Status of the Public Company Accounting Oversight Board Under 18 U.S.C. § 207(c)

Status of the Public Company Accounting
Oversight Board Under 18 U.S.C. § 207(c)
A former senior employee of the Securities and Exchange Commission communicating with the
Commission on behalf of the Public Company Accounting Oversight Board during the year after his
service as a senior employee at the Commission ends would not be communicating on behalf of the
United States and therefore 18 U.S.C. § 207(c) would apply to bar such a communication.
March 30, 2007
MEMORANDUM OPINION FOR THE GENERAL COUNSEL
SECURITIES AND EXCHANGE COMMISSION
Under 18 U.S.C. § 207(c) (2000), a former senior official of the Executive
Branch, in the year after his departure, may not communicate with, or appear
before, his former agency “on behalf of any other person (except the United
States),” in connection with a matter on which he seeks official action. You have
asked whether a former senior official of the Securities and Exchange Commission
(“Commission”) communicating with the Commission on behalf of the Public
Company Accounting Oversight Board (“Board”) during the year after his service
at the Commission ends would be acting “on behalf of . . . the United States.” 1 We
believe that former senior official would not be communicating on behalf of the
United States and that the statute therefore would apply to bar such a communica-
tion.
I.
The Sarbanes-Oxley Act, 15 U.S.C. § 7211 (Supp. IV 2004), created the Board
“to oversee the audit of public companies that are subject to the securities laws,
and related matters,” id. § 7211(a). To carry out that responsibility, the Board,
among other things, is “to register public accounting firms that prepare audit
reports for issuers” under the Act, id. § 7211(c)(1); “establish or adopt . . .
auditing, quality control, ethics, independence, and other standards relating to the
preparation of audit reports,” id. § 7211(c)(2); “conduct inspections of registered
public accounting firms,” id. § 7211(c)(3); “conduct investigations and discipli-
nary proceedings concerning, and impose appropriate sanctions where justified
upon, registered public accounting firms and associated persons of such firms,” id.
§ 7211(c)(4); “perform such other duties or functions as the Board (or the
1
Letter for Steven G. Bradbury, Acting Assistant Attorney General, Office of Legal Counsel, from
Brian G. Cartwright, General Counsel, Securities and Exchange Commission (Apr. 14, 2006)
(“Commission Letter”). In accordance with the practice of our Office, the Commission has agreed to be
bound by our opinion in this matter. Id. at 1. We do not address the status of the Board for any other
purpose, including under any provision of the United States Constitution. See generally Status of
National Veterans Business Development Corporation, 28 Op. O.L.C. 70, 72 (2004).
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Opinions of the Office of Legal Counsel in Volume 31
Commission, by rule or order) determines are necessary or appropriate to promote
high professional standards among, and improve the quality of audit services
offered by, registered public accounting firms and associated persons thereof, or
otherwise to carry out [the] Act,” id. § 7211(c)(5); and “enforce compliance with
[the] Act, the rules of the Board, professional standards, and the securities laws
relating to the preparation and issuance of audit reports and the obligations and
liabilities of accountants with respect thereto, by registered public accounting
firms and associated persons thereof,” id. § 7211(c)(6).
The Commission exercises substantial “oversight and enforcement authority”
over the Board. Id. § 7217(a). For example, after consultation with the Chairman
of the Board of Governors of the Federal Reserve System and the Secretary of the
Treasury, the Commission appoints all five members of the Board. Id.
§ 7211(e)(4). The Commission has the power to approve the Board’s rules of
operation and administration, id. § 7211(g), and must approve (or modify) the
Board’s rules for public accounting firms before they can take effect, id.
§ 7217(b). The Commission also may “enhance, modify, cancel, reduce, or require
the remission of a sanction imposed by the Board upon a registered public
accounting firm or associated person thereof.” Id. § 7217(c)(3). The statute
nonetheless declares that the Board
shall not be an agency or establishment of the United States Gov-
ernment . . . . No Member or person employed by, or agent for, the
Board shall be deemed to be an officer or employee of or agent for
the Federal Government by reason of such service.
Id. § 7211(b).
The present question concerns the status of the Board for purposes of 18 U.S.C.
§ 207(c). Under that provision, a former senior employee of an agency is criminal-
ly liable if
within 1 year after the termination of his or her service or employ-
ment . . . [he or she] knowingly makes, with the intent to influence,
any communication to or appearance before any officer or employee
of the department or agency in which such person served within 1
year before such termination, on behalf of any other person (except
the United States), in connection with any matter on which such per-
son seeks official action by any officer or employee of such depart-
ment or agency.
(Emphasis added). 2 Because “[t]he nature of the close working relationship
between the Commission and the [Board] necessitates frequent contact between
2
Section 207(c) identifies covered senior officials by reference to salary level or to the authority
under which they have been appointed. 18 U.S.C. § 207(c)(2). Although the Commission Letter does
48
Status of the Public Company Accounting Oversight Board Under 18 U.S.C. § 207(c)
the Commission’s staff and [Board] members and staff,” Commission Letter at 4,
if the Board is not considered “the United States” for purposes of section 207(c), a
former senior Commission official “could not, as a practical matter, accept an
appointment as a member of the [Board] or its senior staff,” id.
II.
Your question concerns former “Commissioners or staff members who leave
the Commission to accept a position with the [Board]” and communicate with the
Commission as part of their official functions. Commission Letter at 1, 3. We
believe that such a former official would not communicate “on behalf of . . . the
United States” under 18 U.S.C. § 207(c).
A.
We have previously concluded that communications “on behalf of” a person
under section 207 “include only communications that are made by one who is
acting as an agent or attorney, or in some other representational capacity for
another.” Memorandum for Michael Boudin, Deputy Assistant Attorney General,
Antitrust Division, from J. Michael Luttig, Assistant Attorney General, Office of
Legal Counsel, Re: Application of 18 U.S.C. § 207(a) to Pardon Recommendation
Made by Former Prosecutor at 6 (Oct. 17, 1990) (“Pardon Recommendation”).A
former senior official who works at the Board and communicates in his official
capacity to the Commission would do so as the Board’s agent: “‘Agency is the
fiduciary relation which results from the manifestation of consent by one person to
another that the other shall act on his behalf and subject to his control, and the
consent of the other so to act.’” Id. (quoting Restatement of the Law (Second) of
Agency § 1 (1958) (emphasis omitted)); accord Restatement of the Law (Third) of
Agency § 1.01 (2006). The applicability of section 207(c) thus turns on whether,
as an agent of the Board, a former employee of the Commission would act as an
agent of “the United States.” The statute answers that question in the negative.
The Sarbanes-Oxley Act provides that “[n]o member or person employed by, or
agent for, the Board shall be deemed to be an officer or employee of or agent for
the Federal Government by reason of such service.” 15 U.S.C. § 7211(b) (empha-
sis added). That provision, we believe, indicates that a person employed by or
acting as agent for the Board is not acting “on behalf of . . . the United States”
under section 207(c). Title 18 does not have a general definition of “the United
States,” except “in a territorial sense,” 18 U.S.C. § 5 (2000), but section 207(c)
itself suggests the meaning in the present context. Section 207(c) states that its
not ask for us to address the lifetime ban under 18 U.S.C. § 207(a)(1) for specific-party matters in
which a former officer or employee participated personally and substantially or the two-year ban for
specific-party matters pending under the official responsibility of the former officer or employee, we
note that both provisions also use the “on behalf of . . . the United States” language.
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restrictions apply to certain former “officer[s] or employee[s] of the executive
branch of the United States.” The reference to the Executive Branch of “the United
States” plainly is to the Executive Branch of the federal government. When the
section later refers to a communication “on behalf of . . . the United States,” the
“normal rule of statutory construction” would call for the conclusion that “identi-
cal words used in different parts of the same act are intended to have the same
meaning,” Sorenson v. Sec’y of Treasury, 475 U.S. 851, 860 (1986), and this
principle is especially compelling here because the identical words appear in the
same sentence, see Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 448
(2006). 3 See also 18 U.S.C. § 207(b) (provision restricting a former employee’s
activities with respect to trade or treaty negotiations applies to a former employee
“who personally and substantially participated in any ongoing trade or treaty
negotiation on behalf of the United States within the 1-year period preceding the
date on which his or her service or employment with the United States terminat-
ed”). Because a communication “on behalf of the United States” would thus have
to be on behalf of the federal government, the statement that the Board’s personnel
are not “agent[s] for the Federal Government” negates precisely that they act “on
behalf of . . . the United States” within the meaning of the statute.
The interests of the Board may well coincide with those of the United States.
The Board is a creation of the United States government and is subject to the
control of the Commission in significant respects. Nevertheless, section 207 can
apply even when a former official is advocating the same position that is taken by
his former agency. “‘[A] former employee does not act on behalf of the United
States . . . merely because the United States may share the same objective as the
person whom the former employee is representing.’” 18 U.S.C. § 207 and the
Government of Guam, 20 Op. O.L.C. 326, 329 (1996) (quoting Office of Govern-
ment Ethics, Summary of Post-Employment Restrictions of 18 U.S.C. Section 207,
at 4 (Nov. 4, 1992)). Here, although the Board, the Commission, and more
generally the United States may have the same interests, Congress has declared
that the Board’s personnel are not “agent[s] for the Federal Government,” and,
given this declaration, it does not matter if the Board’s personnel advance interests
that match those of other entities of the federal government. The statute, in other
words, distinguishes between the Board and the United States and treats Board
personnel as speaking on behalf of the Board.
3
The covered persons are former officers and employees “of the executive branch of the United
States,” 18 U.S.C. § 207(c), but communications by a former officer or employee are allowed if they
are “on behalf of . . . the United States,” not just the Executive Branch, Office of Government Ethics,
Summary of Post-Employment Restrictions of 18 U.S.C. § 207, Informal Advisory Mem. 04x11a, at 5
(July 29, 2004) (attachment to Office of Government Ethics, Summary of 18 U.S.C. § 207, Informal
Advisory Mem. 04x11 (July 29, 2004)) (available at http://www.oge.gov/OGE-Advisories/Legal-
Advisories/Legal-Advisories/, last visited Aug. 12, 2014) (“2004 Summary”) (communications on
behalf of Congress are permitted). This difference does not affect the meaning of “the United States,”
which in both cases refers to the federal government.
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Status of the Public Company Accounting Oversight Board Under 18 U.S.C. § 207(c)
B.
The conclusion that communications on behalf of the Board are not “on behalf
of . . . the United States” is consistent with an earlier opinion of our Office,
Applicability of 18 U.S.C. § 207(a) to the Union Station Development Corpora-
tion, 12 Op. O.L.C. 84 (1988) (“Union Station”). There, we stated that we have
“looked to the definition of ‘agency of the United States’ in 18 U.S.C. § 6 to
determine if an entity should be regarded as the United States for the purposes of
the conflict of interest laws.” Id. at 84. We have some doubt that this characteriza-
tion is entirely correct; the opinions cited in Union Station may be read to interpret
the term “agency” or “agency of the United States,” not “United States” itself.
Nevertheless, even if that line of opinions is applicable, it is consistent with the
conclusion we reach here. Section 6 states that
[t]he term ‘agency’ includes any department, independent establish-
ment, commission, administration, authority, board or bureau of the
United States or any corporation in which the United States has a
proprietary interest, unless the context shows that such term was in-
tended to be used in a more limited sense.
18 U.S.C. § 6. We have read section 6 as “establish[ing] a presumption that a
governmental entity is an agency for purposes of a given offense, including the
conflict of interest statutes.” Application of 18 U.S.C. § 205 to Union Organizing
Activities of Department of Justice Employee, 5 Op. O.L.C. 194, 195 (1981)
(“Organizing Activities”).
Here, however, the statute conclusively rebuts that presumption. Section 7211
states explicitly that the Board “shall not be an agency or establishment of the
United States Government.” 15 U.S.C. § 7211(b). In Lebron v. National Railroad
Passenger Corp., 513 U.S. 374 (1995), the Supreme Court concluded that a statute
providing that Amtrak “‘will not be an agency or instrumentality of the United
States Government,’” id. at 391 (quoting 84 Stat. 1330 (1970)), was “assuredly
dispositive of Amtrak’s status as a Government entity for purposes of matters that
are within Congress’s control.” Id. at 392. Similarly, Congress’s declaration that
the Board is not “an agency or establishment of the United States Government” is
dispositive of its status as an agency under the conflict of interest laws.
When a statute has not expressly addressed whether an entity is an agency or
establishment of the United States, we sometimes have examined such factors as
the entity’s “functions, financing, control, and management.” Union Station, 12
Op. O.L.C. at 86. 4 But the use of a multi-factor test is not appropriate where, as
4
A 1948 letter of the Attorney General concluded that the Panama Railroad Company was an
agency of the United States for purposes of the conflict of interest laws, Letter for the Secretary of the
Army, from Tom C. Clark, Attorney General (Dec. 2, 1948), but the statute in that case provided that
the company was “an agency or instrumentality of the United States,” Pub. L. No. 80-807, 62 Stat.
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Opinions of the Office of Legal Counsel in Volume 31
here, Congress has explicitly determined that an entity is not an agency of the
United States for purposes within Congress’s control.
The conclusion that the Board is not “the United States,” we believe, squares
with the Sarbanes-Oxley Act’s own post-employment provision. Under 15 U.S.C.
§ 7211(g)(3), the Board is to
establish ethics rules and standards of conduct for Board members
and staff, including a bar on practice before the Board (and the
Commission, with respect to Board-related matters) of 1 year for
former members of the Board, and appropriate periods (not to exceed
1 year) for former staff of the Board.
This provision does put the Board into a position similar to that of an agency of
the federal government, but this treatment is entirely consistent with the view that
the Board is not a federal agency for purposes of the general conflict of interest
laws, including 18 U.S.C. § 207(c), and thus requires its own conflict of interest
provision. And although the provision, by limiting the practice before the Com-
mission by former Board members and staff, might be read to suggest that, for
conflict of interest purposes, the Board should be equated with the Commission,
the bar on practice before the Commission also could reflect a concern that
confidential information involving regulated entities might give former Board
members and staff an unfair advantage. Cf. Bayless Manning, Federal Conflict of
1075, 1076 (1948). In 1963, we found that the Federal National Mortgage Association (“Fannie Mae”)
was an agency of the United States under 18 U.S.C. § 431 (1958). See Memorandum for Joseph F.
Dolan, Assistant Deputy Attorney General, from Norbert A. Schlei, Assistant Attorney General, Office
of Legal Counsel (Dec. 18, 1963) (“Fannie Mae”). In that instance, the statute made Fannie Mae “a
constituent agency of the Housing and Home Finance Agency,” 12 U.S.C. § 1717 (1958), and Fannie
Mae’s obligations were not obligations of the United States or “of any agency or instrumentality
thereof other than [Fannie Mae],” id. §§ 1719(b), 1721(b) (emphasis added); the “other than” language
suggested that Fannie Mae itself was an agency or instrumentality of the government. Although we did
not refer to these provisions, we noted that the Housing and Home Finance Administrator was the
Chairman of Fannie Mae’s Board. Fannie Mae at 6, 8. In Organizing Activities, we determined that the
Office of the Architect of the Capitol was an “agency.” Noting that the definition in 18 U.S.C. § 6 “in
effect, establishes a presumption that a governmental entity is an agency for purposes of a given
offense, including the conflict of interest statutes,” we did not then identify anything that might have
rebutted that presumption. 5 Op. O.L.C. at 195. In Union Station, the corporation whose status was in
question was “simply the vehicle created by that Department to accomplish [a] congressional mandate”
imposed upon the Department of Transportation under 40 U.S.C. §§ 801–819 (1988), and the statute
was silent on the status (indeed on the existence) of that corporation. 12 Op. O.L.C. at 86; see also
Applicability of 18 U.S.C. § 207 to the General Accounting Office, 3 Op. O.L.C. 433 (1979) (conclud-
ing that section 207 applies to former employees of the General Accounting Office, which, under the
then-applicable statute, was an “establishment of the Government”). Similarly, we concluded that the
National Veterans Business Development Corporation was an “agency” under 31 U.S.C. § 9102. The
statute creating that entity had “no . . . express disclaimer” of its status as an agency. National Veterans
Business Development Corporation, 28 Op. O.L.C. at 72.
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Status of the Public Company Accounting Oversight Board Under 18 U.S.C. § 207(c)
Interest Law 179 (1964) (stating that concern about misuse of inside information is
one reason for federal post-employment restrictions). 5
Concededly, as a matter of policy, it may make little sense to treat the Board as
outside the government for purposes of the conflict of interest laws. As the
Commission Letter points out, this understanding of section 207(c) has the effect
of excluding from appointment to the Board a “uniquely qualified pool of
candidates”—recently departed former high-level officials of the Commission.
Commission Letter at 4. Given the “unique statutory relationship between the
[Board] and the Commission,” there may be a strong policy argument that, for
purposes of the conflict of interest laws, the Board should be treated as an agency
of the government. On the other hand, the Board in several respects is similar to
self-regulatory organizations like the National Association of Securities Dealers
(“NASD”), “a private body empowered by the Commission to oversee the
activities of broker-dealers.” United States v. Frith, 461 F.3d 914, 916 (7th Cir.
2006). Although the Commission’s authority to oversee the Board is even greater
than its authority to oversee the NASD, the Sarbanes-Oxley Act declares that
several provisions of the securities laws relating to the Commission’s oversight
powers “shall apply to the Board as fully as if the Board were a ‘registered
securities association.’” 15 U.S.C. § 7217(a), (b)(4), (b)(5), (c)(2). The statute, to
this extent, treats the Board like the private NASD, which we understand is the
only “registered securities association.” Congress may have wished to treat the
Board as private for all statutory purposes, and section 7211(b) indicates that this
is what Congress chose to do. The unequivocal declaration that “[n]o member or
person employed by, or agent for, the Board shall be deemed to be an officer or
employee of or agent for the Federal Government by reason of such service” and
that the Board “shall not be an agency or establishment of the United States
Government,” 15 U.S.C. § 7211(b), determines our answer.
STEVEN G. BRADBURY
Acting Assistant Attorney General
Office of Legal Counsel
5
Moreover, if the Board were an agency of the United States, a highly paid official of the Board
who left the government would be subject to the one-year cooling-off period under section 207(c), and
practice before the Board by such a former official in the year after his or her departure would violate
the criminal provision. The administrative rule, at least to this extent, would then seem superfluous. See
2004 Summary, supra note 3, at 8.
53