[Federal Register Volume 87, Number 77 (Thursday, April 21, 2022)]
[Proposed Rules]
[Pages 23769-23780]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-08130]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 87, No. 77 / Thursday, April 21, 2022 / 
Proposed Rules  

[[Page 23769]]



OFFICE OF GOVERNMENT ETHICS

5 CFR Parts 2634 and 2635

RIN 3209-AA50


Legal Expense Fund Regulation

AGENCY: Office of Government Ethics.

ACTION: Proposed rule.

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

SUMMARY: The U.S. Office of Government Ethics (OGE) is proposing to add 
a new subpart to the Standards of Ethical Conduct for Employees of the 
Executive Branch (Standards). The new subpart contains the standards 
for an employee's acceptance of payments for legal expenses through a 
legal expense fund and an employee's acceptance of pro bono legal 
services for a matter arising in connection with the employee's 
official position, the employee's prior position on a campaign of a 
candidate for President or Vice President, or the employee's prior 
position on a Presidential Transition Team. OGE is also proposing to 
make related amendments to the portions of the Standards that govern 
the solicitation and acceptance of gifts from outside sources and the 
portions of the Executive Branch Financial Disclosure regulation that 
govern confidential financial disclosure reports.

DATES: Written comments are invited and must be received on or before 
June 21, 2022.

ADDRESSES: You may submit comments, in writing, to OGE on this proposed 
rule, identified by RIN 3209-AA50, by any of the following methods:
    Email: [email protected]. Include the reference ``Proposed Rule: Legal 
Expense Fund Regulation'' in the subject line of the message.
    Fax: (202) 482-9237.
    Mail: Office of Government Ethics, Suite 500, 1201 New York Avenue 
NW, Washington, DC 20005-3917, Attention: ``Proposed Rule: Legal 
Expense Fund Regulation.''
    Instructions: All submissions must include OGE's agency name and 
the Regulation Identifier Number (RIN), 3209-AA50, 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 website, 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: Maura Leary, Assistant Counsel, or 
Heather Jones, Senior Counsel for Financial Disclosure, General Counsel 
and Legal Policy Division, Office of Government Ethics, Suite 500, 1201 
New York Avenue NW, Washington, DC 20005-3917; Telephone: (202) 482-
9300; TTY: (800) 877-8339; FAX: (202) 482-9237.

SUPPLEMENTARY INFORMATION:

I. Background

    There is currently no statutory or regulatory framework in the 
executive branch for establishing a legal expense fund (LEF), and the 
U.S. Office of Government Ethics (OGE) has not approved or disapproved 
any specific LEFs. In the legislative branch, LEFs are governed by 
House and Senate LEF regulations. See House Committee on Ethics, 
``Contributions to a Legal Expense Fund,'' U.S. House of 
Representatives, https://ethics.house.gov/sites/ethics.house.gov/files/Pink%20Sheet%20With%20Regs.pdf; Senate Select Committee on Ethics, 
Senate Ethics Manual, Government Printing Office, 2003, https://www.ethics.senate.gov/downloads/pdffiles/manual.pdf, pages 30-31. OGE's 
role has been limited to providing guidance to help ensure that 
executive branch employees who may receive distributions from an LEF 
will be in compliance with existing ethics laws and rules, such as the 
gift rules, if they accept such a distribution. See OGE Legal Advisory 
LA-17-10 (Sept. 28, 2017). However, this limited approach to LEFs 
lacked transparency and created concerns regarding the appearance of 
corruption in the creation and operation of LEFs for the benefit of 
executive branch employees. See Letter from Emory Rounds, Director, 
Office of Gov't Ethics, to Sen. Margaret Wood Hassan, et al., Sept. 11, 
2018, https://www.oge.gov/Web/OGE.nsf/Congressional%20Correspondence/
495516AF975202A7852585B6005A1FE4/$FILE/
Letter%20to%20Senators%20Hassan,%20Carper,%20Peters,%20Jones,%20and%20Ha
rris.pdf?open. As a result, OGE began the process of drafting an LEF 
regulation with a series of public input opportunities to ``allow the 
creation of a regulation that will ensure that [LEFs] with executive 
branch employee recipients will be transparent, open, and accessible to 
the public.'' Id.
    On April 15, 2019, OGE sought stakeholder input on issues 
specifically related to LEFs through an advance notice of proposed 
rulemaking (ANPRM). See Notice and Request for Comments: Legal Expense 
Fund Regulation, 84 FR 15146 (Apr. 15, 2019). In response to this 
ANPRM, OGE received written comments and heard testimony at a virtual 
public hearing on May 22, 2019. See https://www.oge.gov/Web/oge.nsf/Resources/Rulemaking (providing written comments and hearing 
transcript). OGE also solicited and considered the views of executive 
branch agency ethics officials. On September 26, 2019, OGE invited all 
interested members of the public and agency ethics officials to share 
ideas, provide information, and express concerns at two public meetings 
about specific topics related to LEFs. See Announcement of Public 
Meeting: Legal Expense Fund Regulation, 84 FR 50791 (Sept. 26, 2019). 
These meetings allowed interested groups to hear and respond to the 
concerns of other affected persons and helped OGE to further understand 
the views of various constituencies. See https://www.oge.gov/Web/oge.nsf/Resources/Rulemaking (providing meeting agendas, lists of 
attendees, and lists of topics discussed). OGE also provided for an 
additional comment period. See id.
    After considering this public input, OGE is proposing an LEF 
regulation that creates the framework to govern an employee's 
acceptance of both payments for legal expenses through an LEF and pro 
bono legal services for matters arising in connection with the 
employee's official position, the employee's prior position on a 
campaign of a candidate for President or Vice President, or the 
employee's prior position on a Presidential Transition Team. The 
proposed regulation will

[[Page 23770]]

more clearly spell out who is a prohibited donor, establish donation 
caps, and require transparency in the form of quarterly, publicly 
available reports.
    OGE has consulted with the Department of Justice and the Office of 
Personnel Management pursuant to section 201(a) of Executive Order 
12674, as modified by Executive Order 12731, and the authorities 
contained in titles I and IV of the Ethics in Government Act of 1978.

II. Analysis of Proposed Rule Amendments

    OGE is proposing to add a new subpart J to the Standards of Ethical 
Conduct for Employees of the Executive Branch (Standards). The new 
subpart contains the standards for an employee's acceptance of payments 
for legal expenses through an LEF and an employee's acceptance of pro 
bono legal services for matters arising in connection with the 
employee's past or current official position, the employee's prior 
position on a campaign of a candidate for President or Vice President, 
or the employee's prior position on a Presidential Transition Team 
(hereafter referred to as ``covered legal matters''). OGE has authority 
to issue a legal expense fund regulation pursuant to title IV of the 
Ethics in Government Act of 1978; sections 201(a) and 403 of Executive 
Order 12674 (as modified by E.O. 12731), and 5 U.S.C. 7301, 7351(c), 
and 7353(b)(1). OGE is also proposing to make related amendments to the 
portions of the Standards that govern the solicitation and acceptance 
of gifts from outside sources in subpart B (``gift rules''). Chiefly, 
OGE is proposing a new exception to the gift rules for legal expense 
payments or services for covered legal matters, so long as the payments 
or services are provided in accordance with proposed subpart J. 
Finally, OGE is proposing to make related amendments to the portions of 
the Executive Branch Financial Disclosure regulation that govern 
confidential financial disclosure reports.
    Under the proposed amendments, employees must comply with proposed 
subpart J to accept legal expense payments from LEFs or pro bono legal 
services for any covered legal matters. However, proposed subpart J 
contemplates that, to the extent a gift exclusion or exception in 
subpart B (e.g., gifts based on a personal relationship; gifts of 
discounts and similar benefits; employee benefits plans maintained by 
current or former employers) applies, an employee may continue to use 
those means to accept legal expense payments or services for covered 
legal matters instead of establishing an LEF under subpart J. The 
employee is required to comply with proposed subpart J or use a gift 
exclusion or exception in subpart B regardless of whether payments are 
given from a prohibited source or given because of the employee's 
official position.

A. Subpart J of the Standards

    Proposed subpart J contains the standards for the creation, 
administration, and termination of an LEF that is established to 
receive contributions and to make distributions of legal expense 
payments for covered legal matters. Proposed subpart J also contains 
the standards for an employee's acceptance of pro bono legal services 
for covered legal matters.
Proposed Sec.  2635.1002: Applicability and Related Considerations
    Proposed Sec.  2635.1002 describes the covered legal matters for 
which an employee must comply with proposed subpart J to accept legal 
expense payments or pro bono legal services. Given the nature of the 
covered legal matters and their connection to the employee's government 
position, OGE believes it is necessary to regulate legal expense 
payments for covered legal matters through proposed subpart J to help 
ensure that employees avoid any action that might result in or create 
the appearance of using public office for private gain. In contrast, 
OGE believes that the gift rules in subpart B of the Standards are 
appropriate to govern gifts of legal expense payments for personal 
matters. Such gifts, which are not distinguishable from other personal 
gifts, may be accepted, for example, under the personal relationship 
exception or as a discount or similar benefit. These gifts do not 
trigger the heightened concern of payments for legal expenses arising 
from an employee's official position. Therefore, proposed section 1002 
excludes payments for legal expenses arising from personal matters from 
coverage by this subpart. This treatment is largely consistent with 
House and Senate LEF regulations.
    Proposed Sec.  2635.1002 also makes clear that employees may accept 
a payment for legal expenses without having to establish and administer 
an LEF if that payment is otherwise permissible under a gift exclusion 
or exception in subpart B. When soliciting public input, OGE received a 
number of comments expressing concern that a legal expense fund 
regulation would restrict employees from accessing legal services 
through other allowable means. To the extent that these other means are 
permissible under a gift exclusion or exception in subpart B (e.g., 
gifts based on a personal relationship; gifts of discounts and similar 
benefits; employee benefits plans maintained by current or former 
employers), an employee may continue to use those means to accept legal 
expense payments or services for covered legal matters instead of 
establishing an LEF under subpart J. OGE welcomes comment on the 
continued use of these exceptions for legal expense payments.
    Finally, proposed Sec.  2635.1002 reminds employees that, in 
addition to the rules set out in subpart J, other provisions in the 
Standards continue to apply to employees. Subpart J does not override 
these rules, and employees must ensure that they continue to abide by 
them. The proposed section sets out relevant related considerations for 
employees (e.g., gifts between employees, impartiality concerns) when 
accepting payments for legal expenses through an LEF or accepting pro 
bono legal services. For example, the creation and administration of an 
LEF may only be done in the employee's personal capacity. As a result, 
the payments must be solicited and accepted consistent with the 
provisions in subpart G of the Standards relating to the use of public 
office for private gain, use of nonpublic information, use of 
government property, and use of government time. However, this section 
is not all-inclusive, and employees are strongly encouraged to consult 
with their agency ethics officials on the application of these rules to 
their proposed activities.
Proposed Sec.  2635.1003: Definitions
    Proposed Sec.  2635.1003 sets out the applicable definitions for 
subpart J. Although the definitions set forth in this section are 
largely self-explanatory, the importance of these terms in determining 
the coverage of this regulation warrants additional emphasis. This 
section defines the term ``legal expense payment,'' which is the type 
of payment covered by this regulation. This section also defines 
``legal expense fund,'' a fund established, in accordance with subpart 
J, to receive contributions and to make distributions of the legal 
expense payments. The definitions of ``arising in connection with the 
employee's past or current official position,'' ``arising in connection 
with the employee's prior position on a Presidential Transition Team,'' 
and ``arising in connection with the employee's prior position on a 
campaign'' are also threshold concepts in determining whether the legal 
matter

[[Page 23771]]

for which an employee beneficiary seeks to accept legal expense 
payments is covered by this subpart. Covered legal matters can include 
bringing a legal claim or being subject to a claim. If the employee's 
legal matter does not fall within one of these three definitions, it 
will be considered to be personal and will not be covered by this 
subpart.
Proposed Sec.  2635.1004: Establishment
    Proposed Sec.  2635.1004 sets out the standards for establishing an 
LEF. OGE is proposing to require that all LEFs be structured as trusts 
with a single beneficiary. OGE received many comments expressing a 
strong preference for LEFs to be structured exclusively as trusts. The 
commenters emphasized that the trust structure creates a fiduciary duty 
between the trustee and beneficiary that, in the words of one public 
interest organization, ``provide[s] the best protection for public 
servants, who could be certain that the distributions will not be 
withheld or disbursed according to political pressures.'' Although 
other structures, such as LLCs, partnerships, and 527 organizations, 
were considered, such entities would not provide similar protections. 
Additionally, most commenters strongly supported allowing only a 
single, named beneficiary of an LEF trust. In written comments and 
statements during the public meetings, commenters repeatedly objected 
to permitting group LEFs. Several commenters voiced an overriding 
concern about the appearance of corruption resulting from discretionary 
distributions from a group LEF to employees, as well as the difficulty 
of properly and meaningfully screening for prohibited donors.
    OGE shares these appearance concerns. Accordingly, the proposed 
regulation requires that employees who wish to establish a legal 
expense fund do so through a trust with a single, named beneficiary. 
OGE recognizes, however, that the financial costs and personal burdens 
associated with establishing a trust can create significant barriers to 
entry for many employees who are not wealthy, well-connected, or well-
known. OGE's proposed alternative mechanisms to receive or pay for 
legal services--such as pro bono legal services, assistance from 
employee welfare organizations, and existing gift rule exceptions--
address some of the access concerns for employees who do not have the 
financial or other means to establish or effectively raise money 
through an LEF. However, given the concern that the single-beneficiary 
trust structure may prevent some executive branch employees from 
receiving financial assistance, OGE is soliciting additional comment on 
single-beneficiary versus multiple-beneficiary trusts.
    Proposed Sec.  2635.1004 sets out limitations on who may serve as 
an LEF trustee. The section requires legal expense funds to be 
administered by a trustee who is not: (1) The employee beneficiary, (2) 
their spouse, parent, or child, (3) another federal employee, (4) an 
agent of a foreign government, (5) a lobbyist, or (6) a person who has 
interests substantially affected by the performance or nonperformance 
of the employee beneficiary's official duties. These limitations are 
proposed to ensure that the trustee is independent from the employee 
beneficiary and can perform the trustee's fiduciary duties without 
interference. Several commenters emphasized the importance of such 
limitations on who may serve as trustee.
    Proposed Sec.  2635.1004 further requires employees seeking to 
establish an LEF to submit an LEF trust document to the employee's 
Designated Agency Ethics Official (DAEO) for approval, unless the 
employee is an anonymous whistleblower who chooses to submit the 
document to OGE for review and approval. The DAEO must then review the 
LEF trust document for compliance with the regulation. If the LEF trust 
document is compliant, the DAEO must approve the document. Once the 
DAEO approves the LEF trust document, the signed document must be 
forwarded to OGE within seven calendar days. At that point, the 
employee beneficiary may begin to accept contributions and 
distributions through the LEF. OGE believes agency ethics officials 
should initially review and approve LEF trust documents, as the 
executive branch ethics program has a decentralized structure in which 
agency ethics officials have primary responsibility for their agency's 
ethics program. These ethics officials understand the work of the 
agency and are best suited to be able to identify potential conflicts 
of interest.
    However, OGE recognizes the need for heightened scrutiny and 
consistency across the executive branch with regard to the most senior 
executive branch employees. Accordingly, OGE will conduct a secondary 
review of the LEF trust documents of the employees whose financial 
disclosure reports are reviewed by OGE pursuant to the Ethics in 
Government Act, 5 U.S.C. app. 103, as well as the documents of all 
White House Office and Office of the Vice President employees. OGE will 
review the LEF trust document to determine whether it conforms with the 
requirements established by this subpart. During this review period, an 
employee beneficiary may continue to accept contributions and 
distributions through the DAEO-approved LEF trust. However, if the LEF 
trust document is defective or non-compliant, OGE will notify the 
approving agency and the employee beneficiary or the employee 
beneficiary's trustee or representative, who will have 30 calendar days 
to take necessary corrective action. Additionally, OGE will review and 
approve LEF trust documents for anonymous whistleblowers who elect not 
to file with their agency. In that unusual circumstance, the agency 
DAEO will not be made aware of an anonymous whistleblower's trust 
documents in order to screen for potential conflicts requiring recusal. 
OGE believes the importance of anonymity for whistleblowers outweighs 
the benefit gained by agency ethics officials being able to screen for 
potential conflicts, because the potential donors most likely to 
present significant conflicts issues are prohibited from donating to 
LEFs. In addition, OGE will review the trust documents of anonymous 
whistleblowers for conflicts of interest, which could lead to the 
employee returning donations or recusing from conflicts, as needed.
    Under proposed section 2635.1004, employee beneficiaries are 
required to have the trust document approved by the DAEO before being 
able to accept contributions. This step mirrors the procedures used by 
the legislative branch and ensures that the LEF will be in compliance 
with the proposed rule. All approved, signed LEF trust documents, 
except for those of anonymous whistleblowers, will be made publicly 
available on OGE's website. Although employees may only establish or 
maintain one LEF trust at a time, if multiple legal matters arise at 
the same time, the scope of an existing trust may be amended. If a 
second legal issue arises, that employee may establish a second fund 
for that separate legal matter after that employee has terminated the 
first LEF.
Proposed Sec.  2635.1005: Administration
    Proposed Sec.  2635.1005, in conjunction with proposed Sec.  
2635.1006, sets out the standards for the administration of an LEF. In 
response to various comments on the importance of having an independent 
trustee with a fiduciary duty to the employee beneficiary, proposed 
Sec.  2635.1005 specifies the duties and powers of the trustee as the 
fiduciary for the employee beneficiary. This section also makes clear 
that an employee beneficiary may not exercise control over the LEF 
property, which

[[Page 23772]]

further ensures the trustee's independence.
Proposed Sec.  2635.1006: Contributions and Use of Funds
    Proposed Sec.  2635.1006 provides that an LEF may only accept 
contributions of payments for legal expenses from permissible donors, 
and lists the types of donors who are prohibited. OGE modeled this 
section after the House and Senate LEF rules, which list the types of 
donors who are (and are not) permitted to donate. OGE believes that 
providing a list of prohibited donors will assist the trustee in 
complying with this section, and will result in increased transparency 
for the public about who is a prohibited donor. Inherent in this 
process is the expectation that the trustee will need to consult with 
the DAEO as needed.
    Many commenters shared similar views on the types of donors most 
likely to raise potential appearance of corruption concerns. Several 
commenters also sought a prohibition on donations from organizations 
because the source of an organization's funding may be unknown to an 
employee beneficiary and the agency ethics official. Although the House 
and Senate LEF rules do not prohibit most donations from organizations, 
OGE nonetheless believes that limiting the donors to individuals will 
provide additional safeguards against corruption and the appearance of 
corruption, as well as provide for easier screening by the trustee. 
Currently, OGE has proposed only a narrow exception permitting 
donations from a national committee of a political party or donations 
from campaigns, in the case of former members of a campaign of a 
candidate for President or Vice President. This narrow exception only 
applies if the donation is not otherwise prohibited by law and the 
entity is not substantially affected by the performance or 
nonperformance of an employee beneficiary's official duties. OGE 
believes that existing campaign finance rules provide sufficient 
transparency. However, OGE is soliciting additional comment on 
expanding the exception to allow certain nonprofit organizations, such 
as 501(c)(3) and 501(c)(4) organizations, to donate to an employee's 
LEF.
    With regard to individual contribution limits, commenters proposed 
amounts ranging from $5,000 to $250,000. House LEF rules limit 
contributions to $5,000 per year, while Senate LEF rules limit 
contributions to $10,000 per year. OGE is proposing a contribution 
limit of $10,000 per year from any single permissible donor. OGE's 
proposed annual limit is consistent with the annual limit imposed by 
the Senate. OGE believes that this limit, combined with the proposed 
requirement that contributions generally must come from individuals, 
adequately balances an employee beneficiary's need for legal expense 
payments with potential appearance of corruption concerns. The proposed 
approach, which places no limit on the number of donors, prevents 
employees from relying on any single source for donations. OGE welcomes 
comment on this proposed approach.
    Proposed Sec.  2635.1006 also sets out the permissible uses of 
funds. Several commenters emphasized the importance of limiting the use 
of LEF payments to those uses related to defraying the employee's legal 
costs, and not allowing use for other reasons, such as partisan 
political purposes. OGE agrees, and included this requirement in the 
regulation in order to clarify the fiduciary responsibilities of the 
trustee and to reassure the public and donors that the donations are 
being used for legal expenses as defined in this subpart.
Proposed Sec.  2635.1007: Reporting Requirements
    Proposed Sec.  2635.1007 sets out the quarterly and employment 
termination reporting requirements. OGE received many comments stating 
that contributions and distributions through LEFs should be made 
publicly available on a regular basis. Most of the comments OGE 
received suggested that OGE make quarterly reports available to the 
public, which mirrors the LEF reporting requirements of the legislative 
branch. OGE has incorporated this requirement into the proposed 
regulation, and set the proposed reporting threshold at $250, which is 
the threshold set in the House LEF rules and higher than the $25 
threshold set in the Senate LEF rules.
    The proposed regulation requires agency ethics officials to review 
the quarterly reports of most employees for compliance with the 
regulation. The proposed regulation also requires OGE to conduct a 
secondary review of the quarterly reports of the most senior employees, 
as well as anonymous whistleblowers who elect not to file with their 
agency. As with the initial certification, trustees filing quarterly 
reports should consult with agency ethics officials when necessary. 
When approving a report filed under this section, agency ethics 
officials will make determinations to the best of their ability based 
on the information they have been provided. If an improper donation is 
discovered in the course of the review or by the public at a later 
time, the beneficiary, with the assistance of the trustee, must return 
the donation.
    Under the proposed rule, all quarterly reports, except for those of 
anonymous whistleblowers, will be made publicly available on OGE's 
website. The primary goal of the public posting requirement is 
transparency. In 2004, OGE issued a letter stating that the public 
reporting provisions of the Ethics in Government Act (EIGA) constitute 
the exclusive authority under OGE's jurisdiction to require public 
financial disclosure. OGE Inf. Adv. Op. 04x3 (Apr. 19, 2004). This 
statement stems from the following language in EIGA: ``[T]he provisions 
of this title [title I] requiring the reporting of information shall 
supersede any general requirement under any other provision of law or 
regulation with respect to the reporting of information required for 
purposes of preventing conflicts of interest or apparent conflicts of 
interest.'' 5 U.S.C. app. 107(b) (emphasis added). OGE does not 
consider the proposed LEF reporting requirement to be a ``general'' 
public financial disclosure reporting requirement that would be 
superseded by EIGA. The reporting provision is not ``applicable to the 
occupants of positions . . . that are categorized by the provision in 
general terms.'' See 4B Op. O.L.C. 566 (Apr. 11, 1980) (discussing the 
prerequisites for the supersession by EIGA of a statutory or regulatory 
reporting requirement). Rather, the requirement to report only applies 
to employees who choose to establish an LEF pursuant to these 
regulations.
    In proposed Sec.  2635.1007, OGE also recognizes the need for 
penalties for noncompliance with the standards set forth in the 
proposed regulation. If an LEF receives an impermissible contribution, 
that contribution must be returned to the donor as soon as practicable 
but no later than the next reporting due date. If a report is filed 
after a due date, the employee may not accept contributions or 
distributions until the report is filed. Additionally, OGE will retain 
the authority to indefinitely prohibit employees from accepting 
contributions or distributions from an LEF if there is continuing or 
significant noncompliance.
Proposed Sec.  2635.1008: Termination of a Legal Expense Fund
    Proposed Sec.  2635.1008 sets out the reasons an employee 
beneficiary may terminate an LEF and provides requirements for 
distributing excess funds. OGE received comments

[[Page 23773]]

suggesting that unused funds should be returned to the donors on a pro 
rata basis or donated to a 501(c)(3) organization upon termination of 
an LEF, consistent with the House and Senate rules. Because of the 
difficulties inherent in returning funds to donors (i.e., locating 
donors and ensuring timely return of funds), proposed Sec.  2635.1008 
requires a trustee to distribute excess funds to a 501(c)(3) 
organization within 90 days of termination. The organization must not 
be one that is established by the employee beneficiary, nor an 
organization with which the employee has a covered relationship within 
the meaning of Sec.  2635.502(b)(1), nor can the beneficiary or the 
beneficiary's spouse or child be an officer, director, or employee of 
the organization. Additionally, the proposed regulation requires a 
trust termination report that serves as a final quarterly report and 
indicates the organization to which the excess funds were donated. OGE 
requests comment on whether the 501(c)(3) should or should not be named 
at the formation of the trust, or whether the selection of the 
501(c)(3) should be left to the discretion of the trustee.
Proposed Sec.  2635.1009: Pro Bono Legal Services
    Proposed Sec.  2635.1009 addresses employees' acceptance of pro 
bono legal services. Most commenters were in favor of permitting 
acceptance of appropriate pro bono legal services by employees, with 
sufficient limitations. Moreover, several commenters identified 
problems inherent in overly restricting acceptance of pro bono 
services, including potential interference in attorney/client 
relationships and curtailing access to needed legal assistance for 
government employees. Accordingly, OGE has proposed rules specifically 
governing the acceptance of pro bono legal services, including pro bono 
services from public interest organizations. Proposed Sec.  2635.1009 
would prohibit employees from accepting pro bono services from 
lobbyists, foreign governments or agents, or persons substantially 
affected by the performance or nonperformance of the employees' duties. 
The proposed rule otherwise permits employees to accept pro bono 
services in connection with covered legal matters. Additionally, OGE's 
rule as drafted allows employees to accept pro bono services directly 
from entities providing the legal services (such as law firms or 
nonprofits). However, OGE is soliciting comments on whether employees 
may accept legal services at a reduced cost or free of charge when the 
legal services are paid for by a nonprofit organization, such as a 
501(c)(3) or 501(c)(4), but the services are provided by attorneys 
outside of that organization.

B. Regulatory Amendments to Subpart B of the Standards

    OGE is proposing to make related amendments to the portions of the 
Standards that govern the solicitation and acceptance of gifts from 
outside sources, subpart B. Specifically, OGE is proposing a new 
exception for certain legal expense payments and pro bono legal 
services provided in accordance with proposed subpart J. OGE is also 
proposing to revise Sec.  2635.204(c) of the gift rules to clarify that 
an established employee organization may provide legal services 
pursuant to this section.
Proposed Sec.  2635.204(n): Exception for Legal Expense Funds and Pro 
Bono Legal Services
    OGE is proposing a new exception to the gift rules for legal 
expense payments or services for covered legal matters, so long as the 
payments or services are provided in accordance with proposed subpart 
J. However, regardless of whether an employee's legal expense payments 
or services for covered legal matters are from a prohibited source or 
given because of official position, that employee will still be subject 
to the requirements and safeguards established in subpart J.
Proposed Sec.  2635.204(c): Discounts and Similar Benefits
    OGE proposes revising Sec.  2635.204(c) of the gift rules to 
clarify that an established employee organization may pay legal 
expenses pursuant to this section. The question of whether employees 
may accept free or discounted legal services through established 
employee organizations, such as unions or employee welfare 
organizations, arose during this regulatory process. OGE is aware that 
agencies have used Sec.  2635.204(c)(2)(ii) to accept gifts of services 
(e.g., financial counseling, visiting nurses) from employee benefit 
organizations. However, the language of this exception as currently 
written is ambiguous.
    Accordingly, OGE proposes language under new Sec.  
2635.204(c)(2)(iv) to clarify that employees may properly accept 
opportunities and benefits (including, but not limited to, legal 
services) offered by an established employee organization, when 
eligibility is based on the employee's status as an agency employee. 
OGE added a new Sec.  2635.204(c)(2) exception rather than amend 
existing Sec.  2635.204(c)(2)(ii) because OGE did not want to confuse 
the intended purposes of the separate exceptions or link employee 
acceptance of benefits from employee organizations to similar benefits 
offered to the general public by outside groups. The proposed new 
exception is limited to ``established'' employee organizations, such as 
employee welfare groups for Federal employees, because the purpose of 
this exception is to allow employees to accept opportunities and 
benefits from pre-existing employee organizations with a general 
mission of providing assistance to agency employees, rather than from 
organizations established as a response to a specific investigation or 
established to help a specific employee. An employee organization need 
not be established before this regulation going into effect; rather, 
the organization should be established before a legal matter arises.

C. Regulatory Amendments to Confidential Financial Disclosure Reporting 
Requirements

    OGE is proposing to revise Sec.  2634.907(g)(5) of part 2634 to 
remove the requirement that anonymous whistleblowers who happen to be 
confidential financial disclosure report filers report gifts for 
payment of legal expenses related to the whistleblowing activity. 
Confidential financial disclosure reports are always reviewed by the 
ethics office of a filer's agency and are often reviewed by the filer's 
supervisor. The disclosure of the payment of legal expenses as gifts 
may reveal the whistleblower, which would undermine the protections 
that whistleblowers are provided under the various whistleblower 
protection statutes. See 5 U.S.C. 2302(b)(8), (b)(9)(C); see also 5 
U.S.C. app. II, 8H; 50 U.S.C. 3033, 3517; 28 CFR 27.1. OGE believes the 
possible harm to an anonymous whistleblower outweighs the value of 
disclosing the information, particularly given requirements in proposed 
subpart J. In addition, during OGE's information gathering process 
several public interest groups expressed support for maintaining the 
anonymity of whistleblowers. At this time, OGE is unable to propose a 
similar exception for public financial disclosure filers because there 
is no such exception in the Ethics in Government Act, 5 U.S.C. app. 
102(a)(2).

III. Matters of Regulatory Procedure

Regulatory Flexibility Act

    As Director of the Office of Government Ethics, I certify under the 
Regulatory Flexibility Act (5 U.S.C.

[[Page 23774]]

chapter 6) that this proposed rule will 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) applies because 
this regulation creates information collection requirements that 
require approval of the Office of Management and Budget. The 
information collection requirements imposed by the proposed regulation 
are directed at beneficiaries of legal expense funds, who are current 
executive branch employees. OGE notes that an employee beneficiary who 
is leaving executive branch employment is required to file an 
employment termination report no later than their last day of 
employment. At the same time, a 30-day filing extension may be granted 
for good cause shown. Although it is possible that a beneficiary may 
file a termination report after leaving government service after having 
received an extension, the information collection requirement is 
directed toward current employees. OGE also notes that there are no 
independent information collection requirements on trustees.
    In fulfilling the regulatory requirements, employee beneficiaries 
must in turn collect information from (1) donors who contribute to the 
legal expense fund for the payment of legal expenses and (2) payees who 
receive payments distributed from the legal expense fund. Together, 
this information collection is titled ``OGE Legal Expense Fund 
Information Collection.''
    OGE plans to seek Paperwork Reduction Act approval of this new 
information collection. The purposes of the OGE Legal Expense Fund 
Information Collection include, but are not limited to, obtaining 
information relevant to a conflict-of-interest determination, and 
disclosing on the OGE website information submitted pursuant to 5 CFR 
part 2635, subpart J. The authority for this information collection is 
addressed in the Supplementary Information section.
    OGE estimates that there will be approximately 110 Respondents 
annually. It is anticipated that there may be an average of five legal 
expense fund trusts in existence each year. Each trust is anticipated 
to have approximately 20 donors, whose reporting requirements are tied 
to the frequency with which they donate, and approximately two payees, 
who will submit information each time they receive a distribution.
    OGE estimates that the total annual burden will be approximately 9 
to 10 hours. OGE estimates the estimated time per response to be an 
average of 5 minutes, with respect to each donor or payee communication 
to an employee beneficiary.
    These estimates are based in part on OGE's knowledge of several 
legal expense funds that have been established for Executive branch 
employees, as well as OGE's consultation with the U.S. House of 
Representatives and the U.S. Senate regarding the legal expense funds 
that they oversee.

Request for Comments

    Agency and public comment is invited specifically on the need for 
and practical utility of this information collection, the accuracy of 
OGE's burden estimate, the enhancement of quality, utility, and clarity 
of the information collected, and the minimization of burden (including 
the use of information technology). OGE is currently exploring methods 
for collecting this information, and is seeking public comment. 
Potential methods may include, for example, the use of standard forms.

Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
chapter 5, subchapter II), this proposed rule will 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 proposed rule has been designated as a ``significant regulatory 
action'' although not economically significant, under section 3(f) of 
Executive Order 12866. Accordingly, this rule has been reviewed by the 
Office of Management and Budget.
    Currently, executive branch employees may accept gifts to pay for 
legal expenses from others directly and can also establish funds to 
accept donations for such expenses, as long as the employee remains in 
compliance with the gift restrictions in subparts B and C of the 
Standards of Conduct and the criminal conflict of interest statutes. 
See, e.g., OGE Legal Advisory LA-18-11 (Sept. 12, 2018); OGE Legal 
Advisory LA-17-10 (Sept. 28, 2017). In other words, there are currently 
costs for employees who establish an LEF in order to ensure compliance 
with ethics rules even in the absence of OGE's new proposed framework 
in subpart J, but compliance can be difficult and confusing as the 
current rules do not address these types of gifts specifically. OGE's 
role is currently limited to providing an LEF trust template or to 
providing technical assistance to help ensure that executive branch 
employees who may receive distributions from an LEF will be in 
compliance with existing ethics laws and rules.
    Based on OGE's current experience under the status quo, it is 
estimated that approximately five executive branch employees may seek 
to establish or maintain an LEF annually. The proposed new framework 
will consist of the following activities: Establishment of the LEF 
trust; submission of trust documentation for agency review and 
approval; review and approval by OGE (where applicable); LEF trustee 
soliciting and accepting donations; LEF trustee screening donations to 
ensure the donor is permissible; LEF trustee overseeing distributions 
from the trust for the employee's legal expenses; preparing quarterly 
reports of contributions to and distributions from the LEF; submission 
of quarterly reports for agency review; review by OGE (where 
applicable); preparation of trust termination reports and/or employment 
termination reports; submission of those reports for agency review and 
OGE review (where applicable); and communications regarding all of the 
above. OGE estimates that the annual time burden for all of the above 
is 100 hours. Using an estimated rate $325 per hour for the services of 
a professional trust administrator or private representative, the 
estimated annual cost burden is $32,500. See Clio, Legal Trends Report 
55 (2019), https://www.clio.com/resources/legal-trends/2019-report/ 
(calculating an average hourly rate of $319 for trust lawyers 
nationally). However, OGE estimates that the annual time burden under 
the status quo, if an employee establishes a legal expense fund that 
needs to comply with existing ethics rules, is 75 hours with an annual 
cost burden of $24,375. Thus, the net increase from the status quo is 
approximately $8,125 per fund.

[[Page 23775]]

The estimate of 75 hours is based, in part, on the estimated time 
burden for OGE's qualified trust program. See 84 FR 67743. That number 
was reduced because the status quo does not require review and approval 
of trusts or submission of reports to agencies and OGE. Under the 
status quo, a significant time burden does exist because the lack of a 
detailed framework requires additional research by employee 
representatives, consultation with agency ethics officials and OGE, and 
a more detailed review of each LEF donor in the absence of an 
enumerated list of permissible donors. The additional 25-hour estimate 
is based on the specific submissions required by proposed 5 CFR part 
2635, subpart J. Specifically, submission of LEF trust fund 
establishing documents, quarterly reports, and termination reports; 
review by agencies and OGE of those submissions; and corresponding 
communications will increase the cost burden in comparison to the 
status quo. The burden on LEF donors specifically is unchanged because 
they would need to provide the same level of information under the 
status quo.
    The benefits from implementing this new regulatory structure are 
significant. Employees' acceptance of payments for legal expenses 
relating to their official duties has triggered concerns from outside 
groups, Congress, and the media, in terms of appearance of corruption/
corruption issues and a desire for transparency. Creating this 
regulation will provide a framework for screening for conflicts of 
interest and transparency, which will serve to protect both the agency 
and the employee. Further, the regulation will provide clarity to 
executive branch employees by articulating the process for establishing 
an LEF and the requirements in maintaining one, including: Defining 
prohibited donors, donation caps, review and approval of trust fund 
documents, and the submission of quarterly, publicly available reports. 
As a result of these requirements, as well as the increased public 
reporting requirements, the public will have increased confidence in 
the decision making of executive branch employees who accept gifts of 
legal expenses consistent with the new proposed subpart J.

Executive Order 12988

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

Executive Order 13175

    The Office of Government Ethics has evaluated this proposed rule 
under the criteria set forth in Executive Order 13175 and determined 
that tribal consultation is not required as this proposed rule has no 
substantial direct effect on one or more Indian tribes, on the 
relationship between the Federal Government and Indian tribes, or on 
the distribution of power and responsibilities between the Federal 
Government and Indian tribes.

List of Subjects

5 CFR Part 2634

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

5 CFR Part 2635

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

    Approved: April 12, 2022.
Emory Rounds,
Director, U.S. Office of Government Ethics.

    For the reasons set forth in the preamble, the U.S. Office of 
Government Ethics proposes to amend 5 CFR parts 2634 and 2635 as 
follows:

PART 2634--EXECUTIVE BRANCH FINANCIAL DISCLOSURE, QUALIFIED TRUSTS, 
AND CERTIFICATES OF DIVESTITURE

0
1. The authority citation for part 2634 continues to read as follows:

    Authority:  5 U.S.C. app.; 26 U.S.C. 1043; Pub. L. 101-410, 104 
Stat. 890, 28 U.S.C. 2461 note, as amended by Sec. 31001, Pub. L. 
104-134, 110 Stat. 1321 and Sec. 701, Pub. L. 114-74; Pub. L. 112-
105, 126 Stat. 291; 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. Amend Sec.  2634.907 by:
0
a. Revising paragraph (g)(5); and
0
b. Designating the example following paragraph (g)(5) as Example 1 to 
paragraph (g).
    The revision reads as follows:


Sec.  2634.907   Report contents.

* * * * *
    (g) * * *
    (5) Exceptions. Reports need not contain any information about:
    (i) Gifts and travel reimbursements received from relatives (see 
Sec.  2634.105(o)).
    (ii) Gifts and travel reimbursements received during a period in 
which the filer was not an officer or employee of the Federal 
Government.
    (iii) Any food, lodging, or entertainment received as ``personal 
hospitality of any individual,'' as defined in Sec.  2634.105(k).
    (iv) Any payments for legal expenses from a legal expense fund or 
the provision of pro bono legal services, as defined in subpart J of 
part 2635 of this chapter, or any payments for legal expenses or the 
provision of pro bono legal services that otherwise qualify for a gift 
exclusion or gift exception in subpart B of part 2635 of this chapter, 
if the confidential filer is an anonymous whistleblower as defined by 
Sec.  2635.1003 of this chapter.
    (v) Any exclusions specified in the definitions of ``gift'' and 
``reimbursement'' at Sec.  2634.105(h) and (n).
* * * * *

PART 2635--STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES OF THE 
EXECUTIVE BRANCH

0
3. The authority citation for part 2635 continues to read as follows:

    Authority:  5 U.S.C. 7301, 7351, 7353; 5 U.S.C. App. (Ethics in 
Government Act of 1978); E.O. 12674, 54 FR 15159, 3 CFR, 1989 Comp., 
p. 215, as modified by E.O. 12731, 55 FR 42547, 3 CFR, 1990 Comp., 
p. 306.

0
4. Amend Sec.  2635.203 by adding paragraphs (h) and (i) to read as 
follows:


Sec.  2635.203   Definitions.

* * * * *
    (h) Legal expense fund has the meaning set forth in Sec.  
2635.1003.
    (i) Pro bono legal services has the meaning set forth in Sec.  
2635.1003.
0
5. Amend Sec.  2635.204 by:
0
a. Removing the word ``or'' at the end of paragraph (c)(2)(ii);
0
b. Removing the period at the end of paragraph (c)(2)(iii) and adding 
``; or'' in its place; and
0
c. Adding paragraph (c)(2)(iv), example 4 to paragraph (c)(2), and 
paragraph (n).
    The additions read as follows:


Sec.  2635.204   Exceptions to the prohibition for acceptance of 
certain gifts.

* * * * *
    (c) * * *
    (2) * * *
    (iv) Offered to employees by an established employee organization, 
such as an employee welfare group for Federal employees, because of the 
employees' Government employment, so long as the employee is part of 
the class of individuals eligible for assistance from the employee 
organization as set forth in the organization's governing documents.
* * * * *

[[Page 23776]]

    Example 4 to paragraph (c)(2): A military relief society provides 
access to financial counseling services, loans, and grants to all 
sailors and Marines. Service members may accept such benefits because 
the services are offered by an employee organization that was 
established before the matter arose and in which membership is because 
of the employees' Government employment.
* * * * *
    (n) Legal expense funds and pro bono legal services. An employee 
who seeks legal representation for a matter arising in connection with 
the employee's official position, the employee's prior position on a 
campaign of a candidate for President or Vice President, or the 
employee's prior position on a Presidential Transition Team may accept:
    (1) Payments for legal expenses paid out of a legal expense fund 
that is established and operated in accordance with subpart J of this 
part; and
    (2) Pro bono legal services provided in accordance with subpart J 
of this part.
0
6. Add subpart J to read as follows:
Subpart J--Legal Expense Funds
Sec.
2635.1001 Overview.
2635.1002 Applicability and related considerations.
2635.1003 Definitions.
2635.1004 Establishment.
2635.1005 Administration.
2635.1006 Contributions and use of funds.
2635.1007 Reporting requirements.
2635.1008 Termination of a legal expense fund.
2635.1009 Pro bono legal services.


Sec.  2635.1001   Overview.

    This subpart contains standards for an employee's acceptance of 
payments for legal expenses through a legal expense fund and an 
employee's acceptance of pro bono legal services. Legal expenses 
covered by this subpart are those for a matter arising in connection 
with the employee's past or current official position, the employee's 
prior position on a campaign, or the employee's prior position on a 
Presidential Transition Team.


Sec.  2635.1002   Applicability and related considerations.

    (a) Applicability. This subpart applies to an employee who seeks to 
accept payments for legal expenses from a legal expense fund or the 
provision of pro bono legal services. The legal expenses or the 
provision of pro bono legal services must be for a matter arising in 
connection with the employee's past or current official position, the 
employee's prior position on a campaign, or the employee's prior 
position on a Presidential Transition Team.
    (b) Not covered by this subpart. The following types of payments 
for legal expenses or pro bono legal services are not covered by this 
subpart:
    (1) Personal matters. Payments for legal expenses or the provision 
of pro bono legal services related to matters that do not arise in 
connection with the employee's past or current official position, the 
employee's prior position on a campaign, or the employee's prior 
position on a Presidential Transition Team, such as a matter that is 
primarily personal in nature, are not covered by this subpart. Personal 
matters include, but are not limited to, tax planning, personal injury 
litigation, protection of property rights, family law matters, and 
estate planning or probate matters.
    Example 1 to paragraph (b)(1): A Department of Homeland Security 
employee wants to set up a legal expense fund in connection with the 
employee's divorce and custody proceeding. This is a personal matter 
and the employee may not establish a legal expense fund under this 
subpart, but may use other gift exceptions and exclusions in accordance 
with subparts B and C of this part as appropriate.
    (2) Gifts acceptable according to a gift exclusion or exception. 
Payments for legal expenses or the provision of pro bono legal services 
that otherwise qualify for a gift exclusion or exception other than 
Sec.  2635.204(n) are not covered by this subpart.
    Example 1 to paragraph (b)(2): A Central Intelligence Agency 
employee is facing administrative disciplinary action due to an issue 
with the employee's security clearance and would like to seek financial 
assistance to pay for an attorney. Even though this matter arose in 
connection with their official position, if the employee's parents 
offer to cover the legal expenses, that donation is not subject to this 
subpart, as it would be subject to the gift exception at Sec.  
2635.204(b).
    Note 1 to paragraph (b): Acceptance of legal expense payments or 
pro bono legal services not covered by this subpart must be analyzed 
under subpart B of this part.
    (c) Related considerations--(1) Gifts between employees. Acceptance 
of legal expense payments or the provision of pro bono legal services 
from another employee must be analyzed under 18 U.S.C. 205 and subpart 
C of this part.
    (2) Impartiality. An employee beneficiary will be treated as having 
a covered relationship for one year within the meaning of Sec.  
2635.502(b)(1) with a legal expense fund's trustee and donors, as well 
as any pro bono legal services providers. The one-year period of 
disqualification for each donor begins to run on the most recent date 
the legal expense fund donation is received from that donor or, in the 
case of pro bono services, the last date pro bono services were 
provided. The employee beneficiary must take appropriate steps to avoid 
an appearance of loss of impartiality in the performance of their 
official duties in accordance with Sec.  2635.502.
    Example 1 to paragraph (c)(2): A donor contributed to a Social 
Security Administration (SSA) employee's legal expense fund. Three 
months after this contribution was made, the donor submitted a 
disability claim. Under the circumstances, the SSA employee would be 
correct in concluding that a reasonable person would be likely to 
question the employee's impartiality if the employee were to 
participate in evaluating that disability claim.
    (3) Misuse of position. Legal expense fund payments must be 
solicited and accepted consistent with the provisions in subpart G of 
this part relating to the use of public office for private gain, use of 
nonpublic information, use of Government property, and use of 
Government time.
    Example 1 to paragraph (c)(3): A Transportation Security 
Administration (TSA) employee retains legal counsel due to an 
investigation into inappropriate behavior in their department, and the 
employee establishes a legal expense fund in accordance with this 
subpart. Neither the employee nor the legal expense fund's trustee may 
use the TSA agency seal in materials to imply the Government endorses 
the legal expense fund, or use nonpublic details of the investigation 
to solicit contributions to the legal expense fund. Further, the 
employee may not task subordinates with any work relating to 
administration of the legal expense fund.
    (4) Financial disclosure. In addition to the legal expense fund 
reporting requirements outlined in Sec.  2635.1007, an employee 
beneficiary who is a public or confidential filer, other than a 
confidential filer who is an anonymous whistleblower, under part 2634 
of this chapter must report gifts of legal expense payments accepted 
from sources other than the United States Government, including gifts 
of pro bono services, on the employee's financial disclosure report, 
subject to applicable thresholds and exclusions.


Sec.  2635.1003   Definitions.

    For purposes of this subpart:
    Anonymous whistleblower means an employee who makes or believes to 
be making a protected report or disclosure under 5 U.S.C. 2302(b)(8), 5 
U.S.C.

[[Page 23777]]

2302(b)(9)(C), 5 U.S.C. app. II, 8H, 50 U.S.C. 3517, 50 U.S.C. 3033, or 
28 CFR 27.1, and who seeks to remain anonymous.
    Arising in connection with the employee's past or current official 
position means the employee's involvement in the legal matter would not 
have arisen had the employee not held the status, authority, or duties 
associated with the employee's past or current Federal position.
    Example 1 to this definition of ``arising in connection with the 
employee's past or current official position'': A Department of 
Transportation employee is being investigated by the Inspector General 
for potential misuse of Government resources while on official travel. 
The Internal Revenue Service (IRS) is separately investigating the 
employee for misreporting household income on the employee's personal 
taxes. The employee may use this subpart to establish a legal expense 
fund concerning the Inspector General investigation because the legal 
matter arose in connection with their official position. However, this 
subpart would not apply to the unrelated IRS investigation because that 
legal matter did not arise in connection with the employee's official 
position.
    Example 2 to this definition of ``arising in connection with the 
employee's past or current official position'': A senior military 
officer faces court-martial charges for sexual harassment of a junior 
officer. All of the charged misconduct occurred outside official duty 
hours. Because the officer would not be subject to the Uniform Code of 
Military Justice had the officer not held their official position, the 
officer may establish a legal expense fund in accordance with this 
subpart.
    Arising in connection with the employee's prior position on a 
campaign means the employee's involvement in the legal matter would not 
have arisen had the employee not held the status, authority, or duties 
associated with the employee's prior position on a campaign of a 
candidate for President or Vice President.
    Arising in connection with the employee's prior position on a 
Presidential Transition Team means the employee's involvement in the 
legal matter would not have arisen had the employee not held the 
status, authority, or duties associated with the employee's prior 
position as a member of the staff of a Presidential Transition Team.
    Employee beneficiary means an employee as defined by Sec.  
2635.102(h) for whose benefit a legal expense fund is established under 
this subpart.
    Legal expense fund means a fund established to receive 
contributions and to make distributions of legal expense payments.
    Legal expense payment or payment for legal expenses means anything 
of value received by an employee under circumstances that make it clear 
that the payment is intended to defray costs associated with 
representation in a legal, congressional, or administrative proceeding.
    Pro bono legal services means legal services provided without 
charge to the employee beneficiary or for less than market value as 
defined in Sec.  2635.203(c) to an employee who seeks legal 
representation for a matter arising in connection with the employee's 
official position, the employee's prior position on a campaign, or the 
employee's prior position on a Presidential Transition Team.


Sec.  2635.1004   Establishment.

    (a) Structure. A legal expense fund must be established as a trust 
that conforms with the requirements of this part and applicable state 
law. To the extent the requirements of this part and applicable state 
law are incompatible, the Director of the Office of Government Ethics 
may permit such deviations from this part as necessary to ensure 
compatibility with applicable state law.
    (b) Grantor. The legal expense fund must be established by the 
employee beneficiary.
    (c) Trustee. A legal expense fund must be administered by a trustee 
who is not:
    (1) The employee beneficiary;
    (2) A spouse, parent, or child of the employee beneficiary;
    (3) Any other employee of the Federal executive, legislative, or 
judicial branches;
    (4) An agent of a foreign government as defined in 5 U.S.C. 
7342(a)(2);
    (5) A lobbyist as defined by 2 U.S.C. 1602(10) who is currently 
registered pursuant to 2 U.S.C. 1603(a); or
    (6) A person who has interests that may be substantially affected 
by the performance or nonperformance of the employee beneficiary's 
official duties.
    (d) Employee beneficiary. (1) Except as provided in paragraph 
(d)(2) of this section, a legal expense fund must be established for 
the benefit of a single, named employee beneficiary.
    (2) A legal expense fund for the benefit of an anonymous 
whistleblower may be established without disclosing the identity of the 
anonymous whistleblower to anyone other than the trustee.
    (e) Filing and approval of legal expense fund trust document. An 
employee beneficiary may not solicit or accept contributions or 
distributions through a legal expense fund before:
    (1) Filing the legal expense fund document in accordance with 
paragraph (f) of this section; and
    (2) Receiving approval for the legal expense fund in accordance 
with paragraph (g)(1) of this section.
    (f) Filing of legal expense fund trust document. (1) The employee 
beneficiary, or the trustee or representative of the employee 
beneficiary, must file the legal expense fund trust document with the 
designated agency ethics official at the agency where the employee 
beneficiary is employed.
    (2) An employee beneficiary who is an anonymous whistleblower may 
choose to file a legal expense fund trust document anonymously through 
the employee beneficiary's trustee or representative with the Office of 
Government Ethics only. If the Office of Government Ethics receives a 
legal expense fund trust document from a covert employee of the 
Intelligence Community, the Office of Government Ethics will handle the 
document as classified, according to procedures agreed upon with the 
employee's agency.
    (g) Approval of legal expense fund trust document--(1) Designated 
agency ethics official approval. The designated agency ethics official 
must determine, based on the submitted trust document and information 
regarding the trustee, whether to approve a legal expense fund trust 
document filed by an employee beneficiary, other than an anonymous 
whistleblower choosing to file with the Office of Government Ethics, 
within 30 calendar days of filing.
    (i) Standard for approval. The designated agency ethics official 
must approve a legal expense fund that is, based on the submitted trust 
document and information regarding the trustee, in compliance with this 
subpart.
    (ii) Transmission of trust documents to the Office of Government 
Ethics. Following approval, the signed legal expense fund trust 
document must be forwarded to the Office of Government Ethics within 
seven calendar days.
    (iii) Exception for anonymous whistleblowers. The Office of 
Government Ethics will serve as the approving authority for anonymous 
whistleblowers who choose to file a legal expense fund trust document 
anonymously with the Office of Government Ethics only.
    (2) Office of Government Ethics review. Following approval by the 
designated agency ethics official, the Office of Government Ethics will 
conduct a second review of the legal

[[Page 23778]]

expense fund trust documents of the employee beneficiaries listed in 
paragraph (g)(2)(ii) of this section within 30 calendar days of 
receipt.
    (i) Standard for review. The Office of Government Ethics will 
review the legal expense fund trust document to determine whether it 
conforms with the requirements established by this subpart. If defects 
are ascertained, the Office of Government Ethics will bring them to the 
attention of the approving agency and the employee beneficiary or the 
employee beneficiary's trustee or representative, who will have 30 
calendar days to take necessary corrective action.
    (ii) Employee beneficiaries requiring secondary Office of 
Government Ethics review. The Office of Government Ethics will review 
the legal expense fund trust documents of the following employee 
beneficiaries:
    (A) The Postmaster General;
    (B) The Deputy Postmaster General;
    (C) The Governors of the Board of Governors of the United States 
Postal Service;
    (D) A designated agency ethics official;
    (E) Employees of the White House Office and the Office of the Vice 
President; and
    (F) Officers and employees in offices and positions which require 
confirmation by the Senate, other than members of the uniformed 
services and Foreign Service Officers below the rank of Ambassador.
    (3) Right to Appeal. If the approval of a legal expense fund has 
been denied, the requester may appeal the denial within 60 days by mail 
or email to the Director of the U.S. Office of Government Ethics. 
Requests sent by mail should be addressed to 1201 New York Avenue NW, 
Suite 500, Washington, DC 20005-3917. The envelope containing the 
request and the letter itself should both clearly indicate that the 
subject is a legal expense fund appeal. Email requests should be sent 
to [email protected] and should indicate in the subject line that the 
message contains a legal expense fund appeal.
    (h) Amendments. The trust document may only be amended if the 
trustee and employee beneficiary file the amended legal expense fund 
trust document in accordance with paragraph (f) of this section and 
seek approval in accordance with paragraph (g) of this section.
    (i) One legal expense fund. No employee beneficiary may establish 
or maintain more than one legal expense fund at any one time. An 
employee may not later establish a second legal expense fund for the 
same legal matter.
    (j) Conforming existing legal expense funds. In order for employee 
beneficiaries who have existing legal expense funds to receive legal 
expense payments from the existing legal expense fund, the employee 
beneficiary must comply with Sec. Sec.  2635.1005(b), 2635.1006, and 
2635.1007 by [90 calendar days after the effective date of the final 
rule].
    (k) Public access. Approved legal expense fund trust documents will 
be made available by the Office of Government Ethics to the public on 
its website within 30 calendar days of receipt. The trust fund 
documents will be sortable by employee beneficiary's name, agency, and 
position, as well as type of document and document date. Legal expense 
fund trust documents filed by anonymous whistleblowers will not be made 
available to the public. Legal expense fund trust documents that are 
made available to the public will not include any information that 
would identify individuals whose names or identities are otherwise 
protected from public disclosure by law.


Sec.  2635.1005   Administration.

    (a) Trustee's duties and powers. A trustee of a legal expense fund 
is responsible for:
    (1) Operating the legal expense fund trust consistent with this 
part and applicable state law;
    (2) Operating as a fiduciary for the employee beneficiary in 
relation to the legal expense fund property and the legal expense fund 
purpose;
    (3) Providing information to the employee beneficiary as necessary 
to comply with the Ethics in Government Act, 5 U.S.C. app. 102(a)(2), 
part 2634 of this chapter, and this part; and
    (4) Notifying donors and payees that their names will be disclosed 
on the OGE website.
    (b) Limitation on role of employee beneficiary. An employee 
beneficiary may not exercise control over the legal expense fund 
property.


Sec.  2635.1006   Contributions and use of funds.

    (a) Contributions. A legal expense fund may only accept 
contributions of payments for legal expenses from permissible donors 
listed in paragraph (b) of this section.
    (b) Permissible donors. A permissible donor includes:
    (1) An individual who is not:
    (i) An agent of a foreign government as defined in 5 U.S.C. 
7342(a)(2);
    (ii) A lobbyist as defined by 2 U.S.C. 1602(10) who is currently 
registered pursuant to 2 U.S.C. 1603(a);
    (iii) Acting on behalf of, or at the direction of, another 
individual or entity in making a donation;
    (iv) Donating anonymously;
    (v) Seeking official action by the employee beneficiary's agency;
    (vi) Doing business or seeking to do business with the employee 
beneficiary's agency;
    (vii) Conducting activities regulated by the employee beneficiary's 
agency other than regulations or actions affecting the interests of a 
large and diverse group of persons;
    Example 1 to paragraph (b)(1)(vii): A donor contributed to a 
Department of State employee's legal expense fund. The donor has 
recently applied to renew their United States Passport. Because the 
Department of State's passport renewal office affects the interests of 
a large and diverse group of people, the donation is permissible under 
paragraph (b)(1)(vii) of this section.
    (viii) Substantially affected by the performance or nonperformance 
of the employee beneficiary's official duties; or
    (ix) An officer or director of an entity that is substantially 
affected by the performance or nonperformance of the employee 
beneficiary's official duties.
    (2) A national committee of a political party as defined by 52 
U.S.C. 30101(14), (16) or, for former members of a campaign of a 
candidate for President or Vice President, the campaign, provided that 
the donation is not otherwise prohibited by law and the entity is not 
substantially affected by the performance or nonperformance of an 
employee beneficiary's official duties.
    Note 1 to paragraph (b): Acceptance of a legal expense payment from 
another employee must be analyzed under subpart C of this part.
    (c) Contribution limits. A legal expense fund may not accept more 
than $10,000 from any single permissible donor per calendar year of the 
fund.
    Note 2 to paragraph (c): As discussed in Sec.  2635.1002(b)(2), 
payments for legal expenses or the provision of pro bono legal services 
that otherwise qualify for a gift exclusion or exception other than 
Sec.  2635.204(n) in subpart B of this part are not covered by this 
subpart.
    (d) Use of funds. Legal expense fund payments must be used only for 
the following purposes:
    (1) An employee beneficiary's legal expenses related to those legal 
proceedings arising in connection with the employee's past or current 
official position, the employee's prior position on a campaign, or the 
employee's prior position on a Presidential Transition Team;
    (2) Expenses incurred in soliciting for and administering the fund; 
and

[[Page 23779]]

    (3) Expenses for the discharge of Federal, state, and local tax 
liabilities that are incurred as a result of the creation, operation, 
or administration of the fund.
    Example 1 to paragraph (d): An employee beneficiary's attorney 
determines it is necessary to employ an expert witness related to a 
legal proceeding arising in connection with the employee beneficiary's 
official position. Funds may be distributed from the legal expense fund 
to pay fees and expenses for the expert witness.


Sec.  2635.1007   Reporting requirements.

    (a) Quarterly reports. An employee beneficiary must file quarterly 
reports that include the following information until the trust is 
terminated or an employment termination report is filed as set forth in 
paragraph (d) of this section.
    (1) Contributions. An employee beneficiary must report the donor's 
name, employer, date(s) of contribution, and amount for each donor that 
makes a contribution exceeding $250 during the quarterly reporting 
period. For the report due January 30, an employee beneficiary must 
also disclose contributions from a single donor that exceed $250 for 
the prior calendar year unless the contributions have been disclosed on 
a prior quarterly report.
    (2) Distributions. An employee beneficiary must report the payee's 
name, date(s) of distribution, amount, and purpose of any distribution 
from the legal expense fund exceeding $250 during the quarterly 
reporting period. For the report due January 30, an employee 
beneficiary must also disclose distributions to a single source that 
exceed $250 for the prior calendar year unless the distributions have 
been disclosed on a prior quarterly report.
    (b) Filing of reports. (1) The employee beneficiary must file all 
reports required in this section with the designated agency ethics 
official at the agency where the employee beneficiary is employed. The 
trustee or a representative of the employee beneficiary may file a 
report on behalf of the employee beneficiary.
    (2) An employee beneficiary who is an anonymous whistleblower may 
choose to file reports anonymously through the employee beneficiary's 
trustee or representative with the Office of Government Ethics. If the 
Office of Government Ethics receives a quarterly report from a covert 
employee of the Intelligence Community, the Office of Government Ethics 
must handle the document as classified, according to procedures agreed 
upon with the employee's agency.
    (c) Reporting periods and due dates. Quarterly reports must cover 
the reporting periods and comply with the following due dates:
    (1) January 1 to March 31, with the report due on April 30.
    (2) April 1 to June 30, with the report due on July 30.
    (3) July 1 to September 30, with the report due on October 30.
    (4) October 1 to December 31, with the report due on January 30 of 
the following year.
    (5) If the scheduled due date falls on a Saturday, Sunday or 
Federal Holiday, the report will instead be due the next business day.
    (d) Employment termination report. If the employee beneficiary is 
leaving executive branch employment, the employee beneficiary must file 
an employment termination report no later than their last day of 
employment. No contributions may be accepted for or distributions paid 
by the legal expense fund between the date of the filing and the 
employee beneficiary's termination date. The report must include the 
following:
    (1) A report of contributions received and distributions made as 
required by paragraph (a) of this section between the end of the last 
quarterly reporting period and the date of the report; and
    (2) A statement as to whether the trust will be terminated or 
remain in force after the employee beneficiary terminates their 
executive branch employment.
    (e) Extensions. For each quarterly or employment termination 
report, a single extension of 30 calendar days may be granted by the 
Director of the Office of Government Ethics, or the employee 
beneficiary's designated agency ethics official if filing with agency, 
for good cause upon written request by the employee beneficiary or the 
trustee.
    (f) Review of reports--(1) Designated agency ethics official 
review. The designated agency ethics official must review reports 
within 30 calendar days of filing.
    (i) Standard for review. The designated agency ethics official will 
review the report to determine that:
    (A) The information required under paragraph (a) of this section is 
reported for each contribution and distribution; and
    (B) Contributions to and distributions from the trust are in 
compliance with Sec.  2635.1006.
    (ii) Transmission of reports to the Office of Government Ethics. 
Following review, all reports must be forwarded in unclassified format 
to the Office of Government Ethics within seven calendar days.
    (iii) Office of Government Ethics review for anonymous 
whistleblowers. The Office of Government Ethics will serve as the 
reviewing authority for anonymous whistleblowers who choose to file 
reports anonymously with the Office of Government Ethics only.
    (2) Office of Government Ethics review. Following review by the 
designated agency ethics official, the Office of Government Ethics will 
conduct a second review of the reports of the employee beneficiaries 
listed in paragraph (f)(2)(ii) of this section within 30 calendar days 
of the receipt.
    (i) Standard for review. The Office of Government Ethics will 
review the report to determine whether it conforms with the 
requirements established by this subpart. If defects are ascertained, 
the Office of Government Ethics will bring them to the attention of the 
reviewing agency and the employee beneficiary or the employee 
beneficiary's trustee or representative, who will have 30 calendar days 
to take necessary corrective action.
    (ii) Employee beneficiaries requiring secondary Office of 
Government Ethics review. The Office of Government Ethics will review 
the reports of the following employee beneficiaries:
    (A) The Postmaster General;
    (B) The Deputy Postmaster General;
    (C) The Governors of the Board of Governors of the United States 
Postal Service;
    (D) A designated agency ethics official;
    (E) Employees of the White House Office and the Office of the Vice 
President; and
    (F) Officers and employees in offices and positions which require 
confirmation by the Senate, other than members of the uniformed 
services and Foreign Service Officers below the rank of Ambassador.
    (g) Public access. Quarterly and employment termination reports 
will be made available by the Office of Government Ethics to the public 
on its website within 30 calendar days of receipt. The reports will be 
sortable by employee beneficiary's name, agency, and position, as well 
as type of document and document date. Quarterly and employment 
termination reports that are made available to the public by the Office 
of Government Ethics will not include any information that would 
identify individuals whose names or identities are otherwise protected 
from public disclosure by law. The reports filed by anonymous 
whistleblowers will not be made available to the public.
    (h) Noncompliance--(1) Receipt of impermissible contributions. If 
the legal expense fund receives a contribution

[[Page 23780]]

that is not permissible under Sec.  2635.1006, the contribution must be 
returned to the donor as soon as practicable but no later than the next 
reporting due date as described in paragraph (c) of this section.
    (2) Late filing of required documents and reports. If a report is 
filed after the due date, the employee beneficiary forfeits the ability 
to accept contributions or distributions through the trust until the 
report is filed.
    Example 1 to paragraph (h)(2): A Department of Labor employee 
establishes a legal expense fund in accordance with this subpart. 
Because the employee filed the trust document on February 15, the first 
quarterly report is due on April 30. However, the employee did not 
submit the first quarterly report until May 15. The employee is 
prohibited from accepting contributions or distributions through the 
trust from May 1 until May 15. Once the employee files the quarterly 
report, the employee may resume accepting contributions and 
distributions.
    (3) Continuing or other significant noncompliance. In addition to 
the remedies in paragraphs (h)(1) and (2) of this section, the Office 
of Government Ethics has the authority to determine that an employee 
beneficiary may not accept contributions and distributions through the 
trust if there is continuing or other significant noncompliance with 
this subpart.


Sec.  2635.1008   Termination of a legal expense fund.

    (a) Cause. A legal expense fund may only be terminated for the 
following reasons:
    (1) The purpose of the trust is fulfilled or no longer exists; or
    (2) At the direction of the employee beneficiary.
    (b) Excess funds. Within 90 calendar days of termination of the 
legal expense fund, the trustee must distribute any excess funds to an 
organization or organizations described in section 501(c)(3) of the 
Internal Revenue Code and exempt from taxation under section 501(a) of 
the Internal Revenue Code. Funds from the legal expense fund may not be 
donated to an organization that was established by the employee 
beneficiary, an organization in which the employee beneficiary, their 
spouse, or their child is an officer, director, or employee, or an 
organization with which the employee has a covered relationship within 
the meaning of Sec.  2635.502(b)(1). The trustee has sole discretion to 
select the 501(c)(3) organization.
    (c) Trust termination report. After the trust is terminated, the 
employee beneficiary must file a trust termination report that contains 
the information required by Sec.  2635.1007(d) for the period of the 
last quarter report through the trust termination date. The report also 
must indicate the organization to which the excess funds were donated. 
The report is due 30 calendar days following the termination date of 
the trust.
    (d) Exception for anonymous whistleblowers. An employee beneficiary 
who is an anonymous whistleblower may choose to file the trust 
termination report anonymously through the employee beneficiary's 
trustee or representative with the Office of Government Ethics.


Sec.  2635.1009   Pro bono legal services.

    (a) Acceptance of permissible pro bono legal services. An employee 
may solicit or accept the provision of pro bono legal services for 
legal matters arising in connection with the employee's past or current 
official position, the employee's prior position on a campaign, or the 
employee's prior position on a Presidential Transition Team from:
    (1) Any individual who is not:
    (i) An agent of a foreign government as defined in 5 U.S.C. 
7342(a)(2);
    (ii) A lobbyist as defined by 2 U.S.C. 1602(10) who is currently 
registered pursuant to 2 U.S.C. 1603(a); or
    (2) A person who does not have interests that may be substantially 
affected by the performance or nonperformance of an employee's official 
duties.
    Note 1 to paragraph (a): Pursuant to Sec.  2634.907(g) of this 
chapter, an employee beneficiary who is a public or confidential filer 
under part 2634 of this chapter must report gifts of pro bono legal 
services on the employee's financial disclosure report, subject to 
applicable thresholds and exclusions.
    (b) Role of agency ethics official. An employee must confer with an 
agency ethics official to seek a determination as to whether the legal 
services are from a prohibited pro bono legal services provider before 
accepting the pro bono legal services.
    Example 1 to paragraph (b): A Department of Justice employee is an 
eyewitness in an Inspector General investigation and is called to 
testify before Congress. A local law firm offers to represent the 
employee at no cost. The employee consults with an agency ethics 
official, who determines that the attorney who would represent the 
employee is neither an agent of a foreign government nor a lobbyist. 
However, the law firm is representing a party in a case to which the 
employee is assigned. The ethics official determines that the law firm 
is a person who has interests that may be substantially affected by the 
performance or nonperformance of the employee's official duties. 
Accordingly, the employee may not accept the offer of pro bono legal 
services from the law firm.
    Example 2 to paragraph (b): A Securities and Exchange Commission 
employee is sexually harassed by a supervisor and files a complaint. A 
nonprofit legal aid organization focusing on sexual harassment cases 
offers pro bono legal services to the employee at no cost. The employee 
consults with an agency ethics official, who determines that the 
attorney who would represent the employee is neither an agent of a 
foreign government nor a lobbyist, and neither the attorney nor the 
nonprofit legal aid organization has interests that may be 
substantially affected by the performance or nonperformance of the 
employee's official duties. Accordingly, the employee may accept the 
offer of pro bono legal services from the nonprofit legal aid 
organization.
    Example 3 to paragraph (b): A Department of State employee is asked 
to testify in a legal proceeding relating to a prior position at the 
Department of Justice. An attorney at a large national law firm offers 
pro bono services to the employee. The employee confers with an agency 
ethics official who determines that although the attorney offering 
representation is neither an agent of a foreign government nor a 
lobbyist, the law firm is currently registered pursuant to 2 U.S.C. 
1603(a) and has business before other parts of the Department of State. 
However, neither the attorney nor the law firm has interests that may 
be substantially affected by the performance or nonperformance of the 
employee's official duties. Accordingly, the employee may accept the 
offer of pro bono legal services.

[FR Doc. 2022-08130 Filed 4-20-22; 8:45 am]
BILLING CODE 6345-03-P