ED T4 o? 4?79 UNITED STATES ENVIRONMENTAL 5 PROTECTION AGENCY a, 0: Washington, DC 4741 OFFICE OF GENERAL COUNSEL APR - it 2818 MEMORANDUM Record for ?Review of Lease Agreement Under the Federal Ethics Regulations Regarding Gifts? FROM: Kevin S. Minoli Lag Designated Agency Ethics Of?cial Principal Deputy General Counsel TO: Matthew Z. Leopold General Counsel On March 30, 2018, I signed a memorandum entitled ?Review of Lease Agreement Under the Federal Ethics Regulations Regarding Gifts? (Review). Questions have been raised as to the scope of the Review and the factual basis for it. Today?s memorandum explains the factual basis for the conclusion reached in the March 30 Memorandum and explains the scope of that review. Factual Basis for the Conclusion Regulations promulgated by the Of?ce of Government Ethics exclude from the de?nition of gift ?Anything for which market value is paid by the employee.? The regulations then explain how an ethics of?cial is to establish market value: (0) Market value means the cost that a member of the general public would reasonably expect to incur to purchase the gift. An employee who cannot ascertain the market value of a gift may estimate its market value by reference to the retail cost of similar items of like quality. The market value of a gift of a ticket entitling the holder to food, refreshments, entertainment, or any other bene?t is deemed to be the face value of the ticket. A ?rst step in ascertaining the market value of a gift is to identify and understand the item of value. Here, the item of value is the ability to use the space at 233 Street as de?ned by the terms of the lease. In developing the Review, the ethics of?ce examined the entire lease, which is attached hereto as Exhibit 1, and highlight the following terms that were particularly relevant to the value of the lease: 0 Term: 39 Days from February 20, 2017, to April 1, 2017 0 Rent: $50 per day 0 Rent is ?payable on the day of each month of the term, in installments of $500 on March 1, 2017 and any remaining balance on April 1, 2017 based on days of actual occupancy.? (emphasis removed) 0 Use of Premises: To be used by Tenant and Tenant?s immediate family 0 ?Tenant may store possessions on the premises when he is not occupying the bedroom assigned to him. There will be no charge for storage of limited personal items including clothing.? 0 Tenant?s Hold Over: Provided for the possibility of new week-to-week tenancies 0 Quiet Enjoyment: Limited to one bedroom 0 ?Enjoyment is limited to one bedroom that cannot be locked. All other space is controlled by landlord. (sic) Landlord will attempt to notify Tenant if common space is to be utilized during early or late hours. No notice is required for usage during weekday business hours, 8am-6pm. Tenant shall provide Landlord?s representative (Vicki Hart) with a cell number for this and all required communications.? (emphasis removed) When there is not a pre-established market, the regulation provides that that the ethics of?cial may ?estimate. . .market value by reference to the retail cost of similar items of like quality.? In order to estimate the market value of the use authorized by the terms of the lease, the ethics of?ce reviewed the following information regarding similar items of like quality: Dailv Rentals for One Private Bedroom 0 Because the rent was assessed per day based on days of actual occupancy, we reviewed the availability of a private bedroom available for rent by the day. 0 Because the rentals are ?similar? and of ?like quality,? a cut?off of $55 per day was used and rooms not suitable for an adult were removed from the list. 0 Within a six-block radius of 233 St, NE, there were seven (7) private bedrooms that could be rented for $55 or less/day (Exhibit 2) Across a broader section of Capitol Hill, there were thirty-eight (38) private bedrooms that could be rented for $55 or less/day (Exhibit 3) Rental Units 0 While the lease created something less than a month-to-month tenancy and did not provide exclusive use to the entire property, we reviewed available rental units as potentially similar units to ensure thoroughness of the evaluation. 0 Capitol Hill is the 19th most expensive neighborhood for renting in Washington, DC with an average cost of a rental apartment of $2,361/month 0 Source: trends/us/dc/washington/ 0 Rental units currently available within three blocks (less than 1/3 mile) of the location of the lease (Exhibit4) include: 0 Eight (8) 1BR units with an average price of $2,173/month 0 Three (3) 2BR units with an average price of $3,695 0 Source: Zillow.com The information demonstrates that there are several private rooms available to be rented on a per day basis for $55 or less that are in close proximity to the exact location the leased space. Within the Capitol Hill neighborhood, there are multiple private rooms available at a per day rate equal to or less than the one included in the lease. When checked against the price of traditional month-to-month rentals that would most likely offer increased privacy and exclusivity of use, a converted amount of $1,500 for Tenant?s portion of the rent under the lease is within the range of amounts charged for locations no further than three blocks away. Based on the foregoing, the ethics of?ce estimated $50/day to be a reasonable market value of the use authorized by the terms of the lease. As such, the use of the property according to the terms of the lease would not constitute a gift under the Federal ethics regulations. Scope of Review Under Ethics Regulations Regarding Gifts The Review addressed the terms of the lease as they were written in the lease agreement only. Some have raised questions whether the actual use of the space was consistent with the terms of the lease. Evaluating those questions would have required factual information that was not before us and the Review does not address those questions. The memorandum concluded, after considering the factual record, that the use of the property authorized by the terms of the lease would not constitute a gift. Individuals have noted that the Review used the words ?did not? constitute a gift instead of ?would not? constitute a gift, and understood that language to imply that the Review had evaluated the actual use that occurred; to be clear, despite use of the words ?did not,? the Review only addressed the terms of the lease as written. Ethics Regulations Other than Those Regarding Gifts The Review addressed those parts of the Federal ethics regulations that regard gifts, but was not intended to and did not address other portions of the Federal ethics regulations such as the impartiality rule. It is important to note that the Federal ethics regulations regarding impartiality apply regardless of whether something involves receiving a prohibited gift. A federal employee must comply with the Standards of Ethical Conduct, including those relating to impartiality, at all times. Exhibit 1 District of Columbia Residential Lease Agreem LEASE AGREEMENT (hereinafter referred to as the ?Agreem nt") made and entered into THI this 15?h day February 2017? by and between 223 Street LLC (hereinaft referred to as "Landlord") and Scott Pr itt (hereinafter referred to as "Tenant"). WITNESVSETH: WHE EAS. Landlord is the fee owner of certain real property being! lying and situated in the City of Washingto District of Columbia, such real property having a street address of 223 Street, NE (hereinafter ferred to as the "Premises"). contained he in; and contained herein; WHE EAS, Landlord desires to lease the Premises to Tenant upon the terms and conditions as WHE . EAS, Tenant desires to lease the Premises from Landlord on the terms and conditions as NOW, THEREFORE, for and in consideration of the covenants and obligations contained herein and other good and valuable consideration, the receipt and suf?ciency of wh ch is hereby acknowledged, the parties he eto hereby agree as follows: . Landlord leases to Tenant and Tenant leases from Landlord the above described Prem ses together Wit'l any and all appurtenances thereto, for a term of 39 days, such term begin ing on February 20I 2017 and ending at 11:59 PM on Agril 1I 2017. REM . The total rent for the term hereof is the sum of fig dollars $50.00) per day payable on the 1' day of each mc of the term, in installments of 50 .00 on 20 rema nin balance on A ril 1 2017 based on da 8 of actual occ anc . All such payments shall made to Landlord at premises address as set in nt on or before the due date and without dem nd. USE OF PREMISES. iThe Premises shall be used and occupied by enant and Tenant's immediate family. con isting of tenant, spouse and children exclusiv ly, as a private single family dwelling, andl 0 part of the Premises shall be used at any ti during the term of this Agreeinent by Tenant or the purpose of carrying on any business, ofession, or trade of any kind, or for any purpo other than as a private single family dwelling Tenant shall not allow any other berson, other th Tenant's immediate family or transient relati es and friends who are guests of Tenant, to or occupy the Premises without ?rst obtaini Landlord's written consent to such use. Tenant hall comply with any and all laws, ordinances, rules and orders of any and all governmental or quasi-governmental authorities affecting the clea liness, use, occupancy and press aticn of the Pr mises. Tenant may store possessions or: the remises when he is not occupying the bedroo assigned to him. There will be no charge for torage of limited personal items ncluding clothin . CONDITION OF PRE ISES. Tenant stipulates, represents and war that Tenant has exami ed the Premise and that they are at the time of this Lease in good order, repair, and in a safe, lean and tenant ble condition. Landlord has the option of provi ing cleaning services but must btain Tenant pe mission for cleaning staff to enter the Tenant' bedroom. ASSI NMENT AND B-LETTING. Tenant shall not assign this Ag cement, or sub-let or grant any lic nse to use the remises or any part thereof without the prior ritten consent of Land! rd. Avconsent Landlord to one such assignment, sub-Iettin or license shall not be deem to be a conse tto any subsequent assignment, sub-letting 0 license. An assignment. sub-le ing or license 'thout the prior written consent of Landlord or assignment or sub-letting by op ration of law sh ll be absolutely null and void and shall, at Landlord's option, terminate this Agreement. 11the event the Premises are destroye or rendered wholly unin abitable by ?re,;storm, earthquake, or other casualty not caus by the negligence of Ten nt, this Agreement shall terminate from such time except forth purpose of enforcing rights that ay have then a crued hereunder. The rental provided for herin shall then be accounted for and between ndlord and Tenant up to the time of such inju or destruction of the Pre ises, Tenant pa ing rentals up to such date and Landlord refu ding rentals collected beyond such date. Should a ortion of the Premises thereby be rendered inhabitable, the Landlord shall have the option Ef either repairing such injured or damaged po ion or terminating this Leas . In the eventt at Landlord exercises its right to repair such ninhabltable portion, the rent shall abate int proportion that the injured parts bears to th whole Premises, and such part 0 injured shall restored by Landlord as speedily as practicaole, after which the full rent shall recommence a the Agreement continue according to its ter 3. INS ECTION OF PR MISES. Landlord and Landlord's agents shal have the right at all reas nable times du ng the term of this Agreement and any renewl thereof to enter the ises for the purpose of inspecting the Premises and all buildin- and improvements thereon. And for the purposes of making any repairs, additions or a erations as may be deemed appropriate by Landlord for the preservation of the Premises or the uuilding. Landlord and its agen 5 shall further ve the right to exhibit the Premises and to dis .. lay the usual "for sale", "for rent" or "vacancy" sig on the Premises at any time within forty-?v (45) days before the expir tion of this Lea e. The right of entry shall likewise exist for th purpose of removing placa ds, signs, ?xtur s, alterations or additions that do not conform to this Agreement or to any restri tions, rules or regulations affecting the Premises. 0 LEASE. This Agreement and Tenant's inter st hereunder are and shall be su ordinate, junior and inferior to any and all mortgages, liens or ncumbrances now or here er placed on Premises by Landlord, all advances made der any such mortgages, liens encumbrance (including, but not limited to, future advances, the interest payable on such ortgages, lien or encumbrances and any and all renewals, ensions or modi?cations of such ortgages, liens or encumbrances. TEN HOLD 0 .ER. lf Tenant remains in possession of the Prmises with the consent of Landl rd after the nat ral expiration of this Agreement, a new tenancy from week-to-week shall be or ated between ndlord and Tenant which shall be subject to a of the terms and conditions hereof except that ren shall then be due and owing at dollars 50.00 -er da and except that suah tenancy she I be ten'ninable upon three (3) days written noce served by either party. SUR ENDER OF PR MISES. Upon the expiration of the term here-f, Tenant shall surrender the mises in as go a state and condition as they were at the co mencement of this A reement, reaso. able use and wear and tear thereof and damges by the elements excepted. paya by Tenant an Tenant's performance of all Tenant?s agreem contained herein and Tena t's observance of all rules and regulations, shall and may peacfully and quietly have, hold and erhjoy said Premis-s for the term hereof. En'o ment is limited t- one bedroom that cannot be locked. All other - -ace is controlled landlord. Landlord wi I attem -t to noti Tenant if corr-mon -ace is to be utilized durin earl or late hours. No otice is re uired for usa durln weekd business hours Sam-Sm. Tenant shall rovide Landlord?s re . re entat ve Vicki Hart with a cell number for this and all re- ired communications. INDE NIFICATION. Landlord shall not be liable for any damage or jury of or to the Tenant, Tenan '5 family, guest invitees, agents or employees or to any perSu-n entering the Premises or the bu lding of which Premises are a part or to goods or equipme t, or in the structure or equip ent of the struc ure of which the Premises are a part, and Ten -nt hereby agrees to indem ify, defend and lhOld Landlord harmless from any and all claim or assertions of every kind and ture. I . ENJOYMENT., Tenant, upon payment of all of the sums refe ed to herein as being 10. ALT RATIONS AN IMPROVEMENTS. Tenant shall make no alt rations to the buildings or impr vements on th Premises or construct any building or make a other improvements on the Pre ises without th prior written consent of Landlord. Any and all iterations, changes, and/or impr vements built, onstructed or placed on the Premises by Ten shall, unless otherwise prov ed by written reement between Landlord and Tenant, be a become the property of Lan lord and remain on the Premises at the expiration or earlier ter ination of this Agreement. Ten nt shall not han pictures or othewvise attach any object to the walls NO DELIVERY OF POSSESSION. In the event Landlord cannot eliver possession of the Pre ises to Tenant pen the commencement of the Lease term, th ugh no fault of Landlord or its a ents, then Land ord or its agents shall have no liability, but the rental herein provided shall abat until possessio is given. Landlord or its agents shall have th rty (30) days in which to give session is tendered within such time, Tenant grees to accept the demised Pre ises and pay th rental herein provided from that date. In the vent possession cannot be deiiv red within such time, through no fault of Landlord or its agents then this Agreement and all rights hereunder shal terminate. Tenant shall not keep on the Premise any item of a dangerous, ?am able or explosNe character that might unreasonably increase he danger of ?re or explosion on th Premises or th tmight be considered hazardous or extra ha rdous by any responsible UTIL TIES. Landlord shall be responsible for arranging for and payi requi ed on the Prem? es. No phone service is provided. Tenant ag num er for all teleph communications MAI TENANCE AN RULES. Tenant will, at its sole ex nse, keep and maintain the Prem ses and appurt nances in good and sanitary condition and re ir during the term of this Agre ment and anyr newai thereof. Without limiting the generality fthe foregoing, Tenant shall: 9 for all utility services ees to use his private cell Not obstruct he driveways, sidewalks, courts, entry ways, I shall be used or the purposes of ingress and egress only; (ti) Keep all win ws, glass, window coverings, doors, locks an hardware in good, clean i order and rep ir; Not obstruct cover the windows or doors; Not leave wi ows or doors in an open position during any i clement weather; (ei) Not hang an laundry, clothing, sheets, etc. from any wind w, rail, porch or balcony nor air or dry any fsame within any yard area or space; Not cause or permit any looks or hooks to be placed upon ny door or window without the prior written consent of Landlord; Keep all air conditioning ?lters clean and free from dirt; 5 Keep all iavat' ries, sinks, toilets, and all other water and plu bing apparatus in good r, order and rep ir and shall use same only for the purposes fo which they were constructed. enant shall not allow any sweepings, rubbish, and, rags, ashes or other substances to be thrown or deposited therein. Any damage any such apparatus and . the cost of cle ring stopped plumbing resulting from misuse hall be borne by Tenant; And Tenant's family and guests shall at all times maintain 0 all places on Premises, and shall not make or permit any otherwise dist rb other residents; Keep all radi 5, television sets, stereos, phonographs, etc., urned down to a level of sound that do 5 not annoy or interfere with other residents; Deposit all tra h, garbage, rubbish or refuse in the locations rovided therefor and shall not allow any ash, garbage, rubbish or refuse to be deposit or permitted to stand on the exterior of ny building or within the common elements; Abide by and be bound by any and all rules and regulations ?eeting the Premises or the common a ea appurtenant thereto which may be adopted or promulgated by the Condominium 1 Homeowners' Association having control ov rthem. tairs and/or halls, which er in the Premises and at oud or improper noises, or 18that it.has at law or in equity. 22. i lf Tena tfails to comply with any of the material provi one of this Agreement, other than the covenant pay rent, or of any present rules and regulatio or any that may be hereafter prescribed by by statute, within se en compliance and indi Landlord may termin continues for seven 7) days thereafter. Landlord may, at Landlord' balance of rent paya le hereunder to be immediately due and paya all ri and remedi 5 available to Landlord at law or in equity or rr Agreement. ABANDONMENT. at any time during the term of this Agreement Pre for a payment of any kind whatever. Landlord may, at Landlord's Tenant, relet the Premises, or any part thereof, for the whole or any any part of the then unexpired term, and may receive and collect all Landlord, or materially fails to comply with ny duties imposed on Tenant (7) days after delivery of written notice by andlord specifying the non- ting the intention of Landlord to terminate th Lease by reason thereof, te this Agreement. if Tenant fails to pay rent hen due and the default option, declare the entire le and may exercise any and ay immediately terminate this Tenant abandons the Premises or any part thereof, Landlord may, at Landlord's option, obtain possession of the uses in the man, er provided by law, and without becoming liable to Tenant for damages or i1 discretion, as agent for part thireof, for the whole or rent pa able by virtue of such reletting, and, at Landlord's option, hold Tenant liable for any difference between the rent that would have been payable under this Agreement during the balance Agreement had conti ued in force, and the net rent for such period means of such reletti 9. if Landlord's right of reentry is exercised Premises by Tenant, hen Landlord shall consider any personal pro left on the Premises also have been abandoned, in which case such ipersonal prope in any manner Landlord shall deem proper relieved of all liability for doing so. any of the conditions in possession of the Pr reasdnable attorneys' fee. RECORDING OF AG EEMENT. Tenant shall not record this Agree of any public of?ce. I the event that Tenant shall record this Agreer option, ter inate immediately and Landlord shall be entitl Should it become necessary for Landlord to covenants hereof, including the collection of GOVERNING LAW. This Agreement shall be governed, construed a and uhder the Laws of the District of Columbia. SEVERABILITY. If a provision of this Agreement or the applicatio fthe unexpired term, if this ealized by Landlord by lowing abandonment of the erty belonging to Tenant and ndlord may diSpose of all Landlord is hereby mploy an attorney to enforce rentals or gaining ises, Tenant agrees to pay all expenses so iriicurred, including a ment on the Public Records nent, this Agreement shall, at ed to all rights and remedies interpreted by, through thereof shall, for any reason and to any ext nt, be invalid or unenforceable, neither the remainder of this Agreement nor the application of the provision to other persons, entities or circumstances shall be affected thereby, but instead shall be enforced to the maximum extent permitted by law. BINDIING EFFECT. covenants, obligations and conditions herei 1 contained shall be binding on and inure to the be e?t of the heirs, legal representatives, and assigns of the parties hereto. DESC HEAD N68. The descriptive headings used herein a refere ce only and the are not intended to have any effect whatsoe or obligations of the ndlord or Tenant. CONSTRUCTION. Th both, lingular and plur l. NON- Agreement shall affect Tenant's duties and liabilities hereunder. for convenience of in determining the rights pronouns used herein shall include, where a propriate, either gender or No in ulgence, waiver, election or non-election by ndlord under this i I 28. M0 IFICATION. parties hereby agree that this document contains the entire agreement be een the parties nd this Agreement shall not be modi?ed, changed, altered or amended in any ay except thro gh a written amendment signed by all of the parties hereto. 29. N0 ICE. Any notic re suf? iently given or I If to Landlord to: U?Ojt? Hart 223 Street LLC 223 Street NE Washington, DC 20002 If to Tenant to: Scott Pruitt i [Tenant?s Address] Landlord and Tenant shall eat under this paragraph by writte 30. ADDITIONAL PROVI notice thereof to the other party. DISCLOSURES. quired or permitted under this Lease or under state law shall be deemed erved if sent by United States certi?ed mail, add ssed' as follows: eturn receipt requested, :h have the right from time to time to change tre place notice is to be given I . i As to Landloi'd this clay of LANDLORD: i i Sign: As to Tenant, this TENANT ("Te . Sign: .39 thr? TENANT: 1 [Db 11, day of lab," uv .20 Print: 5.1- Print: .20 Exhibit 2 Search was initially conducted on March 30, 2018, repeated on March 31 and April 1. This version was printed on April 2. Trip? This map documents rooms closest to 233 St. Source: Capitol Hill Rooms for A $55 Or Less - a EH3 No dates - 1 guest 8th Ludlow-Taylor Elementary School9 Morris Pl NE 1E St NE St Acker Lexungton Pl NE 3rd St NE 44 6883 0/20 0 St NE $5l$39 $43 89% . 41/9 4?5 - -- e? r- (3P3 $59 idgePoint Hospital Capitol Hill . 5th St NE 11h St NE a Belmont-Paul . Women's PRIVATE ROOM . 1 BED Stanton Park Place 3F 44 0 Const $39 per night 380% 13 - Superhest $Exhibit 3 Search was initially conducted on March 30, 2018, repeated on March 31 and April 1. This version was printed on April 2. This map documents rooms across Capitol Hill broadly. For the area closest to 233 St, please see the map entitled "Capitol Hill Rooms for $55 Or Less" All lists Broader Capitol Hill Rooms for $55 or Less No dates - 1 guest 38 homes Sih '57 NORTHEAST a HSINE 3. DJ Still . cszxi 'ill$55 9'3. Sumeme Conn ol 0 the United Stale: Q) A Si 'i g? ?99.10: 5th:- - hrs. $49 .3 STREET 0? Gallaudet Uni versity CORRIDOR $50 ESINE Av: 65156 CAPITOL HILL II An? NI . 0117 $50 him?ln r. . a 22:: s: a: =1 .5 ?dtfl .7 ?90. $50 LINCOLN PARK $45 3 .772 ?2 (Lib 91 SE 348 .3 (?in Mia-$29 $40 KINGMAN PARK 540 ?n . W- 4 L9 . Easm Sealer 9 High Sc . $41 i $43 I lb?mS! SC 3501515 5 ?r "4,0 539 $35 NE u-v-v-r-v-v Iv-t "a NE lb'hr AR- 535 bit LANGSTON ?Snunmss WE I i I s; .H $55 BARNEY CIRCLE HILL EAST "l Ll ism: i; J: . Exhibit 4 Availabe 13R and ZBRR eRnt talUnits '1 (I) 557.; 1 Bedroom Apartments 9? rHl. 0 BR $1600 - . 5. . . - IIZLV 918R $2200 . .L 03% 013R $1975 013R $2100 013R $3240 0 13B $2400 013R $1995 2 Bedroom Units 0 28R $2595 0 230 $3750 0 2BR $4740 Leased Property 33 St NE: Site of Leased Space Apartments listed on Zillow March 30, 31, or April 1. Map data 0201?22?39233 Scopeof consideration limitedi.? to eight tblocks bordered by Street 4th Street East Capitol St treet, and 2nd Street. Source :Listed onZiIIow