May 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

Federal Ethics
Office of Government Ethics

OGE Explains the Second Paragraph of the Ethics Pledge
The Office of Government Ethics (“OGE”) continued to advise Designated Agency Ethics Officials (“DAEOs”) with regard to Executive Order 13940, which requires an Ethics Pledge for appointees entering the government. In memorandum DO-09-001, OGE discussed the meaning of paragraph 2 of the Pledge, which requires an appointee to commit that he or she will not, for a period of two years following appointment, participate in any particular matter involving specific parties that is directly and substantially related to his or her former employer or former clients, including regulations and contracts. OGE provided explanations of the phrases that appear in the second paragraph and how the paragraph interacts with existing impartiality regulations found in the Executive Branch Standards of Conduct. (Federal Ethics Report, Issue 16, No. 5, May 2009)

Investigations

Former Senator’s Conviction Dismissed
The conviction of former Senator Ted Stevens (R.-Alaska) on seven counts of filing false statements on his Senate financial disclosure forms was overturned on April 7, 2009 in the U.S. District Court for the District of Columbia. A federal trial jury found Stevens guilty on October 27, 2008 guilty of violating 18 U.S.C. §1001 for failing to include things of value he received from Veco Corporation, a multi national oil services company, and from Veco’s CEO, Bill Allen, on his Senate financial disclosure forms for the calendar years 2001 to 2006. Judge Emmet Sullivan granted the dismissal in response to a request from the Department of Justice (“DOJ”) Attorney General to set aside the verdict and dismiss the indictment. The request for dismissal cited the failure to produce notes taken by prosecutors in a 2008 interview of Bill Allen. In the judge’s order granting the dismissal, he noted that the government conceded that these notes contained information that the government was constitutionally required to provide to the defense for use at trial. (Federal Ethics Report, Issue 16, No. 5, May 2009)

DOD Official Sentenced for False Statement Violation
A former employee of the Defense Logistics Agency (“DLA”), Constance Walton, was sentenced in the U.S. District Court for the District of Columbia for making a false statement by failing to disclose to the Government that she received income from a company she owned. According to the statement of facts accompanying the plea agreement, Walton, in her position as a DLA employee, was required to file a detailed financial disclosure statement to the government on which she was required to identify the source and amount of income she received from entities or individuals other than the federal government. (Federal Ethics Report, Issue 16, No. 5, May 2009)

Army Corp of Engineer Employee Violates Procurement Integrity Act
A former civilian employee of the U.S. Army Corps of Engineers, David M. Honbo, was sentenced in the U.S. District Court for the District of Columbia for violating the Procurement Integrity Act by providing sensitive contract information to a bidder seeking to win a multi-billion dollar government contract. Honbo pleaded guilty on July 22, 2008, to a one-count information charging him with violating 41 U.S.C. §423(a)(e)(1)(B), the Procurement Integrity Act, for providing bid evaluation information to a consultant employed by a multinational consortium trying to obtain a lucrative contract to relocate the U.S. Army base in Yongsan, South Korea. (Federal Ethics Report, Issue 16, No. 5, May 2009)

Business Ethics

The Need to Fuse High Performance with High Integrity in These Troubled Times
Balancing risk-taking and risk management by balancing creativity and innovation with systemic discipline lays the foundation of durable, sustainable corporations, according to Ben W. Heineman, Jr. of Harvard Business School. Heineman, who served as general counsel at General Electric from 1987 to 2003, gave the opening keynote address at the Conference Board’s Ethics and Compliance Conference held in New York City on April 15 and 16, 2009. Heineman argued that only a CEO and the company’s top leadership, not the Board, can make high performance with high integrity operational deep in the company. The reasons this is necessary, according to Heineman, is to constrain pressures for greed and corruption, avoid catastrophic costs and achieve affirmative benefits inside the company, in the marketplace and in society. Making high integrity operational requires the interrelation of key principles and implementing practices, leadership and management, and cultural and system or processes. (Federal Ethics Report, Issue 16, No. 5, May 2009)

KPMG Integrity Survey Released
In a period when public trust and confidence have been shaken, regulators, companies and investors need to understand the factors that may have contributed to the current economic downturn, according to the executive summary of the KPMG Integrity Survey for 2008-2009. The recently released survey takes a look at corporate fraud and misconduct by gathering the firsthand experiences and perceptions of more than 5,000 U.S. employees across 13 industries. The survey is the third issued in a periodic series that KPMG began in 2000. Nearly three out of four employees (74 percent) reported that they have personally observed or have firsthand knowledge of wrongdoing within their organization during the 12 months prior to the survey and nearly half of the employees (46 percent) reported that what they observed could cause “a significant loss of public trust if discovered,” according to the survey. The figure remains on par with the figures from the previous surveys at the national level, and it peaks at 60 percent for employees working in the banking and finance industry. (Federal Ethics Report, Issue 16, No. 5, May 2009)

Cases

Former BPA Employee’s Conflict of Interest Conviction Upheld
A jury conviction of a former official of the Bonneville Power Administration (“BPA”), Jane Selby, for felony conflict of interest, in violation of 18 U.S.C. §208, making false claims and statements, in violation of 18 U.S.C. §1001, and honest service wire fraud, in violation of 18 U.S.C. §1343, was upheld by the U.S. Court of Appeals for the Ninth Circuit. The court said that a rational juror could have found that Selby influenced the decision-making process of BPA and was not candid in disclosing her conflict of interest to BPA. Selby worked as a manager in the Transmissions and Marketing Division of BPA, a federal agency which produces and transmits power through the Pacific Northwest. In this position, Selby helped manage the Division’s transition to a new computer system. While she was managing the transition, Selby approached the vice president of Knowmadic, Inc., a software computer company, about hiring her husband, Scott Selby. Scott was hired by the company and was assigned to the BPA account, which required him to work on-site at BPA’s office and sell Knowmadic’s products. (Federal Ethics Report, Issue 16, No. 5, May 2009)

Federal Election Campaign Financing

Commission Releases Legislative Recommendations for 2009
The Federal Election Commission released to Congress its legislative recommendations for 2009. The Commission’s four recommendations addressed electronic filing of Senate reports, fraudulent misrepresentation of campaign authority, conversion of campaign funds, and the senior executive service. The Commission recommended that Congress require electronic filing for all Senate candidates and their authorized committees (and for those persons and political committees filing designations, statements, reports or notifications pertaining only to Senate elections) if they have, or have reason to expect to have, aggregate contributions or expenditures in excess of the threshold amount as determined by the Commission. Second, Congress should revise the prohibitions on fraudulent misrepresentation of campaign authority to encompass all persons purporting to act on behalf of candidates and real or fictitious political committees and political organizations. Third, the Commission recommended that Congress amend the Federal Election Campaign Act’s prohibition on the personal use of campaign funds to extend its reach to all political committees. Lastly, the Commission recommended that Congress delete the exclusion of the Commission from eligibility for the Senior Executive Service under the Civil Service Reform Act of 1978. The change would bring the Commission’s personnel structure and practices in line with that of other federal agencies. (CCH Federal Election Campaign Financing Guide, No. 408, April 30, 2009).

Party Campaign Committee Authorized to Establish Recount Fund
The Democratic Senatorial Campaign Committee (DSCC) may establish a recount fund, separate from its other accounts and subject to a separate limit on amounts received, and use it to pay for expenses incurred in connection with recounts and election contests of federal elections, such as the 2008 Senatorial recount and election contest in Minnesota, the Commission found. The Commission concluded that the advice provided in AO 2006-24 [CCH Federal Election Campaign Financing Guide ¶ 6512] that recount funds must comply with the Federal Election Campaign Act’s limits and prohibitions, also applied to a national party committee such as the DSCC. Thus, the DSCC could establish a recount fund subject to the Act’s limits, prohibitions, and reporting requirements to be used for expenses incurred in connection with recounts and election contests of federal elections. However, the Commission could not approve a response by the required four affirmative votes with regard to whether the Franken Committee could establish an election contest fund, separate from its existing recount fund, and subject to a separate donation limit. (CCH Federal Election Campaign Financing Guide ¶6574)