Chuck Grassley

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, for years I have worked to decrease our reliance on foreign sources of energy to accelerate and diversify domestic energy production. I believe public policy ought to promote renewable domestic production that burns clean energy. That's why, earlier this year, I introduced the Providing Opportunities With Effluent Renewable, or POWER Act, which seeks to cultivate another homegrown resource: swine and bovine waste nutrients. The benefits of swine and bovine waste nutrient as a renewable resource are enormous. Currently there are at least 20 dairy and hog farms in the United States that use an anaerobic digester or similar system to convert manure into electricity. These facilities include swine or dairy operations in California, Wisconsin, New York, Connecticut, Vermont, North Carolina, Pennsylvania, Virginia, Colorado, Minnesota, and my home State of Iowa. By using animal waste as an energy source, a livestock producer can reduce or eliminate monthly energy purchases from electric and gas suppliers. In fact, a dairy operation in Minnesota that uses this technology generates enough electricity to run the entire dairy operation, saving close to $700 a week in electricity costs. This dairy farm also sells the excess power to their electrical provider, furnishing enough electricity to power 78 homes each month, year round. The benefits of using an anaerobic digester do not end at electricity production. Using this technology can reduce and sometimes nearly eliminate offensive odors from the animal waste. In addition, the process of anaerobic digestion results in a higher quality fertilizer. The dairy farm I referenced earlier estimates that the fertilizing value of the animal waste is increased by 50 percent. Additional environmental benefits include mitigating animal waste's contribution to air, surface, and groundwater pollution. The amendment I am offering will allow livestock producers the option of developing methane recovery systems as a structural practice under the Environmental Quality Incentives Program. This option will provide livestock producers another opportunity when determining what is best for the future of their family farms. Livestock producers will have the ability to meet their own individual energy needs and possibly supply green, renewable energy to other consumers. Using swine and bovine waste nutrient as an energy source can cultivate profitability while improving environmental quality. Maximizing farm resources in such a manner may prove essential to remain competitive and environmentally sustainable in today's livestock market. In addition, more widespread use of this technology will create jobs related to the design, operation, and manufacture of energy recovery systems. The development of renewable energy opportunities will help us diminish our foreign energy dependence while promoting ``green energy'' production. Using swine and bovine waste nutrient is a perfect example of how the agriculture and energy industries can come together to develop an environmentally friendly renewable resource. My legislation will foster increased investment and development in waste to energy technology thereby improving farmer profitability, environmental quality, and energy productivity and reliability. This amendment is good for agriculture, good for the environment, good for energy consumers, and promotes a good, make that great, renewable resource that will reduce our energy dependence on foreign fuels. It is my hope that all of my colleagues join with me to advance this important piece of legislation

Mr. GRASSLEY. Mr. President, are we on the farm bill?

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, today Senator Kerry and I introduced bipartisan legislation that will provide some relief to those workers who are facing a massive tax bill on the phantom income they have from incentive stock options. Because it is important that my colleagues understand the unfairness of this matter, let me provide a very brief background. Incentive stock options ISO, are an option given by an employer to an employee to purchase stock at a certain price. An individual does not recognize any income on the grant of the option or exercise thereof if the individual holds the shares for more than 2 years after grant and 1 year after exercise. If the holding period requirements are satisfied, the employee is taxed on the excess of the sale price over the exercise price on his disposition of the shares. The reason these employees have such a significant tax bill is due to the workings of the Tax Code's answer to Rube Goldberg, the Alternative Minimum Tax, AMT. The employee's nonrecognition of income discussed above does not apply for AMT purposes. For AMT purposes, the code requires the recognition of the excess for the stock's fair market value on the date of exercise over the option price when the stock is substantially vested. Thus, while an employee does not have a tax liability of ordinary income for exercising his ISO the employee may be subject to AMT when he exercises his ISO. While in years past, this may not have been too great a problem in a time when share prices are increasing and individuals have the money to pay the AMT. It is a very different story when shares are declining. The individual is then facing the AMT charges based on the exercise value but often has no funds to pay the AMT since the stock that was the source of the AMT has declined in value since it was exercised. It is true that if the individual had sold the stock in the same year he exercised his ISO he would have potentially reduced his AMT liability significantly. However, the code sends a mixed signal to the individual telling him that he must hold the stock for one year after exercise if he wants to avoid taxation at ordinary income on the value at the point of exercise. The above are the facts of the tax code, but they do not reflect the very real disaster this has done to many people across the country. The story of one company in Cedar Rapids, IA, McLeod USA, puts a real face on how this tax has destroyed families. I have received letters from dozens of honest hard-working people of this company telling me how they are making a good salary in Iowa, say $50,000 or $70,000, and were also given these ISOs as an additional incentive to work for McLeod. Now, because of the AMT rules and the declining market, these families are facing tax bills of tens of thousands, if not over a hundred thousand dollars. It is wiping out a lifetime of savings and hardwork, all to pay a tax bill on phantom income, income they never received, never enjoyed and never had. It is outrageous and it is just plain wrong. The bill that Senator Kerry and I have introduced will provide significant relief from the AMT tax bill for workers. It allows employees to determine the value of their stock options on April 15, 2001, (as opposed to the exercise date), which will reflect the downturn of the market. This will go far in minimizing the AMT hit that employees face. In addition, the relief is targeted to assist low- income and middle-income families. I hope my colleagues will join myself and Senator Kerry to put an end to this tax disaster. I ask unanimous consent the text of the bill be printed in the Record.

Mr. GRASSLEY

Mr. GRASSLEY. That is the one I am speaking about, the Feingold amendment.

Mr. GRASSLEY. Of course, I will yield.

Mr. GRASSLEY. Maybe my own personal experiences in the way of family farming compound this problem. I will just get to the issue and leave the personal experiences I have had out of this issue. In the year 2001, there are farmers who are in the same situation of wanting to market the same way I did the years I had livestock, from 1959 to 1974, and again from 1984 to about 1987, even since I have been in the Senate. We have a situation where you can't deliver whenever you want to deliver. You become a residual supplier. This is a problem Senator Feingold is trying to correct. I hope I can help him. Many packers have arbitration clauses in their contracts with farmers. Arbitration clauses significantly reduce the small family farmer's ability to get a fair shot when a dispute with packers arises, such as misweighing of animals, bad feed cases, or wrongful termination of contracts. When a dispute between a packer and a family farmer arises and the contract between the two includes an arbitration clause, the family farmer has no alternative but to accept arbitration to resolve the dispute. I certainly recognize that arbitration has its benefits. I have promoted that as an alternative dispute resolution as a member of the Senate Judiciary Committee, and we have laws as a result of that. In certain cases, regardless of the advantage of arbitration, it can be less costly than other dispute settlement means. In certain other cases, it can remove some of the workload from our Nation's overburdened court system. For these reasons, arbitration must be an option, but it should be no more than an option. In some cases, however, mandatory arbitration clauses create another level of litigation. State courts provide the ability for a party to challenge an arbitration clause on the basis of fraud, misrepresentation, or lack of knowing and voluntary waiver. Farmers often must file civil actions seeking to invalidate the arbitration clauses after a dispute arises when they realize they would be placed at extreme disadvantage in arbitration in a particular case and because the arbitration fees are too high. We can learn from the experience of the poultry industry. Today nearly 100 percent of the Nation's poultry is captive. In recent years, poultry producers have been especially affected by mandatory arbitration clauses. When one chooses arbitration, he then waives rights to access to the courts and the constitutional right to a jury trial. Certain standardized court rules are also waived, such as the right to discovery. This is important because a farmer must prove his case, the company has the relative information, and the farmer cannot prevail unless we can compel disclosure of relevant information. Moreover, longstanding law states that a waiver of rights by a party must be knowing and voluntary. A farmer cannot waive such rights in a knowing and voluntary way when he is only bargaining about a processor- drafted contract about price and volume terms. He cannot make a knowing and voluntary waiver in a vacuum when a dispute does not exist and has not been contemplated. I am pleased to join Senator Feingold in support of this amendment to prohibit mandatory arbitration clauses from being included in contracts between packers and livestock producers. Our amendment will amend the Packers and Stockyards Act to provide that mandatory arbitration clauses in contracts between packers and livestock producers are not enforceable unless parties agree to binding arbitration after the dispute arises. Our amendment will give farmers the opportunity to choose the best form of dispute settlement mechanism. Instead of binding arbitration, mediation or civil action may give family farmers a fighting chance to succeed in a dispute with a packer. I yield the floor.

Mr. GRASSLEY. It is applicable to your amendment. I will speak also to your amendment at another time.

Mr. GRASSLEY. Mr. President, our Nation's farmers and independent livestock producers are becoming increasingly subjected to vertical integration in their industry. I recall years past when family farmers had complete control over their livestock, from farrowing until marketing. Today, however, more than 80 percent of the hogs are either marketed under contract or are owned by the packer. In my home State of Iowa, vertical integration has led to a situation in which many farmers can't even get a bid on their livestock from packers. Instead, they are simply forced to accept a slot when they can deliver their livestock to packers at the packer's price. That kind of makes them a residual supplier of livestock, kind of puts them in the position of being last in line. It also puts them in a position economically, I believe, of getting a lower price. When I was farming and raising pigs, it was as simple as calling up maybe an hour before you wanted to deliver your pigs, calling up the packing company in Waterloo, IA, and asking: What are you paying today for hogs? You might dicker a little bit, but you eventually reached agreement. When you wanted to sell a lot, you said: Well, I want to sell some. So you loaded up, backed up the pickup to the hog house, loaded a few pigs, and drove 15, 20 miles to deliver them. It was that simple. Today it is even worse for cattle in the sense that you might be able to have a half hour within a whole week of time to be able to sell something. We have a terrible situation where the family farmer is kind of stuck in the sense of being a residual supplier. You can say that farmer has the option of contracting those sorts of things of which he can take advantage. There are some people who ought to have the same opportunity to get the same price other people get. We are in a position now where things are somewhat different.

Mr. GRASSLEY. Mr. President, I want our colleagues to know that what this amendment does is exactly the same as we are doing in the case of car dealerships. We have a bill, S. 1140, which has 47 cosponsors. I am not going to read the names of the cosponsors, but it is a very bipartisan group of people, Democrats and Republicans. I hope that staff listening to this debate or Members listening to this debate will look at S. 1140 and remind their Members, or the Members themselves will be reminded, that they are cosponsoring legislation that does away with arbitration in car dealership contracts with major manufacturers. If it is OK for nonagricultural businesses, it even has to be better for the family farmer that we don't have these sorts of requirements in these contracts. I ask my colleagues to take a look at S. 1140.

Mr. GRASSLEY. Am I going to have an opportunity to speak on the Feingold amendment?

Mr. GRASSLEY

Mr. GRASSLEY. What does the Chair mean without objection? The Chair did not ask if there was any objection.

Mr. GRASSLEY. Mr. President, this is a bipartisan piece of legislation. Members might wonder, if the Governor of Illinois and mayor of Chicago have reached an agreement on expanding O'Hare Airport, why have the legislation? The legislation is very important because this issue has been hanging around for a long time. We want to make sure that somebody coming down the road doesn't change it. O'Hare is a very key national and international hub airport. I am not from Illinois, but for the people in my State of Iowa, particularly the major airports of Des Moines and Cedar Rapids, from the standpoint of the cost of service and the fact that service is not always certain, plus the fact that several smaller airports in Iowa do not have access to O'Hare and are very interested in what happens at O'Hare; Iowans are very concerned about O'Hare. It has to do with the traveling public, both tourists as well as business, and it also has something to do, in turn, with the economic development of a State such as mine because air transportation is so important to economic development. O'Hare is a key national and international hub airport, especially for Iowa. When O'Hare sneezes, the rest of the country gets the flu. Modernization of O'Hare is very important to Iowa's economy. It will help prevent future congestion problems and delays that plague air travelers. It will make air travel more efficient and less frustrating. And it will be easier and more pleasant for air travelers to come to Iowa. Without a doubt, more on-time flights will be a big help for business travel, where time is money. The plan to modernize O'Hare will also make it a safer airport. We're all more focused on air safety after September 11. Air travel security means more than screening passengers and baggage. It means safe take- offs and landings. Today, the runway configuration at O'Hare is not as safe as it could be. The new plan will eliminate dangerous cross- runways. There will be more parallel runways. It will also include more modern electronic instrumentation. I appreciate the way the governor and the mayor got together and worked out a plan. When I first started pressing for a solution to the O'Hare problem last spring, I knew it wouldn't be an easy process for anyone. But it's been a very successful process. It won the support of the airline pilots and air traffic controllers. It produced a compromise that everyone can be proud of. Now Congress needs to do its part to ensure the success of this hard work. That means immediate passage of the Durbin-Grassley legislation. I look forward to working with my colleagues to make this happen--even in the short time left--prior to adjournment.

Mr. GRASSLEY. As a preliminary comment, I want everyone to know something loud and clear. We are all here to do the peoples' business. My Republican caucus is here to do the peoples' business. We are in an extraordinary time. Our Nation is at war. Our Commander in Chief, President Bush, is occupied with the war effort. Our responsibilities to the people that sent us here are always high, but, extraordinarily high in this time of war. This is not a time to play political games with the people's business. In my view, we have a high duty to deliver a legislative product to the President on economic stimulus and aid to dislocated workers. I have committed all of my energy to get to the goal line on a package. I believe my chairman, Senator Baucus, also sincerely wants a stimulus package that the President can sign. When you look at the record, however, I am doubtful the Senate Democratic leadership really wants a package. The President took the lead by proposing economic stimulus measures and a package of aid to dislocated workers. Chairman Greenspan gave us a green light on this effort about 2 months ago. The House passed a bill that the Senate Democrats, with some justification, viewed as partisan. The Senate Democratic leadership then responded with its own partisan bill, shut out all Republicans, and rammed it through the Finance Committee on a party-line vote. That partisan stimulus package dead-ended here on the Senate floor. We were stuck on in a partisan rut for awhile. After much negotiation, the House and Senate leadership on both sides agreed to an extraordinary procedure. It is what I would call a ``quasi conference.'' This agreement contemplates a conference agreement even though the Senate did not pass a bill on the subject matter. This agreement was a major concession by the House to Senator Daschle's insistence that Democrats have only one negotiation. Keep in mind Senator Daschle insisted on one negotiation with a partisan product that has not passed the Senate because it was designed to be partisan. Republicans accommodated the Senate Democratic leadership. After that agreement was reached, I felt some optimism. It seemed that all sides realized it is our job to get this legislative product to the President. My optimism was a bit premature. Now, there has been a lot of speculation about whether the Senate Democratic leadership really wants a stimulus deal. Some say that, inspired by Democratic interest groups and strategists, the Senate Democratic leadership has concluded that it is better to have an issue. The speculation is that, armed with polling data, the Senate Democratic leadership has decided on a strategy of covertly killing a stimulus package, while maintaining a public profile of support. If the economy doesn't recover, better to save the issue to use against the President and the other side for the fall 2002 elections. If the economy does recover, from a political standpoint, what is lost. Better to wait and see, the speculation runs, than to give any more tax relief at this time. Mr. President, such a strategy, if it is the case, is particularly disappointing in wartime. It is a cynical strategy. If true, it short changes American workers and struggling business for an anticipated political shot. It makes economy recovery and aid to dislocated workers secondary to a partisan political objective. I ask, is that how we ought to be operating in wartime? Though I have heard and read this speculation, I had hoped that it was not true. So, let's say I was a bit shocked when I read the Roll Call article yesterday. After reading the article, I concluded Democratic leaders are traveling back in time. They are regressing, not progressing. They are regressing to earlier contentions that the stimulus package had to be a Democratic product or nothing at all. I thought we had moved past that and on to negotiations to build a bipartisan stimulus package. Instead, it appears the Democratic leaders don't want any real compromise. First, they have engineered a nearly impossible threshold. Second, they are conducting what appear to be required consultations between the Democratic negotiators and the rest of the Democratic caucus. If they are trying to prevent a stimulus deal, this is the way to do it. It is important to remember the Senate is split nearly down the middle. There are 50 Democrats, 49 Republicans, and one Independent. Yet the litmus test set up by the Democratic leadership ignores the Senate's makeup. By its terms, this litmus test is designed to limit any agreement to a Democrats-only deal. Because it ignores the reality of an evenly split Senate, this litmus test guarantees failure. If the Democratic leaders really mean what they say, that they want a stimulus bill, I ask them to remove the partisan litmus test. Any litmus test ought to go to the substance of the package. Let's get back to the substance. We're not that far apart. Let's not hold the stimulus package and the aid to dislocated workers hostage to an arbitrary and destructive test like the two-thirds rule. I have been flexible on Republican priorities. It is time for the Democratic leadership to show some flexibility on Democratic priorities. The first sign of flexibility will be to remove a barrier, the two-thirds rule, that guarantees failure.

Mr. GRASSLEY. Madam President, I rise to give a status report on the negotiations of the economic stimulus. I report to the Senate as the lone Republican Senate negotiator. Yesterday's Roll Call quotes numerous Democratic Senators as saying Senate Democrats won't agree to any stimulus deal unless the package has the support of two-thirds of the Democratic caucus. I ask unanimous consent that a copy of the article be printed in the Record.

Mr. GRASSLEY. I am sorry. If it is out of the 10 minutes of the Senator from Washington, that is OK.

Mr. GRASSLEY. Mr. President, this is my annual Defense Department accounting amendment. I call it my accounting 101 amendment. I call it accounting 101 because it calls on DOD to apply one of the most elementary accounting procedures in existence. It request that DOD match disbursements with obligations before making payments. Accountants and bookkeepers have been using this procedure since the beginning of time. It is an important internal control check. But it is simple and effective. Most people do it when they reconcile their monthly credit card bills. Before a bill is approved for payment, someone has to check to make sure that the item in question was, in fact, ordered and received; and it can be located in the warehouse or elsewhere. It is a way of detecting and deterring theft and fraud. Today, it can be done electronically with computers. For unexplained reasons in the past, DOD has not followed this simple procedure. DOD likes to pay the bill first and at some later date-- maybe a year or two later--try to match the payment with a bill. In the Pentagon, they call it ``pay and chase.'' In many cases, the bill is never found. Pay and chase is one big reason why DOD piled up $50 billion in unmatched disbursements in the 1990's. Sloppy bookkeeping leaves DOD's financial resources vulnerable to fraud and abuse. Earlier this year, the very distinguished chairman of the Appropriations Committee, Senator Byrd, raised a series of very troublesome questions about DOD accounting practices. He did it at a hearing before the Armed Services Committee on January on Mr. Rumsfeld's nomination. Senator Byrd said and I quote: ``The Pentagon's books are in such utter disarray that no one knows what America's military actually owns or spends.'' Senator Byrd also said and I quote: ``The Department of Defense's own auditors say the department cannot account for $2.3 trillion in transactions in one year alone.'' The failure to match disbursements with obligations is a big driver behind the problem identified by Senator Byrd. Senator Byrd's inquiry set off a firestorm at the Pentagon. It became a catalyst for change. Secretary Rumsfeld and his team are now committed to reform. As a former chief executive officer with a large corporation, Mr. Rumsfeld understands that he must have accurate, up-to-date information at his fingertips. He knows that he can't make good decisions with lousy information. But that's all he gets right now--lousy financial information. Secretary Rumsfeld knows that financial reform is mandatory. This year I have had the privilege of working with the very distinguished chairman of the Appropriations Committee, Senator Byrd, to solve this problem. Our financial reform initiative was accepted by the committee and is now part of the Fiscal Year 2002 Defense authorization bill. Secretary Rumsfeld's initiatives and the provisions in the Defense authorization bill are part of a long-term effort. It may take four years or more before the new systems are up and running and producing reliable financial information. The amendment that I offer today is a short-term, stopgap measure. It will help to maintain pressure and discipline in accounting before the new systems can kick in to action. Mr. President, the policy embodied in this amendment has been incorporated in the last seven appropriations acts--fiscal years 1995 through 2001. Under current law, Section 8137 of the act for Fiscal Year 2001, the matching threshold is set at $500,000.00. By a unanimous vote taken on June 9, 2000, the Senate agreed to keep the threshold at the $500,000.00 level. Both the General Accounting Office and the inspector general believe that this policy is helping the department avoid ``problem disbursements'' and other related accounting problems. Secretary Rumsfeld has made a firm commitment to ``clean up'' the books and bring some financial management reform to the process at the Pentagon. Mr. President, that's half of the battle right there--the will to do it. And the will is there. Having that kind of attitude at the top gives me a high level of confidence. Maybe we can get the job done this time. Since Secretary Rumsfeld's proposed reforms are still in the development phase and may be several years down the road, I am recommending that the matching threshold be maintained at the current level of $5,000,000.00. I urge my colleagues to support this amendment. amendment no. 2385 (Purpose: To set aside Army RDT&E funds for the Three-Dimensional Ultrasound Imaging Initiative II) At the appropriate place in division A, insert the following: Sec. . Of the amount appropriated by title IV of this division for the Army for research, development, test, and evaluation, $5,000,000 may be available for the Three- Dimensional Ultrasound Imaging Initiative II.

Mr. GRASSLEY. I hope it is after because I informed the Senator from Kansas I wanted to be out of here by 2:30 p.m.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I have placed a ``hold'' on the nomination of General Claude Bolton, Jr. for the position of Assistant Secretary of the Army for Research, Development, Acquisition, and Technology as questions asked by the Iowa/Illinois Senate delegation remain unanswered.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I rise to pay tribute to a departing Senate Finance Committee staffer, Monica Tencate. She has served the Senate with great distinction, and it is with much sadness that I am bidding her goodbye. I'd like to take a few moments to describe her contribution. Monica came to the Senate from California in 1998, and joined Chairman Roth's Finance Committee health team. After effective service there, she moved to Senator Frist's Subcommittee on Public Health, making a tremendous contribution on a broad range of challenging HELP Committee issues. I know her years with Senator Frist were very rewarding ones for her, so I was delighted that she was willing to return to the Finance Committee to work with me, as Director of the Finance Committee's health policy team. As I look back at this year, Monica was a real leader in the Committee's effort to strengthen and improve Medicare for the 21st Century, including prescription drug coverage for Medicare beneficiaries. She did a stellar job in helping to assemble a Tripartisan group, which put forward a framework for future success in this area. Due to the September 11 terrorist attacks, making major improvements to Medicare will have to wait until 2002. I believe, however, that we've laid a solid foundation for next year's efforts, and Monica's contribution was indispensable. Monica also played a key role in the Committee's efforts to help provide coverage to the uninsured, to streamline Medicare regulations for beneficiaries and providers, and to address potentially serious problems posed by the new hospital outpatient payment system. She's done all this while keeping in mind the reality that our federal health programs aren't free--it's hard-working Americans who pay for them. It's easy to lose sight of that fact here inside the Beltway, but Monica never has. Monica's contribution to me and to the Senate, in fact, went beyond policy and politics. She was a true team player, earning the respect of everyone she worked with, and the affection of her fellow Finance Committee staffers. And she did all this during one of this body's most tumultuous years in recent history--a year we'll all remember for the 50-50 Senate, the change in party control, the September 11 attacks, and finally the anthrax attack that drove many of us out of our offices. She served in her extraordinarily challenging job under these difficult circumstances with grace, commitment, and good humor. She will be sorely missed. Now Monica is heading home to San Diego, to rejoin her husband Mike, who's also serving the nation in the United States Marines. I wish her and Mike every blessing in this new phase of their life, and I extend to her my deepest thanks.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I am pleased to join my colleague from Vermont in introducing a bill to protect victims of identity theft. This legislative remedy is prompted by the sweeping impact of the Supreme Court's decision this past week on the rights of more than 750,000 Americans who annually have their identity stolen and their credit put at risk. Under current law, consumers have a two-year statute of limitations to sue credit reporting companies that fail to protect private financial information from improper disclosures and security lapses. The problem with the Supreme Court's decision is that a victim of identity theft often has no idea that information about his finances has been negligently handled or disclosed by a credit reporting company until it's too late to take any legal action. Under current law, the two year statute of limitations begins when the consumer's credit reporting company fails to comply with the law--not when the consumer discovers or should have discovered the problem. Our bill, the Protect the Victims of Identity Theft Act of 2001, changes that rule. As stated, it simply clarifies that the statute of limitations for identity theft does not start until the consumer discovers the problem or should have discovered the problem. This change in the law ensures that consumers have a fair chance to vindicate their rights should credit reporting companies fail to take reasonable steps to protect private financial and personal information from theft and misuse. I urge my Senate colleagues to join us in co-sponsoring this legislation to protect the American consumer.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I am pleased to join my colleague from Vermont in introducing a bill to protect victims of identity theft. This legislative remedy is prompted by the sweeping impact of the Supreme Court's decision this past week on the rights of more than 750,000 Americans who annually have their identity stolen and their credit put at risk. Under current law, consumers have a two-year statute of limitations to sue credit reporting companies that fail to protect private financial information from improper disclosures and security lapses. The problem with the Supreme Court's decision is that a victim of identity theft often has no idea that information about his finances has been negligently handled or disclosed by a credit reporting company until it's too late to take any legal action. Under current law, the two year statute of limitations begins when the consumer's credit reporting company fails to comply with the law--not when the consumer discovers or should have discovered the problem. Our bill, the Protect the Victims of Identity Theft Act of 2001, changes that rule. As stated, it simply clarifies that the statute of limitations for identity theft does not start until the consumer discovers the problem or should have discovered the problem. This change in the law ensures that consumers have a fair chance to vindicate their rights should credit reporting companies fail to take reasonable steps to protect private financial and personal information from theft and misuse. I urge my Senate colleagues to join us in co-sponsoring this legislation to protect the American consumer.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I rise today to introduce the ``Class Action Fairness Act of 2001.'' I am pleased to be joined by Senators Kohl, Hatch, Carper, Thurmond, Chafee and Specter. The Class Action Fairness Act of 2001 will help curb class action lawsuit abuses and protect consumers who find themselves as potential members of class action lawsuits. At the same time, the bill will preserve class action lawsuits as an important tool that brings representation to the unrepresented. In the last Congress, Senator Kohl and I introduced S. 353, the ``Class Action Fairness Act of 1999.'' We worked diligently and in good faith to address concerns expressed by members of the Judiciary Committee, as well as others interested in this issue. The Judiciary Committee marked up and favorably voted out a Hatch/Grassley/Kohl amendment in the nature of a substitute. Unfortunately, S. 353 was not considered by the full Senate in the 106th Congress because of the press of other legislative business. Today, we are introducing the bill that the Senate Judiciary Committee agreed to in the last Congress, with minor modifications. We have also included a few more provisions that will better protect class members. I am hopeful that in this Congress, the Senate will consider this bill promptly and enact the much needed changes to the current system. Presently, the class action system is awash with problems. More and more class action lawsuits are being filed to the benefit of attorneys, where attorneys agree to settlements that give them huge fees while their clients get little of value or nothing. A 1999 Rand Report on class actions found that state courts often give most of the money in a settlement to the lawyers, not the class members they supposedly represent. The Judiciary Committee held hearings where we heard about settlement after settlement where class members got coupons or nothing, but the lawyers got millions of dollars in attorneys' fees. We heard about class members being awarded restrictive coupons for airline tickets, as well as class members who received a lawyers' bill that was higher than the compensation for their injury. But the lawyers got all the money in fees. Is this fair? I thought the lawyers were supposed to represent their clients, not themselves. I am not saying that attorneys should not be paid for their work, but it seems to me that lawyers have found class actions to be an easy way for them to make money. The Judiciary Committee also heard that lawyers game the class action rules to keep class actions in certain State courts, particularly courts that are quick to certify a class without adequately considering the interests of all class members or courts that aren't careful in evaluating whether the proposed class meets the required class criteria. Those State courts are also more likely to rubber-stamp settlement proposals without scrutinizing them for fairness. For example, we learned that in some cases members of a class that lived closer to the courthouse in which the settlement was filed got a larger recovery than others. We also learned about settlements where a bounty was paid to class representatives which was disproportionately larger than that provided to absent class members. It's easy for lawyers to forum-shop and keep these cases in State court, for example, attorneys name irrelevant parties to their class action suits in an effort to destroy diversity. Attorneys make inaccurate statements about the jurisdictional amount to keep the defendant from transferring the case to Federal court, but then retract them one year later when removal is barred. In addition, similar class actions are filed in many State courts and cannot be consolidated, increasing the chances for collusive settlements or situations where there is a ``race to settlement'' by the attorneys. This also creates significant inefficiencies and waste of court resources. A much more troublesome effect of this problem is the fact that State courts are making decisions for the entire country. The 1999 Rand Study and a more recent study by the Manhattan Institute found that most of the increase in class action lawsuits is occurring in State courts. With this happening, basically State courts are dictating national policy. Class actions are usually the cases that involve the most people, the most money, and the most interstate commerce issues. But it is clear that these cases really belong in Federal court. And there is a constitutional basis for this. Article 3, section 2 of the Constitution states that controversies between citizens of different States should be subject to the jurisdiction of the Federal courts. However, the present Federal jurisdiction statutes were originally enacted over a century ago, so they do not take the modern day class action into account and basically exclude them from the Federal court system. Consequently, the current system produces aberrant results as to what can or cannot proceed in Federal court. For example, right now, a slip and fall case worth $75,001 involving two residents from different States can be heard in Federal court. But a nationwide class action that involves millions of citizens residing in all 50 States, that seeks billions of dollars in damages, implicates the laws of every State, and involves interstate commerce issues, is mainly confined to the State courts. Why should a State county court with an elected judge decide these cases, but not a Federal judge? By only allowing State courts to hear nationwide class actions, State courts can dictate national policy or improperly impose their State's laws on the citizens of other States. Let me illustrate this serious problem with the State Farm case. In a large class action case brought against State Farm on the issue of auto insurers' use of ``aftermarket'' auto parts in automobile repairs, an Illinois court applied Illinois auto insurance law to the other 49 States. Several State attorneys general intervened in the case and expressed their opposition to the court's application of Illinois law to their citizens. The National Association of State Insurance Commissioners and Public Citizen also expressed concern over the outcome of this case. The reason for this opposition was because State laws and policy on the use of aftermarket parts varies widely State by State, yet the Illinois State court imposed its auto insurance laws on the other States. The ability of a State court to have such a monumental impact on the laws of other States, by basically overturning national policy and the laws or regulations of the other 50 States is more than troubling. So, there are compelling reasons for us to take remedial steps regarding the class action system. The Class Action Fairness Act of 2001 takes a good first step at addressing some of the problems we have identified. To address the problem of class members not knowing what is going on in a class action or settlement, or not being clear as to what their rights are, the Class Action Fairness Act of 2001 has a provision that notice to class members needs to contain an explanation of their rights and other matters concerning settlement terms, including attorneys' fees, in a plain and easy to understand language. To address the problem where class members get nothing and attorneys get millions, the Class Action Fairness Act of 2001 provides that notification of any proposed settlements must be given to the State attorneys general or the primary regulatory or licensing agency of any State whose citizens are involved. This is so that the State attorney general or responsible agency can intervene in the case to ensure that settlements are fair. To address the problem of special bounties that unfairly impact the absent members of a class, the bill contains a new provision that would prohibit the payment of bounties to class representatives that are disproportionately larger than that provided to absent class members. To address the problem of discrimination between class members based on geographic location, the bill contains a new provision that prohibits courts from approving settlements that award some class members a larger recovery than others based on geography. To start responding to the issue of outrageous attorneys fees, the Class Action Fairness Act of 2001 asks the Judicial Conference to report back to Congress in a year after studying attorneys' fees in class actions and how judges can do a better job in making sure that class action settlements are fair. The bill also includes new provisions that protect class members against net losses and require the courts to make specific findings as to the fairness of coupon and other non-cash class action settlements. To respond to the problem where plaintiff lawyers game the system to improperly keep class action cases in State court, or where similar class action suits are being filed in different State courts, or where State courts are imposing their laws on citizens of other States and formulating national policy, the Class Action Fairness Act of 2001 loosens diversity and removal requirements so that class action cases with national ramifications can be heard in Federal courts and similar class actions can be consolidated. The bill is crafted so that it will not harm federalism or deprive State courts of their ability to adjudicate cases for their own citizens. That is because there is a constitutional basis for class actions to proceed in Federal court. Clearly, the Federal courts are a better forum for these kinds of cases that are of nationwide importance. In conclusion, there is substantial evidence that class action abuse is going on and we should do something about it. I think that the Class Action Fairness Act of 2001 is a good, balanced bill that addresses some of the problems that we've identified. Moreover, there has been a lot of compromise to address concerns about the bill. We have also improved the bill by adding additional consumer protections. So, the Class Action Fairness Act of 2001 will preserve the class action process, but put a stop to the more egregious abuses in the system. In addition, I'd like to thank my friend Senator Kohl, who has worked so closely with me over the years in bringing the issue of class action abuse to the forefront. We both share a deep concern over protecting the rights of consumers, while making sure that the due process rights of all litigants are preserved. I'd also like to thank Senator Hatch, who worked with us to move this bill forward in the Judiciary Committee last year, and worked on improvements to the bill. I urge all my colleagues to join Senators Kohl, Hatch, Carper, Thurmond, Chafee and Specter in supporting this important piece of legislation. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I rise today to introduce the ``Class Action Fairness Act of 2001.'' I am pleased to be joined by Senators Kohl, Hatch, Carper, Thurmond, Chafee and Specter. The Class Action Fairness Act of 2001 will help curb class action lawsuit abuses and protect consumers who find themselves as potential members of class action lawsuits. At the same time, the bill will preserve class action lawsuits as an important tool that brings representation to the unrepresented. In the last Congress, Senator Kohl and I introduced S. 353, the ``Class Action Fairness Act of 1999.'' We worked diligently and in good faith to address concerns expressed by members of the Judiciary Committee, as well as others interested in this issue. The Judiciary Committee marked up and favorably voted out a Hatch/Grassley/Kohl amendment in the nature of a substitute. Unfortunately, S. 353 was not considered by the full Senate in the 106th Congress because of the press of other legislative business. Today, we are introducing the bill that the Senate Judiciary Committee agreed to in the last Congress, with minor modifications. We have also included a few more provisions that will better protect class members. I am hopeful that in this Congress, the Senate will consider this bill promptly and enact the much needed changes to the current system. Presently, the class action system is awash with problems. More and more class action lawsuits are being filed to the benefit of attorneys, where attorneys agree to settlements that give them huge fees while their clients get little of value or nothing. A 1999 Rand Report on class actions found that state courts often give most of the money in a settlement to the lawyers, not the class members they supposedly represent. The Judiciary Committee held hearings where we heard about settlement after settlement where class members got coupons or nothing, but the lawyers got millions of dollars in attorneys' fees. We heard about class members being awarded restrictive coupons for airline tickets, as well as class members who received a lawyers' bill that was higher than the compensation for their injury. But the lawyers got all the money in fees. Is this fair? I thought the lawyers were supposed to represent their clients, not themselves. I am not saying that attorneys should not be paid for their work, but it seems to me that lawyers have found class actions to be an easy way for them to make money. The Judiciary Committee also heard that lawyers game the class action rules to keep class actions in certain State courts, particularly courts that are quick to certify a class without adequately considering the interests of all class members or courts that aren't careful in evaluating whether the proposed class meets the required class criteria. Those State courts are also more likely to rubber-stamp settlement proposals without scrutinizing them for fairness. For example, we learned that in some cases members of a class that lived closer to the courthouse in which the settlement was filed got a larger recovery than others. We also learned about settlements where a bounty was paid to class representatives which was disproportionately larger than that provided to absent class members. It's easy for lawyers to forum-shop and keep these cases in State court, for example, attorneys name irrelevant parties to their class action suits in an effort to destroy diversity. Attorneys make inaccurate statements about the jurisdictional amount to keep the defendant from transferring the case to Federal court, but then retract them one year later when removal is barred. In addition, similar class actions are filed in many State courts and cannot be consolidated, increasing the chances for collusive settlements or situations where there is a ``race to settlement'' by the attorneys. This also creates significant inefficiencies and waste of court resources. A much more troublesome effect of this problem is the fact that State courts are making decisions for the entire country. The 1999 Rand Study and a more recent study by the Manhattan Institute found that most of the increase in class action lawsuits is occurring in State courts. With this happening, basically State courts are dictating national policy. Class actions are usually the cases that involve the most people, the most money, and the most interstate commerce issues. But it is clear that these cases really belong in Federal court. And there is a constitutional basis for this. Article 3, section 2 of the Constitution states that controversies between citizens of different States should be subject to the jurisdiction of the Federal courts. However, the present Federal jurisdiction statutes were originally enacted over a century ago, so they do not take the modern day class action into account and basically exclude them from the Federal court system. Consequently, the current system produces aberrant results as to what can or cannot proceed in Federal court. For example, right now, a slip and fall case worth $75,001 involving two residents from different States can be heard in Federal court. But a nationwide class action that involves millions of citizens residing in all 50 States, that seeks billions of dollars in damages, implicates the laws of every State, and involves interstate commerce issues, is mainly confined to the State courts. Why should a State county court with an elected judge decide these cases, but not a Federal judge? By only allowing State courts to hear nationwide class actions, State courts can dictate national policy or improperly impose their State's laws on the citizens of other States. Let me illustrate this serious problem with the State Farm case. In a large class action case brought against State Farm on the issue of auto insurers' use of ``aftermarket'' auto parts in automobile repairs, an Illinois court applied Illinois auto insurance law to the other 49 States. Several State attorneys general intervened in the case and expressed their opposition to the court's application of Illinois law to their citizens. The National Association of State Insurance Commissioners and Public Citizen also expressed concern over the outcome of this case. The reason for this opposition was because State laws and policy on the use of aftermarket parts varies widely State by State, yet the Illinois State court imposed its auto insurance laws on the other States. The ability of a State court to have such a monumental impact on the laws of other States, by basically overturning national policy and the laws or regulations of the other 50 States is more than troubling. So, there are compelling reasons for us to take remedial steps regarding the class action system. The Class Action Fairness Act of 2001 takes a good first step at addressing some of the problems we have identified. To address the problem of class members not knowing what is going on in a class action or settlement, or not being clear as to what their rights are, the Class Action Fairness Act of 2001 has a provision that notice to class members needs to contain an explanation of their rights and other matters concerning settlement terms, including attorneys' fees, in a plain and easy to understand language. To address the problem where class members get nothing and attorneys get millions, the Class Action Fairness Act of 2001 provides that notification of any proposed settlements must be given to the State attorneys general or the primary regulatory or licensing agency of any State whose citizens are involved. This is so that the State attorney general or responsible agency can intervene in the case to ensure that settlements are fair. To address the problem of special bounties that unfairly impact the absent members of a class, the bill contains a new provision that would prohibit the payment of bounties to class representatives that are disproportionately larger than that provided to absent class members. To address the problem of discrimination between class members based on geographic location, the bill contains a new provision that prohibits courts from approving settlements that award some class members a larger recovery than others based on geography. To start responding to the issue of outrageous attorneys fees, the Class Action Fairness Act of 2001 asks the Judicial Conference to report back to Congress in a year after studying attorneys' fees in class actions and how judges can do a better job in making sure that class action settlements are fair. The bill also includes new provisions that protect class members against net losses and require the courts to make specific findings as to the fairness of coupon and other non-cash class action settlements. To respond to the problem where plaintiff lawyers game the system to improperly keep class action cases in State court, or where similar class action suits are being filed in different State courts, or where State courts are imposing their laws on citizens of other States and formulating national policy, the Class Action Fairness Act of 2001 loosens diversity and removal requirements so that class action cases with national ramifications can be heard in Federal courts and similar class actions can be consolidated. The bill is crafted so that it will not harm federalism or deprive State courts of their ability to adjudicate cases for their own citizens. That is because there is a constitutional basis for class actions to proceed in Federal court. Clearly, the Federal courts are a better forum for these kinds of cases that are of nationwide importance. In conclusion, there is substantial evidence that class action abuse is going on and we should do something about it. I think that the Class Action Fairness Act of 2001 is a good, balanced bill that addresses some of the problems that we've identified. Moreover, there has been a lot of compromise to address concerns about the bill. We have also improved the bill by adding additional consumer protections. So, the Class Action Fairness Act of 2001 will preserve the class action process, but put a stop to the more egregious abuses in the system. In addition, I'd like to thank my friend Senator Kohl, who has worked so closely with me over the years in bringing the issue of class action abuse to the forefront. We both share a deep concern over protecting the rights of consumers, while making sure that the due process rights of all litigants are preserved. I'd also like to thank Senator Hatch, who worked with us to move this bill forward in the Judiciary Committee last year, and worked on improvements to the bill. I urge all my colleagues to join Senators Kohl, Hatch, Carper, Thurmond, Chafee and Specter in supporting this important piece of legislation. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. GRASSLEY

Mr. GRASSLEY. Madam President, I also wish to discuss a Medicaid provision in the Democrats' economic stimulus package that would provide for an expansion of the Medicaid program to a new group of individuals. In order to fully evaluate the potential effectiveness of this proposal, it is important to take a look at State fiscal health. The economic slow-down coupled with increased demands on health care safety net programs is creating major strains on State budgets. Just this year, 44 States have revenues below original forecasts; 28 States have implemented or considered Medicaid cuts; 7 States have convened special legislative sessions to address budget shortfalls; and 11 States have determined a need for supplemental appropriations for Medicaid. Today, Medicaid expenditures are 7.5 percent higher than they were in 1999, and on average account for 19.5 percent of State spending. Therefore, Medicaid is a primary target for State budget cutbacks during economic downturns. States have reported a current cumulative revenue shortfall of $10 billion, and predict this number to continue to grow. Moreover, new and unprecedented State responsibilities for homeland security are exacerbating serious fiscal conditions. Therefore, any new State Medicaid option, no matter how generous the Federal match, is not an attractive proposal to States. States simply do not have the resources to take up a new option under the Medicaid program because States cannot absorb the State share of new Medicaid enrollees. In fact, a spokesperson for the National Governor's Association recently stated that any proposal, including a Medicaid expansion, that requires State funding would have ``zero take-up.'' Aside from the budget constraints that prevent a Medicaid expansion from being a viable health care proposal for dislocated workers, Medicaid expansions are not a timely response to addressing emergencies. In order to develop a new Medicaid eligibility category, States would have to develop a State plan amendment. This entails a planning period that includes: setting income levels and time frames; creating outreach materials and caseworker training; and obtaining approval from the legislature--assuming the legislature is still in session and many aren't--and finally, getting approval from CMS. By the time this process runs its course, the 12 month window would likely be over. Even if the 12 month period isn't over, it wouldn't be an immediate benefit either to health coverage or as a fiscal stimulus. A more immediate and expeditious approach to making health care coverage available to displaced workers would be through the National Emergency Grant program. This program should be expanded to allow States the opportunity to cover health care premiums, including COBRA premiums, for displaced workers and their dependents. The National Conference of State Legislatures agrees that flexible Federal funds would be the best approach to empowering States to effectively address State-specific needs of dislocated workers. There are a number of ways that States could use National Emergency Grant funds to provide immediate health care access to dislocated workers and their families including using State employee health systems to unemployed individuals, utilizing community health centers, or contracting with insurers. The National Emergency Grant program requires nothing more than a new set of grant criteria allowing States to use funds for health insurance. The NEG proposal is an expedient means of making health coverage available to dislocated workers and their families.

Mr. GRASSLEY. Mr. President, I thank the Senator from Minnesota for giving me an opportunity to talk about bankruptcy. I haven't had a chance.