A Question of Ethics

Rules May Tighten on Invites From Lobbyists

October 18, 2011

Reprinted from Roll Call (October 18, 2011)

Q: I work for a lobbying firm, and I have a question about possible changes to the executive branch gift rules. A lobbyist friend of mine told me that the changes would eliminate some important exceptions to the ban on gifts to executive branch employees. Specifically, he said, organizations with lobbyists would no longer be able to invite executive branch employees to widely attended events hosted by the organization. We have been having these types of events for years. Is this really true?

A: Federal law prohibits executive branch employees from accepting certain types of gifts. Other branches of government have similar rules, all of which are generally designed to avoid the appearance of impropriety.

In the case of executive branch employees, the Office of Government Ethics, which oversees the relevant gift rule, has said that “accepting a gift offered because of the employee’s official position may create an appearance of using public office for private gain.” Moreover, if a government employee accepts a gift from someone with business before the employee, “the public may be concerned that the donor will receive favored treatment as a result of the gift.”

I sometimes tell clients that most government gift rules can be stated in two words: no gifts. Under the executive branch gift rule, employees are subject to two prohibitions. They may not accept a gift either (1) from a prohibited source or (2) given because of the employee’s official position. A prohibited source essentially means any person or entity seeking to do business with the employee’s agency, conducting business regulated by the agency or having interests that may be substantially affected by the agency.

Moreover, the term “gift” is defined very broadly. The Office of Government Ethics has said it includes “anything of monetary value.” Regarding events, the office has said that “payment by an outside source of fees charged for an event is considered to be a gift under the ethics regulations.”

There is a long list of exceptions, without which it would be nearly impossible for government employees to carry on everyday lives. One exception allows gifts from family members. Another permits gifts motivated by personal friendship.

One long-standing exception has allowed executive branch employees to attend “widely attended gatherings.” The House and Senate have a similar exception allowing Congressional employees to attend “widely attended events.” The Office of Government Ethics has explained that the “basic purpose” of the exception is as follows: “so that employees may be able to meet on a less formal basis and have an interchange of ideas with a variety of individuals, including members of nongovernmental groups, legislators and other Government agency personnel, who are interested in but may have divergent positions on the same issues.”

In accordance with this basic purpose, an executive branch employee may not use the exception unless several criteria are met. Most significantly, an employee must obtain approval from his agency’s ethics officer. Moreover, an ethics officer may not provide such approval unless he determines that the employee’s attendance will further agency interests and furthering those interests outweighs any appearance that attending might improperly influence the employee’s official duties. The exception has previously been deemed applicable to trade shows, seminars and similar conferences.

Last month, the Office of Government Ethics proposed significant revisions to this exception. Most notably, if the proposed revisions become law, the exception would no longer be available to organizations that employ federally registered lobbyists. Thus, even if it would be in an agency’s interest for its employee to accept an invitation to an event and even if that interest were to outweigh any appearance of impropriety, the employee would no longer be permitted to attend the event if the invitation were to come from an organization with in-house lobbyists.

Conversely, the proposed revisions would not affect the availability of the exception to organizations that do not employ registered lobbyists. An agency employee would still be able to use the exception to accept invitations to events from such an organization. This would remain true even where the organization making the invitation has business before the agency employee, so long as the organization does not employ lobbyists. Under the new rule, the crucial distinction is whether the organization extending the invitation employs in-house lobbyists.

At this stage, the revisions are mere proposals. The Office of Government Ethics is soliciting public comments on the rules, which must be received by Nov. 14.

Assuming the Office of Government Ethics proceeds with the new rules, however, organizations with in-house lobbyists should take particular notice. Given the long history of the widely attended gathering exception in government gift rules at both the federal and state level, many organizations have grown accustomed to it. If the proposed revisions become law, organizations will need to make adjustments when it comes to federal executive branch employees.

© Copyright 2011, Roll Call Inc. Reprinted with permission. Widely regarded as the leading publication for Congressional news and information, Roll Call has been the newspaper of Capitol Hill since 1955. For more information, visit www.rollcall.com.


A Question of Ethics

John Edwards Case Tests Campaign Finance Law

October 4, 2011

Reprinted from Roll Call (October 4, 2011)

Q: I heard that Citizens for Responsibility and Ethics in Washington is lobbying for the dismissal of criminal charges against John Edwards for allegedly violating campaign contribution laws in handling his relationship with his former mistress. This took me aback because I have always thought of CREW as an aggressive advocate for ethics in government. What is it about the charges against Edwards that might be different?

A: On June 3, the Department of Justice filed an indictment against Edwards for alleged violations of federal campaign finance laws. The primary law in question is the Federal Election Campaign Act of 1971, which at the time established a $2,300 limit on the amount that an individual could contribute to a candidate each election. It also requires federal election campaign committees to file periodic reports disclosing each person who contributed more than $200 to the committee within a given period.

The indictment alleges that Edwards conspired with others to violate these laws by accepting and failing to disclose hundreds of thousands of dollars in payments from Bunny Mellon and Fred Baron in order to “conceal Edwards’ extramarital affair” and his mistress’s pregnancy with his child.

According to the indictment, “Edwards knew that public revelation of the affair and pregnancy would destroy his candidacy, by, among other things, undermining Edwards’ presentation of himself as a family man and by forcing his campaign to divert personnel and resources away from other campaign activities to respond to criticism and media scrutiny regarding the affair and pregnancy.”

The case against Edwards hinges on whether the payments by Mellon and Baron qualify as campaign contributions. If they do, Edwards could face liability because he allegedly conspired to receive and not disclose the payments, which far exceeded the annual limit per donor. If, however, they do not qualify as campaign contributions, federal campaign finance laws would not be implicated at all and there would be no basis for the charges against Edwards.

This is where CREW comes in. Last week, CREW made a court filing in support of Edwards’ motion to dismiss the charges against him. CREW states that while it “generally supports the Department of Justice (DOJ) against politicians charged with corruption … it took the unusual step of filing on the side of Sen. Edwards because of the unique nature of the case.”

At issue, CREW says, is whether the government “can broaden the meaning of ‘contribution’ to prosecute Mr. Edwards for receiving and failing to report payments that were made by two personal friends to his mistress to cover certain of her personal expenses.”

CREW argues that the payments from Mellon and Baron do not qualify as campaign contributions under federal election law. Federal law defines a contribution to mean anything of value that is provided “for the purpose of influencing” a federal election.

According to CREW, the purpose of Mellon’s and Baron’s payments was not to influence an election. Rather, Mellon and Baron “made a series of third-party payments to private individuals based on their pre-existing friendships with Mr. Edwards and completely independent of his candidacy for president.”

CREW says Mellon’s and Baron’s purpose was to do a personal favor for Edwards and notes that the payments continued even after Edwards ended his campaign. Moreover, CREW argues, the payments cannot be considered campaign contributions because federal election law would prohibit the use of campaign funds for the uses to which the payments were put. In other words, Edwards could not have used campaign funds to make hundreds of thousands of dollars in payments to his mistress. Had he done so, CREW argues, he could have faced liability for misusing campaign funds.

Perhaps most significantly, CREW warns of the potential consequences of convicting Edwards based on Mellon’s and Baron’s payments to his mistress. According to CREW, the government’s position appears to rest not on Mellon’s and Baron’s intent in making the payments, but rather on the incidental benefit that Edwards’ campaign received from the payments, i.e., preserving the “family man” image that was part of Edwards’ campaign.

CREW argues that this position rests on a “near boundless theory of criminal liability” that “would sweep in anything of value given directly or indirectly to a candidate for federal office.”

So is the case really as significant as CREW suggests? Possibly yes. If payments to Edwards’ mistress were to be considered campaign “contributions” solely because of some incidental benefit received by Edwards’ campaign, the effect indeed could be far-reaching. As CREW points out, under similar reasoning, payments to a candidate to help pay off personal, private debts would be treated as campaign contributions (as opposed to gifts, which other federal laws require candidates to disclose). Any time a federal candidate received anything of value, federal campaign laws could be implicated.

From the indictment alone, it is not yet clear whether the DOJ really is advocating such a broad reading of what counts as a “contribution.” Indeed, the indictment alleges that the payments were made “in order to protect and advance Edwards’ candidacy for President.”

Nevertheless, CREW’s filing is a reminder that the proceedings against Edwards merit close attention from anyone involved in campaign finance. There is at least the potential for campaign finance laws to be extended further than ever before.

© Copyright 2011, Roll Call Inc. Reprinted with permission. Widely regarded as the leading publication for Congressional news and information, Roll Call has been the newspaper of Capitol Hill since 1955. For more information, visit www.rollcall.com.