Page "Effect of Repeal of Criminal Penalties for False Financial Disclosure Reports," Jack H. Maskell, legislative attorney, American Law Division, Congressional Research Service, June 25, 1986.. 105 United States v. Hansen, 566 F. Supp. 162 (D.D.C. 1983).. 114 124 136 139 TO AMEND THE ETHICS IN GOVERNMENT ACT WEDNESDAY, JUNE 25, 1986 U.S. SENATE, SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT MANAGEMENT, COMMITTEE ON GOVERNMENTAL AFFAIRS, Washington, DC. The subcommittee met at 2:25 p.m., in room SD-342, Dirksen Senate Office Building, Hon. William S. Cohen (chairman of the subcommittee) presiding. Present: Senators Cohen, Rudman, and Levin. Staff Present: Susan M. Collins, staff director; Mary B. Gerwin, majority counsel; Linda J. Gustitus, minority staff director; Elise J. Bean, minority counsel; Frankie de Vergie, chief clerk; and Beth Andrews, intern. OPENING STATEMENT OF SENATOR COHEN Senator COHEN. The committee will come to order. In 1978, the Congress passed the Ethics in Government Act in order to promote public confidence in Government and to increase the accountability of Federal officials. A major element of this law was the establishment of a uniform system of financial disclosure for top-level officials and employees in all three branches of the Government. In requiring financial disclosure, the Congress endorsed the principle espoused by Justice Brandeis that "sunlight is the best disinfectant." Congress believed that when the private interests of public servants are matters of record, they can be monitored to determine whether conflicts of interest exist. The issue before the subcommittee today is what sanctions should be used to enforce the financial disclosure reporting requirements. Should the Department of Justice continue to use both criminal and civil penalties in enforcing the law, or should civil and administrative sanctions be the exclusive remedies? To date, the Department of Justice has used the Criminal False Statement Act to indict at least one public official in each branch of Government for submitting false statements on financial disclosure reports. The most publicized of these cases was the conviction of Congressman George Hansen for failing to disclose over $300,000 in loans and profits on his financial disclosure reports filed for 1978 through 1981. Congressman Hansen was fined $40,000 and sentenced to 5 to 15 months in prison for these violations, and his conviction was upheld on appeal. This hearing will consider S. 2214, legislation introduced by Senators Hatch and Cranston that would prohibit the Justice Department from proceeding criminally against officials who intentionally falsify their Ethics Act forms. Under this bill, only civil penalties could be imposed for public officials who knowingly file false financial disclosure reports. Moreover, the bill would be retroactive to the date of the enactment of the Ethics Act. As we will hear in testimony today, the sponsors of S. 2214 believe the Department of Justice and the courts have misinterpreted congressional intent in passing the Ethics Act. They contend that the civil penalties contained in the Ethics Act itself, and not the criminal penalties found in the False Statements Act, should be used to prosecute intentional false statements on financial disclosure forms. Discerning the intentions of the authors of laws is, of course, never easy, but the proponents and opponents of S. 2214 can point to statements made during the floor debate on the Ethics Act that support their point of view. It is worth noting, however, that the courts have specifically rejected the argument that Congress never intended for criminal penalties to apply to the falsification of financial disclosure reports. In addition to examining questions of legislative history, the subcommittee is going to explore the future ramifications of making public officials only civilly liable for financial disclosure violations. It will consider, for example, whether exempting these officials from criminal liability would result in a double, more lenient standard being applied to public officials than to private citizens who make false statements to the Government. The subcommittee is also going to explore whether the passage of this legislation would send a signal to the public that Congress is retreating from its commitment to strong ethics or, conversely, whether subjecting Federal officials to criminal sanctions for reporting violations is simply too harsh-a case of the punishment not fitting the crime. Finally, we will hear testimony on the impact of making the changes proposed by this legislation retroactive. Over the past 5 years, the subcommittee has reviewed several aspects of the Ethics in Government Act to determine how well the law is working. We have, for example, reviewed and recommended changes in the independent counsel and Office of Government Ethics provisions of the law. And in each instance, the subcommittee has asked the essential question of whether the Ethics Act is achieving its goal of promoting public confidence in Government. It is the same principle that will guide the subcommittee in its evaluation of S. 2214. Senator Orrin Hatch was scheduled to be our leadoff witness. Unfortunately, he is engaged in a markup and has asked that his statement be submitted for the record.1 So we will turn next to the Department of Justice to testify first. Before calling upon the Justice Department, I am going to yield first to Senator Levin, who has a statement, and then to Senator 1 1 See p. 44. Rudman for any comments he wishes to make, and then we will proceed with the witnesses. Senator Levin. OPENING STATEMENT OF SENATOR LEVIN Senator LEVIN. Thank you. Mr. Chairman, the bill that is the subject of the hearing today presents us with a number of challenging issues. To what extent can or should Congress repeal criminal sanctions retroactively? Should financial disclosure requirements be immune from criminal sanction? Should we negate successful criminal prosecutions that were legitimately conducted? Would carving out an exception for criminal prosecution under 18 U.S.C. 1001 for false financial disclosure statements create or appear to create a double standard? If so, would such a double standard be justifiable? These issues are matters of serious public concern. Concern over the ethical conduct of public figures has indeed been heightened in the last few years with the numerous stories of abuses-some alleged and some proven-from former Deputy Secretary for Defense, Paul Thayer, sent to prison for insider trading, to former top assistance to the President, Michael Deaver, who is the subject of a pending investigation by independent counsel, with 50 cases in between, including a number in the legislative branch. It is as important now as it was in the post-Watergate era of 1978 to ensure, to the extent laws make it possible to ensure, that public officials will not use their public office for private gain. One of the best ways to accomplish that is to require disclosure of a public figure's financial matters, and one of the best ways to ensure complete disclosure is to make the penalty for intentional false statements a criminal one. I look forward to probing the pros and cons of the issues which this bill presents to the subcommittee. That is the extent of my opening statement. Chairman COHEN. Thank you, Senator Levin. Senator Rudman. OPENING STATEMENT OF SENATOR RUDMAN Senator RUDMAN. Thank you, Mr. Chairman. As chairman of the least-sought-after committee of the U.S. Senate, that of the Senate Ethics Committee, I am particularly interested in what develops at this hearing. I am particularly interested in what the witnesses might have to say, at what I view to be some different standards for Members of Congress vis-a-vis the rest of the executive branch and the judicial branch of the Government. So I am interested in hearing the testimony today. Senator COHEN. Our first witness this afternoon will be John C. Keeney, who is the Deputy Assistant Attorney General in the Criminal Division of the Department of Justice. Mr. Keeney. TESTIMONY OF JOHN C. KEENEY, DEPUTY ASSISTANT ATTORNEY GENERAL, CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE1 Mr. KEENEY. Thank you, Mr. Chairman. 1See Mr. Keeney's prepared statement on p. 25. Mr. Chairman, I am pleased to be here today to present the views of the Department of Justice with respect to S. 2214, a bill that would amend the enforcement provisions of the Ethics in Government Act. S. 2214 would limit the penalty for Ethics in Government Act infractions to a $5,000 civil fine, while also making the limitation retroactive to "the date of the enactment of the Ethics in Government Act," which was in 1978. We believe that the discretion to determine appropriate penalties for violations of Federal law rests ultimately with the Congress, and we defer to your judgment in this case; however, we believe Congress has no authority to enact the retroactivity section of the bill and that, in addition, the retroactivity provision would be an unconstitutional intrusion on the President's constitutional power to pardon. Since EIGA was passed in 1978, the Justice Department has applied 18 U.S.C 1001, the false statement statute, to EIGA, and the forms required by the EIGA carry specific warnings that 1001 applies to intentionally false statements made on those forms. Nevertheless, it has been Department policy in these cases to bring prosecutions under 1001 only in aggravated cases where the false statements can be shown to have been deliberately designed to conceal improper or illegal conduct and thus can be shown beyond a reasonable doubt to have been made knowingly and willfully. Whenever this test has not been met, criminal prosecution has been declined. Consequently, indictments under 1001 in cases involving EIGA forms have been authorized in only five cases in the last 4 years. Mr. Chairman, the retroactivity provisions in sections 2, 3, and 4 of the bill can be read to nullify all criminal convictions under the act since its passage in 1978. If this is the bill's intent, such action would be unprecedented. We strongly oppose the retroactivity provisions on the grounds that Congress lacks the authority to enact a retroactivity provision, which, as here, would unconstitutionally invade the President's exclusive power to pardon under article II, section 2, clause 1 of the Constitution. That clause states that the President has the power "to grant reprieves and pardons for offenses against the United States, except in cases of impeachment." By contrast, the Constitution gives the Congress no authority to legislate a pardon for any individual, any particular individual or class of individuals. There is some precedent, Mr. Chairman, for congessional power in certain limited circumstances to effect the same result that would flow from an exercise of the President's pardon power. However, these circumstances are limited to those involving prospective grants of amnesty or immunity or restoration of civil rights to persons who have not yet been subjected to prosecution by the executive. In no case we have found has Congress been held to have the power, through self-executing legislation, to grant relief in the form of remission of a prison sentence or monetary fine to individuals who have been convicted of violating a criminal statute. |