The federal regulatory agencies are supposed to protect the public from such interstate hazards as dangerous drugs, misleading advertising, fraudulent stocks and excessive utility rates. Yet these agencies are themselves in need of overseeing.
Now congressional investigators have discovered that a startling number of officials in the regulatory agencies have financial interests in the companies they are supposed to regulate. At least 94 officials at the Environmental Protection Agency, for instance, own stock in companies that are subject to their rulings. Forty-five officials at the Federal Communications Commission own stock in companies under their jurisdiction. At the Food and Drug Administration, 104 special consultants collect research money from corporations whose products they regulate.
The inquiry into these conflicts of interest has been conducted by Rep. John Moss (D-Calif.), whose oversight and investigation subcommittee will soon issue a report.
In the past, Congress has been far too willing to tolerate financial ties that undermine the credibility of the regulatory agencies. The subcommittee will call for a tightening of federal regulations to eliminate conflicts.
The law against conflicts hasn't worked, investigators believe, because agencies routinely grant waivers to their employees. They often allow an official merely to transfer his stock to his wife's name. The panel will call for a halt to such waivers.
The subcommittee will not name the officials with financial conflicts, but we have learned their identies. Before citing a few typical examples, we should point out that the officials haven't hidden their financial holdings. On the contray, they have received assurances that their stock ownership presents no problem. It's the laxity of the agencies that is disturbing. Consider these cases:
An official in the Environmental Protection Agency's pesticide division, Coleman Hall Jr., owns over $10,000 worth of Exxon, Gulf and Texaco stocks. All three companies produce pesticides that are regulated by Hall's office. Hall said he no longer deals with Exxon products. His other stocks, he said, "are so small they wouldn't influence my judgment."
A former assistant administrator of the same agency, Roger Strelow, inherited over $50,000 worth of stocks in such companies as Union Pacific, Continental Oil and Goodyear. These firms are affected by the air and waste programs that Strelow headed. "I didn't feel I had a problem because the relationship was so indirect," Strelow told us.
Frank Laden is a Federal Communications Commission engineer who reviews applications from AT&T and other phone companies. But when he inherited almost $5,000 in AT&T stock, agency officials told him it was no problem if he put it under his wife's name. "I just went along with it," said Laden, who later sold the stock.
Commissioner James Quello owned $23,000 worth of stocks in Martin Marietta, Pennzoil and Gladding Corporation, all of which are involved in communications equipment. He sold the stocks after the subcommittee uncovered his holdings.
Other Federal Communications Commission officials own stocks in such communications firms as RCA, CBS, AT&T, General Electric and local phone companies. At the Environmental Protection Agency, officials in charge of air pollution own stocks in such companies as General Motors, Gulf Oil and American Airlines.
The investigators found other conflicts with a different twist. At the Food and Drug Administrations, for example, officials work on research grants from companies they regulate.
Dr. Paul Lietman, for one, serves on the panel that decided not to ban an antibiotic made by Eli Lilly Company. Lietman was also the principal researcher for a study financed by the same company. "I have absolutely no allegiance to Lilly at all," Lietman told our associte Howie Kurtz. "They paid my employer. I did not derive a penny from the study."
Dr. J. Weldon Bellville worked on grants to his university from Bristol Labs, Wyeth Labs and A.H. Robins Co. Yet he chaired a Food and Drug committee that discussed specific products made by all three firms. At one point, he handled the summarizing of the data submitted by Bristol-Myers. "I don't see any problem," Bellville told us. "Food and Drug won't get any meaningful input if they try to find consultants that haven't done any work in the area."
Spokesmen for the communications and environmental agencies told us that much tighter restrictions to prevent conflicts are now being drafted. But a Food and Drug, a spokesman insisted that consultants should not be excluded from ruling on products on which they did research. "People who do research on a product are going to be funded by private companies," said the spokesman. "It's a fact of life."
The investigators, nevertheless, suspect that the Food and Drug Administration is merely trying to get around the law. They also believe that the Civil Service Commission has failed in policing such conflicts. The staff is expected to recommend, therefore, that an Office of Government Ethics be established to root out these financial conflicts.
Footnote: It deserves to be said that President Carter has filled most of the regulatory vacancies with public-interest lawyers, professors and consumer activists. They areslowly loosening the corporate grip on these agencies.