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                                               House Calendar No. 179
115th Congress    }                                     {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                     {      115-898
_______________________________________________________________________

                                     

             
                IN THE MATTER OF ALLEGATIONS RELATING TO

                    REPRESENTATIVE MARKWAYNE MULLIN

                               __________

                              R E P O R T

                                 of the

                          COMMITTEE ON ETHICS










[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]











  August 10, 2018.--Referred to the House Calendar and ordered to be 
                                printed
                                


                                
                                   ______
		 
                     U.S. GOVERNMENT PUBLISHING OFFICE 
		 
79-006                    WASHINGTON : 2018                 
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                          COMMITTEE ON ETHICS

SUSAN W. BROOKS, Indiana             THEODORE E. DEUTCH, Florida
  Chairwoman                           Ranking Member
KENNY MARCHANT, Texas                YVETTE D. CLARKE, New York
LEONARD LANCE, New Jersey            JARED POLIS, Colorado
MIMI WALTERS, California             ANTHONY BROWN, Maryland
JOHN RATCLIFFE, Texas                STEVE COHEN, Tennessee

                              REPORT STAFF

              Thomas A. Rust, Chief Counsel/Staff Director
             Brittney Pescatore, Director of Investigations
               Megan H. Savage, Counsel to the Chairwoman
            Daniel J. Taylor, Counsel to the Ranking Member
                     Molly N. McCarty, Investigator
                   Mark Hamilton, Investigative Clerk
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                         LETTER OF TRANSMITTAL

                              ----------                              

                          House of Representatives,
                                       Committee on Ethics,
                                   Washington, DC, August 10, 2018.
Hon. Karen L. Haas,
Clerk, House of Representatives,
Washington, DC.
    Dear Ms. Haas: Pursuant to clauses 3(a)(2) and 3(b) of rule 
XI of the Rules of the House of Representatives, we herewith 
transmit the attached report, ``In the Matter of Allegations 
Relating to Representative Markwayne Mullin.''
            Sincerely,
                                   Susan W. Brooks,
                                           Chairwoman.
                                   Theodore E. Deutch,
                                           Ranking Member. 
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                                           
                            C O N T E N T S

                              ----------                              
                                                                   Page
  I. INTRODUCTION.....................................................1
 II. PROCEDURAL HISTORY...............................................2
III. HOUSE RULES, LAWS, REGULATIONS, AND OTHER STANDARDS OF CONDUCT...3
 IV. BACKGROUND.......................................................5
  V. FINDINGS.........................................................8
 VI. CONCLUSION......................................................15
VII. STATEMENT UNDER RULE XIII, CLAUSE 3(c) OF THE RULES OF THE HOUSE 
     OF REPRESENTATIVES..............................................16
APPENDIX A: REPORT AND FINDINGS OF THE OFFICE OF CONGRESSIONAL 
  ETHICS (Review No. 13-2392)
APPENDIX B: REPRESENTATIVE MULLIN'S SUBMISSIONS TO THE COMMITTEE 
  ON ETHICS
APPENDIX C: EXHIBIT TO THE COMMITTEE REPORT























                                                House Calendar No. 179
115th Congress    }                                     {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                     {      115-898
======================================================================



 
   IN THE MATTER OF ALLEGATIONS RELATING TO REPRESENTATIVE MARKWAYNE 
                                 MULLIN

                                _______
                                

  August 10, 2018.--Referred to the House Calendar and ordered to be 
                                printed

                                _______
                                

   Ms. Brooks, from the Committee on Ethics, submitted the following

                              R E P O R T

    In accordance with House Rule XI, clauses 3(a)(2) and 3(b), 
the Committee on Ethics (Committee) hereby submits the 
following Report to the House of Representatives.

                            I. INTRODUCTION

    On December 23, 2013, the Office of Congressional Ethics 
(OCE) sent a referral (OCE's Referral) to the Committee in 
which it recommended further review of allegations that 
Representative Markwayne Mullin, in 2013: (1) personally 
endorsed goods or services provided by companies he or his 
family owned; (2) received outside earned income, in excess of 
the applicable limits, from those companies; and, (3) served as 
a director and/or officer of the companies for compensation.
    The Committee did further review the allegations OCE 
referred. After an extensive review, the Committee found the 
allegations raised several novel questions regarding the 
application of House rules and other standards of conduct to a 
Member's efforts to maintain and promote a family business. 
These questions were further complicated by the procedural 
posture of the matter, which began when Representative Mullin 
consulted Committee staff after his election to the House, on 
November 6, 2012, in order to ensure he and his family 
businesses would operate consistent with the applicable rules. 
As Representative Mullin was working with Committee staff to 
bring his family businesses into compliance, OCE began its 
separate review, and eventually referred allegations to the 
Committee that related to issues which were part of the 
Committee's advisory process. While these issues would 
typically be treated as advisory matters, and the Member would 
be given time to bring his businesses into compliance, OCE's 
Referral compelled the Committee to treat the issues as an 
investigative matter.
    Ultimately, the Committee determined that Representative 
Mullin made a good faith effort to seek the Committee's 
informal guidance on numerous issues with respect to his family 
business. Although the Committee acknowledges that its 
informal, staff-level advice is not a categorical shield from 
future adverse actions, such advice is nevertheless necessary 
to enable the House community to successfully navigate 
standards of conduct. Members and their staff are encouraged to 
diligently request the Committee's advice and, upon doing so, 
may rely on the advice to engage in the vetted actions. In this 
case, Representative Mullin sought advice from the Committee 
staff about his family business, and appears to have 
substantially complied with most of that advice. To the extent 
that Representative Mullin substantially complied with the 
Committee's advice, it would be inequitable to subject his 
conduct to additional review.
    The Committee did determine that an accounting error led 
Representative Mullin to inadvertently fail to fully follow 
part of the Committee's advice. Committee staff advised 
Representative Mullin to transfer ownership of a company to his 
spouse. Representative Mullin transferred the ownership, but 
the company failed to terminate an automatic disbursement 
process. That mistake led Representative Mullin to personally 
receive $40,000 from the company in 2013, despite his lack of 
ownership. The money was paid into a joint account held by both 
Representative Mullin and his spouse, the rightful payee. 
However, the Committee found that, to bring Representative 
Mullin into full compliance with the Committee's guidance, he 
must return $40,000 to that company.
    One of the issues on which Representative Mullin sought 
staff-level guidance was his participation in advertisements 
for his family business. Representative Mullin complied with 
the advice he received on this issue. However, the Committee 
believes that, going forward, the House would be better served 
by different guidance with regard to Member participation in 
advertisements. Therefore, the Committee takes this opportunity 
to clarify its guidance with respect to Member participation in 
advertisements or other commercial endorsements of goods or 
services. Under no circumstances should a Member be actively 
involved in personally selling or endorsing goods or services 
in which the Member has a financial interest.\1\
---------------------------------------------------------------------------
    \1\The House has long recognized that Members may receive income 
from the royalties of book sales. This restriction does not change the 
Committee's longstanding guidance permitting Members' participation in 
the promotion of their own books, so long as the Member does so in 
their personal capacity and without using any official resources.
---------------------------------------------------------------------------
    Accordingly, the Committee unanimously voted to adopt this 
Report, and take no further action. Upon publication of this 
Report and repayment of $40,000 to Mullin Plumbing West 
Division, the Committee considers the matter closed.

                         II. PROCEDURAL HISTORY

    The Committee received OCE's Referral on December 23, 2013. 
Representative Mullin then submitted a response to the 
Committee, through counsel.\2\ On March 24, 2014, the Committee 
published OCE's Referral and Representative Mullin's response, 
and publicly announced that it would investigate the matter 
pursuant to Committee Rule 18(a).
---------------------------------------------------------------------------
    \2\Letter from J. Baran to Representative Conaway and 
Representative Sanchez, Jan. 22, 2014 (hereinafter January 22, 2014 
Submission).
---------------------------------------------------------------------------
    In the course of its investigation, the Committee issued 
multiple requests for information to Representative Mullin and 
to the accountants for the plumbing and home maintenance 
companies owned by Representative Mullin at the time of his 
election to Congress (collectively, the ``Mullin Companies''). 
In response to those requests, the Committee received and 
reviewed thousands of pages of materials. The Committee also 
interviewed the Chief Financial Officer (CFO) of the Mullin 
Companies, the companies' accountants, and Representative 
Mullin, who appeared voluntarily before the Committee.

  III. HOUSE RULES, LAWS, REGULATIONS, AND OTHER STANDARDS OF CONDUCT


        A. PERSONAL ENDORSEMENT OF COMMERCIAL GOODS AND SERVICES

    House Rule XXIII, clause 3, provides that a House Member 
``may not receive compensation and may not permit compensation 
to accrue to his beneficial interest from any source, the 
receipt of which would occur by virtue of influence improperly 
exerted from his position in Congress.'' In addition, the Code 
of Ethics for Government Service (Code of Ethics), which 
applies to House Members, states that a federal official should 
never accept ``benefits under circumstances which might be 
construed by reasonable persons as influencing the performance 
of official duties.''\3\ Other House rules and standards 
regarding outside employment and outside earned income may also 
implicate these standards of conduct.\4\ In discussing these 
standards of conduct, the Ethics Manual broadly states: ``[A] 
Member should not undertake any outside employment that would 
involve the Member personally in the selling or endorsement of 
any goods or services.''\5\
---------------------------------------------------------------------------
    \3\Code of Ethics for Government Service para.5.
    \4\See, e.g., Code of Ethics for Government Service para.8; House 
Rule XXV, cl. 2; 5 U.S.C. app. Sec. 50l(a).
    \5\House Ethics Manual (2008) (hereinafter Ethics Manual) at 188.
---------------------------------------------------------------------------

                        B. OUTSIDE EARNED INCOME

    House Rule XXV, clause 4(d)(1), defines ``outside earned 
income'' to include ``wages, salaries, fees, and other amounts 
received . . . as compensation for personal services.'' Any 
such earned income is subject to limits established by the 
Ethics in Government Act (EIGA) and House Rule XXV, clause 
1(a)(1), which provide that a Member may not have outside 
earned income attributable to a calendar year that exceeds 15 
percent of the annual rate of basic pay for level II of the 
Executive Schedule under section 5313 of title 5, United States 
Code, as of January 1 of that calendar year. For calendar year 
2013, the outside earned income limit for a Member was 
$26,955.\6\
---------------------------------------------------------------------------
    \6\The outside earned income limit for other relevant years has 
been: $26,955 (2014); $27,225 (2015); $27,495 (2016); $27,765 (2017); 
$28,050 (2018).
---------------------------------------------------------------------------
    The House Rules include a provision for the treatment of 
payments a Member receives from a family-owned business. House 
Rule XXV, clause 4(d)(1)(D) states:

          [I]n the case of a Member . . . engaged in a trade or 
        business in which such individual or the family of such 
        individual holds a controlling interest and in which 
        both personal services and capital are income-producing 
        factors, any amount received by the Member [is not 
        included in the definition of outside earned income] . 
        . . so long as the personal services actually rendered 
        by such individual in the trade or business do not 
        generate a significant amount of income.''\7\
---------------------------------------------------------------------------
    \7\In 2013, Representative Mullin or his spouse owned each of the 
Mullin Companies, which thus qualify as family-owned businesses. Based 
on information from Representative Mullin, it also appears that two of 
those companies, Mullin Plumbing, Inc. and Mullin Plumbing West 
Division, generated significant revenue from the sales of plumbing 
parts, and thus they satisfied the requirement of House Rule XXV, 
clause 4(d)(1)(D) that ``both personal services and capital are income-
producing factors [of the business].''

    The Committee has stated that if a Member receives payments 
from a corporation that are ``essentially a return on equity 
[invested in the company], then it would generally not be 
considered to be earned income.''\8\ The Ethics Manual further 
states that ``[i]n business corporations, only payment for 
services the Member performs is considered earned income. An 
increase in the value of the firm's stock or distribution of 
profits is not considered earned income.''\9\ However, in 
determining whether a payment from a corporation to a Member is 
a ``distribution'' (return on equity) or compensation for 
personal services, ``the `real facts' of a particular case 
would control as to whether moneys received would be deemed 
earned income.''\10\ Thus, the ``label or characterization 
placed on a . . . payment by the parties may be disregarded for 
purposes of the Rule,'' and the payment will be considered 
earned income if it is ``in fact attributable to any 
significant extent to services rendered by the Member.''\11\
---------------------------------------------------------------------------
    \8\See House Select Comm. On Ethics, Advisory Opinion No. 13 
(October 1978) (herein after Advisory Opinion No. 13), reprinted in 
Ethics Manual at 364; Ethics Manual at 231.
    \9\Ethics Manual at 231 (emphasis in original).
    \10\Id.
    \11\See Advisory Op. No. 13.
---------------------------------------------------------------------------
    In addition to this general guidance, the Committee has 
provided specific guidance with respect to S-Corporations, such 
as the Mullin Companies. If a Member owns an S-Corporation, the 
``determining factor'' for whether payments from the 
corporation to the Member are deemed earned income ``is whether 
the Member's . . . personal services generate significant 
income for the business.''\12\ If the Member performs services 
for the business that ``actually generate any significant 
income for the business,'' then some part of the payments the 
Member receives from the business may be deemed earned income. 
``However, if the Member . . . is engaged primarily in the 
general oversight and management or protection of his or her 
investment [in a business], such services would not be deemed 
to generate significant income.''\13\
---------------------------------------------------------------------------
    \12\Id. (see Ethics Manual at 368).
    \13\Id.
---------------------------------------------------------------------------

     C. COMPENSATION FOR SERVICE AS A CORPORATE DIRECTOR OR OFFICER

    House Rule XXV, clause 2(d) states that a Member ``may not 
. . . serve for compensation as an officer or member of the 
board of an association, corporation, or other entity.'' The 
Ethics Manual notes that ``[a]s a general matter, Members and 
senior staff may serve in such capacities, but they may not be 
paid any directors' fees or other compensation for that 
service.''\14\
---------------------------------------------------------------------------
    \14\Ethics Manual at 222.
---------------------------------------------------------------------------

                             IV. BACKGROUND


A. REPRESENTATIVE MULLIN'S BUSINESS INTERESTS AND ELECTION TO THE HOUSE

    Representative Mullin was elected to the House of 
Representatives on November 6, 2012. At that time, he owned the 
Mullin Companies, five S-Corporations (``S-Corps'') that were 
engaged in the plumbing and home maintenance industries. 
Representative Mullin long served as the primary spokesperson 
for the Mullin Companies and, as such, appeared in numerous 
advertisements promoting the business. These advertisements 
include video clips that appear on the companies' website and 
in other places on the Internet. Additionally, Representative 
Mullin's companies pay to air a weekly radio show in which 
someone from the companies, usually Representative Mullin, 
discusses topics related to home repair and suggests to 
listeners his companies can be a resource to them.
    Representative Mullin was sworn into office on January 3, 
2013. During the period between his election and his assumption 
of office, then-Representative-elect Mullin sought guidance 
from Committee counsel regarding various issues related to his 
ownership of, and work for, the Mullin Companies. Among other 
things, Representative Mullin discussed with Committee counsel 
whether the Mullin Companies could continue to use 
advertisements featuring Representative Mullin that had been 
recorded before his election, and whether he could retain his 
ownership of one of the S-Corps, Mullin Plumbing West Division 
(``Mullin West''), that had a contract with the federal 
government.
    Committee counsel advised then-Representative-elect Mullin 
that the Mullin Companies could continue to use advertisements, 
featuring him, that were recorded before his election.\15\ 
Committee counsel was not asked, and did not discuss, whether 
Representative Mullin could record new advertisements, 
featuring him, after his election. However, Representative 
Mullin asserts that, when Committee staff met with him after 
his election to the House, Committee staff understood that he 
regularly participated in the weekly radio program, and that he 
would continue to participate in that program as a Member, 
provided that he was not compensated for such participation. 
Representative Mullin cites that understanding as proof 
Committee staff did not intend to restrict his ability to 
appear in other forms of advertising for the companies.\16\
---------------------------------------------------------------------------
    \15\Committee counsel made clear to Representative Mullin that any 
previously recorded advertisements that featured him could not make any 
reference to his status as a House Member. As far as the Committee is 
aware, Representative Mullin has complied with this requirement in all 
of his advertisements for the Mullin Companies.
    \16\Neither the Committee nor Representative Mullin have any 
contemporaneous records reflecting a discussion of the radio show. 
However, the Committee has no reason to believe that Representative 
Mullin's recollection of the discussion of the radio show is incorrect.
---------------------------------------------------------------------------
    Committee counsel also advised Representative Mullin to 
transfer ownership of Mullin West to his wife, to avoid any 
issue with a federal statute that prohibits a Member from 
entering into contracts with the federal government.\17\ 
Representative Mullin effected this transfer on December 31, 
2012. Committee counsel also recommended several minor 
modifications to the business operations of the Mullin 
Companies to ensure compliance with House rules and federal 
law. Representative Mullin accepted these recommendations and 
the Mullin Companies made the appropriate changes.
---------------------------------------------------------------------------
    \17\Mullin West held a contract with a federal agency, which could 
have implicated the statutory prohibition on a Member contracting with 
the federal government. See 18 U.S.C. Sec. 431. Consistent with 
precedent, Committee staff advised Representative Mullin to transfer 
ownership of Mullin West to his spouse.
---------------------------------------------------------------------------
    After joining Congress, Representative Mullin continued to 
host the weekly radio show. Representative Mullin also 
continued to appear in radio, television, and web 
advertisements for the Mullin Companies. Those advertisements 
generally recommend contacting the Mullin Companies for the 
audience's plumbing and heating needs.

 B. PAYMENTS FROM THE MULLIN COMPANIES TO REPRESENTATIVE MULLIN IN 2013

    In 2013, Representative Mullin's first year in the House of 
Representatives, the Mullin Companies made payments to him 
totaling $640,110.44. Of that amount, the Committee determined 
$545,110.44 was ``passed through'' Representative Mullin to 
other recipients, including his father (as payment for purchase 
of the businesses from him)\18\ and state and federal 
governments (for payment of the Mullin Companies' tax 
obligations). Representative Mullin, through counsel, described 
the ``pass through'' payments as: ``$387,425: tax payments to 
the IRS and to the Oklahoma Tax Commission; $69,983.44: payment 
to Rep. Mullin's father for purchase of the business; $87,702: 
for purchase of rental properties.''\19\ The Committee found 
these descriptions to be accurate. Such pass-through payments 
are standard for S-Corps, and do not necessarily represent 
payments ``to'' an S-Corp's owner. In addition to these pass-
through payments, in 2013, Representative Mullin did receive, 
and retain, $95,000 in payments from two of the Mullin 
Companies: $40,000 from Mullin West, and $55,000 from Mullin 
Plumbing, Inc. (``Mullin Plumbing'').
---------------------------------------------------------------------------
    \18\Representative Mullin's father started the Mullin Companies, 
and eventually sold them to Representative Mullin pursuant to an 
agreement whereby the Mullin Companies make monthly payments to 
Representative Mullin's father. The Committee understands that the 
amount of each payment is deducted from Representative Mullin's 
ownership interest in the Mullin Companies.
    \19\See January 22, 2014 Submission at 4.
---------------------------------------------------------------------------
    Representative Mullin has characterized these payments as 
``distributions,'' which he asserts were returns on capital he 
invested in the companies. Representative Mullin had capital 
invested in Mullin Plumbing in 2013. However, because he 
transferred ownership of Mullin West to his wife in 2012, 
Representative Mullin did not have capital invested in Mullin 
West in 2013. Some, but not all, of the checks from Mullin West 
to Representative Mullin in 2013 include ``DIST'' on the Memo 
line.
    Although the payments to Representative Mullin from Mullin 
West and Mullin Plumbing raise similar legal issues, the 
Committee's investigation revealed one significant difference 
between them. Mullin Plumbing intended to and did pay $55,000 
to Representative Mullin in 2013, while Mullin West paid him 
$40,000 due to an apparent error in the company's payment 
processes. Those payments were the result of an automatic 
disbursement process of $5,000 monthly payments to 
Representative Mullin. Those payments were not terminated when 
Representative Mullin transferred ownership of Mullin West to 
his spouse. This seems to have occurred, in part, because 
Representative Mullin did not inform the CFO of the Mullin 
Companies of the change in ownership when it took effect. The 
payments were ultimately stopped in September 2013, shortly 
after OCE initiated its preliminary review of Representative 
Mullin's involvement with the Mullin Companies. Representative 
Mullin did not notice the continued payments because they were 
automatically deposited into a joint account held by 
Representative Mullin and his spouse, and Representative Mullin 
did not view the accounts because his spouse managed the 
family's finances. Nonetheless, Representative Mullin did 
receive the payments, and has never returned them.

    C. REPRESENTATIVE MULLIN'S ALLEGED SERVICE AS THE PRESIDENT AND 
                    DIRECTOR OF THE MULLIN COMPANIES

    OCE found substantial reason to believe Representative 
Mullin, after he became a House Member, served as a member of 
the Boards of Directors of each of the Mullin Companies and 
also as the President of at least some of the companies. OCE 
suggested that some portion of the payments Representative 
Mullin received from the companies in 2013 ``may have'' been 
compensation for serving as a director and/or officer of the 
companies.\20\ However, OCE did not provide any basis for 
connecting the payments Representative Mullin received to any 
role he had as a Director or officer. Indeed, it is not clear 
that Representative Mullin even served in these roles after 
2012.
---------------------------------------------------------------------------
    \20\See OCE Referral at 15.
---------------------------------------------------------------------------
    According to OCE's summary of its interview with 
Representative Mullin, which was not recorded or transcribed, 
Representative Mullin stated that in 2013 he served on the 
Board of Directors of each of the five S-Corps that made up the 
Mullin Companies.\21\ However, in testimony to the Committee, 
Representative Mullin stated that none of the Mullin Companies 
had a Board of Directors in 2013, and that he was thus not a 
Director of any company.\22\ The CFO of the Mullin Companies 
confirmed that none of the companies has a Board of 
Directors.\23\
---------------------------------------------------------------------------
    \21\See OCE's Memorandum of Interview with Representative Mullin at 
para.para.4, 17, 24, 29, 33 (Ex. 2 to OCE's Referral).
    \22\See 18(a) Interview of Representative Mullin. Representative 
Mullin told the Committee the Mullin Companies had a ``Leadership 
Team,'' rather than a formal Board of Directors. See id. It is possible 
Representative Mullin confused these concepts when speaking with OCE.
    \23\See 18(a) Interview of Mullin Companies CFO.
---------------------------------------------------------------------------
    The record is less clear with respect to whether 
Representative Mullin served as an officer of the Mullin 
Companies after he became a House Member. Representative Mullin 
told OCE that he gave up his position as President of the 
Mullin Companies when he was elected to the House.\24\ However, 
a 2014 written submission to the Committee stated that he 
continued to serve as President.\25\ When asked in his 
Committee interview whether he was still the President, 
Representative Mullin initially said ``I don't think so. I 
don't know exactly how that's laid out.''\26\ When shown his 
2014 written submission, Representative Mullin changed his 
answer and stated he was still the President of the various 
Mullin Companies.\27\ The Mullin Companies' CFO also told OCE 
in 2013 that Representative Mullin was still serving as 
President.\28\
---------------------------------------------------------------------------
    \24\See OCE's Memorandum of Interview with Representative Mullin at 
para.4 (Ex. 2 to OCE's Referral).
    \25\See Letter from J. Baran to Representative Conaway and 
Representative Sanchez, Mar. 24, 2014, at 5-6.
    \26\See 18(a) Interview of Representative Mullin.
    \27\See id.
    \28\See OCE's Memorandum of Interview with Mullin Plumbing CFO at 
para.para.7, 10 (Ex. 4 to OCE's Referral).
---------------------------------------------------------------------------

                              V. FINDINGS


      A. REPRESENTATIVE MULLIN'S CONSULTATIONS WITH THE COMMITTEE

    Representative Mullin initially approached the Committee 
voluntarily, after his election to the House, to discuss a 
range of issues related to his ownership of, and involvement 
with, the Mullin Companies. During those discussions, Committee 
staff advised Representative Mullin to transfer ownership of 
Mullin West to his wife, and recommended several minor 
modifications to the business operations of the Mullin 
Companies. Representative Mullin followed that guidance. 
Committee staff also informally advised Representative Mullin 
that the Mullin Companies could re-use advertisements, which 
featured him and were recorded before his House election, under 
certain conditions.\29\ Staff did not discuss whether 
Representative Mullin could film new advertisements for the 
Mullin Companies. However, the record indicates that 
Representative Mullin asked whether he could continue to 
participate in a weekly radio program the Mullin Companies paid 
for, in which he discussed common home maintenance issues, and 
that Committee staff said Representative Mullin could continue 
to participate in that program as a Member, provided that he 
was not compensated for such participation.
---------------------------------------------------------------------------
    \29\In an email to Representative Mullin's Chief of Staff, Tom Rust 
stated that the Committee's guidance during staff's meeting with 
Representative Mullin was not memorialized in writing, but that staff 
told Representative Mullin the Mullin Companies could re-use 
advertisements filmed before his House election if the companies were 
not fiduciary businesses and the advertisements made no reference to 
Representative Mullin's position in Congress. See OCE's Referral, Ex. 
11.
---------------------------------------------------------------------------
    The Committee has long encouraged House Members and staff 
to avail themselves of the guidance of the Committee's 
nonpartisan, professional staff. The rules governing outside 
employment often require a fact-specific analysis, and Members 
are encouraged to conduct that analysis with the guidance of 
the Committee's nonpartisan, professional staff. Although 
staff-level advice is not a categorical shield from future 
adverse actions by this Committee, such advice is nevertheless 
necessary to enable the House community to successfully 
navigate standards of conduct. Members and their staff are 
encouraged to diligently request the Committee's advice and, 
upon doing so, Members and their staff may rely on the advice 
to engage in the vetted actions.\30\
---------------------------------------------------------------------------
    \30\See House Comm. on Ethics, In the Matter of Allegations 
Relating to Representative Tom Petri, H. Rep. 113-666, 113th Cong., 2d 
Sess. at 6-7 (2014).
---------------------------------------------------------------------------
    OCE, when confronted with Representative Mullin's evidence 
of consultation with the Committee staff, examined that 
consultation to determine whether it completely and accurately 
disclosed the facts of his proposed actions. As the Committee 
has stated in the past, this is a proper avenue of inquiry.\31\ 
Neither formal advice from the Committee nor informal staff-
level guidance will suffice to protect a Member when that 
advice is based on inaccurate facts, or when that advice 
endorses a course of action fundamentally different from the 
course actually taken. However, where Representative Mullin 
substantially complied with those consultations, the Committee 
believes that it would be inequitable to determine whether 
Representative Mullin's actions would constitute a violation.
---------------------------------------------------------------------------
    \31\See id. at 7.
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             B. PERSONAL ENDORSEMENT OF GOODS AND SERVICES

    The Committee has long advised that ``a Member should not 
undertake any outside employment that would involve the Member 
personally in the selling or endorsement of any goods or 
services.''\32\ While there is no specific law, rule, or other 
standard of conduct that expressly forbids such employment, the 
Committee has stated that this prohibition arises from the 
House Rules and the Code of Ethics for Government Service, 
which prohibit a Member from any use of their office or 
official position to obtain compensation or other benefits.\33\
---------------------------------------------------------------------------
    \32\Ethics Manual at 188. 
    \33\Id.
---------------------------------------------------------------------------
    There is no question that Representative Mullin personally 
endorsed the Mullin Companies' goods and services, both before 
and after he became a Member of Congress, through a weekly 
radio program and advertisements for radio, television, and the 
web. However, Representative Mullin specifically asked the 
Committee's staff whether the Mullin Companies could continue 
to use advertisements featuring Representative Mullin, which he 
had recorded before his election. Committee counsel advised 
Representative Mullin that this would be permissible, as long 
as they made no reference to his status as a Member. 
Representative Mullin also believes that he asked Committee 
staff whether he could continue to participate in a weekly 
radio program the Mullin Companies paid for, in which he 
discussed common home maintenance issues. Representative Mullin 
recalls that Committee staff told him that he could continue to 
participate in the radio show, as long as he was not 
compensated for that participation.
    Representative Mullin's conduct conformed with this advice. 
However, going forward, the Committee believes that the House 
would be better served by different guidance with regard to 
Member participation in advertisements. Because this was 
informal, staff-level guidance, it is not subject to the same 
rule-based safe harbor for formal written guidance but Members 
and their staff are encouraged to diligently request the 
Committee's advice and, upon doing so, may rely on the advice 
to engage in the vetted actions. Thus, the Committee believes 
it would be inequitable to punish him when he relied on that 
advice.\34\
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    \34\The Committee notes that the more comprehensive and consistent 
one's consultation with the Committee or its staff, the more protection 
the Committee can offer in response to actions related to that 
consultation.
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    Further, Representative Mullin was not an employee of the 
Mullin Companies. He was the owner of Mullin Plumbing and his 
wife was the owner of Mullin West. The Committee has not 
previously addressed whether the prohibition on the selling or 
endorsing of goods or services extends beyond employment to 
other situations in which the Member has a financial interest. 
Some of the laws, rules, and other standards of conduct 
pertaining to outside employment make distinctions between 
employment and other financial interests. However, the relevant 
rules and other standards of conduct pertaining to commercial 
endorsements are not so limited. Instead, House Rule XXIII, 
clause 3 applies to the receipt or accrual of compensation to 
the Member's ``beneficial interest from any source.'' And the 
Code of Ethics for Government Service applies to the acceptance 
by the Member or the Member's family of ``favors or 
benefits.''\35\ Thus, there is no reason to believe that the 
prohibition on the selling or endorsing of goods or services is 
limited only to employment situations.
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    \35\Code of Ethics for Government Service para.5.
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    Members of the House of Representatives are widely 
recognizable public servants. Even when they make no explicit 
mention of their official position, when Members actively 
engage in commercial sales or endorsements, they may create the 
perception that they are making use of their official position 
for commercial gain. Members must at all times avoid even the 
appearance that they are monetizing their public role for 
personal gain.
    Therefore, the Committee takes this opportunity to clarify 
for the whole House community that a Member should not be 
actively involved in personally selling or endorsing goods or 
services in which the Member has a financial interest.\36\ As 
such, Representative Mullin should now understand that, going 
forward, he cannot participate in the weekly radio program or 
the advertisements for radio, television, and the web. This 
restriction only applies to the active participation in selling 
or endorsing goods or services. Thus, it does not require 
Representative Mullin to remove his name from the Mullin 
Companies,\37\ nor does it require the Mullin Companies to 
scour the Internet to take down old videos of advertisements 
featuring Representative Mullin. Instead, the Mullin Companies 
can no longer take active steps to promote Representative 
Mullin's endorsement of the companies. Thus, the Mullin 
Companies cannot film any new advertisements featuring 
Representative Mullin, and old advertisements featuring 
Representative Mullin should be removed from the Mullin 
Companies' website.
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    \36\The House has long recognized that Members may receive income 
from the royalties of book sales. This restriction does not change the 
Committee's longstanding guidance permitting Members' participate in 
the promotion of their own books, so long as the Member does so in 
their personal capacity and without using any official resources.
    \37\There are some restrictions on the use of a Member's name for 
certain businesses (e.g., businesses that engage in fiduciary 
professions). And a Member of Congress choosing to add his or her name 
to a commercial enterprise after election to the House might be the 
kind of active endorsement of a commercial enterprise that would be 
improper. However, where no other restriction applies, the simple 
retention of a Member's name on a business does not violate these 
rules.
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                     C. OUTSIDE EARNED INCOME LIMIT

    The Ethics in Government Act (EIGA) states, ``a Member . . 
. may not in any calendar year have outside earned income 
attributable to such calendar year which exceeds 15 percent of 
the annual rate of basic pay for level II of the Executive 
Schedule under section 5313 of title 5, United States Code, as 
of January 1 of such calendar year.''\38\ House Rule XXVI, 
clause 2, provides that Title I of EIGA ``shall be considered 
Rules of the House as they pertain to Members . . . of the 
House.'' Accordingly, House Rule XXV, clause 1(a)(1), 
incorporates EIGA's prohibition against Members earning outside 
earned income in excess of the annual outside earned income 
limit. For the 2013 calendar year, the limit was $26,955.\39\
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    \38\5 U.S.C. app. Sec. 501(a)(1).
    \39\See Memorandum from the Committee on Ethics to All Members, 
Officers and Employees re: Change to Financial Disclosure Reporting 
Obligations and Reminder Regarding Periodic Transaction Reporting 
Requirement (Jan. 24, 2013).
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    Prior to 2013, Representative Mullin received payments from 
the various Mullin Companies which were explicitly designated 
as ``salary.''\40\ Once Representative Mullin joined the House, 
he stopped receiving ``salary'' payments, a change he, and the 
Mullin Companies' CFO, attributed to spending significantly 
less time managing the companies, due to his full-time work as 
a congressman.\41\ However, Representative Mullin did receive 
payments totaling $95,000 from two of the Mullin Companies in 
2013: $55,000 from Mullin Plumbing and $40,000 from Mullin 
West. Representative Mullin has consistently characterized 
these payments as ``distributions''--meaning a return on equity 
for capital he invested in the companies--not salary or other 
compensation for services rendered to the companies.\42\ The 
CFO of the Mullin Companies has also characterized the payments 
as distributions, not salary or other compensation.\43\
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    \40\See OCE's Memorandum of Interview with Mullin Plumbing CFO at 
para. 13; see also 18(a) Interview of Mullin Companies CFO.
    \41\See 18(a) Interview of Representative Mullin; see also 18(a) 
Interview of Mullin Companies CFO. The CFO of the Mullin Companies 
confirmed Representative Mullin did significantly less work for the 
companies once he became a Member of Congress. See id. (``He used to 
come to work every day at 7 o'clock, and that obviously changed. He 
would hire and fire before, and now he doesn't. He would be involved in 
insurance renewals, banking decisions, policy decisions, and now he 
does not, he's not involved in those things. He used to run service 
calls; doesn't do that anymore. He used to oversee our shop; he doesn't 
do that anymore. . . . Now we will involve him on more of a general 
basis, just as an informative. I mean, obviously they are still his 
companies, so we as a consideration just let him know what's going on 
with them. If we change our uniforms, we might let him know that. If 
we--I mean, most of the time it's just reactionary. It's just an 
informative, this is what we've done. He might give his opinion, we 
might make changes based on that and then we might not.'').
    \42\See OCE Memorandum of Interview with Representative Mullin at 
para.para. 11-13, 18-21, 26, 34 (Ex. 2 to OCE's Referral); see also 
January 22, 2014 Submission at 1, 4-7.
    \43\See Letter from Mullin Plumbing CFO to OCE, Sept. 23, 2013 (Ex. 
8 to OCE's Referral); see also 18(a) Interview of Mullin Companies CFO 
(Q. [T]he first sentence [of your letter to OCE] says, for the period 
of January 1, 2013, to current date, Markwayne Mullin has not received 
any income in the form of salary from any of the sources listed or any 
entities affiliated with these sources, and then there's a listing of 
each of the Mullin companies. Is that accurate? A. Yes, it is. Q. The 
next paragraph is, sources of income not considered salary for 
Markwayne Mullin from January 1, 2013, to September 13, 2013, and it 
includes distributions. When you say, `sources of income not considered 
salary,' what does that mean? A. It was not run through our payroll 
system. It was not considered a salary, it was considered a 
distribution.'').
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    OCE's Referral suggested that, despite the ``distribution'' 
label applied to the payments, they were in fact compensation 
for Representative Mullin's services to the Mullin Companies, 
namely the advertisements he continued to record for the 
companies after joining the House. OCE supported this finding 
in two ways. First, OCE cited an interview with an accountant 
for the Mullin Companies. OCE's summary of the interview, which 
was not recorded or transcribed, states that the accountant 
explained the 2013 ``distributions'' to Representative Mullin 
were made ``in lieu of salary,'' which OCE interpreted as 
suggesting that the ``distributions'' were paid to make up for 
salary that Representative Mullin did not receive. Second, OCE 
found that the advertisements generated revenue for the Mullin 
Companies, and therefore should be characterized as outside 
earned income.
    With respect to OCE's first point, Committee staff asked 
the Mullin Companies' accountant about the statement OCE relied 
on. The accountant stated: ``The comment here, in lieu of 
salary,' I can't imagine me saying that because it's really not 
true.''\44\ The accountant also told Committee staff: ``I know 
in 2013 he drew no salary from the Mullin companies because he 
was at that time a Representative of the House, and he wasn't 
working near as much in Tulsa for the company. He elected not 
to take a salary.''\45\ When asked how he came to this 
understanding, the accountant said Representative Mullin told 
him he was not taking a salary in 2013.\46\ Based on all the 
available evidence, the Committee found that neither 
Representative Mullin nor the Mullin Companies or their 
accountant characterized the 2013 payments as salary or other 
compensation, or considered them as such.
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    \44\See 18(a) Interview of CPA.
    \45\See id.
    \46\See id.
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    But this does not settle the matter. The Committee has 
previously stated that ``the label or characterization placed 
on a transaction, arrangement or payment by the parties may be 
disgregarded for the purpose of [House Rule XXV]'' and ``the 
characterization of such amounts as partnership distributive 
share, dividends, rent, interest, payment for a capital asset, 
or the like, will not serve to prevent the application of 
[House] Rule 25\47\ The Committee is, therefore, not bound to 
accept the characterization of money received by Representative 
Mullin from his business, but must look at the facts 
surrounding the receipts of that money to determine whether it 
qualifies as earned or unearned income.
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    \47\See Advisory Op. No. 13.
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    Further, the Mullin Companies are all S-Corps. The 
Committee's longstanding guidance with respect to S-Corps is 
that the ``determining factor'' for whether payments from the 
business to the Member are deemed earned income ``is whether 
the Member's . . . personal services generate significant 
income for the business.''\48\ If the Member performs services 
for the business that ``actually generate any significant 
income for the business,'' then some part of the payments the 
Member receives from the business may be deemed earned income. 
``However, if the Member . . . is engaged primarily in the 
general oversight and management or protection of his or her 
investment [in a business], such services would not be deemed 
to generate significant income.''\49\
---------------------------------------------------------------------------
    \48\Id. (see Ethics Manual at 368).
    \49\Id.
---------------------------------------------------------------------------
    Because Representative Mullin was the owner of Mullin 
Plumbing but not of Mullin West, the Committee considered the 
payments from the two companies separately.
    With respect to the payments from Mullin Plumbing, the 
Committee determined that participation in the radio show and 
filming new advertisements did generate significant income for 
Mullin Plumbing.\50\ In his interview, Representative Mullin 
stated numerous times, in various ways, that the advertisements 
he appeared in were an important driver of revenues for the 
Mullin Companies. For example, when asked the purpose of the 
advertisements, Representative Mullin stated, ``It keeps 
customers coming in. It keeps us busy. Any company that has to 
advertise, they do it for a particular purpose. They don't do 
it just for the sake of spending money.''\51\
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    \50\Notably, Representative Mullin has never denied that his 
advertising role benefited the businesses. Instead, Representative 
Mullin maintains that the ``family business'' provision of the outside 
earned income rule applies to that role. More specifically, 
Representative Mullin contends that, in the context of a family 
business, a Member must be allowed to sustain the business's brand by 
appearing in advertisements for the business, without being subjected 
to the earned income limit. This is incorrect. Participation in 
advertising is not ``general oversight and management,'' and it is not 
``protection of his or her investment.'' Advertising, by definition, is 
a driver of revenue for a company. And Representative Mullin's own 
statements repeatedly made this point.
    \51\See 18(a) Interview of Representative Mullin.
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    Because the radio show and advertisements were a driver of 
revenue, and not simply general oversight and management of the 
firm, some portion of the payments that Mullin Plumbing 
characterized as distributions should be deemed compensation, 
and would be subject to the outside earned income limit. For 
several reasons, the Committee did not assess what portion of 
the payments were compensation subject to the outside earned 
income limit.
    First, for calendar year 2013, the outside earned income 
limit for a Member was $26,955. If Representative Mullin's 
actual return on equity was $28,045, or more, his earned income 
from Mullin Plumbing would be within the outside earned income 
limit. Based on the equity that Representative Mullin did have 
in Mullin Plumbing, $28,045 represents a reasonable return on 
his equity.
    Of course, the reasonableness is not dispositive. In 
general, the Committee will require an actual apportionment of 
the payments to earned income versus return on equity. However, 
it bears emphasis that Representative Mullin initially 
approached the Committee voluntarily, after his election to the 
House, to discuss a range of issues related to his ownership 
of, and involvement with, the Mullin Companies. During those 
discussions, Committee staff did not discuss whether 
Representative Mullin could film new advertisements for the 
Mullin Companies, or whether doing so would raise an issue with 
the outside earned income limit. However, staff does appear to 
have said that Representative Mullin could continue to 
participate in the radio show, provided that he was not 
compensated. Unfortunately, the unique treatment of income from 
S-Corps does not appear to have been flagged during staff's 
discussions with Representative Mullin. If it had been, 
Representative Mullin might have adjusted his actions 
accordingly.
    Moreover, because this matter began as an advisory matter, 
and Representative Mullin has consistently cooperated with that 
process, the Committee believes it would be appropriate to 
treat any conclusions regarding the payments Representative 
Mullin received as they would be treated in the advice and 
education context, and to advise Representative Mullin 
concerning his options in the future. The Committee regularly 
advises Members on how to wind down certain family-owned 
businesses when they are elected to Congress. That process can 
take an extended period of time, and the Committee does not 
punish Members who are not compliant with the applicable House 
Rules during a transition period, as long as they are making a 
good-faith effort to follow the Committee's advice. In response 
to the Committee's guidance on other issues concerning the 
Mullin Companies, Representative Mullin has made several 
changes to the ownership and practices of the companies, which 
reflect his good-faith efforts to follow the Committee's 
advice.\52\
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    \52\In a submission to OCE, Representative Mullin stated: 
``[F]ollowing my November 2012 meeting with House Ethics staff, I and 
others involved in the Mullin businesses structured those businesses, 
and my participation in them, to accord with our understanding of 
Ethics staff guidance. In fact, we spent numerous business hours and 
thousands of dollars to implement this ethics guidance, including the 
hiring of a new chief executive officer to replace me.'' See Letter 
from Representative Mullin to Representative Goss and Representative 
Skaggs, Nov. 8, 2013, at 2 (Attached as Exhibit 1). In addition, 
Representative Mullin transferred ownership of Mullin West to his 
spouse on December 31, 2012, on the advice of Committee staff. It is 
true that Representative Mullin continued to receive payments from 
Mullin West for several months in 2013. However, it appears these 
payments were the result of an automated disbursement process, which 
was not changed when the corporate transfer occurred.
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    Accordingly, based on all of the particular circumstances 
of this matter, the Committee determined to resolve the issue 
of the payments from Mullin Plumbing without any additional 
action.
    With respect to the payments from Mullin West, it is 
unnecessary to assess whether the advertisements generated 
significant income for the company because Representative 
Mullin was not an owner of the company. Prior to his election 
to Congress, the Committee recommended that Representative 
Mullin transfer ownership of Mullin West to his wife. 
Representative Mullin did transfer the company. However, due to 
an accounting error, Mullin West continued to make regular 
payments to Representative Mullin. Given his lack of ownership 
in Mullin West, such payments cannot be considered 
distributions. Moreover, Representative Mullin does not benefit 
from the protection of seeking the Committee's guidance, as the 
mistaken payments were inconsistent with the guidance. The 
money was paid into a joint account held by both Representative 
Mullin and his spouse. However, the Committee determined, to be 
in full compliance with the Committee's guidance, 
Representative Mullin should return those payments to Mullin 
West.

    D. RECEIPT OF COMPENSATION FOR SERVICE AS A DIRECTOR OR OFFICER

    The Ethics in Government Act (EIGA) states, ``a Member . . 
. shall not . . . serve for compensation as an officer or 
member of the board of any association, corporation, or other 
entity.''\53\ House Rule XXVI, clause 2, provides that Title I 
of EIGA ``shall be considered Rules of the House as they 
pertain to Members . . . of the House.'' Accordingly, House 
Rule XXV, clause 2(d), incorporates EIGA's prohibition against 
Members serving for compensation as an officer or member of a 
board of a corporation, association, or other entity. Based on 
Representative Mullin's apparent statement to OCE that he 
served on the Board of Directors for each of the Mullin 
Companies, and his receipt of payments from two of the 
companies in 2013, OCE found ``Representative Mullin may have 
received earned income for his service as an officer and as a 
board member.''\54\ However, if Representative Mullin told OCE 
that he was a Director, it appears he was mistaken. The record 
is clear that the Mullin Companies do not have Directors, and 
thus Representative Mullin could not have received compensation 
for service as such.
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    \53\5 U.S.C. app. Sec. 501(a)(1).
    \54\See OCE's Referral at 15.
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    The record is less clear with respect to Representative 
Mullin's role as an officer of the Mullin Companies. There is 
evidence that Representative Mullin continued to serve as 
President of some or all of the Mullin Companies after he 
became a House Member. However, it appears that if 
Representative Mullin did so, it was largely on a nominal 
basis, and his actual responsibilities in the day-to-day 
operation of the companies were significantly reduced after 
2012.\55\ Further, the Committee found no evidence that any of 
the payments Representative Mullin received from the Mullin 
Companies were intended to be, or could fairly be characterized 
as, payments for his service as an officer of the Mullin 
Companies. Thus, the Committee did not find that Representative 
Mullin violated House Rule 25, clause 2(d).
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    \55\See n.41, supra.
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                             VI. CONCLUSION

    After an extensive review, the Committee found that this 
matter raised several novel questions regarding the application 
of House rules and other standards of conduct to a Member's 
efforts to maintain and promote a family business. These 
questions were further complicated by the procedural posture of 
the matter, which began when Representative Mullin consulted 
Committee staff after his election to the House in order to 
ensure he and his family businesses would operate consistent 
with the applicable rules. As Representative Mullin was working 
with Committee staff to bring his family businesses into 
compliance, OCE began its separate review, and eventually 
referred allegations to the Committee that related to issues 
which were part of the Committee's advisory process. While 
these issues would typically be treated as advisory matters, 
and the Member would be given time to bring his businesses into 
compliance, OCE's Referral compelled the Committee to treat the 
issues as an investigative matter.
    Ultimately, the Committee determined that Representative 
Mullin made a good faith effort to seek the Committee's 
informal guidance on numerous issues with respect to his family 
business. Although the Committee acknowledges that its 
informal, staff-level advice is not a categorical shield from 
future adverse actions, such advice is nevertheless necessary 
to enable the House community to successfully navigate 
standards of conduct. Members and their staff are encouraged to 
diligently request the Committee's advice and, upon doing so, 
may rely on the advice to engage in the vetted actions. In this 
case, Representative Mullin sought advice from the Committee 
staff about his family business, and appears to have 
substantially complied with most of that advice.
    To the extent that Representative Mullin substantially 
complied with the Committee's advice, it would be inequitable 
to subject his conduct to sanction. However, the Committee 
determined that, to bring Representative Mullin into full 
compliance with the Committee's guidance, he must return 
$40,000 mistakenly paid to him in 2013 by a company that he 
transferred to his wife in 2012.
    Representative Mullin complied with the advice he received 
regarding his participation in advertisements for his family 
business. However, the Committee believes that, going forward, 
the House would be better served by different guidance with 
regard to Member participation in advertisements. Therefore, 
the Committee takes this opportunity to clarify its guidance 
with respect to Member participation in advertisements or other 
commercial endorsements of goods or services. Under no 
circumstances should a Member be actively involved in 
personally selling or endorsing good services in which the 
Member has a financial interest.\56\
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    \56\The House has long recognized that Members may receive income 
from the royalties of book sales. This restriction does not change the 
Committee's longstanding guidance permitting Members' participate in 
the promotion of their own books, so long as the Member does so in 
their personal capacity and without using any official resources.
---------------------------------------------------------------------------
    Accordingly, the Committee unanimously voted to adopt this 
Report, and take no further action. Upon publication of this 
Report and repayment of $40,000 to Mullin West, the Committee 
considers the matter closed.

VI. STATEMENT UNDER RULE XIII, CLAUSE 3(c) OF THE RULES OF THE HOUSE OF 
                            REPRESENTATIVES

    The Committee made no special oversight findings in this 
Report. No budget statement is submitted. No funding is 
authorized by any measure in this Report.


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