Mr. FRANK. Let me say, gentlemen, there's one particular point, Mr. Neill, that you mentioned which I want to explore. I invite you to submit anything further, not just in this area but in others. That is that we ought to be talking about two levels of disclosure: A level that's fairly open to the public and a secondary level, probably not as protected as IRS material, but where you would have some kind of a show-cause requirement before you could get at it. I think that there is a problem. We have, I think, gotten into a counterproductive stage. Too much of people's private lives that is not relevant to judging what kind of a job they're doing is made available, I think, in terms of some of the disclosure. I'm inclined to believe, and I've talked to some of the administration people about this when they were recruiting for the Bush administration, that more than anything else, that's a deterrent to public service, that the disclosure forms have some negative effect on some people. I do plan to make it the business of this subcommittee to look into how we might do a two-level situation, so that there's a general public level and, where there is some reason to go deeper, we can go deeper, not just in this case, but in other cases. I appreciate that. There's going to be an element of people who like to know other people's business, so they read about it, and there's a nonpublic purpose.

I must say in that regard I want to encourage the press to go further. It has been my experience that no matter how rigid an ethics restriction has been, in most cases the press has been all in favor of it. The press has not been sympathetic to relaxing any ethics restriction except the one that interfered with their ability to interview their sources over lunch.

I read an interesting article recently about the press welcoming that relaxation, and I welcome the press' welcoming. I just would urge my friends in the press to extend their more pragmatic scrutiny of ethics restrictions to those that don't directly affect their ability to get information from sources.

There were some very interesting comments. I think the rule in question was too rigid. There's no question that the executive branch had overreacted in saying nobody could ever buy anybody any lunch. My only point, though, is that there are rules of similar rigidity that, when some people have tried to get them relaxed, the press has been too willing to say, oh, they're opening up big loopholes. I think being more realistic as to what disclosure needs to be public and what needs to be on file is an example.

Mr. NEILL. I would fully commend that position to you. I think that it's a good one.

With respect to contacts, both with the press and with Members of Congress, I have had discussions with respect to our filings under the Foreign Agents Registration Act. I've discussed that in some detail. Many Members of Congress feel that it's not necessary to have a public filing of my conversations with them with respect to a client.

Mr. FRANK. I would say that, for some of my colleagues, saying that we thought it was not necessary to say that we had been talking to you understates the enthusiasm of the feeling.

[Laughter.]

Mr. NEILL. We have a similar requirement, Mr. Chairman, with respect to our contacts with the press. I would say they feel exactly the same way with respect to contacts where we attempt to lobby them on a position. Where they're seeking information from us it's quite a different story, but when we have to file that we had lunch with an editor of a newspaper or a reporter seeking to talk about a topic of great controversy, they find it very difficult when I explain to them that we're going to have to report that in a public filing. Mr. FRANK. That would be a good way to keep out of the paper. You take somebody to an expensive lunch, file that, and then they'd feel intimidated against writing about it. I'll have to try that.

Mr. FRANK. I thank you. That is an area that we want to pursue, and I thank you for your testimony.

We will now hear from Mr. Richardson. He has joined us. Mr. Richardson, would you come forward, please?

STATEMENT OF ELLIOT L. RICHARDSON, CHAIRMAN, ASSOCIATION FOR INTERNATIONAL INVESTMENT, ACCOMPANIED BY NANCY MCLERNON, DIRECTOR, LEGISLATIVE AFFAIRS, AND BRAD LARSCHAN, GENERAL COUNSEL

Mr. RICHARDSON. Good morning, Mr. Chairman. As you have said, my name is Richardson; first name, Elliot. I am very pleased to have the privilege of appearing before this subcommittee this morning on behalf of the Association for International Investment, of which I am the chairman. I'm not a lobbyist for any foreign company, and I'm not registered for any purpose under the Foreign Agents Registration Act.

I'm accompanied here this morning by AFII's, as we call it, director of legislative affairs, Nancy McLernon, and our general counsel, Brad Larschan, who are sitting behind me. If you have any questions that I can't answer, I hope I may be free to call on them. Mr. FRANK. Certainly.

Mr. RICHARDSON. I have quite a long prepared statement, Mr. Chairman, and, with your permission, I would like to have it inserted in the record.

Mr. FRANK. If there is no objection, we'll make it part of the record.

Mr. RICHARDSON. Having said that, I would like to apologize for not having been here throughout the earlier part of the hearing. I had an earlier commitment to testify before a subcommittee of the Foreign Affairs Committee on the global environment――

Mr. FRANK. We don't need to go into that, Mr. Richardson. Why don't you just get to what you can testify to here?

Mr. RICHARDSON. Well, I only wanted to say that because I'm in less of a good position to know exactly what you would like me to focus on than I would have been. So, let me just say very, very briefly that the essence of our position is that what is being proposed in legislation before the subcommittee would, we think, go

beyond any clearly defined public purpose that we have heard mentioned in the context of these proposals.

Most of the members of our association are American companies. They have American employees with few exceptions. They are integral parts of the U.S. economy. The one thing that distinguishes them from other American companies is that they have a majority of shareholders who are not American, but it has never been believed up until now that this called for any differential treatment of their officers and representatives than has been true of other American companies.

What this bill says, in effect, is that they would have to register the way "foreign agents" register now. We fail to see any justification for that kind of discriminatory treatment. In any case, it derogates sharply from the policy of the United States to accord national treatment to companies with domiciles in other countries, as we consistently pursue the goal of national treatment by other countries.

It would require, we think, a showing of a kind that we are totally unaware of to justify such a sharp departure from that established policy. If there is evidence of some kind of abuse on the part of representatives of foreign companies, perhaps then that calls for some specific kind of response, but a response which says, in effect, that anybody, a director or an officer of a foreign-owned company who makes a speech on trade policy, thereby automatically falls within the registration requirement of FARA, seems to us excessive and unnecessary.

There are some 700-and-some, 775 persons registered under FARA, according to the Justice Department. Our estimate is that if H.R. 1725 were to be adopted, more than 16,000 persons would be required to register. I think basically the question is, Why? We think that, as in the case of other legislation, particularly given the volume of legislation now burdening the bureaucracy, the burden of proof is on the proponent.

That, I hope, Mr. Chairman, is enough by way of an introductory statement. I'd be glad to respond to any questions you may have. Mr. FRANK. Thank you, Mr. Richardson. I appreciate your summarizing that. I have had a chance to read your statement, which is quite complete.

[The prepared statement of Mr. Richardson follows:]

STATEMENT
of

ELLIOT L. RICHARDSON

CHAIRMAN

of the

ASSOCIATION FOR INTERNATIONAL INVESTMENT

on

H.R. 1725
before the

SUBCOMMITTEE ON ADMINISTRATIVE LAW AND REGULATION

of the

COMMITTEE ON THE JUDICIARY

UNITED STATES HOUSE OF REPRESENTATIVES
July 24, 1991

I am

Good morning, Mr. Chairman. My name is Elliot Richardson. I am here this morning on behalf of the Association for International Investment ("AFII"), of which I am Chairman. not a lobbyist for any foreign company and I am not registered for any purpose under the Foreign Agents Registration Act of 1938 ("FARA").'

AFII was founded in early 1988 to represent a partnership of U.S. subsidiaries of foreign companies, American-based multinationals, state governments, and American Chambers of Commerce abroad. We support the longstanding U.S. international investment policy, which encourages the free flow of capital in response to market forces.

-

AFII does not represent individual members corporate, state, or chamber - before the Congress or the Administration on matters that affect their particular business interests. Rather, we seek to address public policy issues that concern everybody with an interest in the freedom of international investment. I am pleased to have the opportunity to appear before this Subcommittee today to address one of these issues of public policy -- whether FARA should be amended to encompass international economic competition.

I. THE FOREIGN AGENTS REGISTRATION ACT

A. The Application of FARA

FARA applies to any person acting as an agent on behalf of a foreign principal (i.e., a "foreign agent").' Although certain commercial activities are exempted, political activities of foreign agents fall directly within FARA's scope.

1

The Foreign Agents Registration Act of 1938, Pub. L. No. 775-583, 52 Stat. 631 (codified as amended at 22 U.S.C. 611 (1988).

2

FARA defines the term "foreign principal" as a foreign government or political party, a person outside the United States, or an entity that is organized under the laws of a foreign country or has its principal place of business abroad." FARA broadly defines the terms "foreign government" and "foreign political party." For example, the term foreign government includes de facto and de jure governments, plus any insurgents claiming authority.

An "agent of a foreign principal" is defined as a person who is supervised, controlled, financed, or subsidized by a foreign person and (1) engages in political activities in the United States; (2) acts as a public relations counsel or political consultant in the United States; (3) solicits or distributes contributions, money, or other things of value within the United States; or (4) represents the interests of the foreign principal before any agency or official of the United States government."

Under FARA's current definition of "foreign principal," persons and entities who work for or on behalf of foreign-owned U.S.-incorporated businesses are not generally considered "agents of foreign principals.

FARA does not apply to all activities by U.S. agents on behalf of foreign principals. There are two main exemptions, the first of which is the so-called "attorneys exemption," which exempts lawyers who represent foreign interests in purely commercial matters.

In addition, foreign-owned or controlled U.S. companies are not generally required to register under the two distinct, although similar, "commercial exemptions." The first, the "commercial" variant of the commercial exemption, provides that FARA does not apply to persons who engage only "in private and nonpolitical activities in furtherance of the bona fide trade or commerce of such foreign principal."9

The second, the "political" variant of the commercial exemption, provides that FARA does not apply to foreign agents who engage only "in other activities not serving predominantly a foreign interest" even though they may be political in nature