IEC Journal

Greenberg Traurig law firm at the center of ‘political intelligence’ case

A lobbyist hears from “very credible sources” that the White House is going to reverse a major health-care proposal. He tells a client in an e-mail, and that person then tells his own clients in a research note.

It sounds like the game of telephone that lobbyists, government officials and even reporters are drawn into every day in Washington. Except in this case, the chain of information may have triggered a spike in trades on Wall Street — and has now led to a government investigation into possible insider trading.

How the lobbyist, who works at the law firm Greenberg Traurig, stepped into this morass offers a window into what has become a routine and profitable practice at law firms and lobbying shops: In addition to their usual work, lobbyists share with financial firms the latest political tidbits they are gathering from sources, sending an e-mail here and there with the latest “political intelligence.” The financial firms value the information because it can inform their investments.

Recent attention has focused on a new breed of companies that offer political intelligence exclusively for investor clients, but some of the country’s most prominent law firms have gotten into the business, too.

Interesting DC Bar Opinion on Conflicts and Furlough-Related Employment Complaints

Can a government lawyer represent an agency employer in defending the agency from furlough-related complaints brought by other agency employees when the lawyer was also furloughed and is pursuing her own complaint in which the allegations are substantially similar to those in the complaint she is defending?

Under the D.C. Rules of Professional Conduct, a lawyer has a conflict of interest in a matter when “[t]he lawyer’s professional judgment on behalf of the client will be or reasonably may be adversely affected by the lawyer’s responsibilities to or interests in a third party or the lawyer’s own financial, business, property, or personal interests.” Rule 1.7(b)(4). Such a conflict plainly exists in this situation.

However, so-called individual interest conflicts like this one can be waived under Rule 1.7(c) if:

        1.Each potentially affected client provides informed consent to such representation after full disclosure of the existence and nature of the possible conflict and the possible adverse consequences of such representation; and

        2.The lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client.

The only affected client here is the agency. The agency’s informed consent to the conflicted lawyer’s representation notwithstanding her individual interest conflict would satisfy the requirements of the first paragraph. But client consent alone is not enough. Under the second paragraph, the lawyer must also reasonably believe that she can provide competent and diligent representation to the agency in the matter despite her personal interest, and her belief must be objectively reasonable under the circumstances. That may be a difficult standard to meet when the lawyer is pursuing her own challenge to the furlough while being asked to defend the agency against substantially similar challenges by other affected agency employees.

The full opinion may be found here.

SEC subpoenas firm, individuals in a case of leaked information

The Securities and Exchange Commission has issued subpoenas to a firm and individuals in connection with the leak last month of a federal funding decision that appeared to cause a surge in stock trading of several major health companies.

The move deepens the government’s scrutiny of the growing “political intelligence” industry, which has been thriving on delivering valuable information from Washington to investors. This relatively new breed of companies capitalizes on the fact that decisions made in Washington — whether a regulator blocking a big merger or a lawmaker tweaking legislation — can create opportunities for stock traders to make money.

The latest case emerged April 1 when Height Securities, a Washington-based stock brokerage firm, alerted its clients that the government would soon make a decision favoring private health insurers who participate in a Medicare program. The alert went out 18 minutes before the end of the trading day, sparking a surge in trading in the shares of several major health-care firms, including Humana and Aetna. The official government announcement was made after trading closed for the day.

Former FEMA Official Gets Probation in Conflict of Interest Case

A former senior FEMA official was sentenced to probation Tuesday in a conflict-of-interest case involving a multimillion-dollar government contract with a polling and market research firm.

Timothy W. Cannon, the former human resources director at the Federal Emergency Management Agency, pleaded guilty in January to trying to arrange a job for himself at the Gallup Organization at the same time he was overseeing and trying to expand the firm’s contract with his government agency.

Cannon, 63, has been barred from future government contracting work and has agreed to pay a $40,000 fine in a separate civil case. In that federal whistleblower case, which names Cannon, the Justice Department alleges that Gallup inflated its cost estimates and work hours for three federal agencies.

Michele Bachmann Faces Congressional Ethics Probe

Rep. Michele Bachmann (R-Minn.) is under investigation by the Office of Congressional Ethics (OCE) for alleged misuse of campaign funds, as first reported by the Daily Beast.

An OCE investigation is a preliminary probe; the office can either dismiss a case or recommend a full House Ethics Committee investigation. Peter Waldron, who served as Bachmann’s national field coordinator in the 2012 presidential race, has filed a Federal Election Commission complaint alleging that the lawmaker’s campaign improperly used leadership PAC funds to pay presidential campaign staff.

Washington Post Reports Grand Jury Investigating Senator Menendez

The Washington Post reports: A federal grand jury in Miami is investigating Sen. Robert Menendez (D-N.J.), examining his role in advocating for the business interests of a wealthy donor and friend, according to three people aware of the probe.

Menendez has intervened in matters affecting the financial interests of Florida ophthalmologist Salomon Melgen, seeking to apply pressure on the Dominican government to honor a contract with Melgen’s port-security company, documents and interviews show. Also, Menendez’s office has acknowledged he interceded with federal health-care officials after they said that Melgen had overbilled the U.S. government for care at his clinic.

Melgen has provided Menendez with plane flights and hospitality at his Dominican vacation home, say people acquainted with their relationship.  Menendez admitted he failed to disclose two trips he took to the Dominican Republic on Melgen's plane in 2010.  Menendez said he wrote Melgen a personal check this winter for $58,500 to reimburse him for the plane rides. The Senate Ethics Committee is investigating why Menendez did not disclose the flights sooner.

Florida Couple Pleads Guilty for Roles in Procurement Contract Bribery Scheme

A Florida couple who owned a military contracting company pleaded guilty today in federal court in Salt Lake City for their roles in a bribery and fraud scheme involving federal procurement contracts.

Sylvester and Maria Zugrav were charged in an indictment, returned on Oct. 12, 2011, along with Jose Mendez, a procurement program manager for the U.S. Air Force Foreign Materials Acquisition Support Office (FMASO) at Hill Air Force Base, in Ogden, Utah.

Mendez was charged in the indictment with conspiracy, bribery and procurement fraud, and has since pleaded guilty to all charges and agreed to forfeit more than $180,000 he received as part of the bribery scheme and awaits sentencing.

According to court documents, the Zugravs owned Atlas International Trading Company, a business that contracted to provide foreign military materials to the U.S. government through FMASO. In his plea agreement, Sylvester Zugrav admitted that, from 2008 through August 2011, he gave Mendez more than $180,000 in bribe payments, and offered Mendez more than $1.05 million in additional bribe payments contingent upon Atlas’s receipt of future contracts with FMASO.  In exchange for Sylvester Zugrav’s bribe payments and offers, Mendez ensured that Atlas and Sylvester Zugrav received favorable treatment in connection with procurement contracts, including, among other things, assisting Atlas in obtaining and maintaining procurement contracts; assisting Atlas in receiving payments on such contracts; and providing Atlas with contract bid or proposal information or source selection information before the award of procurement contracts.

Georgia Woman Admits to Taking Bribes for the Award of Government Contracts

A former employee at the Marine Corps Logistics Base Albany pleaded guilty today to receiving bribes related to the award of contracts for machine products.

Michelle Rodriguez, 32, of Albany, Ga., pleaded guilty before U.S. District Judge W. Louis Sands in the Middle District of Georgia to one count of bribery of a public official.  During her guilty plea, Rodriguez, who worked as a supply technician in the Maintenance Center Albany (MCA), admitted to participating in a scheme to award contracts for machine products to companies operated by Thomas J. Cole and Frederick Simon, both of whom pleaded guilty to bribery charges in January 2013.

According to court documents, the MCA is responsible for rebuilding and repairing ground combat and combat support equipment, much of which has been used in military missions in Afghanistan, Iraq and other parts of the world. To accomplish the scheme, Rodriguez would transmit bid solicitations to Simon by fax or email, usually following up with a text message specifying how much the company seeking the contract should bid. Simon, with Cole’s knowledge, would then bid the amount specified by Rodriguez on each order, which was normally higher than fair market value. Rodriguez was paid $75.00 cash per order. Rodriguez admitted during today’s hearing that she awarded Cole and Simon’s companies nearly 1,300 machine product orders, all in exchange for bribes.

Pentagon IG Finds DARPA Ethics Program Above Board

In a report released Thursday, Jacqueline L. Wicecarver, the Pentagon's assistant inspector general, concluded that Darpa’s ethics training “appropriately mitigated the potential for conflicts-of-interest." Its ethics policies are consistent with federal standards, and its employees tend to follow them.

In the major test case for conflicts of interest that the inspector general studied, Darpa came out with a clean bill of good-government health.

The case began with a request from a different watchdog, the Project on Government Oversight (POGO). As Danger Room first reported in August 2011, the group prevailed on the Pentagon inspector to take a broad, wide-ranging look at Darpa’s contracting process. The initial reason: the discovery that then-Director Regina Dugan owed her family firm, a Darpa contractor, tens of thousands of dollars. (Dugan’s spokesman said she recused herself from any dealing with the firm, RedXDefense. Dugan left Darpa last year to take a job with Google.)

Former FEMA Executive Pleads Guilty to Conflict of Interest Charge

The Washington Post reports the following: 

A former Federal Emergency Management Agency executive pleaded guilty Tuesday to arranging employment with a polling and consulting firm that held a multimillion-dollar contract with the agency.

Former FEMA human resources director Timothy W. Cannon, 63, landed an offer for a six-figure job offer with The Gallup Organization while arranging a $6 million contract for the company to handle the agency’s “BEST Workforce Initiative,” according to a news release from the Justice Department.

Cannon, who led FEMA’s human resources division from July 2007 through February 2009, pleaded guilty to a conflict of interest charge Tuesday at the U.S. District Court for the District of Columbia. He faces a penalty of up to five years in federal prison.

Related articles:  http://articles.washingtonpost.com/2012-11-28/national/35510430_1_contracts-gallup-organization-government

 http://www.washingtonpost.com/blogs/crime-scene/post/former-fema-official-pleads-guilty-in-conflict-of-interest-case-involving-the-gallup-organization/2013/01/15/d121def0-5f36-11e2-a389-ee565c81c565_blog.html

Former HR FEMA Employee To Plead Guilty to Conflict of Interest Charge

A former human resources officer at the Federal Emergency Management Agency is reportedly pleading guilty to conflict of interest charges filed by federal prosecutors on Jan. 2. as part of a larger case involving alleged government contract overcharging by the Gallup Organization.

As reported by NBC News investigative reporter Michael Isikoff, Timothy Cannon, director of FEMA’s Human Capital Division from 2007 to 2009, plans to plead guilty to one felony charge for “knowingly and willfully” participating in the award of contracts to Gallup while arranging to accept a $175,000-a-year job with the polling and research firm.

The attorney for Cannon, a former Army officer, said his client accepts responsibility for his actions. The complaint included email exchanges from 2007 and 2008 in which Gallup discussed what became a $6 million contract to poll FEMA employees on training issues as part of the agency’s BEST Workforce Initiative. The exchanges included references to Cannon interviewing for a job with Gallup. An offer was eventually made but then withdrawn over ethics concerns, NBC News reported.

OGE Releases Advisory on 18 USC 205(e)

The U.S. Office of Government Ethics (OGE) has issued a Legal Advisory clarifying the scope of the exception at 18 U.S.C. § 205(e) for representation of persons with whom an employee has a personal relationship before the Government in connection with most matters. The exception’s provision that permits an employee to act as agent or attorney for his or her parent or child may include representation of an employee’s stepparent or stepchild if the stepchild is determined to be a “dependent child” of the stepparent or the stepparent is a lawful parent of the stepchild. For more information, please see Legal Advisory LA-12-09 dated December 14, 2012:

http://www.oge.gov/OGE-Advisories/Legal-Advisories/Legal-Advisories/

 

OGE Releases Paper on Outreach Initiatives Related to Preventing Corruption

The US Office of Government Ethics recently prepared a document that highlights U.S. Government outreach initiatives related to preventing corruption.

Two reasons to check out this document: 1. Put your day-to-day ethics work into a broader context. Get a sense for anti-corruption activities not only in the public sector but also the private sector and civil society. 2. Get ideas for outreach and effective information-sharing. Follow links to specific examples of useful websites and examples of outreach techniques.

OGE prepared this document, on behalf of the United States, in response to a request to States Parties for information on awareness-raising policies and practices that supports Ch. II (Preventative Measures) of the UN Convention Against Corruption. To access the paper, visit http://www.oge.gov/About/International-Activities/Papers-and-Speeches/

Questions? Contact Wendy Pond at wgpond@oge.gov

Post-Employment Restrictions Examined as Former Feds Seek Jobs with Foreign Companies

Nextgov.com reports:  As a major Chinese telecommunications company suspected of espionage hires former U.S. government officials, critics are raising concerns about the adequacy of government post-employment restrictions, as well as the risk of national security threats.

Huawei, based in Shenzhen, China, has been methodically snapping up former senior federal officials, lobbyists and congressional staffers. Company officials say they are attempting to attract more U.S. business, partly by recruiting well-respected Westerners with government and security backgrounds.

The employment of more Americans at foreign firms can benefit the United States by fostering worldwide security standards and boosting stateside investments. But the unknown variable is to what degree Huawei, a multinational tech company founded by a former People’s Liberation Army member, acts on behalf of the Chinese military. A congressional investigation indicated the company might be inserting backdoors into products that can remotely siphon data or sabatoge computers.

Materials from Oct. 4 IEC Meeting

Thanks again to our speakers, Talisha Searcy and Athena Jones, who gave a wonderful presentation last week.  Attached are the handouts and powerpoint presentation:

Download Conflicts of interest in grants pptx TS

Download IEC handout COI grants

 

President Signs Amendment to Extend STOCK Act Posting Deadline to December 8th

The Office of Government Ethics reports:  On September 28, 2012, President Obama signed into law S. 3625, which extends the date by which certain Executive Branch public financial disclosure forms must be made available on the internet to December 8, 2012.   Subsection 11(a)(1) of the STOCK Act (Public Law 112-105), originally required that by August 31, 2012, public financial disclosure forms filed pursuant to title I of the Ethics in Government Act of 1978 (EIGA) in calendar year 2012, and in subsequent years, be made available to the public on the official websites of the respective Executive Branch agencies not later than 30 days after such forms were filed. The STOCK Act was amended by S. 3510 (Public Law 112-173) to move this deadline to September 30, 2012, and the U.S. District Court for the District of Maryland Southern Division subsequently enjoined posting under the STOCK Act until October 31, 2012.  Section 1 of S. 3625 extends the effective date of subsection 11(a)(1) of the STOCK Act to December 8, 2012, except for certain high-level filers occupying positions listed at Level I and II of the Executive Schedule.

S. 3625 also directs the National Academy of Public Administration to study the issues raised by website publication of financial disclosure forms and to issue a report with findings and recommendations. In addition, section 3 of S. 3625 clarifies that an employee subject to the periodic transaction reporting requirement under subsection 103(l) of EIGA must also report any purchase, sale, or exchange of securities by the employee’s spouse or dependent children.  The periodic transaction reporting requirements for an employee’s spouse and dependent children cover transactions occurring on or after January 1, 2013.

S. 3625 is available in portable document format (PDF) on OGE’s website at: http://www.oge.gov/About/Legislative-Affairs-and-Budget/Ethics-Legislation/

 

GSA’s Ethics Program Approved Just Days After Scandal-Plagued Conference

The Washington Post reports that, just days after news broke of GSA's scandal-laced conference in Las Vegas, the Office of Government Ethics issued a positive review of the ethics program there, based largely on GSA's financial disclosure procedures and ethics training programs.  The article also notes that an OGE employee had noted in early 2010 that GSA had issues with controlling conflicts of interest, recommending frequent reviews of its ethics program.

New U.S. v. POGO decision

US District Court for DC issued its decision on the case about whether a Dept of Interior employee who received a $383,600 monetary award by a group that the employee had assisted in bringing a successful false claims action, had violated 18 USC 209. The case was previously vacated by the Circuit Court (United States v. POGO, 616 F.3d 544 (DC Cir. 2010)).  The District Court ruled against the employee, in summary judgment, and ordered him to repay the entire amount of the award (United States of America v. Project on Government Oversight, DDC CA No. 03-0096 (JDB)--March 21, 2012).

See FedSmith discussion http://www.fedsmith.com/article/3357/former-fed-who-breached-his-fiduciary.html

See DC Dist Court decision Download 86909812-US-v-POGO[1]

Interesting Washington Post Article on Presidential Candidates 278s

A Washington Post article discussed in depth the OGE 278 (Public Financial Disclosure) requirements for Presidential candidates, including focus on what must be disclosed and when.

President signs STOCK Act

OGE reports:

"On April 4, 2012, the President signed the Stop Trading on Congressional Knowledge Act of 2012 (STOCK Act) (S. 2038). The Act establishes new requirements for Executive Branch ethics programs, ethics officials, and the thousands of employees who currently file financial disclosure reports pursuant to the Ethics in Government Act. OGE fully supports the Act’s focus on improving transparency and promoting public confidence in government and is carefully analyzing the provisions of the new law. In consultation with DAEOs and other senior agency ethics officials, OGE will issue a series of Legal, Program, and Education Advisories to implement the Act’s provisions.

Questions from agency ethics officials should be directed to the OGE Team that supports your agency. Media and related inquiries should be directed to Vincent Salamone at (202) 482-9292."

See STOCK Act: Download STOCK Act

The True Cost of Conflict of Interest

The private-sector-focused Business Ethics Blog recently published an nteresting article about the real cost of conflicts of interests that has implications for the public sector.  In particular, the author questions whether contractors who give gifts are intentionally causing others to violate their conflict of interest duties and encouraging people to violate the Standards of Conduct. Food for thought.

Ethics in the News

• Fed. Prosecutor under Fire for appearance of conflict.  Read the GovExec article about a Louisiana Federal Prosecutor in trouble for "engaing in outside activities that would appear to create a conflict of interest."  The cause?  Anonymously posting 600 comments on a local news webpage, including on cases and judges.  See full article at http://www.govexec.com/technology/2012/03/federal-prosecutor-under-fire-anonymously-commenting-news-website/41504/.
• The Hill reports on STOCK Act, "Insider-trading bill grinds to halt."  Discussing the possible ways forward and concerns about the missing political intelligence provision.  See full article at http://thehill.com/homenews/house/216875-insider-trading-bill-stock-act-grinds-to-halt.
• Proposed Legislation, Congressional and Federal Employee Tax Accountability Act of 2012 (S. 2195), would require Congressional and Executive branch employees to affirmatively report tax liabilities and would automatically trigger an Ethics probe.  See FedSmith article at http://www.fedsmith.com/article/3346/legislation-would-force-ethics-probe-tax.html.
• NYTimes article on all kinds of conflicts of interest, in particular its application re SEC and private sector failure to disclose possible or actual conflicts. http://dealbook.nytimes.com/2012/03/19/how-wall-street-deals-with-conflicts/?ref=business.

White House Hiring of Former Lobbyist Questioned

The Washington Post's Dana Milbank questions the hiring of former lobbyist Steve Ricchett as a counselor to Vice President Biden.

Industry Liaisons Raise Questions at FDA

POGO questions why "voting members of the FDA panel, including its chairperson, turned out to have prior relationships with Bayer or a company that markets a generic equivalent of Yaz and Yasmin. In one case, the ties involved thousands of dollars in fees, while some of the other panel members had conducted research funded by Bayer or the generic manufacturer. The four all voted in favor of the Bayer pills and related contraceptives, tipping the balance.

Shelby's STOCK Act

GovExec article discusses the implications of Congressman Shelby's amendments to the STOCK Act, introduced to address concerns about Congressmen not being covered by insider trading laws.  Under the amendment the impact has been expanded to try to cover many Executive Branch personnel.  As currently contemplated, the law could require:

• Electronic availability of Public Financial Disclosure report
• Posting of all stock trades of certain personnel, where the transaction exceeds $1,000, for all or some financial disclosure filers

See full article at http://www.govexec.com/oversight/2012/02/momentum-builds-require-feds-disclose-stock-trades/41092/.

For details about the various STOCK Act versions, see http://insidertrading.procon.org/view.resource.php?resourceID=004520.

Interesting article on Congress' Insider Trading Bill

If you missed it, the Senate overwhelmingly (96-3) passed the bill that would impose insider training restrictions on lawmakers this week.  The House is expected to take it up next week.  Interestingly, attached conflicting amendments would further impose this on certain Executive Branch employees.  See Associated Press article at http://www.foxnews.com/us/2012/02/03/house-ready-to-consider-insider-trading-ban/.

Ex-S.E.C. Official Settles Conflict-of-Interest Case - NYTimes.com

The NY Times reports on a conflict of interest case at the SEC:

A former enforcement official for the Securities and Exchange Commission who was accused of blocking or closing at least three investigations into the activities of the Stanford Financial Group, which the authorities claim was a $7 billion Ponzi scheme, has settled civil charges brought by the Justice Department accusing him of violating conflict-of-interest rules by later representing Stanford before the commission.

Thanks to Rosa Koppel for the tip.

Documentary Inspires Economist Ethics Rules

The Wall Street Journal reports that the "Inside Job," a documentary about the 2007-2008 financial crisis, provided additional public pressure on economists to implement conflict of interest rules.  The new rules will require economists to disclose financial ties and other potential conflicts of interest in papers published by academic journals.  Because many economists serve as consultants for government, companies and other groups outside of their formal academic work, the argument is that the relationships formed through consulting may have influenced the economists' work, causing them to initially miss the signs of the impending financial crisis and to recommend policy prescriptions that served their clients' interests, at the expense of the economy as a whole. 

Alleged Conflicts With FDA Drug Approval Panels

A Washington Monthly article discusses perceived problems with FDA drug approval procedures. Here is an excerpt:

Last month, the U.S. Food and Drug Administration convened a committee of medical experts to weigh new evidence concerning the potential dangers of drospirenone, a synthetic hormone contained in popular birth control pills including Bayer AG’s Yaz and Yasmin. In a decision that helped ensure the continued presence of these drugs on American pharmacy shelves, the committee concluded by a four-vote margin that the benefits of drugs with drospirenone outweigh the risks. However, an investigation by the Washington Monthly and the British medical journal BMJ has found that at least four members of the committee have either done work for the drugs’ manufacturers or licensees or received research funding from them. The FDA made none of those financial ties public.

...

Bayer spokesperson, Rosemarie Yancosek, said in an e-mailed statement: “Bayer had no input on who serves on the U.S. FDA Advisory Committee panel as the FDA has its own process for selecting panel members. Furthermore, it is Bayer’s understanding that the FDA has a procedure for determining conflicts of interest for potential panel members.” 

The FDA does indeed have such a procedure, but critics argue that its guidelines define conflicts of interest too narrowly and provide too much flexibility in how they are applied. The guidelines are technically “suggested or recommended, but not required” provisions (http://www.fda.gov/downloads/RegulatoryInformation/Guidances/UCM125646.pdf). Whether an advisor can participate depends on “whether the discussion at the meeting or outcomes of the meeting will have a direct and predictable effect on the individual’s interest.” For instance, someone who was previously involved in another role for a manufacturer, or whose university received money from a manufacturer, may be allowed to participate. Even having a contract for $100,000 over a five-year period would not necessarily exclude an advisor, according to the guidelines.

 

 

Controversy Over Ouside Organization's Cash Payment to Whistleblower

Thanks to an IEC member for  alerting us to a Fedsmith.com story about legal wrangling over a $383,600 cash payment from POGO to a Department of Interior economist who helped POGO win a false claim action. After the Department of Justice intervened, the defendan oil companies settled the case  for about $440 million.

The Department of Interior attempted to fire the economist, citing 18 U.S.C. 209(a) (prohibiting supplementation of salary).

P.S. We were a little late following up on this tip due to the holidays and medical issues of one IEC reporter. If you submitted a tip, but did not see it published, please send us a reminder. We get a lot of excellent tips from readers, and don't want to inadvertently fail to follow up.

2011 Conflict of Interest Survey

The 2010 OGE Conflict of Interest Prosecution Survey is available:

 

http://www.usoge.gov/OGE-Advisories/Legal-Advisories/LA-11-08--2010-Conflict-of-Interest-Prosecution-Survey/

 

Govt attorney pleads guilty to conflict of interest

Consumer Products Safety Commission attorney plead guilty to a conflict of interest violation and filing false statements on his "ethics forms."  The charges stem from his claim to have “Insider Knowledge” in advertising his private law practice and his failure to disclose this outside business on his disclsoure reports.  He also represented a private client before the Federal Government.

Read the full DOJ press release, see http://www.justice.gov/usao/md/Public-Affairs/press_releases/press08/GovernmentLawyerGuiltyofConflictofInterestandFilingFalseDisclosureForms.html.

The removal appeal of the employee implicated in US v. POGO is remanded

Consequences of United States v. Project on Government Oversight, 525 F.Supp.2d, 161, 164 (D.D.C. 2007).  The Dept. of Interior employee, Robert Berman received notice of his proposed removal for misuse of public office for personal gain.  The Federal Circuit suspended its review of the case pending the outcome of the DC Circuit case on whether he violated 18 USC 209 by accepting an award from POGO.  Since that case was remanded for a new jury verdict, so was the personnel removal case. 

See Berman v. Department of the Interior, C.A.F.C. No. 2010-3052 (nonprecedential) (Nov. 7, 2011) at http://www.cafc.uscourts.gov/images/stories/opinions-orders/10-3052.pdf.

Read related article at: http://www.fedsmith.com/articles/articles_display.php?a=3183&p=1

NSF Conflict of Interest Issues

POGO reports:

The National Science Foundation (NSF) was recently slammed by an Office of Inspector General report for failing to perform sufficient oversight of financial conflicts of interests. Now, the agency is looking to the National Institutes of Health (NIH) as a model for strengthening its regulations.

A copy of the NSF OIG report referenced is available.

GAO Criticizes Federal Reserve Conflicts of Interest

A new GAO report exposes financial links between directors of Federal Reserve banks and financial institutitons that the Federal Reserve supervisess. POGO and the Washington Post have commentary on this significant report.

DHS proposes additional restrictions on their employees

DHS' proposed supplemental ethics rules for its employees.  They include restrictions on the
purchase of certain Government-owned property, requiring employees to report allegations of waste, fraud, and abuse, requiring employees to seek prior approval for certain outside employment and activities, prohibiting employees in some DHS components from engaging in certain types of outside employment and activities, requiring designated components to develop instructions regarding the procedures for obtaining prior approval for outside employment and activities, and designating components within DHS as a separate agency for purposes of determining whether the donor of a gift is a "prohibited source" and of identifying an employee's agency for the regulations governing teaching, speaking, and writing.

See Fed. Reg. at http://www.gpo.gov/fdsys/pkg/FR-2011-10-12/html/2011-26160.htm

See articles discussion same: http://www.federalnewsradio.com/?nid=85&sid=2591216 and http://www.govexec.com/story_page.cfm?articleid=49068&dcn=e_gvet

Washington Times: Retired Officers to be Cleared of Allegations

The Washington Times reports:

A three-year government investigation has found no wrongdoing by Bush-era Pentagon officials when they gave war briefings to retired military analysts who served as TV and radio commentators.

The probe by the Pentagon inspector general was in response to a 2008 Pulitzer Prize-winning article in the New York Times that implied the former military officers, some of whom worked for or were defense contractors, received financial favors in return for their commentary and were tools in a propaganda campaign.

Sources familiar with the IG’s final report said it will say officials broke no rules or laws when they provided information briefings, some from Defense Secretary Donald H. Rumsfeld, during the Iraq and Afghanistan wars.

POGO on SEC Conflict of Interest Allegations

POGO has a summary of the conflict of interest allegations against Former SEC General Counsel David Becker. Here's an excerpt:

This isn’t the first time the OIG has cited SEC employees for misconduct in cases where the employees received advice from the Ethics Office. For instance, in its report on alleged insider trading by SEC employees —which was also referred to the Justice Department —the OIG reported that the employees sought approval from the Ethics Office for most of the trades that later aroused suspicion.

This also isn’t a problem that’s unique to the SEC. POGO has highlighted several instances in which it appears that ethics officials at the Bureau of Land Management did not take appropriate action or provide knowledgeable advice when confronted with revolving door and conflict-of-interest issues.

We’re glad to see that the SEC has recently taken measures to improve its ethics program. At last week’s National Government Ethics Conference , SEC officials highlighted the release of an online searchable ethics handbook , the agency-wide ethics emails that are now being distributed twice a week , and a new online, real-time database in which SEC staff are required to report their financial holdings and pre-clear securities transactions. The OIG also recommended that the SEC Ethics Counsel should report directly to the Chairman rather than the General Counsel, and that the SEC Ethics Office should take all necessary steps to ensure that its advice is “well-reasoned, complete, objective, and consistent” and “documented in an appropriate and consistent manner.”

Along these lines, the Government Accountability Office (GAO) recently recommended that the SEC Chairman “establish standards for documentation of ethics advice.” We made a similar recommendation in our report on the SEC revolving door.

More SEC Developments

Two items:

1. Bloomberg: SEC IG refers SEC Ex-Counsel conflict of interest allegations to Department of Justice.
2. POGO has questions about the circumstances under which an SEC case was dropped.

Criminal Referral in Madoff Case?

Here's an excerpt from a September 16 New York Times story, perhaps related to our previous post:

Federal ethics officials are expected to recommend that the Justice Department begin a criminal investigation into actions taken by David M. Becker, the former general counsel of the Securities and Exchange Commission, who determined the agency’s proposal for compensating victims of the Bernard Madoff Ponzi scheme when he had a financial interest in the outcome.

A possible criminal referral from the Office of Government Ethics is expected to be part of a report issued next week by H. David Kotz, the inspector general of the S.E.C., according to two people briefed on the report’s contents.

Ethics Waivers at HHS

An alert IEC member tipped us off to an interesting August 2011 Office of Inspector General report on conflicts of interest waivers granted at HHS in 2009. 

Among the report's findings: "Fifty-six percent of the 50 HHS conflict-of-interest waivers in our review were not documented as recommended in provisions of selected Governmentwide Federal ethics regulations and the Secretary's instructions."

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OMB Watch Praises NOAA's Scientific Integrity Program

OMB Watch has good things to say about the National Oceanic and Atmospheric Administration's efforts to maintain a high level of integrity in scientific research. represents some of the best efforts so far.

The agency's draft scientific integrity policy and procedural handbook, released to the public in June, are thoughtful and detailed. In addition, NOAA has been an exemplar of openness in developing its policy, most importantly by soliciting public comments on its draft policy.

Fundamentally, an effective scientific integrity policy must do two things: prevent political interference with science and protect the free flow of scientific information. NOAA's draft policy makes strong provisions for both.

NIH Revises Conflict of Interest Rules

An NIH press release explains the organization's new conflict of interest rules. A Government Executive story and some Wall Street Journal comments are available. The NIH Conflict of Interest page has links to related resourcess.

Defense Think Tank Conflict Allegations Bring Scrutiny

Wired magazine has a report on an investigation into alleged conflicts of interest at the Defense Advanced Research Projects Agency (DARPA). An excerpt:

“With [the previous DARPA director], there wasn’t a little line. There was a valley. You either sell your stock [in your old firm], or there’s the door,” one former Darpa program manager says. “With [the current DARPA director], things were very different.”

And not without some justification. Tether’s bright ethical guidelines had unintended consequences. If a company allowed an employee to take a sabbatical to join Darpa, the firm was essentially blocking itself from millions of dollars in agency research projects.

Under Dugan, program managers with potential ethical conflicts could designate someone else at Darpa — usually someone in a more senior position — to make decisions about their former company or university. In a speech last year, Darpa deputy director Ken Gabriel called the new conflict of interest rules “more realistic.”

One of the things that makes Darpa’s deals with RedXDefense so unusual is that those decisions weren’t passed to a more senior defense official, who would, in theory, be immune to any influence from Dugan. The decisions were left to a subordinate, who might feel all kinds of pressure to do right by the boss, and by the company run by her dad.

Advisory Committee Issues at FDA

Food and Drug Administration advisory committee policies have come under criticism:

“The facts at this time do not support the public statements that there are not qualified people to serve on these panel,” POGO investigator Paul Thacker said in an interview. “All agencies are under pressure to loosen regulations to make industry happy. This isn’t acceptable.”

The FDA’s website lists 49 different advisory committees or panels that it uses “to obtain independent expert advice on scientific, technical and policy matters.”

Senior Official Resignation Follows USPS IG Report

Federal Times has a lengthy story about the resignation of a member of the Postal Service Board of Governors after an IG report alleged ethical abuses. Here is an excerpt:

The IG report found that Kessler pressed other postal executives to back off a plan to purchase property that the Postal Service was leasing for a post office and vehicle maintenance facility in Sarasota, Fla. The agency had been leasing the property since 1965 and had an option to buy it at any time at a highly favorable price, the IG report said.

In a May 2 statement to Inspector General David Williams, Kessler's attorney said Kessler denied those charges. Kessler received many inquiries from members of the public and forwarded their concerns to the appropriate postal officials, the attorney said.

The statement said Kessler's involvement in the matter was sporadic and limited to a handful of phone calls with Band and emails to arrange those phone calls. Kessler forwarded emails from Band to postal officials and sent follow-up emails, his attorney said.

"There is no indication that Mr. Kessler improperly influenced or even attempted to improperly influence the Postal Service on this matter, nor did he have any reason to do so," the statement said. "Mr. Kessler had no personal, professional or financial interest in the outcome of the dispute."

Federal Times obtained a copy of the IG report through a FOIA request.

Former DOJ Lawyer Disbarred Over Conflicts

A BLT (Blog of Legal Times) post describes the debarment of a former Department of Justice lawyer over a conflict of interest related to the Jack Abramoff lobbying scandal. The D.C. Court of Appeals opinion on the matter is available.

U.S. v. Stadd, No. 09-3121 (D.C. Cir., March 4, 2011)

FINDLAW posted the decision of the D.C. Circuit on a former NASA employee's appeal of conviction for one count of committing an act affecting a personal financial interest in violation of 18 U.S.C. §§ 208(a) and 216(a)(2) and two counts of making false statements in violation of 18 U.S.C. § 1001(a)(2).  The discussion is interesting and citations to case law may be of interest.  See full opinion at http://caselaw.findlaw.com/us-dc-circuit/1557957.html.

Former Army Contracting Officials Charged with ... Filing False Ethics Forms

A Justice press release reports that a former Army contracting official and his spouse were indicted for conspiracy to defraud the US, filing false tax statements, and filing false statements on their Government ethics financial disclosure documents.  See full press release at http://www.justice.gov/opa/pr/2011/June/11-tax-821.html.

Revolving Door Perspective: "One Man's Evil Empire Is Another's Home Team"

A front page story in this morning's New York Times arguably raises questions about whether existing revolving door rules are adequate to maintain confidence in public service. Here's an excerpt:

Michael K. Loucks was arguably the nation’s most influential prosecutor of health care fraud. He racked up numerous convictions and mega-settlements in nearly a quarter-century, using whistle-blowers and secret grand juries to pressure major pharmaceutical and health companies into ending illegal practices like kickbacks to doctors and misuse of blockbuster drugs.

But a year and a half ago, Mr. Loucks, a Republican, left the United States attorney’s office in Boston after he was passed over for the top post and President Obama appointed a Democrat. Instead, Mr. Loucks joined Skadden, Arps last July, and has startled former allies by emerging in recent months as zealous a corporate defender as he was a prosecutor, complete with proposals seeking more lenient treatment for the medical companies he once vilified.

A quote at the end of the article could provide a platform for discussion during ethics training:

For his part, Mr. Loucks uses a baseball reference. Johnny Damon left his beloved Boston Red Sox in late 2005 to sign with “the evil empire, the New York Yankees,” Mr. Loucks said. Both teams won World Series with help from Mr. Damon.

Asked whether the “evil empire” analogy fit the Justice Department or Skadden, Mr. Loucks said, “One man’s evil empire is another’s home team.”