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III. THE PERSPECTIVE OF THE MAYOR AND HIS STAFF

A. The Mayor's Perspective

The EOM explored the possibility of securing appropriated dollars to fund the events. However, the Mayor was impressed by the partnering concept of other jurisdictions, and instructed his staff to use private funds to finance the events. The Mayor acknowledged that his understanding of the legal and ethical implications of his strategy for partnerships was not fully developed, but he was aware that oversight and safeguards were necessary.

1. An Early Attempt to Secure Appropriated Funds

According to Mark JONES, however, the Mayor intended for these events to be funded privately: "his main goal was not to use public funds, which we didn't." (JONES Tr. at 20) When interviewed by the OIG, Mayor WILLIAMS confirmed JONES' understanding: "[m]y people were generally expected in certain situations to seek dollars from non-profits, seek dollars from businesses to help further these public purpose objectives." (WILLIAMS Tr. at 27)

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2. The Mayor's Concept of Partnering

The guidance that I received was not in any particular form. I just received illustrative and I thought instructive help from other mayors that I visited before I was inaugurated. And I was impressed by the strong public-private partnerships that existed in these communities-communities like Indianapolis; or Detroit; or Portland, Oregon; or Phoenix, Arizona. Subsequent to that time I traveled to Cleveland, Ohio, with Senator [George] Voinovich. And I was impressed by the civic leadership, the major non-profit entities in that city, business entities in that city, certainly some of them regulated, who were joined in a very strong partnership with the city. And I was simply trying to build that same kind of unity and teamwork here in our city.

(WILLIAMS Tr. at 20) The Mayor conceptualized his authority to raise funds as broad and deeply rooted: 

My understanding as it related to fundraising in general and the relationship of 501 [(c)(3)s] and the government in particular was that I had the general authority -- almost organic in my office to accept funds on behalf of the District.

***

My understanding was that fundraising was permissible . . . and based on my understanding, my strategy was that -- we're the nation's capital, and that the potential targets of opportunity -if you want to call them that, people who were lucky enough to be asked to contribute to the District, were any companies or non-profit organizations in the entire United States -- entire world for that matter -- but certainly the United States of America and that could include, but was not limited to, nor would it necessarily preclude regulated entities as long as there was full disclosure and a firewall between that fundraising and partnership and the activities of the government. And that is how I proceeded.

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3. The Need for Oversight and Safeguards

[I]n selected areas . . . this authority could be delegated to people like Dr. Omer, who had a financial management background as deputy CFO, who had an administrative background as a doctor of public administration, who was a high official in my administration that I could delegate to him these responsibilities. And he would ensure that, one, they were executed; and, two, that there was a proper oversight. 

Id. at 13-14.

Although the recollections of Mayor WILLIAMS, Dr. OMER, and Mark JONES differ in many respects, they are all in concert on one point: there was no quid pro quo or any advantage tendered to a non-profit partner or donor in any of the events. Dr. OMER and Mark JONES were particularly emphatic on this point, asserting that Mayor WILLIAMS does not do business this way. Rather, as the Mayor stated:

There was going to be transparency and full disclosure so that any monies raised for any activities, those individuals providing those funds would be publicly documented and disclosed at the event, in public announcements . . . [a]nd that finally, in any event that there would be necessarily a firewall between matters of discretion on my part or people acting on my behalf, whether it's regulation, or administrative action, policy promulgation, or procurement or personnel action, that all those actions would be separate and apart from and would be in no way influenced by what was happening in this public-private area.

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B. The Understanding of EOM Staff

1. Failure to Obtain Legal and Ethics Advice

Neither the Mayor, Dr. OMER, nor anyone else working in the EOM was attuned to the necessity of obtaining appropriate legal and ethics advice as they developed the public-private partnerships. The Mayor expected Dr. OMER to obtain the appropriate legal or ethics counseling that he needed to carry out the duties of the EOM. Likewise, Dr. OMER expected Mark JONES to do the same with respect to his duties as Deputy Chief of Staff for External Affairs. There is no indication that Dr. OMER solicited such advice, and JONES sought advice only occasionally.

Both Dr. OMER and JONES stated that the partnerships did not use District funds and they maintained that the EOM did not seek favorable treatment for any of the private sector partners or their donors. JONES in particular believed it to be part of his official duties to develop and coordinate partnership activities - to include fundraising, which he insisted the Mayor and Dr. OMER were aware of - because these partnerships were generally understood to be activities that were approved and sponsored by the District government. Consequently, they did not perceive a need to obtain legal or ethical advice.

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2. The Role of the District's Ethics Counselor

Throughout the period of time that the public-private partnerships operated, EOM employees infrequently sought advice from the OCC or the Office of Campaign Finance (OCF), and they received no ethics training. In addition, we determined that key employees within the EOM did not file a Confidential Statement of Employment and Financial Interests (D.C. Form 35). D.C. Form 35 is designed to disclose financial and employment interests that may create a conflict of interest for District government employees by virtue of the nature of their government employment responsibilities, and would disclose employees' involvement with non-profit operations.^III-14 We note, however, that the agency head must designate those individuals who are required to file D.C. Form 35 pursuant to criteria listed in the DPM, and that employees have no affirmative duty to submit a filing unless so designated.^III-15 Based on the delineated criteria, presumably all EOM employees involved in fundraising should have been designated and required to submit D.C. Form 35.

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C. Guiding Principals for the Appropriate Development of Public-Private Partnerships

Basic legal guidance was available to EOM staff that clearly set forth the need for a "firewall" between government employees and the fundraising activities of private entities.

Ironically, Mayor's Memorandum 91-11, dated March 5, 1991, to all Deputy Mayors, Department, Agency and Office Heads, from John PAYTON, Acting Corporation Counsel, D.C., entitled, Restrictions on Accepting Donations From Private Sources and Using Them for Government Activities, provided the kind of advice that was directly applicable to the EOM's relationship with the non-profit partners: Private entities (such as nonprofit corporations) may, on their own, raise and spend funds to support or complement government activities or activities jointly sponsored by government and the private entity, if such funds are not at any point in the possession or control of a District officer, employee or agency.

Id. at 2 (emphasis added).

Unfortunately, no one in the EOM appeared to be aware of this dated, yet valuable, opinion. Aside from a memorandum to JONES from RICH dated April 13, 2000, we are aware of only one other occasion where JONES requested legal guidance regarding fundraising. On January 29, 2001, after the first media disclosures of partnership activities, JONES solicited an opinion from Cecily E. COLLIER-MONTGOMERY, Director, Office of Campaign Finance, District of Columbia Board of Elections and Ethics. COLLIER-MONTGOMERY responded with Interpretative Opinion 01-02, dated February 2, 2001, and provided important advice that supplemented the 1991 OCC advice. The D.C. Campaign Finance Act does not preclude a group of citizens from forming a committee, foundation or corporation, and inviting the support of the Mayor, where the activity is not coordinated out of the Office of the Mayor, and the Mayor does not control the fundraising operations or the funds contributed.

Id. at 3 (emphasis added).

Together, these opinions provide the two basic principles that should have been followed by all the District government employees charged with the responsibility of implementing the Mayor's vision of the public and private sectors working in concert for civic purpose: 1) that the private partner must raise and spend its own funds to complement government activities; and 2) that District employees cannot coordinate or control the private partner's fundraising or expenditure of funds.

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D. The Millennium Event Template for the Executive Office of the Mayor's Use of Non-Profits for Fundraising

The failure to understand or heed legal and ethics advice, coupled with the appeal of non-profits as a fundraising vehicle, resulted in a fundraising pattern by which EOM employees either created private non-profit organizations or exerted inappropriate control over existing nonprofit entities. The aggressive operations of the Office of External Affairs resulted in inappropriate practices that involved spending funds for dubious charitable purposes which, in turn, may have created tax problems for donors.

1. The Millennium Event

Without knowledge of or heeding legal or ethics advice, JONES and other EOM employees established "partnerships" in which they either created or commandeered non-profit organizations as fundraising mechanisms in most of the events addressed in this report. Some of these organizations were unincorporated and others lacked tax-exempt status. In early 1999, former Deputy Chief of Staff Henry "Sandy" McCALL recognized the value to the WILLIAMS administration of using non-profit organizations as fundraising vehicles - donations were tax-exempt, and many expenses of the events could be paid without the delay occasioned by the District's procurement process. He was able to raise approximately $1.2 million for the District government's sponsorship of the Millennium celebration by joining forces with private sector corporate entities willing to make tax-exempt donations to a 501(c)(3) non-profit organization.

The Millennium celebration was a large and important undertaking for the new administration and for the Mayor. Consequently, McCALL involved himself and EOM staff in raising funds, coordinating the development of events, and controlling such day-to-day functions as approving invoices and paying bills. By the summer of 1999, McCALL's job title was changed and his responsibilities redirected so that he could work full-time on the development of the Millennium celebration. McCALL thereafter conveyed to his successor, JONES, the framework (or template) upon which JONES continued to create and use nonprofit organizations in supporting civic initiatives of the administration, identifying donors, soliciting funds, hosting events, and controlling expenditures. District government employees performed these functions in their official capacities, from District government facilities, and with District government resources. JONES believed he needed to take an increasingly active role in the non-profit partners' activities to make the Mayor's public-private partnership initiative work effectively and expeditiously. As a result, he fell into an ethical quagmire that he may have never fully understood.

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2. The Benefits of Using Non-Profits to Receive Funds

Section 501(c)(3) of the U.S. Internal Revenue Code exempts from taxation organizations operated for religious, charitable, educational and similar purposes. Donors to 501(c)(3) tax-exempt organizations are allowed to deduct a portion of their donations from their federal income tax.^III-16 Moreover, tax-exempt non-profit organizations are not required to disclose the identities of their donors or the value of their contributions. Although 501(c)(3) organizations are provided favorable tax benefits, these entities are prohibited from engaging in any political campaign activity on behalf or opposed to any candidate for public office. In addition, the statute prohibits the charitable organizations from operating for the benefit of any private interest, including a political party.^III-17 Conferring such a private benefit violates the organization's tax-exempt status and provides grounds for denying or terminating its exemption.

McCALL and JONES understood that wealthy corporations doing business in the city have an interest in a healthy, viable District government. They correctly believed that these corporate citizens would be inclined to donate to a non-profit entity because of the tax-deductible nature of their donation, because such businesses set aside funds for charitable purposes, and because the partnerships were supporting worthwhile public activities. It also appeared to make good business sense to support the WILLIAMS administration, particularly so for corporations that had business relationships with the District government.

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3. The Contrasting Fundraising Efforts of Two EOM Offices

The OPRD sought out pre-existing federal and other grant opportunities and applied for funding where appropriate to District government functions. It also pursued funding opportunities for the District government from foundations and other non-profit entities relied on the non-profit's own organizational structure to provide funding for governmental purposes. In so doing, employees of the OPRD operated solely in their official capacities performing a legitimate governmental function. 

In several instances District government officials became officers of non-profit organizations and gained signatory authority for the organization's bank account, and staff from the EOM - while acting in their official capacities, on official time, and using District government resources - engaged in donor solicitation on behalf of the private non-profit organization. They then coordinated the development of the "private" events, albeit with a perceived public purpose, and performed accounting functions to include depositing donations and paying expenditures from event accounts. Serving as a District government official as well as an officer of a private entity with business dealings with the District government can lead to the violations of criminal conflict of interest statutes as well as the District's Standards of Conduct. In each instance where we found conduct that might constitute a conflict of interest by District government employees, a referral is being made to the enforcement agency with appropriate jurisdiction.

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IV. THE LEGAL FRAMEWORK

A. Methods of Funding Events

The purpose of this section is two-fold: 1) to summarize the legal findings concerning the methods used by the Mayor and his staff to fund each of the events described in the narratives that follow; and 2) to suggest ways in which government fundraising can be accomplished according to law.

1. Appropriated vs. Donated Funds

The latter financing method - donations - is permissible only through: 1) the Mayor's Constituent Services Fund;^IV-18 2) the Mayor's gift acceptance authority as provided in annual appropriations acts; 3) private entities (e.g., non-profit corporations), which may raise and spend funds (independently of the government) to support government activities and programs; and 4) campaign funds, which may be raised and used only for financing political campaign.^IV-19

It should be noted that EOM employees interviewed indicated that they believed that the events they produced were the official business of the District government, i.e., the purpose of the event was to support the ceremonial functions of the Mayor, to further economic revitalization of the city, to honor or bolster morale of members of the city government, etc. Despite what they may have believed, EOM employees did not comply with the requirements of any of the above fundraising methods to support the events that are the subject of this report. In fact, it is often difficult to determine whether there ever was a consensus or clear understanding among the Mayor, McCALL, Dr. OMER, JONES, and other subordinate employees as to whether they relied on the Mayor's authority to accept gifts as provided by Congress, or on "partnering" - the use of an independent entity such as a non-profit organization. The narratives suggest that McCALL and JONES used a legally impermissible system that combined aspects of both - the appearance of partnering justified by the Mayor's gift acceptance authority.

In failing to follow the appropriate lines of authority, many of the EOM employees ventured so far beyond the boundaries of legitimate government business that their actions were often outside the scope of employment, violated District laws and ethical standards, created the risk of civil liability for themselves and the District, and created the appearance of impropriety by engaging in activities that aroused suspicions of malfeasance and corruption.

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2. Appropriated Funds

a. The Annual Congressional Appropriations Act for the District of Columbia

• The Anti-Deficiency Act, 31 U.S.C.A. §1341 (West 1983 & Supp. 1999), is a general prohibition against the acceptance, obligation, or expenditure of funds in a manner that is not specified by Congress in the annual appropriations acts for the federal government and the District of Columbia. One purpose of this legislation is to ensure that federal agencies and the District government do not override the intent of Congress to limit the size or emphasis of specific government functions by augmenting the funding limits. Until 1991, when Congress granted gift acceptance authority to many federal agencies and the District of Columbia, this act effectively banned the acceptance of gifts to the government for official purposes. The District's gift acceptance authority is set forth in its appropriations acts. It permits the Mayor to augment the District's budget "to carry out its authorized functions or duties," with the proviso that "[e]ach entity of the District of Columbia government shall keep accurate and detailed records of the acceptance and use of any gift or donation . . . and shall make such records available for audit and public inspection." The disclosure requirement serves two purposes: (1) Congress is kept informed of the nature and amount of any budget augmentation; and (2) the identity of the donor is made a matter of public record.
• The federal bribery statute, 18 U.S.C.A. §201 (West 2000), makes the acceptance of a gift in return for an official act (quid pro quo) as well as some gratuities a criminal violation.
• Applicable to federal and District employees, 18 U.S.C.A. §209 (West 2000), prohibits the acceptance of any supplement or contribution from a third party to the salary paid for services rendered to and paid for by the government.

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b. The Ceremonial Fund

Any amount appropriated and expended from this fund shall be accounted for and subject to audit. Id. §1-355(d). Additionally, the Secretary of the District of Columbia is charged with issuing an annual report, documenting each disbursement made by the Ceremonial Fund. Id. §1355(e). The Secretary's report is a public document. Id.

The D.C. Council is also allotted a Ceremonial Fund, which is subject to the same restrictions as that of the Mayor. Id. at §1-355(b).

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3. Donated Funds

a. The Constituent Services Fund

The Mayor is authorized to expend funds from a "citizen-service" program, so long as he does not expend more than $40,000 from the fund in a calendar year. D.C. Code §1-1443(a) (1999 Repl.). The Constituent Services Fund is a unique funding source in that its enabling statute specifically authorizes District government employees to engage in fundraising activities for the fund outside of their normal duty hours. Id. §1-1443(e).

The Mayor may fund the citizen-service program with unexpended campaign funds, monetary contributions, or personally. 3 DCMR §3014.5. A person may not contribute more than $400 to the fund within a calendar year, except that the Mayor may contribute more than this amount to his/her own citizen-service program. D.C. Code §1-1443(a) (1999 Repl.). All contributions to and expenditures from the fund must be reported quarterly to the Director of Campaign Finance. Id. §1-1443(d).

The citizen-service program "encompass[es] any activity or program which provides services to the residents of the District of Columbia; and promotes their general welfare, including, but not limited to, charitable, scientific, educational, medical or recreational purposes." 3 DCMR §3014.1. Because this fund appears to be a plausible vehicle for funding, in whole or in conjunction with a public-private venture, some EOM employees recommended its use to the Mayor and Dr. OMER.

However, there were several drawbacks to the use of this fund. Diane SIMMONS-WILLIAMS (the Mayor's wife), who serves as the Treasurer of the Mayor's Constituent Services Fund, advised that she does not construe the statute so broadly as to extend to the receptions and other social/ceremonial functions that were the subject of this investigation. In her interview with OIG investigators, SIMMONS-WILLIAMS advised that she narrowly limited the purpose of the Mayor's Constituent Service Fund to providing necessary services to District citizens in financial need (e.g. assistance with utility bills), and she specifically ruled out the use of the fund for social functions such as "Christmas parties."^IV-20 (SIMMONS -WILLIAMS Tr. at 33) Another limitation on the fund is that it may not be used in connection with campaign activities. D.C. Code §1-1443(a). Finally, the fund may only be used to benefit residents of the District. 3 DCMR §3014.1.

The statute authorizes members of the D.C. Council to establish citizen-service programs as well. D.C. Code §1-1443(a). Similar to the Ceremonial Fund, the statute subjects Council members to the same restrictions on use of the Constituent Services Fund as those placed upon the Mayor.

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b. Appropriations Act Gift Acceptance Authority

As noted above, the expenditure or obligation by a District government official or employee of funds exceeding the amount available in a congressional appropriation can constitute a violation of the federal Anti-Deficiency Act. 31 U.S.C.A. §1341. Accordingly, the District government was unable to use donations of money to augment the funds appropriated for its budget by Congress prior to the creation of the Mayor's gift acceptance authority.

Since 1992, however, Congressional appropriations acts for the District have expressly authorized the Mayor to approve the acceptance and use of gifts or donations for "authorized functions or duties." See, e.g., District of Columbia Appropriations Act, 2001, Pub. L. No. 106522, §118, 114 S tat. 2440, 2460 (2000). The requirement that gifts be used only for an official purpose, i.e., for purchases of items like library books or recreational equipment normally paid for by using appropriated funds, is one of the most important conditions that Congress placed on the gift acceptance authority. The category of appropriated funds that most closely approximates "authorized functions or duties" represented by the events covered in this report is the Ceremonial Fund, which is limited by Congress to $25,000. Because the reception and entertainment of government officials and eminent persons is authorized by statute, under appropriate circumstances it may be considered to be an "authorized function or duty" of the EOM.^IV-21 Therefore, this fund could have been augmented by donations through the Mayor's gift acceptance authority.

In addition to the Mayor's formal approval for the acceptance of a donation, the Appropriations Act requires that "the District of Columbia government shall keep accurate and detailed records of the acceptance and use of any gift or donation . . . and shall make such records available for audit and public inspection." Id. Finally, District law requires that "[a]ll money received by any agency, officer, or employee of the District in its or his official capacity shall belong to the District government and shall be paid promptly to the Mayor for deposit in the appropriate fund." D.C. Code §47-130 (Supp. 1999).

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(2) Delegation of Authority to Other Government Employees to Solicit Funds

The OCC has opined that the express statutory language allowing the Mayor to accept gifts includes the implied authority to solicit donations for authorized governmental purposes. OCC Opinion AL-O1-001, January 4, 2001, at 2. Furthermore, OCC has determined that the Mayor's subordinates may engage in fundraising in their official capacities only through statutory authority or by delegation of the Mayor's authority via Mayoral Order. OCC Opinion AL-01062, January 26, 2001, at 4 ("[A]bsent a statute, generally a District government employee may not engage in fundraising as an official activity."). Accordingly, the Mayor could have delegated his authority to solicit and accept donations to EOM members and other District government employees.22 The OCC has advised that any such delegation of authority should be in writing, except in exigent situations. OCC Opinion AL-01-062 at 3.

During the period of time covered by this investigation, neither the explicit authority to accept donations nor the implied authority to solicit donations was delegated in writing by the Mayor to anyone else in the District government. Mayor WILLIAMS advised that he informally and orally delegated his gift acceptance authority to Dr. OMER, his former Chief of Staff, and that Dr. OMER informally sub-delegated the authority to JONES and others. (See WILLIAMS Tr. at 14) Further, most of the fundraising activities detailed in this report by District employees were conducted by JONES and his subordinates in the EOM, for whom there was no formal sub-delegation of authority other than that implicit in the Mayor's knowledge that JONES and his staff were raising funds for partnership events. 

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(3) Receipt of Donations by Government Employees

The EOM offered several theories to justify their fundraising efforts, including the use of independent non-profit entities and partnerships. However, we have concluded that the only legal authority available to solicit funds for official purposes in the amounts and by the methods used by the EOM staff is the Mayor's gift acceptance authority set forth in the annual Appropriations Acts for the District of Columbia.

In all of the events described in this report where EOM employees engaged in fundraising activities, in none of them were the donations accounted for or publicly disclosed. This failure to follow federal and District law governing donations was not a minor procedural oversight. The requirements of the appropriations acts establish necessary safeguards not only against violations of the anti-deficiency statutes, but also campaign finance law,^IV-23 tax law, procurement regulations, D.C. Code prohibitions against misrepresentation, theft, and embezzlement, conflict of interest, and the District's Standards of Conduct as set forth in the District Personnel Manual (DPM).

District employees who accept donations of money must ensure that such donations are "true gifts" and that no special treatment or preference is expected or given in return for the gift. Mayor's Mem. 91-11, March 5, 1991, at 2. OCC has opined that if the acceptance of a donation leads to some action by the District on behalf of the private party, the transaction will not be treated as a gift but as a contract and, as such governed by the D.C. Procurement Practices Act of 1985 . . . ." Id. (citations omitted). Finally, the Standards of Conduct prohibit District government employees from engaging in any action that gives or appears to give preferential treatment to any person and that would, as a consequence, affect adversely the confidence of the public in the integrity of government. DPM §§1803.1(b) and (f).

The facts of this investigation have been discussed with the USAO and this report will be forwarded to that office for its review. In addition, our investigation revealed that members of the EOM violated the procedures set in place by Congress in the Appropriations Act to limit and control fundraising by the Mayor. Whether the violation of Section 118 of the D.C. Appropriations Act, 2001 constitutes a violation of the federal Anti-Deficiency Act as well is a matter to be referred to the Office of the Chief Financial Officer (OCFO) and the OCC.

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(4) Fundraising by Government Employees - Personal and Official Gifts

(a) The District's Failure to Update the Law Governing Gift Acceptance

Prior to the Fiscal fear 1992 Appropriations Act, District government employees could only solicit donations in their private capacities because they had no legal authority to engage in government fundraising to augment Congressional appropriations. At that time, the District government adopted the ethical standards for federal employees contained within federal law, the Ethics in Government Act of 1978, Pub. L. No. 95-521, 92 Stat. 1824 (codified as amended in scattered sections of Titles 2, 5, 18, 28, and 39 U.S.C.A.). Known as the "old code," the 1978 Act was in effect prior to the time that Congress permitted the acceptance of official gifts to either federal agencies or the District. In addition to official gifts, the old code banned most gifts to government employees, including gifts from "improper sources," such as those having or seeking business with the employee's agency, or regulated by the agency.^IV-24

When Congress relaxed its anti-augmentation rules by permitting the District and many federal agencies to accept gifts for official purposes, a new federal ethics code was issued by the Office of Government Ethics. One purpose of the new rules was to centralize and clarify ethical standards for all government agencies by codifying the separate and often confusing "common law" ethics standards previously in place. The new code also differentiates between gifts that are "personal" to. the employee and "official" gifts to a government agency. Employees are forbidden to accept gifts in their personal capacity from all "prohibited sources," such as those who are doing business, seeking to do business with, or regulated by the agency. An employee may participate in fundraising in an official capacity "if, in accordance with a statute, Executive order, regulation or otherwise as determined by the agency, he is authorized to engage in the fundraising activity as part of his official duties, using his official title, position, and authority." 5 CFR §2635.808(b) (2000). In the case of official gifts, internal agency policy prescribes a review procedure to determine whether there is a conflict of interest or the appearance of impropriety.

This new ethics code, subsequently codified at 5 C.F.R. §2635 (2000), was never made applicable to the District government. As a result, the District's ethics rules were never updated to reflect the distinction between fundraising within an employee's official capacity versus fundraising in the employee's private capacity. The District's current Standards of Employee Conduct were created in 1978 pursuant to the District of Columbia Home Rule Act (codified at D.C. Code §§1-242 to 1-299.7 (1999 Repl.)), which required that "[p]ersonnel legislation enacted by Congress prior to or after January 2, 1975, including . . . legislation relating to . . . discipline . . . shall continue to be applicable until such time as the Council shall, pursuant to this section, provide for coverage under a District government merit system." Id. §1-242(3).

When Congress granted gift acceptance authority to the District and many federal agencies, the federal agencies immediately promulgated internal policy that delineated the manner in which gift acceptance and solicitation would be regulated. No similar attempt was made in the District until January 2002, when Mayor WILLIAMS issued Mayor's Order 2002-2, which acknowledges that "[t]he only method authorized by Congress to augment the District's budget by use of contributed private resources is pursuant to section 115 of the FY 2002 Appropriations Act (and any substantially identical successor law)." Id. at 2. The Order creates a new office "to enforce mandatory procedures for the solicitation, receipt and use of all donations made to the District government, including subordinate and independent agencies, in order to ensure that . . . donations are properly solicited, processed, used and accounted for." Id.

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(b) Problems in Applying DFM §1803.2 to the Mayor's Gift Acceptance Authority

OCC and OCF opinions have addressed factual scenarios where government fundraising was conducted by government employees on behalf of non-profit entities. For example, in a January 26, 2001, opinion, OCC concluded that JONES violated the Standards of Conduct by soliciting for a nonprofit corporation on government time. OCC Opinion AL-O1-062 at 3. ("Because the funds used to pay for the Inaugural event were donated to the Urban Assistance Fund and not the District government, the activity of soliciting funds for the event at the Wilson building was a private fundraising by the 501(c)(3) corporation."). OCF subsequently concurred with the OCC opinion and incorporated JONES' solicitation for the Mayor's Holiday Reception in it findings. "In the Matter of Mark Jones, Deputy Chief of Staff, Office of the Mayor, PI 2001-101", November 7, 2001, at 10 ("[N]otwithstanding his belief that the conduct was within his authority, Mark Jones violated the Standards of Conduct because soliciting funds for a private non-profit organization is not government business."). We note that under federal ethics standards, employee solicitation on behalf of private entities places an employee in his/her private capacity. See 5 CFR §2635.808(c), Examples 1-3.

For these reasons we considered the solicitation of funds on behalf of a private entity, such as FTK, the CACS, the UAF, MWCB, or the EFG as clearly private activities, and we applied DPM §1803.2 accordingly.

In cases where solicitation was on behalf of the District government but did not involve an intermediary non-profit entity, we did not apply Section 1803.2 when the gift acceptance process failed to meet legal requirements because the application of law to this scenario is unclear. These EOM events and activities are the CBC Mayoral Reception, the Clarence Vinson Reception, and the Mayor's HOOP Corner. To our knowledge, this issue has yet to be addressed federally, by OCC, or by OCF.

As explained in several of the narratives, it may be argued that a District government employee's failure to adhere to requisite legal constraints - such as accounting for contributions received while soliciting donations on behalf of the District Government places the employee into his/her private capacity, even if the employee is not conducting fundraising on behalf of or in conjunction with a non-profit entity. If so, then a number of Standards of Conduct in the District Personnel Manual apply to the employee's actions.

For example, in the case of the Vinson Reception, the EOM's activity in soliciting donations for the event was not a private fundraising by a non-profit corporation. Rather, the solicitations were done solely by District government employees, on government time, and for purposes related to the Mayor's ceremonial authority. Because one of the donors to the event was subject to District government regulations as a foreign non-profit at the time of the solicitation, a former government employee may have violated DPM §1803.2 by soliciting a gift from a .corporation that is regulated by the District government. Therefore, the determination as to whether the employee is in his private capacity when he made the solicitation is crucial.

Similarly, if this interpretation is applied, other DPM provisions may be implicated, such as DPM §1804.1(b), which prohibits the use of government time/resources for private activities, and Section 1804.1(i), which forbids government employees from "[e]ngaging in any outside employment, private business activity, or other interest which is in violation of federal or District law."

However, it is not within our jurisdiction to render a legal opinion on this issue. Accordingly, we will forward this issue to OCF and OCC for a final determination.

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4. Campaign Funds

This investigation focused on the funding of civic/ceremonial events and did not produce evidence that the Mayor used his authority to solicit or accept campaign funds for a purpose other than financing his election campaign, either directly or indirectly, in the context of these events. Nor did we find that the donations/solicitations examined in this investigation funded events that were primarily political in nature, i.e., used to endorse any candidate, to make donations to a candidate's campaign, or to distribute statements supporting or opposing a political candidate. That said, it must be noted that the unregulated practice of soliciting unlimited amounts of money for ceremonial events from undisclosed donors, many of which compete for business with the city, created the very appearance of impropriety that campaign finance restrictions seek to minimize by limiting donation dollar amounts, requiring disclosure of donors' identities, and making this information publicly available. 

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a. The Need for Rules Governing the Solicitation and Receipt of Gifts to the District Government

We believe that the Mayor's approval must consist of a formal process designed to provide separate types of legal review of the requirements surrounding the solicitation and acceptance of gifts on behalf of the District. The acceptance of gifts given sua sponte and the solicitation of money by government officials are two discrete functions, with the latter raising several ethical issues, such as exerting undue pressure, promising or implying special treatment, or ignoring a conflict of interest. This risk is not lessened by the fact that most donors who are likely to contribute to the District government are those who conduct business with or are regulated by the District government. Again, the federal model is instructive. Solicitation is not common among
federal agencies; indeed, some federal agencies with gift acceptance authority prohibit solicitation altogether,^IV-25 some limit solicitation to charitable causes and disaster relief, and others limit the authority to a single person.^IV-26 Accordingly, we believe that higher standard of scrutiny is required for solicitations conducted by District officials.

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(1) Standards of Conduct Implications 

When District government employees engage in solicitation on behalf of private groups as part of their government duties, a number of Standards of Conduct may be contravened. Although the purpose and activities of the private entity/non-profit may appear to be parallel with the interests of the District government, as OCC has stated, "there is always the potential for some conflict or divergence, and the interests of such a private organization are not necessarily consistent with the public duties of those who work and serve in the District government." OCC Opinion AL-O1-062, at 4 (citation omitted).

For example, government employees are prohibited from using their public offices for private gain. DPM §1803.1(a). They may not use government time or resources for nonofficial business. Id. §1804.1(b). Finally, they may not direct their subordinates to perform "personal services" for them during government working hours. Id. §1804.1(c).

Partnership relationships between the District government and any corporate entity must also be viewed in the context of their appearance of propriety. District employees must avoid any action that might result in, or create the appearance of, affecting adversely the public's confidence in the integrity of government operations. D.C. Code §1-619.1 (a) (1999 Repl.) (requiring strict adherence to ethical conduct in the performance of official duties and avoidance of any official action that adversely affects the public's confidence in government integrity); see also DPM §1800.1 (requiring District employees to avoid taking any official action which adversely affects the public's confidence in governmental integrity) and §1803.1(f) (same).

In addition to this objective standard mandating government integrity, there is also a subjective component - the court of public opinion - where the relationship between District employees and the business community is further measured. Notwithstanding the Mayor's acknowledgement of the need for a "firewall" between government and private fundraising, EOM employees generally had no understanding of this appearance problem as it affected the public-private partnership activities discussed herein and as evidenced by the many instances of solicitation of thousands of dollars from District government contractors without publicly disclosing the source of the money, its amount, or its use.

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(2) Tax Implications

Soliciting on behalf of non-profits exposes government employees to another fundraising pitfall -- the potential for tax fraud. Because many of the "charitable" organizations utilized to accept donations in their names are not recognized by the IRS as a 501(c)(3) non-profit entity, and because some of the donations were not used in furtherance of the organization's charitable mission, JONES and other EOM employees deceived numerous donors as to the purpose of their donations and the status of the intended recipient organization. For example, at least four donations that were made out to the EFG (which does not have tax-exempt status) and intended for the represented events, were diverted by JONES and deposited in the FTK account to be used for other purposes. In another example, money was solicited to pay for a driver for the Mayor's mother, but was obtained via checks to the CACS, from which CACS then paid the driver.

Other examples are plentiful. A $1,500 contribution by Dr. OMER to the down payment for the CBC reception was first funneled through CACS. Other funds solicited by JONES for CACS  were in fact used to defray personal expenses incurred while attending the DNC. Consequently, issues of tax fraud were raised as well as other tax issues for the donors, for EFG, and for CACS. Some donors may have incorrectly considered their donations to be a charitable deduction. EFG may not have filed a proper tax return, or may have improperly considered income raised by BONES to be nontaxable. The transfer of $22,000 from the CACS to EFG Conference Account nay also have tax implications since the transfer was from an authorized 501(c)(3) non-profit to one that was not so authorized. CACS may have improperly included the salaries of the employees of a consulting firm as business expenses. At the very least, CACS, through its Conference Account, had income generated by JONES from April 2000 through December 2001 that was not intended for or used for charitable purposes. As a result, CACS may not have properly characterized this income as business income and, therefore, taxable.

It is beyond the scope of this investigation to review the tax records of the donors and non-profit entities. However, the results of the investigation of these events will be referred to the Internal Revenue Service (IRS) and the District's Office of Tax and Revenue (OTR) for further consideration.

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V. FINDINGS AND RECOMMENDATIONS

Our investigation has resulted in numerous findings. Some are general in nature and do not necessitate corrective action and others are more specific and call for corresponding recommendations. We address each finding in this section of the report, and recommend corrective action to responsible District and federal government officials where necessary. We have elected to identify in this section only senior EOM managers and executive staff who were in the highest positions of trust and responsibility.

A. General Findings

General Finding #1: We did not uncover evidence that the EOM's fundraising was a campaign of institutional corruption with its purpose or effect being the personal enrichment of the Mayor or EOM employees. We found facts suggesting the possibility of criminal violations in only a few instances, and these matters have been referred to the United States Attorney's Office for evaluation.

General Finding #2: With one exception noted in the Specific Findings Section, we did not identify evidence suggesting that an illegal benefit (quid pro quo) or direct competitive advantage was conferred on any D.C. government contractor or regulated business as a result of its support for, or participation in, EOM fundraising or partnership activities. We referred information regarding one questionable exception to the United States Attorney's Office for evaluation.

General Finding #3: Mayor WILLIAMS and then EOM Chief of Staff Dr. Abdusalam OMER did not properly supervise and manage EOM employees to ensure that fundraising was conducted in accordance with legal standards. Because critical witnesses provided contradictory statements, it is difficult to determine the extent of the Mayor's knowledge of the fundraising activities of his staff. Nevertheless, Mayor WILLIAMS is accountable and responsible for the conduct of EOM employees under his immediate supervision. In interviews, the Mayor and Dr. OMER conceded responsibility for misconduct and mistakes made by EOM employees involved in the fundraising activities examined during the course of this investigation.

General Finding #4: We did not find evidence that government employees endorsed a candidate or engaged in campaign fundraising at any of the events described in this report. However, many of the events appear to be little more than social functions hosted by the Mayor for prominent political, business, and community leaders as well as government officials. As such, these events may be interpreted as being beneficial to the Mayor's candidacy for re-election. In addition, an adverse appearance was created because solicitation by District officials of the magnitude and frequency seen here did not result in the expenditure of government funds to directly benefit District of Columbia citizens in the form of government services and programs. Finally, the appearance that the events had a political purpose could weaken the public's confidence in the integrity of the government in violation of the Standards of Conduct.

General Finding #5: The EOM offered several theories to justify their fundraising efforts, including the use ofindependent non-profit entities and partnerships. However, we have concluded that the only legal authority available to solicit funds for official purposes in the amounts and by the methods used by the EOM staff is the Mayor's gift acceptance authority set forth in the annual Appropriations Acts for the District of Columbia. See Charts entitled "Acceptable Official Fundraising Methods" and "EOM Fundraising Patterns." These charts illustrate fundraising methods that meet legal requirements as opposed to those utilized by the EOM.

General Finding #6: Because donors were solicited directly by EOM staff, the staff should have utilized the Mayor's delegated gift acceptance authority under the District's annual Appropriations Act to augment the level of District government appropriations to finance ceremonial events. However, the EOM did not adhere to the accounting and disclosure requirements of the Appropriations Act, which are preconditions to the acceptance of gifts to the District government. These requirements provide essential safeguards which accomplish the following: (1) prevent misuse of donations; and (2) inform Congress of the manner and the extent by which the budget was augmented. In none of the events were official records kept documenting the receipt and use of these donations. In none of the events were records made of these funds to allow for audit and public inspection.

General Finding #8: None of the $1.5 million raised for the District government was ever placed into the District Treasury where it would accrue interest and be properly accounted for. Instead, the EOM either: (1) instructed donors to pay event vendors directly; or 2) used the accounts of non-profit organizations to deposit donors' checks and pay event vendors. These practices bypassed donor disclosure requirements and avoided the safeguards inherent in the procurement process, such as competitive bidding and preferences for small, local and disadvantaged businesses.

General Finding #9: Mayor WILLIAMS and Council member BRAZIL failed to comply with the conditions for gift acceptance in the Appropriations Act because they solicited substantial monetary contributions for the Republican National Convention/Democratic National Convention Mayoral Events without ensuring that mandatory accounting and public accounting procedures were followed. We are referring this matter to the Office of Campaign Finance to determine whether Mayor WILLIAMS and Council member BRAZIL violated the Standards of Conduct. This finding is discussed in the Specific Findings Section of this report.

General Finding #10: There is an appearance of impropriety in violation of the Standards of Conduct based on the EOM's practice of soliciting large sums of money and other items of value from donors that had business relationships with the District government and/or that were contributors to the Mayor's re-election campaign where accounting and public disclosure safeguards were not addressed.

General Finding #11: Government employees involved in the subject fundraising activities stated that they were motivated by a desire to engage the private sector in supporting the WILLIAMS administration's efforts to revitalize the city. The government employees who engaged in fundraising for these events stated that they believed that they were doing so in their official capacities and for purely government interests.

General Finding #12: Irrespective of the stated intentions of the involved government employees, our investigation revealed that EOM employees solicited and accepted donations on behalf of private non-profit organizations from their government offices, during government working hours, and utilizing government resources. This practice violated a Standards of Conduct provision prohibiting the entanglement of private interests with government activities.

General Finding #13: Not only did government employees fundraise on behalf of existing private non-profit organizations (non-profits), we found that employees of the EOM's Office of External Affairs created their own non-profits, and appointed themselves officers and members of the boards of directors of these entities. Thereafter, they proceeded to raise funds and control the income of the non-profit as well as its expenditures. Funds were moved improperly from one non-profit to another without the knowledge or approval of the responsible officials of the nonprofit. This activity violated the Standards of Conduct in that it created the appearance of using public office for private gain.

General Finding #14: EOM employees who controlled non-profit fundraising and event finances demonstrated ill-regard for prudent business management. The EOM's failure to resolve financial obligations with vendors, who provided services and/or supplies for the events, impacted negatively on the public's confidence in the District government. 

General Finding #15: The nature and variety of the various fundraising methods described in this report .occurred during a period of time when the EOM did not have an Ethics Officer and EOM employees did not receive ethics training or guidance on government fundraising. The Mayor informally delegated his solicitation and gift acceptance authority to EOM staff, rather than setting forth the parameters and limitations of this authority in writing in the form of a Mayor's Order. EOM staff, then, were left to their own devices to raise funds from the private sector to finance civic activities. They seldom solicited advice from the Office of the Corporation Counsel or the Office of Campaign Finance. The Standards of Conduct did not provide adequate guidance to District government employees involved in fundraising, and the EOM maintained no other written policy or instructions on fundraising for employees to reference for guidance.

General Finding #16: The weight of the evidence suggests that government employees did not, in most cases, exert undue pressure upon donors who were solicited for monetary contributions. However, two donors did report to us that they felt pressured by the tactics employed by two government employees. These two exceptions are addressed in the Specific Findings Section.

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B. General Recommendations and Referrals

Our recommendations and referrals may be summarized as follows:

General Recommendation #1: We recommend that the Mayor work with the D.C. Council to revise the Standards of Conduct in the interest of establishing clear and definitive regulations regarding the parameters of official gift acceptance for District government personnel.

General Recommendation #2: To ensure accountability and disclosure of government donations, we recommend that the Director of the Office of Partnerships and Grants Development, EOM, closely scrutinize all applications for gift approval and make certain that all monetary donations are promptly deposited into the District Treasury.

General Recommendation #3: With regard to Mayor's Order 2002-2 and Mayor's Memorandum 2002-1, we recommend that the Mayor consider several revisions to the policy set forth in each document pertaining to his gift acceptance authority.

General Recommendation #4: We recommend that the OCC and the OCFO consider our findings regarding possible violations of the Anti-Deficiency Act. If a violation of the Act occurred, the Mayor must submit to the President and Congress the report required by 31 U.S.C.A. §1351 (1994) in accordance with guidance contained in OMB Circular A-34 (revised October 19, 1999).

General Recommendation #5: We recommend that OCF and District agency heads take disciplinary action, as appropriate, against current District government employees for violations of ethics standards.

General Recommendation #6: Regarding outstanding financial obligations owed to event vendors, we recommend that the OPGD, EOM, endeavor to address any outstanding accounting matters.

General Referral #1: We refer this report to the OSC for its review regarding potential violations of the Hatch Act to determine whether administrative action is warranted against current District government employees.

General Referral #2: We refer our report to the IRS and the OTR to review our findings relating to the fundraising activities conducted on behalf of non-profits.

General Referral #3: Because some of the misconduct may establish violations of a criminal nature, we refer this report to the USAO so that it may continue its review of this investigation to determine whether prosecutive action is merited.

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C. Specific Findings and Recommendations

Our investigation also yielded more specific findings where corrective action is recommended. Our findings in this regard fall into three general areas where:

• administrative action may be necessary to address Standards of Conduct, violations of Procurement Law and Regulations, and Hatch Act violations; 
• responsible agencies should review our report to address potential criminal violations, tax issues, outstanding accounting matters, and the scrutiny of donations; and 
• legislative changes should be considered to address vague ethical regulations. In light of the findings of our report, we additionally make several observations and recommended changes with regard to Mayor's Order 2002-2.

1. Findings and Recommendations for Consideration of Administrative Action

We do not list the specific recommendations association with our findings relating to the Standards of Conduct provisions and violations of Procurement Law and Regulations. Instead, our general recommendation is that the responsible enforcement agencies review our report and determine whether disciplinary action is warranted for current District government employees. We note that the appropriate enforcement agency depends upon the employee's government position. Pursuant to the DPM, the OCF has enforcement responsibility for the Standards of Conduct for, inter alia, the Mayor, members of Council, Executive Service employees, and certain employees in the excepted service who are paid at a DS-13 rate and above. DPM §1802.1. All other employees fall under the enforcement authority of agency heads. Id.

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a. Violations of the Standards of Conduct (Referred to OCF and Agency Heads)

Specific Finding #1: McCALL as well as current and former EOM senior level and subordinate employees violated D.C. Code §1-619.1 (a) (1999 Repl.) and DPM §1803.1(f) because they did not avoid action that might result in, or create the appearance of, adversely affecting the public's confidence in the integrity of government operations. We find them in violation of this statute because they failed to ensure that all of Millennium Washington Capital Bicentennial's (MWCB) financial obligations were satisfied while they served as officers/board members of this nonprofit organization.

Specific Finding #3: Dr. OMER, McCALL, JONES, and other former and current EOM employees violated DPM §§1804.1 (b) and 1806.1, by engaging in actions that were not compatible with their government employment and by using government time and resources for nonofficial business. We found that these employees conducted MWCB business during official duty hours and out of their offices at 441 4th St., N.W.

Specific Finding #4: Dr. OMER and McCALL violated DPM §1804.1(c), in managing MWCB's finances, in that they directed subordinate employees to perform personal services unrelated to official government functions, during working hours.

Specific Finding #5: McCALL violated DPM §1804.1(e) through his position as president of MWCB (a private business activity), which permitted him to capitalize on his official government position (Deputy Chief of Staff, EOM). During his fundraising activities on behalf of MWCB, McCALL represented himself in his official capacity.

Specific Finding #6: McCALL violated DPM §1803.2 by soliciting donations on behalf of MWCB from private entities that have business relationships with the District government or are regulated by the same.

Prayer Breakfast/Economic Conference Event

Specific Finding #7: Dr. OMER and JONES, as well as two former EOM employees and one current District government employee, engaged in conduct during the course of their government employment that adversely affected the confidence of the public in the integrity of the District government, and took official actions well outside of official channels, which further impugned upon governmental integrity. Their actions, then, violated DPM §§1800.1, 1803.1(e), and 1803.1(f).

Specific Finding #8: We found that a current District government employee, JONES, and Dr. OMER exhibited a lack of candor during the course of our questioning concerning this event in violation of DPM §1803.10. During our initial interview of the current District government employee, he/she unequivocally stated that he/she had no fiduciary responsibility with respect to the Mayor's Prayer Breakfast and that his/her participation was limited to basic bookkeeping duties. However, our investigation revealed that this employee served as the custodian for the CACS Conference Account and the EFG checking account, and personally conducted several banking transactions at the request of JONES.

This employee also stated that JONES instructed him/her to withdraw $2,000 from the CACS Conference Account for JONES' DNC expenses. JONES denied giving this instruction. The OIG was able to corroborate the employee's statement through another witness. JONES also informed the OIG that he did not hold an office with any non-profit organizations. However, our investigation revealed that JONES listed himself as the treasurer for the CACS Conference Account as well as the President for another non-profit, FTK.

Dr. OMER denied having received funds from a wire transfer in the amount of $1,500, which JONESinitiated during their stay at the DNC. However, JONES informed the OIG that he had these funds wired for Dr. OMER's expenses at the DNC and a former EOM employee corroborated JONES' assertion.

Specific Finding #9: Our investigation revealed that Dr. OMER and JONES, as well as two former EOM employees and one current District government employee, conducted activities on behalf of CACS on government time and/or with government resources and directed subordinate personnel to do the same. Additionally, these employees engaged in fundraising activities on behalf of CACS as part of their government employment, but did not follow mandatory accounting and disclosure procedures in the process. Taken together, their conduct amounted to violations of DPM §§1804.1(b), (c), and (i).

RNC/DNC Mayoral Events

Specific Finding #10: To secure funding for the Mayor's events at the RNC and DNC political conventions, Mayor WILLIAMS requested the financial assistance of a major District contractor at a social event some months prior to the events. Even though this marked the extent of the Mayor's fundraising activity for these events, he failed to ensure that the contractor's donation was accounted for and disclosed within a public report. Instead, the donated funds went directly to the vendors and the District government did not account for the use of these funds to augment the Mayor's ceremonial appropriation.

Mayor WILLIAMS, through counsel, characterized his request to the contractor as furthering a public-private partnership. However, in this instance, Mayor WILLIAMS solicited a financial contribution directly from a donor, which paid vendors directly. This solicitation did not involve merely suggesting to a non-profit that it raise funds to support a government program; in essence, it crossed the "firewall" that should have existed between the private entity and official government action.

The facts of the Mayor's solicitation activity are similar to those of Council member Harold BRAZIL, who solicited a monetary donation to finance an evening reception at the DNC convention. BRAZIL's solicitation involved a private entity that conducts business with and is regulated by the District government. As with the Mayor's solicitation, BRAZIL did not ensure that public accountability and disclosure mechanisms were in place, or that the contractor's donation was deposited into the District Treasury.

Mayor WILLIAMS and Council member BRAZIL failed to comply with the conditions for gift acceptance in the Appropriations Act because they solicited substantial monetary contributions without ensuring that mandatory accounting and public accounting procedures were followed. See District of Columbia Appropriations Act, 2000, Pub. L. No. 106-113, §125, 113 Stat. 1501, 1516 (1999). In addition, neither of the donations they solicited was deposited into a government fund, as required by D.C. Code §47-130 (Supp. 1999). Because the donors solicited by the Mayor and Council member BRAZIL are private entities that conduct business with the government or are regulated by the government, we are referring this matter to the OCF to determine whether Mayor WILLIAMS and Council member BRAZIL violated DPM §§1800.1, 1803.1(f_, and 1803.2.

Specific Finding #11: The evidence revealed that JONES accepted a contribution from a District contractor to finance a breakfast event for the Mayor at the DNC. JONES accepted the donation while he was on leave from government employment and he was, therefore, acting in his private capacity at the time. JONES' acceptance of this contribution, then, violated DPM §1803.2(a).

Congressional Black Caucus Reception

Specific Finding #12: The investigation revealed that JONES and a former EOM employee pressured two donors during their fundraising for the event. Specifically, one District contractor, who had just made a substantial donation to fund a Mayoral event at the DNC told JONES that he simply could give no more but agreed to loan the money to the EOM for the CBC event. A representative from another corporate entity - that is regulated by the District government - noted that she felt pressured by the former EOM employee to make a contribution for the CBC reception. The use of aggressive fundraising tactics of soliciting private entities with business interests with the city constituted official actions taken well outside of official channels, placed the District government in a negative light, and impugned upon the integrity of the government. These actions violated D.C. Code §1-619.1(a) as well as DPM §§1800.1, 1803.1(e), and 1803.1(f).

Specific Finding #13: Because a non-profit organization was not involved in the planning and fundraising for this event, and giving credit to the Mayor's statement that he informally delegated his gift acceptance authority, JONES and a former EOM employee solicited and accepted donations on behalf of the District government pursuant to the Appropriations Act. See D.C. Appropriations Act, 2000, supra. However, they failed to ensure that the requirements of this federal law and District law were followed. See D.C. Code §47-130, supra.

Vinson Reception

Specific Finding #14: Similar to the CBC event, the EOM did not utilize a non-profit to assist with the planning or fundraising for the Vinson Reception. Rather, Dr. OMER, JONES, and a former EOM employee solicited donors to pay for the costs of the reception, and these donors paid the vendors directly. Even though the Mayor stated that he delegated his gift acceptance authority to Dr. OMER and JONES, they did not adhere to the law's accounting and disclosure requirements. In addition, they violated D.C. Code §47-130

Mayor's HOOP Corner

Specific Finding #15: Although the Appropriations Act contemplates gifts of personal property as well as monetary ones, the accounting and public disclosure limitations still apply. JONES and a current District government employee, then, violated this federal law when they solicited tickets and food in connection with this (otherwise worthy) program. Finally, there was a failure to account for the tickets after receipt. There were no records of how or to whom the tickets were distributed.

For the Kids and Urban Assistance Fund Events

Specific Finding #16: JONES exercised exclusive control over FTK's activities, income, and expenditures. He was intimately involved in FTK activities on government time and used his official title to solicit donations on behalf of FTK - from regulated private entities - ignoring federal and District accounting and disclosure laws in the process. Moreover, he directed subordinate staff within the EOM to donate their government time to FTK activities. Accordingly, we find that his conduct violated several provisions of the Standards of Conduct: a) DPM §1803.1(a) - avoiding action that results in (or creates the appearance of) using public office for private gain; b) DPM §1803.1(e) - making government decisions outside of official channels; c) DPM §1803.1(f) - affecting adversely the public's confidence in government operations; d) DPM §1804.1 (b) - using government time or resources for other than official business; e) DPM §1806.1 - using government property, equipment, or any material for nonofficial purposes; t) DPM §1804.1(c) - directing subordinate employees to perform personal services during official duty hours; g) DPM §1804.1(e) - engaging in private business activity that permits an employee to capitalize on his official position; h) DPM §1804.1(i) engaging in private business activity that violates District or federal law; and i) 1803.2(b) soliciting/accepting gifts in an employee's personal capacity from regulated. outside entities.

Specific Finding #17: As the treasurer for one private organization lacking tax-exempt status (FTK), JONES used another non-profit with tax-exempt status (UAF) as a conduit for fundraising in order to attract donors. JONES then transferred funds raised by UAF to FTK and used these funds to finance the Mayoral Holiday Party for Foster Children. Such conduct adversely affected the confidence of the public in governmental integrity, thereby abridging DPM §1800.1.

Specific Finding #18: A former EOM employee and a current District government employee conducted solicitation activities on behalf of FTK at JONES' instructions. They violated DPM §1803.2(b) by soliciting donations from private entities regulated by the District government. In addition, the former EOM employee also used his/her official position in furtherance of the solicitations, thereby violating DPM §1804.1(e) as well.

Specific Finding #19: In addition to JONES, three former EOM employees and one current D.C. government employee used government time and/or resources in conducting activities on behalf of FIX Such activity constituted a violation of DPM §§1804.1 (b) and 1806.1.

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b. Violations of Procurement Law and Regulations (Referred to Chief Procurement Officer and Agency Heads)

Specific Finding #21: A current EOM employee violated a number of procurement regulations in relation to the Millennium events, to include 27 DCMR §§1700.2, 1702, 1705, 1800.6, and 1901.2, for several reasons. First, he did not obtain a Determination and Finding as required for the sole source contracts let to the MWCB consultants. Second, he did not ensure that the EOM did not engage in impermissible employer-employee relationships with District government contractors. Third, he failed to obtain certification for the pre-encumbrance of funds prior to procurement certification, and it appears that he split procurements.

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c. Possible Hatch Act Violations

Specific Referral #22: We recommend that the OSC review the attached RNC/DNC narrative to determine whether this employee violated the Hatch Act and to determine whether appropriate administrative action is warranted.

Specific Finding #23: A current EOM employee assisted in planning the Mayoral Reception for the CBC on government time and using his/her official title.

Specific Referral #23: Due to the quasi-political nature of the event, we recommend that the OSC review the CBC narrative and determine if this employee's activities abridged the Hatch Act and whether administrative action is necessary.

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2. Recommendations for Review by Responsible Agencies

a. Matters Referred to USAO

Specific Referral #24: We refer this report to the USAO for its review in reference to this finding.

Specific Referral #25: We refer this report to the USAO for its review in reference to this finding.

Specific Finding #26: Evidence obtained during our investigation revealed that JONES, through a subordinate, contacted the President of CACS to request funds for Dr. OMER's personal use at the DNC. The President of CACS, in turn, requested another individual to wire these funds ($1,500) to JONES at the DNC. JONES acknowledged receipt of these funds andclaimed that he gave the money to Dr. OMER at the DNC. Dr. OMER denied ever receiving the money, but witnesses informed the OIG that Dr. OMER offered the $1,500 to JONES after the DNC to pay for costs associated with the CBC Reception.

Specific Referral #26: We refer this report to the USAO for its review in reference to this finding. 

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b. Possible Tax Issues

Specific Finding #27: EOM employees solicited donations for non-profit groups that did not have tax-exempt status (e.g., the EFG and FTK).

Specific Referral #27: We refer this report to the IRS and the OTR for review of the narratives and the donor lists for any tax violations that may fall within their respective jurisdictions.

Specific Referral #28: We refer this report to the IRS and the OTR for review of the attached narratives for potential tax violations. 

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c. Violations of the Anti-Deficiency Act

Specific Recommendation #29: We recommend that the OCC and the OCFO review the attached narratives to determine whether the EOM's repeated use of the Mayor's gift acceptance authority without complying with the accounting and disclosure requirements set forth in Section 118 of the FY 2001 Appropriations Act constituted a violation of the Anti-Deficiency Act by improperly augmenting the level of District government appropriations.

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d. Resolution of Outstanding Accounting Matters

Specific Recommendation #30: We recommend that the OPGD, EOM, endeavor to resolve any outstanding accounting matters in relation to these events.

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e. Scrutiny of Government Donations

Specific Recommendation #31: Commensurate with the new organizational structure in the EOM, we recommend that the Director of the OPGD closely scrutinize the gift acceptance forms submitted to him in the future and ensure that all monetary donations are promptly deposited into the District Treasury.

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3. Recommendations for Legislative Changes

Specific Recommendation #32: We recommend that the Mayor and the D.C. Council revise the Standards of Conduct to define fundraising activity conducted in an employee's official capacity as well as fundraising conducted in an employee's personal capacity. We additionally recommend that consideration should be given to inserting specific examples of fundraising activities that are consistent with an employee's official capacity as well as those that would place an employee in his/her personal capacity.

Specific Finding #33: DPM §1803.2, which generally prohibits solicitation or receipt of gifts or other things of value from "prohibited donors" does not differentiate between an employee's receipt and solicitation of gifts in his/her official capacity versus his/her personal capacity.

Specific Recommendation #33: We recommend that the Mayor and D.C. Council clarify this provision of the DPM to incorporate this distinction.

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4. Recommendations Concerning Mayor's Order 2002-2

During January 2002, the EOM issued an Order and a Memorandum addressing the Mayor's gift acceptance authority.

• Mayor's Order 2002-2, entitled "Establishment - Office of Partnerships and Grants Development; Rescission of Mayor's Order Establishing Office of Partnerships and Resource Development," incorporates into the new OPGD the function of enforcing mandatory procedures for the solicitation, receipt and use of all donations made to the District government. According to the Order, "[t]he only method authorized by Congress to augment the District's budget by use of contributed private resources is pursuant to section 115 of the FY 2002 Appropriations Act (and any substantially identical successor law).
• Mayor's Memorandum 2002-1, entitled "RULES OF CONDUCT GOVERNING DONATIONS TO THE DISTRICT GOVERNMENT," which, inter alia, sets forth policy intended to ensure that donations to the District government comport with the requirements in the appropriations acts that grant gift acceptance authority to the Mayor, centralizes the approval of solicitation or acceptance of donations to the District in the Director of the OPGD, creates a written donations agreement form that contains information about the nature and purpose of the gift and which must be submitted to the Director of OPGD for approval, requires that all donations must be in the form of a check made payable to the District of Columbia Treasurer and that all checks must be forwarded to the OCFO, and requires the CFO to account for donations under the same standards of accounting used for appropriated funds. The memorandum also makes it clear that the failure to follow the rules when soliciting or accepting donations in behalf of the District government takes this action outside the scope of official activity, exposing the employee to the risk of violating D.C. Personnel Regulations that apply to official as well as personal capacity misconduct.

The day before their release, the Mayor's legal counsel provided the OIG with copies of the Order and Memorandum and requested comments and recommendations. We were advised that the contents were developed using input from the OCC, the Mayor's Executive Staff, and the Mayor's privately retained counsel. However, we declined to provide any comment at that time for two principal reasons. First, we did not want to discuss the subject matter of these documents because it was directly linked to our ongoing investigation of the EOM and its fundraising activities. Second, we wanted to avoid the inevitable conflict of assisting to create policy that we potentially would have to hold the Mayor and others accountable to at a later date. However, we indicated that we would review the documents and incorporate our comments into this report.

As an initial observation, we commend the Mayor for creating policy and guidance for the acceptance of official gifts to the District. Had this policy been in place earlier, the mistakes, misconduct, and appearance of impropriety that were the subject of this investigation might have been prevented. We also concur with the conclusion that the only method authorized by Congress to augment the District's budget is through the procedure set forth in the annual appropriations acts.

Other general observations follow.

Observation #1: Section IV of the Mayor's Memorandum refers to private fundraising, official fundraising, and the ethical violations that can ensue from the failure to follow District laws with respect to the acceptance of donations. We do not believe that the rules are understandable unless employees have clearly written definitions of official versus personal actions.

Recommendation #1: We recommend that the Mayor amend the order and memorandum to include language defining the terms "official capacity" and "private fundraising" as it relates to fundraising activities of District government employees. Model language for these definitions can be found in the federal Standards of Ethical Conduct for Employees of the Executive Branch, 5 CFR §2635.808 (Fundraising Activities).

Recommendation #2: While we do not challenge the legal finding of the Corporation Counsel, we suggest the use of restraint and discretion in conducting solicitation, especially in light of the District's need to have its gift acceptance authority reviewed and renewed by Congress on an annual basis. The Mayor's Order, as presently written, provides no guidance with respect to limitations on the value of donations or their frequency, problems identified in the solicitations subject to this investigative report. The Mayor's Ceremonial and Constituent Services Funds are limited by statute to yearly ceilings of $25,000 and $40,000, respectively. However, the Mayor's Orders would not necessarily preclude the kinds of activity uncovered in this investigation - large donations (hundreds of thousands of dollars) or frequent donations from District contractors in order to fund quasi-civic or quasi-political events where attendance is limited or restricted, and which do not appear to provide a benefit to the District government or to its citizens. We believe the use of funds in significant amounts solicited from organizations that have a financial interest in their relationship with the District government for such purposes does create an appearance of impropriety that could adversely affect confidence in the government - not only to taxpayers but also to members of Congressional oversight committees. Accordingly, we recommend that solicitation be limited to the matters that further the broadest public needs.

Observation #3: Section V.(g) of the Mayor's Order lists as part of the mission and objectives of the OPGD: "Establish formal collaborative arrangements (sometimes called "partnerships") memorialized in writing, and approved by the Director, with non-profit and private organizations for the purpose of supplementing existing resources for governmental purposes . . . ." Memorandum at 4. Neither the Order nor the Memorandum defines a "partnership" or provides guidelines for accepting supplemental resources for government purposes.

Recommendation #3: "Partnering" must be carefully defined and regulated in order to avoid the same misconduct that we found during this investigation: solicitation of funds on behalf of and in the name of non-profit organizations; transferring funds from private entity partners into government custody; taking control of the management, financial accounting and/or administration of independent entities; and solicitation of funds through a private entity for nonofficial purposes.^V-29

In each of the events covered by this investigation, EOM personnel engaged in fundraising utilized a confusing array of private-public partnership patterns intended in part to avoid the restrictions placed on official fundraising, such as accounting for the money, providing public disclosure of donors, and complying with the District's procurement laws after the money enters the custody of the government. These temptations will persist if the Executive policy contains the "partnering" loophole. See also Office of Government Ethics Letter to a Designated Ethics Official (July 10, 1995) for a discussion of fundraising in official versus personal capacity with a non-profit entity.

Observation #4: Donation agreements, described in Section III of the RULES OF CONDUCT GOVERNING DONATIONS TO THE DISTRICT GOVERNMENT, require certification that the donation will be used to fulfill an authorized function and is consistent with applicable laws and policies.

Recommendation #4: In order to avoid the appearance of impropriety, we suggest that the Mayor's Orders require that the solicitation and donation forms indicate whether the donor conducts business, is seeking to do business with, or is regulated by the District, as described in DCM §1803.2, and, if the agreed upon donation is over a certain dollar value (e.g., $50,000), that it be reviewed and approved by the OCC. The form should also indicate whether the gift is the result of a solicitation by a District government employee. The addition of this procedure should mitigate against the appearance of impropriety and retain confidence in the integrity of District government.

Observation #5: Mayor's Order 2002-1, §II. REASONS TO DISAPPROVE SOLICITATION OR ACCEPTANCE OF DONATIONS, 1(b) states that a solicitation or acceptance of a donation shall be disapproved if, inter alia, the acceptance would create an appearance of a conflict of interest for the government employee to whom authority to solicit or accept donations has been delegated.

Recommendation #5: Since the Mayor's Order does not limit to whom or under what circumstances solicitation or gift acceptance authority may be sub-delegated, such sub-delegation may, over time, be granted to agency heads and many other District employees. Consequently, we believe it important for either the Mayor's Orders or the revised Standards of Conduct to provide some guidance to potential sub-delegees as to when solicitation or acceptance of donations "appears" to create a conflict of interest or would "appear" to create a lack of confidence in the integrity of District government. With respect to the latter appearance, we note that Mayor's Order 2002-1, §IV. ETHICAL CONDUCT, 5., states that the failure of government employees to follow District laws with respect to donations to the District government may adversely affect the confidence of the public in the integrity of government. Nevertheless, we believe that the nature, value or frequency of solicitations, even in instances where District laws are followed, can also affect the public's confidence in District government.

Observation #6: The investigation also identified instances where the EOM used third parties to solicit funds and items of value on its behalf and for EOM purposes but through non-profits and other corporations for EOM purposes: As the OCC has opined: "The Mayor's Office may accept the services of a person funded by a private foundation to assist the District in increasing donations to the government from other foundations. The personnel detail should be accomplished by an assignment agreement."^V-30 The Mayor's Order makes no mention of such assignment agreements.

Recommendation #6: We recommend that the Mayor's Order and Memorandum address assignment agreements for these instances, and set forth appropriate procedures for their implementation and approval.

Report Approved by:

Jerome O. Campane
Deputy Inspector General for Investigations/Medicaid Fraud Control Unit

Charles C. Maddox, Esq. 
Inspector General

Date of Approval: 3/28/02

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