to be tempted to take advantage-to make a quick buck-at the expense of others to know that the penalty is going to be certain and, hopefully, quickly imposed.

Dr. DUPONT. Yes, sir, and I support that personally.

Senator BAYH. I know you heard the discussions we have had earlier about the importance or lack thereof of IRS giving special attention to drug tax evaders. The IRS cannot do it by itself. But, certainly the IRS does have a tool that is not available to others. I asked Mr. Alexander about a statement he had made before the American Bar Association in Honolulu, in the summer of 1974, in which he pointed out that the IRS was going to deemphasize the special task force-NTTP-approach which directed resources toward those tax evaders who were high-level drug traffickers.

I noticed that about the same time-in fact, in June of that same year-a document entitled, "Federal Strategy for Drug Abuse and Drug Traffic Prevention, 1974" was released.' It was transmitted to the President over your signature, part of which contains the following

text.

First, it targets major drug traffickers as one of five principal targets. Second, it says at page 67:

The Treasury Department, through the Internal Revenue Service, is continuing its program involving intensive investigation of the incoming tax returns of suspected drug traffickers. Since drug traffickers rarely declare their illicit income, tax audits, and investigations can be very productive even when other Federal agencies are unable to obtain enough evidence to prosecute the traffickers successfully for drug law violations.

Further, the following page says:

The strategy in the 1974 action plan in the area of criminal investigative activities against major drug traffickers includes the following:

And the second item specifies:

The Internal Revenue Service will expand its investigations of tax evasion as part of increased Federal efforts against nonopiate drug distribution.

Let me go further.

You are one of those that participated in the drafting of September 1975 White Paper on Drug Abuse; 2 is that correct?

Dr. DUPONT. Yes, sir.

Senator BAYH. Despite the 1974 strategy which was enunciated the year before, and the 1975 White House White Paper makes the following assessment at page 43.

By focusing on the traffickers' fiscal resources, the government can reduce the flow of drugs in two ways. First, high-level operators, usually well insulated from narcotics charges, can often be convicted for tax evasion. Second, since trafficking organizations require large sums of money to conduct their business, they are vulnerable to any action that reduces their working capital.

PRESENT IRS POLICY NONEFFECTIVE IN PRIORITIES

Then the White Paper states:

'Federal Strategy for Drug Abuse and Drug Traffic Prevention, 1974. For sale by Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402. Price $1.15. Stock No. 4110-00014.

White Paper on Drug Abuse, September 1975-A Report to the President from the Domestic Council Drug Abuse Task Force. For sale by Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402. Price $1.55. Stock No. 041-010-00027-4.

The IRS has conducted an extremely successful program that identifies suspected narcotics traffickers susceptible to criminal and civil tax enforcement action. Recently, the program has been assigned a low priority because of IRS concern about possible abuses. The task force is confident that safeguards against abuse can be developed, and strongly recommends re-emphasizing this program. The IRS should give special attention to enforcement of income tax laws involving suspected or convicted narcotics traffickers.

What has happened?

Also, Mr. David Macdonald, Assistant Secretary of the Treasury, in addressing a memorandum to the Deputy Secretary through the Under Secretary, has the following observations-this is a memorandum of March 3, 1975:

Treasury will be hard put to explain why, especially in a period of hard times for the average workingman whose dollar is being eaten up by inflation, we are sactioning an IRS policy that picks on the little guy but lets the bigshot racketeer get off, as the average citizen would put it.

And Secretary Macdonald has other things to say about the shortcoming of the present IRS policy.

Now, isn't anybody listening over at IRS? How can there be such a great differential between what is said at the White House and what is said at Treasury and the policy that is followed at IRS?

Dr. DUPONT. Well

Senator BAYH. Well, is it fair to ask? I assume you meant what you said. Do you still mean it?

Dr. DUPONT. Yes; I think one fact to be considered is the limitations on the power of the people within the executive branch to get compliance in all of the components of the executive branch. I have great hopes that this hearing and your involvement in this issue will help to change the thinking in IRS, because I share with you a strong conviction that this is one of the most important areas for our drug abuse prevention effort.

One of the grave problems in the supply reduction area has been the excessive emphasis on the small dealer and the limited activities impacting on high-level drug traffickers.

IRS COULD LEAD ATTACK ON DRUG TRAFFICKERS

As you point out, one tool that is most effective in dealing with the high-level trafficker is the tax law as administered by the IRS. I think that Mr. Alexander's concern about political abuses of IRS can adequately be dealt with without sacrificing this extremely important tool.

I was the head of the Narcotics Treatment Administration in Washington, D.C., at the time of the initial activity of IRS in the drug abuse field-that is before they downgraded it—and let me assure you that the impact of IRS activity was very strongly felt in the District of Columbia. It led to a sense of energizing and hopefulness on the part of everybody in the local drug field at the time. I hope that with a rejuvenated activity at IRS, with the leadership and encouragement of this committee, this will happen again on a national

scale.

Senator BAYH. I don't think anybody wants to get the Commissioner of the IRS angry at them. However, it seems we have to recognize

I would think, a significant decrease in the request to OMB for resources for IRS to pursue this attack on the high-level traffickers. Can you shed any light on the reason behind that?

Dr. DUPONT. I cannot.

As I understand, though, there may be some question about whether IRS spent the money in the drug area that they already had, and there was some question about whether they would spend additional money specifically on drug-related efforts. But in any event, it is my understanding that OMB and the Domestic Council are unequivocal in their support of IRS activity in this area.

I have had the experience of talking specifically with the President on this very point, and I know that he is very aware of the specific problems in this area and the importance of tax activity against traffickers. So I have a feeling we are going to see some progress in the next few months.

Senator BAYH. What is being done about it?
Dr. DUPONT. I don't know.

Senator BAYH. Here we have a widely publicized speech from President Ford and many of us applaud aspects of its contents; and yet the amount of resources going into the area are subsequently reduced. I had heard rumbles-in fact, it was whispered in my ear after Mr. Alexander left or I would have brought it to his attention-that people at OMB and over at Treasury are angry with him because of the fact that the narcotic traffickers tax program wasn't being done that they did not want to give him money that was not going to be used properly.

Well, it seems to me there is one way to remedy that, and that's not to decrease the effort but to get somebody else to do the job correctly; if, indeed, that is the assessment. I don't know. You seem to lend some credence to that.

IRS SHOULD IMPROVE ACTIVITIES IN NARCOTICS ATTACK

Dr. DUPONT. Well, I am not competent to judge Mr. Alexander's performance across the board in terms of the wide range of activities that he is involved in. But I would say I am not satisfied with what IRS is doing in the narcotics field, and I think something has to be done to improve it.

Senator BAYH. You are here as a representative of the President and the Cabinet Committee on Drug Abuse Prevention, Treatment and Rehabilitation. You might convey our very sincere wishes from one subcommittee chairman to cooperate with the President in any way he can, either to strengthen the laws or in the capacity as a member of another committee to get the resources necessary. Let's not quit and say because it allegedly experienced some problems or because Mr. Alexander has effectively sandbagged it we are going to cut off the arms and legs of the narcotics traffickers tax program. Is there any reason why we should not have this special program revitalized?

[EXHIBIT NO. 23]

CABINET COMMITTEE ON DRUG ABUSE PREVENTION, TREATMENT AND RehabilitatiON The President's Memorandum on the Responsibilities of the Committee and the

Memorandum for: The Secretary of Defense; the Secretary of Labor; The Secretary of Health, Education, and Welfare; The Administrator of Veterans' Affairs

Subject: Cabinet Committee on Drug Abuse Prevention, Treatment and Rehabilitation.

The need to provide humane and effective drug abuse prevention, treatment and rehabilitation services to balance our law enforcement efforts aimed at drug traffickers, has been clearly established. Given the magnitude of the drug abuse problem and its impact on the health and well-being of our nation, it is vitally important that the efforts of the various departments and agencies of the Federal government responsible for providing these services be integrated into an effective overall program.

In my recent message to the Congress on drug abuse, I announced the establishment of a Cabinet Committee on Drug Abuse Prevention, Treatment and Rehabilitation, to have responsibility for oversight and coordination of all Federal activities in this area. You are hearby appointed members of the Cabinet Committee, along with such other members as I may appoint from time to time. The Secretary of Health, Education, and Welfare will serve as Chairman of the Cabinet Committee.

The Cabinet Committee shall be supported by a Working Group composed of personnel from each Federal department and agency having drug abuse prevention, treatment or rehabilitation responsibility and the Office of Management and Budget. The Secretary of Health, Education, and Welfare shall designate an Executive Director of the Cabinet Committee, who shall be Chairman of the Working Group.

The Cabinet Committee shall be responsible for the coordination of all policies of the Federal government relating to the drug abuse prevention, treatment and rehabilitation services, as well as related research activities. To the maximum extent permitted by law, Federal departments, agencies and offices shall cooperate with the Cabinet Committee in carrying out its responsibilities.

More specifically, the Cabinet Committee shall:

(1) develop and implement the Federal strategy with respect to drug treatment, rehabilitation, prevention and research;

(2) assure proper coordination among Federal drug treatment and rehabilitation programs, including the collection, analysis and dissemination of information;

(3) assure that Federal prevention, treatment and rehabilitation resources are effectively utilized;

(4) provide liaison between the Executive Branch and Congress, State and local goverments and the public;

(5) assure implementation of relevant recommendations contained in the Domestic Council's White Paper on Drug Abuse;

(6) develop and monitor a plan for improving job opportunities for former addicts; (7) evaluate and make recommendations to improve Federal drug treatment and rehabilitation programs; and

(8) report progress to me on October 1, 1976, and periodically thereafter.

In addition to the above on-going responsibilities, the Chairman of the Cabinet Committee, shall work closely with the Attorney General to develop plans for improving the coordination between law enforcement and drug abuse prevention, treatment and rehabilitation programs.

GERALD R. FORD.

NOTE: The text of the memorandum was made available by the White House Press Office. It was not issued in the form of a White House press release.

WATERGATE EXCUSE IRRELEVANT TO ISSUE

Dr. DUPONT. No. On the basis of what I understand and what I have heard this morning, and my review of the excellent summary that you submitted in the Congressional Record following last week's hearings, I am persuaded that we do need a special program.

We are talking about reasons for the behavior that we are observing in the IRS. One we focused on is the concern about politicalization. Mr. Alexander referred to Watergate, and I thought your statement about that was very eloquent, because I think it is irrelevant to what we are talking about. But I think it is on his mind.

Senator BAYH. I can understand why it would be on his mind.

they had Watergate, that we are not now able to conform to an acceptable standard. There are others who do conform to the standard and are given marching orders and strict criteria to follow and go about their jobs. Let's get on with it.

BUREAUCRATIC RESPONSES TO MAIN ISSUES

Dr. DuPont. Yes; Mr. Chairman. And there is another problem which we have not focused on which I spent a good bit of my professional life in the past decade dealing with. When we were dealing with people whose bureaucratic responsibilities cover a very broad range of issues, and one component of that broad range-such as the drug component gets special legislative attention, executive branch attention, public attention-the bureaucrat with the broad responsibility will often attempt to, on the one hand, put the special concern-in this case, drug abuse-down into a relatively minor position; or, on the other hand try to use the energy that is created by that to run his entire budget and organization.

In other words, he tries to get not just additional funds for drug abuse activities, but get additional funds for the entire range of bureaucratic activities that the individual is concerned with. That is very destructive tendency, but a very common one. We had it in the drug field in dealing with our mental health colleagues, where for many years they used the public's concern with drugs to fund a broad range of perfectly appropriate mental health activities that didn't have anything to do with drugs. It was because of that activity that ultimately the National Institute on Drug Abuse was created as a separate entity. We simply could not solve that problem in the ambit of overall mental health. I don't know the details in IRS, but on the basis of what I heard from Mr. Alexander today, it seems very possible that a similar activity and a similar solution-which is to identify a specific identifiable budgetary administrative responsibility in IRS-may be justified. And when IRS comes back, in response to your questions, and they say they can't identify their drug abuse activities specifically because they are woven into the fabric of the entire agency; that seems, to me, to be unresponsive to the specific concerns of this committee and of the President. Thus, to have specific accountability on drug abuse within IRS, it presumably, will be necessary to have a separate drug abuse unit.

Senator BAYH. Well, Mr. Alexander and his staff pointed out that they were allegedly shifting from the emphasis on street people to some of the more sophisticated business types who were making it possible for these street people to operate.

From your experience in the drug field, is it not a reasonable assessment that a shift to the shadowy figures-as Congressman Vanik described them, the persons behind the scenes that makes all this possible that the very shift to those persons, more sophisticated, more removed from the scenes, perhaps better educated, more diverse, with an opportunity to thwart prosecution-from the street to the suite is a good policy? That's not bad.

Dr. DUPONT. It's too bad we don't have television here for that. Senator BAYH. That approach requires a degree of sophistication and specialization far above what would be necessary if you're worry