April 2007
From the editors of Wolters Kluwer Law & Business, this update describes important developments from CCH ethics and government publications.
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Campaign Finance
Obama May Raise Funds, Remain Eligible
for Public Financing
Senator Barack Obama (D-Ill.)
may solicit and accept private contributions for the 2008 general presidential
election and remain eligible for public financing if he were to return
those contributions after becoming the Democratic nominee, the Federal
Election Commission has ruled in Advisory Opinion 2007-03. Senator Obama
will be required to deposit contributions intended for the general election
in a separate account, not use them for any purpose, and refund them in
full if he decides to accept public funds. Candidates are required to
certify that they have not accepted and will not accept contributions
for the general election in order to be eligible for payments from the
Presidential Election Campaign Fund for the general election. Federal
candidates who have not won their primary election or received their party's
general election nomination are permitted to accept contributions designated
for the general election. If a candidate fails to qualify for the general
election, contributions received for the general election from contributors
who have already reached their contribution limit for the primary would
constitute excessive contributions. However, a candidate is not considered
to have accepted an excessive contribution if the candidate refunds the
contributions designated for the general election within 60 days of the
date the funds become impermissible. Similarly, FEC reasoned, a presidential
candidate would not be considered to have accepted private contributions
so long as he refunded the full amount of the contributions designated
for the general election within 60 days of the date the funds became impermissible
if he decided to accept public funding. (CCH Federal Election
Campaign Financing Guide ¶14,018)
Business Ethics
Anti-Corruption Compliance for U.S.
Businesses
“Issues relating to the
provisions of the Foreign Corrupt Practices Act (FCPA) are demanding more
and more attention from audit committees of corporate boards,” according
to Homer E. Moyer, Jr., who moderated a discussion on anti-corruption
compliance at the International Corporate Compliance conference sponsored
by The Center for American and International Law on February 22-23 in
Chicago. Moyer listed three reasons for this upward shift in focus: (1)
increased enforcement of FCPA by federal agencies; (2) increased use of
FCPA compliance monitors as part of settlement agreements; and (3) growing
compliance culture in U.S. corporations. Members of the panel included
Mark F. Mendelsohn of the U.S. Department of Justice (“DOJ”),
Fredric D. Firestone of the Securities and Exchange Commission (“SEC”),
Dana Nahlen, Senior International Counsel for Electronic Data Systems
Corporation (“EDS”), and Deb Gramiccioni, Vice President of
TRACE International, Inc.
Audit committees must be informed and possibly even directly involved whenever an FCPA issue arises because payments to foreign government officials can raise the prospect of an unauthorized dissipation of corporate assets, inaccurate books and records entries, and a failure of internal financial controls. Once the basis of relatively few investigations, both the DOJ and the SEC have stepped up activity in this area in light of Sarbanes-Oxley’s mandatory disclosure obligations. (CCH Federal Ethics Report, Vol. 14, Issue 4, April 2007)
Congress Hears Testimony Critical of
the McNulty Memo
The President of the American Bar Association
(“ABA”) joined with the Chairman of the Association of Corporate
Counsel, the former Director of the Enron Task Force and a former Assistant
U.S. Attorney in criticizing the McNulty Memorandum, the latest revised
version of the Principles of Federal Prosecution for Corporations. These
individuals testified at a hearing before the House Subcommittee on Crime,
Terrorism and Homeland Security of the Committee of the Judiciary, on
March 8, 2007. [FER covered the McNulty Memo in the January 2007 issue,
Vol. 14, Iss. 1].
The ABA President, Karen Mathis observed that the McNulty Memo modified but did not reverse the Department of Justice’s (“DOJ”) privilege waiver policy. She said that instead of eliminating the improper practice of requiring or encouraging companies to waive their attorney-client privilege and work product protections in return for cooperation credit, the revision merely requires high level Department approval before formal waiver requests can be made. The McNulty Memo also continues to allow prosecutors to grant cooperation credit for voluntary waivers. The ABA believes that the McNulty Memo and other similar federal policies will continue to lead to the routine compelled waiver of privilege by corporations and will perpetuate the culture of waiver that currently exists. (CCH Federal Ethics Report, Vol. 14, Issue 4, April 2007)
Government Ethics
Contracting Reform Legislation Addresses
Integrity Issues
The House of Representatives
passed a major acquisition reform bill that would amend federal contracting
rules. The Accountability in Contracting Act (H.R. 1362), aims to promote
integrity in contracting by closing loopholes in the current “revolving
door” laws that are applicable to government contracting officials.
One of the bill’s provisions would eliminate loopholes that allow
former federal officials to accept compensation from contractors by extending
the prohibition on procurement officials receiving compensation from certain
contractors to include restrictions on receiving compensation as lawyers
or lobbyists for the contractor. This section would also limit the ability
of former procurement officials to accept compensation from divisions
or affiliates of a contractor with unrelated business lines. In a nod
to the Darleen Druyun scandal, H.R. 1362 would require federal procurement
officers to disclose job offers made on behalf of relatives by expanding
the notification and recusal requirements for procurement officials who
are contacted about non-Federal employment to include job offers for relatives.
The legislation also would establish a new requirement that procurement
officials who were previous employees of a contractor with the Federal
Government could not be “personally and substantially” involved
in contract awards to that contractor for a period of one year beginning
on the date on which the employee leaves the contractor’s employment.
(CCH Federal Ethics Report, Vol. 14, Issue 4, April 2007)
Reversal of Gratuity Conviction Narrows
Definition of "Official Act"
A conviction of a District of
Columbia Metro Police Department detective for violating the illegal gratuity
statute, 18 U.S.C. §201(c)(1)(B), was reversed by the U.S. Court
of Appeals for the District of Columbia Circuit because the government
failed to show that the acts for which the detective received compensation
fell within the scope of the statute. Moreover, the court determined that
the district court judge’s jury instruction on the definition of
“official act” was error.
Valdes originally was indicted on three counts of bribery, in violation of 18 U.S.C. §201(b)(2)(A) and (C), but a jury convicted him of three counts of the lesser-included offense of receipt of an illegal gratuity “for or because of an[] official act.” On appeal before a panel of the D.C. Circuit, Valdes successfully argued that the district court’s interpretation of the statute was in error and that the government’s evidence was insufficient.
The full court subsequently resolved to hear the case en banc, to determine the sufficiency issue and whether the district judge’s charge had correctly defined an “official act.” Because the government failed to show that the payments received by Valdes were for any “decision or action on any question, matter, cause, suit, proceeding or controversy, which may at any time be pending, or which may by law be brought before any public official,” as required by 18 U.S.C. § 201, the judgment of conviction was reversed by the appellate court. Moreover, the court determined that the district court judge’s jury instruction on the definition of “official act” was error. (CCH Federal Ethics Report, Vol. 14, Issue 4, April 2007)
OGE: Revision of Departmental Component
Designation Changes DHS Post-Employment Restrictions
The Office of Government Ethics
(“OGE”), on March 8, 2007, issued a final rule (72 FR 10339)
to revoke certain existing department competent designations and to designate
an additional component for purposes of the one-year post employment restrictions
of 18 U.S.C. §207(c). Senior employees for purposes the post-employment
restriction are those who earn more than 86.5 percent of Executive Schedule
II pay, which is $145,320 in fiscal year 2007. Changes in the department
competent designations will bar all former senior officials of the Department
of Homeland Security (“DHS”) from representing a non-federal
entity before any part of DHS for one year after leaving federal employment.
In requesting that OGE remove the eight separate components from the DHS listing that had been designated at 69 FR 68053, November 23, 2004, DHS stated that the Department has determined that a single, undifferentiated organization for purposes of 18 U.S.C. §207(c) is in the best interest of DHS, the Government, and the public as DHS strives to establish a single, unified workforce. The OGE Director granted the request of DHS because the former components no longer exercise functions which are distinct and separate. In a press release announcing this change, DHS Secretary Chertoff said, “Whatever the component agency or office, the leaders of this department are first and foremost senior DHS officials. There should be no doubt about the integrity of our leadership and the motivation for their service to our country.” (CCH Federal Ethics Report, Vol. 14, Issue 4, April 2007)
Congress
Senate Approves Stem Cell Research
Bill; President Promises Veto
The Senate on April 11 approved
the Stem Cell Research Enhancement Act of 2007, (S. 5), which would expand
the number of human embryonic stem cell lines eligible for federally-funded
research. The measure passed with a vote of 63-34. The Senate also passed
by a vote of 70-28 the Hope Offered through Principled and Ethical Stem
Cell Research Act or the HOPE Act (S. 30). S. 5 directs the Department
of Health and Human Services (HHS) to conduct and support research on
stem cells derived from embryos now stored in fertility clinics that would
otherwise be destroyed. President Bush, however, vowed to veto the bill
if the House accepts the Senate version.
In a prepared statement, Bush noted that S.
5 is very similar to legislation he vetoed in 2006. “This bill crosses
a moral line that I and many others find troubling,” he said. “If
it advances all the way through Congress to my desk, I will veto it.”
(The Week in Congress, Issue 12, April 13, 2007)