[Federal Register Volume 64, Number 167 (Monday, August 30, 1999)]
[Rules and Regulations]
[Pages 47095-47097]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-22348]



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 Rules and Regulations
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  Federal Register / Vol. 64, No. 167 / Monday, August 30, 1999 / Rules 
and Regulations  

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OFFICE OF GOVERNMENT ETHICS

5 CFR Parts 2634 and 2636

RINs 3209-AA00 and 3209-AA13


Civil Monetary Penalties Inflation Adjustments for Ethics in 
Government Act Violations

AGENCY: Office of Government Ethics (OGE).

ACTION: Final rule; technical amendments.

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SUMMARY: In accordance with the 1990 Federal Civil Penalties Inflation 
Adjustment Act as amended by the 1996 Debt Collection Improvement Act, 
these final rule amendments incorporate 10% inflation adjustments for 
each of the five civil monetary penalties provided in the Ethics in 
Government Act, as reflected in the executive branchwide financial 
disclosure and outside employment/activities regulations promulgated by 
OGE.

EFFECTIVE DATE: September 29, 1999.

FOR FURTHER INFORMATION CONTACT: William E. Gressman, Senior Associate 
General Counsel, Office of Government Ethics; telephone: 202-208-8000; 
TDD: 202-208-8025; FAX: 202-208-8037.

SUPPLEMENTARY INFORMATION:

Background

    The Office of Government Ethics is issuing these final rule 
technical amendments as mandated by the Debt Collection Improvement Act 
of 1996, section 31001 of Pub. L. 104-134, 110 Stat. 1321, to adjust 
for inflation the civil monetary penalties (CMP) provided in the Ethics 
in Government Act of 1978 as amended (the ``Ethics Act''), 5 U.S.C. 
appendix. As explained below, all of the Ethics Act penalties are being 
raised by 10%, effective September 29, 1999. These adjustments will 
bring the Ethics Act CMPs into line with inflation since they were last 
adjusted in the 1989 Ethics Reform Act, thereby promoting compliance 
with the law.
    The Debt Collection Improvement Act revised sections 4 and 5 of, 
and added a new section 7 to, the Federal Civil Penalties Inflation 
Adjustment Act of 1990, Pub. L. 101-410, 104 Stat. 890, 28 U.S.C. 2461 
note, to require Federal agencies to regularly adjust certain statutory 
CMPs for inflation. As amended, that statute requires each Federal 
agency to make an initial inflation adjustment by regulation published 
in the Federal Register for all applicable CMPs provided by law within 
its jurisdiction, and to make further adjustments by regulation at 
least once every four years thereafter for these penalty amounts. The 
inflation adjustments are to be rounded, in pertinent part, to the 
nearest multiple of $1,000 for CMPs of greater than $1,000 but less 
than or equal to $10,000, such as those provided in the Ethics Act, 
subject to a limitation on any initial increase of no more than 10% of 
the penalty.
    Under the Debt Collection Improvement Act, the increased penalties 
only apply to violations that occur after the increase takes effect, 
but no earlier than 180 days after the date of enactment (April 26, 
1996) of that law, or October 23, 1996. In the case of the Ethics Act 
CMPs, the inflation adjustments will not become effective until this 
rulemaking takes effect on September 29, 1999.
    In addition, OGE notes that a separate Department of Justice 
rulemaking also being published in today's issue of the Federal 
Register, includes, as part of a broader set of CMP inflation 
adjustments, for that Department's Civil Division (which brings Ethics 
Act CMP enforcement actions) new regulatory provisions being added in a 
new part 85 of 28 CFR which provide for the same penalties, as adjusted 
by the same amount and effective on the same date as are also provided 
for herein. The Office of Government Ethics and the Justice Department 
have, therefore, coordinated in issuance of these two rulemakings.
    The Office of Government Ethics emphasizes that only Ethics Act 
violations occurring on or after the effective date of this rulemaking, 
September 29, 1999, will be subject to the increased civil monetary 
penalty amounts. For any violations occurring prior to that date, the 
CMP amounts originally specified in the Ethics Act as amended by the 
1989 Ethics Reform Act would apply. The modified OGE regulatory 
provisions will reflect both the original and adjusted CMP amounts. The 
Office of Government Ethics will notify departments and agencies by 
memorandum of this rulemaking action and its effect.

Ethics Act CMPs

    There are five civil monetary penalties provided for in the Ethics 
in Government Act, as amended inter alia by the 1989 Ethics Reform Act. 
The law provides for a $10,000 maximum civil penalty that can be 
assessed by an appropriate United States district court, based upon a 
civil action brought by the Department of Justice, for the following 
four types of violations: knowing and willful failure to file, report 
required information on, or falsification of a public financial 
disclosure report; knowing and willful breach of a qualified trust by 
trustees and interested parties; misuse of a public report; and 
violation of outside employment/activities provisions. In the case of 
outside employment/activities violations, an alternative assessable 
maximum penalty, if greater, is the amount of compensation received (if 
any) by an individual for prohibited conduct. That alternative penalty 
is indirectly affected by the increase in the applicable set dollar CMP 
in this rulemaking. In addition, a $5,000 maximum civil monetary 
penalty is specified in the Ethics Act for negligent breach of a 
qualified trust by trustees and interested parties. See sections 
102(f)(6)(C)(i) and (ii), 104(a), 105(c)(2) and 504(a) of the Ethics 
Act, 5 U.S.C. appendix, sections 102(f)(6)(C)(i) and (ii), 104(a), 
105(c)(2) and 504(a). These penalties are reflected in 5 CFR 
2634.701(b), 2634.702 (a) and (b), and 2634.703 of OGE's executive 
branchwide financial disclosure regulation and 5 CFR 2636.104(a) of 
OGE's executive branchwide covered noncareer employee outside 
employment/activities regulation.

Late Filing Fee Not a CMP

    The Office of Government Ethics notes that it has determined, after 
consultation with the Department of Justice, that the $200 late filing 
fee for

[[Page 47096]]

public financial disclosure reports that are more than 30 days overdue 
(see section 105(d) of the Ethics Act, 5 U.S.C. appendix, section 
105(d), and 5 CFR 2634.704 of OGE's regulations thereunder) is not a 
civil monetary penalty as defined under the Federal Civil Penalties 
Inflation Adjustment Act, as amended. Therefore, that fee is not being 
adjusted and will remain at its current amount of $200.

Calculation of Inflation Adjustments

    The Federal Civil Penalties Inflation Adjustment Act, as amended by 
the Debt Collection Improvement Act, requires Federal agencies to 
adjust CMPs within their respective jurisdictions by the cost-of-living 
adjustment set forth in section 5 of that law. The cost-of-living 
adjustment is defined as the percentage by which the U.S. Department of 
Labor's Consumer Price Index (CPI) for the month of June of the 
calendar year preceding the adjustment exceeds the CPI for the month of 
June of the calendar year in which the amount of the penalty was last 
set or adjusted pursuant to law, subject to the rounding formula and 
initial 10% maximum adjustment noted above. The Ethics Act CMPs were 
last set by statute in the Ethics Reform Act of 1989 (with the CMP 
provisions becoming effective on January 1, 1991) and have not 
previously been administratively adjusted for inflation. The CPI for 
June 1989 was 371.7, while that for June 1998 was 488.2. Thus, the 
increase was just over 31% (additionally, OGE notes that the CPI for 
June 1991 was 407.3, which yields an increase to June 1998 of just 
under 20%). Therefore, this first statutorily required adjustment of 
the five Ethics Act CMPs is limited to the maximum 10% increase 
specified by the Debt Collection Improvement Act.
    Applying the 10% increase to the Ethics Act civil monetary 
penalties, OGE is amending its above-noted regulatory provisions, 
effective September 29, 1999, to increase each of the four $10,000 
maximum penalties to a maximum of $11,000 and the one $5,000 maximum 
penalty to a maximum of $5,500.

Conclusion

    The Office of Government Ethics, in coordination with the Justice 
Department will also make future inflation adjustments in accordance 
with the statutory formula under the Federal Civil Penalties Inflation 
Adjustment Act, as amended. That law provides that civil monetary 
penalties are to be adjusted for inflation at least once every four 
years after the initial adjustment.
    Finally, OGE is making a couple of minor clarifying revisions in 
the amended sections of its regulations subject to the CMP adjustments, 
as set forth below.

Matters of Regulatory Procedure

Administrative Procedure Act

    Pursuant to 5 U.S.C. 553(b), as Director of the Office of 
Government Ethics, I find that good cause exists for waiving the 
general notice of proposed rulemaking and public comment procedures as 
to these technical amendments. The notice and comment procedures are 
being waived because these amendments, which concern matters of agency 
organization, procedure and practice, are being adopted in accordance 
with statutorily mandated inflation adjustment procedures of the 1990 
Federal Civil Penalties Inflation Adjustment Act, as amended by the 
1996 Debt Collection Improvement Act. It is also in the public interest 
that the adjusted rates for civil monetary penalties under the Ethics 
in Government Act become effective as soon as possible in order to 
maintain their deterrent effect. However, OGE notes that, in order to 
provide an appropriate period for notification to executive branch 
departments and agencies and their employees, these technical 
amendments will only take effect 30 days after the date of publication 
of this rulemaking in the Federal Register, on September 29, 1999.

Executive Order 12866

    In promulgating these technical amendments to its regulations, 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 amendments have not been reviewed 
by the Office of Management and Budget under that Executive order 
because they are not deemed ``significant'' thereunder since they are 
limited to the adoption of statutorily mandated inflation adjustments 
without interpretation.

Executive Order 12988

    As Director of the Office of Government Ethics, I have reviewed 
this final amendatory regulation in light of section 3 of Executive 
Order 12988, Civil Justice Reform, and certify that it meets the 
applicable standards provided therein.

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 
employees and their agencies.

Paperwork Reduction Act

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

List of Subjects

5 CFR Part 2634

    Certificates of divestiture, Conflict of interests, Government 
employees, Penalties, Reporting and recordkeeping requirements, Trusts 
and trustees.

5 CFR Part 2636

    Conflict of interests, Government employees, Penalties.

    Approved: August 6, 1999.
Stephen D. Potts,
Director, Office of Government Ethics.

    Accordingly, for the reasons set forth in the preamble, the Office 
of Government Ethics is amending 5 CFR parts 2634 and 2636 as follows:

PART 2634--[AMENDED]

    1. The authority citation for part 2634 is revised to read as 
follows:

    Authority: 5 U.S.C. App. (Ethics in Government Act of 1978); 26 
U.S.C. 1043; Pub. L. 101-410, 104 Stat. 890, 28 U.S.C. 2461 note 
(Federal Civil Penalties Inflation Adjustment Act of 1990), as 
amended by Sec. 31001, Pub. L. 104-134, 110 Stat. 1321 (Debt 
Collection Improvement Act of 1996); 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.

    2. Section 2634.101 is revised to read as follows:


Sec. 2634.101  Authority.

    The regulation in this part is issued pursuant to the authority of 
the Ethics in Government Act of 1978, as amended; 26 U.S.C. 1043; the 
Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by 
the Debt Collection Improvement Act of 1996; and Executive Order 12674 
of April 12, 1989, as modified by Executive Order 12731 of October 17, 
1990.
    3. Section 2634.701 is amended by revising the last sentence of 
paragraph (b) to read as follows:

[[Page 47097]]

Sec. 2634.701  Failure to file or falsifying reports.

* * * * *
    (b) * * * The court in which the action is brought may assess 
against the individual a civil monetary penalty in any amount, not to 
exceed $10,000, as provided by section 104(a) of the Act, for any such 
violation occurring before September 29, 1999, as adjusted effective 
September 29, 1999 to $11,000 for any such violation occurring on or 
after that date, in accordance with the inflation adjustment procedures 
prescribed in the Federal Civil Penalties Inflation Adjustment Act of 
1990, as amended.
* * * * *
    4. Section 2634.702 is amended by revising the respective last 
sentences of paragraphs (a) and (b) to read as follows:


Sec. 2634.702  Breaches by trust fiduciaries and interested parties.

    (a) * * * The court in which the action is brought may assess 
against the individual a civil monetary penalty in any amount, not to 
exceed $10,000, as provided by section 102(f)(6)(C)(i) of the Act, for 
such violation occurring before September 29, 1999, as adjusted 
effective September 29, 1999 to $11,000 for any such violation 
occurring on or after that date, in accordance with the inflation 
adjustment procedures prescribed in the Federal Civil Penalties 
Inflation Adjustment Act of 1990, as amended.
    (b) * * * The court in which the action is brought may assess 
against the individual a civil monetary penalty in any amount, not to 
exceed $5,000, as provided by section 102(f)(6)(C)(ii) of the Act, for 
any such violation occurring before September 29, 1999, as adjusted 
effective September 29, 1999 to $5,500 for any such violation occurring 
on or after that date, in accordance with the inflation adjustment 
procedures prescribed in the Federal Civil Penalties Inflation 
Adjustment Act of 1990, as amended.
    5. Section 2634.703 is amended by revising the second sentence to 
read as follows:


Sec. 2634.703  Misuse of public reports.

    * * * The court in which the action is brought may assess against 
the person a civil monetary penalty in any amount, not to exceed 
$10,000, as provided by section 105(c)(2) of the Act, for any such 
violation occurring before September 29, 1999, as adjusted effective 
September 29, 1999 to $11,000 for any such violation occurring on or 
after that date, in accordance with the inflation adjustment procedures 
prescribed in the Federal Civil Penalties Inflation Adjustment Act of 
1990, as amended. * * *

PART 2636--[AMENDED]

    6. The authority citation for part 2636 is revised to read as 
follows:

    Authority: 5 U.S.C. App. (Ethics in Government Act of 1978); 
Pub. L. 101-410, 104 Stat. 890, 28 U.S.C. 2461 note (Federal Civil 
Penalties Inflation Adjustment Act of 1990), as amended by Sec. 
31001, Pub. L. 104-134, 110 Stat. 1321 (Debt Collection Improvement 
Act of 1996); 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.

    7. Section 2636.104 is amended by revising paragraph (a) to read as 
follows:


Sec. 2636.104  Civil, disciplinary and other action.

    (a) Civil action. Except when the employee engages in conduct in 
good faith reliance upon an advisory opinion issued under Sec. 2636.103 
of this subpart, an employee who engages in any conduct in violation of 
the prohibitions, limitations and restrictions contained in this part 
may be subject to civil action under 5 U.S.C. app. 504(a) and a civil 
monetary penalty of not more than $10,000 for any such violation 
occurring before September 29, 1999, as adjusted effective September 
29, 1999 to $11,000 for any such violation occurring on or after that 
date, in accordance with the inflation adjustment procedures prescribed 
in the Federal Civil Penalties Inflation Adjustment Act of 1990, as 
amended, or the amount of the compensation the individual received for 
the prohibited conduct, whichever is greater.
* * * * *
[FR Doc. 99-22348 Filed 8-27-99; 8:45 am]
BILLING CODE 6345-01-P