March 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

The Importance of Compliance Programs in an Economic Downtown
A recent survey of compliance professionals revealed that a declining economy may increase the risk of legal and ethics violations. A majority of the survey respondents stated that increased risks are occurring at a time when budgets to manage those risks are staying stagnant. On February 19, 2009, five ethics and compliance leaders representing different industries discussed the survey results and offered advice on how to deal with the effects of the economy on compliance and ethics programs in an audio/web conference. The Society of Corporate Compliance and Ethics (“SCCE”) and the Health Care Compliance Association, which are non profit membership organizations serving ethics and compliance professionals, conducted the web based survey and the audio/web conference. The seminar moderator, Adam Turteltaub, CCEP, Vice President of Membership Development of SCCE, found the results of the survey troubling because in economic downturns there is a big increase in the risk of employees behaving unethically in order to protect their jobs. At the same time as the increase in risk, it is unlikely that ethics and compliance programs will receive additional resources to fight these risks. He said there is anecdotal evidence showing spikes in allegations of misbehavior. In addition, the problem is likely to be exacerbated by increased government enforcement activity. (CCH Federal Ethics Reports, March 2009, Vol. 16, Issue 3)

White Paper Discusses Building Incentives in Ethics and Compliance Programs
Not only are incentives necessary in a compliance and ethics program, but they help to put a more positive face on the program, according to Joseph Murphy, CCEP. Murphy wrote a 27-page White Paper for the Society of Corporate Compliance & Ethics on the topic, Building Incentives in Your Compliance & Ethics Program. The final draft became available in January 2009, and can be found at www.scce.org. In the White Paper, Murphy discussed the objections people raise to using incentives, the reasons for using incentives, and the actual types of incentives corporations can implement. (CCH Federal Ethics Reports, March 2009, Vol. 16, Issue 3)

Mega Fine Implications for Directors and Officers
Jeff Kaplan recently discussed the implications that the mega fines levied against businesses during the past two years have on directors and officers in a posting on the SAI Global Compliance website. Kaplan, a well known expert in the ethics and compliance field, is a partner at Kaplan & Walker LLP as well as being a SAI Global Advisor. Rational directors and officers, including general counsels, should follow the Caremark warning to take whatever steps are reasonably necessary to ensure that a company’s ethics and compliance program is up to the task of sufficiently mitigating the unprecedented peril posed by the mega fine, said Kaplan. (CCH Federal Ethics Reports, March 2009, Vol. 16, Issue 3)

Office of Government Ethics

OGE Provides Guidance on Executive Commitments Executive Order
The Office of Government Ethics (“OGE”) has issued four memorandums to Designated Agency Ethics Officials (“DAEOs”) regarding Executive Order (“EO”) 13490, “Ethics Commitments by Executive Branch Employees.” The first DAEOgram, issued January 22, 2009, alerted agency ethics officials to the EO issued by President Obama on his first day in office and explained that the EO requires political appointees to sign an Ethics Pledge promising not to accept gifts or gratuities from registered lobbyists or lobbying organizations and to abide by strict revolving door restrictions. The DAEOgram included a copy of the Pledge. On February 10, 2009, OGE issued a DAEOgram responding to questions regarding when appointees must sign the Pledge. On February 11, 2009, OGE provided guidance concerning the implementation and interpretation of the lobbying gift ban covered in the EO. The prohibitions in the EO are more comprehensive and provide far fewer exceptions than the existing OGE rules. On February 23 2009, OGE issued a DAEOgram to provide information to agency heads and DAEOs on the application of the EO section regarding waivers. OGE emphasized that it is the President’s intention that waivers will be granted sparingly and that their scope will be as limited as possible. (CCH Federal Ethics Reports, March 2009, Vol. 16, Issue 3)

Investigations

Another Plea Agreement in the Abramoff Scandal
A former lobbyist, Todd Boulanger, pleaded guilty on January 30, 2009, in the U.S. District Court for the District of Columbia to a one-count information charging him with conspiring with others to commit honest services wire fraud, 18 U.S.C. §371. Boulanger admitted to working to advance the interests of lobbying clients by providing legislative officials with numerous things of value in exchange for government officials taking actions favorable to Boulanger’s clients. (CCH Federal Ethics Reports, March 2009, Vol. 16, Issue 3)

Interior Official Sentenced for Post-Employment Violation
A former official at the Mineral Management Service (“MMS”) of the Department of the Interior, Milton Dial, was sentenced in the U.S. District Court for the District of Nevada for his role in the MMS scandal that came to light following an extensive investigation by the Interior Office of Inspector General (“OIG”) into confidential allegations against more than a dozen current and former MMS employees. Dial pleaded guilty to a one-count information charging him with violating the post-employment statute, 18 U.S.C. §201(a)(1). On February 17, 2009, the judge sentenced Dial to 12 months of probation and ordered him to pay a $2,000 fine. United States v. Dial, Cr. No. 08-00184 (D.Nev. 2008). (CCH Federal Ethics Reports, March 2009, Vol. 16, Issue 3)

Federal Election Campaign Finance

Bundling Disclosure Rule Finalized
Nearly two years after the passage of the Honest Leadership and Open Government Act of 2007 (HLOGA) (P.L. 110-8), the Federal Election Commission finalized rules to implement Section 204 requiring disclosure of bundled contributions. Authorized political committees, leadership PACs, and political party committees are required to provide information about bundled contributions provided by certain lobbyists, registrants, and political committees established or controlled by lobbyists and registrants. The rules are effective March 19, 2009, however, some reports are not required until May 18, 2009. Political committees that are “lobbyists/registrant” PACs must amend their FEC Form 1 (Statement of Organization) by March 30, 2009. Reporting committees must disclose two distinct types of bundled contributions. The first, are contributions that are forwarded to a reporting committee by a lobbyist/registrant or lobbyist/registrant PAC. Second, contributions that, although received by the reporting committee directly from a contributor, are credited by the reporting committee to a lobbyist/registrant or lobbyist/registrant PAC through records, designations or other means of recognizing that a certain amount of money has been raised by that lobbyist/registrant or lobbyist/registrant PAC. In order to determine if a donor is reasonably known to be a lobbyist/registrant or lobbyist/registrant PAC, the reporting committee is required to consult the House, Senate and Commission websites to determine if the person is listed on any of the sites as a lobbyist/registrant or lobbyist/registrant PAC. However, the reporting committee is not entitled to rely on the results of a website search if the reporting committee knows that the person who forwarded or is credited with raising contributions is a lobbyist/registrant or lobbyist/registrant PAC. (CCH Federal Election Campaign Financing Guide ¶12,056)

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