Senior Execs’ Finances Should Not Go Online, Panel Says

Report recommends indefinitely suspending STOCK Act disclosure requirement for top civil servants.

This story has been updated. 

Congress should indefinitely suspend the online posting of senior executives’ personal finances, according to an independent panel of public management leaders.

Making the financial information of top career employees publicly available in an online, searchable database imposes “unwarranted risk to national security and law enforcement” and threatens “agency missions, individual safety, and privacy,” a report released Thursday by the National Academy of Public Administration concluded. NAPA recommended Congress delay the online posting requirements due April 15 and the unrestricted access to the searchable databases planned for October under the 2012 Stop Trading on Congressional Knowledge Act, while continuing to implement the rest of the law. The panel said it opposes creating the online databases, and urged Congress and the executive branch to rethink that part of the law as well as the overall ethics system. NAPA, however, did not call for an outright repeal of the requirement.

The STOCK Act, designed to combat insider trading in government, requires thousands of executive branch employees, congressional staffers and lawmakers to submit their personal financial details to an online, searchable downloadable public database. Congress postponed the requirement for career employees and staffers until April 15 because of concerns over the unintended consequences that could result from posting the financial details of the senior civil service corps online, including identity theft, kidnapping and extortion, particularly for those employees and their families living overseas and intelligence personnel working undercover in foreign countries. The public financial disclosure requirement for the president, vice president, lawmakers, congressional candidates and political appointees under the STOCK Act took effect on Sept. 30, 2012. Members of Congress, the president and vice president, and Cabinet officials already are subject to extensive financial disclosure requirements, and much of that information is posted online.

NAPA’s panel said creating such searchable databases disclosing the personal finances of senior civil servants and their spouses “will provide easy access to ‘high quality’ personal information on ‘high value’ targets.” The report argued that extensive information on the personal finances of those employees already is required by law, and that making it so readily available online, coupled with the already vast reach of the Internet, makes it too easy for individuals or organizations to exploit that information for criminal and other purposes. High-ranking government personnel currently file financial disclosure forms to the Office of Government Ethics; they are available to the public upon written request.

The report likens the searchable databases for senior federal employees to a “boiling the frog” scenario, referring to the parable that if you put a frog in boiling water, it will jump out, but if you put it in cold water and gradually turn up the heat, it will slowly boil itself to death because it didn’t sense the danger in time. “In other words, this forthcoming increment in available data could become the fatal temperature change that goes undetected by the hapless frog,” the report stated. Congress in December directed OPM and NAPA to study the issues raised by the public disclosure of career employees’ finances under the STOCK Act. The report is based on 80 interviews with more than 150 senior executives, stakeholders and ethics experts from each branch of government and the private sector.

Carol Bonosaro, president of the Senior Executives Association, said she appreciated the panel’s findings but was puzzled that NAPA did not call for a repeal of the public disclosure requirement for senior leaders. “NAPA has reached the only possible conclusions regarding the consequences of the STOCK Act’s provision requiring posting financial reports on the Internet,” Bonosaro said. “What is baffling, however, is the Academy’s failure to reach the logical recommendation – that of repealing the requirement. This leaves it to Congress to take the only action which makes sense, and the association urges that it do so.”

Joe Thompson, project director of NAPA’s STOCK Act study, said the panel wants Congress to review the overall federal ethics system before it repeals the disclosure requirement. “The panel feels that the evidence was not strong enough to warrant a recommendation for a complete repeal absent the reconsideration of the ethics regimen,” he said. Thompson argued that indefinitely suspending the requirement would have the same effect in the short term as repealing it, since it would ensure the government does not create the kind of database mandated under the law anytime soon.

Bonosaro, however, said that amounts to kicking the can down the road.

The independent panel also found that disclosing the personal finances of federal employees online “offers little added value for detecting conflicts of interest and insider trading according to ethics officials in the executive branch.” The current oversight process already is designed to ferret out such conflicts, the report said. The threat of publishing online such personal information, in addition to posing security threats, also is a deterrent to recruiting and retaining senior-level executive employees, the panel found.

NAPA said the government should update and strengthen the ethics system, created by the 1978 Ethics in Government Act, to review the changes in technology, threats to individuals and organizations, and more complex financial investments that have evolved during the last 35 years. The panel urged the government to collect information on how such personal financial disclosures have harmed executive and legislative branch employees so far. NAPA could not find any examples of misuse or harm in the course of its study, but that doesn’t mean they don’t exist, said NAPA fellow David S.C. Chu, during a conference call with reporters.

The report comes a day after a federal district judge denied the key part of the government’s motion to dismiss a lawsuit brought by the Senior Executives Association against the government, claiming that the STOCK Act public disclosure requirement is a violation of privacy and due process. The court agreed with SEA on privacy, but not on the due process violation claim.

“We are very gratified by Judge [Alexander] Williams’ strong endorsement of the right to financial privacy and his recognition of the tremendous harm that will be visited on Senior Executive Service employees if the Internet publication mandated by the STOCK Act takes place,” said Jack McKay, partner at law firm Pillsbury Winthrop Shaw Pittman.