LATOURETTE. Point of order is reserved.

The Chair would note that Mr. Sosa and Mr. Hall were invited

to attend today’s hearing. Our information is they are not going to

be here. I would prefer that the gentlelady hold that in abeyance

until we actually get the first panel in to see if they have arrived

yet; and 2, it is my understanding of the rules of the committee

and the subcommittee require for there to be a valid vote on the

gentlelady’s motion that we need to have a quorum of the subcommittee. There is 28 members of the subcommittee. We need to

have 15 people here, which we do not, just at this moment in time.

So if the gentlelady would hold that until we get through with

opening statements, and I know she has another motion, perhaps

we can discuss that.

So if the gentlelady, with unanimous consent, would withdraw

her motion at this moment in time, we will get back to you. Is that

all right with you?

Ms. BROWN. Yes.

Mr. LATOURETTE. Mr. Cummings is next.

STATEMENT OF THE HON. ELIJAH CUMMINGS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MARYLAND

Mr. CUMMINGS. Thank you very much, Mr. Chairman. I want to

thank you, and certainly our ranking member for holding this hearing. And I have got to tell you, as I sit here and I listen to my colleagues on both side of the aisle, I am very—makes me feel good

that we have such strong statements in support of Amtrak. And we

have such strong statements in support of probably the best administrator that Amtrak has ever had. But you know what I am afraid

of? Is that after all the dust settles, and everything is over, we are

going to still be in the same place. I can’t get President Bush to

return my calls. But my Republican colleagues can.

The people that I am most concerned about are the people that

I saw when I left Baltimore this morning standing on a platform

at 6:00 o’clock in the morning, hard working Americans, doing the

best they can with what they got, trying to get to work. And some-
18

times I think that we in Congress forget about the very people who

send us here. They are not asking for any handouts. They are just

trying to get to work.

And like many of my colleagues, I was shocked and deeply troubled to hear about the sudden firing of David Gunn. The press release issued by Amtrak announcing this decision seemed to imply

that this decision was taken in response to the recent release by

the Government Accountability Office of a report strongly criticizing shortcomings in Amtrak’s management. I have thoroughly read

that report. And while it does point to the need for Amtrak to

adopt new financial management, purchasing and strategic planning systems, the report also indicates that Amtrak has been moving to address many of the most serious challenges it has faced in

the last few years.

It also appears that Mr. Gunn was largely the driving force behind these efforts to clean up the problems left by previous Amtrak

officials.

And on that note, I say to you, Mr. Gunn, thank you for your

service.

There are so many who—I think it was Ms. Brown who said she

don’t understand when somebody in this day and age, with regard

to this administration does a good job, they are the ones who get

fired. People standing up for regular, everyday people, they are the

ones who get fired.

And importantly the GAO report that I talked about a moment

ago cited critical shortcomings in the oversight role exercised by

the Amtrak board, which currently lacks three voting members and

includes two board members who were recess appointed and have

not been confirmed by the Senate. In fact, many of the actions recently taken by the Amtrak board appeared to exemplify precisely

the kind of questionable oversight cited by the GAO report.

In April, for example, the Board put forward a plan to ′′save Amtrak.′′ Give me a break. That would essentially split the service and

shift cost to the States.

Most supporters of Amtrak consider this to be an ill-conceived

and short-sighted plan.

Just in case you didn’t know it, States are suffering tremendously. My State has had all kinds of deficit problems. Later in the

still unexplained decision made in September but released in October, the Board decided to separate the Northeast Corridor into a

wholly owned subsidiary, despite having rejected that plan as recently as April, arguing that the complexities and costs of such a

split outweigh its benefits.

Now it’s interesting my good friend Mr. Mica said that this

Board has brought in a new era of transparency. Hello. It’s interesting that we who sit on this rail committee, who have to answer

to our constituents, had to find out about it through the press

many days after the decision has been made. If that’s transparency, ladies and gentlemen, give me a break. Coming on the

heels of these decisions, the board’s actions in firing David Gunn

may indicate that the board’s true intention is to implement, to the

fullest extent possible, the Bush administration’s plan to liquidate

Amtrak as our national rail service and turn it over to the private

sector.
19

Amtrak, which currently serves some 25 million passengers—

many of whom are my constituents—in 46 States, on an annual

basis, is under attack as never before by an administration intent

on derailing this service, and it’s controlled by this runaway train

called the Board.

I urge my colleagues, including all of my colleagues who supported the effort led by our subcommittee’s Chairman and our

Ranking Member, to increase funding for Amtrak in fiscal year

2006 to $1.176 billion, to recommit—I’m almost finished, Mr.

Chairman—to recommit to the value of preserving Amtrak as our

national intercity rail service. That means that we must fully fund

Amtrak. It also means that it is time, in fact past time, to bring

to a close these annual discussions about the future of Amtrak by

adopting legislation that can be the basis for real reform of Amtrak.

And with that, Mr. Chairman, I yield back.

Mr. LATOURETTE. I thank the gentleman. Ms. Carson. Ms. Carson.

Ms. CARSON. Thank you very much, Mr. Chairman. I’m going to

be very quick, because a lot of what I was going to say has already

been said and I won’t be redundant. I have been in Congress almost 10 years and there has never, in my 10 years in Congress,

that I have seen an individual as reverent as the honorable Mr.

David Gunn. You have individuals from both sides of the aisle who

extol the virtues, the talent, the experience of a person who’s got

a track record that is impeccable.

My concern, Mr. Chairman and Ranking Member, is how can

somebody who has no experience, no ability, come in and fire somebody who excels in what he’s doing in terms of Amtrak? Amtrak,

as all of you know, came to the defense of America when we were

hit during 9/11. Prior to that time, Amtrak was at work. If we had

not had Amtrak, this country would have continued to stand still.

The person that is head of the Board, if there is such a Board, I

don’t know how you can take two people and fire a giant like Mr.

Gunn. Two of them haven’t even been confirmed. It’s really a partisan Board; they are all Republicans. You have not bothered to

name the Democrat members of the Board. I don’t know how you

can have some inexperienced, inept individuals come in and fire a

person of Mr. Gunn’s magnitude, who has a track record that’s indisputable.

I’m going to close by reminding that when we had a hearing back

in September, I asked Mr. David Laney what he thought about Mr.

Gunn. Mr. Laney’s quote, verbatim, was he took Amtrak—this is

Mr. Laney referring to Mr. Gunn: He took Amtrak from the day he

landed on the platform and is riding a ship that was listing and

about to spill over. As far as I am concerned, David Gunn is a terrific operator.

That is a quote from Mr. David Laney himself when he fired

Gunn because of his resistance to the strategic initiative.

I would like for the two unconfirmed Board members to come before this committee, Mr. Chairman, and explain what a strategic

initiative is. Even though I am not a betting person, I can assure

you they don’t have the slightest idea.
20

So I want to thank again the Chairman and the Ranking Member for having this committee, and I personally want to give Mr.

Gunn a standing ovation. I usually don’t do that, especially with

some Bush appointee, but you give credit where credit is due. Mr.

Gunn has worked professionally with both members of the aisle in

Congress, both the Democrats and Republicans. That is a rare

breed for the Bush administration. And I would think that given

all of the trouble that the Bush administration has, all the messups of a Michael Brown, that they would want to keep the one

bright and shining star that they have. And that is Mr. David

Gunn, and I applaud him. I don’t apologize for him, and I hope his

life does not become even more difficult because somebody from the

liberal side of the aisle has given him a standing ovation.

I yield back, Mr. Chairman.

Mr. LATOURETTE. I thank the gentlelady very much. Mr. DeFazio

is next.

Mr. DEFAZIO. Thank you, Mr. Chairman. Two lists of names:

General Shinseki; Chairman O’Neill; economic adviser Larry Lindsay, Mike Parker, head of the Corps of Engineers; now David

Gunn. Second list: Michael Brown; David Safavian; Mr. David

Laney; Scooter Libby.

Now, the first list is a group of people who told the administration the truth, the truth about a pending war, the truth about

underfunding investment in infrastructure in this country, or the

truth about the possibility of having a national interconnected rail

future for America.

The second group are all linked by one thing: They are all major

campaign contributors or campaign functionaries who bring no expertise to their jobs. Mr. Brown has been outed. Mr. Safavian, the

Chief Procurement Officer of the United States, who was an intern

on a helicopter project at the Pentagon, highly qualified, is under

indictment. Mr. Libby is under indictment. Mr. Laney has just famously participated in removing the very competent head of Amtrak for telling the truth and defying the Bush administration.

Now, government is not a fantasy camp, although apparently if

you give enough money, you get to play; and there is another way,

and it’s as a profit center. They have done well, as have their contributors; Halliburton, on down the list.

Now I guess they’re eyeing Amtrak and breaking it up as a potential profit center. To hell with the consequences. We’re talking

a lot about the East Coast. That’s very, very important, given the

population density here. But there is a West Coast, too. We have

50 million people between California, Oregon, Washington, and

British Columbia. We have a vision of high-speed rail linking those

areas. We have a critically oversubscribed Interstate 5 with tremendous infrastructure needs linking that area. We don’t have the

money, the President says, to upgrade the highway. Well, then,

how about relieving some of the congestion and providing a costeffective and fuel-efficient alternative for passengers by delivering

on that vision?

Mr. Gunn had a vision to move America in that direction, to

begin to catch up with Third World countries or developing countries, India and others with national rail systems. No one could

ever match them. We’ll never catch up with Europe there. We
21

couldn’t compete with them, I guess. But it’s something that is

hated by the Bush administration. I’m not certain why they hate

the rail system. I know there’s old business, the Governor, former

Governor of Texas, now President; there was an airline based there

that thought Amtrak might compete with them before it became

bigger and it doesn’t worry about those things anymore. I know the

President’s brother came in and killed off high-speed rail in Florida. So there’s some old business, but I don’t think that’s really

what is at play. The airlines are mostly bankrupt; they can’t effectively lobby those issues anymore, talk about subsidies given, how

much they have received.

So I guess it’s down to the fantasy camp, the political hacks, and

running government as a profit center for private interest. But that

does not serve the interest of the American people well. The Board

should go, Mr. Gunn should be reinstated, Congress should assert

its authority in this matter.

Thank you, Mr. Chairman.

Mr. LATOURETTE. I thank the gentleman from Oregon.

Ms. Johnson is next.

Ms. JOHNSON. Thank you very much, Mr. Chairman. I want to

thank you and the Ranking Member for having this hearing. It appears that we were almost forced to do that. And I really do deeply

regret the decision by the Amtrak Board of Directors to fire Mr.

Gunn. Less than 2 months ago, this subcommittee received testimony from the Amtrak Board of Directors that spoke to the effectiveness of Mr. Gunn’s leadership and managerial performance.

This has been said, but I haven’t said it yet: It appears that a

proven track record slashing debt and increasing ridership to a

record 25.4 million passengers for a struggling rail entity are simply not enough to preserve one’s security.

It appears to me that the primary reasons behind Mr. Gunn’s firing lies less with his performance and more with his unwillingness

to go along with the voices above, with the ultimate goal of starving Amtrak to death and getting rid of all the labor-protected employees, and carving its liquidation so that the rich can continue

to get richer and the poor continue to get poorer. That has been

the sign post of this administration.

I want to thank the witnesses that have come before us and

those to come, and I would hope that we could get some honest responses. I wouldn’t like to have this hanging out and waiting for

answers the next year or so. I would hope that the witnesses would

tell us the truth. I don’t think you’re going to take an oath; but I

hope if you don’t tell the truth, you’ll come back under oath.

Thank you very much, Mr. Chairman.

Mr. LATOURETTE. I thank the gentlelady very much.

Ms. Holmes-Norton.

Ms. NORTON. Thank you very much, Mr. Chairman. I just want

to make a couple of quick points. I want to thank you for your

quick action, which I regard as a very important action of public

responsibility.

Points I want to make go to congressional intent and the crisis

in governance that has now been exposed. Mr. Chairman, you may

remember the process, and the best recent indication of just how

strong the support is for Amtrak and the way it is operating must
22

have been in the transportation appropriation process. I have never

quite seen anything like it where subcommittees—I was one of

them—gave up money, transferred money from their own accounts

in order to make up for the shortfall in the appropriated amount

we wanted to make for Amtrak. I mean, I got robbed blind. I’m

Ranking Member of a committee, jurisdiction over GSA, except I

can’t really complain because I gave it up. I gave it up, as Members

on both sides of the aisle kept giving it up, until we finally got

enough to meet the mark.

What was that, Mr. Chairman? It was a vote of confidence in Mr.

Gunn and it was a vote of confidence in the sense that we know

he has given new meaning to the impossible job. We know what he

has been laboring under. What is this fight about? It is about privatization, it is about going back to the future. And I say going

back to the future, because you have to remember how we got Amtrak in the first place. These are private railroads. They didn’t

come to Congress saying, give me a handout; they threw up their

hands saying, we can’t do this. They threw it at us. They said, you

have no railroad unless you take it over. They said, look around the

world. There is no railroad that is operated by the private sector.

Railroads are sustained only with heavy subsidies from the public

sector. Take us, take it over.

That’s how we got it. And our stewardship is a great part of the

responsibility here.

But it was a vote of confidence in Mr. Gunn, because we have

seen palpable improvements in the railroad. We have seen a manager making long-awaited infrastructure improvements at the

same time that he has been cutting costs. It’s impossible to do, my

friends. But we have seen upgrades in this period when we are concerned with terrorism going on, at the same time cost cutting is

going on. It is like fixing a railroad while it is moving on the track,

full of passengers. That’s the kind of job we say, Mr. Gunn, that’s

what we want to you do. Don’t tell us it’s impossible, don’t tell us

you need more money; this is all we can give you.

So Mr. Gunn was fired. He was fired for protesting destroying

the corporation he had revived by spinning off its most profitable

operations.

I’ll be through in a second.

I just want to say that the Board may live to regret—we understand that you can fire a director who doesn’t agree with the

Board. The question is: What is the congressional intent? The congressional intent, through countless actions, was to keep the corporation as a public corporation and not spin it off. So who was in

tune with the Congress, Mr. Gunn or the directors? What the

Board has done is to open up not Mr. Gunn’s tenure. You may have

the power until you sue to fire him. It is the legal legitimacy of the

Board itself, whether it has been operating for the last 2 years as

a lawless Board. You have opened up a whole Pandora’s box. The

Pandora’s box goes well beyond Mr. Gunn; it goes to whether or not

anything this Board has done with its executive committee in the

last 2 years, from settling claims, to disposing of property and developing property, whether or not all of that is up in the air. I

mean, it’s a lawsuit waiting to happen.
23

Let me tell you what I think the Board needs to do. Not fire Mr.

Gunn; fire whatever counsel advised you that you could operate

with this makeshift Board in the way you have and get away with

it without a lawsuit or without accountability from the Congress of

the United States.

Mr. Chairman, I looked at the GAO report that became the excuse for firing. The GAO report has only one sentence in it. It is

a pregnant sentence about this Board, but it encapsulizes where we

need to go and it is certainly not to all of the things that the corporation needs to do. For a very long time, unless there are massive subsidies, you are going to see this kind of GAO report come

out.

What we need to look at is the very last line, and I would like

to quote it as I yield back my time:

′′accountability and oversight mechanisms that do apply, such as

oversight by the Board of directors and the Federal Railroad Administration, are limited or have not been implemented effectively.′′

Accountability stops at the top, starts at the top. And that’s

where the problem has been, beginning with the Board that may

well have been illegitimate in and of itself.

Thank you very much, Mr. Chairman.

Mr. LATOURETTE. I thank the gentlelady very much.

We are now ready to hear testimony from our second panel. Invited to participate this morning is David Laney, Chairman of the

Board of Amtrak; Mr. Jeffery Rosen, General Counsel for the Department of Transportation and the designee of Secretary Mineta

as a member of the Amtrak Board. We also invited Mr. Sosa and

Mr. Hall, members of the Board of Directors of Amtrak; David

Gunn, the former Chief Executive Officer of Amtrak; and Mr.

David Hughes, the newly appointed acting CEO of Amtrak.

Ms. BROWN. Mr. Chairman.

Mr. LATOURETTE. The gentlelady from Florida.

Ms. BROWN. In accordance with clause 2(k)(6) of rule 11, I move

that the committee receive my request to subpoena Mr. Hall and

Mr. Sosa.

Mr. LATOURETTE. I appreciate that. As I now look at the table,

it looks like Mr. Hall and Mr. Sosa are not here. I would tell the

gentlelady that we continue to have the difficulty with an absence

of a quorum.

Mr. MICA. Mr. Chairman, I continue to raise—

Mr. LATOURETTE. Gentlemen reserves a point of order. We continue to have the difficulty of not having 15 members to act on the

gentlelady’s request. I would tell you that counsel on our side is

concerned about—because of the speed of this particular hearing,

the invitations went out; I think that I would have appreciated it

if Mr. Hall and Mr. Sosa, if they in fact received the invitations,

would be here today. I am not averse to eventually getting to where

I think the distinguished Ranking Member wants to go, but at the

moment we don’t have the authority under the rules to act on the

gentlelady’s request.

Ms. BROWN. One quick question. Can you inform me whether or

not counsel sent out an invitation to those two members?
24

Mr. LATOURETTE. It’s my understanding that letters were sent to

all of the witnesses. It’s further my understanding relative to those

two witnesses that letters were faxed to the Amtrak offices.

Ms. NORTON. I have a question.

Mr. LATOURETTE. I’ll yield in just a second. Again, going to—I’m

sympathetic, let me tell the gentlelady, I’m sympathetic to her request. And I know the gentlelady has a request with regard to Secretary Mineta who is a member of the Board, we think, and the

gentlelady’s concern over Mr. Rosen being here as opposed to Secretary Mineta. I can indicate to the gentlelady I spoke to the Secretary; however, I am being informed—and I think that if we get

down to the fact that we have to do this by the book, there aren’t

15 people here, but I think that our side at this moment in time

would feel more comfortable once we have a confirmation that we

know, in fact, Mr. Hall and Mr. Sosa received the invitation and

declined it. And too, relative to the gentlelady’s second request, I

would like to go over the scope, because it involves things back to

2001.

And I’d be happy to yield to the gentlelady from the District of

Columbia.

Ms. NORTON. Mr. Chairman, I have a question. First of all, I

want to say, inasmuch as one of the major issues here is whether

or not this Board had a quorum, under D.C. Corporation laws, I’d

hate to see us take any action without a quorum. That said, I’d like

to know whether in issuing an invitation, you gave any notice to

the two members that they would be subject to subpoena if they

did not, in fact, come.

Mr. LATOURETTE. No, it was not. And that is causing some of the

consternation.

Ms. NORTON. In that case, as much as I would regret, I believe

fairness begins here; and I think they have to be warned, or I think

that a version of due process that we would all embrace would say

they should be warned that if they do not come they will be subject

to subpoena, because often we have people from the administration

who don’t come, who don’t show up, and we just let it slide. Thank

you.

Mr. LATOURETTE. I appreciate the gentlelady’s observations, and

you have summed up the concerns of counsel on this side.

Mr. DeFazio.

Mr. DEFAZIO. I’d like to be specific about how the Chair intends

to proceed. What I would suggest is that we would hopefully—what

I think you’re saying is confirm receipt and confirm that they declined to appear. And would it be at that point the Chairman’s intention to subpoena the witnesses if they have received the invitations and they decline to appear at a future hearing, appropriately

scheduled?

Mr. LATOURETTE. Here is the deal. We didn’t invite Mr. Hall and

Mr. Sosa because we didn’t want to hear from them; we wanted to

hear from them. It would be the Chair’s intention to follow the due

process that the gentlelady from the District of Columbia has established; and that is, confirm that they have received the information and get them to say that if you don’t come to see us, we are

going to subpoena you. And if they still decline, I will again call
25

a meeting of this subcommittee, we’ll collect an appropriate

quorum; and, if we have to go in that direction, will.

Ms. BROWN. I just have one question. How much time are we

planning on giving them? This is a critical issue, critical to the

American people and critical to the riding public. I think it is very

important that we have the full testimony of the Board; in addition, in accordance with clause 2(k)(6) of rule 11, that the committee receive my request to subpoena the Secretary of Transportation, Norm Mineta, and the Department of Transportation General Counsel, Jeff Rosen, to produce within 30 days all books,

records, correspondence, including electronic mail, memorandum,

papers, and telephone records between the recipients and the Amtrak Board of Directors since June 28th 2001, the date that Mr. Mineta joined the Board.

Mr. LATOURETTE. And we have the same infirmity with that request that we have with the other request. What I would say is

that the gentlelady and all members of the minority have my commitment that we will move with deliberate speed to resolve this

issue.

Mr. MICA. Also, if this is a separate request, make a point of

order that a quorum isn’t present to consider that motion and reserve that point of order.

Mr. LATOURETTE. Point of order reserved.

Mr. Nadler, wish to be heard?

Mr. NADLER. Mr. Chairman, I’m a little confused about this discussion. I certainly take a back seat to a known and appreciation

to due process, but a subpoena is not a penalty, a subpoena is simply a request, a demand to appear. And I see no reason not to issue

a subpoena if we want someone to appear and we are not sure they

will. You don’t have to go through the rigmarole of asking them,

making sure they got the receipt, making sure they didn’t do it,

making sure they are in contempt of the committee to issue a subpoena to demand to appear. It is not a penalty. It’s saying show

up.

Subpoena duces tecum, as suggested by the Ranking Member, to

bring a lot of documents should take a little more care, because it

takes time to assemble those documents and so forth. But just a

subpoena to appear, if we have any doubt that they will appear,

we ought to issue the subpoena.

Mr. LATOURETTE. I thank the gentleman for his comments. I will

inform the subcommittee that it’s the Chair’s intention to proceed

in the manner that he has announced, and I am advised that

House counsel has a process relative to these subpoenas, that it involves, as the gentlelady from the District has indicated, notifying

the person the subpoena will issue, and they require a foundation

that we have attempted to invite and a decline.

There is not a quorum present. If we continue to have this discussion, we can move to consider Mr. Mica’s point of order. I think

everybody can count there are not 15 people here.

Ms. Norton, another observation.

Ms. NORTON. I just want to observe that in case it appears punitive, that we want to speak to members of the Board. Normally the

Board chair speaks for the Board. Here we are dealing with a gov-
26

ernance crisis and whether or not a subcommittee of the Board is

legitimate in how they are operating.

Now, the two members are recess appointments who have delegated—whose votes have delegated the operations or decisions concerning governance of the operations to get an executive committee.

So here, because these members’ roles are specifically in doubt, I

believe this committee does need to hear from these members and

not simply from the Board.

And on the question of subpoena, I agree with my friend from

New York; a subpoena is a subpoena. The problem with the committee and with every committee of the House is that subpoenas

are rarely given and members of the administration often don’t

come.

So I would ask, I would particularly ask for regular order here,

since we are demanding regular order from this corporation, and

it is under a cloud for not having engaged in just the kind of discussion we are having before taking action.

Mr. LATOURETTE. I thank you very much. Mr. Cummings.

Mr. CUMMINGS. Just one question. I just wanted to know so the

record will be clear, did counsel get any response from these two

gentlemen, Mr. Sosa and Mr. Hall? Did we get any response whatsoever?

Mr. LATOURETTE. Hang on. I am checking. My information is

that from Amtrak we received information that they would probably not be with us today, but we have not heard directly from

them.

Mr. CUMMINGS. Thank you, Mr. Chairman.

Mr. LATOURETTE. If that’s resolved to everybody’s satisfaction.

Ms. BROWN. It is, Mr. Chairman. Since I’m batting zero here,

maybe we can do one thing that I request, is to have the panel

sworn in.

Mr. LATOURETTE. It’s the Chair’s intention to do that before we

proceed. If you gentlemen would rise.

[Witnesses sworn.]

Mr. LATOURETTE. Again, I have introduced the folks that were

here and just—

Mr. MENENDEZ. A point of order. Is that an affirmative answer

by all the panelists? I only heard one.

Mr. LATOURETTE. I heard people mouth ′′yes′′ or nods of the

head.

Mr. MENENDEZ. So for the record, is that an affirmative answer?

Mr. LATOURETTE. I believe all have acknowledged. Thank you. I

think they are all set.

Again, I want to thank those of you who did come today. For

those that enjoy theater, you will notice there are nine chairs and

there are some chairs missing, but we thank you for coming here

today.

I think you have heard during the opening remarks of the members what their relative concerns are, and again I’d remind the

members, based upon your schedules, based upon the agreement

between myself and Ms. Brown, at the conclusion of the testimony

of this panel there will be extended a half hour of questioning. I

will control the first half hour, the gentlelady from Florida, the second half hour.
27

TESTIMONY OF DAVID M. LANEY, CHAIRMAN OF THE BOARD,

AMTRAK; JEFFREY A. ROSEN, GENERAL COUNSEL, DEPARTMENT OF TRANSPORTATION; DAVID GUNN, FORMER PRESIDENT AND CEO, AMTRAK; AND DAVID HUGHES, ACTING

PRESIDENT AND CEO, AMTRAK

Mr. LATOURETTE. Mr. Laney, thank you for coming to see us

today. We look forward to hearing from you.

Mr. LANEY. Chairman LaTourette, members of the committee,

my name is David Laney. I’m chairman of the Amtrak Board of Directors.

Let me mention one item just to throw a little more either clarity

or confusion into the issue we’re talking about. The only invitation

I received—and there may have been others—but the only one I received and read was one that invited me or my designee. There

may have been another or others; I don’t know what the other

members received. So I assumed that I would be the designee but

I have not spoken with them.

Mr. LATOURETTE. I appreciate that. And we’re not going to count

this against your time, but I’m informed there was not only an invitation to you and/or your designee, but the others were forwarded. Again, based upon the discussion, in fairness we want to

make sure everybody got one before we—not accuse them, but suggest that they didn’t come to see us.

Mr. LANEY. Thank you, Chairman. I know we’re here today to

talk about the recent leadership change at Amtrak and I’ll speak

to that in a moment.

I want to talk about Amtrak’s recent performance and the need

for more fundamental change to put the rail service on a stronger,

more financially sustainable footing. At the outset, I want to make

it clear that our Board is fully committed to leveraging the full potential of intercity rail service in our national transportation mix.

We want to fix Amtrak’s problems and make it better. It is not our

goal to destroy, dismantle, or privatize Amtrak as some have falsely or disingenuously claimed. My hope is today in going forward,

we can have a spirited and open and constructive debate about the

best strategy for improving Amtrak, a goal that all of us share.

Let’s talk about where Amtrak stands today. As I said when I

testified before this subcommittee in September on our Strategic

Reform Initiative, David Gunn has helped Amtrak achieve muchneeded financial and organizational stability. He has focused the

railroad on repairing its core assets in the Northeastern Corridor.

Today Amtrak is a better run company as a result of his leadership, and he and the employees of Amtrak deserve the credit for

these very significant achievements. David leaves, as I’m sure I

don’t need to say for him, with much basis for him to hold his head

high and be proud of what he achieved.

At the same time, however, the Amtrak Board cannot just look

in our rear-view mirror and be content at the distance we have

come. Huge challenges still lie ahead that Amtrak will not and cannot overcome on its present course. These urgently need our attention, our creativity, and, most of all, our concerted action.

For example, for the last 4 years, in spite of the improvements

noted, Amtrak has had operating losses of nearly $500 million a

year. It may very well be these losses would have been worse in
28

recent years without some of the actions David Gunn and the

Board took together. But the critical point is that Amtrak’s financial performance has not improved in the last 3 years. We have lost

the same amount of money every year, and over the last 4 years

Amtrak has lost $2 billion in its operations, a bottom line that is

not acceptable to the Board and cannot continue indefinitely.

Second, a key indicator that Amtrak’s business needs substantial

reengineering is that labor costs—which is salary and related expenses including benefits—were 103 percent of passenger-related

revenue in fiscal 2005. In other words, in our capital-intensive

business where labor is only one element of our cost structure, the

cost of Amtrak’s labor force alone exceeds the revenues derived

from passengers on our trains. Few, if any, businesses would survive long with such outside labor costs.

It would be nice to fix this problem through a significant boost

in passengers and ticket revenue, but to get our labor costs under

control more quickly and certainly, Amtrak will need to outsource

certain services, replace labor in some cases with technology,

change labor agreements, and take other significant steps.

Third, in three areas where Amtrak has had substantial difficulties that drive costs and losses up—food service, beverage service,

long distance service and on-time performance—there is very little

progress to report in any of these areas, and much remains to be

done.

Fourth, Amtrak has been unable to provide a consistent highquality level of customer service aboard its trains. The passenger

experience too often is degraded by an unappealing onboard environment, dirty or under-maintained rolling stock, or arbitrary

treatment of passengers by crew members.

While each Amtrak route can boast certain star trains and some

stellar crew members, the overall level of Amtrak’s interaction with

its passengers is not where it needs to be if passengers are to assume a greater share of the Nation’s transportation mix.

Finally, Amtrak has been unable to provide clear, verifiable,

transparent cost information for what it operates, what it owns,

and what it offers for resale to governments. State departments of

transportation seeking to purchase passenger rail services for use

by their citizens and visitors are unable to obtain clear cost estimates, expense breakdowns, and invoices from Amtrak. While favorably disposed to passenger rail service in principle, these public

authorities too often reject funding because they are unable to justify, understand, or control costs.

With these challenges and others in mind—and there are others—the Board, with the support of management, developed a strategic plan to map out the future reforms for Amtrak that would

build on progress already made. We completed this plan in April

and gave testimony on it to this subcommittee in September.

As I described then, the plan advances four essential objectives.

Without working through them, they are in the plan and in my testimony. But let me move forward.

This brings me to the issue of our management change. The

Strategic Reform Initiative was developed with the knowledge that

progress we had made to date was only a beginning and that Amtrak’s present course was not sufficient to significantly improve the
29

railroad’s performance. David Gunn participated reluctantly, and

often not constructively, in the development of this plan. When it

came to its implementation he became, at best, an unwilling bystander.

His resistance to the Strategic Initiative presented the Board

with two problems. One, David’s refusal to go in several new directions meant that Amtrak would continue on its present course: flat

operating losses, unsustainable labor costs, money-losing long distance and food services, and more. Secondly, it meant that while

the Amtrak Board was accountable to Congress, to the administration, and to the public for the organization’s performance, our Chief

Executive Officer was not accountable to anyone above him.

In the end, the Board concluded that we had no choice but to release David because neither of these outcomes was acceptable.

But let me say this was a decision of last resort, it was a decision

we wish that we did not have to make, it was a decision that was

not made casually or precipitously as some have suggested. On the

contrary, the decision was made with care, deliberation, and objectivity and over an extended period of time. Most important, the action taken by the Board was the right decision based on David

Gunn’s overall performance during the past many months, and it

is our final decision.

I think I will hold my remarks with respect to the Northeast Corridor until later.

Mr. LATOURETTE. I thank you, Mr. Laney.

Mr. Rosen.

Mr. ROSEN. Thank you, Mr. Chairman. Mr. Chairman and Ranking Member Brown and members of the subcommittee—

Mr. MICA. Can’t hear him.

Mr. ROSEN. Can you hear me now? Okay. Thanks.

First I’d like to thank the members of the subcommittee for inviting me to be here today. In the interest of time, I ask that my written testimony be submitted for the record and I would instead like

to share three brief thoughts relevant to today’s hearing.

First, the 1997 Amtrak Reform Act explicitly renamed Amtrak’s

Board of Directors as the Reform Board of Directors. That’s in the

statute. Now, unfortunately, it took approximately 8 years, last

April, finally, Amtrak’s Board unveiled an ambitious plan to turn

the company around by making a significant number of reforms.

The Department of Transportation recognized this plan as a strong

step in the right direction. Many Members of Congress, including

some who are members of this committee, supported the plan when

it was released.

The Amtrak Board sought to move ahead with the many self-reforms that are within Amtrak’s own control. Now, as it turned out,

the Board was unanimous in concluding that Amtrak needed a different president to fix the company. As Congress’ own Government

Accountability Office recently underscored, 3 more years of the

same approach would have meant a $400 million increase in Amtrak’s operating losses, further deterioration of infrastructure, and

ridership below today’s already extremely low one-half of 1 percent

of the total intercity travel market. We have to go forward and not

backward.
30

Second, Amtrak’s Board, in my observation, is genuinely committed to fixing its business and improving passenger rail. Unfortunately, now that Amtrak’s Board has demonstrated its seriousness

about reform and improvement, there are some who have raised

questions about the legitimacy of Amtrak’s Board. Let me say first,

it would be nonsense to think that neither Amtrak’s Board nor anyone else has the authority to terminate a corporate officer. The

statute is explicit that all Amtrak officers serve at the pleasure of

the Board. In addition, the questions that have been raised are old,

and Amtrak itself, several weeks ago, previously provided a memorandum to this subcommittee refuting them. Legally, the questions

about the validity of the Board are just flat wrong.

Now, I don’t have the time in my remarks today to go through

all of it, although I will be happy to do that in Q and A if somebody

would like me to and afford me the time.

What I will say here, suffice it to say, is that the governing statute, the Amtrak Reform and Accountability Act of 1997, explicitly

provides that four of the seven members are sufficient for the

Board to pursue its responsibilities; and it explicitly states that

Board members are appointed, quote, ′′for a term of 5 years,′′ close

quote, not for part of someone else’s term, not for a process of

which the term is only 5 years and multiple people serve it, but for

a term of 5 years.

With regards to the recess appointments, it is telling that the validity of recess appointments to the Amtrak Board was unchallenged over the last 20 years, even though President Reagan made

six such appointments to Amtrak’s Board and notified the Senate

of that. The U.S. Supreme Court killed the viability of any such

legal challenge in a case called Labron vs. Amtrak in 1995.

So, as I said, for anyone who’s genuinely interested in the legal

issues, I would welcome the opportunity to take as much time as

it takes to go through that with any of you who would like me to.

Now, moving on to my third and last observation, there are some

who wrongly claim that Amtrak’s president was let go because he

refused to let the Board or DOT or somebody shut the company

down. Now, this is ironic, because the only person to have repeatedly threatened to shut down Amtrak was Mr. Gunn himself. Neither the Board nor DOT has sought to do that.

The fact is if someone really wanted to kill Amtrak, they would

do nothing. Last year’s approach of spending even more money

than Congress had appropriated to Amtrak is unsustainable. So,

instead, Amtrak’s Board crafted an ambitious reform proposal and

sought action on it. Instead, DOT has worked to encourage significant reforms to the way that we handle intercity passenger rail,

with the eye to improving it so that it is both more available, more

economically run, and better. And this administration has called

far and wide for intercity passenger rail to be improved before taxpayer dollars are used in ways that are not efficient or useful.

For too long the Amtrak debate has been about how much Federal money the Amtrak company should receive, instead of how to

use that money to deliver the best possible rail service for both the

taxpayers and intercity travelers alike. Sometimes the issues are

surrounded by too much heat and not enough light. I hope that we

will be able to focus our time today on discussing the important
31

work that needs to be done to save and improve intercity passenger

rail. I hope we will discuss how to find ways to support Amtrak’s

own efforts to make meaningful and essential reforms. I hope we

can examine new methods for ensuring that our investment in passenger rail goes further and is used more wisely than has been the

case in the past. And ultimately I hope that the Congress will work

with the administration to craft a plan to make passenger rail travel more relevant and useful for the 99.5 percent of intercity travelers that do not use Amtrak today. Thank you.

Mr. LATOURETTE. I thank you, Mr. Rosen.

Mr. Gunn, thank you for coming. We look forward to hearing

from you.

Mr. GUNN. Thank you, Mr. Chairman, members of the committee, you have a copy of my testimony. Anyway, Mr. Chairman and

members of the committee, thank you for inviting me. My name is

David Gunn, formerly, as we all know now, President and Chief

Executive Officer of Amtrak. And I will make my remarks brief

and I want to make 5 points.

First, I am proud of Amtrak’s accomplishments over the last 3-

1/2 years. The status of the company is detailed in the attached letter to Chairman Laney dated November 9, 2005, entitled ′′Year in

Review.′′

Amtrak has a competent, loyal workforce and has produced

sound results. The financial reporting of results is timely, accurate,

and public. Material weaknesses which existed in the system have

been addressed, and, for example, audit adjustments have fallen

from 200 million in fiscal 01 to 7 million in fiscal 04. The operating

loss of funding requirement has stabilized or actually declined over

the last 4 years. The net loss, including depreciation, which is what

is driving the net loss, has stabilized.

The capital program is a well-defined group of multiyear projects

designed to bring the existing infrastructure and equipment to a

state of repair. The capital program is producing the intended results. Productivity is detailed in the attached letter. Actual cash

outlays in fiscal 05 were 92 percent of budget, which means that

we have invested virtually all of the money we were given for the

plan purposes. Ridership has grown steadily and was at a record

in fiscal 05, and currently continuing to grow. Head count has fallen from almost 25,000 in fiscal 01 to 19,177 at the end of fiscal 05.

Second, my second point, the Nation’s transportation systems,

air, highway, even waterways and rail are in trouble. Both freight

and passenger mobility is deteriorating. Intercity rail service, passenger service in carefully selected urban corridors, offers potential

relief at the lowest total cost. The current method of funding, regulating, and governing passenger rail service will not permit intercity rail service to reach its full potential.

The reforms necessary to achieve change were detailed in Amtrak’s Strategic Reform Initiative issued in April of 2005. Those reforms were supported by management, including myself, and by

the Board. We were on track to implement the reforms that were

within our control. No other reforms have been formally promulgated by the Board.

Third, the Amtrak Board cannot unilaterally reform Amtrak.

DOT cannot unilaterally reform intercity passenger rail service.
32

Unlocking the potential of intercity rail requires a collaborative effort between management and employees, the Amtrak Board, DOT

and Congress.

Fourth, the Board structure has generally worked well, despite

the lack of a full Board for quite some time. With regards to the

operating and capital needs of the railroad, the Board and management have been in general agreement.

On the issue of reform, a milestone was reached when we prepared our Strategic Reform Initiative in April 2005. I was surprised last August when our general counsel received the directive

from the Board chairman to create an NEC subsidiary at the September Board meeting. I was told that it was a, quote, ′′fait

accompli.′′ this unilateral action ultimately resulted in my termination last Wednesday.

The current Board stands in contrast to the previous Board

where all seats were filled and there was a true sense of

collegiality and trust among the management and the Board. With

the exception of the DOT representative, the Board followed an

independent course.

Lastly, what is at stake today is the future of Amtrak and intercity passenger rail in the United States. What is required is some

idea of what the end result we want is and a thoughtful plan to

get there, and we don’t know either of those. The destruction of

Amtrak, which I think is possible, will ultimately devastate our

most precious asset: the human capital or knowledge base required

to operate high-speed passenger transportation and set back any

plans for intercity passenger rail.

I consider it to have been an honor to serve as Amtrak’s President and Chief Executive Officer, and I am grateful for the support

shown to me by our staff and our employees. I am grateful for the

support of Congress and the friendships I have with many of you

in the room and your staffs in the room. Thank you and I look forward to any questions.

Mr. LATOURETTE. Thank you, Mr. Gunn.

Mr. Hughes, thank you for coming and we look forward to hearing from you.

Mr. HUGHES. Good morning, Mr. Chairman, Ranking Member

Brown, members of the committee. My name is David Hughes.

Until a few days ago I served as Amtrak’s chief engineer. On

Wednesday of last week I was asked to serve as interim President

and Chief Executive Officer of Amtrak.

While I have been a member of Amtrak senior management for

the past 3-1/2 years, I have been in the railroad industry for more

than 30 years. Fundamentally, I believe passenger rail is an important aspect of our Nation’s transportation network, and I will work

to the best of my ability to continue to advance the goals and objectives of Amtrak and to provide safe and reliable passenger service

for our customers.

Many of you are familiar with the Strategic Reform Initiatives

discussed here today. I was directly involved in the creation of

these reform initiatives and I will see to it during my tenure as

President and CEO—no matter how long—Amtrak will continue to

advance these policies and objectives set forth in that plan. Please

rest assured that despite this time of transition, Amtrak employees
33

will continue to strive to maintain the highest levels of service and

the safety of our passengers, and, at the same time, will endeavor

to look for creative ideas to foster more competition, improve operational efficiencies and to return the railroad to a state of good repair.

The challenges are many, but given the adequate resources and

continuing support of Congress, we can and will pursue to fulfill

the objective of rail passenger service and remain an important

transportation alternative for the American people now and in the

future. Thank you.

Mr. LATOURETTE. I thank you very much, Mr. Hughes.

As I indicated before, pursuant to the agreement that the

gentlelady and I have, we will now proceed to an hour of extended

questioning. I’ll control 30 minutes and will yield to some of my Republican colleagues, and then the gentlelady will have the same;

then, at the conclusion, go back to the 5-minute rule.

A couple of people have read observations. We last had a hearing

in the subcommittee on September 21st, and different people have

read different observations that you made at that hearing, Mr.

Laney. And I have a different one. The quote that I have from that

hearing is:

′′during this fiscal year, Amtrak continued to show strong results

in a number of important areas. Despite everything that has happened this year Amtrak will finish FY 05 under budget and will

set a new readership record. This is quite remarkable, when one

keeps in mind the unforeseen Acela service interruption which

caused the temporary cessation of all Acela trains earlier this

spring. We responded efficiently and safely, while integrating other

equipment quickly into the timetable so that no measurable impact

on any ridership occurred. Now we are back to full Acela service

operating this month 92 percent on time. Just recently we had to

deal with the indefinite truncation of three of our long distance

trains from the impacts of Hurricane Katrina.′′

So I think I came away from that hearing thinking that while

things weren’t great, Amtrak was proceeding along in a pretty good

path, and that’s why I think last week’s news was a little startling,

I guess, to some of us.

Mr. Gunn, I guess I’ll let you start. I heard what you said, but

prior to—and I read an interview you gave to Railway Age Magazine; and as I understand it, the Board came in and asked for your

resignation and when you said no, you were released, according to

the quote at least. What happened? I mean, did you have any conversations with Mr. Laney or the Board prior to this—these events

of last week?

Mr. GUNN. Well, we had had conversations, obviously, prior to

this week. It came as a surprise to me that I was being terminated

on Wednesday. It was no surprise to me that the Board was unhappy with my taking the position that I was against separating

the Northeast Corridor, but I was surprised when I was terminated.

Mr. LATOURETTE. I have an exchange of letters that went back

and forth between you and Mr. Laney. Aside from what may be

contained in those letters, were there ever any conversations with
34

the chairman of the Board relative to expressing his unhappiness

with the position you were taking?

Mr. GUNN. We probably had two or three discussions where he

had expressed—he had said that he couldn’t defend me much

longer, that sort of thing. But that would be over a specific issue

where I was taking a position.

Mr. LATOURETTE. The phrase ′′couldn’t continue to defend you.′′

he’s the chairman of the Board, so who—did you have a sense as

to who he was thinking he had to defend you from?

Mr. GUNN. No, I can’t tell you who. I did not ask.

Mr. LATOURETTE. Let me turn to you, Mr. Laney, because you—

do you recall having such a conversation, making that observation

to Mr. Gunn?

Mr. LANEY. I don’t recall that conversation or that specific comment, but I know we did have interaction and issues, some initiated by David. And I was concerned on a number of occasions

about his unilateral departure and tried my best, I think, to make

it work for David, for the Board, and I thought was aggressive and

patient in trying to keep the thing laced together as best as we

could. But I hate to say it, but I don’t think either—no matter what

you might hear from either me or David Gunn or anyone else, ultimately not too far beneath the surface, I don’t think anybody was

particularly surprised.

Mr. LATOURETTE. Needs to be closer.

Mr. LANEY. I don’t think anyone was particularly surprised at

the action we took. They may have been surprised at the timing,

but there is no timing that’s particularly correct or right.

Mr. LATOURETTE. When you are talking about no one being surprised, you’re talking about no one that knew what was going on

inside the company. You are not suggesting, based upon your observations in September to this subcommittee, that it didn’t catch

others outside the company off guard, right?

Mr. LANEY. That’s correct.

Mr. LATOURETTE. Mr. Rosen, I want to turn to you because I

think that you have—you have sort of hit the issues that I am most

interested in today. And I appreciate while you called some things

ludicrous, you didn’t call this issue about the quorum and the

makeup of the Board ludicrous. I do recognize that they are old discussions, but I do have a little bit of time, and I’d like to go

through it with you if I could.

There are two things that cause me pause with the current constitution of the Board. One goes to the issue of whether or not, if

you follow the 97 statute—and I heard what you said, where you

had a situation where I assume it’s the administration’s position

that the administration has appointed Mr. Laney and the Secretary

to new 5-year terms.

Mr. ROSEN. Not only the administration’s position, it’s what the

Congressional Record—

Mr. LATOURETTE. Pull your microphone closer.

Mr. ROSEN. It’s not only the administration’s position but it’s

what the Senate in the Congressional Record reported at the time

that Mr. Laney was confirmed. It’s what’s reflected on the appointment from the President. So I would say yes, consistent with the
35

statute when these appointments were made, they were for 5-year

terms as set out in the statute.

Mr. LATOURETTE. I read the letter that you sent up here on, I

think, the 26th. I’m familiar with that. I’m also familiar with the

observations made by the Department of Justice. But maybe you

can square—maybe it’s a simple answer, but as I read the statute,

section 24-303 49 USC, the 97 reform act indicates there is going

to be this Reform Board established that you talked about, and

then there was going to be a fork in the road that occurred in 2003.

The fork in the road was going to be occasioned, and that the predicate question is whether or not the corporation was still receiving

Federal assistance. If they were, you go one way; if they weren’t,

you go a different way.

And my question is: Does that paragraph not cause you any

pause? If you are right, this action was taken originally when the

Reform Board was put into place, there wouldn’t be a question in

my mind.

Mr. ROSEN. Three observations, Mr. Chairman. First, there was

a fork in the road, but not with regard to individual directors as

such. There was a provision that said that if Amtrak achieved selfsufficiency by the year 2002, then the Board would cease to be the

Reform Board and would revert to a more traditional corporate

Board. Now, that eventuality was not realized, and the statute provides that therefore the Reform Board continues in effect as it does

today.

So I don’t think there is any question that from the creation of

the Reform Board through today, the same mechanisms are in

place for the President to appoint the Reform Board members.

Second, with regard to, then, the Reform Board, of directors,

memberships and appointments, the statute did not require that

they all be appointed at the same time. If it was just a magic 5-

year window, you would have expected that people would have all

been appointed at the same time and terminated at the same time.

But that is not in the statute. It expressly contemplated appointments that would be made over time and provided—in fact, in section 24302(a)(1)— that as soon as four of them, four of the seven,

were appointed, then they could assume the responsibilities of the

Board.

So a second observation is that the terms of the Board members

are not in the same 5-year window as the self-sufficiency requirement.

Third, then, and most importantly, I looked specifically at the

text of section 24302(a)(2), which is the membership of the Reform

Board, which is going to consist of seven voting members, and here

is the key text, they are to be appointed by the President by and

with the advice and consent of the Senate for a term of 5 years.

A nominee is appointed by the President for a term of 5 years.

It does not say appointed to fill out the remainder of a 5-year

window, shall serve out a term until the year 2002 arrives. Congress could have said those things, but did not. It explicitly said

the appointments were for a term of 5 years.

Moreover, if you look at that against the backdrop of the prior

statute, the prior statute, before 1997, had both a holdover provision such that Board terms were for individual membership, and
36

a provision on how to replace members on an interim basis if their

term was continuing, but they were departing. This statute eliminated that, simplified it, and said you’reappointed for a term of 5

years.

So the Senate, which was half the equation in this bill, with obviously the House the other half, and then the President signing it,

the Senate explicitly, with regard to Mr. Laney when he was appointed with the advice and consent of the Senate, and the Congressional Record reflected—reported that he was being appointed

for a term of 5 years, those 5 years have not expired. Mr. Laney

remains a correctly and appropriately appointed member of the

Amtrak Reform Board of Directors.

Secretary Mineta, similar story except that it does not require

the advice and consent of the Senate, but he was appointed. And

I have seen a—perhaps a mistake, in terms of reporting to us, did

he replace Secretary Slater? He actually did not, because Secretary

Thompson had already been on the Amtrak Board at the time he

became the Secretary of HHS, and since the statute does not permit anyone beyond one DOT official, or executive branch official, to

be on the Reform Board, there was a period where that was Secretary Thompson. And then it was changed over to Secretary Mineta I believe it was around the first of August of 2001. But the

same basic story, appointment for a term of 5 years.

There’s an additional issue with the Secretary, which is one

could read the statute as providing that the DOT Secretary, who,

by the way, this statute explicitly authorizes to act through a designee, which in this instance is me—that the DOT Secretary upon

appointment by the President can serve in excess of 5 years, but

we don’t need to resolve that question because 5 years have not expired.

So, in sum, I rely on the plain text of the statute. But it fits with

the context of the prior statute, the context of what the Senate actually did, and with the overall structure of the ’97 Reform Act.

Mr. LATOURETTE. The second thing that concerns me—and

again, I read your letter of October 26, and also the Department

of Justice memo—has to do with recess appointments. And Mr.

Sosa and Mr. Hall are recess appointments. Is it your judgment

that members of the Board of Directors of Amtrak are officers of

the United States for purposes of recess appointment?

Mr. ROSEN. For purposes of the recess appointments clause and

the appointment clause of the Constitution, yes. And that has been

established both through tradition and custom, as I have indicated,

and that President Reagan appointed six members to the Amtrak

Board by recess appointments. President Bush has done two. But

also, most importantly, the argument to the contrary, which at one

time I think might have been a legitimate inquiry, is that Amtrak

was established by Congress as a private, for-profit corporation.

And so there would be a legitimate question as to whether for constitutional purposes it should be deemed a Federal instrumentality

in some way. And the U.S. Supreme Court, in Lebron v. Amtrak

in 1995, specifically addressed and resolved that question.

There had been some debate in the courts. The trial courts had

said that it was subject to the constitutional provisions at issue

there, and the Second Circuit, I think it was, Court of Appeals had
37

said it was not. And then the U.S. Supreme Court ruled in 1995

that although Amtrak is a corporation established by Congress,

and notwithstanding, the expressed statutory text saying that it is

not a Federal agency, that for constitutional purposes—and in that

case in particular whether the first amendment applied—that Amtrak is subject to constitutional provisions.

And my assessment is that in light of that Supreme Court decision, the recess appointments and appointments clause of Article II

of the Constitution would apply under the current structure in

which the President is making the Board appointments, and Congress has been providing approximately 40 percent of the funding,

and DOT owns approximately 99 percent of the stock, is the largest

debt holder and is also a mortgage holder on the Northeast Corridor.

Mr. LATOURETTE. Again, I know that that is your view, and then

I read the memorandum or the letter from the Department of Justice. I would assume that aside from those sources, Amtrak has requested other opinions on this matter, because I think I at least

agree that some would argue that the Lebron decision skirted the

issue that we are talking about relative to Federal officials, and

there have been subsequent cases since.

Are you aware of Amtrak or the Board of Directors ever receiving

advice to the contrary from counsel that they retained?

Mr. ROSEN. I would have to defer that question to Amtrak’s own

general counsel, who would be responsible for that, and who is the

one who did provide you with a legal memorandum separate from

the one I sent the committee. I would have to reference that question to her.

Mr. LATOURETTE. Mr. Laney, let me ask you that—this whole

question about recess appointments and proper constitution of

theAmtrak Board, are you—aside from the administration view

and Department of Justice view, have you ever seen or been advised of legal opinions that call into question the two things Mr.

Rosen and I are talking about?

Mr. LANEY. The only thing I really recall, Mr. Chairman, was the

memo that was forwarded by the Amtrak general counsel to you in

response to your request. I may have seen other things along the

way, but mostly what I have categorized as interesting theories,

but nothing that really challenges the legitimacy of the Board.

Mr. LATOURETTE. I was urged by the Chairman of this committee to have a hearing on the legal fees that Amtrak pays. And I

am aware of a letter by a firm of Wilmer Cutler and Pickering that

addresses this issue and went to general counsel. And I think what

I will ask—and I am going to yield to Mr. Mica and then to Mr.

Bachus in a little bit for continuing use of our time—but in that

advice that was addressed to someone named Said Bagam, who is

a former general counsel, vice president of the corporation, the

Lebron decision is discussed as well as the belief that, in fact, it

agrees with this whole notion that you can’t have holdovers that

we have talked about. But it reaches different conclusions on this

issue of whether or not Board of Directors are Federal officials

within the meaning of the statute.

And I still would say, Mr. Rosen, that I am troubled when just

thinking about statutory construction, and in order for that, what
38

you have put forward relative to this what I will call a fork in the

road is not the most artful term in the world, I think that that interpretation completely reads subsection B of the statute out of existence. And I know you have a contrary view, but that is what is

troubling me.

But what I will ask is that to supplement this record, to provide

to the committee whether or not the corporation has been advised

with legal opinions or advice on this issue of recess appointments,

and I will be happy to provide to you the letter that I already have

in my possession.

Mr. LATOURETTE. It is now my pleasure to yield 10 minutes of

my time to the gentleman from Florida Mr. Mica.

Mr. MICA. Thank you, Mr. Chairman.

Some of what we have heard today from members of the committee and ladies and gentlemen and our witnesses is a bunch of fog

that has been created to sort of cast aspersions on the Bush administration’s intention and what has taken place. In the next 9-1/2

minutes let me debunk some of that, if I may, Mr. Chairman.

First of all, Mr. Rosen—well, first of all, in 1997, I helped write

the statute creating the provisions that said that if Amtrak received a Federal assistance in 2003, that the current procedures for

appointment would stay in place. Mr. Gunn, to your knowledge,

you’re the old hand, did Amtrak receive Federal assistance in

2003? Yes or no?

Mr. GUNN. Yes.

Mr. MICA. Thank you.

Mr. Rosen, you’re the general counsel. The law is very clear that

if they received that, in fact, that we would continue under the

same appointment procedures as originally established; is that correct?

Mr. ROSEN. That’s absolutely correct.

Mr. MICA. I’m not an attorney. So it is very clear.

Now, you have heard this rhetoric about the appointments and

somehow the Bush administration was trying to subvert the process. You were around, Mr. Gunn, Robert Crandall was nominated

by the President to the Board October 14th, 2003; Lou Thompson—

I think these are both Democrat nominees—January 26th, 2004; is

that correct?

Mr. GUNN. I don’t know. I know nothing about the appointment

process. I am not involved in it. I didn’t pay any attention to it.

Mr. MICA. I am sorry. I will go to the counsel.

Counsel, did the administration do that on those dates or approximately on those dates?

Mr. ROSEN. Yes, it did.

Mr. MICA. And what happened to those appointments?

Mr. ROSEN. Unfortunately the Senate failed to act on them.

Mr. MICA. The Senate didn’t do anything with

thoseappointments. So the President didn’t—did not fail to submit

two Democrat appointments. Why then would you appoint recess

appointees if the Senate doesn’t act? Now, that is a horrible thing

to do, isn’t it? Why did you do that?

Mr. ROSEN. In the situation that existed a year ago, the—
39

Mr. MICA. The Senate didn’t act, so the President, in fact, made

recess appointments of Mr. Floyd Hall and Mr. Enrique Sosa; is

that correct?

Mr. ROSEN. That is correct, because that was important to be

able to keep a quorum, among other things.

Mr. MICA. And that’s a legal quorum under the definition that

you just—that we just concurred was part of the original law, and

again the provisions that were put in place by Congress.

Then we had the Senators—this was funny—to have the Senators up here, and everybody is questioning, oh, gee, now that they

have made these decisions, finally acted, we have a Board in place,

does this really constitute a quorum? But the Senate is going to

run to the rescue and resolve this.

Has anybody read what the Senate proposed? And we heard this;

what did it pass, 93 to 6, some phenomenal amount? The Senate

solution to the Amtrak Board appointment? Page 122. Quorum; a

majority of the members serving shall constitute a quorum for

doing business. Is that—are you—is anyone familiar with this? Mr.

Rosen, is that the language that passed the Senate?

Mr. ROSEN. In the bill tendered by Senators Lott and Lautenberg?

Mr. MICA. Yes.

Mr. ROSEN. I believe that is correct.

Mr. MICA. Mr. Chairman, this exhibit for the provisions passed

by the Senate. So what situation, sir, legal counsel, does that put

us in? Basically the same situation we are in now?

Mr. ROSEN. Yes, it is my view that we have a quorum.

Mr. MICA. Hey. So they have solved the problem.

And let’s go to the heart of the finance plans, the great Lauten- berg plan, which is about $9 billion over 6 years. Is it a little more?

Is anyone familiar with the Lautenberg plan?

Mr. ROSEN. It is a higher number.

Mr. MICA. Twelve? We will go for 12-. Okay. Let’s go for 12-.

Mr. Chairman, I would like to ask that the last GAO report to

the Chairman of the Committee on Transportation and Infrastructure be included as part of the record.

Mr. LATOURETTE. Without objection.

Mr. MICA. On page ii it says, Amtrak’s annual operating loss has grown to over a billion and projected to increase to over $1.4 billion.

Mr. Gunn, what is the current backlog cost for maintenance on

Amtrak, 5-, 6 billion?

Mr. GUNN. We have an annual capital need of about 700 million

to keep the existing system in its—

Mr. MICA. But we have several reports saying it is 5- to $6 billion in backlog.

Mr. GUNN. Look, I ran the railroad. I know what we have to

spend, and we have to spend about 500-, $700 million a year.

Mr. MICA. But the total that has been presented to Congress,

presented in the report, you have seen some of these?

Mr. GUNN. There has been a lot of numbers put forward that are

much higher than you have to spend to keep it in—

Mr. MICA. You said 700 million a year.

Mr. GUNN. I think this in today’s dollars—
40

Mr. MICA. And the current losses are about 1 point—we are subsidizing about 1.2 billion. My point is here, even if we pass the

Lautenberg, and you do the simple math on it, folks, you get absolutely nowhere. You’re not going to build a high-speed corridor. We

have had at least two GAO reports; is that not correct, Mr. Rosen?

Are you familiar with these? It says it is going to take 15- to $20

billion to make a high-speed corridor out of the Northeast Corridor.

Is Congress going to get $15 billion? Never. Not based on the fact

that they bungled the acquisition—the Northeast Corridor improvements.

And I don’t have enough time. Can’t we go through—we could go

through some of these. Mr. Hughes, you’re an engineer. The catenary didn’t work, bungled acquisition of the Acela, probably spent

as much money on legal fees as we did on capital equipment in the

project. Am I close to being correct on that?

Mr. HUGHES. Well, I have the good fortune to not have presided

over those, Congressman.

Mr. MICA. But again, just do the math. And the math does not

work out. So you’re advocating the status quo.

Mr. Laney, you had the audacity, and your Board, to step away

from the status quo, and that was the breaking point. We just

heard Mr. Gunn say the Board cannot reform Amtrak, that it has

to take Congress.

Interestingly enough, our legal counsel told us that is not the

truth, because Amtrak has the ability to do what they did to separate out the Northeast Corridor; is that not correct? Mr. Gunn? I

am sorry, Mr.—

Mr. GUNN. We look alike.

Mr. MICA. Do you have the authority to do what you did?

Mr. Rosen, does he have the authority, the Board, under law, you

are the general counsel, DOT—from your estimate, did they—first,

they had a legally constituted board, correct?

Mr. ROSEN. Yes.

Mr. MICA. Secondly, what they did, did they have the authority

to break out the Northeast Corridor? And we will add to it. Did

they have the authority to dismiss Mr. Gunn.

Mr. ROSEN. Well, as to the latter, without question.

With regard to the Northeast Corridor, the only reason I am

pausing is not one of legal authority, but I think there has been

some misunderstanding about the step that the Board took, because it was—what I would characterize as a rather preliminary

step to study both the practical impediments, the legal needs and

so forth. And so since part of the study is what legal impediments

exist, that is why I am pausing on giving you a conclusory answer.

Mr. MICA. Again, they are starting that process.

Mr. ROSEN. That’s correct.

Mr. MICA. Even though there aren’t a lot of folks here today, Mr.

Laney, you will be receiving from me pages of Members of Congress

whom I have gotten to sign a letter to you and your Board, dozens

of Members who say—congratulate you on the action that you took

in starting this process; also asking you to look at having the private sector both develop and operate that corridor. And, oh, the

shudders. Labor and everyone, should they be concerned about

what you’re talking about, Mr. Laney, about breaking this down?
41

Mr. LANEY. No.

Mr. MICA. He said no. Why shouldn’t they be concerned? Mr.

Gunn, didn’t you testify and tell me how many people you have gotten rid of in Amtrak at one of the most recent hearings?

Mr. GUNN. I gave you the head count this morning in my

testimony—

Mr. MICA. How many employees—

Mr. GUNN. I will tell you. I said we went from—in ’01 we had—

the payroll was 24,800. And we are now down—or they are now

down to about 19—

Mr. MICA. Again, my point from the people from labor, why are

you stuck in this mold? You’re losing your laborers. If we had—we

have a chance to open the Northeast Corridor, let the private sector—Congress is never going to give you 15 to $20 billion. The private sector will do it. We might even make money in the operation

of it.

Why am I interested? Because I chair the Aviation Subcommittee. LaGuardia, Newark, JFK, they are all at capacity. I was just

up in Philadelphia where they are extending another runway. It is

at capacity. It will be at capacity. We can build a high-speed service with the cooperation for both the development and the operation by the private sector.

Finally, we have a Board that is looking—God forbid, Mr.

Laney—you’re looking at it—look at the abuse you’re taking for trying to get there. Imagine if you’re a success, Mr. Laney, in the

Northeast Corridor. How many people could be employed? Because

we do this in the west coast, we do it in the central part of the

United States. We need high-speed service all over.

But do you think for 1 minute that Congress is going to vote the

money to give Amtrak? Do you think Congress is going to vote to

give money, to put that kind of investment in? Is there a plan? The

current plan, the Lautenberg-Lott, whatever the name is, does not

do that.

Mr. LATOURETTE. Mr. Laney, I ask you to answer Mr. Mica’s

question, and then, Mr. Bachus, we have about 9-1/2 minutes left.

Mr. MICA. I was just getting started, Mr. Chairman.

Mr. LATOURETTE. Sadly, you’re almost about done.

Mr. MICA. Maybe we will have a few lights go on here. But we

can expand labor, couldn’t we? We could expand these corridors, if

you get one success, instead of just following the pattern that we

have followed, and some people can’t see that; is that correct, Mr.

Laney?

Mr. LANEY. We need to expand.

Mr. LATOURETTE. Thank you very much.

Mr. Bachus. We have 9 minutes left.

Mr. BACHUS. Thank you.

Mr. Laney, you testified before this committee in September; is

that correct?

Mr. LANEY. Yes, sir. Yes, sir.

Mr. BACHUS. And you talked about the Northeast Corridor. What

you talked about at that time was the infrastructure was in need

of repair and needed more operational reliability; is that correct?

Mr. LANEY. That is correct.

Mr. BACHUS. And that was the part of the strategic plan?
42

Mr. LANEY. Yes, sir.

Mr. BACHUS. About 2 weeks later, I think it was, you all announced that you were going to spin off the Northeast Corridor into

a separate subsidy or operating unit; is that correct?

Mr. LANEY. No, that is not correct. We did announce that—as

Mr. Rosen has referred to, we did announce that we would begin

the process of exploring the notion of segregating the assets mainly

for accounting clarity and accounting and financial management

purposes into a subsidiary.

Mr. BACHUS. So I am reminded about what Mr. Mica said in the

paper about that one of the reasons Mr. Gunn was fired was his

opposition to spinning off the Northeast Corridor. So he is mistaken about that.

Mr. LANEY. Well, with all deference to Mr. Mica, he doesn’t know

why Mr. Gunn was fired. I think only the Board members do.

Mr. BACHUS. Why was he fired?

Mr. LANEY. There was a number of issues mainly centered

around the impasse between our wanting to move forward—left me

finish, if I may—to move forward on our strategic initiatives which

are in here, and they are very clearly laid out, and a very clear

road map—

Mr. BACHUS. Let me stop you. In September you testified about

2 weeks before that he was in support of the strategic initiative.

Mr. LANEY. Yes, sir. He did—

Mr. BACHUS. And you testified that it was an agreement between

the Board and the president.

Mr. LANEY. That’s true.

Mr. BACHUS. But 2 weeks later it wasn’t true?

Mr. LANEY. I think you’re talking about a management move. In

a way, I am the captain of a team, and I am trying to make it

work. And I am not going to stand before you in the middle of trying to work things out and criticize our president. We are trying

to making it work—

Mr. BACHUS. You testified before our committee that he was in

support—

Mr. LANEY. And I will testify the same thing now, and I think

you heard the same thing from him this morning. He is in support

of a number of the concepts of the strategic reform initiatives.

Mr. BACHUS. What was he not in support of? What part was he

specifically not in support of that caused you to, as you just said,

fire him?

Mr. LANEY. I think it would be a long list, and it is scattered

throughout the strategic reform initiatives. He was resistant to the

Board’s push forward on a number of different fronts—

Mr. BACHUS. Wasn’t the Northeast Corridor—you are under testimony—wasn’t that a major part of it?

Mr. LANEY. That was one factor. It wasn’t a major—

Mr. BACHUS. Let’s talk about it. You and the administration are

opposed to Federal subsidies for the railroad; is that correct?

Mr. LANEY. No.

Mr. BACHUS. You are in support of—

Mr. ROSEN. Could I speak to that, Congressman?
43

Mr. BACHUS. Well, I will ask you a question. Well, let me ask you

this. I will ask both of you all. Are you all in support of the administration’s position for zero funding for Amtrak for this last year?

Mr. ROSEN. If you recall, Congressman, the administration’s position was zero for the old model, but we would support funding for

a changed, reformed Amtrak, and very specifically we favor funding

for infrastructure similar to what is done in aviation and highways.

We do not favor—

Mr. BACHUS. What you proposed was funding for infrastructure

for the northern—Northeast Corridor; is that correct?

Mr. ROSEN. More than that, we were in support of—

Mr. BACHUS. What was the amount of money proposed for the infrastructure?

Mr. ROSEN. Well, we have to separate two separate things here.

We submitted a bill that was introduced—

Mr. BACHUS. Wait a minute. The administration proposes a

budget—

Mr. ROSEN. Submitted both a proposal—

Mr. BACHUS. How much was proposed for Amtrak? Can you give

me an answer?

Mr. ROSEN. Yes, if you let me answer. The answer was that

under the old model, we would not support funding. And under the

new model, we submitted legislation as to what the new model

would be—

Mr. BACHUS. New model was zero, right. What you actually did,

let’s talk about what you did.

Is it—Mr. Laney and Mr. Rosen, was it zero? Was that the administration proposal? Either yes or no.

Mr. ROSEN. I think the question has been answered. Do you want

me to repeat the entire answer?

Mr. BACHUS. No. Just was it yes or no funding?

Mr. ROSEN. The administration submitted a proposal that called

for matching grants to the States—

Mr. BACHUS. All right—

Mr. ROSEN. —Northeast Corridor state of good repair and the

amounts to be determined, but did not support funding for operating subsidies of the prior contract model—

Mr. BACHUS. There you go. Now, you proposed no operating subsidy; is that correct?

Mr. ROSEN. I think my answer is what I have said.

Mr. BACHUS. And that is what you said.

Mr. ROSEN. Congressman, I think you have my answer.

Mr. BACHUS. I am asking you again, is that what you said, no

operating subsidies?

Mr. ROSEN. I think what I indicated to you was the administration submitted a proposal that would include matching grants to

States for infrastructure, State—

Mr. BACHUS. Let me ask you this. All right. Now, I have heard

Mr. Laney say, it is in his testimony, that one of the problems was

the Federal subsidy; the administration has said they want to

eliminate the Federal subsidies, and they proposed zero funding for

Amtrak. I mean, am I in error here?

Now, I know what you proposed in the Northeast Corridor. I am

aware of what—this new plan you proposed, but I am talking about
44

what you actually proposed. Let’s go to the Northeast Corridor. But

can’t we be honest with each other? The administration proposed—

here it is, AP story, the White House budget proposal for fiscal

2006 did not include any Amtrak funding.

Now, was the Associated press wrong or right? Did they print—

that is the truth? Or is that a lie?

Mr. ROSEN. It is both accurate and incomplete.

Mr. BACHUS. Let me ask you this: What was proposed for the

Northeast Corridor was for the States to subsidize the operation;

is that correct?

Mr. ROSEN. No.

Mr. BACHUS. You proposed no State subsidies?

Mr. ROSEN. For the Northeast Corridor and the administration’s

position?

Mr. BACHUS. No. What I am saying, this new proposal that was

proposed September 22nd was to turn the—was to spin it off into

a separate operating subsidiary; is that correct?

Mr. LANEY. That is not even close.

Mr. BACHUS. Let me ask you this: Am I even close in saying that

you wanted to substitute State subsidies for national subsidies, as

was reported in the several newspapers?

Mr. LANEY. No. Would you repeat the question? I don’t know if

I fully understood it. I couldn’t hear that one.

Mr. BACHUS. Did you propose the States to start funding the operation of Amtrak in the Northeast Corridor—the new entity?

Mr. LANEY. In connection with our proposal with respect to the

NEC infrastructure?

Mr. BACHUS. Yes.

Mr. LANEY. No.

Mr. BACHUS. So you’re not asking or proposing—the administration doesn’t want the States to pay any money?

Mr. LANEY. Our proposal in September, and our resolution to

begin to explore the notion of segregating the assets for accounting

purposes, has nothing to do with State funding in that instance. All

we are trying to do is understand the costs, which we don’t

understand—

Mr. BACHUS. So there is no intent on the administration on your

part to—

Mr. LANEY. There may be a little bit of a blur between what is

in our strategic plan and what is in the administration’s proposal.

I can speak to the plan. I think Mr. Rosen can speak to the administration’s legislative proposal. But the concept, and over time, almost from anybody you ask, is that the States will begin to assume

a greater share of the overall costs of passenger rail in this country, as California and Washington have already done.

Mr. BACHUS. I have read some of your speeches on this, and I

thought you said you wanted the States to start sharing some of

the costs.

Mr. LANEY. Just what I said. It is in our plan.

Mr. BACHUS. So you did.

Mr. LANEY. Yes.

Mr. LATOURETTE. Mr. Bachus, we have 10 seconds left. Ask your

next question, and then we will yield to our friends on the other

side.
45

Mr. BACHUS. Let me ask this final question. You have proposed under the new plan $900 million of infrastructure subsidy on the

Northeast Corridor; have you not?

Mr. LANEY. You may be referring to the administration’s plan,

but I don’t think so. But I don’t know.

Mr. BACHUS. Did they propose that?

Mr. LANEY. I don’t know.

Mr. ROSEN. I am not sure of the number that you are referencing

to, where that is from.

Mr. BACHUS. Nine hundred million dollars. Are you aware that

they have proposed an infrastructure—spending 900 million on infrastructure? So you’re not aware of any proposal they have made

for infrastructure improvement on the Northeast Corridor?

Mr. LANEY. No, sir. That doesn’t ring a bell.

Mr. BACHUS. You both testified that the Northeast Corridor was

in need of—in fact, Mr. Rosen, you said that there was a deterioration of infrastructure on the Northeast Corridor, and, Mr. Laney,

your testimony says there is a need to bring the Northeast Corridor

up to a state of good repair after years of underinvestment. But the

administration has proposed zero funding for that; isn’t that correct?

Mr. LATOURETTE. Mr. Bachus, we will ask them to ponder that

question and ask you to come back when we go to another 5-minute

round, if we could.

Now, to 30 minutes, under the agreement it will be controlled by

the gentlelady from Florida. Because we had a clock malfunction,

and we want to be fair here, the gentlelady now controls 32 minutes.

Ms. BROWN. Thank you. And I still want to hear the first 2 minutes from Mr. Gunn for any responses that you want to make before I yield 5 minutes to Mr. Nadler. But I want to give you a

chance to respond.

Mr. GUNN. Just to give you my opinion of the action they took

on the 22nd, They keep talking about it being a study for clarity.

If you read—first of all, in the strategic plan, which the Board approved, we would have come forward to the Board with a method

of reporting our expenses by business line for clarity. That is going

to happen at the Board meeting this week, because we were on line

to do that.

If you look at the resolution, on this separation, it says, resolved

that management is authorized and directed to take all appropriate

action to create the Northeast Corridor subsidiary. It is not the

study.

Ms. BROWN. So are you saying that the Board action actually

separated? Can you explain that?

Mr. GUNN. It was to create a subsidiary within Amtrak’s control.

My main concern with all of the action over separating—of creating

a subsidiary is that the administration and actually the Chairman

last spring was—they were trying to separate operations from

maintenance.

My concern is that the corridor, whoever runs it, that it be a vertically integrated railway. And what I fear is we have reverted

back to the original intent of the administration and the Chairman

to separate operations from infrastructure. That is wrong. It is bad
46

railroading. Whether it is private, whether it is public, whether it

is Amtrak or a State-controlled railroad, you want a vertically integrated railway.

Ms. BROWN. I am going to yield 5 minutes to Mr. Nadler.

Mr. NADLER. Thank you, Madam Chair. Thank you.

Mr. Gunn, when you met with the Democratic staff yesterday,

you mentioned something about the Amtrak Board hiring a public

relations firm to head off turmoil as a result of their creating the

Northeast Corridor subsidiary, and I presume it is a result of your

dismissal. Is that accurate? Can you tell us about that?

Mr. GUNN. What I said is there was a public relations firm hired.

When I walked in on Wednesday morning, after I found out I was

going to be terminated, I went down to the press office, and there

was a public relations firm that had been hired. And they were sitting in the office and in control of public affairs.

I can’t—

Mr. NADLER. Let me just ask you this: You were president up to

that moment, so who hired them?

Mr. GUNN. It wasn’t me. It was the Board. It had to be. I don’t

know. But I assume it was the Board. But I don’t know the intent,

because I just found them there. But it was—it sort of indicated to

me something was afoot.

Mr. NADLER. Thank you.

Mr. Laney, can you enlighten us about this? First of all, who

hired them? Why were they hired? What is the purpose?

Mr. LANEY. Well, sir, I think if you put yourself in my shoes, it

wouldn’t be very comfortable sitting and talking with all David

Gunn’s public information, governmental affairs folks about how

we approach the announcement if we, in fact, make a decision to

terminate the president of the company. So we needed to go outside, and the Board—

Mr. NADLER. In other words, you hired—the Board decided to

hire this private public relations firm in order to handle publicity

surrounding the dismissal of Mr. Gunn because you didn’t trust

your own staff to do that because they were appointed by Mr.

Gunn? Is that what you’re saying?

Mr. LANEY. Not exactly, but we didn’t want to talk with them

about it before we spoke with Mr. Gunn about it. I think that is

a matter of courtesy. And we hadn’t made a decision to terminate

Mr. Gunn at the time we employed the outside public information

firm.

Mr. NADLER. Well, wait a minute. If you hadn’t fired Mr. Gunn,

what would their function have been?

Mr. LANEY. There wouldn’t have been any function.

Mr. NADLER. Well, you hired them for possibly no function?

Mr. LANEY. They didn’t do anything for a while.

Mr. NADLER. Would you have paid them during that time period

of doing nothing?

Mr. LANEY. No.

Mr. NADLER. So you hired them, in case you fired Mr. Gunn, to

handle the resulting publicity?

Mr. LANEY. Yes.

Mr. NADLER. Was it a no-bid contract?

Mr. LANEY. Yes, it was.
47

Mr. NADLER. And how much is it costing Amtrak?

Mr. LANEY. Range of hourly fees depending on who is involved

and how much work they do.

Mr. NADLER. Do you have an estimate? Is it going to cost $1 mil- lion, $100 thousand, 100 million? What are we talking about?

Mr. LANEY. Probably $25,000.

Mr. NADLER. Probably $25,000. And out of what pot of money do

you pay for this?

Mr. LANEY. Well, we won’t take it out of the infrastructure fund

for the Northeast Corridor.

Mr. NADLER. That wasn’t the question.

Mr. LANEY. We will take it out of general funds of Amtrak.

Mr. NADLER. The operating budget.

Mr. LANEY. Yes, sir.

Mr. NADLER. Which is taxpayer money?

Mr. LANEY. Yes sir. No, not all. Some of it is fare.

Mr. ROSEN. About 40 percent.

Mr. NADLER. Since this is accomplished already, how long do you

think it necessary to keep an outside public relations firm hired?

Mr. LANEY. I haven’t come to that conclusion yet, sir.

Mr. NADLER. Are we talking a week? A month? A year?

Mr. LANEY. I have no idea. The Board will make that call.

Mr. NADLER. Okay. I will yield back. Thank you.

Ms. BROWN. Mr. Rosen, I have a question for you. Did you, representatives of DOT, recommend to Members of the Senate during

the negotiations on their Amtrak reauthorization proposal that the

Amtrak Board of Directors be dismissed and that the Secretary

should become the sole Board member making Amtrak its central

award of DOT? Please describe that to the Board.

Mr. ROSEN. Not as you phrased it, but I do address that issue

in my written testimony at the lengthy footnote on page 6, where

there have been discussions with the Senate Commerce Committee

staff about during the period in which Amtrak receives Federal

subsidies and has this odd accountability arrangement because it

is a private, for-profit company, incorporated under D.C. Law, and

yet there are people who think it is a public agency and want the

Department and the administration to be responsible for its

progress. There is this hybrid situation.

So there have been extensive discussions with that staff, as well

as others, actually, as to what is the best way to have governance

in a situation where a private entity is receiving Federal subsidies,

and that there needs to be accountability.

Ms. BROWN. That is enough. Let me just ask you another question. Do you think that there is a role for the Congress, you know,

the House and the Senate, the people, and do you think that that

is—there is a role? Because you all proposed a budget that the

House and Senate, bipartisan, rejected. Do you think we have any

role?

Mr. ROSEN. I think the Congress has a vital role in intercity passenger rail, and that is part of why the administration has sent

proposed legislation for the period of—

Ms. BROWN. The proposed legislation that you all sent in. And

I want a yes or no. You zero out the funding for Amtrak. That is

a yes or no. And don’t give me no lawyer’s answer.
48

Mr. ROSEN. What is the question again?

Ms. BROWN. That is a lawyer’s answer.

Did you send a proposal to the United States Congress where

you zeroed out the subsidy for Amtrak? That is a yes or no.

Mr. ROSEN. Well, I think as you saw—

Ms. BROWN. You are not capable of doing a yes or no.

Mr. ROSEN. It doesn’t lend itself to a yes or no answer to be accurate.

Ms. BROWN. I want a yes or no. Did you send that proposal up?

Mr. ROSEN. If you want an answer that is both accurate and

complete, I can’t answer it yes or no.

Ms. BROWN. No, I don’t. I just want a yes or a no.

Mr. ROSEN. Well, with that proviso that you don’t want—

Ms. BROWN. Lawyers are not capable of doing yes or noes, I

guess.

Mr. ROSEN. Not when the question is not one susceptible to it.

But the President’s budget—

Ms. BROWN. Let me ask you another question because you can’t

answer that one. You are the Secretary’s designee, Mr. Mineta; is

that correct.

Mr. ROSEN. That is correct.

Ms. BROWN. In the, I guess, 5 years that he has been Secretary,

he is a Board member of Amtrak; is that correct?

Mr. ROSEN. He was appointed by the President to be a Board

member, but the statute explicitly provides—the statute explicitly

provides for him to act through a designee—

Ms. BROWN. That is not my question. Is he a Board member? Yes

or no.

Mr. ROSEN. The answer is yes, as I have explained.

Ms. BROWN. I don’t need any explanation.

Mr. ROSEN. Why don’t you want an explanation?

Ms. BROWN. My next question is have he ever been to a board

meeting? That is a yes or no.

Mr. ROSEN. Well, he has met with the entirety of the Board

members.

Ms. BROWN. No. No. No. No. You’re under oath, and I asked you

a question. Has he ever been to a Board meeting?

Mr. ROSEN. You are asking me personally that. Keep in mind,I

have been the designee for 1 year. Secretary has been the Secretary for 5 years.

Ms. BROWN. To your knowledge, Mr. Attorney, has Mr. Mineta

ever been to a board meeting? Yes or no.

Mr. ROSEN. From my understanding, he has not, nor have several past Secretaries.

Ms. BROWN. Thank you.

Mr. Gunn, what would be the effect of a zero budget that the administration sent up for Amtrak? What would be the effect, based

on your 40 years of experience?

Mr. GUNN. Insolvency and liquidation of the company.

Ms. BROWN. Is that the comments that they made, that they

wanted Amtrak to—

Mr. GUNN. They wanted—at the last Senate hearing that I was

at, they were talking—well, Mr. Rosen talked about the benefits
49

of—what potential benefits of bankruptcy and—which would be the

result of a zero, a zero budget.

Ms. BROWN. Mr. Menendez, do you have questions? Yes, sir.

Mr. MENENDEZ. Thank you, Congresswoman Brown.

Mr. Laney, in the Strategic Reform Initiative report issued in

April of this year, on page 13 it says, infrastructure separation option. And I read from it. It says, it is important to highlight the

fact that the Board and management have extensively explored a

number of recommendations calling for the Northeast Corridor’s infrastructure to be moved into a separate entity.

We have reviewed models for such a structural split adopted and

implemented in other countries with varying degrees of success.

This step in the overall reform process remains an option for continued review. We have decided for now, however, that the cost

complexities and risks of such a split within Amtrak outweigh the

benefits. Consequently we have concluded that separation of the

Northeast Corridor assets from its operations is not advisable at

this time. At this time.

And then I look at your testimony today, on page 3, and when

you say on paragraph 4, amongst the strategic initiatives is the

opening of intercity passenger rail to competition and private commercial participation. And then on page 4 where you go on to say

that separating—what you did, which is have the Board pass a resolution that begins to move in that direction, separating the accounting and financial management of these distinct business operations, but you say it is not a prelude to an asset sale or the privatization of Amtrak; the Board supports neither at this time. At this

time.

My question to you, reminding you that you are under oath, is,

one, have you or any other Board member spoken to any individual

or group of investors seeking to purchase the capital assets and get

huge tax breaks on operating losses? Yes or no.

Mr. LANEY. I am going to have to answer like Mr. Rosen did. I

have spoken to people that are adamantly opposed to it and people

that are adamantly in favor of it.

Mr. MENENDEZ. So you have spoken to individuals who are interested in buying the capital assets, the infrastructure assets for the

purposes of being able to achieve depreciation losses, yes?

Mr. LANEY. Now, I don’t have any idea what they are after, what

they are going to achieve.

Mr. MENENDEZ. Clearly you have spoken to individuals, based

upon your answer, who are interested in buying the capital assets

of Amtrak along the Northeast Corridor. Is that a yes?

Mr. LANEY. Yes.

Mr. MENENDEZ. Thank you. Who are those individuals?

Mr. LANEY. I don’t know the names of those individuals. I don’t

recall. I can get them to you and get back to you.

Mr. MENENDEZ. I certainly want the committee to have those

names.

Mr. LANEY. My guess is they have spoken to a number of the

members of the committee as well.

Mr. MENENDEZ. Have they provided names to you of individuals

who are interested in purchasing the capital assets?

Mr. LANEY. Who?
50

Mr. MENENDEZ. You said individuals of the committee. Have individuals of the committee approached you about individuals?

Mr. LANEY. No.

Mr. MENENDEZ. When you said you spoke to members of the

committee—

Mr. LANEY. I know a number of these groups that have concepts

in mind have approached a number of Members in the House and

in the Senate with their concept.

Mr. MENENDEZ. And they have also approached you and members of the Board?

Mr. LANEY. I don’t know about members of the Board. They have

certainly approached me.

Mr. MENENDEZ. And you have had conversations with them

about selling the capital assets?

Mr. LANEY. I have had conversations listening to their concepts.

Mr. MENENDEZ. Has the administration spoken to you about any

individual or group of individuals to purchase the capital assets of

Amtrak?

Mr. LANEY. No.

Mr. MENENDEZ. Has anyone spoken to you or have you discussed

the possibility with members of the Department of Transportation

about selling capital assets of Amtrak?

Mr. LANEY. No.

Mr. MENENDEZ. Now, when you continuously have the caveat ′′not at this time,′′ obviously those conversations have created the

possibility of selling the capital asserts of Amtrak.

Mr. LANEY. Is that a question?

Mr. MENENDEZ. Yes.

Mr. LANEY. It doesn’t remove it from the table.

Mr. MENENDEZ. Doesn’t remove it from the table. And that is our

concern.

Mr. LANEY. We don’t have any plan to do that.

Mr. MENENDEZ. I know. We had no plans to separate the capital,

the infrastructure, from the operating, and we moved in that direction by virtue of the Board’s resolution, which no one knew about,

including when you were testifying before this committee and made

no mention of it.

Mr. Gunn, have you had any knowledge of conversations as it relates to the selling? You mentioned before in response to another

question that you were concerned about the original intent of the

Chairman and the Board about selling the capital assets of the infrastructure.

Mr. GUNN. My statement was in separating the operation from

the infrastructure for operations.

Mr. MENENDEZ. Why would one do that if not to sell it?

Mr. GUNN. That is a good question. But my concern has always

been that the corridor should remain a vertically integrated railway. The administration proposal clearly calls for separating and

disposing of the corridor to the States or whoever, and my position

has been that whatever you do with the corridor, it should remain

a vertically integrated rail way so that someone is in charge of

train operation and maintenance.

Mr. MENENDEZ. That is because, as it says here in the Strategic

Reform Initiative, the Northeast Corridor mixes high-speed inter-
51

city services with freight rail services operated by several—by

seven different railroads and some of the densest commuter operations. And it goes on to say that it is a highly complex rail corridor and is therefore, risky.

Mr. GUNN. And Amtrak does a good job managing it and maintaining it and running it. And you need somebody like Amtrak—

you can change the name, do whatever you want—but you need

somebody like Amtrak in charge.

Mr. MENENDEZ. How many years have you been in the railroad

business, Mr. Gunn?

Mr. GUNN. I was on my 42nd year, if you include transit, in that

mix.

Mr. MENENDEZ. And just going back to the point I asked you before, can you think of any good reason to separate the infrastructure from the operation other than to sell the infrastructure?

Mr. GUNN. No. The issue of clarity, the argument of clarity, I

think, is a bogus one. The Board is going to get an accounting system at the next Board meeting which will give them clarity in

terms of how Amtrak spends its money. The real risk is the confusion—you have a very—a fragile accounting system at Amtrak. It

is, as GAO has pointed out, and as we would point out, it is very

manual, and it has some real systems problems. We have been able

to work around those.

What this will do is create not clarity, but confusion. And I think

it is—there is no business reason for doing this to provide clarity.

That is not—you cannot justify this other than on the basis of clarity.

Mr. MENENDEZ. Thank you, Mr. Gunn.

Mr. Laney, in your statement you mentioned that current Amtrak partners will not invest in your infrastructure. They don’t

have confidence that they are getting what they paid for. Well,

New Jersey Transit is one of your major partners, has invested

over $1 billion in the last decade, and your actions aren’t giving

them any confidence.

Don’t you think that the Board should have consulted with your

partners before you went forth on this resolution? Because I have

talked to the executive director of New Jersey Transit, and he had

no knowledge of what you intended to do.

Mr. LANEY. We haven’t done anything. We have begun an exploration of a concept, and we have taken no action. And until we

have understand all the facets and the consequences of that, we

will take no action. But we have taken no action at this point.

Mr. MENENDEZ. Well, the resolution says that the management

has authorized and directed to take all the appropriate actions to

create the Northeast Corridor subsidiary. It seems to me a pretty

definitive action. Are you seeking to be a Federal judge?

Mr. LANEY. No, sir.

Mr. MENENDEZ. You have no intentions of seeking to be a Federal judge?

Mr. LANEY. No, sir, I don’t.

Mr. MENENDEZ. I just want to make sure that everybody’s motives are out on the table.
52

Let me ask Mr. Rosen. Mr. Rosen, can you name a passenger rail

service, a passenger rail service, interested in your mass transit

that is profitable?

Mr. ROSEN. Yes. If we are talking above the rail, it is my understanding that there are several including—

Mr. MENENDEZ. What do you mean by above the rail? I am asking about a passenger rail service.

Mr. ROSEN. I am talking about operationally, my understanding

is Japan Central, Hong Kong Railroad, and I am told there are

others—

Mr. MENENDEZ. I am talking about a passenger rail service.

Mr. ROSEN. That is what I am talking about, too.

Mr. MENENDEZ. Tell me how they are successful without subsidies.

Mr. ROSEN. Well, in the case of the Japan railroads, they, like

Amtrak, were national, subsidized entities in the ’70s, and then

around 1986 or 1987, Japanese Government made the decision to

split that up and create six—

Mr. MENENDEZ. I am not asking about the Japanese Government, Mr. Rosen. Mr. Rosen, I am asking the questions, and I don’t

really want to hear about the Japanese. I care about America.

I want to know—I don’t know of a system that is profitable. The

Washington Metro is unprofitable. The New York City subway system, the busiest mass transit in the United States, is unprofitable.

Yet, you know, you have this dogged determination to say that Amtrak has to be profitable, even though the reason Amtrak came into

being in the first place is because the freight rail service said,

please, take it away from us so that we could have passenger rail

service.

Mr. Gunn, do you know of a passenger rail service that is profitable?

Ms. BROWN. And that has to be the last question. And thank you

so much.

Mr. GUNN. No. I will say this. Mr. Rosen has mentioned the Japanese railway system. After the government invested 80-, $100 billion in new tracks and rights of way, they barely cover their operating expenses.

Mr. MENENDEZ. But we won’t give you—I heard earlier about

from one of my colleagues—we won’t give you 15. I would, but others would not.

Ms. BROWN. We spend $6 billion a month in Iraq, just for your

information. And you, Mr. Rosen, mentioned something about $400

million a year. We wasted $7.2 billion to Halliburton that we don’t

have any, any idea of where the money went.

Mr. Cummings, 3 minutes.

Mr. ROSEN. I assume that is not an advocacy of waste.

Ms. BROWN. I called your name, and I didn’t ask you any questions. I called on Mr. Cummings.

Mr. CUMMINGS. Mr. Gunn, tell us, do you think you were treated

unfairly here in this firing?

Mr. GUNN. The Board has a right to fire me. I don’t question

that. And if they have an agenda which is obviously different than

the one I have, they have the right to fire me. So is it unfair? No.
53

I think that—I am very concerned about the agenda that the administration and the Board has.

Mr. CUMMINGS. And what is your interpretation of that? I guess

what I am trying to get to, we are not going to probably have too

many chances like this to interview you again. They basically

kicked you out of office. And I am not saying that to be smart. We

have a limited amount of time. It is our watch. I want to make

sure that the railroads stay intact. I don’t want to see all these private folks come along and pick pieces of it, don’t necessarily want

to see the States like my State having to take—to put much more

money into the railroad when they don’t even have it.

But yet still they are paying taxes big time, and they subsidized

all kinds of other things, but they just want to subsidize the way

it works. So I want you to tell us, you know, what you see and

what you would like to see.

Mr. GUNN. What happened, we had a strategic vision which we—

the Board and management adopted in the spring. And contrary to

what the Chairman said, that document, I had a big role in preparing that document, and I believe in that document. I did not believe

in some of the other things they wanted to do.

That document, we were following that document. And that document—and the Board will get the benefits of what we have been

doing at the next Board meeting, I believe, unless they change

that.

What happened is that it is clear to me that I became an obstacle

to a plan to, I think—basically to do away with the corporate structure in Amtrak and to implement the administration’s plan for passenger rail service, which is really not a plan at all. It is a plan

of just destroying the corporation and turning the Northeast Corridor over to a committee of governors and let them deal with it.

I think that is what happened, and I was an obstacle. I think I was

definitely an obstacle to the dismantling of Amtrak. And that is

why I am sitting here as the former president. And I believe that.

Mr. CUMMINGS. And looking at this situation, I guess, in sort of

hindsight, I guess there are certain things, Mr. Gunn, that all of

us—we have certain principles, hopefully, that we really stand by.

And I take it that you probably would have had a difficult time no

matter what because the Board wanted you to go, just listening to

what you just said, against some basic principles that you have

about railroading, I guess. The public, I guess—

Mr. GUNN. There are two things that—one is the way you manage a corporation or a railroad. I think the attempts early on to

split operations from infrastructure were wrong from a managerial

operating point of view, and I believe that very strongly.

The other is I firmly believe that this Nation needs passenger

rail service, and I think this dismantling Amtrak is not the right

way to go. Amtrak needs reform. The reform is—I think we documented that reform in our package, which the Board approved. But

obviously they have moved off that. And I think that the—I just

became an obstacle to dismantling Amtrak. And I think what Amtrak right today, Amtrak is the gene pool for passenger rail—intercity passenger rail service in this country, and if isn’t treated in a

fairly thoughtful way, you’re going to set back passenger rail service in this country decades.
54

Mr. CUMMINGS. Just one other question, because I know my time

is limited.

A lot of those employees that Mr. Laney pretty much described

as doing a terrible job—yes, you did—I mean, for the main exec to

sit here and say that about the employees—I mean, I ride Amtrak

all the time. I mean, how do you feel about the employees and

what is the morale there now? I know you’re gone, but how was

it?

Mr. GUNN. I thought it was pretty good. There’s no question that

when you’re dealing with 25 million riders, you’re going to have

problems, but I really think the bulk of our employees do a good

job and they care about the railroad.

I have issues on work rules and all that sort of thing, but the

employees I think are a first-class bunch. There’s a few rotten apples, there would be under 20,000 people, among 20,000 people, but

they’re good.

We have actually started—we had started a fairly systematic

training program where—over the last 2 years, and we have actually seen passenger complaints drop by 20 percent. I think we have

made real progress and I think we are working at that issue. But

our employees, by and large, are professional and they’re good people and they’re good railroaders. Even though I disagree with some

of the work rules and things like that, they’re a good bunch.

Mr. CUMMINGS. Thank you for your service, and we really appreciate it. With that, I yield back.

Ms. BROWN. Thank you.

Mr. Gunn, I have told you that I give you an ′′A′′ as far as your

service to this country.

Mr. GUNN. Every time.

Ms. BROWN. I want to yield 4 minutes to Mr. Nadler.

Mr. NADLER. Thank you.

Mr. Laney, to what extent was Mr. Rosen or Secretary Mineta

involved with the decision to fire Mr. Gunn?

Mr. LANEY. Secretary Mineta was not involved at all. Mr. Rosen

was involved as every other board member was involved.

Mr. NADLER. Mr. Rosen, would you care to comment?

Mr. ROSEN. I think that’s accurate, except that I did confer and

consult with Secretary Mineta in order to make sure that the actions that were being contemplated were—

Mr. NADLER. Fine.

Let me ask you this, Mr. Rosen, first—well, Mr. Laney first. Who

originated the idea to fire Mr. Gunn? Who first brought it up for

consideration?

Mr. LANEY. First came up for consideration—

Mr. NADLER. I didn’t ask when. I said, who brought it up?

Mr. LANEY. I’ll tell you the context.

Mr. NADLER. Who first mentioned it?

Mr. LANEY. David Gunn.

Mr. NADLER. Strike that.

Who first recommended it? Who first recommended it, because I

don’t take that as a serious answer.

Mr. LANEY. That’s a serious answer.

Mr. Gunn nearly left on a couple of different occasions, and it

concerned us and it—
55

Mr. NADLER. Who first expressed that concern?

Mr. LANEY. About Mr. Gunn’s departure?

Mr. NADLER. About maybe he ought to go.

Mr. LANEY. I think it was—I don’t know who first among the

board members. I don’t know who first raised it.

Mr. NADLER. Was it among the board members?

Mr. LANEY. Oh, yes.

Mr. NADLER. I understand, Mr. Laney, that there was a telephone conversation with DOT, or that involved DOT or Secretary

Mineta, during the meeting up to Mr. Gunn’s dismissal; is that correct?

Mr. LANEY. I was not involved in that phone conversation. I don’t

know anything about—

Mr. NADLER. Mr. Rosen, do you know anything about it?

Mr. ROSEN. I don’t think so, but if you could ask it again. I’m

not sure if I got the question.

Mr. NADLER. I understand that there was a telephone conversation with DOT, or that involved DOT or Secretary Mineta, during

the time leading up to Mr. Gunn’s dismissal; is that correct?

Mr. ROSEN. The reason I paused is, as a board member, I spoke

with the other board members as a group. But otherwise I think

the answer is no.

Mr. NADLER. Did anyone outside the board speak on behalf of or

against Mr. Gunn’s firing before he was fired?

Mr. LANEY. Are you asking that of me?

Mr. NADLER. Yes.

Mr. LANEY. It was a discussion.

Mr. NADLER. I know, but did anyone express an opinion on that

who wasn’t on the board?

Mr. LANEY. No.

Mr. NADLER. Mr. Rosen?

Mr. ROSEN. Not to my knowledge. As I say, with the caveat that

Secretary Mineta and I conferred.

Mr. NADLER. Mr. Gunn, did Mr. Laney allude to you that there

were discussions with anyone outside the board regarding your position at Amtrak?

Mr. GUNN. Not that I remember, except, as I said earlier, in several occasions he said he was having trouble defending me.

Mr. NADLER. Mr. Laney, of whom were you speaking when you

said—or when you said that you had tried to defend Mr. Gunn, to

whom were you referring?

Mr. LANEY. Other board members.

Mr. NADLER. Thank you.

Mr. Laney, I want to follow up a little on some questions that

were asked before. You testified that Mr. Gunn, that he was fired

essentially because he refused or failed to do—things he refused to

do in going in several new directions that the board wanted to go,

in implementing the strategic plan. Is that correct?

Mr. LANEY. Let me elaborate, if I may.

Mr. NADLER. Before you elaborate, that is correct, that’s what

you said?

Mr. LANEY. I don’t recall what I said, but it was an incomplete

answer.

Mr. NADLER. I’m going to make it more complete.
56

Specifically what are the most important things that he didn’t

want to do or refused to do that you felt it necessary—that were

the cause of his firing?

Mr. LANEY. I’m very reticent to go into all the detail, but I will

say in general terms there were elements of our strategic agenda—

Mr. NADLER. You said that already. What were some of the elements, the most important, that he didn’t want to go into, that he

didn’t want to do?

Mr. LANEY. We had been pushing reductions in costs from a food

service, beverage service, food service, for a long period of time.

Mr. NADLER. He didn’t want to do reductions in cost?

Mr. LANEY. He was not as aggressive as we thought he should

be.

Do you want me to continue? I can catalog these long or short,

however you would like to do it.

There are a number of areas of expense and, potentially, expense

reduction or at least significant expense control relating to maintenance of our equipment, overhauls of our equipment.

Mr. NADLER. Basically, cost reductions in food service, beverage

service and maintenance of equipment essentially is what you’re

saying?

Mr. LANEY. Cost reductions on the one hand, revenue generations on the other. There are a number of initiatives we didn’t

think he was being aggressive, as he should.

Mr. NADLER. Mr. Gunn, were these subjects of major dispute?

Mr. GUNN. They are now.

Mr. LATOURETTE. If I can interrupt. I’ll let you answer that question then this block of time has expired.

Mr. GUNN. Basically there was never a normal boss-subordinate

sitting down saying, Look, I want you to move this fast on this

issue. At the board meeting—when is it, tomorrow or Thursday—

they’ll get a renegotiated gate gourmet contract. They’ll get a proposal; I think they’ll get a proposal for someone to provide food

service on our trains.

We have in place already the design for the changes we have to

make to the food service cars in order to provide a new type of food

service at a lower cost. We have been moving very aggressively. I

think it’s a nonsense argument. It really is. Specious.

Mr. LATOURETTE. I thank the gentlemen. We’ll now return to the

5-minute rule. I’ll recognize myself for 5 minutes and move through

the list of remaining members.

Mr. Laney, I want to get to something I think Mr. Nadler was

talking to you about, this public relations firm. Has any part of

their function, as retained, to communicate Amtrak’s message to either Members of the House or the Senate?

Mr. LANEY. Yes, sir. We had public information releases going to

the press, going to the Members of the House and Senate.

Mr. LATOURETTE. I bring that to your attention just not as a

′′gotcha′′, but again referring to the Amtrak Reform and Accountability Act of 1997. Section 414 requires—and this is where I

thought Mr. Nadler was going—that if you retain a consulting firm

and one of the functions of that consulting firm is to bring information which, in my mind, is lobbying the United States Congress,

there are requirements set out that you notify the committee, this
57

committee, the name and purpose of the individual involved, the

purpose of the contract and the amount and nature of their obligation.

I’d ask if you’ll review with your legal counsel whether or not

that meets that requirement.

Mr. Rosen, I want to get back to you. I’m concerned that the title

of this hearing was ′′Amtrak governance.′′ I am concerned about

what happens going forward.

We have the Senate about to adjourn, we have two recess appointments, Mr. Hall and Mr. Sosa, whose terms will expire if their

nominations are not acted upon, and the first question I have is:

Is it your view that, should that happen, the Senate take no actions on confirming Mr. Hall and Mr. Sosa, no other nominations

go before the Senate, that it can just be you and Mr. Laney to constitute an executive board, you guys can govern Amtrak?

Mr. ROSEN. Well, I don’t predict that that’s the hypothetical that

we’ll wind up confronting, but if you’re asking me the legal question of would we be able to function, that was the action that the

board took to protect itself in 2002 and 2003, to establish that in

the absence of a quorum, an executive committee could continue to

proceed so that the company would not be directionless or

leadershipless.

Mr. LATOURETTE. Let me say that I guess I read that differently.

The way that I read the initial act, and then there was a change

from three to two by board action, is that that executive committee

was to be between meetings; it wasn’t in the absence. I would think

it would be strange.

And, Mr. Laney, my understanding is, your background is as a

corporate attorney. I would think that would be a very strange corporate structure that you could have the complete absence of a

quorum if, in fact, these two recess appointments are not confirmed

or people don’t take their place, and two folks just—is that your belief too, Mr. Laney?

Mr. LANEY. My belief, that it’s an odd corporate structure?

Mr. LATOURETTE. One that is odd. And do you agree with Mr.

Rosen that the two of you, absent anyone else getting confirmed,

could continue to run the corporation?

Mr. LANEY. Mr. Chairman, we play the hand we’re dealt; and we

have to have a functioning board, and I think we would have the

authority to act.

Mr. LATOURETTE. Let me ask you this. This is the interplay of

the D.C. Business Corporation Act, and my understanding is that

the authorizing statute says that we’re going to follow that as long

as it’s not inconsistent. And one of the provisions in the D.C. Business Corporation Act indicates that one way to solve this problem,

because I really have to tell you I think that that would be not a

good way to conduct business, but that you’re going to have a

shareholder election of interim directors until you can get duly

qualified appointments confirmed by the Senate.

Have either of you given any thought to—again, going back to

corporate governance, my understanding is, if you look at the D.C.

law, the shareholders are supposed to get together for a meeting

once a year. I’m told there’s not been a meeting of the Amtrak

shareholders for 20 years. I’m not saying it’s your fault, but I think
58

that’s unusual corporate governance, that the shareholders don’t

have an annual meeting and they don’t have one for 20 years.

Have you given any thought—and I know that it’s a hypothetical

because it hasn’t happened yet, but have you given any thought to

having your shareholders in and getting interim directors appointed in a way consistent with the D.C. Corporation law; or, Mr.

Rosen, do you think that’s inconsistent with Federal law?

Mr. ROSEN. I think there is a specific problem in that Congress

specifically took away the ability of the common stockholders to

vote for directors in the 1981 Act and has continued that.

I think the other thing that would be difficult is, the Department

of Transportation, as the holder of the preferred stock, holds in excess of 95 percent of the equity of the company and that, likewise,

is nonvoting for directors after the Amtrak Reform Act of 1997.

So if we were to depart from the Federal law—they took away

those voting rights—and say, we’re going to have a meeting and

have them vote, I presume the Department of Transportation

would have over 90 percent of the votes; and I’m not sure if that’s

really the concept that you’re raising.

Mr. LATOURETTE. Let me stop you there.

Two things: One, I’m told by counsel that this ’81 provision has

been repealed and the voting opportunity rights were restored, and

further, that the statute indicates that the 90 percent share, whatever the DOT owns, is nonvoting.

Mr. ROSEN. All the common stock is nonvoting for directors, and

in addition, the statute required that the common stockholders’

stock have been redeemed. That actually has not happened, but

was supposed to happen under statute, in which case while there

could be new common stockholders, the existing ones were supposed to have been bought out under the Reform Act; and for reasons that others would have to explain, that hasn’t occurred.

Mr. LATOURETTE. They’re still stockholders, are they not?

Mr. ROSEN. There are, and it would seem anomalous that people

who don’t have a vote would now be asked to make decisions, unless perhaps they were going to become investors.

Mr. LATOURETTE. All right. I’m a little more confused, but I will

hash this out a little later.

Ms. BROWN. You want to—where do you want me to go first?

Ms. Norton.

Ms. NORTON. Thank you very much, Mr. Chairman. Please correct me if, during the time I had to be out, this question was asked.

We had a committee meeting here about 2 months ago, and—this

question is for Mr. Laney—according to the testimony at that time,

you used the words ′′splendid′′ and ′′terrific′′ to describe the performance—this is 2 months ago now—to describe the performance

of the man you have just dismissed.

Mr. Gunn has done, as far as I am concerned, a splendid job. He

took Amtrak from the day he landed on the platform, in effect—

in 2002, I believe it was—and has righted a ship that was listing

and about to spill over. As far as I’m concerned, Mr. Gunn is a terrific operator.

How could anybody go downhill so fast in 2 months, and would

you explain?
59

Mr. LANEY. I’ll be glad do. The question has been asked and answered, but I’ll be glad to.

Ms. BROWN. It hasn’t been answered properly.

Mr. LANEY. Yes, ma’am. I’ll be delighted to answer the question,

and it’s not inconsistent with my perceptions of David Gunn’s performance from the day he arrived for the next 12 to 18 months

after his arrival.

No one has worked as closely with David Gunn, at least among,

between you all and—on the committee and the board, as the board

has, and no one has seen as closely as we have David Gunn’s performance. But I would add, no one among you is charged with the

responsibility for overseeing Amtrak, as we all assume that responsibility.

David did a terrific job and was the right man at the right time

in 2002.

Ms. NORTON. And as of 2 months ago?

Mr. LANEY. As of 2 months ago he was not the right man.

Ms. NORTON. Why did you answer he had done a terrific and

splendid job?

Mr. LANEY. I described the job he had done for the first 18

months to 2 years.

Ms. NORTON. You did not leverage it, and you know it, as to the

first 18 months.

Mr. LANEY. No, I didn’t say the first 18 months, but read the remainder of my testimony, and I think you’ll see I do raise concerns

about his vision of the future. I was polite about it, he was still

part of the team, trying to make it work.

Ms. NORTON. He is a terrific operator, not has been.

Mr. LANEY. He is a terrific operator. He is not the strategic

strong planner and implementer that we need right now.

Ms. NORTON. Would you summarize in a sentence or two the reason, particularly in light of this glowing testimony, that the board

decided that Mr. Gunn should be fired?

Mr. LANEY. There’s no precipitating single event.

Ms. NORTON. Let me suggest the following. In September there

was a resolution passed that would have split the Northeast Corridor from the existing operations into a new subsidiary. Did Mr.

Gunn agree with that resolution?

Mr. LANEY. No, he did not.

Ms. NORTON. So that, I take it, was the precipitating event.

Mr. LANEY. No, ma’am. He and I had extensive discussions and

disagreements during the entire development of the strategic plan

about that very issue. If that had been the issue, he would have

been terminated then.

That’s not the issue, and you’re making too much of that particular issue. That’s not the reason.

Ms. NORTON. Let me make something of the board’s issue. This

resolution, this September resolution, these events that I’m describing are one on top of another. Here’s the September resolution that

I have just described: It said, split it off into a subsidiary.

Now, that is September. Five months before that, in April, here’s

the board’s position. Strategic and reform initiatives in FY ’06

grant request which indicated—this is the board speaking—that

the cost, complexities and risks of splitting the northeast oper-
60

ations from Amtrak’s operations—and here I’m looking at your language, in particular—splitting it off into a subsidiary outweigh the

benefits and are therefore inadvisable.

Now, I want to know about your turnaround now between April

2005 and September 2005. I’m trying to figure out where this board

is and what is the basis for this board’s decision. What was the

basis for that reversal, if you will?

Mr. LATOURETTE. If I could ask you, Mr. Laney, to answer the

gentlelady’s question, then move on to our next member.

Mr. LANEY. There’s no change at all. They’re absolutely consistent. The concern we raised then is the current concern I have now,

and Mr. Gunn just elaborated or articulated a few minutes ago,

and that is, we are not convinced that the benefits outweigh the

risks of segregating the integrated management of the Northeast

Corridor infrastructure and the management of the train operations on the Northeast Corridor.

There is no change, there is absolute consistency.

Ms. NORTON. I’m sorry, I just read to you that you said that the

risks—that the cost, complexities and risks of splitting the Northeast Corridor from Amtrak’s operations as you now propose to do,

quote, ′′outweigh the benefits and are therefore inadvisable.′′

Mr. LANEY. Yes, ma’am. You’re reading absolutely correctly; and

I agree with the way you phrased it, and there is no inconsistency

between that position stated in the plan and my position now, or

David Gunn’s position, that is, you should not segregate the management, oversight, integration of the operation of the trains and

the operation of the infrastructure.

Mr. LATOURETTE. I thank you very much.

Ms. Brown, 5 minutes.

Ms. BROWN. Thank you, Mr. Chairman.

Mr. Laney, I understand that you have directed management,

subject to the final board approval, to transfer to a new subsidiary

the title of all Amtrak-owned infrastructure in the Northeast Corridor. While the NEC operation would remain with Amtrak control,

there is no transfer of obligations to perform services or the employees’ need to fulfill those obligations. In other words, you’re

busting up Amtrak and explain to me what you are doing, you—

I guess you and one other person.

Mr. LANEY. We have a board of four at the moment, Congresswoman.

Ms. BROWN. Illegal.

Mr. LANEY. The action we took has not directed anybody to do

anything other than to lay out for us all of the implications and

any reasons why we might not go forward, as well as why we

should go forward. But the action, if we do it on the basis of that

analysis, would be, in effect, a transfer of the assets only into a

wholly owned subsidiary of Amtrak. Short of that, the segregation

into a separate division within the current corporate construct is

another option.

We don’t know where we’re going with this. We initiated the

process for further focus, study and understanding; and I’ll be the

first to say that no one on the board and, quite honestly in my

judgment, no one in Amtrak’s management fully understands all
61

the implications of this, and we’re trying to get to the bottom of

that.

Ms. BROWN. I want Mr. Gunn’s response to that, but before I go

to Mr. Gunn, I want to hear from the attorney because, you know—

Mr. ROSEN. Well, I guess the way I’d like to address—that is, the

administration’s proposal—

Ms. BROWN. Is this the Bush administration?

Mr. ROSEN. Yes.

-- had provided for, in our legislative proposal—that’s separate

from what the board action is—but in our legislative proposal for

separation of the infrastructure from the operating companies, just

like airlines are separate from airports.

And one of the concepts is that the infrastructure, because of

Amtrak’s operating needs, periodically is deferred, the maintenance

is starved, and that we need to get the infrastructure brought up

to a state of good repair. And so by having them in separate baskets, if you will, you don’t take from one to support the other, and

so the infrastructure has to get brought up to a state of good repair.

Ms. BROWN. Did you all propose any additional funding for that?

Because the last time I checked, you all just zeroed the funding of

Amtrak.

Mr. ROSEN. This separation has not occurred.

Ms. BROWN. Oh.

Mr. ROSEN. Now, the second rationale, in order to complete the

answer—

Ms. BROWN. Does the Congress play any role? I mean, if you give

us a proposed budget and if we don’t accept it, then what?

Mr. ROSEN. By definition, Congress does play a role and determines what the appropriation is, as well as enacts legislation.

Ms. BROWN. Okay. I have never—I have been elected 25 years

and I have been in this Congress for 13 years; I have never seen

an administration that does not respect the Congress.

Mr. ROSEN. I’m sorry, I think we do.

Ms. BROWN. This is a blatant example of it. You all are moving

forward to dismount Amtrak, two people or three people or four

people, but none have been confirmed by the Senate except one

person—yes, yes, you and Mr. Mineta, who is a member of this

body, haven’t been to one single board member meeting, but he

issues statements about Amtrak.

I would like Mr. Gunn to respond to the question that I initially

asked.

Mr. LANEY. Do you want me to complete the earlier answer?

Ms. BROWN. No, I don’t.

Mr. GUNN. I’d just say two things about this discussion, and that

is that, first of all, the idea that you have to separate the Corridor

to prevent funding from bleeding from capital to operating is nonsense. Our budgets are set and the way our money is appropriated

is operating money, debt service and capital. And we do not fund

the operation out of deferrals of capital. We do not do that. We are

very rigorous about segregating the funds into the proper buckets.

The other thing is that this whole issue of creating a subsidiary,

it is an enormously complicated effort which is probably going to

result in lawsuits to the board from various parties; and it has no
62

benefit, that they aren’t going to get this board meeting when they,

Amtrak, prepares its accounts according to business lines that are

contained in the strategic plan.

It is a specious argument to say, you need to create the subsidiary for clarity. That is absolute nonsense, in my opinion.

Ms. BROWN. Since the board was initially created—I mean, the

Congress has not done the proper thing. I mean, we talk about ′′a

billion-five,′′ but I think Congress has moved forward, both the

House and the Senate, bipartisan, have moved forward in addressing some of the infrastructure needs of Amtrak.

What I find lacking is the board’s response to the direction from

the Congress and also, if you agree, Mr. Laney, with the GAO report that did some minor criticism of Mr. Gunn, it criticizes the

board and said that you all have not done the kind of job that you

are supposed to do as far as directing Amtrak.

I will give you an ′′F′′, you and the board.

Mr. LANEY. I suspected that.

Ms. BROWN. Yes.

Mr. LATOURETTE. If that is not a question, we are going to move

on to somebody else.

Mr. DeFazio.

Mr. DEFAZIO. Mr. Chairman, I’ll move quickly; five minutes isn’t

very long.

As I look at the documents provided, as I understand it, Mr.

Laney, your prior experience with the Texas Department of Transportation—I visited the Web site—had very little to do with rail.

Do you have any other significant expertise in rail, other than

your service on the board that I’m not aware of?

Mr. LANEY. No, sir.

Mr. DEFAZIO. Mr. Sosa, another member of the board, in his confirmation hearing said, he had no experience on land transportation, never ridden an Amtrak train.

Are you aware of anything else there that I might not know

about?

Mr. LANEY. He was CEO of a major industrial company.

Mr. DEFAZIO. We’re talking about rail here. You may think it’s

transferable; we don’t.

Let’s go to the next one. Mr. Laney or Mr. Rosen, Mr. Hall was

Chairman, President, CEO—there you go, Mr. Rosen—of K-Mart,

which bankrupted shortly after his retirement, he went away with

$62 million and a $2 million severance package. Are you aware of

any significant rail experience he has, or transportation experience,

other than what K-Mart might have used for transporting goods?

Passenger, we’re talking about here.

Mr. LANEY. I don’t know his background.

Mr. DEFAZIO. Mr. Rosen, you represented automobile interests—

surface transportation, granted.

Do you have any significant experience in management or knowledge of passenger rail that we’re not aware of other than your service with—as general counsel for 2 years?

Mr. ROSEN. No.

Mr. DEFAZIO. Thank you. That’s good.

Mr. Gunn, 40 years, is that what I heard?

Mr. GUNN. Forty-one.
63

Mr. DEFAZIO. Now you said that a zero budget by the President

would have left an insolvency bankruptcy; is that correct?

Mr. GUNN. Yes.

Mr. DEFAZIO. Mr. Laney, with your vast experience, you disagree, is that correct, yes or no?

Mr. LANEY. No, I don’t disagree.

Mr. DEFAZIO. It would have led to bankruptcy, the President’s

budget?

Mr. LANEY. Zero operating budget leads to insolvency.

Mr. DEFAZIO. Mr. Rosen, you apparently feel that even though

it was proposed for zero, there were other aspects that would have

allowed it to succeed.

Mr. ROSEN. Yes, because the zero was a call to action.

Mr. DEFAZIO. Call to action, but if Congress would have passed

it, it would have been pretty drastic action.

Mr. Gunn, you said something I couldn’t follow at the end of your

testimony, or answer to that previously, something about researching, or Mr. Rosen talking about the benefits of bankruptcy, you

said, at a meeting?

Mr. GUNN. At the Senate testimony before an appropriations

committee, he was questioned about the zero budget, and it was

clear there was no money, no matter what happened in the budget,

for passenger rail. And he discussed—made an analogy between

rail and airlines in terms of the benefits.

Mr. DEFAZIO. So we could break the unions, among other things,

and perhaps question or break contracts?

Mr. GUNN. I’ll let him.

Mr. DEFAZIO. Are those the kinds of benefits, Mr. Rosen?

Mr. ROSEN. I certainly didn’t say that.

Mr. DEFAZIO. It would be similar to the airline industry?

Mr. ROSEN. I think Mr. Gunn’s recollection—

Mr. DEFAZIO. We’ll have to look that up. I only have 5 minutes.

Now, Mr. Laney, I’m just curious, did you have any conversations, communications or directives in any form with any political

appointee of the Bush administration, Department of Transportation, White House or otherwise regarding the firing of Mr. Gunn

before it happened? Yes or no?

Mr. LANEY. No.

Mr. DEFAZIO. You did not. So then who first—what was your—

what is your recollection of your first discussion regarding the firing of Mr. Gunn? Was it with another board member?

Mr. LANEY. Other board members.

Mr. DEFAZIO. More than one? I don’t know how you operate in

terms of rules of procedure, whether you can reach a conclusion before a meeting. Is that illegal?

Mr. LANEY. No.

Mr. DEFAZIO. Talk to three other board members and decide and

go in and vote on it. I know how your boards work.

Mr. LANEY. What’s the question?

Mr. DEFAZIO. The question is, did you discuss it with other board

members before the meeting?

Mr. LANEY. Before what meeting?

Mr. DEFAZIO. When you fired him.

Mr. LANEY. Yes.
64

Mr. DEFAZIO. With all three?

Mr. LANEY. Occasionally with one, two or three.

Mr. DEFAZIO. You had reached a conclusion before the meeting?

Mr. LANEY. I think we had. I wasn’t sure until we took a vote.

Mr. DEFAZIO. Sounds like, if you had that many conversations,

now there are no quorum procedures or anything like that; so you

could discuss it with others before the meeting.

Mr. LANEY. We can discuss it with one, two or three.

Mr. DEFAZIO. All right.

Then, if we can go back to the previous issue, Mr. Gunn, about

the Northeast Corridor, this report—I mean, again, I’m curious at

some of the answers we’re getting.

The Strategic Reform Initiative seems definitive about the complexities, risks of a split, and that, regarding the Northeast Corridor, that it shouldn’t go forward, but you had a major disagreement over that. Apparently, at some point the board decided to go

forward despite the strategic initiatives of April; is that right?

Mr. LANEY. No, not ′′despite′′; it’s very consistent, in my judgment.

Mr. DEFAZIO. So you overcame all the complexities, and the

costs, risks, and split benefits, changed from April, and your position-controlled rail operations to remain unified for purposes of

safety and efficiency despite, we heard, you wanted to split off rail

and operations.

So all those things changed from April to now, and then this is

the report over which you are saying Mr. Gunn is not carrying out

your direction?

Mr. LANEY. No, sir. The board decided not to segregate management of infrastructure from management of train operations.

Mr. DEFAZIO. So that’s Mr. Rosen’s position, not yours?

Mr. LANEY. That’s my position. I don’t know what his is.

It is Mr. Gunn’s position as well. You shouldn’t segregate the

two.

Mr. DEFAZIO. You’re familiar with how well or how poorly it has

worked out in Britain and other places?

Mr. LANEY. I’m very familiar with that.

Mr. DEFAZIO. My time has expired. Thank you.

Mr. LATOURETTE. Thank you very much.

Ms. Johnson.

Ms. JOHNSON. Mr. Laney could you tell me the origin of the privatization plan?

Mr. LANEY. What privatization plan are you talking about?

Ms. JOHNSON. The one where you were going to separate the

Northeast Corridor and sell off.

Mr. LANEY. There is no privatization plan.

Ms. JOHNSON. There is not a plan?

Mr. LANEY. There is no privatization plan, no, ma’am.

Ms. JOHNSON. Who were you going to sell it to, the public?

Mr. LANEY. There is no plan to sell it to anyone.

Ms. JOHNSON. Okay. Who is the Corridor task force and what is

that purpose?

Mr. LANEY. The Corridor task force is a concept in that plan, the

strategic initiative plan that, in effect, involves the input of all the

States or users along the Northeast Corridor—commuter rail,
65

States, departments of transportation—so that we can have their

input in developing our capital plan for the Northeast Corridor.

It’s a concept that we are moving forward on and it’s—in my

judgment, really takes something on a de facto basis, something already done in a more informal way and makes it formal.

Ms. JOHNSON. Are these State DOT people?

Mr. LANEY. I don’t know what we’re actually going to use in

terms of the actual composition of it, but representative users or

interested stakeholders along the Northeast Corridor—States,

DOT’s, and commuter operations.

Ms. JOHNSON. Who is the Amtrak Reform Council?

Mr. LANEY. I can’t give you the history, but the Amtrak Reform

Council was a group that was he designated—I don’t know the

year, 1995, 1997, sorry—and it came together and worked fairly intensely for a period of time and came out with an Amtrak Reform

Council proposal.

Ms. JOHNSON. Is it close to what the proposal is now?

Mr. LANEY. I think there is some similarities and

somedifferences. There’s some similarities and some differences between our plan and virtually every other concept that’s come out

with respect to Amtrak.

Ms. JOHNSON. Is that council still organized?

Mr. LANEY. I don’t think so.

Ms. JOHNSON. Have you had any conversation with anybody

about the future of Amtrak as it relates to reorganizing?

Mr. LANEY. Reorganizing. Pardon me?

Ms. JOHNSON. Other than the board members.

Mr. LANEY. I don’t understand what you mean by reorganizing.

Ms. JOHNSON. What are you reforming then?

Mr. LANEY. Reforming, absolutely. I speak to folks about the very

concepts of reform—Members of the House, Senate, members of the

administration and private sector members, as well as States and

other interested stakeholders who have operations around the

country. So, yes, I speak or, more than that, I listen to most of

those folks who have their own ideas.

Ms. JOHNSON. Who are the stakeholders? Do we have any role

to play in that?

Mr. LANEY. Absolutely. We pay very close attention to what you

say, what you think. You are our source of funding.

Ms. JOHNSON. Thank you very much.

Ms. BROWN. Ms. Johnson, would you yield a minute of your time

to me?

Ms. JOHNSON. Yes, I yield a minute to Ms. Brown or whatever

I have left.

Mr. LATOURETTE. The gentlelady has a minute-33 remaining.

Ms. BROWN. I just have a follow-up question. We’re trying to get

to the meat of the coconut here.

I want to know, how many proposals have you received, how

many have you considered, and please describe the proposals that’s

being considered pertaining to the Northeast Corridor. Have you

received proposals on how to operate?

And remember, you are under oath, and at some point we are

going to get these records. Now would you answer that question?
66

Mr. LANEY. I don’t know the number that I have heard. Some

have been oral presentations, some have been written, but every

presentation I have received I have transmitted to Amtrak. They’re

now in the hands of our planning department for analysis, assessment and guidance to the board.

So all I am—really, in some ways, I listen, some are very interesting, some are not. But it’s a board decision, and we need the

Amtrak—

Ms. BROWN. I’m not real certain about who is Amtrak management right now. Seems like the board is running Amtrak.

Did Amtrak sign a confidentiality and nondisclosure agreement

with any of these proposals, and what did the agreement commit

Amtrak to do?

Mr. LANEY. Yes, we have signed nondisclosure agreements with

respect to a couple—I don’t know how many, whether one, two or

three, because they don’t want proprietary information shared with

the rest of the world—and the proposals are across the board, from

operating our trains to operating various—not trains generally, but

a specific route, to operating various amenities of the trains.

It’s a wide variety of concepts, none of which may make sense,

all of which may make sense. They’re in the hands of our planning

department right now. Let me talk about that for a second.

This is a critical piece of the puzzle in terms of this Strategic Reform Initiative plan. It is in their hands, in our planning department’s hands. And one of the biggest disappointments that I had

was, following with Mr. Gunn’s performances, following the development of this, we created a planning department, strategic planning department for lack of a better word, to do the analysis, to

begin to think through not only what is in here, but what might

come to us over the transom for lack of a better description. That

department, unfortunately, was relegated to not directly reporting

to Mr. Gunn, who is the key for this, to move forward or not.

It was basically told to report to the head of our transportation

department, not to Mr. Gunn, the operating department; and—

Ms. BROWN. I would like for Mr. Gunn to respond to this.

Mr. GUNN. The strategic planning department was created after

the adoption of this reform initiative by the board and—

Ms. BROWN. Can you speak to those proposals?

Mr. GUNN. I don’t see them. They go directly—I have seen some

of them, but they don’t send them to me; they send them around

me to the planning department, so I don’t know. I know a couple

of them, because the head of the planning department has told me

they came in.

But if there have been others, I don’t see them. They go—the

board sends them directly into the organization. But the planning

department, the reason it’s in the operating department is, the

planning department is going to have the strategic control of the

business lines that we have—long distance trains, corridors and so

forth—and they control scheduling and equipment assignments. So

there’s a logic for it to be in the operating department, and that’s

where we put it.

And it’s worked fairly well, or it had worked fairly well. I don’t

see all the proposals.
67

Mr. LATOURETTE. Thank you very much, Mr. Gunn. We’re next

going to move to Mr. Nadler for 5 minutes.

Mr. NADLER. Thank you. Mr. Laney, I have a letter here signed

by you, addressed to Mr. Paul Nissenbaum at Amtrak, saying: ′′Dear Paul, I’m sending the enclosed unsolicited proposals to you

so that you can take a look at them and, at least on a cursory

basis, begin to think through the approach to assess such proposals

going forward. ′′I would suggest the first step is to invite them to the table in

order for them to more fully work the analysis team through the

proposal in more detail than might be apparent from the face of a

written proposal. ′′these are confidential; in fact, I have signed a confidentiality

nondisclosure agreement on behalf of Amtrak regarding one of

them. So it is incumbent on the team that analyzes such proposals

to keep them tightly under wraps during the process, start to finish. ′′also, a critical step in the process is to let the board know, when

a proposal has arrived, the nature of the proposal and the progress

and process of evaluating and responding to the proposal. Because

there is such a built-in bias—I assume built-in because there is

such a built-in bias against any such proposal ever seeing the light

of day at Amtrak—it will also be an essential ingredient to the

process that the final decision as to acceptance or rejection of the

proposal be reserved to the board.′′ My first question is, what does that mean, ′′the final decision as

to acceptance or rejection be reserved to the board′′? Who else

would do it? Are you saying they should be secret from Mr. Gunn,

from others in the corporation?

Mr. LANEY. No, I’m not at all.

Mr. NADLER. What does that sentence mean?

Mr. LANEY. I mean, the board should have the final decision.

Mr. NADLER. That’s obvious. But what does it mean since it’s

such a built-in bias, the essential ingredient of the process, the

final decision be reserved to the board. Is that tautology?

Mr. LANEY. No, it’s not.

No one, Congressman, likes change, and I don’t think—nothing

dislikes or resists change more than entrenched bureaucracy.

Mr. NADLER. We know lots of people won’t like it, but we have

a small amount of time.

What do you mean by the final decision as to acceptance or rejection must be to the board? That’s obvious.

Do you mean no one else should know about it?

Mr. LANEY. A number of operating decisions are not made by the

board; they’re made by senior management.

Mr. NADLER. Acceptance of these proposals?

Mr. LANEY. Senior management might well have concluded.

Mr. NADLER. What were these proposals about? What kinds of

proposals were these?

Mr. LANEY. I don’t remember what went with that letter. Can be

operating different routes, could be—Lord knows.

Mr. NADLER. I have a memo, also dated September 19th, from

Mr. Gunn to you, an e-mail that says, ′′I understand that you have

signed a confidentiality and nondisclosure agreement with either
68

Conex or Railway Service Corporation on behalf of Amtrak. Could

we see a copy of same so we know what we are committed to?′′ Question mark.

So, in other words, you were doing this behind the president’s

back?

Mr. LANEY. No, not exactly behind the president’s back. I think

he was very well aware of it, or he wouldn’t have sent me that letter.

Mr. NADLER. On the contrary. Obviously he hadn’t seen a copy

of it before you made the commitment or he wouldn’t have sent

that e-mail.

Mr. LANEY. I did it independent of the president.

Mr. NADLER. Mr. Gunn, can you tell us what was going on here?

Mr. GUNN. If my memory is right, those are two proposals that

individuals had to operate some of our service in conjunction with

Amtrak, not just take it over, but to have—take over parts of our

service in Chicago and California. It was fairly substantial and—

Mr. NADLER. You hadn’t been told about this?

Mr. GUNN. I found out when a subordinate told me this happened.

Mr. NADLER. So this analysis that was going on by the board is

being done behind your back, so to speak?

Mr. GUNN. We had a pretty tight chain of command, so as soon

as this went to a subordinate, he told his boss, who told me, so I

found out about it; but I didn’t have any role in signing the confidentiality agreement.

Mr. NADLER. Do you find it unusual in terms of how a corporation acts, that that would be the case?

Mr. GUNN. Yes.

Mr. NADLER. Why do you think that was going on?

Mr. GUNN. I don’t know.

Mr. NADLER. In what way was it unusual?

Mr. GUNN. If you’re talking about—if you’re going to have talk

about contracting out Amtrak services and functions, the way you

would have to do that is—because we are under Federal procurements regs is, you do an RFP; and you’d scope out what it is you

want people to do and do an RFP. And you would certainly want

it to go through—if you were going to do it, you would want to do

it through the proper procurement process.

Mr. NADLER. Normally, the president would know about this and

it wouldn’t be done behind his back?

Mr. GUNN. Yes.

Mr. NADLER. If I were to suspect that what was going on here

was that Mr. Laney, or maybe some other members of the board,

wanted to do something that they thought that you would oppose

because you might—you were opposed to this kind of privatization;

and therefore, they wanted to do it to hide it from you, would you

have any reason to think that I was wrong in that?

Mr. GUNN. Personally, I think it was more naivety than anything

else. You’re dealing with people who don’t know the railroad business, and I think they actually thought that they could—that someone could walk in and radically change the economics. In other

words, all the smart people work on the outside, the dumb ones all

work for Amtrak; and I think there is a certain amount of that.
69

Mr. NADLER. I can see that. I mean, I know that that happens

sometimes, smart people walk in from the outside who don’t know

anything about what’s going on, and I have seen that before. I have

seen that, I must say, in some changes of administrations where

a new guy comes in maybe from a new political party, brings a

whole new group of people in the agency and make all the same

mistakes the old guys made 10 years ago because they don’t know

the institutional history. Because they figure they know and they

don’t know what already happened. So I can see that happening.

But my question is, even assuming that, would it not be the normal course of events that if you were thinking of a major institutional change, the president wouldn’t find out from some subordinate?

Mr. LATOURETTE. We’re going to ask you to answer that and

move on.

Mr. GUNN. That is not the normal way of doing business. I was

surprised that that happened.

Mr. LATOURETTE. I thank you.

Mr. Menendez for 5 minutes.

Mr. MENENDEZ. Thank you, Mr. Chairman.

Mr. Laney, I heard you say to Ms. Brown that you hear what we

say. I’m concerned for your health because I don’t think you quite

hear what we say, and I want to give you, since you are under

oath, the opportunity to reconsider some of your answers to me.

Number one is you—when I asked you, did you have conversations about getting investors in the infrastructure of the Northeast

Corridor, you said you didn’t remember—you did, but you didn’t remember any names, you’re going to submit those to the committee,

yet here we are signing confidentiality agreements.

Did any of those agreements involve the purchase of the assets

of the Northeast Corridor?

Mr. LANEY. No, sir.

Mr. MENENDEZ. None of them?

Mr. LANEY. Not that I recall anyway.

Mr. MENENDEZ. I’ll ask you to review your recollection when you

go back and make sure that if there are any, that that answer be

given to the committee.

Mr. LANEY. Absolutely.

Mr. MENENDEZ. When I asked you, don’t you think you should

have talked to your stakeholders, like New Jersey Transit that

pumped in a billion dollars a year, before you moved on the proposal of the separation of the physical assets, you said to me, we

haven’t done anything yet. That was your answer. And yet I read

to you the resolution, and now I have a copy of an e-mail that you

sent to Mr. Gunn, dated September 9th, 2005, where you in part

say: ′′let me know if you plan to protest my proposal to initiate the

transfer of the physical assets of the Northeast Corridor into a separate, wholly owned Amtrak subsidiary. I don’t want to be surprised and accept it to be a fait accompli in any case.′′

Isn’t that much more than saying we haven’t done anything, you

were definitely moving towards a separation of the assets?

Mr. LANEY. Would you like an answer?

Mr. MENENDEZ. Yes.
70

Mr. LANEY. Read the rest of the resolution. We haven’t taken the

final action, and we’re not going to until we fully understand all

the implications, and the implications may stop us from going forward.

Mr. MENENDEZ. Well, the resolution goes on and says, ′′everything necessary to move in that direction.′′ Let me ask you this.

Mr. LANEY. Would you like me the read the remainder?

Mr. MENENDEZ. I wouldn’t have enough time. I’m sure I’m capable of reading it myself.

Let me ask you this, Mr. Laney. In response to one of the other

colleagues’ questions, you said, We believe that keeping the integration of management and operation is essential.

Is it not possible, under the discussions that you have had, to sell

the assets to a private investor and have it with an agreement that

would allow for the management and operation to continue in the

hands of Amtrak?

Mr. LANEY. Yes, that’s possible.

Mr. MENENDEZ. It is possible. Now what guarantee would there

be that an investment in the infrastructure, however, would take

place under such an agreement?

Mr. LANEY. I don’t know what agreement you’re talking about.

Mr. MENENDEZ. The agreements, the conversations that you have

been having with individuals about investors in the infrastructure

of the Northeast Corridor.

Mr. LANEY. Congressman, I haven’t had conversations; I have

had proposals proposed to me, and I have listened and I have

transferred whatever I have got into our planning department.

Mr. MENENDEZ. I’m sure you have asked questions, and you inquired in the process, so the conversation would be a fair framing

of the response.

Mr. ROSEN. Congressman—

Mr. MENENDEZ. I didn’t ask you a question. I would like my own

time to be determined by me.

Let me ask you, Mr. Rosen, however, when you vote on the

board, you’re there as Secretary Mineta’s representative? Yes or no.

Mr. ROSEN. Yes.

Mr. MENENDEZ. And when you vote, does the Secretary tell you

how to vote? Yes or no.

Mr. ROSEN. I can’t answer it yes or no because there is not a single answer. But we regularly consult, and I tend to vote—

Mr. MENENDEZ. Do you vote independently of the way the Secretary wants you to vote? Yes or no.

Mr. ROSEN. No.

Mr. MENENDEZ. So you vote as the Secretary wants you to vote.

Finally, Mr. Gunn, I’m going to give you the last word here, as

I think is fitting and appropriate. You said in response to a question that the reason you believe you were fired as the president of

Amtrak is because you were in the way of dismantling Amtrak.

Could you, with specificity, speak to the committee about what

you viewed as the board’s plan to dismantle Amtrak?

Mr. GUNN. I did say that we were making it work, and that I

was—I really believe that I was an obstacle to dismantling Amtrak.

There hasn’t been a lot of dialogue between the board and myself
71

after the adoption of the strategic initiative in the spring about

strategic direction. My sense of what they’re doing is that they’re

basically following the administration plan. That’s what I think

they’re doing.

Mr. MENENDEZ. That plan being?

Mr. GUNN. Breaking it up into separate corporations and trying

to privatize the various services which won’t occur in most cases

because it’s not a profitable business. I can’t prove that, but all the

indications are that that’s where they’re headed, particularly with

this Corridor initiative.

Time will tell. We’ll see whether they proceed down that road to

separate—to take the company and break it into the three pieces

that are in their legislative proposal and try to privatize the long

distance services or just take them off.

Mr. MENENDEZ. I hope they’re hearing us, Mr. Chairman, because that’s not what many of us support.

Mr. LATOURETTE. Thank you very much.

I would tell the members of the panel and then our witnesses,

who have been very patient to be here, I just have one question,

you always say one question, I’m going to ask a couple of questions

about the stock issue and time myself and however much time I

take, I’ll make available to the other members in turn. If I take two

minutes, I’ll give you 2 minutes and we’ll try and wrap this thing

up.

Mr. Rosen, I want to go back to you on this stock question. It’s

my understanding that the common stock, 38 percent was owned

by BNSF, 50 percent by American Premier—53 percent, then 12

percent roughly split between Canadian Pacific and Canadian National.

Is it your view, or the administration’s, those entities do not own

any voting stock in the Amtrak Corporation today?

Mr. ROSEN. They don’t have voting rights with regard to directors.

Mr. LATOURETTE. With regard to directors?

Mr. ROSEN. Correct.

Mr. LATOURETTE. So it’s your view that they don’t have—do you

think that the D.C. corporation law would apply to them if one of

them read about this hearing and someone owned more than 20

percent of the stocks said we should have a meeting? Do you think

that they have that right?

Mr. ROSEN. I haven’t specifically looked at that, but I guess I’d

say I’m skeptical.

Mr. LATOURETTE. And are you skeptical because the stock was

supposed to have been redeemed? How can you lose your rights if

stock was supposed to be redeemed and nobody has redeemed the

stocks? Don’t they still have rights as shareholders.

Mr. ROSEN. I think they have a right to have their stock redeemed.

Mr. LATOURETTE. But this is—and you’re obviously a lot brighter

than I am, but if the Congress has directed that stock be redeemed

by Amtrak, and Amtrak has never purchased the stock, how can

you take away somebody’s rights when you haven’t paid them for

it?
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Mr. ROSEN. Well the key is the phrase ′′take away their rights.′′ it is what rights did they already have? Remember, this stock was

created way back when, in the 1970s, and its rights have varied

over time. And so it is a question of what rights it has or doesn’t

have, and whether they were altered by statute and whether that

was appropriate.

Mr. LATOURETTE. And I agree with you. And I heard you say

about—what you said about 1981. But we believe that in conversations with the former Amtrak general counsel when the 1981 action was repealed, the rights of the common stock shareholders was

restored. And Amtrak has not purchased the stock—section 415 of

the 1997 act goes on to say that whatever stock is allocated to the

Department of Transportation has no voting rights. That is pretty

clear.

And I guess this quandary, because I guess I am not as competent as you. I believethat the Senate will leave town for the

year—and nothing disrespectful to the Senate, it is the end of the

session—and Mr. Hall and Mr. Sosa will not be confirmed as members of the Board. And there appears to be no vehicle, no way to

have Amtrak run—and I know we disagreed about this whole

quorum issue. But if I am right, and there are some difficulties

with recess appointments and there are some difficulties with continuing Mr. Laney’s term and the Secretary’s term under the 1997

act because of this fork in the road that we talk about in 2003, you

have to recognize that that improper quorum—improper in my

mind—you don’t agree, I got that—but that changed this executive

committee from 3 to 2, because originally there was supposed to be

3. This Board that I have suspicions about then changed it to 2.

Your policy statement in 2002-2003 says that the directors—you

assign all these duties. Well, you don’t have any directors to fill the

slots and nobody has rescinded that.

So I am concerned and I would hope that perhaps we could have

an additional dialogue outside the confines of this hearing where—

because governance is the title of the hearing; governance is something that I am concerned about. And I would hope that the administration and you, Mr. Laney, would be concerned about the potential of this corporation with all the difficulties it is facing moving

forward into the new year with just the two of you. And I don’t consider that to be a good way to run a railroad or a corporation. And

if there is something you want to say before I yield back, I would

be happy to do that.

Mr. ROSEN. Only thing that I would say, Mr. Chairman, is I

would be more than happy, as I said in my opening remarks, to

talk further with you and any members of the committee about

those issues further, because obviously our time, and everyone’s

time, is somewhat constrained in how much detail we can get into.

And I have looked at a number of these questions before. I have

looked at the stockholder one, but I am not as current on that. So

I would like the opportunity to talk about that.

Mr. LATOURETTE. Then let’s talk about it some other time. And

I look forward to the discussion.

Mr. ROSEN. The other thing I would say, really just thinking of

the Ranking Member’s comments, is we think the Board has the

responsibility to oversee and manage the corporate affairs. We very
73

much look to reach out to the stakeholders, and particularly the

Members of Congress, and try to stay in touch. And I can tell you

that Secretary Mineta has, and I have, and others in the department, sought to listen to and meet with a wide array of Members

of Congress, and I think will continue to try to do that.

Mr. LATOURETTE. I thank you very much. And I used 4 minutes

and 50 seconds, and, Mrs. Brown, I yield to you.

Ms. BROWN. I won’t use all that time. I just want to say one

thing. I have been on this Transportation Board since I have been

here. And Mr. Mineta has been Secretary, and he was for 4 years,

5 years, 6 years—not once, well, he certainly have not been to this

committee to address us about Amtrak. I would stand to be corrected. But I am truly disappointed that he has not. He issues

statements around the country about Amtrak. But he himself have

never come and addressed this board, this Congress. And he hasn’t

been to a Board meeting. You have been there. And you are saying

that you talked with him. And I am sure you all discussed how you

want Amtrak to move forward. Is that correct?

Mr. ROSEN. Yes.

Ms. BROWN. And so we are going with his direction, I guess, from

the Bush administration.

Mr. ROSEN. Well, he is the Secretary of Transportation, and I

work for him.

Ms. BROWN. Under the Bush administration.

Mr. ROSEN. Yes, of course.

Ms. BROWN. I have a list of questions that I want to submit to

the record. Keep it in mind you’re under oath, and I want to submit my questions based on that. And I would like, as I told you before, Mr. Laney, I would like a response to my questions in a timely fashion.

And, in closing, once again, I think that the Board is—you know,

it is just like, I guess, that Mr. Brown with FEMA, missing in action. And I am just—I can’t express the disappointment that I have

after talking with you privately, and we discussed being bushwhacked about the proposal by, you know, the corridor; and then

turn around and the firing of Mr. Gunn without any discussion

with the members of the Congress on either side of the aisle. You

know, this administration—and the American people are weighing

in; he gets an F and this board get a zero.

In closing my time, I just want you to know, Mr. Gunn, I have

the greatest amount of respect for you. And no way does this Board

action do anything to demean the work that you have done for this

country and for Amtrak and their employees, and you get positive

stars and checks. And, you know, I love you and thank you so

much for everything you have done. And you will never see me saying anything like that about a Bushappointee, you can rest assured

of that.

And I yield back the balance of my time.

Mr. LATOURETTE. We are going to go around in order, because

after 4 minute and 50 seconds, Mr. Nadler.

Mr. NADLER. I will yield to the gentlelady from Indiana.

Ms. CARSON. I don’t want to be redundant about this, but I am

still—you have a seven-member board. You have a seven-member

board, you had two people that fired Mr. Gunn; is that true?
74

Mr. ROSEN. No, four.

Mr. CARSON. How can you have four members and only two of

them beenconfirmed?

Mr. ROSEN. Two were recess appointed, and one was confirmed

in the position of the Secretary of Transportation. And one was

confirmed by the Senate as Board member and chairman.

Ms. CARSON. Can you tell me what about the other three? When

do we expect to see them three in place?

Mr. ROSEN. I don’t know if I can say prospectively. I can say in

the past that there have been some nominations sent up to the

Senate and we will hope that at least the ones that are pending

there now will get dealt with.

Ms. CARSON. They have been sent up there, though?

Mr. ROSEN. There are two that are pending, which are the two

that were recess appointed.

Ms. CARSON. What about the other three?

Mr. ROSEN. Those are currently vacant.

Ms. CARSON. Are they going to be sent up to somebody, him or

some—the other three? Four plus three equals 7?

Mr. ROSEN. Correct.

Ms. CARSON. So are three going to be sent up? Are they in the

works?

Mr. ROSEN. Well, I don’t know that I can really address what is

going to happen next. I can tell you where we are.

Ms. CARSON. Who submits the names for confirmation?

Mr. ROSEN. The President.

Ms. CARSON. Is he in the country? We need to call him.

Mr. ROSEN. I think he is actually traveling.

Ms. CARSON. He has been traveling during these vacancies. Do

you recommend anybody; say, here is the person that has the expertise, they know all about the rails and trains and stuff like that,

happen to be a Democrat?

Do you send up names like that?

Mr. ROSEN. I think, as Congressman Mica alluded to previously,

the administration had sent up Mr. Thompson, who was a Democrat I believe, Mr. Crandall—

Ms. CARSON. He was with American Airlines, right? He was the

CEO.

Mr. ROSEN. That is correct.

Ms. CARSON. Mr. Crandall.

Mr. ROSEN. Formerly; that’s correct.

Ms. CARSON. So airlines and rail go together. Go ahead; who

else?

Mr. ROSEN. Mr. Sosa and Mr. Hall, both of whom are retired

CEOs, are the nominees who are currently pending.

Ms. CARSON. I am sure Mr. Gunn doesn’t want his job back after

all this rigmarole. But I was trying to understand the procedure for

the next person. I am just speaking—I haven’t even spoken to Mr.

Gunn.

They have a saying in my neighborhood: It ain’t no fun when the

Reverend got a gun. So I am sure Mr. Gunn will be glad to get up

out of here with all this nonsense.

I yield back Mr. Chairman.

Mr. LATOURETTE. I thank you.
75

Ms. Norton, we will go to you next; then Mr. Nadler, Mr. Menendez, and then we will be done.

Ms. NORTON. I just want to establish for the record, Mr. Rosen,

you are the source of legal advice concerning the executive committee and quorums and legal technical questions we have been discussing here?

Mr. ROSEN. No.

Ms. NORTON. Who is?

Mr. ROSEN. I believe Amtrak’s general counsel, Ms. Serfetti.

Ms. NORTON. So you don’t give any of that advice and that person isn’t here? The person that gave you the advice that resulted

in the controversial way in which the Board has been operating

was not you, who was the general counsel of Department of Transportation?

Mr. ROSEN. Right. Amtrak has its own legal department.

Ms. NORTON. You didn’t pass off on that at all?

Mr. ROSEN. Let me clarify. The chairman of this committee did

ask the Department of Transportation for an opinion, in addition

to an opinion from Amtrak. And we both provided that. Including

me.

Ms. NORTON. And so you were, in fact, a source of the legal advice with respect to the way the Board is operating executive subcommittees, quorum and all?

Mr. ROSEN. No. I am sorry. I don’t mean to be difficult, but the

actual advice occurred in the past, when I was not the Secretary’s

designee to the Board, and Ms. Serfetti was and is Amtrak’s general counsel.

Ms. NORTON. You understand that the Chairman’s questions, as

technical as they sound, raise very serious matters for the corporation. That is to say, do you agree that the way in which the Board

is organized today—sorry, operates today, with questions being

raised by quorum, executive committee, could, in fact, put in legal

jeopardy some of the actions of the Board? Do you understand that

that question is now on the table?

Mr. ROSEN. Well, at one level, I mean, questions can always be

put on the table; but I think that there are actually correct answers to them, and I think there are other legal doctrines that

were not yet alluded to, such as doctrines of necessity or the fact

that management cannot—

Ms. NORTON. I want to stick with the doctrine of necessity, because Mr. Laney talked about dealing with the hand he was dealt.

And we should be looking at whether or not the hand you were

dealt, the way in which interim Board members, if you will—

whether or not we need to take some action with respect to that.

Did you or Mr. Rosen, anybody on the board, seek the advice of

the Senate, or of this committee, concerning this dilemma, this

rather unusual corporate dilemma, or did you simply operate within the legal confines of the Department in deciding that it was okay

to operate in this way, quorum—quorums and executive committees notwithstanding, that were unprecedented?

Mr. ROSEN. Well, on pure questions of law, I am the Department’s chief legal officer, and it is my job actually to do this.
76

Ms. NORTON. But given the fact that you were dealt a hand that

Mr. Laney himself testified was difficult because you had these interim appointments, you had to proceed—

Mr. ROSEN. Well, I have to evaluate one of the—

Ms. NORTON. I am asking whether or not you brought this matter to the attention—particularly to the Senate, but even to the

House?

Mr. ROSEN. Well, I had to evaluate whether the situation—

Ms. NORTON. My goodness, did you bring the matter to the attention of the Senate or of this committee or any subcommittee of the

committee? I am simply asking an answer; did you bring the matter, the hand you were dealt, which you say forced you into this

rather jury-built way of operating, did you bring the matter to the

attention of any Member of the Senate or the House? And I haven’t

been among those asking for ′′yes′′ or ′′no′′ answers, but I will be

darned if you can’t answer whether or not you, or any officer in

your knowledge, brought it to the attention of the Senate or the

House. Then I don’t know whether there could ever be a ′′yes′′ or

′′no′′ answer. So can you say whether you have or not, so I can go

on to my next question?

Mr. ROSEN. Forgive me, but the hand we have been dealt—

Ms. NORTON. I’m just quoting Mr. Laney.

Mr. ROSEN. The issue of vacancies, that certainly has been discussed with the Senate. If the issue is some of—

Ms. NORTON. Your ability to operate with an executive committee, that may be operation—may raise legal questions, because

there is a question about your quorum. I am asking if these legal

matters were brought to the attention—not whether or not, you

know, we have vacancies; Mr. Senator, please fill them—whether

these legal matters were brought to the attention of a Senator.

I wish you would answer that question. If you continue to evade

it, then, you know, I can only draw my own conclusions.

Mr. ROSEN. They have been discussed, as indicated from the

Chairman having asked for opinions, which he has received.

Ms. NORTON. Let me move on. Mr. Laney, just for the record, you

wrote the Congress indicating, did you not, that you supported the

President’s proposal for zero funding?

Mr. LANEY. No. I don’t think I did.

Ms. NORTON. The record will show that you wrote the Congress

in support of President Bush’s proposal to eliminate the funding for

Amtrak.

Mr. LANEY. I don’t think the record will show that. I have never

written anything like that to you, that I recall.

Ms. NORTON. So you did not write a letter supporting the President’s proposed operating budget which called for zero funding?

Mr. LANEY. You can prove me wrong by showing me that letter.

Ms. NORTON. I am going to prove you wrong and move on. And

I am going to then release the letter that proves you wrong, because you have been under oath now. You say no.

Mr. LANEY. I say I don’t recall the letter.

Ms. NORTON. So in other words, to do so, I think you would

agree, would be a violation of your fiduciary responsibility.

Mr. LANEY. To do what?
77

Ms. NORTON. To write a letter supporting zero funding from the

Congress of the Amtrak.

Mr. LANEY. I have never supported zero funding.

Ms. NORTON. So to do so would be a violation of your fiduciary

responsibility; would it or would it not?

Mr. LANEY. Well, again, a lengthier answer than that, I think

you could argue that you could support it in the context of a

reform—

Ms. NORTON. You could if you are doing that, of course; a private

corporation may seek to reorganize. But that is not what the President said he was doing. He said zero.

I am asking you the question simply about zero budgeting. And

I believe you wrote that, and I believe you said it was the right

message, and I am going to therefore put that in the record and

release that so I don’t want to make it look like I am paying playing ′′gotcha.′′ I am speaking for the record. I am going to show you

the letter. I don’t have it before me now. I have quotes from the

letter.

The Bush administration has supported stripping altogether the

Northeast Corridor and turning it over to some kind of FederalState consortium; you are aware of that?

Mr. LANEY. I am aware.

Ms. NORTON. That was the initial proposal.

Mr. LANEY. That was the administration’s proposal.

Ms. NORTON. Is there any evidence of any State interest in such

a consortium?

Mr. LANEY. Not to my knowledge, but I don’t interact—this is not

the proposal—

Ms. NORTON. It is for that reason, is it not, that you moved to

the backup proposal of a virtual split by doing a—or proposing, as

you now have, a subsidiary instead of the split which has no congressional—which has no congressional support, which has no support in the States, for some kind of consortium to then take the

matter up?

Mr. LATOURETTE. Mr. Laney, we’re going to ask you to answer

this question and then we will move on to Mr. Menendez for the

last 4 minutes and 50 seconds of the hearing.

Mr. LANEY. Absolutely not.

Ms. NORTON. Your answeer is not to what? I am sorry.

Mr. LANEY. That is not a backup proposal. Absolutely not.

Ms. NORTON. Thank you, Mr. Chairman.

Mr. LATOURETTE. I thank the gentlelady.

Mr. Menendez, you have 4 minutes, 50 seconds.

Ms. NORTON. I ask just for the record—the letter which I referred to for Mr. Laney is February 17, 2005. I will get that for the

record, and I will release that letter.

Mr. LATOURETTE. Without objection.

Mr. MENENDEZ. I will not take the total time. First, I want to

thank you and the Ranking Member for the manner in which you

have conducted this hearing. I believe that it is fair in the process,

and I appreciate the Chair’s pursuing this process and being fair

and equitable in the way in which it has conducted the hearing.

And I just want to make a closing remark.
78

I, as someone who has 100,000 New Jerseyans every day on Amtrak’s lines, and thousands more who use it for intercity travel into

other parts of the Northeast Corridor, I believe that the refusal to

send appointments to the Senate for advise and consent, depending

upon recess appointments of individuals who have no railroad experience whatsoever but who have a great loyalty to the administration, an administration that sets zero funding to the Congress

and that has overtures by investors who care a lot about going

ahead and getting great tax benefits by depreciation losses but very

little interest in running a railroad, point towards a dismal future

for Amtrak, unless this committee and the Congress exert their appropriate role to ensure intercity passenger service—important in

the Nation’s commerce, thousands of people use Amtrak to go sell

their services and goods; important for individuals who seek health

care in major institutions—for example, along the Northeast Corridor; important for those who travel; and important, I would say,

after September 11, of having multiplicity of modes of transportation in the event of an attack upon the country.

That is what is at stake here. And, Mr. Chairman, I appreciate

you pursuing those questions at this hearing.

Mr. LATOURETTE. I thank the gentleman. I want to thank all

four of you. It has been a lengthy hearing.

Ms. NORTON. Could I do a point of correction, because I want to

apologize to Mr. Laney?

Mr. LATOURETTE. Sure.

Ms. NORTON. Because I have this quote. This was a letter from

the Board to Speaker Hastert. And, again, I want to make sure

that that letter is put into—that this letter or this Board message

of February 17, 2005 is put into the record. It is not ascribed to

you, but it is ascribed to the Board, and I apologize. If you didn’t

do it, then I will make sure that when I release it, whoever did it

from the Board, or the entire Board, is noted.

Thank you Mr. Chairman.

Mr. LANEY. Let me say, the Board correspondence comes through

me. I still don’t recall what you are referring to, so please share

a copy with me when you get it.

Mr. LATOURETTE. I was going to thank you all for coming, but

now I have to throw my 2 cents in. My recollection of the letter,

if I have the right letter, is that the President’s budget submission

sends the right message relative to reform and didn’t advocate zero

funding. But we will let the letter speak for itself.

I want to thank you all for coming.

Mr. Gunn, regardless of the opinion different Members may have

about the activities of last week, I think all of us thank you for

your service to this country.

Mr. Hughes, I know you are upset we didn’t ask you any questions and you had to sit there. We very much appreciate your coming before us. It has been a lengthy hearing. I want to thank all

the members who participated.

And there being no further business to come before this subcommittee, we are adjourned.

[Whereupon, at 2:30 p.m., the subcommittee was adjourned.]
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