We see a lot of criminal conflict of interest cases in our firm. Our federal government employee clients often face an investigation based on a vague allegation of a “conflict of interest.” Maybe the client applied for a job with a private company when his government work touched on that private company. Maybe the employee tried to help a relative get a job or win a federal contract.
It’s a scary accusation because although a conflict of interest is an ethics violation, it can also lead to federal criminal charges.
This post will break down the elements of a conflict of interest charge under 18 U.S.C. § 208. The statute prohibits federal agency employees from engaging in any conduct that affects their financial interest.
The Elements of the Offense
Here is what the government has to prove in a criminal conflict of interest case.
First, the statute applies to pretty much any federal employee who works for an executive branch agency or an independent agency. It also covers District of Columbia employees. The statute doesn’t apply to congressional staffers and judicial branch employees. It also doesn’t apply to non-government employees.
Second, the statute requires that the federal employee “participate[d] personally and substantially as a Government officer or employee” in certain conduct.
This is a broad—but vague—standard. The federal employee must participate “personally,” but this could include personally supervising the activity of another government employee that violates the statute. Plus, as you will see below, the range of conduct at issue is extremely broad—a simple conversation could get you in trouble. The participation must be “substantial.” This limitation should, in theory, reduce the risk to federal employees. But since the statute doesn’t define how much participation meets the statute, it leaves federal employees exposed to investigations.
The employee does have to be acting “as a Government officer or employee” in the conduct, so it excludes personal actions by someone who happens to be a government employee. You can’t commit a conflict of interest for picking the daughter of a defense contractor for your rec soccer team.
Third, the statute defines the type of conduct implicated by the statute. The government must prove that a federal employee made a decision, approved/disapproved, recommended, rendered advice, investigated, or “otherwise” took some act in connection with
- a judicial or other proceeding
- an application
- a request for a ruling or other determination
- a contract
- a claim
- a controversy
- a charge
- an accusation or arrest
- or any “other particular matter.”
The breadth of this section is staggering. A federal employee who offers a recommendation with respect to any government contract falls within the statute. A federal employee who gives advice about any “proceeding” falls within the statute. A federal employee who makes any decision whatsoever as to any “particular matter” falls within the statute.
Honestly, you’d be hard pressed to figure out what conduct by any federal employee would not fall within this definition. The Office of Governmental Ethics has said that actions in connection with broad policy decisions do not fall within it, but that’s about it.
Fourth, the federal employee must know that he (or any one of a group of related people/entities) “has a financial interest” in the matter described in #3 above.
This is the heart of the statute. It contains two key limitations. First, the federal employee must know about the financial interest. Imagine that a federal employee decides to award a contract to a defense contractor. She doesn’t know that her stockbroker just bought 100 shares of the contractor’s stock the day before. She would lack knowledge and thus has not committed a conflict of interest.
The statute does not define what level of “financial interest” must exist. The Office of Governmental Ethics has said that it means that “[a] Government employee has a financial interest in a particular matter when there is a real possibility that he might gain or lose as a result of developments in or resolution of the matter.” 83 OGE 1, at 2 (Jan. 7, 1983). So, speculative gain or loss is not enough.
Fifth, this statute applies when the federal employee has the financial interest or when the federal employee’s “spouse, minor child, general partner, organization in which he is serving as officer, director, trustee, general partner or employee, or any person or organization with whom he is negotiating or has any arrangement concerning prospective employment” has the interest. So, a federal employee can get in trouble when any of these people or entities have a financial interest in the action taken.
Exception to Statute
Federal employees can protect themselves from conflict of interest charges. The primary way is to get permission to take the action ahead of time, which is defined in Section 208(b)(1). To take advantage of this exception, the employee must make a “full disclosure of the financial interest” to her supervisor and receive a “a written determination made by such official that the interest is not so substantial as to be deemed likely to affect the integrity of the services which the Government may expect from such officer or employee.”
Note that this written determination must be obtained by the employee “in advance.” That means what it says—this must all be done before the conduct. A federal employee who seeks this determination after the fact is confessing to a potential crime she may have already committed. Asking for forgiveness is not better than asking for permission in this situation.
A federal employee is also protected if the Office of Governmental Ethics has issued a regulation that the particular financial interest “has been exempted” from the statute for being “too remote or too inconsequential to affect the integrity of the services of the Government officers or employees.” 18 U.S.C. § 208(b)(2). There are several OGE regulations that define what financial interests are too remote to count. For example. OGE has said that the imputed financial interests of a nonprofit on whose board a federal employee serves do not implicate the statute.
The Penalties
The penalties for violating Section 208 are in 18 U.S.C. § 216. A “willful” violation is a felony – punishable by a maximum sentence of five years in prison. A non-willful violation is a misdemeanor – punishable by not more than one year in prison.
In addition, the government can bring a civil case for monetary penalties up to $50,000 per violation and/or an injunction.