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When Does a Price Discount Become an Ethics Violation?

Q: I am currently on maternity leave from a position as a Senate staffer, as I have just had a beautiful baby boy named Chase. Chase is our second child, so my husband and I have decided to take the plunge and buy a minivan. We have shopped around at a number of area dealerships and have finally found the car we want at a price that we like. The car salesman told me that the price is typically only available as a loyalty reward for repeat customers as part of a “Favorite Customers— program, but that he would qualify me anyway because I am a Senate staffer. May I purchase the minivan on these terms?

[IMGCAP(1)]A: Congratulations on Chase’s arrival. I am impressed that you have found time to worry about the Senate ethics rules amid all of your new responsibilities. Let’s turn to your question.

As you probably know, the rule in question is the Senate gift rule, which generally prohibits Senators and staffers from knowingly receiving anything of value from anyone. This applies to any “gratuity, favor, discount, entertainment, hospitality, loan, forbearance, or other item having monetary value.— If this rule were applied as written, it would be extremely broad and might bring the everyday lives of Members and staffers to a halt. Senators would risk a violation simply by allowing someone to hold the door open for them. The Senate rules therefore include a long list of exceptions that are designed to allow Members and staffers to carry on with their normal lives without undue intrusion from the gift rules. They allow things like gifts from family members, de minimis gifts and gifts based on friendship.

The exceptions are notoriously full of gray areas, and the one relating to your question is no different. In fact, it is among the grayest of all. The exception applies to benefits available to a wide group. This includes benefits available to the public generally or to a group in which membership is unrelated to Congressional employment. It also specifically covers, for example, bank loans “on terms generally available to the public.— The idea is that being a Senator or staffer should not disqualify you from receiving benefits that people outside the Senate may receive.

Last month, the Senate Ethics Committee interpreted this provision while addressing ethics complaints filed against two Senators who were alleged to have received favorable mortgage terms through a lender’s “VIP— program. The committee dismissed the complaints, citing three reasons. First, the terms and conditions of the Senators’ mortgages were available to borrowers with similar loan profiles. Second, there was no credible evidence that the Senators “knowingly received— any special treatment or other benefits not available to other borrowers with similar loan profiles. And third, there was no credible evidence that the Senators used their position for personal gain.

The committee went on to say, however, the Senators’ discovery that their loans were part of a program with the name “VIP— should have “raised red flags— for the Senators. Consequently, the committee said, the Senators should have sought to find out exactly how they became part of the program and whether they were receiving preferential treatment not available to other borrowers with similar loan profiles.

Applying these standards to your case, the analysis would be easy if you were a repeat customer of the dealership. In that case, the exception clearly would allow you to accept the discount. A discount based on being a repeat customer is a textbook example of a benefit that is available to a group in which membership is unrelated to Congressional employment.

What complicates things here is that you are not a repeat customer. Worse, the car salesman has told you that he has made you eligible for the price because of your position as a Senate staffer. Thus, unlike the Senators who received VIP loans, if you were to accept the price offered then the committee might deem that you “knowingly received— special treatment not available to others.

However, as crazy as this may sound, it is just possible that the car salesman is not telling the truth. Your position as a Senate staffer might have nothing to do with the price you are receiving, and the salesman may have just told you this in an effort to persuade you to buy the car. If that is right, then you might be able to accept the price being offered after all. You would first need to find out whether your Senate position really has anything to do with the price you are receiving. If not, you could ask the dealership to confirm in writing that you are not receiving any benefit by virtue of your position.

If you do not want to ask the dealership for the confirmation or if the dealership cannot provide it, then your only alternative other than declining the offer is to consult directly with the committee. In its letters last month dismissing the complaints against the Senators with the VIP loans, the committee acknowledged that it has not published specific guidance regarding negotiation of financial transactions, and it encouraged Senators and staffers to seek the committee’s input before participating in something like the VIP program. This is good advice. I can provide you my interpretation. Only committee staff can provide theirs.

C. Simon Davidson is a partner with the law firm McGuireWoods LLP. Click here to submit questions. Readers should not treat his column as legal advice. Questions do not create an attorney-client relationship.

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