[Federal Register Volume 60, Number 166 (Monday, August 28, 1995)]
[Rules and Regulations]
[Pages 44706-44709]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-21299]
[[Page 44705]]
_______________________________________________________________________
Part IX
Office of Government Ethics
_______________________________________________________________________
5 CFR Part 2640
Certain Miscellaneous Exemptions Under 18 U.S.C. 208(b)(2); Acts
Affecting a Personal Financial Interest; Interim Rule
Federal Register / Vol. 60, No. 166 / Monday, August 28, 1995 / Rules
and Regulations
[[Page 44706]]
OFFICE OF GOVERNMENT ETHICS
5 CFR Part 2640
RIN 3209-AA09
Certain Miscellaneous Exemptions Under 18 U.S.C. 208(b)(2) (Acts
Affecting a Personal Financial Interest)
AGENCY: Office of Government Ethics (OGE).
ACTION: Interim rule with request for comments.
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SUMMARY: The Office of Government Ethics (OGE) is issuing an interim
regulation describing the circumstances under which certain financial
interests arising from Federal Government employment in the executive
branch are exempt from the prohibition in 18 U.S.C. 208(a). Section
208(a) generally prohibits employees of the executive branch from
participating in an official capacity in particular matters in which
they have a financial interest. It also bars employees from acting in
particular matters in which certain other persons or entities, which
are specified in the statute, have a financial interest. Section
208(b)(2) of title 18 permits the Office of Government Ethics to
promulgate executive branch-wide regulations describing financial
interests that are too remote or inconsequential to warrant
disqualification pursuant to section 208(a). This interim regulation
exempts, in certain circumstances, disqualifying financial interests
that an employee may have in Federal salary and benefits, or in Social
Security or veterans' benefits.
DATES: This interim regulation is effective August 28, 1995 Comments by
agencies and the public are invited and are due by October 27, 1995.
ADDRESSES: Office of Government Ethics, suite 500, 1201 New York Avenue
NW., Washington, DC 20005-3917. Attention: Ms. Glynn.
FOR FURTHER INFORMATION CONTACT: Marilyn Glynn, Office of Government
Ethics, telephone 202-523-5757, FAX 202-523-6325.
SUPPLEMENTARY INFORMATION: Section 208(a) of title 18 of the United
States Code prohibits Government employees from participating in an
official capacity in particular Government matters in which, to their
knowledge, they or certain other persons specified in the statute have
a financial interest, if the matter would have a direct and predictable
effect on the financial interest. Section 208(d)(2) directs the Office
of Government Ethics, after consultation with the Attorney General, to
adopt uniform regulations exempting financial interests from the
applicability of section 208(a) for all or a portion of the executive
branch if it determines that such interests are either too remote or
too inconsequential to affect an employee's services to the Government.
Further, section 201(c) of Executive Order 12674, as modified by E.O.
12731, states that OGE is to obtain the concurrence of the Department
of Justice for any section 208 regulations it promulgates. The Office
of Government Ethics has obtained that concurrence for this interim
rule. Finally, as provided in section 402 of the Ethics in Government
Act of 1978, as amended, 5 U.S.C. appendix, OGE has consulted with the
Office of Personnel Management on this interim rule.
The Office of Government Ethics will soon be issuing in the Federal
Register a proposed regulation describing a variety of holdings or
relationships that OGE has determined are either too remote or too
inconsequential in value to be likely to affect an employee's
consideration of any particular matter. That proposed regulation will
also contain a more detailed analysis of section 208, and guidance on
individual waivers of disqualifying financial interests that agencies
may grant under 208 (b)(1) and (b)(3). The text of this interim
regulation will be included in the appropriate place in the overall
proposed section 208 regulation.
This interim regulation exempts disqualifying financial interests
that arise from employment in the executive branch of the Federal
Government. With certain exceptions, the regulation specifically
exempts an employee's interest in his Government salary and benefits,
and his interest in Social Security and veterans' benefits. It also
exempts, with certain exceptions, the disqualifying financial interests
that arise from the Federal Government employment interests of an
employee's spouse, minor child, general partner, or anyone with whom he
is negotiating or has an arrangement for prospective employment. As
noted, it is anticipated that the exemption for salary and benefits in
this interim regulation will be added to the larger group of exemptions
that will be published as a proposed regulation, as described above.
I. Background
The question of whether an executive branch employee may have a
disqualifying financial interest in his Government salary and benefits
has been addressed a number of times, but has never been definitively
resolved. An opinion issued by the Office of Legal Counsel (OLC) of the
Department of Justice in 1993 concluded that section 208 did not apply
to payments made to employees under section 7 of the Technology
Transfer Act, 15 U.S.C. 1501-1534, because such payments ``are
indistinguishable for these purposes from salary, benefits, and other
payments such as performance awards.'' Memorandum for Stephen D. Potts,
Director, Office of Government Ethics, from Walter Dellinger, Acting
Assistant Attorney General, Office of Legal Counsel, Re: Ethics Issues
Related to the Federal Technology Transfer Act of 1986 (September 13,
1993). The opinion stated that section 208 was intended to cover only
``outside'' financial interests and therefore would not bar an employee
from participating in matters that would affect his Government
compensation.\1\ A copy of this OLC memorandum is available from OGE
(see the FOR FURTHER INFORMATION CONTACT block above).
\1\ In 1980, OLC also concluded that section 208 was
inapplicable to financial interests which arise from Government
employment and salary, where no outside financial interest was
implicated. See Memorandum for Thomas Martin, Deputy Assistant
Attorney General, Civil Division, from Leon Ulman, Deputy Assistant
Attorney General, Office of Legal Counsel, Re: 18 U.S.C. Sec. 208
and Pending Salary Adjustment Litigation (January 24, 1980).
Subsequently, however, OLC questioned the correctness of the 1980
opinion in two other opinions dealing with section 208. See
Memorandum for Richard K. Willard, Assistant Attorney General, Civil
Division, from Charles J. Cooper, Assistant Attorney General, Office
of Legal Counsel, Re: 18 U.S.C. Sec. 208 and Participation of
Departmental Attorneys in Debt Ceiling Litigation p. 2 at n.1
(December 6, 1985); Memorandum for the Solicitor of the Interior,
from Samuel A. Alito, Deputy Assistant Attorney General, Office of
Legal Counsel, Re: Scope of the Term ``Particular Matter'' under 18
U.S.C. Sec. 208 p. 9 at n.13 (January 12, 1987). Copies of all of
these memoranda also are available from OGE.
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The notion that section 208 applies only to so-called ``outside''
financial interests has some support in the statute's legislative
history. In 1962, section 208 replaced 18 U.S.C. 434 which barred
employees from acting in an official capacity in the transaction of
business with any business entity in which they were ``directly or
indirectly interested in the pecuniary profits or contracts.'' The
Senate Report on the bill that became section 208 described the
provision as follows:
The disqualification of the subsection embraces any
participation on behalf of the Government in a matter in which the
employee has an outside financial interest, even though his
participation does not involve the transaction of business.
S. Rep. No. 2213, 87th Cong., 2d Sess. 12 (1962).
Practical considerations might also favor interpreting section 208
to conclude that an employee does not have a disqualifying financial
interest in
[[Page 44707]]
his Government position and salary. Otherwise, an employee's routine
performance of duties might be viewed as creating a disqualifying
financial interest. For example, it may be argued that every time an
employee strives to enthusiastically and conscientiously perform his
duties, he increases the likelihood that he will receive a favorable
performance rating and a subsequent bonus. Similarly, simply asking for
a promotion or submitting an official request for travel reimbursement
might be considered participating in a particular matter that would
have a direct and predictable effect on the employee's financial
interest.
On the other hand, it is arguable that since section 208 was
intended to cover a broader range of activities than section 434,\2\ it
plainly encompasses actions affecting financial interests arising from
Government employment. In United States v. Lund, 853 F.2d 242 (4th Cir.
1988), the court found that section 208 barred an employee from acting
in matters affecting his spouse's Government employment interests.\3\
The court noted that
\2\ Unlike prior section 434, section 208 is applicable to
matters that would affect the interests of an employee's spouse,
minor child, general partner, and certain other persons or
organizations with which the employee has a specified relationship.
It also applies to a wider scope of Government activities than
simply those that amount to the ``the transaction of business.''
Instead, it applies to applications, contracts, judicial proceedings
and other similar particular matters.
\3\ In Lund, the employee secretly married a suboradinate and
subsequently promoted her to another position, granted her pay
increases, and recommended that the Government pay her tuition for a
masters' degree program. The court's determination that section 208
applies to internal personnel matters may have been influenced by
the fact that the marriage was concealed from agency officials.
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the language of section 208(a), unlike that of its predecessor, is
not restricted to conflicts of interest in matters involving outside
entities, and nothing in the legislative history reveals a
congressional intent to limit that broad language to less than its
normal span. To the contrary, the legislative history indicates that
Congress was fully aware of the potential breadth of the new statute
* * * [t]hat the legislative history contains no specific mention of
conflicts of interest in internal personnel matters cannot be taken
as affirmative evidence that it did not intend the statute's
sweeping language to reach them * * *.
Id. at 246.
Moreover, it is not difficult to envision examples of employee
participation in matters relating to salary and benefits that would
clearly appear to amount to a conflict of interest under section 208.
For example, no one seriously doubts that it would be improper for an
employee to participate in Government matters that have a unique or
individual impact on the employee's own salary or benefits, such as
approving his own promotion or awarding himself a cash bonus for
superior performance. It is generally acknowledged that it would be
similarly inappropriate for an employee to approve his general
partner's pay increase or performance bonus.
II. Need for Exemption
In light of the somewhat differing interpretations of section 208
that have been advanced, and in order to resolve continuing questions
about the applicability of section 208 to Federal salary and benefits,
the Office of Government Ethics, in consultation with and with the
concurrence of the Department of Justice, has decided to treat
financial interests that arise from Government salary and employment as
disqualifying under section 208(a). This regulation, however, would
exempt most of those financial interests from the disqualification
provision of section 208(a).
Given the ambiguous nature of existing advice on and
interpretations of section 208, OGE's decision to publish this
exemption should not be construed as an indication that any particular
activity in which an employee might have engaged prior to publication
of this regulation was a violation of section 208. The exemption simply
provides employees with reassurance that performance of the duties
required by their positions does not amount to a violation of section
208. Additionally, the exemption and the illustrative examples describe
the types of activities that are not covered by the exemption, and in
which the employee may not engage in the absence of an individual
waiver under section 208 (b)(1) or (b)(3).
The need for the exemption is particularly important at this time
because a number of executive branch Departments and agencies are
engaged in ``reinvention'' or ``privatization'' activities that will
result in the elimination of Federal positions. In some cases, employee
involvement in these activities necessarily will affect financial
interests arising from Government salary and benefits. However, the
exemption will permit an employee to engage in many of these
activities, with certain limited exceptions described below.
III. Exemption for Interests Arising From Government Salary and
Benefits or From Social Security or Veterans' Benefits
Section 2640.101 applies to executive branch employees whose
activities affect Government salary or benefits, or veterans' or Social
Security benefits. With two exceptions, the provision exempts all
disqualifying financial interests that arise from Federal salary or
benefits, or from Social Security or veterans' benefits. The exemption
does not permit an employee to make (1) determinations that
individually or specially affect his own financial interest in
Government salary and benefits, or (2) determinations, requests, or
recommendations that individually or specially relate to, or affect the
Government employment-related financial interests of any other person
specified in section 208, such as the employee's spouse, minor child,
or general partner.
To the extent that the performance of everyday duties affects an
employee's potential for promotion, for receiving a bonus or other
similar benefit having monetary value, or even for being removed
involuntarily from Federal service, the exemption at Sec. 2640.101
applies to all employees. It also applies to employees who
affirmatively ask for action on, or otherwise make requests or
recommendations about, their own salary and benefits. The exemption
would permit employees, for example, to ask for pay raises and
promotions, for transfers to higher-paid positions, and for
reimbursement of travel expenses. The exemption applies to employee
participation in matters that would affect a panoply of interests that
derive from Government employment, such as salary, premium pay,
performance bonuses, recruitment and relocation payments, Technology
Transfer Act payments, leave, compensatory time, pensions, health and
life insurance, buyouts and early outs, payment of the costs of
training or continuing education, disability payments, housing
allowances, severance pay, unemployment compensation, authorized
personal use of agency equipment, and Government day care facility
expenses. The exemption does not permit employees to make
determinations, such as approvals or disapprovals, that would have an
individual or special effect on their financial interests. Thus, while
an employee could request that his agency pay the cost of his tuition
at a local university, the employee could not approve his own request.
[[Page 44708]]
The exemption does allow an employee to make a determination (as
well as a request or recommendation) affecting his own financial
interest (or that of anyone else specified in section 208), as long as
that interest is not affected in an individual or special way. This
aspect of the exemption has particular applicability to employees who
administer employee benefit plans for their own agency, or for the
executive branch as a whole. The responsibilities of these employees,
of course, affect their own interests to the extent that they affect
the interests of all employees. The exemption permits them to continue
to perform their functions, provided the matters in which they act are
not ones in which they, or any other person specified in section 208,
have an individual or special interest. For example, the exemption
permits employees of the Federal Retirement Thrift Investment Board to
promulgate less stringent standards for borrowing from thrift accounts,
even though the employees may participate in the thrift savings plan
themselves and may borrow from their accounts. Similarly, the exemption
permits an employee of the Federal Reserve (the ``Fed'') who
participates in the Fed pension plan to administer the plan within the
Fed.
The exemption also permits an employee whose agency is involved in
``privatization'' or ``reinvention'' activities to participate in
certain of those activities even when his own position, salary, or
benefits might be affected. As the provision specifies, an employee may
participate in such activities provided that he does not make any
determination that has a special or individual effect on his salary and
benefits. Thus, for example, an employee could serve on an agency task
force that makes a recommendation to the agency head to eliminate the
agency component to which he is assigned. In the absence of an
individual waiver under section 208(b)(1) or (b)(3), however, the
employee could not be responsible for deciding which of two senior
positions in the component should be eliminated--his own or that of
another senior employee. If the matter would have a direct and
predictable effect on the salary and benefits of a very small number of
employees, including that of the employee charged with the
responsibility to act, the employee should not participate without
first receiving an individual waiver.
Moreover, matters that would affect an ``outside'' interest of the
employee, such as his interest in obtaining a position with a
contractor who will be taking over a ``privatized'' Government
function, are not governed by this exemption. For example, where an
agency has decided to transfer certain agency functions to an employee-
owned (or ESOP) corporation, an employee whose position will be
transferred to the new corporation could not, absent an individual
waiver, participate on an agency task force advising the independent
trustee who is charged with creating the ESOP corporation. The new
position is not a financial interest that arises from Federal salary or
benefits. However, an employee who evidences her intent to retire from
the Government when the agency function is transferred to the ESOP
corporation may participate in task force activities since she has no
financial interest in a new position in the new corporation.
The exemption does not permit an employee to make requests or
recommendations, as well as determinations, in matters that would have
an individual or special effect on the financial interests of anyone
else specified in section 208.\4\ See Sec. 2640.101(b). For example,
this exemption does not permit an employee to recommend that his spouse
receive an award for meritorious service. Nor does it permit an
employee to determine that his general partner should receive
compensatory time for work performed in excess of the normal tour of
duty. The Office of Government Ethics believes that it would be
inappropriate to exempt recommendations and requests (as well as
determinations) in matters that would specifically affect the financial
interests of other persons specified in section 208. The narrower
exemption for matters affecting a person other than an employee
specified in section 208 is warranted because the employee's
relationship with that other person might not be generally known, and
the employee's impartiality in such matters reasonably might be
questioned. Making a request or recommendation in a matter affecting
one's own position is on a different footing since the employee's
potential bias is readily recognizable.
\4\ Of course, because only individual persons may become
Government employees, the exemption has no relevance to matters
affecting organizations the employee serves as officer, director,
trustee, general partner, or employee, or those with which he is
negotiating or has an arrangement for prospective employment. The
persons specified in section 208 that are relevant for purposes of
this exemption include the employee's spouse, minor child, general
partner, or individual person with whom the employee is negotiating
or has an arrangement for prospective employment, or for whom he
serves as an employee in a position outside the Government.
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Within the limitations specified in Sec. 2640.101 (a) and (b), the
provision also permits employees whose duties concern Social Security
and veterans' benefits to participate in matters affecting those
benefits. Accordingly, an employee at the Social Security
Administration could recommend and approve changes to certain
procedures for applying for Social Security benefits even though her
spouse is an applicant for benefits.\5\ However, the exemption would
not permit her to approve her spouse's application for benefits. The
exemption also would not permit an employee to take an action in
violation of some other statutory or regulatory provision such as the
prohibitions on nepotism in 5 U.S.C. 3110.
\5\ As indicated in the Standards of Ethical Conduct for
Employees of the Executive Branch at 5 C.F.R. 2635.402(b)(3), not
all Government matters are sufficiently focused on the interests of
a discrete and identifiable class of persons that they can be
considered ``particular matters'' within the meaning of section 208.
Example one accompanying Sec. 2635.402(b)(3) makes clear that
certain Social Security procedures are not ``particular matters.''
This exemption applies to those Social Security matters that are
focused on the interests of a discrete and identifiable class of
persons, and therefore are considered ``particular matters'' for
purposes of section 208.
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IV. Matters of Regulatory Procedure
Administrative Procedure Act
Pursuant to 5 C.F.R. 553 (b) and (d), I find that good cause exists
for waiving the general requirements of notice of proposed rulemaking
and 30-day delayed effective date for this interim rule. These
requirements are being waived because this regulation grants certain
exemptions under the applicable conflict of interest law, 18 U.S.C.
208. Moreover, it is in the public interest that this regulation take
effect as soon as possible in order to clarify the permissible limits
of employees' official actions when certain of their financial
interests may be affected. Interested persons are invited to submit
written comments to OGE on this interim regulation, to be received on
or before October 27, 1995. The Office of Government Ethics will review
all comments received and consider any modifications to this rule which
appear warranted. This same provision will also be part of the overall
proposed section 208 regulation which OGE will publish in a separate
rulemaking document.
Executive Order 12866
In promulgating this proposed regulation, the Office of Government
Ethics has adhered to the regulatory philosophy and the applicable
principles of regulation set forth in section 1 of Executive Order
12866, Regulatory Planning and Review. This interim rule has also been
reviewed by
[[Page 44709]]
the Office of Management and Budget under that Executive order.
Regulatory Flexibility Act
As Director of the Office of Government Ethics, I certify under the
Regulatory Flexibility Act (5 U.S.C. chapter 6) that this interim
regulation will not have a significant economic impact on a substantial
number of small entities because it primarily affects Federal
employees.
Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. chapter 35) does not apply
because this interim regulation does not contain information collection
requirements that require the approval of the Office of Management and
Budget.
List of Subjects in 5 CFR Part 2640
Conflict of interests, Government employees.
Approved: July 21, 1995.
Donald E. Campbell,
Deputy Director, Office of Government Ethics.
Accordingly, for the reasons set forth in the preamble, the Office
of Government Ethics is amending title 5, chapter XVI, subchapter B of
the Code of Federal Regulations by adding a new part 2640 to read as
follows:
PART 2640--MISCELLANEOUS EXEMPTIONS UNDER 18 U.S.C. 208(b)(2) (ACTS
AFFECTING A PERSONAL FINANCIAL INTEREST)
Sec. 2640.101 Exemptions for financial interests arising from Federal
Government employment or from Social Security or veterans' benefits.
An employee may participate in any particular matter, whether of
general applicability or involving specific parties, where the
disqualifying financial interest arises from Federal Government salary
or benefits, or from Social Security or veterans' benefits, except an
employee may not:
(a) Make determinations that individually or specially affect his
own Government salary and benefits, or Social Security or veterans'
benefits; or
(b) Make determinations, requests, or recommendations that
individually or specially relate to, or affect, the Government salary
or benefits, or Social Security or veterans' benefits of any other
person specified in section 208.
Note: This exemption does not permit an employee to take any
action in violation of any other statutory or regulatory
requirement, such as the prohibition on the employment of relatives
at 5 U.S.C. 3110.
Example 1: An employee of the Office of Management and Budget
may vigorously and energetically perform the duties of his position
even though his outstanding performance would result in a
performance bonus or other similar merit award.
Example 2: A policy analyst at the Defense Intelligence Agency
may request promotion to another grade or salary level. However, the
analyst may not recommend or approve the promotion of her general
partner to the next grade.
Example 3: An engineer employed by the National Science
Foundation may request that his agency pay the registration fees and
appropriate travel expenses required for him to attend a conference
sponsored by the Engineering Institute of America. However, the
employee may not approve payment of his own travel expenses and
registration fees.
Example 4: A GS-14 attorney at the Department of Justice may
review and make comments about the legal sufficiency of a bill to
raise the pay level of all Federal employees paid under the General
Schedule even though her own pay level, and that of her spouse who
works at the Department of Labor, would be raised if the bill were
to become law.
Example 5: An employee of the Department of Veterans Affairs
(VA) may assist in drafting a regulation that will provide expanded
hospital benefits for veterans, even though he himself is a veteran
who would be eligible for treatment in a hospital operated by the
VA.
Example 6: An employee of the Office of Personnel Management may
participate in discussions with various health insurance providers
to formulate the package of benefits that will be available to
Federal employees who participate in the Government's Federal
Employees Health Benefits Program, even though the employee will
obtain health insurance from one of these providers through the
program.
Example 7: An employee of the Federal Supply Service Division of
the General Services Administration (GSA) may participate in GSA's
evaluation of the feasibility of privatizing the entire Federal
Supply Service, even though the employee's own position would be
eliminated if the Service were privatized.
Example 8: Absent an individual waiver under section 208(b)(1),
the employee in the preceding example could not participate in the
implementation of a GSA plan to create an employee-owned private
corporation which would carry out Federal Supply Service functions
under contract with GSA. Because implementing the plan would result
not only in the elimination of the employee's Federal position, but
also in the creation of a new position in the new corporation to
which the employee would be transferred, the employee would have a
disqualifying financial interest in the matter arising from other
than Federal salary and benefits, or Social Security or veterans'
benefits.
Example 9: A career member of the Senior Executive Service (SES)
at the Internal Revenue Service (IRS) may serve on a performance
review board that makes recommendations about the performance awards
that will be awarded to other career SES employees at the IRS. The
amount of the employee's own SES performance award would be affected
by the board's recommendations because all SES awards are derived
from the same limited pool of funds. However, the employee's
activities on the board involve only recommendations, and not
determinations that individually or specially affect his own award.
Additionally, 5 U.S.C. 5384(c)(2) requires that a majority of the
board's members be career SES employees.
Example 10: In carrying out a reorganization of the Office of
General Counsel (OGC) of the Federal Trade Commission, the Deputy
General Counsel is asked to determine which of five Senior Executive
Service (SES) positions in the OGC to abolish. Because her own
position is one of the five SES positions being considered for
elimination, the matter is one that would individually or specially
affect her own salary and benefits and, therefore, the Deputy may
not decide which position should be abolished.
Authority: 5 U.S.C. App. (Ethics in Government Act of 1978); 18
U.S.C. 208; E.O. 12674, 54 FR 15159, 3 CFR, 1989 Comp., p. 215, as
modified by E.O. 12731, 55 FR 42547, 3 CFR, 1990 Comp., p. 306.
[FR Doc. 95-21299 Filed 8-25-95; 8:45 am]
BILLING CODE 6345-01-U
