U.S. Congress
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House Democrats Seek Immediate Termination of DOGE's Unauthorized Use of AI Systems, Call Out Security Risks and Potential Criminal Liability
WASHINGTON, April 19 -- Rep. Don Beyer, D-Virginia, issued the following news release:
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House Democrats Seek Immediate Termination of DOGE's Unauthorized Use of AI Systems, Call Out Security Risks and Potential Criminal Liability
U.S. Representatives Don Beyer (D-VA), Mike Levin (D-CA), and Melanie Stansbury (D-NM) were joined by 45 additional Members of Congress including Ranking Member of the House Science, Space, and Technology Committee Zoe Lofgren (D-CA) and Ranking Member of the Oversight and Government Reform Committee Gerry Connolly (D-VA) to call for the immediate termination of ... Show Full Article WASHINGTON, April 19 -- Rep. Don Beyer, D-Virginia, issued the following news release: * * * House Democrats Seek Immediate Termination of DOGE's Unauthorized Use of AI Systems, Call Out Security Risks and Potential Criminal Liability U.S. Representatives Don Beyer (D-VA), Mike Levin (D-CA), and Melanie Stansbury (D-NM) were joined by 45 additional Members of Congress including Ranking Member of the House Science, Space, and Technology Committee Zoe Lofgren (D-CA) and Ranking Member of the Oversight and Government Reform Committee Gerry Connolly (D-VA) to call for the immediate termination ofthe "Department of Government Efficiency's" (DOGE) use of unauthorized AI systems, emphasizing the significant security risks posed and potential criminal liability involved. The lawmakers also expressed deep concerns with lack of oversight over AI usage, sharing of non-public or sensitive data, and with Elon Musk's conflicts of interest as a federal contractor and founder and owner of xAI.
The lawmakers wrote:
"We write to express concern about the use of artificial intelligence (AI) systems within this Administration's "Department of Government Efficiency" (DOGE), without standards or regard for sensitive data. We understand AI's potential for modernization and efficiency improvements within the federal government, and support implementation of AI technologies in a manner that complies with existing data security and software development, acquisition, and usage laws, and that provides proper transparency, vetting, and oversight over the use of such AI technologies. We are specifically concerned about reports of Elon Musk and DOGE's monitoring and sharing of federal employee and non-public federal data using AI tools, and reports of intentions to use sensitive data to train private AI models. These present serious security risks, self-dealing, and potential criminal liability if not handled correctly, and have the potential to undermine successful and appropriate AI adoption.
" In addition, DOGE's reported use of AI technologies on sensitive information raises significant concerns about data security. Musk's DOGE team at the Office of Personnel Management reportedly used AI systems to analyze emails from a large portion of the two million person Federal workforce describing their previous week's accomplishments--without model transparency and without addressing major concerns about security or conflicts of interest. Alarmingly, sensitive data from across the Department of Education was also reportedly fed into an AI system, including data with personally identifiable information for people who manage grants, as well as sensitive internal financial data. Without proper protections, feeding sensitive data into an AI system puts it into the possession of a system's operator--a massive breach of public and employee trust and an increase in cybersecurity risks surrounding that data. Generative AI models also frequently make errors and show significant biases--the technology simply is not ready for use in high-risk decision-making without proper vetting, transparency, oversight, and guardrails in place.
"Sharing of such data would constitute a major data privacy and data security risk. Specifically, we are concerned that sharing such data outside of federal systems or lawfully vetted contracts may run in violation of laws such as the Privacy Act of 1974, the E-Government Act of 2002, and the Federal Information Security Modernization Act of 2014. These laws set requirements for the federal government's collection and use of personal information and sensitive data-- including through establishing limits on agency information sharing, and requirements for data minimization, disclosure limitations, cybersecurity, transparency, and privacy impact assessments for developing or procuring information technology. In addition, the federal government is legally obligated to comply with codified requirements for vetting software and cloud products and services across the federal government, through programs such as the Federal Risk and Authorization Management Program (FedRAMP).
"It is clear that DOGE's use of AI clearly does not meet the standards the previous memoranda set. Worse, existing AI systems like CamoGPT have been used in the misguided purging of federal materials from references to achievements of Americans of color and women, including the Navajo Code Talkers and the Tuskegee Airmen. It is not clear how the use of CamoGPT meets the Congressional authorization for AI usage provided in the 2021 National Defense Authorization Act, but it is alarming that the result of such usage by this Administration was referred to as an error--raising questions about the appropriateness of and lack of sufficient oversight of its use.
"While we support the federal government integrating new, approved AI technologies that can improve efficiency or efficacy, we cannot sacrifice security, privacy, and appropriate use standards when interacting with federal data. We also cannot condone use of AI systems, often known for hallucinations and bias, in decisions regarding termination of federal employment or federal funding without sufficient transparency and oversight of those models--the risk of losing talent and critical research because of flawed technology or flawed uses of such technology is simply too high. We ask that you immediately terminate any use of AI systems that have not been approved by FedRAMP or equivalent formal approval procedures or that do not comply with existing laws. In addition, we ask that you do not use any AI system to make employment termination decisions relating to civil servants."
Full text of the letter follows below, and a signed copy is available here.
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Dear Director Vought:
We write to express concern about the use of artificial intelligence (AI) systems within this Administration's "Department of Government Efficiency" (DOGE), without standards or regard for sensitive data. We understand AI's potential for modernization and efficiency improvements within the federal government, and support implementation of AI technologies in a manner that complies with existing data security and software development, acquisition, and usage laws, and that provides proper transparency, vetting, and oversight over the use of such AI technologies. We are specifically concerned about reports of Elon Musk and DOGE's monitoring and sharing of federal employee and non-public federal data using AI tools, and reports of intentions to use sensitive data to train private AI models. These present serious security risks, self-dealing, and potential criminal liability if not handled correctly, and have the potential to undermine successful and appropriate AI adoption.
A DOGE staffer who is also currently employed at SpaceX reportedly created an "AI assistant" for DOGE staff, powered by Musk's xAI Grok-2 model--this model was hosted on a subdomain of the staffer's external website, raising both security concerns and conflict of interest issues. In addition to privacy and security concerns, Musk stands to profit from access to government data or contracting opportunities that are not available to competitors or the public. Increased access to sensitive government data would set his AI models at an unfair competitive advantage over other AI service providers--the conflicts of interest become exponentially worse if Musk pursues further contracts to become a major provider of government AI services.
Further, DOGE reportedly used a chatbot named "GSAi" based on Anthropic and Meta models with the stated intent of analyzing contract and procurement data via a centralized system consolidated under GSA, which would pose similar security and conflict of interest problems. Giving Musk's teams access to sensitive government data on other contracts across the federal government is especially problematic when considering Musk's business interests with SpaceX --already a major government contractor--as well as with SpaceX subsidiary Starlink, Tesla, and elsewhere.
In addition, DOGE's reported use of AI technologies on sensitive information raises significant concerns about data security. Musk's DOGE team at the Office of Personnel Management reportedly used AI systems to analyze emails from a large portion of the two million person Federal workforce describing their previous week's accomplishments--without model transparency and without addressing major concerns about security or conflicts of interest. Alarmingly, sensitive data from across the Department of Education was also reportedly fed into an AI system, including data with personally identifiable information for people who manage grants, as well as sensitive internal financial data. Without proper protections, feeding sensitive data into an AI system puts it into the possession of a system's operator--a massive breach of public and employee trust and an increase in cybersecurity risks surrounding that data. Generative AI models also frequently make errors and show significant biases--the technology simply is not ready for use in high-risk decision-making without proper vetting, transparency, oversight, and guardrails in place.
Sharing of such data would constitute a major data privacy and data security risk. Specifically, we are concerned that sharing such data outside of federal systems or lawfully vetted contracts may run in violation of laws such as the Privacy Act of 1974, the E-Government Act of 2002, and the Federal Information Security Modernization Act of 2014. These laws set requirements for the federal government's collection and use of personal information and sensitive data-- including through establishing limits on agency information sharing, and requirements for data minimization, disclosure limitations, cybersecurity, transparency, and privacy impact assessments for developing or procuring information technology. In addition, the federal government is legally obligated to comply with codified requirements for vetting software and cloud products and services across the federal government, through programs such as the Federal Risk and Authorization Management Program (FedRAMP).
In 2023, OMB established memoranda to help implement requirements to vet and approve AI technologies for federal use, such as OMB memoranda M-24-10 and M-24-18, which directed federal agencies to use AI only after developing tests and guidelines to ensure that its use would not compromise privacy and cybersecurity. These memoranda recognized the sensitive nature of the information the federal government handles every day and the significant privacy risks of using unvetted AI technologies on such information--including the risk of sharing personally identifiable or otherwise sensitive information with the AI model deployers. While these memoranda were recently revised through OMB's M-25-21 and M-25-22, the new memoranda retain some provisions on data security and data privacy, including calls against using non-public data for training commercial AI models. These memoranda also define employment decisions for federal employees as a high-impact AI use application.
It is clear that DOGE's use of AI clearly does not meet the standards the previous memoranda set. Worse, existing AI systems like CamoGPT have been used in the misguided purging of federal materials from references to achievements of Americans of color and women, including the Navajo Code Talkers and the Tuskegee Airmen. It is not clear how the use of CamoGPT meets the Congressional authorization for AI usage provided in the 2021 National Defense Authorization Act, but it is alarming that the result of such usage by this Administration was referred to as an error--raising questions about the appropriateness of and lack of sufficient oversight of its use.
While we support the federal government integrating new, approved AI technologies that can improve efficiency or efficacy, we cannot sacrifice security, privacy, and appropriate use standards when interacting with federal data. We also cannot condone use of AI systems, often known for hallucinations and bias, in decisions regarding termination of federal employment or federal funding without sufficient transparency and oversight of those models--the risk of losing talent and critical research because of flawed technology or flawed uses of such technology is simply too high. We ask that you immediately terminate any use of AI systems that have not been approved by FedRAMP or equivalent formal approval procedures or that do not comply with existing laws. In addition, we ask that you do not use any AI system to make employment termination decisions relating to civil servants.
It is important to understand the extent to which this administration's reckless disregard for legal authorities and necessary security protocols has extended into use of AI systems. Thoughtful adoption of AI is of strategic national importance. Please provide responses to the following questions by no later than April 25, 2025:
1. Has DOGE or the Trump Administration used AI technologies powered by xAI's models?
2. What new AI software has been deployed and used by this Administration that was not used by a previous administration? Provide a list.
1. Include whether each is on the CISA or DISA authorized technologies list or FedRAMP approved services list, and the date such technology or service was added.
2. Include how this Administration's use of each of such technologies is in compliance with laws such as the Privacy Act of 1974, the E-Government Act of 2002, and the Federal Information Security Modernization Act of 2014.
3. Of the models used in the past two months, who has access to the information submitted to such models and how is oversight being conducted?
1. Please provide the level of clearance, authorization, and training they have received.
2. Please provide whether they are a special government employee or what category of employee they are.
4. Have the "Grok" models used or the AI technologies used in "GSAi" gone through a federal procurement process prior to use?
1. Describe the process such technologies were subject to, and provide documentation.
5. As many AI deployers collect information on the prompts input into their AI models, and use those prompts and their inferences to train their models, how are you ensuring that no deployers of any AI technologies that DOGE or the Trump Administration may use engage in this practice?
6. Has DOGE or the Trump Administration to date used any AI technology to make or recommend an employment decision about a federal employee?
1. If so, which technologies has the Department or Administration used?
2. If so, how many federal employees did the Department or Administration use AI technology to make or recommend an employment decision about?
7. Has DOGE or the Trump Administration to date used any AI technology to make or recommend a decision regarding a contract or federal funding?
1. If so, which contracts and/or which funding? Please provide the search query and rationale for the decision.
8. Have Musk or DOGE employees used government datasets that are not publicly accessible in the training of any non-Federal AI technologies, including for any "Grok" models?
9. Has DOGE or the Trump Administration to date shared any government datasets that are not publicly accessible with any services, sites, or actors that are not approved by FedRAMP or in a way that is not in compliance with the Privacy Act of 1974, the E-Government Act of 2002, the Federal Information Security Modernization Act of 2014, or any other relevant laws governing data security?
The name, agency or department of origin, and a timespan of the information covered in the dataset;
A description of the static or dynamic data sources and scope of the data accessed for the analyses performed; and
A description of the content of the data accessed, including data types and known features. This should include identification of any metadata collected (such as associated users, IP addresses, locations, or timestamps).
10\. Do any DOGE servers or websites incorporate AI technologies not previously approved under the requirements set by M-24-10 or M-24-18, or agency guidance in compliance with those memoranda, or not on the CISA or DISA authorized technologies list or FedRAMP approved services list? If so, provide a list.
11\. What steps has the Trump Administration taken to ensure that Musk and all DOGE employees are not using their federal government role to enrich themselves personally or the companies in which they hold ownership or maintain affiliation, including through sharing of data?
***
Original text here: https://beyer.house.gov/news/documentsingle.aspx?DocumentID=6476
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House Democrats Seek Immediate Termination of DOGE's Unauthorized Use of AI Systems, Call Out Security Risks and Potential Criminal Liability
U.S. Representatives Don Beyer (D-VA), Mike Levin (D-CA), and Melanie Stansbury (D-NM) were joined by 45 additional Members of Congress including Ranking Member of the House Science, Space, and Technology Committee Zoe Lofgren (D-CA) and Ranking Member of the Oversight and Government Reform Committee Gerry Connolly (D-VA) to call for the immediate termination of ... Show Full Article WASHINGTON, April 19 -- Rep. Don Beyer, D-Virginia, issued the following news release: * * * House Democrats Seek Immediate Termination of DOGE's Unauthorized Use of AI Systems, Call Out Security Risks and Potential Criminal Liability U.S. Representatives Don Beyer (D-VA), Mike Levin (D-CA), and Melanie Stansbury (D-NM) were joined by 45 additional Members of Congress including Ranking Member of the House Science, Space, and Technology Committee Zoe Lofgren (D-CA) and Ranking Member of the Oversight and Government Reform Committee Gerry Connolly (D-VA) to call for the immediate termination ofthe "Department of Government Efficiency's" (DOGE) use of unauthorized AI systems, emphasizing the significant security risks posed and potential criminal liability involved. The lawmakers also expressed deep concerns with lack of oversight over AI usage, sharing of non-public or sensitive data, and with Elon Musk's conflicts of interest as a federal contractor and founder and owner of xAI.
The lawmakers wrote:
"We write to express concern about the use of artificial intelligence (AI) systems within this Administration's "Department of Government Efficiency" (DOGE), without standards or regard for sensitive data. We understand AI's potential for modernization and efficiency improvements within the federal government, and support implementation of AI technologies in a manner that complies with existing data security and software development, acquisition, and usage laws, and that provides proper transparency, vetting, and oversight over the use of such AI technologies. We are specifically concerned about reports of Elon Musk and DOGE's monitoring and sharing of federal employee and non-public federal data using AI tools, and reports of intentions to use sensitive data to train private AI models. These present serious security risks, self-dealing, and potential criminal liability if not handled correctly, and have the potential to undermine successful and appropriate AI adoption.
" In addition, DOGE's reported use of AI technologies on sensitive information raises significant concerns about data security. Musk's DOGE team at the Office of Personnel Management reportedly used AI systems to analyze emails from a large portion of the two million person Federal workforce describing their previous week's accomplishments--without model transparency and without addressing major concerns about security or conflicts of interest. Alarmingly, sensitive data from across the Department of Education was also reportedly fed into an AI system, including data with personally identifiable information for people who manage grants, as well as sensitive internal financial data. Without proper protections, feeding sensitive data into an AI system puts it into the possession of a system's operator--a massive breach of public and employee trust and an increase in cybersecurity risks surrounding that data. Generative AI models also frequently make errors and show significant biases--the technology simply is not ready for use in high-risk decision-making without proper vetting, transparency, oversight, and guardrails in place.
"Sharing of such data would constitute a major data privacy and data security risk. Specifically, we are concerned that sharing such data outside of federal systems or lawfully vetted contracts may run in violation of laws such as the Privacy Act of 1974, the E-Government Act of 2002, and the Federal Information Security Modernization Act of 2014. These laws set requirements for the federal government's collection and use of personal information and sensitive data-- including through establishing limits on agency information sharing, and requirements for data minimization, disclosure limitations, cybersecurity, transparency, and privacy impact assessments for developing or procuring information technology. In addition, the federal government is legally obligated to comply with codified requirements for vetting software and cloud products and services across the federal government, through programs such as the Federal Risk and Authorization Management Program (FedRAMP).
"It is clear that DOGE's use of AI clearly does not meet the standards the previous memoranda set. Worse, existing AI systems like CamoGPT have been used in the misguided purging of federal materials from references to achievements of Americans of color and women, including the Navajo Code Talkers and the Tuskegee Airmen. It is not clear how the use of CamoGPT meets the Congressional authorization for AI usage provided in the 2021 National Defense Authorization Act, but it is alarming that the result of such usage by this Administration was referred to as an error--raising questions about the appropriateness of and lack of sufficient oversight of its use.
"While we support the federal government integrating new, approved AI technologies that can improve efficiency or efficacy, we cannot sacrifice security, privacy, and appropriate use standards when interacting with federal data. We also cannot condone use of AI systems, often known for hallucinations and bias, in decisions regarding termination of federal employment or federal funding without sufficient transparency and oversight of those models--the risk of losing talent and critical research because of flawed technology or flawed uses of such technology is simply too high. We ask that you immediately terminate any use of AI systems that have not been approved by FedRAMP or equivalent formal approval procedures or that do not comply with existing laws. In addition, we ask that you do not use any AI system to make employment termination decisions relating to civil servants."
Full text of the letter follows below, and a signed copy is available here.
\-
Dear Director Vought:
We write to express concern about the use of artificial intelligence (AI) systems within this Administration's "Department of Government Efficiency" (DOGE), without standards or regard for sensitive data. We understand AI's potential for modernization and efficiency improvements within the federal government, and support implementation of AI technologies in a manner that complies with existing data security and software development, acquisition, and usage laws, and that provides proper transparency, vetting, and oversight over the use of such AI technologies. We are specifically concerned about reports of Elon Musk and DOGE's monitoring and sharing of federal employee and non-public federal data using AI tools, and reports of intentions to use sensitive data to train private AI models. These present serious security risks, self-dealing, and potential criminal liability if not handled correctly, and have the potential to undermine successful and appropriate AI adoption.
A DOGE staffer who is also currently employed at SpaceX reportedly created an "AI assistant" for DOGE staff, powered by Musk's xAI Grok-2 model--this model was hosted on a subdomain of the staffer's external website, raising both security concerns and conflict of interest issues. In addition to privacy and security concerns, Musk stands to profit from access to government data or contracting opportunities that are not available to competitors or the public. Increased access to sensitive government data would set his AI models at an unfair competitive advantage over other AI service providers--the conflicts of interest become exponentially worse if Musk pursues further contracts to become a major provider of government AI services.
Further, DOGE reportedly used a chatbot named "GSAi" based on Anthropic and Meta models with the stated intent of analyzing contract and procurement data via a centralized system consolidated under GSA, which would pose similar security and conflict of interest problems. Giving Musk's teams access to sensitive government data on other contracts across the federal government is especially problematic when considering Musk's business interests with SpaceX --already a major government contractor--as well as with SpaceX subsidiary Starlink, Tesla, and elsewhere.
In addition, DOGE's reported use of AI technologies on sensitive information raises significant concerns about data security. Musk's DOGE team at the Office of Personnel Management reportedly used AI systems to analyze emails from a large portion of the two million person Federal workforce describing their previous week's accomplishments--without model transparency and without addressing major concerns about security or conflicts of interest. Alarmingly, sensitive data from across the Department of Education was also reportedly fed into an AI system, including data with personally identifiable information for people who manage grants, as well as sensitive internal financial data. Without proper protections, feeding sensitive data into an AI system puts it into the possession of a system's operator--a massive breach of public and employee trust and an increase in cybersecurity risks surrounding that data. Generative AI models also frequently make errors and show significant biases--the technology simply is not ready for use in high-risk decision-making without proper vetting, transparency, oversight, and guardrails in place.
Sharing of such data would constitute a major data privacy and data security risk. Specifically, we are concerned that sharing such data outside of federal systems or lawfully vetted contracts may run in violation of laws such as the Privacy Act of 1974, the E-Government Act of 2002, and the Federal Information Security Modernization Act of 2014. These laws set requirements for the federal government's collection and use of personal information and sensitive data-- including through establishing limits on agency information sharing, and requirements for data minimization, disclosure limitations, cybersecurity, transparency, and privacy impact assessments for developing or procuring information technology. In addition, the federal government is legally obligated to comply with codified requirements for vetting software and cloud products and services across the federal government, through programs such as the Federal Risk and Authorization Management Program (FedRAMP).
In 2023, OMB established memoranda to help implement requirements to vet and approve AI technologies for federal use, such as OMB memoranda M-24-10 and M-24-18, which directed federal agencies to use AI only after developing tests and guidelines to ensure that its use would not compromise privacy and cybersecurity. These memoranda recognized the sensitive nature of the information the federal government handles every day and the significant privacy risks of using unvetted AI technologies on such information--including the risk of sharing personally identifiable or otherwise sensitive information with the AI model deployers. While these memoranda were recently revised through OMB's M-25-21 and M-25-22, the new memoranda retain some provisions on data security and data privacy, including calls against using non-public data for training commercial AI models. These memoranda also define employment decisions for federal employees as a high-impact AI use application.
It is clear that DOGE's use of AI clearly does not meet the standards the previous memoranda set. Worse, existing AI systems like CamoGPT have been used in the misguided purging of federal materials from references to achievements of Americans of color and women, including the Navajo Code Talkers and the Tuskegee Airmen. It is not clear how the use of CamoGPT meets the Congressional authorization for AI usage provided in the 2021 National Defense Authorization Act, but it is alarming that the result of such usage by this Administration was referred to as an error--raising questions about the appropriateness of and lack of sufficient oversight of its use.
While we support the federal government integrating new, approved AI technologies that can improve efficiency or efficacy, we cannot sacrifice security, privacy, and appropriate use standards when interacting with federal data. We also cannot condone use of AI systems, often known for hallucinations and bias, in decisions regarding termination of federal employment or federal funding without sufficient transparency and oversight of those models--the risk of losing talent and critical research because of flawed technology or flawed uses of such technology is simply too high. We ask that you immediately terminate any use of AI systems that have not been approved by FedRAMP or equivalent formal approval procedures or that do not comply with existing laws. In addition, we ask that you do not use any AI system to make employment termination decisions relating to civil servants.
It is important to understand the extent to which this administration's reckless disregard for legal authorities and necessary security protocols has extended into use of AI systems. Thoughtful adoption of AI is of strategic national importance. Please provide responses to the following questions by no later than April 25, 2025:
1. Has DOGE or the Trump Administration used AI technologies powered by xAI's models?
2. What new AI software has been deployed and used by this Administration that was not used by a previous administration? Provide a list.
1. Include whether each is on the CISA or DISA authorized technologies list or FedRAMP approved services list, and the date such technology or service was added.
2. Include how this Administration's use of each of such technologies is in compliance with laws such as the Privacy Act of 1974, the E-Government Act of 2002, and the Federal Information Security Modernization Act of 2014.
3. Of the models used in the past two months, who has access to the information submitted to such models and how is oversight being conducted?
1. Please provide the level of clearance, authorization, and training they have received.
2. Please provide whether they are a special government employee or what category of employee they are.
4. Have the "Grok" models used or the AI technologies used in "GSAi" gone through a federal procurement process prior to use?
1. Describe the process such technologies were subject to, and provide documentation.
5. As many AI deployers collect information on the prompts input into their AI models, and use those prompts and their inferences to train their models, how are you ensuring that no deployers of any AI technologies that DOGE or the Trump Administration may use engage in this practice?
6. Has DOGE or the Trump Administration to date used any AI technology to make or recommend an employment decision about a federal employee?
1. If so, which technologies has the Department or Administration used?
2. If so, how many federal employees did the Department or Administration use AI technology to make or recommend an employment decision about?
7. Has DOGE or the Trump Administration to date used any AI technology to make or recommend a decision regarding a contract or federal funding?
1. If so, which contracts and/or which funding? Please provide the search query and rationale for the decision.
8. Have Musk or DOGE employees used government datasets that are not publicly accessible in the training of any non-Federal AI technologies, including for any "Grok" models?
9. Has DOGE or the Trump Administration to date shared any government datasets that are not publicly accessible with any services, sites, or actors that are not approved by FedRAMP or in a way that is not in compliance with the Privacy Act of 1974, the E-Government Act of 2002, the Federal Information Security Modernization Act of 2014, or any other relevant laws governing data security?
The name, agency or department of origin, and a timespan of the information covered in the dataset;
A description of the static or dynamic data sources and scope of the data accessed for the analyses performed; and
A description of the content of the data accessed, including data types and known features. This should include identification of any metadata collected (such as associated users, IP addresses, locations, or timestamps).
10\. Do any DOGE servers or websites incorporate AI technologies not previously approved under the requirements set by M-24-10 or M-24-18, or agency guidance in compliance with those memoranda, or not on the CISA or DISA authorized technologies list or FedRAMP approved services list? If so, provide a list.
11\. What steps has the Trump Administration taken to ensure that Musk and all DOGE employees are not using their federal government role to enrich themselves personally or the companies in which they hold ownership or maintain affiliation, including through sharing of data?
***
Original text here: https://beyer.house.gov/news/documentsingle.aspx?DocumentID=6476
Dingell Holds Senior Forum to Highlight Importance of Social Security
WASHINGTON, April 19 -- Rep. Debbie Dingell, D-Michigan, issued the following news release:
* * *
Dingell Holds Senior Forum to Highlight Importance of Social Security
Congresswoman Debbie Dingell (MI-06) held a seniors' forum this morning at Fox Run Senior Living to highlight the importance of protecting Social Security. Hundreds of seniors gathered to express their anger, anxiety, and fears about cuts to Social Security.
"Social Security is a part of the fabric of who America is and how we care for our seniors. Two out of every three retirees rely on Social Security for the majority of their ... Show Full Article WASHINGTON, April 19 -- Rep. Debbie Dingell, D-Michigan, issued the following news release: * * * Dingell Holds Senior Forum to Highlight Importance of Social Security Congresswoman Debbie Dingell (MI-06) held a seniors' forum this morning at Fox Run Senior Living to highlight the importance of protecting Social Security. Hundreds of seniors gathered to express their anger, anxiety, and fears about cuts to Social Security. "Social Security is a part of the fabric of who America is and how we care for our seniors. Two out of every three retirees rely on Social Security for the majority of theirincome, and millions of families depend on the program for disability or benefits after the loss of a loved one. But Elon Musk and DOGE have fired 7000 Social Security employees, made it more difficult to call and use the website, continue to make the Social Security Administration less effective, and have threatened to shut it down," Dingell said. "The Commerce Secretary has said his mother-in-law would be fine if she missed a monthly Social Security check, but the fact is that most Americans wouldn't be. I will continue to fight in Congress to make sure we keep the promise of Social Security and will continue to look out for the wellbeing of aging Americans and vulnerable populations who need our help."
There are 2.3 million Social Security beneficiaries in Michigan, including more than 137,000 children. In response to Social Security Administration (SSA) field office closures, Rep. Dingell is co-leading the Keeping Our Field Offices Open Act, which would place a moratorium on the closure of field offices for the rest of the Trump Administration. Rep. Dingell also co-leads the Beneficiary Data Protection Act that would stop DOGE and political appointees from accessing sensitive data systems at SSA. It would also codify SSA data privacy requirements into law, and strengthen oversight and civil penalties for any privacy and disclosure violations of Social Security beneficiaries' personal information.
View photos from the event here.
***
Original text here: https://debbiedingell.house.gov/news/documentsingle.aspx?DocumentID=5630
* * *
Dingell Holds Senior Forum to Highlight Importance of Social Security
Congresswoman Debbie Dingell (MI-06) held a seniors' forum this morning at Fox Run Senior Living to highlight the importance of protecting Social Security. Hundreds of seniors gathered to express their anger, anxiety, and fears about cuts to Social Security.
"Social Security is a part of the fabric of who America is and how we care for our seniors. Two out of every three retirees rely on Social Security for the majority of their ... Show Full Article WASHINGTON, April 19 -- Rep. Debbie Dingell, D-Michigan, issued the following news release: * * * Dingell Holds Senior Forum to Highlight Importance of Social Security Congresswoman Debbie Dingell (MI-06) held a seniors' forum this morning at Fox Run Senior Living to highlight the importance of protecting Social Security. Hundreds of seniors gathered to express their anger, anxiety, and fears about cuts to Social Security. "Social Security is a part of the fabric of who America is and how we care for our seniors. Two out of every three retirees rely on Social Security for the majority of theirincome, and millions of families depend on the program for disability or benefits after the loss of a loved one. But Elon Musk and DOGE have fired 7000 Social Security employees, made it more difficult to call and use the website, continue to make the Social Security Administration less effective, and have threatened to shut it down," Dingell said. "The Commerce Secretary has said his mother-in-law would be fine if she missed a monthly Social Security check, but the fact is that most Americans wouldn't be. I will continue to fight in Congress to make sure we keep the promise of Social Security and will continue to look out for the wellbeing of aging Americans and vulnerable populations who need our help."
There are 2.3 million Social Security beneficiaries in Michigan, including more than 137,000 children. In response to Social Security Administration (SSA) field office closures, Rep. Dingell is co-leading the Keeping Our Field Offices Open Act, which would place a moratorium on the closure of field offices for the rest of the Trump Administration. Rep. Dingell also co-leads the Beneficiary Data Protection Act that would stop DOGE and political appointees from accessing sensitive data systems at SSA. It would also codify SSA data privacy requirements into law, and strengthen oversight and civil penalties for any privacy and disclosure violations of Social Security beneficiaries' personal information.
View photos from the event here.
***
Original text here: https://debbiedingell.house.gov/news/documentsingle.aspx?DocumentID=5630
Center for Truth in Science Board Chair Williams Testifies Before House Oversight & Government Reform Committee
WASHINGTON, April 18 -- The House Oversight and Government Reform Committee released the following written testimony by Richard A. Williams, board chair of the Center for Truth in Science and senior affiliated scholar with the Mercatus Center, from an April 9, 2025, hearing entitled "Restoring Trust in FDA: Rooting Out Illicit Products." FDA is the Food and Drug Administration.
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Chairman Comer, Ranking Member Connolly and members of the committee, thank you for this opportunity to testify. My name is Richard A. Williams, and I am retired from the Food and Drug Administration after serving ... Show Full Article WASHINGTON, April 18 -- The House Oversight and Government Reform Committee released the following written testimony by Richard A. Williams, board chair of the Center for Truth in Science and senior affiliated scholar with the Mercatus Center, from an April 9, 2025, hearing entitled "Restoring Trust in FDA: Rooting Out Illicit Products." FDA is the Food and Drug Administration. * * * Chairman Comer, Ranking Member Connolly and members of the committee, thank you for this opportunity to testify. My name is Richard A. Williams, and I am retired from the Food and Drug Administration after servingfor 27 years. I am currently the Chairman of the Board for the Center for Truth in Science and a Senior Affiliated Scholar with the Mercatus Center. I am also the author of Fixing Food: An FDA Insider Unravels the Myths and the Solutions.
In Reputation and Power, Daniel Carpenter said, "Over the late twentieth century, few regulatory agencies of any sort, in any nation, possessed or exercised the power of the Food and Drug Administration. ... The regulatory power stems in large measure from a reputation that inspires praise and fear.i I saw this regularly during my time at the FDA. When Congress threatened to take governance of seafood away from FDA and give it to USDA in the 90s, FDA implemented a huge regulatory program (HACCP) for seafood. When I suggested that it was not going to make seafood safer, the answer was, "It doesn't matter, we are doing this to keep seafood at FDA." When, after a year of trying to find some health or safety benefits for a rule to regulate dietary supplements and failing, I was told we had to regulate dietary supplements because, "We have to get them somewhere." It wasn't about safety; it was about power.
I see it on the other side as well. When addressing hundreds of small business owners in Atlanta about the then upcoming food labeling regulations, I ended my presentation and asked for questions or comments. Not one hand went up. I ended the conference and immediately was surrounded by participants. They explained to me that they didn't want to give me their name or their company's name for fear that they would be targeted by the FDA. I was dismayed by the obvious fear of the FDA.
Rather than using its regulatory authority to exercise the maximum amount of control over a massive amount of the economy, the FDA must refocus on regaining the trust of the American people. To do so, the FDA needs to take advantage of advances in technology and focus on their programs that achieve real results. We have been increasing funding for food safety and nutrition for decades and not getting the results consumers should expect. It is time to demand results but results, such as making food safer, have not been demanded of FDA.
Each year, FDA presents budget requests that describe new challenges but never discusses how they have used previous budgets to make food safer or how nutrition has improved. I discuss below how FDA resisted the change required under the Bush Administration's Performance Assessment's Rating Tool (PART) that would have required such results.
In addition to making the United States more competitive in world trade, particularly against our enemies, the answer is to reshape the FDA's culture and programs. This will require the agency to focus on research and sharing information on best practices, encouraging invention and innovation, rethinking their approach to regulations, and focusing on targeted risk-based compliance.
These sweeping cultural changes within the agency and Congressional oversight of FDA's outcomes will do much to restore America's faith in the FDA.
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Research and Information Sharing
The FDA needs to be reoriented to be an information agency first, and an enforcement agency second. Ensuring that accurate information is readily available is one of the FDA's most important tools when it comes to minimizing harm and improving food safety. This level of transparency is also critical to building trust.
Back in the early 2000s, CFSAN (now the Human Foods Program) epidemiologists did a deep dive into the root causes of one particular foodborne disease outbreak. Coming up with the original cause of the outbreak, they posted the cause of the outbreak on the FDA website. A food industry executive later told me how food producers all around the country pounced on that solution to see if it applied to their own process. It had an immediate impact and where applicable, companies changed their practices. To the best of my knowledge, FDA has not followed up with similar investigations of outbreaks, at least not sharing them this way. Companies don't want to poison their customers, recall a product, or end up in a courtroom. Starting with root cause investigations, FDA can help to gather information not readily available to consumers and stakeholders and make it freely available on the web.
Creating an easily accessible, central location for vetted information doesn't require the FDA to issue new regulations. But this change could empower food producers to proactively take steps to ensure food safety. Shared information would not be guidance or legally enforceable in any sense. However, with that information, companies could, on their own, determine whether the information applies to their products.
FDA should also be available for consultations to help where asked. One group to benefit from this kind of help will be small businesses who do not have large research and regulatory staffs. The United Kingdom, when implementing a shortened form of Hazard Analysis Critical Control Points (HACCP) for small businesses, started a program where the first visit was always to help, not inspect.
FDA also needs better science to identify actual risks that need to be addressed in regulations and enforcement. In 2016, FDA decided to include fruits and vegetables that had never had a food safety outbreak.ii Ignoring their own risk assessment, they decided to include those that had never had an outbreak to be precautionary because, as was explained to me by an FDA official in 2019, "anything could happen at any time." Another example is given by FDA's focus on food and color additives in the last several years that results from conservative risk assessments and failure to pay attention to alternative risks.iii When we test additives with high dose animal studies, giving rodents 700 or 800 times the amount that humans normally eat, about halfiv of all natural and synthetic foods are found to "cause cancer" in rodents.v That does not establish causation, and it is amazing that the founding principle of toxicology from Paracelsus is so often ignored: "What is there that is not poison? All things are poison and nothing is without poison. "Solely the dose determines that a thing is not a poison."
It's not only the lack of risk of the additive, removing them from the market ignores the downside of these policy choices. The question that should be asked is, "what will replace substances removed from the market?" When something is regulated so that the price goes up, or they are removed from the market entirely, something will take its place. It's called risk/risk trade-offs. For example, synthetic red food dyes banned because of high-dose animal studies will be replaced by carmine. Carmine is a natural red food dye made from crushed up beetles that live on prickly pear cactus, in other words "beetlejuice." And, of course, it is a chemical. Carmine is also an allergen for some causing delayed allergic reactions although, like synthetic red food dyes, it appears to be perfectly safe.vi Carrageenan is a "natural food additive from seafood that has side effects on gut health and inflammation.vii
FDA, perhaps in petitions from activist organizations, also uses results from the International Agency for Research on Cancer (IARC). IARC's assessment does not include the risks associated with exposure: meaning it ignores the probability of getting cancer at actual levels of exposure. This has resulted in everything they have examined being called a cancer-causing agent except for one. As for food and color additives, as Walter Willett recently noted, "rigorous regulations are in place to ensure that these substances do not pose risks to human health." Too frequently, regulations are not supported by the best science. Examples of using poor science include selecting only those studies that support the regulation (cherry-picked), conservative risk assessments, using correlation instead of causation,viii or ignoring risk tradeoffs.ix Using poor science is an easy way for the FDA to erode Americans' trust.1 Another issue is ignoring science for the sake of slogans. Regulatory programs such as FDA's "Closer to Zero" is an example of ignoring evolutionary and toxicological science.x "Closer to Zero" is a program to reduce exposure to children from arsenic, lead, cadmium and mercury as close to zero as possible.
Over the course of evolution, our bodies have developed repair mechanisms such that, for the millions of times we are assaulted daily through air, water, food and other exposures, we repair the damage over 99.99 percent of the time (although these mechanisms decline in efficiency as we age). Not only do we repair almost all chemical and microbiological assaults, but in the case of all radiation and over half of all chemicals, low doses provide medicinal benefits - called hormesis. Cadmium, included in FDA's Closer to Zero program, exhibits hormetic properties. Another example is sulforaphane, a phytochemical that protects against oxidative stress at low doses.xi There are many synthetic chemicals that are hormetic, but this principle has been marginalized in current risk assessment practices.xii Ignoring thresholds and hormesis based on well-established biological mechanisms has led to regulations and enforcement that are both unnecessary and, given trade-offs, potentially harmful.
With better science, including risk/risk analysis, fewer regulations should show that their benefits exceed costs, resulting in fewer regulations.
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1 Unfortunately, too often regulatory economists are forced to use cherry-picked or weak science to generate benefits for regulations.
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Encouraging Invention and Innovation
Precision Health
Health scientists are beginning to realize that "one-size-fits-all" does not work for health. Some foods may have hormetic responses for one person while being toxic for another. Most foods that are allergenic for some are perfectly safe for others. In nutrition, some people lose weight on a low-fat diet, others gain.xiii Even twins respond differently to food.xiv Precision health also includes medicine where a disease shared by many may have different molecular causes for individuals. Human variability includes genetics, epigenetics, age, sex, health conditions, environment, microbiomes and, for behavior change, preferences.
This kind of variation means, in some cases, we cannot try and protect some people from exposure that theoretically may be harmful when they aren't helpful to others or actually harm them. For nutrition, it means that there are most likely zero diets that will work for everyone. Precision health ultimately will help us all to live longer. FDA should incorporate this science into all of their regulatory activities.
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New Technologies
Another way that the FDA hurts their credibility with the American people is lagging behind in implementing technical solutions to improve food safety. FDA has finally engaged in tech-enabled traceability of food but there is so much more they should be considering.xviiixv For example, smart packagingxvi using nanomaterial biosensors can either alert consumers to a spoiled food or even kill growing pathogens.xvii Smart devices can connect food processing machines to allow centralized monitoring. New designs for production machines can remove places where pathogens grow or make them easier to clean. Robots and other automation can be used in restaurants to prepare food or to clean plants - eliminating error-prone or sick humans. New food preservation technologies, like hydrostatic pressure, ultraviolet radiation, pulsed UV light and hydrostatic pressure can be used to treat foods including those that are sold as "fresh." Foods produced in factories, not farms, are much less likely to be contaminated with pathogens. These include, for example, foods produced with precision fermentation or in indoor farms. Genetically modified foods deliver higher yields, are drought resistant, use fewer pesticides and can produce healthier foods to feed a growing world population.
These are the solutions that will drive food safety, not more regulation.
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Rethinking FDA's Approach to Regulation
Achieving maximum control over firms drives many FDA actions. The result is a huge mixed bag of regulations - some that are effective and many that are not. Some were produced at the behest of larger companies actively trying to put smaller ones at a competitive disadvantage and, as I've previously mentioned, some regulations are based on weak scientific support.
Besides better science, some process changes may help eliminate bad regulations.
Most regulations should be preceded by an advanced notice of proposed rulemaking (ANPR) where the agency identifies a problem and suggests one or more possible solutions. This ensures that the agency is not committed to any particular course of action prior to receiving comments. If, after that, they identify a course of action that will result in a major regulation, there should be a pilot program, where feasible, to determine whether the regulation is likely to be effective.
At the proposal stage, the regulation should include: 1) an outcome goal; 2) an explanation of how that goal will be achieved; 3) the time necessary to achieve the goal; and 4) a Regulatory Impact Analysis, including a risk/risk Analysis.
As with formal rules, stakeholders should have a chance to object to them prior to being enacted.
This process should result in regulations being rare and, when implemented, have a much better chance of being effective.
Current regulations and programs should be reviewed, under the auspices of a Congressional agency, to determine which ones are outdated, duplicative or not effective.xix If a regulation or program is not successful in improving outcomes, it is simply a costly burden on the public.
An example of an outdated program is food standards: recipe standards that govern about half of all foods in the United States. Do we really need to ensure that ice cream is at least ten percent milkfat, that reflects how "mother used to make" them in the 1930s?xx Since food labeling has failed to stop the growth of obesity and chronic disease, should FDA continue to tinker with it? Currently, every manufacturer of low acid canned foods must submit paperwork on every food, in every size container. Is it still necessary?xxi With these regulatory and program reforms in place, the 800 pages of the FDA Investigations Operations Manual could probably be shortened considerably.xxii A simplified manual will make it easier for agency staff to focus on the critical processes that Americans rely on to keep food safe.
Recent reorganization efforts to modernize FDA's food program should be examined to see if they eliminated ineffective programs.xxiii
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Targeted, Risk-Based Compliance
With fewer regulations that effectively address existing resources, resources should be freed up to do more and more effective inspections.
When I started at FDA in 1980, I was told "We are cops." It's a role FDA cannot shirk and will always be important. To do so effectively, they must have risk-based inspections including both domestic and international foods. Internationally, we should focus on those who are intentionally trying to do us harm by poisoning our foodxxviixxviiixxiv or who are trying to gain a competitive advantage by undermining American companies.xxv The later harm may occur by influencing regulatory agencies,xxvi investing in tort trials, or stealing technology (e.g., stealing GM seeds). Improved information sharing would also allow the FDA to help American consumers stay informed of potential threats.
Addressing these threats will be strengthened if FDA shares best practices, science, and issues found with foreign suppliers with consumers and manufacturers. Such sharing is likely to be more effective than regulations and inspection.
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Accountability and Oversight
In addition to the cultural changes I've outlined above, Congressional oversight is key to ensuring that the FDA regains public trust.
There are three products of government programs: inputs, outputs and outcomes. For food safety:
* Inputs are the number of people who worked on regulations or inspections;
* Outputs are the number of regulations and inspections; and,
* Outcomes are the reduction in the number of cases or deaths from foodborne diseases reduced.
Outcomes are what consumers and taxpayers who fund this activity care about. Unfortunately, an agency's success is too often measured by their inputs or outputs. In 2007, President George W. Bush attempted to address this issue with an Executive Orderxxix called the Program Assessment Rating Tool (PART) to assure accountability in federal agencies. It was done in conjunction with the Government Performance and Results Act.
The Executive Order required agencies to have outcome goals and to track and report their progress. Agencies, including FDA, fought this requirement, as failure to comply with the E.O. was to be directly tied to reduced agency funding. I was briefly tasked with creating outcome measures for the foods program until the Deputy Center Director found out we would be required to actually achieve a health benefit by reducing consumption of trans fatty acids. The measure was changed to making people aware that trans fatty acids exist.xxx The program was discontinued by the next administration in 2009.
For FDA's food safety program, the outcome goal is simple, reducing the number of illnesses and deaths from food. Bring PART back and ensure that a Congressional committee charged with overseeing the budget uses the results of outcome-based goals to establish agency budgets.
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Additional Areas of Oversight for Congressional Consideration
Operation Stork Speed - Two problems have plagued infant formula: failure to maintain a plant free of pathogens resulting in shortages and high prices that affect low-income consumers. To ensure a consistent supply and that infant formula prices remain low, Congress should make sure FDA's policies encourage new competitors.xxxi More producers will ensure that supply disruptions, such as occurred recently, will not happen again. Also, more competitors will help to keep prices down so that less well-off consumers do not end up trying to extend infant formula with water, a danger to infants who rely on this sole source of nutrients.
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Pathogens
In terms of food making people sick, the biggest problem is still pathogens. After years of increased funding, the rates of foodborne disease are about the same. Unfortunately, the Hazard Analysis Critical Control Points or HACCP has, so far, not appeared to make much difference. It made no difference in the first mandated version for seafood because there were no critical control points for raw seafood like oysters. However, as mentioned above, knowing more about root causes could make a difference. Artificial intelligence may also help with predicting likely areas of outbreaks. Another step forward can be making foods in sanitary environments, like precision fermentation. Also, more targeted, risk-based inspections of plants and facilities could help.
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Single Food Agency
Recognizing it will upset the committee structures in Congress, there is still a great opportunity to clean up enabling laws (e.g., get rid of food standards, get rid of visual observation of meat preparation) by pulling together FDA's Human Food Program, USDA's FSIS, and pesticides from EPA. This would allow greater prioritization of resources, end duplicative or confusing inspections, and perhaps reduce overall expenditures.
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Nutrition
No evidence I have found shows that existing government tools including food labels, the Food Guide Pyramid and the Dietary Guidelines have been effective. We are eating more, getting heavier and chronic diseases have been increasing. If Congress continues to fund FDA's work on nutrition, it must hold the FDA responsible for improving health outcomes. Creating new foods will help but so will devices that will monitor what we eat, keep track of all of the relevant factors such as biomarkers and dietary preferences, and will make recommendations on what to eat. The problem for these devices is that they will fall under the restrictions of FDA's onerous medical device rules. See, for example, US Medical Devices; Choices and Consequences."xxxii
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Summary
In every budget season, FDA presents challenges, and the only question is how much should the budget be increased? There are new challenges but a change in FDA's culture of trying to control everything can lead to better management with existing funds.
New challenges include discovering which, if any, of the various forms of microplastics and PFAS chemicals that occur in food or bottled water are dangerous. There are also food issues from China and other countries that are harming American consumers. The use of new technologies like blockchain for traceback and artificial intelligence to help predict food safety weaknesses, perhaps using data from critical control points, needs further exploration. If artificial intelligence can be used for drug approvals, it should also be applicable to food additive approvals.xxxiii New foods created with precision fermentation and genetic modification offer exciting nutrition possibilities but should be evaluated for food safety challenges.
Better science can identify real risks and separating risks from hazards (terminating the precautionary approach) will help to reduce the rate of new regulations. Reducing the rate of new regulations, the stock of existing regulations, and eliminating outdated programs such as food standards can free up resources to meet new challenges. Both pre-market approvals and regulatory programs should be examined to see where new food and food technologies are being strangled by overly precautious rules.
Importantly, in an increasingly competitive international trade market, FDA can help to encourage new companies that are more competitive for both imports and exports by having fewer, more effective rules.
The FDA will never be able to improve Americans' health outcomes if they are not seen as an effective and trustworthy agency. To help consumers eat safer food and American businesses compete, FDA must shift its focus to public health, rather than simply amassing power.
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Footnotes:
i Carpenter, Daniel, Reputation and Power: Organizational Image and Pharmaceutical Regulation at the FDA, Princeton University Press, Princeton, N.J. 2010.
ii FDA, "Standards for the Growing, Harvesting, Packing, and Holding of Produce for Human Consumption," 2016.
iii Burgoon, Lyle, et. al, "Zero-Risk, Zero Sense: Unscientific Food, Drug Policies Are Nothing New," RealClearScience, March 19, 2025.
iv Ames, Bruce, Science Policy, Bruce Ames, testing for carcinogens | Science Policy.
v Sanders, Robert, "Misconceptions about the causes of cancer lead to skewed priorities and wasted money, UC Berkeley researchers say," Public Affairs, 1997. https://newsarchive.berkeley.edu/news/media/releases/97legacy/11_01_97a.html
vi Sadowska, Beata, et. al., "Carmine allergy in urticaria patients," Advances in Dermatology and Allergology, Nov 13, 2020.
vii Robbins, Robbins, "Common Food Additives in Natural & Organic Foods: Are They Safe?," Food Revolution Network, May 14, 2021.
viii Cox, Louis Anthony, "Objective causal predictions from observational data," Critical Reviews in Toxicology, Vol. 54, 2024.
ix Graham, John D. and Jonathan B. Wiener, editors, Risk vs. Risk: Tradeoffs in Protecting Health and the Environment, Harvard University Press, Cambridge Ma, 1995.
x US FDA, "Closer to Zero: Reducing Childhood Exposure to Contaminants from Foods," https://www.fda.gov/food/environmental-contaminants-food/closer-zero-reducing-childhood-exposure-contaminants-foods
xi Son, Tae Gen, et. al., "Hormetic Dietary Phytochemicals," Neuromolecular Med., Feb 43, 2009.
xii Kim Se-A", et. al., "Evolutionarily adapted hormesis-inducing stressors can be a practical solution to mitigate harmful effects of chronic exposure to low dose chemical mixtures." Environmental Pollution, Feb 2018.
xiii Williams, Richard, "Richard Williams: Nutrition science moves on," TrIb Extra, April 6, 2025.
xiv MedicalNewsToday, "Nutrition: Even identical twins respond differently to food," https://www.medicalnewstoday.com/articles/325521
xv US FDA, "Tech-Enabled Traceability - Core Element 1 of the New Era of Smarter Food Safety Blueprint." https://www.fda.gov/food/new-era-smarter-food-safety/tech-enabled-traceability-core-element-1-new-era-smarter-food-safety-blueprint
xvi Piedmont Plastics, "Technology Trends Revolutionizing Food Safety," https://www.piedmontplastics.com/blog/fda-food-safety?srsltid=AfmBOoqqy_0Dge3V1qgg17dhcQPGKeq6t1EGXXp_hczZZ7Q-KeGD6Ru7
xvii Technology Networks Applied Sciences, "Emerging Technologies in Combating Foodborne Illness, Nov 18, 2021. https://www.technologynetworks.com/applied-sciences/articles/emerging-technologies-in-combating-foodborne-illness-315787
xviii Orth, Steve, "Future of Food Safety: Next-Gen Technologies On The Rise," Food Safety Tech, Dec 3, 2024.
xix Miller, Sofie E. and Susan E. Dudley, "Regulatory Accretion: Causes and Possible Remedies, "Administrative law Review Accord, 67. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.administrativelawreview.org/wp-content/uploads/2016/03/MillerDudley_PublishedVersion-1.pdf
xx US FDA, Code of Federal Regulations, Title 21, Chapter 1, Subchapter B, Part 135. https://www.ecfr.gov/current/title-21/chapter-I/subchapter-B/part-135
xxi US FDA, "Establishment Registration & Process Filing for Acidified and Low-Acid Canned Foods (LACF): Paper Submissions." https://www.fda.gov/food/establishment-registration-process-filing-acidified-and-low-acid-canned-foods-lacf/establishment-registration-process-filing-acidified-and-low-acid-canned-foods-lacf-paper-submissions
xxii US FDA, "Investigations Operations Manual, 2025." chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.fda.gov/media/166525/download?attachment
xxiii FDA, "FDA's Reorganization Approved for Establishing Unified Human Foods Program, New Model for Field Operations and Other Modernization Efforts," May 30, 2024.
xxiv Brevett, Carol S. and Jessica Cox, "Intentional Adulteration of Foods with Chemicals: Snapshot for 2009-2022, Journal of Food Protection, 87/7, July 2024.
xxv Williams, Richard, "How to Beat China at its Own Game," Public Health Without Politics." Mar 6. 2025. https://fixingfood.substack.com/p/how-to-beat-china-at-its-own-game
xxvi Cotton, Tom, Seven Things You Can't Say About China, Broadside Books, 2025.
xxvii U.S. Chamber of Commerce, Institute for Legal Reform, "The ExxonMobil Lawsuit: Foreign Entities Funding Lawsuits to Target American Businesses," Feb 10, 2025.
xxviii Hvistendahl, Mara, "The Scientist and the Spy: A True Story of China, the FBI and Industrial Espionage, Riverhead Books, New York, NY, 2020.
xxix U.S. Government, President George W. Bush, "Executive Order: Improving Government Program Performance, Nov 2007.
xxx Williams, Richard A., Fixing Food, An FDA Insider Unravels the Myths and the Solutions, Post Hill Press, 2021.
xxxi Williams, Richard, "The infant formula blame game," The Hill, 6/4/2022.
xxxii Williams, Richard A., et. al., "US Medical Devices: Choices and Consequences," Mercatus Center. https://www.mercatus.org/research/research-papers/us-medical-devices-choices-and-consequences
xxxiii Pipes, Sally, "Here's How Trump's Pick to Lead the FDA Can Supercharge The Agency," Forbes, Mar 31, 2025.
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Original text here: https://oversight.house.gov/wp-content/uploads/2025/04/Williams-Written-Testimony.pdf
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Chairman Comer, Ranking Member Connolly and members of the committee, thank you for this opportunity to testify. My name is Richard A. Williams, and I am retired from the Food and Drug Administration after serving ... Show Full Article WASHINGTON, April 18 -- The House Oversight and Government Reform Committee released the following written testimony by Richard A. Williams, board chair of the Center for Truth in Science and senior affiliated scholar with the Mercatus Center, from an April 9, 2025, hearing entitled "Restoring Trust in FDA: Rooting Out Illicit Products." FDA is the Food and Drug Administration. * * * Chairman Comer, Ranking Member Connolly and members of the committee, thank you for this opportunity to testify. My name is Richard A. Williams, and I am retired from the Food and Drug Administration after servingfor 27 years. I am currently the Chairman of the Board for the Center for Truth in Science and a Senior Affiliated Scholar with the Mercatus Center. I am also the author of Fixing Food: An FDA Insider Unravels the Myths and the Solutions.
In Reputation and Power, Daniel Carpenter said, "Over the late twentieth century, few regulatory agencies of any sort, in any nation, possessed or exercised the power of the Food and Drug Administration. ... The regulatory power stems in large measure from a reputation that inspires praise and fear.i I saw this regularly during my time at the FDA. When Congress threatened to take governance of seafood away from FDA and give it to USDA in the 90s, FDA implemented a huge regulatory program (HACCP) for seafood. When I suggested that it was not going to make seafood safer, the answer was, "It doesn't matter, we are doing this to keep seafood at FDA." When, after a year of trying to find some health or safety benefits for a rule to regulate dietary supplements and failing, I was told we had to regulate dietary supplements because, "We have to get them somewhere." It wasn't about safety; it was about power.
I see it on the other side as well. When addressing hundreds of small business owners in Atlanta about the then upcoming food labeling regulations, I ended my presentation and asked for questions or comments. Not one hand went up. I ended the conference and immediately was surrounded by participants. They explained to me that they didn't want to give me their name or their company's name for fear that they would be targeted by the FDA. I was dismayed by the obvious fear of the FDA.
Rather than using its regulatory authority to exercise the maximum amount of control over a massive amount of the economy, the FDA must refocus on regaining the trust of the American people. To do so, the FDA needs to take advantage of advances in technology and focus on their programs that achieve real results. We have been increasing funding for food safety and nutrition for decades and not getting the results consumers should expect. It is time to demand results but results, such as making food safer, have not been demanded of FDA.
Each year, FDA presents budget requests that describe new challenges but never discusses how they have used previous budgets to make food safer or how nutrition has improved. I discuss below how FDA resisted the change required under the Bush Administration's Performance Assessment's Rating Tool (PART) that would have required such results.
In addition to making the United States more competitive in world trade, particularly against our enemies, the answer is to reshape the FDA's culture and programs. This will require the agency to focus on research and sharing information on best practices, encouraging invention and innovation, rethinking their approach to regulations, and focusing on targeted risk-based compliance.
These sweeping cultural changes within the agency and Congressional oversight of FDA's outcomes will do much to restore America's faith in the FDA.
* * *
Research and Information Sharing
The FDA needs to be reoriented to be an information agency first, and an enforcement agency second. Ensuring that accurate information is readily available is one of the FDA's most important tools when it comes to minimizing harm and improving food safety. This level of transparency is also critical to building trust.
Back in the early 2000s, CFSAN (now the Human Foods Program) epidemiologists did a deep dive into the root causes of one particular foodborne disease outbreak. Coming up with the original cause of the outbreak, they posted the cause of the outbreak on the FDA website. A food industry executive later told me how food producers all around the country pounced on that solution to see if it applied to their own process. It had an immediate impact and where applicable, companies changed their practices. To the best of my knowledge, FDA has not followed up with similar investigations of outbreaks, at least not sharing them this way. Companies don't want to poison their customers, recall a product, or end up in a courtroom. Starting with root cause investigations, FDA can help to gather information not readily available to consumers and stakeholders and make it freely available on the web.
Creating an easily accessible, central location for vetted information doesn't require the FDA to issue new regulations. But this change could empower food producers to proactively take steps to ensure food safety. Shared information would not be guidance or legally enforceable in any sense. However, with that information, companies could, on their own, determine whether the information applies to their products.
FDA should also be available for consultations to help where asked. One group to benefit from this kind of help will be small businesses who do not have large research and regulatory staffs. The United Kingdom, when implementing a shortened form of Hazard Analysis Critical Control Points (HACCP) for small businesses, started a program where the first visit was always to help, not inspect.
FDA also needs better science to identify actual risks that need to be addressed in regulations and enforcement. In 2016, FDA decided to include fruits and vegetables that had never had a food safety outbreak.ii Ignoring their own risk assessment, they decided to include those that had never had an outbreak to be precautionary because, as was explained to me by an FDA official in 2019, "anything could happen at any time." Another example is given by FDA's focus on food and color additives in the last several years that results from conservative risk assessments and failure to pay attention to alternative risks.iii When we test additives with high dose animal studies, giving rodents 700 or 800 times the amount that humans normally eat, about halfiv of all natural and synthetic foods are found to "cause cancer" in rodents.v That does not establish causation, and it is amazing that the founding principle of toxicology from Paracelsus is so often ignored: "What is there that is not poison? All things are poison and nothing is without poison. "Solely the dose determines that a thing is not a poison."
It's not only the lack of risk of the additive, removing them from the market ignores the downside of these policy choices. The question that should be asked is, "what will replace substances removed from the market?" When something is regulated so that the price goes up, or they are removed from the market entirely, something will take its place. It's called risk/risk trade-offs. For example, synthetic red food dyes banned because of high-dose animal studies will be replaced by carmine. Carmine is a natural red food dye made from crushed up beetles that live on prickly pear cactus, in other words "beetlejuice." And, of course, it is a chemical. Carmine is also an allergen for some causing delayed allergic reactions although, like synthetic red food dyes, it appears to be perfectly safe.vi Carrageenan is a "natural food additive from seafood that has side effects on gut health and inflammation.vii
FDA, perhaps in petitions from activist organizations, also uses results from the International Agency for Research on Cancer (IARC). IARC's assessment does not include the risks associated with exposure: meaning it ignores the probability of getting cancer at actual levels of exposure. This has resulted in everything they have examined being called a cancer-causing agent except for one. As for food and color additives, as Walter Willett recently noted, "rigorous regulations are in place to ensure that these substances do not pose risks to human health." Too frequently, regulations are not supported by the best science. Examples of using poor science include selecting only those studies that support the regulation (cherry-picked), conservative risk assessments, using correlation instead of causation,viii or ignoring risk tradeoffs.ix Using poor science is an easy way for the FDA to erode Americans' trust.1 Another issue is ignoring science for the sake of slogans. Regulatory programs such as FDA's "Closer to Zero" is an example of ignoring evolutionary and toxicological science.x "Closer to Zero" is a program to reduce exposure to children from arsenic, lead, cadmium and mercury as close to zero as possible.
Over the course of evolution, our bodies have developed repair mechanisms such that, for the millions of times we are assaulted daily through air, water, food and other exposures, we repair the damage over 99.99 percent of the time (although these mechanisms decline in efficiency as we age). Not only do we repair almost all chemical and microbiological assaults, but in the case of all radiation and over half of all chemicals, low doses provide medicinal benefits - called hormesis. Cadmium, included in FDA's Closer to Zero program, exhibits hormetic properties. Another example is sulforaphane, a phytochemical that protects against oxidative stress at low doses.xi There are many synthetic chemicals that are hormetic, but this principle has been marginalized in current risk assessment practices.xii Ignoring thresholds and hormesis based on well-established biological mechanisms has led to regulations and enforcement that are both unnecessary and, given trade-offs, potentially harmful.
With better science, including risk/risk analysis, fewer regulations should show that their benefits exceed costs, resulting in fewer regulations.
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1 Unfortunately, too often regulatory economists are forced to use cherry-picked or weak science to generate benefits for regulations.
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Encouraging Invention and Innovation
Precision Health
Health scientists are beginning to realize that "one-size-fits-all" does not work for health. Some foods may have hormetic responses for one person while being toxic for another. Most foods that are allergenic for some are perfectly safe for others. In nutrition, some people lose weight on a low-fat diet, others gain.xiii Even twins respond differently to food.xiv Precision health also includes medicine where a disease shared by many may have different molecular causes for individuals. Human variability includes genetics, epigenetics, age, sex, health conditions, environment, microbiomes and, for behavior change, preferences.
This kind of variation means, in some cases, we cannot try and protect some people from exposure that theoretically may be harmful when they aren't helpful to others or actually harm them. For nutrition, it means that there are most likely zero diets that will work for everyone. Precision health ultimately will help us all to live longer. FDA should incorporate this science into all of their regulatory activities.
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New Technologies
Another way that the FDA hurts their credibility with the American people is lagging behind in implementing technical solutions to improve food safety. FDA has finally engaged in tech-enabled traceability of food but there is so much more they should be considering.xviiixv For example, smart packagingxvi using nanomaterial biosensors can either alert consumers to a spoiled food or even kill growing pathogens.xvii Smart devices can connect food processing machines to allow centralized monitoring. New designs for production machines can remove places where pathogens grow or make them easier to clean. Robots and other automation can be used in restaurants to prepare food or to clean plants - eliminating error-prone or sick humans. New food preservation technologies, like hydrostatic pressure, ultraviolet radiation, pulsed UV light and hydrostatic pressure can be used to treat foods including those that are sold as "fresh." Foods produced in factories, not farms, are much less likely to be contaminated with pathogens. These include, for example, foods produced with precision fermentation or in indoor farms. Genetically modified foods deliver higher yields, are drought resistant, use fewer pesticides and can produce healthier foods to feed a growing world population.
These are the solutions that will drive food safety, not more regulation.
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Rethinking FDA's Approach to Regulation
Achieving maximum control over firms drives many FDA actions. The result is a huge mixed bag of regulations - some that are effective and many that are not. Some were produced at the behest of larger companies actively trying to put smaller ones at a competitive disadvantage and, as I've previously mentioned, some regulations are based on weak scientific support.
Besides better science, some process changes may help eliminate bad regulations.
Most regulations should be preceded by an advanced notice of proposed rulemaking (ANPR) where the agency identifies a problem and suggests one or more possible solutions. This ensures that the agency is not committed to any particular course of action prior to receiving comments. If, after that, they identify a course of action that will result in a major regulation, there should be a pilot program, where feasible, to determine whether the regulation is likely to be effective.
At the proposal stage, the regulation should include: 1) an outcome goal; 2) an explanation of how that goal will be achieved; 3) the time necessary to achieve the goal; and 4) a Regulatory Impact Analysis, including a risk/risk Analysis.
As with formal rules, stakeholders should have a chance to object to them prior to being enacted.
This process should result in regulations being rare and, when implemented, have a much better chance of being effective.
Current regulations and programs should be reviewed, under the auspices of a Congressional agency, to determine which ones are outdated, duplicative or not effective.xix If a regulation or program is not successful in improving outcomes, it is simply a costly burden on the public.
An example of an outdated program is food standards: recipe standards that govern about half of all foods in the United States. Do we really need to ensure that ice cream is at least ten percent milkfat, that reflects how "mother used to make" them in the 1930s?xx Since food labeling has failed to stop the growth of obesity and chronic disease, should FDA continue to tinker with it? Currently, every manufacturer of low acid canned foods must submit paperwork on every food, in every size container. Is it still necessary?xxi With these regulatory and program reforms in place, the 800 pages of the FDA Investigations Operations Manual could probably be shortened considerably.xxii A simplified manual will make it easier for agency staff to focus on the critical processes that Americans rely on to keep food safe.
Recent reorganization efforts to modernize FDA's food program should be examined to see if they eliminated ineffective programs.xxiii
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Targeted, Risk-Based Compliance
With fewer regulations that effectively address existing resources, resources should be freed up to do more and more effective inspections.
When I started at FDA in 1980, I was told "We are cops." It's a role FDA cannot shirk and will always be important. To do so effectively, they must have risk-based inspections including both domestic and international foods. Internationally, we should focus on those who are intentionally trying to do us harm by poisoning our foodxxviixxviiixxiv or who are trying to gain a competitive advantage by undermining American companies.xxv The later harm may occur by influencing regulatory agencies,xxvi investing in tort trials, or stealing technology (e.g., stealing GM seeds). Improved information sharing would also allow the FDA to help American consumers stay informed of potential threats.
Addressing these threats will be strengthened if FDA shares best practices, science, and issues found with foreign suppliers with consumers and manufacturers. Such sharing is likely to be more effective than regulations and inspection.
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Accountability and Oversight
In addition to the cultural changes I've outlined above, Congressional oversight is key to ensuring that the FDA regains public trust.
There are three products of government programs: inputs, outputs and outcomes. For food safety:
* Inputs are the number of people who worked on regulations or inspections;
* Outputs are the number of regulations and inspections; and,
* Outcomes are the reduction in the number of cases or deaths from foodborne diseases reduced.
Outcomes are what consumers and taxpayers who fund this activity care about. Unfortunately, an agency's success is too often measured by their inputs or outputs. In 2007, President George W. Bush attempted to address this issue with an Executive Orderxxix called the Program Assessment Rating Tool (PART) to assure accountability in federal agencies. It was done in conjunction with the Government Performance and Results Act.
The Executive Order required agencies to have outcome goals and to track and report their progress. Agencies, including FDA, fought this requirement, as failure to comply with the E.O. was to be directly tied to reduced agency funding. I was briefly tasked with creating outcome measures for the foods program until the Deputy Center Director found out we would be required to actually achieve a health benefit by reducing consumption of trans fatty acids. The measure was changed to making people aware that trans fatty acids exist.xxx The program was discontinued by the next administration in 2009.
For FDA's food safety program, the outcome goal is simple, reducing the number of illnesses and deaths from food. Bring PART back and ensure that a Congressional committee charged with overseeing the budget uses the results of outcome-based goals to establish agency budgets.
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Additional Areas of Oversight for Congressional Consideration
Operation Stork Speed - Two problems have plagued infant formula: failure to maintain a plant free of pathogens resulting in shortages and high prices that affect low-income consumers. To ensure a consistent supply and that infant formula prices remain low, Congress should make sure FDA's policies encourage new competitors.xxxi More producers will ensure that supply disruptions, such as occurred recently, will not happen again. Also, more competitors will help to keep prices down so that less well-off consumers do not end up trying to extend infant formula with water, a danger to infants who rely on this sole source of nutrients.
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Pathogens
In terms of food making people sick, the biggest problem is still pathogens. After years of increased funding, the rates of foodborne disease are about the same. Unfortunately, the Hazard Analysis Critical Control Points or HACCP has, so far, not appeared to make much difference. It made no difference in the first mandated version for seafood because there were no critical control points for raw seafood like oysters. However, as mentioned above, knowing more about root causes could make a difference. Artificial intelligence may also help with predicting likely areas of outbreaks. Another step forward can be making foods in sanitary environments, like precision fermentation. Also, more targeted, risk-based inspections of plants and facilities could help.
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Single Food Agency
Recognizing it will upset the committee structures in Congress, there is still a great opportunity to clean up enabling laws (e.g., get rid of food standards, get rid of visual observation of meat preparation) by pulling together FDA's Human Food Program, USDA's FSIS, and pesticides from EPA. This would allow greater prioritization of resources, end duplicative or confusing inspections, and perhaps reduce overall expenditures.
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Nutrition
No evidence I have found shows that existing government tools including food labels, the Food Guide Pyramid and the Dietary Guidelines have been effective. We are eating more, getting heavier and chronic diseases have been increasing. If Congress continues to fund FDA's work on nutrition, it must hold the FDA responsible for improving health outcomes. Creating new foods will help but so will devices that will monitor what we eat, keep track of all of the relevant factors such as biomarkers and dietary preferences, and will make recommendations on what to eat. The problem for these devices is that they will fall under the restrictions of FDA's onerous medical device rules. See, for example, US Medical Devices; Choices and Consequences."xxxii
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Summary
In every budget season, FDA presents challenges, and the only question is how much should the budget be increased? There are new challenges but a change in FDA's culture of trying to control everything can lead to better management with existing funds.
New challenges include discovering which, if any, of the various forms of microplastics and PFAS chemicals that occur in food or bottled water are dangerous. There are also food issues from China and other countries that are harming American consumers. The use of new technologies like blockchain for traceback and artificial intelligence to help predict food safety weaknesses, perhaps using data from critical control points, needs further exploration. If artificial intelligence can be used for drug approvals, it should also be applicable to food additive approvals.xxxiii New foods created with precision fermentation and genetic modification offer exciting nutrition possibilities but should be evaluated for food safety challenges.
Better science can identify real risks and separating risks from hazards (terminating the precautionary approach) will help to reduce the rate of new regulations. Reducing the rate of new regulations, the stock of existing regulations, and eliminating outdated programs such as food standards can free up resources to meet new challenges. Both pre-market approvals and regulatory programs should be examined to see where new food and food technologies are being strangled by overly precautious rules.
Importantly, in an increasingly competitive international trade market, FDA can help to encourage new companies that are more competitive for both imports and exports by having fewer, more effective rules.
The FDA will never be able to improve Americans' health outcomes if they are not seen as an effective and trustworthy agency. To help consumers eat safer food and American businesses compete, FDA must shift its focus to public health, rather than simply amassing power.
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Footnotes:
i Carpenter, Daniel, Reputation and Power: Organizational Image and Pharmaceutical Regulation at the FDA, Princeton University Press, Princeton, N.J. 2010.
ii FDA, "Standards for the Growing, Harvesting, Packing, and Holding of Produce for Human Consumption," 2016.
iii Burgoon, Lyle, et. al, "Zero-Risk, Zero Sense: Unscientific Food, Drug Policies Are Nothing New," RealClearScience, March 19, 2025.
iv Ames, Bruce, Science Policy, Bruce Ames, testing for carcinogens | Science Policy.
v Sanders, Robert, "Misconceptions about the causes of cancer lead to skewed priorities and wasted money, UC Berkeley researchers say," Public Affairs, 1997. https://newsarchive.berkeley.edu/news/media/releases/97legacy/11_01_97a.html
vi Sadowska, Beata, et. al., "Carmine allergy in urticaria patients," Advances in Dermatology and Allergology, Nov 13, 2020.
vii Robbins, Robbins, "Common Food Additives in Natural & Organic Foods: Are They Safe?," Food Revolution Network, May 14, 2021.
viii Cox, Louis Anthony, "Objective causal predictions from observational data," Critical Reviews in Toxicology, Vol. 54, 2024.
ix Graham, John D. and Jonathan B. Wiener, editors, Risk vs. Risk: Tradeoffs in Protecting Health and the Environment, Harvard University Press, Cambridge Ma, 1995.
x US FDA, "Closer to Zero: Reducing Childhood Exposure to Contaminants from Foods," https://www.fda.gov/food/environmental-contaminants-food/closer-zero-reducing-childhood-exposure-contaminants-foods
xi Son, Tae Gen, et. al., "Hormetic Dietary Phytochemicals," Neuromolecular Med., Feb 43, 2009.
xii Kim Se-A", et. al., "Evolutionarily adapted hormesis-inducing stressors can be a practical solution to mitigate harmful effects of chronic exposure to low dose chemical mixtures." Environmental Pollution, Feb 2018.
xiii Williams, Richard, "Richard Williams: Nutrition science moves on," TrIb Extra, April 6, 2025.
xiv MedicalNewsToday, "Nutrition: Even identical twins respond differently to food," https://www.medicalnewstoday.com/articles/325521
xv US FDA, "Tech-Enabled Traceability - Core Element 1 of the New Era of Smarter Food Safety Blueprint." https://www.fda.gov/food/new-era-smarter-food-safety/tech-enabled-traceability-core-element-1-new-era-smarter-food-safety-blueprint
xvi Piedmont Plastics, "Technology Trends Revolutionizing Food Safety," https://www.piedmontplastics.com/blog/fda-food-safety?srsltid=AfmBOoqqy_0Dge3V1qgg17dhcQPGKeq6t1EGXXp_hczZZ7Q-KeGD6Ru7
xvii Technology Networks Applied Sciences, "Emerging Technologies in Combating Foodborne Illness, Nov 18, 2021. https://www.technologynetworks.com/applied-sciences/articles/emerging-technologies-in-combating-foodborne-illness-315787
xviii Orth, Steve, "Future of Food Safety: Next-Gen Technologies On The Rise," Food Safety Tech, Dec 3, 2024.
xix Miller, Sofie E. and Susan E. Dudley, "Regulatory Accretion: Causes and Possible Remedies, "Administrative law Review Accord, 67. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.administrativelawreview.org/wp-content/uploads/2016/03/MillerDudley_PublishedVersion-1.pdf
xx US FDA, Code of Federal Regulations, Title 21, Chapter 1, Subchapter B, Part 135. https://www.ecfr.gov/current/title-21/chapter-I/subchapter-B/part-135
xxi US FDA, "Establishment Registration & Process Filing for Acidified and Low-Acid Canned Foods (LACF): Paper Submissions." https://www.fda.gov/food/establishment-registration-process-filing-acidified-and-low-acid-canned-foods-lacf/establishment-registration-process-filing-acidified-and-low-acid-canned-foods-lacf-paper-submissions
xxii US FDA, "Investigations Operations Manual, 2025." chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.fda.gov/media/166525/download?attachment
xxiii FDA, "FDA's Reorganization Approved for Establishing Unified Human Foods Program, New Model for Field Operations and Other Modernization Efforts," May 30, 2024.
xxiv Brevett, Carol S. and Jessica Cox, "Intentional Adulteration of Foods with Chemicals: Snapshot for 2009-2022, Journal of Food Protection, 87/7, July 2024.
xxv Williams, Richard, "How to Beat China at its Own Game," Public Health Without Politics." Mar 6. 2025. https://fixingfood.substack.com/p/how-to-beat-china-at-its-own-game
xxvi Cotton, Tom, Seven Things You Can't Say About China, Broadside Books, 2025.
xxvii U.S. Chamber of Commerce, Institute for Legal Reform, "The ExxonMobil Lawsuit: Foreign Entities Funding Lawsuits to Target American Businesses," Feb 10, 2025.
xxviii Hvistendahl, Mara, "The Scientist and the Spy: A True Story of China, the FBI and Industrial Espionage, Riverhead Books, New York, NY, 2020.
xxix U.S. Government, President George W. Bush, "Executive Order: Improving Government Program Performance, Nov 2007.
xxx Williams, Richard A., Fixing Food, An FDA Insider Unravels the Myths and the Solutions, Post Hill Press, 2021.
xxxi Williams, Richard, "The infant formula blame game," The Hill, 6/4/2022.
xxxii Williams, Richard A., et. al., "US Medical Devices: Choices and Consequences," Mercatus Center. https://www.mercatus.org/research/research-papers/us-medical-devices-choices-and-consequences
xxxiii Pipes, Sally, "Here's How Trump's Pick to Lead the FDA Can Supercharge The Agency," Forbes, Mar 31, 2025.
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Original text here: https://oversight.house.gov/wp-content/uploads/2025/04/Williams-Written-Testimony.pdf
Beatty Pushes Back as Trump Budget Proposal Threatens to Gut Head Start
WASHINGTON, April 18 -- Rep. Joyce Beatty, D-Ohio, issued the following news release:
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Beatty Pushes Back as Trump Budget Proposal Threatens to Gut Head Start
WASHINGTON, DC -- Congresswoman Joyce Beatty (OH-03) issued the following statement in response to reports that President Trump may eliminate Head Start funding in his upcoming budget request:
"President Trump's plan to eliminate Head Start--after 60 years of proven success helping children and families thrive--is yet another reckless and heartless attack on Ohio's working families, children, and future.
Head Start has changed the ... Show Full Article WASHINGTON, April 18 -- Rep. Joyce Beatty, D-Ohio, issued the following news release: * * * Beatty Pushes Back as Trump Budget Proposal Threatens to Gut Head Start WASHINGTON, DC -- Congresswoman Joyce Beatty (OH-03) issued the following statement in response to reports that President Trump may eliminate Head Start funding in his upcoming budget request: "President Trump's plan to eliminate Head Start--after 60 years of proven success helping children and families thrive--is yet another reckless and heartless attack on Ohio's working families, children, and future. Head Start has changed thetrajectory of generations by providing critical early education, nutrition, and health services to children and families who need them most. In Ohio alone, more than 33,000 children and their families rely on Head Start every year. It directly supports over 7,000 jobs and empowers 21,000 parents across the state to pursue work or education, which in turn fuels our local economy--returning up to $10 for every dollar invested.
In my district, OH-03, the consequences of ending Head Start would be devastating: more than 2,700 child care slots could be lost, along with over $42 million in support for Central Ohio families, educators, and service providers.
This proposal isn't just an attack on people and a program--it's an attack on possibility, on opportunity, and on the future of America's children and families. Head Start often helps more than one generation. Let's be clear: you cannot call yourself 'pro-life' while gutting the very programs that support life in its earliest, most formative stages. You can't claim to support families while pulling the rug out from under them.
My Republican colleagues need to join me in protecting Head Start--a lifeline that strengthens children, families, and entire communities.
We cannot go backward as the fight against poverty intensifies. We must protect the progress we've made."
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Original text here: https://beatty.house.gov/media-center/press-releases/beatty-pushes-back-as-trump-budget-proposal-threatens-to-gut-head-start
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Beatty Pushes Back as Trump Budget Proposal Threatens to Gut Head Start
WASHINGTON, DC -- Congresswoman Joyce Beatty (OH-03) issued the following statement in response to reports that President Trump may eliminate Head Start funding in his upcoming budget request:
"President Trump's plan to eliminate Head Start--after 60 years of proven success helping children and families thrive--is yet another reckless and heartless attack on Ohio's working families, children, and future.
Head Start has changed the ... Show Full Article WASHINGTON, April 18 -- Rep. Joyce Beatty, D-Ohio, issued the following news release: * * * Beatty Pushes Back as Trump Budget Proposal Threatens to Gut Head Start WASHINGTON, DC -- Congresswoman Joyce Beatty (OH-03) issued the following statement in response to reports that President Trump may eliminate Head Start funding in his upcoming budget request: "President Trump's plan to eliminate Head Start--after 60 years of proven success helping children and families thrive--is yet another reckless and heartless attack on Ohio's working families, children, and future. Head Start has changed thetrajectory of generations by providing critical early education, nutrition, and health services to children and families who need them most. In Ohio alone, more than 33,000 children and their families rely on Head Start every year. It directly supports over 7,000 jobs and empowers 21,000 parents across the state to pursue work or education, which in turn fuels our local economy--returning up to $10 for every dollar invested.
In my district, OH-03, the consequences of ending Head Start would be devastating: more than 2,700 child care slots could be lost, along with over $42 million in support for Central Ohio families, educators, and service providers.
This proposal isn't just an attack on people and a program--it's an attack on possibility, on opportunity, and on the future of America's children and families. Head Start often helps more than one generation. Let's be clear: you cannot call yourself 'pro-life' while gutting the very programs that support life in its earliest, most formative stages. You can't claim to support families while pulling the rug out from under them.
My Republican colleagues need to join me in protecting Head Start--a lifeline that strengthens children, families, and entire communities.
We cannot go backward as the fight against poverty intensifies. We must protect the progress we've made."
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Original text here: https://beatty.house.gov/media-center/press-releases/beatty-pushes-back-as-trump-budget-proposal-threatens-to-gut-head-start
Bacon and Rouzer Introduce Bill to Help With SNAP Backlogs
WASHINGTON, April 18 -- Rep. Don Bacon, R-Nebraska, issued the following news release:
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Bacon and Rouzer Introduce Bill to Help with SNAP Backlogs
Washington - States can become overwhelmed with the number of SNAP applications due to inflation, economic downturn, and natural disasters. When this happens, many states do not have enough employees to deal with the large increase in applications, which creates backlogs that delay people from getting the SNAP benefits they need. Last week, Rep. Don Bacon (NE-02) and Rep. David Rouzer (NC-07) introduced the SNAP Staffing Flexibility Act of 2025 ... Show Full Article WASHINGTON, April 18 -- Rep. Don Bacon, R-Nebraska, issued the following news release: * * * Bacon and Rouzer Introduce Bill to Help with SNAP Backlogs Washington - States can become overwhelmed with the number of SNAP applications due to inflation, economic downturn, and natural disasters. When this happens, many states do not have enough employees to deal with the large increase in applications, which creates backlogs that delay people from getting the SNAP benefits they need. Last week, Rep. Don Bacon (NE-02) and Rep. David Rouzer (NC-07) introduced the SNAP Staffing Flexibility Act of 2025to give states the option to hire outside contractors to help process applications during these high-demand periods. This contract is terminated once the backlog is cleared.
"When people apply for SNAP Benefits, it is because they are already struggling," said Rep. Bacon. "I want to make sure states can process applications quickly so people can get the assistance they need. In economically challenging times, when state agencies are overwhelmed by applications, the use of outside contractors will speed up the delivery time of benefits."
The Children's Health Insurance Program (CHIP) and other safety net programs successfully use contractors to address backlogs, and this bill would give SNAP the same flexibility. Modernizing SNAP will give states more control over the administrative process in a way that does not threaten the jobs of current employees. This bill will lead to faster processing times, which means that families will get the assistance they need sooner.
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Original text here: https://bacon.house.gov/news/documentsingle.aspx?DocumentID=2649
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Bacon and Rouzer Introduce Bill to Help with SNAP Backlogs
Washington - States can become overwhelmed with the number of SNAP applications due to inflation, economic downturn, and natural disasters. When this happens, many states do not have enough employees to deal with the large increase in applications, which creates backlogs that delay people from getting the SNAP benefits they need. Last week, Rep. Don Bacon (NE-02) and Rep. David Rouzer (NC-07) introduced the SNAP Staffing Flexibility Act of 2025 ... Show Full Article WASHINGTON, April 18 -- Rep. Don Bacon, R-Nebraska, issued the following news release: * * * Bacon and Rouzer Introduce Bill to Help with SNAP Backlogs Washington - States can become overwhelmed with the number of SNAP applications due to inflation, economic downturn, and natural disasters. When this happens, many states do not have enough employees to deal with the large increase in applications, which creates backlogs that delay people from getting the SNAP benefits they need. Last week, Rep. Don Bacon (NE-02) and Rep. David Rouzer (NC-07) introduced the SNAP Staffing Flexibility Act of 2025to give states the option to hire outside contractors to help process applications during these high-demand periods. This contract is terminated once the backlog is cleared.
"When people apply for SNAP Benefits, it is because they are already struggling," said Rep. Bacon. "I want to make sure states can process applications quickly so people can get the assistance they need. In economically challenging times, when state agencies are overwhelmed by applications, the use of outside contractors will speed up the delivery time of benefits."
The Children's Health Insurance Program (CHIP) and other safety net programs successfully use contractors to address backlogs, and this bill would give SNAP the same flexibility. Modernizing SNAP will give states more control over the administrative process in a way that does not threaten the jobs of current employees. This bill will lead to faster processing times, which means that families will get the assistance they need sooner.
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Original text here: https://bacon.house.gov/news/documentsingle.aspx?DocumentID=2649
American Securities Association President Iacovella Testifies Before Senate Special Committee
WASHINGTON, April 18 -- The Senate Special Committee on Aging released the following testimony by Christopher A. Iacovella, president and CEO of the American Securities Association, from an April 9, 2025, joint hearing with the House Select Committee on the Strategic Competition Between the U.S. and the Chinese Communist Party entitled "Financial Aggression: How the Chinese Communist Party Exploits American Retirees and Undermines National Security":
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Chairman Scott, Ranking Member Gillibrand, Chairman Moolenaar, and Ranking Member Krishnamoorthi:
Thank you for the opportunity to testify ... Show Full Article WASHINGTON, April 18 -- The Senate Special Committee on Aging released the following testimony by Christopher A. Iacovella, president and CEO of the American Securities Association, from an April 9, 2025, joint hearing with the House Select Committee on the Strategic Competition Between the U.S. and the Chinese Communist Party entitled "Financial Aggression: How the Chinese Communist Party Exploits American Retirees and Undermines National Security": * * * Chairman Scott, Ranking Member Gillibrand, Chairman Moolenaar, and Ranking Member Krishnamoorthi: Thank you for the opportunity to testifytoday.
My name is Christopher Iacovella, and I am the President & CEO of the American Securities Association (ASA). Our mission is to promote trust and confidence among America's investors, facilitate capital formation for small businesses, and support competitively balanced capital markets.
For the last eight (8) years, the ASA has been the only financial services trade association calling on Congress and the federal government to take action to protect America's investors and our country from the economic and national security threats posed by the Chinese Communist Party (CCP).
Today, I will describe the risks the CCP poses to American investors and senior savings, what can be done about it, and why a bipartisan Congress must act.
I. The Chinese Threat & Western Capital.
History suggests the free flow of global capital and investment is the best way to lift people out of poverty, promote economic growth, and strengthen the rule of law. It also strengthens relations among nations, which furthers international peace and stability.
Unfortunately, this is not how our economic relationship with China has played out.1 While American capital flows into China have helped lift millions of its citizens out of poverty, the widely expected liberalization of China's political and economic systems never materialized.
In fact, the opposite has happened: Beijing has used the openness of the international financial and economic system to increase its global influence and exert geopolitical leverage over the United States and its allies. This has left the world less open and more authoritarian.
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1 Josh Rogin, Chaos Under Heaven: Trump, Xi, and the Battle for the Twenty-First Century (Boston: Houghton Mifflin Harcourt, 2021).
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The CCP has been engaged in a multi-decade and multifaceted political, economic, and military strategy to achieve "the great rejuvenation of the Chinese nation."2 The ultimate goal of this strategy is to reshape the international world order through economic coercion, subversion, and manipulation to benefit China, while avoiding a 'hot' war.
The strategy is broad-based, and it includes, among other things, intellectual property theft, undermining American cultural values, creating social unrest and division in American society, co-opting American elites and heads of multinational corporations, infiltrating U.S. governmental institutions, and accessing Western markets.3 To carry out this strategy the CCP needed access to Western capital, and that's where Wall Street comes in.4
For over two decades, Beijing has used Wall Street to penetrate U.S. capital markets and obtain the capital necessary to fund its economic, technological, and military rise. In exchange for selling Chinese companies to U.S. investors, Wall Street receives huge fees and access to the Chinese market. It's this quid pro quo that directly threatens America's economic and national security.
The CCP operates modern-day China as a 'Party-State', which intentionally blurs the lines between Chinese industry and the CCP.5 That raises an important question: How is the money American investors send to the CCP used?
Among other things, American investor money funds the CCP's use of forced labor, genocide, and other human rights abuses,6 the ongoing internment of Uyghurs in concentration camps,7 the emission of more greenhouse gases than all developed countries combined,8 weapon systems for the People's Liberation Army,9 a broad-based disinformation campaign to undermine American values,10 subsidies for Chinese companies so they can dump goods into our market at artificially low prices to put U.S. companies out of business,11 and a cyber-army that relentlessly attacks the United States,12 and other nations of the free world.13
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2 U.S. Department of Defense, Office of the Secretary of Defense, Military and Security Developments Involving the People's Republic of China (2022) https://media.defense.gov/2022/Nov/29/2003122279/-1/-1/1/2022-MILITARY-AND-SECURITY-DEVELOPMENTS-INVOLVING-THE-PEOPLES-REPUBLIC-OF-CHINA.PDF
3 Political Warfare: Strategies for Combating China's Plan to "Win without Fighting" Kerry Gershaneck, at https://lccn.loc.gov/2020032647. America First Investment Policy (Feb. 21, 2025). America First Investment Policy - The White House "The PRC is also increasingly exploiting United States capital to develop and modernize its military, intelligence, and other security apparatuses, which poses significant risk to the United States homeland and Armed Forces of the United States around the world"
4 Iacovella, C. A. (2024). "How Wall Street Funds China's Rise". In 2024 China Transparency Report, the Heritage Foundation.
5 https://www.asiatimesfinancial.com/ccp-announces-plan-to-take-control-of-chinas-private-sector "President issues 'important instructions' to all regions to boost party control over private enterprise and rejuvenate the nation; all firms will need employees from the party to boost law abidance and moral standard". https://archive.nytimes.com/www.nytimes.com/ref/college/coll-china-politics-002.html
6 https://thehill.com/blogs/congress-blog/homeland-security/522443-countering-chinas-forced-labor-practices;/ https://www.cnn.com/2021/01/19/us/us-xinjiang-china-genocide-intl/index.html; https://www.hongkongwatch.org/all-posts/2022/12/5/updated-new-hkw-report-finds-that-msci-investors-are-at-risk-of-passively-funding-crimes-against-humanity-in-xinjiang; https://www.bbc.com/news/world-asia-china-51697800
7 https://www.reuters.com/article/us-hikvision-usa-uighur/u-s-might-blacklist-chinas-hikvision-over-uighur-crackdown-source-idUSKCN1SS28U; https://www.bbc.com/news/world-asia-china-51697800; https://foreignaffairs.house.gov/press-release/mccaul-welcomes-genocide-designation-for-ccps-treatment-of-uyghurs/
8 https://rhg.com/research/chinas-emissions-surpass-developed-countries/
9 https://www.cnn.com/2020/10/29/asia/us-election-us-military-indo-pacific-intl-hnk-ml/index.html
10 https://omaha.com/opinion/josh-rogin-u-s-schools-are-waking-up-to-the-china-threat/article_e31c9c07-a491-596f-93d9-575285940893.html
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While the American people overwhelmingly reject this behavior, the money flow continues.14
Unless Congress makes funding the CCP illegal or cost prohibitive, the partnership won't end.
As Upton Sinclair said, "It is difficult to get a man to understand something, when his salary depends upon his not understanding it."
II. How the CCP Exploits the U.S. Capital Markets.
A. Chinese company listings on U.S exchanges
As of March 2025, there are 286 Chinese companies listed on U.S. exchanges with a collective market capitalization of $1.1 trillion.15 Each of those companies pays a listing and sustaining fee to an exchange to keep its securities trading. Congress enacted the Holding Foreign Companies Accountable Act and Accelerating Holding Foreign Companies Accountable Act to prohibit these companies from having their shares listed on a U.S. stock exchange if they do not comply with U.S. financial reporting, disclosure, and auditing laws.
The ASA worked with members on both sides of the aisle to advance each law. The laws directed the Public Company Accounting Oversight Board (PCAOB) to examine audit firms headquartered in mainland China and Hong Kong.16 Because this happened while COVID lockdowns were still in place, the PCAOB Chair cautioned the American public that the examination was just a beginning.17 This raises questions about whether the PCAOB examiners were able to fully carry out their duties.
Accordingly, the ASA urges Congress to vigorously exercise its oversight role to ensure that both the SEC and PCAOB carry out the laws and prevent further investor harm.
U.S. exchanges also have regulatory authority to protect the U.S. investing public from any non-compliant Chinese company whose stock is listed on their exchange. They can use that authority to delist any company, its subsidiaries, or a fund that includes such companies and has not complied with U.S. laws or been named to a U.S. prohibition list. To date, they have been reluctant to do so.
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11 https://www.voanews.com/a/report-china-spends-billions-of-dollars-to-subsidize-favored-companies-/6587314.html
12 https://www.justice.gov/opa/pr/chinese-military-personnel-charged-computer-fraud-economic-espionage-and-wire-fraud-hacking;%20https:/www.cnbc.com/2020/07/07/fbi-chief-slams-chinese-cyberattacks-against-us-hudson-institute.html; https://www.cnbc.com/2020/07/07/fbi-chief-slams-chinese-cyberattacks-against-us-hudson-institute.html
13 https://fortune.com/2018/12/19/china-eu-hacking/
14 https://www.wsj.com/articles/china-has-one-powerful-friend-left-in-the-u-s-wall-street-11606924454; https://www.cnbc.com/2021/04/28/a-tidal-wave-of-chinese-companies-rush-into-the-red-hot-ipo-market-in-the-us.html?&qsearchterm=china%20ipo
15 https://www.uscc.gov/research/chinese-companies-listed-major-us-stock-exchanges#:~:text=Summary%3A,market%20capitalization%20of%20%24848%20billion.
16 PCAOB Secures Access to Inspect, Investigate Chinese Firms for First Time in History, available at https://pcaobus.org/news-events/news-releases/news-release-detail/pcaob-secures-complete-access-to-inspect investigate-chinese-firms-for-first-time-in-history 17 PCAOB Secures Complete Access to Inspect, Investigate Chinese Firms for First Time in History. Erica Y. Williams (Dec. 15, 2022) https://pcaobus.org/news-events/speeches/speech-detail/pcaob-secures-complete-access-to-inspect-investigate-chinese-firms-for-first-time-in-history
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B. The passive index loophole
According to Bloomberg, "more than 2,000 U.S. mutual and exchange-traded funds--particularly those tracking indexes--have $294 billion invested across Chinese stocks and bonds."18
An index fund is a fund that owns a portfolio of stocks that tracks a financial market index (i.e., S&P 500 or Dow Jones). Index funds significantly impact the flow of global capital, especially in international and emerging markets. Inclusion in an index can lead to billions of dollars being steered into a company or a country through the sale of mutual funds and exchange-traded funds that track the index.19 A regulatory loophole, I call the "passive index loophole", allows non-U.S. companies listed on non- U.S. stock exchanges to be included in an index fund and sold to American investors. This allows the non-U.S. company to avoid the company-specific disclosure, financial reporting, and audit requirements that American companies must comply with to sell stock to American investors.
With knowledge of the loophole, the CCP pressured the index providers20 to create a special index for mainland Chinese companies listed on Chinese exchanges called A-shares,21 and to include those companies as well as the ones listed on U.S. exchanges in international and emerging market indices. A recent study found the dollar amount of foreign investment in Chinese companies was 51 percent higher for those companies in an index.22 As a result, the 'passive index loophole' has funneled billions of American investor dollars to China.23 By blindly including Chinese companies listed on Chinese stock exchanges in an index, neither the index provider, nor the fund issuer, know whether these companies sold to American investors through index funds are Enron-like frauds,24 affiliated with the Chinese military,25 or supporting human egregious rights abuses.26 Most American investors who buy index funds with international exposure have no idea that their investment goes to Chinese companies that don't comply with U.S. transparency laws, are involved in egregious human rights abuses, or pose a national security risk to the U.S.27 And, as the Select Committee pointed out, not only have many of these companies turned out to be frauds,28 but some of the Chinese companies in passive index funds are actually on U.S. government prohibition lists.29 The last two Administrations have tried to address this issue using Executive Order 13959, which forced the de-listing and de-indexing of firms owned or controlled by the Chinese military trading in the U.S. But, as the Select Committee also noted, the companies de-indexed by this order only scratches the surface of Chinese companies found in index funds.30 To end this practice Congress can pass the 'No China in Index Funds Act',31 which would close the 'passive index loophole' and prevent U.S. investor dollars from being funneled into CCP-backed or controlled companies through index funds.
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18 Silla Brush, "BlackRock, MSCI to See Tighter Oversight Over U.S. Investments in China," Bloomberg, August 15, 2023, https://www.bloomberg.com/news/articles/2023-08-15/blackrock-fund-managers-brace-for-even-more-scrutiny-over-china (accessed September 6, 2023)
19 The three largest index providers are MSCI (Morgan Stanley Capital International), FTSE (Financial Times Stock Exchange), and S&P (Standard and Poor) Dow Jones. More info can be found at Index Industry Association, "What We Do," https://www.indexindustry.org/ (accessed September 6, 2023).
20 https://www.wsj.com/articles/how-china-pressured-msci-to-add-its-market-to-major-benchmark-11549195201
21 https://www.investopedia.com/terms/a/a-shares.asp
22 Juan Jose Cortina Lorente et al., "The Internationalization of China's Equity Markets," Policy Research Working Paper No.10513, 2023, https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099356306282340403/idu0f0ff0f0d04f82046a8082990c1666e4a8c78?cid=DEC_AL_PolicyResearch_EN_INT
23 https://selectcommitteeontheccp.house.gov/sites/evo-subsites/selectcommitteeontheccp.house.gov/files/evo-media-document/4.18.24%20How%20Americsan%20Financial%20Institutions%20Provide%20Billions%20of%20Dollars%20to%20PRC%20Companies%20Committing%20Human%20Rights%20Abuses%20and%20Fueling%20the%20PRC's%20Military.pdf; Peter Pham, "What's China's Secret Source Of Funding?" Forbes, February 12, 2018, https://www.forbes.com/sites/peterpham/2018/02/12/whats-chinas-secret-source-of-funding/?sh=279e7286254b (accessed September 6, 2023).
24 See above.
25 https://foreignpolicy.com/2019/02/07/we-cant-tell-if-chinese-firms-work-for-the-party/
26 https://www.reuters.com/article/us-hikvision-usa-uighur/u-s-might-blacklist-chinas-hikvision-over-uighur-crackdown-source-idUSKCN1SS28U
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C. Variable interest entities
Another scheme the CCP exploits to raise money for its companies is called the variable interest entity (VIE) structure. This scheme essentially removes the equity ownership and voting rights that American investors normally enjoy when they buy a company on a U.S. exchange. Specifically, the VIE structure allows the operating company located in China to control the economic activities of a shell company, usually located in the Cayman Islands, through a contract. The shares of the operating company located in China are not owned by U.S. investors. This makes enforcement of U.S. laws against the mainland Chinese company very difficult and intentionally shields it from legal action by American investors.
The ASA has joined the Select Committee and various investor groups to demand the risks posed by this scheme end.32 While the previous U.S. Securities and Exchange Commission (SEC) Chairman paused its use in new initial public offerings (IPOs), the agency did not stop the use of VIEs by Chinese companies currently listed on U.S. exchanges.33 Congress needs to end this legal fiction and prohibit the listing of any Chinese company on a U.S. exchange that uses the VIE scheme.
D. Business Prohibition Lists & Outbound Investment
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27 http://selectcommitteeontheccp.house.gov/media/press-releases/committee-report-american-financial-institutions-funneled-billions-prc; https://www.institutmontaigne.org/en/expressions/influence-without-ownership-chinese-communist-party-targets-private-sector
28 https://www.reuters.com/article/us-china-stocks-regulation-analysis/chinese-firms-missing-6-billion-tests-regulators-resolve- idUSKCN1SN0OT; https://www.scmp.com/business/companies/article/3024084/why-kangmei-pharmaceutical-found-have- committed-one-chinas; https://finance.yahoo.com/news/one-theme-popping-among-chinese-154155487.html; See also Select Committee Report
29 American Financial Institutions Funneled Billions into PRC Companies Fueling the CCP's Military, Surveillance State, and Uyghur Genocide. Report of the Select Committee on the CCP (April 2024) https://selectcommitteeontheccp.house.gov/media/press-releases/committee-report-american-financial-institutions-funneled-billions-prc
30 https://selectcommitteeontheccp.house.gov/media/press-releases/committee-report-american-financial-institutions-funneled-billions-prc
31 https://spartz.house.gov/media/press-releases/spartz-sherman-introduce-four-bills-address-china-risk-us-stock-market2
32 Gallagher Calls on President Biden to Adopt Restrictions on US Investments to China (August 3, 2023). https://selectcommitteeontheccp.house.gov/media/press-releases/gallagher-calls-president-biden-adopt-restrictions-us-investments-china; https://www.cii.org/files/publications/misc/12_07_17%20Chinese%20Companies%20and%20the%20VIE%20Structure.pdf;
33 https://www.sec.gov/newsroom/speeches-statements/gensler-2021-07-30
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As this Committee and Congress considers policies to counter the CCP's exploitation of our financial markets, I recommend Congress require (1) that an entity placed on one government prohibition list (i.e. OFAC, DOD, Commerce Entity List, and the State Department's Human Rights List) be placed on all lists and automatically allow the Treasury Secreaty to remove that company from our public capital markets,34 and (2) the consolidation of all government business prohibition lists in a general list maintained by the Treasury Department so the public knows what foreign adversary companies are on the consolidated list and the Treasury Secretary can take more immediate action to protect American investors and businesses.
We strongly support efforts by Congress to scrutinize and prevent outbound investments to China made by U.S. individuals and institutions. One bill, the Foreign Investment Guardrails to Help Thwart (FIGHT) China Act,35 allows the Treasury Secretary to prevent American citizens and Wall Street institutions from financing the CCP's cyber army or its military build-up. This bill - in addition to No China in Index Funds Act - will close the scandalous 'passive index loophole'.
E. Mainland Chinese Broker-Dealers with U.S. Customers.
Another risk to retail investors is posed by Chinese-owned broker-dealers operating as a regulated entities in our markets with known ties to the CCP. The Select Committee, State Attorneys' General, and members of Congress on both sides of the aisle have repeated raised concerns about this problem.36 It is shocking that a broker-dealer with operations in mainland China and affiliated with the CCP can be registered to do business in this country.37 If the CCP demands access to the personal and financial information of Americans at these mainland Chinese broker-dealers, then what is to stop the party from using that information to blackmail those Americans or block access to their money unless they agree to spy on this country. This is feature of the CCP's strategy of coercion described above, and it represents the very definition of a national security concern.
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34 This policy is very similar to The Sanction Transactions Originating from Pernicious Chinese Companies and Policies (STOP CCP) Act, cosponsored by Senators Mike Braun and Bill Hagerty and included in Senator Scott's package in March of 2023.
35 https://barr.house.gov/press-releases?ID=7FCD27D4-498D-4F1C-B1BD-DF3EADFC1F05; https://www.cornyn.senate.gov/news/cornyn-cortez-masto-colleagues-introduce-outbound-investment-legislation-to-counter-china/
36 Letter from the House Select Committee on the Chinese Communist Party to Webull CEO, Anthony Denier, (Nov. 25, 2024), available here: https://selectcommitteeontheccp.house.gov/sites/evo-subsites/selectcommitteeontheccp.house.gov/files/evo-media-document/Webull%2011.25%20-%20Final.pdf; Letter from Sen. Tommy Tuberville (R-AL) and Rep. Jim Banks (R-IN) to SEC and FINRA (May 3, 2023) ("May 2023 Tuberville-Banks Letter"), available here: https://static.foxnews.com/foxnews.com/content/uploads/2023/05/Tuberville-Banks-Oversight-Letter-to-SEC-FINRA-5.3.20231.pdf; Letters from Sen. Tommy Tuberville (R-AL) to SEC and FINRA (Jun. 5, 2023), available here: https://www.tuberville.senate.gov/wp-content/uploads/FILE_3666.pdf and to SEC and DOJ (July 10, 2023), available here: https://www.tuberville.senate.gov/wp-content/uploads/FILE_3666.pdf; Letter from Sens. Tommy Tuberville (R-AL), Ted Cruz (R-TX), Mike Braun (R-IN), Rick Scott (R-FL), and Roger Marshall (R-KS) to SEC Chair Gary Gensler (Jul. 29, 2022), available here: https://www.tuberville.senate.gov/newsroom/press-releases/tuberville-colleagues-call-for-investigation-into-stock-trading-platforms-with-ties-to-china/; Letter from Rep. Ritchie Torres (D-NY) to SEC IG and GAO (July 13, 2023), available here: https://twitter.com/RepRitchie/status/1679534903661301761/photo/1; Letter from Rep. Sherman (CA-32) to SEC as reported in Capitol Account (Feb. 23, 2023); Letter from Rep. Luetmekemeyer to SEC and FINRA (Sept. 26, 2023), available here: https://luetkemeyer.house.gov/uploadedfiles/20230926181427040.pdf; Letter from Senator Cotton (R-AR) to Director of National Intelligence Avril Haines (Sept. 23, 2021), available here: https://www.cotton.senate.gov/news/press-releases/cotton-calls-for-investigation-of-chinese-stock-trading-app; Letter from Rep. Lawler (R-NY) to Treasury Secretary Yellen (Apr. 27, 2023), available here: https://lawler.house.gov/news/documentsingle.aspx?DocumentID=257 and Letter from Rep. Lawler (R-NY) to Treasury Secretary Yellen (Jul. 21, 2023), available here: https://lawler.house.gov/news/documentsingle.aspx?DocumentID=556; https://www.banking.senate.gov/hearings/09/06/2023/oversight-of-the-us-securities-and-exchange-commission.
37 May 2023 Tuberville-Banks Letter. The Senators wrote: "As you are aware, Webull and Moomoo collect highly sensitive personal information from millions of their U.S. customers, including personally identifiable information (PII) such as Social Security numbers, mailing addresses, and financial account data. . . . In light of Beijing's increasingly strict privacy laws barring many Chinese companies from sharing data with Western regulators, the presence of Webull registered representatives in the PRC raises serious concerns regarding (1) Webull's ability to meet its supervisory obligations under SEC and FINRA rules; (2) the SEC's and FINRA's ability to oversee and examine Webull and its registered representatives and associated persons located in the PRC; (3) the adequacy of Webull's compliance with all SEC and FINRA recordkeeping requirements; (4) the ability of the SEC and FINRA to adequately enforce federal securities laws, including the ability to obtain documents and information from Webull employees located in the PRC; and (5) the potential for U.S. customer PII to be shared or exfiltrated to Webull employees or affiliated entities located in the PRC."
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III. Taxing Outbound Investment.
As the reconciliation debate heats up and Congress looks for new ways to raise revenue, it can do so while protecting American investors and our national security. Congress should examine how much revenue can be raised by imposing a foreign adversary capital gains tax on the realized proceeds of any type of public or private investment made in China, in a Chinese company, or in a registered investment fund that owns Chinese securities.
Increasing the tax burden on any American money that funds Communist China's global ambitions would significantly change the cost for American companies to do business with this nefarious foreign adversary.
IV. A Word About Fiduciary Duty.
Institutional investors and asset managers owe a fiduciary duty of loyalty to those who entrust them with their money.38
This duty requires fiduciaries to conduct thorough due diligence on any company or fund in which they invest, and that is very difficult to do in China.39
The duty also requires those managing money to evaluate the legal protections and enforceability of the law in the country where they choose to send investor money. Americans who lose money because a Chinese company commits fraud, or the government appropriates their funds have little chance of recovering their money. Additionally, many American investors don't realize the scope of liability associated with owning a U.S.-listed company that does business in China under U.S. law, international law, or otherwise.40 The fiduciary duty also requires American investors to evaluate the political and reputational risks associated with U.S. companies doing business with the CCP specifically, or in China generally. This would include a scenario where China decides to invade, quarantine, or act aggressively with respect to Taiwan,41 and the U.S. government responds by imposing economic sanctions that prohibit American companies from doing business in China (as it did after Russia invaded the Ukraine).42 In this scenario, bond funds would be forced to remove dollar-denominated Yuan bonds from bond indexes sold to American investors.43
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38 https://www.americansecurities.org/post/asa-letter-to-wsj-real-audits-for-chinese-firms-listed-in-the-u-s.
39 https://foreignpolicy.com/2019/02/07/we-cant-tell-if-chinese-firms-work-for-the-party/
40 https://www.justsecurity.org/74388/genocide-against-the-uyghurs-legal-grounds-for-the-united-states-bipartisan-genocide- determination/; https://www.washingtonexaminer.com/news/state-department-china-committing-uyghur-genocide-wont-say-if- ongoing; https://cja.org/what-we-do/litigation/legal-strategy/the-alien-tort-statute/
41 https://www.uscc.gov/hearings/deterring-prc-aggression-toward-taiwan
42 https://www.state.gov/ukraine-and-russia-sanctions/
43 "In order to be considered for inclusion in the Global Aggregate Index, a local currency debt market must be classified as investment grade and its currency must be freely tradable, convertible, hedgeable, and free of capital ontrols." https://www.bloomberg.com/company/press/bloomberg-add-china-bloomberg-barclays-global-aggregate-indices/
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American investors could also lose billions if the CCP responds to sanctions by imposing capital controls on foreign money or on the retained earnings of U.S. company subsidiaries located in China.44 Senator Scott's 'Protecting American Capital Act' could help investors understand the true nature of the financial exposure U.S. listed companies have to Communist China if these scenarios were to materialize.45
V. Combating State-Sponsored Fraud.
The amount of fraud perpetrated against Americans, and especially seniors, is staggering. The Federal Trade Commission (FTC) estimates that Americans lost over $158 billion to fraud in 2023 alone.46
Fraud has gone from an individual criminal act to a business opportunity funded by state-sponsored actors across the globe.47 It has become so lucrative that Deloitte estimates Americans will lose $40 billion to AI-enhanced fraud by 2027.48 Because these criminals are now funded by nation-states like China and Russia they have become increasingly sophisticated in their techniques using generative AI and other means. 49 Many types of scams exist and unfortunately, those who are routinely targeted and most likely to be victimized are the most vulnerable among us, namely our senior citizens.
Despite efforts by regulators to warn investors about the latest scams,50 the level of cunning and the nonstop evolution of the scams these fraudsters employ continues to leave private companies, law enforcement, and investors playing catch-up.
ASA member firms are increasingly grappling with scams that target their employees, their customers, and their firms. For example, it is not uncommon for scammers to pose as personnel from a licensed U.S. Broker-Dealer (BD) after they know a person has been a victim of another scam (perhaps also perpetrated by them or their associates). The criminals then present a deceptive offer of forensic and recovery services, ostensibly to assist the victim in recouping their losses. In reality, they exploit the victim's desperation, extracting multiple payments without providing any genuine assistance or recovery of funds.
Scammers have also begun to hack into customer email accounts and give trade instructions from an email account on file with the BD. Because scammers have access to email history, scammers can pose very credibly as customers and seem to know things specific to the customer. The scammers set up a 'rule' in the customer's email forwarding all incoming email to the customer from the BD to the scammers' fake email account, so the customer will not discover the
activity. The scammers then submit wire requests to the BD to be sent to a bank account in the customer's name that the scammer has opened and controls. By the time the customer and/or BD discover the depth of this scam, the funds have been moved and are extremely difficult to recover.
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44 https://www.cnn.com/2023/03/06/business/mark-mobius-china-capital-controls/index.html
45 https://www.rickscott.senate.gov/services/files/78A1BB15-8B96-4940-A288-66707BAEAAD9
46 https://www.sec.gov/files/20250306-isc-fraud-briefing-iac-meeting.pdf
47 https://www.csis.org/analysis/cyber-scamming-goes-global-unveiling-southeast-asias-high-tech-fraud-factories
48 Id.
49 https://www.sec.gov/files/20250306-isc-fraud-briefing-iac-meeting.pdf; https://www.sec.gov/newsroom/press-releases/2024-196 ""SEC Office of the Investor Advocate Issues Report on Nationally Representative Survey of Investors and Continues Focus on Investment Fraud";
50 https://www.finra.org/investors/insights/gen-ai-fraud-new-accounts-and-takeovers; https://www.finra.org/investors/insights/artificial-intelligence-and-investment-fraud
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The only way to try to combat the sophistication of this ever-changing criminal activity going forward is to promote an open, honest and trustworthy partnership between the private sector and government.
VI. Conclusion.
Congress must end Communist China's use of American investor savings to fund its geopolitical ambitions. Every day that we don't act, the economic and national security threat to our country and the American way of life increases.
I would like to thank each committee for holding this joint hearing and I look forward to answering your questions.
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Original text here: https://www.aging.senate.gov/imo/media/doc/713d6dee-b247-ab39-387e-35005767f950/Testimony_Iacovella%2004.09.251.pdf
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Chairman Scott, Ranking Member Gillibrand, Chairman Moolenaar, and Ranking Member Krishnamoorthi:
Thank you for the opportunity to testify ... Show Full Article WASHINGTON, April 18 -- The Senate Special Committee on Aging released the following testimony by Christopher A. Iacovella, president and CEO of the American Securities Association, from an April 9, 2025, joint hearing with the House Select Committee on the Strategic Competition Between the U.S. and the Chinese Communist Party entitled "Financial Aggression: How the Chinese Communist Party Exploits American Retirees and Undermines National Security": * * * Chairman Scott, Ranking Member Gillibrand, Chairman Moolenaar, and Ranking Member Krishnamoorthi: Thank you for the opportunity to testifytoday.
My name is Christopher Iacovella, and I am the President & CEO of the American Securities Association (ASA). Our mission is to promote trust and confidence among America's investors, facilitate capital formation for small businesses, and support competitively balanced capital markets.
For the last eight (8) years, the ASA has been the only financial services trade association calling on Congress and the federal government to take action to protect America's investors and our country from the economic and national security threats posed by the Chinese Communist Party (CCP).
Today, I will describe the risks the CCP poses to American investors and senior savings, what can be done about it, and why a bipartisan Congress must act.
I. The Chinese Threat & Western Capital.
History suggests the free flow of global capital and investment is the best way to lift people out of poverty, promote economic growth, and strengthen the rule of law. It also strengthens relations among nations, which furthers international peace and stability.
Unfortunately, this is not how our economic relationship with China has played out.1 While American capital flows into China have helped lift millions of its citizens out of poverty, the widely expected liberalization of China's political and economic systems never materialized.
In fact, the opposite has happened: Beijing has used the openness of the international financial and economic system to increase its global influence and exert geopolitical leverage over the United States and its allies. This has left the world less open and more authoritarian.
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1 Josh Rogin, Chaos Under Heaven: Trump, Xi, and the Battle for the Twenty-First Century (Boston: Houghton Mifflin Harcourt, 2021).
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The CCP has been engaged in a multi-decade and multifaceted political, economic, and military strategy to achieve "the great rejuvenation of the Chinese nation."2 The ultimate goal of this strategy is to reshape the international world order through economic coercion, subversion, and manipulation to benefit China, while avoiding a 'hot' war.
The strategy is broad-based, and it includes, among other things, intellectual property theft, undermining American cultural values, creating social unrest and division in American society, co-opting American elites and heads of multinational corporations, infiltrating U.S. governmental institutions, and accessing Western markets.3 To carry out this strategy the CCP needed access to Western capital, and that's where Wall Street comes in.4
For over two decades, Beijing has used Wall Street to penetrate U.S. capital markets and obtain the capital necessary to fund its economic, technological, and military rise. In exchange for selling Chinese companies to U.S. investors, Wall Street receives huge fees and access to the Chinese market. It's this quid pro quo that directly threatens America's economic and national security.
The CCP operates modern-day China as a 'Party-State', which intentionally blurs the lines between Chinese industry and the CCP.5 That raises an important question: How is the money American investors send to the CCP used?
Among other things, American investor money funds the CCP's use of forced labor, genocide, and other human rights abuses,6 the ongoing internment of Uyghurs in concentration camps,7 the emission of more greenhouse gases than all developed countries combined,8 weapon systems for the People's Liberation Army,9 a broad-based disinformation campaign to undermine American values,10 subsidies for Chinese companies so they can dump goods into our market at artificially low prices to put U.S. companies out of business,11 and a cyber-army that relentlessly attacks the United States,12 and other nations of the free world.13
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2 U.S. Department of Defense, Office of the Secretary of Defense, Military and Security Developments Involving the People's Republic of China (2022) https://media.defense.gov/2022/Nov/29/2003122279/-1/-1/1/2022-MILITARY-AND-SECURITY-DEVELOPMENTS-INVOLVING-THE-PEOPLES-REPUBLIC-OF-CHINA.PDF
3 Political Warfare: Strategies for Combating China's Plan to "Win without Fighting" Kerry Gershaneck, at https://lccn.loc.gov/2020032647. America First Investment Policy (Feb. 21, 2025). America First Investment Policy - The White House "The PRC is also increasingly exploiting United States capital to develop and modernize its military, intelligence, and other security apparatuses, which poses significant risk to the United States homeland and Armed Forces of the United States around the world"
4 Iacovella, C. A. (2024). "How Wall Street Funds China's Rise". In 2024 China Transparency Report, the Heritage Foundation.
5 https://www.asiatimesfinancial.com/ccp-announces-plan-to-take-control-of-chinas-private-sector "President issues 'important instructions' to all regions to boost party control over private enterprise and rejuvenate the nation; all firms will need employees from the party to boost law abidance and moral standard". https://archive.nytimes.com/www.nytimes.com/ref/college/coll-china-politics-002.html
6 https://thehill.com/blogs/congress-blog/homeland-security/522443-countering-chinas-forced-labor-practices;/ https://www.cnn.com/2021/01/19/us/us-xinjiang-china-genocide-intl/index.html; https://www.hongkongwatch.org/all-posts/2022/12/5/updated-new-hkw-report-finds-that-msci-investors-are-at-risk-of-passively-funding-crimes-against-humanity-in-xinjiang; https://www.bbc.com/news/world-asia-china-51697800
7 https://www.reuters.com/article/us-hikvision-usa-uighur/u-s-might-blacklist-chinas-hikvision-over-uighur-crackdown-source-idUSKCN1SS28U; https://www.bbc.com/news/world-asia-china-51697800; https://foreignaffairs.house.gov/press-release/mccaul-welcomes-genocide-designation-for-ccps-treatment-of-uyghurs/
8 https://rhg.com/research/chinas-emissions-surpass-developed-countries/
9 https://www.cnn.com/2020/10/29/asia/us-election-us-military-indo-pacific-intl-hnk-ml/index.html
10 https://omaha.com/opinion/josh-rogin-u-s-schools-are-waking-up-to-the-china-threat/article_e31c9c07-a491-596f-93d9-575285940893.html
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While the American people overwhelmingly reject this behavior, the money flow continues.14
Unless Congress makes funding the CCP illegal or cost prohibitive, the partnership won't end.
As Upton Sinclair said, "It is difficult to get a man to understand something, when his salary depends upon his not understanding it."
II. How the CCP Exploits the U.S. Capital Markets.
A. Chinese company listings on U.S exchanges
As of March 2025, there are 286 Chinese companies listed on U.S. exchanges with a collective market capitalization of $1.1 trillion.15 Each of those companies pays a listing and sustaining fee to an exchange to keep its securities trading. Congress enacted the Holding Foreign Companies Accountable Act and Accelerating Holding Foreign Companies Accountable Act to prohibit these companies from having their shares listed on a U.S. stock exchange if they do not comply with U.S. financial reporting, disclosure, and auditing laws.
The ASA worked with members on both sides of the aisle to advance each law. The laws directed the Public Company Accounting Oversight Board (PCAOB) to examine audit firms headquartered in mainland China and Hong Kong.16 Because this happened while COVID lockdowns were still in place, the PCAOB Chair cautioned the American public that the examination was just a beginning.17 This raises questions about whether the PCAOB examiners were able to fully carry out their duties.
Accordingly, the ASA urges Congress to vigorously exercise its oversight role to ensure that both the SEC and PCAOB carry out the laws and prevent further investor harm.
U.S. exchanges also have regulatory authority to protect the U.S. investing public from any non-compliant Chinese company whose stock is listed on their exchange. They can use that authority to delist any company, its subsidiaries, or a fund that includes such companies and has not complied with U.S. laws or been named to a U.S. prohibition list. To date, they have been reluctant to do so.
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11 https://www.voanews.com/a/report-china-spends-billions-of-dollars-to-subsidize-favored-companies-/6587314.html
12 https://www.justice.gov/opa/pr/chinese-military-personnel-charged-computer-fraud-economic-espionage-and-wire-fraud-hacking;%20https:/www.cnbc.com/2020/07/07/fbi-chief-slams-chinese-cyberattacks-against-us-hudson-institute.html; https://www.cnbc.com/2020/07/07/fbi-chief-slams-chinese-cyberattacks-against-us-hudson-institute.html
13 https://fortune.com/2018/12/19/china-eu-hacking/
14 https://www.wsj.com/articles/china-has-one-powerful-friend-left-in-the-u-s-wall-street-11606924454; https://www.cnbc.com/2021/04/28/a-tidal-wave-of-chinese-companies-rush-into-the-red-hot-ipo-market-in-the-us.html?&qsearchterm=china%20ipo
15 https://www.uscc.gov/research/chinese-companies-listed-major-us-stock-exchanges#:~:text=Summary%3A,market%20capitalization%20of%20%24848%20billion.
16 PCAOB Secures Access to Inspect, Investigate Chinese Firms for First Time in History, available at https://pcaobus.org/news-events/news-releases/news-release-detail/pcaob-secures-complete-access-to-inspect investigate-chinese-firms-for-first-time-in-history 17 PCAOB Secures Complete Access to Inspect, Investigate Chinese Firms for First Time in History. Erica Y. Williams (Dec. 15, 2022) https://pcaobus.org/news-events/speeches/speech-detail/pcaob-secures-complete-access-to-inspect-investigate-chinese-firms-for-first-time-in-history
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B. The passive index loophole
According to Bloomberg, "more than 2,000 U.S. mutual and exchange-traded funds--particularly those tracking indexes--have $294 billion invested across Chinese stocks and bonds."18
An index fund is a fund that owns a portfolio of stocks that tracks a financial market index (i.e., S&P 500 or Dow Jones). Index funds significantly impact the flow of global capital, especially in international and emerging markets. Inclusion in an index can lead to billions of dollars being steered into a company or a country through the sale of mutual funds and exchange-traded funds that track the index.19 A regulatory loophole, I call the "passive index loophole", allows non-U.S. companies listed on non- U.S. stock exchanges to be included in an index fund and sold to American investors. This allows the non-U.S. company to avoid the company-specific disclosure, financial reporting, and audit requirements that American companies must comply with to sell stock to American investors.
With knowledge of the loophole, the CCP pressured the index providers20 to create a special index for mainland Chinese companies listed on Chinese exchanges called A-shares,21 and to include those companies as well as the ones listed on U.S. exchanges in international and emerging market indices. A recent study found the dollar amount of foreign investment in Chinese companies was 51 percent higher for those companies in an index.22 As a result, the 'passive index loophole' has funneled billions of American investor dollars to China.23 By blindly including Chinese companies listed on Chinese stock exchanges in an index, neither the index provider, nor the fund issuer, know whether these companies sold to American investors through index funds are Enron-like frauds,24 affiliated with the Chinese military,25 or supporting human egregious rights abuses.26 Most American investors who buy index funds with international exposure have no idea that their investment goes to Chinese companies that don't comply with U.S. transparency laws, are involved in egregious human rights abuses, or pose a national security risk to the U.S.27 And, as the Select Committee pointed out, not only have many of these companies turned out to be frauds,28 but some of the Chinese companies in passive index funds are actually on U.S. government prohibition lists.29 The last two Administrations have tried to address this issue using Executive Order 13959, which forced the de-listing and de-indexing of firms owned or controlled by the Chinese military trading in the U.S. But, as the Select Committee also noted, the companies de-indexed by this order only scratches the surface of Chinese companies found in index funds.30 To end this practice Congress can pass the 'No China in Index Funds Act',31 which would close the 'passive index loophole' and prevent U.S. investor dollars from being funneled into CCP-backed or controlled companies through index funds.
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18 Silla Brush, "BlackRock, MSCI to See Tighter Oversight Over U.S. Investments in China," Bloomberg, August 15, 2023, https://www.bloomberg.com/news/articles/2023-08-15/blackrock-fund-managers-brace-for-even-more-scrutiny-over-china (accessed September 6, 2023)
19 The three largest index providers are MSCI (Morgan Stanley Capital International), FTSE (Financial Times Stock Exchange), and S&P (Standard and Poor) Dow Jones. More info can be found at Index Industry Association, "What We Do," https://www.indexindustry.org/ (accessed September 6, 2023).
20 https://www.wsj.com/articles/how-china-pressured-msci-to-add-its-market-to-major-benchmark-11549195201
21 https://www.investopedia.com/terms/a/a-shares.asp
22 Juan Jose Cortina Lorente et al., "The Internationalization of China's Equity Markets," Policy Research Working Paper No.10513, 2023, https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099356306282340403/idu0f0ff0f0d04f82046a8082990c1666e4a8c78?cid=DEC_AL_PolicyResearch_EN_INT
23 https://selectcommitteeontheccp.house.gov/sites/evo-subsites/selectcommitteeontheccp.house.gov/files/evo-media-document/4.18.24%20How%20Americsan%20Financial%20Institutions%20Provide%20Billions%20of%20Dollars%20to%20PRC%20Companies%20Committing%20Human%20Rights%20Abuses%20and%20Fueling%20the%20PRC's%20Military.pdf; Peter Pham, "What's China's Secret Source Of Funding?" Forbes, February 12, 2018, https://www.forbes.com/sites/peterpham/2018/02/12/whats-chinas-secret-source-of-funding/?sh=279e7286254b (accessed September 6, 2023).
24 See above.
25 https://foreignpolicy.com/2019/02/07/we-cant-tell-if-chinese-firms-work-for-the-party/
26 https://www.reuters.com/article/us-hikvision-usa-uighur/u-s-might-blacklist-chinas-hikvision-over-uighur-crackdown-source-idUSKCN1SS28U
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C. Variable interest entities
Another scheme the CCP exploits to raise money for its companies is called the variable interest entity (VIE) structure. This scheme essentially removes the equity ownership and voting rights that American investors normally enjoy when they buy a company on a U.S. exchange. Specifically, the VIE structure allows the operating company located in China to control the economic activities of a shell company, usually located in the Cayman Islands, through a contract. The shares of the operating company located in China are not owned by U.S. investors. This makes enforcement of U.S. laws against the mainland Chinese company very difficult and intentionally shields it from legal action by American investors.
The ASA has joined the Select Committee and various investor groups to demand the risks posed by this scheme end.32 While the previous U.S. Securities and Exchange Commission (SEC) Chairman paused its use in new initial public offerings (IPOs), the agency did not stop the use of VIEs by Chinese companies currently listed on U.S. exchanges.33 Congress needs to end this legal fiction and prohibit the listing of any Chinese company on a U.S. exchange that uses the VIE scheme.
D. Business Prohibition Lists & Outbound Investment
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27 http://selectcommitteeontheccp.house.gov/media/press-releases/committee-report-american-financial-institutions-funneled-billions-prc; https://www.institutmontaigne.org/en/expressions/influence-without-ownership-chinese-communist-party-targets-private-sector
28 https://www.reuters.com/article/us-china-stocks-regulation-analysis/chinese-firms-missing-6-billion-tests-regulators-resolve- idUSKCN1SN0OT; https://www.scmp.com/business/companies/article/3024084/why-kangmei-pharmaceutical-found-have- committed-one-chinas; https://finance.yahoo.com/news/one-theme-popping-among-chinese-154155487.html; See also Select Committee Report
29 American Financial Institutions Funneled Billions into PRC Companies Fueling the CCP's Military, Surveillance State, and Uyghur Genocide. Report of the Select Committee on the CCP (April 2024) https://selectcommitteeontheccp.house.gov/media/press-releases/committee-report-american-financial-institutions-funneled-billions-prc
30 https://selectcommitteeontheccp.house.gov/media/press-releases/committee-report-american-financial-institutions-funneled-billions-prc
31 https://spartz.house.gov/media/press-releases/spartz-sherman-introduce-four-bills-address-china-risk-us-stock-market2
32 Gallagher Calls on President Biden to Adopt Restrictions on US Investments to China (August 3, 2023). https://selectcommitteeontheccp.house.gov/media/press-releases/gallagher-calls-president-biden-adopt-restrictions-us-investments-china; https://www.cii.org/files/publications/misc/12_07_17%20Chinese%20Companies%20and%20the%20VIE%20Structure.pdf;
33 https://www.sec.gov/newsroom/speeches-statements/gensler-2021-07-30
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As this Committee and Congress considers policies to counter the CCP's exploitation of our financial markets, I recommend Congress require (1) that an entity placed on one government prohibition list (i.e. OFAC, DOD, Commerce Entity List, and the State Department's Human Rights List) be placed on all lists and automatically allow the Treasury Secreaty to remove that company from our public capital markets,34 and (2) the consolidation of all government business prohibition lists in a general list maintained by the Treasury Department so the public knows what foreign adversary companies are on the consolidated list and the Treasury Secretary can take more immediate action to protect American investors and businesses.
We strongly support efforts by Congress to scrutinize and prevent outbound investments to China made by U.S. individuals and institutions. One bill, the Foreign Investment Guardrails to Help Thwart (FIGHT) China Act,35 allows the Treasury Secretary to prevent American citizens and Wall Street institutions from financing the CCP's cyber army or its military build-up. This bill - in addition to No China in Index Funds Act - will close the scandalous 'passive index loophole'.
E. Mainland Chinese Broker-Dealers with U.S. Customers.
Another risk to retail investors is posed by Chinese-owned broker-dealers operating as a regulated entities in our markets with known ties to the CCP. The Select Committee, State Attorneys' General, and members of Congress on both sides of the aisle have repeated raised concerns about this problem.36 It is shocking that a broker-dealer with operations in mainland China and affiliated with the CCP can be registered to do business in this country.37 If the CCP demands access to the personal and financial information of Americans at these mainland Chinese broker-dealers, then what is to stop the party from using that information to blackmail those Americans or block access to their money unless they agree to spy on this country. This is feature of the CCP's strategy of coercion described above, and it represents the very definition of a national security concern.
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34 This policy is very similar to The Sanction Transactions Originating from Pernicious Chinese Companies and Policies (STOP CCP) Act, cosponsored by Senators Mike Braun and Bill Hagerty and included in Senator Scott's package in March of 2023.
35 https://barr.house.gov/press-releases?ID=7FCD27D4-498D-4F1C-B1BD-DF3EADFC1F05; https://www.cornyn.senate.gov/news/cornyn-cortez-masto-colleagues-introduce-outbound-investment-legislation-to-counter-china/
36 Letter from the House Select Committee on the Chinese Communist Party to Webull CEO, Anthony Denier, (Nov. 25, 2024), available here: https://selectcommitteeontheccp.house.gov/sites/evo-subsites/selectcommitteeontheccp.house.gov/files/evo-media-document/Webull%2011.25%20-%20Final.pdf; Letter from Sen. Tommy Tuberville (R-AL) and Rep. Jim Banks (R-IN) to SEC and FINRA (May 3, 2023) ("May 2023 Tuberville-Banks Letter"), available here: https://static.foxnews.com/foxnews.com/content/uploads/2023/05/Tuberville-Banks-Oversight-Letter-to-SEC-FINRA-5.3.20231.pdf; Letters from Sen. Tommy Tuberville (R-AL) to SEC and FINRA (Jun. 5, 2023), available here: https://www.tuberville.senate.gov/wp-content/uploads/FILE_3666.pdf and to SEC and DOJ (July 10, 2023), available here: https://www.tuberville.senate.gov/wp-content/uploads/FILE_3666.pdf; Letter from Sens. Tommy Tuberville (R-AL), Ted Cruz (R-TX), Mike Braun (R-IN), Rick Scott (R-FL), and Roger Marshall (R-KS) to SEC Chair Gary Gensler (Jul. 29, 2022), available here: https://www.tuberville.senate.gov/newsroom/press-releases/tuberville-colleagues-call-for-investigation-into-stock-trading-platforms-with-ties-to-china/; Letter from Rep. Ritchie Torres (D-NY) to SEC IG and GAO (July 13, 2023), available here: https://twitter.com/RepRitchie/status/1679534903661301761/photo/1; Letter from Rep. Sherman (CA-32) to SEC as reported in Capitol Account (Feb. 23, 2023); Letter from Rep. Luetmekemeyer to SEC and FINRA (Sept. 26, 2023), available here: https://luetkemeyer.house.gov/uploadedfiles/20230926181427040.pdf; Letter from Senator Cotton (R-AR) to Director of National Intelligence Avril Haines (Sept. 23, 2021), available here: https://www.cotton.senate.gov/news/press-releases/cotton-calls-for-investigation-of-chinese-stock-trading-app; Letter from Rep. Lawler (R-NY) to Treasury Secretary Yellen (Apr. 27, 2023), available here: https://lawler.house.gov/news/documentsingle.aspx?DocumentID=257 and Letter from Rep. Lawler (R-NY) to Treasury Secretary Yellen (Jul. 21, 2023), available here: https://lawler.house.gov/news/documentsingle.aspx?DocumentID=556; https://www.banking.senate.gov/hearings/09/06/2023/oversight-of-the-us-securities-and-exchange-commission.
37 May 2023 Tuberville-Banks Letter. The Senators wrote: "As you are aware, Webull and Moomoo collect highly sensitive personal information from millions of their U.S. customers, including personally identifiable information (PII) such as Social Security numbers, mailing addresses, and financial account data. . . . In light of Beijing's increasingly strict privacy laws barring many Chinese companies from sharing data with Western regulators, the presence of Webull registered representatives in the PRC raises serious concerns regarding (1) Webull's ability to meet its supervisory obligations under SEC and FINRA rules; (2) the SEC's and FINRA's ability to oversee and examine Webull and its registered representatives and associated persons located in the PRC; (3) the adequacy of Webull's compliance with all SEC and FINRA recordkeeping requirements; (4) the ability of the SEC and FINRA to adequately enforce federal securities laws, including the ability to obtain documents and information from Webull employees located in the PRC; and (5) the potential for U.S. customer PII to be shared or exfiltrated to Webull employees or affiliated entities located in the PRC."
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III. Taxing Outbound Investment.
As the reconciliation debate heats up and Congress looks for new ways to raise revenue, it can do so while protecting American investors and our national security. Congress should examine how much revenue can be raised by imposing a foreign adversary capital gains tax on the realized proceeds of any type of public or private investment made in China, in a Chinese company, or in a registered investment fund that owns Chinese securities.
Increasing the tax burden on any American money that funds Communist China's global ambitions would significantly change the cost for American companies to do business with this nefarious foreign adversary.
IV. A Word About Fiduciary Duty.
Institutional investors and asset managers owe a fiduciary duty of loyalty to those who entrust them with their money.38
This duty requires fiduciaries to conduct thorough due diligence on any company or fund in which they invest, and that is very difficult to do in China.39
The duty also requires those managing money to evaluate the legal protections and enforceability of the law in the country where they choose to send investor money. Americans who lose money because a Chinese company commits fraud, or the government appropriates their funds have little chance of recovering their money. Additionally, many American investors don't realize the scope of liability associated with owning a U.S.-listed company that does business in China under U.S. law, international law, or otherwise.40 The fiduciary duty also requires American investors to evaluate the political and reputational risks associated with U.S. companies doing business with the CCP specifically, or in China generally. This would include a scenario where China decides to invade, quarantine, or act aggressively with respect to Taiwan,41 and the U.S. government responds by imposing economic sanctions that prohibit American companies from doing business in China (as it did after Russia invaded the Ukraine).42 In this scenario, bond funds would be forced to remove dollar-denominated Yuan bonds from bond indexes sold to American investors.43
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38 https://www.americansecurities.org/post/asa-letter-to-wsj-real-audits-for-chinese-firms-listed-in-the-u-s.
39 https://foreignpolicy.com/2019/02/07/we-cant-tell-if-chinese-firms-work-for-the-party/
40 https://www.justsecurity.org/74388/genocide-against-the-uyghurs-legal-grounds-for-the-united-states-bipartisan-genocide- determination/; https://www.washingtonexaminer.com/news/state-department-china-committing-uyghur-genocide-wont-say-if- ongoing; https://cja.org/what-we-do/litigation/legal-strategy/the-alien-tort-statute/
41 https://www.uscc.gov/hearings/deterring-prc-aggression-toward-taiwan
42 https://www.state.gov/ukraine-and-russia-sanctions/
43 "In order to be considered for inclusion in the Global Aggregate Index, a local currency debt market must be classified as investment grade and its currency must be freely tradable, convertible, hedgeable, and free of capital ontrols." https://www.bloomberg.com/company/press/bloomberg-add-china-bloomberg-barclays-global-aggregate-indices/
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American investors could also lose billions if the CCP responds to sanctions by imposing capital controls on foreign money or on the retained earnings of U.S. company subsidiaries located in China.44 Senator Scott's 'Protecting American Capital Act' could help investors understand the true nature of the financial exposure U.S. listed companies have to Communist China if these scenarios were to materialize.45
V. Combating State-Sponsored Fraud.
The amount of fraud perpetrated against Americans, and especially seniors, is staggering. The Federal Trade Commission (FTC) estimates that Americans lost over $158 billion to fraud in 2023 alone.46
Fraud has gone from an individual criminal act to a business opportunity funded by state-sponsored actors across the globe.47 It has become so lucrative that Deloitte estimates Americans will lose $40 billion to AI-enhanced fraud by 2027.48 Because these criminals are now funded by nation-states like China and Russia they have become increasingly sophisticated in their techniques using generative AI and other means. 49 Many types of scams exist and unfortunately, those who are routinely targeted and most likely to be victimized are the most vulnerable among us, namely our senior citizens.
Despite efforts by regulators to warn investors about the latest scams,50 the level of cunning and the nonstop evolution of the scams these fraudsters employ continues to leave private companies, law enforcement, and investors playing catch-up.
ASA member firms are increasingly grappling with scams that target their employees, their customers, and their firms. For example, it is not uncommon for scammers to pose as personnel from a licensed U.S. Broker-Dealer (BD) after they know a person has been a victim of another scam (perhaps also perpetrated by them or their associates). The criminals then present a deceptive offer of forensic and recovery services, ostensibly to assist the victim in recouping their losses. In reality, they exploit the victim's desperation, extracting multiple payments without providing any genuine assistance or recovery of funds.
Scammers have also begun to hack into customer email accounts and give trade instructions from an email account on file with the BD. Because scammers have access to email history, scammers can pose very credibly as customers and seem to know things specific to the customer. The scammers set up a 'rule' in the customer's email forwarding all incoming email to the customer from the BD to the scammers' fake email account, so the customer will not discover the
activity. The scammers then submit wire requests to the BD to be sent to a bank account in the customer's name that the scammer has opened and controls. By the time the customer and/or BD discover the depth of this scam, the funds have been moved and are extremely difficult to recover.
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44 https://www.cnn.com/2023/03/06/business/mark-mobius-china-capital-controls/index.html
45 https://www.rickscott.senate.gov/services/files/78A1BB15-8B96-4940-A288-66707BAEAAD9
46 https://www.sec.gov/files/20250306-isc-fraud-briefing-iac-meeting.pdf
47 https://www.csis.org/analysis/cyber-scamming-goes-global-unveiling-southeast-asias-high-tech-fraud-factories
48 Id.
49 https://www.sec.gov/files/20250306-isc-fraud-briefing-iac-meeting.pdf; https://www.sec.gov/newsroom/press-releases/2024-196 ""SEC Office of the Investor Advocate Issues Report on Nationally Representative Survey of Investors and Continues Focus on Investment Fraud";
50 https://www.finra.org/investors/insights/gen-ai-fraud-new-accounts-and-takeovers; https://www.finra.org/investors/insights/artificial-intelligence-and-investment-fraud
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The only way to try to combat the sophistication of this ever-changing criminal activity going forward is to promote an open, honest and trustworthy partnership between the private sector and government.
VI. Conclusion.
Congress must end Communist China's use of American investor savings to fund its geopolitical ambitions. Every day that we don't act, the economic and national security threat to our country and the American way of life increases.
I would like to thank each committee for holding this joint hearing and I look forward to answering your questions.
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Original text here: https://www.aging.senate.gov/imo/media/doc/713d6dee-b247-ab39-387e-35005767f950/Testimony_Iacovella%2004.09.251.pdf