OVERSIGHT HEARING ON THE EFFECTS OF FEDERAL ETHICS RESTRICTIONS ON THE RECRUITMENT AND RETENTION OF FEDERAL EMPLOYEES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP92M00732R000700070036-5
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 38
• Document Creation Date: December 23, 2016
• Document Release Date: April 25, 2014
• Sequence Number: 36
• Publication Date: June 13, 1989
• Content Type: MISC

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OFFICE OF CONGRESSIONAL AFFAIRS
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C'�
OCA 1927-89
HOUSE POST OFFICE AND CIVIL SERVICE COMMITTEE
SUBCOMMITTEE ON HUMAN RESOURCES
OVERSIGHT HEARING ON THE EFFECTS OF FEDERAL ETHICS RESTRICTIONS
ON THE RECRUITMENT AND RETENTION OF FEDERAL EMPLOYEES
June 13, 1989 10:00 a.m.
311 CHOB
WITNESS LIST
Panel 1
P
Commission on Federal Ethics Law Reform
Judith Bello, Member, R. James Woolsey, Member
The Department of Justice
Joseph Whitley, Acting Associate Attorney General
The Office of Government Ethics
Frank Q. Nebeker, Director
Panel 2
Former Federal Employees
Robert B. Costello, Former Undersecretary for
Acquisition, Department of Defense
Dr. Noel W. Hinners, Former Associate Deputy
Administrator, NASA
. Leland Page, Former Director of the Office of
Automation Service, Airway Facilities Program, FAA
Arthur P. Rosenblum, Former Program Executiv9, Officer,
Management Information Systems, U.S. Arrhy
Panel 3
National Commission on the Public Service, Task Force on
Public Perceptions of the Public Service
Carolyn Warner, Member of the Commission, Dr. Donald F.
Kettl, Associate Professor, Vanderbilt University,
Designated Spokesperson for the Task Force
The Administrative Conference of the United States
Marshall J. Breger, Chairman
The General Accounting Office
Bernard Ungar, Director of Federal Human Resource
Management Issues, General Government Division
Panel 4
The Senior Executives Association
G. Jerry Shaw, General Counsel
The American Civil Liberties Union
Leslie Harris, Legislative Counsel
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i p.t
�
.THE EFFECTS OF FEDERAL ETHICS RESTRICTIONS ON
THE RECRUITMENT AND RETENTION OF FEDERAL EMPLOYEES
� HEARING
Before the
SUBCOMMITTEE ON HUMAN RESOURCES
of the
COMMITTEE ON POST OFFICE AND CIVIL SERVICE
June 13, 1989
OPENING STATEMENT
Chairman Paul E. Kanjorski
The recommendations of the President's Commission on Federal
Ethics Law Reform, and his subsequent legislative proposal on
federal ethics, have fostered a new trend towards further
restricting the conduct of federal employees. While there can be
no doubt that public servants must be expected to adhere to the
highest ethical standards, we must fashion ethical standards to
which public servants can reasonably be expected to adhere.
Concerns have been raised that various federal ethics
requirements and proposals may act as a disincentive to working for
the federal government. For example, in a recent Washington Post
article, the Senior Executives Association suggested that hundreds
of executives were considering resigning due to the implementation
of new rules restricting the pre and post-employment activities of
employees working on procurements.
Because of the government's desire to attract and retain the
"best and the brightest," it is imperative that we have all the
facts before we create more burdens on federal employees and
possibly make public service undesirable. We should know, for
example, (1) how .the Ethics in Government Act, in its ten year
existence, has impacted on the recruitment and retention of federal
employees, (2) whether there is a body of evidence which at least
suggests that there is a need for further restrictions, (3) if
there is a need for further restrictions, how they,might adversely
effect the government's ability to attract and retain qualified
personnel, and (4) whether the need; for further ethics
restrictions justifies the difficulties the government may
encounter.
Unfortunately, it appears that up to this point, neither the
Administration nor Congress has actively sought this information
and that ethics safeguards may be based more upon a desire to
enhance general public trust in government,, than upon actual
problems encountered in the work force.
The purpose of this hearing is to try to answer some of these
questions before Congress and the Administration rushes headlong
into restricting the activities of existing and future public
servants.
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,
TESTIMONY PRESENTED BY
DR. NOEL W. HINNERS
TO THE
HOUSE COMMITTEE ON POST OFFICE AND CIVIL SERVICE
SUBCOMMITTEE ON HUMAN RESOURCES
HEARING ON
"THE EPPECTS OF FEDERAL ETHICS RESTRICTIONS ON THE
RECRUITMENT AND RETENTION OF FEDERAL EMPLOYEES"
JUNE 13,1989'
It is ,a priviledge, Mr. Chairman and members of the subcommittee,
to be invited here today to address what I consider to be one of the most
pressing issues facing our government: the recruitment and retention of
federal employees. Indeed, I do consider it a priviledge, for. in how many
other countries of the world, and one thinks of recent events in China,
would a citizen be invited to critique his government and have no fear-of
retribution? Additionally, I feel a compulsive sense of responsibility to do
what I can to improve a deteriorating federal work environment, for I am
a firm believer that only by attracting and retaining at least some of the
best will we continue to have a government that is truly responsive and _
accountable to the people. I speak today as an ex-civil servant and not as
an employee of the Martin Marietta Corporation which I joined on May 14,
1989. : . .
I realize that the Hearing is focussed on "The Effects -Of Feder-al Ethics
- Restrictions, on the Recruitment _and-
Retention _of _Federal ..Employees and
-
_ will jaddres�, that jssue I ask, however, that you tobear.�.withf. meas-_.1
discuss a: number-of-related items. - I do that because --I believe that -"ethics _
restrictions;,per se are nowhere_phear, the _�totalityi,of, the problem and that ,
disproportionate focus.on ethics in this . time of .soul-searching will cause
diversion from what may be more,' or at least just as, important aspects of
the civil servant's working environment. It is my surmisal that it is the
cumulative effect of . all these factors over the past ,decade or. so which has
led to an increasing disenchantment with Federal service. .Those factors
include (not in priority order): inadequate resources to do the job,
excessive contracting-out, non-competitive pay, regulatory burden, post-
employment restrictions, belief in the importance of the job, and public
perception of the civil service.
Before discussing the issues, I'll present some personal
information which will help put my recent resignation from NASA on
May 13, 1989 in context. I came to Washington in 1963, fresh out of
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college and eager to work on the Apollo Program. As an employee of
an AT&T company called Bellcomm, which was formed to work soley
with NASA on the Apollo Program. I worked side-by-side for nine
years with many NASA civil servants and was truly impressed with
the caliber of folks in NASA. Thus when Bellcomm folded it's tent in
1972, rather than move to New Jersey to the Bell Labs, I chose to join
NASA and participate directly in the exciting mission of space
exploration. The attraction was indeed about that simple.. .what could
be more challenging and rewarding -than to be in a position of
helping to determine our Nation's future in space? At that time I
knowingly gave up nine year's worth of employment counting
towards retirement benefits (one had to have 15 years in the Bell
System to get vested). That seemed like a small price to pay in view
of the nature of the job with NASA and considering the generally
superior retirement benefits of the Civil Service Retirement System
(CSRS). At that time, NASA was able to offer me an increase over
the salary I was making at Bellcomm, certainly a" factor although I
dare say that I would have gone for the same salary (such is the
luxury of youthful fancy with no kids even approaching college age.)
My NASA career started as Deputy Director and Chief Scientist
of Lunar Programs. In 1974 I became Director . of Lunar Programs
and soon thereafter Associate Administrator for Space Science, a
position held until 1979 when I joined the Smithsonian Institution as
_ _Director of the National Air and Space Museum. In 1982 I became
Director of the NASA Goddard Space 'Flight -Center,:-remainini there T
_ until -1987 , when ._J responded to Dr..' Flet-cher'S request to return to -
NASA -.Headquarters as Associate Deputy Administrator (Institutin)
to help locus, is -pir-rof .
r I; - ; � ��� 4.�
,.thp internal t Anstitucional4l management issues (People,---: _
facilitities and 'equipnient) in - the Agency. Inthis last
well as at. Goddard, -I became painfully aware of the magnitude of the
challenges facing us in maintaining an environment conducive to
Mission success and of the seemingly endless bureaucratic and
political impediments to pro'duetive management:�
The reason I returned to NASA Headquarters 'in -1987 Was that
I believed strongly in the mission of NASA and in its people and
thought that I could contribute to improving the situation. In that
light, I committed to Dr. Fletcher that I would go for two years, i.e., to
the summer of 1989 or through the transition to a new NASA
Administrator, at which point I expected to resign from NASA to
work in either the private industry or academia. Had he not asked
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me to return to Headquarters, I probably would have remained at
Goddard at most another year before embarking � on a new, non-
government career. Thus you can see that I had been contemplating
a career move for some time; I did not aspire to any other position in
NASA or the in theFederal government, in part because of the
cumulative effect of a host of frustrations, and as much because I
believed that if I were ever going to make a new career I'd best do it
before getting too old to be attractive to potential employers in the
private sector. Now, although I planned to leave sometime this
coming summer,- the finality of my decision and the accelerated
timing are related directly to the recent fiascos on pay and ethics
legislation.
This is in a sense all prologue but necessary so that you
understand a few aspects of my career. First, I have been blessed
with working in an exciting field with incredibly dedicated, selfless
public servants, ranging from janitors to secretaries to procurement
folks to scientists and� engineers. Those people lie, with few
exceptions, giving the U.S. taxpayer excellent value for their
investment and most are proud to be NASA employees (note that
NASA people tend not to think of themselves as government,
particularly during those periods of "bureaucrat bashing" so
prevalent in the Carter and Reagan Administrations). I have had
fantastic � opportunity and responsibility as -a civil servant and I can
�
say,- without reservation, "that I have been -proud -to :work -for -NASA -
`arid- fof. the 'U.S. GoVerninent:' .
r 7:- �
_
NowI'd
- like to address the problem-areas that arw--part ---- of that -cumulative frustration I 'mentioned above Let's Ifirst:-Tdeal
with i: the iiiailequate � resources and -Contracting out, two related _
� 1-ii-sues;flatielCOW Ilier'affecCNASA'artability -to-,-suCcessfully-imialemen
its approved program. "
The _ shortfall "Of resources' is threefold: 'administrative budget, '
personnel ' ceiling and ' management authority. --- The -administrative, or
operations budget, is that part of the NASA budget called Research
and Program Management and included salaries and travel of civil
servants, supports the day-to-day operations of the Agency, its
Headquarters and field centers, and includes funding for the
associated support service contractors. Over the years budget
squeezes, program priority, and the recent appropiations realignment
have caused the operations to be disproportionately reduced. - On the
one hand, it is sensible to keep pressure on an operating budget to
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assure efficient management. On the other hand, a continuous
squeeze can eventually result in inefficiency and that is now where
NASA is. For specific example, note that NASA cannot hire the
number of civil servants which OMB has authorized for 1989 and
1990, it cannot fund the upgrading of antiquated computerized
business and management systems, and it cannot fund the
conversion of civil service jobs to contractor jobs mandated by the
OMB.
The civil service job conversion is commonly referred to as
"contracting out", a process which has been underway in NASA, albeit
not by the formal A-76 process, for the past 15 years as NASA has
attempted to increase the proportion of engineers in a, until recently,
decreasing total workforce. Some of that conversion has been good:
there are a number of service-related jobs which do not need to be
done by civil servants and there are sometimes real benefits to be
had by employing a contractor (it's at times easier to make a
contractor respond to management desires via the award-fee process
or contract recompetition). On the other side of that coin, it can cost
more to contract for certain activities but there is a more insidious
aspect: it has gone too far in some work areas. I, and many NASA�
employees, believe that NASA has an undue and detrimental reliance
upon contractors in areas ranging from secretarial services to science
program management to engineering support. Not only are some of
those contracted positions legitimate government functions, but one
increasingly sees a situation in which on-site or near-site contractors
are being paid more than the equivalent civil servant (that some of
those contractor employees are recently retired NASA employees
does not help morale.)
A long-term downside of contracting-out is the erosion of
government's ability to manage its contracts. That arises because the
government contract managers typically come up through the ranks
into management, having served a lengthy spell actually performing
the work they eventually manage. As more and more lower level
jobs are contracted out, there is less and less opportunity to grow the
future government manager. The end point potential is an
incompetent government management capability (this is not unlike
what can happen at the top-side of management if too many
inexperienced political appointees enter a government department, a
major issue discussed in the Volker report in which they call for a
reduction of the number of political appointees and an increased
reliance upon the career civil servant. I hasten to add that the
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situation in NASA is unique in that at this time all the top positions
are filled, or soon will be, with career folks.)
The solution to the contracting-out problem is in theory
straight forward: approve and fund sufficient government employees
to conduct the approved programs. I have no doubt that the OMB
program staff, working with NASA, can figure out what that right
number is and can agree on which functions are inherently
governmental. What remains is for the political leadership to realize
that blanket contracting-out quotas, designed to satisfy the political
goal of smaller size government, may be counter-productive to good
government.
Regulatory burden is another item that has aspects of creeping
counter-productivity, whether it be in procurement, management, or
review and audit. And as usual, it's a matter of degree, for all admit
to a need for basic regulatory processes. But, outside of the
regulators, you'll also find a clear consensus that government is
strangling itself with excessive, burdensome and at times onerous
regulation. This is a topic which has received a lot of attention by a
number of studies and I can but add my voice noting that the impact
on the civil service workforce is real and it is negative.
- A few words now on pay. Pay, the dollars in the envelope, is
only a piece of the remuneration of any job. The nature of the work,
the colleagues, location, benefits, impact or influence, opportunity for
advancement, and a I host of other factors constitute the total reward
and each individual makes his or her own decision on employer
- based on conscious or subconscious weighting of the factors.. When
any one factor in an employment environment gets grossly out of -
whack with the competition, erosion of the workforce results. In
government, entry level and senior level pay, especially for technical
people, is now sufficiently non-competitive that recruitment and
retention are increasingly difficult. This is a real problem which is
not going to be evidenced by looking solely at statistics of attrition
and hiring. At the entry level, it is a matter of the best people not
electing to work for government; at the senior level, it is the most
experienced and valuable people who have the option to make non-
government employment decisions.
This problem has been addressed quite thoroughly by the
Quadrennial Commission and others, and I can give specific examples
of NASA instances if desired, but for now let me call to your
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attention a factor that may exacerbate the situation. Several years
ago, the basic civil service retirement system was changed such that
new employees enter government under the Federal Employee
Retirement System, or FERS. There are many positive aspects of FERS
and it in many ways is closer to private employment systems,
including the early vesting of retirement benefits. In contrast to the
CSRS, which has the effect of "hooking" an employee after five to ten
years of service, FERS gives federal people a new mobility. To the
degree that federal employment conditions become undesirable, an
increasing number of employees will opt out, and as usual it will be
qualitatively selective.
On the issue of ethics ligislation, I have only a few thoughts.
First, it is getting impossible for a non-lawyer (and maybe for
lawyers) to comprehend the particular significance of the� different
pieces of ethics legislation. It is just such vaguery in� the OFPP
section 6 that led me and others to accelerate our departures from
NASA rather than risk an adverse ifilerpretation that would severely
limit career choices. There is both the near-term risk and long-term
in that what is o.k. today may be interpreted as not o.k. years from
now.
I personally do not see the need to continue to increasingly
complicate .the life .of _civil ,servants. I can attest that in NASA good
ethics were a way of life. We. took it seriously and, although We
grumbled- a bit over the tinie it 'took' 445 fill -mit all the financial -
disclosure forms, believed .100% that _financial disclosure is .a key .
ingredient to'as-miring othpliane- '" �
. - 4t-fpNobody can ever guarantee that thole-- Will - not- be a violation of-
established ethics principals ag long as we- .have human 'beings in the
work place.. But to continue to attempt to legislate details of ethical
behavior will ,be. counter-productive. I do not want to work for
anyone or any organization that is not founded on trust. I believe
that most civil servants will honor the trust put in them. When and
if it is not, punish the offender but don't pass a legislative cure for
every new instance which then complicates life for three million
federal employees.
With some trepidation, I point out my perception that the great
proportion of governmental ethics violations arise in the political
appointee realm, not in the career civil service. But there too one
should not legislate to the extent that the most qualified people will
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not risk taking a federal job because of a mis-application of ethics
principals.
Mr. Chairman and members of the subcommittee, it is time to
restore confidence in our government. Simple ethics legislation, full
financial disclosure, sensible audit and review, comparable standards
for all branches of government (civil servants chafe at the dual
standards for Congress and the Executive branches), establishment of
trust, competitive pay and top-level Administration and
Congressional support for the civil service workforce in combination
can make federal careers rewarding and attractive. I thank you for
making the effort to improve the situation and _offer my continuing
support wherever possible.
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�-�a-aa�-�
GAO
Testimony
For Release
On Delivery
Expected at
10:00 a.m. EST
Tuesday
June 13, 1989
THE PRESIDENT'S ETHICS PROPOSALS
Statement of
Bernard L. Ungar, Director
Federal Human Resource Management Issues
General Government Division
Before the Subcommittee on Human Resburces
Committee on Post Office and Civil Service
House of Representatives
GAO/T=GGD-89-29
GAO Form 160 (12/87)
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Mr. Chairman and Members of the Subcommittee:
I appreciate the opportunity to appear before the Subcommittee to
discuss the President's proposals for ethics reform as set forth
in H.R. 2337 and S.765, the "Government-wide Ethics Act of 1989."
The 97-page bill proposes major revisions to the Ethics in
"Government Act of 1978 (the Ethics Act) and the conflict of
interest statutes (18 U.S.C. 202-209). These revisions cover a
broad spectrum of complex issues and incorporate many of the
recommendations of the President's Commission on Federal Ethics
Law Reform (the Ethics Commission).
We have done extensive work on the administration and
enforcement of current ethics laws over many years. My comments
will be based largely on that work, plus the work done by the
Ethics Commission.
--- We have long supported high standards of ethical conduct for all
federal officials and employees. At their most important level,
ethics standards reflect fundamental values of morality and
honesty in the work place on which there is a broad consensus and
which permit no compromise. Standards which incorporate these
fundamental values must be clearly stated in the law,
communicated in an understandable way to all employees, and
subjected to vigorous and effective enforcement.
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Our work has documented certain areas of vagueness in the law and
administrative shortcomings that have created uncertainty and
confusion. This makes it difficult to communicate and enforce
those standards which reflect basic values of morality and
honesty. It also tends to blur the distinction between these
fundamental standards and other aspects of ethics administration
which do not reflect basic values but may result in imposing
substantial burdens and adversely affecting the recruitment and
retention of federal employees.
The President's proposals provide a good framework for examining
ethics issues and alternatives. We support many of the
President's proposals for reform but believe that others require
refinement and further discussion. We considered the President's
proposals in the context of financial disclosure requirements,
current employee restrictions, post-employment restrictiong, and
administration and enforcement issues.
_
FINANCIAL DISCLOSURE
We have several comments with respect to the President's
proposals in the area of financial disclosure. First, the bill
would impose on all three branches of the federal government
essentially the same system for reporting and review of financial
interests. While consistency in reporting seems desirable, we
believe that the review aspect of the bill requires close
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scrutiny in terms of the fundamental differences in the three
branches. For example, Members of Congress and judges do not
function in a hierarchy like that of the executive branch in
which supervisors can make decisions about particular financial
holdings.
Second, the bill will replace current public reporting of
financial interests by category of value with reporting of "the
actual value of such interest rounded to the nearest thousand
dollars." It is not evident from our work or the Ethics
Commission's report that reporting actual values would serve any
purpose that outweighs the added burden imposed on filers.
Indeed, the Commission recommended retention of reporting by
category of value.
Another related issue is the extent to which public reporting, as
opposed to confidential reporting, should continue to be _required
for career officials above the-GS-16 level. The Office of
- _
"Government Ethics (0-GE) has recommended that public disclosurebe
limited to individuals holding elective or appointed positions
because there is little public interest in reports filed by
career civil servants.
Finally, we note that the President's bill deals only with public
financial reporting but does not address consistency in
confidential financial reporting among the three branches. We
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believe that, like public disclosure, standards for confidential
financial disclosure are appropriate for all three branches.
CURRENT EMPLOYEE RESTRICTIONS
The President's proposals would extend to the legislative and
judicial branches many of the employment restrictions that are
now applicable only to the executive branch. While we have not
done much work in this area, more uniform restrictions
throughout the government seem desirable in concept. At the same
time, we believe it is essential that such restrictions be
understandable. Unlike financial disclosure requirements, which
are generally well understood, the conflict of interest
restrictions have generated confusion. For example, both GAOand
the Ethics Commission have pointed to the need to clarify the
term "particular matter" used in 18 U.S.C. 208, which prohibits
current officers and employees from participating in "particular
matters" affecting a personal financial interest.
POST-EMPLOYMENT RESTRICTIONS
We have found post-employment restrictions to be the most vague
and confused area of the current ethics system. This probably
results, in part, from a lack of a consensus as to what such
restrictions should be. Furthermore, because violations of these
restrictions can result in criminal sanctions, it is essential
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that current and prospective employees be able to understand up
front what the restrictions are.
Proposal Lacks Sufficient Specificity
We are particularly concerned with the vagueness of the
President's proposal to create a new 2-year post-employment bar
against the use and disclosure of certain non-public
information. Some of the classes of non-public information to be
protected from disclosure under the proposal lack sufficient
specificity. For example, we believe that the proposed
definitions of trade secret/confidential statistical data and
negotiation positions are far too broad and unclear to attach
criminal penalties to disclosure.
We also question providing OGE with the authority to designate
any information beyond the three proposed categories of non-
_ _ - --
public information, the disclosure of which would result in
criminal penalties, fines, and/or debarment. We believe that any
_
such additional categories should be considered by Congress and
established by legislation.
We support the general intent of this proposal to protect the
interests of the government by prohibiting employees leaving the
government from harmful "side switching" and providing vital non-
public information to an outside party dealing with government.
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Our concerns are primarily with the need to specifically define
the information to be protected and the process for doing so.
DOD Post-Employment Restrictions
The President's proposed bill would make several changes to
recently-enacted laws which impose certain post-employment
requirements and restrictions on former Department of Defense
employees -- 10 U.S.C. 2397, 2397a, 2397b, and 2397c. For
example, the bill proposes to repeal section 2397b which
prohibits certain post-employment with defense contractors for
certain DOD personnel.
The Ethics Commission had recommended revisiting the employment
prohibition in section 2397b because it potentially, covers so few
people yet its precise application is difficult to determine. We
question whether section 2397h should be repealed out right. A
better approach might be to clarify its meaning.
The President's proposal would also significantly change section
2397c, the requirement that major defense contractors report
annually to DOD on former DOD personnel to whom they paid
compensation. The proposal would permit DOD to define the
elements of the reports to be submitted under section 2397c.
However, in the past, DOD asked for little more than job titles
which were not a sufficient basis for detecting potential
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conflicts of interest. We believe that the amendments by the
Congress to require that DOD obtain more detailed information
were appropriate and should be retained.
Finally, we note that these post-employment restrictions in 10
U.S.C. 2397-2397c apply only to the Defense Department. We
believe the conflict of interest situations addressed in these
laws could occur in other agencies and departments of the federal
government as well. Thus, if these DOD post-employment
restrictions are continued, Congress may wish to consider
extending similar post-employment prohibitions to other agencies.
ADMINISTRATION AND ENFORCEMENT
With regard to enforcement, we fully support the President's
proposal to establish civil and misdemeanor penalties for
violations of the conflict of interest statutes. As we testified
last year, this would give more latitude to those responsible for
--enforcing the ethics requirements.-Our work shows that the -
Department of Justicehas prosecuted very few conflict of
interest cases under the existing felony statutes. Civil
penalties could facilitate enforcement of the conflict of
interest laws and possibly have a greater deterrent effect as a
practical matter.
7
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A. A
Further, we have reported on a variety of problems and concerns
associated with OGE's administration of the
"compartmentalization" process by which agencies are divided into
designated subunits for application of the 1-year "no contact"
restrictions. While the bill addresses the White House
compartmentalization, it does not sufficiently deal with this
issue for other agencies.
We also believe that ethics requirements must be communicated in
a straightforward manner through regulations and interpretive
rulings that can be understood by the persons they affect.
Another useful aid would be a handbook for all officials which
explains the ethics rules in lay terms.
One other aspect of the President's proposal which is a great
concern to us deals with our access to records authority.
Section 208 of the current Ethics Act grants 'GAO access to all
'"�
financial disclosure reports filed under the Act--both public and
confidential: The President's bill would amend section 208 to
limit GAOto "publicly available" reports. It is essential that
-GAO have full access to both public and confidential financial
disclosure reports in order to assist Congress with oversight
and, indeed, to carry out the review requirements that the
President's bill would impose on-GAO. Therefore, we strongly
recommend that GAO's access authority under section 208 of the
current law be retained.
8
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IMPACT ON RECRUITMENT AND RETENTION
Since 1983, we have issued three reports that address aspects of
the impact of current ethics laws on recruitment and retention.
In general, we did not find the impact of ethics laws to be a
major concern. However, the information in these reports is
quite limited and somewhat dated. A variety of changes in ethics
laws have been proposed since these studies which might make
their results different today. For example, many recent news
articles have described employees leaving government early
because of certain restrictive provisions in the new procurement
policy law.
We believe that this is an issue that merits further study,
particularly in relation to SES members and potential
presidential appointees. Along these lines, we think it would be
particularly appropriate to attempt to determine the extent to
which-concern about ethics laws may result from a general sense
of confusion and a lack of adequate training and education on the
part of federal employees.
That concludes my prepared statement. I will be happy to answer
any questions you may have.
9
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FOR RELEASE ON DELIVERY
Expected at 10:00 A.M.
June 13, 1989
STATEMENT OF
FRANK Q. NEBEKER
DIRECTOR
OFFICE OF GOVERNMENT ETHICS
BEFORE
THE SUBCOMMITTEE ON HUMAN RESOURCES
OF
THE HOUSE COMMITTEE ON POST OFFICE AND CIVIL SERVICE
ON
THE EFFECTS OF FEDERAL ETHICS RESTRICTIONS
ON THE
RECRUITMENT AND .RETENTION OF FEDERAL EMPLOYEES
MR. CHAIRMAN AND MEMBERS OF THE SUBCOMMITTEE:
I appreciate your invitation to appear before this
Subcommittee to present the views of the Office of Government
Ethics (OGE) on the effects of federal ethics restrictions on
recruitment and retention of federal employees.
This is a subject that, while a Very important consideration
- in_maintaining the government's ability to attract and retain the
highest quality individual� in the federal workforce, is only
partially capable of being measured in any meaningful sense and
only then after_ a problem has been recognized. -_Statutes and
regulations which may cause such a problem can, to some degree, be
anticipated before they affect the federal workforce and that is
the crucial issue I would like to discuss with you today. First,
however, let me discuss the lack of statistics in this area.
In terms of recruitment of federal employees, I know of no
meaningful way of determining how many or why individuals choose
not to apply for federal positions. One simply cannot count a
negative. The government could survey each individual whom it
actively selected to recruit for a specific position to determine
why that individual chose not to accept it, but I believe the
resulting information would be position specific and could not be
extrapolated into data that would support more general
conclusions, especially when attempting to relate it only to
conduct restrictions.
1
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With regard to information gathered from individuals leaving
federal service, this Office did a limited survey of advice and
consent appointees who left government service between September
1980, at the end of an Administration, and January 1983. From the
161 who responded to the survey, 76.4% said that the federal
ethics program had no impact on their decision to leave. It is
important to remember that while on the one hand this was the
period immediately following the imposition of public financial
disclosure requirements and more stringent post employment
requirements for all of these individuals, but on the other, the
individuals were also political appointees who never intended to
stay in federal service or who could not remain in their positions
even if they had wished.
Most recently we all have seen in the news reports the fact
that at least two high level career officials at NASA have
publicly laid their decision to leave the government on the
recently enacted amendments to the reauthorization act of the
Office of Federal Procurement Policy. I know of no government-
wide initiative to try to compile data on those individuals in
procurement positions who left or who are leaving the government
because of that statute.
Be that as it may, all of us probably know of cases where
individuals have either decided not to come into government
because "ethics" statutes would cause too much of a financial
hardship or have decided to leave because of some new� pending
piece of legislation. Just recently, my Office was contacted by
the attorney for a potential Presidential appointee who was trying
to determine what it would "cost" the individual to come into
government because of divestiture requirements applicable to the
type of position he was considering. It became clear that the
individual would be required to sell More than a million dollars
worth of stock which, he had accumulated over a number of years.
Because the attorney did not disclose the name of the client, my
Office will not necessarily know what the individual's ultimate
decision was, nor will we know if the-divestiture costs were the
only consideration. While this instance is noteworthy because it
is an indication that those concerns for "ethics" restrictions do
exist, it does not provide the kind of hard data that I'm sure
that you are seeking.
As Director of the Office of Government Ethics, I have been
called upon to comment on a number of pieces of legislation and to
review a number of proposed regulations that attempt to regulate
the conduct of federal officials during their service as well as
after. These have been and will continue to be referred to here
generally as "ethics" �statutes and regulations although I do not
necessarily believe that is a proper term for all of them. I have
on a number of occasions observed that a proposed statute or
proposed legislation appeared to be of the nature that would pose
substantial hardships to the government, in attracting and
2
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retaining the most qualified individuals in the positions that
would be affected by the statute or regulation. The standard that
I have used to judge the future effect of a statute is this. The
government has a legitimate interest in regulating the conduct of
its employees and former employees when a governmental process
would be harmed by or there would be a reasonable and clear loss
of credibility on the part of the public in the governmental
processes if they engaged in the conduct. When a proposed
regulation or statute exceeds that goal and is intended to
restrict conduct where no government processes would reasonably be
harmed or the public's confidence in the government reasonably
lost, then those restrictions may have as one of its effects the
inability of the government to attract or retain individuals in
the positions covered by the restrictions.
In my experience, proposed statutes and regulations have this
difficulty in three ways. First, they are clearly drafted to
cover conduct that is beyond what I believe to be within those
legitimate interests of the government which I mentioned above.
Second, and less obvious, is the proposed statute or regulation is
not precisely drafted and covers �much more than the drafters
intended to cover. Third, the proposed statute or regulation is
so unclear on its face that the extent of the conduct regulated is
so vague as to create a chilling effect on conduct otherwise
causing no harm to governmental processes or a reasonable public's
perception of them. In order to avoid the inappropriate effects
of "ethics" statutes on recruitment and retention of the most
qualified individuals in federal service, Congress and the
Executive branch must always diligently guard against any one or a
combination of these three results when drafting restrictions on
the conduct of present and former federal officials.
With regard to the previously mentioned resignations of
s-enio'e�NASA-- employees,- this Office became- aware of those
provisions- after,, they - had ---become-:--law.-7,--Upon -review', -the Office
'concluded that some provisions would cover conduct that would not
affect-governmental processes or a_reaSonable_publie,s-perdeption.
of the processes, some provisions were drafted so vaguely as to
have a very potentially chilling effect upon those who were
covered, and some provisions did, this Office believes, cover more
conduct than the drafters had intended. In other words, it
involved aspects of all three results to be avoided. In addition,
the conduct covered by the statute was inconsistent with some
present conflict of interest statutes and whally redundant of one
other. (The criminal .conflict of interest statutes for all
federal officials already in existence. covei. gifts, negotiating
for employment and post employment -- the three main subjects of
proscription in that legislation.) Further, by not placing these
provisions with the other conflict of interest statutes, it has
the real potential for ensnarling those who in good faith attempt
to determine proper conduct but inadvertently violate those
additional and somewhat inconsistent provisions because it is not
3
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necessarily logical to assume that restrictions on the same type
of conduct would be found in disparate titles of the Code. The
Office of Government Ethics submitted to the President's
Commission on Federal Ethics Law Reform a series of
recommendations that covered the gamut of ethics laws. Included
was a recommendation that these provisions of the OFPP Act and
certain other provisions applying only to procurement officials in
the Department of Defense (10 U.S.C. 2397a and 2397b) should be
repealed and that those provisions of each which were appropriate
and not already addressed in the criminal conflict of interest
provisions of ch. 11 of title 18 be incorporated there.
I would note that the President's proposed ethics legislation
includes a provision that would repeal the OFPP proscriptions and
the title 10 sections discussed above. In addition, it would
amend the present criminal conflict of interest statutes to take
into consideration provisions in those statutes that were not
already fully addressed by the present code.
Again, I can only stress that the strongest, most respected
and viable ethics program is designed to address only those issues
that the government has a legitimate interest in addressing, that
any proposed proscriptions be directed only to protecting
government processes and the reasonable public's perception of
them. If that is the case, then I do not believe that there will
be a problem with recruitment and retention of the best
individuals for government positions caused by those restrictions.
I have not seen, nor has my Office had any experience that would
lead to a conclusion that legitimate and appropriate restrictions
have been viewed by individuals as prohibiting them from actions
in which they would otherwise engage. The vast majority of
federal employees have no wish to abuse government processes or
have their own or some colleague's conduct bring the projects on
which they work into question.
I have observed that most individuals accept positions within
the government not 'knowing 'exactly what the "ethics" restrictions
are, assuming they will be briefed on those matters as well as a
myriad of others once they have begun in a position. They do so
because they have no reason to believe that they will be unable to
abide by the restrictions, thinking of themselves as ethical
individuals. I hope that attitude continues in new federal
employees and that they are not surprised to find restrictions
that unreasonably affect their conduct as officials or their
proper pursuit of advancement within their fields. I believe that
too is a goal of a proper ethics program.
Finally, it is my personal belief that the most crucial
concern of individuals in considering federal service and in
deciding to leave is the salary they will or could ever expect to
receive while serving the government. I recognize that one cannot
and should not tie high ethics standards to salaries, but I
4
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�
believe that ethics standards may be frayed by salary levels which
are unrealistic and unfair. When that happens and a scandal
occurs, the apparent response of many is to toughen the ethics
standards even though the conduct was covered by an appropriate
restriction. This is done rather than to address the salary
issue.
I would be happy to answer any questions the members of the
subcommittee might have.
5
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TESTIMONY OF
MARSHALL J. BREGER
Chairman
Administrative Conference of the United States
before the
Subcommittee on Human Resources
Committee on Post Office and Civil Service
United States House of Representatives
On the Effects of Government Ethics Restrictions on-the Recruitment and Retention of
Federal Employees
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STATEMENT OF MARSHALL J. BREGER
Mr. Chairman, members of the committee, I am pleased to appear before the
Subcommittee to address the general subject of government ethics restrictions and their
effects on the recruitment and retention of federal employees. I serve as Chairman of the
Administrative Conference of the United States, an independent federal agency established
by Congress in 1964 to study and recommend improvements to the administrative process. I
am accompanied today by Michael W. Bowers, our Deputy Research Director.
Today's hearing is especially timely for it appears that events are inexorably moving
Congress to make significant revisions to the federal ethics statutes. As I have stated in
other testimony, it is important that Congress not act on a piecemeal basis, without an
understanding of the whole government ethics system.
The question of the effects of ethics restrictions on the recruitment and retention of
federal employees historically has been a concern raised during consideration of reform of
the ethics laws. President Bush on January .25 included among his four key principles to
guide his Commission on Federal Ethics Law Reform the principle that "[W]e cannot afford
to have unreasonably restrictive requirements that discourage able citizens from entering
public service."'
1. Our Reliance on Outside Expertise and the Positive Value of the "Revolving Door."
Many of the ethics stories of the last year or more have involved the so-called "revolving
door." Sometimes the players are on the inside and approaching the door. Sometimes they
have just exited. But at the core of the stories is the relationship between government
officials and people or entities who may be affected by government decisions. It is
understandable, therefore, that some people see stopping the revolving-door as the answer to
our ethics problems. Would that it were so easy.
Let us try a thought experiment. Imagine a strongly-enforced curtain separating the
government and the private sector or a rule that once a person left government, _they could
not return to government service. Let's consider what we would lose if. that approach were
adopted.
First, we would lose what G. Calvin Mackenzie has dubbed our "in-and-outer" system of
leadership selection.2 Every- four or eight years this country has an infusion of new
leadership -- an exchange of ideas between new policymaking officials and our permanent
government. This is not always an easy transition. Some people don't like new policies and
change. But I believe this exchange is a fundamental strength of our system and consistent
with our democratic ideals.
But there is an even more harmful consequence of stopping the revolving door by
making it harder for government officials to leave and work in their area of specialization.
At present we do not expect everyone who enters government service to stay there until
retirement. Our job structure is a pyramid. The possibilities for advancement are limited,
and it is not realistic or desirable to retain civil servants indefinitely at the same pay grade
1The White House, "Remarks by the President to the Ethics Commission During Signing of
An Executive Order," Jan. 25, 1989.
2G. C. Mackenzie, THE IN-AND-OUTERS: PRESIDENTIAL APPOINTEES AND TRANSIENT
GOVERNMENT IN WASHINGTON (Johns Hopkins Univ. Press 1987).
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levels. We want to encourage people to spend a portion of their careers in government and
then return to the private sector. If unreasonably high barriers to post-government
employment in the private sector are erected, people will be deterred from ever seeking
public service work.
This was major concern of the Association of the Bar of the City of New York in a
report which laid the foundation for the last major substantive revision of our ethics statutes
in 1960. That report observed that "no man\ will accept government appointment . . . if he
must abandon the use of his professional skills for several years after leaving government
service."3 It further notes that while some former officials may use knowledge acquired in
government against the government, many more will use such knowledge in furtherance of
the goals of government:
In an earlier day, government and the private economy were regarded as
opposed or at least completely separate, and no need was recognized for
having men outside government with experience gained inside government.
With the growth of government and the technological explosion of the
twentieth century, such a view has become unthinkable. Today we desperately
need a maximum flow of information between the government and the
outside, and post-employment restraints tend to build a wall between them.4
A third result, noted by Professor Thomas Morgan in a 1979 study for the
Administrative Conference, is the possible stifling of independence or critical thinking by
government employees who do not have the security of knowing they can find private
employment.5 How many individuals locked into a government career are going to be
willing to challenge official positions which they believe are erroneous or unwise? Morgan
also predicted that a more complete separation between government officials and private
sector professionals would lead to "more rigid attitudes within the agencies and tend to create
a Mandarin class less consistent with the democratic ideal."6
Our need for private-sector expertise is relevant not only to the "revolving door" issue.
One subject the Administrative Conference has been examining is the appropriate ethics
restrictions for members of federal advisory committees:- Many advisory committees are
formed because the agency needs technical expertise that it lacks "in-house." Indeed, it will
often be -inefficient and probably iniiSossible-- for government agencies- to maintain in--liouse
technical expertise in this time of explosive technological discoveries, tight budgets and
changing statutory mandates.
Therefore, the ethics rules for advisory committee members must take into account that
many individuals asked to serve on advisory committees -- typically without pay -- naturally
will have extensive financial interests in their field of expertise. Unlike our approach to
full-time civil servants, we cannot expect government advisers to sever their ties totally with
an industry for the privilege of part-time service on an advisory committee. If the rules are
too strict, these people will simply say "No thanks" -- or something more emphatic -- to an
agency's request that they serve. R. James Woolsey, a member of the Packard Commission
and the President's ethics commission, has predicted that this may happen in the defense area
3The Report of the Association of the Bar of New York City, CONFLICT OF INTEREST AND
THE FEDERAL SERVICE 224 (Harv. Univ. Press 1960).
4Ibid. at 224-25.
5Morgan, Appropriate Limits on Participation by a Former Agency Official in Matters
before an Agency, 1980 DUKE L.J. 1, 54 (1980).
6Ibid. at 55.
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when the controversial new procurement integrity rules -- which I will discuss later -- go
into effect.7
Finally, I would note that, .despite some well-publicized cases, there appears to be no
widespread abuse of the public trust occasioned by individuals entering and leaving
government service. Hundreds -- perhaps thousands -- of government officials leave public
service each year, or participate as part-time governmental advisers, without any compromise
in the integrity of the governmental process.
. So I start with the premises that it is in the national interest to continue to draw urpol.
private-sector expertise and that it is not desirable to stop the revolving door. At the same
time, we must recognize and deal with those few people who view the revolving door as an
opportunity to profit from the use of inside information or the exercise of unfair influence
on their former colleagues. Ethics restrictions are essential.
The nature of our ethics restrictions must take account of our democratic system which
depends upon the support and confidence of the people. As the importance of the federal
government to the national economy has grown in this century, so has the importance of the
public's confidence in the integrity of the governmental decisionmaking processes.8 It is
clear that public confidence in the integrity of the government can be eroded by the
appearance of conflicts of interest just as surely as it can be by actual wrongdoing. After-
the-fact punishment for actual wrongdoing is no longer sufficient.
Restrictions to prevent the appearance of wrongdoing are necessarily anticipatory or
prophylactic in nature. This inevitably means that some conduct that is not only not wrong,
but which indeed may produce public benefits, may be proscribed in order to foreclose the
opportunity for conduct that is wrong. We should be chary of painting too broadly with the
prophylactic brush, for it is easy to set ever higher standards for Caesar's wife when you are
not a Roman. Severe prophylactic restrictions based on appearance considerations only may
unduly burden honest employees and adversely affect our ability to recruit people to serve in
the government.
_ _
2. Evidence of a Deterrent Effect on Retention and Recruitment of Government
Servants.
I want first to address the effects J,of ethics restrictions on the government's ability to
-retain its employees. This,-as I discuss later, is somewhat easier to establish than effects on
the government's ability to recruit employees.
On Retention. In recent times we have seen two instances where proposed new ethics
restrictions have directly and dramatically affected the government's retention of its
employees.
As passed in 1978, the Ethics in Government Act contained a provision making it a
crime for any senior executive branch employee to leave government and within two years to
knowingly represent or aid, counsel, advise, consult or assist in the representation of another
person in any formal or informal appearance before any government entity in any matter
that had been under the senior employee's responsibility while in government.9
Before long, agencies began to complain to Congress that valued employees were leaving
or threatening to leave the government before the effective date of the Act, and also that
people the agencies wanted to hire were refusing job offers because of the impending two-
AEROSPACE DAILY, p. 358 (June 1, 1989).
8 See R. Roberts, WHITE HOUSE ETHICS: THE HISTORY OF THE POLITICS OF CONFLICT OF
INTEREST REGULATION 2-3 (Greenwood Press 1988).
9Pub. L. No. 95-521, Title V, Sec. 501, 92 Stat. 1864.
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year ban on assisting or advising.10 Congress responded with an amendment to 18 U.S.C. �
207 that essentially nullified the ban.11
A recent amendment of the Office of Federal Procurement Policy Act (Pub. L. 100-679,
� 6) produced a similar result. Rules implementing Section 6 of the Act -- the procurement
integrity provisions written to respond to the "Operation Ill Wind" investigation of defense
procurement fraud -- were to become effective May 16, 1989. Numerous top-level officials
at NASA, the Department of Defense, the General Services Administration and the Internal
Revenue Service announced that they would quit the government before the new rules went
into effect.12 Congress quickly acted to delay the effective date of the new law, and
President Bush signed the extension on May 15.13
Congressional sponsors have accused the agency officials of overreacting to the new
legislation, and I tend to agree that on their face the provisions do not seem that onerous.
The OFPPA amendments prohibit former government procurement officials from
participating in a contract in which they had been personnally and substantially involved for
a period of two years after their involvement with the procurement ended. In addition, the
law bars government procurement officials from (1) disclosing proprietary or source selection
information to unauthorized persons, (2) discussing future employment with a competing
contractor, and (3) soliciting .or accepting money, gifts, or other gratuities from a competing
contractor during a procurement. The new statute also requires that contractors and
contracting officials certify that they are unaware of any violations of the statute, and it
establishes stiff civil and criminal penalties for violations.
While we cannot know now the long-term effects of the OFPPA amendments, this
experience at least illustrates that the perception of the effects of new ethics restrictions can
count almost as much as their specific terms. Because of ambiguity about the provisions
(such as when a procurement begins, the trigger for the two-year bar), government
employees have decided to not wait and take a chance on erroneously interpreting the law.
One of the departing employees, who retired from the Army, stated "There are going to be
test cases and none of us want to be involved in that."14
More generally, while it is only anecdotal evidence, I want to add that in conversations
with many. Reagan administration employees about to leave office, their perceptions were
that the restrictions on former officials were far more draconian than the actual reach of the
statutory language. _Provisions that forbid only representation in particular matters that the --
former employee had worked on, for example, were construed as forbidding use of general
knowledge and expertise gained while in government service. So, whatever the cause of this
cognitive dissonance, it is clear that perception of the rigor of the ethics laws plays a major' _
role in decisions to accept or stay in government positions.
Interviews with departing officials also illustrate the difficulty of separating out the
various factors involved in a government official's the decision to leave the government. The
1�See Office of Government Ethics, Proceedings of the Third Annual Conference (1982) at
page 104.
11Pub. L. No. 96-28, 93 Stat. 76 (1979).
12NASA alone has lost 14 senior executives and 52 top-level employees since mid-April.
See AEROSPACE DAILY, p. 358 (June 1, 1989).
13Pub. L. No. 101-28.
14CONGRESSIONAL QUARTERLY 1189 (May 20; 1989). See also "New Ethics Law Provokes
Resignations," THE WASHINGTON POST, A8, Co1.4 (May 23, 1989)(quoting retiring Defense
Department undersecretary for acquisition: "I was raised outside Danbury, Connecticut. I
have no interest in spending my old age there.")
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recent defeat of a bill to raise senior executive salaries plainly contributed to some 'officials'
decisions to leave.15 James C. Fletcher, former NASA administrator, has suggested that the
negative public perception of government service may be another contributing factor.16
Thus, ethics restrictions often are not the only factor in a person's decision to quit
government service.
Let me turn now to the question of the deterrent effects of' ethics restrictions on the
recruitment of individuals to serve in the government.
On Recruitment. As noted in your letter inviting me to testify, the Administrative
Conference considered conducting a, study to determine the extent to which prospective
government officials are deterred from accepting positions because of the current ethics
restrictions. In late 1987 I established a Special Committee on Ethics in Government to
identify and recommend solutions to problems related to our system of ethics regulation, and
a study of the "sticking points" in the recruitment process seemed like a good way to identify
those restrictions most in need of revision.
I should add that considerable anecdotal evidence of the deterrent effect of ethics
restrictions already existed. In 1985 the National Academy of Public Administration issued a
report on the presidential appointments system that concluded:
We have concluded that the new rigors of the financial disclosure and conflict
of interest laws have assumed a very important role in the appointment
process. Their impact is mixed. In some ways, these laws have brought
genuine benefits to the American people by eliminating blatant potential
conflicts of interest and enhancing opportunities for the identification and
prosecution of those who would violate the public trust. On the other hand,
these changes have been costly: costly to the government's ability to recruit
presidential appointees, costly to the relations between the news media and
public officials, and costly in financial sacrifices to a number of honest and
dedicated public officials.17
The National Academy's study included a survey of over twelve hundred presidential
appointees who served during the period from 1964 through 1984.18 Of the appointees who
were required to fill out the executive branch's financial disclosure form (SF 278), 70 percent
reported difficulty filling out 'the form. More significantly, for the period after June 1979 -
- the date the Ethics in Government Act became effective -- 30 percent of the respondents
reported significant difficulty filling out the form. The National Academy's report
y -.�
15See FEDERAL COMPUTER WEEK, "Ethics Law Drives Away Procurement Execs," p. 4 (May
8, 1989)(comments of William Walsh and Daniel Capozzoli). See also, "2 Top NASA Officials
Quit Unexpectedly," THE WASHINGTON POST, Al (Apr. 25, 1989)(comments of Dr. Noel W.
Hinners).
16"We have seen some 12 years of bureaucrat bashing from the White House, . . . We see,
over and over again, intimations by the Congress that civil servants are not to be trusted. In
an environment of that sort, how can we expect the best minds in the land to flock to the
challenge of government service?" Ibid.
17National Academy of _Public Administration, Leadership- in Jeopardy:- The-Fraying- of
the Presidential Appointments System, FINAL REPORT OF THE PRESIDENTIAL APPOINTEE
PROJECT 13 (Nov. 1985).
18Ibid. at 6.
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concluded that the form SF 278 "is a daunting, confusing, excessively detailed hurdle that
few presidential appointees are able to negotiate successfully on the first attempt."19
I will return later to the subject of financial reporting requirements, but the point made
here is that considerable evidence had accumulated which suggested that ethics restrictions
might be deterring good people from accepting presidential appointments.29
As we considered a study of this matter, we were mindful of possible methodological
problems. Perhaps the central difficulty relates to the unstructured and informal personnel
recruitment process, and the problem of identifying those candidates seriously being
considered for positions and their motivations for dropping out of the process.21 And
because of the political overtones of such a study, we decided not to undertake the study
unless we were convinced that it would produce data or findings that would not be open to
charges that they were in any way biased. We, therefore, asked Professor William J.
Chambliss, Professor and Chair of the Department of Sociology at George Washington
University, to determine whether a methodologically-sound study could be done. We
reserved a decision to conduct such a study following receipt of Professor Chambliss'
preliminary report.
In May of 1988 Professor Chambliss proposed a two-stage research project. The first-
stage study was to consist of open-ended interviews with small groups of (1) high-level
appointees in the Reagan Administration and (2) people who declined offers of positions in
the Reagan Administration. The purpose of these initial interviews was to gain insight into
the factors that affected their decisions to accept or not accept a government position so as to
design a more systematic and thorough second-stage study.
The second-stage study was to take place after the presidential election and would
require close cooperation with the next president's personnel recruiter. First, a standardized
questionnaire was to be distributed to all persons contacted about serving in the new
administration. Second, the questionnaire would be supplemented by in-depth interviews
with a random sample of persons chosen from those who applied for,, but refused to accept,
government appointments.
Again, the purpose of the survey and interviews was to objectively weight the factors
that influenced a person's decision to accept or decline an appointment, including the ethics
restrictions, salary, dislocation, public scrutiny and other financial hardships. Of course, the
term "ethics restrictions" encompasses several types of requirements and their effects would
- have to be evaluated -separately. Ethics restrictions -include (1) the Ethics in Government
---Act's public financial reporting requirements, (2) the conflict of interest laws, including the
i
post-employment restrictions n 18 U.S.C. � 207 and any agency-specific statutes, and (3) the
remedies or cures for potential conflicts of interest (e.g., blind trusts).22
We ultimately decided not to undertake the study proposed by Professor Chambliss, as
much because of its likely cost as our uncertainty about being able to overcome the
19Ibid. at 13.
20 att generally R. Roberts, WHITE HOUSE ETHICS: THE HISTORY OF THE POLITICS OF
CONFLICT OF INTEREST REGULATION, Chapt. IX (Greenwood Press 1988); REBUILDING THE
PUBLIC SERVICE: THE REPORT OF THE NATIONAL COMMISSION ON THE PUBLIC SERVICE 16 (1989).
215 Office of Government Ethics, Proceedings of the Third Annual Conference (1982) at
pages 39-41 (discussion of difficulty of empirical study of deterrent effects of ethics laws).
22See, J. Walter, The Ethics in Government Act. Conflict of Interest Laws and Presidential
Recruiting, PUBLIC ADMINISTRATION REVIEW 659 (Nov./Dec. 1981). Mr. Walter, former
Director of the U.S. Office of Government Ethics, discusses the relative importance of these
various ethics requirements or restrictions.
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methodological difficulties involved in the study. Based on prior experience with survey
research -- particularly a large-scale study of Federal Trade 'Commission rulemaking in the
late 1970s -- we estimated that the full Chambliss study would require at least two hundred
thousand dollars to complete. Interviewers would have to be hired and trained for both the
first and second stages of the study; a written questionnaire would have to be designed and
pretested; and the results would have to be analyzed using sound statistical techniques. Very
likely we would have needed a second expert consultant to perform the required statistical
analysis. This high cost would have forced the Conference to forego other projects,
including government ethics projects -- which I will describe shortly�having subst9.ntially
less uncertainty and a greater chance of bearing fruit within a six-month to two-year time-
frame.23
The next question, I suppose, is "Does this lack of 'hard' evidence of the extent that
ethics restrictions deter people from accepting or staying in government jobs mean that we
should not revise our ethics laws until such data are available? I don't think so.
First, experience as well as logic24 indicates that ethics restrictions do deter some people
from entering or staying in the government, although we can't state definitively how many.25
G. Calvin Mackenzie, who served as staff director of the National Academy of Public
Administrations 1985 study, concludes:
The data are clear. There can be no doubt that the Ethics in Government Act
of 1978 has had a widespread impact on the personal finances and private
employment status of presidential appointees. It is a complex and demanding
law with often costly effects. It is no surprise that most appointees, even
those who believe in the salutary effects of financial disclosure and conflict of
interest restrictions, have little affection for it.26
We know enough to be concerned about the potential deterrent effects of ethics restrictions.
Second, there are many issues that can be addressed without empirical data showing the
extent of deterrence. That is, while such data would be relevant, they would not be
231 note that our Special Committee on Ethics in Government, chaired by Fred F.
Fielding, convened a day-long working conference on March 1, 1988; the participants
included current and former members of Congress, White House counsels, directors of
presidential personnel and the the Office of Government Ethics, and academics. This
"roundtable" discussion identified several areas for Conference study, including conflict-of-
interest rules for members of presidential transition teams, public financial disclosure
requirements, and the tax consequences of divestitures of property required to avoid conflicts
of interest.
24In 1984, before "ethics" became a major issue, Professor Alfred S. Neely IV relied on
logic and economic factors to predict what sorts of individuals would find it hard to accept
government jobs under our current ethics laws. See A. Neely, ETHICS IN GOVERNMENT LAWS,
ARE THEY Too "ETHICAL"? (AEI Institute for Public Policy Research, Wash. D.C. 1984).
250ne thing the National Academy of Public Administration conclusively showed is that
the tenure of public officials is short. The median length of service for presidential
appointees in the past 20 years has been just over two years; only 32 percent stayed for three
years. National Academy of Public Administration, Leadership in Jeopardy: The Fraying of
the Presidential Appointments System, FINAL REPORT OF THE PRESIDENTIAL APPOINTEE
PROJECT 4-5.
26G. C. Mackenzie, THE IN-AND-OUTERS: PRESIDENTIAL APPOINTEES AND TRANSIENT
GOVERNMENT IN WASHINGTON (Johns Hopkins Univ. Press 1987) at page 86. See page 83 - 94
for additional discussion of the NAPA results.
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dispositive. The Administrative Conference has tackled several such issues, including (1) the
need for a deferral of taxation when persons appointed to government positions are required
to divest themselves of property or assets and (2) the Ethics Act's financial reporting
requirements. I will describe these proposals in a moment.
Finally, we have to deal with the real world in which there is great public concern over
the ethical conduct of government officials. Delay in order to obtain empirical
documentation may pose political problems, although you certainly understand the political
costs of delay better than I.
Fortunately, a lot of work has been done over the last year or more by the Conference,
the President's ethics commission, Congressional committees and subcommittees (and
especially members such as Senators Strom Thurmond, John Glenn and Carl Levin and
Representative Barney Frank and members of this subcommittee) and other interested groups.
Now let me turn briefly to Administrative Conference proposals which I believe will
make it easier for people to accept offers of government employment.
3. Administrative Conference Proposals.
Deferred Taxation for Conflict-of-Interest Divestitures. In June 1988 the Administrative
Conference adopted a formal recommendation calling upon Congress to allow individuals who
are required to divest property, such as stock holdings, as a condition of accepting a
government position to "roll over" their assets into neutral investments without realizing
taxable gains.27 I attach a copy of this recommendation.
This proposal is designed as a remedy for disincentives to public service and frequent
recusals (i.e., avoidance of decisionmaking) of government officials which compromise the
effective functioning of the governmental processes. As you may know, conflict-of-interest
requirements -- and especially the prohibition in 18 U.S.C. � 208 on participation in 'matters
affecting one's financial interests -- frequently require presidential appointees or career civil
servants to divest property or else not participate in decisions that might affect those
interests. Yet under current law, such divestiture often will result in significant financial
losses in the form of taxation of the gains realized as a result of the forced divestiture.
Confronted with this negative tax consequence of divestiture, some people undoubtedly
will decline government appointments. Others accept the appointments but then enter into
"recusal agreements" by which they agree to not participate in any decision that might affect
their financial interests. The public interest can be harmed by election of either of these
options. The harm from a qualified person's refusing to accept the job and pay the tax is
apparent. But the public interest also may-be harmed when an individual selected by the -- -
President to make policy decisions cannot participate in those decisions. This is especially so
at the highest levels of government where an official's authority is broad -- the case of the
Secretary of State comes to mind.
As a remedy, the Conference proposed that Congress amend the tax laws to permit
individuals required to divest themselves of property to avoid conflicts of interest to sell
their property and place the proceeds in a neutral investment and defer the taxation of the
gains. Taxation would not be eliminated by the proposal but simply postponed until the
individual ultimately disposes of the proceeds of a reinvestment vehicle.
Of course, care must be taken to restrict the opportunity for a tax-free roll-over of
assets only to those situations where there is a genuine ..need for divestiture to avoid conflicts
of interest. The Conference's proposal, therefore, would not allow a government official or
nominee to decide on his own whether this option is necessary. Rather, the official or
27ACUS Recommendation 88-4, Deferred Taxation for Conflict-of-Interest Divestitures
(to be codified at 1 CFR � 305.88-4.)
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nominee would have to be requested or ordered by an independent authority to divest
property to avoid a violation of a conflict-of-interest statute. In addition, the person
ordering divestiture would have .to approve the reinvestment vehicle.
The President's Commission on Federal Ethics Law Reform endorsed the Conference's
recommendation, declaring that "divestiture of troublesome assets and reinvestment in neutral
holdings is the single most important device we have encountered to eliminate completely or
at least mitigate greatly subsequent conflicts of interest. . . . [T]he Commission views
enactment of the ACUS proposal as long overdue."28 Subsequently, the National Commission
on the Public Service the Volcker Corr -- similarly endorsed the Conference's
recommendation in its report, Rebuilding the Public Service.29
Most encouragingly, the proposed legislation sent to Congress by President Bush on April
12th included a provision (Section 108) that, if enacted, would implement the Conference's
recommendation."
Public Financial Disclosure Requirements. Public financial disclosure is another area
where I believe refinements to the ethics laws can be made that will not only lessen the
burden on those who respond to the call to government service, but also result in increased
effectiveness of our overall ethics system:
The Ethics in Government Act's executive branch financial reporting requirements apply
not only to top-level policy officials but also to thousands of career civil servants paid at the
GS-16 level and above. This law has produced the Standard Form 278 mentioned above and
referred to in the National Academy of Public Administration's report as a "pale green
monstrosity."31 In fairness to the Office of Personnel Management and the Office of
Government Ethics, it is generally recognized that the complexity of this form derives from
statutory requirements and that those offices in fact have done an admirable job designing a
form to implement the statute.32
The Conference has been studying and considering recommendations for improving the
Act's financial reporting requirements over the past year or so, and later this week the
Conference as a whole will debate a proposed recommendation on this subject developed by
our Special Committee on Ethics in Government.33 While urging a general review to
simplify., the ,language. of .the statute, the Special Committee ,has recommended numerous
specific Ichanges to the coverage and methods 'of reporting assets and liabilities. The
recommendations .include giving the Office' of Government 'Ethics greater _flexibility- in
granting _extensions., and exemptions from the Act's requirements; -piiity in ihe, threshold
amount for: reporting assets and liabilities; exclusion from reporting income from assets that
_ .
�
28TO SERVE WITH HONOR: REPORT OF THE PRESIDENT'S COMMISSION ON FEDERAL ETHICS
LAW REFORM 3, 27 (Mar. 1989).
29REBUILDING THE PUBLIC SERVICE: THE REPORT OF THE NATIONAL COMMISSION ON THE
PUBLIC SERVICE 16 (1989).
"See also S. 765, "Governmentwide Ethics Act of 1989, � 108 101st Cong., 1st. Sess.
(introduced by Senator Thurmond).
31National Academy of Public Administration, Leadership in Jeopardy: The Fraying of
the Presidential Appointments System, supra note 17 at 13.
� 32iel Ethics in Government: Proceedings of a Working Conference, reprinted in ACUS
_ SOURCEBOOK ON GOVERNMENT ETHICS FOR PRESIDENTIAL APPOINTEES,-Tab -2_at p.-29.- --
33See Notice and Request for Comments on the Special Committee's Proposed
Recommendation on Public Financial Disclosure by Executive Branch Officials, 54 Fed. Reg.
12921 (Mar. 29, 1989).
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otherwise are reported; broader reporting categories; and higher thresholds and categories of
reporting for reimbursements and gifts. The Special Committee's proposed recommendations
are based on an analysis of the statute by Professor Thomas P. Morgan of Emory University
School of Law.34
Again, these recommendations have yet to be acted upon by the Conference as a whole.
I will gladly keep you informed of any subsequent Conference action on this subject.
4. The Danger of Overemphasizing Regulation at the Expense of Alternatives to
Improve Government Ethics.
Let me conclude with some general remarks about ethics restrictions and their reform.
I am concerned that there is a general tendency of policymakers to respond to
government officials' ethical lapses by enacting new rules or reporting requirements while
paying insufficient attention to alternative ways to improve government ethics. They are
pressured to act by the press and public opinion, and the easiest, quickest and most visible
way to act is to propose new regulations designed to prevent even the appearance of a
conflict of interest.
But, as we have found with government regulation generally, regulations have costs.
The costs often are diffused and not easily quantifiable, but they are real nevertheless. And
prophylactic regulations based on appearance considerations usually impose costs and burdens
on the overwhelmingly majority of honest government employees. At the same time, few
ethics restrictions are ever removed. This results in a constant "ratcheting up" of federal
ethics restrictions.35
Certainly there is need for continued review and, where appropriate, a strengthening of
our ethics laws. But I suggest that the need for strengthening our ethics laws does not always
mean a new set of rules is required. Indeed, there is a danger that we will create an "ethics
34 T. Morgan, A FUNCTIONAL APPROACH TO PUBLIC FINANCIAL DISCLOSURE BY FEDERAL
OFFICIALS: REPORT TO THE ADMINISTRATIVE CONFERENCE OF THE UNITED STATES (May 1989).
35Bayless Manning, who served as the staff director of. the Association of the Bar of the
City of New York's influential study of the ethics law in the late 1950's warned of the
dangers of ever-escalating conflict of interest standards:
[T]hough it seems to be little recognized in our age of dwindling privacy, a
question of human dignity is eventually brought into issue as regulations pile
up in the name of Morality.
A man of the stature to assume high public office should not be presumed
to be a crook or a weakling or a fool. His conduct may in time convince us
that he is one or more of the three, but the conclusion should not be
presumed Restraints on conflicts of interest are prior restraints, said to
be prophylactic in character. But prior restraints are an objectionable way to
approach the problem of good conduct in a free society. It has iT.,er been
doubted that we could reduce the incidence of crime if we were willing to use
enough prophylaxis--preventive arrest, unwarned house search, probationary
check-ups, confiscation of arms, house-bugging and other such techniques.
We choose not to resort to such measures because we prefer, by the hierarchy
of values in a democratic society, to tolerate a higher level of crime by the
few rather than force the millions to lead police-ridden lives. Eventually the
same principle comes to bear in the case of official conflict of interest
restraints. The bite of this kind of prior restraint is mild, of course, and in a
sense optional; any man who objects may avoid it by not serving in
government office. ---But-that- is�not enough-of---an- -an answer. - We want men-to
serve the government
B. Manning, The Purity Potlatch: An Essay on Conflicts of Interest, American Government,
and Moral Escalation, 24 Federal Bar Journal 239, 253-54 (1964).
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. -
maze" that Is so complex that no one will understand the underlying ethical principles. I
worry that our ethics law will soon resemble our tax law, where in addition to the Internal
Revenue Code, we have a dozen volumes of Treasury Regulations not to mention revenue
bulletins and rulings of various sorts.
Let me again use public financial reporting to illustrate this danger. I think it true that
virtually all of the review of government officials' financial disclosure forms is confined to
determining whether on their face the forms reveal actual or potential conflicts of interest.
However, no serious attempt is made to systematically confirm of the accuracy of the
information reported 'on the form. True, the forms can be obtained by the public. And
under the "sunlight is the best disinfectant" theory, it is reasonable to assume that
government officials will engage in a certain amount of self-policing when they fill out the
form. But unless one holds a position that makes him a truly public figure, the chances of
anyone conducting an independent investigation of an individual's finances are slight
indeed.36
Consequently, a large proportion of our government ethics resources now are being spent
pushing the disclosure papers of basically honest federal 'employees, instead of investigating
actual abuses of government office.
But there is another aspect of this overemphasis on regulation and reporting
requirements: all too often attention is focused on the failure of an official to properly
comply with these prophylactic regulatory requirements, rather than on true ethical
considerations, namely whether the official has in fact done anything wrong! We have seen
this over and over again.
Therefore, I am pleased to see that the President's proposed Governmentwide Ethics Act
of 1989 goes beyond proposing changes in our regulations and contains numerous provisions
designed to strengthen ethics enforcement. For example, Title HI would amend 18 U.S.C. �
203 to authorize civil penalties, in addition to misdemeanor and felony sanctions, for
violations of ethics laws. The bill also would authorize the Attorney General to seek
injunctions .against conduct that would violate various ethics _laws. A wider range of
� penalties is likely to lead to increased enforcement of existing ethics laws. � Currently the
� Department of Justice is often reluctant to prosecute violations of ethics standards where the
evidence of public harm is slight and the only penalty is a criminal one.37
-
- - -In- addition, I believe-more attention needs to be given to ethics education More needs
- to be_done_in the, way:pf both_entrance and exit counseling of _senior government _officials. --
Entering officials currently receive memoranda, handbooks and the regulations which, -
unfortunately, can :be too easily be ignored or forgotten.-.in the press .Of 'conducting the -
government's business. More personal training and counseling is required. While I am not
sure whether it should be required by statute, I am convinced that more resources need to be
- dedicated to this vital function.
36The Office of Government Ethics has known for years that the public rarely requests to
see the financial reports of career government officials. Consequently they have
recommended, on cost-benefit grounds, narrowing the category, of individuals subject to the
public reporting requirement.
37A report prepared for the Conference's March 1, 1988 working conference concluded:
While some violations of [18 U.S.C. � 207] are addressed appropriately within
the current criminal framework, there is a class of violations of the statute
which may not be sufficiently egregious to warrant use of criminal process.
In such - cases,- -Justice Department prosecutors--wary of the difficulty of
winning convictions before skeptical juries--understandably are very reluctant
to institute criminal proceedings.
Issues and Options Paper No. 4A at page 42.
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�
Finally, we must be mindful when considering amendments to the conflict-of-interest
statutes, that laws can only do so much. To a certain extent, we have become a society
governed too much by legal standards. To quote Alexander Solzhenitsyn: "A society based
on the letter of the law and never reaching any higher fails to take advantage of the full
range of human possibilities."38 Law and penalties are necessary, but we also need to strive
to create a cultural climate that fosters ethical behavior both by government officials and by
society at large.
I thank you for the opportunity to address this most important topic.
38A. Solzhenitsyn, A World Split Apart, in SOLZENITSYN AT HARVARD 3 (R. Berman ed.
1980).
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