Proposed Rule2022-08130
Legal Expense Fund Regulation
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
April 21, 2022
Issuing agencies
Government Ethics Office
Abstract
The U.S. Office of Government Ethics (OGE) is proposing to add a new subpart to the Standards of Ethical Conduct for Employees of the Executive Branch (Standards). The new subpart contains the standards for an employee's acceptance of payments for legal expenses through a legal expense fund and an employee's acceptance of pro bono legal services for a matter arising in connection with the employee's official position, the employee's prior position on a campaign of a candidate for President or Vice President, or the employee's prior position on a Presidential Transition Team. OGE is also proposing to make related amendments to the portions of the Standards that govern the solicitation and acceptance of gifts from outside sources and the portions of the Executive Branch Financial Disclosure regulation that govern confidential financial disclosure reports.
Full Text
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[Federal Register Volume 87, Number 77 (Thursday, April 21, 2022)]
[Proposed Rules]
[Pages 23769-23780]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-08130]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 87, No. 77 / Thursday, April 21, 2022 /
Proposed Rules
[[Page 23769]]
OFFICE OF GOVERNMENT ETHICS
5 CFR Parts 2634 and 2635
RIN 3209-AA50
Legal Expense Fund Regulation
AGENCY: Office of Government Ethics.
ACTION: Proposed rule.
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SUMMARY: The U.S. Office of Government Ethics (OGE) is proposing to add
a new subpart to the Standards of Ethical Conduct for Employees of the
Executive Branch (Standards). The new subpart contains the standards
for an employee's acceptance of payments for legal expenses through a
legal expense fund and an employee's acceptance of pro bono legal
services for a matter arising in connection with the employee's
official position, the employee's prior position on a campaign of a
candidate for President or Vice President, or the employee's prior
position on a Presidential Transition Team. OGE is also proposing to
make related amendments to the portions of the Standards that govern
the solicitation and acceptance of gifts from outside sources and the
portions of the Executive Branch Financial Disclosure regulation that
govern confidential financial disclosure reports.
DATES: Written comments are invited and must be received on or before
June 21, 2022.
ADDRESSES: You may submit comments, in writing, to OGE on this proposed
rule, identified by RIN 3209-AA50, by any of the following methods:
Email: <a href="/cdn-cgi/l/email-protection#f68385999193b6999193d8919980"><span class="__cf_email__" data-cfemail="a7d2d4c8c0c2e7c8c0c289c0c8d1">[email protected]</span></a>. Include the reference ``Proposed Rule: Legal
Expense Fund Regulation'' in the subject line of the message.
Fax: (202) 482-9237.
Mail: Office of Government Ethics, Suite 500, 1201 New York Avenue
NW, Washington, DC 20005-3917, Attention: ``Proposed Rule: Legal
Expense Fund Regulation.''
Instructions: All submissions must include OGE's agency name and
the Regulation Identifier Number (RIN), 3209-AA50, for this proposed
rulemaking. All comments, including attachments and other supporting
materials, will become part of the public record and subject to public
disclosure. Comments may be posted on OGE's website, <a href="http://www.oge.gov">www.oge.gov</a>.
Sensitive personal information, such as account numbers or Social
Security numbers, should not be included. Comments generally will not
be edited to remove any identifying or contact information.
FOR FURTHER INFORMATION CONTACT: Maura Leary, Assistant Counsel, or
Heather Jones, Senior Counsel for Financial Disclosure, General Counsel
and Legal Policy Division, Office of Government Ethics, Suite 500, 1201
New York Avenue NW, Washington, DC 20005-3917; Telephone: (202) 482-
9300; TTY: (800) 877-8339; FAX: (202) 482-9237.
SUPPLEMENTARY INFORMATION:
I. Background
There is currently no statutory or regulatory framework in the
executive branch for establishing a legal expense fund (LEF), and the
U.S. Office of Government Ethics (OGE) has not approved or disapproved
any specific LEFs. In the legislative branch, LEFs are governed by
House and Senate LEF regulations. See House Committee on Ethics,
``Contributions to a Legal Expense Fund,'' U.S. House of
Representatives, <a href="https://ethics.house.gov/sites/ethics.house.gov/files/Pink%20Sheet%20With%20Regs.pdf">https://ethics.house.gov/sites/ethics.house.gov/files/Pink%20Sheet%20With%20Regs.pdf</a>; Senate Select Committee on Ethics,
Senate Ethics Manual, Government Printing Office, 2003, <a href="https://www.ethics.senate.gov/downloads/pdffiles/manual.pdf">https://www.ethics.senate.gov/downloads/pdffiles/manual.pdf</a>, pages 30-31. OGE's
role has been limited to providing guidance to help ensure that
executive branch employees who may receive distributions from an LEF
will be in compliance with existing ethics laws and rules, such as the
gift rules, if they accept such a distribution. See OGE Legal Advisory
LA-17-10 (Sept. 28, 2017). However, this limited approach to LEFs
lacked transparency and created concerns regarding the appearance of
corruption in the creation and operation of LEFs for the benefit of
executive branch employees. See Letter from Emory Rounds, Director,
Office of Gov't Ethics, to Sen. Margaret Wood Hassan, et al., Sept. 11,
2018, https://www.oge.gov/Web/OGE.nsf/Congressional%20Correspondence/
495516AF975202A7852585B6005A1FE4/$FILE/
Letter%20to%20Senators%20Hassan,%20Carper,%20Peters,%20Jones,%20and%20Ha
rris.pdf?open. As a result, OGE began the process of drafting an LEF
regulation with a series of public input opportunities to ``allow the
creation of a regulation that will ensure that [LEFs] with executive
branch employee recipients will be transparent, open, and accessible to
the public.'' Id.
On April 15, 2019, OGE sought stakeholder input on issues
specifically related to LEFs through an advance notice of proposed
rulemaking (ANPRM). See Notice and Request for Comments: Legal Expense
Fund Regulation, 84 FR 15146 (Apr. 15, 2019). In response to this
ANPRM, OGE received written comments and heard testimony at a virtual
public hearing on May 22, 2019. See <a href="https://www.oge.gov/Web/oge.nsf/Resources/Rulemaking">https://www.oge.gov/Web/oge.nsf/Resources/Rulemaking</a> (providing written comments and hearing
transcript). OGE also solicited and considered the views of executive
branch agency ethics officials. On September 26, 2019, OGE invited all
interested members of the public and agency ethics officials to share
ideas, provide information, and express concerns at two public meetings
about specific topics related to LEFs. See Announcement of Public
Meeting: Legal Expense Fund Regulation, 84 FR 50791 (Sept. 26, 2019).
These meetings allowed interested groups to hear and respond to the
concerns of other affected persons and helped OGE to further understand
the views of various constituencies. See <a href="https://www.oge.gov/Web/oge.nsf/Resources/Rulemaking">https://www.oge.gov/Web/oge.nsf/Resources/Rulemaking</a> (providing meeting agendas, lists of
attendees, and lists of topics discussed). OGE also provided for an
additional comment period. See id.
After considering this public input, OGE is proposing an LEF
regulation that creates the framework to govern an employee's
acceptance of both payments for legal expenses through an LEF and pro
bono legal services for matters arising in connection with the
employee's official position, the employee's prior position on a
campaign of a candidate for President or Vice President, or the
employee's prior position on a Presidential Transition Team. The
proposed regulation will
[[Page 23770]]
more clearly spell out who is a prohibited donor, establish donation
caps, and require transparency in the form of quarterly, publicly
available reports.
OGE has consulted with the Department of Justice and the Office of
Personnel Management pursuant to section 201(a) of Executive Order
12674, as modified by Executive Order 12731, and the authorities
contained in titles I and IV of the Ethics in Government Act of 1978.
II. Analysis of Proposed Rule Amendments
OGE is proposing to add a new subpart J to the Standards of Ethical
Conduct for Employees of the Executive Branch (Standards). The new
subpart contains the standards for an employee's acceptance of payments
for legal expenses through an LEF and an employee's acceptance of pro
bono legal services for matters arising in connection with the
employee's past or current official position, the employee's prior
position on a campaign of a candidate for President or Vice President,
or the employee's prior position on a Presidential Transition Team
(hereafter referred to as ``covered legal matters''). OGE has authority
to issue a legal expense fund regulation pursuant to title IV of the
Ethics in Government Act of 1978; sections 201(a) and 403 of Executive
Order 12674 (as modified by E.O. 12731), and 5 U.S.C. 7301, 7351(c),
and 7353(b)(1). OGE is also proposing to make related amendments to the
portions of the Standards that govern the solicitation and acceptance
of gifts from outside sources in subpart B (``gift rules''). Chiefly,
OGE is proposing a new exception to the gift rules for legal expense
payments or services for covered legal matters, so long as the payments
or services are provided in accordance with proposed subpart J.
Finally, OGE is proposing to make related amendments to the portions of
the Executive Branch Financial Disclosure regulation that govern
confidential financial disclosure reports.
Under the proposed amendments, employees must comply with proposed
subpart J to accept legal expense payments from LEFs or pro bono legal
services for any covered legal matters. However, proposed subpart J
contemplates that, to the extent a gift exclusion or exception in
subpart B (e.g., gifts based on a personal relationship; gifts of
discounts and similar benefits; employee benefits plans maintained by
current or former employers) applies, an employee may continue to use
those means to accept legal expense payments or services for covered
legal matters instead of establishing an LEF under subpart J. The
employee is required to comply with proposed subpart J or use a gift
exclusion or exception in subpart B regardless of whether payments are
given from a prohibited source or given because of the employee's
official position.
A. Subpart J of the Standards
Proposed subpart J contains the standards for the creation,
administration, and termination of an LEF that is established to
receive contributions and to make distributions of legal expense
payments for covered legal matters. Proposed subpart J also contains
the standards for an employee's acceptance of pro bono legal services
for covered legal matters.
Proposed Sec. 2635.1002: Applicability and Related Considerations
Proposed Sec. 2635.1002 describes the covered legal matters for
which an employee must comply with proposed subpart J to accept legal
expense payments or pro bono legal services. Given the nature of the
covered legal matters and their connection to the employee's government
position, OGE believes it is necessary to regulate legal expense
payments for covered legal matters through proposed subpart J to help
ensure that employees avoid any action that might result in or create
the appearance of using public office for private gain. In contrast,
OGE believes that the gift rules in subpart B of the Standards are
appropriate to govern gifts of legal expense payments for personal
matters. Such gifts, which are not distinguishable from other personal
gifts, may be accepted, for example, under the personal relationship
exception or as a discount or similar benefit. These gifts do not
trigger the heightened concern of payments for legal expenses arising
from an employee's official position. Therefore, proposed section 1002
excludes payments for legal expenses arising from personal matters from
coverage by this subpart. This treatment is largely consistent with
House and Senate LEF regulations.
Proposed Sec. 2635.1002 also makes clear that employees may accept
a payment for legal expenses without having to establish and administer
an LEF if that payment is otherwise permissible under a gift exclusion
or exception in subpart B. When soliciting public input, OGE received a
number of comments expressing concern that a legal expense fund
regulation would restrict employees from accessing legal services
through other allowable means. To the extent that these other means are
permissible under a gift exclusion or exception in subpart B (e.g.,
gifts based on a personal relationship; gifts of discounts and similar
benefits; employee benefits plans maintained by current or former
employers), an employee may continue to use those means to accept legal
expense payments or services for covered legal matters instead of
establishing an LEF under subpart J. OGE welcomes comment on the
continued use of these exceptions for legal expense payments.
Finally, proposed Sec. 2635.1002 reminds employees that, in
addition to the rules set out in subpart J, other provisions in the
Standards continue to apply to employees. Subpart J does not override
these rules, and employees must ensure that they continue to abide by
them. The proposed section sets out relevant related considerations for
employees (e.g., gifts between employees, impartiality concerns) when
accepting payments for legal expenses through an LEF or accepting pro
bono legal services. For example, the creation and administration of an
LEF may only be done in the employee's personal capacity. As a result,
the payments must be solicited and accepted consistent with the
provisions in subpart G of the Standards relating to the use of public
office for private gain, use of nonpublic information, use of
government property, and use of government time. However, this section
is not all-inclusive, and employees are strongly encouraged to consult
with their agency ethics officials on the application of these rules to
their proposed activities.
Proposed Sec. 2635.1003: Definitions
Proposed Sec. 2635.1003 sets out the applicable definitions for
subpart J. Although the definitions set forth in this section are
largely self-explanatory, the importance of these terms in determining
the coverage of this regulation warrants additional emphasis. This
section defines the term ``legal expense payment,'' which is the type
of payment covered by this regulation. This section also defines
``legal expense fund,'' a fund established, in accordance with subpart
J, to receive contributions and to make distributions of the legal
expense payments. The definitions of ``arising in connection with the
employee's past or current official position,'' ``arising in connection
with the employee's prior position on a Presidential Transition Team,''
and ``arising in connection with the employee's prior position on a
campaign'' are also threshold concepts in determining whether the legal
matter
[[Page 23771]]
for which an employee beneficiary seeks to accept legal expense
payments is covered by this subpart. Covered legal matters can include
bringing a legal claim or being subject to a claim. If the employee's
legal matter does not fall within one of these three definitions, it
will be considered to be personal and will not be covered by this
subpart.
Proposed Sec. 2635.1004: Establishment
Proposed Sec. 2635.1004 sets out the standards for establishing an
LEF. OGE is proposing to require that all LEFs be structured as trusts
with a single beneficiary. OGE received many comments expressing a
strong preference for LEFs to be structured exclusively as trusts. The
commenters emphasized that the trust structure creates a fiduciary duty
between the trustee and beneficiary that, in the words of one public
interest organization, ``provide[s] the best protection for public
servants, who could be certain that the distributions will not be
withheld or disbursed according to political pressures.'' Although
other structures, such as LLCs, partnerships, and 527 organizations,
were considered, such entities would not provide similar protections.
Additionally, most commenters strongly supported allowing only a
single, named beneficiary of an LEF trust. In written comments and
statements during the public meetings, commenters repeatedly objected
to permitting group LEFs. Several commenters voiced an overriding
concern about the appearance of corruption resulting from discretionary
distributions from a group LEF to employees, as well as the difficulty
of properly and meaningfully screening for prohibited donors.
OGE shares these appearance concerns. Accordingly, the proposed
regulation requires that employees who wish to establish a legal
expense fund do so through a trust with a single, named beneficiary.
OGE recognizes, however, that the financial costs and personal burdens
associated with establishing a trust can create significant barriers to
entry for many employees who are not wealthy, well-connected, or well-
known. OGE's proposed alternative mechanisms to receive or pay for
legal services--such as pro bono legal services, assistance from
employee welfare organizations, and existing gift rule exceptions--
address some of the access concerns for employees who do not have the
financial or other means to establish or effectively raise money
through an LEF. However, given the concern that the single-beneficiary
trust structure may prevent some executive branch employees from
receiving financial assistance, OGE is soliciting additional comment on
single-beneficiary versus multiple-beneficiary trusts.
Proposed Sec. 2635.1004 sets out limitations on who may serve as
an LEF trustee. The section requires legal expense funds to be
administered by a trustee who is not: (1) The employee beneficiary, (2)
their spouse, parent, or child, (3) another federal employee, (4) an
agent of a foreign government, (5) a lobbyist, or (6) a person who has
interests substantially affected by the performance or nonperformance
of the employee beneficiary's official duties. These limitations are
proposed to ensure that the trustee is independent from the employee
beneficiary and can perform the trustee's fiduciary duties without
interference. Several commenters emphasized the importance of such
limitations on who may serve as trustee.
Proposed Sec. 2635.1004 further requires employees seeking to
establish an LEF to submit an LEF trust document to the employee's
Designated Agency Ethics Official (DAEO) for approval, unless the
employee is an anonymous whistleblower who chooses to submit the
document to OGE for review and approval. The DAEO must then review the
LEF trust document for compliance with the regulation. If the LEF trust
document is compliant, the DAEO must approve the document. Once the
DAEO approves the LEF trust document, the signed document must be
forwarded to OGE within seven calendar days. At that point, the
employee beneficiary may begin to accept contributions and
distributions through the LEF. OGE believes agency ethics officials
should initially review and approve LEF trust documents, as the
executive branch ethics program has a decentralized structure in which
agency ethics officials have primary responsibility for their agency's
ethics program. These ethics officials understand the work of the
agency and are best suited to be able to identify potential conflicts
of interest.
However, OGE recognizes the need for heightened scrutiny and
consistency across the executive branch with regard to the most senior
executive branch employees. Accordingly, OGE will conduct a secondary
review of the LEF trust documents of the employees whose financial
disclosure reports are reviewed by OGE pursuant to the Ethics in
Government Act, 5 U.S.C. app. 103, as well as the documents of all
White House Office and Office of the Vice President employees. OGE will
review the LEF trust document to determine whether it conforms with the
requirements established by this subpart. During this review period, an
employee beneficiary may continue to accept contributions and
distributions through the DAEO-approved LEF trust. However, if the LEF
trust document is defective or non-compliant, OGE will notify the
approving agency and the employee beneficiary or the employee
beneficiary's trustee or representative, who will have 30 calendar days
to take necessary corrective action. Additionally, OGE will review and
approve LEF trust documents for anonymous whistleblowers who elect not
to file with their agency. In that unusual circumstance, the agency
DAEO will not be made aware of an anonymous whistleblower's trust
documents in order to screen for potential conflicts requiring recusal.
OGE believes the importance of anonymity for whistleblowers outweighs
the benefit gained by agency ethics officials being able to screen for
potential conflicts, because the potential donors most likely to
present significant conflicts issues are prohibited from donating to
LEFs. In addition, OGE will review the trust documents of anonymous
whistleblowers for conflicts of interest, which could lead to the
employee returning donations or recusing from conflicts, as needed.
Under proposed section 2635.1004, employee beneficiaries are
required to have the trust document approved by the DAEO before being
able to accept contributions. This step mirrors the procedures used by
the legislative branch and ensures that the LEF will be in compliance
with the proposed rule. All approved, signed LEF trust documents,
except for those of anonymous whistleblowers, will be made publicly
available on OGE's website. Although employees may only establish or
maintain one LEF trust at a time, if multiple legal matters arise at
the same time, the scope of an existing trust may be amended. If a
second legal issue arises, that employee may establish a second fund
for that separate legal matter after that employee has terminated the
first LEF.
Proposed Sec. 2635.1005: Administration
Proposed Sec. 2635.1005, in conjunction with proposed Sec.
2635.1006, sets out the standards for the administration of an LEF. In
response to various comments on the importance of having an independent
trustee with a fiduciary duty to the employee beneficiary, proposed
Sec. 2635.1005 specifies the duties and powers of the trustee as the
fiduciary for the employee beneficiary. This section also makes clear
that an employee beneficiary may not exercise control over the LEF
property, which
[[Page 23772]]
further ensures the trustee's independence.
Proposed Sec. 2635.1006: Contributions and Use of Funds
Proposed Sec. 2635.1006 provides that an LEF may only accept
contributions of payments for legal expenses from permissible donors,
and lists the types of donors who are prohibited. OGE modeled this
section after the House and Senate LEF rules, which list the types of
donors who are (and are not) permitted to donate. OGE believes that
providing a list of prohibited donors will assist the trustee in
complying with this section, and will result in increased transparency
for the public about who is a prohibited donor. Inherent in this
process is the expectation that the trustee will need to consult with
the DAEO as needed.
Many commenters shared similar views on the types of donors most
likely to raise potential appearance of corruption concerns. Several
commenters also sought a prohibition on donations from organizations
because the source of an organization's funding may be unknown to an
employee beneficiary and the agency ethics official. Although the House
and Senate LEF rules do not prohibit most donations from organizations,
OGE nonetheless believes that limiting the donors to individuals will
provide additional safeguards against corruption and the appearance of
corruption, as well as provide for easier screening by the trustee.
Currently, OGE has proposed only a narrow exception permitting
donations from a national committee of a political party or donations
from campaigns, in the case of former members of a campaign of a
candidate for President or Vice President. This narrow exception only
applies if the donation is not otherwise prohibited by law and the
entity is not substantially affected by the performance or
nonperformance of an employee beneficiary's official duties. OGE
believes that existing campaign finance rules provide sufficient
transparency. However, OGE is soliciting additional comment on
expanding the exception to allow certain nonprofit organizations, such
as 501(c)(3) and 501(c)(4) organizations, to donate to an employee's
LEF.
With regard to individual contribution limits, commenters proposed
amounts ranging from $5,000 to $250,000. House LEF rules limit
contributions to $5,000 per year, while Senate LEF rules limit
contributions to $10,000 per year. OGE is proposing a contribution
limit of $10,000 per year from any single permissible donor. OGE's
proposed annual limit is consistent with the annual limit imposed by
the Senate. OGE believes that this limit, combined with the proposed
requirement that contributions generally must come from individuals,
adequately balances an employee beneficiary's need for legal expense
payments with potential appearance of corruption concerns. The proposed
approach, which places no limit on the number of donors, prevents
employees from relying on any single source for donations. OGE welcomes
comment on this proposed approach.
Proposed Sec. 2635.1006 also sets out the permissible uses of
funds. Several commenters emphasized the importance of limiting the use
of LEF payments to those uses related to defraying the employee's legal
costs, and not allowing use for other reasons, such as partisan
political purposes. OGE agrees, and included this requirement in the
regulation in order to clarify the fiduciary responsibilities of the
trustee and to reassure the public and donors that the donations are
being used for legal expenses as defined in this subpart.
Proposed Sec. 2635.1007: Reporting Requirements
Proposed Sec. 2635.1007 sets out the quarterly and employment
termination reporting requirements. OGE received many comments stating
that contributions and distributions through LEFs should be made
publicly available on a regular basis. Most of the comments OGE
received suggested that OGE make quarterly reports available to the
public, which mirrors the LEF reporting requirements of the legislative
branch. OGE has incorporated this requirement into the proposed
regulation, and set the proposed reporting threshold at $250, which is
the threshold set in the House LEF rules and higher than the $25
threshold set in the Senate LEF rules.
The proposed regulation requires agency ethics officials to review
the quarterly reports of most employees for compliance with the
regulation. The proposed regulation also requires OGE to conduct a
secondary review of the quarterly reports of the most senior employees,
as well as anonymous whistleblowers who elect not to file with their
agency. As with the initial certification, trustees filing quarterly
reports should consult with agency ethics officials when necessary.
When approving a report filed under this section, agency ethics
officials will make determinations to the best of their ability based
on the information they have been provided. If an improper donation is
discovered in the course of the review or by the public at a later
time, the beneficiary, with the assistance of the trustee, must return
the donation.
Under the proposed rule, all quarterly reports, except for those of
anonymous whistleblowers, will be made publicly available on OGE's
website. The primary goal of the public posting requirement is
transparency. In 2004, OGE issued a letter stating that the public
reporting provisions of the Ethics in Government Act (EIGA) constitute
the exclusive authority under OGE's jurisdiction to require public
financial disclosure. OGE Inf. Adv. Op. 04x3 (Apr. 19, 2004). This
statement stems from the following language in EIGA: ``[T]he provisions
of this title [title I] requiring the reporting of information shall
supersede any general requirement under any other provision of law or
regulation with respect to the reporting of information required for
purposes of preventing conflicts of interest or apparent conflicts of
interest.'' 5 U.S.C. app. 107(b) (emphasis added). OGE does not
consider the proposed LEF reporting requirement to be a ``general''
public financial disclosure reporting requirement that would be
superseded by EIGA. The reporting provision is not ``applicable to the
occupants of positions . . . that are categorized by the provision in
general terms.'' See 4B Op. O.L.C. 566 (Apr. 11, 1980) (discussing the
prerequisites for the supersession by EIGA of a statutory or regulatory
reporting requirement). Rather, the requirement to report only applies
to employees who choose to establish an LEF pursuant to these
regulations.
In proposed Sec. 2635.1007, OGE also recognizes the need for
penalties for noncompliance with the standards set forth in the
proposed regulation. If an LEF receives an impermissible contribution,
that contribution must be returned to the donor as soon as practicable
but no later than the next reporting due date. If a report is filed
after a due date, the employee may not accept contributions or
distributions until the report is filed. Additionally, OGE will retain
the authority to indefinitely prohibit employees from accepting
contributions or distributions from an LEF if there is continuing or
significant noncompliance.
Proposed Sec. 2635.1008: Termination of a Legal Expense Fund
Proposed Sec. 2635.1008 sets out the reasons an employee
beneficiary may terminate an LEF and provides requirements for
distributing excess funds. OGE received comments
[[Page 23773]]
suggesting that unused funds should be returned to the donors on a pro
rata basis or donated to a 501(c)(3) organization upon termination of
an LEF, consistent with the House and Senate rules. Because of the
difficulties inherent in returning funds to donors (i.e., locating
donors and ensuring timely return of funds), proposed Sec. 2635.1008
requires a trustee to distribute excess funds to a 501(c)(3)
organization within 90 days of termination. The organization must not
be one that is established by the employee beneficiary, nor an
organization with which the employee has a covered relationship within
the meaning of Sec. 2635.502(b)(1), nor can the beneficiary or the
beneficiary's spouse or child be an officer, director, or employee of
the organization. Additionally, the proposed regulation requires a
trust termination report that serves as a final quarterly report and
indicates the organization to which the excess funds were donated. OGE
requests comment on whether the 501(c)(3) should or should not be named
at the formation of the trust, or whether the selection of the
501(c)(3) should be left to the discretion of the trustee.
Proposed Sec. 2635.1009: Pro Bono Legal Services
Proposed Sec. 2635.1009 addresses employees' acceptance of pro
bono legal services. Most commenters were in favor of permitting
acceptance of appropriate pro bono legal services by employees, with
sufficient limitations. Moreover, several commenters identified
problems inherent in overly restricting acceptance of pro bono
services, including potential interference in attorney/client
relationships and curtailing access to needed legal assistance for
government employees. Accordingly, OGE has proposed rules specifically
governing the acceptance of pro bono legal services, including pro bono
services from public interest organizations. Proposed Sec. 2635.1009
would prohibit employees from accepting pro bono services from
lobbyists, foreign governments or agents, or persons substantially
affected by the performance or nonperformance of the employees' duties.
The proposed rule otherwise permits employees to accept pro bono
services in connection with covered legal matters. Additionally, OGE's
rule as drafted allows employees to accept pro bono services directly
from entities providing the legal services (such as law firms or
nonprofits). However, OGE is soliciting comments on whether employees
may accept legal services at a reduced cost or free of charge when the
legal services are paid for by a nonprofit organization, such as a
501(c)(3) or 501(c)(4), but the services are provided by attorneys
outside of that organization.
B. Regulatory Amendments to Subpart B of the Standards
OGE is proposing to make related amendments to the portions of the
Standards that govern the solicitation and acceptance of gifts from
outside sources, subpart B. Specifically, OGE is proposing a new
exception for certain legal expense payments and pro bono legal
services provided in accordance with proposed subpart J. OGE is also
proposing to revise Sec. 2635.204(c) of the gift rules to clarify that
an established employee organization may provide legal services
pursuant to this section.
Proposed Sec. 2635.204(n): Exception for Legal Expense Funds and Pro
Bono Legal Services
OGE is proposing a new exception to the gift rules for legal
expense payments or services for covered legal matters, so long as the
payments or services are provided in accordance with proposed subpart
J. However, regardless of whether an employee's legal expense payments
or services for covered legal matters are from a prohibited source or
given because of official position, that employee will still be subject
to the requirements and safeguards established in subpart J.
Proposed Sec. 2635.204(c): Discounts and Similar Benefits
OGE proposes revising Sec. 2635.204(c) of the gift rules to
clarify that an established employee organization may pay legal
expenses pursuant to this section. The question of whether employees
may accept free or discounted legal services through established
employee organizations, such as unions or employee welfare
organizations, arose during this regulatory process. OGE is aware that
agencies have used Sec. 2635.204(c)(2)(ii) to accept gifts of services
(e.g., financial counseling, visiting nurses) from employee benefit
organizations. However, the language of this exception as currently
written is ambiguous.
Accordingly, OGE proposes language under new Sec.
2635.204(c)(2)(iv) to clarify that employees may properly accept
opportunities and benefits (including, but not limited to, legal
services) offered by an established employee organization, when
eligibility is based on the employee's status as an agency employee.
OGE added a new Sec. 2635.204(c)(2) exception rather than amend
existing Sec. 2635.204(c)(2)(ii) because OGE did not want to confuse
the intended purposes of the separate exceptions or link employee
acceptance of benefits from employee organizations to similar benefits
offered to the general public by outside groups. The proposed new
exception is limited to ``established'' employee organizations, such as
employee welfare groups for Federal employees, because the purpose of
this exception is to allow employees to accept opportunities and
benefits from pre-existing employee organizations with a general
mission of providing assistance to agency employees, rather than from
organizations established as a response to a specific investigation or
established to help a specific employee. An employee organization need
not be established before this regulation going into effect; rather,
the organization should be established before a legal matter arises.
C. Regulatory Amendments to Confidential Financial Disclosure Reporting
Requirements
OGE is proposing to revise Sec. 2634.907(g)(5) of part 2634 to
remove the requirement that anonymous whistleblowers who happen to be
confidential financial disclosure report filers report gifts for
payment of legal expenses related to the whistleblowing activity.
Confidential financial disclosure reports are always reviewed by the
ethics office of a filer's agency and are often reviewed by the filer's
supervisor. The disclosure of the payment of legal expenses as gifts
may reveal the whistleblower, which would undermine the protections
that whistleblowers are provided under the various whistleblower
protection statutes. See 5 U.S.C. 2302(b)(8), (b)(9)(C); see also 5
U.S.C. app. II, 8H; 50 U.S.C. 3033, 3517; 28 CFR 27.1. OGE believes the
possible harm to an anonymous whistleblower outweighs the value of
disclosing the information, particularly given requirements in proposed
subpart J. In addition, during OGE's information gathering process
several public interest groups expressed support for maintaining the
anonymity of whistleblowers. At this time, OGE is unable to propose a
similar exception for public financial disclosure filers because there
is no such exception in the Ethics in Government Act, 5 U.S.C. app.
102(a)(2).
III. Matters of Regulatory Procedure
Regulatory Flexibility Act
As Director of the Office of Government Ethics, I certify under the
Regulatory Flexibility Act (5 U.S.C.
[[Page 23774]]
chapter 6) that this proposed rule will not have a significant economic
impact on a substantial number of small entities because it primarily
affects current Federal executive branch employees.
Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. chapter 35) applies because
this regulation creates information collection requirements that
require approval of the Office of Management and Budget. The
information collection requirements imposed by the proposed regulation
are directed at beneficiaries of legal expense funds, who are current
executive branch employees. OGE notes that an employee beneficiary who
is leaving executive branch employment is required to file an
employment termination report no later than their last day of
employment. At the same time, a 30-day filing extension may be granted
for good cause shown. Although it is possible that a beneficiary may
file a termination report after leaving government service after having
received an extension, the information collection requirement is
directed toward current employees. OGE also notes that there are no
independent information collection requirements on trustees.
In fulfilling the regulatory requirements, employee beneficiaries
must in turn collect information from (1) donors who contribute to the
legal expense fund for the payment of legal expenses and (2) payees who
receive payments distributed from the legal expense fund. Together,
this information collection is titled ``OGE Legal Expense Fund
Information Collection.''
OGE plans to seek Paperwork Reduction Act approval of this new
information collection. The purposes of the OGE Legal Expense Fund
Information Collection include, but are not limited to, obtaining
information relevant to a conflict-of-interest determination, and
disclosing on the OGE website information submitted pursuant to 5 CFR
part 2635, subpart J. The authority for this information collection is
addressed in the Supplementary Information section.
OGE estimates that there will be approximately 110 Respondents
annually. It is anticipated that there may be an average of five legal
expense fund trusts in existence each year. Each trust is anticipated
to have approximately 20 donors, whose reporting requirements are tied
to the frequency with which they donate, and approximately two payees,
who will submit information each time they receive a distribution.
OGE estimates that the total annual burden will be approximately 9
to 10 hours. OGE estimates the estimated time per response to be an
average of 5 minutes, with respect to each donor or payee communication
to an employee beneficiary.
These estimates are based in part on OGE's knowledge of several
legal expense funds that have been established for Executive branch
employees, as well as OGE's consultation with the U.S. House of
Representatives and the U.S. Senate regarding the legal expense funds
that they oversee.
Request for Comments
Agency and public comment is invited specifically on the need for
and practical utility of this information collection, the accuracy of
OGE's burden estimate, the enhancement of quality, utility, and clarity
of the information collected, and the minimization of burden (including
the use of information technology). OGE is currently exploring methods
for collecting this information, and is seeking public comment.
Potential methods may include, for example, the use of standard forms.
Unfunded Mandates Reform Act
For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
chapter 5, subchapter II), this proposed rule will not significantly or
uniquely affect small governments and will not result in increased
expenditures by State, local, and tribal governments, in the aggregate,
or by the private sector, of $100 million or more (as adjusted for
inflation) in any one year.
Executive Order 13563 and Executive Order 12866
Executive Orders 13563 and 12866 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select the regulatory approaches that
maximize net benefits (including economic, environmental, public health
and safety effects, distributive impacts, and equity). Executive Order
13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
This proposed rule has been designated as a ``significant regulatory
action'' although not economically significant, under section 3(f) of
Executive Order 12866. Accordingly, this rule has been reviewed by the
Office of Management and Budget.
Currently, executive branch employees may accept gifts to pay for
legal expenses from others directly and can also establish funds to
accept donations for such expenses, as long as the employee remains in
compliance with the gift restrictions in subparts B and C of the
Standards of Conduct and the criminal conflict of interest statutes.
See, e.g., OGE Legal Advisory LA-18-11 (Sept. 12, 2018); OGE Legal
Advisory LA-17-10 (Sept. 28, 2017). In other words, there are currently
costs for employees who establish an LEF in order to ensure compliance
with ethics rules even in the absence of OGE's new proposed framework
in subpart J, but compliance can be difficult and confusing as the
current rules do not address these types of gifts specifically. OGE's
role is currently limited to providing an LEF trust template or to
providing technical assistance to help ensure that executive branch
employees who may receive distributions from an LEF will be in
compliance with existing ethics laws and rules.
Based on OGE's current experience under the status quo, it is
estimated that approximately five executive branch employees may seek
to establish or maintain an LEF annually. The proposed new framework
will consist of the following activities: Establishment of the LEF
trust; submission of trust documentation for agency review and
approval; review and approval by OGE (where applicable); LEF trustee
soliciting and accepting donations; LEF trustee screening donations to
ensure the donor is permissible; LEF trustee overseeing distributions
from the trust for the employee's legal expenses; preparing quarterly
reports of contributions to and distributions from the LEF; submission
of quarterly reports for agency review; review by OGE (where
applicable); preparation of trust termination reports and/or employment
termination reports; submission of those reports for agency review and
OGE review (where applicable); and communications regarding all of the
above. OGE estimates that the annual time burden for all of the above
is 100 hours. Using an estimated rate $325 per hour for the services of
a professional trust administrator or private representative, the
estimated annual cost burden is $32,500. See Clio, Legal Trends Report
55 (2019), <a href="https://www.clio.com/resources/legal-trends/2019-report/">https://www.clio.com/resources/legal-trends/2019-report/</a>
(calculating an average hourly rate of $319 for trust lawyers
nationally). However, OGE estimates that the annual time burden under
the status quo, if an employee establishes a legal expense fund that
needs to comply with existing ethics rules, is 75 hours with an annual
cost burden of $24,375. Thus, the net increase from the status quo is
approximately $8,125 per fund.
[[Page 23775]]
The estimate of 75 hours is based, in part, on the estimated time
burden for OGE's qualified trust program. See 84 FR 67743. That number
was reduced because the status quo does not require review and approval
of trusts or submission of reports to agencies and OGE. Under the
status quo, a significant time burden does exist because the lack of a
detailed framework requires additional research by employee
representatives, consultation with agency ethics officials and OGE, and
a more detailed review of each LEF donor in the absence of an
enumerated list of permissible donors. The additional 25-hour estimate
is based on the specific submissions required by proposed 5 CFR part
2635, subpart J. Specifically, submission of LEF trust fund
establishing documents, quarterly reports, and termination reports;
review by agencies and OGE of those submissions; and corresponding
communications will increase the cost burden in comparison to the
status quo. The burden on LEF donors specifically is unchanged because
they would need to provide the same level of information under the
status quo.
The benefits from implementing this new regulatory structure are
significant. Employees' acceptance of payments for legal expenses
relating to their official duties has triggered concerns from outside
groups, Congress, and the media, in terms of appearance of corruption/
corruption issues and a desire for transparency. Creating this
regulation will provide a framework for screening for conflicts of
interest and transparency, which will serve to protect both the agency
and the employee. Further, the regulation will provide clarity to
executive branch employees by articulating the process for establishing
an LEF and the requirements in maintaining one, including: Defining
prohibited donors, donation caps, review and approval of trust fund
documents, and the submission of quarterly, publicly available reports.
As a result of these requirements, as well as the increased public
reporting requirements, the public will have increased confidence in
the decision making of executive branch employees who accept gifts of
legal expenses consistent with the new proposed subpart J.
Executive Order 12988
As Director of the Office of Government Ethics, I have reviewed
this proposed rule in light of section 3 of Executive Order 12988,
Civil Justice Reform, and certify that it meets the applicable
standards provided therein.
Executive Order 13175
The Office of Government Ethics has evaluated this proposed rule
under the criteria set forth in Executive Order 13175 and determined
that tribal consultation is not required as this proposed rule has no
substantial direct effect on one or more Indian tribes, on the
relationship between the Federal Government and Indian tribes, or on
the distribution of power and responsibilities between the Federal
Government and Indian tribes.
List of Subjects
5 CFR Part 2634
Certificates of divestiture, Conflict of interests, Financial
disclosure, Government employees, Penalties, Privacy, Reporting and
recordkeeping requirements, Trusts and trustees.
5 CFR Part 2635
Conflict of interests, Executive branch standards of ethical
conduct, Government employees.
Approved: April 12, 2022.
Emory Rounds,
Director, U.S. Office of Government Ethics.
For the reasons set forth in the preamble, the U.S. Office of
Government Ethics proposes to amend 5 CFR parts 2634 and 2635 as
follows:
PART 2634--EXECUTIVE BRANCH FINANCIAL DISCLOSURE, QUALIFIED TRUSTS,
AND CERTIFICATES OF DIVESTITURE
0
1. The authority citation for part 2634 continues to read as follows:
Authority: 5 U.S.C. app.; 26 U.S.C. 1043; Pub. L. 101-410, 104
Stat. 890, 28 U.S.C. 2461 note, as amended by Sec. 31001, Pub. L.
104-134, 110 Stat. 1321 and Sec. 701, Pub. L. 114-74; Pub. L. 112-
105, 126 Stat. 291; E.O. 12674, 54 FR 15159, 3 CFR, 1989 Comp., p.
215, as modified by E.O. 12731, 55 FR 42547, 3 CFR, 1990 Comp., p.
306.
0
2. Amend Sec. 2634.907 by:
0
a. Revising paragraph (g)(5); and
0
b. Designating the example following paragraph (g)(5) as Example 1 to
paragraph (g).
The revision reads as follows:
Sec. 2634.907 Report contents.
* * * * *
(g) * * *
(5) Exceptions. Reports need not contain any information about:
(i) Gifts and travel reimbursements received from relatives (see
Sec. 2634.105(o)).
(ii) Gifts and travel reimbursements received during a period in
which the filer was not an officer or employee of the Federal
Government.
(iii) Any food, lodging, or entertainment received as ``personal
hospitality of any individual,'' as defined in Sec. 2634.105(k).
(iv) Any payments for legal expenses from a legal expense fund or
the provision of pro bono legal services, as defined in subpart J of
part 2635 of this chapter, or any payments for legal expenses or the
provision of pro bono legal services that otherwise qualify for a gift
exclusion or gift exception in subpart B of part 2635 of this chapter,
if the confidential filer is an anonymous whistleblower as defined by
Sec. 2635.1003 of this chapter.
(v) Any exclusions specified in the definitions of ``gift'' and
``reimbursement'' at Sec. 2634.105(h) and (n).
* * * * *
PART 2635--STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES OF THE
EXECUTIVE BRANCH
0
3. The authority citation for part 2635 continues to read as follows:
Authority: 5 U.S.C. 7301, 7351, 7353; 5 U.S.C. App. (Ethics in
Government Act of 1978); E.O. 12674, 54 FR 15159, 3 CFR, 1989 Comp.,
p. 215, as modified by E.O. 12731, 55 FR 42547, 3 CFR, 1990 Comp.,
p. 306.
0
4. Amend Sec. 2635.203 by adding paragraphs (h) and (i) to read as
follows:
Sec. 2635.203 Definitions.
* * * * *
(h) Legal expense fund has the meaning set forth in Sec.
2635.1003.
(i) Pro bono legal services has the meaning set forth in Sec.
2635.1003.
0
5. Amend Sec. 2635.204 by:
0
a. Removing the word ``or'' at the end of paragraph (c)(2)(ii);
0
b. Removing the period at the end of paragraph (c)(2)(iii) and adding
``; or'' in its place; and
0
c. Adding paragraph (c)(2)(iv), example 4 to paragraph (c)(2), and
paragraph (n).
The additions read as follows:
Sec. 2635.204 Exceptions to the prohibition for acceptance of
certain gifts.
* * * * *
(c) * * *
(2) * * *
(iv) Offered to employees by an established employee organization,
such as an employee welfare group for Federal employees, because of the
employees' Government employment, so long as the employee is part of
the class of individuals eligible for assistance from the employee
organization as set forth in the organization's governing documents.
* * * * *
[[Page 23776]]
Example 4 to paragraph (c)(2): A military relief society provides
access to financial counseling services, loans, and grants to all
sailors and Marines. Service members may accept such benefits because
the services are offered by an employee organization that was
established before the matter arose and in which membership is because
of the employees' Government employment.
* * * * *
(n) Legal expense funds and pro bono legal services. An employee
who seeks legal representation for a matter arising in connection with
the employee's official position, the employee's prior position on a
campaign of a candidate for President or Vice President, or the
employee's prior position on a Presidential Transition Team may accept:
(1) Payments for legal expenses paid out of a legal expense fund
that is established and operated in accordance with subpart J of this
part; and
(2) Pro bono legal services provided in accordance with subpart J
of this part.
0
6. Add subpart J to read as follows:
Subpart J--Legal Expense Funds
Sec.
2635.1001 Overview.
2635.1002 Applicability and related considerations.
2635.1003 Definitions.
2635.1004 Establishment.
2635.1005 Administration.
2635.1006 Contributions and use of funds.
2635.1007 Reporting requirements.
2635.1008 Termination of a legal expense fund.
2635.1009 Pro bono legal services.
Sec. 2635.1001 Overview.
This subpart contains standards for an employee's acceptance of
payments for legal expenses through a legal expense fund and an
employee's acceptance of pro bono legal services. Legal expenses
covered by this subpart are those for a matter arising in connection
with the employee's past or current official position, the employee's
prior position on a campaign, or the employee's prior position on a
Presidential Transition Team.
Sec. 2635.1002 Applicability and related considerations.
(a) Applicability. This subpart applies to an employee who seeks to
accept payments for legal expenses from a legal expense fund or the
provision of pro bono legal services. The legal expenses or the
provision of pro bono legal services must be for a matter arising in
connection with the employee's past or current official position, the
employee's prior position on a campaign, or the employee's prior
position on a Presidential Transition Team.
(b) Not covered by this subpart. The following types of payments
for legal expenses or pro bono legal services are not covered by this
subpart:
(1) Personal matters. Payments for legal expenses or the provision
of pro bono legal services related to matters that do not arise in
connection with the employee's past or current official position, the
employee's prior position on a campaign, or the employee's prior
position on a Presidential Transition Team, such as a matter that is
primarily personal in nature, are not covered by this subpart. Personal
matters include, but are not limited to, tax planning, personal injury
litigation, protection of property rights, family law matters, and
estate planning or probate matters.
Example 1 to paragraph (b)(1): A Department of Homeland Security
employee wants to set up a legal expense fund in connection with the
employee's divorce and custody proceeding. This is a personal matter
and the employee may not establish a legal expense fund under this
subpart, but may use other gift exceptions and exclusions in accordance
with subparts B and C of this part as appropriate.
(2) Gifts acceptable according to a gift exclusion or exception.
Payments for legal expenses or the provision of pro bono legal services
that otherwise qualify for a gift exclusion or exception other than
Sec. 2635.204(n) are not covered by this subpart.
Example 1 to paragraph (b)(2): A Central Intelligence Agency
employee is facing administrative disciplinary action due to an issue
with the employee's security clearance and would like to seek financial
assistance to pay for an attorney. Even though this matter arose in
connection with their official position, if the employee's parents
offer to cover the legal expenses, that donation is not subject to this
subpart, as it would be subject to the gift exception at Sec.
2635.204(b).
Note 1 to paragraph (b): Acceptance of legal expense payments or
pro bono legal services not covered by this subpart must be analyzed
under subpart B of this part.
(c) Related considerations--(1) Gifts between employees. Acceptance
of legal expense payments or the provision of pro bono legal services
from another employee must be analyzed under 18 U.S.C. 205 and subpart
C of this part.
(2) Impartiality. An employee beneficiary will be treated as having
a covered relationship for one year within the meaning of Sec.
2635.502(b)(1) with a legal expense fund's trustee and donors, as well
as any pro bono legal services providers. The one-year period of
disqualification for each donor begins to run on the most recent date
the legal expense fund donation is received from that donor or, in the
case of pro bono services, the last date pro bono services were
provided. The employee beneficiary must take appropriate steps to avoid
an appearance of loss of impartiality in the performance of their
official duties in accordance with Sec. 2635.502.
Example 1 to paragraph (c)(2): A donor contributed to a Social
Security Administration (SSA) employee's legal expense fund. Three
months after this contribution was made, the donor submitted a
disability claim. Under the circumstances, the SSA employee would be
correct in concluding that a reasonable person would be likely to
question the employee's impartiality if the employee were to
participate in evaluating that disability claim.
(3) Misuse of position. Legal expense fund payments must be
solicited and accepted consistent with the provisions in subpart G of
this part relating to the use of public office for private gain, use of
nonpublic information, use of Government property, and use of
Government time.
Example 1 to paragraph (c)(3): A Transportation Security
Administration (TSA) employee retains legal counsel due to an
investigation into inappropriate behavior in their department, and the
employee establishes a legal expense fund in accordance with this
subpart. Neither the employee nor the legal expense fund's trustee may
use the TSA agency seal in materials to imply the Government endorses
the legal expense fund, or use nonpublic details of the investigation
to solicit contributions to the legal expense fund. Further, the
employee may not task subordinates with any work relating to
administration of the legal expense fund.
(4) Financial disclosure. In addition to the legal expense fund
reporting requirements outlined in Sec. 2635.1007, an employee
beneficiary who is a public or confidential filer, other than a
confidential filer who is an anonymous whistleblower, under part 2634
of this chapter must report gifts of legal expense payments accepted
from sources other than the United States Government, including gifts
of pro bono services, on the employee's financial disclosure report,
subject to applicable thresholds and exclusions.
Sec. 2635.1003 Definitions.
For purposes of this subpart:
Anonymous whistleblower means an employee who makes or believes to
be making a protected report or disclosure under 5 U.S.C. 2302(b)(8), 5
U.S.C.
[[Page 23777]]
2302(b)(9)(C), 5 U.S.C. app. II, 8H, 50 U.S.C. 3517, 50 U.S.C. 3033, or
28 CFR 27.1, and who seeks to remain anonymous.
Arising in connection with the employee's past or current official
position means the employee's involvement in the legal matter would not
have arisen had the employee not held the status, authority, or duties
associated with the employee's past or current Federal position.
Example 1 to this definition of ``arising in connection with the
employee's past or current official position'': A Department of
Transportation employee is being investigated by the Inspector General
for potential misuse of Government resources while on official travel.
The Internal Revenue Service (IRS) is separately investigating the
employee for misreporting household income on the employee's personal
taxes. The employee may use this subpart to establish a legal expense
fund concerning the Inspector General investigation because the legal
matter arose in connection with their official position. However, this
subpart would not apply to the unrelated IRS investigation because that
legal matter did not arise in connection with the employee's official
position.
Example 2 to this definition of ``arising in connection with the
employee's past or current official position'': A senior military
officer faces court-martial charges for sexual harassment of a junior
officer. All of the charged misconduct occurred outside official duty
hours. Because the officer would not be subject to the Uniform Code of
Military Justice had the officer not held their official position, the
officer may establish a legal expense fund in accordance with this
subpart.
Arising in connection with the employee's prior position on a
campaign means the employee's involvement in the legal matter would not
have arisen had the employee not held the status, authority, or duties
associated with the employee's prior position on a campaign of a
candidate for President or Vice President.
Arising in connection with the employee's prior position on a
Presidential Transition Team means the employee's involvement in the
legal matter would not have arisen had the employee not held the
status, authority, or duties associated with the employee's prior
position as a member of the staff of a Presidential Transition Team.
Employee beneficiary means an employee as defined by Sec.
2635.102(h) for whose benefit a legal expense fund is established under
this subpart.
Legal expense fund means a fund established to receive
contributions and to make distributions of legal expense payments.
Legal expense payment or payment for legal expenses means anything
of value received by an employee under circumstances that make it clear
that the payment is intended to defray costs associated with
representation in a legal, congressional, or administrative proceeding.
Pro bono legal services means legal services provided without
charge to the employee beneficiary or for less than market value as
defined in Sec. 2635.203(c) to an employee who seeks legal
representation for a matter arising in connection with the employee's
official position, the employee's prior position on a campaign, or the
employee's prior position on a Presidential Transition Team.
Sec. 2635.1004 Establishment.
(a) Structure. A legal expense fund must be established as a trust
that conforms with the requirements of this part and applicable state
law. To the extent the requirements of this part and applicable state
law are incompatible, the Director of the Office of Government Ethics
may permit such deviations from this part as necessary to ensure
compatibility with applicable state law.
(b) Grantor. The legal expense fund must be established by the
employee beneficiary.
(c) Trustee. A legal expense fund must be administered by a trustee
who is not:
(1) The employee beneficiary;
(2) A spouse, parent, or child of the employee beneficiary;
(3) Any other employee of the Federal executive, legislative, or
judicial branches;
(4) An agent of a foreign government as defined in 5 U.S.C.
7342(a)(2);
(5) A lobbyist as defined by 2 U.S.C. 1602(10) who is currently
registered pursuant to 2 U.S.C. 1603(a); or
(6) A person who has interests that may be substantially affected
by the performance or nonperformance of the employee beneficiary's
official duties.
(d) Employee beneficiary. (1) Except as provided in paragraph
(d)(2) of this section, a legal expense fund must be established for
the benefit of a single, named employee beneficiary.
(2) A legal expense fund for the benefit of an anonymous
whistleblower may be established without disclosing the identity of the
anonymous whistleblower to anyone other than the trustee.
(e) Filing and approval of legal expense fund trust document. An
employee beneficiary may not solicit or accept contributions or
distributions through a legal expense fund before:
(1) Filing the legal expense fund document in accordance with
paragraph (f) of this section; and
(2) Receiving approval for the legal expense fund in accordance
with paragraph (g)(1) of this section.
(f) Filing of legal expense fund trust document. (1) The employee
beneficiary, or the trustee or representative of the employee
beneficiary, must file the legal expense fund trust document with the
designated agency ethics official at the agency where the employee
beneficiary is employed.
(2) An employee beneficiary who is an anonymous whistleblower may
choose to file a legal expense fund trust document anonymously through
the employee beneficiary's trustee or representative with the Office of
Government Ethics only. If the Office of Government Ethics receives a
legal expense fund trust document from a covert employee of the
Intelligence Community, the Office of Government Ethics will handle the
document as classified, according to procedures agreed upon with the
employee's agency.
(g) Approval of legal expense fund trust document--(1) Designated
agency ethics official approval. The designated agency ethics official
must determine, based on the submitted trust document and information
regarding the trustee, whether to approve a legal expense fund trust
document filed by an employee beneficiary, other than an anonymous
whistleblower choosing to file with the Office of Government Ethics,
within 30 calendar days of filing.
(i) Standard for approval. The designated agency ethics official
must approve a legal expense fund that is, based on the submitted trust
document and information regarding the trustee, in compliance with this
subpart.
(ii) Transmission of trust documents to the Office of Government
Ethics. Following approval, the signed legal expense fund trust
document must be forwarded to the Office of Government Ethics within
seven calendar days.
(iii) Exception for anonymous whistleblowers. The Office of
Government Ethics will serve as the approving authority for anonymous
whistleblowers who choose to file a legal expense fund trust document
anonymously with the Office of Government Ethics only.
(2) Office of Government Ethics review. Following approval by the
designated agency ethics official, the Office of Government Ethics will
conduct a second review of the legal
[[Page 23778]]
expense fund trust documents of the employee beneficiaries listed in
paragraph (g)(2)(ii) of this section within 30 calendar days of
receipt.
(i) Standard for review. The Office of Government Ethics will
review the legal expense fund trust document to determine whether it
conforms with the requirements established by this subpart. If defects
are ascertained, the Office of Government Ethics will bring them to the
attention of the approving agency and the employee beneficiary or the
employee beneficiary's trustee or representative, who will have 30
calendar days to take necessary corrective action.
(ii) Employee beneficiaries requiring secondary Office of
Government Ethics review. The Office of Government Ethics will review
the legal expense fund trust documents of the following employee
beneficiaries:
(A) The Postmaster General;
(B) The Deputy Postmaster General;
(C) The Governors of the Board of Governors of the United States
Postal Service;
(D) A designated agency ethics official;
(E) Employees of the White House Office and the Office of the Vice
President; and
(F) Officers and employees in offices and positions which require
confirmation by the Senate, other than members of the uniformed
services and Foreign Service Officers below the rank of Ambassador.
(3) Right to Appeal. If the approval of a legal expense fund has
been denied, the requester may appeal the denial within 60 days by mail
or email to the Director of the U.S. Office of Government Ethics.
Requests sent by mail should be addressed to 1201 New York Avenue NW,
Suite 500, Washington, DC 20005-3917. The envelope containing the
request and the letter itself should both clearly indicate that the
subject is a legal expense fund appeal. Email requests should be sent
to <a href="/cdn-cgi/l/email-protection#4a3f39252d2f0a252d2f642d253c"><span class="__cf_email__" data-cfemail="d7a2a4b8b0b297b8b0b2f9b0b8a1">[email protected]</span></a> and should indicate in the subject line that the
message contains a legal expense fund appeal.
(h) Amendments. The trust document may only be amended if the
trustee and employee beneficiary file the amended legal expense fund
trust document in accordance with paragraph (f) of this section and
seek approval in accordance with paragraph (g) of this section.
(i) One legal expense fund. No employee beneficiary may establish
or maintain more than one legal expense fund at any one time. An
employee may not later establish a second legal expense fund for the
same legal matter.
(j) Conforming existing legal expense funds. In order for employee
beneficiaries who have existing legal expense funds to receive legal
expense payments from the existing legal expense fund, the employee
beneficiary must comply with Sec. Sec. 2635.1005(b), 2635.1006, and
2635.1007 by [90 calendar days after the effective date of the final
rule].
(k) Public access. Approved legal expense fund trust documents will
be made available by the Office of Government Ethics to the public on
its website within 30 calendar days of receipt. The trust fund
documents will be sortable by employee beneficiary's name, agency, and
position, as well as type of document and document date. Legal expense
fund trust documents filed by anonymous whistleblowers will not be made
available to the public. Legal expense fund trust documents that are
made available to the public will not include any information that
would identify individuals whose names or identities are otherwise
protected from public disclosure by law.
Sec. 2635.1005 Administration.
(a) Trustee's duties and powers. A trustee of a legal expense fund
is responsible for:
(1) Operating the legal expense fund trust consistent with this
part and applicable state law;
(2) Operating as a fiduciary for the employee beneficiary in
relation to the legal expense fund property and the legal expense fund
purpose;
(3) Providing information to the employee beneficiary as necessary
to comply with the Ethics in Government Act, 5 U.S.C. app. 102(a)(2),
part 2634 of this chapter, and this part; and
(4) Notifying donors and payees that their names will be disclosed
on the OGE website.
(b) Limitation on role of employee beneficiary. An employee
beneficiary may not exercise control over the legal expense fund
property.
Sec. 2635.1006 Contributions and use of funds.
(a) Contributions. A legal expense fund may only accept
contributions of payments for legal expenses from permissible donors
listed in paragraph (b) of this section.
(b) Permissible donors. A permissible donor includes:
(1) An individual who is not:
(i) An agent of a foreign government as defined in 5 U.S.C.
7342(a)(2);
(ii) A lobbyist as defined by 2 U.S.C. 1602(10) who is currently
registered pursuant to 2 U.S.C. 1603(a);
(iii) Acting on behalf of, or at the direction of, another
individual or entity in making a donation;
(iv) Donating anonymously;
(v) Seeking official action by the employee beneficiary's agency;
(vi) Doing business or seeking to do business with the employee
beneficiary's agency;
(vii) Conducting activities regulated by the employee beneficiary's
agency other than regulations or actions affecting the interests of a
large and diverse group of persons;
Example 1 to paragraph (b)(1)(vii): A donor contributed to a
Department of State employee's legal expense fund. The donor has
recently applied to renew their United States Passport. Because the
Department of State's passport renewal office affects the interests of
a large and diverse group of people, the donation is permissible under
paragraph (b)(1)(vii) of this section.
(viii) Substantially affected by the performance or nonperformance
of the employee beneficiary's official duties; or
(ix) An officer or director of an entity that is substantially
affected by the performance or nonperformance of the employee
beneficiary's official duties.
(2) A national committee of a political party as defined by 52
U.S.C. 30101(14), (16) or, for former members of a campaign of a
candidate for President or Vice President, the campaign, provided that
the donation is not otherwise prohibited by law and the entity is not
substantially affected by the performance or nonperformance of an
employee beneficiary's official duties.
Note 1 to paragraph (b): Acceptance of a legal expense payment from
another employee must be analyzed under subpart C of this part.
(c) Contribution limits. A legal expense fund may not accept more
than $10,000 from any single permissible donor per calendar year of the
fund.
Note 2 to paragraph (c): As discussed in Sec. 2635.1002(b)(2),
payments for legal expenses or the provision of pro bono legal services
that otherwise qualify for a gift exclusion or exception other than
Sec. 2635.204(n) in subpart B of this part are not covered by this
subpart.
(d) Use of funds. Legal expense fund payments must be used only for
the following purposes:
(1) An employee beneficiary's legal expenses related to those legal
proceedings arising in connection with the employee's past or current
official position, the employee's prior position on a campaign, or the
employee's prior position on a Presidential Transition Team;
(2) Expenses incurred in soliciting for and administering the fund;
and
[[Page 23779]]
(3) Expenses for the discharge of Federal, state, and local tax
liabilities that are incurred as a result of the creation, operation,
or administration of the fund.
Example 1 to paragraph (d): An employee beneficiary's attorney
determines it is necessary to employ an expert witness related to a
legal proceeding arising in connection with the employee beneficiary's
official position. Funds may be distributed from the legal expense fund
to pay fees and expenses for the expert witness.
Sec. 2635.1007 Reporting requirements.
(a) Quarterly reports. An employee beneficiary must file quarterly
reports that include the following information until the trust is
terminated or an employment termination report is filed as set forth in
paragraph (d) of this section.
(1) Contributions. An employee beneficiary must report the donor's
name, employer, date(s) of contribution, and amount for each donor that
makes a contribution exceeding $250 during the quarterly reporting
period. For the report due January 30, an employee beneficiary must
also disclose contributions from a single donor that exceed $250 for
the prior calendar year unless the contributions have been disclosed on
a prior quarterly report.
(2) Distributions. An employee beneficiary must report the payee's
name, date(s) of distribution, amount, and purpose of any distribution
from the legal expense fund exceeding $250 during the quarterly
reporting period. For the report due January 30, an employee
beneficiary must also disclose distributions to a single source that
exceed $250 for the prior calendar year unless the distributions have
been disclosed on a prior quarterly report.
(b) Filing of reports. (1) The employee beneficiary must file all
reports required in this section with the designated agency ethics
official at the agency where the employee beneficiary is employed. The
trustee or a representative of the employee beneficiary may file a
report on behalf of the employee beneficiary.
(2) An employee beneficiary who is an anonymous whistleblower may
choose to file reports anonymously through the employee beneficiary's
trustee or representative with the Office of Government Ethics. If the
Office of Government Ethics receives a quarterly report from a covert
employee of the Intelligence Community, the Office of Government Ethics
must handle the document as classified, according to procedures agreed
upon with the employee's agency.
(c) Reporting periods and due dates. Quarterly reports must cover
the reporting periods and comply with the following due dates:
(1) January 1 to March 31, with the report due on April 30.
(2) April 1 to June 30, with the report due on July 30.
(3) July 1 to September 30, with the report due on October 30.
(4) October 1 to December 31, with the report due on January 30 of
the following year.
(5) If the scheduled due date falls on a Saturday, Sunday or
Federal Holiday, the report will instead be due the next business day.
(d) Employment termination report. If the employee beneficiary is
leaving executive branch employment, the employee beneficiary must file
an employment termination report no later than their last day of
employment. No contributions may be accepted for or distributions paid
by the legal expense fund between the date of the filing and the
employee beneficiary's termination date. The report must include the
following:
(1) A report of contributions received and distributions made as
required by paragraph (a) of this section between the end of the last
quarterly reporting period and the date of the report; and
(2) A statement as to whether the trust will be terminated or
remain in force after the employee beneficiary terminates their
executive branch employment.
(e) Extensions. For each quarterly or employment termination
report, a single extension of 30 calendar days may be granted by the
Director of the Office of Government Ethics, or the employee
beneficiary's designated agency ethics official if filing with agency,
for good cause upon written request by the employee beneficiary or the
trustee.
(f) Review of reports--(1) Designated agency ethics official
review. The designated agency ethics official must review reports
within 30 calendar days of filing.
(i) Standard for review. The designated agency ethics official will
review the report to determine that:
(A) The information required under paragraph (a) of this section is
reported for each contribution and distribution; and
(B) Contributions to and distributions from the trust are in
compliance with Sec. 2635.1006.
(ii) Transmission of reports to the Office of Government Ethics.
Following review, all reports must be forwarded in unclassified format
to the Office of Government Ethics within seven calendar days.
(iii) Office of Government Ethics review for anonymous
whistleblowers. The Office of Government Ethics will serve as the
reviewing authority for anonymous whistleblowers who choose to file
reports anonymously with the Office of Government Ethics only.
(2) Office of Government Ethics review. Following review by the
designated agency ethics official, the Office of Government Ethics will
conduct a second review of the reports of the employee beneficiaries
listed in paragraph (f)(2)(ii) of this section within 30 calendar days
of the receipt.
(i) Standard for review. The Office of Government Ethics will
review the report to determine whether it conforms with the
requirements established by this subpart. If defects are ascertained,
the Office of Government Ethics will bring them to the attention of the
reviewing agency and the employee beneficiary or the employee
beneficiary's trustee or representative, who will have 30 calendar days
to take necessary corrective action.
(ii) Employee beneficiaries requiring secondary Office of
Government Ethics review. The Office of Government Ethics will review
the reports of the following employee beneficiaries:
(A) The Postmaster General;
(B) The Deputy Postmaster General;
(C) The Governors of the Board of Governors of the United States
Postal Service;
(D) A designated agency ethics official;
(E) Employees of the White House Office and the Office of the Vice
President; and
(F) Officers and employees in offices and positions which require
confirmation by the Senate, other than members of the uniformed
services and Foreign Service Officers below the rank of Ambassador.
(g) Public access. Quarterly and employment termination reports
will be made available by the Office of Government Ethics to the public
on its website within 30 calendar days of receipt. The reports will be
sortable by employee beneficiary's name, agency, and position, as well
as type of document and document date. Quarterly and employment
termination reports that are made available to the public by the Office
of Government Ethics will not include any information that would
identify individuals whose names or identities are otherwise protected
from public disclosure by law. The reports filed by anonymous
whistleblowers will not be made available to the public.
(h) Noncompliance--(1) Receipt of impermissible contributions. If
the legal expense fund receives a contribution
[[Page 23780]]
that is not permissible under Sec. 2635.1006, the contribution must be
returned to the donor as soon as practicable but no later than the next
reporting due date as described in paragraph (c) of this section.
(2) Late filing of required documents and reports. If a report is
filed after the due date, the employee beneficiary forfeits the ability
to accept contributions or distributions through the trust until the
report is filed.
Example 1 to paragraph (h)(2): A Department of Labor employee
establishes a legal expense fund in accordance with this subpart.
Because the employee filed the trust document on February 15, the first
quarterly report is due on April 30. However, the employee did not
submit the first quarterly report until May 15. The employee is
prohibited from accepting contributions or distributions through the
trust from May 1 until May 15. Once the employee files the quarterly
report, the employee may resume accepting contributions and
distributions.
(3) Continuing or other significant noncompliance. In addition to
the remedies in paragraphs (h)(1) and (2) of this section, the Office
of Government Ethics has the authority to determine that an employee
beneficiary may not accept contributions and distributions through the
trust if there is continuing or other significant noncompliance with
this subpart.
Sec. 2635.1008 Termination of a legal expense fund.
(a) Cause. A legal expense fund may only be terminated for the
following reasons:
(1) The purpose of the trust is fulfilled or no longer exists; or
(2) At the direction of the employee beneficiary.
(b) Excess funds. Within 90 calendar days of termination of the
legal expense fund, the trustee must distribute any excess funds to an
organization or organizations described in section 501(c)(3) of the
Internal Revenue Code and exempt from taxation under section 501(a) of
the Internal Revenue Code. Funds from the legal expense fund may not be
donated to an organization that was established by the employee
beneficiary, an organization in which the employee beneficiary, their
spouse, or their child is an officer, director, or employee, or an
organization with which the employee has a covered relationship within
the meaning of Sec. 2635.502(b)(1). The trustee has sole discretion to
select the 501(c)(3) organization.
(c) Trust termination report. After the trust is terminated, the
employee beneficiary must file a trust termination report that contains
the information required by Sec. 2635.1007(d) for the period of the
last quarter report through the trust termination date. The report also
must indicate the organization to which the excess funds were donated.
The report is due 30 calendar days following the termination date of
the trust.
(d) Exception for anonymous whistleblowers. An employee beneficiary
who is an anonymous whistleblower may choose to file the trust
termination report anonymously through the employee beneficiary's
trustee or representative with the Office of Government Ethics.
Sec. 2635.1009 Pro bono legal services.
(a) Acceptance of permissible pro bono legal services. An employee
may solicit or accept the provision of pro bono legal services for
legal matters arising in connection with the employee's past or current
official position, the employee's prior position on a campaign, or the
employee's prior position on a Presidential Transition Team from:
(1) Any individual who is not:
(i) An agent of a foreign government as defined in 5 U.S.C.
7342(a)(2);
(ii) A lobbyist as defined by 2 U.S.C. 1602(10) who is currently
registered pursuant to 2 U.S.C. 1603(a); or
(2) A person who does not have interests that may be substantially
affected by the performance or nonperformance of an employee's official
duties.
Note 1 to paragraph (a): Pursuant to Sec. 2634.907(g) of this
chapter, an employee beneficiary who is a public or confidential filer
under part 2634 of this chapter must report gifts of pro bono legal
services on the employee's financial disclosure report, subject to
applicable thresholds and exclusions.
(b) Role of agency ethics official. An employee must confer with an
agency ethics official to seek a determination as to whether the legal
services are from a prohibited pro bono legal services provider before
accepting the pro bono legal services.
Example 1 to paragraph (b): A Department of Justice employee is an
eyewitness in an Inspector General investigation and is called to
testify before Congress. A local law firm offers to represent the
employee at no cost. The employee consults with an agency ethics
official, who determines that the attorney who would represent the
employee is neither an agent of a foreign government nor a lobbyist.
However, the law firm is representing a party in a case to which the
employee is assigned. The ethics official determines that the law firm
is a person who has interests that may be substantially affected by the
performance or nonperformance of the employee's official duties.
Accordingly, the employee may not accept the offer of pro bono legal
services from the law firm.
Example 2 to paragraph (b): A Securities and Exchange Commission
employee is sexually harassed by a supervisor and files a complaint. A
nonprofit legal aid organization focusing on sexual harassment cases
offers pro bono legal services to the employee at no cost. The employee
consults with an agency ethics official, who determines that the
attorney who would represent the employee is neither an agent of a
foreign government nor a lobbyist, and neither the attorney nor the
nonprofit legal aid organization has interests that may be
substantially affected by the performance or nonperformance of the
employee's official duties. Accordingly, the employee may accept the
offer of pro bono legal services from the nonprofit legal aid
organization.
Example 3 to paragraph (b): A Department of State employee is asked
to testify in a legal proceeding relating to a prior position at the
Department of Justice. An attorney at a large national law firm offers
pro bono services to the employee. The employee confers with an agency
ethics official who determines that although the attorney offering
representation is neither an agent of a foreign government nor a
lobbyist, the law firm is currently registered pursuant to 2 U.S.C.
1603(a) and has business before other parts of the Department of State.
However, neither the attorney nor the law firm has interests that may
be substantially affected by the performance or nonperformance of the
employee's official duties. Accordingly, the employee may accept the
offer of pro bono legal services.
[FR Doc. 2022-08130 Filed 4-20-22; 8:45 am]
BILLING CODE 6345-03-P
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</html>Indexed from Federal Register on April 21, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.