revolving door restrictions

© Sheppard Mullin Richter Hampton LLP 2006

Revolving Door Restrictions

Keith R. [email protected]

2

What is the “Revolving Door”? Restrictions on:

– Discussing employment with current Government officials

– Hiring current and former Government officials

– Representational activities by current and former Government officials

3

Why Do We Care?

4

Statutory Framework Ethics Reform Act (18 U.S.C. § 201 et seq.)

– Criminal statute applicable to current and former Government officials generally

– Implemented by Office of Government Ethics (“OGE”) Regulations at 5 C.F.R. § 2635 et seq.

Procurement Integrity Act (41 U.S.C. § 423)

– Additional restrictions applicable to current and former Government procurement officials

– Implemented by FAR 3.104 et seq.


Ethics Reform Act

6

What is the Ethics Reform Act? Criminal conflict of interest statute that restricts:

– Employment discussions with current Government officials (18 U.S.C. § 208)

– Representational activities by former Government officials (18 U.S.C. § 207)

– Representational activities by current Government officials (18 U.S.C. §§ 203 & 205)

Reaches Government officials and private contractors (18 U.S.C. § 2)

7

Potential Consequences of Violations Penalties for Individuals

– Up to 5 years in prison per violation AND– Civil fine of up to $50,000 per violation OR the amount of compensation

received or offered for the prohibited conduct, whichever is greater

Penalties for Corporations– Criminal fine of up to $500,000, or twice the gain to the corporation or loss to

the Government, whichever is greater AND– Civil fine of up to $50,000 per violation OR the amount of compensation

received or offered for the prohibited conduct, whichever is greater

Additional Consequences for Contractors– Bid protests– Contract rescission– Suspension and debarment


Restrictions on Employment Discussions with Current

Government Officials

18 U.S.C. § 208

9

§ 208 – Basic Prohibition Prohibits a Government official from

participating “personally and substantially” in a “particular matter” in which an organization with which he is “negotiating” or has an “arrangement concerning prospective employment” has a “financial interest”

10

§ 208 – Key Definitions “Personally and Substantially”

– Direct involvement that is of significance to a matter

– Requires exercise of judgment and discretion

“Particular Matter”– A matter focused on the interests of a specific person or

a “discrete and identifiable class” of persons

– Excludes policy matters involving a “large and diverse” group of persons

11

§ 208 – Key Definitions (cont’d) “Financial Interest”

– Requires a close causal link between a decision or action and any anticipated effect on the prospective employer

– Effect must not depend on events that are speculative or unrelated to the matter

“Negotiating” Employment– Any discussions “mutually conducted with a view toward

reaching an agreement regarding possible employment”

– Does not require a formal offer or even discussions regarding the terms and conditions of a specific position

12

§ 208 – Disqualification When a Government official begins negotiating

employment with a contractor, the official is disqualified from participating in matters that could affect the contractor’s financial interest

– Disqualification is accomplished simply by not participating in the matter

– Written disqualification notice is required for Department of Defense employees, but not civilian employees

13

§ 208 – OGE Regulations The OGE regulations require disqualification when

a Government official begins “seeking employment”

– Negotiating employment

– Making an unsolicited communication regarding possible employment

– Making a response other than an unconditional rejection to an unsolicited communication regarding possible employment


Restrictions on Representational Activities by Former Government Officials

18 U.S.C. § 207

15

§ 207 – Basic Prohibition Restricts a former Government official’s ability to

make a “communication” to or “appearance” before the Government with the “intent to influence” the Government on behalf any other party

Restrictions last for a one-year, two-year, or lifetime period depending upon the former Government official’s:

– Level of seniority

– Level of involvement in the matter

16

§ 207 – Key Definitions “Appearance” or “Communication”

– An “appearance” occurs when a former Government official is physically present before the Government or conveys material to the Government in a formal proceeding

– A “communication” includes any oral, written, or electronic transmission

– “Behind the scenes” assistance is not prohibited

“Intent to Influence”– Requires potentially differing views or positions

– Virtually any communication in connection with obtaining or performing a contract risks a finding of “intent to influence”

17

§ 207 – Specific Prohibitions Lifetime ban on switching sides (§ 207(a)(1))

Two-year official responsibility ban (§ 207(a)(2))

One-year cooling off period for former senior Government officials (§ 207(c))

One-year cooling off period for former very senior Government officials (§ 207(d))

18

§ 207(a)(1) – Lifetime Ban A former Government official who

participated “personally and substantially” in a “particular matter” involving “specific parties” may never represent any party before the Government in connection with that same matter

19

§ 207(a)(1) – Key Definitions “Particular Matter” Involving “Specific Parties”

– A specific proceeding affecting the legal rights of the parties OR an isolatable set of transactions between identifiable parties

– Excludes rulemaking, policymaking, and legislation

– A contract becomes a particular matter involving specific parties upon receipt of initial proposals or indications of interest

Same Particular Matter– A procurement, the resulting contract, and any modifications

generally are part of the same matter

– Different contracts generally are different matters

20

§ 207(a)(2) – Two-Year Ban Prohibits a former Government official, for a

period of two years after leaving Government service, from representing any party in connection with a “particular matter” involving “specific parties” that was “actually pending” under the former Government official’s “official responsibility” during his or her last year of Government service

21

§ 207(a)(2) – Key Definitions “Official Responsibility”

– Includes all matters assigned to a Government official by statute, regulation, Executive Order, job description, or delegation

– Terminates when the matter no longer is “actually pending” or there is a formal modification to the Government official’s responsibilities

“Actually Pending”– Begins when a matter has been referred to, or comes under

consideration by, persons in a Government official’s area of responsibility

– Continues until a specific action or event terminates the matter

22

§ 207(c) – Former Senior Officials For a period of one year after leaving senior

Government service, a former “senior” Government official may not represent any party, in connection with “any matter,” before an employee of any agency in which the former senior Government official served during his or her last year of Government service

Former senior Government officials also must comply with the lifetime and two-year bans set forth in § 207(a)

23

§ 207(c) – Key Definitions Former “Senior” Government Official

– Executive Schedule employees– Government officials with a rate of basic pay of at least 86.5%

of the basic rate of pay for Level II of the Executive Schedule ($145,320 for 2007)

– Active duty military officers with a pay grade of O-7 or above (Generals and Admirals)

– Certain Presidential and Vice Presidential appointees

“Any Matter”– Virtually all encompassing– Prior participation in the matter is not required

24

§ 207(c) – Relevant Exceptions “Designated Agency Components”

– The OGE has designated separate agency components that are treated as separate agencies for purposes of § 207(c)

– Former Executive Schedule employees and certain Presidential and Vice Presidential appointees are ineligible

Advance Regulatory Waiver

– The OGE has exercised statutory authority to waive § 207(c) for the positions listed in 5 C.F.R. § 2641, Appendix A

25

§ 207(d) – Former Very Senior Officials For a period of one year after leaving the

Government, a former “very senior” Government official may not represent any party, in connection with “any matter,” before:– A Government official employed by his or her former

agency

– An Executive Schedule employee of any agency

Former very senior Government officials also must comply with the lifetime and two-year bans set forth in § 207(a)

26

§ 207(d) – “Very Senior” Officials Government officials with a rate of basic pay equal to

the basic rate of pay for Level 1 of the Executive Schedule ($186,600 for 2007)

Government officials in the Executive Office of the President with a rate of basic pay equal to the basic rate of pay for Level 2 of the Executive Schedule ($168,000 for 2007)

Vice President of the United States

Certain Presidential and Vice Presidential appointees

27

§ 207 – Exemptions “Special Knowledge”

– Statements based upon “special knowledge” are exempt from §§ 207(c) and (d) IF made without compensation

“Scientific or Technological Information”– Communications made for the sole purpose of furnishing

scientific or technological information are exempt from § 207 IF agency-specific procedures are followed

Testimony– Testimony under oath and statements made under penalty of

perjury are exempt from § 207 BUT special rules apply to expert testimony


Restrictions on Representational Services by Current Government Officials

18 U.S.C. §§ 203 & 205

29

§ 203 – Basic Prohibition Prohibits a current Government official from

receiving “compensation” for “representational services” provided before the Government in connection with any “particular matter” in which the Government is a party or has a direct and substantial interest

Includes receipt of compensation in exchange for representational services provided by any party

30

§ 203 – Key Concepts “Compensation”

– Fees, wages, salary, commission, and any other form of payment

“Representational Services”– Any “communication” or “appearance” made with the “intent to

influence” the Government on behalf of any party

Relevant Exceptions– Testimony under oath and statements under penalty of perjury

– Certain exemptions for special Government employees

31

§ 203 – Terminal Leave An individual on terminal leave remains a

current Government official

Government officials on terminal leave should not be allowed to contact the Government in their capacity as contractor employees

32

§ 205 – Basic Prohibition § 205(a) prohibits a current Government official from:

– Prosecuting any claim against the Government OR

– Assisting in the prosecution of any claim against the Government in exchange for a gratuity or interest in the claim

§ 205(b) is co-extensive with § 203, except:

– Receipt of compensation is not required

– Limited to representational services provided directly by the Government official


Procurement Integrity Act

41 U.S.C. § 423

34

What is the Procurement Integrity Act?

A procurement statute that (among other things):– Establishes reporting and disqualification requirements that

apply when a Government procurement official contacts or is contacted by a bidder or offeror regarding possible employment (41 U.S.C. § 423(c))

– Prohibits a former Government official who was involved in certain procurement functions from accepting compensation from affected contractors for a period of one year after performing those functions (41 U.S.C. § 423(d))

Both requirements reach contractors directly

35

Potential Consequences of Violations Civil Penalties

– Up to $50,000 for individuals and $500,000 for organizations, PLUS

– Twice the amount of compensation received or offered for the prohibited conduct

Administrative Actions– Cancellation of procurement

– Contract rescission

– Suspension or debarment


Restrictions on Employment Discussions

41 U.S.C. § 423(c)

37

§ 423(c) – Basic Prohibition A Government official who is participating “personally

and substantially” in a “Federal agency procurement” in excess of the simplified acquisition threshold and who “contacts or is contacted” by a bidder or offer regarding possible employment must:

– Promptly report the contact in writing to his or her supervisor and designated agency ethics official AND

– Either reject the possibility of employment OR be disqualified from further personal and substantial participation in the procurement

38

§ 423(c) – Key Definitions “Federal Agency Procurement”

– Competitive acquisition of goods, services, or construction using appropriated funds

Employment Contact– Any actions that constitute “seeking employment” under

the OGE regulations AND

– Any unsolicited employment communication from an offeror, even if rejected immediately

39

§ 423(c) – “Personally and Substantially”

Drafting, reviewing, or approving the specifications or statement of work

Preparing or developing the solicitation

Evaluating bids or proposals or selecting a source

Negotiating price or terms and conditions

Reviewing and approving award of a contract

40

§ 423(c) – Disqualification Requires submission of written

disqualification notice to the Contracting Officer, Source Selection Authority, and the Government official’s immediate supervisor

Government official must remain disqualified until the Head of the Contracting Activity authorizes participation


Hiring Ban

41 U.S.C. § 423(d)

42

§ 423(d) – Basic Prohibition Prohibits a former Government official from accepting

compensation from a contractor for a period of one year after serving in any of the following positions on a contract over $10 million awarded to the contractor:– Procuring Contracting Officer

– Source Selection Authority

– Source Selection Evaluation Board member

– Chief of a financial or technical evaluation team

– Program Manager

– Deputy Program Manager

– Administrative Contracting Officer

43

§ 423(d) – Basic Prohibition (cont’d) Prohibits a former Government official from accepting

compensation from a contractor for a period of one year after personally making any of the following decisions:

– Decision to award a contract, subcontract, modification, or order in excess of $10 million to that contractor

– Decision to establish overhead or other rates applicable to that contractor that are valued in excess of $10 million

– Decision to approve issuance of contract payments in excess of $10 million to that contractor

– Decision to pay or settle a claim in excess of $10 million with that contractor

44

§ 423(d) – “Compensation” Includes wages, salaries, honoraria, commissions,

professional fees, and any other form of payment

Does not include compensation paid by a prime contractor to a subcontractor that employs a former Government official UNLESS the subcontract is merely a vehicle to obtain services from a former Government official

45

§ 423(d) – Divisions and Affiliates The hiring ban does not apply to a division or

affiliate of the contractor that:

– Is separate from the entity responsible for the contract that gives rise to the hiring ban AND

– Does not produce any of the “same or similar products or services” as the entity responsible for the contract that gives rise to the ban


Implementing a Revolving Door Compliance Program

47

Components of a Successful Program

Written Policies and Procedures

Pre-Hire Screening

Monitoring of Assignments

Training

Incentives and Penalties

Periodic Compliance Audits

48

Written Policies and Procedures Include the following key elements:

– Commitment to comply with restrictions

– Member of senior management with oversight responsibility

– Brief explanation of restrictions

– Procedures for screening applicants and monitoring assignments

– Documents required to be generated and maintained

– Potential consequences of noncompliance

– Procedures for reporting violations

– Identification of individual or organization responsible for each task

Distribute (and periodically redistribute) to all employees Require certification of receipt by employees

49

Pre-Hire Screening Questions

– Are employment discussions permissible?

– Can the applicant be hired?

– What representational restrictions will apply?

Elements– Conflict of interest questionnaire

– Analysis and written determination

– Pre-hire certification

50

Conflict of Interest Questionnaire Require all applicants to complete the questionnaire before

employment discussions progress

Include questions broad enough to elicit information regarding all revolving door restrictions

Request copies of the applicant’s disqualification statement and ethics opinion

Require the applicant to certify that:

– All responses are current, accurate, and complete

– The applicant will update the contractor immediately of any changes

51

Analysis and Written Determination Utilize reviewers that are independent of the hiring activity

Provide reviewers with all information received from the applicant and a description of the relevant position

Require reviewers to document their findings

– Are employment discussions permissible?

– Can the applicant be hired?

– What representational restrictions will apply?

Do not allow anyone else to speak with the applicant until the review is complete

52

Pre-Hire Certification Provide the new employee a copy of:

– The new employee’s completed conflict of interest questionnaire

– All relevant contractor policies and procedures

Require the new employee to certify that:– The information in the new employee’s conflict of interest

questionnaire remains current, accurate, and complete

– The new employee understands, has complied, and will continue to comply with all applicable revolving door restrictions

– The new employee will notify his or her supervisor immediately if he or she believes that performance of an assignment would violate such restrictions

53

Monitoring of Assignments Require a risk assessment prior to reassignment

Ensure that a supplemental conflict of interest determination is prepared before reassignment

Educate the employee and his or her supervisor about the compliance risks associated with the new position

Require the employee and his or her supervisor to certify that they understand and will comply with all applicable revolving door restrictions

54

Employee Training Provide basic training to all contractor personnel

Provide advanced training to:

– Former government officials

– Supervisors of former government officials

– Members of senior management

Document attendance with certifications

55

Compliance Audits Policies and Procedures

– Are the contractor’s policies and procedures current?

– Have they been modified to address prior audit findings?

Personnel Files– Does the file include all required documents and certifications?

– Are the documents dated at the appropriate point in the process?

– Are all conflict of interest determinations adequate?

Training Program– Are the contractor’s training materials current and adequate?

– What percentage of personnel have attended training?

56

Compliance Audits (cont’d) Reported Violations

– Have all reports been logged, documented, and investigated?

– Was appropriate disciplinary action taken?

– Has the issue been corrected?

Post-Audit Analysis

– Address each violation by taking appropriate disciplinary action

– Analyze the pattern of violations to identify gaps and weaknesses

– Address gaps and weaknesses promptly through modifications to policies, procedures, and training