H.R. 1 and Executive Branch Conflicts of Interest

I want to thank Chairman Cummings, Ranking Member Jordan, and the Committee for asking the Project On Government Oversight (POGO) to testify about executive branch ethics. I am Scott Amey, POGO’s General Counsel. POGO is a nonpartisan independent watchdog that investigates and exposes waste, corruption, abuse of power, and when the government fails to serve the public or silences those who report wrongdoing. We champion reforms to achieve a more effective, ethical, and accountable federal government that safeguards constitutional principles. POGO strives above all else to be fair and accurate in our investigations and reporting. We are diligent in our research. We give credit where credit is due and hold those to account who need to be held accountable—without regard to party.

While some Members of Congress and some in the public might think H.R. 1, the For the People Act of 2019,¹ is solely aimed at President Trump and his Administration—and there are some bills drafted in the 115^th and 116^th Congresses with that purpose in mind—H.R. 1 is not such a bill. In fact, it addresses some problems that many good government groups have assembled for over a decade to correct, problems created by the revolving door and the unlevel playing field that have long existed. Organizations have worked for many years to strengthen ethics and conflict-of-interest standards, including badgering the ethics czar in the Obama Administration.

Those efforts began long before any candidate won the parties’ nominations in the 2016 campaign. We have worked tirelessly to revise the appointee ethics pledge, and we handed over our suggested reforms to both the Trump and Clinton campaigns and transition teams. I along with two colleagues had the privilege of meeting with an official from President Trump’s transition team in October 2016 to discuss our proposals and President Trump’s “drain the swamp” campaign promise. We also supported then-candidate Trump’s five-point ethics reform plan to expand lobbying bans on executive and legislative branch officials, expand the definition of lobbyists to include consultants and advisors, permanently ban senior executive branch officials from lobbying for foreign governments, and prevent “registered foreign lobbyists from raising money in American elections.”²

This Committee did not sit idle. On January 31, 2017, Chairman Jason Chaffetz and Ranking Member Elijah Cummings convened a gathering of Members and government watchdogs to discuss ethics concerns plaguing the federal government. Many groups in attendance followed up with Committee staff. POGO followed up with meetings and sent a letter to Chairman Chaffetz and Ranking Member Cummings with our thoughts on reauthorizing and improving the Office of Government Ethics (OGE).³ H.R. 1 is an opportunity to make good on the previous work this Committee has performed and to reform the ethics system to meet old and emerging challenges.

There has not been a shortage of ethics concerns over the last decade. We have all read government reports, criminal indictments, and media accounts involving bribery,⁴ illegal foreign lobbying,⁵ illegal gifts,⁶ personal financial conflicts of interest,⁷ misuse of one’s government position or government property,⁸ the constantly spinning revolving door,⁹ lack of impartiality,¹⁰ and abuse of authority.¹¹ Everyone is now aware of something called an emolument,¹² although its precise definition is subject to intense debate and litigation.¹³

H.R. 1 is a comprehensive reform bill aimed at closing gaps in ethics and conflict-of-interest standards, and at reforming election and campaign finance processes. My testimony today will provide insights into the bill, focusing on the ethics reforms for the executive branch contained in Title VIII.¹⁴ In addition, I will provide supplementary thoughts on common-sense ethics solutions to long-standing problems that are missing from the bill—reforms to the revolving door that many good government groups have promoted for years.

As the government has increased its reliance on the private sector for goods and services, the revolving door has become an accepted occurrence, with people coming and going between public service and private industry. In a recent study of the revolving door spinning to the defense industry, POGO found:

1. In 2018, there were 645 instances of the top 20 defense contractors hiring former senior government officials, military officers, Members of Congress, and senior legislative staff as lobbyists, board members, or senior executives.¹⁵ Since some lobbyists work for multiple defense contractors, there are more instances than officials.
2. Of those instances, nearly 90 percent became registered lobbyists, where the operational skill is influence-peddling.
3. At least 380 high-ranking Department of Defense officials and military officers shifted into the private sector to become lobbyists, board members, executives, or consultants for defense contractors.
4. Of those Department of Defense officials, a quarter of them (95) went to work at the Department of Defense’s top 5 contractors (Lockheed Martin, Boeing, General Dynamics, Raytheon, and Northrop Grumman).¹⁶

The most significant takeaway from POGO’s study is that the vast majority of the high-ranking military officials who revolve through the door to the defense industry they once oversaw or dealt with are not being lured to the private sector because of their knowledge and experience with programs. Instead, they are jumping ship to go lobby their former colleagues and to provide their new employer or clients with access to information and government officials.

The revolving door is not unique to the Pentagon. In fact, the integrity of decisions, missions, programs, and spending throughout the government is at risk because they are being steered by individuals or companies that:

1. have a personal or private interest in the outcomes;
2. are lenient toward or favor past or future employers or industries; and
3. have an unfair advantage over competitors, which could be used to the detriment of the public.

The revolving door and the tainted influence-peddling that it creates have resulted in intensified “public distrust in government” and in questions about who the government serves,¹⁷ “a decline in civic participation,” and low morale within government circles.¹⁸

For years, POGO has advocated for stronger policies to ensure that high-level government officials going through the revolving door do so in a way that protects government policies from undue industry influence. H.R. 1 would help slow the revolving door, including the cycling of procurement officials leaving government service to work for companies they might have been doing business with. For instance, the bill would prohibit “golden parachute” incentive payments from non-government sources to former employees entering government service. It would also codify ethics restrictions created by executive orders since 1993 governing appointees.¹⁹ These reforms are common-sense steps that will help ensure that those serving in the government are doing so with the public, not their own wallets, in mind.

We have witnessed through the years that ethics enforcement is weak and inconsistent across agencies.²⁰ Acting in part on long-standing recommendations from civil society, H.R. 1 would also strengthen the OGE, giving the OGE director final approval over any executive branch recusals, exemptions, or waivers from ethics laws or regulations, and requiring those recusals, exemptions, or waivers to be publicly posted on OGE’s website. This centralization of authority ensures consistent application of ethics rules and the exceptions to them, and greatly increases transparency. The bill would also give OGE improved investigatory powers over possible violations of ethics laws, and the authority to issue administrative remedies when an ethics violation has occurred, increasing the likelihood that those who violate ethics laws will be held accountable. Finally, the bill would limit any president’s ability to remove the OGE director to instances where there is cause for firing, allowing the director to truly serve independently and ensuring continuity after elections, which should provide more independence to this vital government position.

Not only does H.R. 1 address long-standing executive branch ethics concerns, it also addresses deficiencies in the Foreign Agents Registration Act (FARA). FARA requires all American citizens working to influence U.S. policy on behalf of foreign governments or political parties to register with the Department of Justice and report information about those lobbying efforts. However, a POGO investigation in 2014 found routine failures to follow the law and systemic non-prosecution by the Justice Department.²¹ H.R. 1 would give the Department the authority to levy civil fines to punish offenders who do not properly comply with the law, providing an effective enforcement mechanism between civil injunctions and criminal charges that would help end the Department’s reliance on voluntary compliance.

The government isn’t alone in the ethics game. Companies in the private sector require conflict-of-interest reviews and non-disclosure and non-compete agreements to protect their knowledge base, intellectual property, and bottom lines, all in an effort to best serve their stakeholders.²² The federal government’s ethics system similarly needs to protect its stakeholders, the American public. H.R. 1 was created to do that by mending cracks in the current ethics system, and sometimes adjust for conflicts of interest that were not envisioned. Provisions in Title VIII achieve that mission, although some of those provisions should be amended to better serve their purpose.

1. Section 8002 amends 18 U.S.C. § 209, the supplementation of salary ban. The provision would redefine salary to include bonuses, infamously known as “golden parachutes,” that companies pay employees contingent on their accepting a government job. Payouts for entering public service have concerned Congress for years. In 2013, Senate Finance Committee members questioned Jack Lew, President Obama’s pick to run the Treasury Department, about his severance package from Citigroup for returning to public service.²³ POGO supports the amended language, which would prohibit former executives from receiving a financial payout for going into government service. While serving the public should be applauded, a financial windfall for doing so should not be considered equal to a “bona fide” pension, bonus, or other established benefit plan under the law.²⁴ In addition, “severance payments” should be included on the list of bonuses that are not considered “bona fide.”²⁵

2. Section 8003 amends certain definitions in Section 601 of the Ethics in Government Act of 1978.²⁶ Congress should amend Section 602, which prohibits a covered employee from using his or her official position “to participate in a particular matter in which the covered employee knows a former employer or former client of the covered employee has a financial interest,” to apply when a covered employee “knows or reasonably should know…,” a change that would match existing language at 18 U.S.C. § 207(a)(2)(B). I would also urge Congress to include OGE in Section 602’s provision on the publication of waivers by agencies, requiring OGE to collect the waivers and publish them on its website in the same place it publishes ethics agreements, financial disclosure forms, and compliance records.²⁷

3. Section 8004 strikes the exemption in the Procurement Integrity Act that allows acquisition and program officials to accept “compensation from a division or affiliate of a contractor that does not produce the same or similar products or services as the entity of the contractor that is responsible for the contract[.]”²⁸ POGO fully supports this amendment. The current law’s weak distinction permits the covered officials to leave the government to go work for companies they contracted with or oversaw in their government positions. As a result, former officials are allowed to leverage their relationship with the contractor for future employment, calling into question the decisions they made while in government service, and are allowed access to former colleagues, which can create an unfair competitive advantage.²⁹ As we witnessed in the Darleen Druyun case, it is absurd to allow an acquisition official to go work for a company in, say, its missile division but prohibit her from going to the aircraft division.³⁰ Darleen Druyun was appointed deputy general manager for missile defense systems at Boeing soon after she awarded Boeing a large aircraft refueling contract. Existing laws allowed her to accept that job. Druyun eventually pleaded guilty to a separate ethics violation and served nine months in federal prison.³¹

We also support the addition of 41 U.S.C. § 2108, creating a two-year ban on a government official awarding or administering a contract to a former employer. This common-sense amendment strengthens and extends the current one-year cooling-off period governing personal and business relationships.³² The Committee should clarify “administration of a contract awarded...” to include the “planning, creation, award, administration, and oversight of a contract.”

4. Section 8005 extends the representational and lobbying ban covering “certain senior personnel” who are governed by 18 U.S.C. § 207(c) from one year to two years. POGO supports this amendment. There are, however, a number of additional amendments that Congress should include in this bill. Specifically, 207(c) should require employees who leave federal agencies to wait at least two years before contacting their former agency on behalf of any individual or entity to discuss agency business, including regulations or rules, policymaking, federal funds, examinations, or enforcement matters.³³

Previous well-intentioned lobbying reforms have created a shadow influence industry of advisors, consultants, and trade-association chiefs who can peddle influence but are not required to register as lobbyists. To address this problem at the Department of Defense, Congress recently legislated a ban prohibiting “behind the scenes” activities³⁴ that should be extended government-wide.³⁵ Congress should also require departing federal employees to wait at least two years before taking a job with any entity that had business before the agency within a year prior to their departure. POGO also urges Congress to amend H.R. 1 to include a prohibition on political appointees and Senior Executive Service policymakers (people who develop rules and determine program requirements) seeking employment for a period of two years from companies materially impacted by—including financially benefiting from—the policies they helped draft. The term “materially benefiting” would include obtaining a direct and predictable economic, financial, business, or competitive advantage or right.

5. Subtitle B—Presidential Conflicts of Interest creates new ethics requirements for the president and vice president, which we support. Specifically, Section 8012 states that “[i]t is the sense of Congress that the president and the vice president should conduct themselves as if they were bound by section 208 of title 18, United States Code, by divesting conflicting assets…or by establishing a qualified blind trust[.]” While constitutional concerns have been raised about the application of certain conflict-of-interest laws to the President and Vice President,³⁶ this section strikes the right balance by asking those executives to “conduct themselves as if they were bound” by the personal financial conflict-of-interest law. This request follows decades of presidential precedents when it comes to such situations, and will help avoid real or apparent financial conflicts of interest.

6. Section 8022 implements standards for waivers granted under Executive Order 13770.³⁷ POGO supports the provision because the public has little information about waivers under the President’s order. We also urge Congress to provide more transparency of waivers, exemptions, and recusals granted under other ethics laws and regulations, including those under 18 U.S.C. §§ 207 and 208 and 5 CFR §§ 2635.502 and 2635.503.

7. Section 8033 amends the tenure of the OGE director. H.R. 1 limits the president’s ability to remove the director to only when there is just cause for removal. Traditionally, “just cause for removal” means only when there is “inefficiency, neglect of duty, or malfeasance in office.”³⁸ In recent years we have come to learn about OGE’s importance, whether in vetting presidential nominees or providing ethics training. In order to avoid potential impasses when ethics allegations involve White House staff, Cabinet-level officials, or agency officials, OGE needs to be insulated from political pressure rather than to be in the position of serving at the pleasure of the president. Yet a president also needs to be able to remove a director who engages in misconduct. Section 8033 appropriately balances the need for independence and the need for accountability. In addition to this, H.R. 1 should establish a line of succession in case the OGE director resigns or is terminated, which would help preserve the independence of the agency and avoid creating a lapdog who is trying to impress or appease senior leadership inside the White House.

8. Section 8034 authorizes mandatory education and training programs for designated ethics officials, which would help ensure consistent and fair application of ethics laws. Absent is the frequency with which those programs should be required. I would urge Congress to amend the current provision in H.R. 1 to require education and training programs every two years.

H.R. 1 also includes provisions that allow OGE to “investigate an allegation” and recommend “appropriate disciplinary action.” While POGO supports these provisions, OGE already has limited authority to take these actions.³⁹ H.R. 1 should expand that authority to ensure OGE has clear, independent authority to investigate complaints and to issue binding corrective and disciplinary actions when there are ethics violations in noncriminal cases. POGO also supports the provision granting OGE subpoena power for the production of information, documents, records, and other data, which is essential to properly investigating an ethics allegation. That power, in addition to OGE’s existing authority to receive comments from an official or employee and hold a hearing,⁴⁰ would assist OGE investigations into violations. Congress should require OGE to report the use of such authority to the president and Congress.

9. Section 8062 codifies the ethics pledge rules that started with the Clinton Administration and have continued through the Trump Administration.⁴¹ POGO supports making the pledge rules a law, because otherwise they exist only at the whim of each president. For instance, President Clinton revoked his pledge on is last day in office, thereby lifting the restrictions that prohibited conflicts of interest.⁴² Codifying the pledge would prevent a similar circumstance and add continuity within the ethics community, which has to adjust for changes in the ethics rules with each incoming Administration.

This provision, however, could go even further, building on other presidential executive orders that require ethics commitments by senior-level executive branch personnel. Although controversial at times, the ethics pledges have added and extended ethics restrictions to senior officials who often escape restrictions that exist in law and regulations for lower-level federal employees. Congress should codify President Trump’s executive order that requires a five-year limitation on former political appointees engaging in lobbying activities with respect to their former agency.⁴³ Congress also should ban former officials from lobbying any covered executive branch official or non-career Senior Executive Service appointee for the remainder of the Administration.⁴⁴

The section could also be strengthened by preventing officials at the end of their government tenure from accepting positions during the two years after the official leaves government when their decisions or policies directly and substantially benefited their potential new employers, partners, or clients. One such official this restriction would have applied to is Daniel B. Poneman, a former acting secretary of energy in the Obama Administration who left the Energy Department in the fall of 2014 and started working at Centrus Energy Corporation in March 2015. Centrus is in the enriched uranium industry—an industry that Poneman supported while in his senior government positions.⁴⁵

In 2016, POGO and other good government groups drafted ethics-pledge language restricting an incoming appointee’s financial conflicts of interest or acceptance of a position with an entity that directly and substantially benefited from the official’s decisions. We provided this draft language to both the Clinton and Trump campaigns and transition teams in 2016. Congress should add the following language to Section 8062:

3. Revolving Door Ban—All Appointees Leaving Government.

(a) If, upon my departure from the Government, I am covered by 207(c) of title 18, United States Code, I will abide by post-government restrictions on communications to or appearances before my former executive agency as set forth in section 207(c) of title 18, United States Code, for a period of 2 years. Additionally, I will do the same with respect to such communications to or appearances before the Executive Office of the President.

(b) I will not for a period of 2 years from the end of my appointment accept employment from, or representation of, any party that materially benefited from a particular matter involving specific parties, or from a particular matter benefiting a single source, in which I personally and substantially participated. I agree that my Stop Trading On Congressional Knowledge (STOCK) Act notifications and recusals will be made publicly available upon my leaving government service.

(c) Upon my departure from the Government I will not have any communications with or appearances before any executive branch agency, including the Executive Office of the President, regarding a particular matter involving specific parties on which I worked and I, my current employer, my current client, or a member of my household have a financial interest.

Finally, Section 8062 should require that all records related to the codified ethics pledge, including any recusals, waivers, or exemptions to that pledge, be publicly posted by OGE with other ethics records (ethics agreements, financial disclosure reports, certificates of divestiture, and certification compliance forms).

The following are additional recommendations that Congress should pass to make the government more ethical and to help restore the public’s faith in government.

1. Promoting Ethics and Addressing Corruption

• Create a government-wide database of senior officials who go through the revolving door. Ten years ago, Congress required the Department of Defense (DoD) to create a system for officials to obtain “a written opinion regarding the applicability of post-employment restrictions to activities that the official or former official may undertake on behalf of a contractor.”⁴⁶ That law also required DoD to store those opinions in a database to ensure compliance. Congress should amend H.R. 1 to create a similar system for civilian agencies. Congress should also expand the coverage to include covered officials who are involved in the planning, creation, awarding, administration, and oversight of a contract or grant. POGO has urged DoD to make its database public since March 2009.⁴⁷ As a fervent believer in the aphorism “sunshine is the best disinfectant,” we recommend that Congress make the civilian database public. Taxpayers have a right to know when former senior officials seek employment with those they were doing government business with.

• Require the Justice Department’s Office of Professional Responsibility to report findings of intentional misconduct or reckless disregard. Through Freedom of Information Act requests, POGO learned the Justice Department’s Office of Professional Responsibility (OPR) documented more than 650 instances from 2002 to 2013 of federal prosecutors and other Justice Department employees violating rules, laws, or ethical standards that governed their work. Because the Department of Justice does not generally make the names of those officials public, the Department is largely insulated from meaningful public scrutiny and accountability.⁴⁸ Congress should require OPR to notify both the relevant state bar authorities and the House and Senate Judiciary Committees about any findings of intentional misconduct or reckless disregard by Justice Department attorneys. Further, Congress should give the Justice Department’s Inspector General explicit authority to investigate allegations of misconduct throughout the agency, including those against attorneys, an authority that other agency inspectors general already have.

• Improve transparency of Foreign Corrupt Practices Act (FCPA) enforcement. Congress should establish a centralized public repository of information about open and pending investigations and cases in order to make the United States’ efforts to combat international bribery more effective. Additionally, when a company reports possible FCPA violations to the Department of Justice and/or the Securities and Exchange Commission (SEC) and either agency decides against bringing an enforcement action, Congress should require the public disclosure of the facts that the company reported and the reasons enforcement action was not taken. Either the Justice Department or the SEC should also be required to report statistics regarding instances when the United States government seeks help from, or provides help to, other countries in foreign bribery cases.⁴⁹

• Improving foreign-influence transparency. POGO applauds the inclusion of reforms to the Foreign Agents Registration Act (FARA) in H.R. 1. Since 2014, POGO has recommended incorporating civil fines into the statute to give the Department of Justice a middle-of-the-road enforcement mechanism to punish offenders who do not properly label their FARA filings, who file late, who don’t file if they should have, or who do not register if they should have. We support the provision in H.R. 1 that creates a dedicated enforcement unit. We believe this change will significantly boost the compliance by foreign agents and public access to FARA disclosures the law is supposed to afford.
  
  However, more can be done to clarify registration and reporting requirements under the law. For example, a lack of Departmental guidance or definitions for terms like “principal beneficiary” has left many wondering exactly what triggers a registration requirement. POGO recommends that FARA be amended to eliminate a confusing exemption that allows those representing foreign companies to register under the far less strict domestic lobbying law, the Lobbying Disclosure Act. Foreign governmental and commercial interests are not always as distinct from one another as they are in the United States, and this exemption has frequently been misunderstood and exploited.

• Require disclosure of “beneficial owners” of corporations and limited liability companies. Congress should require persons who form corporations and limited liability companies in states where they are not required to disclose the beneficial owner of that entity to disclose that information to the federal government. The Federal Awardee Performance and Integrity Information System collects information involving corporate relationships, the highest and immediate owners, predecessors, and subsidiaries.⁵⁰ Missing, however, is information about owners who have an interest in the benefits of an entity, but are not on record as owners. Beneficial owners can lurk in the shadows, but can create conflicts of interest that should be known.⁵¹

• Require nominees to disclose when someone with a financial interest in a nomination helps with the process. Individuals, known as “Sherpas,” guide presidential nominees through the confirmation process and gain access to senior officials and information. While these Sherpas are sometimes government officials, they can be government outsiders, where existing conflict-of-interest laws do not apply.⁵² The risk is that these individuals can use the access and information for personal or private gain. Congress should ensure that nominees publicly disclose any material benefit they received throughout their confirmation process from any individual who currently has or had in the past year employers or clients with financial interests involving the nominee’s agency.

• Require clear limits to employment for departing government officials. Congress should require government officials to enter into a written, 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 made available to the public.

When it comes to government ethics, the one thing that everyone can agree on, no matter who is in the White House or controlling Congress, is that the system is complex. In 2004, POGO called the revolving door laws and regulations a “spaghetti bowl.”⁵³ Add in numerous other ethics and conflict-of-interest laws, government-wide and agency-specific regulations, ethics pledges,⁵⁴ and commitments made to Senate committees during nomination hearings, and you have a spaghetti trough.⁵⁵ Different ethics laws and regulations apply to the president and vice president, appointees, senior and very senior officials, government employees, agency procurement officers, Justice Department lawyers, and government scientists. The intertwined criminal and civil laws have been smashed together from the Constitution; codification of bribery; graft; and conflict-of-interest laws in 1962⁵⁶; the Ethics in Government Act of 1978; and defense authorization acts, to name just a few.⁵⁷

While complex, that system is necessary for the government to represent and serve the people rather than a few or the well-connected. On May 8, 1965, President Lyndon B. Johnson issued Executive Order 11222, which instructed agencies to establish “standards of ethical conduct for government officers and employees.”⁵⁸ President Johnson wrote that “[w]here government is based on the consent of the governed, every citizen is entitled to have complete confidence in the integrity of his government. Each individual officer, employee, or adviser of government must help to earn and must honor that trust by his own integrity and conduct in all official actions.”⁵⁹

As a result, the government created an ethics system that is designed to prevent, expose, and resolve any ethics violations, and punish, if necessary, any public servant who violates the public trust for personal or private gain. President Johnson’s order became the foundation for the basic obligations of public service, which state the general principle that:

Each 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.⁶⁰

Even the Federal Acquisition Regulation affirms the need for government contracting decisions to be “above reproach”:

Government business shall be conducted in a manner above reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none. Transactions relating to the expenditure of public funds require the highest degree of public trust and an impeccable standard of conduct. The general rule is to avoid strictly any conflict of interest or even the appearance of a conflict of interest in Government-contractor relationships. While many Federal laws and regulations place restrictions on the actions of Government personnel, their official conduct must, in addition, be such that they would have no reluctance to make a full public disclosure of their actions.⁶¹

Our support for Title VIII of the For the People Act of 2019 and the improvements that I have detailed for the Committee are common sense. Government ethics are important, and improving that system is vital. H.R. 1 is a step forward in reducing improper influence over government decisions, missions, programs, and spending that is often contrary to what is in the public’s interest.

Thank you for inviting me to testify today. I look forward to answering any questions from Committee Members and to working with the Committee to further explore how the federal ethics and conflict-of-interest system can be improved.

Appendix A

Ethics Rules Enacted by Presidents, 1993-2017

Appendix B

Prohibition on lobbying activities with respect to the Department of Defense by certain officers of the Armed Forces and civilian employees of the Department following separation from military service or employment with the Department. 

P.L. 115-91, § 1045 (2017)

Appendix C

Requirements for Senior Department of Defense Officials Seeking Employment with Defense Contractors 

P.L. 110-181, § 847 (2008)