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Government Ethics Stories of the Year

This column was born in the wake of the government ethics boom of 2006. In elections that fall, Democrats seized control of Congress, in part by riding a wave of heightened concern about government corruption. Legislation followed, and the issue of ethics enjoyed more public attention than it had received in years.

Six years later, though government ethics no longer dominates the spotlight, a look back at the biggest ethics stories of 2012 suggests that focus on the topic is here to stay. An informal survey of leading attorneys in the field yielded many answers to the question of what were the biggest ethics stories of the year.

My own vote goes to passage of the Stop Trading on Congressional Knowledge Act. Signed by President Barack Obama in April, the law raised thorny new compliance issues for congressional employees and those who interact with them.

It directed the Securities and Exchange Commission to make a rule prohibiting congressional employees from trading a company’s stock with knowledge of material, nonpublic information about legislation relating to the company. The rule also affirmed potential liability for those who regularly communicate with such employees and actively trade. They could face liability for trading stock in a company after receiving material nonpublic information from a government source about action that could affect the stock value of that company.

For sheer impact on congressional employees and those who interact with them, I find the STOCK Act to be the ethics story of the year.

Yet, there is no shortage of competition. Two attorneys surveyed named the investigation of Rep. Maxine Waters, D-Calif., as the story of the year. “There really isn’t a close second, is there?” asked Stefan Passantino, of McKenna Long & Aldridge. The investigation, which spanned three years, ended in September, when the House Ethics Committee announced it would take no action against Waters.

At issue was whether Waters had improperly used her position to provide assistance to OneUnited, a bank in which she and her husband had a financial interest.

“It appears that Representative Waters recognized and made efforts to avoid a conflict of interest with respect to OneUnited,” the Ethics Committee concluded in September.

Passantino is not so sure. “The available evidence really didn’t warrant the racial overtones, case dismissal and now potential top Financial Services post [for Waters],” Passantino said.

Beyond the debate of the merits of the cases, the investigation took on a life of its own, with allegations of misconduct by Ethics Committee staff and the hiring of independent counsel. The committee recommended adopting several changes to its procedures. Elliot Berke, former counsel to the Office of the Speaker and general counsel to the Office of the House Majority Leader, now with McGuireWoods, said the case was important because it brought to light the “procedural ambiguities and uncertainties that are part of the congressional ethics process.”

Robert Walker, former chief counsel of the Senate Ethics Committee and now of Wiley Rein, said one of the stories of the year was the “scandal” over a lavish conference held by the General Services Administration, the nation’s federal acquisition and procurement agency. Details of the 2010 GSA conference, which became public in April of this year, sparked outrage over perceived excess and waste. In addition to the $800,000 price tag, embarrassing videos of the event poured gasoline on the fire. As a result, the GSA and other government agencies made dramatic changes to their policies for conferences and travel expenses.

In August, the GSA announced that after a “top to bottom review,” it had canceled “47 conferences and implemented strong oversight to ensure that all travel and events are limited to necessary and essential functions.”

Ken Gross, former associate general counsel of the Federal Election Commission, now of Skadden, named the criminal trial of former Sen. John Edwards, D-N.C., as one of the ethics stories of the year. The case relied on a novel interpretation of campaign finance law, under which the government alleged that payments of hundreds of thousands of dollars from two of Edwards’ friends to his mistress should have been treated as campaign contributions to his 2008 presidential run because their purpose was to conceal the affair and thereby aid Edwards’ campaign. That theory met with considerable skepticism from some experts.

The trial ended in May with the jury acquitting Edwards of one charge and deadlocking on five others. Federal prosecutors later announced they would not try again. The charges against Edwards “should never have been brought in the first case,” Gross said.

Notwithstanding the Edwards trial, Gross said that “perhaps the biggest scandal of the year is that there have not been any scandals.” He attributes this to the courts having “essentially legalized unlimited money from virtually any source” as well as “the inability of the FEC to agree on fundamental definitions in the law and hence on the enforcement of the law.”

Does that mean 2013 will not bring any new questions of ethics for us to consider? Somehow, I doubt it. See you next year.

C. Simon Davidson is a partner with the law firm McGuireWoods. Submit questions to cdavidson@mcguirewoods.com. Questions do not create an attorney-client relationship. Readers should not treat his column as legal advice.

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