01-4432. Proposed Revision to Standards of Conduct

AGENCY:

Postal Rate Commission.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Commission proposes eliminating an ethics provision on procedures for reviewing employees' security holdings for conflicts of interest. These procedures have been overtaken by government-wide ethical standards and new screening procedures. Eliminating this provision will prevent confusion in the administration of the Commission's ethics program.

DATES:

Submit comments on or before March 26, 2001.

ADDRESSES:

Send comments to Margaret P. Crenshaw, Secretary, Postal Rate Commission, 1333 H Street NW., Suite 300, Washington, DC 20268-0001.

FOR FURTHER INFORMATION CONTACT:

Stephen L. Sharfman, 202-789-6820.

SUPPLEMENTARY INFORMATION:

Currently, the Commission's standards of conduct [39 CFR part 3000] contain a de minimis rule. The de minimis rule provides that security interests held by a Commission employee that are valued below a certain amount will receive a different level of scrutiny for conflicts of interest than security interests valued above the specified amount. The Commission invites the public to comment on its proposal to delete its de minimis rule.

Rationale for the Proposed Change

Currently, rule 103(b) of the Commission's standards of conduct [39 CFR 3000.735-103(b)] requires the chairman of the Commission to determine an appropriate maximum limit on the value of an interest that a Commission employee may have in stocks, bonds, or other form of securities in any one entity. It authorizes the chairman to specifically approve maintaining a security interest above the maximum limit, if he determines that the interest is not so substantial as to be likely to affect the integrity of the service that the employee provides to the Commission.

The Commission finds that this procedure for screening security holdings for potential conflicts of interest has become redundant under the Commission's current screening procedures. Furthermore, 5 CFR part 2640 contains de minimis exemptions from the conflict of interest rules that are intended to govern federal agencies generally. This regulation was promulgated by the Office of Government Ethics (OGE) subsequent to the Commission's adoption of rule 103(b). The OGE has advised the Commission that its generally applicable de minimis exemptions supercede rule 103(b).

Original Purpose of the De Minimis Rule

The Commission's standards of conduct prohibit its employees from having a financial interest in companies “whose interests may be significantly affected by rates of postage, fees for postal services, the classification of mail, or the operation of the Postal Service.” Conversely, they allow Commission employees to have a financial interest in companies “whose use of the mail is merely an incidental or minor factor in the general conduct of its business.” See 39 CFR 3000.735-103(a).

More than 25 years ago, the Commission's general counsel set up internal guidelines for applying rule 103 that used a three-part test to analyze financial conflicts of interest. Some interests were categorized as conflicts per se, others were categorized as non-conflicts per se, and those that remained required specific approval by the chairman. See memo of general counsel Crutchfield to the Commission staff dated December 26, 1973.

The rigorous financial reporting required by the OGE since 1989, as a practical matter, supercedes this three-part test involving per se categories. The OGE's rules now require that every agency individually analyze every asset held by a policy-making employee that is worth over $1,000 for potential conflicts with that employee's official duties. For that reason, grouping assets into those that are regarded as conflicts per se, those that are regarded as non-conflicts per se, and those that require individual analysis, no longer simplifies the evaluation of financial conflicts that the Commission must perform.

In ethics practice, assuming that financial interests do not present a potentially significant conflict if they are below a certain market value is known as a de minimis rule. Under current rule 103(b), the chairman must select the market value of financial interests that are to be considered de minimis for purposes of conflicts analysis.

The original rationale for the de minimis rule was that most companies are affected to some degree by postal services. Therefore, even where the Commission had already determined that postal activity is a minor part of a particular company's business, the Commission feared that a conflict could arise if an employee were to concentrate investments in a few such companies. See memo to the Commission from David Ruderman, dated July 13, 1993, at 3. Because the Commission now screens all investments worth more than $1,000 for per se conflicts, it has routinely approved the holding of security interests that are above the de minimis amount. Accordingly, the screening procedure required by rule 103(b) has become redundant.

Because the conflicts analysis that current rule 103(b) requires has become redundant, and because it has been superceded by the de minimis rules of 5 CFR part 2640 that apply to federal agencies generally, the Commission proposes that current rule 103(b) be deleted.

Public Comment

Any public comment directed toward this proposal should be submitted within 30 days of the publication of this notice in the Federal Register.

Ordering Paragraphs

1. Public comment on the Commission's proposal to delete paragraph (b) from current rule 103 of its standards of conduct should be submitted within 30 days of the publication of this notice in the Federal Register.

2. The Secretary is directed to cause this notice of proposed rulemaking to appear in the Federal Register.

Dated: February 16, 2001.

Margaret P. Crenshaw,

Secretary.

List of Subjects in 39 CFR Part 3000

• Administrative practice and procedure
• Postal Service

For the reasons stated in the preamble, the Postal Rate Commission proposes to amend 39 CFR part 3000 as follows:

PART 3000—STANDARDS OF CONDUCT

1. The authority citation for part 3000 continues to read as follows:

Authority: 39 U.S.C. 3603; E.O. 12674, 54 FR 15159, 3 CFR, 1989 Comp., p. 215, as modified by E.O. 12731, 56 FR 42547, 3 CFR, 1990 Comp., p. 306; 5 CFR parts 2634 and 2636.

2. Revise § 3000.735-103 to read as follows:

§ 3000.735-103

Financial interests.

An employee shall not, either directly or indirectly, have any financial interest (whether by ownership of any stock, bond, security, or otherwise) in any entity or person whose interests may be significantly affected by rates of postage, fees for postal services, the classification of mail, or the operation of the Postal Service. This paragraph does not proscribe interests in an entity or person whose use of the mail is merely an incidental or a minor factor in the general conduct of its business.