Office of Government Ethics ETHICS NEWSGRAM Vol. 2., No. 4 Should A Government Commercial enterprises offer a vari- In our memorandum of September 17, 1985, to Designated Agency Ethics Officials, entitled "Acceptance of Commercial Discounts," we outline the factors that agencies should consider when deciding whether their employees may appropriately accept specific discounts offered to them. The memorandum discusses three categories of discounts: (1) discounts offered to the general public; (2) discounts offered to Federal government employees as a group; and (3) discounts offered to a class consisting of less than all Federal employees. When a discount is offered to the general public, regardless of an individual's employer or position, a government employee may generally accept the discount, subject to his or her agency's policies or regulations. In such instances, it appears that the motivation of the offeror is to increase sales volume rather than to offer something of value to a particular group. If a government employee is on personal travel, but the hotel in which he or she plans to stay offers him or her the government rate for the room, may the employee accept that discounted rate? Subject to the two (Continued on page 4) November 1985 The Need to Identify Certain Assets As reviewers of public Financial Dis- Highlights Inside a fairly specific notion as to what conflicts exposure exists. Frequently, however, we see references to nonpublic corporations, partnerships, trusts, IRA's, private investment holdings, and other oblique interests with no explanation as to what trades, businesses, or underlying investments are attributable to the reporting individual because of such involvements. In such cases, the SF 278 should be considered incomplete as it does not contain sufficient information and detail to comply with disclosure standards or to serve as an adequate basis for the review process. A reviewer should not certify an SF 278 that does not contain sufficent information to support the conclusion that the reporting individual is in compliance with applicable laws and regulations. One example of this type of incomplete entry would be a reference to an interest in a cash management account (CMA), such as the Merrill Lynch Cash Management Account, or a similar account with another brokerage firm or a commercial bank. An entry on an SF 278 which gives the name of a specific cash or similar account without providing any additional information does not give a reviewer an adequate basis for the requisite conflicts analysis. Cash management accounts and other similar accounts frequently have several component options, such as a conventional securities account, a choice of money accounts, and an account which provides credit card and checking services through a bank. In other words, all cash management accounts are not the same, and the reviewer should not assume that all such accounts consist solely of CD's and money market funds. The reviewer of the SF 278 on which such an entry appears must inquire into the nature (Continued on page 4) Contending with Organic Law Conflict of Interest Prohibitions At the U.S. Department of the Interior By Gabriele J. Paone Deputy Agency Ethics and Audit Coordination Official Managing the ethics program in the The strict conflict of interest restric- 66 terest prohibitions placed in Organic laws. Organic law conflict of interest prohibitions are usually designed to eliminate even the appearance of conflict of interest. An analysis of the five statutes that apply at Interior bears this out. Basically, the five prohibitions have the following elements in common: • They impose an absolute financial restriction which prohibits the establishment of a de minimis value. As a result, even one share of stock in a prohibited company is a violation. For the overwhelming majority of publicly-owned corporations, ownership of one share of stock would seldom, if ever, result in a real conflict of interest with one's official government duties. (Part one of a two-part article) fice of Surface Mining] or any other Federal employee performing any function or duty under this chapter shall have a direct or indirect financial interest in underground or surface coal mining operations. The statute calls for a fine, imprisonment, or both upon conviction of a violation, and it goes on to state that the Director of the Office of Surface Mining Reclamation and Enforcement is responsible for enforcing this prohibition and for annual reporting to Congress on "the actions taken and not taken" with regard to such enforcement. The legislative history to this Act contains a discussion about allowing a de minimis value of 100 shares of stock in coal mining operations. However, this suggestion was firmly rejected. Organic law conflict of interest prohibitions bitions on employees in five separate sub-units (Bureaus) within the Department. Nearly 26,000 employees, just over one-third of all Department employees, are directly affected. Their program responsibilities are in the U.S. Bureau of Mines, the Office of Surface Mining Reclamation and Enforcement, the Bureau of Land Management, the U.S. Geological Survey and the Bureau of Indian Affairs. As a group, these five Organic law prohibitions have some unusual features. The Bureau of Land Management's Organic Act prohibition, for example, became law in 1812. This was prior to the establishment of the Department of the Interior in 1849. The most recent Organic law prohibition affecting Interior passed in 1977 with the establishment of the Office of Surface Mining Reclamation and Enforcement. Further, as indicated from the name of the Bureaus affected, Interior's Organic law prohibitions cover an interesting blend of sometimes competing energy and conservation programs as well as one of the nation's major Indian service programs. This diverse coverage creates some unconventional management problems. To better understand the management problems, it helps to examine, in a general way, the conflict of in 2 • They apply to all employees in the covered organizations regardless of position, responsibilities, or pay level. Consequently, an employee can be in violation of the statute even when there is no relationship between his or her particular duties and the prohibited financial interest. This bases the prohibition on the relationship of the financial interest to the organization's overall mission as opposed to an individual employee's particular duties. The intent clearly is that the mere employment association with the organization must trigger application of the prohibition. They prohibit direct and indirect financial interests. This can effectively extend the prohibitions to the employee's spouse and dependent children. • They each carry severe penalties, including criminal penalties or removal from office. Further, the language used in Organic law conflict of interest prohibitions usually expresses the clear intent of Congress to impose broad coverage. The rather recent prohibition in the Surface Mining Control and Reclamation Act of 1977 serves as a good example. The law states: No employee of the Office [Of Ethics officers who are accustomed to enforcing the governmentwide provisions of E.O. 11222 and 18 U.S.C. §§201-209 might appropriate ly say that Organic law prohibitions like this one are very easy to administer. After all, there is no need for a judgment about the substantiality of the employee's participation in a particular matter as there may be under 18 U.S.C. § 208. There is no need for a judgment about the substantiality of an appearance of a conflict of interest with one's duties as may be required under E.O. 11222. There is also seldom a need to consider alternative solutions for resolution of violations found. Divestiture is normally the only possible solution. Recusal, restriction of duties or transfer of the employee to a different job in the organization simply is not possible under Organic law prohibitions since in order to work, the employee would have to be placed in an entirely different Bureau. This is very convenient. The hard decisions common to all ethics officers are already made for us. Nevertheless, other difficult management problems lie ahead. (In the next issue of the Ethics Newsgram, Mr. Paone will discuss a few of the problems that ethics officials face in dealing with Organic law conflict of interest prohibitions. Ed.) Year In Review This special edition of the Ethics Newsgram contains a report by the (Continued from page 1) Commercial Discounts limitations described in the memorandum, the government employee may accept the government rate. Briefly, the limitations prohibit acceptance if the hotel is a prohibited source described in 5 C.F.R. § 735.202, and prohibit an employee from misrepresenting the purpose of the travel in order to obtain the discount. Otherwise, acceptance is generally permissible because, when a discount is offered, not to the general public, but to a class as large and diverse as all government employees, there is little likelihood that the offeror is seeking to gain influence or to supplement employees' salaries. On the other hand, appearance problems may preclude certain Federal employees from accepting such a discount, particularly when their official duties involve the offeror. The toughest questions in this area involve discounts offered to a class consisting of less than all Federal employees. These discounts may raise the possibility of an improper motive and create appearance problems. In evaluating such discounts, agencies should consider the following factors: (1)whether the offeror is a prohibited source under 5 C.F.R. § 735.202; (2)whether the employee's acceptance of the discount would create an appearance problem under 5. C.F.R. § 735.201a; (3)whether the offeror has a legitimate commercial motive in inducing increased sales volume or whether the offeror expects some form of reciprocation through the employee's official duties; and (4)whether the offeror seeks to supplement the employee's salary for his or her official duties in violation of 18 U.S.C. § 209. For additional information on this matter, please consult the memorandum. If you do not have a copy of it, and would like to obtain one, please contact this Office. CLE Credit For OGE You can obtain CLE credit for your attendance at the OGE seminar on October 9 by sending the following information to Bob Flynn at OGE: ⚫ your name; • your telephone number; ⚫ the date of attendance; and ⚫ the applicable state bar. OGE Personnel Notes The following personnel changes have occurred since this article appeared in the May 1985 Ethics Newsgram: • Diane Marischen left the office in May after serving a one-year temporary appointment as a legal clerk. • Janet Lisenby left the office in June to accept a job with the Senate Finance Committee. David Reich left his attorneyadvisor position in July and is now working at the Defense Logistics Agency. • Doris J. Johnson joined our staff as a secretary in September from the Social Security Administration of HHS. • Mary B. White joined our legal staff in September as an attorneyadvisor. The Ethics is published by the We welcome any news and information related to ethics which you might wish to bring to the attention of OGE and the agencies, as well as your candid critiques and suggestions. Quoting or reprinting materials contained in this publication is strongly encouraged and may be done without seeking OGE permission. (Continued from page 1) Assets and Income of the holdings in a given filer's CMA. Even though the type of explana- Correction In the August 1985 Ethics Newsgram article entitled "The More Things Change," reference was made to 5 U.S.C. § 735.202(a) and (b). The reference, of course, should have been to 5 C.F.R. § 735.202(a) and (b). Office of Government Ethics ETHICS NEWSGRAM Vol. 3, No. 1 Special Edition January 1986 Public Service-Public Trust 1985 This special edition of the Ethics Newsgram contains a report by the |