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Witness Testimony
Mr. Jack Maskell
NIH Ethics Concerns: Consulting Arrangements and Outside Awards.
Mr. Chairman and Members of the Subcommittee: Thank you for the invitation to speak to you today on the matter of "awards" from private sources. My name is Jack Maskell, and I am a legislative attorney with the American law Division of the Congressional Research Service. I began working with the subcommittee staff a little more than a year ago concerning the legal issues of private cash "awards" or "prizes" being given to the directors of the Institutes of the National Institutes of Health from private laboratories or clinics. In the course of that work, the scenario that developed was as follows: An agency of the Federal Government makes grants for research or clinical studies to a private laboratory/ clinic in the sum of tens of millions of dollars a year. That private laboratory/clinic then gives a cash "award" or "prize" of several thousand dollars to the Director of the very federal agency making those grants. One does not need to have an intricately detailed knowledge of federal law and regulations on ethics to see the obvious "appearance" problems and potentials for more serious consequences in that scenario. In fact, preventing appearances of impropriety and increasing confidence in the public's perception of the fairness of the administration of federal programs is one of the principal purposes behind federal ethics regulations and laws. Crandon v. United States, 494 U.S. 152, 164-165 (1990); H.R. Rpt. No. 748, 87th Cong., 1st Sess. 4-6 (1961); 5 C.F.R. 2635.101(a). Upon further research and analysis it became clear that even beyond any mere "appearance" problem, however, this scenario raised specific questions of violations of federal ethics regulations, and the statutes underlying them. I prepared a fairly detailed analysis of some of the legal and ethics issues involved for the subcommittee, and with the subcommittee's permission, I have appended that analysis to my statement today. Simply put, it appears that an agency head, with administrative and operational authority over all aspects of that agency's functions and programs, should not under federal law and regulation be accepting cash gifts, "awards" or "prizes" from a private grantee of his own agency, that is, a private source that is dependant upon and so interested in the official duties, responsibilities and powers of that administrator. This is particularly the case with certain private clinics and laboratories which have a continuing "certification," as well as a substantial and continuing grant, relationship with the agency. As a brief background, federal law now prohibits the receipt of "gifts" by federal officials from "interested parties," or what are also called "prohibited sources." In the executive branch there are two general categories of interested parties. The first are those that are prohibited sources agency- wide, that is, for everyone in the agency, and includes those private entities seeking official action from, doing business with, or that are regulated by one's agency. 5 U.S.C. ' 7353(a)(1); 5 C.F.R. ' 2635.203(1)-(3). The second category are those that are prohibited sources for a particular officer or employee in question, that is, a restriction which is personal to the particular official B and that includes those "whose interests may be substantially affected by the performance or nonperformance of the individual's official duties." 5 U.S.C. ' 7353(a)(2); 5 C.F.R. ' 2635.203(4). While most gifts may not be accepted from either category of interested parties (agency-wide or personal), there is a specific exception in executive branch regulations for the receipt of a bona fide award or prize for meritorious public service, when the donor of the award is a sufficiently independent source. Specifically, the awards exception allows an official to accept a bona fide award under certain circumstances from someone who is not in that second, "personal" category of interested parties, that is, an entity which does not have "interests that may be substantially affected by the performance or nonperformance of the employee's official duties." 5 C.F.R. 2635.204(d)(1). The example specifically given in the Office of Government Ethics regulations, is an NIH official receiving the Nobel Prize. 5 C.F.R. 2635.204(d), note. The Department of Justice, analyzing the "awards" issue under a related criminal statute, explained that acceptable bona fide awards must come from donors who are "detached from and disinterested in the performance of the public official's duties." 8 Op. O.L.C. 143, 144 (1984). It would strain credibility to argue that a grantee regularly receiving millions of dollars in grants from a federal agency is "detached from" or "disinterested in" or "independent of" the duties, powers, and responsibilities of the Director of that agency. Even when the agency head or other supervisory personnel are not directly participating in the award of a grant, or actually participating in certifying the private entity as a "comprehensive" treatment facility, the actual authority over those subordinate employees making the decisions, the inherent influence of supervisors and agency heads over such subordinate employees, and the natural inclination of employees to want to please their superiors, all counsel against such agency heads and management personnel receiving cash awards from these private grantees under the regulation. While there certainly may be some leeway in the interpretation of the language of the regulation, the Supreme Court, in a unanimous decision authored by Justice Scalia in 1999, has given some guidance by explaining fairly clearly that a private entity has interests that "may be substantially affected by the performance of" an official's public duties when that official "has the capacity to exercise governmental power or influence in the donor's favor," regardless of whether there is any specific, particular matter on the desk of the official relating to that private entity. United States v. Sun-Diamond Growers of California, 526 U.S. 398, 405-511 (1999). In fact, if there is a particular matter pending before the official relating to the private entity at the time of the cash payments, questions of both the application of criminal laws as well as ethics violations could be implicated. That Supreme Court decision, known as the Sun-Diamond case, involved a 31-count criminal indictment against the then Secretary of Agriculture for accepting gifts of travel and entertainment from private entities regulated by his Department. The indictment charged the Secretary with the acceptance of "illegal gratuities" under the federal bribery statute. There were no allegations that the Secretary ever did any official act for the donors, or that any specifically identified official matter was pending before the Secretary involving those donors. The Independent Counsel argued before the Court that the mere position of the Secretary, and the authority and power of the Secretary to affect the interests of the donor were enough to invoke the felony "illegal gratuities" prohibition upon accepting gifts or payments from them. The Supreme Court, however, disagreed with the Independent Counsel, and Justice Scalia, writing for a unanimous Court explained in dicta that there is a multi-layered web of ethics laws and regulations in place for federal officials, and that while such so-called "status gifts" are not necessarily "illegal gratuities" (because they can not be tied to any specific, identified official act), they do violate the language of the express regulation that we are discussing today, that is, they are gifts from a donor who has interests that may be substantially affected by the public duties of the official because the public official "is in the position to act favorably to the giver's interest," that is, the official has the "capacity to exercise governmental power or influence in the donor's favor ..." Sun-Diamond, supra at 408, 411. It is obvious that a Director of a federal agency has the official capacity, position and authority to exercise governmental power or influence which may affect the fortunes and interests of a grantee of that agency. Merely because a Director might have "delegated" certain grant functions to subordinates does not relieve or divest the officer of his official authority and responsibility. As noted by the United States Court of Appeals, the head of an agency who delegated authority to a subordinate official "did not, however, divest ... himself of the power to exercise his authority or relieve him of his responsibility for action taken pursuant to the delegation." Skokomish Indian Tribe v. G.S.A., 587 F.2d 428, 432 (9th Cir. 1978), see NLRB v. Duval Jewelry Co., 357 U.S. 1, 7-8 (1958). As stated simply by Professor Bayless Manning, one of the drafters of the model federal conflict of interest laws in the 1960's: "[T]he head of a department or agency would have >under his official responsibility' all matters in the department or agency." Manning, Federal Conflict of Interest Law, at 207-208 (Harvard University Press 1964). That is how the system of responsibility and accountability is constructed in the federal service. Because of the actual authority over subordinate employees and their promotions and pay, the inherent influence of supervisors and agency heads over such subordinate employees, and the natural inclination to please one's superiors, it would appear that the reasons behind the ethics rule do not necessitate the actual or the reasonably foreseeable active participation in a specific matter by such supervisory personnel for them to fall outside of the narrow "awards" exception. Financial disclosure. The framework of the public financial disclosure issues is that certain personnel in the Institutes earning up to $200,000 a year in federal salary are seen as exempt from the statutory requirements for public financial disclosure. This has apparently come about by virtue of the Institute's authority under 42 U.S.C. ' 209(f) and (g) to hire "special consultants" and experts without regard to civil service rules. The pay established by the agency for such positions ranges from $38,000 to $200,000. Under this authority the Institutes have reportedly hired high-level administrative personnel, including apparently directors, but since the "pay range" under this authority begins at $38,000, below the statutory threshold for disclosure, the agency has exempted those hired under this authority from public financial disclosure. Report of the National Institutes of Health Blue Ribbon Panel on Conflicts of Interest Policies, Draft of May 5, 2004 at 20, 29-31. The exemption from filing for those in a "pay range," when the lowest amount in the range is below the statutory threshold, is not necessarily required by the language of the federal law, but is rather an interpretation of the law by the Office of Government Ethics. The federal law merely says in relevant part that public disclosure is required from: each officer or employee in the executive branch ... who occupies a position ..., in the case of positions not under the General Schedule, for which the rate of basic pay is equal to or greater than 120 percent of the minimum rate of basic pay payable for GS-15 of the General Schedule .... 5 U.S.C. appendix, ' 101(f)(3). The law itself does not specifically say anything about pay bands, or the lowest level in any given pay range. The Office of Government Ethics has determined, however, that the statutory language and intent of the law means that the "basic pay" for a "position" is the lowest possible pay, that is, the so-called entry level or beginning pay, for any particular pay range, rather than the pay actually received by a particular incumbent in that position. It should be mentioned here that in the legislative branch we do not follow OGE's particular interpretation of the law (with respect to similar language) applying to legislative branch employees, and that when an employee in the legislative branch reaches the actual annual rate of pay that is comparable to the statutory threshold (120% of a GS-15), then that employee must file a public disclosure, regardless of any minimum pay possible for that "pay band" or "pay range." The Office of Government Ethics has explained that the intent of the disclosure law was to cover a "position" rather than a particular employee, and that the coverage of the disclosure law "is determined by the employee's level of responsibility" and that the lowest level of pay possible defines that responsibility (OGE Letter to DAEO's, No. 98 x 2). In most cases, this is perfectly logical and effective, particularly where there may be a number of "positions" in an occupational series, and several corresponding pay bands to which an employee may be progressively promoted or appointed. The pay ranges may then be fairly correlative to responsibility and, of course, "level of pay" is a more easily determined and definable standard than is "level of responsibility." However, where there is merely an authority to hire and no positions and pay statutorily defined, or merely a maximum rate of pay, then the lowest permissible pay rate may not fairly describe the responsibility of those in the upper echelons of pay and authority. In some cases a rigid application of the "lowest possible pay" interpretation does not conform to the actual facts on the ground. Under their title 42 authority, for example, it has been explained that the Institutes hire managers, supervisors and even directors. Clearly, their positions and levels of responsibilities are significantly different from and greater than "consultants" and advisors at the lower end of that possible pay range. Policy makers must, of course, balance the interest of full disclosure for public officials with the privacy interests of federal employees and officials, and the possible "nuisance" factors of public disclosure and its effect on recruitment and retention of qualified personnel. However, these policy decisions should not be confused with any constitutional "rights to privacy" of public employees with regard to financial matters. The federal courts examining the issue of privacy rights have determined that an implied right to privacy exists under several possible provisions of the Constitution when there is involved "intimate" family and personal relationships and decisions, such as the decision concerning procreation and child-rearing. Whalen v. Roe, 429 U.S. 589 (1977). The courts have not, as of yet, expressly extended any constitutional right to privacy, however, to a public official's financial matters or interests, noting that "[f]inancial privacy is not within the autonomy branch of the right to privacy," that is, it is not within the "sphere of family life constitutionally protected by the right of privacy." Duplantier v. United States, 606 F.2d 654, 669 (5th Cir. 1979), cert. denied 449 U.S. 1076 (1981) [upholding the federal Ethics in Government Act public disclosures for federal judges], citing Plante v. Gonzalez, 575 F.2d 1119, 1132 (5th Cir. 1978), cert. denied 439 U.S. 1129 (1979). Attachment (Adobe PDF) Related Documents |
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