June 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

White House Changes Rules on Lobbying for Stimulus Funds
In response to vociferous complaints from groups as diverse as the American League of Lobbyists, the American Civil Liberties Union and Citizens for Responsibility and Ethics in Washington, the White House Ethics Advisor, Norm Eisen, issued an update on the Recovery Act Lobbying Rules on May 29, 2009. Eisen said that the White House was changing the section of the President’s Memorandum on Ensuring Responsible Spending of Recovery Act Funds (often referred to as stimulus funds) setting out lobbying restrictions that was issued in March 2009. In the update issued on May 29, 2009, Eisen noted that the administration will expand the restriction on oral communication to cover all persons, not just federally registered lobbyists. In making this change, Eisen emphasized that they will reach contacts not only by registered lobbyists but also by unregistered ones, as well as anyone else exerting influence on the stimulus process. (Federal Ethics Report, Issue 16, No. 6 June 2009)

Office of Government Ethics

OGE Advises on Compliance with Ethics Agreements
The Director of the Office of Government Ethics (“OGE”) released a memorandum to Designated Agency Ethics Officials, DO-09-015, titled the Procedures and Required Evidence of Compliance for Ethics Agreements Made by PAS Nominees (officials whose positions require the advice and consent of the Senate). The memo reiterated and clarified previous OGE guidance regarding which commitments in an ethics agreement require evidence of compliance and what documentation OGE will accept as demonstrating compliance. (Federal Ethics Report, Issue 16, No. 6 June 2009)

OGE Continues to Advise DAEOs on the Executive Order Ethics Pledge
The Office of Government Ethics (“OGE”) continues to work with the White House Counsel’s Office to identify and answer questions regarding Executive Order 13490 and the Ethics Pledge for non-career appointees. In a memorandum to Designated Agency Ethics Officials, DO-09-020, issued on May 26, 2009, OGE addressed how to apply paragraph 2 of the Pledge to a non-career appointee who gives an official speech at an event sponsored by a former employer or client and whether the Pledge applies to non-Federal personnel detailed to an agency under the Intergovernmental Personnel Act. (Federal Ethics Report, Issue 16, No. 6 June 2009)

Business Ethics

The Increased Need for Ethical Leadership in Difficult Financial Times
Unlike any other time in recent memory, the public has a tremendous lack of confidence in the private sector, according to Patricia Harned, the President of the Ethics Resource Center, a nonprofit organization dedicated to the advancement of high ethical standards and practices. Harned gave a presentation on proven techniques to be recognized as an ethical leader at the Construction Industry Ethics & Compliance Initiative 2009 Spring Conference held in Washington, DC on April 29, 2009. Harned said the lack of confidence has been fueled by media reports of trips on private jets, executive compensation and bonuses and the Madoff scandal. According to Harned, the public’s record low confidence in business has had an impact on ethics. (Federal Ethics Report, Issue 16, No. 6 June 2009)

Steps Leading to Acceptance of Global Programs
The world is actually smaller than we sometimes think and reactions to compliance and ethics program initiatives are often identical regardless of geography or culture, according to Win Swenson, Partner of Compliance Systems Legal Group. Swenson spoke about the steps that companies can take to achieve acceptance and effectiveness of global programs around the world at the Conference Board’s Ethics and Compliance Conference held in New York City on April 15-16, 2009. During the last three years, Swenson has conducted focus groups and interviews on ethics in 30 countries around the world. (Federal Ethics Report, Issue 16, No. 6 June 2009)

Contracting

Construction Contractors Discuss Implications of the FAR Mandatory Disclosure Rule
Contractors in the construction industry are struggling with the lack of detailed definitions and explanations in the 2008 Federal Acquisition Regulation requiring mandatory disclosure, according to Christine McAnney, Vice President and General Partner of Balfour Beatty Infrastructure, Inc. McAnney spoke on a panel addressing construction contractors’ response to the Mandatory Disclosure Rule at the Spring Conference of the Construction Industry Ethics and Compliance Initiative (“CIECI”) held in Washington, DC on April 29, 2009. Richard Bednar serves as the coordinator of CIECI and moderated the panel. Bednar noted that the rule elevates the importance of contractor self-governance. (Federal Ethics Report, Issue 16, No. 6 June 2009)

Cases

Ex-Congressman’s Appeal of Indictment Rejected; District Judge Clarifies “Official Act”
Former Representative William J. Jefferson’s petition for certiorari requesting review of an indictment against him alleging multiple bribery-related schemes was denied by the U.S. Supreme Court on May 18. (Jefferson v. U.S., No. 08-1059) Jefferson asked the Court whether the indictment of a member of Congress, although facially valid, should be dismissed when evidence privileged under the Speech or Debate Clause was used in the grand jury to obtain the indictment. The Supreme Court’s denial upheld a decision by the U.S. Court of Appeals for the Fourth Circuit affirming a district court opinion that denied Jefferson’s request for the dismissal of the indictment, which Jefferson claimed was based on privileged information under the Speech or Debate Clause of the U.S. Constitution. Since the date the Supreme Court denied certiorari to former Representative Jefferson, Judge Ellis has issued another memorandum opinion addressing the “official act” element of 18 U.S.C. §201(b)(2)(A). (Federal Ethics Report, Issue 16, No. 6 June 2009)

Federal Election Campaign Financing

Commissioner McGahn Discusses the View from the FEC
Federal Election Commissioner Donald F. McGahn described the FEC as a “hybrid agency that only Washington DC can create and love" at a Forum on Corporate Compliance, Campaign Finance, Contracting, Lobbying, and Ethics Rules. BNA, McKenna Long & Aldredge LLP and the American League of Lobbyists presented the Forum on May 18, 2009, in Washington, DC.

McGahn explained that for the first half of 2008, the FEC did not have a quorum because it only had two Commissioners. When McGahn and three other Commissioners arrived in July 2008, they found 200 matters in the agency’s inbox. Since the agency has been fully staffed, the Commissioners have closed 300 matters and settled or imposed penalties of over $1.3 million, which is about average for a nine-month period. Each week the Commission publishes a weekly digest of everything that happens at the Commission during the week. The digest contains a lot of content and includes links to court filings.

He noted with regard to trends in enforcement they treat mostly routine matters. McGahn explained that the FEC has a “sua sponte” policy which is good for compliance programs. He described that self-reporting policy as a way to ensure that you get a discount on the fine levied for non-compliance. With regard to the lowering of fines, McGahn said the Commission was following case law. He said the courts have sometimes found that the fines levied by the Commission were out of whack and have lowered the fines. McGahn concluded by stating that unsettled issues the FEC will continue to face include independent speech, 527 compliance and express advocacy. (CCH Federal Election Campaign Financing Guide, Report No.409, May 29, 2009)

Funds Used to Pay for Security Upgrades Not Personal Use
Congressman Elton Gallegly can use campaign funds to pay for enhanced security at his home due to threats to him and his wife stemming from his role as a member of Congress, and as a candidate, because the security upgrades did not constitute a personal use of campaign funds, and were permissible under the Federal Election Campaign Act (FECA) and regulations, the Commission held. An individual had approached the Congressman’s wife, left a threatening letter at their home, and twice entered their property, once after the Galleglys obtained a restraining order.

The Commission makes a determination on a case-by-case basis whether an expense would fall within the definition of “personal use,” and would be prohibited, when the expense is not one of the listed items that always constitute a prohibited personal use. The Commission has recognized that if a “candidate can reasonably show that the expenses at issue resulted from campaign or officeholder activities, the Commission will not consider the use to be personal use.” Because the Commission concluded the threats would not have occurred except for the congressman being a member of the Congress and candidate for re-election, the use of campaign funds to pay for the security upgrades was not a prohibited personal use under the FECA or Commission regulations. (AO 2009-08) (CCH Federal Election Campaign Financing Guide ¶6577.

Senator Asks to Use Campaign Funds to Pay Legal Expenses
A Senator and his principal campaign committee requested confirmation that the committee could pay the legal fees and expenses incurred from: (1) responding to allegations arising from baseless complaints filed by Senator Coleman’s political opponents; (2) monitoring ongoing litigation related to those complaints, preparing for possible involvement in litigation, and preserving documents that may prove relevant to the litigation; and (3) providing responses and information to the media on these topics. (AOR 2009-12) (CCH Federal Election Campaign Financing Guide ¶4912)