5 minute read | November.08.2018
The results are in: Party control of the U.S. House of Representatives will change for the third time in 12 years, leaving legions of pundits to speculate about what happens next. Prospects for a fundamental change in the way Congress and Washington operate are dim, particularly given that the U.S. Senate remains under Republican control. With new legislation most likely dead on arrival due to the political stalemate on Capitol Hill, the Democrats’ most reliable opportunity to exert their will is almost certainly through congressional oversight and investigations. The last time the Democrats controlled the House during a Republican presidency, following the 2006 midterms, Rep. Henry Waxman remarked that Congress’s oversight powers are “just as important, if not more important than legislation.”
While it is tempting to dismiss congressional oversight, and the attendant theatrical hearings and testimony as nothing but sound and fury, the reality for companies, executives, and others under the microscope is far less anodyne. Lack of preparation and ill-conceived strategy in responding to congressional investigations heightens the prospect of reputational harm that, unchecked, will frustrate business goals, damage shareholders, and derail — or end — careers.
A refresher on congressional investigations
Congress’s constitutional oversight responsibilities flow from Article I’s Necessary and Proper Clause. The scope of that power is “as penetrating and far-reaching as the potential power to enact and appropriate under the Constitution.”2
Central to this broadly defined oversight are the investigations launched by congressional committees. Although any individual member of Congress can make informal requests for information, the formal investigative authority for Congress is vested in its committees. Because each House committee has its own rules, the investigative process is far from uniform; for example, not all committees require that the ranking minority member be consulted prior to the issuance of a subpoena. Moreover, even subcommittees often adopt their own rules, which may be distinct from the rules of the parent committee.
The investigative process is further complicated by informal — and often unspoken — rules that have developed over time. Though all House committees have subpoena power, investigations often begin more informally, through a letter or a phone call requesting a meeting.
Given the power and authority vested in congressional committees, strategies for managing a congressional investigation involves understanding policy as well as politics.
New chairs, new issues
Four House committees — Intelligence, Financial Services, Oversight and Government Reform, and Energy and Commerce — are poised to be the most active in the 116th Congress of the United States.
Permanent Select Committee on Intelligence
As the current ranking member of the House Permanent Select Committee on Intelligence, Adam Schiff (D-CA) will likely take over the chairmanship from Devin Nunes (R-CA). Rep. Schiff confirmed in election-night interviews that the ongoing investigation of Russian interference in U.S. elections will remain front and center, along with scrutiny of the president’s businesses, associates, and political campaign. This will be a volatile inquiry in which party politics will spur committee and witness behaviors. But it’s not all “Russia, Russia, Russia” for the Intelligence Committee. Rep. Schiff has also signaled in recent statements a focus on broader issues beyond the 2016 campaign, including cyber influence on campaigns and hacking by foreign countries.3 Big Tech, social media companies, and advertisers are the likely targets of these investigations.4
Financial Services Committee
As the current ranking member, Maxine Waters (D-CA) is in line to take over as chair of the House Financial Services Committee from Jeb Hensarling (R-TX). While Rep. Hensarling said the Consumer
Financial Protection Bureau was a “destructive” and “rogue”5 agency and the present administration established tight boundaries for its enforcement activities,6 Rep. Waters will likely restore vigorous scrutiny of big banks she has long chastised,7 as well as of payday lenders8 and mortgage servicers.9 Student loan lenders may also be targeted as she had previously called for the committee to investigate the CFPB’s failures to protect student loan borrowers.10 Credit reporting agencies may be particularly at risk as Rep. Waters has been critical of recent data breaches and has introduced legislation to reform the credit reporting industry.11 She can be expected to push the CFPB and other federal agencies to take a more aggressive approach to enforcement and oversight. Finally, Rep. Waters, long a critic of the so-called megabanks, will likely use her committee’s power to make the case for stronger capital requirements and greater accountability to consumers.12
Oversight and Government Reform
The House Committee on Oversight and Government Reform has traditionally wielded the broadest congressional investigatory power and has pursued nearly any subject imaginable under the rubric of preventing fraud and abuse. Elijah Cummings (D-MD) will likely assume the chairmanship from Trey Gowdy (R-SC), and one should expect him to embark on a sweeping agenda, given his frustration with the Republican majority’s refusal to cooperate in his requests over the past several years. Rep. Cummings has methodically tracked every time Republicans have blocked a subpoena request from the minority over the last two years—64 as of the end of September—and we can expect him to start ticking through this list once he is in charge. Under Rep. Cumming’s control, we can expect to see Oversight Committee investigations into whistleblower protections13 Dodd-Frank rollbacks,14 and prescription drugs prices.15 Finally, Rep. Cummings has vowed to “shine a light on waste, fraud, and abuse in the Trump Administration.”16
Energy and Commerce
The House Committee on Energy and Commerce has broad jurisdiction over issues affecting the American marketplace. Frank Pallone (D-NJ) is expected to take over the chairmanship from Greg Walden (R-OR). We anticipate that Rep. Pallone will push for enhanced consumer protection in a wide range of industries and investigations related to data privacy17 and the practices of fintech companies.18 Rep. Pallone will also focus the committee’s attention on health care and prescription drug prices and the weakening of environmental regulations.19
With Democrats poised to become the majority party in the House, we can expect a wave of congressional investigations in 2019. The frequency and intensity of these investigations is likely to grow as 2020 draws closer, as the Democrats (like the Republicans before them) wield their subpoena power to shape the presidential campaign and influence policy.
Please join us for a Dec. 5 webcast that will delve deeper into these topics and offer some thoughts on navigating the coming tide of congressional investigations. If you have questions about congressional investigations or other related issues, please contact an Orrick attorney with whom you have worked in the past.
1 Revival of Oversight Sought, The Washington Post, Apr. 25, 2007 (available at http://www.washingtonpost.com/wp-dyn/content/article/2007/04/24/AR2007042402439.html?noredirect=on).
2 Eastland v. U.S. Serviceman’s Fund, 421 U.S. 491, 504 (1975).
3 See, e.g., Press Release: “Intel Committee Ranking Member Schiff Statement on North Korea Hacking Indictment” (Sept. 6, 2018), available at https://democrats-intelligence.house.gov/news/documentsingle.aspx?DocumentID=409; Press Release: “Schiff Statement on Facebook Takedown of Iran-Linked Inauthentic Accounts” (Oct. 26, 2018), available at https://democrats-intelligence.house.gov/news/documentsingle.aspx?DocumentID=418; Press Release: “Schiff Statement on Facebook Announcement” (Aug. 21, 2018), available at https://democrats-intelligence.house.gov/news/documentsingle.aspx?DocumentID=408.
4 See, e.g., Press Release: “Schiff Statement on Release of Facebook Advertisements” (May 10, 2018), available at https://democrats-intelligence.house.gov/news/documentsingle.aspx?DocumentID=379; Press Release: Schiff Invites Cambridge Analytica Whistleblower to Provide Testimony Before Intelligence Committee (March 19, 2018), available at https://democrats-intelligence.house.gov/news/documentsingle.aspx?DocumentID=367; Press Release: “Schiff, Feinstein Request Twitter and Facebook Conduct Investigation of Russian Bot Activity in #ReleaseTheMemo Campaign” (January 23, 2018), available at https://democrats-intelligence.house.gov/news/documentsingle.aspx?DocumentID=338;
5 Jeb Hensarling, Wall St. J., “How We’ll Stop a Rogue Federal Agency” (Feb. 8, 2017), available at
https://www.wsj.com/articles/how-well-stop-a-rogue-federal-agency-1486597413.
6 Trump Is Systematically Backing off Consumer Protections, to the Delight of Corporations, The Washington Post, (March 6, 2018) available at https://www.washingtonpost.com/business/economy/a-year-of-rolling-back-consumer-protections/2018/03/05/e11713ca-0d05-11e8-95a5-c396801049ef_story.html
7 See, e.g., Press Release: “Waters Statement on Regulators’ Enforcement Action Against Wells Fargo” (Apr. 20, 2018), available at https://democrats-financialservices.house.gov/news/documentsingle.aspx?DocumentID=401306.
8 See, e.g., January 31, 2018 Letter to Leandra English and Director Mulvaney, available at https://democrats-financialservices.house.gov/uploadedfiles/01.31.2018_warren_waters_letter.pdf.
9 See, e.g., Press Release: “Waters Introduces Bill to Improve Protections for Homeowners Facing Foreclosure” (June 18, 2018), available at https://democrats-financialservices.house.gov/news/documentsingle.aspx?DocumentID=401451
10 See, e.g., Press Release: “Waters Leads Call for Committee to Investigate Failures to Protect Student Loan Borrowers at the CFPB” (Oct. 1, 2018), available at https://democrats-financialservices.house.gov/news/documentsingle.aspx?DocumentID=401637.
11 See Press Release: “Following Equifax Breach, Ranking Member Waters Reintroduces Comprehensive Credit Reporting Reform Legislation” (September 13, 2017), available at https://democrats-financialservices.house.gov/news/documentsingle.aspx?DocumentID=400788.
12 See, e.g., Press Release: “Waters, Perlmutter and 17 Other Democrats Call on Fed to Maintain Capital Requirements for Megabanks” (Sept. 21, 2018), available at https://democrats-financialservices.house.gov/news/documentsingle.aspx?DocumentID=401611; Press Release: “Waters Statement in Opposition to Bill That Would Help Megabanks and Predatory Lenders Escape Liability” (Mar. 15, 2018), available at https://democrats-financialservices.house.gov/news/documentsingle.aspx?DocumentID=401239.
13 See, e.g., Press Release: “Cummings, Pelosi, Hoyer, and Other Senior Democrats Call on President Trump to Rescind Executive Orders that Strip Key Protections for Whistleblowers” (June 14, 2018), available at https://democrats-oversight.house.gov/news/press-releases/cummings-pelosi-hoyer-and-other-senior-democrats-call-on-president-trump-to.
14 See, e.g., Press Release: “Warren, Cummings Release GAO Report Confirming 2014 Dodd Frank Rollbacks Resulted in Giant Giveaways for Big Banks” (Sept. 29, 2017), available at https://democrats-oversight.house.gov/news/press-releases/warren-cummings-release-gao-report-confirming-2014-dodd-frank-rollbacks-resulted.
15 See Press Release: “Cummings Issues New Staff Report on Skyrocketing Drug Prices During Trump’s First Year as President (May 11, 2018), available at https://democrats-oversight.house.gov/news/press-releases/cummings-issues-new-staff-report-on-skyrocketing-drug-prices-during-trump-s.
16 See Press Release: “Cummings Issues Statement on Midterm Election Results” (November 7, 2018), available at https://democrats-oversight.house.gov/news/press-releases/cummings-issues-statement-on-midterm-election-results.
17 See, e.g., Press Release: “Pallone Asks GAO to Examine Consumers’ Control Over Personal Information Online” (Feb. 27, 2017), available at https://democrats-energycommerce.house.gov/newsroom/press-releases/pallone-asks-gao-to-examine-consumers-control-over-personal-information.
18 See, e.g., Press Release: “Pallone Statement at Hearing on FinTech” (June 8, 2017), available at https://democrats-energycommerce.house.gov/newsroom/press-releases/pallone-statement-at-hearing-on-fintech.
19 See Press Release: “Pallone on Democrats Winning House Majority” (November 7, 2018), available at https://democrats-energycommerce.house.gov/newsroom/press-releases/pallone-on-democrats-winning-house-majority.