Oversight & Investigations Informer – October 18, 2021

NOTABLE DEVELOPMENTS

What We Are Watching:

BUILD BACK BETTER NEGOTIATIONS CONTINUE: Negotiations over the Democratic spending plan continue, with members of Congress facing a self-imposed deadline of October 31 to reach an agreement. Moderate Senator Joe Manchin (D-WV) has objected to proposals in the plan to penalize utilities that don’t reach clean energy metrics, and the White House is working to restructure climate provisions of the plan to mollify Manchin without alienating progressives.

WARNER URGES COLLEAGUES TO MOVE SOON ON INFRASTRUCTURE: Politico reports that Senator Mark Warner (D-VA) is urging his colleagues to move forward with the bipartisan infrastructure package in the coming days, even if a reconciliation deal hasn’t been reached. Warner is an ally of Virginia gubernatorial candidate Terry McAuliffe who has been outspoken about the need for Democrats to move quickly with the infrastructure deal.

Week Ahead:

The Senate returns to Washington on Monday evening, and the House returns Tuesday evening.

Key hearings include: a House Small Business subcommittee hearing on supply chain issues; a Senate Finance Committee hearing on health insurance in America; a Senate Judiciary hearing on Department of Homeland Security oversight, featuring testimony from DHS Secretary Alejandro Mayorkas.

CYBERSECURITY

What We Are Watching:

REPUBLICAN SENATORS CALL FOR STRENGTHENED HUAWEI RELATED SANCTIONS: A group of Republican senators led by Marco Rubio (R-FL) wrote to the Biden administration calling for sanctions against the Chinese telecoms business Honor, which is a spinoff of telecoms giant Huawei. Rubio and his colleagues argue that Honor, like its former parent company, is a security threat to the United States.

DEMOCRATIC LEGISLATORS CALL FOR STRONGER CRYPTOCURRENCY ENFORCEMENT: Senators Ed Markey (D-MA), Sheldon Whitehouse (D-RI), and Reps. Jim Langevin (D-RI) and Ted Lieu (D-CA) sent a letter to the leaders of Treasury, State, Justice, and Homeland Security Homeland Security departments, asking them to pursue stronger coordination between agencies in cryptocurrency enforcement.

FEDERAL AGENCIES WARN OF CYBER ATTACKS AGAINST U.S. WATER PLANTS: The FBI, the Cybersecurity and Infrastructure Security Agency (CISA), the Environmental Protection Agency (EPA) and the National Security Agency (NSA) released a joint memo warning of cyber threats against information technology and operational technology systems of water and waste-water facilities in the United States.

ENERGY SECTOR

What We Are Watching:

TEXAS GAS INDUSTRY WARNED TO PREPARE FOR WINTER: Two weeks after they were grilled by lawmakers over loopholes that allowed natural gas companies to avoid weatherizing their infrastructure in preparation for the next freeze, the Railroad Commission of Texas, which regulates gas and pipelines, told the industry they “are expected to take all necessary measures to prepare to operate in extreme weather conditions during the winter season of 2021-2022.” Frozen gas wells and pipelines contributed to cascading power failures in February that killed more than 200 people. Last week’s warning falls short of requiring companies to prepare their facilities for cold weather, even as forecasters predict another winter with strong cold snaps.

OIL CEOS SAID TO TESTIFY: Rep. Ro Khanna (D-CA) told The Washington Post last week that the CEOs of the four major oil companies and two trade groups plan to testify before the House Oversight Committee on October 28. Rep Khanna, who has been the driving force behind this hearing, previously threatened to subpoena the companies, but revealed he hasn’t issued any so far and has been “pleased at the compliance that we’re seeing.” Republicans on the Committee said last week that Democrats’ insistence on in-person attendance is designed to “turn it into a spectacle,” since witnesses for other hearings have been permitted to attend virtually during the pandemic. A spokesperson for the Committee later clarified that in-person attendance would not be required.

Week Ahead:

The Senate Committee on Energy & Natural Resources holds a hearing on Tuesday, October 19 at 10 a.m. to consider the nomination of Willie Phillips, Jr. to join the Federal Energy Regulatory Commission. If confirmed, Phillips would give Democrats a 3-2 majority on FERC.

Key Insights:

COULD OIL AND GAS RESTRICTIONS MAKE CLIMATE CHANGE WORSE? California Attorney General Rob Bonta (D) opened an investigation into the oil spill off the coast of California last week, adding to the Orange County District Attorney, as well as an investigation by the Coast Guard and Pipeline and Hazardous Materials Administration. “The trade-off between oil production and environmental harm is simply not one that we would be making any longer,” California Sen. Alex Padilla (D) said as Democrats in Congress move to restrict offshore oil and gas production. But that calculus may yet shift as a global energy crisis unfolds, with growing demand for fossil fuels, as western producers are cutting back in response to actions taken by the Biden Administration. “By adopting a strategy of producing less oil, Western oil companies will be turning control of supply over to national oil companies in countries that could be less reliable trading partners and have weaker environmental regulations,” Michael C. Lynch told the New York Times last week.

FINANCIAL SERVICES SECTOR

What We Are Watching:

ESG-DOL PROPOSED RULE: The Biden Administration’s proposed rule on ESG reverses the Trump Administration’s perspective on ESG in retirement plans by making it clear that environmental, social and governance factors are fair game in 401(k)s and other ERISA-covered plans.

COINBASE WANTS A NEW CRYPTO REGULATOR: Cryptocurrency exchange Coinbase has published its proposal for crypto regulation after more than 75 meetings with stakeholders, including government officials. A big part of that proposal was a call for a new special regulator for digital assets, creating conflict with the SEC’s push to be the leading authority on the crypto industry.

OVERSIGHT HEARING ON A CASHLESS ECONOMY: The House Financial Services Subcommittee on Oversight and Investigations held a hearing entitled, “Cashed Out: How a Cashless Economy Impacts Disadvantaged Communities and Peoples” centered around the impact of a “cashless economy.” The discussion was largely partisan, with Democrats voicing concerns over the trend towards a cashless economy and Republicans voicing optimism about the trend. Of note, no member or witness advocated that cash be removed as a payment option.

Week Ahead:

The full House Financial Services Committee is hosting two hearing this week. The first hearing on October 20 is entitled, “The State of the International Financial System and U.S. Participation in the International Financial Institutions.” The one on October 21 is entitled, “Strong Foundation: How Housing is the Key to Building Back a Better America.”

The Senate Banking Committee is hosting three hearings this week:

• October 19: Full Committee: “International Policy Update: The Treasury Department’s Sanctions Policy Review and Other Issues”
• October 20: Subcommittee: “Protecting Companies and Communities from Private Equity Abuse”
• October 21: Full Committee: “How Private Equity Landlords are Changing the Housing Market”

DC Fintech Week kicks off this week from October 18 to October 21 at Georgetown University and includes panels with FDIC Chair Jelena McWilliams, Acting Comptroller of the Currency Michael Hsu, Acting FinCEN Director Him Das, SEC Chair Gensler and Treasury Undersecretary of Domestic Finance Nellie Liang.

Key Insights:

The topic of cryptocurrencies is becoming more partisan as evidenced by several recent hearings on the topic. One of those hearings was last weeks’ House Financial Services Subcommittee on Oversight and Investigations, where Ranking Member of the Subcommittee Tom Emmer (R-MN) focused his comments on the benefits of the industry while Rep. Emmanuel Cleaver (D-MO) called for Bitcoin to pause until traceability concerns were “worked out”.

HEALTHCARE SECTOR

What We Are Watching:

FDA PANEL UNANIMOUSLY RECOMENDS J&J COVID-19 BOOSTER SHOT: Last Friday, an FDA advisory committee said the agency should authorize boosters of J&J’s single-shot vaccine to more than 15 million Americans who received the initial dose. The panel recommended the boosters to everyone 18 and over who’s already received J&J’s first shot at least two months after the initial dose. Many committee members said it should be considered a two-dose vaccine much like Moderna and Pfizer’s.

AMERICAN SOCIETY OF ANESTHESIOLOGISTS FILE SUIT AGAINST UNITED HEALTHCARE ALLEGING ANTICOMPETITIVE NETWORK EXCLUSIONS: Last Thursday, The American Society of Anesthesiologists wrote a letter to the U.S. Department of Justice asking the government agency to perform a thorough investigation into UnitedHealth Group’s “high rate” of terminating participating provider agreements with anesthesia practices across the country. In the letter, the lobbying group contends that the practice leads to higher costs for patients and employers and threatens providers’ financial viability.

SELECT SUBCOMMITTEE ON THE CORONAVIRUS CRISIS FINDS TRUMP ADMINISTRATION MISMANAGED USDA FUNDS DURING PANDEMIC: Last Wednesday, the Select Subcommittee on the Coronavirus Crisis released a staff report indicating the Trump Administration misused $6 billion taxpayer dollars through its management of the U.S. Department of Agriculture’s (USDA) Farmers to Families Food Box Program, which was intended to address agricultural surpluses and food shortages during the COVID-19 pandemic. According to the report, the program unfairly prioritized “industry over families.” Following the report’s release, Chairman of the Select Subcommittee , wrote a letter to USDA Inspector General Phyllis K. Fong requesting that her office review the Program to identify possible fraud and reclaim wasted taxpayer funds.

Week Ahead:

On Wednesday, October 20, 2021, at 10:30 a.m., the Committee on Energy and Commerce Subcommittee on Health will hold a hybrid legislative hearing entitled, “Enhancing Public Health: Legislation to Protect Children and Families.” According to Chairman of the Energy and Commerce Committee Frank Pallone (D-NJ-6), during the hearing lawmakers will “hear from health experts and advocates on legislation that will advance scientific research, improve public health approaches, and expand access to care for Americans.”.

On Wednesday, October 20 at 10:00 a.m., the Senate Committee on Finance will hold a hearing entitled, “Health Insurance Coverage in America: Current and Future Role of Federal Programs.”

Key Insights:

Last Thursday, the Food and Drug Administration’s (FDA) Vaccines and Related Biological Products Advisory Committee (VRBPAC) voted unanimously to recommend half-dose boosters of Moderna’s COVID-19 vaccine for individuals who are high risk or over the age of 65. The booster shot would be administered at least six months after individuals are fully inoculated with two doses of the Moderna vaccine. However, some VRBPAC panelists questioned whether the available data was sufficiently robust to support the recommendation. For instance, Moderna’s booster shot raised neutralizing antibodies fourfold in 87.9 percent of individuals compared to after the second dose, whereas the FDA requires that 88.4 percent of participants experience the boost. The FDA, which typically heeds VRBPAC’s guidance, is expected to issue its final ruling on the matter in the coming days. If the FDA authorizes boosters of Moderna’s COVID-19 vaccine and the Centers for Disease Control and Prevention (CDC) follows suit after its own evaluation next week, eligible populations could receive boosters shortly after.

INDUSTRIALS SECTOR

What We Are Watching:

FORMER BOEING EXECUTIVE INDICTED FOR 737 FRAUD: The former chief technical pilot for Boeing has been indicted on charges of lying to the Federal Aviation Administration while it was first certifying the 737 Max. The former executive’s attorney released a statement saying that his client was being made a scapegoat for the FAA and Boeing.

AVIATION SUPPLY CHAIN ISSUES:  Reuters reports that global shipping and other supply chain issues are a growing problem for the resurgent aviation manufacturing industry, with plane makers and suppliers scrambling to find available parts to buy.

DEPARTMENT OF DEFENSE PFAS REPORTING REQUIREMENTS: As part of the 2021 National Defense Authorization Act, the Department of Defense was required to produce a report identifying the number of farms with PFAS-contaminated water located within one mile of a military installation. The DoD subsequently notified 2,143 farms of the presence of PFAS chemicals in their respective water supplies, per reporting by Bloomberg Law.

Week Ahead:

House Transportation Subcommittee on Aviation holds a hearing titled “Three Years After Lion Air 610: FAA Implementation of the 2020 Aircraft Certification, Safety, and Accountability Act.” Thursday, October 21 at 10:00 A.M.

The Committee on Small Business Subcommittee on Oversight, Investigations, and Regulations will hold a hybrid hearing titled: “Global Supply Chains and Small Business Trade Challenges.” The hearing is scheduled to begin at 10:00 A.M. on Wednesday, October 20.

TECH, MEDIA & TELECOM SECTOR

What We Are Watching:

PLATFORMS’ OWN CRACKDOWNS HAVE IMPACT: Hardline election misinformation policies instituted by YouTube led to drops on both Facebook and Twitter in similar false or misleading content, researchers found, underscored most notably by a sharp drop of election fraud claims on Facebook and Twitter on December 8th, the day YouTube began to remove unfounded accusations of fraud in the U.S. presidential election.

LINKEDIN RETREATS FROM CHINA: LinkedIn announced this week that it would be shutting down operations of the local version of the service in China, citing a “significantly more challenging operating environment and greater compliance requirements in China,” instead planning to roll out a new China-only platform called InJobs.

BIPARTISAN LEGISLATION AGAINST SELF PREFERENCING: Legislation announced in the Senate aims to tackle practices harmful to business and consumers, particularly ‘self-preferencing’ efforts by dominant platforms. The legislation has big tech in its sights and is similar to the House bill passed earlier this year.

Key Insight:

As weeks tick by without a Democratic nominee from the Biden administration to the FCC, a temporary Republican majority at the commission at the expiration of current interim chair Jessica Rosenworcel’s term becomes increasingly likely. Any swift moves by the Biden Administration ahead of January 5, when Rosenworcel’s five-year term ends, would still face a protracted process in the Senate Commerce Committee. Meanwhile, some speculate the process is stalled since Rosenworcel isn’t “liberal enough.”