Soft Money, Allegations of Political Corruption, and Enron

Congressional research reportFeb 12, 2002

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Order Code RL31288

CRS Report for Congress

Received through the CRS Web

Soft Money, Allegations of

Political Corruption,

and Enron

February 12, 2002

Jack Maskell and L. Paige Whitaker

Legislative Attorneys

American Law Division

Congressional Research Service ˜ The Library of Congress

Soft Money, Allegations of Political Corruption, and

Enron

Summary

While the failure of Enron Corporation is widely seen as some combination of

an economic business failure due to excessive risks, insider profiteering, and

incomplete public disclosures, as well as a failure or lapse of efficient government

regulation or oversight, there has also been persistent speculation and commentary

regarding whether the Enron collapse might involve elements of government or

political “corruption,” and the illegal or improper influence of monied corporate

business interests over both elected and appointed officials in the Federal

Government.

This Report will examine the current state of federal law with regard to the most

persistent charges of government or political corruption relating to the Enron matter,

including federal campaign finance regulation of hard money, the state of the federal

law with respect to soft money, bribery, “illegal gratuities,” extortion, conflicts of

interest and required recusals of government officials, and the “revolving door”

regulations on former government officials.

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Current Federal Campaign Finance Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Activity Regulated by Federal Law: Hard Money . . . . . . . . . . . . . . . . . . . . 2

Contribution Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Disclosure Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Source Prohibitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Activity Unregulated by Federal Law: Soft Money . . . . . . . . . . . . . . . . . . . 8

Political Party Soft Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Corporate and Labor Union Soft Money . . . . . . . . . . . . . . . . . . . . . . 8

Soft Money Spent On Issue Advocacy . . . . . . . . . . . . . . . . . . . . . . . . 9

Campaign Contributions and Official Government Acts . . . . . . . . . . . . . . . . . . 12

Bribery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Illegal Gratuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Extortion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Conflicts of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Entering Government Service and Financial Interests . . . . . . . . . . . . . . . . 25

Disqualification and Current Financial Interests . . . . . . . . . . . . . . . . 26

Disqualification and Past Associations . . . . . . . . . . . . . . . . . . . . . . . 31

Leaving Government and the “Revolving Door” Law . . . . . . . . . . . . . . . . 31

Negotiating Private Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Post-Government Employment Restrictions . . . . . . . . . . . . . . . . . . . 34

Soft Money, Allegations of Political

Corruption, and Enron

Introduction

The failure of Enron Corporation has been seen primarily as an economic

business failure in which excessive corporate risks and speculation, deceptive

bookkeeping, insider profiteering, and conflicts of interest and possible collusion of

supposedly independent outside auditors, were all part of the troubled mix. At

another level, the failure of the Enron Corporation has also been seen as a failure of

Government regulation, and one which exposed loopholes and gaps in such things as

Government oversight and regulation of derivative trading, required public reporting

and record keeping by publically traded corporations, regulations on the independence

of public auditors, and rules for the protection of corporate sponsored or assisted

employee pension plans.

There has also, however, been a persistent undercurrent in news and business

commentary that the entire picture of the Enron collapse involves elements of

Government or political “corruption,” and the illegal or improper influence of monied

corporate business interests over both elected and appointed officials in the Federal

Government. These contentions often involve allegations of improper influence

purchased by soft money campaign contributions from Enron, the receipt of political

contributions by political figures in return for favorable Government treatment,

conflicts of interest of Government officials with personal financial interests in Enron,

and abuses of the “revolving door” between employment in private industry and

positions with the Federal Government.

This Report will examine the current state of federal law with regard to the most

persistent charges of government or political corruption relating to the Enron matter,

including federal campaign finance regulation of hard money, the state of the federal

law with respect to soft money, bribery, “illegal gratuities,” extortion, conflicts of

interest and required recusals of government officials, and the “revolving door”

regulations on former government officials. Addressing a matter that is currently and

continually unfolding necessarily involves a degree of uncertainty and selectivity

concerning any fact situations existing or that may evolve in the ongoing

investigations and revelations, and with regard to potential or hypothetical violations

of federal laws, that such facts may or may not indicate. The discussion of certain

federal laws, regulations, and statutory provisions regarding campaign finance law and

public corruption in this Report is intended only to address some of the more

significant issues and questions that have been raised relating to the Enron matter visa-vis political corruption, as of the date of this writing, and is not intended to exclude

the possibility of the conformance with or violations of any federal law or regulation.

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Current Federal Campaign Finance Law

Activity Regulated by Federal Law: Hard Money

The Federal Election Campaign Act (FECA)1 regulates campaign contributions

and expenditures relating to federal elections. The term “hard money,” which is not

statutorily defined, is typically used to refer to funds raised and spent in accordance

with the limitations, prohibitions, and reporting requirements of FECA.2 Unlike soft

money, hard money may be used “in connection with” or “for the purpose of

influencing” federal elections.

Under the FECA, hard money restrictions apply to contributions and

expenditures from any “person,” as defined to include, “an individual, partnership,

committee, association, corporation, labor organization, or any other organization or

group of persons,” but not including the federal government.3 FECA defines

“contribution” to include “anything of value” given to a federal candidate or

committee, including money, loans, loan guarantees, and in-kind contributions, such

as office space, equipment, and fundraising expenses, “for the purpose of influencing

any election for Federal office.”4 FECA further defines “expenditure” to include any

purchase, payment, distribution, loan, advance, deposit or gift of money, “for the

purpose of influencing any election for Federal office.”5

There are three key features of FECA hard money regulation: contribution limits,

disclosure requirements, and source prohibitions.

Contribution Limits.

FECA provides limits on contributions to candidates, parties, and political action

committees (PACs) in federal elections. Individuals are limited to $1,000 per election

to a candidate; $5,000 per year to a PAC; an aggregate of $20,000 per year to a

political party; and an aggregate of $25,000 per year to all federal candidates, parties,

and PACs. Multicandidate PACs and party committees are limited to $5,000 per

candidate, per election.6 In addition, political parties are limited in the amounts they

may make in coordinated expenditures to pay for campaign services or advertisements

2 U.S.C. § 431 et seq.

See 2 U.S.C. §§ 441a, 441b(a).

2 U.S.C. § 431(11).

2 U.S.C. § 431(8)(A).

2 U.S.C. § 431(9)(A).

2 U.S.C. § 441a(a).

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in connection with a candidate, subject to formulaic limits, which are indexed for

inflation.7

Disclosure Requirements.

Generally, FECA requires all federal candidates, PACs, and political parties,

which are involved in federal elections, to register with the Federal Election

Commission (FEC) and file periodic reports. Under FECA, reports are required to

include aggregate amounts of cash on hand, receipts, expenditures, transfers, loans,

rebates, refund dividends, and interest, itemizing amounts above $200.8

Source Prohibitions.

Under FECA, labor unions and corporations are prohibited from making

contributions or expenditures from their treasury funds in connection with federal

elections.9 However, using their treasury funds, corporations and labor unions are

permitted to establish, administer, and solicit contributions to separate segregated

funds, i.e. political action committees (PACs). Hence, in order to make contributions

and expenditures in federal elections, corporations and labor unions must use the

funds they raise in a PAC, which are voluntarily contributed, non-corporate and nonunion treasury funds.10

The Supreme Court in Federal Election Commission (FEC) v. Massachusetts

Citizens for Life (MCFL)11 evaluated the constitutional application of FECA’s

prescription of a separate segregated fund or PAC for corporate political

expenditures. In this case, the requirement was applied to a non-profit corporation

founded for purely political purposes. The founding charter of MCFL was to “foster

respect for life,” a purpose motivating various educational and public policy

activities.12 Drawing from its general treasury, the corporation funded a pre-election

publication entitled “Everything You Need to Know to Vote Pro-life,” which

triggered litigation under § 441b.13 As the publication was tantamount to an “explicit

directive [to] vote for [named] candidates,” MCFL’s speech constituted “express

advocacy of the election of particular candidates,” subjecting the expenditure to

regulation14 under the express advocacy standard first articulated by the Court in

2 U.S.C. § 441a(d)(3).

2 U.S.C. §§ 432-437.

2 U.S.C. § 441b(a).

2 U.S.C. § 441b(b)(2)(3).

479 U.S. 238 (1986).

See id. at 241-242.

See id. at 242.

Id. at 249. The Court found that the publication not only urged voters to vote for “pro-life”

candidates, but also identified and provided photographs of specific candidates. As a result,

the Court determined that the publication could not be considered a “mere discussion” of

(continued...)

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Buckley.15 However, as applied to MCFL, § 441b was held unconstitutional because

it infringed on protected speech without a compelling justification.16

Noting that § 441b burdened expressive activity,17 the Court examined the

government’s regulatory interests in alleviating corruptive influences in elections by

requiring the use of corporate PACs and the Court held that concentration of wealth,

in itself, is not a valid object of regulation.18 The Court noted that a corporation’s

ability to amass large treasuries confers upon it an unfair advantage in the political

marketplace, as general treasury funds derive from investors’ economic evaluation of

the corporation, not their support of the corporation’s politics.19 By requiring the use

of a PAC, § 441b ensures that a corporation’s independent expenditure fund indexes

for the “popular support” of its political ideas.20 The Court held that by prohibiting

general treasury fund expenditures to advance a political point of view, the regulation

“ensured that competition among actors in the political arena is truly competition

among ideas.”21

While the Court found these interests compelling as applied to most

corporations, it held the restriction unconstitutional as applied to MCFL. Specifically,

the MCFL Court found the following characteristics exempt a corporation from the

regulation: (1) its organizational purpose is purely political; (2) its shareholders have

no economic incentive in the organization’s political activities; and, (3) it was not

founded by nor accepts contributions from business organizations or labor unions.22

Carving out an exception for corporations with these characteristics, the Court

raised equitable grounds for the regulation, stressing that “[r]egulation of corporate

political activity . . . has reflected concern not about the use of the corporate form per

se, but about the potential for the unfair deployment of [general treasury funds] for

political purposes.”23 The Court held that MCFL’s general treasury is not a function

(...continued)

public issues. Id.

See Buckley v. Valeo, 424 U.S. 1, 44 (1976), discussed page 9, infra.

See FEC v. Massachusetts Citizens for Life, Inc., 479 U.S. at 263.

See id. at 252.

Id. at 257 (“political ‘free-trade’ does not necessarily require [that participants] in the

political marketplace [compete with equal resources.]”)

See id. at 258.

Id. at 258.

Id. at 259.

See id. at 259, 264.

Id. (emphasis added). See also, id. at 263 (“voluntary political organizations do not suddenly

present the specter of corruption merely by assuming the corporate form.”), but see Austin v.

Michigan Chamber of Commerce, 494 U.S. 659, 660 (1990)(suggesting that the selection of

the corporate form in itself triggers the state’s regulatory interests. “[T]he unique stateconferred corporate structure that facilitates the amassing of large treasuries warrants the limit

(continued...)

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of its economic success, but is an index for membership support of its political ideas.24

Thus, according to the Court, purely political organizations such as MCFL cannot

constitutionally be regulated by § 441b because their treasuries already embody what

the regulation purports to achieve: an index of the corporation’s political support. In

other words, MCFL is an example of a corporation that is not at risk for gaining an

“unfair” advantage in the electoral process.25

In Austin v. Michigan State Chamber of Commerce,26 the Supreme Court

affirmed and clarified its MCFL holding when it considered whether a non-profit

corporation’s free speech rights were unconstitutionally burdened by a state

prohibition on using general treasury funds to finance a corporation’s independent

expenditures in state elections. While prohibiting expenditures from general treasury

funds,27 the statute permitted independent contributions as long as they were made

from a separate segregated fund or PAC.28 Plaintiff-corporation, a non-profit founded

for political and non-political purposes, asserted that the regulation burdened its First

Amendment interest in political speech by limiting its spending.29 Further, the plaintiff

contended that the regulation was not narrowly tailored to obtain the state’s interests

in avoiding the appearance of corruption by limiting a corporate entity’s inherent

ability to concentrate economic resources.30 Although economic power, in itself, does

not necessarily index the persuasive value of a corporation’s political ideas, the state

argued, a corporation’s structural ability to amass wealth makes it “a formidable

political presence”—a presence which triggers its regulatory interest.31

Unpersuaded by the corporation’s assertion of right, the Court upheld the

regulation. Under Buckley32 and MCFL,33 the Court addressed whether the plaintiff’s

free speech interests were burdened by the regulation; evaluated the state’s regulatory

(...continued)

on independent expenditures.” Id.)

See MCFL, 479 U.S. at 259.

See id. at 260.

494 U.S. 652 (1990).

The statute defined “expenditure” as “a payment, donation, loan, pledge, or promise of

payment of money or anything of ascertainable monetary value for goods, materials, services,

or facilities in assistance of, or in opposition to, the nomination or election of a candidate.”

Id. at 655 quoting Mich. Comp. Laws § 169.206(1) (1979).

The Michigan Statute was modeled on the provision of FECA requiring corporations and

labor unions to use a separate segregated fund or PAC when making independent expenditures

in connection with federal elections, 2 U.S.C. §441b(b)(2)(C). See Austin, 494 U.S. at 656

n. 1.

See id. at 658.

See id. at 659.

Id., quoting Federal Election Comm’n v. Massachusetts Citizens for Life, 479 U.S. 238,

258 (1986)(MCFL).

424 U.S. 1 (1976)(per curiam).

479 U.S. 238 (1986).

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interests; and asked whether the regulation was narrowly tailored to achieve those

interests.34 The Court found that the plaintiff’s freedom of expression was burdened

by the regulation, but held that the state achieved its compelling interests by narrowly

tailored means.

By limiting the source of a corporation’s independent expenditures to a special

segregated fund or PAC, the Austin Court held that the regulation burdened the

plaintiff’s freedom of expression.35 The regulation placed various organizational and

financial burdens on a corporation’s management of its PAC,36 limited PAC

solicitations to “corporate members” only;37 and prohibited independent expenditures

from corporate treasury funds.38 Similar to its finding in MCFL, the Court found that

the statute’s requirements burdened, but did not stifle, the corporation’s exercise of

free expression to a point sufficient to raise a genuine First Amendment claim.39 Thus,

to overcome the claim, the regulation had to be motivated by compelling

governmental interests and be narrowly tailored to serve those interests.

First, the Austin Court evaluated the state’s regulatory interests. The state

argued that a corporation’s “unique legal and economic characteristics”40 renders it

a “formidable political presence” in the market place of ideas, which necessitates

regulation of its political expenditures to “avoid corruption or the appearance of

corruption.”41 The Court stressed that the regulation’s purpose was not to equalize

the political influence of corporate and non-corporate speakers, but to ensure that

expenditures “reflect actual public support for political ideas espoused by

corporations.”42 Moreover, the Court was careful to emphasize that the mere fact

that corporations can amass large treasuries was not its justification for upholding the

See Austin, 494 U.S. at 657. Antecedent to these inquiries, the Court affirmed that the

plaintiff’s interest in using general funds for independent expenditures is “political expression

at the core of our electoral process and of the First Amendment freedoms.” Id. at 657,

quoting Buckley, 424 U.S. at 39. Moreover, the Court noted that the plaintiff’s status as a

corporation did not completely erode its free speech interest under the First Amendment. See

Austin, 494 U.S. at 657, citing First National Bank of Boston v. Bellotti, 435 U.S. 765, 777

(1978)..

See Austin, 494 U.S. at 657.

For example, the Court noted that the regulation required a corporation to appoint a

treasurer to administer the fund, keep records of the funds’ transactional history, and create

and periodically update an informational statement about the fund for the state. Id. at 658.

Id.

Id., citing MCFL, 479 U.S. at 252 (plurality opinion).

As examples, the Court cited attributes that enhanced a corporation’s ability to manage and

attract capital assets favorable to its shareholder’s proprietary interests, such as perpetual life,

limited liability, and favorable treatment with respect to the accumulation and distribution of

capital. Austin, 494 U.S. at 658-659.

Id. at 658, 659, citing Federal Election Comm’n v. National Conservative Political Action

Committee, 470 U.S. 480, 496-497 (1985), and MCFL, 479 U.S. at 258.

Id. at 660.

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statute. Rather, the Court identified the compelling state interest as “the unique stateconferred corporate structure,” which facilitates the amassing of large amounts of

wealth.43 On these grounds, the Court appeared to recognize a valid regulatory

interest in assuring that the conversion of economic capital to political capital is done

in an equitable way. In other words, the Court held that corruption of the electoral

process itself, rather than just the corruption of candidates, is a compelling regulatory

interest.

After finding a compelling state interest, the Austin Court determined that the

regulation was neither over-inclusive nor under- inclusive with respect to its burden

on expressive activity. Responding to the plaintiff’s argument that the regulation was

over-inclusive insofar as it included closely held corporations, which do not enjoy the

same capital resources as larger or publicly-held corporations, the Court ruled that the

special benefits conferred to corporations and their potential for amassing large

treasuries justified the restriction.44 Plaintiff’s under-inclusiveness argument, alleging

that the regulatory scheme failed to include unincorporated labor unions with large

capital assets, fared no better. The Court distinguished labor unions from

corporations on the ground that unions “amass large treasuries . . . without the

significant state-conferred advantages of the corporate structure.”45 Here again, the

Court remarked that the corporate structure, not corporate wealth, triggers the state’s

interest in regulating a corporation’s independent expenditures.46 Hence, despite the

burden on political speech, the Court upheld the regulation because it was narrowly

tailored to reach the state’s compelling interests.

In sum, the Austin Court clarified MCFL and upheld the three-part test for when

a corporation is exempt from the state’s general interest in requiring a corporation to

use a separate segregated fund or PAC for its “independent expenditures.”47 Under

Austin, a corporation is exempt from the PAC requirement when (1) the “organization

was formed for the express purpose of promoting political ideas;”48 (2) no entity or

person has a claim on the organization’s assets or earnings, such that “persons

connected with the organization will have no economic disincentive for disassociating

with it if they disagree with its political activity;”49 and (3) the organization is

independent from “the influence of business corporations.”50

Id.

See id. at 663.

Id. at 665.

“The desire to counter-balance those advantages unique to the corporate form is the State’s

compelling interest in this case.” Id. But see MCFL, 479 U.S. at 259 (“[r]egulation of the

corporate political activity thus has reflected concern not about the corporate form per se, but

about the potential for unfair deployment of wealth for political purposes.”)

See Austin, 494 U.S. 662-664.

Id. at 662, quoting MCFL, 479 U.S. at 264.

Id. at 663, quoting MCFL, 479 U.S. at 264.

Id. at 664, citing MCFL, 479 U.S. at 264.

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Activity Unregulated by Federal Law: Soft Money51

“Soft money” is also an undefined term in federal election law and regulation.

Strictly speaking, “soft money” is considered to be those funds that are not regulated

by FECA, i.e. hard money. Sometimes referred to as nonfederal funds, the term “soft

money” often refers to non-FECA funds raised by the national committees of the two

major political parties. “Soft money” may also refer to corporate and/or labor

treasury funds and individual contributions, in excess of federal limits, which cannot

legally be used in connection with federal elections, but can be used for other

purposes. In addition, “soft money” is also used to describe funds spent for issue

advocacy communications by corporations and labor unions.

Political Party Soft Money.

Political party soft money funds are raised by the national parties from sources

and in amounts prohibited in federal elections by the FECA and are then largely

transferred, in accordance with applicable state law, to state and local political parties

for grassroots and party-building activities, overhead expenses, and issue ads. Since

the 1979 FECA Amendments, certain grassroots, voter-registration, get-out-the-vote,

and generic party-building activities are exempt from FECA coverage.52 Therefore,

money raised and spent for these activities is not regulated and hence, is considered

political party soft money.

Corporate and Labor Union Soft Money.

Generally, contributions and expenditures by corporations, labor unions,

membership organizations, cooperatives, and corporations without capital stock have

been prohibited in federal elections.53 FECA, however, provides for three exemptions

from this broad prohibition, that is, contributions and expenditures for: (1)

communications by a corporation to its stockholders, executive or administrative

personnel and their families or by a labor organization to its members or families on

any subject; (2) nonpartisan voter registration and get-out-the-vote activities by a

corporation aimed at its stockholders and executive and administrative personnel and

their families or by a labor organization aimed at its members and their families; and

(3) the establishment, administration and solicitation of contributions to a separate

segregated fund (commonly known as a political action committee or PAC or SSF)

to be utilized for federal election purposes by a corporation, labor organization,

membership organization, cooperative, or corporation without capital stock.54

For further discussion of soft money, see, Campaign Finance: Constitutional and Legal

Issues of Soft Money, by L. Paige Whitaker (IB98025); Soft and Hard Money in

Contemporary Elections: What Federal Law Does and Does Not Regulate (97-91), by

Joseph E. Cantor.

2 U.S.C. § 431(9)(B)(viii),(ix).

2 U.S.C. § 441b.

2 U.S.C. § 441b(b)(2)(A)-(C); see also 11 C.F.R. § 114.1(a)(2)(i)-(iii).

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Soft Money Spent On Issue Advocacy.55

Spending on issue advocacy communications is another use of soft money that

has gained popularity in recent federal election cycles.

Issue advocacy

communications are paid for by a group, such as a for-profit or non-profit corporation

or labor organization, for advertisements that could be interpreted to favor or disfavor

certain candidates, while also serving to inform the public about a policy issue. The

prevailing view in the lower courts is that Supreme Court precedent requires that only

those communications that expressly advocate the election or defeat of a clearly

identified candidate can be constitutionally regulated; any such communication that

does not meet this “express advocacy” standard is constitutionally protected First

Amendment speech, which cannot be regulated. Hence, issue ads may be paid for

with unregulated soft money.

Origin of Issue Advocacy.

In Buckley v. Valeo,56 the Supreme Court provided the genesis for the concept

of issue and express advocacy communications. In order to pass constitutional muster

and not be struck down as unconstitutionally vague, the Court ruled, FECA can only

apply to non-candidate “expenditures for communications that in express terms

advocate the election or defeat of a clearly identified candidate for federal office,” i.e.,

expenditures for express advocacy communications.57 A footnote to the opinion

provides examples of such “express advocacy”: terms “such as ‘vote for,’ ‘elect,’

‘support,’ ‘cast your ballot for,’ ‘Smith for Congress,’ ‘vote against,’ ‘defeat,’

‘reject.’”58 Communications without these ‘magic words’ are often classified as issue

advocacy, thus falling outside the scope of the FECA. In its rationale for establishing

such a bright line distinction between issue and express advocacy, the Court noted

that the discussion of issues and candidates as well as the advocacy of election or

defeat of candidates “may often dissolve in practical application.” That is, according

to the Court, candidates (especially incumbents) are intimately tied to public issues

involving legislative proposals and governmental actions.59

In the 1986 decision of Federal Election Commission v. Massachusetts Citizens

for Life, Inc., (MCFL),60 the Supreme Court continued to distinguish between issue

and express advocacy, holding that an expenditure must constitute express advocacy

in order to be subject to the FECA prohibition against corporate use of treasury funds

to make an expenditure “in connection with” any federal election.61 In MCFL, the

Court ruled that a publication urging voters to vote for “pro-life” candidates, while

For further discussion of issue advocacy, see, Campaign Finance Reform: A Legal Analysis

of Issue and Express Advocacy, by L. Paige Whitaker (CRS Report #98-282).

424 U.S. 1 (1976).

Id. at 44.

Id. n.52; see 11 C.F.R. 101.22(a).

Id. at 42.

479 U.S. 238 (1986).

Id. at 249-250.

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also identifying and providing photographs of certain candidates who fit that

description, could not be regarded as a “mere discussion of public issues that by their

nature raise the names of certain politicians.” Instead, the Court found, the

publication “in effect” provided a directive to the reader to vote for the identified

candidates and ergo, constituted express advocacy.62

In FEC v. Furgatch,63 the Ninth Circuit presented the following three-part test

to determine whether a communication may be considered issue advocacy:

First, even if it is not presented in the clearest, most explicit language, speech is

‘express’ for the present purposes if its message is unmistakable and

unambiguous, suggestive of only one plausible meaning. Second, speech may only

be termed ‘advocacy’ if it presents a clear plea for action, and thus speech that is

merely informative is not covered by the Act. Finally, it must be clear what action

is advocated. Speech cannot be ‘express advocacy of election or defeat of a

candidate’ when reasonable minds could differ as to whether it encourages a vote

for or against a candidate or encourages the reader to take some other kind of

action.64

However, the trend in the circuit courts appears to be away from the Furgatch

and FEC definitions toward a more limited interpretation of what type of speech will

constitute “express advocacy.” Hence, regulation of fewer types of communications

are being upheld as constitutionally permissible and therefore, more “issue ads” are

permissibly funded with soft money. In Maine Right to Life Committee v. FEC,65 the

First Circuit affirmed the district court’s opinion that the FEC surpassed its authority

when it included a “reasonable person” standard in its definition of “express

advocacy.” The court reasoned that such a standard threatened to infringe upon issue

advocacy, an area protected by the First Amendment. (Id. at 12.) The Fourth Circuit

reached a similar conclusion in FEC v. Christian Action Network.66 Likewise, in

Vermont Right to Life Committee v. Sorrell,67 the Second Circuit found that state

campaign regulations triggering disclosure and reporting requirements of speech that

“expressly or implicitly advocate[] the success or defeat of a candidate” were facially

invalid under the First Amendment because they would result in a regulation of

constitutionally protected issue advocacy, (emphasis added). In Vermont, the court

held that the Supreme Court in Buckley had established an “express advocacy

standard” in order to insure that regulations were neither too vague nor intrusive on

First Amendment protected issue advocacy. Accordingly, the court held that by

Id. at 249-250.

807 F.2d 857 (9th Cir. 1987), cert. denied, 484 U.S. 850 (Id. at 44 n.52; see 11 C.F.R.

101.22(a) (1987)).

Id. at 864.

914 F.Supp. 8 (D. Maine 1996), aff’d per curiam 98 F.3d 1 (1st. Cir. 1996), cert. denied,

118 S.Ct. 52 (Oct. 6, 1997).

92 F.3d 1178 (4th Cir. 1997).

216 F.3d 264 (2d Cir. 2000).

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including the term “implicitly,” the regulations extend to advocacy with respect to

public issues, in violation of the rule enunciated in Buckley and its progeny.68

Issue Advocacy Distinguished from Independent Expenditures.

Soft money spent for issue advocacy communications is sometimes confused

with independent expenditures. Although both types of expenditures are purportedly

independent, (indeed, Justice Kennedy argues that, by nature, practically all

expenditures are coordinated with a candidate and, thus, cannot be considered

independent),69 only independent expenditures are subject to the FECA. The

Colorado I Court held that the First Amendment would prohibit the application of a

FECA provision, 2 U.S.C. § 441a(d)(3), limiting political party expenditures made

independently and without any coordination with a candidate or his or her campaign.

Essentially, the Colorado decision banned any limitations on political party

expenditures when they are made independently of a candidate’s campaign.70 Since

a political committee making independent expenditures, however, is still subject to

FECA restrictions regarding sources and contribution amounts it may receive from

a person, (see, e.g., 11 C.F.R. § 110.0(d)), an independent expenditure is not

considered soft money.

In FEC v. Colorado Republican Federal Campaign Committee (Colorado II),71

the Supreme Court held that a political party’s coordinated expenditures, unlike

genuine independent expenditures, may be limited in order to minimize circumvention

of the Federal Election Campaign Act’s (FECA) contribution limits. While the

Court’s opinion in Colorado I was limited to the constitutionality of the application

of FECA’s “Party Expenditure Provision” (2 U.S.C. § 441a(d)(3)) to an independent

expenditure by the Colorado Republican Party, in Colorado II the Court considered

a facial challenge to the constitutionality of the limit on coordinated party spending.

Persuaded by evidence supporting the FEC’s argument, the Court found that

coordinated party expenditures are indeed the “functional equivalent” of

contributions.72 Therefore, in its evaluation, the Court applied the same scrutiny to

the coordinated “Party Expenditure Provision” that it has applied to other

contribution limits: inquiring whether the restriction is “closely drawn” to the

“sufficiently important” governmental interest of stemming political corruption. The

On July 6, 1995, the FEC promulgated regulations defining “express advocacy” in a manner

consistent with the test espoused in Furgatch. (60 Fed. Reg. 35292, 35304 (codified at 11

C.F.R. 100.22)(effective Oct. 5, 1995) 60 Fed. Reg. 52069 (Oct. 5, 1995).) Despite the

emerging trend in the federal courts against the Furgatch express advocacy doctrine, the FEC

has declined to revise its regulations defining “express advocacy.” (See 63 Fed. Reg. 8363

(Feb. 19, 1998).) The FEC has stated that its primary reason for this decision is “its belief

that the definition of ‘express advocacy’ found at 11 CFR 100.22(b) is constitutional.” (Id.

at 8264.)

Colorado Republican Committee v. FEC (Colorado I), 518 U.S. 604 (1996)(Kennedy, J.,

concurring in the judgment, dissenting in part).

Id. at 614-17.

121 S.Ct. 2351 (2001).

Id. at 2362.

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Court further determined that circumvention of the law through “prearranged or

coordinated expenditures amounting to disguised contributions” is a “valid theory of

corruption.”73 In upholding the limit, the Court noted that “substantial evidence

demonstrates how candidates, donors, and parties test the limits of the current law,”

which, the Court concluded, “shows beyond serious doubt how contribution limits

would be eroded if inducement to circumvent them were enhanced by declaring

parties’ coordinated spending wide open.”74

Campaign Contributions and Official Government

Acts

There have been numerous charges and suggestions of “corruption” of, or in, the

Federal Government because of the totality of campaign contributions made by those

associated with the Enron Corporation to national political parties, to candidates and

to public officials’ PACs, and the subsequent adoption of governmental policies that

were particularly favorable to the Corporation.75 The term public or political

“corruption” has enough imprecision and gradations of meaning to include merely a

“perversion”76 of a political system which, ideally, is intended to operate to the benefit

of the general public rather than for the enrichment of a few, or where the

“motivations” of public officials are not based on the general, public interest.77

However, if the term “corruption” is used in the more narrow, technical sense

generally employed when analyzing the operation of governments, there would then

need to be developed some indication of wrongful conduct which violated particular

statutory or regulatory standards, that is, generally, criminality or other unlawful

conduct on the part of Government officials, or on the part of the Corporation in

Id. at 2361, 2362.

Id. at 2367.

Washington Post, January 23, 2002, at A16, “Campaign Finance After Enron”: “The

existing system of soft-money donations allowed Enron to buy access to the administration

and Congress. Although it is not clear yet whether this access corrupted the policy of the

Bush administration, it appears likely that it did corrupt Congress in the late 1990s ....”;

Washington Post, January 25, 2002, at A18, “NSC Aided Enron’s Efforts”; Washington Post,

January 25, 2002, at A18, “For Gramms, Enron Is Hard to Escape”; Stone and Zeller,

“Enron’s Collapse Renews Old Battles,” National Journal, January 19, 2002, at 182 -183;

Washington Post, January 27, 2002, at A 8, “Pentagon Official From Enron in Hot Seat”;

BNA Money and Politics Report, January 17, 2002, “Lieberman Rejects Recusal From Probe

Despite Enron Donations to Leadership PAC.”

See common definition of “corruption” in Webster’s New Collegiate Dictionary (1977);

Black’s Law Dictionary (7th ed. 1999), definition 1: “Depravity, perversion, or taint; an

impairment of integrity, virtue or moral principle; esp. the impairment of a public official’s

duties by bribery.”

Note, generally, discussion by James Madison of republican principles and governmental

power to pursue “the public good,” that the object of all political constitutions is to have for

officials those who “discern” and “pursue” the “common good of society,” and of the

problems of the “perversion of the power to advance the public happiness ... to the public

detriment.” The Federalist Papers, Nos. XLI and LVII.

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relation to its contributions or relationships to those Government officials, which

served private or personal ends.78 Unless more particularized facts are forthcoming

either through the press or from governmental investigations, the discernment of

actual criminality or illegality in the allegations concerning the improper or undue

“influence” in the Government caused by Enron political contributions or lobbying,

that is, prosecutable public or “political corruption,” may be difficult to identify under

current federal law.

As discussed in the sections above, unlimited soft money campaign contributions

were not prohibited or regulated at the time of the Enron contributions, and were not

illegal under federal law. Similarly, political contributions of so-called “hard money,”

while regulated in amount and source, were also permitted from individuals, such as

corporate officers, and from political action committees (but not directly from

corporation or labor union treasuries), and were not illegal. As a general matter,

campaign contributions, as opposed to other transfers of wealth from private entities

to public officials, are not only permitted under law and practice, but are seen as

necessary in our system of privately financed campaigns for elective office. Without

campaign contributions from private parties (or a system of Government financed

campaigns), it is postulated that only the wealthiest individuals using their own

personal funds could afford to run a viable campaign for federal office.79 Campaign

contributions from private entities thus have a facial legitimacy that gifts or other

transfers of wealth from private parties to public officials do not have, and have been

recognized as having a First Amendment, freedom of expression and association

component.80

If it is assumed that the campaign contributions from persons and entities

affiliated with Enron to federal candidates, political action committees, and political

parties were lawful under current federal law as to the amount, the source, and the

required disclosures and reporting of such contributions, the question remains as to

whether the donation of otherwise lawful campaign contributions, and the subsequent

votes or policies favorable to the political donor, necessarily indicate corruption in

Government. The correlation between campaign contributions and, for example,

votes in Congress for or against particular legislation has always been a difficult

subject for analysis, both in proof and in theory. In the first instance, there is what has

been described as the “chicken or egg” conundrum: that is, in these circumstances, did

campaign contributions flow to those elected public officials because their

independent positions, ideology and votes are favorable to the business enterprise in

Huberts, Expert Views on Public Corruption Around the Globe, at 2-3 (Vrije Universiteit

Amsterdam 1996); Black’s Law Dictionary, supra, definition 2; note generally, U.S.

Department of Justice, Prosecution of Public Corruption Cases (1998).

Buckley v. Valeo, 424 U.S. 1, 26 (1976): “Under a system of private financing of elections,

a candidate lacking immense personal or family wealth must depend on financial contributions

from others to provide the resources necessary to conduct a successful campaign.” John T.

Noonan, Jr. Bribes, p. 621(Macmillan 1984): “Democracy does not work without campaigns

for office. Campaigns require money. Unless only the rich are to run, the money must be

raised. If the government supplied it, the danger of manipulation by incumbents would be

great.”

Buckley v. Valeo, supra at 14-23.

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question, or were those positions or votes actually influenced by or taken because of

the campaign contributions? A similar issue could be raised with respect to

Administration positions on legislative issues, regulatory policy and other executive

policy initiatives, and campaign contributions to presidential candidates and to the

national committees of those candidates’ parties.81 It is understood that as a general

matter individuals and organizations will make campaign contributions to those

officials and political entities with whom they agree on most matters of public policy.82

It would, therefore, be as little of a surprise to find that those affiliated with an energy

corporation such as Enron would make 73% of their campaign contributions to

members of or entities affiliated with the Republican Party83 which, as a general

matter, is perceived as being more ideologically consonant with the interests of

ownership and management of such businesses, than to discover that those affiliated

with labor organizations made the largest percentage of their contributions to

members of the Democratic Party,84 which is perceived as being more aligned with the

interests of the workers in those businesses.

It is, of course, always difficult to discern the “real motivation” behind a position,

policy or ideology adopted by a public official, unless some empirical evidence like

candid writings or statements is produced clearly tying a position, vote, or action to

a contribution or other private promise or thing of value. Motivations, besides

generally being hidden, are often complex or mixed, and even those actions by a

public official which seemingly benefit only a few favored donors at the ultimate

expense of the general public might arguably have been based on an official’s notions

of the public interest and the public policy belief that what is good for the profitability

of a large business entity is generally good for the entire country. Even in the

broadest definition of corruption, as a perversion of a public official’s motive to act

in the interest of the “public good,” there is no universal consensus as to which public

policies best serve the “public good.” The fact, therefore, that political contributions

were made to candidates and political parties, and that those candidates or members

of that party, when elected or appointed, eventually voted on or pursued policies

favorable to those campaign contribution donors, does not, in our system of privately

financed political campaigns, necessarily implicate per se Government “corruption”

or illegal actions, absent specific connecting or “linking” factors.

Washington Post, January 29, 2002, at A1, “Access vs. Success? Enron’s Policy Clout

Tough To Measure,” noting that it is a “difficult task separating actions taken to please a

major campaign contributor from the bona fide policy views of a market-oriented

administration.”

“A contribution serves as a general expression of support for the candidate and his views....”

Buckley v. Valeo, supra at 21; United States v. Brewster, 506 F.2d 62, 73, note 26 (D.C.Cir.

1974). “If the [campaign] money comes from citizens, they give it to candidates they expect

to vote, on at least some issues, in accordance with the donor’s desires. Normally, at any rate,

money is given to an officeseeker whose views on important issues coincide with the giver’s.”

Noonan, Bribes, supra at 621.

Center for Responsive Politics, Money in Politics Alert, “The Fall of a Giant: Enron’s

Campaign Contributions and Lobbying,” November 9, 2001, Vol. 6, No. 31.

Center for Responsive Politics, opensecrets.org, Industry Totals, Long-Term Contribution

Trends: Labor, 1990 - 2002 election cycles.

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This is not to say, however, that the “independent” judgment of a public official

could not be subtly influenced by the reliance and dependence on large contributors,

such that the public official could rationalize that what’s good for his or her private

benefactors is always good for the country; nor is it to suggest that the overall

influence on Government policy from large contributors could not be “undue” or

severely “imbalanced” in favor of those interests represented by accumulated and

aggregated wealth at the expense of other competing (but less well-financed, wellorganized or politically astute) public interests. There is fairly widespread agreement

on at least the potential for public “corruption,” if not the “appearance” of corruption

in the distortion of the independent judgment of Government officials, endemic in a

system which breeds dependance on large campaign contributors. The United States

Supreme Court has noted the “danger” to the country, in the severe eroding of

“confidence in the system of representative Government,” of “the impact of the

appearance of corruption stemming from public awareness of the opportunities for

abuse inherent in a regime of large individual financial contributions.”85 The noted

and respected ethicist, the late Senator Paul Douglas, explained in his treatise Ethics

in Government, that often “the corruption of public officials by private interests takes

a more subtle form” than outright bribes, through indirect financial support which may

“put the public official under such a feeling of personal obligation that the latter

gradually loses his sense of mission to the public ....”86 Douglas noted that sometimes

subtle “shifting loyalties” from the community to narrow private interests may lead

such an official to make decisions favorable to “his private benefactors and patrons”

while all the time “the official will claim – and may indeed believe – that there is no

causal relationship between the favors he received and the decisions which he

makes.”87

One other allegation of “corruption” that is consistently heard is that the large

campaign contributions and wealth of Enron allowed it more “access” to Government

officials than a typical member of the public or constituent would have. Evidence of

the desire for “access” (or, at the least, to create “good will”) may be observed in the

increasing tendency for large contributors to give campaign contributions to both

political parties, or to both candidates of the parties running in the same election.88 It

is theorized that in such cases, the organization or entity making such contributions

to both sides is looking to ensure “access” to the elected official, rather than basing

contributions on ideological factors or more immediate attempts at influencing public

policy. Receiving access or “face-time” because of one’s campaign contributions to

the political party or to that official, however it may offend notions of equality and

republican egalitarianism, is a current fact of life in our political system of privately

financed campaigns where personal “receptions” with party leadership, special

personal “briefings,” brunches or breakfasts with Representatives or other

Government officials, are provided specifically as incentives and rewards exclusively

Buckley v. Valeo, supra at 27.

Paul H. Douglas, Ethics in Government, at 44 (Harvard University Press 1952).

Id.

See, for example, Common Cause, “Life of the Party: Soft Money in the 1st Half of 20012002 Cycle,” at 3: “... many special interests are still playing it safe by making significant

contributions to both parties.”

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for large contributors to the party or the candidate. As developed in more detail

below, mere “access” to a Government official in return for or as a reward or

incentive for political contributions has thus far been found not to necessarily

implicate either the bribery or extortion laws.

If there is deemed, as a matter of public policy, to be a need to address or rectify

the real or perceived imbalance of influence or access, or the actual or appearance of

political corruption resulting from large, unlimited campaign contributions of soft

money to political parties and leadership PACs, for example, it would appear that

such remedial action would need to be addressed not through prosecution of

“corruption” under current federal criminal laws, but rather through new regulatory

and remedial legislation which addressed the matter in a more systemic fashion. As

explained by the Supreme Court in upholding contribution limitations of so-called

“hard money” to candidates, current federal laws on “corruption” such as bribery and

extortion “deal only with the most blatant and specific attempts of those with money

to influence governmental action.”89 As discussed in more detail below, federal

criminal corruption statutes such as the federal bribery or extortion laws would

require evidence of a more particularized connection or linkage between the

contribution of money and a particular official act (that is generally, a quid pro quo

arrangement) than has been reported in the Enron matter thus far in the press or in

revelations from congressional hearings.

Bribery

The most persistent allegations of “political corruption” in the Enron matter is

that the company “bought,” through large campaign contributions widely distributed,

particular official favors, official acts or official forbearance from officers or

employees of the Federal Government. Such allegations would, as an initial matter,

raise questions of violations of federal criminal law under the federal bribery statute.

The federal bribery statute at 18 U.S.C. § 201 provides criminal penalties for any

federal “public official”90 who “corruptly” seeks, receives, accepts or agrees to receive

“anything of value personally or for any other person or entity, in return for being

influenced in the performance of any official act.”91 This provision of federal law

specifically requires that the thing of value be “corruptly” received, sought or agreed

to be received by the public official “in return for being influenced” in the performance

of an official act. The “corrupt” nature of the transaction is part of the required intent

which is characteristic of a bribe.92 The required transaction involved, that is,

Buckley v. Valeo, supra at 27-28.

A “public official” includes any Delegate to or Member of Congress, or any officer or

employee of the United States, or any person acting for or on behalf of the United States or

any of its departments, agencies or branches. 18 U.S.C. § 201(a)(1).

18 U.S.C. § 201(b)(2)(A). The statute also prohibits, in a complimentary fashion, the

corrupt giving or offering of something of value by anyone to the official in return for the

official’s being influenced in the performance of an official act. § 201(b)(1)(A).

“Corruptly” engaging in the conduct “bespeaks a higher degree of criminal knowledge and

(continued...)

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corruptly receiving something of value “in return for” being influenced is interpreted

as an element of the offense that requires some corrupt or wrongful “agreement” or

“bargain,” often described as a quid pro quo — something given in exchange for

something received.93 The bribe under these circumstances must be shown to be the

thing that is the “prime mover or producer of the official act” performed or agreed to

be performed.94

Certainly, campaign contributions, whether of soft money or regulated hard

money, could be the “thing of value” in a “bribe,” and can be implicated in a bribery

scheme if the other elements of the crime of bribery are present.95 However, for a

“bribe” to be present in the case of campaign contributions, there must be shown a

specific quid pro quo, that is, a corrupt agreement or understanding between the

parties that the public official will do some specific official act in return for the receipt

of certain valuable consideration. When such a corrupt agreement exists (e.g., “I will

support this legislation or policy in return for you providing a campaign contribution

to my political committee”), there exists the requisite element of being “influenced”

to do the act “in return for” the campaign contribution.96 When there is only a

campaign contribution and a subsequent official act favorable to the donor, but no

evidence of such an agreement directly linking the motivation for the official act to the

contribution, then there is no bribe. This is why the Supreme Court has noted that

bribery is among the least subtle, and most blatant forms of public corruption.97

As to campaign contributions generally, the courts have noted that: “Every

campaign contribution is given to an elected public official probably because the giver

supports the acts done or to be done by the elected official.”98 The court noted,

furthermore, that: “No politician who knows the identity and business interests of his

(...continued)

purpose” than simple criminal intent (an intent to do the act). United States v. Brewster, 506

F.2d 62, 71 (D.C.Cir. 1974); United States v. Hsieh Hui Mei Chen, 754 F.2d 817, 822 (9th

Cir. 1985), cert. denied, 471 U.S. 1139 (1985). The House Report on the bribery provision

recodified in 1962 described the word “corruptly” to mean “with wrongful or dishonest

intent.” H.R. Rpt. No. 748, 87th Cong., 1st Sess. 18 (1961). The “corrupt” intent of the

bribery provision requires a “specific intent” to be shown, as opposed to a simple mens rea.

United States v. Strand, 574 F.2d 993, 995-996 (9th Cir. 1978).

United States v. Sun-Diamond Growers of California, 526 U.S. 398, 404 (1999); United

States v. Brewster, supra at 72; United States v. Arthur, 544 F.2d 730, 734, 735 (4th Cir.

1976), United States v. Strand, supra; United States v. Tomblin, 46 F.3d 1369, 1379 (5th Cir.

1995).

United States v. Brewster, supra at 72, 82.

United States v. Anderson, 509 F.2d 312 (D.C.Cir. 1974), cert. denied, 420 U.S. 991

(1975). Under the bribery clause, a bribe need not be only for the official “personally,” but

may be sought “for any other person or entity” (18 U.S.C. § 201(b)(2)), such as, presumably,

a campaign committee or political party. See, e.g., United States v. Kelly, 748 F.2d 691, 699,

n.19 (D.C. Cir. 1984).

United States v. Brewster, supra; United States v. Anderson, supra at 330.

Buckley v. Valeo, supra at 27-28.

United States v. Brewster, supra at 73, note 26.

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campaign contributors is ever completely devoid of knowledge as to the inspiration

behind the donation.”99 Therefore, while campaign contributions can be bribes where

there exists a corrupt bargain (a quid pro quo arrangement), campaign contributions

given to a candidate or official merely as support, or in appreciation or thank you for

certain official positions or votes taken, as is the case for many or most campaign

contributions, are not considered to be bribes. The United States Court of Appeals

for the District of Columbia Circuit, in United States v. Anderson, supra, for example,

where a conviction of a lobbyist was upheld for bribing a Senator with “campaign

contributions” to influence the Senator on particular postal rate legislation, approved

the jury instructions given by the trial judge which “exonerated campaign

contributions inspired by the recipient's general position of support on particular

legislation.”100

Campaign contributions may also be in the nature of general contributions,

donations or payments to causes, entities or to other persons, sometimes called

“goodwill” payments, which are given merely to create a favorable atmosphere or

feeling of gratitude in the recipient, or with “some generalized hope or expectation of

ultimate benefit on the part of the donor,” but which are not given nor received in the

context of any express or implied agreement, and are therefore not considered

“bribes” under the statute.101 Political contributions to entities such as a candidate’s

political campaign committee do not in themselves constitute bribes “even though

many contributors hope that the official will act favorably because of their

contributions.”102 A Court of Appeals in United States v. Allen, interpreting a bribery

statute being used as a predicate offense for a RICO charge, explained as follows:

[A]ccepting a campaign contribution does not equal taking a bribe unless the

payment is made in exchange for an explicit promise to perform or not perform an

official act. Vague expectations of some future benefit should not be sufficient to

make a payment a bribe.103

The concept of the lack of a corrupt agreement generally in campaign

contributions, as distinguished from bribes, was discussed in terms of reciprocity and

“obligation” by author John T. Noonan, Jr., in his work entitled Bribes. Discussing

what he calls "donations of democracy," Noonan raises the issue of the differences

between such contributions and bribes, and later in his work attempts to answer the

question raised:

Normally, at any rate, money is given to an officeseeker whose views on important

issues coincide with the giver's. The money is given with the hope, expectation,

purpose that particular views will be translated into particular votes. A tacit

reciprocity exists. How is money given a candidate different from a bribe?

United States v. Brewster, supra at 81.

100

509 F.2d supra at 330.

101

United States v. Johnson, 621 F.2d 1073, 1076 (10th Cir. 1980); United States v. Arthur,

supra at 734, 735; United States v. Allen, 10 F.3d 405, 411 (7th Cir. 1993).

102

United States v. Tomblin, 46 F.3d 1369, 1379 (5th Cir. 1995).

103

10 F.3d 405, 411 (7th Cir. 1993).

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Campaign contributions are imperfect gifts because they are usually not set in a

context of personal relations; they are intended to express ... an identification with

a cause. They are not wholly the recipient's – their purpose is restricted. They

are given in response to work done or expected to be done. ... They do not express

or create overriding obligations, that is, there is no absolute obligation on the part

of the contributor to recognize past work by the candidate, and there is no absolute

obligation on the part of the candidate to do the work the contributor expects.

Absence of absolute obligation creates one difference between contributions and

bribes.104

The issue of providing “access” to elected public officials for private individuals

in return for campaign contributions has been examined in several court decisions in

the context of bribes, or under a similar standard for extortion. Even where a

campaign contribution might be accepted “in return for,” or as the quid pro quo, for

a particular opportunity for access or a personal meeting with a public official, there

remains the question as to whether special access to and the meeting with a

contributor by a public official, particularly an elected official, constitutes an “official

act” of that public official as contemplated by the bribery law. An “official act” is

defined in the bribery statute to mean:

... [A]ny decision or action on any question, matter, cause, suit, proceeding or

controversy, which may at any time be pending, or which may by law be brought

before any public official, in such official's official capacity, or in such official's

place of trust or profit.105

While the term “official act” is often interpreted broadly to include any decisions

and actions on governmental matters taken by an official within his official capacity,

even if such duties are not prescribed by statute or regulation (such as those activities

established by settled practice),106 there needs generally to be involved some decision,

recommendation or forbearance on a governmental matter pending or to be brought

before the official. Voting on legislation, recommending the adoption or rejection of

a particular official policy, or intervening on behalf of a private party before another

public official or agency on an official governmental matter, would all most likely

involve “official acts,” while merely meeting with a constituent or other private

individual, on the other hand, has not been found to involve any specific decision, duty

or official act. The Department of Justice has explained in congressional testimony

that: “The courts that have addressed the issue have held that such access in exchange

for political contributions is not an ‘official act’ that can provide the basis for a bribery

or extortion prosecution.”107 In United States v. Carpenter, the court expressly found

that “granting or denying a lobbyist access to present her views” to a legislator did not

104

Noonan, Bribes, supra at 621, 696-697.

105

18 U.S.C. §201(a)(3)

106

Note legislative history, at H.R. Rpt. No. 748, supra at 18, and S. Rpt. 2213, 87th Cong.,

2d Session, 8 (1962); United States v. Birdsall, 233 U.S. 223, 231 (1914); United States v.

Biaggi, 853 F.2d 89, 97 - 98 (2d Cir. 1988), cert. denied, 109 S.Ct. 1312 (1989).

107

Testimony of Attorney General Janet Reno, to the House Committee on the Judiciary,

Hearings, 105th Cong., 1st Sess., October 15, 1997, at 32.

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constitute an “official act” of the legislator,108 and in United States v. Sawyer, the

court found that “the desire to gain access, by itself,” does not amount “to an intent

to influence improperly the legislator’s exercise of official duties.”109

Being available for and showing deference towards contributors, particularly

generous contributors, by offering special, more regular, or greater access for such

contributors, has thus been found to involve conduct which constitutes what might

be considered an unavoidable, reality in the world of political fund raising, that is, a

kind of “access” payment which is permitted in practice in our form of private funding

of campaigns for elective office.110 “Granting or denying access to an elected

official’s time based on levels of contributions,” noted the court in Carpenter, appears

to be conduct that should not be criminalized since it is, as expressed by the Supreme

Court, “unavoidable so long as election campaigns are financed by private

contributions,” and has “long been thought to be well within the law.”111 The court

in Carpenter noted specifically: “Elected officials must ration their time among those

that seek access to them and they commonly consider campaign contributions when

deciding how to ration their time.”112 While such explicit connections between

contributions and personal access may offend Americans’ sense of equal

representation, fairness and egalitarianism, it appears that it has not been considered

as yet to rise to a “corrupt” bargain for an “official act” violative of the bribery or

extortion statute.113

108

961 F.2d 824, 827 (9th Cir. 1992).

109

85 F.3d 713,731 (4th Cir. 1996). See also other cases cited in the Attorney General’s

testimony, United States v. Rabbitt, 583 F.2d 1014, 1028 (4th Cir. 1978); United States v.

Loftus, 992 F.2d 793, 796 (8th Cir. 1993).

110

“Campaign contributions may be considered a subspecies of a larger class - access

payments. ‘I'm not paying for my congressman's vote,’ the large contributor will say. ‘I

simply want to be sure he will listen to my side of the case.’ ....[T]he access buyer is paying

not only for attention but for favorable attention. The payment is close to what would be

called a bribe if made to a judge; but access to and favorable attention by, a legislator has not

generally been regarded in the same way as an approach to a judge. ...The hypotheticals show

that a legislator is not in the position of a judge. The judge's office is modeled on the

paradigm of the transcendent Judge of the Bible and a sharp line distinguishes him from the

litigants before him. The legislator, on the contrary, is his constituent's representative .... A

certain identity of interest is expected to exist between constituent and legislator...” Noonan,

Bribes, supra at 689, 623-624.

111

United States v. Carpenter, supra at 827, quoting McCormick v. United States, 500 U.S.

257, 272 (1991).

112

United States v. Carpenter, supra

113

The Senate Select Committee on Ethics has ruled that although offering campaign

contributors “special” access to policy discussions with the Senator “may violate no law or

Senate rule, they nonetheless affect public confidence in the Senate” and that campaign

contributions should not be solicited in a manner in which “special treatment” or “special

access” is offered as incentives for such contributions. Senate Select Committee on Ethics,

Interpretative Ruling No. 427, September 25, 1987.

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Illegal Gratuities

Within the bribery statute is the so-called “illegal gratuities” clause which

penalizes a public official who, other than as provided by law for the discharge of

official duties, agrees to accept something of value “personally for or because of any

official act performed or to be performed by such official.”114 This provision has been

found to be a “lesser included offense” of a bribe,115 and does not require a “corrupt”

intent for a violation. The different intent elements for an illegal gratuity, that is, the

absence of a required “corrupt” intent, and the absence of a need to show an intent

to influence or be influenced, are among the principal distinctions between a bribe and

an illegal gratuity.

What is required for a violation of the illegal gratuities clause is that a public

official receive or seek something of value, other than as provided by law,

“personally” (or “for himself”),116 “for or because of” an “official act” done or to be

done by him. There does not have to be an express or implied quid pro quo or a

corrupt bargain for an illegal gratuity,117 but the thing of value must be received

“personally” (or for the official himself), and must be “for or because of” an official

act, that is, connected in some way to an official act, function or duty performed or

to be performed. A thing of value received even after an official act is performed, as

a “thank you” or in appreciation for doing an act that would have been done in any

event, uninfluenced by the donation, might, therefore, still constitute an illegal

gratuity, while a bribe, on the other hand, must be shown to be the “prime mover”

influencing the act.

The intent factor in the bribery provision, as distinguished from the intent

required in the “illegal gratuities” clause was expanded on by the Supreme Court:

The distinguishing feature of each crime is its intent element. Bribery

requires intent “to influence” an official act or “to be influenced” in an official act,

while illegal gratuity requires only that the gratuity be given or accepted “for or

because of” an official act. In other words, for bribery there must be a quid pro

quo – a specific intent to give or receive something of value in exchange for an

official act. An illegal gratuity, on the other hand, may constitute merely a reward

for some future act that the public official will take (and may have already

determined to take), or for a past act that he has already taken.118

114

18 U.S.C. §201(c)(1)(B). The giving or offering of an illegal gratuity to a public official

is prohibited at § 201(c)(1)(A).

115

United States v. Brewster, supra at 68-76.

116

The statute was amended in 1986, P.L. 99-646, §46(f),(g), 100 Stat. 3601-3604, November

10, 1986, to provide technical amendments to the criminal code, including changing the terms

“for himself” to “personally.” There is no indication of an intent to change the substance of

the elements of the offense, and therefore in this report the terms “personally” and “for

himself” are used interchangeably.

117

Brewster, supra at 72; Sun-Diamond, supra at 404 - 405.

118

United States v. Sun-Diamond Growers of California, 526 U.S. 398, 404 - 405 (1999).

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Although no specific illegal bargain, or “corrupt” intent, in receiving an illegal

gratuity need be shown, there is a criminal intent required of an illegal gratuity which

would distinguish this wrongful receipt of a payment from a mere gift unrelated to any

official act, or from a lawful campaign contribution given to an elected public official

“because of” his stand, vote, or position on an issue. The intent has been described

by one court as the knowledge that one is being compensated or rewarded for a

particular official act or acts:

...[U]nder the gratuity section, “otherwise than as provided by law ... for or

because of any official act” carries the concept of the official act being done

anyway, but the payment only being made because of a specifically identified act,

and with a certain guilty knowledge best defined by the Supreme Court itself, i.e.,

“with knowledge that the donor was paying him compensation for an official act

... evidence of the Member's knowledge of the alleged briber's illicit reasons for

paying the money is sufficient.”119

As far as otherwise lawful campaign contributions that are given “for or because

of” an official position, official vote, or other official act of a Government officer, the

donation or the receipt of such a campaign contribution is generally not considered

to be an “illegal gratuity,” substantially because such payments are not considered to

have been received or sought with the requisite intent to “compensate” the public

official “personally” for his acts, as they are not received by the official “for himself”

or “personally” but rather by another entity or person for campaign or other similar

political uses.120 Under federal campaign laws all federal candidates are required to

have a principal campaign committee to which all campaign contributions are given

or transferred, and from which they are expended under authority of the committees’

treasurers, only for campaign or other designated purposes.121 Furthermore, federal

law provides that candidates may not convert campaign contributions to their own

personal use.122 It may therefore be difficult in the case of campaign contributions to

candidate committees, or even in the case of soft money contributions to political

party committees or so-called leadership PAC’s, to show that the money donated was

received by the official with the requisite criminal intent to be “personally”

compensated or rewarded for or because of an official act. As stated by the United

States Court of Appeals for the District of Columbia in the Brewster case:

[A] public official's acceptance of a thing of value unrelated to the performance

of any official act and all bona fide contributions directed to a lawfully conducted

campaign committee or other person or entity are not prohibited by 201(g) [now

201(c)].123

119

United States v. Brewster, 506 F.2d 62, 81-82 (D.C.Cir. 1974), quoting from earlier

Supreme Court decision in United States v. Brewster, 408 U.S. 501, 527 (1972).

120

United States v. Brewster, supra at 77.

121

2 U.S.C. §432(e); 2 U.S.C. §432(a); 2 U.S.C. §439a.

122

2 U.S.C. §439a.

123

506 F.2d at 77. Emphasis added.

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If facts are developed, however, that contributions or payments made to a third

party or entity “for or because of” official acts done or to be done by a public official,

were used or expended in a manner to financially enrich or financially benefit the

official personally, then it might be argued that such funds were received “personally”

or “for himself” even if originally directed to a third-party entity. Contributions to a

committee or any third party, therefore, which are used, for example, to pay for

personal living expenses of a public official, a personal car or other personal expenses

such as transportation, clothing, food, or the college tuition for one’s child, might

arguably be considered payments for the official “himself.”124 In the Brewster case the

court found that the monies given ostensibly as “campaign contributions” were given

by a lobbyist to a sham committee which was merely the “alter ego” of the Senator,

which did not report or keep records such as other political committees under the

federal law at that time, and from which the Senator freely drew funds for his own

personal use, and thus could be considered “illegal gratuities” received by the

Senator.125

It has been suggested in some commentary that payments other than the reported

campaign contributions may have been made by Enron Corporation to various public

officials, but that such payments may be “hard to track” because “Enron’s reporting

and record-keeping are not very good ....”126 If it were found that other monies, gifts

or things of value, other than campaign contributions to committees, were given by

the Enron Corporation to federal officials, then questions of whether such donations

or gifts were “illegal gratuities” under the federal law would most likely involve

whether such gifts or other things of value had the requisite connection to any

“official acts” of those federal officers. While some cases in the circuits had gone so

far as to find that a specific official act need not have been contemplated or identified

for a payment or compensation to constitute an “illegal gratuity” as long as payments

were given to a recipient who was in a “position to use his authority in a manner

which could affect the gift giver,”127 the Supreme Court in 1999 in the Sun-Diamond

case found that such so-called “status gifts,” unconnected to any identified official act,

were not violative of the illegal gratuities provision.128

124

Brewster, supra at 69-70, 75-76; see also United States v. Gomez, 807 F.2d 1523, 1527

(10th Cir. 1986), payment made to third party on direction of official so that “money could

not be linked to him.”

125

506 F.2d at 69-70, 75-76.

126

John W. Dean, FindLaw’s Legal Commentary, “Some Questions About Enron’s Campaign

Contributions: Did Enron Successfully Buy Influence With the Money It Spent?” January 18,

2002.

127

United States v. Niederberger, 580 F.2d 63, 69 (3rd Cir. 1978), cert. denied, 439 U.S. 980

(1978); United States v. Allessio, 528 F.2d 1079, 1082 (9th Cir. 1976), cert. denied, 426

U.S. 94 (1976).

128

Sun-Diamond, supra at 406 - 410. Money given merely because of a person’s official

position is not an illegal gratuity without a link to a specific official act for which the money

was given. United Sates v. Ahn, 231 F.3d 26, 31 (D.C.Cir. 2000), cert denied, 121 S.Ct.

1364; United States v. Schaffer, 183 F.3d 833, 844 (D.C.Cir. 1999). Gifts to federal

officials, even gifts unconnected to any official act may, however, violate ethics rules and

(continued...)

CRS-24

Extortion

Somewhat related to the bribery offense is the “extortion” provision of federal

law, commonly known as the “Hobbs Act,” which prohibits the interference with

commerce by way of “extortion,” defined as the “obtaining of property from another,

with his consent, induced by wrongful use of actual or threatened force, violence or

fear, or under color of official right.”129 Demands by elected public officials on

private citizens for payments, such as for campaign contributions, even when the

payments are to be made to third parties such as campaign committees, may fall

within the extortion provisions when there is some wrongful use of one's official

position to induce or coerce the contribution. As stated by one court, the Hobbs Act

would “penalize those who, under the guise of requesting `donations,’ demand money

in return for some act of official grace.”130 Federal courts have noted that the crime

of “extortion” and the crime of bribery under federal law, “are really different sides

of the same coin,” and that the intent requirements of the two federal offenses are

parallel.131

The Supreme Court has found that elected officials who ask for bona fide

campaign contributions, only violate this law when there is evidence of a specific quid

pro quo, similar to the bribery statute. The Court noted in McCormick v. United

States,132 that the mere nearness in time of official acts by a recipient public official

and campaign contributions from the beneficiaries of those acts, that is, “shortly

before or after campaign contributions are solicited and received from those

beneficiaries,” does not evidence “extortion” under the law, and is an “unrealistic

assessment” of the requirements of the crime, particularly in light of how “election

campaigns are financed by private contributions and expenditures.”133 Rather, the

Court found that the statute would be violated by a request from an elected official

to a member of the public for a voluntary campaign contribution “only if the payments

are made in return for an explicit promise or undertaking by the official to perform or

not to perform an official act,” where the “official asserts that his official conduct will

be controlled by the terms of the promise or undertaking.”134 The Supreme Court in

McCormick explained:

Serving constituents and supporting legislation that will benefit the district

and individuals and groups therein is the everyday business of a legislator. It is

128

(...continued)

regulations such as those promulgated for the House of Representatives (House Rule

XXV(5)), the Senate (Senate Rule XXXV), or for the executive branch of Government (Office

of Government Ethics regulations, 5 C.F.R. §§ 2635.201 et seq.).

129

18 U.S.C. § 1951(b)(2). Emphasis added.

130

United States v. Dozier, 672 F.2d 531, 537 (5th Cir.), cert. denied, 459 U.S. 943 (1982).

131

United States v. Allen, 10 F.3d 405, 411 (7th Cir. 1993), citing Evans v. United States, 504

U.S. 255, 265-268 (1992).

132

500 U.S. 257 (1991).

133

Id. at 272.

134

Id. at 273.

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also true that campaigns must be run and financed. Money is constantly being

solicited on behalf of candidates, who run on platforms and who claim support on

the basis of their views and what they intend to do or have done. Whatever ethical

considerations and appearances may indicate, to hold that legislators commit the

federal crime of extortion when they act for the benefit of constituents or support

legislation furthering the interests of some of their constituents, shortly before or

after campaign contributions are solicited and received from those beneficiaries,

is an unreal assessment of what Congress could have meant by making it a crime

to obtain property from another, with his consent, “under color of official right.”

To hold otherwise would open to prosecution not only conduct that has long been

thought to be well within the law but also conduct that in a very real sense is

unavoidable so long as election campaigns are financed by private contributions

or expenditures, as they have been from the beginning of the Nation.135

In a similar vein as the bribery provision, the making of campaign contributions,

either on one’s own initiative or in response to a request from an official or the

official’s campaign, with the mere hope or expectation that one might be treated

favorably in the future because of one’s generosity and support in making such

campaign contributions, does not provide the necessary quid pro quo or corrupt

character for an extortion charge:

[T]he explicitness requirement serves to distinguish between contributions that are

given or received with the “anticipation” of official action and contributions that

are given or received in exchange for a “promise” of official action. ... When a

contributor and an official clearly understand the terms of a bargain to exchange

official action for money, they have moved beyond “anticipation” and into an

arrangement that the Hobbs Act forbids.136

Conflicts of Interest

Entering Government Service and Financial Interests

Allegations have been raised concerning prohibited conflicts of interest of

persons who have entered the executive branch of the Federal Government and who

have held substantial amounts of stock in Enron Corporation, or who were either

officers or employees of Enron, or of the accounting firm Arthur Anderson, and who

then worked on official governmental matters that had an impact on the Enron

Corporation.

It should be noted that under the current state of the federal law there is no

statute which expressly requires a general divestiture of all private financial interests

before entering Federal Government service, nor could such a provision be practically

or reasonably enacted if the Federal Government were to have any success in

recruiting qualified persons to Government service. When nominees are required to

receive Senate confirmation, however, it is often the case that agreements are reached

between the nominee and the Senate committee reviewing the nomination as to the

135

500 U.S. at 272.

136

United States v. Carpenter, 961 F.2d 824, 827 (9th Cir. 1992).

CRS-26

disposition of particular assets that may prove troublesome, in a conflict of interest

context. Such agreements may require the nominee to divest certain assets or place

others in a “blind trust.”

The issues of “conflicts of interest” with regard to private financial holdings and

interests of a Federal Government official are handled primarily under federal law by

requiring the “recusal” or disqualification of the federal officer from participating in

any official governmental matter affecting the officer’s personal financial interests, or

the financial interests of the officer’s spouse and minor children, or the financial

interests of certain businesses or organizations with which the officer is currently

affiliated.137 Underlying the statutory and regulatory scheme for avoiding conflicts of

interest with respect to certain assets and ownerships is the financial disclosure

requirement under federal law, which assists in identifying potential sources of

conflicts of interest.138 Persons who are entering Government service and who have

assets and ownerships which may create the potential for regular conflicts of interest,

such that these persons would, under the law, have to continually “recuse” themselves

from official matters central to their Government positions, may be directed by ethics

officials to divest the financial interest in question.139 Although such divestiture of

assets and interests by federal officials in the executive branch of Government is

sometimes in order, conflict of interest regulation in the executive branch of the

Federal Government most often involves disclosure and disqualification.

Disqualification and Current Financial Interests.

An officer or employee in the executive branch of the Federal Government is

required to disqualify (or “recuse”) himself or herself from taking official actions on

governmental matters which would have a “direct and predictable effect” upon a

personal financial interest of the employee, or which would have such an effect upon

the financial interests of the employee's immediate family, or upon the financial

137

18 U.S.C. § 208.

138

Detailed public financial disclosure is required from nominees and certain high level

officials upon entering the Federal Government, and yearly from all federal officers and

employees compensated above a certain salary level, including all Members of Congress,

under the provisions of the Ethics in Government Act of 1978, as amended, see now 5 U.S.C.

app. §§ 101 et seq. In addition, employees not compensated above the threshold rate

triggering public disclosure may be required to provide the agency with a confidential

financial report. 5 U.S.C., app. § 107(a); Executive Order 12674, as modified by Executive

Order 12731, Section 201(d); see now 5 C.F.R. §§ 2634.901 - 2634.909.

139

5 C.F.R. § 2635.403(b). An agency may also prohibit or restrict the ownership of certain

financial assets or class of assets by its employees where, because of the mission of the

agency, such interests would “cause a reasonable person to question the impartiality and

objectivity with which agency programs are administered.” 5 C.F.R. § 2635.403(a). There

may be certain positions in regulatory entities concerning which Congress has enacted specific

requirements in the organic act of the agency, commission or board barring certain directors

or other top officials from the ownership of any interests in any private business regulated by

that federal agency, commission, board or bureau.

CRS-27

interests of the employee's outside private employer or business associates.140 The

statutory language is directed not only at conduct which is improper, but rather is

preventative in nature, and is directed at situations which merely have the potential

to tempt or subtly influence an official in the performance of official public duties.

The ownership of certain private economic or financial interests alone, without any

improper conduct, thus raises the disqualification requirement as to governmental

matters which affect those interests.141

While the disqualification statute applies broadly to officers and employees of the

executive branch of the Federal Government and the independent agencies, it does not

apply to any elected officials of the Federal Government, that is, required

disqualification does not apply to the President, Vice President, and Members of

Congress, substantially because of the potential interference with the constitutional

duties required of their offices.142 Specifically as to Members of Congress (who act

as representatives, and not as regulators or administrators), the principles of

representative self-government anticipate that Members of Congress will have a

community of interests with constituents and that particular Members may represent

in Congress those various interests that they have in common with those whom they

represent.143 A mandatory disqualification of a Member of Congress would,

furthermore, act as a disenfranchisement of his or her constituents, as there is no

“deputy” Member to vote in the Member’s place, and could therefore affect the

constituency’s right to representation in Congress.144

Disqualification from “Participation”. The kind of “participation” which

is barred for a federal official in governmental matters affecting his or her financial

interests, is participation in a matter “personally and substantially ... through decision,

approval, disapproval, recommendation, the rendering of advice, investigation or

otherwise....” It would appear that the qualifier “personally” within § 208 means that

140

18 U.S.C. § 208; note regulations of the Office of Government Ethics, at 5 C.F.R. §§

2635.402; see also 5 C.F.R. § 2635.502 for regulatory recusals beyond the statutory

disqualification provision.

141

United States v. Mississippi Valley Generating Co., 364 U.S. 520, 549 (1960): “The

statute is thus directed not only at dishonor, but also at conduct that tempts dishonor. This

broad proscription embodies a recognition of the fact that an impairment of impartial

judgment can occur in even the most well-meaning men when their personal economic interests

are affected by the business they transact on behalf of the Government.”

142

18 U.S.C. § 202(c); note Office of Government Ethics Advisory Opinion, 83 x 16, October

20, 1983; Department of Justice, Acting Attorney General Silberman, letter opinion to Senator

Howard Cannon, Chairman, Committee on Rules and Administration, September 20, 1974.

143

“At some point a purist attitude towards the evils of conflicts of interest in the Congress

runs afoul of the basic premises of American representative government.” The Association

of the Bar of the City of New York, Special Committee on the Federal Conflict of Interest

Laws, Conflict of Interest and Federal Service, at 14-15 (1960).

144

“Constituents of the disqualified Member of Congress are denied their Constitutional right

to representation in the particular legislation at hand.” The Association of the Bar of the City

of New York, Special Committee on Congressional Ethics, Congress and the Public Trust,

at 40 (1970).

CRS-28

one took the governmental action (or inaction) in question oneself, as opposed to

having it merely under one's overall, general responsibility (as a head of a Department

would have over all department matters). However, regulations adopted by the Office

of Government Ethics note that personal participation “includes the direct and active

supervision of the participation of a subordinate in the matter.”145 The qualifier

“substantially” would appear to rule out merely “ministerial” or procedural acts or

acts on a peripheral matter, and relates to the significance and nature of the

involvement, and not merely the time devoted to the matter.146

Governmental “Matters” Covered. The personal participation by an

official in a governmental matter, such as giving advice or making recommendations,

will come within the statute when such involvement is in regard to a “particular

matter,” rather than just merely in relation to a general area of public policy, such as

“in relation to economics.”147 The term “particular matter” and the enumeration of

those particular matters in the statute have been recognized to be “comprehensive of

all matters that come before a federal department or agency.”148 Since, for the

statutory disqualification requirement, the “particular matter” need not involve

specific or identified parties,149 such term has been broadly interpreted to mean any

“discrete and identifiable matter” such as “general rulemaking” or proposed

regulations.150 As stated by the Department of Justice's Office of Legal Counsel, the

restrictions of § 208 will apply when a federal official reviews proposed rules that will

impact an entire industry of which a firm connected to the federal official is part, and

need not affect or deal with only that particular firm to come within the restrictions

of § 208(a):

[W]e have consistently interpreted § 208(a) to apply to rule-making proceedings

or advisory committee deliberations of general applicability where the outcome

may have a “direct and predictable effect” on a firm in which the Government

employee is affiliated, even though all other firms similarly situated will be

affected in a like manner. An example might be the drafting or review of

environmental regulations which would require the considerable expenditures by

all firms in the particular industry of which the company is a part.151

145

5 C.F.R. § 2635.402(b)(4).

146

Note discussion in Perkins, “The New Federal Conflict of Interest Laws,” 76 Harvard Law

Review, 1113, 1128 (1963): “The qualifying adverbs personally and substantially are intended

to rule out participation by purely ministerial or procedural acts, but not to create a loophole

for the lazy executive in the chain of command who may not have bothered to dig into the

substance of the case.” See also 5 C.F.R. § 2635.402(b)(4).

147

Note discussion of “particular” matter as used in 18 U.S.C. § 203 and 208, in Manning,

Federal Conflict of Interest Law, Harvard University Press (Cambridge 1963), at 134-135,

54-55, citing H.R. Rpt. No. 748, 87th Congress, 1st Session, at 20 (1961).

148

H.R. Rpt. No. 748, supra at 20.

149

Compare to 18 U.S.C. § 207(a),(b), and 5 C.F.R. § 2635.502(a); see 2 O.L.C. 151, 153154 (1978).

150

2 Op.O.L.C. 151, 153-154 (1978).

151

2 Op.O.L.C. supra at 155. A different interpretation and application of the restriction may

(continued...)

CRS-29

The Office of Government Ethics, in regulations issued under the statutory

disqualification provision, has explained that the recusal requirement will extend to

“governmental action such as legislation or policy-making that is narrowly focused on

the interests of ... a discrete and identifiable class of persons.”152 The regulations

note, however, that the disqualification provision will not apply to “the consideration

or adoption of broad policy options that are directed to the interests of a large and

diverse group of persons.”153

Financial Interest Required. The statutory language of § 208 requires a

disqualification of a government employee in a matter in which the employee, the

employee's family or connected organization “has a financial interest.” This has been

interpreted to mean that the particular governmental matter in which the employee

would be involved has a “substantial probability” of affecting those financial

interests.154 The regulations of the Office of Government Ethics state that an

employee must recuse himself or herself if the governmental matter “will have a direct

and predictable effect” on those covered financial interests,155 and explains that a

matter will have a direct effect on a financial interest “if there is a close causal link

between any decision or action to be taken in the matter and any expected effect,” that

is, if the “chain of causation” is not “attenuated” nor “contingent upon the occurrence

of events that are speculative or that are independent of, and unrelated to, the

matter.”156

Exemptions. Although the statutory language provides no express de minimis

amount or interest to which the statute would not apply, exemptions to the

disqualification provision may be provided generally by regulation of the Office of

Government Ethics for interests which are “too remote or too inconsequential to

affect the integrity of the services” of the Government employees covered by the

151

(...continued)

apply to those who are “special Government employees” employed on a part-time or

intermittent basis to advise the government.

152

5 C.F.R. § 2635.402(b)(3).

153

Id.

154

The required impact on a financial holding of an employee, or on an entity with which the

employee is connected, for the disqualification provision to apply, was described in terms of

the real, as opposed to a speculative, possibility of financial gain or detriment to an entity, by

the United States Court of Appeals in United States v. Gorman, 807 F.2d 1299, 1303 (6th

Cir. 1988): “A financial interest exists on the part of a party to a Section 208 action where

there is a real possibility of gain or loss as a result of developments in or resolution of a

matter. Gain or loss need not be probable for the prohibition against official action to apply.

All that is required is that there be a real, as opposed to a speculative, possibility of benefit

or detriment.” See also United States v. Mississippi Valley Generating Co., supra at 549,

555 (1960). Note 5 C.F.R. § 2635.402(b)(1)(ii).

155

5 C.F.R. § 2635.402(a).

156

5 C.F.R. § 2635.402(b)(1)(i).

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provision.157 Under this authority, OGE has issued regulations generally exempting

certain holdings, such as, for example, individual holdings in a “diversified mutual

fund” or “diversified unit investment trust”; the holding of publicly traded securities,

not exceeding $5,000 in value, of an entity affected as a specific party to a

governmental matter; and holdings of publicly traded securities, not exceeding

$25,000 in any one entity or $50,000 in all affected entities, of an entity which may

be affected by a particular governmental matter “of general applicability.”158

Waivers may also be obtained by an individual employee for insubstantial

financial interests under § 208(b)(1). These individual waivers may be obtained by an

employee or officer concerning a particular financial interest if the employee advises

the Government official responsible for his or her appointment about the nature and

circumstances of the interest, discloses the interest, and receives a written

determination from the appointing official that the financial interest “is not so

substantial as to be deemed likely to affect the integrity of the services which the

Government may expect from such officer or employee.”159

Regulatory Recusals.

In addition to and beyond the statutory

disqualification in 18 U.S.C. § 208, the Office of Government Ethics [OGE] has

promulgated regulations requiring recusals of federal officials in other situations to

help ensure the avoidance of “an appearance of loss of impartiality in the performance

of” official duties by a federal employee.160 This regulation, in comparison to the

statutory recusal requirement, expands the persons and entities who are deemed to be

so connected to the employee that their financial interests may be “imputed” to that

employee (and, as such, would constitute cause for recusal or disqualification of the

employee from a governmental matter affecting those interests); but, as compared to

the statutory disqualification, narrows those matters that are included in the

disqualification requirement.

As to current associations and relationships, the regulation requires a

Government employee in the executive branch to recuse himself or herself from a

“particular matter involving specific parties” when the employee knows that the

matter will have a direct and predictable effect on the financial interests of, for

example, a member of his or her household who is a relative, on the financial interests

of an entity in which the employee’s spouse, children or parents are serving or seek

to serve as an officer, employee or director, or on an organization (other than a

political party) in which the employee is an active participant, and where the employee

believes that his or her impartiality may be questioned, unless the employee first

advises his or her agency about the matter and receives authorization to participate

in the matter.161

157

18 U.S.C. § 208(b)(2); see 5 C.F.R. § 2635.402(d)(1).

158

5 C.F.R § 2640.201, 202. See other miscellaneous exceptions at § 2640.203.

159

18 U.S.C. § 208(b)(1); 5 C.F.R. § 2635.402(d)(2).

160

5 C.F.R. § 2635.501(a).

161

5 C.F.R. § 2635.502(a).

CRS-31

Disqualification and Past Associations.

While the statutory recusal provision applies only to current financial interests

and associations of the executive branch official, the regulatory disqualification

provision in the regulations of the Office of Government Ethics, discussed above, may

reach some past interests and affiliations of the Government official. The regulatory

recusal requirement includes recusals from certain governmental matters which affect

the financial interests of any person or entity for whom the Government official served

within the last year as an officer, director, trustee, general partner, agent, attorney,

consultant, contractor or employee.162

If one of those persons or entities to which the employee had been connected

within the past year has a financial interest which may be directly and predictably

affected by a particular governmental matter “involving specific parties,” then the

employee should consider recusal, or seek to receive a specific authorization to

participate in the matter. It should be noted that a particular governmental matter

“involving specific parties” is narrower than merely a “particular matter,” and would

not include such things as general rulemaking affecting an industry, but rather would

apply only to matters such as a determination, contract, claim, controversy,

investigation, charge, accusation, arrest or other such matter involving a particular

party where the United States is also a party or has a direct or substantial interest. A

particular matter “involving specific parties” is generally or typically a matter

involving “a specific proceeding affecting the legal rights of the parties or an isolatable

transaction or related set of transactions between identifiable parties,” as opposed to

rulemaking, legislation, or the formulation of general policy or standards.163

Leaving Government and the “Revolving Door” Law

Certain questions have arisen concerning federal officials in regulatory positions

who reportedly promoted policies favorable to Enron, and then shortly after leaving

their official Government employment took a position with the Corporation.

Negotiating Private Employment.

The conflict of interest considerations for one leaving the Government for the

private sector begin before the official actually leaves, and begin in earnest as soon as

negotiations and discussion for private employment commence with a prospective

private employer. The principal federal conflict of interest law for executive branch

employees, at 18 U.S.C. § 208 provides, among other restrictions, that once any

federal employee or officer in the executive branch begins “negotiating” subsequent

employment with a private employer, that employee or officer must disqualify himself

or herself from directly participating in any particular governmental matter which has

a direct and predictable effect on the financial interests of that potential private

employer.

162

5 C.F.R. § 2635.502(b)(1).

163

See definition of “particular Government matter involving a specific party” at 5 C.F.R. §

2637.102(a)(7) (in context of 18 U.S.C. § 207); and at 5 C.F.R. § 2637.201(c)(same).

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Quoting with approval from a Bar Association study which was the model for

the legislative language in question, a federal court described the purpose of the

statute as a measure to deal with the “nagging and persistent conflicting interests of

the government official who has his eye cocked toward subsequent private

employment.”164 As noted in a law review by Roswell Perkins, the chairman of the

special Bar Association study which was the model for the 1962 conflict of interest

legislation: “The lure of a lucrative job following government employment is often

great, and it is essential that a quarantine on official dealings with prospective

employers be established as soon as future employment becomes a matter of

discussion or understanding.”165

Judicial interpretations of the disqualification requirement concerning the

“negotiating” provision have focused on the types of conduct and discussions which

would constitute “negotiating” under the statute. It appears that the judicial

interpretations of the criminal provision may require, at the least, some beginning of

a mutual discussion rather than merely unilateral overtures concerning the possibility

of future employment. In Conlon v. United States, supra, the Court of Appeals,

District of Columbia Circuit, reversed a lower court decision that had dismissed

charges under the statute and had given the term “negotiating” a very narrow reading.

The Court of Appeals explained that to comport with the legislative intent of the

measure, “we must conclude that Congress meant the words ‘negotiating’ and

‘arrangement’ in § 208(a) to be given a broad reading, rather than the narrow reading

accorded them by the district court.”166 The Court of Appeals found that in the

context of the statute, the term “negotiating” is “not exotic or abstruse” but is a

“common word[ ] of universal usage.”167 The common legal and general usage of the

term “negotiate,” it may be noted, denotes communications which “pass between

parties” or the process of arriving “through discussion” at some kind of agreement,168

or “to confer with another” to arrive at a settlement of an issue.169 Thus, in United

States v. Gorman, the 6th Circuit Court of Appeals, noting that “negotiation” is to be

given its “common, everyday meaning,” found that negotiations may be evidenced by

the defendant federal employee's “initial conversation” with a prospective employer

and the federal employee's “list of conditions for taking employment.”170

164

United States v. Conlon, 628 F.2d 150, 155, n.26 (D.C. Cir. 1980), cert. denied, 454 U.S.

1149 (1982), citing to the comprehensive report of the Bar of the City of New York, Special

Committee on Federal Conflict of Interest Law, Conflict of Interest and Federal Service, at

234 (1960).

165

Perkins, “The New Conflict of Interest Law,” 76 Harvard Law Review 1113, 1133 (April

1963). Emphasis added.

166

United States v. Conlon, supra at 155.

167

Id. at 154. See also United States v. Gorman, 807 F.2d 1299, 1303 (6th Cir. 1986).

168

Black's Law Dictionary, at 1036 (6th ed. 1990).

169

Webster's New Collegiate Dictionary, at 769 (1977).

170

807 F.2d at 1303. See CACI, Inc.-Federal v. United States, 719 F.2d 1567 (Fed. Cir.

1983), as to when “negotiations” with an outside business are ended for federal employees.

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In addition to the criminal statute, it should be noted that the Office of

Government Ethics in the executive branch of the Federal Government has issued

regulations concerning this potential conflict of interest. The regulations interpret 18

U.S.C. § 208(a), as well provide ethical standards of conduct beyond the narrower

restrictions of the criminal statute.171 Under the regulations, and as the regulations

interpret 18 U.S.C. § 208(a), a federal employee is “negotiating” private employment,

such that a disqualification is required, when the employee is engaged in a “mutually

conducted” discussion or communication with an employer with a view toward

reaching agreement about prospective employment, even if specifics about terms,

conditions of employment, or particular positions are not discussed:

For these purposes, as for 18 U.S.C. 208(a), the term negotiations means

discussion or communication with another person, or such person's agent or

intermediary, mutually conducted with a view toward reaching an agreement

regarding possible employment with that person. The term is not limited to

discussion of specific terms and conditions of employment in a specific position

.... 172

Furthermore, in addition to the criminal statutory restrictions on “negotiating,”

the regulations of the Office of Government Ethics (OGE) may require recusal and

disqualification even “when an employee's actions in seeking employment fall short

of actual employment negotiations.”173 The regulations also require recusal and

disqualification from an official matter affecting a private employer if the federal

employee has begun “seeking employment” with that private employer, even if no

“negotiations” or mutual discussions were involved, simply by making an “unsolicited

communication ... regarding employment” to a private firm (other than merely asking

for an application or sending a resume to someone who is affected by the employee's

duties “only as part of an industry or other discrete class”),174 or if the employee has

made a response other than a rejection to an unsolicited communication from a private

source concerning employment.175

As noted in the OGE regulations: “Disqualification is accomplished by not

participating in the particular matter.”176 There is no general requirement for a

written, or filed disqualification. However, the regulations provide that during the

time one is within this status of negotiating employment, an employee “should notify

the person responsible for his assignment,” or if the individual is responsible for his

or her own assignments, then the official must take “whatever steps are necessary” to

ensure compliance.177 Appropriate oral or written communication to one's coworkers

and supervisors concerning a required disqualification are suggested in the regulations

171

5 C.F.R. § 2635.601, 5 C.F.R. § 2635.603(b)(1)(i).

172

5 U.S.C. § 2635.603(b)(1)(i).

173

5 C.F.R. § 2635.601.

174

5 C.F.R. §§ 2635.603(b)(1)(ii) and 2635.604(a).

175

5 C.F.R. § 2635.603(b)(1)(iii).

176

5 C.F.R. § 2635.604(a).

177

5 C.F.R. § 2635.604(b).

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as steps to ensure compliance,178 although, as noted above, written documentation of

a recusal is not required in the regulations except to conform to a previous ethics

agreement with the Office of Government Ethics.179 In addition to disqualification,

violations of the provision may be avoided if a waiver from the disqualification

requirement is obtained in writing from the official responsible for the employee's

appointment.180

Post-Government Employment Restrictions.

As a general matter, once an individual leaves federal employment he or she is

not restricted from being hired, employed or retained by any particular firm or

industry.181 However, after leaving federal employment, persons who were federal

officers and employees may be restricted or regulated in some types of employment

activities in which they may engage for their new private employers under the

provisions of a current criminal statute, codified at 18 U.S.C. § 207. The types of

employment duties that are restricted activities under the law involve private

“representational,” lobbying, or advocacy-type of activities before the Federal

Government. Some of the provisions of this law would apply to all employees in the

executive branch after they leave government service, while other provisions of the

statute apply only to more “senior” level officers or employees, or to Members of

Congress.

Section 207 of title 18 provides a series of post-employment restrictions on

“representational” or advocacy activities before the Federal Government, including:

(1) a lifetime ban, covering all executive branch employees, on switching sides, that

is, leaving Government service and representing a private party on the same

“particular matter” involving the same “specific parties” on which the officer had

worked “personally and substantially” while with the Government (§ 207(a)(1)); (2)

a two-year ban on “switching sides” on a somewhat broader range of matters which

were under the executive branch officer’s “official responsibility” during the last two

years of Government service (§ 207(a)(2)); (3) a one-year restriction applying to all

officers and employees of the executive branch and Members and employees of

Congress, on assisting others on certain trade or treaty negotiations in which one had

participated (§ 207(b)); (4) a one-year ban on certain high-level officials in the

executive branch and Congress performing some representational or advisory

activities for foreign governments or foreign political parties (§ 207(f)); and (5) a oneyear “cooling off” period for certain high-level officials barring representational

communications on behalf of private parties on any matter before the Government

offices, agencies or departments in which they had worked, or, in the case of higher

level officials, including Members of Congress, barring for one year representational

communications on behalf of private parties on any matter before a wider range of

178

5 C.F.R. § 2635.604(b).

179

5 C.F.R. § 2635.604(c).

180

5 C.F.R. § 2635.605; 18 U.S.C. § 208(b)1) and (3).

181

Certain more restrictive post-employment rules as to employment opportunities are in force

for “procurement officials” who were involved while with the Government in certain large

procurements from private entities. See 41 U.S.C. § 423(d).

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Government officers or employees in their former branch of Government (18 U.S.C.

§§ 207(c), (d), and (e)).

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.