President Donald Trump promised to drain the swamp in Washington, but under his administration several high-level Labor Department and NLRB officials are dealing directly with cases they touched in the private sector, raising questions about conflicts of interest.
Labor Secretary Eugene Scalia, in his previous capacity as a private attorney for the management-side law firm Gibson, Dunn & Crutcher, won a Chamber of Commerce lawsuit two years ago against an Obama-era regulation governing retirement advice. But in October, DOL’s ethics lawyers cleared Scalia to participate in crafting a new version of the rule.
The DOL official who announced that decision, DOL Solicitor Kate O’Scannlain, helped oversee a proposed regulation issued in October that reversed an Obama-era rule on tipping. In making the case for the change, that proposal quoted O'Scannlain's own father, 9th Circuit Judge Diarmuid O’Scannlain, who in a 2016 dissent declared the Obama policy to be “reckless,” “unsupported,” and “indefensible.”
A DOL official said in a written statement that Kate O’Scannlain’s participation was approved by career ethics officials. Asked whether Scalia’s refusal to recuse himself violates the spirit of Trump's ethics pledge, another DOL official said: “We don’t have to look at the spirit. What we really looked at was the [Office of Government Ethics] guidance.”
The NLRB meanwhile, issued a new recusal policy in November that, barring unlikely intervention by a president or an appellate court ruling, leaves all decisions about conflict of interest to the NLRB member in question. The following month, NLRB member William Emanuel participated in a $172,000 NLRB settlement with McDonald’s — even though an internal NLRB recusal list noted that Emanuel's former law firm, Littler Mendelson, represented “many of the franchisees” in the case.
“Trump may not have any more industry people than any other Republican administration,” said Richard Painter, former President George W. Bush’s chief ethics lawyer. “But the approach to ethics is ... a great big middle finger to the Office of Government Ethics.”
In January 2017, Trump issued an executive order requiring administration officials to pledge, for a period of two years, not to “participate in any particular matter involving specific parties that is directly and substantially related to [that official’s] former employer or former clients, including regulations and contracts.” The wording of that section was identical to an ethics pledge imposed by President Barack Obama.
But multiple plaintiffs in the 2018 retirement-rule case that Scalia helped argue successfully represented the financial services industry, including the Chamber, the Financial Services Institute, the Financial Services Roundtable, and the Securities Industry and Financial Markets Association. Trump ethics officials took Scalia off the hook because he represented no “specific parties,” i.e., he represented no individual company.
“It just doesn't make sense to say that someone could ... go in front of courts and say this is what the rule ought to be, and then immediately go into the government and change their mind and say, ‘Well, no, actually the rule ought to be something different, I was just bulls----ing before because I was getting paid,'" Painter said.
Conflicts of interest didn't loom large for Scalia's predecessor as Labor secretary, Alex Acosta, because Acosta spent most of the previous decade as dean of a Florida law school. Nor was it much of an issue for Obama's two Labor secretaries, Tom Perez and Hilda Solis, who spent most of their careers in government before they joined Obama's Cabinet.
One Democrat on the NLRB, Craig Becker, attracted Republican criticism in 2010 for participating in a case involving an SEIU local. Becker had previously worked as an attorney for the international union, and was cleared by agency ethics officials to take part in on the case. The inspector general agreed with agency ethics officials’ opinion that Becker could participate on the grounds that international unions are separate entities from from their local chapters.
As for the Scalia case, “any administration would want to avoid this conflict,” said Virginia Canter, a former White House associate counsel for the Obama and Clinton administrations who now works for the watchdog group Citizens for Responsibility and Ethics in Washington. “It’s a hornet's nest — if not an actual conflict of interest, there’s a real appearance issue,” Canter told POLITICO. “Especially in the regulatory realm, it’s completely inadvisable.”
Some ethics experts say that the real problem lies with the language of the ethics pledge itself.
On paper, the pledge “seems like it's catching the kind of conduct that we as normal Americans want it to catch,” said Delaney Marsco, legal counsel at the Campaign Legal Center, a government watchdog group. “[But] we don't have a great mechanism — certainly not the ethics pledge — for this specific instance where it's almost impossible to see how [Scalia] can set aside his loyalty to his former moneyed interests that used to pay his salary.”
Emanuel’s participation in the December McDonald’s settlement didn’t violate the Trump ethics pledge because the prohibition concerning former clients expires after two years. Emanuel passed the two-year mark in September.
But even the comparatively lenient OGE noted in its 2018 report, which was released last summer, that Emanuel was one of three government officials who violated the Trump ethics pledge in a related matter during the previous year. The other two officials, who worked at the Environmental Protection Agency, were “provided counseling,” the report said; OGE made no mention even of that mild intervention concerning Emanuel.
Emanuel’s recusal violation concerned his participation in a Dec. 2017 NLRB decision that narrowed the circumstances under which a business could be classified a “joint employer,” jointly liable for labor violations committed by its franchisees and contractors. (The McDonald’s settlement was a joint-employer case.) The NLRB’s inspector general castigated Emanuel for participating in the decision, given Littler Mendelson’s participation in an earlier joint-employer case that the 2017 ruling overturned, and said the episode “exposes a serious and flagrant problem and/or deficiency in the board's administration of its deliberative process.”
Emanuel said he “was unaware” of Littler’s involvement in the earlier case, and Thomas Jipping of the Heritage Foundation criticized the inspector general's conclusion as "subjective, undefined, and retroactive." In a legal opinion, NLRB General Counsel Peter Robb said he "does not agree with the opinions reached in the IG report."
The NLRB, however, responded to the inspector general's report by vacating the joint-employer decision in which Emanuel participated. Instead, the agency in Sept. 2018 issued a proposed rule, from which Emanuel did not recuse himself, that would impose virtually the same policy change. A final rule was expected in December and should be issued soon. The NLRB then issued the December 2019 recusal policy, which expanded disclosure requirements concerning recusals but left any challenge to individual recusal decisions to the president and the courts.
By that point, Democrats had already accused the NLRB of end-running ethics rules.
“There are serious concerns that the NLRB is using rulemaking in some cases as an attempt to avoid compliance with NLRB Members’ individual ethics obligations,” Senate HELP Committee ranking member Patty Murray (D-Wash.), wrote in an October letter to board chairman John Ring.
Scalia has opted to sit out in at least some instances involving former clients. He won’t participate in an Occupational Safety and Health Administration rulemaking limiting workers’ exposure to beryllium, O’Scannlain said, because a lawsuit he participated in before his appointment is still active. Scalia has also recused himself from a rule concerning OSHA recordkeeping of injuries and illnesses. In May he filed an amicus brief on behalf of the National Association of Manufacturers supporting a lawsuit to overturn the recordkeeping rule.
After she was appointed in December 2017, O’Scannlain was recused for two years from participating in matters in which either her former employer, Kirkland & Ellis LLP, or one of her former clients was a party or represented a party. That recusal period ended in December. In a written statement, DOL officials told POLITICO that O’Scannlain has neither requested nor been granted any recusal waivers.
An NLRB spokesperson declined to provide information on Emanuel’s recusal, saying the agency will at a future date release that information along with the recusals of all other NLRB members.
As the OGE report notes, labor agencies aren’t the only corner of the Trump administration generating conflict of interest controversies; the EPA is a trouble spot too. In April, House Democrats launched an investigation into former EPA air pollution chief Bill Wehrum’s ties to his old law firm and to coal-heavy utilities that lobbied against climate regulations. POLITICO reported last year that mere months before Wehrum assumed his post at EPA the nation’s biggest coal-burning power companies paid millions to Wehrum’s law firm to fight various Obama-era climate and air pollution rules.
At the Interior Department, the inspector general is reportedly investigating whether six Trump officials violated the ethics pledge by working with former employers or clients on government business. The agency told ProPublica it was cooperating with the inquiry after the Campaign Legal Center filed a complaint last year.
As for Scalia, his participation in the fiduciary rule could create legal problems for DOL if its rulemaking is challenged in court, a common occurrence for any new regulation.
“I think it’s unwise,” Canter of CREW added. It’s also unnecessary, she said. “I just don't see how the prior litigation he participated in won't be relevant to the future litigation.”