February 2009

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

If you have any comments or suggestions concerning the information provided or the format used, we'd like to hear from you. Please send your comments to pamela.maloney@wolterskluwer

Executive Branch

Obama Signs Executive Order on Ethics
On his first day in office, President Barack Obama signed an Executive Order (“EO”) dealing with ethics commitments by executive branch personnel. The EO provides that all executive branch employees appointed in Obama’s administration are required to sign an ethics pledge stating that they will not accept gifts from registered lobbyists or lobbying organizations for the duration of their executive branch service. The pledge also requires appointees, for a period of two years, not to participate in any particular matter involving specific parties that are directly and substantially connected to their former employer or former clients, including regulations. The EO also deals with post-employment issues. (CCH Federal Ethics Reports, February 2009, Vol. 16, Issue 2)

Business Ethics

The Sentencing Guidelines: Are They Still Relevant?
By: Paul Fiorelli, J.D., M.B.A., CCEP
The Federal Sentencing Guidelines for Organizations (“FSGO”), also referred to as Chapter 8, either caused a sea change in how organizations perceived ethics and compliance, or are much ado about not very much. This article will explore the positive and negative aspects about these Guidelines and attempt to answer the question–are they still relevant? The FSGOs not only influenced the ethics and compliance industries, it impacted how some federal agencies and other organizations, viewed potential violations. Health and Human Services: Office of Inspector General developed compliance programs for health care providers, modeled after Chapter 8. The NYSE and NASDQ require listing companies to have a code of conduct. After December 24, 2007, even smaller companies with more than $5 million in government contracts are required to have a code of conduct, train their employees, and implement methods for reporting violations. (CCH Federal Ethics Reports, February 2009, Vol. 16, Issue 2)

Designing a Compliance Program for the Small-to Medium-Sized Private Company
Compliance programs are not just for large companies, said Art Weiss, Chief Compliance and Ethics Officer for TAMKO Building Products, Inc., located in Joplin, Missouri. Speaking at the Society of Corporate Compliance and Ethics’ 2008 Compliance and Ethics Institute in Chicago this fall, Weiss stated that, under the U.S. Sentencing Guidelines, an effective compliance program may mitigate punishment for offending companies or even help them avoid punishment. He noted that directors can face personal liability. An effective program has a specific individual who is responsible for it, Weiss said. He added that preferably the individual will not report to the legal department. The legal department’s job is to defend the company, while the compliance officer’s responsibility is broader. (CCH Federal Ethics Reports, February 2009, Vol. 16, Issue 2)

Contracting

DOD Interim Rules on Post-Employment and Whistleblowers Impact Contractors
The Department of Defense (“DOD”) issued an interim rule on January 15, 2009, amending the Defense Federal Acquisition Regulation Supplement (“DFARS”) to implement Sections 846 and 847 of the 2008 National Defense Authorization Act. Section 847 required that a DOD official, who has participated personally and substantially in a DOD acquisition exceeding $10 million or who has held a key acquisition position, must obtain a written opinion from a DOD ethics counselor before accepting compensation from a DOD contractor within two years after leaving DOD service. The interim rule also implements Section 846 of the 2008 National Defense Authorization Act and Section 842 of the 2009 National Defense Authorization Act, which address protections for contractor whistleblowers. According to the interim rule, a covered official or former official of DOD must obtain from a DOD ethics counselor a written opinion that outlines the applicability of post-employment restrictions to activities that the official may undertake on behalf of a contractor. (CCH Federal Ethics Reports, February 2009, Vol. 16, Issue 2)

Investigations

OGE Compiles Survey of Conflict of Interest Prosecutions
The Office of Government Ethics (“OGE”) released its annual survey of prosecutions of criminal conflict of interest violations by executive branch employees and other individuals. The survey includes summaries of prosecutions carried out by the Public Integrity Section of the Department of Justice’s (“DOJ”) Criminal Division as well as U.S. Attorneys around the country. The Executive Office of United States Attorneys assisted OGE in compiling the information OGE relies on the Public Integrity Section and the U.S. Attorneys to forward the prosecutions under the relevant statutes. The survey, released in November 2008, reviews settlements and guilty pleas of cases prosecuted during the 2007 calendar year. The cases involved post-employment violations, financial interests, supplementation of salary negotiating employment, and financial disclosure filing issues. In addition, OGE has included corruption cases involving Members of Congress and their staffs. (CCH Federal Ethics Reports, Vol. 16, Issue 2, February 2009)

Federal Election Campaign Financing

Public Hearing on Commission Procedures Held
On January 14-15 the Federal Election Commission held a comprehensive public hearing. The purpose of the hearing was to solicit comments on policy statements, advisory opinions, and public information, as well as on various elements of the compliance and enforcement processes such as audits, matters under review, report analysis, administrative fines, and alternative dispute resolution. The Commission received 25 written comments from practitioners in the campaign finance field, public interest groups, and the Department of Justice (DOJ). Specifically, the DOJ requested a review of the Memorandum of Understanding between the Commission and itself, originally written in 1977. The DOJ requested that the memorandum be updated to reflect changes contained in the Bipartisan Campaign Reform Act of 2002 which increased the severity for violations of campaign finance laws from misdemeanors to felonies. Following the hearing the Commission issued a notice announcing that it would extend the public comment period until February 18, 2009. (CCH Federal Election Campaign Financing Guide, Report 406, January 2009)

Contribution Limits for 2009-10 Released
The Commission released contribution limits for the 2009-10 year this month. The amounts an individual or a political action committee (PAC) can donate to a candidate committee increased from $2300 to $2400, both may donate $5000 to a PAC. Each can also donate $10,000 combined limit to state, district and local party committees and $30,400 to a national party committee. State, district and local party committees, national party committees, and multicandidate PACs are limited to a $5,000 contribution to candidate committees and to PACs. A multicandidate PAC is capped at $5,000 a year for state, district and local party committees and $15,000 for a national party committee. However, state, district and local party committees and national party committees are allowed unlimited transfers to other party committees. Complete contribution limits information is at www.fec.gov. (CCH Federal Election Campaign Financing Guide, Report 406, January 2009)

Only Senator’s Leadership PAC May Pay Coauthors Expenses
A senator’s campaign committee could not pay expenses incurred by the coauthor of the senator’s book, but the senator’s leadership political action committee (PAC) could, the Commission ruled. The senator and his coauthor received an advance from a publisher for the book, but the advance did not cover the coauthor’s promotion and publishing expenses. The senator asked if he could pay the coauthor with funds from either his campaign committee or his affiliated PAC. Under Commission regulations, neither the candidate nor the candidate’s authorized committee could convert contributions accepted by the candidate to the personal use of the candidate. The campaign committee’s proposed payment to the coauthor would constitute personal use, the Commission found, because the costs of promoting and publishing the book were not campaign expenditures and likely would have arisen irrespective of the senator’s reelection campaign or his duties as a federal officeholder. However, the leadership PAC could pay the expenses as a third party on behalf of the senator. Because the book would advance the leadership PAC’s goals and the leadership PAC would have paid for the book and the coauthor’s expenses irrespective of the campaign, the payment to the coauthor did not constitute a contribution. (CCH Federal Election Campaign Financing Guide ¶6566)

Congressional Activity

Fair Pay Act Signed into Law
The Lilly Ledbetter Fair Pay Act (P.L. 111-2) was signed into law by President Obama on Jan. 29, 2009. This legislation amends the Age Discrimination in Employment Act (ADEA), the Americans with Disabilities Act (ADA) and the Rehabilitation (Rehab) Act to state that an unlawful employment practice occurs, with respect to disparate pay, when: (1) a discriminatory compensation decision or other practice is adopted; (2) an individual becomes subject to a discriminatory compensation decision or other practice; or (3) when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits or other compensation is paid, resulting in whole or in part from such a decision or other practice. Accordingly, the new law would reestablish the “paycheck accrual” rule (i.e., receiving a paycheck resulting in whole or in part from a past adverse employment action) as an appropriate method for filing a charge of discrimination with the EEOC. As long as employees file their charges within 180 days of such decisions or practices, their charges would be considered timely. In addition, employees who are victims of discrimination would be entitled to up to two years of back pay.