Congressional Record, Volume 148 Issue 110 (Wednesday, September 4, 2002)

[Congressional Record Volume 148, Number 110 (Wednesday, September 4, 2002)]
[Senate]
[Pages S8183-S8194]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

HOMELAND SECURITY ACT OF 2002--Continued

Amendment No. 4486 To Amendment No. 4471

The PRESIDING OFFICER. The Senator from Minnesota.
Mr. WELLSTONE. Mr. President, I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report the amendment.
The legislative clerk read as follows:

The Senator from Minnesota [Mr. Wellstone] proposes an
amendment numbered 4486.

Mr. WELLSTONE. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:

(Purpose: To prohibit the Secretary of Homeland Security from
contracting with any corporate expatriate)

After section 171, insert the following:

SEC. __. PROHIBITION ON CONTRACTS WITH CORPORATE EXPATRIATES.

(a) In General.--The Secretary may not enter into any
contract with a foreign incorporated entity which is treated
as an inverted domestic corporation under subsection (b).
(b) Inverted Domestic Corporation.--For purposes of this
section, a foreign incorporated entity shall be treated as an
inverted domestic corporation if, pursuant to a plan (or a
series of related transactions)--
(1) the entity has completed the direct or indirect
acquisition of substantially all of the properties held
directly or indirectly by a domestic corporation or
substantially all of the properties constituting a trade or
business of a domestic partnership,
(2) after the acquisition at least 50 percent of the stock
(by vote or value) of the entity is held--
(A) in the case of an acquisition with respect to a
domestic corporation, by former shareholders of the domestic
corporation by reason of holding stock in the domestic
corporation, or
(B) in the case of an acquisition with respect to a
domestic partnership, by former partners of the domestic
partnership by reason of holding a capital or profits
interest in the domestic partnership, and
(3) the expanded affiliated group which after the
acquisition includes the entity does not have substantial
business activities in the foreign country in which or under
the law of which the entity is created or organized when
compared to the total business activities of such expanded
affiliated group.
(c) Definitions and Special Rules.--For purposes of this
section--
(1) Rules for application of subsection (b).--In applying
subsection (b) for purposes of subsection (a), the following
rules shall apply:
(A) Certain stock disregarded.--There shall not be taken
into account in determining ownership for purposes of
subsection (b)(2)--
(i) stock held by members of the expanded affiliated group
which includes the foreign incorporated entity, or
(ii) stock of such entity which is sold in a public
offering related to the acquisition described in subsection
(b)(1).
(B) Plan deemed in certain cases.--If a foreign
incorporated entity acquires directly or indirectly
substantially all of the properties of a domestic corporation
or partnership during the 4-year period beginning on the date
which is 2 years before the ownership requirements of
subsection (b)(2) are met, such actions shall be treated as
pursuant to a plan.
(C) Certain transfers disregarded.--The transfer of
properties or liabilities (including by contribution or
distribution) shall be disregarded if such transfers are part
of a plan a principal purpose of which is to avoid the
purposes of this section.
(D) Special rule for related partnerships.--For purposes of
applying subsection (b) to the acquisition of a domestic
partnership, except as provided in regulations, all
partnerships which are under common control (within the
meaning of section 482 of the Internal Revenue Code of 1986)
shall be treated as 1 partnership.
(E) Treatment of certain rights.--The Secretary shall
prescribe such regulations as may be necessary--
(i) to treat warrants, options, contracts to acquire stock,
convertible debt instruments, and other similar interests as
stock, and
(ii) to treat stock as not stock.
(2) Expanded affiliated group.--The term ``expanded
affiliated group'' means an affiliated group as defined in
section 1504(a) of the Internal Revenue Code of 1986 (without
regard to section 1504(b) of such Code), except that section
1504(a) of such Code shall be applied by substituting ``more
than 50 percent'' for ``at least 80 percent'' each place it
appears.
(3) Foreign incorporated entity.--The term ``foreign
incorporated entity'' means any entity which is, or but for
subsection (b) would be, treated as a foreign corporation for
purposes of the Internal Revenue Code of 1986.
(4) Other definitions.--The terms ``person'', ``domestic'',
and ``foreign'' have the meanings given such terms by
paragraphs (1), (4), and (5) of section 7701(a) of the
Internal Revenue Code of 1986, respectively.
(d) Waiver.--The President may waive subsection (a) with
respect to any specific contract if the President certifies
to Congress that the waiver is required in the interest of
national security.

Mr. WELLSTONE. Mr. President, I ask unanimous consent that I have 5
minutes, without losing my place in the debate, as in morning business.
The PRESIDING OFFICER (Mr. Carper). Without objection, it is so
ordered. The Senator is recognized for 5 minutes. Following his
statement, he will have the floor.
(The remarks of Mr. Wellstone are printed in today's Record under
``Morning Business.'')
Mr. WELLSTONE. Mr. President, I rise to speak to a very simple
amendment I introduced. I say to my colleagues, this actually was
passed in the House in the homeland defense bill. It certainly is
relevant that we bar the Secretary of Homeland Security from entering
into contracts with U.S. companies that give up U.S. citizenship to
avoid U.S. taxes.
I need to really summarize this amendment again. This is a very
simple amendment that would bar the Secretary of Homeland Security from
entering into contracts with U.S. companies that give up U.S.
citizenship to avoid U.S. taxes.
To about 99.9 percent of people in Minnesota and probably to about
99.9 percent of the people in the country, this is a very reasonable
proposition. My colleagues might remember that I had an amendment like
this to the Defense appropriations bill which passed here by unanimous
vote.
Before I get into the specifics of my amendment, let me make a quick
comment about the relevancy of the amendment. I gather there is an
agreement among the majority leader and the minority leader to move all
nonrelevant amendments. That agreement won't affect this amendment
because it was drafted to be relevant. It deals with government
contracts. It deals with the Department of Homeland Security.
The underlying House bill, as I just mentioned, has a similar
provision. So the substance of my amendment is

[[Page S8184]]

fully relevant to this bill. This is the appropriate place to have this
debate, as we debate the question of whether we will have a Department
of Homeland Security.
Former U.S. companies that have renounced their citizenship currently
hold at least $2 billion worth of contracts with the Federal
Government. I don't think companies that aren't willing to pay their
fair share of taxes should be able to hold those contracts.
U.S. companies that play by the rules, that pay their fair share of
taxes, should not be forced to compete with bad actors who can undercut
their bids because of the tax loophole. I had a debate on a similar
provision on ``Nightline.'' I said that the vast majority of companies
in Minnesota and around the country, if they had the lawyers and the
accountants, wouldn't do this because they wouldn't believe it was the
right thing to do, or many of the smaller businesses in my State and
all around the country don't have the lawyers and the accountants to
really get such a loophole.
In the last couple of years, a number of prominent U.S. corporations,
using creative paperwork, have transformed themselves into Bermuda
corporations in order to avoid paying their share of U.S. taxes. These
new Bermuda companies are basically shell corporations. They have no
staff, no offices, no business activity in Bermuda. This exists for the
sole purpose of shielding income from the IRS. That is what this is
about.
By the way, I am talking about shielding not just profits made abroad
but profits made in our country that are just shifted. There is a lot
of cooking of the books that goes on. Does that sound familiar to any
Senator?
U.S. tax law contains many provisions designed to expose such
creative accounting and to require U.S. companies that are foreign in
name only to pay the same taxes as other domestic corporations. But
these bad corporate former citizens exploit a specific loophole in
current law so that the country is treated as foreign for tax purposes
and, therefore, pays no U.S. taxes on its foreign income--or, for that
matter, on all-too-often a good part of its U.S. income. Additionally,
these companies can use accounting tricks, as documented by the Senate
Finance Committee in their investigations of this issue, to reduce
their U.S. income on paper and their U.S. tax on even their U.S.
income.

By the way, I thank staff on the Senate Finance Committee, majority
and minority, for their help in working on this amendment. We have
tried to do this in the right way. I will repeat this point. They use
these accounting tricks, which have been documented by our Finance
Committee, to reduce their U.S. income on paper and reduce U.S. tax
even on U.S. income.
These are Enron-like schemes involving sham loans and other
``Imclone'' transfers that allow these companies to reduce taxes on a
U.S. company, including income from Government contracts. This is
called earnings stripping.
I have spent the last 2 weeks, or thereabouts, at the Minnesota State
Fair. About half the State's population comes. It is quite a happening.
It is the essence of grassroots democracy. I will tell you one thing,
people are really indignant about a lot of these inside corporate
scandals.
Some Senators may say: Paul, you are just jumping on the issue. Well,
I don't know; this has been my work for years. I will tell you this.
Between having some of your savings and putting it in stock and seeing
it erode in value, or your savings in a 401(k) eroding, or CEOs telling
them they had an independent audit done and everything was great, to
invest more of their 401(k), at the same time he dumped his stock and
made $230 million in profit--people are tired of this behavior.
This is all about corporate accountability. That is what this
amendment is all about. What I am saying is that these companies are
not paying their fair share. If they want to renounce their citizenship
so they don't have to pay their fair share of taxes, fine, but don't
expect to get Government contracts.
Now, the loophole that we want to get rid of gives tens of millions
of dollars of tax breaks to major multinational companies, and these
are tax cheats. It also puts other companies that are unwilling or
unable to use this loophole at a competitive disadvantage. No Minnesota
company, or no American company, should be penalized for staying put in
our country while others that renounce their U.S. citizenship get a tax
break. This is a simple proposition. No company that does the right
thing and stays in our country should be penalized for staying put
while others renounce their U.S. citizenship just to get a tax break,
to not pay their fair share of taxes.
The problem is that when these companies don't pay their fair share,
the rest of American taxpayers and businesses are stuck with the bill.
I think I can safely say that very few of the small businesses I have
visited in Detroit Lakes, or Mankato, or Duluth, or Minneapolis, or
Northfield, or Faribault, or on the Iron Range, can avail themselves of
the Bermuda Triangle. As a matter of fact, they would not view it as a
very patriotic thing to do. They cannot afford the big-name tax lawyers
and accountants to show them how to do their books Enron style, but
they probably would not do it anyway if it meant renouncing their
citizenship. So the price they pay for their good citizenship, good
corporate citizenship, their good business citizenship, is a higher
tax bill.

Now, the House passed an amendment similar to this amendment on their
homeland security bill. My amendment uses a different mechanism than
the House bill to get at the same bad behavior. I have worked with
Senator Grassley and Senator Baucus to conform this amendment with
their bill that would close the tax loophole. That is what I ultimately
want to do. Here is how my amendment would work. If a U.S. company
reincorporated in a foreign country and 50 percent or more of the
shareholders of the new foreign corporation were the same as the
shareholders of the old U.S. company, then that company would be barred
from contracting with any homeland security agency if the company did
not have substantial business activity in its foreign home. It is that
simple. That is a perfect operational definition of a sham operation.
In other words, this is a two-part test, and if a company met both
tests, it would be barred from contracting with the Department of
Homeland Security.
First test: Are a majority of the shareholders of the new company the
same as the shareholders of the old U.S. company? This test is designed
to separate the true purchase of two real companies, which is fine,
from a sham transaction done just for tax purposes when the owners
change only the home country.
Second test: Does the new foreign company have substantial business
activity in its new foreign home? If it doesn't, then the new foreign
parent company is really just a paper shell designed to take advantage
of a tax loophole.
A lot of this is self-explanatory. I am not a lawyer, and some of the
technical material is hard for me, but this is not too difficult to
figure out.
This is contained in the Grassley-Baucus tax bill. I believe Congress
will close this tax loophole this year. There is growing support for
doing so in the House. I have introduced legislation to close 24
loophole, and the Senate Finance Committee has reported a version of
this legislation, which I strongly support, that would do so as well.
It is not appropriate for the Senate to close the tax loophole on this
bill--this is not a tax bill--but it is appropriate for us to say that
if a U.S. company wants to bid for a contract for U.S. homeland
security work, then it should not renounce its U.S. citizenship for a
tax break.
We all make sacrifices in a time of war. The only sacrifice this
amendment asks of Federal contractors is that they pay their fair share
of taxes like everybody else.
Mr. President, when I was talking about a Mr. Denis Kozlowski, the
reason I mentioned it, this was about Tyco Company, which has taken
advantage of this scheme. It is highly lucrative for these
corporations. Tyco International saved $400 million last year by
chartering its space in Bermuda--$400 million. About a month ago, we
learned that those savings may have helped the company buy the CEO a
$19 million home in Boca Raton and a $6,000 shower curtain for his
place in

[[Page S8185]]

Manhattan. That was in the Wall Street Journal. Here is Tyco
International which saves $400 million, and the CEO gets a lot of help
to buy a home and also uses $6,000 to purchase a shower curtain for his
place in Manhattan.
Was the company using some of the money that they received in
Government contracts--$220 million--to pay for that home and apparently
a very nice shower curtain? Should we feel sorry for these corporations
that have to scrape and pinch to find some tax savings? This is a
corporate responsibility issue. I think in the House of
Representatives, altogether, there were over 300 votes for a very
similar amendment.
I know some of my colleagues have an honest-to-goodness philosophical
objection to this approach, and I understand that and respect them for
it. On this one, maybe it is the populist in me, but to me this is a
straightforward proposition. If these companies want to engage in this
kind of sham or scam, they want to renounce their citizenship, they are
not going to get U.S. contracts from this new homeland defense agency.
That is what this amendment says.
I will wait for other colleagues to speak. I will say to my colleague
from Tennessee that I have been willing to accommodate anybody's
schedule--if people want to put off the debate for a while and vote
tomorrow, or whatever he wants to do. I wanted to begin and get the
discussion going on the amendment, whatever fits in with the schedule,
obviously.

Mr. President, I ask unanimous consent that Senator Reid and Senator
Baucus be added as original cosponsors.
The PRESIDING OFFICER. Without objection, it is so ordered.
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. THOMPSON. Mr. President, I thank the Senator from Minnesota.
Senator Lieberman can perhaps consult with the Senator from Minnesota
as to the way we will proceed. If the Senator is willing to set aside
the amendment for a moment, we will bring it back in due course and
proceed with the discussion, if that is agreeable.
Mr. WELLSTONE. Mr. President, I say to the Senator from Connecticut,
I will accommodate his schedule. I want to get the amendment up and
have a debate. If the Senator from Connecticut wants to lay the
amendment aside--whatever best accommodates his schedule. As long as my
colleagues will be nice to me in the debate and praise me, I am willing
to do anything he wants.
Mr. LIEBERMAN. It is easy to find common ground. I thank the Senator
from Minnesota. I suggest Senator Thompson and I engage in some
conversation with the Senator from Minnesota. For that purpose, I
suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. DORGAN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Miller). Without objection, it is so
ordered.
Mr. DORGAN. Mr. President, my understanding is the pending business
is the amendment offered by Senator Wellstone.
The PRESIDING OFFICER. The Senator is correct.
Mr. DORGAN. Mr. President, Senator Wellstone has offered an amendment
that deals with a subject I mentioned this morning, and I wanted to
speak a bit more about that subject. It is a subject that, by its
title, most people would not think much about. It is called inversion.
What does inversion mean with respect to corporate America these
days? Inversion is a process by which a corporation decides to renounce
its American citizenship. A number of high-profile corporations have
done that, saying, we wish to renounce our American citizenship and
become citizens of another country--in a couple of cases, Bermuda. So
an American corporation says, we no longer want to be an American
corporation, we want to be a Bermuda corporation.
Why would a U.S. corporation decide it wants to renounce its
citizenship? The answer, of course, is very simple. Because there are
circumstances under which, in the renouncement of citizenship by a
corporation, called an inversion, they can save millions, or tens of
millions, or perhaps hundreds of millions, of dollars in taxation. So
some companies make a decision, we would like to no longer be U.S.
citizens in order that we might save money on our tax bill. I happen to
think that is unpatriotic.
We are at war. Our country is at war with terrorists. Nearly 1 year
ago, on 9/11, we were attacked with unspeakable horror by terrorists in
New York City, in Washington, DC, at the Pentagon, and then there was
the aircraft that crashed in Pennsylvania.
Since that time, of course, we have had a remarkable speech by
President Bush, one of the best I have heard in my service in Congress,
calling this country to cooperate and to work together for a common
purpose, to wage this war on terrorism. Then in the middle of all of
this, we read stories about corporations that decide they want to
renounce their citizenship so they can save on taxation.
I ask a question of a company that decides it wants to renounce its
American citizenship: If it gets in trouble somewhere around the world,
if some dictator wants to expropriate its assets in some country around
the world, whom is it going to call? The Bermuda Navy? The Bermuda
Marines? The Bermuda Army? I do not think so.
It is shameful to see companies do what are called inversions and
renounce their American citizenship. They have a perfect legal right to
do it under today's law, but there are ways to try to plug that hole in
our Tax Code, and a number of us are working on that.
The Senator from Minnesota offers another proposal with respect to
this specific bill, and that is to say those companies that decide they
want to renounce their American citizenship should not be bidding for
contracts under homeland security.
We have a lot to do with respect to the needs in this country, and
the requirement that we all get together, work together, stay together,
to fight terrorism and do what we must as Americans to respond to this
threat. There is something horribly out of step with our requirements
as Americans, our requirements of citizenship, our requirements as the
stewards of this democracy, to see some corporations in this country
decide they no longer want to be American, they no longer want to have
U.S. citizenship. Technically and currently under the law, they have a
right to renounce their citizenship, but I think it sends a terrible
message to our country and to the world when they do that.
Yes, they can save on taxes by doing it perhaps. The question then
will be: Who will pay the taxes they do not pay? Which other Americans
would they choose to burden with this additional tax bill? Americans
working in the manufacturing plants they used to have in this country
or perhaps still have in this country? Do they want to shift the burden
to working people? That is what happens with respect to inversions.
I indicated I am going to hold some hearings on a couple of these
issues. There is some unfinished business with respect to this issue of
corporate responsibility. We passed a bill and the President signed it,
and that is important because we have seen now the emergence and the
disclosures of corporate scandals unparalleled in my lifetime.
You know, I have a card in my pocket. I put it in my pocket this
morning, because it reminded me of something important. I was on an
airplane recently. I was sitting in an aisle seat, and a man sitting
two rows ahead of me in the aisle seat across the aisle, as we landed
and before we disembarked, passed me his business card. His business
card named him and the company for which he worked. He is president of
the company. He wrote on the back of the card with a ballpoint pen and
passed it to me. I had never met the man, did not know him. He said:

Dear Senator Dorgan, Good morning. I am president of a
corporation. I work very hard and I am honest. I believe
there are more like me than not.

This is the president of a corporation. His first name is John.

[[Page S8186]]

I sent John a letter and said: I do not ever speak of corporate
scandal without saying I think we ought to understand American business
by and large in this country is run by wonderful men and women, good
stewards of the investors' money, people who want to do the right
thing, people who do not try to find where the line is and cross the
line, people who do not cook the books, people who work long hours and
are honest and do the right thing. That is the rule in American
business, in my judgment. But it is also true that the emergence and
the disclosures of these corporate scandals tarnish all in American
business and injure those honest, hard-working people trying to run
American companies. It injures the ability to raise capital because it
destroys people's faith in the system. They invest in a stock in a
company they have never visited. They buy a stock in a company they do
not know much about, but they trust the CEO, they trust the financial
statements, they trust the accounting firm that reviewed the
statements, they trust the law firm that gave advice to the CEO, they
trust the board of directors. So they invest in a share of stock in a
company they have never visited or never seen.
But there have been far too many instances recently of corporate
executives acting in complete disregard of their responsibilities as
business leaders. And although we recently passed an accounting reform
bill to tackle some of these problems, we have unfinished business. One
issue involves inversions, the issue that Senator Wellstone is bringing
to our attention today. Another important issue involves bankruptcies,
and an amendment I tried to offer to the corporate responsibility bill.
That amendment was blocked by the Senator from Texas, Mr. Gramm. He
blocked that amendment for a couple of days, and I was not able to put
it on the bill, but it deals with this. It is an amendment that says,
if in the year prior to the bankruptcy of a corporation, the major
executives in the corporation are receiving millions of dollars in
incentive and bonus payments, there ought to be a disgorgement and
recapture of that money to go to the stockholders and the employees. It
is very simple.
Since the time that I was blocked in offering that amendment, the
Financial Times did an investigation and an evaluation of the 25
largest bankruptcies in our country since January of last year.
What did it show? It showed that 230 top executives in the 25 largest
companies that filed for bankruptcy took $3 billion out of those
companies in compensation as those companies headed towards bankruptcy.
Well, guess what. The investors lost their shirts, they lost their
life savings, and, as the Financial Times says, the barons of
bankruptcy, the executives running companies into bankruptcy, went off
with a pocketful of gold.
There is something wrong with that. That is a piece of unfinished
business. We ought to pass legislation that says prior bankruptcy, if
executives are getting bonus and incentive payments as this company
heads towards bankruptcy, there ought to be the right to recapture that
money and use it to help offset the perks and costs with respect to
investors and employees.

That is one piece of unfinished business. Another piece deals with
inversions and the tax with respect to those corporations that want to
renounce their American citizenship. There is unfinished business with
respect to corporate responsibility. We did a wonderful thing in
passing that bill. Senator Paul Sarbanes deserves our unending thanks
for the work he did to put that bill together. The President signed it.
It is a bill destined to give confidence to people, but there is more
to do.
If we stop here we will have stopped before we got to the
intersection. There is more to do. Part of that deals with inversion,
and part of it deals with disgorgement and recapturing of funds as CEOs
took companies into bankruptcy. I intend, in the coming weeks, to be
among those in Congress who will address these issues. We should not
decide the bill we passed represents the end of corporate
responsibility legislation in the Senate.
I conclude by saying the fellow that passed me his business card on
an airplane a few days ago is right. He said: I'm president of a
corporation. I work very hard and I'm honest. I believe there are more
like me than not.
He is right about that. Absolutely. And on behalf of people like him,
we have a responsibility to be tough and to go after those who abuse
their trust and steal money. We have a responsibility to see to it that
they do more than 2 years of hard tennis at a minimum security
institution somewhere.
The Senator from Minnesota does us a service by offering this subject
on the floor of the Senate. There is more to do on inversion, but there
is more to do beyond inversion and corporate responsibility, including
disgorgement and recapturing of bankruptcy incentive and bonus payments
to CEOs.
The PRESIDING OFFICER. The Senator from Nevada.

Amendment No. 4490 to Amendment No. 4486

Mr. REID. I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:

The Senator from Nevada [Mr. REID] proposes an amendment
numbered 4490 to amendment 4486.

Mr. REID. I ask unanimous consent reading of the amendment be
dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:

(Purpose: To prohibit the Secretary of Homeland Security from
contracting with any corporate expatriate)

In lieu of the matter proposed to be inserted, insert the
following:

SEC. __. PROHIBITION ON CONTRACTS WITH CORPORATE EXPATRIATES.

[[Page S8187]]

Internal Revenue Code of 1986 (without regard to section
1504(b) of such Code), except that section 1504(a) of such
Code shall be applied by substituting ``more than 50
percent'' for ``at least 80 percent'' each place it appears.
(3) Foreign incorporated entity.--The term ``foreign
incorporated entity'' means any entity which is, or but for
subsection (b) would be, treated as a foreign corporation for
purposes of the Internal Revenue Code of 1986.
(4) Other definitions.--The terms ``person'', ``domestic'',
and ``foreign'' have the meanings given such terms by
paragraphs (1), (4), and (5) of section 7701(a) of the
Internal Revenue Code of 1986, respectively.
(d) Waiver.--The President may waive subsection (a) with
respect to any specific contract if the President certifies
to Congress that the waiver is required in the interest of
national security.
This section shall take effect one day after the date of
this bill's enactment.

Mr. REID. The Senator from New Hampshire is here and is going to ask
that the present amendments be set aside so that he can offer an
amendment. I will first take just a few minutes.
First of all, I commend the Senator from Minnesota for this
amendment. I was on the Senate floor when he offered this amendment on
a previous piece of legislation and spent some time talking about the
merits of his legislation. It passed by voice vote. The Senator from
Minnesota recognizes in the House something comparable to this has
passed, so we have no problems with this legislation as to it being
relevant or germane.
This legislation is important to reestablish confidence in what is
going on in the country. This amendment is designed to attack a tax
loophole that has allowed scores of U.S. corporations to move their
headquarters, on paper only, to tax haven countries to avoid paying
their fair share of our taxes.
Specifically, the amendment bars the Department of Homeland Security
from awarding Government contracts for those corporate tax runaways.
It is a sad reality that under our current law these corporate
expatriations are technically legal--I say technically. Legal or not,
there is no reason the U.S. Government should reward tax runaways with
lucrative Government contracts.
I had one of these big contractors talk to me. He brought with him
one of my friends who was no longer in the Senate. Because of my close,
warm feelings for the person who brought this man in, I wanted to try
to help. But after listening, I said I cannot help because it is wrong.
These corporations have turned their back on their country in their
country's hour of need, but they continue to come to Congress and the
executive agencies with their hands outstretched asking for rewards. We
need to end as soon as we can the practice of companies that hold
billions of dollars in Federal contracts renouncing U.S. citizenship.
It is wrong that the companies that play by the rules and meet the
responsibilities of the country should be forced to compete with bad
actors who shirk their tax bill.
If the corporations want Federal contracts so badly, I have advice:
Come home. Come back to your country, to our country, and you will be
eligible to bid on homeland security contracts. If you do not, you
can't. Go lobby Bermuda or the Cayman Islands, but leave us alone.
Let me talk about a few of the companies involved that have handled
this in an improper manner: Ingersoll-Rand. When I was a little boy and
went with my dad down in the mines, Ingersoll-Rand was the name on the
compressor that was above ground and on the jackhammer he used
underground. In my mind, even today, I can see my father pick up that
jackhammer and push it into that hard land and drill. Ingersoll-Rand is
all he had, all I remember, an Ingersoll-Rand jackhammer. This company
was founded in 1905. They have been headquartered in Woodcliff, NJ, for
many decades, mostly manufacturing jackhammers, bobcat vehicles, club
car golf carts, hardware products, security devices, control systems.
In fact, one of the things they talk about in advertisements is their
jackhammers made Mount Rushmore.
But times have changed. Last December, 3 months after September 11,
Ingersoll-Rand put the finishing touches on renouncing its U.S.
corporate citizenship. It filed paperwork to set up three British
employees in a little office in Hamilton, Bermuda. Now it can avoid
paying $40 million each year in U.S. taxes. This will not stop
Ingersoll-Rand from lobbying for U.S. Government contracts. As we
speak, the corporation holds over $40 million in Government contracts,
virtually all of which are directly related to homeland defense or the
military. These days, the company has been lobbying the Government to
buy its airport security screening devices. If they renounce their
Bermuda citizenship, I am happy to work with them and let them get the
contract. That is fine.

There are many other companies. Fruit of the Loom, headquartered in
Bowling Green, KY, for years, last year decided it wanted to do
something else and moved offshore. They have millions of dollars in
contracts.
Cooper Industries makes tools and hardware needed to transmit natural
gas. They were founded in 1833 in Mount Vernon, OH. Last year, they had
revenues of $4 billion, net income of $230 million, and they decided
they could make a few extra bucks by moving offshore. That is what they
have done.
I have page after page of companies that have decided to go offshore.
Yet they have large amounts of Government contracts, where the
underlying company had scores, hundreds of offshore Government
corporations, legal entities set up so they could play around with our
money.
Accenture, APW, Carnival Corporation, Cooper Industries, Enron,
Everest Reinsurance, Foster Wheeler, Fruit of the Loom, Global
Crossings, Gold Reserve, Halliburton, Harken Oil--Halliburton had units
in St. Lucia, Liechtenstein, Barbados, Cayman Islands, Cyprus, the
Netherlands Antilles, and the British Virgin Islands, among others--
Helen of Troy, Leucadia Corporation, on and on.
The time has come. If they want to move offshore, let them get their
contracts someplace else.
The PRESIDING OFFICER. The Senator from New Hampshire is recognized.
Mr. SMITH of New Hampshire. Mr. President, my understanding is the
pending business is the Wellstone amendment.
The PRESIDING OFFICER. The Senator is correct.
Mr. SMITH of New Hampshire. I ask unanimous consent the Wellstone
amendment be temporarily laid aside for the purpose of offering an
amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REID. Mr. President, I couldn't hear. What was the request?
Mr. SMITH of New Hampshire. The request I made was to temporarily lay
aside the Wellstone amendment for the purpose of offering an amendment,
which I will not debate at this time.
Mr. REID. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. Does the Senator from New Hampshire yield the
floor?
Mr. REID. Mr. President, I object. Will the Senator from New
Hampshire restate his unanimous consent request?
Mr. SMITH of New Hampshire. I ask unanimous consent that the
Wellstone amendment be temporarily laid aside for the purposes of
offering my amendment on armed pilots.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.

Amendment No. 4491 To Amendment No. 4471

Mr. SMITH. I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:

The Senator from New Hampshire (Mr. Smith), for himself,
Mrs. Boxer, Mr. Murkowski, Mr. Burns, Mr. Bunning, and Mr.
Miller, proposes an amendment numbered 4491 to amendment
4471.

Mr. SMITH of New Hampshire. I ask unanimous consent the reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The amendment is printed in today's Record under ``Text Of
Amendments.'')
Mr. SMITH of New Hampshire. Mr. President, this amendment is offered
on behalf of myself and Senators Boxer, Murkowski, Bunning, Burns, the
Senator presiding, Senator Miller, and others. Because there is an
agreement with some of my colleagues that we would not debate it today,
I will not

[[Page S8188]]

take any further time from the Senate, other than to say that this
amendment is the Arming Pilots Against Terrorism and Cabin Defense Act
of 2002, which will be an amendment that will provide help for training
for those flight attendants in the cabin, and for pilots to be able to
carry weapons, lethal weapons, in the cockpit to protect our country,
our citizens, and those in the aircraft from the aircraft becoming
weapons of mass destruction.
The intention is to debate this tomorrow when my other colleagues are
available, at a time to which the leaders will mutually agree. I very
much appreciate the assistant leader, Mr. Reid, allowing me to offer
the amendment at this time.
I yield the floor.
The PRESIDING OFFICER. The Senator from Utah is recognized.
Mr. BENNETT. Mr. President, I would like to comment on the bill as it
stands and some of the challenges relating to it rather than any
specific amendment.
All of us, as we want to arrive at a position, fall back upon our own
experience. I have some experience that I think is relative to this
situation which I would share with the Senate. I have shared it with
some members of the committee, but I have found in my time in the
Senate that there is no such thing as repetition. Every speech is given
as if it is brand new and no one has ever heard any of this before. I
have learned that from some of my more senior colleagues here.
First when I arrived here, I found it a little distressing, but after
I found out how often people listen to what you say, I decided it is
probably a pretty good thing, because repeating something over and over
again in this body, many times, is the only way you can get anybody to
listen to you.
With that, let me share with you and my colleagues, and any others
who may be listening, my experience with a similar situation when I
served in the first term of the Nixon administration.
In the 18 months prior to President Nixon's election, Joe Califano,
as the Chief of Staff to President Johnson, conceived of the idea of
the Department of Transportation. We were one of the few industrialized
countries in the world that did not have a ministry of transport, as it
is called in most other countries. We found that our transportation
functions were scattered all over the Government. Mr. Califano,
consulting with President Johnson, convinced the President that the
time had come to create the American version of a ministry of
transport. So the Department of Transportation was born.
On paper, it looks like a department that was created at the Harvard
Business School. You had a series of assistant secretaries who were
staff officers. You had a series of administrators who were line
officers. It was put together with modern business terminology and a
complete understanding of how a large organization should be formed.
It took the Federal Highway Administration out of the Department of
Commerce, where it was such a significant part of that Department that
they had two Under Secretaries, one an Under Secretary for
Transportation and the other an Under Secretary for everything else. It
took the FAA from its status as an independent agency reporting
directly to the President. It was called the Federal Aviation Agency.
It was renamed the Federal Aviation Administration so that the
terminology would be comparable.
It took the Coast Guard out of the Treasury Department. It goes all
the way back to the time of Thomas Jefferson, perhaps, as being part of
the Treasury Department looking for smugglers so they could collect
duties on people who would bring goods into the United States. The
Coast Guard represents a significant part of our transportation
activity, and it was recognized it no longer belonged in the Treasury
Department.
There was a fledgling group called the Urban Mass Transit
Administration that was over at HUD, the Department of Housing and
Urban Development. But they recognized it had nothing, really, to do
with housing and belonged over in the new Department of Transportation.
They looked at some other areas where there needed to be some
initiatives in transportation and created some new agencies solely for
those--the Federal Rail Administration being the chief among them. Then
it took some other isolated agencies, folded them in, put them on a
piece of paper, and said: Here is your new department.

Alan Boyd, who was the Under Secretary of Commerce for
Transportation, was made the new Secretary of Transportation and for 18
months struggled with the challenge of trying to bring these groups
together. His service was terminated when President Johnson left
office. John Volpe came down, as former Governor of the State of
Massachusetts, to assume the Secretaryship of the Department of
Transportation. The Under Secretary was James Beggs, who came over from
NASA, where he had performed excellent service as an associate
administrator there. I was hired to run the congressional liaison
function for the Department.
As I say, the Department was 18 months old. When I walked into it to
take over my new duties, I found that almost no one knew what those new
duties would be because the challenge of bringing together, at a
departmental level, all of the people involved in congressional liaison
had not been successfully met in the 18 months previous. I am not
putting any blame on Secretary Boyd or on any of the people who worked
with him during that 18 months. As I became acquainted with the
Department and its functions, I realized how difficult it was to bring
together agencies that had no common culture, no common background,
that had been operating in many different places across the Government,
and turn them into a clearly, smoothly functioning single unit.
Indeed, there were some people in that organization who refused to
admit they were even members of the Department of Transportation.
An anecdote: One of the personnel officers who worked for the
Assistant Secretary for Administration got on the elevator and punched
the button that said eighth floor. Someone behind her said: You are one
of those DOT types. The eighth floor was the floor that had been
recommissioned for the offices of the Secretary. The tenth floor was
where the Administrator of the FAA worked. She turned around and said:
We are all DOT types.

Her remark was not favorably received. The folks behind her in the
elevator said: We are FAA. You are DOT.
It is a small anecdote, but it demonstrates that after 18 months
there were still people who had a hard time bringing themselves into
the new Department.
To my own specific experience, I found that the FAA still had its own
congressional relations function. Urban Mass Transit didn't have one at
all. They had not really brought anything over with them from HUD. The
Federal Highway Administration had a well-entrenched congressional
liaison function, and the Coast Guard had been at it for close to 200
years, and they were not about to give that up to anybody as
unimportant as a Cabinet officer.
The new agencies that had been created didn't have any service. They
didn't know what they were doing. Those officers who had been trying to
perform congressional relations functions for the Secretary and the
team of Assistant Secretaries that had been created under him had been
floundering and flopping around trying to find their way in this
morass.
Secretary Volpe and Under Secretary Beggs gave me the challenge of
trying to pull all of this together. It was one of the most interesting
and difficult experiences of my then-young life. That was enough years
ago that I was a young man when I undertook that.
Eventually, we were able to pull all of those functions together into
a single office reporting directly to the Secretary. I rearranged all
of the functions so that everyone involved in that activity reported to
me either directly or through my deputy. I said: I will give you an
assignment--as if we were a consulting firm dealing with clients. You,
sir, your client is the FAA. You, sir, your client is Urban Mass
Transit, and so on. You will not be acceptable to me if your client is
unhappy. If the Administrator of the FAA believes he is not getting the
kind of congressional relations he deserves, he will complain directly
to me as we meet together in the Secretary's staff meetings, and I will
be around to see you. But at the same time, you work for me. And,
through me, you work for Secretary Volpe.

[[Page S8189]]

This meant that when we had an issue that required more manpower and
womanpower than that particular officer could provide, I could rally
the resources of the office and the other officers to help on that
particular issue at that particular time. We were much more flexible. I
think we were much more efficient and effective.
As it turned out, a large percentage of President Nixon's domestic
agenda fell under the Department of Transportation. Congress passed,
with our help and liaison, a whole series of landmark bills setting
down the transportation process for this country. It was one of the
most stimulating experiences of my life.
What does that have to do with the Department of Homeland Security?
In making the kinds of changes that I have described, I had to have
management flexibility so that when, with the Secretary's authority, I
didn't have--it came from the Secretary--I could say: You no longer
work for the Administrator of the FAA; you now work for me. You no
longer report to the Administrator of the Federal Highway
Administration, you now work for me. This is how we are going to set
your procedures, and this is how we are going to rationalize salaries
within the office that I created.

I was able to do that because the enabling act that created the
Department of Transportation gave the Secretary management flexibility
to move people around within the Department without coming back to the
Congress for approval. He had flexibility to change payroll.
One of the interesting things that occurred was that in the FAA,
promotions were all made on even numbers; that is, you went from a GS-4
to a GS-6; from a GS-8 to a GS-10; from a GS-10 to a GS-12, and so on.
In other parts of the Department they did two numbers per jump, but
they were all on odd numbers.
As I brought all of these people together in the same offices, I had
some GS-5's and GS-6's. The amount of money they were earning, frankly,
was the same. It was very interesting to me, coming from the corporate
world as I was at that time in this somewhat strange and challenging
world of the U.S. personnel system. We had to rationalize that or the
office didn't make any sense. We had to make some changes. We didn't do
it in a way that damaged anyone. No one lost money. No one lost
position. But someone had to transfer from the odd system to the even
system, and adjustments had to be made. And they were made on the basis
of what made the most sense for the office and how it would work. The
flexibility that was written into the act made that possible.
One interesting thing that probably doesn't apply anymore but that
came out of that experience was the result with respect to supergrades.
In those days, a GS-16, GS-17, or GS-18 was called a supergrade, and
each Department had a set number of supergrades. That was true of the
Department of Transportation. I don't remember what the number was, but
the Department could not have more than 25 or 35 or whatever the number
was of supergrades.
As I went through this process of bringing all of these people
together, I was able to walk into the Under Secretary's office and say:
I am giving you back three supergrades--because so many of these people
had held supergrade positions in the previous administration. The way
we organized this, I only needed two supergrades--one for myself and
one for my deputy and everybody else was a GS-10 or below.
I didn't realize what I was doing because the Under Secretary greeted
me with one of the biggest smiles I have ever received and said: This
is pure gold because there are other places in the Department where the
positions deserve supergrades and I don't have any supergrades to give
them. And you have just freed up three supergrades by virtue of your
consolidation of this function.
I don't know where the supergrades went. But they went out to other
deserving people.
That is why I feel so strongly in favor of President Bush's position
that the Department of Homeland Security must be formed with
flexibility for management and personnel and other decisions on the
part of the Secretary. I have been there and I have seen how vital it
is. If we had to go through the kinds of hoops that are created in the
Federal personnel system in the reorganizing something as insignificant
as my offices--I am talking about 30 to 35 people max; I am not talking
about anything approaching the challenge of this new Department--if we
had to go through all of those hoops in reorganizing my office, I would
have spent the entire 2 years that I was there working on personnel
issues and management issues instead of trying to get the program
passed through the Congress--the landmark legislation that was passed.
I still have the pens that President Nixon gave me and my picture in
the Cabinet Room when those bills were signed. We would not have been
able to get that done. We would have been snarled up in all of the
internal management challenges of, well, we have to go to Congress to
get this approved or that approved; we haven't got the flexibility to
do it.
I have that personal experience that drives me to stand with the
President on this issue and to say that I believe the President is
correct when he says he will veto this bill, if that flexibility is not
there.
None of us should have the false assumption that this Department will
work for at least 3 and more likely 5 years. All of us should
understand how difficult a management challenge this is going to be
under the best of circumstances. The Department of Transportation, as I
say, 18 months after its formation was still not working. John Volpe
didn't come in and wave a magic wand to make it work overnight. John
Volpe and Jim Beggs labored for a full 4 years beyond the 18 months
that it had under President Johnson. It was only toward the end of
those 4 years that you began to see things really meshed together and
start to work together and see a real Department of Transportation
instead of the old turf battles that had been there. The Department of
Defense took longer than that to come together. It was the kind of
reorganization more closely paralleling the size of the one we are now
doing.

It is instructive to remember that the first Secretary of Defense,
James Forrestal, committed suicide. The challenge of managing that
difficult a bureaucracy was sufficiently great that this dedicated
public servant--perhaps too dedicated because he took it so seriously--
that he ultimately could not cope with it and committed suicide, which
demonstrates how serious it is for us to do this right.
I do not want the new Secretary, whoever he or she may be, to have
any more impediments placed on the challenge of making this Department
work than are necessary. To not give the Secretary the management
flexibility that the President has called for is asking for failure in
this Department.
As I say, it is not going to work for at least 3, and more likely 5,
years. That does not mean we should not do it. We should do it because
if we wait a year, that will just push back a year the 3-to-5-year
period that it will not work. But let's be realistic about it. Let's
understand from the model of Government mergers, let's understand from
the model of corporate mergers, how difficult this is going to be; and
then let us, in the Congress, fashion a piece of legislation that says
we are going to make it as easy as possible for the new Secretary to do
all of the internal kinds of shifting and changing necessary to make it
work closer to the 3-year figure than to the 5-year figure.
Now, I hope I am wrong. I hope it will work magnificently in 6
months. But life tells me that is not likely. So that is why I voted
against this bill in committee. I said to Chairman Lieberman: If you
really needed my vote to report out this bill, I would give you my vote
because I think the bill ought to be reported out. But since you don't
need my vote, I want to register my deep concern about the management
flexibility and lack thereof that is written into this bill. And the
only way I can do that is to cast a vote against the bill.
Someone has asked me: Well, if it comes out of the Senate and the
President is not given the management flexibility he has asked for, how
will you vote on final passage? I will probably vote against it on
final passage, even though some people say to me:

[[Page S8190]]

Oh, let it go to conference and we'll fix it in conference.
I have learned around here the motto ``let's fix it in conference''
does not always work. Very often it comes back from conference worse
than when it went to conference, and then you are stuck.
So I am dedicated to the creation of the new Department. I will do
everything I can to help the President and the Congress pass
legislation that makes sense. But I cannot, from my own experience,
believe this makes any sense if it does not go forward with complete
management flexibility in every possible way.
A press conference was held today in which some Members of this body
were quoted as saying that those of us who believe as I have just
described are union baiters; that our whole motive here is to bash
organized labor; our whole motive here is to attack honest working
people.
Let me take you back to my experience at the Department of
Transportation. It was my first experience in an executive branch
organization. I had served on Capitol Hill as a staffer, as a
Government employee, but I had never been a civil servant. And I went
in with some of the standard prejudices that many people in the private
sector have about civil servants: That they don't work very hard; that
they are just serving their time until their 40-year period for
retirement comes along; that they are not very entrepreneurial; that
they are not interested in new ideas; that they take as their motto,
``We were here before you got here, and we will be here after you
leave, so we don't need to pay any attention to you.''

There were some who had that view, there is no question. There is a
very small percentage of civil servants who feel that way.
I was overwhelmed with admiration for the career civil service people
in our Government who were dedicated, determined to make Government
work, absolutely determined to do the very best job they could, and
open to suggestions and comments that may have come from the political
appointees.
We had an Assistant Secretary for Administration, a position that is
a civil-service-protected position, who had been appointed by Alan
Boyd. He was a known Democrat. But because his position had civil
service protection, there was not anything that Secretary Volpe could
do about it. He was as helpful to me in this reorganization effort that
I have just described as anybody at the Department.
He sat down with me and helped take me through the labyrinth of
Federal regulations. And when I made some mistakes--and I made several
which were beauts--he did not jump all over me. He said: It's our fault
for not having warned you in advance that that's what would happen if
you did it that way. And if we had been there, we would have helped you
do it another way. And let's see to it that it happens the other way.
These people do not need to be protected from competent managers.
These people need to be motivated and excited about the creation of a
new Department. If the new Department is being created with intelligent
management and flexibility on the part of the management, the civil
servants will respond, certainly those at the Department of
Transportation. They will respond with enthusiasm: At least we are
moving forward in an area where we have been deficient in the past.
Thank you for the opportunity for this new kind of service that the old
paradigm would not allow.
They will be supportive of this. Maybe their union managers are
fearful of what management might do, but get a competent manager in as
the Secretary and have him or her choose competent people as the
Assistant Secretaries and the other administrators, give them the
flexibility to do the right management thing, and the civil servants
will not feel attacked. They will not feel under siege. They will feel
liberated and excited. And they will be part of the solution because if
this Department is going to work in 3 years rather than 5, it has to
have the support of the civil servants; it has to have the kind of
partnership between the civil servants and the political leadership
that America has seen happen so often in so many other places.
So I reject the notion that my call for management flexibility is
somehow an attack on the civil servants or an attack on their unions.
Instead, it is reaching out and saying: Join with us to make the best
kind of Department we possibly can and, thus, create for you the best
working environment you can ever be in in your Federal career. Be part
of something truly exciting, something truly significant and historic,
the creation of a new Department in the 21st century dealing with 21st
century challenges that this country has not had to face in its past
history.
But don't let us start out with a traditional 19th-century-style
management-labor confrontation. Do not let us start out with: We have
to protect our turf and everything we have now, and we have absolutely
no confidence at all that the management will do anything but attack
us.
Let's put all of that aside and say: What are we dealing with here?
As I say, we are dealing with a 21st century challenge of the kind this
country has not faced in its history. We are trying to reorganize the
assets of the Government to meet this challenge in a cohesive,
coherent, intelligent way.
Let us never lose sight of that objective and keep our eye on that
ball as we write this legislation and as we adopt amendments on the
floor.
One of the first amendments that will be offered will be one to give
the Secretary, through the President, the kind of management
flexibility I have been talking about. I intend to support that as
strongly as I know how, for all of the reasons I have laid out here.
I hope my colleagues will join with me.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. CLELAND. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Dayton). Without objection, it is so
ordered.
Mr. CLELAND. Mr. President, I would like to speak on behalf of the
homeland security agency bill.
It is with humble appreciation of the gravity of the task now before
us that I rise to advocate the creation of the Department of Homeland
Security.
Today, almost a full year since the forces of hatred attacked the
American homeland, we are poised to transform the Federal Government
into a sharper, more versatile instrument of peace and security for all
of our citizens. The people of America and their leaders here in
Washington, in both Chambers of the Congress, on both sides of the
aisle, and at both ends of Pennsylvania Avenue, are united on the
substance of this issue.
All agree we cannot stand idly by as the enemies of freedom plot our
destruction. All agree that the homeland security apparatus of the
Government is at present ill equipped for its grave task. And all agree
that we are called, therefore, to take decisive action to retrofit the
Federal Government for the more effective performance of its greatest
commission--the protection of its citizens.
Thomas Jefferson once said the real goal of government is the
protection of life and not its destruction. When Senators Lieberman and
Specter introduced legislation establishing a Department of Homeland
Security in May, I am proud to say I was one of four Senators to sign
on as an original cosponsor.
Since that time, we all now know, the administration, followed by
every Member of Congress, has joined us in this critical reform effort,
so that we find ourselves standing now on the threshold of an historic
bipartisan achievement. A few points of difference on the details do
remain. I look forward to a full and healthy debate on these over the
next few days. But by and large, we are headed in the same direction,
toward the same ultimate destination--the protection of our Nation.

I have no doubt that we will get there together. As my good friend
Congressman John Lewis said after September 11:

We may have come to this country aboard different ships,
but we are all in the same boat now.

How true that is.
Under Senator Lieberman's leadership, the Governmental Affairs
Committee, upon which I sit, has outlined in its bipartisan homeland
security legislation a blueprint for a robust new

[[Page S8191]]

Department that hews closely in most key respects to that envisioned by
the President. The committee's measure would construct the Department
around the core missions already identified by the President: Critical
infrastructure protection, border and transportation protection,
emergency preparedness and response, and science and technology.
With few exceptions, the existing agencies transferred to the new
Department under the administration's proposal are the same as those
transferred by the committee's bill. Often where the committee has
diverged from what the administration has done, as in the case of the
transfer of the Federal Law Enforcement Training Center in Brunswick,
GA, to the new Department, the change has been made in close
consultation with, and with the approval of, the administration. In
other cases, changes are merely a fleshing out of proposals and
concepts previously set forth by the administration.
Among the latter are two amendments I offered during markup of this
legislation that pertain to the Federal response to terrorism of a
biological nature. The administration's proposal laid a strong
foundation by recognizing that public health agencies, such as the
Centers for Disease Control and Prevention, the CDC, in Atlanta are
absolutely central to an effective response to biological terrorism and
by further recognizing that prudence requires that scientists who focus
on bioterrorism not be separated from the vast expertise and resources
of the rest of the public health sector.
My amendments, which the committee adopted during the July markup,
are efforts to use the lessons of last fall's anthrax crisis culled
from hours of testimony before our Governmental Affairs Committee to
build on the solid foundation the President and HHS Secretary Thompson
have set.
The inadequacy of our bioterrorism preparedness and response
capability was exposed in dramatic and painful fashion last fall. In
reaction, the Governmental Affairs Committee, under the distinguished
leadership of Chairman Lieberman and Senator Thompson, held a series of
hearings investigating the roots and potential remedies of that
inadequacy.
At a hearing convened at my request on April 18 this year, Secretary
of Health and Human Services Tommy Thompson, buttressed by a panel of
experts who followed him, testified to the following unmet needs in our
Federal counterbioterrorism efforts:
First, a reorganization of the CDC's Bioterrorism Preparedness and
Response Program, much like on a smaller scale what we are now doing
with the Federal Government at large.
Second, clearer protocols of communication and coordination between
public health and law enforcement officials.
And third, a greater commitment of resources to the CDC.
These recommendations comprise the three-point approach for filling
in the gaps in our national bioterrorism defenses that I have been
advocating for some months now. I am pleased that two of these largely
have been incorporated into the bill we are now considering.
With respect to the first, I proposed, and the committee adopted, an
amendment to create in the CDC a Bioterrorism Preparedness and Response
Division. Why a division, Mr. President? Because that division answers
directly to the head of the CDC. It is an entity located at the
intersection of science and security, of public health and law
enforcement, empowered to respond with speed and with a firm grounding
in the science of biological warfare to the infectious terror some
might seek to unleash upon this great Nation. The CDC's existing
Bioterrorism Preparedness and Response Program is a relatively new
initiative at the agency, having been created only in 1999 with a
handful of personnel, little status within the agency, and meager
funding.
The program remains as a subsidiary of the National Center for
Infectious Diseases, a sub-branch of a sub-branch. It should come as
little surprise then that the many witnesses who testified before our
committee about last fall's crisis depicted a Federal response that was
fragmented, confused, and largely inadequate.
CDC officials, both within and without the bioterrorism program,
responded commendably, but their ability to do so was clearly
constrained by, among other factors, an organizational structure that
led inadequate focus to the unique aspects of a manmade threat to the
public health.
The Bioterrorism Preparedness and Response Division, as described in
this chart, will remedy that. Operating directly out of the Office of
the Director of the CDC, the division will lead and coordinate the
agency's counterbioterrorism activities. It will train and employ a
cadre of public health professionals whose specialized training and
focus is on bioterrorism, and it will serve as a nexus, a meeting
ground, between the realms of public health and security, including
homeland security and law enforcement.
There is a real need in the Federal Government for expertise in the
intersection of health and security. Terrorists, as a matter of fact,
hit the seam. They went right between the two. Officials thinking
exclusively along either law enforcement or public health lines, as is
too often the case under the current structure, will inevitably
overlook key bits of information that are not fully appreciable, except
by individuals with expertise in both areas.

In the case of bioterrorism--the word itself a fusing of health, bio,
and security, terrorism--appreciating such bits of information and
drawing critical conclusions based on these are absolutely essential to
an effective Federal response. The cadre of bioterrorism specialists
developed by the Bioterrorism Preparedness and Response Division would
be specially trained accordingly.
In addition, while the threat posed by bioterrorism bears a strong
resemblance to that posed by conventional disease outbreaks, there are
real substantive differences between a manmade disease outbreak--a la
the anthrax attack through envelopes that were obviously mailed by a
human being--and a naturally occurring one--West Nile virus, Ebola
virus, and the like. Our health officials are highly trained to cope
with the latter, but most lack a sophisticated appreciation of the
different considerations that attend a manmade attack.
The upshot is when a recognition of these different divergences can
make a difference between effective and ineffective emergency response.
For example, while epidemiologists knew that contracting inhalation
anthrax naturally required exposure to between 5,000 to 10,000 spores,
they failed in the early stages of the crisis to consider the ways in
which the deliberate weaponization of anthrax, with a substance such as
silica, might alter the level of exposure required for lethality.
Consequently, two Postal Service workers died.
They are not to be criticized. They are scientists, after all, not
criminal investigators. However, had bioterrorism specialists with
training in both medicine and criminal behavior been on the case last
fall, their unique expertise might have led to conclusions that in the
hands of decisionmakers might have made a difference in recommendations
and courses of action.
In academia, there is a growing recognition that the study of
bioterrorism, though it shares much with the fields of public health
and counterterrorism, is a distinct discipline. To cite just a few
leading examples in the world of academia, Mr. President, Johns Hopkins
University has established the Center for Civilian Biodefense
Strategies; St. Louis University's School of Public Health has a Center
for the Study of Bioterrorism; and the University of Texas medical
branch has established a Center for Biodefense.
This bill will create in the Bioterrorism Preparedness and Response
Division of the CDC a career track for the bioterrorism specialist, a
place for graduates of programs such as these to put to use their
unique expertise in the service of their country.
The chart behind me describes the organization of the
counterbioterrorism efforts of the Federal Government with the
establishment of the Bioterrorism Preparedness and Response Division
and a Department of Homeland Security, as under the bill we are
considering.
The second part of my plan for improving our bioterrorism defenses is

[[Page S8192]]

contained in an amendment also adopted by the committee in the July
markup that mandates that law enforcement, homeland security, and
public health personnel keep each other fully and currently informed in
the event of a bioterrorist attack.
One of the objectives of a Bioterrorism Preparedness and Response
Division of the CDC is to coordinate, cooperate, and communicate with
other elements of the Federal Government that are involved in a
biological attack on this country--Department of Homeland Security, law
enforcement, Department of Justice, FBI, the Department of Health and
Human Services, and State and local public health entities, all of
which are in this boat together, Mr. President.
It was too frequently the case last fall that the different agencies
with a role in the Federal response failed to communicate and
coordinate with one another often or adequately enough. The requirement
of full disclosure that will help put an end to that is upon us, but a
significant part of the same problem relates to confusion in current
law. Executive branch documents delineating the roles of law
enforcement and public health agencies vis-a-vis one another say one
thing while Federal statutes, most notably section 319 of the Public
Health Service Act, say another.
In an effort to address this inconsistency, this legislation we are
considering includes my amendment to direct the Secretary of Homeland
Security to develop a Federal response plan that accords fully with the
statutory authorities granted to the Secretary of Health and Human
Services under the Public Health Service Act.
By so doing, this bill will mitigate in future crises a good bit of
the confusion that prevailed last time. As we debate this legislation,
I will offer an additional amendment to provide further clarity with
respect to the roles of public health, law enforcement, and homeland
security in the event of a bioterrorist attack. This amendment will
provide the Secretary of Health and Human Services with the authority
and flexibility he needs to carry out the responsibilities of the
public health sector in the Federal response to bioterrorism.
Specifically, the amendment provides that no Federal agency may
supersede the authority of the public health agencies to respond to a
public health emergency in whatever manner is appropriate and
necessary.
Last fall, public health authorities were at times muzzled,
overridden, and generally kept out of the loop by law enforcement
agencies. Each was doing its own thing, so to speak. Therein lies the
problem. The problem arises because public health and law enforcement
agencies both have essential roles to play in the event of an attack of
terrorism that is also a threat to the public health. These roles are
distinct but sometimes overlap. While both are vital, in the event of a
terrorist-caused public health emergency, the unique life-and-death
ramifications of such an attack mandate, in my view, that public health
experts take the lead role in investigating and treating the attack.
The amendment I will offer would give public health officials the
authority and flexibility they need to do just that.
The third point of my bioterrorism response plan calls for providing
the public health agencies that will play the central role in preparing
for and responding to bioterrorism with the resources they need to do
the job. We have to put our money where our mouth is--in this case, our
money where our mission is, and our mission is to defend this Nation.
I commend the administration for proposing an unprecedented $4.3
billion for HHS's bioterrorism initiative in the next fiscal year, a
45-percent increase over the current year's funding level. These funds
are badly needed. However, within this considerable request there is
significant oversight. The administration has proposed actually a
reduction in funds for revitalizing and securing the CDC's dilapidated,
World War II-era facilities in Atlanta by $186 million in the next
fiscal year, a Draconian cut of nearly two-thirds. That does not
comport with putting our money where our mission is of defending this
Nation.
As the chart behind me demonstrates, since fiscal year 2000 when
Congress first got on board with the CDC's master plan, the
revitalization of its ramshackle facilities, the budget for building
facilities and security has steadily increased each year. I have been
proud to be part of this increase. This increase accompanied a
recognition on the part of Congress, especially the Senate, and made
more acute in the aftermath of the anthrax crisis, that if the CDC is
able to protect us all against the new, more insidious threats to the
public health we now face, the agency must be equipped with adequate
modern facilities and its labs must be fortified against potential
terrorist designs.
The needed funds will not, of course, be appropriated through the
legislation we are considering today, but I urge my colleagues to keep
in mind, when the Labor-HHS appropriations bill reaches the floor, that
the steps we are taking to combat bioterrorism in this legislation will
require an adequate commitment of resources if they are to be
effective.
In summary, the public health-related provisions of the Governmental
Affairs Committee bill that were added during the markup of this bill
are, in my view, perfectly aligned with the administration's approach
and goals. While they are not contained in the administration's
original proposal, they are really extensions on concepts contained
therein.
On a separate but related matter, however, I must respectfully
disagree with the approach contained in both the committee's and the
administration's proposals. The legislation before us would transfer
the strategic national stockpile--that is the vaccines that are
strategically placed around America in secret locations known as the
strategic national stockpile--from the CDC, where it has been
successfully operated since its creation in 1999, to the Department of
Homeland Security. I have serious reservations about the proposed
transfer. Accordingly, I am continuing to work on a bipartisan basis
with the chairman and ranking member of the Appropriations Subcommittee
on Labor, Health and Human Services, and Education, and Chairman
Lieberman, the administration, and others, on an attempt to preserve
the role of the CDC in the operation of the stockpile.
The stockpile is collectively 12 secret stashes of vaccines,
medicines, and other medical supplies placed in strategic locations
around the country, deliverable in a few short hours to any location in
the country should the need for massive quantities of emergency
medicines arise. Decisions related to deploying the medicines in the
stockpile, what medicines to administer, who should receive medicines,
what medicines should be in the stockpile, are essentially medical
questions. They should, as such, be made by public medical
professionals based on public health considerations. This is the
reason, in point of fact, that the stockpile was assigned to the CDC in
the first place.

The committee's bill would transfer final authority over the
stockpile to the new department while leaving some operational
responsibility with the CDC. I am afraid we are borrowing from Peter to
pay Paul. Leaving aside the problems inherently associated with
separating operational responsibility from accountability, this
approach, while retaining some stockpile functions with the CDC, would
undermine the most important reason to have the CDC involved at all;
that is, to bring to bear the necessary expertise in making final
decisions regarding the use of the stockpile.
If there were a core public health competency in the new department
that could supervise the stockpile, then the reasons cited by the
proponents of the transfer--primarily a desire to consolidate all
emergency response functions in the new department--might be sufficient
to justify the move. However, the public health expertise of the
Federal Government was, by and large--correctly, in my view--left where
it currently resides because of the important synergies, the command,
control, cooperation, and communication, that would be lost if certain
public health professionals were to be segregated from their colleagues
in other public health sectors.

[[Page S8193]]

There is, consequently, no core public health competency in the new
department. There is no assistant secretary for health, as some have
proposed.
An interest in the effective administration of the stockpile demands
then that it remain in the hands of those who do have public health
expertise. The CDC has handled the stockpile effectively to date,
coordinating smoothly its deployment on September 11 and during the
anthrax crisis with FEMA and other emergency responders.
We should follow the old dictum that if it ain't broke, don't fix it.
Whatever the Senate's final decision on this matter, however, let me
reiterate I am fully on board with the President and his team on
homeland security. We are all in the same boat. We cannot, we will not,
stand by idly while those who hate us plot our demise. The fundamental
reorganization of our homeland security apparatus is the surest step we
can take now to gird ourselves for the threats to come. With sober
understanding of the moment of the task now at hand, let us complete
this good work.
Above the pyramid on the Great Seal of the United States, in
reference to the founding of our Nation, it says, in Latin, ``God has
favored our undertaking.'' May He grant us now His favor again.
I yield the floor.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. It is my understanding that the matter before the Senate is
the Smith amendment.
The PRESIDING OFFICER. The Senator is correct.

Amendment No. 4492 to Amendment No. 4471

(Purpose: To amend title 49, United States Code to improve flight and
cabin security on passenger aircraft)

Mr. REID. I send an amendment to the desk on behalf of Senators Boxer
and Smith.
The PRESIDING OFFICER. The clerk will report the amendment.
The legislative clerk read as follows:

The Senator from Nevada [Mr. Reid], for Mr. Smith of New
Hampshire, for himself, Mrs. Boxer, Mr. Murkowski, Mr. Burns,
Mr. Bunning, and Mr. Miller, proposes an amendment numbered
4492 to amendment No. 4471.

Mr. REID. Mr. President, I ask unanimous consent that the reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The text of the amendment is printed in today's Record under ``Text
of Amendments.'')
Mr. REID. Mr. President, before my friend from Georgia leaves--and I
know the Senator from Vermont wishes to speak--I want to emphasize how
important the Centers for Disease Control are to this country and to
the world. I have traveled with the Senator from Georgia to the Centers
for Disease Control and seen some of those old, dilapidated buildings,
some of them built prior to World War II.
We should allow the Centers for Disease Control to have a space where
they can work with some degree of quality. They are spread out all over
the campus, and they need to be brought into one central location. That
is what is being attempted.
I say to my friend, this entity was established many years ago to
fight malaria in the southern part of the United States. After we
whipped malaria, they had such a presence that we used them for a
public health entity in this country. They have done remarkable work,
and not only in America. I had the pleasure of traveling and
representing this country on the continent of Africa during the August
break. The Centers for Disease Control has spread throughout that
continent. It is money that the taxpayers should be proud is being
spent. Each day that goes by, because of the Centers for Disease
Control, lives are being saved from mosquito-related problems and, of
course, AIDS.
The Senator from Georgia has a tremendous responsibility to convey to
the rest of the Senate the importance of the Centers for Disease
Control and make sure they have adequate resources to do the job that
is necessary to be done, especially post-September 11.
The PRESIDING OFFICER. The Senator from Vermont.
Mr. JEFFORDS. Mr. President, I rise today to express my concerns
about a central component of the proposed Department of Homeland
Security--the inclusion of the Federal Emergency Management Agency in
the new department.
I understand that in the wake of the horrific events of September 11,
we would look for ways to strengthen our Nation's defense to prevent
any future catastrophe. I fully support that goal. But we must be
cautious, very cautious, to make sure that we work to correct what went
wrong and not interfere with what went right.
We know what went wrong, and I firmly hope that we, as a nation, will
develop a comprehensive plan to address the shortcomings in our
intelligence gathering and communication efforts. That, I believe,
should be the prime goal of any new homeland defense effort.
What went right after September 11 was the response of the Federal
Emergency Management Agency. In the days after the September 11
terrorist attacks I visited the Pentagon and World Trade Center. I saw
firsthand how well FEMA responded to a horrific scene that all of the
disaster drills and training exercises could not have prepared anyone
for. I was incredibly impressed by what I saw. Thousands of workers
from around the country came together to bring calm and order to an
otherwise chaotic situation.
Of nearly 400 disasters that FEMA has responded to since the Oklahoma
City bombing in 1995, only the attacks on the World Trade Center and
the Pentagon were acts of terrorism. Through the coordination of FEMA's
director, the agency demonstrated that it was capable of responding in
such cases, and responding well.
Yet things have not always gone so smoothly with the Agency. We need
only to look back to the 1980s, when FEMA's focus shifted to civil
defense and left the Agency ill-prepared to respond to natural
disasters. In 1985, after a tornado killed 65 people in Pennsylvania,
FEMA's poor response prompted then-Congressman Tom Ridge to play a
central role in efforts to refocus the Agency's mission on victims of
natural disasters.
But it took time. After seeing the bungled responses to Hurricane
Hugo in 1989 and Hurricane Andrew in 1992, my friend from South
Carolina, Senator Hollings summed up FEMA's performance by saying, ``A
major hurricane is not one disaster, but two: The natural disaster of
the hurricane itself, and the unnatural disaster of Federal efforts to
aid the victims.''
Over the last decade, with help from Congress and new leadership,
FEMA has worked hard to regain the trust of its constituents,
especially those Americans affected by a major disaster. Now we must
maintain FEMA's independence to ensure that an increased emphasis on
terrorism will be in addition to, and not at the expense of, the
Agency's natural hazard programs.
As it now stands, FEMA is a small, flexible agency with a director
reporting directly to the President. This chain of command works well,
but it would be lost if FEMA were moved into the Department of Homeland
Security. Adding another layer of bureaucracy to the disaster
declaration process can only slow vital response and recovery efforts.
Again, I firmly believe that it is critical to prepare America to
respond to terrorist acts, but we must not lose sight of the fact that
FEMA's primary focus is to respond to nature's fury. We know that
fires, floods, tornadoes, earthquakes, and hurricanes will continue to
cause injuries, deaths, and property damage every year.
Jeopardizing FEMA's abilities to deal with disasters is not the best
way to secure our homeland.
As we move forward, we should be thoughtful and deliberate, and we
should focus on fixing the failures and not tinkering with the
successes.
Accordingly, at the appropriate time I will offer an amendment to
remove the Federal Emergency Management Agency from the Department of
Homeland Security. Preserving FEMA's independence is the best way to
prepare our nation to respond to natural disasters and any future
terrorist attacks we may face.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. REID. I ask unanimous consent that the order for the quorum call
be rescinded.

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The PRESIDING OFFICER (Mr. Jeffords). Without objection, it is so
ordered.

____________________