1 Entering the Oversight World

ELISE J. BEAN FINANCIAL EXPOSURE

CARL LEVIN'S SENATE INVESTIGATIONS INTO FINANCE AND TAX ABUSE

Financial Exposure

Elise J. Bean Financial Exposure

Carl Levin’s Senate Investigations into Finance and Tax Abuse

Elise J. Bean Levin Center at Wayne Law Wayne State University Law School Detroit, MI, USA

ISBN 978-3-319-94387-9 ISBN 978-3-319-94388-6 (eBook) https://doi.org/10.1007/978-3-319-94388-6

Library of Congress Control Number: 2018947171

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For the brave, hard-working public servants who fight for good government every day

Foreword

Elise Bean has written a richly textured and highly readable chronicle about the power of congressional oversight and how—when done as an objective, bipartisan search for truth—it can enhance public policy and lead to real reforms.

Her story is based on her staff leadership role on the Senate’s Permanent Subcommittee on Investigations for 15 years. She describes with gusto the grinding work of that subcommittee staff—how they dug deeply into events and helped provide grist for the legislative mill.

The book dramatically recounts that the PSI investigations achieved their goals and their legislative impact because PSI’s Democratic and Republican leadership trusted each other to jointly search for the facts wherever the search might lead them, and because those leaders gave clear, unambiguous direction to their staffs to work together as a bipartisan team, from sharing all witness interviews to sharing all documents.

In a heartwarming way, Elise describes how the staffs welcomed that direction and found highly rewarding work in a mutual commitment to discovering the facts as a team, a commitment so different from the many places on Capitol Hill where information is looked at through partisan filters.

The book is also a reassuring reminder of the power of facts, and how facts can be “stubborn things.” Facts have also become increasingly “fragile things,” making Elise’s account, dramatizing how powerful facts can be when honestly pursued and presented, a reassuring tonic for our times.

Congressional oversight, when pursued on a bipartisan basis, has long served as an essential check on the executive branch and on misconduct in the private sector. Elise’s book provides the best insider account I know of showing how oversight is an essential legislative function at the heart of efforts by

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persons of all political persuasions to improve our communities. Her account should give us confidence that fact-driven, in-depth, bipartisan oversight, as so presciently envisioned by the Constitution, can continue to be an effective defender of our national values.

Former U.S. Senator from Michigan, USA Carl Levin

Prologue

This improbable tale defies conventional wisdom about Congress as a gridlocked, inept, and partisan black hole. It is a story about congressional oversight investigations that exposed wrongdoing, built bipartisan trust, and served as an instrument of positive change, despite widespread distemper in Washington.

The part I played was as a congressional investigator, a job that had never crossed my mind when thinking about a career. I lucked into the oversight world with no notion of the challenges and sheer hard work ahead of me. From the beginning, the job gripped me, stretched me, made me both more cynical and more idealistic. It led me to a deep commitment to Congress, as diabolically frustrating and disillusioning as that institution can be.

My journey began when I was hired by Senator Carl Levin from Michigan. I didn’t know it then, but he was the public servant everyone imagines when thinking of how Congress ought to work. He was tough and shrewd, with the integrity, smarts, and stamina to take on any opponent. His signature image was of a disheveled, avuncular everyman, piercing blue eyes peering calmly over half-rim glasses perched on the end of his nose, refusing to avert his eyes from what he saw. His level gaze, Midwestern decency, and willingness to combat wrongdoing even in the face of long odds inspired the oversight adventures narrated here.

The Levin investigative crew was also right out of central casting—fearless, brilliant, and unrelenting. Folks dedicated to public service despite all the jokes about government and Congress, all the frustrations, and all the disrespect. Colleagues willing to confront powerful interests backed by the biggest lobbyists, law firms, and public relations specialists in town, putting in endless

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hours to make up for our small numbers and limited resources. And, like many investigators, we relished the battle.

This book focuses on 15 years, from 1999 to 2014, when Senator Levin served in leadership positions on the U.S. Senate Permanent Subcommittee on Investigations, also known as PSI. PSI has been the premier investigative body in the Senate for decades, with special tools, traditions, and know-how to carry out high-profile investigations. During my time there, I learned how to squeeze the facts out of opponents, overcome dirty tricks, feed the media, take the political heat, and make the case for change.

In addition, because Senator Levin’s favorite investigative topic was financial chicanery, I learned more than I ever wanted to about money laundering, offshore gimmicks, tax dodging, accounting skullduggery, and derivatives double-dealing. Our investigations ranged from wrongdoing that fueled crime, produced billion-dollar losses, or cheated average families, to dishonest practices that led to widescale economic mayhem like the 2008 financial crisis. We followed the money, unraveled the facts, and disclosed troubling practices to policymakers and the public. And we did it while drinking Manhattans with our Republican colleagues.

The Levin years taught me how simply bearing witness to the facts can spark change, how conducting a good-faith investigation can turn a political competitor into an ally, and how congressional oversight can contribute to the common good. It is an education worth sharing.

More than that, it convinced me that constructive congressional oversight lies at the core of our democratic system of checks and balances. At its best, it can stop abuses, expose wrongdoing, and compel reforms. It can build a factual foundation for a shared understanding of a complex problem and lead to consensus on what to do about it. It offers a bipartisan mechanism to cure some of what ails us.

That’s not to say all congressional oversight plays a positive role. Many of the norms driving high-quality oversight have broken down, leading to congressional investigations that are unfair, dishonest, and counterproductive. Rather than bemoan those bad examples, this book focuses on what congressional oversight can be, should be, and, at times, has been.

This book is intended as a resource for all those brave souls who haven’t given up on good government, who believe that fair-minded congressional investigations are possible and valuable, and who want to practice the art of fact-based, nonpartisan, high-quality oversight. It is dedicated to those who, like me, see congressional oversight as a precious heritage that merits more attention, appreciation, and nurturing by our elected officials, policymakers, academics, the American public, and world community.

I would like to thank everyone who assisted in the writing of this book, including Senator Levin; the folks who lived the PSI investigations; the agency personnel, investigative reporters, and public interest advocates who contributed to PSI’s work; and the Senate legal counsel and historian’s offices—everyone who took the time to help inform this history of PSI. I would also like to thank the nonprofit Levin Center at Wayne Law for banging the drum on the importance of congressional oversight and doing the hard work needed to strengthen fact-based, bipartisan, in-depth congressional investigations. More thanks are due to Linda Gustitus, public servant extraordinaire and valued friend, who was a never-ending source of insight and encouragement. Thanks also to Steve Blakely who managed to diplomatically improve my prose. Above all, my gratitude goes to my husband Paul Carver and our sons Jacob and Joey, who put up with me without complaint and made it possible for me to complete this manuscript.

Detroit, MI, USA Elise J. Bean

List of Figures

Image 1.1 December 2014 PSI farewell party. Source: U.S. Senate Image 4.1 PSI team at Enron’s Houston headquarters in 2002. Source: Private photograph used with permission Image 4.2 JPMorgan Slapshot diagram. Source: 2002 Senate Hearing Exhibit 337 3

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Image 5.1 The 2005 IRS award: Bob Roach, Ray Shepherd, IRS Commissioner Mark Everson, Elise Bean and Leland Erickson. Source: IRS 137 Image 5.2 Point Strategy chart. Source: 2006 Senate Hearing Exhibit 6 153 Image 6.1 Tax Haven Bank Secrecy Tricks chart. Source: 2008 Senate Hearing Exhibit 104 177 Image 7.1 2014 Credit Suisse investigation team. Source: U.S. Senate 205 Image 10.1 Three Pinochet passport photos. Source: 2005 Levin-Coleman Report Exhibit 3 303 Image 11.1 EPI Chart—Over half of U.S. corporate profits are in tax haven countries. Source: Americans for Tax Reform & Economic Policy Institute (used with permission) 335 Image 11.2 EPI Chart—U.S. loses over $100 billion a year in revenue. Source: Americans for Tax Reform & Economic Policy Institute (used with permission) 340 Image 11.3 Apple’s Irish subsidiaries as of 2013. Source: 2013 Senate Hearing Exhibit 1b 350 Image 13.1 Amaranth natural gas trading positions in April 2006. Source: 2007 Senate Hearing at 271 417 Image 13.2 JPMorgan’s electrical power plant chart. Source: 2014 Senate Hearing Exhibit 1h 433

1

Entering the Oversight World

“The scope of [Congress’] power of inquiry … is as penetrating and far-reaching as the potential power to enact and appropriate under the Constitution.” Eastland v. U.S. Servicemen’s Fund, 421 U.S. 491, 504, n. 15 (1975)

The date was Friday, December 12, 2014, and it was time to celebrate. We gathered in the stately hearing room that witnessed so many of the hearings held by the U.S. Senate Permanent Subcommittee on Investigations, also known as PSI. Wood-paneled walls, blue carpeting, and massive doors with shiny brass fittings provided the setting. The lofty ceiling, soaring some 15 feet overhead, featured elegant art deco insets with the 12 signs of the zodiac hovering above the expanding crowd.

We’d decorated the perimeter of the room with a dozen poster boards showcasing past PSI investigations—photographs of witnesses, investigators, and Senators; newspaper articles; copies of key exhibits and colorful hearing charts. As folks trickled in, they surveyed the images, chuckled, and reminisced. Some grabbed our semi-official PSI cocktail—Manhattans made from whiskey and vermouth—sipping as they circulated the room.

The unfolding gala was a celebration of the Levin era on PSI. For 15 years stretching back to 1999, Senator Carl Levin had held the Democratic leadership post on the subcommittee. In January 2015, he was retiring.

During his tenure, he’d worked with four PSI Republican partners: Senator Susan Collins from Maine; Senator Norm Coleman from Minnesota; Senator Tom Coburn from Oklahoma; and Senator John McCain from Arizona.

Invitations had been sent to staff at all four Senate offices, along with the Levin crew. The result was that rarest of Washington scenes: a truly bipartisan assembly of friends and colleagues.

Those joining the celebration were past and present denizens of PSI—folks who’d been on the payroll as legal counsel or investigators, and those who’d provided unpaid help including law students, college interns, and agency personnel who’d worked for PSI on a temporary basis. Invitations also went to a kaleidoscope of House and Senate offices on both sides of the aisle. The wellwishers included a few academics, lawyers, and investigative reporters who’d been invited or heard about the party and snuck in. All around the room, as the numbers swelled, din deepened, and air warmed, folks grinned, greeted old friends, and shook hands with PSI alumni.

When the crowd reached its peak, we clinked glasses for attention and let loose a flood of stories from the Democratic and Republican staff directors who’d served on PSI during the Levin years. Taking turns, we recalled investigative highlights from hard-hitting inquiries into money laundering, abusive tax shelters, the financial crisis, secret offshore bank accounts, credit card misconduct, and corporate misdeeds.

Together, over the years, PSI had faced down corrupt bankers, arrogant executives, and sleazy lawyers. We’d confronted tax dodgers of all stripes, from billionaires to multinationals. We’d interviewed crooks in prison, North Korean representatives, and tax haven operatives. We’d protected whistleblowers, championed victims, and defended honest government employees battling abuses. We’d stood up to dirty tricks, assaults on PSI’s bipartisanship, and attacks on our bosses.

Investigators are generally a cynical bunch, but as each story of PSI’s past exploits was recounted, the emotion in the room cranked up a notch. Everyone present knew that during the Levin years, unlike so much that disappointed in Congress and in Washington, PSI had functioned the way government should—it had conducted its inquiries on a bipartisan basis, pursued the facts honestly, and treated its targets fairly. At the same time, it had exposed monumental wrongdoing, named names, and won reforms. Pride in PSI’s legacy ricocheted around the room with centrifugal force.

At the crescendo of that good feeling, we turned the spotlight on a surprised colleague, Mary Robertson, who’d served as the PSI clerk for 39 years and was retiring along with Senator Levin. Mary had been a hurricane of work, our institutional memory, and a stern guardian of PSI’s bipartisan traditions. When we honored her as the “heart and soul” of PSI, the crowd roared its approval (Image 1.1).

Image 1.1 December 2014 PSI farewell party. Source: U.S. Senate

As the party slowly wound down, bidding farewell to the investigative community we’d built was bittersweet. Fifteen years of all-out effort had produced complex relationships tinged with affection, tough times, jokes, disagreements, successes, and respect. I savored every moment, reminiscing with participants from every period of PSI’s past. I couldn’t help but think back on how the journey to that point had begun.

I first joined the Levin team in 1985, leaving behind a job working for the U.S. Department of Justice as a trial attorney in the civil fraud division. I’d been looking for a post on Capitol Hill for months, and Senator Levin was exactly the type of lawmaker I wanted to work for, an up-and-coming legislator admired in Democratic circles as smart, active, and diligent.

Senator Levin was first elected to the Senate in 1978. Then head of the Detroit City Council, he’d entered the Senate race as a long-shot underdog, but unexpectedly defeated the incumbent, Senator Robert P. Griffin, a member of the Republican leadership. In 1984, Senator Levin won re-election to a second term, defeating another attractive Republican candidate, astronaut Jack Lousma, by a vote margin of 51.8%. It was close, but a win was a win, and it gave him six more years in office.

I was so nervous during my job interview with him that the only thing I remember is twice mentioning I’d attended the University of Michigan Law School, my lone tie to his home state. After the second time, Senator Levin gazed mildly at me over his half-rim glasses and said, “University of Michigan—I got it.” I turned bright red. But at the end of the interview, he offered me the job, and I heard a heavenly choir singing hallelujah in my head as I accepted.

Shaping American Politics

I was hired to be a Levin investigator on the Subcommittee on Oversight of Government Management. At the time, I wasn’t altogether sure what I’d signed up for. To get a better sense of what it meant, I did some research into past landmark congressional investigations. It was like reviewing a pageant of American history.

I learned that the Pujo Committee hearings of 1912 and 1913—named after Congressman Arsene Pujo of Louisiana who led them—exposed how a handful of major Wall Street banks had acquired control over vast commercial enterprises including railroads, oil companies, insurance firms, and shipping and mining ventures.1 The hearings showed how the banks had acquired company shares in so-called money trusts and engaged in stock trades that contributed to chaotic stock prices and financial panics. The hearings set the stage for later enactment of stronger antitrust laws and new constraints on banks.

The Pecora hearings during the 1930s—named after Senate Banking chief counsel Ferdinand Pecora who led the questioning—exposed the role banks played in the 1929 stock crash. They showed how the banks had packaged and sold worthless securities, favored the wealthy and powerful with stock deals unavailable to the general public, and took control of major corporations, at the same time many wealthy bankers were paying no tax.2 The hearings led to a slew of new laws that, among other measures, regulated U.S. stock sales and stock exchanges.

In the 1950s, hearings led by Senator Joe McCarthy fanned the flames of the “Red Scare,” the fear that Communists had secretly infiltrated the U.S. government. Together with other anti-Communist hearings, his efforts helped shape U.S. foreign policy, the U.S. military’s approach to the Cold War, Hollywood, and more. The McCarthy hearings were conducted in such an unfair manner, however, that they eventually triggered a backlash not only against the senator, but against congressional oversight in general. I would learn more about that later.

In the 1970s, the Watergate hearings burst onto the national scene, exposing White House dirty tricks, including break-ins into the offices of political opponents and secret campaign contributions.3 A few years later, the Church Committee—named after Senator Frank Church who led the inquiry—shook the nation again by exposing even dirtier tricks at the Central Intelligence Agency, including plans to assassinate world leaders and covert operations that subjected unsuspecting U.S. military personnel and other Americans to mind-altering drugs.4

Each of those congressional oversight investigations left marks on the American psyche, demonstrating the power Congress had to expose abuses, shake up the nation, and change how the United States operated. That was the world I was about to enter. I couldn’t wait.

Joining the Levin Oversight Team

I reported for my first day of work in November 1985, climbing the stairs to the fourth floor of the Hart Senate Office Building. My immediate supervisor was Linda Gustitus, Senator Levin’s subcommittee staff director and chief counsel. She welcomed me and provided a quick history of the subcommittee which had been designed especially for Senator Levin. She explained that when he was first elected in 1978, Democrats were the majority party in the Senate, and Senator Abe Ribicoff of Connecticut was chairman of the Governmental Affairs Committee. To attract Senator Levin to his committee, Senator Ribicoff offered to create a small subcommittee with a jurisdictional mandate to his liking. Senator Levin requested one that could investigate waste, fraud, abuse, and mismanagement affecting the federal government, and the Subcommittee on Oversight of Government Management—the OGM Subcommittee—was born.

Senator Levin hired the staff for the new subcommittee. In many Senate committees, the full committee chair controls hiring decisions on both the full committee and subcommittee levels. But the Governmental Affairs Committee was different. By tradition, the full committee chair hired the full committee staff, but gave each subcommittee chair the authority to hire and fire their own staff. I was to learn that hiring staff represented real power in the Senate, because it enabled the hiring senator to get things done.

I also learned what a big impact every election had on the composition, staffing, and funding of congressional committees. The Senate and House each supported about two dozen committees, most of which had multiple subcommittees. Each committee and subcommittee operated under dual leadership provided by the two major political parties, the Democrats and Republicans. The few members of Congress who were independent from both parties still caucused with one side or the other for purposes of committee assignments, thereby helping determine which qualified as the majority party.

The majority party—meaning the party whose elected members comprised at least 50% of the House or Senate—controlled selection of the committee chairs, while the minority party selected the “ranking minority members.” The chairs generally controlled the committee agenda, while the ranking members led the minority party’s activities on each body.

The partisan divide in Congress not only determined who set the agenda, but also committee membership numbers and budgets. In the Senate, the number of senators assigned to each committee and subcommittee reflected the numerical split between the two parties in the full Senate. In other words, if the Senate was made up of 60 Republicans and 40 Democrats, each committee and subcommittee had a 60–40 split in its membership, with Republican senators outnumbering their counterparts. In addition, during the 1970s and 1980s, the majority party in the Senate typically controlled two-thirds of the committee budget, while the minority party controlled only one-third, a funding difference of two-to-one.

When I was hired, the Democrats were the minority party, but Senator Levin still had the budget to hire a tiny staff. His OGM employees numbered three, of whom I was the third. Linda was our fearless leader, and my co-worker was Allie Giles, a young woman who’d worked on the senator’s personal staff. All three of us were tucked into a small suite of rooms across the hall from our Republican counterparts, who occupied a slightly larger space with slightly more staff.

The Republican offices also housed the OGM Subcommittee “clerk,” Frankie de Vergie, who handled administrative duties like the budget, office equipment, travel arrangements, and archiving as well as hearings and hearing records. I learned that virtually all Senate committees and subcommittees shared administrative staff between the two parties, each paying half their salaries to provide nonpartisan assistance. OGM’s star clerk was a cheerful workaholic who taught me critical lessons about how the Senate operated.

During my OGM years, the majority party in the Senate flipped twice, in 1987 and 1995, with dramatic consequences for our budget and operations. In 1987, when the Democrats regained majority status in the Senate, the Levin OGM budget doubled, and our staff swelled to ten employees. In 1995, when the Democrats lost majority status, the Levin OGM budget was cut in half and our staff shrank to just two—Linda and me. The erratic size of our budget and staff exacted a human and political toll that I’d been oblivious to when, before law school, I’d worked for a Democratic House member, Congressman Joe Moakley from Massachusetts.

In later years, when the split between Republican and Democratic senators began hovering around the 50% mark, the parties gradually abandoned the one-third/two-thirds budget division as an unfair reflection of political reality. Instead, the budget allocation began to reflect more closely the numerical difference between the parties. If the Senate had a 52–48 split between the parties, it led to a 52–48% split in committee funds. It took years, however, before that sensible approach took hold in the Senate. In the House, the twoto-one budget split between the parties still reins.

Learning from Linda

In the meantime, I was just happy to have a job on Capitol Hill, even in the minority. I was ready to learn the basics of congressional oversight—how to investigate, organize a hearing, and use investigative results to fight for change.

Linda took me under her wing and taught me what to do, step by step. She sent me on errands all over Capitol Hill, so I would learn the Capitol’s byzantine architecture. She had me get charts from the Service Department, bills from the bill clerk, and advice from the Senate Parliamentarian. She sent me to the office of the Official Reporters of Debates to review Senator Levin’s floor remarks, and to the Senate recording studio to watch him do radio shows. She had me prepare hearing exhibits, floor statements, and press releases. She took me to endless meetings with Senator Levin so I could see how he operated and what he wanted from staff.

Linda also gave me a frightening amount of responsibility to conduct investigations, essentially assigning me a topic, allowing me to develop an investigative plan, and then monitoring the actions I took to gather information and develop findings. Throughout the process, she provided investigative guidance and encouragement, seesawing between giving me room to develop and saving me from my missteps. Linda showed me how to write a memo to the boss, how to request documents and prepare for an interview, and how to stand up to agency intransigence. She explained the intricacies of drafting legislation, the etiquette involved with going on the Senate floor, and the unspoken rules for negotiating with the House. She steeped me in Senate procedure, practice, and tradition. And she did it with humor and patience.

Another stroke of fortune: I found myself on a committee with a strong bipartisan tradition. Republicans and Democrats on the Governmental Affairs Committee routinely worked together. Essentially, everyone was against government waste, fraud, and abuse, so it was relatively easy for senators to find common ground to combat problems and design reforms.

On the OGM Subcommittee, Senator Levin’s Republican counterpart was Senator Bill Cohen from Maine, a smart, elegant, and hard-working senator eager to tackle government mismanagement. They collaborated on a wide range of issues, including requiring more government contracts to undergo competitive bidding, combating unfair Social Security disability terminations, requiring lobbyists to disclose more information about their work, and improving federal regulations by increasing the use of negotiated rulemaking.5

The senators, who traded the chair and ranking minority posts twice, were unfailingly courteous with each other. They designed their hearings jointly and often co-sponsored each other’s legislation. If the senator chairing a

hearing had to leave for a vote, he routinely gave the gavel to the ranking minority member until his return. The minority member was routinely allowed to initiate his own investigations and hold a hearing on the results. Once a year, he could also hold a field hearing in his home state.

On a staff level, Linda’s counterpart was Susan Collins, who was then Senator Cohen’s subcommittee staff director. Susan had the trust and respect of her boss and was hard-working, courteous, and fair to the Democrats. Later, Susan returned to Maine and, after Senator Cohen retired in 1997, won election as a senator in her own right. She ended up working with Senator Levin on the PSI and, a few years after that, chairing the full Governmental Affairs Committee. But that was unsuspected territory during our OGM years.

Learning Oversight

In the meantime, Linda threw me into oversight. My assignments included investigating subcontractor kickbacks in the U.S. defense industry; pollution and oil spills affecting the Great Lakes; unsafe laboratory practices in U.S. chemical and biological warfare research projects; mismanagement of federal programs designed to protect U.S. business from unfair foreign trading; and safety and environmental problems plaguing oil tankers carrying fuel worldwide for the Department of Defense. Each investigation took six months to a year to complete. Most resulted in a hearing and report.6

Due to limited funding and staff resources, I did much of the work on my own, under Linda’s watchful eye. I sometimes had help from a college intern or law clerk, but they typically returned to school after a semester. Sometimes we had on staff a federal agency employee—called a “detailee”—who was paid by their agency to work for Congress for a year to gain Hill experience. While they provided tremendous assistance, detailees typically had never worked for Congress or conducted an investigation. Which meant I had to supervise their work, a delicate task since most were older and more experienced than me. Linda helped me figure it out.

Each of the investigations I worked on uncovered complex legal and administrative issues, surprising fact patterns, and problems needing resolution. Each riveted my attention with stories of abuse, dysfunctional programs, incompetence, mismanagement, and sometimes a brave whistleblower fighting internally to improve government operations. While we found problems everywhere, we also identified ways to clamp down on abuses and improve government programs. And we found many hard-working, good-hearted government employees willing to make changes to their operations or programs, a lift that kept me going.

Learning the Law and the Rules

During my 11 years on the OGM Subcommittee, I became seeped in the law, rules, and practices governing congressional oversight investigations. I learned there were some clear rules about what was allowed and what wasn’t, and those rules had a real impact on the investigative work, though their contours and significance took years to really sink in.

I learned, first, that Congress’ authority to investigate was rooted in the Constitution. Article One created Congress. My Capitol Hill friends liked to point out that the Constitution set up Congress before the president and executive branch (Article Two) and the judiciary (Article Three), showing who was top dog in the minds of the Framers.

Article One bestowed a long list of “powers” on Congress, including the power to legislate, raise revenue, and provide for the country’s common defense and general welfare. At the end of that list, Section Eight of Article One stated that Congress had the power to “make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States.”

The Supreme Court invoked that “Necessary and Proper” clause when it held that the Constitution authorized Congress to conduct oversight investigations, even though the power to investigate was never spelled out explicitly in the text. The key Supreme Court case was McGrain v. Daugherty, which arose out of the Teapot Dome scandal of the 1920s.7 The scandal involved oil leases on federal land sold to businessmen who’d provided financial benefits to the Secretary of the Interior Albert Fall. The scandal acquired its name from a Wyoming oil reserve that featured a rock formation shaped like a teapot.

As part of an extended investigation into the scandal, the U.S. Senate formed a select committee to investigate the failure of the Justice Department, under Attorney General Harry Daugherty, to prosecute the wrongdoing. The select committee issued a subpoena to the attorney general’s brother, Ohio banker Mally Daugherty, for oral testimony. When the brother refused to comply, the Senate Sergeant at Arms took him into custody. He sued, challenging the Senate’s authority to investigate, issue subpoenas, and punish noncompliance with imprisonment.

His legal challenge went all the way to the Supreme Court which, in an 8–0 decision, upheld Congress’ right both to investigate and enforce its subpoenas. The Supreme Court found that “the power of inquiry—with process to enforce it—is an essential and appropriate auxiliary to the legislative function.” In upholding the Senate’s right to compel testimony, the Court wrote: