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Trump Era Legal Fund Sparks Ethics Crackdown, ‘Corruption’ Fears

April 21, 2022, 5:16 PM

Ethics regulators are cracking down on legal expense funds for government officials, like those created for Trump allies facing lawsuits and investigations.

The Office of Government Ethics proposed a rule on Thursday that would limit the use of the funds for executive branch employees and require public disclosures tracking the flow of the money. The move is in response to concerns about “the appearance of corruption,” the independent federal agency said.

The regulation, if finalized, would culminate a three-year effort that kicked off after Congress and ethics groups questioned funds created during the Trump administration, raising concerns about oversight and outside influence over government officials.

There is currently no statutory or regulatory framework for establishing a legal expense fund in the executive branch, the OGE said.

The proposed rule would require legal expense funds to identify recipients and potentially limit payouts to one named recipient per fund. It would also force them to be established as trusts and submitted for approval, among other oversight measures.

“The proposed regulation will more clearly spell out who is a prohibited donor, establish donation caps, and require transparency in the form of quarterly, publicly available reports,” OGE said in a press release.

The rule offers a “meaningful framework” over funds that have been the subject of “unprecedented abuse in recent years,” Virginia Canter, chief ethics counsel at non-partisan oversight group Citizens for Responsibility and Ethics in Washington, said in a statement. Notably, it would create a format where trustees owe a fiduciary duty to a single beneficiary, Canter said.

“This format will help mitigate the real risk of outside influence over government officials who may be vulnerable to influence due to mounting legal fees,” Canter said.

Legal expense funds came under scrutiny during the Trump administration. Critics focused specifically on the Patriot Legal Expense Fund, created to pay for legal expenses related to Robert Mueller’s investigation into Russian meddling in the 2016 election.

David Apol, OGE’s Trump-selected acting director, seemed to sign off on the fund in a January 2018 letter to lawyers at Wiley Rein who created it. He said the Patriot Legal Expense Fund would comply with a law governing salaries for government officials, though he noted the OGE does not approve or disapprove of such funds.

Democrats on a congressional oversight committee raised issue with the Patriot Legal Expense Fund in an April 2018 letter to Apol. They said the fund “appears to allow secret donations” and “raises serious concerns about whether it complies with ethics, tax, and election laws.”

The fund later made payments to multiple law firms but didn’t identify the individuals on whose behalf the bills were paid, CNN reported.

“Legal expense funds can be used to facilitate unlimited gifts of cash to executive branch employees from a variety of sources outside the government,” Noah Bookbinder, executive director for the Citizens for Responsibility and Ethics in Washington, said in a May 2019 letter. “These gift-acceptance vehicles create the very real risk of outside influence over top government officials, who may be vulnerable to influence due to mounting legal fees”

To contact the reporter on this story: Roy Strom in Chicago at rstrom@bloomberglaw.com

To contact the editors responsible for this story: Chris Opfer at copfer@bloomberglaw.com; John Hughes at jhughes@bloombergindustry.com