Ms. Dara Corrigan Dear Ms. Corrigan: Recent reports in the New York Times and the Washington Post stated that earlier this year the general counsel of the Department of Health and Human Services (HHS) waived the Department's code of ethics to allow Thomas A. Scully, Administrator of the Centers for Medicare and Medicaid Services (CMS), to discuss prospective jobs with organizations which had "substantial interests in matters pending" at CMS while he was still employed by CMS. Those interests include the prescription drug program and chronic care reimbursements which were included in the recently passed Medicare bill and regulations proposed to revise the average wholesale price (AWP) charged by drug companies to the Federal Government to Medicare and Medicaid patients ("Medicare Chief Scully Says He's 'Checking out of Dodge,'" Washington Post, Dec. 3, 2003, A27; "Health Industry Bidding to Hire Medicare Chief," New York Times, Dec. 3, 2003, A1; "Waiver under Section 208(b)(1), Title 18 of the United States Code - ACTION," May 12, 2003" (hereafter "Waiver")). According to the waiver document, HHS Secretary Tommy Thompson personally approved Mr. Scully's waiver. Because this episode raises serious questions about HHS' code of ethics, its applicability to Mr. Scully, and how it might be applied in the future, I ask your office to examine these matters. Federal regulations and HHS' code of ethics require that any employee seeking a job in the private sector must immediately recuse himself from "any official matter," including legislative initiatives or proposed rules that involve the prospective employer. Failure to do so can lead to criminal prosecution under 18 U.S.C. 208. Waivers are allowed under certain circumstances. As a federal employee is deemed to have the same financial interest in the matter that the prospective employer does, the regulations governing the issuance of a waiver require that the employee make a full disclosure of that financial interest to his appointing official and ethics officer, and that those officials determine that the financial interest is "not so substantial as to be deemed likely to affect the integrity of the services which the Government may expect from such employee" (5 CFR 2635.402(d)(2)(i)). An ethics officer assessing a waiver request must know the identity of the prospective employer, because the "disqualifying financial interest, the particular matter or matters to which it applies, the employee's role in the matter or matters, and any limitations on the employees' ability to act in such matters" must be included in each waiver (5 CFR 2640.301(a)). An insubstantial financial interest is the only basis for an exemption for a full-time federal employee like Mr. Scully (18 U.S.C. 208(b)). Nonetheless, Secretary Thompson, HHS's ethics officer, and two other HHS officials, approved giving Mr. Scully an indefinite, prospective waiver from this requirement on May 12, 2003, stating that it was "neither practicable, nor in the interest of the Department, for Mr. Scully to remain disqualified from such a large number of important and broadly applicable matters while he is seeking future employment." This is not a basis for granting waivers under the applicable federal law and HHS' regulations. Elsewhere, in this very confusing document, Edgar Swindell, HHS' ethics officer, states that Mr. Scully's unnamed prospective employers were "likely to have substantial interests" in matters before Mr. Scully, that those interests were to be imputed to Mr. Scully, but that they were "not so substantial as to be deemed likely to affect" the integrity of his services (Waiver, pp. 1-3). In addition, a supporting document prepared by the Ethics Division of HHS' Office of the General Counsel incorrectly states that the agency can grant an employee a waiver from Section 208 because "the interest of the government in the employee's participation outweighs the concern that a reasonable person may question" the agency's integrity ("Seeking Future Employment," HHS, undated). But it references a regulatory provision that specifically states it is not applicable to employees seeking employment. Waivers from Section 208 can be granted only upon a determination that the employee's financial interest is insubstantial. It appears that at the time of the granting of the waiver, no one in the Department knew with whom Mr. Scully was going to discuss future employment as there is no statement in the waiver of who the prospective employer is, its financial interest in a particular matter that Mr. Scully is involved in, or why his interest is "not so substantial" as to not be disqualifying. In actuality, most of the organizations with which he discussed future employment had significant interests in various sections of the Medicare bill and in the average wholesale price regulations. Mr. Scully was personally involved in developing both the legislation and the AWP regulations and was a decision maker. It appears that this waiver may have been granted to encourage Mr. Scully to remain at HHS through the negotiation of the Medicare legislation. He publicly stated that he wanted to leave in May, which was the same month he was granted a waiver, but was asked to stay by Secretary Thompson. But this would not be a reason under applicable statutes and regulations to grant a Section 208(b) waiver. Mr. Scully told the New York Times that he had been talking to the following organizations:
Waivers of the conflict-of-interest regulations should be rare and based on clear evidence that the prospective employer's financial interests in the matter before the employee are insubstantial and are not deemed likely to affect the integrity of his government service. When waivers are given, the requirements allowing their use must be followed. Moreover, Mr. Scully's waiver may not be a one-time incident. We have been informed that several other high-ranking HHS officials are planning to leave the Department in the next year, and they, too, may be requesting ethics guidance on their job searches. Therefore, I request that your office conduct an inquiry into this event to determine the following:
If you have any questions or need additional information, please have your office contact Edith Holleman, Minority Counsel, at (202) 226-3400. Thank you for your attention to this matter. Sincerely,
JOHN D. DINGELL cc: The Honorable W.
J. "Billy" Tauzin, Chairman
The Honorable Tommy G. Thompson, Secretary
| |
|