- The Washington Times - Thursday, August 19, 2010

The U.S. Office of Government Ethics is warning federal agencies against retroactively waiving ethics rules for federal employees who’ve taken actions that pose potential conflicts of interest.

Saying it has learned of “several situations” of employees getting waivers after making questionable moves, the government’s independent ethics office issued a memo to agencies across government in April saying such after-the-fact practices are prohibited.

The directive doesn’t identify any employees or agencies by name, but officials recently provided information about waivers involving the Federal Deposit Insurance Corp. and the Federal Energy Regulatory Commission in response to an open-records request by The Washington Times for information referenced in the memo. Both agencies dispute issuing any retroactive waivers.

The newly disclosed records show the ethics office told the FDIC last year that it was “gravely concerned” about a blanket waiver for senior officials at the FDIC. The waiver aimed to address any potential conflicts arising from the officials’ residential mortgages and their FDIC work with banks during the financial crisis, according to records.

The ethics office said such a blanket waiver skirted federal ethics rules.

“The granting of a blanket waiver in this instance circumvents the requirement that any case-specific analysis be conducted; indeed, the employees covered by the waiver need not consult with the ethics officer and are left on their own to apply a set of vague criteria … to their personal circumstances and to determine on their own whether they have violated a federal ethics regulation,” the office wrote in a letter to the FDIC.

But FDIC officials said in a response that the waiver was justified because home mortgages are offered to borrowers under terms and conditions largely determined by credit scores and interest rates.

“In this situation, it seems to us appropriate to provide a general waiver to officials whose residential mortgages satisfy all financial requirements generally applicable to all applicants for the same type of residential mortgage,” the FDIC wrote in a formal reply to the ethics office.

Still, the FDIC withdrew the blanket waiver.

In its memo, the ethics office said that while there are different kinds of ethics waivers depending on the situation, all have one thing in common: “The waiver must be granted prior to the employee engaging in otherwise prohibited conduct.”

The ethics office also questioned what it called a retroactive waiver given to FDIC Chairman Sheila C. Bair that was the subject of a story by the Huffington Post Investigative Fund last year. The article said Ms. Bair took out mortgages worth more than $1 million from Bank of America in 2008 about the same time she was working on a federal rescue for the bank.

The report prompted an inquiry by the FDIC’s office of the inspector general, which concluded that it found no evidence that Ms. Bair received any favorable treatment in connection with the mortgages or that they influenced any of her actions.

The FDIC told the inspector general that Ms. Bair wasn’t given a retroactive waiver but instead received a “determination letter” stating that there was no conflict of interest with her mortgages and involvement in the Bank of America rescue.

FDIC spokesman Andrew Gray said, “While at no time did the FDIC ethics office issue a retroactive waiver, the FDIC responded quickly to the Office of Government Ethics to provide clarity around the issues raised in their letter. We always have and continue to take these obligations extremely seriously.”

The ethics office also provided The Times with correspondence concerning an ethics waiver for Federal Energy Regulatory Commissioner Philip Moeller.

A spokeswoman for FERC said the waiver was granted before, not after, Mr. Moeller’s vote in December involving settlements in the California energy crisis. The waiver stemmed from Mr. Moeller’s wife’s status as a partner at a law firm that had represented Chevron, though she was not involved in the FERC matter, records show.

• Jim McElhatton can be reached at jmcelhatton@washingtontimes.com.

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