Floor Statements

Mr. President, I rise today to oppose the conference report for H.R. 3108, the Pension Funding Equity Act, which the Senate is now considering. The original version of this bill that the House passed last year changed the discount rate used by defined benefit pension plans to calculate their pension liabilities from an interest rate based on the now defunct 30-year Treasury bond to an interest rate based on the average rate of return on high-quality long-term corporate bonds for plan years beginning in 2004 and 2005. There is a strong but not conclusive argument that the discount rate should be changed. According to the Pension Benefit Guaranty Corporation--PBGC, replacement of the 30-year Treasury rate will allow companies to lower their pension contributions by $80 billion over the next 2 years.

When this legislation reached the Senate, however, it became a magnet for giveaways to financially weak companies. The industries in which some of these financially weak companies operate are notorious for having woefully underfunded pension plans. Furthermore, select companies were also given additional relief. Why these companies deserve special breaks and others do not is not easily discernable. Multi-employer plans were also given a 2-year delay in recognizing investment losses. The most troubling section in the Senate version of the bill provided that any company could apply with the Secretary of the Treasury to waive a portion of its deficit reduction contribution. Fortunately for taxpayers, this provision was stripped from the bill during conference.

While the House-Senate conference report produced a pension bill that is much more limited in increasing PBGC's deficit than the Senate version, it still allows companies with underfunded pension plans to set aside less, thus increasing their pension deficits. According to the PBGC, the deficit reduction contribution waivers, special breaks to select companies, and the multi-employer plan relief, will allow companies to pay billions less into their pension plans, in addition to the $80 billion less because of the discount rate change. In total, the conference committee report probably relaxes corporate pension funding requirements by close to $90 billion over 2 years.

Allowing weak companies to pay less into their pension plans than is required by current law would be analogous to a credit card company allowing a financially distressed customer to pay less than his or her required monthly minimum payments. Just as credit card companies require minimum payments to ensure consumers do not fall too far behind in debt, the PBGC requires companies with defined benefit pension plans to make deficit reduction contributions to catch up on their funding. I think all of my colleagues would agree, when you're in a hole, the first rule of thumb is to stop digging. Allowing companies with underfunded pension plans to dig the hole deeper could cause premiums for well-funded plans to rise, and retirees could face cuts in pension benefits if their defined benefit pension plans are terminated.

I also am deeply concerned that the conference report does not include a ``hold harmless'' provision for the PBGC. The agency is currently in the worst financial condition in its history. Because it continues to absorb the losses of terminated pension plans, the PBGC reported a record deficit in its single employer program of $11.2 billion for fiscal year 2003, and for the first time ever, its multi- employer program ended the fiscal year in a deficit situation. The PBGC currently remains exposed to $85 billion in pension underfunding in plans sponsored by financially weak employers. I am thus concerned that taxpayers may one day be forced to bail out the PBGC.

In September 2003, as chairman of the Governmental Affairs Subcommittee on Financial Management, the Budget, and International Security, I held a hearing on the PBGC and defined benefit pension plans. While proponents of the deficit reduction contribution waiver and multi-employer plan relief claimed that funding rules are too strict for companies in America, what I found was just the opposite-- that current funding requirements are inadequate to fully protect the pensions of America's workers and retirees when their plans terminate. Companies can stop making contributions when their plans are funded at 90 percent of ``current liability.'' Trouble is, the definition of ``current liability'' is the result of past legislative compromises, and does not reflect the amount of money needed to pay all benefits if a plan terminates. ``Current liability'' assumes the company is an on- going business, and thus does not recognize the early retirements that take place when an employer goes out of business and terminates its pension plan. Nor does ``current liability'' recognize the full cost of providing annuities as measured by group annuity practices in the private market.

Pension benefits are measured against ``termination liability'' if a company goes out of business and terminates its pension plan. Termination liability reflects an employer's cost to settle pension obligations in the private market. In the example of Bethlehem Steel, the company reported that it was 84 percent funded on a ``current liability'' basis in its last filing prior to termination. When the PBGC took over the Bethlehem plan, however, it turned out that the plan was

only 45 percent funded on a termination basis. In my judgment, therefore, further relaxing the already lax contribution requirements for weak companies with underfunded plans is imprudent.

As members of Congress we should not pass laws that encourage companies to manage pension plans in an irresponsible manner. Companies with underfunded pension plans will continue to run up deficits until everyone loses--workers, retirees, and taxpayers. We make a mistake today by giving weak companies the tools to dig their holes deeper.

Mr. President, I rise today to submit a resolution that would designate June 2004 as National Safety Month.

National Safety Month is not just a tribute to our Nation's advances in health and safety and our never-ending efforts to protect lives. It represents a standard of excellence in safety to which we as a Nation must continue to aspire. While our Nation has enjoyed great advances in safety, we must continue to work to reduce the number of unintentional and preventable injuries and deaths. As summer is traditionally a time in which the number of unintentional deaths increases, it is appropriate to dedicate a month at the beginning of the season to the improvement of safety and health in our country.

During National Safety Month, the National Safety Council will provide tips, articles and information to raise awareness and promote safe driving, home and community safety, general preparedness, and workplace safety. This year, the National Safety Council will focus on reducing the number of motor vehicle crashes, which are the leading cause of injury death in the United States.

I would like to commend the National Safety Council for the contributions that it has made to public safety. I am proud that the National Safety Council is headquartered in my home State of Illinois. The National Safety Council is celebrating its 91st anniversary as an organization this year, and its 51st anniversary as a federally chartered organization. Congress chartered the National Safety Council in 1953 to educate and influence society to adopt safety, health, and environmental policies, practices, and procedures that prevent and mitigate human suffering and economic loss arising from preventable causes. The National Safety Council fulfills its mission through a network of approximately 50 local and regional chapters that provide safety and health programs and services to communities across the United States. The Council currently has 37,500 members.

I thank Senator Feinstein for joining me to introduce this resolution that declares June 2004 National Safety Month and recognizes the National Safety Council for its important work. During a time when homeland security is foremost on the minds of Americans, this month will continue to heighten public awareness of the ongoing quest to save and protect lives. I urge all of my colleagues join me in supporting this resolution.

Mr. President, today I rise to introduce the Mutual Fund Reform Act of 2004. This legislation would make fund governance truly accountable, require genuinely transparent total fund costs, enhance comprehension and comparison of fund fees, confront trading abuses, create a culture of compliance, eliminate hidden transactions that mislead investors and drive up costs, and save billions of dollars for the 95 million Americans who invest in mutual funds. Above all, the Mutual Fund Reform Act strives to preserve the attraction of mutual funds as a flexible and investor-friendly vehicle for long-term, diversified investment.

I am pleased to be joined today by my distinguished colleagues on the Committee on Governmental Affairs, Senator Carl Levin and Senator Susan Collins, the committee's chairman, who are original cosponsors of this legislation. I am grateful for the extensive and important input both Senators provided in the drafting of this bill, and appreciate the invaluable perspective Senator Collins provided based on her first-hand experience as Maine's Commissioner of Professional and Financial Regulation.

I would like to take this opportunity to recognize the work of a number of our colleagues in this area. Last year, I was pleased to cosponsor S. 1822, introduced by Senator Daniel Akaka, the Ranking Member of the Senate Governmental Affairs Subcommittee

on Financial Management, the Budget, and International Security, which I chair, to address mutual fund trading abuses. Senators Corzine, Dodd, and Kerry also have sponsored mutual fund bills from which I drew, as well as legislation introduced by Congressman Richard Baker last summer and overwhelmingly passed by the House of Representatives at the end of the last session.

I also would like to acknowledge the ongoing work of the Senate Committee on Banking, Housing and Urban Affairs, the authorizing committee which will ultimately decide questions of mutual fund industry reform. The committee is conducting a series of legislative hearings to examine the mutual fund scandal and the merits of various reform proposals. I commend the leadership of Chairman Richard Shelby and Ranking Member Paul Sarbanes, and look forward to continuing to work with them and the other members of the Banking Committee on this issue in the coming months.

The bill I am introducing today reflects extensive testimony that was presented during oversight hearings of the Financial Management Subcommittee that I chaired on November 3, 2003, and January 27, 2004. The general consensus of the panelists at the November hearing was that illegal late trading and illicit market timing were indeed very serious threats to investors but that excessive fees and inadequate disclosure of those fees were an even more serious threat to American investors. Witnesses at our hearing last month testified regarding the propriety and the adequacy of the disclosure of mutual fund fees, specifically hidden fees such as revenue sharing, directed brokerage, soft money arrangements, and hidden loads such as 12b-1 fees. The subcommittee also heard from two whistleblowers who were responsible for the initial revelations regarding Putnam Investments and Canary Capital Partners,

Mr. President, today I rise to introduce the Mutual Fund Reform Act of 2004. This legislation would make fund governance truly accountable, require genuinely transparent total fund costs, enhance comprehension and comparison of fund fees, confront trading abuses, create a culture of compliance, eliminate hidden transactions that mislead investors and drive up costs, and save billions of dollars for the 95 million Americans who invest in mutual funds. Above all, the Mutual Fund Reform Act strives to preserve the attraction of mutual funds as a flexible and investor-friendly vehicle for long-term, diversified investment.

I am pleased to be joined today by my distinguished colleagues on the Committee on Governmental Affairs, Senator Carl Levin and Senator Susan Collins, the committee's chairman, who are original cosponsors of this legislation. I am grateful for the extensive and important input both Senators provided in the drafting of this bill, and appreciate the invaluable perspective Senator Collins provided based on her first-hand experience as Maine's Commissioner of Professional and Financial Regulation.

I would like to take this opportunity to recognize the work of a number of our colleagues in this area. Last year, I was pleased to cosponsor S. 1822, introduced by Senator Daniel Akaka, the Ranking Member of the Senate Governmental Affairs Subcommittee

on Financial Management, the Budget, and International Security, which I chair, to address mutual fund trading abuses. Senators Corzine, Dodd, and Kerry also have sponsored mutual fund bills from which I drew, as well as legislation introduced by Congressman Richard Baker last summer and overwhelmingly passed by the House of Representatives at the end of the last session.

I also would like to acknowledge the ongoing work of the Senate Committee on Banking, Housing and Urban Affairs, the authorizing committee which will ultimately decide questions of mutual fund industry reform. The committee is conducting a series of legislative hearings to examine the mutual fund scandal and the merits of various reform proposals. I commend the leadership of Chairman Richard Shelby and Ranking Member Paul Sarbanes, and look forward to continuing to work with them and the other members of the Banking Committee on this issue in the coming months.

The bill I am introducing today reflects extensive testimony that was presented during oversight hearings of the Financial Management Subcommittee that I chaired on November 3, 2003, and January 27, 2004. The general consensus of the panelists at the November hearing was that illegal late trading and illicit market timing were indeed very serious threats to investors but that excessive fees and inadequate disclosure of those fees were an even more serious threat to American investors. Witnesses at our hearing last month testified regarding the propriety and the adequacy of the disclosure of mutual fund fees, specifically hidden fees such as revenue sharing, directed brokerage, soft money arrangements, and hidden loads such as 12b-1 fees. The subcommittee also heard from two whistleblowers who were responsible for the initial revelations regarding Putnam Investments and Canary Capital Partners,

Mr. President, I take just a few moments to introduce to my colleagues the nominee on whom we are going to be voting in a couple of minutes. I recommended Mark Filip to President Bush. President Bush nominated him. Senator Durbin concurred in my recommendation to President Bush. I thank Senator Durbin for his support in this effort. I also thank Chairman Hatch and Senator Leahy on the Judiciary Committee, and all members of the Judiciary Committee, for helping to move this nomination forward to the floor.

I think one of the most difficult tasks most of us have in the Senate is finding outstanding nominees to the Federal judicial branch of Government. In many cases, at least from my perspective, the choice has been very difficult. Oftentimes, we will get 80 applicants for a single district court judgeship opening in Chicago and you have to pick just one person. That one person, obviously, is very happy and you have many others who are disappointed that they did not get chosen.

In this case, I was elated to find a person of such outstanding credentials that I could wholeheartedly recommend him to the President. I think in the case of this nominee, Mark R. Filip, we are in fact lucky to have someone of his caliber who is willing to leave a very lucrative practice in the private sector. He is now a partner at Skadden Arps' Chicago office. He is willing to leave that very prestigious position to move into public service and become a district court judge in the Northern District of Illinois.

Mark Filip lives in Winnetka, IL, with his wife Beth. They have four sons.

Mark grew up in Chicago and attended the University of Illinois at Champaign. He graduated summa cum laude from the University of Illinois. While there, he received many academic fellowships, including the prestigious Phi Beta Kappa fellowship. After graduating from U of I, he won the highly sought after Marshall Scholarship to attend Oxford. While there, he received a B.A. and M.A. in jurisprudence and won first class honors at Oxford. Returning from his Marshall scholarship to the United States, he matriculated at the Harvard Law School. He did similarly well at Harvard. He became an editor of the Harvard Law Review.

In Mark Filip's second year at Harvard, he won the Sears Prize, which is given annually to the two students of the second year class who achieved the highest grades. Ultimately, in the early 1990s, Mark Filip graduated magna cum laude from Harvard Law School.

He began his professional career in Chicago, serving as an associate at Kirkland & Ellis, one of the best and oldest firms in Chicago. After a couple of years in the Kirkland & Ellis Chicago office, he moved to the U.S. Attorney's Office and became an assistant U.S. attorney in the Northern District of Illinois, where he gained a lot of experience in a wide variety of criminal cases that he prosecuted successfully, including racketeering, white-collar crime, public corruption, tax fraud cases; and he successfully defended the U.S. Attorney's Office on appeal in many of those cases.

Mark Filip returned to the private sector. After leaving the U.S. Attorney's Office, he became an associate at Skadden Arps in 1999, and in 2001 he became a partner at Skadden Arps.

In recent years, he has been an adjunct professor of law at Northwestern University and the University of Chicago Law School, both outstanding institutions.

Now, again, I emphasize how delighted I am to be able to present to my colleagues in the Senate such a well-qualified nominee, Mark Filip, who is a very young man. He has four children, who range in age from 8 months to 6 years. He is in his late thirties, and I expect that if he goes on the district court in Chicago at this early age, he may well have the opportunity to rise to the circuit court of appeals.

I neglected to mention that between law school and his professional career, he had two very prized judicial clerkships. He served as a law clerk to Steven Williams on the DC Court of Appeals and then as a law clerk for Supreme Court Justice Scalia.

I am confident, having researched and talked to all those he has worked with over the years, that there is no question he will make a superior district court judge.

Mr. President, I yield the floor.

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

Mr. President, I would like to address for a few moments the bill that is now on the floor, H.R. 3108, dealing with pension funding for defined benefit pension plans. The House passed this bill. In the House version of the bill, what it does is it mainly changes the interest rate assumptions that plans are required to use when figuring their actuarial liability for their pension plans and for their annuitants in their plans.

The House bill mainly addresses the situation that has arisen by virtue of the 30-year Government bond being done away with. A few years ago, the Treasury Department made the decision that it would no longer issue 30-year Treasury bonds and the interest rate for 30-year Treasury bonds had historically been what was used in calculating the liabilities for defined benefit pension plans. Now that there are fewer and fewer 30-year Government bonds in circulation, the interest rates for those bonds have gone down, and, of course, interest rates have been very low in general for the last couple of years.

So industries in sectors where defined benefit pension plans are common have come to Washington, asking for some relief in the way they calculate their unfunded liabilities, or their liabilities, and they have asked for the replacement of the 30-year Treasury bond with a benchmark that is, instead, made up of the yield of high-grade corporate bonds. By going to that different reference point, plans ultimately will have to put less money in their pension plans because they can assume a higher rate of return if they are using 30-year corporate debt or high-grade corporate debt as opposed to 30-year Treasury bonds.

In fact, right now companies in America, absent any legislation, would have to put about $170 billion into their defined benefit pension plans next year. If the interest rate relief alone in H.R. 3108 is passed, that will cut about 25 percent off the required payments that all companies with defined benefit pension plans will be required to make into their plans over the next 2 years. So the relief in this bill as it passed the House--and the only relief in the House bill is the interest rate relief--if that relief passes, it would cut about $40 billion per year off the amount that companies have to put into their defined benefit pension plans. Over 2 years, the life of the bill, it would cut $80 billion off of the required payments.

What has happened in the Senate is somewhat disappointing, to me. I could see the public policy rationale for changing the interest rate benchmark that companies use, now that we have done away with the 30- year Treasury bond. I can see the argument for coming up with a different reference. I can see the argument for changing the assumptions that would allow plans to put less money into their pension plans. But the Senate is going way beyond that. In addition to giving the interest rate relief that the House passed, the Senate now is on the verge of passing amendments that would provide special relief for airlines and steel companies.

The airlines and the steel companies would get further reductions in the amounts they have to pay into their pension plans. This is very troubling because airlines and steel companies, as we all know, tend to have the most woefully underfunded pensions of all industry in America. Obviously, they are asking for permission to dig their hole even deeper.

In addition, the Senate amendment that will be offered this week has a sweetheart provision for Greyhound Bus Company. I don't know why Greyhound Bus Company is singled out for this special treatment of all the companies in America, but it certainly must have some powerful friends here on Capitol Hill.

Also getting a sweetheart deal is CNF Trucking, which apparently gets some sort of relief in this bill and some limitation on liability that it might have to a former subsidiary that it spun off a couple of years ago.

So there are a couple of sweetheart deals, not just for some chosen industries, the airlines and steel companies, but also some rifle shots that would be put in here for two special companies, Greyhound and CNF Trucking.

In addition, and perhaps most discouraging, is that the Senate amendment will, in effect, go way beyond just the steel and the airline industries and allow all companies that have underfunded pension plans to go through a political process in applying for a waiver from their required contributions to their pension plans. All companies would be able to go to the Treasury Department and request a waiver.

If this provision becomes law, you can just imagine right before the election all the industrial companies in the Upper Midwest, in Michigan, Pennsylvania, Illinois, Wisconsin, and so forth, all those industrial companies in States that are critical for the upcoming election, they will all be going to the administration, asking for this special waiver from the Treasury Department. They will be making political threats at the same time, that if the administration doesn't give them this relief, they may just support someone else for President. It sets a very bad precedent because now there is a waiver process. But it is an apolitical one, and one for which you have to apply with the Internal Revenue Service and also with the Pension Benefit Guaranty Corporation.

As I said, if it were merely adopting the interest rate relief, we would be granting a 25-percent reduction in the

required contribution of all companies in toto in America to their defined benefit pension plans. We are going way beyond that. In the Senate amendment, we are threatening to grant them an additional about $17 billion a year, at least in reductions in required amounts going into pension funds.

There is also a provision in the Senate amendment in the managers' package that will allow all multiemployer pension plans--those are union-run plans which span employers--from having to make their full contributions.

All of these reductions in required contributions into the pension plans wouldn't be so troublesome but for one fact: In allowing these companies to dig the hole deeper for themselves, it is more likely that they will ultimately default on their pension obligations and turn those obligations over to the Pension Benefit Guaranty Corporation to take advantage of the Government guarantee. It wouldn't be so offensive if it were freezing the Government guarantees. But we are not.

There is a no hold harmless provision in this legislation. There are no reforms of pension funding trying to get tough on the companies that have considerably underfunded their pension plans. We are just allowing them to skip required payments into their pension plans. We are allowing the government guarantees to stay in place.

What is more, we are allowing the companies with underfunded plans to continue sweetening the benefits for their workers and raising their own pension liabilities while those pension liabilities are all guaranteed by the Federal Government.

I know pension funding is something that perhaps makes the eyes of the press glaze over. Not many members of the public understand the importance of this. This is a very roundabout way of transferring liabilities to taxpayers. It is not easy for people to understand. But if I were to make an analogy that the average American could understand about what we are doing here, imagine that you have someone who is behind in their credit card payments. Imagine that you said to that person, you are behind in making your payments on the credit card. You are only making the minimum payment. You are trying to make a minimum payment due each month. You have this huge balance. It is going to take years and years to pay off this deficit of what you owe the credit card company or the bank. Imagine if this person were to have their minimum payments lowered. Imagine that when they are already just barely making the minimum payments, you say: OK, we will even lower your minimum payment.

We are doing that here. But in addition, we are going beyond that. We are telling the credit card holder while you are lowering your minimum payments and digging the hole deeper so that you are likely never to get out of debt, we are going to go out and allow you to continue spending and add more to your credit card. Can you imagine a credit card company telling anybody that? That wouldn't be a way to advise a distressed consumer to try to get out of debt.

We are doing that and more here today in the Senate. We are not only allowing these companies to quit making their required payments into their pension plans, but we are allowing them to continue spending. We are allowing them, specifically if they are 60-percent funded, to keep sweetening the pension benefits for their employees and digging the hole deeper. That would be not only allowing the credit card holder to keep spending but encouraging the credit card holder to go out while they are behind in the payments on this one credit card and get some more credit cards and run up balances on those credit cards.

Obviously, if we pass this legislation we are going to make it hopeless for some companies ever to recover and to fulfill the promises they have made to their pension participants.

Right now, the Pension Benefit Guaranty Corporation--the Government corporation that guarantees pension benefits of people in defined pension plans--is in the worst financial condition of its entire history. It has at least a $11.2 billion deficit. Pension plans in America are now thought to be underfunded by at least $350 billion. This legislation would allow that collective underfunding in defined benefit pension plans in America to grow considerably.

The House was much more responsible. It only passed the change in interest rate assumptions. It passed the separate version of the bill that had the interest rate change, plus some relief for airlines. The Senate is poised to go much further. I am troubled by that. The administration has issued a threat to veto the legislation.

I refer to a letter. This is a Statement of Administration Policy that was issued on January 22. I ask unanimous consent that Statement of Administration Policy on H.R. 3108 be printed in the Record.

Mr. President, a couple of days ago, Elaine Chao, Secretary of the Department of Labor; John Snow, Secretary of the Treasury; and Don Evans, the Secretary of the Department of Commerce, the three board members of the Pension Benefit Guaranty Corporation, wrote a letter to our majority leader, Bill Frist, which asks that the Senate not go beyond amending the interest rate changes that were passed by the House. They said they would oppose it and recommend that the President veto any legislation that would further exacerbate the systemic underfunding of defined benefit pension plans in America.

I ask unanimous consent that this letter be printed in the Record.

Mr. President, I think the Washington Post editorial page had a very good editorial on this issue this morning. They dealt with the irresponsibility of allowing companies with underfunded pension plans to dig the hole deeper. They also talked about how it is troubling that in Washington there are always incentives for Members of the House and Senate to do what is wrong, to cater to the special interests--in this case, the airlines, the steel companies. This is a situation in which the airlines and the steel companies and their managers have conspired with their union members to come to Congress and allow dispensation which allows the companies to put less money into their pension plans. And no one in those companies cares because the pension plans are guaranteed by the taxpayers. So you have the labor unions and you have the managers coming here to Washington lobbying for this relief.

We have gone far beyond just the airline and steel companies. Apparently, in the Senate bill every company in America would be eligible to ask the Secretary of Treasury for a waiver from its pension contributions.

Allow me to read this editorial from this morning's Washington Post. It is called ``Pension Perniciousness.''

Monday, January 26, 2004, by the Washington Post:

Not for the first time, Congress has muscled up to an

important problem, taken a good long look at it and resolved

to make it worse. The problem is the vast hole in the

nation's corporate pension schemes, and the perverse rules

that helped create them. Congress's solution, championed in

the Senate by an alliance of Sens. Charles E. Grassley (R-

Iowa), Judd Gregg (R-N.H.), Max Baucus (D-Mont.) and Edward

M. Kennedy (D-Mass.), is to reward the hole-diggers with what

amounts to a $16 billion loan from taxpayers.

About one in five private-sector workers has a ``defined-

benefit'' pension, the sort in which an employer guarantees a

certain pension to its workers when they retire. To pay for

these future benefits, employers are supposed to put

sufficient money into a pension fund; the problem is they

often don't. The gap between money put aside and money needed

in the underfunded pension plans comes to an enormous $350

billion. When companies go bust, the Pension Benefit Guaranty

Corp., the government-backed entity that insures pensions,

gets saddled with plans that are in deficit. As a result, the

PBGC itself has a deficit of $11.2 billion, which taxpayers

may have to plug eventually. As more companies go bust, more

of the $350 billion problem out there in the private sector

will land on taxpayers' shoulders.

Why do companies run these pension deficits? Because

regulations perversely encourage them to do so. If a firm

gives workers a pay raise, it will have to pay for that

immediately; if it gives them an increase in their pension,

accounting rules allow it to defer the cost into the future.

This deferral is especially tempting for cash-strapped

companies--which often means ones with a strong chance of

going bust. Bethlehem Steel, for example, upped its pension

promises and declared bankruptcy three years later. Wobbly

companies that underfund their pensions would pay extra

insurance premiums if the insurer were a private company. But

the PBGC's rules do not allow it to price risk properly,

adding a further incentive for shaky companies to hitch a

free ride with the others.

There is, as Congress is demonstrating, no political

constituency for fixing this problem. Weak companies with

underfunded pensions lobby lawmakers for permission to

continue their imprudence; labor leaders from those same

firms lobby lawmakers in the same direction; nobody is on the

other side. In the deal currently being cooked up, a group of

hard-pressed companies led by the steel industry and the

airlines will be given a special break for two years; if any

of these firms goes bust in the meantime, the public will end

up shouldering the deficits, which is why the congressional

measure amounts to a taxpayer loan.

Yet taxpayer support for people in defined-benefit pension

plans is a perverse notion. Fully one in two private-sector

workers has no company pension plan whatever. Why should the

less fortunate bail out the lucky ones?

That was the editorial from this morning's Washington Post. It accurately summed up the imprudence of the bill that the Senate will be considering this week. Ideally, it would be great if the Senate did not pass such an irresponsible bill. Obviously, as the Washington Post points out, when you have labor leaders and CEOs of airlines and steel companies lobbying together, conspiring together to stick a liability of theirs off on the taxpayers, I fear they are probably going to win.

My hope, however, is that the House, which has been more responsible on this issue, and the White House, which is opposed to the vast expansion of underfunded liabilities that would be engendered by this legislation--my hope is that the White House and the House will prevail upon the conference committee to pass something more responsible than the legislation currently before the Senate.

One final point. The Washington Post editorial referred to this case of Bethlehem Steel and the editorial talked about how Bethlehem Steel was sweetening its pension benefits for the 3 years prior to its going into bankruptcy; then it just handed the pension plan and all its liabilities off on the Pension Benefit Guaranty Corporation and, by extension, the taxpayers.

That brings up another issue. Some people think the pension funding rules are too severe for companies in America and that we ask too much of companies in the ERISA law where we require them to fund their pension plans as well as possible. But it turns out that--I held a hearing on this issue over the summer and what I found was very troubling--the current rules are exceedingly lax. The law, ERISA, which was passed in 1974, requires defined benefit plans to be 90 percent funded. If they are not 90 percent funded, they have to make extra catchup payments. But that 90 percent funding level is referred to in ERISA as ``current liability.'' It turns out that the definition of current liability is not an actuarial definition. It is not the definition of how much would actually be owed to pay the benefits that have been promised. It turns out that the definition of current liability is actually a political definition.

To illustrate this, the Bethlehem Steel case probably is the best example of how woefully inadequate the current pension funding rules are. In its last filing with the Pension Benefit Guaranty Corporation, Bethlehem Steel claimed it was 84 percent funded on a current liability basis. That was Bethlehem Steel's last filing. Then they filed for bankruptcy and handed their pension plan over to the PBGC. It turns out that Bethlehem Steel's pension plan was not 84 percent funded; it was only 45 percent funded as a percentage of how much the PBGC actually had to pay, to pay the benefits that had been promised.

That example shows how the pension funding laws of this country are already woefully lax. We are allowing companies to make promises to employees that they have no hope of ever fulfilling, promises which risk that the taxpayers will ultimately have to pay

these pensions. This legislation the Senate is considering this week will make this lax funding of pensions in this country far more lax. It will do a lot of long-term damage.

I hope my colleagues in the Senate will think carefully about this notwithstanding the political pressures they will have from airline executives and from labor union leaders.

I yield the floor and suggest the absence of a quorum.

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

Mr. President, I ask unanimous consent to speak as in morning business for up to 15 minutes.

I thank the Chair.

Mr. President, it is with great sadness that I rise to report to my colleagues in the Senate the death of a former Member of this body, U.S. Senator Paul Simon from Illinois. Senator Simon died earlier today. He was 75 years old. This comes as a great shock to all of us who knew and loved Paul Simon.

Earlier today, I had written him a get well note and sent him some flowers. It was announced a couple of days ago that he was going into the hospital for heart bypass surgery and also to have a leaky heart valve replaced. Apparently something happened during the surgery--I don't know what--but Senator Simon, unfortunately, passed away, and we all send our love and our prayers to his wife Patty, his children, his grandchildren, and to all his colleagues at Southern Illinois University where he will be missed greatly.

Senator Simon's first wife, Jeanne, died a few years ago. I also had the privilege of knowing her. May God rest her soul as well.

Senator Simon was a nationally known figure, primarily from his having been a candidate for the Presidency in 1988. In Illinois, he was truly a giant for many decades--three or four decades or more. He served both in the State house of representatives and the Illinois State Senate, as well as in the U.S. Congress and then later in the U.S. Senate. He is thought to be the only person from Illinois to have served in both houses of the Illinois Legislature and then in both Houses of Congress.

He was also in the late sixties and early seventies the Lieutenant Governor from Illinois. On his last reelection race for the U.S. Senate, he won by over a million votes, with 65 percent. I believe he had the highest plurality of anybody running that year.

He was an extraordinary figure, extremely popular, and extremely well respected, especially for his character and integrity. Many people may have disagreed with Senator Simon's policy positions on a variety of issues, but no one ever questioned his ethics and integrity. In fact, those who served with him in the Senate, I am sure, remember his famous bow ties. Those bow ties almost became a symbol of ethics and integrity in the State of Illinois because of Senator Simon. He was a remarkable man.

He started in the early 1950s--maybe before that; maybe in the late forties--as a newspaper editor in southern Illinois. He was about 19 years of age when he was asked to take over a troubled newspaper in Troy, IL, in Madison County. He actually revived the newspaper by going after a corrupt gambling cabal in Madison County. He ultimately put together a string of some 13 newspapers that he sold in the 1960s, and then went from journalism into politics and government service; he never looked back.

He had numerous legislative accomplishments in the U.S. Senate, including the Direct Student Loan Program, the job training partnership amendments, and many other initiatives across a wide spectrum of issues. Of course, he was very accomplished in the Illinois Legislature as well.

Some people think they have done a lot when they have read a book. Senator Simon probably wrote as many books as most people have read. He is the author of at least 21 books, and maybe more than that. He had 55 honorary degrees. As I mentioned, he was a candidate for President in 1988.

One of the most astonishing things about Paul Simon was that his ethics and integrity were not just an act. I think a lot of the professional politicians maybe didn't always appreciate him in Chicago, for example. They maybe thought his bow tie and his constant efforts to maintain the highest standards in Illinois and the Federal Government were an act. But you could see after he retired from the Senate when he was offered, reportedly by foreign governments, to become a high paying lobbyist--I think one foreign government offered him over $600,000 a year to become their lobbyist, and he was offered a variety of lucrative positions. He turned all that down so he could return to Makanda, IL, down in the southern part of the State where he came from so he could teach at Southern Illinois University in Carbondale and be a professor. He turned down higher paying professorships elsewhere in the country. He wanted to come back home and be at Southern Illinois University.

He put together a wonderful public policy institute with some others there, including Mike Lawrence, who was the press secretary to our former Gov. Jim Edgar in Illinois.

I was in the area down by SIU this past summer. I had dinner with Mike Lawrence and he was telling me how hard it was to keep up with Paul Simon. Even at his age, he was keeping a remarkable schedule. So it came as a great surprise to hear of his passing today. It is a great loss. We will all miss him.

He was nothing but kind to me. Even though I was a member of the opposite party, Senator Simon last called me when I announced I would be retiring from the Senate. He was always courteous and kind in offering to help everyone he could.

I remembered from long ago reading a column that was written about Paul Simon, which I thought was a fabulous testament to this wonderful man. The column was written in the Chicago Tribune on February 28, 1997. It was by R. Bruce Dold, entitled ``In Praise of a Decent Former Politician.'' This column is written by a journalist who had covered Senator Simon for many years, including following him around on his election campaigns and seeing his interaction with people all over the State of Illinois. This reporter wrote about how he was amazed that Senator Simon would come into a small town and say hi to everybody, and he would actually know the names of their children and how their grandfather was doing.

Senator Simon had a genuine affection for people. He was a tireless worker. He held over 600 town meetings in his two terms in the Senate, which is a very tough pace to keep up with for any of us in the Senate. He was a remarkable man.

I ask unanimous consent that this commentary written by R. Bruce Dold be printed in the Record immediately following my remarks.

I conclude by saying that Senator Paul Simon was a credit to the State of Illinois and a credit to the Senate, and we will miss him. God rest his soul and may God bless his widow and family.

Exhibit 1

[From the Chicago Tribune, Feb. 28, 1997]

In Praise of a Decent Former Politician

(By R. Bruce Dold)

One of my best lessons in southern Illinois politics came

with Paul Simon's 1984 campaign for the U.S. Senate, the one

where he dusted Sen. Charles Percy and made amends for his

one big political loss, the 1972 bid for governor.

Simon planned to hit about 13 towns in one day, moving from

Vandalia to Cairo and over to Carbondale, with a brief stop

at his Makanda home to show off his Lincoln book collection

to the handful of reporters with him. He'd be meandering over

a few hundred miles, which normally would require a

helicopter. For Simon, all it required was Joe Bob Pierce.

Joe Bob is something of a Renaissance man--an electric

power lineman with a Baptist divinity school degree who can

drive like a bat out of hell, that last talent being the one

Simon required that day.

So the trip went like this. We would drive to the Franklin

county Courthouse public square, and Simon would give a

little speech, and then he would do the real campaigning.

This amounted to greeting each person in the crowd by her

first name and inquiring about her children and her frail

grandfather, and then moving on to the next soul with a

hearty ``nice to see you.''

Then we would pile into Joe Bob's car and he would hit

triple digit m.p.h. on Rt. 142 until we barreled into the

parking lot of the Saline Valley Conservancy District, where

Simon would do it all over again.

And I realized by the second stop that he actually knew all

of these people, and the ages of their kids, and the health

status of their grandfathers.

Simon wasn't supposed to win that election but he did, in

part because he swept most of Southern Illinois.

He's back home now after ending an impressive career in

politics. He's believed to be the only person who ever served

in the Illinois and U.S. House and Senate.

On paper, his career makes no sense. Before politics, he

was a newspaper editor who shook things up in a part of

Illinois that liked things calm. He was too liberal for his

congressional district, too liberal for this state, too

liberal for Congress. He was a bigger-government advocate in

a little-government era. Didn't matter. People thought he

cared about them. He won his last Senate race by almost 1

million votes.

A few Washington types, and a few well-known Chicago

politicians, still believe it was an act, that Simon was just

another pol who had perfected a gee-whiz persona and the

public got snookered into buying it. And while I always liked

Paul Simon, I was also suspicious enough of politics in

general to keep alive the prospect that they might be right.

OK, now that he's retired, it's safe to say that they are

wrong.

When Simon left the Senate and there was no electoral

advantage to being pure, he still did the right thing.

He turned down offers to lobby in Washington--one offer was

for $600,000 a year to work for foreign governments. I'm

taking his word on this--there's that suspicion rising again.

But in the years I've known him he hasn't given me reason not

to take his word.

He also turned down several teaching offers at better-known

schools around the country to take a job running the new

Public Policy Institute at Southern Illinois University in

Carbondale, near his home.

Nobody needs to hold a tag day for him, since he's drawing

$120,000 a year from SIU. But they offered him $140,000 and

he requested a $20,000 cut so he wouldn't be paid more than

the chancellor. That's the kind of gesture that makes the

political cynics snicker, and makes the rest of the world

think Paul Simon is a very decent guy.

Now that Simon's back home and doesn't have to be concerned

about his own elections, he could be more of a political

broker in this state.

He proved he could transfer his credibility and popularity

last year when Richard Durbin was a relatively unknown

central Illinois congressman making his introductions to

Chicagoans at the same time he was asking them to send him to

the Senate. Nobody up here knew Richard Durbin from Richard

Burton. But Simon's endorsement, repeated on television

commercials, was gold. It gave Durbin instant credibility and

carried him to the election.

So Simon could throw his weight around. He intends not to.

Other than supporting Sen. Carol Moseley-Braun's re-election

bid, he's planning to lay low in politics.

He could be a big factor in the Democratic primary for

governor next year. Lots of people want to run. But it looks

like Simon won't play the game. He told me this week he's

been approached by several potential candidates, but doesn't

plan to endorse anybody. He's happy teaching his government

and non-fiction writing courses and doesn't want to taint his

new institute with the smell of partisan politics.

``I anticipate I will be less involved in party activities

than I was before,'' he said. ``I have to be reaching out to

both political parties.''

For a political writer in Chicago, saying something kind

about a politician is akin to volunteering to put a kick-me

sign on your back. But here goes: the people were right all

along, Paul Simon really is a very decent guy.

I suggest the absence of a quorum.

Mr. President, I understand that preliminary estimates suggest that buying no more than 80 tankers in a way that avoids lease-specific costs could save taxpayers as much as $5.3 billion over the Air Force's original proposal to lease 100 tankers.

As I stated during a Commerce Committee hearing on September 2, 2003 regarding this issue, the original lease transaction is nothing more than a complex, byzantine transaction that obscured the true cost of the tankers, reduced the transparency of the arrangement, and would unnecessarily cost American taxpayers billions of dollars. I commend the Senator from Arizona for his watchful eye over the negotiation and execution of this tanker deal. I also commend Senators Warner and Levin for brokering the compromise agreement and putting the public interest ahead of a powerful special interest.

Madam President, I thank both my colleagues from Kansas. I appreciate the remarks that were just made by the chairman of the Intelligence Committee.

I would like to go back to some of the statistics that have been cited in this debate. I guess I have been very troubled to hear on the radio this morning, on call-in radio, the figures being cited over and over again that were offered last night on the other side of the aisle.

We kept hearing that they had only blocked four judges. Well, that is simply not true, and I think it is very important that the American people know that is not true.

I have in my hands a chart that was prepared by the nonpartisan Congressional Research Service that shows that of the Presidents going back to Carter, in 1977, through August 1, 2003, the Senate has blocked a higher percentage and a higher number of judges who were nominated by President Bush than any other President in the Nation's history--or at least going back to 1977. And I am sure nothing was going on prior to 1977 like what is going on today.

The fact is, according to this survey, President Bush has nominated a total of 264 people to serve on the district and appellate courts in this country. As of August 1, 2003, only 144 of them have been confirmed. That is only 54 percent of the number of nominations made by President Bush.

Now we need to break that down. Of district court nominees, President Bush, as of August 1, has nominated 185 nominees to the district court. Only 117 of them have been confirmed. That means the Senate had rejected or not acted on 68 of those district court nominees.

With respect to the appellate courts, as of August 1, the President had nominated 79 appellate court judges and the Senate, as of August 1, only confirmed 27 of them. That is only 34 percent of the total. So that means 52 of President Bush's nominees to the appellate courts have been blocked by the Senate.

My friends on the other side of the aisle have done something very clever. They have just arbitrarily decided they are only going to talk about judicial nominees who have been filibustered and blocked on the floor of the Senate and they are not going to talk about those whose nominations have been blocked in other ways, such as in committee. Thus, the American people have been given a misleading impression overnight. They have been misled into thinking the Senate has only blocked four nominees for the appellate courts. Well, it has been far more than that.

As of August 1, it had been 52. I do not know what the figure would be right as of today, but I would have to tell you, if you compare it to the previous Presidents, the treatment of President Bush's nominees has been deplorable.

Going back to President Carter, he nominated 61 appellate judges; 56 of them were confirmed. In other words, Carter, in 4 years, only had five appellate court nominees who did not make confirmation; 91 percent of his nominees were confirmed. President Reagan, who was a Republican President, served while there was a Democratic Congress. He had 81 percent of his appellate nominees confirmed. The first President Bush had 77.8 percent of his appellate court nominees confirmed. President Clinton had 56 percent of his appellate court nominees confirmed.

If you get down to this President, George Bush, he only has had, as of August 1, 34 percent of his appellate court nominees confirmed. I am very concerned about what this means for our country. It could mean that a minority in the Senate is usurping for itself the power to control the Federal judiciary.

Under our Constitution, the President is supposed to appoint the judges with the advice and consent of the Senate. We have some idea what the Constitution meant by that because Alexander Hamilton addressed the issue in Federalist Paper No. 76. He said the Senate's role is to refuse nominations only for ``special and strong reasons'' having to do with ``unfit characters.''

I do not even think anyone has made the argument that the nominees who have been blocked in the Senate in this Congress have been unfit. I think the arguments against their nominations have been more ideological; simply the other side does not agree with these people, suspects they may be conservative.

Many of President Bush's nominees have been pro-life. I am concerned there may be a litmus test that is being applied on the other side, that they are simply not going to allow pro-life judges on our appellate courts. That is very troubling because that is upsetting our constitutional order that our Founding Fathers have made.

The key point here is, I do not want the American people to come away with the impression that only four of President Bush's nominees have been blocked. The number is far higher. It is probably a total of over 100. Probably about 120 have been blocked. As of August 1, 68 district court judges have been blocked and 52 appellate court judges. So this whole thing about just four judges having been blocked is really nonsense, and we ought to set the record straight.

Thank you, Madam President. Having used up my time, I will now yield the floor to my distinguished colleague, Senator Brownback from Kansas.

Mr. President, I thank my colleague from Illinois for yielding the floor for a few moments. The Senator may wish to resume debate following my remarks.

I want to present a counterpoint, I guess, to the opinions of my distinguished colleague. I think he made a very eloquent case in favor of why we should have class action lawsuits in this country, and I would simply point out to my colleagues that this bill does not in any way diminish our ability to have worthwhile class action lawsuits. In fact, I think the intent of the bill that is passed out of the Judiciary Committee and which Senator Hatch spoke about earlier this afternoon is, in fact, to make the process for class action suits better, fairer, and more beneficial to the plaintiffs.

One of the things the bill would do is create a consumer bill of rights to protect the class action plaintiffs, the actual clients of the class action lawyers. We have all heard about cases in which a class action lawsuit is filed, and in the end, the defendant corporation settles for millions of dollars paid to the lawyer and all the clients, or the plaintiffs get a coupon or something of insignificant value. So contrary to the impression created by Senator Durbin, I want to make it clear to my colleagues that this bill does not in any way seek to do away with class action lawsuits. In fact, we seek to make them better and more beneficial to the plaintiffs, the clients themselves, and cut down on some of the abuses.

I rise to support S. 1751, the Class Action Fairness Act of 2003, and I do so today with a special interest in the commonsense fairness of this legislation. There is, in my State of Illinois, as mentioned by Senator Durbin, one of the infamous venues that have come to be commonly described as ``judicial hellholes,'' State courts where plaintiffs' lawyers know they can file abusive, frivolous, and even extortionate class action lawsuits against defendant companies operating nationwide and

get results they could not get in the vast majority of fair jurisdictions elsewhere in the United States.

It is an abuse that must stop. Under S. 1751, every person's right to file a lawsuit is preserved. Every current legal theory for relief may still be advanced. Under S. 1751, a class action lawsuit can be filed just as easily as it can be today. S. 1751 is a limited and commonsense approach to a widely recognized abuse in our judicial system. It simply makes truly national lawsuits easier to hear in Federal court, and it simply requires judges to take a close look before approving some of the greedier and more abusive features of class action litigation, such as coupon settlements that I mentioned at the outset, where lawyers get millions of dollars and class action members get virtually worthless coupons.

My State has the dubious distinction of hosting one of the judicial hellholes to which Senator Durbin was referring. In fact, if anyone has been following the editorial page in the Wall Street Journal, they have written several editorials about this county. It is Madison County, IL. It is in southwestern Illinois, across the Mississippi River from St. Louis. If my colleagues have never been to Madison County, it is a suburban county with a surge in shuttered plants and steel mills and a new cottage industry in abusive class action litigation.

Several recent studies have looked at class actions in the Madison County courts, and here is what they found: Over a 2-year period, the number of class actions in the county increased by 1,850 percent. In 1998, there were only two class actions filed in Madison County, a number consistent with a community with Madison County's size and economic base.

During 2000, the number rose to 39. During 2001, 43 new class action lawsuits were filed, another 10-percent increase, and the upward trend is increasing.

As of the middle of this year, Madison County was already up to 39--I think Senator Durbin said 43 cases--as of July of this year. That puts it on pace to break its own record.

These findings suggest that Madison County has one of the highest class action filing rates in the country. Indeed, according to an article in the St. Louis Post Dispatch, Madison County has developed a nationwide reputation as the place to file nationwide class actions, even though it only has one-tenth of 1 percent of the U.S. population. It has about 259,000 people.

Here is another troubling statistic: In recent years, only a few thousand class actions were filed annually in the entire Federal court system. That amounts to a per capita rate of about 7.6 class actions for every million residents. In Madison County in 1999, the per capita rate of State court class actions was nearly 9 times higher, with about 61 class actions filed per million people.

These are not local disputes. The vast majority of class actions in Madison County were brought on behalf of nationwide classes. The percentage seeking nationwide class action status is a whopping 81 percent. In Madison County, lawyers have sought to certify classes over the last 3 years that included all Sprint customers nationwide who have ever been disconnected on a cell phone call--I am sure that has happened to all of us--all RotoRooter customers nationwide whose drains were repaired by allegedly unlicensed plumbers, and all consumers in the Nation who purchased limited edition Barbie dolls that were later allegedly offered for a lower price elsewhere.

Why were all these suits filed in Madison County? Why were they not filed in Utah, Idaho, Arizona, or State courts elsewhere in Illinois? Well, because a few lawyers have figured out that the judges in Madison County are very friendly to plaintiffs. It is no surprise that the same five firms appeared as counsel in approximately 45 percent of the cases filed during the 1999-to-2000 period, and that most of these firms are not located in Madison County.

Of the 66 plaintiffs' firms that appeared in the Madison County cases filed during 1999 and 2000, 56, or 85 percent, listed office addresses outside of Madison County.

These studies present a real mystery. Lawyers from all over the country are flocking to Madison County, IL, to file class actions on behalf of people who do not live in Madison County, against companies that do not reside in Madison County, concerning events that did not occur in Madison County.

What is wrong with this picture? Does anybody really think that it is just an accident that these lawyers from all over the country are flocking into Madison County with their cases?

As the Washington Post recently noted in an editorial criticizing class action abuses, having invented a client, the lawyers also get to choose a court. Under the current absurd rules, national class actions can be filed in just about any court in the country.

Large, nationwide class actions should be in Federal court, not in some small county court in some remote location that has nothing to do with the parties or the case. This is an abuse of the system, plain and simple. We are nowhere near the outer perimeter of tort reform here. This is an easy one. This is common sense, a simple, honest, straightforward reform narrowly tailored to achieve fairer results in cases of truly national significance.

I urge you, Mr. President, and all my colleagues, to support S. 1751.

I yield the floor.

If none of my other colleagues wishes to speak at this time, I suggest the absence of a quorum.

Mr. President, I rise today to introduce the Department of Homeland Security Financial Accountability Act. I am joined in introducing this legislation by the distinguished Senator from Hawaii, Senator Akaka, who serves as the ranking member of the Governmental Affairs Subcommittee on Financial Management, the Budget, and International Security, which I chair.

This bill is a companion bill to H.R. 2886 that Congressman Todd Platts, chairman of the Subcommittee on Government Efficiency and Financial Management, introduced in the House of Representatives on July 24, 2003. The House bill has bipartisan support from the leadership of the House Government Reform Committee, including Chairman Tom Davis, Ranking Minority Member Henry Waxman, and the vice chairman and ranking minority member of the Subcommittee on Government Efficiency and Financial Management, Marsha Blackburn and Edolphus Towns.

The purpose of this bill is to ensure that the Department of Homeland Security is included in the Chief Financial Officers Act of 1990, as amended, and is subject to the same audit requirements that currently apply to over 100 Federal agencies.

Improving financial management in the Federal Government to eliminate waste, fraud, and abuse, has long been a priority for me. The Chief Financial Officers Act (CFO Act) is regarded as one of the most important statutes that contributes significantly towards accomplishing this objective. The original CFO Act required 24 Federal agencies to submit audited financial statements to the Office of Management and Budget (OMB) and the Congress, thereby improving the accountability of Federal agencies to the taxpayer. In the 107th Congress I sponsored the Accountability of Tax Dollars Act that extended this audit requirement to all Federal agencies with budgets over $25 million, unless the Office of Management and Budget provided a waiver from the requirement. President Bush signed the Accountability of Tax Dollars Act into law on November 7, 2002, as Public Law 107-289.

As my colleagues may know, an auditor may certify a financial statement as unqualified, also known as a clean audit, or as unqualified. An unqualified opinion means that an agency's financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of the agency. A qualified opinion contains an exception to the standard opinion, but the exception is not of sufficient magnitude to invalidate the statement as a whole. Finally, an agency may also receive a disclaimer of opinion. A disclaimer is the worst case because it indicates that the agency's accounts are in such disorder that the auditor is not in a position to make any certification.

This past year we have seen dramatic improvement by Federal agencies regarding their financial reporting and audit compliance. In February 2003, the Office of Management and Budget announced that a record 21 of the 24 CFO Act agencies submitted unqualified financial audits, including for the first time the Agriculture Department. As a member of the Senate Committee on Agriculture, Nutrition, and Forestry, I raised the issue of financial management with Secretary Ann Veneman at her nomination hearing on January 18, 2001, and stressed the importance of unqualified opinions. I was, therefore, pleased to see that the USDA received its first unqualified opinion this year, demonstrating remarkable improvement in the department's financial management.

I also discussed financial management recently with the Department of Homeland Security, Secretary Tom Ridge, when he testified before the Government Affairs Committee on May 1, 2003. At that time, Secretary Ridge assured me that financial management is a top priority for the Department, and every effort will be made to comply with the provisions of the CFO Act. While Secretary Ridge and the Office of Management and Budget have demonstrated their commitment to financial accountability, the bill I am introducing today will ensure that future secretaries and future administrations also will comply with the CFO Act.

The legislation I propose will ensure that the Department of Homeland Security is subject to the same financial management requirements as all other cabinet departments by accomplishing the following: It will include the Department in the list of agencies covered by the CFO Act, and make necessary adjustments to the Homeland Security Act of 2002 so that it is consistent with the provisions of the CFO Act; it will ensure that the Chief Financial Officer at the Department of Homeland Security is subject to the same requirements as all other similarly situated CFOs in cabinet-level departments by providing that the CFO is nominated by the President and confirmed by the Senate; it will require the CFO at the Department of Homeland Security to report directly to the Secretary and be a part of the statutorily created CFO Council; and it will require the Department of Homeland Security to include in each performance and accountability report an audit opinion of the Department's internal controls over its financial reporting.

Application of the Chief Financial Officers Act to the Department of Homeland Security is essential to ensure that effective financial management and reporting requirements are adhered to by the newest, and one of the largest, cabinet-level departments in the Federal Government. The Department of Homeland Security is in the process of integrating 22 agencies, many with disparate financial systems and a number with their own CFOs. Inclusion of the Department within the management requirements of the CFO Act will help ensure that the financial process is properly managed by requiring full financial disclosure of the Department's financial activities. Therefore, I urge my colleagues to support passage of this bill to protect against financial waste, fraud, and abuse within the Department of Homeland Security.

I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, I rise today to introduce the Department of Homeland Security Financial Accountability Act. I am joined in introducing this legislation by the distinguished Senator from Hawaii, Senator Akaka, who serves as the ranking member of the Governmental Affairs Subcommittee on Financial Management, the Budget, and International Security, which I chair.

This bill is a companion bill to H.R. 2886 that Congressman Todd Platts, chairman of the Subcommittee on Government Efficiency and Financial Management, introduced in the House of Representatives on July 24, 2003. The House bill has bipartisan support from the leadership of the House Government Reform Committee, including Chairman Tom Davis, Ranking Minority Member Henry Waxman, and the vice chairman and ranking minority member of the Subcommittee on Government Efficiency and Financial Management, Marsha Blackburn and Edolphus Towns.

The purpose of this bill is to ensure that the Department of Homeland Security is included in the Chief Financial Officers Act of 1990, as amended, and is subject to the same audit requirements that currently apply to over 100 Federal agencies.

Improving financial management in the Federal Government to eliminate waste, fraud, and abuse, has long been a priority for me. The Chief Financial Officers Act (CFO Act) is regarded as one of the most important statutes that contributes significantly towards accomplishing this objective. The original CFO Act required 24 Federal agencies to submit audited financial statements to the Office of Management and Budget (OMB) and the Congress, thereby improving the accountability of Federal agencies to the taxpayer. In the 107th Congress I sponsored the Accountability of Tax Dollars Act that extended this audit requirement to all Federal agencies with budgets over $25 million, unless the Office of Management and Budget provided a waiver from the requirement. President Bush signed the Accountability of Tax Dollars Act into law on November 7, 2002, as Public Law 107-289.

As my colleagues may know, an auditor may certify a financial statement as unqualified, also known as a clean audit, or as unqualified. An unqualified opinion means that an agency's financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of the agency. A qualified opinion contains an exception to the standard opinion, but the exception is not of sufficient magnitude to invalidate the statement as a whole. Finally, an agency may also receive a disclaimer of opinion. A disclaimer is the worst case because it indicates that the agency's accounts are in such disorder that the auditor is not in a position to make any certification.

This past year we have seen dramatic improvement by Federal agencies regarding their financial reporting and audit compliance. In February 2003, the Office of Management and Budget announced that a record 21 of the 24 CFO Act agencies submitted unqualified financial audits, including for the first time the Agriculture Department. As a member of the Senate Committee on Agriculture, Nutrition, and Forestry, I raised the issue of financial management with Secretary Ann Veneman at her nomination hearing on January 18, 2001, and stressed the importance of unqualified opinions. I was, therefore, pleased to see that the USDA received its first unqualified opinion this year, demonstrating remarkable improvement in the department's financial management.

I also discussed financial management recently with the Department of Homeland Security, Secretary Tom Ridge, when he testified before the Government Affairs Committee on May 1, 2003. At that time, Secretary Ridge assured me that financial management is a top priority for the Department, and every effort will be made to comply with the provisions of the CFO Act. While Secretary Ridge and the Office of Management and Budget have demonstrated their commitment to financial accountability, the bill I am introducing today will ensure that future secretaries and future administrations also will comply with the CFO Act.

The legislation I propose will ensure that the Department of Homeland Security is subject to the same financial management requirements as all other cabinet departments by accomplishing the following: It will include the Department in the list of agencies covered by the CFO Act, and make necessary adjustments to the Homeland Security Act of 2002 so that it is consistent with the provisions of the CFO Act; it will ensure that the Chief Financial Officer at the Department of Homeland Security is subject to the same requirements as all other similarly situated CFOs in cabinet-level departments by providing that the CFO is nominated by the President and confirmed by the Senate; it will require the CFO at the Department of Homeland Security to report directly to the Secretary and be a part of the statutorily created CFO Council; and it will require the Department of Homeland Security to include in each performance and accountability report an audit opinion of the Department's internal controls over its financial reporting.

Application of the Chief Financial Officers Act to the Department of Homeland Security is essential to ensure that effective financial management and reporting requirements are adhered to by the newest, and one of the largest, cabinet-level departments in the Federal Government. The Department of Homeland Security is in the process of integrating 22 agencies, many with disparate financial systems and a number with their own CFOs. Inclusion of the Department within the management requirements of the CFO Act will help ensure that the financial process is properly managed by requiring full financial disclosure of the Department's financial activities. Therefore, I urge my colleagues to support passage of this bill to protect against financial waste, fraud, and abuse within the Department of Homeland Security.

I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, at 5:30 we are going to be voting on a nomination to the Federal bench for the northern district of Illinois. The nominee is Samuel Der-Yeghiayan from Vernon Hills, IL. Senator Durbin and I have recommended Samuel Der-Yeghiayan to President Bush, who has appointed Sam, and he has been confirmed out of the Senate Judiciary Committee. I will say a couple of words in support of his nomination.

Since 1978, Mr. Der-Yeghiayan has worked in the United States Department of Justice Immigration and Naturalization Service first as a trial attorney in Chicago, later as acting district director, acting trial appellate attorney, and for about 18 years the chief district counsel for the INS in Chicago. He has a very good reputation.

Everyone, whether Republican or Democrat, from the many different communities in Chicago speaks very highly of Samuel Der-Yeghiayan. He has a very good reputation in legal circles in Illinois.

Since the year 2000 he has been acting as an immigration review judge in the United States Department of Justice Executive Office for Immigration Review. Sam Der-Yeghiayan has his JD degree from Franklin Pierce Law Center in New Hampshire. He was on the Law Review at Franklin Pierce.

There is an interesting aspect to Mr. Der-Yeghiayan's background that I think makes him somewhat unique. I am advised that he would be the first immigrant of Armenian descent ever to be named to the Federal bench. Mr. Der-Yeghiayan is himself an immigrant, having come to this country at an early age, and has done very well.

I am very proud of his nomination. I believe he is a very fine man, has a wonderful family, and he will be a great asset to our Federal judiciary.

I thank my colleagues and I thank Senator Durbin for his support for the nominee.

Mr. President, I ask for the yeas and nays.

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