ML20246E341
| ML20246E341 | |
| Person / Time | |
|---|---|
| Issue date: | 06/29/1989 |
| From: | Zech L NRC COMMISSION (OCM) |
| To: | Glenn J SENATE, GOVERNMENTAL AFFAIRS |
| Shared Package | |
| ML20246E345 | List: |
| References | |
| NUDOCS 8907120203 | |
| Download: ML20246E341 (21) | |
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6 NUCLEAR REGULATORY COMMISSION
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. June 29, 1989 CHAIRMAN The Honorable John Glenn, Chairman Committee on Governmental Affairs United. States Senate Washington,.DC 20510
Dear' Senator Glenn:
In response to your. request, we have reviewed S. 765, the
" Government-Wide Ethics Act of 1989," which presents the first major revision cf the conflict of interest provisions contained in the' Ethics in Government Act of 1978 and addresses a wide range of ethics issues that have arisen since the enactment of the 1978 legislation.
Our_ detailed comments for consideration in the legislative process are enclosed.
In. general, we are pleased by the bill's directions to the Office of' Government Ethics regarding the issuance of regulations to implement the provisions of some of the conflict of interest statutes that in the past have not been addressed by government-wide regulation.
The bill's approach to the categorization of-employeesfsubject to the various post-employment restrictions is much c1 carer, and easier to apply, than some of the complex proposals that aave-previously received consideration.
Many other provisions in.the bill, such as those that provide fair tax treatment to employees required to divest themselves of security holdings as a condition of employment and those that provide
' Federal agencies with authority to accept gifts of travel, are welcome changes.
- There are, however, some provisions in the bill which in our judgment may not be needed, and if retained, may be counterproductive.
For salary-related reasons, this agency is finding it increasingly more difficult to attract and retain highly talented engineers, scientists, and other professionals.
Some features of S. 765 could exacerbate our problems.
For example, with respect to financial asset reporting by senior executives and others required to file public financial disclosure reports, the bill would eliminate categories of value in favor of reporting the actual value of an asset (rounded to the nearest thousand dollars).
We can perceive no justification for this change, which will add considerably to the burden of preparing financial disclosure reports.
Nor can we understand why the A
s907120203 890629 Md FDR COMMS NRCC CORRESPONDENCE FDC ll
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4' exception from'the reporting. requirements for positions held in reitgious ~, social, fraternal, or political entities has been eliminated.. Provisions such.as these may well deter quclified individuals from seeking management positions with the Government.
L and make it more difficult for us to retain current senior executives.
Our General Counsel, WilliamC. Parler, should be informed if 'the NRC can be of further assistance to your Committee on this l.
important matter.
I Sincerely, Lv.
dI Lando W. Zef,,A,~Jr
Enclosure:
As stated cc:
The Honorable William C. Roth, Jr.
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z COMMENTS ON S. 765-GOVERNMENT TTUE ETRTEX TCT OF 1989, I.
' Federal Personnel Financial Disclosure' Requirements.
A.
Changes in Reporting Requirements.
S.765 has, for the most part, retained the reporting requirements of current law for publicly available financial disclosure reports.. However, some changes made by the bill would increase the detail required in reports well beyond what is needed to make conflict of interest determinations.
Many of our employees strongly believe that excessive reporting of details constitutes an unwarranted invasion of their privacy.
Further, detailed disclosure -- particularly in publicly available documents -- is not warranted where the i
benefits to the public interest resulting from the required i
disclosure are minimal or nonexistent.
The following new requirements of the bill fall into this category:
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1.
Liabilities.
S. 765 would amend section 202 of the Ethics in Government Act of 1978 to expand considerably the range of reportable liabilities.
For example, the current law requires the reporting of liabilities owed to a creditor only where the total of the liabilities owed to the creditor exceeds $10,000 at any time during the preceding calendar year.
This threshold has been eliminated and, therefore, even insignificant liabilities could be required to be reported.
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Under current. law, any liability owed to a relative is excluded, and the term " relative" is defined (in section 209) to include, among others, grandparents and grandchildren, aunts and uncles, nephews and' nieces, and in-laws of the reporting individual.
S. 765 narrows.this definition so that only liabilities owed to spouses, parents, siblings, or children are exempt from the reporting requirement.
The current law does not require the reporting of any mortgage secured by real property that is a personal residence of the reporting individual or his or her spouse.
It also excludes the reporting of any loan secured by a personal motor vehicle, household furniture, or appliances if the loan does not exceed the purchase price of the item that secures the loan.
With respect to revolving charge accounts, only those with an outstanding liability that exceeds $10,000 as of the close of the preceding calendar year need to be reported as liabilities.
None of the exclusions discussed above are contained in S. 765.
We believe that they should be.
The situations to which these exclusions are addressed are very unlikely to raise ethical issues of the nature addressed by conflict of interest laws.
There is, therefore, little, if any, justification for requiring their disclosure.
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,.s 2.
Valuation of reportable items.
S. 765 would~ amend section 202 of the Ethics in Government Act of 1978 to-require that in any case in which a reporting individual is required to list the value of any reportable item, the individual must report the actual value of such item (rounded to the nearest thousand dollars), except that if such item is a security listed on a United States securities exchange, the individual may instead report the number of shares of stock or par valve of the bonds held.
Under current law, actual values of investment holdings generally are not required to be reported.
Instead, the current law establishes categories of values.
(For example, with respect to unearned income, some categories that may be designated are
" greater than $15,000 but not more than $50,000" and " greater than 100,000".)
The move to greater detail in reporting of asset values is contrary to the views that have recently been expressed by many who have given thoughtful consideration to the subject of financial disclosure.
For example, in its March 1989 report, the President's Commission on Federal Ethics Law Reform recommended that the Ethics in Government Act reporting requirements for asset value and income be modified to specify the cut-off figures for the top and bottom disclosure categories, with discretion given to the Office of Government Ethics to determine the number and range of categories.
The Commission expressly urged that the Office of Government Ethics include the minimum number of intermediate
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categories needed to provide information useful to reviewers in l
applying-conflict of interest laws.
We understand that the l
' Administrative Conference.of the United States is currently considering a recommendation that there be only two very broad categories.
While we strongly believe that senior employees of the Government i
should be required to disclose all of the assets they hold for investment, for conflict.of interest purposes it is largely irrelevant whether the holdings in a given company are valued at one thousand dollars or one million dollars.
So long as the.
employee holds the interest, the employee is precluded from
. participating in any particular matter that would have a direct and predictable effect on that interest.
The value of the interest becomes a consideration only if the employee seeks an.
exemption that would permit the employee to work on a matter even though he or she has a financial interest that could be affected by the matter.
In such cases, information on the value of the holding can readily be obtained from the employee.
Therefore, there is little justification for requesting the degree of detail l
that S. 765 would require.
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Transactions.
Both S. 765 and the current law require the reporting of transactions (purchases, sales, and exchanges) with respect to interests in property.
- However, current law limits this requirement to transactions that exceed
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$1,000-and that involve real property or securities.
It specifically excludes property used solely as a personal residence of the reporting individual or his or her spouse.
It also does not require reporting, under this-requirement, of.a transaction solely by and between the reporting individual.his or her spouse, or dependent children.
S. 765 omits all'these limitations and exclusions.-
It could, for example, be interpreted to require the reporting of the sale of an old family car by a parent to his college-age son for the sum of $500.
Such information is not needed for purposes of conflict of interest reviews.
4.
Positions held.
Both S. 765 and the current law require the reporting of non-Governmental positions held by a reporting individual.
However, the current law excludes from this requirement the reporting of positions held in any religious, social, fraternal, or political entity and positions solely of an honorary nature.
There is no such exclusion in S. 765.
Without this exception, a reporting individual could be required to report the holding of unpaid leadership positions in his or her church, the Girl Scouts, or the Rotary Club.
Not only does such a broad reporting requirement raise Constitutional concerns, but it goes well beyond the needs of conflict of interest law.
In this connection, we should like to point out that S. 765 would also require that any Federal employee (except a special
-Government employee) whose position is classified at GS-16 or
4 above'(or who occupies'a position the rate of basic pay for which is fixed at.a rate equal to or greater than the minimum rate'of basic. pay' fixed for GS-16) who wishes to serve on the board of directors of a nonprofit organization must request permission to do so by submitting, with the approval of the individual's supervisor, a written request to the Office of Government Ethics (upon consultation with the appropriate agency ethics office or official) for the review and approval or disapproval of the request.
It is our experience that in the vast majority of such situations there is no significant ethical issue that requires resolution.
There.is, therefore, no reason for establishing an elaborate approval procedure for these cases.
In fact, we can see no justification for any approval requirement where the' entity involved is a religious organization.
In other situations, we believe that it is. sufficient if the employee is required to obtain his or her supervisor's advance written approval.
Prior to rendering a decision the supervisor would be required to consult with the agency's ethics office.
5.
Separated _ spouses.
Current law expressly states that no report shall be required with respect to a spouse living apart from the reporting individual with the intention of terminating the marriage or providing for permanent separation; or with respect to any income or obligations of an individual arising l
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'from the dissolution of his or her marriage or the permanent separation from his or her spouse.
This exclusion. recognizes that reporting.the~ income of a separated. spouse serves no purpose encompassed by conflict of interest law, but it does not appear in S. 765.
It'is not clear whether such an exclusion could be incorporated into implementing regulations-issued by'the Office of.
Government Ethics if it does not appear in the statute.
In any event, the issue will not be free from doubt unless a similar-exclusion is incorporated into S. 765.
If such an exclusion is not adopted. one can anticipate bitter wrangles between reporting-Government-employees and separated spouses who resist providing the requisite information, with Government ethics officials caught in the middle of the battle.
B.
Holdings with Little or No Conflict of Interest Impact.
Current Office of Government Ethics regulations interpret the financial disclosure requirements of the Ethics in Government Act as requiring the reporting of several types of assets (and income therefrom) that are irrelevant to NRC conflict of interest determinations.
Such assets include savings bonds, Treasury bills, and personal savings accounts in a single financial institution (or holdings in a single money market mutual fund) aggregating more than $5,000 in the institution (or fund).
Since S. 765 does not specifically exclude such assets from the reporting requirements, it is highly likely that their reporting
will continue to be required unless an exclusion is added to the bill.
We believe that if a limited number of regulatory agencies need this information from their employees, they should be authorized to collect it.
While we recognize that uniformity in l
financial disclosure requirements is an aid to centralized monitoring of a large volume of financial disclosure reports, that does not justify requiring such disclosure on a Government-wide basis where the information disclosed serves the needs of only a
'few agencies.
II.
Outside Employment.
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Outside Earned Income.
S. 765 limits the permissible outside earned income of (among others) political appointees who are compensated at a pay grade in the General Schedule of grade GS-16 or above.
Under the bill, such individuals may not have, in any calendar. year, outside earned income attributable to that calendar year which is in excess of 15 percent of the salary set for level I of the Executive Schedule as of January 1 of that calendar year.
Currently the amount set for level I of the Executive Schedule is $99,500, and 15 percent of that amount is
$14,925.
While we are not generally opposed to this restriction, it is our view that the restriction on outside earned income for political appointees should not apply to earnings for teaching in
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L institutions of higher education or to earnings from the publication of writings, provided that the head of the political appointee's agency-(or the President, in the case of the head of~
an agency.or White House staff) determines in advance that earning
" income from such an activity will not interfere with the performance of the appointee's official duties.
GenerElly, such-teaching and-writing activities do not pose significant ethical-
' issues, and often are in the public interest.
Therefore, we cannot see any reason to deny full compensation for such activities to individuals who wish to pursue them if they have received the requisite approval.
B.
Service on For-Profit Boards.
S. 765 would prohibit any Federal employee (except a special Government employee) whose i
position is classified at GS-16 or above, or who occupies a position the rate of basic pay. for which is. fixed at a rate equal
.i to or greater than the minimum rate of basic pay fixed for GS-16, l
from serving in any capacity on the board of directors of any for-profit commercial enterprise, business, or organization (whether or not the employee is compensated for such service) during the period of his or her employment with the Federal Government.
While we are in general agreement with this restriction, we believe that an exception should be made (except for Presidential appointees) for small, f amily-held enterprises (e.g., those with gross income below one million dollars in the last fiscal year) that do not engage in business with the Federal
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Government, providing that the head of the employee's agency determines in: advance that such activity mill not interfere with the performance of the employee's' official duties.
III.. Participation Prohibitions of 18.U.S.C. 6 208.
A.
Waivers.
1.
Appointing _0fficial.
While S. 765 incorporates some-significant amendments of 18 U.S.C. 9 208, it is similar to the current law in permitting the Government official responsible for an individual's appointment to provide a waiver of the participation prohibitions of section 208(a)~under certain
' circumstances.
(See proposed section 208(b)(1).)
We have no problem with.the general substance of-this exemption, but we have noted that Federal agencies' interpretations of the term
'" Government official responsible for the individual's appointment" are not uniform. (The same term is used in the new provision on waivers for advisory committee members that would be added by the bill.)
We'suggest that this confusion be cleared up in section 208(e), so that the practice of agencies in granting waivers will be more uniform.
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Partners.
S. 765 would move to section 208(a) the provision prohibiting the partner of a current Government employee l
from representing any other party to the Government in a particular
matter.in which the employee participates, or has participated, personally and substantially, or which.is the subject'of the employee's official responsibility.
This:is probably a more appropriate placement-of the provision than section'207, where it v
is currently located.
Our concern is with the. application of section 208(b)(1), which allows for waiver of the prohibitions of section-208(a) under certain circumstances.
We believe that the application of this waiver provision to a partner is inappropriate because the provision throws the burden of applying for the waiver on the Government employee.
Application for a waiver should be the burden of the partner who wishes to make the representation.
(Note that the partnership in which the Government employee is engaged with.the partner may be totally unrelated to the matter in which the partner wishes to act as attorney or agent.)
B.
Public Disclosure: _ aivers/ Financial Disclosure Reports.
W Proposed section 208(d) generally provides that individual waivers
-pursuant to section 208 shall be made available to the public.
In the case of waivers for special Government employees serving on advisory committees, the bill further provides that the information from the financial disclosure report describing "the asset or assets that necessitated thm Jaiver shall also be made available to the public."
'It is the. practice of the NRC to make all 18 U.S.C. $ 208 waivers public, except.those rt t.ing to negotiations for future employment.
This is because requiring such interests to be made public could interfere with the negotiation process itself, an unfair consequence for the individual involved.
Accordingly, we believe that S. 765 should make clear that such interests do not need to be made public.
IV.
Travel Acceptance.
A.
Conditions of Acceptance.
S. 765 would add:a new section 1352 to-title 31, United States Code, to permit the head of a Federal. agency to accept payment and reimbursement, in cash i
or in kind, from non-Federal entities for expenses of agency employees in~ traveling to attend meetings, conferences, training, public speaking engagements, and similar functions concerning or related to the functions or activities of the agency.
Subsection (c) of section 1352 would make that section the only authority for 4
l acceptance of payments or reimbursements from outside parties for travel expenses relating to these activities, except as provided l
in 5 U.S.C. 6 4111.
While we support this provision i
conceptually, some clarification is warranted.
l l-We assume that, under proposed section 1352, an individual l
l employee could still accept cash for travel expenses from l
non-Governmental entities in connection with travel to attend L
meetings if the donor is determined to be a 6 501(c)(3) l' l
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- organization under the Internal Revenue Code.
(These are primarily religious, charitable, and educational organizations.)
However, only.the agency could accept payment for an employee's travel.if the donor is not such an organization.
The general authority to accept payment for an employee's travel will;be new to some agencies (including the Nuclear Regulatory Commission) and will raise some difficult questions for them.
In particular, under this new authority, will an agency be able to accept payment.for employee travel expenses from a commercial entity that is doing business with, or is regulated by, the agency?
Also, will section 1352 have any application to j
situations where an agency employee who is on annual leave is traveling to a function related to his Federal employment?
AS.these questions indicate, the authority of Government agencies to accept travel expenses pursuant to section 1352 has serious conflict of-interest implications.
It is highly likely that a substantial proportion of the travel benefits offered will come from outside parties who do business with or are otherwise affected by the activities of the accepting agency.
The circumstances for acceptance from such a party should be carefully circumscribed, whether the agency or an employee of the agency is doing the accepting.
Even though section 1352 requires the Administrator, General Services Administration, to prescribe regulations to prevent conflicts of interest, we believe that the
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statute.itself should provide guidance in this highly sensitive
. area.
B.
Spousal Travel Proposed section 1352 would define the term " employee" to include the spouse of an agency employee when the spouse has been invited to accompany an employee attending meetings, conferences, training, public speaking engagements, and similar functions concerning or related to the functions or activities of the agency.
We do not fully understand the implications of defining " employee" to include a spouse.
The_ provision seems to give a Government employee permission to accept a gratuity from an outside party in the form of payment of travel expenses for the employee's spouse.
(That this is done through the fiction of a gift to the agency, rather than the employee. does not change the outcome.)
We have some concerns I
about the advisability of permitting acceptance of such a gratuity.
In particular, we note that while the bill requires the Administrator of the General Services Administration to prescribe regulations to prevent conflicts of interest, it does not itself proscribe acceptance in situations where the employee has official dealings with the donor, or where the donor is an organization made up of entities with whom the employee or the employee's j
l agency does business.
The latter are among those likely to offer to pay a spouse's travel expenses.
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1 Further, as applied to a spouse, proposed section 1352 raises a i
number of interpretive questions.
Does it mean that a Federal agency can be paid by an outside entity for the travel of the
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spouse of an agency empicyee whenever spouses are invited to
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In addition, how do the restrictions of subsection (c) and the penalty provision of subsection'(e) of section 1352 apply to a spouse?
V.
Tax Rollover for Sale of property.
Subject to certain procedures and requirements, S, 765 would amend the Internal Revenue Code to permit nonrecognition of gain or loss from sales or other dispositions of property required to be divested to comply with a Federal conflict of interest statute, regulation, or rule.
One of the conditions for application of the provision is that the proceeds of the sale are reinvested in an
" approved neutral investment" within a specified period.
The term
" approved neutral investment" is defined as
" obligations of the i
United States Treasury or a diversified investment fund which is approved pursuant to regulations issued by the supervising ethics 1
office."
We do not understand why the rollover must be to U.S. Treasury l
obligations or a diversified investment fund in order for the
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nonrecognition of gain or loss to apply.
Why would not any investment be sufficient, so long as it does not present a
? conflict of interest situation?
For example, an NRC. employee subject to-NRC's rule against holding securities of utilities subject to NRC regulation might be interested in investing the A
proceeds of the. sale of utility holdings in stock of a meat-packing company.
It does not appear to us that this would-present any conflict of interest problem, and that to prohibit such an investment is an unreasonable restraint on the employee's rights.
VI.
18 U.S.C. 6 205.
A.
Expert Witnesses.
Section 205 of title 18, United States Code, generally prohibits a Government employee from acting as agent or attorney for anyone before a Government agency or l
l court if the United States is a party or has a direct and substantial interest in the matter.
S. 765 would add a provision to section 205 prohibiting a Government amployee from appearing as 1
L an expert witness (for anyone other than the United States) in a 1
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proceeding involving a particular matter in which the employee has participated personally and substantially.
In general, we agree 1
with the latter provision.
However, we believe that it is necessary to make an exception for situations in which the employee is subject to a court order to testify.
Without such an l
exception, a Government employee could be confronted with the
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- Further, l
twe,noteLthat the cognate provision in the revision of 18 U.S.C.
6 07~contains such an exception.
(See proposed 18 U.S.C.
L6.207(h)'.)
B.
Specia,1 Government Employees.
S. 765 would add a special exception for special Government employees to the general rule prohibiting-Government employees from representing any other party before the Government.
Under this exception a special
. Government _ employee could act as agent or attorney for any other party in the performance of work under a grant by, or a contract with or for the benefit of, the United States, providing that the head of the agency concerned with the grant or contract certifies in writing that the national interest to requires and that the certification;is. published in the Federal Register.
This exception would apply even to a1 grant or contract on which the special Government employee worked personally and substantially as a Government. employee, and goes well beyond the exceptions currently in the law for special Government employees.
(The current' law. generally limits the restrictions on representation to the Government by such employees to a particular matter involving a specific party (1) in which they have participated personally and substantially, and (2) in the case of special Government employees who serve in an agency more than 60 days a year, that is l
pending before the agency in which they are serving.)
. We question the advisability of permitting a special Government employee to represent any other party to the Government, even in the performance of a Government grant or contract, where the employee has participated or is participating in the particular matter personally.and substantially as a Government employee.
If this is appropriate, it is difficult to understand why a similar exception should not be available for regular Government employees.
L VII. Post-Employment Restrictions.
A.
Proh,1bited Disclosures.
S. 765 creates a new post-employment prohibition relating to disclosure of information "that.was.specifically designated" by an agency as " protected" at t'he time the former employee had access to the information and at the time of the disclosure.
The information involved must relate to a Government procurement, trade secrets, or information that relates to the operations or financial activities of an outside party, or a negotiation between the United States and a foreign Government. The Director of the Office of Government Ethics may also designate other information as protected.
Under the amendment, no less than six months after the effective date of this new post-employment provision, agencies will be required to establish procedures for its implementation.
It is not clear just what this would require agencies to do.
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example does.it mean settin'g up-what will in effect be a' type of hi'
- new classification system?)
~Whatever procedures are-adopted, it is. obvious _that.'they will be.~ costly in terms of personnel and paperwork.. While we are in~ genera'l agreement with the objectives
-of the. amendment, we are concerned about the not inconsiderable expenditure that its implementation is likely to entail.
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