Legal Expense Fund Regulation, 33799-33815 [2023-10290]

Agencies

• Office of Government Ethics

[Federal Register Volume 88, Number 101 (Thursday, May 25, 2023)]
[Rules and Regulations]
[Pages 33799-33815]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10290]



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Rules and Regulations
                                                Federal Register
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This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

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Federal Register / Vol. 88, No. 101 / Thursday, May 25, 2023 / Rules 
and Regulations

[[Page 33799]]



OFFICE OF GOVERNMENT ETHICS

5 CFR Parts 2634 and 2635

RIN 3209-AA50


Legal Expense Fund Regulation

AGENCY: Office of Government Ethics.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The U.S. Office of Government Ethics (OGE) is adding a new 
subpart to the Standards of Ethical Conduct for Employees of the 
Executive Branch (Standards). The new subpart contains the standards 
for an employee's acceptance of payments for legal expenses through a 
legal expense fund and an employee's acceptance of pro bono legal 
services for a matter arising in connection with the employee's 
official position, the employee's prior position on a campaign of a 
candidate for President or Vice President, or the employee's prior 
position on a Presidential Transition Team. OGE is also making related 
amendments to the portions of the Standards that govern the 
solicitation and acceptance of gifts from outside sources and the 
portions of the Executive Branch Financial Disclosure regulation that 
govern confidential financial disclosure reports.

DATES: This rule is effective November 21, 2023.

FOR FURTHER INFORMATION CONTACT: Maura Leary, Associate Counsel, or 
Heather Jones, Senior Counsel for Financial Disclosure, General Counsel 
and Legal Policy Division, 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: 

I. Background

    The U.S. Office of Government Ethics (OGE) published a proposed 
rule in the Federal Register, 87 FR 23769 (Apr. 21, 2022), proposing to 
amend both 5 CFR part 2634, Executive Branch, Financial Disclosure, 
Qualified Trusts, and Certificates of Divesture, and 5 CFR part 2635, 
Standards of Ethical Conduct for Employees of the Executive Branch, to 
establish a framework to govern an executive branch employee's 
acceptance of both payments for legal expenses through a Legal Expense 
Fund (LEF) and pro bono legal services for matters arising in 
connection with the employee's past or current official position, the 
employee's prior position on a campaign of a candidate for President or 
Vice President, or the employee's prior position on a Presidential 
Transition Team.
    Before proposing the Legal Expense Fund rule, OGE sought public 
input through an advance notice of proposed rulemaking (ANPRM), see 
Notice and Request for Comments: Legal Expense Fund Regulation, 84 FR 
15146 (Apr. 15, 2019), and at two public meetings, see Announcement of 
Public Meeting: Legal Expense Fund Regulation, 84 FR 50791 (Sept. 26, 
2019). In addition to seeking public input, OGE consulted with 
executive branch ethics officials and with the Department of Justice 
and the Office of Personnel Management pursuant to section 201(a) of 
Executive Order 12674, as modified by Executive Order 12731, and the 
authorities contained in 5 U.S.C. 13122.
    The proposed rule provided a 60-day comment period, which ended on 
June 21, 2022. OGE received 6,916 timely and responsive comments, which 
were submitted by six organizations and 6,910 individuals. After 
carefully considering the comments and the input provided before and in 
response to the proposed rule's publication, and making appropriate 
modifications, OGE is publishing this final rule. The rationale for the 
rule can be found in the preamble to the proposed rule at: https://www.govinfo.gov/content/pkg/FR-2022-04-21/pdf/2022-08130.pdf.
    This rule will be effective 180 days after publication to allow OGE 
to implement procedures, provide training, and publish guidance 
regarding this new ethics program. It will also allow agencies to 
consider staffing needs and their own internal procedures.

II. Comments

    OGE received nearly 7,000 comments from both organizations and 
individuals. The comments are publically posted on OGE's website and 
can be found at this address: https://www.oge.gov/web/OGE.nsf/All+docs+By+Cat/417908CAB842A8128525887E004D262C. Many of the 
commenters provided feedback on several different sections of the 
proposed rule. OGE has reviewed and considered each comment submitted; 
comments are discussed below in the context of the particular subparts 
or sections to which they pertain. OGE is not discussing comments that 
were either generally supportive of the regulation or generally 
critical of the regulation; however, OGE weighed both support and 
criticism when considering any possible changes in response to other 
comments. In addition, OGE does not specifically discuss comments that 
address issues outside the scope of the regulation.
    OGE received 6,907 comments from individuals that all asked OGE to 
take the following actions: (1) make compliance with the regulation 
mandatory; (2) require employee beneficiaries to recuse from particular 
matters involving donors to their legal expense funds for five years; 
(3) remove a particular example; and (4) allow nonprofits to hire 
outside pro bono counsel. OGE addresses each of these comments below in 
the applicable section, and portions of the regulation were revised to 
address the concerns raised.
    In the proposed rule, OGE specifically solicited comments on: (1) 
whether multi-beneficiary trusts should be permitted; (2) whether 
501(c)(3) and 501(c)(4) organizations should be permitted to make 
donations to legal expense funds; and (3) whether 501(c)(3) and 
501(c)(4) organizations may hire attorneys outside their organization 
to provide free or reduced cost legal services for employees. The 
weight of the comments supported single-beneficiary trusts and opposed 
allowing 501(c)(4) organizations to donate to legal expense funds or 
pay for outside legal representation. Although commenters were more 
divided on the question of allowing 501(c)(3) organizations to donate 
to legal expense funds and to pay for outside legal representation, the 
weight of the comments favored allowing such organizations to do both. 
As discussed in more detail in the relevant sections below, the rule 
has been revised to

[[Page 33800]]

permit 501(c)(3) organizations to donate to legal expense funds and pay 
for outside legal services.
    Finally, OGE, in adopting this final rule, has corrected a few 
typographical errors and made a few other minor clarifying revisions to 
the rule as proposed.

General Comments

    Several comments from individuals encouraged OGE to expand the 
regulation to cover employees of the legislative and judicial branches. 
Pursuant to 5 U.S.C. 13122(b)(1), OGE only is permitted to draft 
regulations that apply to executive branch employees. The Ethics in 
Government Act designated a supervising ethics office for each branch 
of government and, within the legislative branch, separate offices for 
the House and Senate. See 5 U.S.C. 13101(18). Each supervising ethics 
office is responsible for promulgating ethics rules that apply to the 
employees of that branch or congressional body.
    One commenter asked that OGE amend the definition of ``covered 
relationship'' in Sec.  2635.502(b)(1) to include the trustee and 
donors of a legal expense fund established under subpart J of part 2635 
and the provider of any pro bono legal services to employees. OGE first 
notes that the relationship between an employee beneficiary and their 
trustee is a ``contractual . . . relationship that involves other than 
a routine consumer transaction'' and thus would already be covered by 
Sec.  2635.502(b)(1)(i). Second, OGE has amended the regulation to 
reflect that the legal expense fund recusal is not a ``covered 
relationship'' recusal under Sec.  2635.502. Instead, OGE is requiring 
employee beneficiaries to abide by a mandatory two-year recusal from 
matters affecting any trustee, donor of legal expense payments, or 
provider of pro bono services. OGE does not want to create confusion as 
to whether the Sec.  2635.502 recusals or the more stringent legal 
expense fund recusals apply, so OGE is electing not to include these 
relationships as covered relationships under Sec.  2635.502.
    Several individual commenters suggested that OGE ban all legal 
expense funds. OGE has determined that this approach would 
significantly limit access to legal services for all but the wealthiest 
executive branch employees. While OGE historically has provided 
guidance to help ensure that executive branch employees who may receive 
distributions from an LEF are in compliance with existing ethics laws 
and rules, OGE believes that the proposed regulation, which creates 
much more robust limitations on the acceptance of payments for legal 
expenses and imposes significant transparency requirements, is the 
preferred and appropriate course.
    Two organizations commented that the rule was vague about which 
funds must be routed through a legal expense fund and suggested that 
items such as pre-paid legal service plans, credit cards, or ``private 
borrowing from family members and close friends'' are covered by 
subpart J. OGE first notes that routine market arrangements, such as a 
pre-paid service plan or the use of a credit card, are not gifts as 
defined in subpart B and therefore would not be required to be routed 
through a legal expense fund. Second, OGE notes that if, for example, 
an employee received a below market rate loan from a family member or 
close friend, it would qualify under the personal relationship 
exception at Sec.  2635.204(b), and the employee could accept the loan 
under that subpart B exception rather than subpart J. OGE included the 
provision at Sec.  2635.1002(b) specifically to address circumstances 
such as ``private borrowing from family members or close friends,'' as 
raised by the commenter. Accordingly, OGE believes the regulation is 
sufficiently clear about which legal expense payments must be accepted 
using subpart J.
    Several individual commenters suggested making contributions from 
legal expense funds taxable income. The Internal Revenue Service makes 
determinations about what income is taxable, and such a determination 
is outside of OGE's jurisdiction.
    Several commenters asked that OGE address the political pressure 
that can be applied by withholding funds from employee witnesses. In 
response to OGE's ANPRM, numerous organizations and individuals 
expressed the desire for legal expense funds to be structured only as 
trusts with single beneficiaries to guard against such pressure. See 
May 22, 2019 Public Hearing Transcript, https://www.oge.gov/web/
OGE.nsf/0/DB24D09F28472B82852585B6005A2206/$FILE/Transcript.pdf; 
Written Comments to ANPRM, https://www.oge.gov/web/OGE.nsf/0/
FE8D43CE6A038852852585B6005A2293/$FILE/
ANPRM%20Legal%20Expense%20Fund%20Regulation%20-
%20Written%20Comments.pdf. The commenters noted that, unlike legal 
expense funds with multiple beneficiaries, trustees of single-
beneficiary trusts have a fiduciary duty to the sole beneficiary. The 
structure of trusts with single beneficiaries, in the words of one 
commenter, ``provides the best protection for public servants, who can 
be certain that distributions will not be withheld or disbursed 
according to political pressures.'' Accordingly, OGE is electing to 
require that legal expense funds be trusts with a single beneficiary.
    OGE received one comment from an organization in support of the 
existing penalties in the regulation, including the penalties for 
impermissible donations. Several comments from individuals requested 
stricter penalties, including imprisonment, for noncompliance with the 
regulation. OGE believes the remedies in the regulation strike the 
appropriate balance for noncompliance. Section 1007(h) requires the 
fund to return impermissible donations and requires the beneficiary to 
forfeit the ability to accept donations and make distributions if a 
quarterly report is late. In addition, OGE has reserved both the right 
to prohibit the fund from either accepting donations or making 
distributions and the right to terminate the trust if there is 
significant noncompliance. Finally, while violation of the substantive 
requirements of a regulation cannot be criminal, the criminal penalties 
for knowingly making a false statement to the government will apply to 
the documents and reports filed pursuant to this regulation.

A. Subpart J of the Standards

Section 2635.1002: Applicability and Related Considerations
    One commenter asked that Sec.  2635.1002 explicitly state that 
referring to an employee's official position in a legal expense fund 
solicitation does not violate subpart G. OGE did not adopt this 
suggestion, because an employee could reference their position in a way 
that would violate subpart G--in fact, Sec.  2635.1002(c)(3) 
specifically requires that employees comply with subpart G in 
soliciting donations. However, OGE is adding language to Sec.  
2635.1002(c)(3) to clarify that the mere reference of the employee's 
official position in a solicitation does not in itself violate subpart 
G.
    Two organizations objected to the regulation's scope being 
restricted to those legal matters arising in connection with the 
employee's past or current official position, calling it a disparate 
burden on employment law litigation. Payments for legal services that 
arise out of an executive branch employee's federal employment or 
service on a campaign raise more significant appearance and misuse 
concerns than payments for purely personal legal services. Numerous 
stakeholders, from public interest organizations to U.S.

[[Page 33801]]

Senators, have noted that legal expense funds previously established to 
defray the costs of legal expenses connected to government service have 
created heightened concern. Specifically, stakeholders have expressed 
concerns about the potential for donors to influence employees' 
official actions or witness statements, the difficulty of screening for 
prohibited donors, and the lack of transparency for legal expense 
donations to those in federal service. OGE has addressed this 
heightened appearance concern by specifically regulating payments for 
legal expenses arising out of an employee's past or current official 
position, limiting who may donate to employee legal expense funds, and 
requiring public disclosure of such donations.
    Moreover, OGE is specifically directed by E.O. 12674 (as modified 
by E.O. 12731) to promulgate regulations addressing fundamental ethics 
principles such as prohibiting the use of public office for private 
gain and avoiding actions that create the appearance of a violation of 
a law or regulation. This directive supports regulating only legal 
expense payments connected to government service, as receipt of such 
payments for legal expenses could be viewed as using a public position 
for personal gain or creating the appearance of violating a law or 
regulation.
    One organization commented that the regulation as drafted would not 
address the concerns about potential corruption raised by Senators in 
their letter to the Director (Letter from Senator Margaret Hassan et. 
al., Aug. 2, 2018, https://www.hassan.senate.gov/imo/media/doc/RoundsPatriotFundLetterSIGNED.180802.pdf). In that letter, the Senators 
specifically raised concerns about transparency and funds with multiple 
beneficiaries, which make screening donations difficult and could allow 
the trustee to prioritize certain employee beneficiaries.
    When drafting the proposed regulation, OGE addressed the Senators' 
concerns about multiple beneficiaries by prohibiting executive branch 
employees from accepting payments for legal expenses from an LEF that 
has multiple beneficiaries. In addition, to promote transparency, the 
proposed regulation requires both that the trust document be made 
publicly available, and that all payments of $250 or more be reported 
quarterly and posted publicly on OGE's website. The proposed regulation 
also limits the amount a single donor can donate and prohibits 
donations from businesses and lobbyists. Finally, the proposed rule 
requires that any existing legal expense fund not structured as 
required by subpart J come into compliance within 90 calendar days of 
the rule going into effect, or use of the fund to pay legal expenses 
will violate the Standards of Conduct.
    Two organizations and 6,907 commenters objected to the language in 
Sec.  2635.1002(b)(2), stating that legal expense fund payments and pro 
bono services that otherwise qualify for a subpart B gift exception or 
exclusion are not covered by this subpart (and thus are not subject to 
the trust, quarterly reporting, and transparency requirements). Many 
commenters stated that this language made the regulation optional, and 
the two organizations requested that subpart J be the exclusive means 
for accepting legal expense fund payments. One organization 
characterized the provision as ``allow[ing] executive branch officials 
to continue relying on the gift rule exclusions and exceptions they 
have historically cited to justify legal expense funds.''
    Compliance with the requirements of subpart J is mandatory. 
Importantly, this regulation specifically clarifies that payments for 
legal expenses arising from an employee's past or current official 
position are given because of the employee's official position, and 
thus may not be accepted unless the employee complies with the gift 
rules. Accordingly, any gift of legal expenses or pro bono services 
arising out of an employee's past or current official position must 
comply with all the requirements of subpart J or conform to a narrow, 
pre-existing subpart B exception. Executive branch officials will not 
be able to rely on the historical interpretation that legal expenses 
could be excluded from the gift regulations under subpart B by 
determining that such expenses are not given because of their official 
position.
    The only two subpart B exceptions likely to be used in practice are 
Sec.  2635.204(b), which requires a determination that the donation is 
clearly motivated by a family relationship or personal friendship; and 
Sec.  2635.204(c), which allows employees to accept free or discounted 
legal services from an established employee organization, such as a 
union or an employee welfare organization. Maintaining these two narrow 
exceptions would allow less well-connected employees to accept help 
with legal expenses from, for example, their spouse, their parents, or 
their union.
    Several individuals requested that the regulation cap donations 
from family and friends at the same amount as everyone else. Such 
donations--which, by definition, must be given under circumstances that 
make clear that the gift is motivated by a family relationship or close 
personal friendship--are much less likely to raise appearance concerns. 
Accordingly, OGE is declining to make this change.
    One organization and 6,907 individuals commented that the 
requirement that employees recuse from particular matters affecting 
donors for one year was too short, and requested that employees recuse 
from such matters for five years instead. A second organization asked 
for the recusal period to apply through the lifetime of the legal 
expense fund, and then recommended instituting different lengths of 
time for the recusal depending on the amount of money donated (e.g., 
one-year recusal for under $5,000, four-year recusal for over $5,000). 
Individual commenters suggested recusal periods ranging from two to ten 
years. One organization also objected to use of the Sec.  2635.502 
impartiality standard because it relies on the reasonable person 
standard and because an agency can authorize an employee to participate 
notwithstanding impartiality concerns. In response to these comments, 
OGE is revising the regulation as follows: Employee beneficiaries will 
have a two-year recusal for donors donating $250 or more in a calendar 
year, starting from the time of each donor's most recent donation. 
Further, this recusal will be mandatory, with no written authorization 
option.
    Two organizations also asked for the recusal to apply to both 
particular matters involving specific parties and particular matters of 
general applicability. OGE declines to adopt this proposal; recusals 
will be required only for particular matters involving specific 
parties. If recusals were extended to particular matters of general 
applicability, as proposed by the commenters, it would make legal 
expense funds unworkable for employees at the many agencies whose 
missions affect large and diverse sectors of the public. In addition, 
identifying which particular matter of general applicability would 
affect each donor to a trust would be extremely difficult.
    OGE further notes that donors are limited to individuals, political 
parties, and 501(c)(3) organizations; for these donors, OGE believes 
that particular matters involving specific parties present the primary 
impartiality risk. Although 501(c)(3) organizations often work on 
policy issues that would be considered particular matters of general 
applicability, they typically do not have a financial interest in those 
particular

[[Page 33802]]

matters of general applicability (see OGE DAEOgram DO-06-002 (Jan. 19, 
2006), discussing OLC's conclusion that a nonprofit organization does 
not have a financial interest in a particular matter on which it spends 
funds to advocate its policy position solely because of those 
expenditures). As a result, OGE does not believe a mandatory recusal 
for particular matters of general applicability is appropriate.
    One commenter recommended that OGE require employee beneficiaries 
to certify in writing that they have notified their pro bono attorney 
of their financial reporting obligations, if any, and that the attorney 
has agreed to provide them with documentation of any services provided 
each year so that they may properly report any gifts. In response, OGE 
notes that Sec.  2635.1009 explicitly reminds financial disclosure 
filers that pro bono services must be reported as gifts on their 
financial disclosure forms and, per Sec.  2634.602(a), filers must 
certify that the financial disclosure reports are true and correct. 
Requiring further certification would create inconsistency and 
unnecessary redundancy in the gift reporting requirement for financial 
disclosure filers, and therefore OGE is not requiring such 
certification.
Section 2635.1003: Definitions
    OGE received one comment that OGE should modify Sec.  2635.1003 to 
emphasize that ``arising in connection with an employee's past or 
current official position'' does not cover assisting individuals with 
presidential nominations for Senate-confirmed positions. Because the 
concept of ``official position'' is regularly employed throughout the 
Standards, OGE does not believe such a change to the regulation is 
necessary. For example, if an executive branch employee assisted a 
nominee in the course of their official duties or in the course of 
their duties on the Presidential Transition Team, and a legal issue 
arose as a result of their official work or work for the transition 
team, that employee could establish a legal expense fund pursuant to 
subpart J. If, however, before an individual's executive branch 
employment, that individual assisted a nominee in the individual's 
personal capacity, then the legal issues would not arise from the 
individual's official position and the individual could not utilize 
subpart J to establish a legal expense fund. In addition, executive 
branch employees in Senate-confirmed positions would not be permitted 
to establish legal expense funds to defray the costs associated with 
the nomination and confirmation process, because those costs are 
expenses that do not arise from that employee's official executive 
branch position.
    One organization also requested that OGE treat contingency fee 
arrangements like pro bono arrangements, requiring pre-approval by 
agency ethics officials. The organization was primarily concerned with 
contingency fees being paid by third parties. Although OGE understands 
the concern, OGE does not believe that differentiating between 
contingency fees and other fee structures is appropriate, as OGE 
considers a contingency fee structure to be a regular market 
arrangement and not a gift. Payments by third parties for any legal 
services arrangement--contingency fees or any other fee structure--must 
comply with subpart J or an applicable exception or exclusion in 
subpart B.
    One organization and 6,907 individuals commented that the example 
to the definition of ``arising in connection with the employee's past 
or current official position,'' was offensive. The example illustrates 
that a military officer accused of sexual harassment off duty would be 
required to follow the subpart J requirements should that officer wish 
to accept payments for legal expenses from anyone other than family, 
close friends, or qualifying employee organizations, because the 
officer's after-work conduct is subject to the Uniform Code of Military 
Justice and thus arises out of the officer's official position. Several 
other individual commenters expressed opposition to the idea that 
employees accused of bad behavior would be able to fundraise for their 
defense. OGE has revised the example in the final rule. OGE would like 
to highlight, however, that nothing in this regulation should be 
construed as restricting an employee's access to a legal defense based 
on the nature of the allegations giving rise to the need for a defense 
fund.
    Two organizations objected to the definition of ``pro bono legal 
services'' in proposed Sec.  2635.1003 as too vague, specifically 
noting that there is ambiguity about whether the definition is limited 
to direct, representational legal services (not extending to, for 
example, amicus briefs). OGE intends the regulatory definition of pro 
bono legal services to mean direct, representational services. OGE will 
provide further guidance on this issue as needed.
    OGE received several comments asking to broaden the definition of 
``whistleblower'' beyond employees making protected reports or 
disclosures under the Whistleblower Protection Act (5 U.S.C. 
2302(b)(8)) and the listed related statutes. OGE believes that a clear, 
objective definition of the term ``whistleblower'' is appropriate. In 
addition, OGE does not want the definition to be overbroad because of 
the public interest in transparency in this area and thus declines to 
broaden the definition of ``whistleblower.''
Section 2635.1004: Establishment
    Two organizations objected to the requirement for a trust structure 
as unduly burdensome for public employees. Three organizations 
commented that they strongly supported the trust structure as drafted. 
OGE weighed these comments, as well as prior comments on this issue, in 
choosing to require the use of single-beneficiary trusts in drafting 
the final regulation. In addition, one organization commented that OGE 
was not taking into account the burden of seeking approval for every 
pro bono representation, and that the overall administrative burden of 
the regulation would outweigh any plausible benefit to employees.
    OGE understands the concerns of the commenters objecting to the 
trust structure, and weighed the additional burden of establishing a 
trust on employees when drafting the proposed rule. However, a number 
of factors support a trust requirement. First, trusts offer the benefit 
of having a fiduciary act on behalf of a single employee and therefore 
in that employee's interest. Second, requiring a trust is consistent 
with the Legal Expense Fund regulations governing House and Senate 
employees. Third, the trust requirement creates a uniform system for 
approval for every executive branch employee, which ensures that each 
employee is treated equally and also eases the review burden for agency 
ethics officials. Finally, the feedback OGE received in interagency 
consultations, as well as the majority of the comments received in the 
public comment period and in the public hearings and meetings held by 
OGE in advance of drafting the proposed regulation, strongly support 
the trust structure being mandatory for legal expense funds.
    Furthermore, in order to address the concerns raised by those 
objecting to the trust requirement and to reduce the burden on employee 
beneficiaries, OGE intends to issue guidance on, and provide sample 
trust clauses that would meet, the requirements of the regulation. In 
addition, OGE has provided other means for less wealthy or well-
connected employees to access legal services. For example, the new 
Sec.  2635.204(c)(2)(iv) creates a specific gift exception for 
assistance offered by pre-

[[Page 33803]]

existing employee organizations, which would permit employees to accept 
assistance with legal fees from organizations such as unions. OGE also 
notes that the requirements for accepting pro bono services under 
subpart J are significantly less burdensome than setting up a trust.
    One commenter asked that the prohibitions on the trustee position 
be expanded to include prohibited sources (as defined in Sec.  
2635.203(d)), employees of lobbyists, all relatives of the beneficiary, 
and an employee or agent of the beneficiary or any other person 
prohibited by this section. OGE believes that the proposed additions 
are overly broad. First, OGE does not believe that a blanket 
prohibition on any individual already serving as employee or agent of 
the beneficiary (e.g., an employee's personal attorney) is needed to 
adequately guard against potential conflicts of interest. OGE further 
notes that the proposed term ``relative'' is broad; instead, OGE 
specifically prohibited spouses, parents, and children for clarity. In 
addition, OGE notes that agency ethics officials emphasized in 
listening sessions following the ANPRM that in large agencies, almost 
all companies (and correspondingly, their employees) are considered 
prohibited sources. Furthermore, the proposed restrictions would 
prohibit an attorney working at any law firm where other attorneys 
perform lobbying work from serving as a trustee. Adding the proposed 
restrictions would greatly limit the pool of people available to serve 
as trustees, which could create additional barriers to access for 
lower-level employees. Accordingly, OGE is not going to adopt the 
proposed restrictions.
    One commenter commended OGE's careful consideration of anonymous 
whistleblowers and the particular risks they face within the proposed 
structure. One organization raised concerns that anonymous 
whistleblowers working for intelligence agencies may risk having their 
identities revealed if OGE contacts the agency to establish procedures 
for handling classified documents. OGE has coordinated with 
intelligence agencies and has confirmed that existing policies at these 
agencies can be adapted to handle any LEF documents with classified 
information. All classified information will remain at the agency. 
Moreover, anonymous whistleblower LEF documents likely will not contain 
any classified information since the employee's name and position will 
not be included. In the unlikely event OGE would need to review a 
document with classified information, an OGE employee with a security 
clearance will review the document in secure agency spaces, consistent 
with the current practice for other ethics documents containing 
classified information.
    OGE received several comments from individuals objecting to ``self-
reporting'' of legal expense funds. OGE understands the concern, but 
notes that because OGE only has the authority to regulate executive 
branch employees, it is necessarily the employee beneficiary's 
responsibility to properly report a legal expense fund.
    OGE received one comment that Sec.  2635.1004(e)(1) is superfluous 
and should be deleted in light of Sec.  2635.1004(f) because both 
provisions discuss the requirement that an employee beneficiary file 
their legal expense trust fund document with their agency. Section 
2635.1004(e)(1) outlines the steps employees must take after accepting 
contributions to their legal expense fund, which include filing the 
legal expense fund trust document with their agency and receiving 
approval. Section 2635.1004(f) specifies which employees need to file 
with their agency and which need to file with OGE. Because paragraph 
(e) identifies which actions an employee must take to accept 
contributions and paragraph (f) specifies where the employee must file, 
OGE disagrees that Sec.  2635.1004(e)(1) is superfluous and declines to 
change the regulation.
    One organization proposed mandating that additional documents be 
sent to reviewing officials for approval, specifically: the trust 
agreement, written procedures for compliance with applicable ethics 
requirements, and a certification that the trustee meets the 
eligibility requirements, which would include the trustee's name, 
business address, employer, and relationship to beneficiary. The 
organization further proposed that there be no redactions of the 
documents other than fee schedules and sensitive personal information 
such as personal addresses, the names of minor children, and account 
numbers.
    OGE notes that providing the trust agreement to the reviewing 
official is already mandated by Sec.  2635.1004(f). Further, Sec.  
2635.1004(g) indicates that the reviewing official should review 
``information regarding the trustee'' along with the trust document, in 
order to ascertain that the trustee meets the requirements of Sec.  
2635.1003. Accordingly, OGE does not believe a separate trustee 
certification is needed. In addition, OGE is electing not to adopt the 
proposal as OGE believes that ``written procedures for compliance with 
applicable ethics requirements'' is vague and could cause confusion--
agency ethics officials can advise on compliance with legal expense 
fund requirements just as they do with other ethics requirements. 
Finally, OGE is adding a note in this section clarifying that only 
sensitive personal information such as fee schedules, personal 
addresses, and account numbers will be redacted.
    Two organizations objected to agency officials serving as the 
approval authority for employee legal expense funds on the grounds that 
the agency is often a party opponent in federal employment litigation, 
which would create an incentive to withhold or delay approval. OGE 
understands this concern, and notes that all employees seeking legal 
expense funds may appeal agency denials to OGE. To more fully address 
this issue, OGE has broadened the existing legal expense fund appeal 
process to include an appeal right if the legal expense fund is not 
approved within the required 30-day timeline. However, OGE notes that 
given the need for conflicts screening, agencies should still be the 
initial review authority for most legal expense funds due to their 
knowledge of agency-specific conflicts.
    In addition, one commenter proposed expanding the list of employees 
for whom OGE would conduct a second-level review of legal expense funds 
to include agency heads and leaders of certain component entities whose 
financial disclosure reports OGE does not review. OGE believes that 
uniformity across the executive branch ethics program is appropriate in 
this case and defers to the authority in 5 U.S.C. 13103 in identifying 
which senior positions require an elevated level of review. 
Accordingly, OGE declines to adopt the commenter's proposal.
    One commenter noted that the proposed regulation did not clearly 
indicate the process for review for a Designated Agency Ethics 
Official's (DAEO) legal expense fund or specify the process for 
subordinate ethics officials. OGE has amended the regulation to clarify 
that OGE would conduct the initial review of a DAEO's legal expense 
fund. Legal expense funds of subordinate ethics officials will follow 
the same process as other employees and be reviewed by the DAEO.
    One organization commented that whistleblowers should have access 
to a standardized trust document to use rather than having to seek an 
individualized prior approval of their trust. State trust laws vary and 
are subject to change. Therefore, OGE cannot create a standardized 
trust document that would reliably satisfy all states' trust laws. It 
is the responsibility

[[Page 33804]]

of the beneficiary and trustee to ensure the trust complies with 
applicable state law. However, OGE will issue guidance that provides 
trust clauses that will comply with subpart J.
    One organization asked that the legal expense fund documents be 
available on OGE's website as ``searchable, sortable, and 
downloadable.'' OGE intends to have the records sortable by name of 
employee beneficiary, agency, position, and type of document. This is 
similar to the search capability for financial disclosure reports, 
which are also publicly available on OGE's website. In addition, OGE 
anticipates that the number of legal expense trust funds will be 
relatively low. Accordingly, anyone seeking information about legal 
expense fund donations should be able to quickly locate the information 
they need using the search capability available.
    One organization requested more specific requirements for donors 
and the trustee when screening donations. Specifically, the 
organization requested that each donor supply their employer and state 
of residence, confirm they meet the eligibility requirements, and 
acknowledge that the information the donor submits is subject to 18 
U.S.C. 1001. They asked that the trustee consult with the beneficiary 
and agency ethics official during the review and that the trustee 
interview every donor giving more than $1,000.
    Although Sec.  2635.1005 does not specifically address the 
information the trustee is required to collect from donors, it does 
state the trustee must provide the beneficiary with the information to 
complete their quarterly reports and public financial disclosure 
statements. As a result, the trustee is required to collect the name 
and employer for every donor and if the beneficiary is a public 
financial disclosure filer, the donor's city and state of residence. To 
create reporting consistency for all beneficiaries, OGE is revising 
Sec.  2635.1007(a)(1) to require the reporting of the donor's city and 
state of residence. Because the donor information is being provided to 
the trust, rather than the government directly, OGE is not requiring an 
acknowledgement that 18 U.S.C. 1001 applies. The trustee is a fiduciary 
and as a result, OGE believes a trustee's duty of care will require 
them to consult with the beneficiary and agency ethics officials, as 
necessary, to determine if a donation is permissible. Finally, OGE 
believes an interview requirement is too great an administrative and 
cost burden to place on the trust as the trustee should be able to 
ascertain whether or not the donation is prohibited without 
interviewing the donor.
Section 2635.1005: Administration
    OGE received no comments regarding this section.
Section 2635.1006: Contributions and Use of Funds
    One individual commenter noted that the scope of acceptable donors 
to legal expense funds is different from the scope of individuals and 
entities that can provide pro bono legal services and suggested both 
have the same restrictions. OGE created more specific requirements for 
donors of in-kind pro bono services because of the nature of legal 
service providers. Many pro bono donors are law firms or legal service 
organizations, which are not individuals and would thus be precluded 
from donating pro bono legal services if the requirements were 
identical. Instead, only solo legal practitioners would be able to 
provide pro bono legal services, severely limiting employees' access to 
such services. For these reasons, OGE is electing to provide executive 
branch employees the opportunity to access pro bono legal services 
within the existing limitations of the regulation. These limitations 
include, importantly, prohibiting pro bono donations from attorneys or 
organizations substantially affected by the performance or 
nonperformance of an employee's official duties.
    OGE requested comments regarding whether 501(c)(3) and 501(c)(4) 
organizations should be permitted to donate to legal expense funds. OGE 
received three comments from organizations expressing opposition to 
allowing 501(c)(4) organizations to donate. OGE also received comments 
from two organizations expressing opposition to allowing 501(c)(3) 
organizations to donate, with one allowing for the possibility of 
permitting donations with certain restrictions on the type of 501(c)(3) 
organizations that can donate.
    OGE believes it is appropriate to allow 501(c)(3) organizations to 
donate to legal expense funds and has revised the regulation to permit 
such donations. 501(c)(3) organizations are tax-exempt charitable 
organizations that are restricted from lobbying activities and have 
other safeguards built into the requirements of the Internal Revenue 
Code. OGE is further requiring that the donating 501(c)(3) organization 
be established for two years before the donation in order to prevent 
donations from entities created specifically to circumvent these 
regulations. 501(c)(4) organizations may participate in lobbying 
activities, and as a result, OGE believes these organizations pose a 
greater risk of impartiality concerns. Accordingly, OGE is electing not 
to allow 501(c)(4) organizations to donate. In addition, OGE notes that 
an employee beneficiary will have a mandatory recusal from particular 
matters involving specific parties for any 501(c)(3) organization 
making a donation (see Sec.  2635.1002) to protect against impartiality 
concerns.
    OGE received many comments arguing for a lower cap on donations, 
including comments suggesting the cap match the campaign finance 
donation limit. One organization commented that there should be no cap 
on donations. The $10,000 proposed donation cap in the regulation is 
consistent with the donation cap for U.S. Senate legal expense funds. 
The cap in the regulation also balances the high cost of legal services 
with preventing employees from relying on a single source or small 
number of sources to fund the employee's legal expenses.
    OGE received several comments from individuals asking OGE to 
prohibit donations from foreign governments and corporations. The 
regulation prohibits foreign governments from donating, and OGE has, in 
addition, amended the regulation to prohibit foreign nationals from 
donating to legal expense funds, serving as trustees, and providing pro 
bono legal services. The regulation also prohibits donations from any 
entities that are not registered 501(c)(3) organizations or political 
parties. For the purposes of this regulation, ``political parties'' 
include the distinct legal entities within national parties and party 
committees.
Section 2635.1007: Reporting Requirements
    Two organizations commented that they oppose the requirement to 
disclose the terms of representation and funding sources for most 
employees in quarterly reports, stating that the information is 
privileged and confidential, that it would require employees to report 
confidential billing statements with attorney work product, and that 
the proposed rule, as written, improperly invades the privileged 
attorney-client relationship. One of the two organizations argued in 
the alternative that the vagueness of the reporting requirements would 
``trick'' unwary clients into disclosing privileged and confidential 
information. This organization further stated that the reporting would 
be onerous and strategically disadvantage federal employees who need 
legal representation. In contrast, a separate organization strongly 
supported the quarterly reporting model as drafted.

[[Page 33805]]

OGE also received many comments from individuals supporting the idea of 
transparency generally and the specific public reporting requirements 
in the proposed regulation. Several individual commenters requested 
additional disclosures including: disclosing all donations, disclosing 
the relationship between the donor and beneficiary, and disclosing 
whether the donor does business with the beneficiary's agency. OGE 
weighed this strong support for transparency when considering any 
possible changes in response to commenters seeking less transparency.
    OGE believes that the required quarterly reporting is necessary for 
transparency and does not impede on attorney-client privilege or unduly 
discourage representation of federal employees. The regulation requires 
that the beneficiary report distributions of $250 or more from the 
fund. Section 2635.1007 requires that the employee beneficiary disclose 
the payee, date of distribution, amount, and ``purpose'' of the 
distribution. The required purpose can be as broad as ``legal 
services'' and the employee beneficiary is in no way compelled to, and 
in fact should not, report confidential attorney-client information. 
OGE notes specifically that the beneficiary is not required to report 
the terms of the representation or the billing rates of the staff 
involved. Moreover, OGE intends to provide more specific guidance 
regarding quarterly reporting requirements. Although OGE acknowledges 
that there may be some strategic disadvantages to any disclosure 
requirements, OGE is balancing that concern with the need for 
transparency, which most commenters emphasized was crucial to this 
process.
    OGE also is balancing the privacy interests of the donors and 
beneficiaries with the need for transparency. OGE believes the 
additional information requested by some individual commenters, such as 
the relationship between the beneficiary and donor, encroaches too much 
on the privacy of the donors and the beneficiary. In addition, the 
information required aligns with the disclosure requirements for U.S. 
House of Representatives legal expense funds.
    One of the organizations also commented that the proposed reporting 
system would deter attorneys from representing federal employees. As 
noted above, OGE believes that the reporting requirements are very 
general and not unduly onerous.
    Two organizations commented that placing the quarterly reporting 
information into a searchable, sortable database makes that information 
available to attorneys of party opponents, and stated that the 
information is privileged. OGE reiterates that no privileged 
information is required to be disclosed under Sec.  2635.1007, and 
information such as whether the client is on a flat or fixed rate or 
the numbers of hours worked is not required by the form. Any 
hypothetical strategic disadvantage to the employee beneficiary is 
outweighed by the employee beneficiary being able to access funds for 
legal services.
    One organization requested that the trustee disclose violations of 
the regulations (which OGE takes to mean impermissible donors or 
expense payments) and the corrective action taken, or in the 
alternative, declare that there have been no known violations. OGE does 
not have the statutory authority to require reporting by the trustee; 
all required reporting is from the employee beneficiary. In addition, 
the regulation contemplates the identification and return of 
impermissible donations as part of the proper functioning of the 
regulation, not as a per se violation. The beneficiary reports all 
donations received of $250 or more and all distributions of $250 or 
more on quarterly reports. These reports will be reviewed by agency 
ethics officials, and in some cases OGE, to ensure compliance with the 
regulation. It is possible that a trustee or beneficiary may not 
promptly identify an impermissible donation: this is the reason for 
agency review. In those cases, the agency ethics official will direct 
the employee to return the donation. OGE believes agency review of the 
quarterly reports and the fiduciary duty owed to the beneficiary are 
sufficient incentives for the trustee to act with care in carrying out 
their responsibilities.
    One organization commented that they were concerned that the 
information required in quarterly reports about donors could provide 
clues as to the identity of an anonymous whistleblower and asked that 
anonymous whistleblowers be permitted to file reports a year after the 
normal deadline. OGE understands this concern, which is why reports 
filed by anonymous whistleblowers are not publicly posted like other 
reports. However, OGE believes the quarterly reporting requirements are 
important to ensure compliance with the regulation and to provide the 
information necessary for the employee and OGE to manage any required 
recusals. OGE believes the regulation strikes the proper balance 
between the risk to the whistleblower and OGE's required oversight of 
the ethics program. As a result, the regulation's quarterly reporting 
requirements apply to all beneficiaries of legal expense funds.
Section 2635.1008: Termination of a Legal Expense Fund
    OGE requested comments regarding how and when the 501(c)(3) 
organization to which excess funds are donated should be designated. 
OGE received two comments from organizations supporting the idea that 
the trustee designate the organization, with one in favor of 
designating the organization at the time of termination of the trust. 
One individual commenter asked that the designation of the organization 
be at the time of formation to provide more information to donors to 
the fund. The commenter also objected to not returning the unspent 
donations to the donors. In addition, one organizational commenter 
requested that the 501(c)(3) organization not have ties to the trustee.
    OGE has revised Sec.  2635.1008 to exclude 501(c)(3) organizations 
that have ties to the trustee, but is not changing the time of 
designation. The regulation's timing in designating the 501(c)(3) 
organization is similar to that for legal expense funds established 
pursuant to the U.S. House of Representatives legal expense fund 
regulations, and the small number of comments weigh in favor of not 
changing the time of designation. The individual commenter was dubious 
of the difficulty in returning unspent funds to individual donors, 
given that the regulation requires the return of impermissible 
donations. In practice, however, it is challenging to return unspent 
donations to individual donors at the end of the life of a fund because 
the trustee would have to apportion the remaining funds among all of 
the donors to the fund, which could result in returning insignificant 
amounts to many individual donors. OGE believes a donation of the 
remaining amount to an approved 501(c)(3) organization reduces the 
administrative burden on the trust and does not create additional 
conflicts issues. However, OGE has amended the regulation to allow the 
return of unspent funds to individual donors if practicable.
    OGE received one comment requesting mandatory termination of legal 
expense funds to prevent beneficiaries from having legal expense funds 
that continue to spend funds after the legal matter has ended, i.e., 
``zombie funds.'' OGE has revised the rule and adopted a mandatory 
termination within 90 days of conclusion of the legal matter or within 
90 days of the last expenditure made in relation to the

[[Page 33806]]

legal matter for which it was created, whichever is later.
Section Sec.  2635.1009: Pro Bono Legal Services
    OGE received three comments from organizations regarding the 
restrictions on individuals and entities that provide pro bono legal 
services. One organization supported this section of the proposed 
regulation as drafted, stating that it contained adequate protections 
against conflicts of interest. One organization suggested that OGE 
adopt the definition of prohibited source found in Sec.  2635.203(d) 
and disallow all prohibited sources from providing pro bono legal 
services. One organization suggested that OGE revise the language of 
the rule to more clearly state that any individuals providing pro bono 
legal services may not be substantially affected by the performance or 
nonperformance of an employee's official duties.
    OGE declines to adopt the suggestion to bar the acceptance of pro 
bono services from prohibited sources as defined in Sec.  2635.203(d). 
In preparing to draft the proposed rule, OGE solicited input from 
agency ethics officials. Several agency ethics officials from large 
agencies told OGE that if the traditional ``prohibited source'' 
definition was applied to pro bono services, the employees at their 
agencies would likely never be able to accept pro bono assistance with 
legal expenses because of the breadth of the agency portfolio.
    OGE also notes that barring acceptance of pro bono services from 
firms registered as lobbyists and foreign agents would make it very 
difficult for employees to retain law firm services at all; this is 
particularly true for employees who live and work in the Washington, DC 
Metro Area. Accordingly, OGE has elected to permit employees to accept 
pro bono services from individual attorneys who are not lobbyists, 
foreign nationals, or foreign agents, and from organizations (law firms 
and other legal entities) that do not have interests that may be 
substantially affected by the performance or nonperformance of an 
employee's official duties. OGE recognizes the concerns related to 
lobbyists and registered foreign agents providing gifts, which is why 
individual attorneys providing pro bono services cannot be lobbyists, 
foreign nationals, or foreign agents.
    In addition, OGE has revised the regulation to more clearly address 
the two-step pro bono donor analysis. First, the individual attorney 
providing legal services cannot be a lobbyist, foreign agent, or 
foreign national, nor have interests substantially affected by the 
performance or nonperformance of the employee's official duties. 
Second, the organization or entity employing the attorney (e.g., a law 
firm, legal services organization, or 501(c)(3) hiring outside counsel) 
may not have interests that may be substantially affected by the 
performance or nonperformance of the employee's official duties. OGE 
believes the regulation as written strikes the proper balance between 
conflicts of interest concerns and allowing access to pro bono services 
in practice for all federal employees.
    OGE solicited comments regarding whether 501(c)(3) and 501(c)(4) 
organizations should be permitted to pay for legal services for an 
executive branch employee. OGE received a comment from 6,905 
individuals that nonprofit charities should be on equal footing with 
law firms in the ability to provide legal services. OGE also received 
comments from three organizations that supported the idea that 
501(c)(3) organizations should be able to pay for outside counsel to 
provide legal services to executive branch employees, with some 
limitations. The limitations proposed include: (1) that the 
organization not have conflicting interests; (2) that the organization 
be in operation for at least two or three years; and (3) that the 
organization's focus be on government integrity, whistleblower 
protections, federal employment law, or fraud, waste, and abuse in the 
government. OGE received one comment from an organization objecting to 
the idea that both 501(c)(3) organizations and 501(c)(4) organizations 
could be able to pay for outside counsel to provide legal services. OGE 
received two comments from organizations objecting to, and no comments 
in support of, allowing 501(c)(4) organizations to provide pro bono 
legal services or pay for legal services for executive branch 
employees.
    OGE notes that Sec.  2635.1009(a)(2) of the proposed regulation had 
allowed both law firms and 501(c)(3) organizations to provide in kind 
pro bono legal services to an employee, so long as the entity providing 
services did not ``have interests that may be substantially affected by 
the performance or nonperformance of an employee's official duties.'' 
This provision allowed a 501(c)(3) organization to provide legal 
services using the organization's own employees, but it did not permit 
any entity to hire an outside lawyer or law firm to provide those 
services.
    Following the review of the comments, OGE also believes it is 
appropriate to allow 501(c)(3) organizations to pay an outside lawyer 
or law firm to provide an employee legal services. As discussed above, 
501(c)(3)s are tax-exempt charitable organizations that are restricted 
from lobbying activities and have other safeguards due to the 
requirements of the Internal Revenue Code. Because 501(c)(4) 
organizations do not have similar safeguards in place and do not have 
the same restrictions on lobbying activity, OGE is declining to allow 
501(c)(4) organizations to pay an outside lawyer or law firm to provide 
an employee legal services.
    OGE has revised the regulation to include a provision permitting 
501(c)(3) organizations to hire outside counsel to represent executive 
branch employees for legal matters arising in connection with the 
employee's past or current official position, the employee's prior 
position on a campaign, or the employee's prior position on a 
Presidential Transition Team. Any 501(c)(3) organization seeking to 
hire outside counsel will be required to have been established for two 
years before paying for an employee's legal services to protect against 
the creation of an entity in order to circumvent these regulations. The 
501(c)(3) organization will also need to meet the requirements of Sec.  
2635.1009(a).
    There is heightened concern about impartiality in pro bono legal 
arrangements and in any circumstance when a third party is paying for 
an employee's legal fees. As a result, the employee will have a 
mandatory recusal from particular matters involving specific parties 
involving the attorney(s) and legal services organization representing 
the employee in a legal matter. The employee will also have a mandatory 
recusal from particular matters involving specific parties involving 
any 501(c)(3) organization paying for the employee's legal fees during 
the representation and for two years after the representation has 
concluded.
    OGE received comments from two organizations concerned that seeking 
approval from the agency for receipt of pro bono service when the 
agency is the opposing party in the legal matter would deter some 
employees from seeking pro bono legal services. The ethics system in 
the executive branch is decentralized; thus, the agencies are in the 
best position to know which individuals, 501(c)(3) organizations, and 
law firms have business before the agency and could create a conflict 
of interest. As a result, the review process

[[Page 33807]]

rests with agencies. To address the concern expressed by the 
commenters, however, OGE has revised the regulation to permit employees 
engaged in legal matters when the agency is the opposing party to 
appeal to OGE when an agency determines that a pro bono service 
provider is prohibited, or when an agency fails to make such a 
determination within 30 days. OGE believes this change strikes a 
balance between ensuring prohibited donors are not providing legal 
services to employees while ensuring every employee entitled to 
assistance with legal services can access those services.
    OGE received a comment from an organization that is concerned that 
legal services providers could be paid by third parties for legal 
services and the employee and/or the legal services provider would then 
characterize those services as pro bono. The commenter requested an 
amendment to the regulation requiring a certification by the legal 
services provider and the employee that no third party is paying for 
the legal services. In response to the commenter's concern, OGE is 
adding a certification to the quarterly report where the employee will 
attest that the information is true, complete, and correct to the best 
of their knowledge. In addition, any employee who files an OGE Form 
278e or 450 financial disclosure statement must disclose the receipt of 
pro bono services or legal services paid for by a non-relative third 
party as a gift on their annual financial disclosure report, which the 
employee must similarly certify is true, complete, and correct to the 
best of their knowledge. Both disclosure statements are subject to the 
civil and criminal penalties for either failure to disclose or false 
disclosure.

B. Comments on Subpart B of the Standards

    Two organizations requested clarification on whether contingency 
fees are provided for less than ``market value'' as that term is 
defined in Sec.  2635.203(c). OGE considers contingency fees to be a 
regular market arrangement, and does not consider a contingency fee 
arrangement on its face to be less than the cost a member of the 
general public would reasonably expect to incur. Accordingly, 
contingency fee arrangements are not pro bono legal services as defined 
in Sec.  2635.1003.
    OGE received no comments regarding Sec.  2635.204(n): Exception for 
Legal Expense Funds and Pro Bono Legal Services and Sec.  2635.204(c): 
Discounts and Similar Benefits in subpart B.
    OGE is implementing a new exception at 5 CFR 2635.204(c)(2)(iv) to 
clarify that employees may properly accept opportunities and benefits 
offered by a previously established employee organization, when 
eligibility is based on the employee's status as an agency employee. As 
discussed in the preamble to the proposed rule (see 87 FR 23773), the 
proposed exception is limited to ``established'' employee 
organizations, such as employee welfare groups for Federal employees, 
because the purpose of this exception is to allow employees to accept 
opportunities and benefits from pre-existing employee organizations 
with a general mission of providing assistance to agency employees, 
rather than from organizations established as a response to a specific 
investigation or established to help a specific employee. As the 
preamble to the proposed rule clarifies, the word ``established'' does 
not mean an employee organization must be established before this 
regulation goes into effect; rather, it means that the organization 
should have been established before the need for assistance arises--in 
the case of an LEF, before a legal matter arises.

C. Regulatory Amendments to Confidential Financial Disclosure Reporting 
Requirements

    OGE received no comments regarding Sec.  2634.907: Report contents.

III. Matters of Regulatory Procedure

Regulatory Flexibility Act

    As Director of the Office of Government Ethics, I certify under the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) that this final rule 
will not have a significant economic impact on a substantial number of 
small entities because it primarily affects current Federal executive 
branch employees.

Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. chapter 35) applies because 
this regulation creates information collection requirements that 
require approval of the Office of Management and Budget. The 
information collection requirements imposed by the proposed regulation 
are directed at beneficiaries of legal expense funds, who are current 
executive branch employees. Although the requirements are directed at 
employee beneficiaries, OGE anticipates that the legal expense fund 
trustees will prepare most or all of the fund documentation and 
reporting.
    In fulfilling the regulatory requirements, employee beneficiaries 
must first submit a trust document for approval by their employing 
agency, and in some cases by OGE. Employee beneficiaries must also 
submit quarterly and termination reports regarding the funds collected 
and disbursed by the legal expense fund. The employee beneficiaries 
will in turn collect information from (1) donors who contribute to the 
legal expense fund for the payment of legal expenses and (2) payees who 
receive payments distributed from the legal expense fund. Together, 
this information collection is titled ``OGE Legal Expense Fund 
Information Collection.''
    OGE plans to seek Paperwork Reduction Act approval of this new 
information collection. The purposes of the OGE Legal Expense Fund 
Information Collection include, but are not limited to, obtaining 
information relevant to a conflict-of-interest determination and 
disclosing on the OGE website information submitted pursuant to 5 CFR 
part 2635, subpart J. The authority for this information collection is 
addressed in the SUPPLEMENTARY INFORMATION section.
    OGE estimates that there will be approximately three new legal 
expense funds filed each year. It is anticipated that there may be an 
average of five legal expense fund trusts in existence each year. Each 
trust is anticipated to have approximately 20 donors, whose reporting 
requirements are tied to the frequency with which they donate, and 
approximately two payees, who will submit information each time they 
receive a distribution.
    The following table estimates the total annual burden resulting 
from the OGE Legal Expense Fund Information Collection will be 
approximately 129.2 hours.

----------------------------------------------------------------------------------------------------------------
                                                                                     Number of
                 Instrument                           Time per  response              annual       Total burden
                                                                                     responses        (hours)
----------------------------------------------------------------------------------------------------------------
Trust Document..............................  20 hours..........................               3              60
Quarterly and Termination Reports             2 hours...........................              20              60
 (beneficiary burden).
Quarterly and Termination Reports (donor and  5 minutes.........................             110             9.2
 payee burden).
                                                                                 -------------------------------

[[Page 33808]]

 
    Total...................................  ..................................  ..............           129.2
----------------------------------------------------------------------------------------------------------------

    These estimates are based in part on OGE's knowledge of several 
legal expense funds that have been established for Executive branch 
employees, as well as OGE's consultation with the U.S. House of 
Representatives and the U.S. Senate regarding the legal expense funds 
that they oversee.
    Shortly after publication of this rule, OGE plans to submit this 
new information collection to the Office of Management and Budget (OMB) 
for approval under the Paperwork Reduction Act. OMB is required to make 
a decision concerning the collection of information requirements 
contained in this rule between 30 and 60 days after publication of this 
document in the Federal Register. Therefore, a comment to OMB is best 
assured of having its full effect if OMB receives it within 30 days of 
publication. Public comments can be submitted on OMB's website: 
Reginfo.gov.

Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
chapter 25, subchapter II), this final rule will not significantly or 
uniquely affect small businesses and will not result in increased 
expenditures by State, local, and tribal governments, in the aggregate, 
or by the private sector, of $100 million or more (as adjusted for 
inflation) in any one year.

Executive Order 13563 and Executive Order 12866

    Executive Orders 13563 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select the regulatory approaches that 
maximize net benefits (including economic, environmental, public health 
and safety effects, distributive impacts, and equity). Executive Order 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This final rule has been designated as a ``significant regulatory 
action'' although not economically significant, under section 3(f) of 
Executive Order 12866. Accordingly, this rule has been reviewed by the 
Office of Management and Budget.
    Currently, executive branch employees may accept gifts to pay for 
legal expenses from others directly and can also establish funds to 
accept donations for such expenses, as long as the employee remains in 
compliance with the gift restrictions in subparts B and C of the 
Standards of Conduct and the criminal conflict of interest statutes. 
See, e.g., OGE Legal Advisory LA-18-11 (Sept. 12, 2018); OGE Legal 
Advisory LA-17-10 (Sept. 28, 2017). In other words, there are currently 
costs for employees who establish an LEF in order to ensure compliance 
with ethics rules even in the absence of OGE's new framework in subpart 
J, but compliance can be difficult and confusing as the current rules 
do not address these types of gifts specifically. OGE's role is 
currently limited to providing a legal expense fund trust template or 
to providing technical assistance to help ensure that executive branch 
employees who may receive distributions from an LEF will be in 
compliance with existing ethics laws and rules.
    Based on OGE's current experience under the status quo, it is 
estimated that approximately five executive branch employees may seek 
to establish or maintain an LEF annually. The new framework will 
consist of the following activities: establishment of the LEF trust; 
submission of trust documentation for agency review and approval; 
review and approval by OGE (when applicable); LEF trustee soliciting 
and accepting donations; LEF trustee screening donations to ensure the 
donor is permissible; LEF trustee overseeing distributions from the 
trust for the employee's legal expenses; preparing quarterly reports of 
contributions to and distributions from the LEF; submission of 
quarterly reports for agency review; review by OGE (when applicable); 
preparation of trust termination reports and/or employment termination 
reports; submission of those reports for agency review and OGE review 
(when applicable); and communications regarding all of the above. OGE 
estimates that the annual time burden for all of the above is 100 
hours. Using an estimated rate $340 per hour for the services of a 
professional trust administrator or private representative, the 
estimated annual cost burden is $34,000. See Clio, Legal Trends Report 
65 (2021), https://www.clio.com/resources/legal-trends/2021-report/read-online/ (calculating an average hourly rate of $332 for trust 
lawyers nationally). However, OGE estimates that the annual time burden 
under the status quo, if an employee establishes a legal expense fund 
that needs to comply with existing ethics rules, is 75 hours with an 
annual cost burden of $25,500. Thus, the net increase from the status 
quo is approximately $8,500 per fund. The estimate of 75 hours is 
based, in part, on the estimated time burden for OGE's qualified trust 
program. See 84 FR 67743. That number was reduced because the status 
quo does not require review and approval of trusts or submission of 
reports to agencies and OGE. Under the status quo, a significant time 
burden exists because the lack of a detailed framework requires 
additional research by employee representatives, consultation with 
agency ethics officials and OGE, and a more detailed review of each 
legal expense fund donor in the absence of an enumerated list of 
permissible donors. The additional 25-hour estimate is based on the 
specific submissions required by 5 CFR part 2635, subpart J. 
Specifically, submission of documents establishing an LEF trust, 
quarterly reports, and termination reports; review by agencies and OGE 
of those submissions; and corresponding communications will increase 
the cost burden in comparison to the status quo. The burden on legal 
expense fund donors specifically is unchanged because they would need 
to provide the same level of information under the status quo.
    The benefits from implementing this new regulatory structure are 
significant. Employees' acceptance of payments for legal expenses 
relating to their official duties has triggered concern from outside 
groups, Congress, and the media regarding appearance of corruption, 
corruption issues, and a desire for transparency. Creating this 
regulation will provide a framework for screening for conflicts of 
interest and transparency, which will serve to protect both the agency 
and the employee. Further, the regulation will provide clarity to 
executive branch employees by articulating the process for establishing 
an LEF and the requirements for maintaining one, including: donation 
caps, the process for review and approval of LEF trust documents, the 
definition of prohibited donors, and the submission of quarterly, 
publicly available reports. As a result of

[[Page 33809]]

these requirements, as well as the increased public reporting 
requirements, the public will have increased confidence in the 
decision-making of executive branch employees who accept gifts of legal 
expenses consistent with the new proposed subpart J.

Executive Order 12988

    As Director of the Office of Government Ethics, I have reviewed 
this final rule in light of section 3 of Executive Order 12988, Civil 
Justice Reform, and certify that it meets the applicable standards 
provided therein.

Executive Order 13175

    The Office of Government Ethics has evaluated this final rule under 
the criteria set forth in Executive Order 13175 and determined that 
tribal consultation is not required as this proposed rule has no 
substantial direct effect on one or more Indian tribes, on the 
relationship between the Federal Government and Indian tribes, or on 
the distribution of power and responsibilities between the Federal 
Government and Indian tribes.

List of Subjects

5 CFR Part 2634

    Certificates of divestiture, Conflict of interests, Financial 
disclosure, Government employees, Penalties, Privacy, Reporting and 
recordkeeping requirements, Trusts and trustees.

5 CFR Part 2635

    Conflict of interests, Executive branch standards of ethical 
conduct, Government employees.

    Approved: May 10, 2023.
Emory Rounds,
Director, U.S. Office of Government Ethics.

    For the reasons set forth in the preamble, the U.S. Office of 
Government Ethics amends 5 CFR parts 2634 and 2635 as follows:

PART 2634--EXECUTIVE BRANCH FINANCIAL DISCLOSURE, QUALIFIED TRUSTS, 
AND CERTIFICATES OF DIVESTITURE

0
1. The authority citation for part 2634 is revised to read as follows:

    Authority:  5 U.S.C. 13101 et. seq.; 26 U.S.C. 1043; Pub. L. 
101-410, 104 Stat. 890, 28 U.S.C. 2461 note, as amended by Sec. 
31001, Pub. L. 104-134, 110 Stat. 1321 and Sec. 701, Pub. L. 114-74; 
Pub. L. 112-105, 126 Stat. 291; E.O. 12674, 54 FR 15159, 3 CFR, 1989 
Comp., p. 215, as modified by E.O. 12731, 55 FR 42547, 3 CFR, 1990 
Comp., p. 306.


0
2. Amend Sec.  2634.907 by:
0
a. Revising paragraph (g)(5); and
0
b. Designating the example following paragraph (g)(5) as Example 1 to 
paragraph (g).
    The revision reads as follows:


Sec.  2634.907  Report contents.

* * * * *
    (g) * * *
    (5) Exceptions. Reports need not contain any information about:
    (i) Gifts and travel reimbursements received from relatives (see 
Sec.  2634.105(o)).
    (ii) Gifts and travel reimbursements received during a period in 
which the filer was not an officer or employee of the Federal 
Government.
    (iii) Any food, lodging, or entertainment received as ``personal 
hospitality of any individual,'' as defined in Sec.  2634.105(k).
    (iv) Any payments for legal expenses from a legal expense fund or 
the provision of pro bono legal services, as defined in subpart J of 
part 2635 of this chapter, or any payments for legal expenses or the 
provision of pro bono legal services that otherwise qualify for a gift 
exclusion or gift exception in subpart B of part 2635 of this chapter, 
if the confidential filer is an anonymous whistleblower as defined by 
Sec.  2635.1003 of this chapter.
    (v) Any exclusions specified in the definitions of ``gift'' and 
``reimbursement'' at Sec.  2634.105(h) and (n).
* * * * *

PART 2635--STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES OF THE 
EXECUTIVE BRANCH

0
3. The authority citation for part 2635 is revised to read as follows:

    Authority:  5 U.S.C. 7301, 7351, 7353; 5 U.S.C. 13101 et. seq.; 
E.O. 12674, 54 FR 15159, 3 CFR, 1989 Comp., p. 215, as modified by 
E.O. 12731, 55 FR 42547, 3 CFR, 1990 Comp., p. 306.

0
4. Amend Sec.  2635.203 by adding paragraphs (h) and (i) to read as 
follows:


Sec.  2635.203  Definitions.

* * * * *
    (h) Legal expense fund has the meaning set forth in Sec.  
2635.1003.
    (i) Pro bono legal services has the meaning set forth in Sec.  
2635.1003.
0
5. Amend Sec.  2635.204 by:
0
a. Removing the word ``or'' at the end of paragraph (c)(2)(ii);
0
b. Removing the period at the end of paragraph (c)(2)(iii) and adding 
``; or'' in its place; and
0
c. Adding paragraph (c)(2)(iv), Example 4 to paragraph (c)(2), and 
paragraph (n).
    The additions read as follows:


Sec.  2635.204  Exceptions to the prohibition for acceptance of certain 
gifts.

* * * * *
    (c) * * *
    (2) * * *
    (iv) Offered to employees by an established employee organization, 
such as an association composed of Federal employees or a nonprofit 
employee welfare organization, because of the employees' Government 
employment, so long as the employee is part of the class of individuals 
eligible for assistance from the employee organization as set forth in 
the organization's governing documents.
* * * * *
    Example 4 to paragraph (c)(2): A nonprofit military relief society 
provides access to financial counseling services, loans, and grants to 
all sailors and Marines. A service member may accept financial benefits 
from the relief society, including to cover legal expenses, because the 
benefits are offered by an employee organization that was established 
before the legal matter arose, and because the benefits are being 
offered because of the employees' Government employment, as set forth 
in the relief society's governing documents.
* * * * *
    (n) Legal expense funds and pro bono legal services. An employee 
who seeks legal representation for a matter arising in connection with 
the employee's past or current official position, the employee's prior 
position on a campaign of a candidate for President or Vice President, 
or the employee's prior position on a Presidential Transition Team may 
accept:
    (1) Payments for legal expenses paid out of a legal expense fund 
that is established and operated in accordance with subpart J of this 
part; and
    (2) Pro bono legal services provided in accordance with subpart J 
of this part.

0
6. Add subpart J to read as follows:

Subpart J--Legal Expense Funds

Sec.
2635.1001 Overview.
2635.1002 Applicability and related considerations.
2635.1003 Definitions.
2635.1004 Establishment.
2635.1005 Administration.
2635.1006 Contributions and use of funds.
2635.1007 Reporting requirements.
2635.1008 Termination of a legal expense fund.
2635.1009 Pro bono legal services.


Sec.  2635.1001  Overview.

    This subpart contains standards for an employee's acceptance of 
payments for

[[Page 33810]]

legal expenses through a legal expense fund and an employee's 
acceptance of pro bono legal services. Legal expenses covered by this 
subpart are those for a matter arising in connection with the 
employee's past or current official position, the employee's prior 
position on a campaign of a candidate for President or Vice President, 
or the employee's prior position on a Presidential Transition Team.


Sec.  2635.1002  Applicability and related considerations.

    (a) Applicability. This subpart applies to an employee who seeks to 
accept payments for legal expenses from a legal expense fund or the 
provision of pro bono legal services. The legal expenses or the 
provision of pro bono legal services must be for a matter arising in 
connection with the employee's past or current official position, the 
employee's prior position on a campaign of a candidate for President or 
Vice President, or the employee's prior position on a Presidential 
Transition Team.
    (b) Not covered by this subpart. The following types of payments 
for legal expenses or pro bono legal services are not covered by this 
subpart:
    (1) Personal matters. Payments for legal expenses or the provision 
of pro bono legal services related to matters that do not arise in 
connection with the employee's past or current official position, the 
employee's prior position on a campaign of a candidate for President or 
Vice President, or the employee's prior position on a Presidential 
Transition Team, such as a matter that is primarily personal in nature, 
are not covered by this subpart. Personal matters include, but are not 
limited to, tax planning, personal injury litigation, protection of 
property rights, family law matters, and estate planning or probate 
matters.
    Example 1 to paragraph (b)(1): A Department of Homeland Security 
employee wants to set up a legal expense fund in connection with the 
employee's divorce and custody proceeding. This is a personal matter 
and the employee may not establish a legal expense fund under this 
subpart, but may use other gift exceptions and exclusions in accordance 
with subparts B and C of this part as appropriate.
    (2) Gifts acceptable according to a gift exclusion or exception. 
Payments for legal expenses or the provision of pro bono legal services 
that otherwise qualify for a gift exclusion or exception other than 
Sec.  2635.204(n) are not covered by this subpart.
    Example 1 to paragraph (b)(2): A Central Intelligence Agency 
employee is facing administrative disciplinary action due to an issue 
with the employee's security clearance and would like to seek financial 
assistance to pay for an attorney. Even though this matter arose in 
connection with their official position, if the employee's parents 
offer to cover the legal expenses, that donation is not subject to this 
subpart, as it would be subject to the gift exception at Sec.  
2635.204(b).
    Note 1 to paragraph (b): Acceptance of legal expense payments or 
pro bono legal services not covered by this subpart must be analyzed 
under subparts B and C of this part.
    (c) Related considerations--(1) Gifts between employees. Acceptance 
of legal expense payments or the provision of pro bono legal services 
from another employee must be analyzed under 18 U.S.C. 205 and subpart 
C of this part.
    (2) Impartiality. (i) An employee beneficiary may not knowingly 
participate in a particular matter involving specific parties, 
consistent with the periods of disqualification detailed in paragraph 
(c)(2)(ii) of this section, if any person described below is a party or 
represents a party:
    (A) The trustee;
    (B) An individual, entity, or organization donating pro bono legal 
services pursuant to Sec.  2635.1009 (pro bono legal services 
provider); or
    (C) An individual or entity that made a donation of $250 or more in 
a calendar year to the legal expense fund.
    (ii) The employee beneficiary's period of disqualification from 
particular matters involving specific parties involving the trustee 
runs from the assumption of the trustee position until two years after 
the trustee's resignation, if the trustee resigns, or two years after 
the termination of the trust. The employee's period of disqualification 
from particular matters involving specific parties involving each pro 
bono legal services provider runs from the commencement of pro bono 
legal services until two years after the last date pro bono services 
were provided. The period of disqualification for each donor begins to 
run on the date the most recent legal expense fund donation is received 
from that donor until two years after the donation.
    Example 1 to paragraph (c)(2): A donor contributed to a Social 
Security Administration (SSA) employee's legal expense fund. Three 
months after this contribution was made, the donor submitted a 
disability claim. The employee may not participate in evaluating the 
disability claim because the claim falls within the two-year mandatory 
recusal period.
    (3) Misuse of position. Legal expense fund payments must be 
solicited and accepted consistent with the provisions in subpart G of 
this part relating to the use of public office for private gain, use of 
nonpublic information, use of Government property, and use of 
Government time. The mere reference to the employee's official position 
in a solicitation would generally not violate subpart G of this part.
    Example 1 to paragraph (c)(3): A Transportation Security 
Administration (TSA) employee retains legal counsel due to an 
investigation into inappropriate behavior in their department, and the 
employee establishes a legal expense fund in accordance with this 
subpart. Neither the employee nor the legal expense fund's trustee may 
use the TSA agency seal in materials or otherwise imply the Government 
endorses the legal expense fund, or use nonpublic details of the 
investigation to solicit contributions to the legal expense fund. 
Agency seals frequently are protected by law or require licensing for 
use. Further, the employee may not task subordinates with any work 
relating to administration of the legal expense fund. However, the 
employee may note in a solicitation that they are an employee of TSA, 
and that the matter arose in the course of their official duties.
    (4) Financial disclosure. In addition to the legal expense fund 
reporting requirements outlined in Sec.  2635.1007, an employee 
beneficiary who is a public or confidential filer, other than a 
confidential filer who is an anonymous whistleblower, under part 2634 
of this chapter must report gifts of legal expense payments accepted 
from sources other than the United States Government, including gifts 
of pro bono services, on the employee's financial disclosure report, 
subject to applicable thresholds and exclusions.


Sec.  2635.1003  Definitions.

    For purposes of this subpart:
    Anonymous whistleblower means an employee who makes or intends to 
make a disclosure or report, or who engages in an activity protected 
under 5 U.S.C. 2302(b)(8), 5 U.S.C. 2302(b)(9), 5 U.S.C. 416, 50 U.S.C. 
3517, 50 U.S.C. 3033, or 28 CFR 27.1, and who seeks to remain 
anonymous.
    Arising in connection with the employee's past or current official 
position means the employee's involvement in the legal matter would not 
have arisen had the employee not held the status, authority, or duties 
associated with the employee's past or current Federal position.

[[Page 33811]]

    Example 1 to the definition of ``arising in connection with the 
employee's past or current official position'': A Department of 
Transportation employee is being investigated by the Inspector General 
for potential misuse of Government resources while on official travel. 
The Internal Revenue Service (IRS) is separately investigating the 
employee for misreporting household income on the employee's personal 
taxes. The employee may use this subpart to establish a legal expense 
fund concerning the Inspector General investigation because the legal 
matter arose in connection with their official position. However, this 
subpart would not apply to the unrelated IRS investigation because that 
legal matter did not arise in connection with the employee's official 
position.
    Example 2 to the definition of ``arising in connection with the 
employee's past or current official position'': A junior employee at 
the Environmental Protection Agency is challenging their proposed 
termination due to misuse of Government property. All of the employee's 
alleged misconduct occurred outside official duty hours. Because the 
employee would not be subject to the Standards of Conduct had the 
employee not held their official position, the employee may establish a 
legal expense fund in accordance with this subpart.
    Arising in connection with the employee's prior position on a 
campaign means the employee's involvement in the legal matter would not 
have arisen had the employee not held the status, authority, or duties 
associated with the employee's prior position on a campaign of a 
candidate for President or Vice President.
    Arising in connection with the employee's prior position on a 
Presidential Transition Team means the employee's involvement in the 
legal matter would not have arisen had the employee not held the 
status, authority, or duties associated with the employee's prior 
position as a member of the staff of a Presidential Transition Team.
    Employee beneficiary means an employee as defined by Sec.  
2635.102(h) for whose benefit a legal expense fund is established under 
this subpart.
    Legal expense fund means a fund established to receive 
contributions and to make distributions of legal expense payments.
    Legal expense payment or payment for legal expenses means anything 
of value received by an employee under circumstances that make it clear 
that the payment is intended to defray costs associated with 
representation in a legal, congressional, or administrative proceeding.
    Pro bono legal services means legal services provided without 
charge or for less than market value as defined in Sec.  2635.203(c) to 
an employee who seeks legal representation for a matter arising in 
connection with the employee's past or current official position, the 
employee's prior position on a campaign of a candidate for President or 
Vice President, or the employee's prior position on a Presidential 
Transition Team.


Sec.  2635.1004  Establishment.

    (a) Structure. A legal expense fund must be established as a trust 
that conforms to the requirements of this part and applicable state 
law. To the extent the requirements of this part and applicable state 
law are incompatible, the Director of the Office of Government Ethics 
may permit such deviations from this part as necessary to ensure 
compatibility with applicable state law.
    (b) Grantor. The legal expense fund must be established by the 
employee beneficiary.
    (c) Trustee. A legal expense fund must be administered by a trustee 
who is not:
    (1) The employee beneficiary;
    (2) A spouse, parent, or child of the employee beneficiary;
    (3) Any other employee of the Federal executive, legislative, or 
judicial branches;
    (4) An agent of a foreign government as defined in 5 U.S.C. 
7342(a)(2);
    (5) A foreign national;
    (6) A lobbyist as defined by 2 U.S.C. 1602(10) who is currently 
registered pursuant to 2 U.S.C. 1603(a); or
    (7) A person who has interests that may be substantially affected 
by the performance or nonperformance of the employee beneficiary's 
official duties.
    (d) Employee beneficiary. (1) Except as provided in paragraph 
(d)(2) of this section, a legal expense fund must be established for 
the benefit of a single, named employee beneficiary.
    (2) A legal expense fund for the benefit of an anonymous 
whistleblower may be established without disclosing the identity of the 
anonymous whistleblower to anyone other than the trustee so long as the 
legal expense fund is created for the purpose of funding expenses in 
connection with the whistleblowing activity or the facts that underlie 
that activity.
    (e) Filing and approval of legal expense fund trust document 
required. An employee beneficiary may not solicit or accept 
contributions or make distributions through a legal expense fund 
before:
    (1) Filing the legal expense fund document in accordance with 
paragraph (f) of this section; and
    (2) Receiving approval for the legal expense fund in accordance 
with paragraph (g)(1) or (g)(3) of this section.
    (f) Filing of legal expense fund trust document. (1) The employee 
beneficiary, or the trustee or representative of the employee 
beneficiary, must file the legal expense fund trust document with the 
designated agency ethics official at the agency where the employee 
beneficiary is employed.
    (2) An employee beneficiary who is an anonymous whistleblower may 
choose to file a legal expense fund trust document anonymously through 
the employee beneficiary's trustee or representative with the Office of 
Government Ethics only. The Office of Government Ethics will not 
receive reports containing classified material; if needed, an OGE 
employee with a security clearance will review any classified documents 
in a secure agency space, consistent with the current practice for 
other ethics documents containing classified material.
    (g) Approval of legal expense fund trust document. (1) Designated 
agency ethics official approval. The designated agency ethics official 
must determine, based on the submitted trust document and information 
regarding the trustee, whether to approve a legal expense fund trust 
document filed by an employee beneficiary, other than an anonymous 
whistleblower choosing to file with the Office of Government Ethics, 
within 30 calendar days of filing.
    (i) Standard for approval. The designated agency ethics official 
must approve a legal expense fund that is, based on the submitted trust 
document and information regarding the trustee, in compliance with this 
subpart.
    (ii) Transmission of trust documents to the Office of Government 
Ethics. Following approval, the signed legal expense fund trust 
document must be forwarded to the Office of Government Ethics within 
seven calendar days.
    (iii) Exception for anonymous whistleblowers. The Office of 
Government Ethics will serve as the approving authority for anonymous 
whistleblowers who choose to file a legal expense fund trust document 
anonymously with the Office of Government Ethics only.
    (2) Office of Government Ethics review. Following approval by the 
designated agency ethics official, the Office of Government Ethics will 
conduct a secondary review of the legal expense fund trust documents of 
the employee beneficiaries listed in

[[Page 33812]]

paragraph (g)(2)(ii) of this section within 30 calendar days of 
receipt.
    (i) Standard for review. The Office of Government Ethics will 
review the legal expense fund trust document to determine whether it 
conforms to the requirements established by this subpart. If defects 
are ascertained, the Office of Government Ethics will bring them to the 
attention of the approving agency and the employee beneficiary or the 
employee beneficiary's trustee or representative, who will have 30 
calendar days to take necessary corrective action.
    (ii) Employee beneficiaries requiring secondary Office of 
Government Ethics review. The Office of Government Ethics will review 
the legal expense fund trust documents of the following employee 
beneficiaries:
    (A) The Postmaster General;
    (B) The Deputy Postmaster General;
    (C) The Governors of the Board of Governors of the United States 
Postal Service;
    (D) Employees of the White House Office and the Office of the Vice 
President; and
    (E) Officers and employees in offices and positions which require 
confirmation by the Senate, other than members of the uniformed 
services and Foreign Service Officers below the rank of Ambassador.
    (3) Review for designated agency ethics officials. When the 
employee beneficiary is a designated agency ethics official, the Office 
of Government Ethics will conduct the sole review and approval. The 
Office of Government Ethics will review the legal expense fund trust 
document to determine whether it conforms to the requirements 
established by this subpart.
    (4) Right to Appeal. If the approval of a legal expense fund has 
been denied, or an employee's legal expense fund request has not been 
acted upon within 30 days, the requester may appeal by mail or email to 
the Director of the U.S. Office of Government Ethics. Requests sent by 
mail should be addressed to the address for the Office of Government 
Ethics that can be found at www.oge.gov. The envelope containing the 
request and the letter itself should both clearly indicate that the 
subject is a legal expense fund appeal. Email requests should be sent 
to [email protected] and should indicate in the subject line that the message 
contains a legal expense fund appeal. Appeals should be submitted 
within 60 days of denial by the designated agency ethics official or 90 
days of submission to the designated agency ethics official, in the 
case of a request that has not been acted upon. In the case of legal 
expense funds for anonymous whistleblowers and designated agency ethics 
officials, OGE staff will conduct the initial review, and the Director 
will serve as the appeal authority.
    (h) Amendments. The trust document may only be amended if the 
trustee and employee beneficiary file the amended legal expense fund 
trust document in accordance with paragraph (f) of this section and 
seek approval in accordance with paragraph (g) of this section.
    (i) One legal expense fund. No employee beneficiary may establish 
or maintain more than one legal expense fund at any one time. An 
employee may not later establish a second legal expense fund for the 
same legal matter.
    (j) Conforming existing legal expense funds. In order for an 
employee beneficiary who has an existing legal expense fund to receive 
legal expense payments from the existing legal expense fund, the 
employee beneficiary must comply with Sec. Sec.  2635.1005(b), 
2635.1006, and 2635.1007 by February 20, 2024.
    (k) Public access. Approved legal expense fund trust documents will 
be made available by the Office of Government Ethics to the public on 
its website within 30 calendar days of receipt. The trust fund 
documents will be sortable by employee beneficiary's name, agency, and 
position, as well as type of document and document date. Legal expense 
fund trust documents filed by anonymous whistleblowers will not be made 
available to the public. Legal expense fund trust documents that are 
made available to the public will not include any information that 
would identify individuals whose names or identities are otherwise 
protected from public disclosure by law. Only sensitive personal 
information such as fee schedules, personal addresses, and account 
numbers will be redacted.


Sec.  2635.1005  Administration.

    (a) Trustee's duties and powers. A trustee of a legal expense fund 
is responsible for:
    (1) Operating the legal expense fund trust consistent with this 
part and applicable state law;
    (2) Operating as a fiduciary for the employee beneficiary in 
relation to the legal expense fund property and the legal expense fund 
purpose;
    (3) Providing information to the employee beneficiary as necessary 
to comply with the Ethics in Government Act, 5 U.S.C. 13104(a)(2), part 
2634 of this chapter, and this part; and
    (4) Notifying donors and payees whose contributions and 
distributions, respectively, are reportable that their names will be 
disclosed on the OGE website.
    (b) Limitation on role of the employee beneficiary. An employee 
beneficiary may not exercise control over the legal expense fund 
property.


Sec.  2635.1006  Contributions and use of funds.

    (a) Contributions. A legal expense fund may only accept 
contributions of payments for legal expenses from permissible donors 
listed in paragraph (b) of this section.
    (b) Permissible donors. A permissible donor includes:
    (1) An individual who is not:
    (i) An agent of a foreign government as defined in 5 U.S.C. 
7342(a)(2);
    (ii) A foreign national;
    (iii) A lobbyist as defined by 2 U.S.C. 1602(10) who is currently 
registered pursuant to 2 U.S.C. 1603(a);
    (iv) Acting on behalf of, or at the direction of, another 
individual or entity in making a donation;
    (v) Donating anonymously;
    (vi) Seeking official action by the employee beneficiary's agency;
    (vii) Doing business or seeking to do business with the employee 
beneficiary's agency;
    (viii) Conducting activities regulated by the employee 
beneficiary's agency other than regulations or actions affecting the 
interests of a large and diverse group of persons;
    Example 1 to paragraph (b)(1)(viii): A donor contributed to a 
Department of State employee's legal expense fund. The donor has 
recently applied to renew their United States Passport. Because the 
Department of State's passport renewal office affects the interests of 
a large and diverse group of people, the donation is permissible under 
paragraph (b)(1)(viii) of this section.
    (ix) Substantially affected by the performance or nonperformance of 
the employee beneficiary's official duties; or
    (x) An officer or director of an entity that is substantially 
affected by the performance or nonperformance of the employee 
beneficiary's official duties.
    (2) A national committee of a political party as defined by 52 
U.S.C. 30101(14) and (16) or, for former members of a campaign of a 
candidate for President or Vice President, the campaign, provided that 
the donation is not otherwise prohibited by law and the entity is not 
substantially affected by the performance or nonperformance of an 
employee beneficiary's official duties; or
    (3) An organization, established for more than two years, that is:
    (i) described in section 501(c)(3) of the Internal Revenue Code and 
exempt from taxation under section 501(a) of the Internal Revenue Code, 
and

[[Page 33813]]

    (ii) not substantially affected by the performance or 
nonperformance of an employee beneficiary's official duties.
    Note 1 to paragraph (b): Acceptance of a legal expense payment from 
another employee must be analyzed under subpart C of this part.
    (c) Contribution limits. A legal expense fund may not accept more 
than $10,000 from any single permissible donor per calendar year.
    Note 2 to paragraph (c): As discussed in Sec.  2635.1002(b)(2), 
payments for legal expenses or the provision of pro bono legal services 
that otherwise qualify for a gift exclusion or exception other than 
Sec.  2635.204(n) in subpart B of this part are not covered by this 
subpart.
    (d) Use of funds. Legal expense fund payments must be used only for 
the following purposes:
    (1) An employee beneficiary's expenses related to those legal 
proceedings arising in connection with the employee's past or current 
official position, the employee's prior position on a campaign of a 
candidate for President or Vice President, or the employee's prior 
position on a Presidential Transition Team;
    (2) Expenses incurred in soliciting for and administering the fund; 
and
    (3) Expenses for the discharge of Federal, state, and local tax 
liabilities that are incurred as a result of the creation, operation, 
or administration of the fund.
    Example 1 to paragraph (d): An employee beneficiary's attorney 
determines it is necessary to employ an expert witness related to a 
legal proceeding arising in connection with the employee beneficiary's 
official position. Funds may be distributed from the legal expense fund 
to pay fees and expenses for the expert witness.


Sec.  2635.1007  Reporting requirements.

    (a) Quarterly reports. An employee beneficiary must file quarterly 
reports that include the following information until the trust is 
terminated or an employment termination report is filed as set forth in 
paragraph (d) of this section.
    (1) Contributions. For contributions of $250 or more during the 
quarterly reporting period, an employee beneficiary must report the 
donor's name, city and state of residence, employer, date(s) of 
contribution, and contribution amount. For the report due January 30, 
an employee beneficiary must also disclose contributions from a single 
donor of $250 or more for the prior calendar year unless the 
contributions have been disclosed on a prior quarterly report.
    (2) Distributions. For distributions of $250 or more during the 
quarterly reporting period, an employee beneficiary must report the 
payee's name, date(s) of distribution, amount, and purpose of the 
distribution. For the report due January 30, an employee beneficiary 
must also disclose distributions to a single source of $250 or more for 
the prior calendar year unless the distributions have been disclosed on 
a prior quarterly report.
    (b) Filing of reports. (1) The employee beneficiary must file all 
reports required in this section with the designated agency ethics 
official at the agency where the employee beneficiary is employed. The 
trustee or a representative of the employee beneficiary may file a 
report on behalf of the employee beneficiary.
    (2) An employee beneficiary who is an anonymous whistleblower may 
choose to file reports anonymously through the employee beneficiary's 
trustee or representative with the Office of Government Ethics. The 
Office of Government Ethics will not receive reports containing 
classified material; if needed, an OGE employee with a security 
clearance will review any classified documents in a secure agency 
space, consistent with the current practice for other ethics documents 
containing classified material.
    (c) Reporting periods and due dates. Quarterly reports must cover 
the following reporting periods and comply with the following due 
dates:
    (1) January 1 to March 31, with the report due on April 30.
    (2) April 1 to June 30, with the report due on July 30.
    (3) July 1 to September 30, with the report due on October 30.
    (4) October 1 to December 31, with the report due on January 30 of 
the following year.
    (5) If the scheduled due date falls on a Saturday, Sunday or 
Federal Holiday, the report will instead be due the next business day.
    (d) Employment termination report. If the employee beneficiary is 
leaving executive branch employment, the employee beneficiary must file 
an employment termination report no later than their last day of 
employment. No contributions may be accepted for or distributions paid 
by the legal expense fund between the date of the filing and the 
employee beneficiary's termination date. The report must include the 
following:
    (1) A report of contributions received and distributions made as 
required by paragraph (a) of this section between the end of the last 
quarterly reporting period and the date of the report; and
    (2) A statement as to whether the trust will be terminated or 
remain in force after the employee beneficiary terminates their 
executive branch employment.
    (e) Extensions. For each quarterly report, a single extension of 30 
calendar days may be granted by the employee beneficiary's designated 
agency ethics official, or the Director of the Office of Government 
Ethics if filing with the Office of Government Ethics, for good cause 
upon written request by the employee beneficiary or the trustee.
    (f) Review of reports. (1) Designated agency ethics official 
review. The designated agency ethics official must review reports 
within 30 calendar days of filing.
    (i) Standard for review. The designated agency ethics official will 
review the report to determine that:
    (A) The information required under paragraph (a) of this section is 
reported for each contribution and distribution; and
    (B) Contributions to and distributions from the trust are in 
compliance with Sec.  2635.1006.
    (ii) Transmission of reports to the Office of Government Ethics. 
Following review, all reports must be forwarded in unclassified format 
to the Office of Government Ethics within seven calendar days.
    (iii) Office of Government Ethics review for anonymous 
whistleblowers. The Office of Government Ethics will serve as the 
reviewing authority for anonymous whistleblowers who choose to file 
reports anonymously with the Office of Government Ethics only.
    (2) Office of Government Ethics review. Following review by the 
designated agency ethics official, the Office of Government Ethics will 
conduct a secondary review of the reports of the employee beneficiaries 
listed in paragraph (f)(2)(ii) of this section within 30 calendar days 
of receipt.
    (i) Standard for review. The Office of Government Ethics will 
review the report to determine whether it conforms to the requirements 
established by this subpart. If defects are ascertained, the Office of 
Government Ethics will bring them to the attention of the reviewing 
agency and the employee beneficiary or the employee beneficiary's 
trustee or representative, who will have 30 calendar days to take 
necessary corrective action.
    (ii) Employee beneficiaries requiring secondary Office of 
Government Ethics review. The Office of Government Ethics will review 
the reports of the following employee beneficiaries:
    (A) The Postmaster General;

[[Page 33814]]

    (B) The Deputy Postmaster General;
    (C) The Governors of the Board of Governors of the United States 
Postal Service;
    (D) Employees of the White House Office and the Office of the Vice 
President; and
    (E) Officers and employees in offices and positions which require 
confirmation by the Senate, other than members of the uniformed 
services and Foreign Service Officers below the rank of Ambassador.
    (3) Review for designated agency ethics official. When the employee 
beneficiary is a designated agency ethics official, the Office of 
Government Ethics will conduct the sole review. OGE will review the 
report to determine that:
    (i) The information required under paragraph (a) of this section is 
reported for each contribution and distribution; and
    (ii) Contributions to and distributions from the trust are in 
compliance with Sec.  2635.1006.
    (g) Public access. Quarterly and employment termination reports 
will be made available by the Office of Government Ethics to the public 
on its website within 30 calendar days of receipt. The reports will be 
sortable by employee beneficiary's name, agency, and position, as well 
as type of document and document date. Quarterly and employment 
termination reports that are made available to the public by the Office 
of Government Ethics will not include any information that would 
identify individuals whose names or identities are otherwise protected 
from public disclosure by law. The reports filed by anonymous 
whistleblowers will not be made available to the public.
    (h) Noncompliance. (1) Receipt of impermissible contributions. If 
the legal expense fund receives a contribution that is not permissible 
under Sec.  2635.1006, the contribution must be returned to the donor 
as soon as practicable but no later than the next reporting due date as 
described in paragraph (c) of this section. If the donation cannot be 
returned to the donor due to the donor's death or the trustee's 
inability to locate the donor, then the contribution must be donated to 
a 501(c)(3) organization meeting the requirements in Sec.  
2635.1008(c).
    (2) Late filing of required documents and reports. If a report or 
other required document is filed after the due date, the employee 
beneficiary forfeits the ability to accept contributions or make 
distributions through the trust until the report or other required 
document is filed.
    Example 1 to paragraph (h)(2): A Department of Labor employee 
establishes a legal expense fund in accordance with this subpart. 
Because the employee filed the trust document on February 15, the first 
quarterly report is due on April 30. However, the employee did not 
submit the first quarterly report until May 15. The employee is 
prohibited from accepting contributions or making distributions through 
the trust from May 1 until May 15. Once the employee files the 
quarterly report, the employee may resume accepting contributions and 
making distributions.
    (3) Continuing or other significant noncompliance. In addition to 
the remedies in paragraphs (h)(1) and (2) of this section, the Office 
of Government Ethics has the authority to determine that an employee 
beneficiary may not accept contributions and make distributions through 
the trust or terminate the trust if there is continuing or other 
significant noncompliance with this subpart.


Sec.  2635.1008  Termination of a legal expense fund.

    (a) Voluntary termination. A legal expense fund may be voluntarily 
terminated only for the following reasons:
    (1) The purpose of the trust is fulfilled or no longer exists; or
    (2) At the direction of the employee beneficiary.
    (b) Mandatory termination. An employee's legal expense fund must be 
terminated within 90 days of the resolution of the legal matter for 
which the legal expense fund was created or within 90 days of the last 
expenditure made in relation to the legal matter for which it was 
created, whichever is later.
    (c) Excess funds. Within 90 calendar days of termination of the 
legal expense fund, the trustee must distribute any excess funds to an 
organization or organizations described in section 501(c)(3) of the 
Internal Revenue Code and exempt from taxation under section 501(a) of 
the Internal Revenue Code. Funds from the legal expense fund may not be 
donated to an organization that was established by the trustee or the 
employee beneficiary, an organization in which the trustee or the 
employee beneficiary, their spouse, or their child is an officer, 
director, or employee, or an organization with which the employee has a 
covered relationship within the meaning of Sec.  2635.502(b)(1). The 
trustee has sole discretion to select the 501(c)(3) organization. If 
practicable, the trustee may return the excess funds to the donors on a 
pro-rata basis rather than donating the funds to a 501(c)(3) 
organization.
    (d) Trust termination report. After the trust is terminated, the 
employee beneficiary must file a trust termination report that contains 
the information required by Sec.  2635.1007(d)(1) for the period of the 
last quarter report through the trust termination date. The report also 
must indicate the organization to which the excess funds were donated 
or if the excess funds were returned to donors. The report is due 30 
calendar days following the termination date of the trust. Trust 
termination reports should be filed in accordance with the procedures 
outlined in Sec.  2635.1007(b).
    (e) Exception for anonymous whistleblowers. An employee beneficiary 
who is an anonymous whistleblower may choose to file the trust 
termination report anonymously through the employee beneficiary's 
trustee or representative with the Office of Government Ethics.


Sec.  2635.1009  Pro bono legal services.

    (a) Acceptance of permissible pro bono legal services. An employee 
may solicit or accept the provision of pro bono legal services for 
legal matters arising in connection with the employee's past or current 
official position, the employee's prior position on a campaign of a 
candidate for President or Vice President, or the employee's prior 
position on a Presidential Transition Team from:
    (1) Any individual who:
    (i) Is not an agent of a foreign government as defined in 5 U.S.C. 
7342(a)(2);
    (ii) Is not a foreign national;
    (iii) Is not a lobbyist as defined by 2 U.S.C. 1602(10) who is 
currently registered pursuant to 2 U.S.C. 1603(a); and
    (iv) Does not have interests that may be substantially affected by 
the performance or nonperformance of the employee's official duties; 
and
    (2) An organization or entity that does not have interests that may 
be substantially affected by the performance or nonperformance of an 
employee's official duties.
    Note 1 to paragraph (a): Pursuant to Sec.  2634.907(g) of this 
chapter, an employee who is a public or confidential filer under part 
2634 of this chapter must report gifts of pro bono legal services on 
the employee's financial disclosure report, subject to applicable 
thresholds and exclusions.
    (b) Provision of outside legal services. An employee may solicit or 
accept payment for legal services for legal matters arising in 
connection with the employee's past or current official position, the 
employee's prior position on a campaign of a candidate for

[[Page 33815]]

President or Vice President, or the employee's prior position on a 
Presidential Transition Team from an organization, established for more 
than two years, that is described in section 501(c)(3) of the Internal 
Revenue Code and exempt from taxation under section 501(a) of the 
Internal Revenue Code. The organization, the legal services provider 
that the organization pays for legal services, and the individual 
attorney providing legal services must meet the requirements described 
in paragraph (a) of this section. The term ``pro bono services'' 
includes the provision of outside legal services as described in this 
section.
    (c) Role of designated agency ethics official. The designated 
agency ethics official must determine whether the organization, the 
legal services provider that the organization pays for legal services, 
and the individual attorney providing legal services meet the 
requirements described in paragraph (a) of this section.
    Example 1 to paragraph (c): A Department of Justice employee is an 
eyewitness in an Inspector General investigation and is called to 
testify before Congress. A local law firm offers to represent the 
employee at no cost. The employee consults with an agency ethics 
official, who determines that the attorney who would represent the 
employee is neither an agent of a foreign government nor a lobbyist. 
However, the law firm is representing a party in a case to which the 
employee is assigned. The ethics official determines that the law firm 
is a person who has interests that may be substantially affected by the 
performance or nonperformance of the employee's official duties. 
Accordingly, the employee may not accept the offer of pro bono legal 
services from the law firm.
    Example 2 to paragraph (c): A Securities and Exchange Commission 
employee is harassed by a supervisor and files a complaint. A nonprofit 
legal aid organization focusing on harassment cases offers pro bono 
legal services to the employee at no cost. The employee consults with 
an agency ethics official, who determines that the attorney who would 
represent the employee is neither an agent of a foreign government nor 
a lobbyist, and neither the attorney nor the nonprofit legal aid 
organization has interests that may be substantially affected by the 
performance or nonperformance of the employee's official duties. 
Accordingly, the employee may accept the offer of pro bono legal 
services from the nonprofit legal aid organization.
    Example 3 to paragraph (c): A registered 501(c)(3) organization 
whose mission focuses on assisting those experiencing workplace 
harassment offers to pay for legal services for the Securities and 
Exchange Commission employee from the preceding example. The legal 
services themselves are performed by attorneys outside the 
organization. The employee confers with an agency ethics official who 
determines that the 501(c)(3) organization has been in operation for 
more than two years, neither the organization nor the attorneys 
performing legal services have interests that may be substantially 
affected by the performance or nonperformance of the employee's 
official duties, and the attorneys performing the legal services are 
neither agents of foreign governments nor lobbyists. Accordingly, the 
employee may accept the legal services even though they are provided by 
attorneys outside of the 501(c)(3) organization.
    Example 4 to paragraph (c): A Department of State employee is asked 
to testify in a legal proceeding relating to a prior position at the 
Department of Justice. An attorney at a large national law firm offers 
pro bono services to the employee. The employee confers with an agency 
ethics official who determines that although the attorney offering 
representation is neither an agent of a foreign government nor a 
lobbyist, the law firm is currently registered pursuant to 2 U.S.C. 
1603(a), some members of the firm are registered lobbyists, and the 
firm has business before other parts of the Department of State. 
However, neither the attorney nor the law firm has interests that may 
be substantially affected by the performance or nonperformance of the 
employee's official duties. Accordingly, the employee may accept the 
offer of pro bono legal services.
    (d) Appeal process. An employee may appeal to the Office of 
Government Ethics in matters when the agency is the party opponent in 
the legal action. An employee may appeal the designated agency ethics 
official's determination that the pro bono legal services are 
prohibited; or a failure by the designated agency ethics official to 
provide a determination regarding whether the pro bono legal services 
are prohibited within 30 days. Appeals should be submitted within 60 
days of denial by the designated agency ethics official, or within 90 
days of submission to the designated agency ethics official, in the 
case of a request that has not been acted upon.

[FR Doc. 2023-10290 Filed 5-24-23; 8:45 am]
BILLING CODE 6345-03-P