[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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                      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.
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[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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    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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    [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 
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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

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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.
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