POGO's comments on Criminal Conflict of Interest Statutes
Office of Government Ethics
Attn: Mr. Stuart D. Rick, Deputy Counsel
1201 New York Avenue, N.W., Suite 500
Washington, D.C. 20005-3917
RE: Criminal Conflict of Interest Statutes
Dear Mr. Rick:
The Project On Government Oversight (POGO) provides the following public comment to the Office of Government Ethics' (OGE) "Review of Criminal Conflict of Interest Statutes; Opportunity for Comment" notice published at 70 Federal Register 22661 (May 2, 2005). POGO investigates, exposes, and seeks to remedy systemic abuses of power, mismanagement, and subservience by the federal government to powerful special interests.
OGE's Federal Register notice states that "Section 8403(d) of the Intelligence Reform and Terrorism Prevention Act of 2004, Public Law 108-458 (December 17, 2004), directs the Office of Government Ethics, in consultation with the Department of Justice, to conduct a comprehensive review of the conflict of interest laws relating to executive branch employment." OGE's review will conclude after it submits a report to the President and pertinent congressional committees by December 17, 2005.
To assist in its review, OGE is seeking the views of the public and federal agencies concerning the need for improvements to the criminal conflict of interest statutes, including 18 U.S.C. §§ 203 (Compensation to Members of Congress, officers, and others in matters affecting the Government), 205 (Activities of officers and employees in claims against and other matters affecting the Government), 207 (Restrictions on former officers, employees, and elected officials of the executive and legislative branches), and 208 (Acts affecting a personal financial interest). 1
POGO’s Conflict of Interest Report
On June 29, 2004, POGO released an investigative report “The Politics of Contracting” -- which is included as an appendix to this public comment. (Appendix A). The report highlighted the frequency of the revolving door practice and how current and former public servants could possibly use their positions for private gain or allow powerful private corporations to unfairly tilt the system in their favor. For instance, since 2003, there has been extensive media coverage involving Pentagon official Darleen Druyun who landed a high-level position with defense contractor Boeing after currying favor with the company through contracting decisions. At the time of her hiring in early 2003, POGO called Druyun’s move to Boeing the worst case of the revolving door in recent memory. Yet, her new position received little attention from the media or policymakers, demonstrating a resounding lack of concern for the real and perceived abuses by federal officials going through the revolving door to the private sector. It was not until Senator John McCain (R-AZ) obtained documents about the Boeing tanker lease that Druyun’s hiring drew any criticism.
Weak conflict of interest laws create six critical problems:
1. It provides a vehicle for public servants to use their office for personal or private gain at the expense of the American taxpayer;
2. It creates an opportunity for government officials to be lenient toward or to favor prospective employers;
3. It creates an opportunity for government officials to be lenient toward or to favor former private sector employers, which the government official now regulates or oversees;
4. It sometimes provides the contractor with an unfair advantage over its competitors due to insider knowledge that can be used to the benefit of the contractor, but to the detriment of the public; 2
5. It has resulted in a highly complex framework of ethics and conflict of interest regulations. Enforcing these regulations has become a virtual industry within the government, costing significant resources, but rarely, as the record shows, resulting in sanctions or convictions of those accused of violating the rules; and
6. The appearance of impropriety has two significant negative implications. First, it exacerbates public distrust in government, ultimately resulting in a decline in civic participation. Second, the vast majority of career civil servants do not use their government jobs as stepping-stones to high paying jobs with government contractors, and it demoralizes them to see their supervisors and co-workers do so.
In order to more fully understand the revolving door and political influence that the federal government's top contractors exert over decision-making, POGO examined the 2002 fiscal year top 20 federal government contractors from January 1997 through May 2004. In FY 2002, those top 20 contractors received over 40% of the $244 billion in total contracts awarded by the federal government. For each of those contractors, POGO's investigation documented campaign contributions, lobbying expenditures, government contract awards, and examples of federal officials moving through the revolving door to those companies. POGO's report provides individual profiles of each company. The primary findings include:
- By examining corporate press releases and filings, POGO identified 291 instances involving 224 high-ranking government officials who shifted into the private sector to serve as lobbyists, board members or executives of the contractors. POGO found that at least one-third of the high-ranking former government employees who went to work for or to serve on the board of a government contractor were in agency positions allowing them to influence government contracting decisions. Generally, revolving door laws do not apply to the most senior policymakers who ultimately have the most power in shaping programs and policies that benefit contractors.
- At least two-thirds of the former Members of Congress who are lobbying or have lobbied for the top 20 government contractors served on Authorization or Appropriations Committees that approved programs or funds for their future employer or client while they served in Congress. Those committees included: Armed Services, Appropriations, Intelligence, Ways and Means, and Commerce. Since 1997, Lockheed Martin – the contractor receiving the most federal award dollars – has hired twice as many former Members of Congress than the next closest contractor.
- In the last three completed election cycles and the current cycle (as of December 2003), the top 20 contractors, and their employees, made $46 million in campaign contributions and spent almost $400 million on lobbying. Their political expenditures have helped to fuel $560 billion in federal contracts. Since 1997, the contractors have spent (on average) 8 cents on campaign contributions and lobbying expenditures for every $100 they have received from the federal government in contract awards. Of course, not all money spent on lobbying and political contributions can be directly tied to government contracts.
- In FY 2003, out of nearly 23,000 white-collar crime or official corruption cases prosecuted by the Department of Justice, only 12 (0.5%) involved revolving door allegations and only two revolving door cases resulted in convictions.
- Previously, the Department of Defense (DoD) kept statistics of former civilian and military employees hired by private contractors. In 1996, however, revolving door laws were "simplified" and, as a result, ending any illusion of transparency of DoD's revolving door.
After interviewing government officials and reviewing conflict of interest and ethics statutes, POGO concluded that federal conflict of interest and ethics laws are a tangled mess. Government employees struggle with a decentralized system of ethics laws and regulations – a multiple-layer system so convoluted that ethics officers and specially trained lawyers hired to enforce them have pushed for a more simplified system.
POGO's report included the following recommendations:
1. Simplify the complex system of laws, Executive Branch regulations, department and agency regulations, executive orders, and agency directives that add ambiguity to government ethics laws. Repeal the multi-tiered system of laws and regulations and incorporate required provisions in a clear and consistent model rule of ethical conduct for the entire federal government.
2. Prohibit, for a specified period of time, political appointees and Senior Executive Service (SES) policymakers (people who develop rules and determine requirements) from being able to seek employment from contractors who significantly benefited from the policies formulated by the government employee.
3. Require government officials to enter into a binding revolving door exit plan that sets forth the programs and projects from which the former employee is banned from working. Like financial disclosure statements, these reports should be filed with the Office of Government Ethics and available to the public. This requirement would benefit government employees who are unaware of or confused by post-government restrictions or who have multiple post-employment bans covering different time periods. It would also enhance public trust in the government.
4. Require recently retired government officials and their new employers to file revolving door reports attesting that the former government employee has complied with his or her revolving door exit plan.
5. Prohibit government employees from overseeing or regulating their former private sector employer.
6. Close the loophole that allows former government employees to work for a department or division of a contractor different from the division or department that they oversaw as a government employee.
7. Establish an Executive Branch-wide law for federal government employees, requiring notification of recusal or disqualification to a supervisor.
8. The Office of Government Ethics should provide enhanced oversight of private sector employees who enter public service. Those types of revolving door cases should receive enhanced oversight because government officials may be placed in positions in which they regulate or oversee programs and policies that may affect their private employer.
9. Remove or modify conflict of interest and Freedom of Information Act exemption and waiver provisions for advisory board members and ensure that unclassified portions of board meeting minutes are publicly available.
10. Enact Executive Branch-wide law requiring federal advisory committee members to recuse or disqualify themselves from any discussion on matters where they or their private employer or client have a significant financial interest. This disclosure or recusal statement, including name, title and employer should be filed with the Office of Government Ethics and made publicly available.
11. Increase the one-year ban on lobbying for Members of Congress and their senior staffers who have a nexus between authorizations or appropriations authority over their post-government employer.
12. Paid contractor consultants should be required to register with the Office of Government Ethics. Many former government employees are hired to promote a contractor's agenda and the current system does not prove any transparency of those actions.
Criminal Conflict of Interest Laws
Each [executive branch] employee has a responsibility to the United States Government and its citizens to place loyalty to the Constitution, laws and ethical principles above private gain. To ensure that every citizen can have complete confidence in the integrity of the Federal Government, each employee shall respect and adhere to the principles of ethical conduct set forth in this section, as well as the implementing standards contained in this part and in supplemental agency regulations. 3
While a worthy goal, the "basic obligation of public service" stated above is undermined by the frequency of government employees leaving to work for federal contractors. Government employees often go to work for federal contractors or leave those contractors to work for the government in positions where they oversee or regulate their future or former employer. This practice, known as the revolving door, is not a new phenomenon. On May 8, 1965, President Lyndon B. Johnson issued Executive Order (E.O.) 11,222, which instructed agencies to establish "standards of ethical conduct for government officers and employees."4 The purpose of this and other conflict of interest and ethics laws was to protect the integrity of the government's system of buying goods and services from contractors. President Johnson stated "every citizen is entitled to have complete confidence in the integrity of his [or her] government." 5
One example of the detriments of special interests driving public policy is illustrated in the recent Boeing tanker lease case. An internal e-mail shows the power wielded by government contractors. (Appendix B). Boeing's Vice President of Aircraft & Missiles Programs, Andrew Ellis, sent an e-mail to the President and Chief Executive Officer of the Integrated Defense Systems, Jim Albaugh, which stated that the company was using its paid consultants Donald Fogleman and David E. Jeremiah, who also sit on the Pentagon's Defense Policy Board, to "engag[e] in osd [Office of the Secretary of Defense] circles." The e-mail also stated that Boeing officials had met with Dr. William Schneider, the Chairman of the Defense Science Board, who Ellis believed was supporting the tanker deal and lobbying for it in the Office of the Secretary of Defense.
The e-mail concluded that Boeing had "ghost" authored several published editorial commentaries, including one from Admiral Archie Clemins, a paid Boeing consultant and the former Commander-in-Chief of the U.S. Pacific Fleet, in which Clemins supported the Air Forces' plan to lease 100 tankers from Boeing. In November 2003, Defense News published an editorial regarding Clemins' commentary, stating: "We failed to do some things we should have done. We should asked Clemins if he had a financial relationship with the program or the contractor. We should have asked if he had, in fact, written the article himself. And we should have weighed his answers in our thinking, because that information is essential to the context of his article." This example highlights the sources used by contractors to win government money and the weight that former senior government employees are afforded when they promote or oppose government projects or policies.
American taxpayers have witnessed a series of mega-mergers that have transformed large government contractors into a small universe of formidable lobbying and influence-peddling machines. The politics of contracting have become so pervasive and entrenched, even Congress is rarely able to stem its power. Additionally, relaxed federal contracting laws and regulations, and frequently inadequate oversight of the entire contracting system, have added to federal contractors' influence over the way the U.S. government (the largest consumer in the world) buys goods and services and creates public policy. In particular, many unneeded or ill-conceived weapons systems are purchased and sweetheart deals are made because of conflicts of interest that have become endemic to the system. POGO avers that the criminal conflict of interest laws require simplification, clarification, and strengthening to prevent special interests from improperly influencing public policy.
1. 18 U.S.C. § 203 -- Compensation to Members of Congress, officers, and others in matters affecting the Government. Prohibits federal employees, including special government employees from acting as a compensated representative for private entities before an agency or court of the executive or judicial branches of government. Violations are subject to the penalties under 18 U.S.C. § 216.
18 U.S.C. § 205 -- Activities of officers and employees in claims against and other matters affecting the Government. Prohibits federal employees, including special government employees from acting as an uncompensated representative for private entities before an agency or court of the executive or judicial branches of government. Violations are subject to the penalties under 18 U.S.C. § 216.
18 U.S.C. § 207 -- Restrictions on former officers, employees, and elected officials of the executive and legislative branches. Provides a permanent, two-year, or one-year "cooling off" period from "representational activities" by former Executive Branch officials, Members of Congress, senior congressional staffers, and others. Former government officials are not limited in going to work for a private contractor, but are limited in the type of work they can perform for them. Violations are subject to the penalties under 18 U.S.C. § 216.
18 U.S.C. § 208 -- Acts affecting a personal financial interest. Generally, an executive branch or independent agency employee cannot participate in matters that affect his/her financial interests, as well as the financial interests of his/her spouse, minor children, partnerships, any organization in which he/she serves as an officer, director, trustee, or employee, or an entity that he/she is negotiating or with which he/she has an arrangement concerning prospective employment. Violations are subject to the penalties under 18 U.S.C. § 216.
2. An unfair advantage can extend beyond the narrow legal definition in 48 C.F.R. § 9.505(b) (2004), which states:
[A]n unfair competitive advantage exists where a contractor competing for award for any Federal contract possesses --
(1) Proprietary information that was obtained from a Government official without proper authorization; or
(2) Source selection information (as defined in 2.101) that is relevant to the contract but is not available to all competitors, and such information would assist that contractor in obtaining the contract.