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Mr. HOUSER. Also the Assistant Attorney General in charge of the Civil Rights Division.

Senator SASSER. Thank you, Mr. Houser. You may proceed this morning and I will ask you, in view of the lateness of getting underway, if you can summarize your statement as much as possible, we would appreciate it. But if that is not possible, you go right ahead. TESTIMONY OF THOMAS J. HOUSER, GENERAL COUNSEL, NATIONAL ASSOCIATION OF MANUFACTURERS, ACCOMPANIED BY JERRIS LEONARD, LEONARD, COHEN, GETTINGS, & SHER, FORMER ASSISTANT ATTORNEY GENERAL FOR CIVIL RIGHTS, HEAD OF THE LAW ENFORCEMENT ASSISTANCE ADMINISTRATION

Mr. HOUSER. We were advised in advance of our appearance that we would have a time restraint today. So both Mr. Leonard and myself have moved to reduce the time that we will take in our direct presentations. We have submitted a statement which I assume will be made a part of the record.

We will divide our statement into three brief sections, Mr. Chairman. I will talk about congressional intent and the aberration thereof. Mr. Leonard will briefly talk about the scope of the problems generated in the implementation of FOIA and I will finish with a few recommended solutions for your consideration.

Since 1955, Mr. Chairman, American industry has had a positive policy regarding the disclosure of proper corporate and Government data. There has never been a conceptual problem with the intent and objectives of FOIA. The problem has arisen from the implementation of the act by various Federal agencies using varying procedures and having various attitudes. Since the midseventies there has been a discernible tilt toward disclosure. Generally speaking, FOIA policy, with notable assistance from the courts, has come on and has evolved as one of resolving all doubts in favor of disclosure. Business has watched the fragmentation of approaches to FOIA enforcement and has begun to lose confidence in the agencies' desire, in some cases, to protect sensitive corporate data. FOIA implementation has in fact added to Government's reputation as "the sieve," if you will, with respect to the protection of sensitive data, whether that be sensitive Government data or sensitive corporate data.

A stated purpose of FOIA was to provide the public with information regarding the workings of government. Indeed, this intent has been met to some extent. The aberration of this intent lies in the disclosure of sensitive corporate and even sensitive government data, with both kinds of disclosure not being contemplated by the Congress as one reviews the legislative history of FOIA. Numerous reports indicate that FOI has been used to, one, gain information regarding activities and ideas of individuals in Federal law enforcement and intelligence communities; two, used to engage in the search and seizure of sensitive corporate data with both businessmen, I repeat, both businessmen and consumer groups functioning as the receivors of sensitive data; and three, FOIA has been used to secure information for personal purposes such as lawsuits. Indeed the number of law firms

making FOIA requests for clients is remarkable as a glance at any issue of the Legal Times of Washington will show.

I am going to eliminate some of my testimony here, Mr. Chairman, and now turn to Mr. Leonard.

Mr. LEONARD. Mr. Chairman, thank you. I will limit my remarks just to observations about the problems that the privately practicing lawyer faces when he attempts to advise the business client.

It seems obvious that the purpose of the act overall is to provide disclosure so that the public can view what its government is doing and it can challenge that government.

It is also clear that the act attempted to exempt what the chairman termed necessarily confidential information which we all refer to today as exemption 4, contained in 552(b) 4 of the act, provisions which exempt trade secrets and commercial and financial information.

Mr. Chairman, that exemption specifically is consistent with the exemption of the Trade Secrets Act itself; that is, the exemption of the Trade Secrets Act makes it a criminal penalty for a government employee to turn over trade secrets that are proscribed by that act. The legal morass, if you please, and I think that is what it is, that we are involved in, comes about because of various court decisions starting back in 1974 with the decision in the Morton case and culminating with a decision in 1979 in the Chrysler case, in which the courts have interpreted exemption 4 to simply mean that the determination of whether or not a matter is exempt and falls under the exemption is a matter for the agency to determine. In other words, they have the option to release or not release, and that is what has created the legal conundrum that we find ourselves in. Lawyers find it almost impossible to adequately and properly advise their corporate business or other clients.

Incidentally, there are voluntary associations, foundations, and others that develop and have information which is proprietary.

So that I think, Mr. Chairman, it is clear that the Congress has got to address that problem.

Let me summarize by just saying this: One might ask rhetorically of those who say that this is a risk because that is what you hear, this is a risk that business has got to assume, whether they have calculated the cost of this legislation, and whether they have added that cost to the growing list of regulatory costs that business must face, all of which get added to the price tag that the consumer pays for the products that are manufactured by American business.

Now, to the lawyers, it is a boon. To the consumers, it is a bane, and without some thoughtful and meaningful amendments, this legislation as it now stands-Senator, I am sure you have heard this term, as we hear it at so many legislative bodies-is a lawyer's bill and it needs to be addressed by the Congress in the interest of the overall American public.

Mr. HOUSER. Mr. Chairman, I don't know whether the Justice Department testified before this subcommittee or not, and I don't know whether they would admit this publicly, but the Justice Department has not been enforcing the Trade Secrets Act now for a good number of years, apparently, because they believe the Trade Secrets Act to be inconsistent with FOIA: I think here another example of a misreading of the intent of Congress.

With respect to some recommended solutions, Mr. Chairman, I would recommend four actions that we think should be considered in the near term: First, the designation of a lead agency, preferably the OMB, to develop clear uniform and precise regulations for implementing FOIA is salutory. Why the OMB? I think one obvious reason is its very unique position in Government at the present time, but in addition it already administers the Privacy Act and the Federal Program Information Act and I think this responsibility would fit in.

Since each agency presently has responsibility for implementing its own FOIA policy, there is a plethora of diffrent fee schedules, time schedules, standards and training procedures. While the mission of each agency admittedly differs, some cohesion in the Federal system seems overwhelmingly necessary.

Two, FOIA responsibility is often located down in the bowels of an agency where junior officers are given the assignment to carry out the FOIA responsibility. Training is often minimal and supervision even less obvious. Some agencies, frankly, treat FOIA as an undesirable, if necessary, responsibility. A lead agency, again preferably the OMB, should be given the responsibility to set minimal training requirements and also insure that senior, as well as junior civil servants participate in these important decisions regarding FOIA.

Three, the intent of Congress in establishing FOIA is so clearly enunciated in the legislative history and has been ignored or misread so pervasively that we are led to suggest the Congress remove the treatment of sensitive Government and corporate data from the purview of FOIA altogether. Repeating, take the sensitive data that both Government and corporations produce and remove them from the purview of FOIA, to establish a new statute, very carefully worded, with separate disclosure requirements to better protect and avoid the kinds of abuses that have occurred under FOIA.

We would urge the Congress to clearly and consistently define by amendment to FOIA the terms "trade secrets," and "sensitive commercial and informational data," so that any consideration of disclosure of this kind of information be undertaken in a new and carefully worded statute.

Four, much of the data provided by business to Government is eventually integrated into the reports or projects of Government. In other words, it becomes the work product of Government. This work product can be no less sensitive and deserving of protection than the raw data from which it was derived, if in fact the original raw data was sensitive or confidential.

Accordingly, we would also suggest that the Congress consider according this type of data similar protection under a new statute.

To some, Mr. Chairman, FOIA is a concept going astray. We urge these legislative steps to restore the balance that has been shifted by agency policies, judicial decisions, and to be frank, the post-Watergate mentality that views any attempt or effort at data protection as the seed of some invidious kind of coverup.

I would like to commend this committee for showing your interest in this important problem and this opportunity to be here to testify before you and I hope and trust, Mr. Chairman, that your committee will be moving in the near term toward some solutions.

Thank you very much.

Senator SASSER. Thank you, Mr. Houser, for your presentation this morning, and that of your colleague.

You mentioned earlier in your testimony about the predatory practices of seeking information that business might wish to safeguard. I was just looking through the latest issue of Forbes Magazine and in a column entitled: "How to See Pols and Influence Bureaucrats." Lo and behold, I came across this paragraph. It said: "One way to seek information possibly about your competitors is to file a freedom of information request." It goes ahead and says: "Every executive branch agency has a Freedom of Act officer. Write for existing documents, et cetera." So apparently the word is getting pretty broad in the business world if Forbes is advising their subscribers here that a good way to eavesdrop on your competitors or get into their files is to file a Freedom of Information Act request and perhaps you can get at some of their trade secrets.

Mr. HOUSER. Unfortunately I believe that article is correct. As I pointed out, the predators are businessmen themselves, business groups, lawyers performing on behalf of individuals who are pursuing their own individual interests.

Senator SASSER. In your prepared testimony you allude to the National Parks case. If you were to devise a new Governmentwide test for establishing the confidentiality of information, do you think the court's decision in this particular case would be a good place to start? I might address that question to both of you.

Mr. LEONARD. Mr. Chairman, I think that the issues and the facts specifically in the National Park case are not nearly as important as the predicate that was laid with that case with respect to the option; that is, that the statute was being read not as an exemption of information but as a right of an agency to decide in its own discretion, without carefully-defined standards and without reference to the Trade Secrets Act what it could release. That is part of the argument that evolves in these cases, where those seeking to prohibit the information from being made public will argue that under the Trade Secrets Act, the release is a criminal offense and therefore cannot be released. The Trade Secrets Act is a criminal statute that has no civil sanctions, therefore the courts have said that such an argument is not applicable. I don't think we want to get into a question as to whether or not a specific case that the court has decided is helpful vis-a-vis the issues presented today, that gets us further into the quagmire.

The issue is the option question that lies within the agency itself. I believe, Mr. Chairman, if I might just suggest, if you turn the hearing into an issue of whether or not the fact situation in a particular case is good or bad, all you do is to get the whole plethora of constituencies from the environmentalists on the one hand to the pro growth people on the other hand involved in a fight as to what the statute should say. The problem is the statute doesn't clearly define the agencies role versus the submittor's rights under exemption 4.

Senator SASSER. Gentleman, thank you very much for appearing here this morning and giving us the benefit of your views.

I might say this to both of you, Mr. Houser, and Mr. Leonard: There will be additional questions which we would like to file with you in writing and request that you respond as promptly as possible. Mr. HOUSER. We would be happy to do that, sir.

Senator SASSER. Thank you.

[The prepared statement of Mr. Houser, and responses to questions from Senator Sasser follow:]

STATEMENT OF THOMAS HOUSER, GENERAL COUNSEL, NATIONAL
ASSOCIATION OF MANUFACTURERS

I. Congressional Intent--Misread or Ignored

Good morning, Mr. Chairman. My name is Thomas J. Houser. I am the General Counsel of the National Association of Manufacturers (NAM), which is a voluntary association consisting of over 12,000 business firms of all sizes from all parts of the country. The NAM is affiliated with an additional 158,000 companies through its Associations Department and the National Industrial Council. I would like to thank you, sir, for the invitation to appear here today and testify on behalf of our members on their concerns and problems regarding the administration of the Freedom of Information Act (FOIA). Appearing with me today are Jerris Leonard, a senior partner in the law firm of Leonard, Cohen, Gettings, & Sher, and a former Assistant Attorney General for Civil Rights and head of the Law Enforcement Assistance Administration, and Gary D. Lipkin, the Assistant General Counsel of the NAM, a former enforcement attorney with the Federal Election Commission, and staff attorney with the U.S. Customs Service.

Mr. Chairman, the NAM Board of Directors adopted a formal position on freedom of information issues in 1956. The NAM policy states, in pertinent part, that American industry pledges complete cooperation, frankness and truth in making available proper information concerning the policies and operations of business. Industry believes that similar access ought to be provided to the informational work-product of government. It is clear that, for many years, the business community has not been opposed to the original thrust and concept of the FOIA, i.e., that non-sensitive information that is created by, and in the possession of, or pertains to the operation of, the federal government should be made

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