[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
      DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY,

              AND RELATED AGENCIES APPROPRIATIONS FOR 2004
                 DEPARTMENTS OF COMMERCE, JUSTICE, AND

                   STATE, THE JUDICIARY, AND RELATED

                    AGENCIES APPROPRIATIONS FOR 2004

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED EIGHTH CONGRESS
                              FIRST SESSION
                                ________
  SUBCOMMITTEE ON THE DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE 
                    JUDICIARY, AND RELATED AGENCIES
                    FRANK R. WOLF, Virginia, Chairman

 HAROLD ROGERS, Kentucky               JOSE E. SERRANO, New York
 JIM KOLBE, Arizona                    ALAN B. MOLLOHAN, West Virginia
 CHARLES H. TAYLOR, North Carolina     ROBERT E. ``BUD'' CRAMER, Jr.,
 RALPH REGULA, Ohio                    Alabama
 DAVID VITTER, Louisiana               PATRICK J. KENNEDY, Rhode Island
 JOHN E. SWEENEY, New York             MARTIN OLAV SABO, Minnesota
 MARK STEVEN KIRK, Illinois         
                                    
                                    

 NOTE: Under Committee Rules, Mr. Young, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
   Mike Ringler, Christine Kojac, Leslie Albright, and John F. Martens
                           Subcommittee Staff

                                ________
                                 PART 8

                                                                   Page
 The Federal Judiciary and United States Marshals Service.........    1
 The Supreme Court of the United States...........................  187
 Federal Trade Commission.........................................  257
 Securities and Exchange Commission...............................  353

                                   

                                ________
         Printed for the use of the Committee on Appropriations
                                ________
                     U.S. GOVERNMENT PRINTING OFFICE
 90-153                     WASHINGTON : 2003



                   COMMITTEE ON APPROPRIATIONS

                   C. W. BILL YOUNG, Florida, Chairman

 RALPH REGULA, Ohio                          DAVID R. OBEY, Wisconsin
 JERRY LEWIS, California                     JOHN P. MURTHA, Pennsylvania
 HAROLD ROGERS, Kentucky                     NORMAN D. DICKS, Washington
 FRANK R. WOLF, Virginia                     MARTIN OLAV SABO, Minnesota
 JIM KOLBE, Arizona                          STENY H. HOYER, Maryland
 JAMES T. WALSH, New York                    ALAN B. MOLLOHAN, West Virginia
 CHARLES H. TAYLOR, North Carolina           MARCY KAPTUR, Ohio
 DAVID L. HOBSON, Ohio                       PETER J. VISCLOSKY, Indiana
 ERNEST J. ISTOOK, Jr., Oklahoma             NITA M. LOWEY, New York
 HENRY BONILLA, Texas                        JOSE E. SERRANO, New York
 JOE KNOLLENBERG, Michigan                   ROSA L. DeLAURO, Connecticut
 JACK KINGSTON, Georgia                      JAMES P. MORAN, Virginia
 RODNEY P. FRELINGHUYSEN, New Jersey         JOHN W. OLVER, Massachusetts
 ROGER F. WICKER, Mississippi                ED PASTOR, Arizona
 GEORGE R. NETHERCUTT, Jr.,                  DAVID E. PRICE, North Carolina
Washington                                   CHET EDWARDS, Texas
 RANDY ``DUKE'' CUNNINGHAM,                  ROBERT E. ``BUD'' CRAMER, Jr., 
California                                   Alabama
 TODD TIAHRT, Kansas                         PATRICK J. KENNEDY, Rhode Island
 ZACH WAMP, Tennessee                        JAMES E. CLYBURN, South Carolina
 TOM LATHAM, Iowa                            MAURICE D. HINCHEY, New York
 ANNE M. NORTHUP, Kentucky                   LUCILLE ROYBAL-ALLARD, California
 ROBERT B. ADERHOLT, Alabama                 SAM FARR, California
 JO ANN EMERSON, Missouri                    JESSE L. JACKSON, Jr., Illinois
 KAY GRANGER, Texas                          CAROLYN C. KILPATRICK, Michigan
 JOHN E. PETERSON, Pennsylvania              ALLEN BOYD, Florida
 VIRGIL H. GOODE, Jr., Virginia              CHAKA FATTAH, Pennsylvania
 JOHN T. DOOLITTLE, California               STEVEN R. ROTHMAN, New Jersey
 RAY LaHOOD, Illinois                        SANFORD D. BISHOP, Jr., Georgia
 JOHN E. SWEENEY, New York                   MARION BERRY, Arkansas
 DAVID VITTER, Louisiana                                                       
 DON SHERWOOD, Pennsylvania
 DAVE WELDON, Florida
 MICHAEL K. SIMPSON, Idaho
 JOHN ABNEY CULBERSON, Texas
 MARK STEVEN KIRK, Illinois
 ANDER CRENSHAW, Florida            
                                                                                                                                         
                                    
                 James W. Dyer, Clerk and Staff Director

                                  (ii)
                                                                    

 DEPARTMENTS OF COMMERCE, JUSTICE AND STATE, THE JUDICIARY AND RELATED 
                    AGENCIES APPROPRIATIONS FOR 2004

                              ----------                              

                                          Thursday, March 27, 2003.

                           FEDERAL JUDICIARY

                               WITNESSES

JUDGE JOHN G. HEYBURN II, CHAIRMAN, COMMITTEE ON THE BUDGET OF THE 
    JUDICIAL CONFERENCE OF THE UNITED STATES, CHIEF JUDGE UNITED STATES 
    DISTRICT COURT, WESTERN DISTRICT OF KENTUCKY
LEONIDAS RALPH MECHAM, DIRECTOR, ADMINISTRATIVE OFFICE OF THE UNITED 
    STATES COURTS, MEMBER, EXECUTIVE COMMITTEE, JUDICIAL CONFERENCE OF 
    THE UNITED STATES
    Mr. Wolf [presiding]. Let me welcome you.
    I have an opening statement, and I will not read it in the 
interest of time, other than to say that the Judiciary has 
requested an 11 percent increase. And boy, this is really going 
to be a very, very tough year, but we will do everything we can 
to ensure that we meet the concerns and the needs of the 
Judiciary.
    We will try to do the best we can, but it will be a very, 
very tough year. It seems like every year's a tough year, with 
that, why don't you begin.

                   Judge Heyburn's Opening Statement

    Judge Heyburn. Congressman Wolf, we are delighted to be 
here again. This is my seventh year. I know Mr. Mecham 
outstretches me by a number of years, but we are delighted to 
be here. We know you have had a long day, but I do have a few 
introductory comments and then, of course, we will be glad to 
hear your questions and try to answer them and have our usual 
good discussion.
    I always look forward to these hearings because they are 
such an interesting constitutional intersection between our two 
branches of government.
    And for that reason, it is an honor to appear before you. 
It is really a very special experience for me, and I treasure 
the opportunity to talk to you about the things that we want to 
do in the Judiciary, particularly in these trying times where 
we believe the Judiciary plays such an important role that both 
of us--both the Congressional side and the Judiciary are 
working hard to protect our countries values and freedoms.
    Because the budget that we are asking for, in our view, is 
really nothing more than what we believe is necessary to do our 
role in the war on terrorism and the fight for freedom here at 
home and around the world.
    The Founding Fathers, of course, did create an independent 
Judiciary for the very purpose of protecting the rights of our 
citizens and providing a neutral authority to enforce the very 
laws that you enact. And in these times, I think it is more 
important than ever that we do so.
    We do want to thank you for the appropriation that you gave 
us last year. I know you just said that this year is going to 
be tough. We know last year was too. There were a lot of 
concerns that you faced towards the end of the year that I know 
you did not expect having to deal with at the beginning of the 
year, and we know you did your very best to fund the Judiciary.
    You did not give us everything we asked for, but our 
commitment to you is to take what you give us and do the very 
best that we can in every possible way, and then to give you as 
clear a possible view as we can of the obligations that we feel 
we have and the resources we need to do that.


                      growth in judiciary workload


    This year, once again, we see the continuing growth of the 
work that the Judiciary is confronted with. It is a workload 
that, as always, is uncontrollable. It is a workload, is ever-
changing. And my concern is not that, the 5 percent that you 
gave us last year is going to lead to some terrific problem, 
even though it was substantially less than we asked for, or 
even that whatever we get this year will lead to some sort of 
crisis, but that over time we are getting there.
    For instance, there are just a few examples of indicators 
that we see as problems on the horizon: The number of pending 
criminal and bankruptcy cases have increased 38 and 17 percent 
respectively since 1998. Now, that is not the number of cases 
filed, although certainly the number of cases filed has 
increased, it is the number of pending cases.
    And what that tells us is that the judges and the system 
are not able to handle the incoming cases in as an efficient 
manner as we have. I am quite confident that we are handling 
with the same number of judges more cases than we were before. 
It is just that the increases continue to pile on, and the 
problem is we do not know exactly when this growing backlog is 
going to become more serious than it is.
    But it is a warning sign, I guess, is all I can say.
    Same thing about probation and pretrial services. The 
number of folks on supervision has grown 16 percent since 1998. 
The number of those people who are on some sort of mental-
health regime is up 81 percent. The number of folks that are on 
some sort of substance-abuse program are up 48 percent.
    All these are sort of red flares, I would say. And we have 
talked about this problem of probation and the increasing 
number of folks on supervision before and we have tried to do 
something about it.
    In fact, this year working with the judges and working with 
the probation offices, we have tried to alert them to the fact 
that we want you to look more carefully at those who are on 
supervision, and if there is no reason for them to be on 
supervision anymore, then their supervision should be 
judicially terminated early.
    And there have been hundreds this past year and a half 
since we first started this--there have been hundreds who have 
been taken off supervision early. These are the ones who have 
satisfied all of their obligations.
    And in the opinion of the probation offices and the judges, 
they do not need supervision anymore. That saved hundreds and 
hundreds of hours and probably millions of dollars in the work 
of probation officers. And the result is that they are able to 
devote their time and energy to those who need the help the 
most.
    On the other hand, what that means is the group of those 
that we now supervise are a group of those who are more serious 
offenders. They are in need of greater attention. As a group, 
they have more need for drug-abuse treatment, substance-abuse 
treatment and all that sort of like.
    So we are trying to narrow our focus. We are trying to do 
our job and put our folks where the need is the greatest. But 
it is a problem that simply will not go away. It is on the 
horizon and I just wanted to alert you to that fact.

                      PANEL ATTORNEY RATE INCREASE

    Another thing that I would highlight, we talked in the past 
about the panel-attorney rate for defenders and you recognized 
the problem so well and we really appreciate the rate that was 
increased to $90 a year ago. And we are still trying to assess 
the impact of that.
    But another area that we have not asked you for previously 
and is in this year's request is an increase of the rate that 
is paid to the panel attorneys who are defenders in capital 
cases. That rate has been $125 since 1996 and we are asking for 
an increase to cover the inflationary increases up to $157 an 
hour. In dollar terms, it is not a large amount of money.
    But we think it is important that it ties in to this whole 
concern about terrorism. Good afternoon, Congressman Serrano, 
glad you are here.
    We were just talking about the rate for attorneys who 
defend capital cases and we are asking for an increase and why 
that is so particularly important. The dollar amounts are not 
significant.
    But more and more the attorney general is asking that the 
death penalty be sought. And it could be in a whole variety of 
cases and I suspect it will be in some of these terrorism 
cases. And if we do not have the attorneys who can adequately 
represent these folks we might as well not go through the 
process.
    And it is not like the regular panel attorneys where the 
average case is a $3,000 or $4,000 case. They can do a couple 
of cases. It is--there are a lot of people who want to do it 
most of the time. In the capital cases, people shy away from 
them because it requires real expertise. When you take a 
capital case, it takes up a lot of time. It is not easy to get 
these folks. We need to have people that are experienced, who 
can defend these cases well.
    Because if we do not, the cases just go on and on, people 
make mistakes. And we think it is vital that the rate for the 
people who will undertake a pretty thankless task sometimes 
that they be at least somewhat well compensated.
    So I would urge you to just give some consideration to 
that. Again, it is a small dollar amount. I think it is $2.9 
million overall. But it is a small but important part of the 
puzzle.

                           CONTEXT OF REQUEST

    We understand the demands you are under this year. And we 
tried to submit a reasonable request and will continue to work 
with you on fine tuning that.
    Earlier today I was thinking about how can I put this in 
some perspective for you because I was thinking about all our 
country is going through and what is going on in the world. And 
you know, it is a pretty narrow thing we are talking about 
really.
    If you look at the main account of the Judiciary, it is 
$4.1 billion. We are asking for a $400 million increase this 
year. It takes about $250 million just to keep us even. You 
know, that is the inflation, that sort of thing. And that is 
really cutting it to the bone. You know, we really need 
something more than that. Another $150 million would be ideal.
    We are not talking about very much to put the Judiciary on 
an even footing. You know, we spend billions of dollars to 
fight for freedom here and around the world and to keep our 
country safe and secure.
    And I was thinking, you know, what are we fighting for? 
Well, what we are fighting for I think is our right to 
individual liberty and a system of justice that allows those 
rights to exist. And we are talking about $150 million for 
that.
    There is a famous judge, Learned Hand, who once said that 
``Freedom is not the right to do whatever one wants, that is 
anarchy. Freedom is a society that respects and affirms the 
rights of individuals and their rights and their 
responsibilities and their differences.'' And that is what the 
Judiciary ensures, particularly in these times.
    It is our tradition of justice, and really our judicial 
system and the freedoms that it allows, that is what separates 
us from a lot of the rest of the world. And we are not talking 
about whether you are going to fund the judiciary or not. We 
know you are going to fund the judiciary. We are talking about 
really a very small margin that makes the difference between 
just how well we can do it.
    And you know, this is not theory. It is happening. I just 
happened to be reading in the Washington Post. There is a 
terrorism trial starting in Detroit.
    And there is a judge, this is in my circuit and I know 
Judge Gerald Rosen well, and he was quoted in the Post as 
saying he acknowledged the trial's potential impact on the 
court today.
    He said, quote, this is a particularly important trial and 
many people are watching our judicial system to see if we can 
give a fair trial in these challenging times.
    Well, you know, many people are watching, and it seems to 
me that the cost of meeting that challenge is so small as 
compared to the cost of falling just short by a small amount.
    We know you are concerned about the very same thing and we 
look forward to working with you and assuring that we can meet 
that challenge, because so many people are watching.
    Thank you.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    
        
                  Director Mecham's Opening Statement

    Mr. Mecham. First of all, Chairman Wolf and Mr. Serrano, I 
am pleased and honored to be with you once again. As Judge 
Heyburn said, I have been here a few times, this will be my 
18th time testifying before your Subcommittee.
    Actually, there were two other times, in the times of the 
ineffable John Rooney so this is my 20th anniversary. I thank 
you for that privilege.
    As Secretary of the Judicial Conference to the United 
States, which is one of my hats, I would like to just echo 
Judge Heyburn's request for adequate funding for fiscal year 
2004.
    We are intimately involved in the budget process and we 
have pretty good ideas of what the challenges and problems are.
    And likewise to echo what Judge Heyburn said about your 
great help for the fiscal year 2003 funding. That was a very 
painful episode for the country, and I am sure for you, it was 
not good for us. We went through, eight continuing resolutions, 
communications going out to the courts telling them how they 
have got to tighten their belts.
    We kept them at 95 percent of fiscal year 2002 funding, 
implemented a freeze on hiring and so on, so we felt the pain a 
bit, too, as you did, as you went through that process.
    I realize that fiscal year 2004 looks like the Judiciary is 
asking for a large increase, which it certainly is in terms of 
the kind of constraints you are under.
    On the other hand, everything we are asking for is to carry 
out missions you or the Constitution have assigned us. And 
there is not a lot of flexability, obviously we will do our 
best with whatever you give us. But there is not a lot that we 
can control, as Judge Heyburn said.

                         ADMINISTRATIVE OFFICE

    With respect to the Administrative Office, which I am 
privileged to have the opportunity to head these past 18 years, 
our staffing levels have really not kept pace with the 
workload.
    We have seen the staffing go up for the judiciary to meet 
the great demands, but for the last 10 years our staffing 
levels have been pretty well flat.
    Since I have been director coming here in 1985, our share 
of the budget, within the Judiciary has dropped from 2.8 
percent to 1.3 percent.
    So we are trying to do our part, we are trying to operate 
lean and mean and efficiently to do our role in support of the 
Federal Judiciary. But the courts continue to grow in size and 
complexity, while the growth in the AO staff lags.
    Our workload goes up, not on a one-for-one proportion but 
it does go up by every increase in the Judiciary. So we feel 
that we have not been able to stay even in that process.

                        FEDERAL JUDICIAL CENTER

    Another hat I wear and am privileged to do so is as a 
member of the board of the Federal Judicial Center, and I am 
aware of the vital role that the FJC plays in support of our 
federal judges and court personnel. One of the primary 
increases requested by the FJC would restore its basic 
judicial-educational program to a 12-month cycle.
    For a number of years they have had to operate on an 18-
month cycle, and it is not good for the judiciary overall. But 
the FJC, like the AO, is committed to maximizing the use of 
distance learning.
    But some course work is better received face-to-face--you 
do not get the serendipity when you do not meet face-to-face.
    So I would like, as a member of the board, to urge your 
support for the rather modest increase that the FJC has 
requested.
    And I would like to thank you, and applaud the Subcommittee 
for inviting us to share the podium here today with the U.S. 
Marshal Service, so we can testify at the same time.

                         U.S. MARSHALS SERVICE

    The support provided by the Marshals Service to the court 
is absolutely critical to a strong judiciary. In past years, 
the Judicial Conference has been very concerned about the lack 
of resources being requested by the Administration for the 
Marshals Service and the impact this shortage of deputy 
marshals was having on the courts.
    Acting on behalf of the Judicial Conference of the United 
States I have been pretty vocal on it, perhaps more than I 
should have been, in trying to make the case for additional 
funding for the Marshals Service, because of the important role 
that they play.
    Through the efforts of many, including this Subcommittee, 
it appears from our meetings with the Marshals Service, 
Director Reyna and others, that the Service is beginning to 
receive the additional resources it needs.
    And I would like to congratulate Director Reyna for 
shepherding through the Department and OMB significant 
increases in deputies in both his fiscal year 2003 and 2004 
requests, and I understand there may be some in the 
supplemental before you. I hope you can pin that down.
    And I would like to thank Director Reyna and the Justice 
Department for including the Judiciary in the current update of 
the Marshals Service staffing formula.
    We have the feeling that Director Reyna wants to do what is 
best for the Judiciary, we are not as sure that the OMB is of 
that view, but we know his heart is good.
    We will continue to work with OMB and with you and I hope 
out of that will come something very significant. One thing we 
hope is that you will do as you did in your report to make 
clear that the 106 deputy marshals for security that you have 
appropriated through our funds, and the director promptly hired 
them those resources here transferred back to the Marshals 
Service this year.
    But you said they would be used for judicial security. So 
we hope that that will be your plan. I believe that is Mr. 
Reyna's plan based on meetings that we have had
    I will close with that point, Mr. Chairman. And Mr. 
Serrano, I thank you for the privilege.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

        
    Mr. Wolf. Thank you.
    Mr. Director.





                                          Thursday, March 27, 2003.

                     UNITED STATES MARSHALS SERVICE


                                WITNESS

BENIGNO G. REYNA, DIRECTOR

    Opening Statement--Benigno G. Reyna, Director, Marshals Service

    Mr. Reyna. Mr. Chairman, Congressman Serrano, and members 
of the subcommittee, thank you for the opportunity to appear 
before you today to discuss the President's fiscal year 2004 
budget request for the United States Marshals Service. I am 
also pleased to be on the same panel with Judge John Heyburn 
and Mr. Leonidas Mecham.
    First thing, let me express my appreciation to you and to 
members of this Subcommittee for the resources appropriated to 
the Marshals Service in the year 2003. Your support has been 
very critical in carrying out our core missions of protecting 
the Federal Judiciary, our primary responsibility, apprehending 
Federal fugitives, safeguarding government witnesses and 
transporting federal prisoners
    The United States Marshals not only protect courthouses and 
Federal judges, we protect the integrity of the judicial 
process.
    Each day deputy marshals across our great country uphold 
the rule of law and thereby uphold justice, preserve freedom, 
defend democracy and safeguard the United States Constitution.
    By safeguarding our Constitution, we protect the rights of 
all people and the American dream. This has been our role for 
over 213 years, and we have been an integral part of the 
American story.
    But in order for us to protect the American dream we must 
have justice. But it has to be justice that is administered in 
the spirit of fairness, of opportunity and due process because 
justice is the foundation of our judicial process.
    For fiscal year 2004, we have requested a total of 4,592 
positions and $720.8 million in our salaries and expenses 
appropriation.
    As Director of the United States Marshals Service, I am 
keenly aware the Service's mission to support the Federal 
courts and other Federal law enforcement agencies. And I 
recognize that to a great extent our workload is generated by 
others.
    These efforts of Federal law enforcement to apprehend and 
prosecute violent criminals and the efforts of the Judiciary to 
rapidly try and sentence individuals have increased.
    During fiscal year 2002 the United States Marshals Service 
received over 250,000 Federal prisoners into custody; produced 
prisoners for court and other proceedings over 640,000 times; 
received 35,500 new Federal felony warrants; served an 
additional 230,000 pieces of judicial process; investigated 
over 500 potential threats to members of the judicial process; 
accepted 118 new witnesses into the witness protection program, 
and brought the total number of principle witnesses to 7,400; 
cleared 34,000 Federal felony warrants and disposed of over 
21,000 seized properties.
    And there is another important aspect of the United States 
Marshals Service, and that is our strong commitment to work 
with our other Federal, state and local law enforcement 
colleagues.
    As the former Chief of Police in Brownsville, Texas, I can 
assure you that these long-term relationships are the best tool 
for fighting crime and more importantly, improving the quality 
of life in our communities.
    In addition to our Federal warrant workload, last year we 
assisted state and local law enforcement agencies to clear 
27,000 state and local warrants.
    With your permission, I would like to highlight a few 
examples of what we encounter each day in our districts.
    In Manhattan, several prisoners were being held in the jury 
box for pre-trial arraignment. And one of the prisoners 
attempted to either escape the courtroom and/or attack the 
judge. As he leapt out of the jury box, he was quickly brought 
to the ground by deputy marshals in the courtroom. No one was 
injured, and there was no further incident with any other 
prisoners.
    We have individuals in our witness protection program who 
have provided testimony in significant terrorist-related 
prosecutions. Some of the testimony resulted in successful 
conviction of terrorists involved in the first World Trade 
Center bombing and trials.
    More recently, we have been facilitating the re-interviews 
of these witnesses by intelligence officials and federal 
prosecutors to obtain further potential valuable information.
    Earlier this month, two New York City detectives were 
tragically killed during an undercover operation. Our New York, 
New Jersey regional task force was contacted and we immediately 
dispatched deputy marshals to follow-up on leads in 
Pennsylvania and in Maryland.
    Using highly specialized surveillance equipment and 
investigative techniques, the suspect was captured in Brooklyn 
within two days. Our ability to cross state lines in the 
pursuit of the fugitive is a determining factor in closing this 
case quickly. Police Commissioner Kelly commended the deputy 
marshals for their assistance in this critical arrest.
    These types of incidents repeat themselves across the 
country.
    In the words of Deputy Attorney General Larry Thompson, and 
I quote, ``the United States Marshals Service sometimes 
performs its most critical work outside the limelight and with 
little fanfare. Yet, its personnel make extraordinary 
sacrifices on a daily basis to safeguard our courts and our 
communities.''
    I am continually impressed by the dedication and hard work 
demonstrated by the men and women of the United States Marshals 
Service.
    Mr. Chairman, honorable members, I would like to impress 
upon the Subcommittee that we continually strive to make better 
use of the resources we have before we come and ask for more.
    Over the past 15 months, we have streamlined and improved 
our internal personnel processes. Specifically, we have filled 
104 supervisory law-enforcement positions, keeping an average 
of 16 weeks from application to selection. Previously, that 
took an average of 20 weeks to fill one supervisory position.
    As we know, first-level managers are critical for the 
success of day-to-day operations in the field because they 
provide direction and leadership to over 2,000 deputy marshals.
    We hired 215 new deputy marshals last year, the highest 
single year in the past 10 years. Our on-board strength today 
is the highest it has been in four years. We maintain a pool of 
at least 200 candidates for deputy marshal positions.
    And we are using workload metrics to quantify our staffing 
needs to determine which districts are in the most need of 
resources. Simply stated, we are putting the people where the 
work is.
    But to accomplish this, it is vital that the newly funded 
positions are appropriated without location 
designations,allowing us to continue to put the people where the work 
is. I recognize and appreciate the subcommittee's work in providing us 
this hiring flexibility and look forward to the same practice in 2004.
    In addition, we are doing our part to support the Attorney 
General's goal of transferring positions to support front-line 
missions. We have done this by moving vacancies from 
headquarters support functions to operational areas.
    Our fiscal year 2004 request includes an increase of 275 
positions, including 231 deputy marshals, and $26.6 million to 
meet the Judiciary's need for more security. Our request 
addresses a critical need to perform our primary mission, which 
is to protect the Federal Judiciary. The number of judges and 
court locations has increased, thereby raising and expanding 
the level of support we must provide. Escalating security alert 
levels since September 11 have resulted in additional judicial 
security requirements on an every day basis.
    Terrorist-related court proceedings, as we know, require an 
unprecedented level of protection for all trial participants 
due to the risk of additional terrorist attacks, the public's 
concerns and intense media interest. Our requirement to support 
terrorist-related court proceedings is widespread and not 
limited to Virginia and New York. The impact on the Marshals 
Service is particularly demanding in places like Florida, 
California, Oregon, Washington, Illinois, the District of 
Columbia, New Jersey, Michigan, North Carolina and Texas.
    I know, Mr. Chairman, that you have been very supportive of 
our efforts to provide security at the courthouse in the 
Eastern District of Virginia where Zacarias Moussaoui is 
charged as a co-conspirator in the September 11 terrorist 
attacks. I would like to thank you for your support in 
obtaining the funds in the fiscal year 2002 Emergency 
Supplemental specifically for this purpose.
    The threat levels associated with these cases mandate that 
additional deputy marshals be assigned to ensure the safety of 
all courtroom participants and to safely transport prisoners to 
all judicial proceedings. Even when these cases do not lead to 
trial, we must provide security at all pre-trial prisoner and 
material witness proceedings.
    Equally important, we must ensure the safety of all 
Marshals Service employees. The men and women who dedicate 
their lives to protecting the Federal Judiciary must receive 
advanced training and equipment to perform their jobs safely.
    In addition, we request $2 million to provide security 
systems in four new courthouse facilities and to upgrade 
security equipment and facilities where high threat and high 
profiles trials will occur. The Subcommittee's support in 
providing funds for courthouse security equipment and 
renovation has let us remedy weaknesses in many courthouses. 
Security systems reinforce the physical security provided by 
deputy marshals when producing prisoners for court.
    Cameras, duress alarms, remote door openers and other 
equipment improves the security condition within a courthouse. 
When incidents occur, we are better equipped to record events, 
monitor personnel and prisoners, and identify situations 
requiring an immediate, and sometimes a life-saving, response. 
I ask for your continued support in this area.
    Before I conclude, I ask for your support for the 
Judiciary's fiscal year 2004 budget request. The Marshals 
Service has always enjoyed a close working relationship with 
Federal judges across this nation, and every year the Judiciary 
transfer funds to the Marshals Service for court security 
officers and security-related equipment such as metal 
detectors, x-ray machines, and trace detection devices for all 
courthouses. These resources are critical for the Marshals 
Service to maintain the safety and integrity of the judicial 
process.
    I hope that I have been helpful in highlighting our 
accomplishments over the past year and in describing our need 
for additional resources in the upcoming year. I appreciate the 
Subcommittee's time that has been provided to the Marshals 
Service, and for giving me the opportunity to appear before 
you.
    This concludes my prepared statement. I would be pleased to 
answer any questions that you may have.
    [The information follows:]

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
    Mr. Wolf. Thank you, Mr. Director.
    The staff tells me that this is the first time the Marshals 
Service has been before the full Committee in ten years. Is 
that right?
    Mr. Reyna. That is correct, Mr. Chairman.
    Mr. Wolf. Well, I do not disagree with anything that any of 
you have said. Our problem is we are faced, as we were in 2003 
with allocations that are very tight and it is a trade off of--
you know, all morning we had the Director of the FBI, who is 
asking for additional funds for counter-terrorism.
    Many of those responsibilities spill over into your areas--
but funding is very--it is like which one of your children do 
you want to short-change and, in some respects. That is the 
problem, but I think you have made a case that is factual or 
accurate.
    It is just a question of how much funding can you draw out 
of the Committee to fund many competing programs. There is the 
issue of embassy security. We have people serving abroad. We 
had the Tanzania bombing, the Kenya bombing and the Beirut 
bombing. So there are many important programs that require 
funding increases.
    But I think you have all made a good case, and the 
Committee will attempt to do the best it possibly can. Let me 
ask you some questions.

                             COURT SECURITY

    Court security: Responsibility and funding for Federal 
court security programs are shared by the Marshals Service and 
the Judiciary. The Marshals Service's budget funds deputy 
marshals responsible for protecting the judges. Have there 
been, in the last year, threats against judges?
    Mr. Mecham. There have been many. I get a report every 
week.
    Mr. Wolf. Ones that you take seriously?
    Mr. Mecham. Well, some judges are under full security.
    Mr. Wolf. How many judges?
    Judge Heyburn. Well, you never know whether it is serious 
or not till after it is been fully investigated.
    Mr. Wolf. Nowadays everything is serious.
    Judge Heyburn. For instance, just recently I had a case, it 
was a products liability case--pro se plaintiff. The plaintiff 
was abusive continually in pleadings to me, but it was not 
something that I took that seriously. And, finally, I got a 
pleading which--this was three weeks ago--which I believed to 
be serious and I am a pretty tough-skinned person. You know, I 
ran for office and people say a lot of things about you. 
[Laughter.]
    And I thought it went way over the line. I was--certainly 
was not going to show it to my wife. You know, she would have 
gone ballistic. But, I felt uneasy about having this person 
around me and about having him around court personnel. And so, 
I called a United States Marshal. I showed him the thing and 
said, ``Look, I do not like this. You tell me?''
    And they went out there, thoroughly investigated the 
situation and after a couple of days did determine that he was 
not a threat. And after they did that, we were relieved and we 
felt like the situation was under control. They are sort of 
watching him, but they do not believe he is a threat
    Now, you know, I think that kind of thing happens not 
infrequently.
    Now, is that a person who is trying to do physical harm to 
a judge? In my case it turned out it was not. But having the 
marshals there and being able to respond to--it was not just 
me, it was the staff. I mean, this person would come in and 
file pleadings all the time, and they felt very uneasy about it
    So that is just one person's example, which thankfully did 
not turn out to be a threat, apparently, to me or anybody else
    But if we had not had the Marshals, if they had not been so 
responsive, then it really is coercive to the whole system.
    Mr. Wolf. How many judges have been killed or assassinated 
in the last 25 years
    Mr. Mecham. In the last 25----
    Mr. Wolf. The last one was in Texas, was that the last one?
    Mr. Mecham. No, the last one was in New York.
    Mr. Wolf. New York. What one was that?
    Mr. Mecham. It was in Queens, he was killed by the father 
of a disappointed litigant. Judge Duranco. There was also one 
in Alabama, a circuit judge who was----
    Judge Heyburn. Judge Vance.
    Mr. Mecham [continuing]. Judge Vance who was killed and 
also a district attorney was in the same case in Florida, he 
was killed, as well. Judge Vance's wife was threatened.
    And then there was one, I think it was Judge Wood in Texas.
    Judge Heyburn. But, you know, I do not think--I mean, I 
know you did not ask the question this way, but the number of 
people who end up being killed or hurt I do not think is the 
criteria.
    Mr. Wolf. No, of course not. But I think there is a danger. 
I know that there are times that when people are upset or 
angry, also with the terrorism threat, and courthouses are a 
potential target, so I just wanted it for the record.
    Judge Heyburn. Of course, we are confronted with the same 
problems you are here, I am sure. We are trying to provide 
security at the same time we want to keep the courthouse 
accessible, because that is the sign that work is going on, the 
country is going about its business, and we want to present 
that approach to people.
    At the same time, we want to have security. It is a tough 
thing to do, as I am sure you all are wrestling with.

                       JUDICIAL SECURITY PROGRAM

    Mr. Wolf. While the Judiciary's budget request funds 
courthouse building security and equipment, guard service, but 
the majority of the funds are appropriated to the Judiciary's 
court service account are then transferred to the Marshal 
Service to manage the funds.
    Fiscal Year 2003 conference report required an independent 
study and a report to the Committee on the administration and 
management of these programs.
    What is the status of the study and are there improvements 
that can be made to the administration of the programs?
    Mr. Reyna. Mr. Chairman, the Marshals Service currently is 
developing a statement award to determine the results, I guess, 
of what that study is designed to do.
    I think it is important that we study those issues and make 
a determination as to the effectiveness that we find within 
that process, but I also think it is important that the 
Administrative Office of the U.S. Courts participate with us 
and they have been very cooperative in working with us and 
trying to begin the study.
    We are in the process of developing a statement of work for 
that.

                         THREAT LEVEL RESPONSE

    Mr. Wolf. Does the operation of the courthouse change when 
the threat goes to orange?
    When it goes to orange or red, you have a procedure that 
takes place in a courthouse when the threat does go up?
    Mr. Reyna. Yes, sir. One of the----
    Mr. Wolf. Every courthouse across the country?
    Mr. Reyna. Yes, sir. One of the things that I think was 
really important that we need to accomplish when our country 
developed a system of alert levels was to harmonize our threat 
level response within the courthouses.
    And we have done that nationwide. However, there are some 
courthouses that require that even if the threat level is 
lowered and the national threat level is lowered, we maintain a 
higher level because of this current and ongoing terrorism-
related or high-threat trials that may be going.
    So some of them actually may stay up.
    Mr. Wolf. Do you get specific briefings from the FBI, or 
Homeland Security?
    Mr. Reyna. Yes, sir. What we, obviously, maintain dialogue 
with the other agencies regarding intelligence matters. We are 
a consumer only of those, I guess, those, that intelligence, 
and ensure that it is used so that we can adequately secure 
members of the judiciary.

                      JOINT TERRORISM TASK FORCES

    Mr. Wolf. Are you a member of the Joint Terrorism Task 
Force in all the regions?
    Mr. Reyna. Yes, sir. We participate in the Joint Terrorism 
Task Force.
    Mr. Wolf. Every one?
    Mr. Reyna. Yes, and in addition to that we also participate 
in some of the other centers that perhaps share information. 
Some of it may be whether we, you know, we might not 
necessarily sit in every one of these task forces, but we have 
dialogue with that particular----
    Mr. Wolf. So are there some task forces you are not part 
of?
    Mr. Reyna. There are some task forces that we may not be 
part of if we do not really play a significant role in that. 
Since our mission is protecting the Judiciary and fugitive 
apprehension, there may be others that may be of an 
investigative nature.
    We will support them if there is a fugitive mission piece 
to that, or certainly there will--you know, our concern is that 
we want to make sure that even if we are not sitting in a 
particular organization that at least people know that we 
welcome any information that may relate to securing the 
judiciary.
    Mr. Mecham. Can I make a comment, Mr. Chairman?
    The Judiciary is not involved in those task forces but we 
would like to be kept informed as to the threat level status. 
There have been some meetings we have been involved with and 
some where we are not invited.
    Mr. Wolf. What would the reason be? We can certainly, what 
would the reason be? The FBI----
    Mr. Mecham. I think they sometimes forget there is such a 
thing.
    Mr. Wolf. Would that compromise----
    Mr. Mecham [continuing]. As the Federal Judiciary.
    Mr. Wolf. No, the Joint Terrorism Task Force is 67, 61 
regions. All of the State and local law enforcement come 
together with Federal law enforcement, exchanging information. 
You are not going to solve all terrorism at the Federal 
levels--Federal, State and local law enforcement must work 
together.
    You know, would that compromise a case at all for you to be 
involved?
    Mr. Mecham. I do not think so. We don't actually need to be 
part of the joint terrorism task force but would like to have 
the marshals keep us well posted.
    Mr. Wolf. The Marshals Service is probably not involved in 
all of them. Of the 61 or 67 how many do you participate in, 
and you do not have to answer if you do not know.
    Mr. Reyna. Yes, I will have to get back to you on the 
specific number, Mr. Chairman.
    However, obviously, one of our concerns is one of 
resources. Our goal, our primary goal every day is to secure 
the Judiciary first. And so, we have to make adjustments in our 
staffing. And so that is our priority in the Marshals Service.
    And so, anytime that we venture into being a member of a 
task force, we have to do it cautiously, and ensure that it 
does not impact on the Judiciary.
    However, I agree that it is vitally important that we have 
this long-term relationship in sharing information. I come from 
a global background, where, you know, cooperative efforts are a 
must. And in these trying times and difficult times in our 
country, knowledge is going to be the most important tool in 
combating terrorism and maintaining safe communities.
    [The information follows:]

United States Marshals Service (USMS) Participation on Joint Terrorism 
                          Task Forces (JTTFS)

    The USMS participates in all JTTFs in a liaison capacity. 
Each of the 94 district offices has at least one person that is 
designated as a liaison to the closest JTTF, and each office is 
encouraged to send available personnel to the JTTF's. 
Currently, eight districts and one headquarters office have 
personnel that spend the majority of their time working with 
the JTTF's. The USMS estimates that 8 FTE will be expended 
supporting JTTF's in FY 2003.

    Mr. Wolf. Well, Judge, or Mr. Mecham, if you want to give 
us a letter telling why you think you ought to participate, we 
would certainly consider it.
    Mr. Mecham. I will do that.
    Mr. Wolf. I guess the determination of that membership 
would be through the Attorney General? Through the FBI?
    Mr. Mecham. Well, it is particularly true here in 
Washington, D.C. But there may be some other parts.
    Mr. Wolf. Maybe New York City, and----
    Mr. Mecham [continuing]. Of the country, I will need to 
find that out.
    Mr. Wolf. Maybe some of the larger metropolitan areas?
    Mr. Mecham. Yes.
    Mr. Wolf. Well, why don't you look at it and think, and if 
you do, give us a letter. And we will ask the director, 
Director Mueller.

                   TERRORIST TRIALS ON MILITARY BASES

    Have the Marshals and the Judiciary considered creating a 
place for holding court for terrorist trials on a military 
base?
    I understand the courts and the Marshals Service have 
already spent $14 million on security costs alone associated 
within the Moussaoui and the Walker-Lindh trials in Alexandria, 
which joins my congressional district?
    This does not include the costs of the City of Alexandria 
sheriff or police departments. Also, it does not include the 
inconvenience to the people that live in the vicinity of the 
courthouse.
    Would there be any merit, or has any thought been given to 
establish or holding a court--at Quantico or Fort Belvoir, that 
would be an institutional U.S. District Court?
    Judges would sit, but there would be heavy security on the 
military bases. You cannot get in Fort Belvoir, you cannot get 
in Quantico. That would be more effective than holding these 
cases and putting the stress and the demand on the Marshals 
Service, on the Judiciary?
    Have you given any consideration to having one, let's say, 
at Quantico or at Fort Belvoir?
    Judge Heyburn. There are a number of obstacles that we 
would have to think about as we considered such an idea. One 
would be that, whatever the military base would have to be 
within the district where the trial was to be held anyway----
    Mr. Wolf. Correct. I was more thinking of our area. I think 
with the rocket-docket here, you are going to see more activity 
here, other than maybe Mr. Serrano's district there in New 
York, but perhaps here than almost any other.
    I understand you cannot take a person from Alabama and send 
them up here, but but go ahead, go ahead.
    Judge Heyburn. And then the idea of a military base has, 
perhaps, some appeal, but on the other hand, it would tend to 
isolate the proceeding and the trials from the public. And, you 
know, it is something we are always wrestling with.
    But if this is a civil trial, not a military trial, I think 
the symbolism, if I was a judge weighing it, the symbolism is 
powerful.
    You want to, in my view--particularly in a time of stress--
you want to go on with our normal way of doing things and 
provide all the security necessary.
    So, from a judge's perspective, that would be something I 
would be very concerned about.
    Mr. Wolf. Well, there are some good reasons. How about, do 
you----
    Mr. Reyna. Mr. Chairman, the----

           IMPACT OF HIGH PROFILE TRIALS ON LOCAL COMMUNITIES

    Mr. Wolf. There is only so much we can put into the 
Alexandria Courthouse. And I think we may have hit on that, and 
I think that citizens down there, those people will not be able 
to get back and forth on the street once the Moussaoui trial 
begins.
    Mr. Reyna. Mr. Chairman, the Marshals Service does not play 
a role in deciding the proper venue for trials. It is something 
that is handled between the Department of Justice, assuming the 
Judiciary and certainly the United States Attorney's Office for 
that particular location.
    However, we do play a central role in the security of 
wherever the trial may be. And one of the things that, if I may 
explain and give--speak about Eastern Virginia as an example. 
That was obviously a very unique, and it is a very unique type 
of trial. Something like the Marshals Service had never, ever 
seen before.
    One of the things that we want to ensure from day one, we 
were notified that the actual trial was going to be held in 
Eastern Virginia, was that we needed to ensure, first of all, 
that we needed to communicate with all our counterparts, all 
our colleagues at the local, county and State level. It was 
important to let everyone know what the actual needs and what 
the potential needs of the Marshals Services and the Federal 
government would be.
    But, more importantly, it was an opportunity for us to 
understand what kind of impact these kinds of proceedings would 
have on the local law enforcement community.
    In addition to that, it was important also for us to 
communicate with the local elected officials--county, state and 
even the Federal elected officials from the area and to inform 
them of what was going to occur.
    We took it one step further and also communicated with 
various community groups, including homeowners groups in the 
area. It is important--it is critically important that we 
communicate with citizens and ensure that their daily lives are 
not impacted and that security be a transparent type of process 
for them and keep them informed.
    There is no doubt that the type of security levels that we 
have implemented in Eastern Virginia do have an impact on the 
citizens. And we want to ensure that we work with them, along 
with the local elected officials and our counterparts to ensure 
that we minimize that and maintain balance in providing the 
best security possible.
    Obviously, security is our priority when we make decisions. 
But I think it requires constant communication. It requires a 
high level of understanding and a strong spirit of cooperation 
and teamwork among the law enforcement agents to make this 
happen.
    I would like to take this moment to acknowledge the 
tremendous support that we received from the local 
community,law enforcement community, the local officials and the City 
of Alexandria for their tremendous support. They have been very 
accommodating, sometimes through some very difficult times. We 
understand those complexities and are willing to work through that and 
ensure that our citizens can move on about their daily business without 
too much of an adverse impact on their daily lives.
    Mr. Wolf. Well, Judge Heyburn said he did not think it 
would be a very good idea. Mr. Mecham, have you been down there 
to see what has been done?
    Mr. Mecham. Yes, I was there. If I were living in one of 
those apartments there, I would be apoplectic about it. But I 
understand the problem.
    Incidentally, under law, unless you change the statute, the 
only place the Eastern District can meet is Alexandria, Newport 
News, Norfolk and Richmond. You would have to have a military 
base in one of those towns to do it. Then you run up against 
the policy decisions, I guess, that Judge Heyburn was talking 
about, the symbolism.
    Judge Heyburn. I was not speaking about Virginia 
particularly. But you know, when we have a prisoner in court 
with a jury, we do not typically put them in irons. And if you 
move a trial to a military base, one could say it is the 
equivalent of putting them in irons. I mean, jurors are going 
to notice the difference.
    And you have to deal with every situation individually. But 
I think you would have to think pretty long and hard before you 
made that kind of a change. Maybe--of course, I am not a 
citizen of that particular area----
    [Laughter.]
    Mr. Wolf. No, it is very tough, and you know it is not my 
district.
    And obviously--and I would take your word if you think it 
is a bad idea. But you are taking $14 million out there. It 
will probably take additional money. And the Judiciary being as 
tight as it is, you begin to--but let me recognize my friend, 
Mr. Serrano
    Mr. Serrano. I just wanted to weigh in. You know, I always 
pay a lot of attention to those areas of the country that have 
growth in immigrants, new Americans as we call them. Northern 
Virginia, as we know, is, according to the Census Bureau, is 
the largest increase of Hispanics in the nation. In large 
numbers it is Texas, California, New York. But in percentage, 
it is Northern Virginia.
    There is no worse message you can send to folks who come 
from countries like the ones they come to then to see the 
military hanging around the Judiciary.
    Mr. Serrano. And I was getting to that, because we have the 
same problem in New York. In New York, we are going to have a 
space problem for what will eventually be a lot of cases. But I 
do not know that the solution is to have terrorist cases heard 
using a military base, because the whole message that that 
sends of mixing the Judiciary with the military is kind of 
scary to a lot of folks. It is scary to a lot of Americans who 
have been here all of their lives.
    We had an incident in New York, which I oppose and people 
just kind of thought I was being silly at first, and then they 
realized that maybe there was something to it.
    We had an asbestos problem in a bunch of buildings, school 
buildings in New York and it was election time. And in New 
York, as you know, we do not use the fire house, we use the 
school building. So someone suggested at the Board of 
Elections, innocently, we will have the elections in a tent 
outside the school building. We will have the National Guard 
patrolling. I said, no. I mean, they will never come out to 
vote. That is what they came here for to get away from the 
National Guard standing in front of the polling site, or the 
military.
    So it is a problem. And I certainly want to see how we can 
solve the fact that--you are right. When these trials begin to 
come, New York City, from traffic to space is going to be a 
nightmare. Northern Virginia, D.C., Maryland--these are the two 
areas that will take the brunt of it. I just do not know if the 
solution is bringing it--moving it to a military base.
    Mr. Wolf. Well, if you and the judge feel that way, then 
maybe you can influence me. I just wanted to get it out on the 
record.
    Although I will tell you, this region--and I am going to 
recognize Mr. Serrano for questions--we are becoming gridlocked 
in this region. They are shutting streets off here. Pretty soon 
you will not be able to move around the city.
    They shut one in front of the White House and in the back 
of the White House. And we are a city where they just shut this 
street down and shut this street down. Sirens coming up and 
down. And so getting to work--Mr. Mecham, where do you live?
    Mr. Mecham. I live outside the beltway in the low rent 
district of Potomac. [Laughter.]
    Mr. Wolf. And how long does it take----
    Mr. Mecham. I take the metro.
    Mr. Wolf. How long have you taken the metro
    Mr. Mecham. I have taken it for 26 years, whenever they 
opened. I have only driven to work twice. [Laughter.]
    Mr. Wolf. Do you use the pass?
    Mr. Mecham. I do. Yes.
    Mr. Wolf. You use the pass, okay.
    Mr. Mecham. I do.
    I feel it is my duty. [Laughter.]
    Mr. Wolf. Because if you talk to the average person, their 
commute has increased tremendously, and a lot the reason is 
because of closing down the different streets. You no longer 
can go in front of the White House. Let me recognize Mr. 
Serrano.

                CONGRESSMAN SERRANO'S OPENING STATEMENT

    Mr. Serrano. Thank you. Thank you, Mr. Chairman.
    First of all, let me apologize for the fact that I was 
late. I was at the newly created Homeland Security 
Subcommittee's hearing, and I wanted to get in my usual 
questions on civil liberties to the folks who are going to 
screen everybody. And they are asking a little old lady in a 
wheelchair to take off her shoes and get off from the 
wheelchair so they can search for bombs. And it has become a 
little overreaching, I think.
    Let me, with that in mind, if you do not mind, Mr. 
Chairman, read my opening statement which I neglected to do 
because I was hanging out with Mr. Rogers.
    I appreciate the opportunity to welcome the distinguished 
representatives today for this hearing. I am confident--maybe I 
should not be after I heard the chairman speak--that the 
committee be able to meet the budgetary needs of our nation's 
judiciary most adequately.
    I would like to say that I believe the importance of the 
institutions you gentlemen represent is heightened in turbulent 
times such as these.
    For citizens of the United States, the Judiciary represents 
a critical last line of defense against overreaching acts of 
the Executive Branch, or against unconstitutional laws passed 
by the Legislative Branch.
    In these past few weeks, throughout the preceding hearings, 
I have often focused on new threats posed to civil liberties in 
this country. As our nation endeavors to defeat terrorism we 
must not lose the freedoms which we define--which define our 
country and which make our country great.
    It is the important responsibility of the courts to 
safeguard our civil liberties and to uphold our Constitution's 
protections.
    I have often said since September 11th, that in the process 
of getting the bad guys, we cannot trample on the rights of the 
good guys.
    I urge you as members of the judicial community to treat 
this issue with the thoughtfulness required. I am confident you 
will do so.
    Now I have a couple of questions, but let me first say to 
you, Mr. Reyna, that you probably will never get an endorsement 
of your agency like the one I am just going to give you. But 
there is a young man in New York who works for you who is like 
a son to me. And he gave me a Marshals' cup, which I drink 
everything in New York out of.
    And then I had a detail from your office a couple of years 
ago, who upon leaving, gave me a similar cup which I drink 
everything from in Washington. [Laughter.]
    So I do not know if this really means anything to you. But 
when this Congressman drinks, drinks acceptable drinks----
    [Laughter.]
    Which in my culture would be Bacardi, right----
    [Laughter.]
    They have come out of Marshals cups. And keep that in mind.
    Mr. Reyna. They are great cups. [Laughter.]
    Mr. Reyna. Do you use them in the microwave? [Laughter.]

   EXTENDING MARSHALS SERVICE ARREST POWERS TO IMMIGRATION VIOLATIONS

    Mr. Serrano. No, they have the gold seal on them. And so it 
is questionable. I have not tried them in the Microwave. I do 
not want to ruin them. I do not want any trouble with my son 
back in New York.
    One of my concerns, and this is for the Marshals Service, 
although all of these questions are really issues that we 
should all deal with here, is the increased authorities. It has 
been reported that the Attorney General has signed an order 
giving the FBI agents and U.S. Marshals authority to arrest 
people on immigration violations.
    Why was this order necessary in your opinion? You have 
sufficient authority to--don't you have sufficient authority to 
arrest or detain individuals suspected of terrorism? Therefore, 
do you need to get into the other area?
    Now, let me tell you what my concern is, and it plays 
something into what I said before, Mr. Chairman. The whole 
issue with me in all of our communities, especially in our 
immigrant communities, those folks who have been here a while 
who want to become citizens, who are citizens, is that they 
learn quickly that in this society, unlike any other society, 
our police, our courts, our law enforcement are professionals 
who 99.9 percent of the time are not abusive and do the right 
thing. And we want to gain from these folks who come from 
societies where that is not the case, that respect.
    Now the most disliked agency for anybody who was born 
anywhere else, or who looks at someone who was born somewhere 
else, is the INS. Whether you are citizen by birth or became a 
citizen last week, the INS scares the hell out of you. To have 
anybody else acting as INS agents I think creates a wall that 
could be a problem.
    If you were police chief still, part of the plan was to 
have police arrest people on immigration violations, a lot of 
police chiefs throughout the nation have said, ``I do not 
really want to do that because they will not tell me when 
somebody is stealing a car or whatever, because they are afraid 
I am going to discuss immigration issues with them.''
    What are your thoughts about that whole thing? And I know 
if that was the order and you are going to follow it, because 
that is what you do and do well. But how do we make sure that 
we do not overreach here and start getting into areas we should 
not be involved in?
    Mr. Reyna. Congressman Serrano, certainly I----
    Mr. Serrano. I appreciate how he rolls the r's. [Laughter.]
    Mr. Reyna [continuing]. My last name is Reyna. [Laughter.]
    But Congressman Serrano, I appreciate your concerns. And 
one of the things that has happened, is there is an order than 
has been signed by the Attorney General extending arrest 
powers. However, no implementation of that order has taken 
place. This matter is still being discussed with the Department 
of Justice to determine what the next step may be. I would be 
more than happy to provide information to you and to the 
committee when there is a decision that is reached on that 
matter.
    However, at this time, there is no exercise of those 
powers. It is still under discussion and under our review.
    If I may, I wholeheartedly agree with you in protecting the 
rights of our people and ensuring that even though we have a 
law enforcement responsibility and authority, we must recognize 
that the badge is not a badge of authority, but a symbol of 
trust that has been entrusted to us by the citizens of this 
great country.
    And so it is important that when we are out there 
performing our job functions, regardless of what they are, that 
we treat everyone with courtesy, dignity and respect. And that 
is certainly the goal of the United States Marshals Service in 
trying to accomplish its difficult missions.
    Mr. Serrano. Now, for instance, I had understood at least 
on paper, the Marshals' main objective being the protection of 
our Judiciary. I know you get involved in other issues such 
as--I know during the Vieques protests in Puerto Rico, there 
were Marshals there involved with that issue. I do not really 
know what the tie was in. But that is what happened. And I 
understand that and that is okay when those things have to 
happen.
    But this whole idea of having you serve as immigration 
officer, if you will, I think is just a dangerous thing.
    Now, without reaching into an area that you are maybe not 
able to talk to me about in public, is it being discussed, 
because it is not ready for implementation yet or are there 
some folks outside of your area that are having trouble with it 
and, therefore, it is being discussed further?
    Mr. Reyna. I think the whole process is under review. I do 
not know that there is any specific structure, but there is 
probably various issues and various opinions regarding that 
matter. Our goal right now is to try to determine what 
direction this new order will take the Marshals Service into.
    And so, we will continue working with the Department of 
Justice. I do not have any specific information that I can 
provide to you at this time. However, I would be more than 
happy to provide any additional information as far as we get it 
from the Department of Justice.
    Mr. Serrano. Right. You also have been, since September 
11--you know, I was thinking at the other hearing today, 
Mr.Chairman, just how sad the September 11 date has become. It is two 
years ago and we still refer to it as September 11, and I suspect 25 
years from now we will refer to September 11 and everybody will know 
that it was THAT September 11 and not another one.
    Have you had since then any other expanded powers given to 
you, other than the one that I just mentioned since that date?
    Mr. Reyna. No, sir. What we have been doing has actually 
been supportive of the mission of the various law enforcement 
agencies within the scope of our responsibilities. As you know, 
all of us learned that within our profession and in law 
enforcement that there were certain things that we needed to do 
different. And so, we have had to make some of those 
adjustments and the most important thing that we needed to do 
different was to cooperate, was to share information, was to 
work with the highest degree of cooperation and teamwork.
    You know, it does not matter whether we are in, you know, 
law enforcement agency x, y or z. All of us in this great 
country, and all three branches represented here, have one 
common goal, and that is to protect the American people. And 
so, our efforts have been focused on supporting some of those 
missions.
    We have been impacted, obviously, seriously impacted, by 
September 11 events and that is in handling these trials and 
the great demand that has been placed on the courts and the 
great demand that has been placed on the United States Marshals 
to support the courts. That is the reason that we are here 
today.
    If I may point out, one of the things that is important to 
us and the reason we are here is that we simply just do not 
want to ask for more like we have done, perhaps, in the past. 
We need to ask for things that are specifically dedicated to 
enhancing our mission, our primary mission, which is the 
protection of the judiciary.
    Because if we ask for some of the same things, we will be 
where we were before September 11 and we do not want to be 
there--the United States Marshals Service is not going to be 
there.
    What we want to do is find the mechanisms to secure the 
judiciary because--you know, the Judiciary, as I stated 
earlier, the Judiciary is what maintains justice and should 
something occur in the Judiciary, then we would obviously have 
a very serious and significant catastrophic event in our 
country.
    So when we talk about freedoms, when we talk about 
liberties, when we talk about opportunities to resolve an issue 
in this great country of ours, it means protecting the 
judiciary because that is where civilized men and women go to 
resolve every type of issue. So we must do everything that we 
can to protect the Judiciary, not only during difficult times, 
but during every type of function they have and ensure that 
nobody will ever not only threaten the Judiciary, but also 
interfere with the fundamental work that they do and the 
cornerstone type of work that they do in maintaining democracy.

                         CAMERAS IN COURTROOMS

    Mr. Serrano. You know, it is interesting you say that 
because, as a follow-up to my comment, Mr. Chairman, about 
immigrants and how they see our society, the comment I always 
get from folks who come from Latin America--the big thing that 
stands out in their mind is the respect for the Judiciary.
    In so many of these countries, you know, the local drug 
dealer can get rid of a judge whenever he wants to, you know, 
and does. You know, and over here, they see that all the time.
    To the Judiciary, in the aftermath of the September 11 
terrorist attacks, and with the current sniper case here in 
D.C., there has been significant discussion about the 
possibility of cameras in the courtrooms to televise the 
hearings of public interest
    What is your position on this issue?
    Now let me tell you that I am rethinking this whole issue. 
When I was in the State Assembly a thousand years ago, I was 
always opposed to cameras in the courtroom because I never 
thought of the bigger trial, Mr. Chairman. I always thought of 
the local drug dealer going before a camera in the courtroom 
and somebody saying, you know, in the process of convicting 
him, that he owned 17 late-model cars and three mansions, and 
so on.
    And I figured some kids watching that would say, ``Gee, it 
is worth the risk. Look at all the stuff he has got.''
    So, I mean, that was my advised opinion in those days. Now, 
seeing other trials on TV at times, and rethinking that, but--
--
    What thoughts do you have, especially for the kinds of 
trials we are going to be having?
    Judge Heyburn. Well, I mean, this is an issue that----
    Mr. Serrano. As the camera focuses in on you
    Judge Heyburn. Yes. [Laughter.]
    There are a lot of different opinions.
    The current policy of the Judicial Conference, and I 
believe, statutes of the United States, are against the use of 
cameras in courtrooms, and there are a lot of good reasons for 
that. You know, I think it is fair to say that there are some 
reasons on the other side. And it is a long discussion. I do 
not know exactly what kind of response you are looking for.
    Mr. Serrano. Do you folks personally have a position, or 
are you presenting the Judicial Conference's position?
    Judge Heyburn. I am presenting the Judicial Conference view 
of it. And I happen to agree with it, by and large, so I do not 
have a problem. I am not saying that there could not be 
exceptions under certain circumstances. But I think as a 
general rule that cameras in the courtroom are a diversion and 
can cause more problems in the adjudication of a case, and do 
not necessarily help.
    I mean, after all, as far as getting the news out, people 
are in the courtroom, everything that happens is open. 
Everything that happens in every courtroom is open, and every 
decision we make is an open one--so open that we state reasons 
why we--in detail--we do things the way we do.
    And my personal opinion is that it is basically a good 
rule. I know there are views on the other side, and there could 
be exceptions. But, I have no problem supporting the Judicial 
Conference on it, and the statutes in this case, so far.
    Mr. Serrano. Do you think there might be a special call 
during, you know, terrorist trials, if you will, for these 
things to be on TV?
    I mean, I know, certainly, the networks want it on, 
because, you know, but I do not think they should have the last 
say, or a say at all in this.
    Do you think people will cave in to that?
    Judge Heyburn. I do not know. I think we ought to always 
keep our eye on the ball. I mean, the most important thing is 
that the trial be conducted in a fair way and that it be open 
and that, there have certainly been examples of where the 
intrusion of television has not been a positive thing for a 
trial. That may not be because of that intrusion; it may be 
because of the way it was handled.
    But, from a judge's point of view, if you have a difficult 
case, it is always possible that having the television cameras 
there raises more difficult questions. You can do all kinds of 
things to minimize the problems, but you have all these 
concerns about juror privacy, about witness privacy, about 
publicity, generally, that can affect all kinds of elements of 
a case.
    If it is a politically charged case, whether the case is 
being tried to the public at large as opposed to the jury. All 
these are questions that do not make having a camera 
impossible--they just make it more and more difficult.
    I mean, after all, as a judge, my job is to have a fair 
trial. And having a fair trial means that the jurors are 
presented with the evidence in a fair way. As to how the public 
perceives it? It is an open courtroom and everybody can know 
what is going on, but certainly a secondary concern is whether 
someone is able to watch it in their home. That is just not the 
primary concern, from my point of view, as a trial judge.
    Mr. Serrano. I guess that brought up a point that I, in all 
honestly, have never thought of--that a prosecutor could, in a 
politically charged trial, play to the TV audience in a way 
where, if the result, the verdict, is not what he has gotten 
the people to believe should be, we could have incredible 
tension between the public and that jury.
    Judge Heyburn. And why that is important--and I recognize 
there are views on all sides of this--but what you want to do, 
from a judge's point of view, you want to insulate the jury 
from what is going on out there. Because you do not know what 
influences jurors will feel. The influences they may feel from 
their friends and family.
    Even if they are sequestered, what is going to be the 
reaction afterwards? Whatever verdict they come through with--
can they deliver a verdict that is fair and honest, based on 
the facts and the law, and not based upon some public opinion 
out there, whether for or against? That is what we want from a 
jury.
    And even if they are sequestered, even if you had to take 
the unusual step to sequester because there is a lot of 
publicity, which is not what you want to do, of course, then 
what will the reaction be when they go back to their 
communities
    Will they be concerned about that and weigh that concern 
when they are deciding the very important fact of their 
verdict?
    You know, you tell them over and over again, but if they 
feel they will face some negative feeling from their community 
and friends about any particular verdict, you know, that can 
weigh on people
    And so, I think you have to consider that in any such a 
trial.
    And of course, not that having it televised would eliminate 
that problem.
    But we spent a lot of time particularly in a trial that 
involves a sensitive issue--of building up the jury so that 
they will make the right decision based on the facts and the 
law, not based on any prejudice they have and not based on any 
prejudice they think they will feel from their friends and 
neighbors.
    Mr. Mecham. Mr. Serrano, an amplification of the Judicial 
Conference policy. The Judicial Conference may be the national 
policy making body of the Judiciary, but it has no order making 
authority.
    So the only teeth that really apply in the cameras area is 
when the circuit councils adopt a resolution embracing the 
policy of the conference in this area, which virtually all the 
circuits have except yours.
    And there are a couple of instances where trials have been 
held, I think by Judge Sweet and a couple of others up in your 
area. You might have the opportunity to observe the impact some 
day
    Mr. Serrano. So that decision is basically left up to the 
judge, then, right
    Mr. Mecham. Circuit council, which has statutory authority.

                       RECRUITMENT OF MINORITIES

    Mr. Serrano. Let me ask you one last question here. I asked 
this of Justice Kennedy last year and I will ask him again when 
he testifies next week and now I will ask you: What progress 
are the courts making in hiring qualified minority clerks and 
other professional staff? What type of outreach activities are 
you conducting to make service in the Judiciary appealing to 
minorities looking to enter the job market
    Judge Heyburn. I think one thing--there are a number of 
things that I think are being done nationwide.
    Recently, within the last year, the way that law clerks are 
being hired, I think, is being opened up in two ways: Number 
one, we have on the judiciary web site a law-clerk part of the 
web site, so that the information about how to apply, what 
positions are open and all that information is much more 
available to everyone.
    And it may seem like that is not very important. But I 
think that getting a law clerk's position is very competitive. 
And if you do not get the information out, it can be sort of 
the province of a select few.
    And I think the broader information you get out about how 
you can apply and the availability of it is very helpful to 
judges. We get a broader selection from which to choose from.
    The second thing that has happened just in the past year is 
that a number of judges got together and said that the whole 
process that we are using to hire law clerks is happening way 
too quickly and that we ought to move it back. And so now--and 
it is for the first time this September, we will be using this 
new process.
    It used to be that law clerks were being hired after only 
one year of law school. And basically the way it worked is if 
you got to be on the law journal your first year and did well 
your first year, then you would apply for a law clerk's 
position. If you did not, it was sort of out of sight, out of 
mind because it would be over in six months.
    And everybody perceived, the law schools and the judges 
perceived, that this process was occurring too early and we 
need to move it back. So starting this September, almost all 
the federal judges in the country have agreed that we are not 
going to hire law clerks until they are beginning their third 
year.
    And the impact of that will be that more people will be 
involved in the process. It will be more open to folks. And I 
would think that that would help everybody and I suspect there 
will be more minority applications because of it. But it is 
just a suspicion on my part. But I think the more open we get 
it, the more informed the law students are. And when it is 
later in the process, there are going to be more people who 
will know about it and be involved.
    Mr. Serrano. Well, a couple of years ago when I asked 
Justice Thomas this question, his answer was really 
interesting. He said, ``Well, the schools we go to do not give 
us any candidates.'' I said, ``Who do you go to?'' He said, 
``Harvard and Yale.'' I said, well, try some other place. There 
are other fine schools that have a more diverse pool.
    Because if you go to a certain place, then you are playing 
into the problem they have, which is a question for another 
hearing in another committee, about their lack of diversity
    Director Reyna, how about in your agency. Has something 
special going on to recruit minorities?
    Mr. Reyna. Yes, Congressman. One of the things that we are 
trying to do is to extend our recruitment efforts into the 
various programs that we have that obviously would allow us the 
flexibility to distribute the information to minority 
applicants. And we do have that ongoing at this time.
    Mr. Serrano. Okay. Mr. Chairman, I have some other 
questions that I am going to submit to the record because I 
know you are trying to get out of here in the next five minutes
    Mr. Wolf. Actually, I am not. We are going to move this 
thing around. I mean, we live here and we are not ready to go 
anywhere. [Laughter.]
    Does not start until seven.
    Mr. Serrano. Just for any reporter in the room, clarify 
that. You live here. My Washington residence is locally, but I 
live in the Bronx
    Mr. Wolf. No, I said, I live here.
    Mr. Serrano. Oh, no, no, you said we live here.
    Mr. Wolf. I live here. [Laughter.]
    And I do not have a dinner until 7 o'clock tonight on the 
way home. So I am--we are okay. No, I am just kind of teasing--
--
    Mr. Serrano. I love this guy.
    Mr. Wolf. On the question of televising, I was going to ask 
a question kind of leading into that, but the Congress did 
direct that the McVeigh hearing be televised for the families.
    And Moussaoui case, and we carried language in our bill in 
the supplemental, directing the Judiciary to televise the trial 
for the families.
    Mr. Serrano. For the families, not for anybody else.
    Mr. Wolf. Closed circuit.
    Mr. Serrano. I just do not want to see that break away 
every two seconds, we break away.
    Mr. Wolf. No, and I think after watching the O.J. Simpson 
case I think that was very, very bad and gave the Judiciary, 
quite frankly a bad name.
    There may be some cases that would be educational, because 
the public sees the network shows on district attorneys and 
they are in court for 10 minutes and you think that is the way 
it really is, so there may be a time that it may be appropriate 
to televise cases.

                  INDEPENDENT REVIEW OF THE JUDICIARY

    Has anyone ever--and I have to be very careful. I have 
great respect for the Judiciary, and I do not tell the 
Judiciary how to operate, and that is what we have always tried 
to do as much as we possibly can fund your request.
    But has anybody ever performed a top-to-bottom evaluation 
maybe done by senior judges or retired judges with a foundation 
such as the Gates Foundation to study the operation of the 
Judiciary. Are there things that could be done differently, 
wiring all the courthouses, so that everybody can go on and 
every courthouse is wired so that a judge in Utah can 
communicate to a judge in--and different things like that.
    Has anyone ever done a top to bottom review?
    Mr. Mecham. We have got a national network, local networks, 
every judge can communicate with every judge, every court 
employee can. Judge Heyburn may want to elaborate.
    Judge Heyburn. Well, I think that, I do not know about the 
top to bottom look, but we certainly in our court I can tell 
you that we are very concerned about optimizing the ability of 
the public to access what we do, not only keeping the 
courthouse safe but also open, but, for instance, we have our 
web site for our court, we put----
    Mr. Wolf. Does every court have a web site?
    Judge Heyburn. Not every court.
    Mr. Wolf. You see, that is what I was thinking.
    Judge Heyburn. I would say it is growing. It may be, I 
would suspect over 80 percent have a web site.
    Mr. Wolf. Do you have a standard for the web pages?
    Judge Heyburn. I do not think there is a standard, because 
there are 94 different districts, and they are all so 
different.
    Mr. Wolf. Are all the decisions put on the internet?
    Judge Heyburn. We put virtually all of our decisions on the 
web site.
    Mr. Wolf. Is that in every district?
    Judge Heyburn. Some of them do and some of them do not. It 
would--there are a lot of factors going both ways why you would 
want to do it, but almost all our judges put all our decisions, 
we put jury instructions----
    Mr. Wolf. But why would you not want to do it? I mean, a 
dissenting opinion, a ruling----
    Judge Heyburn. Well, obviously I believe that it is a good 
thing to do, because we do it. The reason you--the argument on 
the other side would be, is that you look at the books, we 
publish thousands and thousands of cases already, and there are 
too many cases that are published and if you want to know what 
the law is you can find it from the ones that are published, 
and you do not need all the other cases out in the public 
domain because they do not help that much.
    I do not happen to necessarily agree with that, I think 
there is some value in having everything out there, even if it 
is not an official published case, it is out in the public 
domain and it is okay.
    But, you know, there is an argument on the other side.
    Mr. Wolf. Yes, that becomes kind of inside baseball, 
because then just the lawyers know.
    Judge Heyburn. Right, exactly.
    Mr. Wolf. You know, it used to be the Congress was not 
televised, and they said it was going to ruin the Congress. 
Quite frankly, it has improved the Congress.
    There were times they would just photograph the chair or 
the person speaking.
    I think televising Congressional debate has opened up the 
process. I personally probably would not favor television in a 
courtroom for a lot of reasons. Perhaps as I said the O.J. 
Simpson case.
    But all court decisions could be put online--I publish my 
entire voting record, how I voted on every single vote that I 
cast in Congress. I put it online so everybody can access how I 
voted today, they will be able to go online and find out, they 
will not have to buy the Congressional Quarterly.
    They will be able to find out. I am putting out a 
newsletter next week with my town meeting. I am putting that 
online with all of the issues that we are covering: 
videoviolence, hunger in Africa, transportation, and I think the more 
open it is--so that the layman understands, the better I can do my job. 
That is why I wondered if anybody had funded a--and I think the Gates 
Foundation or somebody like that would be appropriate, kind of a top to 
bottom review.
    Judge Heyburn. And essentially we are following the same 
policy that you are. I mean everything the judiciary does is 
open. We are in the process, for instance, of creating 
electronic files so that all of our----
    Mr. Wolf. Do you have pictures on your web page?
    Judge Heyburn. Pictures of?
    Mr. Wolf. Your pictures.
    Judge Heyburn. No, I do not think so, no.
    Mr. Mecham. I think the Marshals Service would encourage us 
not to do that.
    Judge Heyburn. But we are in the process of creating these 
electronic files so it hugely increases the accessibility of 
our courts.
    Because now, even, for instance, in my district, if you are 
not in Louisville, Kentucky, you are in a rural community, 
practicing in a federal court, and you will be able to have 
access to every single file--exactly what is going on, what 
happened yesterday, and you will be able to access through that 
process every single opinion and every single decision we make 
and the reasons for it.
    There has also--been a lot of work done on how we can make 
jury trials run smoother, better and get the information to 
people through the jury process in a better way.
    So, that is why we are improving our courtrooms. We just 
completed one in our district in which now you can present 
evidence electronically. That is the way people are used to 
getting information nowadays, and a jury trial is no different.
    And it is going to improve the quality of jury trials. It 
is going to make them quicker, better, and the lawyers and the 
public, in fact, are demanding that sort of thing, and we are 
trying to keep abreast of that.
    Mr. Wolf. I think it would be healthy to have an 
independent study of court operations. Every institution 
reforms and reforms within the institution. I do not mean to 
have it reformed from outside.
    Clearly, I do not think the Legislative Branch ought to be 
telling the Judicial Branch how to run the courtroom. But we 
reformed--this body here--we made a decision that there would 
be term limits for Subcommittee chairmen. I think it was very 
healthy. It forces a change. All the activities in the House 
are put on-line, and it opens up the process. I think people 
feel more part of it. And I thought if you had a foundation 
that was willing to do it, that might be a healthy thing to do.
    I think I will just ask this next one for the record 
because--and I do not know, if Mr. Mecham, if you want to 
comment, or the judge, or the Marshals Service.

                 REPORTS OF DECLINE IN CRIMINAL FILINGS

    There was an article in the paper here, that because of the 
shift--and this would probably be in this region--the shift in 
the FBI agents from traditional law-enforcement duties to 
counter-terrorism has resulted in significant reductions in the 
number of cases referred to the U.S. Attorneys in Washington to 
Baltimore.
    And I assume that is not happening around the country.
    And the FBI has changed. It is no longer the agency to 
gather the information, present the case, go in and testify, 
and get a conviction. It is--their number one goal is to stop 
terrorism.
    And as a result of that, there are fewer agents working 
some of the traditional cases, and therefore, the U.S. Attorney 
in this region has had fewer cases, and the same in Baltimore.
    But I would assume that is here, and not in other areas. Is 
that----
    Judge Heyburn. Yeah, I think there are a number of things 
you have to bear in mind about that report:
    Number one, the statistics nationwide do not bear out that 
there is a decline in criminal cases being brought. In fact, 
there is a--we had been seeing on the order of a 2 percent or 3 
percent increase, and this past year it is 6 percent. Our 
projection is actually 9 percent for--in 2004.
    Also, what the FBI may or may not be doing is only part of 
the law-enforcement picture. And it may well be that those 
cases in which the FBI is involved could decrease.
    But there is INS, there is DEA, there is the Treasury 
Department--there are a variety of different--you know, we get 
our business, so to speak, from a variety of different sources, 
when you are talking about the criminal cases. And all of it is 
uncontrollable.
    And in a number of a those areas, even though the FBI may 
be focusing in an area which is vital but does not produce the 
cases, if you are talking about terrorism. There are other 
parts of government that are stepping up their efforts. And 
apparently, at least--I just read the numbers the way everybody 
else does, the numbers seem to be holding strong, if not 
increasing, accelerating, on the criminal side. So----
    Mr. Wolf. Well, it might just be in this region.
    Judge Heyburn. That could well be. And that is another--you 
know, that is exactly the problem that we with the Judiciary 
are always dealing--you talk about nationwide trends, but there 
are really no nationwide trends. There are 94 different 
districts, some of which are going up, some of which are going 
down. We have to deal with each of them and try to allocate the 
resources in the best way possible.

                       MARSHALS SERVICE WORKLOAD

    Mr. Reyna. Mr. Chairman, if I may comment on your 
questions. One of the things that we see in the Marshals 
Service is obviously increased workload. And I can tell you, 
the Southwest border, for example: the number of immigration 
cases has increased dramatically. I am quite familiar with 
that, having been born and raised in the area. I am quite 
familiar with seeing that.
    We, obviously, see that in our workload. We also see that 
as Judge Heyburn, you know, clearly indicated, there are also 
other agencies that have started other initiatives that also 
impact on the judiciary, on the Marshals Service.
    So, the other thing, as we start looking at terrorist-
related cases, and perhaps, certainly, terrorist-related 
trials, and maybe take Eastern Virginia, again, as an example. 
That is one case. That is one trial.
    But not only--and I guess the point I want to make is--even 
though it is just one case and one trial, it consumes the 
entire district staffing.
    Not only that, we have to bring in additional resources 
from other parts of the country to support that trial.
    So we will see these types of trials. While they may be 
few, they are of the type that would create a significant 
impact on the United States Marshals Service.
    You know, there may be a shift with the FBI and their 
mission, but there is enough work coming in from the other 
agencies.
    Mr. Wolf. Well, there has been a shift here, though. It has 
been quite dramatic, the number agents--the Washington field 
office has reassigned. There is a March 4 Washington Post 
article, but it says the number of cases referred to U.S. 
Attorneys in Washington and Baltimore are dramatically down.
    Judge Heyburn. And I think that is a nationwide shift. We 
were told, certainly in our district, and we are a backwater 
district in terms of where we think terrorism might be 
occurring.
    But we were told that the FBI would be shifting resources 
as well. Now, they did not know whether that was going to mean 
there were going to be fewer cases brought or not. But it is 
certainly something that has happened nationwide in terms of a 
shift. You never know how it is going to turn out in terms of 
cases.
    Mr. Wolf. Yes, I think this region, and I am sure up in New 
York City, there is an increase in CT efforts. Barriers, you 
know, Mr. Mecham, how this region has changed. If you had left 
this region 10 years ago and come back, you would see a 
dramatic change. And I think the Bureau--a lot of the people 
have been focused to combat terrorism.
    If you could submit for the record the criminal filings per 
district around the country that we could take a look at and 
see how it compares to this region.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
                           CAFETERIA BENEFITS

    On the cafeteria benefits, your request includes $16 
million for the implementation of a cafeteria-style benefits. I 
understand the authorizing language is required for the courts 
to implement the program. And last year the House passed the 
Federal Courts Improvement Bill that contained the necessary 
authorization, but the Senate never acted. Are you working with 
the Judiciary and Government Reform Committees now to get that 
necessary authorization?
    Mr. Mecham. We are indeed. Actually, the House Judiciary 
Committee, Subcommittee has already approved it for the second 
time around. And the Full Committee, I think, is ready to move 
on that. I have been in touch with Senator Hatch on the Senate 
side and some of the others. And we think they are going to 
move that bill earlier this time.
    But we do need, as you suggest--because I think arguably, 
at least co-jurisdiction is in the Government Operations 
Committee. We need to do more there. We have cleared the House, 
but we have not in the Senate.
    Mr. Wolf. Well, if I can help you, Tom Davis, my colleague 
from the adjoining district and a good friend is the Chairman 
of the Government Reform Committee and he could be of help.
    Mr. Mecham. Great, thank you.
    Mr. Wolf. Let us know.
    Mr. Mecham. I appreciate that offer and we will.
    Mr. Wolf. With that, which I think makes sense, why would 
it cost an additional $16 million? Is your proposal to give the 
individuals choices within a specified amount or to increase 
the number of benefits? Is the food in the cafeteria getting 
richer? [Laughter.]
    Mr. Mecham. My understanding is each person would get a 
stipulated amount and they could then allocate how they wish to 
have that amount used--whether it is for vision or dental or 
some other area.
    Mr. Wolf. The staff pointed out that was the intention. Of 
course, it is above the current benefit.
    Mr. Mecham. Oh, yes, I am sorry. It is definitely above the 
current benefits.
    Mr. Wolf. So you will be adding benefits.
    Mr. Mecham. Yes. Based on the studies we have made, people 
feel that the areas where they are most deficient in benefits 
for most people is vision and dental. So presumably that would 
be where a lot of it would be concentrated by each individual 
as they determine which way they wanted to dine in the 
cafeteria.

                         BANKRUPTCY REFORM BILL

    Mr. Wolf. Bankruptcies, the Judiciary's request includes 
400 additional FTE for bankruptcy courts to handle an all-time 
high number of filings. It is just frightening when you look at 
the number of bankruptcies. I do not know what it means. Is it 
realistic that the judiciary could hire 400 bankruptcy staff in 
fiscal year 2004?
    Judge Heyburn. Right. I think if you look at it the 400 may 
or may not sound like a large number. But let's look at it this 
way in terms of an individual district, you are talking about 
roughly, let's say, 100 districts. So even across the entire 
country, you are talking about three or four per district on 
average. So that makes it a much more of an accomplishable 
thing.
    I think in many districts, there will be one or two. In a 
number of others there would be five or six.
    Mr. Wolf. So you think you could hire nationwide 400 in 
2004?
    Judge Heyburn. Yes, we have done it before.
    And the way, of course, it is priced out in the budget is 
that the average would be that they would be hired for--they 
would be on board for six months of that year.
    Mr. Wolf. And what impacts will the bankruptcy-reform 
legislation have? That has passed the House and my sense is it 
will pass the Senate. What impact will that have?
    Judge Heyburn. Well, one of the most significant impacts 
will be the fact that it authorizes 28 new bankruptcy judges. 
And that will be over time a significant driver--a driver of 
costs. I think over five years it will be something on the 
order of $20 million.
    Mr. Wolf. But will the statute itself change the filings?
    Judge Heyburn. I think it will. I do not know if anybody 
has really estimated that yet. At least I have not seen any 
estimate of it. If you have a work requirement, you might end 
up with fewer bankruptcies. That is a possibility.
    Mr. Wolf. Maybe somebody could look at that and see----
    Mr. Mecham. There are some things in this bill that are 
going to impact your Committee and us, Mr. Chairman. Now maybe 
it will be a wash for you, but it will not be a wash for us.
    Mr. Mecham. Another thing it does is that it lowers some of 
the fees by something in the order of $25 million over a number 
of years. So it will be more work and fewer fees.
    And that will mean what you will be doing is diverting 
money from us to the Justice Department. We would like to have 
you keep it with us if you could possibly arrange that. As much 
as we love Mr. Reyna's friends over there.
    Mr. Wolf. We will try and do that. [Laughter.]
    Mr. Mecham. We think we were outmaneuvered on this, by the 
way.
    Mr. Wolf. Have you spoken to Senator Hatch about that?
    Mr. Mecham. I have talked to Senator Hatch. I even talked 
to the Attorney General but I did not get much satisfaction 
from the Attorney General. And so far, Senator Hatch wants to 
get the bill through as it passed.
    Mr. Mecham. He is worried about all of the collateral 
issues that are beginning to arise.
    Mr. Wolf. Yes, yes. And I think they are doing basically 
the same bill but for one or two provisions.
    Mr. Mecham. That is right.
    Mr. Wolf [continuing]. And I think to go in and change it 
again could--although, they could deal with that issue in 
conference. It is really a fee issue more than it is a 
substance issue, isn't it?
    Mr. Mecham. Yes, it is a fee issue in this case.
    Mr. Wolf. Have you mentioned to Mr. Sensenbrenner?
    Mr. Mecham. Yes, we presented that to the Committee, though 
we did not get very far.
    Mr. Serrano. You sound like me. [Laughter.]
    Mr. Mecham. We are going to lose $19 million more in fees 
because of the bill's allowance for in forma pauperis filing. 
So that is $19 million plus, $25 million, plus you are going to 
require all kinds of nonsensical reports that the Judiciary 
does not need, but some commercial people do need it for their 
own records. Like having tax returns on the people who file and 
maintaining that.
    And financial data, consumer debtors--we do not need that 
in the Judiciary. But there are commercial interests that do. 
And that is in there, and it is going to cost us money.
    Mr. Wolf. Well, you make a good point.
    I am going to have one last question.

   INCREASING STAFF REQUIREMENTS FOR PROBATION AND PRETRIAL SERVICES

    Yes, the Judiciary has requested for an increase of million 
for 441 additional FTEs for probation and pretrial service 
offices and an additional $7.4 million for increased drug 
testing, and mental-health treatment. And Judge Heyburn, you 
mentioned electronic monitoring and other services.
    What is the basis for the increase, and is there a higher 
number of offenders under supervision or are offenders released 
from prison more dangerous and require more supervision than in 
the past?
    Judge Heyburn. Both. I think I covered that in my opening 
statement. We are doing everything we can to get people off 
supervision in an appropriate fashion when they no longer need 
to be under supervision.
    But even with those efforts, the number on supervision is 
increasing. And the fact of the matter is that this is not a 
problem that can be solved in one year.
    Because of the work of those who supervise comes from the 
group of those people who are currently in prison, who in the 
next year are going to be getting out of prison.
    And what we see is that those people who are going to be 
finishing their terms, are those who have been in prison for 
quite some period of time, and we anticipate based on past 
experience, are going to need this kind of drug-abuse or 
substance-abuse treatment if we are going to complete the job 
of reacclimating them into society, which is absolutely vital.
    We hope that that can be accomplished. So it is a tough job 
and we see that the numbers of those are increasing and the 
seriousness of their crimes are worse as a group. And that is 
the reason for these increases.
    Mr. Wolf. Well, you make a good case.
    Judge Heyburn. I wish it were otherwise--but that is the 
way that it is.
    Mr. Wolf. Yesterday we had the Justice Department up, and I 
asked them would they speak out on the whole issue of violence? 
Have you ever seen the violence in some of these video games, 
Grand Theft Auto--have you seen the violence?
    Judge Heyburn. I have seen it and I try to keep my son from 
watching it.
    Mr. Wolf. I did not know anything about it until somebody 
brought a copy to my office. And the fact is if you want to 
learn about it, go on my web page and I am doing a piece in my 
newsletter about the violence on video games and Grand Theft 
Auto. Della Reese did a show on ``Touched By An Angel'' two 
weeks ago, where they do a story about two young boys who get 
involved in the video game violence.
    I had heard that the case down in Puducah, Kentucky that 
that youngster had never fired a rifle before and learned eye-
hand coordination through the video and some of these violence.
    And Grand Theft Auto, you get more points for head shots. 
The industry has been totally irresponsible. They have allowed 
these things to be sold without adequate warnings for parents.
    Parents may be buying video games not really knowing what 
is on there. The lobbyists for the industry made a comment. And 
Mr. Baca has been trying to address this issue.
    Judge Heyburn. We have more people on supervision now than 
there are in the Federal prisons out there.
    Mr. Mecham. Very close.
    Judge Heyburn. And it is a big part of what we do. And, 
interestingly, it is a bigger part of my job actually, because 
with more people on supervision, it is increasingly the case 
that we spend part of our day deciding if someone has had a 
positive drug test or if someone has breached their supervision 
in some way, whether they should go back to prison or not.
    And these are really tough decisions because your prayer is 
if they spent five years in prison that they are going to then 
get out into society. They have families--spouses, children--
and your hope is that they will accomplish this transition, and 
you are faced with these decisions. It is taxing, but it does 
take up your time.
    I would say five years ago the amount of time that I spent 
on that was minimal and now it is significant.
    Mr. Wolf. Well, that is got to be difficult.
    Judge Heyburn. There is more change in how our job is 
involved.
    Mr. Wolf. You must have nights you go home and you say to 
your wife, you know, ``There was a case today that----''
    Judge Heyburn. That is why many of the families get broken 
up. I mean, you wish you could do something.

                       ALTERNATIVES TO DETENTION

    Mr. Wolf. I have a bill in that we are going to pass inthe 
next couple of months and have signed into law to deal with the problem 
of prison rape. Thirteen to 20 percent of men who are sentenced to 
prison are raped. Some of the stories are so unbelievably abusive and 
intolerable; and now the Administration supports the bill. We have the 
support from Chuck Colson, the NAACP--Senator Kennedy and Senator 
Sessions are the sponsors on the Senate side and Congressman Scott and 
myself are over here in the House side. And I think Mr. Sensenbrenner 
is going to give us hearings and the Speaker is committed to moving it.
    I mean, at times, you wonder, ``Am I sentencing this young 
person to go into a condition''--and, you know, I do not think 
I would want to have to make that decision. I think it would be 
very tough. I think somehow, too, you ought to be doing a study 
on the drug sentencing issue, because my sense is--and this is 
the second time today I will say it--Mr. Serrano is a liberal 
Democrat, but he said I did not go far enough to the left.
    I am a conservative Republican. But there are some senses--
I mean, having toured the federal prisons, the number of 
prisoners that are in there maybe--and I commend the Bush 
Administration for more money in SAMHSA and more money for 
rehabilitation, but there may be a way of dealing with this 
issue after a certain period of time, 53-55 percent of the 
people in prison are in there for drug-related cases. A number 
ought to be in there for drug-related cases, but there are 
others that there may be some other way of dealing with it.
    And I think that the Judiciary ought to be looking at that 
issue and maybe the Judicial Conference may look at the issue 
and see if there are some offenders that could be put in 
halfway houses or rehab programs rather than putting them into 
prison, whereby brutal things may very well take place. And you 
might want to provide some leadership on that issue.
    Judge Heyburn. You would need to talk to the Attorney 
General about that.
    Mr. Wolf. Well, I think everyone is afraid to take it up.
    Judge Heyburn. Well, I think from a district judge's point-
of-view, and we are the ones that are on the front lines on 
this.
    Mr. Wolf. Do you agree with me?
    Judge Heyburn. Yes, I do. These are difficult things. In a 
way, the sentencing guidelines, in some ways, makes our job 
easy because, on occasions, we simply have no choice but to do 
certain things.
    But I think even with the difficulty, most of the judges do 
not mind the sentencing guidelines--I do not--but at a certain 
level, we would like to have the flexibility to deal with these 
questions.
    You know, just personally, you would like to have the 
option--if the sentence is going to be a year in prison, you 
would like to have the option of whether that should be and 
could be satisfied in a halfway house, where there are all kind 
of family factors that come into play. And so many of these 
defendants are so different.
    Many of these people--it is hard to generalize, but some 
people are simply in the wrong place at the wrong time. Some 
people have the wrong kind of friends and they do not have the 
willpower to say no to them and then they get themselves in a 
situation where, they are suddenly facing prison time.
    It is tough to differentiate between those who are the 
truly evil ones and are potentially harmful to the rest of 
society and those who are, as I say, have the wrong kind of 
friends or are in the wrong place at the wrong time. That is a 
tough job, but it is our job; and, to a certain extent, we know 
Congress sets the penalties and that is your obligation to do 
so. That is a tough job in and of itself.
    Mr. Wolf. Well, maybe the Judicial Conference should do a 
study and make a recommendation to the Congress on that issue.
    Mr. Wolf. I mean, you would know more than anybody else.
    Judge Heyburn. Well, you know, the probation officers, the 
people in the Bureau of Prisons----
    Mr. Wolf. Well, the whole court system.
    Judge Heyburn [continuing]. Have done a lot of research 
about this. And you know, many judges have strong feelings. 
But, on the other hand, many of us feel that, we need to focus 
on enforcing the law and we have a certain amount of 
experience. But on the other hand, we do not want to inject 
ourselves in an area where we know it is really the prerogative 
of Congress.
    Mr. Wolf. Well, Congress may not completely understand. And 
as a compassionate conservative.
    Mr. Serrano. What is that?
    Mr. Wolf. I am a conservative.
    Mr. Serrano. I am agreeing.
    Mr. Wolf. And being very tough on the issue of crime, I 
think, it would be helpful to the judges. And your independence 
provides you an opportunity to take a slice and speak out. You 
have a lifetime appointment.
    Mr. Serrano and I have to run every two years. And I think 
the independent Judiciary does give you an opportunity to speak 
out.
    And I think to have a study done, particularly maybe by 
some judges that are tougher than judges that are not to make 
some recommendations and see what recommendations could come 
up. And I think that Congress would be glad to entertain some 
suggestions.
    Judge Heyburn. Well, one of the things you find that is in 
our request is the United States Sentencing Commission. And 
they do studies. The probation office does studies. The Justice 
Department does studies. And, I mean, I could not agree with 
you more. As you know, these are difficult questions and it is 
not my brief to come here and discuss this with you. I have my 
own opinions about it, but my purpose is to adhere to another 
one.
    Mr. Wolf. No, you could educate us.
    Judge Heyburn. Yes. And there are many judges who speak out 
very forcefully on both sides of this issue, as you know.
    Mr. Wolf. Well, Mr. Mecham, youcould send us some of the 
opinions on both sides. I mean, it is an issue that I have been 
concerned about. I have been in the prisons. And I have seen some of 
these young men that I believe that at a certain time would be better 
in a halfway house with a family around them than they would be in 
prison.
    And when you overlay this--are you aware of the prison rape 
problem in prisons?
    Judge Heyburn. I am aware of it. I am ever mindful that 
whenever you send someone to prison, there are some good things 
that can happen and there are some bad things that can happen. 
And those are things you have to take into account.
    Mr. Wolf. Well, the Committee will send you the material 
that we have. Thirteen percent of the men who go to prison are 
now raped. There was a Nebraska study, 21 percent in the 
Nebraska prisons.
    Judge Heyburn. And think about the effect that that has. 
Where do those people come out of prison? They are under 
supervised release and think of the difficulty they have 
readjusting when that has happened
    Mr. Wolf. Well, the studies show that they do horrible 
things.
    Judge Heyburn. Right. And that is why they are the people 
that our probation officers are trying to bring back into 
society.
    Mr. Wolf. Well, I would appreciate your sending this as 
quickly as possible.
    Mr. Mecham. We will do what we can.

                            OXYCONTIN CASES

    Mr. Wolf. But as I recognize Mr. Serrano, have you seen 
many cases that have come into your court in the last several 
years on OxyContin?
    Judge Heyburn. No, I have not.
    Mr. Wolf. Would they mainly be brought in the State and 
local courts?
    Judge Heyburn. They might be in State courts. And they also 
might be a nationwide class action to some extent.
    Mr. Wolf. The number of OxyContin abuse cases down in 
Southwest Virginia and Kentucky and Mr. Rogers' district has 
been a major, major problem.
    Judge Heyburn. I am in the Western District. And the cases 
from his district would be in another district court.
    Mr. Wolf. So you have not seen anything?
    Judge Heyburn. I have not seen them.
    Mr. Wolf. Okay. Mr. Mecham, if you could see if there are 
many cases that you have had in the Federal court dealing with 
the issue of OxyContin?
    Thank you both, all three for your testimony. We appreciate 
it. We will try to help as much as we possibly can. And with 
that I recognize Mr. Serrano.

                        CAPITAL REPRESENTATIONS

    Mr. Serrano. Well, just to echo your comments and just to 
comment on a few of the things you said.
    I too will do whatever we have to on this side to make sure 
that you get funded properly. Having my way, I would not fund a 
penny to impose a death penalty, but that is another issue. I 
know you said that that was a new cost that you have with the 
Attorney General.
    Judge Heyburn. That was a cost to defend those who were 
charged.
    Mr. Serrano. Oh, to defend.
    Judge Heyburn. Yes.
    Mr. Serrano. Okay. Then I will support tripling that.
    [Laughter.]
    I will bring it up.
    Judge Heyburn. Yes, you did come in the middle of that 
discussion. We are requesting an increase in the panel rate, 
because we think it is so important that they get an adequate 
defense.
    Mr. Serrano. Yes. I always remember former Governor Mario 
Cuomo's quote, you know, ``We kill people who kill people to 
show that killing is wrong.''
    Mr. Serrano. And that is a--I also want to compliment the 
whole Judiciary. That is one thing I could never do. I could 
not do law enforcement, or be a judge because that takes a 
special talent and a special ability that I just do not have. I 
mean, it is tough being----
    Judge Heyburn. I think you played the role of a judge very 
well the one time that I saw you.
    Mr. Serrano. Yes, I did. I did. I just got a three-dollar 
check for that. They keep playing that role.
    Mr. Wolf. I missed that. What was it?
    Mr. Serrano. A long time ago, I got a call. I was quoted in 
a newspaper saying that--they said, ``If you were not doing 
this, what would you like to do?''
    I said, ``I would like to be on tour with Frank Sinatra--
singing, acting or playing center field for the Yankees.''
    So, ``Law and Order'' gave me a call and said, ``Would you 
really like to read for a part''?
    Mr. Wolf. Oh really?
    Mr. Serrano. So, I read for a part. And I played a judge.
    Judge Heyburn. He was very good.
    Mr. Serrano. Now, this is interesting. I tell you something 
very interesting.
    Judge Heyburn. I did not mean to bring up a sore subject, 
but you know.
    Mr. Serrano. And Director Reyna, you will appreciate this, 
as much as I would or anybody else, for that matter.
    But I said to them, ``I have got to ask you one question.
    They said, ``What is it?''
    ``What kind of a role is it am I going to play?'' Because 
they told me, ``you are going to play a Hispanic judge.''
    I said, ``Am I going to play, like, a drug-dealing judge, 
or a corrupt judge? [Laughter.]
    Because I, I am not going to do it, that is not what I want 
to do for my community.
    He says, ``Well, there is a problem. He is a very liberal 
judge.''
    I said, ``Ha, ha.'' [Laughter.]
    ``The part was written for me.'' [Laughter.]
    So, I played it, and I threw a case out because the police 
looked in a car, and so. That--they have played it ever since. 
But I could never be a real-life judge, because what you do is 
really special.
    I could be a Supreme Court justice, that is a different----
    [Laughter.]
    Mr. Wolf. We may not want you there. [Laughter.]
    Mr. Serrano. I know you do not want me there. I would 
actually interpret the Constitution, and that would be a whole 
different thing. [Laughter.]
    That would be a whole different thing.
    But let me just tell you that I really think that at the 
end of this whole process, or as this process on this fight on 
terrorism continues to develop--the courthouses, the courtroom, 
the chambers, the trials will become such an important part of 
this whole issue.
    And the three of you represent will be extremely important 
to us, and I want to commend you for the work you do. I want 
you to keep in mind that I will continue to support you.
    On the issue of minority hiring, for all three of you. Keep 
in mind, if something happened in this country, wonderful, 
after September 11th, any federal agency you talk to will tell 
you that the increase of minority people, Mr. Chairman, who 
applied for jobs--sort of a statement, I think of patriotism. 
Of saying, you know, ``My country was hurt. It was attacked. I 
want to be a Marshal. I want to be a Marine. I want to be an 
FBI agent. I want to work for the State Department.''
    People are applying, Secretary Powell told us yesterday 
that something like, you know, 24 percent or 34 percent of the 
people who passed the exam this last time were minorities
    Well, that is a statement about the people that are 
applying.
    So, this hiring is not--this is not a contract for jobs 
that I bring up. It is a fact that there is a community out 
there that took a hit as much as anybody else in this country 
and now wants, in a new life, to participate in our 
government's life.
    So, when you hire people, and you bring diversity, you are 
doing it at a time when people want to be a part of the 
society, of the country, of the government.
    And, with that in mind, I only have one disagreement. You 
know, I hardly ever disagree with Chairman Wolf. But, I am 
troubled also, because, you know, liberals and conservatives 
meet. It is like a circle.
    We meet on privacy issues. You know, when Dick Armey left 
Congress--this very conservative majority leader--he said two 
interesting things. He said, ``I want people in my private 
life,'' and then he also said Ashcroft was going crazy. But, 
you know, I wish I could get a better quote on that. And that 
shows you how concerned he was.
    I agree with the chairman that there is this whole issue of 
the violence in the video games that we have to begin to look 
at. And my son will probably hate me for saying that, my 14-
year-old. But, there is.
    But, at the same time, you know, we adults on CNN and Fox 
News have shown for the last seven or eight days, that when 
adults have a problem, they settle it by going to war.
    And so, at the same hearing, I would like to have some 
psychiatrist, yes, what effect have the video games had on the 
violence in our society? But what does, you know, under the 
name of our country's security, seeing all this violence do, 
also, to children, when adults settle it by declaring war on 
each other? Be it a terrorist attack on us or a response that 
we do?
    So, with that on mind, you know, we will be here to assist 
you in any way that we can. We commend you for your service, 
and we look forward to seeing you soon.
    Thank you.
    Mr. Wolf. My pal, Joey--Judge Serrano. Pal Joey--get that? 
Frank Sinatra--Pal Joey. [Laughter.]
    Mr. Serrano. That is my e-mail address.

               DEPARTMENT OF JUSTICE SUPPLEMENTAL REQUEST

    Mr. Wolf. I did not know that. Director Reyna, one other 
statement or question. The Administration sent up the 
supplemental for $500 million for counter-terrorism funds, they 
provided the Committee with one page of backup for 
justification for the request. One page.
    Of that $500 million, how much does the Marshals Service 
expect to get?
    Mr. Reyna. Mr. Chairman, we submitted, you know, a request 
through the process, you know, the Department of Justice.
    I do want to point out that the Attorney General and Deputy 
Attorney General have been very supportive of the Marshals 
Service. And we are one out of the three components----
    Mr. Wolf. Of the $500 million, a one page justification, 
which is totally not appropriate. One page, $500 million. But 
of the $500 million, what is your expectation?
    Mr. Reyna. At this time, I do not know, Mr. Chairman. That 
is being worked through the process to put our request in.
    Mr. Wolf. I do not see how the Justice Department can then 
expect, under a separation of powers, just to send up a request 
$500 million with one, page of justification. I mean, the fact 
that you really cannot tell us is an indication that they 
really have not done their homework. I think this Committee 
will be very supportive of the Administration's request. But I 
think it is fair that the Committee know where the money is 
going to go, but not just to have a half a billion dollars to 
the Justice Department to put wherever, ever they want to do 
it.
    And so you do not really have any indication, assuming this 
Committee were to rubber stamp and give $500 million with no 
earmarks whatever, you do not know how much of that the 
Marshals would receive.
    Mr. Reyna. Mr. Chairman, see now, we have to work through 
the process in developing those budgets for the Department of 
Justice. And I can assure you that the focus on our request is 
protecting the Judiciary. And we certainly, you know, think it 
is important to recognize that we are one of the three 
components that----
    Mr. Wolf. I understand that but one page not specifying 
where it would go, I just think that is just kind of a--I just 
do not think you can do that
    So you have--you have no number that you would expect to 
get out of this $500 million, if any?
    Mr. Reyna. We do expect some funding. You know, we have 
submitted our request that has focused on the Judiciary, but it 
is another decision that is made through the process and 
through the department.
    Mr. Wolf. But do you really think it is appropriate for the 
Administration just to send up a $500 million request on one 
page with the idea that they will be able to say where it goes?
    Mr. Reyna. Mr. Chairman, I certainly understand 
yourquestion, but I do want to state that we do follow the processes of 
the Department of Justice. And it is the department that makes those 
determinations. But as far----
    Mr. Serrano. Will the gentleman yield?
    Mr. Wolf. Sure.
    Mr. Serrano. For the record, I am also concerned about the 
fact that $62 billion of the supplemental is to go to the 
Pentagon to use as they see fit. So this whole process that we 
are faced with now is a lot of--``Trust me; we will know how to 
spend it.'' And that I think that--I mean, I know that Mr. 
DeLay was quoted this morning as saying that there are serious 
problems with those kinds of situations where we are just told 
$500 million and we will spend it as we see fit. And $62 
billion to fight the war. And now we hear it is only for 30 
days. So it is a lot of difficult days next week.
    Mr. Wolf. I know I agree with Mr. Seranno, I think you 
really need--the Administration and the Justice Department 
needs to specify where the money will go, what it will be used 
for, to be held accountable because of the separation of 
powers; otherwise the whole Congressional oversight becomes 
almost irrelevant.
    And as a Republican who supports the Bush Administration, 
some time later it could be another Administration that you did 
not support. And so, therefore, there needs to be the 
justification. And the fact that none of the agencies can say 
how much they would get, literally turning over all of this 
authority to the Administration. And I just do not think that 
is a good idea.
    Mr. Mecham. Can I ask a question before you close?
    Mr. Wolf. Yes.
    Mr. Mecham. Could Judge Heyburn's statement and mine be 
submitted for the record as----
    Mr. Wolf. We will take care that----
    Mr. Mecham. Out of mercy, we abbreviated our statements.
    Mr. Wolf [continuing]. All three statements will be in the 
record as if read. And we appreciate all of you, and thank you 
very much
    Mr. Mecham. Thank you.
    Judge Heyburn. Thank you.
    Mr. Reyna. Thank you, Mr. Chairman.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

        
                                          Wednesday, April 9, 2003.

                   SUPREME COURT OF THE UNITED STATES

                               WITNESSES

JUSTICE ANTHONY M. KENNEDY, SUPREME COURT OF THE UNITED STATES
JUSTICE CLARENCE THOMAS, SUPREME COURT OF THE UNITED STATE
SALLY RIDER, ADMINISTRATIVE ASSISTANT TO THE CHIEF JUSTICE
PAMELA TALKIN, MARSHAL
BILL SUTER, CLERK
TONY DONNELLY, DIRECTOR OF BUDGET AND PERSONNEL

                           Opening Statement

    Mr. Wolf [presiding]. Good morning. The hearing will come 
to order.
    I apologize for being a few minutes late, although I know 
where both of you live. I do not know what time you left this 
morning, but there was a lot of traffic on the G.W. Parkway and 
the 14th Street Bridge and the Memorial Bridge--so I do 
apologize. But I know you understand.
    The Committee will come to order.
    We want to thank Justice Kennedy and Justice Thomas for 
appearing before the Subcommittee to discuss the Supreme 
Court's fiscal year 2004 budget request.
    An independent judiciary, trusted and respected by all 
citizens and committed to fairly and expeditiously resolving 
difficult and controversial questions is a fundamental tenet of 
our nation. We will try to ensure that you have the resources 
needed to accomplish this important mission.
    For fiscal year 2003, the Committee was able to provide the 
Supreme Court a 14 percent funding increase for the Court's 
Salaries and Expense account and was able to continue funding 
your building renovation project. In addition, the House-passed 
fiscal year 2003 supplemental includes $1.5 million for Supreme 
Court police enhancements.
    For fiscal year 2004, the Court has requested an increase 
of more than 25 percent over the fiscal year 2003 enacted level 
for your operating account. Thankfully, this increase is offset 
by a $24.5 million decrease in funding required for completion 
of the building renovation project.
    As you know, the budget outlook for fiscal year 2004 is 
very difficult. The Subcommittee's allocation is likely to be 
very tight for fiscal year 2004 and funding this percentage of 
an increase for the Court's operating budget may be very 
difficult. However, the Committee will do its best to continue 
to fund the Court's building renovation project and fund the 
Court's most pressing needs in its Salaries and Expenses 
account.
    With that, we would like to welcome you again and recognize 
Mr. Serrano, the ranking member.
    Mr. Serrano. Thank you, Mr. Chairman.
    I would like to welcome our distinguished guests.
    With the presence of two Supreme Court justices here today, 
there are many topics I might choose to address in this, my 
opening statement. However, I will, once again, focus on an 
issue that we have spoken of in past hearings and that I have 
discussed with you in the past and that is the protection of 
our civil liberties.
    Many citizens have become increasingly fearful that our 
government may go just too far; that we may adjust our 
priorities so much in order to catch the bad guys that we 
overly impinge on the rights of the rest of the general public.
    Certain agencies have suggested or even begun programs 
that, in my opinion, seriously threaten the civil liberties 
guaranteed by our Constitution. In addition, certain laws 
passed by Congress threaten to do the same thing.
    And so I take this opportunity to remind the distinguished 
Justices here that they are a vital last line of defense 
against overreaching acts of the other branches of government. 
I respectfully urge you to remain conscious of this duty to 
review any laws or actions that threaten these rights most 
carefully.
    When it comes to fighting terrorism, we are all on the same 
side. But the Supreme Court must remain a protector of the 
rights of individuals, in spite of government's desire to catch 
criminals. Please do not let our Constitution be trampled in 
the name of fighting terrorism.
    With that, I thank you for your attendance at today's 
hearings. I look forward to working with you. And I assure you, 
as I have in the past, that I will join Chairman Wolf and the 
members of both sides of this committee, to make sure that you 
are treated with respect, and that you get the resources that 
you need to do your job properly.
    Thank you.
    Mr. Wolf. You may proceed as you see fit. Your full 
statements will appear in the record.
    Justice Kennedy. Fine.
    Good morning, Mr. Chairman, and members of the Committee.
    Justice Thomas and I are pleased to be back again with you. 
We bring you greetings from our colleagues.
    We have a number of our staff here: Tony Donnelly, budget 
and personnel officer; Sally Rider, administrative assistant to 
the Chief Justice; our clerk, General Bill Suter; our marshal, 
Pamela Talkin. And I see Kathy Arberg and Ed Turner, our public 
information officers here.
    I might say sometimes people say that Congress and other 
agencies of the government depend a lot on their staff, and 
they say it in a derisive way. But you cannot run a Committee 
with these heavy responsibilities and complex issues without a 
very talented and dedicated staff.
    Over the years (and particularly in the last two years, 
when we have been going through the budget for our building 
renovation project), Mr. Chairman, the relations between our 
budgeting people and your staff have been just excellent.
    They talk on an ongoing basis. This really gives you some 
oversight through the course of the year as to how we are 
doing. And they talk about what our needs are, how they should 
be classified for budgetary purposes. And we trust your staff 
very much and we rely on them. I ask you to give them our 
personal thanks for the courtesies they always show to us.
    Mr. Wolf. Thank you.

                  SUPREME COURT SALARIES AND EXPENSES

    Justice Kennedy. As you indicated, Mr. Chairman, if you 
look just at the formal request that we have before you today 
with a budget of $56 million, in round numbers, and an increase 
of $7,300,000, it is a 15 percent increase. But if you add the 
supplemental increases, it becomes 24 percent.
    When Congressman Rogers was the Chairman of this Committee 
and I appeared before him in 1988, I was asking for a budget of 
about $15 million. And in thinking about why we have the 
increases, most of these things are obvious to you who hear 
budget requests from agencies throughout the government. You 
know about adjustments to base and you know about program 
increases. Our program increases in the last two or three years 
have been driven by an increase in the police force and the pay 
of our police and secondly, and to a much greater extent, by 
our information technology systems.
    The supplemental appropriation of $3.786 million is, we 
think, urgent because this contains the authorization, not only 
for our police parity, but for our hardware. Our hardware has 
reached and really exceeded its limits.
    One of the things we have done since I first came before 
this committee and before then-Chairman Rogers is we have made 
the court open to the citizens of this country through our 
information technology. We have 70,000 hits a day on that web 
site. That is 2,100,000 a month.
    I have not talked to the judges on the Court of the 
European Union or the European Court of Human Rights, but my 
conjecture is that we are the most open court in the world. We 
give more information on our history, on our current issues, on 
our docketing, on our cases under consideration than any court 
in the world. And we are very proud of that
    The information technology systems we request, of course, 
are both for the infrastructure that the public never sees, and 
for this more public function of making information on our 
institution available to all who seek it.
    The payroll functions, our inventory, our internal 
accounting mechanisms need upgraded hardware.
    Then we get to our library. We have one of the really 
finest law libraries in the world. And all of this is 
information technology--electronic technology now.
    Then we have our clerk's office, which has automated all of 
our systems for filing the briefs, records and motions that 
come before the court.
    And then, of course, there is the publication of the 
opinions, which is all electronic. Our opinions are available 
almost immediately--within the hour--after we announce them to 
the Bar and to the public at large.
    We find we may have been too conservative in the past on 
asking for the adequate hardware. Some of the machines we are 
using are not even currently serviced. Part of the request is 
for funds for outside contracting so that we have outside 
advice for all of these upgrades, but our goal is to be able to 
run them in-house. And the authority that we have requested 
will enable us to do that.
    I think that suffices for an overview, Mr. Chairman.
    Oh, I probably should say, you know, we did ask for 27 new 
positions. Of those, 13 are police; seven are technical people, 
mostly in the information technology area; and seven others are 
for non-technical, but we think very essential people in 
payroll, the clerk's department and two laborers.
    With that, I will close my remarks and ask my valued 
colleague, Justice Thomas, if he has anything he wishes to add.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

        
                            COURT AUTOMATION

    Justice Thomas. Good morning, Mr. Chairman.
    Members of the Committee, as in the past, I am honored to 
appear before you. And we both always appreciate your courtesy 
and enjoy working with you and your staff.
    Prior to coming into the Committee room here, in a chat 
with one of the staff members, I remembered that I was 
responsible for bringing the first PC into the EEOC in 1983. A 
lot has happened since 1983. And quite a bit has happened in my 
11 plus years on the court.
    Six years ago when we requested budgets, I think we had 
about 150 or so computers. We now are close to 600 PCs. We have 
two networks now, as opposed to one, and, of course, more 
sophisticated equipment.
    And in addition to the hardware that Justice Kennedy spoke 
about, we are at the obsolescence point for our software. 
Everything has to be moved over from Windows 97 to XP operating 
systems. Now that sounds simple, but on that many computers, as 
well as security problems, it is quite a change.
    We have made quite a few gains, but as I have said to this 
committee in the past, we have never caught up and that is 
still a problem for us. And each year it is going to be more 
expensive to catch up. At some point, we simply have to be 
current in order to not have the problem of coming to you for 
additional significant increases in the technological budgets, 
as opposed to just a support budget.
    The ongoing issues of security, of support, of updating 
hardware and keeping them current are basically what you see 
here. There is no fat. And I understand that the Committee has 
its difficulties with its limits on the budgets. But, as I have 
said in the past, these requests are consistent with the Court 
being able to do the sorts of things that it is required to do.
    With that, Mr. Chairman, once again I simply say that it is 
an honor to be here and to have the opportunity to work with 
you in order to see to it that the court is able to function 
appropriately.
    Justice Kennedy. We feel very comfortable looking at the 
seal of the Supreme Court of the United States. I do not know 
if we sold it to you or if you bought it. [Laughter.]
    Mr. Serrano. You do try to sell it to use. [Laughter.]
    Justice Thomas. Yes. [Laughter.]
    Justice Kennedy. Let us see: I have the cost right here. 
[Laughter.]
    $54 million, Congressman. [Laughter.]

                                SECURITY

    Mr. Wolf. Thank you both.
    With regard to security, what additional security measures 
does the Court implement when the threat level is increased to 
orange or red?
    Justice Kennedy. I am not entirely comfortable talking 
about it. I mean, we do have contingency plans to carry on 
court operations at other places, which we did once with the--
--
    Mr. Wolf. Yes.
    Justice Kennedy [continuing]. Anthrax scare. We have an 
increased presence both on the perimeter of the building and on 
the interior of the building.
    Our new systems that we are installing in the renovation 
will have adequate and state-of-the-art air filtration systems.
    And, as with most of the government and most of the rest of 
the American society, we have a heightened awareness of 
security measures. We want the people that come to the Court--
and we still have over a million visitors a year--to feel 
secure and to be secure.
    We are more careful about screening people that enter the 
building and we do it more than once. And our budget includes 
some upgrades for security equipment on a temporary basis, even 
before we install the equipment in the renovated building.
    Mr. Wolf. What relationship do your police have with the 
Capitol Police?
    Justice Kennedy. They are independent.
    Mr. Wolf. Do they meet?
    Justice Kennedy. Oh, sure.
    Mr. Wolf. On a constant basis, like every Monday?
    Justice Kennedy. I cannot answer that, Mr. Chairman. I will 
find out. But, for instance, when we came here today, the 
Capitol Police were with us when we came over. And they are on 
a network that talks to each other. And one of the requests in 
the budget is that we have pay parity with the Capitol Police. 
Ours is a little bit below that now.
    There, apparently, are regular security briefings in which 
our chief and the chief of the Capitol Police work very 
closely.
    Mr. Wolf. The House-passed fiscal year 2003 war 
supplemental provides $1.5 million for 13 additional Supreme 
Court officers and related equipment. The Senate version of the 
bill does not include this additional funding. Can you explain 
what activities these 13 additional offices will perform? And 
why is this funding needed?
    Justice Kennedy. Our police actually recommended close to 
double that number and we thought it was too much.
    Mr. Wolf. How many do you currently have?
    Justice Kennedy. We have 121.
    And, of course, it is a 24-hour, seven-day-a-week 
responsibility to secure the perimeter of the building and the 
interior of the building.
    We are very careful about visitors in our building. And, as 
I indicated, we want to be open. On the other hand, we are 
dealing with cases which have huge financial consequences. And 
we must be very careful about security. So our police are 
simply excellent about knowing who the law clerks are that are 
current. Law clerks, sometimes, from previous years come and 
the police immediately know that they are not to be admitted to 
the interior halls of the Court.
    Our own police take care of the security for the justices 
and work with the United States Marshal Service whenever we are 
outside Washington, D.C.

                           PERIMETER SECURITY

    Mr. Wolf. Last summer, in the supplemental, the Committee 
provided $10 million to enhance the Court's perimeter security. 
Have the funds been obligated?
    Justice Kennedy. I do not know if those funds have been 
obligated. I do know that they are working on the design. We 
are concerned, as I am sure many of you are, that what is now a 
beautiful, open building does not look like a fortress. We have 
a small wall, which is actually behind an existinghedge that we 
have planted. We have benches and we have some very attractive 
ballards. I actually think it is going to define the perimeter of a 
great building and make it look better.
    But the architects have not signed off on the plans and the 
judges have not signed off. Our instructions are to make it 
adequate, but yet still not domineering or oppressive.
    And I might say, Mr. Mike Turnbull of the Architect of the 
Capitol's Offices is here to present our buildings and grounds 
budget.
    You asked me if they have been obligated yet, Congressman, 
I do not know the answer to that. The funds for design have 
been obligated, but not for the actual work.
    Mr. Wolf. Okay. And have they been coordinating the firmer 
security efforts with the other security enhancements in the 
Capitol complex? Because you can look from the new visitors' 
center to the Supreme Court. It is just one narrow street.
    Justice Kennedy. It is.
    Mr. Wolf. Have they been coordinated?
    Justice Kennedy. They have been. As I have indicated 
before, I wish there had been more thought given to the 
transportation needs in conjunction with the new Visitors' 
Center. There is going to be a huge underground tunnel on East 
Capitol. It will be almost--it will be taller than this room 
and about two-thirds as wide. It is a huge tunnel. And it is 
just for utility use and pipes and things like that.
    I had wished we could have had some sort of underground 
access for the public with shuttle buses to this new visitors' 
center. But that has not been planned for yet.
    Mr. Wolf. Well, has the Court, though, coordinated what you 
are doing?
    Justice Kennedy. We have had meetings. There are many 
commissions. There are commissions for Washington, D.C. There 
is the Capitol Complex Committee, which includes the Architect 
of the Capitol and Sally Rider and Pam Talkin. They sit on some 
of these committees with members of Congress. And the police 
forces are represented.
    I have not seen any master plan come out that I think is 
tremendously innovative or exciting. There is only so much we 
can do. There are these barriers--what do they call them?
    Nasatka barriers that are being placed discretely around 
the Capitol.
    It seems to me if you had enough of those within a three-
block area, you could have, the Library of Congress, our 
building, your building, like an open campus. And I hope we can 
still have that look. The perimeter design we have for our 
building will try to keep that open look so that the heavy 
security for trucks and unauthorized vehicles can take place 
well away from the building.
    We do have the problem in that 2nd Street is right behind 
our building and that is a neighborhood and we do not want to 
impair the character of that neighborhood. But we are going to 
put in barriers and have those manned.
    Mr. Wolf. I will ask one other question, but are the 
barriers compatible with what is being done at the Capitol? 
There are different barriers at Treasury than there are at the 
Park Service at the Washington Monument. We are going to be 
Balkanized in this town.
    Justice Kennedy. I checked with the Capitol Architect who 
is coordinating that. And it will look the same----
    Mr. Wolf. It will look the same?
    Justice Kennedy [continuing]. And be coordinated and you 
will not have to go through redundant systems that are not 
necessary for security.
    We could have had, if perhaps we had have insisted on it, 
tunnel access. There is going to be a tunnel from the Visitors' 
Center to the Library of Congress, as I understand it. We might 
have planned our tunnel to come to our building. We did not 
think we could handle that number of visitors. So we do not 
have tunnel access in the new plan. And we are content with 
that decision.

            PROJECTED OBLIGATIONS FOR MODERNIZATION PROJECT

    Mr. Wolf. Okay.
    The last question--then Mr. Serrano. For the building 
renovation, through fiscal year 2003, the Committee has 
provided $110 million. Can you update the Committee on the 
status of the building renovation project?
    Justice Kennedy. It is now on time and on target. We 
actually have a ground-breaking in just a few months. The heavy 
construction will begin this summer. Completion is 2008. They 
think they can go ahead of that. They have not let the final 
bid for the main contract. But those bids are going out just 
over a month ago.
    As you know, the whole project was delayed for about a year 
and a half or two years because of our concerns with the cost. 
We just could not believe the building that was built for just 
under $8 million in 1935 would have almost triple that spent 
just on the plans for the refurbishing. But we are confident 
that all of this is necessary. The building, as you know, has 
not been upgraded since its construction and all of the basic 
systems have to be replaced.
    The Architect of the Capitol assures us that they can work 
around the schedule of the court. The court will remain open. 
The justices will remain in their chambers and arguments will 
be heard in the court. And we actually investigated moving 
elsewhere and they said that would be more expensive and not 
necessarily time-saving, so we are going to do it this way.
    Mr. Wolf. Okay. In the fiscal year 2004 Buildings and 
Grounds request, there is $12 million for the final increment 
of funding for the building renovation. Since it is taking 
several years, if you could tell us, how much of the $12 
million do you anticipate obligating in fiscal year 2004?
    We are going to work with you and help resolve it. The 
numbers are so tight that we cannot appropriate funds that will 
not be obligated in fiscal year 2004.
    Justice Kennedy. The $121 million--and we are talking about 
the extra $10 million and $112 million.
    We may not obligate all of it. We want the authorization to 
do so in the event that we have some contingency.
    But let me go back to the staff on that and we will see if 
there is some slack there because I understand precisely the 
problem.
    Mr. Wolf. And that would help us in a different area. And 
if you knew that next year that would be helpful.
    Justice Kennedy. We are confident the project has been 
authorized and you are not going to let it remain uncompleted
    Mr. Wolf. No, we are not.
    Justice Kennedy. Let me go back into the obligated portions 
of that actual total
    Mr. Wolf. Okay. Thank you.
    Mr. Serrano.

                         SUPREME COURT WORKLOAD

    Mr. Serrano. Thank you, Mr. Chairman.
    You know, as I have said in the past to both of you, I 
still find myself in a very uneasy situation at this one 
hearing every year. And anyone who knows me knows that I do not 
usually feel uneasy around anything. But----
    [Laughter.]
    The whole idea of having justices of the Supreme Court come 
before our Committee to talk dollars and cents has always 
struck me as somewhat bizarre. But it is a tradition and I 
accept that.
    So on one hand, I am uneasy about talking about renovations 
with you when I really want to talk philosophy [Laughter.]
    And on the other hand, I know I should not be talking 
philosophy because that is not what you do at a public hearing 
with the Supreme Court.
    So, with that in mind, I try to be as gentle as I can and I 
will. And the reason for that is because although I, like other 
Americans, get upset at you every so often, we still hold you 
as something so special to us as the protectors of our 
Constitution and the ones who interpret what that, indeed, 
sacred document says.
    So in my gentleness--the new, gentle Congressman Serrano--
--
    [Laughter.]
    Workload expectations--we spend a lot of time at these 
hearings--and I do--talking about detainments by the INS, the 
PATRIOT Act, so many issues that have to deal with civil 
liberties and immigration issues and everything that has 
happened since September 11. I suspect that eventually one or 
two things will happen: either our government, to the 
satisfaction of people like me, will kind of pull back on that 
behavior, or there will be a lot of court cases in this country 
regarding all of those issues.
    With that in mind, do you see an increase in the workload 
for the Supreme Court over the next couple of years?
    Justice Kennedy. We do. Nothing that is not manageable. If 
you look at page 1.12 of the budget estimates submission, you 
will see the graph that inexorably is going to reach 10,000 
cases.
    The real increase in the workload has been in the Courts of 
Appeals and, in less part, in Immigration. The first, the 
Second, the Third and the Ninth Circuits have not had a new 
judge since the early 1980s. And in the Ninth Circuit, the 
workload has doubled with the same number of judges.
    A large part of this, now, is immigration. The Executive 
Branch has a program to try to be current with the current 
immigration issues and this has increased immigration appeals 
by some 200 percent in the 11th Circuit, which is my Circuit. 
And I think by 100 percent in the Ninth Circuit, which is 
already overloaded.
    So those courts will be processing the caseload first. It 
will then come to us. Most of this is in petition form. And we 
have the experience and the tradition and the working method of 
finding from these cases those few cases which contain issues 
where we think our guidance can be helpful.
    So I think we can keep up with the increased workload, 
particularly if we have the software that our staff needs just 
to accommodate these numbers.
    Mr. Serrano. And do you have the software now in place? Or 
will you have when these budgets are done?
    Justice Kennedy. Well, if the budget authority that we 
request is granted, we will be absolutely on top of this 
caseload.
    And incidentally, as you know, it is our practice and our 
very rigid tradition that we are current with our docket every 
June 30; every case that is submitted to us for an argument 
will be disposed of by June 30, for better or worse.
    Mr. Serrano. So while you see an increase, you still think 
you can handle it. And is the increase related to activities by 
all of us, both Congress and----
    Justice Kennedy. Yes. Whenever Congress passes a new 
statute--the bankruptcy act, the new acts with reference to 
terrorism or security--it creates issues of interpretation that 
courts have to resolve. And, in a matter of time, over a period 
of a couple of years, those issues will come to the courts.

                    HIRING MINORITIES AS LAW CLERKS

    Mr. Serrano. Okay.
    Let me take you to another area that we have brought up in 
the past, the whole issue of the diversity on the staff of the 
court. Have we made some progress there? I know in the past we 
had the issue of clerks and the issue surrounded more on what 
schools were being invited to submit folks for these positions. 
Has it gotten better?
    And although we are dealing with the Supreme Court, you are 
still very much involved in seeing what happens in other 
courts. Has it changed for you? And has it changed elsewhere?
    Justice Kennedy. Yes. As we have discussed before, 
Congressman, a major concern we have with the applicant pools 
where minorities are under-represented, according to the 
population, and they are even under-represented based on the 
percentages in law school, because if you have a young person 
who is a member of a racial minority and he or she has done 
very well in law school, the temptations to go into private 
practice are very strong.
    I will go to a law school and have breakfast with the kids 
and I will say, ``How many of you have a student loan of over 
$70,000 that you are carrying?'' And about two-thirds of them 
will raise their hands. And that means that it is hard for us 
to recruit these clerks.
    But we have done well. There was a newspaper article and I 
believe it is correct, just from my own assessment, that of our 
35 law clerks, eight are minorities. So that is over one 
fourth--well, maybe Justice Thomas has some comment.
    Justice Thomas. Well, I would like to underscore the point 
that we are talking about the financial consideration in 
clerking. I think clerks make about $50,000 a year. I have had 
clerks with as much as $160,000 in debt. And there is no way 
they can finance that indebtedness on that income when the 
salaries in the private sector are far more than double that.
    So considering when you look at the pool of kids we are 
looking at, they are enormously employable and in demand. And 
it is ironic, as I have discussed with them, that from time to 
time there is no debt forgiveness for the kids who go into 
government service. But there is debt forgiveness in other 
areas. But there is an enormous pressure for them to go to the 
law firms in order to finance their indebtedness.
    And to the extent that the minorities that you are 
concerned about have this kind of indebtedness, I have known 
there have been kids in the past I have pursued who could not 
clerk, simply because of the finances.
    So that may also be a consideration.
    Mr. Serrano. I am sure it is.
    I thank you for your answers.
    Mr. Chairman, thanks.

                            LAW SCHOOL DEBT

    Mr. Wolf. Thank you.
    Before I recognize Mr. Rogers, let me ask why could you not 
have the same type of program that the Federal government has 
for debt forgiveness? I would be willing to work with the 
authorizers to give you that ability.
    Justice Kennedy. And it is a revelation to me. I had not 
known of the program.
    Mr. Wolf. Because I think it is a legitimate issue. 
Government service is very, very important. No young person 
will have a greater opportunity than to work in the government, 
whether it be in the Congress or in the Supreme Court. So I 
would support giving you the ability to have a program for debt 
forgiveness for student loans.
    When a clerk comes, do they come for one or two years?
    Justice Kennedy. One year.
    Mr. Wolf. If you can look at it and see, perhaps we can do 
something here on a trial basis or we can work with the 
authorizers to give you the ability to have a debt forgiveness 
program similar to what they do in other Federal agencies. 
Would you be interested in doing that?
    Justice Kennedy. Well, you are teaching me something. This 
is a revelation to me. So we will talk to your staff about it 
at once and see if there is a program that you can authorize 
that would help some of these young people.
    Mr. Wolf. Okay.
    Justice Thomas. Well, I think it is a good idea. I have, 
for years, thought that some of the hydraulic pressure against 
these kids going into the government service was financial.
    Mr. Wolf. Yes.
    Justice Thomas. I had one young clerk who made more as a 
law clerk than both her parents together. And she was carrying 
in excess of $160,000 in debt. So there was just simply no way 
she could stay in government.
    Mr. Wolf. Right. Well, let us look at that and see. I would 
certainly be open to this and I know Mr. Serrano, on his line 
of questioning, would.
    Mr. Rogers.

                            COURT AUTOMATION

    Mr. Rogers. Thank you, Mr. Chairman.
    Mr. Justices, welcome back to this tiny hearing room. I 
have had the pleasure of being in the room with you now every 
year for many years and others on the Court. And I am very 
pleased to hear of your progress in electronic means of 
opinion-writing, research and what have you.
    And, you know, it is absolutely remarkable when you 
consider that your predecessors, when we first had a Supreme 
Court, were scratching out those opinions with quill and ink. 
And I assume all of you are writing your opinions these days on 
the computers. Is that correct?
    Justice Kennedy. When I get in trouble, I use the old 
yellow pad, but it goes onto the computer next.
    Justice Thomas. And I do not have a yellow pad. [Laughter.]
    Mr. Rogers. How has the electronic age that you instituted 
there, at the Supreme Court, changed the way the business is 
done?
    Justice Kennedy. Well, we think we can just be more 
confident that we are supervising or trying to give guidance to 
a system where we have confidence that we know what the issues 
are and how many cases are there out there that are on this 
same point.
    And we have confidence that when we issue an opinion we 
have been able, through electronic research--and this is what 
our clerks do--to pick up the related strands, the loose ends 
that are out in the system and see if we can bring some 
coherence to it.
    When you are doing legal research--and that is the biggest 
benefit, rather than the writing, is the legal research--it is 
like sitting down and talking to someone who has instant recall 
of every case that has ever been written. And I forget some of 
my own cases, especially the ones I wrote on the circuit, but I 
will push in two or three key words and it will come right 
back. And it is faster than I can go to take it off the shelf. 
So it is like talking to someone with this fantastic memory.
    And it makes you aware when you are writing of the horizons 
that are available to you and also some of the dangers for 
certain words that you should use or not use. And I think it is 
made our opinions much better. And it is mostly through the 
legal research and not just the writing.
    One of the things the writing has done is our secretaries 
are really not so much in the loop of the opinion-writing. I 
put something on the screen directly to my law clerk then he or 
she gives it right back to me and the secretary is freed up to 
do other things.
    Mr. Rogers. Well, this Subcommittee has been very open to 
your requests over the last few years, at least, to 
modernization of your systems. As Justice Thomas noted, you 
have grown from 150 personal computers to 557----
    Justice Kennedy. It is close to 600.
    Mr. Rogers [continuing]. And from two servers to 40, 
increasing your storage capacity hugely. You have built a 
separate secure Internet network and bringing that total to 
two. You have developed a fully automated opinion writing 
system and new docket system. You have developed state-of-the-
art finance and payroll systems. And you have upgraded the 
wiring in the building to a modern cable infrastructure, among 
other things.
    And, Mr. Chairman, I appreciate the fact that you have been 
very sensitive to those requests because that really, I think, 
has improved your efficiency enormously, as well as the quality 
of what you do, I would judge.

                                CASELOAD

    But when you talk about the caseload that you are having to 
contend with, if I am not mistaken--and you covered this 
somewhat a moment ago--on page 1.8 of your justifications, I 
notice your total caseload in 2002 is 9,759 cases. And you have 
to go back only to 1975 when you were doing half that many.
    Justice Kennedy. Yes.
    Mr. Rogers. So in some 27 years, you have doubled the 
caseload.
    Could you have done that without these new modern means, 
this electronic age?
    Justice Kennedy. No, and for two reasons. One is our law 
clerks are trained to use these things. And so they more or 
less have to use them.
    Secondly, it is the electronic capability that has allowed 
the law clerks to handle--and our own clerk's office, I might 
say, for processing--this extraordinary increase without any 
increase in the personal staff of the judges and with, I think, 
very modest increase in the staff of the clerk's office.
    So it is all because of the electronic capability that we 
are able to absorb this workload.
    Mr. Rogers. Just coincidentally I noticed, at page 1.13, 
the chart showing your type of cases that are docketed: 37.5 of 
the cases are criminal cases as opposed to 30.3 which is civil 
and the habeas corpus cases at 30.8. How have thosenumbers 
changed in the last few years and in the last several years?
    Justice Kennedy. They have been relatively constant. And, 
as you will see on the next page, it shows you the cases that 
we actually hear arguments in--the civil portion being larger 
and more complex. The numbers have held about even over the 
years as to the percentage of the cases that we hear.
    The increases that you see on the chart on pages 1.11 and 
1.12 show you the huge number of prisoner petitions that have 
occurred for us and that changes the criminal percentage and 
increases it for docketed cases.
    But insofar as the cases argued, I think it has held about 
the same.

                              CIVIL CASES

    Mr. Rogers. And that brings me to another question: The 
Supreme Court, as the head of our judicial system, I know it is 
greatly concerned that--and that is the caseload out there in 
the--in the Federal system. In most Federal court districts 
there are so many pending cases and so many pending criminal 
cases, which, of course, must take precedence, that you cannot 
get a civil case heard. And this old axiom that we have lived 
by that justice denied--the latest justice denied, I am afraid, 
Mr. Justices, that justice is being denied in many civil cases 
in our district courts out there across the land. Am I wrong in 
that?
    Justice Kennedy. I think the picture is somewhat better 
than you indicate, save for this: We have now about a 15 
percent vacancy factor in the appellate courts because of this 
difficult process in appointing and confirming judges. If I 
were to tell you that I am a factory manager and I have had 15 
percent of my production closed down for three or four years, 
you would see the seriousness of this concern.
    District judges have become very good case managers now. 
District judges spend a great deal of their time in 
streamlining litigation. They confine the number of issues. 
They put limits on the number of depositions. They have found 
out that if you put in work at the front end of the litigation 
process, you can shape that litigation and streamline it. There 
is a risk that if the case settles you will have spent your 
time in vain.
    But I think our judges are good case managers.
    Now, it is true that as Congress continues to pass more 
statutes making certain conduct a Federal offense that it 
increases the percentage of criminal cases in the district 
courts. And, as you have indicated, under the Speedy Trial Act, 
they must be given preference. The Speedy Trial Act has, in a 
way, become the delayed Civil Disposition Act. And so that is 
of an increasing concern.
    Some of this can be taken care of by the discretion of the 
Federal government not to prosecute cases where there is 
concurrent jurisdiction; bank robbery can go to State or 
Federal. And the Justice Department, in this administration, I 
am confident, and in the last two administrations, have seen 
that as a cost saving for our overburdened district courts.
    I think we can manage the existing caseload, if our 
judiciaries are brought up to full strength and if the 
request--and some of the districts' pending requests are 
granted--not all circuit courts or district courts need extra 
judges.
    My circuit is the 11th circuit and they are committed to 
maintaining their size and to increasing their output.
    One of the concerns we have at the circuit level is the 
number of cases that are by unpublished dispositions, by just 
short orders. We like a system where the courts have the time 
to give an extended written disposition. I think over 80 
percent of our appellate cases now are done by unpublished 
dispositions, which are shorter. And I certainly do not want to 
see that increase. I want to see more published opinions.
    Mr. Rogers. Mr. Justice Thomas, what is your opinion about 
the civil caseload out there at the district court level and 
the crowding of the docket such that it takes years to have a 
civil case heard? Do you disagree with your brethren? 
[Laughter.]
    Justice Thomas. Far be it from me to disagree with my 
colleague, although I occasionally do. [Laughter.]
    I simply do not know. I have heard any number of district 
judges complain about civil cases being squeezed off their 
dockets because of the large number of criminal cases. And I 
have heard any number of civil litigators complaining that they 
cannot take cases to trial; they pressure them to alternative 
ways of resolving their disputes, whether it is through 
arbitration or mediation, some alternative dispute resolution 
mechanism so that they can get it done more quickly than they 
would if they went to trial.
    So I have heard the complaints on a number of sides, but in 
a large way it is up to Congress. The more things you 
criminalize, the more things the Federal courts have to hear. 
And it is going to cause that pressure and then you have the 
Speedy Trial Act, in addition to that, so the criminal cases 
are forced to the front of the docket.
    But I tend to agree with Justice Kennedy, we really will 
not know until we have a full complement of judges just how bad 
it is. You are working with a significant number of Federal 
judgeships unfilled. So until that happens, I do not think we 
will know.
    And I think ultimately the better source of commentary on 
that would probably be the AO and the members of the Judicial 
Conference, who have a much better feel for exactly what is 
happening in which districts.
    I know, for example that in the middle district of Florida, 
you have to increase the number of judges because of the 
enormous number of drug cases they have in that area. I do not 
know whether that would be true, for example, in Utah or in 
Missouri. But I think the AO and the Judicial Conference would 
have a better handle on that. But generically I see what the 
problem is.
    Justice Kennedy. I was going to say that there are some 
districts that are in serious trouble: the Southern District of 
California, which has the California/Mexican border; the 
Southern District of Florida; the Central District of Florida.
    Interestingly enough, the Middle District of Georgia, which 
is where Highway 95 comes up and it is a drug pipeline, tell me 
their judges, who are highly qualified and marvelous 
professionals who are capable of trying a class action, an 
anti-trust case, a securities case, are trying drug cases all 
day long. And it affects the kind of people we can recruit to 
go on our Federal bench.
    I have urged all of those districts to take increased 
advantage of the inter-circuit assignment mechanisms that we 
have to bring in visiting judges to help with that workload so 
that the judges that are resident in those districts can try 
civil cases and keep up their own skills and serve the Bar and 
the private sector.

                           JUDICIAL VACANCIES

    Mr. Rogers. Well, my time is running out here, but how 
serious is the problem we had with large numbers of judgeships 
that are not filled or confirmed? How big a problem and your 
caseload is that to us?
    Justice Kennedy. On ours, we are at full strength. But for 
the circuit courts and the district courts, about 15 percent of 
your production capacity is just shut down.
    Mr. Rogers. And the problem here----
    Justice Kennedy. We have about a 15 percent vacancy rate.
    Mr. Rogers. In the district?
    Justice Kennedy. Circuit court.
    Mr. Rogers. Do you know what the district percent is?
    Justice Kennedy. District is somewhat smaller. It is 4.3 
percent. The courts of appeals have a 13.4 percent vacancy 
rate.
    Mr. Rogers. Yes.
    So as the caseload stacks up, does not that bring pressure 
on the system to fill those vacancies and, for gosh sakes, give 
us the judges that we are entitled to have?
    Justice Kennedy. The Chief Justice has spoken about this 
for many years. And that is his position and that is, I think, 
the position of most of the judiciary. Yes, sir.
    Mr. Rogers. Is the bottleneck the United States Senate?
    Justice Kennedy. The bottleneck is in all of those who are 
involved in the appointing process. [Laughter.]
    Mr. Rogers. Well, I tried.
    Thank you.
    Mr. Wolf. Mr. Cramer.

                            COURT AUTOMATION

    Mr. Cramer. Thank you, Mr. Chairman.
    And both justices, welcome back before the Subcommittee.
    Mr. Rogers covered many of the issues I wanted to talk to 
you about and that was the automation program issues. And I see 
reflected in your budget a $2.5 million increase to cover the 
increasing costs that you face.
    I admire what you have done. And I am pointing to the 
summary of your testimony there.
    How many people are involved in managing the automation 
program?
    Justice Kennedy. Close to 30.
    Mr. Cramer. Thirty?
    Justice Kennedy. Close to 30; I think 27, 28.
    Mr. Cramer. And, obviously, your budget supports that. Has 
that been an increasing number?
    Justice Kennedy. Yes. And, as I have indicated, if we go to 
outside contractors, it is very expensive.
    Mr. Cramer. You have not done that at all?
    Justice Kennedy. Well, yes, we do that, in part for the 
design. That is where they are really beneficial. But sometimes 
for operational reasons we go outside. And then we have to be 
very careful because of our own security problems. We have to 
make sure that they are aware of the traditions and the climate 
of the Court.
    And this is expensive and this is one of the things we want 
to avoid.
    Mr. Cramer. How connected is your automated system, if at 
all, with the systems at the district and circuit levels?
    Justice Kennedy. It is not.
    Mr. Cramer. Not at all?
    Justice Kennedy. Not connected.
    Mr. Cramer. All right. And the security issues, with regard 
to your systems are secure or at least----
    Justice Kennedy. They are as secure as we can make them. 
Our court has been very lucky in the fact that we have had no 
major breaches of security for pending civil cases, which 
affect hundreds of other cases where settlement decisions could 
be made based on predictions of what our Court will do. So we 
have been very lucky in that. We have been very careful.
    Justice Thomas. May I add to that?
    Mr. Cramer. Of course.
    Justice Thomas. We have been very reluctant to have a 
system that has any sort of gateway or access to the outside 
world, whether it is to the other court systems----
    Mr. Cramer. Which is the reason----
    Justice Thomas [continuing]. Reluctant----
    Mr. Cramer [continuing]. That you are not at all connected 
to those, probably?
    Justice Thomas. Precisely. Nor are we connected to the 
Internet through our internal system. We have an entirely 
physically separate network for the Internet
    Mr. Cramer. How long has that been true?
    Justice Thomas. That we have----
    Mr. Cramer. Separate systems.
    Justice Thomas. We have never been connected to the 
Internet. We slowly and somewhat reluctantly moved in that 
direction, with independent connectivity through phone lines. 
We have only recently gone to the faster lines and we have only 
recently gone to broader connectivity and access to the 
Internet throughout the building.
    For example, in my chambers, until this past summer, we had 
one stand-alone computer that had just dial-up connectivity or 
DSL connectivity to the Internet. But our systems do not 
overlap or speak to each other.
    Mr. Cramer. So you are making the progress that you need to 
make and your budget reflects that?
    Justice Kennedy. Yes, sir.
    Mr. Cramer. All right.
    Justice Thomas. In a sense, yes and no. I have been 
disappointed that we have not been more aggressive. When I came 
to the court, we still had in the hallways the old word-
processing equipment. We are always a little behind the curve.
    Mr. Cramer. Because of your caution, or what?
    Justice Thomas. Well, initially, and probably even now, 
because of our caution. We do not want problems with our 
system. And, as Justice Kennedy has indicated, we have never 
had breaches. And we do not want breaches and we do not want 
viruses like other--like you--as anyone who has computers would 
not want them.
    But the other part is that simply we have not been as 
aggressive in our budget requests and in getting on top of the 
computer problems. It is only in recent years that we have done 
that. And I think we have been very candid about that. We are 
moving, but we need to move faster, hence the requests you see 
in our budget this year.
    Mr. Cramer. Well, I would encourage you to be aggressive 
with us and to ask us for what you need because I think that is 
a very important part of what you need to be doing that makes 
your life easier anyway.
    Justice Kennedy. We are satisfied that this budget and the 
supplemental budget give us what we need. We are also satisfied 
that it is urgent.
    Mr. Cramer. Very good.
    Justice Kennedy. And that it is absolutely necessary.

                           JUDICIAL VACANCIES

    Mr. Cramer. Back to the vacancy rate that you made 
reference to on the district and circuit level, what would that 
vacancy rate have been, say, two years ago or four years ago?
    Justice Kennedy. It would have been slightly less.
    Justice Thomas. Slightly less.
    Justice Kennedy. I think historically there is a 7, 8 
percent vacancy factor.
    Some of the problems about the whole recruiting process or 
the whole appointment process is in getting really qualified 
attorneys to fill the vacancies. That is becoming harder these 
days.
    Mr. Cramer. Why do you think that is?
    Justice Kennedy. In large part, salary.
    Mr. Cramer. Salary?
    Justice Thomas. Salary and the appointment and confirmation 
process. There is just nothing that----
    Justice Kennedy. The dreadful process----
    Justice Thomas. Yes.
    Justice Kennedy [continuing]. Of exposing yourself to that.
    Justice Thomas. I would like to make one further comment 
about that on workload. I was informed by judges who are more 
knowledgeable about these matters than I am that fewer judges 
are going senior status now. A judge on senior status does not 
count against the number of active judges that you have in a 
district or on a circuit but they still work. So you are 
getting the work of a retired judge, as well as an active 
judge.
    It is my understanding that many are choosing now to simply 
retire because of the financial considerations. Well, that 
means that we have a vacant, active judge slot and a judge who 
would normally be doing some work now not doing any work at 
all.

                          DIALOGUE ON FREEDOM

    Mr. Cramer. Justice Kennedy, are you still involved in the 
Dialogue on Freedom Program?
    Justice Kennedy. Yes, sir.
    This--as I explained this to the Committee last time--was 
in the wake of September 11. I thought our high school students 
were not really prepared to recognize that there are certain 
basic values that are inalterable. We have a tradition of 
freedom that we wish to preserve and defend. And so I had a 
program that I participated in and I asked the ABA to take it 
over and we spent about an hour and a half with high school 
seniors asking them to discuss basic American values, the ideas 
of freedom, those universal principles of which Mr. Jefferson 
spoke.
    And at last count, I think the ABA told me we have over 
120,000 students nationwide in this program. And they want to 
continue it again next year.
    Mr. Cramer. Terrific. Congratulations.
    Justice Kennedy. Thank you.
    Mr. Cramer. Thank you, Mr. Chairman.
    Mr. Wolf. Mr. Vitter?

                           ELECTRONIC FILING

    Mr. Vitter. Thank you, Mr. Chairman.
    And thank you, Justices, for being here, as always.
    I wanted to touch on a few questions about technology. I 
know you have been making significant changes and strides. As I 
understand it, most, if not all of it, is, within the Court and 
within the courthouse. The rest is interaction with attorneys 
before the Court or the outside world.
    What thinking or plans, if any, do you have about allowing 
briefs being submitted electronically?
    Justice Kennedy. Justice Thomas is more knowledgeable on 
this than I.
    We have that capacity now in an emergency case. Part of the 
calculus, I think, has to be that the expenditure is borne by 
the Bar and by the parties, rather than shifted to us. And hard 
copies are ultimately what we need and they have to be 
reproduced at some point.
    Now, insofar as filing notices, we have--pro se petitions; 
a lot of that we do handle electronically. If the petition is 
inadequate, we just send it back electronically and they can 
fix the filing date.
    So we save a tremendous amount of turnaround time and 
document preparation on the initial filing of petitions.
    Insofar as the briefs, the capacity is there to do it. And 
we can do it and do do it for emergency cases, but I think we 
have it at about the right balance now.
    Mr. Vitter. If the capacity is there, why wouldn't it be 
beneficial to the Court in terms of costs and efficiencies to 
encourage more filing electronically of the actual briefs?
    Justice Kennedy. Ultimately, they have to be printed anyway 
so that we can read them.
    Mr. Vitter. Well, I guess I do not understand that--why? I 
mean, you can, obviously, read it on a screen.
    Justice Kennedy. Well, I suppose you could condemn me to a 
life in front of the screen. [Laughter.]
    But we have a tremendous reading schedule. Most of us do 
that work at home. We often mark things for our clerks to use. 
We often work with hard copies--and our briefs are actually 
printed. They are in a very good format. And most of us are 
used to working with hard copies
    Now, insofar as being able to access the briefs for 
historical purposes and for reference purposes, do we have 
those electronically, as well? The briefs are not available 
electronically----
    Mr. Wolf. In the narrative cases we receive them----
    Justice Kennedy. In the narrative cases we do.
    For in-house use, we do have electronic briefs. But for the 
justices, we have to have a printed version.
    Mr. Vitter. If it is made available electronically--every 
brief, so that means it has to be put into the system in some 
way--scanned? How does that work?
    Justice Thomas. They are submitted electronically. We are 
not scanning them. So that, as we did in Bush versus Gore, it 
is my understanding that you have the hard copy filed.
    Mr. Vitter. Right.
    Justice Thomas. And they submit an electronic copy of the 
same brief and then we scan it for viruses and put it in our 
system. Clerk Suter has said that some attorneys cannot send 
them electronically, so we scan them and then put them in our 
system. And that is for internal use.
    Mr. Vitter. Is that every case?
    Justice Thomas. That is every merits case. But I think the 
concern is about reading--those briefs are 50 pages.
    Mr. Vitter. Right.
    Justice Thomas. And I think reading 50-page documents on 
the computer is not something I would like to do. In fact, even 
with the longer documents--and I use the computer quite a bit 
to do my work, and even when I have a 15- or 20-page document, 
my preference is to print it and then work with that. So you 
are really duplicating it, so you may as well have the brief. I 
mean, you are simply not going to read a 200-page appendix on 
the screen.
    Mr. Vitter. Right. So am I understanding it right that 
every case on which you grant certiorari is basically in the 
courts both written and electronic?
    Justice Thomas. That is right. And the advantage to that is 
that you can use your search engines to research things in 
that, as well as in the record. And we do that. I tend to work 
on my laptop. And I work quite a bit at home, so it is very 
easy to do it that way.
    So if I say to one of my law clerks that I forgot the blue 
brief in this case, and let's say I am out of town, they can 
send it to me on my laptop and then I pull it up and I have 
printers. I can either print it out or I can read what I am 
interested in on the screen. So it makes the job portable, but 
I still think it does not displace entirely the need for the 
hard copy.
    Mr. Vitter. For those cases, I am wondering if it is--
basically for those cases you have a burden one way or the 
other, either it is submitted in writing and you have the 
burden of scanning it or to the extent you allow it to be 
submitted electronically, you would then have the burden of 
printing it out. And is one burden much greater than the other, 
such that you might want to encourage electronic filing if it 
was in that direction?
    Justice Kennedy. We like the burden on the private Bar. It 
would be a tremendous burden to scan it, yes.
    Mr. Vitter. Okay.
    Justice Thomas. The problem would be that eventually if 
everything is electronically filed, eventually we would need 
hard copies.
    Mr. Vitter. Right.
    Justice Thomas. So then the clerk's office would have to 
reduce those to print. And so we have not saved anything. So it 
is best to simply continue to have the filing and then to, 
perhaps, duplicate that with the electronic copy.
    Now, what we do with opinions--that is similar to what we 
do with opinions within the court; intramurally. We print the 
copy of a circulating opinion, we circulate it and then you 
circulate an electronic copy simultaneously.
    Mr. Vitter. All right.
    Justice Thomas. It is the electronic copy, then, that I can 
pull up at home and work with. So I do not need to talk to my 
clerks and I do not have these things stacked up on my desk.
    But the point is that they sound duplicative or redundant, 
but I think both are important.
    Justice Kennedy. There is a quality concern, too. Major 
cities all have legal printers. And when attorneys go to these 
printers and say, ``Here is my brief and this goes to the 
Supreme Court or the Court of Appeals or the StateSupreme 
Court,'' those printers know what the requirements are. They are very 
good on proof writing and knowing how the footnotes should go.
    So the printers work with the attorneys to make sure that 
the brief conforms, in all respects, to our requirements. And 
that dispersal of functions, I think, makes for excellence in 
the various legal communities and we rely on it.
    Mr. Vitter. For the typical merit case, does the typical 
sophisticated litigant--you know, big firm, significant 
entity--submit electronically also, or no?
    Justice Thomas. Yes.

                     AUDIO TAPES OF ORAL ARGUMENTS

    Mr. Vitter. Okay.
    Another aspect of technology in the recent University of 
Michigan case you released audio tapes same day for the second 
time in history, the first being Bush versus Gore. Where do you 
see that going? Do you see that becoming more common? And what 
sort of criteria do you see being used to decide what cases in 
which to do that?
    Justice Kennedy. We are concerned, of course, with teaching 
that ultimately we will be judged by what is in our opinions. 
There is tremendous interest in the case, such as the one you 
have noted. But we think that the focus of the system ought to 
be on what we write and what the judgment is. And we do not 
wish to distract from that by giving the hearings an importance 
and a significance that they do not, in fact, have.
    There are no guidelines, other than a case of great public 
importance where nearly all the people that want to get in the 
courtroom can get in to hear it; that is the only guideline we 
have.
    In Bush versus Gore we did it because the whole legal 
system was learning about the case as we did, and we did not 
have a chance for the legal academics and for the different 
interests in the Bar and the community to write about the case, 
to comment about it. It was unfolding. And that was the 
justification for it there.
    The Chief Justice made the decision to release the audio 
tapes of the Michigan cases, and we did not necessarily 
disagree.
    I do not think it is going to be a common practice.
    Mr. Vitter. Okay.
    I thank you very much.
    Mr. Wolf. I thank you, Mr. Vitter.
    On that issue--and I think you probably just answered it--
does the chief justice make the decision? Or do you all confer 
as to whether or not--you have only had those two cases--they 
are released?
    Justice Thomas. Yes.
    Mr. Wolf. Can he unilaterally do that? Or am I asking an 
inappropriate question? I mean, you should see all the 
inappropriate questions I have. [Laughter.]
    Justice Kennedy. The Chief Justice is very good about 
consulting us about our wishes on these things and following 
the view of the majority of the court.
    Mr. Wolf. Okay.
    What can you say? [Laughter.]

                       OUTSIDE TECHNOLOGY EXPERT

    Has the court hired or have you considered hiring a 
technology expert to assist in the implementation of the 
programs; someone who does that solely? Or have you had an 
outside--I do not mean a contractor, but an outside group like 
the FBI uses an outside group for their systems.
    Now yours would not be nearly as complicated as the FBI, I 
am sure, or do you have an inside person whose sole 
responsibility is to work on the technology?
    Justice Kennedy. We have people that are on the inside that 
are very skilled at designing systems. But for the major 
design, we have them work with outside contractors.
    Mr. Wolf. What I think the difference is, though, an 
outside contractor versus an outside panel, like Mitre 
Corporation--and I make that up--somebody who has no vested 
interest of selling you a particular package, they just will 
come in and be the honest broker. Have you had anybody look at 
that?
    Justice Thomas. Well, I think, we are like the FBI; the FBI 
has a large, perhaps centrally located----
    Mr. Wolf. True.
    Justice Thomas. Our central system is not a problem. We are 
upgrading that as we go along. But you are talking about a 
number of discrete systems. For example, you are talking about 
our case management system, our budget and our personnel 
systems, our library systems. They are discrete systems. And we 
have had consultants. We did not have the big problem that the 
FBI had. And we do not have a large complicated system, as they 
have. I think we are doing very well as we are doing it with 
consultants and with people who understand the courts.
    I continue to think that it is a problem, if we go too much 
on the outside, of compromising our internal materials. And we 
have not had that problem so far. And I think the mix that we 
have now is just about right and we are actually heading in the 
opposite direction, trying to bring more of it in-house so that 
we do not have the security problems down the road.

                          CASES GRANTED REVIEW

    Mr. Wolf. We were talking about cases granted review. The 
number of cases granted review per term since the mid-1990s has 
remained between 80 and 100. However, in the 1970s and 1980s, 
the Court was reviewing between 120 and 200 cases.
    Can you describe the process the Court uses in deciding 
what cases to review? And is increasing the number of cases 
reviewed an objective of the Court? And what impact will the 
automation have? On page 1.9 you can see the cases granted 
review during the term have dropped, in 1970 it was 161; 2002 
it was 85.
    Justice Kennedy. When I came to the court, we were hearing 
160 cases or 150 cases a year and it was far too much because 
all nine of us must hear and participate in the decision of 
every case. And 160 was just unmanageable.
    Mr. Wolf. And what year was that?
    Justice Kennedy. Well, I came in 1988.
    Mr. Wolf. And it looks like you have made an impact, then, 
because they have dropped quite dramatically. [Laughter.]
    Justice Kennedy. I guess nobody wants to bring their cases 
to me. [Laughter.]
    But that was far too much. Eighty, 85, 90, frankly, is too 
low. We are not at full capacity, so far as the justices are 
concerned as to the number of decisions. But we are not 
particularly conscious of having any particular numerical goal. 
We take those cases where we think our guidance is necessary 
and helpful for the rest of the system.
    We are, frankly, sometimes puzzled that we do not have more 
cases on a particular calendar, but we are not willing, just to 
fill up our docket, to take cases where there has not been a 
division of opinion in the circuit courts or the state supreme 
courts or where it does not present an issue of great 
importance.
    We see any number of cases we think are wrong; and we do 
not take them because that is not our function. Our function is 
to give guidance when basic legal principles are causing 
disagreements among the court.
    When Congress passes new statutes, as I indicated earlier, 
that will automatically increase the number of cases. And in 
light of some of the statutes recently passed with reference to 
terrorism, I expect that this number will rise somewhat.
    Mr. Wolf. Okay. And will the automation enhancements 
requested allow the Court to do that, increase the numbers?
    Justice Kennedy. Absolutely. And, of course, this is just 
the number of cases that we have heard. As you know from the 
other graph, the number of petitions and cases that are filed 
with us is greatly on the increase. For that aspect, we really 
need the information technology.

                           WORKPLACE PROGRAMS

    Mr. Wolf. What telework opportunities does the Court offer 
to its employees?
    Justice Kennedy. I know that you are interested in this, 
Mr. Chairman, and I am, too, because we have the same basic 
commute.
    Mr. Wolf. Well, it is quality of life issue and also the 
studies show that people who are telecommuting or working at 
home, if you will, one day a week are actually more productive 
than those who are coming downtown every day. So there is 
nothing magic about a location.
    Justice Kennedy. And a number of the justices are this way. 
Justice Thomas and I both do a considerable amount of work at 
home.
    Our clerk's office--our Clerk Suter is here--took your 
request seriously and met with his people and concluded that 
they do not see substantial room for telecommuting in the 
clerk's office itself, in part because it is the central 
repository for documents and they have to review those 
documents before they go to our various chambers.
    But I think that what you say here is very important. And I 
am going to ask the clerk to go back and study and see if we 
cannot give you some more positive results for the next time.
    Mr. Wolf. Do you have flex time?
    Justice Kennedy. No.
    Mr. Wolf. That was my legislation, actually. Flex time, you 
may want to come in at 6 and leave at 3 or you may want to come 
in at 9 and leave at 6. With the stress that the American 
family is under today, anything that any employer can do to 
give people greater flexibility to spend more time with their 
families and yet not detract from their jobs are positive 
things.
    For instance, does the Court have job sharing? Can two 
people share a job for a period of time? One may have just had 
a child and perhaps another one wants to stay home and take 
care of a father who may very well be dying of cancer. Does the 
Court have job sharing?
    Justice Kennedy. Yes, we do. Now, in our chambers, I might 
say that I have one of my assistants come in at six in the 
morning. And so we have that capacity----
    Mr. Wolf. Good.
    Justice Kennedy [continuing]. In our own chambers. And then 
the clerk's office, of course, they are open for regular 
business hours, but they have people that come in early to 
prepare.
    Mr. Wolf. So they have the flexibility for that?
    Justice Kennedy. They certainly have it.
    Mr. Wolf. Do you have leave sharing at the Court so that if 
one is ill you can all donate?
    Justice Kennedy. Absolutely, yes, we have that.
    Mr. Wolf. And does the court take care of on-site child 
care with the Capitol?
    Justice Kennedy. We have it close by in the AO building. It 
is not on-site.
    Mr. Wolf. Okay. They are basically the questions that I 
have
    Mr. Serrano, do you have any other questions?

                         MODERNIZATION PROJECT

    Mr. Serrano. I do, Mr. Chairman.
    I know you spoke about it, but we sat here a couple of 
years ago and spoke about horrible physical conditions at the 
court itself. That has gotten better, I hope, through some of 
the renovations.
    Justice Kennedy. Well, the renovation has not really begun 
yet.
    Mr. Serrano. So there is a horrible physical condition?
    Justice Kennedy. No, sir. [Laughter.]
    Justice Thomas. It is not all that bad, but----
    [Laughter.]
    It is----
    Justice Kennedy. It is horrible from the engineer 
standpoint, yes.
    Mr. Serrano. I have you on worldwide TV here giving you a 
break here
    Justice Thomas. I hope not. [Laughter.]
    No, you know, coming from EEOC where we lived in a sick 
building, we are doing pretty well. But it is a problem. The 
beauty of the building belies the significant problems 
internally. And that is all we will say.
    Mr. Serrano. Well, we stay committed, Mr. Chairman, to 
making sure that that gets taken care of. Have to keep these 
folks happy. [Laughter.]
    But, for my part, thank you so much for coming.
    Justice Kennedy. Thank you.
    Justice Thomas. Thank you.
    Mr. Serrano. Thank you.
    Mr. Wolf. Well, we thank both of you. And if you can look 
at a couple of those issues on the 12 million for the building 
renovation, if you could put it off. Secondly, if somebody from 
the Court can come up and meet with our staff on the problem or 
opportunity of perhaps a loan or payment with regard to law 
clerks.

                      MANDATORY MINIMUM SENTENCES

    I have been very, very careful in getting into other 
issues, but I think the Court plays a tremendous role with what 
is taking place in society. I saw the story the other day: We 
now have 2 million people in prison--2 million people in 
prison.
    Justice Kennedy. Too many: 8 percent of those are in the 
Federal system.
    Mr. Wolf. You know, I just see things----
    Justice Kennedy. Mr. Chairman, in many cases our sentences 
are too long.
    Mr. Wolf. Well, you know, I am a conservative Republican 
and I think there is no question if anyone looks at my voting 
record----
    Mr. Serrano. I was wondering if that was redundant. 
[Laughter.]
    Mr. Wolf. No. [Laughter.]
    Mr. Serrano. No, I just----
    Mr. Wolf. No, definitely, I send my entire voting record 
out to every household in my district, how I vote on every 
single issue, so people can know.
    I am also the son of a policeman. I think somebody has to 
really deal with this issue of the sentencing guidelines, 
particularly in some of the drug cases.
    You do not have to answer, because we are not trying to pin 
you down on these issues that are not really the subject of the 
hearing, but I went to some Federal prisons in Pennsylvania and 
I interviewed a lot of the young people. I think at a certain 
point there has to be some other way of dealing with this.
    There is another issue we bill on, which we hope to pass in 
the next several weeks, if not month or two, on the issue of 
prison rape. Thirteen percent of young men in prison are raped. 
In a study in Nebraska it was 21 or 22 percent. I think the 
Court ought to speak out. Somebody ought to speak out on the 
issue. Certainly I think the Congress ought to be addressing 
the issue.
    But you cannot continue to have this many people in prison 
and some of them are not violent. There must be other programs 
and other alternatives to prison.
    Justice Kennedy. Well, Congressman, the legal profession 
has always been focused on the guilt determination phase. When 
the guilt determination phase and the sentencing is over, the 
legal system loses all interest in the prisoner. And this must 
change.
    Winston Churchill said, ``A society is measured by how it 
treats the least deserving of its people.'' And 2 million 
people in prison in this country is just unacceptable; many of 
them are for long, long terms.
    We have talked to Federal marshals and, you know, have a 
young man and he should not be doing this, but he is raising 
marijuana in the woods. That makes him a distributor. He has 
got his dad's hunting rifle in the car; he forgot about it and 
wanted to do target practice. That makes him armed. He is 
looking at 15 years. An 18-year-old does not know how long 15 
years is.
    And it is not so much the sentencing guidelines, it is the 
mandatory minimums. That is the problem. The sentencing 
guidelines are somewhat helpful, but the mandatory minimums are 
harsh and in, I think, many cases are unjust. And it is the 
responsibility of the legal profession and the judiciary, as 
well as the members of the Congress to begin addressing this 
problem.
    Mr. Wolf. Well, I agree.
    Well, with that, we thank you both for your testimony.
    Justice Kennedy. Thank you.
    Mr. Wolf. The hearing is adjourned.
                                          Wednesday, April 9, 2003.

                        FEDERAL TRADE COMMISSION

                                WITNESS

TIMOTHY J. MURIS, CHAIRMAN, FEDERAL TRADE COMMISSION
    Mr. Wolf [presiding]. Hearing will begin.
    I want to welcome you. I have a brief opening statement and 
then you can proceed, and your full statement will appear in 
the record. You could either read the whole statement, 
summarize or whatever you see appropriate.
    I want to thank Chairman Muris for coming before the 
Subcommittee this morning to discuss the Federal Trade 
Commission's fiscal year 2004 budget request.
    The mission of the FTC is to enforce a variety of Federal 
antitrust and consumer protection laws. The FTC seeks to ensure 
that the nation's markets function competitively and are 
vigorous, efficient and free of undue restrictions.
    The FTC also works to protect businesses and consumers from 
unfair and deceptive practices.
    First, I want to congratulate you and your staff on the 
creation of the national Do-Not-Call list. By the end of the 
summer, the FTC will have a national database of telephone 
numbers of consumers who choose not to receive telephone 
solicitations from telemarketers.
    This initiative, I believe, will protect millions of 
American consumers from unwanted and obtrusive telemarketing 
calls. The committee recognizes and appreciates your work and 
that of your staff to make this important program a reality.
    Another issue of particular concern to me is the marketing 
of violent video games to children and the impact that these 
games may have on a child's sense of right and wrong. Later in 
the hearing, I will show you a video on this topic and ask you 
to comment on what actions the FTC is taking to help parents 
protect their children.
    With that--Mr. Serrano will be joining us later--I would 
just open it up for your testimony. Again, as I said, your full 
statement will appear in the record.
    Mr. Muris. Well, thank you very much, Mr. Chairman. Let me 
just give a brief opening statement.
    I certainly appreciate the opportunity to be here today to 
support the FTC's fiscal year 2004 appropriations request. And 
let me start by expressing my sincere thanks to you, Mr. 
Chairman, and to the entire Subcommittee for your continued 
strong support of the FTC's mission.
    I also want to commend the work of your staff, for their 
help throughout the appropriations process.
    As the Subcommittee is aware, we are the only Federal 
agency with both consumer protection and competition 
jurisdiction in broad sectors of the economy. With credit to 
the agency's staff, the FTC continues to handle an increasing 
work load despite only modest resource increases.
    To continue our work the next fiscal year, we request 
$191.132 million and 1,074 FTE. Our request represents an 
increase of $14.524 million over the fiscal year 2003 
appropriation.
    In our consumer protection mission, which is our largest 
mission in terms of funds and FTE, the funds will be directed 
to fighting fraud and deception, protecting consumer privacy, 
and initiatives directed at specific consumer groups, including 
children, Spanish-speaking consumers and military personnel.
    In our competition mission, the focus will be on merger and 
non-merger enforcement, particularly in health care, energy, 
high tech and international marketing.
    Let me turn very briefly to describe the two missions. Our 
consumer fraud program will continue to be the mainstay of our 
consumer protection mission and will continue to target the 
most pervasive types of fraud and deception, drawing 
substantially on data from Consumer Sentinel, the FTC's award-
winning consumer complaint database.
    These efforts have been productive and directly benefit 
consumers. Since April 1 of last year, the Commission has 
organized eight joint law enforcement efforts, called sweeps, 
with more than a hundred law enforcement partners, resulting in 
260 federal and state enforcement actions.
    In the last year, the FTC has filed 120 cases involving 
fraud or deception and has obtained judgments ordering more 
than $650 million in consumer redress. That amount does not 
include a settlement that is awaiting court approval with a 
sub-prime lender that would require the defendants to return 
$215 million to consumers.
    Consumer privacy continues to be a priority. You mentioned 
our creation of a national Do-Not-Call registry. I particularly 
want to thank you, Mr. Chairman, and the Subcommittee for your 
crucial role in moving this important initiative forward. It 
simply would not have happened without your support, and I am 
very appreciative.
    We are going to begin implementation of the registry this 
summer and consumers who sign up will begin to receive fewer 
intrusive and disruptive phone calls.
    We greatly appreciate, Mr. Chairman, your leadership on 
consumer-protection activities for children. I am pleased to 
announce that this fall we will hold a public workshop on the 
marketing of violent entertainment products. We will then 
prepare a follow-up report to Congress on the findings of the 
workshop and on the continued marketing of these products and 
the results of a new mystery shopper survey of retailers.
    In addition, as requested by the Appropriations Committee, 
we have begun to collect information concerning the impact on 
underage consumers of ads for new alcoholic beverages, 
sometimes called ``alcopops,'' and on the alcohol beverage 
industry's response to the Commission's 1999 report to Congress 
and the recommendations made therein.
    On the antitrust front, we have been equally as active 
protecting consumers in areas involving both mergers and non-
merger conduct. During the unprecedented merger wave of a few 
years back, the FTC was forced to divert resources away from 
other activities to meet its statutory responsibilities for 
merger review.
    With the decline in the merger wave, we have been able to 
restore the historical balance of our antitrust resources to 
both merger and non-merger areas.
    For example, in 2000, during the peak of the merger 
activity, the agency opened only 25 non-merger investigations. 
In the last two years since I have been Chairman, with the 
decline in mergers, we have been able to open more than double 
that number.
    As our written testimony reveals, the investigations that 
we target involve enormous harm to consumers. We are saving 
consumers many times the amount of the appropriation that we 
receive from Congress.
    Health care is the most prominent area in our competition 
mission, and pharmaceuticals is the most prominent area of 
health care. One notable example is our recent settlement with 
Bristol-Myers Squibb to resolve charges that the company 
obstructed the entry of low-price generic competition for three 
of Bristol's widely used drug products.
    Our complaint alleged a pattern of inequitable conduct at 
the Patent and Trademark Office, wrongful listings with the 
Food and Drug Administration, sham litigation and payments for 
generics not to enter, all undertaken to prevent generic 
competition.
    The proposed consent order, which is now out for public 
comment, contains strong, and in some cases unprecedented, 
relief. It will directly benefit consumers who were forced to 
overpay by hundreds of millions of dollars for these needed 
drugs.
    Finally, despite the decline in mergers, we continue to 
have an active merger program. We are also, with the increase a 
few years ago in the filing thresholds, reviewing many more 
mergers now that are not reportable, but that can--particularly 
mergers to monopoly and mergers involving small markets--cause 
serious consumer harm. We continue to be vigilant in that area.
    Just to conclude, I think we have had a vital role in 
protecting consumers and we ask that you approve our request. 
Again, we are enormously grateful for your help and support, 
particularly in the Do-Not-Call registry. And I would be happy 
to respond to any questions
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
    Mr. Wolf. Thank you very much. Before I begin with 
questions, let me recognize my colleague, Mr. Serrano.
    Mr. Serrano. I Just want to welcome you here, sir. As I 
told you before, in my other life in New York I chaired the 
Consumer Affairs Committee of the New York State Assembly. So 
this hearing is of great, great interest to me, especially. It 
seems to me that when the economy is doing well, people do not 
sufficiently protect consumers. When the economy does badly, we 
realize that people are being done in by a lot of folks that 
should not be doing certain things.
    So I look forward to continuing to seek out your 
leadership, to make sure that all the things you have 
established continue to grow and to foster the kind of 
protection that we need
    When my time comes, I will have a few questions for you.
    Mr. Wolf. Thank you very much, Mr. Serrano.
    Let me just begin with a budget question, then I want to 
discuss video game violence. But I would like to begin the 
discussion today in terms of budget requests.

                           FTC BUDGET REQUEST

    The FTC's fiscal year 2004 budget request is $191 million, 
an 8.2 percent increase over the enacted 2003 level. This 
request is funded through $159 million pre-merger filing fees, 
$18 million Do-Not-Call fees, and $14 million in direct 
appropriations.
    However, CBO's reestimate of the President's requests 
anticipates $47 million less in pre-merger filing fee 
collection due to declining trends. Therefore, to provide the 
requested program level, we would have to provide $61 million 
in direct appropriations rather than the $14 million proposed 
by the Administration.
    Given the size of the projected budget deficit, and the 
Subcommittees allocation, we are going to have a difficult time 
fully funding the request. But we will do our best. Do you have 
any comments?
    Mr. Muris. Well, a couple of comments. In a prior life, I 
was a budgeteer. I worked at OMB. I know in the past--obviously 
this is not an issue for me or maybe even for the 
subcommittee--but in the past, the appropriators have adopted 
OMB technical assumptions.
    I know they have adopted some of those assumptions for tax 
purposes so that is obviously one example. I think the OMB 
estimate is a reasonable estimate. But, foreseeing what merger 
activity will be in the future is an extraordinarily difficult 
thing to project
    I would add that mergers have never been more than a third 
of the Commission's activity, and that was under the 
extraordinary merger wave. We return now to something like a 
quarter of the merger activity and I think----
    Mr. Wolf. Is that normal now?
    Mr. Muris. It is about normal now. I think that when the 
Congress started the Hart-Scott fees they never thought that 
there would be so many mergers that it could pay for the entire 
budget, not just the quarter of the agency that was mergers
    Now, because of the decline to a more normal activity, 
there is a shortfall requiring a direct appropriation. I think 
it is a small direct appropriation given the very large returns 
that we provide.
    I would hope that you could meet our request, but I 
obviously understand the difficulty and the many competing 
needs. I do think the American people get a very outstanding 
return from our work.

                             MEDIA VIOLENCE

    Mr. Wolf. Well, I would agree. I saw that article in the 
Wall Street Journal the other day about you. I do not know how 
you perceived the article. I guess it depends on your 
viewpoint. But overall, I thought it was pretty good. And I 
think you and your people have done a good job
    On the issue of video-game violence, we are going to show 
a--Hi, Mr. Baca, I am glad you came. We are joined by 
Congressman Baca.
    And I did not know you were coming this quick. I am glad 
you are here. Why don't you sit up here or you might want to 
sit on your side so Mr. Serrano does not think you are 
defecting from----
    [Laughter.]
    Mr. Serrano. It is okay if he sits to my right, everybody 
is to my right. [Laughter.]
    Besides, you will get the feel of him----
    [Laughter.]
    I can deliver a seat for you on this committee.
    Mr. Wolf. Well, I appreciate you coming. It is timely that 
you are here.
    I want to show a videotape on the issue of violence in 
video games and the impact these games have on children. At the 
conclusion of the video, I will ask you several questions, on 
what the FTC is doing to assist parents and ensure that violent 
video games are not marketed to children
    Since 2000, the FTC has issued a series of reports 
entitled, ``Marketing Violent Entertainment to Children: A 
review of the self-regulation and industry practices in the 
motion picture, music, recording and electronic game 
industries.''
    Your latest report from June 2002 found that advertising 
for mature video games was still being placed in television and 
print media with substantial youth audiences.
    Your December 2001 study also found that 78 percent of 
unaccompanied minors from the age of 13 to 16 were able to 
purchase video games rated ``Mature''. In addition, in 
December, the National Institute on Media and Family--I read 
the report last night--gave the overall video game industry an 
``F'' on its media-wise video game report card
    As you know, industry analysts are predicting the video-
game industry will grow to $20 billion a year industry. We must 
take action to help educate parents.
    And in their survey, it states that there is very little 
parent knowledge and one of the recommendations is, ``Parents 
need to become more knowledgeable of content and exert greater 
supervision over the games their children are playing.''
    There are a number of recommendations. But this is really 
troubling. And we just went through, in this region, and I 
believe you live in our region if my memory serves me, the 
sniper attacks. And it terrorized this region. The tape is 
three minutes long. It is shortened from a 10-minute video 
produced by the Lion and the Lamb Project, which is a parent-
driven initiative to help provide information.
    We took the most violent part out of this video. There was 
heavy sexual content that we took out that I did not feel that 
it was appropriate to show in this setting. So what you are 
going to see is kind of watered down. Sniper shots to the head, 
brutal beatings, bludgeoning of women with golf clubs, point-
blank shootings of police officers. You are going to get a 
taste of what many teenagers are seeing every day after school.
    And this is unacceptable. This is just unacceptable. Two 
million people serve in our prisons now. The level of violence 
that is coming into society is incredible. And the figures that 
I saw that something like 92 percent of young people are 
watching these things.
    And I want to commend Mr. Baca. You have been out in front 
of this issue. I mean, I did not see it and I--somebody came in 
to show me one of these games. And my children are grown now 
and, you know, I thought we were talking about ``Pacman'' and--
but this is violence.
    So what I want to do is to show you this video, that is 
watered down, watered down big time, and then see if you have 
any comments. So we can show this.
    [Video.]
    When I drove in today, I came in Route 50 and went by the 
Home Depot where the FBI employee was shot, and this came to 
mind. The thought of this being sold in stores after what this 
region went through, and I saw where there was a Wall Street 
Journal piece, Mr. Baca, where the lobbyist from the industry 
said they did not really care what your bill did because they 
had enough lobbyist up on Capitol Hill.
    What is the FTC going to do to educate parents? Your web 
site displays information defining the video-game ratings, but 
have you issued a consumer alert or taken other steps? What 
more can you do?
    I do not know if you read the report by the media, National 
Institute of Media and the Family. Did you read that report?
    Mr. Muris. Yes, sir.
    Mr. Wolf. Ninety two percent of youngsters aged two to 17 
now play video or computer games. And then, it goes on talking 
about some of the games and their impact. I really think this 
will have an impact on our society. I would hope the industry 
would come forward and say, ``We are going to cooperate. We are 
going to work. We are going to make sure these games don't hurt 
children.''
    And I saw one game that one of the moms brought in; I could 
not find the rating. It was sort of blurry. And so there has to 
be some rating system, some uniformity, some education. 
Otherwise we ought not be surprised when we see what we are 
seeing in culture and we got 2 million in prison and the 
violence we are seeing. So I would like to ask you what can you 
do?
    Mr. Muris. This is a very serious problem, and let me say 
several things, Mr. Chairman. One, I appreciate your leadership 
here.
    Obviously, the sniper concerned us all. The gas station you 
mentioned is a gas station I occasionally have frequented in my 
life. I remember my then-Chief of Staff had been about to go to 
that Home Depot that Sunday night.
    Culture matters, I agree. As a parent, I am deeply 
concerned, and I have seen the parts that you excised--much 
more graphic and much more appalling.
    There are some things we can do, and we have been a leader 
in this area. One thing, occasionally, the people cross over 
the line in the way they market these products and market them 
fraudulently, both in terms of violence and pornography.
    We had a case recently, for example, where someone was 
sending out spam, and they said, ``Win a free Sony 
Playstation.'' And in five clicks of your mouse, you were on a 
pornographic web site with your phone number being billed. We 
managed to shut that down.
    We have been a leader in exposing how many of these 
products, despite the fact that they were rated as not 
appropriate for underage audiences, were in fact marketed to 
underage audiences.
    We have issued several reports, as you have mentioned. This 
year, we thought we would do something different, something to 
try to give a further emphasis on the importance of the issue--
that is to hold a workshop, to invite people like those who 
produced your tape, The Lion and Lamb Project, to come in and 
talk about the problems, and invite the industry, the various 
industries, which are involved in marketing violence. Besides 
the video games, there are the movies.
    We will invite them to come in, and also invite the 
retailers in as well, to talk about their practices. We also 
are going to do another one of these surprise surveys to see if 
there has been any improvement among the retailers in how they 
police the ratings system.
    I hope that we can provide further exposure to this issue 
and encourage further progress to allow parents to have more 
control over what their children purchase.
    Again, I want to thank you for bringing this issue to our 
attention.
    We will continue to be vigilant and, indeed, we are taking 
this extra step to try to provide additional emphasis.
    Mr. Wolf. Thank you.
    And if there are lobbyists here in Washington, they know 
about the sniper case. And they know what every mom and dad 
went through, and every family went through, and professional 
responsibility requires certain activities, and if certain 
activities are not taken then my sense is the nation should 
rise up and bring major lawsuits to begin to change this.
    Because from a cultural point of view we cannot have 
regions go through what we went through and have this around 
the country. You just can not do it.
    Between 9/11 and the sniper in this region it has had a 
major, impact. And had the sniper case not have taken place 
perhaps this would not have been called to my attention and I 
would not have gotten interested.
    But I thank you and I ask those in the industry to be 
responsible and come forward and try to work with us to help 
solve this problem. Mr. Serrano then Mr. Sweeney then Mr. Baca
    Mr. Serrano.
    Mr. Serrano. Thank you, Mr. Chairman. I take very seriously 
your comments on this issue, as I told you before. And I do not 
disagree with you that we need to look at this whole issue of 
video games and how they affect our society.
    But as I have said to you before, if we are going to be 
honest with ourselves and take a look at this, then I think we 
have to take a look at violence in the society.
    I mean, for the last three weeks the major networks have 
shown us their version of a video game, which is called, ``Bomb 
Baghdad Every Night.'' Now, children are watching that violence 
and they are being told that that violence is red, white and 
blue, and very patriotic, but that this other violence 
isimproper for them.
    I would suggest that maybe both violences are improper, and 
I do not have a video but certainly CNN's war coverage to me 
seems to me just as violent as anything I saw on that video.
    And I think if we look at that we have to start looking at 
other things in society just to be fair to ourselves and to be 
fair to everyone else.
    Another example is if two individuals in Mr. Sweeney's 
neighborhood or my neighborhood or your neighborhood, or yours, 
for that matter, start punching each other while playing a game 
of local neighborhood street corner hockey or baseball, they 
are going to probably be arrested.
    Yet in professional hockey you could beat each other to a 
pulp while the crowd watches and that is considered part of the 
game. At what point do we look at that? Or when the benches 
empty in a baseball game.
    So my whole point is that this is serious and I do not want 
to take that seriousness away, and I want to be part of dealing 
with this. But I think we have to be fair to ourselves and 
perhaps look at violence in the society, and that in the last 
couple of weeks we have seen a lot of violence on TV and that 
is considered good violence.
    And I would like to ask a couple of psychologists and 
people who are much brighter than I on this subject what effect 
video games have, or what effect the war coverage has on a 
young child who is told that that is okay and that this is done 
for our country and for ourselves.
    So we need to do that. Now, having said that, I would like 
to bring you to a very boring subject, obviously, but very 
important to all of us, except Mr. Sweeney, who is in great 
shape, and that is the whole issue of weight-loss programs. 
[Laughter.]
    Mr. Baca. He is getting in shape for the baseball game.
    Mr. Serrano. There you go. This is an issue that affects 
just about every American I can think of. Everybody except for 
a couple of people in this country at one time or another look 
at the possibility at one of certain ads and all the claims 
that they make.
    Now, how is this going? What are you doing to deal with 
these issues, and how much fraud is involved in this? And 
lastly, how much of this issue belongs to you, and how much of 
it belongs to the FDA?
    Because some of the claims being made deal with what we 
have to drink and eat and pills and other issues.
    Mr. Muris. That is an excellent question, Mr. Serrano. We 
have a growing problem of obesity and overweight in the United 
States. We issued a report last September, and we found that 
despite unprecedented levels of enforcement by the FTC in the 
1990s aimed at fraud, compared to a sample from nine years 
before, there were many, many more ads that were obviously 
fraudulent, obviously false than there were earlier.
    What is worse, they were running in mainstream, respectable 
media. As an example, page A-3 of the Washington Post said, 
``FTC Decries Deceptive Weight Loss Ads.'' On the same day, 
page A-13 of the Post had a one-quarter page, obviously 
fraudulent weight-loss ad.
    Now, we have met with people from The Washington Post, and 
I believe them when they say that they think they would do a 
better job.
    Dr. McClellan, the new head of the FDA, is committed--and I 
have seen it with the resources FDA put on the issue--to do 
more in the diet-supplement area.
    We are actively working with the FDA. I have also made 
speeches and have had numerous meetings with media 
representatives asking them to screen out the ads that are 
obviously fraudulent.
    I am not asking them to hire scientists. What I am saying 
is that we are working on a list we will give them of obviously 
false claims. Unfortunately, there is no magic bullet, the way 
to lose weight is diet and exercise, but many of these ads are 
wrapped in very scientific-sounding claims.
    People in white coats claim this study and that study shows 
that you can take a pill and eat all you want. We got together 
a scientific panel. The scientists have told us that those kind 
of claims cannot possibly be true. We are hoping to distribute 
this short list of claims and have more--particularly the 
mainstream--media not running these ads
    We think that will help.
    Mr. Serrano. Let me ask you a question. This is something 
that Mr. Baca knows well. And it is just something that comes 
to mind. Do you have a division--are you like the FCC that 
waits for somebody to complain before you investigate, or do 
you initiate investigations?
    I was shocked to find out that the reason some shock jocks 
are investigated and fined by the FCC and other well-known 
radio talk personalities never are is because it is based on 
complaints.
    So if somebody thinks Howard Stern is bad he gets 
investigated and fined. Yet no one complains about Rush 
Limbaugh's outrageous comments. That is okay. Are you based on 
complaints or do you put forth the investigations?
    Mr. Muris. Well, no, we tend to be proactive. We have done 
something with complaints that no one has ever done before, 
which is to compile tens of thousands of complaints a year into 
a centralized data system, and we and law enforcement officials 
all over the country look at that data and mine that data for 
patterns.
    It is not like it used to be where you get a few letters in 
and complaints. We have people complain online. We are also 
about to do a nationwide survey trying to identify problems 
people have had to try to--and we will compare that with the 
kind of complaints that we get to make sure that we are 
considering the right sorts of actions.
    So I think we do both. In the last 20 years the Commission 
has really shifted toward looking at basic fraud problems. My 
predecessors, Bob Pitofsky and Jodie Bernstein, I think, did an 
excellent job and we are trying to build on their record

                           HISPANIC OUTREACH

    I think we are improving.
    Mr. Serrano. I prefaced my comment by saying Mr. Baca would 
know about this--this probably will get me off Spanish TV 
forever from now on, but do you have a special department that 
looks at what is being said in languages other than English?
    For instance, if you watch some of the Spanish TV 
throughout this nation, the most outrageous one is this 
gentleman who dresses in what we stereotypically perceive Jesus 
Christ to look like, and he goes around sayingthat for $19.95, 
if you buy this particular thing that you wear on your wrist, you will 
be healthy forever.
    And there are other claims made for things that you hang 
around your neck. So these ads prey, unfortunately, on people's 
religious beliefs and, in all honesty, their very strong 
Catholic upbringing. I look at these things and say, ``My God, 
somebody has got to put a stop to this.''
    So the question is, do you also examine what is being 
done--and by the way, I am for the acceptance of 1,000 
languages--but that does not mean that we can't have protection 
in all of them.
    Mr. Muris. Well, this is something I feel strongly about. 
This has been a new initiative for the Commission. Since I have 
been there, we pay much more attention to Spanish-speaking 
consumers.
    I grew up in southern California and also lived about five 
years in southern Florida. My sister teaches English as a 
second language at Fullerton State in California, and, of 
course, she has a lot of Spanish-speaking students. I grew up 
more in San Diego, but I did live in Orange County for a 
summer. So we have started. The first thing we started to do 
was to translate and to work with the Spanish-speaking media in 
terms of our consumer education.
    We have, ``Robo de Identitad'', our pamphlet about identity 
theft. Previously, we did not do this. I thought that was a 
mistake not to do it, and fortunately this subcommittee has 
been giving us enough money so that we can do this.
    Now we have also started taking the next, harder step, 
which is looking at law enforcement in the Spanish-speaking 
media. We brought one case, and we are trying to hire more 
attorneys.
    Obviously, it is a tough market for very good attorneys who 
are fluent in both English and Spanish, but we are finding 
them.
    Mr. Serrano. Do you monitor?
    Mr. Muris. Yes, we do, however, this part of the program is 
in its relative infancy. The first thing we did was consumer 
education, and we spent a lot of time with Spanish-speaking 
media talking to them about the consumer-education issues.
    I have been at the FTC less than two years, so this is a 
new program. But we are now starting to move to the enforcement 
efforts and review the kinds of things that you are talking 
about.
    Mr. Serrano. Well, thank you, sir.
    Mr. Wolf. Mr. Sweeney.
    Mr. Sweeney. Yes, thanks, Mr. Chairman. And let me start by 
thanking you for bringing to this hearing the issue of video 
games and the violence and explicit sexual nature.
    My good friend Mr. Serrano has a lot more in common with me 
than that because my first line of questioning was going to go 
in to the dietary supplement, and while that may be mundane, I 
think it is critically important.
    I have been one of those who have been most aggressive on 
the idea that we need to reform the dietary-supplement industry 
and the claims that it makes, so I am going to go--touch on 
that a little bit.
    But on the video-game issue, it is critically important and 
I think that it cuts to the core of a couple of elements that 
are important. The notion of personal responsibility plays in 
here somewhere, and you are, unfortunately, Mr. Muris, in the 
place that you have to--that that debate really affects your 
capabilities, and I want to talk about that.
    But we are talking about consent, consensual behavior in 
adults versus children, and I think that it should not be lost 
on any of us the debilitating impact those images would have on 
anyone, but in particular on children.
    And as a result I intend to get on Mr. Baca's bill today, 
because I was not quite aware of it prior to this, but I am 
now.
    You talked a little bit about the coordination that FTC 
does with FDA as it relates to dietary supplements.
    What I am interested about it is, as it relates to dietary 
supplements. I have got a bill that calls for the ban on 
ephedra and anabolic steroid enhancers and things like that, 
and really the targeting of certain audiences, most 
particularly the minor children, for a variety of reasons.
    I am as well concerned about some other areas where you 
would pass in jurisdiction.
    And one of the questions I had was, is there a lot of 
coordination that FTC has developed with HHS?
    And what other federal agencies besides FDA need to be 
involved, and are you involved with those agencies?
    Mr. Muris. We have had good cooperation with FDA, and I 
think that cooperation has moved to the ``excellent'' category 
with Dr. McClellan, who just took over last November.
    On ephedra, specifically, I participated in a press 
conference with Secretary Thompson and with Dr. McClellan, 
where we talked about the problems with ephedra. The Commission 
has brought cases involving false claims for ephedra. You will 
see that we have been active in this area and the activity is 
increasing.
    Mr. Sweeney. It seems to me, that in a technical capacity, 
the FTC has enhanced dramatically with the linkages that are 
there. So I am glad that you have got those linkages and would 
encourage them even further.
    Do you plan on using similar procedures, similar 
coordinations with--when evaluating advertising about so-called 
reduced-risks tobacco products?
    Mr. Muris. Oh, certainly, it is essential to work with HHS, 
to work with the National Cancer Institute in particular, 
because that is where the scientific expertise in evaluating 
the products is.
    Mr. Sweeney. I do believe in the idea of convening a joint 
workshop, or another public forum might work well there, and I 
would encourage you to do that.
    I have another hearing to go to. That was predominantly 
what I was interested in. And I am going to submit to you some 
other questions, and I look forward to working with you.
    Chairman, with that I give back my time.
    There were some questions, and if I could steal this from 
my friend, Congressman Baca, because I just want to reemphasize 
the point Chairman Wolf started with.
    And here is a description of some of these games. And I 
have noticed that I have seen it on television as well, 
different games advertised. And frankly, I did not pay a lot of 
attention to it, but will now.
    One game is ``Grand Theft Auto III'' and ``Grand Theft 
Auto--Vice City.'' I think that particular--that description is 
partly up there. But this is the description of it: Depicts 
characters having sex with prostitutes, carjacking soccer moms, 
attacking elderly persons and killing police officers. The 
game's even imitate the sensations of a drug hop.
    ``Max Payne'' is another game depicts the likes of sodomy 
and oppression, including a depiction of Abner Louima being 
sodomized by a vibrating dual shock controller.
    ``BMX--Triple-X''--lets players spend their money in strip 
clubs, showing live-action footage of naked strippers.
    ``DOA Volleyball''--allows players to create female 
characters, with full control over breast size, and the option 
to have the character run topless.
    I have three children--two in their teen years, one about 
to be. Two of them are girls. I am just outraged. And I am a 
strong believer in protective speech and expression, but we 
need to really focus our attention on protecting these next 
generations. So, I look forward to working with you on that.
    Mr. Wolf. Thank you, Mr. Sweeney. Mr. Kirk, and then Mr. 
Baca.
    Mr. Kirk.

                          DO NOT CALL DATABASE

    Mr. Kirk. Thank you. Thank you, Mr. Chairman.
    One of the most popular programs we have in the commission 
for my district is--and I note that the FCC will have a similar 
program for it. Because your rule, as I understand it, does not 
control any rotary or automated calls in-state. Long-distance 
telephone companies are not included. Banks, credit unions and 
airlines--all off the list, right?
    Mr. Muris. Well, if they do their own telemarketing.
    Mr. Kirk. Right.
    Mr. Muris. A lot of these companies use for-profit 
telemarketers, in which case they would be subject to the list. 
But it is clear that, with the addition of the FCC, the rules' 
coverage would be much greater, and I anticipate that that will 
happen.
    Mr. Kirk. Are you coordinating--going to use the same 
database?
    Mr. Muris. Ah, yes. The FTC will create and monitor the 
database. It would not make any sense to have two databases. 
Indeed, we hope there will be one national database that the 
states could use, as well. We are coordinating; we spend a lot 
of time talking to the FCC.
    Mr. Kirk. But what is the timing for the FCC?
    Mr. Muris. Well, obviously, I can't speak for the FCC. But 
I believe they are on track to do something by the summer. 
Sign-ups will begin for our national registry around July 1st. 
By the time the telemarketers access the database, and by the 
time we begin enforcement, which will be around October 1. From 
everything I know, the FCC's rule will be up and running by 
this time.
    Mr. Kirk. Very good news. Under the current plan, an owner 
of a telephone line must reregister for each number. So you 
have got to go through the bureaucracy, every side matching, 
putting in your name, address, everything each time. Why can't 
I interact with the FTC Web site and say here are the two 
telephone lines coming into my house?
    Mr. Muris. Well, this will be very easy to do. You can do 
it by the telephone or you can do it online. And what it 
essentially requires you to do, if you are at that phone 
number, is to program in the phone number.
    Mr. Kirk. Right.
    Mr. Muris. So, it will be very simple to do. We are 
expecting somewhere between 40 and 60 million telephone 
numbers. And to do this at a cost that is feasible, we need to 
do it in a way where people do not speak to people. One state 
did this originally with file cards. We cannot have 40 million 
file cards. But we believe the technology is there to do it 
very easily, either over the phone or online.
    Mr. Kirk. I would want you, if you could, to look into on 
the Web being allowed to do not call multiple lines.
    Mr. Muris. Well, I think, Congressman, that would be easy 
to do. You can--I mean, you can register multiple lines. It is 
not a problem. But we need----
    Mr. Kirk. If you could do that in a way that I do not have 
to retype my name, do not have to retype my address.
    Mr. Muris. Sure, sure. That is an excellent point.
    Mr. Kirk. If there is a prompt that comes up, ``Do you have 
any other lines that you want to register?''
    Mr. Muris. Yes, yes. I believe--I am 90 percent sure that 
is the way we are doing it. If not, I will find out why we are 
not.
    Mr. Kirk. Thank you.
    You also have a big exception here for a previous business 
relationship. And, of course, all of these companies are going 
to claim a previous business relationship. On the form that I 
fill out, if it is Web-based, can I check off I do not even 
want people with a previous business relationship to call me?
    Mr. Muris. We have the advantage in creating this list from 
the fact that a lot of states have similar lists. Almost all 
the states have this exception. When the states go out and ask 
their consumers about it, the consumers are happy with it. In 
fact, one of the reasons we have the exception is for 
magazines, for example.
    There are an awful lot of people who just sort of throw out 
their mail and they do not renew until they get a call. So, we 
thought that the exception made sense. For people who claim a 
business relationship and can't prove it, we are setting up a 
complaint system.
    The complaint system, again, will be automated. We plan to 
put a lot of resources--and you have given us enough money to 
do this--a lot of resources on enforcing this.
    So we will enforce that vigorously. But the experience has 
been, and shown through consumer surveys, that in states that 
allow this exception the consumers seem to be happy with it. 
And I think one of the reasons they are happy is because it 
does, from their standpoint, make sense.
    Again, the overwhelming majority of the phone calls will be 
affected. And, if a consumer is still bothered, he can say do 
not call me again, put me on your individual ``Do-Not-Call'' 
list and that will happen. So there is a way to avoid those 
calls.
    Mr. Kirk. I would like to pressure you to have a really do 
not call list. So when you register for a prompt to say ``Even 
those with a previous business relationship.'' And if you check 
that off, you are done.
    Mr. Muris. I understand. I understand what you are saying.
    Mr. Kirk. Also, there is an exception saying that you have 
to have the number, the caller id number, which for a lot of 
these companies is fly-by-night--it is Nevada today and it is 
Mississippi tomorrow--and you have an exception that the 
company name must be included if technically feasible.
    Can we delete that?
    Mr. Muris. Well, what----
    Mr. Kirk. The company name should be there, period. There 
should be no exception.
    Mr. Muris. We have done two things that I think address 
this problem. One problem is the problem of people who have 
caller id that are no longer going to be able to block----
    Mr. Kirk. The number.
    Mr. Muris [continuing]. The number.
    Mr. Kirk. But the number is fly-by-night. I want to nail 
the company.
    Mr. Muris. Well, there is a problem of fly-by-night 
telemarketers. Fortunately, the reason that this ``Do-Not-
Call'' system can work--as opposed to a do not spam system--is 
the overwhelming majority of telemarketers are legitimate 
businesses. For people who are fly-by-night, they are not going 
to pay much attention to the law. We are going to have to go 
after them individually and that is what we will do.
    Mr. Kirk. Right.
    Mr. Muris. We are also addressing in the rule the problem 
of dead air. Because some people when they receive phone 
calls--because of these predictive dialers, you can receive a 
phone call and there is nobody there and that can be 
frightening, besides annoying.
    We are essentially abolishing dead air. We are allowing 
predictive dialers; but, if for some reason they can't have a 
person when they call you, they have to play a recording.
    Mr. Kirk. But would it be possible to delete the ``if 
technically feasible'' exception? You must identify the 
company.
    Mr. Muris. Let me go back and look at that issue. There are 
I understand, some technical issues. But let me take a look at 
it.
    Mr. Kirk. Okay, great.
    And then, charities are totally exempt. And there are some 
charities that we really love. But it is--as an attorney that 
is set up--it is not difficult to, the phrase again, to have a 
fly-by-night charity.
    Could I have a checkoff that says even charities can't call 
me?
    Mr. Muris. Well, here is the way it works with charities. 
And, again, we have the states experience. Charities have some 
constitutional protection that other organizations do not have 
I think, quite frankly, it would be difficult for us to block 
all calls from charities. Under the law, we clearly have to 
apply some different standards.
    Indeed there is a case before the Supreme Court right now 
addressing this issue, and there have been several cases about 
how charities have more rights. That is the first point.
    The second point is, charities are not completely exempt.
    Mr. Kirk. But the charity's right to bother me overrides my 
right to be silent in my home?
    Mr. Muris. The charities----
    Mr. Kirk. I do not think the Supreme Court would be with 
you.
    Mr. Muris. Well, it is an interesting area of law. And the 
charities----
    Mr. Kirk. And the charity, and the Supreme Court would 
strike down a provision that the FCC puts in that allows me to 
designate that I do not want a charity calling? Are you saying 
that they would strike that down?
    Mr. Muris. Here is what they might say. The position we 
have taken is, you can't exempt yourself from all charities. 
You have to do it on a charity-by-charity basis.
    The charities are going to sue us over that. I do not know 
if they have actually filed a lawsuit yet, but we are told they 
are going to sue us and say, ``That is unconstitutional.''
    Now, what we have found, there are some good things about 
the charitable calls in terms of the states that have them. 
Charities are more careful than a lot of commercial 
telemarketers in who they call. They tend to call primarily 
people who donate to them.
    And we have found that consumers overwhelmingly do not 
resent the charitable calls the way they resent the calls from 
the non-charities.
    But, our rule, for the first time, will allow someone who 
is called by a charity to tell that charity, ``Do not call me 
again.''
    Now, we think that is constitutional. That is a narrowly 
tailored position. But, again, that will be tested in court.
    Mr. Kirk. Well, we have a request here for $18 million, and 
I hope the committee supports that. And I really hope you take 
a look at the previous business relationship checkoff and 
eliminate that, identify the company, if technically feasible. 
You must identify the company.
    Mr. Muris. Well, and we will look at that. And one thing 
that this Congress passed and the President signed was an 
authorization. And one thing the authorization requires us to 
do is a top-to-bottom, fairly quick study, and we will 
certainly do that on those issues
    I will look at that one issue, and we will get back to you.
    Mr. Kirk. Thank you. Thank you, Mr. Chairman.
    Mr. Wolf. Thank you, sir.
    Mr. Baca.

                             MEDIA VIOLENCE

    Mr. Baca. Thank you, Mr. Chairman.
    First of all, I would like to thank the New York leadership 
in bringing this attention to the committee--well, I feel is 
very important as well as many of my colleagues on both sides 
of the aisle.
    Because, really, it is about protecting our children, it is 
about violence, it is about attitudes, it is about behavior. 
That is what is going on today in society. And when we look at 
what the Chairman indicated in reference to a multi-million-
dollar industry right now that is using this at the sake of 
making profit.
    Yet the effects that is changed when we look at 
incarceration of individuals in our prisons right now that is 
left with that aggressive behavior, such video games and others 
that are being sold--and I do appreciate, Mr. Chairman, the 
acts that have been taken by the Federal Trade Commission, too, 
as well--as some of the sting operations that you operated 
during the time to demonstrate that a lot of these video games 
are being sold to children under the age--between the ages of 
13 to 16 or under.
    And 78 percent of children between the ages of 13 and 16 
are able to purchase these mature-rated games that are only 
supposed to be for adults, because they are able to do that.
    We realize that it is also part of the responsibility of 
the parent as well, but it is also the responsibility of 
industry, and it is our responsibility of the federal 
government to be involved in what we believe is occurring right 
now that has led to a lot of the violence that we have had, 
such as Columbine and Germany and other areas right now.
    And many of the parents right now are totally unaware of 
what is in this game. Congressman Sweeney just described, you 
know, a few of the many tapes that are sold. And a parent gets 
that.
    I mean, like, who would think of ``DOA Volleyball''? I 
mean, I would think that is--as an athlete, that is an athletic 
game--you know, volleyball playing back and forth, and what is 
DOA?
    But then when you start looking at what is on there. The 
parents then actually start seeing it with the children--``Oh 
my God, I could not believe what is on there.''
    But it leads to aggressive behavior. And psychologists and 
studies and the medical association have proven that children 
then begin to assimilate that action, assimilates that role. 
That is why there is a difference between watching it on TV. 
You do not assimilate that role; you do not play that.
    In the video games, you are actually assuming the identity 
of character. You are actually that character. You are 
transimposed. You now have become that person, so you become 
the aggressor. It is like brainwashing, in a sense
    The player actually participates in that video game. The 
video games are displayed repeatedly, and they become 
addictive. And then, you know what?
    You can play those as often as you can--unless the parents 
are aware. A lot of parents are not aware of what is in the 
content of these games.
    So, I commend you, Mr. Chairman, in terms of really 
operating some of these things.
    These are available. There are some, like Wal-Mart--I have 
got to give Wal-Mart credit--that is the only one that says, 
basically says, ``I will not sell to anyone, you know, under 
the ages.''
    But many of the others do it for profit. They do not 
monitor themselves. And a lot of these kids, then, are taking 
these video games. And that is why, when we look at the amount 
of crimes that we have that has escalated over the period of 
time, the behavior in our society has changed.
    And I think it is time that we began to do something. I 
think, you know, that is why, just even watching the additional 
video game--and when you talked about it--I think that is very 
important, Mr. Chairman. And I commend you, you know, for those 
efforts.
    And I look forward in working, not only with you, Mr. 
Chairman, and also with the FTC, Mr. Chairman, in terms of what 
we might be able to develop to stop these kinds of video games 
that would be available to children that does violate the First 
Amendment.
    As Michigan and Missouri, also--I mean, Missouri has also 
shown it has not. So, we hopefully, that we will be able to 
work with you as we move this Protect Our Children Video Game 
HR 669.
    Mr. Wolf. Well, I appreciate Mr. Baca's efforts and I will 
work with you. I had someone tell me, and this may not be 
accurate, but they said during the time of the sniper there 
were 20-some deaths, that there were more deaths in the inner 
city, where inner-city kids got killed, and yet it was never 
covered.
    Now, I originally come from an inner-city area, in 
Philadelphia, south Philadelphia. I think that Mr. Serrano 
would understand this better than I understand it--but there 
was so much coverage which took place with regard to the 
sniper, rightly so, it paralyzed our area.
    But if these figures are accurate, and we are going to ask 
the staff to check with the D.C. government, the police, to see 
the violence level in the inner city, and if that level was 
simultaneously with or perhaps even higher, there may be a 
whole series of this violence taking place that many are not 
even focusing on.
    So this is an important issue, and I commend Mr. Baca. I 
would also ask you to involve Mr. Baca in the FTC efforts and 
we can work together and try to accomplish something.
    And I would say to my good friends in the business 
community, as a free-market Republican--I think those of us who 
are for fee markets we tend to be more conservative than maybe 
our friends on the other side of the aisle--I think we have a 
greater responsibility, a greater burden in some respects, 
because as we are always talking about the market and talking 
about the business side and talking about the free market.
    I think we really have a greater responsibility in some 
respects to--and so I am going to put my shoulder to the wheel 
with Mr. Baca and the others that joined us to do something 
about it, and I would urge those who represent this industry, 
probably many good people who are not even really aware of what 
is actually going on. I mean, here I am at my age and I had 
never seen this until you people came by.
    So I am sure there are some people, law firms that are 
actually out there representing some of these companies and may 
not even know what is involved. So thank you for your 
testimony, and I also thank Mr. Baca and the others
    On the do-not-call list, when will the consumers be able to 
register to be on the list, and when can people expect a 
decline in telemarketing calls?
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    
    Mr. Muris. We anticipate that registration will begin July 
1st. Registration will--everyone in the country can sign up 
online, and because of the concern over harming the phone 
system of the United States if we did it all at once, we are 
going to do it in rolling, starting in the northwest part of 
the country on July 1st.
    By October 1, people should begin to see a decline in phone 
calls.
    Mr. Wolf. October 1st?
    Mr. Muris. Yes.
    Mr. Wolf. How will consumers registered on the list be able 
to report violations if they continue to receive telemarketing 
calls, and what will the penalty be for not complying? And how 
will you enforce it.
    Mr. Muris. Part of the money that you have given us for 
this will involve enforcement and building an infrastructure to 
process complaints, because we expect a very large number of 
complaints.
    People will be able to complain online, and will be able to 
complain on a phone system. We will use that information. We 
are training--well, first of all, we are putting together 
material to, for both consumers and the business community on 
how to use and comply with the do-not-call registry.
    But we are also working in-house and with the states on a 
significant enforcement effort. We will use this database of 
complaints as they come in as our primary enforcement tool in 
terms of finding violators.
    Mr. Wolf. And what about the last point, with regard to 
penalties?
    Mr. Muris. Oh, I am sorry, with penalties, yes. The 
penalties can be as much as $11,000 per violation. We are 
expecting--
    Mr. Wolf. That is a little steep, isn't it?
    Mr. Muris. Well, it is a little steep if it actually 
happened. Courts never impose the full penalty, and we 
certainly--if we find isolated violations--quite frankly, we 
will tell people, and if it does not happen again, then that is 
fine.
    Mr. Wolf. Yes, I think they have to repeat.
    Mr. Muris. Sure, absolutely. What we are looking for is 
systematic violations. The courts have never been willing to 
impose the highest fines in areas where these penalties apply.
    But we hope that if we really do have egregious violators, 
that the courts will allow us to put hefty fines on them.

                            SPAM ENFORCEMENT

    Mr. Wolf. According to a recent Washington Post article, 
roughly 40 percent of all e-mail traffic in the United States 
is spam, or unsolicited messages from companies trying to sell 
products to Internet users.
    I understand that the FTC has taken several law-enforcement 
actions against companies using spam to operate the get-rich-
quick schemes, using spam to route consumers to adult web sites 
that we referred to.
    What can the FTC do not only to eliminate unsolicited 
fraudulent e-mails, but to reduce the number of unsolicited e-
mails? Have you thought of a national "do-not-spam" list for 
that?
    Mr. Muris. That is a very tough issue. Let me talk about it 
briefly. We are the only people in the United States that want 
spam. We receive over 100,000 spam a day.
    What we do with those spam are--since I have been there--we 
actually have something called the refrigerator which looks 
like the refrigerator where we store the spam.
    Like we say, we try to take the deceptive spamers out of 
the refrigerator and put them on ice.
    We have brought dozens of cases. In some ways it may be 
only a drop in the bucket, but to do something about spam is 
going to require technology. It is going to require law 
enforcement. It may require new legislation.
    A potential problem with a ``do-not-spam'' list is that it 
appears that a very large number of the spamers are already 
violating the laws. So, unlike the telemarketers, there may be 
no way to really reach them and deal with them, at least 
upfront.
    We are having a three-day workshop beginning on April 30th. 
One of the things we are going to announce at the workshop--we 
are doing it right now--we are collecting a random sample of 
spam, and we are going to categorize it in various ways, 
including how many of them are already breaking laws.
    This is a very difficult problem. And if you think about 
it, it is because the cost of making additional telephone calls 
or sending additional letters in the mail is real. The cost of 
adding another 100,000 e-mail addresses, is zero, essentially.
    So you can send out just gigantic amounts of spam. It is a 
serious problem and, as I said, I think it will take a 
combination of technology, education, law enforcement. If there 
is some new legislation that would help, I would certainly 
support it.
    One of the things that we are hoping to do with the 
workshop is to develop a better understanding of what 
legislation might make sense, if any.
    Mr. Wolf. Internet gambling, during fiscal year 2002, the 
FTC found that minors can easily access online gambling and 
that minors are frequently exposed to advertisements for online 
gambling on general-use, non-gambling web sites.
    In order to address this issue, in June 2002, the FTC 
issued a consumer alert to make parents aware of the risk 
associated with children gambling online.
    What activities are you planning for the future to ensure 
that parents are informed of online-gambling risk?
    Mr. Muris. As you know, Mr. Chairman, you and I 
participated in an event that you sponsored last year to try to 
get some more publicity for this issue.
    We are trying to spread the material that we have put 
together and refine it. We are talking to various groups that 
you put us in touch with.
    I also know, and this is beyond what we do, that you are a 
co-sponsor of Mr. Leach's bill, and that bill, if it became 
law, may have a more direct--I am sure you know the legislation 
I am talking about--may have a more direct impact.
    But we certainly think education is an important part of 
it, and I think we have had good success in reaching people who 
were unaware of the problem. We intend to try to build on that 
education effort and continue spreading that message.
    Mr. Wolf. In the area of merger reviews, approximately half 
of the FTC staff work to maintain competition in the 
marketplace, including the prevention of anti-competitive 
mergers, but due to legislative changes and a reduction in 
merger activity the number of pre-merger filings requiring a 
review declined by 76 percent in fiscal year 2000 to 2002.
    With such a large reduction in merger-review workload, why 
doesn't the budget show any reduction in the staffing 
requirements?
    Mr. Muris. Well, here is what happened. Historically the 
FTC has always spent about half of its competition resources on 
mergers.
    During the merger wave of the 90's, the number went up to 
somewhere about three-quarters of the competition budget. There 
has been a significant decline in mergers. The change in 
premerger filing requirements were made with the idea that the 
overwhelming majority of the mergers for which filings were no 
longer required did not raise competitive problems.
    So, although the filings are way down, and the number of 
mergers are somewhat down, there are still significant problems 
in mergers. What we have done is return the historical 
relationship of roughly 50-50 in the merger review process and 
the non-merger process.
    But what it meant, quite frankly was that the Commission 
really stopped its non-merger enforcement significantly. What 
we have done is shift back to non-merger enforcement.
    In the drug area that I mentioned, we would not have been 
able to do that, you know, four or five years ago, to bring the 
kind of cases that we are bringing----
    Mr. Wolf. Did you just reassign people?
    Mr. Muris. Yes, absolutely. And we have returned again to a 
more historical relationship which the commission followed for 
most of the 1980s and most of the 1990s that roughly half of 
the competition work involved.
    So there has been a significant reduction in the amount of 
resources going toward mergers. But they have gone back to 
where they used to be, which is the non-merger area, which I 
think is a very good use of the taxpayers' money.
    Mr. Wolf. Of the fat-finger telephone scam, you remember 
last year at the hearing, we had a----
    Mr. Muris. That was last year's video.
    Mr. Wolf. Yes, that was last year's video.
    This scam occurs when consumers mistakenly misdial the 
popular long-distance carrier number such as 1-800-COLLECT and 
is unwittingly overcharged for that call by another long-
distance carrier that did not identify themselves or their 
rates before placing the call.
    I understand that the FCC issued a consumer alert on the 
topic and has fined two carriers. What has the FTC done to 
inform consumers of this?
    Mr. Muris. Well, we have done a couple of things. We have 
consumer-education materials. And we also have brought cases 
where we had jurisdiction.
    As we discussed last year, we do not have jurisdiction over 
common carriers. I have asked the Congress to provide us with 
that jurisdiction. The Senate Commerce Committee, in fact, 
voted a bill with that jurisdiction in it for the FTC last year 
and the Commission intends to renew that request in this 
Congress.
    Mr. Wolf. Okay, I have one or two more, but Mr. Serrano, 
you want to--okay, just----
    Mr. Serrano. Let me just first comment on something you 
said, Mr. Chairman, which was very important, about the 
coverage of the sniper and the fact that other issues were not 
covered, that is, people who were being killed at the same 
time.
    I do not know that this is an FTC issue as much as it is 
just the way media covers issues in this country. I remember 
with all the sensitivity that this case has that we not long 
ago had a missing young woman in this city and that was the 
number one issue on TV. And yet at that same time, there were 
450 missing people in Washington D.C. that no station ever 
covered.
    And so a lot of that is just how the media reacts to these 
things. And what you folks could do about it. I do not know 
that there is anything to do about it.

                            GASOLINE PRICES

    Gas prices--I see a lot of people laughing when I said 
this, this is a scary one. The American public believes, I am 
sure, for the most part, that the situation in the Middle East 
has something to do--or has everything to do with the 
escalating gas prices. Notwithstanding the fact that last week 
they went down a few pennies.
    One, are you equipped to tell us if that is true; to what 
extent it is true; to what extent it is oil companies taking 
advantage of the situation? And if so, what can you do about 
that and what are you doing about that?
    Mr. Muris. The Commission has a lot of experience in the 
energy industry, particularly through merger investigations. 
Because of concerns over gas prices last year, we started a 
monitoring project in 360 cities at the pump and another 20 
cities at the wholesale level.
    What we have done is we have built--using our economists, 
we have built a model to predict what prices should be based on 
historical factors, including crude-oil prices, which is the 
biggest single factor.
    When the prices turn out to be significantly different than 
historical prices, then we go out and look for the reasons. The 
program has just gotten up and running, but we found a few 
cases where there are variances from what the history predicts 
that they should be.
    It usually turns out there is something extraordinary, like 
a refinery, is shut down. We have found a couple areas, though, 
that look like that they merit some investigation, and, in 
fact, that is occurring.
    Crude-oil prices: One of the reasons, there were a series 
of extraordinary factors, but crude-oil prices did go way up. 
They went up from the low 20s to the high 30s, because of 
concern over what might happen with the war. It looks like, 
fortunately, that the worst fears have not happened. Prices 
have come back down considerably. They are not quite back as 
low as they were.
    The Commission has spent a lot of effort looking at oil 
prices. We will be producing a couple of reports this year 
about spikes in prices.
    One of the problems is that because there are so many 
different grades of gasoline in so many parts of the country 
for environmental reasons, if something happens in the pipeline 
for one of these relatively small areas, the refinery they use, 
for example, shuts down, other gasoline can't be shipped in 
because it is not the right environmental grade.
    We have encouraged the EPA to look at some of the market 
considerations as well when it designs these grades.
    Unfortunately, we have not been able to find violations of 
the antitrust law as the main source of these price increases. 
But we do now have a monitoring system where we are able to 
detect suspicious problems that we did not have before.
    The system will have to run its course for a few years 
before we really know what it tells us.
    Mr. Serrano. That is amazing. Is there a way to alert the 
American public to the fact that there are a lot of different 
factors? Because we have bought the story that the gas prices 
are somehow related to everything that is happening overseas. 
And if the prices keep going up, they will blame the 
government. That is the easy way out. They will blame all of 
us.
    How do we educate, then, the public to make sure that they 
are aware of everything that is going on? Or at least enough to 
make an intelligent assessment?
    Mr. Muris. Well, that is one of the things we hope to do 
with these reports. We held hearings last summer, and we will 
release a report this summer. As you know, as demand goes up 
with the summer driving, prices tend to go up.
    We will release consumer-education advice. There are some 
things people can do. For example, people tend--some people 
tend to buy higher-rated gasoline than they need. There are a 
certain kind of stations that are higher-priced than others.
    One thing we have been aggressive about--this has not made 
some people in the oil industry very happy with us--but there 
are certain companies like Wal-Mart and others that have been 
getting into the gasoline business. Some states have tried to 
pass legislation to make it harder for them to compete. We have 
gone to those states and said that we thought that those state 
laws did not make sense.
    So, there are some things we can do to educate the public 
and even some things we can do to affect prices.
    Mr. Serrano. And are we doing them?
    Mr. Muris. Well, I think we are. One of the things that I 
want to do, once we get all these reports together, is to try 
to go to someplace like the National Press Club--hopefully it 
will be at a time when oil prices are not too high--but try to 
make a speech about these various issues, and try to get it 
distributed. Because that is one of the main functions, quite 
frankly, of the Commission, besides law enforcement, is to 
address these issues.

                            SPAM ENFORCEMENT

    Mr. Serrano. One other question. Not that I know anybody 
who does this, but, let's say a member of Congress gets an e-
mail from those three folks over there on the issue of 
education. And gets an e-mail from these other three on the 
issue of the economy.
    And then that member of Congress puts those folks on a 
list, and every time there is an education issue that he or she 
has, he e-mails them, and these people on the economy list, and 
they get e-mailed. Is that spamming?
    Mr. Muris. Well, it is a very interesting question as to 
what spamming is. To us, we focus on commercial e-mail and not 
noncommercial. The kind of things you are talking about would 
have more First Amendment protection.
    For example, in the phone-call area. Our Do-Not-Call list 
does not apply to surveys that people do or to political 
fundraising. Congress is exempted, not surprisingly, from 
political fundraising from the Telemarketing Sales Act.
    There are disagreements about what spam is. For us, we 
focus on what is the overwhelming majority of this bulk e-mail, 
which has been the commercial segment.
    Mr. Serrano. Mr. Chairman, I have other questions--just a 
couple or more--that I would like to submit for the record.
    Mr. Wolf. Sure.
    Mr. Serrano. But just to say to you, sir, that I appreciate 
your testimony today, for my part, and I will stand ready to 
assist the chairman in helping you in any way that it can.
    You know, if it is true--and I hope it is not true--that we 
are heading towards difficult economic times, more than ever, 
the consumer needs to be protected. Because there are people 
who will try to make money when there is less money to be made 
to make up for it.
    And, as I told you, my experience with this in New York--in 
the State Assembly--as chairman of that committee, there are a 
lot of things that need to be done. I want to be supportive. So 
call on us and consider us allies in this fight.
    Mr. Muris. Well, thank you very much. I really do 
appreciate your support and the Chairman's support. As I said 
at the beginning, we could not have done ``Do Not Call'' 
without you, and we are very appreciative

                               MANAGEMENT

    Mr. Wolf. Thank you, Mr. Serrano. I just have two more.
    On the staffing issue, what is the size--how many staff are 
there in FTE now?
    Mr. Muris. We have in FTE, last year, I think it was 1,055, 
and this year, it will be somewhere there or a little bigger. 
Because of the uncertainty and the lateness of the 
appropriation, it will probably be somewhere in that 
neighborhood again
    Mr. Wolf. And how would that compare with the last, say, 10 
years?
    Mr. Muris. Well, let me go back----
    Mr. Wolf. And then you can submit a chart and tell us what 
you have from 1993 to----
    Mr. Muris. Sure, I could tell you, because I am an old 
budget guy, I can tell you now--but we will submit a chart to 
you.
    If you go back to 1980, the Commission had about 1,800 FTE. 
It shrunk to 1,200 at the beginning of fiscal 1986, and then it 
actually shrunk below 900 a few years later, which is just----
    Mr. Wolf. And when was that?
    Mr. Muris [continuing]. Which is just too small. That was 
in the late 1980s, early 1990s time period.
    And then it gradually, although it bounced around a little 
bit, it gradually increased up above, well above 900. In fiscal 
2001, I think, the number was 1,007?
    Mr. Wolf. Correct.
    Mr. Muris. 1,007. And then last year was the first 
significant increase in staffing. There had been very small 
increases before that.
    I personally think a number somewhere around 1,050 to 1,100 
is a good--very good operating level for the commission. And I 
certainly would not come here and ask, you know, for large 
increases of staff until we see how well we can do with this 
number.
    I think it is a good number for us. I think we do excellent 
work for the American people. I would hope you would fund the 
request which right now is in that level.
    Mr. Wolf. Do you recruit just out of college and just out 
of law school?
    Mr. Muris. Well, we recruit in a variety of ways. In our 
Bureau of Consumer Protection, for example, that we attract a 
lot of experienced people.
    We have a lot of couples. For example, when the husband or 
wife works in a law firm and makes a lot of money and the other 
spouse works at the FTC. One of them does good and one of them 
does well. [Laughter.]
    I will let them decide which is which. But, we have a very 
good esprit de corps. We have the problem that as you know 
everybody in the government has that the baby boom is going to 
retire a large number of employees all at once.
    At our annual staff retreat this year, this is an issue I 
am going to talk about with the staff, because obviously you 
can afford to have a few experienced people retire. But, in the 
second half of this decade, we are going to have a lot of them 
retire all at once.
    That is going to be a problem throughout the government. 
The problem the FTC had in the 1970s when I was there is it did 
not have experienced people. Now we have very experienced 
people. But because of the way the baby boom lumped itself 
together, they--a lot of them are going to leave within a very 
short period of time.
    Mr. Wolf. Do you have a program where you pay tuition costs 
for people who graduate if they come to the FTC?
    Mr. Muris. We have the ability to give them some bonuses. 
We do not have the kind of program I know that has been 
instituted for the FCC of paying outside the market. It is very 
important that we have a significant amount of money for our 
bonus pool and to pay recruitment bonuses as well.
    Mr. Wolf. How many lawyers do you have?
    Mr. Muris. We have about half of the staff--500 and 
something--about half of our people are lawyers. We have 
started--at your suggestion we started a telework program.
    Mr. Wolf. I was going to ask you that.
    Mr. Muris. Including me, we have about 15 people who 
telework. I do not do it as much as I would like, with my 
responsibilities. But I find that it is a very good way to get 
things done. We started a program, and I think that is a great 
thing.
    This is my sixth job in the federal government. I am a 
believer in government service. I think we do a lot of good 
work and that we should be rightfully proud of the good that we 
accomplish.
    Mr. Wolf. I agree. Do you have flex time?
    Mr. Muris. Yes, yes and we have a very good flex time 
program. The ability--one of my assistants is about to have a 
baby.
    Mr. Wolf. Job sharing?
    Mr. Muris. Well, yes. For example, we have two assistant 
directors in one of our consumer protection shops that do that. 
It is harder to do with managers, but we have even found a way 
to do it with managers.
    Mr. Wolf. And you have on-site child care? Or do you have--
--
    Mr. Muris. Yes. Yes, and it is one of the issues, because 
we have--something I never thought I would haveto deal with is 
security concerns. And Congress has appropriately, I thought, given us 
some extra money to deal with some security issues and we are dealing 
with that.
    We have two main buildings and one building is a long way 
from the other. We have had to consider recently is people 
whose kids are in the one building--if something happens.
    And we have been working on how to make sure that we 
protect them. We have been thinking, as everybody throughout 
the government has, about what to do in an emergency.
    Mr. Wolf. And flex time?
    Mr. Muris. Yes, absolutely.
    Mr. Wolf. And leave sharing?
    Mr. Muris. Yes.
    Mr. Wolf. So if someone is sick, you can share your----
    Mr. Muris. Sure, sure. Oh, yes, absolutely.
    Mr. Wolf. Have you used that lately? And you are--like if 
someone is ill and the others have donated?
    Mr. Muris. Yes, yes. Yes, I think the people in the FTC 
world really do regard themselves as part of a family, and that 
includes our alums.
    So we created an award--I created an award ceremony for 
lifetime FTC service. Casper Weinberger, Secretary Weinberger, 
who is a former FTC chairman came back to present the first 
award to someone whom he had worked with closely at the FTC 30 
years ago.
    So there is a lot of loyalty to the FTC by people who were 
once there.
    Mr. Wolf. The last question to get back on the issue of 
video games. I just want to kind of get this for the record and 
help me.
    Some research has suggested the violent video games may 
have an impact on youth behavior. If this or future research 
were to establish a clear link, could the FTC, using your 
consumer protection authorities, take actions to prevent the 
sale of mature video games to children, if they would show the 
link?
    Mr. Muris. Yes, I think that is a very interesting 
question. The problem in an individual case--there are two 
kinds of links. One is the overall link between culture and 
violent behavior. That is a difficult link to show.
    The problem is when you get down to individual products, 
the linkage there is very difficult to show. Most of the 
research, obviously, does not go to individual products, it 
goes to the generic category. But you would have to get down--
for us to do something about individual products, you would 
have to get down the individual link, unfortunately.
    Mr. Wolf. So they would have to be--you would have to--if 
somebody did a study on ``Grand Theft Auto'' and showed that 
the activity in that took place----
    Mr. Muris. Oh, well, no, I am saying, yes, well, no, 
obviously----
    Mr. Wolf. What are you saying? You do not have to react 
specifically say video A created----
    Mr. Muris. No, I do not think you necessarily have to show 
that--you have to show that video A--but most of the activity--
most of the studies that I have seen and when we met with the 
Lion and Lamb people, they directed me to a lot of the 
research, it was at a fairly generic level.
    Now, this kind of study would be very important, obviously, 
for the kind of legislation that people are talking about.
    But, I am sorry, you had a----
    Mr. Wolf. No, that is okay, we are going to have 15 minutes 
whatever happens, so we are okay.
    Mr. Serrano. We are just voting on an increase for the FTC. 
[Laughter.]
    Mr. Muris. Don't let me hold you up.
    Mr. Wolf. There are eight noes and four yeses.
    Maybe what I would like to ask you to do, if you would 
submit to me your best judgment of what type of research would 
be necessary----
    Mr. Muris. Sure.
    Mr. Wolf [continuing]. Whereby we could show a clear link 
that would enable the FTC, using your consumer protection 
authorities, to take action, and also knowing you are a good 
lawyer, if you would also submit to me what you think the 
standard would be for somebody to take somebody to court and 
perhaps win in court
    Mr. Muris. Sure, yes, sir, we could do that.
    Mr. Wolf. Well, I think that is all the hearings that I 
have. And I really do appreciate your efforts there. I think 
you come to this with a good background with your experience, 
and I do believe that it is important that those of us who 
always are supportive of business, and I am talking about the 
free-enterprise system, really promote it and have that 
responsibility to make sure that it is responsible and not 
creating violence and doing these things.
    So, you know, I think you have done a good job, and I 
thank, you know, your staff because none of us can do a good 
job without a good staff
    Mr. Muris. Sure.
    Mr. Wolf. So with that I have no more questions.
    Mr. Serrano. Just to remind you that in spite of their 
successes, there is no need to break up the Yankees, okay? 
[Laughter.]
    Mr. Wolf. But that is under investigation. [Laughter.]
    Mr. Muris. Thank you very much.
    Mr. Wolf. Thank you very much.
                                          Thursday, March 13, 2003.

                   SECURITIES AND EXCHANGE COMMISSION

                                WITNESS

WILLIAM H. DONALDSON, CHAIRMAN, SECURITIES AND EXCHANGE COMMISSION

                    Chairman Wolf's Opening Remarks

    Mr. Wolf [presiding]. Welcome to the committee. We 
appreciate your attendance to discuss the SEC fiscal year 2004 
budget request.
    Congratulations on your confirmation. You have a 
challenging and very, very tough job. And I hope you will be 
willing to speak out and, as they say, speak truth to the 
powerful and not be silent. A lot of people that have been hurt 
in scandals such as Enron, Global Crossing, WorldCom. Enron--in 
my congressional district, result in a lot of people losing 
their jobs. So we do hope you will be very, very aggressive in 
speaking out against corporate corruption.
    Your mission to protect investors and maintain the 
integrity of the securities market has become increasingly 
difficult as business transactions and financial markets have 
become more complex. Unfortunately, the need for more effective 
regulation of the securities and accounting industries became 
apparent last year for the failures of a number of the 
companies that I mentioned. These bankruptcies have left 
investors and a lot of employees really hurting--retirement 
plans absolutely worthless, while corporate executives became 
multimillionaires.
    To ensure the future success of our markets, investors must 
have confidence that companies are accurately disclosing 
financial information, auditors are functioning independently, 
and investment advisers are not inappropriately influenced by 
investment activities.
    Last year, the Congress took several steps to provide the 
SEC with the necessary tools to combat corporate fraud. The 
fiscal year 2002 supplemental provided an additional $31 
million to hire 125 new staff and begin important information 
technology initiatives.
    The Sarbanes-Oxley Act provided the SEC with new 
responsibilities to protect investors, and in the fiscal year 
2003 omnibus appropriation provides $716 million, an increase 
of $227 million. We are going to have a series of questions on 
the level of funds you can effectively spend. This Committee 
actually put more in than the Administration asked for. I wrote 
a letter to Mitch Daniels at OMB, suggesting that they go 
higher and higher.
    Now, with these fund increases we want to know if you can 
effectively carry out your responsibilities.
    Do you need every penny? Do you need more? Can you get by 
with less? Particularly, as you are reading in the paper of the 
budgetary problems and the deficits. So we are going to have a 
series of questions. Whatever you need, I can tell you, I 
cannot speak for everybody, you are going to have the resources 
from this Committee.
    But the other side of the coin is, we just do not want you 
to bank money down there when we have other programs--embassy 
security--Tanzania bombing, Kenya bombing or whether the FBI 
has the resources it needs. So tell us what you actually need 
and what you can spend, and whatever that is, we will make sure 
that you get it.
    The fiscal year 2004 budget requests a total of $841 
million, an increase of $125 million over fiscal year 2003. We 
are pleased that the Administration has recognized the 
importance of the SEC's work and with this very significant 
increase.
    I am also going to ask you to renew the commitment made by 
your predecessors, Chairwoman Unger and Chairman Pitt, to 
require foreign companies to disclose any connections to human 
rights abuses, so this information is readily available to 
investors participating in the U.S. securities market.
    And with that, I will just, again, welcome you to the 
Committee. We look forward to have a, you know, a good, long 
working relationship with you.
    And I recognize Mr. Serrano.

                                Welcome

    Mr. Serrano. Thank you, Mr. Chairman.
    Let me preface my comments by reiterating your point about 
the work you did along with the minority side to make sure that 
these got actually more than the money that was asked for by 
the President. With that support, obviously, comes the need for 
scrutiny of how those dollars are spent, since it is rare that 
the Committee goes above the President on issues like this one. 
We are not talking about school lunches or Medicaid or 
something like that
    Thank you for giving me this opportunity to welcome, Mr. 
Chairman, Mr. Donaldson for his first appearance before the 
Subcommittee.
    Mr. Donaldson, I congratulate you on your appointment and I 
wish you the best of luck in dealing with the challenges facing 
the SEC. I also wish to express my desire to work with you on 
the many complex and troubling issues facing the agency in the 
hope that these issues can be addressed in an inclusive, 
bipartisan manner.
    We would like to note that in addition to your 
distinguished career in the private sector and in public 
service, you served as counsel and special adviser to Vice 
President Nelson Rockefeller, the most recent New Yorker with 
such proximity to the presidency, not counting our junior 
senator, Hillary Rodham Clinton.
    I also understand--and I must say, by the way, that I 
recall Vice President and Governor Rockefeller, Mr. 
Chairman,very fondly. He did something a long time ago that a lot of 
people in this country did not dare to do, he invited Hispanic New 
Yorkers to get involved in politics, and he did it very gently by not 
suggesting they become Republicans, thank God----
    [Laughter.]
    But that they become involved. And he probably had as much, 
if not more to do with our political movement than a lot of 
other people in my own party. And I think that that needs to be 
said.
    I also understand you are considering expanding the 
Securities and Exchange Commission's presence in New York City 
into the historic Woolworth Building, where the office moved 
after the collapse of the World Trade Center towers. I hope you 
decide to spend more time in New York, the financial and 
investment capital of the United States. It will be of great 
help in restoring the confidence of American investors to have 
an increased SEC presence right there where it all happens.
    The recent corporate scandals were the catalyst for the 
very substantial increase in your budget. I trust that you will 
use this additional money wisely, although you should know the 
eyes of the public and of Congress are close upon you.
    Again, I congratulate you on your new position, Mr. 
Donaldson, and wish you the best of luck.
    Thank you, Mr. Chairman.
    Mr. Wolf. Thank you, Mr. Serrano.
    Welcome. You can proceed. You can read your whole 
statement, you can summarize, whatever way you think is 
appropriate.

                         SEC Opening Statement

    Mr. Donaldson. Well, I would like to make a brief 
statement.
    Mr. Wolf. Sure.
    Mr. Donaldson. But before I do I just want to acknowledge 
your acknowledgement, tell you how pleased I am to be here and 
how much I hope that in the days and months ahead we can work 
together.
    Chairman Wolf, Ranking Member Serrano and members of the 
Subcommittee, I am very pleased to have the chance to testify 
today on behalf of the Securities and Exchange Commission in 
support of the President's fiscal 2004 budget request. The 
request for $841.5 million is the largest amount ever requested 
for the SEC and comes on the heels of last year's 
appropriation, which was the largest single-year percentage 
increase ever provided to the Commission.
    At the onset, I would like to thank you for the tremendous 
support and the leadership you have shown in ensuring that the 
Commission receives the resources necessary to fulfill its 
vital mission. Your ongoing efforts demonstrate convincingly 
that the Congress is dedicated to ensuring the financial 
integrity and vitality of our markets.
    This is, as you know only too well, a critical time for the 
agency, and the way we address the challenges before us will 
determine the vitality of the agency for many years to come.
    Although this hearing is for the Commission's 2004 
appropriations request, I believe it is necessary to put this 
request in the context of our fiscal 2003 funding level.
    Thanks to your efforts, the Commission was appropriated 
$716 million to fund its operations this year as part of the 
recent omnibus appropriation. These funds will enable us to 
meet the remaining deadlines of the Sarbanes-Oxley Act, hire 
over 800 new staff, advance initial startup funds to the Public 
Company Accounting Oversight Board, improve our training 
efforts and address our most pressing information technology 
needs.
    The new resources provided in fiscal 2003 will set the 
stage for 2004 and will allow us to focus equally on the 
complex issues that we currently face and on the fundamentals 
upon which the Commission was built--full disclosure, fairness, 
transparency and investor protection. Investor confidence is 
predicated on minding our own knitting in these core areas.
    In addition, I believe that the efficient functioning of 
the SEC is as much a part of investor protection as new rules 
and regulations. As I have said before, ensuring that our new 
resources are used to promote the effectiveness and support the 
modern mission of the SEC, rather than simply increasing our 
numbers, is one of my most important responsibilities as 
Chairman.
    My initial review of the budgets that were prepared before 
my arrival for 2003 and 2004 suggests that the overall staff 
increase requests and the proposed allocation of the agency's 
new resources are warranted.
    However, during the next several weeks and months, I intend 
to delve more deeply into each program area to verify 
personally that this is the best, most effective, and efficient 
use of our new staffing.
    I would therefore like to reserve my option to make changes 
as we go along. My staff and I will work closely with the 
Subcommittee as we finalize our resource allocations among the 
agency's programs and across fiscal years
    New staff and the need for regular training go hand-in-
hand. For this reason, the Commission will increase 
significantly its emphasis on frequent, in-depth staff 
training.
    Management accountability is also central to our ability to 
perform our duties. I intend to enhance the Commission's 
operations by establishing a system to better train and 
evaluate and develop and mentor managers and supervisors.
    This effort is consistent with the goals of the President's 
Management Agenda and is, of course, the right thing to do. We 
cannot expect SEC staff to successfully fulfill their duties if 
they do not have leaders with the skills and tools to lead 
them, and we must set expectations and reward our managers and 
staff accordingly.
    The Commission's operational challenge also extends to our 
information technology program that has been structured to 
maintain existing systems, undertake a few smaller projects 
each year and complete only one large-scale initiative at a 
time.
    We have accomplished this level of activity primarily by 
developing a robust capital planning program and relying 
heavily on contractors and outsourcing.
    To meet our future needs, program staff must work side by 
side with a reinforced information technology staff, and we 
must increase the number of information technology program 
managers we have available to assist the program offices in 
developing major applications.
    We will hire and use our new technology resources 
aggressively, but thoughtfully. As a result, these resource 
targets may only be met over a longer period of time, but they 
will be met with people and systems that we are sure can 
perform our vital tasks.
    The unprecedented increase in resources for the agency 
presents many challenges, but, more importantly, many 
opportunities. I have had the opportunity to preside over 
similar management challenges while in the private sector and 
have seen first hand what it takes to grow rapidly and 
responsibly and improve performance at the same time.
    I look forward to working with the SEC staff and with you 
to effectively grow the organization and build upon its well-
earned reputation for being a preeminent government agency.
    I might just close by saying that I am honored to serve as 
Chairman of the SEC, and I look forward to a strong 
relationship with this committee.
    I would be pleased to answer any questions you might have. 
Thank you.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

        
                   EFFECTIVE UTILIZATION OF RESOURCES

    Mr. Wolf. Well, thank you very much. I will ask a couple--
two different issues, and then we will go back and forth.
    The committee gave the SEC $716 million in 2003. That is a 
$227 million increase over the fiscal year 2002 level and $150 
million increase over the Administration's request.
    The President's fiscal year 2004 request includes an 
additional $125 million--that is an increase of over 70 percent 
from fiscal year 2002 to fiscal year 2004. As you know, the 
deficits that we are talking about upwards to $309 billion.
    We do not know whether or not there will be a war in Iraq. 
We pray there will not be, but there perhaps could be. So we 
are going to be under enormous, and I think, speaking for 
myself, I cannot speak for the Republican Party, but I think 
deficits do matter.
    And so, with the recognition of the pressure that we are 
going to have, and with the fact that you have a 70 percent 
increase over two years.
    Do you think this is more than you can handle, and do you 
think you can use that all wisely?
    Mr. Donaldson. Well, it is an excellent question. The 
bottom line, I think, is that it is not more than we can 
handle, although the challenge of handling it efficiently and 
effectively would be considerable.
    I think you have to measure those increased funds against 
what has happened in our economy in the last decade, and 
particularly in the last three, four, or five years, in terms 
of the increased pressures on the SEC to respond to 
unprecedented numbers of allegations--and beyond that proof--of 
malfeasance in a society. And we have, in the corporate and 
financial world. Our challenge here is to use this money 
wisely.
    I do not mean to over-expand on your question, but I 
believe that we have an opportunity to take a new and fresh 
look at the structure of the SEC--the management structure 
within the agency--we must do so with a view toward making the 
agency more forward-looking, in terms of the anticipation of 
problems coming down the pike.
    In other words, we have been so occupied with handling 
problems that have come in over the transom that we must resist 
simply adding more people to existing operations. We must 
attempt, in my view, to structure the agency so that it can 
anticipate some of the problems that are coming and, actually, 
hopefully prevent some things before they happen, some of the 
things that threaten us that are going to happen.

                       ETHICS IN BUSINESS CULTURE

    Mr. Wolf. Well, you know a lot of what we do is based on 
cultures. And if the culture is in decline and it is a little, 
small town and nobody is honest or ethical or decent or moral, 
you need a lot of policemen to enforce the traffic laws and 
going through red lights.
    If you have a town where there has been aggressive 
enforcement and the town is made up of honest, ethical, decent, 
moral people, at the outset, some may say you do not need as 
much enforcement.
    I would stipulate most the men and women of business are 
honest, are ethical, are decent and moral, do an outstanding 
job. But the reputations of some of these have gotten so bad 
that they have tarnished and they have hurt the entire 
industry. And they have hurt people, as I mentioned.
    We had a job fair in my district with former Enron 
employees, the stories that they came and told you would break 
your heart. People 55 or 60 who have been wiped out. So you 
need to make it clear that if people violate the law, they are 
going to be prosecuted. And I stipulate that most men and women 
in business want to comply with the law, are honest and are 
ethical, perhaps saw an erosion of this thing going on and were 
not quite sure and the culture has sort of changed.
    Are you going to make it clear that if people violate the 
law, that they will be prosecuted? So with the number of 
addition staff Congress has provided are you going to have 
sufficient resources?

                   SPENDING NEEDS AND STAFFING LEVELS

    My question is: can you honestly spend that much money 
wisely, that fast? And I guess if you can keep in touch with us 
as they go through. I mean, we are going to probably give you 
whatever you honestly tell us you need.
    But I would really feel bad if we gave you this figure and 
we come up to the end of the fiscal year and you have got a pot 
left out there and you are running through the SEC saying, 
get--and this is not meant as a joke--anything you want to buy, 
just buy it. Because in government agencies sometimes--I have 
been there where they say we are left with funding here; if we 
do not spend it all, the Congress is going to take it back.
    And so they just spend. And so I think spending wisely is 
necessary, particularly if we have tough fiscal times, so we 
are not just wastefully spending funds without making that much 
of a difference.
    How many additional staff do you plan on hiring in fiscal 
year 2003, and how will you allocate the staff--more for 
enforcement, financial disclosure activities, market regulation 
activities?
    Mr. Donaldson. The budget requests will allow the 
Commission to carry approximately 4,000 positions in fiscal 
2004.
    Mr. Wolf. And how many do you have now?
    Mr. Donaldson. About 3,200. And to reach this level we have 
to hire 800 additional employees in fiscal 2003. It is going to 
be extraordinarily difficult and very likely not possible to 
hire all of this staff in 2003.
    Part of the problem is that we are still grappling--not so 
much on the attorney side of the equation but on the economist 
and accounting side--we are still struggling withbureaucratic 
restrictions applicable to hiring non-lawyers.
    And, as you know, we are hoping that legislation that is 
currently being introduced will allow us to accelerate our 
hiring of accountants.
    Mr. Wolf. I would think the SEC would be a very desirable 
place to work, though. I mean, somebody who cares about public 
service, can make an impact at this time. I would think it 
would be a very good place to work and there would be a great 
appeal.
    Mr. Donaldson. Well, it is a great place to work, and it 
has a great group of people and it is an agency that I have had 
the pleasure of watching operate for a long, long time. It is, 
amongst all government agencies, one of the finest, and it is a 
good place to work. And the challenges there now are 
considerable.
    I think that our ability to hire good people is enhanced, 
not only by the challenge they face, but general economic 
conditions are such that you have a good crack at some very 
good people.

                     FOREIGN CORPORATION DISCLOSURE

    Mr. Wolf. Last year, the SEC made important improvements to 
require additional disclosure from foreign companies listed on 
U.S. securities markets.
    What additional steps have you taken to continue to ensure 
that American investors are not unwittingly buying securities 
from foreign companies that are helping to subsidize human 
rights atrocities in countries like Sudan or China?
    If you were purchasing and knew that this company was 
involved in helping the government of Khartoum that had 
enslaved--you know, we could adjourn this hearing now, you 
could go home to pack. I could take you in a place where you 
could buy slaves--the year 2003, and we could buy slaves.
    I could take you into village after village, whereby there 
is slavery. We could also hear stories of women who would tell 
you that the marauders came in on horses with AK-47s, they 
killed their husbands, they raped them, and then they took 
their children away. They took the children north to Khartoum. 
They took their children other places.
    So if I knew that I had stocks in a company, and I have 
been to Sudan four times--Osama bin Laden lived in Sudan from 
1991 to 1996--if I knew that I had--unwittingly purchased or my 
company had purchased, or I was in a retirement plan, I would 
be sick.
    I would literally want to just be so sick. So what are you 
doing to make sure that the American investors are not 
unwittingly buying securities from foreign companies that could 
be involved in something like this?
    And there were companies that were listed on the New York 
Stock Exchange that were involved--that were giving the 
resources for the Khartoum government to buy helicopter 
gunships, where they were flying along the pipeline route and 
literally gunning down women and children.
    What can you tell me that you are going to do about this 
disclosure, so that I or anyone else, or a teacher's fund, 
would not be faced with that?
    Mr. Donaldson. Well, I am----
    Mr. Wolf. Because the New York Stock Exchange when you were 
president was very, very reluctant--I had written Mr. Grasso so 
many times that I could almost paper my downstairs bathroom 
with the letters. And you get these irrelevant letters back 
that are totally and completely irrelevant, meaning--it says: 
``I do not want to do anything, and I am not going to do 
anything.''
    So you were there, you now have the ability to change 
things.
    You know this Administration, our Administration. You know, 
I am a Republican, very conservative, support the President 
across the board. We are now part of an Administration that has 
a war on terrorism, and Sudan and Khartoum was part of that. 
What are you going to do as the chairman of the SEC to make 
sure that stockholders know that whatever they buy does not 
have links to terrorism or human right abuses.
    Mr. Donaldson. Well, I hope you did not get any obfuscating 
letters from me back when I was Chairman.
    But let me just say, I am aware of your concern, and I 
think the agency is aware of your concern. I have read through 
prior comments in this area. And I think that the SEC is 
sensitized to this concern.
    Now, the weapons that we have are basically disclosure 
weapons. And we have the ability to insist upon disclosure--
whether it is material, operations in countries such as Sudan--
of any company. And I assure you that we will be looking very 
hard at those sorts of disclosures.
    We also will be, I hope, working insofar as our authority 
is expanded by Sarbanes-Oxley coverage. We will be looking very 
hard at non-U.S. companies which fall under our jurisdiction 
for just the kind of open sunlight, if you will, that you are 
talking about in terms of the materials that must come from 
those companies. And I can say it no more emphatically. This is 
very much on our agenda and will continue to be so long as I am 
Chairman.
    Mr. Wolf. Well, that is great. Because as you know there 
are companies in China--there are a number of Catholic bishops 
that are in jail in China now. One is in jail for giving holy 
communion to a member of this body. There are a couple of 
hundred evangelical house church leaders.
    The new leader of China was the one who plundered Tibet. He 
was an enforcer in Tibet during the dark days in Tibet. In 
Tibet, now you cannot even have a picture of the Dalai Lama.
    So some of the Chinese companies--I had a fellow came by my 
office the other day, Harry Wu, who was arrested and served 19 
years in a slave camp in China--are making products for export 
to the West that some American companies may be involved in.
    Now, business is business, I understand that. But I think 
disclosure and letting people know, so that they can make a 
judgment really is very, very important. And if you were able 
to do that, I think you could probably head off a lot of things 
that may very well take place that we would find out five and 
six and seven years later. So I appreciate your commitment on 
that more than I can even tell you.
    With that, let me just recognize Mr. Serrano.

                        FISCAL RESPONSIBILITIES

    Mr. Serrano. Let me first say, Mr. Donaldson, that since 
September 11th the Justice Department, State Department, 
bureaus within those departments, such as the FBI, have gotten 
basically the dollars they asked for. But even though they have 
got those dollars, I never heard the Chairman tellthem you will 
probably get whatever they asked for.
    So I think you should take that statement very seriously in 
terms of the responsibility that comes with that. Not to make 
him or the Committee look back as we increase this amount of 
dollars, because we recognize the work you do and the 
importance of the work that your agency does.
    You are probably the least known by the general public--
top, whatever five, 10 agencies that run or can help run the 
society. So please understand that when Chairman Wolf carefully 
says you will probably get whatever you want, that is a 
statement he does not throw out lightly. And you should see it 
for that responsibility that it is.
    Let me speak to you on--this Subcommittee worked hard to 
overcome Mitch Daniels objections to fund pay parity and to 
provide the Commission the resources necessary to begin to hire 
over 800 staff members in fiscal year 2003.

                          SEC STAFF DIVERSITY

    Here is my concern, when any organizations sets out to 
expand significantly, there is a natural temptation to round up 
the usual suspects to limit the search to those institutions 
from which you have already filled the ranks. If you do not 
reach out to minority-serving institutions, you will not have 
access to a large pool of talented, well-trained, highly 
motivated candidates. The broader and more diverse the pool of 
candidates, the more likely you are to hire the best and 
brightest America has to offer.
    I have never asked a question with a musical background. 
[Laughter.]
    Mr. Serrano. I must tell you, there is something to be said 
about that. [Laughter.]
    Mr. Serrano. So here goes my question.
    What is the SEC doing to ensure diversity in the pool of 
candidates?
    Mr. Donaldson. I am sorry.
    Mr. Serrano. What is the SEC doing to ensure diversity in 
the pool of candidates?
    Mr. Donaldson. Well, we have that very much in mind. Let me 
find a statistic here that will give you exact data on that.
    Just to give you some specific numbers. The SEC is 
committed to hiring a diverse work force; 34 percent of the 
entry-level attorneys and 17 percent of the experienced 
attorneys hired at the SEC since October of 1999 were racial 
ethnic minorities. We have had a similar success with 
examiners--22 percent, and accountants, 15.4 percent. The 
trends are in the correct direction on that.
    Each year the Commission attends and recruits at the 
minority bar associations annual conferences, minority 
accountant professional organization conferences. The SEC's law 
school on-campus recruiting program consists of at least 50 
recruiting events a year, more than 10 of which are targeted 
diversity events.
    Recruitment efforts include outreach to student minority 
associations at law schools and bar associations, and 
attendance at diversity job fairs for accounting, finance and 
business professionals. This year we have identified additional 
professional organizations for women and racial ethnic minority 
professionals related to our major occupations.
    We are gong to use these networks to advertise the new 
positions. We are going to increase our attendance at job 
fairs. And I think that along with that is an increased 
emphasis on our part as to the challenge that people coming to 
the SEC have today, in terms of what you were talking about 
earlier--the challenge to step in at this time and help restore 
some confidence and faith in our system.
    Mr. Serrano. Well, I thank you for that answer. And I would 
hope that there continues to be an effort on the part of the 
commission to make sure that that diversity keeps growing.
    You know, I am one of those folks who soundly oppose any 
intervention in Iraq. But, the one thing that will be clear if 
we get involved in a war, is the diversity of our troops. And I 
think it is only fair and important that as those folks come 
home, America continues to try to diversify in every area. So 
it is not just in fighting wars, but it is in having jobs for 
the future and, in all honestly, also having every so often the 
keys to the executive washroom, which is not a bad thing to 
have.

            GAO'S RECOMMENDATION ON AUTOMATION REVIEW POLICY

    In February, the GAO issued a report recommending 
additional actions to better prepare financial markets for 
possible terrorist attacks. The report praises the SEC's 
efforts to work with trading markets and other participants. I 
note with pride that GAO also commends various New York City 
agencies, including the Department of Information Technology 
and Telecommunications, for leading restoration-of-services 
efforts.
    I would like to ask you about GAO's recommendation 
regarding the Commission's automation review policy.
    To oversee an expanded automation review policy, as 
recommended, would require dedicating resources to hire 
consultants with expertise in this highly specialized area and 
to conduct more frequent and more thorough examinations
    What are your plans in this particular area?
    Mr. Donaldson. Well, to begin with, we agree with the GAO's 
recognition of the importance of our automation review policy 
program. And, as you know, that oversees the trading and 
information dissemination systems that are supporting our 
markets.
    Right now, we are assessing whether rule making is 
appropriate in this area to promote greater industry 
responsiveness to ARP recommendations. In addition, subject to 
the availability of funding, we may consider expanding the 
level of staffing and resources committed to the ARP program.
    That comes really as a direct result of the Commission's 
experience during the 1987 market break, as well as in November 
of 1989, and we are very, very conscious of the need to move 
ahead here. And as I say, we are examining whether we need 
additional rule-making capabilities in order to accelerate 
attention to this problem.
    Mr. Serrano. And when do you think you will know whether 
you do or not?
    Mr. Donaldson. Well, as a matter of fact, I held a 
conference with some of the people involved with this my first 
week in office, asking what we were doing in this area. I am 
aware of, as a result of having lived in New York and having 
seen the press--well, first of all, having experienced 9/11; 
but secondarily, having seen the press reports on the movement 
of security processing and trading facilities and backup 
facilities and the need for that. I am very conscious of the 
fact that we have got to move ahead on these mandates, if you 
will.
    So I would say that it is a top priority for us.
    Mr. Serrano. Mr. Chairman, I just have one question 
herebefore we move on to Mr. Taylor.
    Did we ever find out, Mr. Donaldson, how much physical 
documents, having to do with stocks and/or gold, or any other 
form of currency or exchange, was lost in the World Trade 
Center?
    I had heard, for instance, that there was about 180-
something million dollars in gold--I do not know what gold 
would be doing somewhere at the World Trade Center--that just 
went, unfortunately, the way the artwork went.
    And, then, I imagine that in vaults in there must have been 
large amounts of stock certificates that were totally, Mr. 
Chairman, just destroyed.
    Do we have any idea how much that was? I guess everything 
is computerized, so people were able to recover everything--
possibly not the gold.
    Mr. Donaldson. I do not personally know any more than you 
do. I hear, anecdotally, there was tremendous damage, 
particularly in terms of the gold, and to some of the banks 
that--were in the towers.
    Mr. Serrano. So there was gold in there?
    Mr. Donaldson. I believe there was, yes. And I am not sure 
that the gold was lost, I just do not have the numbers on that.
    Mr. Serrano. Does it melt?
    Mr. Donaldson. I just do not have that. If we have that, I 
will get it for you. If we have a number on that, we will 
report back to you.
    But I think that, as part of our information technology 
makeover if you will, we are very conscious through our own 
experience--as you know, the SEC's office was badly damaged 
during 9/11. We are very conscious of the impact that that sort 
of a disaster can have on records, and we are moving to a 
record retention policy and information technology that will 
safeguard those kinds of records. So we learned a little bit 
ourselves on 9/11.

                 RESTORATION OF THE FINANCIAL COMMUNITY

    Mr. Serrano. And one last related question. Is the physical 
aspect of the stock exchange fully operational to your 
satisfaction? I mean, I know it is working, but is everything 
physically in place that was lost related to it in other 
buildings, other than the exchange itself?
    And where did most of--and I am not asking you for all the 
offices that were at the World Trade Center, but the offices 
related to the stock market and to the financial community--do 
you know where most of those offices went?
    Because I know they did not run across the river to New 
Jersey, to my knowledge.
    Mr. Donaldson. Yes. I was not Chairman of the stock 
exchange at the time, so I was not directly involved. But the 
problem on 9/11 was that the damage that was done happened to 
hit a major switching station for Verizon. In other words, it 
was just bad luck that the communications for that whole area 
of Manhattan were almost directly hit by the disaster.
    An amazing job was done in getting the system back up, 
truly amazing. A lot of it was underwater. Communications 
between the Stock Exchange and those systems was repaired with 
amazing rapidity.
    The problem was that the damage from 9/11 hit several of 
the major brokerage firms, who were in the area also, and they 
had to transfer their communications to remote location in New 
Jersey and elsewhere, and it took them time to get settled in 
the new locations before the Stock Exchange could truly open.
    In other words, the Stock Exchange was ready to do business 
on the Friday of the weekend after 9/11, but you cannot do 
business unless you are in communication with the firms that 
are bringing the business to the floor.
    Mr. Serrano. Sir, I was, on 9/11, Mr. Chairman, I was in 
New York that day. I was not here in the House. The only thing 
that worked was the blackberry. And the reason I was in New 
York, it was election day, primary day, and I often wonder, 
just as an aside, and no one has written that the fact that the 
attack took place on an election day, and elections were 
canceled halfway through, you know, 11:00 a.m. And if you want 
to hit a democracy, Mr. Chairman, I guess the best thing you 
could do is interrupt election day, because that is a statement 
no one--maybe it was a coincidence, or maybe they knew that 
that was a good symbol.
    Thank you, sir.
    Mr. Wolf. Mr. Taylor.
    Mr. Taylor. Thank you, Mr. Chairman.
    Mr. Wolf. I want to say welcome to the Committee, welcome, 
and to Mr. Taylor.
    Mr. Taylor. Thank you, I have only been a member of this 
for 10 years, but thank you, I appreciate that. Mr. Serrano, I 
certainly shared your support for Governor Rockefeller, and 
that is why I headed his campaign in North Carolina, because of 
his support for diversity.
    Now, he wanted an Hispanic registered Republican--and he 
wanted everybody to go to heaven, but alas, what can I say? 
[Laughter.]
    Mr. Serrano. And he owns a house in Puerto Rico, I want you 
to know. Plus, he owns a house in every state, I think, but----
[Laughter.]

            ANTICIPATING PROBLEMS IN THE FINANCIAL COMMUNITY

    Mr. Taylor. Mr. Chairman, you know, my philosophy remains 
that the Government will mess up a one-car funeral. I know we 
have problems, but the last thing I want to do is to turn the 
government loose in an effort to solve the problems in 
business.
    We know that, I think, there were two reasons the 
``anything goes'' administration that we had existed. You know, 
of course, while we were arguing over what those were, a lot of 
business people took that to mean that they could do most 
anything.
    I share your indignation about the industry's leaders, who 
forgot their corporate responsibility and their ethics in 
trying to push ahead for money. I also believe the second 
reason was that we did need more funding in areas to be able to 
detect wrongdoing and to move quickly.
    Fifty percent of our public has stocks now. The average 
individual is very concerned about problems that might be most 
obviously considered. I mean, I am not talking about integrate 
details; just a pump-and-dump, for instance, is not something 
that you would have to look very far about.
    Will the money you are getting help you move faster to 
notify, or at least question, the market regarding those 
obvious problems?
    Mr. Donaldson. Well, I think the money will help us in a 
number of ways. First of all, the actual expertise that comes, 
the additional troops, if you will, that we can pour into this 
battle--if I may use that analogy--will help us with the 
backlog that we have of unexamined entities.
    There are about 11,000 public companies in the United 
States and many of them are very large companies. They report 
through the various reporting mandates--you know, thick piles 
of paper and so forth--and we just need this manpower to get at 
that.
    We also need the technology that our information technology 
program is going to bring us so that we can work more 
efficiently. With the correct technology, we can reduce that 
tremendous paperwork, paper load, to images and storage 
capabilities in ability to scan.
    And I think it will allow us to increase the efficiency of 
our legal and accounting staff.
    Mr. Taylor. Would that help you--and not only historically 
speaking--put together a case, a case that could take a couple 
of years, but would perhaps give some warning in the market 
before the horse is out of the barn?
    That is the only thing that will possibly save the half of 
the American public that own stock: To try to catch a void, to 
do what we can before a crisis actually occurs. I know our 
record of prosecution is good, but will that technology program 
and staffing increases enable you to move faster and perhaps 
anticipate major problems?
    Mr. Donaldson. Well, I think it will. And I think it will 
help in a way I alluded to before, the organizing of our human 
resources so that we are not only processing and analyzing 
hopefully in a more efficient way existing infractions but that 
we are also able to organize ourselves in such a way that we 
can anticipate what might happen in the future.
    There are a number of areas that one needs, I believe, to 
do more work, and not just ourselves, but the whole government, 
in terms of where the risks are now in the financial system we 
have, and to see if we cannot anticipate some of the problems 
that may be coming down the pike.
    Mr. Taylor. Well, I share your feelings in that area. I 
have followed your career with great interest and appreciate 
having a man such as you head the SEC now. As the chairman has 
said, I too stand ready to work with you.
    Chairman, I will yield back.
    Mr. Wolf. Mr. Kirk.
    Mr. Kirk. Thank you. I asked about the Administration's 
view on the public and political--and what it would do for SEC 
jurisdiction. I understand the department is reaffirming the 
Administration's position----
    Mr. Donaldson. Well, as you know, the SEC has been on the 
record for a long time and wanting to get out from being 
responsible for the public operations. And----
    Mr. Kirk. Here is my question: Does that preempt what we--
--
    Mr. Donaldson. I think it will. I think it will give us 
more flexibility to use those resources in other areas.

                   CODE OF ETHICS FOR VENTURE CAPITAL

    Mr. Kirk. That is good news. On venture capital with regard 
to code of ethics: We do not have any national code or--several 
people have been talking about regional codes. Do you have a 
view of the policy?
    Mr. Donaldson. A code of ethics?
    Mr. Kirk. Right.
    Mr. Donaldson. For venture capital?
    Mr. Kirk. That is right. I would just say in the different 
cultures in the midwest it can be very strong in favor of that. 
But we are getting some resistance elsewhere.
    Mr. Donaldson. Well, I think we--insofar as we have been 
through the dot com era and seen the results of over-
investment, too much venture money going into something that is 
nothing more than an idea and with very little substance to it.
    I think there is a heightened awareness of the need for 
responsibility on the part of venture capitalists in terms of 
how they employ other people's money. My instinct is that there 
are a number of venture-capital associations and so forth who 
have addressed that issue. I do not believe we as an agency 
have.
    Mr. Kirk. I do not want--I am very concerned there would be 
somehow outlawed risk by over-aggressing the force with across 
the board. That is in this country. On the other hand, some 
encouragement by the Commission might help. I guess obviously 
we have gone through above all in this area as well.
    Mr. Donaldson. Well, clearly the burdens of regulation fall 
heavily on newer companies who do not have the staff and 
capabilities to handle regulation or oversight. So it is a 
problem.
    I think that falls more heavily on smaller companies. And I 
think it is an overall problem in terms of just attempting to 
regulate in a way that is effective and cost-effective and does 
not deter entrepreneurship.
    Mr. Kirk. Well, and also how do you bring up the children 
so that they are behaving well by the time they go into your 
full scrutiny?
    What is the time line for you on options and broker money?

                      ACCOUNTING FOR STOCK OPTIONS

    Mr. Donaldson. On options, the Financial Accounting 
Standards Board announced just yesterday, I guess, that it was 
on their agenda to come up with a firm recommendation on the 
expensing of options. I think there is general agreement.
    I think there is general agreement that there is a cost to 
options, and that it has not yet been reflected properly. And 
the second part of that is how do you reflect it?
    Mr. Kirk. In your old job, who led the way?
    Mr. Donaldson. Frankly, I look forward to the accounting 
expertise being brought to bear on this problem. I have yet to 
see the formula that I think is the right formula. And I hope 
people with more expertise than I have, who are spending a lot 
of time on it, are going to come up with something that can be 
universally accepted and applied.
    But as far as I am concerned, the need to reflect the cost 
of options and current operations is very important to me.
    Mr. Kirk. Annual meetings next year--you think you would 
want to----
    Mr. Donaldson. Well, just as soon as the FASB gets done 
with its work, and there is work going on elsewhere in the 
world, and just as soon as we get a formula that they propose.
    You know, we were moved to implement it, we just do not 
have that formula.

                  SEC'S INFORMATION TECHNOLOGY PROGRAM

    Mr. Kirk. Your testimony focused on the information 
systems. Can you give us, the Committee, your vision of what it 
looks like?
    Mr. Donaldson. Sure. I have somewhere in my papers here a 
description of the overall information-technology program that 
we have under way or are soon to have under way.
    First is a document-imaging program. In 2003, the SEC will 
pilot a system that provides for the electronic capture,search 
and retrieval in the area of filing and disclosure of processing.
    In 2003, we will conduct an extensive review of our filing 
disclosure processing, with particular emphasis on the filing 
of financial data. We plan to examine ways to restructure the 
filing, to eliminate redundant data.
    In 2004, we will make business process changes, eliminating 
selected forms and consolidate and streamline data required for 
files. That is an elongated way of saying that we are going to 
look at the whole filing and disclosure process and attempt to, 
in layman's terms, redefine it.
    And lastly, in the area of disaster recovery, we need the 
capacity to store and move large amounts of data from one 
regional district office to another without first bringing it 
all back to Washington.
    Now, when this project is complete, the agency's critical 
files and information system will be backed up on a daily 
basis.
    Mr. Kirk. Mr. Chairman, I hope--I know the IRS is moving 
towards the ability of a taxpayer to interact with the digital 
and the web. And I would hope in time that is where we are 
going.
    Mr. Donaldson. It is a good direction.
    Mr. Kirk. Because I think, at this point, this is the first 
year a taxpayer really can fully interact with the Service in 
that way.
    Thank you very much, Mr. Chairman.

                   INDEPENDENT ANALYSIS OF IT SYSTEMS

    Mr. Wolf. Thank you, Mr. Kirk.
    Following up on the question that Mr. Kirk asked, when the 
FBI was establishing its new technology program, what is called 
the Trilogy program, they found out what they had put together 
really was not working well. They had had a lot of good people 
down at the FBI who were good FBI agents, but they did not have 
a lot of technology people.
    And then Mr. Kirk mentioned the IRS, they had that system 
before this tax-information system, where they spent, I think, 
a billion or two billion--I forget the exact amount. And it was 
a failure.
    Have you brought in--not a consultant--what we asked the 
FBI to do was to go out and hire an expert for assistance, you 
have not been in government long, but do you know what DARPA 
is? DARPA is a defense-science-advisory board that looks at 
technologies and is independent. It has a vested business 
interests.
    It is not the contractor being paid to install the program. 
I am sure you have good contractors that are doing that. I am 
sure we have good people that are doing that.
    But they--the FBI has now gone outside and they have put 
together a team of people who have no vested interest of 
selling something or gaining something. But they are the best 
in the business with regard to what the FBI is trying to do.
    Are you confident--have you done that? Have you vetted your 
technology projects with an outside group of contractors who 
are not trying to sell you something, assuming, and I am sure 
you do, have good contractors assisting your IT program?
    But even more importantly, that the tchnology does 
precisely what you want it to do? So has it been looked at by a 
group, like MITRE and DARPA and other groups like that, or has 
it just been looked at by your internal people?
    Mr. Donaldson. Well, you are asking exactly the question 
that I have been asking. I have only been there for three 
weeks, not quite a month. Clearly the budget money that has 
been set aside is a considerable amount of money relative to 
the job at hand.
    We have, I know, contractors that would give us independent 
analysis.
    Having said that, I am well aware, based on my own past 
experience, that one can go down a lot of false routes when 
putting as much new effort into technology as we are, and the 
technology is changing so rapidly.
    So, although we do have contractors in there right now we 
do have a budget that was based on independent advice. This 
whole area of information technology is so important to what we 
are doing that I will attempt to spend a considerable amount of 
effort reviewing what has been done and making sure, insofar as 
I can, that, just as you suggest, is that we are getting the 
best independent advice we can get.
    Mr. Wolf. You might talk to Director Mueller, who I think 
has done a credible job. And let me just say, I second your 
comment about the New York Stock Exchange getting up and 
running so quickly after that terrible event on 9/11, and they 
should be congratulated.
    You may want to ask Director Mueller. He has put together, 
in essence, almost a Team B; but these are people who have no 
vested interest.
    And you might want to call on Director Mueller and see 
who--how he has done it and who he brought in--and--just to 
make sure what you are doing is appropriate. So you, one, do 
not have the cost overruns; but, more importantly, have a 
system that does what you want it to do.

                       SELECTING A PCAOB CHAIRMAN

    The Accounting Oversight Board, the SEC recently adopted a 
process for selecting a chairman for the Public Company 
Accounting Oversight Board. What will this process entail to 
ensure that a qualified candidate is selected by the 
Commission?
    As you know, that was an issue of controversy in the past--
good people, men of integrity.
    What process do you have?
    Mr. Donaldson. Well, clearly, I think, you are all aware of 
the process, which the GAO examined after the fact and judged a 
flawed process.
    Mr. Wolf. And, excuse me, this is your appointment, 
correct? You sold it----
    Mr. Donaldson. Yes, it is the Commission's, my fellow 
Commissioners and my appointment. And it is a very, very 
important appointment, and because of the delay that has taken 
place all over, the Board is up and going and has a very 
competent Acting Chairman. We must move swiftly to put a 
permanent Chairman in place.
    We announced a process two weeks ago, agreed to by all the 
Commissioners in general terms. We have taken some time 
deadlines. We are out right now, ending tomorrow, the two-week 
period, asking for nominations from anybody and everybody that 
wants to nominate somebody. Plus, we had a proactive program of 
talking to business and financial and academic leaders, trying 
to seek their recommendations.
    We will close that process down tomorrow. We will addthose 
names to a list that existed from a prior search process, so we have a 
big list of very good names, and some not so good, but basically a 
wonderful list to shop from. And then we will proceed very rapidly to 
winnow that list down to what I hope will be a very limited number of 
potential candidates.
    When we get it down to a limited number of potential 
candidates, we will begin the vetting process. There is a 
presumption here that you simply have to identify the best 
person in the world and go out and you can hire them like that.
    This is not usually the way it works. Usually the way it 
works, the person that we want to get is probably very happy 
where he or she is, and we are going to have to convince them 
that this is a time to come perform a public service.
    And that is a process that, for anybody that has been in 
the search business and I suspect we all have one way or 
another, it is hard to put a time frame on that.
    Mr. Wolf. Do you recall when you would like to have a 
person on the job?
    Mr. Donaldson. Yesterday, frankly. It is a top priority. We 
have a process. We have a process that all the commissioners 
have bought into.
    We have organized the Commission as a search committee, if 
you will. I am chairing that search committee, and we have 
staffed it, and I would hope that--I would hate to put an 
actual time frame on it, but we are going to do it just as 
quick as we can.

                      OVERSIGHT OF PCAOB SPENDING

    Mr. Wolf. How will the SEC ensure the new board has 
sufficient resources to perform its mission, and the board's 
fee and spending authorities are exercised in a manner that is 
reasonable and transparent?
    Mr. Donaldson. Well, we have the oversight responsibility 
for the Board. We have lent them start-up money, the first 
tranche of which we gave them several months ago. They have a 
request in right now for a second tranche of money from us; I 
think $17 million, roughly. And we are in the process of 
vetting that; that $17 million is particularly important 
because it will enable them to begin to develop the systems 
that they need not only to register the accounting firms and 
corporations, but also to start raising their own money.
    In other words, they are to be supported ultimately by fees 
against companies and accounting firms, and they need a system 
to bill for those fees.
    We hope that by the end of this fiscal year the Board will 
be up and going and collecting its fees and pay us back the 
money that we lent them, and they will be off to the races.

                     PCAOB BOARD MEMBERS' SALARIES

    Mr. Wolf. This is perhaps a controversial issue, and I will 
just throw it, out there to get your comments on it. If you 
feel--or if you really do not want to comment on it, you don't 
have to. But I think it would be good for you to know that 
there is a concern, and you might want to comment.
    A letter was sent by the Committee to the Chairman Pitt, 
concerning the proposed $452,000 annual salary for accounting 
board members and the proposed $560,000 annual salary for the 
board's chair.
    I have placed a telephone call during the time that we were 
marking up the FY03 bill to express a bit of concern. There 
were some Members that asked this Committee, ``Interfere and 
cap the salary, or do something.'' And I thought the 
appropriate thing was not to do that. I think the Sarbanes-
Oxley bill sets it up.
    My own sense is, you are taking a pay cut, or you could be 
out serving on the board, golfing down in Naples and taking 
your boat out, and, I mean, you really could.
    Service, it is called public service. I do not think you 
ought to put a salary on it that makes it difficult for a 
person to live. At that time, the analogy in an article in one 
of the papers compared what the president of the United States 
made and what the chairman of the board made. Most of the 
people that are going to be on the board are fairly wealthy 
people.
    I think this is an opportunity to serve--as Mr. Serrano 
made the comment about the young men and women that are in the 
Gulf today serving--many at a very difficult price, because 
they are in the private sector, and their salary will not 
meet----
    There is a story on the news today, and I saw it on NBC the 
other night of a major in the Marine Corps whose son needed a 
heart transplant. And he left, and he is leading his men over 
in the Gulf and thank the good Lord that last night they found 
a heart for the transplantation and we thank--we just pray that 
it works out.
    Somehow, I think the salary is going to be a little bit too 
high. Now, we are not going to get involved. I mean, they are 
going to have to live with this. How much money can you spend, 
at a certain point in life?
    But--and you do not even have to comment, I think the 
level, speaking for myself now, of $520,000--$560,000 for the 
board's chair is too high----
    Mr. Donaldson. Well, let me----
    Mr. Wolf [continuing]. and I understand, I have gone back, 
and I have read the law, and that may very well be in 
compliance with the law. But what triggered this--and I was not 
sure if you were going to ask the question--but you said they 
got the first tranche, and now we are ready to give them $17 
million of the next--I said, ``It is. This is taxpayer 
dollars.''
    And I think perception ought to match authenticity, means 
the perception and the reality go together, and I think at some 
time, I think people will think that this is too high.
    But if you want to comment.
    Mr. Donaldson. Let me just comment, because I think it has 
been a subject of controversy.
    The intent as I understand it, of the Sarbanes-Oxley 
legislation was to create, in effect, a non-government agency a 
private corporation under a government mandate--and to give it 
the flexibility to pay salaries comparable to those paid people 
who are doing comparable work in the private sector.
    And it is my understanding that the salary levels that were 
arrived at were arrived at based on the salaries being paid in 
the private sector for a similar type of work--FASB and other 
nongovernment but nonprofit organizations.
    I think one point I would make is that it really is notthe 
taxpayers' money. The money will come from fees from corporations and 
accounting firms that will support--it.
    Having said that, I think my own personal view is that it 
gives the entity the freedom to attract people who do have to 
earn money, professionals who do have to earn money.
    And also, they have the flexibility, I believe, to arrive 
at a salary structure that they want to have. And again, it is 
going to be up to that board and the chairman of that board to 
determine on an ongoing basis what the right salary structure 
is.
    I think it is a legitimate subject for determination of 
that board as to whether the comparability that they have 
gotten is the right one.
    Mr. Wolf. Well, that is true. I have listened to stories 
like that, where members of Congress tell me that if they were 
downtown they could make whatever. Well, let them go downtown 
and make it. Public service--again, this is public service. 
Corporations are set up by a group of people who get together; 
they have got a great idea. They get some stockholders, and you 
know better than I do.
    This was set up by an act of Congress, as a result of a 
crisis of confidence in the system. And so when we are setting 
up something to deal with a crisis of confidence--and I commend 
the president for your appointment. You probably could not have 
a better circumstance. What is your salary, for the record.
    Mr. Donaldson. I think it is about $144,000----
    Mr. Wolf. Now, do you think you could have gotten a better 
job somewhere else [Laughter.]
    Mr. Donaldson. I could have tried.
    Mr. Wolf. But you were called.
    Mr. Donaldson. Your point is----
    Mr. Donaldson. --Well taken.
    Mr. Wolf. And I think the salary--let the record show, I 
speak only for myself--just is too high. And looking at the 
background of some of the people that are on there, and yet I 
am a free enterprise person. I mean, I think, but this is a 
little bit different than a corporation set up, where this goes 
before the stockholders and they vote, and there is a board of 
directors.
    This board started on shaky ground. I think they can end up 
maybe hurting themselves and hurting the very cause by setting 
salaries so high.
    It says, he who humbles himself will be exalted--he who 
exalts himself will be humbled. A little humility in setting 
the salaries may help exalt this group to do a good job, which 
is in the best interest of the entire country.

                        AGENCY'S ATTRITION RATE

    On the pay parity, what is the SEC's attrition rate now? 
Where is the economy attrition level?
    Because that was a crisis last year before we funded pay 
parity.
    Is it where it was or is it better or worse?
    Mr. Donaldson. It has been in a relatively short period of 
time, but already we are beginning to see the effects of pay 
parity on our retention.
    Mr. Wolf. Do you think that is because of pay parity, or do 
you think it is because of pay parity and the economy?
    How do you think it would be if this economy were booming 
like it was in 1999; would you definitely need pay parity? I 
have been a strong supporter of good salaries for Federal 
employees.
    But I wonder, if the attrition rate is down, do you think 
it is from pay parity or more from the economy or a little bit 
of both?
    Mr. Donaldson. I do not know for a fact, but I suspect it 
is a little bit of both. But I think that the psychological 
effects of pay parity are considerable. I think the morale 
effect of pay parity is considerable. And, as I say, I think 
you are seeing it.
    Yes, since the SEC implemented pay parity program in late 
August, our retention rates, or rather our loss rates, if you 
will, are: in attorneys, we were losing 4.7 percent, and now we 
are down to 3.54 Accountants; 3.5 prior, 2 after; 4.28 prior, 
2.87 after. So there is a substantial reduction in people 
leaving the agency.
    Mr. Wolf. I have some other questions, but let me just 
recognize Mr. Serrano and Mr. Taylor.

                  GLOBALIZATION OF SECURITIES MARKETS

    Mr. Serrano. Thank you so much, Mr. Chairman.
    You know, I was thinking while you were discussing the 
salary issue, and you and I are equal in that sense that we 
want people to make whatever they can make. But I represent 
Yankee Stadium and some of those guys sitting on the bench 
there are making about $2 million a year. And I had a better 
year than they had last year. And it did not help me in any 
way, shape, or form.
    Let me ask you a question. There is a lot of talk about the 
fact that the securities industry is quickly becoming a global 
market. If you look at the growth in the number of U.S. 
investors holding foreign stock and the number of foreign 
issuers registering in our markets, would you please describe 
the new trends and cross-border trading and any new challenges 
these raise for the commission.
    I guess some people would be concerned about who is now 
investing in our markets, and what markets we may be not 
knowingly investing in.
    So how do we keep an eye on, for instance, where does Osama 
have his money invested?
    Mr. Donaldson. Well, you bring up a subject that is at the 
forefront of, in my view, some of the challenges that we face 
and that is the globalization of our securities markets. I may 
be a little wrong on these figures, but two-thirds of the 
world's GNP is coming from outside the United States now. And 
only a third coming from inside the United States. And, yet, 
U.S. portfolios are heavily weighted to investing in U.S. 
stocks.
    And that trend has been going up. In fact, 10 years ago 
probably, 3 percent of a portfolio, a typical portfolio, was in 
foreign stocks, and that is up probably now to 15 percent. And 
if it matched where earnings were coming from, you could 
conceive of U.S. investors placing two-thirds oftheir equity 
ownership being outside the United States.
    So there is a demand for foreign securities and, clearly, 
we have to give U.S. investors the same kind of protections 
that they have on U.S. securities making sure that they are 
following our rules and regulations
    So that is a challenge number 1.
    No. 2 is that, as evidenced by certain parts of the 
Sarbanes-Oxley Act, as we move to increase the regulation of 
and the corporate governance aspects of our companies, and as 
we try to extend that to foreign companies listed here, we run 
head-on into laws in other countries causing great pain to 
foreign companies in trying to conform with our laws.
    The most obvious example is the requirement now that no 
member of management can be on the audit committee where in 
Germany, by law, management or labor must be represented on the 
audit committee. So there is a real trap, a real conflict.
    And I think trying to straighten this out with foreign 
issuers and trying to reach a compromise that protects our 
investors is a real challenge for us.
    And then, lastly, the markets themselves. Insofar as we 
have other stock markets, stock exchanges, and so forth, in 
other parts of the world we have the problem of trying to 
coordinate global trading, if you will--trying to make sure, 
that, let's say, the purchase of U.S. securities in foreign 
markets has the same protections that they are accorded here in 
the United States.
    And I consider this to be one of the great challenges we 
face now under the general rubric of market structure. How do 
we get onto a global basis and try to get some comparability in 
markets throughout the world?
    Mr. Serrano. Okay, but no sense on where Osama has his 
money invested, right? I understand the gentleman is very 
wealthy, right?
    Mr. Donaldson. I am sorry, I did not get that.
    Mr. Serrano. I said where Osama bin Laden may have his 
money invested.
    Mr. Donaldson. Oh, yes. . . .
    Mr. Serrano. Because we do understand that he is a very 
wealth fellow, right?
    Mr. Donaldson. We cannot find him, and I guess we cannot 
find his money, although, from what I read, we are finding some 
of the people who may have been involved in transporting his 
money around.

                      LISTING OF FOREIGN COMPANIES

    Mr. Serrano. Foreign auditors are required to register with 
the new Public Company Accounting Oversight Board and agree to 
their oversight in order to certify that both the companies are 
trading on the U.S. stock markets.
    In the nineties, when you were at the New York Stock 
Exchange, you proposed to list foreign companies on the 
exchange, even if they followed different accounting standards 
than U.S. companies. Have you changed your view? If not, will 
you try to overturn the Public Company Accounting Oversight 
Board's decision?
    Mr. Donaldson. Well, frankly, there has been . . . you 
know, during the period of my nomination and confirmation, 
there were some reports in the press, which I think were 
misleading as to my position while at the stock exchange on the 
issue of listing of foreign companies. And this is a little bit 
of a repeat of what I have just said a moment ago. But because 
I felt, and we, the New York Stock Exchange, felt that there 
was going to be an increased demand for foreign investing, we 
said we must do something about this because now--and this was 
10 years ago--those in the U.S. who want to invest in foreign 
companies must go through three or four intermediaries to get 
to a foreign market and pay commissions and levels of charges 
and so forth and then buy a security in a foreign market where 
they had none of the protections we have here.
    So we said, somehow, we have got to get foreign companies 
to be able to list on our exchange so that we could give U.S. 
investors the protections--in that case, the protections of the 
New York Stock exchange.
    So our thrust was to try and push for some common 
accounting practices. In other words, we said, can we somehow 
come up with accounting that has investor protections in it but 
may not be pure U.S. accounting, maybe some amalgamation of our 
accounting and other countries' accounting?
    As things have turned out . . . . Years ago, I spent a lot 
of time trying to convince and talk to investors who said they 
thought their accounting was better than ours, and I said I did 
not think it was. As things have turned out, we discovered that 
there are imperfections in our accounting as well as 
imperfections in international accounting.
    So we are all moving now, I think, at a much more rapid 
rate toward an international accounting standard, and we cannot 
get there too fast, as far as I am concerned. But I think the 
issue here is investor protection and assuring that no matter 
where the company is domiciled that the U.S. investor is going 
to buy it, we want that U.S. investor to have the protections 
that the SEC and IRS have always given
    Mr. Serrano. So, some people still think that their 
accounting system is better than ours.
    Mr. Donaldson. Yes, I think they do, and I think the real 
answer here is some combination would be best. I mean, I think 
that, again, there are a number of different philosophical 
approaches to accounting, and some of those approaches are 
based on cultural differences
    In other words, in a country like Germany, let's say, where 
so many of the corporate entities are owned by the banks, the 
banks are true, long-term investors, they own companies 
forever.
    That is changing a little bit now, but the concern there is 
an accounting system that protects the lenders to the company, 
and is less concerned with equity owners, as opposed to in this 
country where we have this broad base of equity owners, and the 
concern is with accounting that reflects earnings per share as 
correctly as it can be.
    So there is a cultural difference, but that is beginning to 
break down now.
    Mr. Serrano. Mr. Chairman, as we strive to reach truth in 
teaching, I can see teachers in the future at the grade school 
level saying, ``Two and two is four, until you get into the 
financial markets, and then it may not always be four.''
    I have no further questions, Mr. Chairman, I just want to 
thank Mr. Donaldson for coming before us today. We stand ready 
to join the Chairman to support you in any way that we can, and 
just take care of the Woolworth Building.
    You know, when I was 18 years old, I worked for 
Manufacturer's Hanover Trust, actually when I was 17, and in 
those days if you wanted a promotion, Mr. Taylor, you had to go 
to the American Institute of Banking.
    Otherwise you would have stayed with a $55-a-week salary 
forever. So I made the big dip and three times a week I would 
take the Number 6 subway to, same one Jennifer Lopez took on 
her CD----
    [Laughter.]
    Not with the same success, but I traveled on the 6 before 
she was born. But, to AIB, and the Woolworth Building is a 
wonderful building which has a very historic significance, and 
please make good use of it. Thank you.
    Mr. Wolf. Thank you, Mr. Serrano.
    Mr. Taylor.

                   ASSISTANCE TO DEVELOPING COUNTRIES

    Mr. Taylor. Thank you, Mr. Chairman. Not all of our 
committees have such a learned individual in foreign affairs as 
yourself, and I agreed with what you were saying earlier.
    When we look at what is happening around the globe--and 
some of our American companies are participating in that--we 
should be more concerned. We also, in Eastern Europe, we have 
changed a good deal, and we have capitalistic aspirations 
there.
    We had GAO, for instance, send advisers to Russia for the 
premiers, in an effort to start a type of accounting process. 
The former Premier of Russia is now the chairman of a committee 
that tries to bring truthful accounting into Russia's 
government and businesses.
    We also have a program called Open World, operated through 
the Library of Congress, through which we try to invite 
businessmen for an exchange. The latest effort was an exchange 
program for judges, to try to work with their courtsystem, 
which is very necessary.
    Russia's industry includes 16 percent small business, and 
that is very important, I think, for developing a middle class 
in a democracy. What can we do, what can your agency do, to 
encourage them? I realize prolific crime still exists in the 
Russian business world and we are not talking about running 
their markets, we are talking about what your agency might do 
to advise or work with them. It is very much in the free 
world's interest to have a capitalistic country that is 
democratic, if not an exact model of the United States, to have 
a democracy that will be global in being able to deal with 
capitalism.
    Is there anything that you have in mind, as far as it would 
be possible, in offering some advice in working with companies 
in Russia, and perhaps in some of the Eastern European 
countries? I do not think China's government is ready to accept 
that type of advice, but a lot of Eastern Europe and Russia, I 
think, would be.
    Mr. Donaldson. Well, prior to my coming into this job I was 
an adviser to a thing called the Foreign Financial Service 
Corporation, which was established by Paul Volcker and John 
Whitehead and a number of distinguished Americans, with a view 
toward exactly what you are talking about, to providing 
American expertise to some of the developing countries, and in 
this case, particularly in Russia and Eastern European 
companies. And, actually, a number of SEC volunteers have taken 
part in missions to Russia to help them back when the whole 
thing was when the wall came down and everybody was getting 
into it to help them.
    And I think we have done the same thing in other Eastern 
European countries. We have, as you know better than I, one of 
the greatest assets in the world this country has is our 
markets, the way they function, our ability to export that is a 
very important thing.
    We also have programs that invite foreign regulators to 
come to the SEC and observe what we are doing, and that 
includes Russia and eastern Europe. So we are very sympathetic 
to the thrust of what you are saying, and I hope that we can 
encourage more of our staff to take some time, be a volunteer 
and help.
    Mr. Taylor. I know some of their oil companies are listing 
on the American Exchange. LUKOIL, I think, bought Getty's 
assets, and I imagine they are the largest oil company.
    Are we working with those that want to come on the market 
in any different ways; or, are they just sort of hiring counsel 
and going to it?
    Mr. Donaldson. Well, I think that--these markets are 
maturing. I think the Russian markets, although I am not as 
close to it as I was, are a lot better today than they were 
five years ago or 10 years ago--but it takes a while. You know, 
I think back on what our markets were like in this country back 
around 1900 or so, and we went through a period that resulted 
in the formation of the SEC and the '33 and '34 Acts, and in 
many ways these countries, like Russia and some of the Eastern 
European countries, have to go through that process themselves, 
and they are. And Russia has been through at least one stage of 
that now and seems to be coming out the other end, the better 
for it.
    Mr. Taylor. I agree. They missed the 20th century in large 
part, not only because of our wanting to see them first develop 
into a capitalistic market, but also because the commodity of 
oil is very important to the whole world. Having a modern 
source and a trading apparatus for the companies to do that is 
crucial. I think it is very important to use to encourage 
Russia, especially with what may now be the limited source we 
have in the Middle East. I think our dependence on the Middle 
East is a problem.
    Thank you very much.

                 DEVELOPING FOREIGN SECURITIES MARKETS

    Mr. Donaldson. Sitting behind me, Alan Beller, who is head 
of our Corporate Finance Division, just slipped me a note and 
said we invite potential issuers, such as those mentioned, to 
meet with Corporate Finance at their request.
    Mr. Taylor. Well, we appreciate that. There is a dearth of 
capital in Russia, and if you are going to encourage a 
capitalistic system that will have to be improved. Granted, it 
is not our primary responsibility, it is the Russians' 
responsibility. However, we could advise them and try to weigh 
that relationship as much as possible, because we would like to 
see them move forward as quickly as possible.
    You are not going to have a capitalistic system of any size 
until you get it the capital, and less than 1 percent of the 
world's investible funds, for obvious reasons, are invested in 
Russia. If we can improve that, I think it will obviously be a 
boon for the United States and for the rest of the world.
    Thank you, Mr. Chairman. I appreciate it.
    Mr. Wolf. Thank you.
    I agree with Mr. Taylor. You may want to have a formal 
program, I mean, in all of the Balkans and the Eastern European 
countries, because I know of no two democracies today that are 
at war with each other. And when a country becomes a democracy 
and has a capitalistic system, they generally settle their 
differences in different ways. And I know Romania just got into 
NATO, and when you look at that country, it looks great. They 
are supporting us in overflights, but there is a high level of 
corruption in Romania and is difficult for a business to 
operate there--bribes and different things like that.
    Now, I think Mr. Taylor has a good idea. You may want to 
have, particularly for the newly-formed countries, including 
the Soviet Union or Former Soviet--Russia, but the countries 
that have gotten into NATO to have some systematic program, 
whereby they are invited over on a yearly basis to spend a 
couple weeks at the SEC--only by seeing, particularly if you 
have a man who has lived in a different system for years and 
years, maybe age 50, and all of a sudden he is thrown into 
capitalism--it is hard to think differently.
    And then you bring them over here; he sees what you are 
doing; he sees how we are doing it. And that can be as 
important as sending a division over there, if you will. If you 
can submit for the record, too, the retention figures that you 
recited, we would appreciate it.
     I have some other formal questions, but you struck my 
thought when you mentioned China. One, do other countries have 
an SEC, like the developing countries? Do the Eastern European 
countries have an SEC? Does China have an SEC?
    Mr. Donaldson. Yes, is the answer. China does. I met with 
them even before I was in this job. Back when I was Chairman of 
the New York Stock Exchange, I traveled to China and met with 
their securities regulators. I also did so in the private 
sector shortly thereafter. They are trying very hard to emulate 
what we have .
    Mr. Wolf. What about other developing countries? Where does 
it kind of cut off?
    Mr. Donaldson. Well, clearly securities regulation is 
probably the most sophisticated elsewhere, I would say, in 
London.
    Mr. Wolf. Well, I know this. But I mean, I would assume 
that--but like in Slovenia, Romania, Bosnia-Herzegovina. Do 
they have SECs?
    Mr. Donaldson. They have one form or another of securities 
regulations; some coming out of the finance division of the--
you know, not independent, but out of the finance----
    Mr. Wolf. Department of Treasury, finance ministry?
    Mr. Donaldson. Yes. Most of the countries that have 
exchanges have some sort of an overseer of the exchanges. As a 
matter of fact, in China, Premier Zhu Rongji made a big effort 
to elevate the comparable entity in China to SEC-like status, 
because when you have such unique problems as they privatize 
their companies, you know, and take them from being government-
owned to an independent stage now that are publicly owned.
    That is a real problem still. And they need an overseer.

            DISCLOSING BUSINESS LINKS TO REPRESSIVE REGIMES

    Mr. Wolf. Last year, the SEC made improvements to require 
additional disclosure from foreign companies listing on U.S. 
security markets. In November, Talisman Energy, a Canadian 
corporation listed on U.S. security market, sold its interest 
in Sudan. Are there any other steps that you could take?
    There was a news report, which I have, and I am going to 
read only part of it and not mention the companies. But New 
York City Comptroller William Thompson, on behalf of the New 
York City Police and Fire Department Pension Fund, has 
submitted shareholder resolutions concerning three U.S. 
companies and possible business links with governments that 
support terrorism.
    The resolution asks shareholders to establish a board of 
directors committed to review corporation operations and their 
link to terrorism sponsors. You know, the New York City 
policemen and firemen who--you can see how strongly they would 
feel.
    These are companies that are doing business in, for 
instance, in Iran or have a subsidiary that is working with a 
subsidiary in Iraq.
    My sense is, one of the reasons the French are being so 
obstinate with regard to Iraq is they have extensive 
investments in Iraq. They have built things in Iraq. It is a 
business thing as much as it is anything else.
    But, do you have anything planned? I mean, we were talking 
about human rights, which, obviously, is important. But, 
shifting over with regard to terrorism, knowing how hard this 
country was hit on September 11th, have you looked at that, do 
you have any plans?
    And I can--I do not want to embarrass the companies, 
because it may not be true. Or then again, it may be. I do not 
know. But I do not think I should put it in the record. But we 
will share with you the stories and the press releases and 
everything, and one was in Barron's I think.
    But do you have any thoughts with regard to providing 
disclosures with regard to American companies or companies that 
are involved with countries who support terrorism?
    Mr. Donaldson. Again, I am a new boy in town in terms of 
what has been done. Clearly, in the case of Iran and Iraq, you 
know, there are legislative inhibitions on selling certain 
products to those countries.
    I sit on a President's Council which has the Chairman of 
the SEC, the Secretary of the Treasury, the Chairman of the 
Federal Reserve and the chairman of the CFTC. And we meet on a 
regular basis, and these are issues that, I am sure, have come 
up and will come up, in terms of the overall U.S. regulatory 
mechanism, vis a vis the kind of issues that you bring up.
    Mr. Wolf. Obviously, you are brand-new, but for years, 
Osama bin Laden controlled the gum-arabic trade coming out of 
Sudan. And we could not get the Treasury Department, under the 
Clinton Administration, to deal with this issue.
    Gum arabic, I almost interceded, but I did not when Mr. 
Serrano asks where does Osama bin Laden have his investments? 
He has it in construction, he has it in conflict diamonds--
there are diamonds coming out of Sierra Leone and out of those 
places that they are using to fund Hamas, Hezbollah and Osama 
bin Laden. He has it heavily into tea, and he has it heavy, 
heavy, heavy into gum arabic.
    And the Treasury Department would not stop gum arabic 
coming in because they did not know if there was another 
source. It is used for newspapers, and different things.
    And very or very little reluctance, and Treasury would call 
up and say, ``Well, you know, you know, we understand, but this 
is important to this one industry, and''--kind of like a 
blindness.
    But we could not get Treasury and others to act--they just 
would of look the other way. Now, I guess the question is, how 
aggressive do you think the SEC should be with regards not to 
stopping, but disclosing, particularly for New York firemen and 
policemen, who have funds invested in some companies? And this 
may not be accurate.
    Mr. Donaldson. Well, speaking strictly for the SEC, we do 
pay particular attention to the disclosure aspects, the 
necessity for material disclosure of companies doing business 
with governments of countries that are subject to U.S. 
sanctions
    So, as to just us, looking at that, we will insist that 
there is a disclosure.
    Now, beyond what we can do, there are other opportunities. 
You say there is some frustration at Treasury. I do not know 
why, but certainly with the subjects you bring up, this may 
require the legal authority of different parts of our 
government to do something about it.

                       DEFINITION OF MATERIALITY

    Mr. Wolf. I have been told and understand that corporations 
must disclose material dealings withgovernments that support 
terrorism.
    However, what is the definition of material? Shouldn't it 
be any dealing a corporation has with terrorist sponsor to be 
disclosed? For example, if an American investor is aware of 
even a minor dealing a corporation may have with one of these 
countries, this could have a significant impact on investors' 
decisions. It could have a significant impact on a 
corporation's stock values.
    So what is the threshold? Your people sitting behind you 
would know material. Is it material now you have to disclose.
    Mr. Donaldson. There are different definitions of 
materiality.
    Mr. Wolf. All right, well, a big company, a $10 million 
deal may not be material. But for another company, it could be.
    And secondly, even though it is a huge company like X, for 
that sale, the sale of the Bulgarians that gave the Russians, 
the Soviets the quiet propeller technology was only in the 
range of a couple million dollars. It really was not material, 
but it was significant in so far.
    So I would like to ask you for the definition. And we do 
not have to take the full Committee's time. I think the 
definition should be any dealing no matter how large or small. 
The world has changed. We are ready to go into Iraq. Young men 
and women are risking their lives.
    And so what may have been appropriate before 9/11 may need 
to be reevaluated. And I am trying to ask these questions 
lightly, because I am not trying to put you down. And also, I 
am not trying to ask you questions that people in the back who 
work for the press will get you to say something you did not 
want to say.
    But I would like you to think about this.
    A New York City fireman or policeman with a pension fund 
should be able to say, ``Okay, I will know, we know that--we 
know--this is a subsidiary that is dealing with and because of 
what that county has done or could potentially be doing with 
regard to terrorism. We do not want to put our money there.''
    So it is not a prohibition.
    So my sense is that it ought to be any. And if you would--
you do not have to give me an answer today--but if you could 
look and tell us that you are willing to change it to any, I 
think that would be----
    Mr. Donaldson. I get your point, and we will look at 
materiality. Obviously, our rules and regulations are such 
that, we have inhibitions on what we can do legally.
    Mr. Wolf. We can put an amendment in the bill and change 
it, I think the less involvement the Congress has in telling 
the markets what to do, the better. I agree with Mr. Taylor.
    I think it is better to have those things come out of the 
SEC.
    So I think changing it from--going from material dealing to 
any dealing would be appropriate--and it is purely a disclosure 
because you could then do whatever you want to do but at least 
you would know that that was the case.

                             TELECOMMUTING

    The last issue so we do not keep you through the series of 
votes, is to the telecommuting issue. Where do you live--do not 
tell me the location--but where do you live roughly in 
Washington now that you are here
    Mr. Donaldson. Right now I am a temporary resident.
    Mr. Wolf. Yes, I know, but where do you plan on driving 
from in the morning when you wake up at 6 o'clock and have your 
oatmeal? Where will you be driving to when you come to the SEC
    Mr. Donaldson. Through downtown Washington, D.C.
    Mr. Wolf. Well, you know our traffic is grim.
    And since 9/11, it is even more so. And we have been a 
proponent of telecommuting. It is actually the law, but there 
are no penalties, requiring that a certain percentage of those 
who are eligible. There is nothing magic about strapping 
yourself into a metal box and driving 25 miles when maybe you 
could sit before your laptop at home and be more efficient, not 
five days a week, maybe only one day every other week, or one 
day a week.
    Also it allows moms and dads to have more control over 
their own lives. It takes--it is good for--it takes cars off 
the road, off the Teddy Roosevelt Bridge, the Woodrow Wilson 
Bridge, the TR Bridge, and everything else
    So I do not know how well you are doing on telecommuting. 
What percentage of your staff telecommutes?
    Mr. Donaldson. Yes, I do. In fiscal 2002 we had a total of 
90 employees telecommuting.
    Mr. Wolf. What percentage is that?
    Mr. Donaldson. That was 90 employees out of 3,000, 3,000-
odd. After the agency implemented a new telework program in 
November, 2002, the number of staff participating increased 
dramatically. Of the 197 employees currently participating in 
the program, 124 are what we call ad hoc participants, with no 
set recurrent schedule, 54 have a set schedule, 15 are 
participating to accommodate temporary medical needs, and four 
are participating for reasonable accommodation purposes
    So, 197 employees----

                    PERCENTAGE OF SEC TELECOMMUTERS

    Mr. Wolf. That is kind of low for the percentage.
    Now, obviously, there are some jobs where you cannot 
telecommute, but if you can you should be able to telecommute.
    Mr. Donaldson. Yes, 197 is, you know, not a huge number 
relative to the entire work force. On the other hand, it has 
gone from 90 to 197, so it has more than doubled.
    Mr. Wolf. Well, that is true, but the law calls for 40 
percent right now, 40 percent of those who are eligible. And my 
sense is that the SEC, that would be a significant number.
    Again, I do not think anyone who does not have a job that 
they can telecommute should be told to telecommute. But if they 
do, also there is a flex plan, job sharing, leave sharing, 
there is different things, but since you are doing pay parity 
in order to attract people, make family-friendly policies, do 
these things, telecommuting, I think, actually the productivity 
of people who telecommute is actually in some respects higher 
than those who are not, because they are very appreciative of 
having that opportunity, and I would appreciate it, the law was 
passed here does call for 20 percent, 40 percent, 60 percent, 
80 percent, if you could just look and see if there are 
positions over there that you could get more people to have 
that ability.
    It saves the federal government money--fewer parking spots, 
fewer desks, fewer telephones, fewer of everything else, so it 
is efficiency as well as a productivity thing.
    With regard to that, I----
    Mr. Serrano. Mr. Chairman, I know that it is just an aside, 
but you said when he gets up at six and he has his oatmeal, it 
has got to be freedom toast, as you know, according to the new 
House rules, cannot be French Toast, it has got to be freedom 
toast.
    And I have one question, Mr. Chairman, that I will submit 
for the record.
    Mr. Wolf. Sure. Without question.
    Mr. Serrano. Hey, you guys brought it up, not me.
    Mr. Wolf. Now, what I was trying to find out is that is how 
far do you drive? I live out in a place called Vienna, out 
halfway to Dulles Airport.
    I can get to my Winchester, Virginia, office, which is in 
the beautiful Shenandoah Valley faster most mornings than I can 
get to my Capitol Hill.
    So driving in this region can be very, very tough, and I am 
sure if you talked to, and this is not New York, where we all 
come down and get on a subway and getting cabs, we have people 
who live in real homes outside and drive in, and so it is a 
little bit----
    [Laughter.]
    Mr. Serrano. Real homes. [Laughter.]

                               CONCLUSION

    Mr. Wolf. With that, I thank you for your testimony. Thank 
    you.
    Mr. Donaldson. Thank you.
    Mr. Wolf. The hearing is adjourned.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    

                           W I T N E S S E S

                              ----------                              
                                                                   Page
Donaldson, W. H..................................................   353
Donnelly, Tony...................................................   187
Heyburn, Judge J. G., II.........................................     1
Kennedy, Justice A. M............................................   187
Meeham, L. R.....................................................     1
Muris, T. J......................................................   257
Reyna, B. G......................................................   100
Rider, Sally.....................................................   187
Suter, Bill......................................................   187
Talkin, Pamela...................................................   187
Thomas, Justice Clarence.........................................   187


                               I N D E X

                              ----------                              
                                                                   Page
The Federal Judiciary and the United States Marshals Service.....
Administrative Office............................................    81
Alternatives to Detention........................................   136
Background Investigations for Judiciary Employees................   186
Bankruptcy Reform Bill.........................................133, 183
Cafeteria Benefits...............................................   133
Cameras in Courtrooms............................................   122
Capital Representations..........................................   139
Congressman Serrano's Opening Statement..........................   118
Context of Request...............................................     4
Court Security...................................................   111
Department of Justice Supplemental Request.......................   141
Director Mecham's Opening Statement..............................    81
Extending Marshals Service Arrest Powers To Immigrant Violations.   119
Federal Judicial Center..........................................    81
Growing Prisoner Population......................................   172
Growth in Judiciary Workload.....................................     2
Impact of High Profile Trials on Local Communities...............   116
Increasing Staff Requirements for Probation and Pretrial Services   135
Independent Review of the Judiciary..............................   126
Inspector General Position in the Judiciary......................   185
Joint Terrorism Task Force................................113, 114, 172
Judge heyburn's Opening Statement................................     1
Judicial Security Program........................................   112
Marshals Service Workload........................................   129
Oxycontin Cases................................................139, 184
Panel Attorney Rate Increase.....................................     3
Recruitment of Minorities........................................   124
Reports of Decline in Criminal Filings...........................   128
Telecommuting....................................................   172
Telework.........................................................   183
Terrorist Trials on Military Bases...............................   115
Threat Level Response............................................   113
U.S. Marshals Service............................................    82
United State Marshals Service Director Benigno Reyna.............   176

                 The Supreme Court of the United States

                                                                   Page
Opening Statement................................................   187
Supreme Court Salaries and Expenses..............................   189
Written Statement................................................   191
Court Automation.................................................   193
Security.........................................................   196
Perimeter Security...............................................   196
Supreme Court Workload...........................................   220
Caseload.........................................................   243
Civil Cases......................................................   244
Judicial Vacancies...............................................   245
Court Automation.................................................   246
Judicial Vacancies...............................................   248
Dialogue On Freedom..............................................   248
Electronic Filing................................................   249
Audio Tapes of Oral Arguments....................................   251
Outside Technology Expert........................................   252
Cases Granted Review.............................................   253
Workplace Programs...............................................   253
Modernization Project............................................   254
Mandatory Minimum Sentences......................................   255
Federal Trade Commission.........................................
Do Not Call Database.............................................   333
FTC Budget Request...............................................   325
Gasoline Prices..................................................   345
Hispanic Outreach................................................   331
Management.......................................................   347
Media Violence..................................................326,337
Spam Enforcement................................................342,347
Securities and Exchange Commission...............................
Accounting for Stock Options.....................................   405
Agency's Attrition Rate..........................................   411
Anticipating Problems in the Financial Community.................   403
Assistance to Developing Countries...............................   414
Auditing Standards and Inspections...............................   430
Chairman Wolf's Opening Remarks..................................   353
Code of Ethics for Venture Capital...............................   405
Conclusion.......................................................   421
Definition of Materiality........................................   419
Developing Foreign Securities Markets............................   416
Disclosing Business Links to Repressive Regimes..................   417
Effective Utilization of Resources...............................   396
Ethics in Business Culture.......................................   396
FASB Independence................................................   431
Fiscal Responsibilities..........................................   399
Foreign Corporation Disclosure...................................   398
GAO's Recommendation on Automation Review Policy.................   401
Globalization of Securities Markets..............................   411
Independent Analysis of IT Systems...............................   406
Insider Loans....................................................   428
Listing of Foreign Companies.....................................   413
Oversight of PCAOB Spending......................................   409
PCAOB Board Members' Salaries....................................   409
Percentage of SEC Telecommuters..................................   421
Restoration of the Financial Community...........................   402
SEC Opening Statement............................................   355
SEC Staff Diversity..............................................   400
SEC's Information Technology Program.............................   406
Selecting a PCAOB Chairman.......................................   408
Spending Needs and Staffing Levels...............................   397
Tax Treatment of Wall Street Settlement..........................   432
Telecommuting....................................................   420
Welcome..........................................................   354
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