Additional material supplied for the hearing record-Continued Page 304 131 Avoiding conflicts of interest Prepared statement_. 220 227 APPENDIX Subcommittee staff summaries of information obtained from selected individual participants' files regarding possible conflicts of interest problems 317 CONFLICT OF INTEREST PROBLEMS WITHIN THE PRESIDENTIAL EXECUTIVE INTERCHANGE PROGRAM FRIDAY, DECEMBER 5, 1975 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ENERGY AND ENVIRONMENT OF THE COMMITTEE ON SMALL BUSINESS, Washington, D.C. The subcommittee met, pursuant to notice, at 10:15 a.m., in room 2359 Rayburn House Office Building, Hon. John D. Dingell (chairman of the subcommittee) presiding. OPENING STATEMENT OF CHAIRMAN DINGELL Mr. DINGELL. The subcommittee will come to order. This is a hearing of the Subcommittee on Energy and Environment of the Small Business Committee to inquire into the administration of the President's Executive Interchange program. Last year, our subcommittee, during its investigation of the energy data requirements of the Federal Government, discovered certain most curious events. We found that an oil company executive on loan to the Federal Government through the Presidential Executive Interchange program directly participated in the writing of regulations which could have substantially benefited his particular private sector of the economy, and more particularly his employer in the private sector. This executive wrote FEO regulations which would have enabled oil companies to recover twice a cost they incurred only once at great cost to the consuming public and to the Nation at large. The GAO estimated that had this subcommittee not discovered this unjustified doubled recovery of costs, the oil industry could have recovered millions of dollars in totally unintended profits. The Chair observes parenthetically that not only does it appear curious that an individual might have been permitted under these circumstances to benefit his private employer, but that he subsequently returned to that private employer. The Chair also observes a curious pattern of circumstances whereby the conflict of interest laws were grossly and inadequately enforced by the Attorney General and by the immediate supervisors of the individual referred to. The Chair also observes that the individual referred to received neither adequate supervision by his supervisors and superiors, nor did he, in any fashion, appear to share the information and judgments that he was making in an appropriate fashion with his supervisors who were much less aware of the facts and the structures of the industry than they should have been. (1) Since this time, there has been a great deal of speculation as to the merits of a program which could have overlooked so blatant a conflictof-interest. Hence, our subcommittee decided to undertake a thorough investigation of the entire program. We have found indications of mismanagement, not to say gross incompetence, potential conflict of interest situations, and possible attempts to politicize the program. And we are here to inquire into the activities, policies and management of the program and its executives. And I might again parenthetically observe as to whether this kind of an organization and this kind of a program so fraught with the possibilities of rascality should be permitted to persist. We hope during the course of these hearings to ascertain the merits of the program, if any exist, and whether or not the program merits continuation. I would like to express my appreciation to the Commission for their cooperation with my staff. Our witness list will be adhered to as much as possible. Our first witness will be Mr. Robert Keller, Deputy Comptroller General of the United States, General Accounting Office. Mr. Keller, we are honored to have you with us this morning. We appreciate your courtesy. If you would, please, for purposes of the record, identify yourself, and also those of your associates with you. We would very much appreciate your testimony. TESTIMONY OF ROBERT F. KELLER, DEPUTY COMPTROLLER GENERAL OF THE UNITED STATES, GENERAL ACCOUNTING OFFICE; ACCOMPANIED BY HYMAN KRIEGER, DIRECTOR OF THE PERSONNEL AND COMPENSATION DIVISION; ANTHONY GABRIEL, ASSISTANT TO HYMAN KRIEGER; AND MILTON SOCOLAR, GENERAL COUNSEL Mr. KELLER. Thank you, Mr. Chairman. Mr. Chairman, I am Robert F. Keller, Deputy Comptroller General of the United States. To my left is Mr. Hyman Krieger, who is Director of our Personnel and Compensation Division-he conducted some of the studies on the Interchange Program. On my right is Mr. Anthony Gabriel, assistant to Mr. Krieger, who also worked on the GAO study. On my far right is Mr. Milton Socolar, our General Counsel. Mr. DINGELL. Mr. Keller, could we ask you to speak a little louder so the audience can hear you as well? Mr. KELLER. Certainly. I have a short statement I would like to read. It will not take very much time. We appreciate the opportunity to discuss our work concerning the President's Executive Interchange program and the possibility of conflicts of interest in such a program. The issue of conflict of interest is, of course, not confined to the Interchange program. The ever-increasing activities of the Government and the interaction with the private sector have, of course, sharpened the issue. Some of the more obvious factors which have resulted in growing concern about actual and/or potential conflicts of interest are: The growth of Government, in terms of programs and activities; The regulatory, financially supportive, and other programs of the Government which affect the daily affairs of business and industry; The dependence of Government on the expertise of the private sector; The mobility of individuals in employment, facilitating a constant flow of individuals in and out of Government. As a part of our effort in this area, we have issued reports on the Federal Power Commission, the Federal Maritime Commission, the Civil Aeronautics Board, the U.S. Geological Survey, and our most recent report concerning the Department of the Interior, on apparent or potential conflict of interest situations. We are also currently doing work at five other agencies, departments, and commissions with plans for additional work on the subject. As a result of a request dated April 4, 1974, from Congressman Charles A. Vanik, we examined the background and employment of four Presidential Executive Interchange program personnel with oil or related industry backgrounds working at the then Federal Energy Office. Congressman Vanik asked that we consider any potential conflict of interest problems. In response to this request, we issued two reports, one on May 3, 1974, and one on June 24, 1974. In the first report, concerning Mr. Robert C. Bowen, we found his duties and responsibilities, including his involvement in commenting on FEO's policies and regulations as they related to the oil industry, created a potential conflict of interest situation. We forwarded a copy of the report to the Department of Justice for such investigation and action deemed warranted by that Department. Our second report concerned three more Interchange personnel. In our opinion, one of these individuals, Mr. Edmond R. Western, worked in a position where he could affect FEO policies and regulations regarding the private industry concern he represented. Accordingly, we also forwarded a copy of this report to the Department of Justice for their consideration. Subsequently, Congressman Vanik, on May 7, 1974, requested a review of the Presidential Executive Interchange program. In response to the Congressman's request, we examined the President's Commission on Personnel Interchange (PCPI) and Civil Service Commission (CSC) files and documents and interviewed 15 program participants from the Departments of Commerce, State, and the Treasury, the Federal Energy Administration, and the Environmental Protection Agency. We concentrated on private executives assigned to Government agencies because of the impact of their assignments could have on policymaking and agencies' operations. In the way of background, after a study in 1968 by the National Institute of Public Affairs, and a report in 1969 by the Presidential Advisory Panel on Personnel interchange demonstrated the feasibility and applicability of a formal program of executive interchange, President Johnson issued Executive Order 11541 establishing PCPI. PCPI was directed to develop, supervise, and review the operations of the exchange program with the CSC furnishing administrative services, staff support, and travel expenses. PCPI established four objectives for the program: To achieve better understanding and relationship between Government and the private sector, To exchange new and effective management techniques, To enhance professional growth of participating middle management executive, and To develop a group of experienced executives for future Gov ernment service. One hundred and eighty private sector employees and 88 Government employees participated in the program from the first exchange in 1971 through September 1974. PCPI staff members visit companies each year to discuss plans for private sector participation and to screen potential nominees. Applications from Federal nominees are not screened, but those found unqualified are notified that there are no positions requiring their particular skills. The specific interchange assignment is a mutual agreement between the participant and the agency or company extending the offer. Nominees may decline any assignments offered in which they have no interest and may also negotiate with agencies or companies for positions not originally offered for the program. We found no evidence in the files that political consideration existed in the selection of interchange candidates, or that persons were solicited in advance to work in specific agencies, and channeled through the program to avoid normal hiring channels. PCPI's staff, to eliminate any potential assignments which might present conflicts of interest: Requests companies to review any State conflict of interest statutes. Advises candidates of applicable statutes, makes available documents on conflicts, and secures acknowledgement that candidate has received publications. Eliminates questionable prospective assignments. Requests review of prospective positions by the organization's General Counsels. Arranges for CSC's General Counsel to brief participants during orientation. Advises participants not to accept transfers or details without PCPI's written approval. Counsels participants, after assignments are underway, on the need to avoid conflicts. We have found that agencies also are sensitive to conflict possibilities and have taken additional steps to prevent them. Title 18 of the United States Code, section 209 (b) allows business employees to accept employment in the Government on a leave-ofabsence without jeopardizing their fringe benefits. Most sponsoring companies allow their executives to retain life and health insurance and stock already acquired through purchase and option plans. For most private sector interchange executives the largest financial tie is probably continued reemployment interest with their sponsoring firms. This depends, I understand, on the firm's policies, and several executives stated that there were no legal obligations to rehire them. |