[Congressional Record Volume 156, Number 118 (Thursday, August 5, 2010)]
[Senate]
[Pages S6888-S6890]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. FEINGOLD:
  S. 3713. A bill to improve post-employment restrictions on 
representation of foreign entities by senior Government officers and 
employees; to the Committee on the Judiciary.
  Mr. FEINGOLD. Mr. President, I am pleased to introduce legislation 
that will tighten restrictions on individuals who move between the 
public and private sector--the so-called revolving door. The 
legislation that I am introducing today aims to better protect the 
United States from conflicts of interest posed by this practice, 
particularly where it comes to senior government officials and 
employees going on to represent foreign entities--sometimes even the 
governments of the very foreign countries in which they had just 
finished representing the United States.
  There was a time when public service was held in high esteem, but the 
ever expanding revolving door between public and private employment has 
generated cynicism and frustration. By placing meaningful restrictions 
on how quickly former officials can access this door and where it will 
take them, we can reverse the trend of government employees going off 
to lobby for foreign entities by making clear they are not ``for 
sale.'' This legislation is an important reminder that public service 
should be treated as an honor and a privilege, and will help to ensure 
that government officials make decisions based on the best interests of 
the American people, and not on their future career prospects.
  Foreign governments and businesses have come to rely on U.S. 
lobbyists to advocate for their interests and interact with key policy 
makers. According to an article in the Milwaukee Journal Sentinel 
earlier this year, data analyzed by watchdog groups found that ``[m]ore 
than 340 foreign entities--from governments to separatist groups to 
for-profit companies--spent at least $87 million on lobbying efforts in 
the United States between July 2007 and December 2008.'' Former senior 
government officials are in demand to represent or advise foreign 
entities after leaving office. Even from the limited data available, it 
appears at least four recent U.S. Ambassadors--the President's chief 
representatives abroad--have done this kind of work in recent years. It 
is not just ambassadors who go on to represent foreign entities, but 
also deputy secretaries, under secretaries, other categories of 
executive branch officials, and, of course, former members of Congress.
  The bill I am introducing today will strengthen the post-employment 
restrictions on foreign entity representation that are already in place 
by both length and scope. It will cover those officials, including in 
the legislative branch, that are already subject to revolving door 
restrictions, but expand the current 1-year restriction on 
representing, aiding or advising a foreign entity with intent to 
influence to 5 years. It will also expand the definition of prohibited 
entities to include foreign businesses as well as foreign governments 
and political parties.
  Revolving door restrictions are supposed to protect the U.S. 
Government and the people it serves from conflicts of interest and from 
Government officials appearing to cash in on their public service. They 
help ensure that people representing the United States at the most 
senior levels are not being influenced by the possibility of securing 
lucrative jobs from outside entities while still in Government and they 
help prevent inside knowledge and personal connections to colleagues 
still in Government from being used on behalf of private parties. These 
are clearly important and legitimate goals and the current 1-year 
prohibition on foreign entity representation is insufficient to secure 
them.
  Critics of tightening these restrictions may argue that former 
Government officials lobbying on behalf of foreign governments can 
sometimes pursue very laudable aims for those governments, such as 
securing resources for public health needs. This is surely true. But 
for every such positive example envisioned, another can come to mind 
that is notably less constructive, such as lobbying on behalf of 
governments with reprehensible human rights records. Moreover, I 
question how healthy it is when a culture of lobbying becomes so 
prevalent that foreign governments seeking to advance their objectives 
in the United States may feel obliged to hire their own advocates in 
this country.
  We need to restore faith in government, and we can help to do that by 
ensuring those who serve at the highest levels do not turn around and 
use their influence and expertise gained during public service for 
personal profit and foreign interests. My legislation will help 
buttress the framework of restrictions that we as members of the 
Government impose on ourselves to ensure this broader good. I urge my 
colleagues to support it.
  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. 3713

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. RESTRICTIONS RELATING TO FOREIGN ENTITIES.

       (a) In General.--Section 207(f) of title 18, United States 
     Code, is amended--
       (1) in paragraph (1), by striking ``1 year'' and inserting 
     ``5 years''; and
       (2) by striking paragraph (3) and inserting the following:
       ``(3) Definition.--In this subsection, the term `foreign 
     entity' means--
       ``(A) the government of a foreign country, as defined in 
     section 1(e) of the Foreign Agents Registration Act of 1938 
     (22 U.S.C. 611(e));
       ``(B) a foreign political party, as defined in section 1(f) 
     of the Foreign Agents Registration Act of 1938 (22 U.S.C. 
     611(f)); and
       ``(C) a partnership, association, corporation, 
     organization, or other combination of persons organized under 
     the laws of or having its principal place of business in a 
     foreign country.''.
       (b) Technical and Conforming Amendment.--Section 141(b)(3) 
     of the Trade Act of 1974 (19 U.S.C. 2171(b)(3)) is amended by 
     striking ``(as defined by section 207(f)(3) of title 18, 
     United States Code)'' and inserting ``described in 
     subparagraph (A) or (B) of section 207(f)(3) of title 18, 
     United States Code,''.
       (c) Effective Date and Applicability.--The amendments made 
     by subsection (a) shall--

[[Page S6889]]

       (1) take effect on the date of enactment of this Act; and
       (2) apply to any individual who leaves a position, office, 
     or employment to which the amendments apply on or after the 
     date of enactment of this Act.
                                 4_____
                                 
      By Mr. LEAHY (for himself, Mr. Grassley, Mr. Cornyn, and Mr. 
        Kaufman):
  S. 3717. A bill to amend the Securities Exchange Act of 1934, the 
Investment Company Act of 1940, and the Investment Advisers Act of 1940 
to provide for certain disclosures under section 552 of title 5, United 
States Code, (commonly referred to as the Freedom of Information Act), 
and for other purposes; to the Committee on the Judiciary.
  Mr. LEAHY. Mr. President, today, I am pleased to introduce an 
important bipartisan bill to ensure that the Freedom of Information 
Act, FOIA, remains an effective tool to provide public access to 
critical information about the stability of our financial markets. My 
bill would amend the Securities and Exchange Act, the Investment 
Company Act and the Investment Advisers Act to eliminate several broad 
FOIA exemptions for Security and Exchange Commission records that were 
recently enacted as part of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act. I thank Senators Cornyn, Kaufman and Grassley 
for cosponsoring this important open government bill.
  I am a proud supporter of the historic Wall Street reform bill that 
has now become law, because this legislation makes significant strides 
toward enhancing transparency and accountability in our financial 
system. But, I am concerned that the FOIA exemptions in Section 929I of 
that bill, which was originally drafted in the House of Representatives 
and included in the final law, could be interpreted and implemented by 
the SEC in a way that undermines this very important goal.
  The Freedom of Information Act has long been the people's window into 
their Government, showing where the Government is doing things right, 
but also where Government can do better. The FOIA has also long 
recognized the need to balance the Government's legitimate interest in 
protecting confidential business records, trade secrets and other 
sensitive information from public disclosure and the public's right to 
know. To accomplish this, care must always be taken to ensure that 
exemptions to FOIA's disclosure requirements are narrowly and properly 
applied.
  When Congress enacted these exemptions, we were seeking to ensure 
that the SEC had access to the information that the Commission needs to 
carry-out its new enforcement powers and to protect American 
investors--not shielding information from the public.
  I have been troubled by the Commission's attempts in recent weeks to 
retroactively apply these exemptions to pending FOIA matters. I am also 
troubled by the sweeping interpretation that the Commission has 
expressed, to date, that these exemptions would shield all information 
provided to the Commission in connection with its broad examination and 
surveillance activities.
  This week, I called on the Commission to promptly issue guidelines 
that interpret the FOIA exemptions in Section 929I in a manner that is 
both consistent with congressional intent and with the President's 
January 21, 2009, Executive Memorandum on the Freedom of Information 
Act. I look forward to the public release of those guidelines. Given 
the overwhelming public interest in restoring stability and 
accountability to our financial system, Congress must also take steps 
to address concerns about the exemptions in Section 929I.
  I thank the many open government organizations, including OpenThe 
Government.org, the Project on Government Oversight, the American 
Library Association and the Sunlight Foundation for their support of 
this bill.
  I have said many times that open government is neither a Democratic 
issue, nor a Republican issue--it is truly an American value and virtue 
that we all must uphold. It is in this bipartisan spirit that Senators 
from both sides of the aisle have joined me in supporting this bill. I 
look forward to working with them and others in Congress to ensure that 
the American public has access to important information about the SEC's 
oversight of our financial markets.
  Mr. President, I ask unanimous consent that the text of the bill and 
a letter of support be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 3717

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. APPLICATION OF THE FREEDOM OF INFORMATION ACT TO 
                   CERTAIN STATUTES.

       (a) Amendments to the Securities and Exchange Act.--Section 
     24 of the Securities Exchange Act of 1934 (15 U.S.C. 78x), as 
     amended by section 929I(a) of the Dodd-Frank Consumer 
     Financial Protection and Wall Street Reform Act (Public Law 
     111-203), is amended by striking subsection (e) and inserting 
     the following:
       ``(e) Freedom of Information Act.--For purposes of section 
     552(b)(8) of title 5, United States Code, (commonly referred 
     to as the Freedom of Information Act)--
       ``(1) the Commission is an agency responsible for the 
     regulation or supervision of financial institutions; and
       ``(2) any entity for which the Commission is responsible 
     for regulating, supervising, or examining under this title is 
     a financial institution.''.
       (b) Amendments to the Investment Company Act.--Section 31 
     of the Investment Company Act of 1940 (15 U.S.C. 80a-30), as 
     amended by section 929I(b) of the Dodd-Frank Consumer 
     Financial Protection and Wall Street Reform Act (Public Law 
     111-203), is amended--
       (1) by striking subsection (c); and
       (2) by redesignating subsections (d) and (e) as subsections 
     (c) and (d), respectively.
       (c) Amendments to the Investment Advisers Act.--Section 210 
     of the Investment Advisers Act of 1940 (15 U.S.C. 80b-10), as 
     amended by section 929I(c) of the Dodd-Frank Consumer 
     Financial Protection and Wall Street Reform Act (Public Law 
     111-203), is amended by striking subsection (d).
                                  ____

                                                   August 3, 2010.
     Senator Christopher Dodd,
     Chairman, Senate Committee on Banking, Housing and Urban 
         Affairs, Dirksen Senate Office Building, Washington, DC.
     Representative Barney Frank,
     Chairman, House Committee on Financial Services, Rayburn 
         House Office Building, Washington, DC.
       Dear Chairmen Dodd and Frank: We, the undersigned 
     organizations concerned with government accountability and 
     transparency, are writing to express our concerns about 
     Section 929I of the recently passed Dodd-Frank Wall Street 
     Reform and Consumer Protection Act (the Dodd-Frank Act). If 
     interpreted broadly, this provision has the potential to 
     severely hinder the public's ability to access critical 
     information related to the oversight activities of the 
     Securities and Exchange Commission (SEC), thereby undermining 
     the bill's overarching goals of more transparency and 
     accountability.
       As you know, Section 929I states that the SEC cannot be 
     compelled to disclose records or other information obtained 
     from its registered entities--including entities such as 
     hedge funds, private equity funds, and venture capital funds 
     that will now be regulated by the SEC--if this information is 
     used for ``surveillance, risk assessments, or other 
     regulatory and oversight activities'' outlined in the 
     Securities Exchange Act of 1934, the Investment Company Act 
     of 1940, and the Investment Advisers Act of 1940.
       SEC Chairman Mary Schapiro wrote to you last week defending 
     this provision. She argued that registered entities need to 
     be able to provide the SEC with access to sensitive or 
     proprietary information ``without concern that the 
     information will later be made public.'' She further 
     explained that, prior to the passage of the Dodd-Frank Act, 
     ``regulated entities not infrequently refused to provide 
     Commission examiners with sensitive information due to their 
     fears that it ultimately would be disclosed publicly.'' She 
     also claimed that investment advisers routinely refuse to 
     turn over personal trading records of investment management 
     personnel, ``instead requiring staff to review hard copies of 
     the records on the adviser's premises,'' which ``materially 
     impacts the staff's ability to detect insider trading 
     activity.''
       These arguments do not adequately describe the SEC's 
     existing regulatory authority, and they fail to acknowledge 
     that the Freedom of Information Act (FOIA) already provides 
     sufficient exemptions to protect against the release of 
     sensitive and proprietary information. Furthermore, the SEC 
     has a troubling history of being overly aggressive in 
     withholding records from the public. For these reasons, we 
     strongly urge you to repeal Section 929I, or to at least 
     curtail the SEC's broad authority to withhold critical 
     information from the public.
       First, we are not convinced by Chairman Schapiro's claim 
     that ``existing FOIA exemptions were insufficient to allay 
     concerns [about public disclosure] due in part to limitations 
     in FOIA.'' For instance, Exemption 8 protects matters that 
     are ``contained in or related to examination, operating, or 
     condition reports prepared by, on behalf of, or for the use 
     of an agency responsible for the regulation or supervision of 
     financial institutions.'' Chairman Schapiro argues that this

[[Page S6890]]

     exemption may not apply to all registrants, but it's worth 
     noting that the courts have broadly construed the term 
     ``financial institutions,'' holding that it is not limited to 
     depository institutions and can also include investment 
     advisers. In addition, Exemption 4 protects ``trade secrets 
     and commercial or financial information obtained from a 
     person [that is] privileged or confidential.'' The Department 
     of Justice's (DOJ) FOIA guide states that this exemption 
     ``encourages submitters to voluntarily furnish useful 
     commercial or financial information to the government and it 
     correspondingly provides the government with an assurance 
     that such information will be reliable,'' calling into 
     question Chairman Schapiro's claim that additional exemptions 
     are needed in order for the SEC to collect information from 
     its registered entities.
       Second, the SEC's track record with FOIA raises additional 
     concerns about giving the agency even more authority to 
     withhold information from the public. Last year, an audit 
     conducted by the SEC Office of Inspector General (OIG) 
     uncovered a wide range of problems related to the SEC's FOIA 
     operations. We were particularly troubled by the OIG's 
     finding that the SEC Chief FOIA Officer was not operating in 
     compliance with Executive Order 13392 or the OPEN Government 
     Act; that few FOIA liaisons have written policies and 
     procedures for processing FOIA requests, increasing the risk 
     that the agency is unnecessarily withholding information from 
     the public; and that there is an insufficient separation 
     between the initial FOIA determination and the appeal 
     process.
       The OIG concluded that the SEC's FOIA release rate was 
     ``significantly lower when compared to all other federal 
     agencies.''
       The OIG put forth a number of recommendations for 
     correcting the glaring deficiencies in the SEC's FOIA 
     operations, such as ensuring that accurate searches are made 
     for responsive information, providing guidelines or written 
     policies for all FOIA-related staff that address the concerns 
     raised by the OIG, and ensuring that all FOIA-related staff 
     has access to sufficient legal expertise to process requests 
     in compliance with FOIA. But according to the OIG's most 
     recent semiannual report to Congress, the SEC has not 
     completed final action on any of these recommendations. 
     Rather than giving the SEC any more leeway to improperly 
     withhold information from the public, we urge you to hold 
     Chairman Schapiro accountable for the excessive delays in 
     implementing the OIG's recommendations.
       Third, we notice that Chairman Schapiro is ``asking the 
     Commission to issue and publish on our website guidance to 
     our staff that ensures [Section 929I] is used only as it was 
     intended.'' The solution for addressing the uncertainty 
     surrounding this provision is not additional guidance. The 
     solution is clarification in the law that public access is 
     vital to accountability and that the existing FOIA exemptions 
     can adequately protect confidential business information 
     provided by regulated entities.
       Fourth, Chairman Schapiro neglected to mention that the SEC 
     already has the authority to compel registered entities to 
     provide information and records. Under the Securities 
     Exchange Act of 1934, the SEC has the authority to subpoena 
     witnesses and require the production of any records from its 
     registered entities. If these entities fail to comply, the 
     SEC has the authority to suspend these entities, impose 
     significant monetary penalties, and refer cases to DOJ for 
     possible criminal proceedings. But instead of using these 
     existing authorities, Chairman Schapiro seems to think that 
     Congress needs to provide blanket FOIA exemptions in order to 
     convince the SEC's registered entities to cooperate. We think 
     such a blanket exemption fosters an environment that defers 
     to the entities it regulates and is unadvisable.
       Finally, it is unclear what Chairman Schapiro's plans are 
     for implementing other blanket FOIA exemptions in the Dodd-
     Frank Act, such as Section 404, which exempts the SEC from 
     FOIA with respect to any ``report, document, record, or 
     information'' received from investment advisers to private 
     funds.
       In the aftermath of the recent financial crisis, the need 
     for greater transparency in our financial system is all too 
     apparent. The SEC's ongoing effort to withhold vital records 
     from the public undermines the spirit of the transparency 
     reforms in the Dodd-Frank Act, and flies in the face of 
     President Obama's guidance instructing agencies to adopt a 
     ``presumption in favor of disclosure, in order to renew their 
     commitment to the principles embodied in FOIA, and to usher 
     in a new era of open Government.''
       We call on you to repeal the unnecessary FOIA exemption in 
     Section 929I, examine the SEC's current record on withholding 
     information, and take whatever steps are necessary to ensure 
     that the SEC isn't given any additional authority to keep its 
     records under a veil of secrecy. We welcome an opportunity to 
     discuss this issue with you further. To reach our groups, you 
     or your staff may contact Angela Canterbury at the Project On 
     Government Oversight.
           Sincerely,
         American Library Association; American Association of Law 
           Libraries; Citizens for Ethics and Responsibility in 
           Washington (CREW); Essential Information; Government 
           Accountability Project (GAP); Liberty Coalition; OMB 
           Watch; OpenTheGovernment.org; Project On Government 
           Oversight (POGO); Public Citizen; Sunlight Foundation.
                                 ______