    [House Hearing, 107 Congress]
    [From the U.S. Government Publishing Office]

                    MISLEADING MAILINGS TARGETED TO SENIORS

    =======================================================================

                                    HEARING

                                   before the

                        SUBCOMMITTEE ON SOCIAL SECURITY

                                     of the

                          COMMITTEE ON WAYS AND MEANS
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED SEVENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JULY 26, 2001

                                   __________

                               Serial No. 107-44

                                   __________

             Printed for the use of the Committee on Ways and Means

                                    _______

                      U.S. GOVERNMENT PRINTING OFFICE
    75-753                     WASHINGTON : 2001

    ____________________________________________________________________________
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    Internet: bookstore.gpr.gov  Phone: toll free (866) 512-1800; (202) 512�091800
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                          COMMITTEE ON WAYS AND MEANS

                       BILL THOMAS, California, Chairman

    PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
    E. CLAY SHAW, Jr., Florida           FORTNEY PETE STARK, California
    NANCY L. JOHNSON, Connecticut        ROBERT T. MATSUI, California
    AMO HOUGHTON, New York               WILLIAM J. COYNE, Pennsylvania
    WALLY HERGER, California             SANDER M. LEVIN, Michigan
    JIM McCRERY, Louisiana               BENJAMIN L. CARDIN, Maryland
    DAVE CAMP, Michigan                  JIM McDERMOTT, Washington
    JIM RAMSTAD, Minnesota               GERALD D. KLECZKA, Wisconsin
    JIM NUSSLE, Iowa                     JOHN LEWIS, Georgia
    SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
    JENNIFER DUNN, Washington            MICHAEL R. McNULTY, New York
    MAC COLLINS, Georgia                 WILLIAM J. JEFFERSON, Louisiana
    ROB PORTMAN, Ohio                    JOHN S. TANNER, Tennessee
    PHIL ENGLISH, Pennsylvania           XAVIER BECERRA, California
    WES WATKINS, Oklahoma                KAREN L. THURMAN, Florida
    J.D. HAYWORTH, Arizona               LLOYD DOGGETT, Texas
    JERRY WELLER, Illinois               EARL POMEROY, North Dakota
    KENNY C. HULSHOF, Missouri
    SCOTT McINNIS, Colorado
    RON LEWIS, Kentucky
    MARK FOLEY, Florida
    KEVIN BRADY, Texas
    PAUL RYAN, Wisconsin

                         Allison Giles, Chief of Staff

                      Janice Mays, Minority Chief Counsel

                                     ______

                        Subcommittee on Social Security

                      E. CLAY SHAW, Jr., Florida, Chairman

    SAM JOHNSON, Texas                   ROBERT T. MATSUI, California
    MAC COLLINS, Georgia                 LLOYD DOGGETT, Texas
    J.D. HAYWORTH, Arizona               BENJAMIN L. CARDIN, Maryland
    KENNY C. HULSHOF, Missouri           EARL POMEROY, North Dakota
    RON LEWIS, Kentucky                  XAVIER BECERRA, California
    KEVIN BRADY, Texas
    PAUL RYAN, Wisconsin

    Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
    hearing records of the Committee on Ways and Means are also published
    in electronic form. The printed hearing record remains the official
    version. Because electronic submissions are used to prepare both
    printed and electronic versions of the hearing record, the process of
    converting between various electronic formats may introduce
    unintentional errors or omissions. Such occurrences are inherent in the
    current publication process and should diminish as the process is
    further refined.

                                C O N T E N T S

                                   __________
                                                                       Page
    Advisory of July 19, 2001, announcing the hearing................     2

                                   WITNESSES

    Social Security Administration, Hon. James G. Huse, Jr.,
      Inspector General, Office of Inspector General.................     8

                                     ______

    AARP, Betty Severyn..............................................   140
    Arkansas Office of the Attorney General, Darrin L. Williams......   144
    Daniels, Lorna, Arlington, VA....................................   137
    TREA Senior Citizens League:
        George A. Smith..............................................    59
        Christy Turner, Public Interest Data Incorporated............    78
        Michael J. Zabko, American Red Cross.........................    78
    Appendix A, supplemental testimony taken by Subcommittee staff
      from Maurice K. (Chip) Heartfield, III, Squire & Heartfield
      Direct, Inc., Oakton, VA, and Richard J. Ruddy, Jr., Ruddy Law
      Firm, Fairfax, VA..............................................   157

                           SUBMISSIONS FOR THE RECORD

    The Retired Enlisted Association, Aurora, CO, Vincent B. Niski,
      statement......................................................   195
    Thoms, William H., Jr., Gloucester, MA, letter...................   197

                    MISLEADING MAILINGS TARGETED TO SENIORS

                                  ----------

                            THURSDAY, JULY 26, 2001

                      House of Representatives,
                           Committee on Ways and Means,
                               Subcommittee on Social Security,
                                                        Washington, DC.
        The Subcommittee met, pursuant to notice, at 10:09 a.m., in
    room 1100 Longworth House Office Building, Hon. E. Clay Shaw,
    Jr., (Chairman of the Subcommittee) presiding.
        [The advisory announcing the hearing follows:]

    ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                        SUBCOMMITTEE ON SOCIAL SECURITY

                                                    Contact: (202) 225-9263
    FOR IMMEDIATE RELEASE
    July 19, 2001
    No. SS-7

                           Shaw Announces Hearing on

                    Misleading Mailings Targeted to Seniors

        Congressman E. Clay Shaw, Jr., (R-FL), Chairman, Subcommittee on
    Social Security of the Committee on Ways and Means, today announced
    that the Subcommittee will hold a hearing on misleading mailings
    targeted to seniors. The hearing will take place on Thursday, July 26,
    2001, in the main Committee hearing room, 1100 Longworth House Office
    Building, beginning at 10:00 a.m.

        In view of the limited time available to hear witnesses, oral
    testimony at this hearing will be from invited witnesses only. However,
    any individual or organization not scheduled for an oral appearance may
    submit a written statement for consideration by the Committee and for
    inclusion in the printed record of the hearing.

    BACKGROUND:

        Social Security affects the lives of almost every American. Nine
    out of ten seniors receive Social Security benefits. Seniors pay close
    attention to any information they receive concerning Social Security,
    as notices often refer to changes in benefits that make up a least half
    of the income for a majority of seniors.
        Despite the fact that the law prohibits certain misleading
    communications, the Social Security Administration's (SSA's) Office of
    Inspector General (IG) continues to receive complaints and conduct
    investigations of misleading SSA-related solicitations. Recently, SSA's
    IG settled a case with the Lead Agency, Inc., who sent approximately
    2.6 million death benefit insurance ``lead card'' mailings to seniors
    that appeared to be from or related to SSA. Information from these
    cards was then used to sell insurance policies.
        More recently, the IG completed investigations regarding two types
    of misleading mailings targeted primarily to seniors. One mailing made
    claims about a fictional ``Slave Reparations Act'' and the other raised
    the prospect of $5,000 payments to ``notch babies.'' Both mailings
    indicated that the payments would be coming from SSA, but that to
    receive the funds, the individual must supply their personal
    information, including their Social Security number to a National
    Victim's Register. All replies were directed to the TREA Senior
    Citizens League (TSCL), an independent affiliate of The Retired
    Enlisted Association (TREA). TSCL is a tax-exempt organization that
    advocates legislative reforms for seniors. According to the IG, these
    flyers generated more than 29,000 individual responses, many of which
    included copies of personal documents such as Social Security cards,
    drivers licenses, birth certificates, and detailed family genealogies.
        TSCL denied any involvement with the flyer and the IG was unable to
    identify its origin. However, the IG investigation revealed that TSCL
    directed its data processing firm to create a database containing the
    respondent's personal information. This information was then used to
    send a letter to respondents disavowing any responsibility for the
    flyers, which included TSCL's standard fundraising brochure.
        In announcing the hearing, Chairman Shaw stated: ``Misleading
    mailing scams targeted at seniors are unconscionable crimes. Many of
    our seniors are particularly vulnerable, due to their limited income or
    isolated living environment. Deceptive mailings that appear to have the
    approval or endorsement of SSA are illegal and will not be tolerated.
    The more seniors know about these scams, the more they and their
    families can protect themselves from becoming victims of these
    heartless perpetrators.''

    FOCUS OF THE HEARING:

        The Subcommittee will hear testimony related to several misleading
    mailings targeting seniors. Testimony will include the experiences of
    victims and related investigation findings of the SSA/IG and other law
    enforcement officials.

    DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

        Any person or organization wishing to submit a written statement
    for the printed record of the hearing should submit six (6) single-
    spaced copies of their statement, along with an IBM compatible 3.5-inch
    diskette in WordPerfect or MS Word format, with their name, address,
    and hearing date noted on a label, by the close of busi- ness,
    Thursday, August 9, 2001, to Allison Giles, Chief of Staff, Committee
    on Ways and Means, U.S. House of Representatives, 1102 Longworth House
    Office Building, Washington, D.C. 20515. If those filing written
    statements wish to have their statements distributed to the press and
    interested public at the hearing, they may deliver 200 additional
    copies for this purpose to the Subcommittee on Social Security office,
    room B-316 Rayburn House Office Building, by close of business the day
    before the hearing.

    FORMATTING REQUIREMENTS:

        Each statement presented for printing to the Committee by a
    witness, any written statement or exhibit submitted for the printed
    record or any written comments in response to a request for written
    comments must conform to the guidelines listed below. Any statement or
    exhibit not in compliance with these guidelines will not be printed,
    but will be maintained in the Committee files for review and use by the
    Committee.

        1. All statements and any accompanying exhibits for printing must
    be submitted on an IBM compatible 3.5-inch diskette in WordPerfect or
    MS Word format, typed in single space and may not exceed a total of 10
    pages including attachments. Witnesses are advised that the Committee
    will rely on electronic submissions for printing the official hearing
    record.

        2. Copies of whole documents submitted as exhibit material will not
    be accepted for printing. Instead, exhibit material should be
    referenced and quoted or paraphrased. All exhibit material not meeting
    these specifications will be maintained in the Committee files for
    review and use by the Committee.

        3. A witness appearing at a public hearing, or submitting a
    statement for the record of a public hearing, or submitting written
    comments in response to a published request for comments by the
    Committee, must include on his statement or submission a list of all
    clients, persons, or organizations on whose behalf the witness appears.

        4. A supplemental sheet must accompany each statement listing the
    name, company, address, telephone and fax numbers where the witness or
    the designated representative may be reached. This supplemental sheet
    will not be included in the printed record.

        The above restrictions and limitations apply only to material being
    submitted for printing. Statements and exhibits or supplementary
    material submitted solely for distribution to the Members, the press,
    and the public during the course of a public hearing may be submitted
    in other forms.

        Note: All Committee advisories and news releases are available on
    the World Wide Web at ``http://waysandmeans.house.gov''.

        The Committee seeks to make its facilities accessible to persons
    with disabilities. If you are in need of special accommodations, please
    call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
    business days notice is requested). Questions with regard to special
    accommodation needs in general (including availability of Committee
    materials in alternative formats) may be directed to the Committee as
    noted above.

        Chairman Shaw. Good morning. If members and guests would
    take their seats, I would like to welcome all of you here
    today.
        We have a very discouraging issue, however, before us.
    Senior citizens are being unscrupulously targeted by misleading
    mailings and flyers, and these are from groups that seek to
    capture Social Security numbers and other personal information.
        Why? So they can sell or rent the data for profit or, in
    some cases, use the information to solicit future sales or
    donations.
        How do they get seniors to turn over sensitive personal
    information? By issuing promises they can't keep or using fear
    and threats. It is downright deceptive, and this Congress must
    do everything in our power to make it stop.
        Nine out of 10 seniors receive Social Security benefits. It
    is no wonder why seniors pay more close attention to any
    information they receive which has the appearance of an
    official government document or otherwise looks like it might
    have anything to do with their Social Security checks.
        I represent a large number of senior citizens in Florida,
    for whom preserving Social Security and Medicare benefits are
    of paramount concern.
        The law clearly prohibits certain misleading
    communications, but the Social Security Administration's Office
    of Inspector General (OIG) continues to receive complaints from
    seniors. Last year alone, the inspector general (IG) opened up
    close to 40 new investigations of misleading Social Security-
    related solicitations.
        My office receives countless numbers of letters generated
    by senior advocacy groups every year. Many of these campaigns
    serve the public good by informing and organizing individuals
    of like interests. Others merely fan fear, which then become
    all the more reason for seniors to support groups that claim to
    be their advocate here in Washington for change.
        Today we will hear from the Social Security
    Administration's Inspector General, who will tell us how and
    why groups generate misleading mailings and the investigative
    strategies his office has used to fight these scams.
        In addition, we will hear perspectives from the Arkansas
    State's Attorney General's office, whose staff works on the
    frontline, combating all types of consumer fraud.
        Lorna Daniels, a targeted victim of these misleading
    flyers, is here to share her story and experience with us.
    Betty Severyn will tell us about American Association of
    Retired Persons' (AARP) many efforts to educate seniors on how
    to avoid falling prey to these unscrupulous organizations.
        Finally, we will hear testimony from The Retired Enlisted
    Association (TREA) Senior Citizens League or TSCL and companies
    they work with on mailings. The addresses of TREA Senior
    Citizens League appears on the so-called slave reparation and
    notch flyers as the reply address.
        While TREA Senior Citizens League claims no role in the
    distribution of these flyers, I find it problematic that they
    retrieved the unsolicited information from their mailbox and
    dumped it in their solicitation database. You can be sure we
    will explore these issues fully when they testify.
        It is unconscionable for rip-off artists to prey on
    vulnerable Americans in their twilight years, many of whom live
    from check to check and cannot afford to lose any of their
    hard-earned benefits and savings. Perhaps I am old-fashioned,
    but I was taught to respect my elders, not to take advantage of
    them.
        It is my goal to shine a bright light on these deceptive
    mailings so that senior citizens will be on guard and contact
    the Social Security Administration or their Member of Congress
    at the first sight of a scam.
        The best protection against misleading mail schemes is
    education. We may not be able to completely eliminate these
    fraudulent groups from targeting senior citizens, but we can
    expose their schemes and educate seniors on how to protect
    themselves.
        Mr. Matsui.
        [The opening statement of Chairman Shaw follows:]

     Opening Statement of the Hon. E. Clay Shaw, Jr., a Representative in
       Congress from the State of Florida, and Chairman, Subcommittee on
                                Social Security

        Welcome. Today, we have a very discouraging issue before us. Senior
    citizens are being unscrupulously targeted by misleading mailings and
    flyers--from groups that seek to capture Social Security numbers and
    other personal information.
        Why? So they can sell or rent the data for profit--or in some
    cases, use that information to solicit future sales or donations. How
    do they get seniors to turn over sensitive personal information? By
    issuing promises they can't keep, or using fear and threats. It is
    downright deceptive, and it must be stopped.
        Nine out of ten seniors receive Social Security benefits. It's no
    wonder why seniors pay such close attention to any information they
    receive which has the appearance of an official government document or
    otherwise looks like it might have anything to do with their Social
    Security checks. I represent a large number of senior citizens in
    Florida, for whom preserving Social Security and Medicare benefits are
    of paramount concern.
        The law clearly prohibits certain misleading communications, but
    the Social Security Administration's Office of Inspector General
    continues to receive complaints from seniors. Last year alone, the
    Inspector General opened up close to 40 new investigations of
    misleading Social Security-related solicitations.
        My office receives countless numbers of letters generated by senior
    advocacy groups each year. Many of these campaigns serve the public
    good by informing and organizing individuals of like interests. Others
    merely fan fears which then become all the more reason for seniors to
    support groups that claim to be their advocate for change.
        Today we will hear from the Social Security Administration's
    Inspector General, who will tell us how and why groups generate
    misleading mailings, and the investigative strategies his office has
    used to fight these scams. In addition, we will hear perspectives from
    the Arkansas State's Attorney General's office whose staff works on the
    front lines combating all types of consumer fraud.
        Lorna Daniels, a targeted victim of these misleading flyers, is
    here to share her story and experience. Betty Severyn will tell us
    about AARP's many efforts to educate seniors on how to avoid falling
    prey.
        Finally, we will hear testimony from TREA Senior Citizens League
    and companies they work with on mailings. The address of the TREA
    Senior Citizens League appeared on the so-called slave reparation and
    notch flyers as the reply address. While TREA Senior Citizens League
    claims no role in the distribution of these flyers, I find it
    problematic that they retrieved the ``unsolicited'' information from
    their mailbox and dumped it in their solicitation database. You can be
    sure we will explore these issues fully when they testify.
        It is unconscionable for rip-off artists to prey on vulnerable
    Americans in their twilight years, many of whom live from check to
    check and cannot afford to lose any of their hard-earned benefits and
    savings. Perhaps I'm old-fashioned, but I was taught to respect my
    elders, not to take advantage of them.
        It is my goal to shine a bright light on these deceptive mailings
    so that senior citizens will be on guard, and contact the Social
    Security Administration or their Member of Congress at the first sight
    of a scam.
        The best protection against misleading mail schemes is education.
    We may not be able to completely eliminate these fraudulent groups from
    targeting seniors, but we can expose their schemes and educate seniors
    on how to protect themselves.

        Mr. Matsui. Thank you very much, Mr. Chairman.
        I want to, first of all, thank you very much, you and your
    staff, in coordinating with myself and our staff. I think you
    are doing a tremendous service, not only to the senior citizen
    population of America, but certainly to the American public.
        I want to also commend my colleagues on both sides of the
    aisle of this Subcommittee, because I know each and every one
    of them feels as strongly as you and I do about this particular
    issue.
        I intend to pursue this issue with the Chairman as far as
    it will go. I think criminal fraud was committed on senior
    citizens in this particular situation.
        And I know three of those individuals that will be asked to
    testify this morning are in the audience. There is a fourth
    one, who claims to be ill, with a doctor's excuse. And as a
    result of that, he has failed to respond to the subpoena,
    although obviously a doctor's excuse would give that person
    that opportunity to do so.
        But that individual will be eventually deposed or brought
    before this Subcommittee. I will guarantee you that. And so, he
    better get well quickly.
        It is my belief that we need to educate the public. And the
    Social Security Administration has that responsibility.
        But also, we need to make sure that individuals who commit
    these frauds and perpetrate these activities are given the full
    force of the law, so that they will be used as an example so
    that this will never happen again.
        And if they think they are going to get out of this, they
    are greatly mistaken.
        The inspector general doesn't have the tools that law
    enforcement officers have, but hopefully this will get,
    obviously with the Arkansas attorney general, but also with the
    U.S. Justice Department as well.
        And I hope that nobody thinks that they are going to go to
    sleep at night feeling protected if they commit these kinds of
    activities.
        I have had constituents as well that have been sent these
    flyers, some of whom undoubtedly sent money to this sham group.
    And as a result of that, I feel very strongly about being able
    to deal with this in a comprehensive way. And I said, this will
    not end until we get to the bottom of how this happened and the
    individuals who are actually responsible for it.
        Mr. Chairman, I want to thank you very much for calling
    this Subcommittee hearing, and for your commitment to this
    issue.
        [The opening statement of Mr. Matsui follows:]

      Opening Statement of the Hon. Robert T. Matsui, a Representative in
                     Congress from the State of California

        Thank you, Chairman Shaw, for calling today's hearing. I am hopeful
    that today's hearing--taken together with the investigations that the
    Office of the Inspector General (OIG) has conducted in recent months--
    will help to alert our nation's senior citizens to the unscrupulous
    activities that some will pursue for the sake of their own gain or
    advancement.
        I think it is simply unconscionable that there are some
    organizations and individuals who are willing to deceive senior
    citizens and prey upon their anxieties. Solicitations such as the ones
    we will hear about today seek to profit off of seniors in their
    seventies and eighties who depend on Social Security to provide a
    significant part of their income. It is disgraceful that any
    organization would try to take advantage of our senior citizens' trust
    in the good name of Social Security.
        In addition, while the OIG's most recent investigation into
    solicitations about a fictional ``Slave Reparations Act'' and so-called
    ``notch'' legislation proved inconclusive, I look forward to hearing
    from Inspector General Huse about some of the information that came to
    light as a result of his office's inquiry.
        Lastly, I am hopeful that today's hearing--and the increased
    attention that it will bring to the issue of misleading solicitations--
    will deter other organizations and individuals from pursuing these
    scams. Scams like the ``Slave Reparations Act'' not only deceive senior
    citizens, but erode their faith in their government and its
    responsiveness to their concerns.

        Chairman Shaw. All members will be given an opportunity to
    place an opening statement in the record, including Jerry
    Kleczka, who is joining us on this panel this morning.
        [The opening statements of Mr. Johnson and Mr. Kleczka
    follow:]

    Opening Statement of the Hon. Sam Johnson, a Representative in Congress
                            from the State of Texas

        Thank you, Chairman Shaw for calling this hearing on misleading
    mailings regarding the Social Security ``notch'' issue. The people
    responsible for sending these misleading mailings are truly
    reprehensible and you are doing a great service for seniors by holding
    a hearing to highlight the Inspector General's findings.
        It's obvious fraudulent groups like this prey on unsuspecting
    seniors. Luckily my constituents are smarter than this. While the
    misleading mailings highlighted by the Inspector General were supposed
    to have been sent last year, just last week I received a letter from a
    constituent. ``Helen'', had recently received a mailing. That mailing
    asked for money to be placed on a ``National Notch Victim Register.''
    In her letter to me, she asked me to advise her whether ``this is
    another Scam-Rip off or on the level.'' Well, Tuesday afternoon I spoke
    with Helen and told her that she does not need to send anyone money in
    order to benefit from new laws. I also told her that legislation on the
    ``notch'' is never going to pass.
        I appreciate AARP coming to testify today on this important issue
    and I also appreciate their help warning seniors about misleading
    mailings.
        Besides the ``notch'' scam, another misleading mailing was scamming
    money from people for a ``slave reparations'' registry. That mailing
    also had the Retired Enlisted Association Senior Citizen's League as
    the recipient of return mail.
        I will be very interested to learn today how the scam mailings,
    with a return address of the Retired Enlisted Association Senior
    Citizen's League, vary from the mailings that this group claims as
    their own. I am also looking forward to learning why on earth the
    Senior Citizen's League would ever glean information from fraudulent
    mailings, and why they would go so far as to use this improperly
    obtained information for fundraising of their own.

     Opening Statement of the Hon. Gerald D. Kleczka, a Representative in
                      Congress From the State of Wisconsin

        Chairman Shaw, Ranking Member Matsui, and Members of the
    Subcommittee, thank you for allowing me to join you in today's hearing.
        Our senior citizens are continually being besieged with misleading
    mailings from questionable advocacy groups telling them that the Social
    Security Administration is cheating them. These letters claim that
    retirees born between 1917 and 1926 are ``Notch Victims'' and are
    entitled to a $5,000 lump-sum payment. This is simply an attempt to
    extort money from the most vulnerable among us--those aged 75 to 84--by
    promising increased Social Security payments.
        Congress corrected the flaw in the Social Security formula in 1977
    and the benefit amount being received today by these retirees is
    correct. However, upon receipt of these mailings, concerned elderly
    immediately call us inquiring if the information is true and if the
    groups sending them are legitimate. I advise my constituents to throw
    out the material for it is nothing more than a scam!
        One such group that continually solicits the elderly is The Retired
    Enlisted Association's (TREA) subsidiary--The Senior Citizens League
    (TSCL). Chartered by Congress in 1992 to serve the interests of our
    retired enlisted service members, this group expanded their reach to
    non-military retirees in 1994.
        Since then, their repeated solicitations for contributions have
    been combined with replicas of $5,000 US Government-Social Security
    Trust Fund checks, plastic Notch Registry cards and requests to seniors
    to include TSCL in their will. Last year these types of deceptive
    tactics netted The Senior Citizens League over $12 million!
        This is all done by telling our elderly that Notch legislation is
    pending in Congress which will give them more money. Although bills
    have been introduced to accomplish this, we all know that the Social
    Security Trust Fund is already strained, and legislation costing $45 to
    $60 billion to raise existing retiree benefits will never pass.
        They go on to state that they are maintaining a notch registry and
    will inform contributors if benefits are increased. Further, the
    mailing requests that seniors check a box if they want their $5,000
    award in four annuals payments or a monthly increase in SS benefits.
    Who died and left this group in charge of the Social Security program!
    As we all know, the Social Security Administration is charged with and
    would notify seniors of any change in benefits.
        There is no need for this organization to maintain any registry
    list and clearly they have no say over any future benefit levels. This
    deception is being perpetrated to accomplish their real goal and that
    is ``I'm enclosing a contribution to join with you and to help cover
    the cost of maintaining the register and to pay for our massive
    national campaign . . .''
        The tactics employed by this group have continually raised serious
    concerns about their legitimacy. In a letter I wrote to The Senior
    Citizens League last May, I asked them to ``. . . stop soliciting my
    constituents for money and asking them to include your organization in
    their wills.'' The time has come for Congress to demand they cease and
    desist, or serious consideration should be given to revocation of the
    TREA charter.
        Again, Chairman Shaw--thank you for allowing me to participate
    today.

        Chairman Shaw. Mr. Huse, welcome to the hearing. And you
    may proceed as you see fit. We have your full testimony, which
    will be made a part of the record, as will the testimony of all
    the witnesses here this morning.
        I would like to point out to the Committee that in about a
    half an hour, we are going to be called for two votes on the
    floor. So at that time, we would recess for as long as
    necessary in order to complete our voting obligations, after
    which we would return to the hearing. Mr. Huse?

     STATEMENT OF THE HON. JAMES G. HUSE, JR., INSPECTOR GENERAL,
      OFFICE OF INSPECTOR GENERAL, SOCIAL SECURITY ADMINISTRATION

        Mr. Huse. Good morning, Mr. Chairman and members of the
    Subcommittee, and thank you for the opportunity to speak today
    about direct mail operators that profit by using references to
    Social Security to trick senior citizens into parting with
    sensitive personal information.
        For over 60 years, the words ``Social Security'' have held
    special meaning for elderly Americans, so when mailings arrive
    with the official Social Security seal or references to Social
    Security, many seniors respond reflexively.
        Today I will describe some of the investigations we have
    conducted this past year into organizations that misuse the
    Social Security Administration's (SSA) name and exploit the
    special bond between the Social Security Administration and its
    beneficiaries.
        The first of these involved a company called Lead Agency,
    which sent solicitations to seniors that appeared to be from or
    endorsed by the SSA. These mailings offered to provide updated
    information on Social Security benefits. And in response,
    thousands of seniors forwarded their personal information to
    the company.
        Lead Agency would then market the data to insurance
    companies and others, generating millions of dollars in
    revenue.
        Pursuant to the settlement reached in this State, the Lead
    Agency agreed to a permanent injunction barring them from
    violating section 1140 of the Social Security Act and further
    agreed to dissolve its corporate charter and pay $595,000 in
    civil monetary penalties to the Social Security trust fund.
        In a contemporaneous investigation, again working in east
    Texas with the U.S. Attorneys Office, we uncovered a separate
    but remarkably similar scam, a corporate doing business as
    United States Seniors Services, Inc., USSS, Acc-U-Lead, and
    Mass Mail Media had been sending similarly misleading
    solicitations to seniors in order to obtain personal
    information for resale on the open market.
        The defendants in this matter ultimately agreed to pay a
    $200,000 civil monetary penalty to the Social Security trust
    fund, and agreed to the entry of a permanent injunction.
        The last case I will discuss resulted in the issuance of a
    nationwide alert to seniors, urging them to exercise great
    caution when responding to solicitations promising additional
    Social Security payments.
        This alert was based on the receipt of hoax flyers by more
    29,000 seniors. They were duped into surrendering personal
    information with the promise of a $5,000 lump sum payment or a
    temporary increase in monthly benefits.
        Along with the Postal Inspection Service, we initiated an
    investigation after our fraud hotline received nearly 100 calls
    about the flyers. A review of the flyers revealed that a post
    office box maintained by TSCL, a tax-exempt organization that
    states it advocates for legislative reforms on behalf of senior
    citizens, was listed on all of the flyers.
        We contacted TSCL and learned that it had received over
    18,000 individual responses to the flyers and had directed its
    data processing contractor to enter all of the victims'
    personal information into a database and to send each senior a
    letter denying any responsibility for the hoax. The letter
    indicated a solicitation for funds to support TSCL's campaigns.
        We requested that TSCL discontinue entering the seniors'
    information into its database, but TSCL refused to comply with
    this request, disavowing any involvement with the hoax flyers
    and maintaining that they must have been disseminated by a
    well-intentioned albeit confused supporter.
        In an attempt to determine the person, individual or entity
    responsible for the creation and dissemination of the hoax
    flyers, we issued subpoenas to TSCL and its database firm to
    obtain all of the original responses.
        Unfortunately, the flyers appeared in churches, senior
    centers, nursing homes, magazines, newspapers, and local
    government offices nationwide. Because of the informal
    distribution channels employed, which included hand-posting on
    cars and bulletin boards, we were unable to identify the source
    of the flyers.
        Nevertheless, the investigation served to highlight the
    vulnerability of senior citizens to exploitation by those who
    use inaccurate, misleading or false information to solicit
    information or money from them.
        Our office has made deceptive Social Security look-alike
    mailings a top investigative priority. While we have made
    significant progress, the three cases I previously described
    illustrate that the problem of deceptive mailing aimed at
    senior citizens is far from eradicated.
        And we thank the Committee for its interest in these
    matters.
        [The prepared statement of Mr. Huse follows:]

    Statement of the Hon. James G. Huse, Jr., Inspector General, Office of
               Inspector General, Social Security Administration

        Good morning, Chairman Shaw and members of the Subcommittee. Let me
    first thank you for the opportunity to speak with you today on a matter
    of great importance to the people of the United States--how misleading
    mailings victimize our nation's senior citizens, specifically, how
    direct mail operators use veiled references to ``Social Security'' to
    trick senior citizens into parting with sensitive, personal
    information. By selling such deceptively gathered information, these
    direct mailers can generate millions of dollars in revenue.
        For over sixty years, the words ``Social Security'' have held
    special meaning for elderly Americans. Social Security checks have
    lifted millions out of poverty, and have provided an important source
    of additional income for many others. So when mailings arrive with the
    official Social Security seal, or references to ``Social Security,''
    many seniors respond reflexively. After all, Social Security is their
    lifeline. They rely on their Social Security check to put food on their
    table, to put a roof over their head, or simply to pay their bills.
    Surely, if a communication is arriving from Social Security, it must be
    important.
        Today, my testimony will focus on how unscrupulous individuals,
    companies, and organizations have exploited this special bond between
    the Social Security Administration (SSA) and its beneficiaries. These
    parasitic groups recognize the powerful nature of the words ``Social
    Security,'' and they seek to include them in their direct mail
    promotions at all costs. They have one simple goal in mind--lining
    their own pockets at the expense of individuals on limited or fixed
    incomes. I will also detail the investigative and legal strategies our
    office has employed to fight such scams. Finally, I would like to
    recognize the work of this Subcommittee in providing a variety of novel
    remedies to fight such scams. I can attest to the fact that these
    legislative remedies work, having used virtually all of these tools
    during my tenure as Inspector General.

                        The Predators and Their Mailings

        There are several common themes that pervade the ranks of
    misleading mailers. First, they recognize the power of the Social
    Security moniker. Their mailers boldly reference Social Security on the
    outside of the envelope, promising such things as a ``2001 Social
    Security Update,'' a ``Social Security Supplement Policy,'' or
    additional Social Security benefits. These ``teasers'' lure seniors
    into opening the mailing, often under the mistaken assumption that the
    mailing is somehow approved by, or affiliated with, the Social Security
    Administration.
        Typically, the mailers seek to disguise their true corporate
    origin. They will frequently use fictitious names such as ``Senior
    Services'' or acronyms such as ``USSS'' to further the ruse.
    Additionally, many mailings use Washington, D.C. street addresses or
    post office boxes in an attempt to confer ``official status'' on their
    deceptive mailings.
        By now, the confused senior simply succumbs and supplies the
    personal information allegedly requested by the Social Security
    Administration or some SSA-approved entity. This is a grave mistake.
    This information now falls into the unrestricted hands of these private
    operators. It is typically resold to insurance firms, mailing-list
    houses, and other companies pitching products to seniors. In the
    process, these predatory individuals, companies, and/or organizations
    can derive millions of dollars in revenue. Meanwhile, the senior has
    exposed himself or herself to potential identity theft, by parting with
    personal information such as date of birth, Social Security numbers
    (SSN), home telephone number, and home address. Our experience
    indicates that such organizations frequently treat such information as
    a commodity, rather than protecting its personal nature. Indeed, the
    irony is that if such information were provided directly to the Social
    Security Administration as intended, it would be protected under the
    Privacy Act. In reality, the senior has been tricked into providing
    their personal information to an organization dedicated to its
    unfettered sale and proliferation.
        Typically, the victims of such scams are elderly individuals who
    enjoy a trusting relationship with the Social Security Administration.
    Such advertisements cleverly play to their desire for more Social
    Security-related information or additional Social Security benefits.
    Indeed, many victims never even realize that they have been tricked
    into parting with their personal information--they just assume that the
    Social Security Administration never responded to their request for
    information.

                       Investigative and Legal Strategies

        Since my appointment as Inspector General in November 1999, I have
    made fighting these scams a top investigative priority and, as a
    result, we have conducted major senior scam investigations. Two, in
    this past year, have resulted in the imposition of large civil
    penalties and permanent injunctions against the companies involved, and
    a third caused us to issue a nationwide alert about hoax flyers. In
    addition, our office receives many inquiries and reviews allegations
    relating to political fundraising solicitations that reference Social
    Security. I would like to briefly discuss each of these topics in turn.
        One of the most egregious scams perpetrated upon the elderly
    involves ``lead card'' mailings. Typically, this scam involves sending
    misleading solicitations to senior citizens nationwide. These
    solicitations trick seniors into thinking that such mailings originate
    from the Agency, or are approved or authorized by the Agency, in direct
    violation of the Social Security Act. In reality, the solicitations are
    nothing more than a come-on for the sale of private burial and other
    funeral related insurance.

    Case One: The Lead Agency, Inc.

        After receiving complaints about several companies engaged in this
    type of activity, we took immediate action in two landmark cases
    pursued under Section 1140 of the Social Security Act, the provision
    prohibiting the misleading use of Social Security words, symbols or
    emblems. On February 16, 2001, the United States Attorney's Office,
    Eastern District of Texas, settled a civil lawsuit filed in Federal
    court on behalf of our office against The Lead Agency, Inc. (The Lead
    Agency), a Texas Corporation. The Lead Agency was a private company
    that formerly sent direct mail solicitations to senior citizens that
    appeared to be from, or endorsed by, SSA. The direct mail solicitations
    offered to provide updated information on Social Security benefits, and
    used explicit terms like ``2000 Benefits Update'' to lure the seniors
    into completing the enclosed reply card. In response to these
    solicitations, senior citizens forwarded highly sensitive personal
    information to The Lead Agency. Unbeknownst to these seniors, The Lead
    Agency would then market this sensitive data to insurance companies and
    agents who would, in turn, solicit the seniors to purchase burial and
    other private insurance policies. The Lead Agency generated millions of
    dollars in revenue from the sale of this sensitive personal
    information.
        On November 13, 2000, U.S. District Judge Paul Brown issued a
    temporary restraining order (TRO), which authorized a modified
    workplace search of The Lead Agency, froze substantial corporate funds,
    and ordered the company to cease mailing the misleading solicitations.
    Pursuant to the final settlement reached in this case, The Lead Agency
    agreed to a permanent injunction barring them from violating Section
    1140 of the Social Security Act. The company also agreed to pay
    $595,000 in civil monetary penalties to the Social Security Trust Fund.
    Additionally, the company agreed to formally dissolve its corporate
    charter.

    Case Two: United States Senior Services, Inc., et al.

        On April 12, 2001, Judge Brown entered a permanent injunction
    against a series of Texas businesses involved in a separate, but
    remarkably similar, scam. We learned that a corporate entity doing
    business as United States Senior Services, Inc. (U.S.S.S.), Acc-U-Lead,
    and Mass Mail Media had been sending misleading solicitations to senior
    citizens employing terms such as ``Social Security Update'' to create
    the false impression that the mailings were from, or endorsed by, SSA.
    Again, senior citizens were duped into sending sensitive personal
    information to a private company, which then sold the information to
    insurance companies and agents. After several unsuccessful attempts to
    bring the company into voluntary compliance, we, in conjunction with
    the U.S. Attorney's Office, Eastern District of Texas, secured a TRO
    that authorized an administrative search of the business premises,
    detention of the corporate mail, and the freezing of corporate assets.
    The TRO also prevented the company from sending further misleading
    solicitations. The defendants ultimately agreed to pay a $200,000 civil
    monetary penalty to the Social Security Trust Fund, and agreed to the
    entry of a permanent injunction, which prohibits future misleading
    mailings to senior citizens as they relate to Social Security.

    Case Three: OIG Nationwide Alert--Hoax Flyers

        As you are aware, we recently issued a nationwide alert to senior
    citizens urging them to exercise great caution when responding to
    solicitations promising additional Social Security payments. This alert
    followed a lengthy investigation, which confirmed that more than 29,000
    elderly persons had been duped by hoax flyers promising $5,000 in
    additional Social Security benefit payments, an increase in monthly
    benefit amounts, and/or slave reparations from the Government.
    Recipients of the flyers provided their name, address, SSN, telephone
    number, and date of birth to a post office box listed on the flyers in
    hopes of receiving the funds. Many seniors were so thoroughly confused
    by the hoax flyers that they sent copies of identity documents,
    including Social Security cards, driver's licenses, birth certificates,
    and military papers along with the completed flyer.
        Along with the Postal Inspection Service, we initiated an
    investigation after our Fraud Hotline received nearly 100 fraud
    allegations on the hoax flyers. A review of these flyers revealed that
    a post office box address maintained by the TREA Senior Citizens League
    (TSCL), a tax-exempt organization that states it advocates for
    legislative reforms on behalf of senior citizens, was listed on all of
    the flyers. Consequently, we contacted TSCL, and learned that TSCL had
    at that time received over 18,000 individual responses to the flyers.
    We became concerned when we learned that TSCL had directed its data
    processing contractor to enter all of the victims' personal information
    into a database. TSCL then sent recipients of the flyers a letter
    denying any responsibility for the hoax that included a solicitation
    for funds to support TSCL's campaigns. We requested that TSCL
    discontinue the keying of personal information into its database,
    however TSCL refused to comply with this request. Therefore, we issued
    subpoenas to TSCL and its database firm to obtain all of the original
    responses in an attempt to determine the person, individual, or entity
    responsible for the creation and dissemination of the hoax flyers. TSCL
    disavowed any involvement with the hoax flyers, maintaining that they
    must have been disseminated by a well-intentioned, albeit confused,
    supporter.
        These hoax flyers appeared in churches, senior centers, nursing
    homes, magazines, newspapers, and local government offices nationwide.
    Because of the informal distribution channels employed, which included
    hand posting on cars and bulletin boards, we were unable to identify
    the source of the flyers. Although we were not able to link any
    individual or entity to the creation of the hoax flyers, the
    investigation served to highlight the vulnerability of senior citizens
    to exploitation by those who use inaccurate, misleading or false
    information to solicit money from them. Our alert advised seniors to
    contact SSA with questions regarding their benefits and to contact
    their representative in Congress with questions regarding pending
    legislation.

    Fundraising/Lobbying

        Perhaps the most challenging area of deceptive practices we have
    encountered with respect to mailings targeting the elderly are direct-
    mail fundraising solicitations. We recognize that there are nonprofit
    and charitable organizations that work for the benefit of the American
    public and it is not these groups that concern my office. The companies
    that we monitor are the exception--those who shield themselves with the
    First Amendment while using scare tactics and half-truths to solicit
    contributions from the population least likely to have such funds to
    spare.
        Often, these organizations use the same misleading words and
    phrases prohibited by Section 1140 of the Social Security Act to entice
    seniors into opening the mail. Once opened, the senior citizen is faced
    with urgent and inflammatory notices such as those that describe how
    the Social Security Trust Fund is being raided by politicians or those
    that inform the beneficiary that he or she is not receiving the
    appropriate benefit amount. The Social Security beneficiary is led to
    believe that the only way to preserve the Social Security Trust Fund,
    or to receive the correct benefit amount, is to send a contribution to
    sustain the fight. Time after time, frightened that their future earned
    benefits are in jeopardy, recipients of the mailings send their money
    to these organizations to support the cause. After all, better to spend
    $5, $10, or even $15 now than to risk losing the check from Social
    Security that most depend on for their livelihood.
        Frequently, my office receives inquiries from senior citizens
    regarding the legitimacy of various fundraising organizations that
    target seniors by focusing on Social Security issues. One senior wrote
    regarding a fundraising organization that she had been ``making
    payments to for a long time'' and, she reports, ``[t]hey keep pressing
    for more.'' See Exhibit 1. The concerned senior speculated that ``the
    news is not as serious as the company states it is'' and asked my
    office to advise her of the company's status. Such inquiries
    demonstrate how, at times, it is difficult to distinguish legitimate
    fundraising solicitations from scams. Scam mailings are often designed
    to resemble the inflammatory, yet constitutionally protected,
    fundraising solicitations that senior citizens are bombarded with
    daily. Although the OIG has pursued cases against political fundraising
    organizations where Social Security words and emblems are misused, our
    hands are tied when it comes to regulating the content of these
    mailings. For this reason, earlier this month we issued an alert
    advising seniors to contact their elected officials directly regarding
    legislation that may affect their Social Security benefits, rather than
    sending money time after time to intermediary organizations.

                         Progress on Deceptive Mailings

        On May 14, 1992, this Subcommittee and the Subcommittee on
    Oversight held a joint hearing to examine deceptive mailings and
    solicitations to senior citizens and other consumers. In addition to
    highlighting the magnitude and severity of the problem then, the two
    Subcommittees expressed concern that existing laws designed to address
    misleading solicitations targeting the elderly were not being enforced.
        Our office has made deceptive Social Security look-a-like mailings
    a top investigative priority. Through the judicious use of Cease and
    Desist letters, we have brought dozens of individuals, companies, and
    organizations into voluntary compliance with Section 1140 of the Act.
    In situations where such groups have refused to comply, we have imposed
    substantial civil monetary penalties against these chronic violators.
    See Exhibit 2. We have also worked closely with the Department of
    Justice to seek TROs, preliminary injunctions, and permanent
    injunctions against chronic offenders who refuse to stop disseminating
    misleading mailings. In short, we have taken this Committee's request
    for more aggressive enforcement of Section 1140 extremely seriously.
        The impact of our enforcement efforts is readily apparent. We have
    seen a steady decline, since 1996, in the number of new individuals,
    companies, and organizations engaging in such deceptive SSA-related
    mailings generally. We have also seen a steady decline in the number of
    consumer complaints filed with our office about all types of deceptive
    SSA-related mailings. That said, there is still a core group of
    deceptive mailers who are unrelenting. Unfortunately, they have chosen
    senior citizens as their preferred target group. At times, we have been
    forced to dispatch teams of investigators to determine which entity or
    individual is ultimately responsible for these misleading mailings to
    seniors. These entities go to great lengths to disguise their
    identities and to frustrate potential Federal or State law enforcement
    activities. As evidenced by the three cases I previously described, the
    problem of deceptive mailings aimed at senior citizens is far from
    eradicated. We will continue our aggressive enforcement efforts until
    all of these senior scams have been exposed and terminated. Social
    Security's good name is based on decades of trust and good will--I will
    never permit swindlers to destroy the faith that America's seniors have
    placed in the Social Security Administration.
        I would like to thank this Committee for its continuing focus on
    this important problem. A lasting prevention campaign includes not only
    aggressive enforcement action, but also requires exposure of the
    problem accompanied by maximal public outreach. I am grateful for the
    enforcement tools that this Committee has provided under Section 1140
    of the Social Security Act. We have tested these tools, with
    significant success in many instances. I also look forward to
    discussing any additional tools that this Committee may have under
    consideration. Quite simply, we need a continuously changing
    investigative and legislative arsenal to keep pace with today's
    misleading mailers. Thank you for the opportunity to testify today, and
    I am available to answer any questions that you may have.
    [GRAPHIC] [TIFF OMITTED] T5753A.026

    [GRAPHIC] [TIFF OMITTED] T5753A.027

        Chairman Shaw. Thank you, Mr. Huse.
        In your testimony you state that the seniors who respond to
    misleading mailings often provide personal identifying
    information, such as Social Security number, date of birth,
    address, and so forth.
        Had this information been provided to the Social Security
    Administration, it would have been protected under the Privacy
    Act. But your experience indicates that these organizations
    treat this information as a commodity. This appears on page 4
    of your testimony.
        What have you learned about what happens to the information
    collected? Is it sold? To whom is it sold? What specific
    information is being sold? Once the information is sold, how is
    it used?
        And I would like for you to also, in your answer, customize
    your answer to TREA organization, who will be with us later
    this afternoon, so they will have an opportunity to respond.
        Mr. Huse. Well, Mr. Chairman, speaking generally about how
    this information is used by the people who garner it, there is
    a commercial opportunity here. These databases and the
    information that are contained in them have value to companies
    that are interested in marketing products and services to
    seniors: insurance companies; medical service companies; in
    some instances, cemeteries and funeral directors; all people
    with an interest in providing goods and services to seniors.
        But these are automatically, because they have been
    gathered together and they are already definitely a target
    audience, a quick step into the opportunity to do this.
        They also have a big value to telemarketers, because if you
    are representing some of these products and services, here you
    have a target audience that has already been set up for you. So
    this is a big business.
        Now, if you take all of this and you put it into the
    context of today's information age, you have another dimension,
    because in the hands of unscrupulous people, this information
    can be misused to create false identities. And ultimately, the
    original person providing their identifying data can easily
    become a victim. So those are concerns.
        In the last case I discussed, TREA issue, at the point that
    these hoax flyers were responded to, and we know that there
    were 29,000 responses that we seized as a result of our
    investigative efforts, as a result of the issuance of our
    subpoena.
        That information----
        Chairman Shaw. You had to issue the subpoena to get that
    information. Is that correct?
        Mr. Huse. That is correct, Mr. Chairman.
        Chairman Shaw. OK.
        Mr. Huse. We know that information was put into a database
    that TSCL had a contractor maintain for them. Now, what we
    don't know is what they did with that at all. They will have to
    answer as to what happened to that data.
        At the point our investigation ended, we know that the data
    went to them, and they have some representations as to what
    they did with it. But we have no knowledge of what they did
    with it.
        Chairman Shaw. As a nonprofit corporation, they have to
    file their income tax publicly?
        Mr. Huse. That is correct.
        Chairman Shaw. They have to disclose that. But does that
    organization have subsidiaries that are not required to expose
    their income tax return to the public? Or affiliated companies?
        Mr. Huse. My sense is they do, but I just wanted to check
    with our investigative team.
        Mr. Chairman, I am informed that they do not. The
    subsidiaries do not have to file under our tax laws.
        Chairman Shaw. And they are for-profit?
        Mr. Huse. No. The subsidiaries are not-for-profit.
        Chairman Shaw. They are not-for-profit but they don't have
    to file publicly. I am either misunderstanding your answer or
    don't understand where we are going with this.
        Mr. Huse. The big tent agency that they are all
    subsidiaries of has to make a public filing, but they do not.
        Chairman Shaw. Well, do you know if they are a for-profit
    or not-for-profit organizations?
        Mr. Huse. They purport to be----
        Chairman Shaw. What determines that the lead organization
    has to file its income tax publicly?
        Mr. Huse. I am not competent to answer that question,
    because I am not a tax expert.
        Chairman Shaw. We can explore that.
        Mr. Huse. But we do know that TREA is a nonprofit agency
    under the tax law and makes a filing. TSCL also purports to be
    nonprofit, or says its nonprofit, but they don't file, to our
    knowledge.
        Chairman Shaw. We can certainly find out about that, with
    that distinction. I think it is important to note here also
    that TREA is a Federally chartered corporation.
        Mr. Huse. That is correct. TREA stands for The Retired
    Enlisted Association.
        Chairman Shaw. How did the ``T'' get on there?
        Mr. Huse. The ``T'' stands for ``The.'' They just took the
    phrase ``The Retired Enlisted Association'' and made an acronym
    out of it.
        Chairman Shaw. It sounds like an abbreviation for
    ``Treasury,'' doesn't it?
        Mr. Huse. It does. It is very close to that.
        Chairman Shaw. Mr. Matsui.
        Mr. Matsui. Thank you, Mr. Chairman.
        Mr. Huse, let me just understand this. TREA is a Federally
    sponsored organization. Is that correct?
        Mr. Huse. It has a congressional charter to conduct its
    activities.
        Mr. Matsui. Exactly. But the senior citizen council, TREA
    Senior Citizens League, is separate. Is that correct?
        Mr. Huse. It is a sub-function or an entity that derived
    from TREA, but it is a separate entity.
        Mr. Matsui. Right. So there are two separate entities that
    one is, not a subsidiary, but one is a member of TREA, right?
    The senior citizen council? Is that correct?
        Mr. Huse. Right, TREA has the Senior Citizens League as
    part of its array of its----
        Mr. Matsui. Because TREA has other organizations as part of
    it. Is that correct?
        Mr. Huse. Correct.
        Mr. Matsui. OK. So we are really talking about the senior
    citizen council here, in terms of----
        Mr. Huse. Exactly.
        Mr. Matsui. Activities that you did your investigation on.
        Mr. Huse. The Senior Citizens League was the focus of our
    investigative efforts.
        Mr. Matsui. Yes. And not TREA?
        Mr. Huse. Correct.
        Mr. Matsui. OK. And TREA has very little to do with this.
    And when you mention that this is a congressionally sponsored
    organization, you have set that aside, right, because that is
    not the subject----
        Mr. Huse. Only in the sense or the context that it is the
    parent organization.
        Mr. Matsui. Exactly. But I want to make sure, so that
    people understand that TREA is not involved in the discussions
    we are having about possibly fraudulent documents being sent
    out to senior citizens.
        Mr. Huse. Right.
        Mr. Matsui. OK.
        Mr. Huse. Correct, sir.
        Mr. Matsui. It is the Senior Citizens League or TREA Senior
    Citizens League--is that correct--that we are talking about?
        Mr. Huse. The Senior Citizens League belongs to TREA.
        Mr. Matsui. I understand that. But it is a separate entity.
        Mr. Huse. And is a separate entity.
        Mr. Matsui. And Mr. George Smith is a current executive
    director of the organization.
        Mr. Huse. Right. Correct.
        Mr. Matsui. Now, let me ask you, how many people did you--I
    want to just set the record straight--how many people did you
    have from the inspector general's office actually on the
    investigation on this issue?
        And then second, how many hours do you estimate you spent
    on this issue?
        Mr. Huse. This will be an estimate----
        Mr. Matsui. Sure.
        Mr. Huse. Because I didn't really----
        Mr. Matsui. No, no. I understand that.
        Mr. Huse. I would say probably a dozen or more individuals
    worked on this, attorneys and investigators, over the period of
    almost 1 year.
        Mr. Matsui. But your activities are not to find criminal
    fraud. Your activities are to try to uncover perhaps fraudulent
    activities and misleading information sent to senior citizens
    in this particular situation. Is that correct?
        Mr. Huse. Initially, our investigation began with
    complaints to our hotline. And you are correct, we began to
    look at the nature of those complaints.
        Mr. Matsui. Exactly.
        Mr. Huse. But the investigation--and we have the power to
    take that onto the focus of the United States Criminal Code--we
    looked at the possibility of criminal fraud. And our
    investigation came to a point where we had exhausted all leads,
    and then we closed it.
        Mr. Matsui. Mainly because everybody denied complicity of
    this, like no one could really say who was the one who
    originated this idea and made it happen.
        Mr. Huse. That is true. But we also employed all of the
    array of investigative techniques that we would normally
    employ, to include forensic examination in laboratories of the
    flyers to see if there were any leads that could be garnered by
    forensic sciences as to the origin. But we came up empty on
    that----
        Mr. Matsui. But you don't have the tools of subpoenaing
    somebody before a grand jury, so that they would have to
    testify under oath, or those kinds of tools that law
    enforcement agencies have. Is that correct?
        Mr. Huse. Well, actually, we do.
        Mr. Matsui. Oh, you do.
        Mr. Huse. If we had got to--and as you understand, we would
    have to come to some threshold where we would bring that to----
        Mr. Matsui. Have you reached that threshold in this
    situation?
        Mr. Huse. Well, no. And I don't think anyone ever will.
        We worked with the Department of Justice as we went through
    this. We had an assistant United States attorney working with
    us as we conducted this investigation always looking for that,
    because that would be a focus, if we got there.
        Mr. Matsui. Then you are the focus of part of my attention
    today, then.
        Mr. Huse. OK, that is fine.
        Mr. Matsui. I am going to run out of time, but we have Mr.
    Smith, we have Michael Zabko, we have Maurice ``Chip'' Heart-
    field, who has stress problems now, so he will not appear,
    Christy Turner.
        I understand Maurice ``Chip'' Heartfield, the president of
    Squire & Heartfield Direct--that is a direct mail firm, right?
    Is that right?
        Mr. Huse. I apologize. Could you ask that part----
        Mr. Matsui. Well, we have Maurice ``Chip'' Heartfield,
    president of Squire & Heartfield Direct. That is a direct mail
    firm, and Mr. Heartfield is the president of that firm. Is that
    correct?
        Mr. Huse. They are a marketing firm.
        Mr. Matsui. Marketing firm.
        Mr. Huse. And it is correct.
        Mr. Matsui. They are the ones that sent the mail out.
        Mr. Huse. Right. Correct.
        Mr. Matsui. I don't know whether this is the subject of an
    open hearing; I have to be somewhat careful.
        But Mr. Heartfield must have talked to somebody at the
    Senior Citizens League about sending this material out. And do
    you know who that person he may have talked to, to get
    permission to send this material out, this slave reparations
    flyers and also the notch flyer?
        Mr. Huse. They deny any involvement with flyers whatsoever.
        Mr. Matsui. Well, is there some employee that you talked to
    at Squire & Heartfield that could say, ``Yes, I sent it out''?
    I mean, there would have to be a pyramid here.
        Mr. Huse. And those interviews were conducted. But in all
    cases, and we exhausted every possible lead with all of the
    entities involved, there was a total disavowal. I know where--
    --
        Mr. Matsui. Yes, you know where I am going.
        Mr. Huse. I do.
        Mr. Matsui. I mean, I can't understand it. I mean, you have
    a room full of people and everyone denies--they admit they sent
    it out, but no one can say, ``Yes, this is the person who
    authorized me to send it out''?
        Mr. Huse. They say that no one authorized the----
        Mr. Matsui. See, this seems to me where you should take
    somebody to a grand jury and have them say this under oath. I
    mean, there has to be something in here that--I mean, you can't
    have this happen.
        And I am not putting it on you.
        Mr. Huse. No, no.
        Mr. Matsui. I am just saying that this is not the way----
        Mr. Huse. But there was a decision made, during the course
    of the investigation, that if in the judgment of the Justice
    Department they wanted to take it to a grand jury, they could
    have, based on the evidence we had.
        But I don't think that threshold, in their minds, was
    present.
        Mr. Matsui. OK. I don't want to get involved in a criminal
    investigation. That is almost improper. On the other hand----
        Mr. Huse. But just as long as you are clear that we
    conducted this from both contexts: a criminal investigation and
    a civil investigation. We were looking to have it go wherever
    it went from the leads we----
        Mr. Matsui. I am not too sure of that. I mean, that is
    where my problem is. And I don't know where your threshold is,
    and maybe we need to have a private conversation. I don't mean
    to say ``private.'' I mean a conversation, just not in a
    public----
        Mr. Huse. I understand.
        Mr. Matsui. Because I don't want to do any damage to
    individuals that should not be damaged.
        Mr. Huse. Correct.
        Mr. Matsui. And I am sorry. I know my time has run out.
        But somehow, you know, you can't have 50 people or 20
    people all deny complicity, when their own office sent it out,
    and not be able to find out how the senior citizen council
    instructed somebody at this marketing firm to send out this
    information that was false and fraudulent. I don't know how we
    cannot find that out.
        I mean, a lot of folks are going to get away with criminal
    activity.
        Mr. Huse. They never admitted that they sent anything out.
    That was our problem. I am being careful, too.
        Mr. Matsui. All right, I understand. But you know it came
    from their office, though?
        Mr. Huse. We know that the hoax flyers contained their
    address for the responses by anyone who chose to respond to
    those flyers. And those are over as one of the exhibits over
    there. Their address is on the bottom.
        [The exhibits follow:]

        [GRAPHIC] [TIFF OMITTED] T5753A.001

        [GRAPHIC] [TIFF OMITTED] T5753A.002

        [GRAPHIC] [TIFF OMITTED] T5753A.003

        [GRAPHIC] [TIFF OMITTED] T5753A.004

        [GRAPHIC] [TIFF OMITTED] T5753A.005

        Mr. Matsui. And let me just--29,000 people apparently
    sent----
        Mr. Huse. They took advantage of those flyers----
        Mr. Matsui. Right.
        Mr. Huse. And sent them to these people.
        Mr. Matsui. And then sent it to the Senior Citizens League.
        Mr. Huse. Correct.
        Mr. Matsui. And the Senior Citizens League then put it in
    their computers and then made direct solicitation of these
    people for additional money.
        Mr. Huse. Right.
        Mr. Matsui. And then some people then sent money back to
    the----
        Mr. Huse. In the process of the direct solicitation,
    though, in the literature that went back to all of the people
    who filled those flyers out, they called those flyers a hoax.
        And this brings us to this huge gray area we have here, in
    terms of these kinds of activities, because they are complex
    and troubling.
        Mr. Matsui. Thank you. My time has run out. And I
    appreciate this, but we may need to further inquire here.
        Mr. Huse. Yes, sir.
        Mr. Matsui. Thank you.
        Chairman Shaw. Mr. Lewis.
        Mr. Lewis. Thank you, Mr. Chairman.
        Mr. Huse, we don't know who sent the flyers out, but we
    know that when the flyers were returned with the funds, those
    flyers were used, put into the database.
        Can they be held responsible for using those flyers in that
    way? If they are not the ones who sent them out, mailed them
    out, placed them around the different communities, can they be
    held responsible for using them?
        Mr. Huse. Not under the existing law. And that is a good
    question, but no.
        Mr. Lewis. What happened to the information in the
    database? How was that used?
        Mr. Huse. With specific focus on TSCL, the Senior Citizens
    League, we don't know what they did with their database
    information. For a fact, we don't know.
        They have made some representations that they stopped that
    activity, but that is a question to put to them. We don't know.
        At the point we closed our investigation, we don't know the
    disposition of that database.
        Mr. Lewis. Can you theorize what type of supporter it would
    have been that took these flyers and disseminated them? Who
    were these----
        Mr. Huse. Who were the people that answered, the 29,000
    people?
        Mr. Lewis. No; who handed the flyers out, that placed them
    in the different communities.
        Mr. Huse. Well, we found that these flyers were distributed
    nationwide, so they had a wide broadcast on these. But we never
    found any person that we were able to talk to.
        And these were the kinds of flyers that when you come out
    of church on Sunday would be on your windshield or perhaps in
    the back of a senior citizens center. They just appeared there.
        And some of the dissemination or broadcast of these was
    accidental, where people thought, ``Hey, this a $5,000 benefit
    coming to me. I had better let Mabel know down the street.''
    Like all Xerox copies, we don't know which generation Xerox
    copy we have.
        But nevertheless, somewhere they began. And every single
    one of them contained the information block on the bottom,
    where to send your name if you wanted to be included on these
    registries that were purported to be established for obtaining
    either the notch benefit on the one hand or the slave
    reparation benefit on the other.
        I hope that was responsive.
        Mr. Lewis. It is just----
        Mr. Huse. I know. There is a gap.
        Mr. Lewis. Right.
        Mr. Huse. And there is a credibility gap there.
        Mr. Lewis. Yes.
        Mr. Huse. I admit that. I found it difficult trying to deal
    with that myself.
        Mr. Lewis. Thousands of these flyers are out there, and the
    gap between TSCL and those who disseminated those flyers, it
    seems like we could nail that down. Thank you.
        Chairman Shaw. Mr. Becerra.
        Excuse me. I have been corrected. Mr. Doggett was here when
    we started. Mr. Doggett.
        Mr. Doggett. Thank you very much, Mr. Chairman.
        If I understand correctly, all of the fraud that was
    committed here was done exclusively in the name of TREA Senior
    Citizens League. Is that correct?
        Mr. Huse. Again, they----
        Mr. Doggett. It was done in their name.
        Mr. Huse. It was done in their name.
        Mr. Doggett. They do not claim responsibility, but it was
    all done----
        Mr. Huse. It was done in their name.
        Mr. Doggett. Under their name.
        Mr. Huse. Although they claim they committed no fraud.
        Mr. Doggett. All right. TREA Senior Citizens League claims
    that no fraud was committed by anyone here?
        Mr. Huse. They recognize that the flyers were a hoax, so
    there was a fraud committed, but it is not their fault.
        Mr. Doggett. They don't deny that there was fraud. They
    don't deny that the fraud was committed exclusively in their
    name. But they do deny they were responsible for this fraud. Is
    that a fair summary?
        Mr. Huse. It is a fair summary, and I would say very well-
    put.
        Mr. Doggett. And is it also correct that TREA Senior
    Citizens League, based on your investigation, benefited
    financially from the fraud that they admit was committed here?
        Mr. Huse. Yes; they did. Correct.
        Mr. Doggett. And I believe you have testified in your
    written testimony unequivocally to that effect, and Ms. Lorna
    Daniels, who we will hear from momentarily, has also testified
    in her written testimony that she was one of the victims who
    forwarded money to them. Is that correct?
        Mr. Huse. That is correct.
        Mr. Doggett. But for some reason, Mr. George Smith, the
    executive director of TREA Senior Citizens League, has denied
    that they benefited financially in his written testimony. Is
    that also correct?
        Mr. Huse. I haven't seen his written testimony, sir.
        Mr. Doggett. Well, I guess we will hear from him shortly.
    But that is how I read page 8 of his testimony.
        As far as the relationship between TREA and TREA Senior
    Citizens League, I believe that TREA benefits financially from
    the activities of TREA Senior Citizens League. Is that correct?
        Mr. Huse. I don't know that for a fact. I would assume that
    because of their relationship.
        Mr. Doggett. Well, if you could comment further on their
    relationship, do they have any common board members, employees
    or officers?
        Mr. Huse. Yes.
        Mr. Doggett. Would you describe those for me? Let's begin
    with board members.
        Mr. Huse. We don't have that with us right now. We can
    respond to that later. Or if you could----
        Mr. Doggett. Well, does article 20 of TREA Senior Citizens
    League proscribe some commonality between the two?
        Mr. Huse. Our understanding is that TSCL, the Senior
    Citizens League, pays a fee to TREA to allow its connection
    with them. Whether there are common board members, I don't know
    that.
        Mr. Doggett. Well, as I read section 2 of article 20:
    ``Control and management of TREA Senior Citizens League shall
    be vested in the board of trustees consisting of at least seven
    members elected or appointed by TREA's national board of
    directors. That would suggest to me that they are a wholly
    owned subsidiary of TREA.''
        Mr. Huse. Based on our analysis, the position of treasurer
    may be common to both of the boards, but that is----
        Mr. Doggett. Well, it does also say that TREA treasurer may
    be appointed treasurer of TSCL. But isn't it correct that under
    article 20 of TREA Senior Citizens League that seven of their
    members are elected or appointed by TREA national board of
    directors?
        Mr. Huse. That is correct.
        Mr. Doggett. Well, then don't the two seem to be one and
    the same. I mean, they may have established a separate legal
    entity, just like some private corporation may have a wholly
    owned subsidiary, but I don't see the distinction in reality
    between the two.
        Mr. Huse. Neither do I. But that is, that particular----
        Mr. Doggett. We have a congressionally chartered entity
    that has a wholly owned subsidiary that admits there was fraud
    here, admits it was done exclusively in its own name, does not
    admit, though your investigation concluded that they benefited
    financially from the fraud, and this is a charter that was
    issued by the Congress to this organization that is described
    as having been involved here.
        Mr. Huse. These may be distinctions without a difference.
        Mr. Doggett. Distinctions without any real meaning.
        Mr. Huse. But they are distinctions that are allowable
    under the law. And they make it extremely difficult, in the
    context of this kind of an investigation, especially where you
    are brushing up against what are really very possible First
    amendment activities, in terms of representing citizens' rights
    and so forth.
        So we are rather circumspect. But there is no better
    statement of what you have here for a relationship than the one
    you made.
        Mr. Doggett. Just in conclusion, Mr. Chairman, as a former
    judge, you won't find a more vigorous defender of the First
    amendment, but I don't think this has anything to do with the
    First amendment. I think is has to do with defrauding seniors.
        Mr. Huse. I meant from----
        Mr. Doggett. I understand that is the argument that you
    have heard.
        Mr. Huse. The difference we have to have as a criminal
    investigative function----
        Mr. Doggett. Of course.
        Mr. Huse. Looking at these activities, you need to be very
    careful how you couch----
        Mr. Doggett. From your activities, is there any legislation
    or any changes in our laws in any way that you believe would be
    helpful in preventing the defrauding of seniors like this in
    the future?
        Mr. Huse. Well, we have some tools that come from the
    Social Security Independence Act that have helped us get to
    this point. Those tools, in the civil money penalty area, need
    to be strengthened. And some of those are proposed, I believe,
    in our legislative requests to the Committee.
        Mr. Doggett. Thank you, Mr. Chairman. Thank you.
        Chairman Shaw. Mr. Brady.
        Mr. Brady. Thank you, Mr. Chairman. Thank you, as well, for
    holding this important hearing.
        And we have a number of people and organizations here to
    testify today. I think it is important that we not paint all of
    the organizations with the same broad brush.
        But specifically, for TREA Senior Citizens League, just so
    I understand this in real life, their address mysteriously
    appeared on two separate senior-targeted flyers.
        Mr. Huse. Correct, sir.
        Mr. Brady. And their response was not simply to warn those
    seniors that this was a hoax. Their response was to warn them
    and to solicit them for money. Is that correct?
        Mr. Huse. That is correct.
        Mr. Brady. So they didn't simply warn the seniors. They
    said let's see if we can make some money off this. And so there
    is apparently a difference between a fraud that hurts you and a
    fraud that makes you some moolah? Is that correct?
        [Laughter.]
        And in effect, claiming to be good Samaritans, they simply
    ran up to the mugging victim and offered to sell them a new
    purse.
        [Laughter.]
        Is that sort of what happened here?
        Mr. Huse. It is what happened. But we have to be careful
    about establishing what the financial benefit was, because we
    don't know.
        Their claim is there was a very minimal financial benefit.
    But at the point our investigation ended--and it ended because
    we had exhausted all remedies we had at that time.
        Mr. Brady. Sure.
        Mr. Huse. Now, we didn't go beyond that and get into the
    actual finances to establish whether it was minimal or great.
        Mr. Brady. Sure.
        Mr. Huse. We don't know.
        Mr. Brady. Well, we are going to get a chance to hear from
    them today. Thank you for your work.
        I guess what bothers me the most is we have a
    congressionally chartered rip-off of our seniors.
        And I hope, Mr. Chairman, that this Committee takes a hard
    look at this congressional charter, to see if it, in fact,
    stands up to how it was originally granted. Thank you, Mr.
    Chairman.
        Chairman Shaw. Thank you, Mr. Brady.
        Congressional charters are no longer issued. And it was
    problems arising out of instances like this that was the reason
    that Congress quit doing it.
        But I think probably the Judiciary Committee should really
    have a hearing and look very carefully into all federally
    granted charters to see how they are being used. Some of them
    are being used very well, and then others you would be a little
    bit concerned about, because it is almost like a seal of
    approval of some sort. Mr. Becerra.
        Mr. Becerra. Thank you, Mr. Chairman.
        And thank you for bringing this to the public's attention,
    not just the Members of Congress.
        And to Mr. Huse, thank you very much for the investigation.
    And hopefully we can continue to pursue this, because we are
    certainly not done.
        Let me ask a question with regard to the number of
    responses that were received as a result of these flyers:
    29,000 responses were received by the Senior Citizens League.
        Mr. Huse. That is correct.
        Mr. Becerra. I don't know if you have any sense of many
    responses you usually receive to these types of solicitations,
    but the response rate is certainly less than 50 percent. It is
    usually a fraction of what is sent out.
        Mr. Huse. Right.
        Mr. Becerra. So if 29,000 responses were received, there
    must have been 10 times, perhaps even more, of these flyers
    sent out throughout the nation.
        How likely is it that a hoax like this, where 29,000
    responses were received--not sent, but received, so obviously
    more were sent--how likely is it that a hoax like this could
    have been independently conducted by a number of different,
    unrelated players?
        Mr. Huse. We both know it flies in the fact of reason to
    think that something was nationwide broadcast and distribution
    of these flyers without some kind of organizational effort
    being involved.
        Mr. Becerra. It likely is, then, that this was a concerted,
    orchestrated effort by a particular entity.
        Mr. Huse. Correct.
        Mr. Becerra. You report that you could not determine the
    actual source of the flyer.
        Mr. Huse. That is correct.
        Mr. Becerra. And you also report the Senior Citizens
    League, TREA Senior Citizens League, maintains that this was
    probably the action of a well-intentioned supporter.
        Mr. Huse. Correct.
        Mr. Becerra. Did the Senior Citizens League ever give you
    any reason to believe that there was some well-intentioned
    supporter that may have done this? Did they explain what they
    meant by that?
        Mr. Huse. They meant that it was an accident, that someone
    who hewed closely to their efforts got off on some kind of a
    distracted activity and promulgated this hoax.
        Mr. Becerra. Are they speculating or are they saying that
    they knew this to be the case, that some well-intentioned
    supporter----
        Mr. Huse. It was couched in the form of speculation. No one
    ever produced a name or a person that might have been
    responsible.
        Mr. Becerra. And so this would have to have been, if the
    explanation that the Senior Citizens League gave were to be
    considered reliable, we would have to assume that there was
    some well-intentioned supporter who was willing to send out
    tens of thousands of these flyers throughout the nation.
        Mr. Huse. All exactly the same.
        Mr. Becerra. That is a very well-intentioned supporter who
    probably could support the entire activities of the Senior
    Citizens League without having to go out there to solicit money
    from fixed-income seniors.
        Let me ask another question. TREA Senior Citizens League
    indicates in some press statements that it sent out that it
    made efforts to try to help the Social Security Administration,
    your agency, and the U.S. Postal Inspection Service in trying
    to determine who did this, to help in the investigation.
        They posted advisories on their Web site, claiming that
    they had reported the scam to the SSA and that they were
    working with you and the U.S. Postal Inspection Service to
    identify the origins of the flyer.
        Did they do as they indicated? Did they go out there and
    cooperate with you to try to make this possible?
        Mr. Huse. I don't doubt that they posted something on their
    Web site, although I never looked at the Web site to see what
    it was.
        I wouldn't count the relationship during the course of this
    investigation with them as helpful to the course of our
    investigation. They opposed our subpoena process at every
    opportunity.
        Mr. Becerra. So let me make sure about something. They say
    that they were trying to help. When you requested documents,
    first you probably did so informally without any legal document
    or subpoena.
        Mr. Huse. Correct.
        Mr. Becerra. Did they help?
        Mr. Huse. No.
        Mr. Becerra. And even when you did say, ``Well, if you are
    not going to give it to me informally, as a friendly matter,
    now we are going to issue subpoenas,'' did they help and
    provide the documents you requested as a result of the first
    subpoenas?
        Mr. Huse. As was their right, they attempted to quash the
    subpoena.
        Mr. Becerra. Quash meaning to stop enforcement of the
    subpoena.
        Mr. Huse. That is correct.
        Mr. Becerra. And did you have to go to Federal court to
    actually enforce some of these subpoenas?
        Mr. Huse. Yes. Yes, we did.
        Mr. Becerra. So you had to go to Federal district court to
    get the Senior Citizens League to fulfill the requirements of
    the subpoenas you issued upon them, even though on the Web site
    they indicate that they were working hand in hand with the
    Social Security Administration and the U.S. Postal Inspection
    Service to try and get this thing resolved.
        Mr. Huse. The subpoenas that were contested in court were
    the subpoenas we issued to their database company and their
    marketing company. TREA subpoena was not opposed.
        Mr. Becerra. I see.
        Mr. Huse. I am being very specific.
        Mr. Becerra. I understand. Mr. Chairman, one last question,
    if I may.
        Because you have turned to the marketing, and as you
    already indicated in some other responses, TREA and TREA Senior
    Citizens League, which now has been clarified as pretty much
    being one and the same, have indicated that they had nothing to
    do with that solicitation.
        Mr. Huse. Correct.
        Mr. Becerra. Yet when that information from the 29,000
    people who responded came in, private information, very
    personal information, they started recording it in their
    database.
        Mr. Huse. Correct.
        Mr. Becerra. And at the same time that they were issuing
    responses to these 29,000 people that responded, saying, ``We
    have nothing to do with that initial mailer,'' they were also
    including solicitations themselves, saying, ``Please contribute
    to our activities to help you.''
        Mr. Huse. Right. Correct.
        Mr. Becerra. So while they claim that they did not have any
    responsibility for the initial fraudulent mailer, they took
    advantage of the 29,000 people who did respond, to try to now
    solicit them in a more legitimate fashion.
        Mr. Huse. Correct.
        Mr. Becerra. All right, thank you very much.
        Mr. Huse. It was a windfall promotion.
        Mr. Becerra. Perhaps, Mr. Chairman, the best thing that is
    going to come out of this hearing, because I don't think we are
    going to resolve everything here, is a statement, a notice, a
    warning, to seniors: Buyer beware. This goes on all the time.
        Mr. Huse. Which is what led us to the point of issuing the
    national press release on the hoax portion, even though we were
    disappointed with the results of our investigation.
        Mr. Becerra. Thank you, Mr. Chairman.
        Chairman Shaw. Mr. Ryan.
        Mr. Ryan. Thank you, Mr. Chairman. Thank you for holding
    this very, very important hearing.
        Mr. Huse, I would like to ask you, just to try and get a
    big picture here, we already established through prior
    questions that 29,000 people responded to the hoax flyers,
    correct?
        Mr. Huse. Correct.
        Mr. Ryan. They put the data in the database, sent back a
    mailing saying, ``We reject these hoax flyers,'' and then they
    put a solicitation in there, correct?
        Mr. Huse. Correct.
        Mr. Ryan. Have you established whether they have sold that
    database, sold those mailing lists or not?
        Mr. Huse. We have not established that. And the
    information, we understand, is they say they have not.
        Mr. Ryan. They say they have not.
        Now, I think a townhall meeting doesn't go by were probably
    any of us have these townhall meeting where a senior citizen
    born between 1917 and 1926, the notch years, comes up to us and
    says, they get this mailing, they are sending $10, $15, $20 a
    month sometimes to this group that promises to restore their
    benefits.
        My colleague, Congressman Kleczka, has provided the
    Committee with an example of these documents that seems like
    what they do is, they send us a postcard, a postcard that
    probably costs a bulk mail stamp rate of about 14 cents,
    saying, ``Please support efforts to restore the notch,'' and
    that is about all of the lobbying they. I have never once met
    somebody up here on Capitol Hill, and we are on the Social
    Security Subcommittee, lobbying on behalf of this organization
    to ``fix the notch.''
        So it seems as if they are making these solicitations,
    asking for $5, $8, $10, $15; they send us only a postcard; and
    pocket the rest of the money and sell these mailing lists. Is
    that essentially what you have seen from the organization?
        Mr. Huse. That is correct. I have an aunt that does the
    same thing, that is a notch baby, and who falls into the
    category of people who respond to these and has interest in it.
        Mr. Ryan. Right. And so the goal of a direct mail operation
    is to grow and expand the list as much as possible, correct?
        And it has become, I think you mentioned in your opening
    statement, a commodity that good mailing lists are a commodity
    because they have respondents that will pony up.
        Mr. Huse. I would say, in today's age, especially with the
    kind information technology we have, somebody could tell you
    how to price a database like this, but I am sure it has great
    commercial value.
        We know that as a result of notch activities, TSCL has made
    $35 million in the last 3 years almost exclusively on notch
    issue solicitation.
        Mr. Ryan. On its notch mailings?
        Mr. Huse. That is correct.
        Mr. Ryan. Thirty-five million dollars?
        Mr. Huse. That is right. That is in their tax statements.
        Mr. Ryan. Have you analyzed what kind of efforts they do to
    promote passage of notch legislation here on Capitol Hill?
        The question I am asking is, they bring in $35 million. All
    we ever see is a little postcard that probably cost them 14
    cents in bulk stamps. It is a tiny, little post card. And that
    is the extent that I and any other Member of Congress I have
    ever spoken to about this has seen of their efforts to promote
    notch legislation. $35 million--where is the rest of that money
    going?
        Mr. Huse. We did not investigate that. And I would take
    that charge on if you assign it to me, but that is not one that
    I took in this instance.
        Mr. Ryan. I think that is something that we will definitely
    be looking into.
        Going on, back to the flyers and the dissemination of the
    flyers, they are claiming that it was a misinformed, confused,
    well-intentioned volunteer, acting on their own volition to put
    out these flyers and to have the mail go back to their post
    office box. Correct?
        Mr. Huse. Correct.
        Mr. Ryan. And this was disseminated across the country?
        Mr. Huse. It appeared all over the United States.
        Mr. Ryan. A lot of times, when you are organizing such a
    very organized dissemination of some kind of thing like this,
    oftentimes groups will hire temporary workers. They will go to
    Manpower or some local temporary agency and hire temps to
    disseminate these flyers. Have you, in your investigation,
    notified or found evidence of any temps being hired to
    disseminate these flyers?
        Mr. Huse. We looked for that type of lead, and we were not
    able to find anyone responsible.
        Mr. Ryan. Have you questioned anybody who has handed out
    these flyers?
        Mr. Huse. Yes, we have.
        Mr. Ryan. And what did they say? Where did they get their
    instructions?
        Mr. Huse. Well, unfortunately, the people we were able to
    find were people who got generations of the flyers----
        Mr. Ryan. OK, so they----
        Mr. Huse. And they weren't sure. They were just spreading
    the word, because the $5,000 benefit was too good not to want
    to get on this registry of potential recipients.
        Mr. Ryan. And your investigation is still open and you are
    still looking for the source of dissemination. Who is that
    well-intentioned, confused volunteer?
        Mr. Huse. Our investigation was closed at the point we
    issued the national alert, but I am beginning to think I had
    better reopen it.
        Mr. Ryan. I think so.
        Mr. Huse. I mean, we could reopen it.
        Mr. Ryan. I think it is important. And, you know, I have
    been doing this ever since I got in Congress, telling people:
    Don't send these groups your money. They are not looking at
    your best interests.
        Senior citizens are literally--I hear this all the time--
    are sending $15 a month to this group because they think that
    is going to get their notch benefit.
        And actually, the flyer that my colleague from Wisconsin
    gave us says right here, you check in a box: Compensation
    preference, check one. Would you like a $5,000 award in four
    annual payments of $1,250 or a monthly increase in your Social
    Security benefits?
        It is as if this going to come if you just send us some
    more money, and we will get your notch benefits restored.
        I would like to know, and if you could take a look at
    analyzing the level of their lobbying on Capitol Hill, and
    their express advocacy on behalf of passage of this
    legislation. The Social Security Administration determines and
    Congress determines how these benefits get sent out, if they
    are ever given out.
        It is legal to send this kind of a mailing out, isn't it?
        Mr. Huse. Correct.
        Mr. Ryan. It is. It is legal. It may not be ethical, but it
    is legal.
        Mr. Huse. It is legal.
        Chairman Shaw. Which mailing are we talking about, Mr.
    Ryan?
        Mr. Huse. It is not legal to send out a hoax, but it is
    legal to solicit direct mail----
        Chairman Shaw. Will the gentleman yield?
        Mr. Ryan. Yes, I will yield.
        Chairman Shaw. If the gentleman would yield for a minute,
    these flyers that we have looked at, talking about the slave
    reparations act and these sort of things----
        Mr. Huse. That is a hoax. That is clearly illegal.
        Chairman Shaw. You find out who did that, that is criminal
    activity.
        Mr. Huse. That is criminal activity. And if we found a
    person responsible for promulgating that activity, we would
    charge them under the United States Code.
        Mr. Ryan. But there are also legal mailings that this group
    is putting out, sending to seniors, acting for direct mail
    solicitations, something like the solicitation that was
    included in the response to the hoax list that may not be
    illegal but is unethical, where they raised purportedly $35
    million from.
        It is important, I think, to look at the whole, big picture
    here. And it seems like an effort is under way to just grow and
    grow and grow a mailing list, sell the mailing list, and also
    reap more money off of the direct mail solicitations.
        Mr. Huse. Mr. Chairman, if it is the Committee's charge on
    any of these issues, we will certainly follow up on any of the
    matters that are still open, and I go back to some of the
    other, earlier questioning. But you can count on that.
        Mr. Ryan. I see my time has expired. Thank you.
        Chairman Shaw. I would like I think to follow up to what
    Mr. Ryan was just saying.
        It is interesting to look at the income tax return, which
    Mr. Kleczka brought in, for TREA Senior Citizens League filed
    for the year 2000, in which it shows, in looking at the
    expenses, it shows the income in excess of $12 million and just
    about all of it went out to solicitation: over $2 million for
    printing and publishing, over $3 million for postage and
    shipping, and professional fundraising, $1.5 million.
        I don't see anything on here which would be of any benefit,
    any of the expenditures here, which would be of any benefit to
    the people who have sent in the money. It just doesn't appear
    that their money was spent that way.
        So it seems like it is just a solicitation machine. That is
    the appearance that it would give to me by looking at their
    return. Mr. Pomeroy.
        Mr. Pomeroy. Thank you, Mr. Chairman.
        My colleagues have covered the ground very, very well, and
    I don't mean to go back over things already covered. I am very
    interested in the panels to follow. One area of question I
    would have is, to whom are these lists marketed? Did you do an
    investigation into that?
        Mr. Huse. These lists, and I am going to the earlier cases
    I discussed, because I don't know anything about TSCL's use of
    their database, but in other mailing activity, the two cases I
    talked about in my testimony, those lists were sold to
    insurance companies that are looking to send----
        Mr. Pomeroy. Stop right there.
        I used to be a State insurance commissioner, and I am
    wondering whether you explored whether or not insurance
    companies acquiring lists or purchasing lists from groups that
    used fraudulent means to assemble those lists violates State
    laws in some way.
        Mr. Huse. I am certain they do, and maybe the Arkansas
    attorney general consumer people that follow me can speak to
    that. But it clearly would violate Federal law.
        Mr. Pomeroy. I would like you to use subpoena power in the
    IG's office to find out what insurance companies are acquiring
    these lists, lists assembled through fraud and deception. I
    believe that the State regulators in those States ought to
    commence activities against those insurance companies.
        I would hope any insurance company paying any attention to
    this hearing at all ought to understand that when they acquire
    lists for purposes of going out and trying to sell policies,
    they are going to be held accountable for the practices used by
    those assembling those lists. And they may be buying a whole
    lot of trouble in addition to the lead lists, if they are not
    dealing with reputable outfits.
        Mr. Huse. We will respond----
        Mr. Pomeroy. Will you get me----
        Mr. Huse. We will.
        Mr. Pomeroy. You will proceed? You will find out the
    insurance companies? And I personally would like to know, as a
    Committee member, those insurance companies so I might contact
    the regulators of those companies.
        Mr. Huse. We will respond to you, sir.
        [The following was subsequently received:]

                                         Social Security Administration
                                            Office of Inspector General
                                              Baltimore, Maryland 21235
                                                        October 4, 2001

    The Honorable Earl Pomeroy
    1110 Longworth House Office Building
    Washington, DC 20515

        Dear Mr. Pomeroy:

        Question 1--The name and address of any insurance company that was
    issued a cease and desist letter by your office.
          Cease & Desist Letters to Insurance Companies and/or Agents

    Carleton Averill, III                                    Omaha Division Insurance Co.
    Information Processing Services                          2316 S. 156th Circle
    P.O. Box 352528                                          Omaha, Nebraska 68130-9900
    Toledo, OH 43635-9946

    John Seneczko                                            The American Home Life Ins. Co.
    Guarantee Reserve Life Insurance Co.                     400 Kansas Avenue
    530 River Oaks West                                      Topeka, Kansas 66603
    Calumet City, Ill. 60409

     Cease & Desist Letters to Insurance Companies and/or Agents--Continued

    Edwin Oom, Jr.                                           NLS
    Oom Insurance Agency, Inc.                               P.O. Box 2417
    606 E. Savidge Street                                    Thomasville, GA 31799-9922
    Spring Lake, Michigan 49456

    Patrick Baird                                            Dalvin Parker
    PFL Life Insurance Co.                                   President
    4333 Edgewood Road, NE                                   Parker and Associates
    Cedar Rapids, Iowa 52499                                 3800 HWY 45 N
                                                             Meridian, Mississippi 39301

    William E. Bixby, III                                    Life of Boston Insurance Co.
    C/o Old American Insurance Co.                           4343 Camelback Road
    3520 Broadway                                            Phoenix, AR 85018
    Kansas City, MO 64111
        and
    701 N. Plano Road
    Richardson Texas 75081

    United American Insurance Company                        Montgomery Ward Life Insurance Co.
    2909 North Buckner Blvd                                  200 N. Martingale Road
    Dallas, Texas 75221                                      Schaumburg, IL 60173-2040

    Globe Life and Accident Insurance Company                Wichita National Life Insurance Co.
    Information Center                                       711 D Avenue
    Post Office Box 26711                                    P.O. Box 1709
    Oklahoma City, Oklahoma 73126-9975                       Lawton, OK 73502

    Equitable Life and Casualty                              Allen R. Mahaffey
    3 Triad Center, Suite 200                                United Benefits
    P.O. Box 2460,                                           301-B George St.
    Salt Lake City, Utah 84110-9944                          Beckley, West Virginia 25801

        Question 2--The name and address of any insurance company that
    entered into a settlement agreement with your office.

    Information Processing Services                          Guarantee Reserve Life Insurance Company,
    P.O. Box 352528                                          530 River Oaks West
    Toledo, OH 43635-9946                                    Calumet City, Ill. 60409

        Question 3--The name and address of any insurance company that
    conducted business with entities named in your July 26th testimony.

        Insurance Companies Conducting Business with the Lead Agency, Inc.

        As a result of an Office of the Inspector General (OIG) subpoena
    issued to Lead Agency, Inc., we learned that Banker's Life & Casualty
    Company, formerly known as Montgomery Ward Life Insurance Co.,
    conducted business with the Lead Agency, Inc.

        Insurance Companies Conducting Business with TREA Senior Citizens
    League.

        In an August 16, 2001 letter addressed to your office, TREA Senior
    Citizen League disclosed that they rented their mailing list to five
    insurance companies during calendar year 2000. This included Garden
    State Life Insurance, GE Capital Corp., Mutual of Omaha Insurance Co.,
    Mayo Clinic Health Letter and Physicians Mutual Insurance. We have no
    further information to provide regarding TREA Senior Citizens League
    and involvement with insurance companies.

        Insurance Companies Conducting Business with United States Senior
    Services, Acculead, A.L.I., The Lead Room, and Mass Mail Media.

        All information regarding insurance companies conducting business
    with United States Senior Services, et al. (USSS) has been extracted
    from USSS accounting records. The accounting records were secured
    during an enforcement action by OIG against USSS in early 2001.
    Enclosure 2 reflects any company listed on the Acculead Open Invoices
    listing, as of March 12, 2001, the A.L.I. Collections Report, as of May
    28, 1999, and/or The Lead Room Account Register, as of March 6, 2001,
    that had the term ``insurance'' in their company name, or otherwise
    appeared to be working in the insurance business. Unfortunately, we do
    not have complete address information in most instances, and have not
    had the opportunity to independently verify this information with the
    individual insurance companies. Nonetheless, this information may
    provide valuable leads for your inquiry. We are willing to provide the
    primary documents to your staff if you deem it necessary.
                                    ACCULEAD

    1st Constitution Insurance Agency                        Insurance Plus, Inc.
    A.D.R. Insurance Marketing                               Insurance Services, KY
    ABC Insurance Service                                    Insurance Services, TX
    Adam General Insurance Agency                            Integrity Insurance
    AMA Insurance Services                                   Jenkins Insurance & Investments
    American Health Underwriters                             Kates Insurance Agency
    American Insurance                                       Kibler Insurance Services
    American Liberty Life                                    Legacy Ins. Services
    Americana Ins. Services Inc.                             Life of Boston
    Approved Health & Life                                   London Insurance Group
    Bankers Life and Casualty Co.                            Met Life
    Beaches Insurance                                        Midland National Life
    Boswell Insurance Services                               Mills Carolina Ins. Service, Inc.
    Cameron-Kramer Ins Marketing                             National Insurance Marketing
    Capitol Holding and Ins.                                 North West Life
    California Insurance Marketing                           Occidental Life
    Central Florida Insurance Partners                       Odom Insurance Agency
    Columbia Universal Life, TX                              Omaha Division Ins.
    Combined Medical Ins Group                               Peninsula Insurance Group Agency, Inc.
    Compare Insurance Agency, Inc.                           Physicians Mutual
    Congress Life                                            Professional Insurance System of Florida
    Continental Insurance Service                            Professional Ins. Assoc.
    Credit Insurance Agency                                  Provident Indemnity Ins. Co.
    Crown Life Ins. Co.                                      Pyramid Life Insurance Co.
    Econo-Wise Insurance Agency                              Regan Insurance Agency, Inc.
    Exline Insurance Agency                                  Security Life
    Family Insurance                                         Security National Life
    Ferro Insurance Agency                                   Senior American Ins. & Fin. Services
    First American Inc. Services                             Shepherd Insurance Agency
    First Guaranty Insurance Co.                             Southern Security Life
    Gates Insurance                                          Southwest Service Life Insurance Co.
    Go-Mac Insurance                                         Southwestern Life Ins. Co.
    Golden State Funeral Insurance Services                  Standard Life
    Goodland Insurance Marketing                             Star Insurance Agency
    Great Western Insurance Co.                              Statesman Life Ins. Co.
    H&R Insurance Planners                                   Tennessee State Insurance
    Hanna, Pyramid Life                                      Tri-State Insurance Agency, Inc.
    Harrison Insurance                                       United American Insurance Company
    Health Underwriter Inc.                                  United Insurance Agency
    Independent Insurance Services Inc.                      United National Life
    Independent Marketing & Ins. Service Inc.                United Security Life Ins. Co. of Illinois
    Insurance Associates                                     United Seniors Ins. Agency
    Insurance Corner                                         Wichita National Life Ins. Co.
    Insurance Network                                        Windle Insurance Agency

                                     A.L.I.

    ABC Insurance Services                                   Mills Carolina Ins. Service, Inc.
    Beaches Insurance                                        National Insurance Marketing
    Davault Insurance Corp.                                  Pyramid Life Insurance Co.
    Independent Insurance Services Inc.                      Senior American Ins. & Fin. Svces.
    Insurance Plus, Inc.                                     Standard Life

                                 THE LEAD ROOM

    Mutual Omaha                                             Braden Insurance Agency

                Sincerely,
                                             James G. Huse, Jr.
                                                      Inspector General

        Mr. Pomeroy. Thank you very much. I yield back.
        Chairman Shaw. Mr. Hulshof.
        Mr. Hulshof. Thanks, Mr. Chairman.
        Mr. Huse, you raise an interesting and vexing problem for
    us because you have cited the First Amendment to the United
    States Constitution, which allows groups to speak publicly.
        And I know, Mr. Chairman, we have had in the previous
    Congress, while it wasn't related to this issue, other groups,
    reputable groups, who have solicited their members with
    information that concerned the future of Social Security and
    certain actions Congress was taking. And certainly, while that
    is legally allowed, I remember that we had the discussion about
    some of the statements within those solicitations.
        So I think maybe the usefulness of this, while we are
    certainly focusing on the Senior Citizens League, maybe the
    usefulness is for all of those organizations to be much more
    vigilant about the type of information that they send out,
    especially to older Americans across the country.
        Now, you have not reviewed the testimony of the panels
    following you. Is that right, Mr. Huse?
        Mr. Huse. We have not had time to do that.
        Mr. Hulshof. As you know, and to my friend Judge Doggett,
    as a former prosecutor, were this a criminal trial or criminal
    prosecution, and if this were in fact a criminal proceeding,
    the prosecutions proceeds first and then there is the defense,
    and then the prosecution has the chance to rebut.
        This is not that type of hearing. We understand that it is
    not adversarial in that regard.
        But I do want to ask for your comments about some of the
    written statements of testimony that is coming up from
    witnesses after you, and I am referring to the written
    testimony of Mr. Smith, who is the chairman of TREA Senior
    Citizens League, at page 5, and I just ask your response
    because you won't have the chance to respond after Mr. Smith
    gives us his sworn testimony.
        Mr. Huse. I understand.
        Mr. Hulshof. ``We too are victims of these hoax flyers,
    that we have tried to determine their origin,'' says Mr. Smith,
    ``and that we have worked responsibly to counteract the
    misinformation these flyers have created ever since we first
    learned of them.'' True or untrue, at least from your vantage
    point?
        Mr. Huse. I would be troubled by the word ``victim.'' I
    don't think they were a victim as much as they were the
    beneficiary. I think our investigation speaks to that.
        Mr. Hulshof. Going on, at the bottom page 5, again quoting
    from the written testimony, ``29,000 seniors were misled into
    wasting their time and the cost of a stamp after reading these
    flyers.''
        Now, I understand from your testimony, while that wasn't
    part of your responsibility of investigation, but it is
    probably a pretty reasonable assumption it wasn't just 29,000
    responses and the single cost of a stamp, was it, Mr. Huse?
        Mr. Huse. No.
        Mr. Hulshof. I mean, we are talking about, as my colleague
    Mr. Ryan from Wisconsin has said, the cost of a stamp and
    probably a check in the mail to the Senior Citizens League.
    That is a reasonable assumption, is not?
        Mr. Huse. It is a reasonable assumption.
        Mr. Hulshof. Let me ask you this, on page 6 of Mr. Smith's
    written testimony, ``It is our understanding that we were the
    first to alert the United States Postal Service authorities
    when this hoax started.'' Is that an accurate assertion?
        Mr. Huse. We have no way of commenting on the accuracy of
    that. It is not our understanding.
        Mr. Hulshof. On page 9 of Mr. Smith's testimony, ``In
    summary, we have done everything we can to inform both our
    supporters and senior citizens-at-large about this hoax.''
        Would you agree or disagree with that assessment by Mr.
    Smith?
        Mr. Huse. On the record, they sent back their response to
    the hoax solicitations. And as far as I know, that is all they
    ever did.
        Mr. Hulshof. Regarding that, and my colleague Mr. Becerra
    asked you these questions, and let me follow up on what he has
    asked about the subpoena and their attempt to quash the
    subpoena that you issued. Is that right?
        Mr. Huse. Their marketing company and their database
    company opposed us on our subpoena process.
        Mr. Hulshof. They inevitably complied with that subpoena,
    at least in part, did they not?
        Mr. Huse. They did.
        Mr. Hulshof. And when you got the database, did you
    believe, or in your investigation, was the database complete or
    were there things missing from the database in response to the
    subpoena?
        Mr. Huse. We received a portion of the database at one
    point, and we realized it was incomplete.
        Mr. Hulshof. Let me ask you, because my time is about up,
    the amount of money, again, this being a legal organization, is
    it not a fact that TREA Senior Citizens League is designated as
    a nonprofit social welfare organization and civil league in
    accordance with Internal Revenue Code Section 501(c)(4)? They
    are a (c)(4) nonprofit. Is that true?
        Mr. Huse. That is my understanding.
        Mr. Hulshof. And I guess, Mr. Chairman, as a final
    comment--and I appreciate your candor and forthcoming today,
    Mr. Huse--on page 7 of Mr. Smith's statement, and I guess the
    question that is yet to be answered by not just this Committee
    but those even beyond the sound of these walls and the sound of
    our voices here today over the mass media, Mr. Smith says,
    ``Far worse than the expenses we've incurred or the huge amount
    of time we've had to devote to fighting this hoax, it is our
    good name that may now be questioned as a result of this
    hoax.'' And I think that perhaps is an understatement.
        [Laughter.]
        Thank you for the time, Mr. Chairman.
        Chairman Shaw. Mr. Cardin.
        Mr. Cardin. Thank you, Mr. Chairman. And let me thank you
    for convening this hearing.
        I just want to make a couple points clear, for those who
    may be following this hearing, because I think getting
    information out to particularly our seniors is very important.
        There are a lot of very legitimate groups out there that
    contact our seniors and try to organize our seniors so they can
    be more effective in their voice here in Washington and their
    own communities on their own issues that affect them. These
    groups are performing a very important function.
        My concern is that when we see the types of misleading
    mailings and fraudulent mailings that are sent out, they sort
    of cast all groups in the same light, and I think that is
    unfortunate. So I want to make it at least clear.
        I often at townhall meetings will get questions from
    constituents as to whether they should respond to a particular
    mailing or not. And I always caution them that if the mailing
    appears to be more interested in getting a check from you
    rather than for you, I would just throw it away.
        And that is clearly the case in the mailing information
    that we have before us today.
        So I think this a very, very serious matter, when groups
    will take advantage of seniors and really cause I think a
    problem for legitimate groups that are out there trying to do
    work for our senior population.
        Mr. Chairman, I am going to ask to put in the record a copy
    of the solicitation that was received by one of my
    constituents, and I am going to ask that her name and address
    be deleted from this. And once I find out what the notch
    registration number is, I might ask that be deleted or not, but
    that may depend upon questions later on, as to what is the
    legal significance of the notch registration number.
        Chairman Shaw. Without objection.
        [The information follows:]

        [GRAPHIC] [TIFF OMITTED] T5753A.006

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        [GRAPHIC] [TIFF OMITTED] T5753A.009

        Mr. Cardin. Thank you, Mr. Chairman. And I yield back the
    balance of my time.
        Chairman Shaw. Mr. Kleczka.
        Mr. Kleczka. Thank you, Mr. Chairman and members.
        Mr. Chairman, if I might, I have no questions of the
    witness, however I would like to make a couple observations, if
    I might be able to.
        My staff and myself have done extensive research on this
    group called TREA Senior Citizens League, and know full well,
    as was pointed in the questioning, TREA and TSCL are one and
    the same. Make no distinction whatsoever. They are one and the
    same.
        TREA group has been chartered by Congress as of 1992. They
    formed this subsidiary, TSCL to, in my estimation, shake down
    the seniors of the nation under the guise of this notch issue.
        Now, for anyone in this Congress or anybody who has looked
    into the notch issue, we know that is a hoax also. There was a
    problem with Social Security payments; Congress corrected them
    back in 1977.
        And we are going to hear testimony today from one of
    probably the most articulate and honest seniors groups in the
    country, and that is the AARP group. And they have produced a
    flyer, a brochure which says, what you are getting today,
    seniors, is the correct amount. And they put these out to all
    our districts and to all our seniors.
        However, there are still unscrupulous groups who will use
    this notch baby issue in an effort to extract money out of our
    seniors. And who are the seniors that are repeatedly getting
    these mailings? Those, my friends, who are age 75 to 84, the
    most vulnerable in our society.
        And the group that I have keyed on because they have just
    dumped another mailing across the country's is TREA Senior
    Citizens League, and this one they term ``Summer 2001 Record
    Update and Verification.'' Well, does that sound official. They
    are updating their records and they are going to verify
    information for our seniors.
        Well, if it has to do with Social Security, the agency that
    is charged with that is the Social Security Administration. Who
    died and left TREA Senior Citizens League in charge of Social
    Security in this country?
        Now, they send the mailing and they use--one can say, well,
    maybe it is not a hoax, but it is sure misleading. Here is a
    copy of facsimile of a government check from the Social
    Security trust fund, and the amount is filled in already. It is
    $5,000.
        Now, here is an 84-year-old senior in my district getting a
    copy of this check.
        Then a couple weeks later, they get a copy of a ``notch
    victim registry'' card. Nice plastic card. Looks like a credit
    card.
        And then they get a mailing, and this is the one that galls
    me the worst, Mr. Chairman, they get a mailing from TREA Senior
    Citizens League, asking seniors to put this group in their
    will. Put them in their will.
        If the members of the Committee look at the back of my
    statement, I have a copy of this.
        Now, enough is enough. This hearing is the most timely that
    I can think of. Why would an organization ask seniors of the
    country to check a box to show their preference as to how they
    want their $5,000. If in fact the Social Security benefits
    payments are ever changed, the Social Security Administration
    will inform every senior in the country.
        This group has no business maintaining a registry, which I
    say is phony anyway. But they will come up and say, ``Yeah, we
    got it on disk.''
        For sale to the insurance companies around the country and
    other businesses.
        But what business does this group have maintaining a list
    of my seniors, called a registry? Or what right do they have to
    ask, ``Hey, you guys want your payment in four equal amounts or
    should we just increase your Social Security check?''
        Why are they doing this? Read on in the brochure: ``Send us
    a contribution so we can maintain your registry and do more of
    these good works.''
        That is the misleading scam situation that our seniors are
    put into repeatedly throughout the year.
        ``But seniors aren't that dumb, to send the money.'' Sad to
    say, some may be. They are concerned. They all could use $5,000
    just for drug costs alone. So they send the money.
        And how do we know that is being successful? A copy of the
    tax filing from 2000 shows they have raised $12 million.
        And what do they do with the money? Use that to mail more
    next year, to keep suckering these poor people who can least
    afford it.
        Mr. Chairman, this is most timely and important hearing
    that we have had in a long time.
        My letter to TREA group a year ago said, ``Stop mailing my
    constituents asking for money.'' And now it is time that be
    extended and Congress demand that TREA Senior Citizens league
    stop mailing our constituents for money.
        As for the charter, I think you have abused your charter.
    And I will be introducing legislation to revoke that charter so
    we can stop this shaking down of the poor seniors in this
    country.
        Mr. Chairman, thank you very much.
        Chairman Shaw. Thank you, Mr. Kleczka.
        And without objection, any of that information that you
    would like to put into the record, without objection, will be
    made a part of the record.
        Mr. Kleczka. Thank you very much.
        [The information follows:]

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        [GRAPHIC] [TIFF OMITTED] T5753A.021

        [Additional material is being retained in the Committee
    files.]

        Chairman Shaw. I have one final question for Mr. Huse, and
    then Mr. Matsui has a question.
        Mr. Smith will testify later--at least his written
    testimony said: We sent respondents a letter informing that the
    flyers they had received were inaccurate, and we included a
    brief descriptive brochure to provide additional background on
    our organization. No reply envelope was provided and no reply
    was anticipated. Most important, a representative of the SSA
    IG's office was shown the content of this mailing, including
    the brochure, before it was ever mailed, and TSCL even made
    changes to the letter based on the request of the SSA
    representative.
        Mr. Huse, is that a factual statement?
        Mr. Huse. That is not a factual statement, Mr. Chairman.
        Chairman Shaw. Perhaps we will inquire of Mr. Smith later
    as to exactly what he is talking about. But you say that what I
    just read directly from----
        Mr. Huse. We categorically deny that.
        Chairman Shaw. Of Mr. George Smith is an inaccurate
    statement.
        Mr. Huse. That is correct. There certainly was contact
    during the course of our investigation, but we never gave
    advice on how it should be mailed nor did we endorse it.
        Chairman Shaw. Mr. Matsui, do you have a follow-up?
        Mr. Matsui. Thank you, Mr. Chairman.
        Mr. Ryan asked a question about a volunteer somehow got all
    this to start. Did you ever ask who the volunteer was and the
    name of the volunteer and where the volunteer lives?
        Mr. Huse. We interviewed people who distributed it, but
    they didn't know where--the person that we were able to find,
    she found her original flyers in the back of a church or
    something and reproduced them on her own.
        Mr. Matsui. No, I am talking about--so no one was able to
    tell you who was the one that, or even a volunteer in the
    operation----
        Mr. Huse. No, exactly.
        Mr. Matsui. They just don't even know how it could have
    gotten out.
        Mr. Huse. But obviously it had to have some kind of
    organization because it went across the United States.
        Mr. Matsui. And let me just conclude by thanking Mr.
    Kleczka for all the work he has done. I appreciate it.
        And I might just comment, he clarified something that I was
    mistaken on. I didn't realize that there was a nonseparation
    between TREA and TREA Senior Citizens League. And I appreciate
    hearing that.
        But, again, thank you very much. I appreciate it.
        [Questions submitted from Chairman Shaw to Mr. Huse, and
    his responses follow:]
                                         Social Security Administration
                                            Office of Inspector General
                                              Baltimore, Maryland 21235
                                                      September 5, 2001

    The Honorable E. Clay Shaw, Jr. Chairman
    Subcommittee on Social Security
    Committee on Ways and Means
    House of Representatives
    Washington, DC 20215

        Dear Mr. Shaw:

        1. You stated that both the Notch Victim and the Slave Reparation
    flyer had the same post office box address maintained by the TREA
    Senior Citizens League (TSCL), a tax-exempt organization that states it
    advocates for legislative reforms on behalf of senior citizens. This
    claim (of being tax-exempt) was listed on all the flyers. This flyer
    also requested personal identifying information including the Social
    Security number. TSCL directed its data processing contractor to enter
    all of the victims' personal information into a database. Did you find
    out why?
        The sentence, ``This claim (of being tax-exempt) was listed on all
    the flyers'' is not on the flyers. However, the flyers do request
    personal identifying information including Social Security number. The
    investigation revealed that TSCL directed DMP to record all identifying
    information. It is TSCL's claim that they recorded the information so
    they could later contact victims.

        2. In Mr. Smith's testimony, he stated that TSCL launched a public
    education campaign to inform their supporters and senior citizens-at-
    large regarding these hoax flyers. During your investigation what
    evidence did you see that would support their statement?
        TSCL posted articles to their website that advised the public of
    this hoax.

        3. Both Mr. Smith and Mr. Zabko indicated that some other party was
    responsible for producing and distributing these flyers. Can you tell
    us if you believe this is a credible conclusion and if not, why?
        SSA-OIG was unable to identify the source of the flyers; we do not
    speculate as to who was responsible for circulating the hoax flyers.

        4. Do you know if temporary workers were used in the distribution
    of these hoax flyers?
        No, we have no information to support or refute the use of
    temporary workers in distributing the flyers. We did speak to one
    individual who was responsible for distributing the article in a local
    newspaper, and she stated that she did this as a community service.

        5. Is Mr. Stubbs an employee of your office? If so, did you query
    him as to his recollection that a sentence be removed from the letter
    TSCL was sending to respondents denying their involvement in the hoax
    flyer? What exactly was his recollection of his involvement in the
    meeting with TSCL?
        Mr. Stubbs is an employee of the Social Security Administration,
    Office of the Inspector General. Mr. Stubbs did not review or approve
    mailings. Mr. Stubbs did not direct or suggest to TSCL to remove a
    sentence that stated TSCL was denying their involvement in the hoax
    flyer. In a meeting between Mr. Stubbs and Mr. Zabko, Mr. Stubbs was
    shown a copy of a letter that stated the SSA was not cooperating with
    TSCL; it is that sentence that Mr. Stubbs suggested be removed from a
    letter TSCL was preparing.

        6. Did your investigation include The Retired Enlisted Association?
    If so, who did you interview and what information did you find? Please
    include the details of how TREA and TREA Seniors Citizens League are
    related to each other, including what moneys pass between the two
    organizations annually and the source and use of those monies.
        The investigation did not include TREA. We did interview a few TREA
    employees but only to gain background information on TSCL. Mark
    Olanoff, TREA Legislative Director, explained that TREA is a Section
    501(c)(19) veteran's service organization and TSCL is a 501(c)(4)
    social welfare organization. Olanoff further explained that TREA has
    existed since 1963 and was chartered by congress in 1992. Olanoff
    recalled that TSCL became a subsidiary of TREA around the same time.
    According to Olanoff, TREA's board of directors appoints TSCL's board
    of trustees and TREA's treasurer can also be TSCL's treasurer. Olanoff
    stated that TSCL paid TREA, on a quarterly basis, a trademark fee that
    is approximately 25% of TSCL's gross contributions.

        7. Certain subpoenas were issued and resisted as part of your
    investigation. Please provide a summary of what subpoenas were issued
    to whom, which subpoenas were resisted, why, and how such resistence
    was ultimately resolved.
        During the course of its investigation, the OIG subpoenaed the
    following entities: TREA Senior Citizens League (TSCL), Association
    Growth Enterprise (AGE), Direct Mail Processors (DMP), Public Interest
    Data, Inc. (PIDI) and Squire & Heartfield Direct, Inc. (S&H Direct).
    AGE and DMP fully complied with the subpoenas as issued. The subpoena
    issued to TSCL asked for, among other things, a copy of the database
    that was used to key in the victims' information. TSCL provided a
    database to Special Agent Alan Stubbs. In the process of analyzing this
    database, Special Agent Stubbs learned that TSCL had omitted portions
    of the database pertaining to contributions TSCL received as a result
    of the follow-up letter it issued to victims of the hoax. Due to TSCL's
    failure to fully comply with the subpoena, the OIG decided to issue a
    subpoena directly to Public Interest Data, Inc., the firm responsible
    for maintaining the database.
        OIG issued a subpoena to PIDI as TSCL's contract data processing
    firm asking for a complete database pertaining to the hoax flyers. PIDI
    agreed to provide a copy of the database, but like TSCL, refused to
    turn over information that would indicate the amount of contributions
    received by TSCL as a result of the follow-up flyer. After negotiations
    with PIDI were unsuccessful, the OIG was forced to seek enforcement in
    U.S. District Court. Once the enforcement action was filed by the U.S.
    Attorneys Office, the OIG again entered into discussion with counsel
    for PIDI. Ultimately, PIDI did agree to provide this information
    without need for a judicial hearing, and the subpoena enforcement
    action was dismissed.
        The OIG issued a subpoena to S&H Direct requesting documents
    pertaining to the ``Slave Reparation Act'' and other business conducted
    with or for TSCL and/or Michael Zabko. S&H Direct objected to the
    subpoena and refused to fully comply. The OIG was again forced to file
    subpoena enforcement pleadings in U.S. District Court. Ultimately, the
    OIG reached an agreement with S&H Direct whereby the company agreed to
    produce all of its documents related to the hoax flyer. The agreement
    specifically left open the possibility that the OIG would issue further
    subpoenas as necessary. Both subpoena enforcement actions were
    eventually dismissed without the need for formal hearing.

        8. Did you find any evidence indicating any money was sent in with
    the flyers received by the TSCL mailbox? If so, how much money was
    received and from how many individuals?
        The investigation found no evidence of any money being received in
    response to the hoax flyers. The hoax flyers do not request any
    contributions or donations; however, the follow-up letters that TSCL
    sent in response to the hoax flyers did request donations.

        9. Did you find any evidence that flyers were mailed to any
    individual?
        The investigation found no evidence that the flyers were mailed.
    The investigation revealed that the flyers were distributed through
    informal channels at churches, senior centers and through community
    bulletin boards.

        10. Do you have any information as to whether funds were received
    from the TSCL followup letter, which included the solicitation? If so,
    how much money was received, what was the average amount received, and
    how many individuals sent in money?
        Due to the fact that TSCL did not send a return envelope with the
    follow-up letter, we cannot discern if any contributions were sent in
    as a result of the follow up letter. According to Christy Turner, PIDI,
    all contributions are code based on a code placed on the return
    envelope. If a contribution is sent in, in a plain envelope, it is
    coded `WM' for white mail. A review of the database provided by PIDI
    revealed TSCL, through Squire & Heartfield Direct (S&H), sent out
    response letters to everyone who sent in an anonymous flyer. According
    to S&H, these mailers were sent out in four batches on the following
    dates; 9/29/00, 10/27/00, 12/8/00, 2/16/01. These mailers did not have
    a source code attached to them because they did not contain a return
    piece. If any of these were returned to TSCL, DMP would have coded them
    with a source code for ``white mail'' and included the month and year
    they were received (ex. WM0601). A review of the information obtained
    from PIDI revealed that after 9/29/00, 357 responses were received and
    coded white mail. Of the 357 responses, 117 had donations with them.
    The donations totaled $2,085.05.

        11. TSCL used the information received from the flyers to set up a
    database. In your investigation, did you determine whether information
    from that database was sold to other organizations?
        According to our investigation and interviews with S&H and Christy
    Turner, all of the information from the anonymous flyers was coded to
    be excluded from TSCL main database and was not sold.

        12. Can you confirm whether TSCL was the first to alert the Postal
    Service of the existence of these flyers?
        SA Stubbs contacted the Postal Inspection Service on June 30, 2000
    to obtain information on the post office box listed on the flyers.
    Between July 30, 2000 and the start of the formal investigation SA
    Stubbs had numerous contacts with various Postal Inspectors to
    ascertain information on postal regulations and violations. A formal
    meeting between the SSA-OIG and the Postal Inspection Service took
    place on September 26, 2000 with Postal Inspector Cowen. The Postal
    Investigation, as well as our investigation, was generated by consumer
    complaints. SA Cowen contacted TSCL on September 12, 2000, independent
    of SSA-OIG. We have no information to reflect TSCL contacted the Postal
    Inspection Service prior to September 12, 2000.

        13. At the time of the hearing, the Associated Press reported that
    based on a review of tax records, six senior groups, including AARP
    collected at least $18.8 million last year by renting out their mailing
    lists. Of that, the lion's share, $16 million, went to a for-profit
    subsidiary of AARP, which charges to share the names of its more than
    34 million members with mutual fund, credit card, and insurance
    companies. The National Committee to Preserve Social Security and
    Medicare, which was reported to have raised $27.6 million from donors
    last year, raised $1.3 million from the rental of their mailing list.
    The TREA Seniors Citizens League was reported to have raised just over
    $417,000 from the rental of their mailing list. Do these organizations
    obtain specific written consent of their members before they share
    these lists? Is all of this legal?
        These organizations are not required to obtain the specific written
    consent of their members prior to sharing their mailing lists. Lists
    are often sold, rented or exchanged with other organizations,
    purportedly to provide additional member-related benefits or to further
    a tax-exempt function. Mailing lists are the intangible personal
    property of the organization that maintains them, and although the
    originating organization may impose confidentiality and/or use
    constraints on the renting organization, there are currently no legal
    prohibitions on selling/renting such lists without the express member
    consent.

        14. You stated that one of the companies you investigated and then
    settled a civil lawsuit against was the Lead Agency, Inc. They sent
    direct mail solicitations under the guise of ``2001 Benefits Update.''
    The personal information they collected was then sold to insurance
    firms or agents that then solicited seniors for burial or private
    insurance policies. Is it illegal for the firms or agents to purchase
    or receive information received by these means? Once received, are
    these firms or agents required by law to safeguard the information
    received in any way? Are the insurance firms or agents affiliated in
    any way with the Lead Agency or companies involved in similar scams?
        Under Federal law, it is not illegal for insurance firms or agents
    to purchase or receive information that was originally obtained in
    violation of Social Security laws. Additionally, there are no Federal
    laws or regulations that prohibit a private company from selling or
    transferring private information in its possession. We do not address
    state regulations governing the receipt or transfer of such
    information, as these regulations may vary by jurisdiction. It is
    common practice for insurance firms and agents to enter into
    contractual relationships with companies such as the Lead Agency in
    order to generate insurance leads. Pursuant to these contracts, the
    leads are purchased by the insurance firms and agents.

        15. You mentioned the most challenging area of deceptive practices
    is direct-mail fundraising. How do you draw the line in terms of which
    mailings are legitimate and which aren't? What advice can you give to
    seniors so that they know the difference?
        Section 1140 of the Social Security Act prohibits individuals or
    entities from using Social Security program words, letters, phrases or
    emblems in a manner that may lead a reasonable person to believe that a
    mailing or other item is approved, endorsed or authorized by SSA. We
    review all allegations of misleading advertising to determine whether
    this provision has been violated and take administrative action where
    appropriate. Several mailings, however, do not appear to be from or
    endorsed by the SSA, but rather make bold and inflammatory statements
    about the Agency or its programs in an effort to solicit contributions.
    These mailings most often target the elderly. We would advise any
    senior citizens who has questions about the origin of a mailing to
    contact their representative in Congress or the Agency mentioned in the
    mailing.

                Sincerely,
                                                     James G. Huse, Jr.
                                   Inspector General of Social Security

        Chairman Shaw. At this point, there appears to be only one
    vote on the floor. We will recess for the appropriate time, and
    we will reconvene 5 minutes after the conclusion of this vote,
    which should be about 15 minutes.
        [Recess.]
        Chairman Shaw. The Subcommittee will come back to order.
        We have changed the order of the second and the third
    panel. And we will now proceed with the third panel, which we
    have Mr. George Smith, who is the executive director and the
    chairman of TREA Senior Citizens League in Alexandria,
    Virginia; Christy Turner, the account executive for TREA Senior
    Citizens League, Public Interest Data Incorporated, Alexandria,
    Virginia; and Michael J. Zabko, who is a former executive
    director of TREA Senior Citizens League in Alexandria,
    Virginia.
        If the witnesses will please stand, I would like to swear
    them in.
        [Witnesses sworn.]
        Chairman Shaw. If the witnesses would be seated, and we
    will proceed with Mr. Smith.
        We have received written testimony from each of the
    witnesses, which will be made a part of the full record. It is
    my intention to ask each one of the witnesses at the
    appropriate time if the contents of the written statement are
    true, under oath. And so I would advise that any of the
    witnesses that may want to make any corrections in the written
    statement, that you do so as part of the testimony you do give
    to this Committee.
        But in any event, your entire testimony will be made a part
    of the record, and you may proceed and summarize as you see
    fit. Mr. Smith?

     STATEMENT OF GEORGE A. SMITH, CHAIRMAN, TREA SENIOR CITIZENS
                      LEAGUE, ALEXANDRIA, VIRGINIA

        Mr. Smith. Mr. Chairman, and distinguished members of this
    Committee, my name is George A. Smith. After serving 21 years
    in the United States Army, I am now honored to serve as the
    volunteer chairman of the board of trustees of TREA Senior
    Citizens League, also know as TSCL.
        I am 70 years old, so I think I am fully qualified to
    testify on a matter as important to senior citizens.
        First, background information. TSCL was established in 1993
    and currently has approximately 1.2 million members,
    supporters, nearly all of whom are over the age of 60.
        Our staff includes three full-time registered lobbyists.
        We have attached our 2001 legislative agenda to our written
    testimony, and you will see we work on a wide range of topics.
        We also spend a large portion of our resources in educating
    our Members on important issues and have developed numerous
    publications on seniors issues.
        We have also provided testimony for a variety of
    congressional committees. At our Web site, anyone can search
    through thousands of pages of information on Social Security
    and Medicare.
        Finally, we offer our members a number of benefits at
    absolutely no cost, including a prescription card, which, by
    the way, meets and probably exceeds the standard laid out in
    the President's recent proposal.
        On the subject of the misleading mail, first I want to
    stress: We never solicit or keep Social Security numbers in our
    records. Therefore, I was disturbed by the Social Security IG
    report and its possible implication that TSCL might have
    requested Social Security numbers on the so-called hoax flyers.
        Let me be clear: TSCL and its service providers did not
    create or distribute these flyers. Our only involvement is that
    our post office box number and some variations of our name was
    placed on the flyers by the persons who created them.
        By the end of this hearing, you will see we are also
    victims of this hoax, that we tried to determine their origin,
    and that we worked to counteract misinformation in the flyers.
        To date, about 29,000 seniors have wasted their time and
    the cost of a stamp after reading these flyers. This hoax also
    cost TSCL time and money to inform these people that they had
    been misled.
        Here are some of the actions we took, starting over a year
    ago:
        We alerted the Postal Service authorities.
        We put up a special Web site, alerting the public to the
    hoax.
        We distributed six press releases to about 1,300 senior
    publications.
        We contacted dozens of government officials, including
    every regional Social Security press officer.
        Our massive public education effort seems to have helped.
    The influx of people responding to the hoax flyer dwindled to a
    trickle by the end of January.
        Mr. Chairman, this Subcommittee requested my testimony on
    questions stemming from the IG report. As I stated in my letter
    to this committee, the report contains some extremely
    misleading information, so let me state the following for the
    record.
        As indicated on page 8 of my written testimony, we only
    recorded respondents' names and addresses, and I should add, in
    some cases, birth dates, so we could write and tell them that
    they were being misinformed. Any claim that TSCL entered Social
    Security numbers into a database or otherwise recorded Social
    Security numbers is untrue.
        Second, when we sent the letter informing them the flyers
    were inaccurate, we included a one-page descriptive brochure so
    they would know who was writing them.
        This was not a fundraising mailing, though it included
    information on how to join our organization. No reply was
    anticipated, and no reply envelope was provided.
        Further, a Social Security representative was shown this
    mailing, including the brochure and then asked for his comments
    before it was mailed. TSCL even made changes to the letter
    based on the request of the representative.
        It is grossly unfair to imply that we were attempting to
    generate contributions through this public service.
        In summary, I believe the public education campaign we
    conducted at our expense was so effective it helped slow the
    spread of the flyers. We continue to remind the public to
    protect Social Security number and private information.
        Finally, and once again, although TSCL did nothing wrong,
    the IG report has left many people with the impression we did.
    This seems unfair.
        Mr. Chairman, in our response to Social Security, we
    requested the record be set straight. Therefore, we would
    appreciate any assistance you might be able to offer in getting
    the record corrected.
        In closing, we thank you for this opportunity, and we look
    forward to helping you to the best of our ability.
        [The prepared statement of Mr. Smith follows:]

     Statement of George A. Smith, Chairman, TREA Senior Citizens League,
                              Alexandria, Virginia

                                  Introduction

        Mr. Chairman and Members of the House Ways and Means Committee's
    Subcommittee on Social Security, my name is George Smith. After serving
    21 years in the United States Army, I now am honored to serve as the
    volunteer Chairman of the Board of Trustees of TREA Senior Citizens
    League, which also is known as TSCL.
        Both TSCL and I share your deep concern about senior citizens,
    including the need to protect our senior citizens from those who seek
    to extract their personal information, possibly for illegal purposes.
    It is a pleasure to be here to testify on behalf of TSCL on this very
    important issue.
        At the beginning, I should say that I am ``social security
    qualified'' to give my views to this Subcommittee, being 70 years old.
    My fellow Board of Trustees members are likewise fully qualified for
    their important responsibilities on the Board, most being over the age
    of 65.

                          TREA Senior Citizens League

        Please allow me to provide you some background on TREA Senior
    Citizens League. TSCL was established in 1993 as a special nonprofit
    project of The Retired Enlisted Association (TREA), a tax exempt
    organization founded in 1963 and chartered by an act of Congress. In
    1994, TSCL was separately charged as an affiliate of TREA, and in June
    1995, the IRS recognized TSCL as an Internal Revenue Code section
    501(c)(4) nonprofit, social welfare organization and civic league.
        TSCL is open to anyone who is concerned about protecting his or her
    earned retirement benefits, and we send out many of TSCL's action
    packets and other materials to members and nonmembers alike. You need
    not send a contribution to be placed on our supporter list and receive
    many of our public service booklets, informational literature and
    action packets. In fact, any member of the public can request and
    receive any of our informational literature, at no charge, at any time,
    and many do. Currently, TSCL has approximately 1.2 million members and
    supporters, nearly all of whom are over the age of 60.
        In keeping with our mission to defend and protect our members'
    earned retirement benefits, TSCL currently employs three full-time
    registered lobbyists dedicated to working for fair Social Security
    laws, and for changes to modernize, upgrade, and stabilize the Medicare
    program.
        Representing the wishes of our members and supporters sometimes
    means we take issue with government policies. We believe it is our duty
    to advance the interests of our constituency, even though, from time to
    time, doing so may cause us to differ with the Social Security
    Administration, or even some Members of this Subcommittee. I have
    included our 2001 Legislative Agenda as Attachment A so that you may
    see more fully the scope of issues on which we work.
        In addition to our legislative efforts we also spend a large
    portion of our resources and time in educating our members on important
    issues affecting their benefits. TSCL members receive a copy of our
    flagship publication, The Social Security & Medicare Advisor
    newsletter, 10 times a year.
        We have also developed and distributed numerous publications and
    booklets educating our members on such topics as ``The Senior Survival
    Guide to the Medicare Maze,'' ``The Senior Survival Guide to
    Caregiving,'' and my personal favorite, ``The Senior Activist's
    Survival Manual,'' which we use to educate our members on how to
    communicate effectively with their Congressional Representatives.
        By the way, every Congressional office receives a copy of our
    newsletter each time it is published and has done so for several years.
    Many Members of Congress use our ``Congressional Corner'' article to
    communicate with TSCL's members. We also send Members of Congress and
    other public officials a variety of policy papers, booklets and
    information. We have provided written testimony for the record for a
    variety of Committees, including the House Ways and Means Committee's
    Subcommittees on Health and on Social Security, and the Senate
    Committee on Finance. We are also members of The Free Speech Coalition,
    The Military Coalition and the National Military and Veterans'
    Alliance.
        Our education efforts and communications with TSCL members and
    senior citizens in general are also enhanced through our website,
    www.tscl.org, where members can search through thousands of pages of
    information on Social Security and Medicare issues, and contact their
    Congressional representatives through the website's Legislative Action
    Center. We have also created a new Speaker's Forum where our three
    lobbyists are available to address seniors' groups and organizations on
    TSCL legislative issues.
        Finally, we offer our members a number of membership benefits,
    including our MatureRx Prescription card. (Let me just say here that,
    this free member benefit meets, and probably exceeds, the standards
    laid out in the President's recent proposal for a senior discount drug
    program.) We also offer various other discounts on car rentals, moving
    van services, and like items. Unlike many other organizations, TSCL
    does not generate any revenue from these member benefits, nor does TSCL
    ``sell'' its members anything such as insurance.
        Again, time does not permit me to enumerate all that we are doing
    for our TSCL members and supporters, but it is a substantial amount of
    activity. I have with me several copies of our TREA Senior Citizens
    League 2000 Annual Report, and they are available to interested members
    of the public on request.

                                The Hoax Flyers

        We advise seniors to guard closely their private information,
    including their Social Security Number. We never, ever, solicit this
    type of information for our records, nor do we store it on our
    database. Thus, I was particularly disturbed by the Social Security
    Administration Inspector General's Report of July 6, 2001, and its
    implication that TSCL might have had something to do with requests for
    Social Security numbers and other misinformation in the hoax flyers
    talked about in that report.
        I'm hoping that by the end of this hearing you will see that we too
    are victims of these hoax flyers, that we have tried to determine their
    origin, and that we have worked responsibly to counteract the
    misinformation these flyers have created ever since we first learned of
    them.
        Let me be clear: TSCL and/or its service providers never put out,
    distributed, or were associated in any way with these flyers. Our only
    involvement was that the hoaxer used some variation of our name and our
    post office box number on the flyers. Regrettably, approximately 29,000
    seniors were misled into wasting their time and the cost of a stamp
    after reading these flyers. I am sure many had their hopes dashed when
    we informed them they were misled. But the hoaxer who started sending
    out the flyers that caused this investigation also cost us a
    substantial amount of money and time as we struggled to inform the
    flood of some 29,000 people that they had been misled.
        It is our understanding that we were the first to alert the United
    States Postal Service authorities when this hoax started. And, last
    year, long before the Social Security Administration published their
    warning, we put up a special consumer website
    (www.tsclconsumeralert.org) with full details on the hoax to make sure
    the public and our supporters knew about the hoax. At every possible
    opportunity we have warned, and continue to warn, our supporters in
    particular, and older Americans in general, to never give out Social
    Security Numbers except as specifically required by law.
        Since last August, we have distributed six press releases warning
    the public that the flyers are a hoax (Attachment B). These press
    releases went out to about 1,300 senior-related publications in
    addition to media in areas where we heard flyers had cropped up. In
    addition, we sent press releases to the National Newspaper Publishers'
    Association, which represents over 200 African American publications.
    Our press releases were also sent to every Member of Congress. We've
    contacted dozens of elected and non-elected government officials,
    including the SSA's Headquarters Press Officer and each regional SSA
    Press Officer. The office of the Secretary of Veterans Affairs told us
    they'd be sure to get the word out to all of their regional offices as
    well as every VA hospital and clinic. The folks at the Better Business
    Bureau also agreed to spread the word to their regional offices.
        As a result of this massive public education effort undertaken
    solely at the expense and time of TSCL, we seem to have been able to
    help put a stop to the spread of this hoax. The influx of people
    responding to the hoax flyer dwindled to a trickle by the end of
    January. Only a handful have shown up for the past several months.
        Far worse than the expenses we've incurred or the huge amount of
    time we've had to devote to fighting this hoax, is that our good name
    may now be questioned as a result of this hoax.

                          Setting the Record Straight

        The letter to me from the Subcommittee requesting my testimony
    today states that the Social Security Administration's Inspector
    General (SSA's IG) had completed investigations about ``two types of
    misleading mailings,'' and that the focus of the hearing would be on
    ``several different mailings, including slave reparation and notch. . .
    .'' The Subcommittee sent me a subpoena so that I ``may respond to
    questions . . . regarding TSCL's actions relative to these mailings.''
        The Subcommittee's letter prompted a response from me, which was
    hand-delivered on Monday, July 23 (Attachment C). The SSA's IG's Report
    of July 6, 2001 reveals that IG investigated two types of flyers. Those
    flyers, which have been referred to as ``hoax flyers,'' were crude
    single page flyers that were apparently widely distributed in certain
    parts of the country. The Subcommittee's letter indicates that,
    according to the SSA IG's Report, ``TSCL responded to the mail
    generated by these flyers by directing its data processing firm to
    create a database containing the respondent's personal information.''
    This information was drawn from the IG's Report, and is misleading, if
    not absolutely false. The only data from the respondents we recorded
    were their names and addresses. These items were necessary so we could
    write to the respondents and tell them they had been misinformed. TSCL
    absolutely did not record any other personal information. Any claim
    that TSCL entered Social Security Numbers into a database or otherwise
    recorded those numbers in any way is untrue. TSCL never records Social
    Security Numbers, and in fact advises seniors to be wary about giving
    out their Social Security Numbers.
        Finally, my response points out that the Subcommittee's letter
    quoted statements contained in the SSA IG's recent Report, that ``TSCL
    . . . wrote to each victim disavowing any responsibility for the
    flyers, but included TSCL's standard fundraising brochure.'' That
    statement is incomplete and misleading. TSCL tried to correctly inform
    respondents who had been misinformed by the hoax flyers. We sent
    respondents a letter informing them that the flyers they had received
    were inaccurate, and we included a brief, descriptive brochure to
    provide additional background on our organization. No reply envelope
    was provided and no reply was anticipated. Most important, a
    representative of the SSA IG's office was shown the contents of this
    mailing, including the brochure, before it was ever mailed, and TSCL
    even made changes to the letter based on the request of that SSA
    representative.
        After reading and rereading the SSA IG's Report of July 6, 2001, I
    replied to the Acting Commissioner of Social Security, pointing out
    several unfair statements in the SSA IG's Report (Attachment D).
        Obviously, today's hearing was initiated by the Subcommittee's
    concern about the delivery of misleading information to senior
    citizens, and it is important that such information, such as the hoax
    flyers, be exposed as false. This is good for seniors, and good for the
    entire country.

                                   Conclusion

        In summary, we have done everything we can to inform both our
    supporters and senior citizens-at-large about this hoax.
        In fact, I believe the public education campaign we launched after
    we first began seeing the flyers was so effective that it has helped
    slow the spread of the flyers--certainly, the number of inquiries we
    receive has slowed from hundreds a day to a handful each month. Since
    there is no guarantee that this hoax will not be resuscitated, we are
    keeping our ``Consumer Alert Website'' updated, and we are continuing
    to remind both our supporters and the public to never give out their
    Social Security numbers or other private information.
        I don't think I am being immodest in saying that TSCL's response to
    this could serve as a model for others who may have to rapidly respond
    to fast circulating, but inaccurate, claims such as those made in the
    hoax flyers.
        Finally, and unfortunately, although TSCL did nothing wrong, the
    Social Security Administration, in its report, was willing to leave the
    impression that we did--this seems unfair.
        Mr. Chairman, in our response back to the SSA's IG Report we
    requested that the record be set straight (see Attachment D).
    Therefore, we would appreciate any assistance you might be able to
    offer in getting the OIG Report corrected.

                                           Attachment A

                          YEAR 2001 LEGISLATIVE AGENDA

                                  JANUARY 2001

                ``In Defense and Protection of Earned Benefits''

        In 2001, TREA Senior Citizens League's goals are to work for fair
    Social Security reform and for changes to modernize, upgrade and
    stabilize the Medicare program. TSCL will also continue to expand its
    legislative agenda to address other issues of importance to seniors
    such as increasing access to affordable long-term care, improving the
    quality of nursing home care, and enacting a fair Patients Bill of
    Rights.
        As TSCL continues to work for these goals, it recognizes that the
    solutions to many of these problems will require Congress to authorize
    additional outlays of funds. The price of reform is often very high.
    However, as the country is in an unprecedented time of prosperity with
    the budget running huge surpluses, TSCL firmly believes that a
    significant portion of these surpluses should be dedicated to immediate
    and long-term reforms of Social Security and Medicare. Therefore TSCL
    urges the Administration and Congress fairly allocate any budget
    surplus to long term strengthening of the Social Security and Medicare
    trust funds; to immediate fixes such an improved and accurate COLA,
    Notch Reform and some form of optional, low-cost, prescription drug
    coverage; and lastly to tax cuts.

        Medicare Improvements:

             Medicare Prescription Drug Benefit: Diligently pursue
            the passage of legislation to establish a voluntary fair and
            universal outpatient prescription drug benefit for all
            Medicare-eligible beneficiaries.

        TSCL Position: TSCL will lend its full support and urge the
    grassroots efforts of its members and supporters to enable the passage
    of any proposed Medicare prescription drug benefit that is universal,
    voluntary, understandable, responsible and most importantly affordable.
    TSCL has and will continue to monitor the many prescription drug
    benefit proposals that surfaced in 2000 and that can be expected in
    2001. TSCL remains objective in its view towards a prescription drug
    benefit in that the League supports virtually any effort that provides
    older Americans with some financial relief at the pharmacy window.
    However, the League does not support inaction or delaying tactics that
    only serve to prolong the hardships being experienced by older
    Americans.
        This means we may from time to time support a bill that may not
    include all of the needed items but will benefit many. In no way will
    this preclude our continuing efforts to achieve all the needed drug
    prescription benefits.

        Bills of Interest:

        TSCL supports a number of bills in both the House and Senate that
    amend title XVIII of the Social Security Act to provide coverage of
    outpatient drugs under Medicare. The major bills in the Senate include
    S. 10--Medicare Prescription Drug Coverage Act of 2001, introduced by
    Senator Tom Daschle (D-SD) and S. 358--Medicare Prescription Drug and
    Modernization Act of 2001, introduced by Senators John Breaux (D-LA)
    and Bill Frist (R-TN). The major bills in the House include H.R. 339--
    Medicare Outpatient Prescription Drug Coverage Act of 2001, introduced
    by Rep. Eliot Engel (D-NY); H.R. 803--Medicare Modernization and
    Solvency Act of 2001, introduced by Senator Pete Stark (D-CA); H.R.
    828--Senior's Health Care Choice Act of 2001, introduced by Rep. Felix
    Grucci (R-NY); and H.R. 1512--Medicare Extension of Drugs to Seniors
    (MEDS) Act of 2001, introduced by Rep. Bernard Sanders (I-VT).

             Medicare Improvements: Work with Congress to
            modernize, improve and strengthen the Medicare program.

        TSCL Position: TSCL continues to support any efforts by Congress to
    improve and strengthen the Medicare program for the future as long as
    such efforts do not negatively impact on current beneficiaries. One of
    the primary things we support is a true modernization which of
    necessity will include ``lockbox'' protection of Medicare funds to
    prevent any future raids by Congress on these funds. TSCL will also
    continue to seek ways to improve and increase health care coverage
    under Medicare such as easing the requirements for beneficiaries to
    qualify for timely hospice care under the Medicare program. TSCL also
    supports legislative efforts to prevent sudden disruption of Medicare
    beneficiary enrollment in Medicare Plus Choice Supplement Plans.

        Bills of Interest: TSCL supports H.R. 148, introduced by Rep. Bill
    Pascrell, Jr., (D-NJ), which prevents sudden disruption of Medicare
    beneficiary enrollment in Medicare Plus Choice plans.

        Social Security Improvements:

             Social Security ``Notch'' Repeal or Settlement:
            Continue to lead the fight to either repeal the previous law
            that created an inequitable distribution of Social Security
            monthly benefits to eligible recipients based on year of birth,
            or to gain support for an acceptable $5,000 settlement in order
            to bring the issue to closure.

        TSCL Position: One of TSCL's first priorities for reform of Social
    Security is compensation for over 9 million surviving Notch babies born
    during the ten-year period of 1917 through 1926. In 1977 Social
    Security was close to bankruptcy, and was expected to run out of money
    by 1981. Congress enacted legislation to change the way benefits were
    calculated, beginning with retirees who were born in 1917 and became
    eligible for benefits in 1979. The changes were major, and the
    transition between the old and new method of calculating benefits not
    only took place over a very short period of time, they did not work as
    anticipated. Those born during the Notch years received substantially
    lower benefits than those paid to retirees born before and after them.
    When represented on a chart, the disparity in benefits forms a deep
    ``V'' notch. Benefits plunged from a peak for retirees born in 1916 and
    hit the lowest part of the ``V'' for those who were born in the years
    1920-21. Benefits began to rise for those born in 1922 until they
    became more in line with other retirees, starting with those born in
    1927.
        Although TSCL believes that Congress did the right thing in 1977 to
    save the Social Security system from bankruptcy, the Notch babies paid
    the price in lower benefits. TSCL believes that it is now time to
    compensate the ``Notch Survivors'' for the sacrifices they made over
    the past twenty years. No matter what explanations are given that the
    ``Notch babies'' are receiving the proper benefits, the fact is that
    people born before and after the Notch years are receiving
    substantially higher Social Security payments. TSCL believes that it is
    consummately unfair to penalize those people who sacrificed and
    suffered through WWII and were responsible for our ultimate victory.
    It's past time to pay these people what is their due and what is fair.
    TSCL has devoted a significant amount of its time and resources to
    finding legislative solutions to correct this inequity. Although TSCL
    would prefer to restore full Social Security benefits to ``Notch
    babies'', TSCL recognizes that ``lump-sum'' notch proposals that would
    provide a one time payment of $5,000, would cost significantly less
    than the traditional notch bills ($10 billion a year for four years vs.
    $300 billion). In a survey of TSCL members 85% indicated they would
    accept the $5,000 settlement proposal and that it would be a positive
    move to greatly improve their quality-of-life.

        Bills of Interest: H.R. 97, introduced by Rep. Ralph Hall (4-TX)
    and H.R. 853, by Rep. Robert Wexler (D-FL) are the TSCL preferred bills
    since they support the payment of a $5,000 settlement. TSCL also
    supports H.R. 80 and H.R. 82, both introduced by Rep. Jo Ann Emerson
    (8-MO), and H.R. 870, introduced by Rep. Bob Clements (D-TN).

             Consumer Price Index_Elderly (CPI-E): Work hard for
            the passage of legislation that establishes an annual Cost of
            Living Adjustment (COLA) index that accurately reflects the
            actual expenditures and needs of older Americans.

        TSCL Position: TSCL emphatically believes that the current method
    of calculating annual COLAs using the Consumer Price Index--Wage
    Earners (CPI-W) method does not accurately take the buying habits of
    older Americans into account. Put simply, older Americans do not have
    the same needs and buying patterns as younger workers. For example,
    seniors have no choice but to spend a significant percentage of their
    income on prescription drugs--an item which has risen rapidly in cost
    and will continue to rise. The Bureau of Labor and Statistics (BLS)
    market basket includes goods ranging from different kinds of meat to
    different kinds of electronic goods. The theory is that if the price of
    one good rises, a consumer will substitute a lower-priced good for the
    first item (ex. beef vs. chicken). When the cost of goods in the market
    basket falls, the CPI is adjusted downward. This results in lower
    COLAs.
        Senior Citizens are affected differently than other consumers by
    the change in the cost of goods. In the case of electronics, whose
    prices are falling sharply with technological advances, seniors are
    affected negatively in two ways. First, seniors often do not use
    laptops, cell phones to the extent that younger people do, so their
    buying habits are not accurately reflected by the CPI. Thus, when the
    prices of these items fall, bringing a change in the CPI, lower COLAs
    result. However, seniors do not benefit since they do not save money on
    the lower prices of these goods because they do not buy them as often.
    Second, seniors are different from other groups of consumers because if
    the price of an item goes up, they often forego that item, either
    because there is no replacement or because they cannot afford even the
    replacement item. (ex. prescription drugs--if cost of a drug goes up
    and no generic is available, there is no substitution because seniors
    often cannot afford the drug at the higher cost.)
        Currently the BLS compiles an experimental CPI-E, which tracks the
    change in prices for goods used by seniors age 62 and older. Over the
    17 years for which CPI-E data has been available, it was found that the
    prices of goods bought by the general public rose by 73.9% while it
    rose by 85.1% for seniors (a difference of over 11 percentage points).
    Medical costs are only weighted as 5.6% of the CPI, but the CPI-E has
    found that the medical costs of seniors rose 181% in the past 17 years.
    A study commissioned by TSCL found that, had the CPI-E been used over a
    17-year period instead of the CPI-W, a retiree with average benefits
    would have received a total of approximately $5,600 more in benefits
    over that 17-year period.
        TSCL strongly supports legislation that would create a more
    accurate Social Security COLA by using the CPI-E vice the current CPI-W
    to determine the annual increase.

        Bills of Interest: TSCL will work with Rep. Bernie Sanders (I-VT)
    to reintroduce his bill--Consumer Price Index Act for Elderly Consumers
    Act--in 2001 that directs the Bureau of Labor and Statistics to make
    the CPI-E permanent as the basis for calculating Social Security COLAs.

             Annual Costs of Living Adjustment (COLA): Work hard
            with the Bureau of Labor Statistics and members of Congress to
            ensure that the ``market basket'' used for determination of CPI
            accurately reflects Seniors' buying habits and resist any
            legislative proposals to cap COLAs below inflation.

        TSCL Position: TSCL previously opposed a series of ``technical
    corrections'' to the CPI that ultimately which reduced annual Cost-of-
    Living Adjustments (COLAs) since 1995, sometimes to levels below the
    rate of inflation. We now realize that this readjustment on a more
    timely basis is necessary to reflect the actual costs of goods and
    services. As previously stated, TSCL believes the CPI-E index is the
    most accurate way to calculate Social Security COLAs. Therefore, TSCL
    remains opposed to any legislative effort to either delay the Social
    Security COLA or to further correct COLAs calculations based on
    calculations that have little reflection of the actual buying habits of
    seniors.

        Bills of Interest: TSCL supports H.R. 832--Social Security
    Guarantee Act of 2001, introduced by Rep. Walter Jones (R-NC). This
    bill guarantees the right of individuals to receive Social Security
    benefits in full with an accurate annual COLA.

             Social Security Reform: Vigorously support any effort
            to reform Social Security that protects benefit levels of
            current beneficiaries and addresses the inevitable structural
            funding problem facing the next generation of retirees.

        TSCL Position: TSCL supports any effort to reform Social Security
    that will not affect today's Social Security beneficiaries. TSCL will
    continue to support legislation that will transition the Social
    Security System into a system that offers a greater rate of return for
    future eligible beneficiaries, as long as today's retirees continue to
    receive their full SS benefit. TSCL will continue to oppose any
    legislation that would reform Social Security by cutting current
    benefits. TSCL will continue to monitor the issue of Social Security
    privatization.

        Bills of Interest: TSCL supports H.R. 14, introduced by Rep. Rob
    Portman (R-OH), which establishes a Bipartisan Commission on Social
    Security Reform.

             Social Security Trust Fund Solvency: Renew the
            commitment to support legislation that creates a tangible
            Social Security Trust Fund that is protected from funding raids
            to support other government programs or balance the federal
            budget.

        TSCL Position: TSCL will continue to support legislative efforts to
    create a tangible Social Security Trust Fund ``Lock-Box'' to
    permanently stop the government from spending Social Security money on
    other federal government expenses. TSCL also will continue to oppose
    any legislative efforts to balance the federal budget that continues to
    use annual Social Security surpluses in order to reach the balance
    target.

        Bills of Interest: TSCL supports H.R. 2--Social Security and
    Medicare Lock-Box Act of 2001, introduced by Rep. Wally Herger (R-CA),
    which establishes a procedure to safeguard the combined surpluses of
    the Social Security and Medicare hospital insurance trust funds. TSCL
    also supports H.R. 96--Social Security Preservation Act of 2001,
    introduced by Rep. Ralph Hall (D-TX), which amends the Social Security
    Act to ensure the integrity of the Social Security trust fund by
    requiring the Managing Trustees to invest the annual surplus of the
    trust fund in interest-bearing obligations of the United States and
    certificates of deposits, and to protect the trust fund from the public
    debt limit.

             Repeal of the 85 Percent Social Security Tax Rate:
            Continue to urge Congress to reduce or eliminate the 85% Social
            Security tax rate passed in 1993 and to fully eliminate all
            taxes on Social Security income.

        TSCL Position: Under current law, up to 50 percent of Social
    Security benefits may be taxable for individuals with annual
    provisional incomes between $25,000 and $34,000, and couples with
    annual provisional incomes between $32,000 and $44,000. Up to 85
    percent of SS benefits are taxable for individuals with more than
    $34,000 in annual provisional income or couples with more than $44,000.
    These income levels are fixed and do not rise annually like personal
    exemptions or tax brackets. This means that as incomes and Social
    Security benefits gradually rise, increasing numbers of older Americans
    must pay the higher 85 percent tax on their benefits. TSCL also
    believes that an eventual total elimination of all taxes on Social
    Security income is warranted. The current practice of taxing Social
    Security income means that individuals are being taxed on monies that
    have already been taxed which is double taxation. If Congress wants to
    cut taxes for the American public they should start with those people
    who have paid taxes the longest and are now receiving Social Security.
    It's only fair!
        TSCL was very encouraged in 2000 when the House of Representatives
    passed H.R. 4865, The Social Security Tax Relief Act, that would have
    repealed the 1993 Social Security 85 percent tax rate increase and
    returned it to the former 50 percent rate. Unfortunately, this bill did
    not make it through the Senate. TSCL will continue to actively work
    with Congress to reintroduce and enact legislation in 2001 to repeal
    the 85 percent tax rate increase.

        Bills of Interest: TSCL is currently supporting two bills, H.R.
    122, introduced by Rep. Sam Johnson (3-TX); and H.R 192, introduced by
    Rep. Bob Stump (3-AZ), that would amend the Internal Revenue Code of
    1986 to repeal the 1993 income tax increase on Social Security
    benefits. TSCL also supports two Senate bills--S. 181, introduced by
    Sen. Richard Shelby (R-AL) and S. 237, introduced by Sen. Tim
    Hutchinson (R-AR).

             Social Security Earnings Limit Expansion: Continue to
            urge Congress to abolish the earning limits for workers between
            the ages of 62 and 64 who are receiving Social Security
            benefits.

        TSCL Position: Last year, TSCL submitted testimony to Congress in
    support of the repeal of the earning limit that previously required a
    dollar for dollar reduction of the Social Security benefits for
    individuals who worked after reaching age 65. Although the Social
    Security benefit offset was repealed for retirees age 65 thru 70, those
    who retired early (under age 65) are still penalized for working.
    Younger retirees can only earn up to $10,680 in 2001 without losing any
    SS retirement benefits. Exceeding this amount requires a $1 reduction
    for every $2 of earning over the limit.
        TSCL continues to believe that those choosing to receive a reduced
    benefit at age 62 should be afforded the opportunity to supplement
    their SS benefit by also being allowed to work without any offset.

        Bills of Interest: None.

             Repeal/Amend Social Security Offset and Windfall Laws:
            Urge Congress to repeal or amend Social Security Offset and
            Windfall laws that reduce Social Security benefits of retired
            government and state employees.

        TSCL Position: Individuals who have worked at jobs covered both by
    a federal or state government pension, and by Social Security should be
    entitled to benefits from each. However, under the Windfall law, Social
    Security benefits of a retired federal or state government employee can
    be reduced by as much as $260 a month (based on someone applying for
    benefits in 2000 at age 62). Under the Offset law, individuals with
    government pensions can be hit even harder when they try to collect a
    spousal or survivor benefit based on their spouse's Social Security
    benefit. The Offset law can almost completely eliminate a spouse or
    survivor's Social Security benefit.
        TSCL supports legislation that would amend or repeal the Windfall
    and Offset laws.

        Bills of Interest: TSCL supports H.R. 664, introduced by Rep.
    William Jefferson (D-LA) and S. 611, introduced by Senator Barbara
    Mikulski (D-MD) which both guarantee a minimum $1200 combined monthly
    income from a government pension and Social Security benefits before
    the Offset could be applied. TSCL also supports H.R. 1073, introduced
    by Rep. Barney Frank which amends the Windfall formula, giving 93
    percent of affected retirees more Social Security benefits, but prefers
    H.R. 848, introduced by Rep. Max Sandlin (D-TX) which just simply
    repeals the Windfall provision.

        Other Key Priorities:

             Increased Access to Affordable Long Term Care:
            Continue to work with Congress to seek innovative solutions to
            increase access to affordable long-term care, whether through
            Medicare or though other programs.

        TSCL Position: TSCL remains very concerned over the lack of
    affordable long-term care for senior citizens. Many of those who need
    such care are forced to ``spend down'' their own assets before they can
    qualify for Medicaid. Although long-term care insurance does exist,
    these plans are only affordable for younger senior citizens. Older
    seniors who are now at the age when they will most likely need long
    term care never had the opportunity to purchase these plans, and cannot
    afford them now.
        TSCL will continue to seek innovative ways to increase access to
    long-term care for senior citizens, whether through the existing
    Medicare program, or through other mechanisms.

        Bills of Interest: None.

             Fight to Prevent and Expose Social Security/Medicare
            Fraud, Waste and Abuse.

        Bills of Interest: None.

                                           Attachment B
                    Misleading Information Aimed at Seniors
        Alexandria, VA (August 2000) The Senior Citizens League (TSCL) has
    recently received reports of a possibly fraudulent scheme aimed
    primarily aimed at African American seniors. We have discussed this
    with both the Social Security Administration and the United States
    Postal Inspection Service. Flyers in Chicago, Milwaukee, Baton Rouge
    and Jackson, Hattiesburg and Canton, Mississippi appeal to those born
    before 1928 and of the ``Black Ethnic Race''. It goes on to claim that
    if people send in their name, address, phone, date of birth, and Social
    Security number to the ``TREA Senior `Systems' League'' that an
    application will be mailed to them leading to either the issuance of a
    $5000 lump sum check or larger Social Security checks.
        ``This is a misleading statement that appeals to the most
    vulnerable seniors who really need every penny to pay for prescribed
    drugs, pay rent and buy food'' said Michael Zabko, TSCL's Executive
    Director. ``To even imply the `Slave Reparation Act' will give them
    $5000, is a senseless and irresponsible act. The only legislation in
    the 106th Congress regarding reparations is H.R. 40, which is a
    proposal to form a commission to study the merit of this issue. H.R. 40
    was referred to the House Judiciary Committee on January 6, 1999 and
    then to the Sub-Committee on the Constitution on February 25, 1999 and
    remains there today.''
        The League is urging the Postal Authorities to find the persons
    responsible for this misinformation since the League's mailing address
    appears on the flyers. Mr. Zabko went on to say, ``We urge anyone with
    information on this to contact us at 1-800-333-8725 or contact the
    Postal Inspection Service through your local post office. We will
    vigorously attempt to stop this misinformation and demand an immediate
    end to the use of our name in conjunction with this.
        TSCL is working for Notch Reform, an unrelated topic. One proposal
    is for a $5000 lump sum or Social Security payment increase to
    compensate certain individuals for lower Social Security benefits. TSCL
    does not ask for Social Security numbers. In fact we caution our
    members that giving out Social Security numbers is very risky due to
    the growing threat of `Identity Theft'.''
        TSCL is a national group of politically active seniors concerned
    about the protection of their earned Social Security, Medicare,
    military and other retirement benefits. TSCL members participate in a
    number of grass roots lobbying and public education campaigns to ensure
    governmental bodies live up to commitments. For more information about
    TSCL, send a self-addressed business-size envelope to: TSCL INFO, 909
    N. Washington St., Suite 300, Alexandria, VA 22314.

         Seniors Warned Not to Give Out Their Social Security Numbers!
        Alexandria, VA (August 2000) ``Seniors should never give out their
    Social Security numbers just because they are asked for them,'' warns
    Michael Zabko, Executive Director of TREA Senior Citizens League
    (TSCL). ``We've recently received reports of flyers being circulated
    indicating that people born from 1917 through 1926 must register their
    social security numbers with TSCL to collect benefits of pending
    legislation. This is 100% false--there is NO REASON to give out your
    Social Security number.''
        ``It IS TRUE that TSCL is working for passage of Notch Reform. But
    we do not need your Social Security number for this. Giving out your
    Social Security number is risky because criminals can use Social
    Security numbers to obtain bank accounts, false drivers licenses, and
    more. `Identity theft' is a growing crime in America and seniors are
    often the victims.''
        ``It is probable these misleading flyers are being circulated by
    well-meaning people, says Zabko. The Social Security Notch issue has
    growing support in the 106th Congress and there are now almost 200
    Members of Congress who have cosponsored the legislation.'' Perhaps
    this growing interest has sparked grassroots efforts for passage that
    mistakenly request Social Security numbers.''
        ``We've received a number of reports of flyers being circulated
    urging citizens to send their social security number to us for
    registration. Others indicate that we are providing a settlement for
    the Slave Reparation Act. Possibly some good intentioned person has
    taken a lot of information and pieced it together to garner support to
    pass this legislation. Unfortunately they have misstated some important
    information. Indeed, TSCL has been active in educating older Americans
    regarding the improper use of social security numbers,'' continues
    Zabko.
        TSCL is a national group of politically active seniors concerned
    about the protection of their earned Social Security, Medicare,
    military, and other retirement benefits. TSCL members participate in a
    number of grassroots lobbying and public education campaigns to ensure
    governmental bodies live up to commitments. For more information on
    TSCL send a self-addressed business-sized envelope: TREA Senior
    Citizens League, Dept. BP100, 909 N. Washington St., Suite 300,
    Alexandria, VA 22314.

        Media Alert
                  African American Seniors Targeted With Hoax
        Alexandria, Virginia, September 21, 2000--TREA Senior Citizens
    League (TSCL) is urging all media professionals to help end a hoax that
    is currently victimizing African American senior citizens.
        ``We are asking the media to put out information informing senior
    citizens, particularly those of African American descent, that the
    ``Slave Reparation Act'' is a hoax,'' said Michael Zabko, TSCL
    Executive Director. ``And, we'd like all media representatives to join
    us in reminding senior citizens that at no time should they provide
    their social security number or other vital information to any cause
    without first checking it out to see if it is valid.''
        Currently, fliers are being circulated across the south that claim
    the ``Slave Reparation Act'' will provide a financial settlement to
    those who apply for it. It targets those born before 1928 and of the
    ``Black Ethnic Race.'' However, The Slave Reparation Act does not
    exist. To date, fliers have been located in Baton Rouge, La.; Canton,
    Hattiesburg and Jackson, Miss.; and in Chicago and Milwaukee, Zabko
    noted.
        The flyer further states that individuals can obtain more
    information on this `Act' by writing to the TSCL post office box in
    Washington. ``This is completely untrue,'' says Zabko. ``There is no
    `Act' and TSCL's name is being unjustly slaughtered by this hoax.''
        ``We've received over 10,000 inquiries from victims to date. As far
    as we can tell, we are the only financial victims of this hoax since
    the flyer doesn't ask people to send money to anyone, and we're
    grateful for that.'' says Zabko. ``But it is costing our organization
    thousands of dollars to respond to all the questions we are receiving
    by phone and mail.''
        To ensure that all inquiries are handled quickly and accurately,
    TSCL has established an immediate response system. ``We tell all those
    who call that the letter is a hoax and that the letter is in no way
    authorized or approved by TSCL. For those who write in, we have a form
    letter that we send out immediately that states the same thing, and
    then goes further to advise individuals to not give out their social
    security number without first checking if there is a legitimate use for
    it. We're trying to stop this beast from growing, but we need help.''
        In an August 29 letter to the chief postal inspector, TSCL urged
    the Postal Inspection Service to ``initiate a nationwide investigation
    of the unauthorized use of the name and address of TREA Senior Citizens
    League by the publishers and distributors of false and misleading
    printed matter directed toward senior citizens.'' A similar letter has
    been sent to the Social Security Administration. And, TSCL has alerted
    the Better Business Bureau, the NAACP and Attorney Generals in most
    southern states.
        Unfortunately, this has not stopped the flyers from circulating.
        ``We need media outlets to help inform the African American
    community that this is a hoax so we can stop this thing in its
    tracks.'' says Zabko. ``Our membership includes many African Americans
    and we are gravely concerned that they are being targeted.''
        ``This hoax is like a computer virus,'' Zabko added. ``A person
    receives the misleading flyer and then may innocently pass it along.
    But it's a cruel hoax that appeals to the most vulnerable seniors who
    really need every penny to pay for food, rent and medication. We all
    need to pitch in and see that our senior citizens are not taken
    advantage of by this hoax.''
        At this time, the only legislation in the 106th Congress regarding
    reparations is H.R. 40, which is a proposal to form a commission to
    study the merit of this issue. H.R. 40 was referred to the House
    Judiciary Committee on January 6, 1999 and then to the Sub-Committee on
    the Constitution on February 25, 1999, where it remains today.
        ``We urge anyone with information on this misleading information to
    contact us at 1 800 333 8725 or contact the Postal Inspection Service
    through their local post office,'' Zabko stated. ``TSCL is working
    diligently to put an immediate end to this hoax and the
    misrepresentation of our organization's name and address.''
        TSCL is a national group of politically active seniors concerned
    about the protection of their earned Social Security, Medicare,
    military and other retirement benefits. TSCL members participate in a
    number of grass roots lobbying and public education campaigns to ensure
    governmental bodies live up to commitments.
        TSCL has created a special, temporary media website for members of
    the working press who want more information on the hoax. Please do not
    publish the URL for this site since it is not designed for high levels
    of public traffic. Visit it at tsclconsumeralert.org
        Usual contact information and format
        TSCL, 909 N. Washington St., Suite 300, Alexandria, VA 22314.

                   Seniors Group Victimized by Misinformation

                         Statement by Michael J. Zabko

                               Executive Director

                          TREA Senior Citizens League

        Defending the Earned Benefits of More Than 1.5 Million Americans

    In response to false information being erroneously circulated under the
                            guise of a TSCL campaign

    Alexandria, Virginia--9/21/00--

        Since as early as January of 2000, the TREA Senior Citizens League
    (TSCL)--a prominent seniors grass-roots advocacy organization--has been
    a victim of misleading information that is causing distress among
    American senior citizens. Because our good name has been linked to
    several flyers that are full of incorrect and possibly inflammatory
    information we have been appealing for assistance from the Social
    Security Administration and other Government agencies in order to help
    track and eliminate these flyers.
        The original materials we were made aware of asked for personal
    information including Social Security numbers, something we do not want
    and have no need for, in order to sign up for notification of a
    settlement of the Social Security Notch issue. The latest wrinkle in
    this proliferation of misinformation has been a new flyer that says if
    elderly black Americans send in their personal contact information,
    once again including Social Security numbers, to a League post office
    box, we will ensure they receive a $5,000 payment due to ``slave
    reparations.''
        We have received some support from the Better Business Bureau in
    Washington D.C. in getting the correct information out to the public.
    They have noted on their website that the problem exists and that we
    are working with them to try and eliminate it (http://www.dc.bbb.org/
    report.html?recordid=18400).
        We assume that many people have been calling Social Security
    offices due to an Associated Press article on September 19th that we
    know appeared in USA TODAY and the Washington Post. The article noted
    that individuals should call their local SSA offices if they received
    one of the flyers. Even though we have informed the Social Security
    Headquarters office in Baltimore, Md., of new developments, we are
    concerned that the information we have passed on to them has not been
    forwarded to their district and local offices. Yet, it is at the local
    level that this false information is causing the most damage.
        The League is as much a victim of this hoax as the individuals who
    receive the erroneous flyers. Whoever initiated the flyers used our
    legitimate P.O. box number and contact information and our office has
    been besieged with calls and letters. Additionally, some newspapers and
    other organizations continue to spread the misinformation and by
    implication have made it appear that the League is responsible for
    spreading these misleading flyers.
        We are asking that if anyone has questions to please contact us at
    1-800-333-8725. If you need instant information please go to a special
    website we set up to answer questions about this problem located at
    www.tsclconsumeralert.org. The site includes true information about the
    League, the actions we have taken to stop this false information from
    spreading, and what we do daily to help seniors.
        The Senior Citizens League is a seniors' advocacy organization
    being forced to use our resources in a manner unacceptable to our
    membership. The tremendous amount of time, effort and funds we are
    using to make sure the correct information is received by those most
    affected, could be better utilized in our primary purpose which is the
    betterment of the quality of life of older Americans. If anyone has
    information on who is distributing these misleading flyers, please
    contact us so we can hopefully put an end to this problem in the very
    near future!
        The Senior Citizens League is a national group of politically
    active seniors concerned about the protection of their earned Social
    Security, Medicare, military and other retirement benefits. It is
    affiliated with The Retired Enlisted Association, established in 1963.
    League members participate in a number of grassroots lobbying and
    public education campaigns to ensure governmental bodies, including the
    Social Security and Health Care Financing Administrations, live up to
    their commitments. For more information please contact TREA Senior
    Citizens League, Dept. SF946.

                                      NEWS

    TREA Senior Citizens League
    909 N. Washington St., Suite 300
    Alexandria, VA 22314

    Contact: Michael J. Zabko, Executive Director

    (800) 333 8725
      TSCL Supports Actions to Investigate Hoax Aimed at Seniors Citizens
        Alexandria, Virginia, October 3, 2000--``We're starting to see some
    positive steps being taken that we hope will put an end to the
    circulation of misinformation about a supposed `Slave Reparation Act,'
    '' said Michael J. Zabko, executive director of TREA Senior Citizens
    League.
        ``There is no `Slave Reparation Act,' '' Zabko said, ``and the
    issue is not--and has never been--on TSCL's legislative agenda. We're
    receiving thousands of calls and letters from senior citizens who are
    hopeful that they can get some much-needed money to help pay for their
    medicine, food and rent. It's not true. That makes it more than just a
    hoax--it's cruel.'' The fliers in question purport that those born
    before 1928 and of the ``Black Ethnic Race'' are eligible for a lump
    sum payment from the government.
        TSCL met with representatives from the Postal Inspection Service
    and the Social Security Administration, among others, last week to
    discuss possible steps to investigate the hoax that is targeting senior
    citizens. ``A major concern to us is that many of the fliers being
    circulated ask for personal information, such as social security
    numbers,'' Zabko noted. ``Under no circumstance, should anyone give out
    their social security number without first verifying that there is a
    legitimate use for it, like getting a loan.''
        ``We're all concerned about protecting the privacy and security of
    our senior citizens. So any steps taken now to safeguard information
    will be helpful in the long run,'' Zabko said.
        According to Michael Ouellette, TSCL director of legislative
    affairs, there are many people who have begun to recognize the impact
    that this hoax might have if it is not taken seriously. ``We want to
    thank Arkansas Attorney General Mark Pryor, Congressman Bobby Rush (D-
    IL), Chicago Ward 3 Alderman Dorothy Tilman and Cook County State's
    Attorney Richard A. Devine who all contacted our office once they were
    alerted to these fliers. Each of these individuals, in turn, contacted
    various government agencies such as the Social Security Administration,
    Postal authorities, and/or the Secret Service. Their repeated inquiries
    helped bring several representatives together to discuss ways to
    investigate, and eventually stop, the spread of misinformation.''
        As early as January, TSCL was alerted that various fliers were
    being circulated to senior citizens that contained a request for
    personal information, including social security numbers. The fliers
    note that individuals can obtain more information by writing to the
    TSCL post office box in Washington, D.C. These materials are not
    authorized or approved by TSCL. TSCL took immediate action. In addition
    to contacting authorities about this hoax, TSCL initiated an immediate
    response system to respond to incoming queries and help clarify the
    misinformation.
        TSCL is a national group of politically active seniors concerned
    about the protection of their earned Social Security, Medicare,
    military and other retirement benefits. TSCL members participate in a
    number of grass roots lobbying and public education campaigns to ensure
    governmental bodies live up to commitments.
        TSCL has created an emergency web button on its website that
    contains information about the hoax. Visit TSCL at www.tscl.org for
    more information.

                                      NEWS

    TREA Senior Citizens League
    909 N. Washington St.
    Suite 300
    Alexandria, VA 22314

    Contact: Michael J. Zabko, Executive Director

    (800) 333 8725

               TSCL Working With Government Agencies to Stop Hoax

        Alexandria, Virginia, October 2, 2000--TREA Senior Citizens League
    (TSCL) is encouraged by the actions being initiated by government
    agencies to safeguard senior citizens and stop the hoax circulating
    about a ``Slave Reparation Act.''
        ``We met with representatives from the Postal Inspection Service
    and the Social Security Administration on Tuesday [September 26] and
    feel confident that these agencies are taking appropriate steps to
    investigate the hoax,'' said Michael J. Zabko, executive director of
    TSCL. ``TSCL agrees to cooperate fully with any investigations underway
    by the Social Security and postal agencies and has been able to turn
    over samples of the erroneous fliers and other information that may
    assist them in their efforts. Our goal is to safeguard the private
    information and benefits of our senior citizens and to clear TSCL's
    name, which has been unjustly linked to this hoax.''
        Fliers are being circulated across the south that claim the ``Slave
    Reparation Act'' will provide a financial settlement to those who apply
    for it. They target those born before 1928 and of the ``Black Ethnic
    Race.'' Additionally, the fliers ask for personal information, such as
    social security numbers. The fliers note that individuals can obtain
    more information on this `Act' by writing to the TSCL post office box
    in Washington, DC.
        ``There is no `Slave Reparation Act,' '' Zabko noted, ``and this
    issue is not--and never has been--a part of TSCL's legislative agenda.
    These fliers are nothing more than a nuisance chain letter that is
    playing on the hopes of our senior citizens. We want to stop them from
    being circulated. Or, at the very least, we'd like to inform the public
    of this hoax so that it is no longer taken seriously.''
        Since the onset of this hoax, TSCL has taken steps to ensure that
    all inquiries are handled quickly and accurately. ``We established a
    rapid response system that includes a recorded message on our office
    voice mail system, a form letter to send to those who respond to the
    fliers, and a hot button on our website where the public can get more
    information,'' Zabko said. ``All these let the public know that the
    fliers are a hoax and that the materials are not authorized or approved
    by TSCL.''
        TSCL is a national group of politically active seniors concerned
    about the protection of their earned Social Security, Medicare,
    military and other retirement benefits. TSCL members participate in a
    number of grass roots lobbying and public education campaigns to ensure
    governmental bodies live up to commitments.
        TSCL has created an emergency web button on its website that
    contains information about the hoax. Visit TSCL at www.tscl.org for
    more information.

                                           Attachment C

                                                          July 23, 2001
    Honorable E. Clay Shaw, Jr.
    Chairman
    Subcommittee on Social Security
    Committee on Ways and Means
    U.S. House of Representatives
    Rayburn Building, Room B316
    Washington, DC

        Dear Mr. Chairman: I am Chairman of the Board of Trustees of the
    TREA Senior Citizens League (``TSCL''), a nonprofit, tax-exempt
    educational organization, which supports, and advocates for, the rights
    of senior citizens.
        I am in receipt of a copy of your letter to me dated July 19, 2001,
    informing me of the hearing before your subcommittee on Thursday, July
    26, 2001, and enclosing a subpoena to testify.
        I wanted to let you know, since I was not in the D.C. metropolitan
    area this week and was not able to receive your letter and its
    attachment personally, that I will be traveling to Washington to
    attend, and will look forward to seeing that you and your Subcommittee
    are accurately informed regarding TSCL and our activities.
        It would appear that you and your Subcommittee thus far may have
    received inaccurate information regarding the subject of the hearing,
    and if so I wanted to be sure that you had the correct facts even
    before the hearing begins.
        There are two specific concerns in that regard that surfaced upon
    reading your letter of July 19. First, your letter states that the
    Social Security Administration's Inspector General (SSA's IG) had
    completed investigations about ``two types of misleading mailings,''
    that the focus of the hearing will be on ``several different mailings,
    including slave reparation and notch . . .'' and that you sent me a
    subpoena so that I ``may respond to questions . . . regarding TSCL's
    actions relative to these mailings.'' As the SSA's IG's report of July
    6, 2001 reveals, the IG investigated two types of flyers. Those flyers,
    which have been referred to as ``hoax flyers,'' were not mailed to the
    best of our knowledge, and the SSA IG's report does not mention that
    any were mailed. The point is to not confuse the distribution of the
    hoax flyers with any mailings TSCL was forced to send out to those who
    were misled by the fliers.
        The second point is the statement in your letter that, according to
    the SSA IG's report, ``TSCL responded to the mail generated by these
    flyers by directing its data processing firm to create a database
    containing the respondent's personal information.'' In fact, as the SSA
    IG knows, TSCL only recorded the respondent's name and address, which
    was necessary so that it could write to the respondent to tell the
    respondent that he or she had been misinformed, and that TSCL
    absolutely did not record other personal information that may have been
    sent out, such as the respondent's Social Security Number. Any
    intimation that TSCL Entered Social Security Numbers into a database or
    otherwise recorded those numbers in any way is categorically false.
    TSCL never seeks or gathers Social Security Numbers, and in fact
    advises seniors to be wary about giving out their Social Security
    Numbers. More information on that subject is available on TSCL's web
    site, at www.tsclconsumeralert.org.
        Your letter, quoted statements contained in the SSA IG's recent
    report, that ``TSCL . . . wrote to each victim disavowing any
    responsibility for the flyers, but included TSCL's standard fundraising
    brochure.'' That statement, while somewhat accurate, is incomplete and
    misleading. TSCL endeavored to correctly inform respondents who clearly
    had been misinformed by the hoax flyers. It sent respondents a letter
    correctly informing them that the flyers they had received were
    inaccurate, and it informed respondents, honorably we would submit, and
    for the benefit of the respondents, who TSCL really is. The brochure
    that was sent was not a fundraising vehicle and no reply envelope was
    provided, as the SSA IG knows well.
        Unfortunately, the statements in your letter, which are also
    contained in the Advisory that your Subcommittee has released, and
    which is set forth on your Subcommittee's web site, creates a false
    impression of TSCL's activities. After reading and rereading the SSA
    IG's report of July 6, 2001, I replied to the Acting Commissioner of
    Social Security, attempting to point out the several instances of
    pejorative inferences and/or misleading information in the SSA IG's
    report directed against TSCL. A copy of my letter to the Acting
    Commissioner is attached hereto.
        I appreciate the opportunity to appear before your Subcommittee on
    July 26. With best regards.
                Sincerely yours,
                                                   George Smith
                                                               Chairman
                                                              Enclosure

                                             Attachment D

                                                          July 18, 2001
    Honorable Larry Massanari
    Acting Commissioner of Social Security
    Social Security Administration
    6401 Security Boulevard
    Altmeyer Building
    Room 900 Baltimore, MD 21235

    Re: Response to the July 6, 2001 Report of the
    Inspector General, Social Security Administration

        Dear Acting Commissioner Massanari:
        I am Chairman of the Board of Trustees of the TREA Senior Citizens
    League (``TSCL''), a nonprofit, tax-exempt education, which supports,
    and advocates for, the rights of senior citizens.
        On July 6, 2001, the Inspector General of the Social Security
    Administration issued a report to you entitled ``Misleading
    Solicitations Target Senior Citizens'' (hereinafter ``the report'' or
    ``the OIG report''). TSCL was featured prominently in that report--
    which was disseminated to the public through the press and the SSA
    website--and I am writing to point out certain statements or
    implications in the report concerning TSCL that we believe are
    inaccurate, unfair, misleading and inappropriate.
        It is our hope that you will correct immediately such unfair
    statements, in a press release or other follow-up statement, with
    respect to certain critical facts that either were not contained in the
    OIG report or were stated in such a way that a false impression
    regarding TSCL may exist in the mind of the public. Statements about
    this matter on your agency's web site repeat many of the same
    prejudicial statements concerning TSCL confirmed in the OIG report.
    Because of the way it is arranged, the web site material may be even
    more unfair than the OIG report, and probably, by virtue of its
    potentially extensive reach, is even more damaging than is the OIG
    report, although both items present the appearance of attempts to
    seriously harm TSCL.
        We are saddened that the OIG report disparages citizens and the
    organizations advocating their causes contrary to the viewpoint of SSA,
    in the guise of an investigative report. Whether it is appropriate for
    a government agency to issue a document, using appropriated funds--in
    possible violation of Federal law--to disparage one side in a public
    policy and lobbying dispute, is a serious issue.

        Misstatements or Harmful Implications Regarding TSCL

        The OIG report summarized the OIG's investigation into ``hoax
    flyers'' that have been distributed nationwide by persons unknown,
    providing false information about Social Security and falsely using the
    name of our organization--TSCL--as a contact. I want to say at the
    outset that TSCL at all times has supported the Social Security
    Administration's investigation into the still unknown origin of the
    hoax flyers. One reading the OIG report, newspaper accounts of that
    report, or the press release announcing that report would not
    necessarily come to that conclusion. In fact, the report is written in
    such a way that it appears TSCL may have tried to impede a proper
    investigation, when nothing could be further from the truth. This
    subject is discussed in more detail below.
        Approximately one-half of the OIG report is given to a discussion
    of the OIG's investigation of the hoax flyers, and it concludes, in the
    section labeled ``Outcome,'' with the statement that ``although the
    investigation did not identify the source of the hoax flyers, it did
    highlight the vulnerability of senior citizens to exploitation. . . .''
    This followed a two and one-half page discussion in which the only non-
    governmental organizations named were TSCL and its affiliate, and in
    which it was reported how much direct public support funding TSCL had
    obtained in the period 1997-1999. To prepare a report for public
    consumption in this manner, we would submit, is profoundly unfair to
    TSCL.
        That the report was meant to attack TSCL is clear throughout. For
    example, in the very second sentence of the section entitled ``The
    Investigation,'' TSCL is described as ``a tax-exempt 501(c)(4)
    organization that purports to advocate for legislative reforms
    favorable to senior citizens'' (emphasis added). The use of the
    pejorative term ``purports'' is inappropriate. The OIG is very well
    aware of TSCL's legislative efforts and successes, including
    legislation now pending in Congress, in both the House of
    Representatives and the Senate (e.g., H.R. 97, H.R. 853. S. 835), that
    has the sponsorship of dozens of Members of Congress and widespread
    Congressional support. Any implication that TSCL is not advocating on
    behalf of the interests of senior citizens is an outright falsehood.
    And this is but one of many examples of unnecessary and unfair attacks
    against TSCL in the OIG report. It is apparent that the OIG used the
    ``hoax flyer'' investigation primarily to prepare a public report
    critical of TSCL and the positions for which it advocates, since these
    political positions are opposed by the Social Security Administration
    (``SSA'').
        Furthermore, although that same section of the report had stated
    that ``the OIG was unable to identify the origin of the hoax flyers . .
    ., ``it follows by saying:

            [t]he investigation did determine, however, that (1) the return
            address listed on the hoax flyers was TSCL's address. . . . and
            (6) TSCL's marketing and data processing firms resisted
            compliance with the OIG's subpoenas.

        The construction of that paragraph of the report, including the
    specific facts related therein, was misleading and most unfair to TSCL.
    All of the facts related in the numbered statements (1) through (5)
    were furnished to the SSA by TSCL voluntarily, many, many months ago.
    It has been known for well over a year, after the hoax flyers first
    surfaced, that someone had prepared these false or misleading flyers
    using TSCL as the contact organization, and including TSCL's mail
    address. To announce these as ``findings'' or ``determinations,'' as it
    did, was an effort by the OIG to imply that the OIG had reached certain
    ``conclusions'' based upon its discovery of information, and that this
    ``discovered information'' implicated TSCL. In fact, most of the OIG's
    ``determinations'' were simply undisputed facts. All of this
    information was well known many months ago; TSCL had reported it to the
    SSA, and had communicated it to the public by putting it on the TSCL
    website, www.tscl.org. Nevertheless, the implication, when such
    information is revealed the way the OIG revealed it, is that all of the
    relevant information discovered in the investigation still pointed to
    TSCL somehow. In fact, this information was known when the
    investigation first began, and the whole point of the investigation--
    which TSCL urged the OIG to conduct--was to determine the origin of the
    hoax flyers. Thus, although the report stated that the OIG was unable
    to identify the origin of the hoax flyers, the report was deceptive in
    not telling you or the public that TSCL urged the OIG to investigate
    the matter of the hoax flyers, and that TSCL voluntarily disclosed
    information to the OIG in an effort to determine the origin of the hoax
    flyers.
        To simply report such ``determinations,'' without any accompanying
    discussion of how the OIG came into possession of the underlying facts,
    or without explaining why such ``determinations'' may be significant in
    the least, was misleading. Most of these so-called determinations
    should have been mentioned, if at all, in the section labeled ``The
    Investigation,'' not the section labeled ``Outcome.'' And certain
    matters should have been mentioned, if at all, only with a full
    explanation. Statement (2), which actually says that the hoax flyers
    ``were very similar to the notch reform flyers that TSCL acknowledges
    distributing in its normal course of business,'' is a case in point.
    What does the OIG mean by that statement? That the hoax flyers were
    similar in format to TSCL's materials, or that TSCL's own materials are
    false? This latter disparaging, and libelous, implication seems to have
    been produced intentionally in the OIG report.
        The misleading nature of the OIG report is underscored by statement
    (6) in the same paragraph (``Outcome'') on page 2, indicating that
    ``TSCL's marketing and data processing firms resisted compliance with
    the OIG's subpoenas.'' Why was such a statement even included,
    particularly in the section of the report labeled ``Outcome''? And if
    it was relevant at all, why were not other, even more relevant facts
    included as well? Other relevant facts would be, for example: (1) that
    the OIG's office issued very broad subpoenas to TSCL itself and its
    mail processing agent in the fall of 2000, and TSCL and its agent,
    while objecting to the breadth and unnecessarily intrusive reach of
    those subpoenas, reached an agreement with the agent and voluntarily
    complied with the subpoenas; (2) that, although the information
    provided by TSCL should have been sufficient for the OIG investigation,
    the OIG could have contacted TSCL for further information (including
    information in the hands of its agents) if it felt such further
    information was necessary, but instead the OIG, without contacting
    TSCL, simply issued very broad-reaching subpoenas to TSCL's agents; (3)
    that the subpoenas that were resisted by TSCL's marketing and data
    processing firms were resisted only in part, again for reasons related
    to the unnecessarily broad reach of the subpoenas and on very solid
    First Amendment grounds, and that the OIG modified its subpoena
    demands; and (4) that the subpoena matters ultimately were settled,
    without litigation. By even mentioning ``resistance'' to the subpoenas,
    as it did, the OIG report tried to communicate that TSCL, through its
    agents, had something to hide, when the OIG knows very well that TSCL
    and its agents disclosed all relevant information.
        A critique such as this runs the risk of being laborious, but the
    OIG report is so infected by innuendo and misleading implications that
    it is difficult to summarize succinctly all of the ways in which the
    report was unfairly fashioned. Suffice it to say that, if the intention
    of the OIG report was to disparage TSCL, the report was successful.
    TSCL has been working very hard in the past days to try to correct any
    false impression generated by the misleading statements in the report
    and follow-up reports by the media. We believe that this state of
    affairs was intended by the OIG. We also believe that, instead of truly
    attempting to determine the origin of the hoax flyers, (1) the OIG
    simply used its ``investigative report'' as a platform to create
    resentment against persons and organizations that are critical of the
    SSA, and that believe in, and fight for, issues that are contrary to
    SSA's positions.
        Although the potential damage to TSCL from the OIG report is
    incalculable, we believe that the situation could be ameliorated by a
    statement issued from your office, detailing the extreme cooperation
    that TSCL exhibited throughout the OIG's investigation, confirming that
    TSCL was a victim of the hoax flyers, and assuring the public that,
    although the SSA does not necessarily endorse the views advocated by
    TSCL or espoused by its members, it recognizes the right to have and
    express those views under the United States Constitution.

        The OIG Report's Suggestion of Remedial Measures

        Although the OIG report states that one of its purposes is ``to
    suggest remedial measures to help reduce the risk of similar scams in
    the future'' (OIG report, p. 1), the report really offers no such
    suggestions at all. Instead, it goes on for more than two full pages,
    arguing against the legislative positions advocated by TSCL and others
    in support of ``notch'' reform, and concluding that ``the federal
    government should do whatever is necessary to provide Social Security
    beneficiaries with balanced and non-inflammatory information on the
    notch issue.'' (OIG report, p. 5.) This general suggestion was merely
    part of the concluding statement in a diatribe by the OIG against
    TSCL--an organization that has been known to criticize the SSA--in a
    situation where the OIG not only did not disclose such friction, but
    used the context of an investigative report to cloak its attack.
        This kind of legislative advocacy by the Social Security
    Administration, in the framework of a so-called investigative report,
    has been used to disparage TSCL and its members for their sincerely-
    held views, and to intimate, without any support in the law, that their
    actions are somehow impermissible. It illustrates, and in fact
    constitutes, viewpoint discrimination, and is doubly wrong because of
    the deceptive context in which it was made. As mentioned above, it may
    violate federal law prohibiting lobbying with appropriated funds.
        TSCL advocates notch reform, as do other organizations, and as it
    is entitled to do under the First Amendment. Bills submitted in
    Congress throughout the past two decades, sponsored by scores of
    congressmen and senators, would enact such reform. And as mentioned
    above, there are bills pending currently in both the House and the
    Senate that would provide relief to those affected by the notch issue,
    with substantial Congressional support. H.R. 97, for example,
    introduced by Rep. Ralph Hall (D-TX), has 80 cosponsors, and H.R. 853,
    introduced by Rep. Robert Wexler (D-FL), has 21 cosponsors. The OIG
    report, while admitting that congressional support for notch reform
    truly exists, somehow discounts the significance of that fact by
    stating that no notch reform legislation has yet been enacted. If
    legislation had been enacted, there would no longer be a need to seek
    legislative redress of this unfair treatment of certain seniors. On the
    one hand, the report rails against fundraising in support of the notch
    issue, all the while admitting, on the other, that ``reasonable people
    may disagree on the merits of the notch reform issue.'' (OIG report, p.
    4.)
        The report is blatantly, and inappropriately, negative in its
    treatment of TSCL throughout. It even attempts to disparage TSCL in
    connection with some of its communications with its members, stating
    (without giving TSCL notice or a chance to respond) that TSCL had not
    honored certain commitments made in certain fundraising solicitations.
    (OIG report, p. 4.) Even if this were true, and TSCL had fallen down on
    one of its promises, the OIG's use of its ``investigative knowledge''
    in this way is a tactic to be deplored. Quite simply, the OIG has used
    its investigation of the hoax flyers to put together a ``hit piece''
    against TSCL, with rhetoric that can only be described as strident and
    inappropriate.
        TSCL stands by its position on notch reform, and intends to
    continue to advocate for the rights of senior citizens. We could easily
    respond to the anti-notch reform statements made in the OIG report, but
    believe you already know our position on this matter. For further
    information, please visit our web site at www.tscl.org.
        In addition to the press release or follow-up statement requested
    above (page 1), we request a copy of the ``fact sheet'' alluded to in
    the final paragraph of the OIG report. If the fact sheet is similar or
    identical to the fact sheet that is found on your agency's current web
    site, we request that the fact sheet also be edited to remove the
    misstatements and adverse inferences concerning TSCL. The materials on
    that web site concerning TSCL are extremely prejudicial to TSCL in the
    same way that the OIG report (which is the basis for the web site
    material) is damaging to TSCL.1 Please correct these
    materials so that they reflect the truth, instead of attempting to
    disparage a nonprofit organization with which SSA disagrees about
    public policy issues.
    ---------------------------------------------------------------------------
        \1\ Aside from discussing its investigation of TSCL, which
    comprised a significant portion of its report, the OIG merely announced
    (``Outcome,'' p. 2): ``[d]espite a thorough investigation by the OIG .
    . . the OIG was unable to identify the origin of the hoax flyers. The
    informal distribution channels employed, which included hand posting on
    cars and bulletin boards, made source identification nearly
    impossible.'' Nowhere was there mention of contacting any of the 29,000
    persons who wrote to TSCL. Nowhere was there any discussion of the
    various locales involved, and the percentages of respondents in each
    locale. One wonders just how thorough this investigation actually was.
    ---------------------------------------------------------------------------
        We appreciate your consideration of the matters set forth above,
    and look forward to your response.
                Sincerely yours,
                                                           George Smith
                                                               Chairman
    cc: Hon. James G. Huse, Jr.
    Inspector General
    Social Security Administration
    6401 Security Boulevard
    Altmeyer Building
    Room 300
    Baltimore, MD 21235-6401

        Chairman Shaw. Thank you, Mr. Smith. Ms. Turner.

    STATEMENT OF CHRISTY TURNER, ACCOUNT EXECUTIVE, PUBLIC INTEREST
      DATA INCORPORATED, ALEXANDRIA, VIRGINIA, ON BEHALF OF TREA
                         SENIOR CITIZENS LEAGUE

        Ms. Turner. Good afternoon. My name is Christy Turner. I
    am----
        Chairman Shaw. Pull the microphone closer to you, would you
    please?
        Ms. Turner. Sorry.
        Chairman Shaw. Thank you.
        Ms. Turner. Good afternoon. My name is Christy Turner. I am
    an account executive of Public Interest Data.
        We are the database that handles nonprofit organizations'
    mailing lists. And I am here today on request of the Committee
    to answer any questions you may have. Thank you.
        Chairman Shaw. Mr. Zabko.

     STATEMENT OF MICHAEL J. ZABKO, AMERICAN RED CROSS, LA PLATA,
     MARYLAND, AND FORMER EXECUTIVE DIRECTOR, TREA SENIOR CITIZENS
                      LEAGUE, ALEXANDRIA, VIRGINIA

        Mr. Zabko. Good morning, Mr. Chairman. My name is Michael
    J. Zabko, and I am the former executive director of TREA Senior
    Citizens League, herein referred to as TSCL.
        It's a 501(c)(4) nonprofit organization and was
    incorporated in Colorado with offices in Alexandria, Virginia.
        I am no longer serving in the capacity of executive
    director of TSCL. And while I am willing to cooperate with this
    inquiry, I'm certain that your best information will come from
    TSCL itself. Therefore, I'm accompanied by my personal counsel,
    the Honorable Mark A. Fury.
        I am here in response to your subpoena to discuss issues
    regarding the actions of TREA Senior Citizens League with
    regards to two sets of flyers made by parties unknown to us.
        These flyers misstated our position regarding the Social
    Security notch issue for recipients born between 1917 through
    1926, and fabricated a position on slave reparations that TSCL
    has never even spoken on.
        As executive director of TSCL, I first became aware of the
    existence of the flyers as a result of a fax from Mr. Tim
    Kelley of the Social Security Administration. It was received
    at our offices on January 13th, 2000.
        The fax included a copy of a flyer advising seniors of the
    notch issue and requesting Social Security numbers in addition
    to other information that would make the respondent a Member of
    a national register for notch victims.
        For reasons that I am still not aware, the makers of this
    flyer used a variation of TSCL name and directed the responses
    to TSCL post office box, presumably to give their flyers
    credibility.
        We responded to Mr. Kelley by letter, dated January 18th of
    the year 2000, denying TSCL's knowledge or involvement in the
    production of the flyer. And subsequently, we instituted
    efforts to ascertain who was behind these printings.
        In every case, TSCL has made every effort to establish
    that--that we had no involvement in the production of and/or
    the distribution of these flyers, and made numerous efforts to
    inform the public of our lack of involvement.
        These efforts included contacting the Postmaster General's
    office, the Better Business Bureau, and responding to
    additional requests for information from the Social Security
    Administration Inspector General's Office and the Office of the
    State Attorney General of Arkansas.
        In addition to sending a letter to everyone who tried to
    contact us as a result of the original flyers, TSCL put up
    information denying involvement in them on our Web site.
        I personally appeared on local TV, radio, and public
    interest and news programs, and reached out to the AG offices
    of the States in which we do business in an attempt to set the
    record straight.
        By August of 2000, at least three State or Federal agencies
    were actively investigating this issue and had contacted us for
    further information about these flyers, which included the
    offices of Representative Bono, the Social Security
    Administration IG's office, the Arkansas AG's office, and the
    Postmaster General's office.
        As near as we can determine, and confirmed by the
    subsequent investigation of the Social Security Administration
    IG's office recently completed, the flyers were produced by
    some party other than TSCL for purposes that are still not
    clear.
        The resulting influx of mail in response to the flyers did
    contain names, addresses, telephone numbers, and other personal
    information of the respondents to the false flyers, which we
    directed our commercial mailing house to sequester under lock
    and key until such time as either the Postmaster General or the
    Social Security Administration could be contacted and
    determination be made what to do with this.
        We continued processing this mail normally and provided the
    utmost security to protect that information that we had
    received unsolicited.
        The sequestered information was inspected by both agencies,
    the Postmaster General's office and the Social Security
    Administration's office, and ultimately was turned over to the
    Social Security Administration after meetings with the Social
    Security, specifically Inspector Stubbs and a representative
    from the Postmaster General's office, Mr. Cohen.
        It was also concluded in those meetings that the right
    course of action was to get a letter to each of those 29,000
    respondents, denying our involvement in the potentially
    fraudulent information, and to advise them of our interest in
    protecting their personal information, and including a copy of
    legitimate TSCL brochures so that they would know the
    difference.
        At Mr. Stubbs' advice, we removed a line from the letter
    pointing out the difficulty we were having in making the
    various government entities understand that we were the good
    guys in this affair.
        Having discussed this mailing with and shown it to
    representatives of all Federal agencies by which we had been
    contacted at that time, I must confess I am somewhat surprised
    to be here to respond to your subpoena about including proper
    TSCL information in the mailing.
        While under my direction, TSCL made every effort to keep
    the government agencies informed and to solicit their input on
    how best to proceed to clarify this problem.
        TSCL had at that time of my departure in February of this
    year 1.3 million members, who contributed, on average, of about
    $10 per year. Our books are audited annually by Johnson &
    Lambert, a reputable CPA firm here in the city, and also has
    been audited by Ernst & Young. We also have filed 9nineties in
    accordance with all IRS rules and regulations.
        TSCL has no need for engaging in fraudulent activities to
    increase its membership or to improve its finances. Our sole
    goal was to protect the interests of seniors. And I for one
    stand with the Committee in its attempt to identify the
    wrongful activities of a few and eliminate them.
        Thank you.
        [The prepared statement of Mr. Zabko follows:]

    Statement of Michael J. Zabko, American Red Cross, La Plata, Maryland,
    and former Executive Director, TREA Senior Citizens League, Alexandria,
                                    Virginia

        Good morning Mr. Chairman, my name is Michael J. Zabko. I am
    formerly the executive director of the T.R.E.A. Senior Citizens League
    (hereinafter referred to as TSCL), a 501(c)(4) non profit organization,
    incorporated in Colorado with offices in Alexandria Virginia. I am no
    longer serving in the capacity of Executive Director of TSCL, and while
    I willingly cooperate with this inquiry, I am certain that your best
    information will come from TSCL itself. Therefore, I am accompanied by
    my personal Counsel, Hon. Mark A. Fury.
        I am here in response to your subpoena to discuss issues regarding
    the actions of the Senior Citizens Leagues with regard to two sets of
    flyers made by parties unknown to us. These flyers misstated our
    position regarding the Notch Issue for Social Security recipients born
    between 1917 and 1926, and fabricated a position on Slave Reparations
    that TSCL has never even spoken on.
        As executive director of TSCL I first became aware of the existence
    of the flyers as result of a fax from Tim Kelly of the Social Security
    Administration, received at our offices on Jan. 13, 2000. The fax is a
    copy of a flyer advising seniors of the Notch issue, and requesting
    Social Security numbers in addition to other information which would
    make the respondent a member of a national register for notch victims.
    For reasons that I still am not aware of, the makers of the flyer used
    a variation on the TSCL name, and directed the responses to TSCL's post
    office box, presumably to give their flyer credibility.
        I responded to Mr. Kelley by letter dated January 18, 2000 denying
    TSCL knowledge of or involvement in the production of the flyers and
    subsequently I instituted efforts to ascertain who was behind these
    printings. In every case TSCL made every effort to establish that TSCL
    had no involvement in the production of or distribution of these fliers
    and made numerous efforts to inform the public of our lack of
    involvement.
        These efforts included contacting the Postmaster General's office,
    the Better Business Bureau, and responding to additional requests for
    information from the SSA Inspector General's office and the office of
    the state Attorney General of Arkansas. In addition to sending a letter
    to everyone who tried to contact us as result of the original Flyers,
    TSCL put up information denying involvement in them on our web site. I
    personally appeared on local TV and radio public interest and news
    programs, and reached out to the AG's offices of states in which we do
    business in an attempt to set the record straight.
        By August of 2000 at least three state or federal agencies were
    actively investigating this issue and had contacted us for further
    information about these fliers which include the offices of
    Representative Bono, Social Security Administration's IG's office,
    Arkansas AG's office and Postmaster general's office.
        As near as we can determine, and as confirmed by the subsequent
    investigation of the SSA IG's office recently completed, the fliers
    were produced by some party other than TSCL for purposes that are still
    not clear. The resulting influx of mail in response to the flyers did
    contain name, address, telephone numbers and other personal information
    of the respondents to the false flyers, which we directed our
    commercial mailing house to sequester under lock and key until such
    time as either the Postmaster General or the SSA could be contacted.
        The sequestered information was inspected by both agencies, and
    ultimately turned over to the SSA, after meetings with SSA Inspector
    Stubbs and representatives of the Postmaster General. It was also
    concluded in those meetings that the right course of action was to get
    a letter to each of the 29,000 respondents denying our involvement in
    the potentially fraudulent information, advising them of our interest
    in their protecting their personal information, and including a copy of
    legitimate TSCL brochures so that they would know the difference.
        At Mr. Stubbs' advice, we removed a line from that letter pointing
    out the difficulty we were having making the various governmental
    entities understand that we are the good guys in this affair. Having
    discussed this mailing with and shown it to representatives of all
    federal agencies by which we had been contacted at that time, I must
    confess that I am somewhat surprised to be here today responding to
    your subpoena about including proper TSCL information in the mailing.
        While under my direction TSCL made every effort to keep the
    government agencies informed and to solicit their input on how best to
    proceed to clarify this problem. TSCL had, at the time of my departure
    in February of this year, 1.3 Million members, who contribute on
    average $10 per year. Its books are audited annually by Johnson &
    Lambert CPA, and has been audited by Ernst & Young. TSCL had no need
    for engaging in fraudulent activity to increase its membership or
    improve its finances. Our sole goal was the protection of the interests
    of senior citizens, and I, for one, stand with the Committee in its
    attempts to identify the wrongful activities of a few, and eliminate
    them.

        Chairman Shaw. Mr. Zabko, you heard Mr. Smith state that in
    the employ of TSCL are three paid lobbyists. Is that correct?
        Mr. Zabko. That is correct, sir.
        Chairman Shaw. And are they full-time employees?
        Mr. Zabko. Yes, sir. That is correct.
        Chairman Shaw. Now, on your 990, you show a total of five
    employees. Who are the other two?
        Mr. Zabko. The other two employees?
        Chairman Shaw. Yes.
        Mr. Zabko. An administrative assistant and a receptionist.
        Chairman Shaw. And that is the full--those are all the
    employees that they had?
        Mr. Zabko. That is it, sir.
        Chairman Shaw. Were you compensated----
        Mr. Zabko. Yes, sir, I was.
        Chairman Shaw. For your service. And what was your
    compensation? Were you the----
        Mr. Zabko. I believe it was----
        Chairman Shaw. Seventy thousand dollars, approximately?
        Mr. Zabko. I think it was----
        Chairman Shaw. That is what is shown on the 990.
        Mr. Zabko. I think it was--$73 on the 990. Yes, sir, that
    is correct, then.
        Chairman Shaw. Mr. Smith has testified that he is not
    compensated, that he works as a volunteer. Do you agree with
    that?
        Mr. Smith. Yes, sir.
        Chairman Shaw. Is that correct?
        Mr. Zabko. I have no idea, sir. That----
        Chairman Shaw. All right. Have you been--what was your
    reason for leaving?
        Mr. Zabko. The board of directors decided to dismiss my
    services.
        Chairman Shaw. Mr. Smith----
        Mr. Smith. Yes, sir.
        Chairman Shaw. In your written testimony, which you
    repeated, you again stated that a representative of SSA's IG's
    office was shown the contents of the mailing that you made in
    reply to the receipts that you got from the fraudulent flyer
    that was out there. And you said that a representative the SSA
    IG's office was shown the contents of this mailing, including
    the brochure, before it was ever mailed, and TSCL even made
    changes to the letter based on the request of SSA's
    representative.
        I think you were sitting here when Mr. Huse denied that.
    Could you tell this Committee who exactly was there, who
    suggested the changes from the IG's office?
        Mr. Smith. At this time, sir, I was not involved in the
    actual operations. Mr. Zabko was the person that was present at
    that meeting, and he was the executive director at that time.
        Chairman Shaw. Well, are you telling us now, Mr. Smith----
        Mr. Smith. And I testified to the fact that he didn't--that
    the meeting was held, sir.
        Chairman Shaw. But you don't know whether it was or not?
        Mr. Smith. The reference that I have, it was held, sir, on
    the 26th.
        Chairman Shaw. What?
        Mr. Smith. On the 26th of September, the meeting was held.
        Chairman Shaw. But you were not there?
        Mr. Smith. No, sir, I was not there.
        Chairman Shaw. And you don't know whether they approved it
    or not. Is that correct?
        Mr. Smith. No, sir, not for a fact.
        Chairman Shaw. So the statement in your testimony is
    incorrect and you wish you correct----
        Mr. Smith. It was based on the information that I was
    given, yes, sir.
        Chairman Shaw. All right, Mr. Zabko, was the IG's office
    involved at all in sending out the correction to the people had
    sent in a reply to that mailer?
        Mr. Zabko. Mr. Shaw, we had a meeting with the Arkansas
    attorney general's office (AG), Ms. Debbie Broadway I believe
    was the young lady's name that was there. Mr. Cohen from the
    postal administration was there. A Mr. Stubbs from the Social
    Security Administration was there.
        They came to talk to us about these particular flyers, the
    flyers that are all the way to the far left, the ones on the
    slave reparation and the notch issue.
        Also in that meeting was counsel for TREA Senior Citizens
    League and another representative for--a part-time employee
    that we had for media. We had hired a consultant for media
    work.
        During that meeting, we discussed these flyers at great
    length. I answered questions in regards to how those flyers
    became in existence.
        At the end of the meeting, we were discussing unofficial
    subpoena form. And at that point in time, our counsel had
    thought that the subpoena was much too broad in respect to what
    the Social Security Administration was looking for, and had--we
    had discussed that we would be more than happy to cooperate but
    in a much more limited aspect that specifically pertained to
    the fictitious flyers.
        After that conversation, it was well agreed, at least in my
    opinion, that we were going to talk and provide all the
    information that they wanted at a--in a limited fashion, and it
    would be agreed upon by the Social Security Administration and
    our legal people.
        Just before the termination of that meeting, we also
    produced a copy of the letter that was sent to these
    respondents and also a copy of the brochure that was placed in
    there, the information brochure about our organization.
        We showed that to those three people, the inspector
    general's office from Arkansas--the IG's office, rather, from
    Arkansas; the postal inspector, Mr. Cohen; and Mr. Stubbs from
    the Social Security Administration.
        Mr. Stubbs pointed out clearly to me that there was an
    error in the letter. In the letter, we had written that up
    until that point in time, we had not heard from these entities
    after asking for help to resolve this issue. And I distinctly
    remember him saying: This is not true, because we are here
    today to resolve this and help bring an end to this.
        So we agreed to change that particular sentence in that
    letter that went out to these respondents to these fictitious
    flyers.
        Chairman Shaw. So it was from the Social Security
    Administration that was represented. It wasn't from the Social
    Security IG's office. Is that correct or am I misunderstanding
    you?
        Mr. Zabko. I believe Mr. Stubbs is employed by the Social
    Security Administration IG's office, or was at that particular
    point in history.
        Chairman Shaw. We can certainly check on that. But you were
    there?
        Mr. Zabko. Yes, sir, I was.
        Chairman Shaw. You have first-hand knowledge.
        Can you tell us what percentage of your income is from
    contributions and what is from other sources, and also name the
    other sources?
        Mr. Zabko. I would have to refer to be exactly sure, sir,
    on a 990 form. But the majority of the income is contributions.
        Chairman Shaw. The 990 also shows that there is $400,000
    from the rental of lists. Is that a correct figure?
        Mr. Zabko. Sir, I can't quantify that because you have----
        Chairman Shaw. On the 990, on page 6, it says $417,161 is
    shown as other revenue, and it is shown as list rental. Is that
    renting lists to outside organizations?
        Mr. Zabko. That would be correct, then.
        Chairman Shaw. Who do you rent them to?
        Mr. Zabko. Multiple----
        Chairman Shaw. Would you tell us who?
        Mr. Zabko. I don't know exactly, sir. I'd have to research
    that.
        Chairman Shaw. Can you give us a partial list of those that
    you rented to?
        Mr. Zabko. To be quite candid, political action committees
    rent them. Other----
        Chairman Shaw. Which ones? Tell us.
        Mr. Zabko. Other nonprofits----
        Chairman Shaw. Tell us which ones.
        Mr. Zabko. I don't know, sir, at this point in time.
        Other nonprofit entities rent them. I believe other seniors
    organizations rent them.
        Chairman Shaw. Can you name any such organizations?
        Mr. Zabko. I could, yes.
        Chairman Shaw. Would you?
        Mr. Zabko. I believe AARP rents lists.
        Chairman Shaw. Rents them from you?
        Mr. Zabko. I believe so, yes, sir.
        Chairman Shaw. AARP, you say?
        Mr. Zabko. Yes, sir.
        Chairman Shaw. Yes.
        Mr. Zabko. I can't think of any political committees that
    rent lists directly from us. Other entities--like I said, other
    nonprofits rent lists.
        Chairman Shaw. Could you tell us, you also testified as to
    the--you had three full-time paid lobbyists. Who are they?
        Mr. Zabko. At this current time, sir? I don't know----
        Chairman Shaw. Tell us who they were, and we will find out
    who they are right now from Mr. Smith.
        Mr. Zabko. OK. At the time when I was employed there, I was
    a current lobbyist. There was a gentleman by the name of Mike
    Plumer that was a lobbyist, and Michael Oulette was a lobbyist.
        Chairman Shaw. Mr. Smith, are they still employed by----
        Mr. Smith. Mike Plumer is currently employed by us.
    Virginia Torsch is the other lobbyist. And Kathy Angiolillo is
    the other lobbyist that we have.
        The three present we have are those three people.
        Chairman Shaw. Do you, Mr. Smith, or you, Mr. Zabko, know
    of any time that the IRS has questioned your tax exempt status?
        Mr. Smith. About our tax exempt status, sir?
        Chairman Shaw. Yes, sir.
        Mr. Smith. As a 501(c)(4), yes, sir.
        Chairman Shaw. They have questioned it?
        Mr. Smith. No, sir. We've never had questions about our tax
    exempt status.
        Chairman Shaw. Mr. Zabko.
        Mr. Zabko. I am not aware of any, sir.
        Chairman Shaw. Can you give us an idea of how your expenses
    are allocated, such as how much money is spent for salaries,
    the office expenses, and fundraising?
        Mr. Zabko. It's allocated under the standard procedures
    that AICPA, American Institute of Certified Public Accountants,
    endorses.
        Chairman Shaw. That wasn't the question. I wasn't asking
    about accounting standards. I was asking about how they are
    allocated.
        Well, let me just put it this way, to make it short: Is the
    allocation shown on the 990 correct?
        Mr. Zabko. I would say, it is, sir.
        Chairman Shaw. Could you, Mr. Zabko, tell us exactly how
    your advocacy on legislative issues has actually helped
    seniors?
        I notice here, in looking at your 990, it says a
    ``statement of organization's primary exempt purpose,'' and you
    show that: The primary exempt purpose of TREA Senior Citizens
    League is to monitor developments of interest to senior
    citizens, to educate and alert senior citizens, primarily TSCL
    members and supporters, about their rights and freedoms as U.S.
    citizens, and defend the benefits senior citizens have earned
    and paid for.
        Would you tell me exactly how you, Mr. Zabko, have defended
    the benefits senior citizens have earned and paid for?
        Mr. Zabko. Excuse me, sir.
        TSCL, sir, has taken numerous polls, queried numerous
    seniors, to determine how we should best represent that
    information to Members of Congress.
        We have prevent--presented surveys to Members of Congress
    upon their request. We provide information about numerous
    issues. We worked extensively on the notch issue, trying to get
    Congress to bring it to the floor for a vote.
        Chairman Shaw. Let's be very specific on that. Who have you
    met with, specifically, in order to lobby for change of the
    notch provision in the Social Security law?
        Mr. Zabko. Off the top of my head, sir, I could think of a
    couple: Mr. Lieberman in the Senate is one. In the House, I
    could think of Mr. Hall; Mr. Hall currently has a bill in the
    House.
        Chairman Shaw. Have you ever talked to anybody on this
    Committee that has jurisdiction over this matter?
        Mr. Zabko. Mr. Hayworth. Mr. Hayworth on this Committee.
    Yes, sir, we have.
        Chairman Shaw. Have you appeared in his office with him?
        Mr. Zabko. Yes, sir.
        Chairman Shaw. Okay. Anyone else?
        Mr. Zabko. Not that my recollection serves for this
    particular Congress. But then again, sir, I was not here after
    February.
        Chairman Shaw. Mr. Smith, are you involved in any of the
    lobbying activities of the organization?
        Mr. Smith. Sir?
        Chairman Shaw. Are you involved in any of the lobbying
    activities of the organization?
        Mr. Smith. No, sir. I am not, sir.
        Chairman Shaw. Are you involved financially in any way with
    any of the organizations that TSCL does business with?
        Mr. Smith. No, sir.
        Chairman Shaw. Is it your testimony that as a volunteer, it
    is strictly volunteer, and you do not receive any compensation
    directly or indirectly because of your involvement with this
    organization?
        Mr. Smith. The only compensation I get, sir, is travel and
    per diem. Other than that, there is no other compensation.
        Chairman Shaw. Mr. Matsui.
        Mr. Matsui. Thank you, Mr. Chairman.
        Mr. Zabko, after you received your subpoena, you
    undoubtedly talked to Mr. Smith, I take it. Is that right?
        Mr. Zabko. No, sir, I did not.
        Mr. Matsui. Not at all?
        Mr. Zabko. No, sir.
        Mr. Matsui. Did you ever talk with Chip Heartfield after
    you received the subpoena?
        Mr. Zabko. No, sir, I did not.
        Mr. Matsui. Did you, Mr. Smith, talk to Chip Heartfield
    after you received your subpoena?
        Mr. Smith. Today?
        Mr. Matsui. I am sorry?
        Mr. Smith. My present subpoena for being here, sir?
        Mr. Matsui. Yes.
        Mr. Smith. No, I haven't had an opportunity to talk to----
        Mr. Matsui. You haven't had any contact with him?
        Mr. Smith. Not with Mr. Heartfield.
        Mr. Matsui. You never directed anybody to have contact with
    him either. Is that right?
        Mr. Zabko. With Mr.----
        Mr. Matsui. With Mr. Heartfield.
        Mr. Zabko. No, sir.
        Mr. Matsui. And you either, Mr. Zabko? Is that correct?
        Mr. Zabko. I missed the question, sir.
        Mr. Matsui. I am sorry. You never directed anyone to have
    any contact with Maurice ``Chip'' Heartfield after you received
    your subpoena?
        Mr. Zabko. No, sir. I'm not in that capacity.
        Mr. Matsui. OK.
        Mr. Smith. No.
        Mr. Matsui. You seem to be the one that was involved in all
    the activities while this was going on. Is that correct? In
    other words, when the 29,000 pieces of mail came back, you were
    then in charge of the Senior Citizens League. Is that right?
        Mr. Zabko. That is correct.
        Mr. Matsui. And you say that there were three lobbyists,
    there was an administrative assistant, and an office
    receptionist; five of you, right, in the operation at that
    time?
        Mr. Zabko. There was a total of eight in the office.
        Mr. Matsui. I am sorry?
        Mr. Zabko. A total of eight employees in the office.
        Mr. Matsui. Who were the other three?
        Mr. Zabko. There was myself, there was an administrative
    assistant, there was a receptionist, there was a lobbyist--we
    call him the legislative director, there was his assistant,
    there was another administrative assistant, and there was a
    member services person, and there was also a public affairs
    person.
        Mr. Matsui. The reason I ask that----
        Mr. Zabko. We----
        Mr. Matsui. I was under the impression you had five in your
    direct response to Chairman Shaw, and then in the tax return it
    says five. But you are saying there were eight, because you had
    three lobbyists plus five others. Is that right?
        Mr. Zabko. There was a total of eight employees in the
    organization, sir.
        Mr. Matsui. OK. And it sounded to me, from your responses
    to Chairman Shaw, that you were wanting to get to the bottom of
    this, how these flyers got out. Is that correct? And so you did
    an independent investigation yourself, right?
        Mr. Zabko. We attempted one, yes, sir.
        Mr. Matsui. Yes, you attempted one. And you talked to
    everyone of the other seven employees in your office, is that
    correct, about how this could have happened?
        Mr. Zabko. Yes, sir.
        Mr. Matsui. And all of them denied any involvement in this.
    They had no idea how that flyer got out.
        Mr. Zabko. That is correct, sir.
        Mr. Matsui. Because I know that Squire & Heartfield
    Direct--that is the direct mail firm that you use. You have
    contacted, at that time, Maurice ``Chip'' Heartfield as well,
    as president, right, to ask him, how that could have happened?
    Is that correct?
        Mr. Zabko. That is correct.
        Mr. Matsui. And what was his response to you?
        Mr. Zabko. Well, they, as us in our office, were baffled on
    how this could've taken place. They could not come up with a
    conclusion that was substantiated with any individual or
    individuals starting this.
        Mr. Matsui. So Mr. Heartfield was baffled himself. Is that
    right?
        Mr. Zabko. That's correct.
        Mr. Matsui. Now, did he tell you that somebody from your
    office, one of the eight of you, made contact with him and said
    we should send out these two pieces of mail?
        Mr. Zabko. These particular flyers, sir, as far as--I'm to
    the understanding have not been received through the United
    States mail. We could not find any evidence that somebody had
    intentionally mailed these two flyers to any individuals.
        Mr. Matsui. OK. Let me put it this way, then: Did you ask
    Mr. Heartfield--he sent it out, right?
        Mr. Zabko. No, sir, he did not.
        Mr. Matsui. What did he do with them?
        Mr. Zabko. Sir, he didn't do anything with them. They came
    into our office. We have--in a direct mail organization, you
    have a company that actually receives that mail.
        Mr. Matsui. OK. Can I ask you this, then: Mr. Heartfield,
    then, said that he had nothing to do with this himself. He
    didn't print these two documents. He told you specifically he
    had nothing to do with them, then, right?
        Mr. Zabko. That is correct.
        Mr. Matsui. So, I want to just make sure I understand this
    correctly, so there is no misunderstanding. You are saying that
    he is saying he disavowed to you that he had anything to do
    with this. He had no idea anything about these two flyers.
        Mr. Zabko. Those two flyers that you're pointing to?
        Mr. Matsui. Right.
        Mr. Zabko. That is absolutely correct, sir.
        Mr. Matsui. OK. Do you use any other direct mailing firms?
        Mr. Zabko. No.
        Mr. Matsui. He is the only one you ever used, when you were
    chief, running the operation at the Senior Citizens League?
    That is the only company you used for direct mail efforts? Is
    that correct?
        Mr. Zabko. Yes, sir, as far as I know--remember.
        Mr. Matsui. Just so I can get this again for the record:
    And there were no other firms that printed or sent out direct
    mail when you were running that operation?
        Mr. Zabko. Well, sir, when you say ``printed'' and ``sent
    out,'' that's a whole another statement.
        Mr. Matsui. I wasn't aware of that. Help me--explain what I
    said, then.
        Mr. Zabko. All right. The Heartfield Company, Squire &
    Heartfield Company, is a consultant. They in fact will find the
    print shops, the mail shops, to take the printed materials that
    get sent out to the United States Postal Service.
        When you talk about printing, that could be done at any
    number of print shops in a different area. We go out for the
    best bids and to get the best services that could be provided.
        The same goes with the mail shop. When a piece of mail is
    actually printed, it then goes to another facility, another
    entity or another organization, that takes that particular
    mail, puts it into the postal stream through the Post Office.
    They have postal inspectors there, watching this mail as it
    goes into the truck to be actually put into the United States
    mail stream.
        Mr. Matsui. And so you are saying--you used a number of
    different--you are aware that Heartfield Direct uses a number
    of printing operations before the mail is actually sent out.
        You must have contacted all these printing companies then,
    because obviously this was a major concern to you, right? Maybe
    there was some wildcat operation? Is that right?
        Mr. Zabko. Sir, the particular print shops that we use
    would not have printed anything like this, because we have to
    approve the actual printing. OK, this is----
        Mr. Matsui. I understand that.
        Mr. Zabko. This is an agreement between the organization
    and that print shop. Those particular documents that are on
    display were not anything similar to what we in fact printed.
        Mr. Matsui. I understand that. But what I am asking is that
    you must have contacted these print shops because you obviously
    wanted to get to the bottom of this. There was a lot of
    pressure on you. So you must have contacted these print shops
    since Mr. Heartfield said, ``I don't know anything about
    this.'' Then you went, ``Well, we've got to get to the bottom
    of this.''
        So you must have called the print shops up. Isn't that
    correct?
        Mr. Zabko. I don't recall calling those print shops up,
    sir, because these were not quality printed pieces of material.
    These were made off of copy machines or fax machines that were
    sending this information. This was not a--at any length, a
    quality printing job that would come from a reputable printer
    that we would have used.
        Mr. Matsui. A minimum of 29,000 photocopied documents. That
    is interesting.
        So you didn't go beyond Mr. Heartfield, in terms of your
    investigation about how that could have got out there with your
    name, with your company's name on it, your 501(c)(4)'s name on
    there, and the return address?
        Mr. Zabko. Yes, sir, we did.
        Mr. Matsui. Who else did you go to?
        Mr. Zabko. We've contacted numerous people that actually
    faxed these things to our office.
        Mr. Matsui. No, no. I am not talking about the people--I am
    not talking about the victims. I am talking about the people
    that you might have had a suspicion--I mean, obviously, you
    want to get to the bottom of this so you can say, ``Hey, it
    wasn't me. It wasn't our company, our eight employees. It was
    somebody else,'' that person or that group.
        I sense that you would have been at least curious enough to
    want to find out who might have defrauded you. I mean, Mr.
    Smith claims you were victimized. You want to find out who
    victimized you, right?
        Mr. Zabko. Well, sir, we would have no reason to contact
    those print shops, once again, because that was a very poor
    quality of print work. In fact, we would have never allowed a
    print shop to print something like that, having not our correct
    name on it.
        Mr. Matsui. So under----
        Mr. Zabko. If you look at those documents, they clearly
    annotate that it's ``TREA Senior Systems League,'' and they
    talk about TREA being a seniors organization. In that
    particular document you have there, it clearly shows that the
    dates are even incorrect in regards to the notch issue in two
    different places.
        Mr. Matsui. Well, my time has run out, but I just want to
    make sure I understand this. So you are saying under oath that
    you never contacted any one of the print companies that you use
    to find whether or not they might have surreptitiously sent out
    these documents? Is that correct?
        Mr. Zabko. Sir, once again, I would like to restate, as far
    as I know, up until my departure from TREA Senior Citizens
    League, there has never been an established piece of mail that
    was sent out. These are all pieces of paper that have been
    handed to one person to another person or faxed to somebody.
    So, therefore, I would not have a reason to contact our quality
    print shops through Mr. Heartfield.
        And just for the record, Mr. Heartfield may have done that.
    He may have contacted them on our behalf.
        But I did not take that action.
        Mr. Matsui. Did you ask Mr. Heartfield if he actually did
    make contact with some of these print companies?
        Mr. Zabko. I don't remember, sir, but I will tell you that,
    as sure as I'm sitting here, that those are not pieces of
    material----
        Mr. Matsui. I am not asking that question.
        Mr. Zabko. That we printed.
        Mr. Matsui. And you said that over and over.
        Mr. Zabko. And, therefore, we wouldn't----
        Mr. Matsui. I am asking you whether or not Mr. Heartfield
    said to you that he made contact with these print shops and
    they don't have any idea who sent it out either.
        Do you know whether or not he told you that during your
    conversation or after your conversation?
        Mr. Zabko. Sir, I don't remember.
        Mr. Matsui. You don't remember. Thank you.
        Chairman Shaw. Mr. Lewis.
        Mr. Lewis. I have no questions at this point.
        Chairman Shaw. Mr. Cardin.
        Mr. Cardin. Thank you, Mr. Shaw.
        Your testimony reminds me of hearings we had in Congress a
    couple of years ago, dealing with the publication companies
    using sweepstakes to entice people to buy their magazines with
    absolutely misleading information to the consumer, in which
    millions of dollars were received from primarily seniors. And
    ultimately, Congress passed new laws to protect our seniors
    from the sweepstakes problems.
        I have heard your response in regards to the flyer that
    requests Social Security numbers, but I want to move on to the
    regular mailings that you sent out to my constituents and to
    seniors around the nation.
        And I am curious as whether you think, in retrospect,
    looking at this--and I understand it was probably designed by
    the mail order consultants that tell you what is the most
    effective way in order to get a response from the people that
    you mail to.
        But the highlighted part in the mailer that dealt with
    notch issue says: Will you review your file card, make any
    corrections, updates, additions, and return it to me in the
    enclosed envelope? Because you will have a choice between
    accepting the settlement in one or two payments, will you also
    indicate your settlement preference for our records? If you
    choose the $5,000 compensation plan, you will receive four
    annual installments of $1,250. Or if you do not choose the
    $5,000 settlement, your monthly Social Security benefit checks
    will automatically increase, using the formula outlined in the
    bill.
        And then you go to the reply card, which gives you a place
    to check to verify the information is correct, that you are
    registering on the national notch victim register. And then of
    course the rest of this deals with sending money in to your
    organization.
        Do you think this is fair? I mean, how would you like your
    parents to receive this mailer and send in a check?
        Mr. Zabko, I know you are longer with the company, but do
    you think this is a fair way in which to inform seniors, as you
    say?
        I am looking at your tax return, and you indicate that your
    government affairs operation, one of your two principle
    functions, you spent $4 million. This is part of it, I assume,
    is to energize the public. And then $4.5 million to educate.
        I mean, do you really believe this right way to educate, in
    order to try to get a check from people? You are not successful
    by just getting back this register; you want to get a check.
    Isn't that the purpose, to get a check?
        Mr. Zabko. Well, in the capacity that I had with the Senior
    Citizens League, sir, we tried our utmost to respond to the
    concerns of the members of our organization. One of those
    concerns was this notch issue.
        This notch issue appears to be a very contentious
    situation, one that nobody wants to make a decision on.
        Mr. Cardin. Sir, do you know what the prospect of this
    Congress taking up the notch issue was when you were employed
    by this operation, by this company?
        Mr. Zabko. Do I know the prospect, sir?
        Mr. Cardin. Yes.
        Mr. Zabko. Well, it must have been on the radar scope
    because there was pieces of legislation that continually would
    be introduced----
        Mr. Cardin. Did your lobbyists tell you there was a good
    chance that Congress would consider a notch bill this Congress?
        Mr. Zabko. We had numerous indications from different
    Representatives that there would be some----
        Mr. Cardin. Was your objective to get a check from the
    people that you mail out to?
        Mr. Zabko. Our objective, sir, was to cause these
    individuals to actively participate in the U.S. Government's
    way of doing business.
        Mr. Cardin. Sir, I am reminding you, you are under oath.
        But are you saying--I want to get this clear. This was
    designed for a specific purpose. Was the purpose, was one of
    the primary purposes in order to get a check returned in the
    envelope?
        Mr. Zabko. I would have to say that direct mail does do
    that, sir. But that was not the only purpose in those pieces of
    mailings that went out to individuals.
        Mr. Cardin. You have energized mailers coming to our
    office, postcards, on different subjects. Are you aware that
    there is no return address from our constituents on the
    postcards that are sent to our office?
        Mr. Zabko. That is correct, sir.
        Mr. Cardin. You think that is an effective way to lobby
    Congress, by getting names of individuals without addresses, so
    we have no ability to know if they live in our districts or we
    can contact them? You think that is an effective way to try to
    change policy here in Washington?
        Mr. Zabko. One of the reasons that addresses were not put
    on there was the individuals concerned did not want to release
    that information to the Federal Government. And they could, if
    they so desired, write that information in. We had talked to
    numerous people of our organization that did not want that
    information on there.
        We also communicated with individuals in Congress and would
    provide, if they asked us, the individual's name, the
    constituent's name, so that they could send back information in
    regards to that information.
        Mr. Cardin. Who put the return addresses on these
    postcards?
        Mr. Zabko. Who put the return addresses?
        Mr. Cardin. Isn't it correct that your operation, not my
    constituent, but you put the return addresses on the postcards
    that were sent to our office?
        Mr. Zabko. I cannot see the return address on there.
        Mr. Cardin. Well, I will be glad to make them available to
    you. They are all identical, as far as the print is concerned.
    But the operation--I assume you are familiar with the postcards
    that sent into our office from your organization?
        Mr. Zabko. I would guess that's what you're referring to,
    sir. But I cannot see that from this point.
        Mr. Cardin. Well, who puts the return address on it?
        Mr. Zabko. Sir, it depends on what return address you're
    speaking of there.
        Mr. Cardin. On the postcards that are sent to our office on
    issues.
        Mr. Zabko. If it's the constituents address and it's in
    handwritten form, then it is the constituent.
        Mr. Cardin. It is imprinted----
        Mr. Zabko. If it's in print, it's printed at the print
    shop.
        Mr. Cardin. That's my point.
        I would submit to you that you don't want us to have the
    addresses of the individuals because you are not really trying
    to influence policy here. What you are trying to do is get
    checks from our constituents, not checks for our constituents.
        And I think that is the concern that many of us have here.
        That last mailer is clearly fraudulent, in requesting
    Social Security numbers. You have acknowledged that you don't
    know how that came about. I accept that for the moment.
        But what I can't accept is your testimony as to the
    efficacy of the mailers that you are mailing out, getting
    checks from my seniors, telling them that you are going put
    them on a national register for compensation that is not, at
    this moment, on the schedule to be considered by Congress, and
    you make no effort to really engage them in the process.
        And last point, Mr. Chairman, if I might, there is a notch
    register number here, and it says ``temporary number.'' Can you
    tell me what this number means?
        Mr. Zabko. When I was employed with TSCL, a temporary
    number would be for somebody who was not a member but wished to
    join. That individual would be somebody that solicited to join
    our organization.
        Mr. Cardin. Well, wait a minute. I am looking at a ``notch
    victim register'' form, not for membership in your
    organization. The form here says that you make a contribution.
    It doesn't say anything about joining.
        Mr. Zabko. Correct.
        Mr. Cardin. It has a temporary number on it.
        Mr. Zabko. I misspoke, sir. That would be, in fact, what
    you just said. It would be for individuals that are interested
    in donating to our organization to become active in the notch
    issue. And that number----
        Mr. Cardin. So what is the temporary number mean?
        Mr. Zabko. That number was just a temporary number that was
    applied to that individual, so that we'll be able to find him.
        Mr. Cardin. That is their notch register number.
        Mr. Zabko. That's correct.
        Mr. Cardin. You have a national notch registry?
        Mr. Zabko. Yes, we do.
        Mr. Cardin. And if this person sends you back a check, will
    he then get a permanent number or is the person still listed
    under the temporary number?
        Mr. Zabko. No, sir. They would receive a permanent number,
    I believe.
        Mr. Cardin. Would it be different than the temporary
    number?
        Mr. Zabko. In some instances.
        Mr. Cardin. Thank you, Mr. Chairman.
        Chairman Shaw. Mr. Brady.
        Mr. Brady. Thank you, Mr. Chairman.
        Just out of curiosity, Mr. Zabko, you were at the Senior
    Citizens League when these two flyers appeared with your post
    office box on them. Is that right?
        Mr. Zabko. Yes, sir.
        Mr. Brady. Was your dismissal in any way related to the
    actions of the Senior Citizens League in response to these two
    mysterious flyers?
        Mr. Zabko. Not that I am aware of, sir.
        Mr. Brady. Would you say that your board would also confirm
    that?
        Mr. Zabko. Yes, sir.
        Mr. Brady. Would the members of the board confirm that?
        Mr. Zabko. I would say so.
        Mr. Brady. Great.
        Mr. Smith, you are now the chairman and executive director
    of the organization?
        Mr. Smith. I'm chairman of the board, sir. We do not have
    an executive director. It's the same.
        Mr. Brady. OK. Obviously, you want to run a good, solid
    organization. But how do you justify soliciting these seniors
    for membership dollars after they have received such a
    fraudulent flyer? I mean, how do you justify it?
        Mr. Smith. Well, one of the things, sir, is that, being a
    senior, no one really takes the time to educate many seniors on
    what is going on. And many times, things that affect them, when
    they find out about them, it's too late. And so, as far as I'm
    concerned, what we've been doing in the past is basically
    education.
        Now, in order to do this, it's like anything else, it takes
    funds to do it with. The members have a right, if they feel
    that we are not providing what it is that they want or they're
    not getting the results of what they want, I think you will
    find in that mailing that we will send them their money back,
    if they ask for it.
        Mr. Brady. But, Mr. Smith, you didn't simply tell them that
    this was a hoax and this was wrong and you were correcting it.
    You also included a solicitation for membership and dollars,
    correct?
        Mr. Smith. No, sir. It was not a solicitation; it was a
    brochure.
        Now, our brochures always contain an opportunity to join.
    And that's basically what it was.
        Mr. Brady. I used to run a nonprofit organization for 18
    years, and there is no difference between a solicitation to
    join and a brochure with the solicitation to join. You are
    asking for money for membership from these people.
        Mr. Smith. If you----
        Mr. Brady. My point is, how do you justify, after you knew
    these people had been already frightened and/or solicited or
    scammed, why didn't the Senior Citizens League simply say,
    ``This is wrong. You need to be aware of this. Stay on your
    toes''?
        Mr. Smith. We said all those things, sir. And in the
    letter----
        Mr. Brady. But then you continued----
        Mr. Smith. That we sent them, and I guess you have a copy
    of that----
        Mr. Brady. Obviously, it was altruistic. Did you receive
    any memberships from the mailing to the 29,000 seniors?
        Mr. Smith. I could not tell you specifically, but I'm sure
    we did receive some.
        Mr. Brady. More than out of----
        Mr. Smith. Not----
        Mr. Brady. Did you receive more than 1,000 memberships,
    perhaps? Or less?
        Mr. Smith. I cannot be specific on that. I would have to
    check with the data people.
        Mr. Brady. What other revenue besides the membership did
    you receive from these 29,000?
        Mr. Smith. Sir? Please state again, sir.
        Mr. Brady. What other revenue, in addition to the
    membership revenue, what other revenue did the Senior Citizens
    League ultimately receive from these seniors who had been
    defrauded?
        Mr. Smith. That was the only thing we were asking them to
    join, for membership.
        Mr. Brady. So those lists, the 29,000-name database, was
    not sold and no revenue was received by the Senior Citizens
    League? That is what you are saying under oath?
        Mr. Smith. As far as I'm concerned, and the records that I
    have available to me, that these lists have been put aside and
    have not been used for anything else.
        Mr. Brady. Other than a single solicitation?
        Mr. Smith. The single mailing that we made to them.
        Mr. Brady. Well, to show your good faith, would the Senior
    Citizens League destroy that database, since its use is already
    up, and return the dollars to those seniors who were solicited
    after being victimized, to show your good faith as an
    organization that simply wants to educate?
        Mr. Smith. Yes, sir. The only reason why we haven't
    destroyed the list was because of the Social Security IG
    investigation. We maintain the lists and we maintain the data
    available until such time as they resolve the issue. When they
    do, then we will destroy it.
        Mr. Brady. At that point----
        Mr. Smith. I would like----
        Mr. Brady. You will destroy it----
        Mr. Smith. Sir?
        Mr. Brady. At that point, you will destroy it. And you are
    saying that it has not, at any point, been sold, given, made
    available, to any other organization at all?
        Mr. Smith. That is my understanding from the data company.
        Mr. Brady. So the sole copy of that will be destroyed, is
    what you're saying.
        Mr. Smith. The copies that we maintain on file now are not
    being used for anything except staying on file in case needed
    by the Social Security in the investigation.
        Mr. Brady. And you are saying--again, I just want to
    understand----
        Mr. Smith. Yes, sir.
        Mr. Brady. It has never been used except for one
    solicitation to those 29,000 people? In any form, it has never
    been used----
        Mr. Smith. Can----
        Mr. Brady. Distributed, made available?
        Mr. Smith. Can I----
        Mr. Brady. I just want to understand.
        Mr. Smith. No, sir. I'm just--no, sir. But let me--can I--
    --
        Mr. Brady. No, sir, it hasn't.
        Mr. Smith. Just cover it a little bit further, sir?
        Some of these names were people who were previous members
    of TSCL. If you were to check their file, which is not being
    used now, you will find that in the past they may have donated.
    But it has not been done since we have done that, put the file
    in hold.
        Mr. Brady. Run that by me again.
        Mr. Smith. Well, in the responses that we got, some of the
    people that responded had already been TSCL members. And so, if
    you were to pull their file up, you would find that they had
    donated previous to this hoax thing.
        But they, too, were put in hold, and they're no longer
    mailed to.
        Mr. Brady. OK. But, again, you are saying that list was
    used one time, has never been sold, never been leased, never
    been made available, never distributed, at any other point,
    other than that one mailing? Is that correct?
        Mr. Smith. This is what I've been told by the vendors and
    also by the data people.
        Mr. Brady. OK.
        No further questions, Mr. Chairman. I am done. Thanks.
        Chairman Shaw. Ms. Turner, was it your job to take the
    responses to the fraudulent mailing and enter them into your
    database?
        Ms. Turner. No, sir. The data entry company is the one----
        Chairman Shaw. Speak up, please.
        Ms. Turner. I'm sorry. The data entry company, they're the
    ones that actually enter the data. We just maintain the data.
        Chairman Shaw. So you don't do any of the actual feeding it
    into the database?
        Ms. Turner. No, we don't actually do the keypunch.
        Chairman Shaw. This is contracted out?
        Ms. Turner. Yes, sir.
        Chairman Shaw. And to whom is it contracted out?
        Ms. Turner. Direct Mail Processors (DMP).
        Chairman Shaw. Who?
        Ms. Turner. Direct Mail Processors.
        Chairman Shaw. Is that Mr. Heartfield?
        Ms. Turner. No, sir. That is in Hagerstown, Maryland.
        Chairman Shaw. I am having trouble hearing you. Pull that
    microphone closer to you, please.
        Ms. Turner. Sorry. It is Direct Mail Processors. They're
    located in Maryland.
        Chairman Shaw. Direct Mail Processors.
        Ms. Turner. Yes, sir.
        Chairman Shaw. And do you review the results of their
    putting that information into the database?
        Ms. Turner. Not on a daily basis, but I do check records. I
    see the records.
        Chairman Shaw. Do your records include the Social Security
    number of any of your members whatsoever?
        Ms. Turner. No, sir. The database doesn't have a field for
    a Social Security number. We just go by ID number.
        Chairman Shaw. Mr. Becerra.
        Mr. Becerra. Mr. Chairman, thank you.
        Thank you for appearing today. We appreciate your
    testimony.
        Let me ask a couple of questions, to follow up on some of
    the questions that have been asked by colleagues.
        Is the Senior Citizens League--I want to be sure about
    something--did I hear correctly that you are willing to
    relinquish the information obtained by that fraudulent mailer
    that you received as a result of the 29,000 response, at least
    as to those that are new, represent new data that you received
    that you did not already have on file for individuals?
        Mr. Smith. Say again, sir?
        Mr. Becerra. You received, from 29,000 people, responses to
    this fraudulent mailer, that Senior Citizens League claims it
    had nothing to do with.
        Mr. Smith. Yes, sir.
        Mr. Becerra. You had a data processing firm input that data
    for you, and you subsequently mailed a letter to these
    individuals, indicating that you had no responsibility for that
    hoax mailer.
        Mr. Smith. That's right.
        Mr. Becerra. Now that you know this was a hoax mailer and
    that there is concern that data was obtained, personal data was
    obtained from these individuals, these seniors, on a fraudulent
    basis, I believe the questions were asked earlier: Would you
    now relinquish that personal data from these seniors that you
    have in your possession?
        Mr. Smith. Under no circumstances, sir. We--the--we didn't
    keep the personal data. We never put the personal data on file.
        Mr. Becerra. What did you put on file?
        Mr. Smith. Only the name and address and, in some cases, a
    birth date.
        Mr. Becerra. And what did you do with all of the responses,
    written responses, that you received, or the communications
    that you received that contain that personal information?
        Mr. Smith. That packets themselves, the documents
    themselves, I correct--correct me--Mr. Zabko can verify this--
    were turned over to Social Security?
        Mr. Zabko. That is correct. Those pieces of information
    were delivered to the Social Security Administration upon their
    request.
        Mr. Becerra. So at this stage, does the Senior Citizens
    League have in its possession any personal information from any
    of these 29,000 individuals who responded to this fraudulent
    mailing?
        Mr. Smith. Not personal information, sir.
        Mr. Becerra. Other than name and address?
        Mr. Smith. Name and address, and maybe a birth date. But--
    --
        I was just informed, there have been some documents
    trickling in that maybe have not been turned over to Social
    Security, but they too were put in a, if you want to call it a
    lockbox.
        Mr. Becerra. And you will be returning that Social
    Security?
        Mr. Smith. Yes, sir.
        Mr. Becerra. And you have not logged any of that personal
    information, aside from name and address, into any database
    system that you have?
        Mr. Smith. No, sir. As best to my knowledge, we have not.
        As I said, the information comes in to DMP. And from that
    point on, their instructions is not to utilize any of this
    information.
        Mr. Becerra. And you were asked earlier if on a good-faith
    basis the Senior Citizens League would return any moneys
    collected as a result of having obtained these individuals'
    names and addresses through this fraudulent mailer. And I don't
    recall the response.
        Mr. Smith. Had they sent money, the money and any personal
    documents, my best understanding, I think Mr. Zabko can address
    that, was returned to these individuals.
        Mr. Becerra. OK. You are saying ``to the best of your
    understanding.'' That is not a----
        Mr. Smith. I can't verify, sir. I wasn't there.
        Mr. Becerra. OK, Mr. Zabko, can you tell us if in fact any
    of that money collected from any of these 29,000 individuals
    was returned?
        Mr. Zabko. Sir, as far I know, there was no money collected
    from those 29,000 individuals, based on the response of those
    fictitious flyers.
        Mr. Becerra. What about based on your subsequent
    solicitation to those individuals that you sent out?
        Mr. Zabko. Sir, I don't know. I was not there after
    February, and I have no knowledge of that.
        But I can tell you that we ordered, in writing, the direct
    mail shop, when the mail came in, that if there was any moneys
    involved in those letters, to notify us immediately. Up to my
    departure, there were no notifications that any moneys were
    received along with those fictitious flyers.
        And we also notified them: Do not type in, because there is
    no space, or collect, any of the personal information, other
    than a name and an address. But you're no----
        Mr. Becerra. OK. Now you are going beyond the information I
    need for the question I have asked.
        Mr. Zabko. I'm sorry, sir.
        Mr. Becerra. Let me see if I can direct it to Mr. Smith,
    since, Mr. Zabko, you are saying you were gone, you left before
    any responses to your solicitation directly to any of the
    29,000 individuals may have occurred.
        So, Mr. Smith, in the communication you had with the 29,000
    individuals who responded to this fraudulent mailer, in that
    mailer, where you explain that you had nothing to do with that
    mailer, you also included solicitation materials for the Senior
    Citizens League, correct?
        Mr. Smith. Yes, sir. There was a join brochure.
        Mr. Becerra. And I think this Committee has asked, members
    of this Committee have asked, if, in good faith, the Senior
    Citizens League would be willing to return any moneys collected
    by the Senior Citizens League as a result of that solicitation,
    which was predicated upon obtaining these individuals' names
    and addresses resulting from that fraudulent newsletter.
        And I don't know if you responded yes or no, that you
    would, on a good-faith basis, return any moneys that were
    obtained as a result of that solicitation that came as a result
    of having names and addresses of individuals who responded to
    that fraudulent mailer.
        Mr. Smith. As the chairman of the board, and I can speak
    for the board, we definitely would return any money. We do not
    want anything that would taint the name of TSCL.
        As we said, we guaranteed the individuals, on our mailings,
    that we would return the money if they're not satisfied with
    the services or with the things that we do in their name.
        Mr. Becerra. So is that a ``yes,'' that you will return----
        Mr. Smith. Yes. Yes, sir.
        Mr. Becerra. I know my time has expired. Thank you, Mr.
    Chairman.
        Thank you very much.
        Mr. Smith. Thank you, sir.
        Chairman Shaw. Mr. Smith and Mr. Zabko, could both of you
    identify the lady and the gentlemen sitting behind you, who are
    advising you during the question period?
        Mr. Smith. The first gentleman is David Washington, a first
    vice president of TREA, The Retired Enlisted Association;
    Virginia Torsch, who is the legislative director for TSCL at
    this time; and Mr. Bill Olson and Mr. John Miles, who are
    TREA's attorneys--I mean, TSCL's attorneys. I'm sorry, sir.
        Mr. Zabko. And the gentleman behind me, as I indicated in
    my original statement, is the Hon. Mark Fury, my personal
    counsel.
        Chairman Shaw. Thank you.
        Mr. Ryan.
        Mr. Ryan. Thank you, Mr. Chairman.
        Let me ask each of the three of you a quick question, and a
    yes or no would be preferable.
        Have any of you been party to a conversation where a
    discussion included using flyers to get lists, using flyers
    talking about notch babies, using flyers talking about slave
    reparations, to get lists? Have any of you been part of a
    conversation like that?
        Mr. Smith. I have not, sir.
        Mr. Zabko. No, sir.
        Ms. Turner. No, sir.
        Mr. Ryan. OK. Ms. Turner, I just want to nail down your
    role. Who do you work for exactly?
        Ms. Turner. Public Interest Data.
        Mr. Ryan. Again, closer into the mike, please.
        Ms. Turner. Public Interest Data.
        Mr. Ryan. And that is a database management firm, correct?
        Ms. Turner. Yes, sir.
        Mr. Ryan. OK. And that is a for-profit firm?
        Ms. Turner. Yes, sir.
        Mr. Ryan. OK. Now, your role is to manage TREA and TSCL's
    database, correct?
        Ms. Turner. Correct.
        Mr. Ryan. OK. When the 29,000 names came in, that came in
    through your firm and you managed that database, correct?
        Ms. Turner. It actually arrived at DMP, who keyed it onto
    our database.
        Mr. Ryan. OK. They came into your mail house firm, correct?
        Ms. Turner. Correct.
        Mr. Ryan. Which then comes onto your database.
        Ms. Turner. Exactly.
        Mr. Ryan. And then you control the firm that does the
    actual data entry in Hagerstown, Maryland, correct?
        Ms. Turner. We don't control them; we work with them.
    They're a separate company.
        Mr. Ryan. OK, but you tell them what to add and what not to
    add, correct? Where to put the lists--you manage where the
    lists are stored and all of those things, correct?
        Ms. Turner. Exactly.
        Mr. Ryan. And you design the fields on every database,
    correct?
        Ms. Turner. Right.
        Mr. Ryan. OK. You did not include any Social Security
    identification numbers in this list, correct?
        Ms. Turner. No, sir.
        Mr. Ryan. OK. Did you intermingle or include the list from
    the hoax flyers into any other list that is held by TSCL?
        Ms. Turner. It's all on one database, but there is a code
    for the flyers, and that code is what we use to omit from all
    of the mailings.
        Mr. Ryan. OK. So the list that came from the hoax documents
    is in the main TREA database.
        Ms. Turner. Yes, sir. It's coded as the hoax flyers, so we
    know that these records are----
        Mr. Ryan. OK.
        Ms. Turner. From the hoax.
        Mr. Ryan. Last year, TREA made $417,000 on its list rental,
    correct?
        Ms. Turner. I don't know that.
        Mr. Ryan. That is off the tax form, I believe, tax return.
        Well, do you control--when someone wants to rent the list
    from TREA, you actually send it to that person, correct? If
    it's an insurance company, if it's AARP, they want to rent the
    list, they send a check to TREA. You're the person who actually
    sends that list or rents it out, correct?
        Ms. Turner. Correct.
        Mr. Ryan. Has this----
        Ms. Turner. Our office does, not me, personally. My office
    does.
        Mr. Ryan. Your office does, right.
        When the list has been rented out, and you have a separate
    code for those 29,000 names, have you ever seen the list rented
    out which included all of these names? Has the entire list been
    rented, including the 29,000 from the hoax mailing?
        Ms. Turner. No, sir. It's part--part of the list rental
    program, it automatically omits the code for the hoax flyers.
    We have several flags that are omitted, the do-not-mails, the
    deceased, and part of the flags that are standard omits are the
    hoax flags.
        Mr. Ryan. OK. Do you know whether or not after the mail
    went out to the hoax list--it had the solicitation in there,
    the form that looks like a solicitation--do you whether or not
    people actually joined up from that original list after
    receiving the follow-up mailing?
        Ms. Turner. We ran some counts before, and I don't know the
    numbers right now, but there were a few people that did
    respond.
        Mr. Ryan. What was the last count you recollect?
        Ms. Turner. Honestly, I can't remember, but we can get that
    information----
        Mr. Ryan. OK. And when that person then signs up, they go
    into the general list. And is their code dropped and they are
    part of the regional TREA group, correct?
        Ms. Turner. Actually, the way we set up is anyone who had
    that code, no matter if they made donations before or after,
    have not received any more mailings.
        Mr. Ryan. OK. Now, Mr. Smith----
        Mr. Smith. Yes, sir.
        Mr. Ryan. Can you tell me, just briefly, what is the
    relationship between TSCL and TREA? Do they have any
    overlapping board members? Can you tell me who controls what?
    What is the relationship between TSCL and TREA?
        Mr. Smith. The Retired Enlisted Association represents
    retired individuals. I am a past national president of The
    Retired Enlisted Association.
        TSCL is an affiliate initially, right now, in the files
    that we have, and we're in the process of changing that.
        Of The Retired Enlisted Association, the board of trustees
    that operate TSCL as an independent operation are selected,
    resumes are turned into the board of directors----
        Mr. Ryan. OK.
        Mr. Smith. Of TREA. They are selected and then elected----
        Mr. Ryan. Let me----
        Mr. Smith. To run TSCL. And that is the--from that point
    on, the board of trustees of TSCL is responsible for running
    the operation.
        Mr. Ryan. OK. So let me move on then. Mr. Zabko, if I could
    just ask a couple quick questions. I see that the red light is
    coming on.
        Have you ever used flyers in solicitations before? Has TREA
    or TSCL ever used flyers in solicitations before?
        Mr. Zabko. Not that I can remember, sir.
        Mr. Ryan. Mr. Smith, is that your answer as well?
        Mr. Smith. No, sir. I'm not aware of them.
        Mr. Ryan. OK. Can you estimate how many solicitations have
    been sent over the years through TREA or TSCL?
        Mr. Smith. Solicitations by TSCL are separate from
    solicitations by TREA.
        Mr. Ryan. TSCL.
        Mr. Smith. TSCL solicitations?
        Mr. Ryan. Yes.
        Mr. Smith. I couldn't tell you the number, sir. But we can
    get that number for you.
        Mr. Ryan. OK. And one last question, and I would like to
    ask, because I don't know if Mr. Kleczka put this in the record
    or not, but I would like to ask that his submission be put into
    the record, pertaining to a person's will.
        Do you, Mr. Smith, Ms. Turner, or Mr. Zabko, know of any
    will or any bequest that has been made on behalf of a member to
    you? Namely after the solicitation in which you mentioned to a
    member that they could bequest money to you from their estates,
    has that transaction ever taken place? Are you, TREA or TSCL,
    listed in anyone's will, to your knowledge?
        Mr. Smith. Now, in TSCL, sir, no. But since I was in
    Memorial Foundation in TREA, yes, we have received those.
        Mr. Ryan. Mr. Zabko.
        Mr. Zabko. As far as TSCL is concerned, no, sir.
        Mr. Ryan. But TREA?
        Mr. Zabko. None that I know of.
        Mr. Ryan. I have no idea about TREA, sir.
        Mr. Zabko. Would you have any--Mr. Smith, do you have any
    idea of how many people have arranged to leave money in their
    wills to TREA?
        Mr. Smith. No, sir. The one just recently happened.
        Prior to that, the only other moneys that are left to
    Memorial Foundation, which is a 501(c)(3), would be from our
    life membership dues, and people can leave that to the Memorial
    Foundation.
        Mr. Ryan. Do you think that's ethical, Mr. Smith?
        Mr. Smith. For TREA, sir?
        Mr. Ryan. Yes.
        Mr. Smith. Certainly, sir, to the Memorial Foundation,
    because it benefits our members.
        Mr. Ryan. Do you think that--Mr. Chairman, if I may--I will
    yield. I see that my time has expired.
        Chairman Shaw. If you will ask them what TREA Memorial
    Foundation does. I notice that they got a $70,000 grant from
    TREA. Perhaps Mr. Smith could enlighten us as to how this
    benefits their members.
        Mr. Ryan. That is where I was----
        Mr. Smith. Yes, sir. The Memorial Foundation is set up to
    provide benevolent assistance to our members. It also provides
    to disasters, which we have donated over $200,000. We donated
    to the various things that has happened in Puerto Rico. We
    donated to the bombing in Oklahoma from the Memorial
    Foundation.
        We also provide 40,000 $1,000 scholarships per year to the
    members and dependents of The Retired Enlisted Association.
        The money from TSCL is donated to the Memorial Foundation.
    Yes, sir.
        Is that----
        Chairman Shaw. It was Mr. Ryan's question. I just
    formulated it.
        Mr. Ryan. Thank you.
        Chairman Shaw. Mr. Hulshof.
        Mr. Hulshof. Thank you, Mr. Chairman.
        Mr. Zabko, in the brochure that you sent out to the 29,000
    respondents, there is a brief bio, and I want to check just
    some of this information.
        It mentions that you then were the executive director, that
    you served 20 years with the U.S. Navy. Is that true?
        Mr. Zabko. That is true, sir.
        Mr. Hulshof. Ten years as a benefits counselor. Is that
    true?
        Mr. Zabko. That is correct.
        Mr. Hulshof. You have stated under oath today that you are
    a registered lobbyist. You also state in this brochure that you
    are a certified veterans compensation and pension counselor. Is
    that true?
        Mr. Zabko. I have a certificate from the Veterans
    Administration (VA), sir.
        Mr. Hulshof. OK. So the certification itself is from the
    VA?
        Mr. Zabko. Yes, sir.
        Mr. Hulshof. Now, is there any continuing education
    requirements in order to maintain that certification?
        Mr. Zabko. As of now, I don't know, sir.
        Mr. Hulshof. Do you continue to be a certified veterans
    compensation and pension counselor? Are you still a member of
    good standing? Or has that certification been revoked?
        Mr. Zabko. It has not been revoked, sir. But I have not
    been doing that particular work.
        Mr. Hulshof. Let me ask you, in your written statement, on
    page 3, you mention the potentially, and I am quoting from you,
    ``potentially fraudulent information,'' referencing the flyers.
    It wasn't potentially fraudulent, was it, Mr. Zabko? It was in
    fact false information. Isn't that true?
        Mr. Zabko. Fraudulent, sir, is a legal definition. And
    unfortunately, I don't have a degree in that particular
    profession.
        Mr. Hulshof. Well, the flyer says that there is a slave
    reparation act. You know that now--I don't know at the time--
    but there is no such legislation as a slave reparation act. You
    know that now, correct?
        Mr. Zabko. That is true. There was legislation, but there
    was no act.
        Mr. Hulshof. Is it your testimony, after all of what you
    have heard today, and as we have undertaken this examination of
    you, that the Senior Citizens League continues to be a victim
    of a cruel hoax?
        Mr. Zabko. Yes, sir. That it is.
        And I also would like to add that in speaking with Mr.
    Cohen of the postal authority, he referred to this whole thing
    as a nuisance chain letter, and everyday we have these
    particular instances going on, more so now with the Internet
    than we do previous to the Internet.
        Mr. Hulshof. Well, let me talk about these particular
    flyers. Let me paraphrase, then, your testimony as: These
    flyers appeared out of the blue; that they included something
    called a ``national notch victim register,'' which the Senior
    Citizens League has used something like that in the past; that
    you had the same post office box number on this flyer that in
    your published brochures. And so all of that information, which
    was accurate, or at least consistent with what you had put out,
    that someone out in America wanted to give a black eye to the
    Senior Citizens League. I mean, is that what we are led to
    believe here today?
        You can consult with counsel, if you choose.
        Mr. Zabko. Thank you.
        As I indicated in my statement, sir, I to this day don't
    know why that has been done, nor do I know who has done it. And
    I cannot speculate that it was done fraudulent reasons or any
    other. I just know that it happened, and we did everything
    possible to protect the private information of the individuals
    that sent us that information.
        Mr. Hulshof. Nonetheless, even though you would consider
    the Senior Citizens League and perhaps yourself, on the
    receiving end of some of these questions today, as victims of
    this hoax, the league was able to profit, at least in some
    regard as far as the solicitations, the 29,000 respondents gave
    checks in--true?
        Mr. Zabko. I don't know that for sure, sir.
        Mr. Hulshof. And if you were a victim of this hoax, then
    why is it that, while you were executive director, that the
    Senior Citizens League chose not to cooperate with this
    investigation?
        Mr. Zabko. Sir, I don't believe that we chose not to
    cooperate.
        Mr. Hulshof. Well, let me ask you about this letter that I
    have, that was cc'ed to you, dated October 5th of the year 2000
    by attorney and counselor at law Michael Boose to John May, who
    is the CEO of Associated Growth Enterprises, and it is
    referencing the subpoena for records of, or relating to, TREA
    Senior Citizens League, and paraphrasing the text of the
    letter, which we can make it part of the record:
        Please be advised, as the second paragraph states, that the
    Senior Citizens League strongly objects to your company--being
    the Associated Growth Enterprises--providing any of its
    documents, records, materials or confidential business
    information to the Social Security Administration in response
    to their subpoena.
        [The information follows:]

                                                Fairfax, Virginia 22030
                                                        October 5, 2000

    John May
    C.E.O.
    Associated Growth Enterprises, Inc.
    1101 Mercantile Lane, Suite 100
    Springdale, MD 20774

    Re: Subpoena for records of, or relating to, TREA Senior Citizens
    League.

        Dear Mr. May:

        I represent TREA Senior Citizens League (``TSCL''), which asked me
    to contact you regarding a subpoena from the Office of Inspector
    General of the Social Security Administration for records of, or
    relating to, TSCL.
        Please be advised that TSCL strongly objects to your company
    providing any of its documents, records, materials or confidential
    business information to the Social Security Administration in response
    to the subpoena. You may not be aware of this, but earlier this week
    representatives of TSCL met with Special Agent Alan F. Stubbs
    concerning the subpoenas that were issued to TSCL and its direct mail
    processing firm. Had TSCL known of the subpoena that was issued to your
    company, you or a representative of your company could have been
    invited to participate in that meeting or arrangements could have been
    made for a similar meeting with you.
        In any event, during the meeting, the scope of the subpoenas were
    narrowed quite significantly, and it is our understanding that the
    Office of Inspector General will not be seeking to enforce the
    subpoenas as issued.
        Prior to your providing any of TSCL's documents, records, materials
    or confidential business information to the Office of Inspector
    General, it is respectfully requested that you have your attorney
    contact me to discuss this matter. While I will not be in my office on
    Friday, I will be available to speak with your counsel regarding this
    matter on Monday and Tuesday of next week. My office number is (703)
    691-7717 and my cell phone number is (571) 213-1015.
        I thank you for your cooperation in this matter.
                Sincerely,
                                                          Michael Boose
                                            Attorney & Counselor at Law
    cc: Michael J. Zabko
    Alan F. Stubbs

        Mr. Hulshof. Now, is it your testimony that this was
    cooperation?
        Mr. Zabko. Sir, the context of that particular letter was
    that individual company no longer did business with us. And in
    fact, the postal authorities seemed to think somehow that they
    were the ones that were handling our mail.
        We were trying to communicate with that particular company,
    and in fact could not receive any communication from their
    legal people, and, therefore, that letter was generated to
    them.
        We wanted to speak to them and consult counsel before we
    participated with this very broad subpoena that was being
    placed on the organization.
        Mr. Hulshof. Mr. Smith, my time also has expired.
        And I see that we are running on autopilot, so let me
    continue with just a few other questions.
        [Laughter.]
        Mr. Collins. I am in charge.
        Mr. Hulshof. OK, Mr. Collins.
        I just wanted to follow up, Mr. Smith, and if I could, ask
    the staff to provide this, because I just want to make sure we
    get on the record.
        To Mr. Smith at the end. Mr. Zabko, if you would pass that
    down to Mr. Smith? If you would pass that down to Mr. Smith,
    please? Thanks.
        Mr. Smith, I think Mr. Kleczka provided this to us, and it
    is a mass mailing that has gone out. And I think the receipt
    date--perhaps, Mr. Kleczka, if I could inquire?
        It says July 12th of 2001?
        Mr. Kleczka. Right.
        Mr. Hulshof. Would that have been from your office, Mr.
    Kleczka?
        Mr. Kleczka. Yes, sir.
        Mr. Hulshof. Mr. Smith, is this your signature, or at least
    a computer-generated facsimile of your signature on the bottom
    of----
        Mr. Smith. Yes, it is, sir.
        Mr. Hulshof. Of that mailing?
        Mr. Smith. Yes, it is, sir.
        Mr. Hulshof. OK.
        Final question: This fraudulent flyer that is out there--
    and just as your statement to us has some bold. I assume that
    is because you want us to pay particular attention to that
    statement, even though you have since said that you didn't know
    this per se, as far as working with the Social Security office,
    changing the mailing, and I think you have corrected that part
    of the record.
        But in this mass mailing to senior citizens, you bold the
    part that says that they are going to get these checks.
        Does it trouble you, sir, that this language in this
    mailing that occurred after this investigation has begun is
    very similar--eerily similar, I would submit--to the actual
    language that is included in these fraudulent flyers? Does that
    trouble you, sir, as the executive director of the Senior
    Citizens League, that the language that you include in this
    mailing is very similar to the information that were on these
    hoax flyers?
        Mr. Smith. If you give me a second to read this, sir. Sir,
    one of the things that, when you have a situation as the hoax
    flyers, you have to address that situation, and we did this.
    But we still have to continue to provide the services that we
    indicated to the people who send us money that we would.
        And to do this, we would have to continue doing the things
    we said, and we do have these things on record.
        We're not trying to continue the hoax. We're merely trying
    to continue the services that we said we would provide when
    these people send their donations.
        And so, that's what we do. And, of course, that's what we
    have to continue to do, sir.
        Mr. Hulshof. Thank you, Mr. Chairman.
        Chairman Shaw. Thank you.
        Mr. Pomeroy.
        Mr. Pomeroy. I am finding this all rather implausible. A
    mailing, a national mailing, soliciting funds, which come to
    you, and you don't know anything about it. So then you send out
    a letter to the 29,000 respondents, disclaiming knowledge of
    the earlier one, and soliciting funds.
        Now, if that passed the smell test--well, let me put it
    this way: It doesn't pass my smell test. It is pretty
    extraordinary.
        But we will go on. I want to inquire as to the recently
    noticed mailing that you do assume responsibility for, and ask
    you some questions on that.
        Mr. Smith. OK, sir.
        Mr. Pomeroy. Mr. Smith, I noted that you responded--you
    characterized the IG's report as containing extremely
    misleading information. That struck me, because you seem to
    have some expertise in that business of writing reports or
    writing documents with extremely misleading information.
        This clearly conveys the impression that someone is about
    to get $5,000 and, on the second page, specifically and
    explicitly represents a level of lobbying activity that you
    undertake on behalf of those sending in money.
        You indicate that you are a leading voice in the effort: As
    the leading voice for national notch justice, we're working to
    ensure all Members of Congress add their names to the
    settlement, and that Congress passes the legislation in this
    session.
        Now, as chairman of the board, can you tell us the members
    of this Subcommittee, the Social Security Subcommittee of the
    Ways and Means Committee, that have been contacted by you on
    this issue, by your organization?
        Mr. Smith. We presently, I can tell you, from February on,
    sir. That's--I can verify from February on, when I became the
    chairman of the board.
        At that time, we brought on board Michael Plumer and Mrs.
    Torsch. And I am sure that she has been up and talked to
    various people. Mike Plumer is the individual that is dealing
    primarily with the Social Security notch issue.
        Mr. Pomeroy. Mr. Smith, I heard earlier testimony that it
    was Mr. Hayworth of the Committee that had been contacted.
        Mr. Smith. That was prior to February, sir.
        Mr. Pomeroy. Well, I would be very interested in receiving
    a list of member contacts that have been made.
        I will submit for the record a constituent letter that I
    got relative to this mailing, to try and convey to you the kind
    of concern and misinformation that letters like this--the
    impact of letters like this on those who receive them.
        This letter is from an elderly constituent, writing about
    this letter, raising questions about it. And he notes: One lady
    here was waiting for her $5,000 so she could pay for a trip she
    wanted to take, which never came.
        You know, you are raising hopes of people without realistic
    expectation of receiving the $5,000, and even for some, raising
    the expectation that the check is in the mail and the
    legislation isn't even on any kind of likelihood of being
    enacted.
        I mean, I think that is just an egregious disservice to
    those you represent.
        I have asked the IG to send us information on the insurance
    companies to whom you have sold lists. I would also ask you to
    provide that information to the Committee.
        Are you aware that you routinely sell your mailing lists or
    rent your mailing lists, I guess the term is, to insurance
    companies?
        [The information follows:]

        [GRAPHIC] [TIFF OMITTED] T5753A.022

        [GRAPHIC] [TIFF OMITTED] T5753A.023

        [GRAPHIC] [TIFF OMITTED] T5753A.024

        Mr. Smith. Yes, sir. I am not aware of the exact companies,
    but I can get that list.
        Mr. Pomeroy. Good.
        Mr. Smith. And you've requested it; it will be forwarded to
    you, sir.
        Mr. Pomeroy. Thank you very much.
        I have been looking at your tax return, trying to figure
    out where all this money that you make goes. You report income
    of $12 million.
        And in looking at it, you had $51,000 in legal fees last
    year. What was that for?
        Mr. Smith. I would imagine it pertained to the change of
    the board of directors and some of the other legal things that
    were done. I would have to--if it was for the total year, I
    would have to ask Mr. Zabko.
        Mr. Pomeroy. Were you involved in litigation or anything?
        Mr. Smith. No, not at all.
        Mr. Pomeroy. The $1.5 million, $1.591 million, professional
    fundraising fees. What does that involve?
        This is in a period of time where Mr. Zabko was director.
    Perhaps you could shed light on where the----
        Mr. Zabko. Sir, the fees for the legal fees, most of those
    are State-required fees to register in the different States
    with the attorney generals' offices, to do fundraising in those
    States. Quite a bit of that is done.
        And then a small portion of it was just regular legal
    consultations.
        Mr. Pomeroy. On the professional fundraising, the $1.59
    million?
        Mr. Zabko. That is for fundraising counsel and fundraising
    endeavors.
        Mr. Pomeroy. You pay your fundraising consultants more than
    $1.5 million? And that is not about stamps and postage; that is
    a separate line item. This is just professional fees for those
    people that these write----
        Mr. Zabko. Professional fees, that's correct, sir.
        Mr. Pomeroy. These misleading letters? Pardon me?
        Mr. Zabko. No, sir. They did not send those misleading
    letters, sir. Those are professional fees for fundraising.
        Mr. Pomeroy. The people that make the phone calls to--no. I
    am sorry. I don't understand your answer.
        This letter that is before you. Not the disputed pamphlets,
    but the letter that was mailed out that you do you not contest.
        Mr. Zabko. That is--those letters that you are holding up
    there, sir, yes, that is part of the professional fundraising--
    --
        Mr. Pomeroy. This is an example of what you get for $1.59
    million? Is that correct?
        Mr. Zabko. That's an example of a fundraising letter, yes,
    sir.
        Mr. Pomeroy. So you have very highly paid consultants that
    write misleading letters designed to generate cash to you and
    names that you then sell to others?
        Mr. Zabko. Sir, I'm not quite sure if that's correct.
        Mr. Pomeroy. I have no other questions.
        Chairman Shaw. Mr. Zabko, let me follow up on that for just
    a moment.
        Who is that professional fee paid to?
        Mr. Zabko. I believe part of that is Squire & Heartfield
    Direct.
        Chairman Shaw. And is that the company that is owned by Mr.
    Heartfield?
        Mr. Zabko. Mr. Heartfield I believe is the vice president
    of that company.
        Chairman Shaw. Who is the principle in that company?
        Mr. Zabko. The principle in that company I believe is Mr.
    Jeremy Squire.
        Chairman Shaw. I am looking down the list of officers,
    directors, and trustees, as well as key employees. And except
    for you, there is no compensation showed by any of the names.
    This is coming from your 990, which was signed by Mr. Smith.
        Do any of these individuals do business with TSCL?
        Mr. Zabko. Do business as in they were paid by TSCL?
        Chairman Shaw. Yes, are they principles in any other
    company that does business with----
        Mr. Zabko. From the best our knowledge, sir, no.
        The only payment that they will receive is for reimbursable
    expenses, such as meals or travel.
        Chairman Shaw. And what is The Retired Enlisted Association
    in Aurora, Colorado?
        Mr. Zabko. I'm sorry, sir, ``what is it?'' you're asking?
        Chairman Shaw. Yes, The Retired Enlisted Association in
    Aurora, Colorado.
        Mr. Zabko. It's just that, sir. It's The Retired Enlisted
    Association. It's an organization that is a (c)(19), 501(c)(19)
    organization.
        Chairman Shaw. What do they do?
        Mr. Zabko. They are a group of individuals that are vested
    in lobbying and working with benefits that affect retired
    enlisted people from the armed forces.
        Chairman Shaw. OK. We are going to have to recess. We have
    one vote on the floor, and we will come back and complete it.
        The scheduled markup for the full Committee that was
    scheduled at 2 o'clock is being delayed. We want to try to
    finish up with this panel and the final panel as quickly as we
    can so that we can go into the full Committee markup.
        So we will stand in recess for approximately 15 minutes.
        [Recess.]
        Chairman Shaw. Mr. Collins may inquire.
        Mr. Collins. Thank you, Mr. Chairman.
        Mr. Smith, I have a constituent who just recently sent me
    all the information that came in an envelope to him from you
    all. I believe it is the same letter that has been referred to
    here earlier.
        And his response was this, he sent me this little
    handwritten note with it, it said: Sir, about once a year I get
    this. This year I saw your name on this. Could you please tell
    me if it is on the up-and-up? I don't think so.
        But then it had my name on it and he thought it might be on
    the up-and-up. Of course, you know what I told him, I hope, and
    that was, ``No, it's not. Don't send them a dime.''
        But on this letter that you signed, you say a mail order
    house handles this for you?
        Mr. Smith. Yes, sir.
        Mr. Collins. I can't find a date on it as to when the
    letter was actually drafted. Is it customary not to put dates
    on letters?
        Mr. Smith. Well, normally what they do, sir, in the
    mailings, they draft the letter, they put a mail date on it,
    and then it's kind of like in a slot of mailings that we get.
    And in some cases, they may not make that date. And I think
    that may be a reason why they don't put that date on it.
        Mr. Collins. Well, it was hard to tell when this particular
    letter was sent out.
        But it does indicate and insinuate that there will be
    compensation. And it goes on to say that the $5,000 settlement
    is now before both Houses of Congress and we are working for
    its passage. How do you interpret that, ``it is before both
    Houses of Congress''?
        Mr. Smith. Well, my interpretation, sir, the bill has been
    introduced. So----
        Mr. Collins. So it would be within a committee then?
        Mr. Smith. Yes, sir. You're there, trying to get
    cosponsors, which is our responsibility to lobby.
        Mr. Collins. But it is not before the House; it is before a
    committee.
        Mr. Smith. I would say----
        Mr. Collins. This letter is a little misleading in that
    direction, too, is it not?
        Mr. Smith. Say again, sir?
        Mr. Collins. I said, the letter is misleading in that
    direction, too, then, is it not? It is not before both Houses;
    it is before committees in each House.
        Mr. Smith. I think the determination for individuals out in
    the field, when a Congressman introduces a bill, it's
    considered that bill is--is going before the House of
    Representatives.
        As a layman out here, I don't think too many of us are much
    aware whether the bill is before a committee or if it is
    legislation that is introduced.
        Mr. Collins. But you said this was a letter to educate
    those folks. Shouldn't you tell them that it is before a
    committee, if you are trying to educate them, rather than
    misleading them that it is before the whole House or the whole
    Senate?
        Mr. Smith. Well, we try to, sir.
        Mr. Collins. I mean, that is the purpose of the letter, is
    it not, to educate the people? Is that what you said?
        Mr. Smith. Yes, sir.
        Mr. Collins. And it is a fundraising letter also.
        Mr. Smith. Yes, sir.
        Mr. Collins. What is your return address? Is it P.O. Box
    97173? That is what is on this envelope.
        Mr. Smith. One thing, sir, that may be the mail return
    address, sir, to DMP.
        Mr. Collins. This is the ``Rush. First class. $1,000 reward
    offered for information leading to the conviction of anyone
    unlawfully interfering with the delivery of this document.''
    And it is to P.O. Box 97173. Is that the correct address?
        Mr. Smith. It should be, sir, yes.
        Mr. Collins. How long have you had----
        Mr. Smith. That is not our individual----
        Mr. Collins. How long have you had this address?
        Mr. Smith. Office address. Sir?
        Mr. Collins. How long have you had this address?
        Mr. Smith. That's a mail-drop address.
        Mr. Collins. How long has this been a mail-drop address?
    Mr. Zabko, do you know?
        Mr. Zabko. Sir, I could shed some light on that.
        That particular address, if I'm not mistaken, was developed
    on the request of the postal inspector after we started
    receiving these. We terminated the original post office box
    that I believe was in existence from 1994.
        Mr. Collins. The post office box on the false flyer then
    was your original box?
        Mr. Zabko. Was the very original post office box, yes, sir.
    And with the information received from the postal inspector
    general's office, we in turn changed that and stopped using
    that particular post office box and then activated another one.
    And I couldn't see the number, but I believe----
        Mr. Collins. And you did that because this was a false
    representation of your organization? This is a copy of what is
    over there.
        Mr. Zabko. Yes, sir. That is correct.
        Mr. Collins. And you said you received replies for some
    29,000 people based on this?
        Mr. Zabko. Those flyers, yes, sir.
        Mr. Collins. You may have answered this: Did you return the
    money to the 29,000 people?
        Mr. Smith. At far as we know--I think you--Mr. Zabko
    mentioned the fact that there was no record of any money being
    received from those people in the original hoax that came in.
        There was some money received when they responded to the
    letter we sent to them, indicating that it was a hoax.
        Mr. Collins. You did not keep a record as to whether or not
    any money came in due to this false flyer?
        Mr. Zabko. Sir, to the best of my knowledge, up until
    February, there was no money received. We did keep very good
    records.
        Matter of fact, there is a written document that went to
    the processing center where the mail is actually opened,
    indicating that in fact those documents that were received with
    money would be actually hand-processed at that point in time
    and that the organization would be notified immediately, and
    that money would be safeguarded, and we would make a
    determination based on the Social Security Administration and
    the postal authorities on what to do with that money.
        Mr. Collins. But you received 29,000 replies, people put
    their own stamp on it, but no money?
        Mr. Zabko. That is correct.
        Mr. Collins. I believe that about as much as I believe
    anything else you have put forth.
        You said you have a per diem, Mr. Smith.
        Mr. Smith. Yes, sir. My per diem is $50 a day.
        Mr. Collins. Are you on per diem today?
        Mr. Smith. Sir?
        Mr. Collins. Are you on per diem today?
        Mr. Smith. Only for meals, sir.
        Mr. Collins. That is all I have, Mr. Chairman.
        I tell you what, this thing just bothers me, that we would
    have people in this country that would scam senior citizens the
    way this thing is set up.
        Chairman Shaw. Mr. Johnson.
        Mr. Johnson. Thank you, Mr. Chairman.
        Mr. Smith, you indicated that you are a victim of the hoax
    flyers. However, I understand the IG seemed to think that you
    were a beneficiary because of the funds that you got through
    your fund raiser that you sent out.
        Now, I understand that you said that you changed the letter
    that you sent out based on the request of the Social Security
    representative. Could you tell me what changes you made to that
    letter?
        Mr. Smith. Mr. Zabko was the individual involved in the
    changes on the letter.
        Mr. Johnson. But isn't it your signature at the bottom?
        Mr. Smith. Sir?
        Mr. Johnson. Your signature at the bottom?
        Mr. Smith. It shouldn't be. It would be now, but it wasn't
    prior.
        Mr. Johnson. It wasn't?
        Mr. Smith. No, sir, not prior to February. The letter that
    was sent, responding letter?
        Mr. Johnson. Yes.
        Mr. Smith. Are you speaking about that one, sir?
        Mr. Johnson. Yes.
        Mr. Smith. To the hoax?
        Mr. Johnson. Yes.
        Mr. Smith. I think Mr. Zabko's name was on that.
        Mr. Johnson. Your name was on the letter. OK. Could you
    tell me what changes you made based on the recommendations of
    the Social Security representative?
        Mr. Zabko. As I stated earlier, sir, there was a question
    on a sentence in there that referred to the fact that we, TSCL,
    had not been receiving any help from the governmental agencies
    up to that time.
        I believe it is Mr. Stubbs from the Social Security
    inspector general's office, reviewed that letter while we were
    having this meeting, and brought out the fact that is
    incorrect, that they were in fact there, and they were going to
    help find the culprit or culprits, whoever was doing this hoax.
        So we in fact changed that to reflect that we are
    communicating with the Social Security Administration and the
    postal authorities to fix this problem.
        Mr. Johnson. Have you ever had any letter like this before?
        Mr. Zabko. Sent to our office, sir?
        Mr. Johnson. Fraud letter sent out under your name.
        Mr. Zabko. No, sir, I have not.
        Mr. Johnson. Mr. Smith, could you explain to me exactly
    what the relationship is between The Retired Enlisted
    Association and the Senior Citizens League?
        Mr. Smith. Yes, sir.
        Mr. Johnson. Precisely. You understand why I am asking
    this? The Senior Citizens League is who you are representing, I
    think, today.
        Mr. Smith. Yes, sir.
        Number one, sir, The Retired Enlisted Association, which
    was started in 1963, was chartered in 1992, is a fraternal
    organization of retired----
        Mr. Johnson. Yes, that is fine. But what is the
    relationship between the two? That is what I want to know.
        Mr. Smith. We are an affiliate of The Retired Enlisted
    Association.
        Mr. Johnson. You are what?
        Mr. Smith. An affiliate.
        Mr. Johnson. Affiliate.
        Mr. Smith. Yes, sir.
        Mr. Johnson. Does that mean they sponsor you?
        Mr. Smith. No, sir. It means that we belong to them,
    basically.
        Mr. Johnson. You belong to them?
        Mr. Smith. Yes, sir.
        Mr. Johnson. Were they aware of these letters?
        Mr. Smith. We are--we are a corporation under them.
        Mr. Johnson. OK. Were they aware of these fraudulent
    letters? And did you talk to them about it?
        Mr. Smith. Yes, sir. Mr. Zabko made them aware.
        I became first aware of them at the convention last year in
    September, when Mr. Zabko notified us, because the chairman of
    TSCL serves on the board of--as a nonvoting member on the board
    of TREA. And that information was brought to TREA convention,
    that these letters--prior to that, I can't speak for the
    knowledge of----
        Mr. Johnson. What was their reaction when they found out?
        Mr. Smith. Well, the reaction was, is to do whatever we can
    do, whatever was necessary, to find out who was doing--who was
    putting them out.
        Mr. Johnson. Are you a notch person?
        Mr. Smith. Yes, sir. No, sir. No, sir, not quite.
        Mr. Johnson. Yes, yes, no.
        Mr. Smith. I'm 70, sir. I'm not, sir.
        Mr. Johnson. OK. When the notch first started, do you
    recall how many years it was?
        Mr. Smith. What the years between----
        Mr. Johnson. Yes.
        Mr. Smith. The timeframe, sir?
        Mr. Johnson. Yes.
        Mr. Smith. I think it's 1916 to 1927.
        Mr. Johnson. No. That is currently what you say. But what
    was it originally?
        Mr. Smith. I have no idea, sir.
        Mr. Johnson. I believe it was a 3-year period, 1919 to
    1921. And organizations over time have increased that date so
    that you could make money. True or false?
        Mr. Smith. Well, the information that I have available to
    me, sir, indicates those dates, so that's why I use those
    dates.
        Mr. Johnson. Where did you get the dates?
        Mr. Smith. From the data that has been put out by our--I
    had----
        Mr. Johnson. Well, who do you rely on for that kind of
    information?
        Mr. Smith. Well, actually, sir, you have to rely on the
    Congress, but the information----
        Mr. Johnson. Well, if you rely on the Congress, you would
    see a chart that says that corrected itself, and there has been
    no problem since 1921. And yet you guys go out to 1926, I
    believe.
        Now, how do you account for that, if you are using our
    data?
        Mr. Smith. I have to get back to you, sir. I don't have an
    answer.
        Mr. Johnson. OK. So, maybe what you are telling the people
    out there is a little bit off-base.
        Can I ask Ms. Christy Turner a question?
        Ms. Turner, I would like you to tell me, you said you use a
    mail house, and that you don't mess with the names or the lists
    at all. Is that true or false?
        Ms. Turner. We have a--Direct Mail Processors are the ones
    that key the data onto our database.
        Mr. Johnson. They key it onto your database.
        Ms. Turner. Yes, sir.
        Mr. Johnson. But how do they get those names?
        Ms. Turner. It comes in the mail. They pick it up at the
    post office box.
        Mr. Johnson. They receive the mail, and they key your
    database.
        Ms. Turner. They key directly into TSCL's database.
        Mr. Johnson. What is your job, then? What do you do? Just
    sit there and look at the computer?
        Ms. Turner. No. I manage the database. I help prepare
    output lists to send to additional mailings. I work with Squire
    & Heartfield in preparing new files to go out.
        Mr. Johnson. How do you know that the data that came in
    from that hoax mailer didn't get into the database if your
    mailer is putting it in?
        Ms. Turner. They were keyed with a special--they were keyed
    with a special code.
        Mr. Johnson. Yes, but you said some of them were previous
    members. So how did you differentiate?
        Ms. Turner. The names and addresses are keyed to the
    database. The donation history is what captures the Code, so we
    can tell by their donation history if they've given prior to
    responding to the hoax flyer or if they've given after the hoax
    flyer.
        Mr. Johnson. OK. Well, what do you do precisely with the
    mail yourself? And how do you keep hoaxes like this from
    happening if you don't have any input at all into your mailing
    agent?
        Ms. Turner. I'm sorry?
        Mr. Johnson. How do you keep hoaxes like this from
    happening if you don't have any input yourself to the mailing
    agent that you hire?
        Because, you know, we hire them, too. All of us do. And I
    am telling you, we have input into them. You must have input
    into your mailer.
        Ms. Turner. Our job is just to maintain the database. We
    don't--we don't determine----
        Mr. Johnson. You don't mess with the database at all?
        Ms. Turner. We maintain it, yes.
        Mr. Johnson. You just told me that the mailer did.
        Ms. Turner. The mailer keys into the database.
        DMP receives the mail from the post office box. They sign
    onto our system, and they enter the responses onto our system.
        Mr. Johnson. And how are you involved in responses that you
    mail out?
        Ms. Turner. How am I involved? I'm sorry, say that----
        Mr. Johnson. You don't have any input into the mail that
    goes out. Is that true or false?
        Ms. Turner. No, sir. I receive instructions from the client
    and their authorized vendors. They ask me to pull a certain
    amount of names. I follow their instructions and create the
    output list for their request.
        Mr. Johnson. OK. So how do you control it if they decide to
    send a hoax mailer out?
        Ms. Turner. We have a standard suppression. The hoax mailer
    is flagged with this special code. That code is omitted from
    all outgoing lists.
        Mr. Johnson. Yes, but the mailer is doing it. How do you
    know that they are not doing the hoax themselves? You don't
    know, do you?
        Ms. Turner. No, sir.
        Mr. Johnson. Thank you, Mr. Chairman.
        Chairman Shaw. Mr. Kleczka.
        Mr. Kleczka. Thank you, Mr. Chairman.
        It is really a miracle to me that we have a bogus mailing
    go out and magically your return address is on there, and then
    you get 29,000 responses and then you mail those people to join
    your organization, which some people responded to.
        I don't think you are a victim of this hoax. My gut feeling
    is, I think you got caught.
        But let me go back to the other portion the hearing the
    Chairman called today to talk about misleading mailings.
        Mr. Zabko, I think you were the executive director when
    this little number went out.
        OK, now here is a mailing that went to Mildred from my
    district in Milwaukee, Wisconsin, and you sent Mildred this
    real nice little plastic ``notch registry'' card.
        And then on the mailing you say, ``Please remove your
    register card and return your reply form in the enclosed reply
    envelope with your check.''
        Well, let's say Mildred sent back this response with $25.
    My question to you is, what should Mildred do with this card?
    What is the value of this card?
        Mr. Zabko. Mildred is now part of our organization with
    that card.
        Mr. Kleczka. Good.
        Mr. Zabko. OK? She receives----
        Mr. Kleczka. Now, for $25 bucks, what does she get?
        Mr. Zabko. She receives newsletters, she receives
    manuscripts----
        Mr. Kleczka. Does she receive annual requests for another
    contribution?
        Mr. Zabko. Yes, she should.
        Mr. Kleczka. Annual or biannual? Do you send them out twice
    or once?
        Mr. Zabko. I believe they are annual, sir.
        Mr. Kleczka. OK, but the fact of the matter is, even though
    it is kind of fancy, nice, looks almost like a Visa card, the
    value of this thing is zero, because it doesn't entitle Mildred
    to anything.
        At least Publishers Clearinghouse, you have a remote chance
    of winning something.
        [Laughter.]
        But this is a dead end for Mildred, who, thank God, sent it
    to me and not to you.
        Let me ask you a couple more questions on your repeated
    mailings.
        OK, you ask seniors in my district and nationwide to join
    and sign up for the notch victim registry. What do you do once
    you have the registry compiled? What do you do with this
    registry?
        Mr. Zabko. Sir, we've used it for different purposes for
    Members of Congress. When they're interested in knowing how
    many people are interested----
        Mr. Kleczka. OK. I would think the big interest here is,
    should by a strike of lightening the bill would pass, I would
    think this information would be very important to the Social
    Security Administration.
        Do you happen to share your notch registry with the Social
    Security Administration?
        Mr. Zabko. Not at this time, sir.
        Mr. Kleczka. OK. Do you think they already have a listing
    of the seniors who would be affected by the notch, the
    nonexistent notch?
        Mr. Zabko. I don't know for sure, sir.
        Mr. Kleczka. Well, if they send these folks a check every
    month, and these folks were born between 1917 and 1926, I can
    guarantee you the Social Security Administration knows about
    these people.
        All right, now, you ask my constituents and Mildred here to
    check two other boxes, OK? You say, ``Millie, a $5,000 award is
    yours. Do you want it in four annual payments of $1,250 or do
    you want just a normal monthly increase to your Social Security
    payment?''
        What is the value of this? Let's say Mildred checks the
    four annual payments. ``I want the money quick.'' What happens
    then? You put that in your database.
        Mr. Zabko. At that time, the organization was compiling--at
    the time that I was there, the organization was compiling this
    information for Members of Congress to use to determine what
    way this legislation should go.
        Mr. Kleczka. What does the bill call for?
        Mr. Zabko. Excuse me?
        Mr. Kleczka. What does the bill call for?
        Mr. Zabko. There is numerous bills that I was aware of
    last----
        Mr. Kleczka. The House bill.
        Mr. Zabko. There is--I believe there was four of them, sir.
        Mr. Kleczka. All right.
        Mr. Zabko. Some of them are----
        Mr. Kleczka. Well, the fact of the matter, the House bill--
    because I don't have much time--the House bill gives the
    seniors an option, should the bill pass. So whether or not
    Mildred marks this for you doesn't make any difference.
        And I am wondering, why are you asking this information?
        And then tell me this, this is for Members of Congress. I
    have been around here a couple, 3 years now. You folks have
    been in existence bilking seniors since 1994. I ain't never met
    you.
        [Laughter.]
        I don't know you. I respond to you by saying, ``Don't send
    my constituents any more requests for money. And please don't
    ask them to put you in their will,'' and you never even respond
    to me or sent your lobbyist to my office to say, ``Hey, wait a
    minute.''
        The fact of the matter is, this is a hoax. This is to make
    the mailing sound credible, as if the senior named here has a
    choice in the matter.
        But you have no reason to know whether or not they want the
    lump or just a monthly increase. You have no reason on Earth to
    maintain a notch registry, because the Social Security
    Administration already has that.
        And I can tell Mr. Johnson why there has been a change in
    the notch years. Originally, yes, it was 1917 to 1921, all
    right? So that makes the seniors, if they are in that period,
    that would make them about 80 to 84 years old, or 79 to 84.
        But your organization expanded that to expand your mailing
    list, because now, using 1917 to 1926, you are catching all the
    seniors 75 years old to 84 years old.
        And in a couple years, you are going to have to up that
    again, because your list is getting kind of narrow.
        But, Mr. Chairman, again, this is a real disservice to all
    our seniors. This is a bogus group, claiming to compile
    information, which is, number one, none of their business;
    number two, they have no say in this matter before Congress.
        And as far as indicting that we raise annually some $12
    million off this scheme so we can educate Members of Congress,
    that is totally false, because what they do, they take that
    money and proliferate the mailings for next year. So it is a
    vicious circle.
        And as I indicated in my previous remarks, I really think
    that Congress should consider revoking the charter, because
    TREA is the same as TREA Senior Citizens League. They are one
    and the same. There is no firewall. They are intertwined.
        And I have already asked that legislation be drafted.
        So you folks can stop taking advantage of our senior
    citizens.
        And my legislation--and I hope you will support it--would
    take away your Federal charter.
        Chairman Shaw. We are going to have to move right along.
        I just want to make a couple of observations here.
        One is that your mail house is in Maryland, you are
    Virginia, and your post office box in Washington. I would
    submit that is only to mislead the people that you are some
    kind of an official organization, because there is no other
    reason I can think of that you would be in Washington.
        One last question I have for Mr. Zabko: Do you know any
    individual in any way, shape or form, involved in sending out
    the two fraudulent flyers?
        That is a direct question. It is yes or no.
        Mr. Zabko. I do not know of anybody that actually sent
    those flyers out, no.
        Chairman Shaw. That is not my question. Do you know anyone
    involved in it?
        I am not saying who actually sent it. Those are weasel
    words.
        My question is, do you know anyone involved in that
    process? Yes or no?
        Mr. Zabko. Only the people who faxed us or sent those
    pieces of information and then, in turn, sent that information
    to someone else. I would have knowledge of those individuals,
    but nobody directly that has sent that information on purpose.
        Chairman Shaw. Who are the individuals that you are
    referring to?
        Mr. Zabko. Sir, we were receiving faxes from individuals
    that are members of our organization that in fact found these
    particular flyers in different locations. They, in turn, had
    alleged that there was people in their towns passing these out.
        So, therefore, I would have knowledge of those individuals,
    receiving them and telling me that.
        But to----
        Chairman Shaw. Mr. Zabko, when you received 29,000 replies,
    how many flyers would have to be put on windshields or
    distributed to get that kind of a response? Hundreds of
    thousands. You know that, and I know that. And so we know that
    there were hundreds of these flyers put out.
        And my question is, do you know any individual who was in
    any way involved in the original distribution, printing,
    manufacture, or in any other way connected with the original
    flyer as it went out? Yes or no.
        Mr. Zabko. No, sir.
        Chairman Shaw. You do not know of anybody? And that is your
    testimony?
        All right, I would also like to make just one final comment
    and that is the question of this whole idea of registering
    somebody is absolute nonsense. Obviously, it is meant for
    people to think they had to be on your list to get some money
    back, which they are not ever going to get back from the
    Federal Government.
        I mean, to me, it is just abhorrent. And I think it
    something that, in my opinion, is highly unethical, and the
    Congress should continue to pursue it.
        And I also want to say that Mr. Heartfield is not here
    because of a letter that we received from his physician. He has
    agreed to answer questions under oath.
        And having listened to the testimony and conferred with my
    fellow Subcommittee colleagues, though I did excuse Mr.
    Heartfield, it is clear that we will need to hear from him in
    the future. We will work with Mr. Heartfield's attorney to
    arrange a face-to-face appearance before designees of this
    Committee. If necessary, we will utilize our authority to again
    subpoena Mr. Heartfield.
        Thank you, and this panel is excused. And we will now go on
    to the final panel.
        [Questions submitted to the panel from Chairman Shaw, and
    their responses follow:]

                                            TREA Senior Citizens League
                                             Alexandria, Virginia 22314
                                                     September 26, 2001

    Honorable E. Clay Shaw, Jr., Chairman
    Subcommittee on Social Security
    Committee on Ways and Means
    U.S. House of Representatives
    Rayburn Building, Room B316
    Washington, DC 20515

        Dear Mr. Shaw:

        This responds to your letter dated August 24, 2001. That letter
    thanked me for appearing before your Subcommittee at its hearing on
    July 26, 2001, it requested me to respond to a very long list of
    questions, and it requests documents. In subsequent back-and-forth
    correspondence, the timing of this response was adjusted because of the
    amount of work involved, activities of TSCL, and my own schedule. In
    addition, the national tragedy that we have been experiencing has
    undoubtedly affected the schedules of all of us. I appreciate the
    Subcommittee's consideration in that regard and, in accordance with
    your correspondence, look forward to our entire response, including
    attachments (unless otherwise requested), appearing in the record of
    the hearing.

                                    OVERVIEW

        First of all, let me say that this entire process--from appearing
    before the Subcommittee on short notice, and without any warning about
    the nature of the uninformed (or misinformed) attempt to malign the
    TREA Senior Citizens League (``TSCL''), to being asked to spend
    literally dozens of hours writing answers to a very long list of
    questions, and to locate, copy and provide to the Subcommittee hundreds
    of pages of documents beyond what TSCL has already provided--has been
    extraordinary. TSCL has attempted to cooperate fully through it all,
    despite the incredible unfairness of the process to which it has been
    subjected.
        TSCL is dedicated to purposes that are beneficial to the public,
    and its activities have been primarily and substantially devoted to
    those purposes. With all due respect, one wonders whether the
    hostilitydirected against TSCL by the Social Security Administration
    and your Subcommittee has been generated primarily because of
    disagreement with the legislative positions TSCL has been advocating.
    Such a connection seems obvious not only from the language in the
    Social Security Administration's Inspector General's Report dated July
    6, 2001, but also from some of the questioning of myself and Mr. Zabko,
    TSCL's former Executive Director, at the hearing before your
    Subcommittee on July 26, 2001.
        And TSCL's sincere efforts to obtain fair and impartial treatment
    and to set the record straight have apparently fallen on deaf ears. For
    instance, prior to the hearing on July 26, I wrote you a letter trying
    to point out the unfairness of the SSA Inspector General's July 6
    report. (A copy of that letter, dated July 23, 2001, and enclosing my
    letter of July 18 to the SSA Acting Commissioner, is attached and
    incorporated by reference as Attachment A.) Not only was that
    information ignored, the Subcommittee seemed critical of the Inspector
    General for not being even harsher.
        As just one specific example of unwarranted treatment of TSCL is
    the Subcommittee's conduct with respect to the issue of TSCL having
    shown a representative of the SSA Inspector General's Office in
    September 2000 its proposed letter to the ``hoax flyer'' respondents
    (prior to TSCL having sent the letter to the respondents)-- a letter
    which was accompanied by a pamphlet on savings tips and by TSCL's own
    organizational brochure. The sending of that letter to the hoax flyer
    respondents was the source of much criticism directed against TSCL by
    the SSA IG and by the Subcommittee, on the theory that TSCL, by
    including its organizational brochure, was attempting to somehow profit
    from the hoax flyer episode, by developing a list of possible
    contributors. This was mentioned prominently in my written testimony
    (page 9) submitted to you for inclusion in the record of the July 26
    hearing, and it prompted a question by one of your Subcommittee Members
    to the SSA IG, Mr. Huse, at the hearing. My recollection is that Mr.
    Huse, obviously uninformed or misinformed, categorically denied that
    such an incident occurred. Mr. Zabko, however, subsequently testified
    at length about the meeting that took place in September 2000, when the
    SSA IG's representative, Agent Stubbs, not only was shown the proposed
    mailing, but suggested a correction of the proposed TSCL letter. (See
    Transcript of Hearing of July 26, 2001, pp. 79-82.) The Subcommittee,
    having heard Mr. Huse make his denial, first tried to impugn my
    testimony by challenging my statement about the meeting, apparently on
    the theory that it was not based upon my personal knowledge since I was
    not present at that September 2000 meeting. (Obviously, however, I
    would not need to be at the meeting to relate what transpired as
    reported to me.) In any event, Mr. Zabko was present at the meeting,
    and he set the record straight. Mr. Huse was not recalled to explain
    his incorrect testimony and, as far as I know, Mr. Huse has never
    explained the error of his testimony in that regard. If so, it seems
    remarkable that Mr. Huse would not take it on himself to come forward
    and correct the record when he realized that his testimony was in
    error.
        Furthermore, it is evident that the only criticism against TSCL in
    connection with the so-called ``hoax flyer'' episode that lends any
    theoretical support to speculation about TSCL's conduct is related to
    the brochure. Clearly, Members of the Subcommittee subscribe to a
    theory that TSCL, even if it was not responsible for the hoax flyers,
    used the hoax flyer phenomenon as a way to raise money. But even that
    is not fair, and the undisputed facts demonstrate such unfairness. Not
    only did TSCL go to great trouble and expense to alert the hoax flyer
    respondents that the information in the hoax flyers was incorrect; it
    also coded its computer files so that the persons to whom it wrote
    (i.e. the hoax flyer respondents) would be clearly identified so as to
    be distinct from TSCL's Membership and supporters, and would not be
    used as a separate list, either for purposes of soliciting
    contributions or renting the list to others. In short, TSCL had nothing
    to do with the hoax flyers, and it acted reasonably in dealing with the
    hoax flyer problem that was thrust upon it.1
    ---------------------------------------------------------------------------
        \1\ One of the Subcommittee's questions, addressed further on in
    this letter, has to do with contributions received by TSCL from hoax
    flyer respondents. As indicated below, it appears that certain of the
    hoax flyer respondents (TSCL is advised that there were no more than
    115 gifts from hoax flyer respondents in response to the TSCL brochure,
    totaling $1,009) sent in a contribution to TSCL subsequent to receiving
    the explanatory letter from TSCL. Perhaps it should have been expected
    that a relative few persons would have been interested in contributing
    to TSCL after receiving the material that TSCL sent. That was not,
    however, the intent of TSCL in sending the information. Furthermore,
    even assuming that such gifts would not have been made even in the
    absence of receiving the TSCL brochure, the receipts are so small that
    this would seem to be a non-issue. Finally, in view of the
    disapprobation that TSCL received at the Subcommittee hearing on this
    matter, TSCL committed to return these contributions, and has done so.
    ---------------------------------------------------------------------------
        At the Subcommittee hearing on July 26, 2001, the testimony
    confirmed the facts set forth above, and certain Subcommittee Members
    not only appeared to disbelieve such testimony, but seemed to scoff at
    the notion that TSCL was not profiting from the hoax flyer issue.
    Hopefully, at some point the Subcommittee Members will acknowledge the
    unfair consequences this attitude has had for TSCL. Not only did TSCL
    go to great lengths and much expense in trying to correctly advise the
    public about the hoax flyer issue (in addition to sending letters, its
    website contained extensive information about the matter), it also has
    had to deal with the attitudes, demands, and negative public utterances
    of both your Subcommittee Members and the SSA regarding the matter.
        TSCL is an honorable organization. Its efforts are directed at
    benefiting the public welfare, and particularly senior citizens. It
    tries to do what it says it will do. This does not mean that TSCL will
    not advocate for legislation that the Subcommittee Members may not
    believe in, and it does not mean that the Subcommittee would approve of
    every word in every one of TSCL's mailings to the public. There is no
    question that certain Subcommittee Members disapproved of certain
    language in some of TSCL's mailings to the public. This does not mean
    that the mailings were in any way wrong. Nevertheless, TSCL is
    carefully reviewing its mailings to make possible improvements.
        As mentioned above, it is our understanding that this response and
    its attachments (except for two attachments that are confidential, as
    indicated below) will be set forth in the published hearing of the
    Subcommittee that took place on July 26, 2001.

                             RESPONSE TO QUESTIONS

        The questions contained in your letter of August 24, 2001, are set
    forth below, each question being followed by my response. As I am sure
    you understand, much of the information that is being provided is
    beyond my personal knowledge, but was put together based upon
    information furnished by a variety of persons. All information that is
    being provided is true and accurate to the best of my knowledge.

        1. Q. You and Mr. Zabko stated that TSCL cooperated with the Social
    Security Administration's (SSA's) Offer of Inspector General's (OIG's)
    investigation. However, the Inspector General indicated in his
    statement that when his office requested TSCL to discontinue the keying
    of personal information into its database, TSCL refused to comply. What
    is your response?

        RESPONSE: I am not certain that such a request by the SSA IG's
    office was ever made. The Inspector General made certain mistakes in
    his testimony, and this could be an example of another mistake.
    Assuming that such a request was made by the SSA IG's office at some
    point during the SSA IG investigation, it is my view that it should
    have been accompanied by some suggestion of the SSA IG regarding
    alternatives so that any documents or files constituting possible
    evidence would not be inadvertently destroyed. To the best of my
    knowledge, the SSA IG never proposed any alternatives regarding the
    method used by TSCL which would accomplish that goal.
        You may recall our testimony that the SSA IG's representative
    actually looked at the proposed TSCL mailing to the individuals who had
    written to TSCL, the purpose of which was to inform them that the
    flyers were incorrect. (The SSA Inspector General erroneously denied
    this fact during his testimony before the Committee on July 26). No
    criticism of the proposed TSCL letter was made by the SSA IG's office
    based upon inclusion of the TSCL brochure. Certainly, there was no
    suggestion by the SSA IG at the time in question that inclusion of the
    brochure--the main reason, as we understand it for the tremendous
    suspicion/criticism of TSCL by your Subcommittee--was in any way
    inappropriate. The fact of the matter is that TSCL at all times tried
    to cooperate with the SSA, and was looking to the SSA for advice and
    assistance in how to handle this matter, and instead it has been
    treated as the target of the investigation.
        TSCL has always believed that records of the names and addresses of
    the individuals sending ``hoax flyer'' information to TSCL should be
    retained, not only with respect to normal record-keeping issues (e.g.,
    alerting such individuals of the incorrect information, checking for
    duplicates, suppressing future mailings to such individuals), but also
    for purposes of furnishing such information to the
    government.2 And this is in fact what was done. As I believe
    you know, TSCL made the SSA IG's office totally aware of what records
    it was keeping. In fact, the SSA IG inspector accompanied TSCL
    personnel at TSCL's data entry vendor's plant in Hagerstown, Maryland,
    to review the actual data entry procedure.
    ---------------------------------------------------------------------------
        \2\ TSCL wrote to the SSA IG, in follow-up to the discussions at
    the July 26 hearing, to determine if the SSA IG agreed with the
    Subcommittee's apparent view that the records should be deleted. The
    SSA IG subsequently informed TSCL that it did so agree, and he
    requested that TSCL deliver an electronic file of the complete deleted
    records, as well as the hard copies of any further responses received
    from persons writing to TSCL because of the so-called hoax flyers. TSCL
    also asked for advice as to whether the Postal Service would want such
    records preserved, but there was no response to this request. TSCL is
    in the process of complying with that request, which will result in
    TSCL losing all of its records identifying such individuals. Compliance
    with this request, means, of course, that TSCL would not be able to
    identify such names in the future or suppress future mailings to such
    individuals, assuming that such individuals appear on future lists
    rented to TSCL or otherwise come to TSCL's attention.
    ---------------------------------------------------------------------------
        I believe that an objective review of what actually occurred will
    demonstrate that TSCL's actions in this matter were consistent with a
    desire to discover the truth, that it cooperated mightily with the SSA
    IG's office, and that TSCL has been most unfairly criticized.

        2. Q. In your testimony you labeled the person or persons who
    created the two flyers as a ``hoaxer.'' At one point, early in the OIG
    investigation, Mr. Zabko and others thought it might be a misguided
    supporter. Since you have been an advocate for the notch, do you have
    an opinion as to who may be responsible for the hoax flyers?

        RESPONSE: I have no single opinion as to who may be responsible for
    the hoax flyers. The likely possibilities would seem to include an
    individual or a group, or even various individuals or groups acting
    independently from one another, attempting either (through ignorance)
    to assist individuals in recovering benefits that might be available or
    (through malice) to injure individuals by providing false information
    and/or to injure TSCL by attempting to associate the TSCL name with
    false information. Insofar as the principal victim of the hoax flyers
    was TSCL, it is always possible that the hoax was perpetrated by an
    individual or group which disagreed with the legislative agenda of
    TSCL, or which viewed itself as a competitor of TSCL. There are
    undoubtedly other possibilities as well.

        3. Q. Since TSCL has never done any mailings about so-called Slave
    Reparation, do you think these flyers also may be from a misguided
    supporter?

        RESPONSE: I do not know. Since TSCL has never had any connection
    with any such issue of which I am aware, it might be more likely that
    whoever perpetrated the misinformation intended to harm TSCL. See the
    above response to Question 2.

        4. Q. Please verify whether any financial contributions were
    received with the 29,000 responses received as a result of the Notch
    Victim and Slave Reparation flyer, and if so, what was the total number
    and dollar amount received. In addition, please provide the number of
    individual memberships and total dollar amount received from the
    follow-up mailing TSCL sent to each of the flyer respondents.

        RESPONSE: (a) I am informed that TSCL's records do not reflect any
    contributions having been received with the approximate 29,000
    responses received by TSCL as a result of the hoax flyers. TSCL early
    decided that if any property (including money) was received with such
    responses, it would be returned.
        (b) It is difficult to say whether any memberships and/or
    contributions were ``received from the follow-up mailing TSCL sent to
    each of the flyer respondents,'' because no one necessarily knows what
    motivated memberships and/or contributions. Furthermore, fundraising
    solicitations mailed by TSCL contain a coded reply form and a reply
    envelope. TSCL's follow-up mailing to the flyer respondents did not
    contain a coded letter, coded reply form or a reply envelope, because
    it was not intended as a fundraising solicitation.There are instances,
    however, where TSCL had already received, and instances where TSCL
    subsequently received, membership applications and/or contributions
    from persons who happened to be hoax responders in response to certain
    TSCL mailings. In an effort to be responsive to that question, TSCL
    instructed its vendors to consider a contribution ``received from''
    TSCL's follow-up mailing if it was received from a hoax flyer
    respondent without any code (white mail) or with an application from a
    TSCL brochure. I am advised that of the nearly 29,000 individuals
    receiving follow-up letters from TSCL, no more than 115 gifts from such
    individuals, totaling $1,009, were received in response to the TSCL
    follow-up mailing with the brochure. Again, however, it is difficult to
    say for certain that even this amount was ``received from'' the follow-
    up mailing of TSCL.

        5. Q. As a member of the Board of Directors of TSCL in 2000, what
    were your duties and responsibilities? What oversight did you provide
    of Mr. Zabko in his day to day duties? What evaluation did the Board
    undertake of Mr. Zabko's activities? How often did the Board of
    Directors meet? How often does the Board of Directors meet today?

        RESPONSE: (a) As you will recall from the testimony before your
    Subcommittee on July 26, 2001, TSCL's Board of Directors is known as
    the Board of Trustees. Additionally, I was not a member of the TSCL
    Board of Trustees in 2000, but was elected in February 2001. My duties
    and responsibilities as a member of TSCL's Board of Trustees in 2001
    have been to attend meetings, review the organization's policies and
    certain documents, and assume the types of management/oversight/
    fiduciary responsibilities that directors of nonprofit organizations
    assume. In addition, I have been entrusted with the duties of a chief
    executive officer, and have been in charge of all significant decision-
    making not requiring a decision by the Board of Trustees.
        (b)-(c) To the best of my knowledge, Mr. Zabko functioned as
    Executive Director, on a day-to-day basis, reporting directly to the
    Chairman at the time, but without any day-to-day oversight from other
    Trustees, and the Board of Trustees simply evaluated his performance in
    the context of evaluating the organization itself.
        (d)-(e) I am informed that, during the year 2000, the TSCL Board of
    trustees met three times. The current Board meets as needed, but no
    less than four times per year.

        6. Q. Has TSCL ever discussed the idea of a mailing, including a
    survey, involving Slave Reparation? If so, who participated in this
    discussion? What was decided?

        RESPONSE: (a) To the best of my knowledge, no.
        (b) Not applicable.

        7. Q. When did the Board of Directors become aware of the SSA OIG
    investigation of the Slave Reparation and Notch Victim flyers? What
    steps did the Board take? What investigation did the Board authorize?
    Who was interviewed? What was the outcome?

        RESPONSE: (a) Although I was not on the Board at the time, I am
    informed that the Board of trustees first became aware of the actual
    investigation of the flyers sometime during the period January-
    September, 2000. I am not certain either when the SSA OIG investigation
    began or when the Board as a body first learned anything about the
    actual investigation. Of course, individual Board members also could
    have learned about the incorrect flyers through communications from the
    TSCL staff, including information posted on the organization's web site
    informing the public about the incorrect flyers.
        (b)-(d) To the best of my knowledge, the Board did not formerly
    take or authorize any particular action, although the members of the
    Board were kept advised regarding the erroneous flyers and the negative
    impact this was having on TSCL because of the influx of mailings to
    TSCL generated by the erroneous flyers, and the TSCL action (e.g.,
    correspondence and meetings with government agencies, public
    information on TSCL's website) that was generated. TSCL's Executive
    Director and TSCL's consultants had initiated a number of steps to deal
    with various issues or problems created by the flyer, including, but
    not limited to, advising the appropriate agencies of what was
    happening, advising the public, advising the persons actually
    communicating with TSCL (including keeping the necessary records so
    that responses could be made), and these were matters within the day-
    to-day responsibilities of TSCL's officers and Executive Director. When
    the SSA IG finally began to investigate the matter of the flyers, TSCL
    cooperated with the investigation. As already indicated above, the
    Board members were advised by the Executive Director, during the
    timeframe set forth above, of many aspects related to the flyers,
    including the tremendous burdens that they were creating for TSCL and
    the efforts that TSCL was making to inform the public of the truth.

        8. Q. You indicated that TSCL has not sent any additional
    solicitations to any of the 29,000 individuals who responded to the
    Slave Reparation and Notch Victim flyers other than the initial mailing
    in reply to the flyer response. Is this correct?

        RESPONSE: First, I would like to say again that the initial mailing
    in reply to the flyer response was not a solicitation. It is my
    understanding that TSCL felt obliged, having received mailings from
    individuals who had been misinformed about TSCL (as well as government
    benefits), to alert those individuals about the misinformation; that
    TSCL alerted the general public about such misinformation (for example,
    through its website, newsletter articles, and the like); that TSCL
    ultimately arrived at a system to communicate with individuals who had
    written to TSCL based upon such misinformation, not only alerting them
    about the misinformation, but also clearly identifying their names and
    addresses on the TSCL's database (through unique identity codes) so
    that such individuals would not mistakenly become part of TSCL's
    contributor list or member list; that this system, as it now exists,
    came into place in October 2000, and a certain number would have been
    sent mailings before that time; and that since that time, no TSCL
    solicitation of any kind (unless you insist on considering the TSCL
    mailing to such individuals alerting them to the misinformation in the
    flyers to be a solicitation) would have been developed and sent to such
    individuals. Obviously, I have no personal knowledge of whether any
    such solicitation actually could have been sent (e.g., by mistake, by
    an individual changing a name or an address), but TSCL attempted to set
    up a system that would prevent any such solicitation from being sent. I
    might add that TSCL did all of this work on its own initiative, without
    any assistance from any government agency.

        9. Q. How many of the 29,000 responses you received were not from
    individuals already in TSCL's database?

        RESPONSE: According to the information furnished me by our database
    manager, approximately 28,634 persons sent TSCL information based upon
    the incorrect or hoax flyers, and of those persons, approximately
    27,020 were not already in TSCL's database.

        10. Q. Mr. Zabko was selected as the Executive Director of TSCL.
    Can you describe the process the Board used to select him as Executive
    Director? Does his selection have to be a unanimous decision by the
    Board? If not, how many votes were required? What review of the
    activities of the Executive Director is conducted by the TREA Board of
    Directors and/or the TSCL Board of Directors? Was this review completed
    with Mr. Zabko, with what result?

        RESPONSE: (a)-(d) I am informed that Mr. Zabko was hired by TSCL's
    Board of Trustees (I believe he was the unanimous selection out of a
    list of applicants for the position, although only a majority vote
    would have been required) in 1994.
        (e)-(f) The Retired Enlisted Association (``TREA'') is related to
    TSCL, in the sense that TSCL's Board of Trustees is elected by the TREA
    Board of Directors. TSCL's Chairman is a non-voting member of TREA's
    Board of Directors, and reports to the Board on TSCL's activities at
    two meetings each year. TSCL's Executive Director did not report to
    TREA, but rather to the TSCL Chairman. I am not certain what your final
    question is asking. TSCL hired Mr. Zabko; he was not hired by TREA's
    Board of Directors. I am unaware of any particular review, as such, of
    the activities of the Executive Director.

        11. Q. Why did Mr. Zabko leave TSCL? Did the TREA Board or TSCL
    Board or both vote to terminate him? If so, why? What was the vote,
    broken down by each Board Member (including whether the board member
    was a member of the TREA or TSCL Board)?

        RESPONSE: As the testimony at the July 26 hearing made clear, Mr.
    Zabko's services were terminated by the TSCL Board of Trustees in early
    2001, for reasons that were internal to TSCL and had nothing to do with
    any question or matter before your Subcommittee. I am informed that Mr.
    Zabko's services were not terminated for cause or for any matter in
    connection with TSCL's mailings to the public, and that TREA was not
    involved in the termination of Mr. Zabko's services. I believe that it
    was a decision having to do with the TSCL's Board's and Mr. Zabko's
    respective visions for the future of TSCL.

        12. Q. Has TSCL ever used the services of Direct Mail Resources? If
    so, for what services? How much has Direct Mail Resources been paid
    over the years? Who approved the use of Direct Mail Resources?

        RESPONSE: (a) No, to the best of my knowledge.
        (b)-(d) Inapplicable.

        13. Q. You stated that the TREA Memorial Foundation received a
    $70,000 grant from TSCL and that the Foundation provides benevolent
    assistance to your members, donated money to disaster relief, and
    provided scholarships to members and dependents of The Retired Enlisted
    Association. How much money has TSCL given to the TREA Memorial
    Foundation over the past 5 years? Do TSCL members know that their
    membership dollars fund these programs? If so, please provide detailed
    information, including copies of any correspondence or other
    information which informs them of this fact.

        RESPONSE: TSCL supports many worthwhile and charitable causes,
    including gifts of money to the TREA Memorial Foundation and other
    organizations. During the past 5 years, according to the IRS Form 90s
    for 1996-2000 that you have asked for, TSCL's gifts to the Foundation,
    which were for scholarships and the benefit of disaster victims, have
    totaled $321,000. Members are informed in a variety of ways, including
    the organization's annual IRS Form 990, about TSCL's support of such
    causes. Attached hereto as Exhibit C, for example, is a copy of TSCL's
    standard brochure (already in the Subcommittee's possession), which
    expressly discusses TSCL's support of such causes.

        14. Q. What finances (including amounts for the past 5 years) are
    exchanged between TREA and TSCL, and for what purposes? Has TSCL tried
    to sever its relationship with TREA in the past? If so, please explain,
    including a summary of the results of any such discussion. How does
    each organization benefit from the affiliation with each other?

        RESPONSE: With respect to finances, to the best of my knowledge,
    any contributions from TSCL to TREA would be reflected on TSCL's annual
    IRS Form 990, which are being provided to the Subcommittee as
    requested. As to contributions from TREA to TSCL, I am not aware that
    there are or would be any once TSCL became established as a separate
    organization. These facts may also be subject to confirmation from a
    review of TREA's 990 returns, which I have asked TREA for and am
    providing with this Response at the Subcommittee's request. See
    Attachment G. As to other transactions, I am aware of a trademark
    agreement between TSCL and TREA, the payments on which are reflected on
    TSCL's annual IRS Form 90s, and at least for certain past years with
    respect to administrative services, payments on which I have not had an
    opportunity to gather, although such expenses would be included in
    various expenses reported in TSCL's annual IRS Form 90s. I am not aware
    of other regular financial transactions between TREA and TSCL, although
    there could be some of which I simply am not aware. As to TSCL trying
    to sever its relationship with TREA, I am not certain what you are
    asking for. As to discussions, the question is simply too broad to even
    try to answer. There might have been many discussions of all kinds, at
    various points in time. It is my understanding, however, that TSCL
    would not have the legal power to remove from TREA any organizational
    power it has, including the power to elect TSCL's Board of Trustees, as
    set forth in TSCL's Articles of Incorporation, and I am not aware of
    any lawsuit or other proceeding to attempt to change that.

        15. Q. In your testimony, you said that a person does not need to
    send a contribution to be placed on your supporter list. What is the
    current size of your supporter list? How has the size of that list
    changed over the past 5 years. What percentage of the supporter list
    for each of the past 5 years are non-contributors? You indicated that
    if a contributor is not satisfied with the services TSCL is providing,
    they can request that their contribution be returned. Please provide a
    copy of the information which informs contributors of this option.

        RESPONSE: (a)-(c) I am informed that the current size of TSCL's
    supporter list has ranged between 1,307,000 and 1,470,000, and that
    this has remained fairly constant over the last 5 years. I am also
    informed that, for each of the years from 1997 to the present, the
    percentage of supporters who were non-contributors has been
    approximately 15, 24, 25, 22, and 23 percent, respectively.
        (d) As I testified before you on July 26, TSCL notifies potential
    contributors that a full refund is available, and this is communicated
    in a variety of ways (e.g., on the organization's website, on
    solicitations). A copy of the language used on solicitations is
    attached as Attachment D hereto. In addition, the solicitations
    included in Attachment I contain such an option. TSCL's standard
    brochure (Attachment C) also contains such an option. In fact, the
    attachment to your letter to me dated August 24, 2001, contains this
    option.

        16. Q. You stated that TSCL contacts Members of Congress in order
    to advocate the issues of your organization. Please provide a list of
    the Members of the House and Senate TSCL has contacted via personal
    visit in the past 3 years?

        RESPONSE: Attachment E hereto lists Members of the House and Senate
    that I am informed TSCL has contacted via personal visit in the past 3
    years. The list may not be complete (e.g., TSCL employees have changed,
    certain records may be incomplete, and so forth.), although reasonable
    efforts have been made to attempt to search records and compile a
    complete listing in the time that I had to respond. I am informed that
    Attachment E refers only to personal office visits. There may have been
    many other contacts with such Members, either by other forms of
    communication and/or by interaction with staff.

        17. Q. You stated that TSCL relied on Congress for the data
    determining the years which constitute the notch years. Yet, the years
    you use are incorrect. How do you account for this?

        RESPONSE: I would respectfully suggest that the premise of your
    question (i.e., that the years TSCL uses are incorrect) is itself
    incorrect. Your question makes an assumption without any explanation of
    its foundation. In fact, I believe that all six pieces of legislation
    currently proposed in the 107th Congress use the same notch years that
    you criticize TSCL for using. As to what constitutes the notch years, I
    am informed that TSCL uses the time period 1917-1926 for those affected
    by the 1977 legislation reforming Social Security that inadvertently
    created the Notch because that is the time period in Appendix 2 to the
    1994 Commission on the Social Security ``Notch'' Issue. This Appendix
    was prepared by James W. Kelley, a former staff director for the House
    Ways and Means Subcommittee on Social Security, and Joseph R.
    Humphreys, a former professional staff member for the Senate Finance
    Committee. This document, which can be reached at the following link,
    ``http://www.ssa.gov/history/notchbase.html'';http://www.ssa.gov/
    history/notchbase.html, is a good summation of the legislative history
    of the 1972 and 1977 Social Security reforms that inadvertently created
    the Notch. It concludes that:
        A disparity in Social Security payments definitely exists for those
    born after 1916 (those who began to be affected by the 1977 change in
    law), and that this disparity extends through 1926. . . . and. . . .
    part of this disparity was a result of unanticipated conditions of
    double digit inflation. The chart that is provided with the referenced
    document clearly shows that after the law change in 1977, the first
    group of retirees (born in 1917) had a 13% differential in benefits, by
    the fourth year, this differential had grown to 29% (with an average
    dollar amount difference of $227), and that the differential then
    remained in the range of 28-30 percent reaching a dollar differential
    in excess of $300 by the 10th year (1926). . . . It is certainly
    possible that differentials of this magnitude, had they been known in
    1977, would have raised questions about the appropriateness of making a
    sharp break between the old law rules for worker born before 1917, and
    the new law rules for workers born in and after 1917.

        18. Q. Please explain the specific results supporters have received
    from TSCL's advocacy on legislative issues during the past 5 years.

        RESPONSE: TSCL's principal mission is education, including advocacy
    in support of those public policy issues of concern to the organization
    and its supporters. Success on these subjects can be measured in
    different ways. TSCL believes that its efforts with respect to
    legislative issues have produced many positive results for supporters
    with respect to their own awareness and/or heightened awareness of
    important questions, as well as much information on such issues. In
    addition, TSCL believes that its education and lobbying efforts have
    helped to produce the following specific bills on issues of importance
    to TSCL supporters, as set forth below.
        I am informed that every year since its beginnings in 1994-1995,
    the TREA Senior Citizens League has been successful in encouraging that
    Notch legislation be introduced in Congress, including that proposed by
    former Representative Mark Neumann (R-WI), Reps. Ralph Hall (D-TX),
    Robert Wexler (D-FL), Joanne Emerson (R-MO), and Senator Harry Reid (D-
    NV). Although Notch legislation has not yet been passed into law, we
    have been successful in ensuring Congress continues to focus on the
    Notch issue. I am informed that currently there are over 100 co-
    sponsors of Notch bills in the House and Senate.
        TSCL has also worked with Rep. Bernard Sanders (I-VT) to introduce
    CPI-E legislation and obtain support for his bill. TSCL has also
    continued to support Rep. Bart Stupak's (D-MI) successful attempts to
    get an amendment added to the Agriculture Appropriations Act to
    increase funding for the ``Meals on Wheels'' program.
        In 2001, TSCL has continued its legislative agenda to address
    Medicare reform, to include creation of a Medicare prescription drug
    benefit. As this Subcommittee well knows, implementation of a Medicare
    prescription benefit may be difficult this year due to the shrinking
    surplus. However, TSCL was one of the few seniors groups to speak out
    on the impact the Administration's tax cut would have on the surplus,
    and to urge Congressional members to withhold part of the surplus for
    Medicare and Social Security reform. TSCL has also been quite vocal on
    efforts by the President's Commission to Strengthen Social Security to
    recommend partial privatization of Social Security. As a seniors'
    organization representing Notch victims affected by the 1977 change in
    the Social Security benefit formula, we have urged caution in future
    attempts to reform this program. On August 15, 2001 we submitted
    testimony to this effect to the President's Commission.
        One final note. TSCL is fully aware that the major legislative
    measures, such as Notch reform and a Medicare prescription drug
    benefit, it seeks for its members are high dollar items, and therefore
    may take years to enact. These are not legislative goals that can be
    achieved in 1 or 2 years. However, TSCL's major success is that we have
    not let Congress forget about these very important issues, and we
    especially have not let Congress forget about the 9 million Notch
    babies who are now in their late 80s. Our members depend on TSCL to
    continue to represent them in Congress and we do not intend to let them
    down, even if Notch reform is not considered by some to be a popular
    issue. It is our responsibility to continue to urge Congress to address
    this inequity no matter how long it takes.
        Other organizations also lobby Congress on such issues, and, while
    TSCL believes that its efforts on various legislative matters described
    above have been successful, it is difficult to say which individuals or
    organizations have achieved the most success on such matters. Credit
    for legislative successes of course, undoubtedly goes to the
    legislators themselves.
        My written testimony provided to the Subcommittee for inclusion in
    the record of the July 26 hearing contains, as an attachment, a copy of
    a report on the current legislative program of TSCL prepared by its
    Legislative Director.

        19. Q. Please provide a copy of both the TREA and the TSCL 990 form
    filed for each of the past 5 years. Please also include a detailed
    summary of income received and expenses for both organizations for each
    of the last 5 years. Please also include how much money TSCL has had on
    hand at the end of each year, including balances from bank accounts,
    brokerage accounts, credit union accounts, and any other accounts.

        RESPONSE: Attachment F hereto includes the IRS Form 90s filed by
    TSCL for each of the past 5 years, and those documents themselves
    contain the information requested in Question 19. At the Subcommittee's
    request for TREA's Form 90s, I requested and received copies of those
    documents, and provide those copies to the Subcommittee as Attachment
    G.

        20. Q. Please provide a list of the mailings TSCL has produced over
    the past 5 years, including: subject of the mailing, how many
    individuals received each mailing, and income resulting from each
    mailing. Please also provide a copy of each mailing, including the
    envelope in which the mailing was inserted.

        RESPONSE: Attachment H hereto is such a list. Attachment H does not
    include each issue of TSCL's regularly issued newsletter, or all
    routine mailings such as Thank-you's, and does include certain mailings
    more than once (e.g., essentially the same mailing sent to different
    persons on different dates). This information (Attachment H) is
    confidential, and TSCL respectfully requests that it not be published
    or disclosed, in the record of the hearing, or otherwise. Attachment I
    hereto is comprised of copies of certain actual mailings, including
    certain newsletters, for each of the past 5 years. Several samples are
    included with respect to each year. TSCL does not have all of the
    requested documents, some of which were already provided to the SSA
    IG's office within the past year. Furthermore, locating, reviewing,
    redacting recipients' names, and copying each mailing during this
    timeframe would have required a tremendous number of staff and
    professional hours, would have involved thousands of pages of
    documents, would have been extremely expensive, would have been unduly
    burdensome, and would have been merely cumulative.

        21. Q. You indicated at the hearing that you are paid a per diem
    and expenses. How much of a per diem do you receive? When are you
    entitled to receive a per diem? What expenses are you reimbursed for?
    Could you provide a list, for example, when you come to Washington, do
    you stay in a hotel? Which hotel? Is there a dollar limit as to the
    amount of the expense you may be reimbursed, i.e., $200 per night for a
    hotel room? Do you rent a car when you travel? Is there a dollar limit
    as to the amount of the expense you may be reimbursed when you rent?

        RESPONSE: As you know from my testimony before the Subcommittee on
    July 26, 2001, the members of the TSCL Board of Trustees, including
    myself, are volunteers. We serve without compensation. Of course, we
    are reimbursed for expenses incurred on behalf of the organization. The
    current per diem for me--or for any other member of the TSCL Board of
    Trustees traveling on official business for TSCL--is $50 per day for
    food. Aside from that, any trustee on official business would be
    reimbursed all reasonable transportation and lodging costs, as well as
    any necessary miscellaneous costs (e.g., telephone charges, postage)
    related to such official business. I usually stay at a Holiday Inn or a
    Sheraton while on trips to Washington, D.C. I rent a car when
    necessary.

        22. Q. Did the members of the Board of Directors have individual
    responsibilities, i.e., were some assigned to review fundraising, plan
    meetings and conventions? If so, who was assigned responsibility for
    fundraising such as the notch letters?

        RESPONSE: The TSCL Board of Trustees is, and has been in the past,
    the ultimate authority in TSCL and responsible for the organization's
    policies and directions. In the past, to the best of my knowledge, the
    Chairman would have been responsible for operational decisions, and
    would have been the person to whom the Executive Director would report.
    But I do not believe that there was any division of responsibility as
    such among Board members, although Board members could function in
    other capacities (e.g., as officers, with day-to-day responsibilities).
    Currently, I am chairman of the board of trustees and also function as
    the chief executive officer of TSCL, so most significant decisions,
    including those related to fundraising, would be made by me or my
    delegate.

        23. Q. Which individual(s) were responsible for creating ideas for
    mailings? Who designed the mailings? Who within TSCL participated in
    designing the mailings? Who had authority to approve the mailings?

        RESPONSE: To the best of my knowledge, the responsibility for
    creation of ideas for mailings at all times, and certainly at the
    present time, has rested with TSCL, which has been assisted by others,
    including its direct response counsel, Squire & Heartfield Direct, Inc.
    Within those organizations, a variety of persons has been the
    originator of ideas. For example, at this time I might originate an
    idea, or TSCL's legislative director might originate an idea, or others
    might do so. Sometimes ideas are the product of meetings discussing
    membership issues, the legislative agenda, or other topics. Currently,
    as TSCL's chief executive officer, I have the authority to approve TSCL
    mailings. In the past, TSCL's Executive Director also had such
    authority, and past Chairmen could have exercised (and may have
    exercised) this prerogative at any time.

        24. Q. Attached is a copy of the mailing Mr. Kleczka attached to
    his statement. We have a few questions about this mailing. Who designed
    this mailings? Who within TSCL participated in designing this mailing?
    Who authorized its use? Did a member of the Board of Directors review
    the mailing before it was sent? Did a member of the Board of Directors
    approve its use?

        RESPONSE: (a)-(c) It appears that Mr. Kleczka's statement attached
    pieces of different mailings to his statement. I believe the procedure
    for all such mailings would have followed that outlined in my response
    to Question 23, above, and I have no knowledge or recollection of any
    specific design, review or approval procedures with respect to these
    particular mailings.
        (d)-(e) The Board of Trustees would not have reviewed/approved any
    such mailing before it was sent, although it is always possible that a
    Board member saw a particular mailing before it was sent. As chief
    executive officer, I would have reviewed or approved any mailing
    designed and sent after February 2001.

        25. Q. How often has TSCL solicited the individuals in its database
    for contributions in the past 5 years?

        RESPONSE: Your question is too broad to be comprehensible and/or
    reasonable, for literally it would require an answer with respect to
    each individual in the database. I assume that you are asking for
    averages per year, since otherwise there would be a range of between 0
    and many dozens over a 5-year span, depending on the individual in
    question. I also assume that your question pertains only to individuals
    who have been members/contributors at all times during the last 5
    years, since, again, otherwise there would be a wide range of answers.
    Finally, I assume that your definition of ``solicited'' would include
    TSCL mailings containing educational materials and program-related
    materials such as action items (petitions to legislators, surveys,
    postcards, and other materials that a member/contributor would receive
    from TSCL and on which the member/contributor would have an opportunity
    to take action), as long as the mailing included a reply vehicle and
    reply envelope for requested contributions. I am informed that
    individuals supporting the Notch program might have received such
    mailings from 8-13 times per year during the last 5 years, while
    individuals supporting TSCL's Social Security and Medicare Programs
    might have received 3-13 mailings per year; and that supporters of both
    programs, and all supporters in certain years, might have received a
    combination of those mailing numbers.

        26. Q. Does TSCL share its database with TREA? If so, under what
    circumstances does this occur? By share, we mean rent, sell, transfer,
    allow TREA to look at or use the information contained in the database.
    Does TREA share its database with TSCL? If so, under what circumstances
    does this occur?

        RESPONSE: I am informed that TSCL and TREA do not share their
    respective databases, but that, under a broad reading of your question,
    there is a sharing of certain information that is also found in the
    database. Specifically, TSCL does not send its mailings to TREA
    members, and TREA therefore advises TSCL of its members so that TSCL
    will not send its mailing to those members. In addition, TSCL regularly
    advises TREA if it becomes aware of TSCL members or supporters who are
    retired enlisted. In such cases, TSCL would send TREA a listing of such
    persons and/or write to such persons advising them of TREA.

        27. Q. Describe how the TSCL Board of Directors are selected. How
    many members are there on the TSCL Board of Directors? How many members
    does TREA select? How does TREA select the members? How are the
    remaining members of the Board selected? Who picks them?

        RESPONSE: Currently TSCL's Board of Trustees is comprised of five
    members. Four members of the TSCL Board of Trustees are elected by the
    majority vote of TREA Board of Directors, the fifth member being TREA's
    treasurer.

        28. Q. Does TREA review the activities of the TSCL Board of
    Directors? If so, what type of review is conducted? What is its
    frequency? Who conducts the review?

        RESPONSE: TREA is not involved in the day-to-day activities of
    TSCL. TSCL's Chairman reports on TSCL's activities twice a year at TREA
    Board meetings, and a TREA representative may attend TSCL Board
    meetings. TSCL is free to conduct its own activities, of course, and I
    am unaware of any review procedure by TREA.

        29. Q. We understand that, several months ago, the TREA Board of
    Directors fired the TSCL Board of Directors. On what basis did the TREA
    Board of Directors make this decision?

        RESPONSE: I was not a member of either the TREA Board of Directors
    or the TSCL Board of Trustees at the time several months ago that TREA
    removed members of the TSCL Board of Trustees, although I was one of
    the subsequent trustees appointed by the TREA Board. I believe TREA
    thought TSCL would benefit from new leadership. My understanding is
    that such action is within the authority of the TREA Board of
    Directors, even where such action is without cause.

        30. Q. What are your current duties at TSCL?

        RESPONSE: I am chairman of the Board of Trustees, and I am the
    chief executive officer for TSCL. In general, in the latter role, I am
    responsible for the significant day-to-day activities of TSCL as well
    as important decisions not requiring the approval of the Board of
    Trustees. Since I serve in a voluntary capacity from my home in Texas
    (unless circumstances require me to travel), I depend heavily on staff
    and agents. As chairman of the Board of Trustees, I am in charge of
    organizing and running the meetings of the Board. Otherwise, my duties
    are those of a member of the Board.

        31. Q. Does TSCL only send its mailings to individuals in its
    database? If not, how does TSCL get names and addressees of
    individuals, other than those currently in its database? How does TSCL
    add names and addresses to its database?

        RESPONSE: To the best of my knowledge, TSCL's practices in this
    regard would be similar to the practices of thousands of other
    nonprofit organizations depending upon public contributions. With
    respect to contributors, TSCL's ``house'' mailings would be limited to
    certain (not all) individuals in its database. Normally, TSCL would
    acquire additional names for prospecting purposes from lists provided
    (on rentals for a fee, or by virtue of list exchanges) by other
    organizations. If such individuals contributed or otherwise responded
    favorably, normally they would be added to TSCL's database.

        32. Q. What reports or other documentation does TSCL have to
    provide to TREA? This could be annual reports as to activities, etc.

        RESPONSE: To the best of my knowledge, none. I believe that,
    although TSCL may choose to provide any number of documents to TREA, it
    is not required to do so. Normally, TSCL would provide TREA with copies
    of its Annual Report, its IRS Form 990, and possibly other documents as
    well.

        33. Q. At the hearing, it was confirmed that TSCL rents out its
    lists of contributors. Who has TSCL rented its lists to in the past 5
    years? What individual information was shared? What was the income
    received for each of these list rentals? Do those individuals on these
    lists know their information is being shared? Do they provide their
    specific written consent? Please provide supporting documentation of
    how individuals are informed and how individuals are asked to provide
    their consent. Have you rented out information about any of the 29,000
    individuals who responded to the Slave Reparation or Notch Victim
    flyers?

        RESPONSE: (a)-(f) Like most nonprofit organizations depending on
    the public for contributions, TSCL rents or exchanges its donor lists
    to or with other organizations. Attachment J hereto, which contains
    confidential information, lists the names of organizations with whom
    TSCL has rented or exchanged lists during the past 5 years, together
    with rental data and other relevant information. I am informed that
    detailed information on income was not available, that in general,
    TSCL's rentals and exchanges would have been at market rates, and that
    the income figures are set forth on the IRS Form 990's that are
    attached hereto. Normally, names, addresses, and giving ranges are the
    only information shared. The individuals themselves may or may not know
    such information is being shared, but they are advised in TSCL's
    mailings that certain information is shared, and they are alerted that
    they can stop their names and addresses from being included. They can
    also request that they not receive unwanted mail. To the best of my
    knowledge, any such request received by TSCL on either point would be
    followed. Attachment B is a sample of a notice to recipients of TSCL
    mailings. To the best of my knowledge, the net income received by TSCL
    from list rentals is reported on TSCL's annual IRS Form 990, copies of
    which have been furnished to the Subcommittee with this response.
    Attachment J confirms testimony at the hearing of July 26 that the
    American Association of Retired Persons is among the organizations
    renting lists from TSCL. Otherwise, the information on Attachment J is
    considered confidential, proprietary, and is not to be published or
    disclosed.
        (g) With respect to individuals who wrote to TSCL because of the
    erroneous information contained in the so-called ``hoax'' flyers, their
    names and addresses were inputted into TSCL's database, and legally, I
    believe, could be used for any lawful purpose, including contribution
    solicitation or list rental. As you will recall, after it became aware
    of the scope of the hoax flier problem, TSCL resolved to try to correct
    the misinformation in the hoax flyers by writing to the individuals,
    and it decided to use such data thereafter only for purposes of writing
    to the individuals in question to alert them that the information they
    had concerning TSCL and the supposed benefits mentioned in the flyers
    was erroneous, and to preserve the evidence for use in investigating
    the flyer mystery. As an added precaution, TSCL (through its agent)
    devised a method to prevent any future mailings to such individuals by
    ordering the records of such persons to be assigned specific codes, and
    ordering that such codes be suppressed in future mailings, as well as
    with respect to list rentals. In actual fact, TSCL has just discovered
    that, although the suppression order has been carried out with respect
    to mailings and initially with respect to list rental/exchange orders,
    TSCL's database manager, Public Interest Data, Inc., through an
    internal clerical production error, failed to observe the suspension
    order with respect to list rental data (although the list rental
    suppression order was reimposed in early September, 2001, as soon as
    the error was discovered). It is possible, therefore, that a relatively
    few of the names in question were included in list rental fulfillment
    orders, although we have as yet received no such information that in
    fact happened.
        On this point in particular, I would like to add a few words for
    the Subcommittee's consideration. The whole issue of TSCL being
    involved in a devious scheme to develop a list of possible
    contributors--which seems to be behind this questioning--is so
    ridiculous that it is absurd. I say this with respect, but I want to
    emphasize my words here. Anyone who thinks that such an accusation or
    insinuation is within the realm of reason has no concept of the
    realities of nonprofit fundraising, and certainly no true idea about
    the character and practices of TSCL.
        To the extent that TSCL may have received subsequent communications
    (including contributions) from persons to whom it had sent its alert
    that the flyers were erroneous, this was coincidental and
    unintentional, as well as being very minor in degree or quantity.
    First, it would not even have made any sense for TSCL to try to make a
    ``prospect list'' out of such records. Furthermore, any funds received
    by TSCL in response to the TSCL follow-up mailing (approximately
    $1,000, at most) paled in comparison with what TSCL spent in trying to
    bring the truth to light. Indeed, TSCL spent many thousands of dollars
    dealing with the problems created by the flyers, and, despite
    attempting to cooperate fully with the investigating agencies, it got
    attacked brutally by the SSA Inspector General's Office as well as by
    certain members of the Subcommittee. Unless someone intentionally set
    up TSCL for ridicule and trouble, the entire``hoax flyer'' episode
    seems inexplicable, except perhaps as an aberrant attempt by misguided
    persons to over-encourage seniors.
        You or members of your Subcommittee may disagree with our position
    on certain legislative issues, and you may believe that certain
    language in some of our mailings to the public are not appropriate or
    desirable, but we would respectfully disagree with you on both counts.
    TSCL does good work for the public, and particularly for its members
    and supporters. We are honorable, with good intent, and we try every
    day to work to accomplish the ends for which TSCL was established. We
    believe that we have a good record of worthwhile achievement, and we
    hope at some point that the recent blot--that the SSA and/or the SSA
    IG, with help from your Subcommittee seems intent on imprinting on
    TSCL--can be eradicated, and attention given to the relevant facts.
                Sincerely yours,
                                                        George A. Smith
                                                               Chairman
    GAS:mm

    [The attachments are being retained in the Committee files.]

                                     Public Interest Data, Incorporated
                                             Alexandria, Virginia 22314
                                                      September 5, 2001

    Mr. E. Clay Shaw, Jr.
    Chairman, Subcommittee on Social Security
    Committee on Ways and Means
    House of Representatives
    Washington, DC 20515

        Dear Mr. Shaw,

        This is my response to your letter dated August 24, 2001.
        As you will recall from my testimony before the Subcommittee on
    July 26, 2001, my employer, Public Interest Data, Incorporated
    (``PIDI''), is responsible for electronically storing and maintaining
    our clients' databases and for producing output from these masterfiles
    (e.g. statistical reports; name/address records for mailings) in
    accordance with the client's instructions. The data belong to the
    client and the client makes the decisions about what data are entered
    and how the database is used. The client is responsible for data that
    are entered onto its masterfile--either by performing this function
    itself or contracting with a separate data entry vendor which enters
    the data online to PIDI.
        With respect to the specific questions in your letter dated August
    24, 2001, my response is as follows:
        (1) PIDI maintains one database for TREA Senior Citizens League
    (``TSCL''), and all TSCL data that it maintains are stored in the
    database. It is standard practice in the database management industry
    to maintain a single database containing all records, including records
    to be omitted from mailings, with appropriate coding. TSCL's
    consultant, Squire & Heartfield Direct, Inc., created unique codes to
    separately identify the names of persons who wrote to TSCL about the
    inaccurate or so-called ``hoax'' flyers, and instructed TSCL's data
    entry vendor to assign these codes to such persons and enter the
    information onto TSCL's database.
        To the best of my knowledge, since October 2000, upon receipt of
    instructions from Squire & Heartfield Direct: (a) all requests for data
    output from the TSCL database for mailings, except as indicated below,
    have required suppression of records with these unique codes; this
    system has operated to prevent any mailings to such persons--aside from
    the basic mailing from TSCL to such persons explaining that the flyers
    were incorrect; and (b) in addition, this system has operated to
    prevent the records of such persons from being included in the
    fulfillment of list rental requests.
        (2) PIDI maintains a single database for TSCL, and was not
    requested to set up any additional database. Assuming receipt of any
    further responses from persons who had received TSCL's mailing
    explaining that the flyers were incorrect, any additional pertinent
    information would have been entered into the database by TSCL's data
    entry vendor. No additional mailings to such persons would have been
    generated, however, because of coding and suppressing the records per
    the above instructions from Squire & Heartfield Direct.
        (3) No. I believe it would be unusual and contrary to general
    industry practice to create a new and separate database, and creation
    of an additional database would be unnecessary. In fact, maintaining a
    single database may not only be more efficient, but also more reliable
    than a multiplicity of databases. As explained above, the TSCL database
    was coded and instructions were given to make sure the individuals who
    responded to the erroneous flyers and received TSCL's letter of
    explanation did not receive any further TSCL mailings.
        I hope this information is of assistance to the Subcommittee in
    understanding these matters.
                Sincerely,
                                                         Christy Turner
                                                      Account Executive

               *         *         *         *         *
                                      Public Interest Data Incorporated
                                             Alexandria, Virginia 22314
                                                     September 12, 2001

    Mr. E. Clay Shaw, Jr., Chairman
    Subcommittee on Social Security
    Committee on Ways and Means
    U.S. House of Representatives
    Washington, DC 20515

        Dear Mr. Chairman:

        The purpose of this letter is to update and correct one particular
    statement contained in my September 5, 2001 response to your letter
    dated August 24, 2001.
        As I stated in my letter, the TREA Senior Citizens League
    (``TSCL'') is a client of my employer, Public Interest Data, Inc.
    (``PIDI''). Last year, in determining how to handle the influx of
    records related to persons responding to the so-called ``hoax'' flyers,
    TSCL's consultant, Squire & Heartfield Direct, Inc., created unique
    codes to identify the names of persons who wrote to TSCL about those
    inaccurate flyers, and instructed TSCL's data entry vendor to assign
    these codes to such persons and enter the information onto TSCL's
    database maintained by PIDI.
        As I also stated, since October 2000, upon receipt of instructions
    from Squire & Heartfield, all requests for data output from the TSCL
    database for mailings have required suppression of records with these
    unique codes, resulting in the omission of records for mailings to such
    persons (except as otherwise indicated in my letter).
        Although I stated in my September 5 letter that this also prevented
    the records of such persons from being included in the fulfillment of
    list rental orders, I discovered recently, since I made my response,
    that this is not fully accurate. Although the instructions from Squire
    & Heartfield were indeed given, and were followed initially, a
    subsequent internal production programming error at PIDI some time
    later resulted in the records of such persons being not automatically
    omitted from the list order fulfillment process. At this time I do not
    know whether any such records were actually selected for any list
    rentals, but we wanted you to know about this development immediately.
        I want to emphasize that the programming error was solely a mistake
    made in-house by PIDI programming staff, was unknown by TSCL or Squire
    & Heartfield, and in fact was unknown to PIDI until we discovered it
    recently. The list rental fulfillment programming mistake was corrected
    immediately after my discovery and steps have been taken internally
    here at PIDI to make sure that this does not happen again. The
    suppression order with respect to all of TSCL's own mailings remained
    intact during the entire period, so all TSCL mailings were suppressed
    in accordance with the instructions from Squire and Heartfield.
        Please accept my apologies. I hope this information is of
    assistance to the Subcommittee in understanding this matter.
                Sincerely yours,
                                                         Christy Turner
                                                      Account Executive

                                                     American Red Cross
                                               La Plata, Maryland 20646
                                                     September 19, 2001
    Hon. E. Clay Shaw, Jr., Chairman
    House Committee on Ways and Means
    Subcommittee on Social Security

        Dear Mr. Chairman:

        In response to your request of August 24th, 2001, please find the
    answers to your supplemental questions. To the best of my knowledge all
    or nearly all of the questions raised in your August 24th letter were
    asked and answered during the hearing held July 26, 2001. As much as
    possible, I have referred to the transcript of my testimony. All
    answers are based on my current recollection and subject to
    verification by reference to documents not necessarily within my
    possession.

        1. To raise money, you sent out solicitations to senior citizens,
    describing what you do and requesting a donation to assist you in your
    efforts, is this a correct statement? Who determined the form and
    content of the solicitations?

        TSCL sends out a variety of informational mailings. Each mailing
    contains information about TSCL, including an address to which
    donations can be sent, as well as an address, phone number and website
    address from which more information can be obtained. The Board of
    trustees has final authority on all actions of TSCL.

        2. What issues were the focus of your lobbying efforts?

        Please refer to the legislative agenda that was put into the record
    at the July hearing.

        3. Please describe what percentage of TSCL's fundraising focused on
    issues relating to Social Security? Specifically, what percentage of
    your fundraising related to the issue of Notch Reform? Approximately
    what percentage of TSCL's Membership list was generated as a result of
    Notch Reform solicitations? How long has TSCL been on raising the issue
    of Notch Reform? How many individuals receive each mailing? What income
    was raised from each of these mailings and how many individual
    individuals have the money?
        Please refer to TSCL for this information.

        4. Given the number of supporters and the number of years that TSCL
    has been fundraising on the notch issue, have you ever been involved in
    a hoax that you believe was propagated by a well-intentioned supporter?

        I have never been involved in any hoax. In my experience, TSCL has
    had many calls from Members, private citizens, even Members of Congress
    and their staff, confused about Social Security benefits and Social
    Security Administration policies. To the best of my knowledge, TSCL has
    always worked to provide accurate information and to correct
    misconceptions on the part of the public.

        5. When did you first become aware of the hoax Slavery Reparation
    and Notch Reform flyers? When did you alert the TSCL Board of Trustees
    and/or the TREA Board of Directors? What steps you pay to find that it
    was responsible for the hoax flyers? What investigation did you
    authorize both within TSCL and outside TSCL? Who was interviewed? What
    was the outcome? What was the result of these efforts?
        In my testimony at lines 1645-1689, I recite all the relevant
    information regarding this question. Please refer to that portion of my
    testimony.

        6. Why did you decide to direct your data processing contractor to
    create a database containing personal information submitted by victims
    of the whole flyers?

        In my testimony at lines 1690-1696, I recite all the relevant
    information regarding this question. Please refer to that portion of my
    testimony.

        7. What specific steps did TSCL else take to combat Slave
    Reparations and Notch Victim flyers?

        In my testimony at lines 1645-1689, I recite all the relevant
    information regarding this question. Please refer to that portion of my
    testimony.

        8. You indicated in your statement that the makers of the flyers
    used a variation on the TSCL name and directed responses to TSCL's post
    office box, presumably to give their flyer credibility. Can you
    theorize who else stood to gain from receiving this information? It was
    sent only to TSCL's post office box. Is there anyone else who has
    access to the post office box? If not, do you believe this was a smear
    campaign to try to harm TSCL? If so, who you think maybe responsible?

        Your question assumes that someone stood to gain from this flyer. I
    have no knowledge to support that supposition. The most likely
    explanation, in my opinion, is that the entire episode was the result
    of one or more people creating what was, in effect, a nuisance chain
    letter.

        9. Why did you provide an incomplete database to the Social
    Security Administrations Office of the Inspector General (OIG) in
    response to the subpoena?

        To the best of my knowledge, the proffered data was complete. To
    the best of my recollection, the only information that was left off was
    the date received or the date keyed, which I am not aware of as having
    been requested.

        10. Why did you refuse to comply with the OIG's request to
    discontinue the creation of the database containing information
    submitted by recipients of the Flyers?

        To the best of my knowledge, the premise of this question is not
    accurate. To the best of my recollection, TSCL never received any
    request to stop. To the best of my knowledge and recollection, TSCL
    complied with every request of the OIG.

        11. Were you aware that your attorney instructed Associated Growth
    Enterprises, your former marketing firm, not to comply with the OIG
    subpoena without first consulting with TSCL?

        I am constrained by TSCL's privilege to maintain the
    confidentiality of its communications with its attorney. Please consult
    TSCL regarding this privilege. If the privilege is waived, I will be
    happy to respond to this question, to the extent that I recall any
    relevant information.

        12. According to the OIG, the TSCL withheld certain information
    from the OIG relating to follow-up correspondence sent by TSCL with
    persons who responded typical flyers, specifically the amount and date
    of the contribution received from the follow-up mailing. Is this true?
    If so, why did you feel it necessary to withhold information?

        To the best of my knowledge and recollection, this is not true. To
    the best of my knowledge, TSCL never received any money from the
    follow-up correspondence during my tenure. I was relieved of duty at
    the beginning of February, 2001. I don't know what happened after
    that.13. Did you direct any of the entities subpoenaed by the OIG not
    to cooperate or not to turn over any documents? Why?

        13. Did you direct any of the entities subpoenaed by the OIG not to
    cooperate or not to turn over any documents? Why?

        No, I did not direct any of the entities not to cooperate. Upon
    advice of TSCL's counsel, I did communicate with certain of our vendors
    to inform them that TSCL felt that the information in the vendors
    possession was TSCL's to control, and that TSCL was negotiating with
    OIG over the scope of the subpoena. On those bases, and upon advice of
    TSCL's counsel, I communicated TSCL's request that the vendors not
    disclose any TSCL information until the negotiations and conversations
    between OIG and TSCL's counsel had been completed.

        14. Has the idea of a mailing, including a survey, involving Slave
    Reparations ever been discussed? If so, who discuss the issue? What was
    decided?

        To the best of my knowledge, the only discussion of Slave
    Reparations at TSCL during my tenure came up as a result of the flyers
    in question, and the only focus of the conversations was how to put an
    end to the confusion.

        15. You indicated that TSCL has not solicited any of the 29,000
    individuals who responded to the Slave Reparations and Notch Victim
    flyers other than sending a brochure, is that correct? How many of the
    29,000 responses you received were not from individuals already in
    TSCL's database?

        During my tenure as Executive Director, TSCL established a policy
    to flag those names so they were segregated on TSCL's data base, and
    thereafter to avoid any solicitation of those individuals, unless they
    were already TSCL members at the time of their initial response. I have
    no recollection of the number of responses that were from individuals
    not already in the database.

        16. You mentioned during your testimony that you left TSCL in
    February 2001. Did your leaving have anything you do with any mailings,
    including the flyers that were the subject of the recent hearings? If
    yes, please elaborate. If no, please explain the circumstances.

        The Board of trustees made a determination to alter the leadership
    of the organization. My services were terminated solely for that
    reason. The termination of my services was unrelated to the issue of
    the flyers.

        17. While you were employed by TSCL, did TSCL ever pay for services
    provided by Direct Mail Resources? If so, what work? For what amount of
    payment? Who approved the use of Direct Mail Resources? Was the TSCL
    Board of Trustees informed about, consulted with, or asked to provide
    their approval of the use of Direct Mail Resources? What services did
    Direct Mail Resources provide? Who is there Executive Director? Does
    Direct Mail Resources to sell, rent, or otherwise compile information
    received from TSCL?

        To the best of my knowledge, TSCL did not pay Direct Mail Resources
    for any services.

        18. What were your duties and responsibilities as Executive
    Director of TSCL? Who have authority to approve the design and sending
    fundraising mailings?

        As Executive Director, I was responsible for the day to day
    operations of the organization, subject to the authority of the Board
    of Trustees. The ultimate authority for all TSCL actions was with the
    Board of Trustees, which consulted with staff and outside consultants.

        19. Attached is a copy of the mailing Mr. Kleczska attached a
    statement. We have a few questions about this mailing. Who designed
    this mailings? Who within TSCL participated in designing this mailing?
    Who authorized its use? Did a Member the Board of trustees review the
    mailing before it was sent? Did a Member of the Board of trustees
    approve its use?

        The referenced mailing was created after the end of my tenure with
    TSCL.

        20. While you were serving as Executive Director, how often did
    TSCL solicit the individuals in its database for contributions?

        Please refer to TSCL for actual information.

        21. Does TSCL share its database with TREA? If so, under what
    circumstances does this occur? By share, we mean rent, sell, transfer,
    allow TREA to look at or use information contained in the database.
    Does TREA share its database with TSCL? If so, under what circumstances
    does this occur?

        During my tenure as Executive Director, TSCL did not share with
    TREA, other than individuals identified as retired enlisted. Those
    names were referred to and invited to join TREA.

        22. While you were Executive Director, did TSCL rent lists of
    members from other organizations? If so, from whom?

        Commercial list providers.

        23. Did TSCL only send mailings to individuals in this database? If
    not, how did TSCL get additional names and addresses of individuals,
    other than those already in this database?

        To the extent that I understand the question, TSCL sought to expand
    its Membership through informational mailings, referrals, and other
    similar means.

        24. Does TSCL have to provide reports or other documentation to
    TREA? This could be annual reports as to activities, and so forth. If
    yes, please describe.

        TSCL provides an Annual Report, which may be reviewed by TREA
    members. TREA representatives may attend TSCL Board meetings. In the
    past, TSCLs Chairman provided a monthly report to TREAs Chairman.
                Respectfully Submitted,
                                                       Michael J. Zabko

        Chairman Shaw. And I have to apologize to the final panel,
    in that this room is booked for a markup beginning at 2
    o'clock, which has passed, so I would ask that the panel come
    forward, sit at the witness table.
        I will also ask all of the members that any questions that
    you might have be submitted in writing, in order to expedite
    the clearing of this hall for the bill markup that is now
    scheduled.
        We have here Ms. Lorna Daniels, from Arlington, Virginia,
    who I understand has been a victim of some type of scheme; Ms.
    Betty J. Severyn, who is a member of the board of directors of
    AARP; Darrin Williams, chief of staff, the Office of the
    Arkansas Attorney General, Little Rock, Arkansas.
        Ms. Daniels, if you would please proceed as you see fit.
    And your full testimony has been made a part of the record, as
    each of the witness' has.

            STATEMENT OF LORNA DANIELS, ARLINGTON, VIRGINIA

        Ms. Daniels. Good morning, Mr. Chairman, Mr. Matsui, and
    members of the Subcommittee.
        My name is Lorna Daniels. I am here today to talk about a
    flyer that I received from a friend that involved a $5,000
    payment to notch victims. I believe this flyer was misleading
    and that seniors should be warned about it and other misleading
    mailings or flyers that they might receive.
        In my case, in early 2000, I received a phone call from a
    friend in Hawaii, asking if I knew anything about the pending
    notch victims legislation. I responded, ``No.'' She then mailed
    me the article and form on notch victims. Initially, after
    receiving these in the mail, I set them aside.
        In the summer of 2000, after re-reading the information, I
    felt that my husband and I would be entitled to each receive
    the $5,000 lump sum payment, but only if we filled out the form
    and had our names placed on the national victim register.
        Several items in the flyer led me to the decision to
    complete the prepared form. My decision to complete the form
    was primarily based on the statement in the article that says,
    ``The plan has already won overwhelming support among notch
    victims and many of their supporters in Congress have endorsed
    it.''
        The other items on the preprinted form that further
    influenced my decision was that the form itself was self-
    addressed to the ``National Victim Register--TREA Senior
    Citizens League,'' and contained the statement that read, ``I
    am requesting in writing that I be registered in order to
    receive this benefit.''
        What concerns my husband and me, and probably other notch
    victims, is that we furnished all of the information requested
    in the form: our full names and other names used, as they
    appear on our Social Security cards; our birth dates; places of
    birth; and our coveted Social Security numbers.
        All this information is personal and private, and we are
    always cautioned to protect them. These belong to the
    individual only and no one else.
        However, if it would assist us in recovering moneys we were
    told were due us, we naturally furnished the information.
        Again, may I reiterate, we believed that the only way we
    would recover our money was to be placed on the register and
    conform to their requirements.
        We sent no money. The completed forms were mailed to the
    post office box given on the form, and we waited for an
    acknowledgement.
        Believing the legitimacy of this, I waited for confirmation
    of our registration, which was indicated.
        Subsequently, I received a mailing from TREA Senior
    Citizens League, which I thought was the response. However,
    that was a letter disclaiming any involvement with the previous
    flyer, rather than a confirmation of our registration.
        This letter from the Senior Citizens League included some
    informational material about themselves and a solicitation for
    a nontax deductible charitable contribution, making a check
    payable to TSCL.
        Question: How could they deny any relationship with the
    original flyer when they had the information to send me this
    public relations material and ask for money?
        Again, I am deeply concerned as to what happened to all the
    personal information they extracted from us and other
    unsuspecting senior citizens who responded to the flyers.
        In conclusion, I strongly urge that steps be taken to
    prevent misleading flyers and mailings, especially those
    directed to senior citizens who are on fixed incomes,
    especially in light of the rising costs of living.
        I appreciate the opportunity to express my concerns and
    wish to thank the Subcommittee for investigating this matter
    and other areas that threaten the welfare of senior citizens.
    Thank you for your attention, and I will be happy to answer any
    questions.
        [The prepared statement of Ms. Daniels follows:]

            Statement of Lorna Daniels, Arlington, Virginia

        Good morning Mr. Chairman, Mr. Matsui and members of the
    Subcommittee. My name is Lorna Daniels and I am here today to
    talk about a flyer that I received from a friend that involved
    a $5,000 payment to ``Notch Victims.'' I believe this flyer was
    misleading and that seniors should be warned about it and other
    misleading mailings or flyers they might receive.
        In my case, in early 2000, I received a phone call from a
    friend in Hawaii asking if I knew anything about pending
    ``Notch Victims'' legislation. I responded ``No.'' My friend
    then mailed me the accompanying article and form on ``Notch
    Victims.'' Initially, after receiving these in the mail, I set
    them aside.
        In the summer of 2000, after re-reading the information, I
    felt that my husband and I would be entitled to each receive
    the $5,000 lump sum payment, but only if we filled out the form
    and had our names placed on the National Victim Register.
    Several items in the flyer led me to the decision to complete
    the prepared form. My decision to complete the form was
    primarily based on the statement in the article that says,
    ``the plan has already won overwhelming support among Notch
    Victims and many of their supporters in Congress have endorsed
    it. `` The other items on the form that influenced my decision
    was that the form itself was self--addressed to the National
    Victim Register--TREA Senior Citizens League, and the statement
    that read ``I am requesting in writing that I be registered in
    order to receive this benefit.''
        What concerns my husband and me, and probably other Notch
    Victims, is that we furnished all of the information requested
    in the form: our full names and other names used, as they
    appear on our social security cards; our birth dates; places of
    birth and our coveted social security numbers. All this
    information is personal and private, and we are always
    cautioned to protect them. They belong to the individual only
    and no one else. However, if it would assist us in recovering
    monies we were told were due us, we, naturally furnished the
    information. Again, may I reiterate--we believed that the only
    way we would recover our money was to be placed on the Register
    and conform to their requirements. We sent no money. The
    completed forms were mailed to the post office box given on the
    form.
        Believing the legitimacy of this, I waited for confirmation
    of our registration, which was indicated. Subsequently, I
    received a mailing from TREA Senior Citizens League, which I
    thought was the response. However, that was a letter disavowing
    any involvement with the previous flyer, rather than a
    confirmation of our registration. This letter included some
    informational material about themselves and a solicitation for
    a non-tax deductible charitable contribution. Question--how
    could they disavow any relationship with the original flyer
    when they had the information to send me this public relations
    material and ask for money? Again, I am deeply concerned as to
    what happened to all the personal information they extracted
    from us and other unsuspecting senior citizens who responded to
    the flyers.
        In conclusion, I strongly urge that steps be taken to
    prevent misleading flyers and mailings, especially those
    directed to senior citizens who are on fixed incomes especially
    in light of the rising cost of living. I appreciate the
    opportunity to express my concerns and thank the Subcommittee
    for investigating this matter and other areas that threaten the
    welfare of senior citizens. Thank you for your attention and I
    will be happy to answer any questions.
        [An additional attachment is being retained in the
    Committee files.]

    Mailed:
    To:
    National Victim Register--TREA Senior Citizens League
    P.O. Box 96472
    Washington, D.C. 20090-6472

        I understand that I may be entitled to receive $5,000 due to
    inequities in my Social Security payments since I am considered a
    ``notch baby'', meaning that I was born in the U.S. between 1917 and
    1926.
        Therefore, by this letter, I am requesting in writing that I be
    registered in order to receive this benefit should this bill/measure be
    passed/approved.
        I understand that the following information is required in order
    for you to register me:

        Name:
        (First)       (Middle)       (Last)
        (Full Name as shown re: Social Security Card)

        Name:
        (First)       (Middle)       (Last)
        (Other Name(s) used.)

        Address:
        Telephone No.:
        Social Security No.:

        To further assist you, I give you the following additional
    information:

        Date of Birth
        Place of Birth

        I would appreciate receiving a confirmation of my registration and
    update(s) as to the status of the passage of this bill/measure. I can
    be contacted at the above telephone number or you may write to me at my
    current home address listed above.
        Thank you for your assistance and anticipated cooperation.
                Sincerely,
                                          Social Security Recipient and
                                       U.S. Senior Citizen and Taxpayer

        Chairman Shaw. Thank you, Ms. Daniels. Ms. Severyn.

      STATEMENT OF BETTY SEVERYN, MEMBER, BOARD OF DIRECTORS, AARP

        Ms. Severyn. Thank you, Mr. Chairman. I am Betty Severyn, a
    member of the AARP board of directors.
        AARP appreciates this opportunity to present its views
    regarding misleading mailings targeted at seniors. We have had
    a longstanding interest in the issue from both the legislative
    and consumer perspectives.
        We remain deeply concerned that misleading mailings are
    often targeted at older persons, many of whom have modest
    incomes. These mailings exploit the sensitivities and
    vulnerabilities of older Americans, their faith in their
    government, and their concern about finances.
        AARP believes that all citizens should be educated about
    and protected from fraudulent and misleading mail.
        The work of this Committee and others in Congress led to
    legislation restricting certain mailings, particularly those
    that used words and symbols associated with the Social Security
    Administration and the Health Care Financing Administration,
    now called the Centers for Medicare and Medicaid Services.
        My oral testimony will highlight three of the five
    categories of solicitation to seniors that we describe in our
    written statement, which you have.
        Thanks to the penalties and restrictions imposed by
    legislation, older recipients now receive fewer mailings from
    groups that use official-looking material to confuse them about
    Social Security and Medicare.
        Some groups that market questionable products, such as a
    gold-embossed Social Security card, were shut down by the
    Federal and/or State governments. Yet many others remain in
    business.
        For example, one group markets a guide to retirement that
    contains the same information Social Security provides free of
    charge.
        These organizations operate within the law, and it is up to
    consumers to avoid suspicious groups and their activities.
        AARP is particularly disturbed by the proliferation of cold
    lead mailers and look-alike groups that prey upon unknowing
    older Americans.
        Representatives from companies use the completed
    information card to coerce older Americans to buy certain
    products, such as living trusts and long-term care insurance.
        One company consistently used AARP's name in materials
    designed to market living trusts. We filed a successful lawsuit
    with the Florida Attorney General's Office against this Texas
    company, but many other companies continue to mislead seniors.
        Fraudulent mailings can be stopped, but we understand that
    misleading ones are difficult to correct.
        As you know, for about 20 years, groups have sent
    misleading mailings about the so-called Social Security notch,
    and you have heard a lot about that today.
        [Laughter.]
        Lately we have begun receiving more inquires regarding
    contributions for notch legislation or a notch victim registry.
    So we have been getting mailings from our members.
        I won't go any further into the notch, since you have had
    quite a bit of that today.
        The association has taken extraordinary steps to educate
    its members and the public at large about differentiating
    between legitimate offers and misleading or fraudulent ones. We
    do try to educate our members.
        Our goal is to reduce fraud and deception in mail
    solicitations. Through our publications and printed materials,
    we have alerted people to specific mailings and the need to
    scrutinize the solicitations they receive.
        In the past 5 years, we have launched campaigns against
    telemarketing and charity fraud based on research examining
    older victims' behavior and perceptions. We have partnered with
    law enforcement and consumer protection agencies and warned
    consumers through public services announcements, educational
    workshops, and other program activities.
        You members of the Committee and we all know that some
    groups are willing to make money at the expense of the
    vulnerable and uninformed. AARP believes that today's hearing
    can help educate everyone regarding some of the misleading
    mailings they receive.
        Those who solicit funds from older Americans in a
    misleading way need to be stopped. We stand ready to work with
    interested Members of Congress, in a bipartisan manner, to
    enact such changes. We also encourage the Social Security
    Administration's Inspector General to continue it's vigorous
    investigation of these groups.
        We are extremely concerned and would appreciate and welcome
    anything that you all could do. And we are willing to work with
    you to obtain some activity that would help stop these
    misleading mailings.
        Thank you, Mr. Chairman.
        [The prepared statement of Ms. Severyn follows:]

      Statement of Betty Severyn, Member, Board of Directors, AARP

        AARP appreciates this opportunity to present its views regarding
    misleading mailings targeted at seniors. The Association has had a
    longstanding interest in the issue from both the legislative and
    consumer perspectives. We remain deeply concerned that some deceptive
    and misleading mailings are targeted towards older persons, many of
    whom have modest incomes and cannot afford to waste their limited
    resources. Many of these mailings exploit the sensitivities and
    vulnerabilities of older Americans, their faith in the government, and
    their concern about finances.
        AARP believes that all citizens should be educated about and
    receive adequate protection from fraudulent, deceptive and misleading
    mail. We commend the subcommittee for revisiting the issue. The work of
    this committee and others in Congress led to legislation restricting
    certain mailings, particularly those that used words and symbols
    associated with the Social Security Administration (SSA) and the Health
    Care Financing Administration (now called the Centers for Medicare and
    Medicaid Services).
    Deceptive Mailings
        Since legitimate businesses and organizations use mass mailings, it
    is essential to strike a reasonable balance between controlling
    fraudulent mailings and limiting the right of these organizations to
    conduct business. Based on our members' letters and phone calls as well
    as information we have received from others, we have categorized the
    deceptive mailings older Americans receive as follows:

               Mailings using look-alike envelopes that can mislead
            people into believing the sender is a government agency. They
            also contain documents bearing official looking symbols or
            words;

               Letters soliciting a fee for services that the
            government may provide for free or a reduced charge;

               ``Cold lead mailers'' which offer seniors
            information about subjects, such as health or life insurance,
            if the individual provides personal information. The personal
            information is then forwarded to a marketing organization that
            rents the list of respondents to salespeople or agents trying
            to sell items;

               Solicitations that imply an affiliation with an
            existing organization or ones that mislead the recipient by
            using a name similar to another organization; and

               Misleading mailings on legislative issues, such as
            those promising financial settlements or action on legislation
            that is not receiving much congressional attention.

        Mailings from groups trying to confuse elderly recipients about
    their Social Security and Medicare benefits by using official looking
    material have been reduced by the penalties and other restrictions
    imposed through legislation passed in 1990 and 1995. Some groups
    marketing questionable products, such as a gold embossed Social
    Security card, have been shut down by the federal and/or state
    governments. Yet many other companies remain in business. For example,
    one group promises a guide to retirement that contains the same
    information SSA provides free of charge. Others charge to obtain a
    Social Security number for a newborn although SSA provides the service
    free. These groups operate within the law; it is up to consumers to
    find out about a suspicious organization and its activities.
    Cold Lead Mailers and Those with Misleading Affiliations
        AARP is disturbed by the proliferation of cold lead cards and look-
    alike groups that prey upon unknowing older Americans. Over the years,
    we have learned about representatives from companies trying to coerce
    older Americans to buy certain products, such as living-trusts and
    long-term care insurance. One company consistently used AARP's name in
    materials designed to market living trusts. We explained to those who
    contacted us that living trusts are part of the complex process of
    estate planning and they should be alert to misrepresentations of our
    or any organization's name. We advised them to contact their local
    consumer protection agency if they were suspicious of any solicitation.
    Ultimately, we filed a lawsuit with the Florida Attorney General's
    Office against this company's misuse of our name in selling living
    trusts.
        Other companies continue to wreak economic havoc in seniors' lives.
    We recently heard about an agent who claimed to be affiliated with AARP
    and persuaded one of our members to liquidate some holdings to buy an
    annuity they were promoting. She sold some mutual funds, had $55,000 in
    capital gains, and received a large bill from the Internal Revenue
    Service. The company and the agent were one of several who take
    advantage of the limited financial knowledge that some older people
    have.
        We also received a copy of the attached solicitation from the
    National Association of Retired Persons encouraging people to pursue
    ``their legal right as a U.S. citizen to receive all the information
    available'' to them. However, they had to complete ``this request form
    within 5 days.'' After mailing in the form the respondent would receive
    a call from someone selling burial insurance. We have attached a sample
    of some of these solicitations.
    Notch Mailings
        For around 20 years, groups have sent misleading mailings about the
    so-called Social Security ``notch.'' Some organizations went out of
    business, others found alternative fundraising issues, but some persist
    in perpetuating misinformation for financial gain. AARP has begun
    receiving more inquiries regarding mailings soliciting funds for notch
    legislation or for a notch victim registry. Yet, those born from 1917-
    21 (or 1926) are receiving the proper benefit amount. They are misled
    to think they get less than they deserve because their dollar benefit
    amount is compared to those born from 1912-16. The 1912-16 group
    received a windfall because of an error made in 1972. If the mistake
    had not been corrected in 1977, the Social Security trust funds would
    have faced greatly increased financial difficulty.
        Numerous inquiries come from our members, or in some cases their
    children, in regard to these notch solicitations. For example, one
    member asks, ``whether the Senior Citizens League is registered with
    the Better Business Bureau? They're asking for money--I figured the
    government wouldn't ask for money.'' Another wrote: ``My wife (born in
    1925) has received at least a dozen of these during the past year. Can
    you enlighten us? Is it a scam? They always ask for money.''
    Unfortunately, while these letters are misleading, they are not
    illegal.
        We respond by correcting the misinformation on the notch and
    encouraging them to be as informed as possible when deciding to
    contribute to any organization. We suggest that they request a copy of
    the group's financial statement before contributing. We hope that this
    advice will be helpful for all the mail they receive, not just
    solicitations targeted at older people.
    AARP Educates Its Members
        The Association has taken extraordinary steps to educate its
    members and the public at large about differentiating between
    legitimate offers and misleading, deceptive or fraudulent ones. Our
    goal is to reduce fraud and deception in mailed solicitations. Through
    our publications and printed materials we have alerted people to
    specific mailings and the need to scrutinize the solicitations they
    receive. In the past five years, we have launched campaigns against
    charity and telemarketing fraud based on research examining older
    victims' behavior and perceptions. We have partnered with enforcement
    and consumer protection agencies and warned consumers through public
    service announcements, educational workshops and other program
    activities.
        We have taken a proactive stance where appropriate. In tandem with
    the Attorney General's office in numerous states, we gathered
    information and warned consumers about potential fraud. We successfully
    brought suit against the previously mentioned organization that
    attempted to confuse people by selecting a name close to ours. We have
    also participated in Operation Mailbox, a coordinated effort undertaken
    with the Federal Trade Commission (FTC) and federal and state law
    enforcement agencies to identify fraudulent mail. (The Operation
    Mailbox campaign is described in the appendix).
    Conclusion
        Unfortunately, some groups are willing to make money at the expense
    of the vulnerable and uninformed. AARP believes that today's hearing
    can help educate everyone regarding some of the misleading and
    deceptive mailings they receive. We urge Congress to determine whether
    additional restrictions can be placed on those who solicit funds from
    older Americans in a misleading or deceptive way, as well as those who
    try to sell them products that they do not need or want. We also urge
    the Social Security Administration's Inspector General to continue
    vigorous investigation of these groups. Of course, AARP will continue
    to keep our members informed, partner (where appropriate) with those
    who seek to expose these organizations, and educate the public about
    the attributes of a knowledgeable consumer.

    Appendix: Flooding Older Americans Homes and Operation Mailbox

        In December 1997, as part of AARP's Anti-Telemarketing Fraud
    campaign, we placed an article in our monthly publication, The
    Bulletin, that asked members to check their own mail for cards and
    letters that looked suspicious or that carried claims that the
    recipient was a ``guaranteed contest winner.'' We also requested that
    readers watch for mail that offered ``no risk'' investments, get-rich-
    quick schemes, or solicitations for dubious charities, as well as mail
    that encouraged the recipient to immediately call a 1-800 or 1-900
    number. We asked readers to submit mailings to the Association so law
    enforcement experts could review them for possible legal actions.
        Throughout the following six months, AARP members submitted over
    10,000 pieces of mail. Dozens of members sent envelopes and boxes
    stuffed with solicitations. Over and over our members asked the same
    questions: ``Is this a legitimate solicitation?'' and ``Can you help me
    get the money I've won or help me get my money back?''
        AARP volunteers and staff spent three months opening, reading and
    sorting the mail sent in by our members. In cooperation with the FTC
    and federal and state agencies that formed the Operation Mailbox task
    force, AARP identified more than 5,000 pieces of mail that might
    require legal action. An outside firm was hired to code the pieces
    under the system used in the Consumer Sentinel database. Consumer
    Sentinel data is used by subscribing law enforcement agencies to
    identify and investigate suspected fraudulent businesses or
    individuals.
        Based in part on the 5,000 pieces of mail that AARP contributed to
    Operation Mailbox, and at no cost to law enforcement, the FTC/Operation
    Mailbox strike force announced over 150 federal and state enforcement
    actions against the sponsors of these mailings.
        [The attachments are being retained in the Committee files.]

        Mr. Johnson. [Presiding.] Thank you. We appreciate your
    testimony. Mr. Williams?

     STATEMENT OF DARRIN L. WILLIAMS, CHIEF OF STAFF AND COUNSEL,
     ARKANSAS OFFICE OF THE ATTORNEY GENERAL, LITTLE ROCK, ARKANSAS

        Mr. Williams. Thank you, Mr. Chairman, Mr. Matsui, members
    of the Subcommittee.
        My name is Darrin Williams. I am the chief of staff to
    Arkansas's Attorney General Mark Pryor.
        The attorneys general across the country and General Pryor
    would like to commend you and thank you for hold hearings on
    this timely issue.
        As all of you know, attorneys general across the country
    are on the forefront of consumer protection. Unfortunately,
    consumer fraud geared directly at seniors is a very big,
    growing industry in America. It has been estimated that nearly
    $40 billion are bilked from seniors each year.
        In Arkansas last summer, the slave reparations scam was
    implemented. Through the investigative efforts of the Postal
    Inspection Service, the Social Security Administration, and our
    office, we determined that nearly 20,000 people signed up. Over
    500 of those lived in Arkansas.
        After people learned of this bogus flyer, consumer
    complaints flooded General Pryor's office.
        One letter from an unsuspecting senior read: I answered
    every question asked to the best of my ability.
        Another said: I have been deceived. The attached flyer led
    me to believe that I was due $5,000.
        Yet another adult child of a senior who responded to this
    flyer wrote: My mother was born in 1918. Her hand shakes so
    that she has to rely on me to do her correspondence. She has
    received at least four of these flyers that I know of.
        Although the Senior Citizens League disavows any knowledge
    of these flyers, whomever is responsible for this sophisticated
    scam has the knowledge to skirt mail fraud laws. They have the
    knowledge and the ability to enact a grassroots program that
    distributes these flyers nationwide.
        We believe the Senior Citizens League did benefit from this
    hoax flyer.
        One responding senior to the slave reparations flyer said
    she received four solicitations from them after she responded.
    Some also contributed.
        Moreover, TREA has a huge asset by the list that built from
    this misleading flyer. We believe that is a benefit.
        Fortunately, we do not have any report of identify theft as
    a direct result of this flyer. However, once personal
    information is supplied, the con artist can act at his leisure.
    There is no timeframe on that.
        Unfortunately, our Social Security numbers now have become
    the cornerstone of identify theft. Scams such as the slave
    reparations act and the notch baby scam have targeted seniors,
    and this is extremely disturbing to attorneys general.
        These types of fraud prey upon our most vulnerable segments
    of society. Many seniors need every penny to live and to pay
    for expensive medications. These seniors are our parents and
    our grandparents. They deserve our protection.
        As America ages, the potential for these types of scams
    grow. In Arkansas, over a half million people are 60 years old
    and older. That represents 19 percent of our population. We
    have the sixth highest percentage of seniors in the country.
        Attorneys general know that the best protection against
    this type of fraud is education. An informed consumer is much
    less likely to be a victim of fraud.
        Attorneys general will continue to fight and continue to
    educate consumers as well as seniors. But realistically, while
    these precautions are good and will reduce the risk of identify
    theft and other frauds via misleading mailings, there is very
    little that seniors can do to stop this.
        The key to stopping or at least greatly reducing misleading
    mailings and identify theft lies in a combined strategy from
    the business community, credit reporting agencies, credit
    issuers, and Federal and State government.
        While Congress plays a major role in protecting seniors
    from consumer scams, one of the most important things that the
    Federal Government can do and be cognizant of is not to preempt
    State laws that attorneys general use to protect seniors.
        State AGs sometimes are able to move more quickly and have
    greater flexibility than Congress. They often are able to
    respond to rapidly changing scams in a very efficient and fast
    manner.
        When acting in concert, like we did against Publishers
    Clearinghouse and others, the State AGs are a powerful and
    swift force.
        Unfortunately, the schemes and scams are as endless as the
    con artist's imagination. Our seniors, our greatest generation,
    need and deserve our protection.
        Through the combined efforts of local, State, and Federal
    officials, and with the help and support of businesses, civic
    organizations, and consumer groups, all of us together can
    combat misleading mailings, and we can combat the con artists
    that prey on our parents and our grandparents.
        Thank you very much.
        [The prepared statement of Mr. Williams follows:]
     Statement of Darrin L. Williams, Chief of Staff and Counsel, Arkansas
             Office of the Attorney General, Little Rock, Arkansas
        Mr. Chairman, Mr. Matsui, Members of the Subcommittee, my name is
    Darrin Williams. I am the Chief of Staff and Counsel to Arkansas
    Attorney General Mark Pryor. On behalf of General Pryor and attorneys
    general all across this country, I would like to thank and commend you
    for holding hearings on such a timely issue as misleading mailings
    targeted to seniors.
        As you all know, attorneys general are on the front lines battling
    all types of consumer fraud. Unfortunately, fraud committed against
    overly trusting seniors is one of the biggest growth industries in
    America. It has been estimated that seniors are bilked out of nearly
    $40 billion per year. A significant portion of this amount is the
    result of deceptive mailings aimed specifically toward seniors. Whether
    it is a sweepstakes promotion that leads consumers to believe they have
    won some sort of prize, usually monetary, or a solicitation arriving in
    a familiar, government-styled envelope with an official-looking seal,
    seniors are being inundated with confusing and often illegal
    solicitations.
        In Arkansas, last summer, senior African Americans throughout our
    state were targeted with a flyer purporting that the government was
    refunding money from the Slave Reparations Act to any living person of
    ``Black ethnic race'' born prior to 1928. This flyer was distributed in
    Black churches, senior communities, nursing homes, and, in some cases,
    delivered in the mail. It promised senior recipients $5,000 if they
    supplied their name, address, phone number, Social Security number, and
    date of birth to the National Victim's Registrar, T.R.E.A. Senior
    Systems League, P.O. Box 96472, Washington, DC 20090-6472. The flyer
    stated that the $5,000 in reparations might be attached to the
    recipient's Social Security benefit check or issued in one lump sum.
        After repeated inquiries about the legitimacy of this flyer,
    Attorney General Pryor opened an investigation. We quickly realized
    that this scam was being implemented throughout the country,
    particularly in southern states. Through the combined investigative
    efforts of the Postal Inspection Service, the Social Security
    Administration, and our office, we determined that over 20,000 people
    responded to this misleading flyer soliciting personal identifying
    information. We discovered that nearly 500 respondents resided in
    Arkansas. The confusion caused by the flyer hoax was immediately
    apparent. Many recipients sent photocopies of personal identifying
    documents, including Social Security cards, driver's licenses, school
    records, military papers, and birth certificates. Believing the flyer
    to be a legitimate notice of a government benefit, one person actually
    sent his original birth certificate, along with a completed flyer.
        After people learned that this flyer was a fraud, formal complaints
    began to pour in to General Pryor. One letter from an unsuspecting
    victim read, ``I answered every question asked to the best of my
    ability.'' Another said, ``I have been deceived, the attached flyer
    mislead (sic) me to believe I could have actuality (sic) been due
    $5,000, if for no other reason than being born before 1927.'' An adult
    child of a recipient of this unscrupulous flyer wrote, ``My mother was
    born in 1918 and her hands shake so much she relies on me to handle her
    correspondence. She has at least four of these things that I know of.''
        Our investigation led us to TREA Senior Citizens League because it
    was to their post office box that respondents were asked to send their
    personal identifying information. The League is a non-profit
    organization in Alexandria, Virginia, and is an independent subsidiary
    of the Retired Enlisted Association. They denied having anything to do
    with the flyers, and thus far, our investigation supports their claims.
    However, they did take this information and built a database of
    thousands of seniors' personal identifying data, which they had
    acquired through the response to these flyers. Moreover, this
    information was used by the League to produce mailers to each
    individual responder providing additional information about the League,
    along with a solicitation for a contribution.
        Fortunately, we do not yet have any reports of identity theft or
    other scams occurring as a direct result of this bogus flyer; however,
    once this type of information is provided, a con artist can act at
    leisure. This is why it is so important to educate everyone about the
    dangers of giving out personal identifying information, particularly
    one's Social Security number.
        Almost 70 years ago, Social Security numbers were established to
    maintain an accurate record of the earnings of working people. Now, the
    use of our Social Security numbers has become so pervasive that they
    are used not only to identify us to our employers, but also to our
    physicians, our schools, for our bank accounts, and credit card
    numbers. Your nine digits have become your de facto identifier. Anytime
    we are required to specifically identify ourselves, those nine digits
    are demanded.
        The Social Security number is the cornerstone of identity theft. In
    our computerized, information-driven world, the theft of one piece of
    personal information, such as a Social Security number or driver's
    license, can lead to out-of-pocket liability, plus hours of frustrating
    attempts to clean up credit reports, cancel accounts, and to endless
    explanations to prospective creditors. There are now more than 700,000
    reported cases of identity theft every year in the United States,
    twenty-eight times as many as were reported approximately 10 years ago.
        Often con artists use bits and pieces of legitimate information to
    lure their victims. This was true of the Slave Reparations Act scam. In
    the post-Civil War period, Congress did vote to provide former slaves
    with ``forty acres and a mule'' as a form of redress for their years in
    slavery. However, President Andrew Johnson vetoed the bill. Also
    contributing to the success of the Slave Reparations scam were news
    reports that many Black leaders and organizations had either called
    for, or introduced, legislation to open discussions about reparations.
    To entice their victims, the perpetrators of the Slave Reparations Act
    scam used an iota of factual information, coupled with the strong
    desire among many in the African-American community to at least discuss
    the effects and possible compensation for the enslavement of their
    ancestors.
        Scams such as this Slave Reparations Act, the ``Notch Baby'' scam,
    and others that target our seniors are extremely disturbing. These
    types of fraud prey upon one of the most vulnerable segments of our
    society. Many seniors need every penny to pay for essentials and for
    medications. These seniors are our parents and grandparents. We owe
    them the protection they deserve.
        As America ages, the potential targets of senior scams grow. In
    Arkansas, almost a half million people are sixty years old or older.
    This represents nineteen percent of our population, giving us the
    sixth-highest percentage of seniors in the country. Sadly, nearly one-
    third of Arkansas seniors live below the poverty level or are
    classified as ``near poor.'' The Arkansas Delta region has had high,
    even extreme, rates of poverty for decades. It is a generally more
    rural area with a higher proportion of African-American residents than
    the state as a whole. Given our demographics of large populations of
    poor and senior communities, Arkansas is even more susceptible to
    misleading solicitations targeted toward seniors. This is one reason
    Arkansas was one of the first states to adopt enhanced-penalty statutes
    for consumer fraud targeted toward older consumers.
        At the beginning of the 20th century, there were only three million
    older Americans. Today, at the dawn of a new century, there are 34.5
    million citizens in our nation over the age of 65. This is about one of
    every eight Americans. And nationally, the older population will
    continue to grow in the future and will inflate significantly as the
    ``baby boom'' generation reaches 65. By 2030, there will be about 70
    million older persons living in the United States, more than twice as
    many as today. They will make up 20 percent of our population.
        Through the tough times and the times of prosperity in the last
    century, it was our seniors who raised families, strengthened our
    economy, defended our nation, and reaffirmed our deepest values. They
    are truly the ``Greatest Generation.'' To honor the immeasurable
    contributions of older Arkansans, and to help them lead independent,
    active, and fulfilling lives, Attorney General Pryor remains committed
    to using the programs and services of his office to enhance their
    quality of life and to protect them from schemes and scams that target
    this population.
        Attorneys General know that the best protection is education. An
    informed consumer is much less likely to be a victim of fraud.
    Realizing this and realizing that our seniors are being preyed upon,
    General Pryor has instituted a ``Senior Tour'' program. He has taken
    his office on the road all over the state of Arkansas to speak at
    senior centers, retirement communities, churches, and civic groups with
    large senior memberships. This tour is aimed at educating our seniors
    to prevent them from becoming victims of consumer fraud. General Pryor
    has also produced a consumer publication geared toward seniors,
    Consumer Issues: A Guide for Senior Citizens in Arkansas. At every stop
    on the tour, there are seniors who have been victimized. Second only to
    telemarketing fraud, deceptive and misleading solicitations, such as
    the Slave Reparations Act scam, dominate much of the conversation.
        When the Slave Reparations Act scam hit Arkansas, General Pryor
    launched a massive education and information effort, aimed at
    preventing seniors from being victimized. We produced consumer alerts
    (attached, Exhibit C) warning people of the scam and directing them not
    to participate in the hoax. We joined forces with the regional Social
    Security Administration, state NAACP, African-American legislators,
    ministers, and media outlets to help get the message out that the Slave
    Reparations Act flyer was a cruel scam. Additionally, we sent a letter
    to each of the 463 people who had responded to the flyer (attached,
    Exhibit D), informing them that it was a hoax and encouraging them to
    protect their personal information.
        Attorneys General across America distribute similar warnings as we
    do. Although there's no law against private use of a Social Security
    number, we encourage consumers to take steps to protect their personal
    information and to know what actions to take if their identity is
    stolen. Some precautions include the following:

               Limit the amount of information you carry with you
            in your wallet or purse.

               Guard your Social Security number. You have to
            provide your Social Security number for employment and tax
            purposes, but for most other situations, ask to use another
            number instead.

               Watch your passwords and PINs. Never use your Social
            Security number, birth date, or other obvious numbers.

               Check your credit report. The sooner you notice
            irregular transactions, the sooner you can clear up the
            problem.

               Alert the credit bureaus first if you find that
            you've been scammed. Then contact the police, banks, and credit
            card companies.

               If your wallet has been stolen, get new checking and
            savings accounts. Have new credit cards issued and old accounts
            noted as ``closed at customer's request.'' Obtain a new ATM
            card with a new PIN and account numbers.

               To reduce the number of unsolicited credit offers
            you receive, contact the three credit reporting bureaus and
            tell them you do not wish to receive pre-approved credit
            offers. You can do this with a single call to 1-888-5OPT-OUT.
            If you continue to receive offers, be sure to shred them.

               Get off junk-mail and phone-solicitation lists by
            signing up for the Direct Marketing Association's Mail
            Preference and Telephone Preference Services. In those states
            that have a Do Not Call list (like Arkansas), sign up for these
            services to prevent telemarketing fraud and to protect your
            privacy.

        Attorneys General will continue to fight for consumers,
    particularly seniors. They will continue to try to educate consumers.
    But realistically, while the precautions above are good and will reduce
    the risk of becoming a victim of identity theft, consumers do not have
    ``real'' power to stop it. The key to stopping, or at least to greatly
    reducing identity theft, lies in a number of combined strategies that
    must be implemented not only by consumers, but also by businesses,
    credit reporting agencies, credit issuers, and government agencies.

        These strategies include:

        Businesses

               Limit data disclosure. For example, a person's
            Social Security number does not necessarily have to be printed
            on staff badges, time sheets, paychecks, invoices, etc.

               Adhere to responsible information-handling
            practices, including proper document disposal (shredding).

               Train staff properly about how to handle sensitive
            information, and spot check to ensure compliance.

               Include responsible information-handling practices
            in business-school courses, even in schools when children are
            learning computer basics.

        Credit Reporting Agencies

               Provide consumers with a free credit report annually
            upon request in all states.

               Provide the ability for consumers to ``freeze''
            credit files, or as in Vermont, at least require affirmative
            consent of subjects before any credit reports are issued to
            customers of reporting agencies.

               Always give the consumer a copy when a customer
            obtains credit information about him or her.

               Conduct profiling and provide notice to a subject
            when unusual action is discovered.

               Demand that reporting agencies must be user-
            friendlier when victims call. A victim should be able to speak
            with a ``live'' person. Also, victims need one-stop shopping so
            they do not have to repeat attempts to clean up their credit
            history for each agency.

        Credit Issuers

               Require credit issuers to be more diligent in
            reviewing credit applications. This includes conducting better
            identity verification, particularly when the address is
            reported as changed.

               Improve identity-checking procedures for ``instant''
            credit, an option that is favored by identity thieves.

               Put photographs on credit cards.

               Reduce the number of pre-approved offers of credit
            mailed to consumers, and print the opt-out phone number
            prominently on all such offers.

        Government

               Congress should strengthen the powers of the Social
            Security Administration giving them more teeth to deal with
            misuse of Social Security numbers.

               Congress can also strengthen enforcement of the Fair
            Credit Reporting Act.

               A clearinghouse should be maintained in each state
            for lost and stolen driver's licenses.

               Social Security numbers and other sensitive
            information from public records should be redacted, especially
            those available on the World Wide Web.

        The success of the Slave Reparations flyer to attract many seniors
    to give out personal information simply highlights how vulnerable
    seniors are to exploitation by those utilizing deceptive, misleading,
    and false information. Unfortunately, the schemes and scams are as
    endless as a con artist's imagination. In fact, while I was preparing
    for my testimony before you today, several cities in Arkansas were
    being targeted by a Black Heritage Tax scam.
        This scam is just the latest version of the Slave Reparations Act
    scam. In this version, descendants of slaves are led to believe that
    they are entitled to more than $40,000. They are asked to pay a fee to
    have an Internal Revenue Tax form filled out by an ``expert,'' but the
    truth is that there are no provisions in the tax laws regarding such
    claims and any fee paid is simply money wasted. It's despicable that
    some con artists are stealing from innocent people by charging fees to
    prepare what they know to be baseless claims. Unfortunately, this is a
    reality today.
        Our seniors, our greatest generation, need and deserve our
    protection. Through the combined efforts of local, state, and federal
    officials, and with the help and support of businesses, civic
    organizations, and consumer groups, all of us together can combat the
    misleading mailings and the con artists who prey upon our parents and
    grandparents.

    Exhibit A
    August 2000
    ATTENTION
    SENIOR CITIZENS

        If you are a ``NOTCH-B-AB--Y'', meaning you were born in the U.S.
    between 1911 and 1926, this news is for you. You may be entitled to
    receive $5,000.00 due to inequities in your social security payments.
    There is a measure attempting to be passed, but you must be registered
    in order to receive it. See the following article:
        Some 11 million americans born from 1917 to 1926 will receive their
    Social Security benefits under a bill proposed in the Senate. The bill
    would give ``Notch Babies'' the option of receiving higher monthly
    payments for 5 years or a $5,000.00 settlement spread over 4 years.
    These Americans have been receiving a lower social security amount than
    others.
        Social Security will contact ``Notch Babies'', so they should write
    to:

        National Victims Register
        TREA Senior Citizens League
        P.O. Box 96472
        Washington, D.C. 20090-6472

        TREA is a senior citizen's organization. You will need to provide
    the following in order to register.

              Name:
              Address:
              Phone:
              SS:

    Exhibit B
    August 10, 2000
        Any black person who is age 73 and older. Anyone born 1927 or
    earlier is entitled to a $5,000.00 payment from the Government.
        These persons need to send their:

        Name
        Address
        Phone
        S.S.
        Date of Birth

        To:
        Nation Victims
        TREA Seniors System League
        P.O. Box 96472
        Washington, D.C. 20090-6472

        You will not get it unless you apply for it.

    Exhibit C
    [GRAPHIC] [TIFF OMITTED] T5753A.025

                                   Exhibit D

    February 8, 2001

    NAME
    ADDRESS
    CITY,
    STATE ZIP

        Dear:

        Based on a recent investigation which originated in my office, your
    name was provided as a possible victim of consumer fraud as it relates
    to a bogus flyer that was circulating about a possible monetary
    settlement in connection with the ``The Slave Reparation Act''.
        The investigation results, thus far, are as follows:

               The identified organization was erroneously
            collecting information in a well thought out membership effort
            to defraud African Americans by thinking they would receive a
            $5,000 check by simply returning a completed flyer; which
            included the name, address, city, state, zip, home phone
            number, social security number, and date of birth.

               I am sad to report that this is simply not true. Our
            investigation is still ongoing, so there is little more I can
            share at this time, other to let you know that over 20,000
            citizens of the United States have responded to his scam.

        As your Attorney General, I wanted to contact you to let you know
    that protecting your social security number, your date of birth, and
    all of your home contact information should remain at the highest of
    confidentiality and should never be shared unless it is unavoidable and
    only to companies or businesses you are familiar with.
        I have enclosed a copy of the Consumer Alert issued by my office as
    well as a tip sheet as it relates to protecting your social security
    number. I hope that you will find this information helpful.
        Should you have additional questions, please do not hesitate to
    contact me at the toll free number listed below. Also, please share
    this information with your friends and family in order to get the word
    out.

                Sincerely,
                                                           Mark Pryor
                                            Arkansas Attorney General
    Enclosure:

        Chairman Shaw. [Presiding.] Thank you, sir.
        We appreciate the testimony of all three of you. And I know
    that each and every one of us would like to question you.
    However, we have run out of time in this room.
        So we will allow the members 10 days to provide questions
    to the staff, which will be forwarded to you. And hopefully,
    you all can give us some of your answers.
        We appreciate your testimony and your individual concern.
    And thank you very much for being here.
        This Committee stands adjourned.
        [Questions submitted from Chairman Shaw to Ms. Severyn, and
    her responses follow:]

                                                                   AARP
                                                   Washington, DC 20049
                                                     September 12, 2001
    The Honorable E. Clay Shaw, Jr.
    Chairman, Subcommittee on Social Security
    House Committee on Ways and Means
    2408 Rayburn House Office Building
    Washington, DC 20515

        Dear Mr. Chairman:

        I am writing in response to your August 30 letter to AARP's
    witness, Mrs. Betty Severyn. Your letter seeks answers to questions
    raised by the testimony of AARP and others at the July 26 hearing
    before your subcommittee on misleading mailings. You have raised some
    excellent points in your inquiries to which AARP is pleased to respond.

        Question 1. When questioned during the hearing as to what groups
    rented or purchased their mailing lists, Mr. Zabko mentioned that AARP
    had rented TSCL's mailing list. Is this an accurate statement? Would
    you elaborate? In order to invite potential members to join the
    Association, AARP acquires names for mailings from various sources,
    including public records and large compiled lists of people believed to
    be at least 50 years old. These mailing lists may generally be used for
    only one mailing, and then must be returned to their owners. AARP does
    not maintain or add the names on these rented lists to AARP's own
    member list.

        AARP has maintained records of the entities from which it has
    rented mailing lists since 1989. These files do not contain records of
    any rentals from The Retired Enlisted Association (TREA) or The Senior
    Citizens League (TSCL). However, if TREA/TSCL mailing lists were
    marketed under different names, or were included in other compiled
    lists, it is possible that AARP may have unknowingly rented the TREA/
    TSCL lists.

        Question 2. In your testimony, you listed categories of misleading
    mailings such as mailings that look as though they are sent by the
    government, cold lead mailers, and mailings on legislative issues, etc.
    Of the misleading mailings you mentioned, would you tell me which ones
    appear to be the most egregious? Why? Do you have any sense of the
    volume of these mailings, how many seniors received misleading mailings
    each year on average, by category? Based on the letters and phone calls
    we receive, cold lead mailers and letters that appear to be sent by a
    government agency are the categories of misleading mailings that are
    most egregious. Many older Americans do not realize that providing
    personal details on a card in order to receive information,
    particularly when the card is included in a mailing, can generate sales
    calls and visits. Look-alike letters make money for the mailer by
    capitalizing on the faith that older people place in their government.
    Frequently, the service or information described in the mailing
    requires a fee to be paid to the mailer, although similar information
    can be obtained from the government without a fee. We are unable to
    provide data regarding the relative frequency with which older
    Americans receive these types of mailings.

        Question 3. You talk about the fact that notch mailings have been
    around for about 20 years. These mailings misinform seniors about the
    issue. Can you tell us how these organizations get the names and
    addresses of individuals that fit into the so-called notch category? We
    have not done extensive research on how ``notch'' mailers get the names
    and addresses of individuals who some characterize as affected by the
    ``notch''. Many states sell drivers' license information and many
    organizations sell their mailing lists to other groups.

        Question 4. You stated that you have informed individuals who
    contact your office regarding the notch issue to request that group's
    financial statement before contributing. Are your members doing this?
    What has been the result? We do not have statistics regarding the
    extent to which our members are requesting financial statements from
    groups sending out ``notch'' letters. We know that many callers are
    dissuaded from sending money when we inform them about the ``notch'',
    the limited lobbying that these organizations do, and indicate that
    ``notch'' legislation is not likely to pass.

        Question 5. You stated that AARP filed a lawsuit with the Federal
    Attorney General's Office against a company that misused AARP's name in
    selling living trusts. Has AARP filed any other lawsuits against
    companies that are misleading seniors with their mailings? If so,
    please provide the names of those companies and the results of any
    court action. Although AARP has not filed any other such lawsuits,
    attorneys with its affiliate, the AARP Foundation, are co-counsel in a
    lawsuit, Navarro, et al. v. Special Data Processing, d/b/a, National
    Magazine Exchange, No. 01-20655 PVT (N.D. Cal.), involving misleading
    mailings to older consumers. This case involves allegations that
    National Magazine Exchange sends mailings to consumers with a toll free
    number to inquire about the status of their sweepstakes entry. Many of
    the recipients of these mailings did not enter any sweepstakes. When a
    consumer calls the toll free number, he or she is pressured to purchase
    magazines. National Magazine Exchange is based in Clearwater, Florida.
    The parties are engaged in discovery. The case was originally filed in
    state court in Santa Clara County, California, and then removed to the
    Federal district court for Northern California. Plaintiffs are
    attempting to have the case transferred back to state court.

        Question 6. You stated that AARP tries to educate their members
    about misleading mailings by launching education campaigns? Please
    provide further details as to what type of educational workshops and
    program activities you conduct? Beginning in 1996 AARP launched a
    nationwide campaign to counter fraudulent telemarketers. Using the
    slogan ``Don't fall for a telephone line,'' AARP engaged in a drive to
    educate consumers regarding ways to avoid falling prey to fraudulent
    telemarketers. The campaign also alerted consumers to the fact that
    fraudulent telemarketers were criminals and were not just playing
    pranks. These slogans came into being after AARP qualitative research
    revealed that although older consumers knew telemarketing fraud was
    wrong, they found it hard to believe that it was a crime. Our research
    suggested that older consumers must be convinced that fraudulent
    telemarketers are criminals before they will exercise greater caution.
        In addition to distributing a variety of brochures, flyers, magnets
    and the like, AARP produced Public Service Announcements and video news
    releases on the subject that were disseminated to media outlets around
    the country. While some of the printed material was mailed to
    consumers, the majority was distributed face-to-face through a series
    of educational workshops. These workshops, some held in conjunction
    with local law enforcement, were a means to ``deputize'' consumers as
    ``fraud fighters.'' At the end of the 2 day or full-day session, those
    in attendance were asked to inform others in their community about how
    to prevent telemarketing fraud. Also, we recently produced and aired a
    video news release on deceptive mailings that builds upon this hearing.
    To date, the news release has been broadcasted on over 100 television
    stations.

        Question 7. In your testimony, you stated that AARP cooperated with
    the FTC and Federal and state agencies to form the Operation Mailbox
    task force. As a result, AARP identified more than 5,000 pieces of mail
    that might require legal action. Did AARP identify the prevalence of
    certain types of misleading mailings? What did you find? You stated
    that the FTC/Operation Mailbox strike force announced over 150 federal
    and state enforcement actions against the sponsors of the mailings.
    What actions were taken? AARP has taken extraordinary steps to educate
    our members and the public at large as to how to differentiate between
    legitimate offers and misleading, deceptive or fraudulent ones. Our
    goal is to reduce fraud and deception in telemarketing and mailed
    solicitations. As part of this mission, AARP has worked in tandem with
    the state Attorneys General, to gather information and warn consumers
    about potential fraud.
        Additionally, we were active participants in Operation Mailbox.
    Operation Mailbox was a coordinated effort undertaken with the Federal
    Trade Commission (FTC) and federal and state law enforcement agencies
    to identify fraudulent mail.
        In December 1997 as a function of the AARP Anti-Telemarketing Fraud
    campaign, we placed an article in our monthly publication, The
    Bulletin. The article asked members to check their own mail for cards
    and letters that looked suspicious or that carried claims that the
    recipient was a ``guaranteed contest winner.'' We also requested that
    they watch for mail that offered ``no risk'' investments, get-rich-
    quick schemes, or solicitations for dubious charities as well as mail
    that told the recipient to immediately call a 1-800 or 1-900 number. We
    asked that such mailings be forwarded to the Association. We told our
    members that law enforcement experts would be reviewing the mail for
    possible legal actions.
        Throughout the next 6 months, AARP members submitted over 10,000
    pieces of mail. Dozens of members sent envelopes and boxes stuffed with
    solicitations. Over and over our members asked the same questions; ``Is
    this a legitimate solicitation?'' and ``Can you help me get the money
    I've won or help me get my money back?''
        Subsequently, for more than 3 months AARP volunteers and staff
    opened, read and sorted the mail sent in by members. In cooperation
    with the FTC and federal and state agencies, which formed the Operation
    Mailbox task force, AARP identified more than 5,000 pieces of mail that
    might require legal action. An outside firm was hired to code the
    pieces under the system used in the Consumer Sentinel database.
    Consumer Sentinel data is used by subscribing law enforcement agencies
    to identify and investigate suspected fraudulent businesses or
    individuals. While the pieces of mail covered a wide variety of
    schemes, sweepstakes-type solicitations were identified as a prime area
    of concern.
        Based in part on AARP's contribution of over 5,000 complaints, at
    no cost to law enforcement, the FTC/Operation Mailbox strike force
    announced over 150 Federal and state enforcement actions against the
    sponsors of these mailings in 1998. Penalties in these cases ranged
    from fines, to forfeiture, to imprisonment.

        Question 8. The Associated Press reported that based on a review of
    tax records, six senior groups, including AARP, collected at least
    $18.8 million last year by renting out their mailing list. Of that, the
    lion's share, $16 million, went to a for-profit subsidiary of AARP,
    which charges to share the names of its more than 34 million members
    with mutual fund, credit card, and insurance companies. Is the
    information in this press account true? Is your membership aware that
    this information sharing occurs? Do members provide their expressed
    written consent to allow this to happen? What specific individual
    information is shared? How does AARP protect the privacy of their
    membership information? Would you explain which membership protected in
    any way, or can the company receiving the information use it and share
    it with others? The AP story correctly states that, last year, AARP's
    wholly owned subsidiary (AARP Services, Inc., or ``ASI'') received
    access fees from providers of AARP member benefits and services for the
    use of AARP's membership list (although these fees totaled
    approximately $14.4 million, rather than $16 million). However, the
    story unfortunately provides an otherwise misleading and incomplete
    impression of AARP's practices with respect to the use of the member
    list and the recruitment of new members.
        Use and Protection of Member Information. AARP has always been
    committed to protecting the privacy of its members. AARP restricts the
    use of its membership list to a limited number of companies that we
    have selected to provide AARP member benefits and services using the
    AARP name and logo. These AARP providers include, for example, United
    HealthCare, which offers Medicare supplement policies under the AARP
    Health Care Options program, and Hartford Insurance Company, which
    offers insurance coverage under the AARP Auto/Homeowners Insurance
    Program. We select AARP providers based on their ability to offer
    services that are of unique value to members and that are consistent
    with AARP's mission to benefit Americans age 50 and older.
        Our contracts with these AARP providers require them to keep the
    member list strictly confidential, and allow them to use the list only
    to offer the AARP endorsed member services or benefits. For example,
    United HealthCare is prohibited from using our membership list to offer
    its HMO plans, and is prohibited from renting, selling, or disclosing
    the list to third parties for any marketing purposes. All of United
    HealthCare's member mailings must relate only to the AARP Health Care
    Options program, and must be reviewed and approved by us in advance.
    AARP Services, Inc. is responsible for monitoring the providers'
    compliance with these contractual requirements.1 Unlike some
    other organizations, AARP does not make its membership list available
    for rental in the general marketplace. AARP does not, for example, rent
    its membership list to mailing list brokers, telemarketers, or any
    other third parties that are not offering AARP endorsed services or
    benefits.
    ---------------------------------------------------------------------------
        \1\ In 2001, the membership list was made available to the
    following eleven AARP providers: United HealthCare (AARP Health Care
    Options), MetLife (AARP Health Care Options), Retired Persons Services,
    Inc. (AARP Pharmacy Services), Cole Vision (AARP Vision Source),
    Hartford (AARP Auto & Homeowners Insurance), General Electric Financial
    Assistance (AARP Motoring Plan), New York Life (AARP Life Insurance),
    Foremost (AARP Mobile Home Insurance), First USA (AARP Credit Card
    Services), Scudder (AARP Investment Program), Royal Insurance Company
    of Puerto Rico (AARP Auto & Homeowners Insurance Program), and America
    Online (AARP Privileges). In 2001, the following providers of AARP
    member benefits may also be permitted to send more limited mailings
    about specific AARP offerings (e.g., three mailings to no more than
    500,000 members), subject to the same contractual restrictions
    described above: US Airways, Gateway Computers, I Explore, American
    Online, and Kiplinger Washington Editors.
    ---------------------------------------------------------------------------
        As is typical under affinity programs offered through associations,
    alumni groups, and membership organizations, the providers that we
    select to offer AARP services and benefits pay AARP a royalty for the
    use of AARP's name and intellectual property. The royalty payments are
    generally based upon a percentage of program revenues or upon the
    number of program participants. Prior to the formation of ASI, pursuant
    to the terms of a 1999 Private Letter Ruling from the Internal Revenue
    Service, there were no separate payments for the providers' use of the
    AARP membership list. AARP would make the membership list available to
    the providers in order to inform members of the AARP member benefits
    and services, but AARP would only receive royalty payments based upon
    member enrollment in the AARP provider programs.
        In calendar year 2000, the total payments to ASI for access to the
    member list were approximately $14.4 million, and the total royalty
    payments to AARP were approximately $180 million.
        Information in the membership List. In addition to collecting basic
    information in member applications (e.g., name, address, date of birth,
    employment status, and, in online applications, e-mail address), AARP
    also keeps track of members' participation in AARP activities,
    programs, and service offerings. Our files identify, for example, if a
    member is enrolled under AARP Health Care Options, has called with
    questions about an AARP service, or has attended an AARP volunteer
    event. AARP supplements member files with demographic information
    obtained from other sources (e.g., aggregate information about the
    average age, education, and racial composition of ``census blocks,''
    and household-specific information about car ownership and estimated
    income). All of this information helps us to understand our members'
    characteristics and needs better, and determine ways to improve our
    programs and services.
        Providers of AARP member benefits and services use this information
    to determine the AARP members to whom they will send mail. As noted
    above, ASI reviews the content and volume of all AARP provider mailings
    in order to ensure that they are appropriate. This process reduces
    mailing costs and minimizes the promotional mail that our members
    receive.
        The membership list does not include any information about our
    members' health insurance claims, health status, credit card numbers or
    balances, or other financial account information under AARP provider
    programs. If members call with questions or complaints about their AARP
    providers, the members or providers may sometimes provide ASI with
    account or claims information so that ASI can follow up on the members'
    behalf with the AARP providers. In these cases, ASI uses the
    information solely for the purpose of fulfilling the members' requests.
        Member Notice and Choice. AARP sends a Member Handbook to all new
    and renewing members. The Handbook explains that AARP shares member
    information with providers of AARP member benefits and services so that
    the providers can inform members of those benefits and services. The
    Handbook also explains that members can call AARP's toll-free number if
    they do not want to receive these promotional mailings and do not want
    AARP to share their member information with AARP providers. AARP does
    not, however, obtain the written consent of members before sharing
    their membership information with AARP providers. AARP recently
    expanded the privacy statement in the Handbook in order to ensure that
    members fully understand our privacy practices and their choices with
    respect to the use of membership information. A copy of the privacy
    statement is attached to this letter.
        Member Solicitations. Contrary to the suggestions in the AP story,
    AARP does not solicit contributions from seniors with letters warning
    that their government benefits may be in jeopardy. As you know, AARP
    testified against deceptive mailing practices before your Subcommittee.
    AARP has had a longstanding interest and deep concern about mailings
    that exploit the sensitivities and vulnerabilities of older Americans
    many of whom have modest incomes and cannot afford to waste their
    limited resources.
        AARP mailings simply invite potential members to join the
    Association for Membership dues of $10 per year. In exchange for this
    dues payment, AARP provides information and resources; advocates on
    legislative, consumer, and legal issues; assists members to serve their
    communities; and offers a wide range of unique benefits, special
    products, and services for our members. These benefits include AARP
    Webplace at www.aarp.org, Modern Maturity and My Generation magazines,
    and the monthly AARP Bulletin.
        AARP Services, Inc (``ASI''). As noted above, ASI is responsible
    for managing our relationships with providers of AARP member benefits
    and services. AARP formed ASI several years ago for business and tax
    reasons. As the sole shareholder, AARP appoints all of the members of
    ASI's Board of Directors. AARP is also responsible for ensuring that
    ASI's activities are consistent with AARP's non-profit mission. To the
    extent that ASI earns a profit, ASI pays taxes on these amounts. Any
    ASI dividends paid to AARP as the sole shareholder would be used to
    support AARP's programs and non-profit mission.
    Chairman Shaw, AARP thanks you once again for inviting us to testify on
        this very important issue. We appreciate the opportunity to respond
        to the above questions and we commend you on your efforts to inform
        members and educate the public about misleading mailings targeted
        at older Americans.
        If you have any further questions or concerns, please do not
    hesitate to call me or ask your staff to call Evelyn Morton of our
    Federal Affairs staff at 202-434-3760.

                Sincerely,
                                                        Martin A. Corry
                                                               Director
                                                        Federal Affairs

                                   ATTACHMENT

    AARP Member Handbook Statement on Privacy

        AARP understands how important privacy is to our members. We are
    committed to protecting your privacy and want to make sure that you
    understand how your membership information is used. We also want you to
    be aware that you have choices about how we use this information.
        What We Collect. When you apply for membership, we ask for basic
    information such as your name, contact information, and date of birth.
    We keep track of your participation in AARP activities and member
    services so we can understand our members' interests and evaluate the
    effectiveness of our offerings. We also collect demographic information
    from other sources to help us learn more about member characteristics
    and needs. All of this information helps us better serve our members
    and improve our programs.
        Information Sharing. We share your personal information only with
    companies we have selected to provide official AARP member services or
    support AARP operations. Some of the providers of AARP member services,
    including many of those listed in this handbook, pay a fee for access
    to our Membership list. Our contracts with these companies require them
    to keep the member information strictly confidential, and allow them to
    use the information only to offer the contracted services to AARP and
    AARP members. We oversee the companies' compliance through our wholly
    owned subsidiary, AARP Services, Inc. Other AARP affiliates, such as
    the AARP Foundation and the AARP Andrus Foundation, may also have
    access to member information. Finally, we may release personal member
    information on the rare occasions when we are required to do so by law,
    or when necessary or appropriate to comply with legal process or
    protect or defend AARP and its members.
        Your Choices. We respect your choices. If you do not want us to
    share your information with providers of AARP member services, you can
    contact us as specified below. You should then stop receiving AARP
    service provider mailings in about six to 8 weeks. (Note: If you
    request services or information from an AARP service provider directly,
    we may still need to confirm to the provider that you are an eligible
    AARP member). You may also elect not to receive information about AARP
    activities, such as legislative events and educational programs, or
    about the activities of other AARP affiliates like the AARP Foundation.
        Contact Us. For more detailed information about our privacy
    practices, please visit our Web site privacy policy at http://
    www.aarp.org/privacy.html, or contact us to request a copy. To exercise
    your choices, or ask questions about your membership information,
    please contact us at:

    Appendix A

        The staff met, at 10:07 a.m., in room B-318 Rayburn House
    Office Building, on August 29, 2001. In attendance was Kim
    Hildred, Staff Director, Subcommittee on Social Security;
    Richard J. Ruddy, Jr., Ruddy Law Firm, Fairfax, Virginia; and
    Maurice K. (Chip) Heartfield, III, Squire & Heartfield Direct,
    Inc., Oakton, Virginia.
        Mr. Heartfield. I brought you guys a resume so you know who
    I am a little bit.
        Ms. Hildred. Very good. As you're aware, we went back and
    forth with Mr. Ruddy before our hearing relative to issues
    regarding the subpoena and the hearing and then Members of
    Congress decided that they wanted to have the opportunity for
    their representatives, Andrea and myself, to ask you some
    questions face to face, which we'll be doing today.
        And obviously you'll be asked questions. Our stenographer
    is also a notary who's going to administer an oath and we have
    a stenographer present and the results of this interview will
    be made part of our hearing record.
        Mr. Ruddy. Will you provide a copy of that?
        Ms. Hildred. Sure, we will. Yes, indeed.
        Mr. Heartfield. Thank you for your understanding of my
    issues.
        Ms. Hildred. OK.
        The Reporter. Mr. Heartfield, in the testimony you're about
    to give do you swear or affirm to tell the truth, the whole
    truth and nothing but the truth?
        Mr. Heartfield. I do.
        Ms. Hildred. How about if I just start and Andrea, please
    jump in whenever you'd like.
        Mr. Heartfield, can you tell me your position at Squire and
    Heartfield Direct?
        Mr. Heartfield. I'm vice president. I'm one of the owners.
        Ms. Hildred. And what are your duties?
        Mr. Heartfield. My primary duties are the administrative
    and management aspects of the company. We have I guess about
    nine or ten employees. I also participate in the creative side
    to a certain extent. Client services, not necessarily program
    development or the lobbying side of it, making sure that
    everything's running smoothly, that type of thing.
        Ms. Hildred. Does your position involve direct client
    contact?
        Mr. Heartfield. Yes.
        Ms. Hildred. And how long have you been in the direct
    marketing business?
        Mr. Heartfield. Twenty-three years. I had a history degree
    and I was going to go to law school. I was going to teach. I
    was going to go into the Foreign Service. I didn't know what I
    was going to do.
        My cousin, who was working for an environmental fundraising
    group, said, ``Well, while you're figuring that out, we need
    help.'' So my first job was sorting petitions for a Save the
    Whale group and processing checks, basically caging direct mail
    returns and handling comment mail, which is when people write
    notes on the sides of the things or actually send letters in
    that need responses. The next thing I knew it was my career and
    I've been doing it ever since.
        Ms. Hildred. And how much of your marketing business is
    aimed at seniors?
        Mr. Heartfield. Well, almost all lists that fundraisers
    use, whether it's for an environmental group, a congressional
    campaign, a seniors organization, all of the lists consist
    primarily of seniors. They're the ones with the disposable
    income. They're the ones that have a track record of responding
    through the mail. Not everybody responds through the mail. If
    you're not a direct mail responsive person, you're a terrible
    prospect for anything.
        So in terms of what lists are mailed, almost all lists that
    everybody mails are largely senior citizens. We have probably
    75 percent or better of the work that we put out for clients
    involves legislation which directly affects seniors.
        Ms. Hildred. When marketing for a client, such as TSCL,
    what are your primary objectives?
        Mr. Heartfield. Well, the client--TSCL would have a
    legislative agenda. Our job is to take the legislative agenda
    and translate it into materials that are suitable for the
    grassroots market, which is the direct mail market. We also do
    some draft work for them on press releases and things. We do a
    lot of the draft work for their newsletter where we take draft
    stuff that they've done and add our 2 cents worth.
        Then when it comes time to put it out, once they've signed
    off on something, whether it's a press release or a newsletter
    or a mailing piece with a petition in it, we then coordinate
    with--we competitive bid the stuff to a number of different
    printers. Or if it's a press release there's obviously a
    variety of services that you can use for that type of thing.
    Almost all the time they're also distributed to every Hill
    office so we actually have a broadcast fax system set up which
    has a bunch of senior publications and I think all but about
    eight congressional offices that don't give out their fax
    numbers and so we mail to them.
        It's taking their legislative agenda and converting it to
    something which is hopefully understandable and compelling to a
    grassroots market. They have people that come down to the Hill
    and go to fundraisers and visit offices and do that, so we're
    not involved in any of that kind of stuff. We don't have
    lunches with anybody or anything. I mean I get dragged to fund
    raisers every once in a while because they have another ticket
    but it's not part of what we do.
        In terms of actually preparing materials, again if they
    support a particular bill number and want to do a mailing on
    that bill, we would sit down, research the issue or take draft
    language from them. Sometimes it can be testimony that they've
    submitted, which gives you--you know, you're writing a letter
    for somebody else, like a speechwriter. So it's not how I want
    to say it; it's how they say it.
        On the other hand, we may come up with a way of saying
    something which the client then says I like the way you've put
    that, so it's a back and forth collaborative process.
        We'll then develop copy from their draft or from their
    agenda only or some talking points. If there are any factual
    statements made, whether by them or by us, we will get the
    document that it came from and that's included when the
    mailings go back over to them for final approval. All approvals
    are in writing.
        So a package will go back over with footnotes so if there's
    a statement made that prescription drug prices went up 18
    percent in 1999, there would be a footnote referencing a
    Washington Post article or even a congressional hearing, a
    statement by somebody at a congressional hearing or a press
    release from a Member of Congress who's put out a bill to do
    something about prescription drug prices. And if the press
    release--especially if the package is in support of that bill,
    if the congressman's press release or speech on the floor says
    prices went up 18 percent last year, sometimes it's quoted,
    sometimes it's just used, but it would be footnoted as coming
    from there.
        The client approves it and, as I said earlier, we then
    coordinate. We don't own printing presses or computers or any
    of those things. We're a coordinator of the production
    services. They use a bunch of different printers and a bunch of
    different mail shops. We're required to get multiple bids to
    end up with the best price. That's not always the lowest price
    but the best price is a combination of price and delivery in
    order to meet a mail date. The mail dates are scheduled to
    avoid holidays or to coincide with Congress coming back into
    session or a bill that a Committee may be getting ready to vote
    on, so it's driven by what's going on. And it's driven by what
    the client is saying to us in terms of when they want a certain
    thing out.
        Ms. Hildred. So if I'm hearing you correctly, the
    objectives are primarily laid out in this particular case, for
    example, by TSCL and then you kind of put the meat on those
    objectives and respond to the objectives that TSCL is looking
    to?
        Mr. Heartfield. Well, they have an actual legislative
    agenda, which is bills that--you know, in the beginning of the
    new Congress it would reference the bill numbers from the
    previous Congress, from the 106th Congress, and hope that, for
    example, if Congressman Sanders is going to reintroduce his
    Consumer Price Index for Elderly People (CPIE), they would call
    his office and say, ``Do you expect that to happen?'' and it
    may be that yes, it's going to happen in the next month or two
    or it's going to be a few months.
        So you would, if you were mailing a mailing or doing a
    press release on the need for the CPIE for seniors you would
    say like Congressman Sanders' bill in the 106th Congress. When
    he then reintroduces it, as he has now in the 107th, then you
    obviously switch and use the current bill number and start
    talking about this many cosponsors and we hope to help get 15
    more in the next three months or whatever the goal is.
        If you just sort of write a letter to people and say,
    ``Send money now,'' it doesn't work. They want to see what's
    going on. They're getting mail from lots of other groups at the
    same time, not just on seniors issues but I mean they may be
    animal lovers or whatever other interests they have--you know,
    Save the Children, that type of thing.
        Ms. Hildred. How do you measure your success in achieving
    the objectives?
        Mr. Heartfield. Well, we do three things for our clients.
    We're not a fundraising agency. We are a grassroots
    communication business. So one objective obviously is
    fundraising because it's a nonprofit group. They don't accept
    any government money. It's all small donations coming in.
        The second thing that we are trying to do is give them
    grassroots lobbying support for what they're doing, which is
    getting people to sign petitions and then they typically take--
    you know, every once in a while a group will show up with a
    truckful of petitions or a hand truckful of petitions and
    they'll have a picture with the congressman who may be
    sponsoring the bill they're supporting or whatever. Everybody
    does that type of thing. But simply shipping the petitions down
    every time doesn't really accomplish much because an office
    gets a box of petitions and they say, ``What am I supposed to
    do with this?''
        So typically the lobbyist would take a print-out of the
    people in a member's district and maybe a cover copy of the
    petition or the language of the petition typed up and visit
    members who are thinking about supporting the legislation or
    are on the fence or whoever they want to go see with these
    petitions or these names and addresses saying, ``Here's 2,400
    people in your district who signed this petition supporting
    this piece of legislation.''
        Then the third thing, and people sometimes will send
    postcards directly in or place calls directly to their
    congressman's office. Or sometimes during a district work
    session like this some groups might do a mailing saying call
    the congressman's office at home because he's home now; he's in
    your district, so call the office nearest you. And there are
    companies you can purchase the information from, you know,
    where the offices are, in computer form, where the offices are
    and phone numbers and addresses and that sort of thing.
        So just on the grassroots lobbying part it really depends
    on what they want to accomplish and how they want to accomplish
    it. Sometimes you actually send them actual letters that have
    their name and address laser-printed at the top and they can
    sign the letter and mail it themselves or they're encouraged to
    write it in their own words kind of thing.
        We also do surveys a lot of times in the packages. You
    know, some of the survey questions are intended to sort of
    help--I mean you're going to get 90 percent of the people who
    are going to say yes, I want this or that. You know, other
    questions are aimed at finding out exactly how many people know
    there's a bill out there that will do something. So, for
    example, on a CPIE again, were you aware that there is a bill
    before Congress now to use the CPIE rather than the other
    formula that's being used for seniors and it measures their
    market basket instead, that type of thing.
        And typically what happens in situations like that is
    you're going to get 50 percent of the people are going to say
    no, I didn't know about that bill or 70 percent or whatever the
    number may be. That gives the client and us some idea of what
    else is needed.
        For example, if half the people don't know--you know, this
    is not a scientific sampling. It's based on mailings and we
    don't say this is a scientific survey. It's just your opinion,
    your input. That would indicate a need to do more public
    education, more press releases, more getting the word out about
    the bill because if you--generally speaking, in fundraising
    world if you are mailing to an audience that is not somewhat
    presold on the idea or the issue, it's not going to do well.
    And again that applies across the board.
        So if you're an environmental group, if people don't know
    that baby seals are being clubbed in Canada and you say,
    ``You've got to help with the seals,'' they're going to say,
    ``Well, what about the seals?'' Sometimes it's as easy as
    putting a picture in of guys clubbing seals but the issue has
    to already be on their minds or already be of concern to them
    for it to be effective. So when you get survey answers like
    that, it means more public education stuff is needed.
        And a lot of people, if they're not aware of it they'll
    sign the petition if they like what it says but they don't send
    money and that's fine, too, and contributions are voluntary.
    Nondonors, favorable nondonors, meaning people that sign the
    petition or answer a survey or whatever it might be, are kept
    on the list and they receive materials, as well, for a period
    of time.
        And again the organization's goal, if they are a grassroots
    organization, is to build as broad a base as possible, so it's
    not limited to people that can afford some certain dollar
    amount. I mean some groups operate that way. Some groups, you
    have to be a member. You have to pay at least $15 a year or you
    get nothing.
        And there are a lot of environmental groups, for example,
    where you get a lot of benefits, so you can spend 15 bucks and
    get this four-color magazine four times a year. That's a
    membership, benefits-driven organization, AARP, of course,
    being the king of benefits-driven organizations. A lot of
    (c)(4), Sierra Club and Nature Conservancy and groups like
    that, you get a lot for one contribution a year. Other groups
    focus on grassroots legislative impact, so they would not
    necessarily configure exclusively as a membership group and
    they would welcome people that sign petitions, even if they
    don't send money.
        Ms. Hildred. Is data kept regarding responses relative to
    kind of meeting those objectives that you were talking about?
    In other words, does TSCL collect data on response rates,
    contributions, the measuring of education through the surveys?
        Mr. Heartfield. Well, all of the direct response
    information is kept. The names and addresses are key-punched,
    the dollar amount, the mail code, the date. If it's a nondonor,
    all the same information except that in the dollar box it says
    zero.
        The surveys are typically sampled so you'll pull 10 percent
    of all the surveys that come in and you'll do a sampling of
    those, the idea being just to see if there's a trend. Again
    some questions are intended to help make your case so 90
    percent or 80 percent of the people are going to say, ``That's
    right.'' Other questions in there are intended to see if people
    are actually willing to pay a few extra dollars for a
    prescription drug premium, so you might say, ``Are you
    interested in a prescription drug premium? Would you be willing
    to get a card and pay more? How much more; $2, $4, $6, $8?
    Other?''--that sort of thing.
        So those surveys are sampled and those results are
    published periodically and distributed in our office and with
    the client and sometimes they use those when they send out
    press releases or they put it in their newsletters. The
    petition-signers, that's obviously kept track of and then
    depending on the bill and how they're working the bill, they
    would go to offices with petitions or a list of names and say,
    you know, ``Here's a bunch of people in your district'' and it
    would typically be Mr. Chip Heartfield, Bethesda, Maryland, not
    a full address just from a security standpoint.
        Some groups, if congressmen ask, will share the full name
    and address because the congressman wants to write back. Other
    groups don't. It's an interesting issue. Some groups--TSCL
    will, if congressmen express greater interest, say, ``Would you
    like to write a column in our newsletter, which goes out 10
    times a year, about this issue?'' So typically they have a
    Member of Congress writing a guest column and a lot of groups
    do that in their newsletters.
        So all of that information is used to help them accomplish
    their legislative agenda. They have a database where they store
    the name and address information. The new term over the last
    couple of years if you were to read any of the direct marketing
    publications is database marketing but that just means you're
    capturing that information and you're using it to try to make
    intelligent decisions about how you communicate with these
    people and how you move forward.
        Ms. Hildred. Does TSCL instruct you in terms of their
    objectives, priorities of those objectives; for example, the
    education piece over fundraising? You talked about a series of
    objectives that mailings are designed to achieve. In the
    creative process or in the design processes, does TSCL decide
    or give you any indication that one of those objectives may be
    more important than the other so that you can ensure that the
    piece that you develop meets that priority?
        Mr. Heartfield. Sure. The newsletter, for example, some
    groups send out newsletters with fundraising pitches in them,
    actual letters asking for money and a little petition or
    something to send back because they want their newsletter
    program to pay for itself or to actually make a little money.
    Or, in a very simple sense, they just put the little coupon
    into the newsletter, although that's passive and doesn't
    usually do anything. Some groups will put an envelope--like
    Nature Conservancy binds an envelope into the middle of all of
    their nice magazines that they send out. I have no idea how
    much money comes back in from that but every penny helps if
    you're a nonprofit group.
        TSCL does not ask for money. Their newsletter, it's an
    eight-page newsletter that goes out 10 times a year. It has no
    requests for money. I don't even think they, as a rule, put in
    even a little box where you can contribute. I'm sure there may
    have been a few in the past. That's a case where they're
    fulfilling an obligation to people that have sent money and
    here's our newsletter.
        Other mailings don't ask for money at all. It might be a
    mailing that you send to just the people in a particular
    congressional district and they want them to call their
    congressman and say, ``Could you please support this bill?''
    That's usually like a telegram-style mailing and it doesn't ask
    for money. It's just an action thing.
        When the Notch Commission met a few years back, TSCL sent
    postcards to supporters in the two cities where they had the
    public hearings to say there's this thing. The press releases
    and that sort of thing--sometimes they'll ask for a dollar in
    return for a white paper and postage and that sort of thing but
    they don't insist on it.
        The regular direct mail, different people have different
    formulas or techniques or styles that they think are going to
    produce the best results. Sometimes they'll say, ``Do we have
    to ask for money so many times in the package?'' Or ``Can't you
    say it this way?'' or ``I want to make sure it says 'If you can
    afford it' right in the letter.'' TSCL, all their reply forms,
    for example, say ``Contributions are voluntary.'' I think on
    the back it says, you know, ``Don't send it if you can't afford
    it.'' They have a money back guarantee. They send refunds all
    the time if somebody gets upset with them.
        So yeah, it just varies depending on what's going on. Our
    job is to raise money for them and to help them achieve
    grassroots action and education but it's their budget so if
    they want to spend money, not make money on something, that's
    their call. If they want to do something which they think will
    make a lot of money, that helps support the things that don't
    make money--the lobbyist that goes down to--Virginia Torsch's
    salary gets paid from that and they're able to say this person
    went down and met with so-and-so or that type of thing. So it
    just varies.
        Ms. Hildred. How long has TSCL been your client?
        Mr. Heartfield. Either late 1992 or early 1993, somewhere
    in there.
        Ms. Hildred. Are they currently your client?
        Mr. Heartfield. Yes.
        Ms. Hildred. Could you give me an estimate of how much of
    your total business this client takes up?
        Mr. Heartfield. Right now they're probably about 60
    percent. It could even be 65 percent. They're our biggest
    client right now.
        Ms. Hildred. Have you been personally involved with the
    services provided to TSCL?
        Mr. Heartfield. Sure.
        Ms. Hildred. How so?
        Mr. Heartfield. Well, again in terms of managing our
    operation, all those people that work for us work for me and
    for my partner. I typically see--I don't do a whole lot of
    writing myself but I typically see copy at some stage in the
    process and look through it. One of the things that I'm
    supposed to do is make sure we have all the state disclaimers
    that we're supposed to have on the back of the form and that
    type of thing. So I look at the artwork and stuff more for that
    because I'm not--in the past I've been an account rep and as
    the account rep, you need to know your client's legislation,
    you need to be basically their marketing person and be on top
    of all of those things down to the nitty-gritty. Personally,
    that's not where I am right now, although I have to have a
    working knowledge of these things.
        And just make sure the footnotes are there. If somebody
    says there's 82 cosponsors I want a reference for that. If
    somebody says it's bill number S. 123, are you sure about that?
    That type of thing.
        Ms. Hildred. Has TSCL used other direct mail marketers?
        Mr. Heartfield. Yeah, a couple of times they have. They
    used a company that--you know, a lot of charities use these
    name and address label mailings. They send you the little
    packet of name and address labels and hope that you'll send
    some money back and that's something that we don't really think
    is a good technique. But they wanted to do it so they tried
    somebody else for that. They did some calendars, I think, 1
    year, which again is another fundraising technique and a
    bonding technique because obviously if you have--I just got a
    calendar yesterday from Nature Conservancy already for 2002.
    Obviously if we hang that up and we're looking at their name
    all the time, we're more likely to send them money.
        We'll send out refrigerator magnets sometimes for our
    clients and it'll have their phone number and it might have the
    Capitol switchboard number on it or whatever. We did some pro
    bono stuff for the Virginia Native Plant Society for about 3
    years and they have a plant of the year every year so we did a
    magnet each year with a picture of the plant and the name of
    the organization on it. It was very important to them to know
    that all their members have these magnets on their refrigerator
    and that they were being reminded of this.
        But we don't generally use premiums or items in our
    mailings, so they've used other people on a few occasions when
    they wanted to try that type of thing.
        Ms. Hildred. And annually about how much money does TSCL
    pay you for your services?
        Mr. Heartfield. Last year I think it was about $1.5 million
    total for direct mail and press releases and the newsletters
    and all the different things we do for them.
        Ms. Hildred. Would you say that those three--direct mail,
    press releases, the newsletters--are the majority of what the
    work pays for or are there other----
        Mr. Heartfield. Yeah. Yeah, basically. We don't charge a
    retainer type of thing so any back-and-forth or advice is sort
    of built in. We also monitor the whole back-end process as part
    of the fee. So we're responsible for making sure that the cage,
    the mail processing facility, is processing the mail in a
    timely fashion and we're responsible for making sure that the
    stuff is keypunched correctly and that we don't have a lot of
    duplicates on the file and if somebody calls in or writes in
    and says, ``Take me off the mailing list,'' that it happens.
    All those details of doing that stuff right are all built into
    the fee structure.
        Ms. Hildred. Have you ever referenced TSCL's association
    with The Retired Enlisted Association in your marketing?
        Mr. Heartfield. Well, typically at the bottom of page 1 of
    their direct mail pieces it'll say an affiliate of The Retired
    Enlisted Association because a lot of people--I mean TREA
    Senior Citizens League, people say, ``What's a TREA?'' So from
    our standpoint, from a pure marketing standpoint, you would
    prefer that they have a name that is easier to grasp but that
    is their name and so we spell out The Retired Enlisted
    Association at the bottom. You still get a lot of people that
    say ``What's a TREA?'' And sometimes they refer to themselves
    as the League in sort of shorthand.
        I think that's the only place because it is a separate
    entity. It's just an informational reference. And, of course,
    if it was on there too much you might have some confusion with
    the post office with the nonprofit permit, saying ``Whose
    mailing is this?'' So I believe it's only there. I don't think
    it's generally referenced in the newsletter or the press
    releases for any reason, unless there was a piece of
    legislation that both groups were interested in and for
    whatever reason they were doing some sort of joint campaign;
    there might be a reference, one direction or the other. But
    other than that, it's a separate but affiliated entity.
        Ms. Hildred. Have you made reference to TREA's
    congressional charter in any of the mailings that you can
    recall?
        Mr. Heartfield. I think for the past several years, several
    being three or four, it typically says something like
    affiliated with The Retired Enlisted Association, established
    1963. TSCL started out, as I assume you know, as a project of
    TREA. It was inside TREA. So, of course, back then the mail
    referenced TREA and some of the mail may have said
    congressionally chartered. It would have depended on whether
    TREA--if TREA said it that way then they probably would have
    asked us to say it the same way and it would just be ``The
    Senior Citizens League is a project of The Retired Enlisted
    Association,'' however they state things in their materials. I
    don't know, but not now, not since they've been an independent
    group.
        Ms. Hildred. Have you ever advised----
        Mr. Heartfield. I can't say it's never been said but it's
    not a standard part of it because again it's not a TREA
    mailing; it's a TSCL mailing.
        Ms. Hildred. Have you ever advised TSCL to promote their
    affiliation with TREA?
        Mr. Heartfield. Not particularly. I mean we don't do work
    for TREA. They've asked us to. We've said it would be a little
    difficult if you have the executive director of TSCL and the
    president of TREA on two phone lines. You know, which call do
    you answer? It's just a lot simpler if we just stick to TSCL.
    Occasionally we'll do a pro bono mailing for the memorial
    foundation, TREA Memorial Foundation, which is a separate
    501(c)(3). And TSCL a couple of times a year will do, if they
    have people on their lists they'll periodically ask people if
    they're eligible, if they want to become members of TREA, but
    it's a very minor aspect of it.
        Other than that, TREA's TREA and TSCL's TSCL from our
    standpoint.
        Ms. Hildred. You've spoken kind of generally to this
    question but just because I'm not as familiar with how things
    work in the direct marketing world, walk me through how a
    mailer is developed.
        Mr. Heartfield. There are issues that the client is
    interested in and especially if there's legislation to achieve
    that, their goal, they would ask to have a package or packages
    developed to try to support that goal. And again either they
    would have talking points or testimony or a column that they
    had written about this already and we would take our cues out
    of that or we would simply take our own shot at a draft, trying
    to say it in the way that we know that client speaks.
        Some of these--well, people have certain ways that they
    like to say things and they think that's the best way of saying
    it, so if we send copy over that says it in a different way
    they feel like we must not like how they say it. So you try to
    pay attention to those kinds of cues and you try to develop a
    mailing, again based on whatever they've given you to start
    with. The copy will go back and forth several times and
    sometimes they'll make a lot of changes, sometimes they won't.
    If it's an issue where they've been working on it for a period
    of time, a lot of the basic questions or issues have been
    ironed out, so if we're doing our job we're sending something
    back over that takes into account comments they've made in the
    past or changes they've made in the past.
        It'll go back and forth a couple of times and it'll go over
    there as flat copy, draft copy, come back with some changes.
    Eventually it'll be turned into artwork. They review the
    artwork. There's a cover sheet that they need to sign off on.
    TSCL has multiple people that review and sign off on their
    copy.
        And the copy, there are sheets which talk about how many
    names are projected to be mailed or the proposed number of
    names to be mailed and the list names if it's a prospecting
    thing.
        And that stuff is approved and then it comes back over and
    then we issue purchase orders in their name, bid the stuff out
    and then manage that whole process to make sure that it gets
    into the mail when it is supposed to.
        And then, as I said earlier, make sure that when the mail
    comes back in it's caged properly and in a timely fashion and
    keypunched properly and all that kind of stuff. That's
    basically the process.
        Ms. Hildred. And who from TSCL signs off?
        Mr. Heartfield. Well, the signer, which is currently George
    Smith. At present they have Virginia Torsch look at all of it.
    That's not uncommon to have the legislative person, because
    it's about legislation, be one of the people that reviews and
    signs off on copy. I'm not sure. There are two or three other
    people over there whose initials are typically on it or at
    least who review it internally for them and provide feedback.
        Sometimes copy will come back over and there will be a
    question posed and then there will be another comment from
    somebody and you're not sure. Either tell us what you want or--
    so you'll have to call back over there and say, ``Is this where
    we are?''--type of thing. So a number of different people are
    looking at the mailings.
        We also have the stuff reviewed by the woman who is the
    editor of their newsletter, who's somewhat of a number-
    crunching, statistics-oriented kind of person. And facts--she's
    a newsletter-oriented person, so she will often review the
    stuff in case there's some breaking development that she's
    aware of from her sources.
        And then it's reviewed typically by two or three people in
    our office. The footnotes are checked. And as far as
    proofreading, at least two people have to look at everything
    from a proofing standpoint, as well, for everything from facts
    to just misspelling the chairman's name on a mailing, to make
    sure that doesn't happen.
        The envelopes--the artwork for the envelopes is shown to
    the postal classification person at the mailshop or at the
    receiving post office before it's printed up, just to make sure
    they don't say, ``Hey, there's a problem with this envelope''
    because different post offices have different--you can have
    something that the Merrifield post office sends out all the
    time and then you go to Brentwood and they say, ``No, that
    can't go because of this or that.'' So those are reviewed by
    them.
        Sometimes the clients have their lawyers look at the stuff.
    There's a registration attorney that handles all their state
    registration stuff and sometimes she's asked to look through
    it.
        Ms. Hildred. Is that the practice at TSCL? Does their
    attorney----
        Mr. Heartfield. Well, their regular attorney, yeah. At
    present that's how they're doing it. I'm not really sure how
    they did--you know, different people were running the show in
    the past and they have different styles. For a while every
    member of the board had to look at it and sign off on it and
    different groups do it different ways. Our goal is to just make
    sure that what's presented has all the facts straight and no
    typos and the postal person doesn't object to the envelope and
    then get the client's written approval, then turn around and do
    all the bidding and stuff for them.
        Ms. Hildred. Is TSCL board involved in any of the sign-offs
    currently?
        Mr. Heartfield. I don't know exactly how. George Smith
    obviously is, as chairman, but I don't know what his current
    circulation system is over there. Virginia could, I'm sure,
    answer that question for you.
        Ms. Hildred. And under Mr. Zabko when he was the executive
    director, I assume that he would sign off on the mailings?
        Mr. Heartfield. Yeah, and for a period there it was he, the
    legislative person, and then the chairman of the board. And
    then for a period it was all members of the board and Mike
    Zabko and the legislative person. I mean it went through
    various stages. Before Mike Zabko there was another executive
    director back in the beginning when it was TREA. He would sign
    off on it because he was their Washington rep and then it would
    go out to Colorado and be signed off on by the person out in
    Colorado, as well. So it varies.
        Our goal is to make sure that somebody that's capable of
    reviewing and signing off on the copy is doing it and sometimes
    you say OK, we don't need 28 people from the stand point of
    meeting deadlines, which is part of our job, but it's up to
    them.
        Ms. Hildred. And who is responsible for accuracy of the
    mailing?
        Mr. Heartfield. Ultimately the client but again we don't
    send anything over that doesn't have a footnoted source. Even
    if it's a number that came from them or a statement that came
    from them, we would either ask them for the documentation to be
    attached or we'll go research it independently and then
    footnote it ourselves before it goes back over. And ultimately
    the cover sheet says you're responsible for the accuracy and
    all that kind of stuff.
        And again there's a legislative person who you would assume
    is on top of the legislative part of it. You're always going to
    be changing the number of cosponsors as it hopefully goes up,
    things like that.
        Ms. Hildred. So you will footnote a source but you may or
    may not verify the accuracy of what the source has said?
        Mr. Heartfield. You mean if we cite a Washington Post
    article do we go further than that?
        Ms. Hildred. Yes.
        Mr. Heartfield. Sometimes if it's a tricky one or if
    you've--you know, you can read the Washington Times and the
    Washington Post on anything and get two different versions of
    something so at that point you just have to say you guys need
    to decide whose facts you're going to stick with. You can have
    a Member of Congress say 42 percent and this member says that's
    baloney; it's 10 percent. Well, if you're supporting this guy's
    bill, you're going to use his number and that's the source if
    they choose to do it that way.
        So we try to do the best job we can and if there's any
    confusion or if we're not sure, we just try to make that clear
    to them that you need to deal with this number issue, or
    whatever.
        Ms. Hildred. It's their responsibility.
        Mr. Heartfield. Right.
        Ms. Hildred. You mentioned the clients--there's a sign-off
    process obviously in terms of proofing the materials. If so,
    when your client requests changes do you keep copies of the
    feedback regarding those changes?
        Mr. Heartfield. Yeah, for a period of time. Then once the
    mailing is complete and there's a final sign-off, that's just
    extra paper so it's not kept.
        Ms. Hildred. Generally the period of time would be months?
        Mr. Heartfield. Yeah, a couple of months. By then if
    there's an issue that would have come up--sometimes the printer
    strips something in wrong and there's a typo and then you could
    be able to track back through, but once you're beyond that
    point, what matters is the final signed-off approval form and
    artwork.
        Ms. Hildred. Who is it determines who will receive the
    mailings?
        Mr. Heartfield. Well, direct response lists, if you're
    talking about prospects, are what work. Telephone books don't
    work. Compiled databases don't work. Drivers license lists
    don't work. This would apply to any fundraising that I've ever
    been involved in for any type of organization.
        From a house file standpoint it's donors and nondonors in a
    certain period, depending on what they're trying to accomplish.
    If they're trying to accomplish raising money out of a
    particular mailing it might be a tighter select. If they're
    trying to accomplish maximum grassroots distribution of
    postcards or petitions or something then it would be a wider
    group of people.
        Ms. Hildred. Do you rent or buy any mailing lists?
        Mr. Heartfield. Well, I don't know anybody that buys
    mailing lists in the fundraising business. You see that in the
    newspapers all the time. I tried to explain this to the Social
    Security people and they got it but I see the word ``buy'' in
    their report so it's kind of frustrating.
        There are people out there that buy and sell mailing lists.
    In the fundraising world you either rent your list to somebody
    else to make some money to help pay for your program or,
    because you have to turn around and rent other lists yourself,
    or you exchange names, which is simply a transaction where
    you're swapping an equal number of names with a group.
        So for TSCL they might swap names with the Veterans of
    Foreign Wars because the lists work for each other so that's
    the arrangement that's done by the list company. But there's no
    buying and there's no selling of names.
        Ms. Hildred. So you, as their marketer, do not participate
    in the renting of lists? That would be a decision that TSCL
    would make?
        Mr. Heartfield. No, we make recommendations because we're
    expected to have the knowledge of lists that would be effective
    versus what wouldn't be effective. Again they have no way of--
    that's not what their business is. So we're typically making
    the recommendations as to what lists we think they ought to
    test. You typically test the list and if it works you can go
    back and mail more of that list but it depends on how much it
    costs and what kind of list it is to rent and that sort of
    thing.
        So it's just an ongoing process. And there's a list company
    that we use that provides recommendations to us.
        Ms. Hildred. I'm not familiar with that term, list company.
    Explain it to me.
        Mr. Heartfield. A list company is typically the company
    that if you need names for a mailing you're doing for your
    client, they're the ones that contact all the other list
    companies that manage all the lists and arrange for the tapes
    to be shipped and that sort of thing.
        The other side of usually that same company is responsible
    for promoting your client's list to folks who you might want to
    either exchange with or who you don't want to use their list
    because it wouldn't work but maybe they want to rent your list
    if it's a noncompetitive offer.
        I mean competitive offer--political mailers aren't
    typically allowed to rent TSCL list, although the Democratic
    and Republican Committees are. AARP rents the list, a couple of
    other groups where they're single issue groups that are so far
    removed from what TSCL does, the list doesn't work, there's no
    point in doing an exchange but they're willing to rent the
    list, and that generates revenue which can be used to defray
    the cost of renting over on TSCL side of the thing.
        Ms. Hildred. Is it the list company that makes the decision
    about who to rent to or who not to? And I may be totally
    messing this up but, for example, if TSCL is going to use the
    list company, is their list made available to the list company
    and that list company makes the decisions about where it gets
    rented?
        Mr. Heartfield. No. Typically the decision is made either
    by the agency on behalf of the client with guidelines or some
    organizations have somebody in-house; they want to do it
    themselves. I mean some groups have feuds with other groups so
    they don't want their list being rented to that group and that
    sort of thing. Others view it as something that they should
    leave to people who are professionally capable of making those
    sorts of decisions.
        So we generally handle that for TSCL. That's one of the
    functions that we manage. And, as I said, there's a set of
    guidelines. You can't just rent it to a competitive offer. We
    still use protected mail dates so if TSCL has a mailing going
    out, other people aren't allowed to mail to the list on top of
    that same mail date. A lot of list companies have abandoned
    that concept but it's a policy that we have and that they're
    happy with.
        Ms. Hildred. So TSCL has provided you with guidelines?
        Mr. Heartfield. Yeah. We recommended guidelines to them
    initially. They've modified those over the years. For example,
    we don't want to do business with this particular group or
    we're willing to rent to that group even though they fit under
    the competitive offer guideline. For example, the political
    parties, the RNC (Republican National Committee), the NRCC
    (National Republican Congressional Committee), any of the
    political parties, the decision was made that provided they
    were simply doing general purpose membership or party-building
    mailings, as opposed to targeted senior mailings, it was OK to
    rent to them. Those lists didn't work for TSCL but there's a
    source of revenue. So they modified the policy to allow that,
    for example, and a couple of others, like AARP, because it was
    determined that AARP is not really a competitor so much as--I
    mean, AARP is AARP. AARP's going to get those names, anyway,
    because they're mailing so much more than anybody else is.
        Ms. Hildred. So say in the last 2 years, who has TSCL made
    their list available to?
        Mr. Heartfield. Well, I think that's one of the questions
    on the letter that you all just sent to TSCL and I know that
    information's being pulled together. It's not something I would
    have in my head. I believe that information was also given to
    the Social Security people, the actual print-out of who the
    names go to. TSCL gets a print-out every month of who's using
    the list and that sort of thing.
        Most groups or even for-profit companies that have lists
    that they market have what they call list cards and you can get
    those through your list company. They just print them out and
    fax them to you and it describes the list and that sort of
    thing. So those can be provided if there's a question about
    what is this list exactly or who is it, that type of thing;
    that's the information you would get on that list. But I think
    the print-outs, I think there's a print-out being done, a
    variety of different organizations.
        Ms. Hildred. Their membership, whether they just responded
    or have made a contribution, do individuals in the database
    know that their names are being shared?
        Mr. Heartfield. Well, TSCL adopted at our recommendation a
    couple of years ago the DMA privacy policy, which is a four-
    part policy. We're members of the Direct Marketing Association.
    You have to notify people that you occasionally make the list
    available, is how the wording usually goes, to other groups and
    if they don't want that to be done, they can request that the
    name be taken off. Anybody that asks to have their name just
    taken off the list, you take it off the list.
        I don't remember the other two, the specific wording of
    them.
        We've always done that for TSCL and we go one step further
    for them. We build a suppression--if you write in to a group
    that sent you a mailing and say, ``Stop sending me mail,'' they
    may have actually gotten your name from a prospect list, so
    they don't have you in their computer so they can't take you
    off their list. Other groups just do a terrible job of taking
    you off their list. They just don't care; they throw it away or
    whatever.
        But what we've done pretty much since the beginning really
    is we create what's called a suppression file. So if somebody
    says, ``Take me off your mailing list,'' whether they actually
    are on the list or not, if they're on the list, they're flagged
    to be not mailed. They're also put on the suppression file and
    that suppression file is bounced against all subsequent
    mailings, house or prospect, in case you catch that name on
    another prospect list of something they may have subscribed to
    or somebody they contributed to.
        So if it's TSCL we can truly take somebody off the mailing
    list permanently, again provided the name and address match up.
    You have people that come in as Mrs. Chip Heartfield or Linda
    Heartfield. You can pick that up sometimes by doing what's
    called householding, which is you match as best you can for
    actual dupes and then you take it down and say forget the first
    name as a match criteria; how about last name and street
    address?
        Catalogues will--most catalogues don't household. Their
    attitude is OK, maybe both people like to buy from our
    catalogue. So I get catalogues at home and my wife gets the
    same one and it drives me crazy. Smart people, in my opinion,
    household because most of the time you don't want two of the
    same thing in the house. Especially for nonprofits, it makes
    the group look--you know, why should I give to a group that's
    wasting money sending me multiple mailings? So we try to do as
    much of that as we can.
        You can have a tight match calculation or a loose match
    calculation, tight meaning literally it has to be character for
    character through all three lines of an address before the
    computer will say it's a dupe. A loose one, it'll take last
    name, street name, city name. That's about as loose as you can
    get. Sometimes you live at 6502 and it got keypunched as 6501.
    It'll recognize that as a dupe, anyway.
        And TSCL has a system where if people call in, they can
    just take them off right over the phone and that's what they
    do.
        Ms. Hildred. With respect to the privacy policies, does an
    individual--so an individual has to personally check a box
    saying I don't--you mentioned they can call in but other wise
    they would check a box saying don't share my information?
        Mr. Heartfield. Yeah, or they can write a note. They can--
    however they want to do it. In the industry people are all over
    the place on that issue.
        Again catalogues, usually now they check--they give you a
    box that you can actually check. Yet, on the other hand, they
    don't household so they're doing one thing very well; they're
    doing one thing not at all well.
        In the fundraising business I don't know how many nonprofit
    groups currently have adopted the DMA privacy policy.
        I know another one of the things is that you have to give
    people money back if they ask for it. Well, TSCL's had that
    guarantee since day one.
        So it just varies how they can do it. More and more people,
    I think, are getting savvy to the idea that if you send a
    contribution in, you can say, ``Please don't give my name out''
    and it should be flagged that way when it comes in the door
    that way. Or they may write in later. They may call and say,
    ``I'm getting all this mail; put me on your do-not-rent list''
    and that's done.
        Ms. Hildred. Are the options in terms of their sharing that
    information, is that included in every mailing?
        Mr. Heartfield. I don't think it's spelled out in every
    mailing. It's periodically put in the newsletter as a little
    item in a box that you can do and it's periodically put in the
    mailings but I don't think it's in every mailing. They do say
    that they subscribe to the DMA privacy policy in every mailing
    but I don't believe they spell it out in every mailing, largely
    because most of the back of the form is taken up with the
    required language from gosh, probably 20 states now that has to
    be put on the forms.
        Some people try to put that on the back of the return
    envelope and some states so no, it needs to be on the piece
    that stays with the person and there's just lots of little
    rules there that you have to deal with. So I don't think it's
    on each and every mailing.
        Ms. Hildred. What happens when you determine a client wants
    to use false information in a solicitation?
        Mr. Heartfield. I don't think I've ever had that
    experience. There was a mistake made once in a TSCL mailing
    where the information turned out to be inaccurate. It was
    three-quarters of a percent versus like slightly less than
    three-quarters or something. They corrected it and moved on. I
    don't think we've ever been given or been asked to put
    knowingly false information--again, as I said, we footnote all
    these things ourselves so if we can't find it somewhere then
    we'd go back and say, ``What's the source for this?''
        I mean we've had instances--well, like I said, you may have
    two Members of Congress or two op-ed pieces that cite entirely
    different statistics and you kind of say well, whose do I use?
    But in a case like that we'd typically defer to the client and
    say, ``Look, how do you want us to phrase this? Do you want to
    say it the way this guy's saying it or do you want to say it
    your own way? How do you want to do that?'' But not knowingly
    false.
        Ms. Hildred. The term ``notch victim registry'' has been
    used in a number of TSCL mailings. Is that concept of a victim
    registry, was that something designed by your company or
    recommended by TSCL, do you recall?
        Mr. Heartfield. No, probably that term would have
    originally come from us as a proposed way of saying it.
        Ms. Hildred. And what would be the value of that, using
    those words or that concept in a mailing?
        Mr. Heartfield. Well, most fundraising mailings you want
    people to belong to a project. I mean they're not giving to the
    group.
        Sometimes they're giving to an individual--Ralph Nader. If
    he signs a letter, people will give to that name, almost
    regardless of what the letter is. At any given time he's
    involved with four or five different groups.
        Generally speaking, though, you would want to have some
    sort of easy way for people to recognize the project that the
    group is working on, so it might be the Wetlands Project of the
    Nature Conservancy or the Notch Victim Register of TREA Senior
    Citizens League and we're just collecting names of notch
    victims and that sort of thing.
        Ms. Hildred. So individuals who feel that they're becoming
    a part of something are more likely to respond, more likely to
    give money in your experience?
        Mr. Heartfield. Yeah, it's a bonding thing with an
    identifiable project that they're interested in. It's giving
    money. It's also signing the petitions.
        Ms. Hildred. And why assign the so-called victims numbers?
        Mr. Heartfield. Well, it's a membership ID number, like all
    nonprofit groups use. That's all.
        Ms. Hildred. It just affiliates them with this group?
        Mr. Heartfield. Well, all groups that use databases, you
    assign an ID number to track that record. Sometimes it's just a
    sequential numerical number. Sometimes it is what's called a
    key line, which is built from--you know, yours would be HLDR,
    the first four consonants and then maybe the last three digits
    of your street address and then your zip code or some--you
    know, magazines will typically do it that way and you'll see it
    on the things.
        It also saves any group that does direct mail, whether it's
    a nonprofit or a commercial entity or a magazine, it saves a
    ton of money and improves accuracy greatly in the keypunching
    in the back end because if you have a number that you can key
    or scan for somebody instead of rekeying their full name and
    address, you're charged less and obviously it matches to that
    number that's already in the database, so you won't have typos.
        So that's a cost savings thing that everybody uses. I think
    any mailing that you get at home, if it's a group you belong to
    there's probably going to have that number somewhere. Some
    people bury it. Some people use a bar code instead of actually
    putting the number. Some people put the number on there in a
    big box.
        Ms. Hildred. How about the value of a membership card to
    the individual?
        Mr. Heartfield. Well, a lot of people like membership cards
    and a lot of people don't like membership cards. Sometimes
    people put stuff on the--sometimes people put calendars on the
    back of the card. I read an article the other day about groups
    that were putting tip tables on the back of their membership
    cards. It was a senior citizen trade association actually, and
    they found that these people--they were all writing in saying,
    ``Can I get another card for my wife? I love this.'' My
    father's like that at the restaurant. He pulls the card out.
        So it's something that some people want to have. Some
    people will call up and say, ``Where's my membership card?''
    Some people will say, ``I only want to get the membership
    mailing'' and then you flag them on the file so they only
    receive that once a year and they don't receive other mailings,
    other solicitation mailings.
        It just varies. Some people use paper cards. Some people
    use thick plastic cards. The high-dollar programs for some of
    the bigger groups and the political parties, they're embossed,
    thick plastic cards because some people want that card and they
    stick it in their wallet. United Airlines, if you're a frequent
    flyer, they send you a plaque. You'd walk into a businessman's
    office and he has his United frequent flyer plaque on the wall.
    It's something that helps people--it keeps them bonded to the
    group. But it's not--it's important but it's like--like I said,
    some people it matters to, some people it doesn't.
        Ms. Hildred. Because obviously the Social Security
    Administration knows who these individuals are if legislation
    were to be passed affecting notch legislation, so the concept
    is more to keep a relationship with that individual with the
    organization who's approaching them?
        Mr. Heartfield. Yeah. People that give to other TSCL
    projects also get membership cards. It's not just notch people.
    TSCL simply says if the legislation's passed, we will contact
    you. They pointed out, I think, for probably a few months after
    the first bill was introduced it was pointed out to them that
    there was no obligation on the part of the Social Security
    Administration to notify people within the bill and that was
    said in the mailings for two or 3 months. Then I believe they
    got a letter from a Member of Congress saying, ``I don't think
    you should say that because it implies that the Social Security
    Administration wouldn't tell people if this legislation were
    passed,'' which isn't what it was implying. It was simply
    stating that was a fact. But they took it out. They wrote back
    to the congressman and said ``Fair enough'' and they took it
    out, so they don't say that. That was probably 5 years ago when
    the first lump sum bill was introduced, give or take 5 years
    ago.
        Ms. Hildred. So to the best of your knowledge for the last
    5 years they haven't been making a reference to the Social
    Security Administration notifying them?
        Mr. Heartfield. I mean I'd have to go look through a bunch
    of the mailings. I can't just say no, they don't say that at
    all, but I don't believe any of the mailings do.
        Ms. Hildred. Earlier you mentioned the idea of postcards to
    the Members of Congress and that some of the mailings might
    include a postcard for the individual to send to the Congress.
        Is it TSCL who makes the decision as to whether those
    postcards have the individual's name and address printed on
    them or not?
        Mr. Heartfield. Yes. I mean again that's just one of those
    things. Some groups want their name, the organization's name on
    the postcard, as well as the person's name and address. Other
    groups want their name and they'll say to just put three lines
    where the return address typically goes and if people want to
    just sign the card and send it, they can. If they want to
    actually write in or put one of their address stickers on,
    that's up to them.
        I don't know that there's a--I've never seen any
    information as to whether somebody's actually tested that to
    see. Some people don't want to send the name and full address
    to Washington, DC so if you give them a postcard that has it
    preprinted on it, they're going to throw the postcard away. On
    the other hand it's probably a more compelling postcard to the
    Member of Congress if it's got that name and full address on it
    and some members will write back to those people based on just
    getting a postcard, whether it has the name preprinted or they
    put it on, but I don't think there's a--there's no standard
    procedure for TSCL. And again I don't know that there's a
    better or a worse way, from the standpoint of achieving maximum
    use of the postcards.
        If somebody wants to voluntarily send a postcard with their
    name and address on it, that's fine. If you give them a
    postcard with their name and address on it, you're not giving
    them the choice.
        Ms. Hildred. Generally what percentage of seniors respond
    to the mailings where there is a reference to sending in money?
    What percentage of seniors respond by sending in money?
        Mr. Ruddy. Do you want to define what prospect mailing
    means?
        Mr. Heartfield. Prospect meaning to new lists, not people
    who have previously given. It's probably 3 percent send money.
    Three percent don't send money but send the petitions, sign
    petitions, and they're keypunched, as well.
        Ms. Hildred. And what's the ongoing return for mailings to
    individuals who are already in the database?
        Mr. Heartfield. Probably closer to 10 percent.
        Ms. Hildred. Whether they've contributed in the past or
    not?
        Mr. Heartfield. Yeah. I mean across the board it's 10
    percent. Some nondonors will convert to being a donor the
    second time or they get a newsletter in the meantime and they
    say hey, this group's for real. They may not send a
    contribution the first time because they don't really know who
    the group is and they don't have access to the website and that
    sort of thing. But then they get a newsletter and then they
    might get a subsequent mailing that asks for money and action
    and they will send money. Some nondonors are just nondonors all
    the time. They'll sign petitions but they don't have the money
    or they don't want to send the money.
        Ms. Hildred. And when you're doing a prospect mailing, for
    example, what's the average number of seniors who the mailing
    goes out to?
        Mr. Heartfield. There's no average number.
        Ms. Hildred. How about a range?
        Mr. Heartfield. It can be 50,000; it can be a million. It
    just depends on----
        Mr. Ruddy. Test mailing versus----
        Mr. Heartfield. It could be a test. It could be an issue
    that a smaller group of people are interested in. It just
    varies.
        Ms. Hildred. And same thing with mailings to those who are
    in the database? Those vary, as well?
        Mr. Heartfield. [Nods.]
        Ms. Hildred. So how big is the database?
        Mr. Heartfield. I don't have the database so I can't give
    you--I mean it's at the service bureau but I guess the active
    is give or take a million names. Again I think that's one of
    the questions on the list that there's going to be a specific
    number response to but it's right around a million, I guess.
        Ms. Hildred. How did you become aware of the hoax flyers
    involving slave reparations and notch babies?
        Mr. Heartfield. The client faxed over one of these flyers
    one day early in 2000, I guess it was, that he had gotten from
    the Social Security office in Baltimore. Somebody over there
    had faxed it over and said, ``Do you know what the deal is with
    this?'' So he faxed it over to us and said, ``Check this out.''
        It wasn't anything that we had put out. It wasn't anything
    that they had put out as far as we knew. It certainly didn't
    look like--it was not a professional attempt. It didn't ask for
    money. And the thing that upset all of us was--again when I
    worked in the cage for Save the Whales we would get homemade
    petition forms all the time and half of them would get the
    wording right, that Norway and Iceland and Japan are the
    countries that still whale and other ones would come in and it
    would say Norway, Sweden and Chile and you just--you know, you
    just have to take a lot of that with a grain of salt. And, of
    course, that was before faxes. Well, that was when there were
    6-minute faxes and there was no Internet and that sort of
    thing.
        I mean this group gets and most groups get homemade
    petitions that come in all the time from people saying, ``I saw
    your thing and so I made up my own and I got everybody to sign
    it and here it is and please put us on the mailing list,'' and
    so on and so forth.
        So this was viewed as basically just another one of those
    except here's this thing asking for the Social Security number,
    which is a complete no-no in our business. It's a sure route to
    this and censure in the industry if you don't have a reason to
    ask for their Social Security number. I mean people just don't
    do it in our business.
        So our response to him was no, we've never seen one of
    these before. Typically the cage, if they get something weird
    they'll send it to us or to the client or a copy of it saying,
    ``What do we do with this?'' and we hadn't seen any of those,
    so our recommendation to the client was you should write the
    guy and say this isn't ours and this is a problem because it's
    asking for Social Security numbers. Thank God it doesn't ask
    for money, too, but it's asking for Social Security numbers, so
    basically I think the letter said could you investigate this
    and let us know what you find out because if it's a misguided
    supporter, which usually that's who it is that's sending in
    petitions, we need to get to them and say, ``Don't ask people
    for Social Security numbers'' and the petition is not exactly
    correct as written.
        So that was the first exposure, as far as I know, that
    either of us had.
        Mr. Ruddy. You said they sent a letter back. Who did you
    send the letter back to?
        Mr. Heartfield. Well, there was a letter to Tim Kelly. This
    was in January of 2000. He sent a fax to Mike Zabko at TSCL so
    Mike Zabko wrote a letter back to Tim Kelly saying it's not
    ours. I'm paraphrasing but it's not ours; we've not seen one of
    these before. If you're looking into it, please keep us posted
    or maybe we can sort of help pinpoint where it's coming from.
    If they're all coming out of San Jose, California area, we
    could possibly mail all our supporters in San Jose and say if
    you know of anybody that's circulating these things asking for
    Social Security numbers, stop.
        So he never got a letter back from Mr. Kelly and that was
    the last we heard of it until I guess in June they got a fax
    from Congresswoman Bono's office. Somebody had sent them a
    similar but I think it might have been a slight variation on
    the other flyer. These are all--you've seen them. They're
    crooked and some of them had misspellings in them and that sort
    of thing.
        So he wrote back to them that it's not theirs and probably
    again an overzealous supporter had unfortunately added this
    line to it.
        I mean it was a trickle of those coming in at first and
    then there was the visit by Mr. Stubbs from Social Security who
    came, I guess, in July, and knew nothing about the previous
    communication with Mr. Kelly. I guess he and Mike Zabko didn't
    necessarily have a cordial conversation.
        That's how we became aware of the first trickle of the
    flyers but they were coming from different places so there was
    no real way to--there wasn't anything that could be done about
    it.
        Ms. Hildred. What advice did you give to TSCL once you were
    made aware of these flyers in terms of what they should do?
        Mr. Heartfield. Well, with the early trickle these appear
    to be people that are signing up to support notch reform
    legislation but you should probably send them a letter and say
    ``Don't give out your--we don't want your Social Security
    number and don't give it out and if you're circulating these to
    any of your friends, take that off of there,'' was the basic
    advice.
        Ms. Hildred. So you didn't recommend that they stop
    soliciting support for notch victims, just when they use these
    flyers or people who are going to develop the flyers, just not
    to include Social Security numbers?
        Mr. Heartfield. Well, if there was a person out there who
    said I'm helping you by making up my own petitions and I'm
    going around and getting my friends who are in the same age
    group to sign them, any organization would say that's great.
    The more the merrier because that's part of what we do on the
    grassroots side. But it needs to be accurate and it needs to,
    in this case, not ask for Social Security numbers. So that was
    the recommendation in the same way that when people send these
    petitions in saying stop Chile from whaling, we'd have to send
    a letter back saying here are the three countries that whale so
    could you please modify your petition, and thank you for what
    you're doing.
        So it was that same kind of response. It needs to be fixed.
    Again in the beginning it was just a few of them. The scary
    thing was it had the Social Security number on it, so we have
    to get them to stop that because that's not a good thing.
        Ms. Hildred. Had you seen other homemade flyers previous to
    this?
        Mr. Heartfield. Oh, sure, none with that request on it but
    sure, they get them. Sometimes they come in in batches. There's
    a local notch association in Nevada. It's a pretty big club
    that meets and they have a convention and all that kind of
    stuff and they'll send in batches of petitions and then just
    different people at different times send them in.
        Ms. Hildred. And you or TSCL, to the best of your
    knowledge, didn't have any objections to those flyers having
    TSCL return address?
        Mr. Heartfield. Well, there was nothing--I mean you can't
    do anything about that. They support the various notch bills
    that are before the Congress and they put out a lot of mail
    supporting those bills, so if somebody wants to help support
    those and send in more signatures on petitions and things,
    that's great. Most groups encourage that; they have that as one
    of the grassroots activities you can do--get more people's
    names on petitions, that type of thing.
        But when these flyers started coming in with the Social
    Security number, it was how do we turn this off?
        Ms. Hildred. So you had advised TSCL to consider sending a
    follow-up letter to those who had responded?
        Mr. Ruddy. Did they respond?
        Mr. Heartfield. You mean to the ones who sent in the flyer?
        Ms. Hildred. Yes.
        Mr. Heartfield. The discussion was we probably should--we
    being TSCL should probably send something to these people
    saying don't give out your Social Security numbers, yeah. But
    again it was a trickle in the beginning so it was a much
    different situation than later in the summer when all of a
    sudden they got bombed with a lot of notch ones and then the
    slave reparation ones started showing up. Then all of a sudden
    it's thousands of these things and on an issue that they've
    never uttered a word on.
        Ms. Hildred. And who specifically came up with the idea to
    send a pamphlet with the mailing?
        Mr. Heartfield. Well, there was back-and-forth discussion
    between us and Mike Zabko. He decided he wanted to send a
    letter to these people, especially the slave reparation people,
    because those flyers essentially said you're entitled to this
    money and there's not even legislation before Congress for
    that. So there you have a case of people who literally think
    they're entitled to this money.
        So his feeling was we have to send a letter to these people
    and say this is a hoax, there is not this legislation, there is
    no money due to you, you shouldn't give out your Social
    Security number, I'm terribly sorry. And then the question was,
    you know, for them and the notch people, the issue was do you
    just do that and that's it? Because then you have all these
    people who their only exposure to this organization is that
    they sent them a letter back saying this flyer you signed is a
    hoax. So is there a way to also put in front of them
    information about the organization just to counterbalance the
    bad feelings?
        Then the question was what do they have at hand that they
    can use? Well, they have a standard brochure. Like I would say
    more than half the organizations that have a brochure,
    nonprofit organizations, it has a panel for making a
    contribution. That's a standard in brochures. It's not all of
    them but it's, I would say, more than half the organizations
    out there that have brochures, that's one of the panels.
    Sometimes it even has a business reply envelope and it's a
    self-mailer type of thing. But it's their information brochure.
    They send it out when people write in or call and say, ``Can
    you send me some information about TSCL?'' They don't
    necessarily send them the big expensive annual report and
    there's no way we could send that--it would have cost a fortune
    to send this big four-color annual report.
        So OK, we can send them the brochure because it says here's
    who TSCL is, here's some of the issues that they work on,
    period. There was no--you're not going to ask the slave
    reparation people for contributions under any circumstances
    because it's not an issue they work on. The notch people,
    you're basically saying you responded to a hoax and you sent
    your Social Security number and you shouldn't have and it's not
    an appropriate place to ask for a contribution. The brochure
    was put in there because it was the piece that was insertable
    in a normal envelope that was available in quantity that
    provided the most information about TSCL and it's what they
    normally send out.
        We suggested that they add the ``70 Ways to Save Money''
    book because they had enough of those in inventory and we
    thought, you know, that's a nice touch when you're writing back
    to somebody and basically saying, ``I don't know who told you
    you were entitled to $5,000 but I'm here to dash your hopes of
    that. You're not getting $5,000. Is there something more we can
    do?''
        And we said, you know, you can send them the ``70 Ways for
    Seniors to Save Money'' book and it's a nice little gesture.
    Again it doesn't ask for money and it's not a fundraising
    vehicle.
        The brochure has never been used in a fundraising mailing
    and I don't know any group that uses their brochure as part of
    their fundraising program, other than if you send it out to
    somebody that wants information.
        And I explained all this to the Social Security people and
    it was very disappointing to keep seeing this reference to
    their standard fundraising brochure. It has never been a
    fundraising brochure. Fundraising, you ask for money in the
    letter. You give them an involvement device or a technique. You
    give them a return envelope. You make it easy for them to send
    you money if that's what you're trying to do and this was the
    farthest thing from that.
        So that was what was decided after everybody going back and
    forth and trying to be highly sensitive to the situation
    because of the Social Security numbers and because the slave
    rep ones, of course, were out of left field and not an issue
    that the client was involved in. So that's what was come up
    with. That was the mailing package that was shown to the Social
    Security guy, the postal inspector. The Arkansas lady happened
    to be in the same meeting 3 days before the first mailing went
    out and Mike Zabko called us up after the meeting and said, ``I
    showed them the mailing and all the pieces. The Social Security
    guy objected to some of the wording in the letter as it related
    to whether or not government agencies were actively
    investigating this so I told him I would make the change,'' so
    he sent over a change.
        The change was made. The mailing started going out. Nobody
    said a word about it and four mailings went out that way over a
    period of a few months. Then, all of a sudden, six, 8 months
    later or whenever it was, you're sending out this solicitation
    letter and this fundraising brochure.
        So I don't mean to get worked up about this but it's so far
    from even a bad attempt at raising money that it just boggles
    my mind and you all can ask your bosses' fundraising
    consultants, you can ask anybody at the respective parties, you
    can call anybody in town that does fundraising and nobody's
    going to say, ``Gee, what a great technique, what a great
    concept.''
        Ms. Hildred. But the pamphlet did include information for
    how an individual could join?
        Mr. Heartfield. There's one panel. Yes, it has one panel
    out of eight or however many panels there are that says you can
    do that, yes. So if somebody had said, if the Social Security
    guy had said, ``You're asking them for money,'' I imagine the
    consensus would have been, ``Whoa, let's just pull that thing
    out or let's go print a special version of the brochure without
    that panel in it because everybody is way overboard on this
    whole thing in terms of assuming that TSCL is doing this on
    purpose.'' But there was no objection raised.
        You know, in hindsight, I wish that it had not been done
    that way because people seem to be keying in on that but all I
    can say is that's not a fundraising brochure and that's not its
    intent, never was, and I don't know of anybody who would look
    at that mailing and say the purpose of this mailing is to get
    money.
        Ms. Hildred. Would you refer to the notch baby flyer as a
    hoax?
        Mr. Heartfield. Well, it's a hoax in that it was not
    authorized by TSCL, it asked for Social Security numbers and
    some of the versions had some wording in them which wasn't
    really true as to the status of the legislation. So we referred
    to all of those flyers as hoax. It was unfortunate.
        Ms. Hildred. OK, which of your employees dealt with TSCL
    regarding their response to the hoax flyer?
        Mr. Heartfield. Emily Matusek, who was the person who came
    with me when we did our meeting with the Social Security
    people, was primarily the one that coordinated the production,
    getting the printing done and all of the response out to the
    hoax letters and that sort of thing.
        Ms. Hildred. What discussions did you have with Mike Zabko
    regarding his cooperation with the Federal investigation into
    the hoax flyers?
        Mr. Heartfield. I mean, you know, from his perspective he
    kept trying to get somebody to investigate and felt frustrated
    that if there was any investigating going on, nobody was
    keeping him in the loop or even saying that they were and in
    other cases just not getting any response. I mean he wrote
    letters to Social Security. He wrote letters to the chief
    postal inspector. He contacted the Better Business Bureau, the
    Veterans Affairs Office, the NAACP, a black ministers group,
    Secret Service, or responded if he got calls. He got
    Congressman Moran to write a letter to the Social Security
    asking what the status of the investigation was.
        So he hired his own investigator, who was a former FBI
    agent, to see if there was anything that could be done with the
    information that TSCL had to try to figure out where they were
    coming from or turn them off.
        In the end it went down to a trickle, I think largely
    because of just the overwhelming number of things that they
    sent out--press releases, notices, letters to--again there were
    a lot of these being passed out, the slave rep ones, in black
    churches in the South, so they tried to put a damper on it, as
    well as asking multiple Federal agencies to investigate and see
    if they could help them find the source.
        Ms. Hildred. And how about discussions with Mr. Zabko
    relative to the subpoenaed information that the Office of
    Inspector General had requested?
        Mr. Heartfield. From them? From TSCL?
        Ms. Hildred. [Nods.]
        Mr. Heartfield. You know, they sent over a copy of the
    subpoena and basically said some of the stuff, you're going to
    have to help us collect, just from a sheer time standpoint.
    They made their own call as to how they were going to respond,
    between them and their lawyer, to the subpoena. It was he and
    the board and their attorney.
        Ms. Hildred. Was your firm subpoenaed by the inspector
    general?
        Mr. Heartfield. Yeah, the Monday before Christmas and they
    asked for everything we had about the hoax, which we had
    sitting in a pile of this size because we expected sooner or
    later somebody would ask for it or at least ask us to have a
    meeting. And they asked for every other document we had
    pertaining to TSCL for the previous 3 years, all due the Friday
    after Christmas, just out of the blue. Never called and asked
    for a meeting. That was the first contact.
        Ms. Hildred. And did you comply with that subpoena?
        Mr. Ruddy. I can answer that. We spoke to I believe it was
    Amy Thompson of the Social Security Administration within a day
    or so of when we got the subpoena, explained to her that Squire
    and Heartfield was closed the last week of Christmas and that
    we were unable to even talk to anybody to figure out what we're
    going to do about it.
        Within--I have in my files--sometime in the early part of
    January we sent them, SSA, copies of what we currently had by
    way of slave reparations and the hoax stuff. The rest of the
    material they wanted was way beyond, in our opinion, the scope
    to which they were entitled and with counsel, with DC counsel,
    we advised them that they needed to help us understand, (1) why
    we were required to produce tens of thousands of documents and
    (2) where did they have the authority to get that. And there
    was statute and case law and so on that was communicated, so
    there was various discussion that occurred.
        Eventually they agreed, by virtue of court orders that were
    entered, that we'd give them, in effect, what we gave them.
        Ms. Hildred. Do you know the results of--you mentioned that
    Mr. Zabko had hired a private investigator to investigate the
    issue. Do you know what the results of that investigation might
    have been?
        Mr. Heartfield. Not that I remember. I saw a report that he
    had submitted to Mike somewhere along the line. It said he had
    called some of the people that had gotten the flyers and
    basically--you know, all over the country, and there was
    consistent feedback that their cousin sent it to them or
    somebody gave it to them in a parking lot, you know, outside
    church or even the minister was passing them out in one case,
    that none of these people had been asked to give any money to
    the person that gave them the flyer. There was a report from
    Detroit that somebody was selling these flyers so he tried to
    chase that down and talked to a reporter, I think, and it
    turned out that wasn't true.
        At the same time this was happening, there was a story out
    of Florida about somebody that was charging people to fill out
    a 1040X IRS form, which was for you to get $40,000 back for
    slave reparations and there had been other--a Washington Post
    article in the middle of all this about a guy that goes around
    to churches and just collects money and says I'm going to get
    slave reparations for all of us and he's never been to
    Washington but people take up collections for him.
        So the concern was is there a money thing going on here, in
    addition to that, or can this guy help us figure out a source?
    Is there any sort of pattern? And my recollection from that one
    report is there was no pattern, it was exactly as it had seemed
    to be, based on people that Mike Zabko or the people in his
    office had talked to when they called in about these flyers,
    which was my cousin faxed it to me, so-and-so emailed it to me,
    so-and-so handed it out in a parking lot. No rhyme or reason.
    They were coming in from all over the country. So that was
    that. I don't know if he got any other reports from this guy
    about it.
        Ms. Hildred. Did you talk to any of your employees to see
    if they had any knowledge of the flyers?
        Mr. Heartfield. I didn't go around and interview each
    employee and say, ``Do you have any knowledge of the flyers?''
    but we're in a small office and everybody knows what's going on
    and everybody was aware of these flyers and aware of all of the
    frenzied phone calls and the stuff happening over at TSCL and
    the fact that the Social Security numbers and Emily was pulling
    her hair out and I was pulling my hair out and that sort of
    thing. So everybody was aware of the flyers.
        Again I've been doing this for 23 years and I'd be hard-
    pressed to figure out a way to initiate the distribution of
    those flyers on purpose in some fashion that it would then go
    like it went. And it would never occur to me to ask. You know,
    we don't benefit from something like that and people in our
    office know that and they don't benefit. Even if you could make
    a case that as an owner I would somehow benefit, employees
    wouldn't benefit.
        But there is no benefit. There was only a cost. There was a
    significant financial cost, as well as this nightmare for all
    this time. And it's something you're kind of powerless to turn
    off.
        But no, I didn't go around and interview each person.
        Ms. Hildred. And Mr. Zabko didn't ask you to interview each
    person?
        Mr. Heartfield. No.
        Ms. Hildred. Did you question any of the print shops that
    you work with about the flyer?
        Mr. Heartfield. No. Again simply because there's no benefit
    to anybody to do it, so it never occurred to me to ask them,
    and they're all people that I've known or we've known,
    somebody's known for a lot of years, for the most part.
        Ms. Hildred. Are you familiar with the company Direct Mail
    Resources?
        Mr. Heartfield. It's a company--I don't know what form of
    company but it's something that Mike Zabko's wife started up. I
    don't know when she started it or when she stopped it if she
    even stopped it.
        Ms. Hildred. Has your company used this company?
        Mr. Heartfield. What Charlene, his wife, told me was that
    she was going to start a company that would do small
    fulfillment mailings and back-end projects, which is an area in
    our industry that there's a chronic shortage of people.
        All the mail shops want big giant jobs that are all
    uniform, the same pieces going into the same envelope thousands
    of times. When you have these little jobs, some groups do them
    in-house or you try to go out and find a small fulfillment
    business to handle them for you and it's tough to find; it's
    always been tough to find.
        When I was at Save the Whales we used to get kids in there
    after school. We had an arrangement with the local school and
    they would come in and help us if we were trying to stuff
    envelopes, and do things in-house.
        So I said, ``Great, you know, our world needs more of those
    things and I'm happy to share that information. If you have any
    brochures or anything, I'll pass it around to my friends,''
    because people call me sometimes because I was on the board of
    the Direct Marketing Association in Washington and I'm kind of
    involved in the community, so people call me. So I said, you
    know, ``I'd be happy to pass your name along.''
        We had another client that had a small fulfillment job
    coming up and it was being handled by one of our principal
    printing brokers, and that's people that go out and bid the
    stuff for you. I asked them to bid that little piece of the
    job, to add Direct Mail Resources to the list of the people
    they were bidding it to, see how they were. They came back and
    said they had the best price and I said, ``All right, it's a
    little dinky job, it's a good way to try them, let's try
    them.''
        They did it. They did an OK job. It wasn't anything
    spectacular. There was a subsequent mailing of that same--
    subsequent need to do a fulfillment on that same project for
    that same client. The printing broker ended up using somebody
    different that time. I didn't ask them to go back and--I didn't
    ask them to use DMR in the first place. I simply said to put
    them on the bid list, which we do all the time. When vendors
    call us we say the brokers handle a lot of that stuff for us,
    so we might meet with you and hear your presentation. All we
    can do is give their name over to the printing broker and
    they'll bid and if it's a good price and you check out, good,
    you can be on the list in the future.
        In this particular case they didn't use them again and that
    was it. That was the only time we had any experience with them.
        Ms. Hildred. Was that client TSCL?
        Mr. Heartfield. No.
        Ms. Hildred. Do you ever print materials in-house?
        Mr. Heartfield. No. We don't have--we have little desktop
    printers and things, so we might print--if you had an emergency
    where you had to print 500 copies of something, sometimes it's
    literally saying go set it up and print it ourselves. No; we
    have no printing equipment, no mail-shop equipment, no
    affiliation with any of those businesses because we're the in-
    between person and our responsibility is to make sure that
    stuff gets done properly.
        Ms. Hildred. How do you account for the similarities
    between the solicitations that TSCL has used and the similar
    look, although not exact, in terms of the hoax flyers?
        Mr. Heartfield. Well, it's pretty normal for grassroots
    petitions or sometimes it's an open letter to Congress,
    whatever it's called, if they get one of yours they try to make
    it look the same.
        Now in our particular case we often use borders around the
    petitions that are color and about all you can do with that,
    unless you happen to be a graphic artist, is you can try and
    Xerox that but to me, these things come in and they're crooked
    and obviously they've been reproduced a million times because
    they have little dots on them from dirty Xerox machines and
    things like that. So we just looked at it and said that's just
    more grassroots stuff coming in.
        Sometimes you get exact reproductions, because you have
    somebody that's very good with a computer and they'll scan it
    in and reproduce it, only they'll add space for 20 people to
    sign instead of one person and they'll go out and get people to
    sign it. So sometimes it can look exactly the same. They'll
    even use color. We can still tell because typically the
    petition form doesn't have a code on it but it looks a certain
    way. And if you get one that comes in with 20 signatures,
    that's not something we put out; it's something that somebody
    took the top part of ours and then dropped the bottom down far
    enough that they could add a bunch of signature lines.
        So that was the basis for the original assumption that this
    is a supporter that's done this and that's great but you can't
    do Social Security numbers; it's just not a good thing to do.
        Ms. Hildred. I know you've referred to the cage process.
    Where are solicitation responses returned?
        Mr. Heartfield. There's a P.O. Box. In this case it's in
    DC. That's used so that the mail processing facility can go and
    pick the mail up in one location. They take it back to their
    secure facility, in this case in Hagerstown, and they process
    it all there.
        Ms. Hildred. And is it that group who enters the data
    that's received?
        Mr. Heartfield. They enter it into computers there and it
    goes into the database, which is at PIDI in Alexandria.
        Ms. Hildred. And what is your relationship to the Public
    Interest Data, Inc.?
        Mr. Heartfield. PIDI?
        Ms. Hildred. [Nods.]
        Mr. Heartfield. They are the service bureau that TSCL has
    their file at and so when we're doing mailings, that's the
    vendor that we send purchase orders to, you know, doing selects
    for names and that sort of thing. We had not used them prior to
    TSCL selecting them. There was a request for proposals process
    that was done and there were 10 service bureaus and five or six
    mail facilities. We went through a whole process with tours and
    pricing and all that kind of stuff and they were chosen as the
    service bureau.
        Ms. Hildred. And did you have any conversations with them
    regarding the hoax flyers after you were subpoenaed by the OIG?
        Mr. Heartfield. Well, other than to say, ``Oh, we got a
    subpoena and I believe they said, ``Oh, we got a subpoena,
    too,'' because I think they got one at about the same time that
    we did. Their subpoena was asking for this; ours was asking for
    other things. Anything you have on the hoax and then other
    things beyond that, but what they were being asked for was
    list-related. What we were being asked for was document-
    related. I don't know whether--no, there weren't any
    conversations.
        Ms. Hildred. Did TSCL advise you how to act with regard to
    your subpoena from the OIG?
        Mr. Heartfield. No. I mean it was our subpoena at that
    point and we had no problem with turning over all the hoax
    stuff that we had. We expected that it would be asked for at
    some point in this whole process. But because of all the other
    things that were asked for that didn't have anything to do with
    the hoax and the volume of it for a little company like ours,
    it went to Richard Ruddy, our attorney, at that point.
        So no, they didn't call up and say we want you to do it
    this way or that way or anything like that. It was a little
    awkward because we had our own subpoena at that point.
        Ms. Hildred. And Mr. Ruddy, you had indicated that
    ultimately there was an agreement that you had complied with
    the subpoena.
        Mr. Ruddy. There was some discussion with Social Security
    and with their counsel, Mr. Sklaar, and with our DC counsel,
    who was very familiar with the inspector general statute and
    eventually Social Security agreed that all Squire & Heartfield
    needed to provide is what they had provided, which they
    provided again, which was copies of stuff which related to the
    specific issue that was relevant to what they were looking into
    and Squire & Heartfield was happy to do that.
        Ms. Hildred. Have you or anyone employed by Squire and
    Heartfield Direct ever discussed the idea of slave reparations
    as a fundraising issue?
        Mr. Heartfield. About 4 or 5 years ago we got a call from a
    company which had as a client the National Council of Negro
    Women, which is Dorothy Height, who's pushing 90, I think, now.
    This company, somebody we had--people we'd known for a long
    time and done business with on and off--even in past companies
    where I worked I knew of them--they said that the Council had a
    new membership chair and she'd called them up and said, you
    know, ``We want to get out there and do some prospecting and
    get some new members.'' And this company does mostly sort of
    benefits management and association management and renewal
    mailings for members; they're not really big on prospecting.
    And did we want to participate in this with them? Did we want
    to write copy for them?
        This was a company that had helped us out in the past with
    some contacts with people. They got us in the door at Purple
    Heart, for example, so we could make a proposal to Purple Heart
    and we could try to get them as a client.
        So I got the call from the guy and I'm thinking to myself,
    I don't know what we could do in that area and you're not in a
    position to manage any more programs right now. So I did say to
    him, ``We can't help you with production or being involved but
    let me talk to Jeremy and see if he wants to write you a
    package and if they take it we'll charge you 1,500 bucks and
    that's it'' kind of thing.
        So I called my partner Jeremy Squire up and I just said,
    ``John called and they're looking for something for this group
    and it's a big fat pain and I don't really want to do it and I
    know you don't want to do it but he's done things for us, so
    think about it.''
        So Jeremy called back a few days later and said that he'd
    rooted around on the Internet and given it some thought and
    what about this whole idea of slave reparations as a
    provocative issue that the National Council could use, a survey
    on slave reparations? How do you feel about this issue because
    that was again five years ago. It was just starting to kind of
    hit the mainstream at that point.
        I didn't know anything about the issue. I said I don't
    know. So we called this other company back and said, ``The only
    idea Jeremy came up with is this; I don't even know if they
    have a position on it or if they want to do anything like
    that.'' And he said, ``Well, I have a meeting with this lady
    next week. Why don't you go ahead and write something on it for
    me?'' Which is not the answer we were hoping to get but I
    called Jeremy and said, ``He wants you to write something.''
        So Jeremy wrote a prospecting package for people to join
    the National Council for Negro Women based on a survey on the
    issue of slave reparations and other issues for blacks, not
    knowing if they had a position on the issue. We gave the
    package to this guy. We didn't hear back from him for several
    weeks. I called him up and said, ``John, what's going on?'' and
    he said, ``Well, she postponed the meeting and now she's saying
    maybe they don't want to have a new prospecting program so I'm
    going to send her over the copy and I'll get back to you.'' And
    that's the last I've heard of it for all those years. I mean we
    didn't charge them for it or anything like that. So that was
    that.
        Ms. Hildred. Was that flyer, when it was devised, was that
    printed in-house?
        Mr. Heartfield. Flyer?
        Ms. Hildred. The draft survey.
        Mr. Heartfield. Well, it's just a Microsoft Word document
    that's printed out and sent off. Social Security people have a
    copy of it.
        Ms. Hildred. I believe this is the document.
        Mr. Heartfield. Yeah.
        Mr. Ruddy. Have you ever seen this before?
        Mr. Heartfield. Yeah, this is that mailing piece.
        Mr. Ruddy. Squire & Heartfield didn't have a copy.
        Mr. Heartfield. Yeah, that is all there is. There's not
    even a file to go with that and there was no discussion. I
    called this guy. That was the call several weeks later--
    ''What's the deal?'' He said, ``They postponed the meeting;
    I'll get back to you on that'' and that's the last I heard of
    it.
        Ms. Hildred. Just a question. The copyright reference at
    the bottom; explain that to me.
        Mr. Heartfield. Well, we were advised when we started the
    business, by the attorney that helped set it up, we said,
    ``What about copy? When we're sending copy out to clients or
    potential clients, could they just go off and use it and they
    don't pay us kind of a thing?'' And the suggestion was in a lot
    of ways there's not a whole lot you can do about that but, at
    the least if you want, when you write copy, just put
    ``copyright'' and your name at the bottom. So it might give you
    some leg to stand on.
        So it's just a canned part of--all our packages, we try to
    put this thing at the bottom. If it's an actual mailing it
    would have a job number, which is a control number that we use,
    and a date and that sort of thing. I don't even know if it has
    any enforceable value.
        Ms. Hildred. After receiving your congressional subpoena
    and before the misleading mailings hearings that we had on July
    26, did you speak to Michael Zabko?
        Mr. Heartfield. After we got our subpoena to testify?
        Mr. Ruddy. That's the subpoena for you to appear, not for
    the documents.
        Mr. Heartfield. Right.
        Mr. Ruddy. That was sometime in July that came out, wasn't
    it?
        Ms. Hildred. Yes, just a few weeks before the hearing.
        Mr. Heartfield. I talked to him at some point in the
    summer. He was working at the Charles County Red Cross and I
    got a message that he had called and I called him back and we
    played phone tag for a while and it had to do with he was
    trying to remember the names of a couple of printers in Waldorf
    that we had used because he wanted to see if they would do some
    printwork, in one case do some printwork for the American Red
    Cross chapter down there. In another case he wanted to see if
    they would sponsor his golf tournament that he was putting on
    for the American Red Cross.
        I don't know if that conversation--I mean it was sometime
    in the summer. The golf tournament was in August so it's before
    August, but I really don't remember when, and it was about
    that.
        Ms. Hildred. How about did you speak to George Smith?
        Mr. Ruddy. After the subpoena?
        Ms. Hildred. Yes.
        Mr. Heartfield. I don't know if I talked to George Smith
    other than if there was some kind of a conference call. My
    partner Jeremy does most of the communicating with George. I'm
    sure I was involved in a conference call or two about pulling
    together information and that sort of thing.
        Ms. Hildred. What is your understanding of why Michael
    Zabko was asked to relinquish his position as executive
    director of TSCL?
        Mr. Heartfield. I don't actually have a good understanding
    of why. I'd like to go to lunch with him and say, ``What's the
    deal with you leaving?'' I don't know. I just really don't have
    an understanding of it.
        Ms. Hildred. And what changes have you seen in your working
    relationship with TSCL since Mr. Zabko has left?
        Mr. Heartfield. Well, on a practical level, without an
    executive director we've had some administrative difficulties
    in just the paper circulation, things like that, if you pull a
    central player out.
        In terms of dealing with copy issues and things like that,
    there haven't been any problems associated with it. It's just
    simply different people that we're talking to about it. And
    again some organizations, you never even meet the board; you're
    always dealing with the president or the executive director.
    Some organizations you're dealing with their marketing--your
    counterpart and you barely get to meet the president. Some
    groups, everybody's dealing with everybody.
        So there's been no real change other than the fact that
    George and Virginia, because she's new, also, want to get up to
    speed so they're asking all the questions you'd expect of a new
    person in any situation.
        Ms. Hildred. And in terms of perhaps--initially you
    referred to TSCL providing you with a legislative agenda, has
    there been changes since the change in administration regarding
    their focus, their legislative----
        Mr. Heartfield. Oh, yeah, their position on some things.
        Ms. Hildred. Can you give some examples?
        Mr. Heartfield. For example, the President's Commission
    wasn't around when Mike Zabko was there. They have a position
    on that now which is not particularly favorable to the
    Commission and the idea of private retirement accounts and that
    sort of thing. I would say Virginia has put her stamp on the
    other issues but, for example, they got a call from Congressman
    Stupak about a Meals on Wheels program that he was pushing--I
    don't know if it was an amendment or what--asking if they could
    put out some--put out the word to some of their supporters, put
    out press releases, do whatever to help support that
    legislation and they jumped right on doing that and that sort
    of thing.
        I think that some of the core issues--CPIE and that sort of
    thing--they've supported that before. It's not really a
    partisan issue.
        Nothing dramatic, I guess, but definitely there's a new
    legislative person over there and that person is working the
    legislative agenda and they updated the agenda and gave us the
    new one and the new one was put into the annual report that was
    issued and all that kind of stuff.
        Ms. Hildred. We also understand that TREA board dismissed
    TSCL board and do you have any understanding as to why that
    might have occurred?
        Mr. Heartfield. No; we try to not--again, TSCL's our
    client. We just try not to get in the middle of situations like
    that, regardless of who the group is. So we were told that
    George Smith was the new chairman and there was a new board and
    everything was fraternal and no expectation of making dramatic
    changes and could we please help them get up to speed on things
    that we were involved in?
        And then subsequent to that they hired Virginia and we went
    over there and did what we call a Direct Mail 101. We do a
    little presentation, walking people who are new to a board or
    new like Virginia, you know, here's how a mailing works and
    here's what we do and here's what you do and that sort of
    thing. But we just didn't want to--it didn't have anything to
    do with us.
        Ms. Hildred. Have you seen any changes relative to the
    different boards in terms of how you work with them? Anything
    significant?
        Mr. Ruddy. You only work with TSCL board, right?
        Mr. Heartfield. Yeah, but you're talking about the new TSCL
    board?
        Ms. Hildred. TSCL board.
        Mr. Heartfield. Well, several of the people on the new TSCL
    board we have gotten to know over the years, either because
    they were previously involved with TSCL or because they were on
    TREA board and we just had met them socially kind of a thing.
        No, they asked a lot of questions to get up to speed.
    Beyond that, I haven't really seen any dramatic changes in the
    way they're doing things. As it relates to us, George has a
    slightly different style as far as how he wants to say things
    and you have to get used to that kind of thing in the copy, and
    Virginia wants to word it slightly differently, based on her
    interpretation of that legislation versus the previous guy's
    interpretation. So we adjust to those sorts of things but
    that's standard any time you get a new executive director or
    new significant person.
        Ms. Hildred. In your opinion is it feasible to get 29,000
    responses from across the nation to a flyer without some kind
    of organizational effort being involved?
        Mr. Heartfield. Well, I think yes and the reason I think
    yes is because that, as far as I'm concerned, that is exactly
    what happened. I mean we watched these things come pouring in
    and the cage watched them come pouring in and they would send
    samples down and they were coming from everywhere and they were
    all different variations and different spelling errors. Not a
    single one of them had any markings or trappings of being
    coordinated in any way.
        I mean if I'd seen like a little code on the bottom of one
    of them I would have said somebody's involved in this and for
    whatever reason they've put a little code on this. Or if they'd
    all been the same or if they'd been more professionally
    reproduced before they were distributed, I'd say somebody's
    trying to--you know, the sloppier something looks, the less
    seriously some people would take it.
        So we never felt like it was anything other than just a
    pure grassroots thing. And especially the slave reparations
    thing because it says you're entitled to $5,000. It's not hard
    to generate signatures in a situation like that. And again
    there were these telephone calls coming into TSCL from
    ministers and from other people reporting that literally people
    were walking into church with 100 of these things, passing them
    out and street corners in little towns. I mean we were shocked
    by the number but it was not unbelievable to see that many of
    those come in.
        I would say the notch ones that came in, I don't even know
    if the number of notch ones that came in--there's no way to
    know and I don't remember off the top of my head how many of
    each there were but it wouldn't be surprising for them to
    receive several thousand homemade notch petitions a year. That
    wouldn't be surprising at all. But you add those and these
    particular ones, because of the Social Security number, then
    add these slave reparation ones, you know, it's 29,000 of them.
        Ms. Hildred. And you used a company to store the personal
    information that was received from the hoax flyers?
        Mr. Heartfield. TSCL--well, the flyers were isolated. Once
    they started coming in volume, notch flyers first with Social
    Security numbers, the cage was instructed--you know, we had a
    conference, a phone call with Mike Zabko: ``What do you want to
    do about these things?'' It's starting to be a significant
    number and there were already starting to be some press reports
    and things like that. And, of course, he had the visits from--
    inquiry from Social Security and then the follow-up from
    Stubbs, from Agent Stubbs. I guess there were subsequent
    conversations and then somewhere in there there was the
    subpoena but what we said to him was you need to isolate these
    names. These source documents, don't mix them in the boxes that
    are going in the back. In fact, we asked the cage to put them
    in the secure room where they lock up the checks and cash
    overnight.
        Don't mix them in at all. Keypunch them with the special
    code NTD, which means non-TSCL document so that they can always
    be kept track of separately. Absolutely don't key the Social
    Security number. There is no place to key a Social Security
    number in that database but it was stated just to make
    absolutely clear that they didn't do that. So that's what was
    supposed to--that's what was happening with these documents.
    They were isolated once there was any sort of volume.
        Ms. Hildred. To your knowledge, has the list of names
    obtained in response to the hoax mailers or the hoax flyers
    been sold?
        Mr. Heartfield. No, hasn't been sold. A few of the names
    probably got through on some rentals early on because again it
    was a trickle of what looked like run-of-the-mill petitions
    except they had the Social Security number, so there was no
    reason to think they weren't--still no reason to think that the
    notch ones weren't legitimate attempts by people to help push
    the legislation.
        When the slave rep ones hit and it became this big number
    and a serious problem, PIDI was instructed to suppress all
    those names with those codes from TSCL mailings and do not rent
    or exchange them, either. So they effectively have been off the
    market, including there were a couple of thousand people that
    sent notch flyers who were actually prior contributors or at
    least supporters of TSCL. They, as well, were put on the do not
    mail, do not rent list. So TSCL actually took names that they
    had acquired through their regular program and just stopped
    mailing to these people because they had also responded to--I'm
    assuming at least 99 percent of them--to the notch flyer, not
    the slave rep flyer.
        So the list, to my knowledge, was never sold. The list was
    not rented in any totality, a few of them in the beginning
    rented or exchanged, and it's been in that status ever since.
    The reason to keypunch the names, and that was stated in some
    of these early documents, was TSCL felt that they were going to
    have to respond to these people and say, ``Don't give out your
    Social Security number.'' And then it became ``Don't give out
    your Social Security number'' and, for the slave rep people,
    ``This is not real. There is no legislation like this. There is
    no money for you. And if you know anybody, please try to turn
    it off.''
        So they were keyed for that reason but with the special
    codes and the actual source documents were always kept
    separately, specifically because it was--I guess Mike offered
    or it was assumed that the postal inspector or the Social
    Security people would--I guess they'd talked about, you know,
    we want the documents at some point, so they were handled that
    way.
        Ms. Hildred. So the database still exists and is still in
    whose possession?
        Mr. Heartfield. It's still at PIDI and I don't--TSCL, I
    guess, has offered to destroy the database at whatever point
    they and Social Security kind of reach an understanding. I mean
    they don't want it. It's no good. I mean if they gave me that
    list I couldn't make a dime out of that list. It is not direct
    response people. It is, by and large, poor, elderly black
    people in the rural South. Those aren't lists that anybody
    wants to rent to sell anything to. It's not a list that most or
    any nonprofits that I can think of would want, but for the most
    part because it's not a direct response list. It's just these
    flyers that came in the door.
        So the list has no value to them or really to anyone. And
    again I think the list company would--if I went to the list
    company and said, ``Hey, here's this list; can we market
    this?'' they'd say no.
        So it's frustrating to hear that, that's maybe one of the
    reasons this was done.
        Ms. Hildred. Do you know of any money that actually came in
    with the flyer responses?
        Mr. Heartfield. You mean with the flyers?
        Ms. Hildred. Yes.
        Mr. Heartfield. Not the responses to the hoax mailing?
        Ms. Hildred. Yes; the hoax flyer.
        Mr. Heartfield. No; I know people sent in documents in some
    cases, copies of their Social Security card or even their cards
    or birth certificates or things like that. We were dreading the
    day that a version of this thing appeared which had the dollar
    box added to it by somebody who said, ``The way you're supposed
    to do this is you ask for money so I'll add that to the bottom.
    I'll make my own version.'' That never happened, thank God.
        In fact, I would say it was surprising. I can't say nobody
    ever sent a dollar in with theirs but we had routine
    conversations with the cage about these flyers. ``How many did
    you get today? Any money?'' And I don't recall ever hearing
    anybody say, ``Yeah, we got some in today with a dollar here or
    a dollar there.''
        The standing order was anything that comes in with them,
    whether it's money or documents or even copies of documents
    goes to TSCL so they can be sent back to these people. So if a
    dollar came in it was sent back.
        Ms. Hildred. So your understanding was that anything that
    they received they did send back?
        Mr. Heartfield. Yes, that TSCL sent back. The cage was
    under instructions just to forward all that stuff to TSCL so
    that they could return those things.
        Ms. Hildred. And in terms of the follow-up mailing that
    went out to those who had responded to the flyers, do you know
    what money might have come in as a result of that?
        Mr. Heartfield. I don't know what the number is. There were
    apparently a few that came in because I know there are some
    that they picked up with a Membership Brochure Application
    code, which is the code that's in the membership brochure. I
    think again that's one of the questions that's on the list and
    PIDI has to run that to see how many it was. I do know that it
    was a tiny number relative to the 29,000 but I don't know what
    the exact number was.
        Ms. Hildred. So you have had conversations with either TSCL
    or PIDI in regards to their questions for the record that they
    have to answer to us? You've referenced that.
        Mr. Heartfield. Well, no. What we did, TSCL sent us a copy
    of Congressman Shaw's letter and said, ``Please help us with
    the questions that are obviously in your area.'' And the only
    other person that was listed on it that they sent it to was
    their attorney.
        So we wrote them back a letter and said, ``We can help you
    with this and this and this, the list stuff, like who rented
    the list or exchanged the list and that sort of thing. You need
    to send this, if you haven't already, to PIDI and get them
    started on the questions pertaining to how many people gave
    here or gave there and gave it as a result of this because we
    can't--we don't have those answers. We don't have the
    database.''
        So that's--it wasn't a conversation. It was just a letter
    or memo that we sent back over to TSCL the day before
    yesterday, I guess, saying PIDI has to get that for you.
        Ms. Hildred. Have you ever prepared any flyer for TSCL?
        Mr. Ruddy. On a particular topic?
        Mr. Heartfield. What do you mean by flyer?
        Ms. Hildred. Anything that TSCL might use to hand out to
    people, versus a formal mailing.
        Mr. Heartfield. No. Sometimes in mailings you use something
    that's usually called a pub note in the magazine trade, a
    publisher's note, which is one of those little forms and it
    says if you're still not convinced you should subscribe, please
    read this. And you open it up and it's a little note from
    somebody. And that little technique is used in fundraising and
    typically the content--it might be a letter like that or it
    might be you open it up and it's got newspaper articles
    mentioning the group or mentioning the need for this bill or
    quotes about it. So it's almost like a flyer in that sense but
    those go in mailings. And we don't use them very often because
    it doesn't really work as well in fundraising.
        But we've never prepared a flyer that I can remember that
    they would have handed out as such. They have materials they
    handout--the brochure, the ``70 Ways'' book. They've published
    a couple of monographs on senior citizens survival guide and
    how to communicate effectively with Congress, you know, and an
    annual report. We help them sometimes with those. Sometimes
    they do them themselves but nothing that's an actual flyer.
        Ms. Hildred. Have you had any involvement or knowledge
    whatsoever in the original distribution, printing, manufacture
    or have you been connected in any other way with these hoax
    flyers?
        Mr. Heartfield. No. Well, any other way other than doing
    the follow-up mailing but absolutely not.
        Ms. Hildred. And do you have any idea, considering the
    large-scale distribution and the considerable response, do you
    have any hypotheses as to how this might have occurred?
        Mr. Heartfield. What I said earlier. And I consider my
    opinion to be a legitimate and valid professional opinion,
    having literally started out in a caging operation and
    experienced things like that coming in without being requested.
        I think it was just grassroots response to an issue. Again,
    especially on the slave reparations, all of the feedback was
    that this literally was a spontaneous grassroots thing.
        Ms. Palm. Why do you think somebody would associate slave
    reparations with TSCL, with them never having worked on the
    issue? I mean why would a supporter generate a new issue for
    TSCL?
        Mr. Heartfield. I have no idea. I really don't. We just
    assume that there was some poor person that got terribly
    confused. All groups receive mail intended for other groups.
    People send their electric bill in the envelope to TSCL. I mean
    they get confused about things. Sometimes you have people that
    are confused and they give 10 contributions in 10 months and
    their son or daughter writes in and says, ``My mother's not
    competent to do this'' and they get a refund.
        Again, once we saw these things coming in, now somebody has
    taken this concept of notch, lump sum payment, and they've
    mixed it up with this idea that there should be a payment for
    slave reparations, which on its own has been around as an issue
    for a number of years but somehow they've taken this thing and
    they've made this leap over here to this one and they're using
    TREA. Some of them even say TREA Senior Systems League, which
    is not their name. And those started pouring in.
        But I truly think it was a very confused person who
    transformed it. They may have gotten a notch one. Well, they
    must have gotten one of the notch ones and somehow or another
    it became slave--oh, I just heard about this on the radio;
    let's change this because they won't understand this notch
    word. I don't know.
        Ms. Hildred. Anything else?
        Ms. Palm. Just sort of an overarching question. Nonprofits
    do direct mail all the time. Do you have any sort of--does this
    tell you anything about TSCL? Do you have any hindsight
    concerns about why in all the world of direct mail TSCL seems
    to have had this happen to them, resulting in investigations
    and other issues when other nonprofits legitimately use direct
    mail to do fundraising and advance their cause? Do you worry
    ethically about the issues that they represent, the wording? Do
    you think that it's misleading? Do you think that there are----
        Mr. Heartfield. Well, the hoax came out of nowhere, these
    flyers, and it asked for the Social Security number and it
    would be suicidal for anyone that knew what they were doing to
    ask for the Social Security number, in our profession or even
    at a nonprofit group. They should know that, as well.
        TSCL has over the years criticized the Social Security
    Administration for having a position on notch, for not
    notifying recipients when there was an improvement made in the
    CPI formula that whacked three-quarters of a point out of their
    calculation and for other reasons they criticize Social
    Security Administration.
        The Social Security Administration, to my knowledge, has
    written to them once and said, ``We think you're wrong about
    something you're saying,'' and TSCL said ``OK'' and corrected
    it and moved on.
        I mentioned the letter from the congressman earlier about
    the other issue. They took that out of the mailing and moved
    on.
        So no, I don't. I mean I see stuff that's awful that groups
    put out on all sides of a lot of issues, that's just flat wrong
    or flat misrepresents positions or it doesn't have the
    disclaimers it's supposed to have, whether state or federal.
    There's a lot of that going on and TSCL doesn't do that. It's
    an issue which some people think is a horrible injustice and
    other people think is made up, and that's true on the Hill, as
    well as anywhere else, as it relates to the notch.
        As it relates to the other issues that TSCL works on,
    they're all mainstream issues that have a lot of support from
    members up here. I mean they're a regular old group as it
    relates to that, so I don't know.
        Like I said, in the very beginning I would see petitions
    misstating the countries that were still killing whales and
    that was a problem. I don't know of any other groups that have
    had--I mean there are other groups that have gotten raked over
    the coals when they shouldn't have in the past but not
    necessarily in a situation exactly like this. I've never seen
    anything like this, no.
        Ms. Palm. Does TSCL ask your advice when they're developing
    their legislative priorities? Is there consideration given to
    what legislative issues have brought them the most money in
    developing their priorities?
        Mr. Heartfield. No, they have a legislative agenda and one
    of our jobs is to identify bills which are worth generating
    grassroots support for because without it being an inordinate
    expense--for example, several years ago they supported--I guess
    it was the mobile home industry safety standards, construction
    standards, which there was legislation to improve the
    standards, which a lot of seniors live in mobile homes and
    trailers so it was something that TSCL supported. Mike Zabko
    was down on the Hill talking to people a couple of times. They
    put it in the newsletter. It was on their legislative agenda,
    but that's not something you can mail on in a big grassroots
    way because it only affects those people that live in that.
        Earnings limit was something that they supported repeal of
    the earnings limit. That applies to a narrow age range and only
    the people in that age range that are working and that sort of
    thing. So those are issues that they had on their legislative
    agenda but which weren't feasible in the mail, other than to be
    mentioned or reported on in the newsletter, press releases,
    that sort of thing, but it's not something that you would--you
    might try to test it but if it didn't work you wouldn't do it,
    because our job is not to--you know, our job is to achieve the
    balance they want between raising money and raising awareness
    and generating grassroots activity, so it depends.
        And I would say that's true of most groups. They might have
    10 things on their list and maybe three or four of them
    resonate with a typical direct mail donors in their world and
    that's what they focus on in their grassroots mailing programs.
        Ms. Hildred. OK, thank you very much.
        Mr. Heartfield. Again thank you for letting me deal with it
    this way. I apologize for any inconvenience to anybody.
        Mr. Ruddy. And thank Congressman Shaw, too.
        Ms. Hildred. We will.
        We may have some further follow-up questions for the record
    just in the sense of as the members' offices take a look at
    this transcript, if they have any other further follow-up
    questions we may submit those to you in writing. I don't know
    if that will happen or not.
        Mr. Ruddy. As far as the transcript, frequently with a
    transcript in a normal court proceeding you have a chance to
    review it if you made some mistakes or you misstated something
    or it got garbled in the process. Will we have that
    opportunity?
        Ms. Hildred. The same procedures will apply. We'll send it
    out to you for your review.
        Mr. Ruddy. You'll give us an errata sheet of some kind?
        Ms. Hildred. Yes.
        Mr. Ruddy. Great. We would really like to read it.
        [Whereupon, at 2:34 p.m., the hearing was adjourned.]
        [Submissions for the record follow:]

    Statement of Vincent B. Niski, National President, The Retired Enlisted
                         Association, Aurora, Colorado

        As the National President of The Retired Enlisted Association
    (TREA), affiliated with the TREA Senior Citizens League (TSCL), I am
    providing this statement for the printed record of the Congressional
    Subcommittee on Social Security hearing of Thursday, July 26, 2001.
        TREA is the ninth largest Veterans' Service Organization Chartered
    by Congress and is exempt from Federal income tax under section
    501(c)(19). There are 33 veterans' organizations that have been
    chartered by Congress. The members who are elected and serve on the
    Board of Directors (BOD) of TREA are all volunteers without
    compensation. The TREA BOD elects members to the TSCL BOT. Under the
    laws of the State of Colorado, TREA can have an affiliate organization
    operated separately.
        TREA was granted a federal charter based on the fact the largest
    majority of it's members served 20 or more years of faithful and
    dedicated military service to our country. TREA is extremely proud of
    the fact that we are chartered and are the ninth largest Veterans'
    Service Organization that not only assists our members, but also any
    and all veterans that utilize themselves of our services. TREA
    presently has over 75 active chapters throughout the country, including
    Puerto Rico and Hawaii. These chapters are deeply involved in the
    activities and programs within their communities. Some of chapter
    community involvement includes: aiding and assisting the elderly by
    transporting meals on wheels to those that are home bound, conducting
    ``Christmas in July'' parties at The Red Cross shelters providing not
    only food for the homeless occupants but also gifts of items that
    improve their quality of life, transport veterans to veteran hospitals
    for treatment, some hospitals 60 plus miles from the veterans
    residence. Some chapters have taken it upon themselves to maintain the
    graves of Medal of Honor recipients in the cemeteries within driving
    distance. Chapters provide scholarships for students, not only those
    related to TREA members but also to the students at large within the
    community. At the National Level, TREA provides 40 $1,000 scholarships
    and several at $1,500 annually to students throughout the country. And
    this is not all. TREA has a Memorial Foundation that has three programs
    to assist our members and the general population of the country. It is
    the Foundation that provides the scholarships mentioned earlier. The
    second is a benevolent program that not only assists members in
    distress, but also others in society that justifies a need. Third is a
    disaster relief program. Several examples are: $50,000 to Oklahoma City
    when the bombing of the federal building occurred; $40,000 to the
    members in Puerto Rico when a hurricane devastated the area; and then
    again $50,000 to Puerto Rico when another hurricane devastated the area
    shortly after the first occurrence. Instructions were provided to the
    chapter to assist their members and utilize remaining funds to assist
    the elderly at large that required emergency assistance.
        TREA has a Legislative Affairs Office located in Alexandria, VA,
    with a staff of five paid professional employees. We pride ourselves in
    the fact that we work within the legislative system to effect change
    to; (1) protect military retiree and veterans earned benefits, (2)
    restore several that have been discontinued, and (3) ensure that all
    veterans are provided the health care they deserve for serving their
    country. The vast majority of beneficiaries of our legislative efforts
    are not members of TREA. A good example is the fact there are 1.4
    million retirees on Medicare part B who are eligible for TRICARE for
    Life to begin October 1, 2001. TREA has slightly less than 100,000
    members and one can readily see that the vast majority of TRICARE for
    Life beneficiaries are not members of our association. When dealing
    with Congress, TREA will not be confrontational, or argumentative, and
    are willing to compromise, provided, compromise is the best solution to
    a veterans or military retiree problem at the time even if it is to be
    a temporary fix.
        I would be remiss if I did not mention the fact TREA is extremely
    proud that part of our overall operation includes an Auxiliary operated
    by a separate national Board of Directors. Spouses of TREA members
    belong to the Auxiliary. Many chapters throughout the country also have
    an Auxiliary. The auxiliaries assist the chapters with their community
    involvement. Many chapter auxiliaries also award scholarships to the
    local youth of the area. Emergency assistance is provided to those in
    dire need of life's necessities within the community. All of the
    auxiliary officers, just like those serving TREA, both at the National
    level and chapter level are also volunteers without compensation.
        TREA publishes a monthly magazine; ``VOICE'' This publication has
    been for many years and presently is being provided to all
    congressional offices, both in the House and the Senate. We feel that
    by providing this publication to the congressional offices, who we are
    and what we are about is readily available to each Congressperson and
    Senator.
        TREA prides itself in being a nationally recognized veterans'
    organization that represents the interest of not only military enlisted
    retirees but also those on active duty, guard, reserve and all
    veterans. We are legislatively involved to ensure the government keeps
    promises to those who serve our country in the military. TREA is known
    to work with Congress and other veteran service organizations. In the
    106th Congress, TREA was a leading organization in lobbying for
    legislation for those enlisted military retirees on Medicare. Due to
    our efforts, Congress included TRICARE for Life and a Prescription Drug
    benefit for Medicare eligible military retirees and/or survivors in the
    Department of Defense Authorization Act. TREA is a member of The
    Military Coalition (TMC), a coalition of military and veterans'
    organizations. TREA currently serves as Co-Chair of Retirement and
    Veterans Affairs Committees of TMC. Further, TREA is a member of the
    National Military Veterans Alliance (NMVA), another coalition of
    military and veterans' organizations. TREA currently serves as Co-
    Director of NMVA.
        The Mission Statement of TREA is provided for the record: ``The
    mission of The Retired Enlisted Association is to enhance the quality
    of life for uniformed services enlistee personnel, their families and
    survivors--including active components, reserve components, and all
    retirees; to stop the erosion of earned benefits through our
    legislative efforts; to maintain our esprit de corps, dedication and
    patriotism; and to continue our devotion and allegiance to God and
    Country''.
        I appreciate the opportunity to provide TREA's input to the written
    record of the hearing.

                                        Gloucester, Massachusetts 01930
                                                         August 1, 2001
    Allison Giles, Chief of Staff
    Committee on Ways and Means
    U.S. House of Representatives
    1102 Longworth House Office Building
    Washington, DC 20515

    RE: Hearing Date: July 26, 2001 Subject: Misleading Mailings Targeted
    to Seniors

        For the written record of the hearing held by the Subcommittee on
    Social Security, I wish to call the National Committee to Preserve
    Social Security and Medicare (NCPSSM) to the attention of the
    Subcommittee.
        Recently the Attorneys General of a number of States entered into a
    settlement agreement with the Publishers Clearing House Corp. to
    regulate and restrict the use of misleading solicitations which prey
    upon confused and frail elders who believe that by purchasing products
    from Publishers Clearing House they increase their chances of winning a
    sweepstakes prize. What Publishers Clearing House has done to appeal to
    greed and the gaming instinct NCPSSM has done in the same manner in
    their appeals to fear that frail elders have of losing Social Security
    benefits.
        I ``joined'' NCPSSM several years ago to see what kind of mailings
    I would receive. The low ``membership'' fee of $10 encourages people to
    sign up. Soon afterward, although I never made another contribution to
    NCPSSM, I began to receive a barrage of mailings with dire warnings
    from former SSA Commissioner Martha McSteen, spokesperson for Max
    Richtman, the real head of NCPSSM, implying that without financial
    support to lobby Congress, continued SSA benefit payments were in
    doubt. More and more impressive envelopes continued to arrive at my
    home, each one containing cleverly contrived ``personalized'' mass
    mailings strongly urging extra contributions to assist in preserving
    elders' SSA and Medicare benefits.
        I am sure that, had I ever actually sent in an extra contribution,
    the sophisticated mass marketing apparatus of NCPSSM, so like that of
    Publishers Clearing House, would have stepped up their appeals even
    more, to include phone calls appealing for funds.
        Some years ago a good friend of my parents passed away at the age
    of 97. Only after his death was it discovered that he had given away
    over $50,000 to Lyndon LaRouche, another scam artist who preyed on the
    elderly with mass mailings which then zeroed in on the few who
    responded with contributions. Max Richtman belongs in the same category
    with these types. NCPSSM is a money-making outfit masquerading as a
    non-profit advocacy organization. His operation should be exposed and
    his company shunned by members of Congress.
        I urge the Subcommittee to investigate this organization's
    marketing practices and their questionable and misleading financial
    statements. A close look at NCPSSM's operation will reveal their
    fundamentally abusive motives, which appeal to confused, fearful and
    frail elders for financial gain
                Sincerely,
                                                   William H. Thoms Jr.