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Communications Commission following the appointment and that, later, these stocks did appear on that prohibited list. We did not have that prohibited list available to us, I am told, at the time of the review.

Mr. LENT. You indicated earlier that the agencies would furnish you with the list of prohibited stocks.

In this case you were not so furnished?

Mr. CAMPBELL. In this case we were not so furnished at this time. Mr. LENT. I have no further questions, Mr. Chairman.

Mr. LUKEN. Mr. Rosenberg?

Mr. ROSENBERG. Thank you, Mr. Chairman. I would like to request that you swear in Mr. Goodman, the General Counsel, and also Mr. Reich, the ethics counsel.

Mr. LUKEN. Would each of you please be sworn.

Do each of you promise to tell the truth, the whole truth, and nothing but the truth, so help you God, in testifying before this panel?

Mr. GOODMAN. I do.

Mr. REICH. I do.

Mr. ROSENBERG. Mr. Goodman, how long have you been General Counsel of the Civil Service Commission?

Mr. GOODMAN. Approximately 2 years.

Mr. ROSENBERG. Since approximately what date?
Mr. GOODMAN. I believe around July of 1975.

Mr. ROSENBERG. What was your position immediately prior to becoming General Counsel?

Mr. GOODMAN. I was Deputy General Counsel.

Mr. ROSENBERG. How long were you Deputy General Counsel? Mr. GOODMAN. A year or a year and a half. Prior to that, I was Assistant General Counsel.

Mr. ROSENBERG. The GAO has issued a series of reports on conflicts problems at various agencies since 1974. Mr. Chairman, with your permission, I would like to introduce for the record a copy of the listing of those reports that GAO has issued. There are 21 reports in all.

They culminate with the report yesterday on the Federal Deposit Insurance Corporation.

Mr. LUKEN. Without objection, the list will be received for the record.

[The list referred to follows:]

GENERAL ACCOUNTING OFFICE REPORTS ISSUED ON AGENCIES'
FINANCIAL DISCLOSURE SYSTEMS

AGENCY, REPORT TITLE, NUMBER, AND ISSUE DATE

1. Federal Power Commission: Need for Improving the Regulation of the Natural Gas Industry and Management of Internal Operations, B-180228, 9/13/74.

2. U.S. Geological Survey: Effectiveness of the Financial Disclosure System for Employees of the U.S. Geological Survey, FPCD-75-131, 3/3/75.

3. Civil Aeronautics Board: Effectiveness of the Financial Disclosure System for Civil Aeronautics Board Employees Needs Improvements, FPCD-76-6, 9/16/75.

4. Federal Maritime Commission: Improvements Needed in the Federal Maritime Commission's Financial Disclosure System for Employees, FPCD-76-16, 10/22/75.

5. U.S. Railway Association. Improvements Needed in Procurement and Financial Disclosure Activities of the U.S. Railway Association, RED-76-41, 11/5/75.

6. Department of the Interior: Department of the Interior Improves Its Financial Disclosure System for Employees, FPCD-75-167, 12/2/75.

7. Food and Drug Administration: Financial Disclosure System for Employees of the Food and Drug Administration Needs Tightening, FPCD-76-21, 1/19/76.

8. U.S. Geological Survey: Letter report to Congressman John Moss on U.S. Geological Survey Employees' Divestiture, FPCD-76-37, 2/2/76.

9. Inter-American Foundation: Inter-American Foundation's Financial Disclosure System for Employees and Its Procurement Practices, ID-76-69, 6/30/76. 10. Federal Aviation Administration: Problems With the Financial Disclosure System, Federal Aviation Administration, FPCD-76-50, 8/4/76.

11. Department of Commerce: Problems Found in the Financial Disclosure System for Department of Commerce Employees, FPCD-76-55, 8/10/76.

12. Small Business Administration: Management Control Functions of the Small Business Administration-Improvements Are Needed, GGD-76-74, 8/23/76. 13. Export-Import Bank: Export-Import Bank's Financial Disclosure System for Employees and Its Procurement Practice, ID-76-81, 10/4/76.

14. Federal Communications Commission: Actions Needed To Improve the Federal Communications Commission Financial Disclosure System, FPCD-7651, 12/21/76.

15. Tennessee Valley Authority: Tennessee Valley Authority: Information on Certain Contracting and Personnel Management Activities, CED-77-4, 12/29/76. 16. Food and Drug Administration: The Food and Drug Administration's Finacial Disclosure System for Special Government Employees: Progress and Problems, FPCD-76-99, 1/24/77.

17. Energy Research and Development Administration: An Improved Financial Disclosure System, FPCD-77-14, 1/26/77.

18. Department of Agriculture: Financial Disclosure System for Department of Agriculture Employees Needs Strengthening, FPCD-77-17, 1/31/77.

19. The White House: Action Needed To Make the Executive Branch Financial Disclosure System Effective, FPCD-77-23, 2/28/77.

20. Office of the Comptroller of the Currency: Financial Disclosure Systems in Banking Regulatory Agencies, FPCD-77-29, 3/23/77.

21. Federal Deposit Insurance Corporation's Financial Disclosure Regulations Should Be Improved, FPCD-77-49, 6/1/77.

Mr. ROSENBERG. Mr. Goodman, would you agree that the GAO reports indicate a general pattern of lax enforcement and inconsistency of conflicts rules?

Mr. GOODMAN. It is my understanding that the GAO has found conflicts problems in various of these agencies. I do not know how I would go ahead and characterize that beyond that. It is my understanding that the GAO has found a series of problems in these various agencies regarding conflicts of interest matters.

Mr. ROSENBERG. Have you personally reviewed each of these reports as they came out?

Mr. GOODMAN. No, I have not.

Mr. ROSENBERG. You have not read each of these reports at all? Mr. GOODMAN. I have read portions of various of the reports, but

I—

Mr. ROSENBERG. Of the portions that you have read, do you generally agree with their findings?

Mr. GOODMAN. I think that is too broad for me to be able to give an answer to, quite frankly, Mr. Rosenberg. I do not know that I could say that I generally agreed with all their findings or disagreed with their findings.

They have their findings. I assume that their findings are correct because I assume that their findings are the findings that they have made and that they have done as good an audit as they can do.

Mr. ROSENBERG. Their findings were that there was a general pattern of lax enforcement, inconsistency in all the agencies that they looked at. Is that correct, based on your understanding of the reports?

Mr. GOODMAN. My understanding is that they have found problems in the various agencies.

Mr. ROSENBERG. For any of those 21 agencies that they did reports on, did you or anyone in your office do a formal analysis of the problems discovered by GAO and make recommendations to the agency involved?

In other words, did you take the GAO report, formally analyze it, and then submit some recommendations on how to improve that process at the agency?

Mr. GOODMAN. I have just consulted with Mr. Reich. He informs me that, perhaps, his view of

Mr. ROSENBERG. Mr. Chairman, perhaps we should have Mr. Reich testify directly on that.

Mr. GOODMAN. Perhaps his views of those reports are a little different in the sense that he indicates that perhaps they are not as critical as one might gather from the questions.

Mr. ROSENBERG. I ask you whether you had done any formal analysis of those reports and submitted recommendations. Obviously, GAO

Mr. GOODMAN. I have not.

Mr. LUKEN. Do you want to direct you question to Mr. Reich? Do you want to step forward, Mr. Reich? Would you respond to the question if you can, please?

Mr. REICH. The GAO has established very close liaison with our office. We, in turn, have been in touch with agencies where the necessity was there.

I have with me, in particular, one report which was very critical of the Federal Aviation Administration. As soon as I saw it. I discussed it with Mr. Goodman. We sent a communication to the General Counsel. I have it here. I would be glad to offer it for the record.

It indicates that we would be glad to assist in whatever way we could to review what had occurred and to make whatever corrections were necessary.

Mr. ROSENBERG. For what other agencies did you send a similar communication?

Mr. REICH. In many of the other cases I spoke directly to the general counsels. I will give an example.

The Export-Import Bank, I believe. was reviewed. Many of the criticisms and I do not have this before me. My best memory is that many of the criticisms were directed to actions that had occurred prior to 1975. GAO, in most of these reports, noted that since 1975, when our Commission had issued a memorandum, in June of 1975, directing the agencies how to conduct their review of these statements, there had been a decided improvement.

Mr. ROSENBERG. It was not your general procedure, however, to do a formal analysis? It was simply a telephone call and sort of an offer of assistance? Is that correct?

Mr. REICH. Well, I would say further

Mr. ROSENBERG. Is that correct? It was sort of an informal telephone offer of assistance for the most part?

Mr. REICH. It was informal, for the most part.

But I say, where it was critical and there seemed to be a basis for it

Mr. ROSENBERG. Yes, and

Mr. REICH. I would correspond, for example, with the FAA.

Mr. ROSENBERG. Was the FAA the only example of that direct correspondence, based on the GAO report?

Mr. REICH. Well, there was previous correspondence prior to the GAO report, for example, with the Department of Agriculture. As a result of that audit

Mr. ROSENBERG. After the report, was there any formal correspondence with anyone beside the FAA?

Mr. REICH. Not formal; but in most cases, if there was a situation involving regulations, there would be a change in the regulationsMr. ROSENBERG. For one of the 21 reports, the FAA, there was formal correspondence and that correspondence-I have not seen itoffered help to re-do the regulations? For the other agencies

Mr. REICH. Would you like me to produce the correspondence? Mr. ROSENBERG. Mr. Chairman, with your permission, perhaps we could hold the record and have that submitted later.

Mr. LUKEN. Without objection.

[The following letter was received for the record:]

Mr. BERT GOODWIN,

U.S. CIVIL SERVICE COMMISSION,
Washington, D.C., August 16, 1976.

Chief Counsel, Federal Aviation Administration,

Washington, D.C.

DEAR MR. GOODWIN: We have read the report of the Comptroller General on his evaluation of the financial disclosure system of your agency and we have noted some of the problems he has raised. In view of our continuing role in the field of ethics under Executive Order 11222, please feel free to call upon us if we can be of assistance. Our Ethics Counsel, David Reich, is available for this purpose.

Sincerely yours,

CARL F. GOODMAN,
General Counsel.

Mr. ROSENBERG. But for the other 20 reports, there was simply an informal kind of

Mr. REICH. That is right. Mr. Rosenberg, if you will look at your reports, there is a statement in each of these reports that they have been discussed with the General Counsel. Your committee has discussed the report, but the agency may not have been given a full opportunity to comment on it

Mr. ROSENBERG. Did you have the Agency comment to you on the report? Did you ask the Agency to comment to you?

Mr. REICH. What I recall very vividly is that, at our conference in September 1976, which I held on behalf of the Commission in Gettysburg, Pa., there were two representatives of the GAO there. There was a man there from the FCC-I believe it was from the FCC-who, in the meeting that we were having, took exception to some of the statements that were made by the GAO report.

He indicated they should have been given an opportunity to comment on it.

Mr. ROSENBERG. This was in what period of time?

Mr. REICH. This was in September 1976.

Mr. ROSENBERG. The GAO report on the FCC came out December -21, 1976. How was he commenting on it at that point?

Mr. REICH. Well, I think what he wanted to comment I do not know the exact date of the report. But the comment was that, perhaps, there were going to appear things that

Mr. ROSENBERG. So, he did not know exactly what the report was going to say, but he was simply commenting at that point. Mr. REICH. I could give another example, if you will

Mr. ROSENBERG. I think that is sufficient at this point.

I would like to direct this question either to Mr. Goodman or Mr. Reich.

Have you done any followup since the GAO reports to determine whether the agencies have conformed to GAO's recommendations in the reports? Some of these reports, of course, go back to 1974. 'There has been some time period.

Mr. REICH. Mr. Rosenberg, a lot has been happening, as you know, since President Carter has become President. Changes that might otherwise have been made have been held in abeyance, assuming we would

Mr. ROSENBERG. Some of those reports were 1975. Is there any

Mr. REICH. As to the reports themselves, you have heard there was some question by the administration of the Civil Service Commission as to our authority in this field.

Mr. ROSENBERG. As to your enforcement authority in specific cases. Mr. GOODMAN. Mr. Rosenberg, I think it fair to say that the Commission has not taken a terribly aggressive role in the ethics area. I think it fair to say that, in 1975, the Commission began to take some more aggressive steps in that regard.

I think it is also fair to say that more aggressive steps can be taken than those that were taken at that time.

Mr. ROSENBERG. The aggressive steps since early 1975 have not, however, included specific followup on the GAO reports to determine whether the agencies are now in conformity with the GAO recommendations; is that correct?

Mr. GOODMAN. Except to the extent that Mr. Reich has indicated his contacts, and perhaps other contacts he may have had.

Mr. REICH. Mr. Rosenberg, may I answer that? I recall very specifically.

There was a report by the GAO on the Department of Interior. I believe it was in late-maybe in the summer of 1975. This was on the Department of Interior. What the Department of Interior did was, in my opinion, an overreaction. Let's say

Mr. ROSENBERG. Did you tell them it was an overreaction?
Mr. REICH. I am just talking to you man-to-man here.

The GAO came in and made its audit. Let us say, for sake of explanation, that there were 1,000 persons who filed statements at the Department of Interior. The GAO people who came there thought there should be some 4,500 statements.

The reason I say there was an overreaction is that the Department of Interior then required maybe 5,000 statements thereafter.

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