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1. INTRODUCTION

We have approached the President's request to evaluate existing ethics rules with twin objectives: to obtain the best public servants, and to obtain the best from our public servants.

Ethical government means much more than laws. It is a spirit, an imbued code of conduct, an ethos. It is a climate in which, from the highest to the lowest ranks of policy and decision-making officials, some conduct is instinctively sensed as correct and other conduct as being beyond acceptance.

Laws and rules can never be fully descriptive of what an ethical person should do. They can simply establish minimal standards of conduct. Possible variations in conduct are infinite, virtually impossible to describe and proscribe by statute. Compulsion by law is the most expensive way to make people behave.

The futility of relying solely or principally on compulsion to produce virtue becomes even more apparent when one considers that there is an obligation in a public official to be sure his' actions appear ethical as well as be ethical. The duty is to conduct one's office not only with honor but with perceived honor.

We must start with a will at the top to set, follow, and enforce ethical standards. President Bush has given this Commission his first Executive Order, by which he has set initially the ethical tone he expects to pervade his Administration.

That order and this report are but a beginning. Each cabinet officer, head of an agency, subordinate official with supervisory authority each must lead by example, by training and educating coworkers, by fair, just and persistent enforcement of the laws. This necessity of leadership applies with equal force to the legislature. What the Framers rightly considered the most powerful branch bids fair to be the least accountable branch. That is a dangerous combination, recognized by thoughtful Members themselves. We do not exclude the judiciary, although more rigorous and easily understood standards have obviated many problems there.

'Masculine or feminine pronouns appearing in this report refer to both genders unless the context indicates another use.

We believe that public officials want to follow ethical rules, and that they will do so if the laws are clearly delineated, equitable, uniform across the board, and justly administered. As Napoleon said: "There is no such thing as a bad soldier; there are only

poor officers."

Ethical rules and statutes rest on moral standards. They are supposed to carry a certain moral authority, as are most laws. When the lawmakers prescribe laws for others but not for themselves, in the eyes of the public the essential moral authority is diminished. This is why it is essential to create ethical rules for the legislative branch as closely similar to those of the judiciary and the executive as is possible, given their differing functions. Instead of statutes applying to only one branch or two, standards should be applicable to all. No part of the Federal Government should be satisfied with a standard of less than absolute honesty in the conduct of public officials.

While our analysis is based on certain fundamental functions which conflict of interest restrictions are intended to serve, our analysis also incorporates the four key principles noted by the President when he signed Executive Order 12668 creating this Commission. One, ethical standards for public servants must be exacting enough to ensure that the officials act with the utmost integrity and live up to the public's confidence in them. Two, standards must be fair, they must be objective and consistent with common sense. Three, the standards must be equitable all across the three branches of the Federal Government. Finally, we cannot afford to have unreasonably restrictive requirements that discourage able citizens from entering public service.

Our recommendations are set out in such a way as to define the issues at stake in each instance, the alternatives considered in arriving at our conclusions, and to provide insight into the deliberative process adopted with respect to each issue. In each instance, a "Black-Letter" statement of the recommendation will be followed by a discussion of the present law, the important considerations, including in some instances a further elaboration of our recommendations, and the alternatives which were considered by the Commission.

After this introduction, our report is divided into five major sections. First, we take up ethics issues which arise on the recruitment of the Government employee and during employment. Next, we treat post-employment restrictions. Financial disclosure deserves a section by itself, as does the structure of federal ethics regulation. We conclude with a discussion of new enforcement mechanisms.

We begin by recommending that the conflicts of interest statute forbidding decision by an executive branch official on a "particular matter" in which he has a financial interest be extended to non-Member officers and employees of Congress and the judiciary, thus striving to achieve (at least in part) the level playing field desired in the ethics laws. Judges are already covered by very strict statutory standards, but there are difficult problems in applying a statutory standard to Members of Congress.

We favor centralizing the issuance of interpretive regulations for the executive branch in the Office of Government Ethics, and we suggest the creation of a similar centralized ethics authority within the legislative branch.

As the newcomer prepares to enter Government service, he or she must fill out various forms disclosing assets and income. This frequently leads to the realization that the prospective official has assets and sources of income which, if retained, would create a recurring conflict of interest with governmental duties. While this conflict can be accommodated by recusal from decision-making or a waiver where the interest appears so small as to have no influence on the officials conduct, yet our strong recommendation is that the prospective official be encouraged to divest these troublesome assets at the very outset. If the official could do that by postponing the tax liabilities by a rollover of the troublesome assets into neutral holdings such as Treasury bills, municipal bonds, or bank certificates of deposit, then many more officials would do so. A divestiture of troublesome assets and reinvestment in neutral holdings is the single most important device we have encountered to eliminate completely or at least to mitigate greatly subsequent conflicts of interest. Many of the problems we discuss would never be problems at all, if such a change of holdings had occurred at the outset of the officials public service.

Since not all conflict problems can be erased by divestiture, we recommend that the Office of Government Ethics exercise a rulemaking authority to deal with de minimis issues, pension plans, mutual funds, the investments of charitable organizations, and the industrywide effects of some rulings on individual companies. With executive branch-wide standardized positions promulgated by the Office of Government Ethics, the compliance of individual public servants with the rules will be much simpler and easier, and the general public as a whole will have a vastly better understanding of exactly what holdings are permissible, and the nature of those retained by public officials filing annual disclosure reports.

This whole process should encourage seeking advice. One principle which helps to avoid a conflict of interest, and even an appearance of such conflict, is the age-old principle which should permeate the whole governmental ethical compliance system, i.e.: "No one shall be a judge in his own case." The possibility of a conflict of interest can be put to rest by submission to an impartial ethics authority, and following the advice received.

We have made specific and uniform recommendations in regard to the thorny problems of augmentation of Government income by private sources, a cap (with the exact percentage yet to be determined) on outside earned income of senior officials of all three branches, a ban on honoraria, and on outside boards and directorships. We believe there must be some cap on most types of outside income earned by the public servant, otherwise many public servants would slowly edge into private activity as a disproportionate source of income, to the detriment of their expected public service. This danger is enhanced every year that governmental salaries lag further and further behind those which can be obtained by the same individuals in private enterprise. We would propose, however, that the President be authorized to exempt from the cap any category of income he determines to be generated by a type of activity which did not pose ethical issues or detract from full performance of official duties.

The disgracefully low compensation for public service affects also the increasingly notorious problem of honoraria. Executive branch rules now prohibit executive branch

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