Senate Select Intelligence, Senate Governmental Affairs, Senate Energy and Natural
Resources, Senate Armed Services
June 22, 1999

SENATE COMMITTEES ON ARMED SERVICES,
ENERGY AND NATURAL RESOURCES,
GOVERNMENTAL AFFAIRS, AND THE SENATE
SELECT COMMITTEE ON INTELLIGENCE
JOINT HEARING ON ALLEGED CHINESE
ESPIONAGE

MURKOWSKI:

Good morning, ladies and gentlemen. The hour of 9:30 has come and not gone very
far, so we're going to get started.

Today we have the Committee on Energy and Natural Resources joining with the
Committee on Armed Services joining with the Committee on Government Affairs and
the Select Committee on Intelligence.

Senator Shelby, Senator Thompson will be joining us very soon; Senator Warner
on my right.

And the purpose of this is to hold a hearing on the President's Foreign Intelligence
Advisory Board report on security problems at the Department of Energy.

I'm told, according to some of the Senate historians, that this four-committee
hearing is unprecedented. It was pointed out that it's kind of like the House where you
have 50 or 60, but in any event, we intend to move along.

Let me propose a procedure for the hearing. First, I would propose the opening
statements be limited to the four chairmen and the four ranking minority members of
each committee for hopefully less than five minutes.

Seeing no objection, we would then turn to our first witness, Secretary Richardson.

And I notice that you're further away than usual, Mr. Secretary.

(LAUGHTER)

Maybe that's a good thing; maybe it isn't.

But in any event, after Secretary Richardson testifies, we'll have a round of
questions with each member having about five minutes. We will then turn to Senator
Rudman for his testimony. After Senator Rudman testifies, we'll have a round of
questions with each member having five minutes as well.

For both rounds of questions, we would start with the chairman and ranking
members alternating sides in order of appearance, again alternating sides.

If that's agreeable to all, I would proceed, and my statement is going to be very,
very brief, in the interest of time and to accommodate our witnesses.

What is before us clearly has been pointed to as a disaster of major proportions to
the national security of our nation, and it's going to take some time, perhaps 10 to 20
years, before we know the full extent of the harm that's been brought about as a
consequence to the worldwide geopolitical impact.

According to the House select committee's report, the Chinese have stolen design
information on virtually all of the United States' most advanced nuclear weapons. Well,
this is, of course, unacceptable, but the question we now face is what we should do
about it, how to prevent it from occurring again.

Senator Rudman's report gives us some clear guidance on what to do. A few
quotes from that report I think are worth mentioning.

Quote, "Organizational disarray, managerial neglect in a culture of arrogance, both
at the DOE headquarters and the labs themselves conspired to create an espionage
scandal waiting to happen."

"The Department of Energy is a dysfunctional bureaucracy that has proven it is
incapable of reforming itself."

"Accountability at the Department of Energy has been spread so thinly and
erratically that it is now almost impossible to find."

"Never before have the members of the special investigative panel witnessed a
bureaucracy of culture so thoroughly saturated with cynicism and disregard for
authority."

"Never before has this panel found such a cavalier attitude toward one of the most
serious responsibilities in the federal government."

"Control and the design information relating to nuclear weapons particularly
egregious (OFF-MIKE) been failures to enforce cyber security measures to protect
and control important nuclear weapons' design information."

"Never before has a panel found an agency with the bureaucratic insolence to
dispute, delay and resist implementation of a presidential directive on security as DOE's
bureaucracy tried to do to the Presidential Decision Directive No. 61 in February
1998."

Finally, the recommendation from the Rudman report is that the panel is convinced
that real and lasting security and counterintelligence reform at the laboratories is simply
unworkable within the DOE's current structure and culture.

Well, I happen to agree. That is why Senator Kyl, Senator Domenici and I will be
offering an amendment to the intelligence appropriations bill when it comes up to the
floor to implement the recommendations to the president's own intelligence advisory
panel.

I'm going to call on Senator Bingaman, and then I would call on each of the
chairmen of the various committee and the ranking members.

Senator Bingaman.

BINGAMAN:

Well, thank you very much, Mr. Chairman. I appreciate the chance to be here and
hear about Senator Rudman's report and of course hear from Secretary Richardson
also.

I've looked through the report. There's a lot in the Rudman report that I agree with.
The report speaks out, first of all, against some of the exaggeration and overreaction
that has been seen in some of our past hearings on Chinese espionage.

I think you quoted from various parts of the report. Let me give you another
quotation that says, "Possible damage has been minted as probable disaster.
Work-a-day delay and bureaucratic confusion has been cast as diabolical
conspiracies."

Enough is enough.

BINGAMAN:

I think that's a good note to sound as well. And having sat through many of these
hearings that various of our committees have had, I think that clearly is an appropriate
comment by the Rudman commission.

At the same time, I think there's a -- there are a number of recommendations in this
report that need to be examined closely before we act. This is particularly true since
we're told that an amendment, as you indicated, based on this report is about to be
offered to the intelligence appropriations bill or authorization bill as soon as tomorrow.

I'm not alone in having some reservations about some of the recommendations that
appear in this report. I'd ask unanimous consent that a statement from the ranking
member of the House Committee on Commerce, Congressman Dingell, be printed in
the record at the hearing following my statement.

Congressman Dingell has been a tireless investigator of the department. On many
occasions he has pointed out deficiencies at the department. But he has a perspective
on this issue that I think we need to be aware of.

MURKOWSKI:

Without objection.

BINGAMAN:

The first recommendation in the Rudman report that deserves closer -- a closer
look is the advocacy of a semi-autonomous agency within DOE as a solution to the
problems of espionage at the labs. The report identifies or defines semi-autonomous as
meaning, quote, "strictly segregated from the ret of the department."

I'm not sure what being semi-autonomous has to do with preventing spying. The
defense programs part of DOE has a well-documented history of ignoring IG, GAO
and other reports on security shortcomings, and history has shown that its management
has not -- has only improved as a result of pressure applied from outside the defense
program. So, given this history, it's not clear to me why DOE defense programs, giving
them more autonomy, necessarily improves future performance in this regard.

Strictly segregating DOE defense programs and its labs from the rest of the
department also builds in institutional barriers between the laboratories and other parts
of the Department of Energy. A chart in the report shows the other parts of DOE as
having to come to the deputy director of the new agency in order to place work at the
labs instead of dealing directly with the laboratories as they can now.

Connections to non-defense research and development are vital if we're to maintain
the defense laboratories' excellence or, as the title of the report puts it, if we're to
maintain science at its best, which I think we're all interested in doing. The Rudman
report has language in it agreeing that these connections should be maintained, but it
seems to me the very nature of the solution being proposed is in conflict with those
good intentions.

The second recommendation in the Rudman report that deserves more scrutiny is
the idea that this semi-autonomous agency within an agency should have its own
general counsel, its own congressional relations, its own comptroller, and so on.

We've seen this duplication of bureaucracies in larger agencies such as the
Department of Defense, and in my view it does not work particularly well there either.
It certainly would not help the work of the Department of Energy laboratories and
would probably cause no end of confusion within the department as to who really is
speaking for the Department of Energy.

The third recommendation that seems to me off the mark is the idea that DOE
needs to cut the field operations offices completely out of the management of its
defense programs. I have no quarrel with DOE field elements being directly
subordinate to the headquarter's sponsors.

BINGAMAN:

That's a recommendation of the 120-day study, and Secretary Richardson has been
implementing that recommendation.

But the Rudman report's idea that you can do away with regional operations offices
altogether and rely on small, on-site offices strikes me as questionable.

Mr. Chairman, let me just indicate that I said on the floor when we discussed this
before that I think these are very far-reaching changes we're talking about in the
organization of the department.

I think the right way to proceed would be to have a series of legislative hearings on
these proposals. We need to invite a broad range of experts in the departments and on
agency management - experts on the department and on agency management to give us
their input.

Last month I mentioned former Secretary of Energy James Watkins as a
highly-regarded individual who could give us real insight into improvements.

We should also hear from present and former managers of the laboratories, former
Sandia Director Al Nareth (ph) comes to mind as someone who has a long and
successful history of managing R&D organizations. We should hear from him in my
view.

We should hear from experts in analyzing government organizations such as Don
Kettle (ph) of the Brookings Institution, who I believe have insights to offer.

I do not believe Congress should make major changes in how we manage the
nuclear arsenal in a hurry fashion or in a partisan fashion. I hope we can come to a
consensus in a deliberate way on improvements that will further the security of the
country.

Thank you very much.

MURKOWSKI:

Thank you very much, Senator Bingaman. Senator Warner and then Senator
Warner would call on his ranking minority member Senator Levin.

WARNER:

Thank you very much, Mr. Chairman. I want to commend you and others and
indeed Senator Lott. Senator Lott has held a series of meetings of the four chairmen
and we have gone into the procedure and the background of this very important case
and it has directly led to this very important hearing we're having here today.

There's nothing that is more important to the Congress than to protect the security
interests of this country, and in most particular as it relates to those weapons systems
that pose the greatest danger to our nation.

Senator Rudman, our former colleague, has done a thoroughly commendable,
outspoken performance of creating this report and we commend you.

I would hope that you could clarify the president's acknowledgment of your work,
that acknowledgment being reported that in essence he accepted it.

Of course we're fortunate to have Secretary Richardson again before our
committees. I think that you have done as best as you can given that you didn't create
the problem. You inherited it and you're trying to deal with it and it unfolds a new
chapter just about each week that goes by.

But this morning you appeared on early morning media and expressed your view
that your approach to this solution and that of former Senator Rudman was very, very
close. And I would hope that in the course of this deliberation this morning, you could
narrow such differences as remain and they could then be the guidepost for the
Congress.

We will have before the amendment by our chairmen, Senators Domenici and Kyl,
and it would -- hopeful that that amendment could quickly embrace whatever, should
we say, agreement that you and Senator Rudman could reach as to the remaining
differences.

The Armed Services Committee of course held a number of hearings on this whole
issue and we will currently continue with our schedule with another hearing tomorrow.

This problem has been characterized as China stealing America's state secrets and
so forth. My own view is that we're aware in this nation -- and in the 21 years I've
been in the Senate and served on the Intelligence Committee as former vice chairman
-- we're aware as a nation that all nations, to one degree or another, are involved in
trying to determine the secrets of another.

In this case, it seems to me that to the extent China was behind this, and the
evidence is mounting, it was like the burglar that entered the house and there the
jewelry and the cash were left out on the bureau, little more than a flashlight was
needed to remove and to depart.

And that's what we've got to protect this nation from ever happening again, whether
it's China or any other nation seeking to get our secrets. Now we've established in the
Armed Services Committee sort of a commission study.

WARNER:

Senator Rudman in his report referred to that study.

Two years ago the Senate Armed Services Committee endeavored to establish just
such a commission, and the Department of Energy, then under the acting secretary,
Mrs. Moler, fought it tooth and nail. And I'd be interested, since we are now
proceeding with the Rudman report and the Armed Services bill, to have this
commission, whether or not it had been formed as originally intended by the Senate,
would we be here today.

So, Mr. Chairman, I join with others. We're in a search for the truth and a solution.
And I think we're making considerable progress.

MURKOWSKI:

Thank you, Senator Warner. Senator Levin.

LEVIN:

Thank you, Mr. Chairman. The security problems at the Department of Energy have
been festering for 20 years. GAO report after GAO report were filed, administration
after administration didn't act on those reports, and there were too many in Congress
that also failed to act, despite positions of responsibility, which seems to me should
have set off alarm bells both with administrations and here in Congress.

The frustration over the security conditions at the Department of Energy has now
created a broad consensus for corrective action, and I hope that we will finally act
further, because some actions have already been taken.

Senator Rudman's report makes clear that this administration is indeed the first
administration since the Energy Department was established in 1977 to address the
issues of security and counterintelligence head on. Beginning with the February 1998
Presidential Decision Directive 61, stronger security and counterintelligence measures
are being implemented by Secretary Richardson at our national weapons labs.

And the Senate has now passed significant legislation in this area. The Armed
Services Committee has included a series of measures in the fiscal year 2000 National
Defense Authorization Act designed to enhance safeguards, security,
counterintelligence at the Department of Energy facilities, and the Senate passed this bill
last month. And during the floor debate on the bill, the Senate adopted Senator Lott's
amendment to expanding and broadening the committee's provision.

There was another amendment which was offered but not passed on the floor of the
Senate by Senators Murkowski and Kyl and Domenici, which is very different from
what Senator Rudman is proposing in his report. There is one similarity, which I think is
important and which I hope there will be a consensus on, which is that weapons and
other defense-related functions be consolidated under one person underneath the
secretary. There is it seems to me a growing consensus on that approach, both in the
amendment which was offered on the floor that as not adopted and also the proposal in
the Rudman report.

But there are very important differences between the so-called Kyl proposal, I
believe, and the Rudman proposal from that point on. And it seems to me the key issue
is whether or not we promote accountability more by having the intelligence and
counterintelligence functions go directly to the secretary of energy as the person
ultimately responsible, or whether or not the persons who are going to be put in charge
of intelligence and counterintelligence would report to that new person underneath the
secretary of energy, a new undersecretary or an assistant secretary.

How do we promote accountability more? That seems to me to be what we're all
after. We want accountability. But there is in that regard and a number of other regards
significant differences between what was proposed to the Senate two weeks and set
aside and what the Rudman commission is proposing to us, which we will be
considering this morning.

But accountability, it seems to me, is what our goal is. And even though there are
some differences as to how best to achieve this, it seems to me that that ought to be the
goal which we keep in mind. So we do want to consolidate I believe by consensus
almost these various defense-related functions and the weapons production and other
weapons-related issues under one person under the secretary. But where we place that
intelligence and counterintelligence direction - down with that person below the
secretary or at the secretary level as the person who is ultimately responsible is one of
the key issues which we I hope will be discussing this morning.

So, I want to commend both of our witnesses. They're both doing wonderful jobs.
Secretary Richardson has undertaken this responsibility with great vigor. He has
already undertaken important reforms. Senator Rudman, as always, with his
commission is doing the yeoman's work which we always saw him do when he was in
the Senate, directly, plain spoken, bluntly.

LEVIN:

And we always enjoyed that when he was here and we appreciate it now again.

MURKOWSKI:

Thank you, Senator Levin. I might add, Senator Levin, we -- Senator Kyl, Senator
Domenici and myself -- have changed our amendment to adopt the language of the
Rudman recommendations. So I mention that at the conclusion of my statement.

WARNER:

Mr. Chairman, it might be helpful if a copy of that amendment would be made
available to all senators for reference....

MURKOWSKI:

I'm sure that we can arrange that to happen.

Moving on, we're joined by Senator Thompson, chairman of the Government
Affairs Committee, and he'll be followed by Senator Lieberman, the ranking member.

THOMPSON:

Thank you very much, Mr. Chairman. We have many people here today and I'll be
brief.

I come away from this with the stark realization of how difficult change is. And in
fact it is true that over a period of several years now, we have had report after report
after report and warning after warning after warning and not much has been done about
it.

Now, this secretary is doing some things. But the question is whether or not it is
going to be enough to make some changes at this late date or whether or not we're
going to have to do something more fundamental than we've done in times past,
because the Rudman report points out very starkly and in no uncertain terms how
extremely difficult it is to move the gigantic bureaucracy that was cobbled together from
40-some-odd agencies once upon a time.

And now we're told that if we do anything with that, that we're making a grave
mistake. I don't think so. I think that anything closely resembling a band-aid approach
or status quo would be a grave mistake. Some of the things that Secretary Richardson
is trying to get done still have not been done despite his best efforts, and there are
many, many more fundamental things.

And apparently even as we sit here today, there are reports coming in to the
Foreign Intelligence Advisory people about the mid level kind of blase attitude toward
all this within the Department of Energy. Very, very disturbing.

I'm convinced something fundamental is going to have to be done. And I applaud
the senators who have worked so hard on the Kyl and Domenici and Murkowski
amendment.

So thank you, Mr. Secretary, for being here.

Thank you, Mr. Chairman.

MURKOWSKI:

Thank you very much, Senator.

Senator Lieberman.

LIEBERMAN:

Thank you. Thanks. Mr. Chairman, members of the Senate, like all of you, I've
been extremely disappointed, troubled and ultimately angered by the numerous and
repeated revelations that we've seen over the past months about the terrible state of
security at our nation's weapons labs.

I've read the Cox report, I've sat through extensive closed hearings of the
Governmental Affairs Committee on the Wen Ho Lee case. And all of that convinced
me of the pressing need to do some serious rethinking of the way the Department of
Energy is organized, particularly around matters of security.

But Senator Rudman's report, I think, sealed the conviction for me that fundamental
change is critically needed at the labs. We simply cannot tolerate either a culture or an
organizational framework that does not put appropriate emphasis on safeguarding the
security of our nation's most precious secrets, secrets that we have invested billions of
dollars to develop and that are critical to our security.

But I think we also have to make sure that the very positive focus and resolve that
we now collectively have aimed at this problem doesn't lead us, in our haste to do
something, to do the wrong thing. As I look around this room, both on this side and on
that side of the table, I think the collective experience and purpose represented here
can allow us in a reasonable period of time to arrive at the right response to this crisis.

I thought that the Rudman report carried the characteristics that I associate with its
author. It was tough-minded, it was direct, it was balanced, and it was ultimately
constructive. I think Senator Rudman's proposal to reorganize the weapons labs as a
semi-autonomous entity within the Department of Energy may very well be the right
way to go.

LIEBERMAN:

But I also think there are a number of legitimate questions that have been raised
about its details that we must answer before we proceed and do so in a timely way.

To take one example, I have had people say to me that the labs do far more than
just traditional weapons-related research. Their weapons-related research in fact
benefits from the non-weapons-related research activities that go on in inside and
outside the labs. So, some of these observers have said, if in using the response, the
tool of isolation to erect a security fortress around our weapons labs, we may also cut
those labs off from part of what makes them great, are we truly doing the right thing? In
other words, may we not in that means reduce not only the quality of research our
nation benefits from, but also the quality of scientists our labs can recruit? I mean, in
some ways it's stated in the title of the Rudman report: "Science at its Best, Security at
its Worst." And the challenge for us here is to keep the science at its best while raising
the security also to its best, to the highest standards.

Those are balances that are manageable if we devote ourselves together to them.
These are very important questions we are dealing with in these considerations. I think
they deserve considered reflection, the reflection that's necessary to make sure that we
get this one right. But I'm convinced that if we work together in the spirit that has
developed between the two witnesses that we have before us today, we can arrive at a
consensus and act appropriately to both protect the science but to protect the security
as well.

I thank you, Mr. Chairman.

MURKOWSKI:

The chairman of the Intelligence Committee, Senator Shelby. Good morning.

SHELBY:

Mr. Chairman, I ask that my entire statement be made part of the record.

MURKOWSKI:

Without objection.

SHELBY:

And I'll try to be brief. Secretary Richardson, Senator Rudman, we appreciate very
much your being here today to testify in public about the thorough, bracing and
compelling report on the security problems at the DOE labs.

Secretary Richardson, I believe, and I've said this before, that you deserve credit
for the steps that you've taken thus far and the energy that you invested in trying, trying
very hard, to do something about this problem. But I believe, Mr. Secretary, that we
need to go further.

First, the Rudman report finds, and I agree, that administrative changes are
inadequate to the challenge at hand. It's just too big. A statutory overhaul is needed.
Prior attempts -- and there've been many -- to reform DOE demonstrate that DOE
and the labs can out wait -- yes, Mr. Secretary, out wait and outlast secretaries and
even presidents. The Rudman report tell us that even after President Clinton issued
Presidential Decision Directive 61 ordering that the department make fundamental
changes in security procedures that compliance by department bureaucrats was
grudging and belated.

Second, a more ambitious reorganization of the nuclear weapons complex is
needed, I believe along the lines proposed by the Rudman report and by Senators
Murkowski, Kyl and Domenici. I further believe that the nuclear weapons complex
needs to be rescued from the Energy Department. It needs to be granted extensive
autonomy. In my view, its chief should be an undersecretary, reporting directly to and
accountable to the secretary of energy.

A good example of this, I believe, would be the National Security Agency, an
agency within the Department of Defense and it has a similar arrangement. However,
only -- yes, only when this reorganization is complete, will the critical issues of nuclear
weapons and security receive the attention that they require.

Senator Rudman, you've done a great service by pointing out the need for urgent,
comprehensive, systematic and statutory reform of the Department of Energy.

Secretary Richardson, you now have the opportunity I believe to do a similar
service by embracing these positive recommendations.

And I believe, Mr. Chairman, that the nation deserves no less.

MURKOWSKI:

Thank you, Senator Shelby. Senator Kerrey.

KERREY:

Well, Mr. Chairman, first of all, I regret that the Appropriations...

MURKOWSKI:

You're the clean-up batter, I might add.

KERREY:

I appreciate that. I'm not very clean, but I will try to bat.

MURKOWSKI:

Well, you're up anyway.

KERREY:

I regret that the Finance Committee and the Appropriations Committee did not
assert jurisdiction of this bill so we could have had this hearing at RFK.

(LAUGHTER)

MURKOWSKI:

I'll keep that in mind.

KERREY:

Never have I felt more separation between myself and the people than I do this
morning.

First of all, let me state that it seems to me what we're doing is debating the final
change that Congress took up on the defense authorization bill, and I say to the public
that we are proposing in the defense authorization bill 11 specific changes to law in
response to the problems that have been -- that have arisen through various committees
and various jurisdictions.

And let me also begin my statement by both commending Senator Rudman's report
and beginning with his language in which he says that "We believe that both
congressional and executive branch leaders have resorted to simplification and
hyperbole in the past few months. The panel found neither the dramatic damage
assessments nor the categorical reassurance of the department's advocates to be
wholly substantiated."

And regrettably, in politics, that very often is the case. This is not unique in a
political debate.

And I, Senator Warner, was also encouraged by Secretary Richardson's comments
this morning, because I think today there is considerably less disagreement between
what the Senate would like to do and what the administration would like to do, and I'm
very hopeful that this hearing will produce further movement together and changes in
the law which will make our country safer but will also enable our laboratories to
continue to produce the good science it's also contributed enormously to this nation's
security.

The question before -- that I try to answer as I look at both the Rudman report as
well as other reports that have been made is why has it taken us so long? The
department was created in 1977. We have been warned for well over 20 years. Not
only why have we taken so long is the question, but why -- what's happened that all of
a sudden we're on the threshold, it seems to me, of significant and meritorious changes
in our law? For whatever the reason, I think it began with a walk-in by a Chinese agent
to a CIA station delivering significant stockpiles of documents to us, and we don't still
know, and the PFIAB did not comment exactly why that occurred, but that has led us
to the change in the law. There's significant irony in that, I dare say.

But we have been warned and we've been given specific road maps about what to
do, not just by the excellent report by the PFIAB, Senator Rudman's report, but in an
equally damaging report by the Institute for Defense Analysis, the so-called 120-day
study, that provided much of the foundational work for the PFIAB's analysis. In other
words, there's no shortage of examinations that tell us that we need to change the law
to reorganize this agency in order to make the United States of America both safe
through our scientific efforts but also safe through our counterintelligence efforts.

The only thing that I can come up with is that, as is often the case, whether you're
trying to reorganize a land grant university or whether you're trying to reorganize a
federal agency, there's always going to be bureaucratic resistance. And Mr. Chairman,
I would ask unanimous consent that an exchange of correspondence between the head
of the Office of Energy Intelligence and Senator Rudman be included in the record as
an illustration of this very thing.

MURKOWSKI:

Without objection.

KERREY:

This exchange of correspondence comes from Mr. Notra Trulock, who objected to
one of the recommendations in Senator Rudman's report, which would down size the
Office of Intelligence. Mr. Trulock took offense at that suggestion, and I think Senator
Rudman's response is not only instructive to Mr. Trulock but also very instructive to us
as to why it has been difficult to change the law. Because a very knowledgeable -- and
Trulock is very knowledgeable. He's a fine public servant. He's helped us a great deal
in bringing a lot of this to our attention. However, I believe he's wrong in his conclusion.

There is a proliferation of efforts throughout the entire government to do intelligence
work. And that's what the PFIAB has noted on previous occasions.

So I think we have to listen to people who were in the bureaucracy, who have
dedicated their lives to try to do their jobs. You have to listen with great respect. But I
believe it is that bureaucratic resistance that's made it difficult for us to make change in
the past, and I think we have to listen with great respect. But at the end of the day, we
have to decide what's in the best interests of the United States of America, and I
believe we're very close to having agreement along the lines of what was initially
suggested by Senator Kyl and Senator Murkowski and Senator Domenici, now
modified in the Rudman report, encouraged by Secretary Richardson's comments.

But I hope that we don't miss this opportunity to change the law. I hope that we
aren't looked back upon 10, 20 years from now and offered as an example of an
opportunity that was squandered and lost.

MURKOWSKI:

Thank you, Senator Kerrey.

Let me just lay down a couple of suggestions to proceed with the hearing, and one
is that we'll conclude with Secretary Richardson's portion at 11, and at least before 11,
no later than 11, and then Senator Rudman will have from 11 to 12:30. I recognize
that's difficult to accommodate everybody, but I don't know any other way to make
this thing equitable relative to the number of members that we have here.

So, let me introduce the Honorable Senator Bill Richardson, the secretary of
energy. You've been very patient this morning. You've listened to the wisdom -- well,
perhaps I should say the views of the various chairmen. And with that, you certainly
need no introduction. We commend you for the difficult task that you've undertaken
and the progress that you've made. We look forward to your statement relative to the
Rudman report today, and as you are aware, after you have concluded, we will have
an opportunity to have a few short questions, and then we'll hear from Senator
Rudman.

So, Senator Richardson, good morning. Please proceed.

RICHARDSON:

Thank you very much.

MURKOWSKI:

I'm sorry. Secretary Richardson.

RICHARDSON:

Thank you very much.

MURKOWSKI:

I'm glad somebody's listening.

WARNER:

He may want to be a senator, but he's a long way from getting there yet.

(LAUGHTER)

MURKOWSKI:

Well, he's pretty well surrounded this morning, John, at least.

WARNER:

Don't you listen, Bill.

(LAUGHTER)

RICHARDSON:

Thank you very much...

MURKOWSKI:

You may be better off, and you may not.

RICHARDSON:

... Mr. Chairman, members of the committees. If there are six messages that I
would wish that you take from comments today, they are as follows:

Number one, the Rudman report is good. It's thorough. It's hard-hitting. It outlines
the problem. It admits dramatic changes are needed, and I want to acknowledge that.
We are prepared to accept close to 90 percent of its recommendations right away.

The second message that I wish to leave you with is that we have undertaken
already dramatic reforms, sweeping reforms at the Department of Energy, to try to deal
with the Cox report and the PFIAB. I think the PFIAB, the Foreign Intelligence report,
the Cox report, all of you here, we all want the same things. We want accountability.
We want vertical integration. We want better oversight. And most importantly, we
want stronger security.

But if you look on my left to those charts that exist there, we have already
undertaken dramatic reforms that deal with ensuring better security and
counterintelligence at our labs.

My third point is that we are ready, as an administration, as the Department of
Energy, to codify some of these changes; to put them into statutory language; to
recognize that there will be secretaries of energy beyond me; to recognize that past
reforms were not implemented. And it makes sense to put them into law. However, as
we put them into law, I believe we have to be extremely careful that we not create
something that we will later regret. And this is I think where we are in terms of our
discussions with members of this committee, with Senator Rudman. I don't think we're
that far apart. But it's extremely important that we carefully, in legislative language, do
something that make sense.

The fourth point that I wish to make is that it is critically important that the secretary
be held accountable. If you're head of a cabinet, you should have full authority. You
should not have entities under you that might undermine you or have their own separate
strength that does not allow you to do your job. So I think it's critically important that
the secretary of energy and future secretaries have full authority to implement these
reforms.

RICHARDSON:

In other words, the whole department should report to the secretary, and that
should be made very, very clearly.

The fifth point that I wish to make is that it is critical, too, that counterintelligence,
security and oversight not be wrapped up in the defense component.
Counterintelligence, according to the PDD and legislation passed by many committees,
should report directly to me. We already have the best counterintelligence person in
government. We are implementing a vigorous plan, and his lines of authority should not
be blurred.

Secondly, in the component on security, we have a problem at the Department of
Energy in the entire complex. The Rudman recommendation deals with about 30
percent of our complex, the nuclear weapons component. We have other areas that
have security problems. They deal with nuclear materials, they deal with science, they
deal with waste.

For instance, Rocky Flats that has weapons waste would not be under this security
component in the defense programs because it is environmental management.

So I want to be very clear that it is important that these entities report directly to the
secretary and they not be wrapped up in this entity that might be created.

Lastly, let me say that it is very important that we not build the Berlin Wall between
our science and our defense and nuclear programs. This is a point that Senator
Lieberman made. Our labs do excellent science, they do biology, they do energy
research, they do many other issues relating to matter and physics that is important to
our national security and to our science. And it's very important that, if not properly
drafted, an autonomous agency or a semi autonomous agency would blur the lines of
authority between science and weapons.

I think it's very important that we deal with some principles as we reorganize the
department, and here are the principles that I wish to share with you.

I'm going to repeat it again: The overarching principle is that the secretary of energy
must be held accountable, responsible, but should have full authority.

The first principle is that it is extremely important that there be clear chains of
command and accountability for implementing national security policy. I've already
undertaken a major reorganization of the headquarters-to-field relationship, which
clarifies reporting lines and responsibilities across the complex.

In my plan, the chain of command is clear and accountability is established for the
nuclear weapons program. The three weapons labs and all of our nuclear weapons
sites and facilities throughout the complex report to the assistant secretary for defense
programs, and we are ready, as I said, to codify many of these changes that have come
from various committees here in the Senate.

Secondly, we must raise and not lower the profile and authority of the nuclear
weapons program to overcome the systemic and long-lived security problems identified
by both the Cox and advisory board reports. In other words, it is important that we
recognize that the national security component of the labs perhaps without question is
the most important, and we must acknowledge that in the bureaucracy.

From my experience, the department needs more engagement from the secretary of
energy and his or her office in the nuclear weapons program.

I agree with Senator Rudman when he says that future secretaries of energy have a
national security background.

I am concerned that fencing off, however, the nation's nuclear weapons program
would blur the cabinet secretary's role.

Third, we should ensure that security and counterintelligence programs have a senior
departmental advocate with no conflicts of interest. The only way to ensure that is to
have a separation between the office responsible for the nuclear weapons program and
the office responsible for establishing and monitoring security and counterintelligence
policies. That's the only way you can assure that security decisions aren't short-changed
and that they're not competing for the time and attention of senior management, as well
as budgetary resources.

Fourth, we must ensure that stockpile stewardship doesn't lose it's link to cutting
edge science. Our ability to ensure the reliability and safety of the nuclear deterrent
depends upon cutting edge science. An autonomous agency would partition the
laboratory system and ultimately undermine the science on which our national security
depends.

A bureaucratic Berlin Wall between the labs and the science labs would hamper the
joint research that they perform and weaken the quality of basic science at the weapons
labs. The nuclear weapons program depends on unclassified, cutting edge science,
active engagement with the other national laboratories in contact with the international
community. And it needs overall scientific excellence to recruit and retrain the best and
brightest scientific minds for the program.

Let me talk about some of the reforms that we have done.

When I went through all the recommendations that the PFIAB proposes, 43 in
number, I found that my new security plan embraces 38 of them. That's almost 90
percent. And we're working to implement and modify our differences on the other 10
percent.

I think that's a lot of common ground on which we can work.

Let me quickly run through some of the reforms we've already put in place.

On counterintelligence. In February of '98, the president ordered that the
department improve its security dramatically and implement innovative, comprehensive
counterintelligence and cyber security plan. By November of last year, I approved the
far-reaching, aggressive new plan improving background checks on visitors, document
controls, use of polygraphs, and increases in our counterintelligence budget, which has
grown by a factor of 15 since '96.

And Senator Shelby, you were right. It should have been implemented right after it
was approved in February.

In March we took additional steps for counterintelligence upgrades, security training
and threat awareness, and focused an additional $8 million on further securing classified
and unclassified computer networks.

And when I was informed of the serious computer transfer issue at Los Alamos, I
ordered a complete standdown of the classified computer systems at our three
weapons labs -- Los Alamos, Livermore and Sandia -- to accelerate computer security
measures already underway. The only -- the systems only went back online when I was
convinced that significant progress had been made.

As of today, we have implemented 85 percent -- I will repeat - 85 percent of the
key recommendations in the counterintelligence action plan.

Let me deal with security.

I came to the Department of Energy after having served 14 years on the House
Energy and Commerce Committee where I came to understand the magnitude of the
security management problems facing the department. Chairman Dingell, and many
other Republican members, had a number of hearings and GAO reports on the subject.

One of the first steps I undertook was to figure out how to untangle the maize of
illogical reporting relationships between the labs, the field offices and headquarters to
clarify chain of command and establish accountability.

If you look at the chart on the right, that was the way the department used to be
organized. It made no sense, there was no security responsibility, there was no security
czar. Each program was responsible for security, including the labs, and this is why
security was not properly attended.

If a program manager had a decision to make -- "Do I spend it on programs or do I
spend it on security?" -- it would be on programs. That reorganization was completed
April 21st. The chart on the left is the reorganization.

On May 11th, we took the next step needed to bring accountability and put some
teeth into the security operation with a farthest reaching security reorganization in the
department's history. We established a new high-level office of security and emergency
operations, gathering all departmental security functions in one place and answering
directly to me.

Last Thursday, retired four-star general, Gene Habiger, accepted the position as the
department's first director of the office of security and emergency operation. General
Habiger brings to this job his experience as the commander in chief of strategic
command where he was in charge of the U.S. nuclear forces.

Members of the committee, General Habiger is on my right, and there's probably no
better person to deal with nuclear weapons. He dealt with them as the number one
official at the Department of Defense. He was one of our nine CINCs, and he is now
my security czar.

As security czar, the general will rebuild the entire department's security, cyber
security and counterterrorism apparatus as well as our emergency response operations.
He will be the single focal point for security policy in ensuring that security is rigorously
implemented across the department complex.

We all know that any organizational structure is only as good as its people. We
should all thank the general for being willing to serve his country one more time, and I
believe that his accepting his job is an endorsement that the office of security and
emergency operations will succeed.

These are some of the measures that we've already undertaken. I believe that these
changes embody the attributes that the Rudman report identifies as critical to meaningful
reform and have already had a dramatic impact on the security of the labs.

But my point here is that more needs to be done, and I'm forward carefully at the
recommendations in the PFIAB report. I've been meeting with various members of this
committee, with members of the House, as we try to sort out what additional steps are
needed, and which of these changes or measures we could codify to ensure that the
changes are institutionalized and last beyond the tenure of any one secretary of energy
or committee chairman.

Let me also say that I think Senator Rudman's recommendation on the office of
intelligence -- that it do more work related to the weapons lab, that it closely link the
department's missions with a national security function -- makes a lot of sense.

I think there is much common ground. I think we can work from that common
ground to build on what has already been accomplished and make even more sweeping
department reforms than the advisory board recommends.

Let me conclude with the need for oversight.

I do have concerns about the creation of the autonomous or semi autonomous
entity, especially if we're trying to solve the security and counterintelligence problems at
the department.

Security and counterintelligence problems cut across all the department's mission,
and are not limited to the weapons labs and production sites.

In other words, I want to improve security at all our complex, and this is why it is
necessary that we be careful about how we deal with this autonomous or
semi-autonomous entity. We need to improve security at all sites, and fencing off the
weapons complex I don't believe is the answer. Plutonium located at our environmental
management sites demands the same level of security as plutonium at Los Alamos. And
classified research at Argonne National Laboratory in Illinois must be as secure from
espionage as classified nuclear information at Livermore National Laboratory. That's
why we need oversight organization and counterintelligence and health and safety and
security that make policy to cover the entire department and that are separate from the
office implementing security.

This is the only -- let me emphasize -- the only effective way for senior department
managers and Congress to get independent information about what is going on within
the department. This is also the exact model the NSA, the NRO, Department of
Defense, CIA, and others use.

The problems that we've had in the past have been directly related to the fact that
there haven't been strong independent organizations who sole mission is
counterintelligence or security. Security and counterintelligence competed against
requirements of the stockpile stewardship program for resources and the time and
attention of senior managers. Security and counterintelligence didn't have the clout to
affect change.

We've taken action to correct the situation with the creation of an independent
office of counterintelligence, security and oversight, reporting directly to me.

It would be a step backward to put these functions under the thumb of the director
whose operations they're supposed to be evaluation.

Let me illustrate one example. Chairman Thompson's Senate Governmental Affairs
Committee is one of the most active oversight committees in Congress, along with its
ranking member, Senator Lieberman. Imagine how Department of Energy oversight
would be hurt if Chairman Thompson and the ranking member were my employees.

RICHARDSON:

I would think that would be great: No hearings, no interviews, no document
requests that I didn't support. But it wouldn't be good oversight, and I think we do
need oversight entities to evaluate everybody, including myself.

Let me conclude by saying that organizational changes alone are not sufficient. The
Rudman report states that, quote, "Even if every aspect of the ongoing structural
reforms is fully implemented, the most powerful guarantor of security at the nation's
weapons labs will not be laws, regulations or management charge. It will be the
attitudes of the behavior of men and women who are responsible for the operation of
the labs each day. These will not change overnight and they are likely to change only in
a different cultural environment, one that values security as a vital and integral part of
day-to-day activities and believes it can co-exist with great science."

And that's an extremely important point. I think the Rudman report should be
required reading for every employee at the Department of Energy and its national labs
and the in the Congress.

I think it is a wakeup call. Last week after reading the report, I ordered all
managers and employees at three nuclear defense national labs -- Los Alamos,
Livermore and Sandia -- to undergo a full-scale security emersion program.

For two days, yesterday and today, the labs are focusing on training so that each
and every employee knows their security responsibilities. In other words, we have
stopped all nuclear weapons activities, computers and operations at the lab to ensure
that many of these security and cyber-security initiatives are implemented.

Change will not occur overnight and our goal here today should be focused on how
we can ensure that the changes will have lasting effect. There's a large patch of
common ground here. We need to work together to find the best way to institutionalize
changes that will ensure that this department provides science and security at its best
for a long time.

Thank you.

MURKOWSKI:

Thank you very much, Secretary Richardson.

In order to accommodate the number of members that we have here -- we have 32
-- I'm going to depart a little bit and call Senator Rudman up for his statement, and then
we will have questions after Senator Rudman's statement to both Secretary Bill
Richardson and Senator Rudman.

So if the seat's warmed up now, Senator Rudman and you can trade -- you could
trade seats. And we welcome you, Senator Rudman. And I trust that the staff will
present a new nameplate to replace that - that's there and that has been done.

Welcome, Warren Rudman. It's nice to have you back. You're living proof that
there is life after the Senate. Please proceed.

RUDMAN:

Thank you very much, Senator Murkowski. Messrs. Chairmen and ranking
members of this distinguished panel, let me first thank you for the invitation to appear
here. I served with many of you here.

I think you know of my affection, esteem and respect for the United States Senate
as a -- just wonderful institution where I spent so many years. And I say very sincerely
it is truly an honor to be asked to appear here today.

MURKOWSKI:

Would you pull the mike up a little closer please?

RUDMAN:

It is truly an honor to have been asked to appear here today and I thank you.

I know there was really enough time to discuss all the issues that are raised in a
report such as ours, but I'd like to make a few introductory comments that will take
about 10 minutes and give you a brief synopsis of the PFIAB report, then move straight
on to questions and answers.

Let me say first that we had one major objective. There is nothing more important
to America's long-term national security interests than security of nuclear secrets.

RUDMAN:

And that security has been atrocious for a long time. Report after report has been
tossed up on the shelf to gather dust.

So our objective was to write a report that would stick, that would actually make a
substantial difference in the way that security at these labs is handled.

I had our staff sit down and add up the number of reports that have found problems
with security at DOE for the past 20 years. The numbers are astounding: 29 reports
from the General Accounting Office; 61 internal DOE reports; and more than a dozen
reports from special task forces and ad hoc panels. Altogether that's more than 100
reports or an average of five critical reports a year for the past two decades. And here
we are, 20 years down the road, still battling with the same issues. I think you would
agree with me that is totally unacceptable.

Even more unacceptable to our panel would be adding this report to that list of
more than 100 reports. We wanted to cut through the fog of the bureaucratic jargon
and wishy-washy language that has worked to protect the status quo over these many
years. So our objective was to take the major security issues one by one, address them
factually, directly, forcefully. I think we did that.

I want to commend my colleagues. It's referred to as the Rudman report. I want to
point out to you, I had three extraordinarily distinguished and experienced people,
several known to you, on this panel.

Dr. Sidney Drell (ph), one of the country's foremost nuclear physicist. Ann Cara
Christie (ph), former deputy director, in fact the first women to be deputy director of
the National Security Agency. And Steven Friedman (ph), who has done a great deal
of intelligence work for this country since leaving his post as co-chairman with
Secretary Rubin of Goldman Sachs. This was for many of us virtually a full-time job for
the last eight weeks.

This was not an easy report to put together. But they and the staff and the adjunct
staff loaned to me by various executive branch agencies put in the hours to get it right,
to make sure it was rock solid, to make sure the facts before you are unimpeachable.
And I want to thank them publicly for that.

I also think President Clinton deserves a great deal of credit. I say that as a
Republican. We had some very tough words for the administration in this report; they
are before you. But he agreed to release it to the public, something that has never been
done before in the entire 45-year history of the PFIAB. And he agreed to put this issue
on the table.

And I must say that when we briefed him last Monday he was very appreciative of
the work that we had done, recognized the seriousness of the issue, and recognized the
importance of getting something done.

There's an old saying around -- amongst New Hampshire, and I expect Maine
farmers, and you've heard it, I'm sure, all over the country, and that is that if it ain't
broke, don't fix it. Well, I have a corollary, and it's simply this: It may be broken so
badly that you can't fix it, you ought to replace it.

This report finds that the Department of Energy is badly broken and it's long past
time for half-measures and patchwork solutions. It's time to fundamentally restructure
the management of the nuclear weapons labs and establish a system that holds people
accountable.

That's what it comes down to. Senator Levin said it very well in his opening
statement. It's not just about security. If you've been ever to these labs, and most of
you have, you'll agree they put up one hell of a fence.

It's not about counterintelligence. It's about whether we are going to have a system
of management that holds each and every person responsible for the security of these
labs.

No president, or no secretary of energy, or no committee chairman can guarantee
that the laws on the books are going to provide absolute security. But when
management of these labs is on our watch, we can and we should demand absolute
accountability.

So that's what this report has proposed -- reasonable alternatives that we think will
help the leadership impress the seriousness of this responsibility on the people within
the organization.

Let me add parenthetically that we do not claim that our proposals are perfect. We
think the Congress must look at these proposals, in conjunction with the secretary of
energy, management experts, and find ways, if they can be improved, to so improve
them.

RUDMAN:

But we gave the Congress two alternatives, which I'm sure you have seen, have
your read our report.

Let me say a word about what we found. We found that these labs are not only the
crown jewels of the United States scientific establishment. They are the crown jewels
of the world scientific establishment.

We visited several of the labs and I can tell you that their work is truly phenomenal.
And I want to be clear that nothing we say in this report is intended as criticism of the
scientific research and development at the laboratories, nor do we want to do anything
to undermine their effectiveness. We want to improve their security, their counter
intelligence and the accountability that allows them to continue to do their job.

We found that maintaining security and strong counterintelligence at the weapons
labs, even under ideal circumstances, is challenging. Part of the difficulty comes from
the inherent character of the work at the weapons labs. First, it's an international
enterprise. Second, it requires collaboration across bureaucratic lines. It involves public
and private cooperation amid a culture of academic freedom and scientific research.

The inherent problems have been made worse over the years because the weapons
labs have been incorporated within a huge bureaucracy that has not made security a
priority until very recently. The department has been distracted by other nation
imperatives, such as the cleanup of radioactive waste and DOE's drive in the -- in the
role of the national drive for the clean and efficient energy, and those priorities are well
important.

We found evidence and we heard testimony that was appalling in six critical areas:
security and counterintelligence, management and planning, physical security, personnel
security, information security, nuclear materials, accounting and foreign visitors.

There has been report after report after report of serious security failings. Here are
a few examples.

Now back in law school, they talk about the weight of the evidence. I'm not sure
this is what they had in mind, but it's pretty heavy.

1986: DOE management and security needs to be improved, done by the DOE.

1988: Major weaknesses in foreign visitor programs at the weapons labs, done by
the GAO.

1993, done by the

DOE:

Lack of accountability for implementing security requirements.

1996, Defense Nuclear Facilities Safety Board: Impediments to resolving problems
are a result of a lack of understanding, experience and personal involvement by upper
echelons of DOE management.

1997, Office of Security Affairs in the

DOE:

Fragmented and dysfunctional security management system in place at DOE.

1999

, DOE:

DOE's bureaucratic complexity is so great that it can conceal otherwise obvious and
easily detected administrative flaws. The variety of relationships that exist between field
offices, headquarters and contractors will continue as a root cause of complexity,
confusion and a lack of efficient and effective performance.

The Chiles report mandated by the Congress, 1999: A thorough revamping to
institute streamlined, efficient management would send a strong signal throughout the
complex that DOE takes its weapons programs seriously and is not willing to tolerate
less than the best approach in its management.

And finally 1999

, GAO:

In the final analysis, security problems reflect a lack of accountability.

Now there are 68 more, but I thought that would give you a flavor. We found
recent cases of foreign scientists visiting labs without proper background checks or
monitoring; classified computer systems and networks with innumerable vulnerabilities;
top-level bureaucrats who could not tell us to whom they were accountable, which I
found remarkable; instances where secure areas were left unsecure for years; and
finally, thousands of employees being granted security clearances without good and
sufficient reason.

RUDMAN:

In the middle of all of this, as you know, there were confirmed cases of espionage
and the true damage of these we may never know.

As you can see from the chart, it shows how long it took to fix even some of the
very basic security problems. Some of the evidence that we found simply boggles the
mind. There's a chart called "How long does it take?" It was meant to introduce a bit of
humor into the report.

But you either laugh or you cry when you read that box, which is contained within
the reports that you have in front of you. I mean, how can it be it took less than three
years for this country to construct the first atomic bomb at Los Alamos, but it took, in
the last several years, four years for someone to fix a lock on a door protecting nuclear
secrets? I mean, it's just -- it's pathetic.

There is not a person in this room, and I would add there's not a person at DOE,
who when confronted with that kind of a record would say it's tolerable. It's not. It's
intolerable. In fact, it's a disgrace to this country.

If that is the case, then why have these things been allowed to go on and on after
years? There's got to be an explanation.

DOE has had so many overlapping and competing lines of authority that people are
rarely held accountable for failure. I expect under Secretary Richardson, that's going to
change. But in the past we haven't found too much evidence of it.

Just to give you an example, I want you to look at a chart that I brought, and I'd like
you to look at the poster on the right. Now, with all due respect to current
reorganizations, that's the most recent chart we could find, the one on the right, when
we started this investigation. Obviously the secretary is making some major changes,
but that is the accountability that existed until very recently - there was no
accountability.

If anyone in this room can make sense out of that structure, he ought to be a brain
surgeon, not a member of Congress. There is no way to figure out who's accountable
to whom on that particular chart.

Several secretaries have tried some type of reform at one time or another, and there
were attempts to try to improve management effectiveness and accountability. But
within the confines of the DOE bureaucracy, the problem is that the DOE bureaucrats
and lab employees who wish to have been able to wait out the reform initiatives and
then revert to form.

Because of the overwhelming weight of damning evidence of security failures and
the profound responsibility that comes with the stewardship of nuclear weapons
technology, it's time to fundamentally restructure in some way the lines of authority so
that the weapons labs and their security are in fact job number one within a
substantially, in our view, semiautonomous agency.

Even in the current uproar over the Cox committee report and related events,
PFIAB found as late as last week business as usual at some level at the labs. For
example, there has been, in spite of the secretary's best efforts, incomplete
implementation of certain computer security measures and we believe foot dragging on
implementation of a good polygraph program. You need only read some of the press
reports of yesterday in response to the secretary's efforts.

If the current scandal plus the best efforts of Bill Richardson are not enough, only a
fundamental and lasting restructuring will be sufficient. And I would agree it is up to the
Congress to decide what that restructuring is. It should be done carefully and it should
be a measured approach.

We believe the Congress and the president have an opportunity to do what none of
their predecessors have done: step up to the plate, make lasting reform by
fundamentally restructuring this part of DOE. We offer two alternatives, one
semiautonomous.

And let me simply say to those who have problems with semiautonomous agencies,
they were not invented by the PFIAB. I would suggest you talk to the secretary of
defense about NSA, the National Security Agency, or about DARPA, the Defense
Department's Advanced Research Projects Agency, extraordinarily good agencies
within a department but with a lot of autonomy, but reporting directly to the secretary
of defense.

Or, for those of you who are familiar with NOAA, it is an independent agency
within the Department of Commerce. It reports to the secretary of commerce and it's
worked and it's worked well over a long period of time.

If you want to look at a good independent agency, I would give you NASA.

RUDMAN:

But we believe that for reasons to some extent Senator Bingaman mentioned, we
believe that it should be within DOE but semiautonomous because of the important
linkage of science.

And I would commend to Senator Bingaman when he reads our report to see that
we have linked science very much to this organization. We think it is of extraordinary
importance.

I want to add something which I was asked to add which I believe is very important
to the department of the Navy and to our nuclear propulsion program. We called for
the integration of the DOE Office of Naval Reactors into the new agency for nuclear
stewardship.

We recommend this because we believe that the ANS should be the repository for
all defense-related activities at the DOE. However, we believe the Office of Naval
Reactors must retain its current structure and legal authority under which its director is a
dual-hatted official, both a four-star admiral and a part of DOE. And I believe the
secretary would I'm sure agree with that.

Someone asked me if a merely a coincidence that the PFIAB's panel
recommendations for a semiautonomous agency was similar to those proposed by
some in Congress. Now foremost I will state unequivocally and for the record there
was no collaboration with the Congress on our findings or our recommendations.

Second, I would remind people that we did not endorse a single solution. We
sketched two alternatives.

Finally, none of the conclusions that we reached or alternatives that we considered
frankly are new. You'll find many of them in these previous reports.

After looking at the 100 or so of these critical reports, and I'm sure the members of
Congress who did the Kyl-Domenici legislation, looked at the same things, my
conclusion is that the reason you reached similar conclusion was a matter of destiny not
coincidence. You were destined to reach this conclusion looking at the same evidence.

In 1976, federal officials studied the operation of the weapons labs and considered
three possible solutions: placing the labs under the Department of Defense, making
them a free-standing agency, or leaving them within the Energy Research and
Development Administration. They opted for the status quo.

In 1979, an internal management audit of DOE found that its top management was
poorly organized, its planning was spotty and its field structure was not integrated into
headquarters staff.

When asked who was in charge of the field offices, the then secretary of energy at
the time said, he would have to consult an organizational chart. So did we.

One employee said the DOE was about as well organized as the Titanic in the 11th
hour. Now this is from current employees who came and unburdened themselves as to
the problems they've had within the agency.

In fact the best information we got came from employees of the agency. I would
highly recommend to you, although I know it's impossible, you get so much more in
closed hearings than you do at open hearings.

Obviously the Senate can't do that except the Intelligence Committee, but the
frankness with which some of these employees spoked to us -- and it's all documented
-- was startling. It was startling.

In 1985, the Reagan administration appointed a blue ribbon panel to study this,
Congress and federal officials waited. Some people said give it to the Department of
Defense, others said leave it where it is, status quo prevailed.

In 1995, the former chairman of Motorola issued the Galvin (ph) report. Here's
what he said, quote, "It's hard to reach any other conclusion than that the current
system of governance of these laboratories is broken and should be replaced with a
bold alternative." That report recommended an alternative structure that achieves
greater independence, but the status quo prevailed.

Finally in 1997, the Congress, the Armed Services Committee authorized, the
Appropriation Committee paid for this IDA report which I imagine some of you may
have seen. It's a terrific piece of work done by a very respected agency. It was ignored
by everybody - Republicans, Democrats, Congress, DOE, everybody.

I'm almost done.

Every time a president or energy secretary or Congress have run up against these
bureaucrats, the bureaucrats have won.

RUDMAN:

They are fully aware of that fact, and if you let them, they'll win again.

It reminds me of what current, fairly high ranking DOE official told our panel just a
few weeks ago. He said that the attitude of the people deep inside the bureaucracy is,
"we be." And I said, "we be?" What does that mean? And he said, their attitude
towards the leadership is, we be here when you came and we be here when you're
gone, so we don't have to take you very seriously. That's arrogance.

That's the type of arrogance that I'm sure the secretary abhors, but it does enable
bureaucrats in that agency to ignore direct orders from their highest authority in the
executive branch -- the president of the United States. When PDD-61 was issued, long
before Secretary Richardson arrived there, the answer was not "yes, sir" or even "yes."
It was "maybe." And we've documented that from participants in the discussions.

I've yet to meet a general who believed he could win a war with soldiers who won't
obey orders and are not punished for failure to do their duty.

Let me just say a few words about the secretary. I have a very high regard for
Secretary Richardson. I think he has been working very hard to carry out his duty. I
would like to commend the secretary for bringing both Ed Curran and General Habiger
in to address the problems at the labs. They have impeccable credentials. They have
no-nonsense approach to their jobs, and they will get things done.

But as good as Ed Curran and General Habiger are, they cannot make up for the
culture of arrogance, the pervasive disregard for security and counterintelligence and
the lack of accountability in this department. The problem is, Mr. Chairman and
members of this committee, that my good friend the secretary will probably be gone
from DOE in about 18 months. And it's not clear to anyone whether or not his
successor will allow these two outstanding public servants to remain indefinitely.

In fact, if you want to look at history, you will assume that everybody will be
replaced at the upper levels. Maybe not this time.

Most of the events that precipitated this uproar occurred before Secretary
Richardson arrived. Because he has been at the tip of the sword, so to speak, I would
say it's fair to say he's been sensitized to these security problems and he's worked very
hard to solve them. But one thing is certain -- the next secretary will have different
priorities and be pulled in different directions by other emergencies. That's the way
government works.

Secretary Watkins, for example, had excellent credentials on security issues. But
when he became energy secretary, he was besieged by the public outcry over the
handling of environmental issues. Congress as well diverted its attention and addressed
these issues, and rightly so. Unfortunately, the reality of it -- and I can speak from
someone who sat where you sit now -- is that the entire body politic in this country
lately has become a lot like a fire department. You respond to the latest emergency.

I said on television on Sunday morning had the New York Times not broken this
story all over the front page, I dare say you would not be here, I would not be here,
and this report never would have been written. That's a sad commentary on how we
oversee some of the nation's critical problems. I don't say it critically, I say it as a
matter of my own opinion.

Finally, I hope that you in this Congress, the president and the secretary can work
together. The PFIAB has no interest in this other than as individual citizens. We will
help, but we have no constituency or authority. If we can contribute to a solution, we
would like to.

Nothing about this is politically easy. There are jobs at stake in our plan, and it's
hard for people who have so much vested in the existing system to admit that it doesn't
work. Witness the letter that Senator Kerrey spoke of this morning.

But I do hope that the Congress and the president can reach an accord. This is a
matter of tremendous gravity for our national security. And I think everyone will agree
this is not a partisan issue in any way, shape or matter. I believe that solving these
security and counterintelligence problems within DOE will ultimately help the
department to better address its many other important missions.

RUDMAN:

Again, I am honored that you would ask me to come up here and testify. Thank you
very much.

MURKOWSKI:

Thank you very much, Senator Rudman.

What I'd like to do now is adjust the podium a little bit to accommodate Secretary
Richardson. We have another mike that I believe is working.

From the standpoint of accommodating the 32 senators that are here on questions, I
would suggest that we limit ourselves to one question to each the secretary or Senator
Rudman. In that way, you can prioritize your questions if you have -- want to address
two questions to the same person, well, that's your option as well.

Well, I'm going to keep this open until I believe that we're going to have to break
this at 12:30 at the latest.

UNKNOWN:

So maybe three minutes a piece?

MURKOWSKI:

Yes, but I would suggest two questions, if you will, because....

First, before I call on Senator Bingaman, my first question is to Senator Rudman.

And I think we've certainly identified that we have a crisis, and the crisis suggests,
Senator Rudman, action. And on the other hand, the action should be intelligent, it
should be well thought out and it should be based on an evaluation of past experiences.

Now you brought up several reports. I think you indicated probably been 100 in the
last 20 years.

What I'm concerned with here is that there -- in the interest of doing it right, there's
going to be more and more consideration given by members of the Senate to study this
thing a little bit more, to get some more experts in, and your parting thoughts on the
bureaucracy overwhelming us all is very real, because we've all seen it happen time and
time again.

How do you suggest that we meet our obligation to ensure that any legislative fix to
structure accountability is done in a thorough manner without getting into this trap that's
very easy for us to fall in --"Well, we've got to get some more experts, we've got to
study it some more" -- and as a consequence we don't get the action, we don't make
the decision and we don't face up to the crisis?

RUDMAN:

I'll answer that briefly. I believe you have before you now really the tools and the
report you need to reach those conclusions.

You have to reach, it seems to me, one fundamental decision, because there is not a
lot of difference right now from what -- from what the secretary is proposed -- and we
met last evening -- and what was in our report.

The question is, should it be semiautonomous. I am very tough on that issue. I think
it has to be. However, semi-autonomy does not in any way jeopardize the control that
the secretary will have. I think if you put it as the secretary's most recent organizational
chart shows, you have the possibility in the future of future secretaries changing the way
things are, moving around the deck chairs, if you will, and having no opportunity
whatsoever to keep in place something that was thoughtfully adopted.

Now, I told the secretary last evening -- and I will tell the panel -- I think that you
ought to decide first what you want to do. You want to be -- you want to have a
departmental reorganization embodied by a statute or do you want it semiautonomous?
Once you decide that, it seems to me that there are enough knowledgeable staff and
senators and members of the House that can sit down and put it in the format it's in.

The secretary's got some problems with some of the boxes we showed on the staff.
I don't have a problem with that.

He thinks the IG ought to be one IG. He's probably right about that.

But the key is the semiautonomous agency and this language, which I would just like
to read to you, which seems to me answers some of the major questions. And I suggest
you talk to Secretary of Defense Cohen and the secretary of commerce to see how
their agencies work within their departments.

It simply says: Notwithstanding any other provision of this act, the director of the
agency for nuclear stewardship, who shall also serve as an undersecretary of energy,
shall report directly to and be responsible directly to the secretary of energy who shall
be the director's immediate superior, which is exactly the way it works at Defense with
NSA, DARPA, at Commerce with NOAA. So that would be my answer.

MURKOWSKI:

Thank you very much.

Secretary Richardson, I have only one question, and it's relative to the legislation
that Senator Kyl, Senator Domenici and I intend to offer as an amendment to the
intelligence authorization bill to put into law the recommendations of the Rudman
report.

And specifically, would you recommend that the president support this amendment
if it is adopted or do you have some specific recommendations you want us to consider
and include?

And I believe you're familiar with our amended amendment, which almost verbatim
takes the Rudman language, and we've attempted to work it out with your staff
collectively.

RICHARDSON:

Senator, we haven't seen that language. But I do think, as Senator Rudman said,
we're not that far apart. I think we have to be very careful in the next few days.

And by the way, I, while I think you need to consult experts and you need to
consult the secretary of defense and others, I think we should move hastily and correct
this problem now with legislative, codified language.

I'd be prepared, and I think we would be prepared, to accept the concept of an
undersecretary for nuclear stewardship that would have authority, that would have clear
lines of responsibility, that would have accountability.

I think, as Senator Rudman mentioned, I have a problem with one entity in my
department having its own general counsel, its own controller, its own congressional
affairs. I would oppose that because that undermines my authority and any future
secretary of defense's authority.

I would want to discuss further the reporting of the security czar and the
counterintelligence director. I think they should report to me directly. On
counterintelligence, that's what the PDD mandated. I believe we have a good plan with
Ed Curran; it's being implemented. I think the FBI director agrees with me there that
this individual should have total access to me directly. I meet him almost once a week.
There's a lot of ongoing counterintelligence issues that we need to follow up, that we
need to implement.

And then, as I said, Senator, there's 70 percent of the department that we haven't
taken care of that also involves security issues: nuclear materials, Rocky Flats
plutonium, Los Alamos plutonium, science labs. There are scientists from sensitive
countries that go to the science labs. We need to deal with those security problems.

So, what I would want as the security czar, somebody like General Habiger, to
have that authority to report to me, to have an entity under him that gives him clout and
responsibility.

So I don't think we're that far apart. We're talking about legislative tinkering. But I
think since we're going to be codifying and we're going to be putting this permanently
into law, we've got to be very careful.

And, again, I appreciate the senators drafting that language. I think that's paramount
that the secretary be held accountable but have full authority. Otherwise there's no
sense in having a secretary without control over his or her programs.

MURKOWSKI:

Thank you very much.

Let me just advise you then that Senator Domenici, Senator Kyl and myself
welcome the input of your department on any specific recommendations you'd like
included, because we are going to move this language to the floor very shortly. And I
do want to obviously have your support because without it, why we're going down the
beach like a couple of crabs, and that's not in the best interests of mutually our
objectives.

DOMENICI:

Mr. Chairman, Mr. Chairman...

MURKOWSKI:

Is that -- you ever watched a crab go down the beach?

(LAUGHTER)

Yes, Senator Domenici.

DOMENICI:

Mr. Chairman, let me just say to the senators, you know, we drafted this legislation
without the benefit of this report. He's just explained the coincidence, why they're kind
of close. But it is not identical. And so we're redrafting it, he has a draft of it now, and
trying to make it much like his report.

But I believe we should add to this that it should be distributed to fellow senators
soon for their participation and their input. And I'm willing to do that, as the one that's
principal architect of the change.

UNIDENTIFIED SENATOR:

Can we get copies of the draft...

MURKOWSKI:

Well, the problem is trying to clear this with the four specific committees of
jurisdiction here.

But we're working on it. It'll be done before the end of the day.

DOMENICI:

Senator, we have a draft. Spent all night trying to make sure it had what he wants in
it. He has a copy. If the sponsors want to circulate the draft, fine. I thought we'd get his
quick comments, then we'd circulate it.

MURKOWSKI:

All right.

But in the meantime let's move on with the questions because we're going to try to
include each person five minutes and we're going to have to really move.

Senator Rudman.

RUDMAN:

Senator Murkowski, I think I could, you know, just say one thing here that might
clear this up a bit as to where we all are so you'll know exactly. Do you have -- do you
all have our report?

MURKOWSKI:

Yes.

RUDMAN:

On page 50, I think, 3 of our report is that chart which...

MURKOWSKI:

That's it.

RUDMAN:

Am I correct, staff, is it page 50? Page 50 or 51, either one.

Here's the disagreement, which is very simple for you to address, it may not be
simple to resolve. Secretary is saying that I would like to have an undersecretary there,
but I don't want a separate agency.

MURKOWSKI:

All right.

RUDMAN:

The PFIAB board is saying we think it's important to have an agency or
administration for the future for a lot of reasons to make sure that none of the other
parts of DOE are able to reach in when they shouldn't be.

However, the secretary makes another comment. If you look to the right of that
agency, it says staff offices. And his point is that he doesn't think that the general
counsel, the inspector general, possibly others in that box ought to be totally
independent, they ought to be arms of his -- secretary's office.

We don't have a problem with that kind of change in organization. So the real
difference we have is to whether or not this is going to be a semiautonomous agency,
and we strongly think it should be.

MURKOWSKI:

Thank you very much. This is page 50 you're referring to...

RUDMAN:

Correct.

MURKOWSKI:

... on that report.

RUDMAN:

Correct.

MURKOWSKI:

Let's try and move on and accommodate the senators. And I would appreciate your
answers being as brief as possible but yet complete.

Senator Bingaman.

BINGAMAN:

Thank you both very much. Senator Rudman, thank you for your good work as
always.

MURKOWSKI:

I'm going to time the light, so be...

BINGAMAN:

Let me ask about -- let me tell you a concern I got about your recommendation. I
hear people talk about the science labs as distinct from the weapons labs, and that
makes me nervous. And I hear you talk about how we don't want other parts of DOE
reaching into these areas that are covered by this semiautonomous agency, and that
makes me nervous, because the only reason that these weapons labs are world class is
because they do a lot of science other than nuclear weapons work.

And I am not interested in signing on to some kind of reorganization that makes it
more difficult for them to do non-weapons work in those labs. I don't want it to be
more difficult for someone else, an undersecretary for science in the Department of
Energy, to have work done in the three weapons labs, to have it more difficult to do it
there than it is to do it at Argonne or somewhere else.

What's your answer to that? How do you solve that problem and still do what
you're recommending?

RUDMAN:

Senator Bingaman, I evidently have not communicated too well, because let me tell
you, if you think you've got to worry about that, you should hear Dr. Sidney Drell
(PH), a member of this panel on this subject.

BINGAMAN:

Frankly, I was amazed that he signed on to the report.

RUDMAN:

Well...

BINGAMAN:

Because of that concern.

RUDMAN:

Well, you shouldn't have a concern. Let me point two things out to you. We are
very aware of that. In fact, we spent time at Los Alamos, at Sandia, at Livermore. We
understand precisely what you're talking about.

Let me refer you, first, to page 47 of the report in which we say at the very end, and
I will not read the whole paragraph, we talk about exactly the issue you're speaking
about. And then we say: "In the semiautonomous model, the secretary will be
responsible for managing and ensuring the effectiveness of the agency relations with the
non-weapons labs."

We merge the science in. In our chart we show a direct line for that reason. Here is
the assistant secretary for science and energy resources, a direct line here.

The problem now is that you've literally accountable directly to both and we believe
that's part of the problem. When you take the 18 -- 18 -- layers of management
bureaucracy in that department at this time and you take each of those and keep sifting
up, and now you multiply it by two or three people to who you're accountable, so the
science people have something to say, the weapons people have something to say, they
both should have something to say, but through one accountable official who is this
deputy we put here.

Dr. Drell (ph), and he's going to testify before the Armed Services Committee this
week, is very comfortable with this organization. And that is the main reason, I will tell
you, Senator Bingaman, that we recommend you don't make this an independent
agency. If you ever made it an independent agency, like NASA, although we gave you
the model, then your concern would be absolutely legitimate.

We believe that we have taken care of that issue. We don't want the science people
to have any opportunity to in fact interfere with how these places are run, but they have
every bit of accessibility that the secretary wishes to give them.

BINGAMAN:

Let me also ask about, under your proposal one of the more important issues that
Secretary Richardson has to deal with is control of fissile material, fissile nuclear
material. You have plutonium at some sites. I think Secretary Richardson's referred to
this a couple of times this morning. He's got plutonium at Rocky Flats. There's
plutonium at Pantex. These are not facilities that would be under this semiautonomous
agency that you're proposing.

RUDMAN:

Pantex would, sir...

BINGAMAN:

Oh, Pantex would be under that?

RUDMAN:

It's Los Alamos, Livermore, Sandia, Pantex, Kansas City, and Oak Ridge Y-12
facility.

BINGAMAN:

Well, who would be responsible for defense programs plutonium at Rocky Flats?

RUDMAN:

That would remain within the department as it is now, but not to this particular
secretary. Secretary Richardson would have that reporting however he wished it to
report.

By the way, one of those is closing, and I think, what is it, Savannah or Rocky Flats
that...

BINGAMAN:

Could we ask Secretary Richardson?

RUDMAN:

The secretary can tell you who would run that, but they -- we would have it
separate, not contained in here.

BINGAMAN:

How do you understand this situation, Secretary Richardson?

RICHARDSON:

Well, Senator, this is what gives me concern. We're setting up a superstructure for
defense programs, but we're not adequately dealing with security for Rocky Flats,
plutonium, fissile materials, and many other sites. And that's the concern that I have.

What I have done with the security czar, with General Habiger, is have him in
charge of the whole complex. Environmental management, which is the Rocky Flats
type of plutonium, this is a budget, it's close to $7 billion, it's huge. It's a lot of security
problems, if you look at these GAO reports, if you look at reports that your
committees have done, we also have security problems at these sites. And I in a way
am going further than what Senator Rudman wants to do in the nuclear weapons
complex. I think that we have an endemic security problem in the whole complex.

Now, let me also say that I am prepared in the nuclear -- in the undersecretary of
nuclear stewardship to create some type of a structure that gives this entity strength, but
I worry about making it so separate from the rest of the department in dealing with
many of these security issues and in dealing with the science.

When you go to Los Alamos, right now to the weapons complex, they're doing
biology, they're doing life sciences, they're doing physics. And I don't want that part of
our cutting-edge science, which also contributes to nuclear weapons, to be hurt by a
separation.

So I don't think we're that far apart, but the details here in how we have legislative
language are going to be crucial.

MURKOWSKI:

If I could encourage that we move on in timely answers. Are you basically finished?

Senator Warner.

WARNER:

Thank you, Mr. Chairman.

MURKOWSKI:

Senator Warner will be followed by Senator Levin.

WARNER:

This dispute is like all others in the history of America: We find the Congress and
executive branch sort of locked in disapproval as to what should be done.

WARNER:

And then the president made a wise decision. And that is, he brought in your
organization, Senator Rudman, the PFIAB. First time any president has done that in 50
years. And I think it represents in my judgment a gutsy decision by the president. I
don't think he fully realized how well we knew you and the great respect that we
repose in you, Senator Rudman, to do things fairly, objectively, forthrightly. And that
you've done.

My question to you is, we're still witnessing today a dispute between the Congress
and the executive branch as to how to redraw this. The engine on the Senate side will
likely be the Domenici et al bill, which we do not have before us. My question then is,
will you ask the president to allow your organization to examine that piece of legislation
and issue another report to us? It would seem to me that it would be helpful, because
you have provided much of the bridging to get where we are today so that the two
witnesses can say, well, we're almost 90 percent in agreement.

RUDMAN:

Well, I'm not sure after this report anybody wants another one out of us, but...

(LAUGHTER)

I certainly will say this, that we'd be pleased to give your our view on whether your
legislation meets the criteria that we set forth.

WARNER:

All right. Then that's satisfactory. It doesn't have to be a formal report.

Can you tell us exactly what the president did say and when did he say it with
regard to your report?

RUDMAN:

Well...

WARNER:

There was some press coverage to the effect that he wanted to accept it at face
value.

RUDMAN:

Well, Senator Warner, having been a very distinguished former secretary of the
Navy, you know how people don't repeat things that presidents tell them. But I guess I
can characterize. It was not a good time. The president wanted a briefing last Monday
because he heard we were going to bring it out on Thursday and was leaving for
overseas and has been very interested in the issues. So we briefed him last Monday,
and he listened very intently and made some comments that indicated to me that he was
very aware of the extent of the problem and what we were saying and thanked us a
great deal and then immediately took a call from Boris Yeltsin. So, I think he didn't
have much time to tell us what he thought. Thereafter he left, and I haven't talked to
him, as he just got back, I guess, or will be back today.

I do know that within the White House those who have talked to us who have these
responsibilities like the report.

WARNER:

Now, you also said your concern was that 18 months from now or whatever period
of time, it's likely to be a whole new team, and we could slide back to this culture
which has dominated for so many years -- a lack of accountability.

We included in the Armed Services language the commission concept: for someone
to have oversight through the years. As a matter of fact, I put that legislation in several
years ago, and it was adopted by the Senate but rejected by the administration, and
most specifically, the Department of Energy killed it. I wonder where we'd be today
had that been accepted.

But are you prepared to continue to recommend in future legislation some continuing
objective body that will oversee the implementation of such legislation as the Congress
enacts?

RUDMAN:

Senator Warner, if you will again look at our charts on page 50, you will note out to
the left of the Agency for Nuclear Stewardship...

WARNER:

I'm aware of that.

RUDMAN:

... that is your legislation, and that is why we put it there, because we think that's a
very good idea. The problem in the past has been, and the secretary I know would
agree with this, is that there have been outside, independent boards but they haven't
met very often. And they have not been effective. The important thing is to make it
small, put people on who really care about the issue and make sure they do their work.

WARNER:

So that will guarantee the oversight?

RUDMAN:

Absolutely.

WARNER:

Lastly, on that chart, I do not see the University of California, yet they are the
overall manager. They are paid a fairly handsome fee. You talked about accountability.
To what extent did they have accountability with this problem? To what extent did they
ever try -- and I ask this question to both of you -- to exercise through that
management contract the responsibility that was necessary?

RUDMAN:

Well, of course, the responsibility for counterintelligence is federal responsibility.
The responsibility for security is a shared responsibility between the federal government
and its contractor. Our report applies equally to them as it does to the DOE
bureaucracy in terms of we thought a poor job of discharging their responsibilities and
in some cases resisting efforts that -- honest efforts by the department...

WARNER:

They were a part of the resistance also in your judgment?

RUDMAN:

No question about it.

WARNER:

Should they be continued in that role, then?

RUDMAN:

Well, I will leave that up to the secretary. That's going to be a tough call. The
University of California at, I believe at Los Alamos and at Livermore, Lockheed Martin
at Sandia, if I'm correct, you know, have done some extraordinarily good work.
They've also -- there were things done that could have been done better, but not in the
scientific area, but in the security and CI areas. So, that's a question, Senator Warner,
that I don't think I'm equipped to answer.

WARNER:

All right.

RUDMAN:

I think the secretary's probably equipped to answer that.

WARNER:

Let the secretary answer. That'll conclude my question.

RICHARDSON:

Senator Warner, first of all...

WARNER:

What was their responsibility as the overall manager? And did they exercise it? And
do they have some accountability?

RICHARDSON:

The answer is yes, they have accountability. Yes, they do better -- they need to do
better. Yes, they are right now undertaking an evaluation of their own about their
responsibilities.

Senator Warner, I want to just say to you, I am ready to accept your independent
oversight board. I regret it wasn't accepted by previous secretaries. I'm ready to take it
lock, stock and barrel. In addition, I am ready within the department to have a
permanent staff of independent oversight. And this was recommendation made in one
of the old, dusted reports.

I've brought an entity into the department. They're all doing - they're already doing
reports that are independent, and I think that that independent oversight needs to be
maintained.

On the University of California, Senator, let me just say that these are universities
we have a lot -- that do a lot of nonprofit managing of the board. Overall, the
University of California right now is doing a good job in managing the labs. They're part
of the change in culture that I've mandated to better do security at the labs. They're
doing a lot better.

Now in terms of the future contract, I make that decision, and I have a policy of as
much as possible competing every contract. I think that's better for the taxpayer. It'll be
the same in the future when we deal with the University of California.

Now, I haven't made that decision yet whether we compete or not. But a lot of the
performance relating to security is also our contractors. But right now, Senator, the
University of California with the changes that we're making, the upgrades, they are
cooperating. They are working with us. And I want to state that on the record.

MURKOWSKI:

Let me call on Senator Levin. Again, I'm going to watch that -- those lights. Senator
Levin.

LEVIN:

Mr. Chairman, thank you. Secretary Richardson made reference this morning to a
large patch of common ground, and I think it's a very good description, and I think it's
actually grown right in front of our eyes. I think the patch is larger now than it was
actually a couple hours ago, and I want to just ask you each a question about that.

What the Rudman panel report recommended was that we eliminate some of this
bureaucratic complexity, the vagueness, the lack of accountability, and basically that we
create a new undersecretary and that that undersecretary would have the responsibility
for weapons programs and defense-related functions underneath that undersecretary,
underneath that one person, in order to achieve greater responsibility and
accountability. That person, of course, would still be under the secretary. But
nonetheless, it would be a new position with those functions underneath it.

I think the secretary, Secretary Richardson, has basically agreed to that approach. I
think that we started with that kind of agreement. We must move in that direction. And
that means reducing the impact and the involvement of field offices as well, because
they very clearly diffuse the responsibility and the accountability here.

On page 50 -- but the secretary raised a question this morning, Senator Rudman,
and it had to do with this. He said he's got to be the person ultimately responsible, he
the secretary. He's got to be accountable for security. And in order for that to happen,
the new security czar and the new counterintelligence director should be accountable
directly to him and reportable directly to him rather than to create a second box in
effect as would be proposed on page 50 of your report.

You indicated, I believe, and I want to clarify this, that that change in your
recommendation would be or might be acceptable to you -- to make that function
directly accountable to the secretary so that we can hold the secretary accountable, we
can hold the secretary responsible if there's a lack of security anywhere in his
department. And I'm wondering whether or not that is accurate. Did I hear you
correctly on that?

RUDMAN:

Not completely, but close. And by the way, whether it's acceptable to me really
isn't very important...

LEVIN:

I understand.

RUDMAN:

... it's whether it's acceptable to all of you.

LEVIN:

I would modify my question. What's your reaction to that?

RUDMAN:

I gave up my vote here voluntarily, Senator Levin.

(LAUGHTER)

If you look at the Agency for Nuclear Stewardship that you're referring to on page
50, there are two essential disagreements here, and only two. And maybe
one-and-a-half. I would say that you've got to call it whatever you want to call it, it
ought to be an administration or an agency, something that is directly reportable to the
secretary and only to the secretary. And I want to tell you that after a long and tough
debate, we looked at Secretary Richardson's idea. Obviously, we didn't know it was
his idea at the time, but one of the possibilities was to organize it the way he's
reorganized it with an undersecretary. But we elected now -- there's been so much
over the years, we want to give this agency status. We thought it would help. All right.
So, that's one disagreement.

Number two. In these staff offices over on the right, you'll note that we have a
whole bunch of things listed there, and I said that a number of them certainly could go
the way the secretary wants them to go. It's a tough question for you to answer, and
the secretary's going to have to help you answer it. At the bottom there's
counterintelligence policy and security policy. The secretary says to you, they have to
report to me. I mean, I need them to report to me, because I need to have
accountability over those folks.

Here's my question that you'll have to get an answer to at some point, and you'll
have to think about it: I would agree on security, which is what General Habiger is now
going to do, that it probably ought to report to him, because security is a very wide
responsibility covering all of the department. Don't disagree with that. Certainly the
general could have a deputy sitting down in this box with this agency at the direction of
the secretary. Counterintelligence, however, is a wholly different thing.

LEVIN:

All right. Could we...

RUDMAN:

I don't think that there's any counterintelligence concerns of a major nature, and I,
you know, am familiar with the subject, other than in the weapons laboratories.

LEVIN:

Before my time runs out, then that's the one narrow difference in that whole box...

RUDMAN:

Right.

LEVIN:

... and we're narrowing them significantly.

Mr. Secretary, on that one issue, why is it important if we're going to hold you
responsible for intelligence failures that that person report to you rather than reporting
to that new person that the Rudman panel is recommending? Or is it?

That's to you. My last question, my second question, to you, Mr. Secretary.

RICHARDSON:

Well, I think we are getting closer, but nonetheless, I think it's essential in any
government structure that you keep counterintelligence and security separate. Now, this
is the way it's done at DOD, at the National Security Agency, the National
Reconnaissance Office. I think that's good practice.

Now, my concern is that this PDD-61, which I think is working well, which this
committee did a lot to -- these four committees - did a lot to push forward and fund the
program, this is Ed Curran's office. Right now we have quadrupled the intelligence
budget. He is doing the background checks. He is implementing 85 percent of the
counterintelligence plan. To all of a sudden put Curran now under an undersecretary,
that means he doesn't report to me anymore. And I do think it makes sense to keep
that CDD structure -- the PDD structure of the president's -- directly reporting to me.
This is what I think the FBI director wants.

Our counterintelligence program affects all of our labs, our five labs. We have
counterintelligence people at our other labs. And to all of a sudden subordinate a
science lab counterintelligence program to a weapons undersecretary I don't think is the
way to go.

RICHARDSON:

This would not diminish what I think Senator Rudman wants to do and that is to
give the weapons complex a priority, bureaucratic strength, a higher hierarchy, and it
would because there isn't an undersecretary in another area.

But again I think for good practices, you want to keep security and
counterintelligence policies separate, but I am pleased that Senator Rudman has seen
that the security component, General Habiger, at least would report directly to me.

MURKOWSKI:

Thank you very much. Senator Thompson.

THOMPSON:

Thank you very much. Senator Rudman, welcome, good to see you again, my
friend. Thank you for your work.

Many of us have been concerned about the standard that the Justice Department
may be applying in issuing the FISA warrants. Certainly with regard to recent events,
it's been very controversial.

Many of has had -- been in closed hearings with regard to that. Think we have a
much better understanding of that. And we've heard the probable cause that was set
forth to the Justice Department.

Many of us believe that there was more than adequate probable cause, especially in
light of the fact that we were dealing with national security matters, and the standard
with which the full Congress had it was that law.

But that warrant was turned down for what I believe to be pretty much traditionally
criminal law kind of green eye shade kind of reasons. I was wondering if your people
had an opportunity to look into that, to what extent you got into that, to what extent
you might have an opinion with regard to that?

RUDMAN:

Senator Thompson, if you'll look at page 31 of the report, you will find indeed we
spent a good time on that issue because we thought that was one of the most baffling
issues that we confronted: The president's charge to us to look at the security issue
generally.

We in fact talked to the current director of OPAR (ph) and talked to the people
from the FBI who had made the original presentation. We have essentially said that we
think both the Congress and the attorney general ought to ask a number of questions
and those questions you'll find on page 31.

Let me give you I think a view that most -- I would say the panel shared. That the
interpretation of the law by OPAR (ph) may be overly strict. Now they would argue in
fairness to them that there are constitutional issues of privacy which you understand
very keenly because of your prior life.

These issues of privacy...

THOMPSON:

They're always there when you're talking about a search warrant.

RUDMAN:

...are extraordinarily important under the Constitution, but the Congress made an
effort to lower that bar for these national security issues and still pass constitutional
mustard.

So there is a very serious question in our mind as to whether or not that's being
administered properly, whether or not they have not administratively raised the bar
higher than the Congress wanted it raised. So I say to the Congress in this report -- we
say, you ought to look at that issue. That's very important.

The second part of that, and I've discussed with Director Freeh, I think is very
important. And in the course of either your committee or the Judiciary Committee's
inquiry, you're going to find out something very interesting which I cannot discuss here
in open session. And that is the character of the information and the completeness of
the information presented by the FBI to the OPAR (ph) (ph) at the time that the
application was made.

I would submit to you that it was not as complete as it could have been. That has
something to do with the separation of the Los Alamos office from headquarters and
probably not the right kind of information technology to transfer things electronically
between those places back at the time when this happened.

And I will only say, without getting involved in something I shouldn't in an open
session, that some of the evidence was about eight to 10 years old, but had that
evidence been presented to OPAR (ph) I think you might have a different result.

There were also serious questions concerning a computer security and the right that
they really had to look at some of these things even without some of the constitutional
requirements being a problem. So my answer is, I guess, yes and yes.

THOMPSON:

A lot of miscommunications. Real quickly, Mr. Secretary, you state in your
organizational plan that your goal is to have the appropriate labs report to the
appropriate secretary of defense -- weapons lab, assistant secretary of defense;
science labs, assistant secretary for energy research. I was wondering with regard to
Oak Ridge, as you know there are really three different missions down there, and I
believe your chart has Y12 reporting to the assistant secretary for energy research>, is
that -- is that what you seek to do? And should they not in fact be reporting to the
assistant secretary of defense?

RICHARDSON:

Senator, they, as you well know since you are - this is your entity, we have a
defense mission that does support under my reorganization to defense programs -- the
assistant secretary of defense program, and this case an undersecretary.

But there is also a science component in the complex that I believe needs to report
to the assistant secretary for science.

RICHARDSON:

And we have this throughout our weapons complex of reporting requirements to
two entities. I think if you have three or four, that's a problem. But you will agree that
the main component, the defense component, is now very clearly with defense
programs. It wasn't before. It was all scattered on the -- well, those aren't my charts --
but it was all scattered in previous reporting, but now it is very clear it is a defense
program.

THOMPSON:

We'll have a chance to talk about this some more. Thank you very much.

MURKOWSKI:

Bob Kerrey.

UNKNOWN:

(OFF-MIKE) Senator Kerrey.

UNKNOWN:

I understand the confusion.

UNKNOWN:

I'm not confused, but go ahead anyhow.

LIEBERMAN:

Well, I just want to point out for the record that I'm Chairman Thompson's ranking
member. We all look alike down this side of the table, though.

(LAUGHTER)

UNKNOWN:

(OFF-MIKE)

LIEBERMAN:

I thank Secretary Richardson and Senator Rudman for their testimony and their
work.

I want to talk to you a little bit about the so-called "culture of the labs." You point
out in your report, Senator Rudman, it's hard to get a clear definition of culture at the
labs, but everybody agrees it's distinct, it's pervasive and it has an effect on the problem
we're talking about.

And you used some pretty harsh language to describe the attitude there, the
bureaucratic culture: "cynicism," "disregard for authority," cavalier attitude towards
security," "bureaucratic insolence." And at one point in the report you say that "one
facet of the culture may be arrogance born of the simple fact that nuclear researchers
specialize in one of the world's most advanced challenging and esoteric fields of
knowledge."

So my conclusion from all this -- and from what you've said, Secretary Richardson
-- is not that you're saying that these labs are, if you'll allow me, "dens of spies." These
are -- these are labs of independent, bright people who bridle at regulations, but in
doing so, have made themselves very vulnerable to espionage, and if that's at the root,
or part of the problem, along with the bureaucratic maze in DOE that you talk about
and the fact that very few people at DOE suffer for failure.

My question is, how do various alternatives for reform that we've talked about and
we've focused on here, as we naturally would at this point --
autonomous/semi-autonomous agency, who reports to the secretary, who doesn't --
how do those various alternatives hold a higher or a lower probability of altering this
culture? Or have all the revelations of the last several months had an effect on the folks
there, and do they now get it? Do they now understand that perhaps not intentionally
they have made themselves vulnerable to espionage that goes to the core of their work
and to our national security?

Senator Rudman.

RUDMAN:

Is that for me?

LIEBERMAN:

Yes.

RUDMAN:

That's a terrific question and for which, you know, I don't necessarily have a terrific
answer. This is very tough to do.

But if you know you have that kind of a culture -- let me define the culture so we all
know what we're talking about. You defined it pretty accurately, but let me just kind of
make an example.

You know, if you talk about the culture in the United States <Marine> Corps or to
refer to your colleague-on-your-left's former occupation, the culture of Navy SEALS,
it's probably a little different from the culture of the people who cut checks at the
Pentagon.

LIEBERMAN:

Right.

RUDMAN:

Probably a little different culture. The culture within these laboratories are of
extraordinarily talented people who believe in academic freedom, who care about this
nation, who are patriotic, who don't knowingly or willingly give away secrets unless
they're obviously in the employ of a foreign power, but they do not have the same
mindset as the people they have going through training at Fort Benning...

LIEBERMAN:

Right.

RUDMAN:

...in terms of discipline.

So here's what we say. We say that we know that you're not going to change that
-- that culture. You probably can't change some of the arrogance that comes with the
certain knowledge that you're probably smarter than anybody else and you're probably
right.

So, what do you do? What you do is you put in place a system of accountability
with excellent counterintelligence and excellence security that you're in a position to
detect if anybody's getting off the reservation, A; and, B, you make every effort to
imbue people with the view that what they're doing is not only, you know, very
important and it should be discussed with their colleagues, but it must be protected at
all costs.

I don't think that's been done. And I think that the secretary would probably agree
with that statement.

LIEBERMAN:

And can you argue that one or another of the recommendations for reform here --
semi-autonomous/autonomous -- is more likely to alter that culture?

RUDMAN:

Well, I think autonomous is virtually off the table.

LIEBERMAN:

OK.

RUDMAN:

I think we're now talking about a semi-autonomous agency, as I hear the debate up
here -- which is what we've recommended -- or the secretary's proposal for a
reorganization with an undersecretary without a semi-autonomous agency.

Let me respond this way to be -- you know, to be totally honest with you. I think
the one thing the semi-autonomous agency gets you that his proposal doesn't is that
people know in the future, when the new secretary comes in, this is an entity essentially
with it's own name. Although it's responsible to the secretary, it has these
responsibilities, nobody else in that bureaucracy ought to muck around it -- unless the
secretary directs them to. I think that's a great advantage in the area of accountability --
culture and all of those things.

LIEBERMAN:

Secretary Richardson.

RICHARDSON:

Senator, the labs are getting it. They are...

LIEBERMAN:

They're getting it.

RICHARDSON:

...at this moment undertaking a security standdown, the second one I've ordered. In
other words, all lab operations stop to make sure our security is 100 percent. It will
end this afternoon. This is the second standdown we've done.

Lab officials are cooperating. They've recognized the problem.

Lab employees -- yes, in the past, the labs resisted many of these
counterintelligence reforms. But one of the problems is secretaries did not give policy
direction to the labs. And I am going to say to you here, the labs -- the labs report to
the secretary of energy, and I am their boss, and they will get more oversight and
direction from me than previous secretaries have.

Some of these reforms they haven't liked, but that doesn't mean they're not
implementing them. They operate on academic/scientific freedom, but I can tell you that
they're cooperating. We have counterintelligence operations at each of the labs. Ed
Curran's people are at each of the labs. We're enforcing accountability.

One of the problems is they weren't getting direction from Washington and
secretaries of energy. We have zero-tolerance policy, we're upgrading security across
the board. We still have a ways to go, but these are men and women that are patriotic,
that are hard working, and they've been tainted unfairly by one or two individuals that
have abused the system.

But overall they are cooperating extensively with these reforms and these upgrades.

LIEBERMAN:

Thank you.

MURKOWSKI:

Senator Shelby.

SHELBY:

Thank you, Mr. Chairman.

Senator Rudman, your report suggests that Secretary Richardson may have
overstated the case when he said, and I'll quote Secretary Richardson when he said,
"Americans can be reassured our nation's nuclear secrets are today safe and secure."

Senator Rudman, are our nuclear secrets safe today? Are our labs safe today? And
if now, why not?

RUDMAN:

They are not safe today because -- in fairness to Secretary Richardson, we've had
some discussions about this. I think that statement was made, but the secretary has
since made a number of other statements that -- in his defense and in fairness to the
secretary, that is not his current feeling, I know.

I think that the secretary would agree with me that what has been done so far is
certainly a major step in reform, but we have a long way to go. And no matter how far
you go, there is no way to guarantee against espionage. After all, we lost the atomic
bomb at Los Alamos. We lost the trigger to the hydrogen at Los Alamos. And who
knows what else we've lost at Los Alamos.

So no matter how good you are, you're still going to have failures. But, you know,
certainly that is not to say you shouldn't try very hard to have as few as possible.

SHELBY:

Secretary Richardson, with respect to the order governing foreign visitors, can you
tell us today what the outlines of the revised order will be and what are the obstacles
here and why is it taking so long?

RICHARDSON:

Well, Senator, we have implemented an extensive foreign visitors program reform. I
can tell you right now that we do 100 percent -- in other words, every foreign scientist
from a sensitive country -- the Russias, Chinas, Indias, Pakistan, et cetera -- have
background checks performed on them now. That means extensive contacts where
these individuals have with intelligence agencies, we have, under my security plan,
created a separate office of foreign visitors. Under the security czar, Mr. Curran, who
is here, is implementing a very vigorous program which I believe is -- is done. The
order -- are you talking about the signing of the...?

SHELBY:

That's right. What -- the order governing foreign visitors. What's the outline of the
revised order. I understand there's a revised order.

RICHARDSON:

OK. Well, it's going to be done next week.

SHELBY:

OK.

RICHARDSON:

We're already implementing these reforms.

SHELBY:

OK. What are the obstacles that you envision that will be here?

RICHARDSON:

Well...

SHELBY:

Structural resistance?

RICHARDSON:

There is -- there is limited resistance. Some of the labs want to be sure, Senator,
that they are not penalized and scientific interchange is not harmed.

Our science, we don't want it to suffer. We want to balance security,
counterintelligence and our science. Now if we have to choose, we have decided to
choose on the side of security because of the problems.

But what they want to be assured of is that, for instance, the Russian program,
which is essential to our security, many senators have worked on this -- Bingaman,
Domenici -- to make sure that scientists do not -- from Russia -- do not go to other
countries, that we talk to them about nuclear safety, nuclear nonproliferation issues, that
we find ways that we talk to the Indians and Pakistanis about nonproliferation.

So you don't want to send a message -- and there is one provision in the House law
but not in the Senate that has a two-month moratorium on foreign scientist exchange. I
think that's not a good idea, because if you get people out for two months, you wonder
whether they will come back.

We don't want the security measures that we are taking to have a chilling effect on
the scientific exchange that helps our security that is essential to our labs.

I think your legislation in the intelligence committee is a good balance. But going
beyond that is not what I think we should do.

SHELBY:

Do you think, as Senator Kerrey has suggested in this language, that the net
assessment, which will come back, is very, very important to what's going on at the
labs?

RICHARDSON:

Yes, absolutely. I think that net assessment is key.

SHELBY:

Thank you, Mr. Chairman.

MURKOWSKI:

Thank you very much. Senator Kerrey. You got it right this time?

KERREY:

Yes, sir. First of all, I'm so glad that the culture of the Senate doesn't produce
insolent and arrogant behavior...

(LAUGHTER)

...or we'd all be in trouble.

First of all, it seems to me that we're now down to drafting differences, and I hope
that we can get a process of drafting language that at least most of us can support. And
the concerns that I have, and looking now to sponsors of the amendment, is, I do think
that the counterintelligence function needs to report directly to the secretary, and I think
we have to be very careful -- and I know Senator Warner understands this very well --
is that you don't give whoever the secretary of energy is the responsibility for all this
and then deny that individual the authority necessary to implement the policy.

So we have to make certain that we match that responsibility with the authority
needed to execute the mission. But it seems that we're very close.

And I hope that in the drafting of it that we'll give due consideration to the 11
changes in the law that are proposed in the defense authorization bill, including the very
important Section 3152, which is the commission that Senator Warner was referencing
earlier. That's a new commission and I think it will add significantly to national security.
And with that in place, I think it does change as well the context that we're now
discussing for further reorganization.

Senator Rudman, I would like to pursue a line of inquiry with you and perhaps just a
question and you can respond.

After the walk-in delivered the documents to the Central Intelligence Agency, as
reported in the press, an investigation was launched. And, again, by all public accounts
that investigation very quickly and continues to focus on a single individual, an
employee at Los Alamos.

And I know that you've got a great deal of experience in prosecution and a great
deal of experience in sort of beginning a case and trying to decide how to proceed.
And I wonder, both for the sake of this joint committee, as well as the Congress, if you
could give us your own evaluation of how this investigation was done and how you
would have done it differently.

RUDMAN:

Well, Senator Kerrey, I'll try to be very brief because I know we're running out of
time.

On page 30 and 31, you know, we address this issue in our report.

This is an open session, but let me choose my words carefully.

As anyone on this panel who's ever done any criminal investigating knows, when a
crime is committed, you look immediately for people who have motive and who have
opportunity.

In this case, for reasons that mystify me, all of the attention was focused on a single
individual who may or may not be guilty.

RUDMAN:

Whether that person is guilty or not is really not the important question to me. The
important question to me, from an investigative point of view at the beginning of this, is
why did the responsible parts of our government charged that job ignore many others
who had opportunity and then decide whether or not they had motive.

I did not think that our federal law enforcement agencies covered themselves with
glory in this investigation. I say that, Senator Kerrey, as someone who has been a
long-time admirer of the FBI. I think they generally do an extraordinary job.

I think in this particular case that between the energy folks who looked at this and
the FBI, they all came to a very rapid conclusion that they had their suspect and we
don't know to this day whether or not there are not others who are complicit in this.

KERREY:

Well, Senator Rudman, to follow you are in a very unique position to assist this
Congress in answering the question, what do we do from here? You've been a member
of the Senate. You've been a member of the Senate Intelligence Committee. You're a
former prosecutor. You are now chairman of the PFIAB. And I would ask you if you
would be willing to take the time in writing to answer the question, what would you
think it would be appropriate for Congress to do at this stage in the game?

Where do we go from here, is the question that I would put to you? Not just in this
particular case, but there will be CI cases that we're going to have to pursue and I
would appreciate any written instruction or advice that you could provide us.

RUDMAN:

I'll be pleased to. I would refer the committee to the questions on page 31 and then
the list of questions of page 34 which we posed for not only the committee and the
appropriate committees, but frankly for the attorney general, the director of the FBI.
So - but I will be happy to do that, Senator.

KERREY:

And I would request that you use the same animated and expressive language that
you used in addressing Mr. Trulock's concerns with your recommendations.

RUDMAN:

We will endeavor to do that.

MURKOWSKI:

Thank you very much, Senator Kerrey. Next, according to the order of
appearance, is Senator Hutchinson followed by Senator Robb. HUTCHINSON:
Thank you, Mr. Chairman and I want to thank Senator Rudman for the service that
he's done our country in this report, and join my colleagues in praising your efforts and
thanking you for the alarm bells that you have sounded for this committee and for the
Congress and for the nation.

Now as I -- as I listened to your testimony today and as I read the report, the
phrase "pervasive disregard for security" reappeared and the phrase "culture of
arrogance" which we have heard repeatedly. And you -- and which you have
described very clear examples of that "culture of arrogance."

Now there are those who have -- this "culture of arrogance," as it's been described
and as you pointed out, has survived over 100 reports and numerous efforts at reform.
And there are those who counsel that we ought not act rationally. I think sometimes
saying don't rationally is another way of saying don't act quickly. And I'm afraid if we
don't act quickly and decisively that in fact the lights will go off, the television cameras
will focus elsewhere and the national alarm that is now seen and evidenced across the
country will wane. And again the bureaucracy will win and national security will lose
and there will, I think you used the phrase, be a reversion to form and the status quo
will prevail. That's my great concern.

Now during the testimony today, Secretary Richardson and yourself, Senator
Rudman, heard particularly Secretary Richardson say that a -- repeatedly the phrase,
not that far about and that we're very close and that there's an agreement with 80
percent, 90 percent, 95 percent.

And I think it -- Senator Levin a few minutes ago that said that the patch of
commonality is growing even during the last two hours. Well this is all very optimistic,
but -- and I hope that is the case, but it seemed to me that there is still yet one very
fundamental difference and that's over this issue of whether such an envisioned agency
should be semiautonomous or not.

And you have I think addressed, Senator Rudman, a number of the concerns in the
fact that it would be still be accountability to the secretary and that he would be in
control of his -- I agree with your very strong conviction that should be
semiautonomous.

Now my question for Secretary Richardson is simply this. I think you were asked
earlier what would be your recommendation to the president. But if the Congress -- if
this Congress should pass a reorganization bill that takes the Rudman recommendations
and makes this semiautonomous and you in fact agree with 95, 99 percent of that bill
and what it does, but you disagree with that provision dealing with the semiautonomous
provision, the undersecretary, would you recommend in that situation that the president
sign the legislation?

RICHARDSON:

Senator, you know I hate to answer it this way, but the devil is in the details. And I
say this because I want to engage in a constructive effort to see if we can get to 100
percent agreement. I worry about future secretaries of energy. What if the next
secretary of energy happens to be weak and an undersecretary is extremely strong?
You have -- what you don't want is a blurring of the lines of authority. What you don't
want is to create an empire that you later can't control.

What you want to do is separate. You have to be clear about making sure that
science is not separated, that it be part of the cutting edge of the nuclear weapons
component. I don't think we're that far apart and I want to work with this committee.

My hope, Senator, is I know you're on several of these relevant committees that,
through legislative language, we can agree on a consensus amendment. That is my hope
and I'd prefer to give you that positive answer rather than talk about the five percent
difference.

If the five difference, if I feel it undermines my authority, then I'd have difficulty. It
depends on how you -- I think we should just try to reach a consensus.

HUTCHINSON:

One other point, and I know my time's about up, but Mr. Secretary, you've
expressed concerns about the proposal, if I understood correctly, that while the
weapons labs would be addressed that there were pervasive security problems in other
areas that would not be adequately addressed. Am I expressing that correct?

Is -- would there any -- is there anything though in the Rudman recommendations
that would preclude you from addressing those other security problems administratively
or internally as you would otherwise, while the Congress moves ahead legislatively to
assure that this weapons labs are in fact secure?

RICHARDSON:

I don't think the Rudman report precludes me, but what I would like to do, Senator,
is since we're codifying a lot of these changes, I would like the codification to be
comprehensive so that we deal with the entire problem.

And what we are addressing today is about 35 percent of the problem, a very
serious and substantial 35 percent because it's our national security. And I would like,
since we're moving towards reform, to address the entire security reform issue at the
department.

HUTCHINSON:

Well that's all fine and well, but I would like to see that 35 percent that deals with
national security done and done quickly. Thank you very much for your testimony.
Thank you, Mr. Chairman.

MURKOWSKI:

Thank you very much. Senator Robb is not here. Senator Campbell and Senator
Bryan are not here. Senator Domenici is here. Senator Domenici.

DOMENICI:

Thank you very much, Mr. Chairman. I have two charts which are blown up --
blow ups from the Rudman report and I'd like just to talk to you all a minute about that.

First let me read two things and then let me -- let me suggest that we have a serious
problem that we can only solve by either creating a independent agents -- an
independent entity that runs nuclear weapons, which I'm against, or that we find a way
to create within the department a autonomous agency.

Now let me just read first. While your report is perhaps the best ever, this hearing
and various proposals remind me of what the Galvin (ph) report said and let me just
read it, one paragraph.

"DOE has become bloated after 25 years of operation because each new set of
government actors has added more governance to the department in the name of
adding value. Each energy secretary and staff person responsible for interpreting these
directives has protected himself or herself by adding even more. Micromanagement and
excessive auditing have become ingrained practice."

Now Secretary Richardson is not doing what this says previous secretaries do, but I
submit that you cannot fix this problem and leave the department essentially like it is in
terms of authority over nuclear weapons activity.

Now this is an experience that I have had. For example, one example of
bureaucracy and I will tell you how it works and why you must fix it. For example two
years ago, we discovered an earthquake fault under a building at Los Alamos.

It turns out that if such an earthquake occurs, and I don't even want to state the
amount of radiation that would be -- that would be dissipated, but it would be a very
significant and dangerous situation.

But it turns out that because it takes so many reviews -- legal, environmental, safety,
programmatic -- it takes four years for DOE to decide to replace the building. In fact,
DOE just yesterday said it will take two more years to make that decision.

Once the decision is made, it will take two more years to design the building and
four more years to build it. Now those who manage the nuclear weapons system of the
United States under the current structure and the structure for the last 15 or 20 years
are met with this kind of problem every time they turn around.

The point we are missing today, and my friend, Senator Rudman, you might not
have even explained it too wall today. As you look at that chart on the left which is the
current structure of the Department of Energy -- and I might tell you that even that is a
streamline version, Chairman Rudman, of what is real.

Now the point you got to understand is that we don't have rules and regulations that
run horizontal -- no excuse me, that run vertical. They run horizontal. They cross the
department. So you see all those boxes operate across the whole department.

Standing in the middle is nuclear weapons development which is subject to the
entire matrix of rules and regulations because they run this way instead of this way. And
unless we find a way now to isolate nuclear weapons development from that maze of
bureaucracy that runs horizontal, thus across everything they do -- it isn't as if it applies
to once piece of what they do, but everything they do.

So that this statement that I read has probably -- they have probably cleared this
with horizontal management schemes that may be sixfold in terms of responsibility as
they determine what to do about a building that's on an earthquake fault that has
significant radiation in it.

Now that's the reason, Mr. Secretary, as I compliment you and you've done a great
job and I do think we're going to work together, we will accomplish nothing in my
opinion if we create some new bureaucracy and some new stopover points, as
powerful as they are, if we leave the horizontal bureaucracy that runs across the
department if we leave there effective against nuclear weapons and its entire array of
activities.

Now I would almost say, and this is very close from my standpoint to being
irreligious, but I believe if we miss the point again of doing what the Galvin (ph) report
said, what the report you mentioned awhile ago, Senator, came from the
Appropriations Subcommittee, you mentioned the department of -- that came from
IDA.

RUDMAN:

DOD.

DOMENICI:

Yes IDA came out of the subcommittee in frustration because people wanted more
field offices and we said could we get a study and we already have too many. That's
what the study said.

So all of these reports are suggesting not where security ought to be -- we can fix
that. If the secretary wants part of security under him, fine, but the point is we got to
change so that the Department of Energy's role in nuclear weapons is not subject to
every rule and regulation in the department which grew up over 25 years. Now that's
the real issue.

And frankly, I am as concerned as my friend, Senator Bingaman, about the
laboratories being flexible. As a matter of fact, you will not believe, while we sit here
and discuss flexibility and doing other work beyond nuclear, you will not believe what
I've been through in my life when members of the House have even tried to take away
certain research at the laboratories because it wasn't close enough related to nuclear
weapons.

I shared those with you when you were here, Senator Rudman, to which we
answered we got to leave the flexibility in because if there are good biologists there
because they studied Hiroshima, what's wrong with them working on the genome
project. You see that's the kind of thing we are doing now.

If I thought we were going to eliminate that or tie a rope around it, I would be here
saying throw out the Rudman report, but I cannot imagine that that's going to happen.
In fact it's just a matter of trying to get -- trying to make sure you've organized it where
they can get it.

Now I want to close by saying to Secretary Richardson, you are not one of the
those secretaries that has been timid and unconcerned, but you and I know some who
were, and there are many since Ronald Reagan's era including one or two of his, that
even if they would have tried, they could not do what you're doing because they did not
have either the concern or the skills.

And that's what worries me. You might very well handle this great, but I think we
need a structure in place the minimizes the interference with the nuclear weapons
activity, including security and we need to do it by way of statute law.

So that even a weak secretary will not be reigning over a department that doesn't
know what in the world they're doing. So I don't know that I have any questions other
than perhaps to ask you, Mr. Rudman, do you agree with my analysis?

RUDMAN:

I think that's a very good statement, Senator Domenici.

(LAUGHTER)

DOMENICI:

And Secretary Richardson, if you -- if you understand why I think some kind of
autonomous agency must be created.

DOMENICI:

That's precisely why I think the weapons system is subject to overregulation,
overburden, and that yields all of this fuzziness that the Rudman report has indicated.

RICHARDSON:

Senator, I think there's nobody that knows these labs better than you and Senator
Bingaman that represent the most of any members of this Congress. And I know
exactly what you're saying, and I think codification to ensure security and better
effectiveness of the nuclear weapons component is necessary, and I agree with you.

The only area that I want to work with you on, which means we have a slight
disagreement, is in the area of oversight. I don't think anybody is perfect. I'm not
perfect. This committee's not perfect. I don't think the nuclear weapons complex is
perfect. I would like to have junkyard dog types within my department, independent
entity, to be able to go into Los Alamos and Sandia and Livermore and say, you're not
doing this right. And it may be in the areas of safety and health. I'll look into that
five-year, four-year problem. And I agree it's excessive.

DOMENICI:

I'm not asking you to look into it. We're looking into it. Things are getting done.

RICHARDSON:

OK.

DOMENICI:

I'm just telling you, they can't avoid it. They can't do it any quicker because of the
way...

RICHARDSON:

We can merge some of these differences. I just don't think you should create a
complex that has no ability to be scrutinized. That's what I worry about.

RUDMAN:

Yes. If I can just simply say, you know, if you look at this report carefully -- and
there is a disagreement here. I mean, you know, yes, we're very close. But, you know,
it reminds me a little bit of the fellow who said, you know, the girl I want to marry,
we're making progress. She says she's down to, you know, only two possible answers.

(LAUGHTER)

Bottom line is that we firmly, unequivocally believe with all of our regard for the
secretary and the people he's brought in, that an autonomous -- semi-autonomous
agency responsible to the secretary with input from the science department through the
secretary, that's what we recommend. We think if you don't do that you're going to
miss a golden opportunity.

And when this secretary is off doing something else 18 months from now and his
successor decides that he's got somebody better than General Habiger, who probably
won't be, and better than Mr. Curran, who obviously won't be, and brings them in
because that's his political right to do, who knows where we go? We're back where
we begin.

Let us codify it like the NSA, like NASA, like any of these agencies and give full
authority to the secretary and at least feel secure that if there is a weak secretary -- I
would pick up the secretary in his point -- that weak secretary may well be thankful
that he's got a strong undersecretary to run these laboratories. Nothing DOE does --
nothing -- comes close to the responsibilities they have with these weapons and for the
environmental clean-up that these weapon productions cause.

So, we may be close. We're not very close at all if this ends up in some other form.
But obviously that's your choice, not ours.

MURKOWSKI:

Thank you. I think we're out of time, gentlemen. Our next -- let's see. We've got
two left here? Senator Akaka and Senator Ihofe. Senator Inhofe was here prior to
Senator Akaka. Please proceed, Senator Inhofe.

INHOFE:

Thank you, Mr. Chairman. And returning to my previous role as a skunk at the
family picnic, while I've enjoyed this love in, I think we're not talking about some of the
real tough things we need to talk about.

First I want to say that I'd echo everything that Senator Warner, Senator Domenici
and others have said about Secretary Richardson. Richardson, Secretary Richardson
and I served together in the House. I hold him in very high regard.

I think he's had a very difficult role to play. I have characterized his role when I was
with him on television as the curator of the White House spin, which is, well, this has
always happened before, other administrations, and we're going to get to the bottom of
this, and there's enough blame to go around. And it's a difficult position to be in.

So, as a result of that, we end up talking about, you know, what happened, when
did it happen, how do you keep it from happening again? When I believe in my own
heart that it happened because of things that President Clinton and this administration
have done. Now I'm going to ask the question of both of you, and when I ask the
question, I'm not asking you accept my premises, those things in which I believe. But if
what I say is true or not true, if we should have a president in the future who has done
what I believe this president has done, I'd like to ask you what we could put in place
that would preclude it from happening again.

Number one, the four premises. Number one, that it's not so important as to when it
happened as to when it was discovered.

INHOFE:

Of the 17 compromises -- and I have them all listed here, and I will defend these if
anyone wants to challenge them -- 16 of the 17 were discovered since 1994. That was
during this administration.

Number two, many of them actually took place -- and I will just read a few of them.
The transfer of the so-called -- this all happened during the Clinton administration -- the
transfer of the so called legacy codes containing data on 50 years of U.S. nuclear
weapons development, including over 1,000 nuclear tests; the sale and diversion to
military purposes of hundreds of high performance computers, enabling China to
enhance its development of nuclear weapons, ballistic missiles and advanced military
aviation equipment; the compromise of nuclear warhead simulation technology,
enhancing China's ability to perfect miniature nuclear warheads without actually testing;
the compromise of advanced electromagnetic weapons technology useful in the
development of anti-<satellite> and anti-missile systems. All these happened, were
during the administration.

The transfer of missile nose cone technology, enabling China to substantially
improve the reliability of its intercontinental ballistic missiles. The compromise of
space-based <radar> technology, giving China the ability to detect our previously
undetectable submerged submarines. And of course we know about many others,
including the transfer of the missile guidance technology that allows China to
substantially improve the accuracy of its missiles.

Now, the third premise on which I've come to my conclusion is that this
administration has relaxed the safeguards that were in place by previous
administrations, Democrat and Republican. It was during this administration in 1993
that they removed all the color-coded security badges that had been used for years at
the energy weapons labs and claimed that they were discriminatory. It was during this
administration that career whistleblowers at the Department of Energy who tried to
warn of serious security breaches, people like Notra Trulock and Ed McCollum (ph),
were thwarted for years by Clinton political appointees who refused to let them brief
Congress and others about what they knew.

In the W-88 investigation, this administration turned down four requests for
wiretaps. I don't know when that's been done in the past. This administration put a hold
on doing FBI background checks for lab workers and visitors, an action which helped
to dramatically increase the number of people going to the labs who would previously
have not been able to have access.

And I'm running out of time. So -- and then lastly, that the president knew of the
security breaches and concealed them from Congress.

Now, as I said, whether or not you agree with these four conclusions that I believe
I've come to from incontrovertible evidence, I would like to have you at least say
hypothetically if 10 years from now we should elect a president who would be guilty of
the type of behavior that I believe this president has been guilty of, what could we
possibly put in place that would keep the same thing from happening?

Secretary Rudman? Or Senator Rudman?

RUDMAN:

I don't think it's only a question of who the president is, I think it's a question of who
the secretary is, there's a question of who the leadership is in the Congress. Quite
frankly, Senator Inhofe, I think you all deserve some blame, all of you who had
anything to do with this. You've had hundreds of pounds of evidence to act on and you
haven't acted on it. I mean, I hate to say that to my former colleagues.

But, you know, I'm going to be fair about this. The president we criticize in this
report for acting too slowly and not taking it seriously enough. Congress had all these
reports what they showed you about it. I mean, you've got a cast of thousands up here
in terms of staff. I used to enjoy that once myself. They could have done something.
Nothing happened.

So my answer to your question is, you all -- presidents, secretaries, senators in
leadership positions, ought to pay a lot of attention. Now, there's a good track record.
A lot of people have tried, but nobody took them very seriously. So I don't think this is
a question of the president or the secretary or the Congress or the leadership. It's
everybody.

Let me say one last thing, the saddest thing of all. Were it not for the media, who,
you know, we all who are in public life like to criticize and kick around, had it not been
for the New York Times breaking this story, we wouldn't be here.

And Ed Curran wouldn't be on board and General Habiger wouldn't be on board,
and you wouldn't get new legislation, which tells you something about the fact that
independent oversight within the Congress probably could be improved, if you want my
honest answer.

RUDMAN:

It could have been improved when I was here, and I'm sure I could improve my
own performance. I mean, we, collectively, could do better, I think that's what I'm
saying.

INHOFE:

Thank you.

MURKOWSKI:

But would all these still be working?

RUDMAN:

I would doubt it.

(LAUGHTER)

MURKOWSKI:

Senator Akaka.

AKAKA:

Thank you very much, Mr. Chairman. I'm certainly happy to have Senator Rudman
back again, and Secretary Richardson.

Just to follow up on the conversation that was held.

Now Senator Rudman, in your report you state that in National Security Berger's
briefing by DOE in April 1996, and I quote, "was insufficient for him to initiate a broad
presidential directive." Could you elaborate on that for me?

RUDMAN:

Yes, I'll be happy to in the time we have.

We went through document by document and recollection by recollection the
contents of that briefing. Of course recollection is imperfect three years later, but
people did the best they could. Our sense was that the briefing in '96 did not raise it to
a level that alarm bells would have gone off and said, "Hey, we've to a real problem on
our hands."

When the next briefing came along, we thought that it was more than enough to
achieve that. We thought the administration should have moved a lot more rapidly at
that point, and we've said so.

AKAKA:

I was very interested in your comments and to the point of saying, "We've tried hard
but there's still more to go. We can take of all of the security problems that we have."
And it seems as though we have been concentrating on the Energy department and also
on particular labs, and yet we know that there are about 20 labs that do work that is of
security to our country.

And pertaining to your feeling of not having answers to all of the problems, I just
wonder about maybe moving in another direction that's not necessarily in your report.

And the other part that was interesting to me was on your page 31, you mention
that key technical information concerning these kinds of information has been available
to numerous U.S. government and military entities since at least 1983 and could have
come from many organizations other than the weapons labs.

RUDMAN:

That is correct, Senator.

AKAKA:

Yes. So we have private contractors out there as well to deal with, when we think
of security. So it's really huge. And you're right, that we don't have all the answers.

So I want to focus in a little different direction to the issue of peaceful cooperation
on nuclear power.

And Senator Rudman, are there any security concerns relating to international
cooperation on the peaceful uses of nuclear power? Should we be concerned, for
example, about the American nuclear industry helping China's nuclear power program?

RUDMAN:

Senator, you know, that is a little bit beyond what we looked at, but I will tell you
that it is my view that the Department of Energy and its counterintelligence force must
be extraordinarily mindful of any technology that is shared with any potentially hostile
power that could be in any way helpful to a program for the production of
weapons-grade material.

To that extent, I think the department does have a responsibility. And I think under
the so-called Nunn-Lugar legislation passed here a number of years ago, that
responsibility continues to exist.

AKAKA:

Senator Rudman, your report mentions that Chinese intelligence has become, and I
quote, "very proficient in the art of seemingly innocuous elicitations of information,"
unquote. Does this mean that you believe we should cut off all contacts by our
weapons scientists with the Chinese scientists? Should we end these contacts between
these scientists, having to do with national weapons labs?

RUDMAN:

No, senator, we did not say that. We didn't say that at all. What we said was that
the sophisticated nature of Chinese collection of intelligence is such that you have to be
very clever and very mindful of their techniques, and you have to have different
programs in force. But I am confident that in Mr. Curran, the department has someone
who knows how to deal with that.

We are not suggesting for a moment that you cut off discussions. Let me say this:
There probably are some areas of discussion that probably ought not to go on. And the
question is: How do you deal with that? That's a whole separate issue.

AKAKA:

Thank you very much for your comments. My time is up. Thank you, Mr.
Chairman.

MURKOWSKI:

Thank you very much, Senator Akaka. I have one other member who's on his way
down -- Senator Kyl. And I believe he'll be here shortly.

Let me ask you, Mr. Secretary, in view of the likelihood that we'll take up the
intelligence authorization tomorrow, and we have pretty much given you the language of
our proposed amendment, and we still have this question of semi-autonomous issue,
and a division which is, I think, not grown further apart, but come closer as a
consequence of time and the opportunity to hear from both you and Senator Rudman.
It's important that we try and come together in the time remaining. Are we going to lose
another opportunity? To lose that opportunity may mean different things to different
people, but I think we're all in agreement that we have a crisis here. We need to take
some definitive action. We need a legislative fix.

Now, can you give us some direction on how you propose to communicate
collectively with those of us who are offering the amendment, and your staff, so that we
can attempt to, you know, identify just how close we can come, recognizing that we
have an opportunity tomorrow.

RICHARDSON:

Senator, I ...

MURKOWSKI:

Mr. Secretary?

RICHARDSON:

... I would propose that our staffs meet, along with members of the minority and
majority to see if we can merge our difference. I am hopeful, but again I want to be
sure that what we're doing, since this will -- might be the law that carries the day, that it
is something that we can support.

Now on the House side, which we have to -- Senator Rudman and I have to go
shortly -- we've got other problems. It's quite a bit of concern, especially on my ...

MURKOWSKI:

I'd like to keep our two bodies separate from the standpoint of trying to get
something done.

RICHARDSON:

Well, I agree, but they have to concur, too.

MURKOWSKI:

I understand, but ...

RICHARDSON:

So I just want to be ...

MURKOWSKI:

I don't want to try and satisfy both from here.

RICHARDSON:

... right. I want to be cooperative. I hope we can reach agreement, but I think what
I've laid out has been very clear. I think several senators have agreed we've come
closer, but again we need to see the details. We need to see your amendment. We
haven't seen it.

MURKOWSKI:

Well, I'm under the assumption that you've had an opportunity to certainly
understand that it's patterned pretty much directly after Senator Rudman's report, so I
mean you have the view. And you've also isolated, I think, the difference on the issue of
the semi-autonomous vis-a-vis your concern relative to the role of the Secretary of the
Interior. We feel the secretary should have obviously accountability, but I think we
need to codify this.

And I guess what I'm telling you, Mr. Secretary, is that we intend to proceed. And
we'd like to have you with us so we could have a bipartisan response. But what we're
not willing to do is simply delay for the sake of delay, because this thing has been pretty
well exercised over a long period of time with reports that have lacked an
administrative fix in the sense of a congressional action, and we think it's time to take
that action.

RICHARDSON:

Senator, I'd -- we will instruct our staff to meet with yours and the minority as soon
as possible. If it takes an extra day to do it right, I would ask for that. I can't deal with
this this afternoon because I have to testify before the House.

MURKOWSKI:

I understand.

RICHARDSON:

But I think we should be judicious. We should move fast, but if it takes another day,
let's be sure we're doing it right.

MURKOWSKI:

Well, we've got today and tomorrow. Senator Kyl?

KYL:

Thank you, Mr. Chairman, and gentlemen, thank you very much. I'm sorry I had to
leave the hearing for a little while, but I was meeting with solicitors at the Department of
Interior on another matter that Secretary Richardson would certainly appreciate from
his old days in the House.

The question that I'd like to ask primarily to Senator Rudman, but to get the
response of the secretary if you desire, is really pretty much the same question that I
asked in the Intelligence Committee when you testified about the basis for your
recommendations. And it was in response, really, to a friendly criticism by Senator
Levin that our original bill was different from your committee recommendations.

We informed Senator Levin that we had decided to conform our legislation to your
recommendations as closely as we could possibly do that, and that one of the key
reasons why our original legislation was different is that we were trying to
accommodate a concern of the secretary, namely that his security czar and
counterintelligence person should not be within the line of responsibility and authority of
the semi-autonomous agency, but rather should be an over-arching Department of
Energy security czar and counterintelligence person, and should report directly to the
secretary.

And my question to you at that time, Senator Rudman, was whether those two
views were essentially inconsistent; whether they represented inconsistent approaches
or whether we could, as I had been trying to do, compromise and accommodate the
secretary.

Your answer, I'll just note my understanding of it and then ask you to please
provide that answer again, was that no, you've got two different management structures
here and you've got to select one or the other.

Now today, you indicated that there might be some ability to take some of the
personnel, like the congressional liaison and some of those folks and deal with them the
way the secretary suggested, and that maybe even with regard to the security person,
who he reports - let me at least -- this is the way I'd interpret your answer -- that who
he reports to is perhaps less important than where he is. In other words, he can report
to the secretary and perhaps also to the undersecretary, but that he should be within
this management structure with the accountability and responsibility for the nuclear
weapons programs.

So I guess my question is, then, this: Underlying your recommendation there were
two key bases as I understood it. One, you can find on page 45 of the report, where
among other things you say we are stunned by the huge numbers of DOE employees
involved in overseeing the weapons lab contract. And you were saying get all of that
gone and just have the nuclear weapons program within one chain of command; and
secondly, the responsibility for security oversight. Those are the two keys.

In your view, what has the secretary -- has the secretary suggested to you any
willingness to compromise on either of those two areas that seems to suggest possible
progress from your point of view in reaching a consensus?

RUDMAN:

Senator, let me just say to you that we continue to believe that there has to be a
major counterintelligence operation within this semi-autonomous agency. Although the
secretary says, and he's right, that there is other CI concerns, the overwhelming
percentage of dollars on counterintelligence go towards the weapons labs, and we have
that in their own data.

On the security issue, I don't have a problem with what he has said here this
morning. I mean, if the secretary says he ought to have security up here next to him with
a separate security liaison, if you will, down next to the new agency, that's not a
problem. We don't have a problem with the counsel, the inspector general, comptroller
- he wants to have those as divisions of his staff, that's not a problem.

The serious problem we've had to this moment is I haven't heard anything the
secretary say that indicates that he really agrees with our absolutely solid position: this
has to be an agency or an administration directly accountable to the secretary of
Energy. Period.

We don't think anything else will work, and we base it on looking at 20 years of
reports. And I dare say, I'll say to my friend the secretary, I dare say I've read more of
those reports than anybody in town. And I don't want to read them anymore. And they
show me unless you are very careful in putting a lockbox around this, you are going to
have some more trouble down the line after you're gone. I think that's what Senator
Domenici believes. That's what I heard him say a few moments ago. And I would hope
we could work this out because the rest of it, it seems to me, is bureaucratic. We're
talking about a principle here.

KYL:

Any response (OFF-MIKE)?

RICHARDSON:

Senator, I do believe we've made some progress today with a security component
reporting directly to me. I think that makes a lot of sense. That's what I've always
wanted. I don't think -- security and counterintelligence should not be in the new tier.
And as I understood last week, you said that in your amendment you agreed with that
-- that counterintelligence should report directly to me.

So I just want to be sure that -- I know this is a hearing where you're questioning
me; where you're not going back on that.

KYL:

Let me make it clear that in response to your concerns, I was saying I was trying to
work with you to work that out. And I did not say that CI -- that counterintelligence
should be directly reportable to you, but I said it seemed to me that the security issues
could be worked out. And I think that you and Senator Rudman are suggesting that
that's the case here, although there still apparently is a disagreement about where the
counterintelligence unit should reside.

But please go ahead.

RICHARDSON:

Yes, that is correct. I believe the counterintelligence unit should report directly to
me. But I thought that was your position, too.

KYL:

Again, it seems to me, and I'd really be pleased to get both of your responses, that
less important who these two people report to is the question of where they are. And
here's what I mean by that. You want these people immediately subject to your
supervision. And when you call them, you want them to come immediately and report
directly to you.

But there may well be a lot of times when you designate somebody else -- your
undersecretary here as the person to get most of their daily kinds of reports. In other
words, my guess is that there will be other people in this loop. And so long as they
have the ability to report directly to you and you have the ability to say that they report
directly to you, I'm satisfied with that because my guess is that on a routine basis, they
may also be reporting to the undersecretary here.

But the key is whether or not both security and counterintelligence has a line
responsibility along the NRO model, which I thought Senator Rudman was right on
target in pointing out. Effectively, when our <satellites are built, security is a
component of them. It's not an add-on later, as the report notes, it's directly built in. So
I think the key here is whether these two people -- the security and counterintelligence
people -- are directly in that line of accountability and responsibility for the nuclear
weapons program.

RICHARDSON:

Well, Senator, I hope we're not drifting apart. We may be, because I read your
amendment that you said you changed and that you had accepted our view that
counterintelligence should report to me. Now, I don't think counterintelligence should
report to the undersecretary, and this may be something that divides us as we move
ahead on this very fast train.

I'd like us to discuss this, but that is essential to me -- that counterintelligence
security have their separate component. This doesn't diminish the undersecretary
concept. And again, I am willing to discuss an undersecretary structure that reports to
me with members of the majority and the minority, but I don't want to go back and
revisit the counterintelligence issue, which I thought you, as the main author of this
amendment with Senator Domenici and Murkowski, had already agreed should report
directly to me.

KYL:

And Mr. Chairman and Secretary Richardson, you are absolutely correct, that in
our version in an attempt to accommodate you, we did that. We had a few words
because we were trying to accommodate you and we got criticized for that. But when
we asked Senator Rudman whether he thought that was a good idea, he said no. And
in order to have a clear piece of legislation, we then took his recommendations as our
bill.

But I accept your invitation and you've accepted our invitation to sit down and try to
work this out. And I think people of good will working toward a common goal can do
that. I would just close by asking, we are in agreement, are we not, that in terms of all
of the other DOE supervision -- these field offices and contracting supervision and all
of that sort of thing that the report talks about, that in that respect, anyway, there is no
disagreement -- that this semi-autonomous agency would have the clear lines of
responsibility and accountability, and there is no disagreement on your part with respect
to that.

RICHARDSON:

The undersecretary structure -- I hate this "agency" word -- I abhor it. And I'm
willing to discuss another word because it connotes something that is a separate entity
within my own entity -- within the Department of Energy entity.

RICHARDSON:

So let us not try to divide ourselves with some of these differences, let us have our
staffs sit down and us sit down.

KYL:

We'll sure do that. But I would just suggest that there is a fundamental point here,
and that is that it is exactly the recommendation of Senator Rudman and exactly the
intent of the three senators who are left up here that there be a semiautonomous group,
agency, division, whatever you want to call it, but an entity within the department that
has one responsibility, the nuclear weapons programs, and is not accountable to a
whole bunch of other people within the department as to their policies with respect to
hiring and firing or environmental or contracting or any of these other things.

And that's a fundamental point. And if we don't, you know, if there's disagreement
on that, then we're going to have to continue to disagree and just move our separate
ways rather than move together. But...

MURKOWSKI:

That's the point I want to make, and I think it's been made. We've got about so
many seconds left on the vote.

Senator Domenici, do you have one question?

DOMENICI:

Look, I want to make this point to the secretary.

Mr. Secretary, you may abhor the notion, but the point of it is they determined in
their report that we should have within the Department of Energy an agency for nuclear
stewardship. That's what they called it. We're going to stop calling it anything else.
We're going to call it an agency for nuclear stewardship.

And the truth of the matter is, that undersecretary is directly responsible to you. And
the concern that it is so autonomous that you're not in charge is not well taken. It is in
charge because it needs management and a straight line of command, not what we've
got now that I won't explain another time.

So we may be very far apart. If you were suggesting that we defuse that by agreeing
to the name of an undersecretary with certain functions, then we will be very far apart,
because that puts us back to having accomplished nothing except set up another
honcho in the department, another person with a title. And we just tried desperately to
tell you that that's what's been going on for 20 years -- a title is created without
changing the structure.

So I hope we don't disagree on that, but rather disagree on what's in that box rather
than that there is this new chain of command, this new order about things. If that's the
case and we argue about what do you want to keep up there in you shop, then there's
only one argument, one question: do you move so much up there that you don't have
autonomous, you don't have this agency for nuclear stewardship? That would be a
legitimate question to be asked as we negotiate.

Thank you, Mr. Chairman.

MURKOWSKI:

Well, thank you, Senator Domenici. Hopefully our staffs can work together to
resolve this.

And, Senator Rudman, do you have anything to add in conclusion? And I mean
we're really down to seconds.

RUDMAN:

Just one sentence. I -- none of us on this panel, with all due respect, understand the
secretary's abhorrence to this word. I mean, we did not invent this.

The reason that NSA and NOAA and DARPA sit as agencies, they are so totally
different from the agencies that they sit in that it was the intention of the Congress to
make them separate agencies responsible to a cabinet secretary but not to get mucked
around with.

And I don't understand the opposition. It may have something to do with budget
authority. I'm not sure what it's got to do with. But it can't be from this bureaucracy for
the reasons stated, and I say that with all due respect. I don't understand the
opposition.

MURKOWSKI:

Mr. Secretary, should we leave it at that.

RICHARDSON:

Senator, my team would be ready to meet with yours, Mr. Falley (PH), Mr. Angel
(ph)...

MURKOWSKI:

All right.

RICHARDSON:

... Ms. Rolfing (PH), and Mr. Eddy (ph). Those are my four.

And, again, I hope we can spend the afternoon with you and the minority staffs and
yourselves and try to resolve this. I want to work this out. And I hope we don't go
different ways. But if it takes another day, we ought to consider that.

MURKOWSKI:

Well, as I indicated, the issue's going to come up tomorrow, so we got today and a
good portion of tomorrow to work it out. It sounds to me like we're very close. But
there is a difference here and I am having a little difficulty understanding your reluctance
on the specifics, but we'll try and work that out with the staffs. But let's recognize that
we've come this far and that's as a consequence of the efforts of both of you.

I want to thank you, Senator Rudman, for your effort and the presentation by your
colleagues in this very important report; and, Secretary Richardson, for your input that
changes the responsibility that you've undertaken.

It's been a worthwhile hearing. We've gotten it over, I think, in a pretty fair
timeframe considering we had some 60 members to contend with. Some of them did
drop out, but most of them were here.

That concludes the hearing. And I wish you all a good day.

The FDCH Transcript Service June 22, 1999

List of Speakers:

ARMED SERVICES COMMITTEE:
U.S. SENATOR JOHN WARNER (R-VA), CHAIRMAN
U.S. SENATOR STROM THURMOND (R-SC)
U.S. SENATOR JOHN MCCAIN (R-AZ)
U.S. SENATOR ROBERT C. SMITH (R-NH)
U.S. SENATOR JAMES M. INHOFE (R-OK)
U.S. SENATOR RICK SANTORUM (R-PA)
U.S. SENATOR OLYMPIA J. SNOWE (R-ME)
U.S. SENATOR PAT ROBERTS (R-KS)
U.S. SENATOR WAYNE ALLARD (R-CO)
U.S. SENATOR TIM HUTCHINSON (R-AR)
U.S. SENATOR JEFF SESSIONS (R-AL)
U.S. SENATOR CARL LEVIN (D-MI), RANKING MEMBER
U.S. SENATOR EDWARD M. KENNEDY (D-MA)
U.S. SENATOR JEFF BINGAMAN (D-NM)
U.S. SENATOR ROBERT C. BYRD (D-WV)
U.S. SENATOR CHARLES S. ROBB (D-VA)
U.S. SENATOR JOSEPH I. LIEBERMAN (D-CT)
U.S. SENATOR MAX CLELAND (D-GA)
U.S. SENATOR MARY LANDRIEU (D-LA)
U.S. SENATOR JACK REED (D-RI)
ENERGY AND NATURAL RESOURCES COMMITTEE:
U.S. SENATOR FRANK H. MURKOWSKI (R-AK), CHAIRMAN
U.S. SENATOR PETE V.DOMENICI (R-NM)
U.S. SENATOR DON NICKLES (R-OK)
U.S. SENATOR LARRY E. CRAIG (R-ID)
U.S. SENATOR BEN NIGHTHORSE CAMPBELL (R-CO)
U.S. SENATOR CRAIG THOMAS (R-WY)
U.S. SENATOR GORDON SMITH (R-OR)
U.S. SENATOR JIM BUNNING (R-KY)
U.S. SENATOR PETER FITZGERALD (R-IL)
U.S. SENATOR SLADE GORTON (R-WA)
U.S. SENATOR CONRAD BURNS (R-MT)
U.S. SENATOR JEFF BINGAMAN (D-NM), RANKING MEMBER
U.S. SENATOR DANIEL K. AKAKA (D-HI)
U.S. SENATOR BYRON L. DORGAN (D-ND)
U.S. SENATOR BOB GRAHAM (D-FL)
U.S. SENATOR RON WYDEN (D-OR)
U.S. SENATOR TIM JOHNSON (D-SD)
U.S. SENATOR MARY LANDRIEU (D-LA)
U.S. SENATOR EVAN BAYH (D-IN)
U.S. SENATOR BLANCHE LINCOLN (D-AR)
GOVERNMENTAL AFFAIRS COMMITTEE:
U.S. SENATOR FRED THOMPSON (R-TN), CHAIRMAN
U.S. SENATOR WILLIAM V. ROTH, JR. (R-DE)
U.S. SENATOR TED STEVENS (R-AK) U.S. SENATOR SUSAN M. COLLINS (R-ME) U.S. SENATOR GEORGE VOINOVICH (R-OH) U.S. SENATOR PETE V. DOMENICI (R-NM) U.S. SENATOR THAD COCHRAN (R-MS) U.S. SENATOR ARLEN SPECTER (R-PA) U.S. SENATOR JUDD GREGG (R-NH)
U.S. SENATOR JOSEPH LIEBERMAN (D-CT), RANKING MEMBER
U.S. SENATOR CARL LEVIN (D-MI)
U.S. SENATOR DANIEL K. AKAKA (D-HI)
U.S. SENATOR RICHARD DURBIN (D-IL)
U.S. SENATOR ROBERT G. TORRICELLI (D-NJ)
U.S. SENATOR MAX CLELAND (D-GA)
U.S. SENATOR JOHN EDWARDS (D-NC)
SENATE SELECT COMMITTEE ON INTELLIGENCE:
U.S. SENATOR RICHARD C. SHELBY (R-AL), CHAIRMAN
U.S. SENATOR JOHN H. CHAFEE (R-RI)
U.S. SENATOR RICHARD G. LUGAR (R-IN)
U.S. SENATOR MIKE DEWINE (R-OH)
U.S. SENATOR JON KYL (R-AZ)
U.S. SENATOR JAMES M. INHOFE (R-OK)
U.S. SENATOR ORRIN G. HATCH (R-UT)
U.S. SENATOR PAT ROBERTS, (R-KS)
U.S. SENATOR WAYNE ALLARD (R-CO)
U.S. SENATOR TRENT LOTT (R-MS), EX OFFICIO
U.S. SENATOR J. ROBERT KERREY (D-NE), RANKING MEMBER
U.S. SENATOR RICHARD H. BRYAN (D-NV)
U.S. SENATOR BOB GRAHAM (D-FL)
U.S. SENATOR JOHN F. KERRY (D-MA)
U.S. SENATOR MAX BAUCUS (D-MT)
U.S. SENATOR CHARLES S. ROBB (D-VA)
U.S. SENATOR FRANK R. LAUTENBERG (D-NJ)
U.S. SENATOR CARL LEVIN (D-MI)
U.S. SENATOR THOMAS DASCHLE (SD), EX OFFICIO
BILL RICHARDSON, SECRETARY, DEPARTMENT OF ENERGY
WARREN RUDMAN, CHAIRMAN, PRESIDENT'S FOREIGN INTELLIGENCE ADVISORY BOAR