Protection Against Federal Regulatory Abuse

February 3, 1995 • Testimony

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

The America people elect a Congress to make laws to protect our life, liberty and property and a President to administer those laws. But of late abuses of freedom have come from the agents of the government themselves. It is as if the security guard you hire to 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 that his floor must be wet mopped every two hours, and another bureaucrat told him it must be dry at all times.
  • A hospital administrator in Ohio was directed by an EPA official to purchase a special incinerator for infectious waste. The administrator placed an order but before delivery, other EPA regulators forced the manufacturer of the incinerators to stop all deliveries pending a regulatory review of their products. The hospital administrator could not acquire the incinerator because of the actions of one set of bureaucrats and thus faced a fine from another.
  • The Exxon Corporation reaped public scorn and billions of dollars in fines and cleanup costs after one of its tankers hit rocks in the coastal waters off Alaska, causing a giant oil spill. The company, critics said, should have known better than to allow a man with a record of alcohol abuse to pilot a ship. Yet now Exxon is being sued for employment discrimination for dismissing a tanker engineer with a drinking problem.

In other cases, in spite of the best efforts of private citizens, it is impossible to determine before the fact what regulators require or prohibit. This is part due to the sheer magnitude of regulations, with some 70,000 pages in the Federal Register. But I give one particularly outrageous example to illustrate the point.

Bill Ellen, an environmentalist, created a wildlife sanctuary which included manmade duck ponds in Virginia. He acquired over twenty permits from regulators. But because ducks can fly from one pond to another, and because the ducks defecate in the ponds, Allen went to federal prison for polluting an inland waterway.

Title VIII Protections.

American businesses and private citizens are correct to ask what are you, the lawmakers, going to do to reign in these out‐​of‐​control agents? Conceptually, the provisions of Title VIII of H.R.9 are a good first step towards this goal.

The Citizens Regulatory Bill of Rights would set up initial safeguards against arbitrary search and seizure by regulators that could 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 the provisions of the rights to regulatory inspections or searches. Perhaps you could substitute for the current preamble something like “Whenever an agency of the federal government conducts a regulatory inspection or search, it must provide the owner (or his representative) written notice of the legal basis for the inspection and/​or search. If the government has a warrant, it must give the owner a copy of the warrant along with all supporting affidavits. The government should also be required to furnish the owner with a written list of the names, titles, and agencies of each government agent who is participating in the search and/​or inspection.” I note that RCRA and Superfund do not expressly require the presentation of credentials prior to inspections.

Second, I would add several provisions, including:

  • The government must issue receipts for all items seized to the owner (or his representative).
  • If any type of samples are taken — such as a chemical or soil sample — a split sample must be offered to the owner of the premises. (I note that the Clean Water Act and the Clean Air Act do not presently require the government to provide split samples.)
  • If any photographs are taken, copies must be provided to the owner (or, upon request).
  • If government agents take or seize any documents, they must give the owner the opportunity to photocopy the documents on site before their removal or, alternatively, provide for off‐​site photocopying within 48 hours. (I note that this is necessary since the owner may need the records to continue day to day business).
  • During inspections and/​or searches, government agents must inform all employees prior to questioning that they have no legal obligation to answer questions from government agents and that they have the right to remain silent.

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

Fourth, I would remove section (c), paragraph (2) the exemption for criminal investigations, since by new wording would focus the provisions of this section more narrowly on regulatory inspections.

Finally, I would also broaden the Title by prohibiting all warrantless searches. Even for inspection it would afford better protection for the public if inspectors at least had to acquire an administrative warrant.

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

Whistleblowers’ Protection.

The need to protect whistleblowers is seen in the experience of many of us in the policy community as well as many member of Congress. We often will talk to individuals who feel they have been abused by regulators. When we ask if they will go on the record with their stories, they decline for fear that regulators will retaliate.

I offer one case that certainly smacks of revenge by regulators. The staff of the Black Hills Institute for Geological Research, of Hill City, South Dakota, in 1990 discovered the world’s largest fossilized Tyrannosaurus Rex, which they nicknamed “Sue.” Sue was found on private land, the title of which is held in trust by the Federal government for a Native American. The owner asked Institute staff to explore for fossils on his land and, when Sue was discovered, the Institute paid $5,000 for the right to excavate and remove the fossil.

But on May 14, 1992 the U.S. Department of Justice sent FBI agents to seize the skeleton, which Institute personnel had already spent 10,000 labor hours preparing for assembly. At first Treasury claimed the T. Rex was an artifact removed contrary to the provisions of a 1906 antiquities act. But on finding rulings showing that this Act did not cover fossils, (artifacts are manmade, which T. Rex is not), Justice changed its story. It declared that Sue was “real estate” that the landowner could sell off only with the permission of the U.S. Secretary of Interior.

No charges were ever filed against the Black Hills Institute for dinosaur theft, and the Institute sued for the return of Sue. But daring to challenge arbitrary theft by government agents can be dangerous for the citizens of this country.

A team from the FBI and the U.S. Attorney’s Office of South Dakota spent Sept. 26, 1993 to Oct. 8 in Japan investigating business dealing of the Black Hills Institute in what can only be considered as revenge against citizens who dare stand up for their rights. This 16 day junket included luncheons, parties, but only seven working days. A back‐​of‐​envelop estimate of the cost to taxpayers 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 conspiracy under RICO statutes. (Indictments against two suppliers were recently dropped.) Since no law bans Black Hill’s activities, they were indicted for breaking regulations made by unelected bureaucrats. (Newly proposed U.S. Forest Service regulations 36 CFR, Parts 261–262 would essentially ban all fossil and mineral collection on Forest Service land.) Federal agents also have made trips to Canada, Argentina and Peru seeking more ways to wreck vengeance on the Institute.

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

Beyond Title VIII.

I consider the provisions of this Title the minimum that might be done to protect citizens from regulators. I would go further.

First, I would establish a regulatory Ombudsman’s office in each agency, perhaps in the Inspector General’s office. This would be a first line for citizen complaints and give Congress a data base by which to judge the extent of regulatory abuses.

Second, I would include in every communication between a regulator and a citizen Regulatory Miranda Rights, informing them of the existence, address and phone number of the Ombudsman’s office.

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

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