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" ! SENATE 108th Congress

2d Session

REPORT

2004

108–421

ACTIVITIES OF THE COMMITTEE ON

GOVERNMENTAL AFFAIRS

R E P O R T

OF THE

COMMITTEE ON GOVERNMENTAL AFFAIRS

UNITED STATES SENATE

AND ITS

SUBCOMMITTEES

FOR THE

ONE HUNDRED SEVENTH CONGRESS

December 7, 2004—Ordered to be printed
(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS

SUSAN M. COLLINS, Maine, Chairman

TED STEVENS, Alaska

GEORGE V. VOINOVICH, Ohio

NORM COLEMAN, Minnesota

ARLEN SPECTER, Pennsylvania

ROBERT F. BENNETT, Utah

PETER G. FITZGERALD, Illinois

JOHN E. SUNUNU, New Hampshire

RICHARD C. SHELBY, Alabama

JOSEPH I. LIEBERMAN, Connecticut

CARL LEVIN, Michigan

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

THOMAS R. CARPER, Delaware

MARK DAYTON, Minnesota

FRANK LAUTENBERG, New Jersey

MARK PRYOR, Arkansas

MICHAEL D. BOPP, Staff Director and Chief Counsel

ANN C. FISHER, Deputy Staff Director

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Counsel

HOLLY A. IDELSON, Minority Counsel

AMY B. NEWHOUSE, Chief Clerk
(III)

COMMITTEE ON GOVERNMENTAL AFFAIRS DURING THE 107TH

CONGRESS UNTIL JUNE 6, 2001 1

FRED THOMPSON, Tennessee, Chairman

JOSEPH I. LIEBERMAN, Connecticut, Ranking Member

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

GEORGE V. VOINOVICH, Ohio

PETE V. DOMENICI, New Mexico 2

THAD COCHRAN, Mississippi

JUDD GREGG, New Hampshire

ROBERT F. BENNETT, Utah

CARL LEVIN, Michigan

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

THOMAS R. CARPER, Delaware

JEAN CARNAHAN, Missouri

SUBCOMMITTEES OF THE 107TH CONGRESS

INTERNATIONAL SECURITY, PROLIFERATION, AND FEDERAL SERVICES

THAD COCHRAN, Mississippi, Chairman

DANIEL K. AKAKA, Hawaii, Ranking Member

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

PETE V. DOMENICI, New Mexico 2

JUDD GREGG, New Hampshire

ROBERT F. BENNETT, Utah

CARL LEVIN, Michigan

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

THOMAS R. CARPER, Delaware

JEAN CARNAHAN, Missouri

OVERSIGHT OF GOVERNMENT MANAGEMENT, RESTRUCTURING AND

THE DISTRICT OF COLUMBIA

GEORGE V. VOINOVICH, Ohio, Chairman

RICHARD J. DURBIN, Illinois, Ranking Member

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

PETE V. DOMENICI, New Mexico 2

THAD COCHRAN, Mississippi

DANIEL K. AKAKA, Hawaii

ROBERT G. TORRICELLI, New Jersey

THOMAS R. CARPER, Delaware

JEAN CARNAHAN, Missouri

PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

SUSAN M. COLLINS, Maine, Chairman

CARL LEVIN, Michigan, Ranking Member

TED STEVENS, Alaska

GEORGE V. VOINOVICH, Ohio

PETE V. DOMENICI, New Mexico 2

THAD COCHRAN, Mississippi

JUDD GREGG, New Hampshire

ROBERT F. BENNETT, Utah

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

THOMAS R. CARPER, Delaware

JEAN CARNAHAN, Missouri

1Senator Lieberman was Chairman from January 3, 2001 until January 20, 2001, when

Senator Thompson became Chairman. On June 6, 2001, Senator Lieberman became Chairman

for the remainder of the 107th Congress. 2Senator Domenici left the Committee and Senator Fitzgerald replaced him on April 23,

2002.
(IV)

COMMITTEE ON GOVERNMENTAL AFFAIRS DURING THE 107TH

CONGRESS AS OF JUNE 6, 2001 1

JOSEPH I. LIEBERMAN, Connecticut, Chairman

CARL LEVIN, Michigan

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

THOMAS R. CARPER, Delaware

JEAN CARNAHAN, Missouri

MARK DAYTON, Minnesota

FRED THOMPSON, Tennessee

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

GEORGE V. VOINOVICH, Ohio

THAD COCHRAN, Mississippi

ROBERT F. BENNETT, Utah

JIM BUNNING, Kentucky

PETER G. FITZGERALD, Illinois 2

SUBCOMMITTEES OF THE 107TH CONGRESS

INTERNATIONAL SECURITY, PROLIFERATION, AND FEDERAL SERVICES

DANIEL K. AKAKA, Hawaii, Chairman

CARL LEVIN, Michigan

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

THOMAS R. CARPER, Delaware

JEAN CARNAHAN, Missouri

MARK DAYTON, Minnesota

THAD COCHRAN, Mississippi

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

GEORGE V. VOINOVICH, Ohio

ROBERT F. BENNETT, Utah

PETER G. FITZGERALD, Illinois

OVERSIGHT OF GOVERNMENT MANAGEMENT, RESTRUCTURING AND

THE DISTRICT OF COLUMBIA

RICHARD J. DURBIN, Illinois, Chairman

DANIEL K. AKAKA, Hawaii

ROBERT G. TORRICELLI, New Jersey

THOMAS R. CARPER, Delaware

JEAN CARNAHAN, Missouri

MARK DAYTON, Minnesota

GEORGE V. VOINOVICH, Ohio

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

THAD COCHRAN, Mississippi

PETER G. FITZGERALD, Illinois

PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

CARL LEVIN, Michigan, Chairman

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

THOMAS R. CARPER, Delaware

JEAN CARNAHAN, Missouri

MARK DAYTON, Minnesota

SUSAN M. COLLINS, Maine

TED STEVENS, Alaska

GEORGE V. VOINOVICH, Ohio

THAD COCHRAN, Mississippi

ROBERT F. BENNETT, Utah

JIM BUNNING, Kentucky

PETER G. FITZGERALD, Illinois

1Senator Lieberman became Chairman on June 6, 2001.

2Senator Domenici left the Committee and Senator Fitzgerald replaced him on April 23,

2002.
(V)

CONTENTS

Page

I. Highlights of Activities ........................................................................................ 1

Homeland Security ........................................................................................... 3

Commission to Investigate the Terrorist Attacts ........................................... 5

E-Government and Information Resources Management ............................. 6

The Collapse of Enron Corporation ................................................................. 7

Government Organization ............................................................................... 12

Regulatory Oversight ....................................................................................... 12

Government Workforce Improvements ........................................................... 14

Financial Management .................................................................................... 15

Small Business Paperwork Relief ................................................................... 16

Public Health and Safety ................................................................................. 16

Election Reform ................................................................................................ 16

Energy Deregulation ........................................................................................ 16

Financial Disclosure for Presidential Nominees ............................................ 17

D.C. Legislation ................................................................................................ 17

Export Controls ................................................................................................. 18

Monitoring, Accountability and Competition in the Federal and Service

Contract Workforce ....................................................................................... 18

Entertainment Ratings .................................................................................... 18

II. Committee Jurisdiction ...................................................................................... 18

III. Bills and Resolutions Referred and Considered ............................................. 19

IV. Hearings ............................................................................................................. 19

V. Reports, Prints, Studies, and GAO Reports ...................................................... 40

VI. Official Communications ................................................................................... 47

VII. Legislative Actions ........................................................................................... 47

Measures Enacted Into Law ............................................................................ 47

Measures Favorably Reported by Committee and Passed by the Senate .... 65

Selected Measures Considered by the Committee ......................................... 67

VIII. Presidential Nominations .............................................................................. 68

IX. Activities of the Subcommittees ....................................................................... 72

INTERNATIONAL SECURITY, PROLIFERATION, AND FEDERAL SERVICES SUBCOMMITTEE

I. Hearings ................................................................................................................ 72

II. Legislation ........................................................................................................... 81

III. Report and GAO Reports .................................................................................. 85

OVERSIGHT OF GOVERNMENT MANAGEMENT, RESTRUCTURING, AND THE DISTRICT OF

COLUMBIA SUBCOMMITTEE

I. Hearings ................................................................................................................ 87

II. GAO Reports ....................................................................................................... 109

III. Legislation ......................................................................................................... 110

PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

I. Historical Background ......................................................................................... 116

II. Subcommittee Hearings During the 107th Congress ...................................... 121

III. Legislation Activities During the 107th Congress .......................................... 138

IV. Reports, Prints, and Studies ............................................................................. 141

V. Requested and Sponsored Reports From GAO ................................................. 152

108th Congress SENATE REPORT " ! 2d Session 108–421

ACTIVITIES OF THE COMMITTEE ON GOVERNMENTAL

AFFAIRS DURING THE 107TH CONGRESS

DECEMBER 7, 2004.—Ordered to be printed

Ms. COLLINS, from the Committee on Governmental Affairs,

submitted the following

REPORT

This report reviews the legislative and oversight activities of the

Committee on Governmental Affairs during the 107th Congress.

These activities parallel the broad scope of responsibilities vested

in the Committee by the Legislative Reorganization Act of 1946, as

amended, rule XXV(k) of the Standing Rules of the Senate, and additional authorizing resolutions. Senator Thompson was Chairman

of the Committee at the outset of the 107th Congress. In June

2001, majority control of the Senate changed hands and Senator

Lieberman served as Chairman for the remainder of the Congress.

I. HIGHLIGHTS OF ACTIVITIES

In the 107th Congress, the Senate Committee on Governmental

Affairs responded quickly and decisively to the crisis occasioned by

the devastating terrorist attacks of September 11, 2001. The Committee was uniquely qualified to shape the government’s organizational response to the terrorist threat, both because of its jurisdiction over government reorganization, and because of its experience

addressing a broad variety of Executive Branch management challenges. The result of the Committee’s efforts was landmark legislation signed into law that fundamentally reorganized the Federal

Government to meet the threat of terrorism and other threats to

our homeland security—the Federal Government’s most significant

reorganization in a half century. For the first time, a new Department has as its primary mission protecting the American homeland

from a variety of threats, the foremost of which is a terrorist attack. If fully and effectively implemented, the legislation will greatly enhance our government’s capacity to deal with threats to our

homeland.

In the months after the September 11 attacks, the Committee engaged in vigorous oversight of the state of the Nation’s ability to
2

prevent, protect against and respond to a terrorist attack. Hearings

probed the organization and vulnerabilities of many aspects of our

government’s operations and examined possible solutions. One

month after the September 11 attacks, Chairman Lieberman and

Senator Specter introduced a bill to create a new Department of

Homeland Security to reorganize the Federal Government’s dispersed and dysfunctional domestic defense programs into a consolidated Department of Homeland Security led by a Secretary accountable to the American people. The proposal (twice approved by

the Committee) evolved through the contributions of other Members of the Committee, other Senators, and, ultimately, the Administration. After a vigorous Senate debate on the legislation, in

which Chairman Lieberman and Ranking Minority Member

Thompson served as floor managers, the legislation to create a new

Department was enacted as the Homeland Security Act of 2002

(H.R. 5005, Public Law 107–296).

Chairman Lieberman also introduced, and the Committee approved, legislation to establish an independent commission to investigate the specific facts and circumstances of the terrorist attacks, and to make recommendations based on the commission’s

conclusions (S. 1867). That legislation also passed at the end of the

Congress, as part of the Intelligence Reauthorization Act of 2002

(Public Law 107–306).

The Committee also continued to pursue its wide reaching legislative and oversight mandates to promote the operation of an efficient and effective government, and to ensure the vigorous implementation of the Nation’s laws by the Executive Branch. The Committee developed, approved, and ultimately saw signed into law

historic legislation harnessing modern information technology to

make government more professional and proficient in serving the

people—The E-Government Act of 2001 (S. 803; Public Law 107–

347). This legislation to promote electronic government included a

variety of important new information management provisions that

promoted the government’s use of the Internet and new information technologies, and improved information dissemination, information security, and training for information technology workers.

Laws mandating more rigorous financial management by Federal

agencies were reported by the Committee and enacted into law (S.

2644 and H.R. 4685, Public Law 107–289; H.R. 4878, Public Law

107–300). Provisions improving management of the Federal workforce and providing for emergency procurement flexibility passed as

part of the Homeland Security Act of 2002 (Public Law 107–296;

Title XIII and Title VIII, Subtitle F).

The Committee balanced these landmark legislative efforts with

important investigative and oversight work scrutinizing the independence and effectiveness of those responsible for overseeing the

Nation’s financial and energy markets, which were scarred broadly

and deeply by the scandalous collapse of Enron Corporation in December 2001. In January 2002, Chairman Lieberman and Ranking

Minority Member Thompson launched a far-reaching investigation

into the role of these watchdogs in Enron’s implosion, with the goal

of determining where the system failed investors in order to prevent a similar debacle from recurring. At the same time, Senators

Levin and Collins, through the Permanent Subcommittee on Inves-
3

tigations, conducted a bipartisan investigation into issues related

to the collapse of Enron Corporation. The full Committee also conducted extensive investigations into the Administration’s rollback

of environmental regulations, and probed the energy markets, election reform, DC voting rights, and a variety of other issues.

HOMELAND SECURITY

In response to the devastating terrorist attacks of September 11,

2001, the Committee engaged in a lengthy and detailed oversight

process into how to strengthen homeland security. Informed by

that process, Chairman Lieberman introduced and moved through

the Committee and to the Senate floor legislation to create a new

Department of Homeland Security (S. 2452). The Homeland Security Act of 2002, ultimately enacted as H.R. 5005, consolidates myriad agencies with responsibilities for homeland security into a single Department. As a result of this legislation, for the first time a

new Department will have as its primary mission defending the

American homeland against a variety of threats, the foremost of

which is terrorist attacks.

Beginning on September 12, 2001, the Committee held a total of

19 hearings on homeland security. Four of the hearings focused

specifically on how government can best be organized to meet the

threat of terrorism on our homeland. The rest of the hearings addressed particular homeland security concerns, and also informed

the process by which Chairman Lieberman and others drafted and

revised comprehensive legislation to create a Department of Homeland Security. These hearings began on September 12, 2001, with

the first of three sessions on critical infrastructure protection, and

continued through June 26–28, 2002, with 2 days of hearings into

the role of the intelligence community in homeland security, and a

third hearing into protecting against weapons of mass destruction.

Other hearings addressed aviation security, bioterrorism, mail safety, port security, the role of State and local governments in homeland security, rail safety, and public health preparedness.

The hearings on specific proposals for government reorganizations began on September 21, 2001, when former Senators Hart

and Rudman described how their United States Commission on National Security/21st Century, in a report entitled ‘‘Road Map for

National Security: Imperative for Change,’’ had found that the government was woefully unprepared for terrorist attacks, and recommended the creation of a new Department to provide for a more

coordinated defense against attacks on United States territory.

Soon after, on October 11, 2001, Senators Lieberman and Specter

introduced legislation to create a new Department (S. 1534), modeled after the Hart-Rudman recommendations. At a hearing the

next day, the Committee examined this and other legislative proposals, including one put forward by Senator Graham (S. 1449) to

establish a National Office for Combating Terrorism. At a third

hearing, on April 11, 2002, the Committee examined draft legislation that synthesized and expanded upon the legislative approaches

taken in the Lieberman-Specter and Graham proposals. The integrated bill, S. 2452, was ordered reported out of the Committee on

May 22, 2002, and reported to the Senate on June 24, 2002 (S.

Rept. 107–175).
4

Before the Senate had a chance to consider the Committee’s

homeland security bill, the President—in June 2002—drafted proposed legislation to create a Department of Homeland Security. At

a hearing on June 20, 2002, the Committee compared the President’s proposal to the legislation the Committee had already reported out (S. 2452). The Administration’s bill included almost all

of S. 2452’s organizational elements regarding the Department but

offered additional provisions, such as allowing the Department’s

management to establish a new personnel system, and turning over

broad authority to the Executive Branch in a number of areas, including appropriations and reorganization of agencies and programs within the Department. The Administration’s bill also did

not include a statutory White House office on combating terrorism.

On July 24 and 25, 2002, the Committee held a business meeting

to consider an amended version of the Committee-approved homeland security legislation that contained many of the Administration’s suggestions on organizational structure. The business meeting also gave Committee members the opportunity to offer and vote

on a wide variety of amendments. The Committee considered 40

first-degree amendments and adopted 31 of them. The modified

version of S. 2452 was approved on a bipartisan vote of 12–5; it became the basis for Senate floor debate, which began in September

2002.

The legislation created a Department of Homeland Security led

by a Presidentially-appointed, Senate-confirmed Secretary and divided into six major divisions or directorates. Each directorate had

a core mission of the Department: (1) shoring up our borders and

transportation system; (2) preparing for and responding to emergencies; (3) protecting our infrastructure; (4) fusing intelligence; (5)

improving immigration security; and (6) coordinating and promoting science and technology research and development for homeland security. The bill proposed to combine more than two dozen

Federal agencies and offices with homeland security missions, such

as the Coast Guard, the Customs Service, the Federal Emergency

Management Agency, the Transportation Security Administration,

the border inspection functions of the Department of Agriculture’s

Animal and Plant Health Inspection Service, and several other critical agencies and offices, into a unified cabinet-level Department.

It also included long-sought reforms of the Immigration and Naturalization Service by creating a bureau of immigration services and

a bureau of enforcement and border affairs within an overall immigration directorate. Finally, it incorporated far-reaching bipartisan,

consensus civil service reforms drafted by Senators Voinovich and

Akaka that require the appointment of chief human capital officers,

reform the competitive hiring process, improve performance management within the Senior Executive Service, and afford other tools

for improving human capital management government-wide.

In September and October of 2002, Chairman Lieberman and

Ranking Minority Member Thompson led the debate on the floor of

the Senate regarding many aspects of the Committee’s legislation.

Among the most disputed issues were the Administration’s efforts

to establish a new personnel system for employees of the new Department, including a new system for labor relations, and to seek

new authorities in a number of other managerial areas. The Ad-
5

ministration believed that the Secretary of the new Department

needed flexibility to set the rules regarding Department personnel,

while others argued that the Administration provisions would alter

procedures and remedies in a way that could undermine merit system principles and were unrelated to national security needs.

Other debate centered around the inclusion in the legislation of a

White House Terrorism Office with a Senate-confirmed Director,

and an alternative amendment offered by Senator Byrd that would

have established the Department more gradually. Senators Gramm

and Miller offered their own version of the homeland security legislation as an amendment. Repeated attempts to achieve cloture on

the legislation were unsuccessful.

On November 13, 2002, the House passed new legislation (H.R.

5710) to establish a Department of Homeland Security that included some of the Administration supported provisions on personnel matters and other issues, although with some significant

modifications from the President’s original June 18, 2002 proposal.

The same day, the Senate tabled the Committee-approved version

of the homeland security legislation on a 50–47 vote. Several days

later, on November 19, 2002, the Senate essentially adopted the

text of H.R. 5710 and, after more than 2 months of floor debate on

the legislation, the Senate passed the legislation to create a Department of Homeland Security by a vote of 90–9. The House

agreed to the Senate amendment by unanimous consent on November 22, 2002. President Bush signed the Homeland Security Act of

2002 (H.R. 5005) into law on November 25, 2002 (Public Law 107–

296).

Although it contained alternative provisions on personnel management and organizational authority, the version of H.R. 5005

that was ultimately enacted is very similar in its organizational

components to the legislation that was approved by the Committee

and will focus leadership and resources on key areas for securing

our homeland by creating directorates within the Department for:

(1) information analysis and infrastructure protection; (2) border

and transportation security; (3) emergency preparedness and response; and (4) science and technology. Other key elements of the

Department include an Office for State and Local Government Coordination, a separate bureau for immigration and citizenship services, and officers devoted to civil rights and civil liberties and to

privacy. Under this configuration, immigration, customs and agricultural border inspectors for the first time will operate within a

single chain of command; diverse programs on cyber-security and

critical infrastructure protection will be coordinated within a single

directorate, which should also include an intelligence fusion center

to analyze all homeland threats; emergency response programs will

be coordinated with homeland security planning; and a new science

and technology capability will advance the research and development agenda of the host of agencies with homeland security missions. The Secretary of the new Department will have authority to

focus and lead the Nation’s homeland security efforts.

COMMISSION TO INVESTIGATE THE TERRORIST ATTACKS

Although the terrorist attacks of September 11, 2001 caused tremendous carnage and loss of life, as of late 2002 no official govern-
6

mental inquiry had been established to comprehensively examine

the tragedy. This despite the fact that such investigations are routinely conducted after plane crashes and terrorist attacks against

U.S. Government facilities.

On December 20, 2001, Senators Lieberman and McCain introduced legislation calling for the establishment of an independent

inquiry to investigate the terrorist attacks of September 11, 2001.

The legislation, S. 1867, was referred to the Committee. It required

the creation of a non-partisan, blue-ribbon commission to produce

a definitive report detailing how our government failed to detect

the plot and protect the homeland, and recommending how our Nation’s defenses against terrorism could be improved. The proposal

set a broad scope for the Commission, extending its jurisdiction to

all relevant areas, including the private sector and State and local

governments. It gave the Commission subpoena power, and required it to report its findings within 18 months.

On February 7, 2002, Chairman Lieberman held a Committee

hearing on the commission legislation. Four witnesses, who had

served on past commissions, testified in support of the bill. On

March 21, 2002, the Committee unanimously ordered the bill reported to the full Senate. On September 24, 2002, the Senate overwhelmingly voted to create a commission as an amendment to the

Homeland Security legislation; earlier, the House of Representatives had voted for a narrower inquiry as part of intelligence reauthorization legislation. In conference, the House and Senate Intelligence Committees agreed to establish a commission similar to the

version that had passed the Senate, as part of the Intelligence Reauthorization Act (Public Law 107–306). The legislation was enacted on November 27, 2002. The Commission, led by Chairman

Thomas Kean and Vice-Chair Lee Hamilton, began its work in January 2003.

E-GOVERNMENT AND INFORMATION RESOURCES MANAGEMENT

The 107th Congress passed important new legislation to promote

next generation government. The passage of Chairman Lieberman’s

‘‘E-Government Act of 2002’’ represented the culmination of 3 years

of work by the Committee. The legislation will improve the organization and delivery of information and services over the Internet,

and will establish a new information resources management framework to transform the way government operates.

Senator Lieberman introduced the E-Government Act of 2001 (S.

803) on May 1, 2001. The Committee held a hearing on the legislation on July 11, 2001. On March 21, 2002, the Committee unanimously ordered reported an amended version, and the bill passed

the Senate by unanimous consent on June 27, 2002. In September,

the House Government Reform Committee began to consider the

legislation; an agreement was reached between the House and Senate Committees in which several provisions were added, but the

original Senate provisions were left intact. The revised legislation

passed the House and Senate as H.R. 2458 on November 15, 2002;

the President signed it on December 17, 2002 (Public Law 107–

347).

The E-Government Act of 2002, among other things, creates an

Office of Electronic Government within OMB headed by a Presi-
7

dentially-appointed Administrator, to provide focused, top levelleadership on e-government and information technology issues. The

Administrator will allocate money from a substantial E-Government Fund to support interagency projects and other innovative

programs. The Act requires that information and services on the

Internet be organized according to citizens’ needs, rather than

agency jurisdiction, and accessible from a single point, or portal.

Several provisions require that government information be better

organized and made more easily searchable.

Sweeping new privacy protections require government officials to

consider privacy ramifications when developing information technology systems or beginning information collections. Federal agencies are required to post their website privacy policies in machine

readable formats, making it easier for individuals’ Internet browsers to access and screen them. The privacy provisions represent one

of the most significant expansions of individuals’ privacy protections since the passage of the 1974 Privacy Act.

The Act also addresses an impending shortage of skilled information technology professionals in the Federal workforce; requires

agencies to conduct their rule-making online; and directs courts to

post their judicial opinions and other information online.

The Act authorizes and makes permanent the information security provisions originally authored by Senators Thompson and

Lieberman in the 106th Congress (Public Law No. 106–398); the

provisions appearing in the final bill were expanded upon with the

addition of House legislation, the Federal Information Security

Management Act. The Act also improves Federal agency information security by authorizing funds for the development of a Federal

bridge certification authority for digital signature compatibility.

The Act includes a modified version of the ‘‘Digital Tech Corps

Act of 2002,’’ introduced in the Senate by Senator Voinovich (S.

1913) and in the House by Representative Tom Davis (H.R. 3925)

(first introduced as H.R. 2678, then as H.R. 3925). The provision

authorizes the exchange of information technology workers between

the private sector and Federal Government agencies. Other language added by the House included an expansion of share-in-savings contracting authority, and an authorization for State and local

governments to purchase information technology off the Federal

supply schedule.

THE COLLAPSE OF ENRON CORPORATION

On December 2, 2001, Enron Corp., then ranked as America’s

seventh largest company, filed for bankruptcy amid allegations of

wide-ranging fraud. The collapse of the company left thousands of

employees without jobs; it also erased billions of dollars of savings

for many of those employees and many more investors. Enron’s collapse, moreover, triggered a crisis of confidence in the U.S. financial markets, which was sustained by the parade of corporate

debacles that followed—WorldCom, Global Crossing, and Tyco,

among others.

In January 2002, the Committee began a broad investigation into

Enron’s failure. Specifically, the Committee examined a variety of

government and private entities with responsibility for overseeing

or monitoring aspects of Enron’s activities and protecting the public
8

against the type of disaster that resulted. The Chairman asked

Committee staff to determine whether these watchdogs could have

done anything to prevent, or at least detect earlier, the problems

that led to Enron’s collapse.

At the same time, the Committee’s Permanent Subcommittee on

Investigations undertook a parallel investigation into how Enron

was governed and the accounting ploys and other mechanisms it

had used to improve the appearance of its financial statements. In

particular, the Subcommittee looked at the role of Enron’s Board

of Directors in the company’s collapse and at the ways in which

certain large financial institutions assisted Enron in structuring

questionable, highly complex transactions designed to hide debt

and to increase the appearance of the company’s revenues.

Starting in February 2002, the Committee sought information

from a number of government agencies about their contacts with

and oversight of Enron, including the Securities and Exchange

Commission, the Federal Energy Regulatory Commission (FERC),

the Commodity Futures Trading Commission, the Department of

Labor, the Department of Energy and the Commerce Department.

The Committee also requested information regarding contacts with

Enron from the ten agencies whose leaders served as members of

the National Energy Policy Task Force headed by Vice President

Cheney. In addition, the Committee requested information from the

Archivist of the United States regarding contacts with Enron by

prior White House administrations, going back to January 1, 1992.

The Committee sought similar information from the current White

House; when it was not forthcoming, the Committee subpoenaed

the materials containing that information on May 22, 2002. On the

same date the subpoenas were issued, the White House provided

the Committee with, and for the first time made public, an extensive list of contacts between Enron officials and the staffs of the

Executive Office of the President and the Office of the Vice President. The Committee also subpoenaed documents from Enron, current and former directors of Enron, and Enron’s auditor Arthur Andersen regarding, among other things, Enron’s contacts with the

government.

As part of its investigation, the Committee held a series of hearings that looked at the actions of certain private and public watchdogs with respect to Enron, as well as at issues arising out of the

disastrous effect that Enron’s collapse had on its employees’ 401(k)

retirement plans.

In addition, Chairman Lieberman and Ranking Minority Member

Thompson released a number of staff reports on various aspects of

the Committee’s investigation. The first of those was a 101-page report prepared by Committee staff (Financial Oversight of Enron:

The SEC and Private-Sector Watchdogs, S. Prt. 107–75 (October 7,

2002)) that set forth a summary of findings and recommendations

relating to the Committee’s investigation of both public and private

sector financial oversight of Enron, particularly by the SEC, the

stock analysts, and the credit rating agencies. The report detailed

a story of systemic failure by the watchdogs relied upon by the

public to properly discharge their appointed roles. The report concluded that, despite the magnitude of Enron’s implosion and the

apparent pervasiveness of its fraudulent conduct, virtually no one
9

in the multilayered system of controls that the public relies upon

detected Enron’s malfeasance, or, if they did detect it, did anything

to alert investors or correct the problems. The report included specific recommendations to the SEC.

The SEC. Staff found that the SEC failed to review Enron’s filings consistently or thoroughly and that, if the Commission

had done so, it might have raised red flags about some of the

company’s most troubling transactions. The report also found

that the SEC staff had made administrative determinations

that allowed Enron to engage in certain accounting practices

and exempted the company from certain regulatory requirements. The SEC then failed to monitor whether Enron was

abiding by conditions the SEC set in making these allowances,

and failed to check to see if the circumstances that warranted

the exemption had changed. The report called upon the SEC

to improve its performance by being more diligent and consistent in reviewing corporate filings, devising effective criteria

to root out financial fraud, and leveraging technology to better

achieve this goal. The report also recommended the SEC make

further efforts to follow up on its own administrative orders,

grants and exemptions to ensure that they are being complied

with and that they remain warranted.

Stock Analysts. The report examined how stock analysts could

have continued to recommend Enron’s stock to investors until

the company’s end. The report concluded that Wall Street analysts are subject to too many pressures and conflicts to offer

the objective and hard-hitting analyses that the investing public demands of them. The most significant source of pressure

on analysts is the investment banking relationship between

the companies they cover and the firms for which they work;

Enron, in particular, was an active customer of investment

banking services, and in at least one case appears to have used

the threat of withdrawing that business to produce a better

rating from an analyst than it would otherwise have received.

The report recommended, among other reforms, that the SEC

tighten regulatory requirements for stock analysts, mandating

that they be entirely separated and insulated from the contaminating influence of the investment banking interests of the

firms for which they work.

Credit Rating Agencies. The report also looked into how credit

rating agencies could have kept Enron’s credit rating at investment grade—meaning a safe investment—until just 4 days before Enron declared bankruptcy. The report found that credit

rating agencies failed to leverage their power and access to

benefit investors. The rating agencies appeared to take at face

value whatever Enron told them, and did not probe for more

information when Enron’s silence concealed potentially damaging facts. The report recommended that the SEC set standards for the rating agencies’ work, monitor to ensure that they

operate in compliance with those standards, and then investigate when ratings significantly understate risks, as in the

case of Enron.
10

On November 12, 2002, Chairman Lieberman also released a

Majority staff memorandum addressing FERC’s failure to monitor

aggressively the deregulated energy markets that Enron allegedly

abused, in conjunction with the Committee’s hearing on that topic

(Asleep at the Switch: FERC’s Oversight of Enron Corporation,

Hearing Before the Senate Governmental Affairs Committee, (S.

Hrg. 107–854, November 12, 2002, Vol. I at p. 220).) The Majority

staff memorandum found that FERC repeatedly failed to ask critical questions about Enron’s business practices—questions that

might have exposed the fissures in Enron’s fiscal foundation sooner, limited some of the abuses that occurred, raised larger questions about Enron’s trading practices, and spared investors, employees, and consumers some of the pain they later endured. The

report found a shocking absence of regulatory vigilance on FERC’s

part and a failure to structure the agency to meet the demands of

the new, market-based system that the agency itself had championed. The investigation revealed that FERC did not fulfill its role

to protect consumers against abuses that can result if a marketbased system is not adequately regulated by those charged with

doing so. Specifically, the investigation looked at four areas in

which FERC had failed to adequately oversee Enron Corp.:

Wind Farm Transactions. The investigation uncovered a number of misdeeds in connection with certain wind farms owned

by Enron. Under Federal law, the wind farms were potentially

eligible for special rate treatment—that is, consumers could be

charged a higher price for the electricity they generated, but

only if the wind farms were not owned by a public utility or

any owner of a public utility—which Enron was. Enron filed

documents with FERC asserting, first, that it had sold 50 percent of its interests in the wind farms, and, later, that it qualified for an exemption from the law. Although both assertions

turned out to be untrue (among other things, the sales of

Enron’s interests turned out largely to be sham sales), FERC

never scrutinized Enron’s filings to see if the claims were supported. Instead FERC let Enron continue to charge the higher,

preferential rates. Only after the Committee’s investigation did

FERC open its own investigation into the wind farms—which

ultimately led to a settlement that will return over $50 million

to California ratepayers.

Enron Online. In May 2001—7 months before Enron declared

bankruptcy—FERC staff conducted an investigation into Enron

Online, Enron’s electronic trading platform. The inquiry included an examination of the competitive advantage Enron Online provided Enron traders and whether that advantage could

be used by Enron to gain an unfair advantage in the marketplace. But the Committee staff’s report found that while FERC

staff members asked some of the right questions, they failed to

follow up on some of the most serious concerns raised and ultimately settled for incomplete, unconvincing or incorrect answers. It was not until March 2003—well after Enron’s collapse—that FERC issued a staff report concluding that Enron

had in fact used Enron Online to manipulate the Western en-
11

ergy markets and make significant additional profits for the

company.

Affiliate Transactions. Enron engaged in a number of inappropriate transactions among its many affiliates. In perhaps the

most striking of these interaffiliate transactions, Enron, shortly before its collapse, borrowed $1 billion through two of its

pipeline subsidiaries. The FERC-regulated pipelines subsidiaries secured the loans with their assets and in turn made unsecured loans to the parent company. When Enron declared

bankruptcy, the pipeline companies (which did not themselves

file for bankruptcy) were left to pay off the debt, with significant potential consequences for their ratepayers. A subsequent

investigation, begun some months later by FERC, challenged

the right of the pipelines to pass these costs on to their ratepayers, but the Committee staff’s report showed that FERC’s

modest regulation in this area had failed to prevent these and

other questionable transactions from occurring in the first

place.

Abusive Trading Practices During the Western Energy Crisis.

Publicly released documents show that Enron traders engaged

in abusive trading practices designed to manipulate the market during the 2000–2001 Western energy crisis. The Committee’s investigation found that FERC, however, waited 2 years

after the first allegations of market abuse arose—and until

after Enron’s collapse—before beginning a formal inquiry into

the potentially abusive actions of individual companies. The

majority staff further found that this action came at the same

time that Enron, concerned about the future of energy deregulation, was conducting an extensive public relations and lobbying campaign to influence FERC’s actions in California and

the Western markets. It was not until March 2003 that FERC

finally released a staff report concluding that Enron and a

number of other energy companies had in fact manipulated the

Western markets.

In sum, the majority staff’s report found that FERC had displayed a shocking absence of regulatory vigilance in its oversight

of Enron. Based on its findings, the Majority staff recommended

that FERC take significant steps to restructure and reorient the

agency to more effectively oversee the new competitive markets it

has championed, including reorienting its mission toward more

proactive oversight and enforcement; reallocating its resources toward monitoring and policing the energy markets; making coordination with other agencies an institutional priority; and improving

its internal communication and coordination practices.

Ranking Minority Member Thompson released minority views on

FERC and its oversight of Enron Corp. (November 12, 2002) (S.

Hrg. 107–854, Vol. IV at p. 682). The minority views asserted that,

while FERC may have had a previous record of failure, a number

of positive developments had occurred at the agency since the current FERC Chairman had taken office 18 months earlier. These actions included proposed rules for regulating a deregulated, marketbased system, and the creation of an office of market oversight and
12

investigation—designed to prevent a recurrence of the problems

highlighted by the Enron debacle.

Finally, on January 3, 2003, Chairman Lieberman and Ranking

Minority Member Thompson released a staff report on the Committee’s staff investigation into concerns about telephone calls made by

certain banks to governmental officials, purportedly in an effort to

obtain government intervention with the Moody’s credit rating

agency, which was threatening to downgrade Enron’s credit rating

in early November 2001 (Enron’s Credit Rating: Enron’s Bankers’

Contacts with Moody’s and Government Officials, Report of the

Staff of the Senate Committee on Governmental Affairs, S. Prt.

107–83). The report concluded that no improper influence was

brought to bear by government officials on Moody’s, and that the

bankers who contacted government officials regarding Enron and

its credit rating did not act contrary to law.

GOVERNMENT ORGANIZATION

The Committee continued to review proposals relevant to the organization of the Federal Government. Two of the proposals considered in the 107th Congress related to the government’s structure

of offices and agencies dedicated to environmental protection.

The Committee debated and endorsed a significant measure to

strengthen the Federal Government’s efforts to combat global climate change. ‘‘Climate Change Strategy and Technology Innovation

Act of 2001’’ (S. 1008) was introduced June 8, 2001 by Senator

Byrd and co-sponsored by Senators Stevens, Rockefeller, Collins,

Reid, Lieberman, Nelson, Voinovich, DeWine, Durbin, and Kerry;

the bill was referred to the Committee. The legislation would have

created an Office on Climate Change within the White House and

required the office to prepare a detailed strategy to stabilize the

concentration of greenhouse gasses in the atmosphere. The legislation also sought to create a new office within the Department of

Energy, with new funding, to research and develop technologies to

combat climate change. As Senator Byrd stated, ‘‘the legislation

would establish a regime of responsibility and accountability in the

Federal sector for the development of a national climate change response strategy.’’ (Congressional Record, June 8, 2001, at S 6002)

At a July 18, 2001 hearing, the Committee heard testimony

about the growing threat of climate change and the need for a more

unified and active effort by the Federal Government to combat this

threat. The Committee subsequently approved the legislation by

voice vote on August 2, 2001. S. 1008 did not progress further in

the 107th Congress. A similar version of the legislation was approved by the Senate as part of omnibus energy legislation (S. 517);

however, that omnibus energy package did not become law.

The Committee also held a hearing on July 24, 2001, to consider

legislation, introduced by Senator Boxer, and cosponsored by Senator Collins and Senator Lieberman, among others, to elevate the

Environmental Protection Agency to a Cabinet-level Department

(S. 159).

REGULATORY OVERSIGHT

Investigation and Report on Regulatory Rollbacks: As part of the

Committee’s implementation of its mandate to oversee the effi-
13

ciency and economy of all branches and functions of government,

with particular references to the operations and management of

Federal regulatory policies and programs, Chairman Lieberman requested information and documents from the Environmental Protection Agency (EPA) and the Departments of the Interior (DOI)

and Agriculture (USDA) regarding their consideration of the possibility of delaying, suspending, rescinding or otherwise modifying

three finalized regulations. Following receipt of this information,

the Majority staff prepared a report for the Chairman, entitled ‘‘Rewriting the Rules,’’ (S. Prt. 107–76, October 24, 2002).

The report reviewed the effect of a memo issued by White House

Chief of Staff Andrew Card, directing Federal agencies to hold in

abeyance recently issued regulations until they could be reviewed

by Bush administration political appointees. In particular, it examined the so-called Card memo’s impact on three important environmental rules finalized before the Bush Administration came into office: (1) the USDA’s rule conserving roadless areas in national forests; (2) the DOI’s rule regulating hard rock mining on public

lands; and (3) the EPA’s rule capping the permissible level of arsenic in drinking water.

The report was critical of the failure of the agencies to comply

with the notice and comment requirements of the Administrative

Procedure Act in delaying the rules. Based on a review of agency

documents, the staff further concluded that decisions to revisit the

three rules at issue appeared based on pre-determined decisions regarding the regulations rather than a documented, close analysis

of the rules or the agency’s basis for issuing them. With regard to

the rule protecting roadless areas in national forests, the staff report concluded that USDA used a third-party lawsuit to undermine

the rule without taking public responsibility for its actions. The

staff report concluded that DOI’s decision to suspend parts of the

hard rock mining rule will allow mining projects that pose unwarranted environmental and health threats to continue. The staff report also concluded that EPA conducted a time-consuming and unnecessary review of a decades-in-the-making rule limiting arsenic

in drinking water. Although the EPA Administrator had stated

concerns about ‘‘sound-bite rulemaking,’’ EPA documents generated

prior to her announcement that the rule would be changed reflected no visible comprehensive analysis, work product, or narrative identifying the nature of the deficiencies in the science supporting the rule.

The report also noted that the agencies planned further changes

in each of these rules. Accordingly, the report raised the concern

that any further actions undertaken by the agencies must be in full

compliance with the spirit and the letter of the law and must not

further erode environmental protections or rulemaking procedures.

Hearings on Environmental Oversight and Legislation: The Committee held 2 days of hearings, on March 7 and 13 of 2002, to examine the Administration’s implementation of environmental laws.

Witnesses included EPA Administrator Christine Todd Whitman,

Connecticut Attorney General Richard Blumenthal, former Director

of the Office of Regulatory Enforcement at EPA Eric V. Schaeffer,

and academics and policy advocates involved with environmental

issues. Several of the witnesses questioned the Administration’s
14

commitment to vigorous environmental enforcement, or spoke from

personal experience of the harm they had witnessed from specific

acts of environmental degradation. EPA’s Administrator Whitman

testified on behalf of the Administration. She called for greater bipartisan cooperation on environmental policy, and described the

Administration’s Clear Skies proposal, which she testified was

aimed at achieving reductions in several air pollutants emitted by

power plants.

GOVERNMENT WORKFORCE IMPROVEMENTS

The Committee reported out, and Congress enacted, a significant

number of laws and provisions related to improving management

of the government workforce, maintaining high ethical standards

and merit system principles, and enhancing benefits for government workers.

Strengthening Management of Human Capital: Legislation intended to improve management of the Federal workforce (S. 2651)

was introduced by Senator Voinovich and referred to the International Security, Proliferation and Federal Services Subcommittee, which held 2 days of hearings. After Senators Voinovich

and Akaka negotiated an agreed-upon text, several of the provisions were then endorsed by the Committee for incorporation into

the Homeland Security Act of 2002, which Congress enacted (Public Law 107–296; §§ 1301–1332). These measures include a requirement that each agency have a Chief Human Capital Officer, a loosening of strictures on the hiring of employees, enhanced authority

to grant early retirement or retirement incentive pay, the inclusion

of human capital strategic planning in agencies’ performance plans,

and reforms relating to the Senior Executive Service.

Securing Merit System Principles: The Committee reported out a

bill to reauthorize the Merit Systems Protection Board (MSPB) and

the Office of Special Counsel (OSC) (S. 3070). The bill, which was

introduced by Senator Akaka, was subsequently incorporated into

other legislation and enacted into law (enacted as H.R. 3340; Public

Law 107–304). The MSPB and OSC administer programs and procedures to safeguard the Federal Government’s merit-based system

of employment, and to protect Federal employees against improper

personnel practices, particularly regarding employees who step forward to disclose government waste, fraud and abuse.

Maintaining High Ethical Standards: The Committee reported

out, and Congress enacted, a bill reauthorizing the Office of Government Ethics, an agency established by the Ethics in Government Act of 1978 to help foster high ethical standards for employees in the Executive Branch (introduced as S. 1202; Public Law

107–119). The bill was introduced by Chairman Lieberman and cosponsored by Ranking Minority Member Thompson.

Deferred Mandatory Retirement for Firefighters: The Committee

reported out, and Congress enacted, a bill raising the mandatory

separation age for Federal fire fighters from 55 to 57, which is the

age that now applies for Federal law enforcement officers. This

measure will enable willing and able Federal fire fighters to continue to serve, and will remove the existing inequity that requires

firefighters to retire younger than law enforcement officers (intro-
15

duced in the Senate as S. 271, enacted as H.R. 93; Public Law 107–

27).

Enhanced Benefits for Federal Government Workers: A number of

bills reported by the Committee and ultimately enacted into law

enhanced employment benefits available to Federal workers. These

include legislation allowing military personnel and civilian employees to make use of promotional benefits, such as frequent flyer

miles, that they receive as a result of official government travel (introduced as S. 1498, enacted as part of Public Law 107–107); authorizing Federal employees who participate in the Thrift Savings

Plan and who are over 50 years old to take advantage of ‘‘catchup’’ contributions, thus allowing the Federal Government’s tax-deferred plan to do what private sector plans may already choose to

do (introduced as S. 1822, enacted as part of H.R. 3340; Public Law

107–304); and enhancing the Federal Long-Term Care Insurance

program to—(1) exempt premiums from State and local taxes, and

(2) expand coverage to include retired Federal employees who are

not yet receiving an annuity but are entitled to a deferred annuity

(H.R. 2559; Public Law 107–104).

Law Enforcement Powers for Inspector General Agents: The Committee reported out legislation, introduced by Ranking Minority

Member Thompson and co-sponsored by Chairman Lieberman, to

provide law enforcement powers to Inspector General Agents (S.

2530). The legislation was enacted as part of the Homeland Security Act of 2002 (Public Law 107–296; § 812).

Notification and Federal Employee Antidiscrimination and Retaliation Act: The Committee reported out legislation that holds Federal agencies accountable for violations of discrimination and whistleblower protection laws. The legislation, originally introduced in

the House by Representative Sensenbrenner and in the Senate by

Senator Warner, was enacted into law (H.R. 169; Public Law 107–

174).

FINANCIAL MANAGEMENT

The Committee passed important legislation strengthening and

expanding financial management reforms for Federal agencies.

Expanded Federal Financial Audits: The Committee reported

out, and Congress enacted, legislation to expand the category of

Federal agencies that are required to prepare audited financial

statements each year. Prior to the introduction of this bill, only the

24 major departments and agencies were required by law to do so.

In the years since the 1994 Government Management Reform Act

mandated the preparation of audited financial statements by the

24 agencies, the financial statements of the affected agencies have

shown marked improvements. The legislation, introduced by Senator Fitzgerald as S. 2644 and passed as H.R. 4685, requires all

Federal agencies to prepare annual financial statements, except

that the OMB Director is authorized to exempt certain very small

agencies (Public Law 107–289).

Reducing Improper Payments: The Committee reported, and Congress enacted, legislation originating in the House of Representatives intended to reduce the billions of dollars in improper payments made by Federal agencies each year. The General Accounting Office (GAO) has reported that improper payments of between
16

$19 billion and $20.7 billion were made in fiscal years 1999, 2000,

and 2001. In October 2001, the GAO issued an Executive Guide

prepared at Chairman Lieberman’s request, that provided best

practices recommendations for agencies to reduce improper payments. Building on these recommendations, H.R. 4878 requires

Federal agencies to identify programs that are vulnerable to improper payments and to estimate annually the amount of underpayments and overpayments made by these programs. Agencies

must also report on the steps they are taking to reduce improper

payments for each program with estimated improper payments

that exceed $10 million (Public Law 107–300).

SMALL BUSINESS PAPERWORK RELIEF

The Committee reported out legislation, introduced by Senator

Voinovich, designed to aid small businesses in complying with Federal information collection requirements and to reduce the paperwork burdens on such companies (S. 1271). The legislation was enacted as H.R. 327 (Public Law 107–198).

PUBLIC HEALTH AND SAFETY

The Committee held several hearings examining the Nation’s

public health and safety, particularly as it affects our youth. The

hearings focused on the ill effects of drug and alcohol abuse among

children and teens, and on child vaccine shortages.

Ecstasy: The Law Enforcement Response: On July 30, 2001 the

Committee held a hearing on the government’s response to the ecstasy epidemic. The hearing examined how law enforcement at the

local, State, and Federal levels was reacting to the rise in use of

this club drug and whether the programs and initiatives designed

to control the epidemic were having the desired effect.

Binge Drinking on College Campuses: On May 15, 2002, a Committee hearing examined evidence of an epidemic of binge drinking

on college campuses, including a comprehensive new study finding

that the culture of drinking on college campuses is more damaging

and deadly than previously recognized.

Child Vaccine Shortages: On June 12, 2002, the Committee reviewed the shortages of childhood vaccines for significant diseases.

Witnesses discussed the consequences of failing to address the

problem, and potential solutions.

ELECTION REFORM

In May 2001, the Committee held 2 days of hearings on Federal

election practices. The hearings explored the flaws in the Nation’s

voting system, including those that marred the 2000 elections, and

examined possible solutions. Recent elections have demonstrated

that States continue to have difficulties ensuring a fair and orderly

election process for a variety of reasons; these included inaccurate

voter registration rolls, faulty voting equipment, and poorly trained

poll workers.

ENERGY DEREGULATION

In June 2001, the Committee held a series of three hearings to

examine the potential adverse consequences of energy deregulation,

especially in the absence of adequate governmental oversight. The
17

Committee began with an examination of California’s troubled

transition to a market-based utility system, and probed from an

economic perspective the proper role of Federal regulators when

the attempts to develop an open market fail. The Committee then

focused more explicitly on the actions and inactions of FERC in responding to power outages and massive price increases experienced

by California and other Western States. The final hearing examined the impact of deregulation of the electricity industry on the reliability of the electric grid.

FINANCIAL DISCLOSURE FOR PRESIDENTIAL NOMINEES

Presidential nominees frequently complain of the lengthy and

unwieldy financial disclosure process they must undergo in order

to accept Executive Branch appointments. Many see the problem as

deterring qualified individuals from entering government. Following 2 days of hearings, Ranking Minority Member Thompson

and Chairman Lieberman introduced legislation to streamline the

financial disclosure process for nominees, while strengthening the

public’s right to know by making it easier to track waivers of conflicts of interest. The legislation, S. 1811, was reported out of Committee on May 16, 2002. The Committee also produced a multi-volume compilation of past commission reports on the financial disclosure process.

D.C. LEGISLATION

The Committee engaged in a number of oversight and legislative

activities regarding the organization of the government of the District of Columbia, and the status and rights of its residents. Some

of the key issues and legislation are described here.

Voting Representation: In May 2002, the Committee held a hearing into whether citizens of Washington D.C. should be granted full

voting representation in Congress. Proponents of voting rights testified that D.C. residents share the same burdens of citizenship as

residents of other States, and are therefore entitled to the same

voting representation. Chairman Lieberman subsequently introduced legislation to provide full voting representation in Congress

to the residents of the District of Columbia. The bill, S. 3054, was

reported out of Committee on October 9, 2002.

D.C. College Access Improvement: The Committee considered and

reported out House legislation to expand the District of Columbia

Tuition Assistance Grant program. The legislation extended the

educational grants to allow DC residents to attend Historically

Black Colleges, and it widened the pool of residents eligible for the

grants. The bill, H.R. 1499, was enacted on April 4, 2002 (Public

Law 107–157).

D.C. Family Court Reorganization: The Committee considered

and reported out legislation to restructure the District of Columbia

Family Court. The reorganization will promote the recruitment of

experienced family law judges, extend their terms, and ensure consistency in the assignment of judges. The legislation was introduced in the House by Representative Tom DeLay (R–Tex.) (H.R.

2657) and in the Senate by Senator DeWine (S. 1382); both bills

were reported out, with an amendment in the nature of a sub-
18

stitute, by the Committee, and the House bill was enacted on January 8, 2002 (Public Law 107–114).

EXPORT CONTROLS

On March 15, 2001, the Committee held a hearing to examine

changes in export control policy regarding high performance computers. The hearing, based on a report released by the GAO, focused on computers that could potentially be used for military purposes by countries responsible for proliferation of weapons of mass

destruction.

MONITORING, ACCOUNTABILITY AND COMPETITION IN THE FEDERAL

AND SERVICE CONTRACT WORKFORCE

On March 6, 2002, the Committee held a hearing to review the

Administration’s initiatives to increase the outsourcing of Federal

services to the private sector, and how outsourcing affects the quality and cost of work performed for and by the Federal Government.

The hearing focused on the Administration’s efforts to impose numerical goals to increase competitions and conversions of Federal

jobs, and on proposed legislation to allow Federal workers to compete more frequently for jobs being outsourced.

ENTERTAINMENT RATINGS

On July 25, 2001, the Committee examined criticisms that the

entertainment industry’s systems for rating media products are not

sufficiently reliable, visible, or understandable, and generally provide parents with insufficient information about content to allow

them to make a knowledgeable choice for their children. The Committee considered the merits of switching to a uniform rating system, monitored by an independent oversight committee and

grounded in research.

II. COMMITTEE JURISDICTION

Rule XXV(1)(k) of the Standing Rules of the Senate requires reference to this Committee of all proposed legislation, and other matters, dealing with (1) archives of the United States; (2) budget and

accounting measures, other than appropriations, except as provided

in the Congressional Act of 1974; (3) census and collection of statistics, including social and economic statistics; (4) congressional organization, except for matters which amend the rules or orders of the

Senate; (5) Federal civil service; (6) government information; (7)

intergovernmental relations; (8) municipal affairs of the District of

Columbia; (9) organization and management of the U.S. nuclear export policy; (10) organization and reorganization of the Executive

Branch of the government; (11) Postal Service; and (12) status of

officers and employees of the United States including their classification, compensation, and benefits.

The Committee is further authorized and directed to (1) receive

and examine reports of the Comptroller General of the United

States and submit to the Senate such recommendations as the

Committee deems advisable; (2) study the efficiency, economy, and

effectiveness of all agencies and departments of the government; (3)

evaluate the effects of laws enacted to reorganize the Legislative

and Executive Branches of government; and (4) study the intergov-
19

ernmental relations between the United States and international

organizations of which the United States is a member.

In addition, the Committee has primary oversight and legislative

jurisdiction over the GAO, the Office of Personnel Management,

and the General Service Administration, and processes all legislation relating to the disposal and the negotiated sales of Federal

surplus property.

With respect to investigations, the Committee is authorized to

study or investigate: (1) the efficiency and economy of operations

of all branches of the government; (2) the extent to which criminal

or other improper practices or activities are, or have been, engaged

in the field of labor-management relations; (3) organized criminal

activity related to interstate or international commerce; (4) all

other aspects of crime and lawlessness within the United States

which have an impact upon or affect the national health, welfare,

and safety; (5) the efficiency and economy of operations of all

branches of the government with particular reference to certain national security concerns; (6) the efficiency, economy, and effectiveness of all agencies and departments involved in the control and

management of energy shortages; (7) the efficiency and economy of

all branches and functions of government with particular references to the operations and management of Federal regulatory

policies and programs (S. Res. 54, Authorizing Expenditures by the

Committees of the Senate for the Periods March 1, 2003, Through

September 30, 2001, October 1, 2001, Through September 30, 2002,

and October 1, 2002, Through February 28, 2003 § 11, 147 Cong.

Rec. S 2089 (daily ed. Mar. 8, 2001)).

III. BILLS AND RESOLUTIONS REFERRED AND CONSIDERED

During the 107th Congress, 140 Senate bills and 61 House bills

were referred to the Committee for consideration. Also, 10 Senate

Resolutions, 8 Senate Concurrent Resolutions and 2 House Concurrent Resolutions were referred to the Committee. Of the legislation

received and considered, 87 bills and resolutions were reported and

80 were enacted into law. However, not all of the measures that

became law did so in the form in which they were considered by

the Committee—some were enacted as part of other bills, sometimes in revised form. Moreover, not all of the 80 measures that

were enacted were actually reported by the Committee.

IV. HEARINGS

During the 107th Congress, the Committee and its three Subcommittees held a total of 114 hearings on legislation, a wide variety of oversight issues, and nominations. The Committee also held

13 business meetings. At the full Committee level, a number of important topics were examined, including:

HOMELAND SECURITY

In the wake of the September 11, 2001 terrorist attacks, the

Committee held 19 hearings on homeland security, in addition to

hearings held by Subcommittees. Four of these hearings, held on

September 21, 2001, October 12, 2001, April 11, 2002, and June 20,

2002, focused specifically on how government can best be organized
20

to meet the threat of terrorism to our homeland. The other fifteen

hearings addressed particular homeland security concerns, and also

included consideration of organizational issues as they related to

those topics. The areas covered by those hearings were: Critical infrastructure protection (September 12, 2001, October 4, 2001, and

May 8, 2002), aviation safety (September 25, 2001 and November

14, 2001), bioterrorism (October 17, 2001), mail safety (October 30

and 31, 2001), port security (December 6, 2001), the role of State

and local government in homeland security (December 11, 2001),

rail safety (December 13, 2001), public health preparedness (April

18, 2002), the role of the intelligence community in homeland security (June 26 and 27, 2002), and protecting against weapons of

mass destruction (June 28, 2002).

HEARINGS ON REORGANIZING THE GOVERNMENT’S RESPONSE TO

TERRORISM

Prior to the September 11 attacks, two reports were issued that

advocated the need for more coordination in the Federal Government on preparedness and response to terrorism. The findings and

recommendations of these reports were examined in the Committee’s September 21, 2001 hearing, entitled ‘‘Responding to Homeland Threats: Is Our Government Organized for the Challenge?’’

Witnesses included former Senators Gary Hart and Warren B.

Rudman, co-chairs of the U.S. Commission on National Security/

21st Century (commonly referred to as the Hart-Rudman Commission); then-Governor James S. Gilmore, III, of Virginia, chairman

of the Advisory Panel to Assess the Capabilities for Domestic Response to Terrorism Involving Weapons of Mass Destruction (commonly referred to as the Gilmore Commission); L. Paul Bremer, III,

former Ambassador-at-Large for Counter-Terrorism, U.S. Department of State, and a member of the Gilmore Commission; and

David M. Walker, Comptroller General, U.S. General Accounting

Office. Although these witnesses had differing views on whether a

new Department or a White House Office was the better course for

addressing the country’s homeland security needs, they agreed that

better coordination of existing agencies and authorities was necessary.

On October 12, 2001, the Committee held a second hearing on

‘‘Legislative Options to Strengthen Homeland Defense.’’ This hearing focused on two bills: The Lieberman-Specter S. 1534, which was

introduced to create a Department of National Homeland Security,

and Senator Graham’s S. 1449, which sought to establish a National Office for Combating Terrorism in the White House. Witnesses included a bipartisan group of Members who were major

sponsors of these and other bills to improve the way government

is organized for homeland defense: Senator Bob Graham (D–FL),

Senator Bob Smith (R–NH), Senator Arlen Specter (R–PA), Representative Wayne T. Gilchrest (R–MD), Representative Jane Harman (D–CA), and Representative William ‘‘Mac’’ Thornberry (R–

TX). These witnesses all agreed that significant change was necessary to overcome existing turf battles between agencies and to

improve cooperation and coordination across government in the

fight against terrorism. They also generally agreed that Tom Ridge,
21

the newly appointed director of the Office of Homeland Security,

did not have sufficient authority to get this job done.

The non-member witnesses at the October 12, 2001 hearing

were: Former U.S. Representative Lee H. Hamilton, who was a

member of the Hart-Rudman Commission; General (Ret.) Barry R.

McCaffrey, formerly the head of the Office of National Drug Control Policy; General Charles G. Boyd, Director of the Washington

Office of the Council on Foreign Relations, who was the Executive

Director of the Hart-Rudman Commission; Stephen E. Flynn, Senior Fellow with the Council on Foreign Relations; and Thomas H.

Stanton of the National Academy of Public Administration. These

witnesses noted some of the shortcomings in Governor Ridge’s appointment as head of the Office of Homeland Security, and highlighted the country’s problems in managing its borders as an example of the hurdles the country must overcome to more effectively

guard against future attacks.

On April 11, 2002 the Committee held a hearing on draft legislation to create a National Department of Homeland Security and a

White House Office on Combating Terrorism. The hearing focused

on the need to provide new leadership on a range of homeland

threats, including terrorism, by consolidating into a single Department the key Federal agencies and programs responsible for border

security, critical infrastructure protection and emergency response,

as well as on the need for a White House office to play a government-wide coordinating role on terrorism, focusing in particular on

matters outside the purview of the new Homeland Security Secretary such as military and intelligence policy. The legislation,

which was later introduced by Chairman Lieberman with some

modifications as S. 2452, also called for a comprehensive national

strategy to combat terrorism, to be developed collaboratively by the

new Secretary of Homeland Security and the Director of the White

House Office for Combating Terrorism.

At the April 11, 2002, hearing the Committee heard from Representative Ellen Tauscher (D–CA); Senator Bob Graham (D–FL);

Senator Arlen Specter (R–PA); Senator Judd Gregg (R–NH); Representative William ‘‘Mac’’ Thornberry (R–TX); and Representative

Jane Harman (D–CA). Other witnesses included former Senator

Warren B. Rudman; David M. Walker, the Comptroller General of

the U.S. General Accounting Office; Mitchell E. Daniels, Jr., the Director of the Office of Management and Budget; Phil Anderson,

Senior Fellow and Director, Homeland Security Initiative at the

Center for Strategic and International Studies (CSIS); I.M. ‘‘Mac’’

Destler, Professor at the School of Public Affairs, University of

Maryland; Stephen M. Gross, Chairman of the Border Trade Alliance; Elaine Kamarck, Lecturer in Public Policy at Harvard’s Kennedy School of Government; and Paul C. Light, Vice President and

Director of Governmental Studies Program at The Brookings Institute.

In June 2002, the President dropped his opposition to creating a

new Department and released his own proposal to create a Department of Homeland Security. On June 20, 2002, the Committee held

a hearing to examine differences between the President’s proposal

and S. 2452 as reported out by the Committee in May, 2002. Witnesses included Tom Ridge, Assistant to the President for Home-
22

land Security, and former Senators Gary Hart and Warren B. Rudman. The key issues considered included: Information sharing and

intelligence analysis; specific agencies included in or left out of the

President’s proposal; the impact of a new Department on agency

non-homeland security functions; the impact on employees moved

to the new Department; and the transition and cost of a new Department. Three subsequent hearings also considered the President’s plan, in the context of specific issues: Two hearings, on June

26 and 27, 2002, examined the impact on the intelligence community, and a hearing on June 28, 2002 focused on protecting against

weapons of mass destruction.

HEARINGS ON HOMELAND SECURITY VULNERABILITIES

CRITICAL INFRASTRUCTURE

The Committee held three hearings on critical infrastructure

issues. The first, on September 12, 2001, had been scheduled before

the terrorist attacks and focused on cyber-security. Joel C.

Willemssen, Managing Director, Information Technology Issues,

GAO, testified that Federal computer systems are plagued with

weaknesses that continue to put critical operations and assets at

risk. Willemssen recommended that the Administration take greater steps to develop the strong analytical and information-sharing

capabilities required by President Clinton’s Presidential Decision

Directive (PDD) 63, to protect the Nation’s critical infrastructures.

Roberta L. Gross, Inspector General for NASA, described the collective findings of 21 departmental and agency Inspectors General,

which discovered a number of problems in agencies’ implementation of PDD 63.

On October 4, 2001, the Committee received testimony regarding

the government’s implementation of PDD 63, which established the

country’s framework for protecting its critical infrastructure. The

hearing, entitled ‘‘Critical Infrastructure: Who’s in Charge?’’ examined the various government offices established to oversee and coordinate critical infrastructure protection with the private sector,

and the government’s efforts to protect its own critical infrastructure. While initiatives had been underway before September 11,

2001, to shore up infrastructure protections, testimony revealed

that progress had been limited, partly because the responsible offices lacked budget authority and had difficulty assuring accountability.

Witnesses included: Ronald L. Dick, Director of the FBI’s National Infrastructure Protection Center (NIPC); Sallie McDonald,

Director of the Federal Computer Incident Response Center, General Services Administration; John S. Tritak, Director of the Critical Infrastructure Assurance Office (CIAO), Bureau of Export Administration, Department of Commerce; Frank J. Cilluffo, Deputy

Director of the Global Organized Crime Project, Center for Strategic and International Studies; Jamie S. Gorelick, Vice Chair,

Fannie Mae; Joseph P. Nacchio, Chairman and CEO, Qwest Communications International, Inc.; and Kenneth C. Watson, President,

Partnership for Critical Infrastructure Protection Security.

In a May 8, 2002 hearing, entitled ‘‘Securing our Infrastructure:

Private/Public Information Sharing,’’ the Committee returned to
23

the issue of critical infrastructure protection. An important part of

our national strategy to protect critical infrastructure has been to

foster the sharing of relevant information between the private sector and the Federal Government and among entities in the private

sector. Yet some in the private sector reported they were reluctant

to share the necessary information because they fear adverse consequences to themselves, such as the release of sensitive information under the Freedom of Information Act (FOIA). On the other

hand, representatives of environmental and open-government

groups stressed the importance of maintaining appropriate public

access to information submitted to the government, arguing that

excessive secrecy actually removes powerful incentives for remedying health, safety, and security risks. This hearing examined

whether information about critical infrastructure was being effectively shared and used, and whether a FOIA exemption or other

legislation intended to foster such sharing and use would be necessary, effective and appropriate. The hearing also examined S.

1456, the Critical Infrastructure Information Security Act of 2001,

which had been introduced by Senators Bennett and Kyl on September 24, 2001.

The witnesses were: Ronald L. Dick, Director of NIPC; John G.

Malcolm, Deputy Assistant Attorney General, Criminal Division,

U.S. Department of Justice; John S. Tritak, Director of CIAO;

Michehl R. Gent, CEO, North American Electric Reliability Council; Harris N. Miller, President, Information Technology Association

of America; Alan Paller, Director of Research, The SANS Institute;

Ty R. Sagalow, Board Member, Financial Services ISAC and Executive Vice President, eBusiness Risk Solutions, American International Group; David L. Sobel, General Counsel, Electronic Privacy Information Center; and Rena I. Steinzor, Academic Fellow,

Natural Resources Defense Council.

AVIATION SECURITY

On September 25, 2001, at a hearing entitled ‘‘Weak Links: How

Should the Federal Government Manage Airline Passenger and

Baggage Screening?’’ witnesses testified to the massive turnover

rates and poor performance among airport screeners due to inadequate training, low wages and lack of benefits. The hearing revealed significant weaknesses in screening checked bags for explosives, restricting access to sensitive areas of the airport, and in

screening passengers and their carry-on items for possible threats.

Those testifying included Monte R. Belger, Acting Deputy Administrator, Federal Aviation Administration, U.S. Department of Transportation; Dr. Gerald L. Dillingham, Associate Director for Transportation Issues, GAO; Kenneth M. Mead, Inspector General, U.S.

Department of Transportation; Robert W. Baker, Vice Chairman,

American Airlines; Rear Admiral Paul E. Busick, USCG Ret.,

President and Executive Director, North Carolina Global

TransPark Authority; Leonard L. Griggs, Jr., Airport Director,

Lambert-St. Louis International Airport; Aubrey ‘‘Bill’’ Harvey, Jr.,

Trainer of Screeners, Chicago O’Hare International Airport; and

Michael B. LaPier, Executive Director, Central Illinois Regional

Airport.
24

The Committee held a second hearing on aviation safety on November 14, 2001, to determine what, if any, improvements had

been made to make air travel safer after the September 11 terrorist

attacks. Although witnesses described some improvements, they

also noted persistent problems. For example, the Department of

Transportation Inspector General testified that only 10 percent of

checked baggage was being scanned for explosives, and explosives

detection machines were being underutilized. Witnesses at this

hearing included Jane F. Garvey, Administrator, Federal Aviation

Administration; Kenneth M. Mead, Inspector General, Department

of Transportation; Bruce E. Carter, Director of Aviation, Quad City

International Airport; Jacqueline Mathes, Flight Attendant, Association of Flight Attendants, AFL–CIO; Marianne McInerney, Executive Director, National Business Travel Association (NBTA); and

Captain Duane E. Woerth, President, Air Line Pilots Association,

International.

BIOTERRORISM

At a hearing on October 17, 2001, the Committee examined the

plans and current capabilities of Federal, State and local elements

of the health system to respond to bioterrorist attacks and natural

disease outbreaks. Held in the midst of the anthrax attacks on the

Senate and elsewhere, the hearing disclosed that some efforts had

been made in recent years to improve the capabilities of government and health care providers to respond to these events, such as

developing a national stockpile of pharmaceutical supplies and improving Federal laboratory capability. However, the hearing also

revealed that far more needed to be done throughout the public

health system, especially to improve State and local public health

laboratory and response capability, health surveillance programs,

and training and preparedness of hospitals and primary care providers.

Testimony was provided by Tommy G. Thompson, Secretary, U.S.

Department of Health and Human Services; Michael D. Brown,

then Acting Deputy Director, FEMA; Deborah J. Daniels, Assistant

Attorney General, Office of Justice Programs, U.S. Department of

Justice; Henry L. Hinton, Jr., Managing Director, Defense Capabilities and Management, GAO; Anna Johnson-Winegar, Deputy

Assistant to the Secretary of Defense for Chemical and Biological

Defense, U.S. Department of Defense; Maureen E. Dempsey, Director, Missouri Department of Health and Senior Services; Margaret

A. Hamburg, Vice President for Biological Programs, Nuclear

Threat Initiative; Gary W. McConnell, Director, Georgia Emergency Management Agency; and Amy E. Smithson, Director, Chemical and Biological Weapons Non-Proliferation Project, The Henry

L. Stimson Center.

MAIL SAFETY

Following the anthrax attacks through the mail in October 2001,

the Committee held a 2-day hearing on ‘‘Terrorism Through the

Mail: Protecting Postal Workers and the Public.’’ The first day, October 30, 2001, examined the adequacy of the steps the U.S. Postal

Service took to protect the safety of its workers and the public and
25

its plans to keep its workers and the mail safe in the future. Based

on decades-old studies, public health professionals did not anticipate that postal employees would be at risk for inhalation anthrax

from sealed envelopes, yet two postal workers died and others became ill. The witnesses at this hearing were: John E. Potter, Postmaster General/CEO, U.S. Postal Service, accompanied by Thomas

Day, Vice President of Engineering, U.S. Postal Service; Patrick

Donahoe, Chief Operating Officer and Executive Vice President,

U.S. Postal Service; and Ken Weaver, Chief Postal Inspector, U.S.

Postal Inspection Service; Gus Baffa, President, National Rural

Letter Carriers Association (NRLCA); William Burrus, PresidentElect, American Postal Workers Union AFL–CIO, accompanied by

Denise Manley, Distribution Clerk, Government Mail Section,

Brentwood Mail Processing Facility; William H. Quinn, National

President, National Postal Mail Handlers Union; Vincent R.

Sombrotto, President, National Association of Letter Carriers

(NALC), accompanied by Tony DiStephano, Jr., President, NALC

Branch 380, Trenton, New Jersey.

The next day, October 31, the Committee heard from public

health officials and health experts regarding their understanding of

anthrax and its potential effects, as well as what could be done better in a future situation. The hearing explored whether those who

had specific information about the nature of the anthrax sent

through the mail accurately communicated the level of risk presented so that crucial decisions could be made properly, such as

whether to close postal facilities and how to respond to individuals

who might be infected. Those testifying included Senator Hillary

Rodham Clinton (D–NY); Senator Paul D. Wellstone (D–MN);

Mitchell L. Cohen, Director, Division of Bacterial and Mycotic Diseases, National Center for Infectious Diseases, Centers for Disease

Control and Prevention (CDC), Department of Health and Human

Services; Raymond J. Decker, Director, Defense Capabilities and

Management Team, U.S. General Accounting Office; Major General

John S. Parker, Commanding General, U.S. Army Medical Research and Materiel Command and Fort Detrick; Ivan C.A. Walks,

Chief Health Officer of the District of Columbia, and Director, District of Columbia Department of Health (DOH), accompanied by

Larry Siegel and Ted Gordon, Senior Deputies, District of Columbia Department of Health (DOH); Dan Hanfling, Chairman, Disaster Preparedness Committee, Inova Fairfax Hospital; and Tara

O’Toole, Director, Center for Civilian Biodefense Studies, Johns

Hopkins University.

PORT SECURITY

On December 6, 2001, the Committee held a hearing, entitled

‘‘Weak Links: Assessing the Vulnerability of U.S. Ports and Whether the Government is Adequately Structured to Safeguard Them.’’

The hearing focused on the vulnerabilities at U.S. ports, which are

the country’s key transportation link for global trade; yet, as the

testimony revealed, security at these ports had been sacrificed for

efficiency. Several witnesses—current or former front-line officials

with experience in maintaining port security—proposed solutions to

remedy these vulnerabilities, such as increasing information-sharing among Federal agencies, as well as among Federal, State and
26

local agencies and the port operators; ‘‘pushing the borders back’’

to inspect goods at points of origin; using technology effectively to

provide in-transit visibility and accountability for goods; and enlisting private sector cooperation in heightening security at ports.

The witnesses at the hearing were: Senator Ernest F. Hollings

(D–SC); F. Amanda DeBusk, Miller and Chevalier, former Assistant Secretary of Commerce and former Commissioner, Interagency

Commission on Crime and Security in U.S. Seaports; Stephen E.

Flynn, Senior Fellow, Council on Foreign Relations and Commander, U.S. Coast Guard; Rear Admiral Richard M. Larrabee,

Ret., Director, Port Commerce Department, the Port Authority of

New York and New Jersey; Rob Quartel, Chairman and Chief Executive Officer, FreightDesk Technologies and former Member, U.S.

Federal Maritime Commission; Argent Acosta, Senior Customs Inspector, Port of New Orleans, and President, National Treasury

Employees Union (NTEU) Chapter 168; Deputy Chief Charles C.

Cook, Memphis Police Department; W. Gordon Fink, President,

Emerging Technology Markets; and Michael D. Laden, President,

Target Customs Brokers, Inc.

ROLE OF STATE AND LOCAL GOVERNMENT IN HOMELAND SECURITY

On December 11, 2001, the Committee held a hearing designed

to review the issues faced by State and local officials, who are often

on the front lines in our Nation’s fight against terrorism. Witnesses

stressed that responsibility for homeland security is shared by the

Federal, State, and local governments. They testified regarding a

variety of needs, including: Increased Federal financial assistance

to local jurisdictions; pre-planning and practice exercises to insure

effective cooperation among first responders; improving cooperation

and communication among governments, and especially among law

enforcement officials; rebuilding of the public health infrastructure

to insure its ability to respond to bio-terrorism events; and the

need for a national strategy for responding to terrorist attacks.

Witnesses were: New Orleans Mayor Marc H. Morial, Chair of

the National Conference of Mayors; Jay Fisette, Chairman, Arlington County Board, Virginia; Javier Gonzales, President, National

Association of Counties; Richard J. Sheirer, Director, Office of

Emergency Management, City of New York, New York; John D.

White Jr., Director, Tennessee Emergency Management Agency;

Chief William B. Berger, President, International Association of

Chiefs of Police; Dr. Michael C. Caldwell, on behalf of the National

Association of City and County Health Officials; Michael J. Crouse,

Chief of Staff for the General President of the International Association of Fire Fighters; and Major General Joseph E. Tinkham, II,

Adjutant General of Maine and Commissioner, Maine Department

of Defense, Veterans and Emergency Management.

RAIL SAFETY

A December 13, 2001 hearing, entitled ‘‘Riding the Rails: How

Secure is our Passenger and Transit Infrastructure?’’ examined the

Federal Government’s role in helping to protect the passenger and

transit infrastructure. Testimony revealed that passenger transit

systems are difficult to secure and present attractive targets to ter-
27

rorists. The fact that the Nation’s public transit systems are diverse and widely dispersed among communities pose unique security challenges, which in turn require greater cooperation between

Federal, State and local governments and regional transit authorities. The Committee heard from Jennifer L. Dorn, Administrator,

Federal Transit Administration, U.S. Department of Transportation; Dorothy W. Dugger, Deputy General Manager, San Francisco Bay Area Rapid Transit District (BART); Ernest R. Frazier,

Sr., Chief of Police and Senior Vice President of System Security

and Safety, Amtrak; Trixie Johnson, Research Director, Mineta

Transportation Institute; Jeffrey A. Warsh, Executive Director,

New Jersey Transit Corporation; and Richard A. White, General

Manager, Washington Metropolitan Area Transit Authority.

PUBLIC HEALTH PREPAREDNESS

On April 18, 2002, the Committee held a hearing on ‘‘The State

of Public Health Preparedness for Terrorism Involving Weapons of

Mass Destruction: A Six-Month Report Card.’’ The hearing was a

follow-up to a hearing held by the Committee on October 17, 2001.

That October hearing highlighted a dangerous lack of preparedness

of the Nation to cope with a terrorist attack utilizing biological,

chemical, or radiological agents. The April 18th hearing focused on:

(1) coordination and communication between public health agencies

and law enforcement in the event of a terrorist attack with public

health implications; (2) the proposed consolidation of public relations functions within HHS; and (3) budgetary requirements for

HHS to fully implement its counter-terrorism efforts. The witnesses included HHS Secretary Tommy G. Thompson, who updated

the Committee on the progress the Department had made in terms

of public health preparedness for terrorism involving chemical, biological, and radiological attacks; Margaret A. Hamburg of the Nuclear Threat Initiative; Thomas V. Inglesby of the Johns Hopkins

Center for Civilian Biodefense Strategies; and Thomas L. Milne of

the National Association of County and City Health Officials.

ROLE OF THE INTELLIGENCE COMMUNITY IN HOMELAND SECURITY

On June 26 and 27, 2002, the Committee held hearings that focused on the relationship between the proposed Department of

Homeland Security and the intelligence community. These hearings

addressed the absence of a single location in the government where

all available intelligence is brought together to be analyzed. The

testimony focused on whether a Department of Homeland Security

requires an all-source intelligence analysis capability in order to effectively achieve its mission of preventing, deterring, and protecting against terrorist attacks; the appropriate role for the Department’s intelligence function when the Nation’s intelligence collection priorities are determined; the extent to which the Department would already be a significant collector of intelligence-related

information, through agencies such as the Customs Service and the

Coast Guard; and the Department’s need for access to information

collected by intelligence, law enforcement, and other agencies.

Witnesses included Senator Bob Graham (D–FL), and Senator

Richard Shelby (R–AL), the Chairman and Ranking Member of the
28

Senate Select Committee on Intelligence; CIA Director George J.

Tenet; FBI Director Robert S. Mueller, III; William H. Webster,

former CIA Director; Lt. Gen. Patrick M. Hughes, former Director

of the Defense Intelligence Agency; Jeffrey H. Smith, former General Counsel of the Central Intelligence Agency; Lt. Gen. William

E. Odom, former Director of the National Security Agency; Chief

William B. Berger, President of the International Association of

Chiefs of Police; and Ashton B. Carter, former Assistant Secretary

of Defense for International Security Policy.

PROTECTING AGAINST WEAPONS OF MASS DESTRUCTION

On June 28, 2002, the Committee held a hearing, ‘‘Preparing for

Reality: Protecting Against Weapons of Mass Destruction,’’ which

explored how a Department of Homeland Security should be organized to counter the threat posed by weapons of mass destruction,

and also addressed relevant science and technology, research and

development, and public health issues. Witnesses who testified included: Lewis M. Branscomb, Professor Emeritus, Public Policy and

Corporate Management, John F. Kennedy School of Government,

Harvard University; Margaret A. Hamburg, M.D., Vice President of

Biological Programs, Nuclear Threat Initiative; J. Leighton Reed,

M.D., General Partner, Alloy Ventures; Janet Heinrich, Director,

Health Care—Public Health Issues, GAO; and William J. Madia,

Director, Oak Ridge National Laboratory, Executive Vice President,

Battelle Memorial Institute.

ENRON

As part of its investigation into the demise of Enron, the full

Committee held a series of five hearings looking into various aspects of the company’s collapse. These hearings took place on January 24, 2002, February 5, 2002, February 27, 2002, March 20, 2002

and November 12, 2002.

The first of the Committee’s hearings on Enron, ‘‘The Fall of

Enron: How Could It Have Happened?’’ was held on January 24,

2002. The hearing sought to gain an overview of some of the most

prominent issues arising out of Enron’s collapse, including problems in oversight of the securities markets, derivatives markets,

employee retirement plans, and the energy markets. Former Securities and Exchange Commission Chairman Arthur Levitt, Jr., testified about the ‘‘culture of gamesmanship’’ on Wall Street—among

the corporate executives, boards of directors, public accountants,

and stock analysts—that created an atmosphere in which largescale financial deception was possible. Former SEC Chief Accountant Lynn E. Turner testified about flawed and ambiguous financial

reporting rules that Enron used in order to cover its fraud. University of San Diego Law Professor Frank Partnoy talked about the

unregulated $100 trillion derivatives market, and how Enron could

have taken advantage of this lack of oversight to engage in false

profit-making transactions. Yale Law School Professor John H.

Langbein, addressing the considerable losses suffered by Enron employees in their retirement accounts, testified that many 401(k)

plans are underdiversified, leaving many employees of other corporations exposed to the same fate as the Enron workers. Bruce B.

Henning, Director of Regulatory and Market Analysis at Energy
29

and Environmental Analysis, Inc., testified about the impact of

Enron’s collapse on the energy markets.

On February 5, 2002, the Committee held a hearing, ‘‘Retirement

Insecurity: 401(k) Crisis at Enron,’’ that examined the enormous

losses suffered by the Enron employees in their 401(k) accounts,

which contained high concentrations of Enron stock (as of December 31, 2000, when Enron stock was at a high, roughly two-thirds

of the $2.1 billion in assets held by the 401(k) plan was in company

stock). The Committee also examined the circumstances surrounding Enron’s ‘‘lock-down’’ of the plan during a time when the

company stock price was dropping, preventing employees from selling the stock and avoiding some of the losses they experienced.

There were three panels of witnesses. The first panel included

Deborah G. Perrotta, an Enron employee who had lost her job and

most of the value in her 401(k), and William D. Miller, Jr., Business Manager and Financial Secretary, of the International Brotherhood of Electrical Workers, Local 125, at Portland General Electric, an Enron subsidiary. The second panel included Executive

Vice President for Human Resources Cindy Olson, who had overseen the lock-out and was a member of the committee overseeing

the 401(k) plan; Mikie Rath, Benefits Manager at Enron; Joseph P.

Szathmary of Northern Trust Retirement Consulting, the company

that had been the recordkeeper for Enron’s 401(k) plan; and

Catheryn Graham of Hewitt Associates, the company to which the

recordkeeping responsibilities had been transferred, a transfer that

resulted in the temporary ‘‘lock-down’’ of the plan. Finally, the

Committee heard testimony from a third panel about the problems

associated with the way 401(k) plans are overseen and managed

and about related policy issues and recommendation; the third

panel consisted of Karen W. Ferguson, Director of the Pension

Rights Center; James A. Klein, President of the American Benefits

Council; Erik D. Olsen, a member of the Board of Directors of

AARP; Stephen M. Saxon of the Society of Professional Administrators and Recordkeepers; and Susan J. Stabile, Professor at St.

John’s University School of Law.

On February 27, 2002, the Committee held a hearing, ‘‘The

Watchdogs Didn’t Bark: Enron and the Wall Street Analysts,’’ to

examine why 11 of 16 stock analysts from major firms covering

Enron failed to detect the problems at Enron and continued to recommend that investors buy the stock until just before the company

declared bankruptcy. The Committee heard from four analysts

from major Wall Street firms—Raymond C. Niles of Citigroup

Salomon Smith Barney, Anatol Feygin of J.P. Morgan Securities,

Inc., Curt N. Launer of Credit Suisse First Boston, and Richard

Gross of Lehman Brothers, Inc.—who defended their assessments

of Enron, as well as from independent analyst Howard M. Schilit,

who testified that there were numerous red flags in Enron’s public

filings that should have led the Wall Street analysts to question

their conclusions. In addition, Robert R. Glauber, Chairman and

CEO of National Association of Securities Dealers, Thomas A. Bowman, President and CEO of Association for Investment Management and Research, Charles L. Hill, Thomson Financial/First Call

Director of Research, and Frank Torres, Legislative Counsel of

Consumers Union, testified about the conflicts of interest that can
30

put pressure on analysts working for Wall Street firms to offer

overly positive stock recommendations in order to establish or

maintain lucrative investment banking client relationships, and

about policy proposals to address these conflicts. Information and

recommendations coming out of this hearing were incorporated into

the Committee staff report on Financial Oversight of Enron: The

SEC and Private Sector Watchdogs (S. Prt. 107–75, Oct. 7, 2002).

On March 20, 2002, the Committee held a hearing, ‘‘Rating the

Raters: Enron and the Credit Rating Agencies,’’ about the role of

the credit rating agencies in Enron’s collapse. The three major

credit rating agencies enjoy a special status because of their greater access to corporate information than most other market participants, the considerable value placed on an investment grade rating, and a special SEC designation. Each of the agencies, however,

maintained an investment grade credit rating on Enron until just

4 days before the company’s bankruptcy. At the hearing, analysts

responsible for evaluating Enron at each of the three major credit

rating agencies—Ronald M. Barone, Managing Director at Standard & Poor’s, John C. Diaz, Managing Director of Moody’s Investors

Service, Ralph G. Pellecchia, Senior Director of the Global Power

Group at Fitch Ratings—testified about why they had failed to find

or take into account problems at Enron in their assessments until

very late. The Committee also heard from a panel that addressed

whether additional oversight and/or regulation of ratings agencies

would be desirable. This panel included SEC Commissioner Isaac

C. Hunt, Jr.; Glenn L. Reynolds, CEO of CreditSights, Inc., an

independent credit analysis firm; Cornell Law School Professor

Jonathan R. Macey; and Steven L. Schwarcz, Professor of Law at

Duke University School of Law. As with the hearing on the Wall

Street analysts, information and recommendations coming out of

the credit raters’ hearing were incorporated into the Committee

staff report on Financial Oversight of Enron: The SEC and Private

Sector Watchdogs (S. Prt. 107–75, Oct. 7, 2002).

On November 12, 2002, the Committee held a hearing, ‘‘Asleep

at the Switch: FERC’s Oversight of Enron Corporation,’’ on the role

of FERC in overseeing Enron. David M. Berick, professional staff

member for the Committee, testified about the findings arising

from the Majority Committee staff’s investigation. In particular,

Mr. Berick testified that there were four areas where FERC utterly

failed to conduct effective oversight of Enron: Its inaction in the

face of Enron’s use of apparently sham sales to maintain favorable

regulatory status for some of the company’s wind farms; its inquiry

into Enron’s electronic trading system, Enron Online; its lack of

oversight into questionable transactions between Enron and its

regulated affiliates; and its slow response to abusive trading practices allegedly engaged in by Enron traders during the power crisis

in the California and Western energy markets in 2000–2001. The

Committee then heard from each of the four individuals who were

FERC commissioners at the time: Patrick H. Wood, III (Chairman),

Linda K. Breathitt, Nora M. Brownell, and William L. Massey.

Among other things, Chairman Wood discussed new measures undertaken by FERC that he believed would address the issues raised

by the Committee’s investigation, including the establishment of a

new Office of Market Monitoring and Investigations. The hearing’s
31

final panel, comprised of Paul L. Joskow, Director of the Center for

Energy and Environmental Policy Research at the Massachusetts

Institute of Technology, and Frank A. Wolak, Professor of Economics at Stanford University, provided their perspective on FERC’s

performance and the outlook for FERC going forward.

In connection with this hearing, Chairman Lieberman released a

staff memorandum setting out Majority staff’s findings in more detail, and Ranking Minority Member Thompson released a staff

memorandum setting forth Minority views on these matters. These

memoranda were included in the appendix to the printed hearing

record (S. Hrg. 107–854).

OVERSIGHT OF ENERGY DEREGULATION

The Committee held a series of three hearings to examine the

impacts of deregulation of U.S. electricity and natural gas markets,

in general, and the markets in California and the West, in particular. These hearings were held on June 13, 2001, June 20, 2001,

and June 28, 2001.

The first hearing, on June 13, 2001, focused primarily on the impacts of California’s failed transition to a market-based utility system and highlighted both the economic costs and the need for aggressive regulatory oversight and intervention by Federal energy

regulators when these ‘‘open’’ markets are being developed, fail, or

are being abused. The Committee heard testimony from a panel of

experts in the economics of the deregulation of markets concerning

whether additional intervention in the California market was necessary or appropriate.

Following testimony by Senator Dianne Feinstein (D–CA), Senator Barbara Boxer (D–CA), and Senator Larry E. Craig (R–ID),

the Committee heard testimony from the following witnesses: Paul

L. Joskow, a professor and researcher at the Massachusetts Institute of Technology in the areas of industrial organization, energy

and environmental economics, and government regulation of industry; Alfred E. Kahn, professor emeritus of Political Economy at Cornell University, and former Chairman of the Civil Aeronautics

Board under President Carter where he led the Nation’s drive to

deregulate the airline industry; Severin Borenstein, professor in

Public Policy and Business Administration at the University of

California’s Haas School of Business, Director of the University of

California Energy Institute, and former member of the Governing

Board of the California Power Exchange Corporation; Frank A.

Wolak, specialist in Industrial Organization and Econometric Theory at Stanford University, where he is a Professor in the Economics Department and is also the Chairman of the Market Surveillance Committee of the California Independent System Operator;

Lawrence J. Makovich who is a Senior Director of Cambridge Energy Research Associates; and William W. Hogan of the John F.

Kennedy School of Government at Harvard University.

The second hearing was held on June 20, 2001 on the role of

FERC in the California energy crisis and the implications of the

crisis for deregulation of energy markets nationwide. The hearing

focused primarily on FERC’s actions, and inactions, in responding

to power outages and massive price increases experienced in California and in adjacent States. Whereas the hearing on June 13 ad-
32

dressed the economic impacts of deregulation and economic justification for rate relief for California and the West, the hearing on

June 20 examined the legal and regulatory underpinnings for the

failure of the California and Western markets and possible solutions. Following testimony by several members of the Senate—Senator Maria Cantwell (D–WA), Senator Frank H. Murkowski (R–

AK), and Senator Patty Murray (D–WA)—the Committee took testimony from four panels composed of the following witnesses: Governor Gray Davis, State of California; Governor John Hoeven, State

of North Dakota; Governor Judy Martz, State of Montana; Christine O. Gregoire, Attorney General for the State of Washington;

Roy Hemmingway, Chairman of the Oregon Public Utilities Commission; Curt L. Hebert, Jr., Chairman, FERC; Linda K. Breathitt,

Commissioner, FERC, Nora M. Brownell, Commissioner, FERC,

William L. Massey, Commissioner, FERC, and Patrick H. Wood,

III, Commissioner, FERC.

The final hearing took place on June 28, 2001 and examined the

impact of deregulation of the electricity industry on system reliability of the electric grid. The Committee heard from a panel of

expert witnesses comprised of the following: David N. Cook, General Counsel, North American Electric Reliability Council; Phillip

G. Harris, President and CEO, PJM Interconnection, LLC; Kevin

A. Kelly, Director, Division of Policy Innovation and Communication, FERC; and Irvin A. ‘‘Sonny’’ Popowsky, the Pennsylvania Consumer Advocate on behalf of the National Association of State Utility Consumer Advocates (NASUCA).

GOVERNMENT REORGANIZATION

Climate Change Legislation: On July 18, 2001, the Committee

held a hearing entitled ‘‘S. 1008—The Climate Change Strategy

and Technology Innovation Act of 2001.’’ S. 1008 sought to create

an Office on Climate Change within the White House, and require

the office to prepare a detailed strategy to stabilize the concentration of greenhouse gasses in the atmosphere. The legislation also

sought to create a new office within the Department of Energy,

with new funding, to research and develop technologies to combat

climate change. Eight witnesses appeared: The bill’s chief sponsor,

Senator Robert C. Byrd (D–WV); two climate scientists, Thomas R.

Karl, Director, National Climatic Data Center, NOAA, and James

E. Hansen, head of NASA’s Goddard Institute for Space Studies;

Eileen Claussen, President of the Pew Center on Global Climate

Change; James A. Edmonds, Senior Staff Scientist, Pacific Northwest National Laboratory, Battelle Memorial Institute; Dale E.

Heydlauff, Senior Vice President-Environmental Affairs, American

Electric Power Company; Jonathan Lash, President, World Resources Institute; and Margo Thorning, Senior Vice President and

Chief Economist for the American Council for Capital Formation.

In addition, the Committee received written testimony from Prof.

John P. Holdren, Director of a program on Science, Technology and

Public Policy at Harvard University’s Kennedy School of Government, and David G. Hawkins, Director, NRDC Climate Center,

Natural Resources Defense Counsel.

EPA Cabinet Bill: On July 24, 2001, the Committee held a hearing on S. 159, a bill to elevate the Environmental Protection Agen-
33

cy to a Cabinet-level Department. The testimony at the hearing favored elevating EPA. Witnesses at the hearing were: Senator Barbara Boxer (D–CA), the bill’s sponsor; Representative Sherwood L.

Boehlert (R–NY); EPA Administrator Christine Todd Whitman;

former EPA Administrators Carol M. Browner and William K.

Reilly; and former EPA General Counsel E. Donald Elliott.

REGULATORY OVERSIGHT

The Committee held 2 days of hearings regarding the Bush Administration’s implementation of environmental laws. Witnesses

testifying on March 7, 2002, provided an overview of actions taken

during the first year of the Bush administration. Senator Larry E.

Craig (R–ID) and Senator James M. Jeffords (I–VT) testified on the

first panel. The Administrator of the Environmental Protection

Agency, Christine Todd Whitman, testified on behalf of the Administration and focused on President Bush’s ‘‘Clear Skies’’ proposal,

an idea for a legislative initiative to change the Clean Air Act. She

also responded to Committee members’ concerns regarding expected changes in the New Source Review (NSR) program, promising the Administration would not undermine the Clean Air Act.

Eric V. Schaeffer, former Director of the Office of Regulatory Enforcement of EPA, testified regarding the adverse impact on EPA’s

enforcement program of personnel reductions; he also described the

EPA’s difficulty obtaining settlement agreements in actions against

industry to enforce emissions requirements as a result of the Administration’s discussion of its plans to revise regulations for NSR.

E. Donald Elliott, a Yale and Georgetown Law Schools Professor

and former EPA General Counsel, testified that he believed the

NSR program was a failure.

Two witnesses described a range of Administration activities

they believed undermined implementation of environmental laws,

including changes in regulations, agency policies and practices and

the settlement of lawsuits challenging environmental regulations.

Thomas O. McGarity, a law professor from the University of Texas,

testified that the Administration had taken steps to reverse or

modify existing protective programs, and was re-establishing a

more aggressive role for the Office of Information and Regulatory

Affairs, Office of Management and Budget, in reviewing regulations. Gregory S. Wetstone, representing the Natural Resources Defense Council, submitted a report analyzing actions throughout the

government and identifying ‘‘more than 60 environmental retreats

on issues ranging from clean air, to clean water, to protection of

National Parks, wildlife, wetlands and forests.’’

On March 13, 2002, citizens who had experienced first hand the

impact of the change in environmental policies testified about their

concerns: The impact of changes in diesel emission regulations, efficiency standards for air conditioners, and requirements to upgrade

controls on power plants on air pollution; the effect of snowmobiles

in Yellowstone National Park on the air quality and enjoyment of

the park; the adverse impact of combined animal feeding operations on water quality and the critical need to improve the regulations; the inability of citizens to successfully oppose mining operations in areas posing risks to safety and the environment; and the

impact of accelerated energy development (occurring without appro-
34

priate environmental analysis) on the land, wildlife habitat, and

water quality in the West. A representative of the Reason Public

Policy Institute described voluntary, cooperative, and locally-derived environmental policy approaches which he testified have accomplished results without the negative effects of regulatory requirements.

The witnesses appearing on March 13 were: Richard Blumenthal,

Attorney General, State of Connecticut; Richard J. Dove, Southeastern Representative, Waterkeeper Alliance; Kenneth Green,

Chief Environmental Scientist, Reason Public Policy Institute; Donald Newhouse, Guardians of the Rural Environment; Hope Sieck,

Associate Program Director, Greater Yellowstone Coalition; Stephen C. Torbit, Senior Scientist, Rocky Mountain Natural Resource

Center, on behalf of the National Wildlife Federation.

COMMISSION ON THE TERRORIST ATTACKS OF SEPTEMBER 11

On February 7, 2002, the Committee held a hearing to consider

S. 1867, legislation introduced by Chairman Lieberman to create

an independent commission to investigate the terrorist attacks of

September 11, 2001. Four witnesses discussed how an independent

commission could help the Nation address unanswered questions

and contribute to the war on terrorism. All of the witnesses had

served on independent commissions addressing important national

security issues. Witnesses included Norman R. Augustine, Chairman of the Executive Committee, Lockheed Martin Corporation,

former Commissioner, U.S. Commission on National Security; Professor Richard K. Betts, Director, Institute of War and Peace Studies, Columbia University, former Commissioner, National Commission on Terrorism; Dave McCurdy, President, Electronic Industries

Alliance, former Commissioner, Commission to Assess the Organization of the Federal Government to Combat the Proliferation of

Weapons of Mass Destruction; and Maurice Sonnenberg, Senior

International Advisor, Bear, Stearns and Company, Inc., and

former Vice Chair, National Commission on Terrorism.

ELECTRONIC GOVERNMENT

On July 11, 2001, the Committee held a hearing to consider S.

803, the E-Government Act, a bill introduced by Chairman

Lieberman. The witnesses at the hearing testified to the potential

of the Internet and other information technologies to provide information and services, organized to citizens’ needs, and to transform

the way government operates. The E-Government Act was ultimately enacted as H.R. 2458. Witnesses at the hearing included

Senator Conrad Burns (R–MT), chief co-sponsor of S. 803; Sean

O’Keefe, Deputy Director, Office of Management and Budget; Anne

K. Altman, Managing Director, U.S. Federal-IBM Corporation; Dr.

Costis Toregas, President, Public Technology, Inc.; Aldona

Valicenti, President, National Association of State Chief Information Officers; Greg Woods, Chief Operating Officer, Student Financial Assistance, U.S. Department of Education; Sharon A. Hogan,

University Librarian, University of Illinois at Chicago, on behalf of

the American Library Association, the American Association of Research Libraries and the American Association of Law Libraries;

Barry Ingram, Vice President and Chief Technology Officer, EDS
35

Global Government Industry Group, on behalf of the Information

Technology Association of America (ITAA); Patricia McGinnis,

President and Chief Executive Officer, Council for Excellence in

Government; and Joseph R. Wright, former Director and Deputy

Director, Office of Management and Budget, and Vice Chairman,

Terremark Worldwide, Inc.

ELECTION REFORM

On May 3 and May 9, 2001, the Governmental Affairs Committee

held 2 days of hearings, entitled ‘‘Federal Election Practices and

Procedures,’’ which explored the flaws in the voting system in the

United States and discussed possible solutions.

The hearings were divided according to the two major hurdles

citizens face with respect to participating in any election: (1) getting to the polls, including registering to vote, and (2) voting at the

polls, including getting ballots cast and counted. Voters were

disenfranchised in the November 2000 election in two ways: Some

never made it past the front desk of the polling place, because they

were told that they were not registered to vote. Others were able

to vote, but did not succeed in casting the ballots they intended,

often because they were foiled by faulty voting equipment, poor ballot design, unclear voting instructions, long lines, ballots not translated into their language, polling places that were moved without

notice, and poorly trained poll workers, who misinformed, rushed,

harassed or refused to assist voters. Witnesses, including Senator

Christopher S. ‘‘Kit’’ Bond (R–MO), also expressed concern about

fraud at the polls, and the need for better verification of those

qualified to vote through a more effective registration process.

At the hearing on May 3, 2001, the Committee heard from four

panels of witnesses, including Senator Bond and Representative

William Lacy Clay (D–MO); Carolyn Jefferson-Jenkins, President

of the League of Women Voters; Ralph G. Neas, President of People

for the American Way; Deborah M. Phillips, Chairman of The Voting Integrity Project; Professor Larry J. Sabato of the University of

Virginia; Professor R. Michael Alvarez of the California Institute of

Technology; John T. Willis, Maryland Secretary of State; Gary

McIntosh, State Elections Director for Washington State; and Daniel B. Perrin of the Committee for Honest Politics.

At the May 9 hearing, the Committee heard from Hilary O.

Shelton, Washington Bureau Director of the NAACP; Arturo

Vargas, Executive Director of the National Association of Latino

Elected and Appointed Officials; Stephen Knack, Senior Research

Economist at The World Bank; Hans A. von Spakovsky of the Fulton County, Georgia Board of Registration and Elections; Conny B.

McCormack, Registrar-Recorder/County Clerk of Los Angeles County, California; Sharon Priest, Arkansas Secretary of State; R. Doug

Lewis, Executive Director of The Election Center; and Samuel F.

Wright, Co-Chair of the Uniformed Services Voting Rights Committee of the Reserve Officers Association.

The hearings yielded a number of possible solutions to protect

voters from facing the same hurdles they encountered in the 2000

elections. To address difficulties voters had found because of faulty

registration lists, witnesses emphasized the critical importance of

having a centralized database of registered voters—ideally, one
36

that is tied with other databases such as the Department of Motor

Vehicles, so that the list of registered voters would be accurate and

up-to-date. A number of witnesses also encouraged States to permit

voters to cast provisional ballots, so the voters’ qualifications could

be checked by the registrar after Election Day but before the results are certified, and the votes counted if appropriate. To address

problems at the polls, witnesses stressed that voting machines

were one part of the problem; though in many instances the technology posed unnecessary challenges to voters—particularly where

punch card machines were in use—all agreed that better voter education and better poll worker retention and training would also

make an importance difference in ensuring that all votes cast

would be counted. However, several witnesses warned that efforts

to increase access to the polls for legitimate voters could lead to actual and potential fraud. They suggested combating fraud by making registration and voting more restrictive in certain ways, such

as a requirement that voters show picture identification at the

polls.

STREAMLINING FINANCIAL DISCLOSURE FOR EXECUTIVE BRANCH

NOMINEES

On April 4 and 5, 2001, the Committee held 2 days of hearings,

entitled ‘‘The State of the Presidential Appointment Process,’’ on

ways to streamline the financial disclosure process for Executive

Branch nominees, while also strengthening disclosure of actions

those nominees take once in office regarding potential conflicts of

interest. Witnesses testified about the barriers to finding and confirming qualified and talented individuals. A recurring complaint

has been the burdensome nature of the financial disclosure nominees must make. In addition, the Office of Government Ethics

(OGE) presented a report it was directed to prepare pursuant to

the Presidential Transition Act of 2000 regarding financial disclosure requirements for Executive Branch nominees and appointees.

The testimony recommended steps Congress could take to improve

the nomination process for high level Executive Branch positions,

including avoiding duplication and overlap between various financial disclosure forms and focusing the information sought on the

areas required for conflict of interest determinations. Scott

Harshbarger, testifying on behalf of Common Cause, expressed the

view that while some changes were warranted, OGE’s proposal was

too drastic in scope.

Witnesses at the hearings included OGE Executive Director Amy

L. Comstock; Paul C. Light, Vice President and Director of Governmental Studies at The Brookings Institute. Franklin D. Raines,

former Director, Office of Management and Budget, and former

Senator Nancy Kassebaum Baker, who appeared on behalf of the

Presidential Appointee Initiative; Common Cause President Scott

Harshbarger; Norman J. Ornstein, Resident Scholar, American Enterprise Institute, on behalf of the Transition to Governing Project;

OMB Deputy Director Sean O’Keefe; former Director of White

House Office of Presidential Personnel Robert J. Nash; Colby College Professor G. Calvin Mackenzie; and Patricia McGinnis, President and CEO of the Council for Excellence in Government.
37

Following these hearings, through the efforts of Chairman

Lieberman and Ranking Minority Member Thompson, the Committee revised its own financial disclosure forms for nominees considered by the Committee. The Committee also produced a multivolume compilation of past commission reports on the financial disclosure process.

D.C. VOTING RIGHTS

On May 23, 2002, the Committee held a hearing entitled ‘‘Voting

Representation in Congress for Citizens of the District of Columbia,’’ marking the first time since 1994 that Congress has held a

hearing on the question of whether citizens of our Nation’s capital

should be granted full voting representation in Congress. Proponents of voting representation for District residents contended

that D.C. residents should have the same rights to participate in

democracy as citizens of the 50 States. They told the Committee

that depriving District residents of full representation in the Congress is inconsistent with the representative democracy that was

envisioned by the framers, which fundamentally derives its authority from the consent of the governed. The witnesses testified that

District residents share the same burden of citizenship as other

Americans, including paying their share of Federal income taxes

and fighting in foreign wars; therefore, the legislators making decisions about these and other matters—particularly those directly related to the District—should be accountable to its residents.

Expert witnesses discussed the most effective methods to achieve

full Congressional representation for the District. Washington College of Law Professor Jamin B. Raskin, American University, testified that Congress could effect this goal through legislation, while

Professor Adam H. Kurland of Howard University Law School testified that a constitutional amendment would be necessary. Other

witnesses included Senator Russell D. Feingold (D–WI); Delegate

Eleanor Holmes Norton (D–DC); Representative Eddie Bernice

Johnson (D–TX), Chair of the Congressional Black Caucus; D.C.

Mayor Anthony A. Williams; D.C. Council Chairman Linda W.

Cropp; D.C. Statehood Senator Florence H. Pendleton; and Wade

Henderson, Executive Director of the Leadership Conference for

Civil Rights. Representative Ralph Regula (D–OH) submitted a

prepared statement.

PROTECTING PUBLIC HEALTH AND SAFETY

The Committee held three hearings relating to public health and

safety issues:

The first hearing on drug and alcohol abuse, entitled ‘‘Ecstasy

Use Rises: What More Needs to be Done by the Government to

Combat the Problem?’’ was held on July 30, 2001. It sought to

bring attention to the harm that ecstasy poses to America’s communities. Representatives from the Drug Enforcement Administration,

Customs Service, Office of National Drug Control Policy, and the

Miami-Dade Police Department provided the Committee with

graphic evidence of the growing scope of ecstasy trafficking. They

noted that the trade is no longer just confined to Western Europe,

where the drug is largely manufactured, but is now a worldwide

phenomenon. The agencies acknowledged the need for closer coordi-
38

nation and cited examples of interagency cooperation. Appearing

before the Committee were two recovering teenage addicts from the

Phoenix House Drug Rehabilitation Center in Long Island, New

York, who testified about the drug’s impact on their lives. Other

witnesses included John M. Bailey, Connecticut Chief State’s Attorney; Joseph D. Keefe, Chief of Operations, Drug Enforcement Administration, U.S. Department of Justice; Alan I. Leshner, Director

of the National Institute on Drug Abuse, National Institute of

Health; Roy Rutland, with the Miami-Dade Police Department;

John C. Varrone, Assistant Commissioner of Customs at the United

States Customs Service; Donald R. Vereen, Jr., Deputy Director,

Office of National Drug Control Policy, Executive Office of the

President.

On May 15, 2002, in response to six deaths of Connecticut college

students in 1 year due to excessive drinking, Senator Lieberman

held a hearing, entitled ‘‘Under the Influence: The Binge Drinking

Epidemic on College Campuses.’’ The hearing examined the high

numbers of alcohol-related student deaths and accidents on college

campuses across the country and recommended strategies to address it.

Among the witnesses was Mark S. Goldman, Director of the Alcohol and Substance Abuse Research Institute, University of Florida.

He presented a recently published study illustrating the seriousness of heavy, episodic drinking on college campuses. The study

found that each year, college drinking contributes to 1,400 deaths,

70,000 sexual assaults or rapes, and 500,000 injuries. Other witnesses at the hearing were Ralph H. Hingson, Professor and Associate Dean for Research at the School of Public Health, Boston University; Raynard S. Kington, Acting Director of National Institute

on Alcohol Abuse and Alcoholism at the National Institute on

Health; Drew Hunter, Executive Director of The BACCHUS and

GAMMA Peer Education Network; Robert F. Nolan, Chief of Police

at the Hamden, Connecticut, Police Department; Daniel P.

Reardon, parent; and John D. Welty, President of California State

University in Fresno.

On June 12, 2002 the Committee held a hearing, entitled ‘‘Protecting Our Kids: What Is Causing the Current Shortage in Childhood Vaccines?’’ on the shortages of childhood vaccines for significant diseases. The hearing focused on the degree of the problem,

as well as potential solutions and long-term consequences if not addressed. Witnesses included Timothy F. Doran, Chairman, Department of Pediatrics, Greater Baltimore Medical Center on behalf of

the American Academy of Pediatrics; Mary Anne Jackson, Chief,

Pediatric Infectious Diseases Section, Children’s Mercy Hospitals

and Clinics, Kansas City, Missouri; Wayne F. Pisano, Executive

Vice President, Aventis Pasteur North America, on behalf of Pharmaceutical Research and Manufacturers of America; Lester M.

Crawford, Deputy Commissioner, Food and Drug Administration,

U.S. Department of Health and Human Services; and Walter A.

Orenstein, Director, National Immunization Program, Centers for

Disease Control and Prevention, U.S. Department of Health and

Human Services
39

MEDICARE PAYMENT POLICIES FOR AMBULANCE SERVICES

The Committee held an oversight hearing on November 15, 2001,

entitled ‘‘Oversight of the Centers for Medicare and Medicaid Services: Medicare Payment Policies for Ambulance Services’’; the hearing examined the proposed changes in Medicare reimbursement of

ambulance services and the impact those changes would have on

the beneficiaries who rely on them. Witnesses included Thomas A.

Scully, Administrator, Centers for Medicare and Medicaid Services,

U.S. Department of Health and Human Services; Mark D.

Lindquist, Medical Director, Emergency Department, St. Mary’s

Regional Health Center; Gary L. Wingrove, Paramedic and Manager, Gold Cross Ambulance Service, on behalf of the Minnesota

Ambulance Association; Mark D. Meijer, Owner and CEO, Life

EMS Ambulance Service, on behalf of the American Ambulance Association; James N. Pruden, Chairman, New Jersey EMS Coalition;

Laura A. Dummit, Director, Health Care—Medicare Payment

Issues, U.S. General Accounting Office; Lori Moore, Assistant to

the General President for EMS Services, International Association

of Firefighters; Deputy Chief John Sinclair, Secretary, Emergency

Medical Services Section of the International Association of Fire

Chiefs.

ENTERTAINMENT RATINGS

On July 25, 2001, the Committee held a hearing called ‘‘Rating

Entertainment Ratings: How Well Are They Working For Parents

and What Can Be Done To Improve Them?’’ The hearing focused

on a letter sent to policymakers in June 2001 by a coalition of researchers, medical groups, and child development experts. The letter, initiated by the National Institute on Media and the Family,

argued that the different ratings are often applied inconsistently,

that many parents find the multiplicity of rating icons confusing,

and called for replacing the existing formats with a new uniform

rating system, monitored by an independent oversight committee

and grounded in sound research. The witnesses at the hearing discussed the concerns raised in the letter and explored the merits of

their recommendations, presented the response of industry keepers

of these rating systems, and discussed possible ways to improve the

ratings to better inform parents and better protect children.

Witnesses included Senator Sam Brownback (R–KS); Dale

Kunkel, Professor of Communication, University of California,

Santa Barbara; Roger Pilon, Vice President for Legal Affairs,

CATO Institute; Dr. Michael Rich, Assistant Professor of Pediatrics, Harvard Medical School; Laura Smit, mother; William Baldwin, President, The Creative Coalition; Douglas Lowenstein, President, Interactive Digital Software Association; Doug McMillon,

Senior Vice President and General Merchandise Manager, WalMart Stores, Inc.; Hillary Rosen, President and CEO, Recording Industry Association of America; Jack Valenti, President and CEO of

The Motion Picture Association of America; and Russell Simmons,

Chairman, Phat Farm.

HIGH PERFORMANCE COMPUTER EXPORT CONTROLS

On March 15, 2001, the Committee held a hearing to discuss a

GAO report on the changes in export control policy regarding high
40

performance computers. The hearing focused on these computers as

‘‘dual use’’ commodities—their use and potential use for military

purposes in countries known to be proliferating weapons of mass

destruction.

Witnesses included Susan S. Westin, Managing Director, accompanied by Stephen M. Lord, Assistant Director, and Jeffrey D. Phillips, International Security Analyst, International Affairs and

Trade Division, U.S. General Accounting Office.

FEDERAL AND SERVICE CONTRACT WORKFORCE

On March 6, 2002, the Committee held a hearing to review the

Administration’s initiatives to increase the outsourcing of Federal

services to the private sector, and how these initiatives affect the

quality and cost of work performed for and by the Federal Government. The hearing focused on the Administration’s numerical goals

to increase competitions and conversions of Federal jobs; many

have criticized the numerical quotas as being arbitrary and unrealistic. The hearing also addressed proposed legislation to allow Federal workers to compete more frequently for jobs being outsourced,

and, in some cases, for new work.

Witnesses included Angela B. Styles, Administrator, Office of

Federal Procurement Policy, Office of Management and Budget;

Barry W. Holman, Director, Defense Capabilities and Management,

U.S. General Accounting Office; Dan Guttman, Fellow, Washington

Center for the Study of American Government, Johns Hopkins University; Bobby L. Harnage, Sr., National President, American Federation of Government Employees, AFL–CIO; Colleen M. Kelley,

National President, National Treasury Employees Union (NTEU);

Mary Lou Patel, Chief Financial Officer, Advanced System Development, Inc.; Stan Z. Soloway, President, Professional Services

Council.

V. REPORTS, PRINTS, STUDIES, AND GAO REPORTS

During the 107th Congress, the Committee prepared and issued

31 reports, prints, and studies on these topics:

(1) Activities of the Committee on Governmental Affairs (For

the 105th Congress) (S. Rept. 107–1);

(2) Activities of the Committee on Governmental Affairs (For

the 106th Congress) (S. Rept. 107–20);

(3) Office of Government Ethics Authorization Act of 2001 (S.

Rept. 107–88);

(4) To Prevent the Elimination of Certain Reports (S. Rept.

107–90);

(5) Climate Change Strategy and Technology Innovation Act of

2001 (S. Rept. 107–99);

(6) District of Columbia College Access Improvement Act of

2001 (S. Rept. 107–101);

(7) Amending the charter of Southeastern University of the

District of Columbia (S. Rept. 107–102);

(8) District of Columbia Police Coordination Amendment Act of

2001 (S. Rept. 107–103);

(9) District of Columbia Family Court Act of 2001 (S. Rept.

107–107);
41

(10) District of Columbia Family Court Act of 2001 (S. Rept.

107–108);

(11) Making Permanent the Authority to Redact Financial Disclosure Statements of Judicial Employees and Judicial Officers

(S. Rept. 107–111);

(12) Amending chapter 90 of title 5, United States Code, relating to Federal long-term care insurance (S. Rept. 107–128);

(13) Phony Identification And Credentials Via The Internet (S.

Rept. 107–133);

(14) To require that Federal agencies be accountable for violations of antidiscrimination and whistleblower protection laws; to

require that each Federal agency post quarterly on its public

Web site, certain statistical data relating to Federal sector equal

employment opportunity complaints filed with each agency; and

for other purposes (S. Rept. 107–143);

(15) To authorize certain Federal officials with responsibility

for the administration of the criminal justice system of the District of Columbia to serve on and participate in the activities of

the District of Columbia Criminal Justice Coordinating Council,

and for other purposes (S. Rept. 107–145);

(16) To establish the National Commission on Terrorist Attacks Upon the United States, and for other purposes (S. Rept.

107–150);

(17) To amend the Ethics in Government Act of 1978 (5 U.S.C.

App.) to streamline the financial disclosure process for Executive

Branch employees (S. Rept. 107–152);

(18) To amend chapter 35 of title 44, United States Code, for

the purpose of facilitating compliance by small business concerns

with certain Federal paperwork requirements, to establish a task

force to examine the feasibility of streamlining paperwork requirements applicable to small business concerns, and for other

purposes (S. Rept. 107–153);

(19) To amend title 44, United States Code, to require any organization that is established for the purpose of raising funds for

creating, maintaining, expanding, or conducting activities at a

Presidential archival depository or any facilities relating to a

Presidential archival depository to disclose the sources and

amounts of any funds raised, and for other purposes (S. Rept.

107–160);

(20) To enhance the management and promotion of electronic

government services and processes by establishing a Federal

Chief Information Officer within the Office of Management and

Budget, and by establishing a broad framework of measures that

require using Internet-based information technology to enhance

citizen access to government information and services, and for

other purposes (S. Rept. 107–174);

(21) To establish the Department of National Homeland Security and the National Office for Combating Terrorism (S. Rept.

107–175);

(22) To amend the Inspector General Act of 1978 (5 U.S.C.

App.) to establish police powers for certain Inspector General

agents engaged in official duties and provide an oversight mechanism for the exercise of those powers (S. Rept. 107–176);
42

(23) To establish the United States Consensus Council to provide for a consensus building process in addressing national public policy issues, and for other purposes (S. Rept. 107–330);

(24) To amend chapter 35 of title 31, United States Code, to

expand the types of Federal agencies that are required to prepare

audited financial statements (S. Rept. 107–331);

(25) To authorize the Court Services and Offender Supervision

Agency of the District of Columbia to provide for the interstate

supervision of offenders on parole, probation, and supervised release (S. Rept. 107–332);

(26) To provide for estimates and reports of improper payments by Federal agencies (S. Rept. 107–333);

(27) To provide for full voting representation in Congress for

the citizens of the District of Columbia, and for other purposes

(S. Rept. 107–343);

(28) To authorize appropriations for the Merit Systems Protection Board and the Office of Special Counsel, and for other purposes (S. Rept. 107–349);

(29) Financial Oversight of Enron: The SEC and Private-Sector Watchdogs, October 7, 2002 (S. Prt. 107–75);

(30) Rewriting the Rules (Majority Staff), October 24, 2002 (S.

Prt. 107–76); and

(31) Enron’s Credit Rating: Enron’s Bankers’ Contacts with

Moody’s and Government Officials, January 3, 2003 (S. Prt. 107–

83).

Also during the 107th Congress, 91 reports were issued by the

General Accounting Office at the request of the Committee:

(1) Potential Questions to Elicit Nominees’ Views on Agencies’

Management Challenges, GAO–01–332R (January 18, 2001);

(2) Regulatory Management: Communication About Technology-Based Innovations Can Be Improved, GAO–01–232 (February 12, 2001);

(3) Information Security: IRS Electronic Filing Systems, GAO–

01–306 (February 16, 2001);

(4) Eligibility Criteria for Individuals to Temporarily Fill Vacant Positions Under the Federal Vacancies Reform Act of 1998,

GAO–01–468R (February 23, 2001);

(5) Export Controls: Inadequate Justification for Relaxation of

Computer Controls Demonstrates Need for Comprehensive

Study, GAO–01–534T (March 15, 2001);

(6) Financial Audit: Independent and Special Counsel Expenditures for the Six Months Ended September 30, 2000, GAO–01–

505 (March 30, 2001);

(7) Managing for Results: Human Capital Management Discussions in Fiscal Year 2001 Performance Plans, GAO–01–236

(April 24, 2001);

(8) Internet Privacy: Implementation of Federal Guidance for

Agency Use of Cookies, GAO–01–424 (April 27, 2001);

(9) Telecommunications: Research and Regulatory Efforts on

Mobile Phone Health Issues, GAO–01–545 (May 7, 2001);

(10) Department of Defense, General Services Administration,

National Aeronautics and Space Administration: Federal Acquisi-
43

tion Regulations; Electronic and Information Technology Accessibility, GAO–01–687R (May 11, 2001);

(11) U.S. Postal Service: Financial Outlook and Transformation Challenges, GAO–01–733T (May 15, 2001);

(12) Presidential Appointments: Agencies’ Compliance With

Provisions of the Federal Vacancies Reform Act of 1998, GAO–

01–701 (May 31, 2001);

(13) Department of the Treasury: Status of Achieving Key

Outcomes and Addressing Major Management Challenges, GAO–

01–712 (June 15, 2001);

(14) Health and Human Services: Status of Achieving Key

Outcomes and Addressing Major Management Challenges, GAO–

01–748 (June 15, 2001);

(15) Veterans Affairs: Status of Achieving Key Outcomes and

Addressing Major Management Challenges, GAO–01–752 (June

15, 2001);

(16) National Science Foundation: Status of Achieving Key

Outcomes and Addressing Major Management Challenges, GAO–

01–758 (June 15, 2001);

(17) Department of the Interior: Status of Achieving Key Outcomes and Addressing Major Management Challenges, GAO–01–

759 (June 15, 2001);

(18) Environmental Protection Agency: Status of Achieving

Key Outcomes and Addressing Major Management Challenges,

GAO–01–774 (June 15, 2001);

(19) Social Security Administration: Status of Achieving Key

Outcomes and Addressing Major Management Challenges, GAO–

01–778 (June 15, 2001);

(20) Department of Labor: Status of Achieving Key Outcomes

and Addressing Major Management Challenges, GAO–01–779

(June 15, 2001);

(21) Department of Commerce: Status of Achieving Key Outcomes and Addressing Major Management Challenges, GAO–01–

793 (June 15, 2001);

(22) Small Business Administration: Status of Achieving Key

Outcomes and Addressing Major Management Challenges, GAO–

01–792 (June 22, 2001);

(23) Department of Transportation: Status of Achieving Key

Outcomes and Addressing Major Management Challenges, GAO–

01–834 (June 22, 2001);

(24) Department of Defense: Status of Achieving Key Outcomes and Addressing Major Management Challenges, GAO–01–

783 (June 25, 2001);

(25) Nuclear Regulatory Commission: Status of Achieving Key

Outcomes and Addressing Major Management Challenges, GAO–

01–760 (June 29, 2001);

(26) Department of Energy: Status of Achieving Key Outcomes

and Addressing Major Management Challenges, GAO–01–823

(June 29, 2001);

(27) Department of Education: Status of Achieving Key Outcomes and Addressing Major Management Challenges, GAO–01–

827 (June 29, 2001);
44

(28) Department of Housing and Urban Development: Status

of Achieving Key Outcomes and Addressing Major Management

Challenges, GAO–01–833 (July 6, 2001);

(29) Federal Emergency Management Agency: Status of

Achieving Key Outcomes and Addressing Major Management

Challenges, GAO–01–832 (July 9, 2001);

(30) Office of Personnel Management: Status of Achieving Key

Outcomes and Addressing Major Management Challenges, GAO–

01–884 (July 9, 2001);

(31) Electronic Government: Challenges Must Be Addressed

With Effective Leadership and Management, GAO–01–959T

(July 11, 2001);

(32) FBI Intelligence Investigations: Coordination Within Justice on Counterintelligence Criminal Matters Is Limited, GAO–

01–780 (July 16, 2001);

(33) Department of Justice: Status of Achieving Key Outcomes

and Addressing Major Management Challenges, GAO–01–729

(July 26, 2001);

(34) NASA: Status of Achieving Key Outcomes and Addressing

Major Management Challenges, GAO–01–868 (July 31, 2001);

(35) General Services Administration: Status of Achieving Key

Outcomes and Addressing Major Management Challenges, GAO–

01–931 (August 3, 2001);

(36) U.S. Agency for International Development: Status of

Achieving Key Outcomes and Addressing Major Management

Challenges, GAO–01–721 (August 17, 2001);

(37) Department of Agriculture: Status of Achieving Key Outcomes and Addressing Major Management Challenges, GAO–01–

761 (August 23, 2001);

(38) Presidential Appointments: Qualifications of Acting Officials at the Department of Justice Under the Federal Vacancies

Reform Act of 1998, GAO–01–1083R (September 6, 2001);

(39) Public Assistance: PARIS Project Can Help States Reduce

Improper Benefit Payments, GAO–01–935 (September 6, 2001);

(40) Critical Infrastructure Protection: Significant Challenges

in Protecting Federal Systems and Developing Analysis and

Warning Capabilities, GAO–01–1132T (September 12, 2001);

(41) Homeland Security: A Framework for Addressing the Nation’s Efforts, GAO–01–1158T (September 21, 2001);

(42) Financial Audit: Independent and Special Counsel Expenditures for the Six Months Ended March 31, 2001, GAO–01–

1035 (September 28, 2001);

(43) Electronic Government: Better Information Needed on

Agencies’ Implementation of the Government Paperwork Elimination Act, GAO–01–1100 (September 28, 2001);

(44) Financial Management: FFMIA Implementation Critical

for Federal Accountability, GAO–02–29 (October 1, 2001);

(45) Combating Terrorism: Considerations for Investing Resources in Chemical and Biological Preparedness, GAO–02–162T

(October 17, 2001);

(46) Homeland Security: A Risk Management Approach Can

Guide Preparedness Efforts, GAO–02–208T (October 31, 2001);
45

(47) Financial Management: Improper Payments Reported in

Fiscal Year 2000 Financial Statements, GAO–02–131R (November 2, 2001);

(48) Ambulance Services: Changes Needed to Improve Medicare Payment Policies and Coverage Decisions, GAO–02–244T

(November 15, 2001);

(49) NASA: Status of Plans for Achieving Key Outcomes and

Addressing Major Management Challenges, GAO–02–184 (November 27, 2001);

(50) Changed Interpretation of Requirements Related to First

Assistants Under the Federal Vacancies Reform Act of 1998,

GAO–02–272R (December 7, 2001);

(51) Department of State: Status of Achieving Key Outcomes

and Addressing Major Management Challenges, GAO–02–42 (December 7, 2001);

(52) United States Postal Service: Information on Retirement

Plans, GAO–02–170 (December 31, 2001);

(53) 2000 Census: Coverage Evaluation Interviewing Overcame Challenges, but Further Research Needed, GAO–02–26

(December 31, 2001);

(54) Managing for Results: Agency Progress in Linking Performance Plans With Budgets and Financial Statements, GAO–

02–236 (January 4, 2002);

(55) Charitable Choice: Overview of Research Findings on Implementation, GAO–02–337 (January 18, 2002);

(56) Human Services Integration: Results of a GAO Cosponsored Conference on Modernizing Information Systems, GAO–02–

121 (January 31, 2002);

(57) 2000 Census: Best Practices and Lessons Learned for

More Cost-Effective Nonresponse Follow-up, GAO–02–196 (February 11, 2002);

(58) Regulatory Review: Delay of Effective Dates of Final

Rules Subject to Administration’s January 20, 2001, Memorandum, GAO–02–370R (February 15, 2002);

(59) Information Technology: Enterprise Architecture Use

Across the Federal Government Can Be Improved, GAO–02–6

(February 19, 2002);

(60) Information Resources Management: Comprehensive Strategic Plan Needed to Address Mounting Challenges, GAO–02–

292 (February 22, 2002);

(61) U.S. Postal Service: Deteriorating Financial Outlook Increases Need for Transformation, GAO–02–355 (February 28,

2002);

(62) Competitive Sourcing: Challenges in Expanding A–76

Government wide, GAO–02–498T (March 6, 2002);

(63) Financial Audit: Independent and Special Counsel Expenditures for the Six Months Ended September 30, 2001, GAO–

02–443 (March 29, 2002);

(64) Electronic Government: Challenges to Effective Adoption

of the Extensible Markup Language, GAO–02–327 (April 5,

2002);

(65) Homeland Security: Responsibility and Accountability for

Achieving National Goals, GAO–02–627T (April 11, 2002);
46

(66) Export Controls: Rapid Advances in China’s Semiconductor Industry Underscore Need for Fundamental U.S. Policy

Review, GAO–02–620 (April 19, 2002);

(67) Performance Reporting: Few Agencies Reported on the

Completeness and Reliability of Performance Data, GAO–02–372

(April 26, 2002);

(68) Energy Markets: Concerted Actions Needed by FERC To

Confront Challenges That Impede Effective Oversight, GAO–02–

656 (June 14, 2002);

(69) Homeland Security: New Department Could Improve Coordination but May Complicate Priority Setting, GAO–02–893T

(June 28, 2002);

(70) Critical Infrastructure Protection: Federal Efforts Require

a More Coordinated and Comprehensive Approach for Protecting

Information Systems, GAO–02–474 (July 15, 2002);

(71) SEC Operations: Implications of Alternative Funding

Structures, GAO–02–864 (July 16, 2002);

(72) Contract Management: Interagency Contract Programs

Need More Oversight, GAO–02–734 (July 25, 2002);

(73) Human Capital Flexibilities, GAO–02–1050R (August 9,

2002);

(74) Financial Management: Coordinated Approach Needed to

Address the Government’s Improper Payments Problems, GAO–

02–749 (August 9, 2002);

(75) Charitable Choice: Federal Guidance on Statutory Provisions Could Improve Consistency of Implementation, GAO–02–

887 (September 10, 2002);

(76) Building Security: Interagency Security Committee Has

Had Limited Success in Fulfilling Its Responsibilities, GAO–02–

1004 (September 17, 2002);

(77) Information Management: Selected Agencies’ Handling of

Personal Information, GAO–02–1058 (September 30, 2002);

(78) Financial Audit: Independent Counsel Expenditures for

the Six Months Ended March 31, 2002, GAO–02–1068 (September 30, 2002);

(79) Program Evaluation: Strategies for Assessing How Information Dissemination Contributes to Agency Goals, GAO–02–923

(September 30, 2002);

(80) Financial Management: FFMIA Implementation Necessary to Achieve Accountability, GAO–03–31 (October 1, 2002);

(81) United States Postal Service: Opportunities to Strengthen

IT Investment Management Capabilities, GAO–03–3 (October 15,

2002);

(82) Nonproliferation: Strategy Needed to Strengthen Multilateral Export Control Regimes, GAO–03–43 (October 25, 2002);

(83) Performance and Accountability: Reported Agency Actions

and Plans to Address 2001 Management Challenges and Program Risks, GAO–03–225 (October 31, 2002);

(84) Building Security: Security Responsibilities for Federally

Owned and Leased Facilities, GAO–03–8 (October 31, 2002);

(85) Electronic Government: Selection and Implementation of

the Office of Management and Budget’s 24 Initiatives, GAO–03–

229 (November 22, 2002);
47

(86) Human Capital: Effective Use of Flexibilities Can Assist

Agencies in Managing Their Workforces, GAO–03–2 (December

6, 2002);

(87) Information Technology Services: Agencies Complying

with Revision to Federal Acquisition Regulation, GAO–03–32

(December 18, 2002);

(88) Natural Gas: Analysis of Changes in Market Price, GAO–

03–46 (December 18, 2002);

(89) Homeland Security: Management Challenges Facing Federal Leadership, GAO–03–260 (December 20, 2002);

(90) Results-Oriented Management: Agency Crosscutting Actions and Plans in Drug Control, Family Poverty, Financial Institution Regulation, and Public Health Systems, GAO–03–320 (December 20, 2002); and

(91) Results-Oriented Management: Agency Crosscutting Actions and Plans in Border Control, Flood Mitigation and Insurance, Wetlands, and Wildland Fire Management, GAO–03–321

(December 20, 2002).

VI. OFFICIAL COMMUNICATIONS

During the 107th Congress, 927 official communications were referred to the Committee. Of these, 914 were Executive Communications, 7 were Petitions or Memorials, 6 were Presidential Messages,

and 227 of the official communications were reports on District of

Columbia legislation.

VII. LEGISLATIVE ACTIONS

The Committee was highly productive in the 107th Congress. Important legislation was reported by the Committee, approved by

Congress and signed by the President in a variety of areas within

the Committee’s jurisdiction.

The following are brief legislative histories of measures referred

to the Committee and, in some cases, drafted by the Committee,

which (1) became public law; (2) were favorably reported from the

Committee and passed by the Senate; and (3) were favorably reported from the Committee but were not subject to further action.

For information not included in this section, refer to the Committee’s Legislative Calendar.

MEASURES ENACTED INTO LAW

S. 271/H.R. 93—To Provide That the Mandatory Separation Age

for Federal Firefighters Be Made the Same as the Age That Applies With Respect To Federal Law Enforcement Officers (Public

Law 107–27)

This legislation raises the mandatory separation age for Federal

firefighters from 55 to 57, which is the age that had already applied with respect to Federal law enforcement officers. The purpose

of the legislation is to enable willing and able Federal fire fighters

to continue to serve, and to remove the existing inequity that requires firefighters to retire at a younger age than law enforcement

officers.
48

S. 271 was introduced by Senator Feinstein on February 7, 2001,

and garnered 12 cosponsors. The bill was referred to the Committee and was further referred to the Subcommittee on International Security, Proliferation and Federal Services on March 20,

2001. The same measure had been introduced previously in the

House of Representatives as H.R. 93 on January 3, 2001, passed

the House on January 30, 2001, and was referred in the Senate to

the Committee and the Subcommittee. Both bills were then polled

out by the Subcommittee and, on August 2, 2001, were ordered reported favorably by the Committee by voice vote; the bills were reported the same day, without written report. H.R. 93 passed the

Senate by unanimous consent on August 3, 2001, and was signed

by the President on August 20, 2001.

S. 803/H.R. 2458—The E-Government Act (Public Law 107–347)

The E-Government Act of 2002 seeks to improve the organization

and delivery of information and services over the Internet, and establishes a new IT management framework to transform the way

government operates. Senator Lieberman (then the Ranking Minority Member) introduced the E-Government Act on May 1, 2001,

with 11 original co-sponsors from both parties. At a Committee

hearing held on July 11, 2001, OMB Deputy Sean O’Keefe testified

in support of e-government, and promised to work with the Committee to arrive at consensus legislation. On March 21, 2002, the

Committee unanimously ordered by voice vote the bill reported

with an amendment in the nature of a substitute. The bill was reported to the Senate on June 24, 2002 (S. Rept. 107–174), and it

passed the Senate by unanimous consent, with an amendment to

the Committee’s substitute, on June 27, 2002. In September, the

House Government Reform Committee began to consider the legislation. An agreement, adding several new provisions, was reached

between the House and Senate Committees before final passage.

The revised legislation passed both the House and Senate, by

unanimous consent, as H.R. 2458 on November 15, 2002. The

President signed the legislation on December 17, 2002.

The Act will, among other things, create an Office of Electronic

Government, headed by a Presidentially-appointed Administrator,

to provide focused, top level-leadership on e-government and information technology issues. The Administrator will allocate money

from a substantial E-Government Fund to support interagency

projects and other innovative programs. The Act requires that information and services on the Internet be organized according to

citizens’ needs, rather than agency jurisdiction, and accessible from

a single point, or portal. Several provisions require that government information be better organized and made more easily searchable. Sweeping new privacy protections will require government officials to consider the privacy ramifications when developing IT

systems or beginning information collections. The Act also addresses an impending shortage of skilled information technology professionals in the Federal workforce; requires agencies to conduct their

rule-making online; and directs courts to post their judicial opinions and other court information. Finally, the Act reauthorizes and

makes permanent the information security provisions originally authored by Senators Thompson and Lieberman in the 106th Con-
49

gress; the information security provisions appearing in the final bill

were expanded upon with the addition of House legislation, the

Federal Information Security Management Act.

S. 1198—A Bill to Reauthorize Franchise Fund Pilot Programs

(Public Law 107–67)

This bill provides a one year extension of the October 2001 sunset date for the franchise fund pilot program. Under this pilot program, created in 1994, six agencies can create franchise funds,

which are fully self-supporting business-like entities staffed by

Federal employees that compete to provide common administrative

services such as financial and administrative systems operations.

Chairman Lieberman and Ranking Member Thompson introduced

this bill on July 19, 2001. The Committee ordered it to be reported

out of Committee by voice vote on August 2, 2001, and it was reported to the Senate the same day without a written report. On

August 3, 2001, the bill passed the Senate by unanimous consent.

At the request of the Administration, a similar provision was included in the Treasury and General Government Appropriations

Act for fiscal year 2002. The House passed the appropriations bill

on October 31, the Senate passed it by unanimous consent on November 1, and the President signed it into law on November 12,

2001.

S. 1202—Authorization of Appropriations for the Office of Government Ethics (Public Law 107–119)

This legislation extends the authorization of appropriations for

the Office of Government Ethics (OGE) for 5 years, through the

2006 fiscal year. OGE was established by the Ethics in Government

Act of 1978 to help foster high ethical standards for employees in

the Executive Branch. OGE’s authorization for appropriations

lapsed after September 30, 2000, and, although both the Senate

and the House passed reauthorization bills in November of that

year, neither bill was enacted.

S. 1202 was introduced by Chairman Lieberman and Ranking

Minority Member Thompson on July 19, 2001, and was referred to

the Committee. The bill was ordered favorably reported by voice

vote on August 2, 2001, was reported with a written report on October 30, 2001 (S. Rept. 107–88), and passed the Senate by unanimous consent on November 15, 2001. The bill then passed the

House of Representatives by voice vote under suspension of the

rules on December 20, 2001, and was signed by the President on

January 15, 2002.

S. 1256—To Provide for the Reauthorization of the Breast Cancer

Research Special Postage Stamp (Public Law 107–67)

This bill extends the sales period of the breast cancer research

postage stamp for an additional 6 years beyond its scheduled sunset date of July 2002. The breast cancer research stamp was the

first so-called ‘‘semi-postal’’ stamp issued by the Postal Service; it

is priced to raise money for breast cancer research in addition to

covering the cost of first class postage. As of March 2002, the

stamp had raised more than $23 million for research.
50

The bill was introduced by Senator Feinstein on July 26, 2001

and had 86 co-sponsors. It was referred to the Committee and was

subsequently referred to the Subcommittee on International Security, Proliferation, and Federal Services on September 10, 2001. A

revised version of the legislation was added to the Treasury and

General Government Appropriations Act for fiscal year 2002, which

extended the sales period for the stamp until December 31, 2003.

It was signed into law by the President on November 12, 2001.

S. 1271/H.R. 327—Small Business Paperwork Relief Act (Public

Law 107–198)

The purpose of this legislation is to facilitate compliance by small

business entities with Federal paperwork requirements and to establish a task force to examine information collection and dissemination. The legislation aids small businesses in understanding and

complying with Federal information-collection requirements, mandates a study of how to streamline information-collection requirements for small businesses and how to strengthen the dissemination of information by the Federal Government, and directs that

certain data be compiled about enforcement activities involving

small entities.

S. 1271 was introduced by Senators Voinovich, Lincoln, and

Leahy on July 30, 2001, eventually garnering 15 co-sponsors. On

November 14, 2001, the Committee agreed to an amendment in the

nature of a substitute developed by Senator Voinovich in consultation with Chairman Lieberman, and ordered it favorably reported.

The bill was reported by the Committee on November 27, 2001, and

passed the Senate by unanimous consent on December 17, 2001. (A

written report, S. Rept. 107–153, was filed May 21, 2002.)

H.R. 327, a bill similar to S. 1271, had previously been introduced in the House of Representatives on January 31, 2001, passed

the House on March 15, 2001, and was referred to the Committee.

Following Senate passage of S. 1271, Chairman Lieberman and

Senator Voinovich worked with the sponsors of H.R. 327 and other

interested Representatives to develop consensus legislation, in the

form of an amendment in the nature of a substitute to H.R. 327.

On May 22, 2002, by unanimous consent, H.R. 327 was discharged

from the Committee, the consensus substitute amendment was

agreed to, and the substitute legislation was passed. The House

agreed to the substitute by unanimous consent on June 18, 2002,

and the President signed the bill June 28, 2002.

S. 1286/H.R. 2590—Child Care Affordability for Federal Employees

(Public Law 107–67)

Legislation establishing permanent authority for a child-care

benefit for Federal employees was introduced in the Committee,

and was later incorporated and enacted as part of the Treasury,

Postal and General Government Appropriations Act for fiscal year

2002 (H.R. 2590). This measure makes permanent a pilot program

first authorized by Congress in 1999 that allows agencies to use appropriated funds to provide childcare for their employees, for the

purpose of making childcare more affordable for lower-income employees. The program strengthens the Federal Government’s ability

to attract and retain quality employees.
51

S. 1286 was introduced by Senator Carnahan on August 1, 2001,

and garnered 13 co-sponsors. The bill was referred to the Committee and on September 10, 2001 was further referred to the Subcommittee on International Security, Proliferation and Federal

Services. The measure was incorporated by the Committee on Appropriations into S. 1398, the Treasury and General Government

Appropriations Act for fiscal year 2002, which was reported on September 4, 2001, incorporated by the Senate into the corresponding

House appropriations bill, H.R. 2590, and passed on September 19,

2001. The conference report on H.R. 2590, in which the child-care

measure was retained (as § 630), passed the House and Senate and,

on November 12, 2001, was signed by the President.

S. 1498/S. 1438—Extending Frequent Flyer Benefits to Military

Personnel and Civilian Employees (Public Law 107–107)

Legislation extending frequent flyer benefits to Federal military

personnel and civilian employees was introduced and ordered reported by the Committee, and was then incorporated and enacted

as part of the Defense Authorization Act for fiscal year 2002 (S

1438; Public Law 107–107 § 1116). This legislation allows Federal

personnel to make use of promotional benefits, such as frequent

flyer miles, that they receive as a result of official government travel. The measure corrects an inequity that exists between government and private sector employees for work-related travel and

should serve to boost employee morale and enhance Federal recruitment and retention. The military departments, other Executive Branch agencies, the Judicial Branch, and the congressional

instrumentalities are covered.

S. 1498 was introduced by Chairman Lieberman on October 3,

2001, and co-sponsored by Senators Thompson, Akaka, Warner,

and Voinovich. The bill was referred to the Committee and further

referred on October 4, 2001 to the Subcommittee on International

Security, Proliferation and Federal Services. The bill was polled out

by the Subcommittee and, on November 14, 2001, the Committee

ordered the bill reported favorably by voice vote.

Previously, on September 7, 2001, the Senate Armed Services

Committee had ordered reported the National Defense Authorization Act for Fiscal Year 2002, S. 1416, including a limited version

of the frequent flyer measure that had been offered by Senators

Lieberman and Warner in their capacities, respectively, as a Member and the Ranking Member of that Committee. A later version

of the defense authorization legislation, including the limited frequent flyer measure, was introduced as S. 1438 on September 19,

2001, and passed the Senate on October 2, 2001. After the Governmental Affairs Committee’s favorable action on S. 1498, the conferees considering S. 1438 incorporated the full text of S. 1498 into

the conference report, which was filed on December 12, 2001 (H.

Rept. 107–333), passed the House and Senate on December 13,

2002 (when Chairman Lieberman placed a section-by-section description of the frequent-flyer measure into the Congressional

Record, printed at pages S 13137–S 13138), and was signed by the

President on December 28, 2001.
52

S. 1713—Rural Service Improvement Act of 2002 (Public Law 107–

206)

This legislation was introduced by Senator Stevens on November

15, 2001 to improve and reduce the costs to the United States Postal Service of the Alaska bypass mail program. This program uses

a system of contract aircraft to deliver mail and supplies to remote

areas of Alaska. On May 22, 2002, S. 1713 was ordered to be reported out of the Committee by voice vote, with an amendment in

the nature of a substitute. Its provisions were included as § 3002

of the supplemental appropriations bill for Fiscal Year 2002, which

was signed into law by the President on August 2, 2002.

S. 1780/H.R. 5005—Federal Emergency Procurement Flexibility Act

of 2001 (Public Law 107–296)

Ranking Minority Member Thompson introduced this legislation

on December 6, 2001, to provide increased flexibility governmentwide for the procurement of property and services that might facilitate the defense against terrorism. The bill provides a 2-year authorization of streamlined acquisition authorities and procedures

for certain purchases and contracts related to humanitarian operations and defenses against terrorism or a nuclear, biological,

chemical or radiological attack. Related legislation—without the 2-

year limitation—was later included in the Homeland Security Act,

H.R. 5005 (at §§ 851–858), which was signed into law on November

25, 2002.

S. 1822/H.R. 3340—Allowing Catch-up Contributions to the Thrift

Savings Plan by Participants Age 50 and Over (Public Law

107–304)

This legislation allows Federal employees who participate in the

Thrift Savings Plan (TSP) and are over 50 years old to take advantage of ‘‘catch-up’’ contributions, allowing the Federal Government’s

tax-deferred plan to do what private sector plans may already

choose to do. An earlier change in the tax code applied to both private and public tax qualified plans, including the TSP, but this program could not be initiated for the TSP until the implementing

amendments in this legislation were enacted.

S. 1822 was introduced by Senator Akaka on December 13, 2001,

and was referred to the Committee and further referred to the Subcommittee on International Security, Proliferation and Federal

Services. The bill was polled out of the Subcommittee and, on

March 21, 2002, was ordered reported by the Committee by voice

vote. In the House of Representatives, the measure was introduced

on November 19, 2001, as H.R. 3340 and, with two unrelated measures added to the bill, was passed by the House on October 7, 2002.

The Senate passed H.R. 3340 by unanimous consent on November

13, 2002, and the President signed the bill on November 27, 2002.

S. 1867/H.R. 4628—To Establish the National Commission on Terrorist Attacks Upon the United States (Public Law 107–306)

This bill establishes a blue-ribbon independent commission to investigate the facts and circumstances of the terrorist attacks of

September 11, 2001, and to report its findings and recommendations to the President and Congress.
53

Chairman Lieberman introduced S. 1867, with Senator McCain

as chief co-sponsor on December 20, 2001. The Commission’s scope

will extend to all relevant areas, including intelligence agencies,

law enforcement agencies, diplomacy, immigration, the flow of assets to terrorist organizations, commercial aviation, and other

areas of the public and private sectors. The Commission has subpoena power, and is directed to report its findings within 18

months.

On March 21, 2002, by unanimous voice vote, the Committee ordered the bill reported with an amendment in the nature of a substitute; the bill was reported on May 14, 2002 (S. Rept. 107–150).

On September 24, 2002, the Senate adopted a slightly modified

version of the commission legislation as an amendment to Homeland Security legislation, H.R. 5005, by a vote of 90–8. The commission language was later removed from the final version of the

Homeland Security Act. On November 15, 2002, the House and

Senate adopted a modified version of S. 1867 as an addition to the

conference report of the Intelligence Authorization Act of 2002,

H.R. 4628 (Title VI). The Act was signed into law on November 27,

2002.

S. 2452/H.R. 5005—To Establish the Department of Homeland Security (Public Law 107–296)

This landmark legislation fundamentally reorganized the Federal

Government for the 21st Century to meet the threat of terrorism

and other threats to our homeland security. With an organizational

structure based largely on legislation introduced and developed

first by Chairman Lieberman, the Homeland Security Act of 2002

(HSA) represents the most significant reorganization of our Nation’s government in a half century. It has combined key agencies

with responsibilities for homeland security into a single agency,

that is led by a Senate-confirmed Secretary. It focuses leadership

and resources on key areas for securing our homeland by creating

directorates within the Department for: (1) information analysis

and infrastructure protection, (2) border and transportation security, (3) emergency preparedness and response, and (4) science and

technology. Some 170,000 employees will work for the new Department.

The HSA is the result of over a year of deliberations begun on

October 11, 2001, when Chairman Lieberman introduced legislation (S. 1534) with Senator Specter to create a Department of

Homeland Security. After the Committee held hearings to examine

ways to improve the government’s organization to protect our

homeland, S. 1534 was combined with legislation by Senator

Graham, creating a White House Office for Combating Terrorism,

and became S. 2452, which was ordered reported by the Committee

with amendments on May 22, 2002. The bill was reported to the

Senate on June 24, 2002 (S. Rept. 107–175). Before the Senate had

a chance to consider that bill, however, the President dropped his

opposition to the legislation and announced his support for a Department of Homeland Security and released his own proposed legislation to create such a Department.

The Committee held further hearings to consider the Administration’s proposals, and Senator Lieberman prepared an amendment
54

to S. 2452 that was considered, and approved, at a July 24–25 business meeting of the Committee. That expanded version of S. 2452

went a considerable way to incorporate important elements of the

Administration’s organizational proposals as well as key proposals

from Committee members, including ground-breaking consensus

provisions on civil service reform prepared by Senators Voinovich

and Akaka. The Committee bill did not include the Administration’s broad provisions to rewrite personnel rules, remove assurances that collective bargaining rights would not be taken away

from employees of the new Department, and turn over broad authority to the Executive Branch in a number of areas, including appropriations and reorganizations.

In late July, the House of Representatives passed its version of

the Homeland Security Department bill, H.R. 5005. This House bill

became the base bill for floor consideration in the Senate, and on

September 4, 2002, the amended version of S. 2452 was offered on

the Senate floor as S. Amdt. 4471 to H.R. 5005. Debate on H.R.

5005 continued in the Senate through September and October of

2002. A significant portion of the debate focused on whether the

Administration would be granted broad new authorities to rewrite

rules of collective bargaining and civil service protections. A number of cloture motions were unsuccessful. On November 13, 2002,

the House passed another version of the legislation (H.R. 5710); the

text of H.R. 5710 was subsequently offered in the Senate as a full

substitute to H.R. 5005. On November 19, 2002, the Senate passed

the legislation by a vote of 90–9. The House agreed to the Senate

amendment by unanimous consent on November 22, 2002. President Bush signed the Department of Homeland Security Act of

2002 (H.R. 5005; Public Law 107–296) into law on November 25,

2002. As enacted, H.R. 5005 is very similar in its organizational

components to the legislation that was approved by the Senate

Governmental Affairs Committee. However, the legislation differed

from the Committee-approved bill in some significant respects, including the authority granted to the Secretary to alter civil service

procedures and remedies and collective bargaining rights of employees of the new Department.

S. 2527/H.R. 3340—Providing Coverage under the Federal Employees Health Benefit Plan for Employees of the Oversees Private

Investment Corporation, Now Under a Separate Plan (Public

Law 107–304)

This legislation, introduced at the request of the Overseas Private Investment Corporation (OPIC), allows OPIC to terminate its

separate employee health insurance plan by transferring about 40

employees and retirees from the plan to the government-wide Federal Employees Health Benefit Program administered by the Office

of Personnel Management. Due to rising healthcare costs and other

factors, it had become inefficient and impractical for OPIC to continue offering a separate employee health plan.

S. 2527 was introduced by Senator Akaka and Senator Cochran,

on May 16, 2002, and was referred to the Committee and further

referred to the Subcommittee on International Security, Proliferation and Federal Services. After being polled out by the Subcommittee, S. 2527 was ordered reported by the Committee on Oc-
55

tober 9, 2002 by a roll call vote of 9–0, was reported on October

15, 2002 without written report, and passed the Senate by unanimous consent on October 17, 2002. The same legislation had been

added to H.R. 3340 (as § 4) as it passed the House of Representatives on October 7, 2002. The Senate passed H.R. 3340 by unanimous consent on November 13, 2002, and the President signed the

bill on November 27, 2002.

S. 2530/H.R. 5005—Provides Law Enforcement Powers for Inspector General Agents (Public Law 107–296)

Legislation to provide law enforcement powers to Inspector General agents was reported by the Committee and passed by the Senate as a separate bill, and was then incorporated by the Committee

and enacted as part of the Homeland Security Act. This legislation

provides specific statutory authority for the Attorney General to

grant certain law enforcement powers to presidentially-appointed

Federal Inspectors General and their investigative personnel.

Criminal investigators for the Offices of Inspector General (OIGs)

have been exercising law enforcement authorities for many years

under designations as Special Deputy U.S. Marshals. Since 1995,

virtually all criminal investigators in OIGs have exercised law enforcement authorities under office-wide deputations, which are renewed biannually. However, this arrangement was burdensome on

the U.S. Marshals Service, lacked sufficient oversight of the use of

law enforcement authority by IGs, and risked a lapse in authority

at the time of renewal. The purpose of the new legislation is to relieve the administrative burdens, provide additional oversight, and

ensure that criminal investigations are not interrupted by lapses in

the current deputation process.

S. 2530 was introduced by Ranking Minority Member Thompson

and Chairman Lieberman on May 16, 2002, and referred to the

Committee. The Committee ordered the bill reported by voice vote

on May 22, 2002, and the bill was reported with a written report

on June 25, 2002 (S. Rept. 107–176). The Chairman then incorporated this legislation into his revised version of the Homeland

Security Act, S. 2452, which the Committee endorsed, with amendments, on July 25, 2002. On October 17, 2002, S. 2530 passed the

Senate by unanimous consent, with an amendment. The Committee’s IG measure was ultimately incorporated into the final version

of H.R. 5005 (§ 812), which passed the Senate on November 19,

2002, passed the House on November 22, 2002, and was signed by

the President on November 25, 2002.

S. 2644/H.R. 4685—Accountability of Tax Dollars Act of 2002 (Public Law 107–289)

S. 2644 was introduced by Senator Fitzgerald on June 19, 2002

to expand the types of Federal agencies that are required to prepare audited financial statements each year, beginning in March

2003. Prior to the introduction of this bill, only the 24 major departments and agencies were required by law to do so, although

several independent agencies such as the Federal Communications

Commission and the Federal Trade Commission were doing so voluntarily. The bill was ordered to be reported out by the Committee

on October 9, 2002 by a roll call vote of 9–0, with a substitute
56

amendment offered by Senator Fitzgerald that conformed its provisions to those of H.R. 4685 as passed by the House. The bill was

reported on October 16, 2002, and a written report was filed on November 4, 2002 (S. Rept. 107–331). The Senate passed H.R. 4685

by unanimous consent on October 17, 2002, and that legislation

was signed into law by the President on November 7, 2002.

S. 2651/H.R. 5005—Federal Workforce Improvement Provisions

(Public Law 107–296)

A number of measures to improve management of the Federal

workforce government-wide were considered by the Committee as

part of a stand-alone bill, and were then incorporated by the Committee and enacted as part of the Homeland Security Act. These

measures include provisions: to require that each agency have a

Chief Human Capital Officer to assist in managing a high-quality

workforce, to loosen some of the civil service rules governing the

hiring of employees, and to increase authority to grant voluntary

separation incentive pay and voluntary early retirement as tools for

shaping the workforce.

S. 2651, the Federal Workforce Improvement Act of 2002, was introduced by Senator Voinovich on June 20, 2002, and was referred

to the Committee and further referred to the Subcommittee on

International Security, Proliferation and Federal Services (ISPFS).

This bill built on provisions of S. 1603, which Senator Voinovich

had introduced on October 31, 2001.

Senators Voinovich and Akaka reached agreement on several

measures from S. 2651, and offered them during the Committee’s

consideration of the Chairman’s amendment in the nature of a substitute to S. 2452, the Homeland Security Act. The Committee

agreed by voice vote to the Voinovich/Akaka amendment, and, on

July 25, 2002, voted to endorse the Chairman’s substitute, with

amendments. These Federal workforce provisions were ultimately

incorporated into the final version of H.R. 5005 (Title XIII), which

passed the Senate on November 19, 2002, passed the House on November 22, 2002, and was signed by the President on November 25,

2002.

S. 3044—Court Services and Offender Supervision Agency Interstate

Supervision Act of 2002 (Public Law No. 107–302)

The bill makes clear that the Court Services and Offender Supervision Agency of the District of Columbia (CSOSA) is responsible

for arranging for the supervision of District of Columbia parolees,

probationers, and released offenders who seek to move out of the

District of Columbia, and also for supervising parolees, probationers, and released offenders from other States and U.S. territories who seek to move to the District of Columbia. In addition,

in order for the agency to meet these interstate obligations, the bill

authorizes CSOSA to enter into an Interstate Compact for Adult

Offender Supervision or other agreements with other States and

U.S. territories. S. 3044 was introduced by Senator Durbin on October 3, 2002, and was ordered to be reported without amendment

by the Committee on October 9, 2002 by a roll call vote of 9–0. The

bill was reported to the Senate on October 15, 2002, and a written

report was filed on November 4, 2002 (S. Rept. 107–332). The Sen-
57

ate passed the bill by unanimous consent on November 13, 2002,

and the bill was passed by the House of Representatives on November 15, 2002. The President signed S. 3044 into law on November

26, 2002.

S. 3070/H.R. 3340—Reauthorizing Appropriations for the Merit

Systems Protection Board and the Office of Special Counsel

(Public Law No. 107–304)

The Merit Systems Protection Board (MSPB) and the Office of

Special Counsel (OSC) administer programs and procedures to

safeguard the Federal Government’s merit-based system of employment and protect Federal employees against improper personnel

practices, particularly those Federal employees who step forward to

disclose government waste, fraud, and abuse. The authorization for

appropriations for MSPB expired in 2002 and for OSC expired in

1997; this legislation extends the authorizations through the end of

the 2007 fiscal year.

S. 3070 was introduced by Senators Akaka and Levin on October

8, 2002, and was referred to the Committee. In addition to the reauthorization provisions, this bill contained a number of measures

to clarify and strengthen the protection of whistleblowers against

reprisal, building on provisions introduced by these and other Senators in S. 2829 and S. 995. S. 3070 also removes the requirement

for OSC to return all documents to the whistleblower in all disclosure cases that are closed without referral to an agency head. The

bill was ordered reported by the Committee on October 9, 2002 by

a roll call vote of 9–0, and was reported with a written report (S.

Rept. 107–349) on November 19, 2002. The same provisions reauthorizing the MSPB and OSC for 5 years and relieving OSC of the

requirement to return documents (but not the additional whistleblower provisions) had been added to H.R. 3340 (at §§ 2–3) as it

passed the House of Representatives on October 7, 2002. The Senate passed H.R. 3340 by unanimous consent on November 13, 2002,

and the President signed the bill on November 27, 2002.

H.R. 169/S. 201—Notification and Federal Employee Antidiscrimination and Retaliation Act of 2002 (Public Law 107–174)

This bill seeks to hold Federal agencies financially accountable

for violations of discrimination and whistleblower protection laws.

The Act requires Federal agencies to reimburse the Treasury for

settlements and judgments paid to employees as a result of antidiscrimination and whistleblower protection complaints. Prior to

the enactment of this law, agencies paid these costs when complaints were resolved administratively, but not when monetary relief (whether by settlement or judicial judgment) followed the filing

of a lawsuit. In such cases, the costs were generally paid by the

Judgment Fund, a permanently authorized fund administered by

the Treasury.

H.R. 169 was introduced on January 3, 2001 by Representative

James Sensenbrenner. On October 2, 2001, the House unanimously

passed the legislation and on October 3, 2001, H.R. 169 was referred to the Committee. Similar legislation, the Federal Employees Protection Act of 2001, was introduced on January 29, 2001 by

Senator John Warner as S. 201 and was referred to the Committee.
58

The Subcommittee on International Security, Proliferation, and

Federal Services considered both bills and polled out H.R. 169 and

S. 201 on March 19, 2002. On March 21, 2002, the Committee ordered reported by voice vote H.R. 169 with amendments. On April

15, 2002, the Committee ordered the bill reported to the Senate (S.

Rept. 107–143). The bill was adopted by the Senate, with additional amendments, by unanimous consent on April 23, 2002. The

House passed the bill under suspension of the rules on April 30,

2002; it was signed into law by the President on May 15, 2002.

H.R. 1042—To Prevent the Elimination of Certain Reports (Public

Law 107–74)

This bill prevents the elimination of certain reports pursuant to

the requirements of the Federal Reports Elimination and Sunset

Act of 1995. That law eliminated or modified approximately 200 reporting requirements imposed on Federal agencies in law and by

Congress, and placed a 4-year sunset on many other reports. The

legislation was designed to reduce paperwork burdens, streamline

information flows, and save taxpayer dollars used to prepare reports that are no longer necessary. The bill put the burden on the

President and Congressional committees to determine which reports they believed were necessary and which were not—and it

gave them 4 years to do it.

The House Science Committee subsequently determined that 29

reports relevant to its oversight responsibilities, which would be

eliminated pursuant to the sunset provisions of Federal Reports

Elimination and Sunset Act of 1995, were still necessary. H.R.

1042 exempts these and other reports from elimination.

H.R. 1042 was introduced in the House of Representatives by

Representative Felix Grucci on March 15, 2001. On March 21,

2001, the House passed the legislation under suspension of the

rules. On March 22, 2001, the legislation was referred in the Senate to the Committee. On August 2, 2001, the Committee ordered

the bill by voice vote to be reported without amendment; the bill

was reported to the Senate on October 31, 2001 (S. Rept. 107–90).

On November 15, 2001, H.R. 1042 was passed by the Senate without amendment by unanimous consent. The legislation was signed

into law on November 28, 2001.

H.R. 1499—District of Columbia College Access Improvement Act of

2002 (Public Law 107–157)

This bill expands the District of Columbia Tuition Assistance

Grant program to provide grants to eligible District residents to attend Historically Black Colleges nationwide, and to make eligible

those District residents meeting certain specified criteria who graduated high school in or after 1998 or who were attending eligible

institutions at the time of enactment of H.R. 1499, no matter when

they graduated high school. H.R. 1499 was introduced in the House

of Representatives on April 4, 2001 by Representative Eleanor

Holmes Norton. It passed the House under suspension of the rules

on July 30, 2001. The Committee ordered H.R. 1499 to be reported

by voice vote with an amendment in the nature of a substitute on

November 14, 2001; the bill was reported on November 29, 2001 (S.

Rept. 107–101). The bill, as amended, passed the Senate on Decem-
59

ber 12, 2001 by unanimous consent, and passed the House of Representatives with further amendments on March 12, 2002. The

Senate cleared the final version of the legislation on March 14,

2002 by unanimous consent and the President signed H.R. 1499

into law on April 4, 2002.

H.R. 2061—To Amend the Charter of Southeastern University of the

District of Columbia (Public Law 107–93)

H.R. 2061 lifts the requirement in the charter of Southeastern

University, which was incorporated by an act of Congress in 1937,

that one third of its Board of Trustees consist of alumni. H.R. 2061

was introduced in the House on June 5, 2001 by Representative Eleanor Holmes Norton. It passed the House under suspension of the

rules on September 20, 2001. The Committee ordered H.R. 2061 be

reported without amendment on November 14, 2001, by voice vote;

the bill was reported on November 29, 2001 (S. Rept. 107–102), and

it passed the Senate by unanimous consent on December 6, 2001.

The President signed the bill into law on December 21, 2001.

H.R. 2199—District of Columbia Police Coordination Amendment

Act of 2001 (Public Law 107–113)

This bill corrects a drafting error in Section 11712(d) of the National Capital Revitalization and Self-Government Improvement

Act of 1997 (D.C. Code, Sec. 4–192(d), recodified at D.C. Code, Sec.

5–133.17), in order to permit all Federal enforcement agencies in

the District of Columbia to enter into cooperative agreements with

the Metropolitan Police Department to further crime prevention

and law enforcement in Washington, D.C. The 1997 Act contained

a list of enforcement agencies that omitted mention of one.

H.R. 2199 was introduced in the House on June 14, 2001 by Representative Eleanor Holmes Norton. On September 25, 2001, the

House passed the bill under suspension of the rules. The Committee ordered H.R. 2199 reported without amendment on November 14, 2001, by voice vote; the bill was reported on November 29,

2001 (S. Rept. 107–103). The bill and a technical amendment were

passed by the Senate by unanimous consent on December 11, 2001,

and the bill, as amended, passed the House of Representatives

under suspension of the rules on December 19, 2001. H.R. 2199

was signed into law by the President on January 8, 2002.

H.R. 2305—Criminal Justice Coordinating Council Restructuring

Act of 2001 (Public Law 107–180)

This bill authorizes the heads of six Federal agencies, specifically, the Court Services and Offender Supervision Agency for the

District of Columbia, the District of Columbia Pretrial Services

Agency, the United States Attorney for the District of Columbia,

the Federal Bureau of Prisons, the United States Parole Commission, and the United States Marshals Service, to meet regularly

with District law enforcement officials as the ‘‘Criminal Justice Coordinating Council.’’ H.R. 2305 authorizes Federal participation

and funds for the Council, and requires it to submit to the President, Congress, and appropriate Federal and local agencies an annual report detailing its activities. H.R. 2305 was introduced by

Representative Constance Morella on June 25, 2001, and was
60

passed by the House of Representatives under suspension of the

rules on December 4, 2001. The Committee ordered H.R. 2305 reported without amendment on March 21, 2002, by voice vote; the

bill was reported on April 29, 2002 (S. Rept. 107–145), and the Senate passed the bill by unanimous consent on May 7, 2002. The

President signed H.R. 2305 into law on May 20, 2002.

H.R. 2336—Reauthorizing the Judiciary to Redact Judges’ Financial Disclosure Statements (Public Law 107–126)

A 1998 amendment to the Ethics in Government Act authorized

the Judicial Conference to redact a judge’s financial disclosure

statement to prevent the release of information that could endanger the judge, subject to a 3-year sunset expiring on December 31,

2001. H.R. 2336, as introduced, would have removed the sunset

and made the authority permanent. In response to concerns expressed by Members of the Committee and other Senators about

the redaction authority and the judiciary’s implementation of it,

the bill was amended before passage by the Senate to extend the

sunset for 4 years, rather than making redaction authority permanent.

The bill was introduced in the House of Representatives on June

27, 2001, and was passed on a motion to suspend the rules on October 16, 2001. The bill was received in the Senate and referred to

the Committee. The Committee ordered the bill reported without

amendment on November 14, 2001 by voice vote, and reported the

bill with a written report (S. Rept. 107–111) on December 7, 2001.

The Senate passed the bill by unanimous consent, with an amendment, on December 11, 2001. The House passed the bill, as amended by the Senate, under suspension of the rules on December 20,

2001, and the President signed the bill on January 16, 2002.

H.R. 2559—Amendments to the Long-Term Care Insurance Program (Public Law 107–104)

In the 106th Congress, the Committee reported out legislation

that became law, the Long-Term Care Security Act, establishing a

program under which qualified Federal personnel and retirees receiving an annuity could purchase long-term care insurance from

one or more private insurance carriers. H.R. 2559 amends the Act

to—(1) exempt premiums under the program from State and local

taxes, making the Act more consistent with other insurance programs for Federal employees and making the program more affordable to potential enrollees, and (2) expand coverage to include retired Federal employees who are not yet receiving an annuity but

who are entitled to a deferred annuity.

H.R. 2559 was introduced in the House of Representatives on

July 18, 2001, and passed the House under suspension of the rules

on October 30, 2001. The bill was received in the Senate, was referred to the Committee, and was further referred to the Subcommittee on International Security, Proliferation and Federal

Services. The bill was polled out of the Subcommittee, was ordered

reported by the Committee on November 14, 2001, by voice vote,

and was reported on November 27, 2001. A written report (S. Rept.

107–128) was filed on December 18, 2001. The bill passed the Sen-
61

ate by unanimous consent on December 17, 2001, and the President signed the bill on December 27, 2001.

H.R. 2657/S. 1382—District of Columbia Family Court Act of 2001

(Public Law No. 107–108)

This bill redesignates the Family Division of the Superior Court

of the District of Columbia as the Family Court of the Superior

Court, and makes structural changes in the Court in an effort to

promote recruitment and retention of judges trained and experienced in family law, and to provide consistency and efficiency in

the assignment of judges. In order to ensure that all families receive the benefits of this expert court, the bill requires that all family cases be heard by the court, with all those pending at the time

of enactment to be transferred to the dockets of judges or magistrates sitting on the Family Court bench. To enhance consistency

and expertise of the court, the bill requires that Family Court

judges serve 5 year terms. The bill also treats hearing commissioners, who have significant expertise in family law, as magistrates to give them additional power to move cases. In addition,

in order to help dispose of the thousands of abuse and neglect cases

pending before the court, the bill authorizes the hiring of additional

magistrates and the appointment of a special master. Finally, the

bill requires the court to have on-site a social services liaison and

to establish an electronic case management and tracking system to

be integrated with the systems of D.C. agencies providing social

services to children and families.

H.R. 2657 was introduced by Representative Tom DeLay on July

26, 2001. A related bill, S. 1382, was introduced on August 3, 2001,

by Senator DeWine, with Senator Landrieu cosponsoring. The

House of Representatives passed H.R. 2657 under suspension of

the rules on September 20, 2001; the bill was referred to the Committee, and subsequently referred to the Subcommittee on Oversight of Government Management, Restructuring and the District

of Columbia. The Committee ordered both H.R. 2657 and S. 1382

be reported with amendments in the nature of a substitute on November 14, 2001, by voice vote; the bills were reported on December 5, 2001 (S. Rept. 107–107; S. Rept. 107–108). H.R. 2657 and

an amendment were passed by the Senate by unanimous consent

on December 14, 2001. The House of Representatives passed the

bill, as amended, under suspension of the rules on December 19,

2001. The President signed H.R. 2657 into law on January 8, 2002.

H.R. 3925/S. 1913—Digital Tech Corps Act of 2002 (Public Law

107–347)

Representative Tom Davis introduced this legislation on March

12, 2002, based on similar legislation he had introduced on July 31,

2001 as H.R. 2678. Senator Voinovich introduced companion legislation on February 6, 2002, which was referred to the Committee.

It was further referred to the Subcommittee on International Security, Proliferation, and Federal Services on April 24, 2002. The legislation authorized the exchange of information technology workers

between private sector organizations and government agencies, for

periods of 6 months to 2 years. H.R. 3925 passed the House on

April 10, 2002, and was referred to the Committee. Similar provi-
62

sions were included in H.R. 2458, the E-Government Act (at

§ 209(c)), which was enacted on December 17, 2002.

H.R. 4878—Improper Payments Reduction Act of 2002 (Public Law

107–300)

H.R. 4878 requires Federal agencies to identify programs that

are vulnerable to improper payments and to estimate annually the

amount of underpayments and overpayments made by these programs, whether by the agency or through a contractor or other

third party administering the program. The bill is intended to reduce the billions of dollars in improper payments made by Federal

agencies each year. Representative Stephen Horn introduced the

bill on June 6, 2002, and it passed the House on July 9, 2002. The

bill was ordered to be reported out by the Committee on October

9, 2002 by a roll call vote of 9–0 with an amendment in the nature

of a substitute, and it was reported on October 15, 2002. A written

report was filed on November 4, 2002 (S. Rept 107–333). The Senate passed the measure by unanimous consent on October 17, 2002,

and the House agreed to the amended version on November 12,

2002. On November 26, 2002, the President signed H.R. 4878 into

law.

Postal Naming Bills

S. 737, a bill to designate the facility of the United States Postal

Service located at 811 South Main Street in Yerington, Nevada, as

the ‘‘Joseph E. Dini, Jr. Post Office’’ (Public Law 107–144).

S. 970, a bill to designate the facility of the United States Postal

Service located at 39 Tremont Street, Paris Hill, Maine, as the ‘‘Horatio King Post Office Building’’ (Public Law 107–145).

H.R. 132, a bill to designate the facility of the United States

Postal Service located at 620 Jacaranda Street in Lanai City, Hawaii, as the ‘‘Goro Hokama Post Office Building’’ (Public Law 107–

6).

H.R. 364, a bill to designate the facility of the United States

Postal Service located at 5927 Southwest 70th Street in Miami,

Florida, as the ‘‘Marjory Williams Scrivens Post Office’’ (Public Law

107–29).

H.R. 395, a bill to designate the facility of the United States

Postal Service located at 2305 Minton Road in West Melbourne,

Florida, as the ‘‘Ronald W. Reagan Post Office of West Melbourne,

Florida’’ (Public Law 107–7).

H.R. 669, a bill to designate the facility of the United States

Postal Service located at 127 Social Street in Woonsocket, Rhode

Island, as the ‘‘Alphonse F. Auclair Post Office Building’’ (Public

Law 107–261).

H.R. 670, a bill to designate the facility of the United States

Postal Service located at 7 Commercial Street in Newport, Rhode

Island, as the ‘‘Bruce F. Cotta Post Office Building’’ (Public Law

107–262).H.R. 821, a bill to designate the facility of the United

States Postal Service located at 1030 South Church Street in

Asheboro, North Carolina, as the ‘‘W. Joe Trogdon Post Office

Building’’ (Public Law 107–32).

H.R. 1183/S. 985, a bill to designate the facility of the United

States Postal Service located at 113 South Main Street in Sylvania,
63

Georgia, as the ‘‘G. Elliot Hagan Post Office Building’’ (Public Law

107–34).

H.R. 1366/S. 2217, a bill to designate the facility of the United

States Postal Service located at 3101 West Sunflower Avenue in

Santa Ana, California, as the ‘‘Hector G. Godinez Post Office Building’’ (as, Public Law 107–190).

H.R. 1374, a bill to designate the facility of the United States

Postal Service located at 600 Calumet Street in Lake Linden,

Michigan, as the ‘‘Philip E. Ruppe Post Office Building’’ (Public

Law 107–191).

S. 1906, a bill to designate the facility of the United States Postal Service located at 3698 Inner Perimeter Road in Valdosta, Georgia, as the ‘‘Major Lyn McIntosh Post Office Building’’ (Public Law

107–160).

H.R. 1748, a bill to designate the facility of the United States

Postal Service located at 805 Glen Burnie Road in Richmond, Virginia, as the ‘‘Tom Bliley Post Office Building’’ (Public Law 107–

161).

H.R. 1749, a bill to designate the facility of the United States

Postal Service located at 685 Turnberry Road in Newport News,

Virginia, as the ‘‘Herbert H. Bateman Post Office Building’’ (Public

Law 107–162).

H.R. 1753, a bill to designate the facility of the United States

Postal Service located at 419 Rutherford Avenue, N.E., in Roanoke,

Virginia, as the ‘‘M. Caldwell Butler Post Office Building’’ (Public

Law 107–35)

H.R. 1761, a bill to designate the facility of the United States

Postal Service located at 8588 Richmond Highway in Alexandria,

Virginia, as the ‘‘Herb Harris Post Office Building’’ (Public Law

107–92).

H.R. 1766, a bill to designate the facility of the United States

Postal Service located at 4270 John Marr Drive in Annandale, Virginia, as the ‘‘Stan Parris Post Office Building’’ (Public Law 107–

85).

H.R. 2043/S. 1181, a bill to designate the facility of the United

States Postal Service located at 2719 South Webster Street in Kokomo, Indiana, as the ‘‘Elwood Haynes ‘Bud’ Hillis Post Office

Building’’ (Public Law 107–36).

H.R. 2261/S. 1184, a bill to designate the facility of the United

States Postal Service located at 2853 Candler Road in Decatur,

Georgia, as the ‘‘Earl T. Shinhoster Post Office’’ (Public Law 107–

86).

H.R. 2454/S. 1381, a bill to redesignate the facility of the United

States Postal Service located at 5472 Crenshaw Boulevard in Los

Angeles, California, as the ‘‘Congressman Julian C. Dixon Post Office’’ (Public Law 107–88).

H.R. 2577, a bill to designate the facility of the United States

Postal Service located at 310 South State Street in St. Ignace,

Michigan, as the ‘‘Bob Davis Post Office Building’’ (Public Law

107–163).

H.R. 2876, a bill to designate the facility of the United States

Postal Service located in Harlem, Montana, as the ‘‘Francis

Bardanouve United States Post Office Building’’ (Public Law 107–

164).
64

H.R. 2910, a bill to designate the facility of the United States

Postal Service located at 3131 South Crater Road in Petersburg,

Virginia, as the ‘‘Norman Sisisky Post Office Building’’ (Public Law

107–165).

H.R. 3034/S. 1222, a bill to redesignate the facility of the United

States Postal Service located at 89 River Street in Hoboken, New

Jersey, as the ‘‘Frank Sinatra Post Office Building’’ (Public Law

107–263).

H.R. 3072, a bill to designate the facility of the United States

Postal Service located at 125 Main Street in Forest City, North

Carolina, as the ‘‘Vernon Tarlton Post Office Building’’ (Public Law

107–166).

H.R. 3248, a bill to designate the facility of the United States

Postal Service located at 65 North Main Street in Cranbury, New

Jersey, as the ‘‘Todd Beamer Post Office Building’’ (Public Law

107–129).

S. 2907, a bill to redesignate the facility of the United States

Postal Service located at 900 Brentwood Road, NE, in Washington,

D.C., as the ‘‘Joseph Curseen, Jr. and Thomas Morris, Jr. Processing and Distribution Center’’ (Public Law 107–225).

H.R. 3379, a bill to designate the facility of the United States

Postal Service located at 375 Carlls Path in Deer Park, New York,

as the ‘‘Raymond M. Downey Post Office Building’’ (Public Law

107–167).

H.R. 3738, a bill to designate the facility of the United States

Postal Service located at 1299 North 7th Street in Philadelphia,

Pennsylvania, as the ‘‘Herbert Arlene Post Office Building’’ (Public

Law 107–264).

H.R. 3739, a bill to designate the facility of the United States

Postal Service located at 6150 North Broad Street in Philadelphia,

Pennsylvania, as the ‘‘Rev. Leon Sullivan Post Office Building’’

(Public Law 107–265).

H.R. 3740, a bill to designate the facility of the United States

Postal Service located at 925 Dickinson Street in Philadelphia,

Pennsylvania, as the ‘‘William A. Cibotti Post Office Building’’

(Public Law 107–266).

H.R. 3789/S. 1970, a bill to designate the facility of the United

States Postal Service located at 2829 Commercial Way in Rock

Springs, Wyoming, as the ‘‘Teno Roncalio Post Office Building’’

(Public Law 107–192).

H.R. 3960, a bill to designate the facility of the United States

Postal Service located at 3719 Highway 4 in Jay, Florida, as the

‘‘Joseph W. Westmoreland Post Office Building’’ (Public Law 107–

193).

H.R. 4102/S. 2840, a bill to designate the facility of the United

States Postal Service located at 120 North Maine Street in Fallon,

Nevada, as the ‘‘Rollan D. Melton Post Office Building’’ (Public Law

107–267).

H.R. 4486/S. 2433, a bill to designate the facility of the United

States Postal Service located at 1590 East Joyce Boulevard in Fayetteville, Arkansas, as the ‘‘Clarence B. Craft Post Office Building’’

(Public Law 107–194).

H.R. 4717, a bill to designate the facility of the United States

Postal Service located at 1199 Pasadena Boulevard in Pasadena,
65

Texas, as the ‘‘Jim Fonteno Post Office Building’’ (Public Law 107–

268).

H.R. 4755, a bill to designate the facility of the United States

Postal Service located at 204 South Broad Street in Lancaster,

Ohio, as the ‘‘Clarence Miller Post Office Building’’ (Public Law

107–269).

H.R. 4794, a bill to designate the facility of the United States

Postal Service located at 1895 Avenida Del Oro in Oceanside, California, as the ‘‘Ronald C. Packard Post Office Building’’ (Public Law

107–270).

H.R. 4797/S. 2929, a bill to redesignate the facility of the United

States Postal Service located at 265 South Western Avenue, Los

Angeles, California, as the ‘‘Nat King Cole Post Office’’ (Public Law

107–271).

H.R. 4851/S. 2828, a bill to redesignate the facility of the United

States Postal Service located at 6910 South Yorktown Avenue in

Tulsa, Oklahoma, as the ‘‘Robert Wayne Jenkins Station’’ (Public

Law 107–272).

S. 2900, a bill to designate the facility of the United States Postal Service located at 6101 West Old Shakopee Road in Bloomington, Minnesota, as the ‘‘Thomas E. Burnett, Jr. Post Office

Building’’ (Public Law 107–227).

H.R. 5308, a bill to designate the facility of the United States

Postal Service located at 301 South Howes Street in Fort Collins,

Colorado, as the ‘‘Barney Apodaca Post Office’’ (Public Law 107–

283).

H.R. 5333, a bill to designate the facility of the United States

Postal Service located at 4 East Central Street in Worcester, Massachusetts, as the ‘‘Joseph D. Early Post Office Building’’ (Public

Law 107–284).

H.R. 5336/S. 2918, a bill to designate the facility of the United

States Postal Service located at 380 Main Street in Farmingdale,

New York, as the ‘‘Peter J. Ganci, Jr. Post Office Building’’ (Public

Law 107–285).

H.R. 5340/S. 2931, a bill to designate the facility of the United

States Postal Service located at 5805 White Oak Avenue in Encino,

California, as the ‘‘Francis Dayle ‘Chick’ Hearn Post Office’’ (Public

Law 107–286).

H.R. 5574, a bill to designate the facility of the United States

Postal Service located at 206 South Main Street in Glennville,

Georgia, as the ‘‘Michael Lee Woodcock Post Office’’ (Public Law

107–291).

MEASURES FAVORABLY REPORTED BY COMMITTEE AND PASSED BY

THE SENATE

S. Res. 187—Resolution Commending the Capitol Hill Community

for Their Courage and Professionalism Following the Release of

Anthrax

This Senate resolution commends the staffs of Members of Congress, the Capitol Police, the Office of the Attending Physician and

his health care staff, and other members of the Capitol Hill community for their courage, professionalism, and dedication to serving

the public in the aftermath of the September 11, 2001, attacks and
66

the release of anthrax in Senator Daschle’s office. The resolution

was introduced by Senator Cleland on December 5, 2001, and was

referred to the Committee. The resolution was ordered to be reported on March 21, 2002 by voice vote; it was reported on April

8, 2002 without written report; and it was agreed to in the Senate

by unanimous consent on April 10, 2002.

H. Con. Res. 339—Resolution Expressing the Sense of the Congress

Regarding the Bureau of the Census on the 100th Anniversary

of its Establishment

This resolution recognizes the 100th anniversary of the establishment of the Bureau of the Census, and acknowledges the achievements and contributions of the Bureau of the Census, and of its

current and former employees, to the United States. The resolution

was introduced by Representative Dan Miller and was agreed to in

the House on March 12, 2002, whereupon it was received in the

Senate and referred to the Committee. The resolution was ordered

to be reported by the Committee on March 21, 2002 by voice vote,

and it was reported the same day without written report. It was

agreed to in the Senate on March 22, 2002.

S. 1144—To Reauthorize the Federal Emergency Management Food

and Shelter Program

This bill would reauthorize funding for the Emergency Food and

Shelter (EFS) program for Fiscal Years 2002 through 2004. The bill

authorized increased funding over current levels. The EFS program

provides emergency assistance to supplement community efforts to

meet food, shelter, and other related needs of homeless and hungry

persons in all fifty States and the District of Columbia. Most of the

money is allocated by local boards composed of representatives

from religious and charitable organizations, which recommend nonprofit and local government agencies to be funded. The money is

spent on food or shelter, or on emergency one-month assistance

with rent, mortgage, and utility payments. Administrative overhead is kept to an unusually low amount, less than 3 percent.

S. 1144 was introduced by Chairman Lieberman on June 29,

2001, and was co-sponsored by Senators Collins, Levin, Akaka,

Durbin, and Cleland. The bill was ordered to be reported by the

Committee on August 2, 2001 by voice vote, was reported the same

day without written report, and was approved by the Senate on August 3, 2001 by unanimous consent.

S. 2936—To Temporarily Increase Annuity Computations During

Periods of Receiving Disability Payments

This legislation would address a longstanding inequity in the

way Federal employee pensions are determined for employees insured on the job who then spend an extended time receiving workers’ compensation. During the time the employee is receiving workers’ compensation, no payments are made into the employee’s

Thrift Savings Plan account or into Social Security. If the employee

returns to work and subsequently retires, the employee is then at

a distinct disadvantage. Under the bill, to correct this situation, an

employee who receives workers’ compensation for at least a year

and then returns to work will, upon retirement, receive a boost in
67

annuity under the Federal Employees Retirement System for the

period when the employee was receiving the workers’ compensation.

S. 2936 was introduced by Senator Allen on September 13, 2002,

on behalf of himself and Senators Warner and Clinton. The bill was

referred to the Committee, and further referred to the Subcommittee on International Security, Proliferation and Federal

Services. The bill was polled out by the Subcommittee; was ordered

reported with an amendment by the Committee by roll call vote of

9–0 on October 9, 2002; was reported from the Committee on October 15, 2002; and was passed by the Senate by unanimous consent

on October 17, 2002. The bill was then received in the House and

referred to the House Committee on Government Reform.

Postal Naming Bills

S. 1983, a bill to designate the facility of the United States Postal Service located at 201 Main Street, Lake Placid, New York, as

the ‘‘John A. ‘Jack’ Shea Post Office Building.’’

SELECTED MEASURES CONSIDERED BY THE COMMITTEE

S. 1008—The Climate Change Strategy and Technology Innovation

Act of 2001

S. 1008 would have created an Office on Climate Change within

the White House, and would have required the office to prepare a

detailed strategy to stabilize the concentration of greenhouse gasses in the atmosphere. The legislation also sought to create a new

office within the Department of Energy, with new funding, to research and develop technologies to combat climate change.

S. 1008 was introduced on June 8, 2001 by Senators Byrd and

Stevens, and referred to the Committee. The Committee held a

hearing on the legislation on July 18, 2001. On August 2, 2001, the

Committee ordered the bill to be reported, with two amendments,

by voice vote. The bill was reported on November 15, 2001 (S. Rept.

107–99). A similar version of the legislation passed the Senate as

part of omnibus energy legislation (S. 517; Title X), but did not become law.

S. 1651—United States Consensus Council Act of 2002

S. 1651 would create the United States Consensus Council,

which would be established to provide for a consensus building

process in addressing national policy issues. Under the legislation,

which was introduced by Senator Dorgan on November 7, 2001, the

Council, a nonprofit independent entity, would provide professional

mediation services in cooperation with Congress to help resolve difficult policy issues by building consensus agreements among stakeholders. On October 9, 2002, the Committee ordered the bill to be

reported with a substitute amendment by a roll call vote of 9–0.

The bill was reported on October 15, 2001, and a written report

was filed on November 4, 2002 (S. Rept. 107–330).

S. 1811—Presidential Appointments Improvement Act of 2002

Ranking Minority Member Thompson and Chairman Lieberman

introduced this legislation on December 12, 2001 with Senators
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Durbin, Akaka, Voinovich, and Lugar as co-sponsors, following 2

days of hearings in April 2001 on ways to streamline the financial

disclosure process for Executive Branch nominees. The bill would

reduce the amount of financial information Executive Branch nominees and high level employees would have to provide, while retaining sufficient detail to determine conflicts of interest. It would also

strengthen the public’s right to know through a provision requiring

a monthly, online list for easy tracking of disclosures of waivers of

conflict of interest requirements.

The Committee unanimously reported the bill out on March 21,

2002 by voice vote, with an amendment that made several technical changes. The bill was reported on May 16, 2002 (S. Rept.

107–152).

S. 3054—No Taxation Without Representation Act of 2002

This bill would entitle D.C. residents to elect two Senators and

as many Members of the House of Representatives as Washington,

D.C. would be apportioned based on its population if it were a

State. (Under current apportionment standards, D.C. would receive

one Representative.) The bill also provides that the permanent

membership of the House of Representatives would be increased by

one to 436. Chairman Lieberman introduced S. 3054 on October 3,

2002, and the bill was ordered to be reported favorably without

amendment on October 9, 2002 by a roll call vote of 9–0. The bill

was reported on October 10, 2002, and a written report was filed

on November 15, 2002 (S. Rept. 107–373).

H.R. 577—To require disclosure of sources and amounts of contributions to presidential libraries

H.R. 577 would amend the Presidential Libraries Act of 1955 to

make the fundraising process for presidential libraries open to public scrutiny by requiring the disclosure of the sources and amounts

of certain donations made during and after a President’s term in

office. The bill was ordered reported out of the Committee without

amendment on March 21, 2002, by voice vote; it was reported on

June 11, 2002 (S. Rept. 107–160).

VIII. PRESIDENTIAL NOMINATIONS

During the 107th Congress, the Committee received a total of 50

Presidential nominations. Of the nominations, 24 were favorably

reported by the Committee and confirmed by the Senate, 13 were

discharged from Committee and confirmed, five were withdrawn by

the President, and eight were not acted upon by the Committee.

The following 24 were favorably reported by the Committee and

confirmed by the Senate:

Joe M. Allbaugh, of Texas, to be Director of the Federal Emergency Management Agency. (Hearing held on February 13, 2001)

Othoneil ‘‘Tony’’ Armendariz, of Texas, to be a Member of the

Federal Labor Relations Authority for a term expiring July 1,

2005. (Hearing held June 21, 2001)
69

Dan Gregory Blair, of the District of Columbia, to be Deputy

Director of the Office of Personnel Management. (Hearing held

February 8, 2002)

James E. Boasberg, of the District of Columbia, to be an Associate Judge of the Superior Court of the District of Columbia for

a term of fifteen years. (Hearing held June 26, 2002)

Michael D. Brown, of Colorado, to be Deputy Director of the

Federal Emergency Management Agency. (Hearing held June 19,

2002)

Erik Patrick Christian, of the District of Columbia, to be an

Associate Judge of the Superior Court of the District of Columbia

for a term of fifteen years. (Hearing held May 22, 2001)

Jeanette J. Clark, of the District of Columbia, to be an Associate Judge of the Superior Court of the District of Columbia for

a term of fifteen years. (Hearing held March 5, 2002)

Todd Walther Dillard, of Maryland, to be United States Marshal for the Superior Court of the District of Columbia, Department of Justice, for a term of 4 years. (Hearing held May 16,

2002)

Nancy Dorn, of Texas, to be Deputy Director of the Office of

Management and Budget. (Hearing held February 8, 2002)

Mark W. Everson, of Texas, to be Controller, Office of Federal

Financial Management, Office of Management and Budget.

(Hearing held October 11, 2001)

Mark W. Everson, of Texas, to be Deputy Director for Management, Office of Management and Budget. (Hearing held July 17,

2002)

Ruth Y. Goldway, of California, to be a Commissioner, Postal

Rate Commission for a term expiring November 22, 2008. (Hearing held October 8, 2002)

John D. Graham, of Massachusetts, to be Administrator of the

Office of Information and Regulatory Affairs, Office of Management and Budget. (Hearing held May 17, 2001)

Tony Hammond, of Virginia, to be a Commissioner, Postal Rate

Commission for the remainder of the term expiring October 14,

2004, to which position he was appointed during the last recess

of the Senate. (Hearing held October 8, 2002)

John L. Howard, of Illinois, to be Chairman of the Special

Panel on Appeals for a term of 6 years. (Hearing held February

8, 2002)

Kay Coles James, of Virginia, to be Director of the Office of

Personnel Management. (Hearing held June 21, 2001)

Louis Kincannon, of Virginia, to be Director of the Census Bureau, Department of Commerce. (Hearing held February 28,

2002)

Lynn Leibovitz, of the District of Columbia, to be an Associate

Judge of the Superior Court of the District of Columbia for a

term of fifteen years. (Hearing held July 26, 2001)
70

Stephen A. Perry, of Ohio, to be Administrator, General Services Administration. (Hearing held May 17, 2001)

Paul A. Quander, of the District of Columbia, to be Director of

the District of Columbia Offender Supervision, Defender, and

Courts Services Agency for a term of 6 years. (Hearing held April

11, 2002)

Robert R. Rigsby, of the District of Columbia, to be an Associate Judge of the Superior Court of the District of Columbia for

a term of fifteen years. (Hearing held May 16, 2002)

Maurice A. Ross, of the District of Columbia, to be an Associate

Judge of the Superior Court of the District of Columbia for a

term of fifteen years. (Hearing held May 22, 2001)

Angela Styles, of Virginia, to be Administrator for Federal Procurement Policy, Executive Office of the President. (Hearing held

May 17, 2001)

Odessa F. Vincent, of the District of Columbia, to be an Associate Judge of the Superior Court of the District of Columbia for

a term of fifteen years. (Hearing held November 6, 2001)

There were 13 nominations in which the Committee was discharged with the concurrence of the Committee and the nominations confirmed by the Senate. Eight of these 13 nominations are

for Inspectors General which, according to a Standing Order of the

Senate, are sequentially referred to the Committee and the Committee is subsequently discharged after 20 days:

Robert Watson Cobb, of Maryland, to be Inspector General, National Aeronautics and Space Administration.

Mitchell E. Daniels, Jr., of Indiana, to be Director of the Office

of Management and Budget. (Hearing held January 19, 2001)

Kenneth M. Donohue, Sr., of Virginia, to be Inspector General,

Department of Housing and Urban Development.

Clark Kent Ervin, of Texas, to be Inspector General, Department of State.

Phyllis K. Fong, of Maryland, to be Inspector General, Department of Agriculture.

J. Russell George, of Virginia, to be Inspector General, Corporation for National and Community Service.

John Portman Higgins, of Virginia, to be Inspector General,

Department of Education.

Daniel R. Levinson, of Maryland, to be Inspector General, General Services Administration.

Sean O’Keefe, of New York, to be Deputy Director of the Office

of Management and Budget. (Hearing held February 27, 2001)

Alejandro Modesto Sanchez, of Florida, to be a Member of the

Federal Retirement Thrift Investment Board for a term expiring

October 11, 2006. (Hearing held November 15, 2002)
71

Andrew M. Saul, of New York, to be Chairman of the Federal

Retirement Thrift Investment Board for a term expiring September 25, 2004. (Hearing held November 15, 2002)

Joseph E. Schmitz, of Maryland, to be Inspector General, Department of Defense.

Gordon J. Whiting, of New York, to be a Member of the Federal Retirement Thrift Investment Board for a term expiring

September 25, 2006. (Hearing held November 15, 2002)

There were five nominations which were officially withdrawn by

the President:

James H. Atkins, of Arkansas, to be a Member of the Federal

Retirement Thrift Investment Board.

Sheryl R. Marshall, of Massachusetts, to be a Member of the

Federal Retirement Thrift Investment Board.

Stuart D. Rick, of Maryland, to be a Member of the Merit Systems Protection Board.

Barbara J. Sapin, of Maryland, to be a Member of the Merit

Systems Protection Board.

Beth Susan Slavet, of Massachusetts, to be Chairman of the

Merit Systems Protection Board.

There were eight nominations not acted upon by the Committee:

Dale Cabaniss, of Virginia, to be a Member of the Federal

Labor Relations Authority for a term of 5 years expiring July 29,

2007.

Albert Casey, of Texas, to be a Governor of the United States

Postal Service for a term expiring December 8, 2009.

Peter Eide, of Maryland, to be General Counsel of the Federal

Labor Relations Authority for a term of 5 years.

Susanne T. Marshall, of Virginia, to be Chairman of the Merit

Systems Protection Board.

Neil McPhie, of Virginia, to be a Member of the Merit Systems

Protection Board for a term of 7 years expiring March 1, 2009.

James C. Miller, III, of Virginia, to be a Governor of the

United States Postal Service for a term expiring December 8,

2010.

Fern Flanagan Saddler, of the District of Columbia, to be an

Associate Judge of the Superior Court of the District of Columbia

for a term of fifteen years.

Linda M. Springer, of Virginia, to be Controller, Office of Federal Financial Management, Office of Management and Budget.
72

IX. ACTIVITIES OF THE SUBCOMMITTEES

INTERNATIONAL SECURITY, PROLIFERATION, AND

FEDERAL SERVICES SUBCOMMITTEE

CHAIRMAN: THAD COCHRAN

RANKING MINORITY MEMBER: DANIEL K. AKAKA

I. HEARINGS

The Subcommittee on International Security, Proliferation, and

Federal Services held the following hearings during the 107th Congress:

FEMA’s Role in Managing Bioterrorist Attacks and the Impact of

Public Health Concerns on Bioterrorism Preparedness (July 23,

2001).

The Office of National Preparedness was created in the Federal

Emergency Management Agency (FEMA) to implement a national

effort against terrorism. The Subcommittee held a hearing to examine what role FEMA is taking in preparing communities and States

for a biological event. How is FEMA ensuring that biological event

issues are addressed and that their preparedness efforts support

and encourage those in the Department of Health and Human

Services? Is FEMA encouraging programs and activities on the

State and local level to improve the public health infrastructure to

both prepare and respond to a bioterrorist attack, naturally occurring epidemic, or any event that may cripple an area’s health care

system?

Witnesses: Bruce Baughman, Director, Planning and Readiness,

Federal Emergency Management Agency; Dr. Scott R. Lillibridge,

Special Assistant to the Secretary, Department of Health and

Human Services for National Security and Emergency Management; Dr. Tara J. O’Toole, Johns Hopkins Center for Civilian Biodefense Studies; and Dr. Dan Hanfling, FACEP, Chairman, Disaster Preparedness Committee, Inova Fairfax Hospital, Falls

Church, Virginia.

S. 995—Whistleblower Protection Act Amendments (July 25, 2001).

The Subcommittee held a hearing to examine legislation to

amend the Whistleblower Protection Act (WPA) in order to restore

and strengthen the protections available to Federal whistleblowers.

The legislation seeks, among other things, to correct recent decisions by the U.S. Court of Appeals for the Federal Circuit which

have limited the scope of the WPA. The hearing examined the recent holdings of the Federal Circuit which have excluded whistleblower protection for certain disclosures despite the repeated statements of congressional intent to protect ‘‘any’’ lawful disclosure.

Witnesses commented on the need to cover any lawful disclosure

without restriction to time, place, form, motive, or context, or prior

disclosure made to any person by an employee or applicant, including a disclosure made in the ordinary course of an employee’s duties, that the employee or applicant reasonably believes is credible
73

evidence of any violation of any law, rule, or regulation, or other

misconduct.

Witnesses also testified on the need for independent litigating

authority for the Office of Special Counsel (OSC). Currently, the

OSC has no authority to request that the Merit Systems Protection

Board (MSPB) reconsider one of its decisions or to seek review of

an MSPB decision by the U.S. Court of Appeals for the Federal Circuit. Even when another party with authority to petition for a review of an MSPB decision does so, OSC has historically been denied the right to participate in those proceedings. In addition, when

the OSC believes that MSPB misinterprets one of the laws within

OSC’s jurisdiction, the OSC has no right to appeal that decision,

even if it was one of the parties before the MSPB. Under current

law, while the Office of Personnel Management (OPM) can request

that the MSPB reconsider its rulings, OSC cannot. According to

witnesses, the limitation undermines both OSC’s ability to protect

whistleblowers and the integrity of the whistleblower law.

Witnesses also testified on a provision in S. 995 which codifies

an anti-gag provision that has been passed annually since 1988 as

part of the appropriations process. The provision states that employees should not be forced to sign disclosure agreements or be

subjected to nondisclosure rules or policies that supercede an employee’s rights under good government statutes. It bans agencies

from implementing or enforcing any nondisclosure policy, form or

agreement that does not contain specified language preserving

open government statutes such as the WPA, the Military Whistleblower Protection Act, and the Lloyd Lafollette Act, which prohibits

discrimination against government employees who communicate

with Congress.

The hearing also covered other provisions of S. 995, as well as

additional reforms necessary to protect whistleblowers such as

overturning the ‘‘irrefragable proof ’’ standard implemented by the

Federal Circuit for determining reasonable belief in whistleblower

cases and a loophole allowing whistleblowers to be fired under the

guise of losing their security clearance.

Witnesses: Hon. Charles E. Grassley, U.S. Senator; Hon. Elaine

Kaplan, Special Counsel, Office of Special Counsel; Hon. Beth S.

Slavet, Chairman, U.S. Merit Systems Protection Board; and

Thomas Devine, Legal Director, Government Accountability

Project. And written statements of Stewart E. Schiffer, Acting Attorney General, Civil Division, Department of Justice; and Colleen

M. Kelley, National President, National Treasury Employees

Union.

The Annual Report of the Postmaster General and the Impact of

Terrorist Attacks on Postal Operations (September 20, 2001).

In the aftermath of the domestic terrorist attacks on September

11, 2001, the Subcommittee expanded its annual hearing on the

state of the U.S. Postal Service to learn what steps the Service had

taken to secure the mail and operations of the Postal Service. The

hearing noted that America’s recovery from the terrorist attacks requires a strong and viable Postal Service. Delivery of the U.S. mail

is a basic and fundamental public service that must be protected

from disruption. The hearing also noted that the added costs asso-
74

ciated with ensuring the continuation of this reliable and efficient

service would have to be addressed, especially in light of the continued drop in mail volume and revenue.

Witnesses: Hon. John E. Potter, Postmaster General and Chief

Executive Officer, U.S. Postal Service; Kenneth C. Weaver, Chief

Postal Inspector, U.S. Postal Service; and a written statement from

Karla W. Corcoran, Inspector General, U.S. Postal Service.

Terrorism Through the Mail: Protecting Postal Workers and the

Public, Joint Hearings of the Governmental Affairs Committee

and the Subcommittee on International Security, Proliferation,

and Federal Services (October 30 and October 31, 2001).

Two days of hearings were held to learn whether adequate steps

were taken to protect postal workers and the public from future

terrorist attacks, especially from biological attacks through the

mail using agents such as anthrax. Of particular interest was

whether the Centers for Disease Control and the Postal Service

were aggressive enough in protecting postal workers and the public.

Witnesses: Hon. John E. Potter, Postmaster General/CEO, U.S.

Postal Service, accompanied by Thomas Day, Vice President of Engineering, Patrick Donahoe, Chief Operating Officer and Executive

Vice President, U.S. Postal Service, and Ken Weaver, Chief Postal

Inspector, U.S. Postal Inspection Service; William Burrus, President-Elect, American Postal Workers Union (AFL–CIO), accompanied by Denise Manley, Distribution Clerk, Government Mail

Section, Brentwood Mail Processing Facility; Vincent R. Sombrotto,

President, National Association of Letter Carriers (NALC), accompanied by Tony DiStephano, Jr., President, NALC Branch 380,

Trenton, New Jersey; William Quinn, National President, National

Postal Mail Handlers Union; and Gus Baffa, President, National

Rural Letter Carriers’ Association (NRLCA).

The Role of Bilateral and Multilateral Arms Control Agreements in

Controlling Threats From the Proliferation of Weapons of Mass

Destruction (Five days of hearings were combined under this

title with listed titles for the following dates:)

(1) Current and Future Weapons of Mass Destruction (WMD) Proliferation Threats (November 7, 2001).

The Subcommittee held a hearing to explore sources of chemical,

biological, and nuclear threats and to examine how export controls

may be best employed to curb weapons of mass destruction (WMD)

proliferation. The widened means to acquire WMD has affected the

utility of export controls. Global commercial networks enable nations to simply buy these materials and technologies instead of developing them indigenously. The utility of export controls will depend on how multilateral export control policies are pursued and

implemented by partner nations. Witnesses reviewed the present

and future weapons of mass destruction threats of greatest concern, the dual use technologies used to develop WMD, the most effective export control mechanisms to curb WMD proliferation, and

whether a new export control process or agency was needed.
75

Witnesses: Dr. Michael L. Moodie, President, Chemical and Biological Arms Control Institute; Dr. Jonathan B. Tucker, Director,

Chemical and Biological Nonproliferation Program, Center for Nonproliferation Studies, Monterey Institute of International Studies;

Rose Gottemoeller, Senior Associate, Carnegie Endowment for

International Peace; Joseph A. Christoff, Director, International Affairs and Trade, U.S. General Accounting Office; Dr. Richard

Cupitt, Associate Director, Center for International Trade and Security; Dr. James A. Lewis, Senior Fellow and Director of Technology Policy, Center for Strategic and International Studies; and

Dr. Gary Milhollin, Director, Wisconsin Project on Nuclear Arms

Control.

(2) Combating Proliferation of Weapons of Mass Destruction (WMD)

with Non-Proliferation Programs: Non-Proliferation Assistance

Coordination Act of 2001, Part I (November 14, 2001).

The collapse of the Soviet Union left stockpiles of nuclear weapons, materials, facilities, and technology vulnerable to theft and diversion to terrorist networks and rogue states. Congress established an array of threat reduction programs to assist in dismantling former Soviet weapons of mass destruction and improve the

security of such weapons, materials and human expertise. The Subcommittee held a hearing to review the Non-Proliferation Assistance Coordination Act of 2001 within the broader context of what

role non-proliferation programs should have in a comprehensive

non-proliferation strategy. In the first part of this hearing, outside

witnesses examined current non-proliferation programs in the

Former Soviet Union and addressed the following questions: (1)

How would the establishment of an interagency committee, such as

advocated by the Non-Proliferation Assistance Coordination Act,

make these programs more effective? (2) How would public and private sector efforts be harmonized? and (3) Are there new programs

that should be considered?

Witnesses: Hon. Chuck Hagel, U.S. Senator; Gary L. Jones (Ms.),

Director of Nuclear and Nonproliferation Issues, General Accounting Office Division of Natural Resources and Environment; Dr.

Laura S.H. Holgate, Vice President for Russia/Newly Independent

States Programs, Nuclear Threat Initiative; and Leonard S.

Spector, Deputy Director, Center for Nonproliferation Studies,

Monterey Institute of International Studies.

(3) Combating Proliferation of Weapons of Mass Destruction (WMD)

with Non-Proliferation Programs: The Non-Proliferation Assistance Coordination Act of 2001, Part II (November 29, 2001).

The Subcommittee held a hearing to consider administration

views of the Non-Proliferation Assistance Coordination Act of 2001

within the broader context of what role non-proliferation programs

should have in a comprehensive national non-proliferation strategy.

Part II included representatives from the Departments of Energy,

Defense, State, and Commerce to discuss their current programs,

coordination efforts, and the impact of their efforts from the BushPutin Summit. The hearing examined current non-proliferation

programs in the former Soviet Union.
76

Witnesses: Vann H. Van Diepen, Acting Deputy Assistant Secretary of State, Bureau of Non-proliferation, U.S. Department of

State; Marshall S. Billingslea, Acting Deputy Assistant Secretary of

Defense for Negotiation Policy, U.S. Department of Defense; Kenneth E. Baker, Principal Assistant Deputy Administrator for Defense Nuclear Nonproliferation, National Nuclear Security Administration, U.S. Department of Energy; and Matthew S. Borman,

Deputy Assistant Secretary, Bureau of Export Administration, U.S.

Department of Commerce.

(4) Multilateral Non-Proliferation Regimes, Weapons of Mass Destruction Technologies, and the War on Terrorism (February 12,

2002).

The Subcommittee held a hearing to assess U.S. relations with

multilateral non-proliferation regimes and provide recommendations for how such regimes may be best incorporated into the war

on terrorism and for preventing the spread of weapons of mass destruction (WMD). The hearing reviewed the effectiveness of five regimes: The Biological Weapons Convention (BWC), the Chemical

Weapons Convention (CWC), the Non-Proliferation Treaty (NPT),

the International Atomic Energy Agency (IAEA), and the Missile

Technology Control Regime (MTCR). Witnesses addressed the following questions: (1) How can multilateral regimes best support

the current war on terrorism? (2) How can verification be made

more effective? (3) How do technology controls contribute to regime

effectiveness? and (4) How can the treaties best address non-state

actors and terrorist groups?

Witnesses: Elisa D. Harris, Research Fellow, Center for International and Security Studies; Dr. Amy E. Smithson, Ph.D., Director, Chemical and Biological Weapons Nonproliferation Project,

Henry L. Stimson Center; Dr. Jim Walsh, Research Fellow, Belfer

Center for Science and International Affairs, John F. Kennedy

School of Government, Harvard University; and Dennis M.

Gormley, Senior Fellow, International Institute for Strategic Studies.

(5) Strengthening Multilateral Non-Proliferation Regimes (July 29,

2002).

The threat of weapons of mass destruction (WMD) terrorism

magnifies the significance of sound multilateral policies to U.S. national security. The Subcommittee held a hearing to examine multilateral arms control regimes within the context of global WMD

terrorism from state and non-state actors. Administration witnesses addressed the effectiveness of current non-proliferation regimes in preventing or delaying proliferation of WMD, the relevance of non-proliferation arrangements and organizations to preventing terrorists and other non-state actors from acquiring WMD,

the steps the United States is taking to increase these regimes’ effectiveness, and emerging technological threats that these regimes

are not handling or are not equipped to handle. The hearing covered the following regimes and international organizations: The

Australia Group, the Biological Weapons Convention, the Chemical

Weapons Convention, the Non-Proliferation Treaty, the Inter-
77

national Atomic Energy Agency, the Wassanaar Arrangement, the

Zangger Committee, and the Missile Technology Control Regime.

Witnesses: Vann H. Van Diepen, Director, Office of Chemical, Biological and Missile Nonproliferation, U.S. Department of State,

and Marshall S. Billingslea, Deputy Assistant Secretary of Defense,

U.S. Department of Defense.

United States Policy in Iraq: Next Steps (March 1, 2002).

The Subcommittee held a hearing to identify the weapons of

mass destruction (WMD) threat posed by Iraq and examine different policies to address U.S. national security concerns. Prior to

the 1991 Persian Gulf War, Iraq was identified as a significant national security threat within U.S. foreign policy and the national

security establishment. Since the end of the Persian Gulf War and

the broader consciousness of WMD terrorism, Iraq has endured as

a national security concern.

As of the date of the hearing, many differed on what form U.S.

policies should take in Iraq. Some believed Iraq was the most immediate threat to national security and swift military intervention

and regime change should take the first priority. Others stressed

that U.S. policy must include strong international support and not

threaten broader multilateral efforts against international terrorism. Witnesses discussed the potential consequences of these

policy options to the broader efforts against terrorism and international national security and addressed how policies can be formulated to ensure they do not create broader national security

problems than those they intend to eliminate.

Witnesses: Robert J. Einhorn, Senior Adviser, International Studies Program, Center for Strategic and International Studies; Dr.

David A. Kay, Vice President, Science Applications International

Corporation; and Dr. Richard O. Spertzel, former head of UN Special Commission (UNSCOM) Biological Weapon Inspections and

former Deputy Commander, U.S. Army Medical Research Institute

of Infectious Disease (USAMRIID).

CIA National Intelligence Estimate of Foreign Missile Developments

and the Ballistic Missile Threat through 2015 (March 11,

2002).

The Subcommittee held its annual hearing to review the Central

Intelligence Agency’s (CIA) fourth National Intelligence Estimate

(NIE) of foreign missile developments and ballistic missile threats.

The NIE is the compilation of the Intelligence Community’s latest

intelligence on ballistic missile developments and threats and a discussion of threats from nonmissile delivery options for weapons of

mass destruction. The NIE describes projections of likely missile

threats, assessments of theater ballistic missile threats worldwide,

the evolving proliferation environment and importance of foreign

assistance to developing missile programs, and summary of forward-based threats and cruise missiles.

Witness: Robert Walpole, National Intelligence Officer for Strategic and Nuclear Programs, National Intelligence Council, CIA.
78

Critical Skills for National Security and the Homeland Security

Federal Workforce Act—S. 1800 (March 12, 2002).

The Subcommittee held a hearing to review the need for more

people with critical skills in math, science, and foreign languages

in the Federal Government and to examine ways S. 1800, the

Homeland Security Federal Workforce Act, would strengthen the

recruitment and retention of Federal employees through student

loan repayment, national security fellowship programs, and management reforms. Witnesses addressed the broad national security

implications of shortages of Federal workers with specific skills in

math, science, and foreign languages. Witnesses examined the critical skills needed in government and responded to the following

questions: (1) How can the provisions in S. 1800 strengthen math,

science, and foreign language skills in government? (2) How has

the national security environment affected the need for these

skills? and (3) How could S. 1800 complement existing recruitment

and retention efforts in the Federal Government?

Witnesses: Donald J. Winstead, Assistant Director, Compensation

Administration, Office of Personnel Management (OPM); Sheri A.

Farrar, Assistant Director, Administrative Services Division, Federal Bureau of Investigation (FBI), accompanied by Margaret R.

Gulotta, Chief of the Language Services Unit, and Leah Meisel,

Deputy Assistant Director and Personnel Officer, Federal Bureau

of Investigation; Ruth A. Whiteside, Principal Deputy Assistant

Secretary, Bureau of Human Resources, Department of State

(DOS); Ginger Groeber, Acting Deputy Assistant Secretary, Civilian Personnel Policy, Department of Defense (DOD); Harvey A.

Davis, Associate Director, Human Resource Services, National Security Agency (NSA); Hon. Lee H. Hamilton, Director of the Woodrow Wilson Center for International Scholars; Dr. Susan S. Westin,

Managing Director for International Affairs and Trade Issues, General Accounting Office (GAO); and Dr. Ray T. Clifford, Chancellor,

Defense Language Institute.

The Federal Workforce: Legislative Proposals for Change (March 18

and 19, 2002).

The Subcommittee held two days of hearings on legislative proposals that addressed how to achieve a strong Federal civil service

workforce. The hearings focused on current and future workforce

challenges in recruiting, hiring, training, and retention. Questions

were raised as to whether agencies have sufficient personnel funding needed to attract, retain, train, and motivate employees. Federal retirements and stiff competition for new talent magnify this

challenge. Witnesses evaluated legislative proposals for their suitability to strengthen the Federal Government as an employer of

choice and addressed the following questions: (1) What are the

most critical funding requirements to address the government’s

workforce needs? (2) How can legislative proposals improve the

civil service while preserving the rights of the Federal workforce?

(3) How can existing and new managerial flexibilities be made effective and fair to Federal workers? (4) What additional resources

and training do Federal agencies require to make existing managerial flexibilities effective? (5) How can recruitment, retention, com-
79

pensation, and management challenges be reconciled with personnel ceiling limitations and contracting out quotas?

Witnesses: First day: Hon. Kay Coles James, Director, Office of

Personnel Management (OPM); Hon. David M. Walker, Comptroller General, General Accounting Office (GAO); Colleen M.

Kelley, National President, National Treasury Employees Union

(NTEU); Bobby L. Harnage, Sr., National President, American Federation of Government Employees (AFGE) (AFL–CIO); G. Jerry

Shaw, General Counsel, Senior Executives Association (SEA); and

John C. Priolo, General Executive Board Member, Federal Managers Association (FMA).

Second day: Dr. Paul C. Light, Senior Advisor, National Commission on the Public Service, Vice President and Director of Government Studies, The Brookings Institution; Dr. Carolyn Ban, Dean,

Graduate School of Public and International Affairs, University of

Pittsburgh and President, National Association of Schools of Public

Affairs and Administration; Max Stier, President, Partnership for

Public Service; and Dr. Steven J. Kelman, Professor of Public Management, John F. Kennedy School of Government, Harvard University.

The Postal Service in the 21st Century: The USPS Transformation

Plan (May 13, 2002).

The Subcommittee held a hearing that reviewed the U.S. Postal

Service’s Transformation Plan and a GAO report on the financial

condition of the Postal Service. Both the Transformation Plan,

which was released on April 4, 2002, and the GAO assessment,

were prepared at the request of the Subcommittee and the Committee on Governmental Affairs. This Subcommittee has long been

concerned with the long-term structural, financial, and operational

challenges facing the Postal Service, which is the linchpin to the

nation’s $900 billion domestic mailing industry employing nine million workers. This hearing built on previous hearings that focused

on the accountability and transparency of postal finances and operations.

Witnesses: Hon. John E. Potter, Postmaster General, U.S. Postal

Service, and Hon. David M. Walker, Comptroller General, General

Accounting Office (GAO).

Russia and China: Non-Proliferation Concerns and Export Controls

(June 6, 2002).

The Subcommittee held a hearing to identify recent proliferation

activity from Russia and China and the methods they use to enact

export controls per international agreements. This hearing, one in

a series of hearings on non-proliferation, addressed the supply-side

of weapons of mass destruction and missile proliferation and concentrated on the two biggest exporters: Russia and China. Concerns have been raised regarding the extent to which Russia and

China, with their highly developed nuclear, chemical, biological and

missile industries, comply with non-proliferation agreements and

enforce export controls.

Hearing witnesses were asked to address the following issues: (1)

What are the recent proliferation concerns from Russia and China?

(2) Have Russia and China complied with multilateral export con-
80

trol agreements and enforced domestic regulations? (3) Are failures

the result of an ineffective export control administration, a lack of

resources, or a lack of interest by the government in compliance?

(4) What assistance has or is the United States providing these

countries to assist them in developing effective export control policies?

Witnesses: John S. Wolf, Assistant Secretary, Bureau of Nonproliferation, U.S. Department of State; Matthew S. Borman, Deputy Administrator, Bureau of Industry and Security, U.S. Department of Commerce; Leonard S. Spector, Deputy Director, Center for

Nonproliferation, Monterey Institute for International Studies;

David Albright, President, Institute for Science and International

Security; and Gary Milholin, Director, Wisconsin Project on Nuclear Arms Control.

Cruise Missile and UAV Threats to the United States (June 11,

2002).

The Subcommittee held a hearing to examine the extent of cruise

missile proliferation, the threat cruise missiles pose to American

forward deployed forces and U.S. territory, difficulties faced in

stemming the spread of cruise missile systems and technology, and

the ability of the Missile Technology Control Regime (MTCR) to

control cruise missiles and unmanned aerial vehicles. The National

Intelligence Estimate on Foreign Missile Developments predicts

that one to two dozen countries will possess a land-attack cruise

missile capability by 2015 through indigenous development, acquisition, or modification of other systems, such as unmanned aerial

vehicles. MTCR is the international regime set up to stem the

spread of cruise missiles. However, member nations focus almost

entirely on ballistic missiles and do not have standard ground rules

on cruise missile performance. Hearing witnesses were asked to address the following questions: (1) How aggressively are nations pursuing cruise missile purchases as complete systems and developing

indigenous capabilities? (2) What MTCR provisions address cruise

missile proliferation? What challenges do the link between cruise

missiles and the aircraft industry pose to the MTCR’s effectiveness? (3) How do unmanned aerial vehicles complicate cruise missile controls? (4) What measures other than the MTCR are being

taken currently to stem cruise missile proliferation? and (5) What

is the current status of efforts to improve the effectiveness of the

MTCR?

Witnesses: Vann H. Van Diepen, Acting Deputy Assistant Secretary, Bureau of Nonproliferation, U.S. Department of State;

Christopher Bolkcom, Analyst in National Defense, Foreign Affairs,

Defense and Trade Division, Congressional Research Service; and

Dennis Gormley, Senior Fellow, International Institute for Strategic Studies.

The Annual Report of the Postmaster General (September 27, 2002).

The Subcommittee held its annual hearing to receive the Postmaster General’s report to the Senate on the state of the U.S. Postal Service. The hearing also continued the Subcommittee’s oversight of the Postal Service’s Transformation Plan requested by the

Subcommittee and Committee on Governmental Affairs.
81

Witness: Hon. John E. Potter, Postmaster General, U.S. Postal

Service.

II. LEGISLATION

The following is a list of the measures that were considered by

the Subcommittee on International Security, Proliferation, and

Federal Services and became public law:

S. 201, the Federal Employee Protection Act, a bill to require

that Federal agencies be accountable for violations of antidiscrimination and whistleblower protection laws, and for other purposes

(As H.R. 169, Public Law 107–174).

S. 271, a bill to amend title 5, United States Code, to provide

that the mandatory separation age for Federal firefighters be made

the same as the age that applies with respect to Federal law enforcement officers (As H.R. 93, Public Law 107–27).

S. 529, a bill to provide wage parity for certain Department of

Defense prevailing rate employees in Georgia (Incorporated in H.R.

3338, Public Law 107–117).

S. 1080, a bill to provide that employees who retire as registered

nurses under the Federal Employees Retirement System shall have

unused sick leave used in the computation of annuities (Incorporated in H.R. 3447, Public Law 107–135).

S. 1256, a bill to reauthorize the Breast Cancer Research Postage

Stamp (Incorporated in H.R. 2590, Public Law 107–67).

S. 1286, a bill to authorize executive agencies to use appropriated

funds for salaries and expenses to provide child care in Federal or

leased facilities, or through contracts, for civilian employees. The

bill requires amounts used to be applied to improve the affordability of child care for lower income employees (Incorporated in

H.R. 2590, Public Law 107–67).

S. 1369 and S. 1498, bills to provide that Federal employees,

members of the foreign service, members of the uniformed services,

family members and dependents of such employees and members,

may retain for personal use promotional items received as a result

of official government travel (Incorporated in H.R. 3338, Public

Law 107–117).

S. 1713, a bill to amend title 39, USC, to direct the Postal Service to adhere to an equitable tender policy in selecting air carriers

of non-priority bypass mail to certain points in Alaska (Incorporated in H.R. 4775, Public Law 107–206).

S. 1822, a bill to allow the Thrift Savings Plan to offer certain

catch up contributions for beneficiaries age 50 and over, as provided by the Internal Revenue Code. (As H.R. 3340, Public Law

107–304).

S. 2527, a bill to allow certain employees and annuitants of the

Overseas Private Investment Corporation to transfer to the Federal

Employee Health Benefits program (As H.R. 3340, Public Law 107–

304).

S. 3070, a bill authorizing appropriations for the Merit Systems

Protection Board and the Office of Special Counsel (reauthorization

provisions included in H.R. 3340, Public Law 107–304).
82

H.R. 2559, a bill to amend chapter 90 of title 5, USC, to make

technical corrections to the Federal long-term care insurance program (Public Law 107–104).

In addition, the following measure was favorably reported by the

Subcommittee and passed by the Senate:

S. 2936, a bill to amend chapter 84 of title 5, United States Code,

to provide that certain Federal annuity computations are adjusted

by 1 percentage point relating to periods of receiving disability payments.

POST OFFICE NAMING BILLS

MEASURES FAVORABLY REPORTED BY SUBCOMMITTEE AND ENACTED

INTO LAW

H.R.132, a bill to designate the facility of the United States Postal Service located at 620 Jacaranda Street in Lanai City, Hawaii,

as the ‘‘Goro Hokama Post Office Building’’ (Public Law 107–6).

H.R. 364, a bill to designate the facility of the United States

Postal Service located at 5927 Southwest 70th Street in Miami,

Florida, as the ‘‘Marjory Williams Scrivens Post Office’’ (Public Law

107–29).

H.R. 395, a bill to designate the facility of the United States

Postal Service located at 2305 Minton Road in West Melbourne,

Florida, as the ‘‘Ronald W. Reagan Post Office of West Melbourne,

Florida’’ (Public Law 107–7).

H.R. 669, a bill to designate the facility of the United States

Postal Service located at 127 Social Street in Woonsocket, Rhode

Island, as the ‘‘Alphonse F. Auclair Post Office Building’’ (Public

Law 107–261).

H.R. 670, a bill to designate the facility of the United States

Postal Service located at 7 Commercial Street in Newport, Rhode

Island, as the ‘‘Bruce F. Cotta Post Office Building’’ (Public Law

107–262).

H.R. 821, a bill to designate the facility of the United States

Postal Service located at 1030 South Church Street in Asheboro,

North Carolina, as the ‘‘W. Joe Trogdon Post Office Building’’ (Public Law 107–32).

H.R. 1374, a bill to designate the facility of the United States

Postal Service located at 600 Calumet Street in Lake Linden,

Michigan, as the ‘‘Philip E. Ruppe Post Office Building’’ (Public

Law 107–191).

H.R. 1432, a bill to designate the facility of the United States

Postal Service located at 3698 Inner Perimeter Road in Valdosta,

Georgia, as the ‘‘Major Lyn McIntosh Post Office Building’’ (Public

Law 107–160).

H.R. 1748, a bill to designate the facility of the United States

Postal Service located at 805 Glen Burnie Road in Richmond, Virginia, as the ‘‘Tom Bliley Post Office Building’’ (Public Law 107–

161).

H.R. 1749, a bill to designate the facility of the United States

Postal Service located at 685 Turnberry Road in Newport News,

Virginia, as the ‘‘Herbert H. Bateman Post Office Building’’ (Public

Law 107–162).
83

H.R. 1753, a bill to designate the facility of the United States

Postal Service located at 419 Rutherford Avenue, N.E., in Roanoke,

Virginia, as the ‘‘M. Caldwell Butler Post Office Building’’ (Public

Law 107–35).

H.R. 1761, a bill to designate the facility of the United States

Postal Service located at 8588 Richmond Highway in Alexandria,

Virginia, as the ‘‘Herb Harris Post Office Building’’ (Public Law

107–92).

H.R. 1766, a bill to designate the facility of the United States

Postal Service located at 4270 John Marr Drive in Annandale, Virginia, as the ‘‘Stan Parris Post Office Building’’ (Public Law 107–

85).

H.R. 2577, a bill to designate the facility of the United States

Postal Service located at 310 South State Street in St. Ignace,

Michigan, as the ‘‘Bob Davis Post Office Building’’ (Public Law

107–163).

H.R. 2876, a bill to designate the facility of the United States

Postal Service located in Harlem, Montana, as the ‘‘Francis

Bardanouve United States Post Office Building’’ (Public Law 107–

164).

H.R. 2910, a bill to designate the facility of the United States

Postal Service located at 3131 South Crater Road in Petersburg,

Virginia, as the ‘‘Norman Sisisky Post Office Building’’ (Public Law

107–165).

H.R. 3072, a bill to designate the facility of the United States

Postal Service located at 125 Main Street in Forest City, North

Carolina, as the ‘‘Vernon Tarlton Post Office Building’’ (Public Law

107–166).

H.R. 3248, a bill to designate the facility of the United States

Postal Service located at 65 North Main Street in Cranbury, New

Jersey, as the ‘‘Todd Beamer Post Office Building’’ (Public Law

107–129).

H.R. 3287, a bill to redesignate the facility of the United States

Postal Service located at 900 Brentwood Road, NE, in Washington,

D.C., as the ‘‘Joseph Curseen, Jr. and Thomas Morris, Jr. Processing and Distribution Center’’ (Public Law 107–225).

H.R. 3379, a bill to designate the facility of the United States

Postal Service located at 375 Carlls Path in Deer Park, New York,

as the ‘‘Raymond M. Downey Post Office Building’’ (Public Law

107–167).

H.R. 3738, a bill to designate the facility of the United States

Postal Service located at 1299 North 7th Street in Philadelphia,

Pennsylvania, as the ‘‘Herbert Arlene Post Office Building’’ (Public

Law 107–264).

H.R. 3739, a bill to designate the facility of the United States

Postal Service located at 6150 North Broad Street in Philadelphia,

Pennsylvania, as the ‘‘Rev. Leon Sullivan Post Office Building’’

(Public Law 107–265).

H.R. 3740, a bill to designate the facility of the United States

Postal Service located at 925 Dickinson Street in Philadelphia,

Pennsylvania, as the ‘‘William A. Cibotti Post Office Building’’

(Public Law 107–266).

H.R. 3960, a bill to designate the facility of the United States

Postal Service located at 3719 Highway 4 in Jay, Florida, as the
84

‘‘Joseph W. Westmoreland Post Office Building’’ (Public Law 107–

193).

H.R. 4717, a bill to designate the facility of the United States

Postal Service located at 1199 Pasadena Boulevard in Pasadena,

Texas, as the ‘‘Jim Fonteno Post Office Building’’ (Public Law 107–

268).

H.R. 4755, a bill to designate the facility of the United States

Postal Service located at 204 South Broad Street in Lancaster,

Ohio, as the ‘‘Clarence Miller Post Office Building’’ (Public Law

107–269).

H.R. 4794, a bill to designate the facility of the United States

Postal Service located at 1895 Avenida Del Oro in Oceanside, California, as the ‘‘Ronald C. Packard Post Office Building’’ (Public Law

107–270).

H.R. 5207, a bill to designate the facility of the United States

Postal Service located at 6101 West Old Shakopee Road in Bloomington, Minnesota, as the ‘‘Thomas E. Burnett, Jr. Post Office

Building’’ (Public Law 107–227).

H.R. 5308, a bill to designate the facility of the United States

Postal Service located at 301 South Howes Street in Fort Collins,

Colorado, as the ‘‘Barney Apodaca Post Office’’ (Public Law 107–

283).

H.R. 5333, a bill to designate the facility of the United States

Postal Service located at 4 East Central Street in Worcester, Massachusetts, as the ‘‘Joseph D. Early Post Office Building’’ (Public

Law 107–284).

H.R. 5574, a bill to designate the facility of the United States

Postal Service located at 206 South Main Street in Glennville,

Georgia, as the ‘‘Michael Lee Woodcock Post Office’’ (Public Law

107–291).

S. 737, a bill to designate the facility of the United States Postal

Service located at 811 South Main Street in Yerington, Nevada, as

the ‘‘Joseph E. Dini, Jr. Post Office’’ (Public Law 107–144).

S. 970, a bill to designate the facility of the United States Postal

Service located at 39 Tremont Street, Paris Hill, Maine, as the ‘‘Horatio King Post Office Building’’ (Public Law 107–145).

S. 985, a bill to designate the facility of the United States Postal

Service located at 113 South Main Street in Sylvania, Georgia, as

the ‘‘G. Elliot Hagan Post Office Building’’ (as H.R. 1183, Public

Law 107–34).

S. 1026, a bill to designate the United States Post Office located

at 60 Third Avenue in Long Branch, New Jersey, as the ‘‘Pat King

Post Office Building.’’ (as H.R. 2997, Public Law 107–146).

S. 1181, a bill to designate the facility of the United States Postal Service located at 2719 South Webster Street in Kokomo, Indiana, as the ‘‘Elwood Haynes ‘Bud’ Hillis Post Office Building’’ (as

H.R. 2043, Public Law 107–36).

S. 1184, a bill to designate the facility of the United States Postal Service located at 2853 Candler Road in Decatur, Georgia, as the

‘‘Earl T. Shinhoster Post Office’’ (as H.R. 2261, Public Law 107–86).

S. 1222, a bill to redesignate the facility of the United States

Postal Service located at 89 River Street in Hoboken, New Jersey,

as the ‘‘Frank Sinatra Post Office Building’’ (as H.R. 3034, Public

Law 107–263).
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S. 1381, a bill to redesignate the facility of the United States

Postal Service located at 5472 Crenshaw Boulevard in Los Angeles,

California, as the ‘‘Congressman Julian C. Dixon Post Office’’ (as

H.R. 2454, Public Law 107–88).

S. 1970, a bill to designate the facility of the United States Postal Service located at 2829 Commercial Way in Rock Springs, Wyoming, as the ‘‘Teno Roncalio Post Office Building’’ (as H.R. 3789,

Public Law 107–192).

S. 2217, a bill to designate the facility of the United States Postal Service located at 3101 West Sunflower Avenue in Santa Anna,

California, as the ‘‘Hector G. Godinez Post Office Building’’ (as H.R.

1366, Public Law 107–190).

S. 2433, a bill to designate the facility of the United States Postal Service located at 1590 East Joyce Boulevard in Fayetteville, Arkansas, as the ‘‘Clarence B. Craft Post Office Building’’ (as H.R.

4486, Public Law 107–194).

S. 2828, a bill to redesignate the facility of the United States

Postal Service located at 6910 South Yorktown Avenue in Tulsa,

Oklahoma, as the ‘‘Robert Wayne Jenkins Station’’ (as H.R. 4851,

Public Law 107–272).

S. 2840, a bill to designate the facility of the United States Postal Service located at 120 North Maine Street in Fallon, Nevada, as

the ‘‘Rollan D. Melton Post Office Building’’ (as H.R. 4102, Public

Law 107–267).

S. 2918, a bill to designate the facility of the United States Postal Service located at 380 Main Street in Farmingdale, New York,

as the ‘‘Peter J. Ganci, Jr. Post Office Building’’ (as H.R. 5336, Public Law 107–285).

S. 2929, a bill to redesignate the facility of the United States

Postal Service located at 265 South Western Avenue, Los Angeles,

California, as the ‘‘Nat King Cole Post Office’’ (as H.R. 4797, Public

Law 107–271).

S. 2931, a bill to designate the facility of the United States Postal Service located at 5805 White Oak Avenue in Encino, California,

as the ‘‘Francis Dayle ‘Chick’ Hearn Post Office’’ (as H.R. 5340,

Public Law 107–286).

MEASURES FAVORABLY REPORTED BY SUBCOMMITTEE AND PASSED

BY THE SENATE

S. 1983, a bill to designate the facility of the United States Postal Service located at 201 Main Street, Lake Placid, New York, as

the ‘‘John A. ‘Jack’ Shea Post Office Building.’’

III. REPORT AND GAO REPORTS

1. Assessment of Remote Sensing Data Use by Civilian Federal

Agencies. In December 2001, Subcommittee Chairman Daniel K.

Akaka released a study prepared by Subcommittee staff that examined the responses of 20 agencies which participated in a Subcommittee-requested Congressional Research Service questionnaire

assessing the use of remote sensing—observation of areas of land

and water by airplane or satellite—by Federal non-military agencies.
86

2. The following reports were issued or requested by the General

Accounting Office (GAO) at the request of the Chairman and/or

Ranking Member of the Subcommittee on International Security,

Proliferation, and Federal Services:

Human Capital: The Role of Ombudsmen in Dispute Resolution, GAO–01–446 (April 2001).

Managing for Results: Human Capital Management Discussions in Fiscal Year 2001 Performance Plans, GAO–01–236 (April

2001).

U.S. Postal Service: Information on Retirement Plans, GAO–

02–170 (December 2001).

U.S. Postal Service: Deteriorating Financial Outlook Increases

Need for Transformation, GAO–02–355 (February 2002).

Results-Oriented Cultures, Insights for U.S. Agencies from

Other Countries’ Performance Management Initiatives, GAO–02–

862 (August 2002).

Hazard Mitigation: Proposed Changes to FEMA’s Multihazard

Mitigation Programs Present Challenges, GAO–02–1035 (September 2002).

U.S. Postal Service: Opportunities to Strengthen Information

Technology Investment Management Capabilities, GAO–03–3

(October 2002).

Use of Human Capital Flexibilities in Selected Federal Agencies GAO–03–02 (December 2002)

Federal Employees’ Health Plans: Premium Growth and OPM’s

Role in Negotiating

Benefits, GAO–03–236 (December 2002).

U.S. Postal Facilities Physical Security, (Expected completion

March 12, 2004).

Effective Workforce Planning Practices in Federal Agencies,

(Expected completion December 15, 2003).

Ballistic Missile Defense Technology Readiness Levels, (GAO–

03–600, August 2003).

Security of Russian Weapons of Mass Destruction, (GAO–03–

482, March 2003).

Nonproliferation of Radioactive Sources Abroad, (GAO–03–638,

May 2003).

Domestic Efforts to Strengthen Controls over Radiological

Sources, (GAO–03–483, April 2003).

Review of the Implementation of the Revised Statistical Policy

Directive Number 15, Race and Ethnicity Standards for Federal

Statistical Agencies and Administrative Reporting.
87

OVERSIGHT OF GOVERNMENT MANAGEMENT,

RESTRUCTURING AND THE DISTRICT OF COLUMBIA

SUBCOMMITTEE

CHAIRMAN: GEORGE V. VOINOVICH

RANKING MINORITY MEMBER: RICHARD J. DURBIN

I. HEARINGS

The Subcommittee on Oversight of Government Management,

Restructuring and the District of Columbia held the following hearings during the 107th Congress, the first four of which were conducted under the chairmanship of Senator George V. Voinovich:

1. High-Risk: Human Capital in the Federal Government (February

1, 2001)

This hearing examined the January 2001 decision by the U.S.

General Accounting Office (GAO) to designate strategic human capital management as a government-wide ‘‘high risk.’’ Since 1990,

GAO has periodically reported on ‘‘high-risk’’ government operations that it has identified as vulnerable to waste, fraud, abuse,

and mismanagement. GAO has determined that the government’s

approach to managing its people (‘‘human capital assets’’) is the

critical missing link in reforming and modernizing the Federal

Government’s management practices. The combined effect of skills

imbalances, succession planning challenges, outdated performance

management systems, and staffing shortages places the ability of

Federal agencies to accomplish their missions at risk.

Witness: Hon. David M. Walker, Comptroller General of the

United States, and Chief Executive Officer, U.S. General Accounting Office.

Mr. Walker explained that after a decade of government downsizing and curtailed investments in human capital, it is becoming

increasingly clear that the Federal Government’s human capital

strategies are inadequate to meet the needs of the government and

its citizens in the most effective, efficient, and economical manner.

He described the transformation needed to establish an organizational culture within government that promotes high performance

and accountability, noting GAO’s opinion that the Federal Government has often acted as if people were costs to be cut rather than

assets to be valued. Mr. Walker outlined several administrative

and legislative solutions to the crisis. He suggested the need to consider modern performance management and incentive approaches

and discussed the importance of focusing on people as a strategic

asset. In addition, Mr. Walker emphasized the roles of the Office

of Management and Budget, the Office of Personnel Management,

and the Congress in the management and oversight of human capital.

2. Assessing the District of Columbia Metropolitan Police Department’s Year 2000 Performance (March 22, 2001)

The Subcommittee assessed the District of Columbia Metropolitan Police Department’s achievement of its year 2000 performance
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goals. In keeping with the Subcommittee’s oversight of the implementation of the District’s performance management system, the

Subcommittee selected the police department as a case study to assess the District’s progress.

Witnesses: John A. Koskinen, City Administrator of the District

of Columbia; Margret Nedelkoff Kellems, Deputy Mayor for Public

Safety and Justice, District of Columbia; and Charles H. Ramsey,

Chief of Police, District of Columbia Metropolitan Police Department.

Mr. Koskinen discussed the District’s effort to improve the delivery of municipal services with the creation and implementation of

a performance management system. He spoke positively about the

establishment of goals to measure and track agencies’ performance.

Ms. Kellems attested to the accomplishments of Chief Ramsey, particularly community-oriented policing and its impact on crime reduction. She described how he achieved his performance goals and

made advancements in community relations and outreach efforts.

Chief Ramsey addressed the specific goals of the fiscal year 2000

performance accountability plan and described how the Department accomplished them. Of particular note was Chief Ramsey’s efforts to make the Metropolitan Police Department more visible and

responsive to the public.

3. The National Security Implications of the Human Capital Crisis

(March 29, 2001)

This hearing, the eighth since January 1999 focusing on the

human capital management challenge facing the Federal workforce, examined how the current and future loss of human capital

from government agencies is affecting and endangering our national security establishment and the ability of the Federal Government to defend our Nation and its interests around the world. The

hearing, held jointly with the Subcommittee on Civil Service and

Agency Organization of the House of Representatives Committee

on Government Reform, considered the extent to which the Department of Defense has and uses flexibilities in managing its civilian

workforce.

Witnesses: Hon. James R. Schlesinger, Commissioner, on behalf

of the U.S. Commission on National Security/21st Century, accompanied by Admiral Harry D. Train, USN-Ret., Commissioner, on

behalf of the U.S. Commission on National Security/21st Century;

Henry L. Hinton, Jr., Managing Director, Defense Capabilities and

Management, U.S. General Accounting Office; and Robert J.

Lieberman, Deputy Inspector General, Department of Defense.

Mr. Schlesinger and Admiral Train discussed the findings of the

Commission on National Security/21st Century review of U.S. national security and addressed such critical areas as contracting

oversight, Presidential appointments, and recruitment and retention in the Foreign Service, civil service, and military personnel.

Mr. Hinton discussed GAO’s evaluation of the Departments of Defense and State, noting that while both departments have taken

some action, much more remains to be done to institute an overarching framework within which future strategic workforce planning is conducted. Mr. Lieberman provided an overview of previous

audit and inspection reports which address human capital chal-
89

lenges facing the Department of Defense, most notably in the

acquisition workforce. Overall recommendations encompassed

sweeping policy reforms that would institute strategic planning to

improve recruiting, managing, and oversight of the Federal Government’s human capital.

4. The Outlook for the District of Columbia Government: The PostControl Board Period (June 8, 2001)

This hearing, held jointly with the Subcommittee on the District

of Columbia of the House of Representatives Committee on Government Reform, sought to gain an understanding of the progress

made by the District of Columbia government during the period

under which responsibilities for the District’s governance were

under the District of Columbia Management Assistance Authority

(also known as the ‘‘Control Board’’). The Control Board was established by Congress and President Clinton on April 17, 1995 (P.L.

104–8) to address the fiscal and governance crisis facing the District of Columbia during the 1990s. At the time of this hearing, the

District had achieved four consecutive balanced budgets and was

anticipating the disbanding of the Control Board on September 30,

2001. The hearing focused on the District’s accomplishments in addressing the financial and management challenges that led to the

control period, and on the appropriate financial and management

oversight mechanisms that should be in place during the post-control period to ensure that the financial and management stability

and progress continues.

Witnesses: Natwar M. Gandhi, Chief Financial Officer, District of

Columbia; Charles C. Maddox, Inspector General, District of Columbia; Joshua S. Wyner, Executive Director, D.C. Appleseed Center; Renee Boicourt, Managing Director, Moody’s Investors Service;

and Parry Young, Director, Public Finance Department, Standard

& Poor’s; Hon. Alice Rivlin, Chair, Financial Control Board; Hon.

Anthony Williams, Mayor, District of Columbia; Hon. Linda W.

Cropp, Chair, Council of the District of Columbia; and J. Christopher Mihm, Director, Strategic Issues, U.S. General Accounting

Office;

Mayor Williams testified on behalf of himself, Dr. Rivlin, and Ms.

Cropp, stating the District has achieved a balanced budget and has

met the statutory requirements since the control period was instituted. Mayor Williams also discussed developing an exit strategy

that would include continuing the position of Chief Financial Officer (CFO), preserving the autonomy of the CFO, and retaining

budget officials in the Executive and Legislative Branches of the

District for transparency. Mr. Mihm recommended establishing an

audit committee and suggested that Congress may wish to specifically require the District to notify Congress if certain predefined reportable events (such as default on borrowing or failing to meet

payroll) occur that require the prompt attention of the District and

Congress.

Mr. Gandhi urged the importance of an independent and insulated CFO who develops and certifies financial data within the District government. Mr. Maddox testified that the Inspector General

will continue to help foster accountability and integrity by auditing

the District government. Mr. Wyner suggested having the District
90

CFO act as the Treasurer and Controller with a renewable 4-year

term, direct control over his personnel, and a role in certifying fiscal impact statements and legislation. Ms. Boicourt testified that

the credit condition of the District is four ratings higher than it

was in 1995 due to the substantial improvement in the District’s

finances and economy. Ms. Boicourt emphasized the need for the

District to continue to improve its public services and management

information. Mr. Young testified that the District’s investment rating is BBB+ on a scale of AAA to D, emphasizing that the Control

Board Act and the 1997 National Capital Revitalization Act, along

with strengthening economic conditions, were significant factors in

the District’s improved financial and administrative position.

5. Finding a Cure to Keep Nurses on the Job: The Federal Government’s Role in Retaining Nurses for Delivery of Federally-Funded Health Care Services (June 27, 2001)

This hearing examined the root causes of nursing staff shortages

and the threat such shortages pose to the quality and cost containment of federally funded health care and long-term care programs,

including Medicare, Medicaid, Veterans and Defense health. Experts and practitioners shared their experiences about the impact

of staffing shortages on delivery of services to beneficiaries under

Federal programs. The hearing probed how the Federal Government and others are, or should be, responding to, coordinating, and

addressing this problem.

Witnesses: Rachel Weinstein, R.N., Director, Clinical Standards

Group, Office of Clinical Standards and Quality, Centers for Medicare and Medicaid Services, U.S. Department of Health and

Human Services, accompanied by Thomas Hoyer, Director, Chronic

Care Purchasing Policy Group; Denise H. Geolot, Ph.D., R.N.,

FAAN, Director, Division of Nursing, Bureau of Health Professions,

Health Resources and Services Administration, U.S. Department of

Health and Human Services (HHS); Kathleen L. Martin, Rear Admiral, Director, Navy Nurse Corps, U.S. Navy; Janet Heinrich, Director, Health Care—Public Health Issues, U.S. General Accounting Office; Ann O’Sullivan, MSN, R.N., President, Illinois Nurses

Association, on behalf of the American Nurses Association; Gary A.

Mecklenburg, President and Chief Executive Officer, Northwestern

Memorial Hospital, Chicago, on behalf of the American Hospital

Association; Carol Anne Bragg, R.N., President, SEIU Local 1998,

the Professional Staff Nurses Association in Maryland, and a member of SEIU’s Nurse Alliance; Hon. Lynn Martin, Chair, Panel on

‘‘Future of the Health Care Labor Force in a Graying Society,’’ accompanied by Mary Jo Snyder, Director of the Nursing Institute,

University of Illinois-Chicago, College of Nursing; and J. David

Cox, R.N., Vice President, National Veterans Affairs Council for the

American Federation of Government Employees (AFGE), AFL–CIO.

Ms. Weinstein emphasized the commitment of HHS to provide

adequate and appropriate pay to health care providers. She also

stated that HHS is analyzing how to best ensure that Medicare

and Medicaid recipients receive appropriate compensation for nursing homes and facilities and that staffing levels are appropriate.

Dr. Geolot projected that, with our aging population, including the

number of nurses nearing retirement age, the United States faces
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a severe shortage of nurses unless more individuals are brought

into the profession within the decade. She recommended that student loan programs for nurses be continued and improved. Admiral

Martin testified that the military is also facing nursing shortages

in its enlisted ranks, reserves, civil service, and contract positions

and encouraged increasing compensation for nurses to help recruit

new personnel.

Ms. Heinrich noted that the demand for nurses is shifting outside of hospitals, increasing the need for nurses. She observed that

inadequate staffing, heavy workloads, mandatory overtime, and the

need for increased compensation has resulted in growing job dissatisfaction among nursing professionals. Ms. O’Sullivan shared

her concerns that managed care and Medicare changes led to cost

containment programs decreasing the number of nurses on the job.

Mr. Mecklenburg testified that 75 percent of vacant positions in

hospitals are for nurses. He contended that there is a nursing

shortage because nurses are retiring at a higher rate, fewer people

are entering nursing school, and the number of patients needing

care is increasing. Ms. Bragg testified that nurses are leaving hospitals due to a deteriorating work environment, staffing shortages,

and abuse of mandatory overtime. Ms. Martin recommended the

need for long term solutions to address the problems of nursing, including improved wages and benefits, improved working environments, best management practices from the private sector, and a

public commission to study how to encourage people to enter the

nursing profession. Mr. Cox described how Veterans Administration hospitals have cut nurses by 10 percent and nurses assistants

by 30 percent. He argued that nurses are overworked, have too

many patients, and must work mandatory overtime, leading to

angry or upset patients, or worse, medical errors.

6. Expanding Flexible Personnel Systems Governmentwide (July 17,

2001)

This hearing focused on the various personnel flexibilities and

special authorities granted by Congress to specific government

agencies to facilitate personnel retention, recruitment, pay and promotion. This hearing built on the foundation established in a series

of hearings held by the Subcommittee in the 106th Congress to address the Federal Government’s human capital challenges. The

hearing showcased three agencies, the General Accounting Office,

the Internal Revenue Service, and the Department of Defense, and

considered whether Congressional enactments granting these entities certain personnel flexibilities had been useful and effective.

The hearing sought to identify lessons other agencies and Congress

could learn from the practical experiences of the three agencies

highlighted, including whether these flexibilities should be extended more broadly.

Witnesses: Hon. David M. Walker, Comptroller General, U.S.

General Accounting Office; Hon. Sean O’Keefe, Deputy Director,

Office of Management and Budget; Hon. Charles O. Rossotti, Commissioner, Internal Revenue Service; Hon. Charles S. Abell, Assistant Secretary of Defense for Force Management Policy, Department

of Defense; Bobby L. Harnage, Sr., National President, American

Federation of Government Employee (AFGE), AFL–CIO; Susan L.
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Shaw, Deputy Director of Legislation, National Treasury Employees Union (NTEU); and Myra Howze Shiplett, Director, Center for

Human Resources Management, National Academy of Public Administration.

Mr. Walker emphasized the importance of a strategic approach

to human capital management, one which is linked to the agency’s

strategic plan, core values, and organizational alignment. He also

explained the initiatives GAO itself had undertaken to enhance its

value by better management of human capital, and how other

agencies may benefit from best practices and GAO’s self-assessment checklist. Mr. O’Keefe stressed the importance of human capital to the President and his desire to use the current flexibilities

more effectively, while at the same time looking to update the personnel system to modernize performance incentives. Mr. Rossotti

shared his experience in implementing the Internal Revenue Service Restructuring and Reform Act of 1998 (P.L. 105–205), including

critical pay to attract senior managers, streamlined hiring, travel,

and relocation procedures and a broadbanded pay system. Mr.

Abell discussed the personnel flexibilities and demonstration

projects in place at the Department of Defense for the civilian

workforce.

Mr. Harnage advocated four broad policy changes to address the

Federal Government’s human capital crisis: Providing comparable

and competitive compensation; eliminating arbitrary personnel ceilings; ending the practice of outsourcing and privatization; and enhancing the value and reputation of public service work. Ms. Kelley

urged support for pay comparability for Federal employees with the

private sector and increased use of recruitment and retention programs available under current law. Ms. Shiplett encouraged increasing flexibility, adding more demonstration projects and opening up demonstration projects that are successful to other agencies

and departments who may wish to incorporate them.

7. Who Cares for the Caregivers?: The Role of Health Insurance in

Promoting Quality Care for Seniors, Children, and Individuals

with Disabilities (July 24, 2001)

This hearing examined health insurance for the over two million

caregivers who provide professional care services for our Nation’s

seniors, children, and individuals with disabilities. The Federal

Government sponsors a wide variety of caregiving programs either

directly or through subsidies. Many of these important caregivers

receive low pay and lack insurance to cover their own health care

needs or the health care needs of their dependents. This combination of low pay and lack of health benefits has resulted in a high

turnover rate in the caregiving profession, posing a threat to the

quality of our Nation’s care treatment and facilities. Reform options

to address this situation were reviewed, including Medicaid expansion, enrollment in State and local employees’ health insurance

programs, and subsidized private health insurance.

Witnesses: Jane Hayward, Deputy Director, Rhode Island Department of Health and Human Services; Suzanne Mintz, President

and Co-Founder, National Family Caregivers Association; James

Stearns, Esq., Past President and Current Board Member, United

Cerebral Palsy Association; Yolanda Sims, Hope School for the De-
93

velopmentally Disabled Children, Springfield, Illinois, on behalf of

the American Federation of State, County, and Municipal Employees; D.J. (Sam) Chapman, Chief Nursing Administrator, Bureau for

Children with Medical Handicaps, Ohio Department of Health and

National Secretary, National Association of Home Care; and

Mardell Bell, Local #880, Service Employees International Union,

Dolton, Illinois.

Ms. Hayward described the health care system in Rhode Island,

which provides health care to family care providers who are licensed by the State. Ms. Mintz testified regarding the plight of

family caregivers, who spend an average of 18 to 20 hours per week

caring for an elderly or disabled family member without compensation. Mr. Stearns discussed providing funding through Medicare

and Medicaid to allow persons requiring direct support attendants

to employ and provide health insurance for them. Ms. Sims shared

her personal experiences with the high costs associated with being

a caregiver, including health insurance expenses, even with the

benefit of employer-provided plans. Ms. Chapman commented on

management difficulties facing caregiver agencies, including challenges of retaining employees, providing benefits, and covering

business costs. She urged that financing for caregivers be made

available through Medicare or Medicaid, which would relieve agencies from having to choose between salary increases or health benefits. Ms. Bell discussed her experience as a healthcare worker without health insurance and the importance of expanding demonstration projects that provide living wages and health benefits to caregivers.

8. Food Safety and Security: Can Our Fractured Food Safety System Rise to the Challenge? (October 10, 2001)

This hearing, a followup to two hearings held by the Subcommittee in the 106th Congress, probed the current fragmented

structure of Federal food safety oversight to determine whether it

can adequately protect the American public from possible food hazards. Following the events of September 11, 2001, Americans are

more keenly focused on how varied aspects of homeland security,

including our Nation’s food supply, may be vulnerable to attack.

This hearing examined weaknesses in our existing food safety system with divided and duplicative responsibilities of multiple agencies. The hearing explored how a single food safety agency, based

on science, could promote greater accountability, maximize limited

resources, and ensure greater public confidence in the safety of our

food system.

Witnesses: Hon. Rosa L. DeLauro, U.S. House of Representatives,

Connecticut, 3rd District; Robert A. Robinson, Managing Director,

Natural Resources and the Environment, U.S. General Accounting

Office, accompanied by Keith W. Oleson, Assistant Director, Natural Resources and the Environment, U.S. General Accounting Office; Hon. Elsa Murano, Ph.D., Under Secretary of Agriculture for

Food Safety, U.S. Department of Agriculture; Bernard Schwetz,

Ph.D., D.V.M., Acting Principal Deputy Commissioner, Food and

Drug Administration, U.S. Department of Health and Human Services, accompanied by Joseph A. Levitt, Director, Center for Food

Safety and Applied Nutrition, Food and Drug Administration, U.S.
94

Department of Health and Human Services; Hon. Dan Glickman,

Akin, Gump, Strauss, Hauer & Feld, L.L.P., former Secretary of

Agriculture, U.S. Department of Agriculture (1995–2001); Michael

F. Jacobson, Ph.D., Executive Director, Center for Science in the

Public Interest (CSPI); John Cady, President and Chief Executive

Officer, National Food Processors Association; Peter Chalk, Ph.D.,

Policy Analyst, RAND Corporation; C. Manly Molpus, President

and Chief Executive Officer, Grocery Manufacturers of America;

and Tim Hammonds, President and Chief Executive Officer, Food

Marketing Institute.

Congresswoman DeLauro discussed the Safe Food Act of 2001,

legislation that would create a single agency responsible for all

Federal food safety activities, which she introduced in the House

of Representatives and Senator Durbin introduced in the Senate.

Mr. Robinson renewed GAO’s longstanding call for a single food

safety agency responsible for implementing uniform and risk-based

food safety laws. He emphasized that the present patchwork design

hampers the government’s efforts to address existing and emerging

food safety threats, and leads to inconsistent oversight and inefficient, inflexible deployment of resources.

Dr. Murano described how the food safety system is challenged

by emerging pathogens, increased international trade, new foods in

the marketplace, the growing segment of the population at greater

risk of contracting food-borne illnesses, and gaps in education. She

outlined the USDA food safety infrastructure of inspection, surveillance, research, and education. Dr. Schwetz explained FDA’s jurisdiction over 80 percent of domestic and imported foods marketed in

interstate commerce. He stressed the need for a strong sciencebased system, an enhanced surveillance system, risk-based prevention standards, and adequate enforcement to meet the food safety

challenges at the FDA. Mr. Glickman argued in support of a single

food safety agency. He shared his belief that the current fragmented organization of the food safety system is flawed and that

piecemeal approaches to reform will fall short. He stressed the

need to improve the underlying food safety statutory authority and

adopt an integrated regulatory structure to meet the challenges of

terrorism.

Dr. Jacobson shared his concerns about using old laws to regulate new hazards, with many gaps, inconsistencies, and inefficiencies in government oversight. He conveyed CSPI’s support for legislation to establish a single, independent food safety agency and a

cohesive, coherent food safety statute. Mr. Cady indicated that the

objectives of legislation to create a single food safety agency could

be achieved by better utilizing existing authorities, and that any

reforms not weaken consumer confidence in the safety of our food

supply. Dr. Chalk outlined his concerns that agriculture, which is

critical to our country’s economic, social, and political stability,

needs to be part of infrastructure protection planning and investment. He indicated support for a single food safety agency which

could streamline and rationalize oversight. Mr. Molpus endorsed

the current system, explaining that allocation of responsibility

among several agencies is logical and reflects the informed judgments of lawmakers and government officials. He argued that restructuring would be disruptive and difficult, but offered four rec-
95

ommendations: More food safety resources for the FDA, greater emphasis on science and research, a commitment to collaboration, coordination, and consultation among the varied agencies, and enhanced resources and tools to effectively regulate imported products. Mr. Hammonds testified that the current food safety system

is ill-equipped to deal with new challenges, and that designating a

single food safety agency is imperative to ensure coordination,

avoid overlap, and better utilize limited resources.

9. Promoting the Best Interests of Children: Proposals to Establish

a Family Court in the District of Columbia Superior Court (October 25, 2001)

This hearing considered the components of S. 1382 and H.R.

2657, legislation pending before the Subcommittee which sought to

restructure the existing District of Columbia Superior Court family

division to address concerns about how child abuse and neglect

cases are handled within the Presidentially-appointed, federallyfunded local court system. At the time of the hearing, more than

4,500 child abuse and neglect cases were spread among the Superior Court’s 59 trial judges, and many children were remaining in

foster care longer than Federal law dictating permanent placements requires. The hearing examined components of the reform

bills, including such elements as placing all cases involving one

family before one judge, assigning a cadre of magistrates to assist

in the judicial function of the court, mandating minimum terms for

service on the court, and transferring to the Family Court all child

abuse and neglect cases dispersed throughout the court system.

The hearing assessed varying perspectives on whether and how the

proposed changes might impact the ability of the court to address

the needs of some of the city’s most fragile residents—victims of

child abuse and neglect.

Witnesses: Hon. Mike DeWine, U.S. Senator; Hon. Mary L.

Landrieu, U.S. Senator; Hon. Tom DeLay, Majority Whip, U.S.

House of Representatives; Hon. Eleanor Holmes Norton, U.S.

House of Representatives; Hon. Rufus G. King III, Chief Judge, Superior Court of the District of Columbia, accompanied by Hon. Lee

Satterfield, Presiding Judge, Family Division, Superior Court of the

District of Columbia; Dr. Olivia Golden, Director, District of Columbia Child and Family Services Agency; Deborah Luxenberg, Chair,

Children in the Courts Committee, Council for Court Excellence;

and Margaret J. McKinney, Co-Chair, Family Law Section, District

of Columbia Bar Association.

Senator Landrieu explained that the bipartisan legislation she

and Senator DeWine introduced was prompted by concerns arising

from the deaths of over 200 children under the care of the District

since 1987. She emphasized that the ‘‘one family, one judge’’ principle underlying the bill was grounded in extensive research about

successful court restructuring efforts in other jurisdictions. Congresswoman Norton commented that in the course of development

of the legislation, best practices from family courts across the country were evaluated and incorporated in the proposal, including ongoing training, alternative dispute resolution, and utilizing a one

family/one judge policy. Congressman DeLay outlined three essential elements of reform: A one judge/one child policy; 5-year terms
96

for judges, and case consolidation within the family court system.

Senator DeWine focused his comments on the need to revamp the

organization of the court to include sufficient numbers of qualified

and experienced judges committed to serve sufficient terms in the

family court, specialized training in family law for the judges, and

improved compliance with the Adoption and Safe Families Act of

1997 (ASFA) (P.L. 105–89). Judge King described several administrative actions he had taken to address concerns about the handling of child welfare cases, including assigning an additional judge

to the child abuse and neglect case docket, remodeling courtroom

space, rearranging calendars, and specialized training on the requirements under the ASFA law. Judge King shared several concerns posed by the Congressional reform proposals. Specifically, he

indicated that requiring all family law cases, not just abuse and neglect matters, be transferred into the proposed new court may be

inappropriate. He also raised concerns that the proposals would

dismantle a highly successful Domestic Violence Unit, mandate extensive judicial terms that may not be in the best interests of families, and micromanage the court in a way that would not permit

necessary administrative flexibility.

Ms. Golden recommended passing the bill to ensure that changes

would coincide with reforms at the Child and Family Services

Agency and provide a stronger legal support system for all elements of the family court system, including judges, lawyers, social

workers, children, and parents. Ms. Luxenberg shared her belief

that the family division lacks adequate resources, stressing that

more funding is essential to achieve the goals of the proposed legislation. She also expressed concern about deferring implementation

of the one child/one judge provision for 18 months, urging that all

newly filed abuse and neglect cases should immediately follow the

one child/one judge approach. Ms. McKinney stressed the importance of having attorneys with family law experience appointed to

the Family Court bench, noting that historically this has not occurred. She recommended increased funding, that the court not be

micromanaged, and that judicial term limits not be legislated.

10. Good Beginnings Last a Lifetime: How the Federal Government

Can Promote Affordable, Quality Child Care (January 28,

2002)

This hearing was conducted as a field hearing at the Childgarden

Child Development Center in St. Louis, Missouri and jointly

chaired by Senators Dick Durbin and Jean Carnahan. The hearing

was designed to identify ways that the Federal Government can assist families, employers, and child care providers in the search for

affordable, quality child care. The hearing examined some of the

challenges of providing affordable and quality child care in the bistate St. Louis area. Problems encountered by parents, providers,

and businesses in accessing child care as well as innovative programs that are working well were discussed.

Witnesses: Lisa Eberle-Mayse, Director, Childgarden Child Development Center; Steve J. Cok, parent of children in day care; JoAnn

Harris, parent of children in day care; Janice Moenster, parent of

children in day care; Teresa M. Jenkins, Director, Office of Workforce Relations, U.S. Office of Personnel Management (OPM);
97

Sarah Kirschner, Missouri Childcare at Work; Penny Korte,

Daycare Owner/Director, P.A.L.S., Highland, Illinois; Corrine Patton, Manager, Missouri Child Care Resource and Referral Network;

and Kim E. Hunt, Illinois Network of Child Care Resource and Referral Agencies (INCCRRA).

Ms. Eberle-Mayse described effective ways to recruit and retain

qualified child care providers, such as minimizing non-salary expenses, fundraising, taking advantage of government programs,

creating a supportive work environment, and investing in continuing education. Mr. Cok, Ms. Harris, and Ms. Moenster shared

their personal experiences as working parents facing the challenge

of finding affordable, quality child care. Ms. Jenkins outlined some

of the successful initiatives launched by Federal agencies to provide

child care assistance for their employees, and OPM’s efforts to provide agencies with models for implementing child care subsidy programs. Ms. Kirschner explained her perspectives on how businesses

are impacted by child care concerns and how successful programs

such as Missouri Child Care at Work encourage businesses to provide on-site child care for their employees. Ms. Korte emphasized

the importance of providing daycare workers the requisite respect

and compensation for the work they perform, and discussed how

Federal assistance to help with recruitment and retention, health

care and retirement programs, and tax benefits for working families could improve the circumstances facing parents today. Ms. Patton discussed how her agency coordinates child care resource and

referral agencies and the importance of services which help parents

make informed decisions and help providers, communities, and employers with technical assistance and other specialized initiatives.

Ms. Hunt shared innovative practices and successful programs to

improve access to high quality child care in communities throughout Illinois.

11. Illicit Diamonds, Conflict and Terrorism: The Role of U.S.

Agencies in Fighting the Conflict Diamond Trade (February 13,

2002)

This hearing focused on efforts of U.S. Government agencies in

fighting the conflict diamond trade. The mining and sales of diamonds by parties to armed conflicts, labeled ‘‘conflict diamonds,’’

make up an estimated 3.7 percent to 15 percent of the value of the

global diamond trade. Conflict diamonds have fueled rebel violence

and egregious human rights violations against civilian populations

in countries such as Sierra Leone, Angola, and the Democratic Republic of the Congo. The hearing examined reports that conflict

diamonds are being used by terrorists to launder money. The hearing also outlined progress in the ‘‘Kimberley Process,’’ which is a

multilateral agreement to control the export and import of diamonds, specifically aimed at keeping conflict diamonds out of the

marketplace.

Witnesses: Hon. Russell Feingold, U.S. Senator; Hon. Mike

DeWine, U.S. Senator; Hon. Judd Gregg, U.S. Senator; Hon. John

E. Leigh, Ambassador of Sierra Leone to the United States; Hon.

Joseph Melrose, former U.S. Ambassador to Sierra Leone; Loren

Yager, Director, International Affairs and Trade, U.S. General Accounting Office; Alan Eastham, Special Negotiator for Conflict Dia-
98

monds, U.S. Department of State; Timothy Skud, Acting Deputy

Assistant Secretary for Regulation, Tariff, and Trade Enforcement,

U.S. Department of the Treasury; and James Mendenhall; Deputy

General Counsel, U.S. Trade Representative.

Senator Feingold discussed both the scourge of conflict that has

been funded by the illicit diamond trade and the benefits and economic growth that the legitimate diamond trade can bring to developing countries. He called for long-term policy options so that weak

states would no longer be attractive to criminals and terrorists as

a base of operations. Senator DeWine described the deplorable impact that conflicts fueled by the illicit diamond trade have had on

the children of Sierra Leone, particularly rape, mutilation, and kidnaping of children to serve in rebel armies. He also discussed the

economic clout the United States has as a major diamond importer

to stop the trade in conflict diamonds. Senator Gregg stressed the

need for legislation to ensure conflict diamonds are not entering

U.S. markets, and discussed past policies toward the Revolutionary

United Front (RUF) in Sierra Leone. He pointed to the ways in

which terrorist organizations use conflict diamonds to finance their

activities. He also called for policy changes toward Liberia as essential for solving the conflict diamond problem.

Ambassador Leigh discussed how conflict diamonds have allowed

the RUF to terrorize the government and people of Sierra Leone.

He distinguished the differences between conflict and contraband

diamonds. He also testified that stopping the trade of illicit diamonds will help bring peace to Africa and hamper criminal and terrorist activity. Ambassador Melrose discussed many facets of the

diamond trade in Sierra Leone, pointing out that diamonds are

easy to obtain since they are panned, are ideal for laundering

money, and that the government has lost its ability to control the

movement of diamonds from the field to the market. He stressed

the need to create a system for preventing illicit diamonds from entering the legitimate market.

Mr. Yager discussed the structure of the diamond trade. He outlined the Kimberley Process and its lack of accountability; the nature of diamonds as a commodity and how non-transparent industry operations create opportunities for illicit trade; and ways the

current system is inadequately designed for the detection of conflict

diamonds. Mr. Eastham discussed the role of the U.S. Department

of State in combating conflict diamonds through the United Nations and in negotiations as part of the Kimberley Process. He

spoke about efforts the United States was taking to strengthen the

Kimberley Process. Mr. Eastham also described the role of diamonds in financing terrorist activities by allowing terrorists to

hoard wealth and avoid legitimate banking circles. Mr. Skud discussed the role of the U.S. Customs Service in enforcing diamond

sanctions and the current import prohibitions on conflict diamonds.

Mr. Mendenhall testified about current U.N. sanctions and possible

conflicts between the Kimberley Process, which would regulate the

rough diamond trade, and U.S. trade commitments under the

World Trade Organization.
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12. A License to Break the Law? Protecting the Integrity of Driver’s

Licenses and State IDs (April 16, 2002)

This hearing took a comprehensive look at problems relating to

the availability and use of fake or fraudulently issued driver’s licenses, with a particular focus on what the Federal and State Governments can do to improve the system. Enhancing the process by

which driver’s licenses are issued, and improving the security of

the cards to make them counterfeit-resistant, will not only assist

in the domestic combat against terrorism, but can also help prevent

underage individuals from purchasing alcohol and tobacco products, keep problem drivers off the streets, and provide law enforcement officials with tools to fight identity theft.

Witnesses: Theodore W. Wern, Esq., Kirkland and Ellis, Chicago,

Illinois; Mary Ann Viverette, Chief of Police, Gaithersburg, Maryland, on behalf of the International Association of Chiefs of Police;

Richard J. Varn, Chief Information Officer, State of Iowa, on behalf

of the National Governors Association; Hon. Barbara P. Allen,

State Senator, Eighth District, Overland Park, Kansas; Betty L.

Serian, Deputy Secretary for Safety Administration, Pennsylvania

Department of Transportation, on behalf of the American Association of Motor Vehicle Administrators (AAMVA); Barry J. Goleman,

Vice President, Public Sector, American Management Systems,

Inc., and former President of AAMVA’s information technology subsidiary, AAMVAnet; and J. Bradley Jansen, Deputy Director, Center for Technology Policy, Free Congress Foundation.

Mr. Wern related his personal experience as a victim of identity

theft, including the time-consuming process of clearing his name of

huge debts and traffic offenses incurred by the person who stole his

identity. Ms. Viverette explained the importance of accurate identity documents to law enforcement officials. She encouraged the

Federal Government to establish uniform minimum standards for

drivers’ licenses and encouraged States to use a unique identifier

and anti-counterfeiting security device on State-issued cards. Mr.

Varn recommended that the Federal Government support an electronic database to verify identity. Ms. Allen described her efforts to

enact a State law in Kansas requiring Social Security numbers and

a biometric identifier for obtaining drivers’ licenses and issuance of

temporary documents until an individual’s identity is confirmed.

Ms. Serian recommended Federal assistance to States to help establish minimum standards for license issuance, help State motor

vehicle departments to identify fraudulent documents, create an

interstate driving record database, and increase penalties for identity fraud. Mr. Goleman, a former driver’s license examiner in California, recommended the Federal-State cooperative effort to implement the Commercial Motor Vehicle Safety Act as a model to stop

counterfeiting of State licenses. He also discussed the benefits of

using biometrics and ‘‘smart cards’’ in tandem with improved

verification technologies to reduce identification fraud. Mr. Jansen

stated his strong opposition to any effort to create a national identification card, contending that it would limit privacy, freedom, and

make identity fraud cases more difficult to solve.
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13. Vital Assets: Human Capital in Federal Economic Regulatory

Systems (April 23, 2002)

This hearing continued the Subcommittee’s inquiry into the

human capital challenge by examining the problem in the context

of how well our country’s economic regulatory agencies are

equipped to accomplish their missions. In January 2001, the General Accounting Office released its report ‘‘High-Risk Series: An

Update,’’ which stated that ‘‘(a) lack of sufficient numbers of experienced staff with the right expertise limits the ability of Commerce

and two other trade agencies to monitor and enforce trade agreements.’’ Furthermore, the collapse of Enron Corporation raised the

question of whether our government has the adequate staff to monitor the publicly traded companies which form the foundation of

our financial markets and economy. The hearing showcased staff

recruitment, selection, retention, and training at the Securities and

Exchange Commission (SEC), the Commerce Department’s International Trade Administration (ITA), and the Office of the U.S.

Trade Representative (USTR).

Witnesses: Loren Yager, Director, International Affairs and

Trade, U.S. General Accounting Office; Richard Hillman, Director

of Financial Markets and Community Investment, U.S. General Accounting Office; Grant Aldonas, Under Secretary for International

Trade and Head, International Trade Administration, U.S. Department of Commerce; James M. McConnell, Executive Director, U.S.

Securities and Exchange Commission (SEC); Edward L. Blansitt,

Deputy Inspector General, U.S. Department of Commerce; Troy

Cribb, Trade Counsel, Steptoe and Johnson, L.L.P.; and Lynn

Turner, Professor of Accounting, Center for Quality Financial Reporting, Colorado State University.

Mr. Yager discussed the GAO study of human capital at the Department of Commerce, Department of Agriculture, and the Office

of the United States Trade Representative (USTR). He identified

increased workloads, as well as recruitment and retention of trade

experts and attorneys, as problems that need to be addressed by

all agencies. Mr. Hillman described the huge increase in the SEC’s

workload over the past decade, concomitant with staffing losses

during the same period. Mr. Aldonas described the growing demands at the International Trade Administration (ITA) for analysis

and enforcement in its supportive role for USTR in negotiation, implementation, and dispute resolution of trade agreements. He noted

the ITA continues to work to meet the goals set forth in previous

GAO recommendations through management and administrative

tools. Mr. McConnell explained how the enactment of pay parity

will improve the SEC’s ability to recruit and retain a talented and

experienced staff, particularly as the Commission faces increasingly

more complex issues as new technologies, participants, and financial products reshape our markets. Mr. Blansitt discussed the

Department of Commerce’s identification of the need to boost international compliance with trade agreements and expand market access for American exporters as vital issues facing the ITA. Mr.

Blansitt outlined actions taken within the Trade Compliance Center, including development of a trade compliance manual to provide

guidance for all ITA staff and use of performance measures to assess effectiveness and enhance ITA’s efforts.
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Ms. Cribb emphasized the growing complexity of trade issues,

and the importance of trained staff to handle complicated health

and safety, transportation, and telecommunications issues. She also

recommended upgrading technology and encouraged staff rotation

as a way to boost interest and knowledge, while maintaining needed expertise. Mr. Turner shared his perspectives that human capital problems facing the SEC are the result of budget constraints

keeping staffing at low levels during a booming market, low pay

leading to high turnover rates, and low morale because SEC attorneys face opponents with greater access to resources. He stressed

that in addition to human capital assets, the SEC needs tools and

resources, including automated management information systems

and improved training, to fulfill its mission.

14. Kids and Cafeterias: How Safe Are Federal School Lunches?

(April 30, 2002)

The hearing, conducted jointly with the House of Representatives

Government Reform Subcommittee on Government Efficiency, Financial Management, and Intergovernmental Relations, examined

the adequacy of government oversight of the Federal school lunch

program. The hearing considered how managerial and organizational deficiencies may be adversely affecting the health of school

children. As the Chicago Tribune reported in December 2001, there

has been a 56 percent increase from 1990–1997 in the number of

outbreaks of illness from school lunches. Distribution companies

ship frozen school entrees quickly throughout the United States

and multi-state cafeteria management contractors put them on

menus in multiple cities simultaneously, too often giving children

instant access to unsafe meals. A complex tapestry of food safety

agencies often do not share information with each other and rarely

tell schools when plants are cited or shut down for health violations. The result of this system is sick children in our Nation’s

schools.

Witnesses: Hon. Rosa L. DeLauro, U.S. House of Representatives,

3rd District, Connecticut; Lawrence J. Dyckman, Director, Natural

Resources and Environment, U.S. General Accounting Office; Lester M. Crawford, D.V.M., Ph.D., Deputy Commissioner, Food and

Drug Administration (FDA), U.S. Department of Health and

Human Services; Hon. Elsa Murano, Ph.D., Under Secretary of Agriculture for Food Safety, U.S. Department of Agriculture (USDA);

Caroline Smith DeWaal, Director of Food Safety, Center for Science

in the Public Interest; Sue Doneth of Marshall, Michigan, on behalf

of Safe Tables Our Priority (STOP); John Bode, Counsel, National

Food Processors Association; Cheryl Roberts, Comer, Georgia, on

behalf of Safe Tables Our Priority (STOP), accompanied by Tyler

Roberts; and Mary Klatko, Administrator, Food and Nutrition

Service, Howard County Public Schools, Howard County Maryland,

on behalf of the American School Food Service Association.

Congresswoman DeLauro outlined her concerns about ensuring

the safety of food in the Federal School Lunch Program under the

current system and urged passage of legislation to establish a single agency responsible for food safety which she introduced in the

House and which Senator Durbin introduced in the Senate. Mr.

Dyckman shared statistics about the extent of the problem, specifi-
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cally that each year 76 million people suffer food borne illness,

325,000 of whom are hospitalized, and 5,000 of whom die. He recommended revising the school food service manual to include guidance regarding safety provisions for procurement contracts, ensuring that State and local officials have access to inspection and compliance records of food suppliers, and sharing recall information of

USDA donated foods with State and local officials if there is a safety concern. Dr. Crawford explained FDA’s role in promoting food

safety from research to outbreak response to education for consumers, health officials, and industry. He also noted FDA oversees

80 percent of domestic and imported foods; including where the

food is produced, processed, packaged, stored, or sold. Dr. Murano

stated that when a commodity purchased by USDA is flagged as

a safety concern all appropriate agencies are notified, an investigation is launched, and the food in question is held. She also commented that schools contract 83 percent of their school lunch food

and must make sure their processors and distributors meet school

standards for safety.

Ms. DeWaal described three gaps in the food safety system: Outbreak recognition, outbreak response, and outbreak prevention. She

encouraged the FDA and USDA to increase their resources for inspections and require more tests of ground meat sold to the school

lunch program, and urged Congress to create a single food safety

agency. Ms. Doneth explained the suffering her family experienced

after her daughter contracted Hepatitis-A after eating frozen

strawberries in her school lunch and later when another daughter

consumed food infected with E. Coli 0157:H7. Mr. Bode testified

that he did not support recall authority for FDA and USDA because the food industry has consistently cooperated in recalls, that

a mandatory recall would have to be done with due process, and

that questions about responsibility for an inappropriate recall were

unresolved. Mr. Bode also discouraged creation of a single food

agency noting the regulatory system and culture of the agency

would not be fundamentally different and would not improve coordination with State and local officials which he argued are vital

to more effective recalls. Ms. Roberts described her son’s experience

after contracting E. Coli 0157:H7 from a hamburger he ate at

school. She stressed the need for local health officials and the

media to report the causes of food borne illness outbreaks.

15. Tobacco’s Deadly Secret: The Impact of Tobacco Marketing on

Women and Girls (May 14, 2002)

This hearing focused on the impact of smoking on the health of

women and girls, particularly the role of tobacco advertising on

smoking initiation among women and girls. The hearing probed

what can and should be done to address the epidemic of smokingrelated disease in women, including efforts that the Federal Government is or should be undertaking. The U.S. Surgeon General

issued a report in 2001 highlighting the health impact of smoking

on women and girls, including that women now account for 39 percent of all smoking-related deaths in the United States, more than

double the level in 1965. Lung cancer is the leading cause of cancer

death among women, surpassing breast cancer in 1987. Meanwhile,

increased marketing by tobacco companies has stalled progress in
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smoking cessation by women and spurred recent increases in smoking among teenage girls.

Witnesses: Cassandra Coleman, and her daughter, Nzingha Coleman, Chicago, Illinois; Elizabeth Whelan, Sc.D., MA, MPH, President, American Council on Science and Health, New York, New

York; Charles King, III, J.D., Ph.D, Assistant Professor, Harvard

Business School, Boston, Massachusetts; Cristina Beato, M.D.,

Deputy Assistant Secretary for Health, U.S. Department of Health

and Human Services; Diane E. Stover, M.D., FCCP, Head, Division

of General Medicine, Chief, Pulmonary Service, Memorial SloanKettering Cancer Center, New York, New York, on behalf of the

American College of Chest Physicians; and Matthew L. Myers,

President, Campaign for Tobacco-Free Kids.

Ms. Coleman discussed her struggle to quit smoking after 25

years after the realization that her smoking caused her two children to develop asthma and leaky heart valves. Nzingha Coleman

shared her observations about smoking-related health problems

and commented on the young age at which some girls start smoking. Dr. Whelan shared the results of the American Council on

Science and Health’s most recent survey of tobacco advertising in

women’s magazines, noting findings that magazines which do not

accept tobacco ads also have the most information about the health

risks of tobacco usage. Dr. King discussed the findings of his study

published in the New England Journal of Medicine, documenting

trends in tobacco company advertising in magazines with a youth

readership and the effectiveness of this kind of advertising. Dr.

Beato testified regarding the Surgeon General’s report about patterns of tobacco use among women and girls, including when and

why girls start smoking, what factors influence smoking, and the

role tobacco marketing plays in influencing girls to start smoking.

Dr. Stover described specific health problems that smoking causes

in women including menstrual irregularity, infertility, and early

menopause. Mr. Myers advocated the need for a Federal policy to

address the smoking epidemic among women and girls, including

encouraging the Food and Drug Administration and the Center for

Medicare and Medicaid Services to take more active roles to protect

the health of women.

16. Half a Loaf—The Impact of Excluding Surplus Commodities

from America’s Response to Global Hunger (June 4, 2002)

The hearing examined the structure, scope and effectiveness of

U.S. food aid programs and the likely impact of legislative and administrative changes under consideration. The administration’s FY

2003 budget proposal contained an overall reduction of some $300

million in U.S. food aid budgets, eliminated surplus commodity donations, sharply reduced monetization of commodities and requested no funding for the ‘‘global school lunch’’ initiative launched

in 2000. It also reorganized and consolidated oversight responsibilities between the U.S. Agency for International Development and

the U.S. Department of Agriculture. Taken together, these steps

have significant implications for the government’s partner organizations and the hungry populations they help feed.

Witnesses: Hon. George McGovern, former U.S. Senator, and

former U.S. Ambassador to the Food and Agriculture Organization;
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Hon. James P. McGovern, U.S. House of Representatives, 3rd District, Massachusetts; Loren Yager, Director, International Affairs

and Trade Group, U.S. General Accounting Office; Hon. A. Ellen

Terpstra, Administrator, Foreign Agricultural Service, U.S. Department of Agriculture (USDA); Hon. Roger Winter, Assistant Administrator, Bureau of Democracy, Conflict and Humanitarian Assistance, U.S. Agency for International Development (USAID); Ellen S.

Levinson, Executive Director, Coalition for Food Aid; and Jason

Phillips, Country Director, International Rescue Committee,

Kenya.

Senator McGovern described the growing problem of world hunger with millions of hungry children, and the positive impact that

United Nations-sponsored school food programs have had on boosting enrollment in schools, especially among girls. He emphasized

the importance of U.S. leadership and Congressional funding for

global hunger relief programs. Congressman McGovern testified

how U.S. food aid programs have led to increased sales of U.S. agricultural products and have helped encourage economic growth

and development in the countries receiving aid. He stressed the importance of using surplus commodities to combat global hunger and

attack poverty, illiteracy, and lack of economic opportunity.

Mr. Yager discussed management and operation of U.S. food aid

programs including why aid fluctuates year to year, the six different food aid programs administered by two different Federal

agencies which deliver food aid, and management of food aid programs. Ms. Terpstra described USDA’s comprehensive review in

2001 of U.S. foreign food aid programs, noting that it uncovered

concerns that the number of programs and administering agencies

has resulted in inefficiencies and that expanded use of surplus

commodities has led to uncertainties about future food availability

on both recipient countries and distributing agencies. She outlined

the steps the administration was undertaking to reduce chronic

world hunger and promote economic security. Mr. Winter emphasized USAID’s active participation and concurrence in the food aid

review, noting that program changes and realignment should improve the ability to manage the programs.

Ms. Levinson expressed her organization’s concerns about the

food aid review and that the recently passed farm bill legislation

will eliminate nearly all surplus donations. She argued that decisions to use half of all international food aid for emergencies will

not reduce chronic hunger and undernourishment problems, and

that 800,000 metric tons of increased food aid will not adequately

replace the two to six million metric tons of food aid that will be

lost by eliminating surplus donations. Mr. Phillips shared his experiences managing a health and feeding program in Kenya’s

Kakuma refugee camp. He described the deteriorating situation of

food rations and the high rate of malnutrition in the camp, which

he attributed to an abandonment of minimum international humanitarian standards in food assistance. He offered several recommendations to provide more durable solutions for the refugees,

including having the United States engage in multilateral diplomacy to share the burden among donor communities, continuing

support for resettlement, exploring more aggressive and creative

opportunities for voluntary repatriation, and continuing efforts to
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achieve peace in countries generating Kenyan refugees, notably

Sudan and Somalia.

17. When Diets Turn Deadly: Consumer Safety and Weight-Loss

Supplements (July 31, 2002)

This hearing focused on the role and responsibility of the Federal

Government to ensure the safety of nutritional supplements. The

hearing probed whether health concerns raised by other governments and organizations are valid, what actions the Federal Government should take in light of product recalls in Canada, and

whether the Dietary Supplement Health and Education Act

(DSHEA) of 1994 and the system through which adverse events are

reported to the government are working to adequately protect

American consumers from dangerous supplements.

Witnesses: Janet Heinrich, Director, Health Care—Public Health

Issues, U.S. General Accounting Office; Michael F. Mangano, Principal Deputy Inspector General, Office of the Inspector General,

U.S. Department of Health and Human Services; Joseph A. Levitt,

Esq., Director, Center for Food Safety and Applied Nutrition, Food

and Drug Administration, U.S. Department of Health and Human

Services, accompanied by Dr. Christine Lewis Taylor, Director, Office of Nutritional Products, Labeling and Dietary Supplements

(ONPLDS), Center for Food Safety and Applied Nutrition (CFSAN),

and John Taylor, Director, Office of Enforcement, Office of Regulatory Affairs (ORA), Food and Drug Administration (FDA); Karen

Ruiz, Consumer, San Clemente, California; Steven B. Heymsfeld,

M.D., Deputy Director, New York Obesity Research Center, St.

Luke’s-Roosevelt Hospital Center, Professor of Medicine, Columbia

University, College of Physicians and Surgeons; Michael McGuffin,

President, American Herbal Products Association (AHPA), Silver

Spring, Maryland; and Cynthia T. Culmo, R.Ph., Chairperson,

Drugs, Devices, and Cosmetics Committee, Association of Food and

Drug Officials, Austin, Texas.

Ms. Heinrich outlined GAO’s evaluation of dietary supplement

oversight, noting that weaknesses in FDA’s voluntary adverse

event reporting system and lack of clinical trial evidence have hindered FDA’s ability to address safety concerns. She stated that

FDA has been slow to finalize good manufacturing practices rules

which could help in oversight of product dosage and contamination

issues. She indicated that Federal efforts have predominantly focused on marketing oversight rather than safety oversight. Mr.

Mangano cited three deficiencies in the voluntary adverse event reporting system, specifically that it detects few adverse events due

to the system’s inherent passivity; that it lacks sufficient information about consumer medical records, product ingredients, and

identity of manufacturers to meaningfully analyze reported events

and any public health concerns; and it does not permit analysis of

data to determine whether action in the interest of public health

is warranted. Mr. Levitt discussed FDA’s strategic plan for full implementation of the DSHEA requirements, stressing the need for

increased resources, better research, and a framework for evaluating product safety.

Ms. Ruiz described her personal experience with using ephedra

products to lose weight and increase energy, and the resultant
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adverse consequences on her health, including manic episodes, paranoia, and loss of sleep. She urged that supplement product manufacturers bear the burden of proving safety, that warnings be posted, and that labeling include a contact number for the FDA. Dr.

Heymsfield explained that the number of subjects studied in clinical trials of dietary supplements has been quite small and since

they are carefully screened, are healthier than the general consumer population. He noted that even among healthy subjects,

stimulant side effects were experienced, such as palpitations and

elevated blood pressure. He posited that because dietary supplements fall outside the realm of regulated drugs which must meet

stringent safety and effectiveness standards, passage of DSHEA

opened up a window for the marketing of ineffective or unsafe

products to highly vulnerable populations. Mr. McGuffin shared his

organization’s belief that FDA enforcement of labeling and advertising requirements for dietary supplements under DSHEA could

be strengthened. He stressed the benefits of industry self-regulation, and recommended that the FDA adopt the labeling and dosage guide used by his organization to ensure products meet label

claims, and are not used by children or individuals with preexisting

conditions, who could have adverse reactions. Ms. Culmo testified

that ephedrine alkaloid products have generated the most adverse

event reports of any dietary supplement. She noted that while Federal rules prohibit drug products containing ephedrine to be combined with other stimulants, currently marketed (but unregulated)

dietary supplements which contain ephedrine do include other

stimulants and other active ingredients, which have complex interactions and safety impacts. She called for premarket safety reviews, manufacturer and distributor registration with the FDA,

product listing, mandatory adverse event reporting, a single adverse event reporting system, enhanced intergovernmental communication, defined criteria for standard of risk, a center for regulatory oversight of dietary supplements, and appropriate funding

for oversight responsibilities.

18. Responding to the Public Health Threat of West Nile Virus (September 24, 2002)

The hearing, held jointly with the Senate Committee on Health,

Education, Labor and Pensions, focused on the emerging health

threat posed by West Nile virus, as well as the adequacy of the

Federal and State response to increased disease incidence. Ongoing

research related to the virus was explored along with future challenges facing various Federal and State agencies to effectively respond to health threats posed by naturally occurring infectious diseases.

Witnesses: Julie Louise Gerberding, M.D., M.P.H., Director, Centers for Disease Control and Prevention, U.S. Department of

Health and Human Services; Anthony Fauci, M.D., Director, National Institute of Allergy and Infectious Diseases, National Institutes of Health (NIH); Jesse L. Goodman, M.D, M.P.H, Deputy Director, Center for Biologics Evaluation and Research, Food and

Drug Administration, U.S. Department of Health and Human Services; Sidney Andrew Houff, M.D., Ph.D., President and Chairman,

Department of Neurology, and Director, Neuroscience and Aging
107

Institute, Loyola University Medical Center, Maywood, Illinois;

John R. Lumpkin, M.D., Director, Illinois Department of Public

Health, Springfield, Illinois; Nickie Monica, Parish President, St.

John the Baptist Parish, LaPlace, Louisiana, and Fay W. Boozman,

M.D., MPH, Director, Arkansas Department of Health.

Dr. Gerberding explained that West Nile Virus is a mosquitoborne virus which moves through birds and mosquitos. As of the

date of the hearing, there were 1,965 human cases in 32 States and

the District of Columbia, with 94 deaths. She recommended eliminating standing water and use of insect repellant and window

screens. Dr. Fauci described the three arenas of research conducted

by the NIH: Basic research, vector research, and vaccine development. Dr. Goodman addressed the issue of the safety of the blood

supply at blood banks and risks associated with receiving donated

blood and organs. He emphasized the need to develop a test to

screen donor blood for West Nile Virus before it goes to a recipient.

Dr. Houff testified there has been a change in the clinical manifestations of the West Nile Virus and that treatment is presently

limited to supportive therapy. He stressed the importance of surveillance centers to monitor arbovirus infections. Dr. Lumpkin described efforts underway in Illinois, which has been among the

States affected hardest by the outbreak. He addressed the impact

of State and local budget constraints on the ability to devote needed resources to the problem, stressing the need for Federal assistance. He urged continuation of research among the avian population and intensive study of communities where the outbreaks

have occurred. Mr. Monica discussed the measures taken in his

community to combat the West Nile Virus, including the implementation of a mosquito control program, spraying, and public education to minimize larvae hatchings near homes and businesses. He

implored the Federal Government to provide emergency funding for

expanded surveillance, testing, and laboratories. Dr. Boozman proposed more immediate assistance to States which are dealing with

the virus on a daily basis for spraying, larvacide, and education

programs. He noted the critical need to invest in public health laboratories to increase their capacities to meet the challenges of

emerging diseases.

19. Ephedra: Who is Protecting the American Consumers? (October

8, 2002)

This hearing, a followup to the Subcommittee’s July 31, 2002 introductory hearing on oversight of dietary supplements, focused

more specifically on ephedra-containing products. The hearing

delved into what U.S. Government agencies and private organizations are doing to protect consumers from harm from these products. The hearing examined the current voluntary adverse event

reporting system for dietary supplements and whether this system

is adequate to protect public health. The hearing emphasized that

hazardous products are being sold that people are led to believe are

safe, that issuance of rules to implement Federal law on dietary

supplement enacted 8 years ago has been too slow, and that much

work remains to be done by both FDA and Congress to meet the

government’s obligation to protect American consumers.
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Witnesses: Kevin and Debbie Riggins, Lincoln, Illinois; Charles

Fricke, Logan County Coroner, Lincoln, Illinois; Lanny J. Davis,

Esq., Counsel, on behalf of David W. Brown, President, and Chief

Executive Officer, Metabolife International, Inc., San Diego, California; J. Howard Beales, III, Ph.D., Director, Bureau of Consumer

Protection, U.S. Federal Trade Commission; Bill Jeffery, LL.B., National Coordinator, Centre for Science in the Public Interest (CSPI),

Carleton University, Ottawa, Ontario, Canada; Ronald M. Davis,

M.D., Board of Trustees, American Medical Association, Chicago,

Illinois; Sidney M. Wolfe, M.D., Director, Public Citizen Health Research Group; Frank D. Uryasz, President, The National Center for

Drug Free Sport, Inc., Kansas City, Missouri, on behalf of the National Collegiate Athletic Association (NCAA); Lester M. Crawford,

D.V.M., Ph.D., Acting Commissioner, Food and Drug Administration, U.S. Department of Health and Human Services. Robert

Occhifinto, President of NVE Pharmaceuticals, the manufacturer of

Yellow Jackets, declined the Subcommittee’s invitation to testify on

the basis of a schedule conflict.

Mr. and Mrs. Riggins related their experience as the parents of

Sean Riggins, a healthy, 16-year-old high school student and athlete, who tragically died after using an ephedra product known as

‘‘Yellow Jackets.’’ Mr. Riggins expressed his concern about the easy

access to dangerous herbal supplements in flashy packaging attractive to young people, and the need for regulations prohibiting sale

to minors. Mr. Fricke described his coroner’s examination into the

cause of Sean’s death, explaining that the forensic pathologist determined that Sean’s death from an acute myocardial infarction

(severe heart attack) was consistent with the effects of ephedrine.

Mr. Fricke also explained how easy it is to obtain the products and

how Sean’s death has heightened the awareness among youth and

the community about the dangers of the product.

Senator Durbin reviewed the findings of a report prepared by the

minority staff of the House Government Reform Committee Special

Investigations Division, in tandem with Senator Durbin’s staff,

which is the first independent analysis of over 14,000 adverse

event reports turned over to the FDA by Metabolife, Inc., a dietary

supplement manufacturer. The findings reflected that the reports

involve many significant adverse events and conflict with Metabolife’s statements that it was unaware of consumer reports of adverse health effects. Moreover, the report finds that Metabolife took

a careless approach to the adverse event reports, did not report

them in a timely fashion to FDA, and routinely failed to obtain the

medical records necessary to evaluate the safety of its products.

Mr. Davis stressed that Metabolife be used only for weight control purposes, at the recommended dosage level, and under the supervision of a doctor. He also rejected the reliability of adverse

event reports, calling them unreliable and flawed. Dr. Beales described FTC’s role in policing deceptive advertising practices and

ensuring that products do not exaggerate or make unfounded

claims about safety. He also stated the FTC has filed over 80 law

enforcement actions over the past decade challenging false or unsubstantiated claims about efficacy or safety of dietary supplements. Mr. Jeffery testified about the January 2002 decision of the

Canadian Government to issue a voluntary recall of all ephedra
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products after 60 adverse event reports and one death occurred.

The Canadian Government determined that there was a ‘‘reasonable probability that use of or exposure to ephedra products will

cause serious adverse health consequences or death.’’ Dr. Davis

stated that the physician members of the AMA are very concerned

about the quality, safety, and efficacy of dietary supplements, believe that DSHEA does not provide for adequate FDA oversight of

dietary supplements, and strongly support removal of dietary supplements containing ephedrine alkaloids from the U.S. market.

Dr. Wolfe shared information about the ban of sale of ephedracontaining products in U.S. Army and Air Force military exchanges

and commissaries worldwide. He questioned why the FDA has

failed to act to ban ephedra alkaloid-containing dietary supplements, despite evidence of the hazards. Mr. Uryasz discussed the

NCAA’s concerns that the use of ephedrine was being so closely

linked to athletic performance and how that led to NCAA’s inclusion of ephedrine on its list of banned substances. He outlined

NCAA’s expanded testing and prevention educational programs on

the dangers of ephedrine usage.

Dr. Crawford described FDA’s regulatory and enforcement authority and actions on dietary supplements, emphasizing that unlike prescription drugs and over-the-counter drugs, the DSHEA

places the burden of proof on the government, rather than the

manufacturer, to prove a dietary supplement product is not safe

and effective. He announced FDA’s recent efforts to publish proposed rules on good manufacturing practices. Dr. Crawford also

noted that a study by the RAND Corporation analyzing the published work on ephedrine is underway with results expected by

year end.

II. GAO REPORTS

During the 107th Congress, the Subcommittee worked in conjunction with the General Accounting Office on the following reports and studies:

Human Capital: Key Principles From Nine Private Sector Organizations, GGD–00–28 (01/31/2000)

District of Columbia Government: Performance Report’s Adherence to Statutory Requirements, GGD–00–107 (04/14/2000)

Financial Management: Census Monitoring Board Disbursements, Internal Control Weaknesses, and Other Matters, AIMD–

00–317 (09/29/2000)

D.C. Criminal Justice System: Better Coordination Needed

Among Participating Agencies, GAO–01–187 (03/30/2001)

Managing for Results: Human Capital Management Discussions

in Fiscal Year 2001 Performance Plans, GAO–01–236 (04/24/2001)

District of Columbia: Comments on Fiscal Year 2000 Performance Report, GAO–01–804 (06/08/2001)

Food Safety and Security: Fundamental Changes Needed to Ensure Safe Food, GAO–02–47T (10/10/2001)

D.C. Tuition Assistance Grants: Program May Increase College

Choices, but a Few Program Procedures May Hinder Grant Receipt

for Some Residents, GAO–02–265 (01/31/2002)
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Private Health Insurance: Access to Individual Market Coverage

May Be Restricted for Applicants with Mental Disorders, GAO–02–

339 (02/28/2002)

Preliminary Information on Proposal for Next-Day Destruction of

Records Generated by the National Instant Criminal Background

System (NCIS), GAO–02–511R (03/11/2002)

District of Columbia: Performance Report Reflects Progress and

Opportunities for Improvement, GAO–02–588 (04/15/2002)

DCPS: Attorney’s Fees for Access to Special Education Opportunities, GAO–02–559R (07/10/2002)

Gun Control: Potential Effects of Next-Day Destruction of NICS

Background Check Records, GAO–02–653 (04/10/2002)

Results-Oriented Cultures: Insights for U.S. Agencies from Other

Countries’ Performance Management Initiatives, GAO–02–862 (08/

02/2002)

Results-Oriented Cultures: Using Balanced Expectations to Manage Senior Executive Performance, GAO–02–966 (09/27/2002)

Human Capital: Effective Use of Flexibilities Can Assist Agencies in Managing Their Workforces, GAO–03–2 (10/21/2002)

III. LEGISLATION

The following bills were considered by the Subcommittee on

Oversight of Government Management, Restructuring and the District of Columbia during the 107th Congress:

MEASURES ENACTED INTO LAW

S.1382—The District of Columbia Family Court Act of 2001. This

bill addresses growing concerns about how child welfare proceedings are handled within the Presidentially-appointed, federallyfunded local court system in the District of Columbia. Mounting

numbers of child abuse and neglect cases, and the tragic deaths of

some 200 children while in the District’s foster care system,

prompted the introduction of this bill to restructure the District of

Columbia Superior Court. The bill redesignates the existing Family

Division as the Family Court, revamps and consolidates the management of child abuse and neglect case dockets, and requires recruitment and retention of trained and experienced judges to serve

in the Family Court. The bill was introduced on August 3, 2001 by

Senators Mike DeWine and Mary Landrieu and was referred to the

Senate Committee on Governmental Affairs. On September 10,

2001, the bill was referred to the Subcommittee, which held a hearing, ‘‘Promoting the Best Interests of Children: Proposals to Establish a Family Court in the District of Columbia Superior Court’’ on

October 25, 2001. The hearing was an opportunity to hear from bill

sponsors, judicial administrators, practitioners, and experts about

the components of S. 1382 and a similar House bill, H.R. 2657. S.

1382 was polled out of the Oversight of Government Management,

Restructuring and the District of Columbia Subcommittee on November 12, 2001. On November 14, 2001, S. 1382 was considered

by the full Committee on Governmental Affairs. A substitute

amendment, developed in collaboration with Senate sponsors, was

offered by Senator Durbin, and adopted by voice vote. S. 1382, as

amended, was ordered reported by the Committee on Govern-
111

mental Affairs by voice vote (S. Rept. 107–107). The Subcommittee

concurrently reported the similar House bill, H.R. 2657 as amended

(S. Rept. 107–108). H.R. 2657, more fully described below, became

the vehicle to advance this legislation to enactment (P.L. 107–114).

H.R. 2657—District of Columbia Family Court Act of 2001. This

bill, like a similar Senate bill (S. 1382) described above, addresses

the need to restructure how child welfare proceedings are handled

within the Presidentially-appointed, federally-funded local court

system in the District of Columbia. The bill redesignates the Family Division as the Family Court, revamps and consolidates the

management of child abuse and neglect case dockets, and requires

recruitment and retention of trained and experienced judges to

serve in the Family Court. H.R. 2657, introduced on July 26, 2001

by Representative Tom DeLay and cosponsored by Delegate Eleanor Holmes Norton and Representatives Connie Morella and Tom

Davis, was referred to the Committee on Government Reform. On

August 13, 2001, H.R. 2657 was referred to the Subcommittee on

the District of Columbia, which held a mark-up session to consider

the bill that same day. On September 20, 2001, H.R. 2657 was

passed by the House of Representatives under suspension of the

rules by a vote of 408–0. On September 21, 2001, H.R. 2657 was

received in the Senate, and was referred to the Senate Committee

on Governmental Affairs. The bill was referred to the Subcommittee on October 16, 2001. On October 25, 2001, the Subcommittee conducted a hearing, ‘‘Promoting the Best Interests of

Children: Proposals to Establish a Family Court in the District of

Columbia Superior Court’’ to consider the elements of H.R. 2657

and the similar S. 1382, including provisions to place all cases involving one family before one judge, assign a team of magistrates

and social workers to assist the judicial function, mandate minimum terms for service for judges on the Family Court, and transfer all child abuse and neglect cases now dispersed across the court

back under a Family Court helm. H.R. 2657 was polled out of the

Subcommittee on November 12, 2001. On November 14, 2001, H.R.

2657 was considered by the full Committee on Governmental Affairs. A substitute amendment, developed in collaboration with

Senate bill sponsors, was offered by Senator Durbin. The Durbin

amendment was adopted by voice vote, and H.R. 2657, as amended,

was ordered reported by voice vote (S. Rept. 107–108). On December 14, 2002, by unanimous consent, the Senate adopted the committee substitute amendment to H.R. 2657 and a manager’s

amendment offered by Senators Lieberman and Thompson, and

passed the bill, as amended. On December 19, 2001, the House of

Representatives, under suspension of the rules, agreed to the Senate amendment on a roll call vote of 418–1. On January 8, 2002,

the President signed the bill into law as Public Law 107–114.

H.R. 1499—District of Columbia College Access Improvement Act

of 2002. This bill eliminates the requirement under the District of

Columbia College Access Act of 1999 that residents of the District

of Columbia must continue on to college within 3 years of high

school graduation in order to be eligible for tuition assistance

through the College Access Act program. The bill expands the list

of eligible institutions to include private Historically Black Colleges

and Universities nationwide. The bill also expands the universe of
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eligible students to include all District of Columbia residents who

have resided in the District of Columbia for at least 5 consecutive

years prior to applying for the program and who are enrolled at an

eligible institution as of the date of enactment of this Act. The bill

requires that a dedicated account be established for the resident

tuition support program, and clarifies requirements on the use of

administrative funds. H.R. 1499 was introduced as the District of

Columbia College Access Act Technical Corrections Act of 2001, on

April 4, 2001, by Representative Connie Morella, Delegate Eleanor

Holmes Norton, and Representative Tom Davis. H.R. 1499 was approved by unanimous consent by the House Subcommittee on the

District of Columbia on June 26, 2001, ordered to be reported by

the full Committee on Government Reform on July 25, 2001, and

passed by the House of Representatives on July 30, 2001 by voice

vote. H.R. 1499 was received in the Senate on July 31, 2001 and

was referred to the Committee on Governmental Affairs. The bill

was referred to the Subcommittee on September 10, 2001. The bill

was favorably polled out of the Subcommittee on November 8,

2001, and considered by the full Committee on November 14, 2001.

An amendment in the nature of a substitute offered by Senator

George Voinovich was adopted by voice vote. The Committee ordered the bill favorably reported, as amended, by voice vote (S.

Rept. 107–101). On December 12, 2001, by unanimous consent, the

full Senate adopted the Committee substitute, a Lieberman amendment to clarify the inclusion of certain individuals, and passed H.R.

1499, as amended. On March 12, 2002, the House of Representatives agreed to the Senate amendments with further amendments

pursuant to H.Res. 364 by voice vote. By unanimous consent, the

Senate agreed to the House amendments to the Senate amendments on March 14, 2002. On April 4, 2002, the President signed

the bill into law as Public Law 107–157.

H.R. 2061—To amend the Charter of Southeastern University of

the District of Columbia. This bill eliminates a requirement in the

charter of the Southeastern University of the District of Columbia

that one third of its Board of Trustees be comprised of alumni of

the institution. H.R. 2061 was introduced in the House of Representatives on June 5, 2001 by Delegate Eleanor Holmes Norton.

The bill was referred to the House Committee on Government Reform, and subsequently to the Subcommittee on the District of Columbia, which considered the bill and advanced it to the full committee on July 9, 2001. On July 25, 2001, the House Government

Reform Committee approved the bill by voice vote and ordered it

reported. The House of Representatives considered the bill under

suspension of the rules and adopted the bill by voice vote on September 20, 2001. H.R. 2061 was received in the Senate on September 21, 2001, and referred to the Committee on Governmental

Affairs. It was referred to the Subcommittee on October 16, 2001.

The bill was unanimously polled out of the Subcommittee on November 7, 2001. The full Senate Committee on Governmental Affairs considered H.R. 2061 on November 14, 2001 and ordered the

bill favorably reported by voice vote (S. Rept. 107–102). The Senate

passed H.R. 2061 on December 6, 2001 by unanimous consent. On

December 21, 2001, the President signed the bill into law as Public

Law 107–93.
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H.R. 2199—District of Columbia Police Coordination Amendment

Act of 2001. This bill amends the National Capital Revitalization

and Self-Government Improvement Act of 1997 to permit any Federal law enforcement agency to enter into a cooperative agreement

with the Metropolitan Police Department of the District of Columbia to assist the Department in carrying out crime prevention and

law enforcement activities in the District of Columbia if deemed appropriate by the Chief of the Metropolitan Police Department and

the U.S. Attorney for the District of Columbia. H.R. 2199 was introduced in the House of Representatives on June 14, 2001, by Delegate Eleanor Holmes Norton. The bill was referred to the House

Committee on Government Reform, and on June 19, 2001, referred

to the Subcommittee on District of Columbia. On June 26, 2001,

the Subcommittee on District of Columbia considered the bill, and

forwarded it to the full Committee on Government Reform by

unanimous consent. On July 25, 2001, the Committee on Government Reform considered the bill and ordered it reported (without

written report). On September 25, 2001, H.R. 2199 was considered

by the House of Representatives under suspension of the rules, and

passed by voice vote. H.R. 2199 was received in the Senate and referred to the Committee on Governmental Affairs on September 25,

2001. On October 16, 2001, it was referred to the Subcommittee,

where it was favorably polled out on November 7, 2001. H.R. 2199

was considered by the Committee on Governmental Affairs on November 14, 2001, and ordered reported by voice vote (S. Rept. 107–

103). The Senate passed H.R. 2199 by unanimous consent on December 11, 2001. On January 8, 2002, the President signed the bill

into law as Public Law 107–113.

H.R. 2305—Criminal Justice Coordinating Council Restructuring

Act of 2002. This bill authorizes the heads of six Federal agencies,

specifically, the Court Services and Offender Supervision Agency

for the District of Columbia, the District of Columbia Pretrial Services Agency, the U.S. Attorney for the District of Columbia, the

Federal Bureau of Prisons, the U.S. Parole Commission, and the

U.S. Marshals Service, to meet regularly with District law enforcement officials as the Criminal Justice Coordinating Council

(CJCC). H.R. 2305 strengthens the CJCC by authorizing Federal

participation and funds. It requires the CJCC to submit to the

President, Congress, and appropriate Federal and local agencies an

annual report detailing its activities. H.R. 2305 was introduced on

June 25, 2001 by Representative Connie Morella and Delegate Eleanor Holmes Norton. It was referred to the House Government

Reform Subcommittee on the District of Columbia on July 9, 2001.

H.R. 2305 was amended in the House subcommittee to address concerns raised by the Department of Justice that requiring participation by the Federal entities designated in the bill in this locallyconstituted body could be read to authorize the local agencies comprising a majority of the CJCC to make decisions with binding authority on the Federal agency participants. The amendment allayed

the concern by making clear that Federal agency involvement is

merely authorized, not required, thereby making clear that the bill

does not impose on the Federal agencies any obligation to accede

to CJCC decisions. H.R. 2305, as amended, was reported to the full

House Committee on Government Reform by voice vote on Sep-
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tember 21, 2001. On December 4, 2001, H.R. 2305, as amended,

was considered by the House of Representatives under suspension

of the rules, and passed by voice vote. H.R. 2305, as passed in the

House, was received in the Senate on December 5, 2001, and referred to the Committee on Governmental Affairs. On December

17, 2001, the bill was referred to the Subcommittee, where it was

favorably polled out on March 14, 2002. H.R. 2305 was considered

by the Committee on Governmental Affairs on March 21, 2002, and

ordered reported by voice vote (S. Rept. 107–145). The Senate

passed H.R. 2305 on May 7, 2002 by unanimous consent. On May

20, 2002, the President signed the bill into law as Public Law 107-

180.

MEASURES REFERRED TO SUBCOMMITTEE UPON WHICH HEARINGS

WERE HELD

S. 1501—Safe Food Act of 2001. This bill would establish in the

Executive Branch an independent Food Safety Administration to

administer and enforce the food safety laws for the protection of

public health. It directs the Administrator of Food Safety to oversee

(1) implementation of Federal food safety inspection, enforcement,

and research efforts, based on scientifically supportable assessments of risks to public health; (2) development of consistent and

science-based standards for safe food; (3) coordination and

prioritization of food safety research and education programs with

other Federal agencies; (4) coordination of the Federal response to

food-borne illness outbreaks with other Federal agencies and State

agencies; and (5) integration of Federal food safety activities with

State and local agencies. The bill would transfer to the Food Safety

Administration all functions of the following Federal agencies that

relate to administration or enforcement of the food safety laws, as

determined by the President: (1) the Food Safety and Inspection

Service of the Department of Agriculture; (2) the Center for Food

Safety and Applied Nutrition of the Food and Drug Administration

(FDA); (3) the Center for Veterinary Medicine of FDA; (4) the National Marine Fisheries Service of the National Oceanic and Atmospheric Administration of the Department of Commerce as it relates

to the Seafood Inspection Program; and (5) such others as the

President may designate by executive order. The bill was introduced on October 4, 2001 by Senator Richard Durbin and cosponsored by Senators Hillary Rodham Clinton, Barbara Mikulski, and

Robert Torricelli, and referred to the Committee on Governmental

Affairs. The bill was referred to the Subcommittee on October 16,

2001. The Subcommittee conducted two hearings related to S. 1501.

The first hearing, ‘‘Federal Food Safety Oversight: Does the Fragmented Structure Really Make Sense?’’ was held on October 12,

2001, and the second hearing, ‘‘Kids in the Cafeteria: How Safe Are

Federal School Lunches?’’ was held on April 30, 2002.

MEASURES WHICH DID NOT ADVANCE BEYOND REFERRAL TO

SUBCOMMITTEE

S. 2316—District of Columbia Fiscal Integrity Act of 2002. This

bill gives the District of Columbia budget authority over locally

raised funds beginning October 1, 2003, while continuing Congres-
115

sional authority to appropriate Federal payments to the District.

The bill provides the District’s chief financial officer (CFO) with

greater autonomy, including procurement authority and control

over personnel. Under the bill, the CFO is charged with monitoring

the District’s financial situation and directed to immediately notify

Congress and the Mayor about any problems that would warrant

reinstatement of a control board. The bill was introduced on April

25, 2002 by Senator Mary Landrieu, and was referred to Subcommittee on April 26, 2002.

S. 2866—District of Columbia Student Opportunity Scholarship

Act of 2002. This bill authorizes the establishment of the District

of Columbia Scholarship Corporation as a private, nonprofit corporation to administer, publicize, and evaluate a District scholarship program and determine elementary and secondary student

and school eligibility. It establishes a District of Columbia Scholarship Fund, to be administered by the Secretary of the Treasury. It

provides for a seven-member Corporation Board of Directors, with

six members appointed by the President from nominees submitted

by the Senate and the House of Representatives, and one member

appointed by the Mayor of the District of Columbia. The bill authorizes the Corporation to award tuition scholarships and enhanced achievement scholarships to District students in kindergarten through grade 12 with family incomes not exceeding 185

percent of the national poverty line. Under the bill, these scholarships could be used for tuition, fees, and appropriate transportation

to public, private, or independent schools (or beyond-school-hours

enhancement programs) in the District and specified neighboring

counties and cities in Maryland and Virginia. The bill was introduced on August 8, 2002 by Senator Judd Gregg, and cosponsored

by Senators Sam Brownback, Larry Craig, and Tim Hutchinson,

and referred to the Senate Committee on Governmental Affairs.

The bill was referred to the Subcommittee on August 30, 2002.
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1 In 1952, the parent committee’s name was changed to the Committee on Government Operations. It was changed again in early 1977, to the Committee on Governmental Affairs, its

present title.

PERMANENT SUBCOMMITTEE ON INVESTIGTIONS

CHAIRMAN: SUSAN M. COLLINS

RANKING MINORITY MEMBER: CARL LEVIN

The following is the annual Activities Report of the Permanent

Subcommittee on Investigations during the 107th Congress:

I. HISTORICAL BACKGROUND

A. Expansion of Jurisdiction

The Permanent Subcommittee on Investigations was originally

authorized by Senate Resolution 189 on January 28, 1948. At its

creation in 1948, the Subcommittee was part of the Committee on

Expenditures in the Executive Departments. The Subcommittee’s

records and broad investigative jurisdiction over government operations and national security issues, however, actually antedate its

creation, since it was given custody of the jurisdiction of the former

Special Committee to Investigate the National Defense Program

(the so-called ‘‘War Investigating Committee’’ or ‘‘Truman Committee’’), chaired by Senator Harry S Truman during the Second

World War. Today, the Subcommittee is part of the Committee on

Governmental Affairs.1

The Subcommittee has had nine chairmen: Senators Homer Ferguson of Michigan (1948), Clyde R. Hoey of North Carolina (1949–

1952), Joseph R. McCarthy of Wisconsin (1953–1954), John L.

McClellan of Arkansas (1955–1972), Henry M. Jackson of Washington (1973–1978), Sam Nunn of Georgia (1979–1980 and 1987–

1994), William V. Roth of Delaware (1981–1986 and 1995–1996),

Susan M. Collins of Maine (1997–2001); and Carl Levin of Michigan (2001–2002).

Until 1957, the Subcommittee’s jurisdiction focused principally

on waste, inefficiency, impropriety, and illegality in government operations. Its jurisdiction has expanded considerably since then,

however, today encompassing investigations within the broad

ambit of the parent committee’s responsibility for matters relating

to the efficiency and economy of operations of all branches of the

government, including matters related to: (a) waste, fraud, abuse,

malfeasance, and unethical practices in government contracting

and operations; (b) criminality or improper practices in labor-management relations; (c) organized criminal activities affecting interstate or international commerce; (d) criminal activity affecting the

national health, welfare, or safety, including investment fraud,

commodity and securities fraud, computer fraud, and use of offshore banking and corporate facilities to carry out criminal objectives; (e) the effectiveness of present national security methods,

staffing and procedures, and U.S. relationships with international

organizations concerned with national security; (f) energy shortages, energy pricing, management of government-owned or controlled energy supplies; and relationships with oil producing and
117

consuming countries; and (g) the operations and management of

Federal regulatory policies and programs. While technically reduced to a subcommittee of a standing committee, the Subcommittee has long exercised its authority as almost a separate

entity, selecting its own staff, issuing its own subpoenas, and determining its own investigatory agenda.

The Subcommittee acquired this sweeping jurisdiction in several

successive stages. In 1957—based on information developed by the

Subcommittee—the Senate passed a Resolution establishing a Select Committee on Improper Activities in the Labor or Management

Field. Chaired by Senator McClellan, who also chaired the Subcommittee at that time, the Select Committee was composed of

eight Senators—four of whom were drawn from the Subcommittee

on Investigations and four from the Committee on Labor and Public Welfare. The Select Committee operated for 3 years, sharing office space, personnel, and other facilities with the Permanent Subcommittee. Upon its expiration in early 1960, the Select Committee’s jurisdiction and files were transferred to the Subcommittee on

Investigations, greatly enlarging the latter body’s investigative authority in the labor-management area.

The Subcommittee’s jurisdiction expanded further during the

1960’s and 1970’s. In 1961, for example, it received authority to

make inquiries into matters pertaining to organized crime and, in

1963, held the famous Valachi hearings described below, examining

the inner workings of the Italian Mafia. In 1967, following a summer of riots and other civil disturbances, the Senate approved a

Resolution directing the Subcommittee to investigate the causes of

this disorder and to recommend corrective action. In January 1973,

the Subcommittee acquired its national security mandate when it

merged with the National Security Subcommittee. With this merger, the Subcommittee’s jurisdiction was broadened to include inquiries concerning the adequacy of national security staffing and

procedures, relations with international organizations, technology

transfer issues, and related matters. In 1974, in reaction to the

gasoline shortages precipitated by the Arab-Israeli war of October

1973, the Subcommittee acquired jurisdiction to investigate government operations involving the control and management of energy

resources and supplies.

In 1997, the full Committee on Governmental Affairs was

charged by the Senate to conduct a special examination into illegal

or improper activities in connection with Federal election campaigns during the 1996 election cycle. The Permanent Subcommittee provided substantial resources and assistance to this investigation, contributing to a greater public understanding of what

happened, to subsequent criminal and civil legal actions taken

against wrongdoers, and to enactment of campaign finance reforms

in 2001.

B. PAST INVESTIGATIONS

Armed with its broad jurisdictional mandate, the Subcommittee

has in recent years conducted investigations into a wide variety of

topics of public concern, ranging from child pornography to espionage, including reviews of organized crime activities such as labor

racketeering, fraudulent insurance plans, and newly emerging
118

2This anniversary also marks the first date upon which internal Subcommittee records generally began to become available to the public. Unlike most standing committees of the Senate

whose previously unpublished records open after a period of 20 years has elapsed, the Permanent Subcommittee on Investigations, as an investigatory body, may close its records for 50

years to protect personal privacy and the integrity of the investigatory process. With this 50th

anniversary, the Subcommittee’s earliest records, housed in the Center for Legislative Archives

at the National Archives and Records Administration, began to open seriatim. The records of

the predecessor committee—the Truman Committee—were opened by Senator Nunn in 1980.

criminal groups. The Subcommittee has also conducted investigations into numerous aspects of the narcotics trade, including money

laundering, issues in Federal drug enforcement, and drug abuse.

The Subcommittee has also devoted itself to investigating allegations of waste, fraud, and abuse in government programs and consumer protection issues, addressing problems ranging from the

safety of imported foods to issues of Medicare fraud and mortgage

‘‘flipping.’’ Most recently, under Senator Levin’s leadership, the

Subcommittee has focused on money laundering, factors influencing the pricing of gasoline and crude oil, and the collapse of

Enron Corporation.

In 1998, the Subcommittee marked the 50th anniversary of the

Truman Committee’s conversion into a permanent subcommittee of

the U.S. Senate.2 In the half-century of its existence, the Subcommittee’s many successes have made clear to the Senate the importance of retaining a standing investigatory body devoted to

keeping government not only efficient and effective, but also honest

and accountable.

(1) Historical Highlights

The Subcommittee’s investigatory record as a permanent Senate

body began under the chairmanship of Republican Senator Homer

Ferguson and his Chief Counsel (and future Attorney General and

Secretary of State) William P. Rogers, as the Subcommittee inherited the Truman Committee’s role in investigating fraud and waste

in U.S. Government operations. This investigative work became

particularly colorful under the chairmanship of Senator Clyde

Hoey, a North Carolina Democrat who took the chair from Senator

Ferguson after the 1948 elections. The last U.S. Senator to wear

a long frock coat and wing-tipped collar, Mr. Hoey was a distinguished southern gentleman of the old school. Under his leadership, the Subcommittee won national attention for its investigation

of the so-called ‘‘five percenters,’’ notorious Washington lobbyists

who charged their clients 5 percent of the profits from any Federal

contracts they obtained on the client’s behalf. Given the Subcommittee’s jurisdictional inheritance from the Truman Committee,

it is perhaps ironic that the ‘‘five percenters’’ investigation raised

allegations of bribery and influence-peddling that reached right

into the White House and implicated members of President Harry

Truman’s staff. In any event, the fledgling Subcommittee was off

to a rapid start.

What began colorful soon became contentious. When Republicans

returned to the Majority in the Senate in 1953, Wisconsin’s junior

Senator, Joseph R. McCarthy, became the Subcommittee’s chairman. Two years earlier, as Ranking Minority Member, Senator

McCarthy had arranged for another Republican Senator, Margaret

Chase Smith of Maine, to be removed from the Subcommittee. Sen-
119

ator Smith’s offense, in Senator McCarthy’s eyes, was her issuance

of a ‘‘Declaration of Conscience’’ repudiating those who made unfounded charges and used character assassination against their political opponents. Although Senator Smith had carefully declined to

name any specific offender, her remarks were universally recognized as criticism of Senator McCarthy’s accusations that communists had infiltrated the State Department and other government agencies. Senator McCarthy retaliated by engineering Senator Smith’s removal from the Subcommittee, replacing her with

the newly-elected Senator from California, Richard M. Nixon.

Upon becoming Subcommittee Chairman, Senator McCarthy

staged a series of highly publicized anti-communist investigations,

culminating in an inquiry into communism within the U.S. Army,

which became known as the Army-McCarthy hearings. During the

latter portion of these hearings, in which the parent Committee examined the Wisconsin Senator’s attacks on the army, Senator

McCarthy recused himself, leaving South Dakota Senator Karl

Mundt to serve as Acting Chairman of the Subcommittee. Gavelto-gavel television coverage of the hearings helped turn the tide

against Senator McCarthy by raising public concern about his

treatment of witnesses and cavalier use of evidence. In December

1954, in fact, the Senate censured Senator McCarthy for unbecoming conduct; in the following year, the Subcommittee adopted new

rules of procedure that better protected the rights of witnesses. The

Subcommittee also strengthened the rules ensuring the right of

both parties on the Subcommittee to appoint staff, initiate and approve investigations, and review all information in the Subcommittee’s possession.

In 1955, Senator John McClellan of Arkansas began 18 years of

service as Chairman of the Permanent Subcommittee on Investigations. Senator McClellan appointed the young Robert F. Kennedy

as the Subcommittee’s Chief Counsel. That same year, Members of

the Subcommittee were joined by Members of the Senate Labor and

Public Welfare Committee on a special committee to investigate

labor racketeering. Chaired by Senator McClellan and staffed by

Kennedy and other Subcommittee staff members, this special committee directed much of its attention to criminal influence over the

Teamsters Union, most famously calling Teamsters’ leaders Dave

Beck and Jimmy Hoffa to testify. The televised hearings of the special committee also introduced Senators Barry Goldwater and John

F. Kennedy to the Nation, as well as leading to passage of the

Landrum-Griffin Labor Act.

After the special committee completed its work, the Permanent

Subcommittee on Investigations continued to investigate organized

crime. In 1962, the Subcommittee held hearings during which Joseph Valachi outlined the activities of La Cosa Nostra, or the

Mafia. Former Subcommittee staffer Robert Kennedy—who had by

now become Attorney General in his brother’s Administration—

used this information to prosecute prominent mob leaders and their

accomplices. The Subcommittee’s investigations also led to passage

of major legislation against organized crime, most notably the

Racketeer Influenced and Corrupt Organizations (RICO) provision

of the Crime Control Act of 1970. Under Chairman McClellan, the

Subcommittee also investigated fraud in the purchase of military
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3 It had not been uncommon in the Subcommittee’s history for the Chairman and Ranking Minority Member to work together closely despite their partisan differences, but Senator Percy was

unusually active in the Minority—a role that included chairing one investigation of the hearing

aid industry.

uniforms, corruption in the Department of Agriculture’s grain storage program, securities fraud, and civil disorders and acts of terrorism. From 1962 to 1970, the Permanent Subcommittee on Investigations conducted an extensive probe of political interference in

the awarding of government contracts for the Pentagon’s ill-fated

TFX (‘‘tactical fighter, experimental’’). In 1968, the Subcommittee

also examined charges of corruption in U.S. servicemen’s clubs in

Vietnam and elsewhere around the world.

In 1973, Senator Henry ‘‘Scoop’’ Jackson, a Democrat from Washington, replaced Senator McClellan as the Subcommittee’s chairman. During these years, recalled Chief Clerk Ruth Young Watt—

who served in this position from the Subcommittee’s founding until

her retirement in 1979—Ranking Minority Member Charles Percy,

an Illinois Republican, was more active on the Subcommittee than

Chairman Jackson, who was often distracted by his Chairmanship

of the Interior Committee and his active role on the Armed Services Committee.3 Senator Percy worked closely in this regard with

Georgia Democrat Sam Nunn, who subsequently succeeded Senator

Jackson as Chairman in 1979. As Chairman, Senator Nunn continued the Subcommittee’s investigations into the role of organized

crime in labor-management relations and also investigated pension

frauds.

The regular reversals of political fortunes in the Senate of the

1980’s and 1990’s saw Senator Nunn trade chairmanship three

times with Delaware Republican William Roth. Senator Nunn

served from 1979 to 1980 and again from 1987 to 1995, while Senator Roth served from 1981 to 1986, and again from 1995 to 1996.

These 15 years saw a strengthening of the Subcommittee’s bipartisan tradition in which investigations were initiated by either the

Majority or Minority and fully supported by the entire Subcommittee. For his part, Senator Roth led a wide range of investigations into commodity investment fraud, off-shore banking

schemes, money laundering, and child pornography. Senator Nunn

led inquiries into Federal drug policy, the global spread of chemical

and biological weapons, abuses in Federal student aid programs,

computer security, airline safety, and health care fraud. Senator

Nunn also appointed the Subcommittee’s first female counsel, Eleanore Hill, who served as Chief Counsel to the Minority from 1982

to 1986 and then as Chief Counsel from 1987 to 1995. Ms. Hill subsequently served as Inspector General at the Department of Defense.

(2) Recent Investigations

In January 1997, Republican Senator Susan Collins of Maine, became the first woman to chair the Permanent Subcommittee on Investigations. Senator John Glenn of Ohio became the Ranking Minority Member. After Senator Glenn’s retirement, Michigan Democrat Carl Levin succeeded him in January 1999, as the Ranking

Minority Member. During Senator Collins’ chairmanship, the Subcommittee conducted a number of investigations affecting Ameri-
121

cans in their day-to-day lives, including investigations into mortgage fraud, phony credentials obtained through the internet, deceptive mailings and sweepstakes promotions, day trading of securities, and securities fraud on the internet. Senator Levin, while

Ranking Minority Member, initiated an investigation into money

laundering, and in 1999, the Subcommittee held a hearing on

money laundering issues affecting private banking. Senator Collins

continued to chair the Subcommittee until June 2001, when the

Senate Majority party changed hands, and Senator Levin assumed

the chairmanship. Senator Collins, in turn, became the Ranking

Minority Member.

During the 107th Congress, then, both Senator Collins and Senator Levin chaired the Subcommittee. In her 6 months chairing the

Subcommittee at the start of the 107th Congress, Senator Collins

held hearings examining issues related to cross border fraud, the

improper operation of tissue banks, and Federal programs designed

to fight diabetes. During the following 18 months, Senator Levin

led a bipartisan Subcommittee investigation of the Enron Corporation, which had collapsed into bankruptcy just before Senator Levin

became the Chairman. Senator Levin also advanced the investigation he had initiated while Ranking Minority Member into issues

related to money laundering and opened new investigations into

offshore tax havens and tax scams, border security, and the pricing

of gasoline and other fuels. The following pages describe the Subcommittee’s work during the 107th Congress.

II. SUBCOMMITTEE HEARINGS DURING THE 107TH CONGRESS

A. Role of U.S. Correspondent Banking in International Money

Laundering (March 1, 2, and 6, 2001)

The first hearings held by the Subcommittee during the 107th

Congress presented evidence of serious money laundering problems

affecting a category of banking services called correspondent banking. Correspondent banking occurs when one bank provides services to another bank to move funds or carry out other financial

transactions. It is an essential feature of international banking, allowing the rapid movement of funds across borders among banks

to enable the banks and their clients to conduct business worldwide.

The Subcommittee’s year-long investigation found that too many

U.S. banks, through the correspondent accounts they provide to foreign banks carrying high risks of money laundering, had become

conduits for illicit funds associated with drug trafficking, financial

fraud, Internet gambling, and other crimes. The investigation identified three categories of foreign banks with high risks of money

laundering: Shell banks, offshore banks, and banks in jurisdictions

with weak anti-money laundering controls. The investigation found

that, because many U.S. banks had routinely failed to screen and

monitor these high-risk foreign banks as clients, they were exposed

to poorly regulated, poorly managed, sometimes corrupt, foreign

banks with weak or no anti-money laundering controls. The investigation determined that U.S. correspondent accounts had been

used by these foreign banks, their owners and criminal clients to

gain direct access to the U.S. financial system, to benefit from the
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safety and soundness of the U.S. banking system, and to launder

dirty money through U.S. bank accounts.

In February 2001, Senator Levin released a 450-page report prepared by his staff detailing the money laundering problems uncovered in correspondent banking. The report indicated that virtually

every U.S. bank examined had opened correspondent accounts for

high-risk foreign banks. The report also presented ten detailed case

histories showing how high-risk foreign banks managed to move

billions of dollars through U.S. banks, including hundreds of millions of dollars in illicit funds associated with drug trafficking, financial fraud, or Internet gambling. In some cases, the foreign

banks were engaged in criminal behavior; in others, the foreign

banks had such poor anti-money laundering controls that they did

not know or appeared not to care whether their clients were engaged in criminal behavior. Several of the foreign banks operated

well outside the parameters of normal banking practices, without

basic fiscal or administrative controls, account opening procedures

or anti-money laundering safeguards. All had limited resources and

staff and relied heavily upon their U.S. correspondent accounts to

conduct operations, provide client services, and move funds. Most

completed virtually all of their transactions through their correspondent accounts, making correspondent banking integral to

their operations. The result was that their U.S. correspondent accounts served as a significant gateway into the U.S. financial system for criminals and money launderers.

In March, the Subcommittee held 3 days of hearings examining

the problem of international correspondent banking and money

laundering from several perspectives. The first witness was a

former offshore bank owner, John Mathewson, who pled guilty to

conspiracy to commit money laundering and tax evasion and has

spent recent years helping to prosecute his former clients for tax

evasion and other crimes. Mr. Mathewson testified that 95 percent

of his 2,000 clients had been U.S. citizens, and he believed that 100

percent of his bank clients were engaged in tax evasion. He characterized his offshore bank as a ‘‘run-of-the-mill’’ operation. He also

said that the Achilles’ heel of the offshore banking community was

its dependence upon correspondent banks to do business and that

was how jurisdictions like the United States could take control of

the situation and stop abuses, if the United States had the political

will to do so.

The March hearings also heard from correspondent bank officers

and their supervisors at three major U.S. banks, Bank of America,

Chase Manhattan Bank, and Citibank. The witnesses were James

C. Christie, Senior Vice President, Global Treasury Risk Management, at Bank of America; David Weisbrod, Senior Vice President,

Treasury Services Division, at Chase Manhattan Bank; and several

officers from Citibank, including Jorge Bermudez, Executive Vice

President, Head of e-Business, at Citibank in New York, Carlos

Fedrigotti, Executive Vice President and Country Corporate Officer

at Citibank Argentina, and Martin Lopez, (formerly with Citibank

Argentina), Vice President and Corporate Bank Head, at Citibank

South Africa. The hearings showed how each of these U.S. banks

opened accounts for high-risk foreign banks, despite significant
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money laundering risks and even after being confronted with disturbing evidence of misconduct or suspicious transactions.

The hearings also heard testimony from correspondent banking

and money laundering experts: Jack Blum of the Lobel, Novins and

Lamont law firm; Anne Vitale, former Managing Director and Deputy General Counsel at Republic National Bank of New York, and

Robb Evans, former head of the California banking association and

currently with Robb Evans and Associates, regarding the need for

U.S. banks to maintain strong anti-money laundering controls in

their correspondent banking operations. Another witness, Arthur

Jacques of the Jacques Little law firm in Toronto, Ontario, Canada,

spoke on behalf of some of the victims of money laundering through

correspondent accounts, including one case in which 700,000 credit

cardholders who were defrauded of more than $40 million in illegal

credit card charges by a criminal who sent the stolen funds to offshore banks with accounts at U.S. banks.

Finally, the hearings heard from Federal law enforcement, including Joseph Myers, Acting Deputy Assistant Secretary for Enforcement Policy at the U.S. Department of the Treasury; and

Mary Lee Warren, Deputy Assistant Attorney General for the

Criminal Division at the U.S. Department of Justice. These witnesses testified about lessons learned from past money laundering

cases that utilized correspondent banking and existing problems

with U.S. anti-money laundering laws that impeded successful

money laundering prosecutions.

After the hearing, most of the high-risk foreign banks highlighted in the staff report were closed by their sponsoring jurisdictions, and many U.S. banks announced efforts to strengthen their

anti-money laundering efforts in the correspondent banking field.

The hearings and staff report also contributed to the enactment of

stronger anti-money laundering provisions in Title III of the USA

Patriot Act, which was signed into law in October 2001. Among

other measures, the USA Patriot Act bars U.S. financial institutions from opening accounts for foreign shell banks and requires

them to use enhanced due diligence before opening correspondent

accounts for offshore banks or banks in jurisdictions that fail to cooperate with international anti-money laundering efforts. The USA

Patriot Act also makes foreign corruption a predicate offense for

U.S. money laundering prosecutions and requires U.S. financial institutions to use enhanced due diligence before opening a private

banking account for a political figure or their close family members. A number of the Subcommittee’s key recommendations were

also incorporated in the leading international guidelines to prevent

money laundering called the 40 Recommendations, which are

issued by the Financial Action Task Force on Money Laundering in

the Organization for Economic Cooperation and Development, were

revised in 2003, and have been used by the United States to evaluate foreign countries’ anti-money laundering laws and practices.

B. Tissue Banks: Is the Federal Government’s Oversight Adequate?

(May 24, 2001)

On May 24, 2001, the Subcommittee held a hearing examining

the practices of the human tissue industry and the adequacy of the

regulatory framework that governs the industry. The recovery and
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medical use of tissue, including skin, bone, cartilage, tendons, and

ligaments are increasingly common and can play an essential role

in improving the quality of recipients’ lives through transplantation.

Tissue banks procure, process, store, and distribute human tissue

for transplantation. Tissue transplants have soared in recent years

due to advances in technology that have greatly reduced the risk

of rejection. In 1994, an estimated 6,000 individuals donated tissue.

By 1999, however, this figure had increased three-fold to approximately 20,000. Donors now make possible as many as 800,000 tissue transplants every year in the United States. Nevertheless, the

industry that carries out these tasks has received little public scrutiny. The organizations that make up the tissue industry are collectively referred to as tissue banks. Some are engaged in tissue recovery, while others process, store, and distribute human tissue.

While most people are familiar with the concept of organ donation, tissue donation is not as well understood. Human tissue is unlike an organ transplant because it is not usually transplanted ‘‘asis’’ from the donor’s body into that of the recipient. Rather, donated

tissue generally undergoes considerable processing before it is

transplanted into a patient. The reconfigured tissues are also

known as ‘‘allografts.’’

Once it is processed, donated tissue can be stored for a period of

time before it is used to enhance, improve, and even save lives. If,

however, human tissue is not properly processed, it can pose dangerous risks to the recipient. Therefore, it is critical that the tissue

come from carefully screened donors and that it be properly processed and stored. It is equally important to ensure that persons

and organization involved in the tissue industry follow good tissue

handling and processing practices in order to prevent contamination, and that the industry employ sound tracking procedures so

that if a problem develops, all of the affected tissue recipients can

be promptly notified.

With the phenomenal growth and new uses for tissue transplants

have come some problems. Incidents have been brought to light in

which tissue obtained from unsuitable donors entered the American tissue supply, raising questions about the adequacy of Federal

regulation. Other concerns were raised about whether the practices

of some tissue banks are sufficient to reduce the danger of spreading such illnesses as the human variant of ‘‘mad cow disease.’’

The Food and Drug Administration (FDA) has been aware of the

public health risks. In 1997, the agency examined the health issues

involving tissue transplantation and concluded that the existing

regulatory framework was insufficient. The review was undertaken

in response to incidents in which imported foreign tissue had tested

positive for serious diseases. The agency then notified the industry

that it intended to make regulatory changes to strengthen the oversight of tissue banks. The changes were to be threefold: First, all

tissue establishments would be required to register with the FDA;

second, screening of potential donors would be expanded to require

testing for the human variant of mad cow disease, syphilis, and

other viruses; and third, a rule would be issued on the methods

and controls used during the processing of human tissue.
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The hearing exposed dangerous practices of some tissue banks as

well as the inadequacy of the regulatory framework. The Subcommittee heard testimony from the following witnesses: George F.

Grob, Deputy Inspector General for Evaluation and Inspections, Office of the Inspector General, U.S. Department of Health and

Human Services; P. Robert Rigney, Jr., Chief Executive Officer,

American Association of Tissue Banks; William F. Minogue, M.D.,

Chairman of the Board of Directors, Washington Regional Transplant Consortium; Valerie J. Rao, M.D., Chief Medical Examiner,

District Five, Leesburg, Florida; and Kathryn C. Zoon, Ph.D, Director, Center for Biologics Evaluation and Research, U.S. Food and

Drug Administration.

The testimony was deeply troubling. The Federal Government

had no idea how many tissue banks were operating in the country.

Prior to the hearing, the FDA estimated that there about 150, but

approximately 350 tissue banks registered with the FDA when the

registration requirement went into effect. That indicated that many

tissue banks were operating with no Federal oversight whatsoever.

There was also considerable testimony about the unacceptable

practices of some tissue banks. For example, George F. Grob, Deputy Inspector General from the Department of Health and Human

Services, testified about unscrupulous tissue banks that engaged in

a practice in which tissues that initially tested positive for contamination were simply tested over and over again until the technicians

achieved the negative result they wanted. Dr. William Minogue

from the Washington Regional Transplant Consortium, testified

that a Lions Eye Bank, which also participated in tissue recovery,

accepted a donor who was 82 years old with a history of cancer.

At the end of the hearing, Senator Collins concluded that the

Federal Government’s oversight was not adequate and that until

the necessary resources were devoted to tissue oversight, ‘‘there are

still going to be holes in the safety net of regulations.’’

C. Cross-Border Fraud: Scams Know No Boundaries (June 14 and

15, 2001)

Under Senator Collins’ chairmanship, the Subcommittee conducted a 5-month investigation into the growing number of incidents of fraud directed at American consumers that originate in

other countries. This emerging crime, known as cross-border fraud,

takes many forms including foreign lotteries and fraudulent sweepstakes. As Senator Collins noted at the hearings, ‘‘Foreign countries, and particularly Canada have, unfortunately, become major

points of origin for lottery, sweepstakes and advance-fee-for-loan

schemes that prey upon Americans, especially the elderly.’’ Such

criminals work principally through direct mail and telemarketing,

commonly seeking to convince their victims that they have won

millions of dollars in a lottery—but that this award can be collected

only if the victims first pay certain ‘‘attorneys fees’’ or ‘‘back taxes’’

on the sum. It is estimated that cross-border fraud costs American

consumers millions of dollars every year. The Subcommittee’s investigation culminated in 2 days of hearings.

On the first day of hearings, the Subcommittee heard testimony

from three senior citizens—Ann Hersom of Maine, Bruce Hathaway

of Ohio and Julia Erb of Michigan—who were victims of cross-bor-
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der scams. The victims had each lost thousands of dollars, and in

one case, tens of thousands of dollars to devious telemarketers and

clever mail solicitations. Mrs. Hersom, for example, testified that

her 80-year-old husband, formerly a successful businessman, had

fallen prey to the tactics of cross-border con artists. She estimated

that he lost $20,000 to these schemes, and she described how devastating these losses had been to their family. The fraudulent

pitchmen did not give up following the hearing, and have continued

to send solicitations from illegal Canadian and Australian lotteries,

as well as place numerous telemarketing calls each day.

The second witness panel was comprised of three U.S. and Canadian law enforcement officials who placed the problem of cross-border fraud in perspective by describing the sweeping reach and the

high volume and the growing number of cross-border frauds, and

described their agencies’ efforts to combat these crimes. Detective

Staff Sergeant Barry F. Elliot, Ontario Provincial Police of Ontario,

Canada testified about an initiative called Phonebusters. The mandate of Phonebusters is to prosecute those involved in telemarketing fraud in Ontario and Quebec, and to facilitate prosecution by U.S. agencies through extradition, and under Canada’s

Competition Act. The Phonebuster’s initiative highlights both the

importance of international information sharing and of aggressive

consumer education and awareness campaigns in combating crossborder fraud. Jackie DeGenova, Chief for Consumer Protection,

Ohio Attorney General’s Office explained the impact of cross-border

fraud on Ohio residents from the perspective of a prosecutor who

has a longstanding and effective working relationship with her Canadian counterparts.

The Subcommittee also heard testimony from Lawrence E. Maxwell, Postal Inspector in Charge, Fraud, Child Exploitation, and

Asset Forfeiture Division, U.S. Postal Inspection Service who discussed efforts aimed at stemming the flow of fraudulent solicitations and efforts made to educate the American consumer. Mr.

Maxwell also testified about the U.S. Postal Inspection Service’s

work with its Canadian counterpart, Canada Post. Reiterating the

need for cooperation, Senator Collins stated at the hearing, ‘‘Clearly, it is important that U.S. and Canadian law enforcement authorities work together more closely in fighting cross-border fraud.’’

On the second day of hearings, the Subcommittee heard testimony from one panel of three witnesses. The Honorable William H.

Sorrell, Attorney General of Vermont addressed the difficulties of

fighting fraud across borders, noting the slow pace of extraditions

under the Mutual Legal Assistance Treaty, the costs associated

with witness travel, and also with hiring Canadian lawyers. Mary

Ellen Warlow, Acting Deputy Assistant Attorney General, Criminal

Division, U.S. Department of Justice discussed the number of telemarketing operations in Canada, and the success of joint U.S.-Canada working groups to combat cross-border fraud.

The third witness, Hugh Stevenson, Associate Director, Planning

and Information, Consumer Protection Bureau, Federal Trade

Commission, testified about the importance of gathering information and sharing with appropriate U.S. and foreign law enforcement agencies on cross-border scams, and the difficulties of chasing
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money across borders. The FTC representative also testified about

the need to make civil remedies more effective across borders.

Senator Levin acknowledged the difficulties that law enforcement

faces when chasing criminals across borders, noting that ‘‘Telemarketers from Canada and other countries prey on elderly Americans causing significant financial loss and emotional distress. It is

difficult for U.S. law enforcement agencies to respond across international lines and these criminals take advantage of that fact.’’

D. Diabetes: Is Sufficient Funding Being Allocated To Fight This

Disease? (June 26, 2001)

Diabetes is the leading cause of kidney failure, blindness in

adults and amputations not related to injury. Diabetes costs more

than $105 billion annually in the United States in health-related

expenditures. In fact, more than 1 out of every 10 dollars spent on

health care, and about 1 out of every 4 Medicare dollars, are spent

to treat people with diabetes. The hearing was held to examine the

impact that juvenile diabetes has had on children and their families

The burden of diabetes falls particularly heavily on children and

young adults with type 1, or juvenile diabetes. Juvenile diabetes is

the second most common chronic disease affecting children—and is

one that children do not outgrow. Senator Collins noted at the

hearing, ‘‘I will never forget the words of a little boy who told me

that his greatest wish was that, just once, he could take a day off

from diabetes. Despite the fact that it might be his birthday or

Christmas, or another important holiday, he could never take a day

off from his disease.’’

In addition to gaining insight into the impact of diabetes on children’s lives, the hearing was intended to highlight advances in the

quest for a cure and the need for additional research. Senator

Levin noted at the hearing, ‘‘Research that is done for type 1 . . .

can also help the even larger number of people who have type 2

diabetes. One of the most important aspects of diabetes research is

embryonic stem cell research.’’

The first witness to testify was Mary Tyler Moore, who serves as

the International Chairman of the Juvenile Diabetes Research

Foundation, and who thanked Congress for increasing funding for

diabetes research, testified about recent advances in diabetes research, and urged support for embryonic stem cell research. The

Subcommittee also heard testimony from Kevin Kline, a Juvenile

Diabetes Research Foundation board member and actor, who highlighted the fears of parents whose children suffer from diabetes.

The third witness, actor Jonathan Lipnicki, testified on behalf of a

friend, Tessa Wick, about her struggle with diabetes. Ms. Wick also

urged support for embryonic stem cell research. Finally, the Subcommittee heard testimony by Captain James Lovell, a former

NASA Astronaut, whose adult son was diagnosed with diabetes.

Captain Lovell testified on the need to fund research opportunities

that have not been pursued for lack of funding, and on the economic impact of diabetes on this country.

The second panel included two researchers, Allen M. Spiegel,

M.D., who serves as Director of the National Institute of Diabetes

and Digestive and Kidney Diseases, National Institutes of Health,
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and Hugh Auchincloss, Jr., M.D., Professor of Surgery, Massachusetts General Hospital and Harvard Medical School. Dr. Spiegel explained what is currently known about diabetes’ progression, and

the scientific community’s goals such as identifying the causes of

diabetes, preventing the disease, reducing complications, and most

importantly, finding a cure. Dr. Auchincloss discussed some promising advances in diabetes research carried out in Edmonton, Canada, involving cell transplantation. He then enumerated the work

that remains to be done in this area before such research can have

wide application, and explained what is entailed in embryonic stem

cell research.

The panel also included James Robbins, President and CEO of

Cox Communications, whose daughter has diabetes, and Greg

Brenneman, former Chief Operating Officer of Continental Airlines,

whose son has diabetes. Mr. Robbins testified about the impact diabetes has had on his daughter and his family as a whole. He also

testified from a business perspective about the financial sense it

makes to fund the Juvenile Diabetes Research Foundation. Mr.

Brenneman testified about the impact diabetes had on his young

son and on his family. Mr. Brenneman testified that he had promised his son that he would help him find a cure for diabetes, and

asked Congress to help him fulfill his promise to his son.

The third panel of witnesses was made up of delegates to the Juvenile Diabetes Research Fund Children’s Congress, and included

Rachel Dudley, age 15 of Michigan; Andrew Webber, age 13 of

Maine; Eliza Jayne Kiley, age 5 of Pennsylvania, accompanied by

her mother Michele Kiley; Daniel Thaller, age 12 of North Carolina, accompanied by Jessica Thaller, age 13; and Caroline Rowley,

age 11 of Texas. These witnesses discussed the impact diabetes has

had on their daily lives, and on their aspirations for the future.

They also urged Congress to continue funding diabetes research.

E. What is the U.S. Position on Offshore Tax Havens? (July 18,

2001)

On July 18, 2001, under the chairmanship of Senator Levin, the

Subcommittee held a hearing examining U.S. efforts to obtain information from offshore tax havens and the U.S. position regarding

an ongoing project sponsored by the Organization of Economic Cooperation and Development (OECD), of which the United States is

a member, to convince offshore tax havens to cooperate with inquiries made by OECD countries to detect, stop and prosecute tax evasion.

Offshore jurisdictions typically are countries that allow corporations, trusts, or other businesses to be established within their territory on the condition that any business they conduct is only with

persons who are ‘‘offshore,’’ meaning persons who are not citizens

or domestic businesses operating inside the country. Offshore jurisdictions charge hefty fees for establishing and maintaining an offshore business, though they often charge little-to-no taxes. The offshore businesses are often shell operations established by attorneys, trust companies, or banks within the offshore jurisdiction operating under corporate secrecy laws that make it difficult to learn

the true owner of a business. These offshore businesses also usually open accounts at banks licensed by the offshore jurisdiction
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and conduct financial transactions under bank secrecy laws that

make it difficult to trace transactions or identify bank account owners. The money deposited in these banks is usually held, though,

in correspondent accounts that the banks have opened at larger

banks in the United States or other countries. Many of the offshore

corporations and trusts serve as mere place holders for individuals

who want to hide their identity and activities.

Because many offshore jurisdictions have combined bank and

corporate secrecy laws with weak bank regulation and anti-money

laundering controls, they have become notorious for offshore operations engaged in money laundering, tax evasion, or other crimes.

Numerous Subcommittee hearings over the years have examined

these problems in offshore jurisdictions, the damage they cause to

U.S. interests, and what can be done about them.

The July hearing focused on the ongoing resistance of many offshore jurisdictions to divulging information needed to detect, stop,

and prosecute tax evasion. For decades, the United States has been

working with other countries, on a bilateral and multilateral basis,

to improve the ability of U.S. tax officials to obtain information

needed to enforce U.S. tax laws and stop tax evasion. Currently,

the U.S. has a network of over 70 tax treaties and information exchange agreements with countries around the globe. But U.S. enforcement efforts have frequently been stymied by offshore tax havens refusing to release information about nonresidents operating

under bank and corporate secrecy laws, resulting in an estimated

U.S. revenue loss of $70 billion each year. U.S. allies have experienced similar problems. In response, with strong U.S. support, the

OECD initiated, in 1998, a multilateral project which sought to

identify uncooperative tax havens and convince them to change

their ways.

In June 2000, the OECD issued a report which identified 35

countries as potentially ‘‘uncooperative tax havens’’ and stated that

OECD members would take ‘‘defensive measures’’ against them unless, by July 2001, the listed countries had made written commitments to improving their cooperation with international tax enforcement efforts. Early in 2001, after his appointment to office,

Secretary of the Treasury Paul O’Neill announced an internal review of the OECD project after expressing ‘‘serious concerns’’ about

its direction. Secretary O’Neill later called for a ‘‘refocused’’ project,

centered on ‘‘its core element: the need for countries to be able to

obtain specific information from other countries upon request in

order to enforce their respective tax laws.’’ In June 2001, after the

OECD agreed to certain revisions in the project to satisfy U.S. concerns, press reports indicated that the United States had renewed

its support for the OECD project, while critics continued to oppose

the project and some claimed the United States still opposed it.

The July hearing examined the historic and ongoing lack of cooperation by some offshore jurisdictions with U.S. tax enforcement

efforts and sought to clear up any confusion about U.S. support for

the revised OECD tax haven project. Four witnesses testified about

the ongoing failure of some tax havens, despite years of effort by

the United States, to cooperate with U.S. tax enforcement efforts.

These witnesses were the Honorable Robert M. Morgenthau, Manhattan District Attorney for New York; the Honorable Michael
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Chertoff, Assistant Attorney General for the Criminal Division,

U.S. Department of Justice; and two former IRS Commissioners,

the Honorable Sheldon Cohen, who served under President Johnson, and the Honorable Donald Alexander, who served under President Ford.

Secretary O’Neill testified that he was firmly committed to taking forceful action to detect and stop tax evasion through tax havens. He testified that the United States supports the revised

OECD tax haven project, the United States is prepared to impose

sanctions on uncooperative tax havens that refuse to share information needed to enforce our tax laws, and the Treasury Department would support legislation to enable the United States to impose tax haven sanctions, if necessary. Secretary O’Neill also

pledged to undertake a major effort to negotiate, within 1 year, bilateral tax treaties with certain tax havens that have historically

resisted exchanging information with the United States to support

U.S. tax enforcement. In July 2002, Secretary O’Neill informed the

Subcommittee that he was able to negotiate ground-breaking treaties with several of these tax havens, including the Cayman Islands, British Virgin Islands, and Jersey.

F. Review of INS Policy on Releasing Illegal Aliens Pending Deportation (November 13, 2001)

On November 13, 2001, the Subcommittee held a hearing and

took testimony from current and past U.S. Border Patrol employees

about a troubling practice in which many persons arrested for attempted illegal entry into the United States in areas outside the

normal ports of entry were released by the Border Patrol and the

Immigration and Naturalization Service (INS) without bond and

were allowed to move freely within the United States under no constraint other than a written instruction to appear at a hearing

often scheduled months later.

The U.S. Border Patrol, which serves as the uniformed law enforcement arm of the INS, is responsible for combating illegal entries into the United States at points other than ports of entry.

Ports of entry, the only places where persons may legally enter the

United States, are typically located at airports, bridges, and highways, and include facilities enabling INS officers and Customs

agents to inspect persons, papers, and luggage. The hearing’s focus

was on persons arrested while trying to cross into the United

States without subjecting themselves to inspection at a port of

entry as required by law.

The hearing presented evidence indicating that the majority of

people who are arrested for attempted illegal entry into the United

States and do not voluntarily return to their country, are released

on their own recognizance, are allowed to move around the United

States at will, do not appear at their removal hearing, and are

rarely located or removed from the United States. Statistics for the

Detroit Sector in Fiscal Year 2001, for example, showed that the

Border Patrol had arrested 2,106 people, a significant percentage

of whom were arrested while attempting to enter the country illegally. Of those 2,106, slightly less than two-thirds voluntarily returned to their country of origin, while 773 were issued notices to

appear at a removal hearing. Of the 773, 595 or more than 75 per-
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cent were then released by the Border Patrol and INS on their own

recognizance, without bond and many without undergoing a criminal background check, and allowed to move freely within the

United States until the time of their hearing. While the INS did

not keep statistics on how many of the 595 later appeared at the

specified hearing, related statistics and estimates by former Border

Patrol officials indicate that the percentage of arrested persons who

were released without bond and did not appear at their hearing

was at least 40 percent and possibly as high as 90 percent.

The Subcommittee heard from two panels of witnesses consisting

of INS and Border Patrol management, and Border Patrol officers

on the front lines in two different sectors of the Border Patrol: The

Detroit Sector which covers four States—Michigan, Ohio, Indiana

and Illinois—and the Blaine Sector which covers Alaska, Oregon

and the western half of the State of Washington. The first panel

of witnesses included senior officials from the Border Patrol and

INS: Michael Pearson, Executive Associate Commissioner for Field

Operations, INS, accompanied by Gustavo DeLaVina, Chief, U.S.

Border Patrol. The second panel included three current or former

Border Patrol officers: Mark Hall, President, Local 2499, National

Border Patrol Council, and Senior Border Patrol Agent, U.S. Border Patrol in Detroit, Michigan; Keith Olson, President, Local 2913,

National Border Patrol Council and Senior Border Patrol Agent,

U.S. Border Patrol in Bellingham, Washington; and Eugene Davis,

Retired Deputy Chief Patrol Agent, Blaine Sector, U.S. Border Patrol in Blaine, Washington. The witnesses testified about the practice at issue, its justification, and the attendant security risks for

the United States.

At the hearing, Senator Levin asked the Border Patrol and INS

to report on the steps they planned to take to close the identified

enforcement loophole. The INS subsequently issued a memorandum requiring a criminal background check to be conducted on

all arrested aliens prior to releasing them on bond or their own recognizance, but otherwise declined to change the procedures for

handling persons who are arrested for attempted illegal entry into

the United States and who decline to return to their country of origin. To further address the enforcement problem identified in the

Subcommittee hearing, Senator Levin added two provisions to the

Enhanced Border Security and Visa Entry Reform Act, which was

enacted into law in 2003, to strengthen U.S. border controls. One

of these provisions requires the U.S. Department of Justice to provide Congress with an annual report on the number of aliens arrested outside ports of entry who were served a notice to appear

for a removal hearing, were released on recognizance, and then

failed to attend their removal hearing. This data was requested to

obtain additional information on the scope of the enforcement problem. The second Levin provision increased training opportunities

for Border Patrol agents.

G. Gas Prices: How Are They Really Set? (April 30 and May 2,

2002)

In June 2001, due to concerns about gasoline price volatility, the

suddenness with which gasoline prices can rise, a pattern of local

gasoline prices rising and falling in tandem, and the importance of
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reasonably priced gasoline to the U.S. economy, Senator Levin initiated an in-depth Subcommittee investigation into the factors behind the pricing of retail gasoline. In April 2002, the Subcommittee

issued a 400-page staff report and, in April and May, held hearings

detailing how U.S. retail gasoline prices are set. The report showed

how oil industry mergers, refinery closings, and increasingly ‘‘tight’’

gasoline supplies had increased market concentration and given

some refiners sufficient market power to reduce gasoline supplies

and increase gasoline prices. Other factors leading to higher prices

and spikes in the Midwest included regional pipeline limitations,

price variations from different fuels, and the practice of ‘‘parallel

pricing’’ in which retailers looked to competitors to set gasoline

prices.

The hearings, which took place over 2 days, took testimony from

top executives at five major oil companies, State regulators, and experts on crude oil markets, gasoline pricing, and antitrust law. On

the first day of the hearings, the Subcommittee heard from representatives of five major oil companies: James Carter, Regional

Director for the United States, ExxonMobil Fuels Marketing Company; Gary R. Heminger, President, Marathon Ashland Petroleum;

Ross J. Pillari, Group Vice President—U.S. Marketing, BP; David

C. Reeves, President of North American Products, ChevronTexaco

Corporation; and Rob Routs, President and CEO, Shell Oil Products U.S. These witnesses described how they price gasoline and

answered questions about price spikes, parallel price increases, and

actions taken by oil companies that appear to influence prices.

On the second day of hearings, the Subcommittee heard first

from Senator Ron Wyden (D-Oregon) who has spent years examining gasoline prices. The next panel of witnesses consisted of three

senior State officials who had experience challenging gasoline price

increases in their States: The Honorable Richard Blumenthal, Attorney General for the State of Connecticut; the Honorable Jennifer

Granholm, Attorney General for the State of Michigan; and Tom

Greene, Senior Assistant Attorney General for Antitrust, California

Department of Justice. Finally, the Subcommittee heard testimony

from five experts on gasoline markets and antitrust law: Peter Ashton, President, Innovation and Information Consultants, Inc.; Dr.

Justine S. Hastings, Assistant Professor of Economics, Dartmouth

College; Dr. R. Preston McAfee, Murray Johnson Professor of Economics, University of Texas; and Dr. Philip Verleger, Jr., President,

PK Verleger, LLC.

Following the hearings, Senator Levin urged the Administration

to take certain specific actions to protect the availability of gasoline

and the reasonableness of its price, including the development of

uniform gasoline specifications and the assignment of adequate resources to the Energy Information Administration to provide timely

data on energy markets. Senator Levin asked the Federal Trade

Commission to scrutinize future proposed oil industry mergers for

their impact on market concentration and on U.S. gasoline prices,

storage, and transportation. He also asked the Environmental Protection Agency to review the effects of reformulated gasoline on

prices and requested a GAO report on the impact of oil industry

mergers on gasoline prices. Finally, he initiated a second phase of

the Subcommittee’s investigation to examine the pricing of crude
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oil which, in turn, affect not only the price of gasoline, but also

home heating oil, jet fuel, diesel fuel, and other key fuels important

to consumers.

H. The Role of the Board of Directors in Enron’s Collapse (May 7,

2002)

In January 2002, Senator Levin announced a bipartisan investigation into issues related to the collapse of Enron Corporation,

which had once been the seventh largest company in the United

States, abruptly declared bankruptcy on December 2, 2001, and

was subsequently discovered to have been involved in a litany of

corporate abuses from deceptive accounting to price manipulation,

insider dealing, and tax evasion. Working as a team, the Majority

and Minority staffs of the Subcommittee conducted the most indepth Enron investigation undertaken by any Congressional committee. Their efforts included reviewing over 2 million pages of documents, conducting over 100 interviews, preparing for 4 days of

hearings, and drafting two Subcommittee reports. The investigation exposed how Enron used complex financial transactions to dishonestly report better financial results than the company actually

experienced, thereby misleading investors, employees, and others

who suffered substantial losses. It also exposed actions taken by

the Enron Board of Directors and major U.S. financial institutions

that failed to halt, and in some cases facilitated, Enron’s misconduct.

The Subcommittee held its first Enron hearing on May 7, 2002.

This hearing focused on the role of the Enron Board of Directors

in the collapse of the company. The first panel of witnesses consisted of five current or former members of the Enron Board of Directors: Norman Blake, current Chairman of the Enron Board and

former member of the Finance and Compensation Committees;

John Duncan, former Chairman of the Executive Committee; Herbert Winokur, Jr., former Chairman of the Finance Committee;

Robert Jaedicke, former Chairman of the Audit and Compliance

Committee; and Dr. Charles LeMaistre, former Chairman of the

Compensation and Management Development Committee. The second panel of witnesses consisted of experts on accounting and corporate governance: Michael Sutton, former Chief Accountant of the

Securities & Exchange Commission from 1995 until 1998; Charles

Elson, Director of the Center for Corporate Governance at the University of Delaware; and Robert Campbell, former Chairman and

CEO at Sunoco, Inc. and current member of the Board at Hershey

Foods, CIGNA, and Pew Charitable Trusts.

Two months later, on July 8, 2002, the Subcommittee released a

bipartisan report containing findings and recommendations regarding the role of the Enron Board of Directors. The Subcommittee report found that the Enron Board of Directors had failed to safeguard Enron shareholders and had contributed to the company’s

collapse by allowing Enron to engage in high-risk accounting practices, inappropriate conflict of interest transactions, extensive undisclosed off-the-books activities, and excessive executive compensation. The report also found that Enron Board members had refused

to admit any missteps, mistakes, or responsibility for the company’s demise.
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The Subcommittee report also presented a number of recommendations to strengthen boardroom oversight and curb excessive compensation, deceptive accounting and other corporate misconduct. These bipartisan recommendations included strengthening

audit committee expertise and independence, urging the compensation committee to stop excessive compensation, prohibiting highrisk accounting and conflict of interest transactions, and ending the

practices of using corporate funds to make personal loans to officers

and directors. Most of these recommendations were subsequently

included in reforms made to the listing requirements of the New

York Stock Exchange or in the Sarbanes-Oxley Act which became

law in July 2002.

I. The Role of the Financial Institutions in Enron’s Collapse (July

23 and 30, 2002)

A second focus of the Subcommittee’s investigation into Enron’s

collapse was to examine the role played by major U.S. financial institutions and to determine whether and to what extent some of

these institutions contributed to the company’s deceptive practices.

These hearings, which were held in July and December 2002, presented evidence that Citigroup, J.P. Morgan Chase, Merrill Lynch,

and other major U.S. financial institutions had not only participated in, but at times designed, advanced, and profited from, complex financial transactions explicitly intended to help Enron engage

in deceptive accounting or tax strategies.

The first set of these hearings, held in July 2002, took place over

2 days and examined transactions involving Enron and three financial institutions, Citigroup, J.P. Morgan Chase and Co. (‘‘Chase’’),

and Merrill Lynch. Each of the transactions examined in the July

hearings resulted in misleading information in Enron’s financial

statements that made Enron appear to be in better financial condition than it was.

The first day of the July hearings looked at more than $8 billion

in deceptive transactions referred to as ‘‘prepays,’’ which Citigroup

and Chase used to issue Enron huge loans disguised as commodity

transactions. By characterizing the transactions as commodity

transactions rather than loans, Citgroup and Chase enabled Enron

to claim the loan proceeds were cash flow from business operations

rather than cash flow from financing, thereby misleading investors

and analysts about the nature of Enron’s incoming cash flow.

The Subcommittee heard from several panels of witnesses. The

first panel consisted of Robert L. Roach, Counsel and Chief Investigator of the Permanent Subcommittee on Investigations, who led

the Subcommittee’s investigation of Enron. He was accompanied by

Gary M. Brown, Special Counsel to the Minority, Committee on

Governmental Affairs, who had assisted the Subcommittee’s investigation. Mr. Roach summarized the Subcommittee’s investigation

and findings. The second panel consisted of an accounting expert

and several representatives of Moody’s Investors Service and

Standard & Poor’s examining the misleading accounting used to depict the transactions and the significance for Enron’s financial

statements and credit analysis. These witnesses included Lynn

Turner, former Chief Accountant of the Securities & Exchange

Commission; Pamela Stumpp, Managing Director and Chief Credit
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Officer in the Corporate Finance Group, accompanied by John Diaz,

Managing Director in the Power & Energy Group, from Moody’s Investors Service; and Ronald Barone, Managing Director in the Utilities, Energy Project Finance Group, Corporate and Government

Ratings, accompanied by Nik Khakee, Director of the Structured

Finance Group from Standard & Poor’s.

The third panel consisted of representatives from J.P. Morgan

Chase: Jeffrey Dellapina, Managing Director of JPMorgan Chase

Bank in New York, accompanied by Donald McCree, Managing Director at J.P. Morgan Securities, Inc. in New York, and Robert

Traband, Vice President of JPMorgan Chase Bank in Houston.

The final panel in the first day of hearings consisted of representatives from Citigroup: David Bushnell, Managing Director of

Global Risk Management for Salomon Smith Barney/Citigroup, in

New York; James Reilly, Jr., Managing Director of Global Power &

Energy Group, Salomon Smith Barney/Citigroup, in Houston; Richard Caplan, Managing Director and Co-Head, Credit Derivatives

Group, Salomon Smith Barney North American Credit/Citigroup, in

New York; and Maureen Hendricks, Senior Advisory Director,

Salomon Smith Barney/Citigroup, in New York.

The second day of the July hearings examined a sham asset sale

of Nigerian power barges from Enron to Merrill Lynch just before

the end of the year 2000, which allowed Enron to claim the alleged

‘‘sale’’ revenue on its 2000 financial statements and boost its yearend earnings. The hearing showed that this transaction did not

qualify as a true sale under accounting rules, because Enron had

eliminated all risk from the deal by secretly promising Merrill

Lynch to arrange a resale of the assets within 6 months and guaranteeing a 15 percent return on the deal. The Subcommittee heard

from two panels of witnesses representing Merrill Lynch. The first

panel consisted of two Merrill Lynch investment bankers who were

involved in the barge transaction and who invoked their Fifth

Amendment rights and were excused from testifying: Robert Furst,

former Managing Director of Merrill Lynch & Co., in Dallas; and

Schuyler Tilney, Managing Director of Global Energy & Power, in

Global Markets & Investment Banking, at Merrill Lynch & Co., in

Houston. The Subcommittee then heard from G. Kelly Martin, Senior Vice President and President of International Private Client Division at Merrill Lynch in New York.

Substantial evidence presented at the July hearings showed that

the financial institutions involved in the transactions with Enron

were fully aware of the significance of their actions—they structured the deals, signed the paperwork, supplied the financing, and

even established new special purpose entities for the transactions

knowing that Enron was using the transactions to report that the

company was in better financial condition than it really was. In the

case of Citigroup and Chase, the banks not only assisted Enron,

they developed the deceptive prepays as a financial product and

sold it to other companies as so-called ‘‘balance sheet friendly’’ financing, earning millions in fees.

Subsequent to the hearing, without admitting guilt, Merrill

Lynch paid $80 million to the Securities & Exchange Commission

and the U.S. Department of Justice to resolve potential liability related to the Nigerian barge deal and another transaction with
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Enron. Citibank and Chase announced that they would strengthen

their internal procedures to prevent future participation in transactions resulting in misleading accounting on a client’s financial

statements. Investigations are ongoing of Citigroup and Chase’s

transactions with Enron by the Securities & Exchange Commission

and U.S. Department of Justice.

J. Oversight of Investment Banks’ Response to the Lessons of Enron

(December 11, 2002)

On December 11, 2002, the Subcommittee held a third day of

hearings examining the role played by some major U.S. financial

institutions in Enron’s collapse. The December hearing focused on

four multi-million dollar structured finance transactions known as

Fishtail, Bacchus, Sundance, and Slapshot, involving Enron,

Citigroup, and J.P. Morgan Chase (‘‘Chase’’). These transactions

had taken place over a 6-month period beginning in December 2000

and ending in June 2001. All four transactions related to a new

business venture by Enron involving pulp and paper trading. All

four had been financed primarily by the Salomon Smith Barney

unit of Citigroup or by Chase. The hearing presented evidence

showing that Citigroup and Chase actively aided Enron in executing the four transactions, despite knowing the transactions utilized deceptive accounting or tax strategies, in return for substantial fees or favorable consideration in other business dealings.

The Subcommittee heard from four panels of witnesses, including

Citigroup and Chase officials, a banking and securities expert, and

key Federal agencies.

The first panel consisted of Citigroup officials who were directly

involved in the Bacchus and Sundance transactions, as well as a

senior Citigroup official responsible for setting corporate policy. The

Citigroup witnesses were Charles Prince III, Chairman and Chief

Executive Officer of Citigroup’s Global Corporate and Investment

Bank; David Bushnell, Managing Director of Global Risk Management for Citigroup/Salomon Smith Barney; Richard Caplan, Managing Director and Co-Head of the Credit Derivatives Group at

Salomon Smith Barney North American Credit/Citigroup; and William Fox III, Managing Director of the Global Power and Energy

Group at Citibank. Mr. Caplan participated directly in both the

Bacchus and Sundance transactions. Mr. Fox was directly involved

in the Bacchus transaction and was the key Citigroup official who

communicated with Enron’s chief accountant, Andrew Fastow, regarding the verbal guarantee of the ‘‘equity investment’’ in the

Caymus Trust. Mr. Bushnell, as head of risk management, was directly involved in the Sundance transaction. At the hearing, Mr.

Bushnell disclosed that, although he had strongly urged Citigroup

not to participate in Sundance, he may have provided the final oral

approval that allowed this project to proceed. Mr. Prince, who was

not directly involved in either transaction, described a number of

Citigroup’s post-Enron reforms, including a new corporate policy to

prevent Citigroup’s participation in any transaction in which the

transaction’s net effect is not accurately disclosed to a company’s

investors and analysts.

The second panel consisted of Chase officials who were directly

involved in the Fishtail and Slapshot transactions, as well as sen-
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ior officials responsible for setting Chase’s corporate policy. The

Chase officials were Michael Patterson, Vice Chairman of J.P. Morgan Chase and Company; Andrew Feldstein, Managing Director

and Co-Head of Structured Products and Derivatives Marketing at

J.P. Morgan Chase and Company; Robert Traband, Vice President

of J.P. Morgan Chase and Company in Houston, accompanied by

Eric Peiffer, Vice President of J.P. Morgan Chase and Company in

New York. Mr. Peiffer played a key role in developing and marketing the Slapshot tax structure. Mr. Peiffer and Mr. Traband

dealt directly with Enron to design and carry out the Slapshot

transaction examined in this report. Mr. Feldstein, who was not directly involved in Slapshot and is the new head of the Chase division carrying out structured finance and derivatives transactions,

described Chase’s renewed commitment to the principles of integrity and transparency in its structured finance and derivative

transactions. Mr. Patterson, who was also not directly involved in

Slapshot, described a number of Chase’s post-Enron reforms, including a new transaction review committee, which he heads, to

prevent Chase’s participation in transactions that facilitate deceptive accounting or carry other reputational risks. The Chase witnesses also testified at the hearing that Chase would no longer

market the Slapshot tax structure or participate in transactions

similar to Slapshot.

The third panel at the hearing consisted of testimony from

Muriel Siebert, Muriel Siebert and Company, Inc., who was the

first woman member of the New York Stock Exchange, the first

woman Supervisor of Banking for the State of New York, and the

current Owner and President of a brokerage house. Ms. Siebert testified that, since Enron’s collapse, her business had seen individual

investors leave the stock market altogether because ‘‘they did not

trust the system.’’ She expressed great concern about the deceptive

transactions discussed in the hearing and the need to initiate reforms to prevent U.S. financial institutions from facilitating deceptive accounting or tax transactions.

The fourth and final panel consisted of top Federal regulators at

the Federal Reserve, Securities & Exchange Commission (‘‘SEC’’),

and Office of the Comptroller of the Currency (‘‘OCC’’). The witnesses were Richard Spillenkothen, Director of the Division of

Banking Supervision and Regulation at the Federal Reserve; Annette Nazareth, Director of the Division of Market Regulation at

the SEC; and Douglas Roeder, Senior Deputy Comptroller for Large

Bank Supervision at the OCC. These witnesses indicated that a

relatively small universe of financial institutions—for example, less

than ten of the national banks overseen by the OCC—engage in the

type of complex structured finance transactions examined by the

Subcommittee. They also acknowledged a regulatory gap that now

exists in overseeing these transactions, since the SEC does not generally regulate banks, and the bank regulators do not generally

oversee accounting practices. All three witnesses agreed that banks

should not ‘‘engage in borderline transactions that are likely to result in significant reputational or operational risks to the banks.’’

Following the hearing, on January 2, 2003, the Subcommittee

issued a bipartisan report detailing the four transactions and calling on Federal securities and bank regulators to stop U.S. financial
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institutions from aiding and abetting dishonest accounting. The report presented several recommendations focused on coordinated action by the SEC and bank regulators to bridge a current gap in

Federal oversight that exists because the SEC does not generally

regulate banks, and bank regulators do not generally regulate accounting practices overseen by the SEC. The recommendations included calling for a joint review of structured finance products and

transactions to identify those that facilitate deceptive accounting,

an SEC policy statement making it clear that the SEC would take

enforcement action against a financial institution that offers deceptive financial products or participates in deceptive transactions,

and a policy statement by bank regulators making it clear that

bank examiners, as part of their routine bank examinations, may

evaluate a bank’s structured finance activities and declare problematic products or activities an unsafe and unsound banking practice.

III. LEGISLATIVE ACTIVITIES DURING THE 107TH CONGRESS

The Permanent Subcommittee on Investigations does not have

legislative authority, but because its investigations play an important role in bringing issues to the attention of Congress and the

public, the Subcommittee’s work frequently contributes to the development of significant legislative initiatives. The Subcommittee’s

activity during the 107th Congress was no exception, with Subcommittee hearings and Members playing prominent roles in the

development of a number of legislative initiatives.

A. Money Laundering Abatement Act

(S. 1371—by Senators Levin, Grassley, Sarbanes, Kyl, DeWine, Bill

Nelson, Durbin, Stabenow and Kerry)

Following a 3-year Subcommittee investigation, 4 days of Subcommittee hearings, and two staff reports on money laundering

problems affecting private banking and correspondent banking

practices in the United States, on August 3, 2001, Senators Levin,

Grassley, and others introduced the Money Laundering Abatement

Act, S. 1371, to correct many of the problems identified in the Subcommittee’s work. Among other provisions, S. 1371 contained language barring U.S. banks from opening accounts for foreign shell

banks, requiring U.S. banks to use enhanced due diligence before

opening accounts for foreign offshore banks and private banking accounts for wealthy foreign individuals or political figures, strengthening the ability of U.S. law enforcement to subpoena records related to foreign bank correspondent accounts and to freeze and

seize criminal proceeds from these accounts, expanding the list of

foreign crimes triggering a U.S. money laundering offense to include foreign corruption offenses, and strengthening the ability of

U.S. prosecutors to prosecute money laundering cases involving foreign banks, corporations, or individuals. After the terrorist attack

of September 11, 2001, S. 1371 formed the basis for the anti-money

laundering provisions in Title III of the USA Patriot Act, and nearly all of its provisions were expanded and enacted into law when

the USA Patriot Act, H.R. 3162, was signed by President Bush on

October 26, 2001, at a White House signing ceremony.
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B. Shareholder Bill of Rights Act

(S. 2460—by Senator Levin)

During the Subcommittee’s year-long investigation into corporate

misconduct at Enron Corporation, on May 6, 2002, Senator Levin

introduced the Shareholder Bill of Rights Act, S. 2460, to address

a number of the problems identified in the Subcommittee’s Enron

investigation. Among other provisions, S. 2460 contained language

to strengthen the process for issuing corporate accounting standards by providing an independent source of funding for the organization that issues them, the Financial Accounting Standards

Board; strengthen auditor independence by barring an audit firm

from auditing its own work and from providing non-auditing services to a company during a specified period; strengthen corporate

accounting by requiring corporate audit committees to oversee companies’ accounting practices and prohibiting companies from improperly influencing or misleading an auditor; require shareholder

approval of any stock option compensation plan not shown on company financial statements as an expense; direct the SEC not to prohibit shareholder proposals permitted under State law to remove a

director or outside auditor; bar preferential treatment by companies of officer or director compensation when during a company

bankruptcy; and strengthen disclosure of company loans to directors and officers and company transactions involving persons affiliated with a board member. A number of the provisions in S. 2460,

or provisions adopting similar requirements, were included in a

Senate corporate reform bill, S. 2673, which was enacted into law

as H.R. 3763, the Sarbanes-Oxley Act. Other provisions in the Sarbanes-Oxley Act, such as Section 402 barring company-financed

loans to corporate officers and directors, also drew in part on the

Enron investigation conducted by the Subcommittee.

C. United States Postal Service Commission Act of 2002

(S. 2754—by Senator Collins)

On July 18, 2002, Senator Collins introduced the ‘‘United States

Postal Service Commission Act of 2002.’’ This legislation was designed to establish a Commission to examine the challenges facing

the Postal Service, and develop solutions to ensure its long term viability and increased efficiency. The Commission was also charged

with developing specific recommendations and legislative proposals

that Congress and the Postal Service can implement.

Senator Collins introduced this legislation in response to the

Postal Services’ ballooning liabilities, billion dollar losses and

shrinking revenue sources. At the same time, the Postal Service delivers more than 200 billion pieces of mail each year to nearly 140

million addresses, a number that is growing to the tune of 1.7 million new addresses each year. In addition, the Postal Service delivers mail to every customer, 6 days a week at affordable rates. Most

commercial enterprises would find it uneconomical, if not impossible, to deliver mail and packages to many areas at rates that the

Postal Service has been offering.

Moreover, the Postal Service is the eleventh largest enterprise in

the Nation with $66 billion in annual revenue. The Postal Service
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itself employs more than 700,000 career employees, and is the

linchpin of a $900 billion mailing industry that employs nine million Americans in fields as diverse as direct mailing, printing, and

paper production.

The Commission was to be comprised of leaders from business,

academia and other fields to consider all relevant aspects of the

Postal Service. The Commission was to be given 1 year to carry out

its study and produce legislative proposals for consideration by the

Administration and the Congress.

S. 2754 was referred to the Senate Governmental Affairs Committee, but no Committee action was taken on the bill. On December 11, 2002, President George W. Bush established a Commission

on the Postal Service with a mandate and makeup similar to that

outlined in S. 2754.

D. National Fraud Against Senior Citizens Awareness Week

(S. Res. 281—by Senators Collins and Levin)

On June 5, 2002, Senator Collins and Senator Levin introduced

a resolution designating the week of August 25, 2002 ‘‘National

Fraud Against Senior Citizens Awareness Week.’’ The resolution

passed the Senate by unanimous consent on June 27, 2002 with 20

bipartisan cosponsors.

This resolution was designed to draw attention to the Postal

Service’s and U.S. Postal Inspection Service’s efforts to increase

public awareness of mail, Internet, and telemarketing schemes that

target elderly Americans. It is through increased awareness on the

part of seniors, their families, and their caregivers that such

schemes, which rob seniors not only of their hard-earned savings

but of their dignity and self respect, can best be prevented.

The comprehensive effort included posters hung in post office lobbies nationwide to highlight the problem and inform seniors and

their families about the steps they can take to protect themselves

and report fraud.

The campaign also included newspaper advertisements in the 13

States and public service announcements by national spokesperson

Betty White on the television and radio. Finally, in an effort to

reach those seniors who may leave their homes infrequently, the

Postal Service included inserts alerting seniors to fraudulent

schemes with the stamps that individuals purchase by mail.

E. Human Tissue Transplant Safety Act of 2002

(S. 2531—by Senators Collins, Clinton, and Durbin)

In May 2002, Senator Collins introduced S. 2531, ‘‘The Human

Tissue Transplant Safety Act of 2002.’’ The legislation was a direct

result of the Subcommittee’s investigation. The bill was designed to

grant explicit authority to the Food and Drug Administration

(FDA) to conduct oversight of tissue establishments, which includes

any entity engaged in the recovery, screening, testing, processing,

storage, or distribution of human tissue or tissue-based product.

Another provision in the bill requires mandatory adverse event

reporting. Under the current regulatory structure, tissue entities

are not required to report defined adverse events which can make

it very difficult for the FDA to assess the extent of a public health
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problem. Moreover, in addition to the mandatory reporting requirement, there is also a provision in the bill that calls for the creation

on a centralized database that would contain the reports. Clearly,

there is a need for a centralized repository for adverse events since

the donated tissue may be obtained in one State, sent to another

for processing, and may be used in a surgical procedure in still another State. Another benefit of a centralized database would be the

accessability of the information to both the FDA and the Centers

for Disease Control and Prevention (CDC). The CDC currently does

not have timely access to the information and must instead rely on

information it solicits from the FDA and State health departments.

Tissue entities conducting business in the United States would be

required to register with the FDA and failure to do would result

in a violation.

IV. REPORTS, PRINTS, AND STUDIES

A. Correspondent Banking: A Gateway For Money Laundering (February 5, 2001); Supplement to the February 5, 2001 Report On

Correspondent Banking: A Gateway For Money Laundering

(Case Histories 8, 9, and 10) (February 28, 2001) (Reports prepared by the Minority Staff and reprinted in S. Hrg. 107–84)

In February 2001, the Subcommittee issued two Minority staff

reports on ‘‘Correspondent Banking: A Gateway For Money Laundering,’’ describing the results of a year-long investigation led by

Senator Levin into how U.S. banks were being used by foreign

banks to launder the proceeds of criminal activity. The reports,

which are meant to be read as a single document and together exceed 450 pages, provide an inside look into the operations of ten

foreign banks that have used major U.S. banks to move and launder millions of dollars obtained through drug trafficking, financial

frauds, bribes, tax evasion, and illegal gambling operations.

This correspondent banking report was completed as part of a

larger anti-money laundering investigation initiated by Senator

Levin in 1999, and was released in connection with Subcommittee

hearings held on this topic in March 2001. The report was based

on the review of thousands of documents produced by banks, financial regulators, law enforcement, courts, and others, as well as numerous interviews of individuals personally involved in money

laundering operations, U.S. and foreign bank owners and employees, U.S. and foreign financial regulators and law enforcement officials, and banking and money laundering experts. The report also

included the results of a survey sponsored by Senator Levin of 20

banks that offer U.S. correspondent banking services to other

banks.

The report presented ten detailed case histories explaining how

a particular foreign bank was able to open accounts and obtain

services from a U.S. bank, despite having a questionable background or operating in a jurisdiction known for weak anti-money

laundering controls; how that foreign bank misused its U.S. accounts to launder criminal proceeds; and what oversight was exercised by the U.S. bank to detect and report suspicious activity. The

profiled foreign banks included four shell banks and six offshore
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banks in various Caribbean, Latin American, European, and South

Pacific jurisdictions. The U.S. banks included both major U.S. financial institutions as well as U.S. offices of major foreign banks.

One case history involved a small offshore bank, British Trade

and Commerce Bank (BTCB), which began operations in 1997. Despite its status as a new offshore bank in a small Caribbean jurisdiction known for weak anti-money laundering controls, BTCB was

able, within 3 years, to open accounts at several U.S. banks and

move more than $85 million through them, including millions of

dollars associated with financial frauds and illegal gambling operations. Another small offshore bank in the Caribbean, American

International Bank (AIB), facilitated and profited from financial

frauds in the United States for 5 years, laundering millions of dollars through correspondent accounts at major U.S. banks, before

collapsing from insider abuse and a sudden withdrawal of deposits.

The report showed that AIB also enabled even smaller, offshore

shell banks to gain access to the U.S. banking system by allowing

them to open an account with AIB and then use AIB’s bank accounts in the United States. A third small offshore bank, British

Bank of Latin America (BBLA), closed its doors after being named

in two separate U.S. money laundering stings. This bank, which

was licensed in the Caribbean but accepted clients only from Colombia, operated as an affiliate of a major bank in London and had

accounts at a major U.S. bank in New York. Although all of the

banks involved knew that BBLA provided U.S. dollar accounts to

Colombian nationals, neither BBLA, its London affiliate, nor its

U.S. correspondent bank took any steps to guard against the

accounts being misused on the Colombian Black Market Peso Exchange to launder U.S. dollars obtained from illegal drug trafficking. The result was that BBLA’s U.S. accounts became a conduit for illegal drug money.

In addition to detailing the ten case histories, the report described a number of other money laundering problems involving

U.S. correspondent accounts opened for foreign banks. These problems included difficulties associated with freezing and seizing suspect funds deposited into these accounts, obtaining reliable and

complete information related to the foreign banks, their customers

and accounts, and tracking multiple wire transfers of funds from

one bank to another across international borders. The report also

included information provided by a former offshore bank owner explaining how he helped his U.S. clients avoid scrutiny and hide

their offshore funds.

The report also contained specific findings and recommendations.

The report found that U.S. correspondent banking had become a

significant gateway for rogue foreign banks and their criminal clients to carry on money laundering and other criminal activity in

the United States and to benefit from the safety and soundness of

the U.S. banking industry. It found that foreign offshore banks,

shell banks, and banks in jurisdictions with weak anti-money laundering controls carried particularly high money laundering risks,

yet U.S. banks were routinely establishing correspondent relationships with such banks and exercising little oversight of their accounts. The report found that most U.S. banks did not have adequate anti-money laundering safeguards in place with respect to
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correspondent banking, and this problem was longstanding, widespread and ongoing. It also found that, in the prior 3 years, some

U.S. banks had become concerned about the vulnerability of correspondent banking to money laundering and begun taking steps

to reduce the money laundering risks, but these steps were slow,

incomplete, and not industry-wide.

The report offered a number of recommendations to strengthen

U.S. anti-money laundering laws and banking practices in the correspondent banking field. Many of these recommendations were included in the Money Laundering Abatement Act, S. 1371, introduced by Senator Levin and others during the 107th Congress.

This bill, in turn, formed the basis for the anti-money laundering

provisions contained in Title III of the USA Patriot Act and enacted into law in October 2001, as explained earlier.

B. Property ‘‘Flipping’’: HUD’s Failure To Curb Mortgage Fraud

(September 25, 2001) (Report prepared by the Minority Staff) S.

Prt. 107–44

On September 25, 2001, the Subcommittee issued a Minority

Staff report on ‘‘Property ‘Flipping’: HUD’s Failure To Curb Mortgage Fraud,’’ which was the result of a 9-month investigation. The

term refers to the purchase and quick resale of a home at a huge

mark-up, often with little work done to improve the property, in

order to create the false illusion of a robust real estate market

though the use of phony paperwork and deceptive sales practices.

The practice of ‘‘flipping’’ poses significant risks to low-income,

first-time home buyers, and may affect the overall stability of a

neighborhood.

During the Subcommittee’s investigation, staff investigators

interviewed over 100 witnesses, including home buyer victims, real

estate brokers, lenders, and attorneys involved in mortgage flipping

cases, as well as government officials, community activists, and

other stakeholders. These investigative efforts confirmed that the

phenomenon of flipping is not simply a local, State, or even regional problem. It is, rather, a significant nationwide problem.

Although the purchase and quick resale of a house at an increased price are not in and of themselves unlawful, the practice

can cross into illegality when documents are falsified in order to

lure lenders or buyers into investing more money in a house than

it is actually worth. In order to finance the transaction, such unscrupulous sellers may also make arrangements to secure a mortgage that is insured by the Federal Housing Authority (FHA). The

principal advantage to having an FHA-backed mortgage is that if

the buyer defaults, the government will reimburse the lender for

almost the entire amount of the loan. As a result, where the FHA

backs mortgages, there is minimal risk in lending money to marginally qualified borrowers. Designed as a means to facilitate loans

to low-income families with little credit history, this system is

sometimes subject to abuse where unscrupulous sellers are concerned: Too often, the process results in the Federal Government

either insuring questionable loans or simply subsidizing mortgage

fraud.
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The Subcommittee’s investigation culminated in 2 days of oversight hearings on June 29 and 30, 2000. Among the witnesses who

testified were three purchasers of flipped homes: Lisa Smith, a

New York City police officer, and single mother; Sonia Pratts, a

health care assistant from Hollywood, Florida; and Steekena Rollins, a day-care service provider from Chicago, Illinois. All three

spent their entire life savings to buy into the American dream of

home ownership, only to have their experience transformed into a

nightmare. As Chairman Collins said in her opening statement,

‘‘I find it very troubling that so many citizens in our Nation’s cities have been victimized by the predatory practices of unscrupulous real estate agencies, appraisers, and

lenders. But what I find most appalling is that the Federal

Government has essentially subsidized much of this

fraud.’’

At the request of Senator Collins and Representative Rick Lazio

(R–NY), GAO prepared a report, entitled ‘‘Single Family Housing:

Stronger Oversight of FHA Lenders Could Reduce HUD’s Insurance Risk.’’ Stanley Czerwinski—accompanied by Robert Procaccini, Assistant Director for FHA Insurance Programs, and Paul

Schmidt, Assistant Director for Single-Family Housing Programs—

appeared before the Subcommittee in 2000 to discuss GAO’s findings.

As the GAO officials made clear, FHA is the principal provider

of Federal mortgage insurance, and is also the major lending

source for first-time, low-income, and minority home buyers. As

such, the agency relies on approximately 10,000 lenders to carry

out its mission, and about 2,900 of those lenders are granted ‘‘Direct-Endorsement’’ (DE) authority. This means that these lenders

can gather and process loan information, underwrite the loans, and

make eligibility determinations, all without prior HUD review.

Given HUD’s reliance on private lenders and the authority they

are given to act on HUD’s behalf, oversight is essential. GAO’s review found problems with HUD’s oversight of the program. Specifically, GAO identified problems in three particular areas: (1) HUD’s

process for granting FHA-approved lenders DE authority provides

only limited assurance that the lenders are in fact qualified; (2)

HUD’s monitoring of lenders does not adequately focus on the lenders and loans that pose the greatest insurance risks to the Department; and (3) HUD has not taken sufficient steps to hold lenders

accountable for poor performance and program violations.

Senator Collins noted that the problems GAO identified in this

report were long-standing issues of which HUD had already been

advised in prior audits and reports. Despite this history of studies

calling attention to the problem, however, no apparent progress

had been made to remedy the deficiencies. In 1993, for example,

HUD’s Office of the Inspector General (OIG) completed an audit of

FHA’s single-family mortgage program and found that HUD’s postendorsement reviews did not consistently ensure quality underwriting. In 1997, the GAO evaluated the appraisal process and

found that HUD was not adequately monitoring appraisers—as

well as that the agency was not moving effectively against faulty

appraisers. Finally, in 1999, the GAO issued yet another report on
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the subject. Entitled ‘‘Single-Family Housing: Weaknesses in

HUD’s Oversight of the FHA Appraisal Process,’’ this study similarly found that: (a) HUD was still not doing a good job monitoring

the performance of appraisers; (b) HUD was not holding appraisers

accountable for the quality of their appraisals, and (c) the Department had limited assurance that its appraisers were in fact knowledgeable.

HUD was made aware on numerous occasions of these problems

and vulnerabilities in its FHA program, and of the Department’s

faulty oversight of mortgage programs. Instead of cracking down on

poor performing lenders, however, the agency did little or nothing

to stop such abuses. The unfortunate result of this failure is that

unscrupulous sellers, effectively subsidized by FHA-backed loans,

made property-flipping victims out of many of the very people

whom HUD’s program was supposed to help attain the American

dream of homeownership.

The victims of property flipping depended on HUD to protect

them from the predatory sales and lending practices revealed by

the Subcommittee’s investigation. Unable to obtain the conventional mortgages needed to buy their homes, these low-income

Americans had no alternative but to turn to FHA-supported programs in order to gain any access to the housing market. HUD has

a duty to protect such home buyers and to help keep them from

becoming the victims of fraudulent sales and lending practices.

HUD also has an obligation as to safeguard the integrity of the insurance fund, which could be imperiled should sloppy oversight of

loan-guarantee practices leave the fund responsible for covering the

cost of many millions of dollars’ worth of bad loans. Unfortunately,

HUD failed to fulfil these responsibilities. Moreover, the Department mischaracterized the assistance it was able to provide to

those home buyers who fell victim to fraudulent practices in the

poorly-overseen lending environment that HUD had for so long permitted to exist.

C. Gas Prices: How Are They Really Set? (April 29, 2002) (Report

prepared by the Majority Staff and reprinted in S. Hrg. 107–

509)

On April 29, 2002, the Subcommittee issued a 400-page report,

prepared by the Majority staff after a year-long investigation, entitled, ‘‘Gas Prices: How Are They Really Set?’’ This report showed

how oil industry mergers, refinery closings, and increasingly ‘‘tight’’

gasoline supplies had increased market concentration and given

some refiners sufficient market power to reduce gasoline supplies

and increase gasoline prices. Other factors leading to higher prices

and spikes in the Midwest included regional pipeline limitations,

price variations from different fuels, and the practice of ‘‘parallel

pricing’’ in which retailers looked to competitors to set gasoline

prices.

The report was based upon a review by Subcommittee staff of

over 250,000 documents; analysis of market data provided by the

Energy Information Administration and wholesale and retail price

data purchased from the Oil Price Information Service; and inter-
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views with oil companies, distributors, service station owners and

dealers, trade associations, economists and other experts. The report included an analysis of the operations and structure of the oil

industry, with particular focus on downstream activities from the

refinery to the pump, and on three regions: The West Coast (California in particular); the Midwest (Michigan, Ohio and Illinois, in

particular); and the East Coast (Maine and the Washington, D.C.

area, in particular).

The report showed that, over the prior 3-year period, gasoline

prices had increased significantly and showed greater volatility and

more ‘‘extraordinary’’ price spikes than in past years. It found that

mergers in the oil industry over the last few years and the closing

of many refineries over the past 20 years had increased concentration in the refining industry. It also found that gasoline supplies

had dropped overall, while demand had increased, resulting in an

increasingly ‘‘tight’’ market that was increasingly sensitive to even

minor supply disruptions. In certain regions of the United States,

the report determined that the refining market was so concentrated and the gasoline market was so finely balanced, that oil

companies could act to limit supply and from time to time spike

prices to maximize profits, without little or no challenge due to insufficient competition. The report also presented internal oil company documents showing that the oil companies viewed it to be in

their economic interest to keep gasoline inventories low and the

supply and demand balance tight, to maximize prices and profits.

The report also documented a variety of specific gasoline pricing

practices. It found, for example, that oil companies do not set

wholesale or retail prices based solely upon the cost to manufacture

and sell gasoline; rather these prices are set on the basis of market

conditions, including the prices of competitors. The report found,

for example, that most oil companies and gasoline stations tried to

keep their prices at a constant price differential with respect to one

or more competitors, leading to prices in specific markets that tended to go up and down together. The report included evidence of one

such leader-follower pricing pattern in Michigan and Ohio in 2001,

in which one company routinely bumped up the price of gasoline

on Wednesdays or Thursdays and a specific competitor then routinely followed.

The report also documented oil company use of a pricing system

referred to as ‘‘zone pricing’’ which allowed oil companies to charge

the highest possible amount for their gasoline in a given area. The

report found that some oil companies, using a highly sophisticated

analysis of market and consumer factors, divided a State or region

into zones, each representing a particular market. Competition was

then limited to the stations within each zone. For example, if most

people bought gasoline on their way home from work instead of on

their way to work, a station on one side of a rush hour street may

be treated as in one zone and the same brand station on the other

side of the street in another zone. The oil company would then

charge those two gas stations different prices for their gasoline, because the station on the side of the street with easy access for

evening rush hour traffic might be able to get a higher price for

its gas than the station on the other side of the street.
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Another pricing practice documented in the report involved how

gasoline station owners set their retail prices. The report showed

that for those stations that leased from a major oil company (about

one-fourth of the 117,000 branded stations) the oil company recommended to the station dealer a retail price. Evidence supplied by

several dealers indicated that if they did not charge their retail

customers the recommended price, the next delivery of gasoline

from the oil company would reflect any price increase instituted by

the dealer so that the dealer would not earn any additional profit.

For example, if a dealer priced the gasoline at $1.40/gallon when

the oil company recommended $1.35, the next delivery of gasoline

to the station (and deliveries are sometimes daily for busy stations)

would cost an additional 5 cents per gallon. The practical effect was

pressure on the dealer to conform with the recommended retail

price. The report concluded that, in these situations, it was the

major oil company rather than the local dealer that determined the

gasoline price and benefitted from higher prices and profit margins.

The report also examined other factors affecting gasoline prices,

including the advent of so-called ‘‘hypermarkets’’ in which large

discount stores like Wal-Mart and Cosco sell the lowest priced gasoline in a market; the use of gasoline storage facilities and pipelines by some oil companies to limit supplies and market competition; and the impact of boutique fuels required in some locations

to address environmental concerns.

The report was released in connection with Subcommittee hearings held on April 30 and May 2, 2002, examining the pricing retail

gasoline.

D. Phony Identification and Credentials Via the Internet (February

4, 2002) (S. Rept. 107–133)

On February 4, 2002, the Subcommittee issued a report, entitled

‘‘Phony Identification and Credentials Via the Internet’’ which

highlighted both the wide variety of false identification materials

and credentials available over the Internet, and the ways in which

those individuals seeking to manufacture and distribute phony

identification are able to use Internet-age technology. The report

includes case studies of several individuals involved in manufacturing, distributing and purchasing false identification materials.

The report was based on the Subcommittee’s 5-month investigation and subsequent hearing held in May 2000 during Senator Collins’ chairmanship. The Subcommittee’s work led to the passage of

legislation authored by Senator Collins, the Internet False Identification Prevention Act of 2000, designed to stem the spread of

false identification obtained over the Internet.

The proliferation of false identification has become a serious public safety issue. False identification documents and credentials can

enable criminals to commit a host of crimes ranging from identity

theft to bank and credit card fraud and allow them to fund larger

and more dangerous criminal activities. Phony identification can

also enable criminals to obtain bona fide, yet unsupported and unauthorized, identification documents such as driver’s licenses.

Moreover, criminals may be able to evade law enforcement by hid-
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ing behind their false identities. Failing to curb the spread of false

identification can have grave consequences, as evidenced by the apparent use of false identification and immigration documents by

some associates of the al Qaeda terrorist organization.

‘‘While the manufacture, distribution and use of phony identification are crimes in and of themselves, phony identification and credentials are nearly always used to commit other more serious

crimes ranging from identity theft to bank and credit card fraud.

Criminals may also be able to evade law enforcement by hiding behind their false identities,’’ said Senator Collins. ‘‘As part of our

war on terrorism, it is vital that we do all we can to curb the availability of false identification. I hope this report will help focus law

enforcement’s attention on that effort.’’

Technological developments during the past few years have significantly increased the dangers associated with the production and

marketing of fake identification documents. Today, both the necessary skills and materials are well within the reach of a growing

number of people. Moreover, it is becoming even easier to obtain

and create false identification documents, which can then be used

for a wide variety of improper and illegal purposes.

False identification materials are distributed over the Internet

through a number of methods. Some websites offer to make identification documents for customers which are then delivered by mail.

Others offer the computer files, known as ‘‘templates,’’ necessary to

manufacture false identification documents. Customers may purchase access to the templates and download them to their own computers, or purchase a computer disk containing the template files.

Still other operators simply offer the templates for free.

The Subcommittee found that the Internet has become a significant source of illegal identification documents, both actual identity

documents containing false information and templates that can be

used to create fake documents. These include driver’s licenses from

all 50 States, birth certificates, Social Security cards, military identification cards, student identifications, diplomas, press credentials,

and Federal agency credentials such as those used by the FBI and

CIA. The Subcommittee also found products such as Social Security

number generators, bar code generators, and instructions for creating holograms. ‘‘As we learned at our hearing, the quantity and

quality of the counterfeit identification documents that can be obtained through the Internet is astounding,’’ said Senator Collins.

As a result of its investigation, the Subcommittee drew three

general conclusions. First, many Internet sites offer a wide variety

of phony identification documents, some of which are of very high

quality and include security features commonly used by government agencies to deter counterfeiting.

Second, the disclaimers that can be found on many websites are

at odds with the marketing strategy pursued by the operators of

those websites. The Subcommittee found that operators frequently

attempted to shield themselves by claiming that their products

were ‘‘for novelty purposes only.’’ At the same time, however, operators commonly implied that their products were so authentic in

appearance as to be illegal—something they clearly considered to

be a marketing asset.
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Third, the Internet has played a leading role in fostering the

manufacture and the sale of high quality false identification, and

has made these products available to a vast customer base with

virtual anonymity for both the sellers and the buyers. This has, in

turn, presented significant challenges for law enforcement.

Since the Subcommittee began its investigation most of the individuals examined have removed their websites from the Internet or

have curtailed their activities. The Subcommittee made referrals of

potential violations of Federal and State law to the appropriate

members of the law enforcement community, urging authorities to

investigate further the activities of several individuals involved

with manufacturing and distributing false identification documents. Nevertheless, operators continue to spring up to take the

places of those who have closed their websites and offer false identification and credentials over the Internet, although most of these

new operators are located abroad.

E. The Role of the Board of Directors In Enron’s Collapse (July 8,

2002) S. Prt. 107–70

On July 8, 2002, the Subcommittee issued a bipartisan report

with findings and recommendations regarding ‘‘The Role of the

Board of Directors In Enron’s Collapse.’’ This report was the first

of two issued by the Subcommittee during the course of its Enron

investigation. It cited and was based upon evidence collected by the

Majority and Minority staffs, working together, to review hundreds

of boxes of documents and conduct interviews of 13 current and

former members of the Enron Board members, as well as other

Enron personnel, Arthur Andersen accountants, and experts in corporate governance and accounting. It followed a Subcommittee

hearing on May 7, 2002.

The Subcommittee concluded in the report that the Enron Board

had failed to safeguard Enron shareholders and contributed to the

collapse of the seventh largest public company in the United States

by allowing Enron to engage in high-risk accounting, inappropriate

conflict of interest transactions, extensive undisclosed off-the-books

activities, and excessive executive compensation. The Subcommittee also found that the Board had witnessed numerous indications of questionable practices by Enron management over several

years, but chose to ignore them to the detriment of Enron shareholders, employees, and business associates. The report detailed

evidence documenting numerous failures of duty by Enron directors

including the failure to stop Enron from using misleading accounting; the failure to protect Enron shareholders from unfair dealing

in the LJM partnership in which an Enron officer had a personal

financial interest; the failure to ensure adequate public disclosure

of material off-the-books liabilities; the failure to ensure the independence of the company’s auditor, Arthur Andersen; and the failure to monitor or halt abuse by Board Chairman and Chief Executive Officer Kenneth Lay of a company-financed, multi-million dollar, personal credit line.

The report presented two sets of bipartisan Subcommittee recommendations to strengthen internal and external oversight of U.S.
150

publicly traded corporations to stop corporate misconduct. The first

set of recommendations concentrated on strengthening internal

Board oversight. They included recommendations that Board members at publicly traded companies prohibit high-risk accounting

practices, including significant off-the-books activity used to make

the company’s financial condition appear better than it is; prohibit

the company’s outside auditor from also providing internal auditing

or consulting services and auditing its own work for the company;

and prohibit conflict of interest arrangements that allow company

transactions with a business owned or operated by senior company

personnel. The Subcommittee also recommended that corporate

Boards act to prevent excessive executive compensation, including

by exercising ongoing oversight of officer and director compensation, ending company-financed loans to officers and directors, and

reducing stock option compensation that encourages improper accounting or other misconduct to increase the company stock price

for personal gain.

The second set of Subcommittee recommendations concentrated

on the Securities & Exchange Commission and the self-regulatory

organizations, including the national stock exchanges, and called

on them to strengthen corporate governance requirements for publicly traded corporations. These bipartisan Subcommittee recommendations included calling for stronger statutory, regulatory

and listing requirements for independent directors, including by requiring a majority of the outside directors to be free of material financial ties to the company; for competent audit committees, including by requiring an audit committee chair who has financial

expertise and a committee charter which requires oversight of the

company’s financial statements and accounting practices and authorizes the committee’s selection and retention of the outside auditor; and for independent auditors, including by prohibiting the company’s outside auditor from simultaneously providing the company

with internal auditing or consulting services and from auditing its

own work for the company.

Many of the Subcommittee’s recommendations for stronger corporate governance requirements were included in the subsequently

enacted Sarbanes-Oxley Act and in new regulatory and listing requirements issued by the Securities & Exchange Commission and

the New York Stock Exchange.

F. Fishtail, Bacchus, Sundance, and Slapshot: Four Enron Transactions Funded and Facilitated By U.S. Financial Institutions

(January 2, 2003) S. Prt. 107–82

On January 2, 2003, the Subcommittee issued a bipartisan report, entitled ‘‘Fishtail, Bacchus, Sundance, and Slapshot: Four

Enron Transactions Funded and Facilitated By U.S. Financial Institutions.’’ This report was the second of two issued by the Subcommittee in the course of its year-long Enron investigation and

presented findings and recommendations relative to four Enron

transactions that were the focus of a Subcommittee hearing on December 11, 2002.
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The report presented evidence obtained during a bipartisan Subcommittee investigation of the role played by certain major U.S. financial institutions in Enron’s collapse and, in particular, with respect to four multi-million dollar structured finance transactions

examined at the December hearing. It presents evidence from the

December hearing which, when combined with evidence from earlier Subcommittee hearings in July, shows that several of the largest U.S. financial institutions were knowingly participating in, and

at times designing, advancing and profiting from, complex financial

transactions using deceptive accounting or tax strategies.

All four of the transactions detailed in the report related to a

new business venture by Enron involving pulp and paper trading.

All four had taken place over a 6-month period beginning in December 2000 and ending in June 2001. All four had been financed

primarily by the Salomon Smith Barney unit of Citigroup or by

Chase. The report presented evidence showing that Citigroup and

Chase actively aided Enron in executing the four transactions, despite knowing the transactions utilized deceptive accounting or tax

strategies, in return for substantial fees or favorable consideration

in other business dealings.

The Fishtail, Bacchus, and Sundance transactions were structured to appear to bring new investment into Enron’s pulp and

paper business venture. In reality, these complex financial deals

enabled Enron to use a $200 million Citigroup loan in a sham asset

sale to boost its year-end cash flow and earnings, and then quietly

return the funds via Sundance. The report concluded that, without

Citigroup’s participation and willingness to provide the required financing, Enron would not have been able to complete these deceptive transactions.

The Slapshot transaction, which was designed by Chase and sold to Enron for $5 million, was a tax avoidance scheme that Enron

used to claim an estimated $60 million in Canadian tax savings

and $65 million in financial statement benefits. Slapshot took place

on June 22, 2001, and involved a complex array of structured finance arrangements utilizing loans, funding transfers, and transactions involving Chase and Enron affiliates in two countries. The

report described how, in essence, Slapshot took a valid $375 million

loan issued by a consortium of banks to an Enron affiliate, combined it with a $1 billion sham loan issued by a Chase-controlled

shell company, and then used the sham loan to inflate its Canadian

tax deductions and U.S. earnings.

In the report, the Subcommittee made several bipartisan recommendations to strengthen Federal oversight of financial institutions and stop them from helping U.S. companies engage in deceptive accounting and tax transactions. These recommendations focused in particular on coordinated action by the Securities & Exchange Commission and bank regulators to bridge a current gap in

Federal oversight that exists because the SEC does not generally

regulate banks, and bank regulators do not generally regulate accounting practices. The Subcommittee recommendations included

calling for a joint Federal review of structured finance products and

transactions to identify those that facilitate deceptive accounting,

an SEC policy statement making it clear that the SEC would take

enforcement action against a financial institution that offers decep-
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tive financial products or participates in deceptive transactions,

and a policy statement by bank regulators making it clear that

bank examiners, as part of their routine bank examinations, may

evaluate a bank’s structured finance activities and declare problematic products or activities an unsafe and unsound banking practice.

The requested review of structured finance products and transactions had already been initiated by the Federal Reserve which

promised to report on its findings. Since the report, the SEC has

taken enforcement action against a financial institution that assisted a company other than Enron to engage in deceptive accounting. Chase announced its intention to discontinue sales of the tax

product involved in the Slapshot transactions, and Citigroup announced a new corporate policy to prevent Citigroup’s participation

in any transaction in which the transaction’s net effect is not accurately disclosed to a company’s investors and analysts. Investigations by the SEC, U.S. Department of Justice, and Canadian tax

authorities into the transactions described in the report may also

be underway.

V. REQUESTED AND SPONSORED REPORTS FROM GAO

In connection with its investigations, the Subcommittee makes

extensive use of the resources and expertise of the General Accounting Office (GAO), the Offices of Inspectors General (OIGs) at

various Federal agencies, and other entities. During the 107th Congress, the Subcommittee requested a number of reports and studies

on issues of importance to Congress and to U.S. consumers. Among

these reports were the following:

(1) Money Laundering: Oversight of Suspicious Activity Reporting

at Bank-Affiliated Broker-Dealers Ceased (GAO–01–474) March

22, 2001

(2) Anti-Money Laundering: Efforts in the Securities Industry

(GAO–02–111) October 10, 2001

(3) Money Laundering: Extent of Money Laundering through Credit

Cards Is Unknown (GAO–02–670) July 22, 2002

In these three reports, completed at the request of Senator Levin,

GAO examined issues related to the money laundering investigation being conducted by the Subcommittee. The first two reports

identified gaps and inadequacies in current anti-money laundering

efforts by the U.S. securities industry, while the third looked at

money laundering through the use of credit cards.

In connection with the first two reports, GAO surveyed 3,015

broker-dealers and 310 direct-marketed mutual fund groups in the

United States to determine whether these firms had voluntary

anti-money laundering measures in place, such as procedures to

verify customers’ identities, monitor account transactions for possible money laundering, and report suspicious activity to law enforcement. The GAO survey estimated that only 17 percent of

broker-dealers and 40 percent of mutual fund groups reported having such voluntary measures in place; an estimated 83 percent of

the broker-dealers and 60 percent of the mutual fund groups, totaling more than 2,600 firms, did not have these measures. The GAO
153

report, thus established that thousands of U.S. securities firms did

not have even basic anti-money laundering controls in place, while

also noting that such controls were not legally required at the time

of the survey. The GAO report also described the concern of U.S.

law enforcement that criminals ‘‘may increasingly attempt to use

the securities industry to launder money,’’ and included a list of 15

U.S. criminal and civil cases since 1997, involving money laundering through brokerage or mutual fund accounts, including a

May 2000 indictment of a former prime minister of Ukraine, Pavel

Lazarenko, who allegedly laundered $114 million through U.S.

bank and brokerage accounts.

By identifying gaps and inadequacies in current anti-money

laundering laws when applied to funds entering the U.S. financial

system through securities accounts, these GAO reports provided

support for legislative efforts in the USA Patriot Act, H.R. 3162, to

expand these laws to apply to the securities industry. Title III of

the USA Patriot Act, signed into law by President Bush on October

26, 2001, marked a major shift in U.S. anti-money laundering statutes by applying their requirements not only to U.S. banks, but

also to U.S. securities firms and other U.S. financial institutions.

For example, Title III of the USA Patriot Act, for the first time, required all U.S. securities firms to establish anti-money laundering

programs, verify the identity of their customers, exercise due diligence before opening accounts for foreign financial institutions, bar

accounts for foreign shell banks, and report suspicious activity to

law enforcement.

The third GAO report identified issues related to money laundering vulnerabilities in the credit card industry, including the use

of credit cards issued by foreign offshore banks to enable U.S. citizens or businesses to obtain access to funds in accounts opened by

these offshore banks. Among other issues, the report examined the

process by which foreign offshore banks were able to convince

major U.S. enterprises like Master Card and Visa to authorize

these banks to issue brand name credit cards. These and other

credit card money laundering concerns are addressed, in part, by

Title III of the USA Patriot Act which expanded U.S. anti-money

laundering laws to apply to the credit card industry for the first

time. This change in the law has prompted major U.S. credit card

associations, companies, and banks to begin to develop anti-money

laundering programs. The Internal Revenue Service has also begun

a major enforcement effort to identify potentially millions of U.S.

citizens using credit cards to obtain access to offshore funds in foreign bank accounts that are not listed on their tax returns and may

facilitate tax evasion.
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(4) Criminal Debt: Oversight and Actions Needed to Address Deficiencies in Collection Processes (GAO–01–664) July 16, 2001

(5) Civil Fines and Penalties Debt: Review of CMS’ Management

and Collection Processes (GAO–02–116) December 31, 2001

(6) Civil Fines and Penalties Debt: Review of OSM’s Management

and Collection Processes (GAO–02–211) December 31, 2001

(7) Civil Fines and Penalties Debt: Review of U.S. Customs Service’s

Management and Collection Processes (GAO–02–655) May 31,

2002

In these four reports, GAO examined a variety of debt collection

issues of interest to Senator Collins. Since October 1985, the balance of uncollected criminal debt has grown from $260 million to

more than $13 billion in 2001. The U.S. Courts have responsibility

for receipting and recordkeeping criminal debt and the Department

of Justice is responsible for collecting the debt.

The first report identified four key factors that have contributed

to the significant growth of uncollected criminal debt. The factors

are: (1) the nature of the debt, in that it involves criminals who

may be incarcerated or deported or who have minimal earning capacity; (2) the pay, as required by the Mandatory Victims Restitution Act of 1996; (3) interpretation by the Financial Litigation

Units of payment schedules set by judges from which limit collection activities; and (4) State laws that may limit the type of property that can be seized and the amount of wages that can be garnished.

The second report focused on the debt collection processes and

procedures used by the Department of Health and Human Services’

(HHS) Centers for Medicare and Medicaid Services (CMS). The primary reason for the growth of CMS’ civil monetary penalties (CMP)

receivables was the expansion of fraud and abuse detection activities from fiscal year 1995 through fiscal year 1997. GAO’s analysis

of CMS’ CMP receivable data revealed similar financial accountability and reporting issues as those identified for non-CMP receivables by CMS’ external financial statement auditors. GAO identified unreconciled differences of tens of millions of dollars in the

CMP receivables balances reported by HHS and CMS for fiscal

years 1997 through 1999, and an unreconciled net difference of

about $22 million between the CMP receivables balance in CMS’

general ledger and the detailed subsidiary systems as of September

30, 2000.

The third report concentrated on the debt collection processes

and procedures used by the Department of the Interior’s Office of

Surface Mining (OSM). GAO reported that the low collection rates

and significant write-offs of OSM’s civil fines and penalties is due

to the poor financial condition of certain debtors. Most uncollected

fines and penalties are associated with mining companies that are

not financially viable.

In the fourth report, the GAO reviewed the Customs Service’s

management of and practices for collecting civil fines and penalties

debt. The GAO found that the gross debt more than tripled from

the beginning of fiscal year 1997 to the end of fiscal year 2000, rising from $218.1 million as of October 1, 1996, to $773.6 million as
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of September 20, 2000. The primary reason for the growth in Customs’ reported uncollected debt was the bankruptcy of a Customs’

broker in 2000. The GAO determined that the agency can strengthen some of its debt collection policies and procedures by enhancing

them and better adhering to them.

(8) Illegal Aliens: INS’s Processes for Denying Aliens Entry Into the

United States (GAO–02–220T) November 13, 2001

In this report, completed at the request of Senator Levin, GAO

examined certain border entry procedures for aliens seeking entry

into the United States. GAO also reviewed INS policy and statistics

on the attendance of certain groups of aliens at removal hearings.

This report provided data and analysis that was considered in connection with a Subcommittee hearing on November 13, 2001, entitled ‘‘Review of INS Policy on Releasing Illegal Aliens Pending Deportation,’’ described earlier.

(9) Multifamily Housing: Improvements Needed in HUD’s Oversight

of Lenders That Underwrite FHA-Insured Loans (GAO–02–680)

July 19, 2002

In this report, at the request of Senator Collins, GAO examined

several HUD mortgage lending practices. Each year, the Federal

Housing Administration (FHA) insures billions of dollars in multifamily housing mortgage loans to help construct, rehabilitate, purchase, and refinance apartments and healthcare facilities. However, the Department of Housing and Urban Development (HUD)

lacks assurances that the lenders approved for the Multifamily Accelerated Processing (MAP) program always meet all of HUD’s

qualifications. HUD’s guidance requires prospective lenders to submit documents showing that they are financially sound, have a satisfactory lending record, and have qualified underwriters. GAO

found that HUD did not always comply with, or effectively implement, controls and procedures for reviewing and monitoring MAP

lenders’ underwriting of loans.

(10) Critical Infrastructure Protection: Commercial Satellite Security Should Be More Fully Addressed (GAO–02–781) August 30,

2002

In this report, at the request of Senator Collins, GAO examined

homeland security issues related to commercial satellites. Government and private-sector entities rely on satellites for services such

as communication, navigation, remote sensing, imaging, and

weather and meteorological support. Disruption of satellite services, whether intentional or not, can have a major adverse economic

impact. When using commercial satellites, Federal agencies reduce

risks by securing data links and ground stations that send and receive data. However, Federal agencies do not control the security

of the tracking and control links, satellites, or tracking and control

ground stations, which are typically the responsibility of the satellite service provider. It is important to the Nation’s economy and

security to protect against attacks on its computer-dependent critical infrastructures, many of which are privately owned. In light of

the Nation’s growing reliance on commercial satellites to meet military, civil, and private sector requirements, omitting satellites from
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the Nation’s approach to protecting critical infrastructure leaves an

important aspect of the country’s infrastructures without focused

attention.

(11) Department of Education: Guaranteed Student Loan Program

Vulnerabilities (GAO–03–268R) November 21, 2002

(12) Purchases of Degrees from Diploma Mills (GAO–03–269R) November 21, 2002

In these two reports, at the request of Senator Collins, GAO examined issues related to fraudulent educational degrees. The first

report investigated the weaknesses in the Department of Education’s administration of student loans for postsecondary education under the Federal Family Education Loan (FFEL) program.

As a result of the investigation, GAO exposed the vulnerabilities in

the program by setting up a fictitious school and obtaining approval for students loans totaling $55,000 on behalf of three fictitious students.

The second report examined diploma mills that illegally sell

fraudulent academic degrees to individuals that use them to gain

positions and increase income based upon the documents. GAO successfully purchased a degree from a diploma mill to demonstrate

how easily one can be obtained. The owner of a mill, Degrees-R-Us,

was questioned and admitted to the sales of approximately one

hundred fraudulent degrees over the past 2 years when his business began.

(13) Homeland Security: Information Technology Funding and Associated Management Issues (GAO–03–250) December 13, 2002

In this report, completed at the request of Senators Collins and

Levin, GAO identified all pending issues from earlier GAO reports

related to information technology equipment and programs at the

22 agencies being transferred to the new U.S. Department of

Homeland Security. This report was requested by the Senators to

facilitate the integration and improvement of computer-related

technologies at the new Department.

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