SPEAKERS CONTENTS INSERTS
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ADMINISTRATIVE CRIMES AND QUASI-CRIMES
SUBCOMMITTEE ON COMMERCIAL AND ADMINISTRATIVE LAW
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
MAY 7, 1998
Serial No. 147
Printed for the use of the Committee on the Judiciary
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Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
COMMITTEE ON THE JUDICIARY
HENRY J. HYDE, Illinois, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
BILL McCOLLUM, Florida
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR S. SMITH, Texas
ELTON GALLEGLY, California
CHARLES T. CANADY, Florida
BOB INGLIS, South Carolina
BOB GOODLATTE, Virginia
STEPHEN E. BUYER, Indiana
ED BRYANT, Tennessee
STEVE CHABOT, Ohio
BOB BARR, Georgia
WILLIAM L. JENKINS, Tennessee
ASA HUTCHINSON, Arkansas
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
JAMES E. ROGAN, California
LINDSEY O. GRAHAM, South Carolina
JOHN CONYERS, Jr., Michigan
Page 3 PREV PAGE TOP OF DOCBARNEY FRANK, Massachusetts
CHARLES E. SCHUMER, New York
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
STEVEN R. ROTHMAN, New Jersey
THOMAS E. MOONEY, SR., Chief of Staff-General Counsel
JULIAN EPSTEIN, Minority Chief Counsel and Staff Director
Subcommittee on Commercial and Administrative Law
GEORGE W. GEKAS, Pennsylvania, Chairman
LAMAR SMITH, Texas
BOB INGLIS, South Carolina
ED BRYANT, Tennessee
STEVE CHABOT, Ohio
LINDSEY O. GRAHAM, South Carolina
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JERROLD NADLER, New York
SHEILA JACKSON LEE, Texas
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
RAYMOND V. SMIETANKA, Chief Counsel
SUSAN JENSEN-CONKLIN, Counsel
JAMES W. HARPER, Counsel
C O N T E N T S
May 7, 1998
Gekas, Hon. George W., a Representative in Congress from the State of Pennsylvania, and chairman, Subcommittee on Commercial and Administrative Law
DeLong, James V., Regulatory Policy Center, Adjunct Scholar, Competitive Enterprise Institute, Washington, DC
Goodman, Steven A., JSG Trading Corporation, Tinton Falls, NJ
Page 5 PREV PAGE TOP OF DOC Krizek, George O., M.D. and Blanka H. Krizek, Washington, DC
Marzulla, Roger J., Marzulla and Marzulla, Washington, DC
Orient, Jane M., M.D., Executive Director, Association of American Physicians and Surgeons, Tucson, AZ
Turley, Jonathan, Professor of Law, George Washington University School of Law, Washington, DC
Unser, Robert (Bobby) W., Albuquerque, NM
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
DeLong, James V., Regulatory Policy Center, Adjunct Scholar, Competitive Enterprise Institute, Washington, DC: Prepared statement
Gekas, Hon. George W., a Representative in Congress from the State of Pennsylvania, and chairman, Subcommittee on Commercial and Administrative Law: Prepared statement
Goodman, Steven A., JSG Trading Corporation, Tinton Falls, AZ: Prepared statement
Krizek, George O., M.D. and Blanka H. Krizek, Washington, DC: Prepared statement
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Marzulla, Roger J., Marzulla and Marzulla, Washington, DC: Prepared statement
Nadler, Hon. Jerrold, a Representative in Congress from the State of New York: Prepared statement
Orient, Jane M., M.D., Executive Director, Association of American Physicians and Surgeons, Tucson, AZ: Prepared statement
Turley, Jonathan, Professor of Law, George Washington University School of Law, Washington, DC: Prepared statement
ADMINISTRATIVE CRIMES AND QUASI-CRIMES
THURSDAY, MAY 7, 1998
House of Representatives,
Subcommittee on Commercial
and Administrative Law,
Committee on the Judiciary,
The subcommittee met, pursuant to notice, at 10 a.m., in Room 2141, Rayburn House Office Building, Hon. George W. Gekas [chairman of the subcommittee] presiding.
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Present: Representatives George W. Gekas, Ed Bryant, Jerrold Nadler, and William D. Delahunt.
Staff present: Raymond V. Smietanka, Subcommittee Chief Counsel; Susan A. Jensen-Conklin, Subcommittee Counsel; James W. Harper, Subcommittee Counsel; Audray Clement, Subcommittee Staff Assistant; Melanie Sloan, Minority Professional Staff Member.
OPENING STATEMENT OF CHAIRMAN GEKAS
Mr. GEKAS [presiding]. The hour of 10 o'clock having arrived, the committee will come to order.
Pursuant to the rules of the House which ordain that for a hearing to be conducted a committee must have at least two members present, we must recess until the appearance of a second member, but the Chair has kept faith with his precept that all committee meetings will start on time. The fact that we're going to recess is another matter. We will now recess pending the arrival of a second member.
Mr. GEKAS. The committee will come to order.
The recess having expired, we note the attendance of the gentleman from New York, the ranking minority member, Mr. Nadler. A sufficient number of members having appeared, the committee will come to order.
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The subject matter of the hearing is one that bears great importance to many, if not most, of the Members of Congress. That is, just like we have seen in the last month or so, the anecdotes of horror stories that emanate from the examination into the IRS as an agency which has gone astray, shall we say, or awry, in the number of cases in which ordinary citizens have been abused, have been wronged, victimized by an agency's overbearing actions with regard to enforcing their regulations.
One might quickly say that these agencies are out of control, which means that the Congress is at fault. Because if they're out-of-control, they're either out of control because the Executive branch has not exerted sufficient control or that Congress has not exerted sufficient control. Since we have no reins on the White House or the Executive portion, the Congress must look within itself to see if any actions can be taken to correct or to at least set straight some of the abuses and to set a pattern or guidelines for prevention of all or most of these kinds of horror stories in the future.
In that regard, the 104th Congress has produced legislation that may create a pattern for us on which to build a fair warning kind of regulatory system in which more advanced notice would be given to the American public on what the force and effect of a regulation might be. We will hear from witnesses who received no adequate fair warning, but were the victims really of arbitrary, quasi-criminal, self-appointed, power-driven on the part of the agencies. That is what we want to examine to see if anything can be set in a broad piece of legislation or action by the Congress that might seek to prevent some or all of these untoward incidents from ever occurring again.
Page 9 PREV PAGE TOP OF DOC The Congress has the exclusive power to define what a crime is or what criminal activity is or even what civil penalty should apply. Yet, we see that the agencies deriving their power from the Congress would just, in an aloof manner, transferred power to them went beyond what might have been the original intent of the Congress. That is what the focus will be of the testimony that we're about to hear.
The odd thing is that the Chair is constrained to say that, upon review of the testimony which we're about to hear, I'm quick to admit that nothing comes to mind immediately of how we can deal with this massive problem, except one way. Many of us believe that that is the proper wayto shrink, to reduce the size of big government. As we do so and return power to the public, as it were, we may be at the same time shrinking the reaches of an administrative agency which has gone astray or which has devolved more power than was originally intended by the Congress of the United States.
With all of this, the witnesses are going to be most helpful in setting the stage for our thinking and our pattern of conduct as we look more closely at the issues which will be discussed here today.
With that, I yield back the balance of the Chair's time and recognize the gentleman from New York.
[The prepared statement of Chairman Gekas follows:]
PREPARED STATEMENT OF HON. GEORGE W. GEKAS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF PENNSYLVANIA, AND CHAIRMAN, SUBCOMMITTEE ON COMMERCIAL AND ADMINISTRATIVE LAW
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Today, we examine administrative crimes and ''quasi-crimes''situations where a crime is established by a federal agency or where an agency treats a citizen like a criminal, even if the citizen deserves only a small civil fine.
The IRS does not have a lock on sharp enforcement practices. Nearly every agency has the power and the potential to abuse American citizens. I believe we will see the results of this abuse today.
Along with using the power to define crimesa power given to them by Congressagencies are using civil enforcement to punish people. In civil enforcement actions, citizens do not have the same constitutional rights. Americans can lose their money, their homes, and their livelihoods without the protective rights we give to drug dealers, murderers, and rapists.
How these cases come before us makes little difference. To the people caught in an administrative enforcement, a government civil suit based on confusing regulations, or a criminal charge for an agency-defined crime, it is all the same. They have to defend themselves or face losing their estates, their livelihoods, or their law-abiding reputations.
The lesson we must take from this is that ''power corrupts.'' We, as a Congress, must be much more careful with the power we give to federal agencies and regulators. Though agencies are populated with dedicated public servants, their good intentions can go awry when they forget fariness, and when they forget that real people with real lives populate the United States.
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Any policy must be created with a sense of balance. Federal agencies are uniquely suited to approach their tasks without a sense of balance. They get from Congress a single mission, dedicate themselves to it, and woe to any citizen who stands in their way.
This is why I believe we must be very cautious about allowing federal agencies to define criminal offenses. Elected representatives are better positioned to strike the appropriate balance for making acts criminal.
Even though administrative agencies are poorly suited to balance competing public priorities, Congress has given more and more sweeping powers to federal agencies for most of this century. Since 1994, we have been working to undo the faulty practices of forty years. We have a very, very long way to go.
Failures on the part of Congress and in the administrative process are responsible for the situation of each witness before us today. And they stand to lose their reputations, their estates, and their livelihoods.
Bobby Unser got lost and nearly died after being caught in a snowstorm while he was out snowmobiling. He allegedly violated a regulation that makes it a crime to enter a wilderness area on a vehicle. Under this regulation, you are guilty whether you know what you have done or not, and there are no exceptions for emergencies.
George and Blanka Krizek worked for years within the confusing rules devised by the Health Care Financing Administration for administering Medicare and Medicaid, until a fine-tooth-comb search over thousands and thousands of records turned up alleged violations of their rules. The government demanded an $81 million dollar penalty.
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Steve Goodman's successful small business is threatened with extinction because he allegedly broke an agency rule that has never been promulgated or described in any statute or regulation.
Federal agencies can define what is and is not criminal. Federal agencies can set citizens up for a fall with confusing rules. And federal agencies can invent new, unadvertised duties out of whole cloth, then force people out of business if they do not comply. This is not right.
Unfortunately, we can not offer an immediate solution to any of our witnesses. Other committees in the House and Senate must work with the agencies under their jurisdiction to correct ill-advised regulations and sharp or unfair enforcement practices. For now, we can only expose these problems to light and begin working on a broad, comprehensive solution.
The stories we hear from today's witnesses demonstrate the huge power in the hands of federal agencies. We have a huge responsibility in Congress to oversee and limit that power.
Mr. NADLER. Thank you, Mr. Chairman. Mr. Chairman, although I welcome the witnesses and appreciate their willingness to appear, I must say that I'm a bit puzzled as to why we are gathered here this morning and, frankly, think it may be a waste of time. Having reviewed the majority's memo on this subject as well as the cases the witnesses will discuss, I'm left wondering exactly what the problem is that we're attempting to address here today.
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Apparently, there are allegations that Federal agencies have exceeded the authority granted them by Congress to promulgate rules and that agencies have infringed upon the function of Congress to define crimes. Specifically, the claim has been that Federal agencies abuse administrative regulations to impose criminal penalties in the guise of civil penalties. But I have to say, looking at the cases of the witnesses the majority has told us we will hear from today, it appears to me that the administrative and judicial processesat least in these casesare functioning just fine. I would even venture to say it appears to me that some of these witnesses have gotten off rather lightly, considering the gravity of what they were convicted of, found to have done.
I am puzzled by what appears to me is undo sympathy for those who have broken the lawsomething not usually shown by my colleagues in the majority. I cannot even hazard a guess as to why my colleagues believe that the violations of the law we will hear about this morning should be treated more leniently, while at every other opportunity these same colleagues argue for harsher penalties for virtually every other type of violation, unless, of course, they simply do not like the underlying law, are embarrassed politically to say so, and so are looking for a way to kill enforcement of the law. That may be the real intent here.
In any event, if the critics were to review the laws more closely, they would see that the conduct we will hear complained about has been sanctionedindeed, requiredby Congress. There are, of course, a number of controls that exist with regard to complained-of agency action, the Administrative Proceedings Act and various other controls which are in the prepared statement; I won't bore anybody with at the moment.
Page 14 PREV PAGE TOP OF DOC Suffice it to say, I think this whole thing is nonsense. I think that if the majority really thought that there were anything to complain about, they should introduce a bill to change the law.
Thank you, Mr. Chairman.
Mr. GEKAS. The Chair will indulge in a short surrebuttal.
It is almost insulting to the citizens of our country to say that it's nonsense to come to a point where they have been victimized or abused by a system that may have gone astray. Not in the way that they have interpreted the law, but rather because they have had possiblyand that's what we're inquiring intotoo much power devolving onto them from the Congress. That the Congress has failed, that is the real point. I insist that to say that it's nonsense demeans the testimony that these fellow Americans are going to present to us today in which they have been victimized.
Mr. NADLER. Mr. Chairman?
Mr. GEKAS. I yield to the gentleman.
Mr. NADLER. Thank you. I'll simply say that the testimony and the questioning will demonstrate which view is more apt. Thank you, Mr. Chairman.
Mr. GEKAS. I'm certain of that.
Page 15 PREV PAGE TOP OF DOC I thank the gentleman from Massachusetts, Mr. Delahunt, who has joined us. The gentleman from New York.
Mr. NADLER. Yes, I forgot, I asked that I submit the entire statement for the record.
Mr. GEKAS. Without objection.
Mr. NADLER. Thank you.
[The prepared statement of Mr. Nadler follows:]
PREPARED STATEMENT OF HON. JERROLD NADLER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK
Thank you Mr. Chairman. I would like welcome our distinguished panel of witnesses and thank them for appearing before us today. The issue before us at today's hearing is an important oneit concerns allegations that federal agencies are exceeding the authority granted them by Congress to promulgate rules and are infringing upon the function of Congress to define crimes. In short, we are here today to discuss claims that the principle of separation of powers is being violated.
Surprisingly, the conduct that is being complained about today is sanctioned by Congress, and all three branches of government have authority to review agency rules before they are enforceable. Before promulgating regulations, administrative agencies must comply with the Administrative Procedure Act. The APA requires federal agencies to provide notice of proposed rules and to allow the public thirty days to comment on them before they are finalized.
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In addition, an Executive Order signed by President Clinton requires those same agencies to submit, among other things, periodic reports to the Office of Management and Budget about the effect of existing regulations. These reports must include information about cost-benefit analyses regarding proposed rules. Any rule submitted for OMB review must be reasonable and have a limited negative effect. Finally, the regulatory agencies must set up regulatory working groups to ensure compliance with the Order.
Congress also holds the power to review administrative rules. The Congressional Review Act, also signed by President Clinton, requires agencies to submit reports regarding rules before those rules are enforceable. The Act allows Congress, by joint resolution, to prevent the implementation of any regulation. The fact that Congress has never availed itself of this remedy says less about federal agencies than it does about Congress.
The fact is, that it is a great deal easier to snipe at federal agencies charged with enforcing the laws we enact, or at the regulations we have the power to override, than it is for members of the House to go to the floor and actually vote against protections for public lands, or regulations to protect the lives of people who work on roofs, or clean air standards, or any of the other agency actions this subcommittee has held hearings to bash in the 105th Congress. To my colleagues who don't like what these agencies are doing, I suggest you bring it to a vote in the light of day. We have the power to change anything you don't like. Let's vote on it if you feel the public is with you.
A final layer of protection for the public against administrative overreaching is judicial review. While the Supreme Court held in Chevron U.S.A. v. NRDC, 467 U.S. 837 (1984), that agency rules should be adjudicated deferentially, federal courts have struck down administrative rules on several occasions. In fact, the D.C. Circuit struck down a Department of Agriculture rule that implemented standards for poultry inspection. AFGE v. Block, 655 F.2d 1153 (D.C. Cir. 1981). In another case, Western Oil and Gas Ass'n v. EPA, 633 F.2d 803 (9th Cir. 1980), the Ninth Circuit struck down an EPA regulation that did not comply with the comment provisions of the APA.
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It comes as no surprise that the cases being complained about today all involve forms of ''public interest'' legislation generally opposed by the majority. Namely, one instance involves environmental protection, another deals with Medicaid and Medicare reimbursements, and a third witness will talking about the Department of Agriculture's licensing scheme.
While I am unable to see how any unconstitutional exercise of authority could occur considering the numerous checks on agencies, I am confident that, with the benefit of our distinguished witnesses, we will be able to shed light on what would be serious violations of our principles of governance. I look forward to today's testimony and will have questions for each of our witnesses.
Mr. GEKAS. The first panel will be made up of Bobby Unser, the Indy car driver and three-time winner of the Indianapolis 500. He's a long-time resident of Albuquerque, New Mexico. When he leaves Washington later today, he will go to Indianapolis to be recognized for his accomplishments at the Brickyard in a Parade of Champions featuring himself, Gordon Johncock, Parnelli Jones, Johnny Rutherford, Tom Sneva and an unknown individual named Al Unser, his brother.
The second witnesses will be George and Blanka Krizek, immigrating from Czechoslovakia in the late 1960's and who have become citizens of the United States in 1974. Mr. Krizek practiced psychiatry for 21 years, treating many severely-ill patients here in the Washington, D.C. area. He earned a medical degree summa cum laude from Charles University in Prague and also from the University of Vienna Medical School. He has published numerous professional papers in a variety of languages.
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They'll be joined by Steven Goodman, the founder and owner of JSG Trading Corporation, a produce company in Tinton Falls, New Jersey. He started the business in 1988 and has built it into a $35-million-per-year company with a number of employees.
Would you please take you seats? From your right to left, it's Unser, Krizek, Krizek, and Goodman.
For those you who have written and submitted statements for the record, they will be accepted, without objection, for the record. We will ask that each witness try to maintain within 5 minutes the bulk of the testimony to be offered. We will begin, in the order in which they were introduced, by asking Mr. Unser to begin his testimony.
STATEMENT OF ROBERT (BOBBY) W. UNSER, ALBUQUERQUE, NM
Mr. UNSER. Thank you, sir. First of all, I'd like to just say that I'm happy that you asked me here and I'm proud to be here. I hope it does some good.
Secondly, am I talking too loud?
Mr. GEKAS. No.
Mr. UNSER. Okay. I can't tell.
Page 19 PREV PAGE TOP OF DOC You probably, the ones that are here, have a fact sheet on who I am, so I won't spend an awful lot of time on that because I won't have enough time to tell you everything I want to tell you anyway. I'm Bobby Unser and I'm from Albuquerque, New Mexico. I've been there almost all my life.
I went snowmobiling 1 daygot a new snowmobilelate December. I have a ranch up in the northern part of New Mexicoa little town called Chama. So I went to Chama and took a race driver friend of mine from Albuquerque. We went to Chamahis first time ever to be on a snowmobile; in fact, he'd never even seen one. So we went snowmobiling up into the mountains and left late that day because it was a beautiful day out. I had about a 20-30 minute ride up in my truck. We trailered the machines up. We went up to a place where we could climb hills. It was just the two of us. In fact, there was nobody else basically up on the mountain that day that I saw. The mountains are high up there. So we were hill climbing. Robert Gayton was his name.
We both snowmobiled for a bit around the trailer and got him kind of acclimated on how the snowmobile works, how to turn it on and off, and things like that. I've been doing it for many years myself. I know the country quite well in the part of the world. Of course there's a lot of country up there, too, so I don't guess anybody really knows at all.
But at any rate, we started snowmobiling. We got up to where we could climb the hills. Robert had gotten stuck quite a few times and it was only about six miles from the trailer where we were snowmobiling, in a place that's totally legal. For sure, I knew there was a wilderness area, but I, like many thousands of people that snowmobile up there, have no idea where the wilderness area is.
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So we were climbing the hills. I was up on topjust recreating is all, just having fun. Sun shining, beautiful weather, and all of a sudden the wind came up, as it often does in that part of the world. Because it's a flat type of a mountain up there, it makes it like a venter in a carburetorthe wind speeds up by the natural terrain of the mountains. So a snowstorm came up, a windstormin other words, a complete white-out. It does it in just a matter of a couple of minutes. The wind comes; the snow blows.
There had been a lot of snow, and a powdery, dry snow that time of the year. So instantly we can't see where we are. So it makes no difference where you are; you're lost. Because there's canyons every place and big dropoffs all around the place, just like we've been going up, only a lot worse than that.
So, ultimately, we had to spend the night up there. One snowmobile got stuck, the one that Robert was riding. That was kind of a blessing because, if he didn't stay attached to mein other words, really close, the two of us togetherhe would have split off and he wouldn't have known how to survive in the mountains. He would have surely died; he would have died the first night.
So, at any rate, I put him on behind mine which was good; mine was a brand new sled, the first time I had ever ridden it. We took off on it and I was trying my best to go in one directionthe machine started getting mechanical problems and quitting. As it would quit, we would get it restarted and try to keep going. Well, it did this until we were running out of daylight. It gets dark about five o'clock. We didn't start until about noon.
Page 21 PREV PAGE TOP OF DOC So by the time that had happened, there was only one thing to do, and that was to spend the night. The wind was blowing a good 5060 miles an hour. So we left that machine and walked as much down as I could find down. We got into some timbers, dug a snow cave, and spent the nightsurvived through the night. The wind never quit blowing, which it always does quit blowing at night.
We got up the next morning and I saw that my tracks were already covered. There was no way to even backtrack the snowmobile because we could have used the gasoline to build a fire, and we needed that. So we started walking. I could see a general direction of which way to walk. It turned out we walked for 18 hours. Robert almost didn't make it. I got very sick and almost didn't make it myself, but we did make it out after 18 hours of walking. That meant two nights and 2 days that we spent up thereand that was not a problem. Ultimately, what happened is I wanted to go back and find my
Mr. GEKAS. Without objection, the witness shall be granted an additional 2 minutes, 3 minutes.
Mr. UNSER. Thank you, sir.
So after that happened, I decided thatI had talked to a lot of people. They said, you know, your machineI wanted to go back and find the machine. The one machine was out and the other one was still up there someplace. I wanted to go back and find it. So I did what I thought would be the right thing to do, which was kind of sad. I could have easily just gone upthere's nobody up thereI could have gone up there anytime and just tried to find my snowmobile. I would have found it in good weather.
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But, instead, I went to the Forest Service and told them that in case that I needed to go into this wilderness, wherever it was, I would like to have a letter or their permission to be therejust not to cause anybody to be mad. Which, at that time, they later onI'm trying to do it as fast as I canlater on, they had two people come down from Colorado. They called me up at my house and said, ''Come down and talk to us; we'll help you find your snowmobile.''
I did. I didn't take an attorney. I didn't take anybody with me. I just wentjust like anybody that was innocent doing the thing I should do. I went down and they went under pretense, didn't even tell me that they were investigators. They went under the pretense with maps to help me find find my snowmobile. We backtracked where I walked out; eventually, figured out between the three of us which canyons I'd gone out through; ultimately, decided by the canyons where I spent the nightnot exactly, of course, but at least in a rough area.
From that, they determined that my snowmobile should have been in some area and possibly could have been into the wilderness. So, therefore, the lady sitting over there with the investigators reaches into her briefcase and pulls out a ticket and hands it to me, a pre-written ticket, one that had been written in the State of Colorado. They are now in Albuquerque. The ticket was written when they didn't even know. They had never seen my snowmobile. They didn't even know where it was, didn't even know truly what the stories were, with the exception of the press. Plus, even after that, even when we went to court, they had pictures of the snowmobile. Now remember, I had described to probably no less than 200 million people that had heard about and read my accounts of where the snowmobile was, and yet none of those described being in a wooded area, and yet they showed up with pictures of the snowmobile being in an tight wooded areasomething that I couldn't even have missed the trees in a blizzard.
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They all admit that there was a blizzard. They all admit I wouldn't have done this for just the fun of it. I wouldn't have walked out for 18 hours, just nearly died80 percent of the people thought that we would die up there.
So at any rate, every time the Forest Service let out something in the news, it was always that Bobby Unser was faced with a $5,000 fine and/or 6 months in jailor in other words, calling me a criminal.
They have no set fine; they have no value on what it should be. So my question would have always been, why were they so sneaky about it? I was the one that was being fair. They had a total written record of everything I did which came out in all the court proceedings. Yet, they had pre-written the ticket and they had also threatened me with 6 months in jail, $5,000 fine, and they hadaccording to the judge of Denver, Colorado, it came out to where he said that I had to prove that I was innocent; they did not have to prove that I was guilty. Now that totally goes against whatever I was taught when I was a young kid going to school.
So I think it's bad for a good, taxpaying citizenand I've paid over millions of dollars, many millions of dollars in taxes in my life to the States and the Federal Government. I think it's an unfair situation to be called a criminal, be threatened with 6 months in jail. Nobody wants to go to jail for trying to save their life. Nobody thinks that $5,000 is a justified thing for trying to save their life. I didn't do anything wrong. They never had to prove that I did something wrong. I, instead, according to the judge, had to prove that I was innocent. That's un-American.
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Mr. GEKAS. We thank the witness.
Pursuant to the request by the gentleman from New York that we permit the questioning of each witness that has been completed, we will now yield to the gentleman from New York for questions for Mr. Unser, 5 minutes.
Mr. NADLER. Thank you, Mr. Chairman.
Mr. Unser, we appreciateI appreciate at leastwhat you went through. But I'm not clear what your complaint is in terms of the law. Let me see if I understand this correctly. You went with your snowmobile into an area. You knew there was a wilderness area. You didn't know exactly where it was. You wound up with a snowmobile in the wilderness area, which is against the law. Then there was a blizzard. Then you had all these adventures, and then they gave you a ticket. What is exactly wrong with either the law or the administrative action?
The other thing is that you were upset that the news reports kept saying that you were subject possibly to a $500or whatever it wasto a fine and to a 6-month jail sentence. But all they were doing is reporting the possible penalty under the law. The actual penalty was $75, not jail.
So forgetting the question of what the news media reportedthey can report anything they want and we can't say anything against itthe fact that the agency, when asked, said, well, the statute provides for up to a 6-month jail sentence and a fine of ''X'' dollars; exactly what do you think was wrong? Was it wrong that you were prosecuted, in effect, under the law because you didn't know it was a wilderness areaor something else?
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Mr. UNSER. No sir, I'm sorry I had to go through that so fast, too, but that's the rule that you guys have. I could have explained it all a lot easier than that with a little more time. But what it is, is that I didn't know that there was wilderness anywhere near Cloaks.
Mr. NADLER. Excuse me, I thought you said you knew there was a wilderness
Mr. UNSER. Thousands of other people that recreated up there.
Mr. NADLER. I thought you said you knew there was a wilderness, but you didn't know where it was.
Mr. UNSER. That's right, sir. But a wilderness could be like a thousand miles away and I wouldn't know where it was. In this particular case, the wilderness was a considerable distance away from where I was recreating, where I was snowmobiling.
Mr. NADLER. Then how did you get into the wildernessbecause of the blizzard?
Mr. UNSER. Because of the blizzard. Because I was totally lost. I didn't go in there
Mr. NADLER. Okay. Let me ask you the following then: We have a law that says the Secretary of Agriculture is instructed to protect the forests, the national forests, and to set out regulations to do so. Reasonable law, I think. You're not saying that that's a bad law.
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Mr. UNSER. Right.
Mr. NADLER. Okay. The Secretary of Agriculture puts out regulations that, among other things, says you can't use a snowmobile in a wilderness area.
Mr. UNSER. Any motorized equipment.
Mr. NADLER. Any motorized equipment, which includes a snowmobile. Reasonable regulation?
Mr. UNSER. Yes.
Mr. NADLER. Okay. So far, so good. What was unreasonable? Then you have the law says that a violation of the law or regulation pursuant to the law has a certain penalty structure. That's also reasonable, but maybe it should be 3 months or less.
Okay. What you seem to be saying is that the agency, or the official of the agency, should have understood and been more reasonable in the particular circumstance because you got lost and violated the law inadvertently because of the blizzard. That's the real crux of your complaint?
Mr. UNSER. No, sir, I did not violate a law. The law doesn't say that. The law says that you have to have intent. That was taken away from me. I did not intend to go into the wilderness
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Mr. NADLER. Okay, excuse me.
Mr. UNSER. I did not know that I was a wilderness
Mr. NADLER. Yes, correct. To violate a law you have to have intent. You're saying that you didn't have intent because you didn't know you were in the wilderness area?
Mr. UNSER. I did not know I was in the wilderness area.
I still don't know today that I was there.
Mr. NADLER. That's why you didn't have the intent, because you didn't know were going into the wilderness area?
Mr. UNSER. I was trying to save my life.
Mr. NADLER. Okay.
Mr. UNSER. I was trying to stay alive.
Mr. NADLER. Okay, but you're saying you didn't have the intent. So they charge you and maybe they were unreasonable in doing so. That's an individual decision by the enforcement officer. That sounds to me like a standard complaint. The cop gave me a ticket when I didn't really go across the light, isn't that the kind of defense you make to the judge, and the judge says yes or no. If you don't like his decision, you appeal it?
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I'm not saying you were wrong; it sounds like you may very well have been right. The judge didn't rule that way and that's an argument to make to the appeals court.
In what way is this different from any other case under any other law in which somebody says, well, I didn't have the criminal intent because of circumstance A, B, or C, and that's an argument to make to the judge? In what way does that rise to an agency disobeying the will of Congress or persecuting people beyond the will of Congress? It's a simple question of fact in a case. What I'm trying to say is, how is that different from any other question of fact in any enforcement proceeding?
Mr. UNSER. Can I just give you one example on that? You've said so many things. If I could answer each one at a time, I could debate it with you easily. But let me just answer it to you this way, sir:
If you were flying your airplane over a wilderness area, the engine quit, and you went down into the wilderness area, you certainly would have to admit that you had no intent in being there and you couldn't, in fact, help it. See, that was no different than my case. I did not intend to go there. I didn't go there because I had any choice.
Mr. NADLER. Sir, I'm not arguing
Mr. UNSER. I did the best ability that I had
Mr. NADLER. I hear you. I hear you. But you're not understanding my question.
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Mr. UNSER. Now, the Congress has also laid out laws that say that, if you have an emergency, that overcomes their laws.
Mr. NADLER. Okay.
Mr. UNSER. The SierraI was also told that the Sierra Club in Washington, D.C.or wherever they are back herephoned up the National Forest Service; told this by the National Forest Service arresting officer, or the ticketgiver, whatever you want to call him, that the Sierra Club pushed it because I was Bobby Unser, a celebrity who wanted to get the attention.
Mr. NADLER. Pushed your case?
Mr. UNSER. Say again?
Mr. NADLER. Pushed what, your case? The Sierra Club pushed it. Pushed what, the complaint, your complaint?
Mr. UNSER. No, no. Pushed the Forest Service.
Mr. NADLER. Oh, okay.
Mr. UNSER. Demanded, according to him, Charlie Burke demanded that I get a ticket if they found the snowmobile to be in the wilderness, regardless of what
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Mr. NADLER. Because you were a famous person?
Mr. UNSER. Now this is what he told me. It's in the original report.
Mr. NADLER. Mr. Unser, I still think you haven't understood the question I'm asking. Granted everything you're saying. Let's assume that everything you've said is the God's honest truth, as I'm sure you think it is. Let's assume it's absolutely accurate. Given the airplane example, I still don't understand one thing. The argument essentially is that the airplane pilot did not commit a crime because he didn't have the intent. You did not violate the law because you did not have the intent. That's the argument essentially, right?
Mr. UNSER. I did not violate the law because I did not
Mr. NADLER. That's your argument. You did not violate the law because you had not
Mr. UNSER. On that one subject.
Mr. NADLER. Let me just finish the question. That's your argument?
Mr. UNSER. Yes, sir.
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Mr. NADLER. Fine. That argument is either correct or it's not correct. But isn't it for the court to decide whether the argument is correct or not? In other words, you may be saying that the agency, the individual agent, was wrong or unreasonable. Maybe the judge is wrong or unreasonable. But that's the standard question in any enforcement proceeding: Is the cop wrong or unreasonable or right? Is the judge wrong or unreasonable or right? How does that rise to the level of saying that there's something that Congress ought to do something about?
Mr. GEKAS. Will the gentleman
Mr. UNSER. Sir, that is an abuse of power.
Mr. GEKAS. Will the gentleman yield? It might be helpful for the witness to frame your questions in the mode of whether or not this was strict liability or as interpreted by the agency, or whether intent ever had a role in determination of whether the gentleman violated that law.
Mr. NADLER. Well, Mr. Chairman, I think
Mr. GEKAS. The gentleman from New York is pursuing this on a basis that intent is to be considered, when under strict liability, it is not.
Mr. NADLER. Mr. Chairman, I'm aware of the distinction. Let me just answer your question. The law, as I understand it, is strict liability. Mr. Unsermay I have a couple of extra minutes? Thank you.
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The law, as I understand it, is strict liability. Mr. Unser seems to be under the mistaken impression that it is not. The reason that I'm pursuing this line is that, even if he were correct that the law is not strict liability, that intent is necessary, I'm trying to understand how this is any different from any case where you may have an unreasonable or mistaken police officer or judge; why it's a question for Congress as opposed to saying we could have more intelligent enforcement officers.
Mr. GEKAS. If the gentleman would yield
Mr. NADLER. Yes, sir.
Mr. GEKAS. That's exactly what we're inquiring, whether or not the Congress should be applying strict liability in cases where citizens inadvertentlyin cases like the ones that Mr. Unser has enunciatedshould have relief when there was no intent, when there was an emergency situation, when there are exergent circumstances. Still, in spite of all of thoseor because of them in some casesthe strict liability is applied with no recourse to the citizen. That's exactly what the Congress, in our judgment, must inquire, to determine whether it's the proper way to devolve power onto the agencies.
Mr. NADLER. Mr. Chairman, let me just comment on that briefly. That is very different. In which case, we shouldn't be talking about what Mr. Unser knew or didn't know, because it's irrelevant and since it's strict liability. That question is the question of maybe we should change the law because it shouldn't be strict liability, and that's a perfectly good question. It doesn't seem to bear much relationship to the topic of the hearing which is the agencies running wild.
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Mr. GEKAS. If the gentleman would further yield, then the attendant question comes: Shouldn't the Government agency, in looking over this situation, as the Forest Service, should they not apply discretion in the application of the lawor whatever agency it was? To apply discretion, meaning that to see that this was a strict liability case, but under no circumstances could anyone contemplate
Mr. NADLER. Well, yes, you see
Mr. GEKAS [continuing]. That the gentleman intended to violate the law.
Mr. NADLER. But could I just say this? Excuse me, excuse me
Mr. GEKAS. To find the discretion on a strict liability is just as important as whether or not there's strict liability.
Mr. NADLER. Mr. Chairman? Mr. Chairman, let me just comment on what you said. First of all, observing the actions of Mr. Ken Starr, we all know that people should use discretion. An agency, as well as Mr. Starr, should use discretion.
Mr. GEKAS. And they have.
Mr. NADLER. But, but, but
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Mr. GEKAS. The time of the gentleman has expired.
Mr. NADLER. I ask unanimous consent
Mr. GEKAS. It's been 11 minutes now.
Mr. NADLER. I ask unanimous consent to finish, 1 minute, one additional minute to finish this.
I'd simply say the following: Should agencies be intelligent and use discretion? Yes, obviously. I don't think we need a hearing for that. Are they using it properly and should we change the law? Maybe that's a subject of a hearing.
Mr. GEKAS. Then the gentleman approves of the hearing.
Mr. NADLER. But the law here is strict liability. That's not the agency's decision. That was Congress' decision.
Mr. UNSER. Well, that's wrong. That is not the case. Congress didn't lay the law out that way.
Mr. NADLER. Excuse me, sir, excuse me. If we want to have a hearing on whether the law should be strict liability, that might be a good subject for a hearing, but it's not this hearing.
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I give back the balance of my time.
Mr. GEKAS. The Chair devolves upon itself for 5 minutes for questioning and reiterates that what the gentleman has just questioned justifies this hearing to see whether or not Congress should be looking into situations where, in applying strict liability, that the Congress has given too much power to a particular agency, to apply strict liability without discretion to use in emergency situations or exigent circumstances. Thus, what we are doing here is examining the very thing that we ought to be doing
Mr. DELAHUNT. Mr. Chairman?
Mr. GEKAS [continuing]. Whether Congress or not should be proceeding.
This is my time now.
Mr. DELAHUNT. If you could just yield for 1 minute?
Mr. GEKAS. I will.
Mr. DELAHUNT. I think it's important, for the benefit of the panel, if you could articulate what our understanding of the law is. I think it's important to note that within the criminal law there are some cases that require specific intent, to have a specific intent. Most of our so-called criminal misdemeanor statutes do not require a specific intent. I think it's important for the panel to understand that, so that you canwhile we appreciate your testimony, Mr. Unser, I think you were going to try to make an explanation. I yield back, but I think it's important that we give them the framework within which we're operating, Mr. Chairman.
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Mr. GEKAS. I was about to do that and the gentleman has helped me.
Mr. DELAHUNT I'm glad I helped.
Mr. GEKAS. The gentleman has helped me by framing what I was about to do. I thank the gentleman.
The gentleman from New York alluded to a summary offense or traffic ticket. In what ways do you consider that is different from the violation with which you were charged?
Mr. UNSER. Couple of things, Mr. Chairman. No. 1, I'd like to make a point to the gentleman from New York that the Forest Servicethe Forest Service now, not the judge or anybody elseas the ones that always let out the news deal thing that I was liable to 6 months in jail and $5,000 fine, for a person that really has been pretty straight all my life, that wasn't good. I had hundreds of calls and lettersthousands totalfrom judges, from citizens, from attorneys, and people all over the United Statesattorneys offering free service, judges offering advice. Many people think not right; you can't go to jail for doing something that you couldn't help anyway, just trying to save your life.
No. 2, on a traffic ticket, how I would I compare it? No. 1, if your wife is pregnant and she's having a baby, you happen to be caught speeding going to the hospital, sir, I respectfully point out that you are not due to get a ticket. It's against the law to give you a ticket. It's okay to be speeding if there's an emergency.
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Mr. GEKAS. Mr. Unser
Mr. UNSER. In fact, it goes on in every State in the Union.
Mr. GEKAS. It may not be okay as you say it, but
Mr. UNSER. The emergency overcomes
Mr. GEKAS [continuing]. The law enforcement officers would apply discretion as to whether or notwithout question. That's the question, whether or notand I'm asking youshould the Congress be looking into these strict liability, as Mr. Delahunt has offered, with the view to determining in what cases discretion should be applied by the law enforcement agency? Isn't that a question that
Mr. UNSER. Yes, sir, it is. You know, when I came back to Washington before on this very same case, most of the congressional people that I met with and that I met, period, and the Senators and staff that operate this country, it was most of their opinions that law enforcement should be taken away from the Forest Service; that they've had problems ever since because they're not discretionary on how they deal with people.
Mr. GEKAS. Aren't you as an American citizen asking the Congress, through this committee, to look into a situation in whichwhen an agency is given by the Congress, either erroneously or intentionally, the power to enforce regulations on a strict liability basis without even having to go into the question of intent and without granting discretion for emergency situations or other, as we call them, exigencies or remarkable circumstances. Shouldn't we, as a Congress, be looking into determining how best to approach those problems?
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Mr. UNSER. I think that would be very much appreciated by all the citizens, sir.
Mr. GEKAS. Mr. Unser, I think you justified this hearing, contrary to Mr. Nadler's peroration at the outset.
The gentleman from Massachusetts, Mr. Delahunt.
Mr. DELAHUNT. Yes, thank you, Mr. Chairman.
I appreciate and sympathize with you, Mr. Unser.
Mr. UNSER. It's a matter of public record, though. [Laughter.]
Mr. DELAHUNT. I'm sympathetic and I accept what you say as accurate, and of course, with the caveat that I don't havehave not had an opportunity to read the public record. I think, again, it's important to make that distinction.
I respectfully disagree with you about your example regarding the trip to the hospital with you pregnant wife. The law itself you would have violated. But anybody with any brains, or any common sense, who would have given you a ticket under those circumstances clearly didn't exercise appropriate discretion. I happened to be, in a former life, for more than two decades, a State attorney, a district attorney in the Greater Boston area. Our system of laws, our jurisprudence, vests prosecutors and police with discretion. From what you tell me, given the circumstances in which you could very well have lost your life, it just didn't make sense on a human level. Maybe that snowmobile ended up in a wilderness area. Well, under the law if you examine it and you understand that, whether you intended to or not, there was still a violation. But to issue a ticket to you just didn't make any sense.
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Now let me tell you what I think the problem is. I think the problem is not so much with the law, because most of us exercise some common sense, but the kind of story that you just told could be told every single day, whether it's the Federal Government, the Forest Service, the State police or the local police. How many people in this room have been stopped by the highway patrol and the officer comes up and says, ''You know, Mr. Unser, this is a 65 mile per hour zone and you were going 75. Slow down, will you?'' That's exercising discretion. Hopefully, you would respect that admonition and you'd take a look at your speedometer.
I think what we don't do enough in this country, and what we in Congress should do, is not necessarily to look to change the law, because if we required every rule and regulation to incorporate a specific intent requirement, we would be having all kinds of problems in terms of court congestion, in terms of the ability just to function in a legal system. What we ought to be doing here in Congress is insisting that there be sufficient resources for training, whether they're Forest Service personnel, FBI agents, Assistant United States Attorneys, or whether they be, as my friend from New York said, independent counsel. There ought to be some judgment and some balance and some training in prosecuting with discretion. The exercise of sound judgment is absolutely essential in a democracy. We, all of us who are in public service, are servants, and we should treat the public with respect and dignity and exercise some judgment and common sense. So maybe what we have to do is spend a little more money; put monies in these agency budgets for the kind of training that teaches civility and respect and discretion.
But, again, now that I've taken up most of my time, I want to just say to you that I'm glad you made it out alive.
Page 40 PREV PAGE TOP OF DOC Mr. UNSER. Well, thank you, sir.
Mr. DELAHUNT. You're welcome.
Mr. UNSER. Can I make just a short comment to that, sir?
Mr. GEKAS. Proceed.
Mr. UNSER. I would just like to add to that the Forest Service admitted in the last court thing that we had that they spent at that time over $600,000estimated today over $700,000prosecuting Bobby Unser, only because he was a celebrity and they wanted to get attention. Plus on my side of the whole deal is: Should I really be called a criminal? Most of the people in the United States think I'm being called a criminal.
Mr. DELAHUNT. Well, I can assure you, Mr. Unser, that I don't think any member of this panel thinks you're a criminal. Anybody with a half a brain after reading that story would say that this is a case where judgment and discretion were not properly utilized by a Federal agency.
But, also, I think it's important to understandand this was the point made by my friend from New Yorkyou know, the press in this country is a free press. We can't control what is said. We can't say what is written about that. But I bet you've lived long enough to know that you can believe about 10 percent of what you read.
Mr. UNSER. But every time
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Mr. DELAHUNT. You know, I'm sorry
Mr. UNSER. Every time you're accused by a Federal agency, it goes under the assumption that you're guilty. If I'm accused of speeding, people just take the assumption you were accused. When it turns out that I was innocent, it shows up on the last page of the paper.
Mr. DELAHUNT. Right.
Mr. UNSER. The accuser must have some responsibility, as you say
Mr. DELAHUNT. Right.
Mr. UNSER [continuing]. Readily brought out.
Mr. DELAHUNT. What I'm saying here is that every member of this panel and every Member of Congress, I can suggest to you, has his or her own complaint with various stories that have been written about us because, in many cases, they're half-truths. In many cases, they have been leaked. In many cases, there is an agenda, as you suggested in your case, because you happen to be a celebrity. Unfortunately, that is nothing that the United States Congress can control. We, in many cases, are victimized as often as you are. So when you read in the future newspaper coverage or media coverage, whether it's the President of the United States or Bobby Unser, take it with a big grain of salt, sir. Thank you.
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Mr. UNSER. Well, that's very true.
Mr. GEKAS. We will now turn to the testimony of Dr. and Mrs. Krizek. But before we do, maybe the gentleman from Massachusetts would be willing to join the chairman at least in looking at the particular regulation of the Forest Service to see if they are prohibited from abusefrom applying discretion. It seems to me that, on appeal many times from a ruling of an administrative agency, the court has to determine whether or not there has been an abuse of discretion. We've got to determine, I think, and that's our role in these kinds of strict liability situations, whether or not any kind of discretion can be built into the law.
So from that request, we'll go forward to the testimony of Dr. and Mrs. Krizek.
STATEMENT OF GEORGE O. KRIZEK, M.D. AND BLANKA KRIZEK, WASHINGTON, DC
Ms. BLANKA KRIZEK. Mr. Chairman, members of the subcommittee, my husband and I are honored to be invited here today to testify about events that have profoundly changed our lives.
We have been fighting to establish the truth about my husband's medical practice for almost 6 years. It has been a very difficult thing to do in this era where Kafkaesque administrative rules can and do result in the criminalization of medicine. Based on Health Care Financing Administration, HCFA, regulations, the Government filed an $81 million lawsuit under the False Claims Act against my husband and me. The suit has been our worst nightmare.
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As our experiences showed, the HCFA regulations are confusing enough that lawyers could spend weeks arguing over how to interpret them. Doctors should spend more time keeping up with the medical literature than keeping up with coding regulations at HCFA.
Our story is about a doctor whose escape from communist Czechoslovakia in 1966, with his family following in 1967, was dramatic enough for a movie, a man willing to leave his comfortable life in Prague when pressed to conduct unethical and politically-motivated psychiatric examinations and to join the communist party. He chose for his family a dangerous escape to freedom because he believed in the American brand of democracy.
While Dr. Krizek was working routine 7-day weeks at the Washington Hospital Center, the HCFA special agents were already hard at work trying to destroy his reputation and his medical practice. It was just before Christmas in 1989 when, under the pretext of a Christmas delivery, three investigators appeared at our door. They said that they came from Medicaid and had some questions to ask about our billing practices. For the next 3 hours, one of the agents screamed and yelled while the two others laughed at me and made fun of my accent. The agents wrongly accused us of committing various forms of fraud.
We did not hear from the Government again until 3 years later on Christmas Eve 1992, when a certified letter came from the U.S. Attorney's office stating that we had falsely claimed 8,002 Medicare and Medicaid reimbursement claims and that the Government was prepared to file a lawsuit against us. However, the letter said that the Government would be willing to resolve this matter without filing suit in exchange for an appropriate cash settlement. We felt that this was official extortion and resolved to fight, for we had done nothing wrong.
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On January 11, 1993, at a hastily-called press conference, then U.S. Attorney Jay Stevens told the media that, as part of a major healthcare fraud enforcement initiative, a lawsuit was being filed against local psychiatrist George O. Krizek and his wife, Blanka, for submitting fraudulent billings for patients psychoanalytic sessions. Dr. Krizek is not a psychoanalyst. All day long, the local media carried the story. Several patients and friends called to tell us that they had seen the reports. We were mortified and fearful.
In the spring of 1994, we endured a 3-week trial during which the Government lost on almost every part of its complaint against us. Based on the testimony of many witnesses and on Dr. Krizek's own testimony, no medically unnecessary treatment was found by the court. The court directly criticized HCFA for interpreting its codes in a way that was incomprehensible to the medical community.
When the court finally issued its opinion, however, the case took a bizarre twist. Also, the court ruled against the Government on all elements of the complaint. The court found liability on the strange theory that my husband would be presumed liable under the False Claims Act for all medical services provided in excess of nine working hours on any 1 day. Can you imagine, a doctor being on call?
Under such a standard, all of the professionals in Washingtonincluding I am sure the members of this committeewould be guilty of quasi-committal acts, if working more than 9 hours a day. So the trial court eventually reversed itself on this point to a degree. Some of its errors were also corrected on appeal. The case is now back on remand.
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Without the help of organizations like the Washington Psychiatric Society and the Association of American Physicians and Surgeons, we are not sure that we would have been able to fight this long. We hope that common sense will prevail in the district court this time around.
Meanwhile, however, the battle continues between the medical community and HCFA. The medical community is trying to clarify the use of the Byzantine billing codes. Doctors, tired of continuously changing definitions, want HCFA to come up with a system that they can use without being accused of fraudulent billing.
Last year, HCFA finally initiated a new system. In case of psychiatrists, they came from 4 original codes to 24. They were supposed to be implemented this year, but, again, everything was delayed because both doctors and HCFA have to acknowledge that the new codes were still too confusing and difficult for doctors to use. It is our deeply-held view that until these problems are worked out, the Government should concentrate its enforcement resources on clear cases of fraudnot cases like ours.
My husband and I have been fighting for years and we are exhausted. This case has taken a tremendous toll on my husband's health. He has cancer now. In fact, because of this case, my husband was prevented from returning to Prague to visit his mother before she diedbecause she was dying during the trial. This case has destroyed our lives.
It is up to you, our lawmakers, to fight not only for us but also for other doctors unjustly persecuted under this perverse law or otherwise subjected to administrative abuse. We can only put our trust in you. Thank you.
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[The prepared statement of Dr. and Ms. Krizek follows:]
PREPARED STATEMENT OF GEORGE O. KRIZEK, M.D. AND BLANKA H. KRIZEK, WASHINGTON, DC
Mr. Chairman, Members of the Subcommittee. My husband and I are honored to be invited here today to testify about events that have profoundly changed our lives forever. We have been fighting to establish the truth about my husband's medical practice for almost six years now. It has been a very difficult thing to do in this era where arcane and Kafkaesque administrative rules can and do result in the criminalization of medicine, in times when HCFA (the Health Care Financing Administration) and Medicare tell the country daily how many billions of dollars are wasted in fraud, yet the ''fraud'' involved is often nothing more sinister than a failure to interpret complex and confusing regulations in the same way the government does, or is simply the result of an honest error. The public is encouraged to participate in fraud-hunting by calling a hotline number at HCFA, with the promise that if the doctor agrees to a monetary settlement, guilty or not, the informer may collect up to 30% of the resulting booty. Statistics show that the number of former patients, disgruntled employees, and even competing fellow physicians turned informers is growing daily. Most doctors accused of fraud are advised by the growing cadre of health-care industry lawyers to settle with the government immediately.
Any lawyer in this field will tell you that, if you choose to fight even the most bizarre accusation, based even on regulations that seem to you to admit of only one interpretation, you will be in courts for years, your legal bills will ruin you, your colleagues and friends will desert you, and stories about your purported fraud will appear in the media. The pressure will be enormous: your life will become nothing but the lawsuit, and your health might fail under such abuses. ''You will be destitute, anyway,'' one of our first lawyers said when we refused to offer our home up to settle a lawsuit, which alleged that we perpetrated an $81 million Medicare and Medicaid fraud on the government. That suit was filed by the U.S. Government against my husband and me almost six years ago, pursuant to the False Claims Act. We were terrified and with good reason, for soon we entered into an unimaginable nightmare. We became convinced that we would lose our financial security and everything that we had worked so hard for in this country.
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In 1863 Abraham Lincoln signed into law the False Claims Act in order to combat rampant fraud perpetrated on the Union Army during the Civil War and to punish cheating defense contractors. This law was amended in 1986; the requirement to prove intent to defraud was eliminated, and the burden of proof was effectively shifted from the Government to the Defendant, who therefore is now guilty until proven innocent. Damages were raised from a multiple of two to a multiple of three, and potential penalties for each claim filed increased from $2,000 to $10,000. I think that Abraham Lincoln would be very surprised to see that this law is being used today to terrorize hard-working doctors. Instead of penalizing doctors for the truly inexcusable offense of bilking the government and thus abusing the public trust, the net of this law has been cast much wider by federal administrators to ensnare doctors who fail to interpret regulations properly or to keep records in the precise fashion that the government prefers, even though the regulations are far from clear. We used to think that the growth of government in America was benign because the American constitutional tradition could be expected to be a strong check on any abuses. We don't believe that anymore, and if President Lincoln were still alive today to see the monstrosity the government has become, with its hands in every pie, and more ''law'' than anyone could read in three lifetimes, law issued by unelected bureaucrats, he would agree with us.
HCFA obviously needed a good, ''scandalous'' medical billing case to start a series of prosecutions of doctors under the newly amended False Claims Act. It remains a secret who selected my husband, an exceptional, dedicated doctor, a specialist in psychiatry, for this thankless role. Under the Freedom of Information Act (FOIA), an important, but in this case unhelpful, check on the discretion of federal administrators, we were informed that we would not be given access to 110 pages of documents responsive to our request, ostensibly since they revealed the identity of the informers involved in our case. We do know, however, from the documents that we did get, that my husband was targeted for investigation as an individual, by name, and not through a ''random audit,'' as HCFA claims.
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Here was a European doctor whose escape from Communist Czechoslovakia in 1966, with his family following in 1967, was dramatic enough for a movie. A man whose father, a jurist, was decorated for bravery in both world wars. A man willing to leave his comfortable life in Prague, Czechoslovakia when pressed to conduct politically-motivated forensic psychiatric examinations and to enter the Communist party. He chose for his family a very dangerous escape to freedom, because he believed, like his father before him, in the American brand of democracy. Never once in his life was his honesty or integrity, both in his professional and personal life, questioned. After nearly forty years with my husband, I am qualified to confirm that.
While Dr. Krizek, known at the Washington Hospital Center, during his quarter of a century there, as one of the most hard-working and respected doctors, continued to work his routine seven-day weeks, the HCFA ''special agents'' were already hard at work trying to destroy his reputation and his medical practice. It was just before Christmas in 1989, when, under the pretext of a ''Christmas delivery,'' three investigators appeared at our door. They said that they came from Medicaid and had some questions to ask about our billing practices. I am still asked why I let them in, since they had no official identification. The simple answer is that, although the visit was unusual, we had nothing to hide and I believed in the fairness of our adopted country's system.
For the next three hours, in a performance designed to scare us to death, one of the agents screamed and yelled while the other two laughed at me and made fun of my accent. The agents accused me of billing for non-existent patients, billing patients of other doctors, of ''double-billing'' both Medicare and Medicaid, and of ''unjustly enriching'' myself. For every patient named I could quickly find a file and proper documentation. But it became clear that these agents did not care and moreover were unfamiliar with billing procedures. What shocked me the most was when they told me that they had already rummaged through hundreds of Medicare and Medicaid patients files kept at the Washington Hospital Center. After this episode, our daughter, who is a lawyer, was assured that there was no evidence of wrongful billing found, and that the investigation was ''routine.'' Dr. Krizek's contracts with Medicare and Medicaid specified that review of billing by these programs was permitted, so we accepted this version of events.
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We never heard from the agents again until three years later, on Christmas Eve 1992, when a certified letter came from the U.S. Attorney's Office stating that we had falsely claimed ''8,002'' Medicare and Medicaid reimbursement claims, and that the Government was prepared to file a lawsuit against us. However, the letter said that the Government would be willing to resolve this matter without filing suit ''in exchange for an appropriate cash settlement.'' We made an appointment with the Assistant U.S. Attorney in charge of our case, in an attempt to find out what exactly we had done wrong. The response was simple: ''We are the Government, we don't have to show you anythingyou go home and find in your files what was wrong with your billing. Pay us hundreds of thousands of dollars and we won't file suit.'' We felt that this was official extortion and resolved to fight.
The most outrageous aspect of the impending lawsuit was that my husband's Medicare and Medicaid contracts specified that the programs were obliged to notify a doctor if any problems with his billing were found and to educate him about proper billing methods. Obviously, the Government was now not honoring such contracts, and taking a ''sue first, educate later'' position. As our experiences indicate, the HCFA regulations and coding procedures are confusing enough that lawyers could spend weeks arguing over how to interpret them. Obviously, a medical practitioner who should, after all, spend most of his time helping his patients and ministering to them, should be treated differently than lawyers. Our experience in this case almost convinces us that the government is bent on turning everyone in the country into a lawyer, at least a part-time one, with the deluge of regulations that we are expected to comply with in order to function in modern society.
Only four days after our first meeting with the assistant U.S. Attorney, on January 11, 1993, at a hastily called press conference, then U.S. Attorney Jay Stevens told the media that as part of a ''major health care fraud enforcement initiative,'' a lawsuit was being filed against local psychiatrist George O. Krizek and his wife Blanka for submitting ''8,002 fraudulent multiple billings for patients' psychoanalytic sessions,'' with potential fines of $81 million. All day long, the local television and radio stations carried the story. Several patients and friends called to tell us that they had seen the news report. In the complaint filed that same day, we were accused of ''medically unnecessary'' patient treatments, and of using the wrong billing codes to claim reimbursement for my husband's services. There was still no explanation of where the Government's numbers came from, or the specific patients to which the government was referring.
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In the Spring of 1994, we endured a three-week trial during which the Government lost on almost every part of its complaint against us. Based on the testimony of Dr. Krizek and other witnesses, no ''medically unnecessary treatment,'' ''upcoding'' or ''miscoding'' were found by the Court. The Court criticized directly HCFA for interpreting its codes in a way that was incomprehensible to the medical community. About 50 doctors, nurses and social workers provided oral or written testimony about Dr. Krizek's exceptional care of patients, many of whom were seriously mentally ill, poor, and/or homeless. One patient testified that Dr. Krizek had repeatedly saved his life.
The Government had not found one patient who would testify against my husband. We were also able to prove that the Government's one medical expert witness, Dr. Harvey Resnik, had barely read the patient charts that he was testifying about. The Government repeatedly tried to misuse its own statistics. The HCFA fraud coordinator testified that my husband's use of psychotherapy code 90844 was the ''most aberrant of them all.'' When the Court ordered HCFA to produce its own printouts, it was revealed that two-thirds of other Washington-area psychiatrists used the code more often than my husband for the same kinds of treatments. While Dr. Krizek's income between 1986 and 1992 was about $100,000 a year and his total Medicare income for this period totalled about $250,000, the printouts revealed that some of his colleagues received up to five times more from the program. The HCFA investigators were found, in the Court's words, to be trying to ''spin the Court'' with its unfounded theories of the case, and the Court threatened to dismiss the lawsuit.
In fact, Washington Hospital Center records revealed that Dr. Krizek was one of the most cost-effective doctors for the Medicare and Medicaid programs, since he consistently had one of the shortest lengths of stay for admitted patients. When confronted with its misuse of its own statistics, HCFA represented that it would soon bring lawsuits against the other doctors listed on its printouts.
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When the Court finally issued its opinion, however, the case took a bizarre twist for us. Although the Court ruled against the Government on all the elements of the original complaint, the Court found liability on the novel theory that my husband would be ''presumed liable'' under the False Claims Act for all medical services provided in excess of nine working hours on any one day. Can you imagine? Under such an absurd standard, all of the professionals in Washington, including many, if not all, members of this Committee and their staffs, would be guilty of a quasi-criminal act if they drew a portion of their paychecks from the Medicare and Medicaid program. In fact, the records produced in our case had documented that Dr. Krizek had often worked very long days at the 800-bed hospital with which he was affiliated, especially on days when he was on call or covering for other doctors who were on vacation or otherwise absent. Based on this new theory of liability, the Court ordered us to pay $47,000 for services rendered in excess of nine hours in the six-year period, plus an additional penalty of $10,000 per patient, per treatment involved. The Washington Psychiatric Society attempted to intervene in the case to explain that hospital-based psychiatrists providing critical care sometimes had to work around the clock. But this was to no avail. It is our personal belief that the Court, while rejecting of necessity the lion's share of the government's claims felt obligated to throw the government a bone, especially after the government had invested so much in such a high-profile case.
Both we and the Government appealed the District Court's decision. We were outraged by the arbitrary amount of the judgment, while the Government felt that the judgment was too low, and demanded a total of $5,750,000 in damages. The Association of American Physicians and Surgeons (AAPS) wrote an amicus curiae brief on our behalf at the Court of Appeals. The Government's sole reason for appealing seemed to be to squeeze as much money out of our case as possible. 'Don't worry, Doctor,' one participant declared, 'we'll leave you enough to live comfortably in the old country.' Another participant asserted that because the Government had invested so much money and so many resources in our case, they would ''never'' be willing to walk away empty-handed.
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Meanwhile, the battle continues between the medical community and HCFA to try to clarify the use of the byzantine HCFA billing codes. Doctors, tired of continuously changing definitions and a lack of explanation, want HCFA to come up with a system that they can use without being accused of fraudulent billing. After years of paying social workers more money than board-certified doctors for submitting requests for reimbursement under the same psychotherapy code, 90844, HCFA finally appears to be recognizing that doctors render greater services in that they medically diagnose and evaluate patients. Last year, more importantly, HCFA finally began accepting 24 codes, rather than the original four, to reflect the great range of services provided by a psychiatrist. This year, implementation of further changes to the billing codes for psychiatrists were delayed, because both doctors and HCFA had to conclude that the new codes were still too confusing and too difficult for doctors to use. It is our deeply-held view that until these administrative problems are worked out, the government should concentrate its prosecutorial and enforcement resources on clear cases of fraud, instead of bringing cases like ours based on complicated theories and assumptions about how billing codes should have been, but are not, used by the medical community as a whole.
Our trial had a sad human aspect. For twenty years, until the fall of Communism, we had not been able to return to our homeland. Ironically, although travel was now possible, when my husband's 87-year-old mother was dying in Prague, my husband could not be with her in her last days because of the trial. She died knowing that her son was being sued in his new country by the Government.
One year after the trial, pending appeal, the Government placed a freeze on all of our assets, including our home. In January 1996, Dr. Krizek was diagnosed with cancer and operated on. When our daughter tried to meet with the Assistant U.S. attorney to tell him about her father's critical illness and to request a removal of the freeze, the Assistant U.S. Attorney had her escorted out of the building by armed security guards.
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In its sixth year, our case is now on remand back before the District Court. We still live and breath this nightmare daily. Although we have won victories along the way, we are no match for the Government, with its endless resources and apparent willingness to stay in the ring until we are exhausted and defeated and give up the fight. Because of this case, my husband has had to close his practice and has lost his health. Although we have both been intensely patriotic in our new country, we must now step back and question whether what we have experienced at the hands of Government investigators and prosecutors meets any possible definition of democracy or due process.
Having had many of its legal theories foreclosed by the Court of Appeals, the government is now back in court attempting to prove that of the 1,825 days it originally claimed my husband billed falsely for, violations of the law occured on 5 of those days, three of which were spent working around the clock because my husband was covering for another doctor on vacation. We can only hope that the Court will see fit this time to reject the government's claim that my husband billed improperly for any of those 5 days, since this claim is based on making counterfactual assumptions about how long particular treatments lasted. The treatments in question were often billed under codes that had no durations associated with them in the government's regulations. Thus, we find it hard to see how we can be found liable for submitting a false claim simply because the government wants to assume that these treatments lasted for a particular period of time. We can only hope these common-sense arguments prevail this time around.
My husband and I spent the first half of our lives first under the Nazi occupation and then under Communism in our native Czechoslovakia. Under Hitler and Stalin and even in Red China, the terror started by selecting average but ambitious young people who were taught how to hate others, how to use arms, and then to use these new and unchecked powers against their fellow citizens. That was how class struggle was fomented, through denouncing and informing on your neighbors, by instilling fear. Today, the armies of new ''special agents'' of the regulatory bureaucracy, driven by a bounty system, are apparently being trained in a seemingly less, but we think, even more dangerous way. The new way is insidious, more deliberate, cleverer, but the tyranny and the loss of liberty can often be as great.
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The country should wake up. The uncontrolled use of the False Claims Act might be only the beginning, the first wave in an attempt to turn the misinterpretation of confusing regulations into massive civil liability, or even crimes. Democracy can be destroyed quickly if the system of checks and balances stops functioning.
My husband and I have been fighting for years, and we are exhausted. It is up to you, our lawmakers, to fight not only for us but also for other doctors unjustly prosecuted under this perverse law or otherwise subjected to abuses of administrative authority throughout the country. We can only put our trust in your integrity. Thank you.
Mr. GEKAS. We thank the lady. We turn to Dr. Krizek. There's no additional testimony. That is the testimony for both
Mr. GEORGE KRIZEK. That's the testimony for both, Mr. Chairman.
Mr. GEKAS. I thank the gentleman.
I will now yield to the gentleman from New York for a period of questioning.
Mr. NADLER. Thank you, Mr. Chairman.
Let me say, first, that I want to join the gentleman from Massachusetts in saying, with regard to Mr. Unser, that I, too, have sympathy for what you've gone through. I, too, question, based on the facts given us, the intelligence and the exercise of discretion by the agency. What I was trying to say before was that the complaint seems to be against the exercise of discretion of the agencylack of intelligent discretionbut not against the underlying regulations or the law.
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Coming down to the Krizeks, as I understand what that you're saying, the U.S. Attorney filed the lawsuit based on the law alleging fraudulent billing. Correct?
The court found fraudulent billing?
Ms. BLANKA KRIZEK. No, they didn't.
Mr. NADLER. The court did not find fraudulent billing?
Ms. BLANKA KRIZEK. Sir, the court didn't find fraudulent billing.
Mr. NADLER. What did the court find?
Mr. GEORGE KRIZEK. The court decided that every work which I performed in the hospitalthe hospital has 800 beds. I had to work on some weekends for other psychiatrists who were out of town. So I covered, for example, for four other psychiatrists and myself. I had to be on-call and on duty sometimes 48 hours, sometimes 72 hours. I had to be there because they left; there were new patients coming through the emergency room. The court decided that all the work which were billed over 9 hours daily, they're evaluated as false claims.
Mr. NADLER. Okay, so the court, based on its assumption, its incorrect assumption, that nobody would work more than 9 hours a day, found that you had submitted false claims.
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Ms. BLANKA KRIZEK. That's correct.
Mr. NADLER. Okay. So the U.S. Attorney filed a lawsuit alleging violations of false claims, alleging fraudulent billing. The court, based on that assumption, found fraudulent billing, and you're saying that the court had no business finding that because it was an assumption and the evidence is the other way. That, in fact, you did spend more than 9 hours and there was no basis for the court's assumption, right?
Dr. GEORGE KRIZER. Sir, I am not a lawyer.
Mr. NADLER. In other words, what you're saying is that the court was wrong in assuming that you didn't work more than 9 hours a day?
Ms. BLANKA KRIZEK. That's correct.
Mr. NADLER. Okay. So its finding a fraudulent billing that was based on that wrong assumption was wrong?
Ms. BLANKA KRIZEK. That's my opinion.
Mr. NADLER. Fine, fine. Okay. Assuming that that's correct the court was wrong in making an assumption and the problem is with the court. How is the problem with a wrong law? In other words, what this hearing is supposed to be about is about agencies overreaching beyond what Congress authorized them to do. What you're complaining about is that the U.S. Attorney wrongfully prosecuted, and that's a problem with the U.S. Attorney's office; that the judge made a wrong decisionand that's on appealand that's a problem with the judge.
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In what way are you saying that the agency, other than the wrong exercise of discretionI mean, understand, every agency has to exercise discretion, whether the agency is the police person on the beat or the Secretary of Agriculture. They have to exercise discretion. They have to decide: We ought to prosecute this case; we shouldn't prosecute this case. The evidence seems to indicate there's a problem here; the evidence seems to indicate there isn't a problem here. There seems to be a problem here, but we shouldn't bother with it because it's not important enough. They have to decide those things. Somebody's got to make those decisions.
We can criticize the decisions they make. The question I have is, aside from criticizing the decisions they make, because Congress can't sit on top of every agency administrator and decide you're right here and you're wrong there, the subject of this hearing, which presumably your case is supposed to illustrate, is that we have to reign-in the agency in some systematic way because they're systematically going beyondnot making wrong decisionsbut going beyond the power that Congress granted them. Do you think that's the case here?
Ms. BLANKA KRIZEK. Yes.
Mr. NADLER. In what way?
Mr. GEORGE KRIZEK. Well, I think that the doctors should be mostly considered as people who are helping other people, not to be somebody who is subject to mistrust and to be subject to some laws which probably were good during the Civil War, but not at the present time.
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For example, the approach of the agency investigating me, they came to my office and tried to say that I did bill for patients who did not exist. When they couldn't prove this, they said, yes, those people did exist but you didn't see them. When they couldn't prove this, they said, yes, you did see them, but you didn't see them as long as you said you saw them face-to-face, and after all that, they tried to say that the treatment of these people was not medically necessary. Because, No. 1, they believed that I am a psychologistthey were not able to distinguish what is a medical doctor, a psychiatrist, as I am, and what is a psychologist, who is not a medical doctor.
Mr. NADLER. Dr. Krizek, I appreciate what you're saying. I, myself, think that the problem is not that the agencies are going beyond what Congress said, but that the agencies, for a variety of reasons, are exercising very poor discretion and are in some cases persecuting citizens, such as yourself. Perhaps what we ought to do to prevent this kind of thing is to put some sort of penalty on the agency, require some sort of restitution, when they make allegations, require larger amounts of time and effort in legal expense when they don't prove their case.
Mr. GEKAS. The time of the gentleman has expired, and he has put his finger on a reason for establishing this hearing today: to determine what Congress can do, just like the gentleman from New York has suggested, to see whether discipline can be applied to the agencies who abuse discretion. I think the gentleman is absolutely correct that the Congress has a role in determining in what way the enforcement agencies are abusing discretion and to see what penalty should apply to the agencies themselves for such abuse.
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Mr. DELAHUNT. Yes. I probably should tell Dr. Krizek and Mrs. Krizek that I happen to be the lead Democrat sponsoring a bill which would make some changes in the False Claims Act. Because what you have testified to is something that I have heard from a number of hospitals. The American Hospital Association approached me several months ago because of their experience with the Department of Justice in terms of the application of the False Claims Act. As I investigate on my own, the final paragraph of your testimony, which I will read again because I think it is very apropos, I think it really underscores the problem that you face, and that others in the medical community face, and that is the continuing tension between the medical community and HCFA over the use of Byzantine billing codes. There is nobody in the United States Congress who could actually explain in clear terms that would be comprehensible to everyone what these billing codes are all about.
It really is incumbent upon Congress to, not just change the laws, but to take a look at a very fragmented system, and try to make some sense out of it, to support the agencies and their missions. I think it's important that you understand that Congress bears some responsibility for this situation, because here's what we've done:
Last year, Congress passed a budget that reduced spending on Medicare by some $119 billion over a 5-year period. Implicit in that was that you've got to go out and you've got to find savings. About the same time, there were antifraud initiatives at the national levelwe know that there is fraud and abuse in every system. What we then do is send a message, or direct these agencies to take this message and extend it beyond a sensible, moderate approach and create the kind of confusion and the kind of turmoil and the kind of reaction that prompts people like yourself, people like hospitals, people like nursing homes, to come to Members of Congress and say, ''We're not criminals. We're not doing anything. We have difficulty in understanding what you want from us. These billing codes, you need a computer and a full team of accountants and lawyers to figure it out. Make it easy for us. Make it easy for us.''
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But at the same time, what we're doing in the system, by reducing healthcare spending by the Federal Government, we are looking to make up for that deficit of $119 billion and we're creating initiativesalbeit well-intentionedto eliminate fraud and abuse. What we're creating is an extreme reaction that hurts innocent people. In my opinion, it's going to have a deleterious impact on the American healthcare system, and it's important to rein it in.
Ms. BLANKA KRIZEK. Thank you, sir.
Mr. GEKAS. We thank the gentleman. The gentleman from Massachusetts has confirmed our feeling that the Congress, as it is doing today through this committee, should be looking at a system that is not applying standards of common application of discretion with individual cases to determine how the rules, the codes, and all of the other things might be misunderstood, not made clear. That's what the purpose of the subcommittee is and that's what the purpose of Congress is.
Mr. DELAHUNT. If the chairman would grant me just an additional minute, I think it's important to note that I have initiated a series of meetings between the American Hospital Association and officials and representatives at the highest levels of the Department of Justice, along with HCFA, and representatives of Health and Human Services, in an attempt to sit down, discuss, and, hopefully, come in with a rational approach to what is truly fraud and abuse.
I daresay there is nobody in this room who would countenance fraud and abuse. We have zero tolerance for fraud and abuse, but let's take a thoughtful approach that doesn't hurt the innocent victim. We are, hopefully, making some progress.
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Mr. KRIZEK. Thank you.
Mr. GEKAS. The gentleman from Massachusetts is correct. Many of us have joined in an effort to try to undo some of the Justice Department's visitations of hospitals in this very same genre of alleged violations, et cetera. Again, it's either one of two things. Either the agency is going beyond its authority, which, giving it the benefit of the doubt, they may not be, but then, if they are not, they're abusing discretion or not understanding clearly what the Congress intended. Therefore, the Congress might be at fault for not making clear what their intent is in the first place, in the promulgation of the law that leads to promulgation of regulations that do not allow for proper exercise of discretion.
With that, we turn to Mr. Goodman for his testimony.
STATEMENT OF STEVEN A. GOODMAN, JSG TRADING CORPORATION, TINTON FALLS, NJ
Mr. GOODMAN. Mr. Chairman, members of the committee, thank you for allowing me the opportunity to appear here today. My name is Steve Goodman. I'm president of JSG Trading, a small New Jersey corporation engaged in interstate produce business.
Since it started operating in 1988, JSG has gradually grown from a desk and a telephone in a room of my house to a company of five full-time salesmen, a transportation manager, two secretaries, its own office building, and an industry credit rating of over $2 million, with an excellent reputation for fair and honest trading.
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JSG purchases truckload quantities of fresh produce from the origin growers and shippers and then resells the produce to wholesale receivers. We have also grown, packed, and marketed our own tomatoes. JSG, like all other businesses operating legally in the produce business, is licensed under the Perishable Agricultural Commodities Act, commonly referred to as PACA. Unlike many produce firms, JSG is a fully capitalized company that is able to pay all of its debts and suppliers without having to depend on collection of its account receivables, and pays its bills in accordance with its agreements and USDA regulations.
In February 1993, USDA investigators showed up unannounced at JSG's office in New Jersey and demanded to be given access to all of the company's records in order to investigate a complaint the Department had received. They refused to give us any information concerning the complaint except to say that it generally involved an ''unfair trade practice.''
I flew back from California the next day, and the agents began their search, still without giving us any indication of what they were investigating. I later learned that they were acting on an anonymous tip the USDA had received about 3 days after I fired one of JSG's salesmen for apparent embezzlement. We since obtained a court judgment against the man for more than $30,000 for the fraud he perpetuated on us.
The Department's investigators spent 2 weeks combing through JSG's records and files. From computer records, financial records, to bank accounts, to thousands of transaction files, they were given everything they asked for, and made well over 5,000 copies of documents. Only on the last day in our office did they finally tell me that they were investigating a charge of commercial bribery.
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Department investigators next went to several of JSG's customers and apparently told them that we were paying bribes to their employees. Several of the customers stopped doing business with us. When one of those customers went further and refused to pay for the produce they had received, we had to sue them. The customer stated in its answer to a Federal Court complaint that it was told by the USDA investigators not to pay JSG for the shipments of produce. After JSG spent thousands of dollars in attorneys' fees, the Federal Court ordered the ex-customer to pay the $13,000 it owed for what it had received.
The USDA filed a formal complaint against JSG charging us with a scheme of commercial bribery involving others who acted as purchaserscustomers' produce buyers. Because of the potential disastrous effect on JSG's business reputation, we asked that the USDA case docket be sealed during the case; USDA refused.
After the district court declined to grant an immediate injunction sealing the docket so that information about the case would not be leaked to the industry, the Washington correspondent for the produce industry's largest trade newspaper, The Packer, got an anonymous tip from someone inside the USDA to look at the complaint in the case docket. News of the complaint's allegations was then quickly spread across the country. The Department repeated its publication as soon as the ALJ filed his decision in the case last June, even though we had the right to appeal and even though the PACA law specifically states that the Secretary may publish only final decisions.
Between the time the complaint was filed in 1993 and the trial in 1995, we had several meetings with the USDA officials here in Washington to explain the transactions and events which they alleged constituted the corruption we were accused of, and tried to resolve the case. They were not interested in any explanations. We offered to pay a large sum of money as reparation for any harm done if they would tell us who should be paid and in what amounts. Our attempts and offers to settle the case without the cost of the hearing were all brushed aside. The Department was demanding nothing less than the destruction of our business, and our attempts to resolve the case, on some rational basis, fell on deaf ears.
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The PACA's officials were apparently not satisfied with their efforts to destroy my company and the people involved in the case. Prior to the start of the hearing, the prosecuting attorney from the Department's Office of General Counsel, plus their lead investigator in the case, went to the customers who were being called as government witnesses at the trial. Under the guise of preparing their witness' testimony, proceeded not to discuss what the witnesses knew about the situation but rather spread before the people JSG's confidential internal financial records and transaction files, apparently, in an effort to make them angry and improperly influence their testimony. At the hearing, witnesses who had been shown the records were never asked to testify about them. We finally notified the USDA's own Inspector General's Office about what had occurred, but, as far as I know, nothing has been done about such outrageous behavior.
The formal hearing was held in late 1995 before a USDA ALJ whose experience, I'm informed, had been primarily with PACA license complaints where the Department seeks revocation of an offending company's produce license for failure to timely pay its suppliers for produce shipments, and has never ruled against the Department in any case referred to him. The ALJ finally filed his decision in June 1997. To no one's surprise, he ruled against JSG, and before we could even ask for the docket to be sealed, the Packer newspaper got another tip and published the results of the decision. We are currently appealing the ruling.
I wish the panel to understand that I firmly believe that commercial bribery is evil and wrong and it strikes the heart of our free enterprise system. Commercial bribery is a felony in New York, where all of the events in my case took place, and it is also a crime in New Jersey, where I live and work. It not only corrupts the people involved, but also makes unattainable that part of the American dream that hard work and honesty will result in success for ourselves and our children.
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In years past, I was approached by potential produce customers, representatives with business that I could have paid to get. I refused to and I never regretted my decision, although, undoubtedly, I could have made a lot more money if I had decided to play the game.
There are, however, two parts of the case that I will use to illustrate what I feel to be the biased, mean-spirited, and heavy-handed way the entire case has been handled.
One of the gentlemen we were accused of bribing, Mr. Tony Gentile, was a salesman and buyer for one of my produce customers in New York. Tony and I have been close personal friends for almost 14 years. He taught me everything I know about the wholesale fresh tomato business. Tony and I also started a small trucking company in 1989 with the full knowledge and consent of the company he worked for. We had three refrigerated 18-wheeler trucks that we dispatched up and down the East Coast carrying all kinds of produce, perishable freight, as well as produce for JSG and Tony's employer. Since Tony obtained a lot of shipments from his contracts in the New York produce market and would be on-call to check the trucks and their loads both in New York and in Floridawhere he spent the winter monthsthe trucking company decided to lease a business car for his use in May 1990. The ALJ ruled that the cara Mercedeswas actually leased by Tony and paid for by JSG as a bribe, even thought the documents in the case record prove that our trucking company leased the car. When we appealed the ALJ's decision to the USDA judicial officer
Mr. GEKAS. Without objection, the witness will be accorded another 2 minutes.
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Mr. GOODMAN [continuing]. Specifically pointed out the error. The judicial officer ignored the unquestionable proof in the documents, refused to correct the error, and held that the car was a bribe made to induce Tony to buy more tomatoes from JSG, when, in fact, he actually purchased less than from JSG than he had in the past. The ALJ ignored the undisputed facts in order to support the Department's interpretation of the case.
Tony Gentile was stricken with prostate cancer in August 1990 and had to undergo radical surgery and extensive radiation and chemotherapy treatments. The illness forced him into early retirement from his salesmen job, although Tony continued to act as the customer's outside tomato buyer. He continued to help with our trucking company. In the summer of 1992, we got the wonderful news that medical tests showed that Tony had remained cancer-free for 2 years since the surgery. To celebrate his second-year milestone as a cancer survivor, I bought tony a stainless steel Rolex watch and gave it to him at his birthday that summer. Both the ALJ and the judicial officer have decided that my gift to my friend, teacher, and trucking partner was a bribe.
PACA, while stating that the fact that commercial bribery is a serious crime, has completely removed the usual requirement that evidence of guilt intent should be shown. When it comes to violations of the PACA, whether for the nonpayment of suppliers or commercial bribery or anything in between, it is irrelevant whether the person being prosecuted meant to do anything wrong or not.
I now have seen firsthand that what I thought was a basic part of our legal systeminnocent until proven guiltyis, in practice, more of a myth than any of us choose to believe. I've seen firsthand a regulatory agency of my own Government that is more intent on using legal processes to destroy the businesses it is entrusted with overseeing than it is with correcting good-faith mistakes and encouraging fair trading, apparently, all in the name of enforcement. I have now seen firsthand how small businesses, such as mine, are used as examples, so that their destruction may strike terror to others, while large companies, arguably engaged in massive dishonesty, either escape scrutiny entirely or receive a governmental wrist slap. USDA wants JSG to be put out of business and its employees thrown out to try and find new jobs, when at the same time Sun Diamond Growers, a major California agri-business cooperative that was convicted of paying bribes and illegal gratitudes to the Secretary of Agriculture, Michael Espy, has merely to pay a fine and have its members' books audited for a few years.
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[The prepared statement of Mr. Goodman follows:]
PREPARED STATEMENT OF STEVEN A. GOODMAN, JSG TRADING CORPORATION, TINTON FALLS, NJ
Mr. Chairman and Members of the Committee,
Thank you for allowing me the opportunity to appear here today.
My name is Steve Goodman. I'm President of JSG Trading, a small New Jersey corporation engaged in the interstate produce business.
Since it started operating 1988, JSG has gradually grown from a desk and a telephone in a room of my house to a company with five full time salesmen, a transportation manager, two secretaries, its own office building, and an industry credit rating of $2,000,000 with an excellent reputation for fair and honest trading.
JSG purchases truckload quantities of fresh produce from the origin growers and shippers and then resells the produce to wholesale receivers. We have also grown, packed, and marketed our own tomatoes. JSG, like all other businesses operating legally in the produce business, is licensed under the Perishable Agricultural Commodities Act, commonly referred to as the PACA. Unlike many produce firms, JSG is a fully capitalized company that is able to pay all of its debts and suppliers without having to depend on collection of its account receivables, and pays its bills in accordance with its agreements and USDA regulations.
Page 68 PREV PAGE TOP OF DOC In February 1993 USDA investigators showed up unannounced at JSG's office in New Jersey, and demanded to be given access to all of the company's records in order to investigate a complaint the Department had received. They refused to give us any information concerning the complaint except to say that it generally involved an ''unfair trade practice''. I flew back from California the next day, and the agents began their search, still without giving us any indication of what they were investigating. I later learned that they were acting on an anonymous phone ''tip'' the USDA had received about 3 days after I fired one of JSG's salesmen for apparent embezzlement. We since obtained a court judgment against the man for more than $30,000 for the fraud he perpetrated on us.
The Department's investigators spent two weeks combing through JSG's records and files. From computer financial records, to bank accounts, to thousands of transaction files, they were given everything they asked for, and made well over 5,000 copies of documents. Only on their last day in our office did they finally tell me that they were investigating a charge of commercial bribery.
Department investigators next went to several of JSG's customers and apparently told them that we were paying bribes to their employees. Several of the customers stopped doing business with us. When one of those customers went further and refused to pay for produce they had received, we had to sue them. The customer stated in its answer to the Federal Court complaint that it was told by the USDA investigators not to pay JSG for the shipments of produce. After JSG spent thousands of dollars in attorney's fees, the Federal Court ordered the ex-customer to pay the $13,000 it owed for what it had received.
The USDA filed a formal complaint against JSG charging us with a scheme of commercial bribery involving others who acted as customer's produce buyers. Because of the potential disastrous effect on JSG's business reputation, we asked that the USDA case docket be sealed during the case. USDA refused. After the District Court declined to grant an immediate injunction sealing the docket so that information about the case would not be leaked to the industry, the Washington correspondent for the produce industry's largest trade-newspaper, The Packer, got an anonymous ''tip'' from someone inside the USDA to ''look at the complaint in the case docket.'' News of the complaint's allegations was then quickly spread across the country. The Department repeated its ''publication'' as soon as the ALJ filed his decision in the case last June even though we had the right to appeal and even though the PACA law specifically states that the Secretary may publish only final decisions.
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Between the time the Complaint was filed in 1993 and the trial in 1995, we had several meetings with the USDA officials here in Washington seeking to explain the transactions and events which they alleged constituted the corruption we were accused of, and tried to resolve the case. They were not interested in any explanations. We offered to pay a large sum of money as reparation for any harm done if they would tell us who should be paid and in what amounts. Our attempts and offers to settle the case without the costs of a hearing were all brushed aside. The Department has demanded nothing less than the destruction of our business, and our attempts to resolve the case on some rational basis fell on deaf ears.
The PACA's officials were apparently not satisfied with their efforts to destroy my company and the people involved in the case. Prior to the start of the Hearing, the prosecuting attorney from the Department's Office of General Counsel, plus their lead investigator in the case, went to the customers who were being called as government witnesses at the trial, and, under the guise of ''preparing'' their witnesses' testimony, proceeded not to discuss what the witnesses knew about the situation, but rather spread before the people JSG's confidential internal financial records and transaction files, apparently in an effort to make them angry and improperly influence their testimony. At the Hearing the witnesses who had been shown the records were never asked to testify about them. We finally notified the USDA's own Inspector General's office about what had occurred, but as far as I know, nothing has been done about such outrageous behavior.
The formal Hearing was held in late 1995 before a USDA ALJ whose experience, I'm informed, had been primarily with PACA license complaints where the Department seeks revocation of an offending company's produce license for failure to timely pay its suppliers for produce shipments, and has never ruled against the Department in any case referred to him. The ALJ finally filed his decision in June, 1997. To no one's surprise, he ruled against JSG, and, before we could even ask for the docket to be sealed, the Packer newspaper got another ''tip'' and published the results of the decision. We are currently appealing the ruling.
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I wish the panel to understand that I firmly believe that commercial bribery is evil and wrong and that it strikes at the heart of our free enterprise system. Commercial bribery is a felony in New York where all of the events in my case took place, and it is also a crime in New Jersey where I live and work. It not only corrupts the people involved, but also makes unattainable that part of the American Dream that hard work and honesty will result in success for ourselves and our children. In years past I was approached by potential produce customers' representatives with business that I would have to ''pay to get.'' I refused, and have never regretted my decision although undoubtedly I could have made a lot of money if I had decided to play their game.
I don't wish to burden this Hearing with a blow-by-blow description of every aspect of my case with USDA that has taken years, many tens of thousands of dollars in costs, and untold sleepless nights for myself, my family, and the other people involved, to reach its present state; especially since the case is still being appealed. There are, however, two parts of the circumstances involved that I will use to illustrate what I feel to be the biased, mean spirited, and heavy handed way the entire case has been handled.
One of the gentlemen who we are accused of bribing, Mr. Tony Gentile, was a salesman and buyer for one of my customers in New York. Tony and I have been close personal friends for almost fourteen years, and he taught me almost everything I know about the wholesale fresh tomato business. Tony and I also started a small trucking company in 1989 with the full knowledge and consent of the company he worked for. We had three refrigerated 18-wheeler trucks that we dispatched up and down the East Coast carrying all kinds of perishable freight, as well as produce for JSG and Tony's employer. Since Tony obtained a lot of the shipments from his contacts in the New York produce market and would be on call to check the trucks and their loads both in New York and in Florida where he spent the winter months, the trucking company decided to lease a business car for his use in May of 1990. The ALJ ruled that the car, a Mercedes, was actually leased by Tony and paid for by JSG as a bribe even though the documents in the case Record prove that our trucking company leased the car. When we appealed the ALJ's decision to the USDA Judicial Officer and specifically pointed out the error, the Judicial Officer ignored the unquestionable proof in the documents, refused to correct the error, and held that the car was a bribe made to induce Tony to buy more tomatoes from JSG when, in fact, he actually purchased less from JSG than he had in the past. The ALJ ignored the undisputed facts in order to support the Department's ''interpretation'' of the case.
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Tony Gentile was stricken with prostate cancer in August of 1990, and had to undergo radical surgery and extensive radiation and chemotherapy treatments. The illness forced him into early retirement from his salesman's job, although Tony continued to act as the customer's outside tomato buyer, and he continued to help with our trucking company. In the Summer of 1992 we got the wonderful news that medical tests showed that Tony had remained cancer-free for the two years since his surgery. To celebrate his Second-Year milestone as a cancer survivor, I bought Tony a stainless steel Rolex watch, and gave it to him on his birthday that Summer. Both the ALJ and the Judicial Officer have decided that my gift to my dear friend, teacher, and trucking partner was a bribe. PACA, while stating the fact that commercial bribery is a serious crime, has completely removed the usual requirement that evidence of guilty intent should be shown. When it comes to violations of the PACA, whether for non-payment of suppliers or commercial bribery or anything in between, it is irrelevant whether the person being prosecuted meant to do anything wrong or not.
I have now seen, first hand, that what I thought was a basic part of our legal system, ''innocent until proven guilty'' is, in practice, more of a myth that any of us choose to believe. I have seen, first hand, a ''regulatory'' agency of my own government that is more intent on using legal processes to destroy the businesses it is entrusted with overseeing, than it is with correcting good faith mistakes and encouraging fair trading, apparently all in the name of ''enforcement.'' I have now seen, first hand, how small businesses such as mine are used as ''examples'' so that their destruction may strike terror into others, while large companies, arguably engaged in massive dishonesty, either escape scrutiny entirely or receive a governmental wrist slap. USDA wants JSG to be put out of business and its employees thrown out to try to find new jobs, when at the same time Sun Diamond Growers, a major California agri-business cooperative that was convicted of paying bribes and illegal gratuities to the Secretary of Agriculture, Michael Espy, merely has to pay a fine and have its members' books audited for a few years.
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Mr. Chairman, Members of the Committee, there is something seriously wrong with a system that allows, apparently even encourages, a government agency to investigate and prosecute based upon half the facts and circumstances, and then to try completely destroy, through a pattern of backdoor, incomplete and inaccurate press releases, a business and the personal reputations of its owners that have been built over years of honesty and fair dealing. It cannot be fair for a government agency to force the object of its institutionalized anger, without the vast resources of the Federal government, to ''prove'' the rest of a story before a supposedly impartial judge who has never ruled against that same Agency that pays his salary. An agency which apparently allows its legal staff to tamper with or improperly try to influence the testimony of hearing witnesses is an agency and tribunal with a fatal flaw. I have come to truly understand my attorney's statement at the hearing that a half truth is the worst kind of lie because it can't be disproved, only explained. It is even worse when the explanation falls on ears that are intentionally deaf to the truth.
As I sit here today and address you, I wonder about one of my other co-defendants in the case, an honest, hardworking man, whom we paid for work he performed for me. Although accused of taking bribes, the man couldn't afford a lawyer to represent him at the Hearing so he had to try to be his own attorney. He couldn't afford to buy a copy of the 3,300 page transcript of the Hearing, and wasn't able to pay an attorney to appeal the ALJ's decision. Consequently, even though I and my company continue to fight, he has been banned from working in the only business he knows, even though neither he nor I thought that what we did was wrong, let alone that it amounted to the crime of commercial bribery. That seems offensive to me in a country which prides itself on the fundamental principal that a person shall not be deprived of his property without due process through a fair and impartial hearing.
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I wish to thank you for this opportunity to relate my experience with the USDA's PACA Branch. I do indeed wish you success in your efforts to ''level the field'' between government and governed, between regulators and the people whose lives and livelihood they control. Some of you on this Committee may remember the near repeal of the PACA in 1995 and the changes to the statute that grew out of the anger of many of the people who operate under its rules. The tactics and means still being used by the USDA's PACA Branch to enforce their policies, if not their arbitrary wielding of personal power, will only renew the dissatisfaction of the people in this country who must deal with this agency.
One of the major changes to the PACA law in 1995 allowed the USDA to impose fines instead of just having to revoke produce companies' licenses for violations of the PACA. That change was actually requested by the USDA officials who testified before Congress. Since the new PACA provisions became effective in 1995, USDA has apparently refused to use the very same ''civil penalty'' option that they, themselves, stated they wanted. USDA's continuing to simply revoke PACA licenses and destroy businesses is not only the opposite of what they testified they wanted to do, but it is also the opposite effect of what the new Small Business Regulatory Enforcement Fairness Act seeks to accomplish. I've been told that under the Regulatory Fairness Program established under S.B.R.E.F.A., the Small Business Administration is currently handling a number of complaints against the USDA's PACA Branch from people in the produce business including JSG, and I encourage you to speak with Mr. Peter Barca, the S.B.A.'s National Ombudsman for the RegFair Program, about that situation.
I urge you to look deep, ask the tough questions, and then take corrective actions to prevent a continuation of the way the PACA is presently being administered and enforced. I most strongly urge you to take steps to halt the kinds of actions by the USDA and its staff that have led to the tainted and biased proceeding that I and my company have been involved in for the last five years.
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Mr. GEKAS. We thank the gentleman. The written statement has been made a part of the record, so some of the questions that will be posed to you will be drawn directly from even that part that you had not orally presented.
Mr. GOODMAN. Okay.
Mr. GEKAS. One question at the outset that the Chair has, you claim in your statement that the Espy case at the Department of Agriculture, that ''X'' was found to be the fine that Mr. Espy should pay. How does that differ from what happened in your case?
Mr. GOODMAN. Well, Sun Diamond Foods
Mr. GEKAS. Pardon me.
Mr. GOODMAN. Sun Diamond Foods is licensed under the PACA, USDA, just as I am.
Mr. NADLER. What's the PACA?
Mr. GOODMAN. Perishable Agriculture Commodities Act. They were convicted of basically bribing the Secretary of Agriculture. They were given monetary fines and, as their punishment, they have to reporta reporting procedure was implemented. So that, instead of putting them out of business like they're trying to do with JSG Trading, they could stay in business and just report every quarter that they're no longer continuing such activities.
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Mr. GEKAS. And what did they do to your company?
Mr. GOODMAN. Well, as of right now, we're under appeal, but they're trying to take my small business and put us out of business, whereas, the larger companies such as Sun Diamond Foods, Cisco Food Systems, Tysons Foods
Mr. GEKAS. In what way are they trying to put you out of business? What is the determination that was made by the agency or the court to, in effect, put you out of business? Did they say you have to close down?
Mr. GOODMAN. Yes. In order to be in the fresh produce business, we have to be licensed by the USDA. If the USDA finds you guilty of breaking their laws, they will revoke your license.
Mr. GEKAS. I understand.
Mr. GOODMAN. They could have revoked Sun Diamond's license. They could have revoked Cisco's Systems' license, but those are large companies. Small companies, like myself, are expendable, so they choose to put us out of business.
Mr. GEKAS. What I draw from that, which is an important part of what Congress must look at it, is the disparity of treatment between one set of citizens and another, having to do with how an agency applies or abuses its discretion. That is very vital to the chairman and is what we're really trying to determine at hearings like this.
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Mr. GOODMAN. If I may say something, excuse me?
Mr. GEKAS. Yes, yes.
Mr. GOODMAN. In 1995, Congress specifically addressedbefore 1995, USDA or PACA had no provisions to impose monetary fines. So if a company was found guilty, they automaticallythey received license revocation. But in 1995, Congress changed that and gave them, at their own request, the ability to impose fines. Now one step further, in 1996, Congress enacted SBRFASmall Business Association
Mr. GEKAS. Yes.
Mr. GOODMAN. The USDA, we have spoken to them on many occasions, and USDA does not seem to want to comply with either one of Congress' wishes.
Mr. GEKAS. That's interesting, because one of the things we tried to do with SBRFA was exactly what the gentleman refers to, and that is how the agency was to undergo certain procedures before it can come to its ultimate conclusion on revoking a license or imposing fines. Another reason why hearings like this are important: So that we can determine what Congress should do in those situations in which discretion may be abused. Again, the question recurs.
The gentleman from New York is recognized for 5 minutes.
Page 77 PREV PAGE TOP OF DOC Mr. NADLER. Thank you, Mr. Chairman.
Mr. Goodman, when thewas it the USDAinvestigator showed up unannounced in 1993 to your offices, did they have a warrant?
Mr. GOODMAN. No.
Mr. NADLER. So they never had a warrant?
To your knowledge, does the law provide an exception from the warrant requirement for them for some reason?
Mr. GOODMAN. Yes. We're required to, upon their request, to provide them with all documentations that they request.
Mr. NADLER. So they don't need a warrant to
Mr. GOODMAN. If we refuse to give them what they request, they can revoke our license based on that alone.
Mr. NADLER. So they don't need a warrant?
Mr. GOODMAN. That's correct.
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Mr. NADLER. How do you know that the Department investigators went to your customers and told them you were paying bribes?
Mr. GOODMAN. Well, we were told by our customers who were very concerned
Mr. NADLER. You were told by your customers that they were told that by the USDA?
Mr. GOODMAN. Yes.
Mr. NADLER. Let me just say, if that is true, it's outrageous. They have no business doing thatclearly. Secondlyhow do you know it was USDA that you repeatedly say they leaked word to the newspaper, The Packer? How do you know that?
Mr. GOODMAN. We were just toldwe were just told that.
Mr. NADLER. You were told that by whom, by The Packer?
Mr. GOODMAN. Nowe'reI don't know really. My attorney was told.
Mr. NADLER. Your attorney was told by someone he believed to
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Mr. GOODMAN. Yes.
Mr. NADLER. Okay. When you told the USDA that Tony was an old friend and a former employee of yours and that that watch did not constitute bribery, what was their reaction?
Mr. GOODMAN. Well, I'd like to add one other thing. He's not only an old friend; he's my business partner.
Mr. NADLER. He's your business partner. What was their reaction?
Mr. GOODMAN. They didn't care.
Mr. NADLER. They didn't care. Let me say, Mr. Chairman, every single one of these witnesses has a compelling story which, if true, certainly indicates abuse of discretion by agencymaybe overreaching. I wish we had the agencies here to hear their side of the story because we don't have the court transcripts. It's difficult to form judgment without hearing
Mr. GEKAS. Would the gentleman yield?
Mr. NADLER. Yes, sir.
Page 80 PREV PAGE TOP OF DOC Mr. GEKAS. If time permits, the remaining part of the session, maybe that would be a good second follow-up hearing to warrant conducting
Mr. NADLER. It might be. Based simply on what we're hearing today, we've got some agencies that have; I don't know if they've overreached beyond their statutory authority, but they've certainly exercised judgment and discretion miserably. Maybe there's something Congress can do about thator maybe there's something Congress can do about that in a number of different ways. I would simply observe, and not in mitigation, but in putting this in context that Sunwhat was the name of that company, Sundance Oil?
Mr. GOODMAN. No, no, Sun Diamond.
Mr. NADLER. Sun Diamond.
Mr. GOODMAN. Raisins.
Mr. NADLER. Raisins? All right. Sun Diamond raisins? I don't know where I got the oil business from. Anyway, Sun Diamond raisins, the heinous crime of bribery that they were accused of with respect to Mr. Espy was giving him what, a bowl? Was giving him a bowl, which isn't all that different from the watch. I don't think they were all treated, in terms of penalty, less harshly, which is wrong, but the underlying accusation wasn't all that different from the Rolex watch. One begins to wonder about that case, too, in the same manner as here.
In any event, I want to express to all of you, if what you're saying is trueand I have no reason to assume it isn't, except that I haven't heard the other sideyou've been the victim of at least gross abuse of discretion. What we can do about that other than saying to people, use your heads intelligently, which is not a very effective thing to doI hope we can do more than that; I don't know. But I do hope that we hear from agencies about these cases, to hear their versions. Maybe we can have some suggestions as to what we might be able to do, not so much about agency overreaching because I don't think that's the problem, but it's about misuse of discretion within the statute.
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Thank you, Mr. Chairman.
Mr. GEKAS. We thank the gentleman. The gentleman from Massachusetts is recognized for 5 minutes.
Mr. DELAHUNT. Well, I won't take 5 minutes. I know we have a vote.
Again, I would just echo the sentiments of my friend, Mr. Nadler. I'd also suggest that when you reflect upon stories in the newspaper and comments by political figures about those defendants, they have all the rights. You know, you pick up the paper every day and somebody is accused of a crime, serious crime. Now all of you are people who are sophisticated, educated, and have abilities and opportunities in life that many in this country have not had. I can assure you from my own experience as a prosecutor, someone who has put thousands of people in jail, that there are innocent people who are incarcerated today in America's prisons. Much of it comes from abuse of authority.
When I was a prosecutor, I had the good fortune of having some of the best and brightest lawyers, I daresay, in this nation who worked for me. They were well-trained. The only admonition that I gave them is that we don't keep score; I'm not interested in winning or losing. What I'm interested in is doing the right thing. Treat everybody, whether it be the celebrity, the wealthy, or the poorest person who stands behindor is part of the systemwho stands behind the bar of justice, treat everybody with respect and dignity. So it's been very informative to hear you today.
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But I also would ask you to think that when you pick up a newspaper or watch your news at 6 o'clock, or wherever you get your information, do not rush to judgment. Understand that it is not a perfect system. Understand that there is a very good reason for a Bill of Rights, and that when we talk about defendants having all the rights, well, they don't have all the rights because government is a very, very powerful institution in our society. Thank God, that we have rights when we are accused of crimes. So take that into account, also. Thank you.
Mr. GEKAS. I thank the gentleman.
The committee now will stand in recess for the purpose of allowing members to go to the House chamber, where a vote is pending. We will resume this hearing with an invitation now to the panel, the second panel, to be prepared to testify at 12:15 p.m.
This committee is recessed until 12:15 p.m.
Mr. GEKAS. The time of the recess has expired. We thank the panel for its indulgence. This is one of the rare occasionsI say that advisedlyin which the chairman has failed to appear exactly on time. I was taking inordinate pride in that; now my record is shattered. [Laughter.]
Mr. DELAHUNT. We only consider it a blemish, Mr. Chairman, but we would duly record it, however. [Laughter.]
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Mr. GEKAS. The gentleman from Massachusetts is present; therefore, a hearing quorum is in attendance. We will proceed with the introduction of the second panel.
Jane Orient is a medical doctor with an internal medicine practice in Tucson, Arizona. She is also a writer, editor, and lecturer. Dr. Orient serves as executive director of the Association of American Physicians and Surgeons. She earned her medical degree at Columbia University.
Seated with her is Mr. James DeLong, a writer, consultant, and a lawyer; the principal of the Regulatory Police CenterPolicy Center. Sorry. [Laughter.]
You're fighting the police centerand an adjunct scholar of the Competitive Enterprise Institute. He is a frequent contributor to scholarly, professional, and popular publications. Among other past positions, Mr. DeLong served as Research Director of the Administrative Conference of the United States.
With them, seated at the table, is Roger Marzulla, founding partner of Marzulla and Marzulla. He represents clients in regulatory and administrative law matters before the EPA, Forest Service, the Fish and Wildlife Service, and the Bureau of Land Management. He served for 6 years in the U.S. Justice Department and was Assistant Attorney General in charge of the Environment and Natural Resources Division.
And, seated with them is Jonathan Turley, professor of law at the George Washington University School of Law. He teaches courses on environmental law, environmental criminal law, constitutional criminal procedure, torts, and prison law.
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We will adhere to the policy of the committee in stating at the outset, without objection, that the written statements of the witnesses will be incorporated into the record. Each witness will be accorded more or less 5 minutes to present an oral summary of that written testimony.
We will begin, in the order in which they were introduced, with Dr. Orient. Would you switch on your microphone, please?
STATEMENT OF JANE M. ORIENT. M.D., EXECUTIVE DIRECTOR, ASSOCIATION OF AMERICAN PHYSICIANS AND SURGEONS, TUCSON, AZ
Mr. ORIENT. Thank you, Mr. Chairman. I am a physician. I've been in solo private practice since 1981, and I speak as the executive director of the Association of American Physicians and Surgeons. Neither I nor the Association receive income from the Federal Government; and, unlike many other physicians' organizations, such as the AMA, AAPS does not accept and rely upon revenue resulting from contractual arrangements with the Government, nor do we derive royalties or other revenue from the sale or licensure of products for aiding compliance with regulations. And, I mention this, not only because it is required to do so, but because I think we have a problem not just with the agencies, but with the private, special-interest groups which collaborate with the agencies to their own self-interest.
We note that the Internal Revenue Service has recently been under congressional scrutiny and we're glad that this committee is taking a broader view.
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We would like to focus attention on the Health Care Financing Administration, which administers about 42,000 pages of regulations, in contrast to the mere 17,000 of the Internal Revenue Code. Most physicians deem that a HCFA audit is more to be dreaded than an IRS audit.
Our physicians are also subject to many rules which appear to be secret or unwritten, and they even receive threat letters from HCFA concerning regulations that are non-existent or have never been published in the Federal Register.
Even before the Kassebaum-Kennedy act or the Health Insurance Portability and Accountability Act, which turned what used to be insurance billing disputes into potential Federal crimes, physicians were being targeted as the scapegoats for the failures of the Medicare system.
The False Claims Act, that Dr. Krizek told you about, which was designed to combat overbilling for things like aircraft carriers, is being used against physicians who might have charged about $13.54 more than Medicare thought they should, and they'll get fined the same amount as the Defense contractor who overcharged for many thousands of dollars.
The methods being used by these Federal law enforcement agencies should frighten all Americans. Patients, office staff, and even a 9-year-old child have been terrorized in armed invasions of peaceful physicians' offices. The young son of Dr. Danny Westmoreland of West Virginia had guns of three different agents aimed at him. The eventual outcome of Dr. Westmoreland's case was that the judge dismissed it before sending it to the jury because the evidence was so weak. But, this was only after a very long and expensive ordeal for the physician and his family.
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What dangerous contraband do agents seize when they make such a raid? Patient records, billing records, things like that. And, if your doctor is targeted, your records could also be seized even if you pay for all services out of pocket. The publicity surrounding such a raid can turn a prominent and respected citizen into a pariah overnight. People assume that where there's smoke, there must be fire because here in America the police are not supposed to kick your door down without a good reason. Here we are supposed to convict people in a fair trial before we punish them. That may still be true for armed robbers and rapists, but not for really egregious criminals, such as drug lords, or now physicians. I do not speak of physicians who molest or kill patients, only those who are suspected of victimizing the Medicare program or another third party, for example, by providing too many services for their patients.
Both the Department of Justice and the AMA deny that such things happen, at least not to good doctors. Therefore, anyone who is so attacked must be a bad guy. And, in a way, given what the rules are, all doctors probably are in violation of some of them. Otherwise, they could not practice medicine.
Doctors cannot even find out what the rules are. In the April 8, 1998, issue of the Bureau of National Affairs Health Care Fraud Report, Alice Gosfield, an expert in health law put it this way: ''This is the cardinal rule of survival in the Medicare Part B world: Don't call the carrier to find out anything. That's a surefire way to shine a laser beam on yourself for something further down the road.'' ''It is probably safe,'' she said, ''to get an outside lawyer to ask your questions, but don't rely on the answers. Ask the same question three times; get three difference answers.''
Page 87 PREV PAGE TOP OF DOC Congressmen, of course, do not want to seem soft on fraud, even though there is no evidence that physicians are responsible for any significant part of the true fraud, such as providing fictitious services to non-existent patients. So, Congress continues to increase HCFA's authority.
HCFA has been auditing more claims and reportedly denying 60 percent of them based on lack of documentation. The proposed answer to this new type of fraud is the AMA/HCFA E&M Documentation Guidelines for evaluation and management, and the medical record has become the main focus of attention for prosecutors, third parties, and compliance experts.
Physicians have been turned into scribes for insurers and oversight agencies, and the medical record is a tool for accountants, managed care, bureaucrats, and the fraud squad. Information the doctor needs to take care of the patient may be hard to find in all the clutter, and, as to confidentiality, the physician who tries to protect that may be guilty of the Federal crime of obstructing justice, not just for failure to turn over records, but for failure to write everything down. ''If it isn't documented, it isn't done,'' they say.
The effect of these new guidelines is probably to expedite fraud because the enforcers assume that, if something is documented, it really must have been done. But, what does this anti-fraud campaign do to the practice of medicine? Medicine is, increasingly, centered around virtual reality called documentation. And, as for the patientsthe practice of medicine is being destroyed. The individual patient-doctor/physician relationship is being destroyed, and physicians are fleeing medicine as fast as they possibly can.
[The prepared statement of Dr. Orient follows:]
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PREPARED STATEMENT OF JANE M. ORIENT, M.D., EXECUTIVE DIRECTOR, ASSOCIATION OF AMERICAN PHYSICIANS AND SURGEONS, TUCSON, AZ
The Association of American Physicians and Surgeons (AAPS), representing thousands of physicians in all practices and specialties, was established in 1943 to preserve the practice of private medicine. AAPS is dedicated to the Oath of Hippocrates and to protecting the sanctity of the patient-physician relationship.
AAPS is a membership organization, which is tax-exempt under Section 501(6) of the Internal Revenue Code. Its revenue is derived primarily from membership dues and activities and publications related to its exempt purpose. Unlike many other physician organizations, including the AMA, AAPS does not accept and rely upon revenue resultant from contractual arrangements with the government. Nor does AAPS accept funds from large foundations that have an interest in expanding government involvement in medicine. Specifically, AAPS has no grants or contracts to produce codes, guidelines, educational materials, software, forms, or other products related to compliance with any law or regulation or to the collection of third-party payments. It derives no royalties or revenues from the sale or licensure of such products.
Jane M. Orient, M.D., is a physician who has been in solo private practice since 1981. She is also a writer, editor, and lecturer, and serves as Executive Director of AAPS. She has not been the recipient of any federal grants or a party to any federal contracts or subcontracts in the current or preceding two fiscal years. She discontinued accepting any funds from Medicare since September, 1990. An abbreviated curriculum vitae is appended.
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The Internal Revenue Service has been under recent scrutiny, and Americans are well aware of the power and lack of accountability of this agency. They are less aware of the other government agencies that have comparable power. We are glad that this committee is taking a broader view and appreciate the opportunity to focus attention on the Health Care Financing Administration, which administers regulations that are even more complex than the Internal Revenue Code.
Any physician who is the recipient of federal funds through the Medicare or Medicaid program is subject to all administrative rules as well as the criminal law pertaining to such programs. Since the enactment of the Health Insurance Portability and Accountability Act (HIPAA) of 1996, federal criminal and civil penalties attach to all insurance arrangements, public or private. Physicians face a Hobson's choice: attempt to comply, or refuse to accept any insurance payments (a choice that for many probably means retiring from medical practice.)
Additionally, any physician who performs a laboratory test (as defined by federal law) is subject to the Clinical Laboratory Improvement Act. Physicians who have any interest in laboratory, imaging, rehabilitation, or other ancillary facilities are subject to ''Stark Rules'' (named for Congressman Pete Stark).
Physicians who are on the medical staff of any hospital which has a Medicare or Medicaid contract are subject to ''anti-dumping'' rules in the 1985 Consolidated Omnibus Budget Reconciliation Act and the Emergency Medical Treatment and Active Labor Act (codified at Title 42, US Code, Section 1395dd). These require all emergency facilities to provide ''screening'' examinations to all patients, stabilize all unstable patients, and meet stringent requirements (including prescribed documentation) before referring a patient to another facility. They also prescribe severe financial penalties up to $50,000 for on-call physicians who fail to respond quickly (even if delayed by other patients or by circumstances beyond their control such as failure to receive a message). This list is by no means exhaustive, but it illustrates that federal law enforcement casts a shadow over nearly every action taken by physicians today.
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Physicians are subject to either civil or criminal penalties, or conceivably both, under many of these laws. The government's burden of proof is substantially less in administrative or civil proceedings. However, the specter of a criminal indictment, even if the physician believes that a prosecutor could never prove his case, is so threatening that a physician will often agree to settle and pay huge penalties rather than take the risk. A malpractice action is far less frightening; under tort law, a physician has clearly defined rights, and his liability policy covers the cost of his defense.
Under administrative law, the physician is, in effect, presumed guilty and must prove his innocence. There is an affirmative duty for ''compliance,'' and compliance must be demonstrated. Physicians are repeatedly told that ''if it isn't documented, it isn't done.'' A highly trained and experienced physician may make a large number of observations about a patient, and rapidly consider a complex and lengthy differential diagnosis, before writing a few lines on the chart. If he claims payment that he believes is rightfully his due on the basis of the expertise needed to do the job, rather than on the ''bullets'' in the chart record, he could be charged with fraud.
Suppose, for example, that he wrote that a complicated patient was ''stable,'' without writing down that he had spoken to the patient, the nurses, and the primary physician; checked the lab results on the computer; looked at the x-ray and electrocardiogram; and decided against performing further tests that day. Is that fraud? After all, the physician failed to prove his innocence by writing the prescribed verbiage. The civil monetary penalty is $10,000 per item, even if the difference in payment due for using a code for a more complex visit as opposed to a simpler one may be a very small sum of money (even less than $10). These fines can quickly mount to more money than a physician could conceivably see in many lifetimes of unremitting toil; they are not proportional to the size of the enterprise, individual physicians being liable for the same fines as a huge corporation.
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WHAT IS THE INTENT OF THE LAW?
The stated intent of the law is to preserve the integrity of the Medicare program and to punish true fraud. No one would defend perpetrators of fraud. Spokesmen for law enforcement agencies can easily find examples of scams involving millions of dollars in claims emanating from post office boxes for fictitious services provided to nonexistent patients. The fact that such scams exist is a grave indictment of the Medicare program as well as law enforcement.
However, there is no evidence that private physicians are responsible for any significant amount of Medicare fraud, much less that such fraud is responsible for the imminent insolvency of the Medicare program. Inspector General June Gibbs Brown stated: ''We aren't finding the individual physician to be a prevalent offender. Most of them are caring people, dedicated to medicine and their patients'' (quoted in Medical Economics, Sept. 9, 1996).
Allegations about ''inappropriate'' levels of payment or ''medically unnecessary'' services (once called a billing dispute and now called fraud) are judgment calls based solely on what is or is not written in the medical record. Skilled, busy physicians do not and cannot ''document'' every move they make or every thought that passes through their mind. Increased regulatory burdens, audits, and threatened prosecutions may suffocate the delivery of medical care, but they do nothing to deter fraud. In fact, they may expand the opportunities for system-gaming by unscrupulous ''providers.'' Even if there were evidence of actual fraud by some physicians, this would not be a rationale for armed invasions of doctors' offices by federal agencies, or for treating all physicians like convicted drug dealers. When asked about abuses, the responses from law enforcement and from organized medicine (usually the American Medical Association) are of several types: (1) Such things don't happen. (2) If they do, then they are mere ''anecdotes'' or the doctor was really one of those ''bad apples.'' (3) If the issue is pursued, the response is eventually silence.
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Another official's testament to good intentions appeared in the Wall Street Journal on May 1, 1998, p. A15: ''As we do in other enforcement areas, we are continuing to refine our approach in fraud cases to ensure that we are using the tools that Congress has provided us fairly and responsibly. . . . Honest hospitals and other health-care providers have nothing to fear.'' This letter was written by Deputy Attorney General Eric Holder, echoing reassurances previously offered by Mr. D. McCarty Thornton, Chief Counsel in the Office of Inspector General of the Department of Health and Human Services. Mr. Thornton severely criticized my Wall Street Journal article of May 30, 1996, and stated that it is ''simply not possible to convict a person for a mistake which is the product of an honest error. . . .'' However, my letter of July 15, 1997, which is appended to this testimony, is still awaiting an answer. As noted in my letter, statements such as those by Holder and Thornton do nothing to limit the unbounded discretion of prosecutors. The laws under which they are acting are a virtual invitation to prosecutorial abuse. Neither the Department of Justice nor the Office of Inspector General have taken any action to investigate abuses that have already occurred.
The intent of the law may very well be to punish persons who deliberately defraud the Medicare program and to leave honest physicians in peace. However, the effects of the law are vastly different, and it is the effects that must concern us.
THE MACHINERY OF THE LAW
The resources and ''tools'' of federal law enforcement were vastly expanded by HIPAA. Besides extraordinary new funding levels, a bounty system was established for depositing fines into a self-perpetuating fund for new investigations. Civil monetary penalties were quintupled from $2,000 to $10,000 per item and extended to new areas such as the provision of ''medically unnecessary services'' (visits that are too frequent, extra laboratory tests, surgery before disability is far enough advanced, too many complex services, etc.)
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The subpoena powers of the Inspector General, once restricted to investigations in which federal funding was involved, were expanded to include any activities under the fraud-and-abuse control program (which encompasses private insurance claims also). Asset forfeiture powers, originally intended to fight drug dealers, can be used against physicians on mere suspicion that they are about to commit an offense, lest they alienate or dispose of assets that may be needed to pay a fine, according to a conference committee report. The act provides incentives to informers and additional mechanisms for reporting suspected abuse. Even the attorney-client privilege is threatened with respect to investigations of suspected federal health-care offenses; doctors are warned to beware of their own ''compliance officers.''
With these new resources, and the high priority assigned to health-care fraud by the Department of Justice, it is not surprising that the number of audits is expected to double. In 1996, the federal government collected more than $1 billion in fines and settlements, a seven-fold increase over the previous year. More than 4,000 civil health care matters were opened (an increase of 61%), and 282 criminal indictments were filed.
THE REQUIREMENTS OF THE LAW
Informed physicians believe that total compliance with the law is impossible. Most physicians would prefer an IRS audit to an audit by the Health Care Financing Administration (HCFA), despite the notorious cases of abuse by the former agency.
The acknowledged complexity of the tax code pales by comparison with the regulations applicable to medicine. Medicare regulations run to 42,000 pages, compared with a mere 17,000 pages of IRS regulations. Moreover, coding updates are published monthly by the AMA. There are literally thousands of forbidden coding combinations, and thousands of errors in the lists. An example of the communications with which physicians must deal every day is appended (letter from Linda Dietz, Project Manager/Coding Specialist for the National Correct Coding Initiative to Dr. Lawrence Huntoon, July 16, 1997, and Dr. Huntoon's letter of July 21, 1997, to Mr. Preston Lowen.) In this instance (which is by no means unusual), it was the carrier who made the error and then accused the physician of malfeasance in a letter to the patient. The interpretations of the codes may actually be a secret; physicians have had to file Freedom of Information Act requests to find out the precise interpretation of a requirement, as they attempt to defend themselves against a $50,000 sanction for noncompliance. The carrier may attempt to penalize a physician for a ''violation,'' when in fact the carrier's requirements are at variance with those of HCFA. While physicians can be investigated because of a ''profile'' that shows them to be ''outliers,'' the norms by which they are judged are deliberately kept secret. If physicians knew the standards, it is argued, they could ''game the system.''
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In other words, HCFA demands that physicians abide by the speed limit, but refuses to tell them what it is.
It is possible that certain important rules are not actually written down anywhere, but are simply conjured up whenever desired at the whim of law enforcers. When one physician, who is now in federal prison, demanded that the prosecutor submit in writing the rule that he was accused of violating, the prosecutors replied that they were under no obligation to do that.
WHAT CONSTITUTES A LAW, AND WHO WRITES IT?
Writing the wrong code on a claims form is an offense carrying a fine of $10,000; thus, it is extremely important to know what constitutes the wrong code. The procedure involved was highlighted at an April 27, 1998, ''fly-in'' held by the AMA, with participation by HCFA in Chicago to discuss proposed new ''AMA/HCFA Evaluation and Management Documentation Guidelines.'' A judgment about the correctness of the code is made by claims-processing clerks on the basis of the medical record, which is now supposed to objectify such imponderables as the complexity of the physician's decision-making process.
Physicians have expressed their outrage that heavy penalties may be exacted because a clerk does not find the right number of appropriate ''bullets'' written on a chart. However, an official of the AMA has stated that the ''guidelines'' are simply that, rather than a ''rule'' or a ''law'' (see correspondence from Mark Segal to Jane Orient dated April 13, 1998). Yet, publications of the AMA stated that the ''guidelines'' were to become mandatory in July, 1998. By what process? No such rules for coding have ever been promulgated according to the requirements of the Administrative Procedure Act. The proposed rules have not been published in the Federal Register. The public, including the physicians facing $10,000 fines for each ''violation,'' has had no opportunity to comment. Nor have the rules met the requirements of the Paperwork Reduction Act. This Act protects small businesses and others, including physicians (most of whom are small businessmen), from onerous, irrational regulatory requirements. Why should HCFA ignore this requirement with regard to physicians? In addition to the legal question, there is a scientific issue. The present set of procedure (CPT) and diagnostic (ICD9) codes, which are supposed to ''match,'' and which must be carried out to the highest possible level of specificity (say four or five significant digits), have never been scientifically validated. Practicing physicians state that the level of uncertainty in diagnosing patients, especially when first seen, does not admit of such specific coding. Studies have shown that perhaps 60% of charts are coded ''incorrectly.'' Thus, physicians may be held to a standard, under penalty of bankruptcy and a lifelong non-dischargeable debt, that the majority of them cannot meet under conditions of actual practice. As to ''peer review'' by practicing physicians, their response was overwhelmingly negative, even though the ''guidelines'' were written by the AMA. Representative comments: ''a political tool to destroy private medicine''; a ''complete waste of time and effort''; a ''first-year medical student exercise''; ''really really stupid''; a ''violation of patient privacy''; ''part of a systematic breakdown of the patient-physician relationship''; ''busy work that takes time away from patient care''; ''impossible to enforce fairly''; and so on.
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At the April 27, 1998, ''fly-in'' in Chicago, the need for assessing the ''reliability'' of the guidelines (which support the coding) was mentioned. One attendee stated that at her institution, trained coders, looking at the same set of data, disagreed on the correct code in 30% of cases. Yet there are no written standards that give a permissible range of ''error'' or variance for purposes of assessing multiple $10,000 fines. Nor are there standards for what constitutes a ''pattern'' of upcoding or provision of ''medically unnecessary'' services (itself an undefined and undefinable term). One physician in federal prison was declared to have a practice ''permeated with fraud'' on the basis of less than 0.1% of his practice. (All charts were reviewed, and the very worst brought to trial. His entire earnings from all insurance payments for an extended period were seized.)
What constitutes the gold standard for accurate codes in the case of a dispute? The prosecutor's witnesses at trial may have the final word. One Michigan office manager spent one year in the Ingham County Jail because the jury believed expert testimony that a certain code required a physical examination. Actual reading of the coding manuals in effect at the time lead to the conclusion that the office manager's coding was quite correct. And in administrative proceedings, it is not even necessary for the prosecutor to convince a jury, but simply a judge who is hired by the agency.
How, then, do these unvalidated codes, developed in defiance of government-in-the-sunshine requirements and never even subjected to the rigors of the Administrative Procedure Act or Paperwork Reduction Act, acquire the functional equivalent of the force of law? On the basis of these codes, a person may lose his liberty, his medical license (because of a felony conviction), his reputation, and his accumulated assets (if criminally convicted). How can he even lose all the assets he has ever earned or hoped to earn on the basis of a civil, administratively imposed fine? Persons convicted of violent crime are often punished far less severely, and only after a trial in which their rights are scrupulously guarded.
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Apparently, the codes acquire their force through a process of government by behind-the-scenes deal-making. The codes, along with the ''guidelines,'' are apparently authored by AMA-appointed committees based on an exclusive contract with HCFA. They acquire their credibility from the AMA imprimatur, even though the AMA probably now represents less than one-third of practicing physicians. They require their legal force from the power of the executive to simply impose them.
This procedure goes far beyond the delegation of power from the legislative to the executive branch (which in itself needs to be examined to see whether constitutional limits have been exceeded). Here, an executive agency is apparently delegating its power to private entities: the Medicare carriers (see again the correspondence to Dr. Huntoon from AdministarFederal) and the AMA. The private organization stands to profit enormously from the ''public-private partnership.'' For example, the AMA sells monthly coding updates (CPT Assistant) for a subscription price of $139 per year. The code books need to be purchased yearly; the regular price for a set suitable for a small office is $210.
Even though ''private'' entities (Medicare carriers, Peer Review Organizations, and other contractors) carry out much of the actual enforcement activity, as well as the rule-making, it is nonetheless done under the protection of sovereign immunity. The ''public-private'' partnership thus allows each partner to avoid accountability. The private partner escapes tort liability by collaborating with the government, and the government apparently escapes due-process requirements and Constitutional restrictions by collaborating with the private partner. The private partner also escapes the pressures of market competition by virtue of its assured monopoly for ''compliance'' materials. A lucrative industry has arisen to supply the ''need'' for such materialsa need created by the suppliers themselves.
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The authority of the private-public partnership affects physicians every day. At the lowest level, the enforcement simply consists of claims denial, which is accompanied with a letter to the patient that implies that the physician is a criminal and states that the patient is under no obligation to pay for the services that he received. Such letters cause, at least, significant anxiety and uncompensated labor to the physician, who must respond, and often cause irreparable damage to the patient-physician relationship. Even when the physician shows that his interpretation was correct, and the carrier made an error, a simple letter to the patient admitting the error will not be forthcoming.
Carriers and HCFA are supposed to be subject to certain laws. It is, for example, illegal to alter claims. Nonetheless, carriers, such as Upstate Medicare of New York, frequently change the status of claims, as from unassigned to assigned, with impunity. Carriers are required to pay clean claims within a certain period of time, and reimbursement is supposed to be a certain amount. But again there are no enforcement mechanisms. When a carrier paid a physician as much as 40% less than the prescribed amount for an entire year, it eventually acknowledged its error and corrected the rate for subsequent payments, but never repaid the $15,000 the physician lost due to its ''mistake.''
While much attention is focused on ''waste'' allegedly caused by physicians, carriers themselves are probably responsible for much more waste. Yet rarely do they face an audit or other type of scrutiny for claims that they improperly pay. The Report on the Financial Statement Audit of the Health Care Financing Administration for Fiscal Year 1996 (A179500096, July, 1997) showed that HCFA failed to ''provide adequate support for its accounts payable estimate'' [of $36.1 billion].'' Medicare contractors ''did not maintain adequate documentation to support reported accounts receivable activity'' [accounts receivable reported to be $2.68 billion]. These material weakness ''were reported in previous Chief Financial Officers Act audit reports and remain uncorrected.'' Meanwhile, the government's search for fraud is focused elsewhere, based on an examination of 5314 claims (a sample of 6.6 per million, or 0.00066% of claims submitted). An analogous response would be for Congress to identify abuse and waste by the IRS, then seek to increase IRS powers in order to solve the problem of occasional taxpayer error. A better solution would be to allow lawsuits to address unscrupulous IRS or Medicare carrier activities.
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In the event of administrative proceedings or investigations prompted by malicious informants, prosecutorial career ambitions, ''targets'' (quotas), or simple error, a physician may spend years and tens of thousands of dollars in legal fees, but even if vindicated can never be made whole. The agency can simply shift its attention to another ''target'' (the term also refers to physicians), once it has exhausted every possible avenue or level of appeal, and apply the lessons it has learned at the expense of the first physician to increase its likelihood of future ''success.'' Success is always measured by convictions obtained or penalties collected, never by justice done.
The sense of injustice is heightened by awareness of the high-profile case, AAPS v. Clinton, which challenged the illegal secret operations of the Clinton Task Force on Health Care Reform. Eric Holder, who now reassures doctors about the fairness of the Department of Justice, is the attorney who decided that there was insufficient evidence to prosecute Ira Magaziner for perjury. Magaziner had filed an affidavit stating that the working groups of the Clinton Health Care Task Force were made up solely of full-time employees of the federal government and hence could legally reinvent American medicine in secret. A federal court relied on that affidavit in the case of AAPS v. Clinton. Recently, Judge Royce Lamberth ordered the federal government to pay plaintiffs more than $285,000, part of their legal costs. Instead of following the order, the government decided to spend more taxpayer dollars appealing the decision.
Interestingly, the amount that the taxpayers may have to pay in sanctions for Magaziner's conduct is of the same order of magnitude as is demanded of Dr. George Krizek for inadvertently billing under some incorrect codes for long days and nights of serving severely disturbed patients. Magaziner is still a senior government official; Dr. Krizek's career was ruined long ago, and the federal government is trying to seize his home as well. Magaziner supposedly didn't know who he was appointing to serve on Task Force working groups; Dr. Krizek should have known how much time he had to spend face to face with a patient, and which room he had to be in to make telephone calls, in order to use certain codes.
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Despite official reassurances, physicians do not believe that simple honesty and conscientious efforts to comply will be sufficient. They receive far too many contrary messages: invitations to subscribe to publications such as the Medicare Compliance Alert with Civil Money Penalties Report or BNA's Health Care Fraud Report, invitations to attend compliance seminars, warnings that they had better hire a compliance officer and draft a compliance plan, communications from insurers in envelopes stamped with fraud-reporting hotline numbers, and reports by other physicians who have been audited and forced to pay tens of thousands of dollars. There are news reports of how Medicare has ''recovered'' a billion dollars and that $23.6 billion in ''improper'' payments were made. A Florida physician reports hearing that 38% of physicians are to face an audit, with fines ranging from $10,000 to $500,000, and an average of $80,000. (Perfect compliance or a fine of $0 is not even one of the possibilities.) Conversation at medical society meetings concerns the intricacies of coding or horror stories about dealing with incompetent, threatening Medicare clerks; no more shop talk about interesting cases or exciting advances in medicine.
Even if the cases known to AAPS are mere ''anecdotes,'' it doesn't take very many atrocities to terrorize a population. If one American's rights can be violated, and the officials never called to account, is any American safe? Physicians are certainly altering their practices. Instead of devoting their full attention to the needs of their patients, they are constantly looking over their shoulders. Many who might be inclined to remain in independent private practice are being driven to join HMOs and other managed-care organizations partly because a larger group can better afford the cost of the unfunded regulatory mandates (the need for the codebooks, the coding software, the in-house coding expert, the compliance officer, and the legal staff). This additional overhead must, of course, be taken away from patient care and physician compensation.
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Physicians feel, with good justification, that they have been turned into paper-pushers and informants for insurance companies and government. To be paid for their services, they must behave in ways that are contrary to the best interests of their patients. The patient's medical needs, and also his confidentiality, are to be sacrificed to the demands of the payer. The impact on physicians is harmful; the effect on all patients is destructive.
Physicians in many different states report a variety of abuses by federal or state law-enforcement agents. These include:
Knocks on the door of their home in the evening by armed agents.
Armed invasions of their offices when patients are present, sometimes with unholstered firearms. Doors may be kicked in.
Detention of personnel in the office even when not under arrest.
Telephones ripped out of the wall so that an attorney could not be called.
Terrorized personnel requiring emergency medical treatment as for cardiac arrhythmias.
Seizure of all office records, without patient consent, with records unavailable for patient care for months.
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Seizure of financial records so that normal business operation is impossible.
Intimidation of patients, even or especially psychiatric patients, with open threats that if the patient does not testify against the doctor, the patient himself will be charged.
Wired informants posing as patients, trying to trap physicians into doing things that might be justified if the ''patient'' were actually telling the truth but are actually ''medically unnecessary'' or otherwise not indicated.
Reputation-destroying publicity before the physician even knows that there is a problem.
Use of perjured testimony.
Threats of criminal penalties based on charges that turn out to be trivial, even absurd, possibly because of malicious motives by competitors in collusion with prosecutors.
The above summary is based on communications with real physicians and review of court documents, correspondence, indictments, videotaped legal proceedings, and news reports. Most physicians, and/or their families, were interviewed personally. Although AAPS can make no definitive representations concerning all of the facts of the cases, the procedure (or lack thereof) must be of serious concern to all American citizens, even if all of the targets were guilty as charged. Although some of the targets may have been stretching the rules, AAPS believes that they probably thought and intended their activities to be in compliance with all applicable laws. It seems clear that cases of physicians who billed large sums to Medicare (and hence are especially likely to get an unsympathetic hearing from jurors) are being used to set precedents that can be used against almost any physician. (Trial lawyers recently attended a seminar in San Diego to learn how to ''get'' doctors based on lessons from the case of a physician who was sentenced to 11 years in prison and $16 million in fines, when the trial court found a ''loss'' to the government of $65,140 upon declaring some procedures to have been ''medically unnecessary.'')
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The existence of such precedents can then be used to extort very disadvantageous settlements from physicians in administrative proceedings. To assert the rights accorded to criminal defendants, physicians will have to place their liberty and their whole career on the line, and even then have no assurance of fair due process. Should they prevail in the criminal arena, the government could still bring a civil case. (Indeed, after the San Diego physician won on many issues in the 9thth Circuit Court, the government filed a civil case against him, at a time when he had no resources to hire legal counsel.)
Once the integrity of the judicial process is compromised, the gates are open to widespread abuse. A crack in the bulwarks can bring down the whole structure of law with devastating rapidity. Dickens described the gruesome results of turning a once respected class (that included physicians) into scapegoats for all societal wrongs in A Tale of Two Cities:
A revolutionary tribunal . . .; a law of the Suspected, which struck away all security for liberty or life, and delivered over any good and innocent person to any bad and guilty one, prisons gorged with people who had committed no offense and could obtain no hearing; these things became the established order . . . and seemed to be ancient usage before they were many weeks old. . . .
Before that unjust Tribunal, there was little or no order of procedure, ensuring to any accused person any reasonable hearing. There could have been no such Revolution, if all laws, forms, and ceremonies had not first been so monstrously abused that the suicidal vengeance of the Revolution was to scatter them all to the winds.
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PHYSICIANS' REACTIONS AND IMPACT ON PATIENTS
The climate of fear has affected the practice of every physician. But the impact on patients is especially worrisome. Some Congressmen are very sanguine about effects on Medicare because such a large proportion of physicians still see Medicare patients, purportedly 96% according to the Physicians Payment Review Commission. However, we think that such figures do not tell the whole story. A survey of AAPS physicians in June 1997 showed that of about 300 respondents, 33% were not accepting new Medicare patients, except possibly under special circumstances. Moreover, 40% reported restricting some services to Medicare patients, leading to an average decrease of 36% in their Medicare practice. Of all respondents, 22% said that Medicare payment did not cover overhead, 31% said that they had experienced hassles or threats from Medicare carriers, and 29% said they feared fines or prosecutions by federal or state law enforcement agencies. About 10% had experienced a Medicare audit, 2% a fraud investigation, 39% a demand to refund payment for a ''medically unnecessary'' service, and 35% a demand to refund payment due to coding error or other reason. About 26% reported having difficulty in finding a physician to accept a Medicare patient in referral.
More than 65% said they were considering retirement at an age earlier than they would have thought possible 5 years ago. Early retirements and a higher-than-expected number of physician retirements due to disability have already been reported by others.
The position of our Association is that perfect compliance with Medicare and other insurance regulations is impossible, and that honest, conscientious physicians may be fined heavily in unfair administrative proceedings. We recommend that physicians opt out of Medicare as soon as possible and treat elderly patients on a private or charitable basis, despite the financial loss that many physicians would thereby incur. We also recommend that physicians decline to accept assignment of benefits from any insurer.
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For combating fraud, the Association has previously submitted a number of suggestions, including forbidding the assignment of benefits. More extensive documentation requirements would be utterly useless for this purpose, and perhaps counterproductive; those intent on fraud would simply produce more false documentation.
For correcting the egregious abuse of administrative law, AAPS suggests the following first steps as a minimum:
Requiring that all regulations carrying a civil or criminal penalty be enacted in strict compliance with the Administrative Procedure Act and the Paperwork
Reduction Act (the approval of the AMA may not substitute for this process) and blocking the enforcement of regulations that do not comply.
Requiring congressional oversight of regulations, especially those imposing high costs or potential high penalties on violators.
Making agents individually accountable for failure to abide by the law; for example, for violations of due process rights, intimidation of witnesses, unauthorized display of firearms, inappropriate searches and seizures, knowingly making false statements to judges or juries, subornation of perjury, or refusal to provide adequate and comprehensible notice of proscribed behavior.
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Abolition of the bounty system that allows prosecutors to benefit from bringing unwarranted prosecutions or administrative proceedings.
Assuring the accused the right to confront his accuser, and applying other provisions of the Bill of Rights to physicians.
Doing away with immunity for those who bring accusations in bad faith.
A fundamental reexamination of administrative law is in order, to the extent that it circumvents the requirements of Amendments VI and VII to the U.S. Constitution. Congress should enact the proposed Administrative Civil Rights Act, which provides as follows:
ADMINISTRATIVE CIVIL RIGHTS ACT
The constitutionally guaranteed civil rights of American citizens shall be protected in administrative proceedings.
Any agency acting under color of federal or state law shall have the right to impose only limited penalties through administrative proceedings, even when these penalties are called ''deterrents'' or ''means of protecting program integrity'' rather than ''punishments.'' Allowed forfeitures include only:
(1) Withholding of future direct payments from the public treasury (except that Social Security benefits up to the amount funded by actual contributions by an individual, including amounts paid by employers in the individual's name, plus interest, may not be withheld);
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(2) Fines or civil monetary penalties not to exceed one week's after-tax income to an individual or one week's net profit to a corporation [or whatever constitutes today's equivalent of $20 at the time the Seventh Amendment was enacted].
Before larger economic penalties or loss of liberty may be imposed, the defendant shall have the right to demand a trial in a court of law and in which the defendant has all the rights accorded to criminal defendants. These include but are not restricted to: trial by jury, representation by counsel, protection against self incrimination and double jeopardy, a presumption of innocence, and protection against unlawful searches and seizures. Personnel of the court shall be independent of the agency bringing the complaint against the citizen and shall receive no direct or indirect remuneration from that agency.
Citizens who are under investigation for violation of any law or regulation by an administrative agency shall be informed of their rights and shall not be penalized for exercising or refusing to waive these rights.
No person shall be permitted to make an anonymous complaint about a condition that carries an administrative sanction, and no monetary rewards shall be given to informants.
This law shall supersede all federal laws that mandate or permit larger administrative penalties to be enforced without proper judicial procedure.
No individual agency shall be exempted from these guarantees of citizens' rights.
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The law shall apply equally to the Food and Drug Administration, the Environmental Protection Agency, the Health Care Financing Administration, the Internal Revenue Service, the Occupational Health and Safety Administration, and any other agency acting under color of federal or state law.
To assure adequate consideration of the serious consequences of abridging the rights of citizens, this Act may be amended only in legislation specifically directed to that purpose, not as part of the budget reconciliation process or as an amendment to unrelated legislation.
All agreements between a citizen and a governmental agency, in which a citizen has waived his rights, shall be held invalid and unenforceable if signed under duress, such as a demonstrable or perceived threat of seizure of assets, loss of licensure, loss of liberty, loss of property value, criminal prosecution, or other adverse consequence imposed upon a citizen under color of federal or state law or regulation.
Citizens deprived of economic or other rights by governmental agents acting in violation of this Act shall not be denied access to federal court or to damages at law.
The rights and freedoms of Americans are eroding at an alarming rate, and Congress must take prompt, decisive action. Most physicians are not aware of the pivotal role that their professional organizations are playing in rule-making and enforcement. Likewise, most legislators are probably unaware of the ways in which the public-private partnership manages to circumvent ''government-in-the-sunshine'' as well as other procedural requirements. By this means, public-private partnerships are effectively abrogating the rule of law and the system of checks and balances on which the survival of our Republic depends.
Page 108 PREV PAGE TOP OF DOCBIOGRAPHICAL INFORMATION:
Born Tucson, Arizona, USA, November 2, 1946
B.A. in chemistry and B.S. in mathematics, University of Arizona, 1967
M.D. Columbia University College of Physicians and Surgeons, 1974
Straight internal medicine residency, Parkland Memorial Hospital, Dallas, Texas, and University of Arizona Affiliated Hospitals, 197477.
Certified American Board of Internal Medicine, 1977
High school teacher (physics, chemi'stry, biology, general science and mathematics), Spencer, SD, 196769
Instructor, then Assistant Professor of Medicine, University of Arizona College of Medicine, 19771980
Solo private practice, 1981-present
Assistant Clinical Lecturer in Internal Medicine, University of Arizona College of Medicine, 1981-present
Director of Continuing Medical Education, Carondelet St. Joseph's Hospital, Tucson, AZ, 1990-present
Chairman, Department of Medicine, Carondelet St. Joseph's Hospital, Tucson, 199293
Executive Director, Association of American Physicians and Surgeons, 1989-present
Editor, AAPS News, 1986-present
Page 109 PREV PAGE TOP OF DOC Professor of Clinical Medicine, Oregon Institute of Science and Medicine, 1993-present
Board of Scientific Advisors, American Council on Science and Health
Contributing editor, The Art and Science of Bedside Diagnosis by Joseph D. Sapira, 1990.
Contributor to Rational Readings on Environmental Concerns, edited by Jay Lehr, 1992.
Your Doctor Is Not In: Healthy Skepticism on National Healthcare, Crown, New York, spring, 1994.
Sutton's Law, a novel, Hacienda Publishing, 1997.
More than 100 articles in scientific journals and lay publications on subjects including: medical diagnosis and treatment, environmental risk assessment, medical economics, ethics, and civil defense.
Member of Technical Subcommittee on Human Health, Arizona Comparative Environmental Risk Assessment Project
Chairman, Public Health Committee, Pima County Medical Society
Vice President, Pima County Medical Society, 1998
Board of Trustees, Foundation for Economic Education
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Page 111 PREV PAGE TOP OF DOC59925o.eps
Mr. GEKAS. We thank the lady, and we'll return to her for some questions after the conclusion of the testimony of all four panelists.
STATEMENT OF JAMES V. DELONG, REGULATORY POLICY CENTER, ADJUNCT SCHOLAR, COMPETITIVE ENTERPRISE INSTITUTE, WASHINGTON, DC
Mr. DELONG. Thank you, Mr. Chairman. My principal point here today is that Dr. Orient's complaints are not limited to the medical field. They apply quite broadly, and this is getting to be a very troubling area of national policy. Congress seems to be conducting a steady drive to convert violations of regulations into criminal offenses, or, if they don't make them criminal, to subject them to penalties that, while formally classified as civil, are every bit as painful as criminal penalties. You have the imposition of massive civil fines, of treble damages, of punitive damages, forfeiture of propertythere are a hundred different forfeiture laws in effect nowdebarment from doing business with the Government, exaggerated calculations of compensatory damages. All of these are growing, right along with the criminal sanctions.
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Both parties in Congress seem to have embraced an assumption that the solution to every national problems lies in, first, a new round of laws and regulations, and, second, severe penalties for any non-compliance, however inadvertent or minor, such as Mr. Unser's snowmobile violation.
It's not enough to force the transgressor to comply or to make him pay for any actual harm caused. He must be made to suffer as well. And this punitive impulse is animating not just medicine but environmental protection, financial practices, government contracting, employment relations, civil rights, health careevery area of government interaction with the society and with the economy. It's becoming a matter of congressional habit, and serious penalties are routinely added to every regulatory proposal.
One example that just crossed my desk yesterday, when I got my new issue of Reason magazine, of which I'm a contributing editor. Senators Kennedy and Feinstein have introduced a bill, S.1602, which would ban experiments with human cloning. If any scientist went too far, he or she would be subject to a fine of $1 million plus confiscation of all property, including real estate, used in or derived from the experiment. Now, I do not claim to know a lot about the cloning issue, but I know enough to know that it is very complex. I know enough to doubt the wisdom of this reflexive application of the blunt instruments of huge fines and forfeiture to questions of great scientific and moral difficulty.
The expansion in the sheer numbers of areas and activities subject to penalties, and in the variety and inventiveness of the penalties, are important, and their impact is accentuated by some other changes in the regulatory system. The most significant of these are: Increasing complexity. The systemsall these systems, not just the medical systemare becoming incredibly complex. No one understand them, not the people subject to them and not those charged with enforcing them.
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Good moral sense is not an adequate guide. Many requirements are what's called malum prohibitum, which means ''wrong simply because they're outlawed,'' rather than malum in se, which means ''wrong morally in themselves,'' which is a very old and very wise doctrine from our legal heritage. Businesses and individuals who try very hard to maintain programs of regulatory compliance still regularly find themselves in violation.
Another very important factor is the diminished role of intent. This was discussed this morning. Too often, either Congress itself or the courts are persuaded to dilute the requirement of intent as an element of an offense. This happens with criminal offenses, and, as far as the civil penalties go, intent is totally irrelevant. You can be subject to a civil penalty of $100,000 a day on the basis of absolutely strict liability, no matter how complex the regulation, or how unreasonable it was to expect you to know about it.
Another area that's becoming important: Greater intrusiveness. It used to be that you could live your life avoiding these regulatory regimes. Now, the new regulatory regimes permeate every area of the economy and the society, and fewin fact, noprofessionals, managers, entrepreneurs, or landowners can avoid them. I think the one group that hasn't been impacted so far is journalists, which may do much to explain why so little public attention has been devoted to this trend.
Another problem that has been pointed out, particularly, by the Cato Institute, is diminished constitutional protections. Standards for what constitutes credible evidence are being lowered drastically and steadily. EPA, in particular, has developed ''credible evidence'' rules which are both impenetrable and seriously deficient.
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Persons or firms involved in regulatory disputes often cannot avoid self-incrimination. They have little protection against arbitrary searches and seizuresthis came out again this morning. They have limited use of lawyer-client privileges.
And, finally, as Dr. Orient mentioned, there is a tremendous loss of political legitimacy going on. Political legitimacy is the sense among the people that its governors have the moral right to make the laws they make. It is the most important asset any government possesses. In my view, it's being dissipated, both by Congress, and by the agencies, by a stream of the ill-considered, intrusive, and often not terribly competent, laws and regulations.
All these factors are combining to undermine time-honored principles of justice and freedom, and, I think congressional attention to this area is crucial and long overdue.
I've brought along some material that I've written on this that I'm submitting for the record, and I thank you for your attention.
[The prepared statement of Mr. DeLong follows:]
PREPARED STATEMENT OF JAMES V. DELONG, REGULATORY POLICY CENTER, ADJUNCT SCHOLAR, COMPETITIVE ENTERPRISE INSTITUTE, WASHINGTON, DC
This hearing on Administrative Crimes and Quasi-Crimes focuses on a troubling area of national policy: Congress' steady drive to convert violations of regulations into criminal offenses, or to subject them to punishments that, while formally classified as ''civil,'' are every bit as painful as criminal penalties. The impositions of civil fines, treble damages, punitive damages, forfeiture of property, debarment from doing business with the government, and exaggerated calculations of compensatory damages are all growing, right along with the increase in sanctions that are officially ''criminal.''
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Both parties in Congress seem to have embraced an assumption that the solution to every perceived problem is not just a new round of laws and regulations, but severe punishments for any non-compliance, however inadvertent or minor. It is not enough to tell the transgressor to comply or to make him pay for any actual harm caused by a violation. He must be made to suffer.
The punitive impulse is permeating environmental protection, financial practices, government contracting, employment relations, civil rights, health careevery area of government interaction with the society and the economy. It is becoming a matter of Congressional habit, as serious penalties are added routinely to every kind of regulatory proposal. For example, in response to the current debate about cloning, Senators Ted Kennedy and Dianne Feinstein have introduced S.1602, which would ban experiments with human cloning. If any scientist went too far, she would be subject to a $1 million fine plus confiscation of all property, including real estate, used in or derived from the experiment.(see footnote 1) I know little about the cloning issue, but I know enough to doubt the wisdom of reflexive application of blunt instrumentssuch as huge fines and property forfeituresto questions of great scientific and moral difficulty.
The expansion in the sheer numbers of areas and activities subject to penalties, and in the variety and inventiveness of the penalties, is important in itself, but the impact is accentuated by other changes in the regulatory system. The most significant are:
Increasing Complexity. Regulatory systems have become incredibly complex. No one understands them, not the people subject to them and not those charged with enforcing them. Nor is a good moral sense an adequate guide; many requirements are malum prohibitum (wrong because it is prohibited), not malum in se (wrong in itself), to invoke a very old, but very wise, doctrine from our legal heritage. Businesses and individuals who are dedicated to regulatory compliance regularly find themselves in violation.
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Diminished Role of Intent. Too often, Congress or the courts are persuaded to dilute the requirement of mens rea, or evil intent, as an element of criminal offenses, and to ignore it completely for ''civil'' penalties, even those having a fiercely punitive impact. People become strictly liable for complex and often incomprehensible rules, even if they were unaware that they were violating them.
Greater Intrusiveness. The new regulatory regimes permeate every area of the economy and society, and few professionals, managers, entrepreneurs, or landowners can avoid them. The one group not much impacted so far is journalists, which may do much to explain why so little public attention is devoted to the trend.
Diminished Constitutional Protections. Standards for what constitutes credible evidence are being lowered steadily and drastically. A person or firm involved in a regulatory dispute often cannot avoid self-incrimination, has little protection against arbitrary searches and seizures, and can make only limited use of lawyer-client privilege.
Loss of Political Legitimacy. Political legitimacy is the sense among the people that its governors have the moral right to make the laws they make. It is the most important asset any government possesses. It is being dissipated by a stream of ill-considered, intrusive, and incompetent laws and regulations.
All these factors are combining to undermine time-honored principles of justice and freedom, and Congressional attention to this area is crucial. To help with the inquiry, I have brought along some material to add to the record you are developing.
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The most important is a monograph entitled: The New 'Criminal' Classes: Legal Sanctions and Business Managers. This was published last year by the National Legal Center for the Public Interest, a distinguished institution located here in Washington, D.C. The NLCPI has graciously supplied me with copies to append to this statement. The work can also be downloaded from the NLCPI website, at http://www.nlcpi.org.
My recent book, Property Matters: How Property Rights Are Under AssaultAnd Why You Should Care, published by the Free Press in 1997, discusses this trend toward the use of punitive sanctions, and the closely-related and equally important topic of political legitimacy. Information on the book is attached, and more is available from my web site, at http://www.regpolicy.com.
Finally, three magazine and newspaper articles on different aspects of this topic are attached:
''Computer Games'' (Reason, November 1997, p. 44), which analyzes the federal program to subsidize access to the Internet by schools and libraries, and the implications for these organizations of the criminal and civil penalties built into the program.
''Just What Crime Did Columbia/HCA Commit?'' (Wall Street Journal, August 20, 1997), which looks at the criminalization of health care rules, and draws a parallel to the experience of the Savings & Loan crisis.
''Slowing the Flow'' (Washington Times, August 23, 1997), which examines the effort to stamp out showerheads that deliver more than 2.2 gallons per minute and toilets that require more than 1.6 gallons per flush.
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Thank you, Mr. Chairman. I would be happy to answer any questions.
JAMES V. DeLONG is a writer, consultant, and lawyer in Washington, D.C., concentrating on property rights and environmental issues, including the problem of global climate change. He also works on regulatory reform, antitrust, intellectual property, the problems of the legal system, and the recent managerial revolution in business.
Mr. DeLong is an Adjunct Scholar of the Competitive Enterprise Institute and the Principal of the Regulatory Policy Center. He writes often for scholarly, professional, and popular publications, and is a Contributing Editor to Reason. His book, Property Matters: How Property Rights Are Under AssaultAnd Why You Should Care, was published by the Free Press in March 1997. Some of his other works are: The New ''Criminal'' Classes: Legal Sanctions and Business Managers, National Legal Center for the Public Interest (June 1997); Superfund XVII: The Pathology of Environmental Policy, Competitive Enterprise Institute (August 1997); Privatizing Superfund, Cato Institute Policy Analysis (December 1995); and ''New Wine for a New Bottle: Judicial Review in the Regulatory State,'' 72 Virginia Law Review 399 (1986). His ''How to Convince an Agency: A Handbook for Policy Advocates,'' Regulation (Sept./Oct. 1982), is used in courses at leading law schools. He has also published articles in the Wall Street Journal, the Washington Times, the New York Times, Reason, the National Law Journal, the New Republic, and the Salt Lake Tribune.
Page 119 PREV PAGE TOP OF DOC Mr. DeLong's prior professional positions include service as Research Director of the Administrative Conference of the United States; Assistant Director for Special Projects in the Bureau of Consumer Protection of the Federal Trade Commission; Director of Programs for the Drug Abuse Council (a private foundation); Staff Analyst in the Office of Program Evaluation of the U.S. Bureau of the Budget; and Litigation Associate in a large law firm.
Mr. DeLong was a magna cum laude graduate of Harvard Law School in 1963, where he was Book Review Editor of the Harvard Law Review, and a cum laude graduate of Harvard College in 1960. He is a member of the bars of the District of Columbia, the State of California, and the Supreme Court of the United States, and has served on the Committee on Scholarship of the Administrative Law Section of the American Bar Association.
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Mr. GEKAS. We thank the gentleman, and we'll return to him presently. For now, we'll turn to the next witness, Mr. Marzulla.
STATEMENT OF ROGER J. MARZULLA, MARZULLA AND MARZULLA, WASHINGTON, DC
Mr. MARZULLA. Thank you, Mr. Chairman, and I congratulate you and the committee on taking up this extremely important issue in our criminal justice system.
When a government official is sued by an American citizen, under a claim of violation of that citizen's constitutional rights, it is a complete defense for that official to put forward that the regulations under which he was acting are voluminous, ambiguous, contradictory, and influx, and, therefore, how could the official really be expected to follow the regulations. The case is dismissed.
Yet, every day Americans in all walks of lifebe they farmers, or ranchers, small businessmen, contractors, health care providers, merchantsfind themselves running the gauntlet of the regulations that are published at the rate of 65,000 pages per year, many of which are criminalized by a blank check written by the Congress to those agencies to prosecute virtually any regulatory violation as a crime. For those Americans, the standard is one of zero tolerance. Any minor deviation, any mistake, no matter how inadvertent in filling out the forms that have to be filed every day, in doing the kinds of testing or examination that is required, can, and sometimes is, prosecuted criminally, resulting in months, and in some instances even years, of time in Federal prison.
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I'd like to make three points to the subcommittee today in my testimony.
The first is that it is not sufficient for Congress to simply do oversight. Mr. Chairman, members of the subcommittee, it's time for Congress to take back responsibility, responsibility granted and delegated to Congress under the Constitution of the United States, responsibility for our criminal justice system. It is simply not satisfactory for Congress to pass statutes which, in effect, say any violation of any regulation under a certain program may be prosecuted criminally and then to allow the agencies to define the crime at the rate of 65,000 pages per year, and for the Congress to have little or no knowledge, let alone understanding, of what those crimes dowhat those regulations do in terms of defining crimes.
Indeed, in many corporations, the fellow who is in charge of environment, health, and safety, and who has to file all those reports and regulations, is only half jokingly referred to as the designated felon because he's the guy the agency's going to go after if they decide that they are going to prosecute that company.
The second point is that Americans should not be imprisoned on the basis of a Government official's interpretation of his own ambiguous regulation. There is a doctrine, called the Chevron doctrine, which allows Government agencies to declare their own regulations ambiguous and then to announce interpretations of those regulations which are then binding upon the court with respect to what the regulation means. What this means for American citizens who are attempting to comply with those regulations is that they are responsible not even for complying for that which is written, but also for complying with that which was in the mind of the official, very possibly that same official who was able to defeat the constitutional claim by saying that his regulations were voluminous and ambiguous, and that he couldn't understand the regulations. The citizen is held to the standard, once again, of zero tolerance even with respect to the interpretation which is the mind of the regulator.
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Third, a point which has already been made in the context of the prior panel, and by other members of this panel, and that is that there is need to reinject the notion of scienterthe notion of whether the individual knew or should have known that he was committing a crimeinto the prosecution of criminal cases. The result of not having a scienter requirement is, not only do you have voluminous and ambiguous regulations, not only do you have, then, the agency defining the crime and the agency interpreting and prosecuting the crime, so that you have, in effect, unified all three of Government functions of lawmaking, law interpretation, and law execution in a single individual, but you have eliminated the only defense, which is that an individual could not or did not understand what was required of him by the regulations.
In a dissent filed in a case a couple of years ago in the Supreme Court, indeed, Justice Thomas, speaking for himself, as well as Justice Breyer, Justice O'Connor, and Justice Ginsburg, pointed out that this kind of regulation, by interpretation, poses a threat to our liberty and our democracy.
I'd be pleased to respond to any questions that the subcommittee may have.
[The prepared statement of Mr. Marzulla follows:]
PREPARED STATEMENT OF ROGER J. MARZULLA, MARZULLA AND MARZULLA, WASHINGTON, DC
Page 123 PREV PAGE TOP OF DOCI. Congress has given away its power to define what is a regulatory crime.
In far too many instances, Congress has passed statutes which allow criminal prosecution for virtually any violation of federal regulations. As a result, agency rulemaking has become the functional equivalent of congressional lawmaking, and agencies are creating thousands of new federal felonies each year.
II. Imprisoning citizens for infractions of ambiguous regulatory requirements violates traditional concepts of fairness and the constitutionally protected due process rights of Americans.
It is a well-established principle of due process that a regulated entity cannot be held liable for penalties when it did not receive ''fair notice'' of what conduct was prohibited or mandated. The Fifth Amendment of the Constitution provides ''nor shall any person be deprived of life, liberty, or property, without due process of law.'' Fundamentally, due process requires that federal agencies make clear what is expected of regulated entities before seeking to impose penalties for alleged violations of their regulations.
III. Criminal prosecution of persons who had no intention of violating agency regulations violates constitutionally protected due process rights and deters compliance efforts.
Most non-regulatory crimes include an element of criminal or specific intent, also known as a mens rea requirement. Specific intent is a mental state above and beyond that which is required to do the actus reus or prohibited conduct. Courts normally require this guilty knowledge element because criminal laws are meant to punish people for and deter them from committing harmful acts.
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IV. Case Studies in Regulatory Criminal Prosecution
Consider the stories of Benjamin Lacy, Tuang Ming-Lin, Ocie and Carey Mills, Ray Britton and James Wilson, and ask yourself if the word ''felon'' immediately comes to mind.
Mr. Chairman and Members of the Subcommittee:
Thank you for the opportunity of addressing the need for congressional leadership in connection with criminal prosecution of regulatory offenses.(see footnote 2) Each year government agencies publish more than 65,000 pages of new regulationsmany of them complicated, unclear and conflictingwith which we are all expected to comply. Combine this with the myriad of statutes (Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act, Forest Management Act, Endangered Species Act) which provide criminal penalties for violation of those regulations, and the fact that courts generally defer to the agency's interpretation of its own regulations, and it is little wonder that thousands of Americans find themselves behind bars for crimes defined not by Congress, but by the agencies that prosecute them.
I am a partner in the Washington, D.C. law firm of Marzulla & Marzulla, specializing in environmental and natural resource law. I previously served as Assistant Attorney General in charge of the Environment and Natural Resources Division of the U.S. Justice Department, where I was responsible for all environmental litigation on behalf of the United States, both civil and criminal. I have worked extensively with all of the major environmental regimes, including the prosecution of civil and criminal actions on behalf of EPA, the Interior Department, NOAA, the Corps of Engineers and the Forest Service, among others, to enforce our nation's environmental laws and regulations. Thus, I have seen regulatory criminal enforcement from the perspective both of prosecutor and defense counsel.
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Today I will address three issues:
Congress has given away to administrative agencies the power to define regulatory crimes, as well as to enforce them. This, as four justices of the Supreme Court said not long ago, constitutes a threat to liberty and democracyand is probably unconstitutional.
The Chevron doctrine, which allows agencies to promulgate ambiguous regulations, then ''interpret'' them for the court, dangerously concentrates both the judicial and prosecutorial power in the hands of the agency.
Finally, by reading the ''knowing'' requirement out of many regulatory crimes statutes, the courts have created a strict liability scheme under which regulated entities and individuals who acted in good faith compliance with what they thought the law was end up in federal prison despite the best of intentions.
Mr. Chairman, I am not talking about hardened criminals and lawbreakers. My concern is for the ordinary, upstanding Americanssmall businessmen, farmers, merchants and contractorswho are suddenly and unjustly thrown into the criminal courts (and often federal prison) through no fault of their own and despite their best intentions. This is a shameful injustice which Congress has the power and the duty to remedy.
I. Congress has given away its power to define what is a regulatory crime.
In far too many instances, Congress has passed statutes which allow criminal prosecution for virtually any violation of regulations adopted by a federal agency. Examples of these include the Clean Water Act,(see footnote 3) the Clean Air Act,(see footnote 4) the Resource Conservation and Recovery Act,(see footnote 5) the Endangered Species Act,(see footnote 6) and the Forest Management Act.(see footnote 7) As a result, agency rulemaking has become the functional equivalent of congressional lawmaking and, as agencies pump out tens of thousands of new regulations each year, they simultaneously are creating thousand of new federal felonies which can be (and often are) prosecuted with the full force of the criminal law. Since Congress rarely conducts oversight of these regulatory criminal programs, the initial statutory authorization (generally enacted decades ago) amounts to a blank check for the agency to create as many new federal felonies as it wishes without any accountability. The unchecked power to legislate crimes and then prosecute their violation constitutes the precise excessive concentration of power in one branch of government which the Founding Fathers sought to avoid by separating our government into three branches, and assigning limited powers to each.
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Not surprisingly, federal agencies have eagerly grasped the intoxicating power to imprison those who do not adequately observe their various regulatory regimesas they interpret them. Agencies like EPA, Fish and Wildlife, NOAA, the Corps of Engineers and the Forest Service (to choose examples within my personal experience) can hardly be blamed for utilizing this potent weapon in the difficult job of implementing their congressionally mandated programs. Indeed, having been given this enormous power by Congress, regulatory agencies may reasonably assume that they are intended to use criminal prosecution as a routine part of their regulatory programs. Add to this prosecutorial blank check a dash of excessive zeal, and Congress has created a recipe for agency oppression of the kind glimpsed in the recent hearings on Internal Revenue Service enforcement abuses by another Committee of this House.
Congress' abandonment of its criminal lawmaking power to the regulatory agencies is wrongheadedand probably unconstitutional.
Respect for the law and agency programs is destroyed when even minor regulatory violations (such as paperwork, reporting, sign-posting and similar technical violations) which are unintentional (and often unavoidable) are prosecuted just like intentional crimes that endanger person, health, property or safety;
Agencies are encouraged to play ''gotcha'' with regulated entities in order to prove their zeal in racking up large numbers of criminal violations, rather than assisting businesses and individuals to understand and comply with reasonable regulations;
Businessespecially small businessis forced into a defensive, ''checklist'' approach to regulatory compliance, in which the goal is just to avoid prosecutionat the expense of economic vigor and the liberties and blessings of our free market system; and
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Constitutional principles of separating lawmaking and criminal prosecution, to avoid tyranny by one individual or group, are violated.
I will now discuss each of these points in turn.
First, our system of law is built on a hierarchy of penalties for legal infractions of various degrees of moral or social culpability. The law reflects society's determination that a parking ticket should not be punished the same as murder in the first degree; murder is more culpable, and it therefore requires a much more severe penalty. Prioritization of these penaltiesand thus the determination of what legal violations the law deems most serioushas been entrusted to our elected representatives in Congress. To commit a federal felony ought to be a very grave matter indeed, punishable by severe penalties and societal disapproval.
Federal agencies, on the other hand, do not have this point of view, nor do they have the responsibility for safeguarding the integrity of the federal legal system. EPA is charged with environmental protection, Fish and Wildlife with protecting endangered species, the Corps of Engineers with wetland protection, OSHA with worker protection, the Office of Surface Mining with mineland protection, etc. For each such agency, its regulatory program is its topif not its onlypriority. Little wonder, then, that these agencies rank violation of their regulations as the highest priority criminal offense, giving little or no thought to the relationship between penalties imposed by that agency and rest of the criminal law regime. After all, it is the job of Congress to strike a balance between regulatory and other criminal or civil penalties by passing laws appropriately penalizing legal infractions.
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But when an individual faces the same federal prison time for improperly filling out a required form that a rapist or drug dealer receives, he is justified in questioning the legal system which criminalizes his relatively benign actions. Unjust imprisonmenta staple of repressive governments and police statesmay engender fear of the law, but not respect for it. Yet today in the United States the ordinary, law-abiding citizen runs the risk of violating one of thousands of complicated (and even conflicting) regulatory requirements, with federal prison as the consequence. This is simply un-American and unacceptable to anyone who believes in the true purpose and genius of the law as an expression of our noblest societal and national goals.
Second, regulatory agencies are encouraged to seek the publicity and budgetary rewards which flow from headlines like: ''Agency Indicts Corporation for Federal Felony.'' Ironically, EPA and other regulatory agencies trumpet annual increases in the number of criminal indictments as though we should be proud that there are more and more environmental (or other regulatory) criminals. Imagine a police force congratulating itself on the fact that prosecutions for rape, murder or drug dealing are at record rates. The dramatic increase in federal regulatory prosecutions in this country either means that Americans are becoming increasingly more lawless (causing us to question our current approach to regulatory enforcement), or to conclude (rightly, I believe) that we have more and more prosecutors and investigators chasing more marginal cases in order to justify their increasing agency enforcement budgets.
At a minimum, Congress should inquire carefully into the kinds of regulatory crimes being prosecuted in order to answer this question. Agencies should be required to explain their choice of cases to prosecute and the penalties sought. Congress, in short, must become re-involved in our nation's regulatory criminal justice system; it cannot be left solely to the agencies to determine what is criminal, and what is not.
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Third, it is not surprising that a repressive regime of apparently arbitrary and unjust federal regulatory prosecutions has lead businessmen and individual citizens to operate defensively in their dealings with agencies. The compliance officer for environment, safety and health in many corporations is referred to (only half jokingly) as the ''designated felon'' because he must sign the myriad reports and applications that must be submitted almost daily to federal agencies. He knows that a single mistake on one such document can land him in federal prison. The result is the focusing of enormous resources on the technical details of compliance with paperwork and similar requirementsoften at the expense of huge possible gains in productivity, worker safety and public health which could otherwise be achieved. A frightened, defensive company is not the model of our dynamic system, which has brought this nation the highest standard of living in the world. We are drowning in regulatory requirements, backed up by overzealous criminal enforcement, costing us more than moneycosting us our liberty and boundless optimism in the future of the United States.
Finally, Congress may not hand over to the prosecuting agency the power to create and define those crimes which it then prosecutes without running afoul of the constitutional principle of separation of powers. The Framers rightly determined that those who hold the power to imprison should not also be entrusted with the power to create and define the offenses for which imprisonment may be imposed. The risk they sought to avoid was the inevitable risk that the prosecutor could first choose the individual or group he sought to punish, then define the law so as to insure a conviction. Thus, Congress is forbidden from passing a bill of attainder, determining culpability for a violation of law. Similarly, executive branch agencies may not be delegated lawmaking power, since lawmaking is the province of duly elected officials. Thus, guilt may not be determined by popular vote, and laws may not be made by unelected government officials.
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Yet a statute which makes any regulatory offense punishable as a crime fuses the lawmaking and prosecuting authority in a single agency. A regulation is, after all, simply a law that was not passed by Congress. Although administrative and penalties may be imposed for regulatory violations without infringing on constitutional prohibitions, when the criminal law is invoked the constitutional limitations come into highest resolution.
II. Imprisoning citizens for infractions of ambiguous regulatory requirements violates traditional concepts of fairness and the constitutionally protected due process rights of Americans.
It is a well-established principle of due process that a regulated entity cannot be held liable for penalties when it did not receive ''fair notice'' of what conduct was prohibited or mandated. The Fifth Amendment of the Constitution provides ''nor shall any person be deprived of life, liberty, or property, without due process of law.'' Fundamentally, due process requires that federal agencies make clear what is expected of regulated entities before seeking to impose penalties for alleged violations of their regulations. All too often, regulatory agencies take advantage of the Chevron doctrine to declare their own regulations ambiguous, then announce an interpretation (to which the court must defer) which puts the citizen in federal prison for failing to guess what that interpretation would be.
In 1994 Justice Thomas, in dissent, unmasked the danger in allowing an agency to declare its own regulation ambiguous under the Chevron doctrine, then ''interpret'' it into a new rule:
It is perfectly understandable, of course, for an agency to issue vague regulations because to do so maximized agency power and allows the agency greater latitude to make laws through adjudication rather than through the more cumbersome rulemaking process. Nonetheless, agency rules should be clear and definite so that affected parties might have adequate notice concerning the agency's understanding of the law. . . . An agency whose powers are not limited either through meaningful statutory standards or . . . rules poses a serious potential threat to liberty and democracy.(see footnote 8)
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As the Supreme Court explained in Daniels v. Williams,(see footnote 9) the purpose of the Due Process Clause is to prevent government from abusing its power or employing it for purposes of oppression. The Due Process Clause, quite simply, forbids all deprivations of property by government action that is arbitrary, unreasonable or violative of fundamental principles of fairness. Id. Also see Tenneco Oil Co. v. Federal Energy Admin, 613 F.2d 298, 303 (Temp. Emer. Ct. App. 1980) (when penalties are involved ''fundamental fairness requires that the regulation be so clear that men of common intelligence need not guess at the meaning and differ as to the application'').
Judge Patricia Wald of the U.S. Court of Appeals for the District of Columbia Circuit commented recently in a major speech that enforcement of unclear and ambiguous regulations at the expense of a company's due process rights is an increasingly serious problem, particularly because of the increasing complexity of regulations. She said, ''legislators and rulemakers would do well to proceed in the immediate future with even greater caution than in the past in insuring that their rules give fair notice of what is expected of the regulated and fair procedures for disputing alleged violations.''(see footnote 10)
Agency officials have successfully pressed this point in citizens' suits against them. Agency officials may be held liable for violating the law only when applicable legal requirements are ''clearly established at the time of the conduct at issue.'' Davis v. Scherer, 468 U.S. 183, 197 (1984).(see footnote 11) Why should federal agency officials be immune from liability when they cannot determine what is expected of them under regulations which are ''voluminous, ambiguous, and contradictory.'' (Id. at 196), while ordinary citizens may be sent to prison on the basis of that same federal official's interpretation of those same regulations? Yet, as I discuss later in this testimony, many Americans have been prosecuted and even imprisoned on the basis of just such ambiguous, voluminous, and contradictory regulationsas interpreted by the very agency which is prosecuting them.
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III. Criminal prosecution of persons who had no intention of violating agency regulations violates constitutionally protected due process rights and deters compliance efforts.
Most non-regulatory crimes include an element of criminal or specific intent, also known as a mens rea requirement. Specific intent is a mental state above and beyond that which is required to do the actus reus or prohibited conduct. Courts normally require this guilty knowledge element because criminal laws are meant to punish people for and deter them from committing harmful acts.
However, there is a category of crimes called ''public welfare offenses,'' in which courts have severely diminished, if not abrogated, the mens rea element. The sale of adulterated drugs under the Federal Food, Drug and Cosmetic Act (''FDCA'') is often cited as a ''public welfare offense'' in that it seriously threatens the community's health or safety. A ''public welfare offense'' is a crime in which the proscribed activity is so dangerous that the actor should presume the activity is likely to be regulated. To convict a person of violating the FDCA or other ''public welfare offense'' statutes, prosecutors need not prove that she had knowledge that her behavior was unlawful.
To what extent are other regulatory crimes characterized as ''public welfare offenses?'' In United States v. Weitzenhoff(see footnote 12) the Ninth Circuit concluded that violations under the CWA and many other environmental laws are ''public welfare offenses,'' and held that knowledge of the law is not an element of a CWA violation. Although it is debatable whether regulatory crimes that do not threaten human health should be considered ''public welfare offenses,'' most regulatory crimes are categorized as such.
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In light of the ''public welfare offense'' doctrine, to what extent is any intent required for conviction of a regulatory crime under most environmental laws? Are environmental crimes pure strict liability crimes in that no intent is needed at all? Many courts have characterized Clean Water Act (''CWA'') permit violations as strict liability crimes. However, a ''knowing'' violation should require that one knows something. Indeed, a ''knowing'' violation ordinarily requires the general intent to carry out the proscribed activity.
The following scenarios illustrate some ''knowing'' violations:
A hypothetical nuclear power plant has a CWA permit that requires that no more than 10,000 gallons per day of hot water is discharged into a nearby river. On a certain day, the hot water discharge from the plant's cooling processes amounted to 9,995 gallons.
(a) Late that night, the Defendant decided to take a hot shower in the power plant's locker room. He knew that the CWA permit limits the plant's daily hot water discharge. He had checked the plant's output immediately before his shower and learned that the plant had discharged 9,995 gallons of hot water that day. He also knew that his shower would cause more than five gallons of hot water to be discharged from the plant. Nonetheless, he showered and caused the discharge of six gallons of hot water.
(b) Late that night, the Defendant decided to take a hot shower. He knew about the plant's permit restrictions for hot water, but did not know whether the plant's output was close to the limit that night. His shower caused the discharge of six gallons of hot water.
Page 134 PREV PAGE TOP OF DOC (c) Late that night, the Defendant, who had no knowledge of hot water limitations, washed the shower floor and meant to rinse away the soap with cold water from the shower. By mistake, he turned the hot water knob and caused the discharge of six gallons of hot water.
(d) Late that night, the Defendant, who had no knowledge of hot water limitations, ran through the showers and accidentally bumped into and turned on the hot water knob. He caused the discharge of six gallons of hot water.
As noted above, ''knowing'' violations of CWA permit requirements are criminal offenses. The accidental bump in (d) should not lead to criminal liability. The Defendant did not intend even to turn on the shower, thus he had no general intent to take the action. In (a), the Defendant had the intent to take a hot shower plus the guilty knowledge that his conduct was unlawful, circumstances which far exceed the elements for a ''knowing'' violation.
Lack of knowledge, seen in (b), is unavailable as a defense for a CWA violation. Mistake-of-fact, like that made in (c), is generally not a valid defense to a CWA permit violation, either. The Defendant in (c) is likely to be found guilty of a ''knowing'' violation because he had the general intent to turn the hot water knob. Even though the Defendants in (b) and (c) were arguably guilty of mere negligence, they still can be found criminally liable for ''knowingly'' violating the CWA because they had the general intent to turn the knob.
With the exception of involuntary action, environmental crimes and many other regulatory violations based on ''knowing'' violations are strict liability crimes. No guilty mind is needed. Although the preceding scenario is oversimplified and involves a relatively harmless pollutant, some real-life examples show that regulatory prosecution can be just as harsh.
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IV. Case Studies in Regulatory Criminal Prosecution
What type of people are prosecutors targeting under the current regulatory crimes regime? Consider the following stories of Benjamin Lacy, Tuang Ming-Lin, Ocie and Carey Mills, James Wilson, and Ray Britton, and ask yourself if the word ''felon'' immediately comes to mind.
Benjamin Lacy makes nonalcoholic sparkling apple cider. He was convicted in September 1995 of altering records to hide the discharge of treated wastewater from two bathrooms and apple juice runoff into Manassas Run, a tributary of the Shenandoah River. The federal agents prosecuted Lacy for CWA permit violations even though they could not find any environmental damage from the pollution. Lacy, a felon at age 74, faced up to 24 years in jail and up to $2,000,000 in fines. The Judge, citing Lacy's old age and lifelong service to his country, sentenced him to a $10,000 fine and three years' probation. His cider company was fined $25,000.32
In February 1994, Tuang Ming-Lin, an immigrant from Taiwan, was accused of killing five kangaroo rats in violation of the Endangered Species Act while plowing his farm near Los Angeles. Twenty armed federal and state agents seized his tractor and threatened him with a $300,000 fine and a claim for 363 acres of his 720-acre farm. The prosecution lasted for more than a year before Tuang Ming-Lin agreed to a settlement, in which he ''donated'' $5,000 to a local habitat conservation fund.
In 1989, Ocie and Carey Mills were found guilty of adding clean fill dirt to a wetland without a permit and unlawfully excavating a drainage ditch, in violation of the CWA. As first time offenders, each was fined $5,000, and sentenced to 21 months incarceration, followed by one year of supervised release. Their sentence was upheld on appeal even though a federal judge had found that their land likely was not a wetland at the time they added the dirt. Unfortunately, this finding was made during an evidentiary hearing that took place after their convictions were confirmed by the Eleventh Circuit Court of Appeals.
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Small businessman Ray Britton took a community eyesore and turned it into an attractive townhome that anyone could be proud of. For his efforts, he faces fines of up to $125,000 for alleged environmental violations he remedied several years ago. The bayside Chincoteage Island (Virginia) property owned by William and Mary Hammond, an elderly couple surviving mainly on Social Security benefits, had become an unofficial dumping ground for island residents. It was littered with old sofas, washers, and other bulk trash. After being cited by the town for this nuisance, the Hammonds contracted Mr. Britton to clean up the lot in 1989.
In 1990, the U.S. Army Corps of Engineers issued a cease and desist order to Mr. Britton and the Hammonds, citing that the improvements to the property constituted the illegal ''filling'' of a wetland. Mr. Britton had never placed fill on the property.
To resolve the wetlands violation, Mr. Britton came to an agreement with the Army. Corps to create wetlands elsewhere. He then proceeded to build three luxury townhomes on the lot. In 1994, he was slapped with another violation that was based on the very same facts as the 1990 violation. This time, however, it came from the Environmental Protection Agency (EPA). Now, despite his prior resolution with the Corps, the EPA is seeking to impose the maximum fine allowed under law$125,000against Britton and the Hammonds.
In February 1996, James Wilson, was convicted on four felony counts charging them with knowingly discharging fill material and excavated dirt into wetlands without a permit, in violation of the Clean Water Act. Wilson faced 21 months in prison and a $1 million fine, as well as $5 million in fines against his contracting business. The crime Wilson committed was ''sidecasting''allowing dirt to fall to the side while digging ditches across the property. Fortunately for Wilson, the Fourth Circuit threw out his conviction on the grounds that the government had failed to prove its case. Unfortunately, the U.S. Attorney in Baltimore has chosen to re-prosecute him for the same offense.
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Congress has effectively issued a ''blank check'' to federal agencies, allowing them to write, interpret, and enforce rules which effectively create new federal crimes. This unchecked power violates the constitutional notion of separation of powers, and allows the agencies to violate constitutional requirements of due process.
Citizens remain subject to tens of thousands of unclear and inconsistently implemented and enforced regulations, with potential exposure to millions of dollars in penalties and hundreds of years in federal prison for unwitting violations. Congress has just begun, through this hearing and others, to peer under the rock of regulatory zeal. Soon Congress must decide how to handle what it has found underneath.
Congress cannot shirk its duty as the primary law-giver, especially where the criminal law is concerned. Agencies need to know the limits on their rulemaking authority. They need to know what, how, and when to prosecute. Most importantly, the public needs to know these things as wellwhat activity is illegal, what is the possible penalty, and what actions must they take to comply with the law.
I congratulate the Subcommittee for addressing this important issue, and I would be pleased to answer any questions you may have concerning my testimony.
Mr. GEKAS. We thank Mr. Marzulla, and we turn to our final witness, Professor Turley.
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STATEMENT OF JONATHAN TURLEY, PROFESSOR OF LAW, GEORGE WASHINGTON UNIVERSITY SCHOOL OF LAW, WASHINGTON, DC
Mr. TURLEY. Thank you, Mr. Chairman, members of the subcommittee. I appreciate the opportunity to speak with you today. The subject of this hearing is enormously important to many individuals, communities, and agencies in this country. I will not be able to do justice to the myriad of issues raised by this hearing in my short appearance before this subcommittee.
I was invited to appear before this subcommittee only 2 days ago while out of town on litigation. Nonetheless, I felt strongly that some issues should be raised during the hearing, albeit in abbreviated form. It is important to address these problems in a balanced and focused way. In this sense, I come to these questions with all of the standard bias of an academic. I prefer the empirical over the anecdotal evidence when considering legislation. With all due respect to our prior witnesses, including my good friend, Roger Marzulla, I believe that there is a danger of losing sight of the forest from the trees. This subcommittee can have a meaningful deterrent effect, but, to do so, the subcommittee must go beyond mere rhetorical and symbolic gestures and address the substantive underlying problems.
While there has been considerable attention to the exercise of agency interpretation of civil and criminal provisions, there can be little question that the agencies are allowed to, and expected to, interpret statutory provisions enacted by Congress. All legislation is necessarily general and vague. To carry out the purpose of a statutory provision, an agency must interpret and apply that provision to countless cases. That's the very point of the Chevron doctrine that Roger referred to in his commentsa doctrine endorsed by a conservative Supreme Court.
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I'm not going to talk about Chevron which is addressed in my testimony. This leaves us with the cases presented to the subcommittee and their significance to a larger legislative purpose. Considering the foregoing, I do not see the significance of these cases as the basis of legislative action.
The only case for which I was given details before my appearance was the case of Mr. Unser. I must confess that my review of this case suggests that the agency and the court acted entirely properly with regard to Mr. Unser. In reading the details in this case I do not find Mr. Unser to be a particularly compelling or heroic figure. To the contrary, Mr. Unser appears outraged that a Federal law enforced against many citizens has been enforced against him. While Mr. Unser may consider enforcement to be, in his words, ''worse than the KGB,'' I would submit that the exemption of the wealthy, powerful citizens from such an enforcement would be the very definition of the type of system that he publicly abhors.
Let us review the facts of this case. In this country, a small percentage of public land is designated wilderness, and protected from motor vehicles and other destructive influences. Snowmobiles are one of the most destructive forms of recreation in our forests, and particularly harmful to wilderness areas. Individuals, however, continue to engage in this conduct due to the low level of detection guaranteed by the remote location of these areas. Rather than recreate in areas designated for snowmobiling, these individuals insist on violating laws to enjoy the experience of snowmobiling through pristine areas. An example of this problem, and the underlaying low detection rate, can be found in studies conducted in wilderness areas. In one such area, the Beartooth Wilderness, the Government recorded 472 violations, but only 7 violators were caught and fined.
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Section 551 of title 16 of the United States Code is a statutory provision enacted by Congress and given to the Secretary of the Department of Agriculture to enforce. This is not an obscure provision. It's the central legal mechanism used to protect wilderness areas from their greatest threat: motorized recreational vehicles of various types, including snowmobiles.
Since 1985, the Forest Service has banned the possession or use of a motor vehicle, motor boat, or motorized equipment in areas designated as a national forest. The regulation was subject to a long notice, hearing, and commentary before it was promulgated.
Mr. Unser chose one of the Nation's most sensitive areas to violate the law; the South San Juan wilderness near the New Mexico border. This is an area at considerable risk from snowmobiles. In an impressive feat, Mr. Unser found himself stranded in the wilderness area and succeeded with a colleague in fighting the elements for 2 days until they were rescued. In this sense, Mr. Unser is not unique. Many areas are restricted to protect citizens as well as the ecosystem itself. It is often the case that individuals will go illegally into restricted areas, only to require rescue. By the time the Service reaches such individuals, it is often a question of body identification, rather than individual citation. As Special Agent Charles Burd stated at Mr. Unser's trial, the Service ''told him that they were glad that he had survived his ordeal and they weren't going after a corpse, as they often do in these situations.'' While these individuals are not required to bear the high cost of such rescues, they are often given citations for their misconduct. This is a minimal deterrent response by the Forest Service. The men and women who searched for 2 days to rescue Mr. Unser, in often dangerous conditions, are not ''nazis'' or ''KGB,'' but professionals who work long hours and for little pay to protect citizens from their own folly.
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Unfortunately, my time has expired and I'll leave it there, Mr. Chairman.
[The prepared statement of Mr. Turley follows:]
PREPARED STATEMENT OF JONATHAN TURLEY, PROFESSOR OF LAW, GEORGE WASHINGTON UNIVERSITY SCHOOL OF LAW, WASHINGTON, DC
Mr. Chairman, members of the Subcommittee, I appreciate the opportunity to speak with, you today. The subject of this hearing is enormously important to many individuals, communities and agencies in this country. I will not be able to do justice to the myriad of issues raised by this hearing in my short appearance before the Subcommittee. I was invited to appear before this Subcommittee only two days ago while out of town on litigation. Nonetheless, I felt strongly that some issues should be raised during the hearing, albeit in an abbreviated form. Mr. Chairman, with the permission of the Subcommittee, I would like to submit my complete written statement into the record and to submit a supplemental statement at a later date.
I am a professor of law and the Director of Environmental Law Advocacy Center at George Washington University. The Environmental Law Advocacy Center contains a variety of projects, including the Environmental Crimes Project and the Shapiro Environmental Law Clinic. In addition to drafting environmental and sentencing legislation, my students and I represent victims of environmental crimes as well as federal whistleblowers in this area. My students and I also litigate cases against the federal government to enforce environmental laws. In all of these cases, my students and I work only pro bono, and do not accept fees from our clients who are often indigent or under considerable financial strain. We often see, in the most personal terms, the physical and financial damage caused by environmental crimes.
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Mr. Chairman, the subject of this hearing is a serious and appropriate question for oversight review: allegations of agency abuse. I am highly sympathetic to such concerns since I have represented individuals who have been victimized by agencies ranging from the workers at Area 51 in Nevada to the current nuclear couriers in Tennessee. No one is more outraged than my students and I when citizens are run to ground by callous or hostile federal agents.
It is important, however, to address such problems in a balanced and focused way. In this sense, I come to these questions with all of the standard bias of an academic. I prefer empirical over anecdotal evidence when considering legislation. With all due respect to some of our prior witnesses, including my good friend Roger Marzulla, I believe that there is a danger of losing sight of the forest from the trees. This Subcommittee can have a meaningful deterrent effect but, to do so, the Subcommittee must go beyond the mere rhetorical or symbolic and address the substantive underlying problems.
While there has been considerable attention to the exercise of agency interpretation of civil and criminal provisions, there can be little question that agencies are allowed to, and expected to, interpret statutory provisions enacted by Congress. All legislation is necessarily general and vague. To carry out the purpose of a statutory provision, an agency must interpret and apply that provision to countless individual cases. In Chevron, USA, Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), the United States Supreme Court articulated a highly deferential approach to such agency interpretations with the understanding that, if Congress does not agree with an agency interpretation, it can enact corrective and binding legislation. However, the need for agency interpretation of federal statutes is beyond serious debateand presumably not seriously questioned by this Subcommittee.
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When hearing the type of testimony today, it would be easy to assume that agencies act both unilaterally and without serious restraints in the imposition of civil and criminal penalties. Clearly, this is not the case. Many agency regulatory interpretations first appear in a lengthy process of review and public comment. These agency actions are often subject to litigation before they are actually applied against any citizen. If an interpretation is a purely legal issue, it is usually reviewed by the agency's Office of General Counsel's (OGC) and often the Department of Justice (DOJ).
Once these interpretations pass muster, an agency can apply the standards or processes to actual cases. When an agency engages in excessive or unfounded interpretations, any civil or criminal sanctions based on such interpretations are subject to judicial review. Federal courts routinely bar prosecution or civil penalties based on constitutional principles of vagueness or overbreadth as well as statutory interpretive principles. Most federal judges in the country follow a fairly narrow construction of federal statutes that do not permit significant departures from the stated language or purpose of an Act. When a federal court agrees with an agency's interpretation, Congress always reserves the right to correct any judicial opinion misinterpreting its legislative intent under an Act. It is unnecessary to explain the obvious value of this system and the value of agencies in the interpretation and execution of federal mandates.
Just as the Subcommittee cannot seriously question the need for agency interpretations, the Subcommittee presumably does not seriously question the need for civil and criminal enforcement of these laws. Administrative orders and agency enforcement remain the primary method of protecting the purity of our food supply, the safety of our workplace and the environment of our communities. For most agencies, this presents a daunting if not impossible task. Agencies cannot expect to enforce these laws against more than a small percentage of violators in an economy of this size. As a result, compliance with these federal laws is a question of the deterrent effect of agency actions. Deterrence itself is a relationship between the rate of detection and the size of a penalty. Agencies such as the Department of Agriculture and the Department of the Interior struggle with areas with extremely low detection and, accordingly, low deterrence. Agencies must use administrative orders and agency enforcement to create a minimal level of deterrence to achieve the purposes of health, environmental and worker safety statutes. In this process, the agency must use its expertise and discretion in setting relative fines or penalties for misconduct falling under its jurisdiction. It is in this discretionary conduct that agency abuse often occurs when officials fail to police their own personnel or review their conduct in individual cases.
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This leaves us with the cases presented to the Subcommittee and their significance to a larger legislative purpose. Considering the foregoing, I do not see the significance of these cases as a basis for legislative action. The only case on which I was given details before my appearance was the case of Mr. Unser. I must confess that my review of this case suggests that the agency and the court acted entirely properly with regard to Mr. Unser. In reading the details in this case, I do not find that Mr. Unser is a particularly compelling or heroic figure. To the contrary, Mr. Unser appears outraged that a federal law enforced against many citizens has been enforced against him. While Mr. Unser may consider such enforcement to be ''worse than KGB, I would submit that the exemption of wealthy, powerful citizens from such enforcement would be the very definition of the type of the system that he publicly abhors.
Let's review the facts of the case. In this country, a small percentage of public land in designated ''wilderness'' and protected from motor vehicles and other destructive influences. Snowmobiles are one of the most destructive forms of recreation in our forests and particularly harmful to wilderness areas. Individuals,, however, continue to engage in this conduct due to the low level of detection guaranteed by the remote location of these areas. Rather than recreate in the many areas which allow for snowmobiling, these individuals insist on violating the laws to enjoy the experience of snowmobiling through pristine areas. An example of the problem and the low detection rate can be found in studies conducted in wilderness areas. In one such area, the Absaroka-Beartooth Wilderness, the government recorded 472 violations but only 7 violators were actually caught and cited.
Section 551 of Title 16 of the United States Code is a statutory provision enacted by Congress and given to the Secretary of the Department of Agriculture to interpret and enforce. This is not an obscure provision but the central legal mechanism used to protect wilderness areas from their greatest threat: motorized recreational vehicles of various types, including snowmobiles. Since 1985, the Forest Service has banned the possession or use of a motor vehicle, motorboat, or motorized equipment in an area designated as a National Forest Wilderness. 36 C.F.R. §261.16(a). This regulation was subject to a long public notice, hearing, and commentary before it was promulgated.
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Mr. Unser chose one of the nation's most sensitive areas to violate the law: the South San Juan Wilderness near the New Mexico-Colorado border. This is an area that is at considerable risk due to snowmobiles and other motor vehicles. Unfortunately for Mr. Unser, during this illegal incursion, he found himself stranded deep into the Wilderness area. In an impressive feat, Mr. Unser succeeded with his colleague in fighting the elements for two days until they were rescued. In this sense, Mr. Unser is not unique. Many areas are restricted to protect citizens as well as the ecosystem from harm. It is often the case that individuals will go illegally into restricted areas only to require rescue. By the time the Service reaches such individuals it is often a question of body identification rather than individual citation. As Special Agent Charles Burd stated at Mr. Unser's trial, the Service ''told him [they] were glad he had survived his ordeal and that [they] weren't going after a corpse, as [they] often do in these situations.'' While these individuals are not required to bear the high costs of such rescues, they are often given citations for their misconduct. This is a minimal deterrent response by the Forest Service. The men and women who searched for two days to rescue Mr. Unser in often dangerous conditions were not ''nazis'' or ''KGB,'' but professionals to work for long hours and for little pay to protect citizens from their own folly.
At this trial, witnesses testified that Mr. Unser was a long-standing snowmobile enthusiast who had been recreating in the area since the mid-1960's. Mr. Unser was not only aware of the restrictions that came into effect in the 1980s but he was specifically aware of the designated wilderness area.. Witnesses testified that the two snowmobiles were found far into the Wilderness area near Red and Dipping Lakes, and not (as has often been suggested) along the edge of the area. Moreover, Mr. Unser could have been sent to jail for six months and given a $5,000 fine for his misconduct. Instead, noting the dire circumstances that he faced in his ordeal, the court imposed a merely symbolic fine of $75 for this misdemeanor.
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It is not clear what Mr. Unser would have had the court or the agency do in light of his misconduct. Mr. Unser violated an important federal law which applies equally to all citizens without exception. Mr. Unser was not facing ''nazis'' but a conservative judge who applied the lowest possible penalty. Mr. Unser, however, has now been the focus of two congressional hearings and a prolonged litigation.
If I sound somewhat incredulous, it is because I have represented serious victims of agency abuse who could not get a return telephone call let alone a hearing from Congress. For example, when I received the call from this Subcommittee two days ago, I was meeting with over twenty special agents who transport nuclear weapons for the Department of Energy (DOE). These nuclear couriers have been treated as criminals by the Federal Bureau of Investigation (FBI) after they raised safety and security concerns. Despite the fact that these concerns were found justified in a federal whistleblower action, the DOE called for a criminal investigation in retaliation. When the Fraternal Order of Police (FOP) sought counsel to help the workers, the FBI became increasingly abusive and passed around a list of any workers represented by counsel as presumptively guilty of something. The FBI refused to interview represented workers and demanded that workers turn in colleagues for any offense as the basis for being ''cleared'' for employment at Oak Ridge. As a result, any worker who spoke with a lawyer was placed on administrative leave and other workers were told that they were targets of investigation due to their represented status.
I mention the nuclear couriers because it is difficult to work up a sense of outrage over Mr. Unser's $75 fine when over twenty families are facing ruin over a common form of abuse by the FBI. They are neither famous nor well-connected. They were not punished for recreational excess. They were trying to do their job and found themselves at the center of an investigation in search of a purpose.
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This Subcommittee is exercising a meaningful oversight function. I would submit, however, that there are hundreds of average citizens who would be better subjects of your attention than Mr. Unser's snowmobiling difficulties. Moreover, the most serious problem is not the agency interpretations but individual agent abuses. The vast majority of abuses in this area can be traced to individual officials or agents who grow abusive or callous in their positions of authority. This occurs because they do not fear a serious deterrent in the form of review. Agents are accountable to review by Inspector General (IG) offices, Offices of Professional Responsibility (OPR) and the Office of Special Counsel (OSC). All three of these offices are notoriously lax and bureaucratic in their reviews of agency misconduct. While given a mandate to police such misconduct, these offices are mere paper tigers that are often the source of derision among federal employees. This leaves us with the very problem of deterrence addressed earlier. Citizens are abused by individual agents because there is neither a high likelihood of detection nor serious penalty for such misconduct.
If this Subcommittee wants to deter the most prevalent form of agency abuse, it would be an easy matter. Congress must restructure the IG, OPR and OSC offices to mandate more aggressive action in these cases. If these internal watchdog offices were functioning properly, citizens could file for review of misconduct before litigation to seek relief. These changes would drive at the heart of the greatest source of abuse for average citizens. Agents would then be subject to a meaningful deterrent if their actions are excessive or abusive. Families like those of the nuclear couriers could then seek help before their lives were ruined by misconduct.
In conclusion, you may count my voice and those of my clients in calling for change. We need help from this Subcommittee. But this help must come in a meaningful form. Congress should not reduce the deterrence of citizens who violate our laws but rather create deterrence for government officials who do so. There is neither a significant detection rate nor penalties for agents who abuse their authority at the cost of innocent citizens. This Subcommittee can change that deterrence equation and, in the process, protect the most vulnerable of our population.
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Once again, Mr. Chairman, thank you for allowing me this opportunity to appear today. I would be happy to respond to any questions that the Subcommittee may have.
Mr. NADLER. Mr. Chairman, can I ask unanimous consent to allow Mr. Turley to finish his statement?
Mr. GEKAS. Without objection.
Mr. NADLER. Thank you.
Mr. TURLEY. Thank you, Mr. Nadler. Thank you, Mr. Chairman.
At this trial, witnesses testified that Mr. Unser was a longstanding snowmobile enthusiast who had been recreating in the area since the mid-1960's. Mr. Unser was not only aware of the restrictions that came into effect in the 1980's, but he was specifically aware of the designated wilderness area. Witnesses testified that two snowmobiles were found far into the wilderness area, near the Red and Dipping Lakes, and not, as has it's been suggested, along the edge of the area. Moreover, Mr. Unser could have been sent to jail for 6 months and given a $5,000 fine for his misconduct. Instead, noting the dire circumstances that he faced in his ordeal, the court properly imposed a merely symbolic fine of $75 for this misdemeanor.
It is not clear what Mr. Unser would have had the court or the agency do in light of this misconduct. Mr. Unser violated an important Federal law which applies equally to all citizens, without exception. Mr. Unser was not facing ''nazis,'' but a conservative judge who applied the lowest possible penalty. Mr. Unser, however, has now been the focus of two congressional hearings and a prolonged litigation.
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If I sound somewhat incredulous, Mr. Chairman, it's because I have represented serious victims of agency abuse, who could not get a return telephone call, let alone a hearing from Congress. For example, when I received a call from this subcommittee 2 days ago, I was meeting with over twenty special agents who transport nuclear weapons for the Department of Energy. These nuclear couriers have been treated as criminals by the Federal Bureau of Investigation after they raised serious safety and security concerns. Despite the fact that these concerns were found justified in the Federal whistleblower action, the DOE called for a criminal investigation in retaliation. The facts of this case are laid out in my testimony.
I mention the nuclear couriers because it's difficult to work up a sense of outrage over Mr. Unser's $75 fine when over 20 families are facing ruin over a common form of abuse by the FBI. They are neither famous nor well connected. They were not punished for recreational excess. They were trying to do their job and they found themselves at the center of an investigation in search of a purpose.
I believe this committee can do some meaningful work and I have no question of the good motivations of this committee. I've suggested in my testimony, which I won't read here, that there are possibilities for reform, ironically, along the lines that Congressman Delahunt described when he was looking for ways in which we could police these agents. Likewise, Mr. Chairman, as you've also indicated, there is room for reform along the lines where you would like to pursue.
In conclusion, Mr. Chairman, you may count my voice and those of my clients in calling for change. We need help from the subcommittee, but this help must come in a meaningful form. Congress should not reduce the deterrence of citizens who violate our laws but rather create deterrence for Government officials who do so.
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Thank you for allowing me to testify today.
Mr. GEKAS. Given the fact that we exceeded to the gentleman from New York when he requested additional time for Professor Turley, does any other witness want to add anything to his or her testimony that time did not permit before. If not, we'll proceed with questions and let you follow through with that.
Professor Turley, do you recommend that we look at the Department of Energy and how it promulgates and enforces regulations, and to see whether they abuse discretion or violated their own and Congress' guidelines? You were talking about these Energy questions just a moment ago.
Mr. TURLEY. Your Honor, I think that the emphasis of this committee is well-founded but the focus has to be on where the abuse is, which is on discretionary authority of agents.
Mr. GEKAS. Yes, you chose to use the word ''chose'' when you described Mr. Unser. He ''chose,'' you said, to go into this. Does that imply that you feel that he intended to do what he didto cross into illegal territories?
Mr. TURLEY. Mr. Chairman, I pretty much take the record at the trial on its face. The Forest Service found these snowmobiles well within the wilderness area. While Mr. Unser suggested that they could have been moved, there was no suggestion in the hearing that the agents changed the site or altered evidence. It certeinly seems rather implausible that the Forest Service would frame Mr. Unser for a $75 fine.
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Mr. GEKAS. Frame? I'm talking about whether or not you believe, in the words that you chose, namely ''chose,'' that Mr. Unser intended, purposely, to enter into the illegal territories.
Mr. TURLEY. Mr. Chairman, I found Mr. Unser's testimony, personally compelling, but the record in this case does not indicate that he wandered into the wilderness by happenstance. The record indicates that Mr. Unser knew that there was a wilderness area and that, if he did not do it intentionally, he was in reckless disregard of where that Wilderness area was.
Mr. GEKAS. Does theto your knowledge, does the Forest Service regulation that umbrellas this casethe Unser casedoes it allow for application of discretion?
Mr. TURLEY. Mr. Chairman, the answer to that is rather difficult. There is discretion that is allowed in the citation of an individual. Clearly, agents perform that discretion all the time. I further agree that such discretion is needed in many of these cases. I'm entirely sure this was an area in which discretion is sometimes abused.
Mr. GEKAS. Mr. DeLong, you mentioned that, in one example, that youof which you're well aware, that a $100,000 a day fine can be imposed for the failure to correct a given situation. It's in exactly that kind of circumstances that many of us push the enacted of what we call the ''Fair Warning Act,'' where those kinds of fines would be set aside if we knew or if the landowner, for instance, was not given fair warning of the application of a particular regulation. Have you had a chance to look at that fair warning system that we tried to enact two Congresses ago?
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Mr. DELONG. No, I have not seen that. I know there has been a dispute in the courts for years now over the problem whether people have a legal right to fair notice of the regulations, as Roger talked about.
Mr. GEKAS. Yes, as a matter of fact, I think it was a New Jersey case or New York case, I'm not sure, which prompted us to try to codify what the court said in that case. They really came down hard on the agency in questionI've forgotten what the circumstances werefor the failure to give proper notice, fair warning, et cetera, and that's what we attempted to do in our legislation. Do you believe that we ought to revisit that and see if we can re-codify what the court did in smacking the hands of an agency for that kind of action?
Mr. DELONG. Yes, I certainly agree with that principle. I think if you have a regulation that a reasonable person cannot interpret or that someone tries honestly to interpret and fails because it's not understandable, that should be a defense. The regulation ought to be fixed, too.
Mr. GEKAS. As a matter of fact, we recall that Mr. Marzulla, and I pose that question to him, is well familiar with the issue about which we speak, and Mr. Marzulla, would you comment on my questions and assertions?
Mr. MARZULLA. Yes, certainly, Mr. Chairman. I had the honor of testifying before this subcommittee on a regulatory Fair Warning Act and find that was, almost to the day, 2 years ago. If anything, the situation has gotten far worse than it was 2 years ago. That is, agencies emboldened by repeated court victories, in which the court applies this doctrine that says that an agency may take its own regulation, declare that regulation ambiguousmind you, the agency is saying, what we wrote isn't clear, then the agency may come forward with its own interpretation, saying here's what we really meant but didn't tell you in the regulation, and then may fine orand I'd like to get, in a moment, Mr. Chairman, to imprisonment, which I think is a much more serious and an issue worthy of examination herebut, may then fine or imprison an individual on the basis of what they didn't tell him by way of interpretation. But, that is, not only contrary to constitutional principles of due process, but it's positively unconstitutional.
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May I give an example, Mr. Chairman, of an ongoing case which I think demonstrates this issue?
Mr. GEKAS. The gentleman may proceed.
Mr. MARZULLA. The United States is presently prosecuting James Wilson. Mr. Wilson is the developer of a community in Southern Maryland. About, I guess almost 20 years ago, when that community, which is being developed as awas being developed as a model community then, jointly with the Housing and Urban Development Department, Mr. Wilson obtained, in the course of the original approvals for that community of St. Charles, which now has about 30,000 population, a letter from the Corps of Engineers stating that there were no wetlands within the area to be developed. About 15 or 16 years later, Mr. Wilson was prosecuted and ultimately convicted, and sentenced to 21 months in Federal prison and a penalty for him and his company totalling $3 million for the crime of unlawfully filling wetlands.
The response to the letter from the Corps of Engineers was that the Corps' interpretation of its regulation, as to what was a wetland and what wasn't, had changed since the time they issued that letter and that, somehow, Mr. Wilson was supposed to know that the Corps had changed its interpretation. He could not rely on the letter that he held in his hand and, as a result, he very nearly served that time in prison. Now, fortunately, on Christmas eve, last year, the Fourth Circuit reversed, but the U.S. Attorney is prosecuting Mr. Wilson, again. He's retrying the case, and he, again, runs the risk of spending a large portion of the remainder of his life in prison, and most of his personal fortunethat portion that hasn't been paid in attorneys fees.
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I suggest to you, Mr. Chairman, and members of this subcommittee, that that is a prime example of a situation in which this Congress has handed over, in the Clean Water Act in 1973, to the applicable agenciesin this case, the Corps of Engineersthe power to define what is a crime, to then not even have to put it in writing, but to be able to make it up by interpretation, and to put normal American citizens, as Dr. Orient pointed out, these are not drug lords, and burglars, and rapists, and murderers. We're talking about ordinary, fine, upstanding Americans who are businessmen and pillars of their community being put in Federal prison on the say-so of an interpretation. Why? Because this Congress has never revisited its delegation to the EPA and the Corps of Engineers of the authority to define, by regulation and interpretation, what is a crime.
I could go on a little bit further by pointing out that what Congress did approve, incidentally, what is illegal under the Clean Water Act, is the discharge of a pollutant into navigable waters. And, so the indictment here says to Mr. Wilson, you've discharged a pollutant into navigable waters; and, he scratches his head and he says, wait a minute, what I did was to level a piece of dry ground. Well, you need to understand that through regulationsomething Congress has never passed, never agreed tothat the applicable agencies, specifically the Corps of Engineers, has defined waters to mean dryland, has defined pollutant to mean moving the dirt around. So, not only do we find Mr. Wilson relying on that interpretation, but the only thing Congress ever approved was the prosecution of one who pollutes water.
Mr. GEKAS. The time of the Chair has expired. We've come
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Mr. MARZULLA. I apologize, sir.
Mr. GEKAS. That's all right. We recognize the gentleman from New York. Five minutes.
Mr. NADLER. Thank you, Mr. Chairman. Professor Turley, most of thewere you here during the first panel? You heard those three
Mr. TURLEY. Yes, Mr. Congressman, I was.
Mr. NADLER. Thank you. Most of these cases that we're hearing don't seem to demonstrate anything wrong with the regulatory process, per se, but wrong with abuses of discretion or poor judgment. (a) Would you agree, and (b) what do you think we ought to do about that kind of problem, if you do agree?
Mr. TURLEY. There seems to be a common denominator in the testimony. There were two types of objections that I have heard today. One was an objection to the failure to show discretion at the initial citations, and an objection that the court cited with the Government agency in its interpretation and its reading of the facts. Those are two issues that are not particularly well suited for the Congress to address. The Congress cannot create legislation to give good judgment to every agent. I wish we could. But, what we can do is to attempt as best as we can to create a method by which citizens can bring abusive discretion to places like the OSC and the OPR and to turn those into meaningful offices for review.
Page 156 PREV PAGE TOP OF DOC Mr. NADLER. So, do you think it might make sense to have some sort of a system in which, if an agency brings someone up in the form of an administrative charge, that person incurs substantial legal bills or other bills, and in the end is found guilty of nothing, that he be recompensed so that the agency has to pay restitution of some sort?
Mr. TURLEY. I don't have much of an objection to some restitution. I think an immediate restitution provision for anyone who successfully beats back an administrative order would be prohibitively expensive and would not necessarily be a good effect on the system. It could create, in fact, a chilling effect on agencies who cannot afford the prospect of paying out restitution in each case. I do support, however, the idea of restitution in cases where you find gross abuse of discretion where there is clearly no foundation for a charge. But, the devil would have to be in the details. We have to establish that line.
Mr. NADLER. In terms of the other cases we heard this morning from Dr. Krizek and from Mr. Goodmanyou heard these casesthe doctor and the small businessmen with the USDAaside from bad discretion, did you detectassuming what they said was true and, unfortunately, we didn't hear from the other side, but assuming that the truth of what they said, did you see anything other than bad discretionother than poor trainingdo you see anything in the nature of an abuse that we could do something about other than training or something?
Mr. TURLEY. Mr. Nadler, I haven't reviewed those cases. My students brought me, when I came here today, the actual opinions written by the court, and I was looking at those opinions during the testimony. I found the Krizeks' to be, once again, personally compelling. I'm sorry for what they have gone through. I have to note, however, that the courts did not share their opinion of the facts. The Court of Appeals panel, which included Judge Centell, and other flaming liberals, like Judge [Laughter.]
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Mr. TURLEY.Silverman and Ginsburg, ruled that they were unpersuaded by the Krizeks' argument that it did not rise to the level of reckless disregard, and found that they were appropriately held responsible. The district court also held that billing errors were not mistakes nor merely negligent conduct. Under the statutory definition of knowing conduct, the court is compelled to conclude that defendants acted with reckless disregard as to the truth or falsity of the submissions. While I'm sympathetic that perhaps the Krizeks' made these mistakes and there should have been greater discretion shown in the counts that were brought, it is important to note that there is a strong difference of opinion as to the nature of their conduct.
Mr. NADLER. Let me just ask you one further question. In Mr. Goodman's case, the Department of Agriculture came in and subjected his books and records to weeks of examination. They did not pursuant to statute. They don't need a warrant, because anyone in that business has to, in order to get license, has to sign a statement to make available those books and records upon request. Do you think that that's really considered a warrant requirement? That a blanket requirement to make one's books and records available, in unlimited amounts and for unlimited periods of time to an administrative agency is a little much in terms of due process?
Mr. TURLEY. Mr. Nadler, I think that there may be some room there to offer more protection, but I would caution in one aspect. The Department of Agriculture protects the purity of our food supply over tens of thousands of actors on any given day. They would be unable, in my view, to satisfy warrant requirements without jeopardizing our need to protect food safety. That would require a prohibitive type of obligation upon the Department of Agriculture and, unfortunately, we could be the victims of that bureaucratic ambivalence or uncertainty.
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Mr. NADLER. That's a point well taken, but do you think that we could make a distinction as between safety inspections and financial inspections. I mean, here they're talking about allegations of commercial bribery, not of putting poison in the foodthat when you're dealing with financial as opposed to purity of the food that maybe you'd better require some more due process.
Mr. TURLEY. Yes, Mr. Nadler, I think that's precisely the type of distinction that could be made and easily executed.
Mr. NADLER. Thank you.
Mr. TURLEY. Thank you.
Mr. GEKAS. The gentlemen's time has expired.
We turn to the gentleman from Massachusetts, Mr. Delahunt.
Mr. DELAHUNT. Yes, Professor Turley, since you're on a roll here [Laughter.]
Mr. DELAHUNT. You know, my preference is always to attempt to make decisions predicated on empirical data that, hopefully, is reliable. Now, my experience is that the exception to the rule in Congress, and that we tend to make too many policy decisions based upon anecdotal information.
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Having said that, however, and let me refocus on HCFA, it almost amounts to judicial notice that 47,000is it 47,000, Dr. Orient47,000 rules and regulations are incomprehensible to the average human being. Maybe Barney Frank, but no other member in Congress could absorb, analyze, and feel comfortable in making correct decisions. I think what we're talking about here is a sense of proportion. And, there is a tremendous amount of anecdotal information that has come my way that has led me to believe that we have a health care systemand I'm just focusing on health care for the momentthat is absolutely incomprehensible to providers and actors within that system. I don't think people know what they're doing. I don't think the people who are delegated to issue the rules and regulations, those responsible for the enforcement, and those that are, some might say, the victims of them, know what's happening.
You know, I've managed, in terms of your background, in terms of your interest, in terms of the environment to stop some very poor policy that has emanated in the form of proposals from this particular committee in terms of concerns that were described as judicial taxation. We managed to defeat that by an amendment that I offered with Mr. Boehlert.
But, there does come a point where there's an equilibrium here and let me speak about Mr. Unser for a minute. Maybe my problem is that I was prosecuting serious crimes that people are legitimately concerned about. And, if I happen to be the head of that agency and someone said, by the way, Mr. Unser, does have wealth and celebrity that's how he happened to get here. I'm concerned not about Mr. Unser necessarily as an individual, but all the Mr. Unsers that are out there who don't have the opportunity and the wherewithal to appear here to relay his outrage.
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The comparable thing, I always say, is the police officer who stops you for speeding. I mean this is really what we're talking about as Mr. DeLong was saying. I mean this is malum prohibitum. Yes, it's wrong. But, for God's sake, I mean, have common sense. The man is out in a blizzard. He's lucky he's alive. And, this is the irritant between the citizen and the Government that creates, I suggest to you, disrespect for Government. This is the point that Mr. DeLong is talking about when he coins the phrase ''political illegitimacy.'' That's what I'm talking about.
Mr. TURLEY. Can I
Mr. DELAHUNT. Sure. Respond to those comments, and I'd welcome anybody to respond. Can I have an additional couple of minutes, Mr. Chairman?
Mr. TURLEY. Mr. Delahunt, I agree with much of what you've said and I don't want to risk bringing about the rapture by agreeing with Roger Marzulla. We do, on occasion, but we both agree on the need [Laughter.]
Mr. DELAHUNT. On occasion, I agree with Chairman Gekas, so that's okay. [Laughter.]
Mr. TURLEY. And, so isn't America great.
Mr. DELAHUNT. It's the American way.
Page 161 PREV PAGE TOP OF DOC Mr. TURLEY. But, we do both agree on the need to have clear basis for criminal standards and prosecution. As for Mr. Unser, there's an obvious different view of what happened with Mr. Unser.
Mr. DELAHUNT. Right. And, I don't want to get into the factual basis.
Mr. TURLEY. Right.
Mr. DELAHUNT. We're not a small claims court here arguing different facts. But, I've got to tell you, in terms of the False Claims Act, that I have become, as I said, a lead sponsor of legislation to amend that statute. The Department of Justice acknowledged that in terms of the enforcement of that act they did a computer run, and without any additional investigatory work, that was the factual predicate that prompted them to issue demand letters to every hospital4,600 hospitals in the country. That's not the way to run a Government.
Mr. TURLEY. Mr. Delahunt, if I can justI just have the one point I wanted to make on Mr. Unser, which I think is connected. As a former prosecutor, I think you might relate to it, and that is the fact that the Forest Service has a need to deter this type of conduct. It's one of the greatest problems in our forests. Deterrence is basically a relationship between the rate of detection and the size of a penalty. The rate of detection for snowmobiling violations is remarkably low. So, they have a policy
Mr. DELAHUNT. I understand thatI agree with you, but let me tell you what I suggest happened as a result of the action of the Forest Service.
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These people now are angry with the Forest Service. It just doesn't make sense. They're working against themselves. Professor TurleyI'm sure you and I agree probably 98 percent in terms of matters of substance, but it's the enforcement action here that creates the issue and the irritant and brings these people up here and makes those of us who agree on substance defend the indefensible.
Mr. GEKAS. Professor DeLongMr. DeLong.
Mr. DELONG. Yes, as I listened to Mr. Unser, what I heard mostly was that he was very upset and outraged at being branded a criminal by his Government for something he didn't mean to do.
Mr. DELAHUNT. Well, I think his complaint also was with the media that, let's face it
Mr. DELONG. Yes, by the media
Mr. DELAHUNT [continuing]. It was humiliating to him, but, you know, in this era ofwell, I guess we've had 200 years of this era of journalism that might not meet our own individual standards.
Mr. DELONG. Well, I had the same experience with my former father-in-law. He's a very ethical businessman. When I had to inform him that he might well be guilty of criminal violations of the Resource and Conservation Recovery Act and Superfund, both of which are very incomprehensible, believe me, he was very upset at this.
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Mr. DELAHUNT. Mr. DeLong, let me suggest this, too, and let me bring Professor Turley into this also. I daresay, yes, the possible sentence is 6 months in jail if there was a judge that had ever, ever suggested that Mr. Unser serve 6 months in jail, I mean, please give me a break. We are talking about maximums that just in the real world are never imposed.
Mr. GEKAS. Dr. Orient.
Mr. ORIENT. Of course, Mr. Bill Ellen did spend 6 months in jailin the Federal penitentiaryfor dumping one load of dirt in something that was a wetland, according to one set of bureaucrats, and an upland, according to another set of bureaucrats. And, physicians live in terror that they're going to go to prison, too, for rules that are not only complex, but are irrational and stupid, and for the law to be concerning itself with such trivia, is outrageous.
For an agency to be acting as legislator, judge, jury, and prosecutor and executioner, it appears, it also
Mr. DELAHUNT. Dr. Orient, because of my interest in the application of the False Claims Act, I'm going to recommend to Chairman Gekas that he seek to have a hearing dealing with just the issue surrounding HCFAits rules and regulationsgoverning the health care system in America.
Mr. GEKAS. The suggestion will be taken under consideration. Let me ask in a counter question, hasn't that been accomplished by one of our fellow subcommittees in Judiciary through the McCollum bill? Weren't there hearings on that or somebody elsesomeone else?
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Mr. DELAHUNT. Actually, Mr. Chairman, it might surprise you, but it's the McCollum-Delahunt bill, and we did have one oversight hearing. [Laughter.]
Mr. DELAHUNT. But, I would suggest that this is an issue that goes beyond that. The False Claims Act is before the subcommittee chaired by Mr. Smith and he did conduct an oversight hearing. But, what we're trying to do here is take on the world. I think that if we focused, specifically, on a discreet area, HCFAand if we had maybe 3 or 4 days of hearings, two panels per day, to raise the visibility of the issue, I think that we would become well-informed. I think the public would become well-informed, and, you know, this is an empty room. I mean let's be really candid here. What's going to come as a result of this particular hearing? Nothing. [Laughter.]
Mr. DELAHUNT. Absolutely zero. But, you know, if we select an issue that really deserves to be reviewed and listen to all perspectives and be respectful of each other, we might be able to accomplish something that can serve as a model for all Federal agencies in terms of the exercise of what I would suggest is their appropriate constitutional authority delegated to them by the Congress.
Mr. GEKAS. The suggestion will be taken under advisement.
Mr. DELAHUNT. Just one more question?
Mr. GEKAS. Yes, sir.
Page 165 PREV PAGE TOP OF DOC Mr. DELAHUNT. Mr. DeLong, I just read your''The New Criminal Classes,'' the mission statement. Very good.
Mr. DELONG. Thank you.
Mr. DELAHUNT. I also want to know, how do you feel about mandatory sentences?
Mr. DELONG. I tend to be opposed to them.
Mr. DELAHUNT. Thank you.
Mr. GEKAS. In the context of what we have seemed to reach as a common denominator, I intend to revive the Fair Warning Act or Fair Warning Bill that we tried to accomplish a couple of terms ago. I will immediately circulate the bill to the members of the subcommittee for a possible co-sponsorship, and that will be an appropriate follow up to this committee hearing, which I think has been valuable. Even if I were the only one here, it would have been valuable. And, so I learned a great deal.
We all agree that abuse of discretion is at least something in which we ought to inquire. And, as a matter of fact, I can't think of a situation, I mean, of a theory in law, like abuse of discretion, that is more in the judicial eye than anything else. Almost everyday we read of a court decision having to do with an agency policy in which the issue is whether or not the agency abused discretion. We have got to restore some, how shall I say, common denominator within that common denominator, and we intend to further our examination of this issue.
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I thank the witnesses. I thank all those who participated. I want to say, at the outset, that one question I failed to ask Mr. Unser was that if he broke any speeding records with that snowmobile. That never came up. [Laughter.]
With the thanks of the committee, this session is adjourned.
[Whereupon, at 1:28 p.m., the subcommittee adjourned subject to the call of the Chair.]
(Footnote 1 return)
Mark D. Eibert, ''Clone Wars,'' Reason, June 1998, p. 52.
(Footnote 2 return)
Pursuant to House Rule XI, clause 2(g)(4), I, Roger J. Marzulla, hereby certify that neither I nor Marzulla and Marzulla have received any federal grants, contracts, or subcontracts in the current and two preceding fiscal years.
(Footnote 3 return)
33 U.S.C. §1319
(Footnote 4 return)
42 U.S.C. §7413
(Footnote 5 return)
42 U.S.C. §6928
(Footnote 6 return)
16 U.S.C. §1540
(Footnote 7 return)
16 U.S.C. §551
(Footnote 8 return)
Thomas Jefferson Univ. v. Shalala, 512 U.S. 504 (1994).
(Footnote 9 return)
474 U.S. 327, 331 (1986)
(Footnote 10 return)
Wald, P., ''Environmental Postcards From the Edge: The Year That Was and the Year That Might Be'', 26 ELR 10182, 10187 (News & Analysis April 1996).
(Footnote 11 return)
Chadd, C., and Bowman, J., ''Agencies' Enforcement of Ambiguous Regulations Don't Deserve Judicial Deference,'' p. 13 (Washington Legal Foundation 1998)
(Footnote 12 return)
1 F.3d 1523 (9th Cir. 1993)