[Congressional Record Volume 155, Number 158 (Wednesday, October 28, 2009)]
[Senate]
[Pages S10852-S10861]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. KAUFMAN (for himself, Mr. Leahy, Mr. Specter, Mr. Kohl,
Mr. Schumer, and Ms. Klobuchar):
S. 1959. A bill to improve health care fraud enforcement; to the
Committee on the Judiciary.
Mr. KAUFMAN. Mr. President, it is no longer a secret that fraud
represents one of the fastest growing and most costly forms of crime in
America today. In no small part, our current economic crisis can be
attributed to unchecked mortgage fraud. Mortgage fraud itself was
spurred by rampant accounting fraud, which enabled crooked executives
to fatten their larders on a bubble of fake equity. And on the back-
end, securities fraud, in the form of market manipulation and insider
trading, hastened the eventual market crash and maximized its impact on
Main Street and average American investors. In response, this body
passed the Fraud Enforcement Recovery Act, FERA, which directed
critical resources and tools to anti-financial fraud efforts.
FERA was passed in response to an unprecedented financial crisis.
Americans should expect Congress to do more than simply react to crises
after their most destructive impacts have already been felt. We owe it
to our constituents to be proactive and to seek out and solve problems
on the horizon so that disaster can be averted.
In the midst of the debate concerning comprehensive health care
reform, we must be proactive in combating health care fraud and abuse.
Each year, criminals drain between $72 and $220 billion from private
and public health care plans through fraud. We pay these costs as
taxpayers and through higher health insurance premiums. As we take
[[Page S10853]]
steps to increase the number of Americans who are covered by health
insurance, and to improve the health care system for everyone, we must
also ensure that law enforcement has the tools that it needs to deter,
detect, and punish health care fraud.
The Finance and HELP committees have worked long and hard to find
ways to fight fraud and bend the cost curve down. They have done a
great job. There's more work to be done, however, which is why today I,
along with Senators Leahy, Specter, Kohl, Schumer, and Klobuchar,
introduce the Health Care Fraud Enforcement Act of 2009.
This bill makes straightforward but critical improvements to the
Federal sentencing guidelines, to health care fraud statutes, and to
forfeiture, money laundering, and obstruction statutes. The bill would
also make available more Federal resources to activities specifically
designed to target health care fraud. Taken together, these measures
send a strong and unmistakable signal to those who would engage in
health care fraud that they will be caught, and they will be punished.
The bill makes important changes to the Federal sentencing guidelines
to ensure that health care fraud offenses will be punished commensurate
with the cost that these offenders inflict upon our health care system.
Health care represents \1/6\ of our national economy, and so unchecked
health care fraud has the potential to inflict devastating harm to our
national prosperity.
Despite the enormous losses in many health care fraud cases, analysis
from the United States Sentencing Commission suggests that health care
fraud offenders often receive shorter sentences than other white collar
offenders in cases with similar loss amounts. And according to
statements from cooperating health care fraud defendants, many
criminals are drawn to health care fraud because of this low risk-to-
reward ratio. For this reason, the bill directs the Sentencing
Commission to increase the offense score of health care fraud offenses
by two to four levels, depending on the dollar amount involved in the
crime.
The bill also clarifies that courts should refuse to entertain
arguments by defendants that they can avoid stiff punishment because
only a portion of their fraudulent claims were likely to be paid.
In addition, the bill updates the definition of ``health care fraud
offense'' in the Federal criminal code to include violations of the
anti-kickback statute, the Food, Drug and Cosmetic Act, and certain
provisions of ERISA. These changes will allow the full panoply of law
enforcement tools to be used against all health care fraud.
The bill also strengthens whistleblower actions based on medical care
kickbacks, which tempt by health care providers to churn unnecessary
medical care at great risk to patients and great cost to the taxpayer.
By making all payments that stem from an illegal kickback subject to
the False Claims Act, this bill leverages the private sector to help
detect and recover money paid pursuant to these illegal practices.
The Department of Justice has had success both prosecuting illegal
kickbacks and pursuing False Claims Act matters based on underlying
violations of the Anti-Kickback Statute. Nevertheless, defendants in
such FCA cases continue to mount legal challenges that sometimes defeat
legitimate enforcement efforts.
For example, a court recently held that, even though a device company
may have paid a kickback to a doctor to use a particular medical
device, the bill to the government for the procedure to implant the
device was not false or fraudulent because the claim was submitted by
the innocent hospital, and not by the guilty doctor. In other words, a
claim that results from a kickback and that is fraudulent when
submitted by a wrongdoer is laundered into a ``clean'' claim when an
innocent third party finally submits the claim to the government for
payment. This has the effect of insulating both the payor and the
recipient of the kickback from False Claims Act liability. This
obstacle to a successful action particularly limits the ability of the
Department of Justice to recover from pharmaceutical and device
manufacturers, because in such instances the claims arising from the
illegal kickbacks typically are not submitted by the doctors who
received the kickbacks, but by pharmacies and hospitals that had no
knowledge of the underlying unlawful conduct.
This bill remedies the problem by amending the anti-kickback statute
to ensure that all claims resulting from illegal kickbacks are ``false
or fraudulent,'' even when the claims are not submitted directly by the
wrongdoers themselves. I want to emphasize that in such circumstances,
neither anti-kickback nor False Claims Act liability will lie against
the innocent third party that submitted the claim.
The bill also addresses confusion in the case law over the
appropriate meaning of ``willful'' conduct in health care fraud. Both
the anti-kickback statute and the health care fraud statute include the
term ``willfully.'' In both contexts, the Ninth Circuit Court of
Appeals has read the term to require proof that the defendant not only
intended to engage in unlawful conduct, but also knew of the particular
law in question and intended to violate that particular law.
This heightened mental state requirement may be appropriate for
criminal violations of hyper-technical regulations, but it is
inappropriate for these crimes, which punish simple fraud. The Finance
Committee health care reform bill, America's Healthy Future Act,
addresses this problem for the anti-kickback statute, but not for the
general health care fraud offense. Accordingly, the Health Care Fraud
Enforcement Act tracks the Finance bill and clarifies that ``willful
conduct'' in this context does not require proof that the defendant had
actual knowledge of the law in question or specific intent to violate
that law. As a result, health care fraudsters will not receive special
protection that they don't deserve.
Next, the bill provides the Department of Justice with critical
subpoena authority for investigations conducted pursuant to the Civil
Rights for Institutionalized Persons Act, also known as CRIPA.
Pursuant to that important statute, the Civil Rights Division of the
Department of Justice investigates conditions in publicly operated
institutions, such as nursing homes, mental health institutions,
facilities for persons with disabilities, residential schools for
children with disabilities, as well as jails and prisons, where there
has been an allegation of pattern or practice of violating residents'
Federal civil rights. Under CRIPA, only injunctive relief is available;
the statute does not provide for the award of damages.
CRIPA investigations commonly concern allegations of inadequate
medical and mental health care, unsafe living conditions, and the
failure to protect residents from harm. The majority of CRIPA
investigations are conducted with the voluntary cooperation of state
and local jurisdictions. When unlawful conditions are identified, CRIPA
investigations are typically resolved through a negotiated settlement
agreement that addresses the reforms necessary to correct policies,
procedures and practices to address the identified deficiencies.
Some jurisdictions, however, have refused to cooperate with the
Division. CRIPA does not authorize the Department of Justice to issue
subpoenas for documents, records, or even for access into the
institution that is the target of the investigation. As a result,
investigations have been hamstrung and the effectiveness of CRIPA to
remedy systemic abuse of institutionalized persons has been
unnecessarily limited.
For example, in a CRIPA investigation of a county nursing home in New
Jersey, the local jurisdiction would not cooperate. The Division's
investigation revealed inadequate medical and mental health care,
unlawful restraint, and inadequate nutrition and hydration. In one
particularly serious incident, which occurred weeks after a meeting
with the county officials to request their cooperation with the
investigation, a resident was fed so quickly by staff that she
aspirated and died. Emergency room physicians extracted a volume of
mashed potatoes from the resident's lungs that filled a Ziploc bag.
Another nursing home resident slowly starved to death because staff
improperly positioned that resident's feeding tube. The Division was
compelled to file suit, resulting in a negotiated settlement more than
4 years after the investigation began. To be sure, these
[[Page S10854]]
abuses are a civil rights issue that demand attention even in the
absence of fraud prevention. But substandard care also represents fraud
and waste, because taxpayers have paid for the provision of
satisfactory medical services at facilities that fall under CRIPA
jurisdiction.
The absence of subpoena authority enables non-cooperating
jurisdictions to obstruct and delay the Division in its mission to
ensure that the Federal rights of persons in the custody of state and
local officials are respected. The resultant litigation when
jurisdictions exploit the absence of subpoena power is extraordinarily
costly, yet the substantive outcome, appropriate injunctive relief, is
the same.
The bill addresses the problem by authorizing the Department of
Justice to issue subpoenas for access to any institution that is the
subject of an investigation related to a violation of CRIPA, and for
any documents, records, materials, files, reports, memoranda, policies,
procedures, investigations, video or audio recordings, and quality
assurance reports of such institution.
In a final substantive change, the bill corrects an apparent drafting
error by providing that obstruction of criminal investigations
involving administrative subpoenas under HIPAA, the Health Insurance
Portability and Accountability Act of 1996, should be treated in the
same manner as obstruction of criminal investigations involving grand
jury subpoenas.
Finally, the Health Care Fraud Enforcement Act provides the resources
needed for law enforcement to uncover and go after these frauds. Health
care fraud cannot be fought effectively without more investigators and
prosecutors. This bill authorizes the appropriation of $20,000,000 each
year from 2011 through 2016 for investigations, prosecutions, and civil
or other proceedings relating to fraud and abuse in connection with any
health care benefit program. The bill authorizes the United States
Attorneys' Offices to be appropriated an additional $10,000,000 each
year for this purpose, the Criminal Division of the Department of
Justice, $5,000,000 each year, and the Civil Division of the Department
of Justice, $5,000,000 each year.
As we move toward meaningful health care reform, we must ensure that
criminals who engage in health care fraud, and those who contemplate
doing so, understand that they face swift prosecution and substantial
punishment. Congress should move quickly to pass this legislation so
that American taxpayers can be confident that their government has the
tools and resources necessary to protect its investment in the health
and welfare of our Nation.
I urge my colleagues to support the Health Care Fraud Enforcement Act
of 2009.
Mr. LEAHY. Mr. President, I am pleased to join Senator Kaufman, as
well as Senators Specter, Kohl, Schumer, and Klobuchar, to introduce
the Health Care Fraud Enforcement Act of 2009. This legislation builds
on the impressive steps the administration has already taken to step up
health care fraud prevention and enforcement, and on the real progress
represented by the anti-fraud provisions of the Finance and Health,
Education, Labor and Pension Committee bills already before Congress. I
was glad to contribute to those efforts.
I feel strongly, though, that more needs to be done. This bill will
provide prosecutors with needed tools for the effective investigation,
prosecution, and punishment of health care fraud. By making modest but
important changes to the law, it ensures that those who drain our
health care system of billions of dollars each year, driving up costs
and risking patients' lives, will go to jail, and that their fraudulent
gains will be returned to American taxpayers and health care
beneficiaries.
For more than 3 decades, I have fought in Congress to combat fraud
and protect taxpayer dollars. This spring, I introduced with Senator
Grassley and Senator Kaufman the Fraud Enforcement and Recovery Act,
the most significant anti-fraud legislation in more than a decade. When
that legislation was enacted, it provided law enforcement with new
tools to detect and prosecute financial and mortgage fraud. Now, as
health care reform moves through the Senate, I want to make sure we do
all we can to tackle the fraud that has contributed greatly to the
skyrocketing cost of health care.
The scale of health care fraud in America today is staggering.
According to conservative estimates, about three percent of the funds
spent on health care are lost to fraud--more than $60 billion a year.
In the Medicare program alone, the Government Accountability Office
estimates that more than $10 billon was lost to fraud just last year.
While Medicare and Medicaid fraud is significant, it is important to
remember that health care fraud does not occur solely in the public
sector. Private health insurers also see billions of dollars lost to
fraud. That fraud is often harder for the Government to track. Private
companies have less incentive to report it, and in some cases, are
responsible for the fraudulent practices themselves. Reining in private
sector fraud must be a part of any comprehensive health care reform.
The Health Care Fraud Enforcement Act of 2009 makes a number of
straightforward, important improvements to existing statutes to
strengthen prosecutors' ability to combat health care fraud. The bill
would increase the Federal sentencing guidelines for health care fraud
offenses. Despite the enormous losses in many health care fraud cases,
offenders often receive shorter sentences than other white collar
criminals. This lower risk is one reason criminals are drawn to health
care fraud. By increasing the Federal sentencing guidelines for health
care fraud offenses, we send a clear message that those who steal from
the Nation's health care system will face swift prosecution and
substantial punishment.
The bill also provides for a number of statutory changes to
strengthen fraud enforcement. For example, it would expand the
definition of a ``Federal health care fraud offense'' to include
violations of the anti-kickback statute and several other key health
care-related criminal statutes, which will allow for more vigorous
enforcement of those offenses, including making their proceeds subject
to criminal forfeiture. It would also amend the anti-kickback statute
to ensure that all claims resulting from illegal kickbacks are
considered false claims for the purpose of civil action under the False
Claims Act, even when the claims are not submitted directly by the
wrongdoers themselves. All too often, health care providers secure
business by paying illegal kickbacks, which needlessly increase health
care risks and costs. This change will help ensure that the government
is able to recoup from wrongdoers the losses caused by false health
care fraud claims. The bill clarifies the intent requirement of another
key health care fraud statute in order to facilitate effective, fair,
and vigorous enforcement.
The bill also provides the Department of Justice with limited
subpoena authority for civil rights investigations conducted pursuant
to the Civil Rights for Institutionalized Persons Act. This provision
allows the Government to more effectively investigate conditions in
publicly operated institutions, such as nursing homes, mental health
institutions, and residential schools for children with disabilities,
where there have been allegations of civil rights violations.
Lastly, the bill provides needed resources for criminal and civil
enforcement of health care fraud laws. It authorizes the appropriation
of $20,000,000 a year to the Department of Justice from 2011 through
2016 for investigations, prosecutions, and civil or other proceedings
relating to fraud and abuse in connection with any health care benefit
program. Studies indicate a return on investment of anywhere from $6 to
$15 in Government recovery of fraud proceeds for every $1 spent on
health care fraud enforcement, so this is a prudent and needed
investment.
We all agree that reducing the cost of health care for American
citizens is a critical goal of health care reform. We in Congress must
do our part by ensuring that, when we pass a health care reform bill,
it includes all the tools and resources needed to crack down on the
scourge of health care fraud. This bill is an important part of that
effort.
[[Page S10855]]
By Mr. AKAKA:
S. 1963. A bill to amend title 38, United States Code, to provide
assistance to caregivers of veterans, to improve the provision of
health care to veterans, and for other purposes; read the first time.
Mr. AKAKA. Mr. President, today I am introducing landmark legislation
that will provide critical assistance to veterans and their family
caregivers. The Caregiver and Veterans Omnibus Health Services Act of
2009, contains provisions from S. 252, the Veterans Health Care
Authorization Act of 2009, and S. 801, the Caregiver and Veterans
Health Services Act of 2009. The Committee reported both S. 252 and S.
801, and but they are being held by a single Senator. Today, I
reintroduce these vital improvements to veterans' health care as S.
1963.
The bipartisan provisions contained in S. 1963 provide needed
assistance and support to family members and others who are serving as
caregivers for the most seriously injured veterans of the conflicts in
Iraq and Afghanistan. This assistance includes health care, counseling,
support and a living stipend. They also expand services for women
veterans, those with traumatic brain injury, and veterans that live in
rural areas. Because the Nation's veterans and their caregivers cannot
wait any longer for this help, I am introducing S. 1963, and asking
that it be immediately placed on the Calendar.
S. 1963 has one simple theme: that every veteran deserves access to
high quality health care, whether that care is provided by VA, or by a
family caregiver. The Congress has previously recognized the
contributions of caregivers. S. 1963 also contains many other important
veterans' health improvements, including expanding services for women
veterans; telemedicine technologies; transportation grants; and
scholarship and loan repayment programs; and eliminating copayments for
catastrophically disabled veterans. States which have an especially
high number of veterans living in rural areas, such as Montana, Nevada,
Wyoming, Florida, Arizona, Arkansas, Virginia, Idaho, Oklahoma, and New
Mexico, would benefit greatly from the provisions in the bill which are
designed to improve health care for rural veterans.
______
By Mr. AKAKA:
S. 1964. A bill to require disclosure of financial relationships
between brokers and dealers and mutual fund companies, and of certain
commissions paid by mutual fund companies; to the Committee on Banking,
Housing, and Urban Affairs.
Mr. AKAKA. Mr. President, today, I am introducing the Mutual Fund
Transparency Act of 2009. Mutual funds are vital investment vehicles
for middle-income Americans that provide diversification and
professional money management. Many working families rely on their
mutual fund investments to pay for their children's education, prepare
for retirement, and attain other financial goals.
I first introduced a version of this legislation in 2003. That fall,
appalling abuses of investor trust were exposed. Ordinary investors
were being harmed by the greed of brokers, mutual fund employees, and
institutional and large investors. The transgressions made it clear
that the boards of mutual fund companies were not providing sufficient
oversight and failed to adequately protect the interests of their
shareholders.
After the introduction of my bill, Securities and Exchange
Commission, SEC, Chairman William Donaldson proposed several rules that
mirrored the provisions in my bill, including a requirement that funds
relying on certain exemptive rules have an independent chairman and
that 75 percent of board directors be independent. However, legal
actions taken against the SEC by the Chamber of Commerce and subsequent
inaction under his successor, Chairman Christopher Cox, have prevented
the adoption of these rules. The SEC needs additional statutory
authority to finish these reforms and ensure that investors can rely on
independent mutual fund boards to protect their interests.
My bill will ensure the independence of mutual fund boards, increase
the transparency of fees and expenses of mutual funds, and impose a
fiduciary duty on all investment advisors.
I have included in this legislation a number of provisions intended
to ensure the independence of mutual fund boards. Poor board governance
was a contributing factor to the mutual fund scandals in 2003.
Independent directors must have a dominant presence on the board to
ensure that investors' interests are the top priority. Once again, my
legislation requires mutual fund boards to have an independent chairman
and that 75 percent of their members be independent. The legislation
strengthens the definition of an independent director. These changes
will ensure that the interest of investors will be the paramount
priority of the board.
My legislation will ensure that investors are provided with relevant
and meaningful disclosures from which they can make better informed
decisions. Mr. President, my bill will increase the transparency of the
complex financial relationship between brokers and mutual fund
companies in ways that are both meaningful and easy to understand for
investors. Shelf-space payments and revenue-sharing agreements between
mutual fund companies and brokers present conflicts of interest that
must be disclosed to investors. Without such disclosures, investors
cannot make informed financial decisions. Investors may believe that
brokers are recommending funds based on the expectation of solid
returns or low volatility, when the broker's recommendation may be
influenced by hidden broker commissions. I have included a point-of-
sale disclosure requirement in my legislation. In my bill, investors
would have to be provided with the amount of differential payments and
average fees for comparable transactions. My legislation also requires
that confirmation notices be provided for mutual fund transactions,
which will indicate how their broker was compensated.
Investors are not provided with a complete and accurate idea of the
expenses involved with owning a particular fund. Consumers often
compare the expense ratios of funds when making investment decisions.
However, expense ratios fail to take into account the cost of
commissions in the purchase and sale of securities. To further increase
the transparency of the actual costs of the fund, brokerage commissions
must be counted as an expense in filings with the SEC and included in
the calculation of the expense ratio. Currently, brokerage commissions
are disclosed to the SEC, but not to individual investors. Brokerage
commissions are only disclosed to investors upon request. My bill
strengthens brokerage commission disclosure provisions and ensures that
commissions will be included in a document that investors have access
to and can utilize. The inclusion of brokerage commissions in the
expense ratio creates an incentive to reduce the use of soft dollars.
Soft dollars can be used to lower expenses since most purchases using
soft dollars do not count as expenses and are not calculated into the
expense ratio. This change will make it easier for investors to know
the true cost of the fund and compare the expense ratios of funds
meaningfully.
When I reintroduced a version of this bill in 2005, I added a
provision pertaining to the fiduciary duty of brokers. Although I have
modified that provision for the current bill, my intent to apply a
fiduciary duty to brokers remains the same. This is an essential
provision because it ensures that all financial professionals have the
same responsibility to act in the best interests of their clients
whether they are an investment advisor or a broker.
We must improve the financial literacy of mutual fund investors so
that they can make more sound investment decisions. I have included a
requirement that the SEC study financial literacy among mutual fund
investors. The SEC would be required to develop a strategy to increase
the financial literacy of investors that results in positive change in
investor behavior. In addition, the bill requires the Comptroller
General of the United States to conduct a study on mutual fund
advertising and make recommendations to improve investor protections
and ensure that investors can make informed financial decisions when
purchasing shares.
We must enact this vital legislation to help protect the investments
that our working families make in mutual
[[Page S10856]]
funds. These reforms are long overdue. I will build upon the
administration's regulatory modernization proposal on fiduciary duty
for brokers and pre-sale disclosure of mutual fund expenses.
I look forward to working with my friend, SEC Chairman Mary Schapiro,
to bring about structural reform in the mutual fund industry and
increase disclosures in order to provide useful and relevant
information to mutual fund investors.
Mr. President, I ask unanimous consent that the text of the bill and
letters of support be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
S. 1964
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 ``Mutual Fund Transparency Act
of 2009''.
SEC. 2. DISCLOSURE OF FINANCIAL RELATIONSHIPS BETWEEN BROKERS
AND DEALERS AND MUTUAL FUND COMPANIES.
(a) In General.--Section 15(b) of the Securities Exchange
Act of 1934 (15 U.S.C. 78o(b)) is amended by adding at the
end the following:
``(13) Confirmation of transactions for mutual funds.--
``(A) In general.--Each broker and dealer shall disclose in
writing to customers that purchase the shares of any open-end
or closed-end company registered under section 8 of the
Investment Company Act of 1940 (15 U.S.C. 80a-8) or any
interest in a unit investment trust or municipal securities
registered under this title used for education savings
plans--
``(i) the amount of any compensation received or to be
received by the broker or dealer in connection with such
transaction from any sources; and
``(ii) such other information as the Commission determines
appropriate.
``(B) Revenue sharing.--The term `compensation' under
subparagraph (A) includes any direct or indirect payment made
by an investment adviser (or any affiliate of an investment
adviser) to a broker or dealer for the purpose of promoting
the sales of securities of an entity described in
subparagraph (A), and payments made by an underwriter of the
fund to a broker or dealer.
``(C) Timing of disclosure.--The disclosure required under
subparagraph (A) shall be provided or sent to a customer not
later than the date of the completion of the transaction.
``(D) Limitation.--The disclosures required under
subparagraph (A) may not be made exclusively in--
``(i) a registration statement or prospectus of an entity
described in subparagraph (A); or
``(ii) any other filing of an entity described in
subparagraph (A) with the Commission.
``(E) Commission authority.--
``(i) In general.--The Commission shall issue such final
rules or regulations as are necessary to carry out this
paragraph, not later than 1 year after the date of enactment
of the Mutual Fund Transparency Act of 2009.
``(ii) Form of disclosure.--Disclosures under this
paragraph shall be in such form as the Commission shall
require by rule.
``(F) Definitions.--In this paragraph--
``(i) the terms `open-end company' and `closed-end company'
have the same meanings as in section 5 of the Investment
Company Act of 1940 (15 U.S.C. 80a-5);
``(ii) the term `unit investment trust' has the same
meaning as in section 4 of the Investment Company Act of 1940
(15 U.S.C. 80a-4); and
``(iii) the term `education savings plan' means a qualified
tuition program described in section 529(b)(1)(A)(ii) of the
Internal Revenue Code of 1986.''.
(b) Disclosure of Brokerage Commissions.--Section 30 of the
Investment Company Act of 1940 (15 U.S.C. 80a-29) is amended
by adding at the end the following:
``(k) Disclosure of Brokerage Commissions.--The Commission,
by rule, shall require that brokerage commissions as an
aggregate dollar amount and percentage of assets paid by an
open-end or closed-end company or a unit investment trust or
issuer of municipal securities during the 5-year period
preceding the date of the transaction be included in any
disclosure of the amount of fees and expenses that may be
payable by the holder of the securities of such company for
purposes of--
``(1) the registration statement of that company; and
``(2) any other filing of that company with the Commission,
including the calculation of expense ratios.''.
SEC. 3. MUTUAL FUND GOVERNANCE.
(a) Independent Fund Boards.--Section 10(a) of the
Investment Company Act of 1940 (15 U.S.C. 80a-10(a)) is
amended--
(1) by striking ``shall have'' and inserting the following:
``shall--
``(1) have'';
(2) by striking ``60 per centum'' and inserting ``25
percent'';
(3) by striking the period at the end and inserting a
semicolon; and
(4) by adding at the end the following:
``(2) have as chairman of its board of directors an
interested person of such registered company; or
``(3) permit any person (other than an interested person,
as described in paragraph (1)) to serve as a member of its
board of directors, unless that person--
``(A) is approved or elected by the shareholders of such
registered investment company at least once every 5 years;
and
``(B) has been found, on an annual basis, by a majority of
the directors who are not interested persons, after
reasonable inquiry by such directors, not to have any
material business or familial relationship with the
registered company, a significant service provider to the
company, or any entity controlling, controlled by, or under
common control with such service provider, that could
reasonably be interpreted as a conflict of interest or cast
doubt on the independence of the director.''.
(b) Action by Independent Directors.--Section 10 of the
Investment Company Act of 1940 (15 U.S.C. 80a-10) is amended
by adding at the end the following:
``(i) Action by Board of Directors.--No action taken by the
board of directors of a registered investment company may
require the vote of a director who is an interested person of
such registered investment company.
``(j) Independent Committee.--
``(1) In general.--The members of the board of directors of
a registered investment company who are not interested
persons of such registered investment company shall establish
a committee comprised solely of such members, which committee
shall be responsible for--
``(A) selecting persons to be nominated for election to the
board of directors; and
``(B) adopting qualification standards for the nomination
of directors.
``(2) Disclosure.--The standards developed under paragraph
(1)(B) shall be disclosed in the registration statement of
the registered investment company.''.
(c) Definition of Interested Person.--Section 2(a)(19) of
the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19))
is amended--
(1) in subparagraph (A)--
(A) in clause (iv), by striking ``two'' and inserting
``5''; and
(B) by striking clause (vii) and inserting the following:
``(vii) any natural person who has served as an officer or
director, or as an employee within the preceding 10 fiscal
years, of an investment adviser or principal underwriter to
such registered investment company, or of any entity
controlling, controlled by, or under common control with such
investment adviser or principal underwriter;
``(viii) any natural person who has served as an officer or
director, or as an employee within the preceding 10 fiscal
years, of any entity that has within the preceding 5 fiscal
years acted as a significant service provider to such
registered investment company, or of any entity controlling,
controlled by, or under the common control with such service
provider;
``(ix) any natural person who is a member of a class of
persons that the Commission, by rule or regulation,
determines is unlikely to exercise an appropriate degree of
independence as a result of--
``(I) a material business or professional relationship with
the investment company or an affiliated person of such
investment company;
``(II) a close familial relationship with any natural
person who is an affiliated person of such investment
company; or
``(III) any other reason determined by the Commission:'';
and
(2) in subparagraph (B)--
(A) in clause (iv), by striking ``two'' and inserting
``5''; and
(B) by striking clause (vii) and inserting the following:
``(vii) any natural person who is a member of a class of
persons that the Commission, by rule or regulation,
determines is unlikely to exercise an appropriate degree of
independence as a result of--
``(I) a material business or professional relationship with
such investment adviser or principal underwriter or
affiliated person of such investment adviser or principal
underwriter;
``(II) a close familial relationship with any natural
person who is an affiliated person of such investment adviser
or principal underwriter; or
``(III) any other reason, as determined by the
Commission.''.
(d) Definition of Significant Service Provider.--Section
2(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
2(a)) is amended by adding at the end the following:
``(54) Significant service provider.--
``(A) In general.--Not later than 270 days after the date
of enactment of the Mutual Fund Transparency Act of 2009, the
Commission shall issue final rules defining the term
`significant service provider'.
``(B) Requirements.--The definition developed under
paragraph (1) shall include, at a minimum, the investment
adviser and principal underwriter of a registered investment
company for purposes of paragraph (19).''.
SEC. 4. FINANCIAL LITERACY AMONG MUTUAL FUND INVESTORS STUDY.
(a) In General.--The Securities and Exchange Commission
shall conduct a study to identify--
(1) the existing level of financial literacy among
investors that purchase shares of open-end companies, as that
term is defined
[[Page S10857]]
under section 5 of the Investment Company Act of 1940, that
are registered under section 8 of that Act;
(2) the most useful and understandable relevant information
that investors need to make sound financial decisions prior
to purchasing such shares;
(3) methods to increase the transparency of expenses and
potential conflicts of interest in transactions involving the
shares of open-end companies;
(4) the existing private and public efforts to educate
investors; and
(5) a strategy to increase the financial literacy of
investors that results in a positive change in investor
behavior.
(b) Report.--Not later than 1 year after the date of
enactment of this Act, the Securities and Exchange Commission
shall submit a report on the study required under subsection
(a) to--
(1) the Committee on Banking, Housing, and Urban Affairs of
the Senate; and
(2) the Committee on Financial Services of the House of
Representatives.
SEC. 5. STUDY REGARDING MUTUAL FUND ADVERTISING.
(a) In General.--The Comptroller General of the United
States shall conduct a study on mutual fund advertising to
identify--
(1) existing and proposed regulatory requirements for open-
end investment company advertisements;
(2) current marketing practices for the sale of open-end
investment company shares, including the use of unsustainable
past performance data, funds that have merged, and incubator
funds;
(3) the impact of such advertising on consumers; and
(4) recommendations to improve investor protections in
mutual fund advertising and additional information necessary
to ensure that investors can make informed financial
decisions when purchasing shares.
(b) Report.--Not later than 1 year after the date of
enactment of this Act, the Comptroller General of the United
States shall submit a report on the results of the study
conducted under subsection (a) to--
(1) the Committee on Banking, Housing, and Urban Affairs of
the United States Senate; and
(2) the Committee on Financial Services of the House of
Representatives.
SEC. 6. POINT-OF-SALE DISCLOSURE.
(a) In General.--Section 15(b) of the Securities Exchange
Act of 1934 (15 U.S.C. 78o(b)), as amended by section 2 of
this Act, is amended by adding at the end the following:
``(14) Broker and dealer disclosures in mutual fund
transactions.--
``(A) In general.--Each broker and dealer shall disclose in
writing to each person that purchases the shares of an open-
end or closed-end company registered under section 8 of the
Investment Company Act of 1940 (15 U.S.C. 80a-8) or any
interest in a unit investment trust or municipal securities
registered under this title--
``(i) the source and amount, in dollars and as a percentage
of assets, of any compensation received or to be received by
the broker or dealer in connection with such transaction from
any sources;
``(ii) the amount, in dollars and as a percentage of
assets, of compensation received in connection with
transactions in shares of other investment company shares
offered by the broker or dealer, if materially different from
the amount under clause (i);
``(iii) comparative information that shows the average
amount received by brokers and dealers in connection with
comparable transactions, as determined by the Commission; and
``(iv) such other information as the Commission determines
appropriate.
``(B) Revenue sharing.--The term `compensation' under
subparagraph (A) shall include any direct or indirect payment
made by an investment adviser (or any affiliate of an
investment adviser) to a broker or dealer for the purpose of
promoting the sales of securities of a registered investment
company.
``(C) Timing of disclosure.--The disclosures required under
subparagraph (A) shall be made to permit the person
purchasing the shares to evaluate such disclosures before
deciding to engage in the transaction.
``(D) Limitation.--The disclosures required under
subparagraph (A) may not be made exclusively in--
``(i) a registration statement or prospectus of a
registered investment company; or
``(ii) any other filing of a registered investment company
with the Commission.
``(E) Commission authority.--The Commission shall
promulgate such final rules as are necessary to carry out
this paragraph not later than 1 year after the date of
enactment of the Mutual Fund Transparency Act of 2009.''.
(b) Fiduciary Duties.--Section 15 of the Securities
Exchange Act of 1934 (15 U.S.C. 78o) is amended by adding at
the end the following new subsection:
``(k) Standard of Care.--Notwithstanding any other
provision of this title or the Investment Advisers Act of
1940, the Commission shall promulgate rules, not later than 1
year after the date of enactment of the Mutual Fund
Transparency Act of 2009 to provide that the standard of care
for all brokers and dealers in providing investment advice
about securities to retail customers or clients (and such
other customers or clients as the Commission may by rule
provide) shall be the fiduciary duty established under the
Investment Advisers Act of 1940, including, without
limitation, the duty to act solely in the best interest of
the customer or client, without regard to the financial or
other interest of the broker or dealer providing the
advice.''.
October 21, 2009.
Hon. Daniel K. Akaka,
Hart Senate Office Building,
Washington, DC.
Dear Senator Akaka: We are writing to express our strong
support for your efforts to ensure that professionals who
advise America's investors are held to the highest standard
of care--the fiduciary standard. Section 6(b) of the Mutual
Fund Transparency Act of 2009 (``MFTA'') would clearly
establish that brokers are subject to a fiduciary duty with
respect to investment advice provided to retail investors.
This provision eliminates a regulatory gap that has long
exposed investors to unscrupulous and harmful sales practices
by brokers.
Under current law, brokers are subject to a general
suitability standard when providing investment advice to
their retail clients. Under a suitability standard, a broker
is not required to ensure that his recommendations are what
is best for his clients, but only what is generally suitable.
The suitability standard allows brokers to recommend
investments, for example, based on the amount of compensation
the broker receives rather than what is in the best interest
of the client. The suitability standard does not even require
brokers to disclose their compensation so that their clients
can evaluate conflict of interest payments for themselves.
In contrast, investment advisers are subject to a strict
fiduciary duty under the Advisers Act. As such, they are
required to make recommendations only if they are in the
client's best interest and to disclose all material
conflicts. By applying the fiduciary standard under the
Advisers Act to brokers, Section 6(b) of the MFTA ensures
that the protection of a fiduciary standard for retail
advisory clients will not depend on an arbitrary regulatory
distinction between brokers and investment advisers, but will
be applied rationally to provide all Americans who receive
investment advice with the regulatory protection that they
expect and deserve.
We wish to express our enthusiastic support for your
proposal to establish a fiduciary duty for brokers and are
available to provide whatever assistance you may need in this
respect.
Respectfully submitted,
Mercer Bullard,
Founder and President, Fund Democracy, Inc.
Barbara Roper,
Director of Investor Protection, Consumer Federation of
America.
Denise Voigt Crawford,
Texas Securities Commissioner and President, North American
Securities Administrators Association, Inc.
Ellen Turf,
CEO, National Association of Personal Financial Advisors.
Kevin R. Keller,
Chief Executive Officer, Certified Financial Planner Board
of Standards, Inc.
Marvin W. Tuttle Jr.,
CAE, Executive Director and CEO, Financial Planning
Association.
____
October 21, 2009.
Hon. Daniel K. Akaka,
Hart Senate Office Building,
Washington, DC.
Dear Senator Akaka: We are writing to express our
enthusiastic support for the Mutual Fund Transparency Act of
2009 because your bill will benefit fund shareholders in
three significant respects. First, it will strengthen the
independence of mutual fund boards to help ensure that the
gross abuses of trust committed by fund managers in
connection with the recent mutual fund scandal will not be
repeated. Second, the bill will require that fund
shareholders be provided with full and understandable
disclosure of brokers' fees and conflicts of interest, and
that when brokers provide individualized investment advice
they will be held to the same fiduciary standards to which
all other investment advisers are held. Third, the bill will
promote competition through increased price transparency, and
thereby improve services and reduce costs for the almost 100
million Americans who have entrusted their financial security
to mutual funds.
Fund Governance
The mutual fund scandal that erupted in September 2003 and
continues to be litigated to this day revealed ``a serious
breakdown in management controls in more than just a few
mutual fund complexes.'' As noted by the Securities and
Exchange Commission:
The breakdown in fund management and compliance controls
evidenced by our enforcement cases raises troubling questions
about the ability of many fund boards, as presently
constituted, to effectively oversee the any management of
funds. The failure of a board to play its proper role can
result, in addition to serious compliance breakdowns, in
excessive fees and brokerage commissions, less than
forthright disclosure, mispricing of
[[Page S10858]]
securities, and inferior investment performance.''
The Act directly addresses the governance weaknesses
revealed by the scandal by strengthening the independence of
fund directors. It plugs loopholes that have allowed former
executives of fund managers and other fund service providers,
among others, to qualify as ``independent'' directors when
their independence is clearly compromised by their former
positions. The Act also ensures that the board's agenda will
be set by an independent chairman, and not by the CEO of the
fund's manager, as is common practice today, and that
independent directors will control board matters and the
evaluation of independent nominees. The Act's requirement
that independent directors seek shareholder approval at least
every five years will enhance the accountability of
independent directors to the shareholders whose interests
they are supposed to serve.
The Act's requirement that funds have an independent
chairman and a 75 percent independent board of directors is
critical in light of the SEC's failure to take final action
on rules imposing similar requirements. Even if these rules
were adopted, they would not prevent fund managers from
terminating independent chairmen or reducing independent
representation on the board to the statutory minimum of 40
percent. The SEC's rules would apply only when the funds
choose to rely on certain exemptive rules. If there were a
conflict between the fund's independent directors and the
fund manager, the fund manager could simply stop relying on
the rules and seek to install its own executives in a
majority of board positions. More importantly, independent
directors know that the protection given them by the SEC is
limited, and they therefore will be less likely to stand up
for shareholders than they would be if--as you have
proposed--the SEC's proposals were codified.
Fiduciary Duties and Full Disclosure for all Investment Advisers
Recent regulatory investigations and enforcement actions
have uncovered persistent and widespread sales abuses by
brokers. Regulators have found that brokers have
systematically overcharged investors for commissions,
routinely made improper recommendations of B shares, accepted
undisclosed directed brokerage payments in return for
distribution services, and received revenue sharing payments
that create incentives to favor funds that pay the highest
compensation rather than funds that are the best investment
option for their clients.
Five years ago, the Commission promised that it would
address the problems that have so long plagued brokers' sales
practices, but the Commission's efforts have fallen far short
of the mark. Its proposals failed to require full disclosure
of brokers' compensation, much less the disclosure of
information that would enable investors to fully evaluate
their brokers' conflicts of interests. The new disclosure
requirements that you have proposed will ensure that brokers
will be subject to a fiduciary duty and their conflicts of
interest will be fully transparent to investors. Investors
will be able to view the amount the broker is being paid for
the fund being recommended compared with the (often lesser)
amount the broker would receive for selling a different fund,
which cannot help but direct investors' attention to the
conflict of interest created by differential compensation
structures. We especially applaud your proposal to ensure
that all broker compensation, including revenue sharing
payments, is disclosed in the point-of-sale document, which
ensures that disclosure rules will not create an incentive
for brokers to favor revenue sharing as a means of avoiding
disclosure.
Remarkably, in the wake of a longstanding pattern of
brokers' sales abuses, the Commission has effectively
repealed Congress's narrow exemption from advisory regulation
for brokers who provide only ``solely incidental'' advice.
The Commission's strained interpretation of ``solely
incidental'' advice to include any advice provided ``in
connection with and reasonably related to a broker's
brokerage services'' has effectively stripped advisory
clients of the protections of an entire statutory regime
solely on the ground that the investment advice happens to be
provided by a broker. The Commission's position flatly
contradicts the text and purpose of the Investment Advisers
Act, which, as the Supreme Court has stated: ``reflects a
congressional recognition `of the delicate fiduciary nature
of an investment advisory relationship,' as well as a
congressional intent to eliminate, or at least to expose, all
conflicts of interest which might incline an investment
adviser--consciously or unconsciously--to render advice which
was not disinterested.''
Your proposal restores crucial components of Congress's
carefully constructed regulatory scheme for the distinct and
complementary regulation of brokerage and advisory services.
It properly recognizes that a ``fiduciary, which Congress
recognized the investment adviser to be,'' is also what
consumers expect an investment adviser to be, as is generally
the case when professional services are provided on a
personalized basis. The Act also recognizes the importance of
``expos[ing] all conflicts of interest which might incline an
investment adviser--consciously or unconsciously--to render
advice which was not disinterested,'' by requiring full
disclosure of such conflicts of interests and other material
information at the time that the prospective client is
deciding whether to enter into the relationship.
Fee Disclosure and Price Competition
Your fee disclosure provisions will do double duty, by
addressing conflicts of interest and brokers' sales abuses
while also promoting competition, thereby improving services
and driving down expenses. Requiring brokers to disclose the
amount of differential payments and average fees for
comparable transactions will provide the kind of price
transparency that is a necessary predicate for price
competition and the efficient operation of free markets. In
addition, the requirement that funds disclose the amount of
commissions they pay will ensure that the fund expense ratio
includes all of the costs of the fund's operations and will
enable investors to make more informed investment decisions.
The best regulator of fees is the market, but the market
cannot operate efficiently when brokers and funds are
permitted to hide the actual cost of the services they
provide.
Financial Literacy and Fund Advertisements
Finally, we strongly agree that there is a need for further
study of financial literacy, including especially information
that fund investors need to make informed investment
decisions and methods to increase the transparency of fees
and potential conflicts of interest. Your proposed study of
mutual fund advertisements is also timely, as the regulation
of fund ads continues to permit misleading touting of
outsized short-term performance and other abuses.
Mutual funds are Americans' most important lifeline to
retirement security. The regulation of mutual funds, however,
has not kept pace with their enormous growth. We applaud your
continuing efforts to enhance investor protection, promote
vigorous market competition and create wealth for America's
mutual fund investors through effective disclosure and truly
independent board oversight.
Respectfully submitted,
Mercer Bullard,
Founder and President, Fund Democracy, Inc.
Barbara Roper,
Director of Investor Protection, Consumer Federation of
America.
Ken McEldowney,
Executive Director, Consumer Action.
Irene E. Leech,
Virginia Citizens Consumer Council.
Walter Dartland,
Consumer Federation of the Southeast.
Damon Silvers,
Director of Policy and Special Counsel, AFL-CIO.
Denise Voigt Crawford,
Texas Securities Commissioner and President, North American
Securities Administrators Association, Inc.
______
By Ms. LANDRIEU:
S. 1965. A bill to authorize the Secretary of the Interior to provide
financial assistance to the State of Louisiana for a pilot program to
develop measures to eradicate or control feral swine and to assess and
restore wetlands damaged by feral swine; to the Committee on
Environment and Public Works.
Ms. LANDRIEU. Mr. President, I rise today to introduce a bill that
will be an important component in our efforts to rebuild Louisiana's
vast wetlands. Today, the coastline of my home state is the site of one
of the Nation's most pronounced ecological disasters: the massive
erosion of Louisiana's coastal wetlands. Few are aware that the marsh
and wetlands along Louisiana's coast comprise some 40 percent of the
Nation's total salt marshes. Louisiana's coastline is a national
treasure. Yet, this national treasure is disappearing at an alarming
rate due to a number of natural and man-made factors, including the
destruction of wetlands caused by non-native feral pig populations that
are literally eating away the coast. The loss of our wetlands threatens
not only our teeming wildlife, but also land, lives, energy
infrastructure, and navigation.
That is why I rise today, to introduce the Feral Swine Eradication
and Control Pilot Program Act of 2009, address the challenges these
species pose to our efforts to reverse coastal wetland deterioration.
Every 30 minutes, a portion of Louisiana's coast the size of a
football field is converted from healthy marsh into open water. Since
1930, 1.2 million acres have been lost--an area roughly the size of
Delaware. Scientists predict that Louisiana will lose another 700
square miles of coastal wetlands by 2050--an area the size of the
greater
[[Page S10859]]
Washington, D.C. and Baltimore metro areas.
Louisiana's coastal land loss problems are caused by a number of
natural and man-made factors. The primary factor has been the leveeing
of the Mississippi River for purposes of flood control and navigation.
Historically, the river would flood seasonally, taking silt from the
Midwest and depositing it across the Mississippi Delta. Levees provided
the needed flood protection, yet prevented vital land-building
sediments and nutrients from replenishing and elevating deteriorating
marshes. Additional activity added to the problem, including dredging
thousands of miles of access canals for petroleum extraction and
navigation. Those canals accelerated saltwater intrusion, further
weakening the marsh.
Another human activity that resulted in significant wetland loss was
the introduction of two invasive species to the marshland habitat: the
nutria and the feral pig. These non-native species are consuming our
wetlands at an alarming rate. Nutria were initially introduced by those
who wanted to raise them for their furs. Their population exploded in
the wild and their appetite for marsh grass is boundless. Scientists
estimate that nutria are currently affecting an estimated 100,000 acres
of coastal wetlands.
The feral hog is another exotic species which has expanded its range
throughout most of Louisiana. Feral swine cause extensive damage to
natural wildlife habitat. In Louisiana, the wild omnivores compete with
native wildlife for food resources; prey on young domestic animals and
wildlife; and carry diseases that can affect pets, livestock, wildlife
and people. Scientists now believe that the feral hogs are not only
wreaking enormous damage to the marsh, but are also negatively
impacting native freshwater mussels and insects by contributing E. coli
to water systems.
According to the Louisiana Department of Wildlife and Fisheries, the
wild pig is the most prolific large mammal in North America and given
adequate nutrition, its populations in an area can double in just 4
months.
As I mentioned earlier, Louisiana's landscape has already been
ravaged by the nutria rodent. In 2002, the first program was created to
combat the increasing nutria populations. This program, the Coast-wide
Nutria Control Program, CNCP, incentivized trappers to catch nutria in
return for monetary compensation. This program has proven successful at
decreasing nutria populations and significantly reducing their impact
to coastal wetlands.
However, more effort was needed to further reduce the nutria damage
to wetlands, both in Louisiana and in other marshy environments,
including Maryland's Chesapeake Bay. The Nutria Eradication and Control
Act was enacted in 2003 to provide a critical supplement of funding to
strengthen the Coast-wide Nutria Control Program. In July, I joined my
friend and colleague Senator Cardin in introducing the reauthorization
of the Nutria Eradication and Control Act. These two measures have been
instrumental in reducing the nutria damage to Louisiana's wetlands.
Now, it is my hope that we can achieve similar success with the
problem of feral hogs. Feral swine are listed by the World Conservation
Union, IUCN, as one of the top 100 invasive species worldwide. If
action is not taken to control the feral swine population, our
biologists fear these animals will undo much of the progress Louisiana
has made in controlling the nutria population. It is my hope that with
the help of my colleagues, we can pass this bill to help eradicate
these pests from our vanishing coastline once and for all.
The bill I am introducing today authorizes the Secretary of the
Interior to allocate funding to create a pilot program modeled off of
the Nutria Eradication and Control Act. This program will assess the
nature and extent of damage to the wetlands in Louisiana and develop
methods to eradicate or control the feral swine population, and restore
the coastal areas damaged by this invasive species.
It is a small program, but rewards it could reap are potentially
vast. Consider this, Louisiana's wetlands are not only the home to our
famed wildlife, they are also the most effective protection we have
against future storm damage.
Coastal wetlands are the last barrier between the sea and the land.
Wetlands reduce high winds and absorb the deadly storm surges that
often accompany hurricanes. Scientists estimate that every 3 to 4 miles
of wetlands can absorb enough water to reduce the height of a storm
surge by 1 foot. That protects the millions of hardworking men and
women who live along Louisiana's coast.
But I would also like to remind my colleagues of the vital strategic
importance these wetlands serve to the Nation's energy security:
Louisiana is one of the economy's largest producers of energy. Without
wetlands as a buffer, storms could devastate the Nation's critical
energy infrastructure.
It is for all of these reasons that this legislation is crucial. I
ask that my colleagues support its prompt passage.
______
By Mr. FEINGOLD (for himself, Ms. Klobuchar, Mr. Tester, Mr.
Harkin, and Mr. Kerry):
S. 1986. A bill to amend the Help America Vote Act of 2002 to require
States to provide for same day registration; to the Committee on Rules
and Administration.
Mr. FEINGOLD. Mr. President, today I will reintroduce, along with
Senators Klobuchar, Tester, Harkin and Kerry, the Same Day Registration
Act of 2009, a bill that would significantly increase voter
participation by allowing all eligible citizens to register to vote in
federal elections on Election Day or the same day that they vote.
In many ways, the machinery of our democracy needs significant
repair. We live in an age of low turnout and high cynicism. The
American people have lost faith in our election system, in part because
they are not confident that their votes will be counted or that the
ballot box is accessible to each and every voter regardless of ability,
race, or means.
What we see instead are long lines at polling places; faulty voting
machines; under-trained, under-paid, over-worked poll workers; partisan
election administrators; suspect vote tallies; caging lists;
intimidation at the polling place; misleading flyers; illegal voter-
file purges; and now, the Supreme Court approving discriminatory voter
ID laws. If people cannot trust their elections, why should they trust
their elected officials?
Three years ago, Professor Dan Tokaji, a leading election law expert,
called for a ``moneyball approach to election reform.'' Named after
Michael Lewis' book about the Oakland A's data-driven hiring system,
Tokaji's approach is quintessentially progressive, as that term was
understood at the turn of the century. ``I mean to suggest a research-
driven inquiry,'' Tokaji wrote, ``in place of the anecdotal approach
that has too often dominated election reform conversations. While
anecdotes and intuition have their place, they're no substitute for
hard data and rigorous analysis.''
This bill embodies the moneyball approach to election reform. In
stark contrast to many so-called election reform proposals, this bill
addresses a real problem--low voter turnout; it targets a major cause
of the problem--archaic registration laws; and it offers a proven
solution--same day registration SDR sometimes known as Election Day
registration, EDR.
The bill is very simple: it amends the Help America Vote Act to
require every state to allow eligible citizens to register and vote in
a Federal election on the day of the election, or on any day where
voting is permitted, like during early voting. Voters may register
using any form that satisfies the requirements of the National Voter
Registration Act, including the Federal mail in voter registration form
and any state's standard registration form. North Dakota, which does
not have voter registration, is exempted from the bill's requirements.
The bill itself is simple, but it addresses a significant problem:
the low voter turnout that has plagued this country for the last 40
years. We live in a participatory democracy, where our government
derives its power from the consent of the governed, a consent embodied
in the people's exercise of their fundamental right to vote. It is self
evident that a participatory democracy depends on participation.
This may be a government of the people, Mr. President, but the people
are
[[Page S10860]]
not voting. Since 1968, American political participation has hovered
around 50 percent for Presidential elections and 40 percent for
congressional elections. Even in 2008, a record-breaking year, national
turnout was only 61.7 percent of the voting age population. The U.S.
may be the only established democracy in the world where the fact that
nearly 40 percent of the electorate stayed home is considered cause for
celebration.
In fact, our predecessors in the Senate would be surprised to find us
celebrating such low turnout: a 1974 report by the Senate Committee on
the Post Office and Civil Service bemoaned the ``shocking'' drop in
turnout in the 1972 election. And what was the number that so troubled
the Committee? Fifty-five percent.
The report went on: ``[i]t is the Committee's conviction that our
disquieting record of voter participation is in large part due to the
hodgepodge of registration barriers put in the way of the voter. Such
obstacles have little, if anything, to recommend them. At best, current
registration laws in the various states are outmoded and simply
inappropriate for a highly mobile population. At worst, registration
laws can be construed as a deliberate effort to disenfranchise voters
who desperately need entry into the decision-making processes of our
country.''
What a shame, that the Committee's findings are still valid. Our
archaic registration laws have been reformed, but they are still
archaic. We have passed a number of important bills designed to combat
low turnout, but turnout is still low. America is even more mobile than
it was in 1974, and yet our registration laws are still out of touch
with the reality that more than 40 million Americans move every year.
Worst of all, our registration laws still fall especially hard on the
young, the old, and the poor.
We have long known that complicated voter registration requirements
constitute one of the major barriers to voting. In fact, many states
adopted voter registration in order to prevent certain segments of the
population from voting. Alexander Keyssar, the preeminent scholar on
the history right to vote in this country, writes that although
``[r]egistration laws emerged in the nineteenth century as a means of
keeping track of voters and preventing fraud; they also served--and
were intended to serve--as a means of keeping African-American,
working-class, immigrant, and poor voters from the polls.''
It is time for a fundamental change. A large body of research tells
us that unnecessarily burdensome voter registration requirements are
the single largest factor in preventing people from voting. Simply put,
voter registration restrictions should not keep eligible Americans from
exercising their right to vote. The solution to this problem is same
day registration.
Decades of empirical research confirm same day registration's
positive impact on turnout. As one academic paper states, ``the
evidence on whether EDR augments the electorate is remarkably clear and
consistent. Studies finding positive and significant turnout impacts
are too numerous to list.'' Mr. President, studies indicate that same
day registration alone increases turnout by roughly 5 to 10 percentage
points.
In general, States with same day registration boast voter turnout
that is 10-12 percentage points higher than States that require voters
to register before Election Day. Turnout in Minnesota and Wisconsin,
which implemented same day registration over 35 years ago has been
especially high: in 2004, for example, when national turnout was just
55 percent, 78 percent of eligible Minnesotans and 75 percent of
eligible Wisconsinites went to the polls. The last time national voter
turnout was above 70 percent, it was 1896, there were only 45 States,
and the gold standard was the dominant campaign issue.
Critics might worry about the possibility of fraud, but same day
registration actually makes the registration process more secure.
Voters registering when they vote do so in the presence of an elections
official who verifies the voter's residency and identity on the spot.
Mark Ritchie, Minnesota's Secretary of State, points out that same day
registration ``is much more secure because you have the person right in
front of you--not a postcard in the mail. That is a no-brainer. We have
33 years of experience with this.''
In contrast to most election reforms, the cost of same day
registration is negligible. A recent survey of 26 local elections
officials in six same day registration States found that ``officials
agreed that incidental expense of administering EDR is minimal.'' In
fact, same day registration may actually result in a net savings
because it significantly reduces the use of provisional ballots.
Provisional ballots, which are required by the Help America Vote Act,
are expensive to administer. The Congressional Budget Office estimates
that provisional ballots cost State and local governments about $25
million a year.
In some States the number of provisional ballots cast is surprisingly
large. For example, in 2004, more than 4 percent of California's
registered voters cast provisional ballots--that is 644,642 provisional
ballots. In Ohio, 157,714 provisional ballots were cast, about 2
percent of all registered voters.
In contrast, in 2004 only 0.03 percent of voters in SDR states cast a
provisional ballot. In Wisconsin, only 374 provisional ballots were
cast. In Maine, only 95 provisional ballots were cast. In fact, only
952 provisional ballots were cast in all the SDR states combined in
2004. To be sure, this bill is no cure-all: it does not address long
lines, deceptive flyers, and faulty voting machines. Other bills, good
bills, address those issues.
The bottom line is this: the Same Day Registration Act would
substantially increase civic participation, improve the integrity of
the electoral process, reduce election administration costs, and
reaffirm that voting is a fundamental right. It has been proven
effective by more than 30 years of successful implementation in
Minnesota and Wisconsin and decades of empirical research. Same day
registration is good for voters, good for taxpayers, and good for
democracy.
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. 1986
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 ``Same Day Registration Act''.
SEC. 2. SAME DAY REGISTRATION.
(a) In General.--Title III of the Help America Vote Act of
2002 (42 U.S.C. 15481 et seq.) is amended--
(1) by redesignating sections 304 and 305 as sections 305
and 306, respectively; and
(2) by inserting after section 303 the following new
section:
``SEC. 304. SAME DAY REGISTRATION.
``(a) In General.--
``(1) Registration.--Notwithstanding section 8(a)(1)(D) of
the National Voter Registration Act of 1993 (42 U.S.C.
1973gg-6), each State shall permit any eligible individual on
the day of a Federal election and on any day when voting,
including early voting, is permitted for a Federal election--
``(A) to register to vote in such election at the polling
place using a form that meets the requirements under section
9(b) of the National Voter Registration Act of 1993; and
``(B) to cast a vote in such election.
``(2) Exception.--The requirements under paragraph (1)
shall not apply to a State in which, under a State law in
effect continuously on and after the date of the enactment of
this section, there is no voter registration requirement for
individuals in the State with respect to elections for
Federal office.
``(b) Eligible Individual.--For purposes of this section,
the term `eligible individual' means, with respect to any
election for Federal office, an individual who is otherwise
qualified to vote in that election.
``(c) Effective Date.--Each State shall be required to
comply with the requirements of subsection (a) for the
regularly scheduled general election for Federal office
occurring in November 2010 and for any subsequent election
for Federal office.''.
(b) Conforming Amendments.--
(1) Section 401 of such Act (42 U.S.C. 15511) is amended by
striking ``and 303'' and inserting ``303, and 304''.
(2) The table of contents of such Act is amended--
(A) by redesignating the items relating to sections 304 and
305 as relating to sections 305 and 306, respectively; and
(B) by inserting after the item relating to section 303 the
following new item:
``Sec. 304. Same day registration.''.
[[Page S10861]]
SUBMITTED RESOLUTIONS
______
SENATE RESOLUTION 326--RECOGNIZING THE 40TH ANNIVERSARY OF THE GEORGE
BUSH INTERCONTINENTAL AIRPORT IN HOUSTON, TEXAS
Mrs. HUTCHISON (for herself and Mr. Cornyn) submitted the following
resolution; which was considered and agreed to:
S. Res. 326
Whereas the George Bush Intercontinental Airport in the
City of Houston, Texas (referred to in this resolution as
``IAH''), was first opened for operation on June 8, 1969;
Whereas in 1997, IAH was named in honor of the Nation's
41st President, George Herbert Walker Bush, a longtime
resident of Houston who, as a member of the Houston
congressional delegation, was present at the 1969 opening of
the airport;
Whereas IAH is the largest airport in Houston, serving over
43,000,000 passengers in 2008, is the 8th largest airport in
the United States and the 16th largest in the world for total
passengers served;
Whereas more than 700,000,000 people have passed through
IAH's gates since its opening;
Whereas IAH has grown to become a world-class international
gateway offering service to more than 109 domestic and 65
nonstop international destinations in over 32 countries;
Whereas in 1990, the city of Houston named the IAH
international arrivals building, now the IAH Terminal D, in
honor of the distinguished Congressman for the 18th District
of Texas, George Thomas ``Mickey'' Leland, a renowned
antipoverty activist who died tragically in 1989 while on a
humanitarian visit to Ethiopia;
Whereas IAH operates the largest passenger international
arrivals facility in the Nation and was selected by the
Department of State and the Department of Homeland Security
as the first ``Model Port'' for its efficiency in welcoming
international passengers arriving in the United States;
Whereas IAH is a regional and world leader in air cargo
processing, consolidation, and distribution;
Whereas IAH is a critical component of the Houston economy,
supporting more than 151,000 jobs and contributing over
$24,000,000,000 in economic benefits to the Houston region;
and
Whereas IAH serves 30 airlines and is the headquarters and
major hub for award-winning Continental Airlines, which is
celebrating its 75th anniversary in 2009: Now, therefore, be
it
Resolved that the Senate--
(1) recognizes the 40th anniversary of the founding of the
George Bush Intercontinental Airport; and
(2) congratulates officials of the George Bush
Intercontinental Airport, the Houston Airport System, and the
city of Houston, Texas, for the airport's record of excellent
service to the citizens of Houston and the national air
transportation system.
____________________