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Ethics Corner 

Companies Must Beware of New 'Revolving Door' Policies 

10  2,009 

By Stephen Epstein 

Relationships between government and private contractor representatives must be carefully approached as recent front page stories highlighting allegations of collusion and impropriety have shown.  

One of President Obama’s first official acts was to issue Executive Order 13490, “Ethics Commitments by Executive Branch Personnel,” which upped the ante in the already highly regulated  “revolving door” arena.  

Federal laws and regulations governing the transition of federal civilian and military personnel from government service to private enterprise now include 18 U.S.C. § 208 and 5 C.F.R. 2635.604(a), which requires federal personnel to recuse themselves from taking official actions in particular matters that affect the financial interests of a potential employer.

The Procurement Integrity Act (41 U.S.C. § 423) and Federal Acquisition Regulation Part 3 require federal personnel participating in procurements over $100,000 to report employment contacts by entities in that procurement, and to either recuse themselves or reject the employment opportunity.

The Integrity Act also bars contractors from paying compensation for one year to former federal personnel who performed specific procurement and program management functions for contracts that exceeded $10 million awarded to the contractor.

In addition, 18 U.S.C. § 207 imposes representational restrictions on former federal personnel. Ethics Pledge (EO 13490) extends the one-year cooling-off restrictions of  18 U.S.C. § 207(c) to two years, and bars lobbying of covered executive branch officials as long as President Obama is in office.

Some agencies have additional restrictions. For example, Department of Defense Section 847 of the 2008 National Defense Authorization Act requires senior and procurement personnel to obtain ethics opinions from their ethics officials.

The question for industry leaders is how to limit the compliance risks related to this laundry list of regulations that carries the threat of criminal and civil prosecution, suspension and debarment and reputational disaster. What measures can companies put in place to prevent violations?

Key elements of an effective compliance program can be tailored to address the risks associated with the revolving door depending on the industry and circumstances.

First, companies should draft a clear policy on hiring former federal personnel that describes the compliance requirements, assigns responsibility and instructs company personnel about how even the most innocent employment discussion creates a conflict of interest for federal personnel.

It should also direct company personnel not to initiate employment discussions without prior approval of the compliance office. Also, it needs to direct company personnel to immediately halt employment discussions initiated by federal personnel unless the federal employee is not involved in any procurement involving a company or has any other duties that affect the financial interests of the company.

The policy needs to direct company personnel to refer all inquiries from federal personnel to the recruiting office and require the compliance officer to screen all former federal and military personnel including reservists who have served on active duty.

Documentation should be filed in the prospective employee’s personnel record to include identity of immediate family members who are current federal employees. This may identify potential favoritism issues if the family member may affect the company’s contracts.

It should also require as a best practice that former federal personnel secure an ethics opinion from their agency ethics official as a condition of employment. This is required for certain Defense Department personnel.

Also as a best practice, all former federal personnel should meet with the compliance officer immediately after being hired to review their restrictions. The compliance officer should provide the new employee and the employee’s supervisor a memo describing the employee’s restrictions.  

This briefing should include a reminder that the employee may not bring to the company any non-public information, including sensitive government information, source selection data, contractor bid or proposal information, proprietary information of other contractors, information protected by the Privacy Act, or controlled unclassified information.

For the next two years, new supervisors of the employee should review the memo regarding the employee’s restrictions.

Steve Epstein has just been named chief counsel for ethics and compliance for Boeing Co. and is the former director of the Defense Department’s standards of conduct office. The views expressed are those of the author.
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