NLRB General Counsel Facing Ethics Complaint Over Wal-Mart Stock

Shannon Green

Corporate Counsel

09-19-2012

If you think Governor Mitt Romney is having a rough week, he still may not want to trade places with Lafe Solomon. House Republicans urged the U.S. Department of Justice Monday to fully investigate a probe by the inspector general of the National Labor Relations Board, looking into NLRB acting general counsel Solomon’s handling of a social media case early this year. 

In a letter to U.S. Attorney General Eric Holder [PDF], U.S. Representative John Kline (R-Minnesota) urged the AG to review what he deemed “serious allegations.” According to an official at the U.S. Department of Justice, “We have received the letter, and we are reviewing it.”

Kline was joined by U.S. Representative Darrell Issa (R-California) Friday in announcing the findings of Inspector General David Berry’s review [PDF] of a hotline complaint into Solomon’s handling of a matter involving Wal-Mart Stores Inc. at a time he owned stock in the company. “As a general counsel and career attorney, Mr. Solomon should know federal statute well enough to know when to recuse himself from a possible conflict of interest between his own finances and his work,” Issa wrote in a press release.

President Barack Obama named Solomon acting general counsel of the board in June 2010, but his formal appointment never went before the Senate for confirmation. Of late, Solomon has been a favorite punching bag of the Republican-controlled House.

Solomon certainly isn’t the only government official to be criticized for allegedly violating ethics rules related to their investments. Last year, former SEC general counsel David Becker was investigated for his handling of the agency’s work related to the Bernie Madoff Ponzi scheme. After reviewing the matter, the DOJ declined to open an investigation or pursue charges against Becker. In 2003 U.S. Supreme Court Justice Stephen Breyer was criticized for not recusing himself in a case involving three pharmaceutical companies in which he owned stock.

Whether the NLRB will be free to move on from this matter remains to be seen. 

Caroline Judge Mehta, a Zuckerman Spaeder lawyer representing Solomon, doesn’t see the facts coming out of the Solomon investigation as being of any interest to the Justice Department. “We are very confident there are not going to be additional proceedings related to this matter,” says Mehta.

She and partner William Taylor, III co-wrote the firm’s response  to the inspector general [PDF] on Solomon’s behalf.

“That the agency should exhaust informal avenues to try to resolve a dispute with the nation’s largest employer before filing a complaint is certainly common sense,” they wrote in the letter, adding that “any suggestion that what occurred at the January 23 meeting was in any sense determinative of the Wal-Mart case is simply wrong.”

On January 23, Solomon met with the board’s Division of Advice to discuss its decision to issue a complaint in the matter. He knew the public reaction would be huge, according to an email reproduced in the report, and wanted to make sure the agency was “prepared.” In the meeting, Solomon instructed the associate GC to contact Wal-Mart to gauge its interest in a settlement.

Three months prior to his participation in the meeting, Solomon had received 300 shares of stock in Wal-Mart. The stock was valued at $18,267 on January 30, the day Solomon requested a waiver from the agency’s designated ethics agency official. That level exceeded the $15,000 threshold that would have entitled him to an automatic recusal exemption. Solomon sold the Wal-Mart stock at the end of February for $17,214.

His waiver request was denied February 1, based on a determination that: 1) Solomon had not offered a compelling reason why the waiver should be granted, and 2) the deputy GC could act in his place in the matter. 

In his report, Berry cited the U.S. Office of Government Ethics explanation as to how financial interest from stock ownership arises. Based on that guidance, Berry said that because “the financial interest of a charged party will be affected by the decisions of the agency,” agents such as Solomon were reminded each year not to participate in matters involving entities in which they own $15,000 or more in stock. 

Berry found no evidence that Solomon acted with “the intent to enrich himself or otherwise achieve any financial benefit.” But the inspector general called the environment in which the violation occurred “dysfunctional and adversarial.”

He said Solomon’s office should have had a system in place to screen matters for conflicts—before they landed on the GC’s desk.  Instead, Solomon sought a waiver from the agency’s director of administration, who, according to the IG, wasn’t even authorized to grant it. 

That the waiver was sought after the meeting, said Berry, and that the NLRB’s deputy GC didn’t stop Solomon from participating in the meeting evidenced a “complete failure” on the part of the office of the GC’s ethics program.

In an email, NLRB spokesperson Nancy Cleeland said that the IG worked with the leadership on the board and general counsel side to make improvements to the system. But while “the IG can make recommendations for improving internal processes and work with agency leadership to implement them,” she wrote, “it’s not the IG’s role to recommend that Congress, for example, take any particular action.”

Solomon’s lawyers consulted with Washington University Law’s government ethics expert Kathleen Clark regarding whether the activity of which Solomon was accused would warrant a criminal investigation by the Justice Department. Clark reviewed Justice’s record of criminal prosecutions under the criminal conflict of interest statute during the last six years.

The law, 18 U.S.C. § 208, prohibits an executive branch employee from participating personally and substantially in a particular matter that will affect their own financial interests, as well as the interests of spouses and other closely tied parties.

“Of the three dozen criminal prosecutions under this statute, most involved procurement,” says Clark. Examples include attempting to steer government contracts for financial gain. She says it was apparent in each of those investigations that the subject had a financial stake in the matter.

Solomon’s lawyers said in their letter that the acting GC “did nothing to advance or hinder his own or Wal-Mart’s financial interest at any point in the life of this matter, much less in the brief period between when he became aware of the Wal-Mart social media matter and when he divested himself of the stock.”

Under the federal code, when requesting a financial conflict of interest waiver, the employee is to advise the official responsible for his appointment of the “nature and circumstances” of the matter and make “full disclosure” of the interest in advance of taking action.

Although Solomon did not seek a waiver until January 30, Mehta stresses that ahead of the meeting the GC acknowledged to other participants in the discussion that he owned the stock.  It was his intention, they said, to explore whether a “resolution could be reached that would obviate the need for him ultimately to decide the case.”

See also: “NLRB general counsel scolded over financial conflict in Wal-Mart case,” The National Law Journal, September 2012.