[Senate Hearing 108-895]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-895

             UNITED STATES OLYMPIC COMMITTEE (USOC) REFORM

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

                                HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 13, 2003

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation




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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                JOHN B. BREAUX, Louisiana
GORDON SMITH, Oregon                 BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois        RON WYDEN, Oregon
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
                                     FRANK LAUTENBERG, New Jersey
      Jeanne Bumpus, Republican Staff Director and General Counsel
             Robert W. Chamberlin, Republican Chief Counsel
      Kevin D. Kayes, Democratic Staff Director and Chief Counsel
                Gregg Elias, Democratic General Counsel




                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 13, 2003................................     1
Statement of Senator Boxer.......................................    45
    Article dated September 1, 2002, from The San Francisco 
      Chronicle, entitled Could Grudge Foil San Francisco's Bid?.    46
Statement of Senator Burns.......................................     3
Statement of Senator McCain......................................     1
Statement of Senator Stevens.....................................     2

                               Witnesses

Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado........     4
D'Alessandro, David F., Chairman and CEO, John Hancock Financial 
  Services, Inc..................................................    23
    Prepared statement...........................................    25
DeFrantz, Anita L., Olympic Medalist; Executive Board Member, 
  U.S. Olympic Committee; Vice President, International Rowing 
  Federation; Member, International Olympic Committee............    33
    Prepared statement...........................................    35
de Varona, Donna, Olympian and Sports Commentator; Co-Chair, 
  Government Relations Committee, U.S. Olympic Committee.........    15
    Prepared statement...........................................    19
Fehr, Donald, Executive Director, Major League Baseball Players 
  Association; Public Sector Member, U.S. Olympic Committee......    38
    Prepared statement...........................................    41
Fielding, Fred F., Partner, Wiley, Rein & Fielding...............     6
    Prepared statement...........................................     9
Schiller, Harvey W., President and CEO, Assante U.S.; Former 
  Executive Director, U.S. Olympic Committee; Chairman, 
  Management Committee for NYC 2012..............................    28
    Prepared statement...........................................    30

                                Appendix

Lautenberg, Frank, U.S. Senator from New Jersey, prepared 
  statement......................................................    55
Moore, Jr., Charles H., Executive Director, Committee to 
  Encourage Corporate Philanthropy, prepared statement...........    55

 
             UNITED STATES OLYMPIC COMMITTEE (USOC) REFORM

                              ----------                              


                      THURSDAY, FEBRUARY 13, 2003

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:30 a.m. in room 
SR-253, Russell Senate Office Building, Hon. John McCain, 
Chairman of the Committee, presiding.

            OPENING STATEMENT OF HON. JOHN McCAIN, 
                   U.S. SENATOR FROM ARIZONA

    The Chairman. The Committee will come to order. I welcome 
the witnesses who are appearing before the Committee today, and 
thank those who made special arrangements to be here. I would 
like to reiterate my appreciation for the efforts and support 
of Senators Stevens and Campbell.
    The purpose of this hearing is to begin the process of 
examining the current organizational structure and culture of 
the United States Olympic Committee and consider what 
legislative reforms are needed to ensure that the USOC operates 
more effectively and efficiently. It is important that the 
organization functions in a manner that places emphasis on 
athletes rather than personal and organizational interests, as 
intended by the 1978 Amateur Sports Act.
    The Committee held a hearing 2 weeks ago to examine the 
turmoil among USOC leaders that ultimately led to congressional 
intervention. Since that time, the USOC president and the chief 
marketing officer have both resigned, and the USOC Executive 
Committee has formed an internal governance and ethics review 
task force that is expected to provide its report and 
recommendations to the USOC board of directors in April.
    While I do not oppose any effort by the USOC to conduct an 
internal review--in fact, I encourage it--I feel that the 
proposed task force will amount to possibly nothing more than a 
reshuffling of chairs on the deck of the Titanic. I believe 
that in order to better ensure the future credibility of the 
USOC movement an independent and objective analysis of the 
current organizational structure and culture is necessary.
    The Olympic movement is not about people who attach 
themselves to the organization for their own benefit. It is a 
movement that is driven by athletes who pour their souls into 
improving their God-given talents with the hope of some day 
realizing their Olympic dreams. The American people have 
entrusted the USOC with the privilege of serving as the 
custodian of the athletes' dreams, but time and again the USOC 
has breached that trust.
    The athletes appear to be nothing more than an after-
thought in the eyes of this ever-growing behemoth of an 
organization. Recent comments by highly respected corporate 
sponsors, reporters, and international Olympic officials, 
referring to the USOC as dysfunctional, cannibalistic, and a 
nincompoop, have been embarrassing and destructive to the 
credibility of the USOC. We must restore faith in this 
organization in the eyes of our athletes, the American people 
and the international sports community.
    To do this, we must first be sure that the structure of the 
organization is in line with the USOC mission to ``preserve and 
promote the Olympic ideal as an effective, positive model that 
inspires all Americans.''
    The Commerce Committee oversees Olympic issues, and has a 
responsibility to ensure that the USOC operates effectively. I 
hope that the USOC will cooperate with this Committee and be 
mindful that its charter is a privilege bestowed upon it, and 
that the charter can be easily revoked and placed in the hands 
of those who may be better qualified to preserve its trust.
    I thank the witnesses again for being here, and I look 
forward to your testimony.
    Senator Stevens.

                 STATEMENT OF HON TED STEVENS, 
                    U.S. SENATOR FROM ALASKA

    Senator Stevens. Mr. Chairman, thank you very much for 
holding this hearing.
    I think we should state at the beginning, for the people 
who are here, or listening to this, that at the time we are 
talking now there is a briefing going on by Governor Ridge, or 
Secretary Ridge on the security matters that affect our 
country. The four of us happen to serve on two committees that 
receive those briefings on a classified basis anyway, so I am 
pleased we are able to be here and conduct this hearing that 
you have scheduled so that there will not be another disruption 
in this process.
    I thank you for holding the hearing. Senator Campbell and I 
look forward to working with you on it.
    During the last hearing, Mr. Chairman, you and Senator 
Campbell and I mentioned how disappointed we were that the 
focus of the articles that were appearing at that time in the 
newspapers were about failures of governance and not about 
athletes. It really saddens me to note that athletes have 
finally come into this picture, but the stories and the 
articles are about athletes who are now facing the problem of 
not having the funds that they were counting upon because the 
USOC has decided to use those funds for internal restructuring.
    That internal restructuring, I assume, must be done, but I 
am disturbed that a fund that was set aside and dedicated to 
athletes was allocated for that purpose. I personally want to 
put the USOC on notice that that is not acceptable.
    We are intent upon trying to save what is left of the USOC 
emphasis on athletes, and it certainly is not conducive to 
coming to an agreement with this panel, in my opinion, to 
remove funds from those allocated for athletes to--and this is 
a little harsh, perhaps, but to use those to save the little 
fiefdoms that have been created in the USOC which were not 
intended by this law.
    Now, I am hopeful that I will be able to stay with you, Mr. 
Chairman. Unfortunately, we have just finished this enormous 
appropriations bill, and I think I am going to be called away. 
I can think of nothing that I am more proud of in my career 
than having worked with the Ford Commission and with the USOC 
over the years. It was just a matter of a few years that the 
USOC, which was hardly efficient at all, turned into one of 
the, if not the most important Olympic organization in the 
world, and I am saddened to see it slip so hard, so deeply, and 
I hope that working together, we may find a way to refashion 
this law so that that cannot--first it will be restructured 
properly, and that cannot happen again.
    Again, I thank you for this, and I look forward to the trip 
we are going to make to Colorado Springs to talk to some of the 
athletes and the people involved in the administration of this 
concept, the USOC, that is, who are not really on an advisory 
level and not one of an enormous board of directors, but the 
people who work daily to try to try to assure that these 
athletes can achieve their dreams. We have a very broad 
spectrum of people on this panel now, and I think they are all 
dedicated to the future of the USOC.
    I want to take a moment to welcome my good friend Donna de 
Varona. I do not know of anyone who has been through this 
process more than she has. Senator Magnuson, Mr. Chairman, 
hired--well, I do not know if hired is a good word, but 
retained her services to consult with us as an athlete at the 
time we considered this legislation in the first instance. She 
was on the Ford Commission, and has worked throughout her life 
to try to improve the conditions for athletes who follow in her 
distinguished record in the Olympics.
    So I look forward to listening to all of these witnesses, 
Mr. Chairman, but I am a little uptight, because I do not like 
to see a program that we put together and gave sound footing 
unravel because of personalities and personal ambitions. I hope 
that day is over.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Stevens, and again I want 
to reiterate my appreciation for your long involvement in this 
issue. I do believe that it needs fundamental restructuring, 
and I believe that you and I and Senator Campbell and other 
Members of this Committee can see this thing through to a 
conclusion, and I thank you, and I know you may have to leave 
to steward one of my favorite bills through the Congress here 
very soon.
    [Laughter.]
    Senator Stevens. I am looking forward to more of your 
statements, Mr. Chairman.
    The Chairman. Senator Burns.
    Senator Burns. I think Senator Campbell was here first.
    The Chairman. Senator Campbell, go ahead.
    Senator Campbell. I would yield to Senator Burns.

                STATEMENT OF HON. CONRAD BURNS, 
                   U.S. SENATOR FROM MONTANA

    Senator Burns. My statement will be very, very brief. I 
have to go to the briefing, too. We are involved in the same 
issue in appropriations, but we hear this great thing, it is 
great to be in public service, and I think we miss the 
definition of that is, we serve the public. And as in a 
government bureaucracy who tend to forget why they are there, 
as sort of happened to the USOC, but I think for those of us 
who have not been that involved with the Olympics, I will tell 
you that the American people are only concerned about two 
things, and that is accountability and credibility, or you will 
lose your public support, and when you lose your public 
support, we will lose the real meaning of the Olympics.
    You are not there for self-serving, you are there to serve, 
and I just want to--just two words I want you to remember are 
accountability and credibility, and that is what is at stake 
here. If you have neither, you will not have an organization 
that can contribute anything to a greater life for any of us.
    Thank you very much, Mr. Chairman, for holding this 
hearing. Thank you for the involvement of Senator Campbell and 
yourself and Senator Stevens, who has been around this 
subject--we accompanied Senator Stevens to Athens one time and 
had a wonderful experience out there, and especially his work 
with Special Olympics, and that should be noted for the record, 
because he has been a champion, but he is also concerned about 
these two words right here. They are very small words, but boy, 
do they pack a lot of meaning and power with the American 
public.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Burns. Senator Campbell.

          STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, 
                   U.S. SENATOR FROM COLORADO

    Senator Campbell. Thank you, Mr. Chairman. First let me 
associate myself with the words of Senator Stevens about our 
friend, Donna de Varona. Donna and I were team mates in 1964, 
but just by chance, I think I met her for the first time when 
she was 16, swimming at the Santa Clara Swim Club in 
California, and I was a student at San Jose State University, 
right across town, and I used to go over and watch them train 
in swimming. George Haynes was her coach in those days, and he 
was, I mean, breaking all kinds of new training methods and 
turning out champions like you would not believe, and Donna was 
one of the really great ones in the pool, and we certainly 
welcome her.
    I would also like, before I make my statement, Mr. 
Chairman, to clarify the record. I was reading, a story in Roll 
Call that I stated took Mr. Ward to task last time about his 
membership in the Augusta Golf Club, but the story implied that 
I somehow do not think it is wrong for Senators to belong to 
the same kinds of clubs, and I would like the record to reflect 
I do not care who they are, Senators or not, they should not 
belong to a club or a group that discriminates against women or 
minorities or racial differences or gender differences or 
anything else. It is just as wrong for Senators, it is wrong 
for private citizens, and I wanted the record to reflect that.
    At our last hearing regarding the problems faced by the 
USOC, I also stated that the ongoing internal fights within the 
USOC structure could only hurt the athletes, and according to a 
story that was in Tuesday's USA Today, I think Senator Stevens 
alluded to that, that is already happening.
    This story said that the USOC is going to set aside $2.5 
million in their budget for two purposes, $1.5 million for the 
restructuring of their committees to confirm to congressional 
demands, and $1 million to repair the damaged public relations 
image. The article went on to say that that allocation had 
delayed the decision by the USOC officials to give an extra 
$3.5 million to the athletes and their national governing 
bodies. Clearly, that money should have gone to helping the 
athletes, there is no question about it.
    There is a big wrestler out there in Colorado Springs now 
training named Rulon Gardner, who I have met several times. He 
came out of Wyoming. He was the 2000 gold medalist in Greco-
Roman wrestling, who defeated the previously undefeated three-
time gold medal winner from Russia named Alexander Karelin. You 
may have read that story. This guy had not been defeated in 14 
years of international competition. He is like a wrestling god 
in most of Europe.
    And Rulon I think said it best when he said, why can't they 
figure out where they can take it out of their budget? It 
should not affect the athletes, because the athletes did not 
create the problem, and Rulon is absolutely right. And he, like 
many other young Americans, are doing their best to represent 
this Nation with honor and dignity, and they are doing it in 
spite of a sometimes self-serving bureaucracy.
    To be clear, the vast majority of athletes, coaches, 
trainers, officials, are doing what I think is an admirable job 
trying to get the USOC back on track, but there is no question 
in my mind that it is not going to be easy, and it is going to 
require some downsizing and some streamlining.
    When Ms. Mankamyer resigned, she said there was no 
possibility of peace unless she did resign, and I think that is 
probably a fair statement to make. I would like to also note 
that yet another high-ranking USOC staffer has resigned, too, 
according to the press, Toby Wong, who had only worked for the 
USOC for 10 months. She was the chief marketing officer. She 
was just hired last April, and her exit was just made a few 
days ago, and it just reinforces my belief that a partial 
housecleaning is not going to cure the problems.
    We have received three calls in our office, because I 
represent Colorado in Colorado Springs, three calls in our 
office from employees of the USOC, and I know this hearing is 
supposed to deal with structure and not personalities, but I 
think I need to put this in the record. These calls all said 
basically the same thing, that Ms. Wong had hired an attorney, 
and was about to file a sexual harassment suit against a top-
level USOC official, whose name I will not mention, but I do 
not know if those calls are partly wrong, or all wrong, or 
partly right, or all right, or what, but in my view, we should 
find out.
    If that is a common practice--the reported severance 
package after 10 months was a six-figure package in addition to 
a salary. I would like to know if that is a common practice for 
the USOC, or if that was, in lieu of a better term, some kind 
of hush money for her not to proceed with a lawsuit, and I 
would just ask you if there is a possibility of having Ms. Wong 
come before this Committee and telling us why she resigned and 
what happened.
    And with that, I have a number of other quiet and refined 
comments that I would like to make as we move along through the 
hearing.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Our first witness is Mr. Fred Fielding, if he would come 
forward. Welcome, Mr. Fielding. Please proceed with your 
opening statement.

            STATEMENT OF FRED F. FIELDING, PARTNER, 
                     WILEY, REIN & FIELDING

    Mr. Fielding. Thank you, Mr. Chairman, distinguished 
Members of this Committee.
    Senator Stevens. Would you pull that mike toward you, Mr. 
Fielding?
    Mr. Fielding. Is that better, sir?
    At the outset, I would again like to express my apologies 
to this Committee for not being present at your last hearing. 
Although I did have a prior engagement out of town, I am 
really, truly sorry for any inconvenience I may have caused the 
Committee in your deliberations, and I want to assure you that 
by my absence, I did not intend in any way to mean any 
disrespect to the Committee or to the importance of what the 
Committee is looking into.
    Mr. Chairman, after a meeting of the Ethics Oversight 
Committee of the USOC on October 24, 2002, I was retained by 
its chairman, Kenneth Duberstein, to conduct an independent 
internal investigation in regard to allegations that were 
presented to that committee by the chief ethics officer of the 
USOC, Mr. Patrick Rodgers, concerning certain conduct of the 
CEO, Mr. Lloyd Ward.
    Mr. Rodgers briefed me on this assignment and provided the 
facts and materials he had gathered, and I was specifically 
directed to obtain any additional information basically on two 
areas, first, since he had not interviewed Mr. Ward, to find 
out if Mr. Ward had a financial interest in his brother's 
companies and, second, whether there were any other related 
communications between Lloyd Ward, his brother, and a Mr. 
Hernando Madronero, who was, in fact, the gentleman in question 
later on, and that information was to be determined by me in an 
interview with Mr. Madronero, with the results provided to the 
committee before the committee would proceed further.
    I was also advised the oversight committee would reconvene 
upon the completion of my preliminary investigation.
    When I undertook this assignment, I suggested and was 
granted permission to expand my charter to permit direct 
interviews of others potentially having knowledge of this 
incident beyond Mr. Madronero.
    By way of process, I reviewed all the documents that were 
provided to me by Mr. Rodgers, as well as the relevant USOC 
policies and notes of the Ethics Committee meetings related to 
this charge. I also checked indices, public resources in regard 
to EMT, which was the company that Mr. Ward's brother was 
involved with, and its parent company, West Bank Holdings, and 
compared notes with Mr. Rodgers in this regard, as he has done 
the same thing, and advised me he had.
    I then conducted a series of interviews with the 
individuals that I determined as a result of information 
brought to my attention, and in some instances, I had followup 
interviews with these people, and each of my interviews was 
conducted telephonically, which is not my preferred method of 
interviewing, but is an effective method, and certainly much 
more economical, and the method that was requested by Mr. 
Rodgers.
    Upon completion of my interviews, and the fact-finding, and 
in anticipation of the oversight committee's meeting, on 
November 21, I had a briefing and a telephonic oral report of 
my findings to Chairman Duberstein and to Mr. Rodgers. At that 
time, they decided that they would not proceed with a telephone 
hearing, and on the next day, I was advised by the chairman 
that I should provide a written summary of my determinations 
and my findings so that everyone on the committee would have 
the same access to the same information.
    At or about that time, I was also advised by Chairman 
Duberstein and by Mr. Rodgers that Mr. Rodgers had agreed to 
recuse himself from further participation since he had been 
factually involved, and also, it had come out, and was told to 
me by Mr. Duberstein and Mr. Rodgers that Rodgers and Ward had 
had some disagreements over Mr. Rodgers' work performance.
    In early December, Mr. Rodgers advised me that he had 
discovered additional documents in Mr. Madronero's office, 
including a presentation made by EMT to the Pan Am Organizing 
Committee, and he was going to review that presentation to 
determine whether it had any unique information that was 
exclusively USOC property, or had been derived from USOC 
documents, and he later advised me that that review was not 
conclusive.
    Subsequently, in December, Mr. Rodgers advised me that 
President Mankamyer had been discussing the EMT proposal with 
officials in Santo Domingo, and had determined that those 
discussions were still ongoing, and I did not attempt to 
interview the president on any of this, and I so advised the 
oversight committee, as it was already clear that discussions 
had occurred through my interview with Mr. Madronero.
    And at that time, I did question Mr. Rodgers as to whether 
he had counseled the president on the propriety of her 
conducting an ethics investigation and also discussing the 
charges about Mr. Ward outside of the oversight committee's 
purview with others, and he said that President Mankamyer had 
told him that was part of her management review of Mr. Ward, 
and she was preparing for the January board meeting, at which 
time his compensation would be discussed.
    On December 16, I submitted my written internal 
investigation report to Chairman Duberstein. Now, questions 
have been raised as to why my report, or the oversight 
committee's report had no recommendations. In simple response 
in regard to my report and this assignment, as had been in 
prior assignments for the USOC, I was asked to merely provide a 
factual report to the committee, and actually it was phrased, a 
preliminary report, in the written instructions that I 
received. I was further told that the committee, the Ethics 
Committee had been specifically directed by the president to 
provide no recommendations to the Executive Committee, but only 
to report its conclusions.
    The oversight committee did meet telephonically on December 
23 and again on January 8 to discuss the results of my 
investigation as well as other information that had been 
developed and was in its possession, and at the latter meeting 
to also carefully review the wording of its report to the 
Executive Committee.
    I was invited to attend both those meetings, and so I can 
advise this Committee that the meetings were lengthy, 
thoughtful discussions. They reached the following conclusions, 
and I should add that these conclusions were unanimous.
    First, that Mr. Ward's actions created the appearance of a 
conflict of interest, and he later failed to make a written 
disclosure of this relationship with his brother, both actions 
clearly contrary to the ethics code.
    Second, that there was a serious lack of sensitivity by Mr. 
Rodgers, the ethics officer, in enforcing the ethics code, 
which could have corrected Mr. Ward's conduct at the time it 
initially occurred, and would have prevented his further 
conduct and his further violations.
    And there were actions by the president, this was the last 
conclusion, by the president and other USOC officials, 
especially in leaking of information, which violated the ethics 
code and abused the ethics oversight process.
    By information sent to the committee, not to me, but to the 
committee, the president also attempted to introduce a charge 
of alleged bribery by EMT into the committee's debate, and the 
committee discussed this at some length, and it was the 
unanimous conclusion that that information was not relevant to 
the deliberations on the conduct of Mr. Ward. Although I was 
not asked for my recommendations--specifically as to what to 
do--by the oversight committee, at the first meeting one of the 
members did ask if I had any other observations for them as a 
result of my interviews.
    I responded that this ethics program, like any ethics 
program, can survive only, and can really work only if it is 
viewed by everyone as fair, equitable, has bright lines of 
acceptable conduct, and is not marred and is totally 
independent of politics, personalities, workplace issues. 
Unfortunately, from my interviews, I advised them, it was clear 
that there was a very unhealthy atmosphere within this 
organization.
    There was open hostility between the CEO and the president. 
It was known to everyone. There was a history of spying on each 
other. There was a history of feuding openly. Worse still, 
there was a feeling among some of those interviewed that the 
ethics officer himself had taken sides in the case and should 
have recused himself from the probe from the beginning.
    The discussions and the deliberations of the Ethics 
Committee were thorough and candid, they were detailed, and 
they were careful. The precise wording of the final report was 
cleared after that meeting with every member, not by me, but by 
the vice chairman, I believe. Further, after some questions by 
one or two members who had already agreed to attend, it was 
decided unanimously that no one from the Ethics Committee would 
attend the Executive Committee meeting, that the report would 
speak for the Ethics Oversight Committee, and after precautions 
were made by the oversight committee to mitigate the 
possibility of leaks, it was distributed, along with my 
investigative report, to all the members of the Executive 
Committee and also to Mr. Ward.
    That would conclude my testimony, Mr. Chairman.
    [The prepared statement of Mr. Fielding follows:]

Prepared Statement of Fred F. Fielding, Partner, Wiley, Rein & Fielding
    Mr. Chairman and other distinguished Members of the Committee:
    At the outset, I would like to again express my sincere apologies 
for not being present at your last hearing. Although I did have a prior 
commitment out of the city, I am truly sorry for any inconvenience my 
absence caused and I want to assure the Chair and the Members that by 
my absence I meant no disrespect to the Committee or to the importance 
of its investigation.
    I am advised that I have been released from my obligation to 
preserve the attorney-client privilege and relationship in regard to 
this matter, so I am prepared to provide any information I can.
    Mr. Chairman, after a meeting of the Ethics Oversight Committee of 
the USOC on October 24, 2002, I was retained as counsel by its 
Chairman, Kenneth Duberstein, to conduct an independent internal 
investigation in regard to allegations presented to the Committee by 
the USOC Chief Ethics Compliance Officer, Mr. Patrick Rodgers, 
regarding certain conduct of USOC CEO Lloyd Ward.
    Mr. Rodgers briefed me on this assignment and the facts and 
materials he had gathered, and I was specifically directed as follows 
to obtain any additional information concerning:

   ``The financial interest of Lloyd Ward in his brother's 
        company Energy Management Technologies (EMT) and its parent 
        company West Bank Holdings, LLC.

   Whether or not there were other related communications 
        between Lloyd Ward, Hernando Madronero, Rubert Ward and other 
        USOC staff (information to be determined by interview with 
        Hernando Madronero with results provided to Ethics Oversight 
        Committee before preceding (sic) further).''

    I was advised that the Oversight Committee would reconvene upon 
completion of my preliminary investigation.
    Upon undertaking this assignment, I suggested and was granted 
permission to expand my charter to permit interviews of others 
potentially having knowledge of this incident beyond Mr. Madronero.
    By way of process, I reviewed all documents provided to me by Mr. 
Rodgers, as well as the relevant USOC policies and notes of the Ethics 
Committee meeting related to this charge. I also checked relevant 
indices and public sources in regard to EMT and its parent company, 
West Bank Holdings, LLC, and compared notes with Mr. Rodgers in this 
regard as he had done the same. I then conducted a series of interviews 
with individuals determined by me as the result of information brought 
to my attention, and in some instances, I had follow-up interviews. 
Each of my interviews was conducted telephonically, which is not my 
preferred method of interviewing, but is an effective method and 
certainly much more economical, and was the method requested by Mr. 
Rodgers.
    Upon completion of my interviews and fact-finding, and in 
anticipation of an Oversight Committee meeting, on November 21 I made a 
brief telephonic oral report of my findings to Chairman Duberstein and 
Mr. Rodgers. The next day, I was advised by the Chairman that I should 
prepare a written summary of my fact-finding, so all members of the 
Committee would have complete access to the information. At or about 
this time I was advised by both Chairman Duberstein and Mr. Rodgers 
that Mr. Rodgers had agreed to recuse himself from further 
participation since he was factually involved and also he and Mr. Ward 
had disagreed over Mr. Rodgers' work performance.
    In early December, Mr. Rodgers advised me that he had discovered 
additional documents in Mr. Madronero's office, including a 
Presentation made by EMT to the Pan Am Organizing Committee. He was 
going to review the Presentation to determine whether it contained 
information that would have been derived exclusively from USOC 
documents; he later advised me that his review could not conclusively 
determine that. Subsequently in December, Mr. Rodgers advised me that 
President Mankamyer had been discussing the EMT proposal and the probe 
with officials in Santo Domingo, and had determined that discussions 
were still ``on-going.'' I did not attempt to interview President 
Mankamyer on any of this (and so advised the Oversight Committee) as it 
was already clear that such discussions had occurred, through the 
interview of Mr. Madronero. At that time I did question whether Mr. 
Rodgers had counseled the President as to the propriety of her 
conducting an ``ethics investigation'' and discussing the charges about 
Mr. Ward with others; he said Ms. Mankamyer had told him that this was 
part of her management review of Mr. Ward in preparation for the 
January Board meeting to discuss his compensation.
    On December 16, I submitted my written Internal Investigation 
report to Chairman Duberstein. Questions have been raised as to why my 
report or the Oversight Committee's Report had no recommendations. In 
simple response, in this assignment, as in prior ones for the USOC, I 
was asked to merely provide a factual report to the Committee. I was 
further told that the Committee had been specifically directed by the 
President to provide no recommendations to the Executive Committee, but 
only to report its conclusions.
    The Oversight Committee met telephonically on December 23 and 
January 8 to discuss the results of my investigation, as well as other 
information in its possession, and at the latter meeting to also 
carefully review the wording of its Report to the Executive Committee. 
I was invited to attend both meetings, and so can advise you that the 
Committee had lengthy and thoughtful discussions, and reached the 
following conclusions, unanimously:

   Mr. Ward's actions created the appearance of a conflict and 
        he later failed to make a written disclosure of this 
        relationship (both actions clearly contrary to the Ethics 
        Code).

   There was a serious lack of sensitivity by Mr. Rodgers in 
        enforcing the Ethics Code, which could have corrected Mr. 
        Ward's conduct at the time it initially occurred and prevented 
        his further conduct and violations.

   There were actions by the President and other USOC 
        officials, especially in leaking information, which violated 
        the Ethics Code and abused the ethics oversight process.

    By information sent to Committee members, but not to me, the 
President attempted to introduce a charge of alleged bribery by EMT 
into the Committee's debate; it was discussed fully and the unanimous 
conclusion was that that information was not relevant to its 
deliberations on the conduct of Mr. Ward. Although I was not asked for 
my recommendations by the Oversight Committee, at the first meeting one 
of the members asked if I had any other observations from my review. I 
responded that this Ethics program, or any such program, can only 
survive and really work if it is viewed by all as fair and equitable, 
has bright lines of acceptable conduct and is independent of politics, 
personalities and work place issues. Unfortunately, from my interviews 
it was clear there was a ``very unhealthy atmosphere'' within the USOC, 
where the open hostility between the CEO and the President was known to 
all, with a history of spying and feuding. Worse still, there was a 
feeling among some interviewed that the Ethics Officer had taken sides 
in this case and should have recused himself from any probe.
    The discussions and deliberations of the Ethics Committee were 
thorough, careful, detailed and candid. The precise wording of its 
final Report was cleared with every member.
    Further, after some questions by one or two members who had already 
agreed to attend, it was the unanimous decision of the Ethics Committee 
that no member of the Committee would attend the Executive Committee 
meeting--their Report would speak for the Ethics Committee.
    After precautions were taken by the Oversight Committee and the 
General Counsel to prevent the premature disclosure of the Report, it 
was distributed along with my investigative report to the Executive 
Committee and to Mr. Ward.

    The Chairman. Thank you, Mr. Fielding.
    Your investigation was clearly the basis upon which the 
Ethics Committee acted. Do you believe that to be the case?
    Mr. Fielding. It certainly was the basis upon which they 
concluded what they did as far as Mr. Ward, with the addition 
of the other information that had come to them subsequent to 
the completion of my investigation, yes, sir.
    The Chairman. And although they did not make a 
recommendation, which was in violation of the bylaws of the 
mission describing the duties of the Ethics Committee, which 
clearly calls for recommendations to be made, if you had been 
asked for recommendations as to what disposition should have 
been made in this case, what would have been your 
recommendation?
    Mr. Fielding. Well, Senator, there was clearly a violation 
of the ethics code. There was more than one violation of the 
ethics code by Mr. Ward, and I assume you mean exclusively as 
to Mr. Ward, my recommendation. At that point, the governing 
authority, the executive of any entity has to make the decision 
as to whether they have a zero tolerance, or whether they have 
a policy which mitigates for performance and that sort of 
thing, so it is difficult for me to step in. But I must say to 
you there were clearly violations of the code, and there was 
clearly a very bad management situation abounding. I do not 
know how else I can embellish on that answer, sir.
    The Chairman. So you do not want to answer my question, 
which is, what recommendation would you have made, which is 
your right to do, if you do not choose to make----
    Mr. Fielding. My recommendation would be to treat this 
person as you would treat other people in your organization, 
according to your executive mandates as you see them. Most 
entities have a zero tolerance, and if this entity has a zero 
tolerance, he should have been dismissed.
    If they were looking at the entirety of the circumstances 
and concluded that there were mitigating circumstances, and 
that was the executive policy, then that is what they should 
do.
    The Chairman. How many hours did you spend in your review, 
Mr. Fielding?
    Mr. Fielding. The review, the initial review, up to----
    The Chairman. Your entire work. How many hours did it take 
you?
    Mr. Fielding. I would have to check that, sir.
    The total billing for the matter up through November, the 
end of November, which was really my initial assignment, was a 
little in excess of $15,000, and my billing rate to this 
organization is $500 an hour, so whatever the mathematics would 
work out to.
    Some of that was not exclusively with this, but I would 
consider that that was within the ballpark, and my budget for 
this was $20,000, but it has exceeded that with the additional 
work and the preparation of a written report, so that I think 
through the end of December, it was in excess of, I would say, 
$22,000, but that also included additional work outside of the 
direct assignment.
    The Chairman. Did you receive any instructions from the 
USOC when you were retained as counsel?
    Mr. Fielding. In what regard, sir?
    The Chairman. As to whether you should make recommendations 
or not.
    Mr. Fielding. Yes. My instructions were written, and 
initial instructions were to interview Mr. Ward to determine if 
he had a financial interest, and to interview Mr. Madronero to 
see if he had talked with anybody else, and to report back to 
the committee, and then, the committee would make the 
decisions.
    I was only to make a fact-finding to the committee. I asked 
that it be expanded so that I could interview other people, 
because I did not think it would be complete without at least 
the interviews. But my function, as I understood it and as it 
was written, was strictly a fact-finding function.
    The Chairman. Well, I thank you, Mr. Fielding, and I find 
it interesting that you can conduct an investigation and get 
$22,000 for it, and then not find time to appear before this 
Committee when you were requested.
    Senator Stevens.
    Senator Stevens. Mr. Fielding, just to get this in focus, 
the chairman at that time, of the USOC, really--I take it she 
was then the president--was not compensated, right? She was 
volunteer?
    Mr. Fielding. Yes. The president--as I understand the USOC, 
the president--I am sorry, the president is not compensated. 
The CEO is compensated. There is a dichotomy of the staffing.
    Senator Stevens. And to make sure we all understand this 
now, the CEO is Mr. Ward, right?
    Mr. Fielding. That is correct, sir.
    Senator Stevens. And he is full-time?
    Mr. Fielding. It is my understanding he is full-time, full 
compensation plus options.
    Senator Stevens. Is Mr. Rodgers a full-time ethics 
compliance officer?
    Mr. Fielding. He was, sir.
    Senator Stevens. Responsible to the CEO?
    Mr. Fielding. Responsible to the CEO, and from my reading 
of the documents, he is responsible to the Ethics Oversight 
Board as well.
    Senator Stevens. Now, what was the role of Mr. Madronero?
    Mr. Fielding. Madronero. His role was--I believe he was in 
charge of the international section, whatever--however they 
divvy it up, and part of the problem that Mr. Ward was having 
with him, as Mr. Ward told me, and as he told me, was that 
there was a dispute as to whose jurisdiction was international, 
whether it was the president, the voluntary president, or the 
CEO, who was the paid staff.
    Senator Stevens. Was Madronero, was he a permanent 
employee?
    Mr. Fielding. Yes, sir.
    Senator Stevens. An employee of the USOC?
    Mr. Fielding. A paid employee, yes, sir.
    Senator Stevens. Did you have a hand in writing the ethics 
code?
    Mr. Fielding. No, I did not.
    Senator Stevens. That was there before you were retained?
    Mr. Fielding. That is right, sir.
    Senator Stevens. Have you made other ethics investigations 
for the USOC?
    Mr. Fielding. No. The only related type of work I have done 
for the USOC was, I conducted the vetting, if you will, for the 
president, and for then the vice president, two separate 
assignments.
    Senator Stevens. Who retained the CEO? Was that done by the 
board, or by the president herself?
    Mr. Fielding. I do not now. I believe it was by the board, 
but I do not know.
    Senator Stevens. It does seem to be sort of a strange 
relationship here, and particularly in terms of the EMT 
reference. Did you ever get called on to discuss the 
relationship to EMT and that accusation of bribery?
    Mr. Fielding. The EMT accusation came up late, really after 
I had finished my investigation, but when I was preparing the 
documents for the committee. We discussed it at some length at 
the first oversight committee meeting, at the time I was in--
December 23, and the decision was not to go forward with it 
because it really did not relate to Mr. Ward, per se, as to his 
conduct, and Mr. Duberstein was going to advise the president 
that although we had received this information from her, that 
we did not feel this was in the purview of the oversight 
committee at this juncture.
    There was some concern expressed as to whether this was a 
violation of the Foreign Corrupt Practices Act. There was some 
discussion as to whether we, having received this information, 
that the president had an affirmative obligation to do 
something in response. But, the decision of the committee was 
to refer it back to her, and advise her that we were not 
considering that an aspect of Mr. Ward's conduct.
    Senator Stevens. Well, my staff counsel tells me that the 
board can hire and fire the CEO. The president does not have 
that power. Did you realize that?
    Mr. Fielding. I guess I assumed that. I did not realize 
that.
    Senator Stevens. That leads me to have a question--we have 
to know a little bit more about what the role of the Executive 
Committee here from the board is.
    Mr. Fielding. Right.
    Senator Stevens. You were meeting with the Executive 
Committee of the board, were you not?
    Mr. Fielding. No, sir, I did not meet with them at all. I 
was working exclusively with the oversight committee which 
reported to the Executive Committee.
    Senator Stevens. I see. I gathered from your statement that 
there was unanimous consent of the Ethics Committee that no 
member of the committee would attend the Executive Committee 
meeting. Their report would speak for the ethics committee. You 
did not attend that meeting?
    Mr. Fielding. The Executive Committee?
    Senator Stevens. Yes.
    Mr. Fielding. No, sir.
    Senator Stevens. Having been chairman of our Ethics 
Committee here, I, too, share the chairman's wonderment at 
having hired a counsel to make the report, but specifically 
directing counsel not to have any recommendations.
    Mr. Fielding. That is right, sir.
    Senator Stevens. Well, I respect your right not to answer 
that question, but I----
    Mr. Fielding. Well, I--excuse me. I will answer any 
question as best I can.
    Senator Stevens. Not you, but I mean, the chairman asked 
you, would you state your opinion now, but if you were not 
hired to make those recommendations, I do not know why we 
should go into it further right now. I just find it strange 
also that your directions were not to do that.
    Mr. Fielding. Yes, sir.
    Senator Stevens. Thank you very much.
    The Chairman. Thank you. Senator Campbell.
    Senator Campbell. Just maybe a short question or two, Mr. 
Chairman.
    Mr. Fielding, in your interviews and your fact-finding, did 
you feel at the time that there was a pattern of behavior, 
because in the last hearing we also heard of Mr. Ward's, what 
he was accused of, of directing contracts toward his daughter, 
or daughters before the EMT problem.
    Mr. Fielding. I had no information in that regard, nor did 
the ethics officer provide that to me, sir.
    Senator Campbell. Well, the Olympic Committee met--the 
Executive Board, I guess it was. I am not sure if the whole 
board met in Chicago last week. They decided to give what I 
thought was a light reprimand to Mr. Ward, and by the way, Mr. 
Chairman, we got a call about that, too, from a lady who works 
at the USOC, angrier than the dickens.
    She said that taking away his bonus, his bonus was more, 
she said, than she had earned in 10 years working for the 
United States Olympic Committee, and she was pretty upset about 
that. I just pass that on for you.
    Do you think that they came to any conclusions that they 
are going to really move ahead, whether there should have been 
a light reprimand for Mr. Ward or, even more important, the 
commission that they have talked about to study how to 
restructure, do you think that is going to do any good? I would 
like to know your recommendations, perhaps, on that, and what 
your personal view is on the reprimand, too, if you have one.
    Mr. Fielding. Well, I can give you my personal view.
    Senator Campbell. That is good enough.
    Mr. Fielding. That is all I can give you.
    Senator Campbell. Fine.
    Mr. Fielding. My personal view is that this committee as it 
is currently structured is in just total disarray. I do not 
want to use the word dysfunctional, because everybody has been 
using it, but it happens to be very apt, and when I said that 
there is an unhealthy atmosphere, that is all I can say. I 
mean, you cannot have good ethics programs, you cannot have 
good management if you have this kind of internal strife and 
the pressures that I have observed, and I have only observed 
them in this limited sense.
    Senator Campbell. Thank you.
    Mr. Chairman, in a little while I will have some 
comparative charts I would like to put up a little later in the 
hearing to just show that dysfunctionalization, or whatever 
word you want to use for it, but thanks very much for appearing 
here. I have no further questions.
    The Chairman. Mr. Fielding, you would agree this 
organization cries out for reorganization?
    Mr. Fielding. Yes, I would, sir.
    The Chairman. Thank you very much, Mr. Fielding.
    Mr. Fielding. Thank you, and again my apologies to the 
Committee.
    The Chairman. Thank you very much.
    The next panel is Mr. Donald Fehr, executive director of 
the Major League Baseball Players Association, Ms. Anita 
DeFrantz, senior member of the IOC and board member of the 
USOC, vice president of the International Rowing Federation, 
Mr. Harvey Schiller, president and CEO, Assante U.S., former 
executive director of the U.S. Olympic Committee, Mr. David 
D'Alessandro, chairman and CEO of John Hancock Financial 
Services, and Ms. Donna de Varona, Olympian and sports 
commentator, member of the International Relations Committee of 
the U.S. Olympic Committee.
    Ms. de Varona, we will begin with you.

STATEMENT OF DONNA de VARONA, OLYMPIAN AND SPORTS COMMENTATOR; 
                CO-CHAIR, GOVERNMENT RELATIONS 
               COMMITTEE, U.S. OLYMPIC COMMITTEE

    Ms. de Varona. First of all, I would like to correct that. 
I am not a member of the International Relations Committee. I 
resigned from that post after Sandy Baldwin left office.
    The Chairman. The record stands corrected.
    Ms. de Varona. But I am currently a lame duck cochair, and 
that has been very confusing, of the Government Relations 
Committee.
    The Chairman. Let the record show.
    Ms. de Varona. I want to say it has been a privilege to be 
back here. I wish I was here under better circumstances, 
because 30 years ago--and I do feel like it is Groundhog Day--
we went to a lot of work to try to set this organization 
straight, and I think for many years it has functioned 
brilliantly, but as with all organizations it has suffered from 
very big growing pains.
    I want to thank you Senator McCain, for chairing these 
meetings, Senator Stevens for always being there and, of 
course, my good friend Senator Campbell, my teammate from the 
1964 Olympics. I remember the days when we used to work in 
inner cities with kids. Some day I would like these programs to 
reach those kids again, because they were very successful.
    I am here today as a representative of some 6,000 
registered Olympic alumni in this country who are willing and 
eager to help make America's Olympic movement what it should 
be. I am also here today to help redirect the U.S. Olympic 
movement so that the inspirational achievements of a Bode 
Miller, who won some gold medals, the best ever, yesterday for 
the United States, or a Sarah Hughes and the many, many others 
who have achieved success since the Salt Lake Winter Olympic 
Games, are not eclipsed by the conflicts that have erupted 
within our Olympic movement.
    For many of us who have seen the Olympics through boycotts, 
organizational disputes, bid scandals, doping issues, and even 
terrorism, we encourage Congress to exert its oversight powers 
in the most vigorous possible manner.
    It is so sad, as we celebrate the 1-year anniversary of the 
incredibly successful Salt Lake City Olympic and Paralympic 
Games which brought such renewed confidence in America's 
Olympic movement post the Salt Lake City scandals, that the 
United States Olympic Committee has brought scandal upon itself 
once again, and in so doing, has overshadowed its own triumphs 
as well as the accomplishments of those who stand to suffer the 
consequences of an Olympic Committee in disarray.
    I am referring, of course, to the American athletes who won 
an unprecedented 34 Winter Olympic medals, who will lose a 
major part of their funding for 2004, as well as those who, 
after the horrific events of 9/11, organized a winter 
celebration which did so much to lift the spirits of a Nation 
in mourning and a world eager to find common ground.
    For athletes in minor sports, the Olympics are their only 
Super Bowl. That is why it is so disheartening to witness the 
festering issues within the United States that has threatened 
to compromise their effectiveness in a broad range of areas.
    Given the steady departure of executives armed with 
reportedly generous buyouts and severance pays, escalating 
staff salaries, ethics violations, and the financial burden of 
hosting large board of directors' meetings which drain the 
United States Olympics coffers to the tune of millions of 
dollars per quadrennium, as well as fundraising inefficiencies 
which have led to a negative rating by Forbes in its year-end 
review of foundations, this kind of dysfunction can only lead 
to more crisis.
    With the Pan American Games scheduled to take place this 
summer, and the Olympic Games in Athens, Greece, just 18 months 
away, those involved in sorting out how to make the USOC more 
effective need to act quickly, as you are today. In this 
regard, I recommend the Senate Commerce Committee, when 
considering this option to reorganize the Olympic Committee, 
take an approach similar to one taken subsequent to the 1972 
Munich Olympics, when Congress intervened to end disputes and 
jurisdictional battles among the AU, the NCAA, as well as to 
investigate why the United States Olympic Committee had failed 
to provide American athletes with the kind of administrative 
support they needed during those games.
    It was apparent then, as it is now, that America's sporting 
community needed outside help to change. Eventually, after many 
congressional hearings and legislative initiatives to try to 
solve the problems, President Ford appointed a commission. It 
is instructive to note that the commission included eight 
Members of Congress as well as athletes and prominent public 
sector members from business, education, and the media.
    It is significant that not one commissioner was directly or 
actively affiliated with the NCAA, the USOC, or an NGB. These 
organizations, however, were invited to make recommendations 
and address the group during open town hall meetings.
    President Ford's Commission on Olympic Sports, in summary, 
did the following things, and they did it while the U.S. 
Olympic Committee, because they were under pressure, 
restructured itself. While the act for very good reasons was 
designed as an amendment to the original charter of 1950, it 
went far beyond its intent of that time, and not only redefined 
USOC's purposes, but it expanded the role and scope of the 
organization.
    It also developed criteria, duties, and authorities for 
national sports governing bodies, provided a mechanism to 
guarantee the right of an athlete to compete in certain types 
of competitions, supported the notion that athletes should be 
included in governance. However, compromises during the 
legislative process both in Washington and within the Olympic 
sporting community left business, as recommended by the Ford 
Commission, unfinished, and I believe that unfinished business, 
in most part, is why we are here today.
    Since the passage of the Amateur Sports Act in 1978, now 
renamed the Ted Stevens Olympic and Amateur Sports Act, which 
was further revised in 1998, the USOC has not only been faced 
with new and emerging issues, but it has evolved into a 
cumbersome, as we know, a multitiered, two-track structure, one 
of which is a 123-member unwieldy and unfocused volunteer board 
of directors headed by, as we know, a volunteer president and a 
21-member Executive Committee.
    The other track is a large professional staff of nearly 500 
people headed by a paid CEO. The two tracks often operate 
independently, at best, and cross purposes at worst. Like the 
geometric principle of two parallel lines meeting only at one 
point of infinity, it often seems the same principle applies to 
the two branches of the United States Olympic Committee.
    As we have seen, this perpetual organizational flaw has led 
to confusion, frustration, power struggles, and squabbling. No 
one knows who should report to whom and who is responsible for 
what. Lost in this disorder is the USOC's primary mission to 
identify and support programs to benefit America's athletes. 
Endlessly caught up in this environment, which excludes rather 
than encourages inclusion of outside leadership and resources, 
the USOC has failed to reach its full potential, most lately.
    Recommendations. I recommend that you on the Senate 
Commerce Committee, appoint a small working group to look at 
changes to the operating structure of the United States Olympic 
Committee, as well as to identify obstacles which have 
prevented the Olympic family from serving America's athletes. 
Appointed individuals should have either a working knowledge of 
ethics, well-run nonprofit organizations, corporate boards, or 
have experience working with the Olympic community as a 
prerequisite to address the unique challenges the Olympic 
movement presents in the following areas.
    Governance. We all recognize, at least we can all agree on 
this, that the governance of the United States Olympic 
Committee has to be streamlined. In that regard, section 
2205(2) of the Amateur Sports Act pertaining to membership 
should be closely examined based on that report of the 
President's Commission on Olympic Sports.
    The commission recommended then that the United States 
Olympic Committee should have both a smaller board of directors 
and Executive Committee to permit the United States Olympic 
Committee to be governed more efficiently and be more 
responsive to the athletes.
    Therefore, I propose the act be amended in at least two 
ways, require the USOC board to become comprised of a 
membership of not more than 22, or some such number, with 51 
percent participation of national federations. This is an IOC 
rule, and if we do not follow that rule, we would have to get a 
waiver from the International Olympic Committee. That is my 
understanding.
    Public sector members, which would be individuals skilled 
in outside areas of sport, such as the late Bill Simon was, 
who, as president of the USOC from 1980 through 1984, brought 
his unchallenged leadership skills and concern for all parts of 
the committee.
    Mandate--this is the second one--that the United States 
Olympic Committee larger body, whether it is called a council, 
or assembly, or congress, be comprised of NGB's. This would 
only streamline the organization, but it would encourage an 
implementation of a vertical structure, a fundamental 
organizational concept proposed in the 1978 Amateur Sports Act 
and the commission report, but unimplemented so far.
    However, in changing governance, the United States Olympic 
Committee should continue to host a gathering of all interested 
constituents during a Congress or national sports assembly 
which would encourage participation by members of the different 
organizations that provide strength to the Olympic movement in 
the United States. During these yearly gatherings, new 
leadership could be identified, emerging issues could be 
addressed, and athletes, volunteers, and sponsors could be 
recognized.
    Always problematic, the size of the USOC board has been, 
and is a product of its own making. The USOC is free to reduce 
the size of its board by revising its own constitution and 
bylaws.
    With these changes in place, the recent flap over the 
conduct of the ethics inquiry most likely could have been 
avoided. Under a revised Olympic structure, the Ethics 
Committee would be a committee of the board, as it is in all 
well-managed corporations, smaller in number and comprised of 
the board members elected from internal constituents, and those 
elected from outside the internal constituents.
    Instead, under the current model, the USOC has to 
completely externalize its ethics reviews to nonboard members, 
because its current 123 board members are potentially the very 
persons whose ethics might be scrutinized. Reporting on ethics 
matters under the model would be more streamlined and 
confidential, and be solely to the other board members, whose 
ethics would have been previously vetted in order to serve on 
the board.
    Finally, if the USOC is going to be fully reexamined in the 
light of the Ted Stevens Olympic and Amateur Sports Act, we 
should also revisit not only the new amendments and the other 
parts of the act, but also current interpretations of the act 
by the USOC. As one who has just completed work on the 
Opportunity in Athletics Commission, I can attest that 
tinkering in one area of legislation could have a profound 
impact in other areas.
    The role of the volunteer versus staff must also be 
examined. Perhaps we could look at the International Olympic 
Committee, where they do have special committees and they bring 
in people from the outside. They include IOC members and staff. 
International relations, as we know, has been a breeding ground 
for the United States for trouble. Clear lines of authority and 
responsibility must be drawn in this area.
    Since the IOC movement depends on volunteers, National 
Olympic Committee presidents are recognized as the official 
voice of authority when international sports protocol is 
observed. However, when business is conducted, overlapping 
areas of responsibility often create friction between the 
president and the CEO. Therefore, in areas of Olympic protocol, 
the president should take the lead, and in business dealings 
the CEO should have the responsibility.
    In order to get a handle on the financial situation of the 
United States Olympic Committee and its attendant programs 
initiative, the United States Olympic Committee must be willing 
to account for all funds raised and donated, be they in the 
form of cash or VIK, how moneys are spent and allocated and to 
whom or for what purpose should be documented to Congress on a 
yearly basis.
    Ideally, if the USOC finds the will and the way to respond 
to change, discussions with the NCAA, the high school 
community, and the President's Council on Physical Fitness in 
Sports on how to find ways to support each other's programs, 
i.e., men's minor sports, and share resources, will result in 
even more Olympic participation opportunities for America's 
youth.
    In conclusion, I know the USOC is going through a 
troublesome and embarrassing period. Nevertheless, as one who 
has been part of this movement for most of my life, I believe 
that it serves a very important function, and that there are 
many good and passionate people involved, and want to be 
involved. Ideally, a restructured USOC would attract America's 
brightest and most dedicated, the kind of people who seek out 
dreams and help those who dare to reach for them, the kind of 
people who work for nonprofits because the bonus they get from 
it is a smile on the faces of those who dare to reach for 
excellence.
    As we seek to make this committee a more streamlined and 
responsible organization, we must not lose sight or abandon 
that which is good. Ultimately the USOC exists to serve not 
only the athletes, but the American people.
    Thank you for giving me this time to speak.
    [The prepared statement of Ms. de Varona follows:]

      Prepared Statement of Donna de Varona, Olympian and Sports 
        Commentator, Co-Chair, Government Relations Committee, 
                         U.S. Olympic Committee
    Good morning Mr. Chairman and Members of the Committee. I am Donna 
de Varona a former member of President Ford's Commission on Olympic 
Sports, a consultant to the United States Senate during the passage of 
the 1978 Amateur Sports Act, a former member of the United States 
Olympic Committee Board of Directors and, most important, one who cares 
deeply and personally about America's Olympic Movement. I am here today 
in that latter role, and as a representative of some 6,000 registered 
Olympic alumni in this country who are willing and eager to help make 
America's Olympic Movement what it should be.
    I am also here today to help redirect the U.S. Olympic movement so 
that the inspirational achievements of a Bode Miller or a Sarah Hughes 
and the many, many others who have achieved success since the Salt Lake 
Winter Olympic Games are not eclipsed by the conflicts that have 
erupted within our Olympic movement. For many of us who have seen the 
Olympics through boycotts, organizational disputes, bid scandals, 
doping issues and even terrorism, we are supportive of the changes 
required to help our Olympic Committee reach its full potential.
    It is so sad, as we celebrate the one-year anniversary of the 
incredibly successful Salt Lake City Olympic and Paralympic Winter 
Games which brought such renewed confidence in America's Olympic 
Movement, that the USOC has brought scandal upon itself once again, 
and, in so doing, has overshadowed its own triumphs as well as the 
accomplishments of those who stand to suffer the consequences of an 
Olympic Committee in disarray. I am referring, of course, to the 
American athletes who won an unprecedented 34 winter Olympic medals, as 
well as those who, after the horrific events of 9/11, organized a 
winter celebration which did so much to lift the spirits of a nation in 
mourning and a world eager to find common ground.
    I would not be here if I were not devoted to what the Olympic 
Movement offers to this nation and to the world. Over the years it has 
not only inspired the notable accomplishments of elite athletes but it 
has given birth to other noble undertakings, such as the Paralympics 
and the Special Olympics, and motivated youngsters to seek the Olympic 
dream which celebrates the triumph of the human spirit.
    For athletes in minor sports, the Olympics are their only Super 
Bowl. That is why it is so disheartening, especially given the 
outstanding accomplishments of our Olympic and Paralympic athletes in 
both the Sydney and Salt Lake Games, that festering issues within the 
USOC threaten to compromise its effectiveness in a broad range of 
areas. Given the steady departure of executives armed with reportedly 
generous buyouts, escalating staff salaries, ethics violations, the 
financial burden of hosting large board of directors meetings which 
drain USOC coffers to the tune of 6 million dollars per quadrennium, as 
well as fund raising inefficiencies which lead to a negative rating by 
Forbes in its year end review of Foundations, this kind of dysfunction 
can only lead to more crisis which will continue to have a negative 
impact on future Olympic efforts both on and off the field of 
competition.
    With the Pan American Games scheduled to take place this summer and 
the Olympic Games in Athens, Greece, just 18 months away, those 
involved in sorting out how to make the USOC more effective need to act 
quickly.
    In this regard, I just hope that this time around those involved in 
the process of reforming the USOC will consider recommendations which 
were originally offered by President Ford's Commission on Olympic 
Sports, recommendations which were not adopted but would have helped 
this organization avoid the predicament it finds itself in today.
History of the USOC
    The United States Olympic Committee began its existence in 1896, 
the year of the first Olympic Games of the modern era. In 1950, as with 
numerous other corporations concerned with the public good, it received 
a federal charter, the most important aspect of which was the first 
statutory protection of the Olympic trademarks to assist the USOC in 
its corporate and other fundraising efforts. Since its inception in 
1896 and through 1976, the USOC was little more than a travel agency 
which functioned once every 4 years to send Olympic teams to the sites 
of the games.
    Through the years of the American Olympic movement, there were both 
successes and failures. The successes may be summarized by a quick 
examination of the achievements of the some 6,000 Olympians. People 
like our alumni President John Naber and Mark Spitz, wrestlers Rulon 
Gardner and Brandon Slay, decathletes Rafer Johnson and Congressman Bob 
Mathias, miler Jim Ryun, Senators Bill Bradley and Ben Nighthorse 
Campbell, Statesmen Jesse Owens and Muhammad Ali, Olympic gold 
medalists such as Wilma Rudolf, Marion Jones, Janet Evans and the 
Williams sisters as well as many others who succeeded in becoming 
household names to whom our youth looked up as role models.
    Many of these athletes succeeded despite the U.S. Olympic 
Movement's failures as embodied in huge disputes among organizations 
that comprised it. In the 1950s and early 1960s, as college and Olympic 
sports became more popular and prominent, three competing sports 
organizations began to fight over athlete jurisdiction; the AAU, then 
the national governing body (NGB) for 10 Olympic sports: the school/
college sports community; and the ``independent'' NGBs which conducted 
their programs apart from the AAU and did not have school/college 
participation in their sports.
    The consequences were (1) our best athletes often were left off of 
or denied the opportunity to compete in certain major international 
competitions, resulting in losses the United States would otherwise 
have won; (2) athletes were denied the opportunity to compete as a 
result of jurisdictional disputes: (3) no mechanism existed in our 
American Olympic system to solve or address these and other such 
problems.
    Eventually, because of the absence of a unified organization in 
charge of amateur sports in the United States, and troubled by 
internecine squabbling which threatened to compromise U.S. athletes, 
Congress held oversight hearings and President Ford's Commission on 
Olympic Sports was established.
President Ford's Commission on Olympic Sports
    In 1975 President Gerald Ford established the Commission on Olympic 
Sports:

        1. To recommend an organizational blueprint for how Olympic 
        sports activities should be structured in this country so that 
        certain types of disputes could be resolved, including an 
        athletes right to compete, and

        2. To find better ways to finance Olympic sport in America.

        After a two-year comprehensive study in which all interested 
        parties were invited to participate, the Commission issued its 
        final report in January, 1977. It, called for a totally 
        reorganized USOC which would assume the leadership for all 
        Olympic sports in the United States while addressing the issues 
        that had plagued the U.S. Olympic movement for years.

        It directed the USOC to:

        1. Create a mechanism to settle disputes.
        2. Facilitate the establishment of independent National 
        Governing Bodies.
        3. Ensure athletes rights to compete.
        4. Be responsible for fund raising efforts.
        5. Provide fair and equitable opportunities for minorities, 
        those with special needs, and women athletes.

        To its credit, the former USOC, in response to the Commission 
        report, voluntarily reorganized itself in 1977 and 1978, 
        ridding itself of a far more unwieldy structure than even 
        exists today. And, it set out on new fundraising/marketing 
        efforts that resulted in more funds being raised than in all of 
        its previous years of existence combined! It was during that 
        quadrennial period that U.S. Olympic programs we now take for 
        granted came to life such as the creation of the Olympic 
        Training Center, financial support for NGBs and travel and 
        training grants for developing athletes.
        Meanwhile, Congress was enacting the Amateur Sports Act of 1978 
        which was based on the Ford Commission Report. The Act was, for 
        very good reasons, designed as an amendment to the USOC 
        original charter of 1950. The Act did several things.

        1. It redefined USOC purposes, expanding the USOC s scope of 
        assigned activity.

        2. It developed criteria, duties and authorities for national 
        sports governing bodies (NGBs) that an NGB had to meet in order 
        to be recognized by the USOC.

        3. It provided procedures for resolving disputes using the NGB 
        criteria and duties as standards.

        4. It provided a mechanism to guarantee the right of an athlete 
        to compete in certain types of competitions, most notably when 
        a national team was involved.

        5. It supported the notion that athletes should be included in 
        governance on all sporting boards within the USOC structure.

Current Situation
    However, since the passage of the Amateur Sports Act in 1978, now 
renamed the ``Ted Stevens Olympic and Amateur Sports Act,'' which was 
further revised in 1998, the USOC has not only been faced with new and 
emerging issues but it has evolved into a cumbersome, multi-tiered, 
two-track structure, one of which is a 123-member, unwieldy and 
unfocused volunteer Board of Directors headed by a Volunteer President, 
and a 21-member Executive Board. The other track is a large 
professional staff of nearly 500 people headed by a paid CEO. The two 
tracks often operate independently at best and cross-purposes at the 
worst. Like the geometric principle of two parallel lines meeting only 
at the point of infinity, it often seems that the same principle 
applies to the two branches of the USOC.
    As we have seen, this perpetual organizational flaw has lead to 
confusion, frustration, power struggles and squabbling. No one knows 
who should report to whom and who is responsible for what. Lost in this 
disorder is the USOCs primary mission to identify and support programs 
to benefit Americas athletes. Endlessly caught up in an environment 
which excludes rather than encourages inclusion of outside leadership 
and resources, the USOC has failed to reach its full potential.
Recommendations
1. Working Group
    Senators Ted Stevens, John McCain and Ben Nighthorse Campbell 
SHOULD appoint a small working group to recommend changes to the 
operating structure of the USOC as well as identify obstacles which 
have prevented the Olympic committee from fully serving America's 
athletes. Appointed individuals should have either a working knowledge 
of ethics, well-run non-profit organizations, corporate boards, or have 
experience working with the Olympic community as a prerequisite to 
address the unique challenges the Olympic movement presents in the 
following areas:
2. Foundation of Governance: History revisited
    We all recognize that the governance of the USOC has to be 
streamlined. In that regard, section 22052 of the Amateur Sports Act, 
pertaining to Membership, should be closely examined. Based on the 
Report of the Presidents Commission On Olympic Sports (PCOS, 1975-77), 
the Commission recommended then that the USOC should have both a 
smaller Board of Directors and Executive Committee to permit the USOC 
to be governed more efficiently and be more responsive to the athletes.
    Therefore I propose the Act be amended in at least two ways.

        (1) Require the USOC board be comprised of not more than 15 
        members with major representation from individuals skilled in 
        areas outside of sport such as the late Bill Simon, who, as 
        President of the USOC from 1980 through 1984 brought his 
        unchallenged leadership skills and concern for all parts of the 
        USOC organization.

        (2) Mandate that the USOC's larger body (whether it is called a 
        council or assembly or a congress) be comprised of only NGBs. 
        This would not only streamline the organization but it would 
        encourage implementation of a ``vertical structure'', a 
        fundamental; organizational concept proposed in the 1978 
        Amateur Sports Act and the Commission report but unimplemented 
        so far.

    However, in changing governance, the USOC should continue to host a 
gathering of all interested constituents during a ``Congress'' or 
``National Sports Assembly'' which would encourage participation by 
members of disparate organizations that provide strength to the Olympic 
Movement in the United States (at the expense of the attendees). During 
these yearly gatherings, new leadership could be identified, emerging 
issues could be addressed and athletes, volunteers and sponsors could 
be recognized.
    Always problematic, the size of the USOC Board has been and is a 
product of its own making. The USOC is free to reduce the size of its 
board by revising its own Constitution and Bylaws. However when 
streamlining, the volunteer aspect of the USOC, which makes up the 
foundation of the Olympic Movement both in the U.S. and 
internationally, should be preserved and protected.
    With these changes in place, the recent flap over the conduct of 
the ethics inquiry, most likely could have been avoided. Under a 
revised Olympic structure the ethics committee would be a committee of 
the board, as it is in all well managed corporations, smaller in number 
(5) and comprised of board members elected from internal constituencies 
and those elected from outside the internal constituencies (e.g. Bill 
Simon). Instead, under the current model, the USOC has to completely 
externalize its ethics reviews to non Board members because its current 
123 Board members are potentially the very persons whose ethics might 
be scrutinized. Reporting on ethics matters under this model would be 
more streamlined and confidential and be solely to the other Board 
members whose ethics would have been previously vetted in order to 
serve on the Board.
    Finally if the USOC is going to be fully reexamined in light of the 
Ted Stevens Olympic and Amateur Sports Act we should also revisit not 
only the new amendments and other parts of the Act but also current 
interpretation of the Act by USOC. As one who has just completed work 
on the Opportunity in Athletics Commission, I can attest that tinkering 
in one area of legislation can have a profound impact in other areas.
3. Role of the Volunteer vs. the Staff
    Studying the way in which the International Olympic Committee 
(``IOC'') delineates and coordinates staff functions in partnership 
with its volunteer membership to prioritize its agenda and implement 
policies could be very instructive when identifying how the USOC should 
function. Currently the IOC appoints commissions that are comprised of 
IOC staff, IOC members as well as outside experts to deal with 
different aspects of international sport. These Commissions include 
Marketing, Media, television and broadcast communications, Solidarity, 
Olympic Games site selection, Olympic Host City Oversight, etc.
4. International Relations
    This area has been a breeding ground for trouble. Clear lines of 
authority and responsibility must be drawn in this area. Since the 
International Olympic Movement depends on volunteers, National Olympic 
Committee Presidents are recognized as the official voice of authority 
when international sports protocol is observed. However when business 
is conducted, overlapping areas of responsibility often create friction 
between the President and the CEO. Therefore in areas of Olympic 
protocol, the President should take the lead, and in business dealings, 
the CEO should have the responsibility.
5. Transparency
    In order to get a handle on the financial situation of the USOC and 
its attendant programs and initiatives, the USOC must be willing to 
account for all funds raised and donated be they in the form of cash or 
``V.I.K.''. How monies are spent and allocated and to whom and for what 
purpose should be documented in a report to Congress on a yearly basis.
6. Future
    Ideally, if the USOC finds the will and the way to respond to 
change, discussions with the NCAA, the High School community and the 
President's Council on Physical Fitness and Sports on how to find ways 
to support each others programs and share resources will result in even 
more Olympic participation opportunities for Americas youth.
Conclusion
    The USOC is going through a troublesome and embarrassing period, 
and perhaps has only itself to blame. Nevertheless, as one who has been 
part of this movement for most of my life I believe that it serves a 
very important function and that there are many good and passionate 
people already involved. Ideally a restructured USOC would attract 
America's brightest and most dedicated, the kind of people who seek out 
dreams and help those who dare to reach for them. The kind of people 
who work for non-profits because the bonus they get is the smile on the 
faces of those who dare to reach for excellence.
    As we seek to make the USOC a more streamlined and responsive 
organization we must not lose sight, or abandon that which is good. 
Ultimately the USOC exists to serve not only the athletes, but also the 
American people. It is doing both now, but it can do it much better. I 
look forward to whatever contribution I can offer to help it become an 
even better and more inclusive organization as do the athletes that we 
are all dedicated to serving.

    The Chairman. Thank you very much.
    Mr. D'Alessandro.

  STATEMENT OF DAVID F. D'ALESSANDRO, CHAIRMAN AND CEO, JOHN 
                HANCOCK FINANCIAL SERVICES, INC.

    Mr. D'Alessandro. Good morning, Mr. Chairman. I would like 
to thank the Committee for showing leadership on this important 
issue. The USOC's problems go well beyond the embarrassing 
public feud and predate current management. Simply changing and 
shrinking the current structure will solve only part of the 
problem. The USOC cannot be fixed until its operational 
underpinnings are also understood and addressed.
    Contrary to popular belief, the United States Olympic 
Committee does not select athletes, it does not develop most of 
our Olympians, and it does not operate the games, which begs 
the question, what exactly do they do? Their mission, according 
to their statement, is to ``lead the world's best national 
Olympic committee, help U.S. athletes achieve sustained 
competitive excellence, while inspiring all Americans and 
preserving the Olympic ideal.''
    It would appear clearly the USOC has lost its way. It fails 
to provide enough resources for athletes, it fails to be 
financially self-reliant, and it fails to provide the 
transparency we all deserve. Every dollar the USOC wastes on 
its bureaucracy or misguided self-indulgence is a dollar not 
spent giving a child an opportunity.
    Here are some facts. The USOC spends an average of 24 
percent of its total revenue on overhead. Most major nonprofits 
spend much less. Now, only 46 percent of these revenues go 
directly to the NGB's and the athletes. The USOC's real estate, 
according to their tax returns, including headquarters and 
training centers, are worth $145 million, with annual expenses 
of $21 million, yet as most athletes would agree, most 
Olympians do not even use the training facilities. People are 
trained in this country on a grassroots basis, and the money 
just does not get there.
    The USOC has 500 paid employees. Even the IOC has only 150. 
Though it receives an average of $70 million a year from the 
IOC, it distributes an average of just over $1 million to each 
NGB. If the USOC was eliminated except for a person to cash the 
IOC checks, our athletes would get $18 million more directly 
than they are getting today.
    In 2001, the USOC gave more money to NGB's that use 
professional athletes from the NBA and the NHL than they gave 
to gymnastics and figure skating, kids who are really scraping 
for the money. The NHL and NBA should be paying the USOC for 
the right to market their product worldwide. The USOC should be 
measured primarily on its ability to give our athletes maximum 
opportunities through financial support.
    Now, I believe the USOC wrongly heralds the number of 
medals won as their primary measure of success. As Donna says, 
we have excellent Olympic athletes in this country, and we have 
every reason to be proud of them. In Sydney, we won 97 medals, 
but let us look at those numbers. With a combined population 35 
million lower than the U.S., Russia, Australia, and Germany won 
202 medals. Salt Lake is a similar story. While I do not agree, 
as I said, that we should measure ourselves on medals, if one 
has to guess, what would the U.S. have won if the USOC was 
actually doing its job?
    Let us turn to the failure of self-reliance. The IOC, as we 
all have heard, provides a large portion of the budget, as much 
as 60 percent, and it comes in cash. We should receive a large 
portion of the IOC's revenues. We deserve it. We send a lot to 
Switzerland, but overdependence on the IOC is fragile and 
dangerous.
    The IOC governs 199 national organizing committees, and it 
is under growing pressure to support other nations. We should 
neither overly rely on fluctuating IOC funding, nor consider 
public subsidies. What we need in this country is a committee 
competent enough to compete with the likes of the NFL and the 
NBA for a share of the $6.4 billion annually spent in corporate 
America on sports sponsorships.
    The USOC is not transparent and accountable for much of its 
money. For example, the IRS now requires the USOC to 
specifically disclose certain contributors and their 
contributions, yet the USOC failed to do so. In its 2001 tax 
return, only international sponsors are listed. All others are 
missing. In addition, value in kind contributions are not 
accounted for. The public cannot tell what the USOC gets, its 
value, or how it is distributed.
    For example, gas cards and shopping credits donated by 
sponsors Chevron and Sears are given USOC staff for bonuses. 
Sports Illustrated yesterday reported 197 company cars are 
given to USOC staff. Yes, the USOC has lost its way. Why? I 
think we all have different conclusions on this subject. As a 
corporate person, I will tell you I believe it has lost its way 
because it does not believe it has a boss to hold it 
accountable. All of us have to answer to somebody. I have 
shareholders and directors. You have voters.
    Mr. Chairman, you are right by reminding the USOC of this 
committee's prerogatives. I would also encourage you to hold 
the USOC to high standards and impose certain goals, including, 
obviously, downsizing and streamlining. I believe Congress 
should look to appoint at least half of the membership of any 
newly reconstituted group.
    We should require in this country that 85 cents of every 
dollar the USOC brings in goes directly to the athletes. It 
should be an absolute requirement. They need to become 
financially progressively self-reliant. I believe the IOC money 
at some point--and I think we should scrape for every dollar of 
it--should be put into a special endowment so the athletes will 
have an ongoing stream over the years that we can rely on.
    If we took the IOC money, we would have, in 10 years, a 
billion-dollar endowment if the cash-flow from the USOC were 
simply to come from U.S. sponsors. Obviously, they need to 
adhere to standards of financial management, and I think they 
need to make a full progress report every year in Congress. If 
this process begins, the next time the USOC officers appear at 
this table, we will all have something to be proud of and not 
embarrassed by.
    Thank you.
    [The prepared statement of Mr. D'Alessandro follows:]

  Prepared Statement of David F. D'Alessandro, Chairman and CEO, John 
                    Hancock Financial Services, Inc.
    I want to thank the Committee for showing leadership on this 
important issue and for inviting this panel to be part of the 
discussion.
    John Hancock is a ten-year Olympic sponsor. We have invested over 
$100 million in the Olympics because it is the only sports sponsorship 
that gives us the dual opportunities for an investment return and to 
help America's youth achieve their dreams.
    The problems at the USOC go well beyond the current embarrassing 
public displays. Changing and shrinking the governance structure will 
only solve part of the problem. The USOC cannot be fixed properly 
unless its financial and operational underpinnings are understood and 
addressed.
    In order to address them, a few fallacies first have to be 
disavowed:

   Contrary to popular belief, the USOC does not select Olympic 
        athletes. They are selected by the 39 National Governing 
        Bodies--or NGB's--the federations that run individual sports.

   The USOC also has virtually no responsibility for the Games 
        when they occur in the U.S. That is primarily the 
        responsibility of the host city.

   And it is not the primary developer and trainer of potential 
        Olympic athletes. That role falls to parents, schools, 
        universities, sports clubs and the NGB's.

    So, what, exactly, is the USOC supposed to do?
    The 1978 Ted Stevens Amateur Sports Act, which helped empower the 
modern USOC, certainly intends support for athletes. And according to 
the USOC's constitution, its mission is to ``lead the world's best 
National Olympic Committee: help U.S. Olympic athletes achieve 
sustained competitive excellence, while inspiring all Americans and 
preserving the Olympic ideal.''
    Given the USOC's less than ideal performance in recent years, it is 
clear that it has lost sight of this mission.
    Frankly, the USOC has lost its way.
    It has lost its way by:

   Failing to provide enough resources and opportunities 
        directly to aspiring athletes;

   Failing to be financially self-reliant; and

   Failing to provide the financial and ethical transparency 
        that the athletes and the American public deserve.

    Let me give a few facts about each of these issues. Much of what we 
are going to talk about is taken from the USOC's federal tax filings 
and audited consolidated financial statements available to anyone on 
the USOC's Web site. These documents are frequently incomplete, 
confusing, and difficult to reconcile. Nonetheless, the outline of the 
USOC's problems is crystal clear.
    First, opportunities for athletes: the USOC uses its money 
inefficiently and does not spend enough on the athletes.
    For the four-year period ending December 31, 2000, the USOC spent 
an annual average of 24 percent of its total support and revenue on 
overhead. \1\ The average major nonprofit spends just 16 percent on 
overhead--with many lower than that number. \2\ A further statistic: 
during the same four-year period, the portion of the USOC's revenues 
that actually went directly to the NGB's and the athletes was only an 
annual average of 46 percent. \3\
---------------------------------------------------------------------------
    \1\ USOC 2000 Consolidated Financial Statements, pp. 58-59.
    \2\ Forbes Magazine Annual Survey of Charities, December 9, 2002, 
p. 186.
    \3\ USOC 2000 Consolidated Financial Statements, pp. 58-59.
---------------------------------------------------------------------------
    The USOC reports that it has considerable real estate investments, 
including its corporate headquarters and training facilities, with a 
cost basis of approximately $145 million and associated annual 
operating expenses of over $21 million. \4\ While the USOC will claim 
that its training facilities are vital, a great many Olympians and 
aspiring Olympians don't use them and train instead at other sites, 
such as universities, private athletic clubs, rinks, and gyms, and 
public and community training centers. And most athletes would agree, 
this is an ineffective use of a major part of the USOC's budget.
---------------------------------------------------------------------------
    \4\ USOC 2001 Consolidated Financial Statements, p. 32, p. 36.
---------------------------------------------------------------------------
    The USOC has also created a paid bureaucracy that is--in the words 
of Lloyd Ward at this Committee's January 28 hearing--``500 strong.'' 
\5\ Contrast this with the International Olympic Committee, which has 
received its share of criticism in recent years. Responsible for both 
the Games and supporting athletes worldwide, the IOC has just 150 paid 
employees. \6\
---------------------------------------------------------------------------
    \5\ U.S Senate Commerce Committee Hearing, January 28, 2003. 
Transcript pages attached.
    \6\ IOC Marketing Department.
---------------------------------------------------------------------------
    The USOC also reports that it will receive from the IOC $418 
million in television royalties over a ten-year period that began in 
1998 and approximately $27 million annually from fees paid to the IOC 
by U.S.-based international sponsors. On average, that totals about $70 
million a year. \7\ Between 1997 and 2000, the USOC distributed direct 
grants and allocations to the NGB's and athletes that averaged $52 
million per year--an average of only slightly over a million dollars 
for each sport. \8\ If the entire USOC bureaucracy in Colorado Springs 
were eliminated--even if the questionable training facilities were 
kept--and the IOC money were just given directly to the NGB's and the 
athletes, they could get about $18 million more a year.
---------------------------------------------------------------------------
    \7\ $418 million: USOC 2001 Consolidated Financial Statements, p. 
33. $27 million: USOC 2001 Federal Tax Return, Schedule B, and USOC 
2001 Consolidated Financial Statements, p. 25.
    \8\ USOC 2000 Consolidated Financial Statements, p. 59.
---------------------------------------------------------------------------
    Here is just one of hundreds of examples of how the USOC has 
distributed its money: In 2001, the USOC gave $2.6 million to 
gymnastics and figure skating. These are the two most popular Olympic 
sports, yet the vast majority of participants are not professional. 
They are aspiring amateur athletes who virtually have to scrape for 
funding. Meanwhile, in the same year, the USOC gave the hockey and 
basketball federations $3.1 million. \9\ The NHL and NBA pros who 
populate the Olympic teams in these sports hardly need the subsidy. Why 
are the NHL and NBA not paying the USOC for marketing their properties 
worldwide?
---------------------------------------------------------------------------
    \9\ USOC 2001 Federal Tax Return, form 990, statement 8.
---------------------------------------------------------------------------
    Every dollar that the USOC wastes on its bureaucracy or misguided 
selfindulgence is a dollar not spent giving a child an opportunity to 
see what he or she can achieve as an athlete. We should measure the 
USOC on its ability to allow the greatest number of young people to 
avail themselves of that opportunity.
    The USOC, on the other hand, heralds the medals won by the world's 
greatest nation as evidence of its success. \10\ It is not just about 
the medals. But even on their own terms, they are not effective.
---------------------------------------------------------------------------
    \10\ Lloyd Ward, ``U.S. Can Be Proud Of Olympic Committee,'' The 
New York Times, January 12, 2003.
---------------------------------------------------------------------------
    In the 2002 Salt Lake City Games, the U.S., with a population of 
288 million, won 35 medals. Germany, Norway, Austria, Canada and the 
Russian Federation, with a smaller combined population of 272 million, 
won 111 medals. Certainly, there is an argument to be made that we are 
stronger in the Summer Games. We do have great athletes, but even in 
the 2000 Summer Games in Sydney, with a population of 282 million, we 
won just 97 medals. With a combined population of 247 million, the 
Russian Federation, Australia, and Germany won 202 medals. \11\
---------------------------------------------------------------------------
    \11\ www.Olympic.org; U.S. Census Bureau, International Data Base, 
population figures for 2000 and 2002, updated October 10, 2002.
---------------------------------------------------------------------------
    This leads to my second issue, the lack of self-reliance at the 
USOC.
    What do we mean by a lack of self-reliance?
    If we look back at the estimated $70 million that the USOC receives 
on average from the IOC each year, that represents a large percentage 
of the USOC's annual operating budget--in some years nearly as much as 
60 percent. \12\
---------------------------------------------------------------------------
    \12\ USOC 2000 Consolidated Financial Statements, p. 59; USOC 2001 
Consolidated Financial Statements p. 25.
---------------------------------------------------------------------------
    While we should get a fair portion of the IOC's revenues, we should 
also be cognizant that our dependence on the IOC is dangerous.
    The IOC now has 199 national organizing committees to support--more 
than twice as many in both Summer and Winter Games as in 1976. \13\ 
Many of these nations cannot afford an Olympic program at all. There is 
considerable international pressure on the IOC to reallocate money to 
them. Given the way the USOC operates, that will only mean even less 
money will make its way to American athletes in the future.
---------------------------------------------------------------------------
    \13\ www.Olympic.org/uk/games/index.
---------------------------------------------------------------------------
    Furthermore, the IOC has awarded the Olympic Games to the United 
States four times in the last 23 years. And in the periods when the 
Games are in the U.S., the USOC achieves higher revenues than when they 
are not. All of this contributes to the USOC's perceived waste and 
gluttony and understandably exacerbates the animosity of some IOC 
members towards the USOC.
    And when the IOC determines two years from now whether to award the 
2012 Summer Games to New York City--or not--it may be more interested 
in holding the Games in a country where the national organizing 
committee is not going to insist on huge sums of money to fund its own 
bloated bureaucracy.
    Other countries subsidize their national organizing committees. But 
we are the richest nation on earth. In 2001, $6.4 billion was spent on 
sports sponsorships in North America. \14\ We don't need to depend on 
the largesse of the IOC to support our athletes. We don't need public 
subsidizes or lotteries for the USOC. We need a USOC competent enough 
to compete for those billions of sponsorship dollars with the likes of 
Major League Baseball and the NFL.
---------------------------------------------------------------------------
    \14\ ``Sponsorship spending n1 in North America by property type,'' 
The American Marketing Association's Marketing News, July 8, 2002.
---------------------------------------------------------------------------
    Here is the third issue: the USOC's current financial reporting is 
far from transparent, allowing it to avoid accountability for the way 
it raises and spends money.
    For example, the USOC is required to specifically disclose to the 
IRS all contributors who give at least 2 percent of its revenue in cash 
and value-in-kind--approximately $950,000 in 2001. \15\ In its 2001 tax 
return, only international sponsors are listed. Its individual donors, 
domestic sponsors, suppliers, and licensees appear to be missing. The 
question is, where are they?
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    \15\ USOC 2001 Federal Tax Return--Form 990 Line 1(d) and Schedule 
B--Regulation Section 1.6033-2(a)(2)(iii)(a). Line 1(d) $47,748,000 
 2 percent = $954,960.
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    Value-in-kind contributions are also not accounted for. The public 
cannot tell what the USOC gets, its value, or how it is distributed. 
The Los Angeles Times gave us a possible hint when it reported on 
January 23 that gasoline donated by Chevron and shopping credits 
donated by Sears are going to the USOC bureaucracy for bonuses, not to 
the athletes. \16\ The question is, how much, what is it, and where 
does it go?
---------------------------------------------------------------------------
    \16\ ``USOC Cuts Spending Amid Budget Crunch,'' Los Angeles Times, 
January 23, 2003.
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    Obviously, the USOC's financial statements raise more questions 
than they answer. That is why we sent the USOC a letter on January 20 
asking them to fill in the blanks. We look forward to seeing their 
financials tomorrow, as promised by Lloyd Ward and the USOC's acting 
president, Bill Martin.
    Clearly, the USOC has lost its way. How did this happen?
    Among other reasons, it has lost its way because it does not have a 
boss. The rest of us all answer to somebody. I have shareholders and a 
board as my bosses. The members of this Committee have the voters. The 
USOC believes it has no boss. I would suggest that this Committee 
become the boss.
    As boss, I would urge this Committee to hold the USOC to a higher 
standard and force it to meet specific goals.
    They should include:

   Dramatically downsizing and streamlining the governance 
        structure;

   And whatever new form of governance is arrived at for the 
        USOC, at least half of the board should be appointed by 
        Congress;

   An 85/15 rule that requires that 85 cents of every dollar in 
        the USOC budget goes to the athletes;

   Becoming progressively and completely financially self-
        reliant within the next ten years;

   Adhering to higher standards of financial management and 
        reporting; and

   Once a year, making a full report to the American people 
        through Congress.

    I believe that if we do these things, the next time the officers of 
the USOC appear before this Committee, we will all have something to be 
proud of, not embarrassed by.
    Thank you.

    The Chairman. Thank you. Just to put this in perspective, 
your corporation has contributed how much to the Olympics as 
sponsors?
    Mr. D'Alessandro. About $110 million.
    The Chairman. Thank you very much.
    Dr. Schiller, welcome.

  STATEMENT OF HARVEY W. SCHILLER, PRESIDENT AND CEO, ASSANTE 
             U.S.; FORMER EXECUTIVE DIRECTOR, U.S. 
            OLYMPIC COMMITTEE; CHAIRMAN, MANAGEMENT 
                     COMMITTEE FOR NYC 2012

    Dr. Schiller. Thank you. Good to see you again. Chairman 
McCain, distinguished Members of this Committee, thank you for 
the opportunity to discuss the United States Olympic Committee, 
its governance and organizational structure. My name is Harvey 
Schiller. I am the president of Assante U.S., and I also chair 
the Management Committee as the candidate city for New York 
City for the Games in 2012.
    I have had previous service as the Executive Director, now 
called the chief executive officer of the U.S. Olympic 
Committee.
    The Chairman. During what period of time, Dr. Schiller?
    Dr. Schiller. From the beginning of 1990 to almost the end 
of 1994, a 5-year period. I served as a volunteer before that, 
and have done some work since then.
    The Chairman. Thank you.
    Dr. Schiller. The United States Olympic Committee has a 
long record of doing lots of things well. The performance of 
athletes in past Olympic, Pan American, and Paralympic Games 
has been extraordinary. The USOC has protected athletes' rights 
to compete, established comprehensive drug-testing protocols, 
provided expert logistical support, and established national 
training centers among their extraordinary achievements, yet 
that track record is in jeopardy.
    The committee stands at a crossroads, having endured more 
than 2 years of constant upheaval and controversy. If the 
committee is to meet the challenges it now faces, the internal 
conflict and failure of leadership which have marked the last 
28 months and more must end.
    I believe the problem lies in the organization's principal 
governing body, its board of directors, which is dominated by 
representatives of the diverse constituent groups that make up 
the committee. These range from dozens of national governing 
bodies of Olympic, Paralympic, and Pan American sports to 
community-based organizations. As an example, a sport such as 
boxing and equestrian are not only different in the fields of 
play, but in terms of the athletes that they represent 
economically as well.
    This diverse membership competes for the organization's 
limited funding, representation, and recognition. The 
conflicting interests and needs of the members of the board 
place them at odds with the primary goal of the committee, as 
defined by the Sports Act. I believe the solution is management 
restructuring aimed at achieving three goals, responsible, 
objective oversight, independent, unaffiliated governance, 
orderly transition of leadership.
    The following steps by an appointed committee of this 
committee could put the USOC on the right path, but will only 
work with the appropriate leadership in place. My 
recommendations are as follows.
    Congress create an oversight committee to which the USOC 
leadership must answer. This authority would have two 
responsibilities, ensuring propriety and staffing a new 
governing body. The oversight committee would ensure that the 
committee complies with all relevant legislation, its own code 
of ethics, and the IOC charter. It would also select qualified 
individuals, independent of both the USOC and its member 
organizations, to serve as a majority of the USOC's newly 
constituted Executive Committee.
    Chief qualifications would include an ability to bring a 
different but complementary perspective to the committee, and 
to reflect the common interests of the American public.
    Next, reorganize the USOC Executive Committee and make it 
the governing body. The most efficient way to create this new 
governance entity will be to use an existing framework. While a 
reorganized and reduced Executive Committee could include USOC 
officers and IOC members, it would predominantly feature 
individuals recommended by the oversight committee.
    The Executive Committee would appoint a chairperson from 
its members, and the CEO of the USOC would continue to be a 
member. The specific responsibilities of the CEO and staff vis 
a vis volunteer leadership would be determined by the Executive 
Committee.
    Next, shift and downgrade the role of the board of 
directors. The board of directors would become an advisory 
group to the reconstituted Executive Committee. Its membership 
should continue to represent the organization's constituent 
groups, and should reflect the broad objectives and purposes of 
the U.S. Olympic Committee. There would be appropriate changes 
in responsibility and voting powers.
    Change the nature of the USOC's Nominating Committee. This 
body, on a quadrennial basis, makes recommendations to the 
board of directors regarding the officers and public sector 
members that the board will then elect.
    The Nominating Committee is currently composed of members 
representing the USOC's various constituent groups. It should 
instead be peopled with individuals unaffiliated with the 
committee, who would more objectively consider appropriate 
individuals for leadership. In fact, a recent study by the 
conference board suggests that independent board members 
comprise the Nominating Committee of all boards of directors.
    Finally, reestablish the positions of first, second, and 
third vice presidents. A strong second tier of management would 
allow for orderly transition when the office of the president 
becomes vacant. This would eliminate the political infighting 
that has so often occurred during these periods of change.
    The USOC and its members have been blessed with many 
individuals who have given much to the Olympic movement. They 
deserve the best from their leadership. Our athletes are 
entitled to an organization whose priorities are clear, and 
whose efforts are focused on supporting them.
    In addition, America's great cities deserve to be viable 
competitors for future Olympic Games, and the need for change 
is urgent. New York is the candidate city of the United States 
for 2012. It needs a stable and successful USOC to have the 
best chance of making its bid a reality.
    Congress must now move to effect the needed management 
restructuring. It is past the time for us to have a USOC. We 
need one that is befitting our Nation's stature as an 
international competitor, global leader, and steward of human 
freedom and achievement.
    Thank you.
    [The prepared statement of Dr. Schiller follows:]

 Prepared Statement of Harvey W. Schiller, President and CEO, Assante 
  U.S., Former Executive Director, U.S. Olympic Committee, Chairman, 
                   Management Committee for NYC 2012
    Chairman McCain, distinguished Members of the U.S. Senate Committee 
on Commerce, Science, and Transportation, ladies and gentlemen, thank 
you for the opportunity to appear today to discuss the United States 
Olympic Committee (USOC), its governance and organizational structure. 
My name is Harvey W. Schiller and I currently serve as President of 
Assante US, a financial services company and also as Chair of the 
Management Committee of NYC 2012, the United States candidate city to 
host the Summer Olympic Games in the year 2012. I have served as 
Executive Director (the position has since been renamed ``Chief 
Executive Officer'') of the USOC, as an officer of a National Governing 
Body (NGB) of Olympic Sport, as well as a volunteer member of the 
USOC's Board of Directors and Executive Committee. My bio is attached 
for your reference.
    First, I would like to recognize the many contributions made by 
members of this Committee, as well as by local, state and federal 
governments in support of the Olympic Movement, its athletes, and the 
dreams and aspirations of so many Americans. From providing the 
services of the Armed Forces for security, to creating coin programs to 
help finance the training of athletes, the support of each of you and 
our government has helped enable our Olympians to accomplish what 
otherwise would have been an impossibility. My respect for Senator 
McCain spans decades, from my service as an Air Force pilot in Vietnam 
to this day. I remember a meeting some ten years ago with Senator 
McCain to discuss many of these same issues that faced the USOC at that 
time. Senator Stevens has been awarded the Olympic Order by the 
International Olympic Committee in recognition of his significant 
contributions to the Ted Stevens Olympic and Amateur Sports Act of 
1978, as well as to subsequent revisions and other legislation in 
support of America's athletes. Senator Hollings, a fellow graduate of 
The Citadel, has been a long time contributor to America's Olympic 
efforts. I can recall discussing officiating with Senator Burns based 
on his personal experience as a game official. When Senator Allen was 
Governor of Virginia many years ago, he led a delegation to St. Louis 
to support the city's bid to host an Olympic Festival in his home 
state. Senator Breaux assisted in staging a very successful Olympic 
Festival in Baton Rouge and has continued to support Olympic fund-
raising efforts here in Washington, D.C. Senator Lautenberg may 
remember a discussion regarding facilities for the New Jersey Nets and 
New Jersey Devils during my tenure as Chairman of the YankeeNets 
organization. And of course, as an Olympian himself, Senator Campbell 
knows the Olympic Movement from all perspectives, and has personally 
assisted me in my former Olympic duties more times than I can remember.
    The views I express today are my own, based on my Olympic service 
and my observations of the USOC since the end of my tenure as Executive 
Director in 1994. The USOC has a long record of doing many things well. 
The performance of our athletes, coaches, and officials in past Olympic 
and Pan American competitions has been extraordinary. The 
accomplishments of our disabled athletes in Paralympic and world 
championship competitions have been second to none. The U.S. Olympic 
Committee itself has done many things well. It has protected athletes' 
rights to compete; established comprehensive drug-testing protocol; 
provided expert logistical support for Olympic, Pan American, 
Paralympic and World University Games; established national training 
centers for athletes and accomplished a long list of other successes.
    The USOC is an organization with a diverse membership, unique needs 
and limited resources. The constituent groups of the USOC range from 
National Governing Bodies of Olympic, Paralympic and Pan American sport 
to community-based organizations such as the Boys and Girls Club. These 
diverse membership groups compete for the organization's limited 
funding, representation and recognition. The diversity of interests and 
needs among the members of the current Board of Directors indicates a 
need for structural change to insure the primary goal of the USOC as 
defined by the Olympic and Amateur Sports Act is met, namely: ``to 
promote and coordinate amateur athletic activity in the United 
States.'' While the USOC is obligated to oversee dozens of different 
sports, it does not benefit from the collegiality seen in organizations 
such as the NCAA and other sports associations. The National Governing 
Body for a sport such as Archery has little in common with the NGB of 
Basketball. Boxing and Equestrian are dramatically different sports, 
not only on their fields of play, but in their social and economic 
compositions as well. While the Olympic Team may appear as an 
integrated unit during Opening Ceremonies, the National Governing Body 
for each of the sports represented on that team are far fields apart. 
Each one competes with the others for sponsorships, media coverage, and 
even athletes themselves. Add to this mix the desire for non-Olympic 
sports to be added to the Olympic program, the special challenges of 
Disabled Sports Organizations, the particular needs of the armed 
forces, community based and religious entities, school and college 
communities, and state organizations. Only then can you begin to 
understand what differentiates the USOC from other charitable 
organizations, and why it needs a structure that will enable it to 
accommodate the needs of its members and fulfill the mission defined by 
the Olympic and Amateur Sports Act and expected by the American public.
    The future holds even more significant challenges for this 
country's Olympic Committee. Today, the USOC depends heavily on Olympic 
Games television and sponsorship revenues for a large percentage of its 
income. Not only will it be more difficult for the USOC to raise 
sponsorship dollars in this country's current economic climate, but the 
organization will also be forced to compete against the growing needs 
of emerging nations in the world marketplace. Both of these factors 
will continue to reduce the pool of funds available to the USOC and its 
athletes. Additional stress is placed on the USOC's budget as it 
becomes more expensive to adequately fund sports teams and the 
organization's operating costs continue to rise. The current expense of 
operating the USOC is driven in part by the travel and meeting costs 
associated with volunteer committees, as well as by the costs of 
maintaining a large paid staff. Forbes magazine has identified the USOC 
as one of three non-profits that failed to meet its minimum standard 
for fund-raising efficiency and warned that the USOC's overhead is too 
high and it doesn't spend enough money on its programs. All of these 
factors demand careful consideration of developing a more streamlined 
and efficient structure of the USOC.
    There have been numerous attempts in the history of the USOC to 
improve the governance structure of the organization. During my tenure 
as Executive Director, the organization eliminated the House of 
Delegates, a cumbersome quadrennial meeting of over 600 individuals. We 
established a Code of Conduct for team members, increased involvement 
of athletes, and even created an independent Ethics Committee. In past 
years there have also been additional attempts to change the 
organization's constitution and operating procedures, including 
engaging independent entities, such as McKinsey and the Steinbrenner 
Commission, to study and make recommendations to the governance 
structure of the USOC. Olympic leaders such as IOC member Anita 
DeFrantz have also worked hard to expand opportunities for women in 
sports as well as develop grass roots programs across America. However, 
while many valid recommendations have been made, most have not been 
implemented by the USOC. There is no question that change must now 
occur.
    The involvement of the Commerce Committee and its members can lead 
the effort for needed change in the USOC's governance structure and 
help the organization to meet its growing challenges. I do feel, 
however, that although the USOC may need some repair of its current 
structure, the required changes may not be as dramatic as some would 
suggest. The interface of volunteers and paid staff is no different at 
the USOC than it is in thousands of other non-profit organizations 
across the nation. I personally served under three different USOC 
Presidents during my tenure at the USOC, witnessed numerous changes in 
the composition of the Executive Committee and saw an almost 75 percent 
change in the leadership of National Governing Bodies. However, I also 
found that the majority of individuals were fully dedicated to the 
success of the Olympic Movement. Most volunteers give much of 
themselves, their resources and their time to serve the needs of their 
respective organizations, the USOC and the Olympic Movement as a whole.
    However, the many accomplishments of the USOC and the athletes it 
supports seem to have been obscured in recent years by frequent changes 
of leadership and internal conflict. There have been significant 
cultural changes in the USOC since my tenure as Executive Director. The 
role of the elected president and the duties associated with the 
position have certainly changed since the days of General Douglas 
MacArthur and William Simon. Today, the president and other officers of 
the USOC are engaged in much more travel both domestically and 
internationally and are required to commit enormous amounts of time to 
their volunteer positions. Defining the roles of both volunteers and 
staff will help eliminate extraneous expenditures of both time and 
financial resources. While there are certainly many changes that would 
help the organization move forward, no change will be effective without 
a sound governance structure that can support the appropriate 
individuals in leadership positions. The USOC must recruit, develop, 
and maintain quality leaders to be successful. Participation should not 
be based on the rewards of protocol or Olympic junkets. We all will 
need to work together to insure the best leaders are selected, 
supported, and retained, and that the focus of the organization remains 
on America's athletes.
    As a start, I believe the following proposals regarding the 
governance structure of the USOC should be both examined and 
considered:

   Creation of an ``Oversight Committee'' by the Commerce 
        Committee, to which the USOC's leadership would be required to 
        report to on a periodic basis. This Oversight Committee would 
        have defined powers to insure that the USOC complies with 
        current legislation, the USOC Code of Ethics and the IOC 
        Charter. The Oversight Committee would play an important role 
        in helping to select qualified individuals (independent of both 
        the USOC and its member organizations) to serve on the USOC's 
        Executive Committee by either (1) appointing such individuals 
        directly to the Executive Committee , or (2) proposing a list 
        from which the USOC Board of Directors would select a certain 
        number of individuals to serve on the Executive Committee. 
        These individuals should be selected on their ability to bring 
        a different, but complementary perspective to the USOC and to 
        reflect the common interest of the American public.

   Reorganization of the existing Executive Committee, which 
        would then function as the principal governing body of the 
        USOC. The new Executive Committee would include USOC officers 
        and IOC members. Officers are an integral and important part of 
        the governance structure of the USOC. I believe those who have 
        served sport through both NGB leadership and athletic 
        performance deserve the opportunity to serve the organization 
        in more significant roles. However, a majority of Executive 
        Committee members would be those individuals recommended by the 
        Oversight Committee. The Executive Committee would appoint a 
        Chairperson from its members and the CEO of the USOC would 
        continue to be a member of Executive Committee. The specific 
        responsibilities of the CEO and staff vis a vis the volunteer 
        leadership would need to be determined by the CEO and the 
        Executive Committee.

   Preservation of the current Board of Directors with some 
        changes in responsibilities and voting power of the current 
        members. The role of the Board of Directors would be shifted 
        from acting as the principal governing body within the 
        organization to becoming more of an advisory group to the 
        reconstituted Executive Committee. The members of the Board of 
        Directors should continue to represent the diverse interests of 
        the organization's constituent groups and should reflect the 
        objects and purposes of the U.S. Olympic Committee.

   Restructure the USOC's Nominating Committee, which is 
        currently appointed on a quadrennial basis to make 
        recommendations to the Board of Directors regarding the 
        officers and public sector members that the Board of Directors 
        will then elect. The Nominating Committee is currently 
        comprised of members representative of the USOC's various 
        constituent groups, each of which brings an inherent bias to 
        the process. The Conference Board Commission on Public Trust 
        and Private Enterprise has recommended that such nominating 
        committees of private corporations be comprised of individuals 
        outside the corporation and who would be more able to 
        objectively consider appropriate individuals for leadership 
        positions. The USOC would benefit from following this sound 
        practice.

   Reestablish the positions of First, Second and Third Vice 
        Presidents to allow for an orderly transition if the Office of 
        President should become vacant. This would help to eliminate 
        the political in-fighting that often occurs during this period 
        of change.

    There are certainly many other changes that would help the USOC 
move forward and I only offer these recommendations as a start. The 
USOC and its members have been blessed with a multitude of individuals 
who have given much to the Olympic Movement. These volunteers deserve 
the very best from their leadership and the athletes of this country 
deserve the very best from their leadership. In addition, America's 
great cities deserve the chance to be viable competitors in the contest 
to host future Olympic Games. New York is the candidate city of the 
United States for the Games of 2012, and it needs the support of a 
stable and successful United States Olympic Committee to have the 
chance of making its bid become a reality.
    Senator McCain, I stand ready to help you and the Commerce 
Committee in any way possible to enable America's athletes, the Olympic 
Movement, the USOC and its members be the best that they can be. Thank 
you again.

    The Chairman. Thank you, Dr. Schiller, and your 
recommendations are important, and will be very valuable to 
this Committee.
    Ms. DeFrantz, your complete statement will be made a part 
of the record.

       STATEMENT OF ANITA L. DeFrantz, OLYMPIC MEDALIST; 
        EXECUTIVE BOARD MEMBER, U.S. OLYMPIC COMMITTEE; 
       VICE PRESIDENT, INTERNATIONAL ROWING FEDERATION; 
            MEMBER, INTERNATIONAL OLYMPIC COMMITTEE

    Ms. DeFrantz. Thank you, sir. Mr. Chairman and Members of 
the Committee, I thank you for the opportunity to appear before 
you today to discuss the necessary reform of the USOC. My name 
is Anita DeFrantz. I am an Olympian. I share my opinions with 
you today as an athlete who has served as an administrator on 
both the national and international levels. While I am a member 
of the International Olympic Committee and the USOC, I serve in 
no capacity that provides me the formal authority to speak on 
behalf of either of those organizations.
    I know the IOC shares this committee's concern. It respects 
the autonomy of the USOC in managing its affairs. It is 
confident a better and stronger USOC will emerge from this 
process. I also know the leadership of the USOC is determined 
to work with this committee to make sure that happens.
    The USOC and its precursors owe a debt of gratitude to 
Congress, which provided its charter in 1950 and clarified its 
role as coordinator of the Olympic and Amateur Sports Movement 
in 1978 and again in 1998. Today, I feel Congress has yet 
another important role in the evolution of the USOC, that of 
guiding the needed reforms.
    The USOC's most recent restructuring back in 1999 was on 
target and in some cases has begun to make a difference in the 
USOC. However, there are some further changes needed to the 
structure and scope of the organization. Those changes will go 
a long way toward resolving the issues that trouble us today.
    I have a list of 10 proposals. I wish to focus on only six 
this morning. The first need is to bring the USOC's governance 
structure more in line with that dictated by the best practices 
of corporate governance. Volunteerism has a long tradition in 
this country, and certainly makes an essential contribution to 
sports on every level. However, the time has come for the 
volunteers to cede authority to the professional 
administration, and for the professional administration to find 
better and other ways to recognize the volunteers for their 
contributions.
    Today's board and Executive Committee structures are much 
too unwieldy, as has already been recognized. I believe the 
board should be converted into an advisory board that meets 
only once a year in the form of a national assembly of sports, 
and with the country's sports leaders involved. The assembly 
would help the administration examine the issues and trends 
affecting sports. Its only authority would be to elect the 
newly configured USOC board, which would in essence be a 
streamline of today's version of the Executive Committee.
    This new USOC board would act much like a corporate board, 
having no executive, day-to-day authority other than hiring and 
firing the CEO. The president, or chairman of the board, would 
then fulfill the important role of representing the 
organization on both the national and international levels, but 
would not have authority to bind the organization in any 
contractual manner at all. This means that all executive 
authority would be entrusted to the CEO and his staff.
    The second element of reform is as important as the first, 
defining the qualifications of the people who should oversee 
the organization. We must demand that all persons hoping to 
serve on both the volunteer board and the professional 
administration are held to the highest of qualifications before 
they are even considered for those positions. Quite simply, 
only qualified athletes compete, only qualified directors 
should represent us.
    The third element of the reform is a better implementation 
of the ethics code. The USOC has an ethics code, but it has 
been poorly implemented and, in order to be effective, the 
code's tenets must be woven into the fabric of its organization 
so that it becomes a part of the philosophy by which all 
decisions are made.
    Fourth, clarity of purpose. One issue that certainly needs 
to be reconsidered is the USOC's wide-ranging mission, powers, 
and jurisdiction granted in 1978. We all agree that a 123-
member board is unwieldy, and it is expensive. The USOC must 
interact with 78 member organizations, only 39 of which manage 
Olympic sports. In many ways, the USOC was chartered to act as 
a privately funded ministry of sports. When considering 
reforms, it will be important to determine whether the 
structure should be changed to meet this expectation, or 
whether the expectation remains a realistic one.
    The fifth element is the enhancement of the governance of 
the NGB's, national governing bodies. I would urge you to 
consider the fact that the USOC is a reflection of the NGB's. 
Reforming the USOC without reforming the NGB's is like pruning 
a tree without examining its roots.
    Sixth and most important is the focus on athletes. That 
should be from which all other reforms flow. One of the most 
important provisions of the Ted Stevens Olympic and Amateur 
Sports Act is a requirement that 20 percent of all the members 
of each body of USOC should be recent athletes, or must be 
recent athletes. The fact of the matter is, if you start by 
asking how each decision affects the athletes, the reform would 
be straightforward.
    In closing, I want to thank your Committee again for taking 
the time to urge these reforms for the USOC. The USOC should be 
a council of sports, not a council of sports politics. Your 
efforts in the coming weeks will be important in making that 
become a reality.
    Thank you. I am ready to answer any questions the Committee 
might have.
    [The prepared statement of Ms. DeFrantz follows:]

 Prepared Statement of Anita L. DeFrantz, Olympic Medalist; Executive 
  Board Member, U.S. Olympic Committee; Vice President, International 
       Rowing Federation; Member, International Olympic Committee
    Mr. Chairman, Members of the Committee: Thank you for the 
opportunity to appear before you today to discuss a topic dear to my 
heart: the health of the United States Olympic Committee.
    My name is Anita L. DeFrantz, and I have been actively involved in 
the Olympic Movement since representing our great country at the Games 
of the XXI Olympiad in 1976, where my boat won a Bronze Medal in 
rowing. I was also a member of our 1980 Olympic team.
    After my career as an athlete, I served in various positions within 
the Olympic Movement. I worked as a vice president for the Los Angeles 
Organizing Committee for the 1984 Olympic Games; I was elected to the 
International Olympic Committee in 1986; and I was elected vice 
president of the International Rowing Federation in 1993. In my 
professional life, I now serve as the president of the Amateur Athletic 
Foundation of Los Angeles, which seeks to serve youth through sport. To 
date, we have leveraged the portion of the Olympic legacy provided to 
the Los Angeles community, $95 million, turning it into more than $130 
million worth of programs, facilities, and equipment for the youth of 
Los Angeles.
    I share my opinions with you today from the perspective of an 
athlete and an administrator, on both the national and international 
levels. Although I am a member of the International Olympic Committee 
and the United States Olympic Committee, I serve in no capacity that 
provides me with formal authority to speak for either organization. I 
do know the International Olympic Committee shares this Committee's 
concern but respects the autonomy of the United States Olympic 
Committee in managing its affairs. It is confident a better and 
stronger United States Olympic Committee will emerge from this process. 
I also know that the leadership of the United States Olympic Committee 
is determined to work with this Committee to make sure that will indeed 
happen.
    As for my thoughts on reform, I first wish to say we have a great 
and proud Olympic tradition in this country.
    Our country has been the host of eight Olympic Games--more than any 
other country, by far--from St. Louis in 1904 to Salt Lake City in 
2002. Each time, the organizers have shown the world what great hosts 
the United States of America can be and how dedicated we are to 
providing all athletes with the support they need to perform at their 
very best.
    Our athletes, year after year, continue to achieve amazing results. 
They always give it their all, often earning a spot on the medals 
podium. They especially make our nation proud when their gold-medal 
performances are met with the raising of the American flag and the 
playing of our National Anthem. From Jesse Owens and Wilma Rudolph to 
``the Miracle on Ice'' to Sarah Hughes--just think how many times our 
athletes have given the nation goose bumps or made us shed tears of 
joy. They truly are national treasures.
    Our National Olympic Committee has had shining moments over the 
years, but recently our leadership has failed to attain the same kind 
of excellence that the athletes exhibit on the field of play. Quite 
frankly, I am dismayed that this Committee, which deals with so many 
issues of great strategic importance, has had to intercede.
    The United States Olympic Committee and its precursors owe a debt 
of gratitude to Congress--having provided its charter in 1950, and 
having clarified its role as coordinator of Olympic and amateur sports 
in both 1978 and 1998.
    Today, I believe that Congress has yet another important role to 
play in the evolution of the USOC: that of a guiding force behind its 
reform. Every reform must be examined and judged by how it helps the 
organization better serve the athletes. In that way, they will also 
serve the broader public interest.
    Fighting for the rights of athletes led me into the world of sports 
administration. In fact, I appeared before this very Committee at a 
hearing Senator Stevens presided over in 1977 to defend the athlete's 
basic right to enter the competition of his or her choice. So it will 
come to no one's surprise that I believe the United States Olympic 
Committee must refocus on serving the athletes. I want to underscore 
the word serving. The United States Olympic Committee must rededicate 
itself to the idea of becoming a service organization.
    While serving may be a word that is not repeated enough, 
restructuring has been spoken much too often. The United States Olympic 
Committee's most recent restructuring, back in 1999, was on target. In 
some cases, it has begun to serve the organization quite well. However, 
there are some further changes to the structure and scope of the 
organization that will go a long way toward resolving the issues that 
trouble us today. I have a list of ten such changes.
1. Corporate Governance
    The first requirement is to bring the United States Olympic 
Committee's governance structure more into line with the processes 
dictated by the best practices of corporate governance.
    Volunteerism has a long tradition in this country, and it makes an 
essential contribution to the development and operation of sport. We 
cannot do without the volunteers, especially at the grassroots level. 
They work tirelessly, giving hundreds of thousands of hours to keep 
sport going in this country. However, the time has come for volunteers 
to cede governing authority to the professional administration, and for 
the professional administration to develop other and better ways to 
recognize the volunteers for their contributions. We must incorporate 
stronger standards of corporate governance while maintaining the 
enthusiasm and spirit of the volunteers. Today's Board and Executive 
Committee structures are much too unwieldy, as has been already 
recognized. The Board, which today comprises a wide array of member 
organizations, should be converted into an advisory body that meets 
only once a year in the form of a national assembly of the country's 
sports leaders. The assembly would help the administration examine the 
issues and trends affecting sports. The assembly's only authority would 
be to elect a newly configured USOC Board--in essence, a streamlined 
version of today's Executive Committee. This new USOC Board would act 
much like a corporate board, having no executive or day-to-day 
authority, other than hiring and firing the CEO. The President, or 
Chairman of the Board, would then fulfill the important role of the 
representing the organization on the national and international levels 
but would not have the authority to bind the organization to any 
contractual agreements. This means all executive authority would be 
entrusted to the CEO and his or her staff.
     This change, by itself, will go a long way toward ensuring 
workable reform.
2. Qualifications
    The second element of reform is just as important as the first: 
defining the qualifications of the type of people who should oversee 
the organization. Currently, the qualification criteria are lacking. 
The time has passed for good intentions to be considered a sufficient 
qualification to lead the United States Olympic Committee. We must 
demand that all persons hoping to serve on both the volunteer board and 
in the professional administration are held to the highest standards of 
qualifications before they are even considered for those positions. The 
qualification requirements must be carefully developed and designed to 
gather all the necessary expertise needed to manage what should be the 
best National Olympic Committee in the world. Quite simply: Only 
qualified athletes can compete. Only qualified administrators should 
manage.
3. Accountability
    The third ingredient for the United States Olympic Committee reform 
should be increased accountability. In my sport, if you cannot pull 
your weight, you are out of the boat. Volunteers and professionals 
alike should be held accountable to strict performance standards. The 
United States Olympic Committee needs to set expectations for every 
major director and executive position so their performances can be 
evaluated on a yearly basis. The organization also should develop a 
mechanism to replace non-performing officers. I go back to my initial 
point: It should be an honor to serve--not an honor to merely hold an 
office.
4. Ethics
    The fourth element of reform is better implementation of the Ethics 
Code. The United States Olympic Committee has a fine Ethics Code, but 
it has been poorly implemented. In order for any Ethics Code to be 
effective, its tenets must be woven into the fabric of the 
organization, so that it becomes part of the philosophy by which all 
decisions are made. This has yet to be fully ingrained within the USOC.
5. Orientation
    The fifth element is education. The organization needs to do a 
better job of supporting its people. Because the Olympic world is 
unlike any other, all newly elected directors and executives should 
undergo a mandatory orientation process. That will help them fully 
appreciate the scope of their new roles, as well as the intricacies of 
the global Olympic Movement. This perspective is necessary to 
succeeding in the Olympic arena.
6. Clarity of Purpose
    The sixth element is clarity of purpose. One issue that certainly 
needs study--and that will require Congressional action to change--is 
the rationalization of the United States Olympic Committee's wide-
ranging mission, powers, and jurisdiction granted in 1978 with the 
needs and circumstances of today. One ramification of this mission, for 
instance, is today's large Board. We all agree a 122-member board is 
unwieldy--and expensive. But we must remember that, due to its mandated 
mission, the United States Olympic Committee must interact with its 78 
member organizations--of which only 38 currently manage Olympic sports. 
In many ways, the United States Olympic Committee was chartered to act 
as a privately funded ``Ministry of Sports.'' When considering reforms, 
it will be important to determine whether its structure should be 
changed to meet this expectation, or whether the expectation has become 
unrealistic in today's changed circumstances.
7. NGBs
    The seventh element is the enhancement of the governance of the 
National Governing Bodies, known as NGBs. I would urge this Committee 
to consider the fact the United States Olympic Committee is a 
reflection of the NGBs. Reforming the United States Olympic Committee 
without reforming the NGBs is like treating the leaves of a tree 
without examining its roots.
    I am not saying that all NGBs have governance issues, but their 
governance must conform to the standards of the United States Olympic 
Committee. In a similar way, one cannot properly reform the United 
States Olympic Committee without focusing on the unique structures and 
needs of the NGBs--one of the United States Olympic Committee's most 
important stakeholders.
8. Integration
    The eighth element is a need for the United States Olympic 
Committee to become better integrated with all its stakeholders, 
especially the public. One symbolic but important change would be to 
move the organization's executive offices to a major metropolitan city, 
such as New York, Chicago or Los Angeles. Having the headquarters in 
Colorado Springs has served the important purpose of developing our 
central athlete training complex. That mission has been fulfilled, and 
the Colorado Springs training center will always be an important 
complex. At this point in its history, it is more important for the 
organization to be out-front and interacting with the public in a major 
metropolitan area on a more regular basis.
    The United States Olympic Committee also must become more actively 
integrated with the international sporting community. We have the 
largest national Olympic Committee, with the best athletes in the 
world. Yet the United States is woefully under-represented in the 
international governing bodies of sport. We need to do a better job of 
working with, and integrating with, this global community. If we do so, 
it will return great dividends to our athletes since they compete in 
the international arena.
9. Reporting to Stakeholders
    The ninth element is closely related to the previous one. There 
should be increased reporting to the stakeholders. Sunshine provides 
credibility and accountability. There is much great work being done at 
the United States Olympic Committee, and everyone should know that. All 
the same, the organization needs to be held accountable to its 
stakeholders' expectations and reviews. Again, the USOC should be a 
service organization.
10. Focus on the Athletes
    Last, but surely not least, is a principle from which all the 
reforms should flow: the focus on the athletes. The most important 
provision of the Ted Stevens Olympic and Amateur Sports Act is the 
requirement that each USOC body should include at least a 20 percent 
representation of recent athletes. The fact of the matter is: If you 
started with the needs of the athletes as your guide, you would have 
the best rule by which to guide your reform efforts.
Conclusion
    In closing, I would like to again thank this Committee for taking 
the time to urge reforms for the United States Olympic Committee. The 
United States Olympic Committee should be a council of sports, not of 
sports politics. Your efforts in the coming weeks will be important in 
making that principle become a reality.
    Thank you.

    The Chairman. Thank you very much, Ms. DeFrantz. Thank you 
for appearing before the Committee again.
    Mr. Fehr, welcome.

  STATEMENT OF DONALD FEHR, EXECUTIVE DIRECTOR, MAJOR LEAGUE 
   BASEBALL PLAYERS ASSOCIATION; PUBLIC SECTOR MEMBER, U.S. 
                       OLYMPIC COMMITTEE

    Mr. Fehr. Thank you Mr. Chairman, Members of the Committee. 
I appear here today in my capacity as a public sector member of 
the USOC board. There are eight of us out of 123 on the USOC 
Board, with the kind of power and influence that eight out of 
123 would suggest, but we are the only members of the board who 
are charged to represent the American public, and who do not 
come from and are not identified with any constituent group.
    I have taken the liberty of asking my fellow public sector 
directors both from this term and two from the last term who 
are no longer in that position to review my statement, which I 
ask be made a part of the record. They have indicated to me 
that, in the main, while the words are mine, the views I have 
expressed are shared by all of them. That does not surprise me. 
We have spent a good part of our time during the 6 years I have 
been on the board expressing wonderment and amazement and 
frustration at what we have witnessed. We sit in board of 
directors' meetings, which are entirely formalistic affairs, 
wondering why we are there. We also have sat from time to time 
in Executive Committee meetings. No member of our group is a 
member of the Executive Committee, but we have attended from 
time to time, and in large part, those meetings have given us 
the same degree of frustration and wonderment, and we often ask 
each other why in the world we bother. We do because we think 
we can make a difference, but it is difficult.
    It is not my purpose here to comment on the Ethics 
Committee report or the Executive Committee response to it, but 
given the questioning, there is one comment that I would make, 
I think, that is relevant. Whenever you ask an Ethics Committee 
composed primarily of outsiders (except for the athletes) and 
all of whom are volunteers, to make sense out of a complicated 
situation fraught with interpersonal rivalries in which 
everyone's motives are suspect and everyone they are speaking 
with has a personal interest, I think we can be grateful that 
they came out with any conclusion at all, much less a unanimous 
one. And, I for one, was pleased that they made all three 
points clear: that there were violations of the code, that 
there were problems with the ethics officer and that, what I 
view as potentially the most serious, there was, at least in 
the opinion of the committee, an attempt to abuse the ethics 
process itself. That is difficult to do, and I think it took a 
fair amount of courage.
    Having said that--or with that lead-in--let me suggest that 
the Public Sector Directors hoped several years ago, at the 
time the McKinsey report was completed, that the changes 
suggested would go a long way toward reforming the 
organization. We were wrong. We were wrong mostly because the 
organization is not committed to reform.
    As a matter of fact, when I talk to people that have been 
involved in the committee for a long time, and around the 
Olympic movement, it is astonishing to me that the only strong 
leader--that is, within the last 15, 20 years--that is referred 
to is Dr. Schiller, which says, I suspect, not only something 
important about him, but something more important about the 
rest of the people that were there.
    What are the problems? First, I do not think it is healthy, 
and it does not make a lot of sense, to compare this 
organization to any other. It is nonprofit, that is true. It 
does not pay income taxes, but it engages in a wide variety of 
activities which mirror precisely what a for-profit entity 
would do. Licensing revenue must be raised. That takes a first 
class commercial organization, because you are competing for 
the sports dollar with the likes of the NFL and NHL and Major 
League Baseball and all the colleges and so on.
    Second, however, the USOC is not, even in the context of 
its nonprofit work, much like an ordinary nonprofit, which has 
a uniformity of purpose, that it is going to raise money and 
have that distributed to a given cause. Instead, what you have 
is a constituency which acts like a legislature. Their 
interests are adverse to one another. There is a limited pie, 
and everybody wants their piece of it, and all of the conflicts 
stem, in my judgment, from that difficult proposition. That is 
a structural matter, and it is a profound cultural matter. 
Until that is overcome, and people begin to strive in 
uniformity toward a common goal which is not limited to their 
individual interests, I am not sure what structural changes are 
going to be able to make a significant difference.
    That point is emphasized, in my view, because there is not 
even a common understanding as to what the role of the USOC is. 
There are some that say its sole purpose is to raise money and 
give it to the NGB's and stay out of the way. There are others 
who say, on the farthest extreme on the other side, that the 
Amateur Sports Act requires us to develop and enhance amateur 
athletics. Well, unless you know what you are trying to do, it 
is going to be very difficult to get a consensus on doing it, 
and it is going to be even more difficult to figure out the 
level of funding needed.
    Third, as has been spoken to, you have an enormous problem 
with the volunteers and the staff not understanding their 
respective roles and relationships. I will not dwell on it 
further, except to point out that in a recent article, if my 
memory serves me right, a former USOC president suggested that 
if you wanted to be president of the USOC, which is a volunteer 
role, you ought to be prepared to devote 20 to 25 hours a week 
to it. That is 1,000 to 1,300 hours a year in a volunteer role. 
Nobody can do that. If you do, of necessity you will attempt to 
micromanage, you will look over everyone's shoulder, you will 
engage in turf battles, and politics will be the order of the 
day. It has been the order of the day.
    Fourth, Clearly, the board is much too large. I would 
suggest that the actual governing body, whatever it is called, 
be reduced in size, to somewhere in the 18 to 25 range, and it 
would not bother me if it were slightly smaller than that. 
There is a problem with officers and the election of officers. 
In the current structure, the election of officers mirrors the 
kind of discord and nonuniformity of purpose that you see on 
the board.
    The officers are elected by competitions between coalitions 
of the constituency groups. Candidates appear before them, they 
answer questions, promises are sought, commitments are made, 
people are upset when people are not perceived to be honoring 
their commitments, and that affects who gets elected the next 
time around, not to mention that who gets to be on what 
committee and make what trip is often a result of who is 
elected.
    Last, in terms of what the problems are, we have not 
managed, with some exceptions, to get the very best people, and 
we need to find a way to do that, but solving the structural 
problems will not do it alone. You are not going to get the 
best people unless they think they are walking into an 
organization that they want to be a part of.
    I think I share the views of a number of the other 
witnesses about a number of the specific reforms that should be 
made, but perhaps with some differences. While the board should 
be substantially reduced, I believe it should consist in 
majority part of outsiders who have no interest in and do not 
come from any affiliated constituency group.
    That may raise an issue with the 51 percent requirement of 
the IOC, but I believe a case can be made for it, and I am 
confident that if that is determined to be desirable, the IOC 
will find a way to accommodate us in that regard.
    The problem will be that by the very nature of doing that, 
you will drastically curtail the power and influence of the 
constituent groups. That will require a major effort to get 
consensus. I agree that the board, even a much smaller board, 
should not act like an additional or substitute CEO or COO by 
committee.
    I think that the purpose of the USOC needs to be clarified, 
and what I mean by that is this. If the job is only to raise 
money for athletes, then that is a job and we can do that. If 
the job, on the other extreme, is to play a substantial role in 
the development and enhancement of amateur athletics for young 
people around the country, that is a much different job, and 
not only does that role need to be clarified, but far more 
importantly, the level of funding it will take to do the latter 
job is vastly greater than that that it will take to do the 
former job.
    How do we begin to address these issues? I was a member of 
the USOC group that was formed to investigate the Salt Lake 
City bribery allegations. There were five of us on that group. 
Three were outsiders, Senator Mitchell, Kenneth Duberstein, 
Roberta Ramo, the first woman to have been president of the 
American Bar Association, I represented the public sector 
directors, and there was an athlete representative required by 
law, who was Jeff Benz, who is now the USOC's general counsel.
    We were completely independent. We retained our own 
counsel. We talked to people, certainly, but all deliberations 
were internal. We identified a problem which was cultural, the 
culture of gift-giving that had pervaded the selection of bid 
cities to host the Olympic Games, and we wrote a series of 
recommendations which we hoped would go a long way toward 
remedying that. Those were adopted completely by the USOC and 
in part by the IOC.
    I think a commission like that can be successful again. I 
would suggest it needs two things. It needs a majority of 
individuals on it who have no affiliation with USOC constituent 
groups, but it needs at least some representation--I suggest 
from the USOC public sector directors--of individuals who have 
some familiarity with how the organization has actually 
functioned. You need that to make sure that you are not missing 
critical points.
    I welcome, in addition, the USOC's Executive Committee's 
efforts to try and do its own reform work. I think it is their 
obligation to do that. I think it is essential that they do it, 
and certainly any thoughts the Executive Committee has would be 
welcomed by an outside group. I do not think, however, that the 
credibility of the organization either to this Congress or to 
the public, is likely to be restored merely by an internal 
review.
    In discussing this with some people, one of my fellow 
public sector members suggested that such ideas would be 
referred to by internal USOC constituencies as very radical 
surgery, and nobody likes that, and they will not like it in 
particular. I think it probably is pretty radical surgery. 
Sometimes you have to do it.
    Thank you.
    [The prepared statement of Mr. Fehr follows:]

  Prepared Statement of Donald Fehr, Executive Director, Major League 
              Baseball Players Association; Public Sector 
                     Member, U.S. Olympic Committee
    Mr. Chairman and Members of the Committee:
    My name is Donald M. Fehr, and I have previously testified before 
this Committee in my capacity as the Executive Director of the Major 
League Baseball Players Association. Today, however, I appear to 
discuss issues related to the United States Olympic Committee (USOC), 
and I do so based upon my experience serving as a member of the USOC 
Board of Directors from the Public Sector. The Committee's invitation 
to testify states that this hearing will ``examine the current 
organizational structure and culture of the USOC'' to determine what 
reforms may be appropriate to make certain that the ``USOC operates 
more effectively and efficiently''. As requested, I will focus my 
testimony on recommendations to improve the USOC, in light of the 
recent series of unfortunate events which led to this hearing being 
called.
    EXPERIENCE AS A USOC PUBLIC SECTOR DIRECTOR I was elected as a 
member of the USOC Board of Directors from the Public Sector for a four 
year term following the 1996 Summer Games in Atlanta, and was re-
elected to a second four year term following the 2000 Summer Games. My 
opinions about the governance and culture of the USOC stem almost 
entirely from my experiences these last six plus years. The USOC 
Constitution, Article XII(3)(J), provides that eight (six prior to 
2000) Public Sector directors will be elected by the Board, who must be 
individuals who are ``not affiliated with or associated with any 
amateur sports organization, who in the judgment of the USOC represent 
the interests of the American public in the activities of the USOC.''
    This charge puts a Public Sector director in a class different from 
that of any other of the more than 120 members of the USOC Board, each 
of whom is either elected or appointed directly by a constituent 
organization, or, in the case of an officer, usually comes from and/or 
is identified with a constituent organization. My colleagues and I take 
this difference very seriously. Although Public Sector directors do 
serve on various USOC committees with some significant 
responsibilities, no Public Sector director sits on the Executive 
Committee or on the Ethics Committee. I have taken the liberty of 
asking my fellow Public Sector directors to review this statement. 
While the specific words here are mine alone, I am satisfied that the 
views expressed here reflect, in the main, the views of all of the 
Public Sector directors with whom I have served. (The current Public 
Sector directors are Gwen Baker, Roland Betts, Bill Bradley, myself, 
Gordon Gund, Henry Kissinger, Donna Lopiano and Mike McManus. Charles 
Moore and Frank Marshall served in this capacity with Gwen, Roland, 
Mike and I from 1996-2000.) Throughout our tenure, as a group we can 
perhaps best be described as very frustrated with the operations of the 
USOC. We each thought we could help out, and hope and believe that from 
time to time we have, but it has been and remains an inordinately 
frustrating and trying experience. During my six years the USOC has 
been an organization fraught with rumor and gossip, and often consumed 
by internal politics. Volunteer vs. volunteer disputes abound, and 
volunteer vs. staff disagreements have been constant. Ethics issues 
continue to arise. When the current internal dispute hit the papers 
some weeks ago, I thought ``Here we go again''. My initial foray into 
these matters took place mid-way through my first term, when I was 
asked by the then President to look into the performance of the then 
Executive Director, whom he thought should be replaced. I went to 
Colorado Springs and spent a day or two talking to staff and trying to 
understand the situation. I then returned to New York and contacted the 
other Public Sector directors, to ask for their help with what appeared 
to be a chaotic situation. Our conclusion was that, at bottom, there 
was no consensus as to who had the responsibility or authority to do 
what. In other words, there was no common understanding as to the 
basics of how the USOC was to operate. After discussing it among 
ourselves, we offered to coordinate the ongoing management study being 
done by McKinsey & Co. At the end of that process, in an effort to put 
the organization on the right track, we both facilitated the 
resignation of the Executive Director and the agreement of the 
President not to seek another term. We urged the adoption by the USOC 
Board of the report by McKinsey, which called for a more traditional 
corporate model of governance with clear division of roles between the 
professional staff and volunteer leadership. At that time we did not 
seek to reduce the size or change the composition of the USOC Board, 
hoping that would not prove to be necessary and also believing it to be 
a political impossibility at that time. We hoped that, with a new 
President and Executive Director/CEO, and the adoption of the McKinsey 
report, significant changes had been made, and that the USOC's internal 
difficulties would be overcome. As events have conclusively 
demonstrated, we were unreasonably optimistic. Since that time we have 
seen three CEO's and three Presidents. And, as Dr. Schiller has 
explained to me, what we have witnessed since 1996 is only a 
continuation of the previously existing pattern; it is neither new nor 
different. It is somewhat like a television soap opera, which runs for 
years and years with the same plot, although the characters keep 
changing. The question, then, is ``Why?'' What is it about the USOC 
organization and structure, and/or the USOC culture, which causes and/
or permits this kind of behavior to continually arise? Why do we 
witness continual personal animosity in the organization? (We saw a 
glimpse of that at the last hearing.) Why have the USOC's leaders 
apparently failed to recognize the stage that they are on, and the 
responsibilities entrusted to them? This is all the more mystifying 
because, so far as I can tell, everyone who becomes involved with the 
USOC or an NGB does so, at least initially, for the very best of 
motives and with the best of intentions, to be of service to our 
athletes and our young people. I believe that it is a combination of 
the structure and culture of the organization to which we should direct 
our attention.
    WHAT ARE THE PROBLEMS? It seems to me that the current USOC 
structure and culture suffers from several difficulties, which can be 
generally described as follows. It is important to remember, however, 
that these factors are at work at the same time; the USOC suffers from 
each of them on an ongoing basis. First, one must recognize that the 
USOC is a bit of an odd duck of an organization. It is non-profit (that 
is, it does not pay income taxes), but the USOC is clearly not a non-
profit organization as that term is commonly understood. In any 
ordinary sense, the USOC often acts like a classic for- profit entity: 
it receives income for the sale of licensing rights of marks, tickets 
for events, and broadcast of events. It protects such commercial rights 
vigorously. Over a four year quadrennium (the period between summer 
Olympic Games) such revenue amounts to several hundred million dollars. 
Obviously, the USOC' commercial operations need to be first rate; 
savvy, well-managed and creative, and able to compete with any other 
entity for the sports dollar. But, that said, the USOC is not 
interested in making profits for the purpose of paying dividends or 
increasing share prices. Rather, it generates revenue for the purpose 
of dividing it up among what seems like an innumerable number of 
constituent groups, which groups make up the USOC Board of Directors. 
Satisfying this amalgamation of National Governing Bodies (NGBS), 
community based, educational and other organizations, and the athletes 
is a daunting task. This is so because the various constituent groups 
which make up the USOC Board have interests which are adverse to one 
another. The various organizations contend with one another to 
determine policy (how will we do things) and money (which programs and 
organizations will be funded, to what extent, and under what 
conditions). Put simply, a corporate board has a uniformity of purpose, 
to make money for the investors. A charitable board has a uniformity of 
purpose: to raise funds to distribute to worthy individuals or in 
support of worthy causes outside of the organization. But, in the 
USOC's case, there is no such uniformity of purpose. Rather, the USOC 
is more like a legislative body, with the differing interest groups 
struggling with one another to protect their own and to get their piece 
of the pie. What this means is that, for all practical purposes, the 
structure of the USOC makes dispute and discord the order of the day. 
It is the natural and inevitable way of things given the existing 
governing structure. Second, there is no overall agreement or 
understanding as to what the role and purpose of the USOC actually is. 
Some believe that the USOC is a limited sort of umbrella organization, 
having as its sole purpose the raising of money to distribute to the 
NGBS for them to do with as they please. After all, the USOC doesn't 
produce any athletes, only the NGBS do. Others assert that the USOC's 
purpose is simply to win events--medals--which is used to define and 
measure success and serve as a source of pride for the organization and 
for the nation. And there is a third view, that the USOC has larger and 
broader responsibilities to the youth of America and the development of 
athletic programs at the grass roots level. The absence of an 
overarching view of what the USOC is supposed to be doing makes the 
internal decision making processes much more difficult. The USOC 
volunteers and staff can't be expected to march together if there is 
not even an agreement on where they are trying to go. A third problem 
is the seeming inability of the USOC volunteers and staff to sort out 
their respective roles and responsibilities so as to be able to work 
together on an ongoing basis. This role confusion is seemingly embedded 
in the USOC culture, as the history of disputes between the volunteer 
leadership and prior CEO's amply demonstrates. Throughout my tenure on 
the USOC Board volunteers have from time to time attempted to micro-
manage day to day operations, and even direct staff. Clearly, 
volunteers are critical to the success of the USOC, but part-time, 
unpaid volunteers should not interfere with or attempt to direct staff 
functions; running the organization is the CEO's job. The problem that 
the Public Sector Directors pointed out years ago persists: there is no 
accepted division of authority and responsibility between the volunteer 
leadership and the staff; we still have no agreement on who has the 
responsibility and authority to do what. I recall a recent press 
article which I believe attributed to a former USOC President the 
notion that anyone seeking the position of USOC President--the senior 
volunteer position--should be prepared to devote 20-25 hours per week 
to the USOC. Consider that for a moment. What person, with a regular 
day job, can devote 1000-1300 hours per year to unpaid volunteer work? 
More importantly, can one reasonably expect that such a level of 
ongoing involvement will lead to anything other than turf battles with 
the CEO? Fourth, The USOC Board of Directors is much too large. A Board 
with 120+ members simply cannot be expected to function well. In my 
view, this Board does not function at all. The twice yearly full Board 
meetings are (with one critical exception noted below) entirely 
ceremonial affairs, albeit very expensive ones. Board meetings are not 
deliberative sessions; rather, they are conventions given over to 
formalistic ratification of decisions already made, speeches, 
videotaped productions extolling the success of our athletes, the 
giving out of awards, and the like. I and the other Public Sector 
members have often asked one another why we bother to come to the Board 
meetings, given that nothing substantive takes place. There is, however 
an exception. Once every four years officers must be elected by the 
Board. This is serious business. Candidates for such positions nearly 
always come from and/or are identified with distinct constituent 
groups. (Frank Marshall, formerly a Public Sector Director, is an 
exception.) They ordinarily vie for the support of the NGB's, the 
athletes, or others. Coalitions form and dissolve. Promises are sought 
and made. In short, elections for officers reflect the disparate 
interests of the various USOC internal groups. And one should remember 
that the officers make up a significant portion of the Executive 
Committee--the real policy making organ of the USOC--along with the 
directly appointed representatives of the various constituent groups. 
Thus the difficulties of the overall Board structure are necessarily 
reflected in the makeup of the Executive Committee. The Members of the 
Committee should understand that I am not arguing that officer 
elections are bad in and of themselves, or that constituent 
representation on the Executive Committee is inappropriate. Rather, I 
submit that officer elections conducted within the current system often 
can and do perpetuate the internal political discord that is the 
predictable result of the existing governance structure. Finally, to 
state what may be obvious, it seems clear that all too often in the 
past the USOC has not had the right people in key leadership positions. 
The repeated leadership changes we have lived through, and the 
circumstances of those changes, are powerful evidence of that point. 
This is important notwithstanding the governance structure that is in 
place. Effective leadership can make an inefficient governance model 
work; ineffective leadership can fail even in a perfect structural 
setting. Given its current image, if the USOC is going to attract the 
best people it must demonstrate that both the structure and the culture 
which produced these difficulties has changed.
    WHAT SHOULD BE DONE? I have been asked to make recommendations to 
the Committee as to what changes should be made in the USOC structure 
and culture. I do not today offer formal or precise recommendations, 
but I will offer a few ideas which may merit some consideration by the 
USOC and by the Congress. I will first suggest several substantive 
concepts, and then offer an idea as to how, procedurally, the Congress 
and the USOC may wish to proceed to consider what should now be done. 
The principle by which I am guided is that the USOC is a public trust, 
and the volunteers and staff of the USOC are charged with carrying out 
the purposes of that trust. Accordingly, the USOC should be organized 
and operated in a way which is consistent with that broad public 
purpose. First, the Board of Directors should be reduced to a 
manageable number, perhaps down to \1/5\ or even \1/6\ of its current 
size. Second, the membership of the Board of Directors should be 
composed largely of independent outsiders; i.e., individuals who do not 
come from or represent any internal USOC constituent group. In other 
words, the Board should consist in large part of outside directors who 
want nothing from the organization save the satisfaction of making a 
needed contribution to a good cause. Such outside, independent 
directors should include individuals with significant experience in 
management, administration, fundraising and other skills that would be 
helpful to the operation of the USOC. The various internal USOC 
constituent groups would then make their arguments re policy and 
budgets, etc., to this largely independent Board. ( I do not have a 
suggestion at this time as to how such outside directors should be 
selected, but that is obviously a matter of considerable import.) This 
may well be a difficult sell to existing USOC Board members and 
constituent organizations. After all, the practical effect of adopting 
such a structure would be to limit the power and influence that such 
groups have traditionally enjoyed. The question which then arises is 
how to determine which, if any, of the internal USOC constituencies 
would be directly represented on the Board, and how the constituency 
groups would interact with the Board. Resolving such issues will not be 
easy. Third, the Board should be expected to act like a Board of 
Directors, not like an additional or substitute CEO or COO by 
committee. The role of the Board is to set overall policy, approve 
budgets, hire the CEO and perhaps other senior staff members, and meet 
its oversight obligations to make sure that the organization is getting 
the job done. The uncertainty of the volunteer / staff roles and 
responsibilities must be clarified so that they work together, and not 
at cross purposes. Fourth, the role and purpose of the USOC needs to be 
clarified. Whatever that role is--raising money for NGBS, winning 
medals, or serving the much larger purposes envisioned by the Amateur 
Sports Act--everyone needs to be on the same page, marching in the same 
direction. It seems to me unlikely that unity of purpose will be 
achieved in the near term absent the Congress insisting on it, and 
conducting periodic oversight to ensure that such purpose is 
effectuated. (It goes without saying that the more extensive the 
purpose the greater will be the need for funding. If the USOC and/or 
its constituent organizations are to undertake tasks beyond the current 
uses of funds, how the USOC will get the money for such other purposes 
necessarily becomes a significant issue.) Procedurally, how should the 
Congress and the USOC proceed to consider such of these ideas as may 
have merit, along with the many other ideas that have been and will be 
offered in response to the current situation? I note that at its 
meeting last weekend, the USOC Executive Committee established a task 
force for the purpose of making a thorough review of existing governing 
structures and policies. I welcome that effort. Quite apart from what 
the Congress or this Committee may suggest, it remains the 
responsibility of the USOC Executive Committee to act promptly to put 
things right, and I am pleased that this step has been taken. . At the 
same time, however, I wonder whether the credibility of the USOC to the 
Congress, and, more importantly, to the American public, can be 
restored without some sort of independent review. For this reason, I 
think that an independent review commission is both appropriate and 
should be helpful to both the USOC and to the Congress. I believe that 
we already have a proven model for such an independent commission. 
About 4 years ago, after the Salt Lake bid-city scandal broke open, the 
USOC appointed an independent commission for the express purpose of 
examining promptly and in detail the entire situation, and making 
findings and recommendations to the USOC for changes in existing bid-
city practices and procedures. There were five members of that group, 
which came to be called the Mitchell Commission. Former Senator 
Mitchell was the chairman, and the other outside members were Ken 
Duberstein and Roberta Cooper Ramo (the first woman President of the 
American Bar Association). I served in my capacity as a Public Sector 
Director, and the athlete member of the commission (required by law) 
was Jeff Benz. We retained our own counsel, and insisted upon and 
received the complete cooperation of the USOC. We made a number of 
findings, including a specific finding that a ``culture of gift-
giving'' pervaded the process by which cities were selected to host an 
Olympic Games. We wrote a comprehensive set of recommendations intended 
to break this culture and change the way that cities were selected to 
host the Games. Our recommendations were in turn adopted by the USOC, 
and significantly influenced measures which were adopted by the IOC. In 
short, the process worked. I believe that a commission with a similar 
charge can do so again. In addition to the independent members, such a 
commission would be helped to a very great extent by having among its 
members one or perhaps two individuals familiar with the USOC's history 
and current operations. In this regard I suggest that such a group 
include one or two current or former Public Sector Directors who, one 
will recall, neither come from nor represent any USOC internal 
constituency, but rather have the obligation to represent the public. 
As I have previously indicated, the Public Sector Directors can bring 
to such a group the benefit of their experiences with the USOC, 
frustrating as they have often been. I can without hesitation tell you 
that each of my seven current colleagues as Public Sector Directors, 
and Charles Moore, who served in that role from 1992-2000, would serve 
ably and with distinction in such a role. Over the last 6 years I have 
developed enormous respect for their integrity, intelligence and 
dedication. Finally, I recognize that there is a desire to move forward 
with dispatch. However, I would not set an artificially short deadline 
for the independent commission to complete its work. The job needs to 
be done quickly, but sufficient time must be allowed for the issues to 
be thoroughly examined and any proposed solutions comprehensively 
analyzed and considered before final conclusions are reached.
    CONCLUSION In conclusion, Mr. Chairman, in this written statement I 
have made certain observations and suggestions for the consideration of 
this Committee, and for the consideration of the USOC, the purpose of 
which is to suggest an alternative framework for the governing 
structure of the USOC, which, hopefully, would operate in a way that 
would also modify its culture. The ideas I have offered here will no 
doubt seem to many like radical surgery. Perhaps so. However, this may 
well be a time in which radical surgery should be considered.

    The Chairman. Thank you very much.
    Senator Boxer has another engagement, and she would like to 
make a statement.

               STATEMENT OF HON. BARBARA BOXER, 
                  U.S. SENATOR FROM CALIFORNIA

    Senator Boxer. Thank you, Mr. Chairman, very much. I have 
to be on the Senate floor, and I will be as brief as possible, 
less than 5 minutes.
    Mr. Chairman, thank you very much for the series of 
hearings you have called here. I appreciate it. This hearing 
and the previous hearing you held with Lloyd Ward are about the 
values and principles that the USOC management and its 
structure should uphold. I had a scheduling conflict the last 
hearing. It is just so unfortunate. I wish that I could be 
everywhere at once.
    I appreciate the fact that you are carrying forward with 
this. On the hearing with Mr. Ward, I shared the, I think, 
dismay with several of my colleagues on both sides of the aisle 
that the evidence indicates that Mr. Ward does not really live 
the values that I think are necessary to lead the USOC, and I 
want to put into the record with your consent just one page of 
the constitution of the Olympics.
    The Chairman. Without objection. *
---------------------------------------------------------------------------
    * The information referred to was not available at the time this 
hearing went to press.
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    Senator Boxer. This says that there shall be no 
discrimination based on a whole series of factors, including 
sex, and then, in regard to the employees, respect the rights 
of all employees to fair treatment and equal opportunity free 
from discrimination or harassment of any type, and this is very 
serious, and I think when you look at membership in the Augusta 
National Golf Club, a club that will not allow women as 
members, I believe it runs contrary to the spirit of the 
Olympic Games.
    I am not going to ask anyone to comment on that, but it is 
just a view that I hold, and I know that Senator Campbell 
shares that very strongly, and others on this committee do as 
well.
    We see two sports heroes here, both women. I think that 
their presence--it is just an honor for me to be in their 
presence. I know what they had to overcome in those early 
years, and yet it seems to me the CEO of this committee should 
respect not only the female athletes in the Olympics, but just 
females in general. I think that is the point of equality.
    California has an extraordinary Olympic heritage. More 
current and former Olympians live, train and work in California 
than any other State, so this is important for us.
    One more point I wanted to make to you, Mr. Chairman, 
because I did not have a chance to discuss it with you one-on-
one, and that is, we have some concerns in California about the 
bid city selection process. Nobody is saying do it again, that 
is not what I am here to say, but I believe there were 
conflicts of interest with people who were having a vote here, 
one in particular, and I ask unanimous consent to place a news 
article in the record, Could Grudge Foil San Francisco's Bid, 
if I might ask you to put that in.
    The Chairman. Without objection.
    [The information referred to follows:]

             The San Francisco Chronicle, September 1, 2002

                 Could Grudge Foil San Francisco's Bid?

                     By Phillip Matier, Andrew Ross

    Political campaigns always include a dash of paranoia that the fix 
is in--and the race between San Francisco and New York for the 2012 
Summer Olympics bid is no exception.
    In this case, local Olympics organizers (although they would never 
say so publicly) have pretty good reason to believe a member of the 
crucial U.S. site selection committee may be bearing a grudge against 
the city.
    We're talking about Roland Betts--businessman, developer and old 
college chum of President Bush.
    He's one of 10 members of the all-important Olympic site selection 
panel, which may well recommend to the U.S. Olympic Committee's 123-
member board which city--San Francisco or New York--should get the nod 
Nov. 3 as the U. S. bid city to host the 2012 Games.
    It's not just that Betts lives in New York, or that he heads the 
board of Lower Manhattan Development Corp.--the post-9/11 agency 
charged with replacing the World Trade Center.
    No, this is about something more intensely personal--like the de-
pantsing Betts got from San Francisco politicos when he put in a bid 
for what he thought was an all but (wink, wink) done deal to build an 
athletic mega-club on San Francisco's waterfront.
    Betts, you may recall, had hoped to build a West Coast version of 
Chelsea Piers--his highly touted New York recreation village/health 
club--at Piers 27-31. But in spring 2001, after a long fight, the Port 
Commission awarded the site to Mills Corp. (the same folks behind the 
yet-to-be-built 49ers stadium-mall) and to the YMCA, which had jointly 
proposed a competing plan for offices, retail and a fitness club.
    And now the Bay Area Olympians are worried that Betts may seek 
revenge.
    After all, after initially encouraging Betts to come West, Mayor 
Willie Brown turned around and threw his weight (and Port Commission 
votes) behind the Mills-YMCA deal.
    It didn't help Betts' mood that he shelled out $43,000 to state 
Sen. John Burton for advice on how to push his plan--only to get 
nowhere.
    ``The whole experience was a nightmare,'' Betts recalled last week 
from his New York offices. ``It didn't even occur to me that we were 
going to be bidding against somebody.''
    For his part, Brown (who is keenly aware of Betts' anger) said, ``I 
don't know why he's mad at me--it was Burton he paid all the money 
to.''
    So will Betts' experience here influence his Olympic decision?
    No way, says Betts.
    ``I have bent over backwards to be fair and objective,'' he said, 
adding that San Francisco wouldn't have made it this far if he and his 
fellow Olympic bigwigs didn't think the city had put in a ``superb 
offer.''
    As a matter of fact, said Betts, ``The whole Olympic process was 
100 percent on the merits--and if the city of San Francisco had treated 
Chelsea Piers on the merits, we'd be under construction by now.''
    Ouch.

    Senator Boxer. Thank you very much.
    The point it makes is, there was someone on the committee 
that just was turned down to do a real estate deal in San 
Francisco. He had a deal in New York, and it is in an area 
where they would benefit from the Olympics. This is very 
discouraging. Someone like that should not really be involved 
in pushing for a particular venue, and so I am very hopeful, 
Mr. Chairman, as you determine where you want to go with this 
particular set of hearings, if we have an independent 
commission, or whether you ask the Olympics to do it, that they 
not only look at the issues that you have been championing, but 
also this issue of the bid selection process.
    So I thank you very much for giving me this opportunity.
    The Chairman. Thank you very much, Senator Boxer.
    Ms. de Varona, did you want to say something?
    Ms. de Varona. I just wanted to welcome Senator Boxer, as a 
former resident of California, and I want to thank the 
Committee for letting me speak. I have a plane to catch at 
11:50, so I am going to have to excuse myself, but I would make 
myself available at any time to respond.
    The Chairman. Before you go, I saw you paid attention to 
Mr. Fehr's statement. Do you have any disagreement, or are 
there some contradictions between your recommendations and his?
    Ms. de Varona. No. My recommendations are an opening point. 
I think that this is a very complicated committee with a lot of 
responsibilities, and how we move the deck chairs around, or 
create a new widget to get the best and the brightest and 
governance that works is very important, and I do not disagree 
with anybody on the panel.
    The Chairman. Thank you very much. Thank you for being with 
us.
    Ms. de Varona. Thank you.
    The Chairman. Dr. Schiller, did you have any disagreement, 
or agreement with Mr. Fehr's statement and his recommendations?
    Dr. Schiller. Specifically about the nominating committee 
and how people are chosen, yes. I think at the same time, we 
have to be a little cautious that the organization does not 
become exclusionary by virtue of economic means. Years ago, the 
committee was filled with what we called the blue blazer boys, 
when you go back to the 1940s and earlier, because people could 
not afford to be part of the committee, and a lot of the 
expenses we are talking about were intended mainly to include 
athlete representation, and we ought to be really cautious that 
we do not exclude the people that may not be able to afford to 
be part of the representation.
    The Chairman. Thank you. I agree with all of Mr. Fehr's 
recommendations, and I guess it is a given that that will then 
bring about some kind of financial discipline, but Mr. 
D'Alessandro's statement I think indicates that there is a very 
serious problem there. I do not know much about how big 
corporations work, but a fleet of 197 company cars for the 
staff of 350, if that is indicative of the spending that is 
going on, then Mr. D'Alessandro's comments about how little is 
actually going to the athletes is certainly understandable.
    Dr. Schiller. You are right, sir, and I think part of the 
problem is the way some of these sponsorship deals are put 
together. They try to look big, and what they contribute are 
called value in kind, which really do not take care of the 
direct cash needs of the organization, and certainly certain 
organizations may want to give gas cards and automobiles in 
lieu of the kind of money that would be necessary to move the 
organization forward, so you have to be very, very careful 
about trying to put a deal together that does not have that 
much of that in its order.
    Mr. D'Alessandro. Thank you, Mr. Chairman.
    The Chairman. By the way, Mr. D'Alessandro, as a part of 
your comments, have you received any response to your letter of 
February 20, or January 20, I believe, where you asked for a 
financial----
    Mr. D'Alessandro. I have been told, Mr. Chairman, I am 
going to receive tomorrow about 80 percent of the actual 
specifics. I was informed yesterday by Mr. Ward in writing 
that, indeed, the tax returns are not correct, that they do not 
reflect accurately all of the contributions, the federal tax 
returns, and that clearly the accounting is not anywhere near 
as transparent as needs to be. I actually have correspondence 
with him on that subject, and so I am looking forward to 
sharing all of the data that we receive.
    I would like to echo Dr. Schiller's comments. In the world 
that I live in, in sports marketing, aside from the insurance 
world I live in, as Don Fehr said, there is a great deal of 
competition for that $6.5 billion. It is an unfair fight today. 
Basically, you have a committee of marketing people trying to 
get money, today, that look a little bit like they came from 
Ted Mack's Amateur Hour.
    They cannot compete with the heralded marketers that are 
around today, so what happens, basically, is there is a barter 
system that has occurred, and as Harvey says, if you take a 
look at where the USOC gets most of its money, it is from the 
IOC. That is the cash that funds salaries and some of the 
NGB's, but basically, when we sit in a room with the NFL, they 
basically say, show me the money.
    When the USOC shows up in similar suits, they say things 
like, show me the Jello, we'll take 20,000 cases of Jello, or 
Kleenex. It is a bit ridiculous to try and fund what we are 
trying to do in this country with barter, and that is the value 
in kind we are talking about. The value in kind really needs to 
be judged, because you cannot train athletes with value in 
kind.
    The Chairman. Ms. DeFrantz, first of all, I understand that 
these reorganization recommendations are the critical aspect of 
it, and I think that it will probably address many of the 
financial issues that have been raised, but has it not 
disturbed you that over a period of time so little money 
actually got to the athletes, and then when it did, as Mr. 
D'Alessandro pointed out, the USOC gave more money to Michael 
Jordan than it did to gymnasts and amateur athletes? Is there 
not something really wrong there?
    Ms. DeFrantz. My understanding was that those organizations 
gave money back to the USOC.
    The Chairman. Say that again.
    Ms. DeFrantz. My understanding was that those organizations 
either had specific programs for youth, or they gave the money 
back to the USOC. My understanding was they were sort of a 
place holder to remind the USOC that they have an NGB, even 
though the athletes now at the games are professionals, but the 
athletes who represent the USOC, or their NGB, actually their 
NGB at other events are not professionals.
    The Chairman. Dr. Schiller, has something changed since you 
were there?
    Dr. Schiller. It might have. I cannot reflect since I left, 
but during my tenure, the eligibility rules changed most 
specifically for the national basketball--so professional 
players were allowed to participate.
    David Stern, the commissioner, was forthright and really 
paid for all the logistical support of the team, all the 
travel, anything that was associated. In addition, he made on 
behalf of the league specific contributions, and we did realize 
increased funding by virtue of some of the joint licensing and 
sales programs we did with the league.
    I really cannot comment since I have left.
    The Chairman. Well, maybe I am straying a little bit, but 
it seems that when you have dysfunctionality, then perhaps the 
people who are intended to receive the benefits obviously are 
not getting them.
    And Mr. Fehr, I understand that we have to define the 
purpose more clearly, and yet I would assert that it is a 
combination of both, it is not just money-raising, because 
there is an obligation to train and help athletes so they can 
prepare themselves for Olympic competition, in some cases that 
is for years, particularly in sports where they otherwise would 
not be able to, wrestlers, for example, so I do not think it is 
either one or the other. I think that perhaps it is some kind 
of combination of the two, with a balance of the emphasis that 
is perhaps not there today. Is that an accurate statement?
    Mr. Fehr. I do not disagree with that. When I talk about 
redefining the purpose, what I was attempting to point out was 
that there are some members of the USOC board that will tell me 
that all they want the USOC to do is go out and generate money 
from Sponsor X and Sponsor Y and give it to them, and stay out 
of my business no matter what I do with it.
    There are others that say no, there are some NGB's that are 
good, but we have to help others and direct others and staff 
them.
    There are some who say that we are missing the point. The 
point is, they say we ought to be developing soccer programs 
for thousands and thousands and thousands of kids out there and 
making sure they work, not just focusing on elite Olympic 
athletes.
    Those are different purposes, and there is no uniformity on 
the board on what we ought to be doing.
    The Chairman. Thank you.
    Let me just say it is my view, and I think that Senator 
Campbell can speak for himself, but I think he and Senator 
Stevens and I agree we have no problem with an internal review 
and changes being made for the better that would be implemented 
to improve the workings of the USOC, and perhaps reduce some of 
this dysfunctionality, but I think in addition to that, we need 
to implement the kind of recommendations you have made and 
others have made, and that would require some outside, 
qualified, knowledgeable people, a combination, as you said, 
some with no affiliation, but probably with some that have some 
affiliation, because corporate knowledge is always an important 
aspect of bringing about meaningful reform.
    Senator Stevens and Senator Campbell and I are going to try 
to get out to Colorado Springs to talk to some of the people, 
but at the same time, we hope we can get a board moving.
    There is some time sensitivity to this whole issue. As I 
think Mr. D'Alessandro pointed out, the people in New York have 
already contacted me to say that their ability to get the 2012 
games is impeded at the moment by this situation, so I do not 
think we can afford to have a lengthy process here, and so I 
would like to act as quickly as possible, again with the expert 
advice and counsel and activity of Senator Campbell and Senator 
Stevens. I thank the witnesses. You have been very helpful 
today.
    Senator Campbell.
    Senator Campbell. Thank you, Mr. Chairman.
    While I certainly agree with many of the statements, and I 
certainly agree with the first part of your statement, Mr. 
Fehr, about we have an obligation, really, to all youth of 
America, regardless of where they come from, not just the elite 
athletes, and I have always supported that--everybody cannot be 
a gold medal winner, that is for sure, but I think all 
youngsters can certainly get some great benefits out of the 
Olympic movement--I certainly do not agree, however, that we 
cannot compare the structure of the USOC with other groups. I 
believe, as Ms. DeFrantz does, that we can compare it. In fact, 
it has been compared a number of times, and not looking very 
good in comparison.
    You said we need radical surgery. Radical surgery is 
warranted, I agree. Well, how would you like to have somebody 
operate on your liver who has never seen a successful liver 
transplant? We can use models, and we do for almost everything, 
and I think there are models out there that we can use.
    I wanted to put a few charts up on the board, with your 
permission, Mr. Chairman. I cannot see all the numbers, but I 
have got a small one up here, but it compares, based on the 
Forbes Magazine study of 200 nonprofits--they did an efficiency 
study, I guess that is the best word to call it, and if you 
compare the numbers up there, you can see, obviously, that the 
Red Cross, which is one of the top ones, according to Forbes, 
for efficiency, and the U.S. Olympic Team, which was one of the 
bottom three for efficiency out of the 200, have some 
similarities and some big dissimilarities, too, numbers of 
employees, and look at the number of board members as an 
example.
    And I might tell you that the Red Cross, we bounced some 
numbers back and forth in the computer a while ago. The Red 
Cross management expense is 5 percent of their annual revenues. 
The USOC's is 15 percent of their annual revenues. The Red 
Cross fundraising expense is about 4.5 percent of their annual 
revenues. The USOC fundraising expense is 18 percent of their 
annual revenues.
    Now, the revenues come into nonprofits, all of them, I 
think very similar. They come in from sales of merchandise, 
they come in from donors and sponsors, they come in from in-
kind contributions, and I think the Olympic Committee has a 
definite advantage because they get a large share of the 
international television marketing process that goes on that 
most profits do not have, but I wanted to point those out.
    The average efficiency, by the way, is 85 percent, about. 
According to the Red Cross about 90 cents of every dollar that 
they raise goes to their commitment, and according to the 
numbers I have, I have seen everything from a high of 78 that 
is on that chart down to 65, the same corresponding number for 
the Olympic Committee.
    This is the organizational chart of the Red Cross, and it 
is a little far for me to see. No, this one that is being put 
up now is the Red Cross, and the first one is the USOC, pretty 
similar. I mean, it does not take a rocket scientist to figure 
that one out. You can see, sort of lines of authority, and 
reading the boxes of what their mission in that area should be.
    The Olympic Committee, although being much smaller, has 18 
departments as opposed to 15 for the Red Cross, but I think I 
could read that, as most laymen could, and get a pretty good 
understanding about what is going on. The chain of command, the 
lines of communication and so on are pretty clear to me, if you 
can see that.
    Now, look at this last chart that I am going to ask staff 
to put up there. I have not found any corresponding chart like 
this in corporate America or, in fact, even in the other 
nonprofits, but that is the U.S. Olympic Committee's 
organizational chart, basically of their board of directors, 
and I will tell you, if a guy designed a Rorschach test and 
gave it to somebody, he could use that as a model, because when 
I look at that and I try to follow all those lines around, it 
looks like a bird's nest instead of some kind of an 
organizational chart.
    I think that is where the big problem is, Mr. Chairman, in 
that area of organizational, and it would seem to me as we move 
forward that is where we probably ought to put our emphasis, 
and that has been alluded to several times already by this 
committee, and it is not going to be an easy thing to do. I 
mean, people resist change, particularly if they have got a car 
and an expense account and they are staying in five-star 
hotels. I understand the deal. It is not easy, but it is 
something that very clearly has to be done.
    Early on, the chairman alluded to other options, and 
clearly, one is that the United States Olympic Committee, if 
there is some real problem where they cannot do it because of 
political reasons to restructure this very clumsy group, I 
think most of you know, as I do, that in most countries they 
have a sports minister that is actually part of the government. 
In our case, it would be an Under Secretary of HEW, or somebody 
with the President's Council on Physical Fitness, or something 
like that.
    I have always resisted that, very frankly, but it is not 
out of the realm of possibility that if they cannot reorganize 
and do it in some kind of manner that is satisfactory to the 
athletes--and I say that first, because without the athletes, 
who needs the USOC? I have mentioned that before, but also to 
all Americans, and certainly here in Congress, that there is 
always that last option, very simply, revoking your charter and 
doing what other countries have done, and letting the 
government take it over.
    I do not want to do that, most of my colleagues do not want 
to do that, but I get the feeling in talking to some of my 
colleagues in the U.S. Senate that they have got a few fewer 
friends now than they used to have. I hope that kind of a trend 
does not continue, and that this problem can be straightened 
out.
    With that, Mr. Chairman, I really have no further 
questions.
    Mr. Fehr. Mr. Chairman, perhaps I summarized a little too 
quickly. Senator Campbell, let me try and respond to your 
initial comments.
    First of all, I think if you will look at my statement, you 
will see that I agree with the notion that we have sort of a 
spaghetti bowl up there on the board of directors chart, which 
is a mess. It needs to be drastically cut down. There is no 
disagreement with that. There is no disagreement about 
clarifying the lines of authority, and so on.
    When I said there is no model, though, I was not referring 
to finances. I was referring to something rather more 
fundamental than that. In an ordinary corporate board, the 
board of directors share one purpose, we are going to make 
money and we are going to give it back to our shareholders in 
some fashion, dividends, or increasing share prices, or 
something.
    In the Red Cross, the board of directors, I suspect--I have 
no personal familiarity with it--has a uniformity of purpose. 
We are going to raise money, and we are going to distribute it 
for causes outside this organization that we believe should 
merit Red Cross support.
    On the USOC board, members of the board are saying, in 
effect, give the money to me, give it to my organization. Do 
not give it to his, and do not give it to hers. That is what I 
mean when I say it is an odd duck of an organization, for which 
I know of no comparable model, and that is what drives me to 
the conclusion that governance has to get past the constituent 
competition that we have.
    Thank you.
    Senator Campbell. I might also mention, Mr. Chairman, just 
in closing, I was just reminded, looking at some of my notes, 
to compare the Red Cross with the U.S. Olympic Committee and 
any oversight we might have, that as I understand it from 
asking staff to research a little bit, there are 10 committees 
in the U.S. Congress, House and Senate side, 10 committees that 
have some oversight of the Red Cross' actions.
    I think the Olympic Committee just has one, and that is 
this committee, and perhaps a little bit in the Appropriations, 
because that is where they come for a lot of the subsidy money 
we do not give them directly, but the indirect money we put 
into olympiads every single year, which is going, as I 
remember, something like $4 billion last time for the Salt Lake 
Games, so we have a real vested interest.
    But one of the things that I noticed--and I do not know if 
the Olympic Committee does it or not. If they do not, they 
probably should. The Red Cross, as an example, provides a copy 
of their audit as well as a number of other things to every 
single Member of the House and the Senate. They may not get 
read, but they are there, so they cannot say later on that they 
never saw it.
    Harvey, you are nodding your head. Is that done?
    Dr. Schiller. I know we did it during my tenure. I would 
assume that it is still done. I do not know.
    Senator Campbell. Well, I am an Olympian, and I darned sure 
have not seen one in my office since I have been in this body, 
10 years.
    Dr. Schiller. Anita just said it has changed from every 
year since 1999 to every quadrennial period, every 4 years.
    Senator Campbell. Every 4 years.
    Dr. Schiller. It was every year during my tenure.
    Senator Campbell. That means, in the case of our House 
friends, some of them will not even be here that long.
    Thank you, Mr. Chairman.
    The Chairman. Mr. D'Alessandro, go ahead.
    Mr. D'Alessandro. Just one more comment, Mr. Chairman. I 
think everybody is basically in agreement with the direction. I 
have to agree with Don Fehr also, because--and with Senator 
Campbell in this sense. We have the greatest development of 
athletes in the world, a lot of it, frankly, through public 
funding. Our universities are one of the great feeders of much 
of our athletes, as are public schools, as are private money 
from parents that are able to do so.
    What we have not been able to do is, frankly, have someone, 
some organization actually develop and coordinate how we give 
more opportunity to everybody throughout the system, not just 
an NGB, to Don's point. It is very, very important, and 
frankly, there are some sports that are underfunded that are 
going to need to be funded, so I think that Don Fehr is right, 
you need some way of finding someone in the governance 
structure in the end who can bring together much of the 
resource in this country that is basically diluted because of 
the effort we see in Colorado Springs.
    The Chairman. Thank you very much. I thank the witnesses. 
This has been very helpful. Thank you. This hearing is 
adjourned.
    [Whereupon, at 11:20 a.m., the Committee adjourned.]



                            A P P E N D I X

  Prepared Statement of Frank Lautenberg, U.S. Senator from New Jersey
    Mr. Chairman, I commend you for holding these hearings into the 
operations and structure of the U.S. Olympic Committee (USOC).
    The bitter dispute between former USOC President Marty Mankamyer 
and USOC CEO Lloyd Ward and their respective ``camps'' would easily 
rival any soap opera or ``reality TV'' show.
    I understand that CBS is auditioning contestants for ``Survivor 
7''--maybe the network should just televise USOC meetings during 
primetime on Thursday nights.
    In all seriousness, these internal problems at USOC have been 
played out in public, I'm sure they have caused USOC sponsors to 
reconsider their support, and--most important--they have undoubtedly 
hurt the athletes the USOC was created to help.
    As I see it, the two principal issues that need to be addressed are 
as follows:

        1. Is Lloyd Ward too ``damaged'' because of his ethics problems 
        to stay on as CEO; and

        2. How can the USOC be transformed from a dysfunctional 
        bureaucracy into a leaner, more effective organization?

    I find it difficult to believe that the USOC has 500 paid employees 
and a four-year budget of $500 million, and that only one-quarter of 
that amount--$127 million--gets paid out in grants to member sports 
organizations every 4 years.
    It's clear that the USOC Board is way too big. The USOC Board is so 
big--120 or so members--that it costs at least $100,000 just to have a 
board meeting.
    I've had plenty of experience with boards over the course of my 
business career, and I think they cease to be effective when they get 
too large.
    I understand why the USOC Board has grown over the years and the 
inclusiveness intended is laudable. But maybe what the USOC should do 
is have a much smaller board and rotate the various eligible members 
through.
    I use this analogy with some trepidation, but the Security Council 
at the U.N. has just 15 members; only five are permanent and the other 
10 serve 2-year terms.
    And the job descriptions for the USOC president and the USOC chief 
executive need to be sorted out once and for all.
    I hope that all of this can get resolved for the sake of our 
athletes--especially our true amateur and Paralympic athletes who so 
desperately need the USOC's help if they are going to keep competing 
and winning.
    Thank you, Mr. Chairman.
                                 ______
                                 
   Prepared Statement of Charles H. Moore, Jr., Executive Director, 
             Committee to Encourage Corporate Philanthropy
Query
    To examine the current organizational situation and culture of the 
USOC to determine what reforms may be appropriate to make certain that 
the USOC operates more effectively and efficiently.
Introduction
    I am Charles H. Moore, Jr., Executive Director of the Committee to 
Encourage Corporate Philanthropy. I also serve as a National Board 
member of the Smithsonian Institution, Commissioner of the Smithsonian 
American Art Museum, Regent of Mercersburg Academy and Director of The 
Sports Authority.
    Following 40 years of senior management of multi-national 
manufacturing companies and of venture capital and consulting firms, I 
served as Director of Athletics at Cornell University from 1994-1999.
Relevant Background
    I served as Public Sector Director and Chairman of the Audit 
Committee of the USOC from 1992-2000 and as Chairman of the USOC Bid 
City Evaluation Task Force in 2001-02. I was a member of the U.S. 
Olympic team in 1952. I presently serve on the President's Council for 
Physical Fitness and Sports.
Assessment
    The Board of Directors of the USOC is little more than symbolic and 
ceremonial. It is preoccupied with special interests seeking funds or 
other considerations.
    The Executive Committee of the USOC meets more frequently, but has 
consistently operated in a reactive mode. It is ``too representative'' 
(i.e., is designed to represent all constituencies) and not 
independent. It tends to be divisive and to micro-manage. It does not 
effectively represent Paralympic interests.
Considerations for Overhaul
    To be successful, an overhaul of the Board of Directors of the USOC 
must address:

        1. Roles of volunteers vs. professionals

        2. Mandated representation, if any, of National Governing 
        Bodies (NGBs) and Athletes

        3. A clear mission (is it more the oversight of Olympic and Pan 
        American sports?)

        4. Significant changes that have developed in the last decade, 
        including

       Commercialization of former amateur sports
       More inclusion of Paralympic sports
       Scope of Olympic/Paralympic and Pan American Games
       Technology (in all areas) and media
        IOC, International Federations and NOCs (including 
        interaction/interdependence)
       Sponsor needs
       Drug use and testing
       Escalating costs, size of staffs and management of 
        training centers
       Tranparency

        5. A sustainable financial model (should there be government 
        support?)

        6. Roles of Armed Forces and community-based organizations

        7. Role of USOC in grassroots development, including fitness 
        (should there be any relationship with the President's Council 
        on Physical Fitness and Sports?)

        8. Sustainable leadership

        9. Continuity

Recommendations
    1. Start again! The culture and mistakes (even conflicts) have been 
institutionalized. This will require a government mandate. I believe 
that it will be impossible for the existing organization (no matter how 
configured) to fix itself.
    2. Create a Board of Directors with a non-executive chairman 
(elected by the BoD) and no other elected officers (similar to 
corporate model except directors are not paid, other than expenses). If 
the NGB, Athletes and Paralympic Councils are maintained, let each 
elect two directors. Appoint nine independent directors. Meet at least 
four (4) times a year, plus Committee schedule, comprising at least 
Audit, Nominating/Governance, Ethics and Finance. Maintain separation 
from Olympic Foundation.
    3. Create volunteer Committees like Games Preparation, Membership, 
International Relations and Development, which will report to 
professional staff, who will, in turn, report to the CEO. Continue 
other staff departments like Marketing, Public Relations, HR, 
Information Technology and General Counsel with clear objectives.
    4. The CEO is responsible to the Board; there is likely little need 
for an Executive Committee.
    5. Government oversight needs to be defined and may vary depending 
on funding role, if any. The Smithsonian Institution model of Regents 
could be considered, or a Minister of Sports.
Summary
    The United States Olympic Committee is a public trust and is 
critical to the promotion of sport in the United States. 
Notwithstanding the fact that the USOC has lost the confidence of 
public, private and independent sectors, it should be restructured and 
restored to a transparent and credible organization to fulfill its 
mission (however defined). These recommendations, while appearing 
dramatic, are straightforward, actionable and measurable. 
Constituencies (NGB, Athletes, etc.) can be maintained as they bring 
continuity, but their direct input (``feeding'') will be replaced with 
sustainable, transparent and independent oversight through a 
professional organization (led by a CEO) and a Board of Directors (led 
by a non-executive chairman), both acting in step with appropriate 
government oversight.