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April 4, 2011

NOTES
DEC/EC Meeting -- Monday, April 4, 2011

Items for Discussion/Presentations:

  1. Awards: Review OGE’s guidance on awards vs. paid lectures. http://oge.gov/DisplayTemplates/ModelSub.aspx?id=2194
  1. Honorary Degrees:  are these gifts permissible?

Confirmed that 5 CFR § 5501.111 does NOT apply to honorary degrees; that provision applies to just awards.

Question has come up as to whether hoods presented to a recipient of an honorary degree is a gift from a prohibited source (and thus needs an applicable exception to permit the employee to keep it), or whether it fits under the exclusion to the gift rule for “items of little intrinsic value . . . which are intended solely for presentation.”  5 CFR § 2635.203(b)(2).  It is a gift, the exclusion does not apply, and needs a gift exception in order for the employee to accept it from a prohibited source.  Same is the case for the cost of the rental of the robe.  The certificate (parchment), however, is for presentation thus, is excluded from the definition of the gift. 

Travel expenses “if requested.”  The gift of travel was offered, so can be accepted.

  1. When is a 520 needed?

Scenario 1:  PTA Officer.  Pursuant to 5 CFR § 5501.106(d)(1)&(2), an employee needs a 520 if:  1) TSW that relates to the employee’s official duties; 2) providing professional or consultative services; 3) serving as an officer, director or board member of an outside organization; or 4) employment with a prohibited source.  However, pursuant to 5 CFR § 5501.106(d)(3), notwithstanding the 520 requirement outlined in 5501.106(d)(1)& (2) – that is, ignore the need for a 520 if: outside activity does not involve the provision of professional services (e.g., medical, legal, accounting, or architectural), no compensation except for the reimbursement of expenses; and the activity is with a religious, social, fraternal, political or recreational organization.  PTA is a social or fraternal organization, so no 520 is needed even though the employee is serving as an officer (assuming no compensation).

Scenario 2:  Employee owns the business.  As discussed above, a 520 is needed in the four situations listed.  Mere ownership of a company does not trigger the 520 requirement.  (Likely a reportable asset on a 450 or 278 report, though.)  However, often ownership comes with a board or officer position.  The employee would file for those reasons (board or officer position), but a second 520 for ownership is not necessary.

  1. Sector Mutual Fund

This type of asset is defined as a mutual fund “that concentrates its investments in an industry, business, single country other than the United States, or bonds of a single State within the United States.”  Most often, the sector funds that cause a conflict for our employees are healthcare or pharmaceutical sector funds such as Fidelity Select Pharmaceuticals (FPHAX), Vanguard Healthcare (VGHCX) and T Rowe Price Health Sciences (PRXSX). 

OGE has issued a regulatory de minimis exception for sector funds at an aggregate of $50,000 for all personal and imputed holdings within the sector.  You do not need to show that the sector fund actually holds Pfizer, for example, for a conflict to arise between the employee’s financial interest (healthcare sector fund valued above $50,000) and the employee’s official duties (a protocol that is testing a Pfizer product).  Merely owning a healthcare sector fund with a value over the $50,000 de minimis will create a conflict.  The conflict can be managed initially through disqualification, but likely the employee will need to ultimately divest of at least some of the holding (to below the regulatory de minimis level) if she is to continue working on intervention protocols.

Specific attention must be given to the review of healthcare sector funds owned by employees engaged in clinical research.  Such employees must monitor the value of these holdings to assure that the value always remain below the $50,000 de minimis level.  This can be accomplished by establishing an automatic sell order with their broker.    

  1. 207 restrictions and IPAs

As we discussed, IPA detailees are subject to the criminal conflict of interest statues (note:  section 208’s prohibition would be triggered if the IPA is assigned to a matter that affects his home institution) and the government-wide ethics regulations (parts 2634, 2635 and 2640, for example) but not the agency supplemental regulations (part 5501).  A question came up as to whether section 207(c)’s restriction for highly compensated employees applies to IPA detailees.  See below, excerpted from http://oge.gov/DisplayTemplates/ModelSub.aspx?id=2251

"Section 207(c) also may apply to an individual serving as a senior employee pursuant to the IPA.  Based on advice that OGE has received from the Office of Legal Counsel (OLC), such individual is considered a senior employee if his total pay, from both Federal and non-Federal sources, is equal to or greater than 86.5 percent of the rate of basic pay payable for level II of the Executive Schedule (excluding Federal reimbursement of a non-Federal employee's share of non-salary benefits) and either:  (1) the individual served in a Federal position ordinarily compensated at this rate; (2) the individual's non-Federal employer received Federal reimbursement in an amount equal to or greater than this rate; or (3) the individual received a direct Federal payment pursuant to 5 U.S.C. § 3374(c)(1) that, when added to the salary that he received from his non-Federal employer, totals an amount equal to or greater than this rate."

  1. Receptions and meals that are part of the meeting – WAG form not needed.  See further discussion at DEC/EC Meeting on May 2, 2011 .
  1. Reporting iPod Apps on 450 or 278 Report

Scenario:  employee invented an application for use on a smartphone.  Various cellular carriers licensed the app from the employee.  The employee receives periodic payments from the carriers.  The app is an asset and if valued over the $1,000 should be reported as such on a 450 or 278 report.  Also, the licensing fees received from the carriers should be reported as a source of income if the fees (by carrier) exceed the $200 reporting threshold.

Posted 4/29/11