[Federal Register Volume 67, Number 94 (Wednesday, May 15, 2002)]
[Rules and Regulations]
[Pages 34591-34598]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-12020]


=======================================================================
-----------------------------------------------------------------------

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 366

RIN 3064-AC29


Minimum Standards of Integrity and Fitness for an FDIC Contractor

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Interim final rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Deposit Insurance Corporation (FDIC) is issuing a 
rule entitled, ``Minimum Standards of Integrity and Fitness for an FDIC 
Contractor''. This rule replaces the March 11, 1996, interim final rule 
entitled, ``Contractor Conflicts of Interest''. This rule establishes 
standards for independent contractors governing contracting 
prohibitions, conflicts of interest, ethical responsibilities, 
confidential information, and reportable information. It is also 
consistent with the goals and purposes of titles 18 and 41 of the 
United States Code. This rule is in addition to, and not in lieu of, 
any other statute or rule which may apply to the conduct of persons 
performing services pursuant to a contract.

DATES: This rule becomes effective May 15, 2002. We must receive your 
written comments on or before July 15, 2002.

ADDRESSES: Address your written comments to Robert E. Feldman, 
Executive Secretary, Attention: comments/OES, and:
    1. Mail to Federal Deposit Insurance Corporation, 550 17th Street, 
NW., Washington, DC 20429;
    2. Hand-deliver to the guard station located at the rear of the 
17th Street Building on F Street, between 8:30 a.m. and 5:00 p.m. on 
business days;
    3. Fax to (202) 898-3838;
    4. E-mail to: [email protected] mailto:[email protected]>; or
    5. Post on the FDIC internet site at http://www.fdic.gov/regulations/laws/Federal/propose.html.
    Comments are available for inspection and photocopying at the FDIC 
Public Information Center, Room 100, 801 17th Street, NW., Washington, 
DC, between 9:00 a.m. and 4:30 p.m. on business days.

FOR FURTHER INFORMATION CONTACT: Martin A. Blumenthal, Counsel, (202) 
736-0359, or Peter M. Somerville, Counsel, (202) 736-0110, Legal 
Division; or Donald L. Rosholt, Senior Ethics Program Specialist, 
Office of the Executive Secretary, (202) 898-7287, Federal Deposit 
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429. 
These are not toll-free numbers.

SUPPLEMENTARY INFORMATION: The contents of this preamble are listed in 
the following outline:

I. Introduction
    A. Overview
    B. Authority
    C. Background
II. Comparison of this rule to the March 11, 1996, interim final 
rule
    A. General changes
    B. Definitional changes
    C. Prohibition from performing services on our behalf
    D. Contractor responsibilities and requirements
    E. Contractor's expectations, rights, and obligations
III. Matters of Regulatory Procedure
    A. Regulatory Flexibility Act
    B. Paperwork Reduction Act
    C. The Treasury and General Government Appropriations Act, 
1999--Assessment of Federal Regulations and Policies on Families
    D. Congressional Review Act

I. Introduction

A. Overview

    This rule sets forth integrity and fitness provisions for FDIC 
contractors in three areas. The first area regards those persons from 
whom the FDIC is prohibited from entering into a contract. The second 
area identifies integrity and fitness responsibilities for independent 
contractors. These include conflicts of interest, minimum standards of 
ethical responsibility, confidential information, and information that 
contractors must disclose to the FDIC. The last area regards a 
contractor's expectations, rights and obligations. These include what 
advice and determinations the FDIC will provide a contractor, 
reconsiderations and reviews of those determinations, and the possible 
consequences a person may face for violating the provisions of this 
rule.
    This rule and Supplementary Information section are drafted in 
plain language. The word ``person'' refers to an individual, 
corporation, partnership, or other entity with a legally independent 
existence. The terms ``I'', ``me'', ``my'', ``mine'', ``you'', and 
``yourself'' refer to a person who submits an offer to perform or 
performs, directly or indirectly, contractual services or functions on 
behalf of the FDIC. The terms ``we'', ``our'', and ``us'' refer to the 
FDIC, except when the FDIC operates an insured depository institution 
such as a bridge bank or conservatorship. The phrase ``insured 
depository institution'' refers to any bank or savings association 
whose deposits are insured by the FDIC.

[[Page 34592]]

B. Authority

    The statutory authorities for adopting this rule are sections 
12(f)(3) and (4) of the Federal Deposit Insurance Act (FDI Act), 12 
U.S.C. 1822(f)(3) and (4), and our general rulemaking authority found 
at 12 U.S.C. 1819 (Tenth). Section 19 of the Resolution Trust 
Corporation Completion Act (RTCCA), Pub. L. 103-204, 107 Stat. 2369 
(1993), required the addition of section 12(f) to the FDI Act.
    We may establish other integrity and fitness policies where we 
determine such policies are required by law or appropriate to maintain 
the integrity of our programs. Any such policies may be independent of, 
in conjunction with, or in addition to the restrictions set forth in 
this rule.
    We may also, temporarily or permanently, suspend this rule or 
exempt a person from compliance with any part of this rule for good 
cause shown, in order to protect our interests or to provide an orderly 
transfer of services to another person.

C. Background

    The contractor integrity and fitness rules, based on statutory 
requirements, are regulatory tools the FDIC uses to assure that certain 
of its contractors meet minimum standards of competence, experience, 
integrity and fitness. See 501(a), FHLB Act Sec. 21A(p)(6). This 
statute was enacted to ensure that no person who contributed to the 
failure of an insured depository institution could contract with the 
FDIC without disclosure and considerable scrutiny. The Oversight Board 
of the Resolution Trust Corporation (RTC) issued the original proposed 
rule on November 28, 1989. From that original rule, related FDIC rules, 
and many years of RTC and FDIC experience, we propose this rule.
    On June 24, 1994, we published a proposed rule applicable to 
independent contractors (59 FR 32661-32668), as required by 12 U.S.C. 
1822(f)(3). That rulemaking proposed standards governing conflicts of 
interest, ethical responsibilities, and use of confidential 
information. It also proposed procedures for ensuring that independent 
contractors meet minimum standards for competence, experience, 
integrity, and fitness. We received six comment letters. After careful 
consideration of each comment and numerous changes that the Office of 
Government Ethics (OGE) requested, we made appropriate modifications to 
the proposal resulting in the reorganization and modification of some 
provisions.
    On March 11, 1996, we adopted an interim final rule entitled, 
``Contractor Conflicts of Interest'', (61 FR 9590), with the 
concurrence of OGE. We determined that an interim final rule was 
appropriate in order to allow interested parties to comment on the rule 
while providing prompt implementation of the rule to satisfy concerns 
relating to the merger of the RTC into the FDIC. We received only one 
comment on the interim final rule and it was non-substantive. We have 
gained significant experience regarding requests for (1) waivers of 
disqualifying conditions and conflicts of interest, and (2) 
reconsiderations of our determinations since the interim final rule was 
issued.
    We now publish this rule entitled, ``Minimum Standards of Integrity 
and Fitness for an FDIC Contractor'', to allow for public comment. We 
believe that public comment is appropriate given the length of time 
that has transpired since the March 11, 1996, interim final rule was 
published and the changes we are making now. The provisions of this 
rule are similar to the interim final rule, except as addressed in 
section II below. In general, those changes relieve restrictions on 
contractors. Therefore, although we request comments on all aspects of 
this rule, we will publish the rule as an interim final rule, having 
found good cause for making it effective immediately. The March 11, 
1996, interim final rule is replaced with this rule. 5 U.S.C. 
533(b)(3)(B) and 533(d)(1) and (3).

II. Comparison of This Rule to the March 11, 1996, Interim Final 
Rule

A. General Changes

    This rule is published in accordance with plain language 
guidelines. It does not include the internal agency procedures that 
were incorporated in the March 11, 1996, interim final rule. Instead, 
it provides for the Board of Directors to delegate to the Chairman, or 
his designee, the authority to grant waivers and implement procedures 
for this rule. Examples are added at Secs. 366.4(b), 366.6(c), 
366.10(b), 366.11(b), 366.12(e) and 366.13(b) for clarity and guidance.
    The title of this rule is changed from ``Contractor Conflicts of 
Interest'' to ``Minimum Standards of Integrity and Fitness for an FDIC 
Contractor'' to better describe its provisions.
    The waiver and reconsideration provisions established in the March 
11, 1996, interim final rule set forth internal agency processes and 
procedures, some of which do not meet the needs or satisfy the 
requirements of our diverse activities. For example, a conflict of 
interest consideration is different for a service contractor when it 
expresses an interest in purchasing an asset from us than when it 
competes to provide us with asset services. A service contractor is an 
independent contractor that provides services other than goods, 
including, but not limited to, legal services, asset disposition or 
management services, or management and consulting services. 
Furthermore, the universe of persons subject to the provisions of this 
rule represents a wide variety of professions and organizational 
structures, which we must take into consideration in making our 
integrity and fitness determinations. For example, the threshold of 
what constitutes a conflict of interest for legal services is not 
necessarily the same as that for non-legal services. Conflicts of 
interest for legal matters involve representational and non-
representational issues. For these reasons, we will continue to issue 
separate and complementary internal policies and procedures, consistent 
with this rule, for our different program areas as may be necessary.
    We interpret the language of section 1822(f) to distinguish between 
two different types of service contracts. The first type is incidental 
or housekeeping service contracts. The phrase ``incidental or 
housekeeping'' refers to services or activities relating to our day-to-
day routine corporate operations. Examples of incidental or 
housekeeping service contracts would include, but would not be limited 
to, (1) food service contracts for employee cafeteria services, (2) 
contracts for janitorial or cleaning services, (3) contracts for mail 
delivery services, and (4) contracts providing employee benefits. Such 
incidental or housekeeping service contracts do not arrange for 
contract workers (rather than FDIC employees) to perform services for 
or on our behalf a FDIC function or activity required of the FDIC by 
statute (described below). Incidental and housekeeping service 
contracts are not covered by the statutory minimum standards of fitness 
and integrity set forth at 12 U.S.C. 1822(f)(4)(E), nor are they 
covered by this rule. We reserve our discretion and flexibility to 
determine an appropriate standard of integrity and fitness where a 
contract worker would provide incidental or housekeeping services for 
or to us. We may impose fitness and integrity requirements up to and 
including the statutory standards upon such contract workers.
    The second type of service contract provides for contract workers 
(rather than FDIC employees) to perform FDIC functions and/or 
activities for or on our behalf. The FDIC functions and/or

[[Page 34593]]

activities performed for or on our behalf relate to any of our 
responsibilities that are required by statute such as regulating banks, 
providing deposit insurance, examining banks, conducting receivership 
activities, and conducting liquidation activities. These types of 
service contracts would include, but would not be limited to, contracts 
to service, manage or sell receivership or corporate assets. The 
minimum standards of integrity and fitness as set forth in section 12 
U.S.C. 1822(f)(4)(E) apply to these contracts. These contracts are 
covered by this rule.
    Previously, since the rule was first proposed in June 1994, we 
chose to voluntarily apply the provisions of the rule to all service 
contracts, including corporate contracts for incidental or housekeeping 
services. This rule differs from the March 11, 1996, interim final rule 
in that we have decided to limit the scope as stated above.
    After careful review of the FDI Act, we propose to establish a 
provision for us to grant waivers at our discretion regarding the 
prohibition to perform contractual services on our behalf to persons 
other than individuals at Sec. 366.7. We believe this change is 
consistent with the FDI Act, which mandates that we establish 
procedures to ensure that any individual who is performing, directly or 
indirectly, any function or service on our behalf meets minimum 
standards of integrity and fitness. Because the statutory language 
refers only to individuals, and not other entities, we believe this 
approach is appropriate.
    In addition, we removed the reference to an obsolete interim 
supplemental financial disclosure rule entitled, ``Supplemental 
Financial Disclosure Requirements for Employees of the Federal Deposit 
Insurance Corporation'', 61 FR 50947-48 (September 30, 1996). This 
supplemental financial disclosure rule was codified at 5 CFR part 3202 
and referenced in the interim final rule at Sec. 366.1(c)(1)(ii).
    There are several provisions in the March 11, 1996, interim final 
rule that are repetitive. For example, the provisions for reconsidering 
our decisions are found at Secs. 366.4(d) and 366.5(e). The 
contractor's 10-day and immediate notification requirements are found 
at Secs. 366.4(b)(2) and (c), 366.5(c)(1)(ii) and (d), and 366.6(b)(2). 
The remedies for the contractor's failure to comply with the rule and 
the contractor's liability requirements are found at Secs. 366.4(c)(2), 
366.5(d)(2), 366.6(c), 366.8(b), and 366.9. We eliminate this 
repetitiveness to make this rule more concise. The reconsideration 
provisions in this rule are consolidated at Sec. 366.16. The 
notification requirements are consolidated at Sec. 366.14(c) of this 
rule. Our remedies for the contractor's failure to comply with the rule 
and contractor's liability requirements are consolidated at 
Sec. 366.17.
    In addition, there are several provisions in the March 11, 1996, 
interim final rule that make distinctions with respect to their 
applicability prior to contract award, after contract award, and during 
the term of a contract. These are found at Secs. 366.4(b) and (c), 
366.5(c) and (d), and 366.7(a). We make no such distinctions in this 
rule at Sec. 366.15(b). There are also separate provisions for a 
person's initial and subsequent submissions of information at 
Secs. 366.6(a) and (b) of the interim final rule. No such distinction 
between these provisions is made in this rule at Sec. 366.14. We 
eliminate these distinctions found in the interim final rule to make 
this rule more concise. This rule applies equally to prior to contract 
award, after contract award, and during the term of a contract.

B. Definitional Changes

    The terms ``affiliated business entity'', ``company'', and 
``management official'' found at Secs. 366.2(a), (b), and (i), 
respectively, in the March 11, 1996, interim final rule do not appear 
in this rule. Other terms that we defined in the interim final rule are 
used in this rule without a formal definition. We rely, instead, on the 
common meaning of the terms as used in the contracting environment. For 
example, reference to ``contractor'', ``offer'', and ``subcontractor'' 
found at Secs. 366.2(d), (j) and (n), respectively, in the interim 
final rule are not defined in this rule. The question-and-answer format 
is used in this rule to describe the terms ``pattern or practice of 
defalcation'' and ``substantial loss'' that were defined in the interim 
final rule at Secs. 366.2(k) and (o), respectively.

1. The following is a discussion of the changes to three terms:

    Conflict of Interest. The definition of a conflict of interest at 
Sec. 366.2(c) of the March 11, 1996, interim final rule includes four 
provisions. We now believe that the suspension and exclusion provision 
at Sec. 366.2(c)(3) of the interim final rule does not constitute a 
conflict of interest, and it is not included in this rule. According to 
the March 11, 1996, interim final rule, a previously suspended or 
excluded person is permanently restricted from performing services on 
our behalf, unless we grant a waiver. This requires us to consider 
waivers for any previously suspended or excluded person even when the 
person is no longer debarred from contracting with us or any other 
federal agency. This waiver requirement is an unnecessary burden for us 
and the previously suspended or excluded person. Moreover, it does not 
provide us with any additional safeguards. We believe a previously 
suspended or excluded person should be eligible to contract with us to 
the same extent they are eligible to contract with other Federal 
agencies, unless Sec. 366.3 of this rule prohibits them from doing so. 
This is consistent with federal debarment restrictions that are usually 
temporary or limited in time.
    Section 366.10 of this rule incorporates the other three provisions 
of the original definition of the term ``conflict of interest'' in 
Sec. 366.2(c) of the March 11, 1996, interim final rule. Section 
366.2(c)(4) of the interim final rule, regarding an unfair competitive 
advantage, applied primarily to asset purchaser situations. Section 
366.10(a)(3) of this rule is included to make this application clearer. 
Section 366.10(a)(4) of this rule is added to cover any other situation 
which could cause us to question the integrity of the services a 
contractor provided, is providing or offers to provide us.
    Pattern or practice of defalcation. Section 366.4 of this rule 
explains pattern or practice of defalcation. Pattern or practice of 
defalcation in this rule does not include the foreclosure provision 
found in Sec. 366.2(k)(2) of the March 11, 1996, interim final rule. 
That foreclosure provision states, ``A loan or advance from an insured 
depository institution where there has been a failure to comply with 
the terms to such an extent that the collateral securing the loan or 
advance was foreclosed upon, resulting in a loss in excess of $50,000 
to the insured depository institution.'' This concept is incorporated, 
in part, in the term substantial loss at Sec. 366.5. It does not apply 
to foreclosures at open institutions in this rule as it did in the 
interim final rule. Examples are added for clarity and guidance.
    Substantial loss. Section 366.5 of this rule explains what it means 
to cause a substantial loss to a federal deposit insurance fund. It 
does not include the provision for obligations that have ever been 
delinquent found in Sec. 366.2(o)(1) of the March 11, 1996, interim 
final rule. We believe 12 U.S.C. 1822(f)(4)(E)(iv) prohibits us from 
contracting with a contractor who is currently delinquent for ninety 
(90) days or more with us, because there is a perceived result of a 
loss to the fund. However, we do not believe it prohibits

[[Page 34594]]

us from contracting with a contractor who may have had a delinquent 
obligation to us that is now current.

    2. This rule describes the term ``person'' more clearly. Section 
366.2(l) of the March 11, 1996, interim final rule defines the term 
``person'' to mean an individual or company. The word ``person'' used 
in this rule includes an individual, corporation, partnership, or other 
legally independent entity. We believe meaning of the word ``person'' 
in this rule is not a change from the meaning of the term used in the 
interim final rule.

C. Prohibition From Performing Services on Our Behalf

    12 U.S.C. 1822(f)(4)(E) requires us to prohibit any person who is a 
convicted felon; who a federal banking agency removes or prohibits from 
participating in the affairs of any insured depository institution 
pursuant to any final enforcement action; who demonstrates a pattern or 
practice of defalcation regarding obligations to insured depository 
institutions; or who causes a substantial loss to federal deposit 
insurance funds from performing any service on our behalf. Section 
366.3 of this rule sets forth the same provisions as those in 
Sec. 366.4 of the March 11, 1996, interim final rule with the exception 
of their applicability to any person that owns or controls you, and any 
entity you own or control. We added to this rule the provision for the 
applicability of the prohibitions to any person that owns or controls 
you and any entity you own or control so that a prohibited contractor 
could not circumvent the prohibition by contracting through a non-
prohibited entity. This rule makes no distinction with respect to those 
prohibitions that arise prior to award and those that arise or are 
discovered after contract award. We do not believe this distinction is 
necessary because the prohibitions are applicable, regardless of when 
they arise.
    Section 366.6 of this rule explains ownership or control, which is 
unchanged from Sec. 366.2(e) of the March 11, 1996, interim final rule. 
Examples are added for clarity and guidance.
    Section 366.7 of this rule is a new provision that permits us to 
grant a waiver of the prohibitions found in Sec. 366.3 to an entity 
other than an individual. This new provision is based upon our 
conclusion that the statutory requirement found at section 12 U.S.C. 
1822(f)(4)(E) limits individuals from contracting with us when the 
prohibitions found in Sec. 366.3 are shown to exist. The application of 
the prohibition to all persons requires us to include a waiver 
provision for entities other than individuals for good cause shown.
    Because this rule includes waiver provisions and allows the FDIC to 
establish policies independent of, in conjunction with, or in addition 
to the restrictions set forth in this rule, section 366.8 is included 
to delegate authority from the Board of Directors to the Chairman, or 
his designee, to issue waivers and implement procedures. This provides 
the FDIC the ability to specify the appropriate officials who will 
administer the provisions of the rule that were incorporated in section 
366.3 of the March 11, 1996, interim final rule.

D. Contractor Responsibilities and Requirements

    12 U.S.C. 1822(f)(3) requires us to prescribe regulations 
applicable to independent contractors governing conflicts of interest, 
ethical responsibilities, and use of confidential information. Sections 
366.10 through 366.14 of this rule set forth the provisions for this 
requirement.
    Section 366.10 explains when you have a conflict of interest. It 
incorporates provisions of Secs. 366.2(c) and 366.5 of the March 11, 
1996, interim final rule. As discussed in II B.1 in this Supplementary 
Information section, the conflict of interest provision changes include 
(1) the removal of a suspended or excluded contractor as a conflict of 
interest, and (2) the addition of the provision to cover other 
situations which could cause us to question the integrity of the 
services a contractor provided, is providing or offers to provide. 
Examples are added for clarity and guidance.
    Section 366.11 sets forth the provision for us to grant waivers of 
a conflict of interest, and it is similar to Sec. 366.5(b) of the March 
11, 1996, interim final rule. However, no distinction is made between 
conflicts that arise prior to award and those that are discovered after 
award. Examples are added for clarity and guidance.
    Section 366.12 sets forth our minimum standards for your ethical 
responsibility. Section 366.12(a) is added to ensure that you and your 
employees are fair and objective. Section 366.12(b) replaces the 
verification provisions in Secs. 366.6(a)(3) and (b)(1) of the March 
11, 1996, interim final rule. Section 366.12(c) was added at the 
request of the Office of Inspector General to ensure that you are held 
to the same standard for reporting waste, fraud and abuse as any FDIC 
employee when conducting FDIC business. Section 366.12(d) incorporates 
the provisions of Sec. 366.7(a) of the interim final rule. Examples are 
added for clarity and guidance.
    Section 366.13 sets forth your obligation to maintain confidential 
information, and it is consistent with Sec. 366.8 of the March 11, 
1996, interim final rule. The consequences for failure to comply with 
the provisions found at Sec. 366.8(b) of the interim final rule are 
incorporated in Sec. 366.17 of this rule. Examples of inappropriate use 
of confidential information are added for clarity and guidance.
    Section 366.14 requires you to provide information to us, and it is 
similar to Sec. 366.6(a) and (b) of the March 11, 1996, interim final 
rule. However, in this rule we do not make a distinction between 
information required prior to award and subsequent to award. In 
addition, we reduce the period of time from the preceding ten (10) 
years to the preceding five (5) years regarding the information about 
defaults that a contractor must report, consistent with section 12 
U.S.C. 1822(f)(4)(C)(i).

E. Contractor's Expectations, Rights, and Obligations

    Section 366.15 of this rule identifies what we will provide you 
with respect to advice and determinations. It simplifies the 
determination, corrective actions and waiver provisions found at 
Secs. 366.4(c)(1), and 366.5(c) and (d) of the March 11, 1996, interim 
final rule.
    Section 366.16 of this rule sets forth our requirements for 
reconsideration or review of our determinations. It includes the 
reconsideration and review provisions found at Secs. 366.4(d), 366.5(e) 
and 366.5(c)(2) of the March 11, 1996, interim final rule.
    Section 366.17 sets forth the sanctions you may be subject to if 
you do not comply with this rule. It consolidates the remedies and the 
contractor's liability provisions found at Secs. 366.4(c)(2) and (3), 
366.5(d)(2) and (3), 366.7(d), 366.8(b) and 366.9 of the March 11, 
1996, interim final rule in one section.

III. Matters of Regulatory Procedure

A. Regulatory Flexibility Act

    The Board of Directors certifies that this rule will not have a 
significant economic impact on a substantial number of small entities 
within the meaning of the Regulatory Flexibility Act (5 U.S.C. 605 
(b)). This rulemaking will replace the interim final rule published on 
March 11, 1996. This rule imposes no new burden other than the minimal 
time required to read new descriptions of unique terms used in the 
rule. As discussed further in the

[[Page 34595]]

Paperwork Reduction Act section below, we are reducing the amount of 
information we currently require from contractors.
    We are also taking this opportunity to engage in a periodic review 
of this rule consistent with our responsibilities under the Regulatory 
Flexibility Act (5 U.S.C. 610). The purpose of this review is to 
determine how we may minimize any significant economic impact of the 
rule on a substantial number of small entities consistent with the 
objectives of the law that requires us to have this rule. Your comments 
on how we may reduce burden on small contractors are welcome.

B. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C. 
3501 et seq.), we may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays 
a currently valid Office of Management and Budget (OMB) control number. 
The collections of information contained in this rule were submitted to 
OMB for review.
    Written comments on the collection of information should be sent to 
the FDIC desk officer: Office of Management and Budget, Office of 
Information and Regulatory Affairs, Attn: Alexander T. Hunt, New 
Executive Office Building, Room 3208, Washington, DC 20503.
    Copies of comments should also be sent to: Federal Deposit 
Insurance Corporation, Office of the Executive Secretary, Attn: Thomas 
E. Nixon, 550 17th Street, NW., Washington, DC 20429, (202) 898-8766.
    Comments may be hand-delivered to the guard station at the rear of 
the 17th Street building (located on F Street) on business days between 
8:30 a.m. and 5:00 p.m. [Fax number (202) 898-3838; Internet address: 
[email protected]]. For further information on the Paperwork Reduction 
Act aspect of this rule, contact Thomas E. Nixon at the above address.
    Comment is solicited on:
    1. Whether the collections of information are necessary for the 
proper performance of our functions, including whether the information 
will have practical utility;
    2. The accuracy of our estimates of burden of the proposed 
collections of information, including the validity of the methodology 
and assumptions used;
    3. The quality, utility, and clarity of the information to be 
collected;
    4. Ways to minimize the burden of the information collections on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, for example, 
permitting electronic submission of responses; and
    5. Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchases of services to provide information.
    Title of the collection: This rule will modify an information 
collection previously approved by OMB titled ``Acquisition Services 
Information Requirements'' under control number 3064-0072.
    Summary of the collection: Generally, the collection includes the 
submission of information on FDIC forms by contractors who wish to do 
business with us or are currently under contract with us.
    Need and Use of the information: We use the information to ensure 
compliance with our contractor integrity and fitness regulation and to 
make contracting decisions.
    Respondents: FDIC contractors and potential FDIC contractors.
    Changes to the collection: This rule changes the definitions of 
terms used on OMB approved contracting forms (for example, the 
Integrity and Fitness Representations, the Contractor Application, and 
Background Investigation Questionnaire). The definition of 
``substantial loss'' will no longer include loans that were formerly 
delinquent but which are now current or satisfied. ``Pattern or 
practice of defalcation'' deletes a concept regarding the foreclosure 
of collateral which has been and continues to be encompassed in the 
concept of ``substantial loss.'' ``Conflict of interest'' will no 
longer include a prior suspension or exclusion from federal government 
contracting or certain terminations of our contracts. In addition, the 
time period for which contractors must disclose defaults on material 
obligations is shortened from 10 to 5 years.
    Burden estimates: On September 12, 2001, OMB approved this 
collection for 12,546 responses with a total burden of 6,285 hours. The 
collection included nine forms with the estimated response time for 
each form varying between .05 hours to 1.0 hour. This rulemaking 
affects three of the nine forms. The estimated burdens for these three 
forms:
    1. ``Integrity and Fitness Representations'', FDIC 3700/12. 2,312 
responses x 20 minutes per response, or 771 hours annual burden.
    2. ``Contractor Application'', FDIC 3700/13. 631 responses x 35 
minutes per response, or 368 hours annual burden.
    3. ``Background Investigation Questionnaire'', FDIC 1600/04. 2,330 
responses x 20 minutes per response, or 776 hours annual burden.
    Title of the collection: This rule will also modify the information 
collection previously approved by OMB titled ``Forms Relating to FDIC 
Outside Counsel Services'' under control number 3064-0122.
    Summary of the collection: Generally, the collection includes the 
submission of information on forms by legal contractors who wish to do 
business with us or are currently under contract with us.
    Need and Use of the information: We use the information to ensure 
compliance with our contractor integrity and fitness regulation, to 
make contracting decisions, and to control payments.
    Respondents: Law firms and legal support service providers that 
contract with us or seek to do so.
    Changes to the collection: The currently approved information 
collection includes 13 forms. This rulemaking affects one of the 13 
forms, FDIC 5200/01, the title of which has been changed from 
``Representations and Certifications Qualifications of Applicants: Law 
Firms and Sole Practitioners'' to ``Representations and Certifications 
for Legal Contractors'', reflecting that the respondent base has been 
expanded to include all legal support service providers. This rule also 
changes the definitions of certain terms. The definition of 
``substantial loss'' will no longer include loans that were formerly 
delinquent but which are now current or satisfied. ``Pattern or 
practice of defalcation'' deletes a concept regarding the foreclosure 
of collateral which has been and continues to be encompassed in the 
concept of ``substantial loss.'' ``Conflict of interest'' will no 
longer include a prior suspension or exclusion from federal government 
contracting or certain terminations of our contracts. In addition, the 
time period for which contractors must disclose defaults on material 
obligations is shortened from 10 to 5 years.
    Burden estimates: On October 10, 2000, OMB approved this collection 
for a total burden of 2,028 hours based on 2,783 responses on 13 forms 
with the estimated response time for each form varying between .5 hour 
to 1.25 hours. This rulemaking affects one of the 13 forms, now titled 
``Representations and Certifications for Legal Contractors'', FDIC 
5200/01. The new burden estimate for FDIC 5200/01 is 500 responses x 1 
hour, or 500 hours annual burden.

[[Page 34596]]

C. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    We have determined that this rule will not affect family well-being 
within the meaning of section 654 of the Treasury and Government 
Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 2681 (1998).

D. Congressional Review Act

    OMB has determined that this rule is not a ``major rule'' within 
the meaning of the Congressional Review Act (5 U.S.C. 801 et seq.). The 
FDIC will file appropriate reports with Congress and the General 
Accounting Office so that this final rule can be reviewed.

List of Subjects in 12 CFR Part 366

    Contractor conflicts of interest, Government contracts, Reporting 
and recordkeeping requirement.
    For the reasons set forth in the preamble, we hereby revise part 
366 of chapter III of title 12 of the Code of Federal Regulations to 
read as follows:

PART 366--MINIMUM STANDARDS OF INTEGRITY AND FITNESS FOR AN FDIC 
CONTRACTOR

Sec.
366.0  Definitions.
366.1  What is the purpose of this part?
366.2  What is the scope of this part?
366.3  Who cannot perform contractual services for the FDIC?
366.4  When is there a pattern or practice of defalcation?
366.5  What causes a substantial loss to a federal deposit insurance 
fund?
366.6  How is my ownership or control determined?
366.7  Will the FDIC waive the prohibitions under Sec. 366.3?
366.8  Who can grant a waiver of a prohibition or conflict of 
interest?
366.9  What other requirements could prevent me from performing 
contractual services for the FDIC?
366.10  When would I have a conflict of interest?
366.11  Will the FDIC waive a conflict of interest?
366.12  What are the FDIC's minimum standards of ethical 
responsibility?
366.13  What is my obligation regarding confidential information?
366.14  What information must I provide the FDIC?
366.15  What advice or determinations will the FDIC provide me on 
the applicability of this part?
366.16  When may I seek a reconsideration or review of an FDIC 
determination?
366.17  What are the possible consequences for violating this part?


    Authority: 12 U.S.C. 1819(Tenth), 1822(f)(3) and (4); Sec. 19 of 
Pub. L. 103-204, 107 Stat. 2369.


Sec. 366.0  Definitions.

    As used in this part:
    (a) The word person refers to an individual, corporation, 
partnership, or other entity with a legally independent existence.
    (b) The terms we, our, and us refer to the Federal Deposit 
Insurance Corporation (FDIC), except when acting as conservator or 
operator of a bridge bank.
    (c) The terms I, me, my, mine, you, and yourself refer to a person 
who submits an offer to perform or performs, directly or indirectly, 
contractual services or functions on our behalf.
    (d) The phrase insured depository institution refers to any bank or 
savings association whose deposits are insured by the FDIC.


Sec. 366.1  What is the purpose of this part?

    This part establishes the minimum standards of integrity and 
fitness that contractors, subcontractors, and employees of contractors 
and subcontractors must meet if they perform any service or function on 
our behalf. This part includes regulations governing conflicts of 
interest, ethical responsibility, and use of confidential information 
in accordance with 12 U.S.C. 1822(f)(3) and the prohibitions and the 
submission of information in accordance with 12 U.S.C. 1822(f)(4).


Sec. 366.2  What is the scope of this part?

    (a) This part applies to a person who submits an offer to perform 
or performs, directly or indirectly, a contractual service or function 
on our behalf.
    (b) This part does not apply to:
    (1) An FDIC employee for the purposes of title 18, United States 
Code; or
    (2) The FDIC when we operate an insured depository institution such 
as a bridge bank or conservatorship.


Sec. 366.3  Who cannot perform contractual services for the FDIC?

    We will not enter into a contract with you to perform a service or 
function on our behalf, if you or any person that owns or controls you, 
or any entity you own or control:
    (a) Has a felony conviction;
    (b) Was removed from or is prohibited from participating in the 
affairs of an insured depository institution as a result of a federal 
banking agency final enforcement action;
    (c) Has a pattern or practice of defalcation; or
    (d) Is responsible for a substantial loss to a federal deposit 
insurance fund.


Sec. 366.4  When is there a pattern or practice of defalcation?

    (a) You have a pattern or practice of defalcation under 
Sec. 366.3(c) when you, any person that owns or controls you, or any 
entity you own or control has a legal responsibility for the payment on 
at least two obligations that are:
    (1) To one or more insured depository institutions;
    (2) More than 90 days delinquent in the payment of principal, 
interest, or a combination thereof; and
    (3) More than $50,000 each.
    (b) The following are examples of when you have or do not have a 
pattern or practice of defalcation. These examples are not inclusive.
    (1) You have five loans at insured depository institutions. Three 
of them are 90 days past due. Two of the three loans have outstanding 
balances of more than $50,000 each. You have a pattern or practice of 
defalcation.
    (2) You have five loans at insured depository institutions. Two of 
them are 90 days past due. One of the two is with ABC Bank for 
$170,000. The other one is with XYZ bank for $60,000. You have a 
pattern or practice of defalcation.
    (3) You have five loans at insured depository institutions. Three 
of them are 90 days past due. One of the three has an outstanding 
balance of more than $50,000. The other two have outstanding balances 
of less than $50,000. You do not have a pattern or practice of 
defalcation.
    (4) You have five loans at insured depository institutions. Three 
of them have outstanding balances of more than $50,000. Two of those 
three were 90 days past due but are now current. You do not have a 
pattern or practice of defalcation.


Sec. 366.5  What causes a substantial loss to a federal deposit 
insurance fund?

    You cause a substantial loss to a federal deposit insurance fund 
under Sec. 366.3(d) when you, or any person that owns or controls you, 
or any entity you own or control has:
    (a) An obligation to us that is delinquent for 90 days or more and 
on which there is an outstanding balance of principal, interest, or a 
combination thereof of more than $50,000;
    (b) An unpaid final judgment in our favor that is in excess of 
$50,000, regardless of whether it becomes discharged in whole or in 
part in a bankruptcy proceeding;
    (c) A deficiency balance following foreclosure of collateral on an 
obligation owed to us that is in excess of $50,000, regardless of 
whether it becomes discharged in whole or in part in a bankruptcy 
proceeding; or

[[Page 34597]]

    (d) A loss to us that is in excess of $50,000 that we report on IRS 
Form 1099-C, Information Reporting for Discharge of Indebtedness.


Sec. 366.6  How is my ownership or control determined?

    (a) Your ownership or control is determined on a case-by-case 
basis. Your ownership or control depends on the specific facts of your 
situation and the particular industry and legal entity involved. You 
must provide documentation to us to use in determining your ownership 
or control.
    (b) The interest of a spouse or other family member in the same 
organization is imputed to you in determining your ownership or 
control.
    (c) The following are examples of when your ownership or control 
may or may not exist. These examples are not inclusive.
    (1) You have control if you are the president or chief executive 
officer of an organization.
    (2) You have ownership or control if you are a partner in a small 
law firm. You might not have ownership or control if you are a partner 
in a large national law firm.
    (3) You have control if you are a general partner of a limited 
partnership. You have ownership or control if you have a limited 
partnership interest of 25 percent or more.
    (4) You have ownership or control if you have the:
    (i) Power to vote, directly or indirectly, 25% or more interest of 
any class of voting stock of a company;
    (ii) Ability to direct in any manner the election of a majority of 
a company's directors or trustees; or
    (iii) Ability to exercise a controlling influence over the 
company's management and policies.


Sec. 366.7  Will the FDIC waive the prohibitions under Sec. 366.3?

    We may waive the prohibitions for entities other than individuals 
for good cause shown at our discretion when our need to contract for 
your services outweighs all relevant factors. The statute does not 
allow us to waive the prohibitions for individuals.


Sec. 366.8  Who can grant a waiver of a prohibition or conflict of 
interest?

    The FDIC's Board of Directors delegates to the Chairman, or his 
designee, authority to issue waivers and implement procedures for part 
366.


Sec. 366.9  What other requirements could prevent me from performing 
contractual services for the FDIC?

    You must avoid a conflict of interest, be ethically responsible, 
and maintain confidential information as described in Secs. 366.10 
through 366.13. You must also provide us with the information we 
require in Sec. 366.14. Failure to meet these requirements may prevent 
you from contracting with us.


Sec. 366.10  When would I have a conflict of interest?

    (a) You have a conflict of interest when you, any person that owns 
or controls you, or any entity you own or control:
    (1) Has a personal, business, or financial interest or relationship 
that relates to the services you perform under the contract;
    (2) Is a party to litigation against us, or represents a party that 
is;
    (3) Submits an offer to acquire an asset from us for which services 
were performed during the past three years, unless the contract allows 
for the acquisition; or
    (4) Engages in an activity that would cause us to question the 
integrity of the service you provided, are providing or offer to 
provide us, or impairs your independence.
    (b) The following are examples of a conflict of interest. These 
examples are not inclusive.
    (1) You submit an offer to perform property management services for 
us and you own or manage a competing property.
    (2) You audit a business under a contract with us and you or a 
partner in your firm has an ownership interest in that business.
    (3) You perform loan services on a pool of loans we are selling, 
and you submit a bid to purchase one or more of the loans in the pool.
    (4) You audit your own work or provide nonaudit services that are 
significant or material to the subject matter of the audit.


Sec. 366.11  Will the FDIC waive a conflict of interest?

    (a) We may waive a conflict of interest for good cause shown at our 
discretion when our need to contract for your services outweighs all 
relevant factors.
    (b) The following are examples of when we may grant you a waiver 
for a conflict of interest. These examples are not inclusive.
    (1) We may grant a waiver to an outside counsel who has a 
representational conflict. We will weigh all relevant facts and 
circumstances in making our determination.
    (2) We may grant a waiver to allow a contractor to acquire an asset 
from us who is providing or has provided services on that asset. We 
will consider whether granting the waiver will adversely affect the 
fairness of the sale, the type of services provided, and other facts 
and circumstances relevant to the sale in making our determination.


Sec. 366.12  What are the FDIC's minimum standards of ethical 
responsibility?

    (a) You and any person who performs services for us must not 
provide preferential treatment to any person in your dealings with the 
public on our behalf.
    (b) You must ensure that any person you employ to perform services 
for us is informed about their responsibilities under this part.
    (c) You must disclose to us waste, fraud, abuse or corruption.
    (d) You and any person who performs contract services to us must 
not:
    (1) Accept or solicit for yourself or others any favor, gift, or 
other item of monetary value from any person who you reasonably believe 
is seeking an official action from you on our behalf, or has an 
interest that the performance or nonperformance of your duties to us 
may substantially affect;
    (2) Use or allow the use of our property, except as specified in 
the contract;
    (3) Make an unauthorized promise or commitment on our behalf; or
    (4) Provide impermissible gifts or entertainment to an FDIC 
employee.
    (e) The following are examples of when you are engaging in 
unethical behavior. These examples are not inclusive.
    (1) Using government resources, including our Internet connection, 
to conduct any business that is unrelated to the performance of your 
contract with us.
    (2) Submitting false invoices or claims, or making misleading or 
false statements.
    (3) Committing us to forgive or restructure a debt or portion of a 
debt, unless we provide you with written authority to do so.


Sec. 366.13  What is my obligation regarding confidential information?

    (a) Neither you nor any person who performs services on your behalf 
may use or disclose information obtained from us or a third party in 
connection with an FDIC contract, unless:
    (1) The contract allows or we authorize the use or disclosure;
    (2) The information is generally available to the general public; 
or
    (3) We make the information available to the general public.
    (b) The following are examples of when your use of confidential 
information is inappropriate. These examples are not inclusive.

[[Page 34598]]

    (1) Disclosing information about an asset, such as internal asset 
valuations, appraisals or environmental reports, except as part of 
authorized due diligence materials, to a prospective asset purchaser.
    (2) Disclosing a borrower's or guarantor's personal or financial 
information, such as a financial statement to an unauthorized party.


Sec. 366.14  What information must I provide the FDIC?

    You must:
    (a) Certify in writing that you can perform services for us under 
Sec. 366.3 and have no conflict of interest under Sec. 366.10(a).
    (b) Submit a list and description of any instance during the 
preceding five years in which you, any person that owns or controls 
you, or any entity you own or control, defaulted on a material 
obligation to an insured depository institution. A default on a 
material obligation occurs when a loan or advance with an outstanding 
balance of more than $50,000 is or was delinquent for 90 days or more.
    (c) Notify us within 10 business days after you become aware that 
you, or any person you employ to perform services for us, are not in 
compliance with this part. Your notice must include a detailed 
description of the facts of the situation and how you intend to resolve 
the matter.
    (d) Agree in writing that you will employ only persons who meet the 
requirements of this part to perform services on our behalf.
    (e) Comply with any request from us for information.
    (f) Retain any information you rely upon regarding the provisions 
of this part for a period of three years following termination or 
expiration and final payment of the related contract for services.


Sec. 366.15  What advice or determinations will the FDIC provide me on 
the applicability of this part?

    (a) We are available to you for consultation on those 
determinations you are responsible for making under this part, 
including those with respect to any person you employ or engage to 
perform services for us.
    (b) We will determine if this part prohibits you from performing 
services for us prior to contract award, after contract award, and 
during the performance of a contract.
    (c) We may determine what corrective action you must take.
    (d) We may grant you a waiver for good cause shown where provided 
for under this part.


Sec. 366.16  When may I seek a reconsideration or review of an FDIC 
determination?

    (a) You may seek reconsideration or review of our initial 
determination by sending a written request to the individual who issued 
you the initial decision.
    (b) You must provide new information or explain a change in 
circumstances for our reconsideration of an initial decision. The 
individual who issued you the initial decision may either make a new 
determination or refer your request to a higher authority for review.
    (c) You must provide an explanation of how you perceive that we 
misapplied this part that sets forth the legal or factual errors for 
our review of an initial decision.


Sec. 366.17  What are the possible consequences for violating this 
part?

    Depending on the circumstances, violations of this part may result 
in rescission or termination of a contract, as well as administrative, 
civil, or criminal sanctions.

    By order of the Board of Directors.

    Dated in Washington, DC, this 7th day of May, 2002.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 02-12020 Filed 5-14-02; 8:45 am]
BILLING CODE 6714-01-P