Legal expense funds have always posed ethical risks: they can be used to facilitate unlimited gifts to executive branch employees, and they risk facilitating excessive outside influence over top government officials.
But in 2019, legal expense funds proved especially alarming when the Office of Government Ethics (OGE) allowed a political organization called the Patriot Legal Expense Fund Trust, LLC (Patriot Fund) to operate as an LLC with a large group of possible beneficiaries, breaking from the practice of structuring funds as trusts with one beneficiary. Alarmed by the Patriot Fund’s newfound ability to influence executive branch employees by withholding or distributing funds, CREW called on OGE to rescind its blessing of the Patriot Fund and issue regulations to protect government integrity. In April of 2022, OGE issued a proposed rule.
CREW has submitted a comment to both commend OGE’s proposed rule, particularly the inclusion of protections afforded to anonymous whistleblowers and penalties for noncompliance, and highlight areas for further improvement. Though the proposed rule largely reflects CREW’s earlier suggestions—for example, the requirement of a trust with a single beneficiary as the structure for legal expense funds answers our previous comment’s most important concern—CREW has suggested further reforms to strengthen the rule. CREW urges OGE to reject the use of all non-trust legal expense funds. If non-trust legal expense funds that take the form of LLCs or partnerships are permitted by OGE under separate gift rules, it would undermine the efficacy of OGE’s newly proposed framework. Other suggested reforms include strengthening the criteria for determining trustee eligibility; imposing an aggregate cap of $10,000 per donor for the life of the legal expense fund; broadening the recusal obligations that apply to donations that exceed $5,000, and establishing clear guidelines for screening donors.
OGE has the opportunity to pass a bold and comprehensive rule to restore government integrity and promote compliance. CREW commends OGE for its commitment to transparency and accountability, and we urge them to continue working to implement strong safeguards against potential abuses of legal expense funds.