vestigate, discipline or otherwise enforce the standards set out in Executive Order 11222. Nonetheless, in such instances we ask the agency involved to investigate and send us a report on the situation. This is the way in which we became concerned with the charge that high-ranking personnel in the Department of Defense, engaged in contracting responsibilities, had accepted entertainment from a Government contractor with extensive Defense contracts. When we heard of the charge, we wrote to the Department of Defense in May of 1975 and requested a copy of its investigative report. In October, the Department of Defense responded.

In return, my General Counsel, disagreeing with the Defense Department's handling of the matter, suggested that the cases be reviewed again. Thereafter, the Department of Defense advised us that it had sent letters of admonition to certain individuals and had modified certain of its directives to assure consistency with the Commission's standards. Our correspondence with the Department of Defense is attached to my prepared statement for your information. Within the last year, the Commission has expanded its role under the Executive Order. As a result of an evaluation which was made in 1974, my General Counsel became convinced of a need to redefine the role of agency ethics counselors to assure compliance with agency regulations.

Agency ethics counselors have been encouraged by seminars conducted by us and by memoranda issued by us to take a leading role in executing the ethics programs of their agencies. We have advised the agencies that their counselors, and ultimately the agency head, must take full responsibility for their ethics program and that, while there may be subdelegations within a large agency, it is the agency head through his ethics counselor who must take the ultimate responsibility for the execution of the program. This effectuates the Executive Order's requirement that "Each agency head is directed to assure the availability of counseling for those employees who request advice or interpretation." This arrangement has also been given expression in the Commission's regulations, which provide that the agency head is responsible for taking remedial action.

Thus, the Commission's role is one of direct responsibility for the reviewing of financial statements from certain Presidential appointees, the monitoring of agency collection of financial statements from its employees, and the coordinating of the ethics program in general.

I have asked our Commission's General Counsel Carl F. Goodman, to expand on my comments on the Commission's involvement in the ethics program of the Federal Government.

[Prepared statement of Mr. Hampton follows:]

STATEMENT OF ROBERT E. HAMPTON, CHAIRMAN, UNITED STATES CIVIL SERVICE COMMISSION

I am appearing today before your Joint Committee on Defense Production in response to your invitation that I present testimony on the backgroud of Executive Order 11222, on the procedure used by the Civil Service Commission for approving agencies' ethics regulations, on our efforts to monitor and evaluate the enforcement of such regulations and the role we have played in the recent decisions of the Department of Defense and the National Aeronautics and Space Administration to redraft their regulations regarding gratuities and entertainment.

Executive Order 11222 prescribes standards of ethical conduct for Government officers and employees. It supplanted Executive Order 10939 which was issued in May 1961 to provide “a guide on ethical standards to Government officials." This previous Executive Order applied only to heads and assistant heads of Government agencies, to full-time members of boards and commissions appointed by the President and to the members of the White House staff. It required each agency head to issue internal directives to assure the maintenance of high ethical and moral standards in his agency.

In May of 1965 Executive Order 11222 was promulgated for the purpose of codifying, clarifying and strengthening the standards of ethical conduct for executive branch personnel. In addition, it required for the first time the submission of financial statements by certain Federal officers and employees. Under section 401 of the Executive Order the heads of agencies, some Presidential appointees in the Executive Office of the President and fulltime members of boards and commissions appointed by the President must submit confidential statements of their employment and financial interests on an annual basis to the Chairman of the Civil Service Commission. As Chairman, I receive approximately 185 such statements each year and they are reviewed for me by the Commission's Office of the General Counsel. Again, the filing of such financial interest statements is made mandatory by the Executive Order and we have assumed the responsibility of ensuring that all covered officials discharge their duty in this regard. If a covered official fails to file the required statement, our recourse is to call the matter to the attention of the President. Furthermore, I am directed to report to the President "any information contained in statements required by section 401 [of the Executive Order] which may indicate a conflict of interest." As a practical matter, where potential conflicts are disclosed, my General Counsel will attempt to resolve the matter directly with the appointee involved; sometimes I will be brought in to make the initial contact, to establish a kind of Presidential appointee to Presidential appointee relationship.

The Executive Order provides that regulations must be adopted by each agency "coordinated and approved by the Civil Service Commission." The Commission has issued regulations under which agency heads must promulgate ethics regulations which meet certain minimum standards. Before any agency can promulgate or modify its ethics regulations, it must submit them for the approval of the Commission. This is to assure consistency among the Federal agencies. Prior to Executive Order 11222 there had been an expressed concern about inconsistency between agency regulations.

Further, the Commission has issued regulations dealing with the submission of financial statements by certain agency employees with their own agencies. Here, too, we monitor compliance with the filing requirements and, where necessary, issue appropriate instructions to ensure compliance.

From time to time we receive complaints from Government employees and private persons alleging that there has been a conflict of interest on the part of some Government employee. Neither the Executive Order nor regulations expressly give us authority to investigate, discipline, or otherwise enforce the standards set out in Executive Order 11222. Nonetheless, in such instances we ask the agency involved to investigate and send us a report on the situation. This is the way in which we became concerned with the charge that high-ranking personnel in the Department of Defense, engaged in contracting responsibilities, had accepted entertainment from a Government contractor with extensive Defense contracts. When we heard of the charge we wrote to the Department of Defense in May of 1975 and requested a copy of its investigative report. In October the Department of Defense responded. In return my General Counsel, disagreeing with the Defense Department's handling of the matter, suggested that the cases be reviewed again. Thereafter, the Department of Defense advised us that it had sent letters of admonition to certain individuals and had modified certain of its directives to assure consistency with the Commission's standards. Our correspondence with the Department of Defense is attached to my prepared statement for your information.

Within the last year the Commission has expanded its role under the Executive Order. As a result of an evaluation which was made in 1974, my General Counsel became convinced of a need to redefine the role of agency ethics counselors to assure compliance with agency regulations. Agency ethics

counselors have been encouraged by seminars conducted by us and by memoranda issued by us to take a leading role in executing the ethics programs of their agencies. We have advised the agencies that their counselors and ultimately the agency head must take full responsibility for their ethics program and that while there may be subdelegations within a large agency, it is the agency head through his ethics counselor who must take the ultimate responsibility for the execution of the program. This effectuates the Executive Order's requirement that "Each agency head is . . . directed to assure . . . the availability of counseling for those employees who request advice or interpretation." This arrangement has also been given expression in the Commission's regulations, which provide that the agency head is responsible for taking remedial action.

Thus, the Commission's role is one of direct responsibility for the reviewing of financial statements from certain Presidential appointees, the monitoring of agency collection of financial statements from its employees and the coordinating of the ethics program in general.

I have asked our Commission's General Counsel, Carl F. Goodman, to expand on my comments on the Commission's involvement in the ethics program of the Federal Government.

STATEMENT OF CARL F. GOODMAN, GENERAL COUNSEL, U.S. CIVIL SERVICE COMMISSION

Mr. GOODMAN. My name is Carl F. Goodman and I am General Counsel of the Civil Service Commission. In this capacity, I am acquainted with the Commission's role in the ethics program since that program is handled in my office and the Commission's ethics counsel is a member of my staff and under my supervision.

Under Executive Order 11222 the Civil Service Commission was directed to issue regulations which would implement the Executive Order and would become the model for the regulations on ethics to be issued by other agencies of the Government.

It is our duty under the Executive Order to serve a coordinating and monitoring role by reviewing each agency's ethics regulations before they are promulgated or modified. This was one of the basic changes brought about by the order and was designed to reach a problem of conflicting and potentially inconsistent agency regulations issued under Executive Order 10939. Still Executive Order 11222 left primary responsibility for the ethics program in the agencies themselves.

Under our regulations issued pursuant to Executive Order 11222 and which are contained in Part 735 of Title 5 of the Code of Federal Regulations, the Commission requires that any government employee who is classified at GS-13 or above and who has contracting or procurement responsibilities or is administering grants or subsidies or performing other activities of a decisional nature with an economic impact on the interests of any non-Federal enterprise, must file a statement of his or her employment and financial interests with his or her agency.

Should an agency determine that some employees below the GS13 classification should be required to file confidential statements, the agency must justify in writing to the Commission that this is an exception which is essential to protect the integrity of the Government and to avoid employee involvement in a possible conflict of interest situation.

Chairman Hampton has reported to you that under Section 401 of the Executive Order, our office reviews for the Chairman the confidential statements of agency heads and other designated Presidential appointees. We have at times suggested that some Presidential appointees divest themselves of financial interests which could cause a conflict of interest or give the appearance of such a conflict. While we cannot force a divestiture, our advice in this area is generally accepted. If necessary, we can report any problem to the White House for action.

At times we must analyze blind trusts. Over the years, as we have gained more experience and a fuller evaluation of blind trusts, we have evolved a form which we recommend in situations where they are necessary.

We require the settlor to instruct the trustee in the trust agreement to sell any shares in companies where the statutes or regulations of the official's agency prohibit their being held by the official and not to purchase any such securities in the future. The reporting of financial interests was the major program adopted in Executive Order 11222 and it has been a mainstay of the Commission's ethics program and responsibilities.

In 1974, my predecessor became concerned that agencies were not giving the resources, energy and commitment that they should to the ethics program. Part of the reason was that the various agencies were not assigning any one official to take full responsibility for the agency's ethics program.

Too frequently the program was being handled in a casual manner and on an ad hoc basis. We came to the conclusion that a better liaison should be set up between the Commission and the ethics counselors of other agencies.

At the beginning of 1975 we arranged for the first meeting of ethics counselors of the Government. This November, we held a 2-day conference for ethics counselors. We intend to hold these seminars on an annual basis. These meetings, plus the ready availability of my office for quick response to agency requests and for the review of agency regulations, have, we believe, resulted in a heightened awareness throughout Government of the ethics program. This role has been one which we have assumed under the Executive Order. It is in part an educational function, one designed to familiarize all employees with their responsibilities under the Executive Order.

We believe that ethics counselors in the various agencies are now a distinct group who have defined responsibilities in their agencies under the ethics program.

You have asked about our participation in the recent changes of the ethics regulations of the Department of Defense and the National Aeronautics and Space Administration. With respect to the Department of Defense, the Chairman has given you the general outline. Let me simply add that in dealing with the Defense Department it seemed to me that the large number of contracting agency officials invited to a contractor's lodge raised questions which the original investigation did not answer. I suggested further re

view. The agency thereafter modified its regulations and issued letters of admonishment to certain individuals.

On December 29, 1975, the National Aeronautics and Space Administration sent us a proposed revision of its standards of conduct for NASA employees. The modification was sent to us for coordination and approval. The Commission's ethics counsel met with NASA officials concerning the proposals and made various suggestions. Thereafter on January 6, 1976, NASA sent us its proposed modifications as changed and on January 9 my office approved them for publication.

The present regulations issued by the National Aeronautics and Space Administration and published on January 19, 1976, in the Federal Register are a substantial modification of past policy by that agency. The acceptance of gifts or entertainment from friends. who deal with that agency has been eliminated and while it is recognized that in certain situations employees of NASA may participate in widely attended luncheons or dinners sponsored by professional associations, participation is permitted only when the host is an association and not a private company and only when approved by the NASA employee's supervisor as being a part of or related to his official duties. We are pleased that we were able to assist NASA in these modifications.

At the present time as a result of our own studies, our experience to date and suggestions made at the last conference of ethics counselors, we are reviewing our Governmentwide ethics regulations as well as the forms for reporting financial interests for the purposes of determining whether they need modification or revision.

In conclusion, let me note that the Commission has no authority to deal with those aspects of the ethics program arising out of 18 U.S.C. § 201 et seq. The Justice Department has exclusive jurisdiction under those statutes.

Under the Executive Order we have a coordinating role and an active role in the financial statement program. Recently, we have expanded our role so as to be a central point of information and expertise. We have expanded our staff and are involved in a major educational effort.

[Prepared statement of Mr. Goodman follows:]

STATEMENT OF CARL F. GOODMAN, GENERAL COUNSEL, UNITED STATES CIVIL SERVICE COMMISSION

My name is Carl F. Goodman and I am General Counsel of the Civil Service Commission. In this capacity I am acquainted with the Commission's role in the ethics program since that program is handled in my office and the Commission's ethics counsel is a member of my staff and under my supervision. Under Executive Order 11222 the Civil Service Commission was directed to issue regulations which would implement the Executive Order and would become the model for the regulations on ethics to be issued by other agencies of the Government. It is our duty under the Executive Order to serve a coordinating and monitoring role by reviewing each agency's regulations before they are promulgated or modified. This was one of the basic changes brought about by the Order and was designed to reach a problem of conflicting and potentially inconsistent agency regulations issued under Executive Order 10939. Still Executive Order 11222 left primary responsibility for the ethics program in the agencies themselves.