[Federal Register Volume 63, Number 165 (Wednesday, August 26, 1998)]
[Proposed Rules]
[Pages 45415-45417]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-22864]


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 Proposed Rules
                                                 Federal Register
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 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. 63, No. 165 / Wednesday, August 26, 1998 / 
Proposed Rules  

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OFFICE OF GOVERNMENT ETHICS

5 CFR Part 2635

RIN 3209-AA04


Standards of Ethical Conduct for Employees of the Executive 
Branch

AGENCY: Office of Government Ethics (OGE).

ACTION: Proposed rule amendments.

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SUMMARY: The Office of Government Ethics is proposing minor amendments 
to the sections on seeking other employment and outside activities in 
the regulation governing standards of ethical conduct for executive 
branch employees, to conform with interpretive advice and to improve 
clarity.

DATES: Comments are invited and must be received before October 26, 
1998.

ADDRESSES: Send comments to the Office of Government Ethics, Suite 500, 
1201 New York Avenue, NW., Washington, DC 20005-3917, Attention: G. Sid 
Smith.

FOR FURTHER INFORMATION CONTACT: G. Sid Smith, Senior Associate General 
Counsel, Office of Government Ethics; telephone: 202-208-8000; TDD: 
202-208-8025; FAX: 202-208-8037; Internet E-mail address: [email protected] 
(for E-mail messages, the subject line should include the following 
sentence--Rulemaking to amend standards of ethical conduct sections on 
seeking employment and outside activities).

SUPPLEMENTARY INFORMATION:

I. Background

    Some six years ago, the Office of Government Ethics (OGE) issued a 
final rule establishing the executive branch standards of ethical 
conduct, pursuant to section 201(a) of Executive Order 12674 (57 FR 
35006-35067, August 7, 1992). These standards and the examples therein, 
as amended and codified at 5 CFR part 2635, are the primary source of 
guidance for ethics officials and employees throughout the executive 
branch in applying the fourteen fundamental principles of ethical 
conduct contained in the Executive order. In a final rule published at 
62 FR 48746-48748 (September 17, 1997), OGE amended the standards of 
ethical conduct regulation, by removing superseded references to the 
former honorarium bar, reflecting statutory changes on procurement 
integrity, adding references to a recent regulation on conflicts of 
interest (5 CFR part 2640), and making other minor corrections and 
updates.
    Based on feedback from the executive branch ethics community, OGE 
believes that the standards of ethical conduct are generally fulfilling 
the intended goals of the Executive order in establishing useful, 
practical guidelines for employees. Over the past six years, OGE has 
provided interpretive advice to department and agency ethics officials 
on the application of these standards, as specific fact patterns have 
arisen. As a result, OGE has determined that selected provisions in the 
standards should now be amended, in order to codify some of that advice 
and to clarify the intended meaning of the regulatory language. In a 
separate rulemaking, OGE published a proposed rule to accomplish that 
with respect to certain provisions in subpart B (Gifts From Outside 
Sources). By this current rulemaking, OGE is proposing similarly minor 
amendments to provisions of the standards of ethical conduct in subpart 
F (Seeking Other Employment) and subpart H (Outside Activities), in 
order to further codify interpretive advice and to improve clarity.

II. Analysis of Proposed Amendments

Subpart F

    Subpart F of the standards of ethical conduct regulation (5 CFR 
part 2635) implemented certain provisions of a criminal statute and an 
Executive order, specifically: (1) 18 U.S.C. 208, restricting 
employees' official participation in matters wherein a person or 
organization with whom they are negotiating for or have an arrangement 
concerning prospective employment has a financial interest, and (2) 
sections 101(h) and 101(j) of Executive Order 12674, directing 
employees to act impartially in official matters and not to engage in 
seeking or negotiating for outside employment that conflicts with 
official duties and responsibilities. See references to these 
implementation goals in the preamble to OGE's proposed rule on 
standards of ethical conduct (56 FR 33786, July 23, 1991), and in 
Sec. 2635.601 of the final rule. Because these provisions of the 
criminal statute and Executive order are so closely related, they were 
combined for implementation at subpart F, with a requirement generally 
for disqualification from participation in certain matters when an 
employee is ``seeking other employment,'' a term that encompasses both 
negotiating and other specified lesser contacts.
    Sections 2635.601 and 2635.602 in that subpart suggest that its 
coverage may be limited to situations where the employee's 
``performance or nonperformance of official duties will affect'' the 
financial interests of a prospective employer. A somewhat more accurate 
test, for purposes of 18 U.S.C. 208, is stated in Sec. 2635.604(a), 
Sec. 2635.605(a), and Sec. 2635.606(a), which is that coverage extends 
to participation in ``a particular matter that has a direct and 
predictable effect'' on those financial interests. The criminal statute 
does not limit its application to situations where one's performance of 
official duties will affect a financial interest, but instead focuses 
on whether a matter in which the employee participates will affect the 
financial interest. Further, the statute is triggered only if the 
effect on the financial interest will be direct and predictable.
    This variation among sections of the regulation was an unintended 
result of the process by which provisions on prospective employment in 
the criminal statute and Executive order were implemented jointly. As 
questions from ethics officials have arisen concerning these apparent 
discrepancies, OGE has advised that the requirements of 18 U.S.C. 208 
control. In order to more clearly align the provisions of subpart F 
with that advice and the criminal statute, OGE proposes to amend 
Sec. 2635.601 and Sec. 2635.602 accordingly.
    Additionally, OGE proposes to amend Sec. 2635.601, Sec. 2635.602, 
Sec. 2635.604, Sec. 2635.605, and Sec. 2635.606, to clarify initially 
in each section that the restrictions apply only when the employee 
would be ``participating personally and substantially'' in a particular 
matter. These modifications will further ensure that subpart F is 
consistent with 18 U.S.C. 208 and in conformance with OGE advice.

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Subpart H

    Section 2635.807(a) in subpart H of the standards of ethical 
conduct regulation directs that employees shall not receive 
compensation from any source other than the Government for teaching, 
speaking or writing that relates to their official duties. This section 
implemented several principles of Executive Order 12674, primarily the 
prohibitions in sections 101(c) and 101(g) against employee misuse of 
nonpublic information and use of public office for private gain, as 
well as the principle in section 101(n) that an employee shall endeavor 
to avoid actions creating even the appearance of such violations. See 
references to these implementation goals in the preamble to OGE's 
proposed rule on standards of ethical conduct (56 FR 33790, July 23, 
1991) and in the preamble to the final regulation (57 FR 35036, August 
7, 1992). Section 2635.807(a) also embodies the criminal prohibition at 
18 U.S.C. 209 on receipt of any supplementation of Government salary as 
compensation for services as a Government employee.
    Essential to the understanding and meaning of this section of the 
regulation is a clear definition of the term ``receive.'' Paragraph 
(a)(2)(iv) thereof defines ``receive'' to include actual or 
constructive receipt of compensation, such that the employee has the 
right to exercise dominion and control over the compensation and to 
direct its subsequent use, and it includes certain indirect payments to 
charitable organizations, relatives, and others. When the standards of 
ethical conduct regulation was issued in 1992, OGE believed that this 
definition would adequately apprise employees of the extent of the 
restrictions on receipt of compensation in Sec. 2635.807(a). It has 
become apparent, however, that there may be some confusion about when 
receipt occurs for compensation that is deferred or made in advance. 
For example, some departing employees have negotiated contracts to 
undertake speaking, teaching or writing activities that may be related 
to official duties, whereby compensation will be: (1) deferred until 
after leaving Government service, for activities performed during 
Government service, or (2) paid while the individual is still a 
Government employee, as an advance for activities to be performed after 
leaving Government service. In response to employees and agency ethics 
officials who have raised these issues, OGE has advised that in both 
circumstances described above, compensation would be viewed as 
received, in violation of Sec. 2635.807(a).
    In order to codify this interpretive advice and intent with regard 
to these issues, OGE proposes to amend the definition of ``receive'' in 
Sec. 2635.807(a). To the extent possible, this will also promote 
consistency with a related regulation and OGE advice concerning the 
term ``receive'' as it pertains to the statutory 15% limit on outside 
earned income and restrictions on compensation for outside employment 
that apply to certain senior noncareer officials (see 5 CFR 
2636.303(c)).

III. Matters of Regulatory Procedure

Executive Order 12866

    In promulgating these proposed rule amendments, OGE has adhered to 
the regulatory philosophy and the applicable principles of regulation 
set forth in section 1 of Executive Order 12866, Regulatory Planning 
and Review. These proposed amendments have also been reviewed by the 
Office of Management and Budget under that Executive order.

Regulatory Flexibility Act

    As Director of the Office of Government Ethics, I certify under the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) that this rulemaking 
will not have a significant economic impact on a substantial number of 
small entities because it primarily affects Federal executive branch 
agencies and their employees.

Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. chapter 35) does not apply 
because these proposed amendments do not contain any information 
collection requirements that require the approval of the Office of 
Management and Budget.

List of Subjects in Part 2635

    Conflict of interests, Executive branch standards of ethical 
conduct, Government employees.

    Approved: April 1, 1998.
Stephen D. Potts,
Director, Office of Government Ethics.

    For the reasons set forth in the preamble, the Office of Government 
Ethics proposes to amend part 2635 of subchapter B of chapter XVI of 
title 5 of the Code of Federal Regulations, as follows:

PART 2635--[AMENDED]

    1. 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.


Sec. 2635.601  [Amended]

    2. Section 2635.601 is amended by removing the words ``who 
otherwise would be affected by the performance or nonperformance of the 
employees' official duties.'' from the end of the first sentence and 
adding the words ``whose financial interests would be directly and 
predictably affected by particular matters in which the employees 
participate personally and substantially.'' in their place, and by 
adding the new sentence ``See Sec. 2635.402 and Sec. 2640.103 of this 
chapter.'' between the second and third sentences.


Sec. 2635.602  [Amended]

    3. Section 2635.602 is amended by removing the words ``the 
employee's official duties would affect'' from the first sentence of 
the undesignated introductory text and adding the words ``particular 
matters in which the employee will be participating personally and 
substantially would directly and predictably affect'' in their place, 
and by removing the words ``affected by the performance or 
nonperformance of his official duties'' from the first sentence of the 
note following the undesignated introductory text and adding the words 
``affected directly and predictably by particular matters in which he 
participates personally and substantially'' in their place.
    4. Section 2635.603 is amended by revising paragraph (d) to read as 
follows:


Sec. 2635.603  Definitions.

* * * * *
    (d) Direct and predictable effect, particular matter, and personal 
and substantial have the respective meanings set forth in 
Sec. 2635.402(b)(1), (3), and (4).


Sec. 2635.604  [Amended]

    5. Section 2635.604 is amended by adding the words ``personally and 
substantially'' after the word ``participate'' in the first sentence of 
paragraph (a).


Sec. 2635.605  [Amended]

    6. Section 2635.605 is amended by adding the words ``personally and 
substantially'' after the word ``participate'' in the first sentence of 
paragraph (a), and by adding the words ``personally and substantially'' 
after the word ``participate'' in the first sentence of paragraph (b).

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Sec. 2635.606  [Amended]

    7. Section 2635.606 is amended by removing the words ``taking 
official action'' from the first sentence of paragraph (a) and adding 
the words ``participating personally and substantially'' in their 
place.


Sec. 2635.807  [Amended]

    8. Section 2635.807 is amended by adding the new sentence ``This 
includes compensation paid in advance to an employee for activities to 
be performed in the future, and compensation deferred to the future for 
activities that are performed while an employee.'' after the first 
sentence in paragraph (a)(2)(iv).

[FR Doc. 98-22864 Filed 8-25-98; 8:45 am]
BILLING CODE 6345-01-U