A Question of Ethics

Members' Travel Expense Process Poses Risks

March 15, 2011

Reprinted from Roll Call (March 15, 2011)

Q: I have a question regarding whether people outside Congress can face liability for conduct during Members’ travel expense certification process. The reason for my question is that I heard that an employee of the Carib News Foundation was in trouble for submitting false travel forms to the House Ethics Committee regarding travel expenses the foundation paid for certain Members. This didn’t make sense to me, though, because I thought that Congressional ethics committees do not have jurisdiction over people outside of Congress. What gives?

A: Well, you are half right. Yes, Congressional ethics committees do not have jurisdiction over people outside Congress. However, this does not mean that people outside Congress are free from liability for missteps during Members’ travel expense approval process. Even though the House Ethics Committee cannot punish outsiders for errors during the process, federal prosecutors can. And, in the case of the Karl Rodney, co-founder of the Carib News Foundation, they are.

Before turning to the charges against Rodney, a little background on the travel rules is in order. As you may be aware, the Congressional gift rules broadly prohibit Members from accepting anything of value unless an exception applies. The travel rules are essentially one big group of exceptions to the prohibition on gifts. The rules define certain limited circumstances in which Members may accept payment of their travel expenses without violating the ban on gifts.

The travel rules are complex and convoluted. An entire chapter, more than 30 pages, of the House Ethics Manual is devoted to the process by which Members can have their travel expenses paid by an outside source. But your question does not concern some technical application of this process. Your question is much more fundamental — whether people outside Congress can face liability for missteps in the process. And the answer to that question is a resounding yes. The case of Karl Rodney is an excellent reminder.

What is Rodney accused of doing wrong? In short, lying to Congress. In 2009, a subcommittee of the House Ethics Committee began an investigation regarding several Members’ trips to business conferences hosted in the Caribbean islands by the Carib News Foundation. In advance of the trips, each of the Members had obtained the House Ethics Committee’s approval for the Carib News Foundation to cover the expenses of their trips.

To gain such approval, they told the committee that the Carib News Foundation was the sole sponsor of their trips. As it turned out, the report concluded, this was not true. Unbeknownst to the Members, several corporations had allegedly paid for portions of the expenses and therefore should have been listed as sponsors.

The report concluded, however, that the Members under investigation were unaware that the corporations were really paying for their trips. The Members had relied on information provided by the Carib News Foundation and gave that information to the Ethics Committee. The subcommittee report concluded that this information was false and that the foundation employees who submitted the information, including Rodney, knew it was false. The subcommittee lacked the power to punish Rodney itself, so instead referred him and the other employees to the Department of Justice.

The Department of Justice conducted its own investigation and last month filed criminal charges against Rodney. Rodney is charged with violating a federal statute that makes it illegal to make false statements to the government. Specifically, the statute applies to anyone who, in a matter within the jurisdiction of the federal government, knowingly and willfully “(1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact; (2) makes any materially false, fictitious, or fraudulent statement or representation; or (3) makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry.”

During the travel process, a sponsor of a Member’s trip, such as the Carib News Foundation, must provide the Member with a sponsor certification form setting forth certain information regarding the trip. On the form, a sponsor must certify that it is the sole sponsor of the trip and that it has not accepted any other source of funds earmarked directly or indirectly to finance any aspect of the trip. The sponsor must sign the form directly below a statement that “I certify that the information contained in this form is true, complete, and correct to the best of my knowledge.” The charges against Rodney allege that his travel sponsor form was false in that it failed to identify all sponsors of the trip and also failed to disclose that other sources had earmarked funds to finance aspects of the trip.

Rodney is scheduled to appear in court next month and faces up to five years in jail. Whatever his ultimate sanction, his case demonstrates what is at stake every time a travel sponsor prepares a sponsor certification form. Before certifying that the forms are accurate, travel sponsors should make sure that they really are.


A Question of Ethics

May House Members Earn Outside Income?

March 1, 2011

Reprinted from Roll Call (March 1, 2011)

Q: I have a question about whether Members of the House can hold outside jobs while in office. Although I have never been politically active, I was so disappointed by the results of the last election in our district that I am considering throwing my hat in the ring next year. Before doing so, I want to make sure I understand what the financial implications of actually being elected would be. I have a large family that is dependent on the income I receive as a senior manager at a large multinational corporation. Joining the House would result in a substantial pay cut. The only way that I could pull it off, I think, is if I kept my outside job on a part-time basis. Would this be permissible? What if I deferred the income until after leaving the House?

A: Unfortunately for you, there are strict limits on the outside earned income that Members may receive while serving in the House of Representatives. The House first imposed these restrictions in 1977, at the recommendation of a House commission. The commission listed three reasons for the restrictions. First, outside earned income creates a potential conflict of interest because a Member’s outside employer might exert pressure over the Member by, for example, cutting off the Member’s salary. Second, there is a “time conflict.” Earning outside income can prevent a Member from devoting his or her full time and attention to official duties. And third, the appearance of Members “cashing in” on their positions of influence, even where there is no actual impropriety, undermines public trust in government.

In 1989, the House approved even stricter limits on outside earned income. The House task force that recommended the stricter limits cited reasons similar to those cited by the House commission in 1977.

So, what are the current restrictions? One group of restrictions limits the type of outside jobs that Members may hold. For example, a Member may not hold a job that includes providing services involving a fiduciary relationship. A Member also may not hold a paid position as a board member of an association, corporation, or similar entity. The House Ethics Committee has said these types of positions would raise inherent conflicts of interest between a Member’s official duties and obligations to the outside entity.

Perhaps more significant for you, however, is the limit on the amount of income that Members can earn from outside jobs. The law sets the annual limit on outside income at 15 percent of the rate of pay for Executive Schedule level II in a given year. In 2011, that rate is $179,700, which means that the annual limit on outside earned income for Members is $26,955. Unearned income, such as returns on investments, does not count against this limit.

In determining whether income should count against this limit, it is helpful to review a 1978 House Ethics Committee advisory opinion, which is still largely applicable today. The opinion says that two things must be true for the amount to be counted against the outside earned income limit in a given year. First, it must fall within the definition of “outside earned income.” And second, it must be attributable to that year.

House rules define outside earned income as “wages, salaries, fees, and other amounts received or to be received as compensation for personal services actually rendered.” As for the attributable year, the advisory opinion says that the correct year is not necessarily the one in which a Member receives the income. Rather, it is the one in which a Member’s right to receive it becomes certain — in other words, the year in which it is earned. This means that a Member who earns outside income while in office cannot evade the limit by deferring the income until after retiring from Congress.

Moreover, the advisory opinion warns, income may not be recharacterized in order to circumvent the income limit. If a Member receives compensation from an employer that is attributable to services that the Member provides, the Member cannot evade the limit simply by characterizing the compensation as a partnership share, dividends or interest. In short, income that is not a return on equity is usually considered earned income and is therefore subject to the limit. Income that is genuinely a return on equity, however, does not count as earned income.

All of this means that, even if elected to Congress, you could continue to receive investment income. In addition, at least in theory, you could maintain certain part-time jobs while a Member of the House. However, you could not be paid more than roughly $26,000 per year. And income from the job would count in the year you earned it even if you deferred receipt of the income to a future year.

But, even setting all of that aside, there is one more thing to consider. Time. While I have never been a Member of Congress myself, it might be wise to consult a current or former Member or staffer about the feasibility of keeping an outside job while in office. With official duties, campaign activities and all of the rest, the limit on outside earned income might not be the only barrier to employment while in office.

© 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.