The Permanent Subcommittee on Investigations was originally authorized by Senate Resolution 189 on January 28, 1948. At its creation in 1948, the Subcommittee was part of the Committee on Expenditures in the Executive Departments. The Subcommittee’s records and broad investigative jurisdiction over government operations and national security issues, however, actually antedate its creation, since it was given custody of the jurisdiction of the former Special Committee to Investigate the National Defense Program (the so-called “War Investigating Committee” or “Truman Committee”), chaired by Senator Harry S. Truman during the Second World War. Today, the Subcommittee is part of the Committee on Homeland Security and Governmental Affairs.
The Subcommittee has had nine chairmen: Senators Homer Ferguson of Michigan (1948), Clyde R. Hoey of North Carolina (1949-1952), Joseph R. McCarthy of Wisconsin (1953-1954), John L. McClellan of Arkansas (1955-1972), Henry M. Jackson of Washington (1973-1978), Sam Nunn of Georgia (1979-1980 and 1987-1994), William V. Roth of Delaware (1981-1986 and 1995-1996), Susan M. Collins of Maine (1997-2001); Carl Levin of Michigan (2001-2002 and 2007-present); and Norm Coleman of Minnesota (2003-2007).
Until 1957, the Subcommittee’s jurisdiction focused principally on waste, inefficiency, impropriety, and illegality in government operations. Its jurisdiction then expanded over time, today encompassing investigations within the broad ambit of the parent committee’s responsibility for matters relating to the efficiency and economy of operations of all branches of the government, including matters related to: (a) waste, fraud, abuse, malfeasance, and unethical practices in government contracting and operations; (b) organized criminal activities affecting interstate or international commerce; (c) criminal activity affecting the national health, welfare, or safety, including investment fraud, commodity and securities fraud, computer fraud, and offshore abuses; (d) criminality or improper practices in labor-management relations; (e) the effectiveness of present national security methods, staffing and procedures, and U.S. relationships with international organizations concerned with national security; (f) energy shortages, energy pricing, management of government-owned or controlled energy supplies; and relationships with oil producing and consuming countries; and (g) the operations and management of Federal regulatory policies and programs. While retaining the status of a subcommittee of a standing committee, the Subcommittee has long exercised its authority on an independent basis, selecting its own staff, issuing its own subpoenas, and determining its own investigatory agenda.
The Subcommittee acquired its sweeping jurisdiction in several successive stages. In 1957 – based on information developed by the Subcommittee – the Senate passed a Resolution establishing a Select Committee on Improper Activities in the Labor or Management Field. Chaired by Senator McClellan, who also chaired the Subcommittee at that time, the Select Committee was composed of eight Senators – four of whom were drawn from the Subcommittee on Investigations and four from the Committee on Labor and Public Welfare. The Select Committee operated for 3 years, sharing office space, personnel, and other facilities with the Permanent Subcommittee. Upon its expiration in early 1960, the Select Committee’s jurisdiction and files were transferred to the Subcommittee on Investigations, greatly enlarging the latter body’s investigative authority in the labor-management area.
The Subcommittee’s jurisdiction expanded further during the 1960s and 1970s. In 1961, for example, it received authority to make inquiries into matters pertaining to organized crime and, in 1963, held the famous Valachi hearings described below, examining the inner workings of the Italian Mafia. In 1967, following a summer of riots and other civil disturbances, the Senate approved a Resolution directing the Subcommittee to investigate the causes of this disorder and to recommend corrective action. In January 1973, the Subcommittee acquired its national security mandate when it merged with the National Security Subcommittee. With this merger, the Subcommittee’s jurisdiction was broadened to include inquiries concerning the adequacy of national security staffing and procedures, relations with international organizations, technology transfer issues, and related matters. In 1974, in reaction to the gasoline shortages precipitated by the Arab-Israeli war of October 1973, the Subcommittee acquired jurisdiction to investigate government operations involving the control and management of energy resources and supplies.
In 1997, the full Committee on Governmental Affairs was charged by the Senate to conduct a special examination into illegal or improper activities in connection with Federal election campaigns during the 1996 election cycle. The Permanent Subcommittee provided substantial resources and assistance to this investigation, contributing to a greater public understanding of what happened, to subsequent criminal and civil legal actions taken against wrongdoers, and to enactment of campaign finance reforms in 2001.
Armed with its broad jurisdictional mandate, the Subcommittee has in recent years conducted investigations into a wide variety of topics of public concern, ranging from corporate misconduct, including the Senate’s most in-depth investigation of the collapse of the Enron Corporation, to unfair energy prices, predatory lending, and tax evasion. The Subcommittee has also conducted investigations into numerous aspects of criminal wrongdoing, including money laundering, the narcotics trade, child pornography, labor racketeering, and organized crime activities. In addition, the Subcommittee has investigated a wide range of allegations of waste, fraud, and abuse in government programs and consumer protection issues, addressing problems ranging from food safety to Medicare fraud to mortgage “flipping.”
In 1998, the Subcommittee marked the fiftieth anniversary of the Truman Committee’s conversion into a permanent subcommittee of the U.S. Senate. In the half-century of its existence, the Subcommittee’s many successes have made clear to the Senate the importance of retaining a standing investigatory body devoted to keeping government not only efficient and effective, but also honest and accountable.
(1) Historical Highlights
The Subcommittee’s investigatory record as a permanent Senate body began under the Chairmanship of Republican Senator Homer Ferguson and his Chief Counsel (and future Attorney General and Secretary of State) William P. Rogers, as the Subcommittee inherited the Truman Committee’s role in investigating fraud and waste in U.S. Government operations. This investigative work became particularly colorful under the chairmanship of Senator Clyde Hoey, a North Carolina Democrat who took the chair from Senator Ferguson after the 1948 elections. The last U.S. Senator to wear a long frock coat and wing-tipped collar, Mr. Hoey was a distinguished southern gentleman of the old school. Under his leadership, the Subcommittee won national attention for its investigation of the so-called “five percenters,” notorious Washington lobbyists who charged their clients five percent of the profits from any Federal contracts they obtained on the client’s behalf. Given the Subcommittee’s jurisdictional inheritance from the Truman Committee, it is perhaps ironic that the “five percenters” investigation raised allegations of bribery and influence-peddling that reached right into the White House and implicated members of President Harry Truman’s staff. In any event, the fledgling Subcommittee was off to a rapid start.
What began as colorful soon became contentious. When Republicans returned to the Majority in the Senate in 1953, Wisconsin’s junior Senator, Joseph R. McCarthy, became the Subcommittee’s Chairman. Two years earlier, as Ranking Minority Member, Senator McCarthy had arranged for another Republican Senator, Margaret Chase Smith of Maine, to be removed from the Subcommittee. Senator Smith’s offense, in Senator McCarthy’s eyes, was her issuance of a “Declaration of Conscience” repudiating those who made unfounded charges and used character assassination against their political opponents. Although Senator Smith had carefully declined to name any specific offender, her remarks were universally recognized as criticism of Senator McCarthy’s accusations that communists had infiltrated the State Department and other government agencies. Senator McCarthy retaliated by engineering Senator Smith’s removal from the Subcommittee, replacing her with the newly-elected Senator from California, Richard M. Nixon.
Upon becoming Subcommittee Chairman, Senator McCarthy staged a series of highly publicized anti-communist investigations, culminating in an inquiry into communism within the U.S. Army, which became known as the Army-McCarthy hearings. During the latter portion of these hearings, in which the parent Committee examined the Wisconsin Senator’s attacks on the Army, Senator McCarthy recused himself, leaving South Dakota Senator Karl Mundt to serve as Acting Chairman of the Subcommittee. Gavel-to-gavel television coverage of the hearings helped turn the tide against Senator McCarthy by raising public concern about his treatment of witnesses and cavalier use of evidence. In December 1954, in fact, the Senate censured Senator McCarthy for unbecoming conduct. In the following year, the Subcommittee adopted new rules of procedure that better protected the rights of witnesses. The Subcommittee also strengthened the rules ensuring the right of both parties on the Subcommittee to appoint staff, initiate and approve investigations, and review all information in the Subcommittee’s possession.
In 1955, Senator John McClellan of Arkansas began 18 years of service as Chairman of the Permanent Subcommittee on Investigations. Senator McClellan appointed the young Robert F. Kennedy as the Subcommittee’s Chief Counsel. That same year, Members of the Subcommittee were joined by Members of the Senate Labor and Public Welfare Committee on a special committee to investigate labor racketeering. Chaired by Senator McClellan and staffed by Robert Kennedy and other Subcommittee staff members, this special committee directed much of its attention to criminal influence over the Teamsters Union, most famously calling Teamsters’ leaders Dave Beck and Jimmy Hoffa to testify. The televised hearings of the special committee also introduced Senators Barry Goldwater and John F. Kennedy to the Nation, as well as leading to passage of the Landrum-Griffin Labor Act.
After the special committee completed its work, the Permanent Subcommittee on Investigations continued to investigate organized crime. In 1962, the Subcommittee held hearings during which Joseph Valachi outlined the activities of La Cosa Nostra, or the Mafia. Former Subcommittee staffer Robert Kennedy – who had by now become Attorney General in his brother’s Administration – used this information to prosecute prominent mob leaders and their accomplices. The Subcommittee’s investigations also led to passage of major legislation against organized crime, most notably the Racketeer Influenced and Corrupt Organizations (RICO) provision of the Crime Control Act of 1970. Under Chairman McClellan, the Subcommittee also investigated fraud in the purchase of military uniforms, corruption in the Department of Agriculture’s grain storage program, securities fraud, and civil disorders and acts of terrorism. In addition, from 1962 to 1970, the Subcommittee conducted an extensive probe of political interference in the awarding of government contracts for the Pentagon’s ill-fated TFX (“tactical fighter, experimental”) aircraft. In 1968, the Subcommittee also examined charges of corruption in U.S. servicemen’s clubs in Vietnam and elsewhere around the world.
In 1973, Senator Henry “Scoop” Jackson, a Democrat from Washington, replaced Senator McClellan as the Subcommittee’s Chairman. During these years, recalled Chief Clerk Ruth Young Watt – who served in this position from the Subcommittee’s founding until her retirement in 1979 – Ranking Minority Member Charles Percy, an Illinois Republican, was more active on the Committee than Chairman Jackson, who was often distracted by his Chairmanship of the Interior Committee and his active role on the Armed Services Committee. Senator Percy worked closely in this regard with Georgia Democrat Sam Nunn, who subsequently succeeded Senator Jackson as Chairman in 1979. As Chairman, Senator Nunn continued the Subcommittee’s investigations into the role of organized crime in labor-management relations and also investigated pension frauds.
The regular reversals of political fortunes in the Senate of the 1980s and 1990s saw Senator Nunn trade chairmanship three times with Delaware Republican William Roth. Senator Nunn served from 1979 to 1980 and again from 1987 to 1995, while Senator Roth served from 1981 to 1986, and again from 1995 to 1996. These 15 years saw a strengthening of the Subcommittee’s bipartisan tradition in which investigations were initiated by either the Majority or Minority and fully supported by the entire Subcommittee. For his part, Senator Roth led a wide range of investigations into commodity investment fraud, offshore banking schemes, money laundering, and child pornography. Senator Nunn led inquiries into Federal drug policy, the global spread of chemical and biological weapons, abuses in Federal student aid programs, computer security, airline safety, and health care fraud. Senator Nunn also appointed the Subcommittee’s first female counsel, Eleanore Hill, who served as Chief Counsel to the Minority from 1982 to 1986 and then as Chief Counsel from 1987 to 1995. Ms. Hill subsequently served as Inspector General at the Department of Defense.
In January 1997, Republican Senator Susan Collins of Maine, became the first woman to Chair the Permanent Subcommittee on Investigations. Senator John Glenn of Ohio became the Ranking Minority Member. After Senator Glenn’s retirement, Michigan Democrat Carl Levin succeeded him in January 1999, as the Ranking Minority Member. During Senator Collins’ chairmanship, the Subcommittee conducted a number of investigations affecting Americans in their day-to-day lives, including investigations into mortgage fraud, phony credentials obtained through the Internet, deceptive mailings and sweepstakes promotions, day trading of securities, and securities fraud on the Internet. Senator Levin, while Ranking Minority Member, initiated an investigation into money laundering. At his request, the Subcommittee held hearings in 1999 on money laundering issues affecting private banking services provided to wealthy individuals, and in 2001 on how major U.S. banks providing correspondent accounts to offshore banks were being used to advance money laundering and other criminal schemes. Senator Collins chaired the Subcommittee until June 2001, when the Senate Majority party changed hands, and Senator Levin assumed the chairmanship. Senator Collins, in turn, became the Ranking Minority Member.
During the 107th Congress, both Senator Collins and Senator Levin chaired the Subcommittee. In her six months chairing the Subcommittee at the start of the 107th Congress, Senator Collins held hearings examining issues related to cross border fraud, the improper operation of tissue banks, and Federal programs designed to fight diabetes. Senator Levin then assumed the chairmanship and, over the following 18 months, led a bipartisan investigation into the Enron Corporation, which had collapsed into bankruptcy just before he became Chairman. The Subcommittee reviewed over 2 million pages of documents, conducted more than 100 interviews, held four hearings, and issued three bipartisan reports on the role played by Enron’s Board of Directors, Enron’s use of tax shelters, and how major U.S. financial institutions had contributed to Enron’s accounting deceptions, corporate abuses, and ultimate collapse. The Subcommittee’s investigative work contributed to passage of the Sarbanes-Oxley Act which enacted accounting and corporate reforms in July 2002. During this period, Senator Levin also advanced the money laundering investigation that he had initiated while Ranking Minority Member, and the problems uncovered by the Subcommittee contributed to enactment of landmark reforms in the Patriot Act strengthening U.S. anti-money laundering laws. During the 107th Congress, Senator Levin also opened new investigations into offshore tax abuses, border security, and abusive practices related to the pricing of gasoline and other fuels.
In January 2003, at the start of the 108th Congress, Senator Collins became Chairman of the full Committee on Governmental Affairs, and Republican Senator Norm Coleman of Minnesota became Subcommittee Chairman. Over the next two years, Senator Coleman held 15 hearings on topics of national and global concern including illegal file sharing on peer-to-peer networks, abusive practices in the credit counseling industry, the dangers of purchasing pharmaceuticals over the Internet, federal contractors with billions of dollars in unpaid taxes, SARS preparedness, border security, and how Saddam Hussein abused the United Nations Oil for Food Program. At the request of Senator Levin, then Ranking Minority Member, the Subcommittee examined how some U.S. accounting firms, banks, investment firms, and tax lawyers were designing, promoting, and implementing abusive tax shelters across the country; and how some U.S. financial institutions were failing to comply with anti-money laundering controls mandated by the Patriot Act, using as a case history Riggs Bank accounts involving Augusto Pinochet, former President of Chile, and Equatorial Guinea, an oil-rich country in Africa.
During the 109th Congress, Senator Coleman held 13 hearings on a wide range of topics, including three additional hearings on abuses associated with the United Nation’s Oil for Food Program, two hearings on federal contractors who had failed to pay billions of dollars in taxes, additional border security hearings focused on securing the global supply chain, two hearings on DOD travel abuses, and two field hearings on consumers hurt by abusive tax refund loans or unfair energy pricing. At Senator Levin’s request, the Subcommittee also held hearings on offshore tax abuses responsible for $100 billion in unpaid taxes each year, and on U.S. money laundering vulnerabilities due to the failure of the states to obtain ownership information for the 2 million companies formed within their jurisdictions each year.
In January 2007, Senator Levin once again became Subcommittee Chairman. During the 110th Congress, Senator Levin held 14 hearings on a wide range of topics, including two hearings on unfair credit card practices, a hearing on tax and accounting mismatches involving executive stock options, hearings on excessive speculation in the natural gas market and the crude oil market, and hearings on offshore tax abuses involving tax haven banks and non-U.S. persons ducking payment of U.S. taxes on U.S. stock dividends. At the request of Senator Coleman, then Ranking Minority Member, the Subcommittee also held hearings on Medicare and Medicaid health care providers who cheat on their taxes, the payment of Medicare claims tied to deceased doctors, abusive practices involving transit benefits, U.S. dirty bomb vulnerabilities, federal payroll tax abuses, and problems involving the United Nations Development Program.
During the 111th Congress, Senator Levin continued as Chairman of the Subcommittee and Senator Tom Coburn joined the Subcommittee as its Ranking Minority Member. During the 111th Congress, Senator Levin held 8 hearings beginning with a hearing on tax haven. The Subcommittee also held a hearing on keeping foreign corruption out of the United States. It held four days of hearings on Wall Street and the financial crisis, looking at the role of high risk home loans, bank regulators, credit rating agencies, and investment banks. The Subcommittee also held a hearing stemming from a year long investigation of excessive speculation in the wheat market. At Senator Coburn’s request, the Subcommittee held a hearing on social security disability fraud.
During the 112th Congress, Senator Levin and Senator Coburn continued in their respective roles as Chairman and Ranking Minority Member of the Subcommittee. In a series of bipartisan investigations, the Subcommittee examined how a global banking giant, HSBC, exposed the U.S. financial system to an array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering controls; how two U.S. multinational corporations, Microsoft and Hewlett Packard engaged in offshore tax abuses; and how excessive commodity speculation by mutual funds and others were taking place without Dodd-Frank safeguards such as position limits being put into effect. At the request of Senator Coburn, the Subcommittee also conducted bipartisan investigations into problems with Social Security disability determinations that, due to poor procedures, perfunctory hearings, and poor quality decisions, resulted in over one in five disability cases containing errors or inadequate justifications; how Department of Homeland Security state and local intelligence fusion centers failed to yield significant, useful information to support federal counterterrorism efforts; and how certain federal contractors that received taxpayer dollars through stimulus funding failed to pay their federal taxes.
During the 113th Congress, Senator Levin continued as Chairman, while Senator John McCain joined the Subcommittee as its Ranking Minority Member. They continued to strengthen the Subcommittee’s strong bipartisan traditions, conducting all investigations in a bipartisan manner. During the 113th Congress, the Subcommittee held eight hearings and released ten reports on a variety of investigations. The investigations examined high risk credit derivatives trades at JPMorgan; hidden offshore accounts opened for U.S. clients by Credit Suisse in Switzerland; corporate tax avoidance in case studies involving Apple, Caterpillar, and a structured financial product known as basket options; online advertising abuses; conflicts of interest affecting the stock market and high speed trading; IRS processing of 501(c)(4) applications; defense acquisition reforms; and bank involvement with physical commodities. At the end of the 113th Congress, Senator Levin retired from the Senate.
(2) More Recent Investigations
During the 114th Congress, Senator Rob Portman became Subcommittee Chairman with Senator Claire McCaskill serving as Ranking Minority Member. Under the Chairman and Ranking Member’s leadership, the Subcommittee held six hearings and issued eight reports addressing range of public policy concerns. Investigations examined the impact of the U.S. corporate tax code on cross-border mergers acquisitions; online sex trafficking; the federal government’s efforts to protect unaccompanied migrant children from human trafficking; consumer protection in the cable and satellite television industry; terrorist networks’ use of the Internet and social media to radicalize and recruit; the U.S. State Department’s oversight of a grantee involved in political activities in Israel; and efforts by Medicare and private health insurance systems to combat the opioid epidemic. The Subcommittee also initiated the first successful civil contempt proceedings to enforce a Senate subpoena in twenty years. The Subcommittee’s long-term investigation of online sex trafficking culminated in a final report and hearing on January 10, 2017, at the start of the 115th Congress.
During the 115th Congress, Senator Rob Portman remained Subcommittee Chairman with Senator Tom Carper serving as Ranking Minority Member. Under the Chairman and Ranking Member’s leadership, the Subcommittee held six hearings and issued six reports on a wide range of issues, including online sex trafficking; the shipment of illicit opioids through U.S. postal mail; the Department of Health and Human Services’ care of unaccompanied alien children; the federal infrastructure permitting process; sanctions compliance and the nuclear agreement with Iran; and the pricing of prescription drugs.
During the 116th Congress, Senator Rob Portman maintained his role as Subcommittee Chairman while Senator Tom Carper continued as Ranking Minority Member. They continued the bipartisan work of the previous Congress, holding seven hearings and issuing eleven reports. Investigations and reports examined a broad variety of topics including China’s impact on the U.S. education system; private sector data breaches; federal cybersecurity and America’s data at risk; the cost of government shutdowns; oversight of Federal infrastructure permitting and FAST-41; the E-Rulemaking and comment systems; securing the U.S. research enterprise from China’s talent recruitment plans; continuity of Senate operations and remote voting in times of crisis; threats to U.S. networks and oversight of Chinese government-owned carriers; IRS oversight of the Free File program; the art industry and U.S. policies that undermine sanctions; oversight of HHS shelter grants for unaccompanied alien children; and the opioid crisis and oversight of the implementation of the STOP Act.