1997 Congressional Hearings
Intelligence and Security

       TOP OF DOC   









 Page 252       PREV PAGE       TOP OF DOC    Segment 1 Of 2  






Opening Comments from Chairman Kolbe

    Mr. KOLBE. The Subcommittee on Treasury, Postal Service and General Government will come to order.

    This afternoon we are pleased once again to welcome Under Secretary Kelly and Director Bowron to our hearing today covering the Secret Service. Today's hearing is going to focus on financial crimes and the role that the Secret Service plays in protecting our nation's financial system and the economy as a whole.

    Most people are aware of the mission of the Secret Service to protect the President and other dignitaries; and, for many people, that is what they think of when they think of the Secret Service. Tomorrow, the subcommittee will be meeting in a closed session with the Under Secretary and the Director to learn more about this protective mission, and I look forward to that, but today we are going to be focusing on another area. That is financial crimes.

 Page 253       PREV PAGE       TOP OF DOC    Segment 1 Of 2  

    As I read through the written testimony from our witness, I was struck by the fact that there are not a lot of clear boundaries when it comes to financial crimes. These crimes are often complex and very much interrelated.

    For instance, it seems to me that computers are being used in almost all the financial crimes that the Director discusses in his testimony—used to create false identification cards, to counterfeit currency, credit cards, securities, commercial paper, government checks. They are used to move and launder money, both domestically and across international boundaries. They are used by hackers to access computer databases, and retrieve personal information without detection. I am pleased that the Secret Service has taken a very proactive stance in this growing area of criminal activity. I think that their proactive and aggressive stance is one that is very much required.

    But I guess the question I would ask is this: are we being aggressive enough? Are we doing enough to stay ahead of these technocrooks? Just as importantly, how do we measure our success as to whether they are staying ahead or falling behind?

    My other concern is that technology moves sometimes so quickly, too quickly perhaps. As we look to embrace electronic payment and cash systems, I think we have to consider whether or not they are ensuring that these systems are not increasing our vulnerability to fraud.

    In particular, as the Federal government moves toward electronic funds and electronic benefits transfer, we need to do everything we can to make sure we don't expose Federal beneficiaries, people who are most vulnerable and the government itself, unnecessarily to even added fraud.

 Page 254       PREV PAGE       TOP OF DOC    Segment 1 Of 2  

    I look forward to hearing from our witnesses today; and I would, before we call them for their testimony, turn to our distinguished Ranking Member for some opening marks.

    Mr. HOYER. Thank you, Mr. Chairman. I look forward to the testimony.

    As you have pointed out, and as I mentioned yesterday, the Secret Service is best known for its protective role, which it does so well. But it has very, very substantial capabilities and responsibilities in many other areas. This is an area where—you want the public to hear what I am saying—the Secret Service has done outstanding work and where there has been, frankly, some degree of controversy as to its role vis-a-vis the FBI.

    There has been discussion, but hopefully we have reached an agreement between various law enforcement components in our government. The expertise of the Secret Service in this area has been recognized certainly by the Congress, because it was resolved that the Secret Service would continue its focus and role in this area. So I am looking forward to hearing the testimony.

    I want to again say to Mr. Bowron, as I mentioned yesterday to Mr. Kelly, that we have some of the top talent in law enforcement in this country, indeed in this world, in your portfolio. Eljay Bowron and the men and women of the Secret Service are as good as it gets, and you are very fortunate to have them as colleagues in this critical effort—law enforcement responsibility at the Federal level.

 Page 255       PREV PAGE       TOP OF DOC    Segment 1 Of 2  
    I look forward to hearing your testimony.

    Mr. KOLBE. Before I call you to testify, Michelle has advised me I misspoke. I knew we were postponing part of tomorrow's briefing, and I didn't realize it was the entire thing. That briefing that I discussed is postponed to April because of the joint session we have tomorrow with President Frei.

    At this point, let me call Under Secretary Kelly and Mr. Bowron for their statements, and let me once again emphasize that the full statement will be made part of the record; summarizing it would be much appreciated so we could have as much time as possible for questions.

    Mr. KELLY. Yes, sir, my remarks will be brief.

    Mr. Chairman, Congressman Hoyer, members of the committee, thank you. Once again, it is a pleasure to appear before you today. With me, as of course you know, is U.S. Secret Service Director Eljay Bowron and members of his staff, as well as Assistant Secretary James Johnson, Deputy Assistant Secretary Elizabeth Brezee and others from the Treasury enforcement staff.

    Money laundering, counterfeiting, tax evasion, financial institution fraud, electronic benefit fraud and insurance fraud have one thing in common. They pose a potential threat to our nation's financial underpinnings. The Treasury Department is responsible for safeguarding those underpinnings, so our role in financial law enforcement is broad.

 Page 256       PREV PAGE       TOP OF DOC    Segment 1 Of 2  
    Secretary Rubin has committed to this effort by making the combatting of financial crimes one of his top priorities. Support of this committee has clearly been vital to this effort.

    I will defer to Director Bowron to explain the specifics of the bureau's work and programs directed at addressing financial crimes. I just want to underscore that the Secret Service has pioneered the successful efforts with the credit card industry to prevent fraud. It has received the unparalleled expertise to combat computerized crime and continues to explore innovative ways to investigate and detect counterfeiting and financial crimes in general.

    Treasury's other law enforcement components complement the Secret Service and each other in the financial crimes area. Secret Service and Treasury enforcement overall is America's best defense against financial crime. In my opinion, no one does it better. With your help, we hope to meet the new and more demanding challenges the future appears to have in store.

    Once again, we look forward to working with you, Mr. Chairman, Congressman Hoyer and the other members of the committee. Thank you, sir.

    Mr. KOLBE. Thank you, that was a good summary.

    Mr. KELLY. I learned my lesson.

    [The information follows:]

    "The Official Committee record contains additional material here."

 Page 257       PREV PAGE       TOP OF DOC    Segment 1 Of 2  
    Mr. BOWRON. Mr. Chairman, Congressman Hoyer, on behalf of the men and women of the Secret Service, first, Mr. Chairman, let me congratulate you on your chairmanship and also welcome any new members——

    Mr. HOYER. Although as good as he is, Mr. Director, I want you to know he would be a fantastic Ranking Member.

    Mr. BOWRON [continuing]. And, as you noted, we have submitted a complete statement with our specific requests for fiscal year 1998 for the record.

    I would like to take a minute to introduce some very important members of the Secret Service that I also may turn to to help answer questions that may be raised by the committee. First, our Deputy Director, Dick Griffin; Ralph Basham, our Assistant Director for Administration; Rich Miller, our Assistant Director for Protective Operations; Steve Sergek, our Assistant Director for Protective Research; Bruce Bowen, our Assistant Director for Investigations; David Holmes, our Assistant Director for Inspection; Lou Merletti, our Deputy Assistant Director of Training; Terry Samway, Assistant Director for Government Liaison and Public Affairs; and John Kelleher, our Chief Legal Counsel.


    Pursuant to the committee's request to focus on a specific aspect of the Secret Service's mission, we have focused our conversation today on financial crimes. It is important to note that we have been involved in financial crimes investigation since the inception of the Secret Service. Our financial crimes cases are a very high priority, and we make a significant impact in this area.

 Page 258       PREV PAGE       TOP OF DOC    Segment 1 Of 2  

    I would like to begin our presentation today by playing a tape from a case that we investigated at the request of the United States Attorney's Office in North Carolina. I think it is only going to serve to illustrate a point that you and Congressman Hoyer have already made, Mr. Chairman, but it involves financial crimes schemes that have been perpetrated against the airline industry which involved millions of dollars of fraudulent activity.

    Maybe not. At any rate, it illustrates the point that you made——

    Mr. KOLBE. It is going to come on. It just had a long lead.

    [Tape played.]

    Mr. BOWRON. So, as I said, Mr. Chairman, it illustrates the point you made. We do protect the President, and that is our highest priority, but we also protect our nation's financial systems.

    Our financial crimes investigations have a significant economic impact. The actual losses associated with our investigations exceeded $500 million in fiscal year 1996 and resulted in over 9,000 arrests. Based on standards set by the financial industry, the estimated potential losses exceeded $10 billion. In other words, had the criminal activity under investigation not been stopped by virtue of our investigation, $10 billion would have been the actual losses.

    To reinforce the importance of that number, it also represents $10 billion of potential revenue that would have been lost to American businesses, $10 billion lost as taxable revenue to the United States Government, and $10 billion which could have been used by criminals to further other types of criminal activity.

 Page 259       PREV PAGE       TOP OF DOC    Segment 1 Of 2  

    Although the actual losses were high, the Secret Service is proud of the fact that the savings to the government and the American people are even higher as a result our investigative efforts. The investigations in many cases identified and apprehended the individuals committing these crimes, as well as recovered the proceeds from the crimes, which could be returned to the victims, businesses or the government.

    As you also indicated in your remarks, Mr. Chairman, although these crimes sound like separate and distinct acts, they are so closely intermingled and cowoven that they work together for successful criminal enterprise in the area of financial crimes. They facilitate one another.

    Each of you has packets in front of you that contain all the items that you need to commit these financial crimes—false identification, counterfeited checks from a legitimate company, counterfeited credit cards with limits according to the compromised account. These are the kinds of packets that the criminal element puts together to facilitate these crimes. Technology gives them access to the systems for the financial information, and technology, like desktop publishing, provides them with the technical wherewithal to manufacture the items in front of you.

    I know the committee's time is limited today, and what we really want to do is answer your questions. You have had a chance to review the information that we have provided, so I would really like to just answer any questions you may have.

    Mr. KOLBE. Thank you very much for your statement.

 Page 260       PREV PAGE       TOP OF DOC    Segment 1 Of 2  

    And I would say, just looking at this, I do appreciate the fact that, at least when you made this up for Mr. Dunn, you did shave a few years off of my age here, which is certainly appreciated.

    [The information follows:]

    "The Official Committee record contains additional material here."

    Mr. KOLBE. I want to begin by asking some questions here, and, as I have said before, we will adhere to the 5-minute rule, including myself. We will use the process that we have used before, taking members who were here at the beginning of the hearing and alternating Majority and Minority and taking members as they come in for their questions.

    I want to begin by asking questions about measuring the impact of the financial crimes. You used the figure of $10 billion of potential losses, yet you noted that the industry loses as much as $12 million annually just from desktop publishing schemes alone. Do we really have any grasp of the total amount of the financial fraud crimes that we are talking about?

    Mr. BOWRON. Well, it is commonly based on industry estimates of the losses; and for the credit card industry, estimated losses are at about $1.9 billion.

    Mr. KOLBE. These are not nonpayments; these are fraudulent.

 Page 261       PREV PAGE       TOP OF DOC    Segment 1 Of 2  
    Mr. BOWRON. Right. I believe $1.9 billion is the figure they associate with credit card fraud.

    Mr. KOLBE. That strikes me as very low, actually, considering how much must be charged on credit cards in the course of a year. I don't quite get to $1.9 billion, but it has got to be a lot of money charged to credit cards.

    Go ahead.

    Mr. BOWRON. Well, losses are big. Losses versus potential losses in most financial systems, whether it is credit cards, your checking account, or other schemes, have built-in limits that are imposed on the system or within the financial transaction. That is what gives them the basis to identify the potential losses.

    For example, suppose the credit limit on a credit card is $15,000, and after $5,000 of criminal activity we arrest a perpetrator that is committing fraud with respect to that one account. The credit card industry would say the potential fraud there wasn't just $5,000, which is the current balance on that card, the potential loss is $15,000. There is $10,000 more there that they would have hit the card for if they had not been arrested or apprehended.

    Now, that is just a simple example of how they estimate that. In most systems, that is how they calculate that number.

    Mr. KOLBE. Well, we have various estimates in drugs of what percentage we are actually interdicting. Do we have any idea what percent of financial fraud crimes we are actually stopping or catching? Is that a fair question?

 Page 262       PREV PAGE       TOP OF DOC    Segment 1 Of 2  

    Mr. BOWRON. It may be a fair question. We may have a method for answering it. I really couldn't give you an answer off the top of my head, but we can try to provide that to you.

    Mr. KOLBE. What then are the right performance measures to use? You don't—to some extent, it seems to me using cases closed is really just a way of measuring our workload. It is not really a measurement of what we are accomplishing or doing. It is not really a performance measurement. What kind of measurements do you think are appropriate to use in this area of financial fraud?

    Mr. BOWRON. I think the economic impact of the investigations is a fair measurement, both as actual loss and potential loss, as well as activity that is aimed at systematic fixes to prevent future fraud.

    Mr. KOLBE. So that is the actual loss that you either prevent, catch or detect and the potential you may have deterred from your activities.

    Mr. BOWRON. That is correct.

    Mr. KOLBE. Is that the $10 billion figure that you are using?

    Mr. BOWRON. Yes.

    Mr. KOLBE. It is certainly substantial, but it probably is only a small part of the potential loss we have in this whole area. Is that not correct?

 Page 263       PREV PAGE       TOP OF DOC    Segment 1 Of 2  

    Mr. BOWRON. Well, I think part of the problem is, when you talk about financial crimes, they are difficult to separate. It may be something that we need to look at in terms of separating, from a resource standpoint, computer fraud versus telecommunications fraud, versus financial institution fraud, versus telemarketing, and versus credit card fraud. Because part of the problem is these things are all woven together. That is the reason that we tend to capture both losses, numbers and hours under the category of financial crimes. Because in most cases——

    For example, if we are involved in a telemarketing case, it normally includes computer fraud, bank fraud, credit card fraud, and, many times, telecommunications fraud. So they are so closely interwoven that it is difficult to separate out the performance measurements in each one of those separate categories.

    Mr. KOLBE. Do you have any other performance measurements other than this $10 billion loss?

    Mr. BOWRON. Well, I think certainly——

    Mr. KOLBE. What are the other measurements——

    Mr. BOWRON. Arrests and convictions. If you are working a lot of cases and you are not apprehending, arresting and prosecuting any criminals, that is a valid measurement that needs to be looked at. And, in our case, we have a relatively high number of arrests relative to the resources devoted; and we have a conviction rate of about 99 percent.

 Page 264       PREV PAGE       TOP OF DOC    Segment 1 Of 2  

    Mr. KOLBE. I have a series of other questions, but Mr. Hoyer.


    Mr. HOYER. Thank you very much, Mr. Chairman.

    Mr. Director, you had a busy year last year. Election years are always very busy; but, in addition, you had the Olympics and conventions. We have a G–7 coming up in Denver. I am going to go beyond just the financial crimes, because I understand this is the only hearing we are going to have on your budget. So, if you don't mind, I will go beyond the financial crimes aspect.

    Mr. BOWRON. Plans are under way for the G–7 Summit in Denver. There are no problems from a staffing standpoint, however there are problems from a funding standpoint. We are working with the local community to plan the security and other arrangements. Things are on schedule.

    Mr. HOYER. With respect to your FTEs, 5,027, do we have sufficient personnel to accomplish the objectives that you have before you in the coming fiscal year?

    Mr. BOWRON. Yes.


 Page 265       PREV PAGE       TOP OF DOC    Segment 1 Of 2  

    Mr. HOYER. The TRIP program, Donna Shalala is rightfully very proud of the fact that we have gotten more welfare, food stamp fraud collections in the last 4 years than I think we had gotten in the previous 20 years combined. Obviously, we are doing a lot in Treasury.

    Tell me about the TRIP program, how successful have we been? This committee is excited about that because we are worried about the fraud of people who get money from the Federal government. Tell me where you are and also comment on the lessons we are learning and how we are transmitting that to other government agencies where recipients are receiving payments.

    Mr. BOWRON. If I could take a moment, TRIP is an acronym—Treasury Recipient Integrity Program—which is really aimed at making sure that organizations that provide benefits from the Federal government have systems in place to assure they know who they are doing business with. They want to be sure that the money that is intended to go to entitled recipients is in fact going to these recipients; and if money is going to nonexistent or wrong recipients, that this is identified.

    We have done several projects with the Department of Defense and other benefit providers. We have eliminated about $6.2 million worth of fraudulent payments that were going on, annually. So this is another example of $6 million in losses if someone had not have stepped in and identified this as a problem. In some cases the problem was, for example, benefits were being provided to people that had long since been deceased; benefits were still being received by people in the name of that individual.

 Page 266       PREV PAGE       TOP OF DOC    Segment 1 Of 2  

    Mr. HOYER. To put the $6.2 million in context, how much money do you allocate to TRIP?

    Mr. BOWRON. Well, we had about $1 million for this fiscal year allocated to TRIP-type initiatives.

    Mr. HOYER. So it would be fair to say that is a 6-to-1 payoff.

    Mr. BOWRON. At the present time, we have an earned savings of $6 million a year.

    Mr. HOYER. I understand. But currently.

    Mr. BOWRON. What has occurred is we have been able to take the lessons learned and provide that information—to providers.

    Mr. HOYER. But you are also expecting at least $1 million a year. We are saving $6.1, but presumably you want another million this year. It is a 6-to-1 payoff. That is not bad in anyone's business. Go ahead.

    Mr. BOWRON. For example, we have passed lessons learned through the different TRIP initiatives on to benefit providers, who in some cases, have instituted regular fraudulent prevention programs. So this kind of fraud can be stopped and the business systems can be fixed to eliminate some vulnerabilities.

 Page 267       PREV PAGE       TOP OF DOC    Segment 1 Of 2  

    The Department of Defense, for example, has taken the reverification procedures, and developed them into a permanent program that will, every 5 years, provide reverification.

    We are currently involved with the Social Security Administration in a border initiative. We are doing a pilot project. Based on the results of the pilot project, it is expected that this will be an initiative to stop people who aren't really entitled to benefits. The people are not living in the United States but are applying for and receiving benefits and only come to the United States to pick up checks from mail drops, fictitious addresses and so forth and then go back to the country that they came from in order to spend and use those benefits. So, right now, we are working with the Social Security Administration.

    Most of our efforts have been overseas. This effort with the Social Security Administration is the first domestic TRIP program where we are taking steps inside the United States to identify fraud.

    Now, in addition to that, and as part of the money that is spent, we are also meeting and doing training and seminars and risk analysis sessions with the different benefit providers to try and identify fixes to the system and save money in terms of end results, to avoid costly investigations, prosecutions and jail time—trying to stop the fraud instead of chasing it after the money is out the door.

    Mr. HOYER. Mr. Chairman, this is obviously a multibillion dollar payoff to the extent that we increase our ability to catch fraudulent recipients. This is sort of a pilot program, small at this point in time. But a lot of agencies are obviously pursuing this at our urging and their own urging. This is a very important program.

 Page 268       PREV PAGE       TOP OF DOC    Segment 1 Of 2  

    Let me go on to another area; and this is the last question I will ask, Mr. Chairman, in this round.


    Mr. Chairman, we have worked very hard with the Secret Service on the whole question of counterfeiting. As you know, we have a new $100 bill; and I happen to like it and think it is a good idea for a lot of reasons. It is a more secure bill, as you know, than its predecessor. The $100 American bill is used much more overseas than it is here.

    Mr. Director, why don't you comment on where we are to the extent you can on the world threat and domestic threat and how we are doing on our resources available to fight that threat, particularly overseas. Because I know we have had problems, Mr. Chairman, with Secret Service's resources being sufficient overseas to work with foreign governments to get at the overseas counterfeiting of $100 bills and other currencies as well.

    Mr. BOWRON. First, let me talk about counterfeiting overseas and domestically. In terms of the threat, the threat is that increasingly our currency is being counterfeited overseas. About 70 to 75 percent of the counterfeit that is passed in this country originates from outside this country.

    Now, historically, our experience has always been and continues to be that the most effective way to attack counterfeiting operations is at the source. Since the source of this counterfeiting is overseas, in order to be most effective in addressing that problem, we have increased our focus overseas.

 Page 269       PREV PAGE       TOP OF DOC    Segment 1 Of 2  

    Now, I want to put the threat in perspective. Because the fact of the matter is this is not a problem that is out of control. It is not out of control because there is an aggressive investigative enforcement effort to suppress counterfeit activity worldwide, and we have had very good success with respect to suppressing those counterfeit activities.

    If you look at most recent efforts by the Federal Reserve Bank, the fact of the matter is that the number of counterfeit notes that come through the Fed from overseas, counterfeit notes per million, is actually lower coming from overseas than it is in the deposits in the United States. So I say to that, first of all, it isn't as though there is this huge amount of counterfeit notes floating around overseas that are not being detected by foreign banking entities. An analysis of the money flowing through the Federal Reserve Bank, which is substantial, doesn't support that.

    Secondly, our experience in working with foreign law enforcement and foreign banking officials gives us evidence that is consistent with the experience of the Federal Reserve in terms of their examination of the currency.

    Now, with respect to our overseas staffing, this committee authorized and funded 28 positions for additional staffing overseas, and I want to find the right section in this binder that gives me that. Of the 28 positions, we have filled 17 of those positions; and 11 positions have been denied by the State Department. There is no single answer for the denial, and it is not something that is final in anybody's estimation. In some cases, the problem is the availability of space. In some cases, it is a prioritization by the State Department and a particular embassy with respect to law enforcement efforts and staffing in that embassy.

 Page 270       PREV PAGE       TOP OF DOC    Segment 1 Of 2  

    But through the Treasury Department, the Office of Enforcement and the State Department, we are going back to appeal those positions that have not yet been filled; and we are also going to offer some alternatives. I mean, this may turn out to be an actual case in point, but it isn't at this moment.

    In Moscow, for example, we are going to build a new embassy. There are some space problems there with respect to the availability for law enforcement purposes, and those are positions that we have not yet been able to have authorized.

    Our request for Moscow was two agents and one support person. We are going back to the Treasury Department and the State Department to appeal that decision. If we are not allowed in the final analysis to staff Moscow, we are going to offer perhaps Helsinki or some other location that will give us good geographic proximity and the logistical capability to get to that region and other places in the world that we need to go to be effective when conducting these investigations.

    Now, I also want to hasten to point out that the fact that we don't have the staffing doesn't mean we are not getting the job done. We are sending people there in a task force and temporary duty situation to make sure we address the needs and conduct the investigations that need to be conducted. So that is where we are.

    Mr. HOYER. Thank you. Thank you, Mr. Chairman.

    Mr. KOLBE. Let's call Mr. Price.

 Page 271       PREV PAGE       TOP OF DOC    Segment 1 Of 2  


    Mr. PRICE. Thank you, Mr. Chairman.

    I am glad to welcome our witnesses; and while I appreciate your testimony today, which acquaints us with the diversity of the work you have underway, I, too, want to return to your protective mission, which of course we take very seriously and are very appreciative of the job you are doing.

    Three of the program changes for fiscal 1998 cover White House security. I understand you are requesting a total of $13 million for implementing recommendations made following the security review you conducted of the White House complex, and I believe that the Service is in the final stage of implementing those recommendations. Is that correct? I wonder if you could provide any more detail about where we are in that process and, when all is said and done, what portion of these recommendations will have been implemented. What are we talking about in terms of the specific objectives of the $13 million request?

    Mr. BOWRON. Well, with respect to the $13 million, to give you specific dollar outlays, I would like to maybe provide you with a written answer to that. But the short answer to your question is that ongoing funding has been provided for completion of the recommendations; and, in fact, the recommendations have been implemented. We have moved forward on that as expeditiously as we possibly could.

    Some of the things that continue to be necessary in terms of funding are the bollards and other permanent security installations around the White House that are construction initiatives. In the meantime, we have taken temporary protective measures until those projects are completed. But the ongoing funding is there, the plans are under way to complete those projects, and that process is moving forward.

 Page 272       PREV PAGE       TOP OF DOC    Segment 1 Of 2  

    So with the FY 1998 funding all of the initiatives that came from the review as well as our own analysis of the security needs, will have been both funded and implemented at the White House complex.

    Mr. PRICE. So this $13 million increment is basically a one-time request?

    Mr. BOWRON. Well, no. The $13 million you are referring to, our Assistant Director of Administrations informs me is funding for FTEs. That is funding for salaries. That goes into our budget to pay for increased staffing.

    Mr. PRICE. Staffing related, though, to that security review?

    Mr. BOWRON. Yes, the security review identified the resulting human resource requirement for implementation of White House initiatives to be 277 FTEs which will be underwritten by that funding, although we don't have all of those positions on board. We are rapidly going through the hiring process; and, in the meantime, any lack of staffing is being compensated for by overtime to cover the necessary operational requirements.

    Mr. PRICE. Alright and if you have further details on that, you can furnish them for the record.

    [The information follows:]

 Page 273       PREV PAGE       TOP OF DOC    Segment 1 Of 2  

    In 1995, the Department of the Treasury conducted a review of White House security. All of the recommendations of the White House Security Review have been implemented. However, some of the new security posts at the White House are temporarily being staffed through the use of overtime until full funding is secured, and officers can be hired. Also, some security enhancements are part of an interim plan, until permanent funding is provided to the National Park Service and the Department of the Interior so that President's Park, the long term preferred alternative, can be completed.

 Page 274       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    The FY 1998 President's budget includes $28.8 million for White House Security, of which $15.6 million has been requested through the Violent Crime Reduction Trust Fund and $13.2 million requested through the Service's Salaries and Expense appropriation. Specifically, this funding will be used to fully fund positions, for protective systems at the White House, to lease vehicles, and for the purchase of primary armored limousines. If the requested funding is provided in FY 1998 and, barring any cost overruns during construction, permanent funding for all of theFTE and other security enhancements recommended by the review will be in place.


    Mr. PRICE. I was listening with interest to your discussion with Mr. Hoyer about your coming challenge with meetings where numbers of foreign dignitaries will be present. Your cost for protecting foreign dignitaries in fiscal year 1996 exceeded the amount projected by a good bit, something like 54 percent, and you attributed this overage to the 50th anniversary of the UN, the Pope's visit, the Bosnian summit, the Olympics and so forth. This, along with the increase in presidential protection activities required during the election cycle, led to greater expenses and the diversion, I would assume, of substantial resources away from the Service's criminal investigations.

    I realize the Pope's visit and the Bosnian summit were unexpected events; but I wonder why that estimate was so far off in 1996 and whether this budget includes a more realistic estimate of the likely expenses in fiscal 1998, for these protective activities. I also wonder what the implications were for this overrun in terms of diversion of resources from criminal investigations during this election year or periods of high travel.

 Page 275       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    Can we do something to address this cyclical diversion of funds? I know we have got to have flexibility and that the Service prides itself on flexibility, but it does raise the question of whether the baseline amount assigned to FTEs is sufficient to ride out these cycles.

    Mr. BOWRON. Well, as you indicate, Congressman, we do have to have the flexibility. Our resources are pulled from our investigative mission in order to accomplish protective operations. We can provide you with more exact numbers, but the fact of the matter is we suffered no real appreciable loss in terms of our investigative effort during that period of time, by relying on a tremendous effort by the work force in the Secret Service in terms of overtime that was put in. Also in terms of maximizing the geographic location of our agents, and trying to minimize their travel time, and the logistical impact of their participation in those protective operations.

    In terms of the estimates for the protection of foreign Heads of State or other protection, we have a pretty straightforward way of projecting that. We have changed it a little bit this last campaign and it basically relates to the number of protection days required to arrive at the figures. We used that for the campaign.

    With respect to foreign Heads of State and for example as in the case of the Pope's visit, we can only project based on our past experience and based on what information we have available to us. For example, with the 50th anniversary of the United Nations and the Papal visit just in advance of that, those were both extraordinarily expensive undertakings. That was truly a historical event.

 Page 276       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    I mean, at the 50th anniversary of the United Nations, we had over 150 foreign Heads of State, a very large number of spouses, plus the President and Vice President all in New York City at one time. It was more expensive than we projected it to be. It was a unique event, a one-of-a-kind event. There has never been anything like that as far as I know in the history of the Secret Service, maybe in the history of the world. So it was unique.

    Mr. PRICE. So your conclusion is that there is not a basic flaw in the method of projecting your needs and that the overrun would not likely be repeated.

    Mr. BOWRON. No, but I would assure you that we are constantly looking at the means that we have to make projections. We try to determine whether or not there is a better way to project and, in fact, this past campaign was an example of that.

    In past campaigns we actually tried to make a guess as to how many candidates there would be. In fact, it doesn't matter how many candidates there are, what matters is how many days we protect a protectee and how many protection days there are. So we changed our method of calculating protective requirements for the campaigns, and we think that the system that we use now is better. My point is, we are constantly looking at the numbers to try to determine whether there is a better way for us to arrive at them, and whether there is better information we could use in the formula.

    Mr. PRICE. Well, as to this trade-off question, you say in your budget justification, and I am quoting, ''Due to the wide range of protective activities during fiscal year 1996, i.e. the Pope's visit, fewer criminal cases were closed than had originally been anticipated. As a result, the Secret Service closed 27,393 criminal cases during fiscal year 1996, 82 percent of the anticipated goal of 33,500. The number of criminal cases closed for fiscal 1997 should reflect an increase over FY 1996, with more of the Secret Service's resources being redirected from campaign protective activities to the investigative areas.'' That language does suggest a trade-off.

 Page 277       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    Mr. BOWRON. Yes, sir. I wouldn't suggest that there was no impact, but what we try to do is prioritize the cases to work the highest priority cases to achieve the goals that we can. Certainly in those cases that we didn't work from a campaign year to a noncampaign year, those are as a result many types of protective operations. So if I implied that there was no impact, I didn't mean to imply that.

    Mr. PRICE. Thank you. Thank you, Mr. Chairman.

    Mr. KOLBE. Mrs. Meek.

    Mrs. MEEK. One quick questions, Mr. Chairman. First of all, I want to commend Mr. Bowron for being here today. I learned in the brief time I have been here, because I had a VA-HUD Subcommittee, a lot more about the Secret Service than I ever imagined the kind of services you render. I also want to commend you on your step up in food stamp fraud and the TRIP program and other kinds of programs. I think our job now is to educate the public, our constituents, to the fact that there is a preventive arm as well as a corrective arm in terms of the kinds of fraud that was perpetrated before this time. So I want to commend you on that and ask you to please keep that going and try to step up the activities in that area.

    Mr. BOWRON. Yes, ma'am. Thank you very much.

    Mr. KOLBE. Do you have further questions? Mike.

    Mrs. MEEK. That is it, Mr. Chairman.

 Page 278       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    Mr. KOLBE. Thank you very much.


    Mr. WOLF. I am sorry I wasn't here earlier, I was chairing another subcommittee, but I can tell you there are two issues that I am so interested in. And when I go out to high school classes, and I spoke to one at Oakton High today, and I don't know what to tell them when I tell them that at the White House we are getting a situation where drug dealers can come into the White House, and maybe that is a one-time thing, and then we hear a guy on the Interpol list comes into the White House. Then we hear you got this guy Wynn coming into the White House who is out on bail. Maybe his bail may have been even revoked for some reasons.

    Then we have this guy, Wang, who heads up the Poly Corporation, Chinese Communist Corporation. It was the operation of a, sting operation that Customs had whereby he wanted to sell assault weapons that could have killed your people and the people in California to street gangs in California.

    Now, I have great respect for the Secret Service—I don't know what to tell people. I don't know how I would go in and explain how people like that can come into the White House. It angers me, it bothers me. I want to know that it bothers you. I want to know that it bothers all of your agents.

    I understand as somebody who worked for the Federal Government, sometimes you are afraid to speak out, but I want to know that you are vexed by it. I want to know that you are bothered by it. I want to know that it gets you down. I want to know when you go home and talk to your husbands and your wives you say I don't know what is going on here, because it bothers me. Because you ought to speak out, Mr. Director. You ought to speak out or you ought to step out. You can't be part of a process then allow these activities to take place.

 Page 279       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    Tell me, how do these things take place? Do you submit something to the President or the Chief of Staff telling him that drug dealers are coming in? Do you submit and tell him that people that are on the Interpol list are coming in? Do you tell him that this guy, Wang, who is trying to sell assault weapons, who is connected to the Chinese Government is coming into the White House? Tell me, do you submit anything, do you tell him anything, and whether you tell him or not, I want to know, does it bother you? Does it make you kind of upset, or is it just kind of a job and that is what the job is and it is over? Would you answer that question for me? Does it bother you?

    Mr. BOWRON. Well, I am going to address my professional response——

    Mr. WOLF. But I want to know that it bothers you, because it bothers me that it doesn't bother you, if it doesn't bother you, and frankly, when we get to a situation, and with the respect that I have for the Secret Service, with the outstanding job your people have done, and I know many of your people, many of your people go to my church, many of your people live in my area, I know a large number of your people. It bothers them. When I talk to them privately, they tell me it bothers them. I want to know, does it bothers you?

    Mr. BOWRON. Well, I am not here talking privately, I am here talking publicly.

    Mr. WOLF. But this is a public hearing.

 Page 280       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Mr. BOWRON. That's right, and I am going to address this from the standpoint of my professional, public responsibilities as the Director of the Secret Service. I am not going to talk about what I talk to my wife about when I go home, or what my personal feelings are about a wide range of issues that may or may not bother me. But I am the Director of the Secret Service and I am here to answer questions about the Secret Service, our mission, and our responsibilities.

    Mr. WOLF. But how could these four people have gotten into the White House?

    Mr. BOWRON. Those four people got into the White House because they did not pose a physical threat to the President of the United States or the White House Complex by being there.

    Mr. WOLF. Did you tell the Chief of Staff that people like this were coming in?

    Mr. BOWRON. The Chief of Staff gave us the information on who was coming—well, not the Chief of Staff, but the administration. We don't provide them with criminal history or background information on the names of individuals that they provide to us.

    Mr. WOLF. Did you know the man's name was on the Interpol list before he came? Yes or no.

    Mr. BOWRON. The answer right now is I don't recall whether we knew that in advance or not. I don't believe that when we ran a name check on that individual on the data bases that we utilize, that an Interpol record was reflected in the summarized history we received.

 Page 281       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    Mr. WOLF. Did you know that Mr. Wynn had been convicted? Did you tell them that Mr. Wynn had been convicted.

    Mr. BOWRON. No, I would say we did not. We did not tell anyone that Mr. Wynn had a criminal history. I don't believe that we provided that information to anyone.


    Mr. WOLF. Did you tell him when Mr. Wang was coming in that he was with the Poly Corporation, which was the very group that we had a sting operation on with the Department of Commerce?

    Mr. BOWRON. My guess is, first of all, we probably didn't have that information about the sting operation or the corporation that this individual was involved with. If there was criminal history, we would have had it and we would have used it to make our judgment about whether or not they posed a physical threat to our protectees.

    Mr. WOLF. Well, I am going to move on to the next—I am going to tell you, I think it is a disgrace. I think it is a disgrace, and I think your people think it is a disgrace, because the Secret Service agents that I talk to tell me that they think that the fact that drug dealers were coming into the United States White House when people have to line up outside is terrible, and they think that the Poly Corporation guy to come in is terrible. And I would say it if it was Bush or Reagan or Nixon or Dole or whoever the case may be.

 Page 282       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    My next comment, I am going to move on to the next subject, I think you ought to speak out on this issue, because it goes to the integrity of the Secret Service, the integrity of the process.

    Mr. BOWRON. Can I speak out on that now?

    Mr. WOLF. You certainly may.

    Mr. BOWRON. Let me just say that the integrity of the Secret Service rests on the performance of our mission to protect the President, the Vice President, their families and the White House Complex. That protection is physical protection, physical protection to make sure that harm does not come to them. I don't think that anybody intends in our statutory authority for the Secret Service to be the people to make suitability judgments about who has access to our elected officials.

    Mr. WOLF. That is true, but they have an obligation to say to the White House Chief of Staff we have a man coming in here who the President should not be around. We have a man connected to the Poly Corporation selling assault weapons to street gangs in California that we don't think the President should be around. You should not tell the President who he or she should have coming in, but you should certainly have a piece of paper going in to say, Mr. President, it is inappropriate that somebody convicted of drugs should come into the White House. There should be a paper file from the Secret Service on every one of these people coming in.

    You don't have the right to tell the President who he should have, but you have an obligation and you have a duty to tell the President that people of this type of records are coming in.

 Page 283       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    The last question, I am running out of time, Agents Libonati and Undercoffer. Are they under investigation?


    Mr. BOWRON. I talked to Agent Libonati. I know from his conversation with me that he received a letter from the Inspector General's office that has advised him that he is not at this time under investigation.

    Mr. WOLF. So the whole investigation is dropped.

    Mr. BOWRON. I don't know whether the whole investigation is dropped, but I know——

    Mr. WOLF. What would they be investigating if not him and Undercoffer? What would they be investigating?

    Mr. BOWRON. Well, I really can't speak to what they may be investigating——

    Mr. WOLF. They are your people.

    Mr. BOWRON. But I don't know what the Inspector General is investigating. They are not, to my understanding, investigating Agents Libonati and Undercoffer. Whether they are going forward with any aspect of that investigation at this point, I have not been contacted with respect to any requests for documents, interviews or access. So I don't know what the status of the Inspector General's investigation is, other than those agents have been told they are not under investigation.

 Page 284       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    Mr. WOLF. Do you think the committee should pay for their legal fees of $16,000?

    Mr. BOWRON. I think they should not have to pay for their legal fees, because I don't think they were appropriately investigated, and as a result, should not have had to seek legal counsel.

    Mr. WOLF. I don't either, and I think this committee should, because $16,000 for somebody who may have a couple of kids they are trying to educate or whatever is a lot of money, so I would hope that you would give us a formal request on behalf of the Secret Service asking this committee to pay for these fees, because what happened there is the chill that that sends to all the people who may get involved in all of the same type of thing, people who may want to come forward and speak out on an issue will now say I can't put my career up. I have a son or daughter in college or this or that. It is a chill, and we would ask you, as the leader of the Secret Service, the people that these men look to for leadership to speak out and let this committee know, one, you request that they pay for the fee, but also say something publicly so there is no longer a chill out there whereby your men and women feel free that they can speak out and do their roles and not have that.

    I thank you, the committee. I feel so strongly, I cannot tell you how strongly I feel about these issues, and some day I would urge and ask you to come up to my office privately where nobody is around so we can talk about these issues. I yield back the balance of my time, Mr. Chairman.

 Page 285       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Mr. KOLBE. I thank the gentleman for his questions and appreciate the depth of his feeling.

    My next questions come from the testimony this morning from Inspector General Valerie Lau with regard to that investigation. Under Secretary Kelly, did you ever have a conversation with Ms. Lau in response to the letters she had received from Senator Stevens and Representative Collins when she initiated—''investigate''apparently isn't the right word,—about the inquiry to respond to that correspondence. Did you have any conversation with her at any time regarding that matter?

    Mr. KELLY. Regarding that specific matter? No, sir, not to my recollection.

    Mr. KOLBE. Did you ever have any conversation with her in which the names of Agents Libonati and Undercoffer came up as being under investigation?

    Mr. KELLY. No, sir.

    Mr. KOLBE. No conversation.

    Mr. KELLY. No conversation with her concerning those individuals. I had conversation with access in general to——

    Mr. KOLBE. Okay, well, that was my first question. Did you have a conversation regarding the access issue and that whole——

 Page 286       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    Mr. KELLY. The access issue.

    Mr. KOLBE. My first question was in response to the letters that she got from Senator Stevens and Representative Collins, which did not name any names. She initiated an inquiry, or investigation, or whatever it is, with regard to the access issue. You did have a conversation with her about that?

    Mr. KELLY. Yes, sir.

    Mr. KOLBE. At no time in that conversation did the names of Agents Libonati and Undercoffer come up.

    Mr. KELLY. No, sir. The discussion was about access to conduct a—the investigation and access to how the process would run as far as access to the Secret Service and White House Complex.


    Mr. KOLBE. At any time did she inform you that Agents Libonati and Undercoffer were under investigation, either civil or criminal investigation?

    Mr. KELLY. No, sir.

    Mr. KOLBE. What is your recollection of the conversation you had with her then as to what this conversation was about, to the extent that you can tell me.

 Page 287       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    Mr. KELLY. The conversation, again, was about how to access personnel and records in the Secret Service. I guess implicitly it was about these two agents. The name never came up. It was, again, the issue of how information would be obtained from the Secret Service.

    Mr. KOLBE. You were then not at the October 21st meeting where the issue, where this issue was brought up about this investigation, Monday, October 21st.

    Mr. KELLY. No, sir.

    Mr. KOLBE. Do you recall that meeting?

    Mr. KELLY. No, sir. I was not at that meeting.

    Mr. KOLBE. I am referring to the letter from the Executive Assistant to the Internal Affairs of Secret Service, if you would like to refer to this.

    Mr. KELLY. I was not there, sir.

    Mr. KOLBE. You were not there. Mr. Bowron, were you at that meeting?

    Mr. BOWRON. No, sir.

 Page 288       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Mr. KOLBE. Have you at any time, Mr. Bowron, reviewed with your staff whether or not this—the contents of this letter?

    Mr. BOWRON. Yes.

    Mr. KOLBE. Do you believe it to be an accurate statement of the facts?

    Mr. BOWRON. I believe it to be an accurate statement of the facts.

    Mr. KOLBE. Accurate.

    Mr. BOWRON. Yes.

    Mr. KOLBE. Let me quote one sentence. At this meeting, and this meeting we are talking about is with Inspector General Lau, who requested a meeting with Secret Service officials to discuss the pending investigation. The Assistant Director for Inspection attended, Mr. Holmes, and Chief Counsel John Kelleher attended on behalf of the Secret Service. We have Chief Counsel Kelleher with us today.

    Mr. BOWRON. Yes.

    Mr. KOLBE. I might ask him this question. At this meeting, the Secret Service was again advised there was an active investigation of Special Agents Libonati and Undercoffer and that this matter was potentially a criminal investigation.

 Page 289       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    Mr. Kelleher did not write this letter, but I presume Mr. Pickle must have spoken to him before he drafted this letter, [and] I would like to ask Mr. Kelleher if that is an accurate statement.

    Mr. KELLEHER. Yes, sir, it is an accurate statement.

    Mr. KOLBE. We have a very interesting problem on our hands then. We were told this morning he was either incorrect or he misrepresented the statement.

    Mr. BOWRON. Mr. Chairman, you may have this or you may not be aware of it, but I would read to you from a statement that was provided by Senator Grassley on this same subject matter, the quote here is, quoting from his statement——

    Mr. KOLBE. I am aware of this letter.

    Mr. BOWRON. You are.

    Mr. KOLBE. But go ahead.

    Mr. BOWRON. Whereupon my staff called Ms. Vassar in the presence of the chief investigator for the Senate Judiciary Committee as to ascertain the facts. During that telephone call, Ms. Vassar explained to my staff that the two Secret Service agents by name were being investigated at the request of Senator Stevens and Congresswoman Collins. The committee investigator prompted my staff to ask if the investigation were criminal. The answer my staff received from Ms. Vassar is it is potentially criminal. My staff simultaneously wrote down the word potentially on a note pad for the committee investigator to communicate Ms. Vassar's response.

 Page 290       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    My staff then asked Ms. Vassar to explain which specific words in Senator Stevens June 18th letter to the IG allowed the IG to interpret this as his request to investigate the two agents. Ms. Vassar responded by reading Senator Stevens' letter verbatim.

    The question was repeated twice more by my staff, and the letter was read verbatim twice more by Ms. Vassar. It was clear at that point that the IG's office was unable to justify its contention that Senator Stevens indeed requested the investigations of Agents Libonati and Undercoffer.

    Subsequently, my staff reported to me that the committee investigator was told by a Treasury legislative affairs official that the investigation of the two agents was potentially criminal. The staff then called the Secret Service officials who corroborated that there was potentially—a potentially criminal investigation according to the IG and that it had been requested by Senator Stevens and Congresswoman Collins.

    Now, this communication with Senator Grassley's office was completely independent of any communication with the Secret Service.


    Mr. KOLBE. That is correct, and it is just simply a second corroboration of this.

    Well, we may need to have another hearing with some people under oath on this matter.

 Page 291       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    But Mr. Wolf is absolutely correct. It doesn't matter at this point what we do. It doesn't matter what we do to correct the problem. It doesn't matter what they do in terms of sending letters to these agents telling them they are not the subject of an investigation. Whoever has been involved in this has had the desired effect, which is to have a chilling effect on anybody in a Federal agency who comes before this committee or any other committee and testifies on a process. All they were being asked to do was testify about the process—and then they were made the subject of an investigation. The result is several thousand dollars in potential legal fees.

    I would like—go ahead and comment if you want. I have one other question.

    Mr. BOWRON. Well, I would just say that the legal fees are certainly important, and that they shouldn't suffer a loss in my opinion. I would look for some way for them to not sustain those costs, because it certainly was something that these agents didn't deserve based on what they did, and it has had a real impact on their morale and how they feel.

    Mr. KOLBE. One other question, sir. Under the normal process, if a member of the Secret Service, of your staff, one of your agents, testifies before a committee on anything like this, in a process or anything like this, would you normally review or—you or would somebody else in Treasury review their testimony beforehand?

    Mr. BOWRON. Normally, if there is prepared testimony, it would be reviewed within the Secret Service; it would be reviewed by Treasury; and it would be reviewed, in many cases, by——

 Page 292       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    Mr. KOLBE. Do you know if that took place in this case?

    Mr. BOWRON. The normal reviewing process did not take place in this instance for a couple of different reasons. One was it wasn't so much testimony as it was them coming up to answer questions, and secondly——

    Mr. KOLBE. That is correct. My understanding is it was informal remarks that were made in the opening testimony. But they did write them out.

    Mr. BOWRON. Secondly, I think with all the right intentions the Department of Treasury and the administration did not want to be in a position of reviewing or impacting testimony on this particular subject matter. We were dealing directly with the Congressional Committees and not putting the questions or the answers through the Treasury Department on this particular subject and that was everybody's understanding. It wasn't anything under the table.

    Mr. KOLBE. No, okay. So they did not submit the testimony. They gave it on their own in good faith and understanding they were giving the process. And, subsequently, we have two separate, independent events that corroborate this, the Inspector General tells these agents or through other people tells these people that they are under criminal investigation. I find that extraordinarily disturbing.


 Page 293       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    I have some more questions on some other topics.

    Mr. Hoyer.

    Mr. HOYER. Thank you.

    Mr. Bowron, do you know of anybody who screens visitors to the Speaker's office?

    Mr. BOWRON. Who screens visitors to the Speaker's office? No, sir, I am not aware of anybody doing that.

    Mr. HOYER. I am not aware of it either. I am aware of the fact that there was a court case, Sherill vs. Knight, 1977, which the Secret Service lost when it tried to screen somebody for reasons other than safety to the person or the property of the White House. Am I correct on that?

    Mr. BOWRON. Yes.

    Mr. HOYER. And can you tell us a little bit about that case?

    Mr. BOWRON. Well, it was a case where we had denied access to someone based on a criminal record. The debate that ensued in that particular court case really centered on the Secret Service having to have an identifiable and clear threshold with respect to who they would allow or not allow into the White House complex.

 Page 294       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    We took the position that that threshold was someone's dangerousness. With respect to what information we are able to share with respect to someone's criminal history, that is governed by Federal regulations. We only have access to criminal histories by virtue of being a law enforcement agency, and can only use that information for law enforcement purposes.

    Mr. HOYER. Let me ask you a question on that.

    There has been a great controversy about White House staffers getting criminal records or FBI records of personnel who may or may not have worked at the White House at any given time. In the event we have pursued the notice that Mr. Wolf suggests, how easy would it be for a White House person to invite somebody to the White House, whether they accepted or not or had a potential invitation and then request a background check on that and advise as to whether that individual ought to be allowed in the White House. If we pursued a standard less than protection, as I understand what you are saying, then the record would be made available to the staffer, chief of staff or deputy chief of staff, who was in charge of the invitation list. Now, you do not do that, do you?

    Mr. BOWRON. No.

    Mr. HOYER. You do not provide that.

    Mr. BOWRON. No, we do not.

    Mr. HOYER. That is a record that is provided to you, as you just said, as a law enforcement agency.

 Page 295       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    You then make a judgment based on the criteria of the Sherill case.

    Mr. BOWRON. That case as well as our experience as to what type of activity should alert us as to someone being a physical threat.

    Mr. HOYER. Let me make it clear. I don't want anybody in the audience or my good friend, who does feel very strongly about this issue to be in any way confused about my position. I think these individuals should not have been invited to the White House. Having said that, I think the Secret Service ought not to be in a position to second-guess the White House or anybody in any White House in invitations, except for the limited criteria of your responsibility, which is safety of the person and of the White House itself.

    I wanted to follow up on Congressman Wolf, because I know he feels strongly and we have a somewhat different perspective on the issue. And we have had this discussion before in terms of what criteria should be applied.

    With respect to the agents involved, I would agree with my colleagues. To the extent that they were acting properly within the framework of their duties and responsibilities, not just formal testimony but acting within the realm of their responsibilities, we ought not to allow our people, whether they be Secret Service or any other government official, to be exposed to legal expenses as a result of the performance of their duties or related to the performance of their duties.

    Mr. Chairman—I know Mr. Wolf and I have felt strongly about that in other cases, and I agree with him on this case, and perhaps we will pursue that.

 Page 296       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    Mr. KOLBE. I am sure we will want to pursue that.

    Mr. HOYER. I don't know what the time frame is, Mr. Chairman. Do you want to go a third round?

    Mr. KOLBE. Fine, let's do that. Mr. Wolf.


    Mr. WOLF. Yeah, I will just make a comment. I don't know if I have a question.

    I will offer, if it is not done, the amendment, as I did for the White House Travel Office, to make sure that your agents are reimbursed.

    Secondly, Mr. Hoyer and I are good friends and maybe we see things differently, but I don't know that we completely do. You have the NCIC checks. It would be good for the President, whoever he or she would be, that they be told that you got a guy coming in who has been connected with organized crime. That would be a good thing, and they would want to know.

    It would be a good thing to tell them you have got a guy coming in who is with the Poly Corporation who is connected heavily with the leaders—some of the prominent leaders of the Chinese government who sold assault weapons, who sold equipment to Saddam Hussein that was used against American servicemen, a government that is persecuting Christians, Catholic bishops and priests in jail, Protestant pastors in jail. There are more gulags than were ever in the Soviet Union. They plundered Tibet.

 Page 297       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    I think the President would want to know that this guy, who was connected to the people that were doing these things—I think that under the Nixon administration or the Carter administration, if somebody had been connected with Gorbachev or Khrushchev or Stalin, who had slaughtered 30 million people, I think they would have wanted to know.

    And I believe—I could be wrong, and I am not perfect. Believe me, my feet are made of clay. When I take any socks off, it is all clay. I may be wrong, but I believe in those administrations. They would have said, Mr. President, this guy is connected with Stalin; and this guy is persecuting those of the Jewish faith and those of the Christian faith; and they are selling weapons to this country. I think that would have been a good thing to tell.

    Even if it is not down there, I am going to try to offer some amendment, something at least saying you should never tell the President who he or she should have, but you should file a report whereby they should have the knowledge that you have, the Secret Service, and you represent what is literally one of the finest agencies in the country. I mean, as I was growing up as a kid, I used to watch the shows, the Secret Service shows and the FBI—my dad was a policeman. You know that. I want the law enforcement people to be well-respected, and I think that would be a good friend.

    So I am—whether I am ruled out of order, tackle me on the Floor, whatever, I am going to offer something to say that you have an obligation so that no Secret Service director can dodge it, that you should have an obligation to send in whatever data you may have. We are not asking you to call the FBI and run background checks. But the NCIC, we run background checks with regard to people with criminal records on whether they can buy a weapon. That ought to be given.

 Page 298       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    When I look at these things—I mean, when I ride by the White House, I still feel the sense—the first time I came to Washington, I remember I got to go in the White House. It was a special place. It was a kind of place that, you know, I wanted my kids to see. It was a special place. It still is. But I will tell you, it has been tarnished in my eyes.

    So we think—I think, and I know Mr. Hoyer and I are good friends and we may disagree, the Secret Service ought to be giving whatever data it may have to the President of the United States or the Chief of Staff so that they then can—and then if they decide to have the Poly Corporation in or a guy out on bail or a drug dealer for a picture at the Christmas tree, you guys, you men and women, have done your job. You can go home. You can be proud.

    You can't tell them what to do. But I tell you, he has to know or she has to know. Because, if we don't, we are going to destroy this.

    And I will tell you—the last comment. It is not a question, because I don't want to put you on the spot and I don't want to browbeat. I don't think I should have any right to do that. I think this is beginning to have an impact on the credibility of the government, and I think it is beginning to make people feel not very, very good about the Government.

    And I think whether it is a Republican administration or Democratic administration—let me tell you, the Nixon administration did terrible, terrible, terrible things; and what happened to President Nixon should have happened to him. But these things make people lose faith. And when that happens you can't tell the kids to come to Washington for the school trip, you can't tell them as they pass the White House to have that thrill, and they will think this town is turning into a town that is fundamentally—they will believe—they will begin to believe that this town is fundamentally corrupt. And if people like that can get in the White House when all the people who line up for hours and hours and hours and hours and hours have to wait to get in, we are going to really lose the American people.

 Page 299       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    I have no comment, but I would appreciate a letter in support. I would like to put the letter from Mr. Davis with regard to the two agents in, and I would appreciate a letter from the Secret Service in support of the amendment.

    [CLERK'S NOTE.—No amendment has yet been introduced.]


    Mr. KOLBE. We did put this in the record, this form.

    Mr. WOLF. I have no further questions.

    Mr. KOLBE. Did either of you have any response or comment. It is not necessary.

    Mr. BOWRON. I would only say that the Secret Service, from an operational standpoint, is not opposed to providing information to the administration or anyone else, provided that we are legally within the framework of the regulations that allow us to provide that information.

    Mr. WOLF. Do you think that would be a good idea?

    Mr. BOWRON. That is an easy way for us to convey that information to the administration, whatever administration may be in there, keeping in mind that you are providing them with criminal background histories. Then you have to decide whether or not it is going to be with respect to ongoing investigations, and a lot of the kinds of information you made reference to, you are not going to get out of NCIC. It is only going out of background investigation.

 Page 300       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    Mr. WOLF. Well, Mr. Director, I would like to work with you then to craft language, because you have forgotten more about this than I will ever know. I would like to craft legislation which I will offer here that deals with that in a responsible way that protects the Secret Service, but also protects the President of the United States from these things. I believe, quite frankly, now, they may very well have wished that this had been in place. I don't know. So if you can have your General Counsel come by, I would like to craft some legislation that would do that.

    Mr. BOWRON. Yes, sir.

    Mr. KOLBE. If I might, starting this last round here, just one question that I hope ties together the comments of Mr. Wolf with the comments that Mr. Hoyer made about the Sherill case. Mr. Wolf has been focusing on the fact that he thinks you should be providing this information. Mr. Hoyer has been focusing on the fact that you cannot, under that decision, exclude somebody for these kinds of reasons from the White House.

    It would be possible, however, for the Administration, for somebody in the White House, the Chief of Staff, or through a policy, to say, as part of a background check, we want you to include any prior conviction or something that may show up.

    Mr. HOYER. Would the Chairman yield before——

    Mr. KOLBE. Yes.

 Page 301       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Mr. HOYER. You recall last year we had discussions as it related to the White House list—and how much information they were going to get. My point that I was trying to make is you could indirectly do exactly what we were so concerned about by simply saying you were going to invite X to the White House, and the NCIC would not be a very complete list, so you wouldn't get the information which Frank is legitimately concerned about. So what I was suggesting is it is a difficult question for us to resolve, a policy matter, and I think the Secret Service will carry out whatever policy we want.

    Mr. KOLBE. Right.

    Mr. HOYER. But the way we said it then was, an employee would have to sign a release indicating that. I want to be an employee and I understand under those conditions, as you do when you make application for employment with the CIA, FBI, Secret Service, whatever, they are going to do a full background investigation. You may well have invites do a similar release. In other words, somebody calls me up and says, Steny, I want you to come down to the White House when the Danish Ambassador and the Queen are coming. Does Steny Hoyer have a criminal investigation done on him that is then available to, perhaps, Donald Reagan who may have been Chief of Staff then? We have been through this in the prior Filegate investigation. This is a spin-off or similar case to that.

    It is a very difficult proposition. Frank's concern, I think, is legitimate. The solution to it is so difficult than I cannot come up with an answer off the top of my head. Legitimately we want to make sure that Americans have the right to privacy. Leon Panetta or anyone else who wants me to come down to the White House, or if I want to come down to the White House, they should not call up and ask Eljay Bowron to do a criminal investigation on me and give it to Mr. Panetta.

 Page 302       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    Mr. WOLF. If the gentleman would yield——

    Mr. KOLBE. I am still waiting for the answer to my question.


    Mr. WOLF. You could return a Lexus-Nexus check. You would have found out about Wang, the guy from Miami, the drug dealer, and I think you would have found out about Winn. I am not asking that you go to the FBI and do a background. I think Mr. Hoyer raises some valid points, but I think there are some things that can be done and I just ask that you come on by and we can work on this.

    Mr. HOYER. Excuse me, Mr. Chairman——

    Mr. KOLBE. That is all right. Back to my question, can you provide the information, if you have it available, to us, requested by the House.

    Mr. BOWRON. No. Mr. Chairman, I think we are talking about three different things. If I understand Congressman Wolf, I think I understand what the Congressman would like us to do, which right now regulations preclude us from doing NCIC criminal history investigations that we get as a result of a name check, can't be used for anything other than law enforcement purposes, and only shared with law enforcement entities. So that part of it is who has access to that information.

 Page 303       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    The answer to that is law enforcement organizations for law enforcement purposes. Now, if you want an entity, whether it is the administration or whatever, if you want an entity outside of law enforcement to have that information, what you are really talking about for practical purposes is allowing that entity to be able to run their own NCIC checks. If you want them to be able to do that, they can run the checks for themselves. They have access to that information.

    Mr. KOLBE. So your understanding is the law now reads, if Mr. Bowles, the Chief of Staff says: ''We have got this person coming in, I am a little dubious about it. Can you tell me anything about it.'' You are not able to give him anything other than to say he is cleared from the standpoint of not being a physical danger to the White House. You cannot tell him about a criminal history.

    Mr. BOWRON. Yes, and I am only smiling because, Mr. Chairman, I am sitting here saying that is the procedure and the policy, but I wouldn't suggest that a Secret Service agent who was asked a question, has never said something along the lines of, you know, you might want to take another look at this and try and get a bit more information.

    Mr. WOLF. I understand that has been done.

    Mr. BOWRON. Well, I am not going to sit here and say that has never been done, but in terms of us providing that information, we would be outside the boundaries of the regulations that guide and govern our ability to have access to that information, and that is what we are abiding by.

 Page 304       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Mr. KOLBE. I have some other areas of questions which we have provided you earlier and I think we will just do all those by submitting them for the record.

    Mr. BOWRON. I just wanted to follow up because the other part of your question on this subject deals with the difference between providing information from criminal history summaries, and whether we make a determination as to whether or not that person should be allowed into the White House Complex. As I understand Congressman Wolf, you are not suggesting that we should do that. You are just suggesting that we should provide that information.

    Mr. WOLF. Right. I don't think you should have the right to tell the President who should come in. I think you should be obligated to tell him what is available.

    Mr. BOWRON. And that is a decision to be made by Congress; in terms of how that information is handled and who should have that information.

    Mr. KOLBE. Well, we certainly thank you for this testimony and for your assistance here today. I am sorry, yes.


    Mr. HOYER. I would like to make an observation and then, if I might ask you a couple of sort of dull, esoteric questions after that. I do not believe you or anybody in the Secret Service needs to have any reticence when asked by Mr. Bowles or any other Chief of Staff or any other White House person, whether, based upon the information you have, would you invite this person to the White House. I don't think there is anything illegal or unethical about your responding honestly to that question. So A, I would be shocked if it hadn't happened, and B, I don't see anything wrong with it.

 Page 305       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    You do not share the information on which you base your judgment because you have that information in a specific authorization and not to be related to others. This is understandable, but I don't think that in any way constrains your ability to pass along your opinion. So when Congressman Wolf asks and you answer, A, I think that is absolutely true and, B, I see nothing wrong with it, from a legal standpoint. I haven't researched this and it is just off the top of my head. Counsel is being very stone-faced.

    Mr. BOWRON. He does a lot of that.


    Mr. HOYER. Pennsylvania Avenue, talking about access.

    Mr. BOWRON. Yes, sir.

    Mr. HOYER. What is the status?

    Mr. BOWRON. It is closed. Well, the status is——

    Mr. HOYER. What does tomorrow look like?

    Mr. BOWRON. We have temporary measures in place. More permanent measures cannot be completed until there is a funding mechanism for the Department of Interior and the National Park Service to follow through with plans for the development of a permanent national park that would be in that location.

 Page 306       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    There are also some studies that are underway with respect to environmental issues and those have to be completed before they can go forward. As far as the Secret Service goes our plans are in place, the funding is in place, the things that we can do prior to the rest of the project moving forward, we are moving forward on now. And if part of your question was related to our view, our view is that closing Pennsylvania Avenue was a very important step to take. It remains absolutely necessary and there is increasing evidence everyday that it is necessary.


    Mr. HOYER. Okay. That is what I wanted to find out. Last question, the most critical question that will be asked at this hearing. Tell me about how the two buildings are doing in Beltsville, wherever Beltsville is, I don't know.

    Mr. BOWRON. We are underway with the administration building with a projected completion date of, I think, approximately a year from this summer. Next fall it should be completed. We are doing the——

    Mr. HOYER. Next fall, fall 1998.

    Mr. BASHAM. 1998, Yes.

    Mr. BOWRON. We are going through the preliminary steps of reviewing plans for the classroom building, and that is probably a year and a half out for completion.

 Page 307       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    Mr. BASHAM. Right now we are in the process of doing the architectural and engineering work on the classroom building. We should have a contract in place for that by the summer, and construction will begin, probably, the summer of 1998.

    Mr. HOYER. Mr. Chairman, I think you are scheduled to visit the Beltsville facility.

    Mr. KOLBE. Yes, well, we haven't set——

    Mr. HOYER. I don't know whether Mr. Wolf has been out there or not, but I hope that you would invite the other committee members to visit. It is a very impressive facility and it is utilized by more than just the Secret Service, because it is in the Washington Metropolitan area, for relatively quick updates and quick training and proximate training. It is an outstanding facility and I am glad you are going to visit.

    Mr. KOLBE. Very impressive facility with very impressive congressional representation, but I would add that the buildings, you probably know that we are talking about really replacing existing space that is devoted to that same activity right now. We are losing a building in Washington, D.C. that provides us with that classroom space now. It is a forced move out, and we are just replacing that space, and in the long haul, well, not all that long, the lease saving space for this building. So it is a cost-effective way to save that space.

    Mr. HOYER. Mr. Chairman, the question has been raised, is the classroom building authorized? Do we need to get that authorized?

 Page 308       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    Mr. BASHAM. Yes, we do.

    Mr. HOYER. We do need to get it authorized?

    Mr. BOWRON. Yes.

    Mr. KOLBE. Further questions.

    Mr. HOYER. No, thank you, Mr. Chairman. Thank you, Mr. Secretary and Mr. Director.

    Mr. KOLBE. Thank you very much for the testimony. I would invite Members who are here, we have a lot of Secret Service equipment that is here and if anybody would like to browse through that, I am sure they would like to show it to us. Thank you very much.

    [Questions for the record and selected budget justification materials follow:]

    "The Official Committee record contains additional material here."