```

[Senate Hearing 109-1091]
[From the U.S. Government Publishing Office]

                                                       S. Hrg. 109-1091

                    S. 967, PREPACKAGED NEWS STORIES

=======================================================================

                                HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 12, 2005

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation

                  U.S. GOVERNMENT PRINTING OFFICE
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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                     TED STEVENS, Alaska, Chairman
JOHN McCAIN, Arizona                 DANIEL K. INOUYE, Hawaii, Co-
CONRAD BURNS, Montana                    Chairman
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon              BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
JIM DeMINT, South Carolina           FRANK R. LAUTENBERG, New Jersey
DAVID VITTER, Louisiana              E. BENJAMIN NELSON, Nebraska
                                     MARK PRYOR, Arkansas
             Lisa J. Sutherland, Republican Staff Director
        Christine Drager Kurth, Republican Deputy Staff Director
                David Russell, Republican Chief Counsel
   Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
   Samuel E. Whitehorn, Democratic Deputy Staff Director and General 
                                Counsel
             Lila Harper Helms, Democratic Policy Director

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 12, 2005.....................................     1
Statement of Senator Dorgan......................................    15
Statement of Senator Inouye......................................     1
    Prepared statement...........................................     1
Statement of Senator Kerry.......................................    16
Statement of Senator Lautenberg..................................     2
Statement of Senator Stevens.....................................     1

                               Witnesses

Adelstein, Hon. Jonathan S., Commissioner, Federal Communications 
  Commission.....................................................     4
    Prepared statement...........................................     5
Cochran, Barbara, President, Radio-Television News Directors 
  Association....................................................    28
    Prepared statement...........................................    29
Phair, Judith T., President/CEO, Public Relations Society of 
  America (PRSA).................................................    36
    Prepared statement...........................................    38
Poling, Susan A., Managing Associate General Counsel, Office of 
  General Counsel, Government Accountability Office..............    22
    Prepared statement...........................................    24
Schlick, Austin C., Acting General Counsel, Federal 
  Communications Commission......................................     7
    Prepared statement...........................................     8
Simon, Douglas, President/CEO, D S Simon Productions, Inc........    32
    Prepared statement...........................................    34

 
                    S. 967, PREPACKAGED NEWS STORIES

                              ----------                              

                         THURSDAY, MAY 12, 2005

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:04 a.m. in 
room SR-253, Russell Senate Office Building, Hon. Ted Stevens, 
Chairman of the Committee, presiding.

            OPENING STATEMENT OF HON. TED STEVENS, 
                    U.S. SENATOR FROM ALASKA

    The Chairman. This is the hearing that I said we would hold 
on a bill sponsored by Senator Lautenberg to create a new 
section in the Communications Act of 1934 to require 
broadcasters, cable, and satellite providers and other persons 
to ensure that the origin of prepackaged news stories produced 
by our Government is disclosed to the public. The bill would 
cover prepackaged news stories intended to be aired within the 
United States. It would make it illegal for any person to 
remove the Federal agency disclosure required by a provision in 
the defense supplemental bill that passed the Senate earlier 
this week. That was the Byrd Amendment. It was adopted on the 
supplemental.
    This hearing will focus on the need to amend the 
Communications Act to authorize the Federal Communications 
Commission to regulate the news industry's handling of what we 
now know as VNR's.
    The first panel this morning is the Honorable Jonathan 
Adelstein, Commissioner of the Federal Communications 
Commission, and Mr. Austin Schlick, the Acting General Counsel 
of the Federal Communications Commission.
    Senator Inouye, do you have an opening statement?

              STATEMENT OF HON. DANIEL K. INOUYE, 
                    U.S. SENATOR FROM HAWAII

    Senator Inouye. Thank you very much, Mr. Chairman. I do 
have an opening statement. I thank you for calling today's 
hearing. May I have my full statement made part of the record?
    The Chairman. Without objection.
    [The prepared statement of Senator Inouye follows:]

 Prepared Statement of Hon. Daniel K. Inouye, U.S. Senator from Hawaii
    Mr. Chairman, I want to thank you for calling today's hearing to 
examine current practices concerning the use of Video News Releases, 
commonly referred to as ``VNRs.''
    When used appropriately, VNRs, like written press releases, can 
provide television news directors with an important source of 
information and video footage that can then be reviewed and edited to 
create independent news stories.
    Unfortunately, as recent press accounts have documented, the 
increasingly ``prepackaged'' and scripted nature of VNRs, sometimes 
including actors posing as news reporters, has tempted some news 
organizations to air VNRs in full without disclosing the true source of 
such information.
    Based on these reports, I wrote to then-Chairman of the Federal 
Communications Commission (FCC), Michael Powell, in March of this year, 
asking the FCC to investigate this matter and to take whatever remedial 
action was necessary to prevent television and radio audiences from 
being misled.
    Roughly one month later, the FCC, under the leadership of its newly 
appointed Chairman, Kevin Martin, responded by unanimously adopting a 
public notice that reminds broadcasters and cable operators of the 
disclosure obligations under the Communications Act and requests 
further investigation into the production, provision, and use of VNRs.
    Today's hearing lets us examine in greater detail the problems that 
arise when VNRs created by government agencies are distributed without 
proper disclosure to the viewing public about their true source. This 
practice has been criticized by the Government Accountability Office 
(GAO) for some time. The GAO has taken issue with the current 
Administration's interpretation of when attribution is required.
    This is not a partisan issue. Congress passed language as part of 
the Supplemental Appropriations bill this past Tuesday that will 
prevent Federal agencies from using funds appropriated this fiscal year 
to create such prepackaged news stories unless clear government 
attribution is provided. While this restriction is only temporary, 
other proposals have been advanced that would result in a more 
permanent solution.
    Mr. Chairman, it was Thomas Jefferson who first noted that 
``information is the currency of democracy.'' But its true value to our 
society can only be realized if our ethical standards require, and our 
laws enforce, a level of transparency and openness that protect the 
American public from being misled. As a result, I look forward to 
today's hearing and to our continuing efforts to enrich civic 
discourse.

    The Chairman. Senator Lautenberg, do you have an opening 
statement?

            STATEMENT OF HON. FRANK R. LAUTENBERG, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Lautenberg. I do. First, I want to thank you, Mr. 
Chairman, for holding this hearing. I know that it was taken 
off a busy agenda, but you did make a promise, and those who 
know you know that you always keep the promise. We have to be 
able to trust one another to get things done here. As we see in 
these days, it is not always easy.
    Well, I am hopeful that soon after this hearing we can move 
ahead on a markup of this legislation so we can move it to the 
full Senate.
    The purpose of the bill that I have introduced with Senator 
John Kerry is simple and straightforward. It would stop the 
Government from producing covert propaganda. And by the way, I 
want to say that this is, to my knowledge, not the first time 
that it has been done. So this is not simply a finger pointing 
at the present Administration.
    Over the past year, the American people have learned of 
numerous incidents in which the Administration produced fake 
news stories that concealed the Government's role. And we have 
also learned of journalists who were paid off to write 
favorable articles about Administration policies. The best 
known example of journalism for hire was the columnist and 
radio commentator, Armstrong Williams, who was paid to write 
and say favorable things about the No Child Left Behind law.
    And cases of journalism for hire continue to be exposed. 
Just this week, we learned that the Department of Agriculture 
had paid a writer to produce favorable articles, which were 
then placed in publications. The people who read the article 
had no way of knowing that these news stories, so-called, were 
bought and paid for by the Government.
    When President Bush learned about the Armstrong Williams 
case, he said it was wrong and he correctly said that the 
Administration policies should be able to stand on their own 
merits without need to bribe journalists. And we commend him 
for that.
    When it comes to another form, however, of Government 
propaganda, the Administration has been unwilling to shut it 
down. That other form of propaganda is the production and 
distribution of fake video news reports that conceal the 
Government's role. One notorious example of such prepackaged 
news stories are the news stories paid for by the Department of 
Health and Human Services that promoted the new Medicare drug 
law. Not only did this supposed news report contain misleading 
and slanted information, but it was signed off as ``this is 
Karen Ryan reporting from Washington,'' but Karen Ryan was not 
the reporter. She is a public relations consultant that was 
contracted to voice over that fake news report. And the fake 
news segment gave no indication that it was actually a 
Government production.
    The Government Accountability Office has determined that 
this practice constitutes--and here I quote--``covert 
propaganda.'' And it is illegal. The GAO told the Bush 
Administration that it must identify itself in these news 
pieces. But incredibly, the Office of Management and Budget 
sent a memo to all Government agencies saying that it is all 
right to hide their sponsorship of these fake news stories.
    And that is why John Kerry and I think this bill is 
necessary. Our bill tells the Administration that if they want 
to produce fake news stories, they have to tell the American 
people who made and paid for these stories. President Bush has 
said it is the burden of the broadcasters who use prepackaged 
news stories to figure out where the VNR came from. I disagree. 
Why put the burden on industry when the Government can solve 
the problem in a simple and efficient way? The only way to 
ensure that the American people know what they are watching is 
to include that information in the video itself.
    Once again, I thank Chairman Stevens and Co-Chairman Inouye 
for staying true to their word, holding this hearing. Again, I 
hope that a markup will soon follow. Our staffs have had 
productive conversations on this issue, and I am hopeful that 
this hearing will lead us to a bipartisan bill so we can soon 
move to the full Senate for consideration. Thanks again, Mr. 
Chairman.
    I look forward to the testimony of our witnesses today.
    The Chairman. Thank you very much.
    Our first witness this morning is Commissioner Adelstein 
from the FCC.
    All witnesses' statements will appear in the record as 
though read. We appreciate your comments and brevity, if 
possible. There will be a vote this morning, I guess two votes 
starting at 11:40.
    Commissioner Adelstein.

STATEMENT OF HON. JONATHAN S. ADELSTEIN, COMMISSIONER, FEDERAL 
                   COMMUNICATIONS COMMISSION

    Mr. Adelstein. Thank you, Mr. Chairman, Mr. Co-Chairman, 
Senator Lautenberg. I appreciate your invitation to testify 
this morning on a matter of great concern to me and to the FCC. 
I think this hearing is especially timely because it can help 
us combat the surprising lack of awareness that the law and the 
FCC rules require disclosure of who is behind certain paid, 
political or controversial programming.
    Congress has maintained the principle from the outset of 
broadcasting that consumers have a right to know who is trying 
to influence them. Sponsorship identification laws date back to 
the Radio Act of 1927, making these laws older than the FCC 
itself. Congress has maintained an unwavering requirement that 
broadcasters must announce who gave them valuable consideration 
to air anything. In the case of controversial issue programming 
or political programming, the FCC's interpretation of the law 
has always required that whenever a third party provides 
material to induce its broadcast, the identity of the source 
must also be disclosed to viewers. So the seriousness with 
which you are treating this matter is entirely consistent with 
the historical concern of this committee and of Congress as a 
whole.
    Because of the need to highlight our rules, I was 
especially pleased that last month the FCC voted unanimously to 
remind the industry of their legal obligations. With the 
leadership of our new Chairman, Kevin Martin, we came together 
on a bipartisan basis to alert the industry that we take our 
responsibilities in this matter extremely seriously and plan to 
enforce the law vigorously. We also sought comments to learn 
more about how VNRs are used and whether we need to refine our 
rules even further.
    A lot of analysts believe that the urgency of this issue 
arises in large measure because of the increasing 
commercialization of the media. Pressures on the bottom line 
are forcing reductions in resources for news operations. And 
this creates a void that PR firms are happy to fill with VNRs. 
They are cheaper to produce than ads, free to get on the air, 
and more effective because they are designed to mimic news 
stories. But this can seriously mislead viewers and has 
probably contributed to the well documented loss of public 
confidence in today's media.
    Another symptom of commercialization is seen in the reports 
of a rising tide of undisclosed product placements in our 
media. I am concerned that there seems to be a lack of 
awareness here, too, of the need for disclosure under our 
rules. Everyone in the industry would be well served if they 
were to review our public notice on video news releases because 
those very same rules can apply to product placements.
    The focus of today's hearing is on the use of VNRs by 
government agencies. As recently as 2002, the FCC reiterated 
that disclosure is particularly important when the government 
sponsors the broadcast matter. You have heard about conflicting 
interpretations between the Justice Department and GAO about 
whether unidentified government VNRs violate laws against 
covert propaganda. The Commission has no jurisdiction over 
these laws and has taken no position. But neither Justice nor 
GAO has noted that the failure by broadcasters and cable 
companies to identify the source of VNRs could violate the 
FCC's sponsorship ID rules. As we said in our public notice, 
these companies do have an obligation to disclose the source of 
political or controversial VNRs.
    If Congress seeks to ensure that the public is notified 
about the source of government-sponsored VNRs, legislation such 
as S. 967 is necessary to bolster our existing rules. This 
legislation would apply whether or not consideration was 
exchanged and whether or not controversial or political issues 
were involved. It would also prohibit the removal of the 
announcement. The bill does not specify the precise nature of 
the announcement, but instead leaves it to the FCC to work with 
broadcasters to determine how to achieve the right balance 
between the public's right to know and editorial discretion. 
The bill would not impose any new burden on broadcasters or 
cable companies. In fact, it would simplify compliance. It 
would ensure that those airing VNRs are aware of the 
government's role in producing them. Most importantly, it 
addresses the public's right to know the source of the 
broadcast so they can make up their own minds about the 
information being presented.
    Again, Mr. Chairman, thank you for inviting me to testify, 
and I would be happy to answer any questions you might have.

    [The prepared statement of Mr. Adelstein follows:]

      Prepared Statement of Jonathan S. Adelstein, Commissioner, 
                   Federal Communications Commission
    Mr. Chairman, Mr. Co-Chairman, and Members of the Committee, thank 
you for inviting me to testify before you today about pre-packaged news 
stories, also known as video news releases, or ``VNRs.'' The issue of 
concern with pre-packaged news stories is that, absent proper 
disclosure, listeners and viewers may believe that these stories are 
produced by bona fide news organizations, rather than third-parties who 
may have a vested interest in the content of the story. As a member of 
the Commission charged with overseeing the influential and powerful 
medium of television, this issue is one of great concern to me, and I 
appreciate the opportunity to share my views.
    This hearing is especially timely because, until recently, there 
appeared to be a surprising lack of awareness that the Communications 
Act and FCC rules already require disclosure by broadcasters and cable 
companies of who is behind certain paid material or political or 
controversial issue programming.
    Because of the need to highlight our rules, I was especially 
pleased that we voted unanimously last month to remind broadcasters and 
cable operators of their obligations under the law. Under the 
leadership of our new Chairman, Kevin Martin, we came together on a 
bipartisan basis to warn that we take our responsibilities seriously 
and plan to enforce the law vigorously, and sought comment to learn 
more about how VNRs are used, and whether there is a need for the 
Commission to refine its rules further to protect the public.
    Pre-packaged news stories are attractive to busy newsrooms that are 
trying to fill longer news windows with fewer journalistic resources, 
because they are off-the-shelf, ready-to-go news stories that require 
no expenditure by the news outlet. Although government-produced pre-
packaged news stories have been the focus of attention recently, 
private corporations also use VNRs to provide information about their 
products. Recently, I've read reports about the growing practice of 
companies paying to guarantee that a media outlet will air their pre-
packaged news stories. VNRs are thus one symptom of the growing 
commercialization of our media.
    We are also seeing reports of a rising tide of product placement, 
and I'm concerned that there seems to be a lack of awareness of the 
need for disclosure under our rules in this area as well. This practice 
is likely to increase, given that embedding products within programming 
is partly a response to the fact that technology increasingly allows 
consumers to view television content how and when they choose. In order 
to comply with our rules, advertisers, broadcasters and cable operators 
would be well-served to review our public notice on VNRs, since the 
same rules can apply to product placements.
    In FCC parlance, the issue of ``sponsorship identification'' dates 
to the very beginning of broadcast regulation. Congress recognized from 
the outset that with the American model of developing broadcast service 
along private commercial lines, consumers have a right to know who is 
trying to persuade them. As far back as the Radio Act of 1927, and 
continuing with the Communications Act of 1934 and subsequent 
amendments, Congress has maintained an unvarying requirement that radio 
and television broadcasters must announce by whom any valuable 
consideration was paid for or furnished. This means that the concept of 
sponsorship identification is in fact older than the FCC itself.
    The Commission adopted its first rules on sponsorship 
identification in 1944. Since that time, our rules have of course 
evolved some, but have never deviated from the core requirements. Our 
rules have always required that whenever programming is aired for 
consideration, the fact of sponsorship and the identity of the sponsor 
must be disclosed. Our rules have also always required that, in the 
case of controversial issue or political programming, whenever any 
material or service has been furnished to the station as an inducement 
to broadcast such programming, the fact that such material or service 
was furnished and the identity of the source be disclosed. In 1960, 
Congress generally excluded property or services provided to 
broadcasters free or at nominal charge from the scope of consideration 
that triggers the disclosure requirement--except for controversial 
issue or political programming. As the Commission has acknowledged in 
the past, disclosure is especially important with this type of 
programming. As a result, for over sixty years, our rules have required 
a disclosure to be made, in the case of controversial issue or 
political programming, whenever any material or service of any kind, 
regardless of cost, is furnished to broadcasters as an inducement to 
air that programming. As recently as 2002, the Commission also 
reiterated that disclosure is particularly important when the 
government is the sponsor of broadcast matter.
    In 1960, Congress also revised section 317 to impose a due 
diligence requirement on broadcasters to obtain from their employees, 
and others they deal with directly in programming, the information they 
need to make the required sponsorship identification announcement. The 
Commission has implemented the express requirements of section 317, and 
has extended its sponsorship identification rules to cable operators 
for ``origination programming,'' or programming subject to their 
exclusive control.
    The seriousness with which this committee is treating this matter 
is entirely consistent with the historical concern of the Committee and 
Congress as a whole.
    In recent months--as evidenced by today's hearing--much attention 
has been given to the appropriateness of Federal departments and 
agencies using pre-packaged news without clear disclosure of the 
government's role in creating the VNRs. Conflicts within the government 
about whether this activity is or is not consistent with laws against 
using appropriated funds for propaganda have arisen, with the 
Department of Justice and the Government Accountability Office reaching 
different legal conclusions on the matter. The Commission has no direct 
jurisdiction regarding the propaganda laws, and therefore has taken no 
position on it. I reiterate, however, that no matter what view one 
takes in that debate, the Commission itself has stated clearly in our 
recent Public Notice that broadcasters and cable companies do have an 
obligation to disclose the source of political or controversial issue 
programming when the source has furnished material to them as an 
inducement for broadcasting that programming.
    Legislation such as S. 967, the Truth in Broadcasting Act of 2005, 
would be an effective complement to our existing sponsorship 
identification rules. The bill would explicitly and unambiguously 
require Federal agencies that produce pre-packaged news stories to 
announce, within the news stories themselves, that the government is 
the source of the stories. This requirement would apply whether or not 
consideration was exchanged, and whether or not controversial or 
political issues were involved. The bill would also explicitly and 
unambiguously prohibit the removal of the announcement. This 
announcement would satisfy the disclosure requirements under our rules, 
such that the bill would not impose any new burden on broadcasters and 
cable companies, and, in fact, would appear to simplify compliance. In 
sum, the bill would ensure that Federal agencies disclose their 
involvement in pre-packaged news stories, that broadcasters and others 
airing stories are aware of the government's involvement, and, most 
importantly, that listeners and viewers understand the nature and 
source of the information being presented.
    Again, Mr. Chairman, thank you for inviting me to testify today. I 
am happy to answer any questions you may have.

    The Chairman. Thank you very much.
    Now we will hear from Mr. Schlick, who is the Acting 
General Counsel for the FCC, please.

STATEMENT OF AUSTIN C. SCHLICK, ACTING GENERAL COUNSEL, FEDERAL 
                   COMMUNICATIONS COMMISSION

    Mr. Schlick. Thank you, Chairman Stevens, Co-Chairman 
Inouye, and good morning, Senator Lautenberg. Thank you for 
this opportunity to address issues surrounding video news 
releases, or VNRs.
    As Commissioner Adelstein noted in his testimony, the 
Commission has adopted rules under the Communications Act that 
further the public's right to know the source of broadcast 
programming. The Act and the Commission's implementing rules 
establish disclosure requirements that apply to sponsored 
programming regardless of its source. Our rules are not 
specific to Government-sponsored programming.
    My testimony this morning will summarize the existing 
Communications Act provisions and FCC rules that apply to 
sponsored programming. I also will describe the Commission's 
recent public notice and request for comment on this topic.
    Sections 317 and 507 of the Communications Act address 
sponsorship identification. Section 317(a) generally requires 
broadcast stations to make an announcement at the time they 
broadcast any material in exchange for ``valuable consideration 
. . . directly or indirectly paid, or promised to or charged or 
accepted by, the station so broadcasting.''
    Section 317(a)(1), however, establishes a proviso that 
services or property furnished without charge or at a nominal 
charge for use in connection with a broadcast do not trigger 
this general obligation of mandatory disclosure unless they are 
furnished in exchange for promotional identification in the 
broadcast. This proviso covers, for example, music recordings 
or video provided without charge for use on the air such that 
there is no disclosure obligation if there is no special 
promotion by the station.
    Consistent with the specific statutory authorization in 
section 317(a)(2), the FCC has provided by rule that 
sponsorship identification additionally is required and 
programming cannot be exempt under the proviso in subsection 
(a)(1) if the programming involves political material or 
discussion of controversial issues of public importance. In the 
case of political or controversial issue programming, the 
commission thus requires sponsorship identification even when 
the program material is provided to the station for free and 
without any special promotion by the broadcaster.
    Section 507 of the act requires disclosure to the station 
when a station employee accepts consideration for the 
broadcasted matter over the station. Disclosure obligations 
also extend to those involved in producing, preparing, or 
supplying program matter that is intended for broadcast. A 
broadcast licensee that receives disclosure pursuant to section 
507 must make a sponsorship identification announcement even if 
the licensee does not itself receive consideration.
    Under section 317(c), a licensee also must exercise 
reasonable diligence to obtain sponsorship information from its 
employees and other persons with whom it deals directly.
    Section 317 and the FCC's rules additionally address the 
content of sponsorship announcements. When an announcement is 
required, the licensee must fully and fairly disclose at the 
time of the broadcast the program matter was sponsored, paid 
for, or furnished and by whom or on whose behalf the 
consideration was supplied or promised.
    Finally, the Commission's rules established for cable 
operators a set of sponsorship identification requirements that 
are based on the requirements for broadcasters under section 
317.
    With respect to enforcement, if the commission determines, 
after investigation, that an entity holding a commission 
authorization has violated the sponsorship identification 
rules, it may impose administrative sanctions. Those sanctions 
may include monetary forfeitures of up to $32,500 per violation 
and the initiation of a license revocation proceeding.
    Section 507 itself establishes civil and criminal penalties 
for violation of its disclosure requirements, with a 
possibility of a fine up to $10,000 and as much as a year of 
imprisonment.
    The FCC recently has received a large number of requests to 
investigate the use of VNRs by broadcast licensees and cable 
operations in light of the sponsorship identification rules. 
Several of those requests have come from Members of this 
Committee.
    On April 13, 2005, the Commission unanimously adopted and 
released a public notice that reminded the industry and the 
general public of the sponsorship identification rules. The 
notice also requested public comment on issues specifically 
relating to VNRs and whether there are alternative or better 
means, in addition to the FCC's current rules, by which the 
Commission could ensure proper disclosure of sponsorship 
identification. The comment period closes on July 22, 2005. 
These comments will help the Commission enforce sponsorship 
identification requirements and better assist Congress in its 
deliberations on this issue.
    I will be happy to answer your questions.
    [The prepared statement of Mr. Schlick follows:]

   Prepared Statement of Austin C. Schlick, Acting General Counsel, 
                   Federal Communications Commission
    Chairman Stevens, Co-Chairman Inouye, and members of the Committee, 
thank you for this opportunity to discuss issues surrounding video news 
releases (VNRs).
    Consistent with the requirements of the Communications Act, the 
Commission has adopted rules that further the public's right to know 
the source of broadcast programming. The rules establish disclosure 
requirements that apply to sponsored programming regardless of its 
source, and are not specific to government-sponsored programming. I 
will summarize the existing Communications Act provisions and FCC rules 
that apply to sponsored programming. I also will describe the 
Commission's recent issuance of a public notice and request for comment 
on this topic.
Statutory Provisions and Rules Governing Sponsorship Identification
    Sections 317 and 507 of the Communications Act address sponsorship 
identification. Section 317(a) generally requires broadcast stations to 
make an announcement at the time they broadcast any material in 
exchange for ``valuable consideration . . . directly or indirectly 
paid, or promised to or charged or accepted by, the station so 
broadcasting.'' Section 317(a)(1) includes an exception to this general 
requirement, providing that `` `service or other valuable 
consideration' shall not include any service or property furnished 
without charge or at a nominal charge for use on, or in connection 
with, a broadcast unless it is so furnished in consideration for an 
identification in a broadcast.''
    Section 507 requires disclosure to the station when there is an 
exchange of consideration or an agreement to accept consideration 
involving a station employee. Disclosure obligations also extend to 
those involved in producing, preparing, or supplying program matter 
that is intended for broadcast. If any such person receives or provides 
consideration for the inclusion of program matter, disclosure up the 
chain of distribution is required. A broadcast licensee that receives 
disclosure pursuant to Section 507 must make a sponsorship 
identification announcement even if the licensee did not itself receive 
consideration. In addition, under Section 317(c), a licensee must 
exercise reasonable diligence to obtain sponsorship information from 
its employees or from other persons with whom it deals directly.
    Section 317 and the FCC's implementing rules--which are found at 47 
C.F.R. Sec. 73.1212--also address the content of sponsorship 
announcements when they are required. When the licensee airs the 
program, it must disclose that program matter was sponsored, paid for, 
or furnished, and by whom or on whose behalf the consideration was 
supplied or promised.
    Under a specific statutory authorization in Section 317(a)(2), the 
FCC has established special disclosure rules for programming that 
involves political material or the discussion of a controversial issue 
of public importance. Political and controversial-issue programming is 
not covered by an exception to the disclosure requirements that 
Congress established in Section 317(a)(1).
    Generally, as stated above, sponsorship identification is required 
where consideration is provided in exchange for the broadcast of any 
material. However, as also noted above, sponsorship identification is 
not necessary under Section 317 if property or services that otherwise 
might qualify as consideration are furnished ``without charge or at a 
nominal charge for use on, or in connection with, [a] broadcast,'' and 
the provider of the property or services does not receive special on-
air identification or promotion. This exception covers, for example, 
music recordings or video provided without charge for use on the air, 
if there is no special promotion by the station.
    In the case of political or controversial issue programming, 
however, the Commission has required sponsorship identification even 
when the program material is provided to the station for free and 
without any special promotion by the broadcaster. The FCC's rules also 
establish special requirements for sponsorship announcements and 
record-keeping in connection with political or controversial-issue 
programming.
    Finally, in Section 76.1615 of its rules, the Commission has 
established for cable operators a set of sponsorship identification 
requirements that are based on the requirements for broadcasters under 
Section 317.
Enforcement
    With respect to issues of enforcement, if the Commission determines 
after investigation that an entity that holds a Commission 
authorization has violated the sponsorship identification rules, it may 
impose administrative sanctions. Those sanctions potentially may 
include monetary forfeitures of up to $32,500 per violation, and the 
initiation of license revocation proceedings. Section 507 itself 
establishes civil and criminal penalties for violation of its 
disclosure requirements, with the possibility of a fine of up to 
$10,000 and as much as a year of imprisonment.
The April 13, 2005 Public Notice
    The FCC has received a large number of requests to investigate the 
use of VNRs by broadcast licensees and cable operators in light of the 
sponsorship identification rules. Several of those requests have come 
from members of this Committee.
    On April 13, 2005, the Commission unanimously adopted and released 
a Public Notice that reminded broadcast licensees, cable operators, and 
others of their sponsorship identification obligations. The Public 
Notice also requested public comment on various issues relating to the 
use of VNRs, including: how VNRs actually are used in programming; the 
terms on which they are provided to broadcasters and cable operators; 
whether mechanisms are in place to ensure that broadcasters and cable 
operators are notified about payments in connection with the production 
and provision of VNRs and about the identity of entities that provide 
political and controversial issue material; and whether there are 
alternative or better means--in addition to the FCC's current rules--by 
which the Commission could ensure proper disclosure.
    The Commission encourages interested parties to participate in its 
new proceeding on VNRs and to address these questions. Initial comments 
are due on June 22, 2005; reply comments are due on July 22, 2005. 
These comments will help the Commission enforce sponsorship 
identification requirements, and better assist Congress in its 
deliberations on this issue.
    Thank you for this opportunity to discuss the Commission's 
sponsorship identification rules and the April 13, 2005 Public Notice. 
I will be happy to answer your questions.

    The Chairman. Well, thank you very much.
    Now, Commissioner Adelstein, as I understand it, on I think 
it was the 15th--what day was it? On the 13th of April, the FCC 
finished an inquiry into VNRs used by broadcasters, cable, and 
satellite providers, and it asked for comments on this matter 
from the industry, with the comment cycle to end on July 22. 
Now, in view of that request and the Byrd Amendment, which was 
passed by 99 votes on the floor of the Senate, which provides 
for a period between now and September 30th of this year that 
any agency must have a clear notification, what is the rush? 
Why should we pass other legislation now?
    Mr. Adelstein. Well, it depends on the objectives of 
Congress. If the concern is government disclosure, the Byrd 
Amendment, to some extent, would deal with that for this year. 
It does not, as you know, deal with it on a permanent basis 
because it only applies for one year. The Byrd Amendment also 
does not contain the level of disclosure requirement that is 
contained in the Lautenberg bill, S. 967, which requires that 
the basic disclosure run throughout the entire period of the 
VNR.
    The Chairman. But is that not what your commission is 
looking into? You have asked for comments by the industry and 
they have until July 22 to respond. What is the rush? Why 
should we have an amendment adopted now or pass out a bill now 
that, if passed, would end your investigation and we would not 
know the comments of the industry unless we held a rather 
exhaustive hearing on this bill?
    Mr. Adelstein. Again, it depends on the objectives of 
Congress. We do not have authority currently to compel 
government agencies to do anything regarding VNRs. We only have 
an obligation to ensure that broadcasters, if the VNR turns out 
to be political or controversial, to----
    The Chairman. But you had the authority to make the request 
of the industry to have comments on a policy position you 
unanimously adopted. Is that not right?
    Mr. Adelstein. That is correct, yes.
    The Chairman. Now, you are really asking Congress to 
interrupt that comment period and to act now before the people 
involved have expressed to the commission what should be done 
on this issue.
    Mr. Adelstein. Well, I am not necessarily asking Congress. 
I am just informing Congress that if it is interested in 
disclosure by government agencies, we do not have authority 
over them, and I do not believe we are really requesting 
particular comment on them, because the law, as it is currently 
structured, really only applies, in this case, to broadcasters' 
obligations, and we do not have a clear ability to compel 
Government agencies to disclose.
    If Government agencies determine that an item is 
controversial or political, if in the judgment of broadcasters 
it is not, there is a question as to whether or not it then can 
air publicly. Then there can be a subsequent determination 
based on complaints that it was political.
    The Chairman. Have there been any comments so far?
    Mr. Adelstein. I have not seen any comments so far, but we 
do have a series of comments on an earlier item, a notice of 
inquiry, that we put out on the localism issue regarding 
payola, which is the same statute. We have a number of comments 
on that docket.
    The Chairman. Well, let me ask Mr. Schlick. We all voted 
for the Byrd Amendment and it was adopted the day after we had 
the discussion here on the Lautenberg amendment that was 
offered to S. 714. That provision is very simple really. Unless 
otherwise authorized by existing law, none of the funds 
provided in this act or any other act--which means it would 
carry forward I think to the end of 2006, but that is another 
matter--may be used by a Federal agency to produce any 
prepackaged news story unless the story includes a clear 
notification within the text or audio of the prepared packaged 
news that the prepackaged news story was prepared or funded by 
that Federal agency.
    Now, Mr. Schlick, does that not sort of cover the situation 
right now until we figure out what the scope of any rule or 
authorization by Congress to make a rule should be?
    Mr. Schlick. Mr. Chairman, that legislation, as well as S. 
967, addressed the specific question of the production of video 
news releases, and potentially other press releases, by 
Government. Our rules are targeted, and the central provisions 
I have described, section 317 and 507, are targeted, at the 
obligations of broadcasters who present the programming and the 
public's right to know at the time of the broadcast who it is 
who is speaking to persuade them. So they address different 
questions, and it is a policy question for Congress the extent 
to which it chooses to additionally regulate the production 
specifically by the Government. Our rules apply generally 
regardless of the source of the programming.
    The Chairman. Well, but this says no agency can use any 
money that it gets from any act of Congress to produce any such 
story unless there is notification. What is wrong with that?
    Mr. Schlick. Again, Mr. Chairman, these are policy 
questions before Congress at this point and the FCC's 
responsibility is the administration of the statutory 
requirements that already exist and apply generally to 
licensees in particular, as well as those who produce 
programming that is ultimately broadcast.
    The Chairman. Do you agree with me that that says no agency 
is going to produce those during this year with Federal funds?
    Mr. Schlick. That is my reading, Mr. Chairman.
    Senator Dorgan. Mr. Chairman, may I ask a question about 
your inquiry? You indicated that you felt the Byrd Amendment 
would apply to the next fiscal year? It was offered to the 
supplemental, and my expectation----
    The Chairman. It says 2005, but if another act comes along 
that contains funds before this law expires, I take it it would 
apply to those funds too. We think it expires on September 30th 
but it may carry forward.
    Senator Dorgan. This year.
    The Chairman. Yes.
    Senator Dorgan. Well, that is my understanding because the 
supplemental deals with this fiscal year----
    The Chairman. But it says, or any other act. So there is a 
question there how far it goes forward.
    Senator Inouye.
    Senator Inouye. Mr. Adelstein, under the Communications 
Act, you indicated that there are a lot of private companies 
who are paying media outlets to guarantee that their 
prepackaged news stories are carried?
    Mr. Adelstein. That is correct.
    Senator Inouye. Now, who has the obligation to provide the 
disclosure that this is prepackaged? Is it the one distributing 
or the one broadcasting?
    Mr. Adelstein. In this case it would apply to both. Section 
507 of the Communications Act requires that anybody involved in 
the distribution chain who pays for the placement of any 
material on broadcast airwaves has an obligation to report that 
to the broadcaster or to the person with whom they are dealing 
at the broadcast station. So 507 obligations apply both to the 
distributor of the VNR, as well as to the broadcast entity 
which, in response to the report that it gets from somebody who 
pays for that purpose or has knowledge of it, is required under 
law to disclose the source of that material.
    Senator Inouye. Would that obligation apply to the 
Lautenberg provision?
    Mr. Adelstein. It would not because the Lautenberg 
provision actually covers it from the outset. Because the 
disclosure would be within the VNR, it automatically takes care 
of the need by the government to disclose. Of course, in this 
case, the government generally does not provide any 
consideration in exchange for it, but the Lautenberg provision 
deals with all the broadcaster's obligations. If that 
legislation is adopted, then there is no need for any 
disclosure because it is already within the VNR itself.
    Senator Inouye. In the disclosure, who determines what is 
political in nature or controversial?
    Mr. Adelstein. Well, in the first instance, it is 
determined by the broadcasters themselves. We are, under the 
law and under court precedent, obligated to try to defer to the 
reasonable interpretations of a broadcaster. If we receive a 
complaint that a particular kind of VNR is political, then we 
investigate it and have to determine basically whether or not 
it was a reasonable use of discretion. We do not determine 
whether or not we think it is political--rather, we determine 
whether or not the broadcaster, in saying that it was not 
political, was exercising reasonable judgment.
    Senator Inouye. So then the final word is with the 
broadcaster?
    Mr. Adelstein. The final word is with us and then with the 
courts, but the broadcaster has the initial word. They have to 
make the initial determination.
    Senator Inouye. Have you ever had this experience?
    Mr. Adelstein. Not in my tenure there. I believe that there 
have been court cases that have affirmed our right to do so. 
Occasionally, the courts have actually overturned the FCC on 
individual court cases saying that we did not give sufficient 
deference to broadcasters in their determination as to what was 
reasonable. But generally speaking, the courts have upheld the 
constitutionality of this approach.
    Senator Inouye. Do you have many allegations of violations 
in your files?
    Mr. Adelstein. We do not have a lot. This year we have a 
much larger amount than we normally have. The Armstrong 
Williams situation and the whole VNR situation has led to, I 
think, 57,000 complaints. We received 18,000 complaints 
involving the Armstrong Williams matter, but generally 
speaking, there are much fewer than that every year.
    Senator Inouye. Well, Mr. Chairman, I will wait for another 
time. I am finished.
    The Chairman. Pardon me. I was trying to find out what the 
Armstrong Williams matter was. I was showing my ignorance.
    Mr. Adelstein. There were allegations that Armstrong 
Williams violated section 507 and 317 by speaking----
    The Chairman. Because he was paid?
    Mr. Adelstein. Because he was paid and it was not 
disclosed.
    The Chairman. Senator Lautenberg.
    Senator Lautenberg. Thanks, Mr. Chairman.
    The one thing I would appreciate, Commissioner Adelstein, 
is if you would confirm the fact that the FCC rule that is now 
in place only affects industry. It does not affect government. 
Am I correct?
    Mr. Adelstein. Well, in terms of the disclosure 
requirement, our disclosure requirements go to the broadcaster.
    Senator Lautenberg. And you were very clear. Just for the 
edification of my colleagues, I wanted to make certain that we 
are placing no additional burden on the broadcasters with our 
bill. All we say is to the government very simply, just say 
that it is a product of the U.S. Government. And the notion 
that maybe they do not want to do it suggests that it is 
designed to deceive. That is my interpretation.
    I want to confirm something else, Mr. Adelstein, and that 
is that the Byrd Amendment does expire on 9/30/05, as is 
written. That is clearly the condition. Now, the Chairman 
raises an issue about whether or not it could have life after. 
I cannot think of any reason why we would want to proceed with 
something that leaves such questions. What is in the public 
interest for the government to hide its role in the production 
and distribution of these news stories?
    Mr. Adelstein. Well, the FCC actually on two occasions, as 
recently as 2002, has stated very clearly that the government 
is, in fact, held to almost a higher standard. I will read to 
you from the 1977 case that was reiterated in 2002 from the FCC 
as a unanimous body. ``We believe that the public is 
particularly entitled to know when the Government is using tax 
dollars to persuade it.'' That has been the FCC policy.
    Senator Lautenberg. But, again, the omission of that kind 
of identification or disclaimer is very clear that it is 
designed to publicize or propagandize the issue. Otherwise, 
there could be no reason for withholding a disclaimer. It does 
not serve the public interest at all not to be aware of the 
fact that this is a Government publication. Am I correct?
    Mr. Adelstein. Well, you can certainly make that argument. 
I think that it is very important that the public knows if the 
Government is behind something. In the case of political or 
controversial programming, of course, it is already required to 
be disclosed, but the problem is that if we do not have this 
rule in place in advance, there is a judgment call as to 
whether or not something is political or controversial, and 
something could air and then complaints could arise. 
Subsequently, we could find that it should have been disclosed 
but it was not. But at that point it has already been basically 
run on the air, and the people have seen it. It is too late to 
take that harm back.
    Senator Lautenberg. When commercial sources produce VNRs, 
which are used, they are always designed to enhance a product 
or enhance a position or enhance a skill. And there is no doubt 
about who produces it. They want it to be known as their 
production. Am I correct?
    Mr. Adelstein. Well, in many cases, actually, private 
commercial entities do not want it known that they are behind 
it because if they can avoid that, then it is seen as much more 
legitimate. It looks like a news story. They are designed to 
mimic news stories, and it comes with the credibility of a news 
story. So if they can hide the fact that it is actually a 
hidden advertisement, I think it makes it actually more 
effective from a PR perspective. That is why we need to be so 
vigilant, to make sure the public knows who is behind it.
    Senator Lautenberg. Yes. But that is part of your 
supervision and responsibility, to make sure people know from 
whence these products come. Right?
    Mr. Adelstein. Right.
    Senator Lautenberg. What burden do you see Government 
having as a result of the legislation that we have proposed 
here? Could you imagine it would have any additional cost to 
Government?
    Mr. Adelstein. It does not seem particularly costly to run 
a disclosure along those lines, and it would prevent some of 
the confusion that we currently are seeing.
    Senator Lautenberg. I want to be sure that this disclaimer 
could be as simple as ``made for or paid for by the U.S. 
Government,'' just in small print underneath large enough to 
see from a reasonable distance. So not having it would seem to 
me to have an overt mission, and that is to help confuse people 
about the fact that this is, again, a Government program to 
politicize or to publicize something.
    As I said before, this is not new and we all know that. It 
has been used in the past by, I think it is fair to say, 
Democratic Administrations as well as Republican. But if one 
sees people passing a red light and lots of people doing it, 
you do not say eliminate red lights and that would take care of 
things. Not at all. That usually makes you more energetic to 
enforce these things.
    Mr. Chairman, I hope it is clearly understood that we are 
not looking to place additional burdens on the FCC or on the 
broadcasters or on industry generally. It is just a question of 
fairness for the citizens.
    Thanks, Mr. Chairman.
    The Chairman. This Senator remembers so often that the last 
Administration put out VNRs about my State and how it was so 
pristine and how it should not be disturbed. They were hawking 
the extreme environmental position to oppose us on the Arctic 
National Wildlife Refuge, to oppose us on drilling, to oppose 
us on so many things. I would love to have that disclosed. You 
better believe. There is no question in my mind I would like 
everyone to know where that propaganda comes from.
    So the question is not that. The question is your bill and 
what it does, and that is what we are trying to figure out.
    Senator Dorgan.

              STATEMENT OF HON. BYRON L. DORGAN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    Senator Dorgan. Mr. Chairman, thank you very much.
    First, let me thank the representatives from the FCC.
    My attention to these issues, I would say, Mr. Chairman, 
came from the Armstrong Williams situation. I was startled to 
learn that one of our agencies in the Federal Government had 
paid a syndicated columnist $240,000 in order to promote the 
Administration's No Child Left Behind agenda. That contract was 
not disclosed to the public. We learned it only because USA 
Today filed a Freedom of Information Act request and got a 
document that told us this agency, the Department of Education, 
had engaged with a syndicated columnist and paid him nearly a 
quarter of a million dollars. As a result, that columnist wrote 
good things about No Child Left Behind, had television programs 
that trumpeted No Child Left Behind. It was kind of journalism 
for hire and I think is kind of the underbelly of the way 
journalism would act in these areas.
    I think journalism is a wonderful occupation. Most 
journalists take very seriously their responsibilities, but 
this was clearly beyond the pale and I think startled 
everybody. It was part of a $1 million deal, as I understand. 
This payment to Armstrong Williams for $240,000 was part of a 
$1 million deal with the Ketchum public relations firm that was 
contracted to produce video news releases as well.
    Let me say that my colleague from New Jersey was accurate 
when he said this is not just about this Administration. It has 
happened before, but all of us ought to be concerned--and I 
think we all are--about making sure people understand where 
information comes from.
    The Chairman. Senator, this does not amend the payola 
legislation.
    Senator Dorgan. No, I understand that.
    The Chairman. That is already being investigated and it is 
already against the law.
    Senator Dorgan. I understand that. My point is the origin 
of this controversy was developed with Armstrong Williams being 
disclosed on the front pages of our newspapers, a syndicated 
columnist who was paid $240,000 to promote something that he 
then used in his columns and on his television show. From that, 
then we got into this discussion about the video news releases 
and other issues. That is the reason I think that prompted the 
Byrd Amendment and it has also prompted a bill here in the 
Senate, on which we have a hearing today.
    I do want to ask a question about concentration in the 
media. My sense is that much of the use of video news releases 
by newsrooms who normally would not use that is now coming 
because of additional concentration in the media where the 
bigger enterprises are, at least, beginning to take apart 
newsrooms and newsrooms are more likely to say, yes, give me 
some VNRs. I can just fill my space with video news releases. I 
would like to ask Mr. Adelstein whether that is your judgment 
as well, and is there evidence to support that?
    Mr. Adelstein. Well, there does appear to be. A lot of 
analysts believe that there is increasing pressure on these 
newsrooms. They are finding less and less resources, and in 
fact, sometimes they have to fill longer news windows. 
Increasingly, according to many reports, they are filling them 
with things like VNRs that are created by somebody else. These 
come at no cost to the broadcast entity. The issue is that 
these companies are under increasing pressure to meet quarterly 
earnings reports. They are chasing the bottom line and it is 
extremely competitive. If they can shave a little of money off 
here or there, we are seeing them do that. You are seeing the 
boundary and the line between news and information increasingly 
blurred, more sensationalism, and less serious news and 
coverage of what is happening in local communities.
    Senator Dorgan. If I may say, the Project for Excellence in 
Journalism did an analysis, which included 1998 to 2002, which 
would have included both Administrations, and they were trying 
to evaluate with local news directors what kind of use of video 
news releases was being done and what kind of information was 
disclosed about that. They found a quarter to a third of news 
directors showed video news releases and disclosed the source 
occasionally, rarely, or never. So that is pretty substantial.
    There is a great op-ed piece about this by Marion Just, a 
professor of political science at Wellesley College, and the 
Director of the Project for Excellence in Journalism. I will 
just read one paragraph. I happen to share this view.
    ``Local broadcasters are being asked to do more with 
less.'' These are quotes. ``And they have been forced to rely 
more on prepackaged news to take up the slack. So we do not 
have to search very far to discover why the Administration has 
succeeded so well in getting its news releases on the air. The 
public companies that own TV stations are so intent on 
increasing their stock price and pleasing their shareholders 
that they are squeezing the news out of the news business.''
    That means there is a much more receptive environment for 
the use of VNRs and I think makes it even more important that 
there be full disclosure. That is why I have supported the 
Lautenberg-Kerry proposal and think that the Congress does need 
to act.
    Mr. Chairman, thank you.
    The Chairman. Senator Kerry.

               STATEMENT OF HON. JOHN F. KERRY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Kerry. Mr. Chairman, thanks a lot for holding the 
hearing. I apologize for being late, but we have the Bolton 
nomination before the Committee and I am going to have to go 
back to that at some point.
    I just want to make a couple comments and see if we cannot 
find some common ground here.
    There is no question that Federal agencies are increasingly 
producing and distributing literally hundreds of so-called 
video news releases. This is agency-wide and hundreds of them 
are going out now. Most often these segments are broadcast with 
no disclosure at all that they were written or produced by the 
Federal Government.
    I heard you saying just as we came in--and I think it is 
generally accepted here that the Federal Government should not 
be in the business of manipulating public opinion with fake 
news reports, with news reports that appear to be official news 
reports and they are not, paid for by public dollars, created 
by public relations experts, broadcast without proper 
disclosure, all of which the American taxpayer is funding 
without even knowing that this is not a legitimate news report 
they are seeing.
    And they are pretty slick. We all know they are geared and 
done in a way that makes it look like it is a reporter 
interviewing somebody. It has a purpose, and the purpose, I 
regret, is not just to inform. It is also to leave people with 
the impression that this is sort of a news station or a 
legitimate part of the currency of our news.
    All of us cherish that. We cherish the independence of the 
flow of information in America. We have laws about propaganda.
    So it is not a partisan issue. I want to emphasize that. I 
was not aware but we learned and were equally shocked to know 
that this was going on in the Clinton Administration. I was not 
aware of that. I think that shows the problem. It sort of 
underscores that it is inappropriate for anybody to be doing 
it.
    So we also know that the Senate unanimously supported the 
Byrd Amendment to the supplemental appropriations bill. In 
short, Democrats and Republicans have come together recognizing 
the problem and wanting to be part of the solution. But the 
Byrd Amendment is only a temporary fix. It is a 1-year deal. It 
expires on September 30th of this year. And the Commerce 
Committee needs to, obviously, look at the oversight role of 
the FCC, the industry that is involved, and the conflicting 
legal interpretations that we have from GAO and the 
Administration. It is our responsibility to try to come up with 
a piece of legislation that deals with it.
    Now, that is why Senator Lautenberg and I have joined 
together to put this bill together. It simply requires that any 
prepackaged news story that is produced by a Federal agency 
identify the U.S. Government as the source of the story. I know 
the majority, your staff, Mr. Chairman, has worked closely with 
ours to try to come up and see if we cannot craft language that 
is acceptable.
    It is pretty simple. It is pretty straightforward. The 
operative section is really section 342, line 8, and it says 
very simply: ``Disclaimer Required. Any prepackaged news story 
produced by or on behalf of a Federal agency that is broadcast 
or distributed by a network organization, broadcast licensee or 
permittee, or multichannel video programming distributor in the 
United States shall contain an announcement supplied by the 
Federal agency''--that is very important--``within the 
prepackaged news story that conspicuously identifies the U.S. 
Government as the source for the prepackaged news story.''
    We are not requiring the broadcaster to do this. We are 
requiring the Federal agency to do this. The agency, which we 
have every right in the world to make a requirement as to 
appropriate disclosure, is required to put the disclosure on 
it. So there is no interference with the broadcaster's rights, 
et cetera. It is simply acknowledging the truth of what the 
broadcaster is being given to broadcast at the expense of the 
American taxpayer, at the behest of a Federal agency. It is 
that simple.
    And there is a page of some definitions. We can work on 
them if there are problems in the definitions.
    But every American is entitled to know the source of 
prepackaged information that is broadcast and characterized as 
news. Otherwise, the viewing public is being misled and we are 
engaging in official propaganda. Every taxpayer has a right to 
know if their tax dollars have been used to produce the so-
called news that they are watching.
    Now, I asked the FCC to investigate this, and last month 
the FCC launched a public comment period to look at the VNRs, 
and that is a positive step. But FCC Commissioner Adelstein 
said at the time that the appropriateness of Government-
produced news segments and disputes among the branches of the 
Federal Government is ultimately an issue for Congress to 
decide. We have got to decide this.
    The problem is we have conflicting views within the Federal 
Government.
    The GAO found that the Federal agencies should not produce 
prepackaged news reports that ``conceal or do not clearly 
identify for the television viewing audience that the agency 
was the source of those materials because they violate existing 
laws dealing with propaganda.''
    The Justice Department in what I believe--and I think any 
common sense interpretation by any member of this committee 
would have to agree--is really a sort of tortured legal 
analysis which likens a prepackaged news story to nothing more 
than a print press release. Well, that is just ridiculous on 
its face. The source of a press release is absolutely clear in 
the title and heading of a press release. More important, as 
far as I know, in a press release no one pretends to be 
somebody else. It comes from a specific person. No actor 
pretends to be a reporter. No actor pretends to be a citizen. 
In short, a press release does and should state a point of 
view, but a press release does not intentionally hide its 
source or the identity of the speakers. So a press release is 
not fake news. A news clip, prepackaged and produced without 
disclaimer, is.
    The White House has, frankly, attempted to split hairs with 
this complicated legal interpretation that says to the agencies 
go ahead and continue to deceive the public and you can 
continue to deceive broadcasters and you can continue to 
produce false news stories. Well, that is just not right, and I 
think every one of us knows it is not right.
    I am open to any suggestions as to how we find the 
appropriate language, but it is critical to have some form of 
disclosure that leaves no doubt in the mind of the American 
public what is happening.
    Now, I know I have used my time. I will go in the next 
round with any questions I have.
    The Chairman. If the Senator has to leave, I will be 
pleased to let you ask questions now, if you wish.
    Senator Kerry. Well, I thank the Chairman.
    The Chairman. I only want to make one statement, Senator 
Kerry. I do not know that there has been any allegations of any 
false news stories here. That allegation is new to me.
    Senator Kerry. Well, fake news in the sense, Mr. Chairman--
I understand what you are saying. It may well be that what they 
are putting out is true. I understand that. That is not what I 
am saying. But if it is not a reporter appearing to be a 
reporter, it is by definition fake, even if the news is true.
    Often it is very one-sided. I have seen some of the clips 
and the news is often very one-sided. It has no counterpoint of 
view, and sometimes the facts are, in fact, incorrect, and we 
can document that. So I think the key here is really getting at 
the disclosure, which raises the standard of truth-telling at 
the same time as you do that.
    But I thank you for letting me ask a couple questions.
    Acting Counsel Schlick, would the disclosures of the Truth 
in Broadcasting Act, as currently set out, meet the terms 
outlined in your April 13, 2005 public notice? Would what we 
have set out meet those terms that you set out?
    Mr. Schlick. Your legislation, Senator, addresses a 
somewhat different question. It might be helpful for me to 
contrast our current rules, which were the subject of that 
public notice, from S. 967.
    As applied to video news releases--our current rules track 
very closely quite detailed provisions in section 317 and 507 
of the Communications Act. So applying those provisions in 
section 317, the rules generally do not require disclosure of 
sponsorship identification, unless there is some consideration 
exchanged in addition to just the provision of the programming 
or the video news release, or unless the broadcaster gives some 
special identification in exchange for the programming.
    Senator Kerry. Can I stop you there for a minute?
    Mr. Schlick. Yes.
    Senator Kerry. Your public notice says that broadcasters 
``generally must clearly disclose to members of their audience 
the nature, source, and sponsorship of the material that they 
are viewing.'' Correct?
    Mr. Schlick. That is correct.
    Senator Kerry. Now you are telling me that that is limited 
exclusively to where there is an exchange of money.
    Mr. Schlick. Under section 317, there is a proviso which 
Congress added in 1960. Specifically, the controversy at that 
time was the payola and----
    Senator Kerry. I agree. But the interest is not. The 
interest we are trying to get at is not defined by the exchange 
of money. It is defined in the act of putting out the news. 
Correct? The disclosure is for a purpose.
    Mr. Schlick. As I understand, Senator, that is right.
    Senator Kerry. Why would the disclosure be limited to an 
exchange of money?
    Mr. Schlick. I am describing existing law, Senator, and 
under existing law, if the programming is not political or 
controversial--and that is----
    Senator Kerry. But that is not what I am asking you. What I 
am asking you is whether what we have set out would meet the 
terms of your requirement on disclosure, leaving out the money. 
Just does it meet the terms of the nature, source, sponsorship 
of material?
    Mr. Schlick. If sponsorship identification is required 
under our rules, then certainly the labeling required by S. 967 
should satisfy that requirement. Right now our statute that we 
implement does not require sponsorship identification in a 
number of instances that would be covered by S. 967.
    Senator Kerry. I understand that, which is precisely the 
sort of hole that we are looking at plugging here right now. 
But what I am trying to get at is, is the terminology that we 
have set forth adequate to require disclosure of the nature, 
source, and sponsorship of the material they are viewing? It 
would meet the standard of disclosure that you have set out, 
would it not?
    Mr. Schlick. I think it would, Senator.
    Senator Kerry. Commissioner Adelstein, FCC rules specify 
``a greater obligation of disclosure in connection with 
political material and program matter dealing with 
controversial issues.'' Correct?
    Mr. Adelstein. That is right.
    Senator Kerry. What guidelines determine whether the 
subject matter of a VNR or ANR is political or controversial?
    Mr. Adelstein. Well, it would really be guided by case law. 
There is a series of decisions that we made mostly under the 
fairness doctrine, which has since been done away with by the 
FCC, but there is very serious case law.
    I mentioned earlier that there is a requirement that we 
defer to the broadcaster's initial determination as to whether 
or not it is political or controversial. And if there are 
complaints raised that they made an incorrect assessment in the 
first instance, we go back and look into that and determine 
whether or not we think it was a reasonable assessment by the 
broadcaster that it was political or not. The problem is that 
if we make that determination later, the information has 
already been broadcast over the air. The public has already 
seen it, and the harm is already done.
    Senator Kerry. So, in other words, it is complicated and 
unclear. It depends on the case law and it is sort of up in the 
air.
    Mr. Adelstein. That is right.
    Senator Kerry. So my question to you is, would full 
disclosure of the Government as the source for all audio and 
video material, as proposed in the Truth in Broadcasting Act, 
not guard against taxpayer-funded publicity or propaganda 
without requiring any kind of complicated oversight regulatory 
system? It is pretty straightforward.
    Mr. Adelstein. It would greatly simplify it because I think 
it is difficult for a broadcaster to determine if some of these 
things are controversial. They do not want to spend the time 
digging through the case law.
    Senator Kerry. Well, it all depends on the legal 
interpretation.
    Mr. Adelstein. Right.
    Senator Kerry. So you get into a lack of clarity that winds 
up leading to misinterpretation.
    Mr. Adelstein. You already see a distinction between GAO 
and OMB as to what the interpretation is.
    Senator Kerry. It seems to me that this is really one of 
the simplest things that we get to deal with around here. We 
have a lot of complicated issues to deal with, but this is 
pretty straightforward. Either the Government is funding stuff 
legitimately and letting people know it or it should not be 
because it is deceptive and subject to, obviously, political 
interpretation. If you have disclosure, which is the right of 
the American people to know the source of news, where it is 
coming from, if it is news, they can discount it. It does not 
say you cannot do it. It just says you have got to know where 
it is coming from. Is that not a pretty fair and simple 
standard?
    Mr. Adelstein. That is the principle that has been embodied 
in legislation that has been approved by this committee and by 
Congress since 1927. In an unwavering series of laws, the 
Congress has always required disclosure of material like this 
so that the public knows who is trying to influence it. So this 
would be consistent with that history.
    Senator Kerry. Has self-regulation of broadcasters ever 
proven adequate?
    Mr. Adelstein. That is a broad question. In this case, 
there does appear to be a loosening of the way that people are 
behaving. That is why it was so important we came together on a 
bipartisan basis to alert broadcasters and everybody in 
industry of their legal obligations because I think there was a 
lack of awareness about it.
    Senator Kerry. This is a question for both of you, my last 
question for now. Mr. Chairman, I would love to be able to 
submit a few questions in writing, if it is possible.
    The Chairman. Yes, sir. We have four other witnesses.
    Senator Kerry. I know that. So the last question is could 
the FCC, Library of Congress, or the National Archives, any one 
of them, take on the creation and maintenance of a publicly 
accessible central archive of all Government-funded VNRs?
    Mr. Adelstein. It seems that would be a simple thing for 
Congress to set up.
    Senator Kerry. Mr. Schlick?
    Mr. Schlick. I imagine it would be possible, yes, Senator.
    Senator Kerry. Do you think it is useful? I mean, if the 
Government is funding all of these things, is it not important 
to have some sort of central repository? People can have 
accountability for them.
    Mr. Adelstein. You could make them available online. That 
would make it very easy for people to access and know where 
they come from. That would be another form of disclosure that 
could complement the kind of disclosure required by S. 967.
    Senator Kerry. Do you want to comment or not, Mr. Schlick?
    Mr. Schlick. No. I would agree with Commissioner Adelstein.
    Senator Kerry. Great. Thank you very much. Thank you, 
gentlemen. Thank you very much, Mr. Chairman.
    The Chairman. Thank you.
    In the interest of time, thank you very much, gentlemen. I 
have asked Senator DeMint if he wanted to ask questions now, 
but because of the time constraint, I ask that the next four 
witnesses come to the table. We will listen to all four of you 
and then have questions, to the extent we can, before the votes 
start.
    The next four witnesses are Ms. Susan Poling, the Managing 
Associate General Counsel of the GAO; Ms. Barbara Cochran, 
President, Radio-Television News Directors Association; Mr. 
Douglas Simon, President and CEO of Simon Productions 
Incorporated; Ms. Judith Turner Phair, President and Chief 
Executive Officer of the Public Relations Society of America. 
We appreciate all of you coming. I do hope you understand our 
problem here.
    Ms. Poling, let us begin with you, if you will. You are 
from the GAO. Is that right?

   STATEMENT OF SUSAN A. POLING, MANAGING ASSOCIATE GENERAL 
              COUNSEL, OFFICE OF GENERAL COUNSEL, 
                GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Poling. I am. Good morning, Chairman Stevens, Senator--
well, I do not see Senator Inouye right now--and members of the 
Committee. My name is Susan Poling and I am responsible for the 
appropriations law decisions and opinions at the GAO. I am 
honored to be here today to discuss our recent legal opinions 
regarding the use of prepackaged news stories by Federal 
agencies. Mr. Chairman, I am going to make this brief statement 
orally. In addition to the written testimony, I would like to 
have the two opinions and the circular be made part of the 
record.
    The Chairman. They will all be made a part of the record. 
We cannot make the video part of it, but the statements of all 
four of you are part of the record.
    Ms. Poling. That is fine.
    As the members of this committee may know, GAO has been 
interpreting appropriations law and issuing opinions since 
Congress created it in 1921. Since 1951, when the prohibition 
on the use of appropriated funds for publicity or propaganda 
was first enacted, GAO has issued over 25 opinions interpreting 
the prohibition. In the past year, GAO addressed, for the first 
time, the issue of whether prepackaged news stories violate the 
prohibition on the use of appropriated funds for publicity or 
propaganda.
    We found that the two agencies we examined violated the 
prohibition by producing prepackaged news stories that did not 
identify to the target audience, that is, the television-
viewing public, that the agency was the source of the material.
    So what are prepackaged news stories? They are complete 
audiovisual presentations that are designed to be 
indistinguishable from news segments broadcast to the public by 
independent television news organizations. Actors or voice-over 
specialists portray reporters. For example, a Government 
contractor concludes a segment saying, ``from Washington, I'm 
Karen Ryan reporting.'' She is not a reporter. She is a paid 
Government contractor.
    There is also usually a script that the TV news anchors can 
use to introduce the story during a broadcast, and video news 
releases also contain slates and B-roll. Our opinion goes to 
the prepackaged news stories because we did not find problems 
with the slates and B-roll that we reviewed.
    Prepackaged news stories permit the creators to maintain 
some control over their message. They are also cheaper than 
actually purchasing broadcast advertising.
    GAO addressed the use of prepackaged news stories in a 
decision regarding VNRs of the Department of Health and Human 
Services. The prepackaged news stories were part of an HHS 
campaign to inform Medicare recipients about the new 
prescription drug legislation. We also looked at similar 
prepackaged news stories produced by the Office of National 
Drug Control Policy as part of its national youth anti-drug 
media campaign.
    Now, GAO has long recognized that agencies have a right and 
perhaps even a duty to inform the public about their policies, 
programs, and activities. In both cases that we reviewed, GAO 
did not legally object to the contents of the news stories 
themselves, and we affirmed that the agencies have a right to 
inform the public of their programs and activities.
    However, we found that the story packages were targeted to 
the TV viewers and clearly designed to be aired exactly as the 
agency had prepared them, but they contained no identification 
to alert the TV viewers to the fact that the agency was 
actually the source of the purported news story. In both cases, 
no disclosure was made to the TV-viewing audience. As a result, 
the audience did not know that they were watching news programs 
about the Government that were, in fact, prepared by the 
Government. We concluded that production and distribution of 
prepackaged news stories that concealed the agency's role in 
producing the story was covert propaganda and, therefore, 
violated the prohibition on the use of appropriated funds for 
publicity or propaganda.
    In preparing these two decisions, our literature search and 
informal research showed that the use of VNRs and prepackaged 
news stories was commonplace in the Government. The Comptroller 
General decided to issue a circular letter to heads of all 
cabinet departments and Federal agencies to remind them of 
their duty to disclose the source of the materials that they 
disseminate to the public.
    To sum up, first, the critical element of covert propaganda 
under the appropriations prohibition is concealment of the 
agency's role in sponsoring the materials.
    Two, agencies have a right to disseminate information about 
their policies and activities, but not covertly.
    And three, agencies may use prepackaged news stories to 
disseminate information if there is clear disclosure to the 
television-viewing audience that the material was prepared by 
the agency.
    I would like to close with a quote from the Comptroller 
General. He said, ``Deceptive video news releases strike a blow 
to the good Government principles of transparency and 
accountability that are essential for a healthy democracy. The 
Government's credibility is enhanced by openness and the public 
is enriched by full and open debate. These actions also enhance 
public trust in the Government.''
    Mr. Chairman, that concludes my formal remarks and I would 
be glad to answer any questions.
    [The prepared statement of Ms. Poling follows:]

   Prepared Statement of Susan A. Poling, Managing Associate General 
  Counsel, Office of General Counsel, Government Accountability Office
    Chairman Stevens and members of the Committee:
    Thank you for the opportunity to be here today to discuss the legal 
opinions recently issued by the Government Accountability Office (GAO) 
regarding the use of prepackaged news stories by Federal agencies. In 
the past year, GAO has issued two legal opinions on the production of 
video news releases (VNRs) that included prepackaged news stories by 
both the Department of Health and Human Services (HHS) and the Office 
of National Drug Control Policy (ONDCP). In both of these instances, we 
concluded that the agencies violated the Federal government-wide 
prohibition on the use of appropriated funds for purposes of publicity 
or propaganda not authorized by Congress. In addition, in February, the 
Comptroller General sent a circular letter to the heads of all Federal 
agencies to alert them to our recent opinions and to remind them of the 
prohibition on publicity or propaganda.
Background
    Since the 1990s, VNRs have become a popular public relations tool 
for private corporations, nonprofit organizations, and government 
entities to disseminate information, in part because they provide a 
cheaper alternative than more traditional broadcast advertising and are 
welcomed by some local news stations in smaller markets with 
significant budget restraints.
VNRs Contain Slates, B-Rolls, and Prepackaged News Stories
    While the use of VNRs is widespread and widely known by those in 
the media industry, the quality and content of materials considered to 
constitute a VNR can vary greatly. Generally, a VNR package may contain 
several items, including a series of video clips, known as B-roll 
footage; title cards containing relevant information, known as slates; 
a prepackaged news story, sometimes referred to as a story package; and 
other promotional materials.\1\ These materials are produced in the 
same manner as television news organizations produce materials for 
their own news segments. By eliminating a news station's production 
efforts and costs of producing an original news story, VNR creators can 
find stations willing to broadcast a favorable news segment on a 
desired topic.
---------------------------------------------------------------------------
    \1\ For example, the Office of National Drug Control Policy (ONDCP) 
video news releases that we examined contained television 
advertisements and public service announcements.
---------------------------------------------------------------------------
    The B-roll footage and slates are intended to assist news stations 
in producing their own news stories, while the story package is a pre-
assembled, ready-to-air news story that is often accompanied by a 
suggested lead-in script for the anchor. Even if a broadcaster does not 
use a story package or scripted materials in full, the production of a 
professionally complete news story provides a framework for the message 
conveyed in the final broadcast, which allows the producer, in this 
case, the Federal agency, to assert some control over the message 
conveyed to the target audience--the viewer of the broadcast.
    The popularity of VNRs may be attributed to the ease with which the 
materials may be distributed. While some packages are distributed 
directly from the source to television stations, satellite and 
electronic news services, such as those provided by CNN Newsource, 
facilitate distribution to a number of news markets in a short period 
of time. Broadcast stations subscribe to these services, which provide 
journalist reports and stories and advertising, in addition to VNR 
materials. While the news services label VNRs differently than 
independent journalist news reports, there apparently is no industry 
standard as to the labeling of VNRs. In fact, some news organizations 
that broadcast the HHS VNR indicated that they misread the label or 
they mistook the story package as an independent journalist news story 
on CNN Newsource.
HHS VNRs Included Narration by Contractors Posing as Reporters
    GAO examined three VNR packages that HHS made available to local 
news organizations. The VNRs consisted of three videotapes with 
corresponding, printed scripts; two of the videotapes were in English, 
and one was in Spanish. The B-roll footage on each of the English 
videotapes was exactly the same and contained footage of President 
Bush, in the presence of Members of Congress and others, signing the 
Medicare prescription drug legislation into law, and a series of clips 
of seniors engaged in various leisure and health-related activities, 
including consulting with a pharmacist and being screened for blood 
pressure. The English videotapes also included clips of former HHS 
Secretary Tommy Thompson and Leslie Norwalk, Deputy Administrator of 
the Centers for Medicare & Medicaid Services (CMS), making statements 
regarding changes to Medicare. The Spanish videotape includes clips of 
statements by Dr. Cristina Beato of CMS, instead of Thompson and 
Norwalk.
    The two English VNRs contained different story packages, each 
narrated by Karen Ryan, an HHS subcontractor, who was not affiliated 
with a news organization. The first story package focused on CMS's 
advertising campaign regarding the prescription drug legislation. The 
suggested anchor lead-in stated that ``the Federal Government is 
launching a new, nationwide campaign to educate 41 million people with 
Medicare about improvements to Medicare.'' The lead-in ended with 
``Karen Ryan explains.'' The video portion of the story package began 
with an excerpt of the television advertisement with audio stating, 
``it's the same Medicare you've always counted on plus more benefits.'' 
Karen Ryan then explained, ``That's the main message Medicare's 
advertising campaign drives home about the law.'' As more clips from 
the advertisement appeared, Karen Ryan continued her narration, 
indicating that the campaign helps beneficiaries answer their questions 
about the new law, the Administration is emphasizing that seniors can 
keep their Medicare the same, and the campaign is part of a larger 
effort to educate people with Medicare about the new law. The story 
package ended with Karen Ryan stating: ``In Washington, I'm Karen Ryan 
reporting.''
    The second English story package focused on various provisions of 
the new prescription drug benefit and did not mention the advertising 
campaign. The anchor lead-in stated: ``In December, President Bush 
signed into law the first ever prescription drug benefit for people 
with Medicare.'' The anchor lead-in then noted, ``There have been a lot 
of questions about'' the new law and its changes to Medicare and 
``Karen Ryan helps sort through the details.'' The video portion of the 
news report started with footage of President Bush signing the 
legislation, and Karen Ryan's narration indicated that when it was 
``signed into law last month, millions of people who are covered by 
Medicare began asking how it will help them.'' Next, the segment 
included footage of Tommy Thompson, in which he states that ``it will 
be the same Medicare system but with new benefits.'' Karen Ryan 
continued her narration, stating ``most of the attention has focused on 
the new prescription drug benefit . . . all people with Medicare will 
be able to get coverage that will lower their prescription drug 
spending . . . Medicare will offer some immediate help through a 
discount card.'' She also told viewers that new preventive benefits 
will be available, low-income individuals may qualify for a $600 credit 
on available drug discount cards, and ``Medicare officials emphasize 
that no one will be forced to sign up for any of the new benefits.'' 
Karen Ryan's narration then led into clips of Thompson and Norwalk 
explaining other beneficial provisions of the new law. The second story 
package also ended with, ``In Washington, I'm Karen Ryan reporting.''
    The Spanish-language materials contained the same three items as 
the English language VNRs--a B-roll, slates, and a story package. After 
the B-roll segments, the story package segment appeared. This segment 
was considerably longer than its two English counterparts, focused on 
prescription drug benefits, and was narrated by Alberto Garcia, who is 
also an HHS subcontractor, not a reporter. The anchor lead-in was 
similar to the second English story package, except the anchor 
indicates that Alberto Garcia ``helps sort through the details.'' The 
video segment began with the footage of President Bush signing the 
prescription drug bill into law, as Alberto Garcia narrated that after 
signing the law, millions of people who are covered by Medicare began 
asking how the new law will help them. The remainder of the story 
package contained footage of Dr. Beato and of seniors engaged in 
various activities. During the video clips of seniors, Alberto Garcia 
narrated that the prescription drug benefit will be available in 2006 
and that drug discount cards will be available in June 2004 and that 
``[p]eople with Medicare may be able to choose from several different 
drug discount cards, offering up to 25 percent savings on certain 
medications.'' Alberto Garcia concluded his report, stating: ``In 
Washington, I'm Alberto Garcia reporting.''
ONDCP Prepackaged News Stories Were Narrated by Contractors 
        Unaffiliated with News Organizations
    For the ONDCP legal opinion, GAO examined eight VNRs, seven of 
which included prepackaged news stories, in addition to B-roll footage 
and slates. Each of ONDCP's news stories included narration by an 
unseen person, identified as Mike Morris, Karen Ryan, or Jerry Corsini. 
The narrator explained that he or she was ``reporting'' on various 
ONDCP activities and on various issues related to the use of marijuana 
by teenagers. Each story was accompanied by proposed ``lead-in'' and 
``closing'' remarks to be spoken by station news anchors. Many of the 
suggested anchor remarks included a phrase like, ``Mike Morris has the 
story,'' or ``Mike Morris has more.'' ONDCP informed us that the 
narrators were hired to read the scripts for the prepackaged new 
stories, as prepared for and approved by ONDCP. Like the HHS VNR 
narrators, none of these narrators were affiliated with any news 
organization at the time the stories were produced or distributed.
    The various ONDCP story packages touched on the addictive nature of 
marijuana, the risks of marijuana use to teenagers, an open letter to 
parents that was sponsored by ONDCP regarding marijuana, the increased 
use of marijuana by teenagers during the summer, the dangers of driving 
a vehicle while under the influence of marijuana, and the respiratory 
health risks of smoking marijuana. Most of the story packages featured 
statements by ONDCP Director John Walters and/or various drug experts. 
The suggested anchor closing remarks directed viewers to an anti-drug 
website and a toll-free telephone number.
GAO's Legal Opinions
    In May 2004, GAO first addressed the use of prepackaged news 
stories in an opinion \2\ issued to HHS regarding VNRs it had prepared 
as part of a campaign to inform Medicare recipients about the new 
prescription drug legislation.\3\ In a subsequent opinion issued in 
January 2005, we addressed the VNRs produced by ONDCP as part of its 
National Youth Anti-Drug Media Campaign.\4\
---------------------------------------------------------------------------
    \2\ In addition to auditing and evaluating programs and activities 
of the Federal Government and investigating matters related to the use 
of public money, GAO is also responsible for settling all accounts of 
the Federal Government. 31 U.S.C. Sec. Sec. 712, 717, 3526. Pursuant to 
this accounts settlement authority, the Comptroller General issues 
legal decisions and opinions to Federal agencies and Members of 
Congress regarding the proper use of Federal funds.
    \3\ B-302710, May 19, 2004 (retained in Committee files).
    \4\ B-303495, Jan. 4, 2005 (retained in Committee files).
---------------------------------------------------------------------------
Agency's Right to Disseminate Information Does Not Include Covert 
        Propaganda
    In both of these legal opinions, we concluded that production and 
distribution of prepackaged news stories that concealed the agency's 
role in producing the story violate the publicity and propaganda 
prohibition. While GAO has long recognized that agencies have a right 
to inform the public about their activities and to defend the 
Administration's point of view on policy matters,\5\ there are several 
statutory limitations on an agency's information dissemination, one of 
which is the publicity or propaganda prohibition. This prohibition, the 
first version of which was enacted in 1951, is usually contained in 
annual appropriations acts. It states that, ``No part of any 
appropriation contained in this or any other Act shall be used for 
publicity or propaganda purposes within the United States not 
heretofore authorized by the Congress.'' \6\
---------------------------------------------------------------------------
    \5\ See, e.g., B-304715, Apr. 27, 2005; B-302504, Mar. 10, 2004; B-
184648, Dec. 3, 1975.
    \6\ See, e.g., Consolidated Appropriations Act, 2005, Pub. L. No. 
108-447, div. H, title VI, Sec. 624, 118 Stat. 2809, 3278 (Dec. 8, 
2004).
---------------------------------------------------------------------------
    In applying this prohibition, GAO affords agencies a great deal of 
discretion in their informational activities. However, GAO has, through 
50 years of decisions, identified a number of specific activities that 
are barred by the publicity and propaganda prohibition. One of the main 
targets of this prohibition is agency-produced material that is covert 
as to source.
    Our opinions have emphasized that the critical element of covert 
propaganda is concealment of the government's role in producing the 
materials.\7\ GAO has concluded that agencies have violated the law 
when they undertook activities such as distributing suggested 
editorials to newspapers or hiring pundits to write commentaries 
without acknowledging the government's sponsorship.\8\ In these cases, 
even though the newspapers that printed the opinion pieces may have 
been aware of their source, the newspaper readers did not know of the 
agency's role in producing the materials.
---------------------------------------------------------------------------
    \7\ B-229257, June 10, 1988.
    \8\ See, e.g., B-223098, Oct. 10, 1986; B-229069, Sept. 30, 1987.
---------------------------------------------------------------------------
Unattributed Prepackaged News Stories Violate Publicity and Propaganda 
        Prohibition
    Similarly, in the case of the story packages produced by HHS and 
ONDCP, the target audience--the viewing public--was unaware that the 
material was produced by the government. The story packages were 
clearly designed to be aired exactly as the agency produced them and 
were intended to resemble traditional news stories. They were narrated 
by government contract personnel who portrayed reporters and included 
suggested anchor lead-in scripts, announcing it as a news story by the 
purported reporter, which facilitated the unaltered use of the story 
package.
    Most importantly, the story packages contained no statement or 
other reference to alert television viewers to the fact that the agency 
was the source of the purported news story. These characteristics may 
lead viewers to believe, wrongly, that the piece was an actual news 
story produced by the local television station and narrated by a real 
reporter. Therefore, we concluded that the prepackaged news stories 
constituted covert propaganda and that HHS and ONDCP both violated the 
prohibition on the use of appropriated funds for publicity or 
propaganda.\9\ Furthermore, because the agencies had no appropriation 
available for covert propaganda, HHS and ONDCP also violated the 
Antideficiency Act, which prohibits obligations in excess of available 
budget authority.\10\
---------------------------------------------------------------------------
    \9\ Although both HHS and ONDCP pointed to specific statutory 
provisions that authorized them to disseminate information to the 
public, GAO concluded that such provisions did not authorize them to 
produce unattributed news stories. In both opinions, GAO also concluded 
that the B-roll footage and the slates did not violate the publicity 
and propaganda prohibition because they were designed to be viewed and 
utilized solely by the news organizations, and the agencies had 
properly disclosed their role in the production of the materials to the 
stations.
    \10\ 31 U.S.C. Sec. 1341(a).
---------------------------------------------------------------------------
    In both of these opinions, we also noted:``In a modest but 
meaningful way, the publicity or propaganda restriction helps to mark 
the boundary between an agency making information available to the 
public and agencies creating news unbeknownst to the receiving 
audience.'' In fact, the appropriations prohibition is not the only 
marker that Congress has enacted to delineate the boundaries between 
the government and the free American press.\11\ Statutory limits on the 
domestic dissemination of news reports produced by the Federal 
Government reflect concern that allowing the government to produce 
domestic news broadcasts would infringe upon the freedom of the press 
and constitute, or at least give the appearance of, an attempt to 
control public opinion.\12\
---------------------------------------------------------------------------
    \11\ See, e.g., 22 U.S.C. Sec. Sec. 1461, 1461-1a (restricting the 
domestic dissemination of news reports originally created by the 
Government for broadcast abroad).
    \12\ B-118654-O.M., Apr. 17, 1979.
---------------------------------------------------------------------------
    HHS and ONDCP both commissioned and distributed prepackaged news 
stories and introductory scripts about their activities that were 
designed to be indistinguishable from news stories produced by private 
news broadcasters. In neither case did the agency include any statement 
or other indication in its news stories that disclosed to the 
television viewing audience (the target of the purported news stories) 
that the agency wrote and produced those news stories. In other words, 
television-viewing audiences did not know that stories they watched on 
television news programs about the government were, in fact, prepared 
by the government. We therefore concluded that those prepackaged news 
stories violated the publicity or propaganda prohibition.
Circular Letter Advised All Agencies of Duty to Disclose Source of 
        Materials
    In addition to the HHS and ONDCP opinions, the Comptroller General 
issued a circular letter to the heads of all cabinet departments and 
Federal agencies in February of this year to alert agencies to our 
opinions on prepackaged news stories and to remind them of their duty 
to disclose the source of materials that they disseminate to the 
public.\13\ GAO decided that a government-wide circular would be 
appropriate given the increasing use of VNRs by the Federal Government. 
In fact, our research showed that VNRs have been produced by a wide 
range of Federal departments and agencies, from the Department of State 
to the Census Bureau to the Transportation Security Administration.
---------------------------------------------------------------------------
    \13\ B-304272, Feb. 17, 2005 (retained in Committee files).
---------------------------------------------------------------------------
    Mr. Chairman, this concludes my prepared statement. I would be 
happy to respond to any questions regarding our opinions that you or 
the Committee may have.

    The Chairman. Do you want to show your video now or later?
    Senator Lautenberg. I had hoped, Mr. Chairman, we could 
show it now as part of this testimony.
    The Chairman. It is about 3 minutes. Right?
    Ms. Poling. What you are going to see here is the complete 
video news release, but we can probably shorten it.
    The Chairman. Let us not shorten it. Let us show it all. 
Let us just see it. OK?
    Ms. Poling. OK. First it contains slates. I was just going 
to explain the parts of it. There are no words with this 
section.
    This is the video news release. What we are pointing out is 
that there are parts of video news releases. This is slates. 
This is just text feed that can be used by the programmers when 
they put together a news program.
    Then you will see some B-roll, which is various kinds, but 
what you are going to see first, I think, are public officials 
making statements. We do not have any problems with this.
    Then you are going to see a public service announcement 
which does identify exactly that this is a product of the 
Department of HHS.
    This is the ad.
    [Video shown.]
    Ms. Poling. That was the ad.
    This is the prepackaged news story. The rest is B-roll.
    Senator Lautenberg. Can we hear it or not?
    Ms. Poling. The text is irrelevant. It is really the 
visual.
    The B-roll consists of pieces that the television news 
studio can use to put together its own story.
    That is the end.
    The Chairman. What is the disclaimer?
    Ms. Poling. I did not hear you.
    The Chairman. Thank you very much.
    Ms. Cochran.

           STATEMENT OF BARBARA COCHRAN, PRESIDENT, 
          RADIO-TELEVISION NEWS DIRECTORS ASSOCIATION

    Ms. Cochran. Thank you, Mr. Chairman, members of the 
Committee. I am Barbara Cochran, the President of the Radio-
Television News Directors Association. Thank you for inviting 
me to appear today on behalf of the electronic journalists, 
educators, students, and executives who comprise RTNDA, the 
world's largest professional organization devoted exclusively 
to electronic journalism.
    As you know, our members are on the front lines in managing 
the news operations of radio, television, cable, and other news 
distribution organizations. We are committed to providing 
accurate and credible news stories. That commitment includes 
appropriate identification of materials used in our stories. 
Credibility is our stock in trade. If our viewers and listeners 
cannot trust our stories, they will tune us out, literally.
    The appropriate use of third party video and video news 
releases is not a new subject for our members. We have sought 
to address questions of when and how to use these materials for 
more than 15 years. Our consistent policy adopted in 1989 has 
been that clear and complete disclosure of outside materials 
must occur, and this policy is incorporated in our code of 
ethics.
    With the recent and public reports concerning 
governmentally produced and funded videos, we revisited and 
expanded upon the guidelines. A copy of these guidelines is 
attached to my written testimony. News directors have reviewed 
the guidelines with their staffs and they have reviewed their 
procedures to ensure material is properly identified.
    Some of these recent reports may leave the mistaken 
impression that unidentified VNRs are widely used. Based on my 
conversations with news directors, little outside material is 
used in the dozens of stories and many hours of news 
programming that stations produce each and everyday. When third 
party material is used, it is most often excerpted or used as 
background footage, the kind of B-roll that we just saw, and it 
is attributed. Rarely are entire releases used and even more 
rarely is the source not identified.
    Even so, some mistakes were made. In part, these miscues 
can be traced to technological changes that have made the 
distribution of audio and video materials more complicated and 
led to difficulties in ascertaining the points of origin. In 
many of the reported cases of unlabeled material, the station 
or the news director has told me that all future material will 
be identified.
    Whatever the causes or reasons, I can report that steps are 
being taken to reemphasize and endorse full disclosure. News 
organizations and producers have changed and are changing the 
distribution procedures to make sure that material is clearly 
labeled when it is sent out.
    In the newsroom, news directors and journalists also have 
taken steps to ensure adherence to the RTNDA guidelines. And in 
addition, we will work with the FCC as it seeks comments on 
appropriate ways to improve source identification and 
disclosure.
    RTNDA members are committed to the appropriate 
identification of third party materials, and we believe that 
the current guidelines and the reinvigorated practices of our 
members will adequately and properly support this commitment 
and ensure that the public is fully informed. Accordingly, we 
do not believe that Government action is needed, at least not 
at this time.
    Determining the content of a newscast, including when and 
how to identify sources, is at the very heart of our 
responsibilities as electronic journalists, and these decisions 
must remain far removed from Government involvement or 
supervision. The Government must be cautious in considering any 
action through legislation or regulation that could interfere 
with journalist judgment or otherwise influence or dictate news 
decisions or content. Any such action must be a last resort, 
not an initial reaction. RTNDA urges you, therefore, not to 
respond to the mistakes of a few by imposing rules that could 
affect the selection and presentation of newsworthy material. 
We have every incentive today to protect the integrity of our 
news broadcasts by fully informing our viewers. The policy 
guidance and procedures are in place to address the recent 
missteps and to fulfill our responsibilities. Government 
intervention, while well intended, is unnecessary and could be 
harmful.
    Thank you.
    [The prepared statement of Ms. Cochran follows:]

           Prepared Statement of Barbara Cochran, President, 
              Radio-Television News Directors Association
    Mr. Chairman and members of the Committee, I am Barbara Cochran, 
President of the Radio-Television News Directors Association (RTNDA). 
Thank you for inviting me to appear before you today to discuss S. 967, 
the Truth in Broadcasting bill introduced by Senator Lautenberg and 
cosponsored by other Senators, including members of this committee, 
Senators Kerry, Boxer and Dorgan.
    RTNDA is the world's largest professional organization devoted 
exclusively to electronic journalism. RTNDA represents local and 
network news executives, educators, students and others in the radio, 
television and cable news business in over thirty countries. I have 
worked as a journalist in Washington for nearly 30 years and have held 
management positions in print, radio and television. I was managing 
editor of the Washington Star, Vice President for news at National 
Public Radio, executive producer of ``Meet the Press'' at NBC News, and 
vice president and Washington bureau chief at CBS News. I became 
president of RTNDA in 1997.
    As you well know, the members of RTNDA are on the front lines in 
managing the news operations of radio, television and other electronic 
news distribution organizations. News directors are responsible for 
determining what stories will be covered as well as when and how these 
stories will be presented. News organizations often receive news topic 
suggestions and materials from third parties. These inputs are not a 
significant source of news for most operations, and they do not replace 
the important and substantial news-gathering activities of our members' 
organizations. In the case of audio clips and video footage, these 
inputs can, however, provide useful material that the news organization 
could not have obtained on its own. For example, a hospital may provide 
footage of its operating room or NASA may provide a graphic depiction 
of a space mission. When third party audio or video is submitted to a 
news operation, the news director or a news staff member who has been 
assigned that responsibility must determine the newsworthiness of the 
material, and he or she must judge whether and how to use this 
material.
    On behalf of my membership, I want to express our appreciation to 
the Chairman for scheduling this hearing to provide an opportunity to 
discuss the appropriate role of the government in the treatment of 
VNRs. We also appreciate the initiative taken by Senator Lautenberg and 
the other sponsors of S. 967 to ensure that VNRs distributed to 
broadcasters and other programming distributors contain information 
concerning their source. As Commissioner Adelstein recently said, ``it 
is up to Congress if it chooses to further strengthen the 
responsibility of government agencies to disclose more fully that 
material is government-produced.''
    As news directors, we appreciate the policy rationale for the 
disclosure requirement imposed on government agencies that prepare and 
release ``prepackaged news stories,'' as contemplated by S. 967 and 
contained in Senator Byrd's amendment to the recently passed 
supplemental appropriations legislation.
    The issue of how to use material from video and audio news releases 
is one RTNDA has grappled with for more than 15 years. As electronic 
journalists, RTNDA members are committed to providing the public with 
accurate and credible news stories. In 1989, RTNDA's Board of 
Directors, whose members are news executives from across the country, 
adopted a policy that calls for clear and complete disclosure of the 
origin of any outside material that is used in a news story or news 
program. This policy was incorporated into the RTNDA Code of Ethics and 
Professional Conduct when it was revised in 2000. The statement is 
unambiguous. The Code says that professional electronic journalists 
should ``clearly disclose the origin of information and label all 
materials provided by outsiders.''
    Last year, when it was first disclosed that a few stations had used 
a video news release produced by a Federal agency without disclosing 
the origin, possibly because the origin was not clear, the RTNDA Ethics 
Committee decided to expand its guidance on the use of outside audio 
and video material. Over the past 12 months, the Committee developed 
guidelines for newsrooms as they consider whether to incorporate this 
material into their own stories or programs. The guidelines were 
released at our annual convention in April. I have attached a copy of 
the guidelines to my statement and ask that it be included in the 
hearing record. (ATTACHMENT) The main principle is unchanged: material 
from outside sources must be clearly identified to the audience.
    The guidelines are intended to help with the editorial decision-
making about whether the material should be used in the first place.
    Recent events have highlighted the importance these guidelines. In 
March, the New York Times reported that the Federal Government was 
sending an unprecedented number of video news releases to local 
stations and they found evidence that some stations were using the 
releases without altering them or identifying them. Unfortunately, as 
the story was spread through other news media, the impression grew that 
the use of unidentified audio and video from government agencies was a 
rampant practice. That is not the case. Based on conversations with 
news directors over the past two months, I believe stations use very 
little outside material among the dozens of stories and hours of news 
programming they produce each day. Of the material they receive, far 
more comes from corporate sources than government agencies. 
Furthermore, the material is far more likely to be used as background 
footage or excerpted in stories that the news rooms produce themselves. 
Very rarely are releases used in their entirety. Technological changes 
have made the distribution of audio and video material more complicated 
and sometimes made it more difficult to ascertain the point of origin. 
Providers have taken steps to make sure that, even in newer, digital 
formats, this material is clearly labeled.
    Nonetheless, the reports that originated with the New York Times 
challenged the credibility of local news. As a consequence, news 
directors have met with their staffs, reiterated their policies and 
made sure everyone in the newsroom understands that if such material is 
used it must be identified. We believe RTNDA's guidelines will be 
helpful in facilitating those newsroom discussions.
    Because electronic journalists operate as trustees of the public, 
underlying our VNR guidelines is the basic tenet that the public must 
be properly informed. News operations are primarily concerned with the 
collection and accurate reporting of relevant news stories to their 
listeners and viewers. In the vast majority of cases and operations, 
news is collected directly by the news staff. Even when third party 
video or audio is received, it generally will not be used by a local 
news organization if similar material can be obtained directly by the 
station or through a network feed. Our guidelines reflect and reinforce 
this practice. When a judgment is made that third party video is 
relevant to a news story and cannot be obtained through a news source, 
our guidelines call for the clear disclosure of the origin of the 
material--and this disclosure applies to all sources of third party 
materials, including private parties, corporations and all levels of 
government. The guidelines cover a broad range of situations and VNR 
materials. They seek to protect the editorial integrity of the audio 
and video aired, to avoid commercialization of news stories, and to 
otherwise guard against third party influence of news content.
    We believe that these guidelines help to ensure that the public 
receives the highest quality and most accurate information and is fully 
informed as to the source of third party material. Our members have 
renewed their efforts to honor their commitments to these guidelines 
and to their responsibilities as electronic journalists. Significant 
market forces compel them to do so--credibility with their listeners 
and viewers is their stock in trade.
    As the bill reflects, sections 317 and 507 of the Communications 
Act of 1934 confer disclosure authority and responsibilities on the 
Federal Communications Commission with regard to sponsorship 
identification by broadcasters, cable operators, producers and others 
subject to its rules. The FCC recently issued a ``reminder'' to these 
entities of their obligations to comply with the FCC's rules. The FCC's 
release stated that its ``rules are grounded in the principle that 
listeners and viewers are entitled to know who seeks to persuade 
them.'' RTNDA supports this public right to know and our guidelines are 
designed to achieve this goal of clearly disclosing ``the nature, 
source and sponsorship'' of news material viewed by the public. The FCC 
also is seeking comment on appropriate ways to improve the disclosures 
and the situations covered thereby. RTNDA looks forward to the 
opportunity to submit comments and to work with the FCC and others to 
ensure the public receives clear and accurate disclosure--and most 
importantly--that the public has clear and unfettered access to 
relevant information.
    The determination of what to include in any particular newscast 
constitutes the very core journalistic function of a broadcaster, and 
is a matter far removed from government supervision. The Government 
must be cautious, therefore, in taking any action that would interfere 
with the editorial judgments of electronic journalists or otherwise 
dictate news decisions or content. RTNDA urges you, therefore, not to 
respond to the mistakes of a few by imposing rules that could very well 
restrict the ability of professional journalists to select and present 
newsworthy material to the public. Electronic journalists have every 
incentive to protect the editorial integrity of the audio and video 
they air without government intervention.
    In closing, I believe we share common goals--a free press and an 
informed public. I look forward to working with you to develop the best 
ways to achieve and protect these goals.
                               Attachment
RTNDA Guidelines for Use of Non-editorial Video and Audio (April 2005)
    Television and radio stations should strive to protect the 
editorial integrity of the video and audio they air. This integrity, at 
times, might come into question when stations air video and audio 
provided to newsrooms by companies, organizations or governmental 
agencies with political or financial interests in publicizing the 
material. News staffs should find answers to the following questions 
when making decisions to broadcast video or audio produced and/or 
supplied by non-editorial sources.
    RTNDA's Code of Ethics and Professional Conduct states that 
professional electronic journalists should ``clearly disclose the 
origin of information and label all material provided by outsiders.'' 
The following guidelines are offered to meet this goal.

   News managers and producers should determine if the station 
        is able to shoot this video or capture this audio itself, or 
        get it through regular editorial channels, such as its network 
        feed service. If this video/audio is available in no other way 
        but through corporate release (as in the case of proprietary 
        assembly line video), then managers should decide what value 
        using the video/audio brings to the newscast, and if that value 
        outweighs the possible appearance of ``product placement'' or 
        commercial interests.

   News managers and producers should clearly disclose the 
        origin of information and label all material provided by 
        corporate or other non-editorial sources. For example, graphics 
        could denote ``Mercy Hospital video'' and the reporter or 
        anchor script could also acknowledge it by stating, ``This 
        operating room video was provided by Mercy Hospital.''

   News managers and producers should determine if interviews 
        provided with video/audio releases follow the same standards 
        regarding conflicts of interest as used in the newsroom. For 
        instance, some releases might contain interviews where subjects 
        and interviewers are employed by the same organization. 
        Consider whether tough questions were asked and if the subject 
        was properly questioned.

   Before re-voicing and airing stories released with all their 
        elements and intended for that purpose, managers and producers 
        should ask questions regarding whether the editorial process 
        behind the story is in concert with those used in the newsroom. 
        Some questions to ask include whether more than one side is 
        included, if there is a financial agenda to releasing the 
        story, and if the viewers and/or listeners would believe this 
        is work done locally by your team.

   Producers should question the source of network feed video 
        that appears to have come from sources other than the network's 
        news operation. Network feed producers should supply 
        information revealing the source of such material.

   News managers and producers should consider how video/audio 
        released from groups without a profit or political agenda, such 
        as nonprofit, charitable and educational institutions, will be 
        used in newscasts, if at all. Can this material add valuable 
        insight to local stories? Has it been issued to be aired 
        locally and credited to the issuing organizations. Will viewers 
        find it to be useful information?

        Developed by the RTNDA Ethics Committee

    The Chairman. Mr. Simon.

           STATEMENT OF DOUGLAS SIMON, PRESIDENT/CEO, 
                  D S SIMON PRODUCTIONS, INC.

    Mr. Simon. Thank you, Mr. Chairman, Senator DeMint, Senator 
Lautenberg. It is an honor for me to be here.
    I would like to disclose that my company has produced 
public relations video for both the current Bush Administration 
and the Clinton Administration. Just like Government 
dissemination of print press releases, Government video news 
releases and B-roll packages are a necessary tool to keep the 
public informed, whichever political party is in power. But 
this legitimate tool must not be abused and disclosure is 
critical.
    The first video news releases, or VNRs, were created in the 
late 1940s, and the first Federal agency produced VNR that I 
remember personally watching was during the Nixon 
Administration. When Neil Armstrong walked on the moon, no 
network had a camera crew at the Sea of Tranquility. NASA 
provided the footage and no one complained.
    I have been invited by this committee to examine this bill 
based upon existing law and existing practices in the news 
industry. Regardless of VNR vendor practice, the overwhelming 
majority of producers and reporters at TV stations know the 
origin of VNR video before deciding to air it, and there is a 
simple reason for this. Reporters will not air the video if 
they do not know the source. They insist on disclosure.
    Now, while the broadcast decisionmakers know the source, 
their station managers may not. The analogy I make is that the 
publisher of a newspaper probably does not know what is on page 
5 of the Metro Section. That is why, when asked about a 
controversial Government piece airing on their station, the 
news directors honestly say, you know, I do not know. I had no 
idea. Well, they know now and I think that is a very positive 
development.
    There have been loopholes that have allowed some Government 
video to reach journalists via network newsfeed services with 
the broadcasters possibly confused about its origin. These 
loopholes are being closed. Newsfeeds are now passing that 
information along to their affiliates.
    Now, as a VNR producer and distributor, you might expect 
that I am against any regulation that affects our industry 
practice. I am not. While many in the PR industry may disagree, 
I believe when Government is involved, and even in the private 
sector, not only do the journalistic gatekeepers need to know 
the original funding source of VNR material, the public has a 
right to know as well. That being said, increased Government 
control over news broadcasts is not a hallmark of democracy.
    The Truth in Broadcasting bill will decrease, not increase, 
the information available to the public. It will limit, not 
expand, the transparency of Government activities. The bill 
calls for the FCC to create the design, presentation, and 
language of a disclaimer that news stations would be required 
to air throughout the entire segment. Rather than deciding 
whether the story or a portion of it should air, based on news 
standards, stations will be factoring in whether they are 
comfortable changing the look of their broadcast. Depending on 
the politics of the Administration in power and in their 
viewing area, broadcasters may feel pressure if they run or do 
not run Government video.
    This bill could result in the Government altering the 
format of the video it produces to avoid disclosure 
requirements. Worse, Government may turn to unregulated third 
parties or pop-up think tanks to become the source of video and 
escape restrictions.
    If legislation is needed, rather than regulate and possibly 
threaten broadcasters, I would encourage that you draft the 
Transparency in Government Use of PR Video Act. Obviously, I am 
not a legislator with that title. This act would require all 
Government video distributed to news stations, whether VNR, B-
roll, or otherwise, be posted on a Government website where the 
public could access it, not just the small percentage of 
viewers who may end up seeing it on their local news. The FCC 
Commissioner at today's hearing already is on record saying it 
would not impose financial burdens on Government.
    Other things to consider. E-mail and fax pitches on behalf 
of the video news releases should disclose that the U.S. 
Government produced the package.
    The videotape could include a graphic identifying the 
Government as the source of the video at the front of the tape, 
as is current industry standard, the VNR without graphics, and 
a second version of the video on the tape with the disclaimer 
burned in over the entire video. This will avoid confusion and 
give broadcasters the option of how its disclaimer should look 
without the threat of Government sanction.
    This suggested approach will dramatically increase 
transparency in Government, allow the dissemination of more 
accurate information to millions more people, and preserve our 
freedom of the press.
    Voice-overs in VNRs have been an industry convention for 
more than 40 years. The focus on fake reporters, in terms of 
the public good, misses the core issue. The public has the same 
right to know what our Government does when a voice-over is 
recorded on a VNR as when it is not.
    And VNRs are not fake news because they are not news. A 
video news release is a communications tool by an interested 
party to get its message on television. When that interested 
party is the Government, the public has the right to know, and 
this is true whether it is factual information or what some 
would call propaganda.
    I believe these goals can be achieved without limiting the 
rights of broadcasters. Thank you very much.
    [The prepared statement of Mr. Simon follows:]

          Prepared Statement of Douglas Simon, President/CEO, 
                      D S Simon Productions, Inc.
    Thank you. I'd like to start by disclosing that my company, D S 
Simon Productions, has produced video news releases or VNRs for Federal 
agencies during both the Clinton and current Bush Administrations.
    It is said that the first VNRs were created in the late 1940s. The 
first Federal Agency produced VNR that I remember personally watching 
was during the Nixon Administration. When Neil Armstrong walked on the 
moon no network had a camera crew at the Sea of Tranquility. NASA 
provided the footage. No one complained.
    I have been invited by this committee to examine this bill based 
upon existing law and existing practices in the news industry.
    Regardless of VNR vendor practice, the overwhelming majority of 
producers and reporters at TV stations know the origin of VNR video 
before deciding to air it. There's a simple reason for this. Stations 
won't air the video if they don't know the source. They insist on 
disclosure.
    While the broadcast decision makers know the source, their station 
managers may not. The analogy I make is that the publisher of a 
newspaper may not know what is being written on page five of the metro 
section. That is why when asked about a controversial government video 
airing on their news programs, News Directors honestly answered they 
didn't know. They know now and I view this as a positive development.
    There have been loopholes that have allowed some government video 
to reach journalists via network newsfeed services with the 
broadcasters possibly confused about its origin. These loopholes are 
being closed. Changes in broadcast practices now require this funding 
information to be passed on to the affiliates.
    As a VNR producer and distributor, you might expect that I am 
against any regulation that effects our industry practice. I'm not. 
While many in the PR Video Industry disagree, I believe, when 
government is involved, and even in the private sector, not only do the 
journalistic gatekeepers need to know the original funding source of 
VNR material but the public has the right to know. That being said, 
increased government control over news broadcasts is not a hallmark of 
democracy.
    I am concerned the ``Truth In Broadcasting'' bill will decrease, 
not increase the information available to the public. It will limit, 
not expand the transparency of government activities. The bill calls 
for the FCC to create the design, presentation and language of a 
disclaimer that news stations would be required to air throughout the 
entire segment. Rather than deciding whether the story, or a portion of 
it, should air based on news standards, stations will be factoring in 
whether they are comfortable changing the look of their broadcast. 
Depending on the politics of the Administration in power, and in their 
viewing area, broadcasters may feel pressure if they run or don't run 
government video.
    This bill could result in the Government altering the format of the 
video it produces to avoid disclosure requirements. Worse, government 
may turn to unregulated third parties or pop-up think tanks to become 
the source of the video and escape restrictions. The most serious risk 
is increasing government control over broadcast news limiting freedom 
of speech--especially when coupled with the recent FCC Notice of April 
13th which held stations could be subject to fine when failing to 
disclose the source of ``matter furnished to them'' which could be 
applied to any information broadcasters receive.
    If legislation is needed, rather than regulate and threaten 
broadcasters I would encourage that you draft the ``Transparency in 
Government use of PR Video Act.'' This act would require:
    All government video disseminated to news stations whether they 
include pre-packaged news stories or not be posted on a government 
website where the public could access it.
    All e-mail and fax pitches on behalf of placing the video would be 
required to disclose that the package is produced by the U.S. 
Government.
    The video tape would include a graphic identifying the government 
as the source of the video at the front of the tape, the VNR without 
graphics and a second version of the video on the tape with the 
disclaimer burned in over the entire video. This will avoid confusion 
and give broadcasters the option of how its disclaimer should look 
without the threat of government sanction.
    This bill will dramatically increase transparency in government, 
allow the dissemination of more accurate information to millions more 
people and preserve our freedom of the press.
    Voice-overs in VNRs have been an industry convention for more than 
40 years. The focus on ``fake reporters'' in terms of the public good 
misses the core issue. The public has the same right to know what our 
government does, when a voice-over is recorded on a VNR and when it is 
not.
    Much also has been made of ``fake news'' which conveys a powerful 
but false image when applied to VNRs. The truth is that what we provide 
for government clients is not news, fake or otherwise. It is paid 
advocacy. I hope we can agree that third-party video of all kinds is 
advocacy whether you believe it is factual information or propaganda. I 
call on you to seriously consider these recommendations and focus your 
attention on government behavior as opposed to setting limits on 
broadcasters. Thank you.
Supplemental Information
Who I am Speaking on Behalf of
    It is an honor for me to be here today. While I have long been 
active in promoting ethical practices within public relations and 
currently serve as Vice President of the Public Relations Society of 
America's New York Chapter, I am here in my capacity as President & CEO 
of D S Simon Productions, a company that I founded 19 years ago on July 
4, 1986.
VNR Industry Practices
    The industry custom for how VNRs are produced has been established 
since the late 1960s. It includes an edited package with a voice-over 
that a station could air in part or in whole or simply use as a 
reference when they create a story using third-party video. We see 
approximately five percent of the VNRs we distribute airing in their 
entirety and an even smaller number using the actual voice-over we 
recorded. The goal of a VNR project is to receive the widest possible 
airings of the key messages contained within. Given the small 
percentage of airings where an entire video is used, a well-crafted VNR 
offers stations maximum flexibility in using the story as they see fit. 
In some cases, a station will use the video to support a story angle 
that is either unrelated to or even in opposition to the intended 
messaging in the Video News Release. This is an accepted risk in our 
industry and combined with the station option not to use the video, is 
one of the best safeguards at avoiding overly commercial or overly 
biased information being disseminated.
    The VNR tape typically includes additional sound bites and footage 
as well as background information, as a graphic and contact information 
for a journalist to fact check. Depending on the story and budget, some 
projects will not include a scripted package but will simply include 
footage, sound bites and background information. This is commonly 
called a ``B-Roll'' package.
    Once the video is produced, it is delivered to news outlets via 
satellite, direct mail or some of the newer digital distribution 
systems. The third aspect of the process is notifying the media that 
the story is available. This is done by, e-mail, fax, phone pitches and 
wire services. The fourth part of the process is monitoring of usage. 
This is done primarily through an electronic encoding signal (much like 
closed captioning) that is invisible to the viewer at home but allows 
Nielsen Media Research to report back to us which stations have aired 
VNR video and when. Secondary monitoring services are also used.
    I can state emphatically that almost 100 percent of the broadcast 
decision makers we deal with know the original funding source of the 
video we provide them. We include notification about the original 
funding source in our e-mail and fax pitches in addition to labeling on 
the video itself.
Broadcast Industry Practice
    The Radio-Television News Directors Association (RTNDA) has issued 
new guidelines. CNN Newsource, CBS Newspath and Fox NewsEdge also sell 
time to VNR distributors on their newsfeed services. CBS has always 
labeled this video as a corporate feed and identifies the funding 
sponsor to its affiliates. CNN now has VNR video and its own video on a 
separate interface so a station cannot pull a VNR thinking it was CNN 
content. This change was made after the infamous ``Karen Ryan video'' 
for the Department of Health and Human Services. The Fox NewsEdge 
affiliate feed now includes a ``Courtesy of '' banner on all third-
party video sent out to its affiliates.
    In a survey of 132 broadcast producers and reporters D S Simon 
Productions completed in April of this year before the FCC Notice was 
issued, they told us that if they receive even a pitch that does not 
reveal the sponsor almost 80 percent never use the story that follows.
The Proportion of Unlabeled Government Video to Broadcast News Content
    How much government produced VNR content is the public actually 
seeing that is controversial or unlabeled? From conversations I've had 
with representatives of monitoring services no more than 10 percent of 
news is VNR footage. Of that, less than two percent comes from the U.S. 
Government. If half of that is controversial, unlabeled government 
material we are talking about 1/20th of one percent of news content 
being a concern. There is strong evidence the source of this video is 
increasingly communicated to viewers based on changes in broadcast 
practices.
The Threat to Broadcasters if This Bill is Adopted
    The most serious risk is increasing government control over 
broadcast is news limiting freedom of speech--especially when coupled 
with the recent FCC Notice of April 13, which held stations could be 
subject to fine when failing to disclose the source of ``matter 
furnished to them'' which could apply to any information broadcasters 
receive. Depending on how it is interpreted, stations could be subject 
to fines if they aired a report based upon an unnamed source or 
whistleblower.
My Suggestions for a ``Transparency in Government Public Relations 
        Video Act'' to Improve the ``Truth In Broadcasting'' bill
    This act would require all government video disseminated to news 
stations whether they include pre-packaged news stories or not be 
posted on a government website where the public could access it. It 
could be made available in libraries so people who do not have Internet 
access would be able to view it at no charge. This posting would 
include the script or transcript of sound bites as well as slate 
information.
    All e-mail and fax pitches on behalf of placing the video would be 
required to mention that the package is produced by the U.S. 
Government.
    The video tape would include a graphic identifying the government 
as the source of the video at the front of the tape, the VNR without 
graphics and a second version of the video on the tape with the 
disclaimer burned in over the entire video to avoid confusion and to 
give broadcasters the option of how its disclaimer should look without 
the threat of government sanction. Phone and e-mail contact information 
of a spokesperson from the Federal agency providing the video would 
also be included.
    If you are concerned about partisanship, you could allow the Senate 
majority and minority the option to appoint one spokesperson to 
contribute one sound bite to the video for balance.
    The monitoring data detailing which stations broadcast portions of 
the video could also be made public.
    Broadcasters would be encouraged to comply with the guidelines 
established by the RTNDA for use of third-party video but not required 
to do so.
    This bill would dramatically increase transparency in government, 
allow the dissemination of more accurate information to millions more 
people and preserve our freedom of the press.

    The Chairman. Ms. Phair.

          STATEMENT OF JUDITH T. PHAIR, PRESIDENT/CEO, 
           PUBLIC RELATIONS SOCIETY OF AMERICA (PRSA)

    Ms. Phair. Thank you, Mr. Chairman. Mr. Chairman, Senator 
Lautenberg, Senator DeMint, my name is Judy Phair and I am 
President and CEO of the Public Relations Society of America. 
It is a great privilege and honor to appear before you today, 
and I thank you for inviting me.
    I want to testify before you on a subject of paramount 
importance to all of us: ensuring the free flow of information 
from Government to citizens that is an essential and core part 
of our democracy.
    I represent 20,000 men and women working in the public 
relations profession in every State of the Union, men and women 
who are committed to using their professional skills to help 
enhance communications and dialog between organizations, 
businesses, government, not-for-profit entities, and the 
communities, constituencies and the public they serve. We also 
have 8,000 student members on 260 college and university 
campuses across the Nation.
    Our mission is to advance the profession of public 
relations, a profession that has as its foundation exactly what 
Senator Kerry was describing earlier this morning, that 
important free flow of information throughout society. We are 
committed to the responsible and ethical practice of public 
relations, and each of our members signs a code of ethics that 
focuses on honesty and full disclosure, and we have attached 
that code of ethics with my written testimony. That code helps 
govern our daily work, which involves the use of many tools and 
tactics to deliver information and frame the dialog between 
organizations and their publics. That is extremely important in 
the context of S. 967, which addresses one important tool in 
the public relations process, and that is the video news 
release, or VNR.
    Society recognizes that as part of strategic communications 
planning, video news releases can, in fact, be valuable tools 
promoting that free flow of information. Just as paper news 
releases, which we discussed also in earlier testimony, are 
used in print journalism and follow the style of print 
journalism, VNRs utilize a format that is suited to electronic 
media. Both print and video news releases deliver information 
to the public via the news media in formats that are suitable 
to those media.
    But we also believe that VNRs should be produced and 
disseminated with the highest levels of transparency, candor, 
and honesty. In order to foster open communication leading to 
informed decisionmaking, we must do more than simply funnel 
information through the media to the public. We must reveal the 
sponsors for causes and interests represented and disclose all 
financial interests related to the VNR. We believe that the 
great majority of public relations professionals and the firms 
they work for hold this view and do practice full disclosure of 
sources and sponsors to the broadcast media. Therefore, we see 
no issue regarding the codification of a practice that 
Government communications professionals and their contracted 
agents should already be doing. And that codification is indeed 
what your bill does.
    We support the intent of the legislation, which would 
require full disclosure of the sources for Government VNRs. 
However, our concern is that some of the provisions go beyond 
mandating the full disclosure of Government involvement and the 
clear identification of sources of information contained in 
these releases. The portions of the bill that are of greatest 
concern to PRSA regard how this disclosure would be made. We 
believe that those provisions may have the unintended 
consequence of actually impeding the flow of important 
information to the public.
    We believe that public relations professionals involved in 
producing video news releases should provide broadcasters with 
all the information they need in order to decide the best way 
to use the information contained in the releases.
    Broadcasters should have the ultimate responsibility for 
providing disclosure to the public. That disclosure could come 
in many forms, depending on the content and context of the VNR 
and the broadcaster's news production format, as long as the 
result is to let the public know the sources of information. By 
prescribing the specifics of disclosure to be used in the 
production of Government-sponsored VNRs, S. 967 could make the 
process so onerous or the end results so inappropriate for 
broadcast use that stations might not use VNRs at all, thus 
limiting the free flow of information.
    PRSA believes the Government should not hold broadcasters 
to a different standard in presenting news to their viewers 
than those standards that print media impose on themselves.
    We have long advocated the ethical, honest production of 
video news releases and full disclosure of their sponsorship. 
It is an issue that is of vital importance to this industry, 
and we are working constantly to keep that disclosure bar set 
high for our members and by example for others in this 
profession. VNRs have been used successfully, with full 
disclosure sources of information, for conveying information to 
the public about several important programs. For example, VNRs 
were effective components of public service campaigns on such 
issues as labeling over-the-counter drug supplements, seat belt 
usage, online tax return filing, and cancer detection and 
prevention.
    Public relations exists as a profession today because it 
has established a level of trust with the media and the public. 
In our role of providing information to the public, often 
through media outlets, that is essential. And we do believe 
that imposing rigid requirements and specifications on the 
information we provide to the public will not best serve that 
public interest.
    I would certainly be happy to take questions, and thank you 
very much, Mr. Chairman and members of the Committee.
    [The prepared statement of Ms. Phair follows:]

         Prepared Statement of Judith T. Phair, President/CEO, 
               Public Relations Society of America (PRSA)
    Mr. Chairman and members of the Committee:
    On behalf of the Public Relations Society of America I thank you 
for the opportunity to submit this testimony concerning S. 967.
    PRSA represents 20,000 public relations professionals in business, 
government, education, nonprofit and other sectors. Our membership is 
divided into ten regional Districts with 114 local Chapters in the 
United States and the District of Columbia. We're governed by a board 
of directors that is elected by members. Our 8,000 plus-member Public 
Relations Student Society of America has 260 Chapters on campuses at 
colleges and universities throughout the United States.
    The mission of PRSA is to advance the profession of public 
relations and public relations professionals through education, 
innovation and adherence to a strong code of ethical behavior. The PRSA 
Member Code of Ethics is signed by each member as a prerequisite to 
join. It guides them in their daily activities in the practice of 
public relations.
    That's extremely important in the context of S. 967, which 
addresses one important tool in the public relations process--the Video 
News Release, or VNR.
    Like members of this committee, our members are well aware of the 
issues surrounding the production of VNRs by government entities or 
with Federal funds. And our position on VNRs is probably similar to 
those of each member of this committee.
    Our Society recognizes that, in strategic communications planning, 
video news releases can be valuable tools promoting the free flow of 
information. Just as ``print'' news releases follow the style of print 
journalism, VNRs utilize a format that is most adaptable to electronic 
media. Both print and video news releases present information in a way 
that is preferred by these respective media and that meets public 
information needs and interests.
    But we also believe that VNRs should be produced and disseminated 
with the highest levels of transparency, candor and honesty. To provide 
open communication that fosters informed decision, we must do more than 
simply funnel information through the media to the public. We must 
reveal the sponsors for causes and interests represented and disclose 
all financial interests related to the VNR. We believe that most of our 
members and the 120,000 men and women practicing public relations in 
the United States today hold that view.
    Therefore, we see no issue regarding the codification of a practice 
that government communications professionals and their contracted 
agents should already be doing.
    Our concern with S. 967 is that some of its provisions go beyond 
what appears to be the intent of the legislation--that is, to require 
full disclosure of government sponsorship of VNRs and clear 
identification sources of information contained in those releases. The 
portions of the bill of greatest concern to PRSA reference how this 
disclosure would be made. We believe those provisions may have the 
unintended consequence of actually impeding the free flow of important 
information to the public.
    We believe that public relations professionals involved in 
producing video news releases should provide broadcasters with all the 
information they need in order to decide the best way to use the 
information contained in the releases.
    Disclosure to the public is ultimately the responsibility of 
broadcasters. It could come in many forms, depending on the content and 
context of the VNR and the broadcasters' news production formats, and 
as long as the result is to keep the public totally informed about the 
sources of information. By proscribing the specifics of disclosure to 
be used in the production of government-sponsored VNRs, the S. 967 
could cause some broadcasters not to use the information at all.
    PRSA believes the government should not hold broadcasters to a 
different standard in presenting news to their viewers than those that 
print media impose upon themselves.
    PRSA has long advocated the ethical, honest production of video 
news releases and full disclosure of their sponsorship. It's an issue 
of vital importance to our industry and we're working constantly to 
keep the disclosure bar set high for our members and, by example, for 
others in our profession. VNRs have been used successfully--with full 
disclosure of sources of information--for conveying information to the 
public about a number of important public programs. For example, VNRs 
have been effective components of public service campaigns on such 
topics as labeling of over-the-counter drug supplements, seat belt 
usage, online tax return filing and cancer detection and prevention.
    Public relations exists as a profession today because it has 
established a level of trust with the media and the public. In our role 
of providing information to the public--often through media outlets--
that trust is essential.
    We can be ``trusted'' only if we work diligently to earn trust. We 
believe that imposing rigid requirements and specifications on the 
information we provide to the public will not best serve the building 
of this trust.
    Thank you.
                                 ______
                                 
      Statement of the Public Relations Society of America (PRSA) 
                     on Video News Releases (VNRs)
    Extensive discussion was focused in recent weeks on a Video News 
Release (VNR) produced by the Department of Health and Human Services 
(DHHS) pertaining to the recently enacted Medicare drug bill. Content 
of the video release touched off partisan debate and discussion but 
also raised ethical questions about the use of VNRs. Because VNRs are a 
basic public relations tool used by corporations, organizations and 
other entities to provide news content to television stations and thus 
communicate with the public, PRSA believes that it is important for 
there to be a better understanding of the role and usage of VNRs.
    Three principles are at work here:

   A VNR is the television equivalent of a press release and, 
        as such, should always be truthful and represent the highest in 
        ethical standards.

   Producers and distributors of VNRs and the organizations 
        they represent should clearly and plainly identify themselves.

   Television stations airing VNRs should identify sources of 
        the material.

    Background: The VNR is the video equivalent of a press release, a 
written document sent to the media. The VNR is designed specifically 
for TV stations and consists of many elements including a complete 
story with visuals and narration/voiceovers, a suggested written 
script, added video that can be used by the station and suggested ways 
the story can be localized. Public relations professionals have 
produced VNRs in this manner for more than 25 years, and media outlets 
have used them on a regular basis.
    Issue in Question: One of the issues raised about the DHHS VNR was 
the inclusion of a sign-off identification at the completion of the 
story that uses the words ``reporting.'' This has caused some confusion 
among people who question whether someone who is not actually a 
reporter should be identified in a manner that could suggest that he or 
she is a journalist. While this is often done when VNRs are produced, 
we agree that this can be considered confusing and/or misleading.
    PRSA Position:

        1. Organizations that produce VNRs should clearly identify the 
        VNR as such and fully disclose who produced and paid for it at 
        the time the VNR is provided to TV stations.

        2. PRSA recommends that organizations that prepare VNRs should 
        not use the word ``reporting'' if the narrator is not a 
        reporter.

        3. Use of VNRs or footage provided by sources other than the 
        station or network should be identified as to source by the 
        media outlet when it is aired.

    PRSA supports use of VNRs as useful public relations tools. They 
will continue to be effective when adhering to the highest standards of 
practice as described above.
About PRSA
    The Public Relations Society of America (www.prsa.org), based in 
New York City, is the world's largest organization for public relations 
professionals helping to advance the profession and the professional. 
Its nearly 20,000 members, organized into 116 Chapters nationwide, 18 
Professional Interest Sections along with Affinity Groups, represent 
business and industry, counseling firms, independent practitioners, 
military, government, associations, hospitals, schools, professional 
services firms and nonprofit organizations.
                                 ______
                                 
PRSA Position on VNRS Overall
    Free Flow of Information--Protecting and advancing the free flow of 
accurate and truthful information is essential to serving the public 
interest and contributing to informed decision-making in a democratic 
society. VNRs are among the many tools used to ensure that information 
flows freely.
    Full Disclosure--Open communication fosters informed decision-
making in a democratic society. We must be honest and accurate in all 
communications, reveal the sponsors for causes and interests 
represented and disclose all financial interests.
PRSA Position on U.S. Senate Bill S. 967
   PRSA supports the spirit of legislation that ensures the 
        free flow of accurate and truthful information and requires 
        full disclosure of sponsors and financial interests. However, 
        disclosure by broadcasters could come in many forms, depending 
        on the content and context of the VNR and how it fits into the 
        individual entities' news production formats. Then all VNRs 
        would serve the purpose of keeping the public totally informed 
        about the sources of information.

   PRSA believes the government should not hold broadcasters to 
        a different standard than print media in presenting news to 
        their viewers.

   PRSA is concerned that such regulation could spill over into 
        the private sector and inappropriately impose tighter 
        regulation on the media, which could raise serious First 
        Amendment constitutional questions.

   Again, while PRSA supports the spirit of Senate S. 967, PRSA 
        believes that more robust self-regulation of VNRs by 
        broadcasters is the optimum way to manage the issue of full 
        disclosure.
Members of Senate Commerce Committee
    http://commerce.senate.gov/about/membership.html
PRSA Official Position on VNRs
    http://www.prsa.org/_News/leaders/vnrs0404.asp
PRSA Code of Ethics
    http://www.prsa.org/_About/ethics/index.asp?ident=eth1
                                 ______
                                 
    Public Relations Society of America--Member Code of Ethics 2000
   Professional Values

   Principles of Conduct

   Commitment and Compliance

    This Code applies to PRSA members. The Code is designed to be a 
useful guide for PRSA members as they carry out their ethical 
responsibilities. This document is designed to anticipate and 
accommodate, by precedent, ethical challenges that may arise. The 
scenarios outlined in the Code provision are actual examples of 
misconduct. More will be added as experience with the Code occurs.
    The Public Relations Society of America (PRSA) is committed to 
ethical practices. The level of public trust PRSA members seek, as we 
serve the public good and advocate for our clients, means we have taken 
on a special obligation to operate ethically.
    The value of member reputation depends upon the ethical conduct of 
everyone affiliated with the Public Relations Society of America. Each 
of us sets an example for each other--as well as other professionals--
by our pursuit of excellence with powerful standards of performance, 
professionalism, and ethical conduct.
    Emphasis on enforcement has been eliminated. But, the PRSA Board of 
Directors retains the right to bar from membership or expel from the 
Society any individual who has been or is sanctioned by a government 
agency or convicted in a court of law of an action that is in violation 
of this Code.
    Ethical practice is the most important obligation of a PRSA member.
              PRSA Member Statement of Professional Values
    This statement presents the core values of PRSA members and, more 
broadly, of the public relations profession. These values provide the 
foundation for the Member Code of Ethics and set the industry standard 
for the professional practice of public relations. These values are the 
fundamental beliefs that guide our behaviors and decision-making 
process. We believe our professional values are vital to the integrity 
of the profession as a whole.
Advocacy
   We serve the public interest by acting as responsible 
        advocates for those we represent.

   We provide a voice in the marketplace of ideas, facts, and 
        viewpoints to aid informed public debate.
Honesty
   We adhere to the highest standards of accuracy and truth in 
        advancing the interests of those we represent and in 
        communicating with the public.
Expertise
   We acquire and responsibly use specialized knowledge and 
        experience.

   We advance the profession through continued professional 
        development, research, and education.

   We build mutual understanding, credibility, and 
        relationships among a wide array of institutions and audiences.
Independence
   We provide objective counsel to those we represent.

   We are accountable for our actions.
Loyalty
   We are faithful to those we represent, while honoring our 
        obligation to serve the public interest.
Fairness
   We deal fairly with clients, employers, competitors, peers, 
        vendors, the media, and the general public.

   We respect all opinions and support the right of free 
        expression.

                          PRSA Code Provisions
Free Flow of Information
Core Principle
    Protecting and advancing the free flow of accurate and truthful 
information is essential to serving the public interest and 
contributing to informed decision making in a democratic society.
Intent
   To maintain the integrity of relationships with the media, 
        government officials, and the public.

   To aid informed decision making.
Guidelines
    A member shall:

   Preserve the integrity of the process of communication.

   Be honest and accurate in all communications.

   Act promptly to correct erroneous communications for which 
        the practitioner is responsible.

   Preserve the free flow of unprejudiced information when 
        giving or receiving gifts by ensuring that gifts are nominal, 
        legal, and infrequent.

Examples of Improper Conduct Under this Provision
   A member representing a ski manufacturer gives a pair of 
        expensive racing skis to a sports magazine columnist, to 
        influence the columnist to write favorable articles about the 
        product.

   A member entertains a government official beyond legal 
        limits and/or in violation of government reporting 
        requirements.

Competition
Core Principle
    Promoting healthy and fair competition among professionals 
preserves an ethical climate while fostering a robust business 
environment.
Intent
   To promote respect and fair competition among public 
        relations professionals.

   To serve the public interest by providing the widest choice 
        of practitioner options.
Guidelines
    A member shall:

   Follow ethical hiring practices designed to respect free and 
        open competition without deliberately undermining a competitor.

   Preserve intellectual property rights in the marketplace.

Examples of Improper Conduct Under This Provision
   A member employed by a ``client organization'' shares 
        helpful information with a counseling firm that is competing 
        with others for the organization's business.

   A member spreads malicious and unfounded rumors about a 
        competitor in order to alienate the competitor's clients and 
        employees in a ploy to recruit people and business.

Disclosure of Information
Core Principle
    Open communication fosters informed decision making in a democratic 
society.
Intent
   To build trust with the public by revealing all information 
        needed for responsible decision making.
Guidelines
    A member shall:

   Be honest and accurate in all communications.

   Act promptly to correct erroneous communications for which 
        the member is responsible.

   Investigate the truthfulness and accuracy of information 
        released on behalf of those represented.

   Reveal the sponsors for causes and interests represented.

   Disclose financial interest (such as stock ownership) in a 
        client's organization.

   Avoid deceptive practices.

Examples of Improper Conduct Under this Provision
   Front groups: A member implements ``grass roots'' campaigns 
        or letter-writing campaigns to legislators on behalf of 
        undisclosed interest groups.

   Lying by omission: A practitioner for a corporation 
        knowingly fails to release financial information, giving a 
        misleading impression of the corporation's performance.

   A member discovers inaccurate information disseminated via a 
        website or media kit and does not correct the information.

   A member deceives the public by employing people to pose as 
        volunteers to speak at public hearings and participate in 
        ``grass roots'' campaigns.

Safeguarding Confidences
Core Principle
    Client trust requires appropriate protection of confidential and 
private information.
Intent
   To protect the privacy rights of clients, organizations, and 
        individuals by safeguarding confidential information.
Guidelines
    A member shall:

   Safeguard the confidences and privacy rights of present, 
        former, and prospective clients and employees.

   Protect privileged, confidential, or insider information 
        gained from a client or organization.

   Immediately advise an appropriate authority if a member 
        discovers that confidential information is being divulged by an 
        employee of a client company or organization.

Examples of Improper Conduct Under This Provision
   A member changes jobs, takes confidential information, and 
        uses that information in the new position to the detriment of 
        the former employer.

   A member intentionally leaks proprietary information to the 
        detriment of some other party.

Conflicts of Interest
Core Principle
    Avoiding real, potential, or perceived conflicts of interest builds 
the trust of clients, employers, and the publics.
Intent
   To earn trust and mutual respect with clients or employers.

   To build trust with the public by avoiding or ending 
        situations that put one's personal or professional interests in 
        conflict with society's interests.
Guidelines
    A member shall:

   Act in the best interests of the client or employer, even 
        subordinating the member's personal interests.

   Avoid actions and circumstances that may appear to 
        compromise good business judgment or create a conflict between 
        personal and professional interests.

   Disclose promptly any existing or potential conflict of 
        interest to affected clients or organizations.

   Encourage clients and customers to determine if a conflict 
        exists after notifying all affected parties.

Examples of Improper Conduct Under This Provision
   The member fails to disclose that he or she has a strong 
        financial interest in a client's chief competitor.

   The member represents a ``competitor company'' or a 
        ``conflicting interest'' without informing a prospective 
        client.

Enhancing the Profession
Core Principle
    Public relations professionals work constantly to strengthen the 
public's trust in the profession.
Intent
   To build respect and credibility with the public for the 
        profession of public relations.

   To improve, adapt, and expand professional practices.
Guidelines
    A member shall:

   Acknowledge that there is an obligation to protect and 
        enhance the profession.

   Keep informed and educated about practices in the profession 
        to ensure ethical conduct.

   Actively pursue personal professional development.

   Decline representation of clients or organizations that urge 
        or require actions contrary to this Code.

   Accurately define what public relations activities can 
        accomplish.

   Counsel subordinates in proper ethical decision making.

   Require that subordinates adhere to the ethical requirements 
        of the Code.

   Report ethical violations, whether committed by PRSA members 
        or not, to the appropriate authority.

Examples of Improper Conduct Under This Provision
   A PRSA member declares publicly that a product the client 
        sells is safe, without disclosing evidence to the contrary.

   A member initially assigns some questionable client work to 
        a non-member practitioner to avoid the ethical obligation of 
        PRSA membership.

Resources
Rules and Guidelines
    The following PRSA documents, available online at www.prsa.org 
provide detailed rules and guidelines to help guide your professional 
behavior. If, after reviewing them, you still have a question or issue, 
contact PRSA headquarters as noted below.

   PRSA Bylaws

   PRSA Administrative Rules

   Member Code of Ethics
                   PRSA Member Code of Ethics Pledge
    I pledge:

        To conduct myself professionally, with truth, accuracy, 
        fairness, and responsibility to the public; to improve my 
        individual competence and advance the knowledge and proficiency 
        of the profession through continuing research and education; 
        and to adhere to the articles of the Member Code of Ethics 2000 
        for the practice of public relations as adopted by the 
        governing Assembly of the Public Relations Society of America.

    I understand and accept that there is a consequence for misconduct, 
up to and including membership revocation.

    And, I understand that those who have been or are sanctioned by a 
government agency or convicted in a court of law of an action that is 
in violation of this Code may be barred from membership or expelled 
from the Society.
    ____________________
                    Signature
    ____________________
                    Date

    The Chairman. Thank you very much, all of you.
    My first question to all of you is how long have VNRs been 
used in the industry. Ms. Poling, did you look back in other 
Administrations?
    Ms. Poling. No. Our study was very narrow. We were asked to 
look at certain video news releases and we did so. So there 
were just two. However, we did see some from the Clinton 
Administration, but we were not doing a study that focused on 
that.
    The Chairman. The rest of you in the industry, how long 
have these been used by the industry?
    Mr. Simon. Sure, Mr. Chairman. As I noted in my testimony, 
I have been told the first VNRs were in the late 1940s and they 
became popular in the 1950s, 1960s. I had one source who said 
they thought President Kennedy had used video like this in his 
campaign in the 1960s, but I could not confirm that 
independently. But it has been a common public relations tool 
basically since television news started to play such a 
prominent role.
    The Chairman. I assume you are all familiar with the 
provision that is in the defense supplemental appropriations 
bill that was passed, signed by the President. The Byrd 
Amendment requires Federal agencies to clearly label 
prepackaged news stories that they produce. The difference 
between that and this bill, this bill would require in video 
that there be a cutline that appears constantly throughout the 
use. All the footage would have this on it, contrary to the 
political ad where there has to be a cutline at the end saying 
this was paid for by the candidate. What about that?
    First, can you live with the Byrd Amendment? We all voted 
for it. Can you live with it?
    Ms. Cochran. Senator, yes. We have no objection to the Byrd 
Amendment.
    Ms. Phair. Mr. Chairman, neither do we.
    Mr. Simon. I have no objection to the Byrd Amendment, and I 
think it makes sense when applied to this issue.
    The Chairman. Now, in terms of this constant exposure on 
prepackaged news stories, what is going to be the impact of 
that on anything, just something like we just saw now?
    Ms. Cochran. Senator, I will begin. I think you heard from 
the colleagues here that imposing this kind of one-size-fits-
all solution to a video is problematic. In some instances, a 
uniform description may not even be the most accurate 
information that you could give the public. I think the public 
benefits from learning exactly what Federal agency has 
originated the material. One example that I use is NASA 
animation of a space shot, and it is used very widely in 
television stories because it helps the viewer understand and 
it is the most authoritative source coming from NASA.
    The Chairman. Pardon me just a moment. We have got a 
limitation on time.
    The term ``prepackaged news story'' means a complete, 
ready-to-use audio or visual news segment designed to be 
indistinguishable from a news segment produced by an 
independent organization. How can you distinguish it? I do not 
understand. Could you live with that? The test would be if it 
was designed to be indistinguishable from something that you 
produce.
    Ms. Cochran. I think it is problematic because that is not 
how these packages are used. Often segments are used. Everyone 
is not as considerate as the example that we saw, as to send B-
roll and excerpts that can be used by themselves. So often the 
prepackaged material is broken down and used. Bits and pieces 
of it can be used. If it has that labeling on it, then it 
becomes very problematic.
    The Chairman. Ms. Poling, in the definition section, it 
says, ``The term `agency' has the same meaning given such term 
in section 551 of title 5, United States Code, and includes the 
Executive Office of the President.'' That ``and'' is not 
normal.
    Ms. Poling. Repeat the question. The ``and'' is what?
    The Chairman. The clause that starts with ``and includes 
the Executive Office of the President'' is not normally within 
the definition of an agency. Is it?
    Ms. Poling. GAO has no comments on the bill, but just from 
a legal perspective, you are correct. It is not normally 
included in the definition of an agency.
    The Chairman. So this is the entire purpose of the bill, to 
include this and make sure that it applies to the Office of the 
President.
    Senator Lautenberg.
    Senator Lautenberg. Thanks, Mr. Chairman.
    The intention of the bill is to make all Government 
agencies responsible.
    The Chairman. It does not apply to Congress. You have 
extended it to the President of the United States, but not to 
Congress.
    Senator Lautenberg. Well, in the case where we see the 
abuse of this information, we do not have in the Congress 
opportunities to issue VNRs independently. No broadcaster is 
going to take something that comes from my office or your 
office and put it on the air and say that the situation in 
Alaska regarding drilling----
    The Chairman. Mine do.
    [Laughter.]
    The Chairman. We issue them every week.
    Senator Lautenberg. You were so lucky to have the 
endorsement of how beautiful Alaska is, and I can see that you 
were happy with that. So I am content to exempt Alaska from 
some of these things.
    [Laughter.]
    Senator Lautenberg. But in all seriousness, I am really 
surprised to hear some of our friends at the table suggest that 
this could be an interference in the free flow of information. 
What is better for the public than to know exactly who is 
saying what? You can produce it. There is virtually no 
interference. We deliberately did not place any burden on the 
broadcasters.
    As a matter of fact, despite the technology, Ms. Poling, 
what do you think of Mr. Simon's comment about technology being 
able to sort things out in a different way so that it is more 
discernible when they get a piece of VNR to produce?
    Ms. Poling. I am not sure I have a view on this.
    What we would say at GAO is that it is important that these 
prepackaged news stories--and I believe his goes beyond 
prepackaged news stories--identify the source of the Federal 
agency. We think that is essential.
    Senator Lautenberg. We say in our legislation that it ought 
to be run as long as that VNR runs. If it runs for 10 seconds, 
it should be on there for 10 seconds. If it runs for 30 
seconds, it should be on there for 30 seconds.
    Mr. Chairman, there is no doubt about the attempt to 
deceive when we hear Karen Ryan say--she does not say I am 
doing this for the U.S. Government. She said I am Karen Ryan. 
The idea is to imitate. And if we have to see that clip again, 
it would be fine with me. But it is designed to imitate a 
reporter. Otherwise, why present it that way?
    Ms. Poling, some of that we know was legitimate news. The 
President signing a bill. I do not have any problem with that. 
That is picked up by the news cameras themselves. But when it 
is a story to sell something and you show the pharmacy and so 
forth, that can, even stretching the imagination a little bit, 
say, well, OK, it is part of a news clip as long as it is 
developed by the station itself, the broadcaster.
    I would appreciate hearing from GAO on this. Is there any 
harm that comes from identifying that this is a piece of a 
Government production? Do you see any burden on the broadcast 
industry as a result of that?
    Ms. Poling. Well, our study did not deal with the broadcast 
industry at all. But the basic principle underlying our 
opinions is that the agencies must disclose themselves to the 
targeted audience which is the television-viewing audience. We 
think it is very important that there be disclosure so that the 
audience can assess the information, which I also heard from 
other members of the panel up here, and also that the taxpayers 
have a right to know when the Government is speaking to them.
    Senator Lautenberg. Ms. Cochran, several news directors ran 
the Karen Ryan piece without realizing that it was Government-
sponsored VNR. Would it not be simpler for your news directors, 
your group, if the Government simply included a clear 
disclaimer in the story itself?
    Ms. Cochran. We are all in favor of that kind of 
disclosure. I think what we are concerned about is the specific 
prescription as it appears in the bill because we think it 
limits the editorial decisions, if you like, just the look of 
how that disclaimer or that disclosure will appear on the air. 
We think that how that looks on the air should be in the hands 
of the people producing the news.
    Senator Lautenberg. Well, to me it would seem more 
appropriate if we had a uniform standard and said, OK, this is 
it. I would be happy, Mr. Chairman, to work with people from 
the industry, keeping in mind that our mission in this bill is 
very clear. It says that transparency is the objective and that 
if it is produced by the Government, let us not fool anybody.
    Again, we acknowledge that it happened--I did not realize 
Mr. Simon was old enough to remember what might have happened 
in the Nixon days. Of course, you and I remember it clearly.
    The Chairman. It is nice to work with kids like you.
    [Laughter.]
    Senator Lautenberg. You are looking at 40 percent of the 
veteran population of World War II sitting here.
    [Laughter.]
    Senator Lautenberg. If we could arrive at the most 
convenient way of displaying it, but one that is visible and 
one that tells the story, Mr. Chairman, I would be happy to do 
it and work with you. You have been eminently fair because I 
know that you do not fully agree here, but you are at least 
willing to have the problem aired. So I am grateful to you. I 
would submit if we have a chance to work this over in the next 
few weeks, I think that if the Byrd Amendment was so 
acceptable, then the least we ought to do is try to make it 
permanent, improve it if we can, but not to let it terminate 
and then have to worry about what happens after September 30.
    The Chairman. It has been our announced intention to try to 
make the Byrd Amendment permanent because it is acceptable, and 
I think it meets the objectives of the original issue. And I 
will be willing to join you at any time in making that 
permanent.
    But in any event, if that is not acceptable, it would be my 
feeling that this committee ought to wait for the outcome of 
the comment period that the FCC has established, and we will 
take the bill up at the end of July after we receive that, 
before the August recess, if it is necessary. If we do not 
adopt the Byrd Amendment permanently, we will take it up 
sometime in July after the comment period is over.
    But let me thank you all for your testimony. I appreciate 
your courtesy very much. There is a vote on.
    [Whereupon, at 11:47 a.m., the Committee was adjourned.]

                                  
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