with a private- sector partner and authorities in spain, and the u.k. to identify 17 key players behind the mariposa, or butterfly.net -- butterfly botnet. mariposa infections were nearly silent as they still banking credentials globally. the affected computers were linked to 13 million unique protocol addresses, and mariposa resulted in over $35 million in losses and damage. this investigation remains significant, not just because it was a highly successful international team effort but because it targeted the programmers as well as the operators. it was dismantled in april 2011. a control millions of private computers worldwide. we saw 800,000 victims within the u.s. and upwards of $20 million in damages over all. they used long keystrokes to

harvest user names and passwords as well as financial information. it was cleverly designed to disarm anti virus programs whenever an infected computer was recruited. for the first time in the u.s., the fbi and justice department was granted permission by a federal judge to take control of servers and intercept the vacations between effective systems and servers controlling them. there were machines about anti virus s offer to begin to remove the malware operating on them. there has not been an arrest because of extradition laws, but there has been the ability to mitigate the damage. reaching a positive outcome for victims required a tremendous, proactive, and unified effort. beyond taking court action in seizing critical hardware in the u.s., owners of the affected machines were identified in contacted about the intrusion. the fbi work with authorities

outside the u.s. to notify non- u.s. victims. last year, with the help of estonia and russian officials, the national aeronautics space administration and members of the internet security committee, we were able to shut down advertising fraud schemes. the malware was delivered using botnets which hijacked more than four million computers in more than 100 countries. they used domain name servers operated by the subject. the bad dns servers and manipulated information and paid for click advertising, the average of $14 million in gains for the seven suspects charged. andfbi worked with isp's insure they knew how to reverse the damage. as professionals, we are at a unique position to address the cyber threat. because of intelligence capabilities, we have an awareness of certain threads. we must couple caused by a thread information to increase the effectiveness of our cybersecurity practices.

more importantly, we west recognize that we share this challenge and must divide our resources and efforts to reduce the threat. what would you do if i told you that right now, while you sit here today, a criminal gang is in iraq was reading your e- mails, copping your business plans, and stealing your research? i imagine he would call the police. then work with the committee to address the consequences of the theft. as a telling you, that kind of theft and intrusion is happening today. yet, we're not calling law enforcement and we are not addressing the threat. in february, the "wall street journal" broke a story about a large telecommunications to the news network systems had been compromised for over a decade. chinese hackers allegedly done loaded technical papers, research and development reports, business plans, an employee e-mails and other documents. stories like this one expose the uncertainties in reporting requirements for company officials to discover the networks are infiltrated and the gap in our treatment of cyber

crime compared to traditional crime. we must increase our vulnerability -- a decrease our vulnerabilities, harden the targets. more importantly, we must be smarter about what we store in our systems. we have to make a cultural shift from protecting these systems to protecting the information. we must prepare to manage the consequences of cyberattack. we must minimize the potential for damage, whether that means in printing data are having redundant systems that can be reconstituted in the event of an attack. as we move further into an information-driven future in which our work, social, consumer, and so many other aspects of our lives offline intertwine with activities online, cyber challenges will continue to dominate. from the law enforcement perspective, we can expect there will be investigated the growing pains. along with the threat, the scope of our responsibility will continue to expand. this is to ensure the safety of our citizens, businesses, and government. we can expect that there will be

cases in which minimizing the impact of the victims is the resolution and that legislators around the world, with additional time and encouragement to agree uniform laws, they clearly defined boundaries and penalties. despite these challenges, improved information sharing and strategic planning a month public, private industry, an international investigative partners is already providing the expanded technical expertise, approved a mitigation, and foundation of cooperation the knees to be in place if we are going to keep pace with and control cyber crime. this must continue to the security of our networks is very much a shared challenge. i thank you for the important part you each play in it. by working together, we can advance the security of our nation's networks and infrastructure. thanks. [applause]

>> we will take a few questions and answers at this time. please step up to the microphone. >> this is for gordon. i was wondering, when you do your investigations for cyber division, you do have currently the problems of independent hacker groups such as anonymous, and how much does this involve tracing of ip addresses and how much involves human intelligence and how much does it involve getting other nations to cooperate with getting access to these targets? >> it involves everything that you just referenced. heavy forensic review, good

victim, investigative cooperation. the international partners, and everything else that is bundled with that. it is a large breadth and scope for those institute -- investigations and suddenly need to keep digging into. one thing you mentioned that i think is critical, and i tried to talk about some today, is just the way we treat internet crime and traditional crime. in many of the cases, it has been basic tackling for investigations. you know, see who we can find, see where the humans are. at some point, somewhere in this whole echoes system, there's somebody behind this keyboard tapping away at keys -- summer in this ecosystem. we need to find the undercover platforms. the human answers information and intelligence to make sure we can dismantle any organization we can look at, from the activist to the national security threat.

>> yes, mr. snow, i've got a question on how much the fbi may be working with operating system at the vendors to tighten their defiled installs. most users, including the average americans at home, have no idea about computer security other than anti virus or spamware. and the default, after the fact security that we are applying does not work as well as if it was built into an image or installed as a security platform. have you made any headway with the vendors on this? are there any plans to push that effort? >> let me break it into a couple pieces. one is, your comments are exactly right on target but there are a lot of things that many of us in the cyber security

realm need to do in the entire ecosystem in the u.s. and globally. the fbi does attribution and person, so the investigation portion of it. department of homeland security does the mitigated efforts. and the contact and outreach with private industry. but since it all overlaps, we all work in that realm. at the national cyber forensic training alliance that we have partnered with our private sector partners with, and great effort these centers of excellence, across the nation for nsa and dhs, and also for those501c's, like the center for i did could be at the university of texas and many others is were there addressing those issues. a lot of it happens to be awareness. some of it happens to be awareness. others is exactly what you are talking about. but we are still a market-driven society. until we get the awareness fully

dead center in everybody's mind that everybody understands that the cyber threat is everybody's responsibility, i do not think we will be crying out for those products that will be so fearful for the industry which runs 85% of the network to develop. but we are looking at it from a security aspect in all those places i talked about as one team. >> thank you. >> good morning. you mentioned about the new trend of the threats, one with the manufacturers. when it comes to cybersecurity, what is the greatest threat from china? and how do we -- what is aneeded to meet the threat, and how difficult is it to accomplish that? >> it is difficult to talk about the national security side on this forum, but let's do it in a different fashion to all countries face the national security threat to include china. when i look at a threat from any

one of the nation state actors, i tried to determine what it is that is really at risk. so the biggest threat is just the hack. the biggest threat is the compromise. not really looking from a technical scope or view, but let's say the compromise of the computer is the largest threat. that can be done by any number of means because of the gentlemen that was with the before talked about the security implications and protocols that could be damaging. and we all know that phishing or an e-mail coming through your firewall can have executable malware. the threat is to compromise the computer and the loss of everything that your company, your corporation, your agency would hold the most critical and valuable to you. if you have growing concern or you are a continuing entity, corporation, our business, any

of those threats, those plans, research and development of the cutting edge technology, you're reintroduction of your product, all that information is very critical. does that answer your question? >> yes, and you also mentioned the -- that the fbi worked with other nations. are we cooperating with the chinese law enforcement agencies to address this issue? >> we are cooperating with the chinese in many different aspects in law enforcement. hopefully we will see that continue to improve in the internet space and the cyber realm. we have the liaison officer that is over there that works in intellectual property rights concerns. obviously, china and the u.s., for a loss of intellectual property. and we look at it -- we have worked with the chinese in all realms and spectrums across the bureau. i would just hope that that would flourish and at one point this global environment would

understand that that threat is to all and we have to partner closely. >> thank you. >> certainly. >> good morning. i am from seoul security agency -- administration. you talk about frame tech out in the field and partnerships with state, federal, local authorities and other agencies. are there any hackers, white hats, reform hackers, or ethical hackers that are in your employee or with other agencies? >> other agencies, that we have hired, people we have recruited. white had hacker, for everybody here, is just the person that is a member of the league of justice. they're using their powers for good, not legal. as opposed to the black hat hackers. i would consider all my individuals that have that skill and technical expertise to be

white had hackers. obviously in this environment or that skill is so widely s ought, many times we partner with them in private-public partnerships. security venues to make sure the things we're looking at are thinking about will be the most beneficial and have the most impact. >> thank you. >> thank you for the question. >> i am part of the national initiative that cyber security education. one of the questions we get quite often this, what kind of education are you looking for and where are the jobs? >> the education i would be looking for, and this is just gordon speaking. i do not want to speak for the entire u.s. government. but gordon speaking, you know,

looking at my work force, i would start with a couple things. let's start with the nation. i would want to make sure that that technical and mathematical, scientific background that we had so many years ago would be replicated and become stronger here in the u.s. so that those skills that we need would populate automatically. i would like to see education and awareness for everybody. you know, i think a large percentage of the population still believe that a laptop really does not provide any threat to them because it is inside their house and behind a locked door. we go wherever we want and surf where ever we want to, and it lasts about two or three years. pretty soon we get the blue screen of death. then we go to best buy and get a new one. i kind of want people to understand that the threat is out there constantly, on your tablets, on your smart phones, in your computer systems. everything you touch at work or

at home in the internet, from the counter-terrorism threat to use the infrastructure to attack our infrastructure in homeland all the way laterally to the child predator that is out there. i kind of on a lot of that information to come out. then i would want to structure k-12 to make sure we're building that strong core and substance that we will need to repair, 6, protect our network in the future. i would -- repair, fix, and protect our network in the future. i'd like to see education that is developed -- we talked about cyber network operations traditionally, we talk about cyber network attacks, cyber network defense, exploitations, and we do not talk about cyber threat investigations. i would like to see that skill set be developed so that we can -- instead, i go out and find technical experts and teach them

and bring them into the cultural mind-set of doing investigations. i would like to see that not only for ourselves but for other agencies and companies and corporations be instituted. you know, the technical people in the u.s. have some of the most expansive experience and training, but since it is not done on a traditional four-year died degree or program, it really is not recognized for what it should be. i would like to see some of the restructured. >> thank you. >> good morning. this question is mostly for mr. boelter. what about online radicalization, engagement, and dialogue? >> it is a difficult problem, because, you know, the

radicalizers can change. there is not a single source of this. it is very dynamic environment. the audience is a very broad. so i think -- a truly, i think we just need to assess and get out, as i said before, a counter-message. and we are doing that. i am talking about the entire u.s. government. but i think we need to step up the game and to do that at a more effective level. frankly, it is a vulnerability, clearly, and it is a difficult challenge for us. thank you. >> i do not know at this microphone is on. hello? yes, a question over here. we have got millions of people out there with computers and we

heard the discussion about not having the right protection on those computers. as we move toward the cloud, and i am not sure where that is going, are we going to end of everyone having terminals at home working on that big central computer in the sky -- how will that affect computer security? >> i think it will have a huge impact. which way the impact goes will depend on how we structure the cloud. as i look at the cloud, while it has some great characteristics, you know, efficient, effective, agile, lower-cost for corporations and entities, i just want to ensure in this awareness peace we talked about before that we are not driving toward the bottom line of cost- reduction and not thinking about security. so if you look at the contractual products, i guess that is the best way to put it, if we look at the contractual

relationships that are built between the corporation or an entity going into the cloud and the service provider, you know, there are some very critical things you should know. it looks overall like the corporations and companies are outsourcing the information but retaining the liability and the risk. and if you do not look at the contract close enough, you will see that the cloud computing service, depending on how the contract is written, may have no responsibility for security and may, in fact, have no security available at all. it would be something we would want to look at very closely to see which way this is going to tip. if it tips in the direction of strong security, a very good managed services, and as soon as that it can protect the network, then that is a good thing. if those add-on features are

included in the service, then you may find out that you do not own the information. you may not have access to the information. and if the information is taken, then you may not be able to retrieve it. so before any and to become a corporation, business platform went into the cloud, i would just say that the awareness part will be very important and a strong rebuke from technical experts on what that contract is providing is also going to be very important -- a strong revealed -- revealed important. if the information is outsourced into a country that does not have a long reach of the law, it means i may not be able to provide you any assistance if you are intruded on. does that answer the questions? >> thank you, gentlemen, for being here this morning. i am an account.

i am also a senior in my computer forensics education. and seeing these two merge together brings forth this circle of life around the cyber crime, terrorism, and now the advent of the cyber terrorism. in that, i have been tracking money for a very long time. how is it our governments and our partners across the ponds help in this regard in tracking the money which funds a lot of this crime, and how are we better equipped to deal with that? is that becoming better? >> it is. and thank you for the question. a lot of great efforts by col. just like in any other traditional crime, to follow the money. there is mutual legal assistance treaties that we use with other countries, depending on where

they were signed. it kind of discusses how much force and power is in it that -- you know, what challenge of sovereignty is there to another country when we're talking about money? and how effective their relationship is built on any one of the many nations that we would be looking for assistance from? we have to remember also that, just like the cyber criminals intrude the computers and still the personally identifiable -- identifiable information and the credit card information to drain your resources, they also still that information to buy the infrastructure. sometimes i may follow a long path and track the information that comes back to tell me that is a stolen credit card or stolen money or it is an identity that does not exist because it has been stolen before. so it is difficult. it is difficult when we are

tracking that money, but all the efforts are getting better. i think from the awareness -- and keep going back to awareness. not because i am trying to hammer that in, but it is an important part. as globally our partners become more aware, i have seen in the efforts from all law enforcement and intelligence community partners get even closer. a lot of times we have policies in place from either the law enforcement side of the intelligence community side that there therefore obviously good reasons. maybe decades ago when systems were not interconnected. and i see a lot of good efforts from all the global partners to bolster those down to make sure we cannot have been stronger efforts and impact going forward. >> as the economy has slowed down and over the next couple of years we are looking at a lot of reduction in fiscal creance for

homeland security, how do you see this affecting the local law enforcement participation and some anti-terrorism teams? >> well, i am not unconcerned about it. i am concerned about the changing economy. and the resources available for counter terrorism as a result. within the bureau, we have, obviously, counter-terrorism has grown over the years. i am not anticipating the continued growth going forward. back to my comments, we need to be smarter. our analysis needs to be sharper. it really needs to drive our operations so that we can maximize our effectiveness. we do not have the luxury within the bureau to sort of waste any resources on this problem, because the problem is very dynamic. i am looking out across the landscape, and i mentioned the fixed -- of the 56 field

divisions that we have and support, and i am looking for any sort of beginning of a trend or local law enforcement is drawing from the jttf, taking members away. i have not seen that yet. but i am is sensitive to that possibility going forward. as far as grants in terms of homeland security, i am not aware of any sort of degradation in resources yet going to counter terrorism. i've been it is such a high priority at this point, i am thinking that we will not see that in the future, but i do not know at this point. i am is sensitive to those different things. >> we have time for one more question if there is one.

>> both for cyber and for counter-terrorism, can you talk about how you might be interacting with and supporting the multiple fusion centers around the nation? and especially with respect to spatial awareness to intelligence when it comes to cyber and counter-terrorism. >> quickly on counter-terrorism, we have a very close relationship with the fusion centers. the fusion centers are all a little bit different. they are not uniformly staffed. >> or uniformly funded. >> yes. and their missions very greatly. i have the minneapolis a division and we had three fusion centers, so to speak, in

that territory, but they were all very different. and they operated under different restrictions, different rules. so i think it will very fusion center to fusion center, but we are committed to working with them across the country. that is really handled a lot of intelligence that manages the fusions a relationship. but i know from my days in minneapolis, and now we engage with the fusion centers where ever possible. los angeles, new york, a very robust relationship in the counter-terrorism realm. others, you know, they are at the other end of the spectrum as well. it is not at all the classified environment. there is only so much that you can undo. >> from the cyber realm, not as much interaction with the fusion centers, although that seems to be growing. we have not had a large state and local law enforcement

population in the cyber security area, although you have seen probably in the last four years that has started to grow. a lot of police agencies and local departments are putting in their own high tech crime centers, including intrusions. we had in springfield, illinois, original concern that the water treatment facility had been intruded, and one of the water treatment poms had been taken offline by an asian state actor. that was original reporting from the illinois state police fusion center. they came out quickly. at allow everybody to respond. i think i would expect that to increase as of the state and local law enforcement entities started dealing with the attacks that are more localized. and we will be there to try to funding andthe

helping in direction as to move forward. from the g.o. special realm, and as you know since you're asking the question -- thegeospecial rahm, we have entities that do analysis to help construct systems, give us assistance, and for us to look at it from that realm. it is a quick way to route >> thank you for attending. this concludes our program.

>> and this sunday, the u.s. senate youth program. >> i got the opportunity to meet all of my senators. being able to meet them and talk to them. >> some of the leaders like leon panetta talks about how important it is to be financially sound. devoting money to national defence will not be worth it if we do not have money to devote to it. >> high-school students from all 50 states participated in a week-long government and leadership program. share their observations and experiences as they interact with members of congress, the supreme court and the president. >> we all said there is a lot of bipartisanship going on.

everybody we have met here has said that and it makes me wonder if everybody is saying that but it is not actually happening. is there a discrepancy between what they're saying and doing? i never thought about that before i came here. >> sunday night at 8:00 eastern on c-span's q and a. this saturday at noon eastern on c-span-to book tv, and join our live call in program with a distinguished former navy seal and author chris kyle as it talks about his life to becoming the most lethal sniper in u.s. military history. >> if you think of yourself as a family and a team and she said when i get a raise at work, people are proud of me, it is like we got a raise. but i felt as though she be defined providing to include what her husband does and she

had a lot of respect for what he was doing. >> liza on the changing role of women at the breadwinners of the family and how that impacts their lives. also this weekend, america the beautiful. ben carson compares the decline of the empire's past with america and shares his thoughts on what should be done to avoid a similar fate. sunday at 3:30 p.m. book to be, every weekend on c- span to. >> douglas shulman predicted disaster. he is serving the last year of a five-year term. he spoke at the national press club about the agency's modernism -- modernization efforts and improved customer service record. [captioning performed by national captioning institute] [captions copyright national cable satellite corp.

>> good afternoon. i am the president of the national press club. we are committed to our professions -- a programming such as these while fostering a free press worldwide. for more information about the national press club, visit our web site at press.org. to donate to our programs offered to the public through our national press club in journalism institute, visit press.org/institute. i would like to welcome our speaker and those of you attending today's event. our head table includes guests of our speaker as well as working journalists who are club members. if you hear applause from our audience, members of the general public are attending so it is not necessarily evidence of a

lack of journalism objectivity. i would also like to welcome our c-span and public radio audiences. our luncheons are also featured on our weekly podcast from the national press club available on itunes. you can also follow the action on twitter using the hashtag @qnpclunch. i will ask as many questions as time permits. now it is time for me to introduce our head table guests. i ask each of you to stand up as your name is announced. from your right, jim, washington editor, barron's. jennifer, reporter. peter blake, editor. jeff shulman, father of a iraq

-- irs commissioner. lori russo, managing director, stanton communications and today's luncheon organizer. leslie mays. ralph winnie. [applause] today's speaker said he prides himself on leading a non- political and non-partisan organization and in recent days, he has been publicly involved in discussions at the highest levels of government about everything from health care reform to keep party politics. as the person in charge of collecting around to a $4 trillion in taxpayer dollars, his words are closely followed

by lawmakers and many of us in this room today. in the final year of his five- year term as commissioner of the irs, doug shulman overseas thousands of employees. he is managing a $300 million budget cut in staff reduction in the thousands. challenges that have raised questions about the ability of the irs to enforce tax compliance, conduct audits and provide quality customer service. just a few weeks ago, he requested an 8% budget increase from congress to make up for those losses. i'm sure we will hear more about that today. commissioner showman came to the irs from the financial regulatory authority. the private sector regulator of security firms doing business in the united states. he also served as vice chairman of the national association of securities dealers where he played an integral role in restructuring the organization.

he led negotiations of the sale of nasdaq stock market and the american stock exchange, oversaw the launch of industrywide market transparency and modernize technology operations. earlier in his career, commissioner shulman co-founded teach for america and was integral and several start-ups organizations. he will day -- as degree from williams and mary college, a master's from harvard john f. kennedy school of government and he holds a degree from georgetown university law center. please give a warm welcome to douglas shulman. [applause] >> thank you, theresa. it is good to be back at the national press club. i have done this in the last couple of years. right as we round up filing season at the end, as we approach april 15, april 17 this

year, spring is a great time in washington. the flowers are blooming, the trees are blooming, lots of kids are here on spring break. anyone who visits washington also is always impressed by the permanence and the timelessness of the buildings, the statues, the colonnades. it really speaks to the legacy of this great nation. and in my job, as someone responsible for an important institution in government, it reminds me of the people who have come before me trying to make this government a little bit better and the country better. and it reminds me of the enormous progress that men and women have made over the years trying to move the nation forward.

i am always impressed by the creativity and innovation that ec institutions, both private sector and -- that you see in institutions, both private sector and public. many of the statues that you see when you walk around washington are of men and women who were not a part -- not afraid to embrace new ideas, not afraid to challenge the past way of doing things and to come up with new ideas and move them forward. i am also a fan of continuous improvement. that is what we try to do at the irs. there are a number of great quotations about improvement, one is from ibm's thomas watson. he says that whenever an individual or a business decides that success has been attained, progress stops. i am a big believer that when your response before an institution like the irs -- responsible for an institution like arar's, the job is to build on the successes of the past and then try to push the agency forward to the next level.

that is what i've tried to do with me and my senior team at the irs. if you look back at the irs, there is a lot of press coverage of the irs in the mid-1990s, and it was not all positive. since that time, there has been a major reorganization of the irs, and we have had a sustained arc of progress, very different from the beginning in the 1990's. if you look in the rearview mirror, there was a time the irs was thought of as an organization mired in the past, one that had not kept pace with advances in technology, one that was slow to adapt and embrace emerging best practices in things like analytics and compliance, and also in customer service, and one that was slow to recognize any vaulting taxpayer base, including increasing the fact that many of the taxpayers were operating in a much more global economy.

but i would argue that standing before you today, standing on the shoulders of predecessors and others who moved the institution forward, we have made a lot of lasting progress at the irs that will serve the nation and the tax system well for the years to come. as irs commissioner, as teresa mentioned, it is a big institution. i have 100,000 employees. we view ourselves as a financial services institution. most of those employees are interacting, trying to get refunds back to taxpayers, in directing with businesses,

nonprofits, moving vast amounts of money for over 235 million customers. people often ask me how you get an institution that big to move forward. i would argue that there are two key prerequisites. there are many pieces of that answer. first, you've got to set the right strategy, and make sure it is one that people inside and outside the institute -- institution can believe in and understand. and second, you have to stay very focused. i am a believer in a relentless and myopic focus on priorities, and not getting distracted by too many crises or incoming demands. and making sure that you communicate your priorities in a very clear manner. this is much easier said than done, especially in a large government agency where there are a lot of things coming at you.

but say -- staying focused and consistent for multiple years is a key to success. today, what i want to do is share with you some of the results of four years of relentless focus on an handful of key strategic priorities that we set for the irs. these priorities were creating new capabilities and efficiencies through technologies, rethinking henry imagining our relationship with the paid -- rethinking and re imagining our leisure with the paetec prepare, leveraging debt to improve our operation, enhancing our service capabilities, transforming the agency to confront a global economy, and positioning the irs work force to make sure we are prepared for tomorrow's challenges.

let me take them each in turn, and begin with our efforts to modernize our technology. and specifically focus on one critical program that we call the customer account data engine portlock or cade 2. many people have seen the footage from the 1960's. we're very earnest looking people who load huge tapes into mainframe computers. it is the first time we started using technology to perform than magical feat of automated data processing. if you fast forward 40 years, although the tapes are a lot smaller and there are no longer people moving the tapes but robotic arms, the irs is still actually operating with some of the core systems and basic technologies that were built in the 1960's.

you might ask yourself why. that is a complicated question. there are at least three things. first, because it works. the irs was one of the first institutions to deploy data processing on a large scale. and some of our original technologies, ones that hold hundreds of millions of taxpayer accounts and billions and trillions of pieces of data on taxpayers, were truly engineering marvels of their time. the problem is, now there are not a lot of people who remember how to keep running those systems and those people are dwindling. it is hard to keep them up and running. the second reason our systems are so old is because we have actually built an elaborate set of your systems on top of those older systems. -- newer systems on top of those older systems. some of the things like running calls or exams elections are being run on top of the old systems.

but we also have a complicated, in a related set of systems that when you try to unbundle those, it makes the job even harder. the third reason we have been operating on old technology is because there has been a reluctance to fund our technology in a way commensurate with our mission. we spend less than 3% of our budget on long-term enhancements to our information technology infrastructure. if you compare this to other private sector financial institutions, none of which come close to matching the number of customers that we need to support, that percentage is shockingly low. i would argue we have been underfunded for many years in the technology space. president obama has proposed a much-needed substantial increase in irs technology, really, reflecting in large part our

critical mission. with all of these factors in mind, when i arrived at the irs, we initiated a broad review of our technology portfolio. and we pruned that portfolio. we shut down a bunch of projects -- back to focus. and we started focusing projects on the most visible and complex issue that had been holding us back for decades. since the 1960's, we have been conducting our core account processing on a weekly basis, weekly batch cycles. this process includes the basic tax information in your account, how much your balance is outstanding, whether you have made any recent payments. to put it into perspective, in the past when you sent in your tax return, we would receive it. it would be a week before we would process it and maybe

another week before another piece of technology process it. if you called to check on it, we might say, call back in a couple of weeks when it is posted. i'm very pleased to report that this year, the irs successfully migrated from a weekly processing cycle to a daily processing cycle. this was a multi-year, incredibly complex undertaking, that went to the heart of our systems that process trillions of dollars in tax revenue. it is an incredibly important milestone for the irs, and one that we first embarked on in the late 1980's. the payoff from this improvement -- put your tax return processing for all taxpayers, up-to-date information at the fingertips of our account representatives, and a platform for much more real time data analytics and compliant. it is already benefiting taxpayers this year, and this

upgrade in our technology is going to produce major benefits for the nation's tax system for years to come. our next long-term priority was looking at how we interact with paid a tax return preparers. let me tell you why we took this on. right now, many people in this room and across the country in the viewing audience are wrestling with and tackling one of the biggest financial transactions every year, that is, filing and paying your taxes, or hopefully getting a refund from the federal government. however, in the past 20 or 30 years, the way the taxpayers go about finding their taxes has dramatically changed. today, nine out of 10 taxpayers use either a paid tax return preparer, or software that they have purchased to file their taxes.

despite the fact that this is a huge financial transaction and now there is a set of intermediaries that actually facilitate the transaction, when i arrived at the irs, there were no basic competency requirements for tax return preparers. in most states, you need a license to cut somebody's hair. but just a few years ago, you did not need any sort of certification, testing, etc., or basic level of competency to file someone's taxes. i am the irs commissioner, bias that taxes are more important than how your hair looks. [laughter] other people view that differently. and i'm always looking for a point of leverage with the irs. where are we going to spend our limited resources? our return preparer initiative is just that. one way to look at it is that we shifted from a retail approach where we dealt with one taxpayer at a time into a wholesale approach, where we are starting to focus more on preparers, so

we can deal with 100 or 1000 at a time. that is what i mean by leverage. to give you a sense of scale, 95 million individual and business income tax returns were prepared by paid preparers in 2011, and that does not include people who use do-it-yourself software. $5.70 trillion of income was reported through paid preparers. given the importance of the paid preparers to the tax community, we are now well on our way to ensuring that there is a basic level of competency in the tax preparer community. we have registered 840,000 tax preparers in the last year-and- a-half, and we have begun administering a competent to test and requiring continuing education for all prepares to are not cpa's, lawyers, or enrolled agents.

our next priority is leveraging data analytics in order to continually improve our operations. we are very information intensive as an enterprise. and a key to our success is taking in the information, organizing it, and then analyzing it in a way that is intelligent, figuring out where to deploy resources and how we are going to act on the information. during the last couple of years, we have built a team of people with analytic expertise, and connected them very closely with our business units in an effort to continually improve operations. they're working on multiple fronts and have had a lot of impressive results for the nation's tax system. let me give you one example of how we are leveraging data

analytics and how it connects into the last two things i talked about. using better data that we now have on return preparers that we have gotten from registering return preparers as well as faster processing cycles, so we can get that data more in real time tax returns because we have cade 2 plaze, we have applied advanced data analytics that show potentially serious compliance issues with the individual preparer who prepares them. what we identify -- once we identify these returns, we quickly have gone out to preparers can use a variety of compliance treatments -- and used a variety of compliance treatments to stop fraudulent payment, or if there are just mistakes being made, to alert people to the mistakes and get things fixed early in the filing season.

but we are testing different techniques in a much more real time and based on those results, we will continue to feed that into our operations and leave of our programs. the results are still early. it is early in the process in the piece that we are doing this year. but as we have a continuous feedback loop of data analytics moving into places where we see noncompliance, we will drive that kind of learning into our operations. in addition to finding and stopping more fraud this year, by combining our data analytics team from our audits teams, are preparer teams, our technology teams cannot or ordaz we are building a lot of intelligence and -- technology teams, we are building a lot of ability to detect noncompliance and in act compliant earlier.

the irs is not just about compliance. while popular culture links the three letters irs with compliance and enforcement, the truth is that the irs into racks with the overwhelming majority of the violations to agree on a customer service basis. and providing customer service is every bit as important to our mission as enforcing the tax laws. we provided numerous options for assisting taxpayers, from our publications to our website, to our toll-free line, to in person options. the list goes on. every year, the customer service at a section index measures customer service and satisfaction across a variety of industries and sectors of the economy. and it also does work with government agencies. we have a lot of madrak at the

irs, but the main one that our senior management team, our oversight board tracks tuesday, how we are doing -- to see how we are doing generally is the customer's satisfaction index. in 1998, we hit rock bottom. on the index that goes to 100, we have 32. it showed deep dissatisfaction with the general interactions with the irs. but over time, we have moved forward and i'm very pleased that last year, 2011, we had an historic high of 73. that gives us a piece of feedback that across all of our programs, we continue to make significant progress in the customer service are we now. -- customer service arena. however, as leaders of a big organization, i remind our folks that we will never be satisfied. we cannot rest on our laurels.

we have an ever-increasing job. we have been handed new responsibilities. the tax code is getting more complex. and the budget has recently been cut. we're going to need to stay on top of our game innovating if we're going to keep those scores going. that me mention a couple of innovations, the kinds of things you ought to keep doing at the irs. one is e-filing. it is one of the most successful programs in government. 15 years ago, 16% of taxpayers of electronically filed their returns. last year, 77% of individual taxpayers file their returns. this has great benefits for taxpayers. you get your refunds faster. all of the data comes in electronically, which -- rather than sending in a piece of paper that we code, that could have a coding error and cause a problem down the line. but it also is greater efficiency for government.

it costs about 15 cents to process an electronically filed returns. it costs about $3.50 to process a paper return. this has been a huge success and we will keep pushing that. another example of where we have innovated is our use of new media. i always talk about that as an agency that serves every american, we need to meet people on their own terms where they want to be met. that is why we still have walk- in centers in some places because people still want to see face-to-face interaction. but last year, week unveiled the iphone or android app called "irs to go." you can now track your refunds on your smart phone and a variety of other information on -- from the irs. you can expect to see us continue to internet -- to innovate because we will need to do that to serve taxpayers

well. let me shift and talk about how the irs is managing its responsibilities in an increasingly global world. we live in a world where products are produced routinely where intellectual property is developed in one country, logistics and engineering than happens in another country -- one or more countries -- risks are managed in a variety of other countries, and components are sourced from yet other countries. when you actually take the product to market, it can be quite a challenge to figure out what the proper u.s. corporate income tax is. not only are corporations

operating in a global world, but individuals are, too. people with modest income with retirement savings usually have something global exposure through their 401k. this shift to a more global world produces challenges for the irs. we put a big dent in offshore tax evasion as a major priority. we cannot have a tax system where wealthy people are hiding assets offshore and not paying their taxes, and schoolteachers and firemen and ordinary americans are getting paid through a paycheck, having their taxes withheld and sent right to the irs, and footing the bill for people who are invading tax as offshore. over the last four years, we have significantly increased our resources and our focus on offshore tax evasion. the results have been very substantial.

we upped the ante in a meaningful way with work on swiss financial institutions, where for the first time in history, the bank secrecy jurisdiction turned over thousands of names and account numbers to the irs. as we have increased our enforcement efforts, we also created a new voluntary disclosure program. we have had the program for many years, and usually about 100 people come in and say, i want to disclose something i've done wrong. i will pay a serious penalty, but avoid going to jail. when we broke -- open this program up a couple of years ago we thought we would get maybe a thousand people. we have gotten 33,000 people so far and disclose offshore bank accounts. today, we brought in just through the voluntary disclosure more than $4.4 billion, and that number continues to grow. we have also brought in a lot

of information about intermediaries, bankers, banks, and taxpayers through that. that will allow us to continue pressing in this area. collecting all of this money for past misdeeds and punishing people who broke the law is only part of the story. perhaps, the more important part of the story is the deterrence story. i think we are well on our way to stopping the next generation of people from even thinking about hiding assets overseas. we have fundamentally changed the risk for advisers who would potentially facilitate offshore evasion, for banks that would potentially take assets from americans, and for americans to essentially try to send their money overseas.

we have shifted our strategies when we think about compliance issues. we have increased coordination with our counterparts in globally. the chairman of a group of my counterparts from 43 nations, we have moved to score needed action on offshore tax evasion, but we are doing things by -- like joint audits, so there is coordinated action. that may conclude with a couple of the last pieces that we are quite proud of. one is people. i believe that if you want to do service and compliance well, you need to make sure people show up every day, ready to do their

job, and people need to be respected, that they are engaged, accountable. we have put a big focus on people to last couple of years. we have worked on tap -- on culture, to deter people have the right technology to get the job done. we're pleased at the result of trying to move the organization forward on the people front. from 2008 to two dozen 11, we jumped from eighth place to third place among the 15 large agencies with over 20,000 employees in the best place to work government's survey. we have a lot of work to do: 4. we need to make sure that we focused on our people and make sure we have the best people and the government. that is our practical agenda. in recent years, we have also

been called on to execute some of the key policy priorities of this country. i call this final category of work that we have done in coming priorities because it is a must to work for the nation we are recognized as an efficient and effective government agency to carry out height-profile initiatives. a couple of examples. in the recovery act when the nation would have -- was having questions whether the recession was on to become a depression, and the government had to step in in a serious way, $300 billion or about 1/3 of the recovery act was pushed out through the tax system. 95 percent of the americans were part of the making work pay credit, said that extra money -- money, through their bank

accounts, and we did where people could ask for a longer time get operating losses, get some of that money back from previous years. we put tens of billions of dollars into business at the time the credit markets were frozen. we have recently been asked to play a significant role in the affordable care act, because much of the money flows in that piece of a deflation are through the tax system. the lesson is we need to be nimble and we need to be agile when we are called on to do something to support the country. four years ago, we set out with a clear strategy and a very intense focus on six strategic priorities. technology monetization, tax return preparers, at data analytics, a taxpayer service,

offshore tax evasion, and our people. the economic downturn and new policy directions candidate two other major initiatives, but by staying focused and explaining our strategy consistently to our employees and to the stake holders of the irs, we have made significant headway in all of these areas, and have made lasting, positive change in our nation plus tax system, which will position it well to serve the american people for the years to come. with that, i will thank you for listening and i will be happy to answer some questions. [applause] >> how big a problem is fraud on the part of paid tax preparers?

>> the vast majority of tax preparers are honest, ethical, hard-working, and provide a great service to both the tax system and the country. the problem is there are unscrupulous preparers out there who bring down the reputation of all the great prepares out there, but also, the real problem with unscrupulous prepares is is the tax payer left holding the bag. they jack up your feet refund, tell you you are going to get this refund when you did not deserve a, you get $3,000, you spend it, we figure that out, the prepares packed up shop, and you are left holding the bag. it is a small number of people that are unscrupulous but those

are people we need to make sure we're focused on said the tax payers get the treatment. >> dwight d. you feel it is better to place regulations on -- whitey field is better to place regulations on tax preparers? >> we did it in a deliberate and public way, and so first without having any preconceived notions about should we do something, should we not do something, and if so, what should we do, we went and held public hearings across the country, most of which i tend it and got feedback. overwhelmingly, tax payers, public interest groups, said it was ridiculous that there is no basic level of competency in the

preparer community, and you should do something. through that dialogue, which put out a blueprint to report, and said here is what we think should be done. we got lots of feedback from that. from that we moved to put on regulations, and each time we had public comment on those regulations. we have adjusted this as we have gone. the result we think is a very balanced set of service and compliance initiatives, a basic competency test to make sure people have a basic understanding of all law. we have given you three years to pass that and you can take as many times you want. people should be able to pass that test, but we also, through the process, got a lot of feedback on things we should

change, places we should treat, and mr. that we took. the other part of the question, should the tax could be simplified. the answer is yes. but we have a code that is complex, and we want to make sure as people wrestle through professional to do so, that that professional is competent and ethical. i am a huge fan of democracy. i am a big believer of the three branches of government. anyone can use the courts. as i just said, we went through an extensive process to land where we did, and i am confident, not only is everything we are doing going to be seen as legal, but more importantly everything we are doing is going to benefit the american people. >> you said nine out of 10

people either use a paparer or tax software? what percentage uses the software? >> the latest numbers are 65% were using paid preparers, and the rest were using software. that moves back and forth, and there are quite a few people that use both. it is a moving target. >> with gasoline prices on a seemingly endless upward spiral, will the irs increase the mileage rate? >> a specific question. [laughter] we have a formula that looks at what the standard mileage rate should be, and this is the reimbursable rate. we look at changes and fluctuations, and we do it once a year. occasionally, when there has

been a big change come upward or downward, we will do it midyear, and we always look at midyear to see if it is appropriate. >> what is the agency doing to combat identity theft? >> most people know that the fastest growing financial crime in this country is identity theft, which is someone stealing a purse or wallet, getting hold of a social security number and a credit card, and using that for mischief. unfortunately, some people who do that -- and identity theft is not an issue that emanates from the irs -- sometimes they try to use that identity to get a false refund. we have an aggressive program around that. last year we stopped $14 billion of refunds from going out the door that had some

indicia of fraud. we continually change our refunds. last year we put in place a new program where if you have been a victim of identity theft, the context is this is outside the tax system, but somebody might come in to the tax system and try to get a refund using your social security number. you can call us and we will give you a pin with a six-digit number. if you use that six-digit pin, your refund will fly through. if anybody else uses your social security number, that refund will be blocked. because we saw there was an escalating problem, this year in coordination with the justice apartment in january we did a nationwide criminal sweep

of people who had used identity theft in the tax system. we had 100 people who were subjected to arrest, search warrants, or indictment in a one-week period in january, which sent a strong statement out to folks, which is if they commit identity theft they had better not use the tax system to do so, or we will be on the beach. we have tripled the number of people dedicated to general identity theft issues, and this includes the victim assistance. when somebody comes in, where somebody has stolen their identity, and they are having a problem getting their refunds, we have more people dedicated to unravel that problem for them. >> there are many tax cuts, tax laws that expire at the end of this year. "the wall street journal" calls it "taxageddon."

how big a problem will this be? >> one of the jobs he takes seriously is to make sure that as americans wrestle with a complex tax code that it is a seamless experience for them. we speak for the american people try to get their taxes filed well. unfortunately, congress has gotten in the habit the last several years -- at least since i have been here -- passing tax legislation very late. a lot of that is legislation that has already expired. to give you an example, this things happening. there are tax cuts from 2001 and 2003 are set to expire at the end of this year. the payroll tax cut is set to

expire at the end of this year. the most important and complicated issue is there is a whole bunch of tax cuts that expired several months ago and are already expired, which include the amt and things called extenders, which include deductions that schoolteachers take for buying supplies for their classrooms -- those have already expired. if contest does not act until late in the year, next year, say, after the election, we will have a risk in the system. we may have to do what we had to do two years ago, which is delayed the opening of filing season for a whole number of people. if congress cannot act by the end of the year, and even starts to think about retroactive legislation of things like the amt, you could have a real disaster in the filing season where there is total confusion, where some people are filing under what law and then under another. it is an issue we're tracking closely and we are quite

concerned about, and we are hopeful these pieces of legislation will pass sooner rather than later. >> do you think we can ever expect to see a simpler tax code? >> yes. [laughter] the statistics are going in the wrong direction now, but i am an optimist. there have been 3,000 changes to the tax code since 2000, so we have a very complex tax code. i think there is broad political consensus, both parties, the administration and congress, all would like to see a simpler tax code. the problem is i had a friend when i took this job and he said, the problem with taxes it is real money. every change to the tax code, even simplification, can mean

some people might pay less, some people might pay more. it is hard to do, but i think we're hitting a critical mass of sentiment brown the country that something needs to be done about the tax code. >> some leaders are calling for an end to the mortgage tax credit, and what you think those effects would be? >> look, the more it deduction is an important detection. we have the mortgage deduction is an important detection. we have an economy on the rebound and the housing market that is looking better than it did before, so i would not speculate on something that is not in the works. i will leave it to somebody else to speculate on something that may or may not ever happen. >> you stated that the irs technology portfolio is significantly deficient and far behind the private sector. how secure is taxpayer

information from hackers who have gained access to files of certain financial institutions? >> let me clarify my comment. my comments were we have been underfunded for many years, and we are operating on some old technology, and this year we had a major breakthrough in upgrading the core piece of technology we need to upgrade. we are making progress and now in a significant way, and it is phenomenal we have been able to run the tax system every year on the older technology we have got. regarding data security, it is something we take very, very seriously. we have had no perimeter breaches from hackers. we have got a set of people doing cybersecurity in a very serious way, and we have had extensive internal security

that we have put in place. i tell everybody my first hour as irs commissioner i got sworn in, there was a safety briefing, and an information security briefing. that is how seriously we take it, and our people take this all very seriously. the american people can feel very confident that their data is secure at the irs. >> given it is so much cheaper for the irs to processed electronically filed returns, what are you doing to encourage e-filing? >> we moved from 16% to 77% the filing in the last 15 years. that number is continuing to go up. there are people who want to file on paper, and we still provide that option. last year we actually mandated

paid preparers had to file electronically if they filed more than 100 returns. i have seen returns that have clearly been prepared on a computer that somebody had printed out, sent to us, and we had people typing in that return. that does not seem efficient and a good use of dollars. this led us to mandate these things. the trend is moving in the direction. people are more and more using technology. there will be a time when everything will be electronic, but we also have an obligation to every american, not just the americans who use a computer. there are some people who do not use a computer for a variety of reasons, and as the number dwindles, and e-file will continue. >> several nonprofits have said

they would e spending money on political elections. why did you not revoke their status? these specific cases. not addressing any specific nonprofit or any detailed information someone has or does not have, 501-c4 organizations are social welfare organizations that are generally under the tax code promoting the common good. they are allowed to engage in political activity as long as it is not their primary activity. our job is to administer the tax laws. we do is 501-c4's common

organization, some apply, he did not need to apply, you can hold yourself out. all have to file a form 990. when any taxpayer filed their forms, we have a set of screens we put them through, and when we see an issue with a 501-c4, 501-c3, we will do an audit and gather more facts. >> he said 73% satisfaction with the irs, and that is considered below average. what are you doing to continued satisfaction? >> the question asks about the overall filing experience, and it continues to move up. the irs has a ubiquitous brand, and off as people think about enforcement. when you get a question about the irs, they have a knee-jerk

reaction -- no. what we are doing is doing our job. information. our people are polite. make sure when we do an audit we have competent people who find problems when there are problems any problems. we make sure we have more and better web applications so if you want to do your job with us job with us over the internet. we make sure preparers are qualified, and the list goes on. our job at the end of the day is to do all the things we're and those numbers will go up. while i will not compare us to kids in school and their grades, what i will tell you is it is the highest number we have ever had that shows continued improvement for the irs. >> there are hundreds of

thousands of undocumented documented, undocumented aliens in the usa. is the irs doing anything to collect taxes on these aliens? >> it is a great question, and one of the pathways to citizenship that people believe is a good one is if you are not taxes. our job is to make sure if you work in this country and you have a tax obligation that you file a tax return, and that is what's we try to do. our job is around what exactly who wrote the question asked, to make sure taxes are paid. we're not responsible for the other parts of immigration law and policy. you have a lot of people in this country who pay taxes who are not here legally, who file returns, said they can show a track record of being good

citizens. the people who are being good members of society, they are contributing to national defense, contributing to our roads, schools, and that is what we want. we try to run the system in a fair way that allows to to pay taxes. had you had to check with your wife for a second term. did you get permission? fall. my plan is to serve out that term, but to leave at the end of my term. what i would say is this is ait has a phenomenal cadre of leaders who are well positioned to move the institution for, and that is what we have tried to

focus on while we are here, to make sure that the institution is much stronger than any of us who are here, that it continues to serve taxpayers, next year, from now, and a generation from now. >> before i get to the last question, i have a couple housekeeping matters to take care of. i would like to remind you of our luncheon speakers upcoming. april 11, a discussion of the new baseball season. alec baldwin will also be here. that event is sold out. april 24 we have ken salazar from the department of interior. i would like to present you with our traditional coffee mug. had you ever been audited? [laughter] >> i will take a second one

first. when you become the irs commissioner, every tax lawyer in the government takes a look at your return. my returns have been thoroughly vetted, and i have a preparer who does my tax returns. >> how about a round of applause for our speaker today. thank you for coming. [applause] i would also like to thank our staff for organizing today's events. here is a reminder that you can find more information about the national press club on our website. if you would like to get a copy of today's program, check the thank you all for joining us today. we're adjourned.

[captions copyright national cable satellite corp. 2012] [captioning performed by national captioning institute] >> tomorrow wrote a panel of former trade representative's talks about president obama's trade policies. we will have live coverage for the center of strategic and international studies at 10:00 a.m. eastern on c-span and c- span.org. >> is weekend, the anniversary of the bloodiest -- this weekend, the anniversary of the battle of shiloh. we will toward the battlefield,

saturday at 6:00 p.m. eastern. the founder of the red cross clara barton operated the missing soldiers office until 1868. join us as we rediscover the third-floor office as it is prepared for renovations, this weekend on american history tv on c-span3. >> this sunday, the u.s. senate youth program. >> when i got the opportunity to meet both of my senators, being able to meet them and talk to them. >> leon panetta talked about being financially sound, because if we are not, devoting money to national defense will be worth that. >> high school students participated in a week-long program. share their observations and

experiences as they interacted with congress, the supreme court, and the president. >> there is a lot of partisan ship, and everybody we have met here have said that. i never really thought about that before i came here. >> sunday night at 8:00 eastern. >> a senate hearing on campaign finance laws looked into a proposal to require disclosure of political spending by corporations, labor unions, and super pac's. if it passes, organizations would be publicly required to name organizations that detonated $10,000 or more.

senators charles schumer shares committee. >> i would like to thank my friend ranking member alexander for joining us, and all my colleagues to discuss the disclose act of 2012, which sheldon whitehouse introduced last week. the supreme court's citizens united decision, in conjunction with other cases, has radically altered the election landscape by unleashing a flood of unlimited money into our elections. in response to zap -- to that decision, which introduced the disclose act which would have increased transparency by requiring full disclosure of the real sources of money behind political advertising. the house passed it, and in the senate it failed to get cloture. the problem is no longer hypothetical. the public is now living with

the aftermath of the citizens united decision every time they turn on their tv sets, and endless streams of natiegative s . this has confirmed our worst fears about the impact of its citizens united. two years ago we were warned about these harmful effects, but the results are worse than expected. this morning we woke up to the breaking story reported by bloomberg news that major corporations, including chevron and mark, gave millions to groups that ran attack ads in the 2010 elections. that means voters were left totally in the dark about who paid for the attack ads. the trend is disturbing. according to the center of responsive politics, it showed

the% of at -- it showed the percentage of campaigns spending rose to 47% in 2010. we can only imagine by what percentage it will grow by the end of 2012, almost certainly over 50%. almost half the ads run in america have no disclosure, and that is incredible and awful. the money is coming overwhelmingly from the wealthiest americans, as you would expect. a recent study in politico found 93% of the money contributed by individuals to came inc's in 2011 contributions of town thousand dollars or more. -- $10,000 or more. half of the money came from 37 donors. is that democracy?

even more worrisome, we are increasingly seeing contributions from non-profit organizations, groups that can use the tax code to hide their sources of money, and from shoddily corporations. some of these groups are nothing more than a post office box in the middle of an office park. it should be be clear that better disclosure is needed. the 2012 disclose act is already supported by 40 senators, and it should be acceptable to people of every stripe. that is how it was designed. the previous bill imposed bans on government contractors and foreign-owned corporations. those bans have been taken out, although most of the sponsors but it was the right thing to do. the two dozen 10, to dow's 11

-- the legislation required the nations of $600, but that threshold has been raised to $10,000, because these donations for that amount and make the donation of $100 seem irrelevant. the new act has two key components, and it is simple. disclosure means outside groups that make expenditures should explode -- expose their donors in a timely manner. the bill includes a way to drill down to the original source of money to reveal those using intermediaries as a conduit to obscure it true funders. to this cover transfer position, even the most sophisticated billionaire's will have difficult to hide behind a corporation. disclaimer means voters watching the political ad will know who paid for it.

under current law, candidates are hard to stand by their ads. why should outside organizations engaging in this same kind of political activity be different? the 2012 disclosed that would otheruper pac's and corporations identify their top five funders in their tv ads. the leader of the monetization would have to stand by the ad like candidate must do. transparency is not a democratic priority. my colleagues have declared support for greater disclosure to prevent corruption. eight of nine supreme court justices in the citizens united decision supported disclosure. potential for corruption in the post here at is all too clear. it is the time to get serious about full transparency. this bill will do that. that is why we're holding a hearing, to examine the need for better disclosure and to discuss

this particular position. before we turn to our distinguished panel of experts, i want to ask my good friend ranking member alexander and any other member here if they would like to make opening statements, as is usual practice. i would ask statements by members and witnesses be limited to 5 minutes. let me call on senator alexander. >> thank you. it is good to be with you on this beautiful spring day, and this hearing is as predictable as the spring flowers in the middle of an election. my friends on the other side of the aisle are trying to change the campaign finance laws to the scores -- discourage contributions from people with whom they disagree, all to take effect by july 1, 2012. i deeply appreciate this and the the chairman is showing for the victimized republican primary candidates santorum and gingrich, and i am sure they

would want me to thank you for that as well. this is a quickly called hearing -- >> the thanks is accepted with gratitude and humility. >> most of the enthusiasm for this bill comes as the chairman indicated in his remarks because of the citizens united the decision, which says rich non candidates have the same rights as candidates. this legislation is in the name of full disclosure, which i am in favor of, but there's nothing in the constitution about full disclosure. there is something about free speech. i often go by that newseum down the street -- congress shall make no law -- there is a way to

have full disclosure and free speech, and that is to take all limits of campaign contributions. the problem is the limits. becauseper pac's exists of the limits that have existed. get rid of limits and they will go away, and you have full disclosure, because everyone will get their money directly to the campaigns and the campaigns must disclose in ways we have already agreed to not discourage free speech. i have done research, and i have found a compelling statement before this committee that was rendered just exactly 12 years ago today, march 29, 2000. some of you were actually here that day. it was given by an obscure former governor who had run for president and who had permanently retired from politics, and he came before

this committee, and these were the words that he said -- "i have come to argue one practical proposition, that the thousand dollars individual competition elimilimit makes it impossible accept for the front runner to run a serious campaign. this has a number of bad effects for our democracy. it is insiders in the media more say. it protects incumbents. it makes raising money the principal occupation of most candidates which makes campaigns to lanka's -- too long. it is but it has done the reverse. i have come with this practical solution -- raise the limit." that obscure retired former governor was me. a few years earlier, senator

mccarthy, a better-known retired politician, came before this committee and said he never would have been able to challenge lyndon johnson if those who agreed with him had not given him so much money in the 1968 campaign. the reason i am talking about limits is because if we took the limits of we would solve the disclosure problem. which candidate can continue their campaigns. allowed otherve candidates to run. presidential races before or like the patriots losing the first three games. in the nfl, you play all the way through to the end. having money is what you need, and if senator kerry have their own money, and others should contribute their money.

as long as we have a first amendment to the constitution individuals have a right to express themselves. the best way to combine free- speech with full disclosure in a way that does not chill free speech is to take off all the limits which would cause most contributors to give to campaigns, it would drop super pac's it would make this legislation completely unnecessary. thank you, mr. chairman. >> senator feinstein. >> mr. chairman, i think you very much. given what we have seen in the republican primary this year, i really believe we must try to pass the disclose at. in 2010 we came close to passing

it, and it looks like we need just one additional boat to move the big ford now. this new act is a critical step to ensure that corporate dollars will not flow in the dark to one candidate and against another. but instead, our collection process will regain the transparency it has lost after citizens united. i find this whole hidden shadowy world of the super pac to be really discouraging, and i suspect it is going to have a very discouraging impact on candidates that have not yet run for office, but might be considering to run for office. there is no way the average person new candidate can fight it. if the company does not like what you are doing, whether it

is a big bank and you are for financial reform, go out and get this person with on told, and known millions of dollars. i do not think it is the american method of electing candidates. i think this is the first step forward. i was really surprised at the supreme court. i want to thank the offer and i want to thank you and hopefully -- i want to thank the author and i want to thank you. >> i appreciate the opportunity to discuss the disclosed acts. i have some concerns with the bill. as a former secretary of state in missouri, where i served as the chief election official, i am interested in these policies that affect elections. i believe this bill would place additional burdens on nonprofits

as they seek to advocate for public policies. i am also concerned about the first amendment challenges that i believe this bill would present. before we consider any new restrictions, i think we would be well served to examine our current laws and ensure they are having their intended effect, and i suggest that might be a good topic for another hearing, particularly in this election year, to look at the loss we have and the books now. i am pleased we are having this hearing. i look forward to hearing from the witnesses, and thank you for holding it, mr. chairman. >> thank you for the hearing. i support the disclose act. we're not talking about super .ac's we have seen a dramatic increase

in these independent expenditures. mirror mortars who dare run for office have to wonder whether they are born to be overrun by some super pac some individual or interest group regardless of the merits of their campaign. what we are doing is introducing an element which is fundamentally corrupted. senators who have to wonder whether this morning's speech on the floor or this afternoon's a vote might irritate a loss biggest casino magnate the made a fortune in oil, or a retired plutocrats in jackson hole, because tomorrow the world might change for you. we have seen a candidate for reelection with more than $5 million being spent by march before the election, and negative ads in their states. that is a phenomenon which is

not conducive to an active, positive, and productive debate among voters in this country about where this country should go and how it should move forward. now for something totally different? i support the disclose act, but i really believe we need to get to the heart of the matter, and that is what i had introduced the fair elections now act, public funding, and states as diverse as maine and arizona have voted to move to public funding. take a special interest and a fat cat out of the picture. shorter campaigns, less money spent, direct contact with voters instead of sitting for endless hours on a telephone begging for money from strangers. i think it is the right thing for the future of this country. major or form unfortunately requires a major scandal. isly this year's campaign building up to a major scandal when it comes to fund raising

and the amount of money spent. will it be enough? will it be the breaking point for real change? , i hope this bill passes. i hope the disclose act starts to lift the veil on expenditures that are taking place, but we need to step beyond this, or we run the risk of dramatically changing this democracy, which we all love. >> i want to thank particularly senator udall for being here. he has introduced legislation that comes before our junior members' committee. chairman leahy -- which would undo a decision that started this -- started us in this convoluted way with dealing with campaign finance reform and has been a real leader here.

we thank him for coming. >> thank you, chairman schumer. this is an important bill and i appreciate you holding a hearing on it. in january 2010, the supreme court issued its disastrous opinion. two months later the d.c. circuit court of appeals in the speech case, these two cases are the ones that gave rise to super pac's. millions of dollars now lead into campaign ads without revealing the true sources. the citizens united and the other decision renews our concerns about campaign finances, but the court made the groundwork for this broken system many years ago. in 1976, the court held that

restricting independent campaign expenditures violates the first amendment right to free speech. in effect, money in a speech to the same thing. the damage is clear. less about theme how he quality of ideas come out more about special interests, and less about public service. i do not think we can truly fix the broken system until the unto the flawed premise that spending money on elections is the same thing as free speech. that can only be achieved if the court overturns buckley or we amend the constitution. until then, we fall short of the real reform that is needed. we can do everything we can in the meantime to make a bad situation better. that is what we are trying to do with the disclose act to pick it is not to reform i would like to see, but it is what is possible

under the flocked supreme court precedents that restrain us. it asks the fair question, where does the money come from, and where is it going? this is a practical, sensible measure. it does not get money out of our elections, but it shines a light into the dark corners of campaign financing. a similar bill in the last congress had brought support with 59 votes in the senate, and it passed the house. now that we are seeing the real impact of citizens united, the need for this legislation has become even more apparent. the downpour of unaccountable spending is wrong and undermines our political process, and is sounding an alarm that is truly bipartisan. i recalled the debate when the we this is -- i recall the

debate when we did considered the disclose act in the last congress. now we know. unfortunately, our worst fears have come true. the toxic effect of citizens united and subsequent lower court rulings have become prettily clear. the floodgates to unprecedented campaign spending are opened, and thread to drown out the voices of ordinary citizens. look at what we have seen already, and we are only in the primary season. huge sums of money flooding the airwaves, an endless wave of attack ads pay for by billion ears, the poisoning of the discourse, the spectacle of 5 appeasing their status to shield their debtors and funnel money into super pac's.

the american public rightly looked on in disgust. a recent washington poll found that 70% of registered voters would like super pac's to be a legal. among independent voters some eager wrote to 78%. supporters of on limited campaign spending claim they are promoting democratic process, but the public knows better. well the individuals and special interests are buying our own actions. our nation cannot afford a system that says, on in to the rich and powerful, and says did not bother to everyone else. the faith of the american people in their system is shaken by big money. it is time to restore that faith. it is time for congress to take back control. there is a great deal to be done to fix our campaign finance system. i will continue to push for a

constitutional amendment. we need comprehensive reform, but let's at least shine a light on the money the american people deserve to know where this money is coming from, and they deserve to know before, not after, they had to the polls. that is what the disclose act will achieve, and i want to thank chairman schumer on this hearing and look forward to hearing from our witnesses and ask that my entire statement be put into the record. >> without objection. the fact that the judiciary committee is involved in this issue, make us glad that he is a member of this committee. it will help us as we move forward. >> thank you. i join you in reintroducing to

disclose act. i appreciate you having this. our efforts to restore transparency, campaign finance laws were gutted, and we cannot wait any longer. the stroke of a pen, five supreme court justices overturned a century of laws designed to protect our collections and corporate spending. it ran roughshod over preside cedent, and i remained trouble today that the supreme court is extending rights to individual americans. corporations are not the same as individual americans. they do not have the same rights, morals, or interests. you would say logically what the

supreme court has done is this country elected general eisenhower as president. should we not let general electric as president? we have elected a lot of yahoos as president? why not elect yahoo! as the vice-president? the founders understood this. americans across the country have long understood that corporations are not people in this political process, and unfortunately, a very narrow majority of the court apparently did not want to believe what all americans have believed. i cherish our democratic process, cherished the fact that vermont has the highest turnout of all states in the union, but we should be heard as vermonters.

it we will continue to have this happen until we take start takiy passing this act. the first act after the supreme court's decision, i hope the public will mitigate the impact. we were trying to restore much of the mccain law. all we needed was to have one republican vote to restore it. we could have done it. we did not. we needed that one vote. we did not get it. i think this is going to hurt both parties. it ensures that corporate money flowing in from undisclosed sources will continue.

the chairman mentioned, the republican primaries, this could happen on either side, the rise in super pac's. i advised my colleagues, this uninhibited, and disclosed spending is hurting everyone of us. it is one of the reasons why the american people are so turned off on how government is run, politics is run. it is going to hurt every single person. it is going to hurt the institutions i cherish, the congress. the ability of republicans and democrats to work together for the best interest of the country. vermont is a small state. there is a tiny fraction of the

corporate money. they're out spend every republican and every democrat. that is wrong. the zoning board is considering a corporate interest, let's stop the corporations from wiping them out. i would urge my colleagues, whether they are republican or democrat, you have an interest to getting everyone back where everyone knows who is involved in the government, who is spending, you have a chance for voices to bes' heard. if we do not this, the ability for good people in the party to come forward is going to stop. the disrespect for our institutions, including the supreme court, will grow. this country will suffer. thank you. >> thank you.

i would like to thank all of our colleagues for their excellent statement. will ask our witnesses to come forward. fred wertheimer founded his group in 1997. he was a visiting lecturer at the law school. he has been a nationally recognized leader. he served as an analyst at cbs and abc. david keating is the president for the center of politics. previously, he served as

executive vice president of the national taxpayers union and executive director of americans for fair taxation. he founded speechnow.org. richard hansen is a professor at the irvine school of law. he is the author of the election a lot log. he has written over four thousand articles and seven books. he previously taught at loyola. thank you all for coming. each of your statements will be read into the record. we ask you to limit your opening statement to 5 minutes. mr. wertheimer. >> i am the president of democracy 21. i appreciate the opportunity to testify in support of the act. if the opportunity arises, i

would like to address senator aboutder's views contribution limits. i will focus my comments on the disclose act. it restores a cardinal rule of campaign finance law, citizens are entitled to know who is giving in spending money to influence their vote. this fundamental right to know has been recognized for decades and by the supreme court in repeatedly upholding the constitutionality of the laws. in 2010, more than $135 million in undisclosed contributions were injected into the congressional race. this amount is expected to grow in 2012 in terms of the undisclosed contributions. this has returned the country to the era of the watergate scandals.

huge amounts of secret money was spent in federal elections. secret money is dangerous money. as the supreme court held, disclosure requirements deter actual corruption and avoid the appearance of corruption. the disco's act would ensure that citizens know the identities of and the amounts given by donors whose funds are being used to pay for outside spending campaigns. new disclosure laws were enacted during the watergate era to address the problem of secret money in federal elections. 22010 there-1970's was a consensus in the country -- to 2010 there was a consensus and the country in support of campaign finance disclosure. in 2000, in response to a loophole that was allowing

certain 527 groups to spend undisclosed monday in federal elections, a republican controlled congress acted to close the loophole. they passed the legislation with overwhelming support from republicans and democrats. the house vote was 385-29. bipartisan support disappeared in 2010. the policy issues have not changed. the votes have. we urge the senate to return to the bipartisan approach of support for campaign finance disclosure that was the rule for almost four decades in the senate and in the house. these gaping loopholes in the laws were caused by a combination of the citizens united decision and ineffectual fec regulations.

this problem has been made worse by groups claiming tax exempt status in order to keep secret their donors. we have petitioned the irs to change their regulation to deal with eligibility for this tax status. i would like to inclose those petitions in the record. the citizens united decision was based on a false assumption that in striking down the corporate dan, there would be disclosure for the campaign expenditures that followed. justice kennedy wrote, "a campaign finance system that has corporate expenditures has not existed before today." it still does not exist. that is what will be cured. there is no constitutional problem with disclosure.

there is no constitutional problem with the disclose act. the supreme court, by end 8-1 vote, upheld disclosure for the kinds of expenditures that are dealt with in this legislation. the court specifically noted the problems that result when groups run ads while hiding behind dubious names and conceal the true source of their funds. the court also rejected that disclosure requirements can only apply in express advocacy. thank you very much. >> thank you. he finished exactly in five minutes. you are a well-rehearsed witness. mr. keating. >> thank you for inviting the

center for competitive baltics to present an analysis. while the goal of the bill is to increase disclosure, the proposal actually chills speech, forces nonprofits to alter their fund-raising efforts, and hijacks 25% of the advertising copy during an election year. i think many of these provisions will generate significant first amendment questions and the litigation. the most infamous provision of the mccain fine gold bill was its restriction on thgroups to even mention the name of a congressman. this would stretch the restriction to the entire election year. that change would wreak havoc on

groups that want to use tv or radio ads to lobby congress. in my testimony, i give the example of an environmental group that may want to run an ad urging support for a bill to regulate carbon dioxide. it might have to disclose all significant donors. these donors might have supported the group's clean water efforts. yet, they had not thought to earmark their checks. they may be listed on the ad itself as supporting the ad when they do not. another thing that is not talked about in this bill at all is the disclaimer requirements with a totally ridiculous. currently -- which are totally ridiculous. currently, if a radio ad were to run, and there is no primary,

the group which i made up, the ad would say at the end, paid for by american action for the environment. i think most americans with think that is a good disclaimer. you know who is running the disclaimer. -- the ad. the bill would require this. it would have to say, something like this, no editing is required. the commissioners behind me could affirm this. the group i used to work at once asked for an example. it would say, paid for by american action for the environment, www. americanactionfortheenvironment. org, not authorized by any candidates, i am john smith, the

chief executive officer, american action for the environment approves this message. major funders are -- that took about 20 seconds to speak. how are groups opposed to purchase a 32nd radio ed if you have a 22nd disclaimer? -- purchased a 32 second radio ad if you have a 22 second disclaimer? all of this is unnecessary. law requires disclosure of all spending to the fec. all contributions over two hundred dollars a year to further such communications. i have given examples in my written statement. there is more in this bill that goes far beyond disclosure. it adds confusion to an

election code and regulations that are already too complicated. i tell people that make the tax code looks simple by comparison. there is an indecipherable definition. that should go from the bill. in conclusion, i want to emphasize this bill pyles new costs on nonprofits and other speakers, costs that are going to chill speech and would create too long disclaimers, what congress may not do under the first amendment. thank you. >> mr. -- professor hansen. >> members of the committee. thank you for the up a committee

to be here today to testify about the act. i support the measure as a way of closing loopholes and the private disclosure of information which will deter corruption, provide the public with relevant information, and allow for other laws. the legislation uses high dollar thresholds and enables contributors to shield their identity when making non- election related contributions. these insure that the first amendment rights are fully protected. i hope the senate returns to its prior bipartisan consensus. unfortunately, the world has not materialized. the main problem is that action has shifted from pac's, which have to disclose contributors, to new 501c organizations which required no public

disclosure. most contributors by not disclosed. how serious of a problem is secret money? the center for responsive politics found that in 2010 the spending rose to 47%. in 2006, 501c spending increase from 0% to 43%. furthermore, with the rise of super pac's, contributors can shield their identity, hiding behind innocuous names. the public does not get the information on who is funding the eds when it needs it the most. even worse, contributors can contribute to a 501c4 which donates to a super pac, which recently happened. disclosing the freedom works contributions came from freedom

works is not helpful. i now turn to the benefits. the first benefit is they can prevent corruption. well this solution might be to return to the days before simpson united, disclosure is important and a second best alternative. second, disclosure laws provide valuable information to voters. this is apparent to california voters when they turned down a ballot proposition that would have benefited pacific gas and electric. pg&e provided almost $46 million, compared to slow spending on the other side. thanks to disclosure laws, pg&e's name appeared on every ad. help, disclosed laws would campaign finance laws.

if you're worried about foreign money, the only way to find this out is through adequate disclosure. finally, we turn to the question of whether the disclose act would face first amendment challenges. we have heard that in other cases, the supreme court has unanimously upheld disclosure laws, going much further than just the requirement of disclosure as to express advocacy. the supreme court has also stated that if a group can demonstrate a history or threat -- they are entitled to a constitutional exemption. as to harassment, in a forthcoming article i analyzed the claims of harassment that have been made in recent court cases. both of the district court found that harassment is not a serious problem.

if it is, there is the entitlement to an exemption. it is close act provisions are ingenious in allowing contributors -- de discos act provisions are ingenious in allowing contributors to keep the money private when it is going to non-election purposes. they can set up a separate account. the act targets the activity, contributed money to election- related ads. if they are contributing money to run an election at, that to be disclosed. thank you for the opportunity -- election ad, that should be disclosed. thank you for the opportunity. >> mr. keating, the example where somebody contributes a great amount of money to a 501c4, and the shell

organization gives it to the super pac and it just discloses the name of the 501c4, your testimony does not account for that. do you not agree there is no effective disclosure when a 501c4 is given a large contribution and a large percentage of that is used to put advertisements on tv? >> their is already a loaw against contributing in the name of another. >> he said that freedom works, just having freedom works be the listing is not adequate. it does not tell us anything. you could have a false name. citizens against pollution could be funded by people who want to remove pollution controls.

having any name on the ad does not tell you anything. the name could be deliberately deceptive. >> the simple proposition that 99% of all americans would say, obviously. if the sierra club runs an ad. we need to know the donors to the sierra club. >> let's say they want to take out somebody who is a defender of -- in a state where coal is used. they issa an ad campaign saying -- they set up a campaign swing citizens for coal use. -- saying citizens for coal use. disclosure does no good. if they use the name, sierra club, people know what that is. you are using an obvious example.

they could set up a shell organization with an opposite name. the pollution club. >> under the law, -- under the law, all that would be disclosed is the name the pollution club. that is absolutely correct. >> you are incorrect. if it is an independent expenditure, that group needs to report the donors used for the independent expenditure. that would be listed in the fec filings. we would know that the sierra club gave to the script. -- to this group. >> the statute does require contributors to be disclosed. the regulations have gutted the disclosure provision. they have limited the disclosure to only individuals who give for

the specific purpose of running those ads. that is how we wound up with $135 million in undisclosed contributions. >> the practical effect is we do not know where this 501c4 money is coming from. we will never know. that is the bottom line. >> i think if you listen to mr. keating, he talked about independent expenditures. what is happening is they are running communications, contributions to fund and not adequately disclosed. think fe toc regulations. >> my example is correct? >> i think so. >> thank you. my time is running out.

we will try to have a second round. my quest -- my second question goes to mr. wertheimer. some have suggested removing contribution limits. that it would be a solution. can you give us a brief sketch of what would happen in the political landscape if we did that? i think your proposal would be that everything would be disclosed. if somebody wanted to give to a 501c4, there would be disclosure. >> i am assuming that if the limits were lifted, people would give to campaigns and they would disclose. there would be no reason to give to a super pac. >> unless you did not want to disclose. why don't you give us a little example. >> in my view, that would take

us back to its system of legalized bribery. let me give you a few comments from people other than me. the supreme court said that contributions were necessary to deal with the reality or appearance of corruption inherent in the system permitting unlimited financial contributions. inherently corrupt system, that is what they call the system of unlimited contributions. the former republican senator said about the unlimited soft money system, a system of unlimited contributions " prostitutes' ideas and ideals, the means democracy, and it debases debates. who can contend that a $100,000 the nation does not alter the

way one thinks about an issue? " one former senator said, "i know firsthand how the holden elected officials can become to those -- elected officialsn can become. larger donations purchased greater benefits for donors." it affects what gets done and how it gets done. they affect outcomes as well. one must quote from a former colleague, -- one of last quote from a former colleague, a late quote from al one last former colleague, a late former colleague. he said the distinction between a large contribution and a bride is a hairline's difference.

we go back to a system of buying results in congress if we go back to a system of unlimited contributions. >> what senator alexander, my good friend, i have tremendous respect for him, he would go back to the old system. he is saying, let's go back to the system with no limits. it was in existence for 30 years ago. >> it was in existence when we got what it. senator alexander. >> -- when we got watergate. senator alexander. >> thank you for asking the question. senator mccarthy said watergate was an example of corruption of the system. there was nothing that would have been presented by the 1975 act.

-- been prevented or made illegal by the 1975 act. do you think if it passes there will be less spending by the groups affected by the elections? >> it is hard to say. there is no way of knowing. i think there would be less spending. there would be massive disruption in the way that many of these organizations need to handle their fund-raising. i did want to mention something, my other witnesses identified something in what they say is the regulation of law. if there is a problem with that, why did you not take a surgical knife and just fix that one small problem? i can tell you i recently worked at the club for growth, that group was a qualified nonprofit corporation. before citizens united, that

group as well as the league of conservation voters and other groups were allowed to do any expenditures. we did not raise money for independent expenditures from people. we ran independent expenditures of about general budget. that is something -- out of our general budget. that is something that most americans would agree that groups should be able to fund these ads out of their own budget. if there is consensus that the problem is created by the regulations being vague about raising money for independent expenditures, being used for it generally, why not fix that one thing? this goes way beyond that. it covers anything that is run in an election year. that goes too far. >> you are using up all my time. let me ask you this,if we took f

contributions, do you think that would tend to dry up super pacs? >> i think it would go directly to the candidates. >> it should be fully disclosed. >> absolutely. >> on limits, i have a different view. i have run in a presidential campaign with limits. here's the way it works. because of the limits of 1995, i went to 250 fund-raisers to try to get money from people who cannot get more than $1,000. i spent a lot of people. of my time. that raise 10 or $11 million.

in 2000 a, he spent $30,000 of that -- $30 million of his own money. i tell that to john kerry. he spent his own money. if you were ever in that position, it probably would help you. he was in that position in 2003. the media was saying he cannot raise money. he but six or $7 million of his own money and became the nominee. i watch fox and msnbc sometimes. ads run at a regularly -- regularly from a political point of view. that is their right to do.

in countries that do not have a democracy, at the leaders to cover the television stations to keep everyone else and having enough money our resources to advertise their views. as long as we have a first amendment, it prevents steve forbes and john kerry to spend their own money that all we are doing with limit turning washington into a city of panderers for $1,000 contributions. before 1975, we did not spend dollar time and fund-raisers. the only reason you do is because you cannot raise money in sufficient amounts to run a campaign to compete with the ads that they are already running. taking the limits off would solve almost all disclosure

problems. the money would be given to campaigns. people would participate. the campaigns would run longer. more voters would have a chance to vote. officials would spend less time with people you're trying to spend the money. >> thank you. if you do not still require disclosure of the super pacs, there are people that would want to give for undisclosed amounts. did you want to give a million dollars, you will have to disclose it. >> you have to disclose that. >> my only question for clarification is are you recommending there be some kind of disclosure in addition to removing the ban it? >> if you are willing to remove

the limit, i am willing to discuss disclosure. >> i appreciate that. >> i had been sitting here reflecting on changing time. he mentioned that disclosure and knowledge was a radical idea. i was taken aback by that. i do not see how possibly can be. this bill is modest. you can get over $10,000 without disclosure to a super pac, it is over $10,000. someone that contributes over $10,000 and generally has some kind of motivation to contribute. the disclosure allows andividuals to look at this n

see who is supporting a candidate. what about this is so radical? >> it sounds like i may have been misinterpreted or miss spoke. i was talking about the bill itself not disclosure being a radical concept. perhaps the most radical as the government mandated disclaimer that goes on for 20 seconds or more on a radio ad. this would cover all radio ads that mention the name of a congressman as a building before congress that says call congressman smith and urgent to vote. -- urge him to vote. you're going to drive of the cost of these ads.

it did not understand why we need a disclaimer that goes on for 20 seconds. it is paid for by americans for action for the environment. that is a radical approach requiring them to stage a bunch of bureaucratic nonsense and a disclaimer that drives up the cost of advertising by a tremendous amount. >> i am running for reelection. it is very expensive for television. i should be responsible. the disclaimer is important. it says to people that the ad is speaking for me. i take responsibility for it. what is radical about that? >> the bill specify something that goes on forever.

it'd be said in far fewer words. >> he is focused on the radio ads. let's move to the television ads for a moment. the tv ads require the have of an organization to take responsibility for the ad in the same way that you have to take responsibility for your ads so there is accountability and responsibility. the tv ads require the ad to lead tlist of the top five dono. that would take up no time from the content of the ads. with respect to the radio ads, it gives them the power through regulation to exempt the kinds of ads --

>> that is incorrect. it is not. that is not correct. it only extends major donor listings. >> let me just interrupt. there is a hardship exception which they can use for what you're talking about. you are correct. >it takes eight seconds. there is a hardship exception. yet a couple of extra minutes. >> i was reading about a case

where -- i wish i had in front of me. i put it down somewhere. uuhere it is. eqthe pac raised approximately $46.2 million. all of which was donated by pg&e. it has fallen on very hard times. at one point, it donated 9 million in one day. there is a consumer groupequueud the utility reform network. they were able to raise $33,000. it out spent 500 to one, which amounts to approximately $25 per boat. they lost. is

because of the disclaimer. auauaueverybody was able to como the conclusion that this is not fair. @uthis is a company about which this initiative is. it is not fair. @uthe company is not necessarilu speaking. it is a@u@u group. @uit seems to me that this is a very good example of disclosure. the entity@u@uauau@u@u@u@u@u@u@r pak without disclosure has a very unfair position on the ballots. you would disagree with that? >> i am not familiar with the details of california law.

i have no problem with that. >>nóñó÷óoóñóóóóñóñóoóoólómóly their name. this is on the bill. >> i will read this. >> if the communication is transmitted through radio and paid for in part with the payment which is treated as a campaign related disbursements comedy talk to funders are applicable. the communication is of short duration that including the top

two funders would constitute a hardship for the person paying for this by requiring a disproportionate amount of contactax. i imagine if you have a 32nd ad, it should clearly be a hardship. this is the legislative intent. >> i do not want to take a lot of time. you said earlier it required disclosure that they have get it. how have they gutted the disclosure? >> it is only required to be disclosed. >> these would-be contributions

to these various groups? >> yes. they might spend money for that purpose. >> yes. >> do you think we should be having a hearing on enforcing the statute? >> i think you ought to have a separate hearing on fundamentally reforming the federal election commission. this will xpxp solve the problem of disclosure. under the current role of the statute, there is a contribution provision which has resulted in more than $130 million not being disclosed. >> he made a statement that groups like the sierra club or club for growth should be able to run ads out of their own

budgets. is that there's a? -- is that there? >> yes. >> so long as they apply with the ethical -- with the applicable disclosure rules. >> what you say? >> if it is an independent expenditure, you must listed within 48 hours. you need to fix those of the expenditure. if money was given, and this is where i alluded to the confusion, different people to

different interpretations of what that means. we interpret this to mean that if you raise money generally for independent expenditure, the donor would have to be disclosed. other people may take a different view. that is how our group tickets. we only did this from our general funds. whenever asked anyone for money for independent expenditures. >> you did not disclose all the donors to club for growth on any reports anywhere? >> that is correct. no money was given. they have the super pak. it uses that entity to raise money for independent expenditures. >> the donors are disclosed but the regular donors for the

sierra club are not disclosed? >> correct. they did raise money for independent expenditures. it is my view that it would have to be disclosed under law. other people feel differently. >> is it accurate that a member of the house or senate, which groups cannot mention their name for the year of the election? >> any group. if we're talking about this bill becoming law, any group that wanted to run an ad during the election year, it is the more than $10,000 would have to meet the requirements. >> half how would you mention the name of the house members? mention theld you name of the house members?

>> there are disclosure requirements. >> the cannot mention someone's from january 1 and of the election. the election. xp >> the bill provides a definition of an lectionary communication. it is something that is triggered because it provides for disclosure information. these were struck down. >> we take the 60 or 90 days that were 30 or 60 days in the law now. we take that same principle. >> that is right. >> i would think that members of the house and senate would like that. they could not have their name

mentioned without these restrictions. that is half a house term. >> thank you. >> there is no limit to in principle to this. why could it not be there? i did not see any limiting principal. >> under existing law, have primaries been held where super pacs ran ads in donors were not told until after the primary? >> it is a big problem. úpthe iowa caucuses and the new hampshire and florida primaries were all p run and over with before we had the first disclosures of the super pcs and

to their funders were. they only disclose semiannually and at the end of the year. all of the money raised in the last six months of 2011, there is no disclosure of the doctornr until january 31. the bill requires disclosures to be made when the expenditures are made. then have to disclose big contributors as well. there is a serious disclosure problem that existed. >> the 2010 elections, and i did not look at all of these, i

think senator schumer will remember this. he told us that the combined expenditures are overwhelmed the totals for both democrats and republicans. do you see when we are moving down the road as we get into 2012 and 2014, where the combined spending is well beyond what the candidates are spending, is this a good trend? does this better inform the voters? do you think this is good for democracy? >> no. nor do i think the solution is to remove the contribution. studies have shown that almost all of the ads are negative

attack ads. that leads me to believe that even if you did remove the contribution limits, you would still have them raising large amounts of money and writing negative ads. one of the steps that should and could be taken is to end the candidates specific super pacs of the type we have seen in the presidential and election. they can be eliminated. when the supreme court ruled that this took place, they also said they have to be independent of the candidates. they left congress to define what that is. we have a very weak and problematic ordination rules. even under those roles we

believe they are operating illegally. we feel you could define them in a way that they're not going to be run by close associates of the candidates. having not going to be their money raised. the super pacs are not independent. most people recognize that. they are hiding behind their own views of what constitutes coordination under the law. and also under a realization that this is being forced upon them. when the supreme court talked about independent expenditures was very clear. it had to be wholly independent, fully independent, a truly

independent. these are anything but those concepts. >> i know i only have a couple of seconds. it seems to me in reading about the super pacs these are individuals who worked very closely with the candidates in many cases. and may have left the campaign recently. these are the kind of people that are running the super pacs. in one case it was the candidate's father. >> is the overwhelming major funder. >> this is a strange concept that somehow a father can

corrupt the sun during a donation. this is another provision we have of a husband can run but cannot take contribution from his wife because his wife might corrupt and by giving a contribution that is too large. the election locked has some very strange provisions in it. we have heard the call for tax code simplification. one thing we need is election law simplification. he is saying some things that are misleading. the idea that a campaign manager can go to a super pac, he cannot have someone going from a campaign to a pac.

there are restrictions. there is no evidence that these are illegally coordinating. of course people that know and strongly support candidates may feel strongly about starting up such a group. that is not a surprise. the final thing i would like to observe is money is not everything. you looked at candidates who soared during the primary on the strength of their performances. money is very important. the increased money in this primary has been a good thing. it has been a very competitive race.

>> i think there is one example for a p major fund-raiser for te broadly campaign left the campaign and a few days later went to work for the romney is super pac. if you think that is illegal, and maybe you do something about it. the way this works is that former post-political associates of the candidates, whether it is mitt romney or president obama, have lefset of the super pacs. in the case of president obama, to former white house staff people left the white house and set of priorities action,. this is happened over and over again. people who are running them are closely tied to the candidates.

in the case said president obama m. it@p romney, they are sending their top aide p to these fund- raising events. they are claiming they're not there to@p solicit unlimited money. the reality of what isúp@púp@p n here is that they are coordinating with expenditures. this is happening all over the world. @pthis is not good. it does not make it right. in the end, the highest priority is to protect the interests of the american people, not the democratic@p party for democratc candidates. people have p the bottom line stake here. they have a right to know who was putting up the money into is spending it to influence their

votes. >> i hope we could have a second round of questions. did they moved up the boavote. there are a lot more questions that i have. i hope we can move this bill to the floor. it is a really important issue. i think my word, i think what has happened is corroding the very essence of our democracy. free speech is not an absolute. it has a disproportionate effect on the election. this corrodes the very roots of our democracy.

i worry about the future of the democracy in terms of accountability. we take the liberty of making a closing statement. we have to move forward. with that, without objection, at the hearing record will be remains open for 10 business days for additional statements and documents. we also request that our witnesses respond in writing to additional questions from committee members. i want to thank my members for participating. i want to thank our witnesses for a very demanding discussion. with that, the meeting is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]