Revolving Door Restrictions
© Sheppard Mullin Richter Hampton LLP 2006
Keith R. Szeliga
kszeliga@sheppardmullin.com
What is the “Revolving Door”?
 Restrictions on:
– Discussing employment with current
Government officials
– Hiring current and former Government officials
– Representational activities by current and former
Government officials
2
Why Do We Care?
3
Statutory Framework
 Ethics Reform Act (18 U.S.C. § 201 et seq.)
– Criminal statute applicable to current and former
Government officials generally
– Implemented by Office of Government Ethics (“OGE”)
Regulations at 5 C.F.R. § 2635 et seq.
 Procurement Integrity Act (41 U.S.C. § 423)
– Additional restrictions applicable to current and former
Government procurement officials
– Implemented by FAR 3.104 et seq.
4
Ethics Reform Act
© Sheppard Mullin Richter Hampton LLP 2006
What is the Ethics Reform Act?
 Criminal conflict of interest statute that restricts:
– Employment discussions with current Government
officials (18 U.S.C. § 208)
– Representational activities by former Government
officials (18 U.S.C. § 207)
– Representational activities by current Government
officials (18 U.S.C. §§ 203 & 205)
 Reaches Government officials and private
contractors (18 U.S.C. § 2)
6
Potential Consequences of Violations
 Penalties for Individuals
– Up to 5 years in prison per violation AND
– Civil fine of up to $50,000 per violation OR the amount of compensation
received or offered for the prohibited conduct, whichever is greater
 Penalties for Corporations
– Criminal fine of up to $500,000, or twice the gain to the corporation or loss to
the Government, whichever is greater AND
– Civil fine of up to $50,000 per violation OR the amount of compensation
received or offered for the prohibited conduct, whichever is greater
 Additional Consequences for Contractors
– Bid protests
– Contract rescission
– Suspension and debarment
7
Restrictions on Employment
Discussions with Current
Government Officials
18 U.S.C. § 208
© Sheppard Mullin Richter Hampton LLP 2006
§ 208 – Basic Prohibition
 Prohibits a Government official from
participating “personally and substantially” in
a “particular matter” in which an organization
with which he is “negotiating” or has an
“arrangement concerning prospective
employment” has a “financial interest”
9
§ 208 – Key Definitions
 “Personally and Substantially”
– Direct involvement that is of significance to a matter
– Requires exercise of judgment and discretion
 “Particular Matter”
– A matter focused on the interests of a specific person or
a “discrete and identifiable class” of persons
– Excludes policy matters involving a “large and diverse”
group of persons
10
§ 208 – Key Definitions (cont’d)
 “Financial Interest”
– Requires a close causal link between a decision or action and
any anticipated effect on the prospective employer
– Effect must not depend on events that are speculative or
unrelated to the matter
 “Negotiating” Employment
– Any discussions “mutually conducted with a view toward
reaching an agreement regarding possible employment”
– Does not require a formal offer or even discussions regarding
the terms and conditions of a specific position
11
§ 208 – Disqualification
 When a Government official begins negotiating
employment with a contractor, the official is
disqualified from participating in matters that could
affect the contractor’s financial interest
– Disqualification is accomplished simply by not
participating in the matter
– Written disqualification notice is required for Department
of Defense employees, but not civilian employees
12
§ 208 – OGE Regulations
 The OGE regulations require disqualification when
a Government official begins “seeking employment”
– Negotiating employment
– Making an unsolicited communication regarding possible
employment
– Making a response other than an unconditional rejection
to an unsolicited communication regarding possible
employment
13
Restrictions on
Representational Activities by
Former Government Officials
18 U.S.C. § 207
© Sheppard Mullin Richter Hampton LLP 2006
§ 207 – Basic Prohibition
 Restricts a former Government official’s ability to
make a “communication” to or “appearance” before
the Government with the “intent to influence” the
Government on behalf any other party
 Restrictions last for a one-year, two-year, or lifetime
period depending upon the former Government
official’s:
– Level of seniority
– Level of involvement in the matter
15
§ 207 – Key Definitions
 “Appearance” or “Communication”
– An “appearance” occurs when a former Government official is
physically present before the Government or conveys material to the
Government in a formal proceeding
– A “communication” includes any oral, written, or electronic
transmission
– “Behind the scenes” assistance is not prohibited
 “Intent to Influence”
– Requires potentially differing views or positions
– Virtually any communication in connection with obtaining or
performing a contract risks a finding of “intent to influence”
16
§ 207 – Specific Prohibitions
 Lifetime ban on switching sides (§ 207(a)(1))
 Two-year official responsibility ban (§ 207(a)(2))
 One-year cooling off period for former senior
Government officials (§ 207(c))
 One-year cooling off period for former very
senior Government officials (§ 207(d))
17
§ 207(a)(1) – Lifetime Ban
 A former Government official who
participated “personally and substantially” in
a “particular matter” involving “specific
parties” may never represent any party
before the Government in connection with
that same matter
18
§ 207(a)(1) – Key Definitions
 “Particular Matter” Involving “Specific Parties”
– A specific proceeding affecting the legal rights of the parties OR an
isolatable set of transactions between identifiable parties
– Excludes rulemaking, policymaking, and legislation
– A contract becomes a particular matter involving specific parties
upon receipt of initial proposals or indications of interest
 Same Particular Matter
– A procurement, the resulting contract, and any modifications
generally are part of the same matter
– Different contracts generally are different matters
19
§ 207(a)(2) – Two-Year Ban
 Prohibits a former Government official, for a
period of two years after leaving Government
service, from representing any party in
connection with a “particular matter” involving
“specific parties” that was “actually pending”
under the former Government official’s
“official responsibility” during his or her last
year of Government service
20
§ 207(a)(2) – Key Definitions
 “Official Responsibility”
– Includes all matters assigned to a Government official by statute,
regulation, Executive Order, job description, or delegation
– Terminates when the matter no longer is “actually pending” or there
is a formal modification to the Government official’s responsibilities
 “Actually Pending”
– Begins when a matter has been referred to, or comes under
consideration by, persons in a Government official’s area of
responsibility
– Continues until a specific action or event terminates the matter
21
§ 207(c) – Former Senior Officials
 For a period of one year after leaving senior
Government service, a former “senior” Government
official may not represent any party, in connection
with “any matter,” before an employee of any
agency in which the former senior Government
official served during his or her last year of
Government service
 Former senior Government officials also must
comply with the lifetime and two-year bans set forth
in § 207(a)
22
§ 207(c) – Key Definitions
 Former “Senior” Government Official
– Executive Schedule employees
– Government officials with a rate of basic pay of at least 86.5%
of the basic rate of pay for Level II of the Executive Schedule
($145,320 for 2007)
– Active duty military officers with a pay grade of O-7 or above
(Generals and Admirals)
– Certain Presidential and Vice Presidential appointees
 “Any Matter”
– Virtually all encompassing
– Prior participation in the matter is not required
23
§ 207(c) – Relevant Exceptions
 “Designated Agency Components”
– The OGE has designated separate agency components that
are treated as separate agencies for purposes of § 207(c)
– Former Executive Schedule employees and certain
Presidential and Vice Presidential appointees are ineligible
 Advance Regulatory Waiver
– The OGE has exercised statutory authority to waive § 207(c)
for the positions listed in 5 C.F.R. § 2641, Appendix A
24
§ 207(d) – Former Very Senior Officials
 For a period of one year after leaving the
Government, a former “very senior” Government
official may not represent any party, in connection
with “any matter,” before:
– A Government official employed by his or her former
agency
– An Executive Schedule employee of any agency
 Former very senior Government officials also must
comply with the lifetime and two-year bans set forth
in § 207(a)
25
§ 207(d) – “Very Senior” Officials
 Government officials with a rate of basic pay equal to
the basic rate of pay for Level 1 of the Executive
Schedule ($186,600 for 2007)
 Government officials in the Executive Office of the
President with a rate of basic pay equal to the basic
rate of pay for Level 2 of the Executive Schedule
($168,000 for 2007)
 Vice President of the United States
 Certain Presidential and Vice Presidential appointees
26
§ 207 – Exemptions
 “Special Knowledge”
– Statements based upon “special knowledge” are exempt from
§§ 207(c) and (d) IF made without compensation
 “Scientific or Technological Information”
– Communications made for the sole purpose of furnishing
scientific or technological information are exempt from § 207
IF agency-specific procedures are followed
 Testimony
– Testimony under oath and statements made under penalty of
perjury are exempt from § 207 BUT special rules apply to
expert testimony
27
Restrictions on
Representational Services by
Current Government Officials
18 U.S.C. §§ 203 & 205
© Sheppard Mullin Richter Hampton LLP 2006
§ 203 – Basic Prohibition
 Prohibits a current Government official from
receiving “compensation” for “representational
services” provided before the Government in
connection with any “particular matter” in which the
Government is a party or has a direct and
substantial interest
 Includes receipt of compensation in exchange for
representational services provided by any party
29
§ 203 – Key Concepts
 “Compensation”
– Fees, wages, salary, commission, and any other form of
payment
 “Representational Services”
– Any “communication” or “appearance” made with the “intent to
influence” the Government on behalf of any party
 Relevant Exceptions
– Testimony under oath and statements under penalty of perjury
– Certain exemptions for special Government employees
30
§ 203 – Terminal Leave
 An individual on terminal leave remains a
current Government official
 Government officials on terminal leave
should not be allowed to contact the
Government in their capacity as contractor
employees
31
§ 205 – Basic Prohibition
 § 205(a) prohibits a current Government official from:
– Prosecuting any claim against the Government OR
– Assisting in the prosecution of any claim against the
Government in exchange for a gratuity or interest in the claim
 § 205(b) is co-extensive with § 203, except:
– Receipt of compensation is not required
– Limited to representational services provided directly by the
Government official
32
Procurement Integrity Act
41 U.S.C. § 423
© Sheppard Mullin Richter Hampton LLP 2006
What is the Procurement Integrity Act?
 A procurement statute that (among other things):
– Establishes reporting and disqualification requirements that
apply when a Government procurement official contacts or is
contacted by a bidder or offeror regarding possible
employment (41 U.S.C. § 423(c))
– Prohibits a former Government official who was involved in
certain procurement functions from accepting compensation
from affected contractors for a period of one year after
performing those functions (41 U.S.C. § 423(d))
 Both requirements reach contractors directly
34
Potential Consequences of Violations
 Civil Penalties
– Up to $50,000 for individuals and $500,000 for
organizations, PLUS
– Twice the amount of compensation received or offered
for the prohibited conduct
 Administrative Actions
– Cancellation of procurement
– Contract rescission
– Suspension or debarment
35
Restrictions on
Employment Discussions
41 U.S.C. § 423(c)
© Sheppard Mullin Richter Hampton LLP 2006
§ 423(c) – Basic Prohibition
 A Government official who is participating “personally
and substantially” in a “Federal agency procurement” in
excess of the simplified acquisition threshold and who
“contacts or is contacted” by a bidder or offer regarding
possible employment must:
– Promptly report the contact in writing to his or her supervisor
and designated agency ethics official AND
– Either reject the possibility of employment OR be disqualified
from further personal and substantial participation in the
procurement
37
§ 423(c) – Key Definitions
 “Federal Agency Procurement”
– Competitive acquisition of goods, services, or
construction using appropriated funds
 Employment Contact
– Any actions that constitute “seeking employment” under
the OGE regulations AND
– Any unsolicited employment communication from an
offeror, even if rejected immediately
38
§ 423(c) – “Personally and Substantially”
 Drafting, reviewing, or approving the specifications
or statement of work
 Preparing or developing the solicitation
 Evaluating bids or proposals or selecting a source
 Negotiating price or terms and conditions
 Reviewing and approving award of a contract
39
§ 423(c) – Disqualification
 Requires submission of written
disqualification notice to the Contracting
Officer, Source Selection Authority, and the
Government official’s immediate supervisor
 Government official must remain disqualified
until the Head of the Contracting Activity
authorizes participation
40
Hiring Ban
41 U.S.C. § 423(d)
© Sheppard Mullin Richter Hampton LLP 2006
§ 423(d) – Basic Prohibition
 Prohibits a former Government official from accepting
compensation from a contractor for a period of one year
after serving in any of the following positions on a contract
over $10 million awarded to the contractor:
– Procuring Contracting Officer
– Source Selection Authority
– Source Selection Evaluation Board member
– Chief of a financial or technical evaluation team
– Program Manager
– Deputy Program Manager
– Administrative Contracting Officer
42
§ 423(d) – Basic Prohibition (cont’d)
 Prohibits a former Government official from accepting
compensation from a contractor for a period of one year
after personally making any of the following decisions:
– Decision to award a contract, subcontract, modification, or order in
excess of $10 million to that contractor
– Decision to establish overhead or other rates applicable to that
contractor that are valued in excess of $10 million
– Decision to approve issuance of contract payments in excess of $10
million to that contractor
– Decision to pay or settle a claim in excess of $10 million with that
contractor
43
§ 423(d) – “Compensation”
 Includes wages, salaries, honoraria, commissions,
professional fees, and any other form of payment
 Does not include compensation paid by a prime
contractor to a subcontractor that employs a former
Government official UNLESS the subcontract is
merely a vehicle to obtain services from a former
Government official
44
§ 423(d) – Divisions and Affiliates
 The hiring ban does not apply to a division or
affiliate of the contractor that:
– Is separate from the entity responsible for the
contract that gives rise to the hiring ban AND
– Does not produce any of the “same or similar
products or services” as the entity responsible
for the contract that gives rise to the ban
45
Implementing a Revolving
Door Compliance Program
© Sheppard Mullin Richter Hampton LLP 2006
Components of a Successful Program
 Written Policies and Procedures
 Pre-Hire Screening
 Monitoring of Assignments
 Training
 Incentives and Penalties
 Periodic Compliance Audits
47
Written Policies and Procedures
 Include the following key elements:
–
–
–
–
Commitment to comply with restrictions
Member of senior management with oversight responsibility
Brief explanation of restrictions
Procedures for screening applicants and monitoring assignments
–
–
–
–
Documents required to be generated and maintained
Potential consequences of noncompliance
Procedures for reporting violations
Identification of individual or organization responsible for each task
 Distribute (and periodically redistribute) to all employees
 Require certification of receipt by employees
48
Pre-Hire Screening
 Questions
– Are employment discussions permissible?
– Can the applicant be hired?
– What representational restrictions will apply?
 Elements
– Conflict of interest questionnaire
– Analysis and written determination
– Pre-hire certification
49
Conflict of Interest Questionnaire
 Require all applicants to complete the questionnaire before
employment discussions progress
 Include questions broad enough to elicit information
regarding all revolving door restrictions
 Request copies of the applicant’s disqualification statement
and ethics opinion
 Require the applicant to certify that:
– All responses are current, accurate, and complete
– The applicant will update the contractor immediately of any changes
50
Analysis and Written Determination
 Utilize reviewers that are independent of the hiring activity
 Provide reviewers with all information received from the
applicant and a description of the relevant position
 Require reviewers to document their findings
– Are employment discussions permissible?
– Can the applicant be hired?
– What representational restrictions will apply?
 Do not allow anyone else to speak with the applicant until
the review is complete
51
Pre-Hire Certification
 Provide the new employee a copy of:
– The new employee’s completed conflict of interest questionnaire
– All relevant contractor policies and procedures
 Require the new employee to certify that:
– The information in the new employee’s conflict of interest
questionnaire remains current, accurate, and complete
– The new employee understands, has complied, and will continue to
comply with all applicable revolving door restrictions
– The new employee will notify his or her supervisor immediately if he
or she believes that performance of an assignment would violate
such restrictions
52
Monitoring of Assignments
 Require a risk assessment prior to reassignment
 Ensure that a supplemental conflict of interest
determination is prepared before reassignment
 Educate the employee and his or her supervisor
about the compliance risks associated with the new
position
 Require the employee and his or her supervisor to
certify that they understand and will comply with all
applicable revolving door restrictions
53
Employee Training
 Provide basic training to all contractor personnel
 Provide advanced training to:
– Former government officials
– Supervisors of former government officials
– Members of senior management
 Document attendance with certifications
54
Compliance Audits
 Policies and Procedures
– Are the contractor’s policies and procedures current?
– Have they been modified to address prior audit findings?
 Personnel Files
– Does the file include all required documents and certifications?
– Are the documents dated at the appropriate point in the process?
– Are all conflict of interest determinations adequate?
 Training Program
– Are the contractor’s training materials current and adequate?
– What percentage of personnel have attended training?
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Compliance Audits (cont’d)
 Reported Violations
– Have all reports been logged, documented, and investigated?
– Was appropriate disciplinary action taken?
– Has the issue been corrected?
 Post-Audit Analysis
– Address each violation by taking appropriate disciplinary action
– Analyze the pattern of violations to identify gaps and weaknesses
– Address gaps and weaknesses promptly through modifications to
policies, procedures, and training
56