Mr. ERTEL. Thank you, Mr. Chairman. I have no questions of this witness at this point.

Mr. KASTENMEIER. The gentleman from Illinois?

Mr. RAILSBACK. I think I would like to hear your questions.

Mr. KASTENMEIER. As to mail covers, you have very little comment on title II obviously.

First of all, I should ask you, Mr. Davis, may we assume that your testimony reflects the position of all the constituent agencies of the Treasury Department, including IRS and the Alcohol, Tobacco, and Firearms Division?

Mr. Davis. Yes; it represents the testimony of the Treasury Department and all its constituent agencies.

Mr. KASTENMEIER. Do these constituent parts of the Treasury Department or the Treasury Department itself use mail covers for purposes of investigation?

Mr. DAVIS. There is some use of mail covers. Now I do not have a number but in each of the instances the bureaus instruct their agents about the current Postal Service regulations and require, obviously, strict adherence to those.

Mr. KASTENMEIER. The reason I ask is, while the Postal Service will, of course, address itself to this, the Treasury Department may be in a different position. Indeed, the Justice Department may be in yet another position. The Postal Service not only for its own purposes uses mail covers, but surely it has to administer mail covers, so it has special responsibilities. You don't have that. You would be a user of the tactic, presumably, and would have possibly a different point of view from the Postal Service.

Mr. DAVIS. We only would have the one responsibility and that is why generally we feel that we can work with the current postal regulations from a user point of view. We do not have an objection to the proposals contained in H.R. 214, but as a general matter, since the postal authorities are the ones that have the ultimate responsibility for assuring that any system is properly implemented, we would generally defer to them on the details of that issue.

Mr. KASTENMEIER. Do you believe H.R. 214, as amended by your proposed suggestions would be a preferable means of handling the privacy if third-party-held records to the present privacy provisions of the Tax Reform Act of 1976 on a comparative basis?

Mr. DAVIS. Here I am going to draw a little bit of a distinction between IRS and the rest of Treasury. IRS right now is doing its own study of the comparison because they are just concerned over the fact of having just switched to the Tax Reform Act, whether it is desirable to now switch to a new system if this bill or a similar bill is enacted. Generally, however, Treasury believes that this is a better system and we all believe, including the IRS, that an important improvement in this system is the fact that it places some initial responsibility and we don't feel it is a very heavy burden but some initial responsibility on the individual citizen to go forward and file a relatively simple form of affidavit. We believe and hope in that way that the casual objector-the one who because he gets a letter that says if you object, something won't happen, without thinking about it really just says, "I object" -can be avoided.

We are not sure that any system avoids the planned, frivolous objection. By that I mean if somebody really, with the design of delaying an investigation, wants to do everything that person canand that happens in some criminal investigations-probably they could file the motion just simply. But, we think that our proposal would reduce substantially nonmeritorious objections, and particularly for that casual objector. So we think that is an important difference.

We think generally also that the time limits, and the way this treats the appeal issue are also desirable. Our proposed preserves appellate rights until after the investigation is completed, and if the investigation produces a lawsuit, a criminal indictment or a trial, enabling the person to include any appellate rights that accrue at this early stage and appeal from any final report judgment. If there is not lawsuit filed, we provide for a later time to appeal. These are also important improvements over the Tax Reform Act in terms of preventing possible delay.

So I think over all the Treasury Department believes that this is a better approach than the Tax Reform Act.

The IRS, because it has just gotten its people used to one system, is now studying what it really feels about whether it really wants to make a switch to another system.

As you know, the bill reported out by the Banking Committee would authorize continued use of 7609, the Tax Reform Act.

Mr. KASTENMEIER. In view of the fact that that is the second bell and an important vote, we will have to recess the committee for 10 minutes, Mr. Davis. I regret having to do that. We will reconvene in 10 minutes.

Accordingly, the subcommittee stands in recess.

[Brief recess.]

Mr. KASTENMEIER. The committee will come to order.

Mr. Davis, to open another subject, why do you feel a special exemption is needed for the Secret Service in their efforts to protect Presidents?

Mr. DAVIS. I think that there are two reasons: One is why delay is required and, two, why no notice is required. One, upon receipt of information as to a possible threat or upon investigation of some incident or person who may be a threat to the President or one of the other protectees of the Secret Service, which also covers visiting heads of state among others, generally, great speed is necessary. Geat speed is necessary because information is often of a very general nature, and it is important to act quickly.

Secondly-and, I think, in a way more importantly-it is, I believe, an unfortunate reality that in many of the situations those involved in threats on the President are those with a history of mental illness. Now, I don't mean to suggest because somebody has a history of mental illness, they are a danger to the President; I mean that if you look at the class of people who have made threats, there is a high percentage in that category.

In that situation we are concerned about providing notice at all because of the uncertainty of the reaction to finding out of Secret Service interest in a particular individual. In some situations, that may be a deterrence to action; in other situations, that may be a stimulus to some sort of action and, unfortunately, sometimes it is very difficult to have any great predictability in that.

Mr. KASTENMEIER. You are referring to notice after the fact?

Mr. Davis. That is correct. People do things for a variety of reasons. As I say, sometimes you are talking about a situation where becoming aware of Secret Service interest can stimulate interest in the particular individual in acting or thinking of acting or making additional threats. It becomes a very complicated problem.

We think that we should, within the Service and from the Treasury Department, Department to Service, monitor very carefully the standards and the criteria and the methods by which any of these investigations are conducted; and we on a regular basis meet to discuss these. I think that in that particular situation this is sufficient. And we believe for the reasons of speed and the other reasons I have just articulated, that the exemption for the Secret Service in connection with its protective responsibilities only is necessary.

Mr. KASTENMEIER. Have you independently concluded what types of records ought to be included or covered by the protections of title I; that is to say, credit records, telephone toll records, bank records, medical records?

Mr. DAVIS. We have concluded that the bank and financial records of that type should mainly be covered. As to toll records, we endorse or join in Mr. Heymann's caution, which largely was premised onMr. KASTENMEIER. Why would you be cautious about telephone toll records?

Mr. DAVIS. I think the caution had a little bit of "let us wait and see how the system works before we put a lot more into it." When I say caution, that was the kind of caution. I think there is a distinction in terms of telephone toll records and financial records. When you look at a checking account, you look at the actual transactions, particularly if you look at underlying documents. That can give you much more substantive knowledge about a person's habits than if you look at a toll record. A toll record gives you some. I don't mean to suggest that there is not a privacy interest there. I am just saying in the spectrum, looking at the toll record gives you information that a particular number was called. That it seems to me lesser than looking at the bank records. the underlying transaction records in a bank account at the same time.

Therefore, we think that bank records plainly, yes; and as to the credit card records, in the bill originally suggested by the Treasury Department and the Justice Department, we urged there not be credit card records included, largely because we were concerned not so much about American Express but a definitional problem that could come up with every department store that runs a credit card system; but we are really not-I don't know how to phrase this not very seriously opposed to the way that turned out in the Banking Committee; and on the telephone records would endorse the Justice Department's view. In terms of other records, as a general matter we think it is true that as you expand the number of records, depending on what you are including, you are expanding the potential impact on the system itself. More records and more agencies becoming involved would contribute to larger numbers of cases which in itself could be a problem. We think there we should look at it on a record-by-record basis.

Plainly, medical records are an area where there is a very strong privacy interest, but I think in terms of the Treasury Department's position we have to come to a position as to exactly how we would want to handle that. Plainly there should be some protection, but in terms of an official position as to whether we think we need any particular relief or exception, we have not come to that view yet.

Mr. KASTENMEIER. Mr. Davis, as one who would proceed with caution, it would seem just the reverse, that you would opt for subjecting medical records and telephone toll records to some sort of title I coverage but wait a bit on credit and bank, since that would impact to use your word-on your activities far more than telephone toll or medical.

Basically, you don't often seek those other records, but very often you do seek bank records, and to a lesser extent credit records. Isn't that true?

Mr. DAVIS. I think that is correct.

In think bank records are the type of records which has the largest use, and from the perspective of the testing phase, I think that you are

correct.

On the other hand, because it is a large use, there is also a greater or very strong demand that there be some protection. Because bank records are very frequently gone to by investigative agencies, so there has been a feeling that there should be some protection. We, in looking at the proposed legislation which focused largely on credit and bank records, were prepared to come up with a solution to that real problem. I think what I am saying is, in terms of other records we probably would look at them on a record-by-record basis.

We support the Justice Department's position as far as other types of records. We do not have an official position yet.

Mr. KASTENMEIER. One last question: It relates to the exception you request for disclosure of records obtained by the Office of Foreign Assets Control.

What sort of situation were you talking about on page 7 of your statement?

Mr. DAVIS. There are two provisions linked to foreign assets control that we are interested in. One relates to a variation on the courtorder notice. We are not talking about a situation in that particular case where they do not have to go to court. We are talking about where they go to court and obtain a delay, that there should be a recognition that in some circumstances that delay should be indefinite.

The circumstance we are thinking about is where the owner of an account is a foreign national, which is very often the case, because what you are talking about is blocked accounts in this country.

Now it may well be it is a blocked account owned by a Cambodian, or a Vietnamese, or some other national. In that situation it would be very difficult for some period of time to provide notice to that person without really providing notice to that government. And we are concerned about retribution against that individual because that may be an account that government doesn't know about. So we are talking about a situation where foreign assets control can make that showing to the court, that in that circumstance there should be an opportunity for indefinite notice.

Mr. KASTENMEIER. Aside from that sort of situation, would you agree, if you are familiar with the administration's foreign intelligence surveillance bill and its broad privacy protection, not only citizens but also resident aliens and even foreign visitors, would you say that by analogy that these protections ought to reach a similar group of people?

Mr. Davis. While I am familiar with the Foreign Intelligence Act, I am not prepared in all its aspects. In terms of whether the provision of H.R. 214 or the Justice-Treasury proposal should reach noncitizens, I think that we begin with the premise that we feel most strongly about citizens and then resident aliens. But at least insofar as people who are in this country, so that there is an opportunity to meaningfully comply with notice provisions of the act, so the system can work, so you can really provide notice, I do not see an objection to including them. By doing so you have the advantage of getting as much uniformity in application of the system as possible, which is a desirable goal.

Mr. KASTENMEIER. I want to thank you on behalf of the committee, Mr. Davis, for your testimony today, and your help with the legislation before us.

Perhaps we will have further occasion to be in touch with you in reference to it. Thank you, sir.

Mr. DAVIS. We would be happy to work with the committee on this and any other matters.

Thank you very much, Mr. Chairman.

Mr. KASTENMEIER. Next, the Chair would like to call Assistant Chief Postal Inspector, the Honorable Paul G. Coe.

Mr. Coe, welcome.

Mr. Coe, you have a rather brief statement, actually.

TESTIMONY OF PAUL G. COE, ASSISTANT CHIEF POSTAL INSPECTOR FOR CRIMINAL INVESTIGATIONS, U.S. POSTAL SERVICE, ACCOMPANIED BY CHARLES R. BRAUN, ASSISTANT GENERAL COUNSEL, SPECIAL PROJECTS DIVISION, LAW DEPARTMENT, USPS

Mr. COE. Yes, sir. I would like to read it for the record.

Mr. KASTENMEIER. There is no reason why you shouldn't proceed from it.

Mr. COE. Thank you.

Mr. Chairman and members, I am Paul G. Coe, Assistant Chief Postal Inspector, Criminal Investigations. Accompanying me is Mr. Charles R. Braun, Assistant General Counsel, Special Projects Division, Law Department.

It is a pleasure for me to meet with you today to discuss H.R. 214, the proposed Bill of Rights Procedures Act of 1977.

The interest of the Postal Service in this legislation centers on title II of the bill which would enact certain guidelines for the use of mail covers. Title II would enact a statutory definition of the term "mail cover" and specify the authorities who may authorize the use of this investigative technique. It would establish criteria for judging whether grounds for the use of a mail cover exist; it would limit the time for which a mail cover may be conducted and it would establish remedies for the improper initiation of a mail cover.