Senator PROXMIRE. Well, now that you have a more stringent standard of conduct directive and now that we have had this situation, talking about the future, do you anticipate the future abuses will be dealt with more severely?

Mr. CLEMENTS. There's no question whatsoever about it.

Senator PROXMIRE. That's welcome. What kind of penalties could a future offender expect to face?

Mr. CLEMENTS. There would be a severe reprimand in writing put into the personnel folder in the permanent records. That would be the starting point.

Senator PROXMIRE. Well, I think that's helpful because government employees must have a clear idea of what they face if they violate the standards of conduct. We know that the blame in the cases to date does not rest entirely with the officials who accepted the invitation. The directives seemed to have been perceived as a dead letter. Still, the public will compare the actions taken in the hunting lodge episode with the punishment given to the Navy commander who had the go-go dancer aboard his submarine. In that case, he was relieved of command and given a dead-end desk job.

Is this an indicator of how the relative seriousness of these offenses is viewed in the Pentagon? Is wholesale and repeated disregard for standards of conduct slightly less serious than having a go-go dancer on the deck of your submarine?

Mr. CLEMENTS [Laughs]. Senator Proxmire, that question reminds me of the one about when did you beat your wife last. There's no good answer to that.

Senator PROXMIRE. I won't ask you to tell me about that.

[Laughter.]

Mr. CLEMENTS. I can assure you, Senator Proxmire, that if any of these incidents occur now, in the future or in the immediate past after we were alerted to the problem, actions will be quick and they will be very severe.

Senator PROXMIRE. Are you investigating the possibility that Department of Defense officials may have themselves initiated requests for entertainment or other forms of gratuities?

Mr. CLEMENTS. Yes. I looked into that to some degree and discussed it with various people and I had a curiosity also as to whether that was possible or not. I have not found anything that would indicate that, but I still am watchful in that regard and I have that in mind, particularly if there's a pattern that would seem to be indicated in some of these incidents.

Senator PROXMIRE. If they did initiate requests, if they did ask for hospitality, would you regard that as a conduct that should warrant more severe penalties?

Mr. CLEMENTS. Very serious.

Senator PROXMIRE. And the penalty would be more severe?

Mr. CLEMENTS. Yes, sir.

Senator PROXMIRE. At the best, yesterday's testimony revealed that some contractors carry on their government relations or product promotion activities in ignorance of standards-of-conduct regulations. Besides your one-shot letter to contractors, what do you think the Department can do to remind contractors on a regular basis of their

69-394 76-9

responsibility to avoid putting Federal officials in a compromising position?

Mr. CLEMENTS. We are doing that and we have the means of doing it through the various industry association publications. We have it through industry association meetings where the officials of these companies gather and their representatives and operating people. We have it through our project offices and this message is carried out to the various operations now, Senator Proxmire, to a degree that I'm sure has never been done before and we intend to keep it on a current basis.

Senator PROXMIRE. Will you do it on a systematic, regular periodic basis so that it won't tend to fade away? These things tend to come to attention and there's an improvement in conduct for a period of months or maybe a year or two and then it seems to go away. Mr. CLEMENTS. I agree with that.

Senator PROXMIRE. So you will do this at least annually?
Mr. CLEMENTS. We will.

Senator PROXMIRE. Now yesterday both Mr. Jones of Northrop and Mr. Anderson of Rockwell International stated that no official of the Department of Defense, to their knowledge-and they are, of course, the top people and they would have been apprised it seems to me if it had been done in any formal or emphatic way-no official of the Department of Defense had ever contacted their company to remind them of the provisions of standards of conduct regulations and to admonish them not to provide prohibited forms of entertainment before this came to light.

Do you agree with their contentions?

Mr. CLEMENTS. No, sir, I do not.

Senator PROXMIRE. I say before this came to light, before the revelations in the papers about the entertainment at the Northrop hunting lodge.

Mr. CLEMENTS. I don't think

Senator PROXMIRE. Can you tell us, then, what notification was given to Rockwell or to Northrop?

Mr. CLEMENTS. In the case of Rockwell, I cannot say with complete assurance that this was discussed specifically with them. In the case of Northrop, it was, and there is certainly no doubt whatsoever in Mr. Jones' mind how I feel about this sort of activity and this sort of misbehavior.

Senator PROXMIRE. Was that prior to October 1975?
Mr. CLEMENTS. Yes, sir.

Senator PROXMIRE. Will you provide for the record copies of any communications with Northrop or with any other defense contractor regarding entertainment of government officials prior to October 1975?

Mr. CLEMENTS. I'm not sure that there will be anything of a written record, Senator Proxmire.

Senator PROXMIRE. Once again, Mr. Secretary, it's that written record which is the only basis on which we can have assurance that action was taken and the companies themselves-men also of integrity and you're a man of great integrity-tell us that they were not informed. The only way we can determine this is on the basis of writing.

Mr. CLEMENTS. I think you're right and this is a fault of ours in the past that we have not communicated in a direct sense in writing these kinds of observations and senses of integrity on these kinds of behavior. This will not be done in the future. We will communicate in writing, but the communication that I referred to with Mr. Jones was not in writing. It was a verbal discussion.

Senator PROXMIRE. Now all the disciplinary actions we are talking about—we talked about so far-have concerned individual employees of the Department of Defense. Is there any disciplinary action, any penalty, that could be taken against companies that are found to have attempted to exert undue influence on the procurement process by entertaining Government officials?

Mr. CLEMENTS. May I consult with Mr. Wiley a moment here about this?

Senator PROXMIRE. Yes; if you would like Mr. Wiley to answer it, he can go ahead.

Mr. WILEY. Senator Proxmire, I don't think any of the investigations to date have in any way indicated that any of the entertainment activities thus far have in any way led to any influence, undue or otherwise, on the procurement processes decisions. I think it's fair to state that if in the course of its further investigations the Department uncovered any evidence of any such undue influence, any influence at all that would be other than in most objective possible terms, that the Department would deal very immediately and very severely with any evidence of such influence.

Senator PROXMIRE. Let me read to you that part of the law that concerns me here. This is a reference to Section 2207 of Title 10 of the United States Code. This section states:

The United States may, by written notice to the contractor, terminate the right of the contractor to proceed under the contract if the Secretary concerned or his designee finds, after notice and hearing, that the contractor, or his agent or other representative, offered or gave any gratuity, such as entertainment or a gift, to an officer, official, or employee of the United States to obtain a contract or favorable treatment in the awarding, amending, or making of determinations concerning the performance of a contract.

If a contract is terminated under clause (1), the United States has the same remedies against the contractor that it would have had if the contractor had breached the contract and, in addition to other damages, is entitled to exemplary damages in an amount at least three, but not more than 10, as determined by the Secretary or his designee, times the cost incurred by the contractor in giving gratuities to the officer, official, or employee concerned.

Have you considered whether any action would be appropriate against contractors under this statute?

Mr. CLEMENTS. Senator, we are aware of the passage that you read and we have in the past discussed various actions that we might take in this regard, but our conclusion to date has been that we shouldn't do this, that the misbehavior, if you want to term it that, has not at this time warranted our moving forward.

Now, we still have this under consideration. You will be interested to know that no later than this morning we talked about an action of this type, but we have not come to any conclusion in this regard and I would say that we still are thinking about it. We are evaluating the misbehavior patterns, and we may very well take this kind of action in the future.

Senator PROXMIRE. You say an action of this type against whom? Mr. CLEMENTS. I would prefer not to say, Senator Proxmire, at this time. It just would be inappropriate and it is not an action that has been formalized and I think it's a wrong thing to say.

Senator PROXMIRE. Would this involve more than one contractor? Mr. CLEMENTS. It could.

Senator PROXMIRE. Mr. Clements, it seems obvious to me that Congress made its concerns well known when it enacted this legislation I just referred to. It was obviously the sense of the Congress that there should be stiff penalties against the improper exercise of influence on contracting. Both corporate officials who testified here yesterday agreed that one purpose of these events was to build up some goodwill for the company, and Mr. Anderson went so far as to admit that business was commonly discussed on these trips.

How far do you think a company would have to go in this area for this law to apply?

Mr. CLEMENTS. This is a very difficult question to answer and I'm sure that in your relationships and in your experiences you know that this is a very fine line at times. And my answer to you, Senator Proxmire, is that the best way to handle this is not to have these occasions arise. The environment for this sort of misbehavior is created under these sorts of auspices and I'm absolutely opposed to them and I want our people to stay out of those duck blinds and I want them to stay out of hunting lodges and I don't want these so-called working lunches and I want our relationships to be maintained on a very businesslike, straightforward, high-plane basis.

Senator PROXMIRE. Mr. Secretary, I just have two or three more questions.

I understand the Department of Defense has the primary investigative responsibility for suspected violations of the noncriminal selling law against selling materials to the Department, even though the GAO makes the final determination as to whether a pension will be denied. In the case of Representative Bennett's request to you, I understand that your investigation largely consisted of verifying the information contained in each individual's report, and in surveying major procurement commands to see whether the individuals had been engaged in prohibited activities.

Did you explain to these commands that even one telephone call to inquire about future needs could constitute a violation?

me.

Mr. CLEMENTS. Senator Proxmire, I'm not sure what you're asking

Senator PROXMIRE. I'm talking about the retired military officers selling material or products to the Department of Defense.

Mr. CLEMENTS. We are extremely sensitive to this. The officers that I have personally discussed this sort of thing with say that they will not even see their friends and acquaintances through many, many years in the services. They will not see them on business matters at all. Now I hope that that is responsive to what you're talking about. I cannot answer that this person doing the investigation warned them that even one telephone call would constitute a violation. I cannot say that that was so, but we are very, very sensitive to this problem.

Senator PROXMIRE. Now yesterday Mr. Jones told this committee that one purpose of these hunting trips was to promote goodwill for the company.

Mr. CLEMENTS. Well, the opposite effect has been what's happened. Senator PROXMIRE. The Comptroller General has ruled that "contacts to promote goodwill" are prohibited activities for a retired officer. Both General Wilson and Captain Whidden were heavily involved in the operation of this hunting lodge. General Wilson's duties are further described in the August 6 DCAA audit report as to "entertain where necessary to enhance the image of Northrop."

Do you see any reason why their activities would not be prohibited

under this law?

Mr. CLEMENTS. I can't answer that offhand, Senator Proxmire. I'd want to look at that and get the benefit of counsel and let him give you a considered legal opinion from the Department of Defense. [See Appendix IV (K), p. 435.]

Senator PROXMIRE. All right.

Mr. CLEMENTS. I think that would be better.

Senator PROXMIRE. Now all of this may have been a moot point if a recent DOD legislative proposal had succeeded. Why did the Department suggest that the provisions of this law be considerably softened? Mr. CLEMENTS. Considerably what?

Senator PROXMIRE. Softened, Let me proceed and perhaps that will help you.

Mr. CLEMENTS. I have no knowledge of that. I'm sorry.

Senator PROXMIRE. We have heard this captioned before as an effort to implement the Fitzhugh Commission recommendations, but the committee staff was unable to find any recommendation in that report that this law be changed so that it would only apply in cases where there was a finding of intention to exert undue influence. The fact that this proposal was rejected is immaterial if we are considering basic DoD attitudes toward enforcement of these laws. I can construe it no other way except as a conscious Department of Defense effort to soften the intent of one of the few strong conflict of interest laws on the books.

Mr. CLEMENTS. Senator Proxmire, I have no knowledge whatsoever of these actions that you are talking about. I hope that you have gotten from my appearance here today that it's hard to imagine anyone that would be any stronger in their opinions about this conflict of interest issue than I am and

Senator PROXMIRE. This was a formal legislative proposal from the Department of Defense earlier this year to amend the selling law as it related to retired officers.

Mr. CLEMENTS. We will look into that and I will give you a considered opinion for the record, but I cannot respond to it because I know of no such action on our part. It's inconceivable to me that the Department would take that kind of position with my responsibilities with respect to this conflict of interest and not consult me about it.

Senator PROXMIRE. Well, then, you didn't have a chance to review that legislative proposal?

Mr. CLEMENTS. I certainly did not. I don't know anything about it, but we will look into it and I will respond for the record.