STATUTORY PROHIBITIONS AND THE DEPARTMENT'S

FINANCIAL DISCLOSURE REQUIREMENTS

STATUTORY PROHIBITIONS

In

Before 1962 the Federal conflict-of-interest laws applied equally to full-time and part-time employees. 1962 the Congress recognized that the restraints placed on part-time employees were unduly restrictive and hindered the Government in obtaining expert advice. The Senate Judiciary Committee report on a bill to amend the conflictof-interest statutes stated:

"In considering the application of present law in
relation to the Government's utilization of tem-
porary or intermittent consultants and advisers,
it must be emphasized that most of the existing
conflict-of-interest statutes were enacted in the
19th century--that is, at a time when persons
outside the Government rarely served it in this
way. The laws were therefore directed at activi-
ties of regular Government employees, and their
present impact on the occasionally needed experts--
those whose main work is performed outside the
Government--is unduly severe. This harsh impact
constitutes an appreciable deterrent to the Govern-
ment's obtaining needed part-time services."

*

"At this date it is no longer open to question
that many, if not most of the departments and
agencies find it necessary for the optimum
performance of their tasks to make use of the
skill, talent, and experience of leaders in
the sciences, business, and the professions
whose regular work is conducted in private
spheres. Today's Government requires the
part-time services of thousands of such per-
sons to deal with problems of increasing com-
plexity and scope. It can scarcely be ques-
tioned that a satisfactory means must be found
of facilitating the employment of these in-
dividuals by the departments and agencies, as
needed, without relaxing basic ethical stand-
ards or permitting actual conflicts of interest."

The resulting legislation, a criminal statute (18 U.S.C. 201-218), established the category of "special Government employee" and required generally less stringent restrictions on these employees than those applicable to regular Government employees. For example, 18 U.S.C. 209, which prohibits a regular employee's receipt of pay from private sources in certain circumstances, specifically excludes SGES from its coverage.

The most pertinent restrictions placed on SGES are set forth in sections 203, 205, 207, and 208 of 18 U.S.C. Sections 203 and 205 contain prohibitions affecting the activities of SGES in their private capacities. Section 207 contains prohibitions affecting the activities of SGES after their Government employment is ended.

Section 208 prohibits an SGE, in the course of his official duties, from participating personally and substantially in a particular matter in which, to his knowledge, he, his spouse, minor child, partner, or a profit or nonprofit enterprise with which he is connected has a financial interest. Under 208(b) an agency may grant an SGE an ad hoc exemption from this prohibition if the interest is deemed not so substantial as to affect the integrity of his service. An agency may also waive certain financial interests by a general rule or regulation which are considered too remote or too inconsequential to affect the integrity of an SGE's services. Our review focused primarily on section 208 provisions.

While the Congress lessened the restrictions placed on SGES, it emphasized the need for greater administrative supervision. In commenting on the proposed 1962 legislation, the Chairman of the cognizant Senate Subcommittee stated:

"*** we have created a "special Government
employee" for whom the restraints *** have
been relaxed under the bill. This was done to
permit the Government to be able to bring ad-
visers and consultants in temporarily--a prob-
lem which under present law is difficult, as
the report indicates.

"I wish to emphasize that there will have to be
close administrative regulation of this provi-
sion. Among the regulations should be current
statements of their financial interests, a con-
tinuous scrutiny of the role and the need for
the individual in the agency, and of the ap-
pearance of these employees on behalf of non-
Government organizations and enterprises.

"These individual views of mine are in the
nature of a warning and a caution to the
executive branch to be more alert and to be
more vigilant where we have relaxed this
conflict-of-interest provision."

EXECUTIVE ORDER

In 1963, the President recognized the need for employing highly skilled persons on a temporary basis, but he was also acutely aware of the potential for conflict of interest. In a memorandum 1/ to the heads of executive departments and agencies, the President stated:

"The temporary or intermittent adviser or con-
sultant and the department or agency which em-
ploys him both must be alert to the possibility
of conflict. It is, of course, incumbent upon the
adviser or consultant to familiarize himself with
the laws and regulations which are applicable to
him. The responsibility of the department or
agency is equally great. It is important that it
oversee his activities in order to insure that the
public interest is protected from improper conduct
on his part and that he will not, through ignorance
or inadvertence embarrass the Government or himself.
It must assist him to understand the pertinent laws
and regulations. It must obtain from him such in-
formation concerning his financial interests as is
necessary to disclose possible conflicts. It must
take measures to avoid the use of his services in
any situation in which a violation of law or regula-
tion is likely to occur. And it must take prompt
and proper disciplinary or remedial action when a
violation, whether intentional or innocent, is
detected."

In 1965, the President issued Executive Order 11222, part III of which prescribed standards of ethical conduct for SGES. This order states that SGES must refrain from any use of public office which is motivated by or gives the appearance of being motivated by the desire for private gain for himself or other persons, particularly those with whom he has family business, or financial ties. It also directed the Civil

1/This memorandum was revoked by Executive Order 11222. However, the substance of the memorandum is still contained in the Federal Personnel Manual, Chapter 735, Appendix C.

Service Commission (CSC) to establish implementing regulations and to approve standards of conduct established by each agency. In November 1965, CSC issued instructions requiring each agency to prepare standards of employee conduct and to establish a system for reviewing employee financial disclosure statements.

DEPARTMENT'S REGULATION

Pursuant to the Executive order and CSC's implementing instructions, in March 1966, HEW issued a regulation (45 C.F.R. 73.735) governing employees' responsibilities and conduct. Only Subpart L of the regulation applies to SGES. It states that an SGE must conduct himself according to ethical behavior of the highest order and prescribes standards for adherence.

SGES are required by this regulation to submit a statement which reports (1) all other employment and (2) the financial interests which relate either directly, or indirectly, to his duties and responsibilities. These statements are required at the time of employment and are to be kept current throughout the period of employment.

In 1972, the Department issued supplemental regulations (45 C.F.R. 73a.735) providing interpretive definitions to the Department's regulation and additional requirements for FDA's regular employees. It stated that since FDA is a unique consumer protection and regulatory agency within the Department, the Department's regulation needed further supplementation to reflect this role. The Department has not issued supplemental regulations covering SGES.

The Assistant General Counsel, Business and Administrative Law Division, Office of the General Counsel, was designated the Department's ethics counselor to give advice and Administer regulations governing SGE's responsibility and conduct. If the ethics counselor cannot resolve a conflict, pertinent information is forwarded to the Secretary of HEW, for his consideration.

FDA's Associate and Deputy Associate Commissioner for Administration and the Director, Policy Management Staff, are responsible for making a conflict-of-interest determination based on statements submitted by SGES on employment and financial interests which must be filed (1) prior to initial appointment and (2) annually prior to reappoint

ment.

SYSTEM TO PROTECT AGAINST

CONFLICT OF INTEREST FOR SGES

HOW SGES ARE APPOINTED

FDA advertises in the Federal Register for (1) position openings resulting from the establishment of new committees and (2) vacancies which are to occur during the next 12 months for existing committees. These notices state the function of the committees, qualifications required, and term of the office. For nominations submitted, a summary of the candidate's qualifications is required and, except for industry representatives, a statement that the individual appears to have no conflict of interest that would preclude committee membership. Industry representatives are selected by industry

associations.

Most committee openings are presently being filled from responses to Federal Register notices. Occasionally, nominations are solicited from committee members already appointed and by mass mailings to various professional and scientific groups.

The sequence of steps followed before the initial appointment of an SGE are:

1. An official in the sponsoring bureau/office (usually an executive secretary) contacts the prospective SGE to determine his interest, availability, suitability, and possible conflicts of interest.

2.

3.

4.

The committee management officer of the sponsoring office forwards the necessary appointment forms, including the FD-2637, "Confidential Statement of Employment and Financial Interest," to the nominee.

An official in the sponsoring bureau/office reviews the appointment forms and initially states in writing whether a conflict of interest exists.

The Director, Policy Management Staff, reviews the appointment forms, including the "Confidential Statement of Employment and Financial Interest," and makes the final determination whether a conflict exists.