Arlen Specter

Mr. SPECTER

Mr. SPECTER. Mr. President, the senior Senator from Louisiana has asked for 2 minutes to precede my comments, and I am prepared to yield to her for that purpose.

Mr. SPECTER

Mr. SPECTER. Mr. President, I have sought recognition to introduce legislation to establish a reporter's privilege. The situation in the United States today is that newspaper reporters, journalists, are subject to a compulsory process to disclose confidential informants. The matter came to a head with the incarceration of a New York Times reporter, Judith Miller, for an extended period of time. Last year, Senator Lugar and I introduced legislation to establish a reporter's privilege. Since that time, the legislation has been revised to provide limitations where national security is involved or where the reporter may be the eyewitness to a specific event. This legislation differs from S. 1267, the bill which has been introduced by Senator Lugar and Senator Dodd, in that it tightens up exceptions where, for reasons of substantial public importance, the privilege will be limited. But today, there is a patchwork quality in the law, with the circuits going in different directions. Privileges are accorded under many State laws. This bill has very widespread support. So on behalf of Senator Schumer, Senator Lugar, and myself, I introduce this bill. I ask unanimous consent that the full text of my prepared statement be printed in the Record.

Mr. SPECTER

Mr. SPECTER. Mr. President, I have sought recognition to introduce legislation to establish a reporter's privilege. The situation in the United States today is that newspaper reporters, journalists, are subject to a compulsory process to disclose confidential informants. The matter came to a head with the incarceration of a New York Times reporter, Judith Miller, for an extended period of time. Last year, Senator Lugar and I introduced legislation to establish a reporter's privilege. Since that time, the legislation has been revised to provide limitations where national security is involved or where the reporter may be the eyewitness to a specific event. This legislation differs from S. 1267, the bill which has been introduced by Senator Lugar and Senator Dodd, in that it tightens up exceptions where, for reasons of substantial public importance, the privilege will be limited. But today, there is a patchwork quality in the law, with the circuits going in different directions. Privileges are accorded under many State laws. This bill has very widespread support. So on behalf of Senator Schumer, Senator Lugar, and myself, I introduce this bill. I ask unanimous consent that the full text of my prepared statement be printed in the Record.

Mr. SPECTER

Mr. SPECTER. Mr. President, at the outset, permit me to greet the distinguished Presiding Officer, Senator Casey, my colleague from Pennsylvania. It is a pleasure to come back after the August break and see Senator Casey looking so well and fit and in the chair.

Mr. SPECTER

Mr. SPECTER. Mr. President, I have sought recognition to eulogize a friend and a former member of the Senate family, Kent Shearer, who died on August 23. Kent Shearer and I were boyhood friends from our early days in Russell, KS, when we were debaters at the high school. Kent was a great intellect. At the time when his colleagues were playing marbles, Kent was studying and talking about the Peloponnesian wars. During our high school days, Kent and I were colleagues in our freshman year debating the subject on the negative: resolved that individual income should be limited to $25,000 annually. Shows you how times have changed. Kent and I were on two high school debating teams which won the State championship. In 1945, Russell was a small school with fewer than 400 students. We competed with schools our size, then moved the next year to the big-school category, where high schools had several thousand students across Kansas, finished in second place, and lost by a speaker's ballot. Then, in 1947, we were on the team that won the State AA championship with the big schools. Kent was the outstanding debater in Russell High. He won the Kiwanis award, went on to the University of Kansas, where he was Phi Beta Kappa, was the winner of the Perdue National Invitational Debate Tournament, competed in the West Point National Tournament, served then in the Judge Advocate General's office, and settled in Salt Lake City, UT in 1958, until 1997, when Alice, his wife, passed away, and he then moved to Portland, OR. A few years back, Kent came to join me, working on the Senate staff. He worked for 3 months. It was an honor and a pleasure to have my longstanding friend Kent Shearer work with me in the Senate. He brought a level of legal insights and erudition which was rare for a Senate staffer. But then Kent himself might have been a Senator had his career path taken one different shift. That was in 1994, in January, when the staff was being organized on the President's Commission to investigate the assassination of President Kennedy, commonly known as the Warren Commission. We had one spot left among the young lawyers on the staff. The Commission was recruiting lawyers from all over the country in order to avoid having the Washington establishment conduct the investigation out of concern that there might be some thought of a coverup if the same crowd in Washington did the investigation. There was concern about the integrity of Washington then as now. The staff was recruited from all over the country. We had lawyers from Des Moines and Denver and Cleveland, Philadelphia, New York, Los Angeles. I called up Kent and urged him to apply for the position. Unfortunately, he couldn't do so because of his own career plans at that time. I think had Kent accepted a position as assistant counsel to the Warren Commission and come to Washington, his career might have been parallel to mine. Kent was active in Utah politics, was chairman of the State committee, was instrumental in the campaigns of Senator Garn and Senator Hatch and worked for Senator Bennett's father, also a Senator. He worked with Senator Robert Bennett, very close to the political establishment of the State of Utah, a friend to the Secretary of Health and Human Services, Michael Leavitt, and would have been well suited for the U.S. Senate. Had Kent come to the Senate, we would have had three Senators from Russell, KS, since Senator Dole's hometown is Russell, while I was born in Wichita and moved to Russell at the age of 12. Kent would have fit in this establishment very well. He would have been a credit to the Senate. On August 30, Steve Mills, who was also Kent's colleague for the debate tournaments, and I went to Salt Lake City to participate in Kent's funeral services. He was a great American. He had a knack for writing, contributed extensively to the newspaper in Washington on columns. He was a brilliant man, an outstanding lawyer, and a really great American. I have taken a few moments today to eulogize him because his record is worth noting for the permanent record in our Congressional Record, especially since he was a member of the Senate family, even though for only a 3-month period. I ask unanimous consent to have the following obituary printed in the Record.

Mr. SPECTER

Mr. SPECTER. I ask unanimous consent that the order for the quorum call be rescinded.

Mr. SPECTER

Mr. SPECTER. Mr. President, in the absence of any Senator seeking recognition, I suggest the absence of a quorum. Mr. President, I withdraw that suggestion. I had not noticed the presence of the Senator from Tennessee.

Mr. SPECTER. Mr. President, during the last 2 weeks of August, I had occasion to travel to Europe to discuss with a variety of foreign leaders subjects of mutual concern. The highlight of the trip was visiting the museum in Warsaw on the Jewish uprising, which occurred on August 1, 1944. That was a time when the Allies were making substantial progress, with the invasion of Normandy having occurred on June 6, 1944. The Soviets were coming in from the east, and the uprising was a valiant, heroic effort by the Jews in the Jewish ghetto to upset the Nazi tyranny. Regrettably, it failed. But for anyone who has any doubt about the Holocaust or about the brutality of the Nazis in putting down the Jewish people, the 6 million Jews who died--and you have preposterous statements coming forth with some regularity, most recently from the President of Iran, doubting the existence of the Holocaust--a visit to the museum in Warsaw on the Jewish uprising will certainly quell any doubts. The facts are established there, with the documentation, with people speaking, those who survived, to tell the grim tale of the Nazi brutality and the existence of the Holocaust. Mr. President, I ask unanimous consent that the full text of my report be printed in the Record.

Mr. SPECTER

Mr. SPECTER. When Ada Mae Groetzinger left Russell High in the spring of 1946, Tom Kelly became the debate coach. Tom Kelly had not had experience as a debate coach. He was the drama coach. He directed the school plays ``Lost Horizon'' and ``Nothing But The Truth,'' and was very adept at that. But having inherited an extraordinary group of high school debaters, Tom Kelly was our coach when we won the State AA championship in the spring of 1947. With the experience he gained at Russell High School, he then went on to Hutchinson Junior College, where he won national championships and was an outstanding teacher in his own right. He gave two lectures to us which have carried forth with me to this day. Every Friday, when we would prepare to go to a debate tournament, Mr. Kelly would organize the students and start to tell us about the forthcoming trip. His slogan was ``Don't choke up in the clutch.'' That means: Don't get too nervous to do your job. ``Don't choke up in the clutch.'' We would go to the tournament, characteristically come back having won the tournament, and on Monday he would again address the high school debaters and say: ``Don't rest on your laurels.'' Those were Tom Kelly's words, which have carried through to this day. I made these comments and was reminded of the outstanding educational experience from those two high school debate coaches as I reflected on the events going to Salt Lake City for Kent Shearer's funeral. This past May, over the Memorial Day recess, Kent Shearer, Steve Mills, Gene Balloun, and I--the four debaters on the high school team--paid a visit to Ada Mae Groetzinger, who is since married and is now Ada Mae Groetzinger Haury, in her retirement home in Newton, KS. It was a good event to have the four of us get together. At that time, Kent was not feeling well. He suffered from emphysema. It was a good occasion for the group to get together with our high school coach just a few months before Kent passed away.

Mr. SPECTER

Mr. SPECTER. Mr. President, I seek to pay tribute to an outstanding educator. As the Senate takes up the appropriations bills--it soon will take up the bill on funding for education--it is appropriate to focus on the importance of education in our society. My brother, my two sisters, and I have been able to share in the American dream because of our educational opportunities. My father had no formal education. My mother only went to the eighth grade, when she had to leave work to help support her family where her father had died in his mid-40s of a heart attack. But because of their love for education and recognition of its importance, their children have benefited from great educational opportunities. Our health is our No. 1 capital asset. Without good health, none of us can do anything. And our No. 2 capital asset is education. Without education, there are severe limitations. I say this in the context of paying tribute to Ada Mae Groetzinger Haury, the Russell High School debate coach. She came to Russell in the fall of 1945, in her early 20s, having recently graduated from college herself. She brought a level of intensity to high school debating, which level of intensity was unparalleled in my educational experience. We had a class in debate at 9 o'clock in the morning. Then she would sit at 4 o'clock and have another round of debate, again at 5, again at 7, and again at 8 o'clock. And she would judge the debates. In retrospect, it seems surprising that somebody would have done that. Each member of the debating team debated twice in 1 day, once in the class at 9 and once in the other lines. The analytical process in working through the debate topics--one of which was national health insurance, another of which was lowering the voting age to 18--was great for high school students. Our high school coach, Ms. Groetzinger, emphasized a smooth delivery. If anybody faltered during the course of a 10-minute speech or a 5-minute rebuttal, that individual was likely to be rated fourth. She rated everybody on every day of the debates. It was not only the first team which excelled, but it was the second team which also excelled. We went to one tournament at Salina High School, a town about 70 miles east of Russell, and the second team did better in the preliminary rounds than the first team. The second team advanced to the semifinals, and the first team, which I was on, sat and watched the proceedings because they had done better than the first team. One year everybody on the debating team went through one tournament undefeated. So it was a very remarkable background in analysis, in organization, in extemporaneous speaking, and very good training for the practice of being a trial lawyer, very good training for being a Senator, very good training for the questioning which we do in the various committees where we serve.

Mr. SPECTER

Mr. SPECTER. I thank my colleague Senator Casey. Mr. President, as a cosponsor of S. 558, I am pleased that the Senate is taking up this important legislation. I thank Health, Education, Labor, and Pensions, HELP, Committee Chairman Kennedy, Senator Domenici, who along with HELP Committee Ranking Member Enzi and others, have worked to establish mental health parity for millions of American citizens.

Mr. SPECTER. In 1989, in the Commonwealth of Pennsylvania, the State legislature passed a bill, Pennsylvania Act 106, which requires all commercial group health insurance plans and health maintenance organization's to provide a full continuum of addiction treatment including detoxification, residential rehabilitation, and outpatient/ partial hospitalization. The only lawful prerequisite to this treatment and to coverage is certification to need and referral from a licensed physician or psychologist. Such certifications and referrals in all instances control the nature and duration of treatment. I support existing Pennsylvania law and, before agreeing to support S. 558, assured myself that S. 558 will not serve to supplant greater Pennsylvania protections for those seeking treatment for substance abuse.

Mr. SPECTER

Mr. SPECTER. Mr. President, I seek recognition, along with my colleague from Iowa, Senator Grassley, to inform the full Senate of the conclusion of our joint investigation into allegations of abuse of authority at the Securities and Exchange Commission and of the availability of our findings and recommendations. On January 31, 2007, Senator Grassley and I came to the floor and submitted the ``Specter- Grassley Interim Findings on the Investigation Into Potential Abuse of Authority at the Securities and Exchange Commission.'' Senator Grassley and I did not want to delay in expressing our concerns about, No. 1 the SEC's mishandling of the investigation of potential massive insider trading by a hedge fund which we recommended be reopened; No. 2, the circumstances of the termination of SEC attorney Gary Aguirre, who was leading the investigation; and No. 3, the manner in which the SEC's Inspector General's Office handled Aguirre's allegations that he was terminated for improper reasons, including pressing too hard to interview a witness in the investigation. We were concerned about what appeared to be managerial interference with the independence and doggedness of an SEC attorney who was determined to follow the evidence wherever it might lead. Today, we file our comprehensive report and recommendations-- comprising nearly 100 pages of annotated findings and recommendations-- with the Senate Judiciary and Finance Committees. Before I summarize the key findings and recommendations, I must commend the SEC for two aspects of its response to Congress. First, the SEC, despite some initial disputes and letters relating to document production and privilege, ultimately cooperated fully with Congress by producing all requested documents and permitting all witnesses to be interviewed under oath and with a transcript. Second, Chairman Cox, the other Commissioners, and SEC Director of Enforcement Linda Thomsen have clearly been listening to concerns we raised about insider trading in general and in particular suspicious trading ahead of mergers on the part of hedge funds and others with access to material nonpublic information as a result of the intertwined relationships in our financial sector. Since the Judiciary Committee began holding hearings on insider trading and related fraud in June 2006, the SEC has filed a number of substantial civil cases--often in coordination with the Department of Justice, which handles criminal matters. Linda Thomsen testified at the Judiciary Committee hearing on September 26, 2006 that ``[r]igorous enforcement of our current statutory and regulatory prohibition on insider trading is an important part of the Commission's mission.'' This appears to be the case. In February 2007, the SEC charged seven individuals and two hedge funds with insider trading ahead of announcements by Taro Pharmaceuticals Industries regarding earnings and FDA drug approvals. Four of the individuals were in their early thirties or younger and worked at major accounting and law firms. In March 2007, the SEC and Federal prosecutors filed charges against a dozen defendants, including a former Morgan Stanley compliance officer who pleaded guilty in May 2007 to charges that she and her husband sold information about four deals--including Adobe Systems Inc.'s $3.4 billion purchase of Macromedia and the $2.1 billion acquisition of Argosy Gaming by Penn National Gaming, Inc.--to individuals who used the information in trading for hedge fund Q Capital Investment Partners and other accounts. In March 2007, the SEC charged a 41-year-old UBS research executive with selling information about upcoming UBS upgrades and downgrades of the stock of Caterpillar, Goldman Sachs, and other companies. The information was then used in trading on behalf of hedge funds Lyford Cay, Chelsea Capital and Q Capital Investment Partners. In May 2007, a 37-year-old Credit Suisse investment banker was charged with insider trading for leaking details of acquisitions involving nine publicly traded U.S. companies including the $45 billion takeover of TXU Corp by a private equity firm. He also leaked information on deals involving Northwestern Corporation, Energy Partners, Veritas DGC, Jacuzzi Brands, Trammel Crow Co., Hydril Company, Caremark RX, and John H. Harland Co. In May 2007, the SEC accused a former analyst at Morgan Stanley and her husband, a former analyst in the hedge fund group at ING, of making more than $600,000 by trading on companies advised by Morgan Stanley's real estate subsidiary. In May 2007, the SEC obtained a court order requiring Barclays Bank to pay $10.9 million--including a $6 million penalty--for insider trading based on material nonpublic information obtained by its head trader, who served on bankruptcy creditors committees. In June 2007, the SEC filed a complaint alleging that a former bank vice president had traded in securities of a bank that he learned would be acquired by another bank. In June 2007, the SEC filed a complaint alleging unlawful insider trading by the former managing partner of the Washington, DC office of a large law firm who learned of an imminent acquisition from a job candidate. In July 2007, a court sentenced a corporate executive to a 6-year jail term, and ordered him to forfeit $52 million, in a case involving more traditional insider trading executed by a company executive in his own company's stock. These aggressive enforcement efforts send a strong message to the public, and we commend the SEC for ensuring that action accompanies their assurances to Congress and to the public. I point out the ages of some of those charged because it strikes me that they may not have lived through the insider trading scandals of the 1980s that resulted in jail sentences for some very prominent businessmen. Though time has passed since those scandals, there continues to be a need to reinforce that insider trading is a serious violation of the law. Following our hearings and investigation, the SEC appears to have reasserted itself. On March 1, 2007, in announcing charges against 14 individuals in a brazen insider trading scheme, Chairman Cox stated: ``Our action today is one of several that will make it very clear the SEC is targeting hedge fund insider trading as a top priority.'' Linda Thomsen, Director of the SEC's Division of Enforcement, recently stated that the SEC has made insider trading ahead of mergers and acquisition one of its top priorities. Peter Bresnan, Deputy Director of the SEC's Division of Enforcement, stated in a CNBC interview on May 11, 2007: ``Hedge fund managers are under enormous pressure to show profits for their clients. . . . Not every hedge fund manager can get those kinds of returns through legitimate trading.'' Bruce Karpati, an Assistant Regional Director in the SEC's New York office stated in May 2007 that the SEC is ``actively studying the relationships that hedge funds have both inside the hedge funds and outside'' to see how information flows around financial markets and that the SEC is also looking at ``more complex trading strategies'' at hedge funds. Also in May 2007, when the SEC filed charges against a Hong Kong couple and alleged that they had illegally traded ahead of News Corp.'s offer to buy Dow Jones, Cheryl Scarboro, SEC Associate Enforcement Director, stated: ``Cases like this, insider trading ahead of mergers, are a top priority and we will continue our pursuit of it, no matter where it occurs.'' Finally, in early 2007 it was widely reported that the SEC had begun a factfinding study of the relationships that hedge fund advisers have with brokerages to determine if those contacts could have led to insider trading. The SEC had specifically requested information about stock and options trading by major firms. It is encouraging to see that the SEC's rhetoric is increasingly matched by real cases against those who subvert our capital markets through insider trading. On the other hand, we agree with Peter Bresnan, who recently expressed dismay over the number of Wall Street professionals involved in these cases, from investment bankers and advisers to lawyers and accountants. ``When we see Wall Street professionals engage in insider trading, it is particularly reprehensible because we rely on them to keep the markets fair and clean.'' As I stated during the Judiciary Committee hearings, although disgorgement and civil penalties in these cases are a good start, I will continue to press for jail terms for those who engage in fraudulent conduct that harms other investors, especially when those who commit fraud are in positions of trust. With respect to our investigation and final report, Senator Grassley and I were primarily concerned about three aspects of a single case of insider trading: First, the handling of the investigation of what some at the SEC believed was one of the largest insider trading cases in recent history; second, the timing of the firing of Gary Aguirre, one of the lead investigators on the case; and third, the worse-than- cursory inspector general investigation of Mr. Aguirre's claims of improper discharge. All of this presented a troubling picture that centers on apparently lax enforcement by the SEC. The alleged insider trading occurred in July 2001, several weeks before the public announcement that GE would purchase Heller Financial. During the lead-up to the announcement, Pequot CEO Arthur Samberg began purchasing large quantities of Heller Financial stock while also shorting GE stock. Two years later, the SEC began an investigation. Despite several promising leads, the investigation was left to wither when the lead attorney, Gary Aguirre, was abruptly fired with little explanation. When Aguirre complained to Commissioner Cox about the circumstances of the termination, Chairman Cox instructed the inspector general to investigate. The inspector general's staff, however, did so with the stated view that they were not going to ``second guess'' Aguirre's managers. Perhaps for this reason, the inspector general did not interview Aguirre or the other employees named in Aguirre's letters to Chairman Cox, choosing instead to accept the managers' explanations at face valueeven the explanations that were inconsistent with SEC procedures and some of the documentary evidence submitted by Aguirre. What was Gary Aguirre investigating? As explained at our hearings, when an acquisition like the GE-Heller deal is announced, the price of the purchasing company typically falls and the price of the purchased company typically rises. This is an opportunity for guaranteed, quick and easy profits. Samberg directed the purchase of ``a little over a million shares'' of Heller stock. On several days, the shares he sought to purchase exceeded the total volume of trading that day. On January 30, 2002, the NYSE ``highlighted'' these trades for the SEC as a matter that warranted further scrutiny and surveillance. Yet it was not until 2004, when Gary Aguirre joined the Commission, that an investigation began in earnest. Mr. Aguirre became the driving force behind the investigation of the GE Heller trades. Aguirre's immediate supervisors were initially enthusiastic about the investigation and the identification of John Mack as the possible tipper. On June 14, 2005, Mr. Aguirre's supervisors authorized him to speak to Federal prosecutors concerning the trades. His immediate manager, Robert Hanson, wrote in an e-mail on June 20, 2005, ``Okay Gary you've given me the bug. I'm starting to think about the case during my non work hours.'' But the enthusiasm quickly waned at some point after newspapers reported on June 23, 2005, that Morgan Stanley was considering hiring John Mack as its new CEO. Aguirre testified that the timing was no coincidence and that his supervisor, Robert Hanson, would not let him take Mack's testimony because of his ``powerful political contacts.'' Hanson later sent Aguirre e-mails that mentioned Mack's ``juice'' and ``political clout.'' Hanson, for his part, later explained that he simply wanted to make sure that the SEC had gotten ``their ducks in a row'' before taking drastic action. Although reasonable minds may disagree on an appropriate investigative strategy, the SEC's stated rationale for delaying the taking of Mack's testimony runs counter to the normal approach described to the committees' staff by insider trading experts at the SEC. Hilton Foster, an experienced former SEC investor with knowledge of the Pequot matter, stated that ``as the SEC expert on insider trading, if people had asked me when do you take his testimony, I would have said take it yesterday.'' The explanation offered by Aguirre's supervisors--that without direct evidence that Mack had knowledge of the GE transaction, the deposition would consist simply of a denial by Mack--is not at all convincing since the SEC eventually did question Mack for over 4 hours in August 2006 without such direct evidence. Mack's testimony was taken 5 days after the statute of limitations expired. We note that shortly after Aguirre's termination, the SEC Market Surveillance Branch Chief sought removal from the Pequot investigation, stating that ``something smells rotten.'' We note that this chief was a reluctant witness who came forward to the committees to do the right thing. Despite a number of such SEC employees, with Aguirre gone and a change in staff on the Pequot case, the trail seems to have grown cold and any evidence likely lost. With respect to our recommendations, we start by noting that the committees adduced documents and testimony showing that Gary Aguirre, a probationary employee while at the SEC, was an experienced, smart, hard-working, aggressive attorney who was passionately dedicated to the Pequot investigation. These attributes were noted in a June 1, 2005, performance plan and evaluation. A more detailed ``Merit Pay'' evaluation written by Hanson on January 29, 2005, noted Aguirre's unmatched dedication ``to the Pequot investigation'' and ``contributions of high quality.'' These evaluations were submitted to the SEC's Compensation Committee, which approved a two-step salary increase recommendation on July 18, 2005. After these favorable reviews, Aguirre's managers wrote a ``supplemental evaluation,'' on August 1 that included negative assessments. The document was never shared with Aguirre, who received a notice of termination exactly 1 month later, on September 1. To the extent that there was contemporaneous documentation, little appears to support the assertion that the decision to terminate was based on poor performance or employee misconduct, which leaves open the possibility that the discharge was for improper reasons. More disturbing, however, is the cursory investigation of Aguirre's allegations by the SEC's Office of Inspector General, headed by Walter Stachnik. Chairman Cox referred the matter to Stachnik, who failed to interview Aguirre or any of the other SEC employees mentioned in Mr. Aguirre's letter. The IG's investigators repeatedly told staff that in investigating Mr. Aguirre's allegations of improper motivation for his termination that they ``don't second guess management decisions . . . [and they] don't second guess why employees are terminated.'' These statements are troubling. After speaking only to Aguirre's supervisors about the facts and accepting everything they said at face value, the IG staff reviewed only those documents identified by Aguirre's managers. This is not a recipe for an independent and thorough investigation. Even after committee hearings, Stachnik insisted that his investigation was ``professional,'' but he did reopen the IG investigation. Unfortunately, as part of the reopened investigation, Stachnik sought documents in Aguirre's possession, including documents that were communications between Aguirre and the Senate. When Aguirre balked, Stachnik asked the Department of Justice to petition a Federal court to enforce the subpoena. If Chairman Cox had been able to obtain a timely, objective, and thorough consideration of Aguirre's concerns, the Pequot investigation may have been put back on track shortly after Aguirre's termination. Because the Chairman did not have the benefit of a careful review by the IG, we will never know what would have happened. In light of this, and based on the committees' investigation, we make certain recommendations intended to help the SEC remedy obvious shortcomings in order for it to avoid an undermining of public confidence in the agency. The reputation of the SEC as a fair and impartial regulator must be restored. I note that through our investigation, we determined that what we have is not merely an issue of perception. There are real failures that need real solutions to improve the management of complex securities investigations; the handling of ethics concerns and issues; and personnel policies and procedures to increase employee morale and confidence in management and to ensure more consistency, transparency, and careful internal deliberations. The SEC should draft and maintain a comprehensive manual of procedures for conducting enforcement investigations, along the lines of the U.S. Attorney's Manual. The manual should address situations and issues likely to recur, including a section outlining all SEC policies related to the issuance of subpoenas. It should set a consistent SEC policy and provide general guidance for complex issues that require individual assessment on a case-by-case basis. Among other policy changes, the SEC should begin to conduct regularly scheduled, confidential employee surveys to measure confidence in senior management. Such responses should be reviewed and evaluated by the inspector general as potential predicates for audits, investigations, or recommendations to senior management. The SEC should also revise its policies on disclosing nonpublic information to third parties. The SEC currently lacks a set of objective criteria for setting staffing levels and has no mechanism for designating a case as mission critical. The SEC should set standards for assessing the size, complexity, and importance of cases to ensure that significant cases receive more resources. The Enforcement Division should develop objective criteria for determining how many attorneys, paralegals, and support personnel should be assigned to a particular case. It may be unavoidable that the SEC often will have fewer resources than the entities the agency regulates, but effective staffing could help the SEC avoid being outmatched when it matters most. The SEC should issue written guidance requiring supervisors to keep complete records of all external communications regarding any investigation. As a starting point for drafting such a policy, the SEC should review and consider adopting an approach similar to that of the Food and Drug Administration in 21 C.F.R. section 10.65. The need for a clear record and transparency is especially acute regarding any communications by supervisors that exclude the staff attorney assigned to the case. Allowing outside counsel and interested parties to circumvent the staff attorney by dealing separately with higher level officials may undermine the investigation and also undermine the goals of consistency, impartiality, and professionalism. The SEC Office of Inspector General should develop a plan to ensure independence from SEC management and the General Counsel's Office. Such a plan must ensure that the SEC's investigations of allegations against management are thorough, fair, and credible. The OIG should submit its plan to Congress for review and followup oversight. Equally as important, employees should have confidence that they have confidential alternate channels of communication through which both real problems and misperceptions may be resolved early and without public controversy. Personnel procedures should be regularly audited and reviewed to ensure that they are fairly and consistently applied. All SEC inspector general audit and investigation reports should be available to Congress, on a confidential basis when appropriate. The detail, quality, and volume of reports from the Inspector General's Office need to be improved dramatically. The SEC should review its guidance to employees regarding their obligations to disclose any connections with potential employers and recuse themselves from any matter involving those employers. The appearance created by having undisclosed contacts with potential employers while still participating in an enforcement matter involving that employer undermines public confidence in the fairness and impartiality of the SEC. Employee evaluations should be submitted in a timely manner, according to an established schedule. Evaluations should not be prepared outside or apart from the established procedure. The process should be audited regularly, and supervisors who fail to follow the procedures should face meaningful consequences. Although it is appropriate to document and discuss performance issues as they arise, submitting a reevaluation with substantive changes after the regularly scheduled evaluation is submitted can raise questions--especially when it occurs just after an employee reports alleged wrongdoing by a supervisor. In conclusion, I will comment on an issue that was the subject of much discussion during the investigation whether hedge funds should be subject to greater regulation. With baby boomers beginning to retire, pension funds are moving more of their assets out of fairly conservative stocks and bond portfolios and increasing their investments in hedge funds. This shift comes as hedge fund returns are cooling. As just one example, the Amaranth fund, which made risky bets on natural gas, collapsed in September 2006. On July 25, 2007, the Commodity Futures Trading Commission charged the fund and its chief energy trader with trying to manipulate the natural gas markets. Hedge funds are fiercely protective of their trading strategies, and they are hard to value because they are not actively traded. Unlike mutual funds, they are not required to register with the SEC or disclose their holdings. In addition, they may borrow as much as 10 times their cash holdings to execute their investment strategies. For this reason, many say that there is an inconsistency between the high- risk, high-return concept behind hedge funds and the low-risk, guaranteed return goal of pension funds. Pension funds may have consultants and sophisticated money managers, but even they can be tripped up, as evidenced by the fact that Bear Stearns, a Wall street firm known for its caution and its expertise in bond-treading, notified clients this month that their investment in two prominent hedge funds were worth pennies on the dollar. Those funds made bets on risky bonds backed by subprime mortgages. Individuals, like managers of the pension funds of middle class workers, have also begun to increase their investments in hedge funds. Once limited to the wealthy, hedge funds are now available to retail investors through funds of funds. By pooling money, funds of funds allow investors who do not have the minimum investments or assets to gain access to the hedge fund club. Because of my concern for these investors, I will continue to study the question of increased transparency and effective regulation of hedge funds.

Mr. SPECTER

Mr. SPECTER. Mr. President, to state the obvious: This is a very troublesome way to legislate. We have been looking at this issue for more than a year. Senator Feinstein introduced legislation, and so did I. And it comes down to the last minute. We have waited in the Chamber all day. I have just talked to the Director of National Intelligence, Admiral McConnell, who says only the Bond bill is acceptable for our security interests. I heard it from him personally. The President is reportedly prepared to sign only the Bond bill. I have just had a hurried conversation with the senior Senator from Michigan, who has handled the negotiations on the Rockefeller bill. He has stipulated three points of concern which I think could be ironed out, Director McConnell says in the course of a couple of hours. But we are not having the couple of hours. Perhaps if both bills fail, we will be back to try this again tomorrow. But as I listened to what Senator Levin has had to say: It would be better if in one spot it said ``foreign persons''--but I believe that is the intent, although it is not really explicit--I think it would be preferable if the Attorney General was not making the certification--a point I have made repeatedly--and there is an element of delay. So to say it is not a perfect bill is again to state the obvious. But I think it is time we have to act and, therefore, I am going to support the Bond bill.

Mr. SPECTER

Mr. SPECTER. Mr. President, I have sought recognition today to introduce a sense of the Senate regarding a recent Centers for Medicare and Medicaid Services, CMS, national coverage determination on the treatment of anemia in Medicare cancer patients. On June 29, 2007, I wrote to Secretary of Health and Human Services Michael Leavitt concerning the proposed CMS coverage determination that limits access to erythropoiesis-simulating agents which increases the red blood cell counts of chemotherapy patients who have become anemic. Further, 51 other Senators sent similar letters to Department of Health and Human Services officials. On July 30, 2007, CMS issued the final coverage determination, and while some of the proposed restrictions were substantially altered in favor of patients, I remain concerned about the impact that this decision will have on Medicare beneficiary access to needed therapies. The new policy requires that patients have lower red blood cell counts before being able to receive treatment with an erythropoiesis- simulating agent, resulting in patients that are unnecessarily weaker and may not be able to maintain their chemotherapy treatment regimens without having to turn to costly and time-consuming blood transfusions. This restriction is inconsistent with both the FDA-approved label and prescribing instructions and is also contrary to national professional society oncology guidelines. For instance, the American Society of Clinical Oncology, the national organization representing physicians who treat patients with cancer, has written to CMS to express deep concerns about the coverage determination, urging CMS to reconsider these restrictions. I encourage my colleagues to support this sense of the Senate that I introduce with Senators Harkin and Lautenberg to have CMS reconsider the final national coverage determination on the use of erythropoiesis- simulating agents.

Mr. SPECTER

Mr. SPECTER. Mr. President, I move to waive the applicable points of order under the Congressional Budget Act with respect to the amendment and ask for the yeas and nays.

Mr. SPECTER. Mr. President, the core issue is the repeal of the 1993 alternative minimum tax rate increase. The alternative minimum tax was put into effect in 1969 in order to catch people who paid little or no taxes; people in high brackets who had sufficient loopholes to avoid taxation. Regrettably, it has grown by bracket creep to be very expansive. In 2006, it covered 3\1/2\ million people. If it is not changed, it will cover 23 million people this year. The tax was increased in 1993 from 24 to 26 percent for people making under $175,000, to 2 percent more for people in the upper bracket. This is a matter that can be explained in a minute. It is a tax which never should have occurred, and now we can correct it for the people in the lower brackets.

Mr. SPECTER. Mr. President. I voted against the Allard Amendment for the following reasons. This amendment sought to codify in law the treatment of unborn children, therefore establishing the fetus as protected separately from the mother. Under the current bill, SCHIP States may treat pregnant mothers. In 2002, the Bush administration issued a regulation that gave States the option of extending SCHIP coverage to unborn children without a waiver. While I support the waiver policy in the pending legislation, this amendment is an effort to advance a political cause rather than provide a medical necessity because pregnant women are now covered. Under current law, there is ample ground for coverage during pregnancy. In fact, the Senate bill allows States to provide coverage for pregnant women without denominating them as unborn children to advance a political cause. While the amendment failed by a vote of 49 to 50, there is no practical effect in terms of health care coverage for pregnant women. amendment no. 2557

Mr. SPECTER

Mr. SPECTER. Madam President, I have consulted with both of the managers about bringing up amendment No. 2557. I consulted with Senator Grassley, who advised that we would be going back on the bill at 12:45, but the distinguished Senator from West Virginia had extended his time. But I have been waiting here now for more than an hour. It would be my hope we could proceed with the consideration of this amendment. I am advised the managers want to see the amendment. I am advised, Madam President, that the Democrats are fine with my calling it up. I just want to be sure--

Mr. SPECTER. In that event, Madam President, I ask unanimous consent that the pending amendment be set aside so we may consider amendment No. 2557.

Mr. SPECTER. Madam President, I ask unanimous consent that the reading of the amendment be dispensed with.

Mr. SPECTER. Yes. Fine. This amendment would eliminate the 1993 alternative minimum tax rate increase, a remedial step which I suggest to my colleagues is long overdue. The alternative minimum tax was created in 1969 in response to a small number of high-income individuals who had paid little or no Federal income taxes. Today, because of a lack of indexing for inflation, and the higher AMT tax rates relative to the regular income tax system, we have a parallel tax system which has grown far beyond its intended result. If there is no legislative action, the number of taxpayers subject to the alternative minimum tax will rise sharply from approximately 3.5 million filers in 2006 to some 23 million in 2007. This issue has been before the Senate four times this year already. It will hit taxpayers in the moderate range excessively hard. The alternative minimum tax was increased in 1993 from 24 percent to 26 percent for taxable income under $175,000, and from 24 to 28 percent for taxable income in excess of $175,000. There has been some question as to what is the offset and there is no offset, and none should be looked for where you have a tax which essentially was not expected to be imposed. There was no anticipation, no intention that this alternative minimum tax was going to produce additional revenue. So when the tax law is corrected so the additional taxes will not be imposed because of bracket creep--and this is designed to avoid that, and to redirect the alternative minimum tax to its original intent--that is exactly what tax fairness requires. Madam President, I ask unanimous consent that the full text of my statement be printed in the Record.

Mr. SPECTER. It is a pretty simple, open-and-shut matter, and it does not take a whole lot of time to explain. I know the managers are not on the floor, but I did want to have the amendment considered, setting aside the other amendments, so we could engage in argument and be prepared to debate it further. Unless the Senator from Vermont indicates--with a hand gesture, a timeout, no argument at this time--I will be available to return to the floor when the managers consider it appropriate. But I wanted to get this on the record. Before departing, might I add my words of congratulations and admiration for the distinguished Senator from West Virginia. I hadn't planned to listen to his extended speech, but I wanted to be here at the moment it concluded, because sometimes when you are not here, half a dozen Senators precede you. Amendment No. 2627 to Amendment No. 2530 (Purpose: To ensure that children and pregnant women whose family income exceeds 200 percent of the poverty line and who have access to employer-sponsored coverage receive premium assistance) Madam President, I have been asked to ask unanimous consent to temporarily set aside the pending amendment and call up amendment No. 2627 for Senator Coburn.

Mr. SPECTER

Mr. SPECTER. Mr. President, I would like to join my colleagues in commending the growing bipartisan movement to craft climate legislation that can pass this body. Senator Bingaman and I have been striving for some time to develop an approach that provides a deliberative and measured response to climate change. I agree with the criteria outlined today. Several of these elements were critical to my support for the Low Carbon Economy Act. First, I represent a State that relies heavily on manufacturing and coal production. We must craft climate change legislation that will protect the U.S. economy. It is critical that we not only provide funding to develop and deploy new climate-friendly technologies, but we must also find the most efficient way to drive these new technologies forward. One aspect of the bill I sponsored with Senator Bingaman that I want to highlight is designed to drive the development of carbon capture and storage a technology that is critical to coal-producing States such as Pennsylvania. The bill provides a significant economic incentive to innovative companies willing to take on the challenge of building commercial-scale power plants that capture and store carbon dioxide emissions. Second, while I agree that the United States needs to take more aggressive steps here at home to address this issue, I also believe that any legislation must include provisions to ensure that we periodically review whether other countries are taking comparable action and that we be prepared to apply pressure on nations that continue to avoid implementing emissions limits. I believe that this is an idea we all embrace and thank the Senators from the Environment and Public Works Committee for their willingness to work with us as they move legislation through the committee. We must bring together many interest groups in the fight against global warming. Only with broad support inside and outside of this chamber will we develop a bill that can pass.

Mr. SPECTER

Mr. SPECTER. Mr. President, I voted against Senate amendment 2538 to the State Children's Health Insurance Program reauthorization because of the critical need to provide health insurance to 3.3 million additional children under this program. This vote should not be misconstrued as a vote against National Institutes of Health, NIH, funding but as recognizing the need to provide health insurance to children. This amendment would transfer the additional $35 billion for children's health insurance into a fund for NIH to increase medical research. As ranking member and chairman of the Labor, Health and Human Services, and Education Appropriations Subcommittee, I have ardently supported doubling funding for NIH. The fiscal year 2008 Senate Labor, Health and Human Services, and Education appropriations bill provides $29.9 billion for NIH. While I support an increase in NIH funding, it cannot be at the expense of providing much needed health care to America's children. I yield the floor. Mr. President, I suggest the absence of a quorum.