[Federal Register Volume 60, Number 103 (Tuesday, May 30, 1995)]
[Rules and Regulations]
[Pages 28033-28035]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13117]





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DEPARTMENT OF THE TREASURY
12 CFR Part 509

[No. 95-102]

RIN 1550-AA80


Rules of Practice and Procedure in Adjudicatory Proceedings

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Final rule.

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SUMMARY: The Office of Thrift Supervision (OTS) is amending its Rules 
[[Page 28034]] of Practice and Procedure in Adjudicatory Proceedings. 
The final rule is intended to clarify provisions relating to ex parte 
communications to conform to the requirements of the Administrative 
Procedure Act (APA). In particular, the amendment clarifies that the ex 
parte provisions do not apply to intra-agency communications, which are 
governed by a separate provision of the APA.

EFFECTIVE DATE: July 1, 1995.

FOR FURTHER INFORMATION CONTACT: Karen Osterloh, Counsel, Banking and 
Finance, Regulations and Legislation Division, Chief Counsel's Office 
(202/906-6639), Office of Thrift Supervision, 1700 G Street, NW., 
Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

I. Background

    In August, 1991, the Office of Thrift Supervision (OTS), the 
Comptroller of the Currency (OCC), the Board of Governors of the 
Federal Reserve System (Board of Governors), the Federal Deposit 
Insurance Corporation (FDIC), and the National Credit Union 
Administration (NCUA) adopted Uniform Rules of Practice and Procedure 
for agency adjudicatory proceedings.<SUP>1 The OTS codified these 
uniform rules in its Rules of Practice and Procedure in Adjudicatory 
Proceedings at 12 CFR Part 509, Subpart A.

    \1\ OTS, 56 FR 38302, Aug. 12, 1991; OCC, 56 FR 38024, Aug. 9, 
1991; Board of Governors, 56 FR 38048, Aug. 9, 1991; FDIC, 56 FR 
37968, Aug. 9, 1991; and NCUA, 56 FR 37762, Aug. 8, 1991.
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    By notice published December 5, 1994 (59 FR 62354), the OTS 
proposed to amend one aspect of its rules on ex parte communications to 
clarify that the rules parallel the requirements of the Administrative 
Procedure Act (APA). The other banking agencies have issued identical 
proposals.<SUP>2 The Board of Governors has published a final rule on 
this matter.<SUP>3

    \2\ Board of Governors, 59 FR 60094, Nov. 22, 1994; FDIC, 59 FR 
60921, Nov. 29, 1994; OCC, 59 FR 63936, Dec. 12, 1994; and NCUA, 59 
FR 67655, Dec. 30, 1994.
    \3\ 59 FR 65244, Dec. 19, 1994.
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    Currently, section 509.9 prohibits ``a party, his or her counsel, 
or another interested person'' from making an ex parte communication to 
the Director or other decisional official concerning the merits of an 
adjudicatory proceeding. When the uniform rules were proposed and 
adopted in 1991, the joint notice of proposed rulemaking explained that 
the proposed rule regarding ex parte communications ``adopts the rules 
and procedures set forth in the APA regarding ex parte 
communications.'' <SUP>4 There was no intention to impose a rule more 
restrictive than that imposed by the APA.

    \4\ 56 FR 27790, 27793, June 17, 1991.
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    The APA contains two provisions relating to communications with 
agency decision-makers. The APA's ex parte communication provision, 5 
U.S.C. 557(d), restricts communications between ``interested person[s] 
outside the agency'' and the agency head, the administrative law judge 
(ALJ), or the agency decisional employees. Intra-agency communications 
are governed by the APA's separation-of-functions provision, 5 U.S.C. 
554(d). That section prohibits investigative or prosecutorial personnel 
at an agency from ``participat[ing] or advis[ing] in the decision, 
recommended decision, or agency review'' of an adjudicatory matter 
pursuant to section 557 of the APA except as witness or counsel. The 
same separation-of-functions provision provides that the ALJ in an 
adjudicatory matter may not consult any party on a fact in issue unless 
the other parties have an opportunity to participate.<SUP>5 It does not 
prohibit agency investigatory or prosecutorial staff from seeking the 
amendment of a notice or the settlement or termination of a proceeding.

    \5\ 5 U.S.C. 554(d)(1).
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    The rule as proposed and adopted in 1991, however, neglected to 
mention the separation-of-functions concept explicitly, and appeared to 
apply the ex parte communication prohibition to all communications 
concerning the merits of an adjudicatory proceeding between the 
Director, ALJ or decisional personnel on the one hand, and any ``party, 
his or her counsel, or another person interested in the proceeding'' on 
the other. The OTS and the other banking agencies have never 
interpreted this provision as limiting agency enforcement staff's 
ability to seek approval of amendments to or terminations of existing 
enforcement actions. As drafted, however, the provision could be 
misinterpreted to expand the ex parte communication prohibition beyond 
the scope of the APA. The OTS and the other banking agencies did not 
intend this result.
    The amendment clarifies that the regulation is intended to conform 
to the provisions of the APA by limiting the prohibition on ex parte 
communications to communications to or from ``interested persons 
outside the agency,'' 5 U.S.C. 557(d), and by incorporating explicitly 
the APA's separation-of-functions provision, 5 U.S.C. 554(d). This 
approach is also consistent with the most recent Model Adjudication 
Rules prepared by the Administrative Conference of the United States.
    The OTS received two comments on the proposed rule. One commenter 
argued that the separation-of-functions provision of the APA prohibits 
agency investigatory or prosecutorial staff from seeking the amendment 
of a notice or termination of a proceeding, without notice and 
opportunity for other parties to be heard. The commenter further 
suggests that the separation-of-functions provision prohibits the 
Director from acting on such a request. The case law, however, does not 
support the commenter's assertions. Prosecuting staff may advise agency 
heads ex parte with respect to initiating a new action against a party 
in a pending proceeding, adding new parties to an ongoing case, 
enlarging or clarifying issues in a pending case, and reopening a 
closed proceeding.<SUP>6

    \6\ See RSR Corp. v. F.T.C., 656 F.2d 718 (D.C. Cir. 1981); 
Environmental Defense Fund v. E.P.A., 548 F.2d 998, 1006, n.20 (D.C. 
Cir. 1976), cert. denied, 431 U.S. 925 (1977); Environmental Defense 
Fund v. E.P.A., 510 F.2d 1292, 1305 (D.C. Cir. 1975).
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    Another commenter suggested that the OTS explain the so-called 
``Chinese wall'' between staff members who prosecute an administrative 
proceeding and staff members who advise the Director on disposition of 
that matter. The amended rule specifically sets out the APA separation-
of-functions provision that prohibits agency prosecutorial personnel in 
one case from participating in the Director's decision on that or a 
factually related case. This provision clearly prevents prosecutorial 
staff from communicating about the merits of a case with those staff 
members who advise the Director on the final decision in the case. It 
is unnecessary to set out internal procedures implementing this 
statutory prohibition in a formal rulemaking. To do so may limit the 
OTS's flexibility with regard to its internal operations.

II. Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act, the 
OTS hereby certifies that this final rule will not have a significant 
economic impact on a substantial number of small entities. Accordingly, 
a regulatory flexibility analysis is not required.
    The final rule makes a minor amendment to conform an existing rule 
of procedure to current intra-agency practices. Because the change 
affects intra-agency procedures only, it should not result in 
additional burden for regulated institutions. The purpose of the 
revised regulation is to conform the provisions of the regulation to 
those imposed by statute. [[Page 28035]] 

III. Executive Order 12866

    The OTS has determined that this final rule is not a significant 
regulatory action as defined in Executive Order 12866.

IV. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, 104 Pub. 
L. 104-4 (signed into law on March 22, 1995) requires that an agency 
prepare a budgetary impact statement before promulgating a rule that 
includes a Federal mandate that may result in expenditure by State, 
local, and tribal governments, in the aggregate, or by the private 
sector of $100 million or more in one year. If the budgetary impact 
statement is required, section 205 of the Act also requires an agency 
to identify and consider a reasonable number of regulatory alternatives 
before promulgating a rule. As discussed in the preamble, this final 
rule is limited in application to the internal procedures of OTS. The 
OTS has therefore determined that the final rule will not result in 
expenditure by State, local, or tribal governments or by the private 
sector of more than $100 million. Accordingly, the OTS has not prepared 
a budgetary impact statement or specifically addressed the regulatory 
alternatives considered.
List of Subjects in 12 CFR Part 509

    Administrative practice and procedures, Penalties.

    For the reasons set forth in the preamble, the Office of Thrift 
Supervision hereby amends part 509, chapter V, title 12, Code of 
Federal Regulation as set forth below:

SUBCHAPTER A--ORGANIZATION AND PROCEDURES

PART 509--RULES OF PRACTICE AND PROCEDURE IN ADJUDICATORY 
PROCEEDINGS

    1. The authority citation for part 509 continues to read as 
follows:

    Authority: 5 U.S.C. 556; 12 U.S.C. 1464, 1467, 1467a, 1813; 15 
U.S.C. 78l.

    2. Section 509.9 is amended by revising paragraphs (a) and (b) and 
by adding a new paragraph (e) to read as follows:


Sec. 509.9  Ex parte communications.

    (a) Definition--(1) Ex parte communication means any material oral 
or written communication relevant to the merits of an adjudicatory 
proceeding that was neither on the record nor on reasonable prior 
notice to all parties that takes place between:
    (i) An interested person outside the Office (including such 
person's counsel); and
    (ii) The administrative law judge handling that proceeding, the 
Director, or a decisional employee.
    (2) Exception. A request for status of the proceeding does not 
constitute an ex parte communication.
    (b) Prohibition of ex parte communications. From the time the 
notice is issued by the Director until the date that the Director 
issues the final decision pursuant to Sec. 509.40(c) of this subpart:
    (1) No interested person outside the Office shall make or knowingly 
cause to be made an ex parte communication to the Director, the 
administrative law judge, or a decisional employee; and
    (2) The Director, administrative law judge, or decisional employee 
shall not make or knowingly cause to be made to any interested person 
outside the Office any ex parte communication.
* * * * *
    (e) Separation-of-functions. Except to the extent required for the 
disposition of ex parte matters as authorized by law, the 
administrative law judge may not consult a person or party on any 
matter relevant to the merits of the adjudication, unless on notice and 
opportunity for all parties to participate. An employee or agent 
engaged in the performance of investigative or prosecuting functions 
for the Office in a case may not, in that or a factually related case, 
participate or advise in the decision, recommended decision, or agency 
review of the recommended decision under Sec. 509.40 of this subpart, 
except as witness or counsel in public proceedings.

    Dated: May 23, 1995.

    By the Office of Thrift Supervision.
Jonathan L. Fiechter,
Acting Director.
[FR Doc. 95-13117 Filed 5-26-95; 8:45 am]
BILLING CODE 6720-01-P