[Federal Register Volume 81, Number 124 (Tuesday, June 28, 2016)]
[Rules and Regulations]
[Pages 41787-41790]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15193]



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 Rules and Regulations
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  Federal Register / Vol. 81, No. 124 / Tuesday, June 28, 2016 / Rules 
and Regulations  

[[Page 41787]]



OFFICE OF GOVERNMENT ETHICS

5 CFR Parts 2634 and 2636

RINs 3209-AA00 and 3209-AA38


Civil Monetary Penalties Inflation Adjustments for Ethics in 
Government Act Violations

AGENCY: Office of Government Ethics.

ACTION: Interim final rule.

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

SUMMARY: In accordance with the Federal Civil Penalties Inflation 
Adjustment Act Improvements Act of 2015, the U.S. Office of Government 
Ethics (OGE) is issuing this rule to make 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.

DATES: This interim final rule is effective August 1, 2016. Written 
comments are invited and must be received on or before August 1, 2016.

ADDRESSES: You may submit comments, in writing, to OGE on this interim 
final rule, identified by RINs 3209-AA00 and 3209-AA38, by any of the 
following methods:
    Email: [email protected]. Include the reference ``Civil Monetary 
Penalties Inflation Adjustments Interim Final Rule'' in the subject 
line of the message.
    Fax: (202) 482-9237.
    Mail/Hand Delivery/Courier: Office of Government Ethics, Suite 500, 
1201 New York Avenue NW., Washington, DC 20005-3917, Attention: ``Civil 
Monetary Penalties Inflation Adjustments Interim Final Rule.''
    Instructions: All submissions must include OGE's agency name and 
the Regulation Identifier Numbers (RINs), 3209-AA00 and 3209-AA38, for 
this proposed rulemaking. All comments, including attachments and other 
supporting materials, will become part of the public record and subject 
to public disclosure. Comments may be posted on OGE's Web site, 
www.oge.gov. Sensitive personal information, such as account numbers or 
Social Security numbers, should not be included. Comments generally 
will not be edited to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: Kimberly L. Sikora Panza, Assistant 
Counsel, General Counsel and Legal Policy Division, Office of 
Government Ethics, Telephone: 202-482-9300; TTY: 800-877-8339; FAX: 
202-482-9237.

SUPPLEMENTARY INFORMATION:

I. Background

    The Office of Government Ethics (OGE) is issuing this interim final 
rule as mandated by the Federal Civil Penalties Inflation Adjustment 
Act Improvements Act of 2015 (Sec. 701 of Pub. L. 114-74) (the 2015 
Act), which further amended the Federal Civil Penalties Inflation 
Adjustment Act of 1990 (Pub. L. 101-410) (the Inflation Adjustment Act) 
to adjust for inflation the civil monetary penalties (CMPs) provided in 
the Ethics in Government Act of 1978 as amended, 5 U.S.C. appendix (the 
Ethics Act). As explained below, all of the Ethics Act CMPs are being 
raised in accordance with the formula set forth in the 2015 Act. These 
``catch-up'' adjustments will improve the effectiveness of the Ethics 
Act CMPs and maintain their deterrent effect.
    In revising the Inflation Adjustment Act, the 2015 Act requires 
Federal agencies to adjust the level of civil monetary penalties with 
an initial ``catch-up'' adjustment through an interim final rule. The 
2015 Act also requires agencies to make subsequent annual inflationary 
adjustments of their CMPs. Under the 2015 Act, the interim final rule 
with the ``catch-up'' adjusted penalties must take effect by August 1, 
2016. In the case of the Ethics Act CMPs, the effective date of this 
rulemaking regarding the ``catch-up'' adjustments is August 1, 2016.
    OGE emphasizes that the increased civil monetary penalty amounts 
calculated under the 2015 Act are applicable only to civil penalties 
assessed after August 1, 2016 whose associated violations occurred 
after November 2, 2015, the date of enactment of the 2015 Act. 
Therefore, violations occurring on or before November 2, 2015, and 
assessments made on or before August 1, 2016 whose associated 
violations occurred after November 2, 2015, will continue to be subject 
to the civil monetary penalty amounts currently in effect. The modified 
OGE regulatory provisions will reflect the original, previously-
adjusted and newly-adjusted Ethics Act CMP amounts. OGE will notify 
departments and agencies by memorandum of this rulemaking action and 
its effect.

Ethics Act CMPs

    There are five CMPs provided for in the Ethics Act, as amended 
inter alia by the 1989 Ethics Reform Act and the 2007 Honest Leadership 
and Open Government Act (HLOGA). Specifically, the law provides for 
civil penalties 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 five 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; 
negligent breach of a qualified trust by trustees and interested 
parties; misuse of a public report; and violation of outside 
employment/activities provisions. 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, 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.
    In a 1999 rulemaking, 64 FR 47095, Aug. 30, 1989, OGE made 
inflation adjustments to the Ethics Act civil monetary penalties. These 
adjustments were mandated by the Debt Collection Improvement Act of 
1996, section 31001 of Pub. L. 104-134, 110 Stat. 1321, which revised 
the Inflation Adjustment Act to require Federal agencies to adjust 
certain statutory CMPs for inflation. Prior to the 1999 rulemaking, the 
Ethics Act CMPs were set by statute in the Ethics Reform Act of 1989. 
In the 1999 rulemaking, OGE increased the

[[Page 41788]]

maximum civil monetary penalties for 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 from 
$10,000 to $11,000. OGE also increased the maximum civil monetary 
penalty for negligent breach of a qualified trust by trustees and 
interested parties from $5,000 to $5,500. In that same rulemaking, OGE 
adjusted the maximum civil monetary penalty for knowing and willful 
failure to file, report required information on, or falsification of a 
public financial disclosure report from $10,000 to $11,000; however, in 
the 2007 HLOGA, Congress statutorily increased that penalty to a 
maximum of $50,000. No further adjustments have been made to any of the 
Ethics Act CMPs described in this paragraph.

Late Filing Fee Not a CMP

    The Office of Government Ethics notes that it has previously 
determined, after consultation with the Department of Justice, that the 
$200 late filing fee for public financial disclosure reports that are 
more than 30 days overdue (see section 105(d) of the Ethics Act, 5 
U.S.C. appendix, 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 in this rulemaking (nor was 
it previously adjusted by OGE in the 1999 rulemaking), and will remain 
at its current amount of $200.

Calculation of Inflation Adjustments

    The ``catch-up'' adjustments to civil monetary penalties mandated 
by the 2015 Act are based on the percent change between the Consumer 
Price Index for all Urban Consumers (CPI-U) for the month of October in 
the year of the previous adjustment (not made under the Inflation 
Adjustment Act), and the October 2015 CPI-U. The inflation adjustments 
are to be rounded to the nearest dollar, and agencies may not increase 
penalty levels by more than 150 percent of the corresponding levels in 
effect on November 2, 2015. Subsequent annual adjustments for inflation 
mandated by the 2015 Act will be based on the percent change between 
the October CPI-U preceding the date of the adjustment, and the prior 
year's October CPI-U.
    With the exception of the penalty for knowing and willful failure 
to file, report required information on, or falsification of a public 
financial disclosure report, 5 U.S.C. appendix, 104(a), 5 CFR 
2634.701(b), all of the Ethics Act CMPs were last adjusted other than 
pursuant to the Inflation Adjustment Act by the 1989 Ethics Reform Act. 
(As discussed above, the adjustments made in the 1999 rulemaking were 
done pursuant to amendments to the Inflation Adjustment Act; the 
``catch-up'' adjustment calculation established by the 2015 Act 
requires agencies to make adjustments based on when CMPs were 
established or last adjusted other than pursuant to the Inflation 
Adjustment Act.) For these CMPs, the adjusted penalties established by 
this rulemaking will be calculated by multiplying the penalty amount 
established by the 1989 Ethics Reform Act and 1.89361, the CPI-U 
multiplier for 1989. The penalty for knowing and willful failure to 
file, report required information on, or falsification of a public 
financial disclosure report was most recently adjusted by statute in 
2007 by HLOGA. For this CMP, the adjusted penalty established by this 
rulemaking will be calculated by multiplying the penalty amount 
established by HLOGA and 1.13833, the CPI-U multiplier for 2007. None 
of these adjusted penalties are more than 150 percent of the 
corresponding levels in effect on November 2, 2015.
    Applying the formula established by the 2015 Act, OGE is amending 
the Ethics Act CMPs to further increase the three previously-adjusted 
$11,000 maximum penalties reflected in 5 CFR 2634.702(a) and 2634.703 
and 5 CFR 2636.104(a), to a maximum of $18,936; to increase the one 
previously-adjusted $5,500 maximum penalty reflected in 2634.702(b), to 
a maximum of $9,468; and to increase the one previously-adjusted 
$50,000 maximum penalty, reflected in 5 CFR 2634.701(b), to a maximum 
of $56,916. As noted above, these new amounts apply only to civil 
monetary penalties that are assessed after August 1, 2016 whose 
associated violations occurred after November 2, 2015.
    The Office of Government Ethics will also make future adjustments 
to the Ethics Act CMPs in accordance with the statutory formula set 
forth in the 2015 Act, which provides for annual adjustments for 
inflation.

II. Matters of Regulatory Procedure

Administrative Procedure Act

    Pursuant to 5 U.S.C. 553(b), as General Counsel 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 2015 
Act, which specifies adoption through an interim final rulemaking. 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, the effective date for this interim final rule is August 1, 
2016.

Regulatory Flexibility Act

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

Paperwork Reduction Act

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

Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
chapter 5, subchapter II), this rule would not significantly or 
uniquely affect small governments and will not result in increased 
expenditures by State, local, and tribal governments, in the aggregate, 
or by the private sector, of $100 million or more (as adjusted for 
inflation) in any one year.

Executive Order 13563 and Executive Order 12866

    Executive Orders 13563 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select the regulatory approaches that 
maximize net benefits (including economic, environmental, public health 
and safety effects, distributive impacts, and equity). Executive Order 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This rulemaking has been

[[Page 41789]]

reviewed by the Office of Management and Budget, even though it is not 
deemed ``significant'' under section 3(f) of Executive Order 12866 
since it is limited to the adoption of statutorily mandated inflation 
adjustments without interpretation.

Executive Order 12988

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

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.

    Dated: June 22, 2016.
David J. Apol,
General Counsel, 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--EXECUTIVE BRANCH FINANCIAL DISCLOSURE, QUALIFIED TRUSTS, 
AND CERTIFICATES OF DIVESTITURE

0
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) and Sec. 701, Pub. L. 114-74 
(Federal Civil Penalties Inflation Adjustment Act Improvements Act 
of 2015); 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.


0
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 the Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015; and 
Executive Order 12674 of April 12, 1989, as modified by Executive Order 
12731 of October 17, 1990.


0
3. Section 2634.701 is amended by revising paragraph (b) to read as 
follows:


Sec.  2634.701  Failure to file or falsifying reports.

* * * * *
    (b) Civil action. The Attorney General may bring a civil action in 
any appropriate United States district court against any individual who 
knowingly and willfully falsifies or who knowingly and willfully fails 
to file or report any information required by filers of public reports 
under subpart B of this part. The court in which the action is brought 
may assess against the individual a civil monetary penalty in any 
amount, not to exceed the amounts set forth below, as provided by 
section 104(a) of the Act, as amended, and as adjusted in accordance 
with the inflation adjustment procedures prescribed in the Federal 
Civil Penalties Inflation Adjustment Act of 1990, as amended:

------------------------------------------------------------------------
                Date of violation or assessment                  Penalty
------------------------------------------------------------------------
Violation occurring before Sept. 29, 1999.....................   $10,000
Violation occurring between Sept. 29, 1999 and Sept. 13, 2007.    11,000
Violation occurring between Sept. 14, 2007 and Nov. 2, 2015...    50,000
Violation occurring after Nov. 2, 2015 and penalty assessed on    50,000
 or before Aug. 1, 2016.......................................
Violation occurring after Nov. 2, 2015 and penalty assessed       56,916
 after Aug. 1, 2016...........................................
------------------------------------------------------------------------

* * * * *
0
4. Section 2634.702 is revised to read as follows:


Sec.  2634.702  Breaches by trust fiduciaries and interested parties.

    (a) The Attorney General may bring a civil action in any 
appropriate United States district court against any individual who 
knowingly and willfully violates the provisions of Sec.  2634.408(d)(1) 
or (e)(1). The court in which the action is brought may assess against 
the individual a civil monetary penalty in any amount, not to exceed 
the amounts set forth below, as provided by section 102(f)(6)(C)(i) of 
the Act and as adjusted in accordance with the inflation adjustment 
procedures prescribed in the Federal Civil Penalties Inflation 
Adjustment Act of 1990, as amended:

------------------------------------------------------------------------
                Date of violation or assessment                  Penalty
------------------------------------------------------------------------
Violation occurring before Sept. 29, 1999.....................   $10,000
Violation occurring between Sept. 29, 1999 and Nov. 2, 2015...    11,000
Violation occurring after Nov. 2, 2015 and penalty assessed on    11,000
 or before Aug. 1, 2016.......................................
Violation occurring after Nov. 2, 2015 and penalty assessed       18,936
 after Aug. 1, 2016...........................................
------------------------------------------------------------------------

    (b) The Attorney General may bring a civil action in any 
appropriate United States district court against any individual who 
negligently violates the provisions of Sec.  2634.408(d)(1) or (e)(1). 
The court in which the action is brought may assess against the 
individual a civil monetary penalty in any amount, not to exceed the 
amounts set forth below, as provided by section 102(f)(6)(C)(ii) of the 
Act and as adjusted in accordance with the inflation adjustment 
procedures of the Federal Civil Penalties Inflation Adjustment Act of 
1990, as amended:

------------------------------------------------------------------------
                Date of violation or assessment                  Penalty
------------------------------------------------------------------------
Violation occurring before Sept. 29, 1999.....................    $5,000
Violation occurring between Sept. 29, 1999 and Nov. 2, 2015...     5,500
Violation occurring after Nov. 2, 2015 and penalty assessed on     5,500
 or before Aug. 1, 2016.......................................
Violation occurring after Nov. 2, 2015 and penalty assessed        9,468
 after Aug. 1, 2016...........................................
------------------------------------------------------------------------

0
5. Section 2634.703 is revised to read as follows:


Sec.  2634.703  Misuse of public reports.

    (a) The Attorney General may bring a civil action against any 
person who obtains or uses a report filed under this part for any 
purpose prohibited by section 105(c)(1) of the Act, as incorporated in 
Sec.  2634.603(f). The court in which the action is brought may assess 
against the person a civil monetary penalty in any amount, not to 
exceed the amounts set forth below, as provided by section 105(c)(2) of 
the Act and as adjusted in accordance with the inflation adjustment 
procedures prescribed in the Federal Civil Penalties Inflation 
Adjustment Act of 1990, as amended.

------------------------------------------------------------------------
                Date of violation or assessment                  Penalty
------------------------------------------------------------------------
Violation occurring before Sept. 29, 1999.....................   $10,000
Violation occurring between Sept. 29, 1999 and Nov. 2, 2015...    11,000
Violation occurring after Nov. 2, 2016 and penalty assessed on    11,000
 or before Aug. 1, 2016.......................................

[[Page 41790]]

 
Violation occurring after Nov. 2, 2015 and penalty assessed       18,936
 after Aug. 1, 2016...........................................
------------------------------------------------------------------------

    (b) This remedy shall be in addition to any other remedy available 
under statutory or common law.

PART 2636--LIMITATIONS ON OUTSIDE EARNED INCOME, EMPLOYMENT AND 
AFFILIATIONS FOR CERTAIN NONCAREER EMPLOYEES

0
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) and Sec. 701, Pub. L. 114-74 (Federal Civil Penalties 
Inflation Adjustment Act Improvements Act of 2015); 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.

0
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, 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 the amounts set forth below, as 
adjusted 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.

------------------------------------------------------------------------
                Date of violation or assessment                  Penalty
------------------------------------------------------------------------
Violation occurring before Sept. 29, 1999.....................   $10,000
Violation occurring between Sept. 29, 1999 and Nov. 2, 2015...    11,000
Violation occurring after Nov. 2, 2015 and penalty assessed on    11,000
 or before Aug. 1, 2016.......................................
Violation occurring after Nov. 2, 2015 and penalty assessed       18,936
 after Aug. 1, 2016...........................................
------------------------------------------------------------------------

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[FR Doc. 2016-15193 Filed 6-27-16; 8:45 am]
 BILLING CODE 6345-03-P