Protection Against Federal Regulatory Abuse


I want to thank the committee for the opportunity to testify onone of the most serious problems facing Americans today, abuse byfederal regulators, and on how Title VIII of H.R.9 will help dealwith this problem.

The America people elect a Congress to make laws to protect ourlife, liberty and property and a President to administer thoselaws. But of late abuses of freedom have come from the agents ofthe government themselves. It is as if the security guard you hireto protect you business begins to pull stick-ups in the halls.

The abuses of which I speak fall into several categories.

Regulations often contradict one another, creating a"damned-if-you-do, damned-if-you-don't" situation. Examples:

  • One bureaucrat told the Baltimore sausage factory owner thathis floor must be wet mopped every two hours, and anotherbureaucrat told him it must be dry at all times.
  • A hospital administrator in Ohio was directed by an EPAofficial to purchase a special incinerator for infectious waste.The administrator placed an order but before delivery, other EPAregulators forced the manufacturer of the incinerators to stop alldeliveries pending a regulatory review of their products. Thehospital administrator could not acquire the incinerator because ofthe actions of one set of bureaucrats and thus faced a fine fromanother.
  • The Exxon Corporation reaped public scorn and billions ofdollars in fines and cleanup costs after one of its tankers hitrocks in the coastal waters off Alaska, causing a giant oil spill.The company, critics said, should have known better than to allow aman with a record of alcohol abuse to pilot a ship. Yet now Exxonis being sued for employment discrimination for dismissing a tankerengineer with a drinking problem.

In other cases, in spite of the best efforts of privatecitizens, it is impossible to determine before the fact whatregulators require or prohibit. This is part due to the sheermagnitude of regulations, with some 70,000 pages in the FederalRegister. But I give one particularly outrageous example toillustrate the point.

Bill Ellen, an environmentalist, created a wildlife sanctuarywhich included manmade duck ponds in Virginia. He acquired overtwenty permits from regulators. But because ducks can fly from onepond to another, and because the ducks defecate in the ponds, Allenwent to federal prison for polluting an inland waterway.

Title VIII Protections.

American businesses and private citizens are correct to ask whatare you, the lawmakers, going to do to reign in theseout-of-control agents? Conceptually, the provisions of Title VIIIof H.R.9 are a good first step towards this goal.

The Citizens Regulatory Bill of Rights would set up initialsafeguards against arbitrary search and seizure by regulators thatcould undermine Fourth Amendment protections. I would, however,suggest some changes to the wording in Title VIII.

First, in the preamble, (a) General, I would limit theprovisions of the rights to regulatory inspections or searches.Perhaps you could substitute for the current preamble somethinglike "Whenever an agency of the federal government conducts aregulatory inspection or search, it must provide the owner (or hisrepresentative) written notice of the legal basis for theinspection and/or search. If the government has a warrant, it mustgive the owner a copy of the warrant along with all supportingaffidavits. The government should also be required to furnish theowner with a written list of the names, titles, and agencies ofeach government agent who is participating in the search and/orinspection." I note that RCRA and Superfund do not expresslyrequire the presentation of credentials prior to inspections.

Second, I would add several provisions, including:

  • The government must issue receipts for all items seized to theowner (or his representative).
  • If any type of samples are taken - such as a chemical or soilsample - a split sample must be offered to the owner of thepremises. (I note that the Clean Water Act and the Clean Air Act donot presently require the government to provide splitsamples.)
  • If any photographs are taken, copies must be provided to theowner (or, upon request).
  • If government agents take or seize any documents, they mustgive the owner the opportunity to photocopy the documents on sitebefore their removal or, alternatively, provide for off-sitephotocopying within 48 hours. (I note that this is necessary sincethe owner may need the records to continue day to daybusiness).
  • During inspections and/or searches, government agents mustinform all employees prior to questioning that they haveno legal obligation to answer questions from government agents andthat they have the right to remain silent.

Third, in the current bill I would remove (4), the right to havean attorney or accountant present, since this would not be relevantfor most inspections.

Fourth, I would remove section (c), paragraph (2) the exemptionfor criminal investigations, since by new wording would focus theprovisions of this section more narrowly on regulatoryinspections.

Finally, I would also broaden the Title by prohibiting allwarrantless searches. Even for inspection it would afford betterprotection for the public if inspectors at least had to acquire anadministrative warrant.

I also want to mention the problem of criminal investigations.Many actions or transaction by businesses which should not beregulated at all are subject to government controls. Worse,violation of regulations which at worst should be civil offenseshave been made into economic crimes. in some cases regulator havebroad discretion to determine whether a case is treated as a civilor criminal issue. In the future Congress should review allregulations with an eye to dealing with this problem.

Whistleblowers' Protection.

The need to protect whistleblowers is seen in the experience ofmany of us in the policy community as well as many member ofCongress. We often will talk to individuals who feel they have beenabused by regulators. When we ask if they will go on the recordwith their stories, they decline for fear that regulators willretaliate.

I offer one case that certainly smacks of revenge by regulators.The staff of the Black Hills Institute for Geological Research, ofHill City, South Dakota, in 1990 discovered the world's largestfossilized Tyrannosaurus Rex, which they nicknamed "Sue." Sue wasfound on private land, the title of which is held in trust by theFederal government for a Native American. The owner asked Institutestaff to explore for fossils on his land and, when Sue wasdiscovered, the Institute paid $5,000 for the right to excavate andremove the fossil.

But on May 14, 1992 the U.S. Department of Justice sent FBIagents to seize the skeleton, which Institute personnel had alreadyspent 10,000 labor hours preparing for assembly. At first Treasuryclaimed the T. Rex was an artifact removed contrary to theprovisions of a 1906 antiquities act. But on finding rulingsshowing that this Act did not cover fossils, (artifacts aremanmade, which T. Rex is not), Justice changed its story. Itdeclared that Sue was "real estate" that the landowner could selloff only with the permission of the U.S. Secretary of Interior.

No charges were ever filed against the Black Hills Institute fordinosaur theft, and the Institute sued for the return of Sue. Butdaring to challenge arbitrary theft by government agents can bedangerous for the citizens of this country.

A team from the FBI and the U.S. Attorney's Office of SouthDakota spent Sept. 26, 1993 to Oct. 8 in Japan investigatingbusiness dealing of the Black Hills Institute in what can only beconsidered as revenge against citizens who dare stand up for theirrights. This 16 day junket included luncheons, parties, but onlyseven working days. A back-of-envelop estimate of the cost totaxpayers is $50,000, minimum.

From the trip came a 39 count indictment against the Institute,staff members and some of the Institute's suppliers and customers,for money laundering, theft of government property and conspiracyunder RICO statutes. (Indictments against two suppliers wererecently dropped.) Since no law bans Black Hill's activities, theywere indicted for breaking regulations made by unelectedbureaucrats. (Newly proposed U.S. Forest Service regulations 36CFR, Parts 261-262 would essentially ban all fossil and mineralcollection on Forest Service land.) Federal agents also have madetrips to Canada, Argentina and Peru seeking more ways to wreckvengeance on the Institute.

So now the power and vast funds of the federal government arepoised to crush a handful of underfunded entrepreneurs who refusedto be victims of arbitrary bureaucrats.

Beyond Title VIII.

I consider the provisions of this Title the minimum that mightbe done to protect citizens from regulators. I would gofurther.

First, I would establish a regulatory Ombudsman's office in eachagency, perhaps in the Inspector General's office. This would be afirst line for citizen complaints and give Congress a data base bywhich to judge the extent of regulatory abuses.

Second, I would include in every communication between aregulator and a citizen Regulatory Miranda Rights, informing themof the existence, address and phone number of the Ombudsman'soffice.

Third, I would set strict time limits on how long regulator cantake to do their jobs when approval for some kind of private actionis needed. If regulators fail to meet their deadlines, permissionfor the action would be automatically granted unless certain verystrict criteria warranted an exception.

Subcommittee on Commercial and Administrative Law
Committee on the Judiciary
United States House of Representatives