Office of Government Ethics proposes changing rules on legal expense funds for federal employees

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Federal employees who get into legal trouble can, under certain circumstances, accept financial help from legal expense funds. Now the Office of Government Ethics has proposed a revision to the rules for legal expense funds. The Federal Drive with Tom Temin got the gist of the new rule from the associate counsel in the Office of Government Ethics, Elizabeth Horton.

Interview transcript:

Tom Temin: Ms. Horton, good to have you on.

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Elizabeth Horton: Thank you for having me.

Tom Temin: And I have to confess this is an area of government legality that even I am not familiar with, after many, many years of covering this. So talk about what domain we’re operating in here federal employees getting money for legal expense funds. What is this rule all about to begin with, the existing rule?

Elizabeth Horton: I’ll first start off if I may, with a brief overview of the Office of Government Ethics in case anyone is unaware or unfamiliar with us. The Office of Government Ethics, or OGE provides overall leadership and oversight of the Executive Branch Ethics Program. And our mission is to prevent and resolve conflicts of interest. So in that role, we develop and advise on ethics regulations, and on standards of ethical conduct for more than 2.7 million employees in over 130 executive branch agencies.

Now, I just mentioned the standards of conduct. And within those standards of conduct, there are currently gift rules with which federal employees have to comply. And under those rules, employees would still have to apply in situations for instance, if they wanted to accept contributions for legal expenses. However, in an effort to balance and employee beneficiary’s need for legal expense payments, with the potential appearance of corruption concerns, the proposed regulation that we have now seeks to provide a framework for screening for conflicts of interest, for instance, and the appearance of corruption, and also add an element of transparency because there currently is no existing statutory or regulatory framework specific to legal expense funds.

Tom Temin: Well, let me try to make an example, totally hypothetical, a contracting officer gets in trouble for having say, been less than proper with respect to a contractor, and they get into legal trouble. And maybe they’re sued for this. And that contractor contributes to their legal expenses. That’s the kind of thing you want to not happen. Correct?

Elizabeth Horton: The framework that we’re talking about now is that the scope of the proposed rule is really quite narrow in that it would apply to executive branch employees that wants to accept donations for legal expenses for matters related to their official position and job duty. So it would not, for example, apply to legal expenses for personal matters, like divorce or child custody, or contract disputes. But if it’s something that’s related to their official position, and they have to incur legal expenses for matters arising from that, then those are the types of situations that this proposed rule would speak to.

Tom Temin: Well, doesn’t sovereign immunity, pretty much protect executive branch employees from personal lawsuits that they would have to pay for? Or does this sometimes happen anyway?

Elizabeth Horton: Well, with the sovereign immunity, that I think that’s talking about the government as a whole, but now we’re talking about individuals, if they’re sued in an individual capacity, then they may have to incur legal expenses to defend or even bring forth the claim. And in that instance, I think we all know that legal expenses can be quite hefty. And so if they wanted to receive assistance for that, then this is a method that they can do that. And what the proposal seeks to do is really provide a roadmap where they can do that, where not only does it protect the agency and the employee in ensuring that they are complying with all of the applicable rules and regulations. But it also provides transparency for the public in case that there are concerns of any appearance of corruption.

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Tom Temin: How often does this come up in a given year?

Elizabeth Horton: As I mentioned, there is no existing statutory or regulatory framework. And for that reason, we don’t really track how many there have been. The proposed rule, I think does refer to what we estimate may be the case going forward, but I really can’t give a number at this moment.

Tom Temin: So in other words, if people have this framework, and this has to be transparent and reported on, then you could, at some point in the future, then get an idea of how often this type of aid is sought by federal employees.

Elizabeth Horton: Right, exactly, because the proposed rule does provide for reporting requirements and approval. So it does provide that roadmap that agencies and employees would have to follow and for transparency as well.

Tom Temin: We’re speaking with Elizabeth Horton, she is associate counsel in the Office of Government Ethics. And by the way, when federal employees come to my studio, we give them a mug as a souvenir but they cost less than a buck apiece. So am I OK here?

Elizabeth Horton: Yes, I think that’s fine. There are exceptions within the gift rules that allow for things as little monetary value.

Tom Temin: Yeah, well, they’re made in China. So they’re not very expensive. We wouldn’t violate ethics rules here. But do you know of any particular cases, again, without having to quantify how many happen annually. Have you seen this kind of thing happen where someone goes to outside sources for legal expense help?

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Elizabeth Horton: Yeah, the way this came up and you know, as the oversight agency for the Executive Branch Ethics Program, one of OGE’s responsibilities is to develop rules and regulations pertaining to conflicts of interest and ethics in the executive branch. And as discussed, there is not an existing regulatory or statutory framework for legal expense funds. But for instance, the legislative branch has applicable regulations on legal expense funds. So since such funds can be subject to heightened concerns as appearance of corruption, OGE began the regulation process to allow for a framework that would promote that transparency and enable screening for conflicts of interest and have other parameters within which works. So no specific situation, but we just saw a need for clarity on a potential gap that we thought the proposed rule could seek to address.

Tom Temin: And does the proposed rule put a cap or limit on how many dollars someone can accept presuming the source of the funds is legit, and not a conflict of interest?

Elizabeth Horton: Right. So the proposal proposes to do a lot of things and some of the things that it does try to lay out are, for instance, yes, contribution limits as well as prohibited donors. It structures, the legal expense fund as a trust. It also talks about the independence of the trustee and has reporting requirements, as well as limits on the distribution of any unused or excess funds and provides for a mechanism for agency review and approval and administration of the fund.

Tom Temin: So is one of the goals perhaps that employees who are sued personally, in respect to their official duties are not kind of hung out to dry there, financially?

Elizabeth Horton: Right. And so with the proposed rule has now and I want to note that, again, this is a proposed rule. And we are currently seeking comments from the public on the proposed rule. But as it is proposed right now, there is a $10,000 cap per donor for any contributions.

Tom Temin: And what’s the timetable? What’s the status now? And have you gotten comments yet, and what types of organizations or individuals are commenting?

Elizabeth Horton: So we are currently accepting a written comments until June 21, that we’ll review and consider and we really would like to hear from the audience and anyone in the public. So if anyone would like to submit a comment, they can go to our website at www.oge.gov. And at the bottom of our homepage, just click on rulemaking and there they can find instructions for submitting written comments. After that, then we hope to publish the final rule in April 2023. And then the rule would go into effect, presumably sometime thereafter.

Tom Temin: Interesting. So have you gotten comments yet?

Elizabeth Horton: Yes, we’ve already had an extensive period of input even before we’ve reached this stage. And we’ve received input from various stakeholders from ethics officials, government groups, the public at large. And so we’re still seeking additional input now that we have cobbled all of those previous inputs together and come up with this proposed rule as well as looking to the existing regulations that are in the legislative branch and put forth this proposed rule that we’d now like additional input on so people can do that through June 21.

Tom Temin: All right, sounds like you’re sort of uncovering a whole new area of ethics here or changing something that’s been neglected for a long time.

Elizabeth Horton: As I mentioned, we do have existing gift rules that even if this rule does go into effect, they would still have to comply with those gift rules. But we feel that this is an area that is in need for clarity, or there may be a gap. And to the extent that there is, we thought that proposed regulation would be the way to go.

Tom Temin: Elizabeth Horton is associate counsel in the Office of Government Ethics. Thanks so much for joining me.

Elizabeth Horton: Thank you, again.

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