As any Wall Street CEO or top oil executive can attest to, there are few invitations more unwelcome than one to testify on Capitol Hill for a Congressional investigation. Unfortunately, Congress is likely to start issuing more of them.
Several committees have recently added investigative units and, with the Republicans taking over the House of Representatives, there are several new committee chairs with new pet peeves. Both developments mean that companies in many sectors could become targets of inquiries. Additionally, industries currently involved in investigations, such as financial services and energy, can expect those to continue.
“Frankly, investigations are going to affect a number of different sectors—businesses, individuals, and entities—as the different committees get started in the 112th Congress in the House and Senate,” Michael Bopp, chair of Gibson Dunn's Financial Services Crisis Team, said during a recent Webcast on congressional investigations.
Larry Brady, majority staff director of the House Committee on Oversight and Government Reform, a federal government watchdog, echoed that sentiment. House Speaker John Boehner has “left absolutely no doubt with all the chairmen that he expects them to do oversight in their jurisdiction,” signaling a more aggressive stance in inquiries by all congressional committees, he said.
Brady added the Committee on Oversight and Government Reform has some “very aggressive” sub-committee chairmen, who were appointed Jan. 18 by Oversight Committee Chairman Darrell Issa. “Over the next few weeks, you're going to see some very strong oversight by the sub-committees,” he said.
It is too early to know what industries are likely to become targets, as the Oversight Committee and its sub-committees are still in the process of reviewing their agendas. Brady did cite examples, however, of existing investigations that will continue and may be intensified, such as those in the mortgage industry. “From our standpoint, if there is any case example of corruption … that has a major, major effect on public policy, it is the Countrywide, Fannie [Mae], Freddie [Mac] sub-prime mortgage issue,” explained Brady. “We describe sub-prime mortgages as the cancer that was the core of the financial crisis.”
Even some of the agencies themselves will be the focus of greater oversight, such as the recent reorganization of the Minerals Management Service, the agency that oversees offshore oil and natural gas drilling. Secretary of the Interior Ken Salazar announced on Jan. 19 that MMS would be split into separate entities: the Bureau of Ocean Energy Management would be charged with the development of offshore energy, while the Bureau of Safety and Environmental Enforcement would be charged with enforcing safety regulation. As such, the agency has been renamed the Bureau of Ocean Energy and Management, Regulation, and Enforcement.
“The former MMS was saddled with the conflicting missions of promoting resource development, enforcing safety regulations, and maximizing revenues from offshore operations,” Michael Bromwich, director of the agency, explained in a prepared statement. “Those conflicts, combined with a chronic lack of resources, prevented the agency from fully meeting the challenges of overseeing industries operating in U.S. waters.”
The Committee on Oversight and Government Reform has some “very aggressive” sub-committee chairmen, “so over the next few weeks, you're going to see some very strong oversight by the sub-committees, also.”
—Larry Brady,
Majority Staff Director,
Committee on Oversight and Government Reform
Brady said the reorganization is being closely reviewed due to the level of concern it has created. Sparked by reaction to the Deepwater Horizon oil spill in the Gulf of Mexico, the reorganization was “done haphazardly to satisfy a public relations objective in our view, without really having been thought through very clearly,” he said. “It is an agency that needs serious, serious review.”
But MMS is not the only agency to fall under investigation by a congressional committee. House Energy & Commerce Committee Chairman Rep. Fred Upton has also made it clear that one of his top priorities will be challenging the Environmental Protection Agency.
“This EPA has a track record of regulating too much too fast while ignoring potentially devastating economic consequences,” Upton said in a prepared statement. Specifically, the committee plans to focus its attention on challenging the EPA's plan to control industrial emissions of greenhouse gases.
In addition to the Committee on Oversight and Government Reform, the Senate Energy & Natural Resources Committee also announced plans to reform offshore oil and gas drilling in light of the BP oil spill. Furthermore, Chairman Jeff Bingaman said he will continue to encourage development of renewable energy sources.
Brady said he is hopeful that there will be greater coordination and oversight among committees where similar issues are concerned. “It's not very productive to get a cabinet secretary in front of three or four different committees on the same issue,” he said. “I'm hoping that you will find more joint committee hearings,” such as between financial services and oversight or energy and commerce and oversight.
Investigation Defenses
While a lot of the tools used in a congressional investigation appear similar to those used in an executive branch investigation—such as coercive authority, subpoena power, and deposition authority—the two approaches are very different.
FIGHTING THE MAN
What follows is a list of defenses one can take when on the other end of a congressional investigation:
Investigation must relate to a legislative purpose. Kilbourn v. Thompson.
– But courts interpret legislative purpose broadly. Shelton v. United States.
Questions must be reasonably related to subject matter of inquiry. Sinclair v. United States.
Procedural irregularities.
First Amendment. Balance the interest in privacy against the need for disclosure (has never succeeded in court). Barenblatt v. United States.
Fourth Amendment. Reasonableness varies depending upon the “nature, purposes, and scope of the inquiry.” McPhaul v. United States.
– Overly broad demands for documents may violate protection against search and seizure.
FTC v. American Tobacco Co. (Refusing to read Senate resolution authorizing FTC to
investigate tobacco trade as granting power “to direct fishing expeditions into private
papers on the possibility that they may disclose evidence of crime.”).
– Other cases challenge this argument. Eastland v. United States Servicemen's Fund (An
investigation may lead “up some ‘blind alleys' and into nonproductive enterprises. To be
a valid legislative inquiry there need be no predictable end result.”).
Fifth Amendment. Watkins v. United States.
– Individuals can invoke right against self-incrimination. McPhaul v. United States.
– Generally applies only to testimony. Fisher v. United States.
– Can compel testimony by granting full or partial immunity.
Source
Gibson Dunn Webcast on Congressional Investigations. (Jan. 24, 2011).
One of the most significant differences between a congressional investigation and those of the executive branch or a court is that objections generally are not recognized or effective, largely because they would be made to the chairman of that committee, who, unlike a judge, is not an impartial to the investigation. “It's sort of like having to make your objections to a Department of Justice investigation to the Attorney General,” said Bopp.
Ultimately, the committee's enforcement authority is before the court of public opinion rather than the court of law. Therefore, they have a wide range of rules and equally wide latitude in the interpretation of those rules. It is almost always the case that a committee can figure out a legislative rationale for conducting an investigation. “I'm not aware of any court rendering a decision that a committee had exceeded its jurisdiction,” said Bopp. Generally, courts won't step in to question the investigative tactics of a committee, he added.
In some cases, an employee actually wants a protective subpoena issued before testifying before a committee, “which happens more often than, perhaps, one would expect,” said Bopp.
When it comes to attorney-client and work-product privilege, different committees have different approaches, as well. In general, congressional committees usually will honor such privileges, “but that is not always the case,” said Bopp. “You cannot always assume that, because a document is privileged, that it won't have to be produced anyway.” If necessary, document requests result in a subpoena, which are enforceable in three ways: criminal, civil, or contempt (after a vote of full House and Senate).
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