[Federal Register Volume 62, Number 152 (Thursday, August 7, 1997)]
[Proposed Rules]
[Pages 42474-42478]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20851]


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DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

50 CFR Part 600

[Docket No. 970728182-7182-01; I.D. 071697A]
RIN 0648-AG16


Magnuson-Stevens Act Provisions; Financial Disclosure

AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and 
Atmospheric Administration (NOAA), Commerce.


[[Page 42475]]


ACTION: Proposed rule.

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SUMMARY: NMFS issues this proposed rule to revise the rules of conduct 
and financial disclosure regulations applicable to Regional Fishery 
Management Council (Council) nominees, appointees, and voting members. 
The proposed revisions would implement a provision of the Magnuson-
Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) 
that was amended by the Sustainable Fisheries Act (SFA) in 1996. The 
new provision prohibits Council members from voting on matters that 
would have a significant and predictable effect on a financial interest 
disclosed in accordance with existing regulations. The recusal 
requirement will not become effective until the Secretary of Commerce 
(Secretary) promulgates final regulations, which is scheduled to occur 
by October 11, 1997.

DATES: Comments must be received by September 8, 1997.

ADDRESSES: Comments should be sent to Dr. Gary C. Matlock, F/SF, NMFS, 
1315 East-West Highway, Silver Spring, MD 20910. Comments regarding the 
collection-of-information requirement contained in this rule should be 
sent to the above address and to the Office of Information and 
Regulatory Affairs, Office of Management and Budget (OMB), Washington, 
DC 20503 (Attention: NOAA Desk Officer).

FOR FURTHER INFORMATION CONTACT: Margaret Frailey Hayes, Assistant 
General Counsel for Fisheries, NOAA Office of General Counsel, 301-713-
2231.

SUPPLEMENTARY INFORMATION:

Background

    In the 1986 amendments to the Magnuson Fishery Conservation and 
Management Act (Public Law 99-659), Congress created a requirement for 
voting members and Executive Directors of each Council to disclose any 
financial interest they held in the harvesting, processing, or 
marketing of fishery resources under the jurisdiction of their 
respective Council. The financial interests of the member included 
those held by that member, the spouse, minor child, or partner of the 
member, and any organization (other than the Council) in which the 
member was serving as an officer, director, trustee, partner, or 
employee. If they disclosed their financial interests as required by 
the statute, the amendments exempted Council members and Executive 
Directors from the provisions of 18 U.S.C. 208, which generally 
prohibit persons from making decisions on behalf of the Federal 
Government during their employment when a conflict of interest arises. 
If a member did not comply with the financial disclosure requirements, 
the prohibitions and penalties of 18 U.S.C. 208 would apply.
    Congress intended that Council members could have a direct 
financial interest in fisheries. Governors are required to nominate 
persons who are ``knowledgeable'' or ``experienced'' regarding the 
conservation and management or commercial or recreational harvest of 
the fishery resources within the jurisdiction of the Council (16 U.S.C. 
302(b)(2)(A)). Congress also believed, however, that the public has a 
right to know of any voting Council member's financial interests in 
fishery matters under the purview of a Council. Council members could, 
therefore, participate in matters of general public concern that were 
likely to have a direct and predictable effect on their financial 
interests in harvesting, processing, or marketing activities in a 
fishery if such interests were disclosed on the member's statement of 
financial interests. Even if their financial interests were reported, 
however, they could not participate in a particular matter primarily of 
individual concern, such as a contract, in which they had a financial 
interest under rules now codified at 50 CFR 600.225(b)(8)(i).
    On October 11, 1996, the President signed into law the SFA, which 
made numerous amendments to the Magnuson-Stevens Act (16 U.S.C. 1801 et 
seq.). This proposed rule would amend 50 CFR 600.225, Rules of Conduct, 
and 50 CFR 600.235, Financial Disclosure, to implement the SFA 
amendments to the Magnuson-Stevens Act concerning recusal of Council 
members from votes involving matters in which they have a financial 
interest.
    The proposed regulations would remove 50 CFR 600.225(b)(8)(ii), 
which prohibits a Council member from voting on any matter of general 
public concern that is likely to have a ``direct and predictable 
effect'' on a member's financial interest unless it has been disclosed. 
That language would be replaced with new Sec. 600.235(c), described 
below under ``Financial Disclosure.''
    The proposed rules would retain the first sentence in 50 CFR 
600.225(b)(8), which prohibits any Council member from participating in 
a ``particular matter primarily of individual concern'' in which he or 
she has a financial interest. Examples of such matters are contracts 
with the member's employer, grants to the member's academic 
institution, and management measures that affect only the member's 
business and a few other fishery participants.
    Section 302(j) of the Magnuson-Stevens Act requires the disclosure 
by ``affected individuals'' of financial interests in any harvesting, 
processing, or marketing activity that is being, or will be undertaken, 
within any fishery under the jurisdiction of the individual's Council. 
The financial interests include those of the affected individual's 
spouse, minor child, or partner, or any organization other than the 
Council in which the individual is serving as an officer, director, 
trustee, partner, or employee.
    The SFA defines ``affected individuals'' as persons nominated by a 
Governor, and voting members appointed by the Secretary of Commerce 
from among those nominees, under section 302(b)(2) of the Magnuson-
Stevens Act. The term also includes the Indian representative on the 
Pacific Council, if he or she is not subject to disclosure or recusal 
requirements under Indian tribal government laws.
    Voting members of Councils who are excluded from the definition are 
Regional Administrators of NMFS, and the principal state officials and 
designees named by Governors under section 302(b)(1) of the Magnuson-
Stevens Act. Council Executive Directors, who previously had been 
subject to the financial disclosure reporting requirements, are no 
longer ``affected individuals.''

Financial Disclosure

    The SFA's most significant revision to section 302(j) of the 
Magnuson-Stevens Act is the addition of a provision that prohibits an 
affected individual from voting on a Council decision that would have a 
significant and predictable effect on the affected individual's 
financial interests in harvesting, processing, or marketing activities. 
That effect exists if there is a close causal link between the Council 
decision and an ``expected and substantially disproportionate benefit'' 
to the financial interest of the affected individual relative to the 
financial interests of other participants in the same gear type or 
sector of the fishery.
    This rule would define ``expected and substantially 
disproportionate benefit'' as a quantifiable positive or negative 
impact with regard to a matter likely to affect a fishery or sector of 
the fishery in which the affected individual has a significant 
interest, as indicated by (1) a greater than 10 percent interest in the 
total harvest of the fishery or sector of the fishery in question, (2) 
a greater than 10 percent interest in the marketing or

[[Page 42476]]

processing of the total harvest of the fishery or sector of the fishery 
in question, or (3) full or partial ownership of more than 10 percent 
of the vessels using the same gear type within the fishery or sector of 
the fishery in question.
    We interpret the statutory term ``benefit'' to include both 
positive and negative impacts on the member's financial interest. The 
purpose of the 1996 amendments was to address real or perceived 
conflicts of interest, i.e., situations where Council members might 
have a greater incentive to protect their own financial interests than 
to consider the welfare of all fishery participants and the national 
interest. In this context, actual or perceived conflicts of interest 
occur when a member's income or investment is threatened, just as much 
as when they may be augmented. Avoiding a negative is as advantageous 
as gaining a positive.
    To limit ``benefit'' to positive impacts would unfairly bias the 
Council system toward preservation of the status quo. If members who 
stood to gain from a proposed Council action could not vote, but 
members who might suffer a loss from the same action could do so, 
proposals for change would be handicapped.
    The choice of a particular percentage as indicative of a 
``significant'' interest is a difficult one. The Councils manage 
fisheries as small as seven vessels and as large as thousands of 
vessels. The agency is considering a tiered approach, with different 
percentage indicators for different-sized sectors of the fishing 
industry, but has been unable to construct a workable model. We invite 
comments and specific suggestions on dealing with this issue.
    Affected individuals who have financial interests in businesses or 
not-for-profit organizations closely related to harvesting, processing, 
or marketing activities are covered by section 302(j) of the Magnuson-
Stevens Act and must disclose those interests. Examples are suppliers 
of bait, manufacturers of fishing gear, business or economic 
consultants to the fishing industry, and representatives of 
environmental organizations that address fisheries issues. Because the 
effects of Council decisions on this type of financial interest are 
unlikely to be ``significant or predictable,'' we do not foresee 
recusals by such individuals under proposed Sec. 600.235(c); however, 
such individuals could not participate in a ``particular matter 
primarily of individual concern'' under Sec. 600.225(b)(8).
    Under the proposed rule, an affected individual who is a 
representative of an association of fishermen, processors, or dealers 
would be required to disclose, in addition to his/her own interests, 
the financial interests of the association in harvesting, processing, 
or marketing activities that are or will be undertaken within any 
fishery under the jurisdiction of his or her Council. The financial 
interests of the association would be considered as separate from the 
financial interests of its individual members. A vote on a Council 
decision that might have a significant and predictable effect on the 
members of the association would not be considered to have a 
significant and predictable effect on the financial interests of the 
representative.

Procedures

    An affected individual would be able to recuse him or herself by 
simply announcing an intent not to vote on a Council decision that is 
likely to have a direct and predictable effect on that individual's 
financial interest.
    The proposed regulations would provide that, if an affected 
individual has a significant interest that prohibits him or her from 
voting, he or she may still participate in Council deliberations on 
that matter.
    The proposed regulations would set out the process for raising the 
issue of whether a Council decision would have a significant and 
predictable effect on an individual's financial interest, the 
information that would be considered in making that determination, and 
procedures for review of a determination. The proposed regulations 
would specify the NOAA General Counsel attorney advising the Council as 
the designated official who would determine whether the affected 
individual must recuse him or herself. The determination by the NOAA 
attorney would be based upon the information contained in the member's 
financial disclosure report and any other reliable and probative 
information provided in writing. All information provided would be made 
part of the public record for the decision.
    If the NOAA attorney determines that the member may not vote, the 
member may state for the record how he or she would have voted.
    Any Council member would be able to file a request for review of 
the determination to the NOAA General Counsel within 10 days of the 
determination. The member whose vote is at issue would have an 
opportunity to respond to such request for review by another Council 
member. The NOAA General Counsel would issue a decision within 30 days 
from the date of receipt of the request for review. As specified in 
section 302(j)(7)(E) of the Magnuson-Stevens Act, if the General 
Counsel's decision reverses a recusal determination, that decision may 
not be treated as cause to invalidate or reconsider the Council's 
action.
    The proposed regulations would implement the part of section 307(1) 
of the Magnuson-Stevens Act that makes it unlawful for an affected 
individual to knowingly and willfully fail to disclose or to falsely 
disclose any financial interest required to be disclosed or to 
knowingly vote on a Council decision in violation of section 302(j). 
The penalties for violation include removal of the affected individual 
from the Council and/or a civil penalty of up to $100,000 per 
violation.

Classification

    This rule has been determined to be not significant for purposes of 
E.O. 12866.
    The Assistant General Counsel for Legislation and Regulation of the 
Department of Commerce certified to the Chief Counsel for Advocacy of 
the Small Business Administration that this proposed rule, if adopted, 
would not have a significant economic impact on a substantial number of 
small entities. This proposed rule would implement statutory provisions 
of the SFA relative to the disclosure of financial interests of Council 
nominees, appointees, and members in harvesting, processing, or 
marketing activities that are or will be undertaken in fisheries under 
the jurisdiction of the individual's Council. Certain Council members 
may be required to recuse themselves from voting on a Council decision 
that would have a significant and predictable effect on a financial 
interest disclosed in accordance with these regulations. This proposed 
rule would have no effect on the conduct of business of any small 
entities. As such, no Initial Regulatory Flexibility Analysis has been 
prepared.
    This rule contains a collection-of-information requirement subject 
to the PRA. The financial disclosure form that must be completed by 
affected individuals has been approved by OMB under control number 
0648-0192.
    Public reporting burden for this collection of information is 
estimated to average 0.58 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completining and reviewing the 
collection of information. Send comments regarding this burden estimate 
or any other aspect of this collection of information, including 
suggestions for reducing this burden, to OMB and NMFS (see ADDRESSES).

[[Page 42477]]

    Notwithstanding any other provision of the law, no person is 
required to respond to, nor shall any person be subject to a penalty 
for failure to comply with, a collection of information subject to the 
requirements of the Paperwork Reduction Act (PRA), unless that 
collection of information displays a currently valid OMB control 
number.

List of Subjects in 50 CFR Part 600

    Administrative practice and procedure, Confidential business 
information, Fisheries, Fishing, Fishing vessels, Foreign relations, 
Intergovernmental relations, National Oceanic and Atmospheric 
Administration, Penalties, Reporting and recordkeeping requirements, 
Statistics.

    Dated: August 1, 1997.
David L. Evans,
Deputy Assistant Administrator for Fisheries, National Marine Fisheries 
Service.
    For the reasons set out in the preamble, 50 CFR part 600 is 
proposed to be amended as follows:

PART 600--MAGNUSON-STEVENS ACT PROVISIONS

    1. The authority citation for part 600 continues to read as 
follows:

    Authority: 5 U.S.C. 561 and 16 U.S.C. 1801 et seq.

    2. In Sec. 600.225, the last sentence in paragraph (b)(4) is 
removed, and paragraph (b)(8) is revised to read as follows:


Sec. 600.225  Rules of conduct.

* * * * *
    (b) * * *
    (8) No Council member may participate personally and substantially 
as a member through decision, approval, disapproval, recommendation, 
the rendering of advice, investigation, or otherwise in a particular 
matter primarily of individual concern, such as a contract, in which he 
or she has a financial interest.
    3. Section 600.235 is revised to read as follows:


Sec. 600.235  Financial disclosure.

    (a) Definitions. For purposes of this section:
    (1) ``Affected individual'' means an individual who is--
    (i) Nominated by the Governor of a state or appointed by the 
Secretary to serve as a voting member of a Council in accordance with 
section 302(b)(2) of the Magnuson-Stevens Act; or
    (ii) A representative of an Indian tribe appointed to the Pacific 
Council by the Secretary under section 302(b)(5) of the Magnuson-
Stevens Act who is not subject to disclosure and recusal requirements 
under the laws of an Indian tribal government.
    (2) ``Designated official'' means an attorney designated by the 
NOAA General Counsel.
    (b) Reporting. (1) The Magnuson-Stevens Act requires the disclosure 
by each affected individual of any financial interest of the affected 
individual in any harvesting, processing, or marketing activity, or 
related industry, that is being, or will be, undertaken within any 
fishery under the jurisdiction of the individual's Council, and of any 
such financial interest of the affected individual's spouse, minor 
child, partner, or any organization (other than the Council) in which 
that individual is serving as an officer, director, trustee, partner, 
or employee. The information required to be reported must be disclosed 
on NOAA Form 88-195, ``Statement of Financial Interests for Use by 
Voting Members and Nominees of Regional Fishery Management Councils'' 
(Financial Interest Form), or such other form as the Secretary may 
prescribe.
    (2) The report must be filed by each nominee for Secretarial 
appointment with the Assistant Administrator by April 15 or, if 
nominated after March 15, 1 month after nomination by the Governor. A 
seated voting member appointed by the Secretary must file a Financial 
Interest Form with the Executive Director of the appropriate Council 
within 45 days of taking office; must file an update of his or her 
statement with the Executive Director of the appropriate Council within 
30 days of the time any such financial interest is acquired or 
substantially changed by the affected individual or the affected 
individual's spouse, minor child, partner, or any organization (other 
than the Council) in which that individual is serving as an officer, 
director, trustee, partner, or employee; and must update his or her 
form annually and file that update with the Executive Director of the 
appropriate Council by February 1 of each year.
    (3) The Executive Director must, in a timely manner, provide copies 
of the financial disclosure forms and all updates to the NMFS Regional 
Administrator for the geographic area concerned, the Regional Attorney 
who advises the Council, the Department of Commerce Assistant General 
Counsel for Administration, and the NMFS Office of Sustainable 
Fisheries. The completed financial interest forms will be kept on file 
in the office of the NMFS Regional Administrator for the geographic 
area concerned and at the Council offices, and will be made available 
for public inspection at such offices during normal office hours.
    (4) Councils must retain the disclosure form for each affected 
individual for at least 5 years after the expiration of that 
individual's last term.
    (c) Restrictions on voting. (1) No affected individual may vote on 
any Council decision that would have a significant and predictable 
effect on a financial interest disclosed in his/her report filed under 
paragraph (b) of this section.
    (2) As used in this section, a Council decision will be considered 
to have a ``significant and predictable effect on a financial 
interest'' if there is a close causal link between the decision and an 
expected and substantially disproportionate benefit to the financial 
interest of any affected individual or the affected individual's 
spouse, minor child, partner, or any organization (other than the 
Council) in which that individual is serving as an officer, director, 
trustee, partner, or employee, relative to the financial interests of 
other participants in the same gear type or sector of the fishery.
    (3) ``Expected and substantially disproportionate benefit'' means a 
quantifiable positive or negative impact with regard to a matter likely 
to affect a fishery or sector of the fishery in which the affected 
individual has a significant interest, as indicated by:
    (i) A greater than 10 percent interest in the total harvest of the 
fishery or sector of the fishery in question;
    (ii) A greater than 10 percent interest in the marketing or 
processing of the total harvest of the fishery or sector of the fishery 
in question; or
    (iii) Full or partial ownership of more than 10 percent of the 
vessels using the same gear type within the fishery or sector of the 
fishery in question.
    (d) Voluntary recusal. An affected individual who believes that a 
Council decision would have a significant and predictable effect on 
that individual's financial interest disclosed under paragraph (b) of 
this section may, at any time before a vote is taken, announce to the 
Council an intent not to vote on the decision.
    (e) Participation in deliberations. Notwithstanding paragraph (c) 
of this section, an affected individual may participate in Council 
deliberations relating to the decision after notifying the Council of 
the voting recusal and identifying the financial interest that would be 
affected.
    (f) Requests for determination. (1) At the request of an affected 
individual, the designated official shall determine for the record 
whether a Council decision would have a significant and

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predictable effect on that individual's financial interest. The 
determination will be based upon a review of the information contained 
in the individual's financial disclosure form and any other reliable 
and probative information provided in writing. All information 
considered will be made part of the public record for the decision. The 
affected individual may request a determination by notifying the 
designated official--
    (i) Within a reasonable time before the Council meeting at which 
the Council decision will be made; or
    (ii) During a Council meeting before a Council vote on the 
decision.
    (2) The designated official may initiate a determination on the 
basis of--
    (i) His or her knowledge of the fishery and the financial interests 
disclosed by an affected individual; or
    (ii) Written and signed information received within a reasonable 
time before a Council meeting or, if the issue could not have been 
anticipated before the meeting, during a Council meeting before a 
Council vote on the decision.
    (3) At the beginning of each Council meeting, or during a Council 
meeting at any time reliable and probative information is received, the 
designated official shall announce the receipt of information relevant 
to a determination concerning recusal, the nature of that information, 
and the identity of the submitter of such information.
    (4) If the designated official determines that the affected 
individual may not vote, the individual may state for the record how he 
or she would have voted. However, a reversal of that determination 
under paragraph (g) of this section may not be treated as cause for 
invalidation or reconsideration of the Council's decision.
    (g) Review of determinations. (1) Any Council member may file a 
written request to the NOAA General Counsel for review of the 
designated official's determination. A request for review must be 
received within 10 days of the determination.
    (2) A request must include a full statement in support of the 
review, including a concise statement as to why the Council's decision 
did or did not have a significantly disproportionate benefit to the 
financial interest of the affected individual relative to the financial 
interests of other participants in the same gear type or sector of the 
fishery, and why the designated official's determination should be 
reversed.
    (3) If the request for review is from a Council member other than 
the affected individual whose vote is at issue, the requester must 
provide a copy of the request to the affected individual at the same 
time it is submitted to the NOAA General Counsel. The affected 
individual may submit a response to the NOAA General Counsel within 10 
days from the date of his/her receipt of the request for review.
    (4) The NOAA General Counsel must complete the review and issue a 
decision within 30 days from the date of receipt of the request for 
review. The NOAA General Counsel will limit the review to the record 
before the designated official at the time of the determination, the 
request, and any response.
    (h) Exemption from other statutes. The provisions of 18 U.S.C. 208, 
regarding conflicts of interest, do not apply to an affected individual 
who is in compliance with the requirements of this section for filing a 
financial disclosure report.
    (i) Violations and penalties. It is unlawful for an affected 
individual to knowingly and willfully fail to disclose, or to falsely 
disclose, any financial interest as required by this section, or to 
knowingly vote on a Council decision in violation of this section. In 
addition to the penalties applicable under Sec. 600.735, a violation of 
this provision may result in removal of the affected individual from 
Council membership.
[FR Doc. 97-20851 Filed 8-6-97; 8:45 am]
BILLING CODE 3510-22-F