August 2009

From the editors of Wolters Kluwer Law & Business, this update describes important developments from CCH ethics and government publications.

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Business Ethics

Information Sought on the Role of E & C Programs in Enforcement Decisions
Although senior management and boards of directors want to know the extent to which organizations have benefited from implementing effective ethics and compliance (“E & C”) programs, such information is in small supply, according to a report issued by the Conference Board on July 23, 2009, entitled Ethics and Compliance Enforcement Decisions—the Information Gap. The report, which was written by Ron Berenbeim, a principal; research at the Conference Board, and Jeffrey Kaplan, a partner in the Princeton, New Jersey office of Kaplan & Walker LLP, explained that many companies have responded to the Organizational Sentencing Guidelines issued in 1991 by creating E & C programs that have far exceeded early expectations with respect to prevalence design and rigor.

The report stated that since 1999, the Department of Justice (“DOJ”) has had a formal policy, The Principles of Federal Prosecution of Business Organizations, of considering E & C programs when determining whether or not to bring charges against organizations for the offenses of their employees and other agents. In 2001, the Securities and Exchange Commission (“SEC”) established a policy which weighed E & C programs, among other things, in enforcement proceeding, said the report. The report found that despite the Guidelines’ incentives for companies to develop and implement E & C programs and the similar policies subsequently adopted by other enforcement agencies, case examples that are critical to affirming the incentives’ credibility are hard to find. (CCH Federal Ethics Report, August 2009, Vol. 16, Iss. 8)

Ethical Challenges of Working with Third Party Operators
The ethical challenges presented when retaining the services of a third party operator was the subject of a presentation by Marjorie Doyle, CCEP, Ethics and Compliance Advisor, Marjorie Doyle & Associates LLC, at a conference on Utilities and Energy Compliance and Ethics hosted by the Society of Corporate Compliance and Ethics. The conference was held in Houston, Texas on March 1-3, 2009. Doyle began her presentation by reminding all in attendance that the hiring of third party contractors and outsourcing can create a host of issues for a company. Third parties can be any type of vendor including suppliers, law firms, staffing, auditing, IT, and a host of other suppliers. Doyle noted that often a third party can harm a company’s reputation far worse than any legal harm that they cause. (CCH Federal Ethics Report, August 2009, Vol. 16, Iss. 8)

Executive Branch

OMB Issues Updated Guidance on Lobbying for Recovery Act Funds
The Office of Management and Budget (“OMB”) issued updated guidance on July 24, 2009, on how to comply with the March 20, 2009 memorandum issued by President Obama that restricted contact between registered lobbyists and executive branch officials regarding spending of recovery funds. The guidance outlines the actions federal employees should take whenever they receive or participate in oral or written communication with any outside persons or entities, including lobbyists, regarding Recovery Act funding determinations. The prohibition on oral communication between Federal agency officials and federally registered lobbyists regarding specific Recovery Act projects that was contained in the earlier guidance has been clarified to apply to the stage and context where concerns about merit-based decision-making are greatest—during the period commencing after the submission of formal applications for, and up through awards of, competitive grants or other competitive forms of Federal financial assistance under the Recovery Act. Also, the restriction has been expanded to cover, generally, all persons outside the Federal Government, and not just federally registered lobbyists, who initiate oral communications concerning pending competitive grant or loan applications under the stimulus Act. (CCH Federal Ethics Report, August 2009, Vol. 16, Iss. 8)

Cases

Court Upholds 10-Count Indictment of Abramoff Associate
The U.S. District Court for the District of Columbia issued an opinion on June 25, 2009, upholding a 10-count indictment brought against Kevin Ring, a lobbyist who worked for and with Jack Abramoff. On September 25, 2008, a grand jury issued a 10-count indictment which identified a scheme in which Ring and his co-conspirators identified public officials who could use their influence and positions to perform official actions that would assist Ring and his coconspirators in their lobbying efforts on behalf of their clients.

Count one of the indictment charges Ring with conspiring in violation of 18 U.S.C. §371, to pay illegal gratuities in violation of 18 U.S.C, §201 and to commit honest services wire fraud in violation of 18 U.S.C. §§1343 and 1346. Count two, which incorporates many of the conspiracy allegations charges Ring with paying illegal gratuities to DOJ official Robert Coughlin by giving him eight tickets to basketball games for or because of his contacting an INS employee to request expedited review and approval of Abramoff’s school’s application to admit foreign students. Counts six through eight, which incorporate all of the conspiracy count’s allegations, charged Ring with committing honest services wire fraud. These counts are premised upon six separate interstate wires including one-mail exchange between and Ring and Coughlin, four e-mail exchanges between Ring and John Albaugh, a congressional chief of staff who pleaded guilty to his role in the Abramoff lobbying scandal. The last fraud charge concerns a bank wire involving a $5,000 check from the lobbying firm’s bank account that was deposited into an account controlled by the Congressman’s wife. Counts 9 and 10 charge Ring with obstruction of justice for making false statements to the lobbying firm’s outside counsel and thereby preventing the communication of information to the Federal Bureau of Investigations, the grand jury and a Congressional committee relating to the commission of the offenses charges. (CCH Federal Ethics Report, August 2009, Vol. 16, Iss. 8)

Investigations

NIH Official Sentenced for Lying about Outside Employment
A former employee of the National Institutes of Health (“NIH”), Jack Snyder, was sentenced in the U.S. District Court for the District of Maryland for violating 18 U.S.C. §1001 by making a false statement on his financial disclosure form. Snyder failed to report income from a private consulting company when he had received $165,234 in gross income from the company in 2005. On February 9, 2009, Judge Deborah K. Chasanow sentenced Snyder to one year of probation and ordered him to perform 160 hours of community service. The judge also ordered Snyder to pay a $200,000 fine. United States v. Snyder, Cr. No. 08-512 (D. Md. 2009). (CCH Federal Ethics Report, August 2009, Vol. 16, Iss. 8)

Interior Official Sentenced for False Statements on Financial Disclosure Form
A former employee of the Department of the Interior, Donald Howard, was sentenced in the U.S. District Court for the Eastern District of Louisiana for failing to report a gift from a single source totaling $285 or more on his financial disclosure form. Howard pleaded guilty to making a false statement in violation of 18 U.S.C. §1001. On February 4, 2009, Judge Jay C. Zainey sentenced Howard to serve one year of probation. In addition, the judge ordered Howard to perform 100 hours of community service and pay a $3,000 fine. United States v. Howard, Cr. No. 08-00271 (E.D. La. 2009) (CCH Federal Ethics Report, August 2009, Vol. 16, Iss. 8)

Federal Election Campaign Financing

U.S. Supreme Court Orders Rehearing for Citizens United
Citizens United v. Federal Election Commission [CCH Federal Election Campaign Financing Guide ¶82] was restored to the U.S. Supreme Court calendar for reargument on Wednesday September 9, 2009. The Court decided to expand the scope of questions presented to include overruling either or both Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1990) and McConnell v. Federal Election Commission, 540 U.S. 93 (2003), [CCH Federal Election Campaign Financing Guide: Proposed Regulations, Explanations & Justifications, Court Decisions, New Developments 1999-2005 ¶14,010]. The decision to expand the scope of the hearing could lead to a major change in campaign finance regulation. Citizens United has filed its reply brief in which it argues that Austin was wrongly decided and should be overruled and that McConnell’s validation of BCRA’s restrictions on “electioneering communications” also should fall. The government’s brief argues that this case is not the correct vehicle for a reexamination of Austin and McConnell and that both Austin and McConnell were decided correctly and should be upheld.

Advisory Opinion Hearings Instituted
The Federal Election Commission established a program to allow individuals requesting an advisory opinion, or their counsel, a limited opportunity to appear before the Commission. The purpose of allowing the appearance is to answer questions from the Commission at an open meeting during consideration of the requestor’s draft advisory opinion. In order to arrange an appearance, a requestor must submit a written notice to the Commission indicating that they will be available to respond to questions at an open meeting no later than 48 hours prior to the scheduled open meeting. The opportunity to appear before the Commission does not guarantee that a requestor will be able to address the Commission if no Commissioner has any questions of the requestor. (CCH Federal Election Campaign Financing Guide, No. 411, July 2009)

Audit Hearings Pilot Program Launched
The Federal Election Commission is instituting a pilot program to provide committees that are audited, pursuant to the Federal Election Campaign Act of 1971, with the opportunity to have a hearing before the Commission prior to the Commission’s adoption of a Final Audit Report. The audit hearings will provide audited committees with the opportunity to present oral arguments directly to the Commission and will give the Commission an opportunity to ask relevant questions prior to adopting a Final Audit Report. This is a pilot program that will remain in effect for at least one year. The program will be evaluated by the Commission and will require an affirmative vote by four Commissioners to be confirmed. (CCH Federal Election Campaign Financing Guide, No. 411, July 2009)