Congress has also recognized, however, that Government employees should be free to engage in lawful financial transactions to the same extent as private citizens where no real conflict of interest exists. This approach has been followed in both the general revision of the conflict-of-interest laws enacted by the Congress in 1962 (Public Law 87-849, approved Oct. 23, 1962) and in President Johnson's Executive Order No. 11222 of May 8, 1965, prescribing standards of ethical conduct for Government officers and employees.1 Section 4 (b) of the Communications Act, as it presently stands, contains a wide prohibition against any financial interest by any Commissioner or Commission employee in any company connected with radio. It covers not only communication common carriers, and broadcast and other radio licensees, but also any company manufacturing radio apparatus, and every company furnishing services or radio apparatus to companies which are licensees or manufacturers. It prohibits the ownership of "stocks, bonds, or other securities of any corporation subject to any of the provisions of the act.' When it was enacted in 1934, the relevant background was the use of radio by broadcast companies and the regulation of communications common carriers. Since that time, however, the Commission has licensed over a million companies and individuals in the safety and special radio services. Thus, today many corporations having nothing to do with broadcasting or communications common carriers subject to the Commission's regulatory authority are Commission licensees, and our employees are prohibited from buying their stock, solely because their corporate airplace is equipped with radio, or because in some other incidental way they use radio communications in their business. States and municipalities are also usually licensees of police and fire radio systems. In fact, practically every facet of modern industry and commerce, whether it be farming, mining, manufacturing, transportation, or public utilities, uses radio communication and is, therefore, subject to the licensing provisions of the Communications Act. The growth of mutual funds containing a wide diversity of stocks, some of which are almost certain to be in the communications field, raises further problems under the broad language of subsection 4(b). While FCC Commissioners and employees should be prohibited from investing in broadcast companies and communications common carriers, we strongly believe that the broad language of subsection 4(b) should be changed to remove the shadowland involving those thousands of companies which use radio merely as an incident of their business, and situations such as investment in an ordinary mutual fund. S. 1948 would go a long way both in clarifying and making realistic the law in this field, without sacrificing the necessary and meaningful restrictions on substantial outside interests which might affect a Commissioner's or an employee's performance of his duties. It would continue to prevent the same types of activities now prohibited by subsection 4(b)—that is, investment, employment by, or holding "official relation to" certain types of companies. It would continue to apply these prohibitions both to Commissioners and Commission employees. It would continue to preclude direct investment by Commissioners and Commission employees in broadcasting or communications common carriers, the primary fields of Commission regulatory activity. Moreover, it would continue to apply to relationships with, and investments in, companies a substantial part of whose activities consists of the manufacture or sale of radio apparatus or of apparatus for wire or radio communication or the providing of services to radio broadcasters or to common carriers offering communication services by wire or radio. The language also adds a specific reference to prohibit official relationships with, or investment in, companies a substantial part of whose activities is the installation, servicing, or maintenance of apparatus used for the transmission of communications by wire or radio. These provisions would, for example, preclude investment in networks, manufacturers of telephones, radio and television sets, etc. However, a furniture store which happens to include a broadcast licensee among its customers would not ordinarily be a prohibited investment, nor would a department store which handles television sets among countless thousands of other items. Such operations clearly have no bearing upon any conflicts of interest, real or apparent, which the section is designed to prevent. 1 See, e.g., H. Rept. No. 748, 87th Cong., 1st sess., p. 6, and sec. 203 of Executive Order No. 11222, May 8, 1965, 30 F.R. 6469. S. 1948 would also prohibit investment in a holding company, mutual fund, or other investment company whose activities are concentrated substantially in broadcasting, communications by wire, or the other mentioned activities. In such circumstances, the nonparticipation test of Public Law 87-849 would apply; that is, whether the investment is so substantial as likely to affect the integrity of the services which the Government may expect, or whether it is too remote or inconsequential to affect the integrity of such services. Finally, we have been continuing to consider these conflict-of-interest provisions, and would like to bring to the subcommittee's attention one important matter not presently included in S. 1948. Even under S. 1948, situations of injustice and hardship may arise in exceptional circumstances. Thus, for example, if a Commission employee were to be named beneficiary of a trust containing, among other things, a few shares of stock of an interstate communications common carrier, he would be in violation of the act if he continued in the Commission's employ. Yet he might have no control over the trust and not be able to get the trustees to sell the offending shares. Other factual situations, each one unique, could arise. We believe that there should be some provision for flexibility so that such cases will not be violations of the law where no substantial actual or apparent conflict of interest exists. We suggest, therefore, that a provision similar to that in the general conflict-of-interest law (18 U.S.C. 208) be included, so that the proscription of the act would not apply where, after full disclosure, a written determination is made by the appointing official that the interest is not so substantial as to be deemed likely to affect the integrity of the services which the Government may expect from the Commissioner or employee. This could be accomplished by adding a new paragraph (4) to subsection (b) of section 1 of S. 1948 as follows: "(4) Paragraph (2) of subsection (b) of this section shall not apply if the Commissioner or employee advises the Government official responsible for appointment to his position of all pertinent circumstances and receives a written determination made by such official that the financial interest, employment, or official relation to a person described in paragraph (2) is not so substantial as to be deemed likely to affect the integrity of the services which the Government may expect from such Commissioner or employee." S. 1948 also exempts from the financial interest provisions of subsection 4(b) "special Government employees" as that term is defined in Public Law 87-849, 76 Stat. 1119, approved October 23, 1962, 18 U.S.C. 201. The broad scope of existing section 4(b) stands as an obstacle to the use of part-time consultants contemplated by Public Law 87-849, which has liberalized the conflict-of-interest standards as they apply to special Government employees. That act is designed to "*** help the Government obtain the temporary or intermittent services of persons with special knowledge and skills whose principal employment is outside the Government." (Attorney General's "Memorandum Regarding Conflictof-Interest Provisions of Public Law 87-849," dated Jan. 28, 1963 (28 F.R. 985).) Such an employee would continue to remain fully subject to all the conflictof-interest standards now contained in Public Law 87-849. And, in the event a "special Government employee" should become a regular employee of the Commission, or a member thereof, he would then become subject to section 4 (b) (2) of the Communications Act. In short, it is not intended to confer on "special Government employees" any rights beyond those now set out in Public Law 87-849. Also exempt from the financial interest provisions of subsection 4(b) would be persons acting as executive reservists pursuant to subsection (e) of section 710 of the Defense Production Act of 1950, as amended (69 Stat. 583, 50 U.S.C. app. 2160 (e)), and not otherwise employed by the Government in a full-time capacity, and those executive reservists employed full time in time of war or during periods of national emergency declared by the President. The executive reserve program, approved in Congress in 1955, authorized the President to provide for the establishment and training of a nucleus executive reserve for employment in executive positions in Government during periods of emergency. It further authorized the President to provide by regulation for the exemption of members of such reserve from the operation of the conflict-of-interest provisions in sections 281, 283, 284, 434, and 1914 of title 18 of the United States Code and section 190 of the Revised Statutes (sec. 99 of title 5). This he did in his Executive order establishing the National Defense Executive Reserve. (E.O. 10660, Feb. 15, 1956, 21 F.R. 1117.) The financial interest provisions of section 4 (b) of the Communications Act have been found to be unduly restrictive in the recruitment for the executive reserve training program of the Commission. This has been one of the difficulties encountered in the search for well-qualified appointees. And it is those people who, by reason of their past employment in the Commission or employment in executive positions in the communications industry, are the best qualified and most valuable to serve the Government as full-time Commission employees in periods of national emergency or time of war. In view of the foregoing, the Commission supports S. 1948 as a bill of important practical significance to its employees and one whose purpose is consistent with the recent expressions of congressional and administration intent, while maintaining full protection to the public interest in leaving administrative proceedings free from actual or potential conflicts of interest. Senator PASTORE. Has the Budget Bureau passed on this? Senator PASTORE. They have no fault to find with it? It applies to such circumstances as an employee who might want to work for his brother on the weekends at a gas station. If the gas station has a citizen's band radio to use in its business, then theoretically the Government employee can't work for his brother on the weekends nor can he loan him a thousand dollars to help him with the business and take an interest in and so on. It is this kind of thing that our amendment addresses itself to. Senator PASTORE. And you mean that the conflict-of-interest section in the Communications Act is very strict along these lines and inflexible? Mr. HENRY. Yes; it is. Senator PASTORE. What would be the guidelines of protection that we wouldn't run into abuses here? Mr. HENRY. What would be the guidelines of what? Senator PASTORE. So that we would not run into abuses. Mr. HENRY. Well, this is the primary thing that is eliminated. RETAINED IN SECTION 4(b) Retained in section 4 (b) is that: No member of the Commission or person in its employ shall have a financial interest in, be employed by, or have any official relation to (A) any person engaged in radio broadcasting; (B) any person engaged in communication by wire or radio as a common carrier; (C) any person a substantial part of whose activities consists of the manufacture or sale of radio apparatus for wire or radio communication; (D) any person a substantial part of whose activities consists of the installation, servicing, operation, or maintenance of apparatus used for the transmission of communications by wire or radio; (E) any person a substantial part of whose activities consists of the providing of services to any other person *** Now, what those provisions Senator PASTORE. Now, let me ask you this question: In other words, what you are saying to me is this: If they own a gasoline station and they do towing service and on that tow truck there is a radio, that because their radio is licensed under the law an individual who works for the FCC could not go there of a Saturday afternoon and pump some gasoline in an automobile? Is that what your're saying? Mr. HENRY. Yes. This is the doubt created by the present formulation. Senator PASTORE. You are trying to get away from these small, minimal cases which were never contemplated within the purview of the conflict of interest? Is that correct? Mr. HENRY. Yes. Senator PASTORE. Do I give the right example here? Mr. HENRY. Yes, sir. Senator PASTORE. All right. Let's get to the next bill. (No response.) Senator PASTORE. All right. Let's go to the next one. Mr. HENRY. We are just, for your information, Mr. Chairman, adding an additional clause which would allow waivers of 4(b) in appropriate circumstances along the lines presently provided for in the conflict-of-interest laws. That is where full disclosure has been made and a written determination by the appointing official that the interest is not so substantial as to be deemed likely to affect the integrity of the services rendered. Senator PASTORE. Now, that has been cleared too? Senator PASTORE. All right. Now we come to S. 1949. This is a bill amending the Communications Act of 1934 so as to give full and complete effect to the Convention for the Safety of Life at Sea. This convention was formulated in London in 1960 and was ratified by the Senate on April 12, 1962, pursuant to the terms of the convention, and was to come into force on May 26, 1965. Generally, the objective of the legislation was designed to modernize the ship radio requirements. The three substantive changes in the present law to be made by the legislation are: 1. Lower the limit from 500 to 300 gross tons with regard to cargo ships which are required to carry radio installations; 2. Eliminate nuclear ships from the categories of ships with regard to which the Commission is authorized to make exemptions insofar as radio installations are concerned; and 3. Eliminate the compulsory radio requirements of the Communications Act for vessels which are navigated both in the open sea and on the Great Lakes during such time that such vessels are on the Great Lakes. Vessels operating on the Great Lakes are subject to the safety radio requirements of the Great Lakes Agreement between the United States and Canada. Since the announcement of our hearings, the House Interstate and Foreign Commerce Committee reported a companion bill, H.R. 7954, and it passed the House of Representatives on June 7, 1965, and has been referred to this committee, so H.R. 7954 will be considered by the committee at this time. (Full text of S. 1949 and H.R. 7954 follows:) [S. 1949, 89th Cong., 1st sess.] A BILL To amend the Communications Act of 1934, as amended, to conform to the Convention for the Safety of Life at Sea, London (1960) Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 3 of the Communications Act of 1934, as amended (47 U.S.C. 153), is amended as follows: (a) Subsection (w) is amended by adding paragraph (5) to read as follows: "(5) 'Nuclear ship' means a ship provided with a nuclear powerplant." (b) Subsection (x) is amended to read as follows: "(x) 'Radiotelegraph auto alarm' on a ship of the United States subject to the provisions of part II of title III of this Act means an automatic alarm receiving apparatus which responds to the radiotelegraph alarm signal and has been approved by the Commission. 'Radiotelegraph auto alarm' on a foreign ship means an automatic alarm receiving apparatus which responds to the radiotelegraph alarm signal and has been approved by the government of the country in which the ship is registered: Provided, That the United States and the country in which the ship is registered are parties to the same treaty, convention, or agreement prescribing the requirements for such apparatus. Nothing in this Act or in any other provision of law shall be construed to require the recognition of a radiotelegraph auto alarm as complying with part II of title III of this Act, on a foreign ship subject to such part, where the country in which the ship is registered and the United States are not parties to the same treaty, convention, or agreement prescribing the requirements for such apparatus." (c) Subsection (y) is amended to read as follows: "(y) (1) 'Operator' on a ship of the United States means, for the purpose of parts II and III of title III of this Act, a person holding a radio operator's license of the proper class as prescribed and issued by the Commission. "(2) 'Operator' on a foreign ship means, for the purpose of part II of title III of this Act, a person holding a certificate as such of the proper class complying with the provisions of the radio regulations annexed to the International Telecommunications Convention in force, or complying with an agreement or treaty between the United States and the country in which the ship is registered." (d) Subsection (z) is redesignated “(aa)" and a new subsection (z) is added as follows: “(z) (1) ‘Radio officer' on a ship of the United States means, for the purpose of part II of title III of this Act, a person holding at least a first- or second-class radiotelegraph operator's license as prescribed and issued by the Commission. When such person is employed to operate a radiotelegraph station aboard a ship of the United States, he is also required to be licensed as a 'radio officer' in accordance with the Act of May 12, 1948 (46 U.S.C. 229a-h). "(2) 'Radio officer' on a foreign ship means, for the purpose of part II of title III of this Act, a person holding at least a first- or second-class radiotelegraph operator's certificate complying with the provisions of the radio regulations annexed to the International Telecommunication Convention in force." (e) Present subsections "(aa)" through "(dd)" are redesignated as "(bb)” through "(ee)", respectively. (f) Present subsections "(ee)" and "(ff)" are deleted and the present subsection "(gg)" is redesignated “(ff)”. SEC. 2. (a) Section 351 of such Act, as amended, is amended by revising the heading to read as follows: "SHIP RADIO STATIONS AND OPERATIONS". (b) Subsection (a) of section 351 of such Act, as amended, is amended to read as follows: "SEC. 351. (a) Except as provided in section 352 hereof it shall be unlawful— "(1) For any ship of the United States, other than a cargo ship of less than three hundred gross tons, to be navigated in the open sea outside of a harbor or port, or for any ship of the United States or any foreign country, other than a cargo ship of less than three hundred gross tons, to leave or attempt to leave any harbor or port of the United States for a voyage in the open sea, unless such ship is equipped with an efficient radio station in operating condition, as specified by subparagraphs (i) and (ii) of this paragraph, in charge of and operated by one or more radio officers or operators, adequately installed and protected so as to insure proper operation, and so as not to endanger the ship and radio station as hereinafter provided, and in the case of a ship of the United States, unless there is on board a valid station license issued in accordance with this Act. "(i) Passenger ships irrespective of size and cargo ships of one thousand six hundred gross tons and upward shall be equipped with a radiotelegraph station complying with the provisions of this part; "(ii) Cargo ships of three hundred gross tons and upward but less than one thousand six hundred gross tons, unless equipped with a radiotelegraph station complying with the provisions of this part, shall be |