Government Employees at Risk: Conflicts of Interest May Be Crimes, Not Just Ethics Violations

By Sara Kropf

Many of the clients we represent in Office of Inspector General (OIG) investigations are facing allegations that they violated federal ethics regulations or internal agency ethics rules.

Here’s how it usually plays out. An OIG agent knocks on the employee’s door (yes, literally) and says they have a few questions about a potential conflict of interest. Thinking “oh, it’s just an ethics violation,” the employee agrees to the interview. In her mind, it can’t be that serious.

That’s a mistake. For government employees, conflict-of-interest violations can turn into serious matters. In many circumstances, what a federal employee believes is “just an ethics violation” is actually a potential crime.

Following what seems to be an innocuous interview, the OIG agent refers the case to the Department of Justice because the employee has admitted to a conflict of interest. In a private company, a conflict of interest would get you fired. In the government, it can get you arrested.

That OIG interview has turned into a complete nightmare.

We have already written a lot about the risk of an OIG investigation when you are a government employee. This serious of articles (helpfully titled “Government Employees at Risk”) will talk about the particular risks of a criminal investigation when you are a government employee.

Penalties for Criminal Conflict of Interest Violations

There are six primary criminal conflict of interest statutes that apply to federal executive branch employees:

1. Conflicting financial interests – 18 U.S.C. § 208
2. Bribery and gratuities – 18 U.S.C. § 201
3. Representation of others in government matters – 18 U.S.C. § 205
4. Receipt of compensation in government matters – 18 U.S.C. § 203
5. Restrictions on former federal employees – 18 U.S.C. § 207
6. Supplementation federal salary – 18 U.S.C. § 209

If you are curious, the missing sections involve extremely rare situations. Section 204 prohibits members of Congress (or members-elect) from practicing before the Court of Federal Claims or Federal Circuit. Section 206 exempts any “retired officer of the uniformed services of the United States” from Sections 203 and 205. (Section 202 is the definitions section.)

Of these statutes, bribery is arguably the most serious. Some bribery violations could result in 15 years in prison.

For the other sections, the penalties are set forth in 18 U.S.C. § 216. If the conduct was not willful, then it is a misdemeanor punishable by not more than one year in prison. However, if the conduct was willful, then the maximum penalty is five years in prison.

There are also civil remedies. A government employee can be sued in a civil case under Sections 203, 204, 205, 207, 208, or 209. The penalties are only monetary but steep: $50,000 for each violation or the “amount of compensation which the person received or offered for the prohibited conduct.”

How Will a Criminal Case Start Related to a Violation of These Statutes?

There are a range of ways that a criminal case under one of these statutes can begin. Very often, it is through an OIG investigation. Another federal employee, or disgruntled former employee, or a public interest group, may complain to the OIG, which will then open an investigation.

Once the OIG has conducted its initial investigation and uncovered a possible criminal violation, it will “refer” the case to DOJ. This may be as simple as an email to the local United States Attorney’s Office to see if it is interested in taking the case. It may result in an in-person meeting between the OIG agent and the USAO, at which the agent will describe the results of the investigation.

A case may also begin from a whistleblower who goes straight to DOJ to report the possible wrongdoing.

If DOJ decides to investigate further, it will often work with the OIG agents who started the investigation. This can be particularly dangerous for federal employees. All the employee will see is an OIG investigation and she will think it is merely a civil or administrative matter. Meanwhile, behind the scenes, DOJ is investigating a possible criminal case.

If the OIG refers the case to DOJ, and DOJ decides to investigate it, then it’s almost certainly a willful violation (with the more serious prison term in Section 216)–or at least DOJ thinks it may be a willful violation. It’s fairly rare for a prosecutor to get revved up about a misdemeanor conflict of interest, but it happens.

This is one reason that hiring a lawyer for what can seem like an innocuous OIG investigation is critical. A federal employee needs to retain someone who is alert to possible criminal violations.

What About the “Ethics Pledge”?

You may have heard about President Trump’s “Ethics Pledge.” On January 28, 2017, he signed Executive Order 13770, which required every full-time, political appointee to sign an Ethics Pledge upon accepting the political appointment.

This pledge (1) only applies to political appointees, a very small slice of federal employees; and (2) does not create any criminal penalties. It sets forth the civil remedies for a violation:

Sec. 5. Enforcement. (a) The contractual, fiduciary, and ethical commitments in the pledge provided for herein are solely enforceable by the United States by any legally available means, including any or all of the following: debarment proceedings within any affected executive agency or civil judicial proceedings for declaratory, injunctive, or monetary relief.

Under the Pledge, appointees agree to a range of restrictions. For example, they agree not to engage in lobbying activities with respect to the agency to which he or she was appointed to serve for five years after termination of the appointment. They agree not to engage in engage in lobbying activities with respect  to any covered executive branch official (as described in the Lobbying Disclosure Act) or any non-career Senior Executive Service appointee for the remainder of the Trump Administration. They will not accept gifts from lobbying organizations.

The pledge does permit the President or his designee to waive any of these restrictions. It also requires each agency’s head to establish regulations to ensure that each political appointee signs the pledge and that the agency ensures compliance.