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DIGEST: The Deputy Assistant Secretary of Commerce for Automotive Affairs and Consumer Goods who was planning to leave government and sent letters to 32 foreign-owned vehicle manufacturers seeking to form and head a trade association to represent their interests should have recused himself from participation in International Trade Administration matters affecting their interests as soon as he dispatched those letters. Were consistent with advice he received from the Department of Commerce's Office of General Counsel. Our findings are also being furnished to Congressman John D. RELEVANT LEGAL BACKGROUND There is no statute or regulation which specifically limits the right of a Department of Commerce employee to seek employment outside the government.

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B-229215, Feb 22, 1988

DIGEST: The Deputy Assistant Secretary of Commerce for Automotive Affairs and Consumer Goods who was planning to leave government and sent letters to 32 foreign-owned vehicle manufacturers seeking to form and head a trade association to represent their interests should have recused himself from participation in International Trade Administration matters affecting their interests as soon as he dispatched those letters. Although the would not be deemed to be negotiating for employment under 18 U.S.C. Sec. 208(a) until he received a response to one of those letters, he violated the Standards of Conduct and the Office of Government Ethics guidelines by participating in a meeting concerning the development of a system to analyze data to be provided by the Japanese under the MOSS Agreement, data potentially revealing of the auto parts purchasing habits of Japanese- owned vehicle manufacturers to whom he sent his letters.

The Honorable Sam M. Gibbons:

In your letter of October 7, 1987, you asked that the General Accounting Office investigate certain actions taken by Mr. Robert E. Watkins to determine whether he violated any law or otherwise acted improperly. The actions in question relate to Mr. Watkins' efforts to secure private employment while he continued to serve as Deputy Assistant Secretary of Commerce for Automotive Affairs and Consumer Goods within the Department's International Trade Administration. We found no evidence of a statutory violation by Mr. Watkins, but determined that his participation in one matter affecting foreign-owned vehicle manufacturers violated the Standards of Conduct. Mr. Watkins' actions, however, were consistent with advice he received from the Department of Commerce's Office of General Counsel. Our findings are also being furnished to Congressman John D. Dingell by letter of this date.

RELEVANT LEGAL BACKGROUND

There is no statute or regulation which specifically limits the right of a Department of Commerce employee to seek employment outside the government. An individual's search for other employment, however, may affect his ability to continue to perform some or all of the duties of his federal position. Section 208(a) of title 18 of the U.S. Code (1982) prohibits an employee from participating personally and substantially in any particular matter affecting the financial interests of an entity with which he is negotiating for employment.

The Department of Justice has taken the position that the mere solicitation of an employment or business relationship does not constitute negotiating for employment within the meaning of 18 U.S.C. Sec. 208(a). It has cautioned, however, that the Standards of Conduct prescribed for federal employees in Executive Order 11222 may require an employee to refrain from participating in a governmental capacity in a matter affecting the financial interests of an entity the employee has contacted about future employment and which has not rejected that overture. In this regard, the Standards of Conduct provide that an employee shall avoid any action which might result in or create the appearance of using public office for private gain, giving preferential treatment to any person or losing complete independence or impartiality. See 5 C.F.R. Sec. 735.201a (1987); to the same effect, see the Department of Commerce Standards of Conduct at 15 C.F.R. Sec. 735-lOa (1987).

On April 27, 1987, the Director of the Office of Government Ethics (OGE) sent to designated agency ethics officials throughout the government a set of practical guidelines which address the criminal and regulatory concerns associated with negotiating for future employment. In discussing the elements of an offense under 18 U.S.C. Sec. 2O8(a), the guidelines define negotiating for employment as the "act or process of communicating or conferring with another so as to arrive at some form of agreement." They point out that the term "negotiating" does not lend itself to simple, clear-cut application and that the Standards of Conduct establish a much broader standard of disqualification than that imposed by section 208(a). With that preface, the guidelines provide, in pertinent part, that an employee should avoid acting on matters which directly affect a person or organization if:

"The employee has made contact with the person or organization, either directly or through an intermediary, inquiring about future employment. The Office of Government Ethics does not view the mass distribution of resumes, without additional communications, as being included within this proscription."

Appendix A contains a more complete discussion of the statutes, regulations and guidelines that pertain to federal employees who are seeking other employment.

ADVICE PROVIDED TO MR. WATKINS

On June 22, 1987, Mr. Watkins contacted an attorney in the Department of Commerce's Office of General Counsel and specifically asked for guidance on seeking other employment. The attorney, who is under the supervision of the Department's Alternate Designated Ethics Official, advised Mr. Watkins that he could send letters seeking employment to persons he dealt with in his official capacity and to firms who had dealings with the International Trade Administration. He told Mr. Watkins that he would need to take action to recuse himself from (refrain from participating in) matters affecting a recipient of his letter only after he received a positive response from that prospective employer. There was no discussion of the number of letters Mr. Watkins intended to send or of their contents.

The advice Mr. Watkins received was given without consideration of the OGE guidelines issued the previous month or Justice Department guidance dating back to 1976. The attorney who advised Mr. Watkins had not seen the OGE guidelines and advised Mr. Watkins based on his understanding of when employment negotiations begin under 18 U.S.C. Sec. 2O8(a). He did not take into account whether the Standards of Conduct would require Mr. Watkins to recuse himself from matters affecting those to whom he simply mailed letters seeking an employment or business relationship. The Alternate Designated Ethics Official testified at a congressional hearing on October 27, 1987, that the advice given by her subordinate was consistent with guidance provided by her office to Department of Commerce employees who, like Mr. Watkins, have duties of a policy-making nature. Appendix B contains a more thorough discussion and analysis of the advice received by Mr. Watkins.

MR. WATKINS' SEARCH FOR EMPLOYMENT

On September 19, 1987, while serving as Deputy Assistant Secretary of Commerce for Automotive Affairs and Consumer Goods, Mr. Watkins initiated a search for private employment by sending out the first batch of two form letters which ultimately went to more than 500 addressees. The letters, typed and addressed by a private secretarial firm at Mr. Watkins' expense, were dated either September 16 or 23, 1987.

According to Mr. Watkins, the more general letter forwarding his resume was sent to 484 addressees. Hereafter referred to as the general resume letter, that letter states that his service to the Reagan Administration is approaching an end and that he is interested in discussing how his experience might now be used. The addressees of the general resume letter included individuals who represented or were employed by firms or companies in a diversity of industries. /1/

The second letter, hereafter referred to as the trade association letter, was sent to 32 addressees chosen by Mr. Watkins on the basis that they represented the interests of motor vehicle manufacturers controlled by a foreign parent with production facilities in the United States. With one exception, the addressees of the trade association letter were officials of companies related to Honda, Nissan, Toyota, Mitsubishi, Mazda, Fuji, Volvo, Volkswagen and Mercedes Benz. /2/ The letter states that there is a need for automobile producers identified as "foreign" to organize into a trade association to promote the interests of its members. A draft charter for the association and a copy of his resume were forwarded with the letter, which states Mr. Watkins' belief that he is uniquely qualified to establish and lead an automobile association committed to market principles. Copies of the trade association and general resume letters, together with their respective attachments, are provided in Appendix C.

Prior to his resignation on October 8, 1987, Mr. Watkins received eleven responses to the above letters. Six of the eleven responses were from individuals who indicated an interest in further discussions concerning either the trade association idea or Mr. Watkins' possible employment their firm or company. The other five responses were from friends or acquaintances who had received his general resume letter and offered to be on the lookout for or otherwise advise or assist Mr. Watkins in his search for other employment. We have no information that Mr. Watkins engaged in employment discussions with anyone else prior to his resignation.

Of the six who called indicating an interest in further discussions, two called in response to the trade association letter. On September 24, a Toyota official called expressing his company's interest in the trade association idea. On September 28, an individual whose firm represents two Nissan companies called conveying their interest in the trade association idea. /3/ Of the four who responded to the general resume letter, two were members of firms that represent automotive interests. individual whose firm represents Mazda called on September 29 to invite Mr. Watkins to an interview, which he attended on October 2. The other, whose firm represents the Japanese Auto Parts Industry Association (JAPIA), called on September 30 to set up an interview; however, the interview never occurred. Of the remaining two responses to the general resume letter, one, on October 7 or 8, was from a Hyundai official setting up a meeting to discuss possible employment and the other, on September 22, was from a telecommunications company setting up an employment interview, which occurred on October 1. While the telecommunications company had no interests affected by the work of Mr. Watkins' former office, the employees or clients of the other five respondents did have interests potentially affected by the work of the Automotive Industry Affairs Office, one of the two offices within the Automotive Affairs and Consumer Goods Office which reported to Mr. Watkins.

Of the five individuals who called to offer advice or assistance in Mr. Watkins' search for other employment, two were with Washington, D.C., firms that represent foreign automotive interests. The third was with a firm whose clients include U.S. automotive interests. The fourth was employed by a corporation with an automotive parts division and the fifth was an official with a furniture manufacturers association. The first four were individuals whose employers or clients had interests potentially affected by the work of the Automotive Industry Affairs Office. The furniture manufacturers association had interests within the purview of the Consumer Goods Office, the other office within the Automotive Affairs and Consumer Goods Office which reported to Mr. Watkins. More specific information concerning the eleven responses Mr. Watkins received prior to his resignation on October 8 is contained in Appendix D.

MR. WATKINS' RECUSAL

According to Mr. Watkins, it was the call from a Toyota official late in the day on Thursday, September 24, that prompted him to take action to recuse himself from participation in matters affecting the automotive industry. /4/ Because he traveled to Michigan to give a speech the next day, Mr. Watkins did not come into the office until the following Monday, September 28. On that day, Mr. Watkins telephoned the attorney he had consulted earlier to set up a meeting to discuss his recusal.

Mr. Watkins met with the attorney the next morning, September 29. told the attorney that he had sent out letters soliciting employment and had recently received responses from individuals representing companies with which he had official matters pending and from automobile companies, a furniture manufacturers association and telecommunications firm. /5/ During the meeting, Mr. Watkins' duties were discussed and the attorney explained that he could no longer participate in matters affecting the automobile or furniture industries - including foreign trade sub-zone applications, the U.S.-Canadian Free Trade negotiations and trade adjustment assistance grants. Mr. Watkins told the attorney that he had already notified his supervisor that he was looking for other employment /6/ and that he would recuse himself from any matters concerning the persons or firms from which he had received responses, or their clients, including the automobile industry. The next day, September 30, Mr. Watkins furnished a list of the eight individuals and their employers, firms or relevant clients from whom he had received responses. The following day he furnished the name and client of the individual who had contacted him on September 30.

In the afternoon on September 30, Mr. Watkins called a meeting of his senior staff and explained that he was looking for another position and could not take any official action affecting the automobile or furniture industries. The following day, October 1, Mr. Watkins informed his Special Assistant for Trade Policy that anything coming up on the U.8.- Canadian Free Trade negotiations would be that individual's responsibility. At a staff orientation meeting on October 2, Mr. Watkins announced his recusal to all members of his office staff. /7/

On Tuesday, October 6, a story about Mr. Watkins' trade association letter appeared in the Washington Post. On that same day, the Alternate Designated Ethics Official sent Mr. Watkins a memorandum reiterating the advice he had been given by her subordinate and attaching a recusal statement for his signature. The recusal statement lists the nine firms or companies with which Mr. Watkins was "in the process of negotiating. /8/ It further provides: "... I cannot participate in matters which are likely to have a direct and predictable effect on these persons or firms, including policy matters which are likely to affect an entire industry in which one of these firms is a member. Therefore, I will discontinue working on the United States - Canada Free Trade Zone negotiations, the Foreign Trade Sub Zone Applications program, and specific industry requests for Trade Adjustment Assistance grants from the automobile or furniture industries. I will also discontinue working on trade missions if these companies are participating in the mission or are likely to be affected by the mission. If any such matters come to my office which would normally require my participation, they should be directed to others without my knowledge or involvement."

Mr. Watkins signed the recusal statement on October 7. In handwriting, he annotated the statement to clarify that "the majority of the names of prospective employers was given to Office of General Counsel on September 29, 1987." A dated copy of the statement also includes the handwritten names "Hyundai of America, Inc." and "Motorola, Inc." whose representatives contacted Mr. Watkins on or after October 7. Copies of the recusal statement and the forwarding memorandum are included as Appendix E.

An October 6 memorandum from the Assistant Secretary for Trade Development to all Trade Development staff explained that Mr. Watkins had decided he could no longer be effective as Deputy Assistant Secretary for Automotive Affairs and Consumer Goods and would assume a position on the Assistant Secretary's immediate staff. In a memorandum to his own office staff also dated October 6, Mr. Watkins notified his subordinates of the impending change in his position and that he had undertaken to remove himself from issues that might affect his prospective employers, including the "auto parts negotiation follow-up, the U.S.-Canadian Free Trade Area negotiations and ... recommendations on foreign trade zone applications." On Thursday, October 8, Mr. Watkins was asked for and submitted his resignation.

ANALYSIS

Based on our review, it appears that Mr. Watkins followed the advice he had been given by the Office of General Counsel. Under 18 U.S.C. Sec. 208(a), Mr. Watkins was required to recuse himself from matters affecting Toyota, Nissan, Mazda, JAPIA and Hyundai after he received calls from officials or representatives of those companies on September 24, 28, 29, 20 and October 7, respectively. We found that he disqualified himself and, in fact, refrained from any involvement in matters that could affect their interests following his receipt of the September 24 call from Toyota and continuing until his resignation on October 8. In this connection, it should be understood that Mr. Watkins' duties as Deputy Assistant Secretary were generally of an analytical and policy-making nature. The Automotive Affairs and Consumer Goods Office has no regulatory or enforcement authority. A general description of the operations and responsibilities of that office is contained in Appendix F.

As represented in his formal recusal statement and his October 6 memorandum to staff, Mr. Watkins refrained from any substantive involvement in matters relating to the U.S.Canadian Free Trade negotiations, the MOSS follow-up, foreign trade zone applications, trade adjustment assistance grant requests and trade missions affecting Toyota, Nissan, Mazda, JAPIA, and Hyundai, as well as all the other respondents to his letters. The single most significant matter to arise during the 10 working days between close of business on September 24 and Mr. Watkins' resignation on October 8 was the Canadian Free Trade negotiations. Declining to participate in these negotiations, Mr. Watkins turned this responsibility over to his Special Assistant for Trade Policy who participated in the working level negotiations on automotive matters.

Consistent with the OGE guidelines, however, Mr. Watkins should have recused himself from matters affecting the addressees of his trade association letter following dispatch of the first of those letters on Saturday, September 19. /9/ While Mr. Watkins recused himself from matters affecting those addressees after he received the call from a Toyota official late in the day on September 24, there were four working days between September 19 and that call during which he participated fully in the affairs of his office, including one meeting of interest to Japanese automobile manufacturers.

As a practical matter, most of Mr. Watkins' duties from September 21 to 24 did not have any effect on the recipients of his trade association letters. On September 21 and 22 he spent a considerable portion of his time on internal personnel matters, received a routine briefing of an informational nature, participated in a meeting in the nature of a courtesy call with the representative of a U.S. truck manufacturer, and served as a moderator at a Government-sponsored conference on competitiveness. On September 23 he attended the meeting of an industry advisory committee where he explained and responded to questions concerning the terms of the MOSS Agreement he had helped to negotiate in August 1987. He also was one of several Department of Commerce officials who participated in two meetings concerning the Tokyo Auto Parts Office. /10/ In the morning on September 24, he participated in a meeting in the nature of an introduction and courtesy call with a new Hyundai representative. /11/

On September 24, however, Mr. Watkins attended the final meeting of the MOSS Study Group. The group included representatives of the U.S. auto parts industry who had been called together to advise the Automotive Affairs and Consumer Goods Office on the MOSS negotiations with the Japanese which had concluded the previous month. As the senior Department of Commerce official present, Mr. Watkins led the discussion in soliciting suggestions for a system to verify and analyze trade data to be provided by the Japanese Automobile Manufacturers Association under the MOSS Agreement. That data is to include an aggregate figure representing sales by U.S. auto parts companies (Japanese-owned as well as U.S.-owned companies) to Japanese vehicle manufacturers, including their U.S. subsidiaries.

From the early stages of the MOSS negotiations, concern had been expressed that an aggregate figure which included sales by Japanese owned auto parts companies would not provide a meaningful indicia of progress toward eliminating the traditional structures of Japanese business that have inhibited sales by U.S.-owned auto parts companies to vehicle manufacturers such as Toyota and Nissan. During the meeting, various aspects of a data verification system were discussed. Industry members suggested surveying Japaneseowned companies in the U.S. to isolate a figure representing sales by Japanese-owned parts companies. According to one attendee, Mr. Watkins rejected this idea on the basis that it was against administration policy to treat foreign owned companies in the U.S. differently than U.S.-owned companies. While several who attended the meeting recalled the general discussion, only one individual stated that it was Mr. Watkins who rejected the idea of surveying Japanese-owned companies. One member of Mr. Watkins' staff believed that it was she who had articulated the administration's policy against discrimination on the basis of capital ownership.

In this context, it is relatively unimportant whether it was Mr. Watkins or his subordinate who vetoed the suggestion to survey Japanese owned companies and it is relatively unimportant whether either acted in accordance with administration policy in doing so. It is significant that Mr. Watkins participated in this meeting after he had dispatched letters seeking to form and head a trade association comprised of many of the same companies whose purchasing practices were a focus of the MOSS Agreement. Mr. Watkins' very participation as de facto chairman of a meeting aimed at establishing a system to verify and analyze data potentially revealing of the purchasing practices of the very companies he sought out for his trade association created at least the appearance that he would not act impartially in a matter affecting their interests. In our opinion, his participation in this meeting violated the Standards of Conduct.

RECOMMENDATIONS

As to Mr. Watkins, we offer no recommendation for corrective action. Although we believe that Mr. Watkins violated the Standards of Conduct, it is significant that he acted in accordance with advice he received from the Office of General Counsel. In any event, all of the potential remedial actions which may be taken when there has been a violation of the Standards of Conduct as specified in the Department of Commerce regulation -- 15 C.F.R. Sec. 0.735-40(b) (1987)-- apply to current employees. Because Mr. Watkins resigned from his position as Deputy Assistant Secretary, there is no action which may be taken against him under this regulation.

Our investigation indicated a need for the Department of Commerce's Designated Ethics Official to provide proper guidance for Department employees who intended to seek employment outside the federal government. We recommend that the Designated Ethics Official issue and broadly disseminate guidelines on seeking employment which comport with the OGE guidelines of April 27, 1987. Because the advice heretofore given by the Office of General Counsel has not been consistent with Department of Justice or OGE guidance in this area, Department of Commerce guidance on seeking employment should be issued only with the concurrence of OGE. this connection, we recommend that OGE review the propriety of the Department's regulation at 15 C.F.R. Sec. 0.735 13(b) which is discussed in Appendix A.

We trust that the above information serves the purpose of your request.

/1/ Most of the addressees were selected from a publication entitled The 1987 Washington Representative and from membership lists of two committees that advised the Automotive Affairs and Consumer Goods Office. Mr. Watkins also sent the letter to individuals on a handwritten list he had prepared.

/2/ The addressees included an official of Diamond Star Motor Corp, a Mitsubishi-Chrysler venture, and officials of New United Motor Manufacturing Corp., a Toyota-GM venture. The addressees also included John Moller of Manchester Associates, whose firm represents Nissan companies.

/3/ This call was from John Moller, whose friendship with Mr. Watkins dates back 12 years. According to Mr. Watkins, Mr. Moller was the only person with whom he discussed his thoughts about private employment prior to dispatching his letters. On July 29 he told Mr. Moller in general terms about his idea for a trade association and on September 11 he showed to and discussed with Mr. Moller a draft of his trade association letter and the charter.

/4/ Although he received a call two days earlier inviting him to interview with a telecommunications company, that call had not prompted him to take any action regarding the company's interests, which are not affected by the work of the Automotive Affairs and Consumer Goods Office fall generally within the jurisdiction of the Deputy Assistant Secretary of Commerce for Science and Electronics.

/5/ Contemporaneous notes made by the attorney reflect that Mr. Watkins told him that the respondents included "4 or 5 lawyers or consultants; will help get a job; they represent car co w/which he has off- responsibilities."

/6/ On September 23, the Assistant Secretary for Trade Development asked Mr. Watkins about rumors that he was looking for another job. Mr. Watkins confirmed that fact and stated that the Office of General Counsel had approved what he was doing.

/7/ During the workweek beginning September 28, Mr. Watkins, superior, the Deputy Assistant Secretary for Trade Development twice asked Mr. Watkins for a recusal statement. In the second conversation, Mr. Watkins indicated that he was frustrated because the recusal statement was still in the Office of General Counsel.

/8/ While the recusal document states that Mr. Watkins is "in the process of negotiating" with the nine (9) persons or entities listed, the memorandum from the Alternate Designated Agency Ethics Official states that the list includes "companies with which you are negotiating for employment or that are represented by persons who are assisting you in such negotiations."

/9/ While the general resume letter would fall within the exception to the OGE guidelines for a "mass distribution of resumes, without additional communications," the trade association letter would not. It did not simply forward Mr. Watkins' resume, but contained a proposal and draft charter for a trade association. Because it was targeted to a specific industry sector, OGE would not in any event view its dispatch to 32 addressees as a "mass distribution."

/10/ The Tokyo Auto Parts Office is funded in part by a 1986 trade adjustment assistant grant awarded to the Motor Equipment Manufacturers Association. Matters discussed during the meetings were of a housekeeping nature, including such issues as the staffing and formal opening of the office.

/11/ The Office of General Counsel attorney consulted by Mr. Watkins advised him that he could arrange routine introductions for employees of companies who had responded to his letters. Courtesy calls and introductions are routine within the International Trade Administration, an agency whose work involves extensive interaction with private industry.

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