[Congressional Record Volume 153, Number 143 (Tuesday, September 25, 2007)]
[Senate]
[Pages S12056-S12067]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. FEINGOLD (for himself, Mr. Sununu, Mr. Durbin, Ms.
Murkowski, Mr. Salazar, and Mr. Hagel):
S. 2088. A bill to place reasonable limitations on the use of
National Security Letters, and for other purposes; to the Committee on
the Judiciary.
Mr. FEINGOLD. I am pleased today to introduce the National Security
Reform Act of 2007, a bipartisan effort that has the support of
Senators who I respect a great deal, and with whom I have worked over
the years on the Patriot Act and other issues. It also has the support
of organizations and activists across the political spectrum.
This past spring, the Inspector General of the Justice Department
issued the results of a congressionally mandated audit, an audit that
examined the FBI's implementation of its dramatically expanded
authority under the USA PATRIOT Act to issue National Security Letters,
or NSLs. The Inspector General found, as he put it: ``widespread and
serious misuse of the FBI's national security letter authorities. In
many instances, the FBI's misuse of national security letters violated
NSL statutes, Attorney General Guidelines, or the FBI's own internal
policies.'' A subsequent internal audit conducted by the FBI itself
confirmed the IG's findings.
After the IG report came out, the Judiciary Committee heard from the
Inspector General himself, who described his conclusions in detail, and
from the FBI Director, who talked about some steps the FBI is taking in
response to the report.
I appreciate that the FBI agrees with the IG's conclusions and
recognizes that it needs to change the way it does business when it
comes to NSLs. But in my view, leaving it to the FBI to fix this
problem is not enough.
Unfortunately, Congress shares some responsibility for the FBI's
troubling implementation of these broad authorities. The FBI's
apparently lax attitude and in some cases grave misuse of these
potentially very intrusive authorities is attributable in no small part
to the USA PATRIOT Act. That flawed legislation greatly expanded the
NSL authorities, essentially granting the FBI a blank check to obtain
some very sensitive records about Americans, including people not under
any suspicion of wrong-doing, without judicial approval. Congress gave
the FBI very few rules to follow and failed to adequately remedy those
shortcomings when it considered the NSL statutes as part of the Patriot
Act reauthorization process.
This Inspector General report proves that ``trust us'' doesn't cut it
when it comes to the Government's power to obtain Americans' sensitive
business records--without a court order and without any suspicion that
they are tied to terrorism or espionage. It was a significant mistake
for Congress to grant the Government broad authorities and just keep
its fingers crossed that they wouldn't be misused.
Congress has the responsibility to put appropriate limits on
government authorities--limits that allow agents to actively pursue
criminals, terrorists and spies, but that also protect the privacy of
innocent Americans.
In addition, a Federal district court recently struck down one of the
new NSL statutes, as modified by the Patriot Act reauthorization
legislation enacted in 2006. The court found that a statutory provision
permitting the FBI to impose a permanent, blanket nondisclosure order
on recipients of NSLs violated the First Amendment.
Congress also has not provided sufficient privacy protections to
govern the related authority in Section 215 of the Patriot Act, which
permits the Government to obtain court orders for Americans' business
records under the Foreign Intelligence Surveillance Act. Often referred
to as the ``library'' provision, although it covers all types of
business records, Section 215 was one of
[[Page S12057]]
the most controversial provisions in the Patriot Act. Unfortunately,
Congress did not go nearly far enough in the reauthorization process in
addressing the very legitimate privacy and civil liberties concerns
that have been raised about this power, including with respect to the
low standard the Government has to meet to obtain a Section 215 order,
the entirely insufficient judicial review provisions, and the lack of
other procedural protections.
All of this is why a bipartisan group of Senators, three Democrats
and three Republicans, are introducing the National Security Letter
Reform Act of 2007.
The bill places new safeguards on the use of National Security
Letters and related Patriot Act authorities to protect against abuse.
It restricts the types of records that can be obtained without a court
order to those that are the least sensitive and private, and it ensures
that the FBI can only use NSLs to obtain information about individuals
with some nexus to a suspected terrorist or spy. It makes sure that the
FBI can no longer obtain the sensitive records of individuals three or
four times removed from a suspect, most of whom would be entirely
innocent.
It prevents the use of so-called ``exigent letters,'' which the IG
found the FBI was using in violation of the NSL statutes. It requires
additional congressional reporting on NSLs, and it requires the FBI to
establish a compliance program and tracking database for NSLs. It
requires the Attorney General to issue minimization and destruction
procedures for information obtained through NSLs, so that information
obtained about Americans is subject to enhanced protections and the FBI
does not retain information obtained in error.
On Section 215, the legislation establishes a standard of
individualized suspicion for obtaining a FISA business records order,
requiring that the government have reason to believe the records sought
relate to a suspected terrorist or spy or someone directly linked to a
suspected terrorist or spy, and it creates procedural protections to
prevent abuses. The bill also ensures robust, meaningful and
constitutionally sound judicial review of both National Security
Letters and Section 215 business records orders, and the gag orders
that accompany them.
This legislation is a measured, reasonable response to a serious
problem. The NSL authorities operate in secret. The Justice
Department's classified reports to Congress on the use of NSLs were
admittedly inaccurate. And when, during the reauthorization process,
Congress asked questions about how these authorities were being used,
we got empty assurances and platitudes that we now know were mistaken.
Oversight alone is not enough. Congress also must take corrective
action. The Inspector General report has shown both that the executive
branch cannot be trusted to exercise those powers without oversight and
that current statutory safeguards are inadequate. This National
Security Letter Reform Act is the answer.
I ask unanimous consent that the text of the bill be printed in the
Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:
S. 2088
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``National
Security Letter Reform Act of 2007'' or the ``NSL Reform Act
of 2007''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title and table of contents.
Sec. 2. National Security Letter authority for communications
subscriber records.
Sec. 3. National Security Letter authority for certain financial
records.
Sec. 4. National Security Letter authority for certain consumer report
records.
Sec. 5. Judicial review of National Security Letters.
Sec. 6. National Security Letter compliance program and tracking
database.
Sec. 7. Public reporting on National Security Letters.
Sec. 8. Sunset of expanded National Security Letter authorities.
Sec. 9. Privacy protections for section 215 business records orders.
Sec. 10. Judicial review of section 215 orders.
Sec. 11. Resources for FISA applications.
Sec. 12. Enhanced protections for emergency disclosures.
Sec. 13. Clarification regarding data retention.
Sec. 14. Least intrusive means.
SEC. 2. NATIONAL SECURITY LETTER AUTHORITY FOR COMMUNICATIONS
SUBSCRIBER RECORDS.
Section 2709 of title 18, United States Code, is amended to
read as follows:
``Sec. 2709. National Security Letter for communications
subscriber records
``(a) Authorization.--
``(1) In general.--The Director of the Federal Bureau of
Investigation, or a designee of the Director whose rank shall
be no lower than Deputy Assistant Director at Bureau
headquarters or Special Agent in Charge of a Bureau field
office, may issue in writing and cause to be served on a wire
or electronic communications service provider a National
Security Letter requiring the production of the following:
``(A) The name of the customer or subscriber.
``(B) The address of the customer or subscriber.
``(C) The length of the provision of service by such
provider to the customer or subscriber (including start date)
and the types of service utilized by the customer or
subscriber.
``(D) The telephone number or instrument number, or other
subscriber number or identifier, of the customer or
subscriber, including any temporarily assigned network
address.
``(E) The means and sources of payment for such service
(including any credit card or bank account number).
``(F) Information about any service or merchandise orders,
including any shipping information and vendor locations.
``(G) The name and contact information, if available, of
any other wire or electronic communications service providers
facilitating the communications of the customer or
subscriber.
``(2) Limitation.--A National Security Letter issued
pursuant to this section shall not require the production of
local or long distance telephone records or electronic
communications transactional information not listed in
paragraph (1).
``(b) Requirements.--
``(1) In general.--A National Security Letter shall be
issued under subsection (a) only where--
``(A) the records sought are relevant to an ongoing,
authorized and specifically identified national security
investigation (other than a threat assessment); and
``(B) there are specific and articulable facts providing
reason to believe that the records--
``(i) pertain to a suspected agent of a foreign power; or
``(ii) pertain to an individual who has been in contact
with, or otherwise directly linked to, a suspected agent of a
foreign power who is the subject of an ongoing, authorized
and specifically identified national security investigation
(other than a threat assessment); or
``(iii) pertain to the activities of a suspected agent of a
foreign power, where those activities are the subject of an
ongoing, authorized and specifically identified national
security investigation (other than a threat assessment), and
obtaining the records is the least intrusive means that could
be used to identify persons believed to be involved in such
activities.
``(2) Investigation.--For purposes of this section, an
ongoing, authorized, and specifically identified national
security investigation--
``(A) shall be conducted under guidelines approved by the
Attorney General and Executive Order 12333 (or successor
order); and
``(B) shall not be conducted with respect to a United
States person upon the basis of activities protected by the
first amendment to the Constitution of the United States.
``(3) Contents.--A National Security Letter issued under
subsection (a) shall--
``(A) describe the records to be produced with sufficient
particularity to permit them to be fairly identified;
``(B) include the date on which the records must be
provided, which shall allow a reasonable period of time
within which the records can be assembled and made available;
``(C) provide clear and conspicuous notice of the
principles and procedures set forth in this section,
including notification of any nondisclosure requirement under
subsection (c) and a statement laying out the rights and
responsibilities of the recipient; and
``(D) not contain any requirement that would be held to be
unreasonable if contained in a subpoena duces tecum issued by
a court of the United States in aid of a grand jury
investigation or require the production of any documentary
evidence that would be privileged from disclosure if demanded
by a subpoena duces tecum issued by a court of the United
States in aid of a grand jury investigation.
``(4) Retention of records.--The Director of the Federal
Bureau of Investigation shall direct that a signed copy of
each National Security Letter issued under this section be
retained in the database required to be established by
section 6 of the National Security Letter Reform Act of 2007.
``(c) Prohibition of Certain Disclosure.--
``(1) In general.--
``(A) In general.--If a certification is issued pursuant to
subparagraph (B), no wire
[[Page S12058]]
or electronic communication service provider, or officer,
employee, or agent thereof, who receives a National Security
Letter under this section, shall disclose to any person the
particular information specified in such certification for 30
days after receipt of such National Security Letter.
``(B) Certification.--The requirements of subparagraph (A)
shall apply if the Director of the Federal Bureau of
Investigation, or a designee of the Director whose rank shall
be no lower than Deputy Assistant Director at Bureau
headquarters or a Special Agent in charge of a Bureau field
office, certifies that--
``(i) there is reason to believe that disclosure of
particular information about the existence or contents of a
National Security Letter issued under this section will
result in--
``(I) endangering the life or physical safety of any
person;
``(II) flight from prosecution;
``(III) destruction of or tampering with evidence;
``(IV) intimidation of potential witnesses;
``(V) interference with diplomatic relations; or
``(VI) otherwise seriously endangering the national
security of the United States by alerting a target, a
target's associates, or the foreign power of which the target
is an agent, of the Government's interest in the target; and
``(ii) the nondisclosure requirement is narrowly tailored
to address the specific harm identified by the Government.
``(C) Termination.--If the facts supporting a nondisclosure
requirement cease to exist prior to the 30-day period
specified in subparagraph (A), an appropriate official of the
Federal Bureau of Investigation shall promptly notify the
wire or electronic service provider, or officer, employee, or
agent thereof, subject to the nondisclosure requirement that
such nondisclosure requirement is no longer in effect.
``(2) Exception.--
``(A) In general.--A wire or electronic communication
service provider, or officer, employee, or agent thereof, who
receives a National Security Letter under this section may
disclose information otherwise subject to any applicable
nondisclosure requirement to--
``(i) those persons to whom disclosure is necessary in
order to comply with a National Security Letter under this
section;
``(ii) an attorney in order to obtain legal advice or
assistance regarding such National Security Letter; or
``(iii) other persons as permitted by the Director of the
Federal Bureau of Investigation or the designee of the
Director.
``(B) Nondisclosure requirement.--A person to whom
disclosure is made pursuant to subparagraph (A) shall be
subject to the nondisclosure requirements applicable to a
person to whom a National Security Letter is directed under
this section in the same manner as such person.
``(C) Notice.--Any recipient who discloses to a person
described in subparagraph (A) information otherwise subject
to a nondisclosure requirement shall inform such person of
the applicable nondisclosure requirement.
``(3) Extension.--The Director of the Federal Bureau of
Investigation, or a designee of the Director whose rank shall
be no lower than Deputy Assistant Director at Bureau
headquarters or a Special Agent in Charge of a Bureau field
office, may apply for an order prohibiting disclosure of
particular information about the existence or contents of a
National Security Letter issued under this section for an
additional 180 days.
``(4) Jurisdiction.--An application for an order pursuant
to this subsection shall be filed in the district court of
the United States in any district within which the authorized
investigation that is the basis for a request pursuant to
this section is being conducted.
``(5) Application contents.--An application for an order
pursuant to this subsection shall include--
``(A) a statement of specific and articulable facts giving
the applicant reason to believe that disclosure of particular
information about the existence or contents of a National
Security Letter issued under this section will result in--
``(i) endangering the life or physical safety of any
person;
``(ii) flight from prosecution;
``(iii) destruction of or tampering with evidence;
``(iv) intimidation of potential witnesses;
``(v) interference with diplomatic relations; or
``(vi) otherwise seriously endangering the national
security of the United States by alerting a target, a
target's associates, or the foreign power of which the target
is an agent, of the Government's interest in the target; and
``(B) an explanation of how the nondisclosure requirement
is narrowly tailored to address the specific harm identified
by the Government.
``(6) Standard.--The court may issue an ex parte order
pursuant to this subsection if the court determines--
``(A) there is reason to believe that disclosure of
particular information about the existence or contents of a
National Security Letter issued under this section will
result in--
``(i) endangering the life or physical safety of any
person;
``(ii) flight from prosecution;
``(iii) destruction of or tampering with evidence;
``(iv) intimidation of potential witnesses;
``(v) interference with diplomatic relations; or
``(vi) otherwise seriously endangering the national
security of the United States by alerting a target, a
target's associates, or the foreign power of which the target
is an agent, of the Government's interest in the target; and
``(B) the nondisclosure requirement is narrowly tailored to
address the specific harm identified by the Government.
``(7) Renewal.--An order under this subsection may be
renewed for additional periods of up to 180 days upon another
application meeting the requirements of paragraph (5) and a
determination by the court that the circumstances described
in paragraph (6) continue to exist.
``(8) Termination.--If the facts supporting a nondisclosure
requirement cease to exist prior to the expiration of the
time period imposed by a court for that nondisclosure
requirement, an appropriate official of the Federal Bureau of
Investigation shall promptly notify the court, and the court
shall terminate such nondisclosure requirement.
``(d) Minimization and Destruction.--
``(1) In general.--Not later than 180 days after the
enactment of this section, the Attorney General shall
establish minimization and destruction procedures governing
the retention and dissemination by the Federal Bureau of
Investigation of any records received by the Federal Bureau
of Investigation in response to a National Security Letter
under this section.
``(2) Definition.--In this section, the term `minimization
and destruction procedures' means--
``(A) specific procedures that are reasonably designed in
light of the purpose and technique of a National Security
Letter, to minimize the retention, and prohibit the
dissemination, of nonpublicly available information
concerning unconsenting United States persons consistent with
the need of the United States to obtain, produce, and
disseminate foreign intelligence information, including
procedures to ensure that information obtained pursuant to a
National Security Letter regarding persons no longer of
interest in an authorized investigation, or information
obtained pursuant to a National Security Letter that does not
meet the requirements of this section or is outside the scope
of such National Security Letter, is returned or destroyed;
``(B) procedures that require that nonpublicly available
information, which is not foreign intelligence information,
as defined in section 101(e)(1) of the Foreign Intelligence
Surveillance Act of 1978, shall not be disseminated in a
manner that identifies any United States person, without such
person's consent, unless such person's identity is necessary
to understand foreign intelligence information or assess its
importance; and
``(C) notwithstanding subparagraphs (A) and (B), procedures
that allow for the retention and dissemination of information
that is evidence of a crime which has been, is being, or is
about to be committed and that is to be retained or
disseminated for law enforcement purposes.
``(e) Requirement That Certain Congressional Bodies Be
Informed.--
``(1) In general.--On a semiannual basis the Director of
the Federal Bureau of Investigation shall fully inform the
Permanent Select Committee on Intelligence of the Senate and
the Select Committee on Intelligence of the House of
Representatives, and the Committee on the Judiciary of the
Senate and the Committee on the Judiciary of the House of
Representatives, concerning all requests made under this
section.
``(2) Contents.--The report required by paragraph (1) shall
include--
``(A) a description of the minimization and destruction
procedures adopted by the Attorney General pursuant to
subsection (d), including any changes to such minimization
procedures previously adopted by the Attorney General;
``(B) a summary of the court challenges brought pursuant to
section 3511 of title 18, United States Code, by recipients
of National Security Letters;
``(C) a description of the extent to which information
obtained with National Security Letters under this section
has aided intelligence investigations and an explanation of
how such information has aided such investigations; and
``(D) a description of the extent to which information
obtained with National Security Letters under this section
has aided criminal prosecutions and an explanation of how
such information has aided such prosecutions.
``(f) Use of Information.--
``(1) In general.--
``(A) Consent.--Any information acquired from a National
Security Letter pursuant to this section concerning any
United States person may be used and disclosed by Federal
officers and employees without the consent of the United
States person only in accordance with the minimization and
destruction procedures required by this section.
``(B) Lawful purpose.--No information acquired from a
National Security Letter pursuant to this section may be used
or disclosed by Federal officers or employees except for
lawful purposes.
``(2) Disclosure for law enforcement purposes.--No
information acquired pursuant to this section shall be
disclosed for law enforcement purposes unless such disclosure
[[Page S12059]]
is accompanied by a statement that such information, or any
information derived therefrom, may only be used in a criminal
proceeding with the advance authorization of the Attorney
General.
``(3) Notification of intended disclosure by the united
states.--Whenever the United States intends to enter into
evidence or otherwise use or disclose in any trial, hearing,
or other proceeding in or before any court, department,
officer, agency, regulatory body, or other authority of the
United States against an aggrieved person any information
obtained or derived from a National Security Letter pursuant
to this section, the United States shall, before the trial,
hearing, or other proceeding or at a reasonable time before
an effort to so disclose or so use this information or submit
it in evidence, notify the aggrieved person and the court or
other authority in which the information is to be disclosed
or used that the United States intends to so disclose or so
use such information.
``(4) Notification of intended disclosure by state or
political subdivision.--Whenever any State or political
subdivision thereof intends to enter into evidence or
otherwise use or disclose in any trial, hearing, or other
proceeding in or before any court, department, officer,
agency, regulatory body, or other authority of the State or
political subdivision thereof against an aggrieved person any
information obtained or derived from a National Security
Letter pursuant to this section, the State or political
subdivision thereof shall notify the aggrieved person, the
court or other authority in which the information is to be
disclosed or used, and the Attorney General that the State or
political subdivision thereof intends to so disclose or so
use such information.
``(5) Motion to suppress.--
``(A) In general.--Any aggrieved person against whom
evidence obtained or derived from a National Security Letter
pursuant to this section is to be, or has been, introduced or
otherwise used or disclosed in any trial, hearing, or other
proceeding in or before any court, department, officer,
agency, regulatory body, or other authority of the United
States, or a State or political subdivision thereof, may move
to suppress the evidence obtained or derived from the
National Security Letter, as the case may be, on the grounds
that--
``(i) the information was acquired in violation of the
Constitution or laws of the United States; or
``(ii) the National Security Letter was not issued in
conformity with the requirements of this section.
``(B) Timing.--A motion under subparagraph (A) shall be
made before the trial, hearing, or other proceeding unless
there was no opportunity to make such a motion or the
aggrieved person concerned was not aware of the grounds of
the motion.
``(6) Judicial review.--
``(A) In general.--Whenever--
``(i) a court or other authority is notified pursuant to
paragraph (3) or (4);
``(ii) a motion is made pursuant to paragraph (5); or
``(iii) any motion or request is made by an aggrieved
person pursuant to any other statute or rule of the United
States or any State before any court or other authority of
the United States or any State to--
``(I) discover or obtain materials relating to a National
Security Letter issued pursuant to this section; or
``(II) discover, obtain, or suppress evidence or
information obtained or derived from a National Security
Letter issued pursuant to this section;
the United States district court or, where the motion is made
before another authority, the United States district court in
the same district as the authority shall, notwithstanding any
other provision of law and if the Attorney General files an
affidavit under oath that disclosure would harm the national
security of the United States, review in camera the materials
as may be necessary to determine whether the request was
lawful.
``(B) Disclosure.--In making a determination under
subparagraph (A), unless the court finds that such disclosure
would not assist in determining any legal or factual issue
pertinent to the case, the court shall disclose to the
aggrieved person, the counsel of the aggrieved person, or
both, under the procedures and standards provided in the
Classified Information Procedures Act (18 U.S.C. App.) or
other applicable law, portions of the application, order, or
other related materials, or evidence or information obtained
or derived from the order.
``(7) Effect of determination of lawfulness.--
``(A) Unlawful orders.--If the United States district court
determines pursuant to paragraph (6) that the National
Security Letter was not in compliance with the Constitution
or laws of the United States, the court may, in accordance
with the requirements of law, suppress the evidence which was
unlawfully obtained or derived from the National Security
Letter or otherwise grant the motion of the aggrieved person.
``(B) Lawful orders.--If the court determines that the
National Security Letter was lawful, it may deny the motion
of the aggrieved person except to the extent that due process
requires discovery or disclosure.
``(8) Binding final orders.--Orders granting motions or
requests under paragraph (6), decisions under this section
that a National Security Letter was not lawful, and orders of
the United States district court requiring review or granting
disclosure of applications, orders, or other related
materials shall be final orders and binding upon all courts
of the United States and the several States except a United
States court of appeals or the Supreme Court.
``(g) Definitions.--As used in this section--
``(1) the term `agent of a foreign power' has the meaning
given such term by section 101(b) of the Foreign Intelligence
Surveillance Act of 1978 (50 U.S.C. 1801(b));
``(2) the term `aggrieved person' means a person whose
information or records were sought or obtained under this
section; and
``(3) the term `foreign power' has the meaning given such
term by section 101(a) of the Foreign Intelligence
Surveillance Act of 1978 (50 U.S.C. 1801(a)).''.
SEC. 3. NATIONAL SECURITY LETTER AUTHORITY FOR CERTAIN
FINANCIAL RECORDS.
Section 1114 of the Right to Financial Privacy Act of 1978
(12 U.S.C. 3414) is amended to read as follows:
``SEC. 1114. NATIONAL SECURITY LETTER FOR CERTAIN FINANCIAL
RECORDS.
``(a) Authorization.--
``(1) In general.--The Director of the Federal Bureau of
Investigation, or a designee of the Director whose rank shall
be no lower than Deputy Assistant Director at Bureau
headquarters or Special Agent in Charge of a Bureau field
office, may issue in writing and cause to be served on a
financial institution, a National Security Letter requiring
the production of--
``(A) the name of the customer or entity with whom the
financial institution has a financial relationship;
``(B) the address of the customer or entity with whom the
financial institution has a financial relationship;
``(C) the length of time during which the customer or
entity has had an account or other financial relationship
with the financial institution (including the start date) and
the type of account or other financial relationship; and
``(D) any account number or other unique identifier
associated with the financial relationship of the customer or
entity to the financial institution.
``(2) Limitation.--A National Security Letter issued
pursuant to this section may require the production only of
records identified in subparagraphs (A) through (D) of
paragraph (1).
``(b) National Security Letter Requirements.--
``(1) In general.--A National Security Letter issued under
this section shall be subject to the requirements of
subsections (b) through (g) of section 2709 of title 18,
United States Code, in the same manner and to the same extent
as those provisions apply with respect to wire and electronic
communication service providers.
``(2) Reporting.--For purposes of this section, the
reporting requirement in section 2709(e) of title 18, United
States Code, shall also require informing the Committee on
Banking, Housing, and Urban Affairs of the Senate and the
Committee on Financial Services of the House of
Representatives.
``(c) Definition of `Financial Institution'.--For purposes
of this section, section 1115, and section 1117, insofar as
they relate to the operation of this section, the term
`financial institution' has the same meaning as in
subsections (a)(2) and (c)(1) of section 5312 of title 31,
except that, for purposes of this section, such term shall
include only such a financial institution any part of which
is located inside any State or territory of the United
States, the District of Columbia, Puerto Rico, Guam, American
Samoa, the Commonwealth of the Northern Mariana Islands, or
the United States Virgin Islands.''.
SEC. 4. NATIONAL SECURITY LETTER AUTHORITY FOR CERTAIN
CONSUMER REPORT RECORDS.
Section 626 of the Fair Credit Reporting Act (15 U.S.C.
1681u) is amended--
(1) by striking the section heading and inserting the
following:
``Sec. 626. National Security Letters for certain consumer
report records'';
(2) by striking subsections (a) through (d) and inserting
the following:
``(a) Authorization.--
``(1) In general.--The Director of the Federal Bureau of
Investigation, or a designee of the Director whose rank shall
be no lower than Deputy Assistant Director at Bureau
headquarters or Special Agent in Charge of a Bureau field
office, may issue in writing and cause to be served on a
consumer reporting agency a National Security Letter
requiring the production of--
``(A) the name of a consumer;
``(B) the current and former address of a consumer;
``(C) the current and former places of employment of a
consumer; and
``(D) the names and addresses of all financial institutions
(as that term is defined in section 1101 of the Right to
Financial Privacy Act of 1978) at which a consumer maintains
or has maintained an account, to the extent that such
information is in the files of the consumer reporting agency.
``(2) Limitation.--A National Security Letter issued
pursuant to this section may not require the production of a
consumer report.
``(b) National Security Letter Requirements.--
``(1) In general.--A National Security Letter issued under
this section shall be subject to the requirements of
subsections (b) through (g) of section 2709 of title 18,
United States Code, in the same manner and to the
[[Page S12060]]
same extent as those provisions apply with respect to wire
and electronic communication service providers.
``(2) Reporting.--For purposes of this section, the
reporting requirement in section 2709(e) of title 18, United
States Code, shall also require informing the Committee on
Banking, Housing, and Urban Affairs of the Senate and the
Committee on Financial Services of the House of
Representatives.'';
(3) by striking subsections (f) through (h); and
(4) by redesignating subsections (e) and (i) through (m) as
subsections (c) through (h), respectively.
SEC. 5. JUDICIAL REVIEW OF NATIONAL SECURITY LETTERS.
(a) Review of Nondisclosure Orders.--Section 3511(b) of
title 18, United States Code, is amended to read as follows:
``(b) Nondisclosure.--
``(1) In general.--The recipient of a request for records
or other information under section 2709 of this title,
section 626 of the Fair Credit Reporting Act, section 1114 of
the Right to Financial Privacy Act, or section 802(a) of the
National Security Act of 1947, may petition any court
described in subsection (a) to modify or set aside a
nondisclosure requirement imposed in connection with such a
request. Such petition shall specify each ground upon which
the petitioner relies in seeking relief, and may be based
upon any failure of the nondisclosure requirement to comply
with the provisions of section 2709 of this title, section
626 of the Fair Credit Reporting Act, section 1114 of the
Right to Financial Privacy Act, or section 802(a) of the
National Security Act of 1947, or upon any constitutional or
other legal right or privilege of such person.
``(2) Standard.--The court shall modify or set aside the
nondisclosure requirement unless the court determines that--
``(A) there is a reason to believe that disclosure of the
information subject to the nondisclosure requirement will
result in--
``(i) endangering the life or physical safety of any
person;
``(ii) flight from prosecution;
``(iii) destruction of or tampering with evidence;
``(iv) intimidation of potential witnesses;
``(v) interference with diplomatic relations; or
``(vi) otherwise seriously endangering the national
security of the United States by alerting a target, a
target's associates, or the foreign power of which the target
is an agent, of the Government's interest in the target; and
``(B) the nondisclosure requirement is narrowly tailored to
address the specific harm identified by the Government.''.
(b) Disclosure.--Section 3511(d) of title 18, United States
Code, is amended to read as follows:
``(d) Disclosure.--In making determinations under this
section, unless the court finds that such disclosure would
not assist in determining any legal or factual issue
pertinent to the case, the court shall disclose to the
petitioner, the counsel of the petitioner, or both, under the
procedures and standards provided in the Classified
Information Procedures Act (18 U.S.C. App.) or other
applicable law, portions of the application, National
Security Letter, or other related materials.''.
(c) Conforming Amendments.--Section 3511 of title 18,
United States Code, is amended--
(1) in subsection (a), by--
(A) inserting after ``(a)'' the following ``Request.--'';
(B) striking ``2709(b)'' and inserting ``2709'';
(C) striking ``626(a) or (b) or 627(a)'' and inserting
``626''; and
(D) striking ``1114(a)(5)(A)'' and inserting ``1114''; and
(2) in subsection (c), by--
(A) inserting after ``(c)'' the following ``Failure To
Comply.--'';
(B) by striking ``2709(b)'' and inserting ``2709'';
(C) by striking ``626(a) or (b) or 627(a)'' and inserting
``626''; and
(D) by striking ``1114(a)(5)(A)'' and inserting ``1114''. .
(d) Repeal.--Section 3511(e) of title 18, United States
Code, is repealed.
SEC. 6. NATIONAL SECURITY LETTER COMPLIANCE PROGRAM AND
TRACKING DATABASE.
(a) Compliance Program.--The Director of the Federal Bureau
of Investigation shall establish a program to ensure
compliance with the amendments made by sections 2, 3, and 4
of this Act.
(b) Tracking Database.--The compliance program required by
subsection (a) shall include the establishment of a database,
the purpose of which shall be to track all National Security
Letters issued by the Federal Bureau of Investigation under
section 1114 of the Right to Financial Privacy Act of 1978
(12 U.S.C. 3414), section 626 of the Fair Credit Reporting
Act (15 U.S.C. 1681u), and section 2709 of title 18, United
States Code.
(c) Information.--The database required by this section
shall include--
(1) a signed copy of each National Security Letter;
(2) the date the National Security Letter was issued and
for what type of information;
(3) whether the National Security Letter seeks information
regarding a United States person or non-United States person;
(4) the ongoing, authorized, and specifically identified
national security investigation (other than a threat
assessment) to which the National Security Letter relates;
(5) whether the National Security Letter seeks information
regarding an individual who is the subject of such
investigation;
(6) when the information requested was received and, if
applicable, when it was destroyed; and
(7) whether the information gathered was disclosed for law
enforcement purposes.
SEC. 7. PUBLIC REPORTING ON NATIONAL SECURITY LETTERS.
Section 118(c) of the USA PATRIOT Improvement and
Reauthorization Act of 2005 (Public Law 109-177) is amended--
(1) in paragraph (1)--
(A) by striking ``concerning different United States
persons''; and
(B) in subparagraph (A), by striking ``, excluding the
number of requests for subscriber information'';
(2) by redesignating paragraph (2) as paragraph (3); and
(3) by inserting after paragraph (1) the following:
``(2) Content.--The report required by this subsection
shall include the total number of requests described in
paragraph (1) requiring disclosure of information
concerning--
``(A) United States persons;
``(B) non-United States persons;
``(C) persons who are the subjects of authorized national
security investigations; and
``(D) persons who are not the subjects of authorized
national security investigations.''.
SEC. 8. SUNSET OF EXPANDED NATIONAL SECURITY LETTER
AUTHORITIES.
Subsection 102(b) of Public Law 109-177 is amended to read
as follows:
``(b) Sections 206, 215, 358(g), 505 Sunset.--
``(1) In general.--Effective December 31, 2009, the
following provisions are amended to read as they read on
October 25, 2001--
``(A) sections 501, 502, and 105(c)(2) of the Foreign
Intelligence Surveillance Act of 1978;
``(B) section 2709 of title 18, United States Code;
``(C) sections 626 and 627 of the Fair Credit Reporting Act
(15 U.S.C. 1681u, 1681v); and
``(D) section 1114 of the Right to Financial Privacy Act
(12 U.S.C. 3414).
``(2) Exception.--With respect to any particular foreign
intelligence investigation that began before the date on
which the provisions referred to in paragraph (1) cease to
have effect, or with respect to any particular offense or
potential offense that began or occurred before the date on
which such provisions cease to have effect, such provisions
shall continue in effect.''.
SEC. 9. PRIVACY PROTECTIONS FOR SECTION 215 BUSINESS RECORDS
ORDERS.
(a) In General.--Section 501(b) of the Foreign Intelligence
Surveillance Act of 1978 (50 U.S.C. 1861(b)(2)) is amended--
(1) in paragraph (1)(B), by striking ``and'' after the
semicolon;
(2) in paragraph (2)--
(A) in subparagraph (A), by striking ``, such things being
presumptively'' through the end of the subparagraph and
inserting a semicolon;
(B) by redesignating subparagraph (B) as subparagraph (C)
and striking the period at the end and inserting ``; and'';
and
(C) by inserting after subparagraph (A) the following:
``(B) a statement of specific and articulable facts
providing reason to believe that the tangible things sought--
``(i) pertain to a suspected agent of a foreign power; or
``(ii) pertain to an individual who has been in contact
with, or otherwise directly linked to, a suspected agent of a
foreign power if the circumstances of that contact or link
suggest that the records sought will be relevant to an
ongoing, authorized and specifically identified national
security investigation (other than a threat assessment) of
that suspected agent of a foreign power; and''; and
(3) by inserting at the end the following:
``(3) if the applicant is seeking a nondisclosure
requirement described in subsection (d), shall include--
``(A) a statement of specific and articulable facts
providing reason to believe that disclosure of particular
information about the existence or contents of the order
requiring the production of tangible things under this
section will result in--
``(i) endangering the life or physical safety of any
person;
``(ii) flight from prosecution;
``(iii) destruction of or tampering with evidence;
``(iv) intimidation of potential witnesses;
``(v) interference with diplomatic relations; or
``(vi) otherwise seriously endangering the national
security of the United States by alerting a target, a
target's associates, or the foreign power of which the target
is an agent, of the Government's interest in the target; and
``(B) an explanation of how the nondisclosure requirement
is narrowly tailored to address the specific harm identified
by the Government.''.
(b) Order.--Section 501(c) of the Foreign Intelligence
Surveillance Act of 1978 (50 U.S.C. 1861(c)) is amended--
(1) in paragraph (1), by--
(A) striking ``subsections (a) and (b)'' and inserting
``subsection (a) and paragraphs (1) and (2) of subsection
(b)''; and
(B) inserting at the end the following: ``If the judge
finds that the requirements of subsection (b)(3) have been
met, such order shall include a nondisclosure requirement
subject
[[Page S12061]]
to the principles and procedures described in subsection
(d)''; and
(2) in paragraph (2)(C), by inserting before the semicolon
``, if applicable''.
(c) Nondisclosure.--Section 501(d) of the Foreign
Intelligence Surveillance Act of 1978 (50 U.S.C. 1861(d)) is
amended to read as follows:
``(d) Nondisclosure.--
``(1) In general.--No person who receives an order under
subsection (c) that contains a nondisclosure requirement
shall disclose to any person the particular information
specified in such nondisclosure requirement for 180 days
after receipt of such order.
``(2) Exception.--
``(A) Disclosure.--A person who receives an order under
subsection (c) that contains a nondisclosure requirement may
disclose information otherwise subject to any applicable
nondisclosure requirement to--
``(i) those persons to whom disclosure is necessary in
order to comply with an order under this section;
``(ii) an attorney in order to obtain legal advice or
assistance regarding such order; or
``(iii) other persons as permitted by the Director of the
Federal Bureau of Investigation or the designee of the
Director.
``(B) Application.--A person to whom disclosure is made
pursuant to subparagraph (A) shall be subject to the
nondisclosure requirements applicable to a person to whom an
order is directed under this section in the same manner as
such person.
``(C) Notification.--Any person who discloses to a person
described in subparagraph (A) information otherwise subject
to a nondisclosure requirement shall notify such person of
the applicable nondisclosure requirement.
``(3) Extension.--The Director of the Federal Bureau of
Investigation, or a designee of the Director (whose rank
shall be no lower than Assistant Special Agent in Charge),
may apply for renewals for the prohibition on disclosure of
particular information about the existence or contents of an
order requiring the production of tangible things under this
section for additional periods of up to 180 days each. Such
nondisclosure requirement shall be renewed if a court having
jurisdiction pursuant to paragraph (4) determines that the
application meets the requirements of subsection (b)(3).
``(4) Jurisdiction.--An application for a renewal pursuant
to this subsection shall be made to--
``(A) a judge of the court established under section
103(a); or
``(B) a United States Magistrate Judge under chapter 43 of
title 28, who is publicly designated by the Chief Justice of
the United States to have the power to hear applications and
grant orders for the production of tangible things under this
section on behalf of a judge of the court established under
section 103(a).''.
(d) Use of Information.--Section 501(h) of the Foreign
Intelligence Surveillance Act of 1978 (50 U.S.C. 1861) is
amended to read as follows:
``(h) Use of Information.--
``(1) In general.--
``(A) Consent.--Any tangible things or information acquired
from an order pursuant to this section concerning any United
States person may be used and disclosed by Federal officers
and employees without the consent of the United States person
only in accordance with the minimization procedures required
by this section.
``(B) Use and disclosure.--No tangible things or
information acquired from an order pursuant to this section
may be used or disclosed by Federal officers or employees
except for lawful purposes.
``(2) Disclosure for law enforcement purposes.--No tangible
things or information acquired pursuant to this section shall
be disclosed for law enforcement purposes unless such
disclosure is accompanied by a statement that such tangible
things or information, or any information derived therefrom,
may only be used in a criminal proceeding with the advance
authorization of the Attorney General.
``(3) Notification of intended disclosure by the united
states.--Whenever the United States intends to enter into
evidence or otherwise use or disclose in any trial, hearing,
or other proceeding in or before any court, department,
officer, agency, regulatory body, or other authority of the
United States against an aggrieved person any tangible things
or information obtained or derived from an order pursuant to
this section, the United States shall, before the trial,
hearing, or other proceeding or at a reasonable time before
an effort to so disclose or so use the tangible things or
information or submit them in evidence, notify the aggrieved
person and the court or other authority in which the tangible
things or information are to be disclosed or used that the
United States intends to so disclose or so use such tangible
things or information.
``(4) Notification of intended disclosure by state or
political subdivision.--Whenever any State or political
subdivision thereof intends to enter into evidence or
otherwise use or disclose in any trial, hearing, or other
proceeding in or before any court, department, officer,
agency, regulatory body, or other authority of the State or
political subdivision thereof against an aggrieved person any
tangible things or information obtained or derived from an
order pursuant to this section, the State or political
subdivision thereof shall notify the aggrieved person, the
court or other authority in which the tangible things or
information are to be disclosed or used, and the Attorney
General that the State or political subdivision thereof
intends to so disclose or so use such tangible things or
information.
``(5) Motion to suppress.--
``(A) In general.--Any aggrieved person against whom
evidence obtained or derived from an order pursuant to this
section is to be, or has been, introduced or otherwise used
or disclosed in any trial, hearing, or other proceeding in or
before any court, department, officer, agency, regulatory
body, or other authority of the United States, or a State or
political subdivision thereof, may move to suppress the
evidence obtained or derived from the order, as the case may
be, on the grounds that--
``(i) the tangible things or information were acquired in
violation of the Constitution or laws of the United States;
or
``(ii) the order was not issued in conformity with the
requirements of this section.
``(B) Timing.--A motion under subparagraph (A) shall be
made before the trial, hearing, or other proceeding unless
there was no opportunity to make such a motion or the
aggrieved person concerned was not aware of the grounds of
the motion.
``(6) Judicial review.--
``(A) In general.--Whenever--
``(i) a court or other authority is notified pursuant to
paragraph (3) or (4);
``(ii) a motion is made pursuant to paragraph (5); or
``(iii) any motion or request is made by an aggrieved
person pursuant to any other statute or rule of the United
States or any State before any court or other authority of
the United States or any State to--
``(I) discover or obtain applications, orders, or other
materials relating to an order issued pursuant to this
section; or
``(II) discover, obtain, or suppress evidence or
information obtained or derived from an order issued pursuant
to this section;
the United States district court or, where the motion is made
before another authority, the United States district court in
the same district as the authority shall, notwithstanding any
other provision of law and if the Attorney General files an
affidavit under oath that disclosure would harm the national
security of the United States, review in camera the
application, order, and such other related materials as may
be necessary to determine whether the order was lawfully
authorized and served.
``(B) Disclosure.--In making a determination under
subparagraph (A), unless the court finds that such disclosure
would not assist in determining any legal or factual issue
pertinent to the case, the court shall disclose to the
aggrieved person, the counsel of the aggrieved person, or
both, under the procedures and standards provided in the
Classified Information Procedures Act (18 U.S.C. App.) or
other applicable law, portions of the application, order, or
other related materials, or evidence or information obtained
or derived from the order.
``(7) Effect of determination of lawfulness.--
``(A) Unlawful orders.--If the United States district court
determines pursuant to paragraph (6) that the order was not
authorized or served in compliance with the Constitution or
laws of the United States, the court may, in accordance with
the requirements of law, suppress the evidence which was
unlawfully obtained or derived from the order or otherwise
grant the motion of the aggrieved person.
``(B) Lawful orders.--If the court determines that the
order was lawfully authorized and served, it may deny the
motion of the aggrieved person except to the extent that due
process requires discovery or disclosure.
``(8) Binding final orders.--Orders granting motions or
requests under paragraph (6), decisions under this section
that an order was not lawfully authorized or served, and
orders of the United States district court requiring review
or granting disclosure of applications, orders, or other
related materials shall be final orders and binding upon all
courts of the United States and the several States except a
United States court of appeals or the Supreme Court.''.
(e) Definition.--Title V of the Foreign Intelligence
Surveillance Act of 1978 (50 U.S.C. 1861 et seq.) is amended
by adding at the end the following:
``SEC. 503. DEFINITIONS.
``In this title, the following definitions apply:
``(1) In general.--Except as provided in this section,
terms used in this title that are also used in title I shall
have the meanings given such terms by section 101.
``(2) Aggrieved person.--The term `aggrieved person' means
any person whose tangible things or information were acquired
pursuant to an order under this title.''.
SEC. 10. JUDICIAL REVIEW OF SECTION 215 ORDERS.
Section 501(f) of the Foreign Intelligence Surveillance Act
of 1978 (50 U.S.C. 1861) is amended to read as follows:
``(f) Judicial Review.--
``(1) Order for production.--Not later than 20 days after
the service upon any person of an order pursuant to
subsection (c), or at any time before the return date
specified in the order, whichever period is shorter, such
person may file, in the court established under section
103(a) or in the district court of the United States for the
judicial district within which such person resides, is found,
or transacts business, a petition for
[[Page S12062]]
such court to modify or set aside such order. The time
allowed for compliance with the order in whole or in part as
deemed proper and ordered by the court shall not run during
the pendency of such petition in the court. Such petition
shall specify each ground upon which the petitioner relies in
seeking relief, and may be based upon any failure of such
order to comply with the provisions of this section or upon
any constitutional or other legal right or privilege of such
person.
``(2) Nondisclosure order.--
``(A) In general.--A person prohibited from disclosing
information under subsection (d) may file, in the courts
established by section 103(a) or in the district court of the
United States for the judicial district within which such
person resides, is found, or transacts business, a petition
for such court to set aside the nondisclosure requirement.
Such petition shall specify each ground upon which the
petitioner relies in seeking relief, and may be based upon
any failure of the nondisclosure requirement to comply with
the provisions of this section or upon any constitutional or
other legal right or privilege of such person.
``(B) Standard.--The court shall modify or set aside the
nondisclosure requirement unless the court determines that--
``(i) there is reason to believe that disclosure of the
information subject to the nondisclosure requirement will
result in--
``(I) endangering the life or physical safety of any
person;
``(II) flight from prosecution;
``(III) destruction of or tampering with evidence;
``(IV) intimidation of potential witnesses;
``(V) interference with diplomatic relations; or
``(VI) otherwise seriously endangering the national
security of the United States by alerting a target, a
target's associates, or the foreign power of which the target
is an agent, of the Government's interest in the target; and
``(ii) the nondisclosure requirement is narrowly tailored
to address the specific harm identified by the Government.
``(3) Rulemaking.--
``(A) In general.--Not later than 180 days after the date
of enactment of the National Security Letter Reform Act of
2007, the courts established pursuant to section 103(a) shall
establish such rules and procedures and take such actions as
are reasonably necessary to administer their responsibilities
under this subsection.
``(B) Reporting.--Not later than 30 days after promulgating
rules and procedures under subparagraph (A), the courts
established pursuant to section 103(a) shall transmit a copy
of the rules and procedures, unclassified to the greatest
extent possible (with a classified annex, if necessary), to
the Committee on the Judiciary and the Select Committee on
Intelligence of the Senate and the Committee on the Judiciary
and the Permanent Select Committee on Intelligence of the
House of Representatives.
``(4) Disclosures to petitioners.--In making determinations
under this subsection, unless the court finds that such
disclosure would not assist in determining any legal or
factual issue pertinent to the case, the court shall disclose
to the petitioner, the counsel of the petitioner, or both,
under the procedures and standards provided in the Classified
Information Procedures Act (18 U.S.C. App.) or other
applicable law, portions of the application, order, or other
related materials.''.
SEC. 11. RESOURCES FOR FISA APPLICATIONS.
(a) Electronic Filing.--
(1) In general.--The Department of Justice shall establish
a secure electronic system for the submission of documents
and other information to the court established under section
103(a) of the Foreign Intelligence Surveillance Act of 1978
(50 U.S.C. 1803) relating to applications for orders under
chapter 36 of title 50, authorizing electronic surveillance,
physical searches, the use of pen register and trap and trace
devices, and the production of tangible things.
(2) Funding source.--Section 1103(4) of the Violence
Against Women and Department of Justice Reauthorization Act
of 2005 is amended--
(A) in subparagraph (C), by striking ``and'' after the
semicolon;
(B) in subparagraph (D), by striking the period and
inserting ``; and''; and
(C) by adding at the end the following:
``(E) $5,000,000 for the implementation of the secure
electronic filing system established by Section 11(a)(1) of
the National Security Letter Reform Act.''.
(b) Personnel and Information Technology Needs.--
(1) Office of intelligence policy and review.--
(A) In general.--The Office of Intelligence Policy and
Review of the Department of Justice may hire personnel and
procure information technology, as needed, to ensure the
timely and efficient processing of applications to the court
established under section 103(a) of the Foreign Intelligence
Surveillance Act of 1978 (50 U.S.C. 1803).
(B) Funding source.--
(i) Section 1103(4) of the Violence Against Women and
Department of Justice Reauthorization Act of 2005 is
amended--
(I) in subparagraph (D), by striking ``and'' after the
semicolon;
(II) in subparagraph (E), by striking the period and
inserting ``; and''; and
(III) by adding at the end the following:
``(F) not to exceed $3,000,000 for the personnel and
information technology as specified in Section 11(b)(1)(A) of
the National Security Letter Reform Act.''.
(ii) Section 1104(4) of the Violence Against Women and
Department of Justice Reauthorization Act of 2005 is
amended--
(I) in subparagraph (C), by striking ``and'' after the
semicolon;
(II) in subparagraph (D), by striking the period and
inserting ``; and''; and
(III) by adding at the end the following:
``(E) not to exceed $3,000,000 for the personnel and
information technology as specified in Section 11(b)(1)(A) of
the National Security Letter Reform Act.''.
(2) FBI.--
(A) In general.--The Federal Bureau of Investigation may
hire personnel and procure information technology, as needed,
to ensure the timely and efficient processing of applications
to the Foreign Intelligence Surveillance Court.
(B) Funding source.--
(i) Section 1103(7) of the Violence Against Women and
Department of Justice Reauthorization Act of 2005 is amended
by inserting before the period the following: ``, and which
shall include not to exceed $3,000,000 for the personnel and
information technology as specified in Section 11(b)(2)(A) of
the National Security Letter Reform Act''.
(ii) Section 1104(7) of the Violence Against Women and
Department of Justice Reauthorization Act of 2005 is amended
by inserting before the period the following: ``, and which
shall include not to exceed $3,000,000 for the personnel and
information technology as specified in Section 11(b)(2)(A) of
the National Security Letter Reform Act''.
SEC. 12. ENHANCED PROTECTIONS FOR EMERGENCY DISCLOSURES.
(a) Stored Communications Act.--Section 2702 of title 18,
United States Code is amended--
(1) in subsection (b)(8), by--
(A) striking ``, in good faith,'' and inserting
``reasonably'';
(B) inserting ``immediate'' after ``involving''; and
(C) adding before the period: ``, subject to the
limitations of subsection (d) of this section;'';
(2) in subsection (c)(4) by--
(A) striking ``. in good faith,'' and inserting
``reasonably'';
(B) inserting ``immediate'' after ``involving''; and
(C) adding before the period: ``, subject to the
limitations of subsection (d) of this section.'';
(3) redesignating subsection (d) as subsection (e) and
adding after subsection (c) the following:
``(d) Requirement.--
``(1) Request.--If a governmental entity requests that a
provider divulge information pursuant to subsection (b)(8) or
(c)(4), the request shall specify that the disclosure is on a
voluntary basis and shall document the factual basis for
believing that an emergency involving immediate danger of
death or serious physical injury to any person requires
disclosure without delay of the information.
``(2) Notice to court.--Within 5 days of obtaining access
to records under subsection (b)(8) or (c)(4), the
governmental entity shall file with the appropriate court a
signed, sworn statement of a supervisory official of a rank
designated by the head of the governmental entity setting
forth the grounds for the emergency access.''; and
(4) in subsection (e), as redesignated in paragraphs (1)
and (2), by striking ``subsection (b)(8)'' and inserting
``subsections (b)(8) and (c)(4)''.
(b) Right to Financial Privacy Act.--
(1) Emergency disclosures.--The Right to Financial Privacy
Act of 1978 (12 U.S.C. 3401 et seq.) is amended by inserting
after section 1120 the following:
``SEC. 1121. EMERGENCY DISCLOSURES.
``(a) In General.--
``(1) Standard.--A financial institution (as defined in
section 1114(c)) may divulge a record described in section
1114(a) pertaining to a customer to a Government authority,
if the financial institution reasonably believes that an
emergency involving immediate danger of death or serious
physical injury to any person requires disclosure without
delay of information relating to the emergency.
``(2) Notice in request.--If a Government authority
requests that a financial institution divulge information
pursuant to this section, the request shall specify that the
disclosure is on a voluntary basis, and shall document the
factual basis for believing that an emergency involving
immediate danger of death or serious physical injury to any
person requires disclosure without delay of the information.
``(b) Certificate.--In the instances specified in
subsection (a), the Government shall submit to the financial
institution the certificate required in section 1103(b),
signed by a supervisory official of a rank designated by the
head of the Government authority.
``(c) Notice to Court.--Within 5 days of obtaining access
to financial records under this section, the Government
authority shall file with the appropriate court a signed,
sworn statement of a supervisory official of a rank
designated by the head of the Government authority setting
forth the grounds for the emergency access. The Government
authority shall thereafter comply with the notice provisions
of section 1109.
``(d) Reporting of Emergency Disclosures.--On an annual
basis, the Attorney General of the United States shall submit
to the Committee on the Judiciary and the
[[Page S12063]]
Committee on Financial Services of the House of
Representatives and the Committee on the Judiciary and the
Committee on Banking, Housing, and Urban Affairs of the
Senate a report containing--
``(1) the number of individuals for whom the Department of
Justice has received voluntary disclosures under this
section; and
``(2) a summary of the bases for disclosure in those
instances where--
``(A) voluntary disclosures under this section were made to
the Department of Justice; and
``(B) the investigation pertaining to those disclosures was
closed without the filing of criminal charges.''.
(2) Conforming amendments.--The Right to Financial Privacy
Act of 1978 (12 U.S.C. 3401 et seq.) is amended--
(A) in section 1102 (12 U.S.C. 3402), by striking ``or
1114'' and inserting ``1114, or 1121''; and
(B) in section 1109(c) (12 U.S.C. 3409(c)), by striking
``1114(b)'' and inserting ``1121''.
(c) Fair Credit Reporting Act.--Section 627 of the Fair
Credit Reporting Act (15 U.S.C. 1681v) is amended to read as
follows:
``SEC. 627. EMERGENCY DISCLOSURES.
``(a) In General.--
``(1) Standard.--A consumer reporting agency may divulge
identifying information respecting any consumer, limited to
the name, address, former addresses, places of employment, or
former places of employment of the consumer, to a Government
agency, if the consumer reporting agency reasonably believes
that an emergency involving immediate danger of death or
serious physical injury to any person requires disclosure
without delay of information relating to the emergency.
``(2) Notice in request.--If a Government agency requests
that a consumer reporting agency divulge information pursuant
to this section, the request shall specify that the
disclosure is on a voluntary basis, and shall document the
factual basis for believing that an emergency involving
immediate danger of death or serious physical injury to any
person requires disclosure without delay of the information.
``(b) Notice to Court.--Within 5 days of obtaining access
to identifying information under this section, the Government
agency shall file with the appropriate court a signed, sworn
statement of a supervisory official of a rank designated by
the head of the Government agency setting forth the grounds
for the emergency access.
``(c) Reporting of Emergency Disclosures.--On an annual
basis, the Attorney General of the United States shall submit
to the Committee on the Judiciary and the Committee on
Financial Services of the House of Representatives and the
Committee on the Judiciary and the Committee on Banking,
Housing, and Urban Affairs of the Senate a report
containing--
``(1) the number of individuals for whom the Department of
Justice has received voluntary disclosures under this
section; and
``(2) a summary of the bases for disclosure in those
instances where--
``(A) voluntary disclosures under this section were made to
the Department of Justice; and
``(B) the investigation pertaining to those disclosures was
closed without the filing of criminal charges.''.
SEC. 13. CLARIFICATION REGARDING DATA RETENTION.
Subsection 2703(f) of title 18, United States Code, is
amended by adding at the end the following:
``(3) A provider of wire or electronic communications
services or a remote computing service who has received a
request under this subsection shall not disclose the records
referred to in paragraph (1) until such provider has received
a court order or other process.''.
SEC. 14. LEAST INTRUSIVE MEANS.
(a) Guidelines.--
(1) In general.--The Attorney General shall issue
guidelines (consistent with Executive Order 12333 or
successor order) instructing that when choices are available
between the use of information collection methods in national
security investigations that are more or less intrusive, the
least intrusive collection techniques feasible are to be
used.
(2) Specific collection techniques.--The guidelines
required by this section shall provide guidance with regard
to specific collection techniques, including the use of
national security letters, considering such factors as--
(A) the effect on the privacy of individuals;
(B) the potential damage to reputation of individuals; and
(C) any special First Amendment concerns relating to a
potential recipient of a National Security Letter or other
legal process, including a direction that prior to issuing
such National Security Letter or other legal process to a
library or bookseller, investigative procedures aimed at
obtaining the relevant information from entities other than a
library or bookseller be utilized and have failed, or
reasonably appear to be unlikely to succeed if tried or
endanger lives if tried.
(b) Definitions.--In this section:
(1) Bookseller.--The term ``bookseller'' means a person or
entity engaged in the sale, rental, or delivery of books,
journals, magazines, or other similar forms of communication
in print or digitally.
(2) Library.--The term ``library'' means a library (as that
term is defined in section 213(2) of the Library Services and
Technology Act (20 U.S.C. 9122(2))) whose services include
access to the Internet, books, journals, magazines,
newspapers, or other similar forms of communication in print
or digitally to patrons for their use, review, examination,
or circulation.
______
By Mr. DURBIN (for himself, Mr. Kennedy, Mr. Feingold, and Mr.
Obama):
S. 2092. A bill to amend title 11, United States Code, to improve
protections for employees and retirees in business bankruptcies; to the
Committee on the Judiciary.
Mr. DURBIN. Mr. President, I rise today to support this Nations'
workers, who deserve better treatment than they currently experience
when their employers fail them.
We all remember what happened with Enron. Thousands of workers toiled
over decades to slowly build up good, solid companies of which they
could be proud. Then, in just a few short years, these companies were
bought up by a conglomerate and run into the ground.
Enron went bankrupt and, just like that, the workers and retirees who
spent their lives building something lost their jobs, their benefits,
and most of their pensions. Our bankruptcy system helped facilitate
that loss.
It is not just Enron. Workers and retirees are always near the back
of the line when their companies go into bankruptcy. Some firms have
gone into bankruptcy at least in part because companies can walk away
forever from some of their obligations to their employees.
Today I am introducing the Protecting Employees and Retirees in
Business Bankruptcies Act, along with Senators Kennedy and Feingold. I
am pleased that Chairman Conyers of the House Judiciary Committee will
be introducing the House companion.
The Protecting Employees and Retirees in Business Bankruptcies Act
will increase the value of worker claims in bankruptcy. The bill
doubles the maximum value of wage claims for each worker to $20,000;
allows a second claim of up to $20,000 for benefits earned; eliminates
the requirement that employees earn wage and benefit claims within 180
days of the bankruptcy filing; creates a new priority claim for the
loss in value of workers' pensions; and establishes a new priority
administrative expense for workers' collective severance pay.
The bill also will reduce the loss of wages and benefits. It protects
the value of collective bargaining agreements by limiting the
situations in which they can be rejected and by tightening the criteria
by which they can be amended. It also protects retiree benefits and
ensures that bidders for assets of the bankrupt company that promise to
honor back wages, vacation time, and other benefits are considered
favorably.
Finally, the bill will increase the parity of worker and executive
claims. For example, the bill prohibits deferred executive compensation
in situations where employee compensation plans have been terminated in
bankruptcy.
No longer will executives and insiders be able to pay themselves huge
bonuses in the midst of slashing payroll and benefit costs.
No longer will consultants receive huge fees while retirees are
losing most of their pensions.
No longer will companies be able to sell off all of the assets that
make the company worthwhile, and yet refuse to use those proceeds to
support the workers who have lost their livelihoods.
I am proud to introduce this legislation with Senators Kennedy and
Feingold, and I thank the AFL-CIO and all of its workers for their
wholehearted support.
Mr. President, I ask unanimous consent that the text of the bill be
printed in the Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:
S. 2092
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Protecting Employees and
Retirees in Business Bankruptcies Act of 2007''.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) Recent corporate restructurings have exacted a
devastating toll on workers through deep cuts in wages and
benefits, termination of defined benefit pension plans, and
the transfer of productive assets to
[[Page S12064]]
lower wage economies outside the United States. Retirees have
suffered deep cutbacks in benefits when companies in
bankruptcy renege on their retiree health obligations and
terminate pension plans.
(2) Congress enacted chapter 11 of title 11, United States
Code, to protect jobs and enhance enterprise value for all
stakeholders and not to be used as a strategic weapon to
eliminate good paying jobs, strip employees and their
families of a lifetime's worth of earned benefits and hinder
their ability to participate in a prosperous and sustainable
economy. Specific laws designed to treat workers and retirees
fairly and keep companies operating are instead causing the
burdens of bankruptcy to fall disproportionately and
overwhelmingly on employees and retirees, those least able to
absorb the losses.
(3) At the same time that working families and retirees are
forced to make substantial economic sacrifices, executive pay
enhancements continue to flourish in business bankruptcies,
despite recent congressional enactments designed to curb
lavish pay packages for those in charge of failing
enterprises. Bankruptcy should not be a haven for the
excesses of executive pay.
(4) Employees and retirees, unlike other creditors, have no
way to diversify the risk of their employer's bankruptcy.
(5) Comprehensive reform is essential in order to remedy
these fundamental inequities in the bankruptcy process and to
recognize the unique firm-specific investment by employees
and retirees in their employers' business through their
labor.
SEC. 3. INCREASED WAGE PRIORITY.
Section 507(a) of title 11, United States Code, is
amended--
(1) in paragraph (4)--
(A) by striking ``$10,000'' and inserting ``$20,000'';
(B) by striking ``within 180 days''; and
(C) by striking ``or the date of the cessation of the
debtor's business, whichever occurs first,'';
(2) in paragraph (5)(A), by striking--
(A) ``within 180 days''; and
(B) ``or the date of the cessation of the debtor's
business, whichever occurs first''; and
(3) in paragraph (5), by striking subparagraph (B) and
inserting the following:
``(B) for each such plan, to the extent of the number of
employees covered by each such plan, multiplied by
$20,000.''.
SEC. 4. PRIORITY FOR STOCK VALUE LOSSES IN DEFINED
CONTRIBUTION PLANS.
(a) Section 101(5) of title 11, United States Code, is
amended--
(1) in subparagraph (A), by striking ``or'' at the end;
(2) in subparagraph (B), by inserting ``or'' after the
semicolon; and
(3) by adding at the end the following:
``(C) right or interest in equity securities of the debtor,
or an affiliate of the debtor, held in a defined contribution
plan (within the meaning of section 3(34) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1002(34))
for the benefit of an individual who is not an insider or 1
of the 10 most highly compensated employees of the debtor (if
1 or more are not insiders), if such securities were
attributable to--
``(i) employer contributions by the debtor or an affiliate
of the debtor, other than elective deferrals (within the
meaning of section 402(g) of the Internal Revenue Code of
1986), and any earnings thereon; or
``(ii) elective deferrals and any earnings thereon.''.
(b) Section 507(a) of title 11, United States Code, is
amended--
(1) by redesignating paragraphs (6) through (10) as
paragraphs (7) through (11), respectively;
(2) by inserting after paragraph (5) the following:
``(6) Sixth, loss of the value of equity securities of the
debtor or affiliate of the debtor that are held in a defined
contribution plan (within the meaning of section 3(34) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1002(34)), without regard to when services resulting in the
contribution of stock to the plan were rendered, measured by
the market value of the stock at the time of contribution to,
or purchase by, the plan and the value as of the commencement
of the case where an employer or plan sponsor that has
commenced a case under this title has committed fraud with
respect to such plan or has otherwise breached a duty to the
participant that has proximately caused the loss of value.'';
(3) in paragraph (7), as redesignated, by striking
``Sixth'' and inserting ``Seventh'';
(4) in paragraph (8), as redesignated, by striking
``Seventh'' and inserting ``Eighth'';
(5) in paragraph (9), as redesignated, by striking
``Eighth'' and inserting ``Ninth'';
(6) in paragraph (10), as redesignated, by striking
``Ninth'' and inserting ``Tenth''; and
(7) in paragraph (11), as redesignated, by striking
``Tenth'' and inserting ``Eleventh''.
SEC. 5. PRIORITY FOR SEVERANCE PAY.
Section 503(b) of title 11, United States Code, is
amended--
(1) in paragraph (8) by striking ``and'' at the end;
(2) in paragraph (9) by striking the period and inserting
``; and''; and
(3) by adding at the end the following:
``(10) severance pay owed to employees of the debtor (other
than to an insider, other senior management, or a consultant
retained to provide services to the debtor), under a plan,
program, or policy generally applicable to employees of the
debtor, or owed pursuant to a collective bargaining
agreement, but not under an individual contract of
employment, for termination or layoff on or after the date of
the filing of the petition, which pay shall be deemed earned
in full upon such layoff or termination of employment.''.
SEC. 6. EXECUTIVE COMPENSATION UPON EXIT FROM BANKRUPTCY.
Section 1129(a)(5) of title 11, United States Code, is
amended--
(1) in subparagraph (A)(ii), by striking ``and'' at the
end; and
(2) in subparagraph (B), by striking the period at the end
and inserting the following: ``; and
``(C) the compensation disclosed pursuant to subparagraph
(B) has been approved by, or is subject to the approval of,
the court, as reasonable when compared to persons holding
comparable positions at comparable companies in the same
industry and not disproportionate in light of economic
concessions by the debtor's nonmanagement workforce during
the case.''.
SEC. 7. LIMITATIONS ON EXECUTIVE COMPENSATION ENHANCEMENTS.
Section 503(c) of title 11, United States Code, is
amended--
(1) in paragraph (1), by inserting ``or for the payment of
performance or incentive compensation, or a bonus of any
kind, or other financial returns designed to replace or
enhance incentive, stock, or other compensation in effect
prior to the date of the commencement of the case,'' after
``remain with the debtor's business,''; and
(2) by amending paragraph (3) to read as follows:
``(3) other transfers or obligations, to or for the benefit
of officers, of managers, or of consultants retained to
provide services to the debtor, before or after the date of
filing of the petition, in the absence of a finding by the
court based upon evidence in the record, and without
deference to the debtor's request for such payments, that
such transfers or obligations are essential to the survival
of the debtor's business or (in the case of a liquidation of
some or all of the debtor's assets) essential to the orderly
liquidation and maximization of value of the assets of the
debtor, in either case, because of the essential nature of
the services provided, and then only to the extent that the
court finds such transfers or obligations are reasonable
compared to individuals holding comparable positions at
comparable companies in the same industry and not
disproportionate in light of economic concessions by the
debtor's nonmanagement workforce during the case.''.
SEC. 8. REJECTION OF COLLECTIVE BARGAINING AGREEMENTS.
Section 1113 of title 11, United States Code, is amended--
(1) by striking subsections (a) through (c) and inserting
the following:
``(a) The debtor in possession, or the trustee if one has
been appointed under this chapter, other than a trustee in a
case covered by subchapter IV of this chapter and by title I
of the Railway Labor Act, may reject a collective bargaining
agreement only in accordance with the provisions of this
section.
``(b)(1) Where a debtor in possession or trustee
(hereinafter in this section referred to collectively as a
`trustee') seeks rejection of a collective bargaining
agreement, a motion seeking rejection shall not be filed
unless the trustee has first met with the authorized
representative (at reasonable times and for a reasonable
period in light of the complexity of the case) to confer in
good faith in attempting to reach mutually acceptable
modifications of such agreement. Proposals by the trustee to
modify the agreement shall be limited to modifications to the
agreement that--
``(A) are designed to achieve a total aggregate financial
contribution for the affected labor group for a period not to
exceed 2 years after the effective date of the plan;
``(B) shall be no more than the minimal savings necessary
to permit the debtor to exit bankruptcy, such that
confirmation of such plan is not likely to be followed by the
liquidation of the debtor or any successor to the debtor; and
``(C) shall not overly burden the affected labor group,
either in the amount of the savings sought from such group or
the nature of the modifications, when compared to other
constituent groups expected to maintain ongoing relationships
with the debtor, including management personnel.
``(2) Proposals by the trustee under paragraph (1) shall be
based upon the most complete and reliable information
available. Information that is relevant for the negotiations
shall be provided to the authorized representative.
``(c)(1) If, after a period of negotiations, the debtor and
the authorized representative have not reached agreement over
mutually satisfactory modifications and the parties are at an
impasse, the debtor may file a motion seeking rejection of
the collective bargaining agreement after notice and a
hearing held pursuant to subsection (d). The court may grant
a motion to reject a collective bargaining agreement only if
the court finds that--
``(A) the debtor has, prior to such hearing, complied with
the requirements of subsection (b) and has conferred in good
faith with the authorized representative regarding such
proposed modifications, and the parties were at an impasse;
``(B) the court has considered alternative proposals by the
authorized representative and has determined that such
proposals do not meet the requirements of subparagraphs (A)
and (B) of subsection (b)(1);
[[Page S12065]]
``(C) further negotiations are not likely to produce a
mutually satisfactory agreement; and
``(D) the court has considered--
``(i) the effect of the proposed financial relief on the
affected labor group;
``(ii) the ability of the debtor to retain an experienced
and qualified workforce; and
``(iii) the effect of a strike in the event of rejection of
the collective bargaining agreement.
``(2) In reaching a decision under this subsection
regarding whether modifications proposed by the debtor and
the total aggregate savings meet the requirements of
subsection (b), the court shall take into account--
``(A) the ongoing impact on the debtor of the debtor's
relationship with all subsidiaries and affiliates, regardless
of whether any such subsidiary or affiliate is domestic or
nondomestic, or whether any such subsidiary or affiliate is a
debtor entity; and
``(B) whether the authorized representative agreed to
provide financial relief to the debtor within the 24-month
period prior to the date of the commencement of the case, and
if so, shall consider the total value of such relief in
evaluating the debtor's proposed modifications.
``(3) In reaching a decision under this subsection, where a
debtor has implemented a program of incentive pay, bonuses,
or other financial returns for insiders or senior management
personnel during the bankruptcy, or has implemented such a
program within 180 days before the date of the commencement
of the case, the court shall presume that the debtor has
failed to satisfy the requirements of subsection
(b)(1)(C).'';
(2) in subsection (d)--
(A) by striking ``(d)'' and all that follows through
paragraph (2) and inserting the following:
``(d)(1) Upon the filing of a motion for rejection of a
collective bargaining agreement, the court shall schedule a
hearing to be held on not less than 21 days notice (unless
the debtor and the authorized representative agree to a
shorter time). Only the debtor and the authorized
representative may appear and be heard at such hearing.'';
and
(B) by redesignating paragraph (3) as paragraph (2);
(3) in subsection (f), by adding at the end the following:
``Any payment required to be made under this section before
the date on which a plan confirmed under section 1129 is
effective has the status of an allowed administrative
expense, as provided in section 503.''; and
(4) by adding at the end the following:
``(g) The rejection of a collective bargaining agreement
constitutes a breach of such contract with the same effect as
rejection of an executory contract pursuant to section
365(g). No claim for rejection damages shall be limited by
section 502(b)(7). Economic self-help by an authorized
representative shall be permitted upon a court order granting
a motion to reject a collective bargaining agreement under
subsection (c) or court-authorized interim changes under
subsection (e), and no provision of this title or of any
other Federal or State law shall be construed to the
contrary.
``(h) At any time after the date on which an order is
entered authorizing rejection, or where an agreement
providing mutually satisfactory modifications has been
entered into between the debtor and the authorized
representative, at any time after such agreement has been
entered into, the authorized representative may apply to the
court for an order seeking an increase in the level of wages
or benefits, or relief from working conditions, based upon
changed circumstances. The court shall grant the request so
long as the increase or other relief is consistent with the
standard set forth in subsection (b)(1)(B).
``(i) Upon request by the authorized representative, and
where the court finds that the prospects for reaching a
mutually satisfactory agreement would be aided by granting
the request, the court may direct that a dispute under
subsection (c) be heard and determined by a neutral panel of
experienced labor arbitrators in lieu of a court proceeding
under subsection (d). The decision of such panel shall have
the same effect as a decision by the court. The court's
decision directing the appointment of a neutral panel is not
subject to appeal.
``(j) Upon request by the authorized representative, the
debtor shall provide for the reasonable fees and costs
incurred by the authorized representative under this section,
after notice and a hearing.
``(k) If a plan to be confirmed under section 1129 provides
for the liquidation of the debtor, whether by sale or
cessation of all or part of the business, the trustee and the
authorized representative shall confer regarding the effects
of such liquidation on the affected labor group, in
accordance with applicable nonbankruptcy law, and shall
provide for the payment of all accrued obligations not
assumed as part of a sale transaction, and for such other
terms as may be agreed upon, in order to ensure an orderly
transfer of assets or cessation of the business. Any such
payments shall have the status of allowed administrative
expenses under section 503.
``(l) A collective bargaining agreement that is assumed
shall be assumed in accordance with section 365.''.
SEC. 9. PAYMENT OF INSURANCE BENEFITS TO RETIRED EMPLOYEES.
Section 1114 of title 11, United States Code, is amended--
(1) in subsection (a), by inserting ``, whether or not the
debtor asserts a right to unilaterally modify such payments
under such plan, fund, or program'' before the period at the
end;
(2) in subsection (c)(1), by adding at the end the
following: ``Where a labor organization elects to serve as
the authorized representative, the debtor shall provide for
the reasonable fees and costs incurred by the authorized
representative under this section after notice and a
hearing.'';
(3) in subsection (f), by striking ``(f)'' and all that
follows through paragraph (2) and inserting the following:
``(f)(1) Where a trustee seeks modification of retiree
benefits, a motion seeking modification of such benefits
shall not be filed, unless the trustee has first met with the
authorized representative (at reasonable times and for a
reasonable period in light of the complexity of the case) to
confer in good faith in attempting to reach mutually
satisfactory modifications. Proposals by the trustee to
modify retiree benefits shall be limited to modifications in
retiree benefits that--
``(A) are designed to achieve a total aggregate financial
contribution for the affected retiree group for a period not
to exceed 2 years after the effective date of the plan;
``(B) shall be no more than the minimal savings necessary
to permit the debtor to exit bankruptcy, such that
confirmation of such plan is not likely to be followed by the
liquidation of the debtor or any successor to the debtor; and
``(C) shall not overly burden the affected retirees, either
in the amount of the savings sought or the nature of the
modifications, when compared to other constituent groups
expected to maintain ongoing relationships with the debtor,
including management personnel.
``(2) Proposals by the trustee under paragraph (1) shall be
based upon the most complete and reliable information
available. Information that is relevant for the negotiations
shall be provided to the authorized representative.'';
(4) in subsection (g), by striking ``(g)'' and all that
follows through the semicolon at the end of paragraph (3) and
inserting the following:
``(g) If, after a period of negotiations, the debtor and
the authorized representative have not reached agreement over
mutually satisfactory modifications and the parties are at an
impasse, the debtor may apply to the court for modifications
in the payment of retiree benefits after notice and a hearing
held pursuant to subsection (k). The court may grant a motion
to modify the payment of retiree benefits only if the court
finds that--
``(1) the debtor has, prior to the hearing, complied with
the requirements of subsection (f) and has conferred in good
faith with the authorized representative regarding such
proposed modifications and the parties were at an impasse;
``(2) the court has considered alternative proposals by the
authorized representative and has determined that such
proposals do not meet the requirements of subparagraphs (A)
and (B) of subsection (f)(1);
``(3) further negotiations are not likely to produce a
mutually satisfactory agreement; and
``(4) the court has considered--
``(A) the effect of the proposed modifications on the
affected retirees; and
``(B) where the authorized representative is a labor
organization, the effect of a strike in the event of
modification of retiree health benefits;'';
(5) in subsection (k)--
(A) in paragraph (1)--
(i) in the first sentence, by striking ``fourteen'' and
inserting ``21''; and
(ii) by striking the second and third sentences, and
inserting the following: ``Only the debtor and the authorized
representative may appear and be heard at such hearing.'';
(B) by striking paragraph (2); and
(C) by redesignating paragraph (3) as paragraph (2); and
(6) by redesignating subsections (l) and (m) as subsections
(n) and (o), respectively, and inserting the following:
``(l) In determining whether the proposed modifications
comply with subsection (f)(1)(A), the court shall take into
account the ongoing impact on the debtor of the debtor's
relationship with all subsidiaries and affiliates, regardless
of whether any such subsidiary or affiliate is domestic or
nondomestic, or whether any such subsidiary or affiliate is a
debtor entity.
``(m) No plan, fund, program, or contract to provide
retiree benefits for insiders or senior management shall be
assumed by the debtor if the debtor has obtained relief under
subsection (g) or (h) for reductions in retiree benefits or
under subsection (c) or (e) of section 1113 for reductions in
the health benefits of active employees of the debtor on or
after the commencement of the case or reduced or eliminated
active or retiree benefits within 180 days prior to the date
of the commencement of the case.''.
SEC. 10. PROTECTION OF EMPLOYEE BENEFITS IN A SALE OF ASSETS.
Section 363 of title 11, United States Code, is amended--
(1) in subsection (b), by adding at the end the following:
``(3) In approving a sale under this subsection, the court
shall consider the extent to which a bidder has offered to
maintain existing jobs, has preserved retiree health
benefits, and has assumed the obligations of any defined
benefit plan, in determining whether an offer constitutes the
highest or best offer for such property.''; and
[[Page S12066]]
(2) by adding at the end the following:
``(q) If, as a result of a sale approved under this
section, retiree benefits, as defined under section 1114(a),
are modified or eliminated pursuant to the provisions of
subsection (e)(1) or (h) of section 1114 or otherwise, then,
except as otherwise provided in an agreement with the
authorized representative of such retirees, a charge of
$20,000 per retiree shall be made against the proceeds of
such sale (or paid by the buyer as part of the sale) for the
purpose of--
``(1) funding 12 months of health coverage following the
termination or modification of such coverage through a plan,
fund, or program made available by the buyer, by the debtor,
or by a third party; or
``(2) providing the means by which affected retirees may
obtain replacement coverage on their own,
except that the selection of either paragraph (1) or (2)
shall be upon the consent of the authorized representative,
within the meaning of section 1114(b), if any. Any claim for
modification or elimination of retiree benefits pursuant to
section 1114(i) shall be offset by the amounts paid under
this subsection.''.
SEC. 11. UNION PROOF OF CLAIM.
Section 501(a) of title 11, United States Code, is amended
by inserting ``, including a labor organization,'' after ``A
creditor''.
SEC. 12. CLAIM FOR LOSS OF PENSION BENEFITS.
Section 502 of title 11, United States Code, is amended by
adding at the end the following:
``(l) The court shall allow a claim asserted by an active
or retired participant in a defined benefit plan terminated
under section 4041 or 4042 of the Employee Retirement Income
Security Act of 1974, for any shortfall in pension benefits
accrued as of the effective date of the termination of such
pension plan as a result of the termination of the plan and
limitations upon the payment of benefits imposed pursuant to
section 4022 of such Act, notwithstanding any claim asserted
and collected by the Pension Benefit Guaranty Corporation
with respect to such termination.''.
SEC. 13. PAYMENTS BY SECURED LENDER.
Section 506(c) of title 11, United States Code, is amended
by adding at the end the following: ``Where employees have
not received wages, accrued vacation, severance, or other
benefits owed pursuant to the terms of a collective
bargaining agreement for services rendered on and after the
date of the commencement of the case, such unpaid obligations
shall be deemed necessary costs and expenses of preserving,
or disposing of, property securing an allowed secured claim
and shall be recovered even if the trustee has otherwise
waived the provisions of this subsection under an agreement
with the holder of the allowed secured claim or successor or
predecessor in interest.''.
SEC. 14. PRESERVATION OF JOBS AND BENEFITS.
Title 11, United States Code, is amended--
(1) by inserting before section 1101 the following:
``SEC. 1100. STATEMENT OF PURPOSE.
``A debtor commencing a case under this chapter shall have
as its purpose the reorganization of its business and, to the
greatest extent possible, maintaining or enhancing the
productive use of its assets, so as to preserve jobs.'';
(2) in section 1129(a), by adding at the end the following:
``(17) The debtor has demonstrated that every reasonable
effort has been made to maintain existing jobs and mitigate
losses to employees and retirees.'';
(3) in section 1129(c), by striking the last sentence and
inserting the following: ``If the requirements of subsections
(a) and (b) are met with respect to more than 1 plan, the
court shall, in determining which plan to confirm, consider--
``(1) the extent to which each plan would maintain existing
jobs, has preserved retiree health benefits, and has
maintained any existing defined benefit plans; and
``(2) the preferences of creditors and equity security
holders, and shall confirm the plan that better serves the
interests of employees and retirees.''; and
(4) in the table of sections in chapter 11, by inserting
the following before the item relating to section 1101:
``1100. Statement of purpose.''.
SEC. 15. ASSUMPTION OF EXECUTIVE RETIREMENT PLANS.
Section 365 of title 11, United States Code, is amended--
(1) in subsection (a), by striking ``and (d)'' and
inserting ``(d), and (q)''; and
(2) by adding at the end the following:
``(q) No deferred compensation arrangement for the benefit
of insiders or senior management of the debtor shall be
assumed if a defined benefit plan for employees of the debtor
has been terminated pursuant to section 4041 or 4042 of the
Employee Retirement Income Security Act of 1974, on or after
the date of the commencement of the case or within 180 days
prior to the date of the commencement of the case.''.
SEC. 16. RECOVERY OF EXECUTIVE COMPENSATION.
Title 11, United States Code, is amended by inserting after
section 562 the following:
``Sec. 563. Recovery of executive compensation
``(a) If a debtor has obtained relief under subsection (c)
or (e) of section 1113, or subsection (g) or (h) of section
1114, by which the debtor reduces its contractual obligations
under a collective bargaining agreement or retiree benefits
plan, the court, as part of the entry of such order granting
relief, shall determine the percentage diminution, as a
result of the relief granted under section 1113 or 1114, in
the value of the obligations when compared to the debtor's
obligations under the collective bargaining agreement or with
respect to retiree benefits, as of the date of the
commencement of the case under this title. In making its
determination, the court shall include reductions in
benefits, if any, as a result of the termination pursuant to
section 4041 or 4042 of the Employee Retirement Income
Security Act of 1974, of a defined benefit plan administered
by the debtor, or for which the debtor is a contributing
employer, effective at any time on or after 180 days before
the date of the commencement of a case under this title. The
court shall not take into account pension benefits paid or
payable under the provisions of title IV of such Act as a
result of any such termination.
``(b) Where a defined benefit plan administered by the
debtor, or for which the debtor is a contributing employer,
has been terminated pursuant to section 4041 or 4042 of the
Employee Retirement Income Security Act of 1974, effective at
any time on or after 180 days before the date of the
commencement of a case under this title, but a debtor has not
obtained relief under subsection (c) or (e) of section 1113,
or subsection (g) or (h) of section 1114 of this title, the
court, upon motion of a party in interest, shall determine
the percentage diminution in the value of benefit obligations
when compared to the total benefit liabilities prior to such
termination. The court shall not take into account pension
benefits paid or payable under the provisions of title IV of
the Employee Retirement Income Security Act of 1974 as a
result of any such termination.
``(c) Upon the determination of the percentage diminution
in value under subsection (a) or (b), the estate shall have a
claim for the return of the same percentage of the
compensation paid, directly or indirectly (including any
transfer to a self-settled trust or similar device, or to a
nonqualified deferred compensation plan under section
409A(d)(1) of the Internal Revenue Code of 1986) to any
officer of the debtor serving as member of the board of
directors of the debtor within the year before the date of
the commencement of the case, and any individual serving as
chairman and any individual serving as lead director of the
board of directors at the time of the granting of relief
under section 1113 or 1114 of this title or, if no such
relief has been granted, the termination of the defined
benefit plan.
``(d) The trustee or a committee appointed pursuant to
section 1102 may commence an action to recover such claims,
except that if neither the trustee nor such committee
commences an action to recover such claim by the first date
set for the hearing on the confirmation of plan under section
1129, any party in interest may apply to the court for
authority to recover such claim for the benefit of the
estate. The costs of recovery shall be borne by the estate.
``(e) The court shall not award postpetition compensation
under section 503(c) or otherwise to any person subject to
the provisions of subsection (c) if there is a reasonable
likelihood that such compensation is intended to reimburse or
replace compensation recovered by the estate under this
section.''.
SEC. 17. EXCEPTION FROM AUTOMATIC STAY.
Section 362(b) of title 11, United States Code, is
amended--
(1) in paragraph (27), by striking ``and'' at the end;
(2) in paragraph (28), by striking the period at the end
and inserting ``; and'' and
(3) by adding at the end the following:
``(29) of the commencement or continuation of a grievance,
arbitration, or similar dispute resolution proceeding
established by a collective bargaining agreement that was or
could have been commenced against the debtor before the
filing of a case under this title, or the payment or
enforcement of an award or settlement under such
proceeding.''.
SEC. 18. PREFERENTIAL COMPENSATION TRANSFER.
Section 547 of title 11, United States Code, is amended by
adding at the end the following:
``(j) The trustee may avoid a transfer to or for the
benefit of an insider (including an obligation incurred for
the benefit of an insider under an employment contract) made
in anticipation of bankruptcy, or a transfer made in
anticipation of bankruptcy to a consultant who is formerly an
insider and who is retained to provide services to an entity
that becomes a debtor (including an obligation under a
contract to provide services to such entity or to a debtor)
made or incurred on or within 1 year before the filing of the
petition. No provision of subsection (c) shall constitute a
defense against the recovery of such transfer. The trustee or
a committee appointed pursuant to section 1102 may commence
an action to recover such transfer, except that, if neither
the trustee nor such committee commences an action to recover
such transfer by the time of the commencement of a hearing on
the confirmation of a plan under section 1129, any party in
interest may apply to the court for authority to recover the
claims for the benefit of the estate. The costs of recovery
shall be borne by the estate.''.
SEC. 19. FINANCIAL RETURNS FOR EMPLOYEES AND RETIREES.
Section 1129(a) of title 11, United States Code, is
amended--
[[Page S12067]]
(1) by adding at the end the following:
``(18) In a case in which the debtor initiated proceedings
under section 1113, the plan provides for recovery of
rejection damages (where the debtor obtained relief under
subsection (c) or (e) of section 1113 prior to confirmation
of the plan) or for other financial returns, as negotiated by
the debtor and the authorized representative (to the extent
that such returns are paid under, rather than outside of, a
plan).''; and
(2) by striking paragraph (13) and inserting the following:
``(13) With respect to retiree benefits, as that term is
defined in section 1114, the plan--
``(A) provides for the continuation after its effective
date of payment of all retiree benefits at the level
established pursuant to subsection (e)(1)(B) or (g) of
section 1114 at any time prior to the date of confirmation of
the plan, for the duration of the period for which the debtor
has obligated itself to provide such benefits, or, if no
modifications are made prior to confirmation of the plan, the
continuation of all such retiree benefits maintained or
established in whole or in part by the debtor prior to the
date of the filing of the petition; and
``(B) provides for allowed claims for modification of
retiree benefits or for other financial returns, as
negotiated by the debtor and the authorized representative,
to the extent that such returns are paid under, rather than
outside of, a plan).''.
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