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Senate Ethics Guidance May Prove a Liability for Stevens Prosecution

            One other motion filed by Senator Stevens should be noted because it refers to what I anticipate will be at the core of his defense.   The issue, explained below, is whether Senate Ethics guidelines clearly require the disclosure of the “things of value” Stevens received. 

            The government charges that Stevens received various things of value over a seven-year period (1999-2006) from VECO and its CEO, Bill Allen, and that Stevens falsified his financial disclosure reports (FDs) for those years by failing to report these things of value as either gifts or liabilities.  In particular, the government alleges that from 2000 to 2006, “STEVENS accepted from ALLEN and VECO more than $250,000 in free labor, materials, and other things of value in connection with the substantial renovation, improvement, repair and maintenance to [Stevens’s personal residence in Girdwood, Alaska].” 

            Significantly, the indictment alleges that these things of value had to be disclosed as either a gift or liability, but does not specify which.  In his motion, Stevens asks: “Was it a gift or liability?  Why did this alleged gift or liability qualify as such under the applicable rules for completing the form in question?  Notably, the monetary disclosure thresholds are vastly different for gifts and liabilities:  during the relevant period a gift had to be disclosed if it exceeded an amount between $260 and $305, while a liability had to be disclosed only if it exceeded $10,000.” 

            In a footnote, Stevens amplifies this point: “Wholly absent from the indictment is any allegation by the government about why the things of value at issue qualified as a ‘gift’ or ‘liability’ as those items are described on the face of the Financial Disclosure Form.  These words, in the context of the completion of the form, are terms of art and cannot be interpreted colloquially or cavalierly.  See Senate Financial Disclosure Report, date 3/08, pp. 14-17, available at http://ethics.senate.gov/downloads/pdffiles/cover1.pdf  (instructions for “Gifts” and “Liabilities” sections) (relevant pages attached as Exh. 1).”  

Piecing these points together with what has been reported about the Stevens case, I anticipate that the Senator’s defense will go something like this: (1) Stevens expected that he would be billed in the ordinary course for any work performed on his house; (2) Stevens paid those bills he received but did not keep close track of what work had been done versus what work was billed; (3) to the extent that work was performed but not billed, Stevens did not understand that he was required to report this as a “liability” on his FD; and (4) a reasonable person, reading the Senate Ethics rules, instructions and guidance would not have understood that there was any such obligation.

From the prosecution’s perspective, the last point could be a bit of a problem. Looking at the Senate FD form, one would be hard-pressed to reach the conclusion that disclosure of unbilled contractor work is required. The page for reporting liabilities states: “Report liabilities over $10,000 owed by you, your spouse, or dependent child . . . to any one creditor at any time during the reporting period. Check the highest amount owed during the reporting period. Exclude: (1) Mortgages on your personal residences unless rented; (2) loans secured by automobiles, household furniture or appliances; and (3) liabilities owed to certain relatives listed in Instructions. See Instructions for reporting revolving charge accounts.”

The language used here directs the filer’s attention to mortgages, financed purchases, credit card balances and similar types of loan transactions. Similarly, the two examples given, “mortgage on undeveloped land” and “promissory note,” suggest the type of transaction associated with the extension of credit, rather than a debt incurred in the ordinary course of commerce.

The Instructions for filling out the FD also are suggestive of a loan-type transaction. For example, the instructions state: “Report the name and address (city, state) of the creditor to whom the liability is owed. You must also indicate the type of liability and date the liability was incurred, interest rate, and term (if applicable) of each liability. The category of value which must be checked is that which indicates the highest amount owed on that liability during the reporting period, not just at the end of the period. If the liability was completely paid during the reporting period, you may also note that on the form if you wish.”

The brief discussion of “liabilities” in the Senate Ethics Manual is similarly indicative of some sort of loan: Personal obligations aggregating over $10,000 owed to one creditor at any time during the reporting period, regardless of repayment terms or interest rates, must be reported. The identity (name of the creditor), type, interest rate, term and amount of the liability must be stated. Except for revolving charge accounts (e.g. credit card accounts), the largest amount owed during the calendar year is the value to be reported. For revolving charge accounts, the value is determined by using the balance occurring within 30 days of the end of the reporting period (e.g. for annual Reports, the year-end or December balance is used); however, if the revolving charge account is less than $10,000 at the close of the reporting period, no reporting is required.”

With one exception, all of the examples given in these sources, including the examples of things that do not need to be disclosed, involve loan-type liabilities that would ordinarily be owed to financial institutions and carry an interest-rate of some sort. The one exception is that the Ethics Manual notes that Senate filers are “not required to report tax deficiencies [because] such matters involve the government as a creditor, are normally confidential, and may be contested.” Even this example (of something that need not be disclosed) involves a debt that is overdue and carries an interest rate established by law.

It would not be surprising if the average Senate filer, reading these various sources of guidance, reached the conclusion that “liabilities” did not extend to bills received in the ordinary course of commerce. This conclusion is buttressed by a quick review of the most recent FDs of 28 Senators (Akaka through Craig, excluding Bingamin and Corker, whose FDs I could not, for some reason, open). These Senators either reported no liabilities, or reported liabilities such as “mortgage,” “line of credit,” “promissory note,” “credit card,” or “student loan.” None of the FDs reported ordinary debts to contractors or others who provide goods and services without some credit aspect.

Of course, a wider search might yield different results. But one would expect that there would be a fair number of filers in recent years who incur obligations of more than $10,000 to someone during the course of a year. Anyone who has had a kitchen remodeled or any other substantial home project can testify that it doesn’t take much to reach the $10,000 mark. Not to mention things like medical bills or attorneys fees, which can easily reach those levels. If in fact there are few or no Senate filers who have disclosed such items, one could infer that the term “liability” has not been interpreted to reach such ordinary debts.

If Stevens makes this argument, the prosecution will no doubt respond that a debt owed to a contractor falls within the literal language of the Ethics in Government Act, which requires disclosure, with some exceptions not applicable here, of “total liabilities owed to any creditor” (see 5 U.S.C. App. § 102 (a) ((4)). It could rely on Opinion 94-11 (5-25-94) of the Office of Government Ethics, which advised that executive branch employees must disclose “outstanding fees for legal or other services as a liability on a public financial disclosure report.” OGE rejected the argument that the terms “liabilities” or “creditor” could be “limited to cash loans” or “defined in a manner other than their ordinary usage.” It therefore concluded that “[l]iabilities owed to creditors typically include promissory notes, mortgages, debts arising out of installment sales agreements, outstanding fees for personal services, revolving charge accounts such as credit card balances, outstanding bills for consumer goods and services, contractual financial obligations, overdue tax liabilities, and any other debt owed to a creditor.”

There are, however, two problems with this response. First, while OGE has the authority to interpret financial disclosure requirements for the executive branch, it has no such authority with regard to the legislative branch. The fact that the Senate Ethics Committee has apparently chosen not to incorporate OGE’s advice in the guidance provided to Senate filers may suggest that the Committee was not in agreement with this advice. If anything, the Committee’s silence arguably underscores the ambiguity in the instructions provided to Senate filers on this point, ambiguity which, as noted in an earlier post, the court is constitutionally prohibited from resolving with its own interpretation.

Finally, even if the OGE opinion controlled, the prosecution might have a problem. The opinion refers to “outstanding bills” for goods and services, but Stevens did not receive any bills for the services that are at issue. Thus, it is not at all clear, under the OGE opinion, that Stevens would have an obligation to disclose unbilled work as a “liability.”

These considerations suggest that the prosecution may have a difficult time proving that Stevens falsified his FD by failing to disclose liabilities.

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