Legislative Council Secretariat
IN06/02-03
INFORMATION NOTE
Supplementary Information on Selected Issues Relating to
Declaration of Interests and Avoidance of Conflicts of Interests
1.
Introduction
1.1
The Panel on Constitutional Affairs at its meeting on 21 October 2002
requested the Research and Library Services Division (RLSD) to provide information
regarding the following issues in the case of the United States of America (US):
(a) restrictions for Cabinet Secretaries reverting to their professions after
stepping down from office;
(b) appointment of Cabinet Secretaries from the private sector by way of
arrangements under which the Cabinet Secretaries took no-pay leave
from their previous employers or organizations during the period of
office;
(c) arrangements made by the former US President Jimmy Carter in
managing his family business during his presidency to avoid
perception of conflict of interest; and
(d) comparison of the requirements applicable to members of the US
Congress and senior members of the government in respect of
declaration of interests.
2.
Restrictions for Cabinet Secretaries reverting to their professions after
stepping down from office
2.1
There are no restrictions for Cabinet Secretaries reverting to their
professions after stepping down from office, although they are subject to certain other
post-office restrictions stipulated in Title 18 of the US Code Section 207.1 These
restrictions prohibit a former Cabinet Secretary from making representations to
employees of his former government agency on matters regardless of his prior
involvement. These restrictions usually last for one to two years; however, if a
former Cabinet Secretary has been personally and substantially involved in a matter
while he was in government, a lifetime ban on making representations on the matter
will be imposed on him.
1
For detailed information regarding post-office restrictions for the US Cabinet Secretaries, see
"Restrictions on Activities of Former Heads of Government and Former Senior Members of
Government", Research and Library Services Division, Legislative Council Secretariat, 10 January
2002, paragraphs 5.19-5.21 on page 10.
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2.2
There are also restrictions on Cabinet Secretaries seeking employment
while they are still in government. For example, they are required to obtain a written
waiver from an appropriate authority before they can have an arrangement concerning
future employment.
2.3
The example of Robert Rubin, the former Secretary of Treasury, is used to
illustrate that there are no post-office restrictions for Cabinet Secretaries reverting to
their professions. Rubin had a career in finance at Goldman Sachs between 1966
and 1992. He left the private sector in 1993 to join the Clinton Administration. He
first served in the White House as the Assistant to the President for Economic Policy,
and then worked as the 70th Secretary of Treasury between January 1995 and July
1999. Since there was no requirement for Rubin to seek approval for reverting to his
profession after his tenure with the government, he joined the Citigroup in October
1999 and served as the Chairman of the Executive Committee and Member of the
Office of the Chairman of the Citigroup.
3.
Appointment of Cabinet Secretaries from the private sector by way of
arrangements under which the Cabinet Secretaries took no-pay leave
from their previous employers or organizations during the period of
office
3.1
The Office of Government Ethics (OGE) defines the term "no-pay leave
appointment arrangements" as "a leave of absence where no services are performed
or required by the private employer during the individual's term of service. It also
means that the individual will not maintain some unpaid officership or directorship in
the organization, nor will the organization continue to use the individual's name as
being affiliated with the organization."2
3.2
Only those Cabinet Secretaries coming from universities are allowed to
maintain no-pay leave of absences with their previous employers, i.e. universities.
The institution should have a pre-existing written plan generally available to all of its
qualified faculty members and the Cabinet Secretary has to meet these qualifications.
The policy for allowing these arrangements for educators but not other professions is
related to the traditional arrangements for tenure track positions with universities.
3.3
Cabinet Secretaries who took no-pay leave from universities are required
to formally declare their future employment arrangements by filing the Public
Financial Disclosure Report (i.e. SF 278). A complete reporting of an employment
arrangement comprises:
(a) Parties to the agreement;
(b) Dates of the agreement;
2
This definition is provided by OGE in response to our enquiry.
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(c) A specific description of the position involved;
(d) Terms of the agreement; and
(e) At the filer's3 opinion, information about steps taken to eliminate any
potential conflicts of interests in regard to the arrangements.
3.4
OGE is responsible for examining SF 278 to identify potential conflicts of
interests. When conducting such analysis, OGE will examine a variety of potential
conflicts. These include:4
"(a) Could the financial interests of the filer which exist through a
reported employment tie be affected "directly and predictably" by the
outcome of an official government matter in which the filer will be
participating?
(b) Does the filer report employment interests which create "covered
relationships"5 that may cause conflicts of interests?"
3.5
If conflicts of interests exist, the filer is required to sign an ethics
agreement that commits the personnel to take "remedial" measures to resolve the
conflicts within 90 days of being sworn in. For example, the filer agrees to recuse or
disqualify himself or herself from participating in any discussion or decision on a
matter that could affect the person's financial interests.6
3.6
In reply to our enquiry as on whether there are professors who were on nopay leave from universities and served/are presently serving in the Cabinet, OGE
remarks that there are currently no Cabinet Secretaries on no-pay leave from
universities and it cannot provide any specific examples.
3
4
5
6
The term "filer" refers to a person who is required by law to file the public financial disclosure
report.
US Office of Government Ethics, Public Financial Disclosure: A Reviewer's Reference, 1996,
pages 109-110.
Covered relationships may include someone with whom the filer has a joint business venture, a
contract or consultancy.
For detailed information, see "Process of Appointment of Senior Members of Government in
Selected Countries", Research and Library Services Division, Legislative Council Secretariat,
13 March 2002, pages 30-32.
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4.
IN06/02-03
Arrangements made by the former US President Jimmy Carter in
managing his family business during his presidency to avoid
perception of conflict of interest
4.1
At the time when Jimmy Carter served as the 39th President of the US
between January 1977 and January 1981, there were no legal requirements for him to
reveal information about his personal finances. Therefore, the details of Carter's
business affairs during his presidency are only known in a general outline.7
4.2
Jimmy Carter set up a blind trust for holding the publicly held stocks, but
he took no particular actions concerning the Carter farms and warehouse8. Carter
himself owned the Carter farms and warehouse in partnership with other members of
his family. After losing the election in November 1980, Jimmy Carter stepped down
from office on 20 January 1981.
5.
The Presidential Records Act
5.1
The Presidential Records Act (PRA) was enacted in early 1981. PRA,
which governs the official records of Presidents and Vice Presidents created or
received after 20 January 1981, has changed the legal ownership of the official
records of the Presidents from private to public. Since then, the US President has to
disclose publicly his financial interests and those of his spouse and dependent children
as well.
5.2
Presently, senior members of the government, including the President, are
required to disclose business ownership interests, comprising both publicly-traded
entities and private business arrangements. However, there is no statutory
requirement that they should place the assets in a blind trust to resolve potential
conflicts of interests.9
5.3
According to OGE, reporting of shares in publicly-traded entities is
relatively straightforward because information on their activities and holdings is
available in standard reference materials.10 Consequently, senior members of the
government may only need to disclose the name of entity.
7
8
9
10
Information on this issue is provided by the Jimmy Carter Library and Museum.
The warehouse was a general-purpose seed and farm supply company.
For information relating to a blind trust, see "Selected Issues Relating to Declaration of Interests
and Avoidance of Conflicts of Interests by Senior Members of Government", Research and Library
Services Division, Legislative Council Secretariat, 3 October 2002, pages 5-8.
These include Standard and Poor's Corporate Registry and Moody's Manuals.
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5.4
Filers are required to disclose more detailed information regarding private
business arrangements. The elements of a complete description are:
(a) The name of entity;
(b) Its address;
(c) The form of business (such as sole proprietorship, partnership, joint
venture and corporation);
(d) The nature of any trade or business that is actively conducted by or
through the entity;
(e) Any portfolio investments or other attributions from the entity that are
not solely incidental to the trade or business disclosed;
(f)
The value of their investment, capital account, or shares in the
business; and
(g) The amount of income from the business11.
6.
Comparison of the requirements applicable to members of the US
Congress and senior members of the government in respect of
declaration of interests
6.1
The Ethics in Government Act of 1978 requires that members of the US
Congress and senior members of the government report the same information on their
interests. The law allows the Senate, the House of Representatives and the
government to each develop their own forms for reporting purposes.
6.2
Congressmen and senior members of the government are required to
disclose the following 10 categories of information:
(a) Payments to charitable organizations in lieu of honoraria12;
(b) Earned and non-investment income;
11
12
This requirement applies if the business interest produced more than US$200 of income during
the reporting period.
The term "honoraria" is defined as payments of money or anything of value to the filer for an
appearance, speech, or article, less any necessary travel expenses. Filers are required to (i)
report each honorarium as earned income; (ii) report the amount of honoraria received and
subsequently donated to charities; and (iii) report payments directed to charities in lieu of
honoraria, including the name of the charity, date and actual amount of payment.
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(c) Both the publicly and non-publicly traded assets and unearned income
sources;
(d) Transactions of stocks, bonds, properties, commodity futures and
other securities that exceeded US$1,000;
(e) Gifts in excess of US$260 in value by one source;
(f) Reimbursed travel related expenses from one source aggregating
more than US$260 in value;
(g) Liabilities over US$10,000 owed to any one creditor;
(h) Positions held outside US government;
(i)
Employment agreements or arrangements; and
(j)
Sources of compensation in excess of US$5,000 paid by one source.
6.3
Filers are required to report information concerning their spouses and
dependent children in the categories of (b), (c), (d), (e) and (f) listed above.
___________________
Prepared by Jackie WU
13 November 2002
Tel: 2869 9644
----------------------------------------------------------------------------------------------------------------The Legislative Council Secretariat welcomes the re-publication, in part or in whole, of this document, and also
its translation in other languages. Materials may be reproduced freely for non-commercial purposes, provided
acknowledgement is made to the Research and Library Services Division of the Legislative Council Secretariat
as the source and one copy of the reproduction is sent to the Legislative Council Library.
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References:
1.
Jimmy Carter, Keeping Faith: Memoirs of a President, London, 1982.
2.
Legislative Council Secretariat, Declaration of Interests by Senior Civil Servants
in Some Overseas Countries, 15 March 2000, RP02/99-00.
3.
Legislative Council Secretariat, Restrictions on Activities of Former Heads of
Government and Former Senior Members of Government, 10 January 2002,
RP02/01-02.
4.
Legislative Council Secretariat, Process of Appointment of Senior Members of
Government in Selected Countries, 13 March 2002, RP05/01-02.
5.
Legislative Council Secretariat, Selected Issues Relating to Declaration of
Interests and Avoidance of Conflicts of Interests by Senior Members of
Government, 3 October 2002, IN35/01-02.
6.
Office of the Secretary of the Senate, United States Senate Public Financial
Disclosure Report, February 2002.
7.
US Office of Government Ethics, Public Financial Disclosure: A Reviewer's
Reference, 1996.
8.
US Office of Government Ethics, Public Financial Disclosure Report for
Executive Branch Personnel, March 2001.
Websites
1.
Website of Jimmy Carter Library and Museum, www.jimmycarterlibrary.org
2.
Website of House of Representatives, www.house.gov
3.
Website of US Office of Government Ethics, www.usoge.gov
4.
Website of US Senate, www.senate.gov
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