Request for Public Input on the Application of the Criminal Conflict of Interest Prohibition to Certain Beneficial Interests in Discretionary Trusts., 122-124 [2016-31583]
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further funding for clinical trials, and an
extensive amount of time to even reach
the stage of applying to the FDA for
approval. The regulatory approval
process itself can also be timeconsuming as the FDA reviews the
volume of material and data a company
submits in support of its application.
The Consent Agreement
The Consent Agreement remedies the
competitive concerns raised by Abbott’s
proposed acquisition of St. Jude by
requiring that the parties divest to
Terumo all of the assets and resources
needed for it to become an independent,
viable, and effective competitor in the
U.S. markets for vascular closure
devices and steerable sheaths. It also
requires Abbott to provide notice if it
intends to acquire ACT’s lesionassessing ablation catheter assets.
Terumo possesses the industry
experience and reputation necessary to
replace competition that would be lost
in the U.S. markets for vascular closure
devices and steerable sheaths. Terumo
is headquartered in Tokyo, Japan. It has
been active in the U.S. medical device
market for over thirty years and has a
U.S. subsidiary based in Somerset, New
Jersey. Terumo offers a portfolio of
products that are highly complementary
to the vascular closure and steerable
sheath products being acquired but does
not sell any competing products.
Through its Interventional Systems
business unit, Terumo manufactures
and sells guidewires, catheters, and
sheaths, as well as other vascular access
devices. As a result, it currently sells its
products to many of the same customers
as Abbott and St. Jude. Terumo is thus
well positioned to restore the benefits of
competition that would be lost through
the Proposed Acquisition.
Pursuant to the Order, Terumo will
receive all rights and assets related to St.
Jude’s vascular closure device business
and Abbott’s steerable sheath business,
including all of the intellectual property
used in those businesses. In addition,
Terumo will take over part of the facility
in Caguas, Puerto Rico where St. Jude
currently manufactures most of its
vascular closure device products. In
order to ensure continuity of supply for
certain vascular closure devices and
components that are not currently
manufactured in the Puerto Rico
facility, the Order requires that St. Jude
supply Terumo with finished vascular
closure devices and components for up
to two years while Terumo transitions to
independent manufacturing.
To ensure that the divestiture is
successful, the Order requires the
parties to enter into a transitional
services agreement with Terumo to
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22:14 Dec 30, 2016
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assist the company in establishing its
manufacturing capabilities. Further, the
Order requires that the parties transfer
all confidential business information to
Terumo, as well as provide access to
employees who possess or are able to
identify such information. Terumo also
will have the right to interview and offer
employment to employees associated
with St. Jude’s vascular closure device
business and Abbott’s steerable sheath
business.
The parties must accomplish the
divestiture no later than forty-five days
after the consummation of the Proposed
Acquisition. If the Commission
determines that Terumo is not an
acceptable acquirer, or that the manner
of the divestiture is not acceptable, the
Order requires the parties to unwind the
sale and accomplish the divestiture
within 180 days of the date the Order
becomes final to another Commissionapproved acquirer.
To ensure compliance with the Order,
the Commission has agreed to appoint
an Interim Monitor to ensure that
Abbott and St. Jude comply with all of
their obligations pursuant to the
Consent Agreement and to keep the
Commission informed about the status
of the transfer of the rights and assets to
Terumo. Further, the Order allows the
Commission to appoint a Divestiture
Trustee to accomplish the divestiture
should the parties fail to comply with
their divestiture obligations. Lastly, the
Order terminates after ten years.
The purpose of this analysis is to
facilitate public comment on the
proposed Consent Agreement, and it is
not intended to constitute an official
interpretation of the proposed Order or
to modify its terms in any way.
By direction of the Commission.
April J. Tabor,
Acting Secretary.
[FR Doc. 2016–31800 Filed 12–30–16; 8:45 am]
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Kevin Kampschroer,
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[FR Doc. 2016–31786 Filed 12–30–16; 8:45 am]
BILLING CODE 6820–14–P
OFFICE OF GOVERNMENT ETHICS
Request for Public Input on the
Application of the Criminal Conflict of
Interest Prohibition to Certain
Beneficial Interests in Discretionary
Trusts.
AGENCY:
Office of Government Ethics
(OGE).
GENERAL SERVICES
ADMINISTRATION
ACTION:
[Notice–MA–2016–08; Docket No. 2016–
0002; Sequence No. 31]
SUMMARY:
Federal Management Regulations;
Transportation Prepayment Audit
Requirements
Office of Government-wide
Policy, General Services Administration
(GSA).
ACTION: Notice of a bulletin.
AGENCY:
GSA has issued a guidance for
agencies and wholly-owned
Government corporations, which
SUMMARY:
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Notice of request for public
comments.
This notice and request seeks
input from members of the public with
expertise in trust law concerning the
following question: Are there any
circumstances under which an eligible
income beneficiary of a discretionary
trust might, in the absence of a vested
remainder interest, be able to compel
the trust to make a distribution or
payment? OGE will take into
consideration all relevant expert input
submitted by the public within 60 days
of the date of this notice. To be
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Federal Register / Vol. 82, No. 1 / Tuesday, January 3, 2017 / Notices
considered, any submission exceeding
five (5) pages in length must include a
one-page summary of key points and
conclusions. Commenters are requested
to state briefly the nature of their
expertise in trust law.
DATES: To be assured consideration,
comments must be received at the
address provided below, by no later
than 5:00 p.m. on March 6, 2017.
ADDRESSES: You may submit comments,
in writing, to OGE regarding this notice
and request by any of the following
methods:
E-Mail: usoge@oge.gov. Include the
reference ‘‘Request for Input on
Discretionary Trusts’’ in the subject line
of the message.
Fax: (202) 482–9237.
Mail/Hand Delivery/Courier: U.S.
Office of Government Ethics, Suite 500,
1201 New York Avenue NW.,
Washington, DC 20005–3917, Attention:
‘‘Request for Input on Discretionary
Trusts.’’
Instructions: All submissions must
include OGE’s agency name and the
words ‘‘Discretionary Trusts.’’ All
comments, including attachments and
other supporting materials, will become
part of the public record and subject to
public disclosure. Comments may be
posted on OGE’s Web site, www.oge.gov.
Sensitive personal information, such as
account numbers or Social Security
numbers, should not be included.
Comments generally will not be edited
to remove any identifying or contact
information.
FOR FURTHER INFORMATION CONTACT:
Jennifer A. Matis, Assistant Counsel,
Office of Government Ethics, Suite 500,
1201 New York Avenue NW.,
Washington, DC 20005–3917;
Telephone: 202–482–9300; TTY: 800–
877–8339; FAX: 202–482–9237.
SUPPLEMENTARY INFORMATION: During the
administration of President George W.
Bush, a former Director of the U.S.
Office of Government Ethics (OGE),
Hon. Robert I. Cusick, issued a guidance
memorandum addressing a novel legal
issue concerning the application of the
primary criminal conflict of interest
statute to the interests of eligible income
beneficiaries of discretionary trusts who
lack vested remainder interests.
Discretionary Trusts, DO–08–024
(2008). That conflict of interest statute,
18 U.S.C. 208, prohibits an executive
branch employee from participating
personally and substantially in any
particular matter that directly and
predictably affects a ‘‘financial interest’’
of either the employee or a person
whose interests are imputed to the
employee (e.g., the. employee’s spouse
or minor child). See 5 CFR part 2640,
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subpart A. The 2008 memorandum
articulated OGE’s conclusion that, for
purposes of the conflict of interest
statute, an eligible income beneficiary of
a discretionary trust would not be
considered to have a financial interest
in the holdings of the trust, provided
that the beneficiary was not the grantor
and did not have a vested remainder
interest. Discretionary Trusts, DO–08–
024 (2008). The premise underlying
OGE’s conclusion was that such a
beneficiary could never have an
‘‘enforceable right to payment.’’ Id. at 1.
For this premise OGE relied upon the
American Law Institute’s Second
Restatement of the Law of Trusts. Id.
(citing Restatement of the Law (Second)
Trusts, § 155).
In 2013, OGE issued a second
guidance memorandum on the topic of
reporting requirements applicable to a
beneficiary who could meet the
requirements articulated in its 2008
memorandum. The 2013 memorandum
clarified that such a beneficiary would
not have to report the holdings of the
discretionary trust in an executive
branch financial disclosure report filed
under the Ethics in Government Act, 5
U.S.C. app. 101, et seq., in the event that
the beneficiary were to receive income
from the trust during the reporting
period, though the beneficiary would
have to report the income itself.
Reporting Requirements for
Discretionary Trusts, LA–13–04 (April
9, 2013). The 2013 memorandum did
not otherwise modify the 2008
memorandum or revisit its underlying
premise.
The 2008 memorandum, which OGE
has continued to apply, is based wholly
on the premise that there are no
circumstances under which such a
beneficiary could ever compel a
distribution or payment from a
discretionary trust. This month,
however, OGE learned that the
American Law Institute’s Third
Restatement of the Law of Trusts may
suggest a contrary analysis as to the
financial interests of eligible income
beneficiaries of discretionary trusts, at
least in some jurisdictions. See
Restatement of the Law (Third) Trusts,
§ 60, cmt. e (Am. Law Inst. 2003) (‘‘A
transferee or creditor of a trust
beneficiary cannot compel the trustee to
make discretionary distributions if the
beneficiary personally could not do so.
It is rare, however, that the beneficiary’s
circumstances, the terms of the
discretionary power, and the purposes
of the trust leave the beneficiary so
powerless. The exercise or nonexercise
of fiduciary discretion is always subject
to judicial review to prevent abuse.’’).
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123
This discovery drew OGE’s attention
to an article in the Quinnipiac Probate
Law Journal by Alan Newman, Professor
of Law for the University of Akron
School of Law. See Newman, Alan,
Trust Law in the Twenty-First Century:
Challenges to Fiduciary Accountability,
29 Quinnipiac Prob. L.J. 261 (2016).
Professor Newman writes,
‘‘[I]f, in fact, the beneficiary of a
discretionary trust had only an expectancy
with respect to the trust, arguably the
beneficiary would be unable to hold the
trustee accountable to enforce the trust.
However, as noted elsewhere, ‘the difficulty
with this theory is that it is not true.’
Although there is a longstanding debate
whether a beneficiary of a trust has a
property interest in the trust assets, merely a
claim against the trustee, or both, it is wellestablished that: (i) the beneficiary’s interest
in the trust itself is property, regardless of
whether the trust terms provide that
distributions to the beneficiary are at the
trustee’s discretion; and (ii) the beneficiary
may enforce them.
Id. at 282 (quoting Jesse Dukeminier &
Robert H. Sitkoff, Wills, Trusts, and
Estates 689 (9th ed. 2013)).
Professor Newman further explains
that cases denying the claims of a
beneficiary’s creditors against the trust
reflect only a ‘‘policy-oriented’’
approach to addressing the claims of
creditors and do not necessarily stand as
evidence that the beneficiary lacks ‘‘an
enforceable property interest with
respect to the trust.’’ Id. at 283. At the
time of its 2008 memorandum, OGE’s
research focused on cases addressing
the rights of creditors or the eligibility
of beneficiaries for public assistance,
but Professor Newman’s article raises a
question as to whether OGE should have
focused instead on cases addressing the
rights of beneficiaries as to trustees of
discretionary trusts. See, e.g., id at 284
(‘‘[R]ecently enacted statutes stating that
beneficiaries of discretionary trusts do
not have property interests with respect
to those trusts are part of the enacting
jurisdictions’ trust codes addressing the
rights of beneficiaries’ creditors, not the
relationship between the trustee and
beneficiaries, and appear intended to
apply only in the creditors’ rights
context.’’).
OGE reviewed one of the cases cited
in Professor Newman’s article. In that
case, the Seventh Circuit wrote,
We see no reason why a beneficiary,
simply by virtue of being the beneficiary of
discretionary trust, should be denied the
ordinary equitable rights that flow from the
fiduciary duty that runs from a trustee to a
beneficiary. Included in those rights is the
right to bring an action for breach of trust.
Scanlan v. Eisenberg, 669 F.3d 838,
844 (7th Cir. Ill. 2012). The plaintiff in
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Federal Register / Vol. 82, No. 1 / Tuesday, January 3, 2017 / Notices
that case, a beneficiary of several trusts,
sued for malpractice and breach of
fiduciary duty after the trusts invested
millions of dollars in a real estate
investment trust that later went
bankrupt. The Seventh Circuit found
that an eligible beneficiary possessed
the required stake to establish standing
as a result of her interest in the trust. Id.
at 846. To the extent that the plaintiff
had standing by virtue of being affected
by the trust’s potential for gain or loss,
that ‘‘stake’’ would appear to meet
OGE’s definition of a disqualifying
financial interest for purposes of the
conflict of interest prohibition. See 5
CFR 2640.103(b) (‘‘the term financial
interest means the potential for gain or
loss’’).
Other cases also seem to lead to this
conclusion. For example, a New York
court similarly provided the following
guidance, under the trust law of that
state, as to the rights of the beneficiary
of a discretionary trust:
sradovich on DSK3GMQ082PROD with NOTICES
In the present case, the trustees’ discretion
is absolute and not limited by any standard.
However, even in such a case, the trustees
may be compelled to distribute funds to the
beneficiary if they abuse their discretion in
refusing to make distribution.
Estate of Gilbert, 156 Misc. 2d 379, 383
(N.Y. Sur. Ct. 1992). Likewise, a
California court held that, under that
state’s trust law, a trustee who has
discretion to make or withhold a
payment, may not withhold a payment
with the intent of avoiding child
support. Ventura County Dept. of Child
Support Services v. Brown, 117 Cal.
App. 4th 144, 150 (Cal. App. 2d Dist.
2004) (quoting Prof. Russell Niles,
consultant to Cal. Law Revision Com.,
Memo Re Spendthrift and Related
Trusts (Nov. 6, 1984)). In the California
case, the outcome may well have been
determined in part by language in the
trust instrument requiring that the trust
be administered for the benefit of the
beneficiary’s children in the event of the
beneficiary’s death, see id. at 148;
however, this contributing factor would
serve only to complicate the issue for
OGE by leaving open the possibility that
subtle variations in trust language may
be relevant in determining the existence
of a financial interest for purposes of the
conflict of interest law.
Because it is not clear to OGE whether
these materials represent the rule, an
exception, or differing approaches to
trust law in various jurisdictions, OGE
would benefit from the input of
members of the public who have
expertise in trust law. Specifically, OGE
seeks expert input concerning the
following question: Are there any
circumstances under which an eligible
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22:14 Dec 30, 2016
Jkt 241001
income beneficiary of a discretionary
trust might, in the absence of a vested
remainder interest, be able to compel
the trust to make a distribution or
payment? Should this question be
appropriately answered in the
affirmative, OGE may need to revisit the
premise underlying its 2008 guidance
memorandum on discretionary trusts—
i.e., that such a beneficiary could never
have enforceable right to a distribution
or payment from the trust. OGE will
take into consideration all relevant
expert input submitted by the public
within 60 days of the date of this notice
in response to the question posed before
evaluating the continuing validity of
OGE’s guidance memorandum,
Discretionary Trusts, DO–08–024
(2008). To be considered, any
submission exceeding five (5) pages in
length must include a one-page
summary of key points and conclusions.
Commenters are requested to state
briefly the nature of their expertise in
trust law.
Approved: December 23, 2016.
Walter M. Shaub, Jr.
Director, U.S. Office of Government Ethics.
[FR Doc. 2016–31583 Filed 12–30–16; 8:45 am]
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DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Agency for Toxic Substances and
Disease Registry
[60Day–17–17IY; Docket No. ATSDR–2016–
0007]
Proposed Data Collection Submitted
for Public Comment and
Recommendations
Agency for Toxic Substances
and Disease Registry (ATSDR),
Department of Health and Human
Services (HHS).
ACTION: Notice with comment period.
AGENCY:
The Agency for Toxic
Substances and Disease Registry
(ATSDR), as part of its continuing
efforts to reduce public burden and
maximize the utility of government
information, invites the general public
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and/or continuing information
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received on or before March 6, 2017.
ADDRESSES: You may submit comments,
identified by Docket No. ATSDR–2016–
0007 by any of the following methods:
• Federal eRulemaking Portal:
Regulations.gov. Follow the instructions
for submitting comments.
• Mail: Leroy A. Richardson,
Information Collection Review Office,
Centers for Disease Control and
Prevention, 1600 Clifton Road NE., MS–
D74, Atlanta, Georgia 30329.
Instructions: All submissions received
must include the agency name and
Docket Number. All relevant comments
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to Regulations.gov, including any
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access to the docket to read background
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Please note: All public comment
should be submitted through the
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address listed above.
FOR FURTHER INFORMATION CONTACT: To
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the information collection plan and
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Collection Review Office, Centers for
Disease Control and Prevention, 1600
Clifton Road NE., MS–D74, Atlanta,
Georgia 30329; phone: 404–639–7570;
Email: omb@cdc.gov.
SUPPLEMENTARY INFORMATION: Under the
Paperwork Reduction Act of 1995 (PRA)
(44 U.S.C. 3501–3520), Federal agencies
must obtain approval from the Office of
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collection of information they conduct
or sponsor. In addition, the PRA also
requires Federal agencies to provide a
60-day notice in the Federal Register
concerning each proposed collection of
information, including each new
proposed collection, each proposed
extension of existing collection of
information, and each reinstatement of
previously approved information
collection before submitting the
collection to OMB for approval. To
comply with this requirement, we are
publishing this notice of a proposed
data collection as described below.
Comments are invited on: (a) Whether
the proposed collection of information
is necessary for the proper performance
of the functions of the agency, including
whether the information shall have
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Agencies
[Federal Register Volume 82, Number 1 (Tuesday, January 3, 2017)]
[Notices]
[Pages 122-124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31583]
=======================================================================
-----------------------------------------------------------------------
OFFICE OF GOVERNMENT ETHICS
Request for Public Input on the Application of the Criminal
Conflict of Interest Prohibition to Certain Beneficial Interests in
Discretionary Trusts.
AGENCY: Office of Government Ethics (OGE).
ACTION: Notice of request for public comments.
-----------------------------------------------------------------------
SUMMARY: This notice and request seeks input from members of the public
with expertise in trust law concerning the following question: Are
there any circumstances under which an eligible income beneficiary of a
discretionary trust might, in the absence of a vested remainder
interest, be able to compel the trust to make a distribution or
payment? OGE will take into consideration all relevant expert input
submitted by the public within 60 days of the date of this notice. To
be
[[Page 123]]
considered, any submission exceeding five (5) pages in length must
include a one-page summary of key points and conclusions. Commenters
are requested to state briefly the nature of their expertise in trust
law.
DATES: To be assured consideration, comments must be received at the
address provided below, by no later than 5:00 p.m. on March 6, 2017.
ADDRESSES: You may submit comments, in writing, to OGE regarding this
notice and request by any of the following methods:
E-Mail: usoge@oge.gov. Include the reference ``Request for Input on
Discretionary Trusts'' in the subject line of the message.
Fax: (202) 482-9237.
Mail/Hand Delivery/Courier: U.S. Office of Government Ethics, Suite
500, 1201 New York Avenue NW., Washington, DC 20005-3917, Attention:
``Request for Input on Discretionary Trusts.''
Instructions: All submissions must include OGE's agency name and
the words ``Discretionary Trusts.'' All comments, including attachments
and other supporting materials, will become part of the public record
and subject to public disclosure. Comments may be posted on OGE's Web
site, www.oge.gov. Sensitive personal information, such as account
numbers or Social Security numbers, should not be included. Comments
generally will not be edited to remove any identifying or contact
information.
FOR FURTHER INFORMATION CONTACT: Jennifer A. Matis, Assistant Counsel,
Office of Government Ethics, Suite 500, 1201 New York Avenue NW.,
Washington, DC 20005-3917; Telephone: 202-482-9300; TTY: 800-877-8339;
FAX: 202-482-9237.
SUPPLEMENTARY INFORMATION: During the administration of President
George W. Bush, a former Director of the U.S. Office of Government
Ethics (OGE), Hon. Robert I. Cusick, issued a guidance memorandum
addressing a novel legal issue concerning the application of the
primary criminal conflict of interest statute to the interests of
eligible income beneficiaries of discretionary trusts who lack vested
remainder interests. Discretionary Trusts, DO-08-024 (2008). That
conflict of interest statute, 18 U.S.C. 208, prohibits an executive
branch employee from participating personally and substantially in any
particular matter that directly and predictably affects a ``financial
interest'' of either the employee or a person whose interests are
imputed to the employee (e.g., the. employee's spouse or minor child).
See 5 CFR part 2640, subpart A. The 2008 memorandum articulated OGE's
conclusion that, for purposes of the conflict of interest statute, an
eligible income beneficiary of a discretionary trust would not be
considered to have a financial interest in the holdings of the trust,
provided that the beneficiary was not the grantor and did not have a
vested remainder interest. Discretionary Trusts, DO-08-024 (2008). The
premise underlying OGE's conclusion was that such a beneficiary could
never have an ``enforceable right to payment.'' Id. at 1. For this
premise OGE relied upon the American Law Institute's Second Restatement
of the Law of Trusts. Id. (citing Restatement of the Law (Second)
Trusts, Sec. 155).
In 2013, OGE issued a second guidance memorandum on the topic of
reporting requirements applicable to a beneficiary who could meet the
requirements articulated in its 2008 memorandum. The 2013 memorandum
clarified that such a beneficiary would not have to report the holdings
of the discretionary trust in an executive branch financial disclosure
report filed under the Ethics in Government Act, 5 U.S.C. app. 101, et
seq., in the event that the beneficiary were to receive income from the
trust during the reporting period, though the beneficiary would have to
report the income itself. Reporting Requirements for Discretionary
Trusts, LA-13-04 (April 9, 2013). The 2013 memorandum did not otherwise
modify the 2008 memorandum or revisit its underlying premise.
The 2008 memorandum, which OGE has continued to apply, is based
wholly on the premise that there are no circumstances under which such
a beneficiary could ever compel a distribution or payment from a
discretionary trust. This month, however, OGE learned that the American
Law Institute's Third Restatement of the Law of Trusts may suggest a
contrary analysis as to the financial interests of eligible income
beneficiaries of discretionary trusts, at least in some jurisdictions.
See Restatement of the Law (Third) Trusts, Sec. 60, cmt. e (Am. Law
Inst. 2003) (``A transferee or creditor of a trust beneficiary cannot
compel the trustee to make discretionary distributions if the
beneficiary personally could not do so. It is rare, however, that the
beneficiary's circumstances, the terms of the discretionary power, and
the purposes of the trust leave the beneficiary so powerless. The
exercise or nonexercise of fiduciary discretion is always subject to
judicial review to prevent abuse.'').
This discovery drew OGE's attention to an article in the Quinnipiac
Probate Law Journal by Alan Newman, Professor of Law for the University
of Akron School of Law. See Newman, Alan, Trust Law in the Twenty-First
Century: Challenges to Fiduciary Accountability, 29 Quinnipiac Prob.
L.J. 261 (2016). Professor Newman writes,
``[I]f, in fact, the beneficiary of a discretionary trust had
only an expectancy with respect to the trust, arguably the
beneficiary would be unable to hold the trustee accountable to
enforce the trust. However, as noted elsewhere, `the difficulty with
this theory is that it is not true.' Although there is a
longstanding debate whether a beneficiary of a trust has a property
interest in the trust assets, merely a claim against the trustee, or
both, it is well-established that: (i) the beneficiary's interest in
the trust itself is property, regardless of whether the trust terms
provide that distributions to the beneficiary are at the trustee's
discretion; and (ii) the beneficiary may enforce them.
Id. at 282 (quoting Jesse Dukeminier & Robert H. Sitkoff, Wills,
Trusts, and Estates 689 (9th ed. 2013)).
Professor Newman further explains that cases denying the claims of
a beneficiary's creditors against the trust reflect only a ``policy-
oriented'' approach to addressing the claims of creditors and do not
necessarily stand as evidence that the beneficiary lacks ``an
enforceable property interest with respect to the trust.'' Id. at 283.
At the time of its 2008 memorandum, OGE's research focused on cases
addressing the rights of creditors or the eligibility of beneficiaries
for public assistance, but Professor Newman's article raises a question
as to whether OGE should have focused instead on cases addressing the
rights of beneficiaries as to trustees of discretionary trusts. See,
e.g., id at 284 (``[R]ecently enacted statutes stating that
beneficiaries of discretionary trusts do not have property interests
with respect to those trusts are part of the enacting jurisdictions'
trust codes addressing the rights of beneficiaries' creditors, not the
relationship between the trustee and beneficiaries, and appear intended
to apply only in the creditors' rights context.'').
OGE reviewed one of the cases cited in Professor Newman's article.
In that case, the Seventh Circuit wrote,
We see no reason why a beneficiary, simply by virtue of being
the beneficiary of discretionary trust, should be denied the
ordinary equitable rights that flow from the fiduciary duty that
runs from a trustee to a beneficiary. Included in those rights is
the right to bring an action for breach of trust.
Scanlan v. Eisenberg, 669 F.3d 838, 844 (7th Cir. Ill. 2012). The
plaintiff in
[[Page 124]]
that case, a beneficiary of several trusts, sued for malpractice and
breach of fiduciary duty after the trusts invested millions of dollars
in a real estate investment trust that later went bankrupt. The Seventh
Circuit found that an eligible beneficiary possessed the required stake
to establish standing as a result of her interest in the trust. Id. at
846. To the extent that the plaintiff had standing by virtue of being
affected by the trust's potential for gain or loss, that ``stake''
would appear to meet OGE's definition of a disqualifying financial
interest for purposes of the conflict of interest prohibition. See 5
CFR 2640.103(b) (``the term financial interest means the potential for
gain or loss'').
Other cases also seem to lead to this conclusion. For example, a
New York court similarly provided the following guidance, under the
trust law of that state, as to the rights of the beneficiary of a
discretionary trust:
In the present case, the trustees' discretion is absolute and
not limited by any standard. However, even in such a case, the
trustees may be compelled to distribute funds to the beneficiary if
they abuse their discretion in refusing to make distribution.
Estate of Gilbert, 156 Misc. 2d 379, 383 (N.Y. Sur. Ct. 1992).
Likewise, a California court held that, under that state's trust law, a
trustee who has discretion to make or withhold a payment, may not
withhold a payment with the intent of avoiding child support. Ventura
County Dept. of Child Support Services v. Brown, 117 Cal. App. 4th 144,
150 (Cal. App. 2d Dist. 2004) (quoting Prof. Russell Niles, consultant
to Cal. Law Revision Com., Memo Re Spendthrift and Related Trusts (Nov.
6, 1984)). In the California case, the outcome may well have been
determined in part by language in the trust instrument requiring that
the trust be administered for the benefit of the beneficiary's children
in the event of the beneficiary's death, see id. at 148; however, this
contributing factor would serve only to complicate the issue for OGE by
leaving open the possibility that subtle variations in trust language
may be relevant in determining the existence of a financial interest
for purposes of the conflict of interest law.
Because it is not clear to OGE whether these materials represent
the rule, an exception, or differing approaches to trust law in various
jurisdictions, OGE would benefit from the input of members of the
public who have expertise in trust law. Specifically, OGE seeks expert
input concerning the following question: Are there any circumstances
under which an eligible income beneficiary of a discretionary trust
might, in the absence of a vested remainder interest, be able to compel
the trust to make a distribution or payment? Should this question be
appropriately answered in the affirmative, OGE may need to revisit the
premise underlying its 2008 guidance memorandum on discretionary
trusts--i.e., that such a beneficiary could never have enforceable
right to a distribution or payment from the trust. OGE will take into
consideration all relevant expert input submitted by the public within
60 days of the date of this notice in response to the question posed
before evaluating the continuing validity of OGE's guidance memorandum,
Discretionary Trusts, DO-08-024 (2008). To be considered, any
submission exceeding five (5) pages in length must include a one-page
summary of key points and conclusions. Commenters are requested to
state briefly the nature of their expertise in trust law.
Approved: December 23, 2016.
Walter M. Shaub, Jr.
Director, U.S. Office of Government Ethics.
[FR Doc. 2016-31583 Filed 12-30-16; 8:45 am]
BILLING CODE 6345-03-P