[Senate Hearing 108-149]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-149

 NOMINATIONS OF TERRENCE A. DUFFY, SUSANNE T. MARSHALL, AND NEIL A.G. 
                                 McPHIE

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


                                HEARING

                               before the


                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                                 ON THE

    NOMINATIONS OF TERRENCE A. DUFFY TO BE A MEMBER OF THE FEDERAL 
RETIREMENT THRIFT INVESTMENT BOARD; SUSANNE T. MARSHALL, TO BE CHAIRMAN 
  OF THE MERIT SYSTEMS PROTECTION BOARD; AND NEIL A.G. MCPHIE TO BE A 
              MEMBER OF THE MERIT SYSTEMS PROTECTION BOARD

                               __________

                              MAY 15, 2003

                               __________

      Printed for the use of the Committee on Governmental Affairs



88-249              U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpr.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092250 Mail: Stop SSOP, Washington, DC 20402ï¿½090001

                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
ARLEN SPECTER, Pennsylvania          RICHARD J. DURBIN, Illinois
ROBERT F. BENNETT, Utah              THOMAS R. CARPER, Deleware
PETER G. FITZGERALD, Illinois        MARK DAYTON, Minnesota
JOHN E. SUNUNU, New Hampshire        FRANK LAUTENBERG, New Jersey
RICHARD C. SHELBY, Alabama           MARK PRYOR, Arkansas
              Michael D. Bopp, Staff Director and Counsel
                    Johanna L. Hardy, Senior Counsel
Michael Russell, Staff Director, Financial Management, the Budget, and 
                  International Security Subcommittee
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
           Jennifer E. Hamilton, Minority Research Assistant
Jennifer L. Tyree, Minority Counsel, Financial Management, the Budget, 
                and International Security Subcommittee
                     Darla D. Cassell, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Fitzgerald...........................................     1
    Senator Durbin...............................................     2
    Senator Akaka................................................     4

                               WITNESSES
                         Thursday, May 15, 2003

Hon. George Allen, a U.S. Senator from the State of Virginia.....     3
Terrence A. Duffy, to be a Member of the Federal Retirement 
  Thrift Investment Board........................................     5
Susanne T. Marshall, to be Chairman of the Merit Systems 
  Protection Board...............................................    10
Neil A.G. McPhie, to be a Member of the Merit Systems Protection 
  Board..........................................................    11

                     Alphabetical List of Witnesses

Allen, Hon. George:
    Testimony....................................................     3
Duffy, Terrence A.:
    Testimony....................................................     5
    Biographical and professional information....................    28
    Pre-hearing questionnaire....................................    32
Marshall, Susanne T.:
    Testimony....................................................    10
    Prepared statement...........................................    21
    Biographical and professional information....................    43
    Pre-hearing questionnaire with attachments...................    48
    Post-hearing questions and responses from Senator Akaka......   181
McPhie, Neil A.G.:
    Testimony....................................................    11
    Prepared statement...........................................    27
    Biographical and professional information....................   157
    Pre-hearing questionnaire....................................   167
    Post-hearing questions and responses from Senator Akaka......   186

                                Appendix

Memo to Elise Bean, PSI, Joe Bryan, Senator Levin, dated May 16, 
  2003, from Susanne T. Marshall, subject: Classified 
  Information/Security Clearance Issues..........................    23
Letter to Senator Fitzgerald from Susanne T. Marshall, dated May 
  21, 2003, with enclosed chart entitled ``Case Processing Times 
  for Selected Agencies--May 19, 2003''..........................    24

 
                   NOMINATIONS OF TERRENCE A. DUFFY,
                        SUSANNE T. MARSHALL, AND
                            NEIL A.G. McPHIE

                              ----------                              


                         THURSDAY, MAY 15, 2003

                                       U.S. Senate,
                         Committee on Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:03 p.m., in 
room S-143, U.S. Capitol, Hon. Peter G. Fitzgerald, presiding.
    Present: Senators Fitzgerald, Levin, Akaka, and Durbin.

            OPENING STATEMENT OF SENATOR FITZGERALD

    Senator Fitzgerald. The Committee will come to order. 
Senator Akaka is at a meeting but he gave us dispensation to 
begin without him. He will be here shortly.
    Today we consider the nominations of Terrence Duffy to be a 
member of the Federal Retirement Thrift Investment Board; 
Susanne Marshall to be chairman of the Merit Systems Protection 
Board; and Neil McPhie to be a member of the Merit Systems 
Protection Board. I would like to welcome our nominees today. 
Each of you has a distinguished background and record of 
service. The President has selected you for important positions 
in our government, and I congratulate you on your nominations.
    I would also like to welcome our distinguished colleagues 
from Illinois and Virginia, Senator Durbin and Senator Allen, 
who are with us today to introduce two of our nominees.
    Mr. Duffy, Ms. Marshall, and Mr. McPhie have filed 
responses to the Committee's biographical and financial 
questionnaire, answered prehearing questions submitted by the 
Committee, and had their financial statements reviewed by the 
Office of Government Ethics. Without objection, this 
information will be made part of the hearing record with the 
exception of the financial data which are on file and available 
for public inspection in the Committee offices.
    In addition, I personally have reviewed the FBI background 
investigation reports on each of the nominees.
    On our first panel today we will hear from Mr. Duffy, whom 
I have had the pleasure of knowing personally for several years 
now. President Bush nominated Mr. Duffy to be a member of the 
Federal Retirement Thrift Investment Board, which was 
established as an independent agency to administer the Thrift 
Savings Plan. Mr. Duffy has served as chairman of the Chicago 
Mercantile Exchange Inc. since April 2002, and has been a 
member of the Chicago Mercantile Exchange Inc. for over 20 
years.
    On our second panel we will hear from Susanne Marshall, and 
Neil McPhie, whom the President has nominated to the positions 
of chairman and member, respectively, of the Merit Systems 
Protection Board. Both Ms. Marshall and Mr. McPhie currently 
serve in those positions on the board through recess 
appointments.
    The Merit Systems Protection Board was created in 1978 to 
serve as a guardian of Federal merit systems principles. The 
board plays a critical role in protecting the rights of 
whistleblowers, who have presented some of the most compelling 
evidence of government abuse and in fiscal mismanagement, 
saving the taxpayers hundreds of millions of dollars.
    Both the Federal Retirement Thrift Investment Board and 
Merit Systems Protection Board are vital agencies in our 
Federal Government. The nominees are being considered for 
important positions of leadership in these agencies, and we 
appreciate their presence today before this Committee.
    Before we proceed with their statements, I would first like 
to call on my colleague from Illinois, Senator Durbin, to 
introduce Terrence Duffy, if that is OK with Senator Allen.

              OPENING STATEMENT OF SENATOR DURBIN

    Senator Durbin. Thank you, Mr. Chairman. I am pleased to be 
here this afternoon and honored that Terry Duffy would ask me 
to introduce him to this Committee. Of course, he needs no 
introduction to you personally. We both know of Terry Duffy and 
his contribution to the business community and the city of 
Chicago. I think he is an excellent choice to be a member of 
the Federal Retirement Thrift Investment Board. I know that he 
is accompanied here by his spouse, Jennifer, and his mother, 
Barbara Duffy, and his assistant, Joyce Balkus. I am certain 
that he appreciates their presence and support at this 
important hearing.
    This is a critical appointment to an important position. 
The Federal Retirement Thrift Investment Board may be obscure 
to some, but it is not to the millions of Federal retirees and 
current Federal employees who are saving a portion of their 
earnings in anticipation of retirement. This is an independent 
agency which administers the Thrift Savings Plan and it has an 
important mission. Currently the Thrift Savings Plan has 
approximately 3 million participants and assets of over $100 
billion, including the family fortune of the Durbin family, so 
I am particularly interested in making certain that Mr. Duffy 
does a great job in his new position.
    As you said, Mr. Chairman, he has an excellent background. 
A native of Chicago, he graduated from the University of 
Wisconsin at Whitewater, and worked as a broker assistant for 
RB&H Commodities in Chicago. Since November 1981, Terry Duffy 
has been president of TDA Trading, Inc., a trading broker 
association, most recently serving as chairman of the 
prestigious Chicago Mercantile Exchange Holdings Board and the 
board of the Chicago Mercantile Exchange Inc. itself.
    I have had an opportunity to look at his responses to the 
policy questions which this Committee has posed, and there is 
no question he is well-prepared and well-positioned to serve 
this Nation well in this capacity. I heartily endorse his 
nomination.
    Senator Fitzgerald. Thank you, Senator Durbin.
    I would now like to recognize my colleague from Virginia, 
Senator George Allen who will introduce Mr. McPhie on panel 
two.
    Senator Akaka is here. Do you want to let Senator Allen 
introduce Mr. McPhie first and then you can make your opening 
statement?
    Senator Akaka. Yes.
    Senator Allen. If I may, I will introduce Mr. McPhie and 
also Susanne Marshall.
    Senator Fitzgerald. You certainly may.

 STATEMENT OF HON. GEORGE ALLEN, A U.S. SENATOR FROM THE STATE 
                          OF VIRGINIA

    Senator Allen. Let me start first with Susanne Marshall as 
she is appointed to be chairperson of the U.S. Merit Systems 
Protection Board. I am pleased to introduce her. She is a 
resident of the Commonwealth of Virginia. She is well-known to 
many of you already having served on the Governmental Affairs 
Committee staff for Senator Roth of Delaware, Ted Stevens of 
Alaska, and Fred Thompson of Tennessee. As you may know, she 
was confirmed as a member of the Merit Systems Protection Board 
in November 1997 under former President Clinton, and now 
President Bush has nominated her to serve as chairman for the 
remainder of her term.
    I can go into her Virginia heritage, that I know you would 
all love to hear, since her father's side of the family came to 
Virginia in 1650 a few years after it first was founded in 
1607. That makes her one of the first families of Virginia.
    She does have an expert record having served here on 
Capitol Hill as a staffer for more than 15 years in both the 
House of Representatives and the Senate, ending only upon her 
appointment to the Merit Systems Protection Board. Mr. 
Chairman, Senator Akaka, I recommend her very highly to you as 
an outstanding public servant and respectfully ask that she be 
confirmed as chair of the Merit Systems Protection Board.
    While her family is not here with her, they are all here in 
spirit and very proud of her.
    Mr. Chairman, Senator Akaka, I am also pleased to introduce 
Neil McPhie, who has been nominated to be a member of the U.S. 
Merit Systems Protection Board. I am confident that when you 
look at his record in the Commonwealth of Virginia and his 
service to the community, you will recognize that President 
Bush selected the right person for this job.
    I am pleased to be recommending him because I do know of 
his service. He helped me when I was Governor of the 
Commonwealth of Virginia. He has served most recently as senior 
assistant attorney general in Virginia since 2002 where he has 
shown himself to be a very seasoned and effective litigator. He 
also served the Commonwealth of Virginia as executive director 
of the Virginia Department of Employment Dispute Resolution.
    Now I mention my service as Governor. Right as my term 
ended, Governing magazine rated Virginia as one of the best 
managed States. Any CEO or executive will tell you, the 
executive is fine, but you need good people and a good cabinet. 
You need good leaders. Mr. McPhie, his attention to detail, his 
superb leadership skills really played an important role in 
Virginia getting that high honor from Governing magazine. It 
was not just to me. It was to my cabinet secretaries, to a 
variety of State agencies, and also to the attorney general's 
office.
    You will see from his education and his background, he 
unquestionably has way more than the necessary qualifications 
to undertake the charge President Bush has asked of him. He has 
a wealth of knowledge in employment law issues that will enable 
him to successfully meet the challenges he will face an 
adjudicator of the board. I would like to take a quick moment 
to recognize Neil's wife, Regina, holding young Sydney there. 
This is Abigail here. So he has a fine family and I urge each 
of you all on the Committee to move as quickly as possible to 
get Mr. McPhie to work for the people of the United States.
    I thank you, Mr. Chairman, Senator Akaka, for your 
willingness to pull together this hearing so that you can move 
forward in these deliberations. Thank you, all.
    Senator Fitzgerald. Thank you for being here. Hope you did 
not miss any votes.
    Senator Allen. Me too. If you will excuse me.
    Senator Fitzgerald. Thank you, Senator Allen.
    Now the Chair would call upon Senator Akaka for an opening 
statement.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Mr. Chairman. I want to 
welcome all of you here and add my welcome to all of you. Ms. 
Marshall, it is good to see you again after all these years. 
Mr. McPhie, and Mr. Duffy, welcome to this Committee.
    Before I begin I want to compliment the Chairman of this 
Committee. Today is one of those days when everything is 
upended. He was able to pull this hearing together despite a 
day-long voting session. I had some problem finding this room, 
but I finally found it, and I want to thank him for moving so 
quickly and so well.
    I would ask that my full statement be placed in the record. 
I just want to say that the positions to which our witnesses 
have been nominated are among the most important to Federal 
employees. Let me highlight that. You have a tough job ahead of 
you. But it is important for our country.
    If confirmed, Mr. Duffy will have authority over the 
government's retirement savings plan which serves over 3 
million participants with assets of about $100 billion. 
Likewise, Ms. Marshall who is the acting chair of the Merit 
Systems Protection Board and Mr. McPhie who will join her, will 
play a critical role in safeguarding Federal employees from 
abuse by agency management. Those are important jobs. In the 
next 7 years it is going to be critical for our Nation, but we 
will talk about that later.
    I will submit the rest of my statement, Mr. Chairman.
    Senator Fitzgerald. Without objection, Senator Akaka's 
statement will be provided in the record.
    [The prepared statement of Senator Akaka follows:]

                  PREPARED STATEMENT OF SENATOR AKAKA

    Thank you, Mr. Chairman. It's a pleasure to be with you this 
afternoon, and I join you in welcoming Ms. Marshall, Mr. McPhie, and 
Mr. Duffy to our Committee.
    The positions to which our witnesses have been nominated are among 
the most important to Federal employees. If confirmed, Mr. Duffy will 
have authority over the government's retirement savings plan, which 
serves over 3 million participants with assets of about 100 billion 
dollars. Likewise, Ms. Marshall, who is the acting chair of the Merit 
Systems Protection Board, and Mr. McPhie, who will join her, will play 
a critical role in safeguarding Federal employees from abuse by agency 
management.
    As the sponsor of legislation to strengthen Federal whistleblower 
statues, I believe that one of the key tenants of the Federal merit 
system principles is the ability of employees to report waste, fraud, 
and abuse without the fear of retaliation. Reporting government 
mismanagement is a basic obligation of a Federal employee. As our 
witnesses know, the MSPB shares great responsibility to ensure that 
employees are protected when they come forward to report waste, fraud, 
or abuse.
    Since enactment of the WPA in 1989, Congress has revisited the law 
to address actions taken by the Federal Circuit Court of Appeals, the 
MSPB, and the Office of Special Counsel that have been inconsistent 
with congressional intent. I plan to reintroduce whistleblower 
legislation shortly, and I welcome the opportunity to discuss this with 
Ms. Marshall and Mr. McPhie. I am also interested in your views on the 
new Department of Homeland Security and the Department of Defense 
proposal to exempt itself from many civil service laws, including MSPB 
appeal rights.
    I don't want Mr. Duffy to think I am ignoring him. You have had a 
distinguished career as a member of the Chicago Mercantile Exchange 
Inc. where you now serve as its chairman. As head of the Nation's 
largest futures exchange, I am hopeful that you will impart your 
knowledge and expertise with your fellow Thrift Board members.
    Mr. Chairman, I wish to thank you for holding today's hearing.

    Senator Fitzgerald. I am going to recommend that Senator 
Akaka and I leave to vote. The vote started at 2:10, so we are 
a few minutes into it, and they are only 10-minute roll calls. 
We will immediately return and then we will proceed with Mr. 
Duffy and then to the Merit Systems Protection Board. We will 
try and conduct this hearing rapidly given the time constraints 
we are under today. So we will recess for a few moments and we 
will be back shortly.
    Thank you.
    [Recess.]
    Senator Fitzgerald. I would like to call the meeting back 
to order.
    At this point I would like to call on our first witness, 
Terry Duffy. Why don't you come up here, Terry. Our Committee 
rules require that all witnesses at nomination hearings give 
their testimony under oath, so I am going to ask you to remain 
standing and raise your right hand.
    [Witness sworn.]
    Senator Fitzgerald. Thank you. You may be seated.
    Before you begin your opening statement, Terry, I wonder if 
you would like to again recognize your wife and mother and 
assistant who are here? I know Senator Durbin briefly referred 
to them but maybe you would like to introduce your family 
members.

   TESTIMONY OF TERRENCE A. DUFFY,\1\ TO BE A MEMBER OF THE 
           FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

    Mr. Duffy. I appreciate that, Senator. With me today I have 
my wife Jennifer, my mother Barbara, and my good friend and 
assistant, Joyce Balskus, along with two young ladies that 
represent us out here in our Washington office, Lita Frazier 
and Lanae Denney.
---------------------------------------------------------------------------
    \1\ The biographical and professional information of Mr. Duffy 
appears in the Appendix on page 28.
     Pre-hearing questionnaire appears in the Appendix on page 32.
---------------------------------------------------------------------------
    Senator Fitzgerald. Welcome to all of you. You may go ahead 
and give your statement.
    Mr. Duffy. Thank you, Mr. Chairman. I appreciate it very 
much. Senator Akaka, I appreciate it. Good afternoon. As 
Senator Fitzgerald has said, my name is Terry Duffy and it a 
great honor for me to be nominated to serve as a member of the 
Federal Retirement Thrift Investment Board.
    I understand the gravity of the responsibilities that I 
will be required to fulfill if my nomination is approved. Three 
million Federal employees have invested more than $100 billion 
to assure a successful and productive retirement after 
diligently serving the government and its uniformed services. I 
have discussed my duties and responsibilities with the staff 
and the board. I have reviewed the pending litigation involving 
the board and its director. I am confident that my background 
in the financial services industry will permit me to perform 
the duties of this high office as intended by Congress.
    I believe that my experience in the financial industry 
equips me to perform the important fiduciary duties for which I 
have been nominated. My professional life has been connected to 
the Chicago Mercantile Exchange Inc., which is now the largest, 
most successful futures exchange in the United States. I began 
my career at the very bottom of the ladder as a runner in 1980. 
In 1981, I became a CME member and was able to work as a floor 
broker and a trader. I have formed and been a president of my 
own company, TDA Trading, Incorporated since 1981. In 1995, I 
was elected to the CME's board, in which capacity I have served 
since that time. In 1998, I was elected vice chairman of the 
board, and in 2002 I was elected chairman of the board.
    In that time I led a very successful effort to execute an 
initial public offering to make the Chicago Mercantile Exchange 
Inc. the first publicly traded exchange in the United States. I 
have served or currently serve on the executive compensation, 
nominating, strategic planning, and regulatory oversight 
committees. My professional life has equipped me to understand 
tools available for modern risk management. In my leadership 
role at the CME, I have participated directly in the creation 
of new risk management tools, and I have managed financial risk 
in all segments of our economy.
    Retirees are a major element of our economy, and their 
economic welfare depends on the safety and the soundness of 
their retirement plans. In 2002, I was appointed by President 
Bush to serve on the National Saver Summit on retirement 
savings. I understand the serious responsibilities that are 
invested in the thrift board. I will bring to bear all my 
experiences and knowledge to serve the interest of the 
beneficiaries of the thrift board's actions.
    Again, I am extremely honored to be here today and look 
forward to answering any questions that you may have for me. 
Thank you.
    Senator Fitzgerald. Mr. Duffy, thank you very much. I would 
begin with customary Committee questions, and we will limit 
questions to 6 minutes each, if that is OK. We will probably 
have another vote shortly.
    Is there anything that you are aware of in your background 
which might present a conflict of interest with the duties of 
the office to which you have been nominated?
    Mr. Duffy. No, sir.
    Senator Fitzgerald. Do you know of anything personal or 
otherwise that would in any way prevent you from fully and 
honorably discharging the responsibilities of the office to 
which you have been nominated?
    Mr. Duffy. No, sir.
    Senator Fitzgerald. Do you agree without reservation to 
respond to any reasonable summons to appear and testify before 
any duly constituted committee of Congress if you are 
confirmed?
    Mr. Duffy. Yes.
    Senator Fitzgerald. Senator Akaka, do you have questions 
that you want to ask at this time?
    Senator Akaka. Yes, I do, Mr. Chairman.
    Mr. Duffy, let me start off by saying how impressive your 
background is.
    Mr. Duffy. Thank you, sir.
    Senator Akaka. It appears that you have been in the right 
place at the right time and moved up well, and here you are 
again, another place at another time. I did review your papers 
and everything seems to be in order.
    My question to you is one that interests me tremendously 
because I have been trying to move our country to be more 
financially literate. My question will be along that line.
    Federal employees, for instance, depend a lot on the thrift 
savings program for a significant part of their retirement 
savings. As life expectancy in the United States continues to 
increase and people are living longer, as they do in Hawaii, 
they must make sure that their retirement savings meet their 
future needs. Federal workers cannot afford to make mistakes on 
their TSP, the allocations, or miss opportunities presented by 
TSP or other retirement investment options. Employees of all 
agencies should be informed about different retirement options.
    My question to you is, what can be done to improve 
financial literacy among Federal employees to ensure that they 
are making educated and informed decisions about their 
retirement investment options, especially their use of TSP?
    Mr. Duffy. Senator, I think that is an excellent question. 
The way I would respond to it, I think that I would go about it 
the same way I do about running a public company today, and 
that is through the education process. I think education and 
communication are key. If you can have what I believe--I do not 
know the other board members of the TSP, but you have to have 
independence. When you have independence, then the participants 
who are in that plan will have more confidence in you and they 
will be more willing to listen to you when you try to educate 
them.
    So I think education, communication, and independence are 
critical to getting more people to participate in plans, and 
give them the confidence. This has been a very difficult time 
over the last 3 to 4 years with markets and market conditions. 
I think the American public, and I do not think the government 
workers are immune to it, have been affected by it. I think 
that they need to have the confidence reinstalled in them to 
let them know that there are legitimate people looking out for 
their best interest, and we should educate them, Senator.
    Senator Akaka. Mr. Chairman, I have other questions but I 
will submit them for the record.
    Thank you very much for your response.
    Senator Fitzgerald. I was wondering, Mr. Duffy, if you had 
been following the dispute that the TSP board has had with its 
contractor who had been working on its computer system. There 
subsequently was a suit filed by the board. Subsequent to that, 
a new board has come in at TSP and they have suggested that the 
executive director of TSP should not have filed that suit, and 
should have gone through the attorney general.
    There is a dispute about the level of independence that the 
TSP board should have from both Congress and the 
administration. This morning there was an article in the 
Washington Post that contained a recommendation or relayed a 
recommendation that the GAO had made regarding how greater 
accountability could be placed on the TSP board, having them 
made more accountable to the Department of Labor. Apparently, 
the Department of Labor could sanction a private pension fund 
that was violating its fiduciary responsibilities, but in the 
case of the TSP board the Department of Labor could find a 
violation but they could not do anything to the TSP board.
    So there is a tension between walling off the TSP board 
from the political process on the one hand to prevent it being 
used for political purposes. But on the other hand, there is a 
danger that the board not be accountable to anyone if there are 
violations of fiduciary obligations by the board of directors.
    I would like to ask if you had given any thought to whether 
the board should just totally be out on its own? If a member of 
Congress or the administration calls you and makes a 
recommendation, should you get your hackles up and be very 
concerned, or do you feel that it should be more accountable to 
Congress? This is a tough question, and I do not mean to throw 
a tough question to such a good friend, but it is an important 
issue.
    Mr. Duffy. I welcome it, Senator. Actually, I think there 
are several questions in your statement. I will address the 
latter part of it on the issue of whether the board should be 
accountable to Congress. Again, I am not on the board right 
now. I just know by what I read through the press and what is 
available in the public domain.
    As a chairman of a publicly traded company, I think 
independence is critical. To come under pressure from either 
side of the aisle of Congress does not seem to suit $100 
billion very well because it just does not seem to work. These 
are decisions that have got to be made in the best interest of 
these government workers and I do not think that Congress 
should have too much influence over how that works. Obviously, 
there has got to be somebody that they have to be accountable 
to. When you talk about fiduciary responsibility, I think that 
is where the accountability comes in. I think that is why you 
hold these hearings and you try to find the best people to 
represent a substantial amount of money like this which is a 
good part of the savings of these people.
    So I think it is critical to have accountability. Whether 
it should be Congress or not, I do not know. I guess I would 
have to read into it a little bit more. I know that the Labor 
Department has some oversight on this.
    As far as the litigation is concerned, I am not a lawyer by 
trade, but as a chairman I worked in litigation with our 
lawyers. Just when you think you have got it figured out, there 
is another side of the story. That is one thing I have learned 
about lawsuits. So for me to make a comment on the litigation I 
do not think would be fair because I do not have the 
information the rest of the board has or the staff has. I only 
have what is in the public domain. I do know one thing for 
certain. Whatever is in the public domain, there is another 
side of that story, and there might be two more sides to that 
story.
    Senator Fitzgerald. I can attest to that.
    Mr. Duffy. So I think it is important that you have all the 
information.
    Senator Fitzgerald. That is right. I like your answer. I 
think you recognize the fiduciary responsibilities of the 
members on that board. That is an awful lot of money, $100 
billion. It is a big responsibility to be one member of that 
board who is overseeing so much in retirement funds for so many 
people. It is an awesome responsibility. You are certainly one 
who is up to the task, and I think you have a proven record of 
success in the business world, and certainly at the Chicago 
Mercantile Exchange Inc., which was the most successful initial 
public offering in all of 2002 in our entire country. We really 
could not have someone much better than you here. So I 
congratulate you and wish you well.
    I would leave it open to Senator Akaka for any final 
questions you may have before we proceed to the others.
    Senator Akaka. May I ask one more?
    Senator Fitzgerald. Yes.
    Senator Akaka. Mr. Duffy, along the same line. The Federal 
Thrift Investment Board is seeking a new executive director. 
Given the current debate over independence and authority of the 
executive director as raised in the American Management System 
lawsuit over completion of the new TSP recordkeeping system, my 
question to you is, how would you define the roles and 
responsibilities of the executive director as compared to 
thrift board members?
    Mr. Duffy. I look at it, Senator, in a couple ways. But I 
would say again, I use my experience chairing a public company 
board, that the buck stops there. We are ultimately accountable 
to our shareholders. The Thrift Savings Board is ultimately 
accountable to its participants. So I could sit there and tell 
you that I think that the management made a bad decision. They 
say, that is great, but you are accountable. You are the board 
of directors. That to me is doing my fiduciary duty to the 
participants.
    It is no different from you today as being the chairman of 
the largest U.S. exchange. I have a duty to my shareholders, 
fiduciary responsibility. So I have to stay completely 
independent of my management. I think that is critical to the 
success, not only of private business, but also in the public 
and the private sector.
    Senator Akaka. Thank you very much for that response.
    Mr. Chairman, thank you.
    Senator Fitzgerald. Senator Akaka, thank you very much. Mr. 
Duffy, thank you for your testimony. Thank you for bringing 
your family here, today. We wish you well. We will not take any 
more of your time. We will now go on to Ms. Marshall and Mr. 
McPhie. Thank you very much for coming.
    Mr. Duffy. Thank you, Senator Fitzgerald. Thank you, 
Senator Akaka. I appreciate it very much.
    Senator Fitzgerald. Thank you.
    Another vote just started. We are going to take another 
break. We will not be long. A quick vote and we will be right 
back, and then we will swear in Ms. Marshall and Mr. McPhie.
    [Recess.]
    Senator Fitzgerald. I call the hearing back to order. I 
would like to swear both of the witnesses.
    [Witnesses sworn.]
    Senator Fitzgerald. Thank you. You may be seated.
    Mr. McPhie, I understand you want to introduce your family, 
too. I know that Senator Allen briefly introduced your family, 
but maybe you want to introduce them, and then I will allow Ms. 
Marshall to start with her statement.
    Mr. McPhie. Yes, sir. There are a number of people who came 
from Richmond that I will recognize, if I may.
    Senator Fitzgerald. Absolutely.
    Mr. McPhie. First my family. My wife Regina McPhie is right 
here. My daughter Abigail, and my son Sydney.
    Senator Fitzgerald. What grade is Sydney in?
    Mr. McPhie. Sydney is in third, but sometimes I think he is 
in sixth or seventh. I am very proud of those folks, and they 
have stood by dad, and my wife by me, through ups and downs. 
Without them, I would not be here and I am grateful for that.
    As I said, there are some folks who I really owe a lot to 
as my career has progressed. I do appreciate them taking time 
off and coming up here from Richmond, Virginia. There are some 
people from the Attorney General's office in Richmond, and then 
there are some folks from my agency over there, the Employment 
Dispute Resolution Agency that have come up here. And then 
there are two other persons who knew me when I was a little guy 
in my native country of Trinidad, and they are both here. I 
feel very grateful to be here with people like that around me. 
I appreciate the opportunity to say that on the record.
    Senator Fitzgerald. Welcome to all your friends, and thank 
you for being here. At this point, Ms. Marshall, I would 
welcome you to the Committee. Do you have a statement you would 
like to make at this time?

  TESTIMONY OF SUSANNE T. MARSHALL,\1\ TO BE CHAIRMAN OF THE 
                 MERIT SYSTEMS PROTECTION BOARD

    Ms. Marshall. Yes, Senator. Thank you and your staff for 
coordinating the hearing this afternoon with so much going on. 
I also want to thank Senator Allen for taking the time to be 
here to provide the introduction for both Mr. McPhie and 
myself. I have to thank President Bush for the honor of 
nominating me to be chairman of the Merit Systems Protection 
Board.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Marshall appears in the Appendix 
on page 21.
     The biographical and professional information of Ms. Marshall 
appears in the Appendix on page 43.
     Pre-hearing questionnaire with attachments appears in the Appendix 
on page 48.
     Post-hearing questions submitted for the Record by Senator Akaka 
appears in the Appendix on page 181.
---------------------------------------------------------------------------
    In order to save the Committee time, I will provide a more 
lengthy statement for the record.
    Senator Fitzgerald. Without objection, we will submit your 
prepared comments for the record.
    Ms. Marshall. Thank you. It is very hard for me to believe, 
having been a Committee staffer, that it has been 5\1/2\ years 
since I have been here in the Capitol building. It is really an 
honor for me to be here today, and quite a treat to see some of 
my former colleagues and friends. I do not have family here, 
but I would acknowledge friends that are here from the Hill as 
well as from the MSPB. So, I just would acknowledge that for 
the record.
    In 1997, when I was confirmed, my goal, as I stated at that 
time, was to prove myself worthy of the confidence that had 
been placed in me. As I come here 5\1/2\ years later, I hope 
that my record and my reputation speak for itself, and that I 
have the support of members on both sides of the aisle.
    In every effort that I have made as a member, as vice 
chair, as acting chair, and now as chairman, I look forward to 
being able to lead the agency throughout the remainder of my 
term. It is a terrific agency. It is very small, very 
efficient, with hard-working and dedicated civil servants. That 
is what I look forward to. I appreciate the opportunity to be 
here today.
    Senator Fitzgerald. That is great.
    Mr. McPhie, you may also submit your written comments for 
the record and we will make that a part of the Committee's 
transcript, or you may read them if you wish, or you may talk 
off the top of your head.

 TESTIMONY OF NEIL A.G. McPHIE,\1\ TO BE A MEMBER OF THE MERIT 
                    SYSTEMS PROTECTION BOARD

    Mr. McPhie. In the spirit of intimacy and speed I would 
submit--I have already submitted a prepared statement for the 
record and I would ask that it be placed into the record.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. McPhie appears in the Appendix on 
page 27.
     The biographical and professional information of Mr. McPhie 
appears in the Appendix on page 157.
     Pre-hearing questionnaire appears in the Appendix on page 167.
     Post-hearing questions submitted for the Record by Senator Akaka 
appears in the Appendix on page 186.
---------------------------------------------------------------------------
    Senator Fitzgerald. Without objection.
    Mr. McPhie. Rather than just read it, I just want to 
highlight some other things. I am extremely grateful to be 
here. I am honored by the confidence placed in me by the 
President of the United States. I am honored by the effort this 
Committee went through, and the opportunity for me to come 
before you at this time. I appreciate the questions that were 
asked of me, some very probing questions by your staffers some 
of whom are here. I tried to answer them as forthright and as 
best I could. I hope I have succeeded in doing that. I look 
forward to a relationship based on openness, candor, and 
forthrightness.
    If confirmed, I pledge to do everything within my power and 
to the best of my abilities to decide these important cases in 
a fair and objective basis, controlled by the facts, the law 
and the policies and nothing else.
    I intend to give this position all I have and to work with 
Chairman Marshall in a collaborative effort and a common goal 
to make the Merit Systems Protection Board better than I found 
it. I know the staffers by their questions had certain issues 
that they raised. I intend to follow up on some of these 
concerns and see if we cannot get cases in and out of that 
place as quickly as we can and as fairly as we can. I look 
forward to acquitting those responsibilities in that fashion.
    I would be more than happy to answer any questions you or 
anyone else may have, sir.
    Senator Fitzgerald. Thank you, Mr. McPhie.
    Ms. Marshall, you began serving as acting chairman in 
February 2002, and then as the board's chairman since August 
2002?
    Ms. Marshall. Yes.
    Senator Fitzgerald. Given your experience in these 
capacities, what new initiatives have you undertaken, and what 
new policies have you implemented to improve the operations of 
the Merit Systems Protection Board?
    Ms. Marshall. Initially, because our main function is the 
adjudication of a large volume of cases, it was to try to 
determine how we could move more quickly, particularly with our 
complex cases. Oftentimes, these cases were reviewed so 
extensively in our Office of Appeals Counsel or Office of 
General Counsel before they came up to the board members that 
we were left with a short timeframe to act on them.
    Senator Fitzgerald. How many cases do you have?
    Ms. Marshall. At Board headquarters, we process, on 
average, about 1,700 cases annually. In those cases that are 
more difficult and more time-consuming, that have multiple 
claims or different sets of facts, we have tried to get them to 
the board members earlier so that we have enough time to give 
direction to the staff to work those cases.
    Senator Fitzgerald. Have you been able to do that?
    Ms. Marshall. Yes. We actually have color-coding, putting 
them in green folders so that we can make notes as they come 
into our office that this case has a particularly difficult 
issue and we need to give it expeditious review so that we can 
determine what direction it should take if it needs any more 
work.
    Senator Fitzgerald. Assuming your confirmation, are there 
any additional initiatives or policies that you want to 
implement?
    Ms. Marshall. One of the major initiatives that we are 
working on implementing is our e-Appeal process. It will be an 
interactive electronic process for filing an appeal. The user 
will be able to navigate it in a manner similar to TurboTax. 
Questions will be asked as to the action being appealed. Is it 
an adverse action? Is it a retirement decision? Then the user 
can follow a set of questions for the action being appealed, as 
opposed to having to deal with a very lengthy form.
    Senator Fitzgerald. To get rid of the paperwork.
    Ms. Marshall. Yes, it would also do that. We hope to have 
e-Appeal implemented by October.
    Senator Fitzgerald. So do you see the biggest challenge of 
the MSPB the caseload numbers and how to speed the cases along? 
Is that one of the biggest challenges?
    Ms. Marshall. That certainly is our daily challenge, 
something that we face on a regular basis. Right now, we also 
must deal with the challenge of the Department of Homeland 
Security, the Department of Defense, and plans that would take 
certain employees out from under Title 5 protections. I think 
the board must work to make sure that the role that we play in 
protecting employee rights is understood. We provide the 
neutral third party review. So, I think that our biggest 
challenge over the next year is going to be educating the 
public and other agencies as to the role that we play.
    Senator Fitzgerald. Do you think the MSPB has sufficient 
resources to do its job now?
    Ms. Marshall. Currently we operate adequately. We meet our 
needs. I would not want to see our budget cut. I think we are 
right at the edge. We have reduced our staff dramatically, with 
almost a 25-percent cut in personnel 5 years ago. So, we have 
to hold our own. I do not want to see us reduced. We operate, I 
think, very efficiently with the resources that we have.
    Senator Fitzgerald. Are there any legislative remedies that 
you would recommend that Congress consider to help the board at 
this time?
    Ms. Marshall. At this time I would say that it would be 
preserving the merit principles as Congress looks at the future 
of civil service protections for Federal employees. I have one 
proposal that I described in my written responses that deals 
with a legislative fix in the handling of FERS disability cases 
so that we do not have to have repayment issues occur. That is 
something I would be happy to provide additional information on 
if the staff wishes to follow up on this suggestion.
    Senator Fitzgerald. Part of the MSPB's work involves 
hearing cases that fall under the Whistleblower Protection Act 
as it was amended in 1994. The act was intended to strengthen 
protections for Federal employees when they disclose 
information pertaining to wrongdoing within a particular agency 
or department. This act is an integral part of the MSPB's 
mission and operations.
    Ms. Marshall, would you please share your assessment of the 
current effectiveness of this Whistleblower Protection Act 
including any particular strengths and weaknesses?
    Ms. Marshall. I think probably the greatest value of the 
act is something that we cannot measure. That would be the 
deterrent effect. I believe that by its very existence and the 
enforcement of it over the years that it has probably led many 
agency managers and supervisors to be much more careful in the 
actions that they take. They know that there will be 
enforcement by the Office of Special Counsel and the Merit 
Systems Protection Board.
    I personally am not supporting any particular legislative 
remedies. I know that there have been a number of provisions 
reviewed by the Committee and currently under review by the 
Committee. I have found, as an adjudicator, that the more 
recent amendments, when Congress emphasized the use of 
``any''--and a very broad reading of the language--allows the 
adjudicator to look at all the particular facts of the case and 
any violation of any law, rule, or regulation or any 
significant change in duties. So I think it is our enforcement 
of a broad reading of the statute, the plain language of the 
statute that I find most useful.
    Senator Fitzgerald. Do you believe that whistleblower 
rights are adequately protected now?
    Ms. Marshall. I think it has been very effective.
    Senator Fitzgerald. Do you think they are adequately 
protected now? Do you know how many whistleblowers have been 
helped through settlements or board rulings providing relief, 
or what the win-loss track record for decisions is?
    Ms. Marshall. OSE considers all WPA claims first, but I 
think for cases that have come to the board, say over the past 
year, perhaps we have had 130 cases that have not been 
dismissed that we have looked at the merits of the issue. A 
little over 50 percent of that, maybe 60 percent, we have made 
a finding of a nonfrivolous allegation of whistleblowing.
    But even if we had a finding of potential whistleblowing, 
the agency still has the opportunity to prove by clear and 
convincing evidence that they would have taken the personnel 
action anyway. So you may have a valid whistleblower as an 
appellant, but it does not always lead to relief.
    Senator Fitzgerald. Thank you.
    Mr. McPhie, as has been noted by Senator Allen, you have a 
wealth of experience in dispute resolution through your work in 
the Virginia Department of Employment Dispute Resolution and at 
the EEOC. Based on your background and experience, what 
specific initiatives would you like to pursue as a confirmed 
member of the Merit Systems Protection Board?
    If we could interrupt you for one second, Mr. McPhie, I 
would like to welcome Senator Levin. Thank you for coming here. 
Senator Levin, would you have any opening comments? We are on 
Susanne Marshall and Neil McPhie, who are nominated for the 
Merit Systems Protection Board, and we were discussing the 
whistleblower laws.
    Senator Levin. I have some questions but no opening 
statement.
    Senator Fitzgerald. OK. Mr. McPhie, would you like to go 
back and answer that question. Based on your background and 
experience, what specific initiatives would you like to pursue 
as a confirmed member of the Merit Systems Protection Board?
    Mr. McPhie. First, sir, I want to tell you, I do not have 
any specific agenda. I came here with a wide open mind. The 
bottom line is, I want to be known and ultimately remembered as 
a member who decided cases objectively on the facts, applying 
the relevant law and policies and nothing else. I think the 
board has got to be impartial when it speaks. I think the board 
has a history of being impartial. I intend to continue that.
    Some of the things that I have picked up over the years is, 
whenever you run a system and you have a lot of pro se people 
in the system, those cases to me are the most difficult cases 
to decide. Not because the law or the facts are complex. 
Sometimes it is a clear loser. But because of the human 
emotion, and lack of understanding.
    It seems to me any system worth its salt, has to stay away 
from outcomes. I never carried around a win-loss record because 
then you get caught up in this one side should win more than it 
should be winning, and I think that is not healthy. But what I 
do try is to assure the folks who come before that system, win 
or lose, really feel that they have gotten a shot; somebody 
listened. Many times these disputes are between people who 
ultimately are going back to the same job situation and the 
expectation is from both sides that they are going to be 
friends, and they are going to be productive, and they are 
going to continue a relationship.
    So many times it is not about taking prisoners, who can use 
cross-examination to make the other person look bad and so on 
and so forth. You have to find a way to preserve that working 
relationship, albeit in difficult circumstances.
    So it seems to me, top and bottom, the board has got to 
reflect that kind of culture. I think we have got to 
understand, and I am going to try my best to employ some of it, 
is that you can do a case quickly and you can still assure 
quality. They are not necessarily two different items. They can 
coexist quite nicely. But if you do not get the folks from the 
front end to the back end to buy into that then it is not going 
to happen.
    I personally think the administrative judges in that 
system, have perhaps one of the most important jobs. I think 
the way people feel about the MSPB turns a lot of what happens 
to them in front of those administrative judges.
    I had the pleasure of going to a conference recently where 
I met the administrative judges for the first time in their 
element. These guys are not afraid to talk. And I listened to 
them. I will tell you it concerns them when cases take too 
long. It concerns them when people complain that they are not 
being fair. It concerns them when they get, in their view, 
scattershot directions from court precedent. These folk 
impressed me as people who understand the importance of their 
job, who want to do a good job, and will indeed do a good job. 
Some will tell you there are some resource issues. I do not 
know anything about that so----
    Senator Fitzgerald. I am afraid I am going to have to 
interrupt you because I am going to have to run to the floor 
for a vote. Senator Levin, I do not know if you have voted.
    Senator Levin. I did, thank you.
    Senator Fitzgerald. I will turn it over to you, Senator 
Levin, you could ask some questions, and I will go vote. Thank 
you.
    Mr. McPhie. Senator Levin, those are some of the things I 
would do.
    Senator Levin. I just have a few questions for you, Ms. 
Marshall, because you have been there. Mr. McPhie, you are 
going to get off the hook a little bit here because you are 
new. I am intrigued by your comment that the people who appear 
before the board should feel that they have had a fair hearing, 
because that is what I think everybody's goal would be. That is 
a constant search and a constant struggle for whistleblowers.
    Some of the questions that I have of Ms. Marshall have been 
addressed to you, but for the record I want to clarify your 
answers to some of those questions. First is a case which was 
decided by the Federal Circuit in 1999, and maybe Mr. McPhie 
could listen to this. Even though you have not been on the 
board I would be interested in your reaction in any event.
    In the LaChance case, LaChance vs. White, the Federal 
Circuit said that in order to establish a reasonable belief of 
gross mismanagement, the whistleblower, the appellant, had to 
overcome a presumption that the management of the Department of 
the Air Force had acted ``correctly and fairly and in good 
faith, and in accordance with the law and governing 
regulations.'' So that the agency is given a presumption of 
good faith to begin with which the whistleblower needed to 
overcome.
    But then the court added the following, which was truly 
unusual. That the presumption would stand unless Mr. White 
provided irrefragable proof to the contrary. Now that is almost 
an irrebuttable presumption, to use another word. If you have 
to prove or disprove a presumption with irrefragable proof, you 
have got to show that what you allege is incontestable, 
incontrovertible, incapable of being overthrown, undeniable. 
That is what irrefragable means. So this standard is extreme. 
It contradicts Congressional intent in the whistleblower law. 
And it, frankly, I think almost stands alone in the law, as far 
as I can tell, in terms of what evidence would be needed to 
overcome a presumption.
    Now in your answers, you state that in your view the 
irrefragable standard applies only in limited circumstances so 
that it may not be necessary to amend the act to make it clear 
that we are talking about reasonable belief on the part of the 
whistleblower, and not having to prove something which is 
undeniable, indisputable, and so forth. Some of the experts 
that we have consulted with have already said that the LaChance 
decision has had an impact on a broad array of whistleblower 
cases and that we need to clarify the law.
    So I would ask you, Ms. Marshall, whether you would agree 
that is appropriate for Congress to pass legislation which 
clarifies the whistleblower statute and overturns the erroneous 
standard in the LaChance case?
    Ms. Marshall. Far be it from me to say Congress does not 
have the appropriate authority to take that action if it deemed 
it appropriate.
    Senator Levin. But would you recommend----
    Ms. Marshall. I have not necessarily recommended it on 
LaChance vs. White. I do not look at the holding as being as 
strong as it has been interpreted by some others. As you said, 
the case was decided in 1999. Irrefragable had not been 
referred to prior to or after in any other whistleblower 
decision. I do not think it is a standard that the board has 
used, and I do not believe it is an appropriate standard, as 
you say, impossible to refute.
    Senator Levin. You do not think that is the appropriate 
standard for the board?
    Ms. Marshall. No. We would not be able to adjudicate under 
irrefragable in the sense that no one would ever be able to 
prove anything. So, in that sense, I understand the seriousness 
and the use of the term in that decision. Actually, the case is 
still pending before us on a remand decision, and it is 
something that we will be looking at again. As to whether 
Congress should deal specifically with irrefragable, I said as 
an adjudicator, earlier that, I prefer the broad language of 
the statute, which covers ``any'' violation of law, rule, or 
regulation. I think that is because we need to be able to look 
at all the facts of the case.
    Senator Levin. If the board does not follow the 
irrefragable standard, and I am glad to hear it does not, why 
should then there be any doubt that the Congress should make 
sure that is not the standard?
    Ms. Marshall. I should not say the Board does not follow a 
decision of the Federal Circuit because it is our reviewing 
court. I think it is the context in which language is used. I 
think there have been some initial decisions where 
``irrefragable proof'' is quoted because it is quoted as having 
been from the Federal Circuit decision, so perhaps that is 
somewhat of a misstatement. Since I have been a member of the 
board, we have not seen the language as requiring proof that 
was irrefragable.
    Senator Levin. There is a lot of uncertainty here which 
needs to be cleared up. You have a court decision and I think 
the board is bound by it; are you not?
    Ms. Marshall. We are bound by the decisions of the Federal 
Circuit. They are precedential, very definitely.
    Senator Levin. So how then can you not follow that 
decision, even though it is wildly wrong?
    Ms. Marshall. I would say, without going too far, that in 
reading the White case, the holding in the case is that there 
should be an objective versus a subjective standard for a 
finding of gross mismanagement. The sentence in which 
irrefragable was used appeared in a following paragraph. It 
does not seem to me to be the main holding of the case. That is 
just my view as a member of the board.
    Senator Levin. Now has the legal----
    Ms. Marshall. It is still pending before the board and it 
is something that we have been researching and continues to 
research.
    Senator Levin. Is there a counsel to the board who has 
given you advice on this issue?
    Ms. Marshall. Yes.
    Senator Levin. Has that counsel said that the irrefragable 
standard is not binding upon you, is not the holding in the 
case?
    Ms. Marshall. As the case is ongoing, it is hard to say 
that we have a final conclusion on that. That would obviously 
take a majority vote of the board. I have had some interesting 
discussions with your staff. As I said, if there were action by 
the Congress specifically to overturn the use of irrefragable 
proof, I see that only as upholding what I currently consider 
to be the law.
    Senator Levin. And what you consider to be appropriate for 
the board to follow.
    Ms. Marshall. Yes.
    Senator Levin. So that you do not believe the board should 
follow the irrefragable standard. But if Congress decided to 
adopt that belief into law you would----
    Ms. Marshall. I think it would simply reinforce what I 
believe is what the board practices and what is appropriate.
    Senator Levin. A couple additional questions. Senator Akaka 
and I have the bill which would do just that and I would hope 
that the subcommittee could consider that bill given this court 
opinion which is so extreme on this subject, so unusual and is 
not apparently even viewed as a holding by the board, thank 
God. So perhaps the subcommittee will be able to take a look at 
the bill which Senator Akaka and I have introduced for possible 
consideration.
    Just two other questions, Ms. Marshall, for you. It relates 
to the question of somebody whose security clearance has been 
revoked because they have been a whistleblower. That is part of 
the retaliation, and as to what the board can do to reverse 
that decision revoking the security clearance of an employee. 
Your written answers suggest that there is no ability to 
reverse a security clearance revocation itself, therefore 
whatever the board might do would be viewed as an advisory 
opinion which the board cannot issue.
    First of all, I think that the board can do much more than 
just give an advisory opinion that the whistleblower was 
retaliated against. The board has the ability to invoke other 
remedies against the employer, the agency that discriminates 
against the whistleblower or retaliates against the 
whistleblower, other than ordering the removal of a security 
clearance. There are other remedies which are permitted 
including back pay, reassignment of the employee to a new 
position, attorney fees, and other relief. So how would that be 
viewed then as an advisory opinion?
    Ms. Marshall. In the written responses, I was looking at 
the fact, that the board's opinion in finding retaliation could 
be used by another agency to try to determine whether or not to 
restore a security clearance. It seemed to me that would be 
giving the board's opinion to another agency as to what we find 
and that this ought to be considered. I have met with your 
staff and had more detailed discussions on this. The way the 
bill is written, as a matter of law, we would have a final 
decision of the board providing relief. Then, it might trigger 
another action, but the decision is not advice from the board 
to the other agency. So I would agree, as a matter of law, that 
there is a distinction, yes.
    Senator Levin. And you would agree that the board in a 
security clearance revocation retaliation case, can order other 
remedies.
    Ms. Marshall. We could provide relief under the 
legislation, not under current law.
    Senator Levin. Under current law, do you not agree that the 
board could, if somebody was retaliated against in the form of 
revocation of security clearance, could remedy that in other 
ways than ordering the restoration of the security clearance, 
including attorneys fees, back pay, and so forth? Are there not 
other remedies?
    Ms. Marshall. We would be looking at retaliation, perhaps 
under an individual right of action case that might come to us. 
Generally, we are not going to look behind a security clearance 
issue. So, there might be a finding of retaliation for some 
other related reason, but we look at the due process rights for 
an individual under a security clearance revocation right now. 
We do not look at underlying issues.
    Senator Levin. You are saying under current law you cannot 
look at an allegation that somebody's security clearance was 
removed because of a retaliatory motive for whistleblowing; 
that you are not allowed to look at that.
    Ms. Marshall. We have not been reviewing security clearance 
issues under retaliation.
    Senator Levin. So our bill would give you the authority.
    Ms. Marshall. The legislation would provide that, yes.
    Senator Levin. So that is another reason why I would hope 
the subcommittee would look at the bill. But I would disagree 
with you. I think that you can look at other remedies under 
current law besides the restoration of the security clearance.
    Ms. Marshall. It would be possible for the board to look at 
other remedies.
    Senator Levin. Then finally, your written answers state 
that the legislation requiring the board to review security 
clearances would have an impact on how the board conducts its 
normal business and that the board would need to establish 
procedures and a separate process for handling and reviewing 
security clearance matters as well as classified and/or 
sensitive material. I understand that subsequently you reviewed 
the board's handling of past cases involving classified 
information and concluded that the board did and does have an 
information security manual which establishes official board 
policies for handling classified information; is that correct?
    Ms. Marshall. Yes, there is a manual. But we currently do 
not have employees with the necessary background checks. It has 
not been an issue during the 5\1/2\ years that I have been at 
the board. So, we would need to reinstitute and restore some of 
those practices.
    Senator Levin. By the manual----
    Ms. Marshall. The manual exists. We have a process. We just 
do not have the employees right now.
    Senator Levin. Thank you, Mr. Chairman.
    Senator Fitzgerald. Senator Akaka, do you have any 
questions of the witnesses?
    Senator Akaka. Thank you very much, Mr. Chairman. I pose 
this question to both Ms. Marshall and Mr. McPhie. The 
Department of Defense has proposed legislation to waive a 
number of provisions in Title 5, including those relating to a 
Federal employee's right to appeal to the MSPB. Appeals from 
DOD constitute approximately one-third of MSPB's caseload 
according to your 2001 annual report.
    Now here is the question. If the Defense Department 
proposal is enacted, how would this change impact the MSPB? And 
what does this trend signal for the public's trust in the 
civilian workforce?
    Ms. Marshall. Certainly, DOD is the largest agency in terms 
of the number of civil service employees. What is not clear in 
the legislation as drafted is whether or not DOD employees 
would be in a different internal review process, or what their 
due process rights would be. As I said, we are trying to 
educate others as to our systems and how we have gained 
credibility with the civil service workforce for our 
independence.
    I use the example of the FAA. The board currently has the 
ability with FAA, as we do with the Internal Revenue Service, 
the Patent and Trademark Office, and other personnel systems 
that have provisions outside of Title 5, to adjudicate appeals 
from employees of those agencies. Our have to look at the 
particular regulations that govern in the particular personnel 
system that may be unique. The board has the ability to provide 
those services and I would just like to sell what I think is 
the very effective work of the board.
    Senator Akaka. Mr. McPhie.
    Mr. McPhie. I was asked that question by your staff. The 
answer involves a discussion of due process, what it is and how 
you protect it. Once you give people a right, then the 
Constitution says, before you can take it away you have to give 
them this dispute process. What it means simply is notice and 
opportunity to be heard; a hearing being the key. A hearing 
that is effective, a hearing that makes sense, you cross-
examine, do all those kinds of things.
    Out there exists a number of due process models, some with 
review to third parties, some without. State and Federal courts 
broadly speaking, have held such models to be constitutional. 
So you would have, for example, a decisionmaker reviewing his 
or her own decision and it is constitutional.
    The question for me is, does it make good sense? The answer 
to that, based on my experience, is no. If you have an 
internal, a completely internal process, your process tends to 
lose credibility. If it has no credibility, in a sense you have 
no process because you end up with more disputes, not less. So 
in my judgment, at a minimum, you have to have some external 
body.
    Should it be the MSPB? I think Congress will put it 
wherever Congress wants. But if you have an MSPB and based on 
its history and its record, it is operating, with some 
criticisms but in the main it is operating well, why would you 
want to create another body to do that? It would not make a lot 
of sense to me. But again, I defer to the wisdom of Congress on 
that.
    Senator Akaka. Thank you very much for your response.
    Mr. Chairman, thank you very much.
    Senator Fitzgerald. I now will ask you both the standard 
questions that the Committee always asks. You may respond 
together.
    Is there anything you are aware of in your background which 
might present a conflict of interest with the duties of the 
office to which you have been nominated?
    Ms. Marshall. No.
    Mr. McPhie. No.
    Senator Fitzgerald. Do you know of anything, personal or 
otherwise, that would in any way prevent you from fully and 
honorably discharging the responsibilities of the office to 
which you have been nominated?
    Ms. Marshall. No, sir.
    Mr. McPhie. No.
    Senator Fitzgerald. Do you agree, without reservation, to 
respond to any reasonable summons to appear and testify before 
any duly constituted committee of Congress if you are 
confirmed?
    Ms. Marshall. Yes.
    Mr. McPhie. Yes.
    Senator Fitzgerald. If Senators have no further questions, 
and I gather there are no other Senators here, I want to thank 
you both very much for coming. Without objection, the hearing 
record will remain open for any additional statements or 
questions from Senators through 5 p.m. tomorrow. If there is no 
other business to come before the Committee, this hearing is 
adjourned.
    [Whereupon, at 3:31 p.m., the Committee was adjourned.]


                            A P P E N D I X

                              ----------                              

[GRAPHIC] [TIFF OMITTED] T8249.001

[GRAPHIC] [TIFF OMITTED] T8249.002

[GRAPHIC] [TIFF OMITTED] T8249.003

[GRAPHIC] [TIFF OMITTED] T8249.004

[GRAPHIC] [TIFF OMITTED] T8249.005

[GRAPHIC] [TIFF OMITTED] T8249.006

[GRAPHIC] [TIFF OMITTED] T8249.007

[GRAPHIC] [TIFF OMITTED] T8249.146

[GRAPHIC] [TIFF OMITTED] T8249.147

[GRAPHIC] [TIFF OMITTED] T8249.148

[GRAPHIC] [TIFF OMITTED] T8249.149

[GRAPHIC] [TIFF OMITTED] T8249.150

[GRAPHIC] [TIFF OMITTED] T8249.151

[GRAPHIC] [TIFF OMITTED] T8249.152

[GRAPHIC] [TIFF OMITTED] T8249.153

[GRAPHIC] [TIFF OMITTED] T8249.154

[GRAPHIC] [TIFF OMITTED] T8249.155

[GRAPHIC] [TIFF OMITTED] T8249.156

[GRAPHIC] [TIFF OMITTED] T8249.157

[GRAPHIC] [TIFF OMITTED] T8249.158

[GRAPHIC] [TIFF OMITTED] T8249.159

[GRAPHIC] [TIFF OMITTED] T8249.160

[GRAPHIC] [TIFF OMITTED] T8249.008

[GRAPHIC] [TIFF OMITTED] T8249.009

[GRAPHIC] [TIFF OMITTED] T8249.010

[GRAPHIC] [TIFF OMITTED] T8249.011

[GRAPHIC] [TIFF OMITTED] T8249.012

[GRAPHIC] [TIFF OMITTED] T8249.013

[GRAPHIC] [TIFF OMITTED] T8249.014

[GRAPHIC] [TIFF OMITTED] T8249.015

[GRAPHIC] [TIFF OMITTED] T8249.016

[GRAPHIC] [TIFF OMITTED] T8249.017

[GRAPHIC] [TIFF OMITTED] T8249.018

[GRAPHIC] [TIFF OMITTED] T8249.019

[GRAPHIC] [TIFF OMITTED] T8249.020

[GRAPHIC] [TIFF OMITTED] T8249.021

[GRAPHIC] [TIFF OMITTED] T8249.022

[GRAPHIC] [TIFF OMITTED] T8249.023

[GRAPHIC] [TIFF OMITTED] T8249.024

[GRAPHIC] [TIFF OMITTED] T8249.025

[GRAPHIC] [TIFF OMITTED] T8249.026

[GRAPHIC] [TIFF OMITTED] T8249.027

[GRAPHIC] [TIFF OMITTED] T8249.028

[GRAPHIC] [TIFF OMITTED] T8249.029

[GRAPHIC] [TIFF OMITTED] T8249.030

[GRAPHIC] [TIFF OMITTED] T8249.031

[GRAPHIC] [TIFF OMITTED] T8249.032

[GRAPHIC] [TIFF OMITTED] T8249.033

[GRAPHIC] [TIFF OMITTED] T8249.034

[GRAPHIC] [TIFF OMITTED] T8249.035

[GRAPHIC] [TIFF OMITTED] T8249.036

[GRAPHIC] [TIFF OMITTED] T8249.037

[GRAPHIC] [TIFF OMITTED] T8249.038

[GRAPHIC] [TIFF OMITTED] T8249.039

[GRAPHIC] [TIFF OMITTED] T8249.040

[GRAPHIC] [TIFF OMITTED] T8249.041

[GRAPHIC] [TIFF OMITTED] T8249.042

[GRAPHIC] [TIFF OMITTED] T8249.043

[GRAPHIC] [TIFF OMITTED] T8249.044

[GRAPHIC] [TIFF OMITTED] T8249.045

[GRAPHIC] [TIFF OMITTED] T8249.046

[GRAPHIC] [TIFF OMITTED] T8249.047

[GRAPHIC] [TIFF OMITTED] T8249.048

[GRAPHIC] [TIFF OMITTED] T8249.049

[GRAPHIC] [TIFF OMITTED] T8249.050

[GRAPHIC] [TIFF OMITTED] T8249.051

[GRAPHIC] [TIFF OMITTED] T8249.052

[GRAPHIC] [TIFF OMITTED] T8249.053

[GRAPHIC] [TIFF OMITTED] T8249.054

[GRAPHIC] [TIFF OMITTED] T8249.055

[GRAPHIC] [TIFF OMITTED] T8249.056

[GRAPHIC] [TIFF OMITTED] T8249.057

[GRAPHIC] [TIFF OMITTED] T8249.058

[GRAPHIC] [TIFF OMITTED] T8249.059

[GRAPHIC] [TIFF OMITTED] T8249.060

[GRAPHIC] [TIFF OMITTED] T8249.061

[GRAPHIC] [TIFF OMITTED] T8249.062

[GRAPHIC] [TIFF OMITTED] T8249.063

[GRAPHIC] [TIFF OMITTED] T8249.064

[GRAPHIC] [TIFF OMITTED] T8249.065

[GRAPHIC] [TIFF OMITTED] T8249.066

[GRAPHIC] [TIFF OMITTED] T8249.067

[GRAPHIC] [TIFF OMITTED] T8249.068

[GRAPHIC] [TIFF OMITTED] T8249.069

[GRAPHIC] [TIFF OMITTED] T8249.070

[GRAPHIC] [TIFF OMITTED] T8249.071

[GRAPHIC] [TIFF OMITTED] T8249.072

[GRAPHIC] [TIFF OMITTED] T8249.073

[GRAPHIC] [TIFF OMITTED] T8249.074

[GRAPHIC] [TIFF OMITTED] T8249.075

[GRAPHIC] [TIFF OMITTED] T8249.076

[GRAPHIC] [TIFF OMITTED] T8249.077

[GRAPHIC] [TIFF OMITTED] T8249.078

[GRAPHIC] [TIFF OMITTED] T8249.079

[GRAPHIC] [TIFF OMITTED] T8249.080

[GRAPHIC] [TIFF OMITTED] T8249.081

[GRAPHIC] [TIFF OMITTED] T8249.082

[GRAPHIC] [TIFF OMITTED] T8249.083

[GRAPHIC] [TIFF OMITTED] T8249.084

[GRAPHIC] [TIFF OMITTED] T8249.085

[GRAPHIC] [TIFF OMITTED] T8249.086

[GRAPHIC] [TIFF OMITTED] T8249.087

[GRAPHIC] [TIFF OMITTED] T8249.088

[GRAPHIC] [TIFF OMITTED] T8249.089

[GRAPHIC] [TIFF OMITTED] T8249.090

[GRAPHIC] [TIFF OMITTED] T8249.091

[GRAPHIC] [TIFF OMITTED] T8249.092

[GRAPHIC] [TIFF OMITTED] T8249.093

[GRAPHIC] [TIFF OMITTED] T8249.094

[GRAPHIC] [TIFF OMITTED] T8249.095

[GRAPHIC] [TIFF OMITTED] T8249.096

[GRAPHIC] [TIFF OMITTED] T8249.097

[GRAPHIC] [TIFF OMITTED] T8249.098

[GRAPHIC] [TIFF OMITTED] T8249.099

[GRAPHIC] [TIFF OMITTED] T8249.100

[GRAPHIC] [TIFF OMITTED] T8249.101

[GRAPHIC] [TIFF OMITTED] T8249.102

[GRAPHIC] [TIFF OMITTED] T8249.103

[GRAPHIC] [TIFF OMITTED] T8249.104

[GRAPHIC] [TIFF OMITTED] T8249.105

[GRAPHIC] [TIFF OMITTED] T8249.106

[GRAPHIC] [TIFF OMITTED] T8249.107

[GRAPHIC] [TIFF OMITTED] T8249.108

[GRAPHIC] [TIFF OMITTED] T8249.109

[GRAPHIC] [TIFF OMITTED] T8249.110

[GRAPHIC] [TIFF OMITTED] T8249.111

[GRAPHIC] [TIFF OMITTED] T8249.112

[GRAPHIC] [TIFF OMITTED] T8249.113

[GRAPHIC] [TIFF OMITTED] T8249.114

[GRAPHIC] [TIFF OMITTED] T8249.115

[GRAPHIC] [TIFF OMITTED] T8249.116

[GRAPHIC] [TIFF OMITTED] T8249.117

[GRAPHIC] [TIFF OMITTED] T8249.118

[GRAPHIC] [TIFF OMITTED] T8249.119

[GRAPHIC] [TIFF OMITTED] T8249.120

[GRAPHIC] [TIFF OMITTED] T8249.121

[GRAPHIC] [TIFF OMITTED] T8249.122

[GRAPHIC] [TIFF OMITTED] T8249.123

[GRAPHIC] [TIFF OMITTED] T8249.124

[GRAPHIC] [TIFF OMITTED] T8249.125

[GRAPHIC] [TIFF OMITTED] T8249.126

[GRAPHIC] [TIFF OMITTED] T8249.127

[GRAPHIC] [TIFF OMITTED] T8249.128

[GRAPHIC] [TIFF OMITTED] T8249.129

[GRAPHIC] [TIFF OMITTED] T8249.130

[GRAPHIC] [TIFF OMITTED] T8249.131

[GRAPHIC] [TIFF OMITTED] T8249.132

[GRAPHIC] [TIFF OMITTED] T8249.133

[GRAPHIC] [TIFF OMITTED] T8249.134

[GRAPHIC] [TIFF OMITTED] T8249.135

[GRAPHIC] [TIFF OMITTED] T8249.136

[GRAPHIC] [TIFF OMITTED] T8249.137

[GRAPHIC] [TIFF OMITTED] T8249.138

[GRAPHIC] [TIFF OMITTED] T8249.139

[GRAPHIC] [TIFF OMITTED] T8249.140

[GRAPHIC] [TIFF OMITTED] T8249.141

[GRAPHIC] [TIFF OMITTED] T8249.142

[GRAPHIC] [TIFF OMITTED] T8249.143

[GRAPHIC] [TIFF OMITTED] T8249.144

[GRAPHIC] [TIFF OMITTED] T8249.145

[GRAPHIC] [TIFF OMITTED] T8249.161

[GRAPHIC] [TIFF OMITTED] T8249.162

[GRAPHIC] [TIFF OMITTED] T8249.163

[GRAPHIC] [TIFF OMITTED] T8249.164

[GRAPHIC] [TIFF OMITTED] T8249.165

[GRAPHIC] [TIFF OMITTED] T8249.166

[GRAPHIC] [TIFF OMITTED] T8249.167

[GRAPHIC] [TIFF OMITTED] T8249.168

[GRAPHIC] [TIFF OMITTED] T8249.169

