Navigating the Nomination Process for Political Appointees

Robert Rizzi and Elizabeth France

Corporate Counsel

2012-09-06 00:00:00.0

This is the latest in a series of columns from attorneys at O'Melveny & Myers LLP, examining the intersections of the political and legal worlds in the run-up to Election Day 2012.

Presidential elections trigger a wave of personnel changes, as the new or incumbent chief executive scrambles to fill critical posts while avoiding embarrassment and scandal. To expose potential problems, prospective appointees submit to rigorous review, allowing government agencies and the public to appraise their past and present relationships, investments, and activities. Once in office, they commit to ongoing scrutiny and make substantial sacrifices to comply with complex ethical rules. Missteps at any stage can lead to legal jeopardy and, often worse, reputational damage that takes years to repair.

Despite these burdens, nearly all political appointees relish the opportunity to serve, and many will recall their time in office as a pinnacle of an already distinguished career. Understanding the nomination and compliance processes—and enlisting counsel—can smooth the path to public office and free appointees to focus on and to enjoy their well-earned chances to serve.

Both federal pre-office vetting and post-confirmation compliance systems stem from an ever-changing hodgepodge of statutory rules and administration- or agency-specific policies. This year, for example, the Stop Trading on Congressional Knowledge Act (STOCK Act) expanded executive disclosure and enlarged public access to previously protected personal financial information, while another law passed in August 2012 slashed the number of positions requiring confirmation by the U.S. Senate. With these constant shifts, even veterans of prior administrations are often blindsided by the complexity of the vetting process. But despite continuous change, potential nominees can expect a standard suite of steps on the path to public office:

1. Nearly all prospective senior appointees must complete a national security questionnaire delving deeply into financial history, mental health, substance abuse, criminal charges, foreign travel, and every residence and job they have had for at least 15 years. The online form [PDF]—filed under penalty of perjury—challenges appointees’ memories and contains several traps for the unwary; completing it without legal guidance is highly risky. Each administration may also overlay its own background questionnaire, sometimes requesting such personal information as the nominees’ Internet handles and any potentially embarrassing emails, instant messages, or text messages they have sent. While the particular questions may vary with the President-Elect come November, potential nominees will likely encounter some variation on these personal probes.

2. Nominees must catalog all financial interests—assets, income, and loans for themselves, their spouses, and their dependent children—on a separate form, and usually must provide several years of tax returns. Detailed examination can unearth problems, from errors in reporting to tax evasion. Tax issues—including perennial “nanny tax” problems—have derailed many high-profile nominations, like those of Zoe Baird, Kimba Wood, Bernard Kerik, and Tom Daschle.

3. At least three government units, the Office of the White House Counsel, the Office of Government Ethics, and the ethics office of the appointee’s prospective department/agency, review the forms to identify potential conflicts of interest—matters that would predictably and materially affect a federal employees’ financial interests. Depending on official duties, even uncontroversial investments like blue-chip stocks, municipal bonds, and certain mutual funds can create conflicts and have a substantial impact on an appointee’s portfolio and investment strategy. Resolving these conflicts is neither simple nor uniform: risk levels vary across posts, and a range of tools, including waivers and recusals, can manage conflicts. If necessary, the government can require a fire sale of conflicting assets, although the appointee may be able to defer capital gains taxes under a special and highly technical tax rule.

4. The particular package of financial restrictions to which a nominee consents—as well as other “ground rules” for ethics compliance—is then formalized in a written agreement. While in office, officials must comply with these ethics agreements, update their financial filings annually and, under the STOCK Act, report all securities transactions monthly. The reports are publicly available and, if a recent legal challenge to the STOCK Act fails, will soon be online.

5. Nominees for Senate-confirmed positions must undergo a separate vetting process with the relevant committee and its eager staff. This process is more onerous in some committees than in others, and review in the most demanding ones can be akin to a full-blown tax audit.

The entire process challenges most appointees, who have spent careers preparing for their positions but not for navigating a highly public ethical labyrinth. Questionnaires and disclosures often have tight deadlines, exacerbating the pressure, and even minor discrepancies between filings (which request overlapping information) can cause embarrassment. Serious mistakes can scuttle a nomination—or worse. Bernard Kerik, for one, was imprisoned in part for false statements to federal officials related to his U.S. Department of Homeland Security appointment.

Because vetting is so demanding and the stakes are so high, many nominees engage experienced counsel to guide them through the process. These specialists spot and resolve potential problems before they draw public attention and help nominees answer sensitive background questions accurately but in a way designed to avoid future embarrassment. As compliance plans develop, attorneys with expertise in ethics rules can negotiate with agencies to resolve potential financial conflicts without imposing unnecessary burdens on officials’ personal and financial lives.

The vetting process is designed to detect and deter ethical violations, but as it grows more intensive and invasive, it risks deterring talented people from seeking public office instead. The nation is fortunate that despite these burdens, these critical positions remain in high demand, and with preparation and guidance, distinguished nominees can negotiate the path to public service.

Robert Rizzi is a partner in O'Melveny & Myers LLP’s Washington D.C. and New York offices and head of the tax practice. For the past 10 years, his practice also has included advising senior executive branch appointees on "vetting" and related matters. Elizabeth France is an associate in O'Melveny's Washington D.C. office and a member of the public policy and political strategy practice.